SEC Slaps $50,000 Fine on Delaware-Based Crypto Investment Fund

On December 7, 2018, the United States Securities and Exchange Commission (SEC) issued a cease and desist order and a penalty of $50,000 against Delaware-based crypto assets fund firm CoinAlpha Advisors LLC.

SEC Hits Crypto Fund for Violating Securities Law  

According to the filing published on the commission’s website, the SEC charged CoinAlpha Advisors LLC for acting as an unregistered securities dealer. Additionally, the filing highlights that the accused company violated SEC laws by offering securities through interstate commerce.

Reportedly, CoinAlpha LLC was established in July 2017 to act as manager of the investment fund dubbed CoinAlpha Flacon LP. The fund was launched in October 2017 with the sole purpose of investing in digital assets.

From October 2017 to May 2018, the investment fund managed to raise over $600,000 from twenty-two investors spread across multiple U.S. states. As part of the investment, investors gained limited partnership interest in the crypto-focused investment fund. The SEC filing states:

“Through this offering, the investors purchased limited partnership interests in the Fund in exchange for a pro rata share of any profits derived from the Fund’s investment in digital assets.”

The order notes that CoinAlpha filed for a “Notice of Exempt Offering of Securities” a month after it was set up. However, the request for exemption was turned down by the securities regulator citing that the firm was not eligible for such an indemnity.

Additionally, the agency pointed out a number of irregularities in the CoinAlpha’s know-your-customer (KYC) system. The SEC states that the investment fund failed to ensure the status of the accreditation status of its investors.

CoinAlpha Cooperates with the SEC

Notably, CoinAlpha agreed to halt its offering after being contacted by the securities regulator in October 2018. Furthermore, the Delaware-based fund cooperated with SEC to get its website, offering strategy materials, and social media posts audited.

The commission reached an agreement with CoinAlpha by imposing a $50,000 fine and instructing the firm to reimburse all its investors, to which the company has agreed. The filing read:

“Respondent further voluntarily reimbursed all fees it had already collected, surrendered all rights to future management and incentive fees, unwound the Fund, and made payments to ensure that no Fund investor suffered a loss. During the Commission staff’s investigation, Respondent retained a third party who determined that all 22 investors were accredited investors.”

Recently, the SEC has been aggressively pursuing crypto-related firms and individuals. Just a week back, the commission fined American professional boxer Floyd Mayweather Jr. and music producer DJ Khaled for illegally promoting crypto projects. Both celebrities paid a combined penalty of over $750,000.

Author: Pratik Makadiya
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UK Financial Regulators At-Ease to Issue New Crypto Rules

The UK’s government officials and major financial regulators revealed that a fall in the price of Bitcoin and other cryptocurrencies has relieved the tension on Britain’s financial watchdog to take fundamental action that could dissuade or discourage financial innovation and investment.

The very swift boom in Bitcoin (BTC) and other major ICOs in 2017 prompted central bankers and regulators across the globe to oversee the industry.

But a decline in crypto value over the past 12 months as crypto investors make losses and a fall in BTC, which plunged by up to 10% on Tuesday, November 20, to reach around $4,400, has made it easy for the government and regulators to issue sturdy new rules.

The Proportionate Approach

The government and regulators are focused on how around 2,000 cryptos fit into the existing rules before taking into account reforms.

“We want to take the time to look at that in a bit more depth and make sure we take a proportionate approach,” Gillian Dorner, deputy director for financial services at Britain’s finance ministry, told a City & Financial conference.

The UK experiences the difficulty of making an innovative economy come into equilibrium with upholding consumer protection, preventing financial crime and more consistent markets, she revealed.

Christopher Woolard, ED for strategy and competition, Financial Conduct Authority, (FCA), revealed that it’s important to define “grey edges” within the existent regulatory perimeter.

The FCA will confer before 2018 ends on where exactly the regulatory perimeter falls for cryptos, he revealed.

Woolard further revealed that the ministry of finance would, therefore, confer on if the regulatory perimeter required shifting.

Crypto Task Force

The ministry of finance’s task force, the Bank of England (BoE) and the FCA in October this year proposed a blanket ban on the sale to all retail clients of derivatives commodities directly linked to cryptos.

But Christopher revealed that one-sided action by only one nation had its limits, and the FCA will have to collaborate with international partners.

World regulatory structures have, as of now, not been able to reach common agreement on rule variations and have rather opted to oversee the industry separately.

Author: Coin Idol
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EU Urged to Develop Common Regulations on Cryptocurrency

The European Union should adopt common rules on cryptocurrencies and scrutinize how new digital units are distributed to investors and subsequently traded, according to a report prepared for EU finance ministers.

In the report, the Brussels-based think tank Bruegel argues for EU-level regulation of crypto exchanges and clearer rules on “Initial Coin Offerings” (ICOs) to control risks and exploit the potential of the industry and its underlying Blockchain technology.

The document, seen by Reuters, is due to be presented to the ministers who are meeting on Friday and Saturday in Vienna.

