The crypto market capitalization was unaffected on the week amid several US lawsuits

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Welcome back to Chain reaction.

If you thought last week was crazy with the US Securities and Exchange Commission cracking down on major crypto companies like Coinbase and Tron, brace yourself for this week’s news.

Binance, the world’s largest crypto exchange by volume, its CEO Changpeng Zhao and Chief Compliance Officer Samuel Lim are being sued by the US Commodity Futures and Trading Commission (CFTC), according to a filing on Monday.

The company, Zhao and Lim are being sued for allegedly violating rules on trading and derivatives.

The CFTC filing alleges that the exchange has never registered with it in any capacity and has “disregarded federal laws” for US financial markets, including laws that implement controls to prevent and detect money laundering and the financing of terrorism, among other items.

After launching in June 2017, the exchange became the largest crypto exchange globally within 180 days and has held that ranking ever since. Binance has spent $80 million on external partners such as KYC providers, transaction monitoring, market monitoring and investigative tools to support its compliance programs, a company spokesperson shared with TechCrunch.

“This filing is unexpected and disappointing as we have been cooperating with the CFTC for more than two years,” the spokesperson added. “However, we intend to continue to work with regulators in the United States and around the world. The best way forward is to protect our users and to work with regulators to develop a clear, thoughtful regulatory regime.”

The CFTC is unlikely to agree with this position, as its filing stated that Zhao and other involved parties in Binance’s senior management have “failed to properly monitor Binance’s activities” and these actions have “actively facilitated violations of US law.”

In response to the CFTC announcement, Zhao said tweeted “4,” which refers to one previous tweet of his from January using the number to tell others to “ignore FUD, fake news, attacks, etc.” FUD is an acronym for Fear, Uncertainty and Doubt and usually refers when a company feels they are being put at a disadvantage.

This action comes at a time when the crypto industry – especially big players – is facing a lot of US regulatory action, which some see as a good thing for clarity, but others see as unfair or stifling innovation. Whether this action will have a positive impact on the US crypto ecosystem will be determined in the long run.

But even after a series of regulatory enforcements, the cryptocurrency market seems unaffected. The total crypto market capitalization increased slightly from $1.15 trillion to $1.18 trillion during the week, according to CoinMarketCap data. At the time of writing, bitcoin and ether increased by 4% and 3% respectively within the same time frame.

This week in web3

Binance CFTC suit shows ‘regulators will continue to regulate and regulate more’ (TC+)

In keeping with the theme from above, TechCrunch delved into what the Binance lawsuit from the CFTC means for the larger crypto industry – and the impact could be far-reaching. “Crypto is under attack,” Yankun Guo, partner at Chicago-based law firm Ice Miller, told TechCrunch+. “The past six months have seen a wave of complaints and enforcement actions against blue-chip names including Coinbase, Kraken and KuCoin, and it was only a matter of time before Binance had its turn.” The eventual impact on Binance could send shockwaves through the global digital asset market, another market participant noted.

Former FTX CEO Sam Bankman-Fried charged with allegedly bribing Chinese officials

Another crypto exchange (former) executive was also in the news this week, but for different reasons. US prosecutors filed a superseding indictment against former FTX CEO Sam Bankman-Fried alleging he bribed Chinese officials. According to court documents from the US District Court for the Southern District of New York, “in or about 2021,” Bankman-Fried “authorized and directed a bribe of at least $40 million to one or more Chinese government officials.”

Are cryptocurrencies commodities or securities? Depends on which US agency you ask (TC+)

It’s a confusing time to be a crypto company. Markets are volatile and trading activity is erratic right now, but the biggest problem for crypto firms seems to be that there is currently no clarity around the laws they must comply with. In the CFTC’s latest lawsuit against Binance, it alleged that some cryptocurrencies were commodities — a view that diverges from another major US government agency, the Securities and Exchange Commission (SEC), which views most cryptoassets (aside from Bitcoin) as securities.

The United States and South Korea are both demanding the extradition of Do Kwon to face charges

Do Kwon, the founder of Terraform Labs, which operated the TerraUSD stablecoin and its sister token LUNA, was arrested in Montenegro last week while trying to board a flight to flee to Dubai with forged documents. What will be next? We don’t know which country Kwon will be sent to, as he now faces criminal charges in the United States as well as his native South Korea. And both countries appear to be seeking Kwon’s extradition.

Coinbase executives weigh in on crypto’s future in US amid regulatory scrutiny (TC+)

Coinbase was issued a Wells notice by the US Securities and Exchange Commission last week, and executives from the company took to Twitter Spaces to discuss the decision and what Coinbase’s next steps will be in creating a legal framework for the crypto world. “Regulators should come up with the rules, tell everybody the rules and we follow them,” CEO Brian Armstrong said on the call. “The current laws are not clear and we would like more clarity.”

The last pod

For last week’s episode, Jacquelyn Emin interviewed Gün Sirer, founder and CEO of Ava Labs.

Ava Labs has raised about $640 million, according to Crunchbase, and is backed by firms such as a16z and Polychain Capital. In recent months, Ava Labs has announced a number of partnerships with major brands and companies, such as Amazon Web Services, which TechCrunch covered exclusively.

Ava Labs created the layer-1 blockchain Avalanche, a platform that allows developers to build multi-functional blockchains and decentralized applications with a focus on speed and low transaction costs.

We talked about Gün Sirer’s background; why he launched the tier-1 blockchain, Avalanche, in 2020; whether the space has too many L1s; and how blockchains can scale more efficiently.

We also discussed:

• How layer-2 vision is broken
• US regulatory crackdown on crypto
• Ava Labs’ growth in Asian markets
• Blockchain’s partnership and business development
• Ava Labs’ focus for 2023 and beyond

Subscribe to Chain reaction on Apple Podcasts, Spotify or your favorite pod platform to catch up on the latest episodes, and leave us a review if you like what you hear!

Follow the money

1. Crypto wallet company Ledger raises another $108 million
2. Web3 protocol Polytrade raises $3.8 million to improve global trade
3. Blockchain startup Fetch.ai raises $40 million to provide monetization and other tools for AI-generated information
4. Aptos-based protocol Econia Labs raises $6.5 million to build decentralized order books
5. Eigen Labs closes $50 million Series A round led by Blockchain Capital

This list was compiled using information from Messari as well as TechCrunch’s own reporting.