Category: News

By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) – The dollar fell on Monday in choppy trading after last week’s strong rally, weighed down by firmer stocks and lower long-dated Treasury yields, as investors consolidated positions ahead of Tuesday’s crucial U.S. consumer price index (CPI) data.

The greenback, however, rose to six-week highs against the rate-sensitive Japanese yen on expectations the Federal Reserve will keep monetary policy tight for longer. This view will be challenged or confirmed by the CPI data, which loomed over Monday’s trading.

“Higher stocks and lower yields are causing the dollar to take a breather ahead of tomorrow’s inflation data,” said Joe Manimbo, senior market analyst at payments company Convera in Washington.

“The risk-on trade is also weighing on the yen, while it’s not helping that the next head of the BOJ (Bank of Japan) might not necessarily signal an imminent change in course from the negative rate policy.”

Investors expect headline CPI to rise 0.5% in January on Tuesday, after falling 0.1% in December, with the core number seen advancing to 0.4% from 0.3% the previous month, according to a Reuters poll.

The euro hit a one-month low of $1.0656 in Asia trading, but was last up 0.4% at $1.0719. The British pound rose 0.6% to $1.2134, after hitting a one-month low of $1.1961 last week.

That left the dollar index, which tracks the greenback against six major currencies, at 103.29, down 0.3%.

The dollar rose to 132.91 yen, the highest since Jan 6.. It was last up 0.7% at 132.34 yen.

“The market doesn’t want to be short dollar/yen ahead of CPI tomorrow,” said Marc Chandler, chief market strategist at Bannockburn Forex in New York.

The greenback tracked the rise in the U.S. Treasury two-year yield, which was last up 1.7 basis points (bps) at 4.53%, after hitting its highest since late November.

“We have a nice pullback in the U.S. dollar after a strong rally last week,” said Bannockburn’s Chandler.

“I don’t think we have taken out key levels just yet. But we’re consolidating some positions after last week’s moves and ahead of tomorrow’s CPI.”

Higher U.S. yields were a major driver of the softer yen. The benchmark 10-year U.S. Treasury yield on Monday hit a fresh six-week high of 3.755% and the two-year yield hit its highest since late November at 4.56%.

The Japanese currency dropped sharply last year to a 32-year low of 151.94 per dollar as U.S. rates rose, while Japanese rates stayed near zero.

It has regained ground this year as U.S. rates seemed to be near their peak, and as expectations rose that the Bank of Japan would move away from its ultra-loose stance, but both scenarios now look like they have been delayed.

Sources said on Friday that former Bank of Japan board member Kazuo Ueda is set to become the next governor. In an interview the same day, Ueda said it was appropriate for the BOJ to maintain its current ultra-easy policy.

In the United States, money markets are positioned for U.S. interest rates to peak at 5.2% around July, compared with the Fed’s current target rate of 4.5-4.75%, but have mostly walked back expectations of major rate cuts later in the year.

Elsewhere, the Swiss franc strengthened after Swiss inflation data came in higher than expected. The dollar slid as low as 0.9193 Swiss francs and was last down 0.4% at 0.9197 francs.

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Currency bid prices at 3:59PM (2059 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 103.2600 103.6000 -0.31% -0.222% +103.8400 +103.2300

Euro/Dollar $1.0722 $1.0678 +0.42% +0.07% +$1.0730 +$1.0656

Dollar/Yen 132.2800 131.4150 +0.67% +0.90% +132.9000 +131.1100

Euro/Yen 141.83 140.27 +1.11% +1.09% +142.3800 +140.3200

Dollar/Swiss 0.9193 0.9237 -0.47% -0.57% +0.9259 +0.9193

Sterling/Dollar $1.2137 $1.2059 +0.63% +0.34% +$1.2151 +$1.2031

Dollar/Canadian 1.3337 1.3346 -0.06% -1.56% +1.3379 +1.3325

Aussie/Dollar $0.6965 $0.6919 +0.68% +2.19% +$0.6973 +$0.6891

Euro/Swiss 0.9858 0.9861 -0.03% -0.37% +0.9877 +0.9847

Euro/Sterling 0.8832 0.8852 -0.23% -0.14% +0.8876 +0.8824

NZ $0.6358 $0.6311 +0.76% +0.15% +$0.6366 +$0.6291

Dollar/Dollar

Dollar/Norway 10.0945 10.1565 -0.47% +3.00% +10.1800 +10.1000

Euro/Norway 10.8276 10.8351 -0.07% +3.18% +10.8680 +10.8113

Dollar/Sweden 10.3775 10.4524 -0.31% -0.29% +10.4913 +10.3710

Euro/Sweden 11.1280 11.1631 -0.31% -0.15% +11.1860 +11.1245

(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Alun John in London and Kevin Buckland in Tokyo; Editing by Shri Navaratnam, Simon Cameron-Moore, Hugh Lawson and Richard Chang)

By Nikunj Ohri

(Reuters) – The Group of 20 (G20) big economies is exploring whether the group could collectively regulate cryptocurrencies, Finance Minister Nirmala Sitharaman said on Saturday.

Given the sophisticated technologies involved with these virtual assets, countries must discuss whether a given regulation is needed, said Sitharaman, whose country is this year’s G20 president.

Prime Minister Narendra Modi’s government has for several years debated drafting a law to regulate or even ban cryptocurrencies but has not made a final decision.

“We are talking to all nations, that if it requires regulation, then one country alone cannot do anything,” Sitharaman told reporters after meeting the central bank’s directors in New Delhi.

