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Report: CEO of Largest Romanian Crypto Exchange Arrested on US Warrant

The CEO of Romanian crypto exchange Coinflux was reportedly arrested for alleged fraudulent activity.

The CEO of Romania’s largest crypto exchange Coinflux was reportedly arrested on a warrant from the United States for fraud, organized crime, and money laundering, local news outlet Mediafax reported Dec. 13. Coinflux has subsequently stopped all digital currency exchanges.

Founded in 2015 in the Romanian city of Cluj, Coinflux is an online digital currency trading platform, with reportedly more than 200 million euro worth of Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), and Ripple (XRP) in transactions.

Vlad Nistor, the CEO and founder of Coinflux, was supposedly arrested on the territory of Romania upon the request of U.S. prosecutors. Nistor is accused of alleged fraudulent activity, organized crime and money laundering. The issue of extradition of Nistor to the U.S. will reportedly be heard by the Appeals Court of Bucharest.

Following the purported arrest, Coinflux published an announcement saying that the exchange has temporarily suspended all digital currency exchanges, while the company’s bank accounts have been frozen. Coinflux states that the ongoing investigation has also restricted its access to some parts of the platform.

In July of 2018,  the Ministry of Finance of Romania released a draft Emergency Ordinance, which regulates the issuance of electronic money (e-money). Per the document, any legal entity looking to issue e-money must have a share capital of no less than €350,000 ($395,000), while its members are subject of approval by the Romanian National Bank (BNR).

While the first Bitcoin automated teller machine (ATM) in the country appeared back in 2014, it took Romanian authorities about three years to come up with an expanded comment on cryptocurrencies. In 2017, Ilan Laufer, Romania’s Business, Commerce and Entrepreneurship Environment Minister, expressed his belief in cryptocurrencies, but pinpointed that the area should be officially regulated.

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Report: Court Ruling to Return Mistakenly Sent Cryptocurrency Could Set Precedent

A blog post from the University of Oxford Faculty of Law highlights the potential impact of a recent Canadian court ruling on lost or stolen crypto claims.

A Dec. 12 Business Law Blog post from the University of Oxford Faculty of Law notes possible repercussions for lost and stolen crypto claims following a case in a Canadian trial court earlier this year.

In the post, SAFE Frankfurt researcher Grygoriy Pustovit notes the case of Copytrack Pte Ltd v Wall. The superior trial court of British Columbia ruled that Ethereum (ETH) tokens, which were mistakenly sent by the plaintiff, Singapore blockchain startup Copytrack, to the defendant, Brian Wall, must be returned to Copytrack.

The defendant mistakenly received 530 Ethereum coins from Copytrack instead of 530 Copytrack (CPY) tokens that he was supposed to receive after participating in Copytrack’s initial coin offering (ICO). The Ethereum amounted to 495,000 Canadian dollars ($370,482), while the value of CPY tokens he intended to purchase was 780 Canadian dollars ($583) at the time.

“This precedent may have major repercussions for the enforcement of claims regarding lost or stolen cryptocurrency,” Pustovit claims, as the ruling allows the plaintiff to trace and recover tokens “in whatsoever hands those Ether Tokens may currently be held.”

As professional services for tracing digital assets develop, the rightful owners of certain assets could trace them on a public ledger and ostensibly recover tokens once they appear in an exchange’s wallet. Pustovit states that blockchains are not only governed by their code, but by the laws of concerned jurisdictions as well.

While noting that cross-border enforcement of varying national laws and regulations could prove difficult, the blog says that crypto businesses will likely comply with judgements in jurisdictions wherein they have strategic interests.

Pustovit also states that the Canadian court “missed the opportunity” to define the legal character of cryptocurrencies because it “could not be handled through summary judgment.” Since the defendant was deceased, “there would be no practical utility in sending this matter to trial.” The court therefore ruled the Ethereum tokens to simply be the property of the plaintiff and that they should be returned. Claims in conversion and detinue were left unsettled.

