Tether's settlement / MoneyGram pauses RippleNet / Ripple wants to see internal SEC discussions

Bitfinex and Tether have settled the probe by the New York Attorney General...

Inside.com Part of   Network February 24, 2021

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Bitfinex and Tether have settled the two-year probe by the New York Attorney General (NYAG). According to NYAG, "Tether made false statements about the backing of the tether stablecoin, and about the movement of hundreds of millions of dollars between the two companies to cover up the truth about massive losses by Bitfinex." Class action lawsuits continue, and the settlement does not prevent lawsuits by other states.  Details: Neither Bitfinex nor Tether admitted wrongdoing in the settlement. In 2017, when Tether "verified" that it had $1 worth of reserves for every Tether (USDT), NYAG explained that in reality, "the cash ostensibly backing tethers had only been placed in Tether's account as of the very morning of the company's 'verification.'" On Nov. 1, 2018, Tether claimed that Tethers "are fully backed by U.S. dollars that are safely deposited in our bank accounts," yet proceeded, the very next day, to withdraw hundreds of millions in funds from its bank account into a new loan. Bitfinex and Tether say that the settlement does not show that their behavior manipulated crypto prices. The NYAG only launched a probe and did not file formal charges. The $18.5M payment only settles this probe, and does not preclude other legal actions by states, the U.S. government, or individual investors. Bitfinex and Tether say they provided more than 2.5M pages of documentation to the NYAG during the probe. This story continues below in part 2... New York Attorney General

Now that the NYAG probe is settled, what happens next for Bitfinex and Tether? First, they must pay an $18.5M fine and immediately cease any trading activity with New Yorkers, ending years of unlicensed and unregulated trading of virtual currencies in the state, according to NYAG. Additional requirements through February 2023: On a quarterly basis, the companies must submit regular reports to NYAG to ensure compliance with trading prohibitions. At least once per quarter, the companies must detail how they have segregated corporate and client accounts, including the segregation of government-issued and virtual currency accounts. The companies must report transfers of assets between Bitfinex, Tether, and their entities. Tether must offer public disclosures of the types of assets backing tethers, including any loans or receivables to or from affiliated entities. The companies must also report any use of non-bank "payment processors" or other entities used to transmit client funds. A multi-billion-dollar class-action lawsuit, "In re Tether and Bitfinex Crypto Asset Litigation" (case 1:19-cv-09236 in the U.S. District Court for the Southern District of New York) will continue. Click to tweet the following text (you can edit it before sending): $USDT Bitfinex and Tether agree to settle the NYAG probe with a small fine and various reporting covenants for two years. New York Attorney General

Moneygram International remittance giant MoneyGram (NASDAQ:MGI) has put its partnership with Ripple Labs on hold due to legal risks regarding XRP (XRP). MoneyGram cited the SEC's lawsuit as a reason for suspending its trading on Ripple's platform, RippleNet. MoneyGram does not hold any XRP for investment purposes. Since 2019, Ripple has incentivized MoneyGram to use XRP for some international settlements. MoneyGram "is not planning for any benefit" from Ripple's "market development fees" in Q1. We have covered the relationship between MoneyGram and Ripple in previous Inside Cryptocurrency editions. Click to tweet the following text (you can edit it before sending): The partnership between MoneyGram and Ripple is now on hold amid legal uncertainty regarding $XRP Coindesk

Ripple's counsel has requested documents regarding the SEC's internal and third-party discussions about its lawsuit. Matthew Solomon, counsel to Ripple CEO Bradley Garlinghouse, said that regulators discussed whether Ripple's XRP token was an investment contract with unnamed "ultra-sophisticated market actors." During the first hearing about the SEC's enforcement action, the defendants considered filing a motion to compel U.S. regulators to release case-related internal documents. Ripple's motion might clash with a similar motion filed by the SEC, demanding legal documents that clarify Ripple's leadership, which could fall under attorney-client privilege.  Ripple's executives Christian Larsen and Brad Garlinghouse plan to file motions to dismiss after responding to the SEC's amended allegations through a public letter. Click to tweet the following text (you can edit it before sending): Ripple $XRP executives ask the U.S. SEC to turn over internal discussion documents. They plan to respond to the SEC's amended allegations and then motion to dismiss. Law360

