Tag: Ignore

By Luc Cohen and Jonathan Stempel

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

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

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

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

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

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

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

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

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

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

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

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

(Reporting by Luc Cohen in New York)

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

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

By Medha Singh, Lisa Pauline Mattackal and Vidya Ranganathan

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

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

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

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

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

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

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

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

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

FEARS OF A PULLBACK

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

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

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

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

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

RISK & RECESSION REAR

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

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

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

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

By Michelle Nichols

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

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

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

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

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

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

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

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

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

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

EXTORTION

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

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

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

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

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

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

SANCTIONS BUSTING

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

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

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

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

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

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

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

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

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

By Dietrich Knauth

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

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

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

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

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

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

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

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

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

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

By Marc Jones

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

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

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

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

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

Pain in crypto land- https://www.reuters.com/graphics/GLOBAL-MARKETS/lgpdknmayvo/chart.png

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

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

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

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

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

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

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

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

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

Countries exploring digital currencies- https://fingfx.thomsonreuters.com/gfx/mkt/jnpwyxakdpw/Pasted%20image%201675428344427.png

GEOPOLITICAL REALITY

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

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

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

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

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

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

(Reporting by Marc Jones, Editing by William Maclean)

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

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

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

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

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

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

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

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

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

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

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

(Reporting by Sam Tobin; Editing by Sharon Singleton)

By Luc Cohen

NEW YORK (Reuters) – Sam Bankman-Fried is in talks with U.S. prosecutors to resolve a dispute over the FTX cryptocurrency exchange founder’s bail conditions, his lawyer said on Thursday.

The judge overseeing Bankman-Fried’s criminal fraud case in federal court in Manhattan on Wednesday temporarily barred the 30-year-old former billionaire from contacting employees of FTX or his Alameda Research hedge fund, after prosecutors raised concerns he might tamper with witnesses.

His lawyers had previously countered that he had contacted current executives at the now-bankrupt exchange to offer “assistance” and not to interfere, and so the additional bail condition was not needed.

Bankman-Fried has pleaded not guilty and is under house arrest at his parents’ California home.

In a court filing, defense lawyer Mark Cohen asked U.S. District Judge Lewis Kaplan to postpone a Feb. 7 hearing on the matter, as well as a Feb. 2 deadline to explain why he should be able to access and transfer cryptocurrency before trial.

“The parties would like to continue these discussions, which we are optimistic will lead to an agreement between the parties in the next few days and eliminate the need for further litigation,” Cohen wrote, noting that prosecutors consented to the request.

A spokesperson for the U.S. Attorney’s Office in Manhattan declined to comment.

Once worth an estimated $26 billion, Bankman-Fried was arrested in December after FTX collapsed.

Prosecutors have said he looted billions of dollars in FTX customer funds to plug losses at Alameda. Two former colleagues have pleaded guilty and are cooperating with prosecutors.

Bankman-Fried has acknowledged risk management failures, but said FTX collapsed because of a liquidity crunch and that he did not steal funds. A trial is scheduled for Oct. 2.

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

(This Feb. 1 story has been corrected to fix the name of CIO in the “Going Private” section to Nicoll from Nicole)

LONDON (Reuters) – The end of the easy-cash era is over and its impact yet to be felt on world markets, hopeful that the pain of aggressive rate hikes and high inflation has passed.

U.S. and UK central banks are unwinding stimulus further by offloading bonds they hold, and the European Central Bank will join them soon. Nomura estimates the balance sheets of the three banks will shrink by $3 trillion this year.

Graphic: Bloated central bank balance sheets start to shrink https://www.reuters.com/graphics/GLOBAL-MARKETS/znpnbkeaypl/chart.png

Tech stocks and crypto currencies look vulnerable. They are among risky assets that soared as cash pumped out by central banks fighting weak inflation in recent years searched for a home.

“When you have unprecedented monetary tightening, the likelihood is that you get issues that are uncovered – that might be something hidden such as liquidity or something more obvious like pressures in the housing market,” said Zurich Insurance Group chief market strategist Guy Miller.

We look at some potential pressure points.

1/ DARLINGS NO MORE

Once darlings of the easy-cash era, tech stocks are being shunned by many investors even after a January bounce as higher rates make it more expensive to take punts on the potential earnings growth of early stage or speculative businesses.

