Genesis and its parent company, Digital Currency Group (DCG), have preliminarily agreed on a Chapter 11 bankruptcy plan aimed at alleviating financial pressures for both entities.

According to a recent court filing, this plan could potentially offer unsecured creditors the opportunity to recover anywhere between 70% to 90% in USD and 65% to 90% in terms of digital assets, contingent upon market fluctuations.

Upon receiving court authorization, DCG is anticipated to inject over a billion dollars in new debt facilities into the struggling cryptocurrency lender, thus aiding its financial situation. In return, DCG would obtain specific financial concessions by Genesis and its creditors.

Within this arrangement, DCG hopes to settle its current debts, which encompass roughly $630 million in unsecured loans set to mature by May 2023 and a $1.1 billion promissory note expiring in 2032.

For the venture capital firm, this agreement offers a vital relief, given its struggles with liquidity problems that compelled it to sell assets at considerably reduced prices. Last year, its investment division, Grayscale, temporarily halted redemptions for its primary Bitcoin Trust, resulting in a noticeable decline in share value.

Genesis encountered bankruptcy filing in January after halting customer withdrawals in November, attributing the decision to the collapse of the FTX exchange and unfavorable market conditions.

While the agreement still confronts obstacles such as approval by the bankruptcy court and the backing of various creditors, if sanctioned, it represents a significant advancement in the overall restructuring process for the company.
 

The recently revealed tax plan for crypto gains in the United States faced criticism by the crypto community right after its release. The objections came particularly via individuals connected to decentralized operations categorized as brokers.

The prompt backlash by the crypto sector demonstrates that the new approach by the U.S. Treasury Department for managing taxes related to digital assets will encounter challenges as it goes through a prolonged phase of public comments and hearings.

A Flawed Plan

X, formerly known as Twitter, swiftly filled with grievances regarding the extent of the aforementioned plan, mainly focusing on how the tax reporting requirements might encompass decentralized crypto activities that are seen as unfeasible to conform with.

Miller Whitehouse-Levine, the CEO of a lobbying group for DeFi, expressed on the social media platform that the proposal is overly broad in its current iteration. He highlighted sections that could encompass a wide range of entities, such as self-hosted wallets. He noted that although the proposal acknowledges that users of self-hosted wallets carry out their own transfers, it still attempts to hold third parties accountable for these transfers.

Another individual on the platform pointed out that wallet providers like Metamask, decentralized exchanges like Uniswap, and any smart contract utilizing a multisignature security setup might fall under the obligations of the reporting requirements. This would necessitate these entities to establish new know-your-customer regulations for their users.

Room For Improvement

Congressman Patrick McHenry (R-N.C.), Chair of the House Financial Services Committee, conveyed in a statement that while he appreciated the inclusion of the effective date and specific exemptions, he found the proposed rulemaking deficient in various other aspects. He highlighted that after the passing of the Infrastructure Investment and Jobs Act, lawmakers emphasized that any proposed rule should be precise and limited in scope, which he believed this proposal failed to achieve.

Kristin Smith, CEO of the Blockchain Association, stated shortly after the release of the proposal that the crypto ecosystem differs significantly when compared to traditional assets, implying that regulations must be adapted accordingly to avoid affecting ecosystem participants without a feasible way to comply. She acknowledged that the forthcoming regulations could offer clarity for numerous crypto investors to accurately fulfill tax requirements, ultimately removing a substantial barrier to participating in digital assets.

Smith mentioned that, if executed correctly, these regulations could equip everyday crypto users with the necessary guidance to adhere to tax laws. The industry has until October 30th, 2023, to voice their concerns to the Treasury and Internal Revenue Service, followed by public hearings on November 7th and 8th. The drafters of the proposal included sections in the comprehensive document that invite input by the crypto industry.

One immediate positive aspect however is the general exclusion of crypto mining operations, alleviating concerns that arose when the 2021 infrastructure law established tax regulations.

Magnate Finance, a popular lending company operating on the Ethereum Layer 2 network Base, appears to have conducted an exit scam, absconding with approximately $6.4 million.

Security firm PeckShield labeled this event as a rug pull, a phrase denoting crypto developers deceitfully vanishing with the deposited funds of the users. The investigation conducted by PeckShield revealed that Magnate Finance manipulated the price oracle used by the lending platform to drain all user deposits.

Since then, the Magnate Finance team has completely wiped out its online presence, erasing social media accounts on platforms like X and Telegram, and rendering the official website inaccessible. The exit scam was exposed following a warning issues by on-chain analyst ZachXBT after they raised concerns about the potential for an exit scam involving Magnate Finance on Base.

