Crypto news & regulatory update: September 13 – October 4, 2024

a16z crypto Regulatory Team

10.7.24

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

  • A federal judge sentenced former Alameda Research CEO Caroline Ellison to 24 months in prison for her role in defrauding FTX’s customers and investors.
  • The Securities and Exchange Commission (SEC) announced settled charges against Mango DAO and Blockworks Foundation for engaging in the unregistered offer and sale of crypto assets called “MNGO” tokens, and against Blockworks Foundation and Mango Labs for engaging in unregistered broker activity in connection with various crypto assets that were offered and sold as securities on the Mango Markets platform.

🌽 Commodity Futures Trading Commission

  • A federal court ordered a New York man to pay more than $36 million in connection with his fraudulent foreign currency and digital assets fraud scheme. The defendant previously pleaded guilty to related criminal charges.
  • The Commodity Futures Trading Commission (CFTC) charged four entities (cryptoiminerstrade.com, Expert Stocks Zone, FalconForexBot, and swiftminingexpert.com) that offered binary options based off the value of certain cryptocurrencies for failing to register as futures commission merchants. Commissioners Summer K. Mersinger and Caroline D. Pham dissented.
  • The CFTC charged two firms and three individuals for fraudulently soliciting and misappropriating at least $3.6 million in fiat and digital currencies from at least 32 customers as part of an investment scheme that targeted Asian Americans.

🦅 Congress

  • House Financial Services Committee (HFSC) Chairman Patrick McHenry (R-N.C.) and House Majority Whip Tom Emmer (R-Minn.) wrote to SEC Chair Gary Gensler seeking clarity on the regulatory classification of digital asset airdrops.
  • HFSC Chairman Patrick McHenry (R-N.C.) and others wrote to the banking regulators and the SEC requesting the agencies’ communications about SEC Staff Accounting Bulletin 121 and digital asset custody.
  • Senate Majority Whip Dick Durbin (D-Ill.) and others wrote to 10 bitcoin ATM operators asking them to take action to address financial fraud against elderly Americans arising from the use of bitcoin ATMs.
  • House Representative Ritchie Torres (D-N.Y.) published an article arguing that the U.S. should embrace the proliferation of dollar-backed stablecoins.
  • Senator Cynthia Lummis (R-Wyo.) discussed digital asset regulation on Squawk Box.

⚖️ Department of Justice

  • As mentioned in “tl;dr,” a federal judge sentenced former Alameda Research CEO Caroline Ellison to 24 months in prison for her role in defrauding FTX’s customers and investors.
  • A federal judge sentenced a Florida man to 47 years in prison for his role in a scheme involving a series of home invasion robberies targeting victims for cryptocurrency. A total of 12 men have been sentenced for their role in the scheme.
  • A federal judge sentenced the founder of cryptocurrency ponzi scheme IcomTech to 121 months in prison.
  • The Department of Justice (DOJ) charged two Russian nationals for operating money laundering services involving digital assets. In parallel actions, the Office of Foreign Assets Control sanctioned one of the Russians, as well as virtual currency exchange Cryptex. The Financial Crimes Enforcement Network also issued an order identifying PM2BTC, a virtual currency exchange associated with one of the Russians, as being of “primary money laundering concern.”
  • The DOJ charged two men from Los Angeles and Miami in connection with a conspiracy to steal and launder more than $230 million in cryptocurrency from a victim in Washington, D.C.
  • An Indiana man pleaded guilty to charges of conspiracy to commit wire fraud and conspiracy to launder monetary instruments in connection with stealing customer personally identifiable information and then cryptocurrency worth more than $37 million from nearly 600 victims.

🏛️ Government Accountability Office

  • The Government Accountability Office released a report recommending, in part, that the IRS better prepare to implement recent changes to reporting requirements for Form 1099-DA, which brokers will use to report digital asset transactions.

📈 Securities and Exchange Commission

  • As mentioned in “tl;dr,” the SEC announced settled charges against Mango DAO and Blockworks Foundation for engaging in the unregistered offer and sale of crypto assets called “MNGO” tokens as securities, and against Blockworks Foundation and Mango Labs for engaging in unregistered broker activity in connection with various crypto assets that were offered and sold as securities on the Mango Markets platform.
  • The SEC announced that Prager Metis CPAs and its California professional services firm agreed to pay $1.95 million to resolve two actions relating to misconduct in its audits of FTX and auditor independence violations.
  • The SEC announced settled charges against crypto lending platform Rari Capital and its cofounders for misleading investors and engaging in unregistered broker activity in connection with their operation of two blockchain-based investment platforms and for conducting unregistered offerings of crypto assets as securities tied to those platforms.
  • The SEC announced settled charges against TrueCoin and TrustToken for their fraudulent and unregistered sales of securities involving purported stablecoin TrueUSD.
  • The SEC charged Flyfish Club with conducting an unregistered offer of crypto assets as securities in the form of non-fungible tokens that raised approximately $14.8 million from investors.
  • The SEC charged various entities and individuals in connection with two relationship investment scams involving fake crypto asset trading platforms NanoBit and CoinW6. The defendants allegedly solicited investors via social media apps, lied to them to gain their trust and confidence, and then stole their money.
  • A federal judge ruled that startup Rivetz Corp. and its founder engaged in the unlawful offer and sale of $18 million worth of crypto assets called RvT tokens as securities.
  • All five SEC commissioners testified before the House Financial Services Committee on various topics, including digital assets.
  • SEC Chair Gary Gensler discussed digital asset regulation, a bitcoin reserve fund, and other issues on Squawk Box.

🌍 International

🇦🇷 Argentina

  • Crypto exchange Bit2Me announced that it received approval to operate as a virtual asset service provider from Argentina’s National Securities Commission.

🇦🇺 Australia

  • The Reserve Bank of Australia and Australia’s Department of the Treasury released a report summarizing research on central bank digital currencies (CBDCs), the government’s current assessment of CBDC issues in Australia, and a three-year roadmap for future work on digital money in the country.

💰 Bank for International Settlements

  • The Bank for International Settlements (BIS) announced that more than 40 private sector financial firms will join the BIS and a group of leading central banks in Project Agorá to explore how tokenization can enhance wholesale cross-border payments.

🇨🇦 Canada

  • The Bank of Canada announced that it will be scaling down its work on a retail CBDC and shifting its focus to broader payments system research and policy development.

🇩🇪 Germany

  • The German Attorney General’s Office Frankfurt am Main and the country’s Federal Criminal Police Office shut down 47 crypto exchanges allegedly tied to criminal activities including money laundering.

💵 International Monetary Fund

  • The International Monetary Fund published a paper outlining various regulatory strategies, education and communication initiatives, design and deployment choices, and incentive mechanisms to prepare central banks for CBDC adoption.

🇬🇧 United Kingdom

  • In the first UK conviction of its kind, a UK man pleaded guilty to illegally operating a crypto ATM network.

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