Coinz.com

By Dietrich Knauth

(Reuters) – A U.S. judge overseeing the bankruptcy of FTX said on Friday that he will allow media companies to make their case that the collapsed crypto exchange must publicly disclose the names of its customers.U.S. Bankruptcy Judge John Dorsey in Delaware said the New York Times, Dow Jones, Bloomberg and the Financial Times could present their arguments on requiring FTX to disclose customer names at a hearing on Jan. 11.

The media companies argued in a court filing that keeping the names of as many as 1 million customers secret could turn bankruptcy proceedings into a “farce” if creditors start fighting anonymously over how much money they should receive.

FTX has argued the U.S. bankruptcy practice of disclosing details about creditors, which includes customers, could expose them to scams, violate privacy laws and allow rivals to poach them, undermining the FTX’s value as it hunts for buyers.

FTX said on Friday it planned to sell its LedgerX, Embed, FTX Japan and FTX Europe businesses during its bankruptcy case. The four companies are relatively independent from the broader FTX group, and each has its own segregated customer accounts and separate management teams, according to an FTX court filing.

FTX is not committed to selling any of the companies, but it already received dozens of unsolicited offers. FTX expects to generate additional bids by scheduling auctions in February and March.

Other bankrupt crypto companies, like crypto lenders Voyager Digital and Celsius Network, have struggled to auction their assets. Voyager had planned to sell its assets to FTX before FTX’s implosion, and Celsius said in a Thursday court filing it had postponed an auction of its business to try to improve the bids it had received.

FTX attorneys also said at Friday’s hearing they have made “significant progress” on recovering assets and are working to resolve a dispute with Bahamian securities regulators and attorneys overseeing the liquidation of the Bahamas-based FTX Digital Markets.

An attorney for the Bahamas-based liquidators, Jason Zakia, said FTX has prevented the Bahamas bankruptcy from moving forward by cutting off access to data and casting “aspersions” on the actions of the Bahamas government. Dorsey will address the data access dispute on Jan. 6 if the two sides do not reach a deal.

Friday’s bankruptcy hearing comes at the end of a dramatic week for the crypto exchange. Founder Sam Bankman-Fried was arrested on fraud charges on Monday, FTX CEO John Ray testified before the U.S. Congress on Tuesday, and FTX opposed Bahamas-based liquidators’ demand for access to its systems and records on Wednesday.

(Reporting by Dietrich Knauth in New York; Additional reporting by Tom Hals in Wilmington, Del.; Editing by Amy Stevens, Alexia Garamfalvi and Matthew Lewis)

By Luc Cohen

NEW YORK (Reuters) – A dual citizen of Sweden and the United Kingdom pleaded guilty to U.S. fraud and money laundering charges on Friday for selling a fake cryptocurrency alongside one of the United States’ most-wanted fugitives, a woman referred to as the ‘Cryptoqueen.’

Karl Greenwood, 45, was arrested in Thailand and extradited to the United States in 2018 for his role in selling the purported cryptocurrency OneCoin, which federal prosecutors in Manhattan call a pyramid scheme that defrauded investors out of $4 billion. He has been detained since his arrest.

The plea comes as prosecutors in the Southern District of New York (SDNY) ramp up enforcement of financial crimes related to digital assets. On Tuesday, prosecutors unsealed an indictment of Sam Bankman-Fried, the founder of the FTX crypto exchange, on charges of stealing billions in customer deposits.

“This guilty plea by the co-founder of OneCoin caps a week at SDNY that sends a clear message that we are coming after all those who seek to exploit the cryptocurrency ecosystem through fraud,” Damian Williams, the top federal prosecutor in Manhattan, said in a statement.

Prosecutors said Greenwood founded OneCoin in Sofia, Bulgaria in 2014 alongside Ruja Ignatova, a German citizen who prosecutors say is also known as the ‘Cryptoqueen.’ The FBI named her to its top ten most-wanted list in June, and prosecutors said on Friday she remains at large.

A lawyer for Greenwood declined to comment. He is scheduled to be sentenced on April 5 for the three counts to which he pleaded guilty.

Bankman-Fried has acknowledged risk management failures at FTX but said he does not believe he has any criminal liability. He is currently detained in The Bahamas, where FTX is based, and is contesting a U.S. request for his extradition.

(Reporting by Luc Cohen in New York; Editing by Josie Kao)

By Nate Raymond

(Reuters) – Coinbase Global Inc cannot force former customers to use private arbitration rather than the courts to resolve claims over a Dogecoin sweepstakes the cryptocurrency exchange ran, a U.S. appeals court ruled on Friday.

Four former Coinbase users had sued Coinbase, claiming the company duped them into paying $100 or more to enter a sweepstakes in June 2021 for a chance to win prizes of up to $1.2 million in the cryptocurrency Dogecoin.

Each of the users had agreed to the company’s user agreement to create an account, which included a provision requiring them to pursue any disputes in arbitration.

Friday’s ruling came a week after the U.S. Supreme Court agreed to review a procedural issue from that and another case that Coinbase unsuccessfully sought to force into arbitration.

Business groups say arbitration is more efficient than suing in court. Plaintiffs’ lawyers say arbitration favors companies and that consumers are better off in court.

But a federal judge declined to compel arbitration, and San Francisco-based 9th U.S. Circuit Court of Appeals agreed with that decision, citing a provision in the sweepstakes’ official rules requiring disputes to be heard in California courts.

David Harris, the users’ lawyer, said they were pleased with the ruling. Coinbase declined to comment.

The case is one of two that Coinbase is appealing to the Supreme Court after the 9th Circuit decisions declining to put trial court proceedings on hold while it appealed judges’ decisions to not force the cases into arbitration.

