This week witnessed a surge in global crypto enforcement actions, with the U.S., Germany, and Hong Kong making significant moves. Ripple co-founder Chris Larsen fell victim to a major hack, while FTX announced plans to fully repay its customers.
Enforcement actions
Multiple enforcement actions took place this week, with the U.S. taking the lead. The U.S. Department of Justice (DoJ) charged Belarusian national Aliaksandr Klimenka for his involvement with Russian crypto exchange platform BTC-e. Additionally, two staff members of a New Jersey school, Jeffrey Menge and Eric Drabert, faced charges for running an illegal crypto mining farm.
The U.S. Securities and Exchange Commission (SEC) also joined in by indicting Brian Sewell, the founder of American Bitcoin Academy, for allegedly orchestrating a scheme that stole $1.2 million from students.
Regulatory climate
Amidst these enforcement actions, the regulatory climate in the U.S. remains uncertain. Coinbase challenged the SEC’s rejection of their petition for clear rules-making, claiming that the basis for rejection was inadequate. The SEC withdrew its case against Debt Box to avoid potential penalties after being asked to justify proposed penalties against the company.
A report confirmed that 18 U.S. senators support the crypto scene, including Cynthia Lummis of Wyoming and Ted Cruz of Texas.
Germany and Britain seize billions in crypto
The enforcement actions were not limited to the U.S. German police seized 50,000 Bitcoin tokens worth over $2 billion during an investigation into an illegal file-sharing protocol. Similarly, British police confiscated 61,000 BTC worth $1.7 billion from an investment scam involving Chinese nationals in 2018.
China crypto regulations
China and Hong Kong also made headlines this week. China plans to review its anti-money laundering policies to accommodate the crypto industry after 17 years. Hong Kong expressed its commitment to enforcing robust crypto regulations and raided six offices associated with OpenAI’s Worldcoin project.
The Beijing Municipal Development and Reform Commission released a plan for strengthening energy conservation in cryptocurrency mining activities.
Ripple chair hacked
Ripple co-founder Chris Larsen fell victim to a hack involving 213 million XRP worth $112.5 million. The malicious actors used exchanges like Binance, Gate.io, and Kraken to siphon the funds. Binance froze $4.2 million of the stolen funds sent to their platform. Another security breach occurred with the SSX project, resulting in the theft of $10.2 million worth of SSX tokens from Upbit.
FTX plans full customer repayment
FTX announced plans to liquidate its assets to fully repay its customers, abandoning previous plans to restart the exchange. The FTX bankruptcy estate received $26.8 million from a British charity organization. FTX is also seeking permission to sell its stake in Anthropic, aiming to realize $1.4 billion in funds. The DoJ revealed that FTX lost $400 million due to a sim-swap attack orchestrated by three individuals over two years.
Spot Bitcoin ETF market updates
In the U.S., spot Bitcoin ETF products experienced net inflows after a week-long decline, with inflows totaling $247 million on January 30 and $38.4 million on February 1. Galaxy Digital and Invesco reduced fees on their spot Bitcoin ETF products, while Valkyrie chose Bitgo as a custodian for its ETF, becoming the first issuer with two custodians. BlackRock and VanEck’s spot Bitcoin ETF products secured ad space on Google following a change in Google’s ad policy to allow crypto-related advertisements. Harvest Fund’s Hong Kong branch filed to launch a spot Bitcoin ETF.
Hot Take: A Week of Global Crypto Enforcement Actions and Hacks
This week has been eventful in the crypto world, with several countries taking action against illicit activities and hacks. The U.S., Germany, and Hong Kong all made significant moves in terms of enforcement actions, seizing billions of dollars’ worth of cryptocurrencies. Meanwhile, Ripple co-founder Chris Larsen fell victim to a major hack, highlighting the ongoing security risks in the industry.
Amidst these developments, regulatory uncertainty persists in the U.S., while China and Hong Kong are actively working on implementing crypto regulations. FTX also made headlines with its plans for full customer repayment and revelations about its losses due to a sim-swap attack.
On a positive note, spot Bitcoin ETF products saw net inflows after a period of decline, signaling renewed investor interest. Overall, this week serves as a reminder of the challenges and opportunities present in the crypto market.
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