Axios Crypto

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GM! The law is weird! And complicated!

Today's newsletter is 967 words, a 4-minute read.

🌎 1 big thing: SBF's arcane argument

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Illustration: Sarah Grillo/Axios

Here's one of those things that sounds crazy at first but then sort of makes sense the more you dig in, Brady writes.

Driving the news: Last week, Sam Bankman-Fried's attorneys moved that six of the 13 charges against him should be summarily dismissed by the court because of something called the Rule of Specialty.

  • They also moved to dismiss some other charges for other reasons, but that's for another day.

Quick take: When I first confronted this concept it put me in despair at how fiddly the law can be.

Context: The Rule of Specialty is a fixture in virtually all extradition treaties, providing limitations to prosecution cases.

  • The gist: When one country extradites someone, the guideline is that the extraditing nation has to say exactly which charges they plan to try the person over.

The intrigue: The party protected by the rule is not the accused. It's the nation hosting the alleged criminal. In SBF's case, that was the Bahamas.

  • The idea here is that the rule protects the nation hosting the accused from a bait and switch. The extraditing nation can't say they are charging the person with one thing, and then switch it to something else.

Zoom in: SBF's attorneys contend that the Bahamas only agreed to seven of the original charges. There are now 13 against him.

Details: "The Bahamian government agreed to release him to U.S. authorities and issued a warrant of surrender specifying that he be tried on seven of the eight counts in the Original Indictment β€” but not the count relating to alleged campaign finance violations," SBF's attorneys at Cohen & Gresser contend in their first of several pre-trial motions, submitted on May 8.

  • Yet the campaign finance charge remained when SBF was prosecuted.
  • And in February, additional charges were brought, including one alleging bribery of foreign officials, a charge that had nothing to do with any of the violations discussed before SBF's extradition.

Yes, but: "Frequently, defendants who have been extradited to the United States attempt to dismiss or limit the government's case against them by invoking the Rule of Specialty. There is a split in the courts on whether the defendant has standing to raise specialty," according to the Department of Justice website.

  • The DOJ also details the procedure for prosecutors who want to raise new charges following extradition, looping in attorneys who are experts on the rule.

What we're watching: Whether or not the Bahamas weighs in.

The bottom line: This sounds like one of those "technicalities" we have always heard about.

🍊 2. Charted: Bitcoin transaction fees are dropping

Data: Blockchair; Chart: Axios Visuals
Data: Blockchair; Chart: Axios Visuals

It looks like Bitcoiners can quit fretting about the "attack" on bitcoin, Brady writes.

  • Transaction fees on the oldest cryptocurrency network are dropping again, suggesting that the fad for Bitcoin NFTs and memecoins is wearing off.

By the numbers: Transaction fees normally make up about 3% of the reward a miner gets for "winning" a block of Bitcoin.

  • Typically, most of the reward comes from the fresh bitcoin released to the miner of each block.
  • On May 8, though, transaction fees were so high that they represented 74% of the block reward.

Yesterday it was more like 8%.

Quick take: Who could have foreseen the buzz waning except for everyone?

πŸ’Έ 3. LBRY fines

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Illustration: Sarah Grillo/Axios

A top U.S. regulator is amending its previous complaint against LBRY, cutting the fine imposed against the crypto firm by more than 99%.

  • But don't call it a "win" for the sector, Crystal writes.

Details: The SEC cited "ability to pay" and LBRY's inevitable shuttering in lowering the fine, though the company argued in court that the original $22 million was comparatively larger than others' also caught in the regulators' crosshairs over similar offenses.

  • The SEC wants to reduce the fine to roughly $111,000, a court document filed Friday shows.

Context: New Hampshire-based LBRY is a content-sharing blockchain that endeavors to be a decentralized database that can't be controlled by a single entity.

  • The SEC charged it with conducting an unregistered securities offering in selling its native LBC tokens to investors, including those in the U.S., in March 2021.
  • LBRY CEO Jeremy Kauffman has taken a Ripple-like posture against the complaint, maintaining that LBC tokens were not securities.

The intrigue: The SEC also wants the court to stop the company from offering LBC until all of the tokens are destroyed and the firm shutters.

What they're saying: "The time before LBRY dissolves may prove to be the time of greatest risk of further violation β€” a cash-strapped defendant who knows that it will cease to exist as a legal entity may have a sense of impunity and be more likely to violate the securities laws during that time," the SEC said.

  • LBRY did not respond to Axios' emailed query for a statement.

🍱 4. Catch up quick

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Illustration: Annelise Capossela/Axios

πŸ‡ΊπŸ‡Έ The DOJ is homing in on crypto exchanges. (Reuters)

πŸ‡¨πŸ‡¦ Binance is leaving Canada, citing new stablecoin guidance as well as investor limits imposed on exchanges. (Binance)

πŸ‡―πŸ‡΅ G7 finance ministers met to discuss crypto asset supervision, ahead of a summit next week in Japan. (CoinDesk)

Top coins

Performance of select cryptocurrencies
Data: CoinGecko; Table: Axios Visuals

🌢 5. Culture hash: Aragon take

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Screenshot: @laurashin (Twitter)

On Friday we reported the facts of Aragon's dispute with many of its token holders.

Catch up fast: The token holders of a project funded by a 2017 initial coin offering have clearly expressed a desire to take control of the ginormo treasury funded by that sale.

  • The issue has recently come to a head as other investors have gotten involved.

What they're saying: "I think in some respects [the Aragon Association is] acting in bad faith," Schmidt said. "Effectively the market is saying you've effectively created $25 million in negative equity value."

  • And that's just a bit of it.
  • The others take a pretty dim view of the whole affair as well.

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

State of play: The price may be down, but 1 million addresses have a full bitcoin (or more) in them.β€”C & B