So far EU authorities have avoided comprehensive regulation because of the sector’s relatively small size and the low percentage of trade in bitcoin, the most popular cryptocurrency, into euros. However, they have long worried about the market’s high volatility and the risk of fraud and money laundering.

The market capitalisation of crypto assets, such as cryptocurrencies and crypto tokens issued for an ICO, has fallen to around $200 billion in August from a peak of more than $800 billion in January. Bitcoin has dropped by about 60 percent against the dollar this year.

Now the possible expansion of the crypto exchange business in Europe and considerable interest in ICOs in EU countries, which account for 30 percent of the global market in terms of projects funded, is pushing regulators to take a closer look.

Hong Kong-based Binance, one of the world’s largest crypto exchanges, plans to move to Malta, the EU’s smallest state, after a Chinese crackdown on the industry.

Austria, which holds the rotating EU presidency, is asking whether EU regulations need changing to address “potential risks posed by crypto assets” and harness their full potential, according to a preparatory document for the meeting of finance ministers.

Bruegel says regulation of bitcoins as such is impossible because of their virtual nature, but that of entities dealing with the instruments, such as exchanges, could be subject to stricter disclosure rules or even be banned. “As done in China, mining farms can be forbidden,” the document said, referring to the business of releasing new cryptocurrencies.


New EU rules on money laundering will increase checks on crypto exchanges but are unlikely to be fully operational in all member states before 2020. Regulation of the platform business is largely left to national authorities.

Citing the planned Binance move to Malta, Bruegel said this “might suggest that there is scope for regulatory arbitrage” following a crackdown on exchanges in some Asian countries.

However, the report also said exchanges seeking jurisdictions with lighter regulation might need to be tolerated for some time “to experiment and learn about the best approaches to this fast-developing technology.”

Clearer rules on ICOs could also be useful as most involve utility tokens, where future services are promised in exchange for a current payment – a business that is currently often unregulated. Only the smaller share of ICOs that are securities usually fall under EU financial regulations.

Author: Francesco Guarascio
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Ripple’s XRP “Moves Really, Really Fast” While Bitcoin Is “Breaking Down,” Says Company’s Marketing Executive

• “Bitcoin (BTC) is slow, Ethereum (ETH) is slow” said Ripple’s chief marketing strategist.
• Per his words, Ripple (XRP) “moves really, really fast” because it “is a better technology.”

Ripple’s chief market strategist Cory Johnson recently stated in an interview with Fox Business news that the XRP token “is a better technology” than Bitcoin (BTC). He referred to the technology behind Ripple’s XRP as the “Blockchain 2.0.”

The former hedge fund manager and co-host of Bloomberg West acknowledged that Bitcoin “was a fascinating idea”, however, he thinks that the flagship cryptocurrency is “breaking down in terms of [usability].” Johnson criticized bitcoin’s slow confirmation times and said Ripple was focused on solving a “business problem.”

Focusing On a “Business Problem”

Per the market strategist, the business problem is being able to effectively “move money across borders.” He gave examples of how easy it has become to share ideas, messages, and documents instantly because of the internet. He noted, however, that it’s currently not that simple or efficient to make cross-border payments.

Commenting on how slow and costly it currently is to make international payments, Johnson said:
If I want to move money from New York to Mexico city, it takes five days, it costs 500 basis points. That’s crazy in this era of technology.
Cory Johnson

In order to solve this problem, the New York University graduate stated Ripple has developed a suite of software products “to accelerate” the process of money transfer. By using the XRP token, Ripple’s developers are aiming to make remittance payments “in less than a minute,” Johnson said.

He added that XRP will have “great value over time” and that when it comes to transferring money, Bitcoin (BTC) and Ethereum (ETH) are slow. On the other hand, Johnson claims “XRP moves really, really fast” since it’s based on a different technology.

He claimed that “fundamentally, money should move as fast as ideas move, as fast as data moves.” Johnson added that funds can’t yet be transferred in a cost-effective, quick way, which is hurting businesses throughout the world. This, he added, makes inconvenient for people working outside their home countries to send money back home.

Ripple Is “Thrilled” About Regulations

When questioned about how and whether decentralized cryptocurrencies should be regulated, the former hedge fund professional stated that “it’s really important for investors to be protected…and that [Ripple] is thrilled that regulators are getting involved.”

He then implied regulations are necessary, pointing to cases of crypto-related theft.

Johnson added that Ripple’s XRP does not require mining since it was “pre-mined.”

Therefore, its usage does not consume a lot of power, making it more cost-effective to operate an XRP-based node than running a full-node on the Bitcoin or Ethereum network, the Ripple marketing executive said.

In comparison to the US, Johnson said other countries are moving faster when it comes to adopting the latest financial technology and regulating its use. Per his words, countries like Switzerland, Singapore, and Thailand are investing resources to make sure businesses are able to leverage crypto’s underlying technology, the blockchain, to optimize their work procedures.

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Author Omar Faridi 
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