Crypto news & regulatory update: August 12 – September 13, 2024

9.16.24

Editor’s note: Our Regulatory Updates series highlights the latest regulatory, legal, and policy happenings relevant to builders in web3 and crypto, as tracked and curated by the a16z crypto regulatory team. The roundups are based on recent news, guidance, legislation, and frameworks released by regulators, industry consortia, professional associations, banks, governments, and other entities as they impact the crypto industry (or applications) around the world. We also occasionally include select resources such as talks, posts, or other commentary — from us or from others — with the updates.

🧠 tl;dr

The Sixth Circuit partially reversed a federal district court’s dismissal of a lawsuit against the Internal Revenue Service (IRS) challenging a new tax-reporting requirement that mandates disclosure of digital currency transactions over $10,000 to the IRS. The lawsuit will proceed in the district court on three of the five original claims.
Non-fungible token (NFT) marketplace OpenSea announced that it had received a “Wells Notice” from the Securities and Exchange Commission (SEC) stating that the agency is considering bringing an enforcement action against the platform.
The Commodity Futures Trading Commission (CFTC) ordered Uniswap Labs to pay a $175,000 civil monetary penalty for offering leveraged or margined retail commodity transactions in digital assets. Commissioners Summer K. Mersinger and Caroline D. Pham dissented.

🌽 Commodity Futures Trading Commission

As mentioned in “tl;dr,” the CFTC ordered Uniswap Labs to pay a $175,000 civil monetary penalty for offering leveraged or margined retail commodity transactions in digital assets. Commissioners Summer K. Mersinger and Caroline D. Pham dissented.
A federal court ordered an Oregon resident to pay more than $209 million in monetary sanctions for commodity pool ponzi schemes involving digital assets.
The CFTC’s Office of Customer Outreach and Education announced two partnerships with federal and private groups to distribute cryptocurrency relationship investment scam information.

🦅 Congress

House Representative John Rose (R-Tenn.) introduced the Bridging Regulation and Innovation for Digital Global and Electronic Digital Assets Act or the “BRIDGE” Digital Assets Act, which would establish a Joint Advisory Committee on digital assets between the SEC and the CFTC.

⚖️ Department of Justice

The Department of Justice (DOJ) charged a former Congressional candidate and romantic partner of a former high-level executive at FTX with campaign finance laws based on allegations that she orchestrated a sham consulting agreement with FTX to illegally finance her campaign.
The DOJ seized nearly $5 million worth of Tether that had been traced to wallet addresses allegedly associated with the laundering of criminally derived proceeds stolen from victims of crypto “pig butchering” investment scams.
The founder of crypto project CluCoin pleaded guilty to wire fraud for a scheme involving the transfer of more than $1 million worth of CluCoin investor funds to his personal account.
A Kansas man was sentenced to more than 24 years in prison for using his former position as chief executive officer of Heartland Tri-State Bank to embezzle tens of millions of dollars in a cryptocurrency scheme.
A Texas man pleaded guilty to filing a tax return that falsely underreported the capital gains he earned from selling $3.7 million in bitcoin.
The Federal Bureau of Investigation (FBI) released its cryptocurrency fraud report for 2023. The report notes that the FBI received more than 69,000 complaints from the public regarding cyber-enabled crime and financial fraud involving the use of cryptocurrency that resulted in more than $5.6 billion in reported losses.
The FBI issued a notice warning that North Korea is conducting social engineering campaigns against employees of decentralized finance, cryptocurrency, and similar businesses to deploy malware and steal companies’ cryptocurrency.

💵 Department of the Treasury

As mentioned in “tl;dr,” the Sixth Circuit partially reversed a federal district court’s dismissal of a lawsuit against the IRS challenging a new tax-reporting requirement that mandates disclosure of digital currency transactions over $10,000 to the IRS. The lawsuit will proceed in the district court on three of the five original claims.
Treasury’s Office of Foreign Assets Control sanctioned a Cambodian businessman and his businesses for their role in human rights abuses related to the treatment of trafficked workers subjected to forced labor in online scam centers, which included virtual currency scams.

🛍️ Federal Trade Commission

The Federal Trade Commission released new data reflecting an increase in the amount of money consumers report losing to scammers involving bitcoin ATM machines.