QUICK HITS: This company is reinventing home and renters insurance. Get a quote to see how much you could save.* The SEC has delisted shares in Long Blockchain (NASDAQ:LBCC). Long Island Iced Tea Company changed its name to Long Blockchain at the height of the late 2017 crypto mania. The Hong Kong Monetary Authority and the Bank of Thailand have co-announced that the Central Bank of the United Arab Emirates and the Digital Currency Institute of the People's Bank of China have joined their cross-border crypto payments initiative. Dubai businessman Khurram Shroff, Chairman of IBC Group, has pledged 100,000 bitcoin ($4.8B) to establish the Miami 2.0 Blockchain Strategy Foundation. Sweden's financial supervisory authority completed a crypto review and has declared the market to be "unsuitable for most, if not all, retail consumers." India's SEC is asking IPO promoters, including merchant banks and attorneys, to divest all crypto before raising funds for entities looking to go public. The Government of Thailand plans to curb retail crypto trading by requiring investors to attest to sufficiently high income or savings before opening an account at one of the nation's licensed crypto exchanges. Ran Yi of Kronos said yesterday on Clubhouse that his team transacts $5-10B per day in crypto on FTX and decentralized exchanges. Bank of Korea Governor Lee Ju-yeol said digital assets have "no intrinsic value," and he expects crypto pricing to remain "extremely volatile." What are the costs of inefficiencies in your product release cycle? Read how top companies save over $1M each year.* *This is sponsored content.

Curated by Associated Press fanboy, eye-strained news terminal watcher, and bitcoin follower since $1, Aaron Wise. Temporarily listening to news squawk boxes in Florida while awaiting the construction of cryptopia. Editor Charlotte Hayes-Clemens is an editor and writer based in Vancouver. She has dabbled in both the fiction and non-fiction world, having worked at HarperCollins Publishers and more recently as a writing coach for new and self-published authors. Proper semi-colon usage is her hill to die on.

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What a Transparent Tether Means for Bitcoin

Tether pays $18.5M and promises transparency in end to NYAG suit.

