Looty NFT Project Launches Digital Art Heists to Reclaim African Artifacts: Report
By Reuters | Updated: 25 May 2022
A Nigerian man has launched a project called “Looty” to reclaim African artifacts stolen by European colonisers by creating 3-D images of them, selling them as non-fungible tokens (NFTs) and using the proceeds to fund young African artists.
Calls for objects stolen during the colonial period to be returned to their places of origin have intensified in recent years, and Western institutions have sent items back to countries including Nigeria and Benin.
Chidi Nwaubani, the founder of Looty, described his project as an alternative form of repatriation, by which digital technologies are used to reclaim a measure of control and ownership over artifacts still held far from Africa.
“Imagine a world where these items were never looted,” Nwaubani told Reuters in an interview. “We’re just trying to reimagine that world and bring that world into the digital form.”
The process begins with what Nwaubani called a “digital art heist”, a perfectly legal procedure in which a Looty team member goes to a museum and scans a target object using technology that can be used to create a 3D image.
An NFT of the image is created and put up for sale via the Looty website, which also acts as an online gallery where anyone can view the images for free. Nwaubani said 20 percent of the proceeds of NFT sales would go towards grants for African artists aged 25 or under.
NFTs are a type of digital asset that allows anyone to verify who owns them.
The website launched on May 13 and although there were no immediate sales, Nwaubani has received messages of interest from around the world.
Looty’s first NFTs are based on an image of one of the Benin Bronzes that were looted by British troops in 1897 from what is now Nigeria and are held in the British Museum in London.
“Knowing that it’s Nigerian but it lives outside of Nigeria has always troubled me. So I felt that there’s something that we could do to change that,” said Nwaubani.
Looty’s next big project is focused on an Ancient Egyptian item, Nwaubani said, declining to give further details.
The name Looty refers to the act of looting and is also a playful homage to the dog Looty, which was found by a British captain after troops looted the Summer Palace near Beijing in 1860, taken back to London and presented to Queen Victoria.
© Thomson Reuters 2022
US SEC Sues Coinbase, One Day After Suing Binance; Accuses Crypto Exchange of Operating Illegally
By Reuters | Updated: 7 June 2023
The US Securities and Exchange Commission on Tuesday sued Coinbase, accusing the largest US cryptocurrency platform of operating illegally because it failed to register as an exchange, in another blow to the crypto industry.
The lawsuit is the SEC’s second in two days against a major crypto exchange, following its case against Binance, the world’s largest cryptocurrency exchange, and founder Changpeng Zhao.
Both civil cases are part of SEC Chair Gary Gensler’s push to assert jurisdiction over the crypto industry, which he on Tuesday again labelled a “Wild West” that has undermined investor trust in the US capital markets.
“The whole business model is built on a noncompliance with the US securities laws and we’re asking them to come into compliance,” Gensler told CNBC.
Crypto companies say the SEC rules are unclear, and that the agency is overreaching by trying to regulate them.
Coinbase suffered about $1.28 billion (roughly Rs. 10,564 crore) of net customer outflows following the lawsuit, according to initial estimates from data firm Nansen.
Paul Grewal, Coinbase’s general counsel, in a statement said the company will continue operating as usual and has “demonstrated commitment to compliance.”
Ten US states led by California also on Tuesday accused Coinbase of securities law violations concerning its staking rewards program.
Shares of Coinbase’s parent Coinbase Global closed down $7.10 (roughly Rs. 586), or 12.1 percent, at $51.61 (roughly Rs. 4,260) after earlier falling as much as 20.9 percent. They are up 46 percent this year.
‘Can’t ignore rules’
In its complaint filed in Manhattan federal court, the SEC said Coinbase has since at least 2019 made billions of dollars by operating as a middleman on crypto transactions, while evading disclosure requirements meant to protect investors.
The SEC said Coinbase traded at least 13 crypto assets that are securities that should have been registered, including tokens such as Solana, Cardano and Polygon.
Founded in 2012, Coinbase recently served more than 108 million customers, and ended March with $130 billion (roughly Rs. 10,73,016 crore) of customer crypto assets and funds on its balance sheet. Transactions generated 75 percent of its $3.15 billion (roughly Rs. 25,998 crore) of net revenue last year.
In the staking rewards program, which has about 3.5 million customers, Coinbase pools crypto assets and uses them to support activity on the blockchain network, in exchange for “rewards” it provides customers after taking a commission for itself.
The SEC lawsuit seeks civil fines, the recouping of ill-gotten gains and injunctive relief. The SEC had warned Coinbase in March that charges might be coming.
