Asia Express

SBF allegedly bribes Chinese officials with $150 million to unfreeze accounts, Binance justifies blocking Hamas users, meanwhile, Huobi hacker returns all $8M in stolen assets.

Our weekly roundup of news from East Asia curates the industrys most important developments.

SBFs Chinese bribe scandal worsens

According to October 11 testimony from Caroline Ellison, co-founder of FTX-linked hedge fund Alameda Research, her colleague disgraced FTX founder Sam Bankman-Fried allegedly paid $150 million in bribes to Chinese government officials in 2021, higher than the $40 million disclosed initially.  

Ellison said during the FTX trial that two years prior, $1 billion worth of Alameda Researchs digital assets on crypto exchanges OKX and Huobi were frozen by Chinese law enforcement as part of a money-laundering investigation. Senior FTX executives, such as chief operations officer Constance Wang and Alameda trader David Wa, were also involved in the incident. The individuals first tried to contact a Chinese lawyer to unfreeze the funds, which didnt work. 

Then, FTX and Alameda staff allegedly created accounts on OKX and Huobi using the identification of a Thai prostitute to negotiate the return of funds. When that didnt work out, Ellison accused Bankman-Fried of paying a $150 million bribe to unfreeze the accounts. The bribe was recorded as the thing in future Alameda balance sheets. According to Ellisons testimony, the funds were immediately unfrozen following the bribe.

Presiding Judge Lewis Kaplan of the United States District Court for the Southern District of New York reminded the jurors that Bankman-Frieds alleged bribery of Chinese officials is not within the scope of the ongoing FTX trial. Instead, a second trial relating to SBFs bribery charges has been scheduled for March 11, 2024. The FTX trial will remain ongoing for the month of October. 

Binance clarifies account freeze

Yi He, a co-founder of Binance, clarified on the Chinese social media app WeChat earlier this week that only accounts of users suspected of violating international sanctions will be frozen on the exchange. 

The statement came after a wave of inquiries in response to local news reports that the exchange froze accounts of suspected Hamas militants per Israeli law enforcements request. Yi He explained: 

Hamas is a designated terrorist organization by the United Nations. Therefore, any organization, including banks and trading platforms, will need to cooperate on the receipt of freeze requests. This is not something Binance can decide on its own.

The Binance executive commented: I have no political biases, yet no trading platform can refuse such law enforcement requests. Palestine has an organized government. Hamas is a local militant group. They kill civilians; thats the problem. Hamas is not Palestine; the freeze is targeted towards Hamas, not Palestine.

In a follow-up post on October 11, Yi He further clarified that Binance would not confiscate nor freeze assets of ordinary users. Rules are created by the strong; in the face of international regulations, Binance is a nobody. She also pointed to the fact that, despite the ongoing war between Russia and Ukraine, the exchange has not frozen the accounts of ordinary Russians.

Crypto lending invalidated by second Chinese court

Crypto lending contracts in China are not protected by law because the underlying asset is illegal, a second Chinese court has ruled. 

As narrated by the Nanchang Peoples Court on October 10, plaintiff Mr. Ming lent 80,000 USDT to defendant Mr. Gang in April 2021 for the purpose of stablecoin trading. The loan was to be repaid within six months. Mr. Gang subsequently defaulted on the loan, leading to a civil lawsuit by Mr. Ming. Both the lawsuit and its appeal were dismissed. 

In their decision, the presiding judge wrote: 

There are legal risks involved in participating in virtual currency investment and trading activities. If any legal person, unincorporated organization, or natural person invests in virtual currencies and related derivatives that violates public order and good customs, the relevant civil legal actions will be invalid, and the resulting losses shall be borne by them.

The judge further explained that according to various legislation forming Chinas crypto ban, virtual currencies only exist in digital form, are not legal tender, and do not have legal compensation, such as Bitcoin, Ethereum, Tether, etc., and cannot be used as currency in the market. Virtual currency-related business activities are illegal financial activities that harm national financial order, financial security and social public interests, and are strictly prohibited.

The ruling does not extend to the digital yuan central bank digital currency, which the presiding judge said is a legal currency in digital form issued by the Peoples Bank of China. It is operated by designated operating agencies and redeemed by the public. It is equivalent to banknotes and coins.

Previously in August, a Chinese man lost $10 million worth of Bitcoin after the borrower defaulted on his Bitcoin lending agreement and a court ruled that the contract was invalid, citing similar reasons as the Nanchang Peoples Court. 

Huobi hacker returns all assets

According to a statement by Justin Sun, de-facto owner of cryptocurrency exchange HTX, formerly known as Huobi, a hacker has returned all of the 5,000 Ether ($8 million) stolen during a security incident last month. 

We have confirmed that the hacker has fully returned all funds, as promised, and we have also paid the hacker a white hat bonus of 250 ETH. The hacker made the right choice. We would like to express our gratitude to everyone in the industry for their help, Sun wrote. On September 25, Huobis hot wallet was hacked for 5,000 ETH in an incident first detected by blockchain analytics firm Cyvers Alerts. 

Sun subsequently offered a bounty and threatened legal action if the funds were not returned. During the incident, the blockchain personality also claimed that the exchange held around $3 billion in users assets. Last month, Huobi rebranded as HTX, raising community eyebrows due to the similarity of the name to the now-defunct crypto exchange FTX. 

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3AC co-founder Su Zhu was arrested in Singapore, leaving several disgraced blockchain executives’ entrepreneurial ventures in disarray.

Our weekly roundup of news from East Asia curates the industrys most important developments.

3AC creditors strike back 

On Sept. 29, Su Zhu, co-founder of defunct Singaporean hedge fund Three Arrows Capital (3AC) which prior to its collapse last June managed more than $10 billion in digital assets was apprehended at Singapores Changi International Airport while attempting to flee the country following the issuance of a committal order. 

Just days prior to his arrest, Singaporean courts issued an arrest warrant for Zhu after his deliberate failure to comply with a court order obtained which, in essence, compelled him to cooperate with the liquidators investigations and account for his activities as one of the founders of 3AC and its former investment manager. Zhu, a Singaporean national, was sentenced to four months in prison for the breach. 

Teneo, the appointed liquidator for 3AC, said in an email statement that creditors would seek to engage with him on matters relating to 3AC, focusing on the recovery of assets that are either the property of 3AC or that have been acquired using 3ACs funds during his time in prison.

