Tag: Cryptocurrencies

By Huw Jones

LONDON (Reuters) – Banks would have to set aside a punitive amount of capital to cover holdings of cryptoassets under a draft law due to be voted on by lawmakers on Tuesday.

The European Parliament’s economic affairs committee is due to vote on cross-party compromises, seen by Reuters, on a draft law which implements remaining elements of Basel III, a global accord which forces banks to hold more capital to cope with market shocks unaided by taxpayers.

One amendment states that banks would have to apply a risk-weighting of 1,250% of capital to cryptoassets exposures, meaning enough to cover a complete loss in their value.

This is in line with recommendations from the global Basel Committee of banking regulators in December.

The amendments also introduce a definition of “shadow banking”, the vast sector of insurers, hedge funds and investment funds that make up about half the world’s financial system and typically less regulated than banks.

The amendment requires the EU’s executive European Commission to publish a report by June 2023 analysing the possibility of introducing prudential limits on banks’ exposures to shadow banks.

Amendments also require renumeration policies at banks should be aligned with their transition plans to address environmental, social and governance (ESG) risks over the short, medium and long term.

The draft law introduces a new “fit and proper” regime for appointing bankers, with amendments saying there should be targets for a bank’s management body.

They should be “sufficiently diverse as regards age, gender, and geographical and educational background” according to a report from Jonas Fernandez, the committee member leading the negotiations on the draft law in parliament.

The amendments generally go further than changes made by EU states, who reached a deal among themselves in December and which generally focused on temporary carve-outs on some of the requirements to give banks more time to adapt, in the teeth of European Central Bank opposition.

After Tuesday’s vote the lawmakers and EU states will thrash out a final deal which would come into effect in 2025.

(Reporting by Huw Jones, Editing by Louise Heavens)

(Removes extraneous word in para 3)

(Reuters) – Bitcoin rose 2.3% to $23,199 at 10:07 GMT on Saturday, adding $521 to its previous close.

Bitcoin, the world’s biggest and best-known cryptocurrency, is up 40.6% from the year’s low of $16,496 on January 1.

Ether, the coin linked to the ethereum blockchain network, rose 0.58% to $1,668.1 on Saturday, adding $9.7 to its previous close.

(This story has been refiled to remove the extraneous word in paragraph three)

(Reporting by Jose Joseph in Bengaluru, Editing by William Maclean)

By Dietrich Knauth

(Reuters) – Federal prosecutors have seized nearly $700 million in assets from FTX founder Sam Bankman-Fried in January, largely in the form of Robinhood stock, according to a Friday court filing.

Bankman-Fried, who has been accused of stealing billions of dollars from FTX customers to pay debts incurred by his crypto-focused hedge fund, has pleaded not guilty to fraud charges. He is scheduled to face trial in October.

The Department of Justice revealed the seizure of Robinhood shares earlier this month, but it provided a more complete list of seized assets Friday, including cash held at various banks and assets deposited at crypto exchange Binance.

The ownership of the seized Robinhood shares, valued at about $525 million, has been the subject of disputes between Bankman-Fried, FTX, and bankrupt crypto lender BlockFi.

The most recent asset seizure reported by the DOJ took place on Thursday, when prosecutors seized $94.5 million in cash from an account at Silvergate Bank which was associated with FTX Digital Markets, FTX’s subsidiary in the Bahamas. The DOJ seized more than $7 million from other Silvergate accounts associated with Bankman-Fried and FTX.

The DOJ previously seized nearly $50 million from an FTX Digital Markets account at Moonstone Bank, a small bank in Washington state.

DOJ also said that assets in three Binance accounts associated with Bankman-Fried were subject to criminal forfeiture, but did not provide an estimate of the value in those accounts.

(Reporting by Dietrich Knauth; Editing by Noeleen Walder and Daniel Wallis)

(Reuters) – Bitcoin rose 6.24 % to $22,401 at 22:07 GMT on Friday, adding $1,315 to its previous close.

Bitcoin, the world’s biggest and best-known cryptocurrency, is up 35.8% from the year’s low of $16,496 on Jan. 1. Ether, the coin linked to the ethereum blockchain network, rose 5.66 % to $1,639.2 on Friday, adding $87.8 to its previous close.

(Reporting by Siddharth Jindal in Bengaluru; editing by Diane Craft)

LONDON (Reuters) – The lending unit of U.S. crypto firm Genesis filed for U.S. bankruptcy protection on Thursday, the latest company toppled by a market rout last year that wiped about $1.3 trillion off the value of crypto tokens.

While bitcoin has rallied this year, the impact of the market collapse has continued to hit companies in the highly interconnected sector.

Here are the major crypto firms to file for bankruptcy over the last year (listed in reverse chronological order).