“We are talking with all nations, if we can make some standard operating procedure which is followed by everyone to make a regulatory framework, and if it can be effective.

India will host G20 finance ministers and central bank governors this month.

Last year, Modi has said a collective global effort is needed to deal with problems posed by cryptocurrencies. The Reserve Bank of India has said that cryptocurrencies should be banned as they are akin to a Ponzi scheme.

(Reporting by Nikunj Ohri; Editing by William Mallard)

By Brendan O’Boyle

(Reuters) – Risks over El Salvador’s embrace of bitcoin “have not materialized,” but use of the cryptocurrency still requires transparency and attention, the International Monetary Fund (IMF) said Friday in a statement after a visit to the Central American country.

“Given the legal risks, fiscal fragility and largely speculative nature of crypto markets, the authorities should reconsider their plans to expand government exposures to bitcoin,” the IMF said in a statement.

The annual visit by IMF staff followed a $600 million bond payment by El Salvador last month amid investor concerns over its financing sources and fiscal policy.

The IMF’s so-called “article IV” visit has been sharply critical in the past. El Salvador’s move to make bitcoin legal tender in September 2021 effectively closed the doors to IMF financing.

While the lender noted that risks “have not materialized due to the limited bitcoin use so far,” it said the cryptocurrency’s “use could grow given its legal tender status and new legislative reforms to encourage the use of crypto assets, including tokenized bonds.”

El Salvador’s Congress last month passed a law regulating the issuance of digital assets by both the state and private entities.

President Nayib Bukele announced on Twitter a series of purchases of some 2,380 bitcoin before mid November, when he said the Treasury would buy a bitcoin every day.

If those purchases were made, the government holds nearly 2,470 coins acquired for about $106.4 million. The current value of that investment is $52.2 million, for a paper loss over 50%.

The numbers are Reuters estimates, as the government does not officially disclose purchases, holdings or where the coins are kept.

“Greater transparency over the government’s transactions in bitcoin and the financial situation of the state-owned bitcoin-wallet (Chivo) remains essential,” the IMF said.

The IMF highlighted the “full recovery” of El Salvador’s economy to pre-pandemic levels, “driven by the effective government response to the health crisis.”

Real GDP is projected to grow by 2.4 percent in 2023, the IMF said, above the historical average.

However, the lender also expressed concern over a rising current account deficit and the possible spillover effects of a recession in the United States.

(Reporting by Brendan O’Boyle and Rodrigo Campos; Additional reporting by Kylie Madry; Editing by Anthony Esposito and David Gregorio)

By Jonathan Stempel

(Reuters) – A U.S. judge on Friday dismissed a lawsuit accusing Robinhood Markets Inc of misleading investors about the online brokerage’s financials and growth prospects when conducting its 2021 initial public offering.

U.S. District Judge Edward Chen in San Francisco found no proof that disclosures in Robinhood’s IPO materials were false or misleading, or that declines in key metrics shortly before the company went public in July 2021 were historically extraordinary.

He said Robinhood’s warnings about future growth were “not particularly robust,” but were sufficient.

“Plaintiffs thus failed to plead that Robinhood did not disclose ‘material factors’ that would make an investment in Robinhood speculative or risky,” Chen wrote.

Shareholders in the proposed class action said Robinhood had concealed “severe deterioration” in the two months before the Menlo Park, California-based company’s IPO.

They said this included the number of people who actively used its platform, how much revenue they generated, assets under custody, and a 90% decline in cryptocurrency trading volume.

Shareholders said Robinhood’s stock price fell as much as 82% to $6.81 last June from the $38 IPO price as the company became, in the words of a JPMorgan analyst, “a growth company without the growth.”

Chen also dismissed claims against Robinhood Chief Executive Vladimir Tenev, other company officials, and the IPO underwriters led by Goldman Sachs and JPMorgan.

The plaintiffs were led by Vinod Sodha, a psychiatrist from Beverly Hills, California, and his daughter Amee Sodha, a doctor from Millburn, New Jersey. Chen gave them permission to file an amended complaint.

Lawyers for the plaintiffs did not immediately respond to requests for comment. Robinhood and its lawyers also did not immediately respond to similar requests.

Robinhood reported on Wednesday a loss for 2022 of $1.03 billion, or $1.17 per share, on net revenue of $1.36 billion.

The case is Sodha et al v Robinhood Markets Inc et al, U.S. District Court, Northern District of California, No. 21-09767.

(Reporting by Jonathan Stempel in New York; Editing by Kirsten Donovan and Leslie Adler)

By Hannah Lang and Elizabeth Howcroft

(Reuters) – Crypto companies offering their customers eye-popping yields through so-called “staking” products are earning the ire of the U.S. securities regulator who says such services should be registered.

Crypto exchange Kraken on Feb. 9 agreed to shutter its staking service for U.S. customers and pay $30 million in penalties, as part of a settlement with the regulator, and investors are worried a broader ban on the practice could follow.

Here’s what you need to know about staking:

What is staking?

Staking is a process in which cryptocurrency holders volunteer to take part in validating transactions on the blockchain – in other words, checking that the ledger all adds up.

The checking is not done by individuals, but by computers in the blockchain network, often via third-party staking services. In return, validators, who cannot use their cryptocurrencies involved in the validating process for a period of time, receive a share of the transaction fees or newly created cryptocurrencies. That reward is then passed on to customers at centralized exchanges who agree to stake their assets. 

