This week saw a surge in global crypto enforcement actions, with the U.S., Germany and Hong Kong taking center stage. Ripple co-founder and chairman Chris Larsen suffered a massive hack. Meanwhile, FTX disclosed plans to fully repay its customers.
- Multiple enforcement actions rocked the crypto scene this week, with the U.S. accounting for a substantial amount. The U.S. Department of Justice (DoJ) leveled charges against Belarusian national Aliaksandr Klimenka in a case involving Russian crypto exchange platform BTC-e.
- In a subsequent enforcement action, the DoJ also brought charges against Jeffrey Menge and Eric Drabert, two staff members of a New Jersey school, for allegedly running an illicit crypto mining farm in the country.
- The U.S. Securities and Exchange Commission (SEC) joined the party on Feb. 3, bringing up an indictment against the founder of the American Bitcoin Academy Brian Sewell, alleging that he ran a scheme that stole $1.2 million from unsuspecting students.
- Amid these enforcement actions, the U.S. regulatory climate still tells the story of uncertainty. On Jan. 30, Coinbase challenged the SEC’s rejection of a petition from the exchange for clear rules-making, deeming the basis of the rejection inadequate.
- The SEC’s legal woes spilled into this week, with the securities regulator withdrawing its case against Debt Box in an attempt to evade potential penalties. This development came shortly after the court requested justification for the penalties against Debt Box proposed by the agency.
- A report from Jan. 29 confirmed that up to 18 senators — including Cynthia Lummis of Wyoming and Ted Cruz of Texas — in the U.S. support the crypto scene.
Germany and Britain seize billions in crypto
- The enforcement actions this week were not limited to the U.S. Amid a probe into an illegal file-sharing protocol, the German police seized up to 50,000 Bitcoin (BTC) tokens valued at over $2 billion at the time of the report.
- A day after this development, reports emerged, suggesting that the British police took a similar action against an investment scam linked to Chinese nationals in 2018. The police announced that they confiscated 61,000 BTC worth $1.7 billion at the time.
China crypto regulations
- China and Hong Kong also made headlines this week amid the global regulatory efforts and enforcement. A Jan. 31 report revealed China’s plans to review its AML policies for the first time in 17 years to accommodate the crypto industry.
- Hong Kong also expressed its determination to properly regulate the crypto industry in a press release on Feb. 2. The special administrative region reaffirmed its dedication to enforcing ample crypto regulations.
- As part of the efforts toward regulating the crypto industry, Hong Kong authorities raided six offices associated with OpenAI’s Worldcoin project amid a probe into potential data privacy breaches.
- Meanwhile, the Beijing Municipal Development and Reform Commission, along with 11 other departments, released a plan for strengthening energy conservation as it pertains to cryptocurrency mining activities.
Ripple chair hacked
- This week also saw a resurgence of hacks. Chris Larsen, Ripple’s co-founder and executive chairman, was one of the latest victims. On Jan. 31, prominent sleuth ZachXBT called attention to a hack involving 213 million XRP worth $112.5 million, stating that it involved a Ripple wallet.
- Chris Larsen confirmed the hack, but emphasized that the affected wallet was his personal account, and not a Ripple address. He and Ripple CEO Brad Garlinghouse stressed that Ripple’s wallets remain unaffected.
- ZachXBT revealed that the malicious actors used several exchanges to siphon the funds, including Binance, Gate.io and Kraken. Shortly after the development, Binance CEO Richard Teng noted on X that the exchange had frozen $4.2 million from the stolen funds sent to Binance.
- Besides Ripple, the SSX project also witnessed a security breach this week. The team behind the project reported the theft of $10.2 million worth of SSX tokens to Upbit, resulting in the exchange pausing deposits and withdrawals of SSX.
FTX plans full customer repayment
- Meanwhile, FTX took center stage this week amid the latest updates surrounding its bankruptcy proceedings. The firm revealed plans to liquidate its assets for full customer repayments, abandoning earlier plans to restart the exchange.
- Amid the customer repayment plans, the FTX bankruptcy estate secured $26.8 million this week from a charity organization located in Britain. The organization had received these funds from FTX during the firm’s glory days.
- This week, a court filing indicated that FTX is seeking permission to dump its stake in public benefit firm Anthropic, looking to realize $1.4 billion in funds.
- Revelations from this week share more insights on some of the triggers of FTX’s losses. According to a Feb. 2 report, the DoJ revealed that FTX lost $400 million to a sim-swap attack orchestrated by three individuals over two years.
Spot Bitcoin ETF market updates
- Amid the recovery in Bitcoin’s price, spot Bitcoin ETF products in the U.S. recorded net inflows on the second day of this week for the first time in a week. These products witnessed inflows totaling $247 million on Jan. 30.
- In addition, the trend of inflows extended to Feb. 1, with spot Bitcoin ETF products seeing net positive flows to the tune of $38.4 million.
- This week, Galaxy Digital and Invesco decided to reduce the fees on their spot Bitcoin ETF from 0.39% to 0.25% as competition heats up. And Valkyrie chose Bitgo as a custodian for its ETF, becoming the first issuer to have two custodians.
- The broader crypto community was hit with elation, as BlackRock and VanEck’s spot Bitcoin ETF products secured an ad space on Google. This came on the back of Google’s new ad policy change to allow crypto-related advertisements.
- As Hong Kong looks to review its view on spot Bitcoin ETFs, asset manager Harvest Fund’s Hong Kong branch filed with the Hong Kong Securities and Futures Commission to launch a spot Bitcoin ETF.