Matrixport, a leading digital finance platform, today, November 22, released a comprehensive research note focusing on the significant implications of yesterday’s developments in the crypto industry, particularly regarding the prospects of a spot Bitcoin Exchange-Traded Fund (ETF) in the United States.
Following the guilty plea of Binance CEO Changpeng Zhao (CZ) and the substantial financial settlements involved, Matrixport suggests that the path for approving a spot Bitcoin ETF might have become significantly clearer. The note highlights the regulatory crackdowns and compliance upgrades in the crypto sector, indicating a shift towards greater regulatory alignment with traditional financial (TradFi) systems.
“Some would argue that the US agencies have cleaned up the industry this year by dismantling the US crypto-related banks, as two of them were running an internal ledger that crypto companies could use 24/7 to transfer fiat. Arguably, few (perceived) major actors are left, and with Bitcoin only declining -3.4% during the last 24 hours, the market is stomaching a major risk-off event,” Matrixport remarks.
Spot Bitcoin ETF Approval Odds At 100% Now?
The company points out that with stringent enforcement actions and enhanced compliance programs becoming the norm among crypto exchanges, the differentiation between regulated and non-regulated cryptocurrency exchanges may become a key metric in 2024. This shift is seen as instrumental in the potential approval of a spot Bitcoin ETF in the US, a development long anticipated by the industry.
“The result will likely be that more exchanges will enhance their compliance programs and become part of a surveillance-sharing agreement, which will be instrumental in approving a spot Bitcoin ETF in the US,” the firm stated, adding, “With this plea deal, the expectations for a spot Bitcoin ETF might have increased to 100% as the industry will be forced to follow the rules that TradFi firms must follow.”
The firm believes that this “whitewashing” of the industry will not only enhance Bitcoin’s adoption by institutional players but also position it as a safe-haven asset in investment portfolios. “More importantly, this industry’s whitewashing will strengthen the Bitcoin adoption case for institutional players and will likely become a safe-haven asset in investors’ portfolios,” Matrixport predicts.
The note also touches on the anticipated sale of the FTX exchange and its potential relaunch under a US securities law-compliant management team by Q3 2024. Matrixport speculates that this could lead to significant inflows, estimated between $24-50 billion, into any US-listed Bitcoin ETF. They also note the increasing trend of crypto firms making markets on CME-listed crypto derivatives, indicating a shift from retail-focused, unregulated exchanges to those that are fully regulated and cater to institutional clients.
‘Dark Cloud Has Been Removed’ As ETF Makes Progress
Analysts and industry experts have echoed Matrixport’s sentiments. Will Clemente, a noted analyst, stated, “With resolution on Binance, just a matter of weeks until Bitcoin ETF approval now.” Tony “The Bull” Severino, head of research at NewsBTC, commented, “A dark cloud has just been removed from the crypto market.” Conversely, Scott Johnsson, a finance lawyer at Davis Polk, offered a more cautious view, suggesting that “It’s far more likely an ETF decision led the Binance resolution than the other way around imo. And I’m not convinced either is that likely.”
Remarkably, there has been some movement in the spot ETF approval process in the last few days. Ark Invest has kicked off the third round of amendments to the S-1 filings, Grayscale had a meeting with the US Securities and Exchange Commission yesterday regarding its “uplisting.”
NEW YORK (AP) — The Department of Justice has informed former Vice President Mike Pence ‘s legal team that it will not pursue criminal charges related to the discovery of classified documents at his Indiana home.
The department sent a letter to Pence’s attorney on Thursday informing him that, after an investigation into the potential mishandling of classified information, no criminal charges will be sought.
WASHINGTON (AP) — Lawyers for former President Donald Trump have in recent months voluntarily turned over to federal investigators additional papers marked as classified, as well as a laptop belonging to a Trump aide, a person familiar with the situation said Friday night.
The legal team also provided an empty folder with classified markings, according to the person, who spoke on condition of anonymity to The Associated Press to discuss an ongoing investigation. It was not immediately clear what material was supposed to have been in the folder.
A Justice Department special counsel has been investigating the retention by Trump of hundreds of documents marked as classified at his Florida estate, Mar-a-Lago. FBI agents who served a search warrant at the property in August recovered roughly 100 classified documents, including records classified at the top-secret level.
A federal grand jury has been hearing evidence in the case for months. Prosecutors are investigating whether Trump willfully hoarded the material and whether he or anyone else sought to obstruct their probe, court filings show.
