The FTX trial has taken an unexpected turn as Caroline Ellison, co-founder of FTX-linked hedge fund Alameda Research, reveals shocking details of alleged bribery involving Sam Bankman-Fried, the disgraced founder of FTX. Ellison testified on October 11 that Bankman-Fried paid $150 million in bribes to Chinese government officials in 2021, a significantly higher amount than the initially disclosed $40 million. The bribes were allegedly used to unfreeze $1 billion worth of Alameda Research’s digital assets that were frozen by Chinese law enforcement during a money-laundering investigation. The trial also implicates other senior FTX executives, including COO Constance Wang and Alameda trader David Wa. These individuals allegedly resorted to creating accounts on crypto exchanges OKX and Huobi using the identification of a Thai prostitute in an attempt to negotiate the return of funds. When their efforts failed, Bankman-Fried allegedly resorted to paying the bribe to unfreeze the accounts. While Judge Lewis Kaplan clarified that the bribery charges are not included in the ongoing FTX trial, a separate trial relating to SBF’s bribery allegations has been scheduled for March 11, 2024. The FTX trial will continue throughout the month of October.
Yi He, co-founder of Binance, recently addressed concerns about the freezing of accounts on the exchange. In response to news reports that Binance had frozen accounts of suspected Hamas militants at the request of Israeli law enforcement, Yi He clarified that only accounts of users suspected of violating international sanctions would be frozen. She explained that Hamas is designated as a terrorist organization by the United Nations, and as a result, organizations like Binance are obligated to cooperate with freeze requests. Yi He emphasized that Binance does not have the authority to make these decisions independently. While assuring users that ordinary accounts would not be affected, she highlighted the distinction between Palestine and Hamas, stating that the freeze was targeted towards Hamas, not Palestine. Yi He also noted that despite the ongoing conflict between Russia and Ukraine, Binance has not frozen the accounts of ordinary Russians. These statements aim to provide clarity on Binance’s account freezing policy and its compliance with international regulations.
China’s legal system continues to raise concerns for crypto investors, as a second Chinese court ruled that crypto lending contracts are not protected by law. The Nanchang People’s Court revealed the details of a civil lawsuit where the plaintiff lent 80,000 USDT to the defendant for stablecoin trading. However, when the defendant defaulted on the loan, the lawsuit and its appeal were dismissed. The presiding judge cited legal risks associated with participating in virtual currency investment and trading activities that violate public order and good customs as the basis for their decision. The judge further highlighted that virtual currencies, such as Bitcoin and Ethereum, are not legal tender and cannot be used as currency in the market. As a result, virtual currency-related business activities are considered illegal financial activities that harm national financial order and are strictly prohibited. However, the ruling does not extend to the digital yuan central bank digital currency, which the judge acknowledged as a legal currency issued by the People’s Bank of China. This ruling adds to the uncertainty surrounding the legality of crypto investments in China and the protection offered to participants in lending contracts.
In a positive turn of events, Justin Sun, the de-facto owner of cryptocurrency exchange HTX (formerly known as Huobi), recently announced the return of 5,000 ETH ($8 million) stolen during a security incident. After offering a bounty and threatening legal action, the hacker responsible for the theft returned all the funds and received a white hat bonus of 250 ETH. The incident occurred on September 25 when Huobi’s hot wallet was hacked, prompting concerns about the security of users’ assets. Sun’s statement reassured users and expressed gratitude to the industry for its support during the incident. This incident highlights the challenges faced by cryptocurrency exchanges in maintaining robust security measures and responding effectively to security breaches.
The East Asian crypto markets continue to face scandals and legal challenges that impact the industry’s reputation and raise questions about regulatory frameworks. The FTX trial’s allegations of bribery shed light on potential misconduct within prominent crypto companies, while Binance’s account freezing policy raises concerns about individual privacy and the impact of international regulations. China’s stance on crypto lending contracts adds to the legal uncertainties surrounding crypto investments in the country. However, the recovery of stolen funds by HTX demonstrates the perseverance of industry players in mitigating potential losses and maintaining user trust. As the crypto industry evolves, addressing these issues and establishing clear regulations will be crucial to fostering trust and stability in East Asian crypto markets.
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