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CFTC Denies FOIA Request for Bitfinex and Tether Subpoenas

The top U.S. futures regulator has denied a Freedom of Information Act (FOIA) request related to cryptocurrency exchange Bitfinex and the closely-linked ‘stablecoin’ operator Tether, according to records obtained by CoinDesk.

The FOIA request, sent in late February, sought “subpoenas issued to iFinex inc. also known as Bitfinex and it’s subsidiary companies, as well as subpoenas issued Tether Limited and its subsidiary companies” and was initially submitted in February.

The request came weeks after reports first indicated that Bitfinex and Tether had been subpoenaed by the Commodity Futures Trading Commission (CFTC), though it’s not clear what, exactly, is being investigated. That news followed the revelation that Tether’s relationship with its auditor, Friedman, had “dissolved.”

In its response to the FOIA request, dated June 5, the CFTC wrote that it found “thousands of responsive records, all of which are exempt from the FOIA’s disclosure requirement,” going on to cite a number of exemptions in denying the request, including one commonly applied to law enforcement investigations.

“Some records are exempt from disclosure under FOIA Exemption 7(A), 5 U.S.C. § 552(b)(7)(A), because disclosure of that material could reasonably be expected to interfere with the conduct of the Commission’s law enforcement activities,” the letter stated.

The letter contained another exemption citation aimed at protecting the confidentiality of sources, noting:

“Some records were obtained on the condition that the agency keep the source of the information confidential. Those records are exempt from disclosure under FOIA Exemption 7(0), 5 U.S.C. § 552(b)(7)(D). That exemption is intended to ensure that “confidential sources are not lost because of retaliation against the sources for past disclosures or because of the sources’ fear of future disclosures.”

“We routinely receive legal process/inquiries from law enforcement agents and regulators conducting investigations, and it is our policy not to comment on the specifics of any such requests,” Bitfinex’s head of marketing, Kasper Rasmussen, told CoinDesk by email.

When reached, a representative for the CFTC declined to comment, adding that it could not confirm or deny the existence of any investigations.

FOIA image via Shutterstock

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Louisiana Officials Probe Staffers for Bitcoin Mining

The attorney general of the U.S. state of Louisiana is reportedly investigating a group of former staffers for using official resources to mine cryptocurrencies.

According to a report from the Tribune News Service, officials in Louisiana have yet to publicly comment on the rumored investigation. Yet sources told the publication that the Louisiana Bureau of Investigation began asking questions after discovering “hardware that they believed could have been used in the so-called mining of bitcoin.”

“We were worried that the (computer) systems may have been compromised,” one source told the news outlet. Some of the employees, whose names were not published, have reportedly denied that they engaged in the energy-intensive mining process, through which new coins are minted.

If confirmed, the investigation would be the latest to emerge in recent years regarding the suspected use of public-office resources to mine cryptocurrencies.

In January 2017, for example, Federal Reserve’s Office of the Inspector General fined a former staffer $5,000 after being caught mining bitcoins on a server owned by the U.S. central bank between 2012 and 2014. Later that year, New York’s Department of Education sanctioned an employee for mining bitcoins on their work computer between March and April 2014.

Flag image via Shutterstock

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at news@coindesk.com.

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Report: CFTC Sends Subpoenas to Bitfinex, Tether

UPDATE (30th January 2:11 p.m. EST): Bloomberg has updated its report, stating that the subpoenas were sent on Dec. 6, not last week.


Cryptocurrency exchange Bitfinex and Tether, the company behind the controversial USDT token, have been subpoenaed by the U.S. Commodity Futures Trading Commission, according to a new report from Bloomberg.

Citing an unnamed source, Bloomberg said that the CFTC had sent queries to both companies. The news comes days after CoinDesk reported that Tether’s relationship with auditing firm Friedman LLC had “dissolved,” though it still remains unclear which party moved to curtail the work. Friedman had been working on an audit with Tether, which is closely linked to the British Virgin Islands-based Bitfinex.