This suspicion emerged via the discovery that the deployer address for Magnate Finance was directly linked to a previous exit scam related to a project called Solfire, which had defrauded $4.8 million.

August has been a troublesome month for Base, as this incident marks the second rug pull observed within the month. Earlier in August, SwirlLend similarly disappeared with $460,000 in an exit scam on Base, with additional funds being stolen on Linea as well.

As per information provided by the official PEPE Twitter account, certain members of the PEPE core team have allegedly sold around 16 trillion tokens (equivalent to $16 million) without prior notice.

According to the official statement, precautionary measures were taken by reducing the required number of signatory wallets for the multisig wallet to 2 out of 8. Initially, there were 10 trillion PEPE tokens in the multisig wallet, but now only one signature wallet remains, which is secure.

The remaining team members have indicated that the PEPE altcoin encountered disruptive and avaricious individuals within its ranks. These individuals, who reportedly impeded progress since the early days, have reportedly been removed.

Regarding the sale incident, the sole remaining signatory team member revealed being betrayed during the event. Allegedly, three malicious team members exploited the opportunity to sell 16 trillion PEPE tokens via the multisig wallet. Afterward, they attempted to run away by removing all traces of themselves in the multisig wallet.

The team member who stayed behind stressed that the tokens sold were never intended for sale and that the remaining tokens are securely held. Additionally, control of the PEPE Twitter account has been retained by this remaining team member.

The final team member also expressed a desire to transition PEPE into a fully decentralized state once all ongoing transactions conclude. This series of events has shed light on significant disagreements within the official token team and the subsequent token sale. The veracity of the statements made by the wallet claiming to be the sole remaining member remains uncertain.

Cryptocurrencies linked to AI have shown significant progress after chip manufacturer Nvidia Corp released its impressive Q2 earnings report for fiscal year 2024. This surge in the AI tokens has added to the overall enthusiasm within the AI industry, which has been flourishing since last year.

Over the past week, Nvidia shares have ascended by almost 9%, and they have soared by more than 24% in the past three months. The company has shown exceptional performance over the past year, with a growth rate of 163%, and an impressive 222% year-to-date (YTD) increase.

The report also revealed a revenue of $13.51 billion, marking an almost 88% surge compared to the previous quarter and over 100% comparative to the same period in the previous year. This exceeded analyst predictions gathered by Refinitiv, which anticipated revenue of $11.22 billion and an adjusted earnings per share (EPS) of $2.09. Nvidia surpassed these initial projections, reporting an adjusted EPS of $2.70.

This boom could further enhance the value of AI tokens, which are likely to become even more prevalent thanks to the ongoing expansion of the AI sector as demand continues to grow and projections remain robust. In May, the market capitalization of Nvidia reached $1 trillion, aligning it with major players like Alphabet, Microsoft, and Amazon.

According to CEO Jensen Huang, Nvidia is well-positioned for an advantage due to the evolving landscape of computers and servers. Huang emphasized that the world is rapidly entering a new era of computing, and that companies globally are transitioning towards accelerated computing and generative AI.

AI tokens are poised for continuous growth as the industry expands and application possibilities increase. Nevertheless, there exists a general regulatory concern about the future of these tokens, as governments strive to regulate the AI industry.
 

In the rapidly changing realm of crypto trading, the RSI (Relative Strength Index) is a valuable instrument used by traders and investors to assess the momentum of any given asset. A recent occurrence has set the stage for a significant market event, as the daily RSI of Bitcoin has fallen to levels not witnessed since the crash caused by COVID-19 in March 2020.

As a commonly employed technical indicator, the RSI gauges the speed and alteration of price movements, oscillating between 0 and 100. Readings above 70 typically denote an excessively bought condition, while readings below 30 suggest an excessively sold condition.

The recent decline in the daily RSI of BTC below the 20-mark has grabbed the attention of the crypto community. This degree of oversold territory has not been observed since the tumultuous days of the market crash brought about by the pandemic in March 2020, when fear and uncertainty gripped the entire financial landscape.

Market analysts and enthusiasts are now closely monitoring this RSI movement, as many instances in the past have shown that extremely oversold conditions often preceded substantial price rebounds, leading to speculative conversations about the potential for a bullish reversal in the upcoming weeks.

Nonetheless, it is crucial to approach these indicators cautiously. While oversold RSI levels can provide insights into potential price turnarounds, they are not infallible predictors. Crypto markets in particular are known for their unpredictability, influenced by a multitude of factors, both on a macroeconomic and technological scale.