February 23, 2021 The top stories in bitcoin, crypto and more – all in one place, delivered daily. Sponsored By: By Daniel Kuhn If you were forwarded this newsletter and would like to receive it, sign up here.  Sound bites Paxos CEO Charles Cascarilla thinks the kinks in crypto's plumbing are being worked out, which could prefigure a much larger wave of institutions entering the crypto economy.    "I don't think anyone would have expected that corporate treasuries would be buying bitcoin," he said. But here we are.   Watch the full interview here. Market intel Bitcoin traded within an unprecedented $11,000 range Monday dropping from a lifetime high of $58,000 set over the weekend to below $47,000. This marks the leading cryptocurrency's first five-figure daily price range, CoinDesk's Zack Voell reports. A surge in bitcoin balances on major cryptocurrency exchanges preceded Monday's sell-off, Muyao Shen noted, adding that this could prefigure further drops. Some 40,000 BTC ($2.1 billion worth) moved to exchanges between Friday and Monday. Prices bounced back this morning, following news that Bitfinex and Tether settled with New York state attorney general's office regarding a multi-year investigation into the stablecoin issuer's internal finances. Further, the Federal Reserve's commitment to a loose monetary policy and pro-inflationary asset purchase program could reignite bitcoin's skyhigh rally. CoinDesk's Omkar Godbole gives the macro overview of bitcoin's position as a perceived inflationary hedge. Though there are (four) bearish signals to keep in mind. SPONSORED BY NEXO Your digital assets deserve a savings account in their BEST INTEREST. Leading crypto lender Nexo treats you, your crypto and your fiat to industry-best Crypto & Fiat services, featuring:    * Up to 12% interest on digital assets, paid out daily! * Yields available on BTC, ETH, LTC, BCH, XRP, XLM, EOS, TRX, LINK, BNB, PAXG, USDT, USDC, TUSD, PAX, DAI, HUSD, GBP and EUR. * No minimum or maximum limits on funds deposited, offering infinite opportunities to earn. * Full flexibility with no lock-in periods, so you can withdraw your funds anytime. * #ZeroFees on all transactions. * Military-grade wallet security and top-tier insurance on all custodial assets with SOC 2 Type 2 certified crypto custodian BitGo. Get started at nexo.io. Top shelf An army of Ethereum bots has "extracted" at least $107 million in cryptocurrency over the past month, according to new research. These Miner Extracted Value (MEV) bots find arbitrage opportunities in Ethereum's mempool, sometimes by copying profitable trades waiting to be settled and increasing the gas price to beat the original to profit, according to CoinDesk tech reporter Will Foxley. While this could suck for individual traders, it also adds bloat to the network and likely contributes to Ethereum's skyhigh gas prices. One arbitrage scenario occurred on Kraken yesterday, with the price of ETH dropping as low as $700 (down from $1,628.82), for a narrow band of time. It's unknown what caused this "flash crash," though some signs point to a fat-finger mistake, CoinDesk's Muyao Shen reported. Though Kraken CEO Jesse Powell suggested an ether whale might have "decided to dump his life savings." A record-high $115 million in decentralized finance (DeFi) lending positions were wiped out Tuesday after the price of ether continued to correct to as low as $1,406 on Tuesday.  Crypto infrastructure is working out its kinks. Koine, a crypto custody and settlements layer provider, is insolvent, CoinDesk's Ian Allison reports. The London-based firm was short on cash as it attempted to build out an ambitious tech stack that could serve clients as diverse as Bitfinex and brokerage GCEX. "[T]he coming wave of [institutional crypto] interest is breaking too late for Koine," Allison notes. But blockchain infrastructure as a service isn't DOA. BNY Mellon, for instance, tapped Fireblocks as part of the banking giant's coming crypto business. MoneyGram is stepping back from its partnership with Ripple Labs citing the legal uncertainty around the blockchain startup's XRP token. MoneyGram "is not planning for any benefit from Ripple market development fees in the first quarter" of 2021, usually a reliable source of income for the remittance firm, which brought in some $61.5 million. Introducing "Money Reimagined," exploring the future of money on CoinDesk TV From the world leader in crypto news and events, the all-new CoinDesk TV covers the rapidly evolving world of digital finance and its role in the global economy.   CoinDesk's Money Reimagined, a newsletter and podcast series, expands into television with the same critical look at the issues and people that are influencing the future of money and economics as we know it. The TV series is a video production of the eponymous weekly podcast hosted by CoinDesk's Chief Content Officer Michael Casey and The World Economic Forum's Sheila Warren.   Watch "Money Reimagined" Saturdays at 12 p.m. ET on YouTube or CoinDesk.com. At stake Clarity and uncertainty The New York Attorney General's (NYAG) multi-year investigation into the twinned exchange and stablecoin issuer Bitfinex and Tether's internal finances has wrapped, with the regulator bringing no formal charges. The firms will pay $18.5 million to settle a suit centered on claims that the U.S. dollar stablecoin was not fully-backed, but have admitted no wrongdoing.   