When economic uncertainty is high, investors often look for reliable returns from dividends to safeguard portfolios. That makes the likes of tech stalwarts such as Apple, whose shares trade on a dividend yield of less than 1%, look vulnerable.

“We’re at a stage where very elevated valuations in markets have collided with much less supportive policy,” said James Harries, senior fund manager at Troy Asset Management. “So, the outlook is darkening.”

Tech firms are reversing pandemic-era exuberance, cutting jobs after years of hiring sprees. Google owner Alphabet plans to axe about 12,000 workers; Microsoft, Amazon and Meta are firing almost 40,000.

Graphic: Big tech’s earnings growth put to the test https://www.reuters.com/graphics/GLOBAL-MARKETS/mypmogzgmpr/chart.png

2/ DEFAULT RISKS

Concerns about corporate defaults are mounting as rates rise, although recession worries have eased.

S&P Global said Europe had the second-highest default count last year since 2009.

It expects U.S. and European default rates to reach 3.75% and 3.25%, respectively, in September 2023 versus 1.6% and 1.4% a year before, with pessimistic forecasts of 6.0% and 5.5% not “out of the question.”

Man GLG portfolio manager Michael Scott said markets have not fully priced in the risk of higher defaults.

Graphic: Corporate default rate may double in 2023 https://www.reuters.com/graphics/GLOBAL-STRESS/dwpkdegzdvm/chart.png

3/ GOING PRIVATE

Private debt markets have ballooned since the financial crisis to $1.4 trillion from $250 billion in 2010.

The largely floating-rate nature of the financing appeals to investors, who can reap returns in high single to low double digits, and became popular as plunging rates post-2008 boosted risk assets.

Now, a reality check: higher rates imply a heavier burden for companies as recession looms, casting a shadow over their ability to generate sufficient cash to pay ballooning interest costs.

“What surprises me is that you’re almost back to complacency,” said Will Nicoll, CIO of Private and Alternative Assets at M&G Investments. “We’ve gone from a position where three months ago everybody was talking about a credit cycle coming through for the first time in decades and now people appear to have forgotten that.”

Graphic: Direct lending stellar growth https://www.reuters.com/graphics/GLOBAL-CREDIT/PRIVATE/lbpgggwlnpq/chart.png

4/CRYPTO WINTER

Rising borrowing costs roiled crypto markets in 2022. The price of bitcoin plunged 64% and around $1.3 trillion was wiped off the global cryptocurrency market cap.

Bitcoin has rallied recently but caution remains. The collapse of various dominant crypto companies, most notably FTX, left investors shouldering large losses and prompted calls for more regulation.

January brought a fresh wave of job cuts as firms brace for the so-called crypto winter, while the lending unit of Genesis recently filed for U.S. bankruptcy protection, owing creditors at least $3.4 billion.

Graphic: Pain in crypto land https://www.reuters.com/graphics/GLOBAL-MARKETS/lgpdknmayvo/chart.png

5/FOR SALE

Real estate markets, first responders to rate hikes, started cracking last year and 2023 will be tough with U.S. house prices expected to drop 12%.

Fund managers surveyed by BofA see China’s troubled real estate sector as the second most likely source of a credit event.

European real estate is reporting distress levels not seen since 2012, according to data from law firm Weil, Gotshal & Manges.

How the sector services its debt is in focus and officials warn European banks risk significant profit hits from sliding house prices.

Real estate investment management firm AEW estimates the UK, France and Germany could face a 24 billion euro debt funding gap through 2025. Luckily, bank balance sheets are better positioned to absorb losses, so few expect a 2008 repeat.

Graphic: Distress in Europe’s real estate sector rises https://www.reuters.com/graphics/GLOBAL-STRESS/byprlryzbpe/chart.png

($1 = 0.9192 euros)

(Reporting by Chiara Elisei, Dhara Ranasinghe, Naomi Rovnick, Elizabeth Howcroft and Yoruk Bahceli; Graphics by Kripa Jayaram and Vincent Flasseur; Editing by Dhara Ranasinghe and Christina Fincher)

By Josh Smith

SEOUL (Reuters) – Last year was the worst on record for cryptocurrency heists, with hackers stealing as much as $3.8 billion, led by attackers linked to North Korea who netted more than ever before, a U.S.-based blockchain analytics firm said in a report on Wednesday.

