French Bank Receives Crypto License; New Crypto Products Launch; FSB Publishes Framework for Crypto-Asset Activities; BITA Merges with GBBC

By Robert A. Musiala, Christopher Lamb and Keith R. Murphy on July 24, 2023 Posted in Blockchain

In this issue:

• French Bank Licensed to Offer Crypto Services, New Crypto Products Launch
• FSB Publishes Global Regulatory Framework for Crypto-asset Activities
• BITA to Merge with Global Blockchain Business Council

French Bank Licensed to Offer Crypto Services, New Crypto Products Launch

By Christopher Lamb

According to recent reports, one of the largest banks in France recently received the first license for crypto services issued by the French financial regulator, Autorité des Marchés Financiers (AMF). The bank’s crypto unit is reportedly now licensed to offer cryptocurrency custody, trading and sales. The AMF license reportedly requires compliance with stricter rules than for companies only registered with the AMF in areas including corporate governance, cybersecurity and compliance.

According to another recent report, Gnosis, an Ethereum development firm, has partnered with a major global financial services firm to launch Gnosis Card, a physical debit card that connects to self-custodied cryptocurrency wallets, allowing users to “spend[] crypto like fiat” in traditional point-of-sale and internet transactions. Gnosis is also reportedly launching a set of developer tools that will allow others to create their own version of the Gnosis Card.

In a recent blog post, blockchain development firm Chainlink announced that “the Chainlink Cross-Chain Interoperability Protocol (CCIP) has entered the Mainnet Early Access phase on the Avalanche, Ethereum, Optimism, and Polygon blockchains.” According to the blog post, “CCIP is the most secure, reliable, and easy-to-use interoperability protocol for building cross-chain applications and services.” The blog post notes that CCIP “enables protocols to quickly start transferring tokens across chains using audited token pool contracts they control without writing custom code and in a fraction of the time it would take to build on their own.” Among other things, the blog post notes that developers, applications and enterprises can use CCIP for cross-chain applications of tokens, lending applications, NFTs, account abstraction, gaming, and data storage and computation.

For more information, please refer to the following links:

FSB Publishes Global Regulatory Framework for Crypto-asset Activities

By Robert A. Musiala Jr.

The Financial Stability Board (FSB) recently issued a press release announcing the publication of its Global Regulatory Framework for Crypto-asset Activities (FSB Framework). According to the press release, “[t]he G20 tasked the FSB to coordinate the delivery of an effective regulatory, supervisory and oversight framework for crypto-assets.” The FSB Framework consists of two distinct sets of recommendations: (1) High-level recommendations for the regulation, supervision and oversight of crypto-asset activities and markets; and (2) Revised high-level recommendations for the regulation, supervision and oversight of “global stablecoin” arrangements. According to the press release, “In light of events of the past year, the FSB has strengthened both sets of high-level recommendations in three areas: (i) ensuring adequate safeguarding of client assets; (ii) addressing risks associated with conflicts of interest; and (iii) strengthening cross-border cooperation.”

For more information, please refer to the following links:

BITA to Merge with Global Blockchain Business Council

By Keith R. Murphy

Through a merger, the BITA Standards Council (BITA) will become an initiative of the Global Blockchain Business Council (GBBC), with BITA members becoming members of GBBC, according to a recent press release. The GBBC reportedly is the largest industry association for the blockchain and digital assets community, and when combined with BITA, it will have more than 500 institutional members across more than 100 jurisdictions and disciplines. BITA focuses on the creation of open-source, royalty-free data standards in the global supply chain space. Following the merger, BITA will continue work to map, produce, publish and adopt those standards, according to the press release. One focus will be shipment/inventory tracking and tracing. “With combining scale and expertise of these two entities, we will help to shape a future for Web3 and blockchain that will enable businesses to collaborate more effectively and efficiently across the global supply chain,” according to GBBC Chair David Treat.

For more information, please refer to the following link:

BITA Standards Council Merges With Global Blockchain Business Council to Launch Initiative Using Blockchain Technology to Improve Global Supply Chains

Ripple Decision Makes Waves Finding Some XRP Sales Not Securities

By Lauren Bass, Jonathan A. Forman, Adam Gale, Teresa Goody Guillén, Robert A. Musiala, Sydney Park, Veronica Reynolds and Joanna F. Wasick on July 20, 2023 Posted in Alert

On July 13, 2023, the U.S. District Court for the Southern District of New York issued its highly anticipated summary judgment decision in the U.S. Securities and Exchange Commission’s (SEC) action against Ripple Labs, Inc. (Ripple) and two of its senior leaders, Bradley Garlinghouse and Christian Larsen. Significantly, the Court found that blind sales of cryptocurrency through digital asset exchanges did not violate federal securities laws. This decision is the first major ruling in which a U.S. federal judge has found that certain digital assets sales fall outside the ambit of U.S. securities law. While certain key portions of the decisions will likely be challenged by all parties, for now the decision appears to provide potential ways forward for the U.S. crypto market, which has been targeted by the SEC.

Read full alert.

Kraken Loses Bid to Avoid Turning Over Customer Information to IRS

By Scott Danielson, Carlos Ortiz, Betsy Smith, Nicholas C. Mowbray, Kayley Sullivan and Christina Gotsis on July 18, 2023 Posted in Tax

In a recent ruling, a California federal judge held that Kraken, an online cryptocurrency exchange program, has to turn over user information to the IRS as a result of a John Doe summons originally served on Kraken in 2021. The IRS launched Operation Hidden Treasure in May 2021 in an effort to root out tax abuses among cryptocurrency users. As part of these efforts, the IRS has been issuing John Doe summonses to major cryptocurrency platforms, seeking information that will enable the IRS to identify users who are not in compliance with tax reporting and payment obligations. Cryptocurrency platforms and users should expect this decision to further embolden an already aggressive IRS and Department of Justice.

Stablecoin Pilot Launches; Crypto Fund Report Published; Senate Seeks Crypto Tax Input; Numerous Crypto Enforcement Actions Announced; NFTs Hacked

By Robert A. Musiala and Christopher Lamb on July 17, 2023 Posted in Blockchain

In this issue:

• Company Announces Stablecoin Pilot; BIS Publishes Reports on CBDCs
• Bitcoin ETF Applications Refiled, Crypto Hedge Fund Report Published
• Report Provides Data on Top NFT Royalty Earnings
• Senate Finance Committee Members Seek Input on Digital Asset Taxation
• Multiple DOJ and CFTC Actions Target Crypto Spoofing, Hacks, and Fraud
• DOJ, SEC, CFTC, and FTC Bring Charges Against Crypto Firm and Executives
• NFT Project Hacked, Mid-Year Crypto Crime Report Published

Company Announces Stablecoin Pilot; BIS Publishes Reports on CBDCs

By Robert A. Musiala Jr.

