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A U.S. District Judge has rejected the Securities and Exchange Commission’s (SEC) attempts to shield documents related to a 2018 speech on cryptocurrencies from former Division of Corporation Finance Director Bill Hinman in its ongoing case with blockchain firm Ripple.

The commission had appealed a prior judge’s decision for it to hand over the materials as part of its legal case with the crypto payments company.

The two have been locked in a legal battle since the SEC brought its case against Ripple in 2020, alleging the sale of its XRP token constituted an unregistered securities offering. Since then, much of the case has centered on internal documents relating to Hinman’s speech, which sought to create regulatory wiggle room for some digital tokens to be exempted from securities registrations.

Ripple has continued to request the emails and memos related to the speech, and Magistrate Judge Sarah Netburn has repeatedly sided with Ripple, denying the SEC’s requests for reconsideration in February and April. In July, the SEC once again objected, kicking the issue to District Judge Analisa Torres. Torres overruled the objection today, directing the SEC to comply with the orders and produce the documents.

The SEC has sought to avoid handing over internal communications on the speech in the discovery process, employing what Netburn characterized as conflicting arguments. Initially, the SEC claimed Hinman’s speech consisted of personal views on crypto rather than agency-wide policy. Later, it attempted to shield the documents by claiming they were part of his SEC duties and therefore protected under a statute that provides privacy for internal deliberations for crafting policy or reaching decisions.

In the previous opinion on the matter, Netburn said the SEC was attempting to have it both ways, saying the conflicting arguments suggested “that the SEC is adopting its litigation to further its desired goal, and not out of a faithful allegiance to the law.”

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

If the past week is any indication, efforts are ramping up to offer loan capital to bitcoin miners as they contend with a difficult business climate.

Icebreaker Finance, which announced a $300 million lending pool for bitcoin miners last week, is targeting a subset of the market and looking for stability over time in power costs.

“We don’t see this pool providing some kind of index exposure to the whole market,” the company’s CEO and founder Glyn Jones told The Block. “What we’re looking for is businesses are going to be resilient through a wide range of market conditions.”

Another lending fund specifically geared towards bitcoin miners was announced this week, coming at a time when the industry is struggling with slimmer operating margins. The first $50 million investment comes from none other than bitcoin mining firm Bitdeer. Bitdeer chairman Jihan Wu is seeking to raise an additional $200 million from outside investors.

“The fund size is 250M and the returns will depend on the hashrate price when the market recovers in the next bull run,” said Matt Linghui Kong, the CEO of Bitdeer Group. “Interest is expected from institutions that are open to opportunities in mining and riding the market cycle, but don’t have direct access or operational expertise, for e.g. alternative investment funds, family offices and venture capital.”

Icebreaker’s Jones referred to miners that can still manage to generate enough cash flow in a market with suppressed bitcoin pricing and elevated hash rates. Production costs — energy in particular — stick out as an important factor and miners with long-term power contracts at a fixed rate can offer more security for the term of the loan.

“The market’s fundamentally changed,” Jones said. “If I go back six months ago, there were a lot of lenders in the space. Market pricing was I think extremely aggressive (…) Not really reflecting the risks being embodied.”

The rates that Icebreaker Finance is now offering (15% to 20%, with 12 to 18 months maturity) are on the higher end at least compared to other loans seen this year from public miners — for example, Iris Energy in March (11% interest rate from NYDIG), Argo Blockchain in May (12% from NYDIG), Bitfarms in June (12% from Galaxy Digital), Marathon in July (with a variable interest rate then priced at 7.25% from Silvergate Bank). Bitdeer did not disclose more details about how it will structure deals.

Yet interest rates for public miners have generally trended downward since January 2020, according to data compiled by public relations firm BlocksBridge in its Miner Weekly newsletter. It also points out that other variables included in the loan terms should be taken into consideration.

“Most of the loans we analyzed had a maturity term ranging from 24 to 36 months while several were short-term bridge notes, lasting from 1 to 6 months,” the newsletter said. “Some of the loans also included specific covenants on a borrower’s financial health like coverage ratios, which provided additional color on how TradFi organizations evaluate mining companies.”

Icebreaker’s interest rates reflect current market conditions, where the hashrate is reaching record highs while the coin is down 70% from its record price, said Strahinja Savic, head of data and analytics at FRNT Financial.

“The possibility of bitcoin moving lower means that lenders in the mining space are being extremely cautious. There is plenty of risk right now,” Savic said.

Savic went on to highlight a “solvency crisis” in the crypto space, which recent legal moves in the sector demonstrate.

Bitcoin mining hosting provider Compute North filed for Chapter 11 bankruptcy last week. Compute North’s CFO said in a corresponding court filing that the firm “has been unable to maintain sufficient liquidity to bring planned projects in development online and pay all of its obligations on a current basis.”

