Multichain Bridge’s recklessness attracts controversy

Multichain Bridge’s recklessness attracts controversy

Key Points

  • The crypto community has expressed disdain over poor management and centralization in the Multichain crypto ecosystem.
  • Multichain experienced a series of ‘hacks,’ which have all been confirmed to be inside jobs, resulting in a series of companies being forced to close down. 

Multichain Bridge ‘hack’ has sent a ripple of distrust in the crypto industry after what investors thought was a hack was revealed to be an inside job. Multichain is forced to close down as it does not have operational funds to continue operating since all control was under an arrested CEO, and all validators have been kicked out of the MPC node servers. 

Multichain Bridge mismanagement stirs the pot

The crypto community is not buying into the Multichain hacking and CEO disappearance story, as the industry is counting losses from the misfortune. According to the company, Multichain Bridge CEO Zhao Jun was arrested in May 2023.

Since his disappearance, Multichain Bridge has been left with crippled systems. Its MPC node validators were kicked out of the servers, and no one else had access to them or Jun’s cloud server, or so it was thought. This state of operation was the case until it was discovered that Jun’s sister was transferring investor funds from MPC accounts to a personal EOA address.

She was also arrested by the same Chinese authorities that reportedly took Zhaojun. Now, Multichain has to wind down its operations. This misfortune has sent a wave of distrust and disdain across the crypto space. Multichain was one of the largest bridges and had thousands of users. 

Talking to Fintech Express, DeFi solutions provider Bracket Labs called on DeFi projects to recheck their decentralization approaches and avoid falling for a similar centralization of power as seen in the Multichain saga. 

“It is extremely disappointing to hear that the disappearance of the Multichain founder could lead to a shutdown of the protocol because of centralized back-end infrastructure. Even though the MPC nodes themselves are running properly, the fact that they are node servers running on the founder’s personal cloud server account is concerning. 

This is a wakeup call for all DeFi projects to verify that they do not rely on any single individual or infrastructure provider/vendor,” Bracket Labs said.

Aftershock events of the Multichain Bridge meltdown

As a result of poor management in the ranks of Multichain Bridge, multiple investors have been affected. Some projects will even be forced to close down. Such a project is Geist Finance. Geist Finance is a lending protocol that held its assets on Multichain. However, it has no choice but to wind up its operations permanently following the misfortune.

The Ripple effect has also hurt the Fantom network, as the blockchain harbored Multichain. Multichain was its largest bridge, meanings its shutdown resulted in lower network usage. In a July 17 update, Fantom expressed that it was disappointed to hear about Multichain but had found a solution.

“We are deeply disappointed to hear about the latest Multichain news. It is a difficult situation for everyone impacted, on a brighter note we have found an alternative to swap Multichain Assets using our inbuilt Dex Aggregator. USDC holders can now swap their funds to $FTM at $1 price using the Dex Aggregator,” the tweet read.

Since the beginning of July, the total value locked (TVL) in the Fantom network had been on a sharp dive owing to the Multichain saga. The TVL had fallen by 67% on July 16 in July only. This makes it one of the biggest hits in the network’s operational history.

Keep watching FinTech Express for more updates on this and other fintech-related developments.

Gemini’s Cameron Winklevoss calls out SEC for bad regulatory practices

Gemini’s Cameron Winklevoss calls out SEC for bad regulatory practices

Key Points

  • Cameron Winklevoss has called out the US SEC for its bad crypto regulations following the Ripple case partial loss.
  • The Gemini boss has expressed that some SEC’s practices, such as allowing companies like Coinbase to go public only to charge them later, are ludicrous.

Gemini boss Cameron Winklevoss has expressed dissatisfaction with the US SEC’s unrealistic crypto regulation approach. He pointed out on Coinbase story where the US SEC allowed it to go live only to charge them later, calling it “ludicrous.”

SEC allowing a company to go public and then charging it is ludicrous- Cameron Winklevoss

Coinbase is one of the many crypto organizations that are ‘victims’ of the US SEC’s regulatory sword. The crypto exchange has featured in a high-profile lawsuit where the US SEC alleges that it is trading crypto securities in the country without its permit.

Coinbase has, however, challenged the allegation that it cleared with the regulator long before going live. However, the US SEC still feels that more needs to be done. In a Thursday court proceeding, SEC lawyers claimed that simply because it allows a company to go public doesn’t mean it has its blessings.

“Simply because the US SEC allows a company to go public, it does not mean that it is blessing the company’s business,” said SEC’s Peter Mancuso.

This statement has come through as a trap for companies, as the US SEC should only have allowed a company to go live in the first place if it was satisfied with the business it had outlined in the initial filing. 