The other proposed class action was filed by Abraham Bielski, who said he was tricked into letting a scammer access his Coinbase account, who then stole more than $31,000 from him.

A judge put the proceeding in the sweepstakes case on hold pending appeal, but only after Coinbase asked the Supreme Court to hear the dispute.

(Reporting by Nate Raymond in Boston; Editing by Josie Kao)

By Jack Queen

(Reuters) – FTX founder Sam Bankman-Fried was swiftly indicted after the collapse of his crypto empire, but a trial in New York is likely more than a year away as prosecutors build out their case and both sides spar over evidence.

The bare-bones indictment against Bankman-Fried – which could be amended with more details and co-defendants as the case progresses – suggests prosecutors have a long road ahead piecing together what they have described as one of the biggest financial frauds in American history. Pretrial litigation can also be a lengthy process as both sides argue over the admissibility of evidence, what can and cannot be argued at trial, and whether the case should be dismissed.

“A trial is probably 14 to 18 months out,” said Michael Weinstein, a white-collar criminal defense lawyer and former federal prosecutor.

On Tuesday, U.S. Attorney Damian Williams in Manhattan said a grand jury had indicted Bankman-Fried on wire fraud, securities fraud, commodities fraud, campaign finance law violations and conspiracy charges. Williams said the investigation is “ongoing” and that more announcements are to come.

The indictment came just weeks after Bankman-Fried’s $32 billion crypto exchange collapsed – an extraordinarily fast turnaround for prosecutors.

Bankman-Fried has apologized to customers but said he is not guilty of any crime. A representative of the crypto entrepreneur declined to comment.

Bankman-Fried was arrested in the Bahamas on Monday but indicated he would fight extradition to the United States. He is behind bars in a Bahamian correctional center and will not enter a plea until he is arraigned in the United States. His absence keeps potentially years-long pretrial litigation on hold.

COMPLICATIONS

Legal experts are doubtful Bankman-Fried will prevail fighting extradition, though he could relent in the coming months after a Bahamian judge denied him bail. Bankman-Fried’s lawyers filed a new bail request on Thursday.

Regardless of where Bankman-Fried is held, prosecutors will spend the coming months poring over evidence and interviewing witnesses before potentially filing a so-called superseding indictment with new details or co-defendants. The limited information in the indictment unveiled on Tuesday suggests there is plenty of work to do, according to legal experts.

“The indictment does not have smoking-gun details like emails and documents that you’re used to seeing in fraud cases,” said Renato Mariotti, a former federal prosecutor with experience in financial fraud cases. “That suggests that they put this together quickly, but they wouldn’t bring high-profile charges like this if they didn’t think they had the goods.”

FTX has been described by its restructuring executive as a chaotic operation that shuffled assets without basic accounting or record-keeping protocols, which will likely complicate prosecutors’ efforts to build out their case further.

Securing the help of former FTX employees who can make sense of the incomplete records could take a long time, especially if negotiations for immunity or plea deals in exchange for cooperation are involved.

“They will need an insider who was part of the decision-making process or was privy to how things worked internally,” Weinstein said.

Williams, the U.S. attorney, on Tuesday pointedly addressed people who may have information about FTX’s downfall.

“If you have not reached out to us to talk to us, I would encourage you to do so, and do so quickly.”

(Reporting by Jack Queen in New York; Editing by Noeleen Walder and Matthew Lewis)

(Reuters) – French auditing firm Mazars said on Friday it has paused all work for clients in the crypto business, reflecting a broader sentiment in the global high-finance industry as companies distance themselves from the beleaguered sector.

Paris-based Mazars was hired last month by major crypto exchange Binance to perform a so-called proof-of-reserves check on its bitcoin holdings.

The firm this month found that the exchange’s reserves on a single day in late November were overcollateralized. Mazars later deleted the webpage containing a report, published on Dec. 7, on the check.

“Mazars has paused its activity relating to the provision of Proof of Reserves Reports* for entities in the cryptocurrency sector due to concerns regarding the way these reports are understood by the public,” the company said.

Proof-of-reserves checks are supposed to let users of exchanges confirm their holdings are included in checks of blockchain data, and that the exchange’s reserves match clients’ assets. They are not akin to a full financial audit.

Bloomberg and news outlet CoinDesk reported the story earlier on Friday.

Nearly $2 trillion in value has been wiped out from the crypto sector this year on rising interest rates and exacerbating worries of an economic downturn. The slump has eliminated key industry players such as Voyager Digital, Three Arrows Capital and Celsius Network.

But the bigger blow came after larger crypto exchange FTX filed for bankruptcy protection last month. Its swift fall has also sparked tough regulatory scrutiny of how major exchanges hold user funds.

Binance earlier this week was hit by a surge in outflows, which CEO Changpeng Zhao called “business as usual”.

The crypto exchange also paused withdrawals of a major stablecoin for a period on Monday, blaming delays in the traditional banking system.

(Reporting by Mehnaz Yasmin in Bengaluru and Tom Wilson in London; Editing by Nivedita Bhattacharjee, Krishna Chandra Eluri and Sriraj Kalluvila)

By Jasper Ward and Brian Ellsworth

(Reuters) – The Bahamas should not be blamed for the collapse of bankrupt cryptocurrency platform FTX, the country’s foreign minister said on Friday, following repeated accusations by FTX management of alleged misconduct by the Caribbean nation’s authorities.

FTX lawyers on Wednesday said they “do not trust” the Bahamian government, which FTX’s leadership has accused of colluding with now-jailed former CEO Bankman-Fried to help account holders withdraw $100 million just as the platform was going bankrupt.