ABC News first reported the discovery of the additional documents.
The person familiar with the matter said a handful of pages with classified markings were found during a search weeks ago at the Mar-a-Lago complex that was supervised by the Trump legal team, and were promptly provided to the Justice Department. The documents were found in a box containing thousands of pages, the person said. The Trump legal team had enlisted investigators to search for any other classified documents that had not yet been recovered by the government.
Separately on Friday, the FBI searched the Indiana home of former Vice President Mike Pence and found an additional document with classified markings, following the discovery by his lawyers last month of sensitive documents. FBI officials have also searched the Delaware homes of President Joe Biden after his lawyers found documents with classified markings at his former office in Washington and at his Wilmington property.
The Department of Justice (DOJ) has sent a pointed letter to the new chair of the House Judiciary Committee, Rep. Jim Jordan (R-Ohio), signaling that it’s unlikely to share information about ongoing probes to safeguard the “integrity” of the investigations.
Additionally, the letter warned that the DOJ probably wouldn’t share any “non-public” information.
The letter read that the department is “committed to cooperating with the Committee’s legitimate efforts to seek information,” adding: “Any oversight requests must be weighed against the Department’s interest in protecting the integrity of its work.” Assistant Attorney General Carlos Uriarte sent out the letter Friday to Jordan.
“Longstanding Department policy prevents us from confirming or denying the existence of pending investigations in response to congressional requests or providing non-public information about our investigations,” according to the letter.
“The Department’s obligation to ‘protect the government’s ability to prosecute fully and fairly’ is vital to the Executive Branch’s core constitutional function to investigate and prosecute criminal matters,” Uriarte said in the letter.
He added that the executive branch’s policy throughout history has “generally been to decline to provide committees of Congress with access to, or copies of, open law enforcement files except in extraordinary circumstances.”
The letter was in response to Jordan’s sweeping demand Tuesday for information about several investigations to Attorney General Merrick Garland, as well as to the FBI, the Drug Enforcement Administration and the Bureau of Alcohol, Tobacco, Firearms and Explosives.
The demand included all records and communications regarding classified documents found recently at President Joe Biden’s home and a former office.
Jordan heads not only the Judiciary Committee but also a special subcommittee to investigate the Biden administration and the so-called “weaponization” of the federal government.
The letter from Uriarte laid out ways the DOJ and committees can cooperate. DOJ officials can brief committee members on issues, he noted.
In addition, DOJ authorities can testify in congressional hearings about certain matters as long as they’re given adequate notice at least two weeks in advance, he wrote.
Jordan did not immediately respond to the letter. But a tweet from the committee asked why the DOJ was “scared” to cooperate.
Why’s DOJ scared to cooperate with our investigations?
The U.S. Department of Justice (DOJ) has announced the closure of the Bitzlato cryptocurrency exchange, along with the FBI’s arrest of the exchange’s owner, Anatoly Legkodymov. In a live stream hosted on January 18, representatives from the law enforcement bureau revealed that the Hong Kong-based exchange was allegedly a part of a large illicit cryptocurrency network designed to circumvent sanctions, launder money and conceal crimes.
“Legkodymov operated Bitzlato as a high-tech financial hub that, in his own words, catered to ‘known crooks,’” the DOJ statement reads. “Bitzlato failed to implement safeguards required by U.S. law – safeguards that enable authorities to detect and investigate financial crimes.”
In the live stream, officials warned that criminal actors, regardless of their location or residence, must answer to U.S. law enforcement. “Whether you break our laws from China or Europe or abuse our financial system from a tropical island—you can expect to answer for your crimes inside a United States courtroom,” the DOJ claims, in a potential reference to the embattled FTX’s Bahamas hub.
Indeed, the announcement regarding Bitzlato comes at a time of increasing scrutiny from law enforcement and regulators. Gemini and Genesis have both been charged by the SEC in just the previous week, alongside the aforementioned FTX and all the charges levied against those involved.
The DOJ alleges that Bitzlato facilitated more than $700 million in transactions involving illicit funds from 2018-2022, but at the time of the live stream, Bitzlatos’ tagged wallets only had $11,000 on them, compared to a peak of $6 million. Even at its peak, the volume of money involved in this event is minor when compared to the recent collapse of Three Arrows Capital and other related entities, who many alleged to be scams in their own right. This discrepancy in volume could potentially frustrate those desiring proper law enforcement in the industry.
