regulatory scrutiny

Vodafone Follows PayPal and Visa to Leave Facebook's Libra Association

Facebook’s Libra faced another blow as Vodafone announced to have quitted the association.

British telecom conglomerate Vodafone is the eighth founding member to leave the Libra Association, which follows the exit of Stripe, Mastercard, Visa, eBay, Booking Holdings, Mercado Pago, and PayPal in 2019.

Vodafone’s exit is a different story

In June 2019, Facebook announced that it would launch the digital currency in partnership with other members of the association. However, the Libra project quickly faced hurdles imposed by skeptical regulators around the globe.

In October 2019, the Group of Seven (G7) warned cryptocurrencies like Libra can pose a risk to the global financial system, and they formed a task force to examine the issues. The past defecators (payment companies) left because of concerns regarding increased regulatory scrutiny that many US senators pointed out.

Vodafone’s exit is another story. The telecom giant mentioned it intends to focus on developing its own payment service, M-Pesa, further than the six African nations where it is currently available. The company said that it is not burning bridges as it is open for possible “future cooperation” with Facebook.

A Vodafone spokesperson said, “Vodafone Group has made the decision to withdraw from the Libra Association. We have mentioned from the beginning that Vodafone’s focus is to make a genuine contribution to extending financial inclusion. We remain completely committed to the goal and feel we can make the greatest contribution by focusing our efforts on M-Pesa (mobile payments platform).”

Dante Disparte, the head of communications and policy for the Libra Association, mentioned, “The representation of the association members may change over time, but the design model of Libra’s technology and governance ensures that the Libra global payment system would remain resilient.”

What’s next for Facebook Libra?

This is not a disaster for Facebook’s Libra Association. The Libra Association plans to add members later in 2020, with a current waiting list of more than 1,500 companies.

However, this is still not a resounding vote of confidence in Libra’s success. Vodafone thinks that Libra stands a better chance of doing it alone, and the association must work much harder to satisfy other partners to stay onboard as Libra prepares for its anticipated launch.

Initially, the members were expected to run nodes to assist in facilitating transactions on the Libra network and contributing about $10 million to get Libra going. Spotify, Lyft, Coinbase, and Uber, etc. are the initial founding members in the Libra association.

Image via Shutterstock

Kraken Fights IRS Over Customer Information

Kraken, the popular crypto exchange, is contesting the United States Internal Revenue Service’s (IRS) demand for critical exchange user information, citing it as an “unjustified treasure hunt.” According to Bloomberg, the crypto exchange has requested federal court intervention in San Francisco to ask the IRS to back off from its demand for customer information.

Kraken’s pushback against the IRS comes in response to the agency’s February summons, which demanded additional user information to identify Kraken accounts that did at least $20,000 of cryptocurrency trading in any single year between 2016 and 2020. The exchange claims that the IRS has gone “far beyond” its intrusive summons, and its demands for customer information are not justified.

Kraken’s request for federal court intervention cited Coinbase’s case from 2017, where the tax agency scaled back its initial demand after Coinbase’s continuous refusal. In the Coinbase case, U.S. District Judge Jacqueline Scott Corley decided that the summons sent to more than 14,000 customers of the exchange wasn’t too intrusive because the IRS had a valid reason to look into taxpayers who might not be disclosing their Bitcoin (BTC) gains.

Kraken’s lawyers claimed that the IRS has gone “far beyond” the rules set by Judge Corley in the Coinbase case. Kraken joined Coinbase in its efforts to push back against growing regulatory scrutiny by American regulators. Coinbase is currently fighting its own battle against the U.S. Securities and Exchange Commission (SEC) over offering crypto staking services.

The SEC alleged that staking services offered by Kraken, Coinbase, and other platforms violate securities law. While Coinbase settled with the SEC for $30 million for offering staking services, it has decided to head to court for its IRS battle.

The growing regulatory scrutiny has become a growing concern for crypto companies in the U.S. The likes of Coinbase CEO Brian Armstong and USD Coin issuer Circle CEO Jeramy Allaire have warned that the growing pushback from regulatory bodies will force budding crypto companies to move offshore.

