By Reuters | Updated: 6 December 2022
A US agency that probes allegations of deceptive conduct confirmed on Monday that it had investigations open into several cryptocurrency firms for “possible misconduct.” The Federal Trade Commission spokesperson declined to name the firms or say precisely what actions prompted the investigations.
“While we can’t comment on current events in the crypto markets or the details of any ongoing investigations, we are investigating several firms for possible misconduct concerning digital assets,” the spokesperson said in a statement.
Bloomberg said in a report that the investigation was linked to misleading advertising but the FTC spokesperson declined to confirm this.
The spectacular implosion of FTX recently sent fresh shock waves through the cryptocurrency industry, with the value of Bitcoin down sharply this year.
The Securities and Exchange Commission, which also has regulations mandating disclosures from individuals promoting securities, has cracked down on celebrity endorsements, including reality TV star Kim Kardashian on allegations of promoting a crypto token on her Instagram account without proper disclosure that she had been paid.
The FTC has also pursued companies that presented themselves as cryptocurrency-related firms but which were allegedly nothing more than scams.
Back in June, the FTC said in a report that more than 46,000 people reported losing over $1 billion (roughly Rs. 8,233 crore) in cryptocurrency scams since the start of 2021.
Nearly half the people who reported losing digital currencies in a scam said it started with an ad, post or a message on a social media platform, according to the FTC.
The craze for cryptocurrencies was at a fever pitch last year with Bitcoin hitting a record high of $69,000 (roughly Rs. 56 lakh) in November 2021.
Nearly four out of every ten dollars lost in a fraud originating on social media was lost in crypto, far more than any other payment method, with Instagram, Facebook, WhatsApp and Telegram being the top social media platforms in such cases, according to the FTC’s report.
© Thomson Reuters 2022
Crypto Rug-Pulls Affect Thousands of Users in Himachal Pradesh, Over Rs 200 Crore Lost
By Press Trust of India | Updated: 3 October 2023
Fraudsters in Himachal Pradesh minted a series of a crypto coins — two of which were KRO and DGT — to cheat thousands of investors of more than Rs 200 crore over a period of five years, beginning in 2018 — the year that crypto reached fever pitch.
The persons alleged to be part of a gang lured people promising them high returns in a short span of time in crypto investments and created a network of investors.
The initial investors then were baited to reel in other people in a Ponzi-style scheme.
The matter was raised in the Vidhan Sabha by Independent MLA Hoshyar Singh who pegged the amount of money swindled from people in Kangra and Hamirpur alone to be upwards of Rs. 200 crore.
In the wake of Singh’s assembly speech, a special investigation team was formed to probe into the matter.
The exact amount defrauded is yet to be ascertained, Deputy Inspector General of Police, Northern Range, Abhishek Dhullar, who is heading the SIT, told PTI on Monday.
Five people have been arrested in the connection with the frauds, however, their kingpin is still at large, police said.
The frauds used a combination of misinformation, deception, and threats to maintain control over their scheme and continued to extract money from unsuspecting investors by manipulating the prices of their coins, he said.
The first coin they launched was ‘Korvio Coin’ or KRO coins.
They charged the buyers an initial activation fee and promised them substantial returns. In their five-year-run, the frauds used three to four cryptocurrencies.
Cryptocurrency is a digital currency designed to work as a medium of exchange through a blockchain-based computer network that is not dependent on any central authority, such as the government or bank to uphold or maintain it.
Once their accounts were activated, the investors were encouraged to rope in more members into the scheme, police said.
The criminals used a Ponzi scheme pattern — a type of investment scam in which returns are paid to earlier investors from the capital contributed by new investors rather than from any legitimate profits.
Investors were encouraged to keep recruiting new members, a practice which created a cycle where money from new investments was used to pay returns to earlier investors. These initial investors got huge returns and became brand ambassadors of the scheme.
The scammers built fake websites to list their coins and manipulated their prices.
They later launched a new coin called ‘DGT Coin.’ After enough people had purchased these coins at a higher rate, its price was deliberately brought down causing a massive rugpull.
The accused introduced new coins and investment plans under different company names, such as ‘Hypenext’ and ‘Aglobal.’ Each time a new coin was introduced, it was marketed as a yet another investment opportunity, police said.
According to police, they have received 50 complaints about such frauds this year alone.
During their investigation, police found that the modus operandi across these frauds was similar and names involved common, SP Cyber Crime Rohit Malpani said.
Since then, five people have been arrested and chargesheeted in connection with these frauds and eight FIRs filed, police said.
“We are close to nabbing the kingpins of cryptocurrency scams in Himachal Pradesh and have mapped their assets and are conducting financial investigation,” Director General of Police Sanjay Kundu told PTI.
