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Crypto Exchanges

The plaintiffs allege that they were deceived into buying securities and that Coinbase’s business model is illegal.

Stay up-to-date with the latest legal developments in the world of cryptocurrency. Find out how regulations impact the industry on Coinpaper.com.

Legal

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Coinbase and Its CEO Hit With New Class-Action Lawsuit

The chair of the United States Commodity Futures Trading Commission believes there will very likely be an uptick in enforcement actions from regulators over the next 6 to 24 months.

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SEC Issues Wells Notice to Robinhood Over Securities Violations

Charles Hoskinson, the founder of Cardano, expressed interest in Bitcoin Cash's development roadmap, sparking curiosity and speculation in the cryptocurrency community.

Discover the latest news and insights on the world of cryptocurrency with Coinpaper.com. Stay up-to-date on the latest trends and developments in the crypto space.

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Curiosity Sparks as Cardano Founder Charles Hoskinson Eyes Bitcoin Cash

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Coinbase and its CEO Brian Armstrong are facing a new class-action lawsuit alleging that  people were deceived into buying securities and that the exchange’s business model is illegal. The lawsuit was filed in a California district court and claims that Coinbase's digital asset sales violated state securities laws, with tokens like Solana and Polygon being considered as securities. 

Meanwhile, Alexander Vinnik, co-founder of the BTC-e exchange, pleaded guilty to money laundering conspiracy. Additionally, three former executives of the bankrupt crypto lender Cred were charged with wire fraud and money laundering.

 and its CEO Brian Armstrong. The lawsuit, filed in the United States District Court for the Northern District of California San Francisco Division, alleges that investors were deceived into buying securities and that Coinbase's business model is illegal.

The plaintiffs also claim that Coinbase's digital asset sales violated state securities laws since the company was started. They believe that tokens like 

 (SOL), Polygon (MATIC), Near Protocol (NEAR), Decentraland (MANA), Algorand (ALGO), 

 (UNI), Tezos (XTZ), and Stellar Lumens (XLM) are securities.

According to the lawsuit, Coinbase actually admitted to being a "Securities Broker" in its user agreement and implied that the digital asset securities sold by the exchange qualify as investment contracts or other securities. The plaintiffs pointed out that Coinbase Prime brokerage is functioning like a securities broker.

The plaintiffs want full rescission, statutory damages under state law, and injunctive relief through a jury trial. This is certainly not Coinbase’s first legal rodeo as this lawsuit is very similar to another class-action suit about consumer harm from Coinbase's sale of securities.

 crypto asset sales do not meet securities transaction criteria and questioned the relevance of securities regulations. 

Coinbase is also already involved in a very publicized legal battle with the U.S. Securities and Exchange Commission (

) about the classification of tokens sold on its platform as securities. Coinbase recently filed an interlocutory appeal in response to a judge's decision allowing the 

Despite the legal challenges, Coinbase reported an impressive rebound in the first quarter of 2024, driven by improved market performance and the launch of spot Bitcoin exchange-traded funds. The exchange posted $1.6 billion in total revenue and $1.2 billion in net income for the first quarter.

 is a process integral to understanding security tokens, and involves representing real-world assets or rights digitally. Essentially, anything can be tokenized, like  ownership and registration of a car. For instance, a token could signify ownership of a car by tokenizing its vehicle identification number (VIN) along with the owner's details, recorded on a 

. Security tokens are created through a very similar process, with a company inputting what the token represents and offering it to investors on exchanges or investment platforms. Ownership of these tokens is then recorded on the blockchain, associated with the owner's blockchain address.

The concept of tokenizing ownership isn't entirely novel, as paper stock certificates were previously issued by companies to investors. These certificates represented ownership or other rights and were very similar to digital security tokens, albeit in physical form. However, digital security tokens are stored and created on a blockchain, offering efficiency and transparency in ownership transfer.

While security tokens and cryptocurrencies share similarities, their fundamental difference lies in their intended use. Cryptocurrencies like Bitcoin and 

 are designed for use as decentralized currencies or transactional mediums. In contrast, security tokens mimic traditional investment assets like stocks or bonds and are intended for investment purposes.

Despite this distinction, certain cryptocurrencies, like Bitcoin and Ethereum, have been treated as 

 by investors because of their trading and investment potential, although they were not originally designed for these purposes. It is important to note that while they may function similarly in the market, they do not inherently meet the criteria to be considered securities by regulators like the SEC.

In other legal news, Alexander Vinnik, the co-founder of the 

 conspiracy after an investigation into the exchange's activities from 2011 to 2017.