The firm has between $100 million-$500 million both in estimated liabilities and estimated assets, according to the filing. It is facing at least one lawsuit from one of its creditors, NBTC Limited.

Miners deleveraging

The industry saw some of the biggest public miners sell large portions of their bitcoin holdings, especially in June, as the cryptocurrency plunged, putting pressure on bitcoin-backed loans.

Some of those companies had historically maintained a policy of holding on to the bitcoin they mined. Yet Bitfarms sold 3,000 BTC in June to pay down a $100 million bitcoin-backed loan from Galaxy, while Argo sold 637 BTC and CleanSpark 328 BTC.

“The company made the strategic decision to derisk the liability of the bitcoin-backed loan and reduce our exposure,” said Argo CEO Peter Wall during the company’s second-quarter earnings call. “We didn’t want to get into a position where we had to liquidate our bitcoin at very low prices.”

Regardless, Argo is still “well placed to be able to access the debt markets,” CFO Alex Appleton said, adding that the company has changed its debt profile. It recently started energization at its flagship site in Texas, after securing millions in financing for the expansion over the past year. “You can’t use your machines as collateral until you actually have them in your possession. You can’t use infrastructure until you have it built,” he said.

Even as miners were deleveraging earlier in the summer, Marathon — which has refrained from selling its bitcoin — closed a new $100 million term loan with Silvergate Bank in July and refinanced an existing $100 million revolving line of credit.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Sen. Bill Hagerty (R-Tenn.) has introduced a bill to create a safe harbor for cryptocurrency exchanges that might otherwise face legal action for listing unregistered securities.

According to text of the bill obtained by The Block, the legislation would allow for a two-year grace period from enforcement actions by the Securities and Exchange Commission against crypto exchanges that list tokens deemed by the commission to be unregistered securities. The grace period would begin when the commission makes a determination that a token is an unregistered security. Exchanges would also not be subject to legal action for failure to register as a broker-dealer or national securities exchange during the grace period.

The bill is expected to become public tonight. 

If the bill were to become law, the SEC could still label tokens as unregistered securities through statements, enforcements, or rulemakings, though the Commodity Futures Trading Commission would have the right to object. The exchange could also still sue for an appeal of the decision in court, where a judge would determine the security definition.

CFTC Chair Rostin Benham has pushed for more direct authority over digital assets, while SEC Chair Gary Gensler wants to keep his agency in point position on the asset class, continuing a longstanding argument by the SEC that most crypto tokens are securities offerings.

The SEC is currently investigating Coinbase’s listing of nine tokens it believes to be unregistered securities.

Hagerty sits on the Senate Banking Committee, which holds jurisdiction over the SEC and legislation like the bill he introduced. However, the bill faces long odds to becoming law during this Congress, due to the limited amount of time left in session.

Under terms of the bill, exchanges listing tokens determined to be securities would have to register as broker-dealers or national securities exchanges. To prevent interruption of services, they would also be required to enter agreements with other broker-dealers or banks to maintain operations if the SEC labels a listed token as a security.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Most bitcoin mining stocks tracked by The Block trended downward on Thursday.

Bitcoin sunk below $18,000 in the morning but rallied throughout the rest of the day, trading at around $19,400 during market close, according to data from TradingView.

SAI.TECH’s stock fell by 26.14%, followed by Core Scientific (-10.34%), Digihost Technology (-9.34%) and Cipher Mining (-8.96%).

A new bitcoin miner may soon be added to this report, as Rhodium plans to go public via a merger deal with SilverSun Technologies, months after delaying its IPO.

Here’s how crypto mining companies performed on Thursday, Sept. 29:

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Aurora paid out $2 million to a pair of hackers who identified critical vulnerabilities.

The EVM scaling and bridge solution has fixed the issues and no users funds were lost. The two $1 million bounties were rewarded in its native token AURORA and will be paid out linearly over 1 year. The payouts were facilitated via the ImmuneFi bug bounty platform.

The vulnerability report was announced earlier today and was discovered on June 10 by security firm Halborn.

Aurora is an EVM-compatible bridge and Layer 2 scaling solution between the Layer 1 NEAR protocol and Ethereum. The first vulnerability was related to Aurora having a different ERC-20 (fungible token standard), called NEP-141.

The bridge between the two chains is permissionless, meaning anyone can bridge over any token to any address without their permission.

An attacker could have created a worthless NEP-141 token on NEAR, bridged it to Aurora, and then sent it to unsuspecting victims on Aurora. This would allow attackers to “take ETH from Aurora addresses essentially for free,” Aurora wrote in its report. This is because there is an option in the bridge to charge a fee denominated in ETH to the recipient or victim.

