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Tokyo District Court Ordered Japan’s First Bitcoin Seizure

The Tokyo District Court has set a legal precedent for the cryptocurrency industry in Japan, by issuing the first-ever Bitcoin seizure in the nation’s history.

The Tokyo District Court ordered a seizure of nearly $50,000 worth of Bitcoin (BTC) in relation to a cyberattack hack that was enacted against Coincheck exchange in 2018—setting a Japanese legal precedent as the first issued cryptocurrency seizure.

According to Japanese media publication Kyodo, the seizure order was issued at the request of the Tokyo Metropolitan Police Department.

The police have already seized the Bitcoin which was being hoarded by a Hokkaido doctor and executive from Osaka. Both men were arrested in March 2020, for their involvement in the hack against Coincheck Exchange.

The Hokkaido doctor and Osaka executive we accused of purchasing the stolen cryptocurrency, which at the time was in the form of NEM (XEM) through the dark web. Both men were allegedly aware of the illicit status of the currency which violates the organized crime laws of the country.

Coincheck suffered an attack that saw over $500 million worth of the cryptocurrency NEW stolen from its wallets. While the arrested Japanese men are complicit in have purchased the stolen goods, it was revealed that the personal computers of Coincheck employees were allegedly found to have been infected by a virus associated with Russian hackers.

Former Nissan CEO Wanted in Japan

Japanese authorities are currently looking for Carlos Ghosn, the former Nissan Motors CEO and Chairman, who allegedly paid cryptocurrency worth nearly $500,000 to escape criminal charges he was facing in Japan.

According to a court filing by US prosecutors, Ghosn fled Japan to his native country Lebanon on board a private jet is hidden in a musical equipment box. It is claimed that the crypto payment was made between January and May this year, but before this, Carlos had wired $862,500 to a firm linked to Peter Taylor in October 2019 before his December getaway.

Some of the financial crime charges that Ghosn faced in Japan included understating his compensation in Nissan Motors’ financial statements. Japanese prosecutors claimed that he only declared nearly $88 million, and this was only half of what he received between 2011 and 2015.

US CFTC Charges BitMEX For Operating Illegal Crypto Derivatives Exchange

On October 1, the US Commodity Futures Trading Commission charged owners of BitMEX cryptocurrency derivatives exchange for illegally operating in the United States.

In a complaint filed in the US District Court for the Southern District of New York, the CFTC brought a civil enforcement action against Arthur Hayes, the CEO, and co-founder of BitMEX, Samuel Reed, the exchange’s CTO and co-founder, and Ben Delo, its co-founder for operating an unregistered trading exchange and violating several CFTC regulations, including failing to implement required know-your-customer (KYC) regulations and anti-money laundering (AML) procedures.

The Legal Battle Presents Rough Moment for BitMEX

The CFTC claims that from at least November 2014 through the present, and under the leadership of Hayes, Reed, and Delo, BitMEX has been illegally offering leverage retail commodity transactions, options, futures, and swaps on cryptocurrencies, thus allowing customers to use leverages of up to100x and giving them the chance to make profits at a high level from minor fluctuations in crypto prices on its platform.

As per the CFTC, BitMEX has failed to implement the key compliance procedures required of financial institutions that impact U.S markets. The agency charged BitMEX with operating a facility for the processing or trading of swaps without having CFTC approval as a designated swap execution or contract market facility. The regulatory body further charged BitMEX with violating CFTC rules by failing to implement anti-money laundering procedures, customer information programs, and know-your-customer procedures.

According to the CFTC, BitMEX recognizes itself as the world’s largest crypto derivatives platform, with billions of dollars of trading volume each day. The commission alleges that the crypto exchange has obtained over $11 billion in Bitcoin deposits and made over $1 billion in fees while conducting most of its business in the U.S and accepting funds and orders from U.S customers.

However, BitMEX has not only failed to register with the CFTC but also failed to implement basic safeguards required by the CEA (Commodity Exchange Act) and CFTCs’ regulations designed to protect the U.S market participants and derivatives markets.

Heath P. Tarbert, chief executive and chairman of the CFTC, said:

“Digital assets hold great promise for our derivatives markets and for our economy. For the United States to be a global leader in this space, it is imperative that we root out illegal activity like that alleged in this case. New and innovative financial products can flourish only if there is market integrity. We can’t allow bad actors that break the law to gain an advantage over exchanges that are doing the right thing by complying with our rules.”