The liquidators will pursue all opportunities to ensure Mr. Zhu complies in full with the court order made against him for provision of information and documents relating to 3AC and its former investment manager during the course of his imprisonment and thereafter, Teneo wrote. 

The filing revealed that Kyle Livingston Davies, 3ACs co-founder and a naturalized Singaporean citizen, was also sentenced to four months imprisonment for contempt of court. However, his current whereabouts remain unknown. Cointelegraph previously reported that Davies had fled to Dubai earlier this year and opened a restaurant there. 

Recently, the Monetary Authority of Singapore barred both Zhu and Davies from conducting enterprise investment activity in the city-state for nine years due to regulatory violations, such as exceeding 3ACs statutory assets under management limit. 

In July 2022, 3AC filed for bankruptcy after a series of failed leveraged trades on the Terra ecosystem left the hedge fund emptied of assets and left creditors with over $3.5 billion in claims. The event caused a chain reaction that led to the bankruptcy of 3ACs counterparties, such as Celsius, Voyager and FTX. Prior to the counterattack, 3AC creditors had suffered a humiliating setback where over one year of bankruptcy proceedings were halted by a U.S. judge due to a clerical error. 

At one point in the last year, Davies publicly boasted that there were no pending lawsuits or regulatory action against him. After the collapse of 3AC, both Zhu and Davies embarked on alternative entrepreneurial ventures. Aside from Davies restaurant, Zhus $36 million luxury Yarwood Homestead in Singapore, purchased just months before 3ACs collapse, had been converted into an eco-farm. Local media writes: 

Based on the principles of ecological design and agroecology, the company transformed the garden into a farmland, an ecosystem that includes agriculture and aquaculture, producing local vegetables, herbs, fruits, fish, chickens and ducks.

The farm is owned by Su Zhus wife, Evelyn Tan, through her company Abundunt Cities. Yarwood Homestead is open to curious gardeners, citizen scientists, and the community on an invitation-only basis. We also run a private dining experience to help us test recipes for native edibles through our Native Edibles R&D Kitchen, an excerpt from its website reads. 

A second wave

When it rains, it pours. 

In January, Zhu and Davies novel exchange OPNX a platform based in Hong Kong for trading bankruptcy claims on fallen crypto companies such as 3AC and FTX was spearheaded into development after soliciting $25 million from various investors. The platform launched in April with just $13.64 in trading volume on its debut. By June, the firm claimed it had reached nearly $50 million in daily trading volume. 

However, holders of OPNX did not appear to have enjoyed news of Zhus arrest and Davies indictment. On the day of the announcement, the Open Exchange Token fell nearly 60% in a single day to $0.01. The token has lost 79% of its value in the past month and has a fully diluted market capitalization of just $77 million, compared with over $300 million in June. 

In July, OPNX announced that it had onboarded tokenized claims of FTX and Celsius. Per design, claims would be converted into collateral in the form of OPNXs native reborn OX (reOX) tokens or oUSD, its credit currency. Users could then trade crypto futures using reOX as collateral.

However, the firms claims dashboard remains dysfunctional at the time of publication. Leslie Lamb, OPNXs CEO, had tried to distance the firm from Davies and Zhu, claiming that they are no longer involved in [its] operations. In August, all three executives were fined the equivalent of $2.7 million by Dubais Virtual Asset Regulatory Authority for running OPNX as an unlicensed exchange in the Emirate. 

Prior to Zhus arrest, 3AC Ventures, a venture capital fund created by the duo in June, appeared to be doing quite well. Its investments have since expanded to a project called Gamerlan since its initial investment in Raise. 3AC Ventures is focused on superior risk-adjusted returns without leverage, its creators proclaimed. 

Regardless, creditors have made it clear that their priority is in recovering the assets of 3AC and maximising returns for its creditors, which could also include former 3AC assets that are used to create new entities. Teneo has since recovered several nonfungible tokens owned by 3AC and auctioned them via Sothebys, netting a total of $13.4 million. The proceedings are still ongoing.

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Crypto industry concerns after Chinese dev fined 3 years’ salary for using a VPN, largest Ponzi in Hong Kong history, JPEX saga, and more.

Our weekly roundup of news from East Asia curates the industrys most important developments.

Chinese worker fined $145K over VPN 

An unnamed individual in China was fined 1.06 million yuan ($144,907) for using a virtual private network (VPN) to access restricted websites as part of a remote work routine for a foreign employer.

According to local media reports from earlier this week, during his employment as a consultant between 2019 to 2022, the unnamed individual accessed GitHub to view source code, answered questions in customer support, held teleconferences via Zoom and posted multiple threads on Twitter with the help of a VPN.

Based on a document issued by the city of Chengde Police, the individual’s income earned with the aid of a VPN was deemed as “proceeds of crime.” The police issued a penalty of $144,097, equivalent to three years of the individual’s salary.

Chinese law prohibits the use of VPNs to bypass the country’s “Great Firewall” that blocks popular sites such as Google, Wikipedia and Facebook. The ruling has spooked many in China’s IT and Web3 circles, who often rely on VPNs for similar remote-work tasks.

City of Hangzhou airdrops 10M digital yuan

The city of Hangzhou is airdropping 10 million digital yuan central bank digital currency, worth a total of $1.37 million, to incentivize food and beverage spending as it hosts the 19th Asian Games.

Anyone within the municipality of Hangzhou, locals and visitors alike, can receive the airdrop for use in food delivery platforms. Individuals can receive up to three vouchers that reimburse merchants in digital yuan for up to 20% to 30% of the value of food items after purchase.

The airdrop will renew every five days until the balance is emptied. The vouchers are only effective for five days and can only be tendered through select food delivery platforms. Earlier this year, the city of Hangzhou airdropped 4 million digital yuan, worth $590,000, in an effort to boost the CBDC’s adoption.

15 detained over largest alleged Ponzi scheme in Hong Kong’s history

Hong Kong police have detained 15 individuals linked to the collapse of cryptocurrency exchange JPEX. 

As of Sept. 27, Hong Kong Police claim they have received over 2,392 complaints claiming a total loss of 1.5 billion Hong Kong dollars ($191.6 million) in the apparent Ponzi scheme. Since the investigation began mid-September, police say that they have seized HK$8 million ($1 million) in cash and frozen bank accounts worth HK$77 million ($10 million) suspected of being proceeds of crime.