Judge Faila replied to Mancuso, saying she was skeptical about the whole saga and would have thought that the form S-1 (a registration file) would have involved due diligence. She added:

“They (referring to SEC officials) could have said, ‘Hey, you have filed as a securities exchange.’ That was within their power was it not?”

Cameron Winklevoss has come out against the US SEC for doing this to Gemini, saying it’s ludicrous. Keep watching Fintech Express for more updates on Coinbase vs. SEC and other Fintech-related developments.

US SEC under fire for posting an unconvincing press release following loss to Ripple

US SEC under fire for posting an unconvincing press release following loss to Ripple

Key Point

  • US SEC is under fire after posting a rather unconvincing press release detailing that they won against Ripple in some cases where the crypto company had tried to introduce an unconventional law.
  • The crypto community is calling out the US SEC for its tendency to want to regulate the crypto industry greedily.

Voices have been raised against US SEC following its recent loss in the case against Ripple regarding XRP being security. The crypto community feels that authority should have been fair, meaning they would have expected SEC to have an outright win.

The crypto community celebrates a win against the US SEC

The crypto community has come together to celebrate another massive win against the US SEC after the judge officiating the case between the regulator and Ripple ruled in favor of Ripple that Primary markets sale of XRP does not constitute properties of a securities asset.

The SEC has fallen prey to an unforgiving crypto community after posting an official press release that ‘celebrates’ its win against Ripple, claiming that the crypto company tried to formulate its own rules. 

A statement in their press release reads:

“ The court agreed with the US SEC that the Howey Test governs the securities analysis of crypto transactions and rejected Ripple’s made -up test as to what constitutes an investment contract, onstead emphasizing that the Howey test and subsequent cases have held that a variety of tangible and intangible assets can serve as subject of an investment contract.”

The US SEC continued:

“ Further, the court rejected Ripples fair notice argument noting that Howey test is clear and that claiming ignorance is not a defense to violating the securities laws. We’ll continue to review the decision.”

This development has been received with open arms by crypto exchanges like Coinbase, which is in a similar court battle with the US SEC. Coinbase has relisted XRP and claims that the win from Ripple is a win for the industry, developers, and investors.

Binance.US, which has a court battle with the SEC, is also impressed by the development as it plans to relist XRP/USDT pair on 7/14 at 9 am ET.

The crypto community has also reacted to the story, with investor Scott Melker calling out the US SEC for their unpopular press release. Scott asks the US SEC to digest the developments rather gracefully.

Ripple CEO Brad Garlinghouse was also included, as he notes the important part of the ruling. He tweeted saying:

“The most important part of this ruling: “XRP, as a digital token, is not in and of itself a “contract, transaction[,] or scheme” that embodies the Howey requirements of an investment contract.” This is a now a matter of law (not up for trial.).”

Watch Fintech Express for more updates on crypto regulation and other fintech-related developments.

Cameron Winklevoss: Barry Silbert, accept our deal or face litigation

Cameron Winklevoss: Barry Silbert, accept our deal or face litigation

Key Points

  • Cameron Winklevoss has addressed a second open letter to DCG’S Barry Silbert regarding the functioning of DCG and loan repayment
  • Gemini to take legal action on July 6, 2023, in case DCG’s Barry Silbert doesn’t accept their deal

Cameron Winklevoss has penned a new open letter and addressed it to DCG’s Barry Silbert on Twitter, claiming that Silbert has been evading fulfilling his dues to DCG’s earned customers for the past 8 months. Winklevoss has warned Silbert of a potential lawsuit in two days if he doesn’t fulfill the demands from Gemini bosses.

Gemini bosses call out DCG’s Barry Silbert for owing its 232K Earn customers $1.2B

In an open letter, Cameron Winklevoss has slammed Digital Currency Group’s Barry Silbert regarding delays settling with Gemini and paying back the $1.2 billion that DCG owes the exchange’s 232,000 Earn customers. 

Cameron Winklevoss shot at Barry Silbert, claiming he has been heading the DCG enterprise in a fraudulent behavior intertwined with a culture of lies and deceit. He said that this trend has gone on long enough at the expense of Gemini customers, and after 8 months of interactions with Silbert’s lawyers and legal advisors, there has been no fruition.

Winklevoss hit out at SIlbert, saying:

 “you have never had any intention of finding global, consensual resolution with creditors and Earn users and have never had any intention of doing the right thing and taking responsibility for the mess that you, your companies, and your employees created with your reckless and fraudulent behavior.”

He added that SIlbert knowingly slowed down the resolution process via “abuse” of the mediation process. Cameron Winklevoss also expressed his disappointment with Barry SIlbert’s climb of being a “victim” in the fallout.

