Cryptocurrencies, tokens, NFTs, virtual "assets" frauds

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Binance CEO pleads guilty amid US illicit finance probe; S’porean ex-chief compliance officer charged​

Binance chief Zhao Changpeng's exit marks a dramatic development for the China-born mogul and for Binance. PHOTO: BLOOMBERG

NOV 22, 2023

NEW YORK – Binance chief Zhao Changpeng has stepped down and pleaded guilty to breaking US anti-money laundering laws as part of a US$4.3 billion (S$5.8 billion) settlement resolving a years-long probe into the world’s largest crypto exchange, prosecutors said on Nov 21.
The deal, which will see Zhao personally pay US$50 million, was described by prosecutors as one of the largest corporate penalties in United States history. It is another blow to the crypto industry, which has been beset by investigations, and comes on the heels of the recent fraud conviction of FTX founder Sam Bankman-Fried.
“By failing to comply with US law, Binance made it easy for criminals to move their stolen funds and illicit proceeds on its exchanges,” US Attorney-General Merrick Garland said on Nov 21. “Binance also did more than just fail to comply with federal law. It pretended to comply.”
Some of the charges, which are both criminal and civil, relate to practices that Reuters reported first in a series of articles in 2022.
The deal with the Department of Justice (DOJ) is part of a larger settlement between the exchange and other US agencies, including the Commodity Futures Trading Commission (CFTC) and the Treasury Department, the agencies said.
The agreement will resolve criminal charges that Binance conducted an unlicensed money transmitter business, undertook conspiracy and breached sanctions regulations, the DOJ said.
Binance’s former chief compliance officer Samuel Lim, a Singaporean, was charged by the CFTC with violating the Commodity Exchange Act and wilfully aiding and abetting Binance’s numerous violations of the Act.

The CFTC on its website said Lim has agreed to pay US$1.5 million to settle the charges. The proposed settlement is subject to court approval.
Binance itself will pay US$1.81 billion within 15 months, and a further US$2.51 billion forfeiture as part of the deal, prosecutors said.
“Today, I stepped down as CEO of Binance,” Zhao said in a post on X after the settlement was announced. “Admittedly, it was not easy to let go emotionally. But I know it is the right thing to do. I made mistakes, and I must take responsibility. This is best for our community, for Binance, and for myself.”

Zhao pleaded guilty in a Seattle court on Nov 21 afternoon, The Seattle Times reported. It described him sitting in court with three attorneys. Zhao’s plea agreement does not contemplate prison time, court papers show.
While the authorities have probed Zhao and Binance for years, Zhao’s exit marks a dramatic development for the mogul, one of the most powerful figures in the crypto industry, and for Binance. The deal raises questions over the future of the crypto exchange, which has been tightly run by Zhao since he founded the company in 2017.
Mr Richard Teng, a Singaporean and long-time Binance executive, will take over at Binance, Zhao said. Mr Teng is a former director of corporate finance at the Monetary Authority of Singapore, and was also chief regulatory officer at the Singapore Exchange.

Binance said in a statement: “These resolutions acknowledge our company’s responsibility for historical, criminal compliance violations, and allow our company to turn the page on a challenging yet transformative chapter of learning and growth.”
Mr Teng said in a statement that his focus will be on “reassuring users that they can remain confident in the financial strength, security and safety of the company” as well as collaborating with regulators and working with partners to drive growth.
Neither Lim nor his lawyers immediately responded to requests for comment.

‘Potentially illegal’​

Binance has been under the DOJ’s scrutiny since at least 2018, Reuters reported in 2022, just one of a string of legal headaches it faces in the US.
Federal prosecutors at the agency asked the company in December 2020 to provide internal records about its anti-money laundering efforts, along with communications involving Zhao.
The CFTC in March filed civil charges against Binance, alleging it failed to implement an effective anti-money laundering programme to detect and prevent terrorist financing. Internally, Binance officers and employees acknowledged that the platform facilitated “potentially illegal activities”, the CFTC alleged.
In February 2019, Lim received information on transactions by the Palestinian militant group Hamas on Binance, the CFTC wrote.
“(Lim) explained to a colleague that terrorists usually send ‘small sums’ as ‘large sums constitute money laundering’,” the CFTC said in its March lawsuit.
Zhao, a billionaire who was born in China and moved to Canada at the age of 12, said at the time that the CFTC’s “complaint appears to contain an incomplete recitation of facts, and we do not agree with the characterisation of many of the issues alleged”. REUTERS

 

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Binance was used to funnel money to Hamas, other militant groups​

Binance's compliance chief acknowledged Hamas funding in 2019. PHOTO: REUTERS

NOV 22, 2023

WASHINGTON - In February 2019, Binance Holdings’ then chief compliance officer Samuel Lim acknowledged that the cryptocurrency exchange was being used to funnel money to Hamas, saying to a colleague that terrorists normally sent “small sums”.
Hamas could “barely buy an AK47 with 600 bucks”, the colleague responded in a chat message, according to the US Commodity Futures Trading Commission’s (CFTC) March lawsuit against the world’s largest crypto exchange.
That apparently nonchalant attitude caught up with Binance and its chief executive officer Zhao Changpeng on Tuesday. In announcing US$4.3 billion (S$5.8 billion) in fines against the firm and a guilty plea by Zhao for failing to comply with anti-money laundering laws, the US government put Hamas and terrorist organisations front and centre. The broad settlement also resolves the CFTC suit.
“Binance enabled a range of illicit actors to transact freely on the platform,” the Treasury Department said in a statement that named Hamas, Al-Qaeda, Palestinian Islamic Jihad and the Islamic State in Iraq and Syria as terrorist organisations that received funds through the exchange.
Binance’s settlement and Zhao’s guilty plea come as Hamas is embroiled in a war with Israel, sparked by the group’s Oct 7 attacks that killed more than 1,200 people, with more than 200 others taken hostage. Israel responded by invading Gaza, where thousands more have been killed.
In a press conference, US Attorney-General Merrick Garland said Zhao “wilfully violated federal law that requires financial institutions to guard against money laundering and terrorist financing”.

Cavalier attitudes​

According to the US government, Binance failed to report suspicious transactions with terrorists. As part of its settlement, the company will have to file those reports going forward and review past activity it should have disclosed.

“This will advance our criminal investigations into malicious cyber activity and terrorism fundraising, including the use of cryptocurrency exchanges to support groups such as Hamas,” Mr Garland said.
Treasury’s Financial Crimes Enforcement Network (FinCEN) will receive US$3.4 billion of the fines paid by Binance, while its Office of Foreign Assets Control will get US$968 million. The FinCEN fine is the largest in that bureau’s history.
A number of cryptocurrency entrepreneurs have expressed cavalier attitudes about terrorists or other bad actors using their platforms. BitMEX co-founders Arthur Hayes, Benjamin Delo and Samuel Reed in 2022 pleaded guilty to wilfully failing to implement anti-money laundering and customer identification policies at their crypto derivatives exchange.
Former Ethereum Foundation researcher Virgil Griffith was sentenced in 2022 to more than five years in prison for participating in a 2019 blockchain and cryptocurrency conference in North Korea.
At the conference, Griffith discussed how North Korean money might be converted into cryptocurrency as a way to evade sanctions.
Photos showed the researcher dressed in a North Korean-style uniform, standing in front of a whiteboard on which he drew a smiley face and wrote “No sanctions yay”. BLOOMBERG

 

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Binance sees $1.3 billion in outflows after Zhao steps down to settle US probe​

Binance founder and former CEO Zhao Changpeng faces a maximum prison sentence of 18 months and has agreed not to appeal any sentence up to that length. PHOTO: REUTERS

NOV 23, 2023

BENGALURU – Investors pulled about US$956 million (S$1.3 billion) from crypto exchange Binance over the past 24 hours, market data showed, after its founder and chief executive Zhao Changpeng stepped down and pleaded guilty on Nov 21 to settle a years-long US illicit finance probe.
The deal, in which Binance will pay US$4.3 billion to the US authorities, raises questions over the future of the world’s largest crypto exchange and marks another blow for an industry beset by scandals. Zhao has been replaced by Mr Richard Teng, a Singaporean and former executive at the Monetary Authority of Singapore and the Singapore Exchange.
It remained unclear on Nov 22 how much jail time, if any, Zhao would ultimately serve and how much influence he – as Binance’s founder and major shareholder – could continue to exert on the company under the terms of the settlement.
Some analysts also noted that the deal was unlikely to end the exchange’s US legal woes, with charges from the Securities and Exchange Commission (SEC) alleging that Binance broke US securities laws still unresolved.
“Binance is not entirely out of the woods. The ongoing civil lawsuit with the SEC remains a concern for the exchange, which (is) likely to result in further fines,” Mr Robert Le, a crypto analyst at data firm PitchBook, wrote in a note.
Data from crypto analytics platform Nansen, which does not include Bitcoin flows, signalled that some investors had been rattled by the news, pulling US$956 million from the exchange. Still, the outflows were small relative to the more than US$65 billion of assets that remain on Binance, Nansen said.
As it strived for market dominance, Binance shunned key checks that Zhao believed would turn off customers, the authorities said.