In a withering voice recording distributed over WhatsApp on Friday morning, Bahamas Foreign Minister Fred Mitchell, said “this blame game directed at The Bahamas” is undermining efforts to recover assets that were lost as a result of fraud.

“Every day there is some accusation being hurled at The Bahamas, but it is clear the jurisdiction of the alleged fraud is not the reason the fraud happened,” said Mitchell.

“We in The Bahamas can ask the question: How did the mastermind of FTX get on the front page of Forbes magazine, a U.S. magazine? Which nation’s press called him the next Warren Buffett? Clearly that was the United States.”

Bankman-Fried was arrested on Monday and remanded on Tuesday to a Bahamian detention center after a magistrate judge denied his bail request. On Thursday, his lawyers filed a new bail application, this time before the Supreme Court, according to a source.

U.S. prosecutors accuse the 30-year-old of misappropriating billions of dollars and violating campaign laws in what has been described as one of America’s biggest financial frauds.

(Reporting by Jasper Ward in Washington and Brian Ellsworth in Miami; Editing by Mark Potter)

By Dietrich Knauth

(Reuters) – The U.S. Department of Justice’s bankruptcy watchdog on Thursday appointed a committee to represent FTX accountholders and other junior creditors in the collapsed crypto exchange’s bankruptcy case.

The committee – which includes a mix of individual account holders, investment funds, and an affiliate of U.S. crypto firm Genesis – will represent the interests of all unsecured creditors, who are among the last to be paid in a typical bankruptcy.

The nine-member committee includes three individual creditors, Genesis affiliate GGC International Ltd, crypto trader Wintermute Asia PTE, Coincident Capital International, Pulsar Global Ltd, Octopus Information Ltd and Wincent Investment Fund.

FTX filed for bankruptcy protection in Delaware in November after traders pulled $6 billion from the platform in three days and rival exchange Binance abandoned a rescue deal. The collapse has left an estimated 1 million creditors facing losses totaling billions of dollars.

Crypto firms that went bankrupt earlier this year, including Voyager Digital and Celsius Network, have classified most of their customers, particularly those with interest-bearing accounts, as unsecured creditors.

Unsecured debts, such as credit card or medical bills, do not grant lenders any specific collateral rights. Secured debt, like a mortgage or car loan, is backed by specific collateral that may be claimed by a lender if the debt goes unpaid.

U.S. Bankruptcy Judge John Dorsey, who is overseeing FTX’s Chapter 11 case, said during a Wednesday court hearing that he expects the creditors’ committee to weigh in on issues related to customer privacy at a hearing scheduled in early January.

FTX has argued that customer names should be kept secret to protect them from scams and to preserve the business value of FTX’s customer list for potential buyers.

Creditor names, contact information, and the amount they are owed are treated as public information in most bankruptcy cases, and both the Justice Department and a group of media organizations have tried to block FTX from straying too far from bankruptcy’s transparency requirements.

(Reporting by Dietrich Knauth, Editing by Alexia Garamfalvi and Deepa Babington)

By Georgina Lee

HONG KONG (Reuters) – Hong Kong’s first bitcoin and ether futures exchange traded funds (ETFs) ended their first trading day higher on Friday, reflecting investors’ interest despite the broader crypto market meltdown.

The CSOP Bitcoin Futures ETF closed up 0.5% at HK$7.81 per unit, while the CSOP Ether Futures ETF ended 0.4% higher at HK$7.805.

Both ETFs had opened flat compared to their estimated net asset values, both at HK$7.77 per unit. Among the two, the bitcoin futures ETF attracted more trading volume, as a total of 937,200 units worth HK$7.3 million changed hands.

“The two crypto asset ETFs provide investors with exposure to the digital asset space for the first time in Asia and reflect both our ongoing commitment to, and the market’s appetite for, the digital economy,” said Wilfred Yiu, chief operating officer and co-head of markets at Hong Kong Exchanges & Clearing.

Prior to the their debut, the two funds raised a combined $73.6 million from investors.

($1 = 7.7777 Hong Kong dollars)

(Reporting by Georgina Lee; Editing by Christian Schmollinger and Mark Potter)

By Alison Frankel

(Reuters) – The law firm led by famed litigator David Boies appears to have engaged in some unusual litigation tactics on behalf of FTX crypto exchange users who accuse NFL quarterback Tom Brady, supermodel Gisele Bundchen, comedian Larry David and other celebrities of inducing them to open FTX accounts.

This tale ventures deep into the weeds of federal court filing procedures, but the upshot is that Boies’ firm, Boies Schiller Flexner, and co-counsel from The Moskowitz Law Firm filed three different but obviously related FTX lawsuits in the same federal court in Miami without asking the court to consolidate the cases before just one judge.

The cases were assigned to three different Miami federal judges before the judges realized they were related. Last week, U.S. District Judge Michael Moore of Miami entered an order consolidating the lawsuits and clarifying that he will oversee the litigation.

That was apparently not what the Boies and Moskowitz firms were hoping. In mid-November, the firms filed the first of their three FTX lawsuits in federal court. The suit, a class action on behalf of FTX accountholders in the U.S., alleged that FTX founder Sam Bankman-Fried and celebrity endorsers violated Florida securities and consumers laws by promoting the FTX yield-bearing accounts as a safe way to invest in cryptocurrencies.

I’ll pause here to point out that law firm Latham & Watkins, which is representing Brady, Bundchen and David, declined to comment on the cases. Bankman-Fried counsel Mark Cohen of Cohen & Gresser did not respond to a query. I also did not receive a response from the NBA’s Golden State Warriors, which is also named as a defendant.