“It takes a special kind of person to owe $3.3 billion to hundreds of thousands of people and believe, or at least pretend to believe, that they are some kind of victim…. even Sam Bankman Fried is incapable of such delusion,” said Winklevoss. 

Cameron Winklevoss summed up by giving SIlbert his final and best offer, after which Gemini will press charges if Silbert does not reciprocate.

Winklevoss wants DCG to make a loan repayment of $275 million by July 1, a subsequent payment of $355 million before July 21, 2025, and a final payment of $835 million by July 21, 2028, topping off the whole payment to $1.47 billion. 

He gave Silbert up to 4 pm ET on July 6, 2023, to accept the terms of the deal, or Gemini would move forward with the following steps:

  • A lawsuit against DCG and Barry Silbert
  • File a turnover motion 
  • Advance a non-consensual plan
  • UCC litigation

Keep watching Fintech Express for updates on this and other Fintech-related developments.

Do Kwon denies forging legal documents, blames Chinese agency

Do Kwon denies forging legal documents, blames Chinese agency

Key Points

  • Terra Ecosystem EX-CEO Do Kwon has denied the forgery of travel documents refuting any financial ties to Europe Now Party leader Milojko Spajic.
  • Do Kwon told a Montenegro Court that he wasn’t aware that his traveling passport was fake, pinning the blame on a Chinese-named agency

Do Kwon, the former CEO of the collapsed crypto empire Terra Ecosystem has told a court in Montenegro that he is innocent of using forged documents. Kwon expressed that he was unaware of his travel documents being fake.

Do Kwon says he is innocent of forgery

Surprisingly, Terra Ecosystem Ex-CEO Do Kwon claims that he received his travel documents from third-party agencies and thus did not realize they had been faked. He said that a friend had recommended he reach out to the “agencies” to acquire a Costa Rican passport much faster.

“I received my Costa Rica passport after filling in the documents required by a Singaporean agency that was recommended to me by a friend. I received my Belgian passport through another agency.”

Kwon told the court that he had used the same traveling document for years to enter and leave Costa Rica; therefore, he did not see any issue. When asked for further details about the identity or functioning process of the “agencies” used to acquire the passport, Do Kwon said that he could not recall though the name was in Chinese.

In addition to denying the forgery of documents, Do Kwon expressed that he never made any financial donations to Montenegro’s former finance Minister Milojko Spajic who now serves as the Europe Now Party leader. Spajic also refuted the news of his ties with Do Kwon that had been spread heavily in Montenegro earlier.

Kwon now remains in extradition custody for up to six months as the local court considers the request for extradition to South Korea. Additionally, Judge Ivana Becici is set to rule on forgery claims against Do Kwon on June 19. Keep watching Fintech Express for updates on this and other Fintech-related developments.

Hinman documents released: the end of SEC authoritarian regulation as we know it 

Hinman documents released: the end of SEC authoritarian regulation as we know it 

Key Points

  • Hinman documents were released on June 13 showing contempt from SEC to smother the crypto industry
  • EX SEC Director Bill Hinman said that some crypto assets could evolve into commodities
  • The information recorded in Hinman documents calls the industry irrelevant sparking outrage from law practitioners and the crypto industry 
  • SEC regarded as the wrong regulator for the crypto industry

What are Hinman documents?

Hinman documents are internal messages from regulators tied to SEC on ex-director Bill Hinman’s infamous 2018 speech. The documents include emails, his speech and messages pointing to discussions about the crypto industry, regulation approaches and its relevancy in the U.S.

What are the contents of Hinman documents?

It’s been around five years since Bill Hinman gave a speech about the crypto industry and SEC regulation. He touched on SEC’s lawsuit against Ripple which was not very well received by the crypto community. As such, the SEC conducted follow-ups behind the scenes and wanted Hinman documents hidden from the public.

However, on May 16, 2023, a US Judge in the case against Ripple ordered the Hinman documents to be released to the public.

In Hinman’s speech, he claimed that the fact that some tokens achieve decentralization as they gain users makes them commodities and no longer securities. As such, he deemed it, not a fit for the SEC to “register and regulate” such assets. 

An internal comment regarding his speech reads

“The fact that tokens on a sufficiently decentralized network are no longer securities- and no longer required to register with all the benefits to investors of registrations- seems to point out to what might be considered the “regulatory gap” that exists in this space.” 

The comment continues “In other words, this speech acknowledged that there is an “other” category-its not a security because there is no controlling group {At least in Howey sense} yet, like many other things (medication, credit cards) there may need be a regulation to control customer purchases”

This comment acknowledges the fact that tokens on sufficiently decentralized networks are not securities as they do not satisfy Howeys factors.

