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On August 20, the Securities and Exchange Commission announced two judgments in its ongoing case against BitConnect, a crypto lending platform that the SEC contends was a $2 billion unregistered securities offering.

The case began in May, targeting five of BitConnect’s alleged promoters. Today’s judgments include only two, Michael Noble and Joshua Jeppesen, whose fiancé Laura Mascola, is not accused of wrongdoing but will have to return funds that Jeppesen transferred to her. 

Jeppesen himself was a liaison between BitConnect and promoters. Regulators have alleged that BitConnect itself is a Ponzi scheme, with the FBI issuing a call for victims early in 2019. None of today’s cases, however, feature criminal charges. 

Per the final judgment, Jeppesen and Mascola are on the hook for paying $3.5 million and 190 bitcoin (worth $9.1 million) in disgorgement and prejudgment interest. As for Noble, the size of his fine remains undetermined. 

The judgments have enjoined both Noble and Jeppesen against participating in digital asset offerings in the future. 

The SEC’s investigation into BitConnect continues, as do its cases against the remaining executives. 

© 2021 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

• Luno, Liquid, Binance US, and FTX are the cheapest spot exchanges overall
• FTX is the cheapest exchange for retail traders
• Huobi, Gemini, Bitstamp, and Coinbase are the most expensive exchanges

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Binance has said it’s now requiring all users to complete Intermediate Verification amid mounting compliance pressure from worldwide regulators.

The world’s largest exchange said in an announcement on Friday that effective immediately, all new users now must complete Intermediate Verification to access Binance’s services, including cryptocurrency deposits, trades and withdrawals.

Binance said the move comes as it reviews its products and services on an ongoing basis to “determine changes and improvements in light of evolving global compliance standards.”

Per Binance’s Identity Verification process, an Intermediate Verification includes the submissions of government-issued ID as well as facial verification.

For existing users who have not completed the Intermediate Verification, their account access will be limited to “withdrawal only,” which means they can only withdraw assets, cancel orders or close positions.

“This will be carried out in phases to minimize user-experience disruption, from now through 2021-10-19 00:00 AM (UTC),” the firm said. Existing users can only resume full access to Binance products and services like deposits and trading after completing at least the Intermediate Verification.

The latest change also comes weeks after Binance further reduced the daily withdrawal limit for non-verified accounts from a maximum of 2 BTC to 0.06 BTC.

The exchange has come under a series of regulatory scrutiny by global regulators in multiple jurisdictions including the U.S., the U.K., Canada, Cayman Islands, Hong Kong and several European Union countries.

© 2021 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.

Brokerage firm Coinbase has the green light from its board to purchase more than $500 million worth of crypto on its balance sheet, according to a tweet from its chief executive officer Brian Armstrong. 

The firm, which is known for helping publicly traded companies make large bitcoin purchases, will also be investing 10% of all future profits in crypto. 

“I expect this percentage to keep growing over time as this crypto economy matures,” Armstrong said. 

Coinbase, which tapped the public markets in April, has helped companies including MicroStrategy and Tesla make large crypto purchases. Firms like MicroStrategy view the move as a way to protect capital from potential inflation. It’s not clear what cryptos Coinbase would purchase.

As reported by the Wall Street Journal, Coinbase has also stockpiled billions of dollars worth of cash in the event of a crypto winter or regulatory crackdown. It could also put that capital to work to make acquisitions. 

© 2021 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.

Earlier this month, former Acting Comptroller of the Currency Brian Brooks left his post as chief executive of Binance.US after just three months with the U.S.-based exchange.

Now, sources tell major news outlets that the “strategic differences” Brooks referenced in his departure announcement include a failed bid to raise $100 million from venture capital investors. 

A source involved in the fundraising process confirmed to The Block that Binance.US is still working on raising a $100 million round that could close as soon as next month. The source said it is having a more difficult time locking down investors in the U.S. due to regulatory concerns.

Both The New York Times and Bloomberg have reported that the crypto exchange was in the early stages of a possible initial public offering (IPO), with the Brooks-led deal acting as a first step. GreatPoint Ventures and SoftBank were among the names Brooks courted for the deal, though both decided against making an investment, according to the Times. 

However, the deal Brooks pitched as a movement towards an IPO would eventually fall through as investors worried over U.S. authorities’ investigations into affiliated crypto exchange giant Binance. Though Binance.US was set up as a firm separate from Binance, Binance owner Changpeng Zhao retains a 90% ownership stake, which worried investors.

Zhao told Bloomberg there remains “significant interest” from “top level investors” and Binance.US hopes to close the round shortly. Zhao also confirmed the firm intends to go public at some point, with that timing to be determined. 

© 2021 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

• Recent months have seen drastic changes in the information that stablecoin operators disclose to the public. 
• Now, these major operators are locked in a competition to out-transparency each other.
• Understanding what’s going on now requires first understanding the historical context.