On Sept. 13, the Hong Kong Securities & Futures Commission issued a warning regarding JPEX being an unlicensed exchange within its jurisdiction. The move led to several arrests of its key executives and the abandonment of its corporate booth in Token2049 Singapore. Prior to its collapse, JPEX was one of the most heavily marketed crypto exchanges in Hong Kong, with corporate ads displayed across the city’s metro lines and taxis.

The incident is shaping up as potentially the worst Ponzi scheme in Hong Kong’s history in terms of monetary loss. Shortly after it was discovered, the SFC began publishing a list of crypto exchanges that are awaiting registration or are unlicensed within the special administrative region of China.

CoinEx resilient despite $70M hack 

Hong Kong crypto exchange CoinEx will resume services despite falling victim to a $70 million wallet hack orchestrated by North Korea’s infamous Lazarus Group. 

According to a September 22 statement, CoinEx claims to have resumed deposits and withdrawals on 190 cryptocurrencies, including Bitcoin, Ethereum, USD Coin and Tether. The firm stated:

“The wallet system is operating safely and steadily at present. We will gradually resume deposit and withdrawal services for the remaining 500+ cryptos. Since the resuming operations will be processed frequently, there will be no further or separate announcements for each crypto.”

As part of its new wallet system, CoinEx updated the deposit addresses of all crypto assets, rendering old addresses invalid. On Sept. 12, a leak of the exchange’s hot wallet keys led to the theft of over $70 million worth of users’ cryptos. Despite the incident, CoinEx said that cold wallets were not affected and that the CoinEx User Asset Security Foundation would “bear the financial losses from this incident.”

Multiple blockchain security firms, such as Elliptic, have pointed to North Korea’s Lazarus Group as the perpetrator of the exploit. The CoinEx team has since offered a “generous bounty” for the return of stolen funds. Prior to the hack, the exchange disclosed it had around $260 million worth of major cryptocurrencies in its proof-of-reserves report.

Alibaba moves into digital wallets

Chinese tech conglomerate Alibaba wants to launch its own wallet service. 

According to the Sept. 28 announcement, Alibaba’s Cloud subsidiary has partnered with crypto custodian Cobo to create an enterprise wallet-as-a-service solution for developers and organizations, integrating crypto wallets into software through APIs and SDKs. Cobo says it is incorporating its custodial wallet and multi-party computation technology to build the Alibaba Cloud wallet.

“This collaboration marks a significant step towards setting new standards in security, performance, and accessibility of the digital wallet infrastructure for Web3,” said Dr. Changhao Jiang, co-founder and chief technology officer of Cobo. The firm claims to hold partnerships with over 500 institutions, with billions of digital assets in custody through its wallet solutions. In June, crypto-friendly executive Joe Tsai became the chairman of Alibaba Group, replacing his predecessor Daniel Zhang.

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The 3AC saga continues, Token 2049 kicks off in Singapore and CoffeeDAO gives mom-and-pop cafes a leg up on Starbucks.

Our weekly roundup of news from East Asia curates the industrys most important developments.

Token 2049, one of the largest crypto conferences of the year, attracted a record 10,000 attendees, 300 speakers and 5,000 companies during the two-day event in Singapore.

From Sept. 1314, attendees entering the majestic Marina Bay Sands Convention Expo and Center were greeted by the energetic beats from the Polyhedra DJ, then to a hall of booths showcasing the latest innovation in the blockchain industry. Aside from the main show, over 400 side events took place this year.

Among the biggest announcements during the event, KXVC, a subsidiary of Kasikornbank, the largest bank in Thailand with 20 million customers, launched a $100 million fund dedicated to Web3, AI and deep tech firms based in Southeast Asia. KXVC wrote:

“For Web3, KXVC targets Web3 infrastructures, nodes validators, RPC providers, middlewares, modularity technologies, privacy, ZKP, wallets, alternative L1/L2s, shared securities, LsdFi and consumerization of NFTs.”

As for AI, the firm said it would prioritize investing in “consumer-focused AI, cybersecurity, AI/ML tools (e.g., deployment platforms, data annotation, model optimization), and problem-specific AI startups.”

The fund will be led by Krating Poonpol group chairman of Kasikorn Business Technology Group, and Jom Vimolnoht, managing director of KXVC. According to KXVC, Poonpol has over 100 investments, four unicorns, and 10 exits across five funds as a venture capitalist. Meanwhile, Vimolnoht has managed $400 million in startup investments and has backed 35 startups in the region.

On Sept. 15, Ethereum layer-two scaling solution Mantle Network,launcheda $200 million development fund for ecosystem acceleration. Among the first recipients are LiquidX, an application layer-focused venture studio building Web3 companies; Valent, a decentralized money market exploring liquid staking derivatives finance (LSDFi); and Range Protocol, an all-in-one on-chain asset management platform and ecosystem.

Previously known as BitDAO, the Mantle Network has been a maverick in reinvigorating blockchain communities, with the launch of a $500 million blockchain gaming fund in November 2021.

In May 2023, BitDAO (BIT) passed a “One brand, One token” unity governance proposal rebranding the network to Mantle with 235 million BIT tokens voting yes and 988 BIT voting no.

CoffeeDAO tokenizes marketing potential of cafes

A new decentralized autonomous organization, dubbed CoffeeDAO, is partnering with cafes around the world to unravel their market potential in exchange for free coffee.

In a live demonstration at Chye Seng Huat Hardware coffee store in Singapore, Cheney Cheng, co-founder of CoffeeDAO, showed Cointelegraph how to receive up to four free coffees at the store with a simple scan of a bar code, yielding four COFFEE tokens minted on Polygon, which could then be directly exchanged for coffee. Not only do customers receive airdrop tokens per visit, but the “loyalty points” can then be spent at other cafes.

According to Cheney, the concept is all about the neighborhood, which would allow community-based mom-and-pop stores to compete with the likes of Starbucks and McDonald’s. Customers aside, a referral program exists where individuals can receive up to 200 COFFEE tokens (200 cups of espresso) for onboarding cafes to the program. So far, over 15 cafes have partnered with CoffeeDAO throughout Singapore and Hong Kong.

