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Director of FinCEN Affirms That Cryptocurrency Industry Is in Line With Agency Regulations

The director of FinCEN (Financial Crimes Enforcement Network) Kenneth. A Blanco believes that the cryptocurrency industry is starting to fall in place with the agency’s regulations on money transmission services. A speech was given at the American Bankers Association & American Bar Association Financial Crimes Enforcement Conference suggested that FinCEN’s guidance of May 2019 showed more positive impacts of the crypto – space.

The report also verified how the regulations related to the money services business, also known as MSB’s, apply to the specific business models within the industry as well as abiding by obligations under the United States Bank Secrecy Act.

Kenneth also observed that businesses within the crypto space are increasing their internalization of the agency’s essential advisory and applying them in their filings directly.

Image via Shutterstock

OKEX Suspends Withdrawals Causing a Bitcoin and OKB Token Price Plunge

Leading Asian cryptocurrency exchange OKEx has caused a mild selling panic in the crypto markets after suddenly suspending its services to cooperate with an investigation. The suspension of services immediately stirred a reaction in the Bitcoin price which plunged 3% while OKB took a 15% hit.

According to an announcement by the major crypto exchange today, OkEx has suspended all cryptocurrency withdrawals as one of its private key holders is now cooperating with a public security firm in regard to an ongoing “investigation.”

Per the OKEx statement:

“One of our private key holders is currently cooperating with a public security bureau in investigations where required […] In order to act in the best interests of customers and deliver exceptional longtime customer service, we have decided to suspend digital assets/cryptocurrencies withdrawals as of [October 16, 2020 at 11:00 (Hong Kong Time)]. We assure that OKEx’s other functions remain normal and stable and the security of your assets at OKEx will not affected.”

OKEx serves many Chinese retail investors and is one of the three largest Chinese crypto exchanges along with Huobi and Binance.

The company’s CEO, Jay Hao addressed the withdrawal suspension on Weibo:

“Please be assured that the company, operation, and business are not impacted. It’s a matter of a private key holder’s personal issue, which is why we suspended withdrawal.”

The exchange has not been able to contact the private key-holder in question and claims to be unable to complete the associated authorization requests—OKEx assures the public that cryptocurrency withdrawals can resume as soon as the key-holder is able to authorize the transaction in question.

The Bitcoin (BTC) price has fallen nearly 3% following the news and OKEx’s own token OKB has crashed around 15%.

Is it Money Laundering?

While the information is largely unverified—a Beijing based reporter named Colin Wu has been following the event and tweeted:

“OTC merchant on OKEx had mistakenly received 500,000 CNY from the fraud group and was hunted by the police across the provinces.”

Wu also reported that the notice of the end of the withdrawal suspension fluctuates constantly between 12pm and 3pm. He further suggested that the events may be related to money laundering.

Wu wrote:

“The Chinese government is cracking down on money laundering using cryptocurrency for telecom fraud, and centralized exchanges are in a very dangerous state.”

More updates will come soon as more information on the OKEx suspension is revealed.

OKEx Founder Star Xu Arrested After Crypto Exchange Suspends Withdrawals

According to Caixin news, OKEx founder Mingxing ‘Star’ Xu has allegedly been arrested by police following the major crypto exchanges sudden suspension of its withdrawals as one of its private key holders was said to have been cooperating with a public security firm in regard to an ongoing “investigation.”

The news of leading Asian cryptocurrency exchange OKEx suddenly suspending its services to cooperate with an investigation drove the crypto markets into a panic—and it has now been reported that the person cooperating with authorities was the founder of the exchange Star Xu.

The suspension of services immediately stirred a reaction in the Bitcoin price which plunged 3% while OKB took a 15% hit.

The exchange reported at the time of the service suspension, that it had been unable a private key-holder in question and claimed to be unable to complete the associated authorization requests. The private key holder in question was Mingxing Xu, who has now been taken into police custody.

Two other sources close to OKEx told Caixin News, that they confirmed the key holder under investigation was Star Xu, OKEx’s founder, who was “cooperating with the investigation by the public security authorities” per the exchange announcement.

