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US FTC Settles With Alleged Crypto Pyramid Scheme for $500,000

The U.S. Federal Trade Commission has settled charges it filed in 2018 against a crypto pyramid scheme involving four individuals, with the defendants paying $500,000.

The United States Federal Trade Commission (FTC) has settled charges it filed in 2018 against an alleged crypto pyramid scheme involving four individuals.

Terms of settlement

According to an official statement on Aug. 22, the regulator permanently banned the defendants from multi-level marketing and misrepresenting investment opportunities and charged a total of over $500,000 as part of the settlement.

In March 2018, the FTC first obtained a court order against Thomas Dluca, Eric Pinkston, Louis Gatto and Scott Chandler that stopped their misleading marketing practices and froze their assets. At the time, the FTC stipulated that the individuals violated the FTC Act by “advertising, marketing, and promotion of purported money-making schemes.”

Referral pyramid scheme

Specifically, the action alleged that the defendants misled investors by promising high returns from paying crypto such as Bitcoin (BTC) and Litecoin (LTC) to sign up for schemes marketed under the names Bitcoin Funding Team and My7Network. The programs represented chain referral schemes, requiring members to constantly recruit new participants to generate revenue, the FTC noted.

The defendants reportedly claimed that Bitcoin Funding Team could turn a $100 payment into $80,000 in monthly income. Eventually, most participants failed to reimburse their initial investments, the FTC stated.

As part of the proposed settlement, Dluca will pay $453,932, and Chandler will pay $31,000. Pinkston also agreed to a $461,035 judgment, which will be suspended upon payment of $29,491, due to his inability to pay the full amount. If he is later found to have misrepresented his finances, he will be required to pay the full amount. The FTC filed the proposed order in the U.S. District Court for the Southern District of Florida.

Earlier this year, the FTC sued startup iBackPack for misusing raised funds of the amount of $800,000 during four crowdfunding campaigns from consumers.

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House Financial Services Committee Will Continue Libra Review

Maxine Waters, the chair of the House of Representatives’ Financial Services Committee, says continuing to review Facebook’s crypto activities is on its fall agenda.

Representative Maxine Waters, chair of the United States House of Representatives’ Financial Services Committee, says the committee will continue to review Facebook’s proposed cryptocurrency Libra and the corresponding digital wallet Calibra.

A priority for autumn 2019

Waters announced the committee’s priorities for fall 2019 on Aug. 23. According to the statement, the committee plans to receive the testimony and opinions from governmental officials and regulators. 

Specifically, Waters lists Treasury Secretary Mnuchin, Consumer Financial Protection Bureau Director Kraninger, Federal Housing Finance Agency Director Calabria and Federal Reserve Vice Chairman Quarles.

Waters remains cautious on Libra

As previously reported by Cointelegraph, Waters requested that Facebook halt work on Libra in the middle of June. Waters wrote:

“Given the company’s troubled past, I am requesting that Facebook agree to a moratorium on any movement forward on developing a cryptocurrency until Congress and regulators have the opportunity to examine these issues and take action”

Waters expressed her concerns regarding Facebook’s past during Libra’s congressional hearings in July. She said that Facebook has a “demonstrated pattern of failing to keep consumer data private on a scale similar to Equifax” and that the social media behemoth had “allowed malicious Russian state actors to purchase and target ads” to — purportedly — influence the 2016 U.S. presidential elections.

Waters blasts Libra, Mnuchin blasts Bitcoin

One of the federal officials that Waters mentioned in her fall 2019 plan, Treasury Secretary Mnuchin, has vocalized strong anti-Bitcoin (BTC) and anti-crypto sentiments recently. In July, Mnuchin argued that Bitcoin is used for money laundering more than cash. Mnuchin has also claimed that “cryptocurrencies have been dominated by illicit activities and speculation.” He further stated that crypto has financed a variety of crime with billions of dollars, saying:

“Cryptocurrencies such as Bitcoin have been exploited to support billions of dollars of illicit activity, like cybercrime, tax evasion, extortion, randomware, illicit drugs, human trafficking […] This is indeed a national security issue.”

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7,000+ Sign Petition Against Drafted Cash Restrictions in Australia

A new petition has emerged in opposition to a bill restricting cash and digital currency transactions in Australia of over 10,000 AUD.

More than 7,000 people have signed a new petition against drafted cash restrictions in Australia, different drafts of which include and exclude digital currencies from proposed limits.

Earlier this week, Robert Barwick, director at the Citizens Electoral Council of Australia, initiated a petition against the proposed “Currency (Restrictions on the Use of Cash) Bill 2019” recently introduced as an explanatory draft by Australia’s parliament. The drafted bill specifically proposes banning cash transactions over 10,000 AUD ($6,900), including transactions involving digital currencies.