While the legal status of cryptocurrencies in case law remains hazy, “there is an increasing number of decisions recognizing that other intangible assets, e.g. funds, shares and mineral interests, may be subject to claims in conversion and detinue.”

Canada is reportedly one of the most crypto-friendly countries, with its favorable regulation of the industry, and low energy costs for crypto mining. In the summer of 2018, the Canadian government issued an official draft regulation for crypto exchanges and payment operators.

Additional reporting by Helen Partz

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Canadian Court Rules to Return Mistakenly Sent Ethereum to Rightful Owner

A superior trial court of British Columbia decided that mistakenly transferred Ethereum should be returned to the rightful owner.

A Canadian court has decided that a sum of mistakenly transferred cryptocurrency should be returned to its rightful owner, according to a report from the University of Oxford Faculty of Law published Dec. 12.

A superior trial court of British Columbia found that Ethereum (ETH) tokens, which were mistakenly sent by the plaintiff, blockchain startup Copytrack, to the defendant, Brian Wall, must be returned to Copytrack.

According to the report, the defendant mistakenly received 530 Ethereum coins from Copytrack instead of 530 Copytrack (CPY) tokens that he was supposed to get after participating in Copytrack’s Initial Coin Offering (ICO).

At the time of the incorrect transaction to his private crypto wallet, the amount of acquired Ethereum amounted to 495,000 Canadian dollars ($370,482), while the value of CPY tokens he intended to purchase was worth 780 Canadian dollars ($583).

Copytrack subsequently discovered the mistaken transaction, and requested Wall to return the erroneously sent crypto. Following initial denials to transfer back the Ethereum, the defendant agreed to send the tokens back to the startup.

Eventually, Wall claimed that his private wallet was hacked and the mistakenly transferred amount of Ethereum was stolen. Per the report, Wall passed away only a few days after legal proceedings on the matter began.

In addition to ruling on the return, the court was called to find a working definition of cryptocurrencies, as both parties argued about whether the Ethereum tokens constituted a digital currency, a digital good, or another type of asset.

According to the report, the Canadian court “missed the opportunity” to define the legal character of cryptocurrencies because it “could not be handled through summary judgment.” Since the defendant was deceased, “there would be no practical utility in sending this matter to trial.”

The court therefore ruled the Ethereum tokens to simply be the property of the plaintiff and that they should be returned. Claims in conversion and detinue were left unsettled.

The report notes that, while the legal status of cryptocurrencies in case law remains hazy, there is an increasing number of cases in which “intangible assets” such as funds and shares are subject to conversion and detinue claims.

Canada is reportedly one of the most crypto-friendly countries, with its favorable regulation of the industry, and low energy costs for crypto mining. In the summer of 2018, the Canadian government issued an official draft regulation for crypto exchanges and payment operators.

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Chinese Internet Court Uses Blockchain to Protect Online Writer’s Intellectual Property

A Chinese Internet Court has started using blockchain to protect the intellectual property of online writers.

An Internet Court in Hangzhou, Eastern China, has turned to blockchain to fight piracy at the expense of online writers, English-language media outlet China.org.cn reports Dec. 8.

China has reportedly “set up three Internet courts in Hangzhou, Beijing and Guangzhou.” Internet Courts are courts expressly intended to manage internet-related cases and allow plaintiffs to file their complaints online.

The official website of Hangzhou Internet Court reads that it “behave[s] as an ‘incubator’ for Internet space governance, a ‘test field’ for Internet judicial rules, a ‘leader’ for diversified Internet disputes, and a ‘first mover’ for the transformation of Internet trials.”

Hangzhou, whose Internet Court plans to use a blockchain copyright system, is “home to many, if not most, online writers in China,” according to China.org.cn. The news outlet notes that 107 “famous” online writers work in a “writers’ village” in the Binjiang District of the city.

The aforementioned article explains that online writers are frequently damaged by piracy, and it’s often hard for them to prove that they are the original authors of any text. Writers used “to resort to screenshots and downloaded content as evidence,” but this is weak evidence since it can be easily forged, China.org.cn notes.