As you are doubtless aware, Boies is known for high-profile matters, including his representation of Democratic presidential candidate Al Gore in the U.S. Supreme Court case that decided the election of 2000. More recently he has represented Jeffrey Epstein accusers including Virginia Giuffre.

On the official form that accompanied Boies Schiller’s FTX lawsuit, which is known as a cover sheet, the Boies and Moskowitz firms said the FTX class action was related to a different class action that the firms are litigating on behalf of crypto investors who used the Voyager Digital Ltd platform. The Voyager case similarly accuses a celebrity crypto endorser – Dallas Mavericks owner Mark Cuban – of deceptive promotion of a crypto investment. Cuban counsel Stephen Best of Brown Rudnick told me he is confident the class action will be tossed, in part because Voyager account holders did not rely on Cuban’s endorsement.

Presiding over that case is U.S. District Judge Roy Altman, who was a partner at the plaintiffs’ firm Podhurst Orseck before joining the bench in 2019. He has yet to rule on Cuban’s motion to dismiss the case, but in November determined that the Boies and Moskowitz firms were entitled to discovery from Cuban.

By asserting that the first FTX suit was related to the Cuban case before Altman, the Boies and Moskowitz firms apparently hoped Altman would also be appointed to oversee the FTX class action, even though there was no overlap between the plaintiffs and defendants in the cases.

The court instead assigned the case to Moore, a George H.W. Bush appointee and former federal prosecutor, on the same day it was filed.

On Nov. 21, the Boies and Moskowitz firms filed a second FTX class action, this time on behalf of non-U.S. FTX customers. The cover sheet said the case was not related to any other proceeding in Miami federal court, although it mentioned the Voyager class action in a box where such information can be listed. The cover sheet did not refer to the case before Moore.

The second suit was assigned to U.S. District Judge Darrin Gayles.

On Dec. 7, the Boies and Moskowitz firms filed a third FTX class action in federal court in Miami, this time on behalf of all FTX customers, in and out of the U.S. Once again, the cover sheet for the filing did not mention the firm’s previous (and very similar) FTX suits. Once again, the Voyager class action showed up in the box for related cases.

The third suit was assigned to U.S. District Judge Beth Bloom. (Both Bloom and Gayles are former Florida state-court judges who were appointed by former President Barack Obama).

The day after Bloom’s assignment to the case, the Moskowitz and Boies firms voluntarily dismissed the two previously-filed FTX class actions before Moore and Gayles. They then submitted an amended complaint in the case before Bloom, adding the lead plaintiffs from the other two now-dismissed suits.

Those maneuvers seem to have caught Bloom’s attention. She issued an order on Dec. 9, transferring the remaining class action to Moore, who had been assigned the first suit filed by Moskowitz and Boies. Moore issued his order consolidating the litigation in his courtroom on the same day.

I emailed Adam Moskowitz of the Moskowitz firm and four Boies Schiller lawyers, including David Boies, to ask why they had said the first FTX suit was related to the Voyager case and why they failed to disclose that their second and third FTX suits were related to the first class action. Specifically, I asked if they were trying to avoid Moore and get the FTX litigation before Altman, the judge overseeing the Voyager case.

Moskowitz said in two email responses that the firms’ goal has always been to have all of the federal cases consolidated before one judge. (His firm and the Boies firm also have filed several cases in Florida state courts.)

“As we got more cases, we filed more cases,” Moskowitz said. “We wanted to make sure to cover all of these victims.”

Moskowitz said the firms “always try our best to complete all information on all court forms.” He and Boies lawyers, he said, have been coordinating with defense counsel in both the state and federal FTX cases, despite the “different cases, different clients and different law firms.”

Both the state and federal cases, Moskowitz said, are now sorted out and will be overseen by one judge in federal court and one in state court.

“After four weeks of hard work, cooperation and coordination, including with defense counsel, we are happy to at least have two avenues for all of those victims across the globe (in Florida state and federal courts),” Moskowitz said. “It is a good day for the victims.”

Boies lawyers did not respond beyond Moskowitz’s emails.

Read more:

FTX’s Bankman-Fried, Tom Brady and other celebrity promoters sued by crypto investors

(Reuters) – Former FTX CEO Sam Bankman-Fried has made a new bail application before the Bahamas Supreme Court, a source familiar with the matter said on Thursday, after a magistrate judge on Tuesday rejected the former crypto mogul’s request for bail.

(Reporting by Jasper Ward in Washington)

(Reuters) – The New York State Department of Financial Services (NYDFS) on Thursday issued digital asset guidance to state-regulated banks laying out what information financial institutions must submit before getting approval to engage in virtual currency-related activities.

The guidance, one of the clearest paths forward yet for banks to offer cryptocurrency services, instructs banks to submit a business plan with details of the proposed activity, detail how such a service would impact the bank’s capital and liquidity and inform NYDFS of its plans at least 90 days beforehand.

(Reporting by Hannah Lang in Washington)

By Stefanno Sulaiman

(Reuters) – Indonesia’s parliament on Thursday approved a financial law revising more than a dozen existing regulations, including an addition to the central bank’s mandate to support economic growth and formalise its direct purchases of government bonds.

Here are some of the changes introduced in the new law, which has over 500 pages:

CHANGES AFFECTING THE CENTRAL BANK

* Bank Indonesia (BI)’s objective to include maintainingfinancial system stability in order to support sustainableeconomic growth, compared with only maintaining the rupiahcurrency’s value under previous laws. * A new provision underlines that BI will be able to issuecapital flow regulations that include repatriation and/orconversion of foreign exchange. * A new requirement states candidates running for BI’s board must not be a member and/or a functionary of a political partyat the time of nomination. * The law brings in a stricter timeframe for nomination andconfirmation hearings of board members by parliament.