One of the sources also reported that Xu had been taken for questioning by authorities last week and did not appear at work for several days. The source described Xu as being very detail-oriented in financial expenditure management and it seems obvious to them that the delays were due to his inability to authorize the withdrawals as one of the main private key holders.

OKG Holdings Says OKEx Founder Investigation Won't Impact Business, OKB Price Plunges Further

As OKEx founder Mingxing ‘Star’ Xu remains under investigation following the suspension of the exchange’s withdrawal service, OKG Technology Holdings Limited has told its shareholders that business operations won’t be affected—even though Xu is a controlling shareholder of the publicly listed company. Despite Xu being under investigation by Chinese authorities and a controlling shareholder in OKG Holdings (Stock Code: 1499), the company announced that they expect the investigation into the OKEx founder to have little effect on its business operations or that of its subsidiaries.

OKEx Suspension and Founder Investigation

Last week, leading Asian cryptocurrency exchange OKEx caused panic in the crypto markets after suddenly suspending its withdrawals to cooperate with an investigation.

The suspension of services immediately stirred a reaction in the Bitcoin (BTC) price which plunged 3% while OKB took a 15% hit on the day.

According to the first announcement by the major crypto exchange on Oct. 16, OKEx had suspended all cryptocurrency withdrawals as one of its private key holders was cooperating with a public security firm in regard to an ongoing “investigation.”

Soon after on the same day, it was reported by Caixin news, that the private key holder under investigation was OKEx founder Mingxing ‘Star’ Xu.

Xu had allegedly been taken into custody by police following the major crypto exchanges sudden suspension of its withdrawals as one of its private key holders was said to have been cooperating with a public security firm in regard to an ongoing “investigation”, according to two other sources close to OKEx.

According to the OKG Holdings announcement on Oct.18, the board of directors of the company was notified by the legal counsel acting for OKC Holdings Corporation on 16 October 2020 that Mr. Xu Mingxing is presently under an investigation by public security authority in the People’s Republic of China (PRC). OKG Technology has not yet been able to contact Mr. Xu to confirm the information.

Per the announcement:

“Mr. Xu is a non-executive Director of the Company and also the controlling shareholder of the Company (OKG) through his interests in OKC. As of the date of this announcement, OKC holds 3,904,925,001 shares of the Company, representing 72.60% of the total issued share capital of the Company.”

The OKG technology said that to the best of their knowledge the board is not subject to any ongoing government investigation in the PRC. The announcement also highlighted that they expect that the investigation with Mr. Xu will not have any material effect on the business operations or financial position of the OKG and its subsidiaries.

BTC Price Recover, OKB continues Plunge

As reported, following the suspension of services on Oct.16 at OKEx, the BTC price fell around 3%, but has now recovered from the scare and is currently valued at $11,467.35 at the time of writing. The OKEx token (OKB) however has continued to fall. Prior to the OKEx suspension of withdrawals, the OKB price was around $5.88, it then plunged 35% before making a slight recovery. At the time of writing OKB, token price sits at $4.71 around 20% lower than Oct. 16.

OKEx Founder Troubles Not Linked to Yuan Money Laundering in China, Says Blockchain Journalist

Colin Wu, a Chinese blockchain journalist, has recently posted a tweet reporting that the legal troubles facing Mingxing “Star” Xu, the founder of OKEx cryptocurrency exchange, most likely have nothing to do with allegations associated with the CNY money laundering activities.

Colin Wu is a Chinese journalist who frequently covers issues associated with cryptocurrency exchanges, blockchain and digital currencies, and their regulations in China.

After the OKEx founder was arrested, the Twitter community and even the media assumed that the ongoing investigations of Xu are associated with the involvement of money laundering activities in China. Media sources reported that OKEx crypto exchange might have violated anti-money laundering regulations with over 800 accounts and huge amounts of funds involved in the case.

