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Has Judgement Finally Come for 2017 ICOs? Class Action Lawsuits Name Binance, BitMEX and Block.One Among Host of Crypto Defendants

11 class action lawsuits have been filed against 42 defendants for violating securities law by Roche Freedman LLP. Among the companies named were some of the crypto industry’s most prominent players including Binance, Block.One and Bitmex.

According to OffShoreAlert, the class action law suits were filed in the Southern District of New York Court on April 3 for the sale of unregistered securities.

The lawsuits have also included crypto firms HDR Global Trading; Tron; Civic; Kyber Network; Status; Bibox; KuCoin, and Quantstamp.

Several executives have also been specifically named including Changpeng Zhao (CZ) of Binance, Brendan Blumer and Dan Larimer of Block.one (EOS), Vinny Lingham of Civic, as well as Arthur Hayes of BitMEX.

Roche Freedman LLP is known in the crypto industry for having represented the estate of the late Dave Kleiman in its lawsuit against the self-proclaimed “Satoshi Nakomoto” and instigator of the BSV fork, Craig Wright.

2017 ICO Reckoning?

The crypto world suffered an onslaught of initial coin offerings (ICO) in 2017 as bitcoin surged bringing with it a manic public interest and incredible inflows of investment to the nascent digital space. As outlined by Offshore alert, the ICO investors who collectively lost 80% of their investments during this period were entitled to certain financial disclosures as mandated by the United States Securities and Exchange Commission (SEC).

At the time, many of these project sought to take advantage of the loose categorization of digital assets and many were successful in separating investors from their money with little recourse brought against them. It appears that these new law suits are targeting the ultra successful companies that executed ICOs such as Binance, which has grown into a colossus and was even able to recently acquire CoinMarketCap for $400 million.

The class action has been made on behalf of several individuals who invested in these 2017 projects including Chase Williams, Alexander Clifford, Eric Lee, and William Zhang, but also include “all others similarly situated.”

The lawsuit covers 42 defendants across 16 different countries, some with very little enforceable regulation. Decentralized projects means that there are rarely any central figures to hold accountable and bringing many of these projects to justice will prove near impossible for the Courts.

Has Telegram Ruling Opened Floodgate?

Many believe a precedent may have been set when the SEC won an important decision in their court case against Telegram over the legal status of the latter’s $1.7 billion Gram token offering.The US federal court granted the regulator an injuction to halt the distribution of Grams at the outset of the legal battle as the evidence presented to the court through the SEC’s Howey Test appears to have compelled them to act in favour of the regulator veryearly in the legal proceedings.

On Feb. 18, Telegram’s lawyer, Alexander Drylewski had criticized the application of the SEC’s Howey Test, citing that a test designed to categorize securities does not apply to digital assets that are offered with a promise of managerial oversight, that will increase their value over time.

Philip Moustakis, attorney at Seward & Kissel LLP and former SEC counsel told Blockchain.News that the SEC application of the Howey test was done correctly stating “An issuer cannot avoid application of the federal securities laws by separating in time the capital raise and the delivery of the digital representation of the investor’s interest in that capital raise. And, at delivery, in my view, the Grams would still represent the series of promises and understandings that led up to their distribution.”

It appears the success of the Howey Test in determining Telegram’s 2018 ICO as the sale of unregistered securities may have opened the floodgates for the crypto industry with the class action lawsuit being mounted by Roche Freedman LLP very shortly after the US Courts sided with the SEC.

South Korea Proposes 20% Capital Gains Tax on Cryptocurrency Commodities

South Korea’s parliament has put forward a bill that could see crypto profits taxed by up to 20%.

In South Korea’s parliament, a private members’ bill has been put forward that aims to impose a capital gains tax that could be as high as 20%. The tax bill will also apply to any income made in ICOs and crypto mining operations.

The crypto taxation bill has fostered a growing discussion on the true value and the nature of cryptocurrency within South Korea. While historically, South Korea is one of the most active trading markets for cryptocurrencies, authorities have been hesitant to regulate the digital assets, due to their belief that crypto regulation could further legitimize the sector.