Bitcoin recently plummeted to around $25,000 from its previous value, leading to a substantial drop in cryptocurrency values across the board. Traders faced approximately $1 billion in liquidation losses in a 24 hour period. This sell-off also marked one of the most severe downturns for digital assets this year.

Bitcoin witnessed a 7% drop to roughly $26,900, with an earlier dip to nearly $25,000, the lowest value since June. CoinGlass data reveals that about $821 million worth of long positions, which are bets on price increases, were eradicated as traders hurriedly exited their positions. Among these losses, BTC traders bore the brunt, with long liquidations amounting to $472 million, followed by ETH at $302 million.

This represents the highest volume of Bitcoin liquidations on a single day since June 2022, a time when Bitcoin plummeted to $17,000. The trigger for this downturn included concerns about collapsing foreign currencies, apprehensions about the Chinese economy, and surging bond yields to multi-year peaks.

Typically, when an exchange closes a leveraged trading position due to a partial or total loss of the given initial margin, which means that the trader fails to meet the margin requirements or does not have enough funds to keep the trade open, this is referred to as a liquidation. When asset prices fall, the dynamic can set off a chain reaction of liquidations, exacerbating losses and price declines.

However, despite the investigation, the cybersecurity company remains unable to ascertain the true identities of these hackers who have managed to steal a whopping $1 million in crypto.

The report raised suspicions of an anonymous scammer being associated with a Canadian group. Nevertheless, the firm has been unsuccessful in confirming any specific name or identity. CertiK disclosed its discoveries resulting via the scrutiny of a crypto scam artist known as Faint. This individual, supposedly operational since 2022.

CertiK pinpointed various Ethereum Name Service (ENS) domains linked to Faint, encompassing domains such as faintxbt.eth, comefindme.eth, thanksfortheseed.eth, onchainkitten.eth, and hzontop.eth.

The report also underlined connections between Faint and another alleged scammer dubbed Soup. An on-chain researcher named ZachXBT previously published a probe on Soup, asserting their involvement in purloining substantial assets by infiltrating Discord servers and posing as a media platform employee.

Despite these revelations, CertiK still faces challenges in unmasking the true identities of these hackers. The company underscores that Faint continues to pose a threat to the crypto community and urges members to take precautions against potential wallet draining attempts.

Within the report, CertiK suggests utilizing applications like Wallet Guard and Pocket Universe, designed to alert users about interactions with wallet drainers. The company also advises users to exercise caution by verifying addresses and ensuring that any approvals granted do not originate from recognized phishing addresses.

The move gives the SEC up to 240 days to delay the processing of crypto ETF applications, which means that some companies might not hear decisions on filings made in July 2023 until around March 2024. The agency, which holds the final authority over permitting a crypto ETF, appears to be getting closer to approving such investment vehicles after several years of applications.

Stuart Barton, Co-Founder and Chief Investment Officer of Volatility Shares, a firm responsible for a leveraged Bitcoin futures ETF listing, shared that their interaction with the SEC involved negotiations, with the regulator proposing modifications to disclosure documents. He speculated that smaller firms might find it easier to gain SEC approval for a spot crypto ETF offering.

While larger companies have been making similar efforts for years without significant progress, the spotlight has shifted towards applications made by major asset management firms including ARK Invest, Bitwise Asset Management, VanEck, WisdomTree, Invesco, Galaxy Digital, Fidelity, and Valkyrie.

The hesitance in approving a spot crypto ETF could stem via the nature of the US crypto market, which, although regulated, has raised calls for clearer oversight. The SEC is currently involved in enforcement actions against Coinbase, Binance, and Ripple, and it has also imposed fines on companies like Bittrex.

There is a sense that both sides will need to be flexible, as Barton suggested that the SEC might need to be more open-minded and that US lawmakers are considering legislation to define the roles of the SEC and CFTC in regulating digital assets going forward.

One of the main obstacles facing approval for a spot crypto ETF by the SEC could be the nature of the investment itself. Bitcoin futures-linked ETFs enable investment in the crypto asset without using an exchange, whereas a spot BTC ETF involves directly holding Bitcoin within a fund for investment purposes.

Shortly after launching their stablecoin, PayPal has unveiled a new service which focuses on facilitating crypto sales, purchases, and other functions through both PayPal and PYUSD.

In an effort to establish a presence in the fast-growing cryptocurrency landscape for payment purposes, PayPal has been exploring broader cryptocurrency endeavors. Their proprietary dollar-backed stablecoin, PYUSD, was recently introduced, marking PayPal as the first major US financial institution to launch such a stablecoin.

