Crypto Flipsider News – CFTC Sues Gemini; Japan Legalizes Stablecoins; Crypto.com’s Dubai Approval; Terra Chat Leaked; OpenSea Insider Trading

  • CFTC sues Gemini Trust over “misleading statements” made in 2017.
  • Japan passes bill legalizing stablecoins – FTX launches in Japan.
  • Crypto.com receives provisional VARA approval to open shop in Dubai.
  • Leaked chats from before Terra 2.0 launch shows the panic after Terra crash.
  • Former OpenSea product manager charged with NFT insider trading.

CFTC Sues Gemini Trust Over “Misleading Statements” Made in 2017

The Winklevoss-led Gemini Trust has been sued by the Commodity Futures Trading Commission (CFTC) for misleading the agency when the company was evaluating a potential bitcoin futures contract in 2017.

The lawsuit, filed on Thursday, May 2nd, alleges that staff members of the exchange made “false or misleading statements and omissions” to CFTC staff through in-person interviews for the launch of the first U.S.-regulated Bitcoin futures contract in 2017.

According to the CFTC, Gemini misled the agency in relation to how traders would have to fund their bets fully, or could borrow to do more trading.

In March 2017, Gemini attempted to launch trading for Bitcoin futures contracts through a partnership with Chicago Board Options Exchange (CBOE). However, the filing does not state whether the lawsuit is connected to the partnership.

Flipsider:

  • Gemini has become the latest fintech to cut staff numbers by 10%, blaming “turbulent market conditions” for the decision.

Why You Should Care

The CFTC hopes to use the lawsuit to gather relevant information before Gemini’s contract launch, thereby ensuring that it wouldn’t be susceptible to manipulation.

Japan Passes Bill Legalizing Stablecoins – FTX Launches in Japan

In a historical event on Friday, June 3rd, Japan’s parliament passed a law clarifying the legal status of stablecoins. The bill defines stablecoins as digital money, and has outlined that their issuance is limited to licensed banks, registered money transfer agents, and trust companies.

Although the bill does not include algorithmic stablecoins, holders of legally issued stablecoins will now have the right to redeem them at face value. The bill, which is part of a five-year effort to protect crypto investors, won’t come into effect until the end of the year.

Leading crypto exchange FTX has expanded, staking its presence in Japan, one of the world’s largest crypto markets. To facilitate the move, FTX acquired Japan-based fintech firm Liquid Group and its subsidiaries, known as Quoine Corporation.

The acquisition grants FTX the status of licensed Japanese crypto-asset exchange services provider, and a Type 1 Financial Instruments Business license holder.

Flipsider:

  • Ahead of the bill’s passage, Mitsubishi UFJ (NYSE:MUFG) Trust and Banking Corp outlined plans to issue their own stablecoin, called Progmat Coin.

Why You Should Care

The bill in Japan provides the necessary clarity for crypto investors ,and could catalyze stablecoin regulation in other countries.

Crypto.com Receives Provisional VARA Approval to Open Shop in Dubai

In other expansion news, Singaporean exchange Crypto.com has received provisional approval from the Dubai Virtual Assets Regulatory Authority (VARA). After completing initial compliance checks, Crypto.com is now authorized to operate in Dubai as a licensed exchange.

VARA requires all approved crypto service providers to operate within Dubai’s strict market model of testing, adapting, and scaling.

VARA has authorized Crypto.com to set up a regional outpost in Dubai within just three weeks its inception. However, unlike Binance, the exchange has elected not to move its headquarters to Dubai.

Regional law requires crypto companies looking to do business in the region to incorporate Dubai, and Crypto.com will be required to meet some further requirements before its full license can be granted.

Flipsider:

  • Unlike Crypto.com’s temporary approval, Binance has received full approval to operate in Dubai, and will be moving its headquarters there.

Why You Should Care

The expansion of services into new territories by crypto exchanges could herald the mainstream adoption of digital assets.

Leaked Chats from Before Terra 2.0 Launch Shows the Panic After Terra Crash

A Terra validator, going by THORmaximalist, has released the full chat logs of the events leading up to the launch of LUNA 2.0. The leaked chat gave insight into the chaos and confusion Terra insiders had to deal with before the Terra 2.0 launch.

The conversation in a Telegram group, the “Terra Rebirth League” (TRL), started on May 12th, and raised many issues, causing a great deal of confusion due to the range of conflicting opinions. The TRL included Terraform Labs founder Do Kwon, and Sunny Aggarwal of Osmosis.

One such contentious issue related to deciding the height at which the blockchain should halt. Validators did not stop transacting at the same time, and so proposals to include ordinary members were also shelved to avoid more panic.

One major concern of the group was whether they collectively had sufficient voting power to control and direct the fate of Terra. However, as the situation progressed, it became apparent that the group had considerable support to move their plans forward.

Flipsider:

  • Do Kwon, among other members of the Terra, are currently under investigation by the South Korean authorities for their role in the Terra ecosystem’s collapse.

Why You Should Care

The move to release chats before the launch of Terra 2.0 is a bid to increase the transparency about how the project is being run.

Former OpenSea Product Manager Charged with NFT Insider Trading

Nathaniel Chastain, former product manager of OpenSea, the largest online marketplace for non-fungible tokens (NFT), has become the first person to be arrested for insider trading relating to NFTs.

At OpenSea, the 31-year-old was tasked with selecting the NFTs to be featured on OpenSea’s homepage. Between June and September 2021, Chastain made huge profits from secretly purchasing soon-to-be-launched NFTs, before later selling them for up to 5x their initial cost

To cover his tracks, Chastain used anonymously registered digital currency wallets and OpenSea accounts. He was arrested and charged by the Department of Justice for conducting insider trading of digital assets on June 1st.

According to NFT buyers who analysed his transactions on the Ethereum blockchain, the former exec made profits of up to 19 ETH. He now faces charges of wire fraud and money laundering, with each count carrying a maximum sentence of 20 years in prison.

Flipsider:

  • Chastain made a public acknowledgement of his misdeeds, and OpenSea dismissed him upon determining that the allegations were legitimate.

Why You Should Care

Chastain’s case is the first such instance of insider trading of NFTs, and highlights the reason for the growing interest regulators have taken in the crypto industry.