Crypto News Roundup: August 18, 2023 📰

Welcome to Crypto News Roundup, where I bring you the latest and most important headlines from the world of crypto. Today, I have five stories that you don’t want to miss:

Coinbase-Backed Lawsuit Against Tornado Cash Sanctions Fails 🤔

A group of six crypto users, including two Coinbase employees, who filed a lawsuit against the US Treasury Department over its sanctions on Tornado Cash, a decentralized protocol that allows users to mix their Ethereum transactions for privacy purposes, has lost the case in a federal court.

The plaintiffs argued that the Treasury’s Office of Foreign Assets Control (OFAC) violated their constitutional rights and exceeded its authority when it designated Tornado Cash as an association of persons that are subject to sanctions for allegedly facilitating money laundering and terrorist financing.

However, Judge Robert Pitman of the US District Court for the Western District of Texas ruled in favor of the government, finding that Tornado Cash is indeed an entity that can be sanctioned under OFAC regulations. He compared Tornado Cash to a decentralized autonomous organization (DAO), which is a collective of individuals who agree to a common purpose and operate through smart contracts.

He wrote:

"The DAO is an entity unto itself that, through its voting members, has demonstrated an agreement to a common purpose. As the government notes, the structure is not unlike that of stockholders of a corporation who may not intend to vote in a shareholder meeting, without this affecting the structure of the entity [….] The Court finds that Tornado Cash is an association within the ordinary meaning of the term and is, therefore, an entity that may be designated per OFAC regulations."

The lawsuit was funded by Coinbase, the largest US-based crypto exchange, which has been vocal in its opposition to the Treasury’s sanctions on Tornado Cash. Coinbase CEO Brian Armstrong tweeted in September 2022 that the sanctions were “a step backward for crypto” and that they would "hurt innocent people who are just trying to protect their privacy."
The plaintiffs have not yet announced whether they will appeal the decision.

Helio Lending Sentenced Over False License Claims ⚖️

Helio Lending, an Australia-based crypto lending platform, has been sentenced to a one-year non-conviction good behavior bond of 15,000 Australian dollars ($9,600) for falsely claiming that it had an Australian credit license.

The Australian Securities and Investments Commission (ASIC) charged Helio Lending in April 2022 for making false representations on its website and in a news article that it held an appropriate credit license, which would have given its customers certain protections under the law.

Helio Lending pleaded guilty to the charge and had another charge related to a false representation on its website withdrawn. ASIC Deputy Chair Sarah Court said:

"We expect entities and individuals to provide accurate information to their customers and potential customers. Helio falsely claimed that it held an Australian Credit license, misleading their customers to believe that they had the protections afforded by such a license."

Helio Lending is a subsidiary of Cyios Corporation, a US-based public holding company that also owns Randombly, an upcoming non-fungible token (NFT) platform. Helio Lending offered crypto-backed loans to customers using digital assets as collateral.

OpenSea Makes Creator Royalties Optional for NFT Trades 🔎

OpenSea, the largest NFT marketplace, has announced that it will make creator fees optional for new collections starting from August 31. This means that artists who create and sell NFTs on OpenSea will be able to indicate their preferred creator fee, which is a percentage of the sale price that they receive every time their NFTs are resold on secondary markets. However, buyers will be able to choose whether to pay this fee or not.

OpenSea founder and CEO Devin Finzer explained in a blog post that this change was made in response to feedback from both creators and collectors who wanted more choice and control over their NFT transactions. He also said that OpenSea’s previous attempt to enforce creator fees through an on-chain tool called the Operator Filter was unsuccessful, as it was circumvented by some web3 marketplaces and aggregators that did not respect creator fees.

Finzer wrote:

“In November 2022, we launched the Operator Filter: a tool designed to give creators more control by restricting the sale of their collections to web3 marketplaces that enforce creator fees in secondary sales. It was meant to empower creators with greater control over their web3 business models, but it required the buy-in of everyone in the web3 ecosystem, and unfortunately that has not happened. So we’re making a few changes to our approach to creator fees.” Adding “To be clear, creator fees aren’t going away – simply the ineffective, unilateral enforcement of them.”

Finzer also said that OpenSea will make it easier for buyers to identify secondary listings with the creator’s preferred fees included and for sellers to customize their creator fees payment. He added that OpenSea will continue to support and protect creator fees for existing collections that enabled the Operator Filter before August 31 and for collections on non-Ethereum blockchains until February 29, 2024.