The second vulnerability had to do with the burn functionality in Aurora’s bridge. When user’s bridge funds from one chain to another, the tokens are burned on one chain and debited on the other.

An attacker could have created a ‘fake burn event’ on Aurora, without it occurring. This fake event could then be used to withdraw funds from the “locker on Ethereum”, which is the Aurora bridge’s stored amount of ETH used for bridging between the chains.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

State securities regulators in Texas and Vermont are objecting to crypto lender Celsius’s plan to sell its stablecoin holdings.

The Texas State Securities Board, the Texas Department of Banking and the Vermont Department of Financial Regulation filed their objection today. Celsius wants to sell the stablecoin holdings in order to shore up its finances amid the ongoing bankruptcy proceedings.

Vermont’s lawyers said it’s possible Celsius could use the proceeds to resume potentially illegal activities. They objected on the basis that the Celsius request doesn’t detail how the firm would use the funds, and thus “creates the risk [Celsius] will resume operating in violation of state law.” The filing references the collaborative investigation among 40 state regulators into Celsius’ activities that include potential unregistered activity, fraud and market manipulation.

The Texas agencies filed jointly with similar arguments, calling Celsius’ request to sell its stablecoin “troublingly broad.” Celsius failed to provide sufficient details in their application to sell the stablecoin holdings, according to the Texas filing.

“The Debtors fail to disclose in the Motion how much stablecoin will be sold, and how the monetization of the stablecoin ultimately benefits the bankruptcy estate and the many consumer creditors of the Debtors,” said the Texas filing.

Celsius asked the court for permission to sell off stablecoin holdings midway through this month after disclosing the proceeds to be around $23 million. At the time, it said it owns “eleven different forms” of stablecoins but did not name the tokens. A hearing on the matter is scheduled for Oct. 6.

The regulators’ objections are a common chorus in the Chapter 11 case, which began in July of this year. Throughout the process, parties including state securities regulators and the U.S. Trustee have continuously cited a lack of clarity from the bankrupt firm.

The court appointed an outside examiner on Thursday to produce a third-party report on the firm’s financials. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The court has approved an examiner for the Celsius bankruptcy case, according to a new order signed by bankruptcy judge Martin Glenn.

The U.S. Trustee, the representative of the Department of Justice in the bankruptcy process, asked the court to approve Shoba Pillay earlier this morning. 

Pillay is a partner at the law firm Jenner & Block where she co-chairs the firm’s Data Privacy and Cybersecurity Practice. She’s also a partner in the firm’s Investigations, Compliance, and Defense Practice and the National Security, Sanctions, and Export Controls Practice.

Before entering the private sector in 2021, Pillay was an Assistant U.S. Attorney in the Northern District of Illinois for more than 11 years. At Jenner & Block, Pillay conducts internal and government-related investigations related to cybersecurity issues.

Pillay will produce a report on Celsius’ storage of crypto holdings, account management for customers, the status of its mining business and tax issues. 

The court elected to appoint an examiner to Celsius earlier this month. Though a rare measure in Chapter 11 cases, the U.S. Trustee first moved to appoint an outside party to conduct an investigation into Celsius to gain more transparency into the firm’s leadership and business practices in the lead-up to its collapse. State securities regulators soon filed in favor of the motion, citing allegations that the firm misled investors and offered unregistered securities. 

The committee representing creditors and customers was initially hesitant for the Celsius estate to incur the expense of an outside examiner. The group reached an agreement with the U.S. Trustee once the office narrowed the scope of the examiner’s investigation.

The creditor committee is conducting its own investigation into Celsius leadership – the findings of which recently led it to call for the removal of CEO Alex Mashinsky, who subsequently resigned.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Voyager counsel filed a proposed order last night to authorize its sale to FTX US, providing more insight on the $1.4 billion winning bid and the path forward for customers.  

After a two-week-long auction process, Voyager announced earlier this week that FTX US had won the auction process with a bid that encompassed a $1.3 billion sale of the assets on its platform, with the final price to be based on a to-be-determined date. The bid also included $111 million in “incremental value.”

Thursday’s filing details that $111 million includes a cash payment of $51 million and an earn-out of up to $20 million. It also features a $50 account credit for customers who move to FTX’s platform and pass its know-your-customer process. 

At a hearing today, counsel for Voyager told Bankruptcy Judge Michael Wiles that the agreement provides flexibility on how customers can recoup their assets. They may receive their crypto through FTX’s platform or cash if the tokens held are not supported by FTX. If they do not wish to sign up for FTX, Voyager would remain responsible for making the distributions, and it’s not clear whether that would be in crypto or cash, according to counsel.