“My advice to people is not to fall prey to the cryptocurrency fraudsters,” he said.
Cryptocurrency market has seen several rug-pulls in the past few years, including the famous 2021 Squid coin scam in which the coin makers reportedly made off with $23 million (roughly Rs. 190 crore).
Crypto exchange Coinbase obtains Monetary Authority Of Singapore licence
By Reuters | Updated: October 1, 2023
Oct 2 (Reuters) – The Singapore arm of cryptocurrency exchange Coinbase (COIN.O) said on Monday that it had obtained a Major Payment Institution (MPI) licence from the city-state’s central bank.
The licence, granted by the Monetary Authority of Singapore (MAS), will allow the largest U.S. crypto exchange to offer digital payment token services to individuals and institutions in Singapore.
© Thomson Reuters 2023
Binance Crypto Exchange to Sell Its Russia Business to CommEX for Undisclosed Amount
By Reuters | Updated: 28 September 2023
Cryptocurrency exchange Binance said on Wednesday it will sell its Russia business to newly-launched exchange CommEX, becoming the latest company to pull out of Moscow since the country began its war against Ukraine.
Binance, the world’s largest cryptocurrency exchange, did not disclose financial details of the deal. The company said it will have no ongoing revenue split from the sale, nor will it maintain an option to buy back shares in the business.
“As we look toward the future, we recognise that operating in Russia is not compatible with Binance’s compliance strategy,” Chief Compliance Officer Noah Perlman said, without referring to the war in Ukraine, which Russia calls a “special military operation.”
Binance also said that all the assets of its existing Russian users were safe and that there will be an orderly process for the migration of users. The divestment process will take up to one year, it added.
CommEX is a centralized cryptocurrency exchange backed by crypto venture capitalists, according to its website. The company only launched its exchange on Tuesday. It did not respond to a request for comment on the Binance deal.
Many Western companies, including the likes of Renault, Shell, McDonald’s and others, have agreed to sell their Russian assets or hand them over to local managers to take action to comply with sanctions over the war in Ukraine and deal with threats from the Kremlin that foreign-owned assets may be seized.
Last month, Mastercard announced that the company and Binance exchange would end their four crypto card programmes in Argentina, Brazil, Colombia and Bahrain as of September 22. The Binance cards allow users to make payments in traditional currencies, funded by their cryptocurrency holdings on the exchange.
Binance is also facing legal and regulatory challenges. US regulators sued the crypto exchange and its CEO Changpeng Zhao in June for allegedly operating a “web of deception.” Binance has said it would defend itself “vigorously.”
© Thomson Reuters 2023
JPMorgan’s UK Bank Chase to Ban Crypto Transactions After Increase in Scams
By Reuters | Updated: 27 September 2023
JPMorgan’s British retail bank Chase will ban crypto transactions made by customers from October 16 due to an increase in fraud and scams, the company said on Tuesday.
“We’ve seen an increase in the number of crypto scams targeting UK consumers, so we have taken the decision to prevent the purchase of crypto assets on a Chase debit card or by transferring money to a crypto site from a Chase account,” a spokesperson for the bank said.
Chase has become the latest lender in the UK to restrict customers’ access to crypto amid long-running concerns over its use in online scams run by criminals.
JPMorgan has attracted more than 1.6 million customers to its Chase retail bank since launching the mobile app-based service in Britain two years ago, and plans to roll out the consumer bank in other international markets over time.
Chase informed customers of its planned policy change by email on Tuesday morning, the bank confirmed. Crypto media outlet Coindesk reported the move earlier on Tuesday.
In March, NatWest (NWG.L) imposed new limits on the daily and monthly amount customers can send to crypto exchanges, seeking to protect consumers from “crypto-criminals.”
Spain’s Santander said last year it would block UK customers from sending real-time payments to crypto exchanges as part of measures to protect customers from scams.
Last month, payments giant PayPal announced that it would stop allowing UK customers to buy cryptocurrencies through its platform from October as it worked to comply with new rules on crypto promotions.
Britain’s financial regulator is due to bring in tougher rules to limit how crypto is advertised to British consumers, including requiring crypto firms to carry warnings about the risk and scrapping “refer a friend” bonuses.
© Thomson Reuters 2023
Crypto Reporting Framework Discussed During G20, Decision Taken on Swift Implementation
By Press Trust of India | Updated: 9 September 2023
The G-20 leaders on Saturday decided on swift implementation of the reporting framework for crypto assets, saying a significant number of member nations want information exchange on such non-financial assets to start by 2027.
The Crypto Asset Reporting Framework (CARF) or template is being developed to make sure that such non-financial assets are not used by tax evaders to conceal their unaccounted wealth.