From a customer’s perspective, it’s a way to receive returns on cryptocurrencies, by agreeing for them to be “put to work,” or “locked up,” for a certain period of time. Staking is only possible on “proof-of-stake” blockchains, such as ethereum. 

The question for regulators is whether this reward scheme resembles an investment contract and should adhere to the accompanying rules.

What firms are engaged in it?

Nearly all of the major crypto exchanges offer staking services to their customers for a variety of tokens, including Coinbase, Binance, Crypto.com, Gemini, Huobi and OKX. Those firms offer clients anywhere from a 2% annual percentage yield to as high as 40% APY on certain tokens. The most popular tokens that can be staked include ethereum, Solana, Polygon and Avalanche.

While those centralized exchanges provide staking as a service to their clients, cryptocurrency owners can also stake their tokens on decentralized exchanges, like Uniswap, although doing so requires more technical know-how.

It’s not just crypto firms either. British digital banking app Revolut recently started allowing customers in the UK and Europe to stake cryptocurrencies they hold on the platform.

Why are regulators unhappy about it?

The SEC has said most staking providers fail to provide customers proper disclosures about how their cryptocurrency will be used and should register their staking services with the agency. In its settlement with the SEC on Feb. 9, Kraken neither admitted nor denied the SEC’s claim that its staking service should have been registered.

SEC Chair Gary Gensler said the action should put other crypto exchanges that offer similar services to U.S. users on notice, and that those platforms should come into compliance with securities laws.

While regulators have expressed concerns about crypto products which lure in customers with the promise of high yields, the practice of staking has not been singled out for specific regulatory attention in countries besides the United States.

Kraken said it would continue to offer staking to customers based outside of the United States.

What’s next?

Although Gensler said the SEC’s settlement with Kraken should be a warning sign to the rest of the cryptocurrency industry, it’s not immediately clear that other crypto exchanges that offer staking will register those services with the SEC.

In a statement, Coinbase said its staking program was not affected by Kraken’s settlement with the SEC because its own service is “fundamentally different” than Kraken’s.

The Blockchain Association, an industry trade group that represents a number of prominent crypto firms in the United States, noted that the Kraken settlement isn’t law, but should serve as a push for Congress to pass legislation that governs cryptocurrency.

(Reporting by Hannah Lang in Washington and Elizabeth Howcroft in London; Editing by Andrea Ricci)

(This Feb. 9 story has been refiled to add ‘U.S.’ in the first sentence to reflect the closure of the U.S. service only)

By Hannah Lang

(Reuters) – Crypto exchange Kraken agreed to shut down its U.S. cryptocurrency staking service and pay $30 million in penalties to settle U.S. Securities and Exchange Commission charges that it failed to register the program, the agency said on Thursday, in a move that could cause headaches for platforms with similar offerings.

The settlement marks the SEC’s first crackdown on staking, a common service offered at both centralized and decentralized crypto exchanges, including most of the major exchanges in the United States such as Coinbase and Binance US.

In a video message posted to Twitter on Thursday, SEC chair Gary Gensler said that most staking providers fail to provide customers proper disclosures such as how a company is protecting a user’s staked assets. Those providers should register their staking services with the SEC, Gensler added.

“When a company or platform offers you these kinds of returns, whether they call their services ‘lending,’ ‘earn,’ ‘rewards,’ ‘APY,’ or ‘staking’ – that relationship should come with the protections of the federal securities laws,” Gensler said.

Owners of crypto assets that use a “proof-of-stake” blockchain can stake some of their assets to potentially take part in the process of validating transactions. In exchange for their work, validators are often rewarded with newly created crypto assets.

Kraken offers its customers the ability to “stake” certain crypto tokens in order to earn rewards. Its website advertises that users can earn up to 20% in annual yield if they pledge to lock up their assets for a certain period of time.

The San Francisco-based platform did not admit or deny the allegations in the SEC’s complaint.

In a statement, Kraken said its agreement to end its on-chain staking services would affect only U.S. clients, and that most assets enrolled in its program by U.S. users would be automatically “unstaked” starting on Thursday.

In a series of tweets on Wednesday, Coinbase CEO Brian Armstrong said a ban on staking for U.S. retail customers would be “a terrible path for the U.S.” Coinbase also offers a staking service to its U.S. customers.

“We need to make sure that new technologies are encouraged to grow in the US, and not stifled by lack of clear rules,” Armstrong said.

Shares of Coinbase were down more than 14% on Thursday.

Kraken in November agreed to pay $362,000 to the U.S. Treasury Department’s Office of Foreign Assets Control to settle civil liability related to apparent violations of sanctions on Iran, and to invest an additional $100,000 in certain sanctions compliance controls.

The company’s incoming CEO told Reuters in September that the exchange had no plans to register with the SEC as a market intermediary, or to delist crypto tokens that the regulator has labeled as securities.

The settlement comes a year after a subsidiary of crypto company BlockFi Inc agreed to pay $100 million to the SEC and 32 states to settle charges in connection with a retail crypto lending product the company offered to nearly 600,000 investors.

As part of the settlement, BlockFi had planned to offer an alternative product expected to be the first crypto interest-bearing security registered with the SEC, but the New Jersey company filed for bankruptcy in November without launching the product.

(Reporting by Hannah Lang in Washington, Editing by Franklin Paul and Will Dunham)

By Luc Cohen

NEW YORK (Reuters) – A U.S. judge on Thursday extended a ban on FTX cryptocurrency exchange founder Sam Bankman-Fried’s ability to contact employees of companies he once controlled and use encrypted messaging technology while out on bail awaiting trial on fraud charges.

