BitMEX is one of the world’s largest cryptocurrency trading platforms. On August 10, 2021, the U.S. District Court for the Southern District of New York entered a Consent Order that the U.S Commodities Futures and Trading Commission agreed to with five companies charged with operating BitMEX. The order requires the BitMEX entities to pay a $100 million civil monetary penalty and provides that up to $50 million of the penalty may be offset by payments…
On August 6, 2021, the U.S Securities and Exchange Commission charged two Florida men and their Cayman Islands company with unregistered sales of more than $30 million of securities using smart contracts and decentralized finance (DeFi). The SEC said this was its first case involving securities using DeFi. According to the SEC’s order, Gregory Keough, Derek Acree, and their company Blockchain Credit Partners, offered and sold securities in unregistered offerings through DeFi Money Market (DMM)…
Early posts in this blog mentioned how former SEC Chairman Jay Clayton had famously told Congress in February 2018 that “I believe every ICO I’ve seen is a security.” His successor, Gary Gensler, resurrected those thoughts in his prepared remarks delivered on August 3, 2021 to the Aspen Security Forum: I think former SEC Chairman Jay Clayton said it well when he testified in 2018: “To the extent that digital assets like [initial coin offerings, or…
On July 21, 2021, U.S. Securities and Exchange Commission Chairman Gary Gensler spoke at an American Bae Association event. His main topic was security-based swaps. But at the end of his prepared remarks, the Chairman went out of his way to comment about the intersection of security-based swaps and financial technology, including cryptoassets. With respect to initiatives to offer crypto tokens or other products that are priced off of the value of securities and operate…
One of the poster-children for the ICO craze in late 2017-18 was an iced-tea company in Long Island, New York known as the Long Island Iced Tea Co. From approximately 2015 to 2017, the company’s principal business was ready-to-drink beverages. In December 2017, the company changed its name to Long Blockchain Corp. (LBC) and announced that it was shifting its business operations from soft drink production to activities related to blockchain technology. The rebranding with…
On June 24, 201, the United States Department of Justice brought a criminal bill of information against Michael Yusko III. According to the DOJ, under U.S. federal law, any business that engages in “the acceptance of currency, funds, or other value that substitutes for currency from one person and the transmission of currency, funds, or other value that substitutes for currency to another location or person by any means” is deemed to be a money…
We previously reported how, 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 Block.one. One of those cases was dismissed, which led to five others then being withdrawn. The case against Block.one has now been settled. At the height of the ICO craze in 2017-18, Block.one raised a record $4 billion in its ICO, much of it…
If you happened to prepare your own tax return this year or at least looked at the top of the first page, you might have noticed that the IRS has literally moved cryptocurrency transactions to the top. We recently published an article in Bloomberg’s Tax Management Memorandum that looked at the aggressive moves the IRS is taking with respect to cryptocurrency. We looked at the disparate ways that the various U.S. government agencies define cryptocurrency,…
According to the Coinbase website, “staking” is “the process of actively participating in transaction validation (similar to mining) on a proof-of-stake (PoS) blockchain. On these blockchains, anyone with a minimum-required balance of a specific cryptocurrency can validate transactions and earn Staking rewards.” On May 26, 2021, a Tennessee couple sued the IRS seeking a refund for taxes they paid on Tezos tokens that they earned through staking. As explained in their complaint: The Tezos public…
The U.S. Securities and Exchange Commission announced on May 28, 2021 that it had filed an action against five individuals alleging that they promoted a global unregistered digital asset securities offering that raised over $2 billion from retail investors. These activities relate to BitConnect, which shut down its business in early 2018, shortly after, as we reported, the Texas State Securities Board issued a cease and desist letter. At that time, the regulator alleged that…