Emergent Fidelity case is “futile,” says the bankrupt crypto lender which is seeking access to its 55 million Robinhood shares.

Bankrupt crypto lender BlockFi on Thursday moved to strike out the bankruptcy case of Emergent Fidelity Technologies, as a battle over around $600 million in assets mainly owned by FTX founder Sam Bankman-Fried becomes ever more complex.

Emergent, an Antiguan shell company 90% owned by Bankman-Fried, owns 56 million shares of online broker Robinhood (HOOD) plus some cash, and apparently little else.

Those assets are now the subject of a legal tussle between FTX, BlockFi, and the Department of Justice and the Robinhood Board itself– and BlockFi believes Emergent’s Antiguan liquidators are making it even more complex by filing for Chapter 11 bankruptcy in the U.S.

“Neither law nor equity require the doing of a futile act. But this bankruptcy case asks the Court to do just that—to ‘reorganize’ an empty shell,” BlockFi’s filing said.

The bankruptcy filing, made Feb. 3, was not made in good faith; the company isn’t eligible, having no employees, no income and no business; and the case exists “solely” to advance the interests of Antiguan liquidators who’ve already gained over $1.7 million in fees, BlockFi said.

BlockFi has taken legal action to secure access to the stocks, which it says were security for a loan made Nov. 9. The Department of Justice seized the assets in January, as it investigates fraud charges against Sam Bankman-Fried and Gary Wang, who owns the remaining 10% of Emergent. Bankman-Fried has pleaded not guilty while Wang has entered a plea deal.

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The move comes after more than two years of proof-of-concept experiments by the BoJ.

Japan will launch a pilot programme in April to test the use of its version of the central bank digital currency (CBDC) known as the digital yen, its central bank said on Friday.

“We plan to develop a system for experiments,” Bank of Japan (BoJ) Executive Director Shinichi Uchida said in remarks during the fifth meeting of the BoJ Liaison and Coordination Committee on Central Bank Digital Currency.

“The aim of the pilot program is twofold: first, to test the technical feasibility…and second, to utilize the skills and insights of private businesses in terms of technology and operation for designing a CBDC ecosystem in the possible event of social implementation,” Uchida said.

The move comes after more than two years of proof-of-concept experiments by the BoJ around the digital yen, even as China’s digital yuan continues to lead the CBDC race globally, which has extended to more than 105 countries representing over 95% of global GDP.

The move also comes at a time when the BoJ is set for leadership transition with Kazuo Ueda expected to take over the top job from Haruhiko Kuroda, whose second five-year term ends in April.

In November 2022, Nikkei reported that starting in the spring of 2023, the BoJ would work on experiments on a digital yen with three megabanks and regional banks in the country.

“At present, the pilot is not expected to see any actual transactions between retailers and consumers, the bank said, while adding that it will establish a CBDC Forum and invite private businesses engaged in retail payments or in related technologies to participate.

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The former CEO should repay money he transferred in the run-up to the lender’s July bankruptcy, the document said

Celsius and its creditors have begun court action to recover millions they say was fraudulently transferred from founder and former chief executive officer Alex Mashinsky, his wife and other former senior executives.

Court documents published on Tuesday allege Mashinsky, co-founder S. Daniel Leon and others mismanaged the crypto lender, inflated the price of CEL tokens for their own benefit, and made “negligent, reckless and sometimes self-interested investments” in the run-up to bankruptcy in July last year.

“The Complaint would bring claims and causes of action against the Prospective Defendants to return millions of dollars removed from the Celsius platform” in the months before it froze withdrawals, the filing said, adding that it seeks to “recover damages from billions of dollars that were lost by the Prospective Defendants’ negligent, reckless, and self-interested conduct.”

The 150-page legal document they filed requests recovery, costs and punitive damages based on 33 counts. They include the transfer of billions to decentralized finance platform KeyFi, which Mashinsky partly owned, to engage in speculative investment, a move which the filing said lost Celsius approximately $200 million.

The document cites $2.8 million transferred to Mashinsky’s own wallet in May 2022 as allegedly fraudulent transfers under the U.S bankruptcy code, which regards as suspect payments made up to two years before a company goes under. It also refers to $12 million the company transferred to AM Ventures and $5 million to Koala LLP, both owned and controlled by Mashinsky.

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Charges can wait until the Department of Justice’s case against the FTX founder concludes, a judge said.

The U.S. Securities and Exchange Commission’s case against FTX founder Sam Bankman-Fried will be put on hold until related charges brought by the Department of Justice are dealt with, a U.S. judge said in a Feb. 13 ruling.

U.S. prosecutors last week said a pause would save time and resources, as the DOJ case against Bankman-Fried will likely influence overlapping civil cases. The SEC said Bankman-Fried used customer funds for his lavish lifestyle.

