SEC Charges Rapper T.I. & Four Others for Promoting Fraudulent ICO, FLiK

The US Securities and Exchange Commission has charged Atlanta-based rapper Clifford Harris, Jr., better known as T.I., and four others for promoting an unregistered and fraudulent initial coin offerings (ICO).

T.I. promoted FLiK tokens in 2017 to his social media followers, falsely stating that he was a co-owner of the project boasted as “Netflix on the blockchain.” The platform was advertised as a streaming media platform with products that can be purchased with digital tokens, the SEC said in a statement on Friday.

The 39-year old rapper has agreed to pay the penalty of $75,000.

As per SEC’s order, he is not allowed to participate in offerings or sales of digital-asset securities for at least five years.

The company’s founder, a film producer, named Ryan Felton, who started FLiK and CoinSpark, is meanwhile facing claims that he misappropriated the raised funds to buy Ferrari, a million-dollar home, and other luxury goods.

“Felton victimized investors through material misrepresentations, misappropriation of their funds, and manipulative trading,” said Carolyn M. Welshhans, Associate Director in the Division of Enforcement.

The complaint alleges that Felton secretly transferred FLiK tokens to himself and gained an additional $2.2 million in profits by selling them into the market.

Previously, boxer Floyd Mayweather and music producer DJ Khaled have also been sued by the regulators for hyping the ICOs.

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Author: AnTy

Hong Kong Regulator to Grant Fidelity-backed OSL Digital the First Crypto Exchange License

The Securities and Futures Commission (SFC) of Hong Kong will be issuing a license to cryptocurrency firm OSL Digital Securities, reported Reuters.

OSL, a unit of Fidelity-backed BC Group, became the first firm in November last year to apply for a digital license under the market regulator’s new rules allowing cryptocurrency exchanges to opt into regulation.

The company revealed in its exchange filing on Friday that the financial regulator has agreed in principle to grant the license.

The final approval, however, is subject to certain conditions, which “you’d expect from a conservative regulator in a financial hub,” said BC Group CEO Hugh Madden.

OSL and some of its competitors to welcome the regulation as it would enable the regulated institutions to reduce their risk by engaging with other regulated risks.

In the first half of 2020, BC Group made a net loss of 90.8 million yuan ($13.13 million). Besides its crypto business, which accounts for the company’s bulk of revenue, it also provides business parks and advertising services.

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Author: AnTy

Germany’s Financial Authorities Introduce A Draft Bill On Blockchain Based Securities

  • Germany’s financial authorities aim at introducing electronic securities to modernize its regulatory and supervisory capabilities with blockchain technology playing a pivotal role, the draft bill states.

The German finance ministry, Federal Ministry of Finance (BMF), and the Federal Ministry of Justice and Consumer Protection (BMJV) have introduced a bill on August 11 on digitizing securities on blockchains. According to the official statement, the authorities aim to introduce a new law on electronic securities (eWpG).

Currently, financial instruments in Germany, classified as securities under civil law, must be securitized in a paper form document. The paper document allows buyers and sellers a point of contact to transfer the securities legally. The BMF and BMJV draft bill aims at replacing this paper form contract into an electronic system in a bid to improve the marketability of legal securities. The statement reads:

“To ensure the marketability of securities and legal compliance, however, it requires a suitable replacement of the paper document, for example, by an entry in a register-based on the blockchain technology.”

According to the draft bill, the introduction of blockchain technology will improve the overall liquidity of securities markets while providing regulatory clarity. The Federal Financial Supervisory Authority will be the leading monitoring and maintenance agency of these blockchain-based electronic stocks.

The draft bill further differentiates between central electronic securities register by a central securities depository and registers kept for issuing electronic bonds on distributed ledger technologies (DLTs) and other electronic bases.

With the introduction of blockchain-based e-stocks, Germany aims to strengthen its market for stocks while improving the overall securities industry. Introducing blockchains will also increase transparency, market integrity, and investor protection, the bill states.

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Author: Lujan Odera

Crypto Mom, Hester Peirce, Secures Second Term as SEC Commissioner Through 2025

The US Securities and Exchange (SEC) Commissioner Hester Peirce, aka “Crypto Mom,” has been confirmed for a second term that will last till June 5, 2025, by the US Senate in a voice vote.

The “Crypto Mom” nickname was bestowed upon her by the crypto community for her support of the cryptocurrency market. Just last month, during her testimony in the nomination hearing, she maintained that stance as she said crypto is “clearly going to be here to stay, and I would like us to set up a regulatory framework that works well for crypto.”

Pierce wants to work on SEC’s “attitude towards innovation,” which she said is highlighted in their consideration of crypto.

Earlier this year, she proposed a three-year safe harbor for blockchain companies that conduct token sales. Here, she talked about SEC oversight and adherence to disclosure standards while allowing the firms to develop a network and work toward decentralization before being subject to the Howey test.