However, Wu’s tweet on Oct. 21, indicated that he believes the sudden suspension of services last week on the OKEx exchange and the investigation into founder Star Xu have nothing to do with the Yuan money laundering on going in China. Wu suggested that the real issues are likely to be personal matters between the Chinese authorities and Mingxing Xu, the OKEx founder.

Wu wrote in the twitter post:

“OKEx announced the opening of CNY deposits and withdrawals, and the direct withdrawal of crypto is still not open. This may indicate that the OKEx platform has nothing to do with CNY money laundering. It is more of a personal problem with the founder of OK, Star Xu.”

On October 21, OKEx announced that it would resume P2P trading with Vietnamese dong, Indian rupee, and Chinese yuan fiat pairs. The crypto company said that for the time being, the buy option would only be available while the suspension of cryptocurrency withdrawals and sales still remains until further notice. The company’s blog said: “Please note that cryptocurrency withdrawals are still temporarily suspended and the “Sell Crypto” option is not available.”

In June this year, China’s Central Bank announced widespread investigations of money laundering activities from non-bank financial institutions and those identified to have violated expected regulations would be held accountable.

OKEx Suspended Withdrawals

OKEx suspended cryptocurrency withdrawals on October 16 after the exchange announced to its customers that the company was unable to contact the private key holders in China. Information later emerged that such as an individual was the crypto exchange’s founder, Mingxing Xu, who by then had been arrested and was cooperating with the police for ongoing investigations. Caixin Chinese media company disclosed that Xu was interrogated for at least a week ago and had been absent at work some time. But the surprising thing is that he is the only person who holds the keys of the entire offer crypto exchange.

However, Jay Hao, the CEO and co-founder of the crypto exchange, stated that the issues facing Xu were to do with his own personal matters, which would not adversely affect the company’s business.

After OKEx announced the news regarding the suspension of cryptocurrency withdrawals, Bitcoin price fell by nearly 3% and OKEx’s native token (OKB) declined by 15% within half an hour. However, Jay Hao assured customers that all their funds are safe.

OKB Token Price Rises Over 10% on News of OKEx Exchange Founder’s Release

The OKB token price surged over 10% today on the back of circulating rumors of OKEx exchange founder Mingxing “Star” Xu’s potential release from the custody of Chinese authorities.

A Chinese crypto reporter “Wu Blockchain” has posted on Twitter that OKEx founder Star Xu may be free on bail soon and that Chinese authorities are unsure where or not to continue their investigation. The OKB price immediately surged more than 10% on the news, with the exchange’s native token at $5.40 at the time of writing up form $4.81.

On Oct 16, leading Asian cryptocurrency exchange OKEx caused a mild selling panic in the crypto markets after suddenly suspending its services to cooperate with an investigation with Chinese authorities. The suspension of services immediately stirred a reaction in the Bitcoin price which plunged 3% while OKB token also took a 15% hit—falling from nearly $6.00 to $4.25.

At the time, the major crypto exchange’s sudden suspension of its withdrawals was explained as one of its private key holders was said to have been cooperating with a public security firm in regard to an ongoing “investigation.” OKEx founder Mingxing ‘Star’ Xu was arrested by police shortly after withdrawal services were suspended.

Representatives from OKEx reportedly denied rumors that Xu was detained for any money laundering activities.

According to Wu Blockchain’s post on Nov 19, Star Xu may be released on bail soon and Chinese authorities are considering discontinuing their investigation into the OKEx founder. The reporter wrote, “This may bring a little bit of optimism in the investigation storm sweeping the Chinese crypto industry.”

Wu Blockchain also mentioned the development may be positive for the investigation surrounding the COO of Huobi as part of the investigation storm. He wrote:

“On the other hand, the COO of Huobi was also investigated by Shanxi police in early November. Several employees involved in OTC were reported to assist in the investigation. But Xu’s gaining a certain degree of freedom may also be good news for Huobi.”

The optimism may be spreading as trading volumes for the OKB token has been steadily rising with $56 million in trades on Monday compared to the $143 million in OKB traded today, according to data from CoinMarketCap.

