Global Payments Network to Begin Digital Assets Pilot, Crypto Products Launch
By Robert A. Musiala Jr.
According to a recent press release by the banking cooperative that operates the world’s foremost global payment messaging network, central and commercial banks will soon be able to use the network “to carry out trial transactions of digital currencies and assets, in expansive pilots that seek to demonstrate the cooperative’s ability to facilitate the flow of all kinds of value between more than four billion accounts across 200 countries and territories.” The press release notes that “[t]he new trials will explore how [the network] can provide its community of financial institutions with a single window of access to multiple digital asset classes and currencies – paving the way for their seamless integration into the wider financial system.”
In another press release, a major cryptocurrency custody provider announced a partnership with Solidus Labs, a crypto-native compliance and security solution provider. According to the press release, the collaboration will bolster the custody provider’s transaction monitoring capabilities, “ensuring comprehensive coverage of both onchain and offchain transactions.”
In a final notable development, Anemoy, a web3 native asset manager, announced “a strategic partnership with Archax, the UK’s first regulated digital securities exchange, broker and custodian to add the Liquid Treasury Fund (LTF) to its Primary Platform.” According to a press release, the partnership “allows Archax users to directly access LTF through the platform, marking a significant step in broadening distribution for tokenised assets and enabling streamlined on-chain investments in one of the most familiar asset classes available – US Treasury bills.”
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Digital Assets Trade Groups Publish Papers on Policy and Smart Contracts
By Robert A. Musiala Jr.
A major digital assets industry trade group recently published a report titled “Mapping the U.S. Blockchain Future: Key Personnel and Policy Directions in Potential U.S. Presidential Administrations.” The report “analyzes the potential impact of the next U.S. administration on cryptocurrency, focusing on potential policy positions [and] key personnel likely to influence either a Kamala Harris or Donald Trump presidency … highlighting the priorities and individuals that could redefine the regulatory landscape for these technologies.”
Another trade group recently published a paper providing an overview of smart contract implementation within financial services and regulatory solutions for risk management. The paper “provides an initial overview of what smart contracts are, how they are being implemented within financial services and proposes how to apply existing legal and regulatory frameworks to mitigate risks from utilizing such technology.” Among other things, the paper sets forth a set of eight “principles of best practice for smart contract implementation.”
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SEC Charges Mango Markets DAO and Affiliates, CFTC Charges Also Reported
By Isabelle Corbett Sterling
In a recent press release, the U.S. Securities and Exchange Commission (SEC) announced charges against Mango DAO and Blockworks Foundation for engaging in the unregistered offer and sale of MNGO tokens (the governance tokens of the Mango Markets platform) by raising more than $70 million from unregistered offers and sales of MNGO tokens to investors worldwide, including in the U.S. According to the press release, the SEC also settled charges against Mango Labs LLC and Blockworks Foundation for acting as unregistered brokers in connection with various crypto assets offered and sold on the Mango Markets platform. The SEC’s complaint claims that the two entities solicited and recruited users of Mango Markets to trade securities, advised and provided valuations on investments in securities, and facilitated securities transactions on the Mango Markets platform by assisting customers opening accounts, and handling customer funds and securities. The acting chief of the Crypto Asset and Cyber Unit at the SEC said, “Since the inception of our crypto enforcement program, our view has been that the label ‘DAO’ does not change the reality of who is behind a project, what activities they engage in, or whether their activities need to be registered. Nor does engaging in intermediation of securities with the aid of automated or open-source software change the nature of such activities.” Mango Labs LLC and Blockworks Foundation have agreed to injunctions and to pay nearly $700,000 in civil penalties, to destroy their MNGO tokens, to request removal of MNGO tokens from trading platforms, and not to solicit any trading platform to offer MNGO.
According to recent reports, Mango Markets, which is governed by a DAO, will present the U.S. Commodity Futures Trading Commission (CFTC) with a binding $500,000 settlement offer as well as an agreement to cease and desist from further commodities law violations to resolve a nonpublic investigation by the agency. The proposal by the entity appointed as the go-between for the DAO and its legal counsel reportedly says that the CFTC has alleged that Mango DAO, Mango Labs and Blockworks Foundation violated registration provisions of the Commodities Exchange Act and CFTC regulations, including failure to comply with the Bank Secrecy Act. The $500,000 would be paid by the DAO, Mango Markets and Blockworks Foundation, and funds would come from the DAO Treasury.
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DOJ and Foreign Agencies Continue Crypto Enforcement, Seize Illicit Crypto
By Keith R. Murphy
According to multiple recent press releases, Tether assisted the U.S. Department of Justice (DOJ) in connection with the seizure of more than $6 million in purported proceeds of a cryptocurrency confidence scheme. The alleged scheme, run out of Southeast Asia, targeted United States individuals and resulted in the theft of millions of dollars of cryptocurrency. The U.S. Federal Bureau of Investigation reportedly was able to trace victims’ funds on the blockchain and locate more than $6 million of victim funds across multiple cryptocurrency wallet addresses. According to the releases, Tether froze and assisted in the retransfer of these fraudulently obtained assets.
In related enforcement news, a recent press release from the DOJ announced that an Indiana man has pleaded guilty to conspiracy charges relating to cyber intrusion and the theft of $37 million in cryptocurrency. According to the release, the defendant stole customers’ personal identifying information from an investment holding company and then used this information to steal cryptocurrencies from nearly 600 clients who held assets with the investment holding company. The stolen cryptocurrencies reportedly were funneled around the world, including through mixing services and gambling websites.
And finally, according to a recent media release, the multiagency Criminal Assets Confiscation Taskforce (CACT), run by the Australian Federal Police (AFP), seized $9.3 million in cryptocurrency in connection with an investigation into the alleged mastermind of Ghost, a dedicated encrypted communication platform. A CACT analytics specialist reportedly deciphered the seed phrase of an account following analysis of digital devices found at the man’s home, which enabled the AFP to access and transfer the funds into secure storage. According to the release, this is the second restraint of assets conducted in connection with Operation Kraken by the AFP.
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Crypto Hacks and Scams Continue; 2024 Q3 Data Shows Increase in Losses
By Robert A. Musiala Jr.
According to recent reports, Bedrock, a liquid restaking protocol, recently lost approximately $2 million in digital assets in a hacking incident. The hack reportedly involved a security vulnerability involving uniBTC, a so-called synthetic bitcoin token. In another recent incident, scammers reportedly stole more than $70,000 in cryptocurrencies from various victims through a scam involving a fake crypto wallet application. The fake wallet app was reportedly available on a major application downloading service for approximately four months before being shut down.
Recent reports provided updated data on the crypto threat environment. According to a report by Immunefi, Q3 2024 losses to crypto threats totaled $412,994,499, with $409,906,947 lost to hacks across 31 incidents and $3,087,552 lost to fraud across three incidents. According to another report, losses from security incidents in Q3 2024 totaled $753 million across 155 incidents. And a third report reportedly found that losses to hacks and scams in the web3 ecosystem have reached an all-time high of $2.1 billion in the first three quarters of 2024, already exceeding the total losses in 2023.
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