In conclusion, Kraken is fighting against the IRS’s demand for customer information, citing it as an “unjustified treasure hunt.” The exchange has requested federal court intervention, pointing out that the IRS has gone “far beyond” its intrusive summons. With growing regulatory scrutiny, Kraken and Coinbase’s pushback against American regulators could become a growing trend in the crypto industry, with more companies moving offshore to avoid regulatory barriers.

Breaking: Binance Sells Russian Operations to CommEX, Exits Market

Key Takeaways

Binance to sell its entire Russia business to CommEX
Off-boarding process for existing Russian users to take up to one year
Binance cites compliance strategy as the reason for exit

Binance, the world’s largest cryptocurrency exchange, has announced that it will sell its entire Russia-based operations to CommEX. Noah Perlman, Binance’s Chief Compliance Officer, stated, “As we look toward the future, we recognize that operating in Russia is not compatible with Binance’s compliance strategy.” The move comes as part of Binance’s broader focus on compliance and regulatory adherence in over 100 other countries where it continues to operate.

While Russia is tightening regulations on crypto exchanges, the U.S. is simultaneously investigating Binance for potential violations of U.S. sanctions against Russia.

On May 6, 2023, the U.S. Department of Justice’s national security division initiated an inquiry into Binance. The investigation focused on whether the exchange allowed Russian customers to access its platform in violation of U.S. sanctions, which were imposed in response to Russia’s invasion of Ukraine. This inquiry was not an isolated incident; it followed a 2021 joint investigation by the Department of Justice and the Internal Revenue Service into the global exchange. Additionally, the U.S. Securities and Exchange Commission (SEC) has been probing Binance’s relationship with two firms owned by its founder, Changpeng Zhao, since early 2022.

Earlier this year, on April 25, 2023, Binance quietly lifted restrictions it had placed on Russian citizens and residents over a year ago. These restrictions were initially imposed in March 2022 after the European Union sanctioned Russia for its invasion of Ukraine. At that time, Binance had stopped supporting deposits from Visa and Mastercard cards issued in Russia. However, by April 2023, users were able to deposit Russian rubles and other currencies from bank cards issued in Russia. The exchange also lifted limits for accounts with balances larger than 10,000 euros for users in Russia.

The European Union had broadened its sanctions last year, making it impossible for Russian citizens and residents to use any crypto service registered in the EU. This led to immediate actions from other crypto platforms like LocalBitcoins, Crypto.com, and Blockchain.com, which notified Russian users that their accounts would soon be discontinued.

To facilitate a seamless transition, Binance and CommEX have outlined an orderly process for the migration of users and their assets. Existing Russian users have been assured that their assets are secure and will be protected throughout the transition period, which is expected to last up to one year. A portion of new user registrations from Russia will be immediately redirected to CommEX, scaling up over time.

While the financial terms of the deal remain undisclosed, it is noteworthy that Binance will not have any ongoing revenue split from the sale. Additionally, the company does not retain any option to buy back shares in the business, marking a complete exit from the Russian market.

Although exiting Russia, Binance remains optimistic about the growth prospects of the Web3 industry globally. The company plans to “focus our energy on the 100+ other countries in which we operate,” according to Perlman.

These regulatory pressures and policy shifts provide a broader context for understanding Binance’s decision to exit the Russian market. The sale to CommEX can be seen as a strategic move by Binance to navigate a complex and evolving regulatory landscape, both in Russia and globally.

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FTC Settles with Voyager Digital Over Misleading FDIC Claims, Former CEO Charged

The Federal Trade Commission (FTC) on October 12, 2023, disclosed a settlement with the beleaguered cryptocurrency firm, Voyager Digital, post allegations of misleading consumers regarding the safety of their deposits. The settlement emerges amid a broader crackdown on deceptive practices in the rapidly evolving crypto sector.

Voyager Digital, under the helm of CEO Stephen Ehrlich, is alleged to have falsely claimed that consumers’ deposits were insured by the Federal Deposit Insurance Corporation (FDIC) from at least 2018 until its bankruptcy declaration in July 2022. This misrepresentation reportedly played a significant role in attracting consumers to entrust their funds to Voyager. The debacle resulted in consumers being locked out of their cash accounts for over a month, culminating in a loss exceeding $1 billion in cryptocurrency assets.