“We routinely receive legal process from law enforcement agents and regulators conducting investigations. It is our policy not to comment on any such requests,” the companies said in a statement to Bloomberg. A representative declined further comment when reached.

The news is likely to further inflame the controversy around Tether’s USDT token, which functions as a kind of synthetic dollar. Critics have argued that the token isn’t backed on a 1-to-1 ratio with the U.S. dollar as otherwise claimed and that the tokens generated by Tether in recent weeks have been used to boost the price of bitcoin, particularly during times of market weakness.

The report also sparked a rout in the price of bitcoin, sending it below $10,000 as word emerged about the CFTC subpoenas. At press time, the price of bitcoin is trading at $9,957.88.

Image Credit: Mark Van Scyoc / Shutterstock.com

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at news@coindesk.com.

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SEC 'Looking Closely' at Public Company Blockchain Pivots, Says Chairman

The head of the U.S. Securities and Exchange Commission said today that the securities market regulator is “looking closely” at the trend of public companies that have announced new focuses on blockchain.

As previously reported by CoinDesk, a number of firms in recent months have made waves by announcing that they are shifting to blockchain business ventures, including a firm previously dedicated the sale of iced tea. And while those announcements have often sparked price increases, the trend itself has sparked warnings from both the agency as well as groups like FINRA as one potentially ripe for abuse by would-be fraudsters.

In statements issued earlier today during an event in Washington, D.C., SEC chairman Jay Clayton said that the agency is looking into the issue, honing in on the subject of investor disclosures specifically.

“The SEC is looking closely at the disclosures of public companies that shift their business models to capitalize on the perceived promise of distributed ledger technology and whether the disclosures comply with the securities laws, particularly in the case of an offering,” Clayton remarked.

He also said:

“I doubt anyone in this audience thinks it would be acceptable for a public company with no meaningful track record in pursuing the commercialization of distributed ledger or blockchain technology to (1) start to dabble in blockchain activities, (2) change its name to something like “Blockchain-R-Us,” and (3) immediately offer securities, without providing adequate disclosure to Main Street investors about those changes and the risks involved.”

Earlier this month, for example, the SEC moved to halt trading of UBI Blockchain, a public firm that saw its price soar in the past year thanks to its crypto-oriented branding. Data from MarketWatch suggests that the stock remains frozen.

Taking lawyers to task

Elsewhere in his speech, Clayton also took aim at some of the lawyers providing advice to would-be ICO organizers, including those he suggested of taking a more lax approach to compliance with U.S. securities laws.

“First, and most disturbing to me, there are ICOs where the lawyers involved appear to be, on the one hand, assisting promoters in structuring offerings of products that have many of the key features of a securities offering, but call it an “ICO,” which sounds pretty close to an ‘IPO,'” said Clayton.

Nearly as problematic, according to Clayton, are lawyers that “appear to provide the ‘it depends’ equivocal advice” regarding the blockchain use case, regardless of whether the associated token bears similarities to a security under U.S. law.

“With respect to these two scenarios, I have instructed the SEC staff to be on high alert for approaches to ICOs that may be contrary to the spirit of our securities laws and the professional obligations of the U.S. securities bar,” he concluded.

Image via Shutterstock

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at news@coindesk.com.

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South Korea Reportedly Expands Crackdown on Crypto Exchanges

New reports suggest that the South Korean government is intensifying its moves against the country’s bitcoin exchanges.

Reuters reported tonight that Bithumb and Coinone were raided by police and tax office officials on Wednesday and Thursday. Citing employees of the two exchanges, which are among the largest in South Korea, the news service said officials visited their offices amid an investigation into alleged tax evasion.

“Local police also have been investigating our company since last year, they think what we do is gambling,” a Coinone employee told Reuters. The employee said that the exchange was cooperating with the investigation.

Separately, South Korean news service SBS has reported that the South Korean Justice Department is moving to prepare legislation that would pave the way for exchanges in the country to be shut down entirely.