📈 Securities and Exchange Commission

As mentioned in “tl;dr,” NFT marketplace OpenSea announced that it had received a “Wells Notice” from the SEC stating that the agency is considering bringing an enforcement action against the platform.
The SEC settled charges against Galois Capital Management, a former registered investment adviser for a private fund that primarily invested in crypto assets, for failing to comply with requirements related to the safeguarding of client assets, including crypto assets being offered and sold as securities.
The SEC charged NovaTech and its principals and promoters with operating a fraudulent scheme that raised more than $650 million in crypto assets from more than 200,000 investors worldwide, including many in the Haitian-American community.
The SEC settled charges against Plutus Lending LLC (Abra) for failing to register the offers and sales of its retail crypto asset lending product, Abra Earn, and operating as an unregistered investment company.
The SEC charged two brothers in connection with a $60 million ponzi scheme involving a crypto asset trading platform that allegedly defrauded 80 investors across the country.
Technology firm tZERO Group announced that it had received approval from the SEC and the Financial Industry Regulatory Authority to become a special purpose broker-dealer for “digital asset securities custody,” making it the second firm to receive the license.
eToro USA agreed to pay the SEC $1.5 million to settle charges that it operated an unregistered broker and unregistered clearing agency in connection with its trading platform that facilitated buying and selling certain crypto asset securities.
The SEC charged an Alabama resident with defrauding investors in connection with a private investment fund that he and his partners managed, which raised at least $852,000 worth of crypto assets from approximately 70 investors in the U.S. and abroad.

🇺🇸 State

🐻 California

In its first public action against a crypto company, the California DOJ announced a $3.9 million settlement with Robinhood Crypto for failing to allow customers to withdraw their cryptocurrency from their Robinhood accounts from 2018 to 2022 and for failing to fully disclose aspects of its trading and order handling arrangements.
California’s Department of Financial Protection and Innovation announced that the Superior Court for Los Angeles County upheld the Digital Financial Assets Law’s daily transaction limits for crypto asset kiosks.

🐝 North Carolina

The North Carolina Senate voted to overturn the governor’s veto of a bill that bans payments to the state using a central bank digital currency (CBDC) and prohibits state participation in CBDC testing.

🇺🇸 State Regulators

Five U.S. states reached a settlement agreement with GS Partners, a company that offered multiple crypto investments, which provides that investors receive a return of all fiat and cryptocurrency deposited with GSB Group and GS Partners.

🌍 International

🇦🇺 Australia

Australia’s Securities and Investments Commission announced the takedown of more than 7,300 phishing and investment scam websites, including 615 cryptocurrency investment scams.
An Australian court ruled that Bit Trade, Kraken’s operator in Australia, provided a “margin extension” financial product in contravention of the country’s Corporations Act.

💰 Bank for International Settlements

The Basel Committee on Banking Supervision published a working paper on the risks that banks face in transacting on permissionless blockchains.

🇧🇷 Brazil

Binance agreed to pay more than $1.7 million to the Brazilian Securities and Exchange Commission to settle allegations that it offered derivatives trading services in the country without receiving the corresponding license.

🇩🇪 Germany

Germany’s Federal Financial Supervisory Authority announced that it had seized 13 crypto ATMs in a raid and confiscated cash amounting to almost €250,000.

🇮🇳 India

Reserve Bank of India Governor Shaktikanta Das said that the country’s CBDC pilot has 5 million users, but that it should not rush to put out a CBDC until there is a “comprehensive understanding” of its impact on users, monetary policy, the financial system, and on the economy.

💵 International Monetary Fund

An article from the International Monetary Fund argued for targeted tax policies directed at crypto miners to curb carbon emissions.

🇬🇧 United Kingdom

The UK government introduced a bill in parliament that would classify digital holdings including cryptocurrency, non-fungible tokens, and carbon credits as personal property under the law.
An annual report from the UK’s Financial Conduct Authority (FCA) found that 87% of crypto registrations were rejected, withdrawn, or refused, but that the agency is helping firms apply for authorization by communicating its expectations and issuing guidance on good and poor practices.
The FCA charged an individual for unlawfully running multiple crypto ATMs without FCA registration.

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