Regulatory scrutiny over cryptocurrency operations in the United States has taken center stage with two recent legal developments. In Vermont, state financial regulators have dropped their case against Coinbase, following the SEC’s decision to dismiss its lawsuit over the exchange’s staking services. Meanwhile, in California, a jury has found AML Bitcoin creator Rowland Marcus Andrade guilty of wire fraud and money laundering.
Vermont Drops Legal Action Against Coinbase Following SEC’s Case Dismissal
The US state of Vermont has officially dropped its “show cause order” against Coinbase. The action, originally taken as part of a multi-state initiative against the exchange’s staking service, alleged that Coinbase was offering unregistered securities to users. However, Vermont’s Department of Financial Regulation (DFR) announced on March 13 that it would rescind the order, following the US Securities and Exchange Commission’s (SEC) recent dismissal of its own case against Coinbase.
The move comes amid a shifting regulatory landscape, particularly as federal authorities reassess their stance on crypto-related financial products. In its statement, the DFR noted the SEC’s decision to drop its case against Coinbase on Feb. 28, as well as the formation of a new task force designed to guide future regulatory efforts surrounding cryptocurrency products and services.
Vermont was one of ten US states that had launched regulatory actions against Coinbase in June 2023 on the same day the SEC filed its lawsuit. The coordinated effort by states including Alabama, California, Illinois, Kentucky, Maryland, New Jersey, South Carolina, Washington, and Wisconsin targeted Coinbase’s staking services, alleging they violated securities laws by operating without proper licensing.
The “show cause order” issued by Vermont required Coinbase to justify why it should not be forced to halt its staking program. However, now that Vermont has opted out, there is speculation that other states may follow suit, especially as regulatory sentiment shifts under new leadership at the SEC.
Paul Grewal, Coinbase’s Chief Legal Officer, welcomed Vermont’s decision and urged other states to follow its lead.
He further emphasized that while Vermont’s move is a step in the right direction, more action is needed at the federal level to provide clear, comprehensive crypto regulations.
The debate over whether staking services constitute securities has been a longstanding point of contention between regulators and the crypto industry. Coinbase has consistently maintained that staking is simply a means for users to participate in network security and earn rewards—a position that Vermont’s latest decision implicitly acknowledges.
The SEC’s case against Coinbase was originally part of a broader enforcement push under former Chair Gary Gensler, who had taken an aggressive stance against the crypto industry. However, since his resignation on Jan. 20, there has been a noticeable shift in the agency’s approach.
Several crypto firms facing SEC enforcement actions have seen their cases dismissed in recent weeks. One of the latest examples includes crypto trading firm Cumberland DRW, which had its case dropped on March 4. Additionally, the SEC is reportedly concluding its multi-year battle against Ripple Labs, a case that has been ongoing for over four years.
In response to the SEC’s pattern of enforcement actions, Coinbase’s Paul Grewal has filed a Freedom of Information Act (FOIA) request to determine how many crypto-related enforcement actions were initiated under Gensler’s tenure and the associated costs to taxpayers.
What’s Next for US Crypto Regulation?
With the SEC pulling back and Vermont withdrawing its action, the future of crypto regulation in the US remains uncertain. The creation of a new SEC task force dedicated to cryptocurrency regulation suggests that new rules or clarifications could be on the horizon.
Many industry leaders are hopeful that Congress will finally take action to pass clear legislative frameworks for digital assets, which could resolve long-standing ambiguities around staking, decentralized finance (DeFi), and other crypto services.
For now, Vermont’s decision represents a significant win for Coinbase and a potential bellwether for other states reconsidering their legal battles against crypto firms. With regulatory attitudes evolving, the crypto industry may soon see the beginning of a new, more favorable regulatory environment in the US.
The withdrawal of Vermont’s enforcement action against Coinbase marks a turning point in the battle over crypto staking regulation. While the decision does not establish a nationwide precedent, it signals a shift in regulatory attitudes, especially as the SEC reassesses its stance under new leadership.
With Congress facing increasing pressure to pass comprehensive digital asset legislation, all eyes are now on how state and federal regulators will proceed in the coming months. For Coinbase and other crypto firms, Vermont’s decision is not just a victory—it is a sign that the broader regulatory tide may finally be turning in their favor.
