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The Securities and Exchange Commission has shot down two spot bitcoin exchange-traded fund proposals, continuing a trend of rejections from the US securities market regulator. 

The rejections were for proposals submitted by NYDIG and Global X. 

As has been the case with rejections for other spot bitcoin ETF proposals, the regulatory filings cited a lack of surveillance-sharing agreements and the perceived inability to curb fraud or manipulative practices in the market.

“This order disapproves the proposed rule change,” the SEC wrote in its NYDIG-related order. “The Commission concludes that NYSE Arca has not met its burden under the Exchange Act and the Commission’s Rules of Practice to demonstrate that its proposal is consistent with the requirements of Exchange Act Section 6(b)(5), and in particular, the requirement that the rules of a national securities exchange be ‘designed to prevent fraudulent and manipulative acts and practices’ and ‘to protect investors and the public interest.'”

Last fall, the SEC moved to allow the listing of bitcoin futures ETFs for the first time. Recent months have also seen the proposal of ETF products tied to the stocks of crypto-related companies, including publicly traded miners. 

© 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 UK’s Financial Conduct Authority (FCA) has contacted crypto ATM operators to shut down their machines or face penalties since they are unlicensed.

According to an FCA notice published on Friday, none of the crypto ATM operators in the UK are registered to do business in the country. As such, all such machines are operating illegally.

There are 81 crypto ATMs in the UK, according to data from CoinATMRadar, with the majority located in the London Area. Manchester, Oxford and Birmingham also host a few machines.

The FCA’s notice comes on the heels of a court ruling against Gidiplus, a crypto ATM operator in the UK. Gidiplus previously lodged an appeal with the Upper Tribunal challenging the FCA’s decision to reject its licensing application under the Money Laundering Regulations (MLR) regime.

At the time, the FCA rejected the Gidiplus application due to insufficient identity verification for customers doing small transactions. The FCA stated that Gidiplus’s identity verification for people doing transactions below 250 British pounds ($327) opened to door to “smurfing” risks.

Smurfing is a technique allegedly used by money launderers where large sums of money are deposited in smaller amounts to evade detection from the authorities. Ruling on the matter, the court stated that Gidiplus had failed to prove that it could operate in a manner compliant with MLR protocols.

Since assuming its role as the crypto money laundering overseer in 2020, the FCA has moved to tighten cryptocurrency regulations in the UK. Earlier in March, the regulator stated that it had investigated over 300 crypto businesses in the last year.

Singapore made a similar move to shutter crypto ATMs earlier this year as part of a wider crackdown on digital currency marketing.

© 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.

Alex Kriete, co-head of digital assets at Citi, is leaving the bank after less than a year in the role.

Kriete had spent more than 11 years at Citi and was appointed to oversee its newly formed crypto division in June last year, initially as co-head of digital assets alongside Greg Girasole. Kriete was made a director in January.

But in a LinkedIn post on March 10, Kriete said he would be leaving Citi to create a new company in the crypto sector. Bloomberg was first to report the news.

“Unsurprisingly to those who know me, I believe digital assets will continue to grow in importance to global capital markets and the formation of new business models, and I could not be more excited to assist in the maturation of this market,” he said in the post.

Citi and Kriete were contacted for comment but did not respond by press time.

In forming its new crypto division last year, Citi followed in the footsteps of rivals Morgan Stanley and Goldman Sachs, both of which have rolled out products to help wealthy clients tap the crypto market.

© 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.

Digital real estate platform Roofstock closed a $240 million Series E equity financing round, achieving a valuation of $1.94 billion.

The Roofstock platform enables the $4 trillion fragmented, cottage industry of single-family rentals or “SFRs” to become a relevant asset class. Since it was founded in 2015, the platform has facilitated more than $5 billion in transaction volume, half of which came in the last year, according to a company statement.

These are made up of both individual investors and portfolio transactions by institutional investors. In 2021, Roofstock bought homes on behalf of institutional clients, representing over $1.2 billion in assets.

SoftBank Vision Fund 2 led the new financing with participation from existing and new investors.

“Real estate is a huge asset class that has been relatively untouched by technology, and is often fragmented, analog and inefficient as a result. Roofstock makes buying and investing in rental homes seamless and accessible, and we saw a huge opportunity for the platform, particularly as interest in the sector continues to grow,” said Serena Dayal, Investment Director at SoftBank Investment Advisers, in a statement. 