The United States Department of Justice (DOJ) announced on May 3 that during Vinnik’s time at the exchange, BTC-e 

 more than $9 billion in transactions with a user base exceeding one million globally, including many users in the United States. The platform was allegedly used to launder money stolen through criminal activities like computer hacking, ransomware attacks, and drug trafficking.

According to the DOJ, BTC-e operated without any essential legal compliance measures, which made it very attractive to people who were looking for a way to conceal money transactions from law enforcement. It was also revealed that Vinnik established many shell companies and financial accounts around the world. This allowed him to facilitate the illicit transfer of funds through BTC-e, resulting in criminal losses totaling at least $121 million.

Vinnik has been dealing with legal battles for the past five years because of his alleged role in BTC-e. 

 in Greece in 2017 on money laundering charges, he was later extradited to France in 2020. In France, Vinnik was acquitted of ransomware allegations but convicted of money laundering charges and sentenced to five years in prison. Despite an unsuccessful appeal by his lawyers who claimed he was only an exchange employee with no involvement in illicit activities, Vinnik was extradited to the U.S. in 2022 after serving two years in a French prison.

As a Russian citizen, Vinnik attempted to secure a prisoner swap deal between Russia and the United States, but his attempt ended up being unsuccessful. This case is just one of many that proves that U.S. regulators are scrutinizing crypto exchanges at the moment. Very recently, the former FTX CEO Sam Bankman-Fried was 

Three former executives of the bankrupt crypto lender Cred have been 

 with engaging in wire fraud and money laundering before the firm's collapse in November of 2020. Daniel Schatt, the former CEO, and Joseph Podulka, former chief financial officer, face 13 charges each, while James Alexander, former chief commercial officer, is facing four counts. 

Mark Mosley, an acting special agent in the U.S. Internal Revenue Service, described the alleged scheme as predatory as it ended up defrauding victims of hundreds of millions of dollars in cryptocurrency.

 in 2020 caused some concerns among users about the safety of their funds. Prosecutors allege that the executives misled customers about Cred's lending and investment practices, falsely claiming collateralized or guaranteed lending and hedged 

. Despite the claims, prosecutors hold firm that Cred engaged in lending that was neither collateralized nor guaranteed.

Schatt and Podulka appeared in court on May 2 and are scheduled to enter a plea on May 8, while Alexander's court date has not been set yet.

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The U.S. Securities and Exchange Commission (SEC) has issued a Wells notice to Robinhood, signaling potential enforcement actions against the trading platform because of  alleged securities violations. Despite regulatory uncertainty, innovations continue to emerge in the digital finance sector, like Hermetica's introduction of USDh, a Bitcoin-backed synthetic dollar that is aimed at enhancing liquidity. and yield-generating opportunities in Bitcoin-native decentralized finance (DeFi). The synthetic dollar is scheduled to be released  in June and promises huge yield-generating capabilities of up to 25%. 

The United States Securities and Exchange Commission (SEC) recently 

, a widely-used trading platform. This notice is a formal indication that the SEC plans to possibly enforce action and was issued after an investigation into Robinhood's cryptocurrency listings and custodian services. The investigation pointed towards potential 

, despite Robinhood's attempts to comply with SEC regulations, including attempts to register its crypto services.

After the Wells notice was issued on May 4, Robinhood’s stock price experienced a drop of about 2.5% in pre-market trading, settling at $17.95. 

Responding to the SEC's actions, Dan Gallagher, Robinhood's chief legal, compliance and corporate affairs officer, shared his disappointment with the matter in a 

 on May 6. Gallagher, who is a former SEC commissioner, reiterated Robinhood's view that the cryptocurrencies listed on its platform do not qualify as securities. He also made sure to mention that the company is ready to contest any legal action by the SEC.

This Wells notice from the SEC comes despite the fact that Robinhood has a very selective approach to cryptocurrency offerings, avoiding certain tokens and services like crypto lending and staking, which the SEC had previously classified as securities in actions against other platforms. Gallagher also 

 for cryptocurrencies in the U.S. He compared it to the equities markets before the reforms of 1933. He believes that inconsistent state regulations and the absence of clear federal guidelines is hindering mainstream adoption and fair competition in the crypto market.

As of now, both the SEC and the Commodity Futures Trading Commission have not established definitive regulations 

 and commodities in the context of digital assets, leaving companies like Robinhood in a very tough position with regards to  compliance and operational clarity.

