Bankman-Fried Associates FlipAs FTX Co-Founder Arrives In NYC
According to an announcement from the U.S. Attorney Damian Williams, former Alameda Research CEO Caroline Ellison and FTX co-founder Gary Wang have pleaded guilty to fraud and are reportedly cooperating with prosecutors in their investigation into the collapse of FTX.
The announcement coincides with FTX co-founder Sam Bankman-Fried’s (SBF) successful extradition to the U.S. on Wednesday. SBF is expected to make his first appearance in Manhattan federal court on Thursday.
Williams also warned others involved in the collapse to come forward before it’s too late, stating:
“Let me reiterate a call I made last week. If you participated in misconduct at FTX or Alameda, now is the time to get ahead of it. We are moving quickly and our patience is not eternal.”
He also said:
Williams also confirmed that SBF is now in the custody of the Federal Bureau of Investigation (FBI) and is “on his way back to the United States” where he will be transported directly to the Southern District of New York to appear before a judge “as soon as possible.”
In a separate action, the United States Securities and Exchange Commission announced on December 21 that it has charged Ellison and Wang for their rules in a “multiyear scheme to defraud equity investors in FTX,” adding that it is also investigating other securities law violations and into other entities and persons relating to the misconduct as well.
The SEC noted that both Ellison and Wang are cooperating with its ongoing investigations as well.
SBF was officially handed over from Bahamian custody to U.S. authorities on December 21 after he waived his right to a formal extradition process that could have taken weeks.
His lawyer claimed that SBF wanted to speed up the process as he is currently driven to “put the customer right.”
Meanwhile, Ellison’s recent guilty plea and cooperation with the SDNY may be unsurprising for some, given that she was reportedly spotted at a coffee shop just a short walk away from the U.S. Attorney’s Office and the New York FBI office on December 5.
Retiring U.S. Senator Pat ToomeyIntroduces Stablecoin TRUST Act
Outgoing Pennsylvania Sen. Pat Toomey is reportedly introducing a new stablecoin bill titled “The Stablecoin TRUST Act.” TRUST is an acronym for Transparency of Reserves and Uniform Safe Transactions.
The bill is aimed at establishing a federal regulatory framework for “payment stablecoins,” and is designed to guide Congress towards a path of “sensible regulation of cryptocurrencies.”
Toomey, who used one of his last few weeks in office to introduce the bill, stated,
“I hope this framework lays the groundwork for my colleagues to pass legislation next year safeguarding customer funds without inhibiting innovation. This bill will also ensure the Federal Reserve, which has displayed significant skepticism about stablecoins, won’t be in a position to stop this activity.”
The legislation is very similar to the TRUST Act that Toomey introduced in April, and is both the latest and likely last bill of several relating to digital assets that Sen. Toomey introduced or cosponsored in this last term.
Sen. Toomey’s proposal would also take stablecoin regulation out of the hands of the Securities and Exchange Commission (SEC) and the Commodities Futures Trading Commission (CFTC). The Stablecoin TRUST Act would prevent the classification of “payment stablecoins” as securities and exclude their issuers from being regulated as investment advisors or investment companies.
Instead, the act would create a new federal license for “payment stablecoin issuers” managed by the Office of the Comptroller of the Currency (OCC) – the agency charged with regulating traditional banks and savings institutions.
Toomey is bullish on the potential for stablecoins to transform existing, real-world financial transactions.
“By digitizing the U.S. dollar and making it available on a global, instant and nearly free-cost basis, stablecoins would be widely used across the physical economy in a variety of ways,” he said in the latest release, echoing his vision for the bill introduced in April, in which he noted that “while today stablecoins facilitate trading with cryptocurrencies, tomorrow stablecoins could be widely used in the physical economy.”
For issuers, the act would standardize public disclosure requirements, including what is being used to back the stablecoin – which must be “high-quality liquid assets.”
For holders, privacy would be tantamount, excluding “new technologies like digital assets” from Bank Secrecy Act requirements and asserting that “private transactions not involving an intermediary or a financial institution do not need to be reported.”
While Senator Toomey joined the rally cry of lawmakers calling for crypto regulation in the wake of the FTX collapse, he warned his colleagues in Congress that the disaster was not due to the fact that cryptocurrency was involved, but because those digital assets were poorly – or fraudulently – handled.
“The wrongful behavior that occurred here is not specific to the underlying asset; what appears to have happened here is a complete breakdown in the handling of those assets,” he said in prepared remarks. “In our discussion of FTX today, I hope we are able to separate potentially illegal actions from perfectly lawful and innovative cryptocurrencies.”
Sen. Toomey has also been critical of SEC commissioner Gary Gensler, recently disagreeing with the regulator’s assertion that cryptocurrencies are securities. He has also introduced and cosponsored other crypto bills, such as the Virtual Currency Tax Fairness Act.
The senator announced his retirement from Congress in October 2020.
Peer-To-Peer Crypto Marketplace PaxfulRemoves ETH From Platform
Peer-to-peer crypto marketplace Paxful has removed Ether (ETH), Ethereum’s native token, from its marketplace, citing three major concerns with the digital asset.
Paxful CEO Ray Youssef announced the move stating, “Revenue is nice, but integrity trumps all.”
THe first major concern highlighted by Youssef is Ethereum’s switch from a proof-of-work (PoW) to a proof-of-stake (PoS) consensus mechanism. Youssef reasoned that PoW is the “innovation that makes Bitcoin the only honest money there is” and that Ethereum’s transition to PoS has turned ETH into a “digital form of fiat.”
The second major concern is the relative centralization of the Ethereum blockchain. He stated that ETH is “controlled by a small number of people” and that one day we will “need permission to use it.”
The third major concern cited by Youssef is the prevalence of scams in the Ethereum blockchain that “have robbed people of billions.”
Responding to questions on Twitter, Youssef said Paxful will continue offering trade in stablecoins Tether (USDT) and USD coin (USDC), but didn’t seem too enthusiastic about it.
Paxful is a peer-to-peer marketplace that is popular in Africa, a region Youssef believes will see mass adoption of bitcoin due to its financial inclusionary potential.
“In short, our industry is under attack right now, which means our responsibility to protect our users is greater than ever before,” concluded Youssef.
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