CRISIS RESPONSE

* BI is allowed to buy bonds directly from the government ifthe president declares a crisis situation. Up to now, this hasonly been allowed between 2020 to 2022 in response to thepandemic. * BI will also be allowed to buy corporate bonds held bybanks in times of crisis, which is currently prohibited. * The new law aims to strengthen the crisis responsemechanism, including by giving the government permission to lendto the Indonesia Deposit Insurance Corporation (LPS) and for LPSto repo its government bond holdings to the central bank if itneeds to raise funds.

CENTRAL BANK DIGITAL CURRENCY AND CRYPTO ASSETS

* The law recognises the digital rupiah, to be issued by BI,as an additional form of the national currency, on top of coinsand banknotes. * Supervision and regulation for trading of digital assetssuch as crypto assets will be placed under the remit of theFinancial Services Authority (OJK). There will be a gradualtransition of these roles from the commodity regulator.

CONSUMER PROTECTION

* Financial regulators are mandated to form a nationalcommittee to improve financial literacy and widespread access tofinancial products. * The law brings in penalties, including criminal sanctions,for companies that do not meet the requirements for customerprotection, such as failing to inform clients of investmentrisks.

BULLION BANKING, CARBON EXCHANGE

* The law introduces the establishment of a bullion bank, orbank to deposit, trade and lend gold. * It also allows for the set up of carbon exchanges, withthe OJK’s permission, to facilitate carbon trading. * The OJK will supervise and regulate bullion banks andcarbon exchanges.

OTHER CHANGES

* BI and OJK will jointly supervise and regulate fintechs. * The law calls for the formation of supervisory bodies forOJK and LPS and the strengthening of the supervisory body forBI. * Banks are obliged to publish their interest rates in atransparent way in order to promote efficiency. * The LPS will be in charge of guaranteeing insurancepolicies. * To be able to do that, LPS will collect a fee frominsurance companies. * The law introduces jail punishments for a controllingparty of an insurance firm who fails to conduct theirresponsibilities.

(Reporting by Stefanno Sulaiman; Editing by Gayatri Suroyo and Ed Davies)

By Georgina Lee

HONG KONG (Reuters) – Two exchange traded funds (ETF) that track U.S.-listed cryptocurrency futures have raised a combined $73.6 million ahead of their debut on the Hong Kong stock exchange on Friday in defiance of the sector’s meltdown.

Cryptocurrencies have endured months of turmoil, with the collapse of crypto exchange FTX the latest blow to the sector. Bitcoin, the biggest cryptocurrency, has lost more than 70% of its value since hitting a record high in November 2021.

The ETFs, managed by CSOP Asset Management, invest in bitcoin and ether futures listed on the CME exchange in the United States, the only cryptocurrency assets currently permitted by Hong Kong’s Securities and Futures Commission (SFC).

The larger of the two, CSOP Bitcoin Futures ETF, pulled in $53.9 million, according to the manager. That topped ProShares Bitcoin Strategy ETF, the first U.S. bitcoin futures ETF that debuted on the NYSE Arca exchange in October 2021 with $20 million of seed capital, according to media reports.

“Coming after the recent liquidity problems affecting some of the crypto platforms, our two crypto futures ETFs demonstrate that Hong Kong remains open-minded on the development of virtual assets,” said Yi Wang, head of quantitative investment at CSOP.

Just before FTX’s collapse last month, the SFC said in October it would start a consultation to allow retail investors to trade cryptocurrencies and ETFs. The regulator had initially proposed restricting participation to professional investors.

“As the ETFs do not invest in physical bitcoin, and are traded on regulated U.S. and Hong Kong exchanges, there are more regulatory safeguards for investors compared to tokens traded on unregulated platforms,” Wang said.

On Friday, each lot trading on the Hong Kong Exchanges & Clearing (HKEX) will debut at HK$780 each.

“The price of bitcoin may be subject to manipulation as a significant portion is held by a small number of holders” and the CME futures could drop to zero, the ETFs’ product document filed to the HKEX said.

(Reporting by Georgina Lee; Editing by Mark Potter)

By Stefanno Sulaiman

JAKARTA (Reuters) – Indonesia’s parliament on Thursday voted to approve financial legislation that widens the central bank’s mandate to include supporting sustainable economic growth and formalise its debt monetisation operations.

Called the “Development and Strengthening of Financial Sector” bill, the new rules are also seen opening the door for ex-politicians to head Bank Indonesia (BI), raising concerns about its independence.

Running to more than 500 pages, lawmakers say the bill intends to update regulations to address challenges in the digital era, improve financial sector efficiency and promote financial inclusion.

Speaking after the vote, Finance Minister Sri Mulyani Indrawati told lawmakers the new law replaces old regulations, including some that had been in place for 30 years.

The new law explicitly bars members of political parties from running for BI’s board, including becoming governor.

However, politicians can be nominated for BI’s top jobs after resigning from their party, sources involved in the deliberation said.

Some economists believe allowing former politicians rather than technocrats to head BI could threaten its independence as party ties would remain strong while there would also be questions about their expertise and suitability.

The legislation underlines that the central bank remains an independent agency, but it widens BI’s mandate to also include maintaining financial system stability in order to support sustainable economic growth, on top of the current sole mandate of keeping the rupiah’s value stable.

BI has also received permission to buy government bonds in the primary market if the president declares a crisis situation, effectively formalising the bank’s pandemic-era bond buying operations.

This has raised concerns in financial markets about the risk of the government putting pressure on the central bank to pump such support into the economy, particularly given Indonesia’s history of runaway inflation.

The central bank did not respond to a request for comment.