CFTC Chair Predicts More Crypto Enforcement

, the chair of the United States Commodity Futures Trading Commission (CFTC), believes there will be continued regulatory scrutiny on cryptocurrency firms as investor interest in the market remains high. Behnam spoke at the 2024 Global Conference on May 6 where he pointed out the resilience of the crypto market despite it having to deal with major downturns and bankruptcies in 2022. He did, however, share his beliefs that there will very likely be an uptick in enforcement actions over the next 6 to 24 months due to increasing asset values and retail investor engagement.

While Behnam did not directly specify whether the CFTC or the SEC would lead these efforts, he did share his thoughts on the necessity of a regulatory framework to curb potential fraud and manipulation in the absence of transparency and regulatory tools. The need for clear regulation was echoed by U.S. lawmakers, who are considering legislation that would define the 

 when it comes to overseeing digital assets. This legislation is currently awaiting a floor vote in the House of Representatives.

The SEC has been especially active recently. In fact, 2023 saw the highest number of 

 cases since 2013, according to a January report from Cornerstone Research. High-profile cases are also pending against major U.S. crypto firms like 

. The recent Wells notice to Robinhood proves that the SEC does not intend to stop its crypto crackdown any time soon.

The CFTC itself has also ramped up its enforcement actions, with a third of its total crypto-related actions taking place in 2023. These included cases against people like former FTX CEO Sam Bankman-Fried and former Celsius CEO Alex Mashinsky.

Central Banks Must Adapt with Digital Currencies

Despite the crypto industry having a regulatory target on its back at the moment, Joachim Nagel, president of the Bundesbank and a member of the European Central Bank (ECB), believes Central banks have to rethink their business models and swiftly embrace 

 at a panel during the Innovation Summit hosted by the Bank for International Settlements on May 6. Here, he shared some of his concerns about the evolving financial landscape and the decreasing allure of physical money.

Nagel pointed out that twenty years ago he would have never questioned the resilience of the central bank's business model. However, today, he actually sees potential vulnerabilities and believes there is the need for adaptation. He also specifically mentioned distributed ledger technology (DLT) and sees it as a crucial tool that could help central banks in revamping their operations.

Francois Villeroy de Galhau, another ECB member from France, also spoke about the issue at the same conference. Galhau wants to see the inclusion of digital currencies in both wholesale and retail banking sectors. He argued that updating the method of making central bank money available is essential for the 21st century and to ensure that it continues to serve as a stability anchor for the financial system.

The ECB is actively working on a digital euro and completed the investigative phase to finalize its design and technical specifications. The project is expected to be completed by October of 2025.

Hermetica Introduces Bitcoin-Backed Synthetic USD

Meanwhile, Hermetica has introduced USDh, the first Bitcoin-backed synthetic United States dollar that is set to revolutionize Bitcoin-native decentralized finance (

). The synthetic dollar is scheduled to be released in June and promises huge yield-generating capabilities  of up to 25%. 

Jakob Schillinger, the founder and CEO of Hermetica Labs, 

 that USDh is designed to allow Bitcoin enthusiasts to hold and earn yield on U.S. dollars without relying on traditional banking systems or engaging with non-Bitcoin financial products. Schillinger strongly believes that USDh will enhance liquidity and introduce new functionalities in the Bitcoin DeFi sector that will allow people to trade, lend, and transact in a dollar-denominated asset fully backed by Bitcoin.

The launch of USDh comes after the introduction of 

 USDe, which is another synthetic dollar that debuted with a 27.6% yield. This ended up raising some concerns about its long-term viability. USDh could encounter similar concerns, especially considering its high yield in comparison to past stablecoin offerings like TerraUSD, which famously collapsed in May of 2022.

However, Schillinger assures that the high yield offered by USDh is sustainable and is  supported by backtest data from January 2021 to March 2024, which shows an average annual yield of 11.71%. He attributes the robust yield performance to the structural demand for long leverage in the Bitcoin futures market, which peaked during the 2022 bull market at an annual return of 26.11%.

As Bitcoin DeFi continues to expand, driven by innovations like 

, Schillinger is very optimistic about its future. In fact, he predicts that Bitcoin DeFi could equal or surpass Ethereum DeFi in scale within the next five years. Just recently. trading volumes in Bitcoin Ordinals have already 

A synthetic dollar is a digital financial instrument that is designed to mimic the value of the US dollar without direct backing by physical dollar reserves. Instead, it maintains its dollar peg through financial derivatives like futures or algorithmic strategies, particularly in the crypto realm. 

This innovation is primarily used in international trade, investments, and DeFi platforms, allowing entities globally to access dollar liquidity effortlessly without the actual possession of USD. This is especially beneficial in regions where accessing USD is either restricted or challenging.