“You simply can’t ignore the rules because you don’t like them,” SEC Enforcement Chief Gurbir Grewal, who is not related to Paul Grewal, said in a statement.
States probing the staking rewards program also include Alabama, Illinois, Kentucky, Maryland, New Jersey, South Carolina, Vermont, Washington and Wisconsin. New Jersey fined Coinbase $5 million (roughly Rs. 41.2 crore) for selling unregistered securities.
Coinbase said it expects to have “productive conversations” with the states and is confident its staking services are not securities.
Opposition to SEC crackdown
Gensler’s crypto crackdown has prompted the industry to boost compliance, shelve products and expand outside the country.
Kristin Smith, CEO of the Blockchain Association trade group, rejected Gensler’s efforts to oversee the industry.
“We’re confident the courts will prove Chair Gensler wrong in due time,” she said.
On Monday, the SEC accused Binance of inflating trading volumes, diverting customer funds, improperly commingling assets, failing to keep wealthy US customers off its platform, and misleading customers about its controls.
Binance pledged to vigorously defend itself against the lawsuit, which it said reflected the SEC’s “misguided and conscious refusal” to provide clarity to the crypto industry.
Customers pulled around $790 million (roughly Rs. 6,520 crore) from Binance and its US affiliate following the lawsuit, Nansen said.
On Tuesday, the SEC filed a motion for a US asset freeze in the Binance case.
Coinbase’s friction with Gensler dates to 2021, when the SEC threatened to sue if Coinbase were to let users earn interest by lending digital assets. The company scrapped the idea.
Tuesday’s case is SEC v Coinbase Inc et al, US District Court, Southern District of New York, No. 23-04738.
© Thomson Reuters 2023
Global Framework for Crypto Regulation Could Leverage Learnings From India: WEF Report
By Press Trust of India | Updated: 6 June 2023
From fragmented monitoring and enforcement to differing classifications of crypto assets, many barriers hinder global coordination on crypto-asset regulation efforts, a global study said on Monday while calling for leveraging learnings from India.
The report published by the World Economic Forum (WEF) emphasised that while full global coordination for crypto regulation would be ideal, varying ecosystem maturity in different jurisdictions, evolving use cases, capacity of regulators and other factors make it difficult to achieve.
As such, regulators and industry players should explore alternative regulatory pathways to collaborate and regulate the crypto-asset ecosystem through a principle-based, agile approach, taking into consideration the local context.
In its section on recommendations, the report argued that the framework for crypto-asset regulations could leverage learnings from existing frameworks in financial services.
In this context, it cited the inter-operable regulatory sandbox of RBI as an example of cross-sector coordination; and data Empowerment and Protection Architecture (DEPA) as an illustration of having systems that are compliant by design.
“In India, the Reserve Bank of India released a Standard Operating Procedure for an Interoperable Regulatory Sandbox (IoRS) in October 2022. IoRS enables the testing of financial products/services that fall within the remit of more than one regulator,” it said.
It also noted, “Data protection and empowerment architecture in India provides for consent by design. The decoupling of a consent manager from the data provider/ consumer allows for neutrality and compliance with consent-related obligations.” Recently, India also extended its anti-money laundering laws to include ‘virtual digital assets’, while G20 is deliberating under India’s Presidency on creating global rules for regulating crypto-assets.
“The evolving crypto-asset ecosystem and recent market events have underscored the pressing need for collaboration and the building of robust guardrails,” said Matthew Blake, Head of WEF’s Centre for Financial and Monetary Systems.
Over the past few years, various international standard-setting bodies and organisations have made considerable efforts to produce evidence-based research as well as high-level frameworks.
Geneva-based WEF, which describes itself as an international organisation for public-private cooperation, also called on industry leaders to continue working on interoperable technical standards and focus on establishing and disseminating best practices.
“Crypto industry players have a vital role to ensure that the ecosystem evolves in a responsible manner and can learn from more mature industries to fulfil this role,” it said.
Regulating this dynamic sector effectively requires the utilisation of diverse regulatory tools, including legislative frameworks, voluntary codes of conduct and educational initiatives.
Furthermore, given the inherent transparency of these new technologies, it becomes conceivable to envision even more effective regulatory tools to address cross-border concerns, the WEF paper said.
“The coordinated efforts of all jurisdictions to regulate cryptocurrencies are extremely important. Even if you have the best tools and officers to trace cryptocurrency, all your efforts will be in vain once you bump into some non-regulated exchange that simply doesn’t provide information to law enforcement,” said Oleksiy Feshchenko, Advisor, Global Program against Cybercrime, UN Office on Drugs and Crime (UNODC).