According to a blog post by a major multinational software company, the company has begun a pilot project to experiment with using the USDC and EUROC stablecoins (which are backed by U.S. dollars and euros, respectively) for cross-border payments. The blog post notes that the project aims to create a user experience that is as simple as online banking but that leverages blockchain technology to reduce costs, increase speed, and improve transparency for cross-border funds transfers.

In related news, the Bank for International Settlements (BIS) recently published two new papers addressing central bank digital currencies (CBDCs). The first paper provides the results of a 2022 BIS survey on CBDCs and crypto. Among other things, the paper finds that almost a quarter of central banks are piloting a retail CBDC and that more than 80 percent of central banks see potential value in having a retail CBDC, and suggests that there could be 15 retail and nine wholesale CBDCs publicly circulating by 2030.

The second paper is a report on CBDCs submitted by BIS to the G20 Finance Ministers and Central Bank Governors. Among other things, the report finds that wholesale CBDCs will be driven by the public and private sectors’ quest to shape the future of trading and settlement; the most promising CBDC model is a two-tier model with public-private partnership; the most fundamental feature of a CBDC is privacy; the greatest challenge for a CBDC is cybersecurity; and cross-border CBDC arrangements will present significantly increased complexity compared with domestic CBDCs.

For more information, please refer to the following links:

Bitcoin ETF Applications Refiled, Crypto Hedge Fund Report Published

By Robert A. Musiala Jr.

According to reports, a major U.S. equities exchange recently filed amended applications to list proposed bitcoin exchange-traded funds (ETFs) offered by four major financial firms. The amended applications reportedly include a commitment by the equities exchange to enter into a bitcoin spot market price surveillance-sharing agreement with a major U.S. cryptocurrency exchange. The U.S. Securities and Exchange Commission (SEC) has yet to approve a single bitcoin ETF application and has previously rejected approximately 30 prior applications. The rejection of the prior applications is reportedly due in part to the SEC requiring the listing exchange to have a surveillance-sharing agreement with a regulated market of significant size related to the underlying or reference bitcoin assets.

A “Big Four” professional services firm recently published its 5th Annual Global Crypto Hedge Fund Report. Among other things, the report finds that (1) crypto hedge fund investors are making greater demands for regulation and risk management, including through segregation of assets, financial audits, independent statements of reserve assets, and platform security assurances; (2) crypto hedge funds are seeking to improve their liquidity management tools, counterparty risk management, custody solutions, and use of decentralized exchanges; (3) 93 percent of crypto hedge funds expect the capitalization of the crypto-assets market to be higher at the end of 2023 than at the end of 2022; and (4) the U.S. regulatory environment has led to around a quarter of traditional hedge funds currently investing in crypto-assets to state that they may reconsider the viability of their crypto-assets strategy.

For more information, please refer to the following links:

Report Provides Data on Top NFT Royalty Earnings

By Robert A. Musiala Jr.

A recent report provided data on the top royalty earnings for nonfungible tokens (NFTs). As reported, the top three NFT royalty earners were the Bored Ape Yacht Club (over $58 million), Azuki (over $43 million), and Pudgy Penguins (over $7.2 million). In related news, in a recent NFT initiative, a French fashion brand has reportedly released NFTs that offer new features, including the ability for NFT holders to access physical merchandise and exclusive in-person and virtual events.

For more information, please refer to the following links:

Senate Finance Committee Members Seek Input on Digital Asset Taxation

By Robert A. Musiala Jr.

According to a recent press release, “Senate Finance Committee Chairman Ron Wyden, D-Ore., and Finance Committee Ranking Member Mike Crapo, R-Idaho … launched an effort to address uncertainties surrounding the tax treatment of digital assets with an open letter seeking input from experts, stakeholders and interested parties.” The letter is addressed to “Members of the Digital Asset Community and Other Interested Parties” and poses numerous questions on digital asset taxation issues related to the following topics:

Marking-to-Market for Traders and Dealers (IRC Section 475)
Trading Safe Harbor (IRC Section 864(b)(2))
Treatment of Loans of Digital Assets (IRC Section 1058)
Wash Sales (IRC Section 1091)
Constructive Sales (IRC Section 1259)
Timing and Source of Income Earned from Staking and Mining
Nonfunctional Currency (IRC Section 988(e))
FATCA and FBAR Reporting (IRC Sections 6038D, 1471-1474, 6050I, and 31 U.S.C. Section 5311 et seq.)
Valuation and Substantiation (IRC Section 170)

The letter sets a deadline of September 8 for responses, which should be sent to responses@finance.senate.gov. The press release also notes, “To provide background on current law, Chair Wyden and Ranking Member Crapo asked the Joint Committee on Taxation to compile a report on the taxation of digital assets,” and provides a link to the recently completed report. Among other things, the report provides an in-depth analysis of each of the nine topics raised in the letter.

For more information, please refer to the following links:

Multiple DOJ and CFTC Actions Target Crypto Spoofing, Hacks, and Fraud

By Christopher Lamb

According to a recent press release issued by the U.S. Department of Justice (DOJ), a four-count indictment has been unsealed, charging an individual for “a scheme to impersonate the OpenSea marketplace in order to obtain unauthorized access to cryptocurrency and non-fungible tokens (NFTs).” The indictment alleges that the defendant stole approximately $450,000 worth of cryptocurrencies and NFTs. According to the release, the defendant allegedly used spoofing—in this instance, creating a fake version of the OpenSea login page—to obtain the victim’s digital wallet seed phrase, which allowed the defendant to steal the victim’s cryptocurrency and NFTs.

According to another recent DOJ press release, DOJ has charged an individual with wire fraud and money laundering in connection with an “attack on a decentralized cryptocurrency exchange.” According to the release, the defendant carried out an attack by “exploiting a vulnerability in one of the Crypto Exchange’s smart contracts and inserting fake pricing data to fraudulently cause that smart contract to generate approximately $9 million dollars’ worth of inflated fees that [the defendant] did not legitimately earn.” The defendant then laundered the stolen funds through a variety of methods, including token swaps, bridging, anonymized cryptocurrency, and overseas cryptocurrency exchanges.