The utility of synthetic dollars extends beyond simple transactions. They are pivotal when it comes to providing stability and liquidity in diverse financial environments. They are also  crucial in hedging against local currency fluctuations, facilitating seamless international transactions, and boosting the growing digital finance ecosystem by acting as a stable medium of exchange. Their role is increasingly vital in supporting economic activities where traditional financial systems are inefficient or inaccessible.

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Charles Hoskinson, the influential founder of Cardano, has been at the center of various discussions. From expressing an unexpected interest in Bitcoin Cash to offering insights into the Ripple and SEC controversy, and addressing the misinformation campaigns targeting Cardano, Hoskinson's actions and comments continue to stir intrigue and debate within the crypto community. 

Cryptocurrency Crossroads: Cardano Founder's Surprising Pivot to Bitcoin Cash Raises Eyebrows

In a move that has taken the crypto community by surprise Hoskinson, the visionary behind the 

 blockchain, has recently turned his gaze towards Bitcoin Cash (BCH), an offshoot of Bitcoin. This unexpected shift has set the stage for speculation and introspection within the crypto world about potential synergies and the broader implications for both digital assets.

Hoskinson, known for his articulate vision and deep involvement in the development of Cardano, one of the leading blockchain platforms designed to foster innovation and secure decentralized applications, has expressed curiosity about Bitcoin Cash. 

In a tweet that has since caught the attention of crypto enthusiasts and analysts alike, Hoskinson solicited insights into the Bitcoin Cash roadmap, signaling an interest that few had anticipated. "I'm curious about Bitcoin Cash's roadmap. Can anyone from the Bitcoin Cash community point me to what's happening on the Dev side and some of the near-term priorities?" his tweet read.

Bitcoin Cash, a crypto that forked from Bitcoin in 2017, was created to address some of the scalability issues associated with Bitcoin by increasing the block size. This change allows for more transactions to be processed at a faster rate and at lower fees, setting Bitcoin Cash apart as a practical alternative for everyday transactions. Over the years, BCH has cultivated a strong community and has continued to evolve its technological infrastructure.

The crypto community is buzzing with theories about Hoskinson's sudden interest. Some speculate that the move could be driven by a desire to explore new blockchain technologies that could complement Cardano’s long-term vision, especially in areas like scalability and transaction efficiency where Bitcoin Cash has made significant strides.

Adding another layer to this unfolding story is the recent arrest of Roger Ver, a prominent early cryptocurrency investor and a major proponent of Bitcoin Cash, who earned the nickname "Bitcoin Jesus" for his early and vocal advocacy for Bitcoin before shifting his support to BCH. The implications of his arrest are not fully clear, but it adds a dramatic backdrop to Hoskinson's inquiries into Bitcoin Cash.

While Hoskinson's interest in Bitcoin Cash might be seen as a strategic move to possibly integrate some of BCH’s features with Cardano, it raises questions about the long-term implications for both blockchain projects. Could this signal a potential collaboration, or is it merely a moment of personal curiosity? The answers are not yet clear, and representatives from Cardano have not provided further details on the direction this interest might lead.

The market reaction to Hoskinson’s tweet was mixed, with some investors seeing it as a positive sign of openness to collaboration, while others are wary of potential shifts in focus. Meanwhile, the Bitcoin Cash community has largely welcomed Hoskinson's interest, with several community members providing detailed responses to his query about the development roadmap.

As the situation develops, the crypto community will be watching closely to see how Hoskinson's interest in Bitcoin Cash evolves and what it could mean for the future of both Cardano and Bitcoin Cash. Whether this leads to a new partnership or remains a mere exploratory interest, it highlights the dynamic and interconnected nature of the crypto landscape.

Charles Hoskinson Offers Insight into Ripple Controversy, Clarifies Ethereum and XRP Dynamics

Hoskinson also stepped into the fray of an ongoing controversy surrounding Ripple and its digital currency, XRP. Hoskinson's comments provide a nuanced view into the complex relationship and regulatory treatments of major cryptocurrencies, including Ethereum and Ripple.

The discussion began when Hoskinson was prompted to apologize to the Ripple team and the XRP community. In his response, he highlighted how his previous statements had been misconstrued, leading to prolonged public scrutiny and even harassment. This harassment, according to Hoskinson, included calls for legal action against him based on unsubstantiated allegations of corruption.

Central to the controversy is a conspiracy theory that the U.S. Securities and Exchange Commission (SEC) has shown preferential treatment towards Ethereum over Ripple. This theory gained traction within parts of the crypto community, leading to significant debate and speculation.

Hoskinson, with his deep industry knowledge—both as a former co-founder of Ethereum and the creator of Cardano—provided his perspective on these allegations. He has outright dismissed the notion that Ethereum could have orchestrated SEC actions against Ripple, describing such claims as unfounded and lacking credible evidence. 