U.S. District Judge Lewis Kaplan on Feb. 1 had temporarily barred Bankman-Fried from contacting any current or former employees of FTX or Alameda Research, his hedge fund, after prosecutors raised concerns that the 30-year-old former billionaire may be trying to tamper with witnesses.

As a condition of his release on $250 million bond, the judge also prevented Bankman-Fried from using messaging apps such as Signal that let users auto-delete messages.

After rejecting an agreement between defense lawyers and prosecutors to loosen those conditions on Tuesday, Kaplan on Thursday said the restrictions would remain in place until Feb. 21 and instructed both sides to explain by Feb. 13 how they could be sure Bankman-Fried would not delete electronic messages.

“I am far less interested in the defendant’s convenience” than in preventing possible witness-tampering, Kaplan said at a hearing in Manhattan federal court.

“There is still snail-mail and there is still email and there are all kinds of ways to communicate that don’t present the same risks,” Kaplan added.

Defense lawyers have argued that Bankman-Fried’s efforts to contact an FTX general counsel and its new chief executive John Ray were attempts to offer “assistance” and not interfere.

Bankman-Fried, accused by prosecutors of cheating investors and causing billions of dollars in losses, pleaded not guilty on Jan. 3 to eight criminal charges including wire fraud and money laundering conspiracy. He faces up to 115 years in prison if convicted, though any sentence would ultimately be determined by a judge based on a range of factors.

His agreement with prosecutors would have allowed him to use communication tools such as Zoom and texting, as well as WhatsApp if he installed monitoring technology on his phone. It also would have exempted some people from the no-contact order, without specifying who they were.

A prosecutor, Danielle Sassoon, told the judge that the people were connected with FTX but not central to the government case and not expected to testify.

“We don’t want to completely eliminate the defendant’s ability to communicate,” Sassoon said.

Bankman-Fried had originally proposed being banned from contacting only certain potential witnesses like former Alameda CEO Caroline Ellison and former FTX Chief Technology Officer Zixiao “Gary” Wang, who have pleaded guilty to fraud and are cooperating with prosecutors. Bankman-Fried had also agreed to withdraw his objection to a bail condition preventing him from accessing FTX, Alameda or cryptocurrency assets.

Bankman-Fried rode a boom in bitcoin and other digital assets to build an estimated $26 billion fortune and become an influential political donor. FTX collapsed and filed for bankruptcy in November. Bankman-Fried was extradited from the Bahamas, where he had lived and where the exchange was based, to face the criminal charges.

(Reporting by Luc Cohen in New York; Editing by Will Dunham and Lisa Shumaker)

(This Feb. 8 story has been corrected to fix Michael Demissie’s job title in paragraph 1)

By Samuel Indyk

LONDON (Reuters) – Bank of New York Mellon’s head of advanced solutions Michael Demissie said on Wednesday that digital assets were “here to stay”, citing a 2022 study of the custodian bank’s clients. 

    “What we see is clients are absolutely interested in digital assets, broadly,” BNY Mellon’s Demissie said, speaking on a panel on cryptocurrency at Afore Consulting’s 7th Annual FinTech and Regulation Conference. 

Demissie cited a survey of BNY Mellon clients conducted in October 2022 that found that more than 90% of them expected to invest in tokenised assets in the near future.

Cryptocurrency markets plunged in 2022, as rising interest rates and a series of high-profile collapses at crypto firms made investors cautious.     

Demissie also said that deeper regulation was required. 

    “It’s important that we navigate this space in a responsible way,” Demissie said. 

“We absolutely need clear regulation and rules for the road. We need responsible actors who can offer reliable services that live up to investors trust.”  

(Reporting by Samuel Indyk and Elizabeth Howcroft; editing by Amanda Cooper and Alex Richardson)

(Reuters) – Cryptocurrency exchange Kraken is under investigation by the U.S. Securities and Exchange Commission for the sale of unregistered securities, according to a Bloomberg report.

The regulator’s inquiry is at an advanced stage and could result in a settlement with the San Francisco-based platform in the coming days, the report added.

Kraken declined to comment on the report. The SEC did not immediately respond to a request for comment.

SEC Chair Gary Gensler has previously said that companies that help facilitate transactions in the crypto market should register with the agency just like other market intermediaries.

Kraken’s incoming chief executive officer told Reuters in September that the exchange had no plans to register with the SEC as a market intermediary, or to delist crypto tokens that the regulator has labeled as securities.

In November, Kraken agreed to pay $362,000 to the U.S. Treasury Department’s Office of Foreign Assets Control to settle civil liability related to apparent violations of sanctions on Iran, and to invest an additional $100,000 in certain sanctions compliance controls.

(Reporting by Hannah Lang in Washington; Editing by Andrea Ricci)

By Dietrich Knauth

(Reuters) – Failed crypto firm FTX received court approval on Wednesday to issue subpoenas to its founder Sam Bankman-Fried and members of his family as part of the company’s investigation into “misappropriated and stolen” funds.

FTX, a once-prominent crypto exchange, filed for bankruptcy protection in November amid allegations that Bankman-Fried used FTX customers’ money to prop up the balance sheet of the FTX-affiliated hedge fund Alameda Research. FTX said that it needs more information from former insiders, including its indicted founder, to identify misspending that could be clawed back to repay FTX’s customers.

U.S. Bankruptcy Judge John Dorsey, who is overseeing FTX’s Chapter 11 proceedings, approved FTX’s request to issue subpoenas to Bankman-Fried, his parents Barbara Fried and Joseph Bankman, his brother Gabriel Bankman-Fried, former FTX Chief Technology Officer Gary Wang, former Alameda Research CEO Caroline Ellison, and former FTX chief operating officer Constance Wang.