Huobi Global changes name to… HTX? 

Cryptocurrency exchange Huobi Global is changing its name to a word where “H” represents the first letter of Huobi, “T” represents Justin Sun’s blockchain project Tron, and “X” represents the exchange’s 10th anniversary; the new name also happens to be eerily similar to the now bankrupt crypto exchange FTX.

According to the Sept. 13announcement, the rebranding coincides with the exchange’s goals in its new era to further “global expansion, thriving ecosystem, wealth effect and security and compliance.”

Justin Sun, de facto owner of HTX, said during a Token2049 press conference that the new name is also designed for non-Chinese users of the exchange, citing the difficulty of pronouncing “Huobi” for foreigners.

HTX has been in turmoil since the beginning of the year, shortly after Sun acquired the exchange and reportedly crushed an employee revolt. Despite touting stellar revenue and profit figures, Edward Chen, managing director of HTX Ventures, revealed that the exchange had cut its staff count down to 900 from 2,500 at the beginning of the year. Last month, the exchange denied it was close to insolvency and that Chinese police had arrested its senior executives. 

Justice’s late arrival for 3AC

It seems that some mild justice has finally arrived for Zhu Su and Kyle Davies, both co-founders of Singaporean crypto hedge fund Three Arrows Capital (3AC), who blew up the $3.5 billion firm in 2022 and then embarked on a game of catch-me-if-you-can with creditors.

In a September 14 statement, the Monetary Authority of Singapore (MAS) reprimanded both Zhu and Davies, barring the two from enterprise activities in the city-state’s regulated capital markets for nine years. As told by the MAS, the misconduct includes:

“(i) Providing false information to MAS [on 3AC]; (ii) failing to notify MAS about changes to Mr Zhu’s and Mr Davies’ directorship and shareholdings; and (iii) exceeding the assets under management threshold allowed for a registered fund management company.”

More than a year later, 3AC’s bankruptcy is still ongoing, and no criminal complaints have been filed against either Davies or Zhu in any jurisdiction. Last month, an embarrassing mistake that assumed Davies was a U.S. instead of a Singaporean citizen invalidated Davies’ court service in U.S. bankruptcy courts, which have cost over $30 million to date. Both Davies and Zhu have now been served in Singaporean courts.

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Tencent builds the largest AI LLM model ever, South Korean authorities bust $83M crypto scam.

Our weekly roundup of news from East Asia curates the industrys most important developments.

$500B firm partners with Polygon 

South Korea’s Mirae Asset Security Token Working Group, with over $500 billion in assets under management (AUM), is collaborating with Ethereum layer-two scaling solution Polygon (MATIC) for security tokenization initiatives. 

According to a Sept. 7 press release, Mirae Asset Securities has signed a memorandum of understanding with Polygon Labs for “helping domestic and international tokenized securities networks.”

“Mirae’s foray into tokenization will undoubtedly help accelerate the mass adoption of web3 among other financial institutions,” commented Polygon Labs’ executive chairman Sandeep Nailwal.

Meanwhile, Ahn In-sung, head of the digital division at Mirae Asset Securities, wrote: “Through technical collaboration with Polygon Labs, Mirae Asset Securities aims to establish global leadership in the field of tokenized securities.”

Previously, Polygon Labs partnered with the Monetary Authority of Singapore (MAS) and key financial institutions in its Project Garden asset tokenization initiative. Last November, Project Guardian executed foreign exchange and sovereign bond transactions via Polygon.

Tencent launches the largest LLM model ever 

Tencent’s new Hunyuan Large Language Model (LLM) has over 2 trillion parameters. Previously, the largest LLMs have contained upwards of 175 billion training data parameters.

During the Chinese IT conglomerate’s Global Digital Ecology Conference on Sept. 7, Tencent unveiled its Hunyuan AI competitor to ChatGPT which is now available through Tencent Cloud. Users are able to directly connect their software APIs to Hunyuan, or use it as a basis for a variety of applications in mechatronics, customer service and enterprise operations.

Tencent claims that Hunyuan is capable of processing “tens of trillions” of data per day and can reduce risk analysis procedures in automobile manufacturing from four hours to less than 30 minutes. The company has invested a combined $31.4 billion into cloud and AI research and development within the past five years. The firm wrote: 

In response to the problem that large models are prone to babbling nonsense, Tencent has optimized the pre-training algorithm and strategy, reducing the illusion of the mixed-element large model by 30% to 50% compared with mainstream open source large models.

Coinbase introduces stricter KYC measures for Singaporean customers

Singaporean clients of cryptocurrency exchange Coinbase must now provide know-your-customer information (KYC) when sending crypto to addresses other than Coinbase. 

In accordance with MAS regulations, Coinbase’s Singaporean customers will need to provide info on recipients’ wallet type, counterparty exchange name, full name and country of residence when sending crypto off the exchange. In addition, users who receive external crypto on Coinbase will need to provide similar KYC information on the sender in order to access their deposits.

The new KYC checks will not affect transfers between Coinbase accounts. MAS’ anti-money laundering requirements for digital asset transactions took effect in January 2020 and were last revised in March 2022. It’s not immediately clear as to why the exchange only implemented the regulations just now. 

Shangdong Province’s Metaverse KPIs

Government officials in China’s Shangdong Province have set key performance indicators (KPIs) for local bureaucrats to expand the province’s metaverse industry to 15 billion Yuan ($2.05 billion) by 2025, or for a cyclically adjusted growth rate of 15% per annum. In addition, the KPIs include the incubation of 100 metaverse ecosystem projects, 3,000 metaverse-related patents, and at least 30 metaverse experiences at public service centers. The Shangdong People’s Government wrote: 

“[It is necessary to] build a Shandong cultural dedicated network, Shandong cultural big data center and cultural database to form a cultural tourism metaverse big data system. Focus on cultural tourism resources such as A-level tourist attractions, cultural centers, libraries, and museums, and develop a number of immersive tourism service products such as VR [Virtual Reality] cloud tours.”

80 Chinese crypto influencer accounts banned

Sina Weibo, one of China’s largest social media platforms with over 580 million monthly active users, has banned 80 Chinese crypto influencer accounts with a combined follower count of over 8 million. 