Operating on the Ethereum blockchain, PYUSD is issued by Paxos and fully backed by US dollar deposits, adhering to the stablecoin model. Following the PYUSD debut, PayPal has updated its terms and conditions to introduce its Cryptocurrencies Hub. This feature empowers users to hold and engage with Bitcoin and other cryptocurrencies within their PayPal accounts.

The hub permits crypto trading, while streamlining the conversion between PYUSD and other assets, and facilitating PayPal-based transactions post-crypto sales. It is worth noting that not all PayPal users will have immediate access to this new feature. Priority is given to users with sound account balances, and the service is not available for residents of Hawaii, as per the updated terms and conditions.

For PayPal, this marks a substantial foray into the realm of digital assets and blockchain technology. The company is banking on mainstream customers adopting stablecoins as a legitimate payment method. If successful, PYUSD could significantly impact the Ethereum blockchain and reshape how conventional investors perceive cryptocurrencies.

Similar to other stablecoins, PYUSD will be tradable on various cryptocurrency exchanges. Huobi, a popular crypto exchange, recently announced its support for PYUSD, being the first to launch the PYUSD/USDT trading pair.

The U.S. SEC and the Commodity Futures Trading Commission (CFTC) have collectively imposed charges against numerous firms, including Wells Fargo, Bank of Montreal, BMO Capital Markets Corp, BNP Paribas, Société Générale, Wedbush Securities, Houlihan Lokey Capital, Moelis & Company, SMBC Nikko Securities America, Mizuho Securities, and SG Americas Securities.

This penalty is a result of their apparent failure to appropriately document electronic communications regarding apps like iMessage, Signal, and WhatsApp, leading to violations of securities laws.

The investigation begins

The investigation conducted by the regulatory bodies revealed that employees across these companies engaged in informal communication through the aforementioned platforms concerning the business activities of their employees. A significant portion of these communications was not recorded, constituting a violation of federal securities regulations according to the SEC.

These firms have acknowledged their wrongdoing and their violation of record-keeping provisions of federal securities laws. They have agreed to pay a combined sum of $289 million in penalties and have initiated steps to enhance their compliance measures to rectify these breaches.

The CFTC also pursued similar charges against some of the firms, resulting in separate fines, namely BNP Paribas, Société Générale, Wells Fargo, and the Bank of Montreal which were subject to fines of $75 million, $75 million, $75 million, and $35 million respectively.

Looking ahead

Gurbir S. Grewal, Director of the SECs Division of Enforcement, emphasized the importance of adhering to record keeping regulations for investor protection and the proper functioning of markets. He urged non-compliant firms to self report violations, cooperate, and remediate to achieve better outcomes.

These fines are part of a series of penalties targeting established financial institutions. Notably, Credit Suisse was fined over $250 million in the previous month due to its involvement with Bill Hwang, an investor who suffered significant losses due to high leverage and poor trades.

A federal judge has reportedly revoked the bail of the former FTX CEO, Sam Bankman-Fried (SBF), following allegations that he attempted to intimidate witnesses by sharing information with various reporters.

During an August 11th hearing in the United States District Court for the Southern District of New York, Judge Lewis Kaplan ordered the bail to be revoked. This suggests SBF will remain in jail for his two upcoming fraud trials related to his activities at FTX. Prosecutors had been advocating for the revocation of his $250 million bail, which had kept him out of custody since his arraignment in December 2022.

Judge Kaplan stated that the interactions with the reporters were likely intended to intimidate the former colleague and girlfriend of SBF, Caroline Ellison, who is also the former CEO of Alameda Research. The legal team representing SBF confirmed his engagement with the reporters, prompting Kaplan to impose a gag order preventing any extrajudicial statements about the case.

Assistant U.S. Attorney Danielle Sassoon cited instances where SBF violated previous bail conditions, including communicating on the Signal app, using a virtual private network for Internet activity, and sharing information with reporters to intimidate Ellison.

Sassoon also argued that SBF allegedly asked witnesses to delete certain messages and documents, asserting that he was attempting to interfere with the trial. His attorney, Mark Cohen, requested that his bail conditions continue, emphasizing the need for coordination with the legal team and suggesting that allegations of witness intimidation be addressed during the October trial.

Cohen further indicated that the legal team planned to appeal the ruling. However, the judge denied the motion and ordered SBF to be remanded into custody, likely at the Putnam County Correctional Facility. He was led out of the courtroom in handcuffs.

SBF is facing 12 criminal charges divided between two trials scheduled for October 2023 and March 2024. While prosecutors decided to drop a campaign finance violation charge in July due to an extradition agreement with the Bahamas, they indicated on August 8th that they would still consider the alleged scheme as part of a wire fraud charge.