Historical Context and Regulatory Disparities

He pointed to Ethereum's origins, noting its modest beginnings with an $18 million initial coin offering. Hoskinson suggested that any regulatory leniency Ethereum experienced in its early days might have been influenced by a range of factors, including personal relationships and informal arrangements, rather than a coordinated effort to disadvantage Ripple.

Despite acknowledging some disparities in regulatory treatment between Ethereum and Ripple, Hoskinson firmly rejected the conspiracy theory. He emphasized that Ethereum and Ripple operate in distinct domains and do not directly compete in the same smart contract space. This distinction, he argued, is crucial for understanding the different challenges and regulatory scrutiny they face.

Ripple has been at the center of a significant legal battle with the SEC, which alleges that XRP was sold as an unregistered security. This case has drawn attention to the broader implications for the cryptocurrency industry and raised questions about the consistency of regulatory approaches.

Hoskinson's insights are particularly valuable given his unique position in the crypto industry. Having been involved in the founding of Ethereum and later creating Cardano, he has firsthand experience with the inner workings and early challenges of major blockchain projects. His removal from Ethereum in 2014, reportedly due to differing visions for the project's future, adds another layer to his perspective on inter-project dynamics and competition.

The crypto community has reacted to Hoskinson’s clarifications with a mix of appreciation for his candor and continued skepticism of the regulatory landscape that governs digital assets. Market analysts and investors are closely monitoring the situation, as the outcome of the SEC’s case against Ripple could set a precedent that affects the entire sector.

As the debate continues, Hoskinson’s comments have provided a clearer lens through which the community can view the intricate tapestry of relationships and regulatory issues that define the cryptocurrency world. His call for a rational and evidence-based approach to understanding these dynamics is a reminder of the complexities that underpin the burgeoning crypto industry.

Unraveling the Campaign Against Cardano: Insights from a Community Whale

Cardano has emerged not only as a technological powerhouse but also as a lightning rod for criticism. Recently, insights from a prominent community member known as Cardano Whale have shed light on the reasons behind the persistent negative sentiment directed towards Cardano, suggesting that much of the hostility is the result of deliberate misinformation campaigns rather than mere organic skepticism.

Cardano Whale's analysis points to the roots of this antagonism, which he believes stem from the perceived threat 

 posed to established blockchain projects, particularly Ethereum. Charles Hoskinson, Cardano’s founder, played a critical role in the development of Ethereum before creating Cardano. His departure and subsequent development of a competing platform may have been seen as a direct challenge to Ethereum's dominance.

Technical Innovations and Market Dynamics

The critique often intensified as Cardano introduced innovations that were seen as advancements over existing technologies. For instance, when Cardano introduced its staking mechanism, which was perceived as superior to those in place at the time, it quickly ascended to third place in market capitalization. This rapid rise was often dismissed by critics, who attributed it to a simple migration of XRP holders to ADA, rather than acknowledging the technological merits or the community's support.

Moreover, the rollout of Cardano’s UTxO-based DeFi app was met with criticism focused on every minor issue at launch, mirroring challenges that were also prevalent on Ethereum Virtual Machine (EVM) chains. These critiques have often been amplified to reinforce a narrative that Cardano was either overhyped or underperforming.

Despite the negative narrative, Cardano Whale remains optimistic about the future of the blockchain. He emphasizes Cardano's high degree of decentralization and its robust, active community. Upcoming scalability improvements are also highlighted, which are expected to enhance Cardano’s capabilities significantly.

Cardano's unique position in the crypto industry is also noted. It boasts a large and distinct talent pool that continues to innovate and drive the project forward, distinct from other major crypto projects. This innovation, according to Cardano Whale, is precisely why Cardano faces opposition—it represents a potential shift in the established order of the cryptocurrency ecosystem.

The idea that misinformation campaigns are influencing public perception is not new in the tech world, but in the realm of crypto, where market dynamics can be swayed by public sentiment, such campaigns can have significant implications. Investors and community members may find themselves needing to navigate through a sea of skewed narratives to understand the true value and potential of technologies like 

Despite the challenges posed by these negative sentiments, Cardano continues to develop and release updates that contribute to the blockchain ecosystem's overall growth and sophistication. As the platform evolves, it may well prove that its technological contributions can outshine the shadows cast by misinformation.

While the debate continues, the broader crypto community will watch closely to see how Cardano navigates these complex waters. The outcome will likely not only affect Cardano but also provide insights into the dynamics of competition and innovation within the larger blockchain industry.