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Bitcoin has gained more than 7% during the past seven days while ether jumped over 23% as the global crypto market cap reclaimed $1 trillion of value.  

At the time of writing, bitcoin was trading down 5.4% over the past 24 hours, while ether was down 5.7%, according to CoinGecko. Despite the pullback this morning, both cryptocurrencies and the broader market have trended upward over the past week.  

Here’s what JPMorgan and crypto market makers had to say about this week’s price action: 

Price rebound helped by Ethereum merge 

JPMorgan Chase analysts attributed the rebound, in part, to the announcement of a tentative date for Ethereum’s merge — September 19. The merge refers to the Ethereum blockchain’s move from a proof-of-work to a proof-of-stake consensus mechanism. 

JPMorgan analysts said the announcement “boosted sentiment among crypto investors, propelling ether and other cryptocurrencies.”  

According to the note, the “extreme phase of backwardation seen in May and June, the most extreme since 2018, appears to be behind us.”  This is evident by the shift back to contango — when the price of futures contracts is higher than the current spot price — in bitcoin and ether futures, displaying a significant improvement in demand. 

Still, analysts at the bank noted that the same demand wasn’t seen in the crypto funds or futures space, suggesting that the improvement is likely to be driven by retail investors. 

Market makers share similar sentiment 

QCP Capital, a crypto trading firm in Singapore, shared a similar opinion in its weekly market update on Thursday. It went on to say that ether has been the clear leader during this “mini bull-run,” driven by new clarity on the merge. 

The firm also said that positive macro factors played a part in the uplift of crypto across most asset classes. In the time since the record June inflation figure of 9.1%, the market has been pricing out the possibility of a 100-basis point interest rate hike from the Fed in July. 

QCP expects a 75-basis point hike and another boost for the market as a 100-basis point hike gets completely priced out. Furthermore, inflation has shown signs of hitting a peak, and this would spell more positivity for the market.  

The note concluded that, despite markets being sanguine at present, the possibility of further credit contagion persists.  

Chicago-based firm Cumberland echoed this on Thursday when it said it noticed increased flows through its OTC desk, with institutional buyers going long on ether ahead of the merge. 

Cumberland’s head of trading, Jonah Van Bourg, said this action reflects the incentive structure of every volatile asset, noting that “it’s always easier to buy a bounce than to catch the falling knife.”

© 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 founder of a defunct, Nevada-based cryptocurrency company, My Big Coin, was convicted of bilking investors out of more than $6 million by marketing and selling a fraudulent virtual currency that he claimed was backed by $300 million in gold and other assets.  

Randall Crater, 51, was convicted on Thursday by a federal jury in Boston of wire fraud and unlawful monetary transactions. District Court Judge Denise J. Casper scheduled sentencing for Oct. 27. Crater was arrested and charged in February 2019, after being sued by the US Commodity Futures Trading Commission the previous year. 

Crater founded his business in 2013, according to a news release from the US Attorney’s Office, offering payment services through a fraudulent digital currency that he marketed to investors between 2014 and 2017. 

Crater falsely claimed to be selling “a fully functioning cryptocurrency backed by $300 million in gold, oil and other valuable assets,” the release said.  

He also fraudulently told investors that My Big Coin had a partnership with MasterCard and its digital currency could be exchanged for fiat or other virtual currencies. “Crater promulgated these misrepresentations through social media, the internet, email and text messages.”  

Over the course of the scheme, he “misappropriated over $6 million of investor funds for his own personal gain and spending on goods, including hundreds of thousands of dollars’ worth of expenses on antiques, artwork and jewelry,” the release said. 

US Attorney Rachael S. Rollins said: “Crater saw the burgeoning popularity of crypto as a chance to get rich quick through an unscrupulous fraud scheme cloaked by flashy marketing tactics and outright lies. In the end, he is just another fraudster who made his way into the booming world of cryptocurrency.”  

The case is US v. Crater, US District Court, District of Massachusetts, No. 19-cr-10063. Crater was represented by Scott Lopez of Lawson & Weitzen. 

© 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.

Virtual pet owning game Neopets said that it was investigating a breach of customer data and recommended that users change their passwords.

“Neopets recently became aware that customer data may have been stolen. We immediately launched an investigation assisted by a leading forensics firm. We are also engaging law enforcement and enhancing the protections for our systems and our user data,” the company wrote in a twitter thread on Thursday. 

The company had recently launched its own range of non-fungible tokens (NFTs) for use in its online metaverse game. 

The Block contacted Neopets about the scale of the breach but had not heard back by time of publication.

