Liam Hennessy

FTX reboot could falter due to long-broken user trust, say observers

Crypto industry observers have questioned whether customers or investors will ever want to “come near” FTX again.

Several crypto industry commentators have expressed skepticism about FTX CEO John Ray’s vision to potentially reboot the crypto exchange, citing trust issues and “second-class” treatment of customers as reasons why users may not “feel safe to go back.”

Former FTX CEO Sam Bankman-Fried tweeted on Jan. 20 praising John Ray for looking at a reboot of FTX, suggesting it is the best move for its customers.

I’m glad Mr. Ray is finally paying lip service to turning the exchange back on after months of squashing such efforts!

I’m still waiting for him to finally admit FTX US is solvent and give customers their money back…https://t.co/XjcyYFsoU0 https://t.co/SdvMIMXQ5K

— SBF (@SBF_FTX) January 19, 2023

This came after John Ray told The Wall Street Journal on Jan. 19 that he was considering reviving the crypto exchange to make the users whole.

Ray noted that despite top executives being accused of criminal misconduct, stakeholders have shown interest in the possibilities of the platform coming back — seeing the exchange as a “viable business.”

In comments to Cointelegraph, Binance Australia CEO, Leigh Travers, believes it will be difficult for FTX to secure a license again, particularly as the industry moves into a new year with increased regulation and oversight by regulators.

Travers also noted that since the closure, FTX users have migrated “to other platforms, like Binance.” He questioned whether those users will “feel safe to go back.”

He addressed the issue of FTX governance and controls, with administrators sharing details about some clients getting “preferential treatment,” including “back door switches.” Travers noted:

“How will users feel comfortable going back to a platform that treated some clients as second-class?”

Digital assets lawyer Liam Hennessy, a partner at Australian law firm Gadens, thinks that it would be “very difficult” for FTX — given the reputational damage and lack of trust — to get customers or investors to “come near them again.”

Hennessy was also skeptical whether FTX will ever get approved for a license again, saying that it is “one big question mark” which entirely depends on jurisdictions.

The lawyer believes that in some offshore jurisdictions, it will be easier for the exchange to get license approval, but it will be pointless if its users do not intend to return.

“To jump through the hoops the major jurisdictions will set such as the US, UK and Australia will be a serious challenge.”

Meanwhile, RMIT University Blockchain Innovation Hub senior law lecturer, Aaron Lane, told Cointelegraph that it is “not surprising” that FTX would consider reviving the exchange business, stating that is the purpose of the Chapter 11 process — giving the company the ability to propose a plan to run the business and pay the creditors back “over time with the court’s approval.”

He believes that the “onus will be on FTX,” or a creditor that files a competing plan, to show that creditors will get a “better result” under the revival plan compared to liquidating FTX’s assets.

Lane however also questioned whether customers will ever trust FTX again, saying it is possible that another company looking to launch a new exchange “purposes those assets” rather than developing its own interface from scratch.

Death and self-custody: How to pass on your crypto when you die

Crypto lawyers suggest including highly detailed instructions in one’s will and appointing a crypto-savvy next-of-kin, among other suggestions.

The average crypto investor probably isn’t planning on dying of old age anytime soon, but that doesn’t mean they shouldn’t have a plan in place to pass on their crypto in the event they meet an unlikely demise, lawyers warn.

Speaking to Cointelegraph, Dubai-based crypto lawyer Irina Heaver believes that “billions” worth of Bitcoin (BTC) has been lost due to a lack of proper death-related planning by hodlers.

She noted that many families have been unable to access their loved one’s crypto assets due to private keys being taken to the grave, and emphasized the importance of discussing crypto assets with family and including them in their will.

Heaver said that the typical crypto investor is a “male millennial” between the ages of 27 to 42, which is the age range where arranging one’s financial affairs in case of death is the “last thing” to come up in conversation.

However, the lawyer believes it is “essential” to confirm that the administrator of one’s will is proficient in using cold and hot wallets in order to properly distribute one’s holdings.

Digital asset lawyer Liam Hennessy, partner at Australian law firm Gadens, believes that crypto investors should know that the “vanilla first step” to safeguarding their families’ future is to prepare a will — but they should also be mindful that crypto is a complicated asset and that the will needs to include really specific instructions on where the crypto is and how the keys are accessed.