Samuel Levine, the Director of the FTC’s Bureau of Consumer Protection, emphasized the ongoing efforts to curb deceitful claims surrounding cryptocurrency assets, which witnessed over $1.4 billion in losses due to scams in the previous year alone. The action against Voyager and Ehrlich underscores the FTC’s commitment to ensuring companies and individuals adhere to truthful claims, particularly regarding FDIC insurance.

The settlement mandates a permanent prohibition on Voyager and its affiliates from handling consumers’ assets. Furthermore, a $1.65 billion judgment has been agreed upon, albeit suspended to allow the bankruptcy proceedings to facilitate the return of remaining assets to consumers. However, former executive Stephen Ehrlich has not concurred with a settlement, thus, the litigation against him will continue in federal court. Additionally, Ehrlich’s wife, Francine Ehrlich, has been named as a relief defendant in the complaint.

Central to the FTC’s complaint is the misrepresentation of FDIC insurance, a crucial factor for consumers deliberating on where to deposit their assets. Voyager’s marketing materials, inclusive of direct assertions regarding the safety of consumers’ deposits, prominently featured claims of FDIC insurance which were found to be baseless as Voyager is neither a bank nor a financial institution. The complaint further noted that the FDIC does not insure cryptocurrency assets, rendering Voyager’s claims as misleading.

The settlement with Voyager sends a clear message to the crypto industry regarding the veracity of claims pertaining to asset safety and insurance. The FTC’s action illustrates a broader regulatory scrutiny aimed at ensuring transparency and consumer protection within the financial sector, extending beyond traditional banking to encompass emerging crypto entities.

In a simultaneous action on October 12, as reported by Blockchain.News, the Commodity Futures Trading Commission (CFTC) also charged Stephen Ehrlich with fraud and registration failures, mirroring a wider regulatory effort to uphold legal and ethical standards in the burgeoning crypto space.

Taiwanese Singer Chen Lingjiu Implicated in JPEX Cryptocurrency Fraud Case

The ongoing investigation into Taiwanese cryptocurrency exchange JPEX has taken a dramatic turn with the involvement of Chen Lingjiu, a well-known Taiwanese singer. As reported by Central News Agency on November 9, 2023, this development is part of a larger narrative of troubles surrounding JPEX, known for its rapid rise in the Asian cryptocurrency market and subsequent legal challenges.

JPEX, established in [Year], gained prominence for its innovative approach to cryptocurrency trading and diverse financial products. However, its growth was marred by regulatory scrutiny and allegations of operating outside legal boundaries. In [Month, Year], JPEX faced its first major challenge when regulatory authorities questioned its compliance with international financial regulations.

The case intensified when Chen Lingjiu, acting as JPEX’s spokesperson in Taiwan, was summoned as a defendant by the Taipei District Prosecutors Office. The Hong Kong police previously arrested JPEX executives, indicating a multi-regional investigation. Chen’s involvement has brought significant public attention to the case, highlighting the often-overlooked risks of celebrity endorsements in finance.

Chen, initially a witness, faced backlash due to his promotional role. His recent media statements reveal a 15% loss in his investments in JPEX, surpassing the earnings from his endorsement deal. This personal financial impact and his commitment to more prudent future endorsements shed light on the complexities celebrities face in such agreements.

The accusations against JPEX include fraudulent promotion of virtual currencies like JTC coin, with promises of high returns. Numerous investors have reported substantial losses, prompting legal actions against JPEX and its endorsers. The involvement of Chen Lingjiu has added a layer of complexity, as his celebrity status may have influenced investor decisions.

This case not only exposes the vulnerabilities in the cryptocurrency market but also emphasizes the responsibility of celebrities in endorsing financial products. As JPEX faces increasing legal scrutiny, the role of Chen Lingjiu illustrates the potential consequences of celebrity involvement in complex financial matters.

Dee Templeton Joins OpenAI's Board Amidst Corporate Governance Overhaul

Dee Templeton, a seasoned Microsoft executive, has been appointed as a nonvoting observer on OpenAI’s board. This appointment is part of a broader restructuring of the board, initiated in the wake of tumultuous events that saw OpenAI’s CEO, Sam Altman, briefly ousted and subsequently reinstated.