A third DOJ press release announced charges against an individual in connection “with a scheme to steal money from investors and other victims by offering a variety of fraudulent cryptocurrency-related investment services, including sales of multimillion-dollar batches of cryptocurrency, marketing and advertising services, and short-term investments and loans.” The defendant allegedly worked together with his son in the scheme.

A recent press release issued by the U.S. Commodity Futures Trading Commission (CFTC) announced a default judgment by a U.S. district court granting a permanent injunction against a Florida resident and four companies he controlled, prohibiting them from trading in any CFTC-regulated markets or registering with the CFTC, as well as disgorgement and civil monetary penalties. According to the release, the individual attempted to manipulate the price of his own digital asset exchange, illegally offered futures transactions, failed to register with the CFTC, and failed to implement a know-your-customer program.

A second CFTC press release announced charges against two Florida residents for “perpetrating a multi-million dollar bitcoin fraud.” According to the release, the defendants engaged in “a deceptive and fraudulent scheme where they knowingly or recklessly made false representations to investors” in which they induced the investors to send money to the individuals to buy bitcoin. After receiving the funds, the individuals “failed to deliver the bitcoin as promised and failed to return the investors’ funds.”

For more information, please refer to the following links:

DOJ, SEC, CFTC, and FTC Bring Charges Against Crypto Firm and Executives

By Robert A. Musiala Jr.

According to recent press releases by the U.S. Department of Justice (DOJ), U.S. Securities and Exchange Commission (SEC), U.S. Commodity Futures Trading Commission (CFTC), and U.S. Federal Trade Commission (FTC), all four agencies have brought charges against Celsius Network, LLC (Celsius) and its former executives. According to the DOJ press release, among other things, the Celsius founder and former chief executive officer (CEO) and its former chief revenue officer (CRO) were charged with manipulating the market for the Celsius crypto token, CEL. The former CEO was charged with securities fraud, commodities fraud, and wire fraud for defrauding customers and misleading them about core aspects of the company. The former CEO and former CRO were further charged with “conspiracy, securities fraud, market manipulation, and wire fraud for illicitly manipulating the price of CEL … all while secretly selling their own CEL tokens at artificially inflated prices.”

According to the SEC press release, the SEC charged Celsius and its founder and former CEO “for violating registration and anti-fraud provisions of the federal securities laws, including by failing to register the offers and sales of Celsius’s crypto lending product, the Earn Interest Program; making false and misleading statements to investors of the Earn Interest Program and Celsius’s own crypto asset security, CEL; and engaging in market manipulation as it relates to CEL.”

According to the CFTC press release, the CFTC charged Celsius and its former CEO “with fraud and material misrepresentations in connection with the operation of its digital asset-based finance platform, which falsely touted high profits and security to induce customers to deposit their digital asset commodities on the platform.” The CFTC also alleged Celsius “acted as an unregistered commodity pool operator (CPO) and [the CEO] operated as an unregistered associated person (AP) of a CPO.”

Finally, according to the FTC press release, the FTC reached a settlement with Celsius that “will permanently ban it from handling consumers’ assets.” The FTC also charged three former Celsius executives with “tricking consumers into transferring cryptocurrency onto the platform by falsely promising that deposits would be safe and always available.”

For more information, please refer to the following links:

NFT Project Hacked, Mid-Year Crypto Crime Report Published

By Robert A. Musiala Jr.

According to reports, hackers recently stole $765,000 of NFTs in a SIM swap attack on the Gutter Cat Gang NFT project. The hackers reportedly took control of the project’s social media account and used it to share links to fraudulent NFT airdrops. The fraudulent links directed victims to take steps that allowed the hackers to gain access to the victims’ digital wallets and steal the NFTs and cryptocurrencies stored in the wallets.

Blockchain analytics firm Chainalysis recently published its Crypto Crime Mid-year Update. According to the report, “[t]hrough the end of June, crypto inflows to known illicit entities … are down 65% compared to … the same time in 2022” and “[i]nflows to risky entities (made up primarily of mixers and high-risk exchanges) are down 42%.” However, the report notes that ransomware is on pace to grow in 2023, “with attackers having extorted $175.8 million more than they did at the same time in 2022.”

For more information, please refer to the following links:

Fireside Chat Series: Bulls, Bears, and Blockchain

By Jonathan R. Barr, John J. Carney, Jimmy Fokas, Teresa Goody Guillén, Michelle Tanney and Veronica Reynolds on July 12, 2023 Posted in Blockchain

Join BakerHostetler for our series of Fireside Chats about the latest developments impacting the capital markets and their participants, and the blockchain industry.

In light of the historic “SEC Speaks” event being canceled this year and the uptick in the SEC’s enforcement and rulemaking docket, the next event in this exciting series will take place July 17 at 2:00 p.m. ET / 11:00 a.m. PT with a discussion featuring four former Commissioners of the U.S. Securities and Exchange Commission:

Paul Atkins, Chief Executive and Founder, Patomak Global Partners, SEC Commissioner (2002 – 2008)
Daniel Gallagher, Chief Legal and Corporate Affairs Officer, Robinhood, SEC Commissioner (2011 – 2015)
Troy Paredes, Founder, Paredes Strategies LLC, SEC Commissioner (2008 – 2013)
Michael Piwowar, Executive Vice President, Finance, Milken Institute, Acting SEC Chairman (2017), SEC Commissioner (2013 – 2018)

This event will include a discussion regarding the cancellation of SEC Speaks, the SEC’s approach to digital asset regulation and enforcement, the SEC’s approach to cyber and artificial intelligence, the future of administrative proceedings, and much more! We will also remember the life and distinguished career of Chairman Harvey Pitt.

Register here.

Crypto Firms Expand Offerings; FATF Publishes Virtual Assets Update; CFTC Continues Crypto Enforcement; Israeli Agency Seizes Hezbollah Crypto

By Robert A. Musiala and Joanna F. Wasick on July 3, 2023 Posted in Blockchain

In this issue:

• Crypto Firms Expand Offerings in Stablecoins, Private Key Management
• FATF Publishes Targeted Update on Virtual Assets
• Nevada Financial Regulator Seeks to Place Crypto Custodian into Receivership
• CFTC Announces Multiple Enforcement Actions Alleging Digital Asset Fraud
• Israeli Agency Seizes Hezbollah Crypto; Illicit Crypto Report Published

Crypto Firms Expand Offerings in Stablecoins, Private Key Management

By Robert A. Musiala Jr.