According to a Sept. 5 announcement, the accounts were banned due to “promotion of crypto trading activities” in accordance with eight legislations that together form China’s “Crypto Ban,” which has been in force since August 2021. One user commented:

“Even more [crypto] groups have been removed. A large part of those who were with me six years ago have now removed as well. Those who have not been removed have also been greatly restricted. Please go and promote them on Twitter. Weibo is no longer a good environment.

Though the Crypto Ban has been in effect for some time, China has only taken a harsh stance on enforcement starting this year. It has resulted in the removal of criminal enterprises, legitimate projects, and caused collateral damages to foreign investors alike.  

$83M crypto scam group busted in South Korea

South Korean police have busted a 110 billion Won ($83 million) crypto scam. 

Authorities say that on Sept. 5, 22 individuals were arrested on charges of deception and fraud. The unnamed group, accused of orchestrating a Ponzi scheme, allegedly solicited $83 million from 6,610 individuals based on promises of investment returns in the crypto markets as high as 300%.

An investigation subsequently revealed that business entities created by the group advocating token listings and entry into digital asset exchanges were falsified. Local news reported that assets linked to the unnamed group have been seized in criminal proceedings. A police official wrote: 

“We will strictly respond to various financial crimes that infringe upon the people’s livelihood by exploiting the desperate psychology of ordinary people who want to improve economic conditions and the virtual asset investment craze.”

OKX in final stages of licensing in Hong Kong 

According to local news reports on Sept. 3, cryptocurrency exchange OKX is in the advanced stages of receiving its virtual asset provider license from Hong Kong regulators. Zhikai Lai, the firm’s CCO, said that he expects OKX to receive the regulatory license by June 2024 and hopes to attract anywhere between 100,000 to 200,000 retail Hong Kong crypto investors within the first year. The executive noted:

“Banks have held a conservative attitude towards the virtual currency industry for many years. It was not until the government promoted Hong Kong as a global virtual asset center last year, and the Securities and Future Commission and the Hong Kong Monetary Authority gave a clear message that banks were required to prepare resources to focus on the industry. After that, their attitude became positive.”

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Thailand to give every citizen 10,000 baht in crypto, Delio users unlikely to recover all funds, Vietnam is world’s No.1 country for crypto.

Our weekly roundup of news from East Asia curates the industrys most important developments.

Thailand’s crypto UBI

Thailand has a national airdrop in the works under which every citizen 16 years and older receives 10,000 baht ($285).

According to local news reports on Aug. 30, Thailand’s ruling Pheu Thai party will consult the Bank of Thailand in developing a “utility type 1” token necessary for the airdrop. The solution will be a Know Your Customer blockchain-based infrastructure that sources say will take at least six months to roll out. A 100 baht fee will also be charged per user for the KYC process. In addition, the solution will require the approval of the country’s Securities and Exchange Commission.

Real estate developer and crypto investor Srettha Thavisin was elected as Thailands prime minister on Aug. 22. During campaigning, Thavisin promised to give each person 10,000 baht in basic income stimulus via digital currency” if elected into power. In 2021, Thavisins firm, Sansiri, purchased a 15% stake in Thai asset tokenization provider X Spring for 1.6 billion baht ($45.7 million).

The Thailand Development and Research Institute said funding for the Thavisin Airdrop will come from tax collection in the 2024 fiscal year. The total budget estimate for the project is 560 billion baht ($16 billion).

The airdrop will not be equivalent to fiat baht funds, however. Users reportedly can only spend the digitized tokens within four kilometers of their residence. The tokens will only be valid for a period of six months and cannot be converted into cash or used to settle debts. Thavisins government is expected to assume office by the end of September.

Delio users assets slashed in half

More bad news is coming for users of troubled South Korean Bitcoin lender Delio. 

According to local news reports on Aug. 30, the South Korean crypto lending giant, which holds over $1.2 billion in Bitcoin and Ether, is expecting a recovery rate of just 50% to 70% on its assets. On June 14, Delio suspended deposits and withdrawals after disclosing significant counterparty exposure to fellow South Korean Bitcoin lender Haru Invest.

On June 13, Haru Invest also suspended deposits and withdrawals after allegations of fraudulent activities arose surrounding its operator, B&S Holdings. Haru Invest is currently in bankruptcy proceedings. Likewise, Delio is currently under investigation by the countrys regulatory authorities for allegations of fraud, embezzlement and breach of trust. The platform previously announced that it would resume withdrawals, although no updates on such a timeline have since been given.

Vietnams booming crypto market

Vietnam is currently ranked first in the world in crypto adoption, with up to 19% of its population between the ages of 18 and 64 using digital assets.

Thats according to an Aug. 30 report authored by Vietnamese venture capital firms Kyros Ventures and Coin 68, together with Animoca Brands. Currently, the Southeast Asian country is the home to around 200 blockchain projects and is expected to generate $109.4 million in revenue from crypto exchanges this year. The countrys crypto users are forecast to grow to 12.37 million by 2027.

Among the highlights, 76% of Vietnamese crypto users say that they invest in digital assets based on advice from friends, a number 2.5 times higher than individuals surveyed in the U.S. Nearly 70% of respondents said the crypto bear market would last less than one year or has already ended. Almost half of respondents say that centralized exchanges offer just as much utility as decentralized ones, but 90% of crypto owners use decentralized exchanges.

Binance Japan to list 100 coins

On Aug. 30, Tsuyoshi Chino, CEO of Binance Japan, held an online business briefing discussing the exchanges domestic expansion strategy. During the session, Chino said that Binance Japan would seek to list 100 coins and tokens as soon as possible.”

Local news reports note that Binance Japan currently provides spot trading of cryptocurrencies alongside staking “Simple Earn” programs. The use of margin trading is currently not available unless the exchange obtains a regulatory license. The presentation also revealed that its parent exchange, Binance, has surpassed 150 million in user count, with an average daily trading volume of $65 billion. Earlier this year, cryptocurrency exchange Coinbase ceased operations in Japan, citing difficult market conditions.

Shenzhens 15 million yuan for airdrops

In a government-sponsored conference promoting the digital Chinese yuan central bank digital currency, officials from the City of Shenzhen pledged 15 million digital yuan ($2.1 million) for municipal airdrops over the next three years. Binqquan Wei, vice governor of Agricultural Bank of China Shenzhen, said that the digital yuan has proven during trials to be a highly efficient method for consumer transaction receipts via its immutable distributed ledger technology:

“The platform currently has more than 200 merchants, involving 11 key industries such as education and training, catering, pet services, elderly care and sports.”