The law also brings in new rules covering banking, insurance, fintech and digital assets. In addition, it seeks to tighten governance of financial regulators, including calling for a new supervision body for the Financial Services Authority (OJK). The law also moves the oversight of cryptocurrency trading to the OJK from a commodity regulator.

(Reporting by Stefanno Sulaiman; Additional reporting by Gayatri Suroyo; Editing by Ed Davies)

By Luc Cohen and Chris Prentice

NEW YORK (Reuters) – When he took office as the top federal prosecutor in Manhattan in late 2021, Damian Williams pledged to prioritize “rooting out corruption in our financial markets.”

Now, with the fraud charges filed earlier this week against Sam Bankman-Fried, the founder of the bankrupt FTX exchange, Williams has further solidified his office’s growing role in prosecuting financial crimes involving cryptocurrency, according to interviews with a half-dozen former prosecutors.

“Every U.S. attorney is defined in the public eye by some of the biggest cases that they bring,” said Harry Sandick, a partner at law firm Patterson Belknap and former Manhattan federal prosecutor. “This will forever be connected to the current U.S. attorney.”

The indictment against Bankman-Fried – who was charged with using billions in stolen customer funds to buy real estate, pay debts for his hedge fund, Alameda Research, and donate to political campaigns – situates Williams as a primary adversary for the high-profile entrepreneur whose downfall has captured public attention and led to calls for greater regulation of cryptocurrency platforms.

Bankman-Fried, 30, has acknowledged risk management failures at FTX but said he does not believe he has criminal liability. His lawyer said he is evaluating his legal options. On Tuesday, a judge in The Bahamas ordered him detained there while he contests a U.S. extradition request.

Williams led the Southern District of New York’s (SDNY) securities and commodities task force before being nominated as the district’s top prosecutor by President Joe Biden. Williams, SDNY’s first Black U.S. attorney, earned his law degree from Yale and clerked for former Supreme Court Justice John Paul Stevens as well as current Attorney General Merrick Garland when Garland was an appellate judge.

Earlier this year, Williams brought the first-ever insider trading cases involving digital assets with charges against a former employee of non-fungible token trading platform OpenSea as well as a former product manager at Coinbase Global Inc, an FTX rival.

Both those defendants have pleaded not guilty.

SDNY has long been known as one of the most muscular enforcers of financial crimes, and some former prosecutors compared Williams’ string of crypto-related prosecutions to the focus on insider trading by Preet Bharara, who served as U.S. Attorney from 2009 to 2017 and secured convictions of fund managers such as Raj Rajaratnam.

Williams was a prosecutor on several high-profile financial crimes cases during Bharara’s tenure, including the insider trading conviction of former Goldman Sachs board member Rajat Gupta and the fraud conviction of a former portfolio manager at Visium Asset Management LP.

“Crypto is the Wild West, but at the end of the day fraud is fraud,” said Mike Ferrara, a former prosecutor and now an attorney with Kaplan Hecker & Fink LLP in New York. “Damian is doing a good job of saying, ‘we’re going to push the envelope in crypto,’ the way Preet was aggressive about insider trading.”

A spokesman for Williams’ office declined to comment.

‘COME SEE US BEFORE WE COME SEE YOU’

Pursuing cryptocurrency-related prosecutions is not without challenges. Defense lawyers may argue that because the sector is relatively new and questions about how it will be regulated are still being worked out, their clients were not clear on how laws crafted for traditional finance applied to them.

“The government is having trouble keeping up and making clear to participants in the industry what they’re supposed to be doing,” said Elise Maizel, a professor at NYU School of Law and former white-collar defense lawyer. “With these criminal cases, a lot of the time they’re regulating through enforcement.”

In one setback for prosecutors, three former founders of crypto exchange Bitmex and its first employee – who pleaded guilty to charges brought by Williams’ predecessor of failing to establish an anti-money laundering program – earlier this year received lighter sentences than prosecutors requested.

The judge in that case said that while the crime was serious, prosecutors had not brought more weighty charges of money laundering or fraud, and there were no identifiable victims.

To be sure, Williams’ office has pursued more traditional financial crimes cases as well, with charges filed this year against the founder of Archegos Capital Management for lying to banks to obtain loans before the firm’s meltdown, and against the former chief investment officer at a unit of Germany’s Allianz SE for inflating fund results.

Both pleaded not guilty.

In the wake of Bankman-Fried’s arrest, Williams has made clear he would plow on with cryptocurrency enforcement. On Wednesday, he announced wire fraud conspiracy charges against the founders of two separate cryptocurrency mining and trading companies he called Ponzi schemes.

The five individuals charged in one of the cases have pleaded not guilty, while the three individuals charged in the other have not yet entered pleas.

On Tuesday, Williams told reporters more charges in the FTX probe were possible.

“This investigation is very much ongoing and it is moving very quickly,” Williams said. “To anyone who participated in wrongdoing at FTX or Alameda Research and who has not yet come forward, I would strongly encourage you to come see us before we come see you.”

(Reporting by Luc Cohen and Chris Prentice in New York; Editing by Noeleen Walder, Amy Stevens and Matthew Lewis)

NEW YORK (Reuters) – Charges brought by U.S. prosecutors against Sam Bankman-Fried, the founder of cryptocurrency exchange FTX, on Tuesday were among the highest-profile brought against a crypto player. It was the latest in a string of cases involving digital assets that U.S. regulators and prosecutors have been looking into.

Here is a summary of some of those civil and criminal cases, and their outcomes:

BITFINEX HACK

The U.S. Justice Department in February charged a husband-and-wife team on charges of conspiring to launder 119,754 bitcoin stolen after a hacker broke into digital currency exchange Bitfinex in 2016 and initiated more than 2,000 unauthorized transactions. The pair are in talks with prosecutors about a possible plea, court records show.