Wang Jiangqiao, a judge at Internet Court, said that since “blockchain guarantees that data can not be tampered [with] […] all digital footprints stored in the judicial blockchain system […] have legal effect,” specifically noting the ability to track “authorship, time of creation, content and evidence of infringement.”

Wang Jiangqiao’s statement is in line with China’s Supreme Court ruling in early September that blockchain can legally authenticate evidence.

As Cointelegraph previously reported in an analysis, blockchain use to contrast piracy in online media is nothing new.

A Russian startup is also reportedly working on a blockchain-based copyright network in Uzbekistan. The project will start by digitizing patents and storing them on-chain before moving onto securing intellectual property as well.

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Russian Intellectual Property Court Trials Blockchain to Store Copyright Data

A Russian intellectual property court has stored data on right holders via blockchain, reportedly setting a precedent for the country.

A Russian court dedicated to intellectual property cases has successfully tested a blockchain network for storing copyright data. The technology was reportedly used for the first time in the judicial area in Russia, major Russian news agency TASS writes Monday, Dec. 3.

According to TASS, the court recorded a change in a group of right holders, using a blockchain solution provided by Russian intellectual property startup IPChain. IPChain’s president Andrey Krichevsky claims this is a precedent for the Russian judicial system, calling the use of the tech “a definite breakthrough.”

Krichevsky believes that blockchain could help increase interoperability in the copyright market, as it allows all information stored to be kept up-to-date, which is particularly important for the area of property rights.

TASS reports that the court’s representative, Ludmila Novoselova, hinted that the courts’ tech support will further evolve, noting that in five years all the legal disputes will probably be settled online.

As Cointelegraph reported before, IPChain has previously partnered with the Uzbek government to deploy its decentralized solutions in the local copyright sphere, especially in the field of science and invention.

Earlier this year, a similar deal was signed between IPChain and the State Patent Office of Kyrgyzstan to digitize patent records and store them in a decentralized database. Krichevsky has also stated that blockchain projects were discussed with Armenian officials as well, TASS notes.

Spanish public institutions are also exploring the use of blockchain in the copyright area. In July, the Spanish Society of Authors and Publishers and the Madrid School of Telecommunications Engineering announced they started researching blockchain use in copyright management.

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New York District Judge Rules That CFTC Can Permanently Ban Crypto Firm

The U.S. Commodities Futures Trading Commission (CFTC) has won a court order to permanently bar the operator of the New York-based firm CabbageTech Corp. for cryptocurrency-related “bold and vicious fraud,” Bloomberg reported August 24.

Earlier this year, Patrick McDonnell, cryptocurrency promoter and operator of CabbageTech Corp., was charged with “fraud and misappropriation in connection with purchases and trading of Bitcoin (BTC) and Litecoin (LTC).” McDonnell subsequently argued that the CFTC did not have the authority to regulate his commercial operations; however, New York district judge Jack B. Weinstein rejected his claim.

In July, Weinstein reportedly held a nonjury trial where he claimed that McDonnell ran a “boiler room,” deceptively luring investors in different states and counties using “trickery, false statements and misappropriation of funds,” Bloomberg notes. Weinstein delivered a judgement that McDonnell must pay $290,429 in restitution and $871,287 in penalties.

According to Bloomberg, CabbageTech was not represented by a lawyer, as McDonnell claimed he could not afford to pay for counsel. McDonnell also stopped appearing in court during the trial.

McDonnell was also involved in a different lawsuit by the CFTC against his another company, Coin Drop Markets. The CFTC claimed in the the lawsuit that customers who paid McDonnell and Coin Drop for crypto trading advice did not receive the advice they paid for, and that McDonnell shut down Coin Drop’s website and failed to respond to customers. The lawsuit also notes that Coin Drop was not registered with the CFTC.