Sam Bankman-Fried, the disgraced former CEO of collapsed cryptocurrency exchange FTX, has been formally indicted on charges of fraud, money laundering and others. The unsealed document reveals eight charges from the United States Southern District Court of New York, including:
Conspiracy to commit wire fraud on customers
Wire fraud on customers
Conspiracy to commit wire fraud on lenders
Wire fraud on lenders
Conspiracy to commit commodities fraud
Conspiracy to commit securities fraud
Conspiracy to commit money laundering
And conspiracy to defraud the United States and violate the Campaign Finance Laws.
This follows Bankman-Fried’s arrest on the night of December 12 in the Bahamas by local authorities, after they had received notification from the U.S. that it had filed criminal charges against SBF.
SBF was also charged with defrauding investors by the U.S. Securities and Exchange Commission, alleging that he diverted customer funds from FTX to Bankman-Fried’s Alameda Research fund while simultaneously raising $1.8 billion with investors.
In addition to the SEC and N.Y. Southern District Court’s charges, the CFTC also filed charges against SBF, Alameda Research and FTX for “fraud and material misrepresentations in connection with the sale of digital commodities.”
The collapse of FTX led to billions of dollars of lost customer funds which have yet to be recovered, and there is no guarantee that will happen. Both FTX and Alameda Research fund are undergoing bankruptcy proceedings. Today’s unsealed indictment shows that the Department of Justice is seeking any profits Bankman-Fried received from these ventures.
The House Financial Services Committee has commenced its investigation into the collapse of FTX, with the current CEO testifying. Bankman-Fried appeared this morning in front of Chief Magistrate Joyann Ferguson-Pratt in Nassau, during which he told the judge that he had not yet had the chance to speak to his lawyer.
A Reuters report stated that several sources close to the investigation claim there is deliberation on whether to not to file charges against individual Binance executives including CEO Changpeng Zhao.
Others within the investigating entities, which include the Money Laundering and Asset Recovery Section (MLARS), have argued in favor of reviewing more evidence.
The investigation, which was launched nearly two years ago, comes at a precarious time for the industry as it reels from the collapse of FTX.
Binance has responded to the Reuters report, stating on Twitter, “Reuters has it wrong again. Now they’re attacking our incredible law enforcement team. A team that we’re incredibly proud of – they’ve made crypto more secure for all of us,” with a link below to a blog post highlighting their claims of the competency of their security team.
According to Reuters’ sources, “discussions included potential plea deals,” in relation to charges of “unlicensed money transmission, money laundering conspiracy and criminal sanctions violations.”
As the news source notes, the investing bodies could bring an indictment against Binance and executives at the company, could accept a settlement or could do nothing to the company. Binance has reportedly argued that “A criminal prosecution would wreak havoc on a crypto market already in a prolonged downturn.”
The cryptocurrency exchange responded to the investigation by hiring a former chief of MLARS, Kendall Day, who reportedly has been meeting with Justice officials and communicating with investigators.
Binance is the world’s largest cryptocurrency exchange with a 24 hour trading volume of about $10.5 billion on the day of reporting. A separate U.S. entity exists, Binance.US. The international company does not have an official headquarters according to the CEO.
The U.S. Department of Justice seized over $3.36 billion in BTC related to Silk Road that has been missing since 2012, per a release from the Justice Department.
James Zhong, an exploiter who stole 51,680.32473733 BTC from Silk Road, has pleaded guilty to committing wire fraud in order to steal bitcoin from the dark web marketplace.
“James Zhong committed wire fraud over a decade ago when he stole approximately 50,000 Bitcoin from Silk Road,” U.S. Attorney Damian Williams said. “For almost ten years, the whereabouts of this massive chunk of missing Bitcoin had ballooned into an over $3.3 billion mystery.”
From 2011 until 2013, Silk Road served as a marketplace for users to obtain drugs anonymously, as well as other items not easily obtained through regulated marketplaces. In 2015, Silk Road’s founder Ross Ulbricht was arrested and sentenced to life in prison.
“Thanks to state-of-the-art cryptocurrency tracing and good old-fashioned police work, law enforcement located and recovered this impressive cache of crime proceeds,” Williams continued. “This case shows that we won’t stop following the money, no matter how expertly hidden, even to a circuit board in the bottom of a popcorn tin.”
