This week, the United States Securities and Exchange Commission (SEC) hinted at exploring alternative legal avenues following Judge Torres’ ruling that XRP is not a security. Meanwhile, surprising revelations emerged from the FTX saga. Despite this, regulatory efforts continued to be in the spotlight as cryptocurrency adoption increased.
The SEC is considering appealing the court’s ruling on XRP
After Ripple’s victory against the SEC, lawyer Marc Fargel expressed doubts about the court’s decision. He believed that the ruling could challenge the SEC’s arguments on the trading of assets in secondary markets, including cryptocurrencies.
Fargel predicted potential appeals from both parties, with the SEC having an edge in overturning the ruling on “programmatic sales.” He noted that if the SEC chooses not to appeal, it could impact its cases with other crypto-focused entities like Binance and Coinbase.
Following Judge Torres’ ruling that XRP does not meet the definition of a security, Judge Sarah Netburn requested Ripple and the SEC to collaborate in selecting three suitable dates for a settlement discussion.
However, it is essential to manage expectations as the mere suggestion of a settlement talk does not guarantee an immediate resolution. The discussion will only proceed if both parties see it as beneficial.
The SEC is dissatisfied with Judge Torres’ decision on July 13, and this week they hinted at the possibility of appealing. The SEC believes that the ruling contradicts established securities laws, prompting them to consider pursuing further review through an appeal process.
Judge Torres found that while Ripple’s sale of XRP to major investors was a violation, he did not apply the same judgment to transactions involving smaller investors. This discrepancy is a point of contention for the SEC.
New revelations concerning Bankman-Fried
The FTX saga continued this week with interesting developments. The Australian financial regulator announced on July 19 that it had revoked FTX Australia’s operational license.
FTX Australia is only allowed to provide limited services to settle obligations and repay clients until July 12, 2024, when its license will be terminated.
Subsequently, reports on July 20 suggested that FTX’s legal representatives accused Sam Bankman-Fried of misusing customer funds for personal gain.
The new FTX leadership is seeking the return of $71.5 million from Bankman-Fried’s Life Science NGO, alleging that the NGO and FTX Foundation used user funds to invest in life science ventures during 2022.
These investments supposedly enhanced Bankman-Fried’s reputation and influence in political and investor circles. After his companies collapsed in 2022, FTX reportedly provided financial support to politicians in exchange for their backing.
Furthermore, court filings from July 20 shed light on Bankman-Fried’s unconventional measures to protect himself and his associates. According to the records, Bankman-Fried considered buying Nauru, an independent island nation, as a refuge for him and his allies in the effective altruism community in case of major disasters.
The reports also revealed a significant $22.5 million bonus granted to Ellison, a key member of FTX.com, in March 2022. This bonus was awarded to the company during a critical financial period when they faced a substantial $10 billion challenge.
The FTX saga unfolds
This week, the new FTX management filed a $1 billion lawsuit against former CEO Sam Bankman-Fried and associates, alleging mismanagement and embezzlement. The new management aims to recover these funds.
Bankman-Fried and his associates are accused of unauthorized transfers, concealing illegal activities, and lacking proper financial records, contributing to the exchange’s downfall.
The lawsuit highlights various transactions, including $100 million in political donations and over $500 million used to purchase Robinhood shares with government involvement.
McDonald’s joins the metaverse trend
In line with other major brands like Coca-Cola and Gucci, McDonald’s Hong Kong ventured into the virtual realm by launching “McNuggets Land” on The Sandbox platform to celebrate the 40th anniversary of Chicken McNuggets’ global launch.
“McNuggets Land” offers a variety of mini-games and interactive activities centered around the iconic McNuggets. Players can earn SAND tokens as they complete quests.
Of particular interest to the Hong Kong community is the chance to obtain genuine McDonald’s vouchers by finishing tasks in “McNuggets Land.”
US regulatory challenges
As cryptocurrencies gain popularity, there is a growing need for robust regulatory frameworks, especially in the United States. Congressman Ritchie Torres expressed his concerns to SEC Chairperson Gary Gensler on July 18, urging a shift in focus from cracking down on cryptocurrencies to targeting wrongdoers in the industry.
Torres praised Judge Analisa Torres’ ruling in the Ripple vs. SEC case, where XRP was deemed a non-security. He highlighted the implications of the SEC’s aggressive stance on cryptocurrencies in light of recent legal outcomes.
The US Senate introduced the Crypto-Asset National Security Enhancement Act of 2023 on July 18. The bill aims to regulate DeFi protocols by imposing strict anti-money laundering rules on entities managing these protocols or offering user-friendly interfaces for smart contracts.
Entities investing over $25 million in DeFi development, even within decentralized protocols, must adhere to regulatory requirements, including customer checks, anti-money laundering measures, and reporting suspicious activities promptly.
Kristin Smith, CEO of the Blockchain Association, opposed the bill, citing inconsistencies with decentralized finance principles. The Association argued that fraudulent transactions in crypto were minimal compared to traditional finance crimes, and existing law enforcement tools were sufficient.
Kennedy Jr. criticizes SEC, advocates for Bitcoin
Senator Robert F. Kennedy Jr. expressed doubts about SEC Chairman Gary Gensler’s handling of crypto fraud during a Senate Committee hearing on July 19. He questioned the SEC’s lack of investigation into FTX despite Sam Bankman-Fried’s involvement in the exchange.
Kennedy Jr. criticized the SEC for not thoroughly examining FTX and raising questions about Bankman-Fried’s wealth source.
In the midst of this regulatory dilemma, Robert F. Kennedy Jr., the Democratic presidential candidate, voiced his support for cryptocurrencies, especially Bitcoin, in an interview with Heal The Divide and Bitcoin Magazine.
RFK Jr. proposed backing 1% of Treasury Bills with a hard currency like gold or Bitcoin to boost Bitcoin adoption within the country and attract investments.
Kuwait bans crypto, UK explores regulatory measures
Kuwait’s Central Markets Authority banned all cryptocurrency activities, including payments, mining, and investment, following a study to comply with international standards. The ban does not affect regulated securities or other financial instruments.
Meanwhile, Britain’s Financial Services Minister, Andrew Griffith, addressed a report that recommended classifying specific crypto assets as gambling due to consumer risks. Griffith disagreed with this proposal, opting for a balanced approach to caution investors about crypto risks while developing suitable regulatory frameworks.
These developments underscore the ongoing regulatory challenges facing the cryptocurrency industry globally.