Preventing cash usage in illicit activities?

The impetus for the bill purportedly lies in the government’s desire to prevent cash usage in illicit activities like money laundering and tax evasion. What might initially seem like an attempt to develop a cashless society is “a totalitarian law that […] will trap Australians in banks so they cannot escape bail-in and negative interest rates,” according to Barwick.

Barwick thus urges parliament to “scrap this bill and the cash ban policy,” and “crack down on the real black economy by going after multinational banks and corporations, the Big Four accounting firms, and the tax havens.” Barwick added:

“Banning cash transactions over $10,000 will not end the tax evasion and money laundering of the ‘black economy’, but will strip individuals of their right to privacy in financial affairs, and trap them in private banks, unable to escape policies such as ‘bail-in’ and negative interest rates.”

Controversy feelings about crypto

Worth noting is that an explanatory memorandum to the draft issued in mid-July proposed an exception:

“There is little current evidence that digital currency is presently being used in Australia to facilitate black economy activities. Given this, the Government has decided at the present time to effectively carve digital currency out from the cash payment limit.”

The new version of the draft is thus contradicting these earlier supportive statements on digital currency. The draft reads: “cash means either or both of the following: (a) digital currency; (b) physical currency.”

The Australian Tax Office recently issued warning letters to 18,000 Self Managed Super Funds for concentrating too much investment in one asset class. Under Australian law it is illegal to invest more than 90% of retirement funds in a single class, such as property or cryptocurrency.

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Andrew Yang Wants to Make US Elections Fraud-Proof Using Blockchain

Andrew Yang wants to implement blockchain-based mobile voting as President of the United States.

Andrew Yang, a 2020 United States presidential candidate in the Democratic Party and blockchain advocate, says he will implement blockchain-based mobile voting as president.

According to Yang’s campaign website, Yang believes that Americans should have the option of voting on a mobile device, using blockchain tech for verification purposes. Yang also believes that in terms of security risk, most voting machines are just as vulnerable to hackers as is the case with modern tech. Yang states:

“It’s ridiculous that in 2020 we are still standing in line for hours to vote in antiquated voting booths. It is 100% technically possible to have fraud-proof voting on our mobile phones today using the blockchain. This would revolutionize true democracy and increase participation to include all Americans — those without smartphones could use the legacy system and lines would be very short.”

As an upshot, Yang reportedly hopes that mobile voting will drive increased participation in elections. Per the website, presidential elections currently have approximately 50% participation from the public. He notes that this “rewards extreme points of view as opposed to the popular will.”

“Vast potential”

Last month, a new political action committee supporting presidential candidate Andrew Yang announced it will accept donations in Bitcoin via Lightning Network. In April, Yang also called for clear guidelines for investors, companies and individuals on cryptocurrencies adding that the blockchain has vast potential.

As previously reported by Cointelegraph, the ruling party of the Russian Federation, United Russia, launched a blockchain-based platform for voting in primary elections back in March. It allows citizens to vote online with vote counting supported by blockchain technology to prevent tampering.

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What’s Driving Up Bitcoin Price? Central Banks, Says FT Reporter

The Financial Times’ chief correspondent for international finance has argued that central banks can ironically be credited for boosting Bitcoin’s price.

The Financial Times’ chief correspondent for international finance has argued that central banks can ironically be credited for igniting Bitcoin’s price.

In a column for Nikkei Asian Review on Aug. 21, Henry Sender said that banks’ dovish policies are spurring an increasing recognition of cryptocurrencies as safe-haven assets.  

Hedging big macro risks with Bitcoin

Analysts anticipate more dovish announcements from the Federal Reserve at this year’s central banking meeting in Jackson Hole, Wyoming, later this week.

In July, Fed Chairman Jerome Powell cut interest rates for the first time in over a decade, continuing the dovish tone set by the European Central Bank.

In China, the yuan fell below the watershed mark of 7 to the U.S. dollar on Aug. 5 and government bonds continue to be plagued by volatility, with little assurance of solid yields.

Against this backdrop, Sender argues that the actions of developed market central banks are turning Bitcoin from a speculative instrument into a solid investment that can help to hedge big macro risks. 

He cites a report from Grayscale Investments’ research unit, which similarly argued that:

“Bitcoin has the potential to perform well over the course of normal economic cycles as well as liquidity crises, especially those involving currency devaluations […] [it has] store-of-value characteristics similar to real assets like gold, with hard-money attributes like immutable scarcity.”