The report by Chainalysis found hacking activity that “ebbed and flowed” throughout the year, with “huge spikes” in March and October. October was the biggest single month ever for cryptocurrency hacking, with $775.7 million stolen in 32 separate attacks, the report said.

The cryptocurrency market floundered in 2022, as risk appetite diminished and various crypto firms collapsed. Investors were left with large losses and regulators stepped up calls for more consumer protection.

At the time, Chainalysis and other firms confirmed to Reuters that North Korean-related accounts had lost millions of dollars in value.

But that did not deter hackers.

North Korea-linked hackers such as those in the cybercriminal syndicate Lazarus Group have been by far the most prolific cryptocurrency hackers, stealing an estimated $1.7 billion worth of in multiple attacks last year, the report said.

“In 2022, they shattered their own records for theft,” it said.

North Korea has denied allegations of hacking or other cyberattacks.

According to a panel of experts monitoring United Nations sanctions, North Korea has increasingly relied on hacking to fund its missile and nuclear weapons programmes, particularly as publicly declared trade dwindled under sanctions and COVID-19 lockdowns.

“It isn’t a stretch to say that cryptocurrency hacking is a sizable chunk of the nation’s economy,” Chainalysis said.

For the first time last year, U.S. law enforcement seized $30 million in stolen funds from North Korea-linked hackers.

“These hacks will get harder and less fruitful with each passing year,” Chainalysis predicted.

Targets in “decentralized finance” or DeFi, a thriving segment in the cryptocurrency sector, accounted for more than 82% of the cryptocurrency stolen in 2022, the report said.

DeFi applications, many of which run on the Ethereum blockchain, are financial platforms that enable crypto-denominated lending outside of traditional banks.

Last year saw a record amount of crypto transactions related to illicit activity overall, reaching $20.1 billion, Chainalysis said in January.

(Reporting by Josh Smith, Editing by Louise Heavens)

By Nate Raymond

BOSTON (Reuters) – The founder of a defunct cryptocurrency business was sentenced on Tuesday to more than eight years in prison for defrauding investors and customers out of millions of dollars by marketing a virtual currency called My Big Coin with lies and half-truths.

Federal prosecutors had urged U.S. District Judge Denise Casper in Boston to impose a 13-year prison term on Randall Crater to send a message to others in the first sentencing of a cryptocurrency company founder for a marketing fraud.

While Casper concluded that that request went too far, she rejected Crater’s contention that a 30-month prison term was sufficient to punish him for his false claims, including that My Big Coin was a real cryptocurrency backed by gold.

“Certainly cryptocurrency is a newer enterprise, a newer market, a 21st Century market,” Casper said. “But the scheme at its core was age-old, and that was fraud.”

Crater, who was sentenced to 100 months in total and ordered to forfeit nearly $7.7 million, is expected to appeal. In court, he apologized but said he never meant to defraud anyone.

“I did not set out to steal money from anyone,” he said. “That does not mean I am not remorseful.”

A jury in July found Crater, 52, guilty of committing wire fraud and making unlawful monetary transactions in a prosecution that spilled out of a precedent-setting case by the U.S. Commodity Futures Trading Commission.

The CFTC’s 2018 lawsuit against Crater and his failed company, Nevada-based My Big Coin Inc, led to one of the first court rulings holding that a virtual currency could be considered a commodity within the regulator’s jurisdiction.

Prosecutors subsequently secured Crater’s indictment in 2019 and accused him of causing investors and customers to lose $7.5 million from 2014 to 2017 with lies about My Big Coin, whose name sounded similar to the popular virtual currency bitcoin.

Prosecutors said those false claims included that My Big Coin was a real virtual currency, was backed by gold and had a partnership with MasterCard. Prosecutors said he used the money to buy cars, jewelry, artwork and antique coins.

(Reporting by Nate Raymond in Boston; Editing by Bill Berkrot)

By Medha Singh and Lisa Pauline Mattackal

(Reuters) – Big investors are dipping their toes into crypto waters again after a bumper month for bitcoin.

Digital asset investment products, often favored by institutional investors, saw inflows of over $117 million last week, the biggest weekly increase since last July, according to data from asset manager CoinShares.

Bitcoin was far and away the biggest draw, with funds tracking it responsible for $116 million of that. Crypto funds’ total assets under management have risen to $28 billion, up 43% from lows plumbed in November as the collapse of the FTX exchange sent shockwaves through the industry.