She is also an advocate for the approval of a bitcoin ETF, which has been rejected numerous times on the round of price manipulation. In February, in a dissenting statement, Pierce objected to SEC’s approach to these products and that “it evinces a stubborn stodginess in the face of innovation.”

As we reported, with the potential of SEC Chairman Jay Clayton moving to the US Attorney’s office, Pierce is also speculated to be the next SEC Chair.

“On behalf of our 4,500 dedicated colleagues, we applaud their long-standing commitment to investors and look forward to their continued work to advance the SEC’s vital mission of protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation,” Clayton and fellow commissioners congratulated Pierce and Caroline A. Crenshaw.

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Author: AnTy

Grayscale Ethereum Trust Files with SEC to Halve the ETHE Locking Period Same as GBTC

Grayscale Investments has publicly filed a registration statement on Form 10 with the US Securities and Exchange Commission (SEC) on behalf of its Ethereum product, Grayscale Ethereum trust (ETHE).

If approved, it will offer the product a higher SEC status, the same as Grayscale Bitcoin Trust, to become the second digital currency investment vehicle to attain the status of a reporting company by the SEC.

The prominent change will be reducing the unlocking period of ETHE shares from 12 months to 6 months, the same as GBTC. If effective,

“accredited investors who purchased shares in Grayscale Ethereum Trust’s private placement would have an earlier liquidity opportunity, as the statutory holding period would be reduced from twelve months to six months.”

This is a “milestone” for Grayscale Ethereum Trust as even though Bitcoin is the most popular of its products, “Ethereum has gained significant traction and interest over the years.”

Grayscale notes that there is a “strong demand” for access to Ethereum which has grown to become the “largest” Ethereum investment vehicle.

In Q2 2020, Grayscale’s Ethereum Trust hit a weekly investment of $10.4 million in ETHE, amounting to the record quarterly inflows at $135.2 million. Overall, demand for ETHE accounts for nearly 15% of total inflows into Grayscale products this past quarter.

In other news, Grayscale is interested in getting its products on the Robinhood app. A zero commission trading place, Robinhood is popular among millennials that got even more so in 2020 thanks to the lockdown and government’s monetary stimulus to combat the coronavirus pandemic.

However, not everyone thinks it is a good decision, given that Robinhood already allows trading for Bitcoin and Ethereum along with five others including Bitcoin Cash, Bitcoin SV, Ethereum Classic, Litecoin, and Dogecoin.

Also, while ETH is trading on Robinhood at the same price as any spot exchange, ETHE shares are trading at $100.50 at a premium of over 200%. The premium has come down drastically from about 950% in early June 2020, as per Ycharts.

Also, no matter which option users go with, they are not getting the crypto to themselves as while Grayscale has Coinbase Custody to safe keep the digital assets for their users, Robinhood doesn’t support coin withdrawals or transfers of existing cryptos.

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Author: AnTy

SEC Contracts with DARPA Funded CipherTrace to Track BNB & Binance Chain

The US Securities and Exchange Commission (SEC) is now taking a special interest in Binance Chain and the native token of the leading spot exchange Binance BNB among other tokens on its blockchain.

Binance Chain hosts about 189 tokens along with the 10th largest cryptocurrency by market cap of $3 billion BNB and underlies Binance DEX, a decentralized exchange.

“This is a significant step to have more BinanceChain token listings on fiat exchanges. Working for our ecosystem projects,” said Changpeng Zao, Binance CEO.

As per the public records, SEC has chosen CipherTrace Inc. for this task to which the agency intends to award a fixed-price contract on a single source basis. The contract will be awarded by SEC by today for a period of one year with four options of one year each to extend the contract. It states,

“CipherTrace Inc., is the only source that can reasonably meet the SEC’s requirement in accordance with FAR Part 13.106-1(b).”

Founded in 2015, the blockchain analytics company was initially funded by the US Department of Homeland Security and DARPA, an agency of the US Department of Defense responsible for the development of emerging technologies for the military use.

CipherTrace is the only forensics and risk intelligence tool that can support Binance Coin (BNB) and all other tokens on the Binance network, reads the notice.

CipherTrace partnered with Binance in November 2019 to bring anti-money laundering (AML) tracing tools to Binance Chain.

At the time, Dave Jevans, CipherTrace CEO said, as the crypto ecosystem matures, regulators demand better transparency and compliance.

The technology will enable regulators to browse Binance blockchain and identify high-risk addresses, said Binance adding, CipherTrace will improve its blockchain’s AML controls.

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Author: AnTy

Securities Commission: Binance & eToro Not Authorized to Operate in Malaysia

Binance is the latest addition to the Securities Commission of Malaysia’s Investor Alert List that covers those unauthorized websites, investment products, companies, and individuals that don’t comply with the country’s securities law.

In Malaysia, the SC regulates persons and entities that are carrying out capital market activities, including dealing in securities, derivatives, and private retirement schemes, fund management, advising on corporate finance, investment advice, and financial planning. It also covers those that provide services as a market operator or issue or offer securities without proper approval or authorization.