In its ongoing litigation against the owners of BitMEX, the CFTC now seeks restitution for the benefit of customers, civil monetary penalties, disgorgement of ill-gotten gains, civil monetary penalties, and a permanent injunction, permanent trading and registration bans from future violations of the CEA (Commodity Exchange Act).

BitMEX On Receiving End

This is not the first time when BitMEX is facing legal issues. The crypto exchange has been on the receiving end of multiple lawsuits within the last six months or so months, and they cast a long shadow over one of the largest crypto operators in the industry. In March this year, U.K’s Financial Conduct Authority (FCA) blew the whistle on BitMEX for not being authorized to operate in the country. The financial watchdog revealed that the crypto exchange has been operating and offering financial services and products to the U.K residents without being given legal authority by the regulator. BitMEX operating without regulators’ authorization leaves traders without protection.

US Department of Justice Releases Cryptocurrency Enforcement Framework

As the prevalence and usage of cryptocurrency continues growing rapidly, the US Department of Justice (DOJ) has released a cryptocurrency enforcement framework, which offers a comprehensive overview of the enforcement challenges and emerging threats in the crypto space.

Cryptocurrency has the potential to transform society

During the release of the framework, Attorney General William P. Barr alluded to the fact that cryptocurrency was an emerging technology that could revolutionize the way people interact. As a result, federal enforcement priorities had to be implemented in this growing space for a smooth transition.

He noted:

“Cryptocurrency is a technology that could fundamentally transform how human beings interact and how we organize society. Ensuring that use of this technology is safe, and does not imperil our public safety or our national security, is vitally important to America and its allies.”

The cryptocurrency enforcement framework is a cohesive report produced by the Attorney General’s Cyber-Digital Task Force detailing crucial apparatus like taming illicit usage of cryptocurrency. For instance, it highlights how criminals utilize crypto to hide their tracks on the dark web.

FBI Director Christopher Wray stated:

“At the FBI, we see first-hand the dangers posed when criminals bend the important technological promise of cryptocurrency to illicit ends. As this Enforcement Framework describes, we see criminals using cryptocurrency to try to prevent us from ‘following the money’ across a wide range of investigations, as well as to trade in illicit goods like criminal tools on the dark web.”

He added that cybercriminals had a preference for cryptocurrency whenever they conducted ransomware attacks as it could conceal their identities when obtaining malware, payments, and infrastructure.

Tremendous promise for the future

As much as distributed ledger technology and cryptocurrencies present a tremendous promise for the future, Barr acknowledged that it was crucial for crypto entities to adhere to the law.

The framework is divided into three parts, and it outlines fundamental information aimed at enlightening the public about legal regimes governing blockchain technology and cryptocurrency.

Last month, the US Central Intelligence Agency (CIA) rolled out a federal laboratory and in-house research and development arm dubbed CIA Labs to scale up technological and scientific breakthroughs like blockchain for future intelligence challenges.

Ripple CEO Says DOJ Report Offers No Regulatory Clarity, XRP Price Not Influenced

The tightening regulations on cryptocurrency raise many concerns and the DoJ’s new guidance around cryptocurrency enforcement, which casts the industry as fraught with criminal activity, has Ripple’s CEO and the crypto community up in arms.

Ripple CEO Brad Garlinghouse has been critical of the oppressive US regulation towards blockchain and digital assets. On Oct 7, incidentally, only two days after John McAfee’s arrest in Spain for ICO fraud and tax evasion, the Ripple CEO tweeted:

“Strongest internet companies built in the US, in part b/c of regulatory clarity. We have that opp with blockchain + digital assets. Responsible players like Ripple aren’t looking to avoid rules, we just want to operate in a jurisdiction where the rules are clear.”

The day after Garlinghouse floated the idea that Ripple may move operations to avoid crushing United States regulation, the crypto regulatory environment further intensified.

Attorney General William P. Barr published a cryptocurrency enforcement framework that provides, “a comprehensive overview of the emerging threats and enforcement challenges associated with the increasing prevalence and use of cryptocurrency; details the important relationships that the Department of Justice has built with regulatory and enforcement partners both within the United States government and around the world; and outlines the Department’s response strategies.”