GENESIS GLOBAL CAPITAL

One of the largest crypto lenders, Genesis froze customer redemptions in November after major exchange FTX stunned the financial world with its bankruptcy. The company is owned by U.S. venture capital firm Digital Currency Group.

In a filing with the U.S. Bankruptcy Court for the Southern District of New York on Thursday, the firm said it had both assets and liabilities in the range of $1 billion to $10 billion, and estimated it had more than 100,000 creditors.

Genesis Global Holdco, the parent group of Genesis Global Capital, also filed for bankruptcy protection, along with another lending unit, Genesis Asia Pacific.

CORE SCIENTIFIC

One of the biggest publicly traded crypto mining companies in the United States, Core Scientific Inc cited slumping bitcoin prices, rising energy costs and a $7 million unpaid debt from bankrupt crypto lender Celsius Network as it filed for Chapter 11 in December.

BLOCKFI

Crypto lender BlockFi filed for Chapter 11 in late November, some two weeks after FTX’s collapse.

BlockFi said its substantial exposure to FTX had created a liquidity crisis. The New Jersey-based lender had relied on a $400 million FTX credit facility to stay afloat after competing crypto lenders Voyager Digital Ltd and Celsius Network went bankrupt earlier in 2022.

FTX

The Bahamas-based exchange shocked the crypto world by going bankrupt in November after suffering withdrawals of about $6 billion in just 72 hours and rival crypto exchange Binance ditched a possible rescue.

FTX’s affiliated hedge fund Alameda Research also filed for bankruptcy. The collapse of the companies, founded by former billionaire Sam Bankman-Fried, became one of the most high-profile failures in the crypto sector. Investors in FTX had included BlackRock and Canada’s biggest pension plan.

Bankman-Fried pleaded not guilty this month to criminal charges that he cheated investors in FTX and caused billions of dollars in losses.

CELSIUS NETWORK

A crypto lender brought down by the collapse of terraUSD and luna, Celsius began its U.S. bankruptcy case on July 14.

Since then, Celsius has been embroiled in disputes over fraud investigations, disparate treatment of customer accounts, customer privacy, and its spending on a new bitcoin mining facility.

VOYAGER DIGITAL

New Jersey-based crypto lender Voyager Digital filed for bankruptcy in the United States on July 6 after Three Arrows Capital (3AC) defaulted on a crypto loan worth more than $650 million.

The U.S. affiliate of major crypto exchange Binance said in December it intends to buy Voyager’s crypto lending platform in a deal valued at about $1 billion.

The deal, however, could be delayed or blocked in a review by a U.S. body that vets foreign investments into U.S. companies for national security risks.

THREE ARROWS CAPITAL

The crypto hedge fund Three Arrows Capital filed for bankruptcy on July 1, brought down by the collapse of the so-called stablecoin terraUSD and its sister token luna in May.

Those meltdowns wiped out $42 billion in investor value, and led to an arrest warrant in South Korea for terraUSD’s developers.

(Reporting by Tom Wilson in London and Dietrich Knauth in New York. Editing by Sharon Singleton)

By Tom Wilson and Hannah Lang

(Reuters) – As an investment banker, Barry Silbert worked on some of the highest-profile corporate failures. Now, as founder of venture capital firm Digital Currency Group, parent of troubled crypto firm Genesis, he is grappling with problems closer to home.

Silbert, 46, cut his teeth on bankruptcies including Enron’s and WorldCom’s when working at California-based investment bank Houlihan Lokey. “The experience working on complex, problematic restructurings proved invaluable,” he told the U.S. Senate Banking Committee in 2011.

Genesis Global Capital, one of the world’s biggest crypto lending firms, filed for U.S. bankruptcy protection on Thursday owing creditors at least $3.4 billion, the latest in a string of major corporate failures in the digital asset industry sparked by the 2022 rout in crypto prices. It plans to exit the bankruptcy by May 19, filings showed on Friday.

Genesis, which brokers crypto for financial institutions like hedge funds and asset managers, had frozen client withdrawals in its lending unit in November, citing an “extreme market dislocation and loss of industry confidence” following the downfall of major cryptocurrency exchange FTX.

Its two biggest borrowers were Three Arrows Capital, the Singapore hedge fund that went bankrupt in July, and Alameda Research, the hedge fund of FTX founder Sam Bankman-Fried that is also in bankruptcy proceedings, Reuters reported this month.

The troubles at Genesis are a blow to Silbert and his ambition, described to Reuters in a 2017 interview, that DCG would one day become a publicly traded conglomerate akin to Warren Buffett’s Berkshire Hathaway.

DCG did not immediately respond to a request for comment.

EARLY ADOPTER

Silbert, who grew up in Maryland, was an early bitcoin adopter.