Commodities not Currency

Further to the crypto taxation bill, an influential representative of South Korea’s Democratic Party, Yang Kyung Sook proposed an amendment to reclassify digital assets and cryptocurrency as ‘commodities’ instead of ‘currency’. Yang asserted that classifying crypto as goods rather than currency is due to the nature of investor behavior, which he believes qualifies digital assets for a capital gains tax.

Speaking to the Parliament, Yang said, “So far, virtual assets were recognized only as a function of money, and income tax was not imposed. However, recently, virtual assets are increasingly being traded as goods with property value.” He continued, “Considering various conditions, such as the recognition of intangible assets with property value, the necessity of taxation and the recognition of the property value of virtual assets are being raised at the same time.”

According to the data submitted by the Financial Services Commission, an average of 1.33 trillion won or US $1.10 billion made up the average daily cryptocurrency trade. Additionally, an average of 7.609 billion won (US $6.33 million) was traded in just the first five months of 2020.

The cryptocurrency market is actively trading. If you tax this, you are expected to get a lot of tax revenue. The United States and Japan are taxing cryptocurrencies.

South Korea CBDC Committee Begins

The South Korean government is set to announce the final details of taxing income generated from cryptocurrency transactions after years of discussion about the virtual asset that yet remains in a grey area.

The South Korean central bank has announced its intention to follow the global trend in the development of a central bank digital currency in April 2020. The bank launched the process by setting up a six-man panel including professors of commercial laws and lawyers focused on Fintech. The committee which also has a staff from the Bank of Korea’s legal policy office will review all potential regulatory issues that might impede the novel project.

The committee began work on the CBDC development in early June with a timeline spanning till the end of May 2021. The committee’s work will constitute part of the 22-month project timeline set to launch the CBDC.

SEC Makes ICO Token Sales More Inclusive, Not Enough For SEC Commissioner Hester Peirce

The United States Securities and Exchange Commission (SEC) has modernized its definition of an accredited investor to now consider not just an individual’s wealth, but their education to qualify for investing in cryptocurrency ICOs, as well as mainstream capital market offerings.

The US SEC has broadened its definition of “accredited investors” that qualify to take part in token sales of Initial Coin Offerings(ICOs) to include the consideration of a person’s education not just their net worth. Pro-crypto and blockchain SEC Commissioner Hester Peirce believes that the definition needs to be made even more inclusive and extended to “mom and pop” retail investors.

According official release on Aug. 26, the SEC’s new amendments to the definition are part of the Commission’s ongoing effort to “simplify, harmonize, and improve the exempt” offering framework creating more inclusion and opportunity while “maintaining appropriate investor protections and promoting capital formation.”

Under the old “accredited investor” definition, individual investors who did not meet specific standard of wealth “regardless of their financial sophistication”, have been denied the opportunity to invest in the United States’ multifaceted and vast private markets. The new definition applies to all capital market offering not just cryptocurrency token sale ICOs, and will also include native American and Tribal government entities.

SEC Chairman Jay Clayton said:

“For the first time, individuals will be permitted to participate in our private capital markets not only based on their income or net worth, but also based on established, clear measures of financial sophistication.”

While the rules for investment in capital markets and tokens sales of ICOs have become more inclusive, a document from the SEC states that they do not expect the number of eligible investors to increase significantly.

Crypto Mom Peirce Wants More Inclusion

Newly re-confirmed SEC Commissioner Hester Peirce, who is known for her forward thinking when it comes to regulation on innovation—thinks the new definition is not inclusive enough.

In a Tweet following the announcement, Peirce wrote:

“Americans shouldn’t have to ask the SEC for permission to invest, but today’s accredited investor rule at least offers people a path to ask permission based on their education rather than simply telling them ‘no, unless you’re rich.’“

Billionaire Investor Mike Novogratz Refuses to Lose Faith in Bitcoin

On Monday, 14th September 2020, during an interview on CNBC’s “Squawk Box,” Mike Novogratz, the CEO and founder of crypto-focused merchant bank Galaxy Digital asset management company talked about why he still loves cryptocurrencies as a hard asset despite a pause in the latest crypto market rally.