“For the most part, people are more confident than they were a month ago,” said Joseph Edwards, investment adviser at Enigma Securities.

Bitcoin, the original cryptocurrency, has soared nearly 40% in January, closing in on its best monthly performance since October 2021 and its second-best January in the past 10 years. 

The rally, combined with a possibly brightening macro picture, has some investors hoping the long crypto winter might finally be verging on spring. Many investors expect the U.S. Federal Reserve to hike its benchmark rates by 0.25% this week – the smallest rise since their tightening cycle began last year.

“If peak inflation is indeed behind us for now, then long-term interest rates may move lower as we approach the end of the inflation-focused rate-hiking cycle,” analysts at Fidelity Digital Assets wrote.

“This could signal positive momentum on the macro front for assets such as bitcoin.”

Activity in the options market indicated traders were rushing to place bets just after the Fed meet, a sign of the importance the market is placing on it, crypto liquidity provider B2C2 said.

Crypto trading volumes are also rising, according to CoinShares, with average weekly volumes up 11%, indicating traders are returning after months of dampened activity.

Still, crypto’s not out of the woods by a long stretch, and the Fed could still spoil the party if they take a more hawkish tone this week.

Crypto data platform Coinglass’s bitcoin Fear & Greed index – where 0 indicates extreme fear and 100 extreme greed – is hovering at 61, the highest level since mid-November 2021, just after bitcoin began retreating from its peak.

“We might see a drop off next week or two, how deep that drop goes is questionable,” Edwards said.

Graphic: Bitcoin at the forefront https://www.reuters.com/graphics/FINTECH-CRYPTO/WEEKLY/akveqmgjrvr/chart.png

BITCOIN ‘DOMINANCE’

Nonetheless, there are also other signs that the end of the bear market might be nigh, according to analysts at exchange Bitfinex. They said shorter-term investors were selling their bitcoin at a profit, while longer-term “HODlers” were still sticking with their coin and not contributing to selling pressure.

“The realised profit and loss for the entire market has been recorded as positive in January 2023 for the first time since April 2022, a continuation of this trend would signal the final stages of a bear market,” they said.

Additionally, bitcoin’s “dominance” or share of the total crypto market has hovered around 41% this month, levels not seen since last July. Analysts at Citi said this mimicked a similar jump in bitcoin dominance in April 2019, when a bitcoin rally marked a crypto market bottom.

Other market watchers said stocks, another relatively risky asset class, would likely drive bitcoin prices in the next week, particularly the performance of interest rate-sensitive tech stocks.

Bitcoin’s correlation with the Nasdaq is at 0.94, the highest since May 2022, where a measure of 1 indicates the two are moving in lock-step.

Late in November, bitcoin broke its bonds with stocks and traded with a negative correlation of 0.7.

“It’s possible that bitcoin could reach the next resistance level of $25,200 in the coming weeks,” said Rachel Lin, CEO of exchange Synfutures. “Even if bitcoin ends up down again, there is a decent chance it will achieve a higher low on the larger timeframe.”

(Reporting by Lisa Pauline Mattackal and Medha Singh in Bengaluru, Alun John in London; Editing by Pravin Char)

By Dietrich Knauth

NEW YORK(Reuters) – Bankrupt crypto exchange FTX sued crypto lender Voyager Digital on Monday, seeking to claw back $445.8 million in loan repayments that FTX made before collapsing into bankruptcy in November 2022.

FTX and Voyager both filed for bankruptcy amid a 2022 collapse in cryptocurrency markets, but Voyager’s bankruptcy preceded FTX’s filing by four months.

After Voyager filed in July, it demanded repayment of all outstanding loans to FTX and its affiliate hedge fund Alameda Research.

FTX said in a court filing that on Alameda’s behalf, it paid Voyager $248.8 million in September and $193.9 million in October. FTX also made a $3.2 million interest payment in August, according to its court filings.

Because those loan payments were made so close to FTX’s own bankruptcy filing, they are eligible to be clawed back and potentially used to repay other FTX creditors, according to FTX’s complaint.

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

Its founder Sam Bankman-Fried has been indicted on fraud charges, and several top executives, including Alameda Research CEO Caroline Ellison, have pleaded guilty to fraud. Bankman-Fried has denied wrongdoing and is scheduled for trial in October.