Last month, speaking from Capitol Hill, Congressman Bill Huizenga argued that Congress should empower financial regulators such as the U.S. Securities and Exchange Commission (SEC) and the CFTC to regulate the cryptocurrency market in compliance with the same rules governing other currencies and stocks.

In May, the CFTC chairman Chris Giancarlo said he doesn’t see comprehensive crypto legislation coming from the federal level in the near future, pointing out that the statutes by which the CFTC is operating were written in 1935. He added that embracing a modern innovation like Bitcoin within terms invented decades ago will take time.

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US Federal Court Denies Motion to Remand Against Ripple

The U.S. District Court, Northern District of California has ruled to deny a motion to remand against Ripple, its subsidiary XRP II, and Ripple CEO Brad Garlinghouse, according to an official document issued Aug. 10.

The original lawsuit was first initiated by XRP investor Ryan Coffey in a San Francisco court on May 3, 2018, claiming that he lost $551.89 while trading XRP tokens. The class action was filed by law firm Taylor-Copeland, alleging that Ripple sold XRP tokens in violation of both the U.S. the Securities Act and the California Corporations Code. The plaintiff also claimed that XRP is not genuinely decentralized.

According to court documents, the plaintiff failed to show whether the presence of a Securities Act issue was sufficient to bar the defendant from removing an action under the Class Action Fairness Act. In the ruling the court found that, “The parties candidly admit that their research failed to turn up any case directly addressing this question and the court’s own research fared no better.”

The plaintiff was seeking a “rescission of all XRP purchases, damages, and a constructive trust over the proceeds of defendants’ alleged sales of XRP.”

At the time the lawsuit was first filed, David Silver, a partner at Silver Miller Law Firm, commented to Cointelegraph that “lawsuits like this are simply private litigants testing the legitimacy of these companies,” claiming that it will bring more judicial clarity.

A Ripple spokeswoman said that at the moment the lawsuit was filed, the SEC had not yet decided whether XRP is a security. She claimed, “We continue to believe XRP should not be classified as a security.”

In early June, Ripple appointed former chair of the U.S. Securities and Exchange Commission (SEC) Mary Jo White as a representative in the class action filed by Coffey.

Recently, Ripple released the second quarter 2018 report for its digital asset, arguing that the XRP token price was in line with the overall trend in crypto markets, which “[underscores] XRP’s independence from Ripple.”

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China: Trader Sues Exchange OKCoin for Failing to Release Bitcoin Cash

A Chinese Bitcoin (BTC) investor has sued local crypto exchange OKCoin for allegedly preventing him from getting Bitcoin Cash (BCH) after the BTC fork, local news agency Legal Weekly reports July 31. The case is reportedly the first legal action in China that involved last year’s fork of Bitcoin.

The investor, known under the pseudonym Feng Bin, filed a lawsuit against OKCoin, accusing the exchange of blocking him from receiving 38.748 BCH that he was due after Bitcoin’s hard fork in August 2017.

In the lawsuit, Feng Bin states that he attempted to sell the Bitcoin Cash when the digital currency reached its all-time high of around $4,000 in December, 2017. However, when the investor tried to withdraw the BCH after the fork, he reportedly “found that there was no ‘button’ to extract the [BCH] that the platform promised.”

Following a complaint to the platform’s customer support, OKCoin stated that Feng Bin could not extract any Bitcoin Cash because the platform’s program for claiming the forked crypto has expired. The investor in turn claimed that the crypto exchange had not made an official announcement about the deadline for claiming Bitcoin Cash:

“I have been paying attention to the announcement of the OKcoin currency release. In all the announcements, there is no declaration of the deadline for receipt and the removal of the program.”

OKCoin has reportedly challenged Feng Bin’s claim, citing inconsistencies between his story and the records of his account balances.

Bitcoin Cash is one well-known example of a hard fork, which is a permanent split in a blockchain protocol, wherein nodes running in the previous version will no longer be accepted in the new version.