He told Reuters in the 2017 interview that he bought about $175,000 worth of the cryptocurrency in 2012, paying about $11 a coin at a time when bitcoin was little known beyond niche internet blogs.

Silbert went on to launch Digital Currency Group in New York in 2015, later moving the firm to Connecticut.

As crypto markets soared in value, DCG raised money from the venture capital arm of Bain Capital, MasterCard, New York Life Insurance Company, and Canadian bank CIBC.

Bain Capital declined to comment while the other firms did not respond to requests for comment.

DCG built up a formidable portfolio of companies – over 200 in more than 35 countries Silbert told shareholders this month – from Genesis and crypto news and events site CoinDesk to New York-based Grayscale, a major digital asset manager.

It has also invested in more than 50 crypto funds and other related projects, Silbert said.

Unlike other prominent crypto moguls, Silbert kept a relatively low profile, eschewing the regular tweets favored by his peers. He was also deeply embedded in the world of financial trading even before the advent of cryptocurrencies.

In 2004, he founded Restricted Stock Partners, a trading platform for restricted securities issued by companies as part of private deals. The company expanded and changed its name in 2008 to SecondMarket and by 2011 had facilitated billions in private market transactions, according to Forbes.

Nasdaq bought SecondMarket in 2015 for an undisclosed amount and Silbert relaunched SecondMarket’s crypto trading division as Genesis Trading the same year, incorporating it into his growing crypto empire.

Silbert’s current worth is unclear but Forbes pegged it last year at $3.2 billion.

Silbert has come under fire since Genesis suspended withdrawals, with the co-founder of crypto exchange Gemini accusing him of misleading investors and engaging in bad-faith stall tactics. Gemini offered a crypto yield product in partnership with Genesis, and says Genesis owes the firm $900 million.

Genesis declined to comment. A spokesperson earlier this month expressed disappointment that Gemini was “waging a public media campaign despite ongoing productive private dialogue between the parties.”

In an open letter posted to Twitter on Jan. 10, Gemini’s Cameron Winklevoss demanded the DCG board remove Silbert as CEO and install a new leader.

“He has proven himself unfit to run DCG and unwilling and unable to find a resolution with creditors that is both fair and reasonable,” the letter said.

In a letter to shareholders, also dated Jan. 10, Silbert called the past year the most difficult of his life.

“It has been challenging to have my integrity and good intentions questioned after spending a decade pouring everything into this company and the space with an unrelenting focus on doing things the right way,” he said.

(Reporting by Tom Wilson in London and Hannah Lang in Washington; editing by Megan Davies, Kirsten Donovan)

By Dietrich Knauth and Andrew Goudsward

(Reuters) – Collapsed crypto exchange FTX will try to convince a judge at a hearing on Friday to sign off on its hiring of lawyers and financial advisers, amid allegations that its chosen law firm’s prior work for FTX creates a conflict of interest.

The U.S. Department of Justice’s bankruptcy watchdog has asked U.S. Bankruptcy Judge John Dorsey in Wilmington, Delaware, not to approve FTX’s hiring of Sullivan & Cromwell, arguing that the elite New York law firm has not disclosed sufficient information about its past ties to FTX, including the fact that FTX’s U.S. general counsel, Ryne Miller, is a former partner at the firm.

Former top FTX attorney Daniel Friedberg also opposed Sullivan & Cromwell’s hiring, saying Thursday that the law firm had conflicts of interest stemming from its connections to Miller.

Miller tried to “channel a lot of business to S&C” and “looked forward to returning as a partner to S&C” after his stint at FTX, Friedberg wrote.

Miller could not immediately be reached for comment late Thursday.

FTX pushed back in court filings this week, saying it relies on Sullivan & Cromwell for high-stakes work like securing customer assets and sharing information with U.S. prosecutors and regulators.

FTX said forcing it to find new lawyers would disrupt efforts to clean up the mess left behind by founder Sam Bankman-Fried, who has been accused by U.S. prosecutors of orchestrating an “epic” fraud that may have cost investors, customers and lenders billions of dollars.

Bankman-Fried, who has pleaded not guilty, has repeatedly attacked Sullivan & Cromwell since FTX’s implosion, claiming he was strong-armed by lawyers at the firm into filing for bankruptcy and surrendering control of the company. The firm called those allegations false in court filings this week.

Sullivan & Cromwell has told the court it should not be disqualified simply because it performed some pre-bankruptcy work for FTX. A Sullivan & Cromwell spokesperson has said the firm had a “limited and largely transactional” relationship with FTX prior to the bankruptcy and never served as primary outside counsel to any FTX entity.

FTX filed for bankruptcy protection in November, saying it was unable to completely repay customers who had deposited funds on its exchange. FTX’s new CEO, John Ray, has said his top priority is recovering assets to repay FTX customers.