Other news sites reported the hack may have affected as many as 69 million accounts. One site, Bleeping Computer, alleged that a hacker known as TarTarX began offered up the source code and database for the Neopets.com website for the price of four bitcoin, citing screenshots from a hacking forum. 

Recent reports estimate the game clocks more than 4 million site visits per month, down from a peak of 92 million in the early 2000s. 

Launched in 1999, Neopets was many gamers’ first experience of a social networking site, with its own economy and land predating the growth of major social media sites such as 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.

The US Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) on July 21 brought parallel criminal and civil actions against a former Coinbase employee, his brother and his friend for allegedly running an insider trading scheme. While the legal proceedings play out, a number of firms may be caught in the crossfire.

According to the DOJ’s complaint, Ishan Wahi worked on Coinbase’s assets listing team, and during his time with the firm, he allegedly tipped his brother Nikhil Wahi and friend Sameer Ramani about new coins that were slated to be listed on Coinbase. The complaint alleges the men made at least $1.5 million in illegal trades from 25 different crypto assets and at least 14 Coinbase listings. Many of those assets, the SEC contends, are securities — a claim that could affect business for firms even if they aren’t the object of this enforcement. 

The DOJ approach

The three now are facing charges of wire fraud from the DOJ. It’s applying a case theory it’s also using to prosecute former OpenSea product manager Nate Chastain, who allegedly purchased non-fungible tokens (NFTs) ahead of their listing on the NFT platform’s home page and sold them for a profit. In both cases, the DOJ is using wire fraud charges to take the alleged perpetrators to task for profiting off of non-public information. Wire fraud alleges fraud took place using the “wires,” or in modern terms, the internet. It’s a broad statute that prosecutors have used to go after a variety of activities.  

The DOJ has not sought the charge of insider trading in either situation. That’s because insider trading is a securities violation. Anand Sithian​​, counsel at Crowell & Morning and a former trial attorney in the DOJ’s Criminal Division, Asset Forfeiture & Money Laundering Section, noted the DOJ hasn’t touched the question of whether the digital assets at hand are securities. If the DOJ brought securities fraud charges, Sithian said, it would have to prove the underlying assets were securities, which is an additional burden rather than just proving some type of fraud occurred using the wires.

But that’s not stopping the SEC.

The SEC’s scarlet letter

In Chastain’s case, the assets were NFTs, which for the moment seem to be squarely outside the SEC’s purview. But Wahi’s trading took place on Coinbase, a platform SEC Chair Gary Gensler has continuously called attention to for possibly qualifying as an unregistered securities exchange. Gensler contends that many crypto tokens are likely securities, and therefore the platforms that list them should register with the SEC. 

With that as backdrop, the SEC lodged a parallel civil complaint against Wahi and his associates alleging insider trading violations, and it called out a number of tokens the men allegedly traded as securities. Those assets were: AMP, RLY, DDX, XYO, RGT, LCX, POWR, DFX, KROM.

This appeared to be the first clear communication from the SEC that it viewed these specific tokens as securities. Indeed, Coinbase’s CLO Paul Grewal published a statement in response to the complaint: “Seven of the nine assets included in the SEC’s charges are listed on Coinbase’s platform. None of these assets are securities.”

“We cooperated with the SEC’s investigation into the wrongdoing charged by the DOJ today. But instead of having a dialogue with us about the seven assets on our platform, the SEC jumped directly to litigation,” his post said.

“The SEC’s charges put a spotlight on an important problem: The US doesn’t have a clear or workable regulatory framework for digital asset securities. And instead of crafting tailored rules in an inclusive and transparent way, the SEC is relying on these types of one-off enforcement actions to try to bring all digital assets into its jurisdiction, even those assets that are not securities.”

To be clear, Coinbase is not officially on the defense in this case. In fact, both the SEC and DOJ’s cases against Wahi hinge on the idea that he allegedly violated his employee agreement with Coinbase. In other words, Coinbase is the victim of the scheme. But with the wording of its complaint, Jason Gottlieb, partner and chair of Morrison Cohen’s White Collar and Regulatory Enforcement group, said the SEC has taken one more step in solidifying the idea that some digital assets, particularly those named, are securities. The exchanges that list them could be considered unregistered, yet the SEC hasn’t issued a rulemaking process or provided clear communication on how the potentially liable firms should proceed.

“The fact that the SEC has come out publicly and said that these tokens are securities is going to have an immediate and terrible impact on the price and availability of all these tokens and therefore all these projects,” he said.