Novogratz has long been an advocate for Bitcoin and sees it as digital gold. During the interview, he took the opportunity to profess his love for Bitcoin. He said: “I don’t see our deficits miraculously collapsing. I still have a big Gold position. I still love cryptocurrency as hard assets. I think being short the dollar still makes a whole lot of sense.”

The Biggest Threat Facing Bitcoin

Last Friday, the US Department of The Treasury announced that the country’s deficit surpassed $3 trillion for the first time in history. It is projected to hit $3.3 trillion by the end of this budget year.

The U.S federal deficit hit $3 trillion due to aggressive fiscal and monetary stimulus. The U.S federal reserve resorted to printing more money in order to deal with a huge fiscal deficit. Novogratz once described “Money growing on trees” as the biggest threat to the world’s largest cryptocurrency. In other words, the biggest threat that any government could pose to Bitcoin is to decide to launch a budget surplus, therefore undermining one of the main value propositions of the world’s largest cryptocurrency.

When the government began printing money to facilitate a trillion-dollar stimulus package, investors such as Paul Tudor Jones begin turning to the scarce cryptocurrency to hedge against inflation.

While Bitcoin’s rally in August was partially attributed to the weakening U.S Dollar Index (DXY), the most current pause also coincided with the recent greenback’s temporary revival.

Novogratz stated that he prefers Bitcoin under this current financial situation, describing it as an “amazing environment” to buy the leading cryptocurrency. With “money growing on trees”, “another possible trillion-dollar stimulus package”, and “global money printing orgy”, Novogratz says that this is the year for bitcoin.

Investing in Cryptocurrencies

The billionaire investor Mike Novogratz thinks that global investors should hold Bitcoins in their portfolios. In his recent advice last month, he said that investors should watch Bitcoin and gold. He is a well-known investor and a famous hedge fund manager. He is a big believer in cryptocurrencies, and in 2017, he told the press that 20% of his net worth was in Bitcoin and Ethereum. He is also known for his price predictions. In 2017 December, Novogratz predicted the bear market prices and continues making price predictions.

How Bitcoin's 2020 Record Price Run Past $18,000 Is Different From Its All-Time High in 2017

Bitcoin has once again soared to new heights, rallying above $18K and hitting a high of $18,393.95 on CoinMarketCap at the time of writing.

The mainstream cryptocurrency has seen exponential growth and has exceeded all expectations, as it is the first time since 2017 that it has surpassed the $18K mark. Since its inception in 2009, Bitcoin’s price has only reached above $18,000 on four days. Speaking about Bitcoin’s surge past a crucial benchmark, MicroStrategy’s CEO Michael Saylor said:

“#Bitcoin is a monetary network that gets stronger as more individuals & corporations adopt it to protect their treasury reserve. The fire in cyberspace is spreading…”

Institutional investors touted Bitcoin early

In the past month, the digital asset’s price has increased by approximately 50%, led by many institutional investors endorsing Bitcoin.

MicroStrategy, Square, and Grayscale’s BTC investments have served to increase the market cap of Bitcoin and promote it as an ideal hedge. All three companies have diversified their treasury reserves with Bitcoin purchases, touting the cryptocurrency as a necessary investment in times of economic turmoil. Square jumped on the opportunity to purchase BTC when Bitcoin’s price was below $11,000.

With institutional investors turning to Bitcoin, the crypto asset has had an incredible run this year, as it was recorded around the $3K level only eight months ago. Bitcoin bull Cameron Winklevoss said:

“I’ve said this before but it bears repeating. There are 46.8 million millionaires in the world. There are only 21 million #Bitcoin – less than half will ever be able to own 1 bitcoin. Don’t miss the revolution.”

Needless to say, Bitcoin (BTC)’s rally has been greeted with much excitement by market traders, but market experts that have been closely monitoring the cryptocurrency have expected the digital asset to consolidate at the $17,500 level.

The difference with the 2017 Bitcoin rally

However, Bitcoin has broken the level cleanly with the support of Bitcoin bulls, pushing the mainstream cryptocurrency’s price higher. Currently, analysts expect the cryptocurrency’s price to pull back slightly before surging past its all-time high of near $20K.

With new money pouring into BTC thanks to large-size institutional investments, a retracement of the cryptocurrency has been brought up, but market experts are still debating on when Bitcoin’s rally will end.