It failed to report more than 100,000 suspicious transactions, including with organisations the United States described as terrorist groups such as Palestinian militant group Hamas, and never reported transactions with websites dedicated to selling child sexual abuse materials.
Binance did not immediately respond to a request for comment, but said on Nov 21 that it had worked hard to make Binance “safer and even more secure”. Lawyers for Zhao did not respond to requests for comment on Nov 22. On Nov 21, he had conceded: “I made mistakes, and I must take responsibility.”
While the authorities have probed Zhao and Binance since at least 2018, Zhao’s exit marks a dramatic development for one of the most powerful figures in the crypto industry. Zhao, who resides in the United Arab Emirates, entered his plea in a Seattle court on Nov 21.

He faces a maximum prison sentence of 18 months under US guidelines and has agreed not to appeal against any sentence up to that length. Prosecutors will take a position on how much jail time to seek closer to Zhao’s Feb 23 sentencing in Seattle, a Justice Department spokesperson said on Nov 22.
“But we do reserve the right to seek a sentence above the guidelines,” said the spokesperson.

Zhao paid a US$175 million bail bond, with another US$15 million held in a trust account, a court filing showed. He has agreed to return to the US 14 days before sentencing.
Later on Nov 22, US prosecutors urged a judge to block Zhao from leaving the continental US prior to his February sentencing, saying in a court filing that he posed a serious flight risk despite his bail conditions.
Some legal experts said they did not expect Zhao to spend more than a year in prison, and maybe less, citing former chief of crypto exchange BitMEX Arthur Hayes, who likewise pleaded guilty to anti-money laundering violations.
Hayes was ultimately sentenced to six months of house arrest in 2022, even though the government sought prison time. Other senior BitMEX executives charged did not serve time.
However, FTX founder Sam Bankman-Fried could spend decades in prison after being found guilty in November of defrauding customers of his now-bankrupt crypto exchange.
Based on the alleged facts, prosecutors likely could have charged Zhao with more serious crimes carrying heavier sentences, but had to weigh that against the probability that he would have stayed abroad to avoid capture, legal experts said.
The settlement also bars Zhao from “any present or future involvement in operating or managing” Binance, which he founded in 2017 and had maintained a tight grip on since. He remains a major shareholder and said on Nov 21 that he will be “available to the team to consult as needed”, consistent with the deal.
“This could give him a hook on which to exercise control – through the usual corporate governance channels (for example, shareholder voting),” Professor Yesha Yadav of Vanderbilt University’s law school wrote in an e-mail to Reuters.
“At the same time, I imagine that Binance will be looking to be very careful.” REUTERS

 

[k1976]

Taigong CZ is not allow to leave US shore while he waited for his sentencing

https://www.google.com/amp/s/www.co...-zhao-is-a-manageable-flight-risk-us-doj/amp/

 

[k1976]

Next is the Korean Chap Do Kuan?

Tiagong ish pending for extradition back to Goryeo home ground

 

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Retail customers will not be allowed to use local credit cards to buy cryptocurrencies: MAS​

Crypto service providers are not allowed to offer financing, margin or leverage transactions. PHOTO: PIXABAY

Claire Huang
Business Correspondent

NOV 23, 2023

SINGAPORE – Retail customers dealing with Singapore-regulated providers of digital payment token (DPT) services will not be allowed to buy cryptocurrencies with local credit cards.
They will also have to undergo risk awareness assessments of trading in DPTs, prices of which are volatile.
These measures are among the list of conditions set out by the Monetary Authority of Singapore (MAS) on Nov 23 as it finalises its proposed rules for DPT service providers here.
The final measures, to take effect in phases from mid-2024 following legislative amendments, also state that crypto service providers are not to offer incentives such as free tokens to court retail users.
Crypto service providers are also not allowed to offer financing, margin or leverage transactions.
There is also a limit to the value of cryptocurrencies in determining a customer’s net worth.
Under the rules, providers of crypto services will treat all customers as retail customers by default, save for institutional investors. Retail customers refer to those who are not accredited or institutional investors.

Those who qualify as accredited investors have to opt in to be treated as one.
Currently, an accredited investor is someone with at least $2 million in net personal assets.
Under the finalised rules in determining if an individual is eligible as an accredited investor, the regulator will recognise no more than 50 per cent of the value of DPT holdings a person has, or up to $200,000, whichever is lower.

However, MAS said crypto players and financial institutions may adopt their own valuation models as long as they “achieve the same or more prudent outcome”.
Besides consumer safeguards, players must also adhere to business conduct rules.
They have to identify, mitigate and clearly disclose potential and actual conflicts of interest; publish policies, procedures and criteria that govern the listing of a DPT; as well as establish effective policies and procedures to handle customer complaints and resolve disputes.
MAS said crypto service providers should resolve disputes with retail customers through modes such as mediation, arbitration and litigation in the Singapore courts.
It noted that the providers may voluntarily engage the services of the Financial Industry Disputes Resolution Centre as an alternative dispute resolution channel on an ad-hoc basis for an agreed case fee.

In terms of technology and cyber risk, MAS says it will require DPT service providers to maintain high availability and recoverability of their critical systems, in line with current requirements imposed on financial institutions.
There will be an adequate transitional period for DPT service providers to properly implement these measures, says MAS.
Mr Robson Lee, a partner at law firm Kennedys Law, cautioned that retail consumers must not place blind faith or reckless trust in crypto operators who are licensed by MAS as all investments carry risks.
He said retail consumers must be mindful not to unwittingly be complicit in any money-laundering or other illicit schemes, as the legal consequences for abetting any such illegal activities are severe.
“The risks of being inadvertently involved in money laundering and/or funding of terrorists’ activities are real when consumers are drawn to participating in ‘get-rich’ schemes, promised by crypto operators who are situated in a borderless world not within the legal jurisdiction of any established financial market that has proper regulatory guardrails and rigorous enforcement regimes,” added Mr Lee.
Mr David Gerald, founder and chief executive of the Securities Investors Association (Singapore), said that while MAS rules have safeguards for consumers, the risks are too much for small investors. “No amount of regulations can protect the retail investors fully; everyone must know they are taking a huge risk when investing in cryptocurrencies.”
The finalised measures come a year after MAS first proposed that providers of DPT services must test a customer’s understanding of the possible risks of trading before allowing them to invest, among other things.
In July, MAS published the first tranche of consultation responses and proposed legislative amendments to do with customer asset segregation and custody requirements.
These are meant to ring-fence Singapore customers’ assets in a move that is meant to avoid a repeat of the huge investor losses chalked up in 2022 when cryptocurrency firms went bust.
In August, the regulator laid out its rules for stablecoin issuers in Singapore, including having a minimum amount of reserves and allowing investors timely redemption at par value.
Ms Ho Hern Shin, deputy managing director for financial supervision at MAS, said that while the business conduct and consumer access measures can help safeguard retail investors’ interests, “they cannot insulate customers from losses associated with the inherently speculative and highly risky nature of cryptocurrency trading”.
She urged consumers to remain vigilant and exercise caution when dealing with DPT services.

 

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How ‘pig-butchering’ scams have emerged as a billion-dollar crypto industry​

Crypto fraud has emerged as a multi-billion-dollar criminal speciality that has entrapped victims around the world. PHOTO: ST FILE

NOV 24, 2023

LONDON – At a Thai police headquarters in October 2022, Chinese businessman Wang Yicheng congratulated one of Bangkok’s most senior cybercrime investigators on his recent promotion, presenting the official with a large bouquet of flowers wrapped in red paper and a bow.
Mr Wang, the vice-president of a local Chinese trade group, wished the new cybercrime investigator “smooth work and new achievements”, according to the group’s website, which displays photographs of the event.
Over the past two years, Mr Wang has forged relationships with members of Thailand’s law enforcement and political elite, the trade group’s online posts show.
During that time, a cryptocurrency account registered in Mr Wang’s name was receiving millions of dollars linked to a type of cryptocurrency investment scam known as “pig butchering”, a Reuters investigation has found.
In total, crypto worth more than US$90 million (S$120 million) flowed into the account between January 2021 and November 2022.
The victim of one of the scams was a 71-year-old California man.
According to blockchain analysis company Coinfirm, he sent money to crypto wallets that channelled more than US$100,000 into the account in Mr Wang’s name.