With this funding, the company plans to focus on innovating a wide range of investment products, including strategic mergers and acquisitions on top of the three previous acquisitions the company has completed; expanding into other forms of real estate; and doubling its team size in 2022.

The firm has also been open about its potential application of blockchain, particularly the possible tokenization of real-world assets, something it discussed publicly last year.

“The company is also investing to help further improve accessibility and liquidity in the SFR asset class,” Roofstock said in its Thursday release. “It recently was accepted into the Cypher Accelerator program at the Stevens Center for Innovation in Finance at the University of Pennsylvania’s Wharton School to help accelerate its real estate tokenization initiative.”

© 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.

CK Zheng — formerly the global head of valuation risk at European investment bank Credit Suisse — is targeting a $200 million fundraise for a new crypto hedge fund. 

The Wall Street vet has joined forces with Felix Xu and Yemu Xu to launch ZX Squared Capital, which will deploy strategies in crypto options to help deliver better returns with less volatility, according to Zheng. 

“We can use options in a way that can substantially reduce volatility,” Zheng told The Block in an interview. 

Options, a type of derivatives, can be used to speculate on assets, but also are a Wall Street tool to squeeze returns out of an asset’s volatility. For instance, strategies like long strangle allow a trader to take advantage of a potential surge in the volatility of an asset. 

ZX Squared is plotting a way to deliver outsized returns in the market while dampening the volatility of bitcoin. In sum, the pitch to investors is that it can reduce the volatility of the underlying market to 30% to 40% compared to bitcoin’s volatility of more than 80%. 

The crypto options market has grown by nearly 10x since 2020, according to data compiled by The Block. Since the start of 2022, the bitcoin options market has turned over more than $7 billion across venues ranging from CME Group to Deribit. 

Zheng spent more than 17 years at Credit Suisse and previously held positions in interest rate derivatives trading at Bank of America and Susquehanna International Group. In a sense, his entrance into the crypto market — and the fund’s overall approach — reflect the crypto market’s growing maturation and complexity. 

According to Zheng, ZX Squared Capital plans to leverage proprietary indicators based on on-chain data to inform its models. “We’re leveraging the both of the two worlds.”

As for his partners, Felix Xu is a well-known NFT enthusiast whose collection was featured in the Wall Street Journal. He has worked on building out two crypto projects, ARPA and Bella Protocol. Yemu Xu, who got his start at Fidelity, has invested actively in the decentralized finance market. 

ZX Squared Capital’s pending launch comes as a wave of capital pours — buoyed by billionaire investors like Alan Howard and Paul Tudor Jones — enters the market. On the venture side, the market has seen a number of new multi-billion dollar funds crop up, rating from Paradigm to FTX. 

© 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 long-delayed appropriations bill for 2022 has passed in the House of Representatives and is heading for the Senate as of March 9.

Included in the bill’s 2,741 pages of legislation are several provisions aiming at China’s central bank digital currency, or CBDC, as well as new requirements for ransomware reporting.

One section calls for the President to produce a report on the Chinese digital yuan, particularly the “short-, medium-, and long-term national security risks” that it poses. The risks the report would emphasize are transactional surveillance, illicit financing, and economic coercion from China.

Several US senators introduced a bill calling for similar reporting on Wednesday. 

The appropriations package also introduces mandatory reporting of ransomware payments by critical infrastructure to the Cybersecurity and Infrastructure Security Agency within 24 hours of making such a payment. 

The new reporting requirements for ransomware attacks became a major topic of policymaking discussions in 2021, after ransomware attacks crippled the Colonial Pipeline and JBS meatpacking. Ransomware subsequently became a centerpiece of President Joseph Biden’s foreign policy. 

Some of the ransomware policy’s “whole-of-government” language would make its way into Biden’s executive order on crypto that the White House released yesterday. 

© 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 Labor published a notice Thursday saying it will conduct an investigative program aimed at retirement plans offering crypto.

The agency advocated retirement managers exercise “extreme care” when considering cryptocurrency as a retirement investment option. 