Chinas central government has been heavily promoting the digital yuan CBDC as a means of stimulating the countrys ailing economy amid a looming recession. In its latest figures, the CBDC has surpassed $123 billion in cumulative transactions since 2021, with test sites running in 17 provinces and 26 districts.

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Retail crypto trading is only days away in Hong Kong, but a mainland crackdown sees bounties offered for crypto firms and miners imprisoned.

Our weekly roundup of news from East Asia curates the industrys most important developments.

HashKey Hong Kong to commence retail trading 

Crypto exchange HashKey, the first licensed virtual asset provider in Hong Kong, will open its doors to residents for retail trading on Aug. 28.

According to local news reports, investors will only be allowed to invest up to 30% of their net worth into cryptocurrencies when using the platform. A risk control warning will be displayed if the limit is exceeded. However, Xiaoqi Weng, chief operating officer of HashKey, mentioned that the exchange “cannot validate users net worth,” and the limit is largely based on self-verification” of assets.

Weng also disclosed that the exchange will assess users’ investment background based on information submitted during Know Your Customer verification. “Beginners are limited in what they can purchase,” said Weng.

At its debut, users can only trade Bitcoin (BTC) and Ether (ETH) on HashKey Hong Kong. The Hong Kong Securities and Futures Commission has not yet allowed the margin trading of crypto products or crypto derivatives on regulated exchanges, Weng noted.

Dark side of Chinas crypto crackdown

It appears China no longer wants any private blockchain firms operating within its borders and is on the warpath to get rid of them, no matter the consequences. The move comes amid an increase in using crypto as a means of capital flight in an economic downturn.

Local media reports suggest that, legitimate or not, blockchain projects in China have literal bounties on their heads. First, third-party tracking firms tip off the police on undercover crypto projects in the country; if the report leads to arrest and asset forfeiture, the tracking firm stands to make millions of dollars in commission if not hundreds of millions of dollars for large-scale projects such as Multichain.

Then, after arrest, crypto executives are reportedly intimidated into handing over the projects private keys and access to servers. Police then allegedly get third-party payment processors to “dump” the coins and tokens over-the-counter in exchange for Chinese yuan.

Crypto executives are then charged with operating a “multilevel marketing scheme,” “pyramid scheme,” or “money laundering.” If convicted, the charges result in the seizure of all protocol-related assets by the state.

Sources claim that a portion of the funds goes into law enforcement agency revenue. Zhengyao Liu, a senior lawyer at the Shanghai Mankuen Law Firm, wrote: 

“In fact, in the past two years, the profit-seeking law enforcement in crypto-related criminal cases, especially in crypto-related MLM cases, has been the main reason people do not trust the case-handling agencies. For example, the ‘contribution’ of crypto-related criminal cases to financial fines and confiscation revenues is more than 50% higher than in previous years in the Jiangsu Province.”

The crackdown has led to the termination of several protocols this year, with little recourse for non-Chinese users with funds stuck on these platforms. Unsurprisingly, it has sparked a wave of emigration among Chinese Web3 founders and overseas law enforcement efforts to try and recover the “stuck” funds.

Digital yuan green bonds debut

Despite the draconian crackdown on private crypto activities, government-led blockchain efforts in China are doing quite well. 

On August 18, the first digital yuan central bank digital currency green bond was issued with a principal amount of 100 million Chinese yuan ($14 million), a term of two years, and a coupon rate of 2.6% per annum.

Facilitated by the Bank of Ningbo, the loans will be used to finance a 1.4 gigawatt and a 1.0 GW solar panel facility expansion project in Wuxi.

The digital yuan CBDC has been repeatedly “shilled” for much of this year as a means of stimulating domestic spending amid a financial crisis within the country. In the city of Tianjin alone, digital yuan transaction volumes have surpassed $17.5 billion in the first half of 2023, with over 302,000 merchants accepting the CBDC as a means of payment.

FBI tracks $41 million in North Korean crypto

On Aug. 22, the U.S. Federal Bureau of Investigation announced the identification of 1,580 BTC ($41 million) stolen from various projects by North Korean hackers. The six displayed wallets include funds stolen from the $60 million Alphapo hack in June, $37 million stolen from CoinsPaid in June, and $100 million stolen from Atomic Wallet in June. The FBI wrote:

“Private sector entities should examine the blockchain data associated with these addresses and be vigilant in guarding against transactions directly with, or derived from, the addresses. The FBI will continue to expose and combat the DPRK’s use of illicit activities including cybercrime and virtual currency theft to generate revenue for the regime.”

The agency said it believes North Korea will attempt to cash out the stolen funds. Criminal investigations into North Korean hackers role in the Harmonys Horizon Bridge and Sky Mavis Ronin Bridge exploits last year are still ongoing.

Chinese Bitcoin mining magnate sentenced to life in prison

Yi Xiao, a former vice chairman of the Jiangxi Provincial Political Consultative Conference Party Group, has reportedly been sentenced to life in prison by the Hangzhou Intermediate Peoples Court for unrelated charges of corruption and abuse of power in a Bitcoin mining enterprise.

According to local news reports on August 22, Yi Xiao operated a 2.4 billion Chinese yuan ($329 million) Bitcoin mining enterprise under the corporate name Jiumu Group Genesis Technology from 2017 to 2021. Despite knowing about a ban on cryptocurrencies, Xiao amassed over 160,000 Bitcoin miners with other corporate executives and, at one time, 10% of the city of Fuzhous entire electricity consumption.

Xiao was convicted of using his public office to secure preferential subsidies, capital, and electricity supply for the Jiamu Group. The former official also used his position to fabricate statistical reports to conceal the operations true nature.

Starting this year, China has been cracking down harshly on crypto activities amid a spree of data theft and money laundering incidences involving digital assets. Earlier this month, a Chinese national was sentenced to nine months in prison for purchasing $13,067 worth of Tether (USDT) for an acquaintance.

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Sources reveal the real reason China is ramping up efforts to stamp out Bitcoin and crypto. And a year’s worth of 3AC court orders nixed.

Our weekly roundup of news from East Asia curates the industrys most important developments.