“We call for the swift implementation of the CryptoAsset Reporting Framework (“CARF”) and amendments to the CRS. We ask the Global Forum on Transparency and Exchange of Information for Tax Purposes to identify an appropriate and coordinated timeline to commence exchanges by relevant jurisdictions,” said the G20 Leaders’ declaration, which was adopted by consensus.
The leaders of 20 developing and developed nations have reaffirmed the commitment to continue cooperation towards a globally fair, sustainable and modern international tax system appropriate to the needs of the 21st century.
“We remain committed to the swift implementation of the two-pillar international tax package. Significant progress has been made on Pillar One including the delivery of a text of a Multilateral Convention (MLC), and work on Amount B (framework for simplified and streamlined application of the arm’s length principle to in-country baseline marketing and distribution activities) as well as the completion of the work on the development of the Subject to Tax Rule (STTR) under Pillar Two,” the declaration said.
Briefing reporters after the summit, Finance Minister Nirmala Sitharaman said the G20 countries have made substantial progress on the two-pillar solution.
“Work has happened on exchange of information on immovable property transactions between countries. There is a launch of the pilot programme of the South Asia academy for tax and financial crime investigation in collaboration with the OECD,” Sitharaman said.
Under the global tax deal, about 140 countries, including India, have agreed to an overhaul of global tax norms to ensure that multinationals pay taxes wherever they operate and at a minimum of 15 percent rate. However, some vexed issues still need to be ironed out before its implementation.
The G20 countries called on the OECD to develop an inclusive framework to swiftly resolve the few pending issues relating to the MLC (multilateral convention) with a view to preparing the MLC for signature in the second half of 2023 and completing the work on Amount B by the end of 2023.
“We welcome the steps taken by various countries to implement the Global Anti-Base Erosion (GloBE) Rules as a common approach. We recognise the need for coordinated efforts towards capacity building to implement the two-pillar international tax package effectively and, in particular, welcome a plan for additional support and technical assistance for developing countries,” the declaration said.
The G20 countries also took note of the OECD report on ‘Enhancing International Tax Transparency on Real Estate’ and the ‘Global Forum Report on Facilitating the Use of Tax-Treaty-Exchanged Information for Non-Tax Purposes’.
The OECD has suggested automatic exchange with regard to information on real estate assets among countries and the setting up of digitalised ownership registers accessible to designated relevant government agencies on a real-time basis amid concerns over investments in foreign real estate being used to “shelter undeclared assets”.
The report noted that there has been a significant increase in foreign-owned real estate assets over the past decade, and a lot of funds have been shifted from financial assets to buying foreign real assets.
The Global Forum report also called for countries to adopt a ‘whole-of-government’ approach to address the challenge of illicit financial flows through the sharing of information from tax authorities to non-tax agencies, like financial intelligence units, anti-corruption agencies, customs authorities and public prosecutors.
India had been pressing for expanding the scope of common reporting standard (CRS) at the G20 to include non-financial assets like real estate properties, under the automatic exchange of information (AEOI) among OECD countries.
IMF-FSB, Regulators Set Out Roadmap to Coordinate Global Cooperation on Crypto Asset Regulation
By Reuters | Updated: 8 September 2023
Global financial regulators and the International Monetary Fund on Thursday set out a roadmap to coordinate measures that stop crypto assets from undermining macroeconomic and financial stability. Such risks are exacerbated by noncompliance with existing laws in some instances, the G20’s risk watchdog, the Financial Stability Board, and the IMF said in a paper.
Many of the claimed benefits from crypto assets, such as cheaper and faster cross-border payments, and increased financial inclusion, have yet to materialise, it added.
“Widespread adoption of crypto-assets could undermine the effectiveness of monetary policy, circumvent capital flow management measures, exacerbate fiscal risks, divert resources available for financing the real economy, and threaten global financial stability,” the paper said.
The paper sets out timelines for members of the IMF and G20 to implement recent recommendations to regulate crypto from the Financial Stability Board and IOSCO, a global group of securities regulators.
It marks a further evolution in regulatory thinking after several years of seeing little threat from the sector, with attitudes hardening after the collapse of the crypto exchange FTX last November, which rattled markets and left investors nursing losses.
“A comprehensive policy and regulatory response for crypto-assets is necessary to address the risks of crypto-assets to macroeconomic and financial stability,” said the paper, which will be presented to G20 leaders at a summit this month in New Delhi.
The European Union has approved the world’s first comprehensive set of rules for crypto assets, but there is a patchier approach elsewhere to a borderless sector where fraud and manipulation are “prevalent”.
Other elements include governments avoiding large deficits which can lead to inflation that dents fiat currencies and encourages substitutes such as cryptoassets, the paper said.
The tax treatment of crypto assets should also be spelled out, along with how existing laws apply to the sector.
© Thomson Reuters 2023
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