The man’s family told Reuters he lost about US$2.7 million, his life savings, after falling prey to someone claiming to be an attractive young woman called Emma.
The previously unreported transactions provide rare insight into the finances of pig-butchering scams, which involve engaging unsuspecting people online.
Scammers cultivate trust and then persuade victims to invest in fraudulent crypto schemes, sometimes via fake websites built to look like legitimate trading platforms. Sometimes the targets initially receive real returns to trick them into believing the scheme is legitimate.

Such scams have drawn intensifying scrutiny from global law enforcement over the past year, but little is publicly known about the people behind them.
Mr Wang, who is 41 according to the account registration documents, did not respond to detailed questions for this article.
Neither did the Thai government, the Thai police or the Bangkok-based trade group Mr Wang represented, the Thai-Asia Economic Exchange Trade Association.
Some aspects of the pig-butchering operation remain murky.
Ms Lisa Wolk, a blockchain intelligence analyst at TRM, said the crypto account in Mr Wang’s name “is a node in a money laundering network and not necessarily the ultimate recipient of funds”.

Ms Erin West, a California prosecutor specialising in cybercrime, said she participated in a briefing in January about cyberfraud attended by agents from the US Federal Bureau of Investigation (FBI) and the US Secret Service.
A 72-page presentation prepared for the attendees, which Reuters reviewed, provides details on cyberscams operated from South-east Asia and cites Mr Wang as among alleged beneficiaries.
The FBI and Secret Service declined to comment on the briefing, or on whether Mr Wang was part of any investigation.
The briefing was given by the Global Anti-Scam Organisation, a US non-profit that advocates for fraud victims and investigates cases.
The crypto account registered to Mr Wang was held at Binance, the world’s largest crypto exchange, according to three blockchain analysis firms.
In an August post on its website, the company said the number of reports of pig-butchering scams it had received in 2023 was double that of 2022, an increase it attributed to an influx of inexperienced crypto investors and scammers looking to exploit them.
Crypto fraud has emerged as a multi-billion-dollar criminal speciality that has entrapped victims around the world.
According to the FBI, in the United States alone, victims reported losses of US$2.6 billion from pig butchering and other crypto fraud in 2022, more than double the previous year’s amount.
The true scale of the losses is unknown because victims are often too embarrassed to report crimes to the authorities.
In April, the US Department of Justice said it had seized about US$112 million worth of crypto linked to pig-butchering scams, without identifying suspects.
A warrant that resulted in the seizure of more than half that amount specified a Binance account registered in Thailand.

‘Absolute devastation’​

Ms West, the US prosecutor, said many victims in the hundreds of pig-butchering cases she has handled since early 2022 have lost more than US$1 million.
Many are never able to recover their money.
Ms West said at least one victim died by suicide and another attempted suicide.
“I’ve never seen this level of absolute devastation,” she added.
Financial crime specialists say pig-butchering scams originated in China.
The US Treasury said in September that many such scams are now run by criminal organisations out of South-east Asia that use victims of labour trafficking to contact individuals around the world.
Cases are difficult to prosecute.
Mr Jeremy Douglas, regional representative of the United Nations Office on Drugs and Crime, told Reuters that perpetrators are typically “ruthless transnational organised crime syndicates” that thrive on corruption.
One of the blockchain analysis firms told Reuters that several scams connected to deposits made into the account in Mr Wang’s name were run from an industrial park on the Myanmar-Thailand border.
According to two former workers and groups that support workers or scam victims, workers are trafficked to the area, known as KK Park, by gangs that force them to con people online.
China has announced a crackdown on cyberscams in recent months in partnership with Thailand and Myanmar.

Thailand has also said it is combating cyberfraud. Thai police in September announced the arrest of several Chinese nationals in connection with a crypto investment fraud operation.
Binance publicly said it had assisted Thai police with a probe into “a significant pig-butchering scam”, and that about US$277 million of assets were confiscated.
Thai police did not respond to questions about the operation or whether there was any connection to Mr Wang.
Binance chief Changpeng Zhao stepped down and pleaded guilty to breaking US anti-money laundering laws on Nov 21, as part of a US$4.3 billion settlement resolving a years-long probe.
The US authorities said that over five years, Binance processed transactions by users who “laundered proceeds” of criminal activity, including scams.
Mr Wang has continued to court officials.
In August, he helped host an event in Bangkok, according to photos and a description published on the Thai-Asia association’s WeChat account.
Standing on a red carpet under a chandelier and flanked by floral decorations, Mr Wang “warmly welcomed” the guests.
They included a government minister, senior police officers and Chinese embassy officials, according to the trade group’s post.
Among those in attendance: Police Lieutenant-General Kornchai Klaiklueng, the assistant to the national police chief who previously headed up the cybercrime unit. REUTERS

 

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$12m lawsuit: Snap Innovations’ then MD ‘likely’ signed investor guarantee, says handwriting expert​

An investor is suing fintech firm Snap Innovations and its former managing director Bernard Ong (above) for breaching a service agreement. ST PHOTO: KELVIN CHNG

Joyce Lim
Senior Correspondent

NOV 27, 2023

SINGAPORE - A US$9 million (S$12 million) lawsuit filed by a Greek investor against Singapore fintech firm Snap Innovations and its former managing director Bernard Ong went to trial on Nov 27.
Mr Georgios Baizanis, 48, is suing Snap for breaching a service agreement that the two parties entered into on May 24, 2019, which stated that Snap would substitute any digital assets stolen by any of its staff within five business days.
The corporate guarantee was apparently signed by a Snap director in Vietnam, Mr Wu Zongyi, also known as Zee, and second defendant Mr Ong, who was listed at the time as the managing director of Snap.
Mr Ong is also the founder of the now-collapsed cryptocurrency trader Torque, where Zee also held the position of chief technology officer.
Mr Baizanis said in his statement of claim that he first learnt of Cryptotrage, a cryptocurrency trading platform run by Snap in Vietnam, in 2018 and started placing small investments with the platform.
In 2019, he increased his investments with Snap by an additional US$5 million after the corporate guarantee was signed.
On Feb 9, 2021, Mr Baizanis discovered that his investments with Cryptotrage had vanished and was told by a Snap Vietnam employee that Zee, who was managing Cryptotrage and Torque, had gone missing.

Mr Ong subsequently made a police report alleging that Zee had conducted unauthorised trades, resulting in significant losses of investor funds.
Mr Ong also applied to the courts in the British Virgin Islands, where Torque was incorporated, to wind up the company. Torque was ordered to be wound up on March 18, 2021.
He faces a separate lawsuit from Torque’s liquidators, who accuse him of failing in his duty as the director of Torque. The liquidators are seeking to recover hundreds of millions in cryptocurrency that were allegedly lost on his watch.

Mr Baizanis commenced his lawsuit against Snap for breaching the corporate guarantee and failure to supervise Zee in 2021. He is also suing Mr Ong for breach of warranty of authority.
Mr Baizanis said his US$9 million claim represents his estimated losses based on the exchange rates in March 2021. He is seeking a delivery of the crypto of this sum into his wallet, or damages at the open market price of each crypto asset as at the date of judgment, interest and cost.
Snap, represented by lawyer Christopher de Souza from Lee & Lee, has denied all claims by Mr Baizanis, who is represented by Mr David Ong of David Ong & Co.
In its defence filed with the High Court in 2021, the firm founded by artificial intelligence researcher Ting Shang Ping said it never had trading operations in Vietnam through Snap Vietnam.

Snap Innovations founder Ting Shang Ping arriving at the High Court on Nov 27. ST PHOTO: KELVIN CHNG
The court documents stated that Zee was engaged on an informal basis to market products and services. He was not a director or authorised to conduct dealings on the firm’s behalf.
Snap also said Mr Ong was not a registered director. He was engaged to market products and services, and this task was facilitated by listing him as a director on the company’s website.
Mr Ong, who is represented by Mr Sarbrinder Singh of Sanders Law, denied having signed any corporate guarantee and being acquainted with Mr Baizanis.

Mr Georgios Baizanis leaving the High Court on Nov 27. The Greek investor is suing Snap for breaching a service agreement. ST PHOTO: KELVIN CHNG
On the first day of the trial, the court heard that one of the main issues centres on the corporate guarantee, whose authenticity Mr Ong disputed.
Handwriting expert William Pang Chan Kok testified that he had examined at least five documents that had the actual signatures of Mr Ong, and assessed that it was likely that the corporate guarantee was signed by Mr Ong and not “cut and paste” onto the document.
Mr Pang also said that Mr Ong is likely the one who wrote the words “Managing Director, Snap Innovations (Singapore)” under the signature on the corporate guarantee.
When cross-examining Mr Pang, Mr Singh asked how he could have come to that likely conclusion that Mr Ong had written those words when he did not have any specimen of those words by Mr Ong to compare with.
Mr Pang said that he could tell the habit of a writer based on his examinations of Mr Ong’s signatures.
The trial, which is scheduled to run until Dec 8, will see Mr Ong taking the stand next week.