The DOL has seen an uptick in firms marketing crypto investments for 401(k) plans in recent months, according to its notice. These defined contribution plans usually offer a variety or “menu” of investment options to participants. Some of these firms are now marketing crypto as a menu option.

As it stands, the DOL is skeptical of crypto as a retirement investment due to its volatility, custodial and record-keeping concerns, issues with reliable valuation and the murky regulatory environment. 

“At this early stage in the history of cryptocurrencies, the Department has serious concerns about the prudence of a fiduciary’s decision to expose a 401(k) plan’s participants to direct investments in cryptocurrencies, or other products whose value is tied to cryptocurrencies,” said the DOL.

Additionally, given the narrative that crypto can produce outsized returns, the DOL cautions that it may cloud investors’ judgement and attract inexpert investors. The DOL’s notice reminds those managing those accounts that they are responsible with identifying the risk of possible investments. 

“Fiduciaries may not shift responsibility to plan participants to identify and avoid imprudent investment options, but rather must evaluate the designated investment alternatives made available to participants and take appropriate measures to ensure that they are prudent,” said the notice.

As a result of the uptick in crypto retirement investment options, the Employee Benefits Security Administration will conduct an investigative program for plans that offer crypto investments. With the investigation, EBSA will “take appropriate action to protect the interests of plan participants and beneficiaries with respect to these investments,” according to the notice. 

© 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.

Bessemer Venture Partners, a San Francisco-based venture capital firm, announced on Wednesday a $250 million investment fund for entrepreneurs in the decentralized tech space. 

The fund has a specific focus for individuals working in consumer crypto, or those working to increase widespread adoption of decentralized technology in areas such as gaming, marketplaces or the metaverse, web3 infrastructures like wallet services and smart contracts, and decentralized finance (DeFi). 

Bessemer partners Ethan Kurzweil, Charles Birnbaum, Talia Goldberg and Jeremy Levine are leading the decentralized tech fund, with help from Mike Giampapa, Lindsey Li, Alexandra Sukin, Aditya Nidmarti and Sarah Du.

Bessemer has already invested in web3 entrepreneurs including Jay Chang of the Solana-based game Genopets, Josh Fried of Solana and Esteban Castaño of TRM Labs, among others. 

Along with the $250 million fund for decentralized tech, Bessemer has also launched BessemerDAO, a tool for community engagement and product development among entrepreneurs in the web3 industry.

© 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 Canadian man was extradited to the US on Wednesday after being accused of conducting ransomware attacks in 2020. 

Sebastien Vachon-Desjardins, 34, from Quebec, was accused of carrying out dozens of ransomware attacks between April and December 2020, according to the Department of Justice. Some $28.2 million in bitcoin was seized by Canadian officials in early 2021 in connection with the investigation.

The University of San Francisco was one of his alleged targets and is said to have paid over $1.1 million to regain access to their data, according to the Toronto Sun. The Canadian paper reporter that Vachon-Desjardins was a computer technician employed by the federal department of Public Services and Procurement and was suspended after being arrested in 2021.

The US intends to forfeit more than $27 million which allegedly can be traced back to the crimes Vachon-Desjardins is charged with, according to court documents.

“As exemplified by the seizure of cryptocurrency by our Canadian partners, we will use all legally available avenues to pursue seizure and forfeiture of the alleged proceeds of ransomware, whether located domestically or abroad,” said Assistant Attorney General Kenneth A. Polite Jr.

Vachon-Desjardins faces charges of conspiracy to commit computer fraud and wire fraud, intentional damage to a protected computer and transmitting a demand in relation to damaging a protected computer.

He allegedly used NetWalker ransomware, which operates as a so-called ransomware-as-service model. It has been used to target universities, companies, municipalities and hospitals during the pandemic, according to the Department of Justice, which announced last year an international effort to crack down on the use of NetWalker.

Canadian authorities arrested Vachon-Desjardins on Jan. 2021 after doing a search warrant on his house in the town of Gatineau. They found 719 BTC and C$790,000.

He was returned on an indictment from the Middle District of Florida and is scheduled to have his first court appearance on Thursday. The FBI is investigating the case.

© 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.

Quick Take

• MoonPay’s concierge service has paid some head-turning premiums for Bored Ape NFTs over the past six months for its celebrity clients.
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