US Sues Binance Crypto Exchange and CEO Changpeng Zhao Over ‘Web of Deception’ as Bitcoin Tumbles
By Reuters | Updated: 6 June 2023
US regulators sued Binance and its CEO Changpeng Zhao on Monday for allegedly operating a “web of deception,” piling further pressure on the world’s biggest cryptocurrency exchange and sending Bitcoin to its lowest in almost three months.
The Securities and Exchange Commission (SEC) complaint, filed in a federal court in Washington, D.C., listed 13 charges against Binance, Zhao, and the operator of its purportedly independent US exchange.
The SEC alleged that Binance artificially inflated its trading volumes, diverted customer funds, failed to restrict US customers from its platform, and misled investors about its market surveillance controls.
The SEC also claimed that Binance and Zhao, its billionaire founder and one of the crypto industry’s highest-profile moguls, secretly controlled customers’ assets, allowing them to commingle and divert investor funds “as they please.”
Binance created separate US entities “as part of an elaborate scheme to evade US federal securities laws,” the SEC also alleged, citing a number of practices first reported by Reuters in a series of investigations into the exchange published this year and in 2022.
From almost three years ago until June 2022, a trading firm owned and controlled by Zhao, Sigma Chain, engaged in so-called wash trading that artificially inflated the trading volume of crypto asset securities on the Binance.US platform, the SEC also alleged. Sigma Chain spent $11 million (roughly Rs. 90 crore) from an account on a yacht, the SEC said.
“We allege that Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law,” SEC Chair Gary Gensler said in a statement.
In a blog post, Binance said: “We intend to defend our platform vigorously,” adding that “because Binance is not a US exchange, the SEC’s actions are limited in reach.”
“All user assets on Binance and Binance affiliate platforms, including Binance.US, are safe and secure,” the blog post said.
In a statement, Binance said it had “actively cooperated” with the SEC “from the start” and “respectfully disagree” with the SEC’s allegations. Binance had been trying to find a “reasonable resolution” with the SEC but the agency “at the eleventh hour” issued new requests and went to court. Binance said the SEC’s actions appeared to be an effort to “claim jurisdictional ground from other regulators.”
Binance.US, which is ultimately controlled by Zhao, said in a tweet that the lawsuit was “unjustified by the facts, by the law, or by the Commission’s own precedent.”
Bitcoin, the world’s biggest cryptocurrency, fell as much as 6 percent on the news to its lowest in almost three months. Binance’s own cryptocurrency BNB, the world’s fourth-largest by market size, dropped more than 5 percent.
Market players said the SEC’s allegations could hobble Binance, with the lawsuit likely to reverberate through the crypto industry. Binance dominates crypto trading, last year processing trades worth about $65 billion (roughly Rs. 5,36,916,250 crore) a day.
A March report from CCData showed that Binance’s spot market share across top-tier exchanges fell in March for the first time in five months to 57.7 percent from 62.0 percent in February. Its derivatives trading volume, however, rose.
“I think that there’s a big risk here that this could be crippling to Binance,” said Ed Moya, senior market analyst at Oanda.
The SEC complaint is the latest in a series of legal headaches for Binance, which was also sued by the US Commodity Futures Trading Commission (CFTC) in March for operating what the regulator alleged were an “illegal” exchange and a “sham” compliance program. Zhao called those an “incomplete recitation of facts.”
Binance is also under investigation by the Justice Department for suspected money laundering and sanctions violations, according to people familiar with the probe.
The holding company of Binance is based in the Cayman Islands. It was founded in Shanghai in 2017 by CEO Zhao, a Canadian citizen born and raised in China until age 12. The exchange says it does not have a headquarters and has declined to state the location of its main Binance.com exchange.
The SEC alleged that Zhao designed and implemented a plan to “surreptitiously evade US laws.” The agency said Binance’s chief compliance officer admitted that: “We do not want [Binance].com to be regulated ever.” It said Zhao directed Binance.US even though the US entity has long said it operates independently.
The SEC said billions of dollars in Binance customer funds were commingled, or mixed with corporate funds, in breach of US laws, in a bank account of an entity controlled by Zhao, then transferred to a trading firm, Merit Peak, also controlled by Zhao.
Last month, Reuters reported that Binance commingled its customers’ funds with its corporate revenues in a US bank account belonging to Merit Peak. Binance denied mixing customer deposits and company funds, saying users who sent money to the account were not making deposits but rather buying Binance’s bespoke dollar-linked crypto token.
Reuters reported on Monday before the SEC lawsuit that a senior Binance executive was the main operator for five bank accounts belonging to BAM Trading, the operator of Binance.US, including an account that held American customers’ funds.
The SEC wrote that the executive had at least until December 2020, also had “signatory authority over BAM Trading’s US Dollar accounts.”
