Crypto Weekly Recap: SEC Sues Do Kwon, FTX-tied Bank Sued, SBF might be Jailed, FTX to Resume Withdrawals: Feb. 12–18 2023
We are moving to a new week, and it is time to analyze every notable event that has happened in the crypto news over the last seven days.
The week was bombarded with multiple lawsuits and the continuation of some ongoing high-profile lawsuits. Meanwhile, the global crypto market capitalization soared above $1.13 trillion, as Bitcoin momentarily hit $25,000 before declining a bit to about $24,880 at press time.
If there is one thing we can be sure of, according to some events we noticed during the week, it is that the American Securities and Exchange Commission (SEC) will probably not lower the intensity of its attacks on the cryptocurrency space.
Judge suggests jail for SBF to limit his communications and internet access
The founder of the bankrupt FTX cryptocurrency exchange, Sam Bankman-Fried, may have his bail withdrawn after a federal judge found “probable cause” to suspect the former FTX CEO of trying to tamper with witnesses.
Judge Lewis A. Kaplan raised the possibility for the first time that jail might be the only way to ensure Bankman-Fried doesn’t outfox the government with ways to use electronic devices in ways that can’t be tracked.
Currently, Sam Bankman-Fried is on a $250 million bail package that lets him live with his parents in Palo Alto, California, while preparing for trial on charges that he cheated investors and looted customer deposits at FTX, his cryptocurrency trading platform.
The SEC sues Do Kwon and Terraform Labs Over Crypto Securities Fraud
The US Securities and Exchange Commission (SEC) launched an attack against the failed Terraform Labs cryptocurrency ecosystem that collapsed in May 2022. Terraform Labs, the Singapore-based company that developed LUNA and UST—native tokens of the Terra ecosystem — and its co-founder Do Kwon were charged on February 16 with orchestrating a multibillion-dollar scam by marketing and trading unregistered securities using digital assets.
The SEC’s action, filed in the US District Court for the Southern District of New York, claims that the fraudulent scheme sponsored by Kwon and Terraform resulted in billions of dollars in losses to both retail and institutional investors through various investment channels.
Meanwhile, Do Kwon’s location has not been discovered despite Interpol issuing a red notice against him last year.
Paxos, the Issuer of Binance USD (BUSD) Stablecoin, is Facing Regulatory Attacks
The SEC sent a letter known as a “Wells notice” to Paxos, alleging that the U.S. dollar-pegged BUSD stablecoin is an unregistered security, and the regulator is planning to sue the firm for violation of investor protection laws.
Now, the New York Department of Financial Services (NYDFS) has now ordered Paxos to stop releasing new BUSD stablecoins into circulation. However, Paxos Trust Company says it “categorically disagrees” with the United States securities regulator that has described Binance USD as a security.
These actions reveal that regulators are showing an interest in scrutinizing stablecoins and their issuers, and this might be regarded as a lack of sufficient understanding of the digital asset class on the regulators’ part. Stablecoins are a well-liked entry point for consumers entering the cryptocurrency space for the first time, so this action might pose a significant threat to the crypto sector.
Celsius Network Chooses NovaWulf Bid for Bankruptcy Exit
Under the direction of asset manager NovaWulf Digital Management, which will take over the management of a new business that will be held by Celsius customers, cryptocurrency lender Celsius Network would attempt to emerge from bankruptcy.
Ross Kwasteniet, an attorney for Celsius, stated during the hearing on Wednesday that the proposed agreement with NovaWulf should enable Celsius to emerge from Chapter 11 and start repaying cryptocurrency to consumers in June.
Senator Elizabeth Warren Vows to Reintroduce AML Bill that Extends to DAOs and DeFi
Senator Elizabeth Warren claims that they would reintroduce the bipartisan Anti-Money Laundering (AML) legislation that would encompass “decentralized entities” such as decentralized autonomous organizations (DAOs) and decentralized finance (DeFi) protocols.
At the Senate Banking Committee hearing on February 14 titled “Crypto Crash: Why Financial System Safeguards are Needed for Digital Assets,” Senator Elizabeth Warren, a fierce critic of cryptocurrencies, asserted that the community wants decentralized entities running on code to be exempt from AML requirements.
Bankrupt FTX’s Japan Unit Takes Step Closer to Returning Client Funds
FTX Japan, a division of the bankrupt cryptocurrency exchange FTX, allegedly intends to begin withdrawals for concerned consumers as early as February. According to a recent Bloomberg report, as part of the procedure to start enabling withdrawals, FTX Japan sends a notification requesting customers to confirm their account balances.
Seth Melamed, the exchange’s chief operating officer, reportedly stated that customers may move funds to accounts on the Liquid Global platform, which is controlled by FTX, with withdrawals beginning “very soon.”
Silvergate Bank Has Been Sued for “Aiding And Abetting” FTX Fraud
A party called Soham Bhatia has filed a new lawsuit targeting Silvergate Bank on behalf of himself and all others in a similar situation, citing the bank’s connections to the disgraced Sam Bankman-Fried (SBF) and the collapsed FTX crypto exchange.
The lawsuit was submitted before the United States District Court for the Northern District of California and is the most recent instance of a class action lawsuit that has been filed against the bank in the last two months because of its ties to the defunct entities.
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