FTX initially appeared to weather the storm that brought down Voyager and other crypto firms in summer 2022, presenting itself as a “white knight” that could stabilize reeling crypto markets. FTX offered to buy Voyager’s platform in a bankruptcy auction, but the proposed acquisition fell apart when FTX imploded in November.

In its Monday court filing, FTX acknowledged the allegations that Alameda raided FTX customer assets to cover its risky borrowing and lending. But it said Voyager and other crypto lenders were complicit in Alameda’s conduct, “knowingly or recklessly” pushing their clients’ assets toward Alameda.

“Voyager’s business model was that of a feeder fund,” FTX said. “It solicited retail investors and invested their money with little or no due diligence in cryptocurrency investment funds like Alameda and Three Arrows Capital.”

Three Arrows Capital also went bankrupt in 2022, and its founders have refused to cooperate with court-appointed liquidators who are trying to recover assets for Three Arrows customers.

(This story has been refiled to add a dropped letter in the lede)

(Reporting by Dietrich Knauth. Editing by Gerry Doyle)

SINGAPORE (Reuters) – The business model that crypto firm Celsius Network had advertised and sold to its customers was not the business it actually operated, a U.S. court-ordered examiner report released on Tuesday showed.

From its inception, Celsius and its founder Alex Mashinsky, who is currently facing fraud allegations in the United States, did not “deliver” on its promises surrounding its native CEL token and other business activities, the report stated.

It added that Celsius’s stablecoin deficit between May 28, 2021 and its bankruptcy filing last year amounted to a billion-dollar hole in its assets, as a result of its use of customer deposits to acquire stablecoins.

Hoboken, New Jersey-based Celsius filed for Chapter 11 protection from creditors last July in Manhattan after freezing customer withdrawals from its platform. It listed a deficit of $1.19 billion on its balance sheet.

Celsius representatives did not immediately respond to emailed requests for comment sent during nighttime in the United States.

Crypto lenders such as Celsius boomed during the COVID-19 pandemic, drawing depositors with high interest rates and easy access to loans rarely offered by traditional banks.

Many have since collapsed.

Similar to a bank, Celsius gathered crypto deposits from retail customers and invested them in the equivalent of the wholesale crypto market, including “decentralized finance” or DeFi sites that use blockchain technology to offer services from loans to insurance outside the traditional financial sector.

U.S. Bankruptcy Judge Martin Glenn, who is overseeing the Chapter 11 case, appointed former prosecutor Shoba Pillay as an independent examiner in September.

She was tasked with investigating accusations by Celsius customers that the company operated as a Ponzi scheme and also with reporting on its handling of cryptocurrency deposits.

(Reporting by Rae Wee,a dditional reporting by Alun John; Editing by Clarence Fernandez and Louise Heavens)

By Jonathan Stempel

NEW YORK (Reuters) – A U.S. judge on Monday said the names of two people who helped guarantee bail for indicted FTX cryptocurrency exchange founder Sam Bankman-Fried should be made public, but put his ruling on hold pending an expected appeal.

U.S. District Judge Lewis Kaplan in Manhattan ruled in favor of several media outlets including Reuters that sought the names.

The judge said that while the public had only a “weak” right to know who Bankman-Fried’s guarantors were, it outweighed Bankman-Fried’s arguments for confidentiality, including that the guarantors’ safety could be imperiled.

Kaplan also said the names will remain under seal until at least Feb. 7, because “the question presented here is novel and an appeal is likely.”

A spokesman for Mark Cohen and Christian Everdell, who represent Bankman-Fried, declined to comment.

Bankman-Fried, 30, has been confined at his parents’ home in California, after pleading not guilty to fraud for allegedly looting billions of FTX customer dollars.

His parents, both professors at Stanford Law School, had co-signed a $250 million bond for their son, with two other guarantors required to sign $500,000 and $200,000 bonds.

Bankman-Fried’s lawyers said the parents had been harassed and received physical threats since FTX’s November collapse and bankruptcy, and there was “serious cause for concern” the additional guarantors might suffer similar treatment.

Kaplan disagreed, noting that long before bail was posted, the parents had faced “intense public scrutiny” over their relationship with their son, who was once worth an estimated $26 billion.

“The amounts of the individual bonds–$500,000 and $200,000–do not suggest that the non-parental sureties are persons of great wealth or likely to attract attention of the types and volume of that to which defendant’s parents appear to have been subjected,” Kaplan wrote.