BITMEX EMPLOYEES

Employees of BitMEX, including the cryptocurrency exchange’s founders, pleaded guilty this year to willfully failing to establish, implement and maintain programs to prevent money laundering. The firm’s cofounders pleaded guilty in federal court in New York and each agreed to pay a $10 million criminal fine.

Another of the firm’s employees also pleaded guilty, and agreed to a $150,000 fine.

Federal prosecutors originally brought the criminal charges in 2020.

In 2021, the exchange agreed to pay a civil penalty to settle separate charges from the U.S. Commodity Futures Trading Commission and the Financial Crimes Enforcement Network (FinCEN) unit of the U.S. Treasury Department.

A BitMEX spokesperson this week declined to comment on the charges against its former employees.

At the time the case was settled with the CFTC and FinCEN, the firm’s chief executive officer emphasized its robust compliance and anti-money laundering capabilities.

BLOCKFI LENDING LLC

A subsidiary of crypto firm BlockFi Inc agreed to pay a record $100 million penalty to the SEC and state regulators to settle civil charges in connection with an interest-bearing lending product it offered to nearly 600,000 investors.

BlockFi, which filed for bankruptcy on Nov. 29, still owes $30 million of the $50 million civil penalty it agreed to pay the SEC, according to a court filing.

A spokesperson for the firm did not respond to request for comment this week, but in a statement at the time said the resolution of the case is an example of the firm’s “pioneering efforts in securing regulatory clarity for the broader industry and our clients.”

FORMER COINBASE MANAGER

The Manhattan U.S. Attorney’s Office and the SEC in July charged a former product manager at crypto exchange Coinbase, his brother and friend in an alleged insider trading scheme. The cases marked the first-ever insider trading charges involving cryptocurrencies.

The former Coinbase employee pleaded not guilty to the charges. His brother changed an earlier plea to guilty through an agreement with prosecutors. A third defendant has been charged but is still at large.

Coinbase slammed the SEC’s charges, saying in a blog post at the time that the exchange does not list securities and that the agency was pursuing “regulation by enforcement.”

ONECOIN LTD

In 2019, U.S. authorities charged the alleged leaders of a multibillion-dolar pyramid scheme involving a fraudulent cryptocurrency called OneCoin. One of the leaders is still on the run, and the other pleaded not guilty.

FORMER OPENSEA EMPLOYEE

Federal prosecutors in Manhattan in June charged a former product manager at OpenSea, an online marketplace for non-fungible tokens, with insider trading. The charge marked the first such case involving digital assets.

Prosecutors said the former product manager secretly bought NFTs based on confidential information that the tokens, or others by the same creator, would soon be featured on OpenSea’s homepage.

OpenSea this week pointed to its previous statement about the charges that it started an investigation and asked the employee to leave the company.

RIPPLE LABS INC

The SEC in December 2020 sued blockchain payments company Ripple and two executives, alleging they had been conducting a $1.3 billion unregistered securities offering.

The San Francisco-based company, which founded cryptocurrency XRP in 2012, has been embroiled in a years-long court battle with the regulator.

Ripple has asked a judge to deem XRP not a security, and thus not subject to SEC oversight. The case has broad potential legal consequences for the industry, which occupies a regulatory gray area in the United States.

A spokesperson for Ripple did not provide an updated comment this week.

TELEGRAM GROUP

The SEC in October 2019 halted a $1.7 billion unregistered digital token offering by the messaging service Telegram Group and its TON Issuer subsidiary. After a six-month court battle, Telegram agreed to pay an $18.5 million civil penalty and return $1.2 billion to investors.

The firm, which did not admit or deny the SEC’s findings, did not respond to request for comment.

(Reporting by Chris Prentice and Luc Cohen, editing by Deepa Babington)

By Jared Higgs and Brian Ellsworth

NASSAU (Reuters) – Cordoned-off roads, a sweltering courtroom and numerous delays marked Sam Bankman-Fried’s first in-person public appearance since his crypto company collapsed.

The Bahamas courtroom hearing, conducted over the course of six hours, saw Bankman-Fried, dressed in a suit rather than his typical t-shirt attire, seeking bail to dispute his extradition to the U.S. He was ultimately refused and faces possible extradition to the United States.

It was a stunning fall from grace for the crypto boss, once estimated by Forbes as worth as much as $26.5 billion.

“I’m not waiving,” Bankman-Fried said when asked if he would seek to waive his right to an extradition hearing.

It was a rare comment in a hearing that was largely taken up with lawyers discussing process. In another comment, Bankman-Fried referred to the night of his arrest as “hectic.”

There was high anticipation ahead of the appearance by Bankman-Fried, who has done numerous media interviews since his firm collapsed but not been widely seen in public.

The day started with Bankman-Fried ushered into court away from the main entrance and photographers and reporters who crowded to get a shot.

Bahamas Chief Magistrate JoyAnn Ferguson-Pratt contributed witty asides that often left the courtroom chuckling, once quipping “I wasn’t born yesterday” at the defense counsel’s interpretation of the law.

Ferguson-Pratt’s repeatedly forgetting the defendant’s last name led to laughter.

“Samuel,” she said before trailing off, with the once-billionaire crypto magnate reminding her of his name: “Bankman-Fried.”

People in the courtroom fanned themselves to keep cool in the tropical heat as sun shone through the windows.

The hearing was adjourned twice, once to consult about the court’s jurisdiction to grant bail, and again in the afternoon.

It also included an extensive discussion of Bankman-Fried’s medication, which his lawyer said was for conditions including depression, insomnia and attention deficit disorder.