Serving as primary bankruptcy counsel to FTX would likely allow Sullivan & Cromwell to reap hundreds of millions of dollars in fees, legal experts have said. FTX has sought bankruptcy court permission to pay top Sullivan & Cromwell attorneys more than $2,000 per hour.

Some FTX creditors and a bipartisan group of U.S. senators have separately raised concerns to the Delaware bankruptcy judge about the law firm’s ability to conduct an impartial investigation. Dorsey responded to the senators’ letter at a Jan. 11 hearing, saying that outside pressure “will have no impact on my decisions whatsoever.”

Bankruptcy judges usually allow companies to choose their bankruptcy attorneys, but conflicts of interest can result in attorney disqualification in some rare cases.

(Reporting by Dietrich Knauth in New York and Andrew Goudsward in Washington D.C.; Editing by Alexia Garamfalvi, Matthew Lewis and Kim Coghill)

By Elizabeth Howcroft and Hannah Lang

(Reuters) – U.S. crypto company Digital Currency Group (DCG) is at the center of the industry’s latest meltdown after one of its companies, Genesis, froze customer withdrawals in November.

The lending unit of Genesis Global Capital filed on Thursday for U.S. bankruptcy protection from creditors.

Here is what we know about the many companies Digital Currency Group owns:

COINDESK

DCG acquired crypto news website CoinDesk in 2016 after previously investing in the outlet. TechCrunch at the time pegged the deal as being worth about $500,000 to $600,000.

CoinDesk in November published a leaked balance sheet of Alameda Research, the crypto trading firm founded by Sam Bankman-Fried. Many industry observers cited the report as the catalyst for the downfall of Alameda and Bankman-Fried’s crypto exchange FTX, which filed for bankruptcy less than two weeks later.

GENESIS

Genesis Trading was originally the bitcoin trading division at DCG Chief Executive Barry Silbert’s SecondMarket, but relaunched with its new name as a subsidiary of DCG when Silbert started the venture firm in 2015.

Genesis’s crypto lending arm, Genesis Global Capital, announced in November it would stop making new loans and blocked customers from withdrawing funds, citing the market dislocation caused by the collapse of FTX.

Genesis Global Capital had partnered with a number of other crypto companies, including crypto exchange Gemini, to offer a crypto lending product. Gemini now says its customers are owed $900 million from Genesis.

Genesis owes more than $3 billion to its creditors including Gemini, according to a person familiar with the matter.

DCG itself owes $1.675 billion to Genesis’ crypto lending arm, according to a November letter Silbert sent to shareholders. That includes a $1.1 billion promissory note that appears to be connected with liabilities DCG assumed from Genesis after it was hit hard by the collapse of Singapore-based crypto hedge fund Three Arrows Capital.

GRAYSCALE

Silbert started Grayscale Investments in 2013 after he stepped down as CEO of SecondMarket. After selling SecondMarket to Nasdaq Inc in 2015, he launched DCG, with Grayscale as one of the firm’s subsidiaries.

Grayscale’s flagship Grayscale Bitcoin Trust (GBTC) is the world’s largest bitcoin fund, one that the company hopes will someday be converted into an exchange-traded fund.

GBTC has not traded at a premium relative to the price of bitcoin, its underlying asset, since early 2021. DCG embarked on an effort to reduce the discount in 2021, announcing a plan to spend up to $1 billion to purchase GBTC shares.

Troubles at Genesis’ lending business had no impact on DCG and its subsidiaries, DCG said in November, while Grayscale said its underlying assets were unaffected.

OTHER VENTURE CAPITAL INVESTMENTS

DCG is a prolific venture capital investor, listing more than 160 companies in its portfolio on its website, of which it has acquired 28, it says. Crypto exchange Luno and crypto mining and staking firm Foundry are listed as subsidiaries.

DCG is also an investor in U.S. crypto exchanges Coinbase and Kraken, and its other holdings include the U.S. firm Circle, which runs the stablecoin USDC, and blockchain analytics companies Chainalysis, Dune Analytics, Elliptic and Etherscan.

(Reporting by Elizabeth Howcroft in London and Hannah Lang in Washington; Editing by Lananh Nguyen and Matthew Lewis)

By Luc Cohen

NEW YORK (Reuters) – A car drove into a metal barricade outside Sam Bankman-Fried’s home in California, his lawyers said on Thursday, in a recent incident they said underscores the security risks faced by the FTX founder and those ensuring his return to court.

In a filing in Manhattan federal court, lawyers for the 30-year-old onetime billionaire said three men got out of the car and told a security officer guarding the Palo Alto home, “You won’t be able to keep us out.” The men, who have not been identified, then got back in the car and drove away.