The issuer of the Pax Dollar (USDP) stablecoin recently announced that USDP is now available to all Mexican customers of a major Latin American online payments platform. According to a press release, “Mexico is one of the most active marketplaces for digital assets with millions of users tapping into the ecosystem to gain access to key financial services.”

Another recent press release announced that Fireblocks, a digital asset enterprise platform provider, has expanded “its highly secure MPC-CMP wallet and key management technology to include support for HSMs and public and private cloud, including Thales, Securosys … GCP, and Alibaba Cloud.” According to the press release, among other things, the expanded product offering will include (1) enabling customers to host all MPC key shares across multiple servers in their data centers and cloud; (2) new cloud data centers across the EU, Switzerland and Hong Kong along with Fireblocks’ current cloud data centers in the U.S.; and (3) a dedicated single-tenant cloud environment.

In other payments news, the Bank for International Settlements (BIS) recently published an interim report on Project Mariana, which expands on wholesale Central Bank Digital Currency (wCBDC) experiments “with the aim of improving the effectiveness, safety and transparency of FX trading and settlement.” According to the interim report, among other things, Project Mariana borrows from decentralized finance technology by exploring “joint trading and settlement in wCBDCs using a so-called automated market-maker,” “tests a common standard for fungible wCBDC tokens” and “investigates asset mobility between different blockchain-based networks using so-called bridges.”

For more information, please refer to the following links:

FATF Publishes Targeted Update on Virtual Assets

By Robert A. Musiala Jr.

The Financial Action Task Force (FATF) recently published a report entitled Targeted Update on Implementation of the FATF Standards on Virtual Assets and Virtual Asset Service Providers. According to a FATF press release, the Targeted Update “provides an update on country compliance with FATF’s Recommendation 15 and its Interpretative Note (R.15/INR.15), including the Travel Rule, and updates on emerging risks and market developments, including on Decentralized Finance (DeFi), Peer-to-Peer transactions (P2P), and Non-Fungible Tokens (NFTs), unhosted wallets, and stablecoins.” Among other things, the report discusses the following key findings:

Based on 98 FATF mutual evaluation and follow-up reports since the revised R.15/INR.15 was adopted, 75% of jurisdictions are only partially or not compliant with the FATF’s requirements related to VAs and VASPs.
Of the 151 jurisdictions that responded to FATF’s 2023 Survey, more than half still have not taken any steps toward implementing the Travel Rule with respect to VAs.
While DeFi and unhosted wallets do not account for a large share of VA transactions, they are at risk of misuse, including by sanctioned actors.

According to the report, FATF will publish another Targeted Update report in 2024, along with “a table showing which steps FATF member jurisdictions … have taken towards implementing R.15 (e.g., undertaking a risk assessment, enacting legislation to regulate VASPs, conducting a supervisory inspection, etc.).”

For more information, please refer to the following links:

Virtual Assets: Targeted Update on Implementation of the FATF Standards on Virtual Assets and Virtual Asset Service Providers

Nevada Financial Regulator Seeks to Place Crypto Custodian into Receivership

By Joanna F. Wasick

Nevada’s Financial Institutions Division (NFID) recently petitioned its state court to place a Nevada-registered crypto custodian into receivership. An NFID press release explains that the petition “asks the court to appoint a receiver to take over the day-to-day operations of the company and thoroughly examine all its finances” to determine the best option to protect the custodian’s clients, “either by rehabilitating and returning the company to private management or by liquidating the company.” Earlier this month, NFID had filed a cease and desist order that alleged the custodian had “considerably deteriorated to a critically deficient level” and was in a position “where it is in an unsafe or unsound condition to transact business.” The receivership request provides more detail, specifying that the custodian owes clients over $85 million in fiat but has only $3 million on hand. Likewise, the custodian allegedly owes $69.5 million in crypto and has only $68.6 million in crypto on hand. According to the petition, at least part of the custodian’s position is a result of miscommunication between old and new management, which led to an inability to access numerous customer accounts. Notably, this receivership request comes days after another crypto custodian reportedly called off its bid to acquire its troubled competitor.

For more information, please refer to the following links:

CFTC Announces Multiple Enforcement Actions Alleging Digital Asset Fraud

By Robert A. Musiala Jr.

The U.S. Commodity Futures Trading Commission (CFTC) recently published multiple press releases announcing digital asset enforcement actions. The first press release announced an enforcement action against William Koo Ichioka, alleging the defendant solicited and misappropriated over $21 million from more than 100 commodity pool participants in a fraud scheme promising investments in bitcoin and ether with a term of “30 business days with a 10% return.” According to a CFTC press release, the defendant misappropriated investors’ funds, using the funds “to pay back other participants, and for his personal use and expenses, such as luxury automobiles, jewelry and rent payments.” According to a statement from CFTC Commissioner Kristin N. Johnson, “To conceal losses, Ichioka falsified financial documents to inflate the amount of assets in the pool accounts and also provided false statements of account to participants.” The U.S. Department of Justice (DOJ) and the U.S. Securities and Exchange Commission both filed parallel actions. Among other things, the DOJ action charged Ichioka with wire fraud, filing false or fraudulent tax returns, and securities and commodities fraud.

A second CFTC press release announced an enforcement action against a defendant who allegedly “misappropriated over $1.3 million in customer funds intended for digital asset commodity and forex trading.” The defendant allegedly operated a “romance scam” known as “Pig Butchering” whereby the defendant cultivated a romantic relationship with at least 29 customers before soliciting them to participate in a fraudulent financial opportunity. According to the CFTC press release, instead of using customer funds for digital asset and forex trading, the defendant misappropriated the funds for his personal use and “transferred the majority of the funds to bank accounts, digital wallets, and digital asset trading platforms under the control of other members of the fraudulent scheme.”

A third CFTC press release announced a default judgment against a defendant who “operated a fraudulent scheme that solicited and misappropriated funds to purportedly trade digital commodity assets.” According to the CFTC press release, “more than 150 individuals and entities deposited at least $33 million” with the defendant but “less than $10 million was used to trade digital commodity assets and the remaining funds were misappropriated for personal use or to prolong the fraudulent trading scheme.”

For more information, please refer to the following links:

Israeli Agency Seizes Hezbollah Crypto; Illicit Crypto Report Published

By Robert A. Musiala Jr.

