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CNN Business
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The big news in crypto this week came via a lawsuit in Texas.
FTX, the crypto giant headed by arguably the most powerful person in the industry, is under investigation by Texas regulators for selling unregistered securities.
“The Enforcement Division is now investigating FTX Trading, FTX US, and their principals, including Sam Bankman-Fried,” said Joseph Jason Rotunda, director of enforcement for the Texas State Securities Board.
FTX is not alone here. Just this month, we’ve seen Reuters report that Binance is under investigation by federal prosecutors. Bloomberg had the scoop that the SEC is investigating Yuga Labs, the company behind Bored Apes Yacht Club, as well as Three Arrows Capital for a “number of possible violations.”
Crypto critics have long criticized regulators for allowing the industry to grow unfettered. But with the wave of high-profile investigations we’re now seeing, it seems a real shift may be imminent.
John Reed Stark, a crypto critic who formerly headed the SEC’s Office of Internet Enforcement, told me that the FTX investigation is “an extraordinary harbinger of the attack on crypto regulatory enforcement that lies ahead.”
“You don’t mess with Texas,” said Stark, who believes state regulators across the country have been at the forefront of cracking down on crypto. But Stark – who has been highly critical of regulators in the past – says the tide is now turning.
“If the crypto ecosystem doesn’t prepare for a US regulatory onslaught, they’ve got their heads in the sand. The FDIC, OCC, SEC, DOL, FBI, US Treasury and IRS have all stepped up their crypto enforcement. And they’re just getting started.”
Leading crypto-skeptic Nouriel Roubini once wrote in 2019 that regulators were “asleep at the wheel” when it came to crypto, so I wanted to see if he still thinks that’s true. He sounded less optimistic than Stark.
“Despite recent research, regulators are still way behind the curve,” Roubini told me. “It’s the law of the jungle in crypto.”
Inside the industry, there is regret that the government has chosen to regulate crypto through enforcement and not rulemaking, also passing a bill.
“We want rules,” an industry lawyer told me. His beef is that the SEC enforces the same type of cases over and over again, while failing to clarify the bigger questions.
“All we get from the SEC is five more cases where they say you shouldn’t have issued this as a security in 2016, or they come out and bust Kim Kardashian and make it a big deal like they didn’t already. bust Floyd Mayweather and Steven Segal for the same.”`
Meanwhile in DC, cryptocurrency free-flowing competing bills snake their way through the legislative process. Molly Ball broke down the latest on DC’s crypto bonanza in a comprehensive Time Magazine feature.
Through the Ooki glass
One case that hasn’t received much coverage outside of the crypto press, but is all the rage in the industry, is the CFTC’s Ooki lawsuit.
Ooki, a decentralized autonomous organization, was fined $250,000 by the CFTC in September in the first-ever case against a DAO. The suit claims that anyone who owns an Ooki token can be held responsible for the actions of the larger group. This is an entirely new legal theory, one that is controversial even within the CFTC.
But the high level of interest in the case is not really about Ooki, a minor player, but rather who is enforcing.
In the absence of specific federal legislation requiring crypto oversight, the SEC and CFTC have been divided in what has become DC’s multi-year crypto turf war. The CFTC has long been viewed by the crypto industry as the most favorable of the US enforcement agencies, with Sam Bankman-Fried advocating oversight by the commission as a central plank of his crypto-friendly regulatory push.
The crypto attorney I spoke with told me that those who prefer the CFTC over the SEC fall into two camps. The first – let’s call them The Cynics – believe that the CFTC is the more underfunded and understaffed agency… while the second camp – The Wonks – believe that cryptos fit better with existing commodity laws.
So now that the CFTC is cracking down on Ooki, The Cynics have had a rude awakening…maybe the CFTC isn’t the pushover they were hoping for.
Yes, the CFTC is doing all that with Ooki.
15 million
President Biden announced the sale of an additional 15 million barrels of oil from the Strategic Petroleum Reserve. It is the last of the 180 million barrels Biden announced in March that the government would sell to stabilize the then sky-high gas prices.
The move comes on the heels of OPEC+ cutting output – a move that infuriated Western officials.
An administration official told CNN that the White House’s plan is to replenish the reserve when the market makes it most beneficial.
SAYLORIN ON
Michael Saylor, founder of Microstrategy and dark priest of the crypto church, emerged in 2020 as perhaps the most ubiquitous bitcoin booster on TV.
From Fox News (“Bitcoin is the most secure thing in the world,” Saylor told Tucker Carlson in March) to CNBC to Bloomberg, Saylor was always available to pump up bitcoin through its dizzying rise and fall. I interviewed Saylor last year for CNN’s crypto interactive (“The Bitcoin Billionaire” is what we called him).
In August, however, it was reported that Saylor was named in a lawsuit by the DC attorney for evading $25 million in taxes. He quickly resigned as CEO of Microstrategy, and since then Saylor’s media tour has ground to a halt. While his Twitter feed remains active with his same brand of bitcoin boosting, Saylor hasn’t made a TV hit since the news broke, according to the Internet Archive’s Television News Archive.
I emailed Saylor to ask if his TV silence has been a personal choice, or if the invitations to network bookers have dried up. Apparently his reticence extends beyond the world of broadcasting. We didn’t hear back.
And with that, I’ll leave you with Bad Brains’ classic Sailin’ On
(Which of course is not to be confused with Toots and Maytal’s also brilliant Sailing On.)