Bankman-Fried, arrested last month on fraud and conspiracy charges related to the collapse of the cryptocurrency exchange, is under house arrest at his parents’ home until his Oct. 2 trial. Prosecutors say he stole billions of dollars of FTX customer funds to plug losses at his hedge fund.

He has pleaded not guilty.

The lawyers, Mark Cohen and Christian Everdell, did not specify when the incident took place, describing it only as recent.

The lawyers brought up the incident in response to a push by major media outlets, including Reuters, to make public the names of two people who helped guarantee Bankman-Fried’s bond alongside his parents, both Stanford Law School professors who put up their house as collateral for the $250 million bond.

The news organizations argued last week that the right of the public to know the two sureties’ identities outweighed their privacy and safety rights. Bankman-Fried’s lawyers said the media groups “assign far too much weight to the presumption of access” and ignored the safety of the guarantors.

“Given the notoriety of this case and the extraordinary media attention it is receiving, it is reasonable to assume that the non-parent sureties will face significant privacy and safety concerns if their identities are disclosed,” Cohen and Everdell wrote in their letter to U.S. District Judge Lewis Kaplan.

Prosecutors took no position on whether to disclose the sureties’ identities or not, Bankman-Fried’s lawyers wrote in the filing. A spokesman for the U.S. Attorney’s office in Manhattan declined to comment.

Prosecutors interviewed and approved the two individuals on Jan. 4, Cohen and Everdell wrote. They proposed that the two additional sureties post bonds of $500,000 and $200,000, respectively. The sum represents the amount they will be liable to pay if Bankman-Fried does not show up in court.

(This story has been refiled to remove an extraneous apostrophe after billionaire in paragraph 2)

(Reporting by Luc Cohen in New York; Editing by William Mallard, Robert Birsel)

(Reuters) – The lending unit of crypto firm Genesis filed on Thursday for U.S. bankruptcy protection from creditors, toppled by a market rout along with the likes of exchange FTX and lender BlockFi.

Genesis Global Capital, one of the largest crypto lenders, froze customer redemptions on Nov. 16 after FTX stunned the financial world with its bankruptcy, fuelling concern that other companies could implode. The company is owned by venture capital firm Digital Currency Group (DCG).

Genesis’ lending unit said it had both assets and liabilities in the range of $1 billion to $10 billion in its filings with the U.S. bankruptcy court.

Genesis’s bankruptcy filing is the latest in a cascade of crypto failures and steep job cuts triggered by plunging prices last year.

(Reporting by Tom Hals in Wilmington, Delaware and Akanksha Khushi; Editing by Lananh Nguyen and Clarence Fernandez)

By Chris Prentice

NEW YORK (Reuters) – Nexo Capital Inc has agreed to pay $45 million in penalties to settle charges from the U.S. Securities and Exchange Commission and state regulators that the crypto firm failed to register its crypto asset lending product, the SEC said on Thursday.

Nexo has agreed to pay a $22.5 million penalty to the SEC and another $22.5 million in fines to state regulators in relation to its Earn Interest Product to U.S. investors, the SEC said in a statement.

Nexo began to offer its lending product around June 2020, allowing U.S. investors to give their crypto assets to the company in exchange for a promise of interest, the SEC said. The company ceased offering the product to new investors after the SEC announced similar charges against another company in February 2022.

The UK-based crypto lender said last month it would phase out its U.S. products and services over the coming months due to clashes with regulators.

Nexo did not admit or deny the SEC’s findings.

The securities regulator has been targeting such offerings by crypto firms over the last year, bringing its first charges against a subsidiary of BlockFi Inc for selling a similar product in February 2022.

Last week, the SEC sued Genesis Global Capital LLC and Gemini Trust Company LLC for their lending product.

(Reporting by Chris Prentice in Washington; Editing by Matthew Lewis)

(Reuters) – Bankrupt crypto exchange FTX is looking into the possibility of reviving its business, Chief Executive Officer John Ray told the Wall Street Journal on Thursday.

Ray, who took over the reins in November, has set up a task force to explore restarting FTX.com, the company’s main international exchange, he said in an interview with the WSJ.

The CEO also told the Journal that he would look into whether reviving FTX’s international exchange would recover more value for the company’s customers than his team could get from simply liquidating assets or selling the platform.

FTX’s native token FTT surged nearly 30% after the report.

“I’m glad Mr. Ray is finally paying lip service to turning the exchange back on after months of squashing such efforts!” FTX founder and former CEO Sam Bankman-Fried said in a tweet.

“I’m still waiting for him to finally admit FTX US is solvent and give customers their money back,” Bankman-Fried added.

A legal representative for FTX did not immediately respond to a Reuters request for comment.