FTX said in court papers filed Wednesday that most of the subpoena targets had begun cooperating with its investigation. FTX said that it is still in discussions with Ellison and that Sam Bankman-Fried “remains non-responsive.”

Ellison and Gary Wang have pleaded guilty to fraud charges for their role in the collapse of FTX and Alameda. Bankman-Fried has pleaded not guilty, and is scheduled to face trial in federal court in Manhattan in October.

The subpoenas focus on questionable spending by FTX insiders. That includes $16.7 million spent on Bahamian real estate by Bankman-Fried’s parents and a Washington, D.C., headquarters building purchased by Guarding Against Pandemics, an advocacy organization founded by the Bankman-Fried brothers.

FTX is also seeking information about political donations. In addition to donations by Sam Bankman-Fried, his mother founded a political action committee called Mind the Gap, which makes recommendations to a network of political donors.

Bankman-Fried declined to comment, and members of his family could not immediately be reached for comment. Mind the Gap has previously said that Sam Bankman-Fried did not make any direct contributions to the organization but did donate to some of its recommended programs.

(Reporting by Dietrich Knauth; Editing by Nick Zieminski)

(Reuters) – Digital Currency Group (DCG) is selling shares in several of its cryptocurrency funds at a high discount, and has started offloading its holdings in investment vehicles run by subsidiary Grayscale, the Financial Times reported on Tuesday.

Woes have piled up for SoftBank-backed DCG with its lending unit Genesis filing for bankruptcy protection, owing creditors at least $3.4 billion after being toppled by a market rout along with exchange FTX and lender BlockFi.

The reported move comes as DCG is trying to raise funds to support its collapsed lending units under Genesis.

A quarter of DCG’s stock in its ethereum fund has been sold, raising as much as $22 million in several trades since January 24, the newspaper said, citing U.S. securities filings seen by them.

DCG has also moved to sell smaller blocks of shares in its Litecoin Trust, Bitcoin Cash Trust, Ethereum Classic Trust and Digital Large Cap Fund, the report added.

DCG and Grayscale did not immediately respond to Reuters request for comment.

DCG, owned by Barry Silbert, owns a portfolio of crypto companies in addition to Genesis, including crypto news and events site CoinDesk and New York-based Grayscale, a major digital asset manager. Those companies are not bankrupt.

(This story has been corrected to add dropped words “crypto trusts” in the headline)

(Reporting by Sneha Bhowmik and Akriti Sharma in Bengaluru; Editing by Eileen Soreng)

By Luc Cohen

NEW YORK (Reuters) – A former Coinbase Global Inc product manager pleaded guilty on Tuesday in what U.S. prosecutors have called the first insider trading case involving cryptocurrency, his defense lawyer said in a court hearing.

Ishan Wahi, 32, pleaded guilty to two counts of conspiracy to commit wire fraud, after initially pleading not guilty last year.

Prosecutors said Wahi shared confidential information with his brother Nikhil and their friend Sameer Ramani about forthcoming announcements of new digital assets that Coinbase would let users trade.

“I knew that Sameer Ramani and Nikhil Wahi would use that information to make trading decisions,” Ishan Wahi said during Tuesday’s hearing in federal court in Manhattan. “It was wrong to misappropriate and disseminate Coinbase’s property.”

Nikhil Wahi and Ramani were charged with using ethereum blockchain wallets to acquire digital assets and trading at least 14 times before Coinbase announcements between June 2021 and April 2022.

The announcements typically caused the assets to rise in value and generated at least $1.5 million in illicit gains, prosecutors have said.

Nikhil Wahi pleaded guilty in September to a wire fraud conspiracy charge, and in January was sentenced to 10 months in prison. Ramani is at large.

As part of a plea deal, prosecutors stipulated that sentencing guidelines called for Ishan Wahi to be imprisoned for between 36 and 47 months. U.S. District Judge Loretta Preska scheduled his sentencing hearing for May 10.

Coinbase is one of the world’s largest cryptocurrency exchanges. The company has said it shared its findings from an internal probe into the trading with prosecutors.

On Monday, Ishan Wahi asked a judge to dismiss a parallel lawsuit from the Securities and Exchange Commission (SEC), saying that charges represent an “abuse of power” by the agency. At issue is whether nine tokens listed on Coinbase were, in fact, securities and subject to SEC regulation.

A spokesperson for the SEC declined to comment.

In pleading guilty to the criminal charges on Tuesday, Ishan Wahi said he did not believe any of the relevant tokens were securities. Noah Solowiejczyk, a prosecutor, said the question of whether or not the tokens are securities was not an element of prosecutors’ case.

(Reporting by Luc Cohen in New York; editing by Jonathan Oatis)

By Luc Cohen and Jonathan Stempel

NEW YORK (Reuters) – A federal judge on Tuesday rejected a proposal to modify Sam Bankman-Fried’s bail conditions, despite an agreement between the FTX cryptocurrency exchange founder and prosecutors to address potential witness tampering concerns.

U.S. District Judge Lewis Kaplan in Manhattan did not provide reasons for the denial, and said a hearing on Bankman-Fried’s bail remains scheduled for Feb. 9.

A spokesman for Bankman-Fried declined to comment. The office of U.S. Attorney Damian Williams did not immediately respond to a request for comment.

Bankman-Fried, 30, has been free on $250 million bond and living with his parents in Palo Alto, California, since pleading not guilty to looting billions of dollars from the now-bankrupt FTX.

Prosecutors had asked last month to tighten his bail conditions, citing Bankman-Fried’s efforts to contact both the general counsel of the FTX U.S. affiliate and new FTX Chief Executive John Ray, ostensibly to provide assistance.

The proposed conditions would prevent Bankman-Fried from talking with most employees of FTX or his Alameda Research hedge fund without lawyers present, or using encrypted messaging apps such as Signal.

On Monday, Bankman-Fried’s lawyer Mark Cohen said his client had reached agreement with prosecutors to allow communications with a specific set of employees, pending Kaplan’s approval.

That agreement also prevented Bankman-Fried from using Signal, but let him communicate by phone, email, text message, Zoom and Facetime, as well as WhatsApp if he installed monitoring technology and preserved messages.

(Reporting by Luc Cohen and Jonathan Stempel in New York; Editing by Daniel Wallis)

NEW YORK (Reuters) – U.S. prosecutors on Tuesday asked a judge to postpone civil cases brought against FTX founder Sam Bankman-Fried by federal regulators until a parallel criminal case against the former billionaire concludes.

The Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) have each filed civil fraud cases against Bankman-Fried over the collapse of his cryptocurrency exchange.

Bankman-Fried has pleaded not guilty to criminal fraud charges in Manhattan federal court.

(Reporting by Luc Cohen in New York)

(Reuters) – Canada’s Hut 8 Mining Corp. plans to merge with rival U.S. Bitcoin in an all-stock deal to create a mining giant in North America, the companies said on Tuesday.

(Reporting by Mehnaz Yasmin in Bengaluru; Editing by Sohini Goswami)

By Medha Singh, Lisa Pauline Mattackal and Vidya Ranganathan

(Reuters) – Have bitcoin and ether finally turned a corner? It’s looking that way, if crypto options traders are anything to go by.

The volume of bitcoin options traded on Deribit, one of the leading exchanges for crypto-focused derivatives products, jumped 82% in January versus December, according to crypto market maker OrBit Markets. Ether options swelled 38%.

More investors are positioning for price gains, with the volume skewed to bullish call options – paying a premium for an option to buy bitcoin or ether at a future date and agreed price – rather than the conversely bearish put options to sell.

Calls commanded 71.1% of total bitcoin futures open interest, and 77.5% for ether, according to Deribit data.

“You’ve actually seen a couple people trading in $50,000 calls, for example, that’s been the general appetite that we’ve seen – just increased appetite for upside,” said Chinedu Ume-Ezeoke, quantitative research analyst at data firm Laevitas.

Yet the surge in volumes also indicates investors are in two minds about the direction of crypto markets, preferring low-risk, low-reward options to actually buying bitcoin or ether.

The surge in the options markets, after months of tame trading and depressed volatility, coincides with a 40% leap in the price of bitcoin in January – its best month since October 2021 – and a 32% jump for ether.

“Bitcoin’s rally was explosive, almost like imagining the release of a beach ball that had been forced under water,” said Joe Ziolkowski, the CEO of Relm, a digital asset insurer.

Graphic: Jump in option trades https://www.reuters.com/graphics/FINTECH-CRYPTO/WEEKLY/myvmokbqgvr/chart.png

FEARS OF A PULLBACK

Total bitcoin futures open interest – which measures the number of contracts yet to be settled – across all expiries was 293,000 on Jan 27, the highest since November, while the put-to-call ratio was 0.42, the lowest in at least a year, according to Laevitas data, indicating traders were favoring calls over puts.

“This is driven by renewed investors demand for call options as they expect spot momentum to continue higher,” said Pulkit Goyal, vice-president of trading at OrBit Markets.

The trend in futures may not necessarily be bullish for bitcoin or ether, though, as investors also use these derivatives as hedges against falls in their other investments.

“People are interested in the upside potential of bitcoin and ether, but also concerned about a potential pullback after the massive run-up in prices,” said CK Zheng, founder of crypto derivatives-focused hedge fund ZX Squared.

“On both sides of the equation, people are trying to get some protection.”

RISK & RECESSION REAR

The macro backdrop of a potential U.S. recession or that of further tightening by the Federal Reserve is just one among several factors that could derail the latest rally.

After U.S. jobs data came in better than expected last week, markets are betting that the Fed may hike interest rates further than initially expected, which could douse demand for riskier assets such as cryptocurrencies.

“We’re probably not out of the woods yet,” said Ume-Ezeoke at Laevitas. “In the short term, a lot of people are anticipating some sort of correction.”

(Reporting by Vidya Ranganathan in Singapore, Lisa Pauline Mattackal and Medha Singh in Bengaluru; Editing by Pravin Char)

By Michelle Nichols

UNITED NATIONS (Reuters) – North Korea stole more cryptocurrency assets in 2022 than in any other year and targeted the networks of foreign aerospace and defense companies, according to a currently confidential United Nations report seen by Reuters on Monday.

“(North Korea) used increasingly sophisticated cyber techniques both to gain access to digital networks involved in cyber finance, and to steal information of potential value, including to its weapons programmes,” independent sanctions monitors reported to a U.N. Security Council committee.

The monitors have previously accused North Korea of using cyber attacks to help fund its nuclear and missile programs.

“A higher value of cryptocurrency assets was stolen by DPRK actors in 2022 than in any previous year,” the monitors wrote in their report – submitted to the 15-member council’s North Korea sanctions committee on Friday – citing information from U.N. member states and cybersecurity firms.