 

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Former Binance CEO Zhao Changpeng must stay in US for now, judge says​

Zhao Changpeng pleaded guilty last week to failing to implement anti-money laundering policies at the world's largest crypto exchange. PHOTO: REUTERS

NOV 28, 2023

NEW YORK - Binance Holdings’ former chief executive Zhao Changpeng cannot return to his home in the United Arab Emirates (UAE) for now, a federal judge in Seattle ruled.
US District Judge Richard Jones on Nov 27 put on hold a ruling granting the billionaire’s request to return to the UAE following his guilty plea last week to US criminal charges but before his Feb 23 sentencing. That order will remain in effect until the district judge issues a decision on prosecutors’ motion to keep Zhao in the United States through his sentencing.
The co-founder of the world’s largest cryptocurrency exchange pleaded guilty to failing to implement anti-money laundering policies and US sanctions violations as part of a broad agreement with the US government. He agreed to post a bond of US$175 million (S$234 million), secured by US$15 million in cash held in trust, to guarantee his appearance for sentencing.
Zhao, who stepped down as Binance’s chief executive as part of the plea deal, theoretically faces as much as 10 years in prison but is expected to get no more than 18 months. He also agreed to pay a US$50 million fine.
Binance itself also pleaded guilty and agreed to pay US$4.3 billion in penalties and forfeitures. It is also facing civil lawsuits from investors seeking to recover billions lost in the exchange’s struggles.
US prosecutors on Nov 22 asked District Judge Jones to reverse a magistrate judge’s decision to let Zhao return home on bail, saying there was a “substantial risk” that he would not return to the US because of his significant assets, ties to the UAE and the lack of an extradition agreement with the Persian Gulf state.
Zhao claims he is not a flight risk, noting that he voluntarily came to the US.

Meanwhile, Binance investors sued international football star Cristiano Ronaldo, saying his efforts as a paid promoter for the exchange helped dupe customers into buying products that amounted to unregistered securities. Other celebrity endorsers named as defendants include National Basketball Association star Jimmy Butler and YouTube influencers Graham Stephan and Ben Armstrong, who was known as BitBoy Crypto.
“Mr Ronaldo’s promotions were published on public websites, television and social media accounts accessible to plaintiffs nationwide,” according to the complaint filed on Nov 27 in federal court in Miami.
Ronaldo, a native of Portugal who plays for the Saudi Arabian club Al Nassr, could not be immediately reached for comment on the suit. BLOOMBERG

 

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Class action with 377 parties against Terraform, Do Kwon to move ahead in Singapore court​

Terraform Labs co-founder Do Kwon being taken to court in Montenegro on March 24, 2023. The proceedings in Singapore are said to be the furthest a class-action suit has progressed internationally against Terraform and its co-founders. PHOTO: REUTERS
Yong Hui Ting

DEC 1, 2023

SINGAPORE - A class action brought against Terraform Labs and its co-founders is moving forward.
This comes after the High Court on Nov 30 dismissed an appeal that had been filed by the defendants.
The case is one of several lawsuits that have been filed against Terraform and related parties following the collapse of TerraUSD (UST) tokens in May 2022.
Terraform is a Singapore-incorporated company that developed and operates the Terra blockchain, and was responsible for issuing and marketing the UST cryptocurrency.
The Business Times understands that this is the furthest a class-action suit has progressed internationally against Terraform and its co-founders.
The suit was filed in September 2022 by Spanish citizen Julian Moreno Beltran and Singaporean Douglas Gan on behalf of 375 others.
They have alleged fraudulent misrepresentation by Terraform; its co-founders Do Kwon and Nikolaos Alexandros Platias; and Luna Foundation Guard, an organisation supporting the stability of UST by building reserves.

The claimants allege that these misrepresentations induced them to purchase UST, stake the tokens and hold on to them even as their value plummeted.
UST – which was supposed to be pegged to the United States dollar on a 1:1 ratio – suffered a collapse in confidence in May 2022.
It was trading at around five US cents on the day the court’s grounds of decision were released.

The individuals claim they suffered losses of close to US$57 million (S$76 million).
Terraform had tried to get the suit thrown out on the grounds that the terms of use on its website contain an arbitration clause – users were alleged to have waived their rights to trial by jury or participation in a class action.
Lawyers for the defendants tried instead to shift the legal action to “confidential arbitration proceedings” as they argued that the court has no jurisdiction.
The assistant registrar (AR) earlier in 2023 denied the application for a stay in favour of arbitration.
In its grounds of decision, the AR said the defendants had failed to establish an arbitration agreement between the company and the claimants in the action.
The terms of use were located at inconspicuous parts of the website and there was also insufficient effort to highlight those clauses to users.
Kwon and his companies filed an appeal against this decision, which was heard by Justice Hri Kumar Nair on Sept 25.
The grounds of decision released on Nov 30 said Terraform’s conduct of the matter up to that point meant that it had accepted the Singapore court’s jurisdiction over the matter – and thus did not have the right to move the proceedings into arbitration.
Terraform’s acts included filing a defence on the merits of the suit as well as a counterclaim, and seeking substantive remedies such as a request for further and better particulars that did not concern a jurisdictional challenge.

Although the court ruled that Terraform had managed to establish a prima facie case of an arbitration agreement, the fact that Terraform had taken a step in the proceedings meant that it accepted the jurisdiction of the court and should no longer be granted a stay in favour of arbitration.
Kwon, Terraform and Luna are represented by Mr Lawrence Teh, Ms Melissa Thng and others of Dentons Rodyk & Davidson; while Mr Platias is represented by Mr Danny Ong, Mr Jason Teo and Ms Mazie Tan of Setia Law.
The appeal had been filed by Terraform and case management stays were requested by Kwon, Luna and Mr Platias.
As the latter’s stays were predicated on Terraform obtaining an arbitration stay, their appeals have also been dismissed.
Meanwhile, the 377 claimants are represented by Mr Mahesh Rai and his team from Drew & Napier.
Justice Nair noted, in his closing observations, that the suit had been served in September 2022 but that Terraform’s jurisdictional challenge was heard only in June 2023.
This delay of more than nine months was regrettable, he said.
Singapore introduced new legislation – called Rules of Court 2021, or ROC 2021 – that came into operation in April 2022. ROC 2021 is meant, among other things, to enhance the speed of adjudication.
“That philosophy was not embraced in this case, and parties (particularly Terraform) engaged in the old ways of procedural and strategic manoeuvres unrelated and unnecessary to resolving the jurisdictional challenge,” the judge said.
“As far as a party’s actions in delaying the judicial process are not intentional or disingenuous, some lenience may be granted.
“However, where such conduct is deliberate or unreasonable, parties should expect to be met with firm sanctions from the court.”
THE BUSINESS TIMES

 

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Founder of failed crypto firm Torque denies ties to Cryptotrage project​

Torque founder Bernard Ong (left) rejected having any liability towards Cryptotrage investor George Baizanis. ST PHOTOS: KELVIN CHNG

Joyce Lim
Senior Correspondent

DEC 7, 2023


SINGAPORE – The Singaporean founder of collapsed cryptocurrency trading platform Torque denied any knowledge of cryptocurrency trading platform Cryptotrage, which was allegedly using Torque’s Binance account to hold and trade investors’ deposits.
Taking the stand during an ongoing trial that is delving into allegations surrounding Cryptotrage, Mr Bernard Ong, 36, vehemently rejected having any liability towards Cryptotrage investor George Baizanis.
The 48-year-old Greek investor is seeking to recover US$9 million (S$12 million) from Singapore fintech firm Snap Innovations and Mr Ong for allegedly breaching a service agreement that he entered into with Snap on May 24, 2019.
The agreement stated that Snap would make good any digital assets stolen by any of its staff within five business days.
The corporate guarantee was apparently signed by a Snap director in Vietnam, Mr Wu Zongyi, also known as Zee, and second defendant Mr Ong, who was listed at the time as the managing director of Snap.
Mr Bazainis told the court that Cryptotrage was run by Snap in Vietnam, and he started placing small investments with the platform in 2018. He increased his investments in 2019 after the corporate guarantee was signed.
On Feb 9, 2021, he discovered that his investments with Cryptotrage had vanished and was told by a Snap Vietnam employee that Zee had gone missing.

Both Mr Ong and Snap deny any knowledge of Cryptotrage. In filings with the court in 2021, Snap said it never had trading operations in Vietnam through Snap Vietnam.
Mr Ong subsequently made a police report against Zee, who also held the position of chief technology officer with Torque, and applied to the courts in the British Virgin Islands, where Torque was incorporated, to wind up the company.
Torque was ordered to be wound up on March 18, 2021.

