💰 1 big thing: SBF charged with bribing officials abroad

Samuel Bankman-Fried departs from federal court in New York, Feb. 2023.

🧑🏽‍💻 2. Charted: U.S. losing its share of crypto devs

🎨 3. Tokenized Warhol prints

Illustration of three of Andy Warhol's Campbell's soup cans, gradually becoming pixelated.

🕺4. Catch up quick 

Top coins

🌈 5. Culture hash: The great unlock

👀 $32 billion in ether will be tradable again in April after being locked up, sometimes for years, without any way to know for sure when the investor would be able to access it. Wild. Oh, and some crime stuff, if you're into that.

Today's newsletter is 1,131 words, a 4½-minute read.

This newsletter was edited by Pete Gannon and copy edited by Carolyn DiPaolo.

Off topic: Wes Anderson has a movie coming in June about 👽🛸👽! —C & B

Crypto

green

Follow how cryptocurrency and blockchain are upending markets and the regulatory shifts. With Brady Dale.

Axios Crypto

⛔️ 1 big thing: A path to registration

🎟 2. Charted: Fees

🧾 3.  The Fed's explanation 

🗺 4. Catch up quick 

⛏ 5. Culture hash: Altruistic Satoshi

GM! It's another week. No banks shut down during the weekend. How about that?

📆 Axios’ second annual What’s Next Summit is Wednesday in Washington, D.C.! You’ll hear from YouTube's chief and from the White House's science and tech office. Register for the livestream here.

Today's newsletter is 1,132 words, a 4-minute read.

👀 We followed up with Stripe about their crypto payments for freelancers program, launched last April to see if we could get a one-year update on adoption. The company declined to give us any numbers, however. —C & B

☎️ 1 big thing: SEC's hotline bling

Illustration of a rotary phone with a knot in the wire.

🚓 2. Charted: When the SEC charges

🌅 3. Dark day for Justin Sun

🦈 4. Catch up quick 

🤔 5. Culture hash: How now legal DAO?

🎵 When the SEC's hotline bling, that could only mean one thing.

🚨 Situational awareness: Authorities in Montenegro have announced the capture of someone they believe to be Terraform Labs founder Do Kwon, traveling under false documents.

Today's newsletter is 1,160 words, a 4-minute read.

🐎 Who's getting sued next? Place your bets. —C & B

1 big thing:  Open Exchange 

Illustration of a crypto coin glowing atop a pile of receipts

😬 2. Charted: In-FLEX-tion? 

🚔 3. They got Do

South Korean cryptocurrency entrepreneur and co-founder of Terraform Labs, Do Kwon, being escorted into court by two officers.

🏌️4. Catch up quick 

🗿 5. Culture hash: Based Greenpeace

The Skull of Satoshi in collaboration with art activist Benjamin Von Wong and Greenpeace USA

The plight of many opens up a window of opportunity for some. Plus, what's metal.

Today's newsletter is 1,290 words, a 5-minute read.

If Brady is ever an internationally wanted criminal with millions of dollars in cryptocurrency on a thumb drive, he's going to stick to boats and backwoods as he runs. Guaranteed. Like Harrison Ford in "The Fugitive." No airports for this crook. No, sir. —C & B

🤳 1 big thing: The CFTC's complaint

Illustration of a person testifying at a desk with an angry face emoji

👩‍💻 2. What's this: Virtual private network

Illustration of a padlock with a slide to unlock touch button. 

🫧 3. Charted: Wash-trading 

🥊 4. Catch up quick

🩴 5. Culture hash: Crypto taxonomy

Twitter user says "last week ETH was a security" in a nod to overlapping regulatory jurisdictions in crypto

⚰️ Binance's death might be greatly exaggerated. Plus, going around the rules. 

 🚨 Situational awareness: FTX's Sam Bankman-Fried is hit with a new indictment. DOJ alleges he paid over $40 million to bribe at least one Chinese government official.

Today's newsletter is 1,146 words, a 4-minute read.

The courts have put SBF back on flip phone life, which, honestly: kinda jealous. —C & B

National

A top U.S. financial regulator continues to hammer into the crypto industry.

Why it matters: The top-line complaint leveled by the Securities and Exchange Commission against Beaxy alleges the platform failed to register as a national securities exchange, and also takes issue with how it operated.

Driving the news: The SEC Wednesday charged Beaxy.com, its executives including founder and former chief Artak Hamazaspyan. 

The big picture: The SEC enforcement actions appear to be reaching fever pitch, with major exchanges such as Coinbase and Kraken as well as smaller, but well-known crypto leaders like Tron's Justin Sun in their crosshairs. 

What they're saying: “We allege that Beaxy and its affiliates performed the functions of an exchange, broker, clearing agency, and dealer without registering with the Commission and complying with clear, time-tested rules governing those activities,” said SEC Chair Gary Gensler in a press statement.

Details: The SEC also alleges that Beaxy illegally raised $8 million in an unregistered offering of its native Beaxy token (BXY).

And it also accuses Hamazaspyan of misappropriating some $900,000 of those funds for personal use, including gambling.

What we're watching: Windy will cease operations, Beaxy has been shuttered and customer assets are supposed to be accounted for and transferred back to them.

Also, Windy will destroy all BXY in possession.

Zoom in: The complaint also alleges that Nicholas Murphy and Randolph "Bay" Abbott ran the Beaxy platform through a company called Windy Inc. Windy also entered into an agreement with Brian Peterson and his firms for market-making services.

For all of the activities they were conducting, the SEC alleges that Windy should have registered as an exchange, but also as a clearing agency, as well as a broker.

The bottom line: Windy, Murphy, Abbott, Peterson and his associated firms, settled without admitting or denying the allegations of the complaint. 

The intrigue: The SEC says it is "litigating" charges against Hamazaspyan and Beaxy. 

The SEC charges crypto platform Beaxy, founder

Cryptocurrencies

A top U.S. financial regulator continues to hammer into the crypto industry.Why it matters: The top-line complaint leveled by the Securities and Exchange Commission against Beaxy alleges the platform failed to register as a national securities exchange, and also takes issue with how it operated.

After a record economic expansion, the coronavirus pandemic sent the U.S. economy into a recession as unemployment soared to staggering heights. The country now faces urgent questions about how much stimulus is needed for reeling consumers and businesses, and what a recovery might look like.

Economy & Business

The Federal Reserve, in an order published Friday, explained that it rejected Custodia Bank's application to become a member bank due to possible runs on the bank, among other risks. 

Why it matters: The state-chartered Wyoming special purpose depository institution (SPDI) has been pushing a new banking model that makes money on fees, not by investing deposits.

The big picture: Two running narrative threads in crypto converge in the Custodia saga. One, that there is a coordinated effort to shut down the industry, and two, that crypto poses serious safety and soundness risk to the U.S. financial system and therefore should be kept out of it. 

What they're saying: In its 86-page order, the Fed pretty much says the latter (And the industry would say the Fed's actions confirm the effective crypto prohibition). 

"The absence of deposit insurance coverage at Custodia could increase the firm’s risk of runs and contagion."

Yes, but: In the wake of real, less theoretical bank runs, CEO Caitlin Long has pointed out that Custodia had always proposed holding $1.08 in cash per dollar deposited.

Details: The Fed evaluates on factors in considering membership, and it found that in terms of financial, managerial, corporate powers, Custodia's application was "inconsistent."

On the managerial factor that includes risk. "In general, the Board has heightened concerns about banks with business plans focused on a narrow sector of the economy."

On the financial factor: Custodia's reliance on crypto means that it's "without a materially diversified business."

On the corporate powers factor: "The Board does not believe that this business model is consistent with the purposes of the Federal Reserve Act."

Of note: The Fed focused in on what it refers to as Custodia's "stablecoin," dollar-denominated tokens that would facilitate crypto transactions between counterparties or what Custodia calls Avits.

What we're watching: Custodia is suing the Fed, saying it cannot deny them. 

Fed rejected Custodia due to run risk

The Fed's 86-page report spelled out the factors behind its decision.

Photographer: Graeme Sloan/Bloomberg via Getty Images

The Federal Reserve, in an order published Friday, explained that it rejected Custodia Bank&#x27;s application to become a member bank due to possible runs on the bank, among other risks. Why it matters: The state-chartered Wyoming special purpose depository institution (SPDI) has been pushing a new banking model that makes money on fees, not by investing deposits.The big picture: Two running narrative threads in crypto converge in the Custodia saga. One, that there is a <a class="gtmContentClick" data-vars-link-text="coordinated effort" data-vars-click-url="https://www.axios.com/2023/02/06/crypto-washington-federal-reserve" data-vars-content-id="42948220-9e8a-4edf-bf2e-2a8f30d71cb6" data-vars-headline="Fed rejected Custodia due to run risk" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/2023/02/06/crypto-washington-federal-reserve" target="_self">coordinated effort</a> to shut down the industry, and two, that crypto poses serious safety and soundness risk to the U.S. financial system and therefore should be kept out of it. What they&#x27;re saying: In its 86-page <a class="gtmContentClick" data-vars-link-text="order" data-vars-click-url="https://www.federalreserve.gov/newsevents/pressreleases/orders20230324a.htm" data-vars-content-id="42948220-9e8a-4edf-bf2e-2a8f30d71cb6" data-vars-headline="Fed rejected Custodia due to run risk" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.federalreserve.gov/newsevents/pressreleases/orders20230324a.htm" target="_blank">order</a>, the Fed pretty much says the latter (And the industry would say the Fed&#x27;s actions confirm the effective crypto prohibition). <ul><li>&quot;The absence of deposit insurance coverage at Custodia could increase the firm’s risk of runs and contagion.&quot;</li></ul>Yes, but: In the wake of real, less theoretical <a class="gtmContentClick" data-vars-link-text="bank runs" data-vars-click-url="https://www.axios.com/2023/03/12/silicon-valley-bank-banking-crisis" data-vars-content-id="42948220-9e8a-4edf-bf2e-2a8f30d71cb6" data-vars-headline="Fed rejected Custodia due to run risk" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/2023/03/12/silicon-valley-bank-banking-crisis" target="_self">bank runs</a>, CEO Caitlin Long has <a class="gtmContentClick" data-vars-link-text="pointed out" data-vars-click-url="https://twitter.com/CaitlinLong_/status/1639315169674248215?s=20" data-vars-content-id="42948220-9e8a-4edf-bf2e-2a8f30d71cb6" data-vars-headline="Fed rejected Custodia due to run risk" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://twitter.com/CaitlinLong_/status/1639315169674248215?s=20" target="_blank">pointed out</a> that Custodia had always proposed holding $1.08 in cash per dollar deposited.Details: The Fed evaluates on factors in considering membership, and it found that in terms of financial, managerial, corporate powers, Custodia&#x27;s application was &quot;inconsistent.&quot;<ul><li>On the managerial factor that includes risk. &quot;In general, the Board has heightened concerns about banks with business plans focused on a narrow sector of the economy.&quot;</li></ul><ul><li>On the financial factor: Custodia&#x27;s reliance on crypto means that it&#x27;s &quot;without a materially diversified business.&quot;</li><li>On the corporate powers factor: &quot;The Board does not believe that this business model is consistent with the purposes of the Federal Reserve Act.&quot;</li></ul>Quicktake: It&#x27;s the crypto. Of note: The Fed focused in on what it refers to as Custodia&#x27;s &quot;stablecoin,&quot; dollar-denominated tokens that would facilitate crypto transactions between counterparties or what Custodia calls Avits.What we&#x27;re watching: Custodia is suing the Fed, saying it <a class="gtmContentClick" data-vars-link-text="cannot deny them" data-vars-click-url="https://www.coindesk.com/policy/2023/02/17/custodia-bank-renews-push-for-fed-master-account-after-rejection/" data-vars-content-id="42948220-9e8a-4edf-bf2e-2a8f30d71cb6" data-vars-headline="Fed rejected Custodia due to run risk" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.coindesk.com/policy/2023/02/17/custodia-bank-renews-push-for-fed-master-account-after-rejection/" target="_blank">cannot deny them</a>.

A cryptocurrency crackdown has gone beyond token issuers and crypto exchanges, with the long arm of the law now collaring celebrities who also help spread the (digital) word. 

Driving the news: The Securities and Exchange Commission on Wednesday charged eight celebrities, including actor Lindsay Lohan, professional boxer Jake Paul, porn star Kendra Lust, and rapper Akon, for "illegally touting" Tronix (TRX) and BitTorrent (BTT). They are accused of failing to disclose compensation details. 

Why it matters: Amidst broader regulatory enforcement efforts, the SEC now appears to be going after how the message gets spread, by going after the folks being hired to do so.

The charges were brought simultaneously, with one against Tron founder Justin Sun and three of his companies for market manipulation, plus selling unregistered securities offerings. 

Details: Some of the celebrities charged agreed to pay a collective total of more than $400,000 to settle the charges, without admitting or denying the SEC's findings.

Many accepted crypto or cash to tweet about TRX and tagging Sun's handle @justinsuntron. 

Flashback: Kim Kardashian was charged over a similar infraction last year. 

Our thought bubble: Longtime Sun watchers know that, while the founder might not be happy to be sued, he'll probably be pleased to be listed in the press release alongside celebs.

If the SEC wanted to rain on his parade, it should have separated them out.

Editor’s note: This story has been corrected to reflect that only some of the charged celebrities agreed to pay $400,000.

Lindsay Lohan, Jake Paul, Akon nabbed by SEC in crypto crackdown

Several boldface names have found themselves caught in a crypto dragnet.

Justin Sun, founder of Tron. Photo: Bryan van der Beek/Bloomberg via Getty Images

A <a class="gtmContentClick" data-vars-link-text="cryptocurrency crackdown " data-vars-click-url="https://www.axios.com/2023/03/03/bitfury-ceo-brooks-talks-operation-chokepoint-20" data-vars-content-id="7f221546-ce90-4561-9c68-04f92e9b9dc2" data-vars-headline="Lindsay Lohan, Jake Paul, Akon nabbed by SEC in crypto crackdown" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/2023/03/03/bitfury-ceo-brooks-talks-operation-chokepoint-20" target="_self">cryptocurrency crackdown </a>has gone beyond token issuers and crypto exchanges, with the long arm of the law now collaring celebrities who also help spread the (digital) word. Driving the news: The Securities and Exchange Commission on Wednesday charged eight celebrities, including actor Lindsay Lohan, professional boxer Jake Paul, porn star Kendra Lust, and rapper Akon, for &quot;illegally touting&quot; Tronix (TRX) and BitTorrent (BTT). They are accused of failing to disclose compensation details. Why it matters: Amidst broader regulatory enforcement efforts, the SEC now appears to be going after how the message gets spread, by going after the folks being hired to do so.<ul><li>The charges were brought <a class="gtmContentClick" data-vars-link-text="simultaneously" data-vars-click-url="https://www.sec.gov/news/press-release/2023-59" data-vars-content-id="7f221546-ce90-4561-9c68-04f92e9b9dc2" data-vars-headline="Lindsay Lohan, Jake Paul, Akon nabbed by SEC in crypto crackdown" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.sec.gov/news/press-release/2023-59" target="_blank">simultaneously</a>, with one against Tron founder Justin Sun and three of his companies for market manipulation, plus selling unregistered securities offerings. </li></ul>Details: Some of the celebrities charged agreed to pay a collective total of more than $400,000 to settle the charges, without admitting or denying the SEC&#x27;s findings.<ul><li>Many accepted crypto or cash to tweet about TRX and tagging Sun&#x27;s handle @justinsuntron. </li></ul>Flashback: Kim Kardashian was <a class="gtmContentClick" data-vars-link-text="charged" data-vars-click-url="https://www.axios.com/2022/10/03/kim-kardashian-sec-crypto-settlement" data-vars-content-id="7f221546-ce90-4561-9c68-04f92e9b9dc2" data-vars-headline="Lindsay Lohan, Jake Paul, Akon nabbed by SEC in crypto crackdown" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/2022/10/03/kim-kardashian-sec-crypto-settlement" target="_self">charged</a> over a similar infraction last year. Our thought bubble: Longtime Sun watchers know that, while the founder might not be happy to be sued, he&#x27;ll probably be pleased to be listed in the press release alongside celebs.<ul><li>If the SEC wanted to rain on his parade, it should have separated them out.</li></ul>Editor’s note: This story has been corrected to reflect that only some of the charged celebrities agreed to pay $400,000.

The Supreme Court Tuesday kicked off its first case involving crypto, though the issue at hand has nothing to do with cryptocurrencies.

Why it matters: The eventual ruling in the case brought by Coinbase, a crypto exchange, will have much broader implications — a bellwether case that could mark a new era for consumer protection across the business landscape, experts tell Axios.

Catch up fast: The issue at the core is a rule called the Federal Arbitration Act (FAA), which for a century has protected businesses from the expense and risk of going to court to settle customer disputes.

"Arbitration clauses" are found in all sorts of user contracts, sometimes coupled with another that bars class-action suits.

They're intended to compel customer disputes to be handled through-closed-doors resolution outside of the court system.

A lower court denied Coinbase's attempts to enforce arbitration against a pair of customer lawsuits, and the U.S. Court of Appeals for the Ninth Circuit denied the company's motions to stay the hearings — or hit pause — while it considers an appeal.

Driving the news: The Supreme Court Tuesday heard arguments related to whether those cases — Coinbase v. Bielski and Suski v. Coinbase — should proceed in court, even as the company's appeal is still pending.

Quick take: "The majority of the Supreme Court justices appeared skeptical of the automatic stay," Imre Szalai, a law professor at Loyola University in New Orleans, tells Axios.

With the exception of Justice Brett Kavanaugh, most appeared to take a textualist approach to the rule.

The big picture: "Any decision in the arbitration realm affects the behavior of corporations with respect to arbitration clauses, which ultimately impacts consumers," Jill Gross, a law professor at Pace University tells Axios.

"The no. 1 killer of class-action lawsuits is the arbitration clause — it's protection for businesses," Szalai said.

The question before the Supreme Court is whether a company can be compelled to go to court if denied arbitration while it still has a valid appeal, Jeffrey Dasteel, an arbitrator and retired UCLA professor on the subject, tells Axios.

"It’s about how much time and money do [businesses] have to spend in court, when [they] agreed to not be in court in the first place," Gross said.

Zoom in: It's more likely than not that the average American has signed an agreement with an arbitration clause. AT&T and Verizon have one. Apple doesn't, but has piggybacked off of AT&T's with mixed success.

Fun fact(s): They're also in labor contracts. Famous people use them: Actor Charlie Sheen, President Donald Trump, plus pro-golfer Tiger Woods.

Flashback: When the FAA was drafted in the 1920s, it was aimed at protecting contracts between businesses; there was no such thing as the mass consumer at the time.

Meanwhile, those arbitration clauses upheld by the FAA started getting picked up by businesses in user agreements. They've since proliferated as the internet became a thing.

What they're saying: "The abuse of arbitration agreements has deprived consumers of choice... the choice of whether they want to have access to justice," Gross says.

"By necessity, being pro arbitration agreement is an anti-consumer position."

The other side: "Consumer arbitration is quicker and [features] tight proceedings, less discovery, less motion practice," Dasteel says, adding that companies tend to foot the bill.

What we're watching: Since the 1980s and 1990s, the court has expressed a pro-arbitration agreement stance, according to law professors who spoke with Axios.

Pro-arbitration agreement has meant pro-business.

The question now is whether justices will continue to present that position, or if they will use the Coinbase case to express a more pro-consumer stance.

Supreme Court hears arguments in Coinbase arbitration case

It's a bellwether case that could mark a new era for consumer protection across the business landscape.

Photo: Kent Nishimura / Los Angeles Times via Getty Images

Supreme Court

The Supreme Court Tuesday kicked off its first case involving crypto, though the issue at hand has nothing to do with cryptocurrencies.Why it matters: The eventual ruling in the case brought by Coinbase, a crypto exchange, will have much broader implications — a bellwether case that could mark a new era for consumer protection across the business landscape, experts tell Axios.

Coinbase, the largest cryptocurrency exchange in the U.S., is in the crosshairs of a top financial regulator, again.

Driving the news: The company said Wednesday evening that it received a Wells notice from the Securities and Exchange Commission (SEC) — a formal communique alerting a recipient of possible enforcement action.

"We are prepared for this disappointing outcome and confident in the legality of our assets and services," Paul Grewal, chief legal officer, said in a statement. 

Details: Coinbase said the Wells notice touched on aspects of its exchange, its staking service called Earn, and its non-custodial wallet following an SEC investigation it described as "cursory."

What they're saying: The SEC has said its identified potential violations without being specific about them, according to Coinbase.

"We met with the SEC more than 30 times over nine months, but we were doing all of the talking," the company said in a blog post.

The big picture: SEC Chair Gary Gensler has said most everything in crypto is a security. And by the looks of the charges the SEC has levied against companies in the industry just this year alone, it appears the regulator is winding up for more.

Recall Kraken settled with the SEC over staking earlier this year and shuttered that product in the U.S.

Meanwhile, the SEC has charged and/or settled with companies and individuals including BKCoin, FTX's Nishad Singh, NBA Hall of Famer Paul Pierce, Terra's Do Kwon, Kraken, Nexo, Genesis, and Gemini — all in just the last three months. And now Tron's Justin Sun.

Flashback: This is not Coinbase's first brush with the SEC, nor its first Wells notice. 

The SEC threatened to sue the exchange in 2021 over its yet-to-be-launched Lend product, prompting Coinbase to drop it altogether. 

Also, there is the pending issue of the nine tokens that the SEC deemed were securities, some of which Coinbase still lists. 

What we're watching: How Coinbase responds, which it has 30 days to do. 

Quick take: Coinbase probably won't shutter its products and go quietly this time. 

SEC threatens to sue Coinbase over staking, more

The largest cryptocurrency exchange in the U.S. received a Wells notice  — a formal communique alerting a possible enforcement action.

Photo: Jakub Porzycki/NurPhoto via Getty Images

Coinbase, the largest cryptocurrency exchange in the U.S., is in the crosshairs of a top financial regulator, again.Driving the news: The company said Wednesday evening that it received a Wells notice from the Securities and Exchange Commission (SEC) — a formal communique alerting a recipient of possible enforcement action.

From the Valley to D.C., Big Tech players like Facebook, Google and Amazon are under more scrutiny than ever as new technology develops and privacy and antitrust concerns grow in lockstep with companies’ ambitions.

Crystal Kim

Stories

The SEC charges crypto platform Beaxy, founder

Fed rejected Custodia due to run risk

Lindsay Lohan, Jake Paul, Akon nabbed by SEC in crypto crackdown

SEC threatens to sue Coinbase over staking, more

Supreme Court hears arguments in Coinbase arbitration case

Newsletter editions

Bribery charge against SBF

Binance's plight

Paradigm looks at SEC registration

OPNX nearly open

☎️ The SEC is calling