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U.S. federal prosecutors are asking for a seven-year prison sentence for a former minority owner of the National Football League’s Minnesota Vikings who pleaded guilty to running a crypto shadow bank that lost $850 million in customer funds it was holding for the Bitfinex exchange.

The hole in Bitfinex’s accounts became controversial when it emerged that Bitfinex was issuing loans — as opposed to cash — to Tether as reserve backing for its stablecoin.

Prosecutors are especially annoyed at Crypto Capital operator Reginald Fowler because in February, while he was awaiting sentencing, they say he went on a wild gambling spree and lost more than $200,000 at Arizona casinos, even though he owes former business partners $53 million.

Fowler will be sentenced today. In their letter to the judge asking for a prison sentence, prosecutors describe an outrageous scam that Fowler attempted to continue even after he knew he was under investigation.

Fowler provided crypto exchanges such as Bitfinex, Binance, CEX.io and QuadrigaCX with illegal access to U.S. banks even though Fowler did not have a banking license, prosecutors say. He was indicted in 2019 on charges of conspiracy to commit bank fraud, wire fraud and operating an unlicensed money transmission business.

Prosecutors are also seeking $53 million in restitution for his role in bankrupting a startup football league called the Alliance of American Football. They allege Fowler promised them a $53 million investment and a $120 million line of credit, but reneged on both promises leading to the collapse of the league.

They also want the forfeiture of $740 million — cash that ran through Crypto Capital on behalf of its exchange clients. In total, they’re seeking $793 million from Fowler, although they’re unlikely to ever see it.

‘Black money scam’

But it is Fowler’s behavior while under investigation that is, perhaps, the strangest part of the case.

In 2016, he was stopped at the Canadian border carrying items commonly used in a “black money scam,” according to court filings by the prosecution. It’s not clear exactly what Fowler was intending to do, but usually a “black money scam” involves convincing a dupe to take a trove of banknotes that have apparently been stained with ink, as if they were snatched in a robbery that contained a dye pack. The promise is that if the dupe can clean the notes with a special chemical, they can share the newly washed loot. Of course, the notes are fake.

Two years later, the FBI raided his home and found $14,000 in counterfeit bills.

After he was charged in the Crypto Capital case, Fowler presented to the court a sketchy document that purported to show he had a money transmitting license from a “free industrial zone” in the Republic of Georgia. It was dated after the time he was charged.

Casino binge

Worse, as his sentencing date grew closer, Fowler appears to have gone on a gambling binge, prosecutors told the judge:

“The government has obtained records from a casino company in Arizona that indicate that during the pendency of the defendant’s criminal case, he has gambled hundreds of thousands of dollars. This gambling continued after his plea, and records the government has obtained from the company indicate that the defendant has continued to gamble until at least February 7, 2023, spending at least $200,000 in the period from October 3, 2022 until that date.”

“Every dollar the defendant has risked at these casinos is a dollar less likely to be paid to victims in restitution, and to the government in forfeiture. The government therefore respectfully requests that the court add a bail condition that bars the defendant from gambling.”

Fowler later agreed to a ban on him entering casinos.

Right now, Fowler says he has no money, no bank accounts and no lawyer. His last attorney quit because bills went unpaid.

“I have used all my assets. I put my properties up for bail. I can’t get a bank account. We don’t have any income. We can’t get to the assets. I want to find a firm that understands that,” Fowler told a judge in November.

The Block contacted Fowler’s most recent lawyer for comment.

© 2023 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.

Despite Agility’s total valued locked increasing more than 643% to $467 million in the past seven days, CoinGecko and CoinMarketCap have expressed cautionary warnings about AGI developers having the ability to mint new tokens.

The exchange will let POLYX holders stake that token on Binance by the end of this week.

A Bitcoin whale address that has been dormant for over nine years transferred 2,071.5 BTC ($60.7 million) out today.

The newly awoken address in question received its 6,071.5 bitcoins on Dec. 19, 2013 — when the price of one bitcoin was $663 — noted on-chain analyst Lookonchain.

While the reason for the move is unknown, some speculate that many long-time crypto users are moving old funds to new wallets amid a significant (and mysterious) wallet-draining operation seemingly targeting old wallets.

The price of bitcoin has dropped by nearly 4% over the past 24 hours. The market-leading cryptocurrency is trading just below $29,000 as of press time.

© 2023 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.

Deribit, the world’s largest crypto options exchange, is entering the spot trading space.