North Korea has previously denied allegations of hacking or other cyberattacks.

The sanctions monitors said South Korea estimated that North Korean-linked hackers stole virtual assets worth $630 million in 2022, while a cybersecurity firm assessed that North Korean cybercrime yielded cybercurrencies worth more than $1 billion.

“The variation in USD value of cryptocurrency in recent months is likely to have affected these estimates, but both show that 2022 was a record-breaking year for DPRK (North Korea) virtual asset theft,” the U.N. report said.

A U.S.-based blockchain analytics firm last week reached the same conclusion.

The U.N. report noted: “The techniques used by cyberthreat actors have become more sophisticated, thus making tracking stolen funds more difficult.”

The report is due to be released publicly later this month or early next month, diplomats said. 

EXTORTION

The monitors said most cyber attacks were carried out by groups controlled by North Korea’s primary intelligence bureau – the Reconnaissance General Bureau. It said those groups included hacking teams tracked by the cybersecurity industry under the names Kimsuky, Lazarus Group and Andariel.

“These actors continued illicitly to target victims to generate revenue and solicit information of value to the DPRK including its weapons programmes,” the U.N. report said.

The sanctions monitors said the groups deployed malware through various methods including phishing. One such campaign targeted employees in organizations across various countries.

“Initial contacts with individuals were made via LinkedIn, and once a level of trust with the targets was established, malicious payloads were delivered through continued communications over WhatsApp,” the U.N. report said.

It also said that, according to a cybersecurity firm, a North Korean-linked group known as HOlyGhOst had “extorted ransoms from small- and medium-sized companies in several countries by distributing ransomware in a widespread, financially motivated campaign.”

In 2019, the U.N. sanctions monitors reported that North Korea had generated an estimated $2 billion over several years for its weapons of mass destruction programs using widespread and increasingly sophisticated cyberattacks.

SANCTIONS BUSTING

In their latest annual report, the monitors also said Pyongyang continued producing nuclear fissile materials at its facilities and launched at least 73 ballistic missiles, including eight intercontinental ballistic missiles last year.

The United States has long been warning that North Korea is ready to carry out a seventh nuclear test.

North Korea has long been banned from conducting nuclear tests and ballistic missile launches by the Security Council. Since 2006, it has been subject to U.N. sanctions, which the Security Council has strengthened over the years to target Pyongyang’s nuclear and ballistic missile programs.

But North Korea has continued illicit imports of refined petroleum and exports of coal, evading sanctions, the monitors said. They also said they have started an investigation into reports of ammunition exports by North Korea.

The United States has accused the Russian mercenary company Wagner Group of receiving arms from North Korea to help bolster Russian forces in Ukraine. North Korea has rejected the accusation as groundless and Wagner’s owner, Yevgeny Prigozhin, denied getting arms from North Korea.

Last May, China and Russia vetoed a U.S.-led push to impose more U.N. sanctions on North Korea. This included a proposed asset freeze on the Lazarus hacking group.

The Lazarus group has been accused of involvement in the “WannaCry” ransomware attacks, hacking of international banks and customer accounts, and the 2014 cyber-attacks on Sony Pictures Entertainment.

The United States linked North Korean hackers to the theft of hundreds of millions of dollars’ worth of cryptocurrency tied to the popular online game Axie Infinity, the United States said in April. Ronin, a blockchain network that lets users transfer crypto in and out of the game, said digital cash worth almost $615 million was stolen on March 2022.

(Reporting by Michelle Nichols; Editing by Don Durfee and Stephen Coates)

By Dietrich Knauth

(Reuters) – A U.S. bankruptcy judge at a court hearing in Delaware will consider on Monday whether to greenlight a court-supervised investigation into the collapse of FTX, a course of action that the crypto exchange has opposed as redundant and wasteful.

The U.S. Department of Justice’s bankruptcy watchdog has urged U.S. Bankruptcy Judge John Dorsey, who is overseeing FTX’s Chapter 11, to appoint an independent examiner to investigate allegations of “fraud, dishonesty, incompetence, misconduct, and mismanagement” that are “too important to be left to an internal investigation.”

FTX says an examiner would merely duplicate work already being done by FTX, its creditors, and law enforcement agencies. FTX has acknowledged that its past conduct raised questions about fraud and mismanagement, but has said another layer of review would only add cost and delay to the company’s effort to repay customers in bankruptcy.

FTX, once among the world’s top crypto exchanges, shook the sector in November by filing for bankruptcy, leaving an estimated 9 million customers and investors facing losses in the billions of dollars.

FTX’s founder Sam Bankman-Fried, who has been accused of stealing billions of dollars from FTX customers to pay debts incurred by his Alameda Research hedge fund, has pleaded not guilty to fraud charges. He is scheduled to face trial in October. Several former top executives, including Alameda Research CEO Caroline Ellison, have pleaded guilty to fraud.

FTX’s new CEO, John Ray, who worked with court-appointed examiners while leading Enron Corp and Residential Capital through bankruptcy, has said examiners in those two cases cost a combined $150 million and provided “minimal” benefits to creditors, according to court filings.

FTX’s official creditors committee has sided with FTX, saying the proposed investigation is redundant. State securities regulators in Texas, Vermont and Wisconsin supported the Justice Department’s bid, saying a neutral report would benefit creditors and customers.

An examiner was appointed in the separate bankruptcy of crypto lender Celsius Network and tasked with investigating claims that Celsius operated as a Ponzi scheme and misled customers about the safety of their cryptocurrency deposits.