Mr Baizanis is also suing Mr Ong, as Snap’s managing director, for failing to supervise Zee.
During the cross-examination on Dec 6, Mr Baizanis’ lawyer, Mr David Ong of David Ong & Co, pointed out several withdrawals made by Mr Baizanis on different occasions in relation to Cryptotrage from Torque’s trading account with cryptocurrency exchange Binance.
Mr David Ong also flagged a letter by Torque’s liquidators to investors on the “unauthorised” withdrawals made from Torque’s only Binance account, which were apparently made outside of Torque’s ordinary business, further emphasising that those “unauthorised” withdrawals made by Mr Baizanis were in relation to Cryptotrage.
“I am demonstrating to you that all these withdrawals were the withdrawals made of his (Mr Baizanis’) funds in Cryptotrage because these funds, as far as Snap Vietnam team is concerned, were also in the same Binance account as Torque,” Mr David Ong told Mr Bernard Ong.
He went on to question Mr Bernard Ong on his knowledge of Torque’s Binance account.

Mr Bernard Ong, who faces a separate lawsuit by Torque’s liquidators of allegedly failing in his duty as the director of Torque, said he did not know of Cryptotrage or that the project was using any sub-accounts created under Torque’s Binance account.
In his response to Mr David Ong, Mr Bernard Ong said he found the withdrawals suspicious and there was no evidence that the sub-accounts used by Mr Baizanis under Torque’s main Binance account belonged to Cryptotrage. He added that Mr Baizanis was a Torque user who had made withdrawals from Torque.
“So why is there this project called Cryptotrage using our sub-account? There is nowhere in these documents to prove that these sub-accounts belong to Cryptotrage. What is Cryptotrage? I do not know,” said Mr Bernard Ong, who had also told the court that he is disputing the unauthorised withdrawal claims by Torque’s liquidators.
Mr Bernard Ong, who is represented by Mr Sarbrinder Singh of Sanders Law, also denied having signed any corporate guarantee and being acquainted with Mr Baizanis.
He told the court he had been introduced to Zee by Snap founder Ting Shang Ping.
Mr Bernard Ong was hired by Snap to market products and services for the company. Although he was listed as a director on Snap’s website, he was not a registered director of the company.
Snap, represented by lawyer Christopher de Souza from Lee & Lee, has denied all claims by Mr Baizanis.
The trial is expected to wrap up on Dec 8.

 

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Crypto platform operator Cake Group’s co-founder files bid to wind up firm amid shareholder dispute​

Cake Group co-founder Chua U-Zyn (left) filed for the company to be wound up, but another co-founder Julian Hosp (right) said the group will seek to dismiss the case. PHOTOS: ST FILE, CAKE GROUP

Claire Huang
Business Correspondent

DEC 7, 2023

SINGAPORE - A co-founder of Cake Group, which operates a cryptocurrency investment platform, has filed for the company to be wound up amid a shareholder dispute.
A winding-up notice in The Straits Times on Dec 7 showed that the company’s co-founder, shareholder and chief technology officer Chua U-Zyn, represented by law firm Rajah & Tann Singapore, had filed an application with the High Court on Dec 1.
The hearing has been fixed for Dec 22.
In a statement issued to ST, the group’s co-founder and chief executive Julian Hosp said the group will seek to dismiss the court application as it has “a strong case”.
He said the court application stemmed from “internal disagreements” with the company’s restructuring that was announced in mid-November.
Dr Hosp said the group was informed of Mr Chua’s court application on Dec 6.
He stressed that the group “is solvent and financially strong”, has ongoing business activities, can meet its obligations, that its assets exceed the liabilities, and that the proof of reserves shows customer funds remain backed on a one-to-one basis.

Dr Hosp said: “It is important to note that the winding-up application has been commenced on the basis that it is just and equitable to wind up Cake Group in connection with the dispute between shareholders.
“In other words, the winding up application has not been brought on the grounds that Cake Group is unable to pay its debts.”
He also said he remains committed as the chief and that the day-to-day operations remain unaffected.
The dispute comes after the group in mid-November announced it would cut 30 per cent of its staff.
Dr Hosp had said in a Nov 14 blog that 52 people would be cut in a restructuring exercise across the Singapore and Kuala Lumpur offices.
This would bring the team down to about 125.
Dr Hosp said the team grew quickly in 2020 and 2021, when the digital assets market was buoyant.
“We grew operating costs too quickly. We underestimated both the longevity and extent of a broader slowdown in the crypto landscape, and the impact it would have on investor sentiment,” he wrote.
The saga comes in the wake of a crypto winter that some are hoping will taper off soon as institutional players enter the scene, either focusing on tokenisation of real-world assets like bonds and securities or issuing their own stablecoins.
The sector’s downturn started in 2022 with the fall of many known names in the cryptocurrency space, including the Terra/Luna tokens, hedge fund Three Arrows Capital and exchange FTX.

 

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Crypto exchange HTX hit by $346 million outflow in wake of hack​

The HTX exchange is linked to China-born industry mogul Justin Sun. PHOTO: REUTERS

DEC 11, 2023

MUMBAI – The HTX exchange, a digital asset trading platform linked to China-born industry mogul Justin Sun, has suffered a US$258 million (S$346 million) net outflow since resuming operations after suffering a major hack.
The funds left the exchange between its Nov 25 restart and Dec 10, DefiLlama data shows, a sign that some clients were unsettled by November’s security incident.
HTX said it lost US$30 million worth of crypto tokens in the breach and temporarily suspended withdrawals and deposits following the attack.
Neither the exchange nor a spokesperson for Mr Sun immediately replied to requests for comment about the outflows from the exchange.
Mr Sun is also linked to the Poloniex exchange and the Heco Bridge, a network set up by HTX to enable transfers between blockchains. Poloniex and Heco were hacked in November too, leading to the theft of about US$200 million in crypto.
After the November HTX incident, Mr Sun said in a post on X that a probe was under way and that the exchange would “fully compensate for HTX’s hot wallet losses”.
Hackers also stole US$8 million from the platform in September.

HTX, once known as Huobi, had an average trading volume of US$1.6 billion in the past 24 hours, putting it in the top 20 crypto exchanges by that metric, according to CoinMarketCap figures as at 6.25pm on Dec 10 in Singapore.
Digital asset investors have become more attuned to shifts in flows and reserves at virtual currency exchanges following the collapse of the FTX platform in 2022 with a giant hole in its books.
At HTX, the biggest chunk of reserves – about 33 per cent – is comprised of Bitcoin, according to DefiLlama.
About 32 per cent is in the TRX token from the Tron blockchain, which Mr Sun launched in 2017.
HTX’s exchange coin HT accounts for some 14 per cent, followed by a Mr Sun-backed token called stUSDT at 12 per cent.
TRX is at the centre of US fraud allegations against Mr Sun.
The Securities and Exchange Commission in a March lawsuit accused him and his firms of market manipulation to make the token appear actively traded.
Mr Sun tweeted at the time that the suit “lacks merit”.
Security firm BlockSec said HTX recovered the US$8 million stolen in September. Hackers still appear to control the US$30 million taken in November, it added. BLOOMBERG

 

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US seizes crypto linked to South-east Asian investment scam​

The US Secret Service seized the crypto from an account in the name of Wang Yicheng in June, worth about US$500,000 (S$672,000) at the time. PHOTO: REUTERS

DEC 13, 2023

LONDON – The United States has seized digital currency worth about US$500,000 (S$672,000) from an account registered to a Chinese man who featured in a Reuters investigation into crypto investment fraud run from South-East Asia.
The US authorities said the scam that prompted the seizure involved a crypto investment fraud known as “pig butchering”. In such schemes, fraudsters manipulate unsuspecting people they meet online, persuading them to invest in bogus crypto schemes.
The US Secret Service seized the crypto from an account in the name of Wang Yicheng in June, according to a document filed by the US authorities in federal court in Massachusetts. The crypto was worth about US$500,000 at the time. Money initially stolen from a Massachusetts victim was traced to Wang’s account, the Nov 21 filing said.
Reuters, in an article published in November, identified Wang as a businessman who forged relationships with members of Thailand’s law enforcement and political elite while serving as the vice-president of a Bangkok-based Chinese trade group.
The Nov 23 article detailed how a crypto account in Wang’s name received more than US$90 million in recent years, based on documents and transaction logs. Of that, at least US$9.1 million came from a crypto wallet that US blockchain analysis firm TRM Labs said was linked to pig-butchering scams, Reuters reported.
The report highlighted the example of a California man whose family said he was scammed out of about US$2.7 million. He sent money to crypto wallets that channelled funds into the account in Wang’s name, the reporting showed.
The recent US court filing cited another example, a resident of Cambridge, Massachusetts. He was allegedly cheated of about US$478,000 worth of crypto, which was diverted into two crypto accounts, one of which was in Wang’s name.

