On July 22, 2020, the Office of the Comptroller of the Currency (“OCC”) issued an interpretive letter confirming that national banks and savings associations may provide cryptocurrency custody and related services. National banks have long provided safekeeping and custody services for a wide variety of customer assets, including both physical objects and electronic assets, and the extension of these services to cryptocurrency is a modern form of these traditional activities. In the letter, the OCC…
On April 3, 2020, multiple class-action law suits were filed in the Southern District of New York against a host of crypto exchanges and token issuers, including Binance, Bibox, KuCoin, HDR Global Trading Ltd (which operates BitMEX), Tron Foundation, Block.one, BProtocol Foundation (also known as Bancor), Civic Technologies Inc., the Kyber Network, Quantstamp Inc., and Status Research & Development GmbH. Investors Chase Williams, Alexander Clifford, William Zhang, and Eric Lee, on behalf of the proposed investor classes, allege…
The U.S. Internal Revenue Service (“IRS”) released Revenue Ruling 2019-24 on October 9, 2019 providing guidance on the U.S. income tax treatment of hard forks and airdrops of cryptocurrency. Revenue Rulings are an official interpretation of the U.S. tax laws by the IRS and intended to guide taxpayers in addressing their income reporting and tax obligations. This Revenue Ruling supplements the first and only cryptocurrency-related guidance issued by the IRS in 2014. The IRS described…
On June 21, 2019 a Connecticut federal judge certified a class of alleged victims of a cryptocurrency mining Ponzi scheme. Class certification is another step forward in providing legitimate avenues of restitution for those who have been defrauded by cryptocurrency schemes. The suit, led by Denis Marc Audet, alleges that GAW Miners LLC, ZenMiner LLC, and Stuart Fraser (who allegedly had control of the two companies) defrauded him and thousands like him in violation of…
During a speech at Consenus 2019, Sigal Mandelker, the U.S. Treasury’s Under Secretary for Terrorism and Financial Intelligence, reiterated the projection that the Financial Action Task Force (“FATF”) will adopt international standards for cryptocurrency-based services in June 2019. FATF (also known by its French name, Groupe d’action financière) is an independent inter-governmental body that develops global standards for anti-money laundering and counter-terrorist financing. In 2014 and 2015 FATF began expressing concerns that the potential benefits…
On October 10, CipherTrace – a developer of cryptocurrency AML, bitcoin forensics, and blockchain threat solutions – released its Cryptocurrency Anti-Money Laundering Report – Q3 2018 (the “Report”). The Report analyzed 45 million bitcoin transactions involving the top 20 global cryptocurrency exchanges to produce some sobering findings regarding the level of criminal activity at crypto exchanges and the effectiveness of AML regulation. Some key findings are summarized below. 97% of bitcoin payments made directly from…
Switzerland often ranks among the most friendly and accommodating countries for blockchain-based companies to conduct their initial coin or token offering (“ICO”). Indeed, recent estimates are that more than 530 blockchain companies established in the Swiss cantons of Zurich and Zug have raised more than US$540 million through ICOs. Despite these facts, these companies often face significant difficulties in opening a bank account in Switzerland to hold the fiat currency proceeds of their ICOs. Swiss…
On Tuesday, September 11, a New York Federal Judge rejected a defendant’s argument that he cannot be prosecuted because the digital coins he sold were not securities. Maksim Zaslavskiy is accused of making materially false and fraudulent representations in connection with two investment schemes and ICOs for REcoin Group Foundation, LLC (“REcoin”) and DRC World, Inc. (“Diamond”). Zaslavskiy claimed that REcoin and Diamond did not involve securities and were therefore beyond the reach of the…
On Tuesday, September 11, the Financial Industry Regulatory Authority (“FINRA”) took its first disciplinary action against an industry professional, charging a broker, Timothy Tilton Ayre, with securities fraud and the unlawful distribution of an unregistered cryptocurrency security, HempCoin. FINRA’s complaint alleges that Ayre attempted to lure public investment in his public company, Rocky Mountain Ayre, Inc., by issuing and selling HempCoin. Ayre made a host of fraudulent statements about his company’s business and finances, as…
On August 22, the Securities and Exchange Commission (“SEC”) issued three separate orders rejecting multiple applications which would have allowed the listing and trading of Bitcoin exchange-traded funds (“ETFs”). Two of the orders involved NYSE Arca, Inc., an exchange headquartered in Chicago. NYSE Arca submitted proposed rule changes which would allow it to list shares on behalf of two Proshares ETFs and five Direxion ETFs. The third order involved a proposed rule change by the…