The company announced late Wednesday that it is launching a zero-fee spot exchange on April 24. The move comes shortly after rival Binance’s zero-fee spot trading campaign ended late last month.

“We have been working on the implementation of the spot trading solution for the past few months,” Luuk Strijers, Deribit’s chief commercial officer, told The Block. “We now are able to offer clients a full spectrum of trading opportunities that encompass both derivatives and spot trading.”

At launch, Deribit will offer spot trading with three pairs: BTC/USDC, ETH/USDC and ETH/BTC. It might list more coins, according to Strijers, but zero fees won’t last for the long term. Free trading will exist “for the foreseeable future,” he said.

Deribit data

Deribit’s entry into spot trading comes seven years after its inception.

The exchange is currently the leader in the crypto options market, with over 90% share of open interest in both bitcoin and ether options trading, according to The Block’s Data Dashboard.

Open interest is the value of outstanding derivative contracts that are yet to be settled.

Last year, Deribit had challenging times as it had to liquidate Three Arrows Capital’s (3AC’s) positions after the now-bankrupt crypto hedge fund failed to meet its margin calls. In turn, Deribit took a “small” hit and later went on to raise $40 million from existing shareholders at a $400 million valuation.

The company was valued at $2.1 billion in its previous funding round in August 2021. Strijers at the time said the valuation “is essentially irrelevant” because the fundraising came from existing investors.

Deribit’s retail strategy 

Deribit plans to attract more retail users with its spot trading launch, said Strijers. It also plans to get a crypto license in Dubai and move its headquarters to the city from Panama.

Whether Deribit will mirror its options performance in the spot market, which Binance currently leads, remains to be seen. Strijers said, “As the digital asset space continues to evolve, trading venues will have to grow alongside it and ensure the ecosystem remains secure, transparent and compliant.”

Deribit’s spot exchange, like its derivatives platform, won’t be available for users in the U.S. and some other restricted countries, Strijers said.

© 2023 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 availability of the spot market means traders no longer have to go elsewhere to exchange major cryptocurrencies and can set up multi-leg complex strategies at one place.

The TradGaming world has tentpole franchises that have drawn large audiences, but Web3 games have yet to connect meaningfully with gaming enthusiasts.

BitBoy is due in court tomorrow. He probably won’t show up. 

Things are so nasty between “BitBoy Crypto” YouTuber Ben Armstrong and the class action lawyer suing him that Armstrong is due in court on Thursday to answer for his alleged bad behavior. 

But Armstrong is on a long-awaited BitBoy-branded crypto cruise to the Bahamas. He intends to skip the hearing, despite a judge’s order that he appear in person to address his alleged harassment of Adam Moskowitz, the lawyer who filed a case against him. 

“I will not be there in person,” Armstrong told The Block via text message on Wednesday. 

The $1 billion class action case is the latest crypto drama to play out in a federal courtroom after the high-flying crypto exchange FTX crashed and burned last year. 

Armstrong and other crypto influencers are accused of promoting the sale of unregistered securities at FTX in a class action lawsuit. The case was filed by several plaintiffs including Oklahoma man Edwin Garrison, an FTX customer who is also suing the company’s celebrity promoters like Shaquille O’neal and Tom Brady in a separate case being spearheaded by Moskowitz.

But Armstrong, who regularly gives his 1.45 million YouTube subscribers “the latest crypto news, project reviews, and cryptocurrency trading advice,” claims the lawsuit doesn’t apply to him. Armstrong says he never promoted FTX. The court filings from Moskowitz’s firm indicate that he once praised FTX and its utility token. 

“Adam Moskowitz is a clout chasing whore,” Armstrong said in a telephone interview.

FTX suit targets BitBoy, Kevin Paffrath

The lawsuit targets influencers like Kevin Paffrath, a YouTuber who once unsuccessfully ran for governor in California, as well as Graham Stephan, Andrei Jikh and others. The filing claims influencers “played a major role” in the FTX collapse. The company was once valued at $32 billion and crumbled after a run on its FTT token. 

“With the rise to prominence of the internet and social media, a new multi-billion dollar cottage industry of ‘influencers’ has been created,” court filings said. “FTX could not have arisen to such great heights without the massive impact of these influencers, who hyped the deceptive FTX platform for undisclosed payments ranging from tens of thousands of dollars to multimillion dollar bribes.”