Bankman-Fried has been accused of stealing billions of dollars from the exchange’s customers to pay debts incurred by his crypto-focused hedge fund, Alameda Research. He has pleaded not guilty to fraud charges.

The future of customer funds, however, remains unclear. Earlier this week, FTX said in a report to creditors that hackers stole about $415 million in crypto from its international and U.S. exchanges since its bankruptcy in November.

(Reporting by Niket Nishant in Bengaluru; Editing by Shailesh Kuber and Anil D’Silva)

(Reuters) – Crypto outlet CoinDesk Inc is exploring a full or partial sale of its business and has hired investment bank Lazard Ltd to lead the process, the media company’s chief executive said on Wednesday.

The crypto industry is going through one of its worst phases, with prices of major tokens at two-year lows and a string of bankruptcy filings from top players.

“My goal in hiring Lazard is to explore various options to attract growth capital to the CoinDesk business, which may include a partial or full sale,” CEO Kevin Worth told Reuters in a statement.

The development comes amid an industry turmoil, which began with the crash of stable coins TerraUSD and Luna early last year.

More recently, top crypto exchange FTX filed for bankruptcy, while publicly traded Coinbase Global Inc laid off a fifth of its workforce after slashing over 1,000 jobs last year.

New York-based CoinDesk launched in 2013 to track Bitcoin, but the platform has emerged as a key source of news and pricing benchmarks for the entire range of crypto currencies.

The company is wholly owned by crypto-focused venture capital firm Digital Currency Group, which also has interest in Coinbase, according to its website.

(Reporting by Yuvraj Malik in Bengaluru; Editing by Subhranshu Sahu)

By Paritosh Bansal and Divya Chowdhury

DAVOS, Switzerland (Reuters) – In the snow and ice on the main drag in Davos, the impact of the crypto winter is plain for WEF attendees to see.

Last May, the dressed-up shop fronts that line both sides of the Promenade street running through the Swiss ski resort were dominated by crypto firms, rolling in bitcoin.

Now there are just a handful and the executives who have made it to Davos have swapped their hoodies for blazers, despite sub-zero temperatures outside.

Some of those from the digital industry which have set up shop on the fringes of the World Economic Forum (WEF) annual meeting were quick to distance themselves from cryptocurrencies.

“I hope there’s an increased focus on utility value and practical applications of the technology, and less focus on retail investors chasing meme coins,” Jeremy Allaire, CEO of USDC stablecoin issuer Circle, said.

“There was a lot of nonsense,” Allaire told the Reuters Global Markets Forum.

Former Reserve Bank of India Governor Raghuram Rajan believes last year’s plunge in digital assets allows investors to focus on the true value of the technology.

“We’re at the right place now in terms of crypto,” he said.

Executives in Davos said they are now all about blockchain technology, proper controls and regulation, and the promise of disruption that it holds for financial services and beyond.

“We are an infrastructure, plumbing play. We build infrastructure today for digital assets, which is crypto. Tomorrow it will be different assets,” said Dmitry Tokarev, chief executive of Copper, which provides custody services.

“I would question some of the stuff that I saw, ‘What is the return on that?'” Tokarev added, referring to the big presence of crypto companies at the last WEF meeting, which was unusually held in May as a result of the COVID-19 pandemic.

“We have been always ignoring the noise. All our partners were here last year. They are here this year,” Tokarev added.

The world of digital assets has changed drastically since May, with the value of the crypto market plummeting and some of the major crypto companies going under as investors pulled back from riskier assets in the face of rising interest rates.

The market capitalization of crypto currencies has shrunk by $1.4 trillion, a third of its value from peaks hit in late 2021 and some of the best-known crypto firms are under stress or have gone under, including the collapse of crypto exchange FTX.

“There is a place for trading use cases but they cannot be the singular focus, we need to move to more real use cases and put attention there,” said Denelle Dixon, CEO of Stellar Development Foundation, which supports the Stellar blockchain.

‘DODGED A BULLET’

While interest remains in the technology, the conversation is turning to responsibility.

Colm Kelleher, chairman of Swiss bank UBS, told a WEF panel that blockchain technology will help reduce costs for banks. But he said the industry needed to figure out the basics, such as anti-money laundering controls.

“We kind of dodged a bullet,” Kelleher said, noting that the collapse in the value of crypto currencies had not caused systemic problems. “We did have investors who did want to invest in coinage. And we had to draw a line on what was suitable for those investors,” he added.

Yat Siu, co-founder of Hong Kong-based blockchain gaming developer Animoca Brands, was supportive of the firms in Davos.

“These are companies with serious cash positions and revenue generating companies,” Siu said. “They’re billion dollar enterprises.”