SEC Poised to Approve Ether-Futures ETFs in Win for Crypto Industry ❗️

The US Securities and Exchange Commission (SEC) is reportedly ready to allow the first exchange-traded funds (ETFs) based on Ether futures, a major victory for several firms that have long sought to offer the products. The regulator is unlikely to block the products, which would be based on futures contracts for the second-largest cryptocurrency, according to people familiar with the matter.

Nearly a dozen companies, including Volatility Shares, Bitwise, Roundhill and ProShares, have filed to launch the ETFs. It is not clear which funds would get the green lights, but officials have indicated that several might by October, said one of the people, who asked not to be identified discussing information that has not been made public.

The SEC has refused to allow an ETF based directly on a cryptocurrency, but in late 2021, it started allowing trading in a fund that involves Bitcoin futures contracts that trade on the Chicago Mercantile Exchange. Speculation has been mounting that a product with Ether futures, which also trade on CME, would be next.
The potential approval signals a new era of integration for cryptocurrencies into mainstream financial products, as the industry also awaits decisions on Bitcoin ETFs. Several firms, including BlackRock Inc., recently filed applications to list ETFs based directly on Bitcoin. The BlackRock filing in June helped push the token’s price above $31,000.

On Thursday, Ether’s price jumped 11% amid anticipation of the approval, reflecting Ethereum’s growing prominence in finance. Ethereum is the platform that hosts most of the decentralized applications and smart contracts that power the crypto economy. It is also undergoing a major upgrade that aims to improve its scalability and security.

FTX and Genesis Strike Deal for $175M Bankruptcy Claim 🤝

Crypto exchange FTX and its CEO John J. Ray III have filed a motion seeking to reach a settlement of $176 million with Genesis entities, which include Genesis Global Capital LLC (GGC), Genesis Global Trading Inc. (GGT), and Genesis Global Clearing LLC (GGC). The settlement aims to resolve complex claims arising from their respective ongoing bankruptcies.

The claims put forth by Genesis entities involve around $176 million in customer claims against FTX Trading and its affiliates. These claims are largely related to the transfer of funds and assets between FTX and Genesis in 2022, before FTX filed for bankruptcy in November 2022 amid allegations of fraud and mismanagement.

The settlement entails Genesis paying $175 million to FTX’s trading arm, Alameda Research, which is also facing a $140 million avoidance claim and an outstanding loan claim of about $40 million from FTX. The settlement also waives Genesis’ parallel claims against FTX, which amount to nearly $4 billion.

The settlement represents a significant reduction from the nearly $4 billion FTX originally sought from Genesis. FTX argues that potential recoveries from Genesis debtors and affiliated entities are uncertain, making a settlement the optimal way to avoid further conflicts. FTX’s CEO, John Ray III, supports the motion, saying that it is in the best interest of both parties.

However, FTX creditors have expressed discontent over the settlement, saying that it is highly unfavorable for them. They point out that Alameda used billions of FTX customer funds in 2022 to repay Genesis, which rightfully belong to FTX customers. They also note that Genesis claims are currently worth more than FTX’s, as Genesis lender balances are inflated by the interest they earned from lending to Alameda and others.

The Official Committee of Unsecured Creditors of FTX (UCC) is expected to object to the settlement, as it believes that it does not adequately protect the interests of FTX creditors. The UCC also argues that Alameda and Genesis are closely connected through Digital Currency Group (DCG), which owns Genesis and has invested in Alameda.

Conclusion

That’s all for today’s Crypto News Roundup. Stay tuned for more updates and insights from the world of crypto. And don’t forget to subscribe to my newsletter and follow us on social media for more exclusive content. Thanks for reading and happy trading!

Sources 🔗

1. Court Sides with Government in Coinbase-Backed Lawsuit Over Tornado Cash Sanctions | Source: The Block
2. Crypto Firm Helio Lending Gets Bond Sentence Over False License Claims | Source: Cointelegraph
3. OpenSea Will Make Creator Royalties Optional for NFT Trades | Source: Decrypt
4. SEC Set to Greenlight Ether-Futures ETFs in Win for Crypto Industry | Source: Bloomberg
5. Genesis, FTX Strike Deal for $175M Bankruptcy Claim | Source: CoinDesk

 Don’t forget to subscribe to my newsletter for daily updates on the crypto world. I will keep you informed about the latest news, trends, tips, and insights on everything related to cryptocurrencies.
Thank you for reading and stay tuned for more!