USDCoinbase Wins, Robinhood Settles $45M: Crypto's Biggest Legal Moves This Week
Coinbase Wins Court Ruling Against SEC, Pressuring Regulator for Clearer Crypto Rules
The US Court of Appeals for the Third Circuit granted Coinbase a partial victory in its legal battle against the Securities and Exchange Commission (SEC). The court criticized the SEC's dismissal of Coinbase's 2022 petition for clearer crypto regulations, labeling its reasoning as “arbitrary and capricious” based on the Administrative Procedure Act. While not mandating the SEC to initiate rulemaking, the court emphasized that the regulator must provide a comprehensive rationale for its decisions, highlighting constitutional concerns over due process and fair notice to crypto companies.
This ruling exposes the SEC's ongoing ambiguity regarding which digital assets are classified as securities, creating a climate of uncertainty within the industry. The decision has been welcomed by legal experts and industry leaders as a significant precedent for future crypto legal cases, reinforcing the need for regulatory clarity in the evolving digital asset landscape.
Robinhood Settles SEC Violations for $45M Amidst Surge in Crypto Trading Activity
Robinhood has agreed to pay $45 million to settle civil penalties related to securities law violations uncovered by the SEC. The settlement, detailed on January 13, 2025, includes $33.5 million from Robinhood Securities LLC and $11.5 million from Robinhood Financial LLC, as the SEC identified issues such as inaccurate trading reports, poor cybersecurity, and inadequate fraud prevention from 2019 to 2022. Key violations included delays in reporting suspicious transactions and insufficient protections against identity theft.
Additionally, Robinhood Securities faced scrutiny over fractional share trading and stock lending. Despite these issues, Robinhood's crypto operations, which are not implicated in this settlement, showed significant growth, with $119 billion in trading volume and $38 billion in digital assets under custody reported as of November 2024. The company also expanded its crypto offerings to include tokens like Solana and Cardano, increasing available digital assets to 20 in the U.S.
Supreme Court Allows Class Action Against Binance Over Unregistered Token Sales
The U.S. Supreme Court has denied Binance and founder Changpeng Zhao's petition to review a lower court ruling, allowing a class-action lawsuit to proceed. Investors allege that Binance illegally sold unregistered tokens that subsequently lost significant value. The initial ruling stated that U.S. securities laws apply, as transactions occurred on U.S. servers despite Binance's lack of a physical U.S. headquarters.
The lawsuit, filed by Chase Williams in April 2020, claims Binance operated as an unregistered securities exchange. Legal challenges for Binance escalated following a SEC lawsuit in mid-2023, and a subsequent $4.3 billion settlement with the U.S. Department of Justice for money laundering violations in November 2023. Binance faced further litigation, including a class action in Canada and a lawsuit from the FTX bankruptcy estate for $1.8 billion. Zhao himself served four months in prison for money laundering-related charges but was released in September 2024.
Tether Relocates HQ to El Salvador After Securing Digital Asset License
Tether, a stablecoin issuer, announced its relocation from the British Virgin Islands to El Salvador after obtaining a digital asset service provider license. The decision, made on January 13, 2025, aims to leverage El Salvador's progressive regulatory environment and Bitcoin-savvy community. Tether's CEO, Paolo Ardoino, emphasized the move as a commitment to financial freedom and innovation through decentralized technologies. Previously, Ardoino and COO Claudia Lagorio became naturalized citizens and acquired real estate in El Salvador in 2024.
Since President Nayib Bukele's Bitcoin adoption initiative began in 2021, the crypto industry has actively engaged with local businesses. The Salvadoran government holds over 6,000 BTC, valued at over $550 million. Despite praising Bitcoin's positive impact, Bukele expressed that benefits fell short of expectations. While lauded for reducing crime rates, his administration faces criticism for alleged human rights abuses and detentions of dissenters.
Telegram-Linked TON Blockchain Shifts Focus to U.S. Growth Under Trump Administration
The Open Network (TON), a blockchain project associated with Telegram, is set to emphasize growth in the US under the administration of President-elect Donald Trump. The TON Foundation, under newly appointed president Manuel Stotz, aims to position the US as a major market for TON, recognizing its potential as a crypto hub fostering retail adoption of digital assets. Stotz, an influential digital asset investor and founder of Kingsway Capital Partners, will lead this initiative, replacing Steve Yun while remaining on the board.
The move indicates a significant shift as TON, which originated as the "Telegram Open Network," seeks advancement after Telegram's withdrawal in 2020 due to legal challenges with the SEC. With the foundation officially established in Switzerland in 2023, TON's journey continues, involving community-driven efforts and incorporating Toncoin into Telegram's ecosystem, showcasing its relevance in the evolving blockchain landscape.