Crypto is trying to establish its presence, SkyBridge Capital founder Anthony Scaramucci said, adding “there’s nothing more establishment than the World Economic Forum.” Scaramucci maintains a bullish stance on crypto despite losses last year.

Back on the Davos Promenade, some signs of crypto’s lost swagger endure.

Parked right outside a pavilion promoting blockchain early in the week was a bright orange Mercedes.

On the hood, instead of the carmaker’s insignia was a copper-colored symbol for bitcoin.

The tires carried a slogan in white: “In Bitcoin we trust”.

(Additional reporting by Lananh Nguyen in Davos, Stefania Spezzati and Lisa Mattackal; Editing by Alexander Smith)

By Daphne Psaledakis, Raphael Satter and Chris Prentice

WASHINGTON (Reuters) – U.S. authorities said on Wednesday they have arrested the majority shareholder and cofounder of Hong Kong-registered virtual currency exchange Bitzlato Ltd for allegedly processing $700 million in illicit funds.

Anatoly Legkodymov, a Russian national living in China, was arrested in Miami on Tuesday on charges that he operated the exchange as an unlicensed money exchange business that “in his own words, catered to ‘known crooks,'” a top Justice Department official said.

Prosecutors said Bitzlato exchanged more than $700 million in cryptocurrency with Hydra Market, which they described as an illicit online marketplace for narcotics, stolen financial information, fraudulent identification documents and money laundering services that U.S. and German law enforcement shut down in April 2022.

“Whether you break our laws from China or Europe or abuse our financial system from a tropical island — you can expect to answer for your crimes inside a United States courtroom,” Deputy Attorney General Lisa Monaco told reporters at a news conference at the Justice Department.

Bitzlato also received more than $15 million in ransomware proceeds, prosecutors said. It was not immediately possible to contact Hydra Market for comment.

“Despite it being a small name, it carries a lot of weight,” said Chen Arad, the chief operating officer at Solidus Labs, a crypto market surveillance company.

“Small actors are not safe and they carry just as much risk as any big-name exchange (or) platform,” he said.

Authorities described Legkodymov as the cryptocurrency exchange’s cofounder, saying the 40-year-old Russian helped run the company from the Chinese city of Shenzhen. Legkodymov did not immediately respond to an email with questions, and messages left on Bitzlato’s automated Telegram support chat service were answered with the phrase, “Oops, sorry.”

Bitzlato has processed $4.58 billion worth of cryptocurrency transactions since May 3, 2018, prosecutors said, adding a substantial portion constitutes “the proceeds of crime.”

It also broke rules requiring significant vetting of customers and failed to meet requirements aimed at preventing money laundering, authorities said. Archived versions of Bitzlato’s website noted that the site’s clients could register using “only your email.”

Prosecutors said Bitzlato knowingly serviced U.S. customers and conducted transactions with U.S.-based exchanges using U.S. online infrastructure. For at least some period of time, it was being managed by the defendant while he was in the United States, they said.

The charges were filed in conjunction with the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN), which said it has prohibited certain transmittals of funds involving Bitzlato by any covered financial institution after labeling Bitzlato Ltd a “primary money laundering concern” related to Russian illicit finance.

“Identifying Bitzlato as a primary money laundering concern effectively renders the exchange an international pariah,” Deputy Treasury Secretary Wally Adeyemo said at the news conference.

Adeyemo said Bitzlato has repeatedly facilitated transactions for Russian-affiliated ransomware groups, including the gang behind Conti, which he said has links to the Russian government and Russia-connected darknet markets.

Cari Stinebower, a former Treasury Department official now a partner at law firm Winston & Strawn, said the penalties imposed are akin to those under Section 311 of the U.S. Patriot Act and will make Bitzlato untouchable by U.S. and foreign banks.

“None of the mainstream financial institutions will deal with an entity identified as a primary money laundering concern,” she said.

“While U.S. financial institutions will refuse to engage in business with Bitzlato, (one would expect that) other financial institutions will follow suit,” she added. “The impact will be to freeze Bitzlato out of the global financial sector almost immediately.”

By midday Wednesday, Bitzlato’s website was replaced by a notice saying that the service had been seized by French authorities “as part of a coordinated international law enforcement action.”

(Reporting by Daphne Psaledakis, Raphael Satter, Kanishka Singh, Chris Prentice and Arshad Mohammed; additional reporting by Hannah Lang; Writing by Chris Prentice; Editing by Megan Davies and David Gregorio)

By Chris Prentice and Hannah Lang

NEW YORK/WASHINGTON (Reuters) – A top official with the U.S. Commodity Futures Trading Commission (CFTC) on Wednesday plans to warn lawmakers against allowing cryptocurrency exchanges to self-certify with the agency to list products for trading.