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A trio of filings with the Securities and Exchange Commission on Thursday reveal that both Wells Fargo and JPMorgan are working with investment services company NYDIG to offer bitcoin investment exposure to their respective client bases.

Two of the notices name J.P. Morgan Securities as the recipient of the shares tied to the bitcoin fund. Another notice names Wells Fargo Clearing Services.

All three will offer “pooled investment fund interests” from private issuers that NYDIG has established to hold bitcoin. 

The second J.P. Morgan offering is linked to NYDIG’s Cayman Islands-based issuer. In the case of that partnership, the minimum investment accepted from outside investors is $100,000, while the other two filings are U.S.-based and have no quota for outside investment. 

In all three cases, the notices indicate that the partnered banks will receive placement and servicing fees for clients it refers to NYDIG. The filings don’t show any sales having yet been made in connection with the funds.

NYDIG has $6 billion assets under custody and continues to expand. It announced a variety of new partnerships in Q2 of this year to enable ease of access to Bitcoin in the banking space. Meanwhile, J.P. Morgan has been on a blockchain hiring spree to fill positions in its Onyx unit, and it recently took steps to allow its wealth management clients to invest in crypto funds. 

© 2021 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 Fractional Token Company, also known as Fractional.art or Fractional, has raised $7.9 million in total seed funding.

The company closed $6.3 million in funding on August 5th. Robot Ventures provided $500,000 earlier this year, Fractional co-founder Andy Chorlian told The Block, and also contributed to this most recent round. Additional funders include Divergence Ventures, Flamingo DAO, Variant Fund, and Delphi Ventures. 

At the center of the project is a concept known as fractional non-fungible tokens. Essentially, it results in the division of NFTs into digital pieces, which can then be distributed or sold as constituent parts of a “whole” NFT. The NFT fractions themselves are fungible ERC-20 tokens that can be transacted or traded on decentralized exchanges or marketplaces, for example.

Fractional intends to use the funds to expand its team, particularly in the smart contract and front-end development spaces, Fractional COO Shant Marootian told The Block. The startup also intends on expanding its business development team and in-house counsel as well. 

The startup currently has 200 curators and 2,500 NFT fraction owners. NFT fractions include that of CryptoPunks, Twin Flames, Meebits, XCOPY, and Bored Ape Yacht Club. 

© 2021 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.

Brian Quintenz, a commissioner for the Commodity Futures Trading Commission, has announced that August 31 will be his final day in office.

Quintenz has been a notable crypto advocate for the duration of his term. In his statement upon departure, he highlighted his work on cryptocurrency issues.

“During my term, the CFTC has overseen the listing of Bitcoin futures contracts; the custody of digital assets within the traditional clearing infrastructure; the proliferation of blockchain technology; the creation of cryptographic, tokenized commodities; and the rapid expansion of decentralized finance (DeFi), which purports to realize the ultimate transparency-competition-innovation-reward dynamic of a true free market.”

On Wednesday, Quintenz tweeted a question about how to qualify fraud in DeFi, a question that both the CFTC and sister regulator the Securities and Exchange Commission has been debating hotly. 

From my experience, fraud usually involves a level of centralization/control as well as opacity. Query if those two conditions exist in a true, full #DeFi system. If not, how does the idea of “investor protection” change, or shift from the govt’s to a participant’s prerogative?

— Brian Quintenz (@BrianQuintenz) August 18, 2021

Initially nominated by President Obama and confirmed under President Trump, Quintenz’s term expired last year, which resulted in some back and forth as to when he would actually be stepping down amid a change in administrations. Quintenz ultimately continued under President Biden.

Reports emerged earlier this week that Biden was planning to nominate acting CFTC Chair Rostim Behnem to serve as full chair. 

© 2021 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.

1confirmation, the investment firm backed by Peter Thiel and Mark Cuban, announced Thursday an investment in non-fungible token (NFT) project Catalog. 

The raise, which officially closed in late June, injects $2.2 million of fresh capital into the project. Other investors in the round include Inflection and Delphi Digital. The investment is part of 1confirmation’s third fund, which raised $125 million to back early-stage crypto companies.  

Catalog aims to serve a specific corner of the NFT market: independent music artists. The startup says it has lined up over 100 independent artists, who have earned in aggregate more than $315,000 selling records through the platform. 

Powered by Zora, Catalog offers a marketplace specific for music. 

“We think music needs it’s own space both aesthetically & functionally – artists want to drop their music where people are coming to listen to music, on a platform built for it, not amongst thousands of pengus and apes and deviant art,” said Michael McKain. 

In a sense, it is a blockchain-based version of Bandcamp, a platform through artists can upload music for free and have more control over sales. The Web3 format aims to give artists even more control over those sales and allows them to collect more in proceeds, the company says. 

“Artists collect 100% on primary sales and collect the creator share (Zora feature), set by them, on secondary sales,” McKain added. 

© 2021 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.