On Tuesday, another civil case brought against the disgraced founder by the U.S. Commodity Futures Trading Commission was also delayed until after the trial.

In December, Bankman-Fried was arrested following the collapse of FTX, and has pleaded not guilty to criminal charges brought against him by the DOJ, which include wire fraud and money laundering.

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Paxos also faces a probe from the New York Department of Financial Services

The U.S. Securities and Exchange Commission (SEC) intends to sue stablecoin issuer Paxos, which is behind the Pax Dollar (USDP) and Binance USD (BUSD) tokens, over the latter stablecoin, the Wall Street Journal reported Sunday.

An SEC spokesperson told Coinesk the commission does not comment on the existence or nonexistence of a possible investigation.

The SEC is alleging that BUSD is an unregistered security, according to the report. The news comes days after CoinDesk reported Paxos is under investigation by the New York Department of Financial Services, though the scope of NYDFS’ investigation is unclear.

BUSD is a Binance-branded stablecoin issued by Paxos, a New York-regulated trust company that also enjoys a provisional charter from the Office of the Comptroller of the Currency, a federal bank regulator.

Spokespeople for Paxos, the SEC and Binance did not immediately return requests for comment.

Sunday’s news comes right after the SEC settled charges with crypto exchange Kraken, when the regulator alleged its staking services were an offering of unregistered securities. Kraken did not admit or deny the charges under the terms of the settlement, but did shut down all of its U.S. staking programs.

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The inquiry will investigate the extent of the risk to the charity’s assets and whether the trustees are complying with their duties around protection of said assets.

The Charity Commission for England and Wales has initiated a probe into Effective Ventures Foundation, a charity backed by Sam Bankman-Fried, founder of the now bankrupt crypto exchange FTX.

The inquiry will investigate the extent of the risk to the charity’s assets and whether the trustees are complying with their duties around the protection of said assets.

The charity reported FTX’s bankruptcy as a “serious incident” because of the significant funds it had received from the exchange’s philanthropic arm.

“There is no indication of wrongdoing by the trustees at this time,” the Commission said on Monday. “However, there are indications of potential risks to the charity’s assets, and the inquiry has been opened to establish facts and help ensure the trustees protect the charity’s assets and are running the charity in line with their duties and responsibilities.”

The Commission added that the trustees are cooperating fully and that it may extend the scope of its enquiry should further regulatory issues emerge.

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India currently holds the presidency of the G-20, giving the nation powers to determine the agenda around discussions regarding global crypto rule-making.

India’s central bank Governor Shaktikanta Das has predicted that the next financial crisis will come from “private cryptocurrencies” if they are allowed to be regulated and not banned outright. Das was speaking at the Business Standard BFSI Insight Summit on Wednesday.

“Our view is that it should be prohibited because if you try to regulate it and allow it to grow, please mark my words the next financial crisis will come from private cryptocurrencies,” Das said. “They have no underlying value. They have huge inherent risks for our macro economic and financial stability. I am yet to hear any credible argument about what public good or what public purpose it serves.”

The term “private cryptocurrencies” is being used to make the distinction between a public cryptocurrency like India’s CBDC and cryptocurrencies such as bitcoin and ether, which are issued by private players, people familiar with the central bank’s functioning told CoinDesk.

“I think the term private cryptocurrency is a fashionable way of describing what is otherwise a 100% speculative activity and there is a talk that it should be regulated,” Das said.

The Reserve Bank of India’s (RBI) governor has previously stated that cryptocurrencies should be prohibited. These comments assume significance at a time when the nation is holding the presidency of the Group of 20 (G-20) nations, giving it the power to set the agenda. Indian Finance Minister Nirmala Sitharaman has said how to regulate crypto assets should be an international priority and will be a big topic of discussion during its G-20 presidency.

The RBI’s entourage of more than 20 people, according to sources, has been attending these G-20 meetings in India over the past few days where different nations are presenting their views on how to regulate the space.

“Countries have been taking different views,” said Das. “I don’t think we need to say anything more about our stand after the developments over the last one year including the latest episode around FTX.”

The governor’s comments also come at a time when the RBI is trying to create awareness around its CBDC, the e-rupee or digital rupee, and is facing questions around whether CBDCs are in competition with private cryptocurrencies.

“It’s not a question of fear of missing out or of offering competition to a private cryptocurrency. I think that is how the world is going to evolve, said Das when asked whether India’s CBDC was an “optic to fight crypto.” “You will see in days to come more and more central banks will embrace digital currencies and India has been in the forefront of the digital revolution in the current century.”

Previously, Das said the warning bells sounded by the Indian central bank persuaded people to avoid cryptocurrencies.

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The suit, filed in Miami last month, called FTX a “house of cards, a Ponzi scheme where the FTX entities shuffled customer funds between their opaque affiliated entities.”