The details of the account given in the US court filing – including who it was registered to, where it was held, the account number’s last four digits and the corresponding crypto wallet address – match the details of the Wang account highlighted in the Reuters report.
The US authorities said the account in Wang’s name had received more than US$90 million since it was opened in 2020, according to the filing, which was an affidavit by Secret Service special agent Heidi Robles.
“This level of activity is indicative of an account controlled by a criminal organisation for the purpose of laundering stolen funds,” Ms Robles said in the filing.

Wang did not respond to requests for comment. The head of the Thai police’s Cyber Crime Investigation Bureau declined to comment.
The trade group that Wang represented is called the Thai-Asia Economic Exchange Trade Association. In response to questions for this article, it said it abided by laws and regulations and did not support illegal activity.
It said Wang’s business and personal affairs had “nothing to do with the trade association”, adding that he was no longer part of the group and it was no longer in contact with him.
The Thai-Asia group previously told Reuters in a Dec 4 letter that Wang left its board more than three months ago. That was due to Wang’s failure to pay the trade group’s new membership dues as well as “personal reasons”, on which the letter did not elaborate.

The group said that background checks it conducted on Wang when he originally applied for membership and after Reuters’ Nov 23 report found no criminal record.
The US court filing was part of a civil forfeiture action, in which the government seeks court approval to take possession of seized assets it alleges are linked to a crime. The US has not filed a criminal action related to the case, the US Attorney’s Office in Massachusetts said at the time of its November filing.
Acting US Attorney Joshua Levy in Massachusetts told Reuters that his office has been using civil forfeitures to recover funds stolen via crypto fraud schemes.
“Despite the seemingly elusive nature of cryptocurrency transactions, law enforcement is adapting and evolving,” he said in a statement. REUTERS

 

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2023: NFTs go from hero to zero​

NFTs are digital works that exist solely in the digital space, most commonly in the form of digital artworks, music or videos. PHOTO: TZ APAC
Charmaine Lim

DEC 18, 2023

SINGAPORE – The majority of non-fungible tokens (NFTs) are now worthless – or are they?
September was rife with headlines from media outlets such as Business Insider and Bloomberg reporting that 95 per cent of NFTs were worth nothing.
The articles came after cryptocurrency gambling website dappGambl published a study on Aug 29, saying that 95 per cent of the 73,257 NFT collections it identified had stock market value of 0 Ethereum (ETH) and were worth US$0.
Ethereum is the second-most popular cryptocurrency after Bitcoin and the study used data provided by NFT Scan, the largest world’s NFT data structure company.
NFTs are digital works that exist solely in the digital space, most commonly in the form of digital artworks, music or videos. Savvier creators may also use them as membership tokens for exclusive discounts on physical items, such as clothing or food.
The conclusion of the study was that these NFTs were either worthless or drastically lower in value than they were when purchased.
NFTs gained popularity in the tech space in 2017 through the CryptoKitties blockchain game, then with the general public in April 2021 when Bored Ape Yacht Club sold out its first collection of 10,000 NFTs in 12 hours, now reportedly worth millions each.

American athletes Serena Williams and Shaquille O’Neal and late-night talk-show host Jimmy Fallon were among the reported buyers of these NFTs.
Despite established auction houses like Sotheby’s backing the space to sell NFTs, the meteoric rise was met with a vengeful fall.
However, collectors such as Mr Vignesh Sundaresan, 35, who has amassed a digital art collection said to be worth tens of millions, beg to differ.


Mr Vignesh, a blockchain technologist who also goes by his virtual alter ego Metakovan, tells The Straits Times via a video call: “This is the fourth time I’ve seen an incredible crash like this since 2013, but I don’t approach collecting NFTs without the knowledge that a crash could happen. I prepare myself for these cycles because it also pushes out the people who are in it only for the short term.”

Mr Vignesh Sundaresan, also known as Metakovan, says the NFT market will have ups and downs like fiat (physical) currencies do. PHOTO: ST FILE
Mr Stephan Huang, 36, co-founder of the Hungry Bros Club, an NFT club that offers retail and dining discounts and perks to its members, says: “I feel like the word ‘crash’ is only for people who speculate or are in it for a quick buck.
“For artists, we don’t ever have a crash. Do you think a Leonardo da Vinci work has crashed because it was sold for half of its previous price?”
Their staunch refusal to leave the space makes them part of a minority who still believe that there is a future for the digital tokens.
Mr Vignesh says: “I don’t approach it from a market perspective, I approach it from a technology perspective. I feel like that’s more relevant in the age of artificial intelligence (AI) and the exponential growth of information on the Internet.”

The rise in Bitcoin on Oct 27 appears to be a positive sign, as it raises the value of other cryptocurrencies like Ethereum. As these currencies stabilise, it could restore value to NFTs as well.
Curator of exhibitions at ArtScience Museum Deborah Lim, 31, says: “What I have seen the NFT platform produce is ways for artists to earn royalties and authenticate their artworks. It’s more of an extension of the platforms that are already out there.”
She co-curated Notes From The Ether with independent curator Clara Peh, 25, for the museum in August, the first institutional exhibition in Singapore for NFTs and AI-generated art. It also coincided with Token2049, a large Web3 conference which took place at Marina Bay Sands Convention Centre.

Notes From The Ether is the first institutional show in Singapore for NFTs and AI generative artworks. PHOTO: ARTSCIENCE MUSEUM
Web 3.0 or Web3 is a decentralised system open to everyone, built upon blockchain technologies that store data and transactions.
Mr Huang says: “If you look at NFTs as something to build a community around, it’s a tremendously beautiful opportunity.”
Rather than focusing on the money-making aspect of the space, he emphasises the importance of artists and business owners building relationships with collectors through discounts and perks, which in turn makes them more likely to spend money on future NFTs.
While collectors and curators appear unfazed by the latest research, this could mark the end of an era for casual NFT investors and collectors.
Ms Peh says: “Collectors from a crypto-native background feel like the downturn is temporary, but there has been a decrease in collectors from the traditional market who may have been trying to broaden their portfolios.”
True believers remain unswayed. Mr Vignesh says: “The day I feel like this isn’t useful, I’ll definitely be worried. But at the moment, I’m not worried at all.”
Will the market eventually stabilise? The jury is still out on whether 2023 marks the demise of NFTs or if they truly are the future.

 

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Singapore-based Terraform Labs files for bankruptcy in US after $53.6 billion crypto crash​

Terraform Labs, which was co-founded by Do Kwon (centre), said the filing would allow it to execute its business plan while navigating ongoing legal proceedings. PHOTO: REUTERS

Claire Huang
Senior Business Correspondent

JAN 22, 2024

SINGAPORE – The company co-founded by Do Kwon and under probe for a US$40 billion (S$53.6 billion) cryptocurrency crash has filed for protection against bankruptcy in the United States.
Singapore-registered Terraform Labs, which is behind stablecoin TerraUSD, said on Jan 22 that it made the application in a bankruptcy court in Delaware.
The firm said the move would “enable it to continue its operations and support for the Terra community and ecosystem”.
It added that the filing would let it execute its business plan while navigating ongoing legal proceedings, including representative litigation pending in Singapore and in the US, which involves the US Securities and Exchange Commission (SEC).
Terraform Labs said it intended to meet all financial obligations to employees and vendors during the Chapter 11 case, and did not require additional financing to do so. Reports said the firm had listed assets and liabilities in the range of US$100 million to US$500 million.
Mr Chris Amani, chief executive of Terraform Labs, said: “The Terra community and ecosystem have shown unprecedented resilience in the face of adversity, and this action is necessary to allow us to continue working towards our collective goals while resolving the legal challenges that remain outstanding.”
He added that the decision ensured it is able to continue working with the community on infrastructure, innovative tools and products, and other ecosystem support.

“We have overcome significant challenges before and, against long odds, the ecosystem survived and even grew in new ways post-depeg. We look forward to the successful resolution of the outstanding legal proceedings,” Mr Amani said.
The SEC has launched a civil trial against Terraform Labs and Kwon for allegedly orchestrating a US$40 billion cryptocurrency fraud via his algorithmic stablecoin TerraUSD and sister token Luna.
A stablecoin is a digital token that usually has a valuation of US$1 and is pegged to or backed by fiat currency or other cryptocurrencies or commodities on a one-to-one basis.
In the case of TerraUSD, the stablecoin was backed by Luna, with both tied to the Terra blockchain.
TerraUSD used algorithms and trader incentives linked to Luna to maintain the dollar peg, but both tokens crashed spectacularly in May 2022, wiping out more than US$40 billion of investors’ monies.
The SEC alleges that from April 2018 until the scheme’s collapse in May 2022, Terraform Labs and Kwon raised billions of dollars from investors by offering and selling an interconnected suite of crypto asset securities, many in unregistered transactions.
The crash of TerraUSD and Luna triggered the fall of many crypto firms, including prominent ones such as hedge fund Three Arrows Capital, Singapore lender Hodlnaut, brokerage Voyager Digital and lender Celsius Network.
The collapse of TerraUSD and Luna eventually sparked a massive crypto winter or market sell-off that lasted for much of 2023.
Kwon, a South Korean national, also faces related US criminal charges over fraud and market manipulation. He was arrested in Montenegro in March 2023. There is also an extradition request from his native South Korea.