Indeed, Bitcoin’s increasing correlation with the precious metal has not gone unnoticed — yet further consolidating its moniker as digital gold. In the last 3 months alone, the correlation between the assets has almost doubled.

A perfect storm

In China, a government concerned about soaring capital flight considers cryptocurrency to be among the channels for such outflows. This — alongside other factors — has accelerated the central bank’s actions to develop its own central bank digital currency, insider sources claim.

According to an expert at the informal bitcoin association of China, cryptocurrency purchases have shot up 50% in recent months, Sender notes — with the caveat that the figure remains difficult to verify.

Earlier this month, digital asset research firm Delphi Digital published a report arguing that central banks’ monetary easing and the increasing risk of fiat currency devaluation are likely to catalyze the price of both Bitcoin and physical gold. Macro factors are creating the perfect storm to ignite the coin’s price appreciation, the report concluded.

Anthony Pompliano, who recently stated that the European Central Bank’s expected dovish turn will be “rocket fuel” for Bitcoin — a view that is shared by those in the traditional financial sector.

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Saudi Arabia Warns of Crypto Scammers Posing as Gov’t Projects

Saudi Arabia’s Finance Ministry has warned against crypto tricksters using the kingdom’s official emblem to promote tokens that purport to be tied to government projects.

Saudi Arabia’s Finance Ministry has warned against crypto tricksters using the kingdom’s official emblem to promote tokens that purport to be tied to government projects.

Arab News reported on Aug. 21 that the ministry has identified a Singapore-based company promoting two fraudulent cryptocurrencies, dubbed “CryptoRiyal” and “SmartRiyal.” 

Fraud alert: hype and pump

CryptoRiyal and SmartRiyal’s promoters are reportedly claiming that their cryptocurrency project’s ultimate goal is to finance NEOM — a smart city and tourism hub currently under construction in the north of Saudi Arabia. 

The report cites an official statement issued yesterday from the ministry, which indicated that any use of the Kingdom’s name, national fiat currency or emblem for cryptocurrencies will be subject to legal action from the authorities.

In an interview with Arab News, cryptocurrency expert Dr. Assad Rizq said that many trickster firms are unregulated, have no assets and even copy their white paper from other projects. He added:

“They hype and pump their project so the price goes up. Inexpert investors, afraid of missing out, jump in, which spikes the price even higher. Then the owners sell up and make tons of money.

Dr. Rizq also underscored that investors should thoroughly research the technology and sector before investing and familiarize themselves with their country’s rules and regulations.

Bona fide state initiatives

While scammers may be falsely representing their alleged government ties, Saudi Arabia is in fact involved in a project to develop a cryptocurrency together with the United Arab Emirates (UAE). 

The bilaterally issued digital asset will be an interbank asset dubbed Aber with restricted circulation. The two countries have said the project aims to explore the practical application of cryptocurrencies to reduce remittance costs and facilitate cross-border payments.

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US Secretary of State Wants to Regulate BTC Like Other E-Transactions

U.S. Secretary of State Mike Pompeo said that Bitcoin should be regulated the same way as other electronic financial transactions.

United States Secretary of State Mike Pompeo believes that Bitcoin (BTC) should be regulated the same way as other electronic financial transactions.

Security risks of reduced governmental monitoring

In an interview on Squawk Box on Aug. 20, Pompeo pointed out the risk of anonymous transactions associated with crypto, saying:

“The risk with anonymous transactions is one that we all know well. We know this from 9/11 and terror activity that took place in the 15 years preceding that where we didn’t have good tracking, we didn’t have the capacity to understand money flows and who was moving money.”

CNBC’s co-host Joe Kernen brought up the subject of Bitcoin in terms of terrorism. Kernan raised the question in light of geopolitical tensions in the Middle East. Specifically, Kernen recalled a viral claim by U.S. Treasury Secretary Steven Mnuchin that cash is not used for nefarious activities like Bitcoin is.

When asked for his stance towards Mnuchin’s statements, Pompeo appeared to support the Secretary to a degree, expressing his hope that crypto and anonymous transactions will not become the norm since that “would decrease the security for the world.”

Equal regulation

However, in contrast to Mnuchin’s intentions to enforce strong regulations in the space, Pompeo expressed his vision of regulating Bitcoin the same way as all other electronic financial transactions today.

Recently, a former exec at German multinational investment bank Deutsche Bank published an article urging that Bitcoin is a leading indicator of hidden geopolitical tensions.

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China Is Racing to Launch a Digital Currency Ahead of FB’s Libra

The People’s Bank of China is almost ready to launch its government-backed digital currency, official sources say.

The People’s Bank of China (PBoC) is almost ready to launch its government-backed digital currency, official sources say.