A class action lawsuit filed against former FTX CEO Sam Bankman-Fried and a host of paid celebrity promoters for the now-defunct crypto exchange has been dropped.

On Thursday, lawyers for the suit’s lead plaintiff, Edwin Garrison, filed a voluntary notice of dismissal with the U.S. District Court for the Southern District of Florida.

The initial suit, filed in Miami, called FTX a “house of cards, a Ponzi scheme where the FTX entities shuffled customer funds between their opaque affiliated entities.”

According to the notice on Thursday, none of the defendants in the case – including Bankman-Fried, NFL quarterback Tom Brady, comedian Larry David, tennis player Naomi Osaka, and the NBA’s Golden State Warriors team – had been served with the summons or the complaint.

Garrison’s lawyer, Adam Moskowitz, did not return CoinDesk’s request for comment as to whether the matter had been settled out of court.

The suit initially called for unspecified damages and a jury trial.

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The Securities Commission of The Bahamas said FTX misrepresented the regulator’s move to secure the embattled exchange’s assets against hacks in bankruptcy court filings in the U.S.

The Securities Commission of The Bahamas is firing back at collapsed crypto exchange FTX’s accusations that the country had directed unauthorized access to transfer assets off the platform after it filed for bankruptcy protection in the U.S.

In a Wednesday notice, the regulator called the allegations “intemperate and inaccurate,” and said it had sought the order from the country’s Supreme Court to protect the embattled exchange’s digital assets against “the risks associated with hacking and compromise.”

Sam Bankman-Fried’s collapsed crypto enterprise, under new leadership, has kicked off insolvency proceedings in the U.S. Bankruptcy Court for the District of Delaware. Shortly after the company filed for chapter 11 bankruptcy on Nov. 11, court-appointed liquidators in the Bahamas filed another chapter 15 suit for cross-border insolvency proceedings in a New York Court.

FTX, in a consequent court filing, asked the court to allow the chapter 15 filing to be transferred to Delaware so that all proceedings could take place in one venue. In the same filing, FTX accused the Bahamian government of directing unauthorized access to FTX’s systems in order to withdraw assets after the company.

The Securities Commission announced afterwards that it had ordered the contents of FTX’s crypto wallets to be transferred to government-controlled wallets for safekeeping.

On Tuesday, during the first court hearing for the chapter 11 proceedings, FTX’s lawyers said they had reached an agreement with the Bahamian liquidators to transfer their New York case to Delaware. While announcing the agreement, James Bromley, a partner in Sullivan & Cromwell’s Finance and Restructuring Group, said FTX had evidence showing that “there have been movement of assets out of the debtors’ estates to the Bahamas.”

The Commission’s statement comes after the hearing, and said it was “concerning” that FTX “chose to rely on the statements of individuals they have (in other filings) characterized as unreliable sources of information and potentially “seriously compromised.””

Statements made by other FTX officials about the exchange suffering “significant thefts” and that their systems were compromised “reinforces the wisdom of the Commission’s prompt action to secure these digital assets.”

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The Austrian crypto exchange can now offer custody and proprietary trading services to customers in the European country.

Austrian exchange Bitpanda has obtained a crypto license in Germany through its local unit, the company said Tuesday.

With the license from the German Federal Financial Supervisory Authority (BaFin), Bitpanda Asset Management GmbH can independently offer crypto custody, as well as proprietary trading for crypto assets for German residents, the company said in a press release.

“Additionally, Bitpanda will be able to maintain an order book and directly market services for crypto assets, enabling them to provide a secure and regulated environment for German customers to invest in a wide range of cryptocurrencies,” the company said.

Regulators worldwide are closely watching the crypto industry as it reels from its latest upset – the fall of crypto exchange giant FTX. Germany is a member of the European Union, which recently finalized its comprehensive framework for supervising crypto issuers and service providers looking to operate in the any of the 27 member states of the trade bloc.

Since FTX filed for bankruptcy in the U.S., Stefan Berger, the German lawmaker who was in charge of shepherding the draft legislation through the European Parliament, has said the EU’s Markets in Crypto Assets (MiCA), should be the global standard for crypto regulation.

But MiCA won’t take effect until at least 2024, and EU countries like Germany and France are continuing to issue local regulatory licenses – although the latter has said it will start winding down the local regime in preparation for MiCA.

Bitpanda, which became Austria’s first fintech unicorn last year, has received regulatory approval in a number of European countries including Austria, France, Italy, Spain, the U.K., Czech Republic and Sweden.
The German license was months in the making, Bitpanda co-founder and CEO Eric Demuth said in a statement to the press.

“That means being regulated and it means a strict separation of customer and company assets, which is sadly not the case everywhere these days,” Demuth said, seemingly referring to reports that say FTX misused customer funds for conducting risky trades.

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