According to a recent blog post by blockchain analytics firm Chainalysis, “Israel’s National Bureau for Counter Terror Financing (NBCTF) has, for the first time ever, seized cryptocurrency from Hezbollah, a heavily sanctioned terrorist group based in Lebanon, and from Iran’s Quds Force, which funds and works extensively with Hezbollah.” The blog post notes that the Israeli agency “seized roughly $1.7 million worth of cryptocurrency and disrupted cryptocurrency-based terrorism financing infrastructure jointly run by the two organizations.” Among other things, the blog post provides details on the methods used by Hezbollah to move funds “first from financial facilitators to hawala services and OTC brokers, and then to Hezbollah-controlled addresses at mainstream [cryptocurrency] exchanges.”

Another blockchain analytics firm, TRM Labs, recently published its Illicit Crypto Ecosystem Report. The report “spans over 20 blockchains and covers all major known forms of crypto-mediated illicit finance, as well as the use of cryptocurrency to launder the proceeds of crime.” The first part of the report “maps out criminal activities that generate crypto proceeds of crime including illicit commerce, illicit payments, fraud, and theft.” The second part “catalogs the way the crypto ecosystem is used in laundering proceeds of crime, whether fiat or crypto.” Among its many findings, the report notes that “the fall in crypto’s value does not appear to have dissuaded criminals from using and exploiting crypto” and “the various kinds of crypto crime and their perpetrators do not operate in silos; rather, they are highly intertwined.”

For more information, please refer to the following links:

New Crypto Products Launch; CBDC and NFT Reports Published; Network Protocol/Governance Updates Announced; Crypto Enforcement Continues

By Robert A. Musiala, Christopher Lamb, Amos Kim, Maya Rivera and Keith R. Murphy on June 26, 2023 Posted in Blockchain

In this issue:

• New Crypto Products Launch in Exchanges, Wallets, and Custody
• BIS, IMF, and Monetary Authority of Singapore Publish Papers Exploring CBDCs
• Advocacy Group Publishes NFT Report; NFT Initiatives Continue
• Blockchain Networks Announce Protocol and Governance Developments
• Multistate Investigation Results in Cease and Desist Order Against Crypto Firm
• FDIC Issues Warning to Crypto Exchange; New Multiagency Task Force Formed

New Crypto Products Launch in Exchanges, Wallets, and Custody

By Christopher W. Lamb

A recent press release announced the launch of EDX Markets, a “first-of-its-kind digital asset marketplace designed to enable safe and compliant trading of digital assets through trusted intermediaries.” According to the release, EDX Markets is backed by several major financial institutions and will “facilitate trades against a central counterparty, allowing participants to benefit from enhanced price competition and reduced settlement risks, while increasing operational efficiencies.”

Another recent press release announced that the subsidiary of a major U.S. blockchain and crypto solutions company has obtained “In-Principle Approval of the Major Payments Institution License application from the Monetary Authority of Singapore (MAS).” According to the press release, this license will allow the “offer[ing] [of] regulated digital payment token products and services in the city state” and enable the company to “further scale its customers’ use of its crypto-enabled On-Demand Liquidity (ODL) service.”

In a third recent announcement, a self-custody bitcoin wallet app provided details on new partnerships with two major cryptocurrency exchanges to enable its customers to “transfer and buy bitcoin through these platforms with a transparent and integrated experience.” According to the announcement, the wallet app will “display the full cost of the transaction being offered by the different partners so that customers can decide which partner is right for them before redirecting to the partner-hosted experience.”

In a final development, according to a recent report, the asset servicing arm of two major European banks has been registered by French regulators to provide crypto custody services. The new crypto custody offering will reportedly be regulated under the European Union’s new crypto licensing rules, known as MiCA, beginning in 2024.

For more information, please refer to the following links:

BIS, IMF, and Monetary Authority of Singapore Publish Papers Exploring CBDCs

By Robert A. Musiala Jr.

The Bank for International Settlements (BIS) recently released two publications addressing central bank digital currencies (CBDCs). The first is the final report on Project Rosalind, “an experiment exploring application programming interfaces (APIs) for retail central bank digital currency (CBDC).” According to a press release, Project Rosalind “is based on a two-tier model representing a public private partnership” with an API layer that “connects public and private infrastructures” and “offers a set of standardised functionalities to enable different systems to interoperate.”

Another recent BIS publication, “Blueprint for the future monetary system: improving the old, enabling the new,” explores the concept of “A new type of financial market infrastructure – a unified ledger – [that] could capture the full benefits of tokenisation by combining central bank money, tokenised deposits and tokenised assets on a programmable platform.” According to the paper, a unified ledger providing access to central bank money could “harness programmability” to access the “great potential” of tokenized money and assets.

The International Monetary Fund (IMF) also addressed CBDCs in a recent publication, “Central Bank Digital Currency Adoption: A Two-Sided Model.” According to an IMF press release, the paper “develops a dynamic two-sided payments model with both heterogeneous households and merchants/firms to study: (1) The adoption of CBDC by households and firms, and (2) The impact of CBDC issuance on financial inclusion, informality, and disintermediation.” Among other things, the paper finds that “[h]ouseholds are more likely to adopt CBDC if it is low cost, provides an attractive savings vehicle, reduces the cost of remittances, improves the efficiency of government payments, and … offers a valuable means of payment.” The paper also finds that “[f]irms are more likely to accept CBDC if fees are low, if there are tax exemptions or subsidies for transactions made in CBDC, and if households who prefer to make payments with CBDC make up a large share of revenue.”

In a final notable item, the Monetary Authority of Singapore (MAS) recently published a white paper “proposing a common protocol to specify conditions for the use of digital money such as central bank digital currencies (CBDCs), tokenised bank deposits, and stablecoins on a distributed ledger.” According to an MAS press release, the paper was developed in collaboration with the IMF, Banca d’Italia, Bank of Korea, and various financial institutions and fintech firms.

For more information, please refer to the following links:

Advocacy Group Publishes NFT Report; NFT Initiatives Continue

A blockchain industry advocacy group recently published a report discussing different use cases for non-fungible tokens (NFTs). According to the report, NFTs “are by and large consumer products that should not be regulated in the same manner … as cryptocurrencies.” Among other things, the report explains how NFTs differ from cryptocurrencies and takes the position that “mitigation strategies used for physical analogues are effective for NFTs.” NFT use cases discussed by the report include digital art and collectibles, the supply chain, financial services, music, community access, gaming, the metaverse, and ticket sales.

In other recent news, American rapper and actor Snoop Dogg announced the release of an NFT collection collaboration project with Transient Labs that will provide “various content, such as behind-the-scenes videos and photos” uploaded while on tour. In the past, Snoop Dogg has collaborated with other artists to showcase NFTs and is also the co-founder of the Web3-powered platform Shiller.