Heaver has observed “huge problems” in the process of inheriting crypto, including a case where a family approached her asking for help in accessing a deceased loved one’s crypto assets.

Digital asset lawyer Krish Gosai, managing partner of Gosai law, believes that it is especially important to inform beneficiaries about crypto due to the lack of understanding surrounding digital assets.

Gosai believes it’s important to inform the executor of the will or loved ones about the existence of crypto assets but advised against sharing sensitive login information or seed phrases, saying it isn’t necessary.

He suggested that, if necessary, the seed phrase could be split among four family members.

Tax implications

Inheriting crypto can also be complex due to the differences in tax structures among jurisdictions.

Heaver added that in some jurisdictions, there are inheritance taxes. For example, in the United Kingdom, crypto assets will be “liable” for inheritance tax on the death of the holder and capital gains tax on a valid disposal.

In Australia, there is no inheritance tax, but Heaver noted that there is a capital gains tax if one disposes of an asset inherited from a deceased estate.

She noted there are then jurisdictions where there are no taxes, like the United Arab Emerites.

Digital asset lawyer Liam Hennessy, partner at Gadens, added that realizing digital assets at the best price can be another complication, due to factors such as price fluctuations and smart execution protocols.

Saying ‘not financial advice’ won’t keep you out of jail: Crypto lawyers

Australian and U.S. digital asset lawyers told Cointelegraph that by and large, the words on their own as “pretty useless.”

Crypto influencers may need to practice what they preach and “do their own research” when it comes to sharing their crypto tips.

According to several digital asset lawyers, the popular disclaimer “this is not financial advice” — may not actually protect them in the eyes of the law.

United-States-based securities lawyer Matthew Nielsen from Bracewell LLP told Cointelegraph that while its “best practice” for influencers to disclose that “this is not financial advice,” simply saying the term will not protect them from the law as the “federal and state securities laws heavily regulate who can offer investment advice.”

Australian financial regulatory lawyer Liam Hennessy, a partner at Gadens, explained that “advice warnings” are “by and large pretty useless,” while Australian digital lawyer Michael Bacina of Piper Alderman added that they aren’t “magic words which when uttered will disclaim liability.”

Crypto influencers and celebrity ambassadors have been increasingly finding themselves under the scrutiny of regulations, particularly in the United States.

Nielsen cited the recent Kim Kardashian case as an example, where Kardashian was charged by the SEC for failing to disclose how much she received to promote EthereumMax to her followers.

Influencers feeling the pressure

Crypto influencer Mason Versluis, aka Crypto Mason, who has over a million followers on Tik Tok, told Cointelegraph that he can’t stress enough to his followers that his content should not “be taken as financial advice.”

Versluis however said that despite using the disclaimer “this is not financial advice,” it’s important for influencers to be mindful that some people do “make financial moves according to what certain influencers say.”

He also stressed how difficult it can be to determine whether a project will end up in a “rug pull” situation as influencers “simply deal with the marketing team,” and generally have no contact “with any of the developers or owners.”

Australian crypto influencer Ivan Vantagiato, aka Crypto Serpent who has amassed 68,000 followers on Tik Tok says that influencers should do their due diligence researching a crypto project before running a promotion.

Hennessy believes the best way for crypto influencers to protect themselves is to be able to determine “what token is a security and what token is not a security.”

He further explained that it’s critical to understand that a “derivative is a product that derives its value from something else,” and you can be “criminally liable” for promoting derivatives.

Meanwhile, Bacina noted that an influencer residing in Australia is required to have a license to give out financial advice, and that “no disclaimer is going to give protection.”

Saying ‘not financial advice’ won’t keep you out of jail — Crypto lawyers

Australian and U.S. digital asset lawyers told Cointelegraph that, by and large, the words on their own are “pretty useless.”

Crypto influencers may need to practice what they preach and “do their own research” when it comes to sharing their crypto tips.

According to several digital asset lawyers, the popular disclaimer “This is not financial advice” may not actually protect them in the eyes of the law.

United States-based securities lawyer Matthew Nielsen from Bracewell LLP told Cointelegraph that while it’s “best practice” for influencers to disclose that “this is not financial advice,” simply saying the term will not protect them from the law, as “federal and state securities laws heavily regulate who can offer investment advice.”