The CFTC already allows self-certification for exchanges to list contracts for other products, such as commodities. Lawmakers were considering a similar process as part of proposed crypto legislation being hammered out last year.

But CFTC Commissioner Christy Goldsmith Romero said the process would open the door to “regulatory arbitrage” as some crypto assets are likely securities that need to be overseen by a different agency, the Securities and Exchange Commission (SEC).

“Oversight is necessary to prevent abuse” of the process, she said, according to remarks prepared for an event at the University of Pennsylvania.

Her warnings come as lawmakers regroup to draft legislation to better oversee the troubled crypto industry, which had a wave of bankruptcies last year and continues to reel from FTX’s sudden collapse and alleged fraud.

Romero also raised questions about the level of due diligence firms conducted before investing in FTX, suggesting there could be incentives “to turn a blind eye” to red flags in a competitive market.

Federal prosecutors have brought charges against three of FTX’s former top executives, accusing them defrauding investors and misappropriating customer funds.

The SEC is also probing FTX investors’ due diligence, according to two sources familiar with the inquiry.

In order to regain the public’s trust following the FTX meltdown, the crypto industry should enshrine strong corporate governance and increase the roles that gatekeepers like lawyers and compliance professionals play at companies, Goldsmith Romero said.

“Gatekeepers should have seriously questioned the operational environment at FTX in the lead-up to its meltdown,” she said.

(Reporting by Chris Prentice; Editing by Josie Kao)

WASHINGTON (Reuters) – The U.S. Justice Department will “announce a major, international cryptocurrency enforcement action” on Wednesday, it said in a statement, adding the U.S. Treasury Department will also make an announcement.

“The U.S. Department of the Treasury will also announce an action in this space,” the statement said.

U.S. officials, including Deputy U.S. Attorney General Lisa Monaco and Deputy U.S. Treasury Secretary Wally Adeyemo, will deliver remarks at 12 p.m. (1700 GMT) in Washington, according to the statement.

Other officials will include the associate deputy director of the FBI and the U.S. attorney for the Eastern District of New York.

Representatives for Treasury declined to comment further.

(Reporting by Daphne Psaledakis and Susan Heavey, editing by Paul Grant and Chizu Nomiyama)

(Reuters) – FTX founder Sam Bankman-Fried in a blog post refuted some claims made by the company’s lawyers on Tuesday, saying that they were “extremely misleading” and that FTX U.S. was and is solvent.

(Reporting by Juby Babu in Bengaluru; Editing by Sandra Maler)

(Reuters) – Cryptocurrency lender Genesis Global Capital is planning to file for bankruptcy as soon as this week, Bloomberg News reported on Wednesday, citing people with knowledge of the situation.

A bankruptcy filing has been expected for weeks, after the company froze customer redemptions on Nov. 16 following the downfall of major cryptocurrency exchange FTX.

The collapse of FTX in November has claimed several victims including crypto lender BlockFi and Core Scientific Inc, one of the biggest publicly traded crypto mining companies in the United States, both of which filed for bankruptcy protection in the following months.

Genesis, its parent Digital Currency Group and creditors have exchanged several proposals, but have so far failed to come to an agreement, the Bloomberg report said, adding that Kirkland & Ellis and Proskauer Rose have been advising groups of creditors.

Genesis did not immediately respond to a Reuters request for comment.

Genesis is also locked in a dispute with Gemini, founded by the identical twin crypto pioneers Cameron and Tyler Winklevoss.

Gemini offered a crypto lending product called Earn in partnership with Genesis, and now says Genesis owes it $900 million in connection with that product.

The U.S. Securities and Exchange Commission last week said it had charged Genesis and Gemini with illegally selling securities to hundreds of thousands of investors through their crypto lending program.

(Reporting by Niket Nishant and Mehnaz Yasmin in Bengaluru; Editing by Sriraj Kalluvila)

LONDON (Reuters) – UBS Chairman Colm Kelleher said traditional finance firms were “systemically safe” after years of increased regulation, but guardians of global financial markets had further to go to eradicate the risks posed by the non-banking sector.

“Regulators have – with respect – taken their eyes off the ball in terms of the non-banking sector,” the chairman of Switzerland’s largest bank said during a panel discussion at the World Economic Forum in Davos, referring to a category of loosely supervised finance firms.

“Banks and insurance companies are well regulated. They’re systemically safe, we can argue,” he added.

The world’s biggest banks have emerged largely unscathed from months of turmoil in the nascent cryptocurrency sector, which has toppled several major crypto investors, lenders and exchanges.

“I think we’ve dodged a bullet because this thing blew up very quickly but it will come back in one form or another,” he said.

“We are looking for the regulatory framework that will allow us to accommodate that for our clients.”

(Reporting by Stefania Spezzati and Sinead Cruise; Editing by Bernadette Baum)