Bitcoin forked on August 1, 2017, leading to the presence of two completely different digital currencies, while users who held Bitcoin prior to the fork received an equal number of Bitcoin Cash. BCH celebrated its “first birthday” earlier last week.

Bitcoin Cash has been the subject of some controversy throughout the year. Roger Ver, one of the biggest promoters of BCH claimed that Bitcoin Cash is the “real Bitcoin” in November 2017. Ver said that BCH will “have the bigger market cap, trade volume and user base in the future.”

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Former Beverage Company Long Blockchain Corp. Receives Subpoena From SEC

Former drinks manufacturer-turned-blockchain development company Long Blockchain Corp. has been issued a subpoena by the U.S. Securities and Exchange Commission (SEC), Bloomberg reported August 1.

During a filing today, the company reportedly said that the subpoena, originally dated July 10, requested certain documents from Long Blockchain Corp. The firm declined to provide further details, saying:

“The company is fully cooperating with the SEC’s investigation. The company cannot predict or determine whether any proceeding may be instituted by the SEC in connection with the subpoena or the outcome of any proceeding that may be instituted.”

Yesterday, the New York-based company announced it had changed its line of business to loyalty program schemes, which will be performed by a new subsidiary called Stran Loyalty Group. New CEO Andy Shape said in a press release:

“Creating stronger loyalty with customers who are engaged in loyalty programs through advancements in technology is the key to future growth and massive scalability.”

Long Blockchain Corp. joined the blockchain world in January by changing its name from “Long Island Iced Tea,” a move which resulted in a 500% increase in the company’s stock price in a blockchain-related euphoria. The company said then that it would offer 1.6 million shares at $5.25 per share with the aim of moving into Bitcoin (BTC) mining.

However, in April Nasdaq Stock Market (Nasdaq) announced that it would delist Long Blockchain Corp.’s stock due to low market capitalization. The company reacted with a decision to place its shares on the Pink Current Information tier operated by the OTC Markets Group Inc. After delisting, Long Blockchain Corp. remained a public company.

According to Bloomberg, Long Blockchain Corp.’s market value is currently less than $5 million, while in December last year it totalled nearly $70 million after changing its name.

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BitFunder Founder Pleads Guilty to Charges of Fraud and Obstruction of Justice

The operator of now defunct Bitcoin (BTC) stock exchange BitFunder has pleaded guilty to federal charges of obstruction of justice and securities fraud, Reuters reports July 23.

According to prosecutors, 37-year old Jon Montroll, also known as Ukyo, also pleaded guilty to obstruction of justice, admitting that he provided false balance statements to the U.S. Securities and Exchange Commission (SEC) in an investigation of the fake 6,000 BTC BitFunder hack in 2013.

Montroll, of Saginaw, Texas, operated BitFunder, where users could sell virtual shares of businesses for bitcoins, as well as Bitcoin exchange and depository WeExchange Australia Pty Ltd. Montroll took WeExchanges users’ bitcoins and sold them for fiat currency, which he subsequently spent on personal expenses.

In July 2013, Montroll also started soliciting investments in a security that he dubbed Ukyo.Loan, promising daily interest and an easy redemption process. However, after the 6,000 BTC hack, Montroll was unable to pay owed amounts to Ukyo.Loan investors or WeExchange and BitFunder clients. Montroll continued to solicit investments without disclosing hack information.

In February, the SEC and the Department of Justice (DOJ) officially filed charges against Montroll, accusing him of operating an unregistered securities exchange, defrauding users of said exchange, and making “false and misleading statements in connection with an unregistered offering of securities.” The cyberattack in question led to the loss of more than 6,000 BTC, then worth around $720,000, and today over $45 million.

Earlier this month, Cointelegraph reported that the alleged former operator of BTC-e crypto exchange, Alexander Vinnik, was ruled to be extradited to France by a Greek court. Vinnik, also known as “Mr. Bitcoin,” was indicted by U.S. authorities on fraud and money laundering charges in 2017, reportedly involving up to $4 billion in Bitcoin.