 

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Amount in crypto stolen via hacking fell in 2023 but number of cases on the rise​

Global funds stolen via crypto hacking plunged by about 54.3 per cent to US$1.7 billion (S$2.2 billion) in 2023. PHOTO: ST FILE

Claire Huang
Senior Business Correspondent

JAN 25, 2024

SINGAPORE - The amount of stolen cryptocurrency from hacking may have fallen globally in 2023, but the number of incidents has risen, a report by blockchain research firm Chainalysis said.
The firm on Jan 24 said global funds stolen via crypto hacking plunged by about 54.3 per cent to US$1.7 billion (S$2.3 billion) in 2023 compared with the year before.
However, the number of individual hacking incidents grew 5.5 per cent the same year to 231, from 219 in 2022.
Hacking refers to the unauthorised access, manipulation or exploitation of computer systems, networks or information.
The report said cryptocurrency hacking has become a pervasive and formidable threat that has led to billions of dollars stolen from crypto platforms and exposed vulnerabilities across the ecosystem.
The drop in the amount stolen via crypto hacking in 2023 is largely because of a fall in decentralised finance, or DeFi, hacking. DeFi refers to a new financial system where transactions are made peer to peer on public blockchains.
“Hacks of DeFi protocols largely drove the huge increase in stolen crypto that we saw in 2021 and 2022, with cyber criminals stealing US$3.1 billion in DeFi hacks in 2022. But in 2023, hackers stole just US$1.1 billion from DeFi protocols. This amounts to a 63.7 per cent drop in the total value stolen from DeFi platforms year over year,” said Chainalysis.

The fall in the value and number of DeFi hacks come as DeFi operators become better at smart contract security, the report said.
Smart contracts are self-executing contracts on the blockchain, with the terms of the agreement directly written into code.
Ms Mar Gimenez-Aguilar, lead security architect and researcher at Web3 and blockchain security firm Halborn, said in the report that the rise in security measures in DeFi protocols is a key factor in lowering the number of hacks linked to smart contract vulnerabilities.


“If we compare the top 50 hacks by value lost from 2023 with those from previous years, there is a reduction in losses from 47 per cent of the total to 18.2 per cent,” she said.
Ms Gimenez-Aguilar said price manipulation attacks remained almost constant, with around 20 per cent of the total value lost. Price manipulation hacks take place when an attacker exploits a smart contract vulnerability to reflect inaccurate asset prices, thereby manipulating a token’s price.
These trends, when combined, indicate that protocols have to take into account how they interact with the whole DeFi ecosystem when performing audits, she added.

Despite the drop in amount stolen from DeFi hacks, there were still some incidents that stood out.
In March 2023, Euler Finance, a borrowing and lending protocol on the Ethereum blockchain, experienced a flash loan attack. This led to roughly US$197 million in losses.
In 2023, July recorded the highest number of hacks at 33. These included US$73.5 million stolen from decentralised exchange and automated market maker Curve Finance.
Chainalysis noted that there were several large exploits that occurred in September and November, on both decentralised and centralised platforms, including Mixin Network (US$200 million), CoinEx (US$43 million), Poloniex Exchange (US$130 million), crypto entrepreneur Justin Sun’s exchange HTX (US$113.3 million) and Kyber Network (US$54.7 million).

The report also found that North Korea hacked more crypto platforms than ever in 2023, but stole less in total value than in 2022.
It noted that North Korea-linked hacks have been on the rise over the past few years, with cyber-espionage groups such as Kimsuky and Lazarus Group using various malicious tactics to acquire large amounts of crypto assets.
In 2023, the estimated total amount stolen in hacks linked to North Korea came up to just over US$1 billion, down from US$1.7 billion in 2022.
However, Chainalysis said the number of hacks rose to 20 in 2023 – the highest number on record – in a crypto bear market. This was up from 15 hacks in 2022.
The report added that while it is clear that attackers are becoming increasingly sophisticated and diverse in their attacks, crypto platforms are also beefing up their security and responses to these incidents.
“When crypto platforms act promptly after exploits, law enforcement agencies will be better equipped to contact exchanges where frozen funds are located, to initiate seizure and contact services through which the funds flowed to gather relevant information about accounts and users,” Chainalysis said.
It added that over time, it is likely that funds stolen from crypto hacks will continue to decline as these processes improve.

 

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Why the Bitcoin funds are not ‘solid long-term investment’​

Jeff Sommer

Simply being legal does not make a strategy sensible for most investors. PHOTO: REUTERS

JAN 26, 2024

Exchange-traded funds (ETFs) come in many shapes and sizes. Some are plain vanilla, diversified index funds that let you invest in the entire stock and bond markets, and are excellent core holdings for the great majority of people.
Then there are the quirky, narrowly focused ETFs like the Inverse Cramer Tracker, which enables you to bet against the stock picks of CNBC television host Jim Cramer. The fund is legal, approved by the United States Securities and Exchange Commission (SEC) – and a money loser since its inception in 2023. Betting against Mr Cramer is just not a great investing strategy.
Neither is fear of missing out. Yet Fomo is the main reason for putting money into Bitcoin, which remains highly speculative, difficult to categorise and without an immediately identifiable economic function.
The SEC approved 11 new ETFs in January 2024 that track the price of Bitcoin, and the decision has been heralded by promoters of Bitcoin – and of the new funds – as an important event, legitimising Bitcoin as an asset class.
I do not think so.
The SEC’s action, in itself, does not give Bitcoin any new stature. It merely adds Bitcoin funds to a long list of ETFs that are perfectly legal and simple to buy, but that do not belong in anybody’s core portfolio.
I would put the Inverse Cramer Tracker in this category, as well as ETFs that track a single stock like Tesla, PayPal or Nvidia, or that use leverage to triple a bet on energy prices or quadruple one on the S&P 500. I could go on and on.

Simply being legal does not make a strategy sensible for most investors. In fact, while approving the Bitcoin ETFs, the agency also issued an explicit warning against Fomo investing in so-called digital assets – as it has done many times before.
“Just because others around you might be buying into these kinds of opportunities, it doesn’t mean you have to,” said Ms Lori Schock, director of the SEC’s Office of Investor Education and Advocacy.
The agency’s approval of the new Bitcoin funds does change things in one important sense, though. Until now, it was easy for me to avoid discussing Bitcoin in the context of investing. Why bring attention to something that is not right for most people?

But now that major financial services companies such as BlackRock, Fidelity, Franklin Templeton, Invesco and Wisdom Tree are beginning to operate Bitcoin ETFs, and make them available to their clients, silence seems unnatural and, maybe, irresponsible.
So here goes.

Making sense of Bitcoin​

I do not want to dismiss Bitcoin entirely. Granted, it is possible to make – and lose – a great deal of money buying and selling it. And Bitcoin is a serious proposition, in terms of its underlying structure.
As Mr Bryan Armour, who directs research into strategies based on index funds at Morningstar, told me: “Not believing that Bitcoin ETFs are a good investment doesn’t mean that blockchain isn’t a good or useful technology.”
But Bitcoin itself? He put it politely. “I’d say Bitcoin is still in the price discovery stage. We’re still trying to figure out what it might be worth.”
For large corporations or other big institutional investors interested in getting some Bitcoin exposure, the new ETFs may be a better and more convenient option, said Ms Samara Cohen, chief investment officer of ETF and index investments at BlackRock. “It’s the start of a journey,” she said.
But for ordinary people investing for important things like retirement or a house or a child’s education, I would be very careful. The collapse of the FTX trading platform in 2022 and the fraud and conspiracy conviction of Sam Bankman-Fried only a few months ago are reminders that Bitcoin is extremely risky. Its future is uncertain, and so is its very definition.

Defining terms​

Just to start, I find the term cryptocurrency to be a misnomer. These things are not currencies because they cannot be widely exchanged for products and services in the real world. But even if they were currencies, it would not make sense for ordinary people to invest in them.
Major corporations hedge against fluctuations in currency values, but most of us invest in assets that at least have the potential of producing income and cash flow – assets that can be purchased with currency.
Then we get to the central claim for the new ETFs – that they are helping to create “an asset class”, one that “protects you” in times of uncertainty, much as gold did “for thousands of years”, in the words of BlackRock chair Laurence D. Fink. This comparison, I think, is strained.
Gold has a historical cachet, has actually served as money, is still held by central banks, has commercial uses in jewellery and industry and has an important cultural role in countries like India. Bitcoin has none of those attributes.
A Morningstar study in 2023 by analyst Madeline Hume found that as little as a 2 per cent holding of Bitcoin can transform a conservative stock-bond portfolio into a far riskier one. Investors may be tempted by Bitcoin when its price is rising, but beware: “Compared with other assets, though, Bitcoin’s volatility is more kerosene than kindling,” the report said.