For more information, please refer to the following links:

Blockchain Networks Announce Protocol and Governance Developments

By Robert A. Musiala Jr.

The Uniswap Foundation recently published its first-ever “Bridge Assessment Report,” which analyzes the use of “cross-chain messaging protocols (bridges)” by the Uniswap decentralized autonomous organization (DAO) “to relay governance decisions from Ethereum to destination chains where the Uniswap V3 contracts have been deployed.” According to the report, the Uniswap Foundation “evaluated six bridges and approved two for the DAO’s cross-chain governance use case.” Among other things, the report found that “a multi-bridge architecture was likely the best option for the Uniswap DAO’s cross-chain governance use case, but … protocols that provide this functionality are nascent and not mature enough for immediate implementation.”

In another recent development, a blog post introduced Polkadot OpenGov, a new governance framework for the Polkadot ecosystem of interconnected public blockchains. Among other things, the blog post described the process by which network upgrade proposals are proposed, voted on, and enacted “to ensure that the decisions made by the community are legitimate and transparent.”

For more information, please refer to the following links:

Multistate Investigation Results in Cease and Desist Order Against Crypto Firm

By Maya E. Rivera

On June 16, the Texas State Securities Board (TSSB) issued an emergency cease and desist order against California-based cryptocurrency firm Abra, its subsidiaries, and its founder. The order alleges that the parties “engaged in fraud,” that they made “statements that were materially misleading or otherwise likely to deceive the public,” and that the company is “insolvent or nearly insolvent.” The TSSB order also declared that certain of Abra’s products are unregistered and unlicensed securities and demanded that the company immediately cease and desist all operations in Texas.

In a related action, on June 20, a press release announced that the New Jersey Bureau of Securities had issued a summary penalty and cease and desist order against Abra to stop the company and its associated entities from violating state Uniform Securities Law “in connection with the sale of interest-bearing crypto accounts.” The order demanded that the company, its subsidiaries, and its founder immediately cease and desist offering and selling unregistered securities to New Jersey investors and stop misrepresenting material facts to investors in connection with the sale of securities. The order further assessed civil penalties of $232,900 against Abra and its subsidiaries and $50,000 against its founder.

For more information, please refer to the following links:

FDIC Issues Warning to Crypto Exchange; New Multiagency Task Force Formed

By Keith R. Murphy

According to a recent letter published by the Federal Deposit Insurance Corporation (FDIC), the FDIC asserts that a major U.S. cryptocurrency exchange and its senior executives have made false and misleading statements regarding the exchange’s insured status. The FDIC letter identifies specific examples of improper statements on the exchange’s website and demands corrective action and the removal of any offending claims from the website. According to the FDIC’s letter, the exchange “is not FDIC-insured and the FDIC does not insure non-deposit products. By not distinguishing between U.S.-dollar deposits and crypto assets, the statements imply FDIC insurance coverage applies to all customer funds (including crypto assets). In addition, the FDIC does not insure or endorse particular blockchains.”

A recent press release from U.S. Immigration and Customs Enforcement announced a multiagency memorandum of understanding (MOU) formalizing the Darknet Marketplace and Digital Currency Crimes Task Force (Task Force). The MOU was signed on behalf of Homeland Security Investigations, the Arizona U.S. Attorney’s Office, the U.S. Drug Enforcement Administration, the Internal Revenue Service, and the U.S. Postal Inspection Service. According to the press release, the Task Force’s mission “is to disrupt and dismantle criminal organizations that exploit the appearance of anonymity on the darknet or use digital currency to facilitate criminal activities, such as drug trafficking, money laundering, theft of personal information, and child exploitation.”

For more information, please refer to the following links:

CBDC Initiatives Advance in Colombia, Hong Kong; DOJ Charges Defendants in Mt. Gox Hack, BTC-e; CFTC Wins Ooki DAO Case; Crypto Hacks Continue

By Robert A. Musiala, Christopher Lamb and Keith R. Murphy on June 20, 2023 Posted in Blockchain

In this issue:

• CBDC Initiatives Advance in Colombia and Hong Kong
• DOJ Charges Defendants Re: Mt. Gox, BTC-e; CFTC Highlights Ooki DAO Order
• Hackers Attack Decentralized Wallet, Centralized Trading Desk, DeFi Protocol
• Reports Provide Insights Into Cryptocurrency Illicit Finance Typologies

CBDC Initiatives Advance in Colombia and Hong Kong

By Christopher Lamb

According to a recent press release, a major U.S. fintech company and “leader in enterprise blockchain and crypto solutions” has announced a collaboration with Colombia’s Central Bank to explore blockchain technology use cases that leverage the fintech company’s Central Bank Digital Currency (CBDC) platform and its open-source blockchain, XRP Ledger. The Central Bank will “pilot use cases that enhance Colombia’s high-value payment system using … an energy-efficient and open-source blockchain.” The goal is to “educate national and territorial public entities through interactive and collaborative real-world application experiments on how blockchain technology[] … can revolutionize payment systems and data management.”

A white paper recently published by the Hong Kong Monetary Authority (HKMA) provides findings from an HKMA study on the prospect of issuing a retail CBDC (rCBDC) in Hong Kong, referred to as e-HKD. Among other things, the study found that respondents from a market consultation “are supportive of the e-HKD initiative and believe that rCBDC has the potential to make payments more efficient while supporting the digital economy.” The study found significant agreement that an rCBDC should take a holistic approach, seek to protect user privacy while supporting legal and regulatory compliance, achieve the highest level of cybersecurity, support interoperability with a wide range of payment and transaction systems, and be open and inclusive to support a diverse set of participants and rCBDC wallet providers. Based on the study findings, “the HKMA considers it necessary to at least start paving the way for possible future implementation of e-HKD.” Future initiatives cited by the study include laying the technology and legal foundations for implementing e-HKD, researching use cases and design issues, and conducting pilots with various stakeholders.

For more information, please refer to the following links:

DOJ Charges Defendants Re: Mt. Gox, BTC-e; CFTC Highlights Ooki DAO Order

By Robert A. Musiala Jr.