Tether Sues Swan Bitcoin Over Joint Venture Breaches Amid Rivalry with Proton Management
Tether has filed a lawsuit against Swan Bitcoin, alleging significant breaches in their joint Bitcoin mining venture established through 2040 Energy in 2022. Tether claims it acted in good faith while accusing Swan of reckless actions that compromised their agreements. The legal action escalates following accusations by Swan that former employees misappropriated proprietary information to launch a rival company, Proton Management. Swan alleges this betrayal harmed its market competitiveness and claims Proton convinced Tether to sever ties with it.
On August 12, 2024, Swan’s CEO was removed from 2040 Energy, allowing Proton to assume operational control. Tether denies any wrongdoing, stating it acted within its contractual rights. Additionally, Swan is pursuing legal action against its former law firm for alleged malpractice, claiming conflicts of interest influenced their case against Proton. The dispute highlights ongoing tensions between the companies amid struggles within the Bitcoin mining sector.
Hong Kong Courts Utilize Tokenized Legal Notices to Target Illicit Crypto Wallets
Hong Kong courts are innovating by serving tokenized legal notices on blockchain to address anonymous crypto wallets linked to illicit activities. This approach, highlighted in a case involving two Tron wallet addresses, enables authorities to freeze assets digitally, circumventing traditional legal document delivery methods. Despite serving notices on wallets containing 2.65 million USDT lost in a scam, much of the funds had already been moved. Hong Kong has issued four blockchain-related court orders since 2023, showcasing a growing trend in legal recognition of digital assets.
Comparatively, the UK has adapted similarly, recognizing NFTs as property in legal proceedings. Both regions face challenges in navigating complex legal frameworks for asset enforcement, emphasizing a need for collaboration between legal and blockchain systems. As crypto scams rise, awareness among victims remains low, suggesting further education on utilizing these technologies is essential as courts explore new avenues for justice in the digital age.
CFTC Launches Investigation into Crypto.com's Super Bowl Betting Futures Contracts
The Commodity Futures Trading Commission (CFTC) is investigating the legality of Crypto.com's futures contracts that allow users to wager on football games, including the Super Bowl. A vote among CFTC commissioners is underway to determine if a 90-day review is necessary, assessing potential violations of federal gaming laws. The CFTC historically opposes contracts enabling betting on sports and other controversial events.
Although the agency cannot immediately halt trading, it may impose a ban post-Super Bowl on February 9. Crypto.com notified the CFTC about its sports contracts plans on December 19, 2024, just before Christmas, causing a delay in review due to the holiday. The contracts use vague terms instead of official game names, allowing betting on significant events like the Super Bowl. Regulatory changes may come with the transition to new CFTC leadership following Chairman Rostin Behnam's departure, potentially impacting the agency’s stance on cryptocurrency and event contracts moving forward.
BitMEX Fined an Additional $100 Million for Bank Secrecy Act Violations
BitMEX was fined an additional $100 million for violations of the Bank Secrecy Act between 2015 and 2020, following a guilty plea in July 2024 to anti-money laundering infractions and a prior agreement to pay a $110 million penalty. U.S. District Judge John G. Koeltl deemed the initial fines inadequate, given that BitMEX generated around $1.3 billion in global revenue while circumventing U.S. regulations.
The firm failed to implement a proper anti-money laundering program and allowed U.S. users, constituting 11.5% of its user base, onto its platform without complying with necessary regulations. BitMEX will also face a two-year probation period. Government officials emphasized that adherence to anti-money laundering and know-your-customer rules is essential for protecting financial systems and national security. Separate civil charges have been filed against BitMEX and several executives, including co-founder Arthur Hayes, for similar violations.
South Korea Suspends Upbit Operations Over 700,000 KYC Violations
South Korea's Financial Services Commission (FSC) has temporarily suspended operations at Upbit, the largest cryptocurrency exchange in the country, due to over 700,000 Know Your Customer (KYC) violations identified during a business license review. This suspension halts new user onboarding but allows existing users to continue trading. The regulatory scrutiny comes amid heightened anti-money laundering (AML) efforts enforced by the FSC, which includes the Virtual Asset User Protection Act enacted in July 2024.
Upbit, controlling over 70% of South Korea's crypto market, faces risks to investor confidence and potential complications in renewing its business license. The FSC's sanctions may impact liquidity and trading volumes in the market. Additionally, upcoming regulatory reforms set for late 2025 could tighten compliance requirements, potentially consolidating market power among few larger platforms as smaller exchanges struggle to adapt to stricter measures.
This article has been refined and enhanced by ChatGPT.