Already exposed​

In a very small way, even without the new ETFs, there is a good chance that you already have exposure to Bitcoin in your portfolio.
Most of the new ETFs rely on Coinbase, which calls itself “a trusted and easy-to-use platform for accessing the broader cryptoeconomy”, for important functions: converting cash into Bitcoin and Bitcoin into cash, storage and safekeeping of Bitcoin, assistance in monitoring the fund’s operations and sometimes all of these.
Coinbase is a publicly traded company, and the largest holders of most such companies are mutual funds and ETFs run by giants like Vanguard, BlackRock, State Street and Fidelity. I checked: My Vanguard workplace retirement accounts include broad, diversified stock index funds that hold Coinbase.

And that is not all. They also include small shares of companies like MicroStrategy, which owns a lot of Bitcoin. Then there are firms like Riot Platforms and CleanSpark that call themselves “Bitcoin miners” – entities that run the computers that generate new Bitcoin and keep the Bitcoin universe spinning.
I do not see a great social purpose for Bitcoin mining. A 2022 White House report said global electricity consumption for “crypto assets” was greater than “the total annual electricity usage of many individual countries, such as Argentina or Australia”. That is hard to justify in an age of global warming.
I am not happy about this, but I have a stake in them, and you probably do, too. That is the way index fund investing goes. You hold part of the entire universe of publicly traded companies.
On the positive side, if it turns out that I am wrong about Bitcoin, and that it really is the next big thing – and, somehow, is needed to save the planet – well, these companies will grow in size, and my portfolio will swell, too. That would be a win-win, though I am not counting on it.
Vanguard, I should point out, has taken a principled stand against Bitcoin. Its broad index funds own the companies involved with crypto because those funds own all companies. But if you want to buy the new Bitcoin ETFs – or, as at Jan 12, older ones that tracked Bitcoin futures markets – you cannot do it at Vanguard.
In short, although the new ETFs may help the companies involved with them and may well cause interest in Bitcoin to grow, Bitcoin is still not important for serious individual investors.
Nothing the SEC has done has changed that.
That does not mean you should avoid Bitcoin. Owning some might be fun and profitable. But I would make the same statement about buying lottery tickets, spending evenings at a casino, making online bets on your favourite sports team – or purchasing shares of the Inverse Cramer Tracker.
If you can afford to spend your money on entertainments like these, by all means, enjoy yourself. But do not kid yourself that you are making a solid long-term investment. NYTIMES

 

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Binance sued by Hamas hostage, families of victims for allegedly facilitating Oct 7 attack in Israel​

The lawsuit against Binance appears to be the first civil case in what is expected to be a wave of litigation targeting Hamas and its networks after the Oct 7 mass attack. PHOTO: REUTERS

FEB 1, 2024

NEW YORK CITY – An American mother who was taken hostage by Hamas in Gaza and the relatives of two men killed following the militant group’s Oct 7 attack have sued crypto giant Binance for allegedly facilitating the violence.
Ms Judith Raanan, who was released with her daughter on Oct 20, and the relatives of Israel Defence Forces soldier Itay Glisko and Dr Daniel Levi Ludmir, who were murdered by Hamas, filed the lawsuit against the digital asset exchange, as well as Iran and Syria, in federal court in Manhattan on Jan 31.
It appears to be the first civil case in what is expected to be a wave of litigation targeting Hamas and its networks after the militant group’s attack and mass kidnapping that sparked an ongoing war with Israel.
The lawsuit takes aim at Binance for allowing Hamas to trade on its platform.
The allegation surfaced following a regulatory and criminal investigation into the world’s largest cryptocurrency exchange that came to a head in 2023.
Binance pleaded guilty to violating sanctions and anti-money laundering laws that allowed groups like Hamas to circumvent United States banking regulations.
The exchange is paying a criminal fine of US$1.8 billion (S$2.4 billion) and forfeiting US$2.5 billion, while former Binance chief executive officer Zhao Chanpeng is awaiting sentence for violating banking laws.

Officials at Binance did not immediately reply to an e-mail seeking comment. A lawyer for Ms Raanan and the families, Mr Robert Seiden, said he is confident that the victims are entitled “to recover substantial damages” under US law, including an anti-terrorism Act.
“We have been working on this lawsuit for weeks and believe that anyone who aids terrorism should be held accountable,” he said in a statement.
According to claims made by the government in the Binance case, Hamas military wing Al-Qassam Brigades used Bitcoin transactions to raise money for the Palestinian resistance.
At least 1.1 million transactions valued at US$899 million were conducted by people living in Iran in violation of US sanctions, the company admitted.
The assistance that Binance provided to Hamas helped finance the violent attacks and recruit individuals to carry out those attacks, the complaint filed on Jan 31 states.
According to the complaint, the plaintiffs also allege that Iran emerged as “the principal backer of Hamas terrorism” and that it has increased funding and the supply of weapons to the group in recent years.
“Iran consistently and continuously provided funding to Hamas in the amount of a hundred million US dollars each year for the purpose of allowing Hamas to buy weapons and pay its terrorist fighters and otherwise carry out its terrorist operations,” the complaint states.
Similarly, the plaintiffs argue, Syria was one of the “cradles of Hamas terrorism” and contributed to the group’s military arsenal in the lead-up to Oct 7. The complaint references press reports, publicly available research and documents filed in related court cases.
Ms Raanan, the Glisko family and Dr Ludmir’s uncle, Mr Jeffrey Ludmir, are suing Binance for aiding and abetting and providing material support to Hamas. The plaintiffs are seeking damages against Iran and Syria as state sponsors of terrorism.
Ms Raanan’s daughter, Natalie, who was held captive for two weeks in Gaza, and Ms Raanan’s former husband are also named as plaintiffs. BLOOMBERG

 

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Hackers drain $150 million from Ripple boss’ crypto wallets​

According to San Francisco-based news outlet TechCrunch, this was the largest crypto heist in 2024 so far, and the 20th largest crypto theft to date. PHOTO: PEXELS

Ang Qing

FEB 1, 2024

Even the boss of a crypto payment firm is not immune to cybertheft.
On Jan 31, more than US$110 million (S$150 million) worth of tokens were drained from several personal crypto wallets belonging to Ripple’s co-founder Chris Larsen.
He confirmed the case on X, formerly Twitter, after an analyst known as ZachXBT reported the theft on the social media platform.
Both did not elaborate on how hackers had gained access to Mr Larsen’s wallets.
According to San Francisco-based news outlet TechCrunch, this was the largest crypto heist in 2024 so far, and the 20th largest crypto theft to date.
While the amount of global funds stolen via crypto hacking fell by more than 50 per cent to US$1.7 billion in 2023 compared with 2022, the number of individual hacking incidents rose by 5.5 per cent in the same period, a report by blockchain research firm Chainalysis said.

In a recent study, Singapore-based cyber-security firm Group-IB detailed how a scam operation known as Inferno Drainer had drained at least US$80 million in assets from victims’ wallets in a year, before its developers shut it down in November 2023.

More than 100,000 victims were affected by this attack, according to crypto news site Cointelegraph.
On Jan 31, the authorities in Singapore warned that cyber criminals are increasingly using “crypto drainers”, a type of malware that allows hackers to empty crypto wallets, in their operations.
“While such cases have not been observed in Singapore, members of the public should remain alert to such cyber attacks that are happening globally,” the Singapore Police Force and Cyber Security Agency of Singapore (CSA) said in a joint statement on Jan 31.
“There are cyber criminal groups that develop ‘commercial’ crypto draining kits and provide services to other cyber criminals with limited technical expertise based upon a Drainer-as-a-Service model,” the two agencies said, adding that the criminals charge their users by taking a percentage of the stolen amount.
Crypto drainers are usually woven into phishing attacks, the agencies added.
Victims are tricked into clicking a malicious link or opening a malicious attachment, and by doing so, the drainers are able to steal from their wallets.
Crypto owners are advised to protect themselves from such scams, the agencies said.
They should be wary of attractive offers that appear too good to be true, such as promises of free tokens.
They should also verify the legitimacy of the parties they are interacting with before approving any transactions, and connect only empty crypto wallets when unsure about a crypto platform or project, the agencies added.
Victims of crypto scams should contact their crypto exchange immediately to freeze compromised accounts, and inform the police and CSA’s Singapore Computer Emergency Response Team.