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Our weekly roundup of news from East Asia curates the industry’s most important developments.

Blowing up a Singaporean crypto hedge fund worth an estimated $10 billion at its peak was, by all means, a life-changing event for its co-founders Kyle Davies and Zhu Su. It appears that the trauma from the incident had been so severe that the two executives embarked on a series of spiritual journeys starting mid-2022 to transcend the effects of Three Arrows Capital’s (3AC) bankruptcy.

The voyage appears to have been fruitful. From escaping the pursuit of creditors, to making philosophical observations after witnessing the deaths of German tourists, to discovering the grace of Allah through Islam, to reigniting their passion for life through the culinary arts, to finding companionship in Japanese NFT avatars, Davies and Su may have finally found the answer to overcoming life’s hardships: If you don’t get it right the first time, keep trying until you succeed.

After reportedly soliciting $25 million from investors in January, the former 3AC co-founders launched the OPNX exchange on April 5. The exchange is designed to trade bankruptcy claims of fallen crypto entities, such as their own bankrupt hedge fund. It is unclear how the highly personalized and private nature of bankruptcy claims can allow them to be traded on a public exchange without prior approval from bankruptcy trustees or courts.

Nevertheless, Davies and Su decided to press forward with the idea anyway. On the first day of trading, the total trading volume on OPNX in the previous 24 hours was reportedly $1.26. The report drew swift condemnations from OPNX, which clarified that the exchange’s 24-hour trading volume was actually $13.64, or 982% more than stated.

Blockchain exploits can be extremely costly; with poorly designed smart contracts, decentralized apps and bridges are attacked time and time again.

For example, the Ronin Network experienced a $625-million breach in March 2022 when a hacker was able to steal private keys to generate fake withdrawals and transferred hundreds of millions out. The Nomad Bridge later that year in August experienced a $190-million breach when hackers exploited a bug in the protocol that allowed them to withdraw more funds than they had deposited.

These vulnerabilities in the underlying smart contract code, coupled with human error and lapses of judgment, create significant risks for Web3 users. But how can crypto projects take proactive steps to identify the issues before they happen?

There are a couple of major strategies. Web3 projects typically hire companies to audit their smart contract code and review the project to provide a stamp of approval.

Another approach, which is often used in conjunction, is to establish a bug bounty program that provides incentives for benign hackers to use their skills to identify vulnerabilities before malicious hackers do.

As a Millennial who remembers the world before digital devices and the internet were everywhere, Sarah Zucker — aka The Sarah Show — is fascinated by the accelerated transition society at large is going through.

“I feel as a Millennial that I’m part of this generational cohort that’s in this very unusual experience of having had an analog childhood and now living a digital future,” says Zucker. 

“I’m specifically using tools of the recent past like analog TVs to take people out of our present moment and create this different experience of time and sense. I would say my work really is about time more than anything.” 

The Los Angeles artist is considered an OG of the NFT art scene, having started way back in 2019 (her first mint was on April 4 that year) compared to most artists who arrived on the scene in the last 12–24 months.

Her art seems to resemble something you’ve seen before, all while feeling like something completely new, telling stories with a dose of humor while tapping into cutting-edge and obsolete technologies. 

Dakar, the capital of the West African nation of Senegal, now boasts an annual Pan-African Bitcoin conference, over 10 merchants accepting Bitcoin, a local peer-to-peer BTC exchange and a budding Bitcoin community.

What’s more, the speed at which Bitcoin’s progress is unwinding is staggering. The city hosted the DakarBTC Days conference just 10 months after the country’s first “in real life” Bitcoin meetup. All of this is despite a brutal bear market that has put a big dent in Bitcoin adoption.

Why is Bitcoin bubbling in Senegal? Is this country on the path to “hyperbitcoinization,” or at least more entrenched Bitcoin adoption and use? Could Senegal be the next country to follow in El Salvador’s footsteps?

I wanted to find out. I had missed out on the inception of Bitcoin Beach in El Salvador in 2019, so I wanted to explore what a bottom-up, Bitcoin-circular economy might look like in West Africa. This is that story so far.