© Thomson Reuters 2022
FTX’s Sam Bankman-Fried Could Be Planning to Blame Lawyers Who Helped Launch Firm in Criminal Case
By Reuters | Updated: 1 June 2023
Indicted FTX founder Sam Bankman-Fried seems to be gearing up to blame the lawyers who helped him establish the crypto exchange.
That’s the subtext of a motion filed on Tuesday by his lawyers at Cohen & Gresser, who are defending Bankman-Fried against federal charges of fraud, conspiracy and bribery. They’re asking for access to documents from Fenwick & West, the Silicon Valley law firm that represented FTX and sister hedge fund Alameda Research from the companies’ inception through their collapse in November 2022.
Fenwick & West did not respond to my email queries. The firm has not yet filed a response to a civil suit by FTX customers who named Fenwick as a defendant.
Bankman-Fried has pleaded not guilty to the charges. The defense motion claims that Fenwick & West advised him, FTX and Alameda on at least four matters at the heart of the Manhattan federal court indictment against the onetime crypto billionaire.
The California law firm, for instance, allegedly provided counsel to FTX on the creation of shell companies that opened accounts at Silvergate Bank to receive deposits from FTX customers, according to Tuesday’s motion. Those shell company bank accounts are a critical element of the government’s bank fraud conspiracy charge.
Fenwick & West also allegedly advised FTX that it was not required to register with the U.S. government as a money transmitting business, according to the new motion. Prosecutors have charged Bankman-Fried with conspiring to violate wire transfer laws by failing to register but his lawyers said in the new motion that Fenwick’s alleged advice “directly contradicts the government’s theory.”
Bankman-Fried’s filing similarly contends that Fenwick & West reviewed internal agreements in which Alameda loaned money to Bankman-Fried and other FTX executives. The government alleges that the loans were an illegal misappropriation of customer deposits as part of a scheme to violate federal campaign finance laws. Bankman-Fried’s new motion argues that Fenwick & West’s legal advice on the tax consequences of the loans might rebut the government’s contention that the loans were improper.
Finally, the motion asserts that it was Fenwick that instructed Bankman-Fried to communicate with other FTX and Alameda executives via Signal and other ephemeral messaging apps. That alleged advice would undercut the government’s claim that Bankman-Fried directed his colleagues to use Signal and other encrypted communication apps to hide evidence of his crimes.
Bankman-Fried’s lawyers acknowledged in the motion that their assertions about Fenwick & West are based on a very limited set of documents.
The filing does not specifically invoke the words “advice of counsel” to refute government claims that Bankman-Fried acted with criminal intent. But Bankman-Fried’s lawyers seem to be headed in that direction, telling US District Judge Lewis Kaplan of Manhattan that they need to know more about Fenwick’s work for FTX and Alameda to determine if the law firm’s documents exonerate their client.
Those documents could help Bankman-Fried later argue at trial that he was following advice from FTX’s lawyers.
Tuesday’s filing asks Kaplan to order the government to turn over evidence from Fenwick & West or to authorize Bankman-Fried to subpoena documents from the law firm.
The firm would almost certainly rather not turn over client files to Bankman-Fried. Among other reasons, Fenwick & West has been named as a defendant in a sweeping class action by FTX customers. The plaintiffs’ lawyer who filed that case, Kerry Miller of Fishman Haygood, told me on Wednesday that he plans to monitor the Bankman-Fried criminal case for any Fenwick & West documents that might boost the class allegations.
Bankman-Fried’s lawyers from Cohen & Gresser declined comment on the new motion through a spokesperson. The Manhattan U.S. Attorney’s office also declined to comment.
Attorney-client privilege is often a complication for white-collar defendants who want to blame their companies’ lawyers for providing bad advice. Companies – rather than individual executives or outside law firms — control the right to insist that communications with their counsel remain confidential. Companies are typically reluctant to waive privilege for fear that their lawyers’ documents might be used in other cases.
Bankman-Fried’s new motion said his lawyers are in negotiations with FTX’s new counsel about whether the company intends to assert attorney client privilege over relevant Fenwick & West documents. (The motion did not name FTX’s new law firm but it is Sullivan & Cromwell.) Defense counsel also said that Fenwick & West told them it would not turn over any documents without FTX’s permission.
The motion floats two theories for why Bankman-Fried is entitled to access to certain Fenwick & West communications even if FTX claims privilege. Bankman-Fried said the law firm represented him personally in addition to serving as counsel to FTX and Alameda. That assertion seems to hint that Bankman-Fried will claim that he can personally waive privilege over some Fenwick & West communications.