What seems to have alarmed the crypto community and Ripple’s CEO is that the report cites the words “crime” and “criminals” almost 170 times and states: “Ripple Labs willfully violated several requirements of the [Bank Secrecy Act] BSA.”

Ripple CEO Brad Garlinghouse believes the report falls short of providing any further clear guidance, which he believes the United States desperately needs. He tweeted:

“An 70+ page contradictory report is not regulatory clarity — many responsible private players are trying to follow the rules, but that becomes increasingly hard when there’s no single arbiter of the law.”

The Ripple CEO commented on the report believing that the report is not regulatory clarity highlighting that unclear regulation is making it increasingly difficult to follow the rules.

Garlinghouse said:

“We need a framework (like #DCEA) that provides clarity, protects consumers AND fosters innovation in the United States or companies will move their investment (or whole company) overseas.”

As mentioned, Ripple is prominently cited in the DOJ’s report as “one example of successful collaboration, FinCEN, working in coordination with the United States Attorney’s Office for the Northern District of California, assessed a $700,000 civil monetary penalty in 2015 against Ripple Labs Inc. and its wholly-owned subsidiary, XRP II, LLC.67″

The XRP Price Reaction

Despite talks of relocation, Ripple is currently a US-based blockchain company and the DOJ’s Cryptocurrency Enforcement Framework will no doubt have a direct and profound impact on Ripple’s future and the XRP price.

Source: TradingView XRP/USDT

At the time of writing, Ripple’s XPR token remains uninfluenced by the Cryptocurrency Enforcement Framework news and is up 2.45% over the last 24hrs, sitting at a price of $0.25. However, the Ripple XRP price still appears to be on a downtrend. Charts analysis indicates that the 30-day moving average has become the support level after a price surge on Oct 4. But the 90-day MA is a critical resistance level that XRP must break to resume any upward price action, the Ripple crypto is currently consolidating below the 90-day MA.

The XRP price appears content to fluctuate between the 90-day MA and the 30-day MA levels, but we expect that when the DOJ regulation is put into action, XRP price could face a drop.

Additional reporting by Kun Hu

US SEC Hiring Attorneys for Crypto Assets and Cyber Unit

Regulators in the United States have been ramping up their efforts to regulate the crypto space, and the latest move from the U.S Securities and Exchange Commission (SEC) is no exception. The SEC has announced that it is seeking to hire general attorneys for its Crypto Assets and Cyber Unit in the Division of Enforcement. This unit is responsible for enforcing laws and regulations governing the use of crypto assets and cyber issues.

The job posting, which is available on the official government website, states that the successful candidates will be responsible for conducting “complex, fast-moving investigations” involving crypto asset securities and cyber issues. They will also be required to draft subpoenas or document requests, question witnesses through interviews, evaluate evidence and more.

This announcement comes shortly after the SEC’s chairman, Gary Gensler, asked for nearly $2.4 billion in funding to help the agency chase down crypto “misconduct” on March 29. This move highlights the regulatory pressure that the crypto community has been facing in the United States over the last year.

The crackdown on the crypto industry by US regulators has been ongoing, with local regulators planning to introduce new taxes directed towards the industry. Some industry insiders are concerned that these and other regulations could “choke” the industry and prevent much-needed innovation.

The Beaxy cryptocurrency exchange recently shut down after the SEC filed multiple charges against the company’s founder. Japan-based decentralized autonomous organization (DAO) Sushi is also facing a subpoena from the SEC. These actions demonstrate the SEC’s commitment to enforcing regulations governing the use of crypto assets.

However, not everyone in positions of regulatory authority is on board with the SEC’s approach. Congressman Tom Emmer has called Gensler a “bad faith regulator” and questioned his methods of industry oversight. Emmer’s comments highlight the ongoing debate about the appropriate level of regulation for the crypto industry.

In conclusion, the SEC’s move to hire general attorneys for its Crypto Assets and Cyber Unit in the Division of Enforcement is a clear sign that the agency is taking the regulation of the crypto industry seriously. This move follows a string of regulatory actions against crypto companies, and the ongoing debate about the appropriate level of regulation is likely to continue. The future of the crypto industry in the United States remains uncertain, but it is clear that regulators are not backing down from their efforts to enforce the law.