AML Bitcoin Founder Found Guilty of Wire Fraud and Money Laundering in California Court
In other legal news, a California jury has found Rowland Marcus Andrade, the creator of AML Bitcoin, guilty of wire fraud and money laundering. The March 12 verdict, handed down in the US District Court for the Northern District of California, marks the conclusion of a multi-year legal battle against Andrade, who was initially charged in June 2020 for allegedly defrauding investors.
The ruling follows revelations that Andrade misled investors about the capabilities and regulatory compliance of AML Bitcoin, a cryptocurrency he claimed would revolutionize the industry by integrating advanced Anti-Money Laundering (AML) and Know Your Customer (KYC) protocols. However, as authorities unraveled his scheme, it became evident that the promised technology never existed, and that Andrade had diverted millions of dollars into personal luxuries.
The case against Andrade, which ran parallel to a civil suit filed by the US Securities and Exchange Commission (SEC), revealed systematic deception designed to entice investors. His company, the NAC Foundation, marketed AML Bitcoin as an innovative digital asset designed to comply with stringent AML and KYC requirements, a key issue in crypto regulation.
However, during the trial, prosecutors demonstrated that AML Bitcoin never actually launched, and that Andrade fabricated partnerships to mislead investors.
Evidence presented at trial showed that Andrade collected over $2 million from investors during the initial coin offering (ICO) phase between 2017 and 2018. Instead of funding the development of AML Bitcoin, he pocketed the proceeds, spending extravagantly on real estate and high-end automobiles.
One of the most damning pieces of evidence was Andrade’s false claim that the Panama Canal Authority was on the verge of adopting AML Bitcoin for transactions involving ships passing through the canal. This nonexistent deal was a key selling point used to entice investors, despite there being no formal agreement between Andrade and the Panamanian government.
Adding another layer of controversy, the SEC’s civil case against Andrade was notable for its connection to Jack Abramoff, a notorious political lobbyist who served four years in prison between 2006 and 2010 for a corruption scandal involving mail fraud, conspiracy to bribe public officials, and tax evasion.
Abramoff had been working alongside Andrade in promoting AML Bitcoin but eventually pleaded guilty to related charges. A federal judge had stayed the SEC’s lawsuit against Andrade in January 2021, pending the outcome of his criminal trial. Now that Andrade has been convicted, the SEC’s case is expected to resume, potentially adding further penalties and restrictions to the disgraced crypto entrepreneur.
The Legal Fallout: Andrade Faces Decades in Prison
Having remained free on a $75,000 bond since 2020, Andrade is now set to return to court for sentencing on July 22. He faces a maximum penalty of 20 years in prison for wire fraud and 10 years for money laundering, meaning he could spend up to 30 years behind bars.
Given the scale of the fraud and the financial losses suffered by investors, prosecutors are likely to seek a lengthy sentence to serve as a warning to others engaged in similar crypto scams.
Andrade’s conviction highlights an ongoing issue in the cryptocurrency industry: fraudsters exploiting investor enthusiasm with bold claims and misleading narratives. Over the past decade, dozens of fraudulent ICOs have surfaced, with investors often left with nothing as bad actors vanish with the funds.
The case is reminiscent of other high-profile crypto frauds, such as:
OneCoin (2014-2017): A $4 billion Ponzi scheme orchestrated by Ruja Ignatova, who is still on the FBI’s Most Wanted List.
BitConnect (2016-2018): A multi-billion dollar crypto lending scheme that collapsed in one of the largest exit scams in history.
FTX Collapse (2022): Former CEO Sam Bankman-Fried is currently facing decades in prison for fraud and mismanagement of customer funds.
Regulators have been ramping up their scrutiny of the cryptocurrency sector, with agencies like the SEC, IRS, and FBI increasingly targeting fraudulent schemes.
Just this week, the IRS announced new investigations into tax evasion and financial crimes within the crypto industry, signaling tougher enforcement measures against individuals attempting to use digital assets for illicit purposes.
Meanwhile, Congress is debating new regulatory frameworks that could provide clearer guidelines for ICOs, staking services, and cryptocurrency compliance—a move that could prevent future cases like AML Bitcoin.