Tether (USDT) is the largest stablecoin in the crypto economy. In the past year it has grown from $2 billion to $34 billion, and serves a systemically important role for traders, exchanges and virtually all aspects of this emerging financial sector. Since tether's inception, there have been unanswered questions as to whether this synthetic asset was fully backed by reserves held in a bank account, which Tether claimed.   "Tether's claims that its virtual currency was fully backed by U.S. dollars at all times was a lie," Attorney General Letitia James said. According to court documents, Bitfinex and Tether "recklessly and unlawfully covered-up massive financial losses," "obscured the true risk investors faced," "were operated by unlicensed and unregulated individuals" and, at one point, lacked a bank account.   Despite proving these strong accusations true, Tether looks to have gotten off fairly easy. In addition to the aforementioned fine, the firm will provide regular reports on Tether's reserves for the next two years. The firm is also barred from operating in New York State.   This increased level of transparency is viewed positively by industry commentators. Castle Island Ventures partner and CoinDesk columnist Nic Carter said this was a historic "derisking event" for the industry. According to Carter, one of the largest hurdles for institutions to enter the market was the lack of certainty around USDT, despite its outsized role.   For instance, JPMorgan analysts said just last week a loss of faith in tether could cause a liquidity crisis in crypto. In addition to questions about USDT's backing, there have been persistent conspiracies that tether is used to inflate the price of bitcoin.   "I think we can put that to bed now," Charles Cascarilla, CEO and co-founder of Paxos, said on CoinDesk TV Tuesday morning.   There are still questions about the form these quarterly reports will take, and the level of insight they may provide. "[T]he mandatory reporting and transparency requirements are better, although it will depend on the quality and nature of those reports and disclosures, including whether they are independently audited, etc," Elizabeth Renieris, founder of hackylawyER and technology expert, said in an email.   "Obviously the parties cannot be trusted to tell the truth," she continued. Though the issue is larger than just Tether: "Until some of the other measures around mandatory reporting and transparency requirements become institutionalized and standardized for stablecoins in general, it won't mean much," Renieris said.   One of the most vocal and consistent Tether critics, who goes by the pseudonym Cas Piancey, notes these developments are a "positive thing for Tether, and likely the space as well."   "I'll continue [researching and writing on Tether] because there's still loose ends to tie up in regard to the ongoing CFTC/DOJ actions, but if they start getting regular attestations and being properly regulated then no need to push for that," he added in a direct message regarding the Commodity Futures Trading Commission and the U.S. Department of Justice.   Indeed, as Cascarilla said, "In the case of Tether, it's still unregulated, unaudited and ... that will always create concerns. That doesn't mean tether is a source of systemic risk." Quick bites Regulatory updates 'India's Warren Buffett,' Rakesh Jhunjhunwala, Backs Bitcoin Ban (CoinDesk) The European Central Bank (ECB) wants veto power over stablecoins like libra. (CoinDesk) Nigeria's Crypto Ban Fuels Mistrust in Government (CoinDesk Opinion) What Janet Yellen Gets Wrong About Bitcoin (Decrypt) Capital flows State Bank of India (SBI) is joining JPMorgan's blockchain payments network. (CoinDesk) Bitcoin payments platform for social networks Bottlepay raised £11 million. (CoinDesk) Nasdaq-listed bitcoin mining company Bit Digital partnered with Compute North, Core Scientific and others for a North American expansion. (CoinDesk) Uncovering Coinbase's $100 billion pre-market valuation. (CoinDesk Opinion) Galaxy Digital Leads $4.3 Million SAFT Into Blockchain Platform Centrifuge (Decrypt) "Rich Getting Richer in PoS Chains:" by Chainflow's Chris Remus (The Defiant) What Happens When Cryptocurrencies Earn Interest? (HBR) Sperax launches mobile app Sperax Play to connect everyone with modern money   Sperax Play is a mobile app whose initial utility is a decentralized crypto wallet where users have full control over their accounts. Ultimately, Play will grow into a community hub for  Speraxians, crypto enthusiasts, and everyone interested in decentralization.    Mine, add, earn, play.    Sperax Play makes crypto easier than you think. Who won Crypto Twitter? ATTENTION: Scammers have been sending fraudulent emails with links to sites disguised to look like coindesk.com. If you are in doubt about a link, type https://www.coindesk.com directly into your browser; do not copy and paste. Remember, if something seems too good to be true, it probably is. Blockchain Bites   A newsletter from CoinDesk   See Previous Editions Copyright © 2021 CoinDesk, All rights reserved.    250 Park Avenue South New York, NY 10003, USA You can manage your preferences here or unsubscribe from all CoinDesk email.