An Aug. 20 report from the CPC-owned English-language news portal China Daily further revealed that the central bank digital currency (CBDC) may have been influenced by the unveiling of Facebook’s planned cryptocurrency, Libra. 

‘Inspiration from Libra’

After five years of research and system development work since 2018, the PBoC is almost ready to launch its CBDC, the deputy director of the bank’s payments unit Mu Changchun revealed at a forum last week. 

Trials for the currency have been ongoing and the institution is reported to be testing multiple approaches for the project. If things proceed smoothly, the PBoC expects it could launch the currency sooner than Libra. 

The latter’s recent announcement is notably reported to have influenced the PBoC’s original design for its planned CBDC. 

Yang Dong — director of the Research Center of Finance Technology and Cyber Security at Renmin University of China — told China Daily that the announcement of Libra had sparked debate among Chinese regulators and motivated the project’s designers to involve more non-governmental institutions in the currency’s development and issuance process. He stated:

“Further testing is needed before officially launching the Chinese CBDC, gaining inspiration from the Libra.”

While not revealing specific names, Yang indicated that the next round of CBDC trials will involve both the central bank and private- and state-owned firms and will focus on non-governmental and cross-border applications.

CBDC expected to have many positive impacts

China UnionPay chairman and former PBOC official Shao Fujun told China Daily that the CBDC “will have lots of positive impacts, including tracking the money flow in economic activities and supporting making monetary policy.”

It nonetheless faces challenges such as global coordination as regards monetary and exchange rate policy, he noted.

China’s digital legal tender will be controlled by the PBoC and 100% backed by the reserves commercial institutions pay to the institution, an unnamed central bank official indicated. Citizens will be able to exchange the currency in commercial institutions.

At the forum, Mu further highlighted that currently, several different designated institutions are taking different technical routes for developing the CBDC and electronic payment infrastructure. 

He added that the CBDC’s organizational structure is to some extent similar to that of Libra’s.

As reported just yesterday, top crypto exchange Binance is launching an open blockchain project — focused on developing localized stablecoins worldwide — that also appears to compete directly with Libra.

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Israeli Financial Authority to Accelerate Blockchain, Fintech Licensure

A department of the Israel Ministry of Finance is looking to drive fintech competition with industry teams and licensing help.

The Capital Market, Insurance and Saving Authority, a division of Israel’s Ministry of Finance (MoF), is looking to accelerate the process of procuring licenses for blockchain and fintech companies in the country.

Israeli business news outlet Calcalist reported the development on Aug. 19. According to the report, the authority has launched dedicated industry teams, some of which specialize in blockchain companies.  

According to the report, the authority is hoping to foster local competition by licensing more fintech companies. Moshe Barkat, who was appointed as the supervisor for the department back in 2018, remarked:

“Business and technological innovation and the relationship with the industry are the basic principles that guide the Authority in its operations. The Authority is engaged in the licensing and regulation of fintech companies on a regular basis, including digital insurance companies, P2P platforms and credit providers, digital wallets, blockchain-based fintech ventures and other payment services providers.”

Additionally, preliminary research by the Israeli Securities Authority has shown that dozens of companies, at a minimum, could receive a work permit in Israel with minimal changes to their business models or technologies, per the report.

Bitcoin advocates go after Israeli banks

As previously reported by Cointelegraph, the nonprofit Israel Bitcoin Association has purportedly started a legal petition to make the Bank of Israel disclose local banks’ policies pertaining to crypto. An unnamed cryptocurrency investor has also started a class action suit  against the Israel Bank Hapoalim, since they would not accept money deposits that were generated via Bitcoin (BTC) investments. 

The complainant’s lawyer, Lior Lahav, emphasized that this banking issue is a problem affecting tens of thousands of investors in the country:

“There are more than 70,000 bitcoin investors in Israel who are facing the same problem from their banks […] 99 percent of them are ordinary people that invested in a thing that’s completely legal.”

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New York Court Rules That State Attorney Has Jurisdiction Over Bitfinex

The New York State Supreme Court has ruled that Bitfinex is in the jurisdiction of the state’s Attorney General, allowing for a continuation of its investigation.

Disclaimer: This story is breaking and will be updated shortly with further details.

The New York State Supreme Court has ruled that the New York Office of the Attorney General (NYAG) has jurisdiction over cryptocurrency exchange Bitfinex.

According to a report by The Block on Aug. 19, this will allow the NYAG to continue its investigation of the exchange over allegations of fraud and misleading investors. 

Issues of jurisdiction had previously been a primary issue of contention in an ongoing case between the state of New York and the exchange.