In this case:
• NFT integration software released; NFTs used to serve complaint in civil action
• US Treasury Officials Signal Upcoming DeFi Illicit Finance Risk Assessment
• SEC Chairman comments on crypto activities, NYAG sues crypto exchange
• US and International Law Enforcement ‘Takedown’ Crypto Mixing Service
• Hackers Use “Flash Loan Attack” To Steal $199 Million From DeFi Protocol
NFT integration software released; NFTs used to serve complaint in civil action
According to a recent press release, a major US software company has launched a suite of tools that will allow users to “enter the Web3 and NFT space securely, and buy directly from their trusted brand’s website as opposed to third-party marketplaces.” The new product reportedly includes “drag and drop tools” to help brands set up NFT collections and API integration that allows brands to access data and “connect customer activity across Web2 and Web3.” According to the press release, the new tools will allow organizations to gain “a holistic view of each customer across both physical and digital environments.”
According to a recent report, a federal judge in Florida issued a default judgment in favor of a party who served “complaints to more than a dozen unidentified suspects through a non-fungible token.” According to the report, it is “possible to track the NFT when opened.” A lawyer for the plaintiff in the case said that allowing service through NFTs “is going to pave the way” to start suing fraudsters. The order by the Florida federal judge is reportedly the first of its kind to issue a default judgment after service of a complaint through an NFT.
According to recent reports, NFT marketplaces have accounted for $73.8 billion in trading volume, but the report suggests that “more than 42% of the volume is fake, with $31.2 billion attributed to wash trading.” The report notes that two popular NFT platforms have flagged 98% and 85% of transaction volume as suspicious. The report suggests that fake NFT trading volumes can “[i]nflat prices and production[e] the popularity of certain collections” and allow criminals to use NFTs “as a means of money laundering.”
In a recent development, a recently filed class action lawsuit alleges that a popular NFT platform “illegally sold unregistered securities when it issued non-fungible tokens through its own marketplace.” The complaint allegedly alleges that “the NFTs were not decentralized” and that the company controlled “all aspects” of the NFTs, including the ledger that recorded their ownership. According to a report, the popular platform began to lose out to other NFT marketplaces, and with the decline in demand for the platform’s NFTs, “their value took off.”
For more information, please see the following links:
US Treasury Officials Signal Upcoming DeFi Illicit Finance Risk Assessment
This week, the U.S. Treasury Department released prepared remarks by Assistant Secretary for Terrorist Financing and Financial Crimes Elizabeth Rosenberg at a meeting of banking industry representatives. The assistant secretary’s comments included comments on the illicit financial risk of decentralized finance (DeFi), and she noted that “my team is actively working on and will soon publish an illicit financial risk assessment on DeFi.” The assistant secretary also expressed concern about the use of digital assets by North Korea-linked actors who have “conducted ransomware attacks, stolen hundreds of millions of dollars worth of virtual assets, and laundered their ill-gotten funds through mixers and other virtual asset service providers to finance North Korea’s illegal nuclear weapons and ballistic missile programs.”
In a foreign-based development, the Thailand Securities and Exchange Commission recently published a notice that it is seeking public comments on a draft regulation that would prohibit digital asset business operators from (1) accepting deposits of digital assets from customers and lending, investing , wager or use such digital assets; (2) accept deposits of digital assets from customers and pay them regular interest or other types of benefits from their own source of funds unless these activities comply with promotional rules; and (3) advertise, solicit or otherwise act in support of deposit taking and lending services. Comments on the proposed regulation are due by 7 April.
For more information, please see the following links:
SEC Chairman comments on crypto activities, NYAG sues crypto exchange
US Securities and Exchange Commission (SEC) Chairman Gary Gensler recently published an Op-Ed article titled Making crypto firms do their work within the bounds of the law. Among other things in the article, chairman Gensler took up “the talk that there is a lack of clarity in the securities laws” and said that he found such claims “not convincing”. In paragraphs full of hyperlinks to SEC material, Chairman Gensler cited various past SEC actions that address cryptomarket activities, including lending, betting, “crypto-securities listing,” combining functions, accounting for cryptoassets, disclosure obligations, and custody. Key materials from the SEC cited in Chairman Gensler’s article include the DAO report; the framework for “investment contract” analysis of digital assets; SEC actions against BlockFi, a US crypto trading platform, a major US crypto exchange, Nexo, Poloniex and EtherDelta; an earlier speech given by the chairman; Personnel Accounting Bulletin No. 121; previously issued disclosure guidance; a recent proposed rule by the SEC; and a list of SEC crypto enforcement actions. Addressing SEC enforcement actions, Chairman Gensler said, “The goal is to get market participants to comply with laws and regulations and to protect … American investors.”
In separate comments recently covered by the news media, Chairman Gensler reportedly addressed proof-of-stake tokens and protocols. In his comments, Chairman Gensler reportedly said that staking participants “anticipate a return … on these proof-of-stake tokens” and suggested that “a protocol that is often a small group of founders and developers” should “seek to come into compliance.” “
In another recent development, the New York Attorney General (NYAG) announced a lawsuit against the KuCoin cryptocurrency exchange “for failing to register as a securities and commodities broker and falsely representing itself as an exchange.” According to a press release, the enforcement action seeks “to stop KuCoin from operating in New York and to block access to its website until it complies with the law.” In a notable statement, the press release states: “This action is one of the first times a regulator has asserted in court that ETH, one of the largest cryptocurrencies available, is a security.”
For more information, please see the following links:
US and International Law Enforcement ‘Takedown’ Crypto Mixing Service
On Wednesday, the US Department of Justice (DOJ) announced a coordinated international “takedown” of ChipMixer, an unlicensed darknet cryptocurrency “mixing” service that, according to the DOJ, laundered more than $3 billion worth of cryptocurrency from multiple criminal schemes involving ransomware, darknet markets, fraud , cryptocurrency heists and other hacking schemes around the world, including those perpetrated by North Korea’s Lazarus Group. According to the DOJ, ChipMixer allowed customers to deposit bitcoin, which ChipMixer then mixed with other ChipMixer users’ bitcoin to prevent law enforcement agencies or regulators from tracking criminal transactions. ChipMixer also allegedly offered other additional features to obscure the identities of its criminal customers and concealed the operational location of its servers to avoid seizure by law enforcement. As part of the takedown, the US government seized two domains directing users to the ChipMixer service and one GitHub account, and charged one person with operating an unlicensed money transfer business, money laundering and identity theft in connection with ChipMixer’s operation. German law enforcement has reportedly seized the ChipMixer back-end servers and more than $46 million in cryptocurrency. Law enforcement in Belgium, Poland and Switzerland also assisted in the criminal investigation, as did Europol.
For more information, please see the following links:
Hackers Use ‘Flash Loan Attack’ To Steal $199 Million From DeFi Protocol
According to recent reports, “Crypto lending protocol Euler Finance suffered a loss of $199 million on the morning of March 13, following an attack on a flash loan.” The attacker allegedly exploited a flaw in one of the Euler Finance smart contracts to steal USDC, Dai, WBTC and Staked Ether, then laundered the proceeds using Tornado Cash, a decentralized mixing service previously sanctioned by the US government. According to reports, blockchain data shows that an address linked to the hack sent 100 ETH to a wallet associated with the Lazarus Group, a cybercrime group affiliated with the government of North Korea.
For more information, please see the following links:
