Welcome to Law Decoded, your weekly digest of all the major developments in the field of regulation.
The FTX drama escalated last week when the Royal Bahamas Police Force arrested its former CEO, Sam Bankman-Fried, at the request of the United States government. Within hours, politicians, crypto executives and influencers had all booted up their Twitter apps to comment on the arrest of the former CEO, who had to miss his testimony before the U.S. Congress. However, the text of SBF’s planned testimony was obtained by the media, wherein he blamed the inclusion of FTX.US in the Chapter 11 bankruptcy on John J. Ray III, a restructuring lawyer who assumed the role of FTX CEO after the bankruptcy filing.
The body of allegations against FTX and SBF personally is stacking up. The United States Securities and Exchange Commission (SEC) charged Bankman-Fried with violating the anti-fraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. At the same time, the Commodity Futures Trading Commission (CFTC) has filed a lawsuit against Sam Bankman-Fried, FTX and Alameda Research, claiming violations of the Commodity Exchange Act and demanding a jury trial. A fresh indictment, signed by United States Attorney for the Southern District of New York Damian Williams, is 14 pages long and contains eight counts.
Bankman-Fried reportedly reconsidered his earlier decision to contest extradition and is expected to appear in court in the Bahamas on Dec. 19 to seek a reversal. By consenting to extradition, he would be able to appear in a United States court, where If convicted, he could get up to 115 years in jail. However, there is a “lot to play out” in the case until he gets a final sentence within the next few months or even years, legal commentators told Cointelegraph.
Senators Warren and Marshall introduce money-laundering legislation for crypto
U.S. Senators Elizabeth Warren and Roger Marshall introduced the Digital Asset Anti-Money Laundering Act of 2022. The seven-page bill would expand the classification of a money service business (MSB), prohibit financial institutions from using technology such as digital asset mixers and regulate digital asset kiosks, otherwise known as ATMs.
Money service businesses would be required to have written Anti-Money Laundering policies and to implement them. The bill would finalize reporting requirements already proposed by FinCEN and impose new requirements, including reporting transactions over $10,000 in accordance with the Bank Secrecy Act.
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Canada bans crypto leverage and margin trading
The Canadian Securities Administrators (CSA), the council of Canada’s provincial and territorial securities regulators, issued an update to crypto trading platforms operating in the country. According to the statement, all crypto trading firms operating in Canada — both local and foreign ones — have to comply with newly expanded terms, which ban them from offering margin or leverage trading services to any Canadian clients. The expanded terms also require crypto exchange services providers in Canada to segregate custody assets from the platform’s proprietary business.
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Nigeria set to pass bill recognizing Bitcoin and cryptocurrencies
The Nigerian government will reportedly soon pass a law that will recognize the usage of Bitcoin (BTC) and other cryptocurrencies as a means to keep up to date with global practices. If the Investments and Securities Act 2007 (Amendment) Bill is signed into law, it would allow the local Securities and Exchange Commission to “recognize cryptocurrency and other digital funds as capital for investment.”
The report comes almost 24 months after Nigeria banned crypto activity in February 2021, with the Central Bank of Nigeria (CBN) ordering local crypto exchanges and service providers to cease activity and mandating banks to shutter the accounts of any individuals or entities found to be engaging in trading activities.
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