Bad branding

A significant portion of its filing is devoted to explaining why the SEC believes these assets are securities, and these projects could face fallout from such a public declaration even if the enforcement isn’t aimed at the projects themselves. It’s possible US exchanges might choose to delist the assets and US investors choose to sell, ultimately pushing these projects offshore to avoid noncompliance. Even if the SEC hasn’t taken formal action against them specifically, branding them could curb some of their activity in the US.

“What the SEC has done is sort of help itself to a win against these projects in a way, to certain kinds of injunctive relief, and I think that’s not the proper way to regulate,” Gottlieb said. “It’s not even regulation by enforcement, it’s regulation by enforcement against other people.”

The projects themselves have little recourse in this situation, according to Gottlieb. Because they aren’t parties in the case, they likely won’t have an avenue to contest the claims.

Still, it might never get that far. It’s possible the civil proceedings might receive a stay while criminal proceedings play out, experts agreed. By the time Wahi and his associates close their criminal case, they may choose to settle with the SEC. If the case doesn’t move forward in court, the SEC won’t have to prove the tokens are securities, and the regulator will have branded the projects without further discussion.

© 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.

Bitcoin mining companies were down in the stock market on Friday afternoon, as bitcoin’s value fell below $23,000.

The coin’s price was around $22,600 at the end of the trading session, according to TradingView.

BIT Mining’s stock dropped by 12.24%, followed by CleanSpark (-11.82%), Hive Blockchain (-11.69% on Nasdaq) and Bitfarms (-10.67% on Nasdaq).

Here’s how crypto mining companies performed on Friday, June 22:

© 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.

In an interview with CNBC today, FTX CEO Sam Bankman-Fried said that he would be willing to spend “hundreds of millions beyond what we have thus far and in some cases more than that” to backstop firms affected by crypto’s recent market crash.

The interview comes days after Bloomberg reported that FTX and FTX US are in talks to raise fresh funds, following a spending spree that saw the firm deploy nearly $1 billion over two weeks in June.

During this period, Bankman-Fried bought Canadian trading platform Bitvo and clearing house Embed, and also entered deals to provide revolving credit lines to struggling crypto firms BlockFi and Voyager. 

Although Bankman-Fried said that the amount the firm will deploy is “open-ended,” he noted that “there is a limit.” 

Asked if his recent buying spree is creating the conditions for a monopoly, he said this isn’t something FTX is actively pursuing, adding that “we would love other people to be coming in and providing capital to those in need.”

© 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 company that owns and operates the popular cryptocurrency exchange FTX.com has proposed a plan to allow Voyager Digital customers the chance to receive a part of their bankruptcy claims immediately through its platform.

FTX Trading announced on Friday that it was proposing this option along with two other firms —  FTX US owner and operator West Realm Shires Inc., as well as Alameda Ventures. It outlined details of the plan in a letter to Voyager.

Voyager Digital customers with bankruptcy claims would be able to immediately receive a portion of their funds by opening an FTX.com account. Participation is voluntary, Voyager said. 

“Under the joint proposal, customers of Voyager would have the opportunity to start a new account with FTX with an opening cash balance funded by an early distribution on a portion of their bankruptcy claims,” FTX.com said in a press release. “Customers would be able to withdraw their cash immediately, or use it to purchase digital assets on the FTX platform.”

The proposal is subject to the bankruptcy court’s approval. FTX said in its press statement that it hopes to close the deal as soon as possible, and “preferably in early August.” In the letter outlining the proposal to Voyager Digital, FTX said it is requesting a first response from the firm by July 26, and “would aim for documentation to be in final form for execution by Saturday, July 30.” 

“Voyager’s customers did not choose to be bankruptcy investors holding unsecured claims,” FTX CEO Sam Bankman-Fried said in the statement. “The goal of our joint proposal is to help establish a better way to resolve an insolvent crypto business — a way that allows customers to obtain early liquidity and reclaim a portion of their assets without forcing them to speculate on bankruptcy outcomes and take one-sided risks.”

FTX clarified in its statement that none of the companies proposing the plan would acquire Voyager’s loans to Three Arrows Capital, and that Voyager debtors “can continue to pursue Three Arrows Capital for additional recoveries.”

Three Voyager Digital business entities filed for Chapter 11 bankruptcy protection on July 5, via the US Bankruptcy Court for the Southern District of New York. Those companies include Voyager Digital Holdings, Voyager Digital LLC and Voyager Digital Ltd.

© 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.

Amid a spate of recent deals, FTX is now talking to crypto exchange Bithumb about a potential acquisition, according to Bloomberg.