On Aug. 11, a Chinese individual known only as Mr. Chen was sentenced to nine months in prison after helping his friend, Mr. Lin, purchase 94,988 Chinese yuan ($13,104) worth of Tether (USDT) and earning a commission of 147.1 Yuan ($20.24).

Because Mr. Chen shared his personal bank information for the peer-to-peer fiat-to-crypto transaction, Chinese authorities considered the act to be money laundering and imposed a harsh sentence. 

Officially, Chinese authorities attribute the tough-on-crypto approach to a spree of data theft and the use of crypto to launder proceeds of crime. However, sources tell Cointelegraph that the crackdown is more related to the countrys stringent capital control rules, where Chinese nationals are prohibited from buying more than $50,000 worth of foreign currencies each year without a state permit. The same applies to large-sum Chinese yuan transactions with foreign banks. 

The capital controls had been almost complete until the advent of crypto, sources say. The problem is further exasperated by a looming recession in China, making senior government officials wary of further money moving out of the country. 

In July, Jingmen municipal police were tipped off about an online poker platform operating in the city. Raiding the offices, police discovered the group had “laundered” over 400 billion Chinese yuan ($54.93 billion) worth of gambling funds using cryptocurrencies and involving over 50,000 individuals. 

However, the underlying criminal act that resulted in the tainted money was never mentioned. Unlike other jurisdictions, the act of gambling itself and the transfer of currencies abroad without applicable permits are deemed to be illicit activities. According to user reports, fiat-to-crypto transactions stemming as far back as 2021 are currently being audited by special police task forces.” 

Crypto projects and their Chinese founders are also disappearing at an alarming rate. The well-known Multichain incident aside, in May, employees of Chinese offshore yuan stablecoin issuer CNHC were detained by police following an office raid. They have not been heard from since. Commenting on the story, Wuwei Liang, a former employee of defunct crypto exchange CoinXP, claimed: 

“Suddenly, despite there being no complainants nor victims, the Wuxi police who came to Beijing from across the province took away all the members of the CoinXP team of China’s domestic blockchain entrepreneurial team.”

Liang further alleged that Chinese police would resort to “intimidation” to force a confession and the surrender of a projects private key. Armed with this as “evidence” police then charge the co-founder with “fraud and multilevel marketing,” bringing about a sham trial where the accused is convicted, resulting in the seizure of enterprise and user funds alike. (These allegations have not been proven in court.) We reported earlier on allegations of intimidation, detention, and even suggestions of the “kidnapping” of the defense counsel at the ongoing CoinXP trial. 

CBDC printer goes brrrr

Don’t misinterpret the Chinese government, however; they are quite fond of blockchain, so long as they are the ones in charge. 

In the interest of revitalizing Chinas ailing economy via consumer spending, government officials have recognized the role of the Chinese yuan central bank digital currency and made its adoption a political priority. On July 27, the city of Suqian airdropped 20 million ($2.75 million) of digital yuan shopping vouchers to residents. 

This was followed by a 10 million ($1.37 million) digital yuan food voucher airdrop by the city of Hangzhou, a 40 million ($5.49 million) digital yuan airdrop by the city of Shaoxing, a 30 million ($4.12 million) digital yuan airdrop by the city of Jianyang, and a 3 million ($0.412 million) digital yuan airdrop by the city of Ningbo, all within less than two weeks. At one test site in Chengdu, Chinas largest food delivery platform, Meituan, reported a 65.5% daily increase in the number of digital yuan transactions on its platform. 

So there are definitely real-world results to help revitalize the economy something desperately needed right now. On Aug. 15, China announced it would stop reporting its youth unemployment figures after the metric reached a record 21.3% in June. Perhaps we can expect the (blockchain) printer to go brrr in the months ahead? 

3AC creditors suffer humiliating defeat 

Lawsuits can be tough, especially when it comes to matters such as liquidating a $3.5 billion Singaporean hedge fund through multi-jurisdictional litigation. This is why a high level of competency is generally required for the attorneys who take part in such proceedings. 

And so, creditors of Three Arrows Capital (3AC) were dealt a significant setback on Aug. 11, when United States Bankruptcy Judge Martin Glenn said civil contempt rulings against 3AC co-founder Kyle Davies were invalid.

Judge Glenn explained that the subpoenas issued by law firm Teneo on behalf of creditors to Davies via Twitter starting in December were made on the basis that Davies held U.S. citizenship. However, it emerged earlier this month that Davies renounced his U.S. citizenship to acquire Singaporean citizenship a few years prior. 

“Because Mr. Davies’ United States citizenship was a prerequisite for valid service on him in the manner effected, he was not properly served with the subpoena issued by this Court.”

As a result, the U.S. court could not exercise jurisdiction against Davies, with Judge Glenn suggesting that creditors attorneys bring a motion to a Singaporean court to compel Davies’ compliance instead. It has been over a year since 3AC filed for bankruptcy. 

In other words, after one years time, creditors have just found out that the jurisdiction where they filed to claim debtors assets had no jurisdiction over the debtors. 3AC co-founder Zhu Su, by the way, also has Singaporean citizenship and cannot be compelled by U.S. courts on this matter. 

Now dont get me wrong, everyone makes mistakes, but often trivial mistakes have trivial consequences. Unfortunately, that wasnt the case here. Since the inception of proceedings, 3AC creditors have reportedly spent millions in legal fees, with some estimates going as high as $30 million. The proceedings have so far led to the recovery of several nonfungible tokens (NFTs) owned by 3AC, which were sold at two Sothebys auctions for a combined … $13.4 million. 

In another setback, a Singaporean court ruled on Aug. 15 that the city-state would be the convenient forum for hearing 3AC creditors $140 million dispute with DeFiance Capital, and not the British Virgin Islands as suggested by Teneo. 3AC creditors allege that funds held with DeFiance Capital belong in the estate of 3AC, while DeFinance Capital says that its assets belong to its independent investors. Commenting on the double whammy, Su Zhu wrote: 

“As the current acting liquidator for 3AC, we believe Teneo is repeatedly overreaching in their attempt to seize other investors’ funds. Even on a technical and legalistic approach, the DC [DeFiance Capital] and SNC assets rightfully belong to the feeder funds of 3AC,”

But in the overall context, winning a battle is easy; winning a war is difficult. On Aug. 16, Dubai regulators reminded Davies and Zhu that their new OPNX exchange for trading crypto bankruptcy claims remains unregistered in the Emirate and, correspondingly, faces a 10 million Dirham ($2.72 million) penalty for operating without a proper license.