The U.S. Department of Justice (DOJ) recently published a press release announcing unsealed charges related to the 2011 hack of the cryptocurrency exchange Mt. Gox and the operation of the illicit cryptocurrency exchange BTC-e. According to the press release, two Russian nationals are charged with conspiring to launder approximately 647,000 bitcoins from their hack of Mt. Gox. One of the defendants is also charged with conspiring to operate BTC-e. According to the press release, the defendants laundered more than 300,000 bitcoins stolen from Mt. Gox by transferring the bitcoin to a cryptocurrency exchange account held by a “Bitcoin Broker” based in New York. In exchange for the bitcoin, the Bitcoin Broker transferred U.S. dollars to offshore bank accounts, including accounts in the names of shell corporations, controlled by the defendants. The press release notes that from 2011 to 2017, BTC-e “was one of the world’s largest cryptocurrency exchanges and was one of the primary ways by which cyber criminals around the world transferred, laundered, and stored the criminal proceeds of their illegal activities.” The defendants are charged with conspiracy to commit money laundering and operating an unlicensed money services business.

A press release by the U.S. Commodity Futures Trading Commission (CFTC) highlighted the recently entered default judgment order by the U.S. District Court for the Norther District of California against Ooki DAO. According to the press release, the order “requires the defendant Ooki DAO, a decentralized autonomous organization that the CFTC charged with operating an illegal trading platform and unlawfully acting as a futures commission merchant (FCM), to pay a civil monetary penalty of $643,542; orders permanent trading and registration bans; and orders the Ooki DAO, as well as any third party providing web-hosting or domain-name registration services to shut down the Ooki DAO’s website and remove its content from the Internet.” Among other things, the press release states that “in a precedent-setting decision, the court held that the Ooki DAO is a ‘person’ under the Commodity Exchange Act and thus can be held liable for violations of the law.”

For more information, please refer to the following links:

Hackers Attack Decentralized Wallet, Centralized Trading Desk, DeFi Protocol

By Keith R. Murphy

According to a recent report, losses to Atomic Wallet, a decentralized cryptocurrency wallet, relating to an alleged hack attributed to North Korea’s Lazarus Group have reached $100 million. The report notes that in response to the freezing of certain assets, the thief has now modified its behavior and is allegedly utilizing a Russia-based exchange to launder the stolen assets.

In related news, an institutional trading desk with a focus on cryptocurrencies reportedly suffered a cyberattack earlier this week. According to a recent report, the company halted trading, deposits and withdrawals following the cyberattack, which resulted in a $15-$20 million loss of cryptocurrency. The company had previously undergone cybersecurity audits and penetration testing in an effort to ensure it was safe, and had achieved a SOC-2 rating, according to the report.

And finally, a hack of a decentralized finance protocol has resulted in the loss of 442 Ether, worth approximately $800,000, by exploiting a security vulnerability, according to a recent report. The hack was accomplished through a reentrancy attack, and the stolen funds were sent to crypto-mixer Tornado Cash, based on the report. The root cause of the hack was noted as being a faulty price oracle.

For more information, please refer to the following links:

Reports Provide Insights into Cryptocurrency Illicit Finance Typologies

By Robert A. Musiala Jr.

Blockchain analytics provider Elliptic recently released its 2023 Elliptic Typologies Report, which analyzes “the evolving nature of illicit behaviors and financial crime typologies in the crypto space.” Among other things, the report finds that in 2022, (1) large-scale ransomware attacks persisted, with attackers devising increasingly sophisticated laundering methods; (2) pig-butchering scams proliferated to become a massive illicit business, with criminals increasingly looking to Bitcoin ATMs as a conduit for receiving funds from victims; (3) North Korea’s Lazarus Group continued its large-scale hacking activity, increasingly targeting vulnerable points in the decentralized finance (DeFi) ecosystem; (4) the Russian invasion of Ukraine focused attention on the use of cryptoassets by nation-state actors to evade financial and economic sanctions; and (5) illicit actors have increasingly begun to launder funds by swapping cryptoassets through the DeFi ecosystem. The report provides insights into these and other cryptocurrency illicit finance typologies, including through case studies and illustrations.

Another blockchain analytics firm, Chainalysis, recently published a blog post analyzing the use of cryptocurrency mining pools for money laundering. Among other things, the blog post discusses the use of mining pools to launder cryptocurrency funds by the North Korean hacking syndicate Lazarus Group, ransomware gangs and crypto scammers. The blog post includes two case studies demonstrating how threat actors use mining pools to create the illusion that illicit funds are proceeds from mining rather than criminal activity.

For more information, please refer to the following links:

Podcast: NFTs and the Future of Digital Brands

By Gerald J. Ferguson on June 12, 2023 Posted in Podcast

Guests Jerry Ferguson and Scott Kominers discuss NFTs and how they can create opportunities for brands in the marketplace with the help of some Really Awesome Raccoons.

Questions and comments: gferguson@bakerlaw.com.

Listen to the full episode.

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New Crypto and NFT Products Launch; Proposed Crypto Legislation Published; Crypto Enforcement Actions Continue; Wallet Provider Hacked for $35 Million

By Robert A. Musiala, Christopher Lamb, Lauren Bass, Veronica Reynolds and Joanna F. Wasick on June 12, 2023 Posted in Blockchain

In this issue:

• New Products Launch for Crypto Futures, Wallets, Stablecoins and Settlement
• From Sports to Fashion to Travel, Brands Continue to Embrace NFTs
• US House of Representatives Committees Publish Draft Crypto Legislation
• SEC Charges Cryptocurrency Exchanges with Securities Law Violations
• DA Seizes Fraudulent Crypto Website; South Korea Sanctions Crypto Public Keys
• Crypto Wallet Provider Hacked for $35 Million; New Crypto Hack Data Published

New Products Launch for Crypto Futures, Wallets, Stablecoins and Settlement

By Christopher Lamb

According to a recent press release, a leading global options exchange has received the necessary approval from the U.S. Commodity Futures Trading Commission to offer margined futures contracts for “physically and financially settled Bitcoin and Ether contracts.” According to the press release, this will be the “first U.S. regulated crypto native exchange and clearinghouse combination platform to offer leveraged derivative products.”

In further news, two private blockchain software technology companies recently announced the integration of a “web3 wallet for organizations and the first multi-custodial institutional web3 offering on the market.” According to a press release, the integration “will allow users to access over 17,000 DeFi and web3 dapps” when they connect their accounts through the web3 wallet. The wallet provider now offers access to 12 custodians and custody technology providers through its services.

According to another recent press release, “Asia’s leading qualified custodian and registered trust company” is launching a new stablecoin, First Digital USD (FDUSD), intended to be “backed on a 1:1 basis by one U.S. dollar or asset of equivalent fair value, held in accounts of regulated financial institutions in Asia.” According to the press release, FDUSD reserves will be held in segregated accounts restricting any co-mingling with other assets, which “ensures that holders of FDUSD can remain confident in the 1:1 backing of the tokens and the ability to redeem their stablecoins.”