While Star Xu may soon be released, the OKEx exchange has still not resumed withdrawal services and a message from an OKEx administrator apologized for the inconvenience but failed to give a time frame for when this service will be available.

South Korea Launches “Emergency” Inspection of Crypto Exchanges Following Terra Crash

Financial authorities in South Korea have beefed up crypto exchange inspections to boost investor protection following the recent collapse of LUNA and TerraUSD (UST) tokens

Per the announcement:

“The Financial Services Commission and the Financial Supervisory Service (FSS) have recently asked local cryptocurrency exchange operators to share information on transactions linked to TerraUSD and Luna, including the volumes of their trading, their closing prices, and the number of relevant investors.”

The financial watchdogs are also scrutinizing what caused the recent market crash and creating countermeasures for future events.

Confirming the ongoing inspection, an official of a local crypto exchange stated:

“Last week, the financial authorities asked for data on the number of transactions and investors and sized up the exchanges’ relevant measures. I think they did it to draw up measures to minimize the damage to investors in the future.”

Nearly 200,000 investors in Korea are speculated to have invested in LUNA and UST.

Despite the Terra tokens being invented by a Korean national, the authorities are taking the case seriously because they were traded globally. Do Kwon, the CEO of Terraform Labs, is the face behind the Terra blockchain.

The Terra ecosystem has been making headlines over the past week because LUNA collapsed to near-zero overnight despite being one of the top ten cryptocurrencies.

Kwon has proposed hard forking the Terra blockchain so that the troubled network can be salvaged, and if his suggestion is implemented, the new chain is set to go live on May 27.

Following the Terra crash, Kwon has been the centre of scrutiny, with some quarters suggesting that he was one of the pseudonymous co-founders of the failed algorithmic Basis Cash (BAC) stablecoin.

Therefore, history seems to be repeating itself because Basis Cash had to maintain the $1 threshold through code and not collateral, just like UST.

Hotbit Suspends Trading, Withdrawals amid Criminal Investigation

Hotbit, a cryptocurrency trading platform based in Hong Kong, announced on Wednesday that it has suspended trading, deposit, withdrawal and funding functions because law-enforcement agencies have frozen some of the company’s funds during a criminal investigation involving a former employee.

Hotbit confirmed an employee in question worked for the company until April this year. The exchange further stated that last year, the employee was involved in an external project, contrary to the company’s guidelines, and is now suspected of violating criminal laws.

Hotbit did not disclose many details about the investigation or the employee’s identity. The firm did not even disclose which jurisdiction is the investigation being conducted.

Hotbit only stated that the person, a former management employee, is under investigation because of his involvement in an external project in 2021, which is alleged to violate criminal laws.

Since the start of last month, the company said that law enforcement authorities summoned several senior managers of Hotbit to assist in the investigation.

But Hotbit clarified that the company and other employees did not have knowledge about the matter and were not involved in the project in question.

In a statement in its blog post, Hotbit wrote: “Law enforcement has frozen some funds of Hotbit, which has prevented Hotbit from running normally. Hotbit will resume normal service as soon as the assets are unfrozen.” The firm further added that the assets and data of all users are safe and said it has sent its application to the law enforcement authorities to release the frozen funds.

Hotbit was established in 2018 and registered in Hong Kong and Estonia, with most of its workers coming from China, Taiwan, and the U.S. According to the company’s website, the exchange has over 1 million registered users from more than 170 countries.

As per its blog post, the exchange cancelled open orders during the suspension and liquidated all users’ leveraged exchange-traded fund (ETF) positions according to their values at 12:00 UTC on August 10 Wednesday to prevent losses.

Coinbase Is Under SEC Scrutiny for Staking Programs

Cryptocurrency exchange Coinbase released its second-quarter earnings Tuesday and published its letter to shareholders.

In its quarterly form 10-Q filing, US-based Coinbase disclosed that it is under the U.S. Securities and Exchange Commission’s (SEC) scrutiny over its staking programs that allow customers to earn rewards for holding cryptocurrencies.