In September of 2012, Zhong executed a successful wire fraud attempt by creating at least nine fake accounts which simultaneously launched the Silk Road withdrawal process creating over 140 transactions in rapid succession. The bitcoin was dispersed into multiple accounts which was then transferred to multiple addresses, or bitcoin wallets.
Initially, Zhong would deposit anywhere between 200 and 2,000 BTC to start an account and within moments he would trigger rapid withdrawals for the amount of BTC used to fund the account, but he would launch multiple withdrawals and the system couldn’t keep track of how many withdrawals were paid out.
On November 9, 2021 IRS-CI agents seized “50,491.06251844 Bitcoin of the approximately 53,500 Bitcoin Crime Proceeds (a) in an underground floor safe; and (b) on a single-board computer that was submerged under blankets in a popcorn tin stored in a bathroom closet. In addition, law enforcement recovered $661,900 in cash, 25 Casascius coins (physical bitcoin) with an approximate value of 174 Bitcoin, 11.1160005300044 additional Bitcoin, and four one-ounce silver-colored bars, three one-ounce gold-colored bars, four 10-ounce silver-colored bars, and one gold-colored coin.”
Zhong will be sentenced by Judge Gardephe on February 22, 2023, at 3:00 p.m.
From left, Assistant Attorney General for National Security Matthew Olsen, Deputy Attorney General … [+] Lisa Monaco, Attorney General Merrick Garland, and FBI Director Christopher Wray, meet with reporters as they announce charges against two men suspected of being Chinese intelligence officers for attempting to obstruct a U.S. criminal investigation and prosecution of Chinese tech giant Huawei, at the Department of Justice in Washington, Monday, Oct. 23, 2022. (AP Photo/J. Scott Applewhite)
Copyright 2022 The Associated Press. All rights reserved
Monday marked a major escalation in the U.S.’s legal war on Huawei—and on the People’s Republic of China (PRC). On Monday, the DoJ unsealed an indictment against two PRC intelligence agents charged with obstructing the DoJ’s criminal case against a Chinese telecommunications company widely understood to be Huawei. The U.S. has launched legal attacks against Huawei for years. Monday’s indictment, however, marks the first time that PRC officials have been charged in connection with the U.S.’s legal proceedings against Huawei. The unraveling of Huawei’s ties to the PRC may bode poorly for the U.S.’s relationship with other Chinese-owned tech companies, including TikTok. It may also have tremendous implications for relations between the U.S. and the PRC in the courtroom and beyond.
The U.S. and Huawei have been engaged in legal battles for the past five years. In August 2018, Congress enacted the 2019-2020 National Defense Authorization Act (NDAA), which blocked the U.S. government from procuring, extending, or renewing contracts with Huawei for telecommunications equipment, systems or services; from doing business with entities that use Huawei equipment, systems or services; and from contracting for any equipment, system, or service for which Huawei products are a substantial component or critical technology. The PRC requires its corporations to allow the state access to their products for government use, upon request. Congress’s concern was that Huawei, given its close ties to the Chinese Communist Party and history of industrial espionage, could provide a back door in its technology that would allow the PRC to spy on the U.S. In 2020, Huawei lost a federal lawsuit challenging the ban, in which it denied allegations that its products would be used for spying and argued that the ban was unconstitutional.
This screen grab made from video released on September 25, 2021 by Chinese state broadcaster CCTV … [+] shows Huawei executive Meng Wanzhou waving as she steps out of the plane upon arrival following her release, in Shenzhen in China’s southern Guangdong province. – – China OUT – XGTY / RESTRICTED TO EDITORIAL USE – MANDATORY CREDIT “AFP PHOTO / CHINA CENTRAL TELEVISION (CCTV) ” – NO MARKETING NO ADVERTISING CAMPAIGNS (Photo by CCTV / AFP) / China OUT – XGTY / RESTRICTED TO EDITORIAL USE – MANDATORY CREDIT “AFP PHOTO / CHINA CENTRAL TELEVISION (CCTV) ” – NO MARKETING NO ADVERTISING CAMPAIGNS / China OUT – XGTY / RESTRICTED TO EDITORIAL USE – MANDATORY CREDIT “AFP PHOTO / CHINA CENTRAL TELEVISION (CCTV) ” – NO MARKETING NO ADVERTISING CAMPAIGNS (Photo by -/CCTV/AFP via Getty Images)
CCTV/AFP via Getty Images
Meanwhile, the DoJ went after Huawei’s leadership. On December 6, 2018, Canada arrested Meng Wanzhou for bank fraud and violation of U.S. sanctions on Iran. Meng is Huawei’s CFO CFO , the deputy chair of its board, and the daughter of its founder. In response, Meng argued that her extradition would violate Canada’s constitution because the allegations against her were not crimes under Canadian law. Meng lost her motion, but struck a deferred prosecution agreement with the DoJ in exchange for her return to the PRC. Under the agreement, Meng did not admit guilt, but made statements regarding the company’s actions that, ostensibly, the DoJ could use in prosecutions against Huawei—which by then, were already underway.