As per the official website of SC, the leading spot cryptocurrency exchange is “operating a recognized market without authorization from the SC.”

Binance is still providing support for Malaysian ringgit, which was added to its P2P platform and the mobile app just a few months back.

“The public is advised not to make any investment with companies/individuals that are not licensed or approved by the SC,” said the financial regulator.

The list contains several companies, including eToro, for carrying out capital market activities of dealing in securities and derivatives without a license and operating a recognized market without authorization from the SC. Fidelity Solutions is also listed for dealing in securities and fund management without a license.

Binance has been getting flagged in other jurisdictions as well. Earlier this month, the Brazilian Securities and Exchange Commission said that the exchange is unauthorized and, as such, banned from offering derivative products in the country.

Before that in March, Malta Financial Services Authority issued a similar warning and that Binance is not subject to regulatory oversight by the MFSA.

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Author: AnTy

The Malaysian Securities Commission Warns Investors Against Using Crypto ATMs

The Malaysian Securities Commission (SC) has issued a warning against the use of crypto ATMs in the country. The warning stated that crypto ATMs come under Digital Asset Exchange (DAX) and thus require a clearance license from the security commission to operate in the country. Still, the SC says it has not issued any such operating license.

Crypto ATMs are commonly used to buy digital currencies using cash and debit/credit card, and their popularity has soared in the past couple of years. The same is true in Malaysia, and there are multiple crypto ATMs installed around the country.

The SC says interacting with these ATMs could lead to fraud since they are not regulated or authorized to operate. The SC released a statement stating:

“As such, we wish to caution and remind members of the public not to deal with unlicensed or unauthorized entities or individuals. Those who do so are not protected under the Malaysian securities laws and are exposed to various risks, including fraud and money laundering.”

The SC also warned the operators of these ATMs to cease their operations or face the ire of the law. Under the current securities law, the operators of these ATMs could face ten years of imprisonment or RM10 million in fine for operating without the DAX license.

The SC also released a website link that shows the names and list of verified operators from whom the users can purchase digital assets. The agency also asked the citizens to be more aware of these operators and also inform the agencies if they come across any such suspicious service providers or get any phone calls or emails.

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Author: Rebecca Asseh

Binance Banned from Offering Crypto Derivatives in Brazil

The Securities and Exchange Commission (SEC) of Brazil issued a notice to the leading spot crypto exchange Binance to cease offering crypto derivatives trading in the country.

As per the document released on July 2nd, 2020, the company does not hold the authorization from the SEC to act as a securities intermediary in the country.

It further states that Binance Futures, through its page “www.binance.com,” is offering derivative intermediate services to the customers residing in Brazil.

This is because “derivative contracts are securities, regardless of the underlying assets,” states the document.

As such, the company is ordered to “immediately suspend” offering derivatives. Failure to comply with this order will subject Binance to the imposition of a daily fine of R $ 1,000.00 (one thousand reais worth nearly $187).

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Author: AnTy

Telegram Fined $18.5M As Court Battle With SEC Closes; Ordered to Pay Back $1.2B for ICO

  • After a long hard fight to launch and distribute the GRAM tokens, Telegram and the U.S. Securities and Exchanges Commission (SEC) agreed to settle.
  • The messaging app will pay the SEC an $18.5 million fine and distribute $1.22 billion back to its investors within the next four years.

According to a court filing on June 24, 2020, the U.S Southern District Court of New York Judge Kevin Castel, ordered Telegram to pay a civil penalty of $18.5 million to the SEC within the next 30 days for violating the securities laws in issuing its GRAM tokens during its public offering.

The court also ordered the disgorgement of the $1.7 billion ICO raised in 2018, asking Telegram to return $1.22 billion (72% of the ICO amount) as agreed in the ICO contract – if the project failed to launch. Telegram already stated that U.S. investors will receive 72% of their investment back with non-U.S. investors having the option to defer their payment for one year and receive 110% of their funds back.

A three-year watch

Telegram will also have a three-year “baby-sitting” period whereby they will need to give the SEC a 45-day notice before the launch or issuance of a similar token to GRAM –

“cryptocurrencies, digital coins, digital tokens, or (and) similar digital asset issued or transferred using distributed ledger technology.”

However, the company is only obliged to give notice to the SEC and does not constitute SEC giving approval or consent on the asset. The statement further reads,

“Nor should this [notice] be construed to require Defendants to provide the Commission with any information beyond the notice contemplated herein.”

A fair ruling?

Lawyer and governing council at Compound Finance, Jake Chervinsky, weighed in on ruling stating it may be the best outcome for Telegram. He tweeted,

“Telegram’s SEC settlement seems fair given the facts & circumstances surrounding the TON project & Grams offering (which were very bad for Telegram).”

The six-month-long court battle finally comes to a close but “sadly ends [this saga] on a confused District Court opinion”, Jake said on the court’s decision to use the Howey Test to prove Telegram’s token is a security. No more GRAMs, but TON blockchain lives on as an open-source network.

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Author: Lujan Odera