Unlike in the U.S., Davies and Zhu actually own assets in the UAE vulnerable to seizure, including Davies prized chicken restaurant. Whether the co-founders can really keep their assets sheltered from the path of angry creditors (and regulators alike) remains to be seen. 

Just before we published Asia Express, 3AC liquidators filed a committal order against Zhu Su in the court of Singapore.

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Man loses $10M after Chinese court rules Bitcoin lending is not protected by law, loads of Web3 founders get arrested, and Huobi rumors swirl.

Our weekly roundup of news from East Asia curates the industrys most important developments.

Chinese man’s $10M loss as court says Bitcoin lending not protected by law

A man in China’s Jiangsu province, identified as Mr. Xu, appears to be out of luck after a court ruled that his 341 Bitcoin loan ($9.9 million) to counterparty Mr. Lin is not protected by law according to local news reports on August 3.

Some time ago, Mr. Xu lent 341 Bitcoins to Mr. Lin after the latter approached him for a peer-to-peer loan. At the time, Mr. Xu lacked fiat funds, and so the parties settled on using Bitcoin for the borrowing through a written agreement. Shortly afterward, however, Mr. Lin defaulted on the loan, prompting Mr. Xu to sue in the Changzhou Zhonglou People’s Court. The case was dismissed. 

In supporting the judgment, Ming Wang, vice-magistrate of the Changzhou Zhonglou People’s Court, told reporters that Bitcoin is a digital commodity that does not hold the same legal status as fiat currencies. Therefore, the asset can neither be subject to a legal enforcement action, enter circulation, or be used to ” award compensation.”

“The lender bears ALL risks [when lending crypto],” Wang warned. That said, in another ruling dated Nov. 29, the Hangzhou Internet Court wrote that digital assets such as nonfungible tokens are “online virtual property” that should be protected under Chinese law. 

Aside from outright ownership, all forms of cryptocurrencies and transactions are currently illegal in China. The country has been cracking down on private blockchain initiatives in favor of the Central Government’s efforts to promote centralized blockchain, such as via the digital yuan CBDC. 

China’s disappearing Web3 founders 

Just last month, Chinese cross-chain bridge Multichain was still one of the biggest in the DeFi sector. While its reputation took a hit due to the disappearance of its co-founder, Zhaojun He, the protocol still had around $1.5 billion in total value locked at the start of July.

Then on July 14, investors’ worst fears came true after Multichain developers revealed that Zhaojun had been arrested by Chinese police nearly two months prior. Because Zhaojun held discretionary control of Multichain’s entire server-based and private keys, they said the protocol had to be shut down.

But the question left many readers pondering, how does the arrest of a single individual lead to the shutdown of an entire enterprise and the disappearance of enterprise funds? One anonymous user in the Multichain Telegram chat claimed:

“Its become a total supply chain. Third-party tracking companies will supply leads to the police to take them into custody as long as the [Web3] co-founder is in China and has money. Where do you think the police’s case came from? Third-party tracking companies make at up to 10 figures [CNY] from such tipoffs.” 

While Zhaojun is currently detained without any revelation of the charges or any news whatsoever the Multichain funds supposedly “stuck” in the protocol are on the move. Blockchain security firms, such as Bitrace and PeckShield, have revealed that since Zhaojun’s arrest, assets stored on the Multichain bridge had been swapped for stablecoins and transferred out of the protocol. The move prompted stablecoin issuers such as Circle and Tether to freeze over $63 million of suspicious transactions linked to Multichain.

In a series of screenshots seen by Cointelegraph, exchanges such as Binance are also investigating stablecoin deposits to its platform linked to the Multichain incident. Meanwhile, whoever is making the transfers has appeared to smarten up as well, with swaps of users’ assets now being done through privacy coins as opposed to traceable assets.

Some observers theorize that the circumstantial evidence points to the Chinese police moving the coins. For starters, the In a similar incident, Wuwei Liang, brother of CoinXP co-founder Liang Liang, wrote in regard to the ongoing criminal proceedings against his brother and the firm:

The virtual currency involved in the case [seized from CoinXP by police] was transferred to other wallet addresses by the Wuxi Public Security Bureau, and 20 Bitcoins disappeared during the transfer process and have not been recovered so far.”

Liang Liang’s trial is ongoing and the blockchain executive is currently charged with “illegal solicitation of public funds and running a “multi-level marketing” scheme. The latter, by the way, carries the penalty of civil forfeiture of all personal and enterprise assets if convicted, and the trial is not going well.

The crackdown appears to have started with China’s own state-blockchain centralization efforts this year. On May 31, Cointelegraph reported that offices of the Chinese offshore-yuan stablecoin issuer CNHC had been raided by police. Its executive had been reportedly detained and like Multichain, no news has been heard from them since.

Huobi in trouble once again Everything is just fine

If I could sum up with everything that goes on in blockchain from day to day using one phrase, it’d be “all is not, as it seems.”

On August 6, local news outlets in Hong Kong reported that senior executives of cryptocurrency exchange Huobi had been arrested by Chinese police. The exchange subsequently denied this as “fake news.” Chinese blockchain personality Justin Sun, the de-facto owner of the exchange, also labeled the news as fear, uncertainty, and doubt (FUD). 

But as Adam Cochran, partner of Cinneamhain Ventures, claimed on Twitter that Sun allegedly withdrew $60 million from the exchange after the news broke out. Cochran also claimed that some Huobi staff “are currently under criminal investigation,” citing an insider at Tron (Sun’s blockchain project) who has “first hand knowledge of the investigation.”

However, according to Sun, Huobi is doing just fine. On August 1, Sun claimed that the exchange generated more than $85 million in profits in Q2 2023, with $100 million in profits projected for Q3 2023. Pretty impressive, considering that the exchange suffered an internal revolt just earlier this year after the firm allegedly slashed a vast majority of employment benefits.

But anyway swirling rumors around Huobi may be behind its USDT reserves declining to less than $100 million from $630 million last month, while its total assets have fallen to $2.5 billion compared to $3.1 billion in the same period.

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