The discussions have been ongoing for several months, according to the report, which cites an unnamed source close to the deal.

Bithumb is a South Korean crypto exchange founded in 2014 that currently processes around $569 million in daily trading volume, according to CoinGecko. Since 2017, the exchange has been the subject of considerable controversy, experiencing a number of high-profile hacks resulting in the loss of millions. 

This week, the firm was among the South Korean crypto exchanges whose offices were raided by local prosecutors as part of an investigation into Terraforms Labs following the collapse of stablecoin TerraUSD in May.

News of the talks between Bithumb and FTX comes amid a surge of recent acquisitions and other deals by FTX. In June it announced that it would acquire Canadian crypto trading platform Bitvo and clearing firm Embed. It also entered deals to provide revolving credit lines to struggling crypto firms BlockFi and Voyager. FTX CEO Sam Bankman-Fried has committed about $1 billion so far to acquire or prop up firms impacted by the recent crypto market crash.

As reported by Bloomberg earlier this week, FTX and its US subsidiary FTX US are currently in talks to raise fresh funds, a move that will put the firm in a position to continue its recent deal spree. 

The Block reached out to FTX and Bithumb for comment but neither responded by press time.

© 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.

A collection of metaverse platforms teamed up to launch the metaverse interoperability DAO, dubbed the Open Metaverse Alliance for web3 (OMA3), the group announced on Thursday.

The majority of members have links to Hong Kong-based game software and venture capital firm Animoca Brands. OMA3 includes Animoca Brands itself, The Sandbox, which is one of its subsidiaries, and several brands the company has invested in — Alien Worlds, Dapper Labs, Splinterlands, Star Atlas and Upland. 

It also includes Decentraland, with which Animoca has collaborated on projects, Cryptovoxels, Meta Metaverse, SPACE, Superworld and Wivity. 

“The standards we create are guided by the goals of true ownership and real-time interoperability. We will build infrastructure to ensure the metaverse operates as a unified system where digital assets (such as NFTs), identities, and data are permissionless and interoperable for all and controlled by users, not platforms. Users will immutably own these assets and transfer them to any OMA3 virtual worlds freely, without needing the platform’s permission,” said OMA3 in a statement.

OMA3 has invited all blockchain-based metaverse companies to join the DAO. Details about governance and how voting power will be allocated have not yet been revealed.

‍The announcement did cause some confusion, however. It comes a month after the launch of the big tech-heavy Metaverse Standards Forum, backed by the Khronos Group. Armed with similar ideals around interoperability, The Block noted at the time that top metaverse platforms were absent from their membership roster.

However, the Metaverse Standards Forum told The Block that it had already met with OMA3 and that the latter is planning to join the forum once it is incorporated. 

© 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.

Solana-based gaming metaverse Star Atlas announced the launch of the Star Atlas DAO on Thursday during its 426LIVE community event.

The DAO will utilise Star Atlas’ governance token POLIS to enable members to take part in decision-making processes. The DAO’s voting escrow-model is designed to favor community members with long-term conviction in the Star Atlas vision, it said. As such, the company has also announced POLIS locking, with which holders will be able to commit their tokens for up to five years.

“The vision for Star Atlas is a DAO of DAOs, operating at these various levels of the game, utilizing a variety of on-chain tools to manage in-game assets and treasuries, coordinating activities using the blockchain’s trustless and decentralized nature,” said Star Atlas co-founder Michael Wagner. “We are committed to building these tools and delivering them to our community over the next months and years.” 

Launched in 2020 by Wagner and Pablo Quiroga, Star Atlas is a virtual gaming metaverse set in the year 2620. The world is divided into three factions that struggle for resources, territorial conquest and political domination: the MUD territory governed by humans, the Ustur Sector belonging to sentient androids and the ONI Region ruled by a consortium of alien species. 

The Star Atlas DAO, however, is not the only DAO planned for the Star Atlas metaverse. Each of the three in-game factions will have its own DAO, which will be used for purposes such as setting and distributing taxes for their respective controlled regions.

“Aside from the Star Atlas DAO, which is open to every holder of POLIS, the other DAOs require players to have localized commitments to participate in their politics. For example, only Ustur holders will be allowed to participate in the Ustur DAO, and only land owners of a particular stellar system will be entitled to vote on said system decisions,” the company said.

Along with the DAO, Star Atlas announced the revamp of its Galactic Marketplace with new new DAO-enabled gaming foundations and a new interface. Players will now also be able to buy and sells assets directly with other players.

© 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.