At the start of the proceedings, Bankman-Fried asked to change an Emsam patch, a medical strip applied to the skin that is used to treat adult depression. He asked to briefly leave the court room to take the medication.

Bankman-Fried acknowledged that he had not taken his medications with him when he was arrested, which he attributed to having had a “hectic night”.

His parents, Joseph Bankman and Barbara Fried, at times seemed frustrated with the arguments made by the prosecution, which described him as a flight risk.

Bankman-Fried’s defense counsel pointed out that Bankman-Fried had spent weeks in The Bahamas after his business collapsed without attempting to leave the country.

At the end of the hearing, his head lowered, he hugged his parents. A van outside the court waited to take him away.

(Reporting by Jared Higgs in Nassau and Brian Ellsworth in Miami; editing by Megan Davies, Noeleen Walder and Sam Holmes)

By Dietrich Knauth

(Reuters) – Lawyers for the bankrupt crypto exchange FTX will square off in court on Wednesday to fight a demand for internal records from an insolvent affiliate based in the Bahamas as the two wrestle over scraps of the once high-flying business.

In Wednesday’s emergency hearing, liquidators of FTX’s Bahamian business will ask U.S. Bankruptcy Judge John Dorsey to give them access to the U.S. unit’s Slack, Google and Amazon Web Services accounts and data.

Lawyers for FTX asked Dorsey to deny the request. They argued that Bahamian regulators had worked with FTX’s founder, the recently arrested Sam Bankman-Fried, to undermine the U.S. bankruptcy case and withdraw assets to the detriment of some creditors.

FTX, its hedge fund Alameda Research and dozens of affiliates filed for U.S. bankruptcy last month after the trading platform suffered a rush of withdrawals and a rescue deal failed.

The same week, authorities in the Bahamas, where the company had its headquarters, appointed liquidators to wind down FTX’s international trading business.

The dispute between FTX’s U.S. bankruptcy team and attorneys appointed to oversee the liquidation of Bahamas-based FTX Digital Markets was aired in Congress on Tuesday.

John Ray, who was appointed as chief executive of the bankrupt FTX, told a Congressional committee that the Bahamian government colluded with Bankman-Fried to help account holders in the country pull $100 million from the crypto exchange just as it was going bankrupt.

Ray called the Bahamian government’s actions “alarming” and suggested that people in the Bahamas have something to hide.

“Unlike the Chapter 11 process, there is no transparency in the process in the Bahamas,” Ray said. “We have repeatedly asked them for clarity on what they’ve been doing, and we’ve been shot down on that.”

The Securities Commission of The Bahamas (SCB) disputed Ray’s “misstatements” about the Bahamian government’s response to FTX’s collapse.

Ray’s recent court filings included a partial record of emails between attorneys for the U.S. bankruptcy team and Bahamian liquidators, creating “a false impression” that Bahamian citizens were being protected at the expense of FTX’s other customers, the SCB said in a statement.

Any improper distributions made to Bahamian citizens will be subject to the appropriate clawback actions under the law, the SCB wrote.

Bankman-Fried was arrested Monday in the Bahamas and is being detained while awaiting extradition to the United States to face criminal and civil fraud charges.

(Reporting by Dietrich Knauth; Editing by Leslie Adler)

FRANKFURT (Reuters) – Germany’s top regulator this week called for global regulation of the cryptocurrency industry to protect consumers, prevent money laundering and preserve financial stability.

Mark Branson, the president of Germany’s financial market regulator BaFin, said a hands-off approach that would “just let the industry grow as a playground for grownups” was the wrong tactic.

“We’ve seen the self-regulated world. It will not work,” Branson told journalists in Frankfurt on Tuesday evening.

Branson was speaking hours after U.S. prosecutors accused Sam Bankman-Fried, founder of cryptocurrency exchange FTX, of misappropriating billions of dollars and violating campaign laws in what has been described as potentially one of America’s biggest financial frauds.

Branson said a “crypto spring” may follow what has been a “crypto winter” but that the industry that emerges is likely to have more links with traditional finance, further increasing the need for regulation.

“Now is the time for serious cryptocurrency regulation,” he said.

“The most important point is that it doesn’t need just a European solution. It needs a worldwide solution.”

Regulation of the industry has been loose and patchwork.

Germany requires licences for banks to deal with cryptocurrency.

The European Union has been working on a new Markets in Crypto Assets Regulation (MiCA) that some, including European Central Bank President Christine Lagarde, say would need to be broadened out in a future iteration and branded “MiCA 2”.

Branson has sounded sceptical about the sector in the past. Last month he said in an interview on the ECB’s website that “not all crypto business models are serious”.

“Waves of innovation, as we know, also bring with them freeloaders and crooks,” he said.

(Reporting by Tom Sims and Frank Siebelt; Editing by Mark Potter)

SINGAPORE (Reuters) – Deposits are returning and “things seem to have stabilised” at Binance, its chief executive said on Wednesday, a day after it had a sharp increase in withdrawals and paused some stablecoin transactions.

On Tuesday, blockchain data firm Nansen said that Binance had seen withdrawals of $1.9 billion in the last 24 hours and that the exchange said it “temporarily paused” withdrawals of the USDC stablecoin.

“Things seem to have stabilised,” CEO Changpeng Zhao wrote in a tweet. “Yesterday was not the highest withdrawals we processed, not even top 5.”

The $1.9 billion of withdrawals of tokens based on the ethereum blockchain marked the largest daily outflow over a 24-hour period since June 13, the Nansen data showed.

How crypto exchanges such as Binance and its now-bankrupt former rival FTX handle customer deposits is under close scrutiny from users and regulators.

(Reporting by Rae Wee. Editing by Gerry Doyle)