5,958 views Jan 18, 2023
DOJ announcement: https://www.justice.gov/live
DOJ announcement: https://www.justice.gov/live
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.
Well, bailouts for wayward banks are back in style in a big way. According to Securities and Exchange Commission (SEC) filings made by crypto-friendly banks, Federal Home Loan Banks (FHLB) in San Francisco, Boston, New York and Pittsburgh have made large advances of money to banks facilitating crypto in various ways as bank depositors yanked their cash and/or the banks’ share prices tanked.
We suggested that this might be a problem if Signature’s procedures failed to identify bad actors and pointed to some public evidence that suggested Signature had allowed bad actors to use their platform. Chief among them was FTX, which had several accounts at Signature Bank. However, we did not have a list of Signet clients to determine how bad things might actually be.
Recently, we obtained an official list of some of Signet’s clients from November 2021.
Genesis Global Holdco, which filed for bankruptcy protection in New York late Thursday, owes more than $3.6 billion to its top creditors.
After filing for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York late on Jan. 19, Genesis published a list of its top 50 unsecured claims. The total value of the claims amount to over $3.6 billion.
The Securities and Exchange Commission today charged Nexo Capital Inc. with failing to register the offer and sale of its retail crypto asset lending product, the Earn Interest Product (EIP). To settle the SEC’s charges, Nexo agreed to pay a $22.5 million penalty and cease its unregistered offer and sale of the EIP to U.S. investors. In parallel actions announced today, Nexo agreed to pay an additional $22.5 million in fines to settle similar charges by state regulatory authorities.
“We charged Nexo with failing to register its retail crypto lending product before offering it to the public, bypassing essential disclosure requirements designed to protect investors,” said SEC Chair Gary Gensler. “Compliance with our time-tested public policies isn’t a choice. Where crypto companies do not comply, we will continue to follow the facts and the law to hold them accountable. In this case, among other actions, Nexo is ceasing its unregistered lending product as to all U.S. investors.”
Data from Arkham Intelligence shows that tens of millions of dollars flowed from an alleged nexus of money laundering, Bitzlato, through intermediate wallets to Binance, the world’s largest crypto exchange.
A FinCEN complaint from Wednesday noted that Binance was Bitzlato’s largest counterparty, but blockchain data reveals rudimentary efforts to conceal where funds came from before they arrived in Binance custody.
Binance and its chief executive, Changpeng Zhao, are reportedly under federal scrutiny over anti-money laundering compliance.
Cameron Winklevoss, the co-founder and Chief Executive Officer (CEO) of the Gemini trading platform has threatened to sue Genesis Global and its parent company, the Digital Currency Group. Cameron took to Twitter to share the update following the bankruptcy filing lodged by Genesis involving two of its other subsidiaries.
Genesis owes over $3.5 billion to its top 50 creditors – and one of the creditors has ties to a $6.8 billion pension fund system in Fairfax County, Virginia.
tdtwedt wrote:FTX ContagionLast updated January 20, 2023.
The banking partner involved is Signature Bank, according to a Jan. 21 report by Bloomberg. The bank set the minimum transaction limit of $100,000 in effort to decrease its exposure to the digital asset market, Bloomberg explained.
But money laundering, fraud, market manipulation and tax evasion aren’t risks that just fix themselves. As the European Central Bank’s Fabio Panetta has pointed out, regulators see the costs to society of unregulated digital assets as high and requiring more action. The crackdown is clearly just getting started; those who are keen to dive back into crypto, even having just taken a bath, should take note.
New York’s chief financial regulator is set to release new guidance on Monday dictating that companies separate customers' crypto assets from their own, after alleged co-mingling of funds at collapsed crypto exchange FTX and its affiliated trading firm Alameda Research led to hefty losses for clients.
However, crypto firms often prove to be too hot to handle for traditional banks. For example, just a few days after we proved Signature Bank was providing services to Binance through a shell corporation, Signature limited Binance’s transfers to >$100,000, essentially cutting the exchange off of dollars from retail customers.
Due to these challenges, many crypto exchanges have continued to partner with questionable offshore payment processing entities to do business. We believe we have discovered one of the major firms providing these services today: Advanced Cash Limited (Advcash).
Advcash’s clients include the crypto exchanges Binance, Huobi, OKCoin, and the Nexo crypto lending firm. It turns out this company, while legally domiciled in Belize, actually appears to be operated out of Eastern Europe and Russia. Its founder and CEO is tied to at least one failed cryptocurrency scheme. And it turns out that another major crypto payments firm shares links to both Advcash and to the same crypto scam…
Binance Holdings Ltd., the world’s largest crypto platform, acknowledged that it mistakenly keeps collateral for some of the tokens it issues in the same wallet as exchange-customer funds.
A Genesis unit is seeking more than $20 million from Bitcoin Cash backer Roger Ver, alleging that he failed to settle cryptocurrency options transactions that expired in December.
Ver, known to some as “Bitcoin Jesus” for his evangelistic role in the early days of crypto, was named in a court summons in New York on Tuesday by GGC International Limited. The filing included a notice seeking no less than $20.9 million in monetary damages, in addition to legal costs and expenses.
South Korean prosecutors are seeking the arrest of Kang Jong-Hyun, the chairman and owner of cryptocurrency exchange Bithumb, a Korean news outlet reported on Wednesday.
Kang and two other executives – including his younger sister, Kang Ji-Yeon, the CEO of two publicly traded Bithumb affiliates, Inbiogen and Bucket Studio – were charged by the Seoul Southern District Prosecutor’s Office with embezzlement, breach of trust and fraudulent illegal transactions, according to local reports.
Earlier this month, it was reported that South Korea’s National Tax Service had opened an investigation into possible tax evasion at Bithumb and its affiliates.
It is pretty obvious that a lot of the names seem shady at first glance. So we dug deep and looked up the names one by one. It is noteworthy that some of them had no information available at all. Since Signet is designed as a payment system where proper KYC is mandatory, this finding is disturbing: It is a basic principle of KYC to look up the public presence of potential customers - in addition to checking documentation. This research will show that even the most basic principles of KYC were obviously ignored when onboarding the customers to Signet.
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