Templeton, with over 25 years of experience at Microsoft, currently holds the position of Vice President for Technology and Research Partnerships and Operations. Her role at Microsoft involves managing technical partnerships, including the company’s collaboration with OpenAI. This deep involvement with AI and technology innovation at Microsoft positions her aptly for the observer role at OpenAI.

The backdrop to this appointment traces back to November 2023, when OpenAI’s board took the controversial step of ousting CEO Sam Altman. This abrupt decision sparked intense debate and speculation within the tech community. It was suggested that disagreements within OpenAI regarding the ethical and security aspects of AI technology might have played a role in this decision. However, the specifics of these internal conflicts remain unclear. Altman’s reinstatement was announced just days later, coupled with a decision to overhaul the board, including providing a seat for a Microsoft representative, given its substantial investment in OpenAI.

The episode had far-reaching implications, not just for OpenAI, but for the broader AI industry. It highlighted the fragility and the complexity of corporate governance in fast-evolving tech companies, particularly in the domain of AI. The incident also underscored the increasing concentration of power in the hands of a few tech giants and the need for more robust and transparent governance structures in such companies.

Microsoft’s substantial investment in OpenAI, totaling around $13 billion, has positioned it as a key player in the AI landscape. This investment and Microsoft’s integration of OpenAI’s products into its core businesses have elevated the tech giant to a leading position in AI among major tech firms. The event of Altman’s brief ouster and the subsequent changes in OpenAI’s governance have also attracted regulatory scrutiny, with authorities in both the US and UK examining the partnership for potential antitrust implications.

The integration of Templeton into OpenAI’s board as a nonvoting observer signals a strategic alignment between Microsoft and OpenAI, reflecting the tech giant’s vested interest in the direction and governance of OpenAI. Her experience and expertise are expected to add value to the board, particularly in navigating the complex landscape of AI development and its ethical, legal, and societal implications.

German Crypto Firm USI Tech Founder Charged in $150 Million Fraud Scheme

Horst Jicha, the German founder of USI Tech, a crypto mining and digital-asset trading platform, faces severe legal consequences in the United States. Federal prosecutors in New York charged Jicha with orchestrating a fraudulent scheme that allegedly defrauded investors of approximately $150 million, according to DOJ official website. This case highlights the ongoing risks and regulatory scrutiny in the cryptocurrency sector.

Jicha, 64, has been accused of multiple crimes, including securities fraud, money laundering, and wire fraud. He was arrested on December 23, 2023, while attempting to vacation in Miami. This arrest marks a significant development in a saga that has been unfolding for several years.

In 2017, Jicha claimed USI Tech was the world’s first automated Bitcoin trading platform, aiming to make crypto investments more accessible to retail investors. He aggressively marketed the platform in the United States, particularly in New York and Las Vegas. However, by March 2018, as authorities began their investigation, Jicha abruptly shut down the USI online platform. This action blocked withdrawals of about $150 million worth of investor-owned crypto assets, which remain unaccounted for.

The FBI’s involvement underscores the seriousness of the allegations. James Smith, head of the FBI’s New York office, stated that the platform was merely a facade and accused Jicha of fleeing the country with millions of investors’ money.

Jicha’s case, filed as US v Jicha, 23-CR-342 in the US District Court for the Eastern District of New York (Brooklyn), represents a stark reminder of the potential risks associated with unregulated investment platforms, particularly in the volatile cryptocurrency market. The case also underlines the increasing efforts by U.S. authorities to clamp down on fraudulent activities in the crypto space.

Jicha has pleaded not guilty to the charges and was released on a $5 million bond. His defense lawyers, Marissel Descalzo and David Tarras, have expressed their intention to defend Jicha vigorously, seeking to bring to light the facts of his involvement with USI Tech. They aim to distinguish Jicha’s actions from those of the actual “bad actors.”

This development in the crypto world is a critical reminder for investors to exercise caution and conduct thorough research before investing in digital assets. It also highlights the need for improved regulatory frameworks to protect investors and maintain the integrity of the crypto market.