Voyager is currently in discussions with FTX counsel to outline the procedures for the plan. Finer details related to customer distribution will be filed in a disclosure statement Voyager plans to file next week. A hearing on the plan is slated for Oct. 19.

“We intend to provide creditors and customers with all the information that they need to understand how distributions will be made and in what amounts,” said counsel at today’s hearing.

Counsel and FTX had a public squabble in the early stages of the bankruptcy process when the exchange publicized a proposal to bring early liquidity to customers. Counsel said this violated the integrity of the process since the bidding process requires companies with an intention to participate to enter into confidentiality agreements. They also called the publicized offer a “low ball bid” and sought to dispel the notion that FTX was a frontrunner early on.

The final deal “provides substantially more value to the Debtors’ estates that the original offer,” according to the court filing.

“Due to this comprehensive marketing process and robust Auction, the Sale provides all creditors with significantly more value through the Sale than they would have received had the Debtors accepted FTX US’s original offer,” said the filing.

With the deal in hand, the bankruptcy process that began this July is in its end stages. Once the motions related to the deal are approved by the court, the plan will be put to a vote.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Facebook owner Meta Platforms Inc. is freezing hiring and restructuring teams to cut costs, Bloomberg reported, citing Chief Executive Mark Zuckerberg.

Meta will trim budgets across the company as it shifts priorities, not fill open roles or replace outgoing employees, and may manage out underperformers, Zuckerberg said during a weekly Q&A session with employees.

“I had hoped the economy would have more clearly stabilized by now, but from what we’re seeing it doesn’t yet seem like it has, so we want to plan somewhat conservatively,” Zuckerberg said during the meeting, according to Bloomberg. 

The moves come after a July warning that Meta would “steadily reduce headcount growth” amid a downturn in advertising revenue growth and increased competition from competitors like TikTok. Meta has been aiming to cut its costs by at least 10%, the Wall Street Journal reported on Sept. 21, noting that staff reductions would be one part of the strategy.

Meta missed on both earnings and revenue in the second quarter, with its metaverse and virtual-reality division Reality Labs losing $2.8 billion in the three-month period.

There’s no indication as to what the newly announced moves mean for Zuckerberg’s big plans for the company’s metaverse projects. Nonetheless, the social media giant has unveiled crypto-related initiatives in recent months, including embracing digital collectibles and NFTs on Facebook and letting users cross-post digital assets between Instagram and Facebook.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Gemini has submitted a proposal on the MakerDAO forum to boost the adoption of the Gemini dollar (GUSD) stablecoin in the latter’s ecosystem by paying a fixed yield on the GUSD balance in MakerDAO’s vaults.

Gemini co-founder Tyler Winklevoss submitted the proposal on Thursday, detailing a three-month marketing incentive plan.

The proposal seeks to grow the volume of the GUSD balance in the MakerDAO PSM, which is currently at about $24 million based on this Dune Analytics dashboard. PSM refers to the peg stability module that allows users to mint DAI by swapping any MakerDAO-accepted collateral. The PSM is also useful for maintaining DAI’s peg to the U.S. dollar.

As part of the scheme, the proposal states that Gemini will pay a fixed annual interest of 1.25% on the total GUSD in the PSM vault. The annualized fixed rate will be evaluated and paid on a monthly basis. A condition of the payment is that the average GUSD balance in the vault is more than $100 million on the last day of the month. The GUSD volume in the vault rising to $100 million means that users are depositing GUSD to mint DAI.

The proposal stated that Gemini will credit MakerDAO in GUSD once every month for a three-month period. This incentive will require Maker to create a new entity that will be issued an account with Gemini to receive the payments. The Maker entity will also have to go through know-your-customer verification processes. MakerDAO’s governance can also choose to move the funds from this entity to its treasury.

This incentive scheme will not, however, alter the administration of the GUSD-PSM vault. As such, Gemini will not move custody of the GUSD from the PSM vault to its own platform. “

We recognize the importance of the PSM in securing Dai redemptions and we believe keeping it on-chain is the best way to fulfill that task,” the proposal stated.

The Winklevoss proposal described the scheme as an experiment. Gemini says it will review the results of the process and decide if it wants to renew the partnership.

The Maker governance system will have to conduct a vote to accept or reject Gemini’s initial proposal. If the DAO approves the proposal, it would create an opportunity for Maker to earn yield on its balance sheet.

Issues regarding revenue generation for Maker have been brought to the forefront in recent times. Pseudonymous community member adcv, a member of Maker’s strategic finance core unit. hailed the proposal, stating: “For the level of liquidity that a GUSD PSM leaves for Dai redemptions, Gemini is offering a very compelling incentive to hold as much of the PSM in GUSD as we can.”

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.