In a final recent development, a global member-owned cooperative and a leading provider of secure financial messaging services is collaborating with more than a dozen major financial institutions “to test how firms can leverage their existing [] infrastructure to efficiently instruct the transfer of tokenized value over a range of public and private blockchain networks.” According to a press release, the global cooperative is “focused on enabling instant, frictionless and interoperable transactions” and wishes to use its “existing infrastructure … as a single access point to multiple tokenization platforms operated by financial institutions running on top of private blockchains.”

For more information, please refer to the following links:

From Sports to Fashion to Travel, Brands Continue to Embrace NFTs

By Lauren Bass

A major sportswear brand recently announced a partnership by which its NFT (non-fungible token) platform would be integrated into video games produced by one of the top video game publishers. According to a press release, the collaboration aims to build “new immersive experiences,” allow members of the digital community to customize and “express their personal style through play,” and offer unique virtual creations within the games.

According to reports, Japan’s largest airline recently announced the launch of its own NFT platform. The digital collectible space will reportedly offer aeronautical-themed tokens.

In a final notable item, a French luxury fashion house recently announced the launch of an NFT collection featuring digital versions of its iconic travel trunks. These NFTs are reportedly being released as soulbound tokens (SBTs), which would allow owners to unlock never-before-seen creations of the fashion house’s designs, and which offer exclusive access to unique physical, real-world items. Each NFT is reportedly selling for €39,000 (approx. $42k USD) and will be available for purchase through an invitation-only event.

For more information, please refer to the following links:

US House of Representatives Committees Publish Draft Crypto Legislation

By Veronica Reynolds

Lawmakers recently published a draft legislative framework for the regulation of digital assets. The proposed bill contemplates that oversight of digital assets be the responsibility of both the CFTC and the SEC, and was proposed by the Financial Services Committee Chair Patrick McHenry, R.-N.C., and Committee on Agriculture Chair Glenn “GT” Thompson, R.-PA.

Among other things, the draft bill proposes that digital assets offered as investment contracts be regulated by the SEC. It also provides a path for digital asset issuers to later request that the digital asset be deemed a commodity if certain requirements for decentralization of the protocol (i.e., lack of centralized control) are met. Issuers would have to apply to the SEC to be considered for the exemption. The SEC would be required to issue a “detailed analysis” if it objects to any applicant seeking the exemption.

The draft bill would also provide a path to compliance for digital asset exchanges and commodity brokers and dealers (Centralized Finance or CeFi). For example, it would allow centralized exchanges to list payment stablecoins and digital asset commodities if certain requirements were met. It would also require that digital asset exchanges and commodity brokers and dealers disclose to the CFTC certain company information through a provisional registration statement, submit to inspection by the agency, and segregate customer assets. Digital assets that meet the draft bill’s definition of “restricted digital assets” (i.e., assets that are purchased from an issuer in a private offering or distributed to end users) would trigger enhanced disclosure requirements from the issuer.

For more information, please refer to the following links:

SEC Charges Cryptocurrency Exchanges with Securities Law Violations

By Robert A. Musiala Jr.

Recently, over the course of two days, the U.S. Securities and Exchange Commission (SEC) issued two press releases announcing charges against two major cryptocurrency exchanges. The first press release announced 13 charges for violations of the U.S. securities laws against various entities used to operate the world’s largest cryptocurrency exchange by volume. The second press release announced charges against a major U.S. crypto exchange for multiple violations of U.S. securities laws. The same major U.S. crypto exchange was also issued a Show Cause Order by a multi-state task force of 10 state securities regulators, which gives the exchange 28 days to show cause why it should not be directed to cease and desist from selling unregistered securities with respect to the exchange’s staking rewards program. In a recent article that accounts for the SEC complaints filed in these actions, Cointelegraph listed a total of 68 digital assets that have now been labeled as securities by the SEC over the course of multiple SEC enforcement actions in the past several years.

For more information, please refer to the following links:

DA Seizes Fraudulent Crypto Website; South Korea Sanctions Crypto Public Keys

By Joanna F. Wasick

On June 7, the Manhattan District Attorney’s Office (Office) announced its seizure of the website domain for Coin Dispute Network (CDN), which the Office describes as “a fraudulent cryptocurrency recovery company exposed during an investigation that has identified multiple victims in Manhattan and dozens more across the country.” According to the Office, CDN purported to act as a tracing and recovery service for people whose cryptocurrency was stolen, in exchange for a fee. Instead, the Office alleges, CDN kept the fee and extracted additional ether from their customers by making false promises of asset recovery and generated inaccurate blockchain tracing reports for victims. This seizure marks the first time the Office has taken down a cryptocurrency recovery site.

According to a recent Chainalysis report, on June 1, 2023, South Korea’s Ministry of Foreign Affairs (MOFA) sanctioned Kimsuky, a North Korean hacking group that has been active since at least 2012, and is known to have stolen technologies related to weapon and satellite development as well as foreign policy information on behalf of the North Korean government. The report states that Kimsuky operatives mined cryptocurrency to generate and launder funds, operated “semi-legitimate” services to get paid in bitcoin or ether, and conducted malicious activity targeting cryptocurrency entities as well as individuals with “sextortion” campaigns. In the sanctioning, MOFA includes two cryptocurrency public keys as identifiers for the hacker organization.

For more information, please refer to the following links:

Crypto Wallet Provider Hacked for $35 Million; New Crypto Hack Data Published

By Robert A. Musiala Jr.

According to recent reports, Atomic Wallet, a centralized crypto custody and wallet service, was hacked for nearly $35 million in various cryptocurrencies. Some Atomic Wallet users reportedly found that their crypto was stolen after a recent software update, while others reportedly said they lost funds despite not running the update. In a blog post, blockchain analytics firm Elliptic stated that its investigations team “has traced funds from the $35 million Atomic Wallet hack to Sinbad.io, a mixer used to launder over $100 million in cryptoassets stolen by North Korea’s Lazarus Group.”

According to a recent blog post by blockchain security firm Beosin, “22 [crypto] security incidents occurred in May, and the total amount of losses from various attacks was about $19.69 million,” with the largest attack of the month being the attack on Jimbos on the Arbitrum chain, with a loss of about $7.5 million. According to the blog post, cryptocurrency losses in May from rug pulls and scams reached over $45 million across six incidents.

For more information, please refer to the following links: