SEC

Jury in Terraform Labs case shouldn’t decide whether crypto is a security — SEC

According to the SEC, the tokens at issue in its civil case against Terraform Labs should be a “legal question” for a court, “not a factual question for the jury.”

Lawyers representing the United States Securities and Exchange Commission requested the judge in its civil case against Terraform Labs and co-founder Do Kwon determine whether certain crypto assets are securities rather than a jury.

In a Dec. District Court for the Southern District of New York, the SEC argued that the matter of cryptocurrencies as securities under the commission’s guidelines was a “legal question to be determined [by] the Court, not a factual question for the jury.” According to the SEC, sending the question of whether certain cryptocurrencies in the Terraform Labs case qualified as securities under the Howey test — the commission’s standard for determining what is a security — opened the matter up for discussion.

“There is no genuine dispute of material fact that Defendants’ crypto asset offerings involved an investment of money, in a common enterprise, with an expectation of profit to be derived from Defendants’ efforts,” said the SEC.

The SEC has taken it upon itself to label different cryptocurrencies as securities in various lawsuits, including enforcement actions against Binance and Coinbase. In the commission’s case against Ripple, a federal judge ruled in July that the XRP (XRP) token did not necessarily qualify as a security, potentially leading to the SEC dropping charges against CEO Brad Garlinghouse and executive chair Chris Larsen.

The question of what cryptocurrencies qualify as securities or commodities in the United States has been an ongoing debate among lawmakers and regulators, as has the role the SEC should play in regulating digital assets. Many experts are also speculating that the SEC may soon decide on whether to approve a spot crypto exchange-traded product for the first time.

BlackRock received $100K seed funds for Bitcoin ETF — SEC filing

BlackRock and other financial giants have entered the race to launch the first spot Bitcoin ETF in the United States.

The world’s largest asset manager, BlackRock, received $100,000 in seed funding from an unknown investor for its spot Bitcoin (BTC) exchange-traded fund (ETF) in October 2023, according to its latest United States Securities and Exchange Commission (SEC) filing.

The SEC filing revealed that the investor agreed to purchase 4,000 shares for $100,000 on Oct.

The latest filing by BlackRock also revealed certain details on the asset manager’s plans to pay the sponsor’s fee, where it plans to borrow Bitcoin or cash as trade credit from the trade credit lender on a short-term basis.

The settlement of trade credits will occur on the business day following the execution date, attracting a financing fee of 11% plus the federal funds target rate divided by 365 ((11% + fed funds target)/365).

ETF analyst Eric Balchunas called the new revelations an interesting development in the nerdiest way.

This is so interesting in the nerdiest way.

— James Seyffart (@JSeyff) December 5, 2023

BlackRock was among the first institutional giants to file for a spot Bitcoin ETF in July.

Tax services are getting pushy to have crypto declared: Law Decoded, Nov. 27–Dec. 4

Spain and Brazil are chasing cryptocurrency stored abroad, while the U.K. wants taxes paid for crypto assets that weren’t previously declared.

Last week, His Majesty’s Revenue and Customs (HMRC) presented an unpleasant Christmas surprise to hodlers in the United Kingdom, demanding they declare any crypto holdings they failed to report in the last four, six or even 20 years. The disclosure must include “exchange tokens,” such as Bitcoin (BTC), as well as any nonfungible tokens (NFTs) and “utility tokens.”

Less harsh in its demands, the Spanish Tax Administration Agency has also reminded its citizens about their obligations to declare crypto, even if they store it abroad.

Brazil will also proceed to tax its citizens’ foreign crypto holdings via a bill already passed in the Chamber of Deputies and expected to be approved by President Luiz Inácio Lula da Silva. The change makes those funds taxable at the same rate as domestic funds.

The SEC is still digging into Binance.US

The United States Securities and Exchange Commission is still looking for evidence that Binance.US had a backdoor to potentially control customer assets similarly to FTX. Anti-Money Laundering laws as part of a $4.3 billion settlement with the U.S.

SEC faces sanctions threat as Judge questions DEBT Box case accuracy

Initially, the SEC, led by attorney Michael Welsh, had convinced the court to freeze DEBT Box’s assets, arguing the company was moving to Dubai, beyond U.S. regulatory reach.

United States District Judge Robert Shelby has cautioned the Securities and Exchange Commission (SEC) lawyers, hinting at possible sanctions due to purportedly deceptive statements in a legal action against Digital Licensing Inc., also recognized as DEBT Box, a crypto company.

Lodged in the federal court of Utah, the SEC’s legal action alleged that DEBT Box deceived investors by around $50 million via the vending of unregistered securities known as “node licenses.”

Judge Shelby’s decision revealed notable discrepancies in the SEC’s case. Initially, the SEC, led by attorney Michael Welsh, had convinced the court to freeze DEBT Box’s assets, arguing the company was moving to Dubai, beyond U.S.

The judge raised apprehensions regarding the behavior of the SEC lawyers.

The intricacy of the case is underscored by a TRM Labs report corroborating the SEC’s primary claim that DEBT Box deceived investors regarding mining tokens.

This milestone signifies a pivotal moment in the legal process, highlighting the complexities of cryptocurrency regulation and underscoring the significance of legal responsibility in high-stakes financial litigation.

The SEC is facing another defeat in its recycled lawsuit against Kraken

The Securities and Exchange Commission is suing Kraken for selling cryptocurrencies, but it looks like a recycled version of a losing lawsuit.

The legal duel between the United States Securities and Exchange Commission (SEC) and Kraken, a leading cryptocurrency exchange, looks like another misguided attempt by the SEC to exert control over an industry that fundamentally challenges an outdated regulatory playbook. The agency’s lawsuit, filed in November, accuses Kraken of operating as an unregistered securities exchange.

The lawsuit isn’t just a repeat of the SEC’s past failures.

Unlike traditional securities exchanges, platforms like Kraken offer a diverse range of digital assets that do not fit neatly into the securities framework.

The SEC lawsuit against Kraken shamed the exchange for telling users they could attempt to profit by dollar-cost averaging into Solana.

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Terraform Labs and SEC lawyers spar over whistleblower in court: Report

Though many filings in the SEC case were made under seal, Judge Jed Rakoff reportedly suggested that nothing would remain confidential should the matter go to trial.

Lawyers representing the United States Securities and Exchange Commission and Terraform Labs and co-founder Do Kwon sparred in court over information provided by a whistleblower in the securities lawsuit.

According to a transcript of court events provided by Inner City Press on Nov. 30, the SEC reiterated its claims that Terra and Kwon “committed fraud” using the LUNA token, citing sealed evidence provided by an unnamed whistleblower.

“The SEC has misrepresented Do Kwon’s statements,” said Kwon’s and Terra’s lawyer, according to the report.

OK – now at SEC v Terraform Labs & Do Kwon, Inner City Press will live tweet, thread below https://t.co/zRKCGlc0T4

— Inner City Press (@innercitypress) November 30, 2023

The arguments came in a hearing of the U.S. 28, the judge approved the confidential treatment of certain materials filed by Jump Crypto, the firm under scrutiny for its alleged involvement in the events leading to the depegging of UST.

Kwon, who was arrested by authorities in Montenegro in March for using falsified travel documents, could face extradition to either the U.S. Attorney’s Office charged Kwon with eight criminal counts related to fraud at Terraform Labs.

SEC solicits comments on Fidelity’s spot Ether ETF application

“Interested persons” will have 21 days to comment on a proposed rule change allowing the Cboe BZX Exchange to list and trade shares of the Fidelity Ethereum Fund.

The United States Securities and Exchange Commission called on the public to comment on a proposed rule change that could allow asset management firm Fidelity to offer shares of its spot Ether (ETH) exchange-traded fund, or ETF.

In a Nov. 30 notice, the SEC said “interested persons” may comment on the Fidelity offering, proposing the Cboe BZX Exchange list and trade shares of its Fidelity Ethereum Fund. Fidelity first filed for approval of the fund on Nov.

Has been long known that Fidelity entered the spot ETF race but this filing *essentially* starts the ~240+ day clock for their spot #Ethereum ETF. Will have definitive deadline dates in the coming weeks https://t.co/0C6NKcxNNz pic.twitter.com/gdW9ZQDgs9

— James Seyffart (@JSeyff) November 30, 2023

The filing noted that investors in other countries, “including Germany, Switzerland and France,” had opportunities to gain exposure to Ether through exchanges offering exchange-traded products.

“U.S.

The filing added:

“Approval of a Spot ETH ETP would represent a major win for the protection of U.S. investors in the crypto asset space.”

Bitcoin ETF race gets 13th entrant, BlackRock revises ETF model

Pando’s ETF bid comes as several spot Bitcoin ETF applications draw closer to a final decision deadline.

Swiss asset manager Pando Asset has become an unexpected late entrant into the spot Bitcoin (BTC) exchange-traded fund (ETF) race in the United States.

On the same day, investment giant BlackRock met with the country’s securities regulator to pitch an updated ETF model based on the agency’s feedback.

On Nov. 29, Pando submitted a Form S-1 to the U.S.

Like other ETF bids, the trust aims to track Bitcoin’s price with the custody arm of the crypto exchange Coinbase to hold Bitcoin on behalf of the trust.

Pando is the 13th applicant for an approved spot Bitcoin ETF in the U.S.

In a Nov. 29 X (formerly Twitter) post, Bloomberg ETF analyst Eric Balchunas said he has “more questions than answers” about Pando’s filing, questioning why it came so late.

more questions than answers: where have they been for last 3mo? why bother at this point? if they make Jan 10 crew what does that say about fair play and even society as we know it? And what exactly is a Pando?

— Eric Balchunas (@EricBalchunas) November 29, 2023

Balchunas also raised concern about the implications should Pando’s ETF be among the Bitcoin ETF filings he predicts will be approved on Jan.

“What does that say about fair play and even society as we know it?” he added.

Do Kwon lawyers reportedly dismiss SEC’s securities fraud allegation

Kwon’s lawyers claimed that the SEC failed to prove the alleged defrauding of US investors in connection with Terra’s $40 billion collapse of TerraUSD (UST) and Luna (LUNA).

The lawyers representing Terraform Labs co-founder Do Kwon reportedly argued in court against the allegations pressed by the US Securities and Exchange Commission (SEC). The federal agency had sued Kwon for allegedly defrauding US investors by illegally offering unregistered securities.

On April 21, Do Kwon’s lawyers asked the judge to dismiss the SEC lawsuit claiming that the regulator’s acquisitions were unfounded. While requesting to dismiss the lawsuit, Kwon’s lawyers asserted that US law prohibits regulators “from using federal securities law to assert jurisdiction over the digital assets in this case,” reported Bloomberg.

In addition, the lawyers claimed that the SEC failed to prove that Kwon had defrauded US investors in connection with Terra’s $40 billion collapse of the TerraUSD (UST) and Luna (LUNA) cryptocurrencies. According to the lawyers, the stablecoin at issue is a currency, not a security.

The legal proceedings began when Do Kwon was arrested in Podgorica airport, Montenegro on March 23, while attempting to fly to Dubai using fake documents. Following his arrest, both South Korean and American authorities requested the entrepreneur’s extradition.

At the time of writing, it remains unclear as to which country, if any, would be the most likely to be granted the extradition of Kwon.

The Seoul Southern District Court recently denied an arrest warrant for Terraform Labs co-founder Shin Hyun-Seong.

While prosecutors saw Kwon’s arrest as an opportunity to pin down Shin, the court denied the request while citing unconfirmed allegations and the unlikeliness of Shin being a flight risk or destroying evidence.

“In the case when we receive several extradition requests, I would like to say that determining to which state they will be extradited is based on several factors like the severity of the committed criminal offense, the location and time when the criminal offense has been committed, the order in which we have received the request for extradition and several other factors,” said Montenegrin Justice Minister Marko Kovač through an interpreter.

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Do Kwon lawyers reportedly dismiss SEC‘s securities fraud allegation

Kwon’s lawyers claimed the SEC failed to prove he defrauded U.S. investors in connection with the $40 billion collapse of Terra’s TerraUSD and LUNA.

Lawyers representing Terraform Labs co-founder Do Kwon reportedly argued in court against the allegations of the United States Securities and Exchange Commission that Kwon defrauded U.S. investors by illegally offering unregistered securities.

On April 21, Kwon’s lawyers asked the judge to dismiss the SEC lawsuit, claiming that the regulator’s acquisitions were unfounded, according to a Bloomberg report. While requesting to dismiss the lawsuit, Kwon’s lawyers asserted that U.S. law prohibits regulators “from using federal securities law to assert jurisdiction over the digital assets in this case.”

In addition, the lawyers claimed the SEC failed to prove that Kwon had defrauded U.S. investors in connection with the $40 billion collapse of Terra’s TerraUSD (UST) and LUNA (LUNA). According to the lawyers, the UST stablecoin is a currency, not a security.

The legal proceedings began following Kwon’s arrested at the Podgorica airport in Montenegro on March 23 while allegedly attempting to fly to Dubai using fake documents. After his arrest, both South Korean and American authorities requested the entrepreneur’s extradition.

At the time of writing, it remains unclear which country, if any, will be granted their extradition request.

The Seoul Southern District Court recently denied an arrest warrant for Terraform Labs co-founder Shin Hyun-Seong. While prosecutors saw Kwon’s arrest as an opportunity to pin down Shin, the court denied the request, citing the unconfirmed nature of the allegations and the unlikeliness of Shin being a flight risk or destroying evidence.

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