Defense lawyers also argued that FTX, which is in Chapter 11 bankruptcy, has already waived its privilege over certain documents by turning them over to prosecutors. If that’s correct, said former federal prosecutor Harry Sandick of Patterson Belknap Webb & Tyler, it will be easier for Bankman-Fried to obtain Fenwick’s communications.
“It’s hard to see why the defense should be denied access,” Sandick said.
If Bankman-Fried’s lawyers believe that Fenwick documents can help them refute the government’s evidence of criminal intent, Sandick said, they will eventually have to make a strategic decision about how to get the law firm’s communications in front of a jury.
The documents must be introduced through a witness – presumably Bankman-Fried himself or a Fenwick & West lawyer. The strongest defense case, Sandick said, would probably feature testimony from a Fenwick & West witness to bolster testimony from Bankman-Fried about his reliance on advice from FTX lawyers. But contradictory testimony from a law firm witness could undermine Bankman-Fried’s advice-of-counsel defense.
That’s a concern for another day. Right now, Sandick said, Bankman-Fried’s lawyers just want to know whether Fenwick & West’s files will help their client.
“It’s an understandable motion,” he said. “They’re saying, ‘Let’s see what the documents say, then we’ll decide how to use them.’”
© Thomson Reuters 2023
Binance Australia Customers Seen Selling Bitcoin at Discount to Rival Crypto Exchanges
By Reuters | Updated: 30 May 2023
Bitcoin prices on the Australian arm of Binance, the world’s largest crypto-currency exchange, were almost A$9,000 (roughly Rs. 4.8 lakh) lower than prices on rival exchanges on Tuesday, in a sign customers were seeking to exit their positions quickly.
The price of the world’s biggest cryptocurrency, bitcoin, was at around AUD 34,000 ($23,062.20, or roughly Rs. 18.3 lakh) on Binance Australia, compared with A$43,000 on BTC Markets, an Australia-based cryptocurrency exchange.
Bitcoin was quoted at $27,790 (roughly Rs. 23 lakh) outside Australia.
Binance did not immediately respond to Reuters request for comment.
Earlier this month, the Binance unit said some customers in Australia will not be able to deposit or withdraw money after a third-party service provider cut off its service.
Binance on social media had said users were unable to make Australian dollar deposits by bank transfer with immediate effect.
“We are working hard to find an alternative provider to continue offering AUD deposits and withdrawals to our users,” Binance had said in a statement.
Binance has been battling regulatory suits and probes around the world. The company said in April it would close its Australian derivatives business after relinquishing a financial services licence amid a regulatory probe into its operations.
Binance also withdrew from Canada earlier this month, weeks after the country issued a series of new guidelines for cryptocurrency exchanges including investor limits and mandatory registrations.
“Unfortunately, (the) new guidance related to stablecoins and investor limits provided to crypto exchanges makes the Canada market no longer tenable for Binance at this time,” crypto exchange Binance had said in a tweet.
($1 = 1.4743 Australian dollars)
© Thomson Reuters 2023
Blockchain.com CEO Says US Debt Default Would Hit Cryptocurrencies Initially
By Reuters | Updated: 26 May 2023
A US government default would trigger an initial pull-back from cryptocurrencies followed by a “push upward” the CEO of London-based crypto firm Blockchain.com said on Thursday.
The US government could fall behind on its bills next month – and even default on its debt – if Congress does not raise a $31.4 trillion (roughly Rs. 2,59,54,29,80 crore) cap on government borrowing, a failure that could trigger economic calamity and panic on global financial markets.
In the short term, “a US default or a US recession is probably bad for crypto. These are risk assets, and you want to take risk off,” Blockchain.com CEO Peter Smith said at the Qatar Economic Forum, organised by Bloomberg.
“On a long horizon, these are probably good for crypto…If the US government defaults, we’ll probably see a quick pull-back and then a very strong push upward in the crypto market.”
The cryptocurrency market has followed cyclical patterns and while 2022 was “quite painful”, it is recovering this year and 2024 will be “another exponential year”, Smith said.
Blockchain.com, which offers users a crypto wallet and is also a crypto exchange, is considering an expansion of its small Middle Eastern office in the commercial center of Dubai.
“The (Dubai) governments in a very healthy, consultative process with the industry and about regulations…I think so long as those end up where we think they will, we’ll probably be investing heavily in Dubai,” he said.
Last September, Blockchain.com signed an agreement with Dubai’s crypto regulator Virtual Assets Regulatory Authority (VARA) and has since opened an office and hired staff.
Currently, the company is investing most heavily to shore up operations in Singapore and Europe, Smith said.
© Thomson Reuters 2023
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