The Moskowitz Law Firm has filed lawsuits against promoters of FTX, bankrupt crypto lender Voyager Digital and Binance, the world’s largest crypto exchange. The FTX case against Armstrong and other influencers was filed in the U.S. District Court for the Southern District of Florida. 

“There’s a long list of influencers that promoted this,” Moskowitz said during a recording of The Scoop with Frank Chaparro this week. “I can’t go after 1,000 right now. So you go after the largest ones.”

Moskowitz didn’t comment for this story. 

Everything Sam Bankman-Fried touches ‘turns to gold’ 

Armstrong denies ever having promoted FTX. In the wake of the FTX collapse, Armstrong railed against the defunct exchange online, uploading dozens of YouTube videos with titles like “BIGGEST Scam in Crypto History (FTX Destroyed Peoples Lives)” and “FTX Insiders Rigging Crypto (BIGGEST Corruption Scandal Ever).”

Lawyers have, however, surfaced videos in which Armstrong addresses FTT, the FTX token, and says “everything” former FTX CEO Sam Bankman-Fried “touches turns to gold.” Bankman-Fried has pleaded guilty to criminal charges and is awaiting an October trial.

“It is already well-documented that Armstrong has been intricately involved in many nefarious activities,” a court filing said. “Posting a plethora of materials regarding specifically FTX, FTT and Sam Bankman-Fried (much of which he has since altered or deleted, though many are still publicly available), including his own purported half million dollar stake in FTT.”

Now Armstrong is taking aim at Moskowitz, promising to “totally blow up his entire case.”

“He’s trying to tie me into a lawsuit with the biggest fraud in the history of the world? Like, that’s defamation. There’s no evidence to tie me into it,” Armstrong said by phone. 

‘Shorter than the average American male’

Armstrong’s combative communication with Moskowitz, which has included profanity-laden emails and social media posts, has prompted a judge to order him to appear in court on Thursday to answer for his behavior. 

“It could be a bit of a circus,” said Josh Garcia, a partner at the Ketsal law firm, noting that lawyers for other defendants in the case have been invited to attend the court proceeding. Garcia is not involved in the case.

If Armstrong doesn’t show up — and he says he won’t — he could be held in contempt of court or subject to other sanctions for his absence, according to lawyers. Armstrong’s representative Jason Rindenau did not respond to a request for comment. 

The judge could also punish Armstrong for his alleged conduct toward Moskowitz, perhaps with a temporary restraining order. His behavior toward Moskowitz is well-detailed in court filings and on Armstrong’s own social media.

“Daily reminder you are a p***y,” Armstrong purportedly wrote in a recent email to Moskowitz, which Armstrong shared on Twitter.

“Me getting your legal license taken is not a threat. It’s a promise you bitch. Thank you, Ben Armstrong,” he said he wrote in another tweeted email. Armstrong has also shared photos of Moskowitz on his Twitter page, deriding him as “shorter than the average American male” and “an ambulance chasing douche bag.”

Moskowitz claims the harassment was so intense that he worried for his family’s safety and contacted the FBI and local law enforcement. The Moskowitz Law Firm said it received two dozen phone calls in a matter of hours regarding the lawsuit, according to court filings. Armstrong denies having made any phone calls to Moskowitz. 

“If people haven’t figured out by now, I own what I do. I don’t run and hide from things that I did,” Armstrong said. 

© 2023 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.

Coinbase could launch an offshore derivatives exchange as soon as next week, after the crypto exchange received a license to operate in Bermuda. 

The company obtained a license from the Bermuda Monetary Authority, according to a company blog post published on Wednesday. Coinbase lauded Bermuda as “a highly respected and experienced financial regulator” in its announcement.

Coinbase had been exploring launching an offshore platform to trade perpetual swaps tied to cryptocurrencies, The Block reported last month. That expansion could come as soon as next week, according to a Fortune report.

“Bermuda was one of the first financial centers to pass comprehensive digital assets regulation in 2018, and its regulatory environment is long known for a high level of rigor, transparency, compliance, and cooperation,” Coinbase said in its blog post. The company did not immediately respond to a request for comment. 

Perpetual swaps — a type of future and a popular product in the crypto space – are expected be among the offerings. They provide a more capital-efficient way for traders to make bets on the underlying crypto market.

© 2023 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.

CoinJoin increases privacy by combining multiple bitcoin payments from multiple spenders to produce a single transaction whose history and ownership are obfuscated.