Crypto influencers and celebrity ambassadors have been increasingly finding themselves under the scrutiny of regulations, particularly in the United States.

Nielsen cited the recent Kim Kardashian case as an example, where Kardashian was charged by the SEC for failing to disclose how much she received to promote EthereumMax (EMAX) to her followers.

Influencers feeling the pressure

Crypto influencer Mason Versluis, aka Crypto Mason, who has over a million followers on TikTok, told Cointelegraph that he can’t stress enough to his followers that his content should not “be taken as financial advice.”

Versluis, however, said that despite using the disclaimer “This is not financial advice,” it’s important for influencers to be mindful that some people do “make financial moves according to what certain influencers say.”

He also stressed how difficult it can be to determine whether a project will end up in a “rug pull” situation, as influencers “simply deal with the marketing team” and generally have no contact “with any of the developers or owners.”

Australian crypto influencer Ivan Vantagiato, aka Crypto Serpent, who has amassed 68,000 followers on TikTok, said that influencers should do their due diligence researching a crypto project before running a promotion.

Hennessy believes the best way for crypto influencers to protect themselves is to be able to determine “what token is a security and what token is not a security.”

He further explained that it’s critical to understand that a “derivative is a product that derives its value from something else” and that you can be “criminally liable” for promoting derivatives.

Meanwhile, Bacina noted that an influencer residing in Australia is required to have a license to give out financial advice and that “no disclaimer is going to give protection.”

Rushing ‘token mapping’ could hurt Aussie crypto space — Finder founder

Australian crypto entrepreneur Fred Schebesta said Australia already has a “fledgling” crypto industry but needs to “align with the other major markets.”

Australian crypto entrepreneur and investor Fred Schebesta has described the Australian government’s prioritization of token mapping as “wonderful,” but warns that rushing it could lead to detrimental effects on the economy.

Schebesta’s comments come after Australian Treasurer Jim Chalmers released a statement on Aug. 22 stating that the “treasury will prioritize token mapping work” in 2022 to show how “crypto assets and related services should be regulated.”

Speaking to Cointelegraph, Schebesta believes Australia already has a “fledgling” crypto industry but needs to “align with the other major markets and their regulations.”

Schebesta added that the “intricacies” of token mapping are not clear, and “things are changing as well.”

Schebesta is an Australian entrepreneur and investor — best known as the co-founder of Finder, an Australian comparison website. Schebesta is also a co-founder of crypto investment fund Hive Empire Capital and an advisor for Balthazar, a nonfungible token (NFT) gaming platform.

He explained that if “we rush” — the token mapping exercise could turn away crypto companies, particularly if there’s a “very different approach” to other countries.

Schebesta stressed that it’s not the time to “rush it out,” but take the time “to just take it easy and really, really do some deeper analysis.”

The token-mapping announcement from Australia’s new Labor government came three months after it came into power, breaking a long silence on how it would approach crypto regulation in the country.

At the time, Treasurer Chalmers said the government wanted to reign in on the “largely unregulated” crypto sector.

“As it stands, the crypto sector is largely unregulated, and we need to do some work to get the balance right so we can embrace new and innovative technologies,” he said.

While many in the industry lauded the announcement as an “important step” for the industry, some were disappointed that there the country was not “further along” the path to regulatory certainty.

Australian lawyer Liam Hennessy, a partner at Gadens, told Cointelegraph that Australia has been at the “forefront of the crypto developments,” but worries that the country is “slowly falling behind the U.K. and U.S.” due to itfailure to create rules for those “in the crypto industry, in particular those in financial services.”

Hennessy believes that while token mapping is vital, it shouldn’t be the primary focus for regulators.

“It should be secondary to actually creating some tax rules and regulations around licensing that we can give to our businesses that really need to hear it so they can compete with our global competitors.”

He fears that Australia is falling into the trap of “thinking that a little bit of attention from the government will solve the problems,” which he believes that the token mapping exercise “to some extent, is being viewed as.”

Schebesta said he spoke at a senate hearing in 2021 where he highlighted that “Australia would have a huge influx of new businesses […] because it’s a safe, stable, and great regulatory place to build their business,” adding that “tens of thousands” of jobs would be created “in the next two to three years.”