In Feburary 2020, the U.S. District Court in Brooklyn returned a superseding indictment against Huawei, its official and unofficial U.S. subsidiaries, and Sabrina Meng, updating earlier charges. The indictment included 16 charges involving Huawei’s alleged practice of fraudulently and deceptively misappropriating technology from U.S. companies, and allegations of Huawei’s attempts to conceal its involvement in business in countries subject to U.S., E.U., or U.N. sanctions. Monday’s indictments assert that Chinese intelligence officials attempted to obstruct its prosecution of Huawei, laundering money in the process. According to Monday’s indictment, Guochun He and Zen Wang, two PRC intelligence officers paid at least $61,000 in Bitcoin BTC bribes to a double-agent supervised by the FBI in order to obtain what they believed to be confidential information about witnesses, trial evidence, and potential new charges to be brought against Huawei. He and Wang were not arrested and are believed to be in the PRC.
This wanted poster provided by the FBI shows Guochun He. Guochun He is one of two suspected Chinese … [+] intelligence officers have been charged with attempting to obstruct a criminal investigation and prosecution into Chinese tech giant Huawei. That’s according to court documents unsealed Monday, Oct. 24, 2022. (FBI vi AP)
Associated Press
By alleging that Chinese officials are directly involved in an attempt to obstruct Huawei’s prosecution, the DoJ has, for the first time, drawn a direct link between Huawei’s allegedly illegal activities and the Chinese state. DoJ officials made this explicit in their remarks accompanying the announcement of the indictments, and in their timing. Attorney General Merrick Garland announced the Huawei-related indictment simultaneously with two others involving “Alleged Participation in Malign Schemes in the United States on Behalf of the Government of the People’s Republic of China.” The other cases involved a conspiracy to forcibly repatriate PRC nationals, known as Operation Fox Hunt, and an effort to target individuals in the U.S. to act as PRC agents. Garland painted the three cases as part of a broad PRC effort to “interfere with the rights and freedoms of individuals in the United States and to undermine our judicial system that protects these rights.” Deputy Attorney General Lisa Monaco’s pointed remarks cited “ongoing efforts to steal sensitive U.S. technology.” In what may have been a warning, she asserted, “The case exposes the interconnection between PRC intelligence officers and Chinese companies, and it demonstrates, once again, why such companies—especially in the telecommunications industry—should not be trusted to securely handle our sensitive personal data and communications.”
The DoJ’s indictments, and allegations of the PRC’s intent to undermine democracy, will pressure lawmakers to restrict technology from exploitation by the PRC. The Biden administration has launched efforts to restrict the PRC from gaining access to sensitive technologies, particularly those with military applications. Earlier this month, the administration announced new limits on the sale of semiconductor technology to the PRC. The FCC is expected to vote soon on whether it will ban new Huawei products from being sold in the U.S. The indictments also come as the U.S. is negotiating a much-awaited deal with TikTok to ensure that it is not used as a spying tool by the PRC and to protect Americans’ data accordingly. If the deal fails, TikTok’s operations within the U.S. may be at risk—along with the Democratic Party’s relationship with many young voters who use the app. TikTok will now be on the defensive to prove it can safeguard Americans’ data from the long arm of the Chinese state—which apparently extends to spies on U.S. soil.
When Meng Wanzhou received a deferred prosecution agreement and was sent home to the PRC, many observers argued that she received a slap on the wrist. But experienced attorneys knew that the DoJ was using an old prosecutor’s trick: use the little fish to catch the big ones. As lawfare between the U.S. and Huawei continues, it seems that the bigger fish may be Huawei, the PRC’s tech industry—or even the PRC itself.