“The Ministry of Justice will set up its own bill, which sees the virtual money brokerage itself as illegal and completely closes the exchange, and plans to start full-fledged ministry discussions this week,” the service reported, according to a translation.

The news represents a significant expansion in the growing scrutiny applied to the crypto-exchange space by South Korean regulators. Earlier this week, the Korean Financial Intelligence Unit and the Financial Supervisory Service announced that they were inspecting six unnamed banks for compliance with anti-money laundering and know-your-customer regulations.

The government had already declared in December that it would move to apply more scrutiny amid growing trade volume at the exchanges, including moves to curb anonymous trading.

Exchanges in South Korea have consistently seen prices well above those seen on other marketplaces. Indeed, it’s a circumstance that earlier this week led to a controversial change by one popular data service to begin excluding some of the country’s exchanges from its cryptocurrency price averages.

Image Credit: Pius Lee / Shutterstock.com

Editor’s Note: Some of the quotes from this report have been translated from Korean. 

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at news@coindesk.com.

Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.

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OneCoin Promoter Targeted By Finnish Police in Ongoing Investigation

A police investigation in Finland into the OneCoin cryptocurrency investment scheme is accelerating.

The Finnish Broadcasting Company reports that, according to law enforcement officials in the city of Österbotten, an as-yet-unnamed OneCoin promoter is now the subject of an “economic crime case.”

“The…damage is over half a million euros,” said Antti Perälä, an official with the city police who is leading the investigation.

As many as 20,000 residents of Finland have invested in the scheme, which sees promoters selling packages of “tokens” that can then be redeemed for OneCoins through a centralized, online website. The OneCoin promoter is one of two individuals that are the subject of the financial crimes investigation, according to police sources.

The investigation, revealed in August, is actually the second OneCoin-related inquiry launched in the country to date. A previous one, according to BehindMLM, was conducted by national authorities before ending with no charges filed.

Countries like Germany and India have moved in recent months to crack down on the scheme, which has been widely criticized as a fraudulent pyramid scheme, and regulators elsewhere have issued warnings to investors as well.

Notably, the Österbotten police official predicted that a wider investigation into OneCoin could be launched jointly between several law enforcement agencies within Europe or beyond.

“If there is a crime investigation around OneCoin, it will be bigger and involve several countries, in my opinion,” Perälä said.

Editor’s Note: Some of the statements in this report have been translated from Finnish.

Image Credit: Jne Valokuvaus / Shutterstock.com

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at [email protected].

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Swiss Finance Regulator Is 'Investigating ICO Procedures'

Switzerland’s top financial markets regulator has launched an investigation into initial coin offerings (ICOs).

Though it didn’t name any specific token sales, the Swiss Financial Market Supervisory Authority said today that it is examining “a number of ICO cases to determine whether regulatory provisions have been breached.” Specifically, the regulator wants to see whether organizers of ICOs, who sell cryptographic tokens in a bid to bootstrap blockchain networks, have violated any laws around anti-money laundering, securities or collective investment schemes.

FINMA said:

“Given the close resemblance, in some respects, between ICOs/token-generating events and conventional financial-market transactions, one or more aspects of financial market law may already cover ICO campaigns according to their various models. FINMA is currently looking into a number of different cases.”

That the agency would begin investigating the funding use case in Switzerland is perhaps unsurprising, given the growing number of regulators that have undertaken such actions in recent months. For example, South Korea’s government unveiled new measures today to restrict ICOs, stating that token sales run afoul of domestic capital market slaws. That move followed a similar crackdown in China earlier this month.

Yet how the situation in Switzerland will develop remains to be seen. According to FINMA, ICOs are not regulated under Swiss law because they do not have a third-party intermediary and are launched for one own’s platform. However, that does not mean ICOs are completely free from legal obligations, the agency went on to say.

“Due to the underlying purpose and specific characteristics of ICOs, various links to current regulatory law may exist depending on the structure of the services provided,” FINMA wrote.

Image Credit: Lee Yiu Tung / Shutterstock.com.

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at [email protected].