Media outlets distinguished the case from another judge’s decision not to reveal who guaranteed a bond for Jeffrey Epstein’s longtime associate Ghislaine Maxwell.

They said there was less “stigma” from being associated with Bankman-Fried than from being associated with the late sex offender. Maxwell was later convicted.

Other media seeking to identify Bankman-Fried’s guarantors included the Associated Press, Bloomberg, CNBC, CoinDesk, Dow Jones, the Financial Times, Insider, the New York Times and the Washington Post.

(Reporting by Jonathan Stempel in New York; Editing by David Gregorio)

By Jonathan Stempel

NEW YORK (Reuters) – The U.S. government on Monday urged a judge to reject Sam Bankman-Fried’s claim it went too far by insisting that the indicted founder of the now-bankrupt FTX cryptocurrency exchange be banned from contacting his former colleagues.

In a letter to U.S. District Judge Lewis Kaplan in Manhattan, prosecutors also asked that a bail condition that prevents Bankman-Fried from accessing or transferring assets at FTX and his Alameda Research hedge fund be left in place.

They argued those assets were “vulnerable to exploitation and in need of protection from the defendant.”

The requests came two days after Bankman-Fried’s lawyers proposed letting their client access crypto assets and continue communicating with most of FTX’s and Alameda’s estimated 350 employees, some of whom they said could help his defense.

Mark Cohen and Christian Everdell, who represent Bankman-Fried, did not immediately respond to requests for comment. They have until Feb. 1 to address prosecutors’ view on accessing assets.

Bankman-Fried, 30, has been free on $250 million bond and confined at his parents’ home in California, after pleading not guilty to fraud for allegedly looting billions of customer dollars from FTX.

Prosecutors previously raised concerns about witness tampering after Bankman-Fried on Jan. 15 sent an encrypted message over the Signal app to an FTX affiliate’s general counsel, who could testify against him at a trial set to begin in October.

“I would really love to reconnect and see if there’s a way for us to have a constructive relationship, use each other as resources when possible, or at least vet things with each other,” Bankman-Fried had written.

In Monday’s letter, prosecutors called the message an effort to “improperly influence” the general counsel, no matter how benign it might seem.

“The defendant’s position of authority with respect to his former employees, combined with his recent outreach to a former employee about the case, raises a sufficient specter of witness tampering,” prosecutors said.

Prosecutors also want to ban Bankman-Fried from using apps such as Signal that let users auto-delete messages, and instead have him communicate in text messages, emails and phone calls.

Bankman-Fried’s lawyers have said their client was trying simply to provide assistance to the general counsel, and has not been not using the auto-delete feature.

They also proposed that Bankman-Fried not be allowed to talk with select colleagues, including former Alameda chief Caroline Ellison, former FTX technology chief Zixiao “Gary” Wang and former FTX engineering chief Nishad Singh.

Ellison and Wang have pleaded guilty and are cooperating with prosecutors.

(Reporting by Jonathan Stempel in New York; Editing by Anna Driver)

By Dietrich Knauth

(Reuters) – A court-ordered examiner is expected to release a report on Monday addressing whether bankrupt crypto firm Celsius Network operated as a Ponzi scheme, which could add to the pressure on founder Alex Mashinsky, who is already facing fraud allegations.

U.S. Bankruptcy Judge Martin Glenn, who is overseeing the crypto lending platform’s Chapter 11 case, appointed former prosecutor Shoba Pillay as an independent examiner in September, tasking her with investigating Celsius customers’ allegations that the company operated as a Ponzi scheme and reporting on the company’s handling of cryptocurrency deposits.

Hoboken, New Jersey-based Celsius filed for Chapter 11 protection from creditors last July in Manhattan after freezing customer withdrawals from its platform. It listed a $1.19 billion deficit on its balance sheet.

Celsius had consented to an examiner’s review after reaching a deal that scaled back a wide-ranging investigation proposed by the U.S. Department of Justice’s bankruptcy watchdog and state securities regulators from Texas, Vermont and Wisconsin.

After appointing Pillay to the job, Glenn expanded her role by asking her to address persistent customer complaints about Mashinsky’s conduct.

Mashinsky was sued earlier this month by New York Attorney General Letitia James, who alleged that he defrauded investors out of billions of dollars in digital currency by concealing the lending platform’s failing health.