The Celsius examiner published a 689-page report on Jan. 31 presenting evidence that Celsius was never solvent, that it misused customer funds to inflate the value of cryptocurrency tokens owned by its founder, and that it used new customer deposits to cover other customers’ withdrawals.

(Reporting by Dietrich Knauth; Editing by Alexia Garamfalvi and Daniel Wallis)

By Marc Jones

LONDON (Reuters) – Cryptomarkets have not been killed off by last year’s turmoil, while the new wave of central bank digital currencies will face geopolitical limits, the Bank for International Settlements’ new innovation head has predicted.

Dubbed the central bank to the world’s central bank, the BIS has long been critical of cryptocurrencies, likening bitcoin to both a ponzi scheme and market bubble in the past.

Last year’s collapse of Sam Bankman-Fried’s FTX empire as well as Celcius, Three Arrows Capital and a number of ‘stablecoins’ saw many of its warnings come true as more than $2 trillion was wiped of the sector’s value.

Since the start of 2023, however, there has been something of a rebound, including a 40% recovery in bitcoin’s price.

“I would assume that the industry will learn from these failures and they will come up with new things,” Cecilia Skingsley, the new head of the BIS ‘Innovation Hub’, told Reuters in her first in-depth interview since taking the role.

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The former Swedish central banker also said the problems had not appeared to have affected central banks’ plans for what could be swathes of nationally-issued digital currencies (CBDCs) in the coming years.

As the global central bank umbrella body, the BIS has been coordinating many of the international experiments around CBDCs, which can be built either for public use or just for banks to use behind-the-scenes in the ‘wholesale’ money markets.

“Everything I hear is that those who have these projects are pushing on with them,” Skingsley said.

Eleven countries have already launched a CBDC while over 100 more, representing over 95 percent of global GDP, are now exploring them, with this year set to see some significant milestones.

China for example will expand its digital yuan pilot to most of its 1.4 billion population. The European Central Bank should get the go-ahead for full-scale tests. The U.S. Federal Reserve is doing some testing too, while Australia, Britain, Brazil, India, South Korea and Russia are also taking important steps.

This global push comes as physical cash use falls globally and authorities look to fend off the threat to their money-printing powers from bitcoin and ‘Big Tech’ firms.

Sanctions imposed on countries like Russia and Venezuela in recent years have been another driver, including even for long-time U.S. allies like Europe, who want to ensure they have an alternative to the Visa, Mastercard and Swift networks.

“You need be resilient enough when it comes to defence, when it comes to food supply, but it also becomes important when it comes to payment systems,” Skingsley said.

“I can understand the rationale for any country to ask, all right, how resilient are we? Which countries can be our friends, our allies?”

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GEOPOLITICAL REALITY

While CBDCs should make currencies more high-tech and easier and cheaper to send to other countries, “tectonic plates” were likely to form with the new forms of e-money only fully interoperable between geopolitically-aligned countries, Skingsley said.

“We will never have full interconnectedness,” Skingsley said, adding though that the BIS’ work aimed to make CBDCs as versatile as possible.

“There will be too many frictions and not all countries in the world will be prepared to cooperate fully with all the other countries in the world – That’s the reality.”

She also responded to the low take-up of some of the CBDCs already, and to some of the scepticism voiced, including this month by the head of the Bank of England Andrew Bailey, that CBDCs may be a solution looking for a problem.

“There are some problems here,” Skingsley said. “If you extrapolate the cash usage in many countries, cash will no longer be used as a payment method some time in the future.”

“That opens up the question of how do you maintain public policy objectives that we think are important – namely trust in the money system.”

(Reporting by Marc Jones, Editing by William Maclean)

LONDON (Reuters) – Self-proclaimed bitcoin creator Craig Wright’s lawsuit against bitcoin network developers to try to recover billions of dollars can continue to trial, a London court said on Friday.

The ruling paves the way for a trial on whether developers owe duties to the owners of digital assets – which a lawyer representing some developers said could pose a fundamental challenge to decentralised finance if Wright won.

Australian computer scientist Wright is suing 15 developers in an effort to retrieve around 111,000 bitcoin – currently worth about $2.5 billion – after he lost the encrypted keys to access them when his home computer network was allegedly hacked.

Wright’s Seychelles-based company Tulip Trading is taking legal action against the developers of three networks, arguing they are obliged to write software patches to help Tulip recover the bitcoin.

Tulip’s case was thrown out last year, but the Court of Appeal ruled on Friday that developers arguably do owe duties to owners, which should be determined at a full trial.

Judge Colin Birss said Tulip had a realistic argument that cryptocurrency is “entrusted” to network developers, who could therefore have a duty to, for example, “introduce code so that an owner’s bitcoin can be transferred to safety”.

Wright says he wrote the bitcoin white paper which first outlined the technology behind the digital assets under the pseudonym Satoshi Nakamoto in 2008, however the claim is hotly disputed.

He said in a statement that he was delighted with the ruling.

His lawyer, Felicity Potter, said the decision was “a step towards a properly regulated and well-governed digital asset ecosystem which should be welcomed by potential and current coin-holders alike”.

James Ramsden, a lawyer who represented 13 of the 14 developers involved in the appeal, told Reuters that code writers are “incredibly nervous” about the case, which could leave them liable for massive sums of money if Wright wins.

He added that the outcome of any trial will affect “all aspects of (decentralised finance), whether it involves value tokens or NFTs (non-fungible tokens) or the wider blockchain system”.

(Reporting by Sam Tobin; Editing by Sharon Singleton)