Compared to 2017, when Bitcoin reached its all-time high, the bull run is different this time, as money pouring into the crypto asset has largely been attributed to huge Bitcoin endorsements driven by institutional investors. In 2017, most BTC investments were reported to be attributed to retail investors, meaning that endorsements were of a smaller sum. People also invested in Bitcoin because they had cases of FOMO (fear of missing out).

This time around, Bitcoin’s bullish momentum looks more promising, as hopes that it will gain more and sustain a higher price level, in the long run, has been expressed by many. With positive market sentiments all-around, co-founder of 10T Holdings, Dan Tapiero, tweeted explanations as to why Bitcoin’s rally was only beginning:

“Macro fundamentals much more supportive #Bitcoin today than last time we were at the same price in ’17. Now: Zero rates more prevalent; colossal world balance sheet expansion; 23% USM2 growth; 15% US budget def; Em fiat debasing; Covid impact.”

DeFi-ing all odds

Although Bitcoin will undoubtedly continue surging, the gains may not necessarily be as high as traders are hoping for, in the short term. Crypto analyst Qiao Wang explained:

“As bullish as I am on #BTC, I’m not expecting this bull market to be as big as the last one %-wise. I’d be happy with 30k-40k TBH. It really takes lot of money (sic) to move BTC. On the other hand retail money can take the sexy new narratives like DeFi a higher than your wildest dream.”

The crypto analyst suggested that decentralized finance protocols were only going to continue their upward trend, and that the craze surrounding DeFi has not ended yet.

The crypto space has been greatly transformed this year, with decentralized finance becoming a game-changer and revolutionizing digital assets in 2020. With the emergence of crypto, Bitcoin is sure to gain even more in the long run, as institutional support has only served to tout it as a safe proof investment.

Billionaire John Paulson Describes Crypto as “Worthless Bubble”, Will Eventually Crash to Zero

John Paulson, a renowned billionaire hedge fund manager, remains strongly against investing in cryptocurrencies.

On Monday, August 30, Paulson had an in-depth interview with Bloomberg TV where he called cryptocurrencies a “bubble”, and their values will eventually plunge to zero.

“I would say that cryptocurrencies are a bubble. Regardless of where they’re trading, today will eventually prove to be worthless. Once the exuberance wears off, or liquidity dries up, they will go to zero. I wouldn’t recommend anyone invest in cryptocurrencies,”

Paulson described crypto assets as a “limited supply of nothing”, referring to a fixed quantity that some coins have, including Bitcoin’s 21-million-coin cap – though others have no such limit.

When asked why he does not just short cryptocurrency, Paulson stated that crypto prices are too volatile, making such an asset class too risky for him to short or place bets against. He singled out the extreme volatility of cryptocurrency, stating that a short bet could ruin him in the short term, even if he were proven right in the long run.

Paulson said: “In crypto, there’s an unlimited downside. So even though I could be right over the long term, in the short term, I’d be wiped out.”

Paulson told Bloomberg that he is betting on another alternative asset – gold – as a safe haven for now. He revealed that he has favoured buying gold, saying that precious metal tends to perform well during high-inflation periods. He stated that he continues to buy gold in anticipation of rising inflation as the money supply expands.

Paulson, the hedge fund manager who made a fortune worth $20 billion by predicting the downfall of the US housing market in 2008, now is predicting that cryptocurrencies will go to zero.

Interest Among Hedge Funds

Paulson’s hard-line against cryptocurrency stands in complete contrast to most of his hedge fund colleagues who recently embraced Bitcoin and other digital tokens.

Some famous hedge fund managers, such as Paul Tudor, are Bitcoin investors. In contrast, Brevan Howard, a European hedge fund management firm, has put a small percentage of its funds in cryptocurrency. Its co-founder, billionaire Alan Howard, is a big supporter of the crypto space.

In February. A veteran US investor and hedge fund manager, Bill Miller approved his investment management firm, Miller Value Partners, to invest 15% of its assets into Grayscale’s Bitcoin Trust.

