Feds allege that about every unregulated crypto exchange of any kind.
It does seem like this particular business was relying upon legal hacks and obscurity more than following the established rules for financial firms, probably for ideological reasons.
Honestly I don’t know, crypto in general is a scam in my book but I’m very well aware that doesn’t makes it illegal.
Now what SBF is actually guilty of I can’t tell you, you’ll might be able to find a large number of various small violations in terms of fiduciary responsibility but I do not have the sufficient legal expertise to start unpacking this.
I definitely haven’t seen anything specifically that amounts of wire fraud the closest public thing might be when they insinuated that FTX deposits are covered by FDIC insurance.
Which kind of brings us to the next problem not with FTX but with crypto exchanges as a whole they don’t seem to act as only as exchanges but also as banks and investment funds. Stock, derivatives and other goods exchanges don’t tend to have customer deposits their roles is to connect between buyers and sellers and provide arbitration services to execute trades.
Every time I look at crypto exchanges my brain starts to hurt and I can only think to myself how is any of this shit is even legal.
Other potential issues would be the relationship between FTX and Alameda normally you will never be able to have that conflict of interests between an exchange and a market maker in any regulated equity market.
I also don’t understand how or why these exchanges can issue their own tokens that would normally be equivalent to a promissory note.
I honestly can’t wait until this entire crypto fab dies over but I also unfortunately don’t see people going to jail over any of this nonsenses.
I hope I'm not the only one that finds this completely ridiculous. What right does the U.S. Federal Government have to prosecute people who aren't even operating within their jurisdiction? This is nothing but imperialism and a captured government trying to shut down competitors to U.S.-based regulated exchanges from more crypto-friendly countries.
The key detail here is that Liberty Reserve (Like MtGox) was operating an unlicensed money transmitter. Let's be honest, if you're transmitting money without a license, you're gonna end up in jail once you hit scale. It's inevitable; the only companies that evade capture are the small potatoes.
So I think companies like MtGox have a lot to worry about, but companies like Tradehill, which have gone and done the regulatory dance, will be fine.
This is not the US versus Bitcoin, this is the US versus dumbasses who try to cheat the money transmitting rules and know damn well what they're doing is illegal. I happen to sympathize with these folks because I don't think the government should have its hands in every monetary transfer, but regulatory concerns are always a part of any business plan and ignoring them is a plan too (albeit not necessarily the best one).
Alternative headline: unsustainable business practices found to be significantly less sustainable when interest rates rise.
Other banks beyond Silvergate/SVB/etc were not explicitly prevented from doing business with crypto companies to my knowledge. It's just that their risk analysis teams internally decided it was not worth it. And, turns out, it seems they were right. You've crypto firm after crypto firm falling because of shady business practices, usually predicated on shoddy financial reporting that was either fraud or too opaque to deal with for the other banks.
Mad because some entrepreneurs makes the effort to build legitimate business entities, and what certain governments find to do is any scheme to keep them out of legitimity.
Not that crypto fans would care all that much about these businesses, but there is a need to onramp and offramp given transactions are made in their vast majority in fiat. An exchange run as a business having at least a lot at stake in ensuring continuity is one of the decent ways to get on with crypto.
If it was my call I would skip the perp and earn products to stay clear of regulators when operating in the US, but there must be stories behind closed doors that we don't easily get to know would be my guess.
That’s usually the way these things work. That’s why the AG is making statements like “stop the illegal activity” and stuff, it degrades trust. However, if you read the statement it’s a win for the crypto exchange. Only an $18m fine for supposedly “billions in fraud” (course if you read deeper, they found no fraud).
And that is supported by the known past actions of "some government authorities". This is definitely not the first time the US government has deliberately sabotaged crypto.
Hold on a second, I thought the whole point of crypto was having minimal to no government regulations. Now the article’s author wants to blame the SEC for having minimal to no government regulations?
If you do it in "real" markets, you get the attention of the SEC or similar agencies in other countries. Crypto is completely unregulated in this regard.
This doesn't make any sense. There is legal clarity and regulation inside the US. Crypto largely is deliberately attempting to create ambiguity. All the financial instruments created by crypto have real world regulated equivalents, whether that's ICOs or currencies of commodities. They already exist. What was FTX doing that CME, or a big hedge fund aren't? Well for one, FTX is a mix of those two businesses - why doesn't that exist in normal finance? Because of the dead obvious conflict of interests that we have seen resulted in exactly what happened at FTX.
So what do you want? FTX to operate under the same regulations as traditional financial institutions? Ok. That's fine, but we already have those regulations, it's the crypto organisations that are pretending that they don't exist - for the exact reason they don't want to follow them.
I think you meant to say 'one of the most regulated cryptocurrency exchanges in the world', in which case this isn't so surprising because the exchanges and currencies in that space are a mess of unregulated and downright fraudulent actors who actively deceive their customers and try to avoid scrutiny (bitfinex is another recently). We should not be surprised by this, it is the norm, and much more fraud and self-dealing will come to light after this bubble bursts.
They've been reprimanded by a federal judge for blatant extrajudicial power grabs like this one. None of their huge cases claiming various cryptocurrencies are securities have succeeded, except in the super cut-and-dry cases like ICOs and centralized schemes that clearly pass the Howey test.
In which the main problem here is "United States", not the digital currency donation.
US agencies have too many overreaching regulations like the OFAC one, together with a lot of fake regulations.
The SEC was close to FTX and totally blind to the whole fraud operation that was going on. Likewise, many things in traditional finance markets (debt collaterization, etc.) are legal and regulated, but they're often nothing else but outright scams.
In my opinion, authorities avoided regulating this space because they already have a precedent. They convinced Bitfinex to use multi-segregated wallets to store customer funds, and this resulted in the Bitfinex Hack. My guess is that authorities are probably keeping too careful when it comes to regulation.
It does seem like this particular business was relying upon legal hacks and obscurity more than following the established rules for financial firms, probably for ideological reasons.
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