According to the filing, Coinbase “has received investigative subpoenas and requests from the SEC for documents and information about certain customer programs, operations and existing and intended future products.”

The requests are related to Coinbase staking programs, asset-listing process, classification of assets, and stablecoin products, the firm elaborated.

At Coinbase, blockchain-rewards income, majorly from staking, accounted for 8.5% of internet income in the second quarter. It dropped by 16% to $68.4 million in the course of the quarter, compared to the first quarter.

In the letter to the shareholders, Coinbase stated the SEC might dispatch a voluntary request for its token listings and listing process. But the exchange said it does not know whether the same will turn into a formal investigation.

Coinbase further mentioned within the letter: “As with all regulators around the world, we are committed to a productive discussion with the SEC about crypto assets and securities regulation, and to working alongside all policymakers to build a workable regulatory framework for the crypto economy that addresses any areas of risk, while enabling the development and adoption of digital innovation for the benefit of the broader society.”

Late last month, Coinbase was reportedly facing a probe from the SEC over whether it allowed users to trade unregistered securities. Bloomberg media first reported the matter. However, the SEC has not made the investigation public.

This investigation was separate from the SEC’s case against former Coinbase product manager Ishan Wahi, his brother, Nikhil Wahi, and his friend, Sameer Ramani.

Earlier last month, the watchdog charged the three with insider trading, alleging Ishan repeatedly tipped the timing and information about upcoming listings to his brother and friend, who, as a result, made profits worth over $1.1 million out of trading.

The investigation involving the staking programs might go the same way the SEC dealt with Coinbase last year.

In September last year, the SEC threatened to sue Coinbase if the exchange went ahead with launching its planned lending program. Users were primed to earn interest through the program by lending their tokens, but Coinbase later cancelled the project.

U.S. Federal prosecutors allege that Sam Bankman-Fried has used money from FTX exchange to invest in the VC

The United States government may have uncovered another another component of Sam Bankman-cryptocurrency Fried’s enterprise thanks to their investigation.

According to The New York Times, federal prosecutors in the United States have accused that Bankman-Fried invested money from the FTX exchange in the venture capital (VC) business Modulo Capital using funds obtained from the FTX exchange.

It was previously stated that SBF’s hedge fund and FTX’s sister business, Alameda Research, spent a total of $400 million in Modulo in 2022. This was one of SBF’s most substantial investments, and it became one of the most prominent investments overall.

The fact that Modulo, a relatively unknown company, was able to raise a considerable amount of cash amid hard times for the cryptocurrency market drew the attention of authorities, who have shown a special interest in the fundraising.

According to the most recent information obtained by the detectives working for SBF, the investment in Modulo was most likely made using the profits of a crime or with money that had been stolen from FTX clients and placed with the exchange.

According to the authorities, Modulo had developed into an essential component of the inquiry.

As the attorneys for FTX struggle to collect the billions of dollars owed to reimburse their customers, investors, and other creditors, Modulo’s assets are apparently coming into focus for their investigation.

The location of the SBF’s 400 million dollar investment has not been revealed as of yet.

Modulo Capital was created in March 2022 by three former executives of Jane Street, a New York-based business that had employed Bankman-Fried and Alameda CEO Caroline Ellison.

According to reports, Duncan Rheingans-Yoo, who was purportedly one of the founders, had just recently graduated from college.

Xiaoyun Zhang, sometimes known as Lily, was another one of Modulo’s co-founders. She had worked as a trader on Wall Street in the past and had some connections to SBF.

It is also common knowledge that Modulo operates its business out of the same condo complex in the Bahamas from where SBF operated.

The disclosure comes at a time when a commissioner for the United States Commodity Futures Trading Commission, Christy Goldsmith Romero, is calling into question the work that venture capitalists and money managers that sponsored FTX did in terms of their due diligence.

Earlier, the Deputy Prime Minister of Singapore confirmed that the investment company Temasek, which is controlled by the Singaporean government, was at risk of suffering “reputational harm” as a result of their investment in FTX.