A lawyer for Mashinsky did not immediately respond to a request for comment, but has said previously that his client denies the allegations and looks forward to vigorously defending himself in court. A spokesperson for Celsius did not immediately respond for comment.

Mashinsky, 57, is an entrepreneur who founded companies like Arbinet, which went public in 2004, and Transit Wireless, which provides wi-fi service to the New York City subway.

In hundreds of interviews, blog posts and livestreams as the public face of Celsius, Mashinsky promised its customers that they would receive high returns if they deposited digital assets on his platform, with minimal risk, according to the New York AG’s lawsuit.

Bankruptcy examiners can provide courts, judges and creditors with an impartial look into the failures of a bankrupt company, but their cost is a frequent source of controversy when limited funds are available to pay existing debts.

Crypto exchange FTX, which went bankrupt in November, has resisted calls for an examiner in its own Chapter 11 case, citing the cost of overlapping investigations.

FTX CEO John Ray, who worked with examiners in the bankruptcies of Enron and Residential Capital, said in a court filing that examiner reports in those two bankruptcies cost a combined $150 million and provided “minimal” benefits to creditors.

Pillay and her team have sought to be paid $1.86 million for work performed in October and $1.69 million for November, according to court filings.

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

By Jonathan Stempel

NEW YORK (Reuters) – Lawyers for Sam Bankman-Fried on Saturday urged a U.S. judge not to ban the indicted FTX cryptocurrency executive from communicating with former colleagues as part of his bail, saying prosecutors “sandbagged” the process to put their client in the “worst possible light.”

The lawyers were responding to a Friday night request by federal prosecutors that Bankman-Fried not be allowed to talk with most employees of FTX or his Alameda Research hedge fund without lawyers present, or use the encrypted messaging apps Signal or Slack and potentially delete messages automatically.

Bankman-Fried, 30, has been free on $250 million bond since pleading not guilty to charges of fraud in the looting of billions of dollars from the now-bankrupt FTX.

Prosecutors said their request was in response to Bankman-Fried’s recent effort to contact a potential witness against him, the general counsel of an FTX affiliate, and was needed to prevent witness tampering and other obstruction of justice.

But in a letter to U.S. District Judge Lewis Kaplan in Manhattan, Bankman-Fried’s lawyers said prosecutors sprung the “overbroad” bail conditions without revealing that both sides had been discussing bail over the last week.

“Rather than wait for any response from the defense, the government sandbagged the process, filing this letter at 6:00 p.m. on Friday evening,” Bankman-Fried’s lawyers wrote. “The government apparently believes that a one-sided presentation – spun to put our client in the worst possible light – is the best way to get the outcome it seeks.”

Bankman-Fried’s lawyers also said their client’s efforts to contact the general counsel and John Ray, installed as FTX’s chief executive during the bankruptcy, were attempts to offer “assistance” and not to interfere.

A spokesman for U.S. Attorney Damian Williams in Manhattan declined to comment.

Bankman-Fried’s lawyers proposed that their client have access to some colleagues, including his therapist, but not be allowed to talk with Caroline Ellison and Zixiao “Gary” Wang, who have pleaded guilty and are cooperating with prosecutors.

They said a Signal ban isn’t necessary because Bankman-Fried is not using the auto-delete feature, and concern he might is “unfounded.”

The lawyers also asked to remove a bail condition preventing Bankman-Fried from accessing FTX, Alameda or cryptocurrency assets, saying there was “no evidence” he was responsible for earlier alleged unauthorized transactions.

In an order on Saturday, Kaplan gave prosecutors until Monday to address Bankman-Fried’s concerns.

“The court expects all counsel to abstain from pejorative characterizations of the actions and motives of their adversaries,” the judge added.

(Reporting by Jonathan Stempel in New York; Editing by Andrea Ricci)

SAO PAULO (Reuters) – Mastercard Inc and Binance said on Monday they are lauching a prepaid card in Brazil, Latin America’s largest economy, as part of the crypto giant’s efforts to “broaden the connection between traditional finance and crypto”.

According to a statement, the so-called Binance Card is currently in beta testing and should be widely available in the next few weeks, making Brazil the second country in Latin America to receive it after Argentina.

Brazil is one of Binance’s ten-largest markets, the crypto said, adding that the prepaid card will all new and existing Binance users in the country to shop and pay bills with cryptocurrencies at Mastercard merchants.

(Reporting by Andre Romani; Editing by Steven Grattan)