The unsealed Hinman documents show that in this sense, truly decentralized crypto assets not satisfying Howeys factors, make the SEC liable for ignoring multiple warnings about poor regulation with no basis in law. As such, their actions are just but unlawful and here to create confusion showing greed and ill intentions by the regulator.

 When Hinman served as the Head of SEC’s Corp Fin, he gave his infamous speech declaring that its ‘common sense’ when crypto assets attain sufficient decentralization it transitions into being a commodity as there no longer is a controlling group. Though he claimed that his speech was his own opinion, the SEC Chair of the time, Jay Clayton publicly pointed to the speech.

The speech also remained on the regulator’s website which shows that it acknowledges its contents. As such, the SEC has continued to pressure crypto assets that are already decentralized and use them to “scare” the markets. 

Even with a change in regime in 2021, the SEC has continued to push its agendas of crypto “having no relevancy in the U.S.” as current Chair Gary Gensler has continually said. Gary Gensler has been in the limelight for trying to smother crypto in favor of a digital dollar.

In an interview with CNBC after suing Binance and Coinbase in the US, Gary Gensler said that the U.S. doesn’t really need any more digital currencies as the dollar is already there. In his own words, he said 

“We don’t need more digital currency… we already have digital currency, it’s called the U.S. dollar,” Gensler said. “We have not seen, over the centuries, that economies and the public need more than one way to move value.”

What Senior SEC officials said to Hinman as he drafted his speech

Upon the unsealing of Hinman documents, information has surfaced that several senior SEC officials talked to Bill Hinman as he prepared his speech. The Head of Trading and Markets (T&M) commented saying that some of his deliberations were wrong but he ignored

“Because the list of factors is so extensive – and appears to include things that go beyond the typical Howey analysis – we have concerns this might lead to greater confusion on what is a security.”

T&M directly asked Hinman to tie his new factors as “more closely and explicitly to the Howey analysis.” As usual, Hinman ignored the warnings.

The Office of General Counsel (OGC) and T&M called a factor invented by Hinman irrelevant and uncalled for. However, Hinman went ahead and kept it in the speech. 

T&M and OGC noticed that Hinman has skipped over the threshold jurisdiction question of “whether a digital asset meets the legal standards of a security.” However, Hinman as usual skipped it to ask if SEC oversight on the asset class could be beneficial, completely disregarding the present “regulatory gap.”

On June 4, 2018, Hinman wrote that he did not see the need to regulate ETH as a security and was on the verge of calling Vitalik Buterin to confirm their standing. 

Regarding the mention of Ether in the speech, OGC warned that it would be difficult for the U.S. SEC to touch on the asset in the future. Now the current SEC chairman, Gary Gensler has hinted at ETH being a security as OFAC threatened to introduce censorship on the chain. He did this despite knowing the controversies behind Hinman documents and his agency being reckless in the past. As a result, the markets were affected resulting in claims of market manipulation being in play. 

Though ETH Chain censorship hasn’t happened, something more controversial has, the SEC has charged crypto stakers like Coinbase and Kraken in the U.S. for facilitating the staking of ETH and other crypto tokens. It even asked Kraken to close down its staking operations in the country on top of a $30M fine earlier this year.

Is it market manipulation or hate? One thing is SEC is not the best regulator for the crypto industry

The deliberations from Hinman documents show that poor leadership has led SEC regulation down this dark alley. As such, more light should be shed on the SEC and an investigation against all those who backed Hinman including the ones who have been using flawed regulatory approaches on the crypto industry. 

The likes of Gary Gensler ought to be answerable for their unlawful extortion of monies and disregard shown in Hinman documents by twisting decentralized assets to fit their narrative. Wait, that’s possible! U.S. lawmakers have tabled a bill to see the SEC restructured and Gary Gensler held accountable including his firing.

The crypto community has also been pushing for him to be fired as well. The release of Hinman documents and the current arrogance shown by chair Gary Gensler including contempt of law (lied that he has never been a crypto advisor yet he wanted to join Binance in a similar capacity in 2019) shows that the SEC has a hidden narrative behind their regulatory approach and their will to let crypto thrive in the U.S. 

Could we be seeing market manipulation or is it pure hatred that is pushing SEC to smother the crypto industry when other regions like the Eurozone, Russia, UAE and Hong Kong are slowly coming to terms with the innovation? You tell me! 

But what is evident is that SEC has no regard for playing fair in crypto regulation as the head already “does not see the need for any more crypo assets in the U.S.” forgetting that it’s not up to him to see the need for it. It’s up to citizens to have financial freedom and regulators stepping up to match their needs by providing security in their investments but not dictating what they go for!

Where to find raw Hinman documents?

View all documents here

Warning: This is an opinion piece and does not in any way show the stand of Fintech Express regarding SEC or any other crypto regulatory approaches. Read and research more to make your own deliberations.