In May, Ray Dalio, the founder and co-chief investment officer of the world’s largest hedge fund firm, Bridgewater Associates, revealed that he bought some Bitcoins and said he would prefer investing in Bitcoin rather than bonds.

Hedge funds are not only well aware of the risks but also the long-term potentials of cryptocurrencies. The increased interests among hedge fund managers contrast sharply with prevalent scepticism among more conventional asset managers concerned about the high volatility of crypto assets and uncertainty concerning regulation.

Investors Enjoy Growing Enthusiasm & Popularity of Bitcoin: Grayscale's Study

Grayscale Investments surveyed 1000 U.S. investors recently; the Digital Currency Group (DCG) owned crypto asset manager has revealed the growing enthusiasm and popularity of Bitcoin as an investable asset class.

Key Takeaways in the Grayscale Survey

Per the survey, more than half of cryptocurrency investors in America, or about 55%, started investing in the space in the past 12 months, showing the demand for Bitcoin has surged within this time frame. According to the report, more than 66% of those who acquired the premier digital currency are still HODLing their bag to date.

About 91% of those investors who have liquidated their Bitcoin portfolio have done so at a good profit margin. The survey revealed that the growth in Decentralized Finance (DeFi) and its attendant investment innovations and the growth of Non-Fungible Tokens (NFTs) have not deterred the influence of BTC in the broader industry. Grayscale unveiled that Bitcoin still accounts for 46% of the total value of crypto markets, despite this apparent growth.

The presence of government-backed investment products linked to Bitcoin has also been cited as a good catalyst for some investors.

“More than three-quarters (77%) of the U.S. investors said they would be more likely to invest in Bitcoin if an ETF existed,” the survey report reads.

Investors welcomed its first Bitcoin Futures-linked ETF product through ProShares back in October. This has fueled the optimism that with more obvious strides, the Securities and Exchange Commission (SEC) can be convinced to approve the first Bitcoin ETF, as many other market regulators have.

Implications for Grayscale

With solid plans to offer an additional suite of digital assets products to meet investor demand, Grayscale has been sailing against the tides to float a Bitcoin ETF product. Armed through the survey with the knowledge that investors’ interest in a Bitcoin ETF has not waned over the past year, Grayscale can draw an additional motivation to meet the SEC’s demands to permit a functioning, full-fledged BTC ETF.

Image source: Shuttstock

Could Current DeFi Rebound be Indicative of Broader Market Revival?

The broader digital currency ecosystem has been well-reflected by the volatility that has kept the combined crypto market cap below the $1 trillion benchmark for many weeks now.

The experienced plunge has been an encompassing one, and all ecosystems in the crypto space, including the Decentralized Finance (DeFi) offshoot, have recorded a similar valuation drop. The DeFi ecosystem has slumped from a peak of $165.22 billion as of April 2 to $54.85 billion at the time of writing, with the drop coming off bigger than the slump of the market cap from about $3 trillion to the current value of $931 billion.

Despite the gloomy nature surrounding digital assets at this time, the current DeFi valuation came with a significant 24 hours growth which was pegged at 29.26% at the time of writing, according to data from CoinMarketCap.

The growth of the DeFi subsector is quite unusual, as the combined market cap had a 0.69% growth over the same time frame.

Coincidence in DeFi Growth and Crypto Slump?

The current growth in the DeFi market can be tagged as an intriguing coincidence as it comes at a time when industry participants are exploring how to invest in Ethereum as it now operates using the Proof-of-Stake (PoS) consensus model.

Among the major DeFi tokens that have added to the bottom line are the biggest gainer, Terra Classic (LUNC), which has climbed 69.85% to $0.0003375. The digital currency, linked to the Terraform Labs startup, collapsed back in May, dropping more than 99% of its value.

Uniswap (UNI) is also outperforming the market atop a 10.69% growth to $6.29. Reserve Rights and Maker are also amongst the major tokens that have added to the current bullish out of the broader market.

Price and valuations grow when investors inject capital into the ecosystem, and with cash inflows coming into the DeFi world, one may assume that this liquidity injection will soon trickle down to the broader crypto ecosystem. Should this happen this week, it will soon stir a change in the industry’s outlook, characterized by flattening volatility that will usher in stability and, eventually, a good growth trend.