A colonial currency

The West African Economic and Monetary Union CFA franc is an awful currency. The French created it; they control its conversion rate; they even design and print the notes for use in Africa. A Frenchman sitting in the historic university town of Clermond-Ferrand conjures up the designs in use on CFA notes used by millions of Africans across 13 countries — despite the fact that they might never have set foot in Africa.

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FTX EU launches withdrawal website to pay back European users

The European arm of FTX has launched a website to allow customers in Europe to submit withdrawal requests. It comes nearly five months after the global trading platform collapsed and went bankrupt in early November. Meanwhile, in the United States, lawyers for former CEO Sam Bankman-Fried have entered a not-guilty plea for five additional charges, including accusations of bribery in China. On bail since being turned over to U.S. custody from the Bahamas, Bankman-Fried is now prohibited from using any smartphone with internet access as part of a new court agreement.

Tesla CEO Elon Musk and Apple co-founder Steve Wozniak were signatories on an open letter signed by more than 2,600 tech industry leaders and researchers calling for a temporary halt on any further artificial intelligence (AI) development. The petition shared concerns that AI with human-competitive intelligence can pose serious hazards to society and mankind. It urged all AI firms to “immediately cease” developing AI systems that are more potent than GPT-4 for at least six months. Although supported by many, the petition has divided the larger tech community over the halt of developments.

Binance and CZ sued by CFTC over US regulatory violations

A lawsuit has been filed by the U.S. Commodity Futures Trading Commission against Binance and its CEO, Changpeng “CZ” Zhao. Claims against the crypto exchange include failing to register with regulators, noncompliant trading, obscuring the location of its executive offices, and performing transactions for persons in the United States since 2019, despite a policy of blocking or restricting customers in the country. Binance’s CEO has rejected the allegations, arguing that the crypto exchange “does not trade for profit or ‘manipulate’ the market under any circumstances,” but primarily to cover expenses in fiat or other cryptocurrencies using its crypto revenue.

Our weekly roundup of news from East Asia curates the industry’s most important developments.

Binance’s secret U.S. users

On Mar. 27, the U.S. Commodity Futures Trading Commission (CFTC) charged Binance and its founder Changpeng Zhao with alleged willful evasion of federal law and operating an illegal digital assets exchange. In the 74 page complaint, the CFTC claimed that despite the exchange’s public position of banning U.S. users, internal documents suggest that at least 20% to 30% of the exchange’s traffic came from U.S. customers. That equates to almost three million alleged U.S. users by mid-2020.

Crypto exchanges are required to register with either the CFTC or the U.S. Securities and Exchange Commission before soliciting U.S. customers. However, the CFTC allege that Binance ignored such ruling as its executives claimed that the regulations were “not reasonable” in the context of Binance’s corporate structure and that it was more “profitable” to simply bypass them.

Since the allegations surfaced, Chicago quantitative trading firm Radix Trading has confirmed that it is one of the three high-volume trading firms onboarded by Binance and listed in the CFTC complaint. In an official statement, Binance called the CFTC lawsuit “unexpected and disappointing.”

Founded in China by CZ in 2017, Binance quickly became the world’s largest crypto exchange through its low-fee trading mechanisms and wide range of product offerings. However, the exchange also came under intense scrutiny by regulators over allegedly lax know-your-customer and anti-money-laundering measures. Among many items, the CFTC seeks disgorgement of revenue generated by U.S. users’ trading activities, civil monetary penalties and permanent injunctive relief.

As the annual Game Developers Conference in San Francisco came to a close last week, there was one game that stood out from the rest. Shrapnel, a highly anticipated first-person shooter in the Web3 space, was the talk of the conference thanks to its stunning graphics and immersive gameplay. 

Select visitors were treated to a hands-on experience with the pre-alpha version of the game. Set in the year 2044, Shrapnel takes place in a post-apocalyptic world. Players must navigate the “sacrifice zone,” where they collect NFT gear and a compound named Sigma. They can win by reaching an extraction point where they can escape with their loot. If they die, they lose their loot. 

Shrapnel founder Mark Long told Cointelegraph at GDC that for his team, it’s all about the gameplay first. He added that while the demo took place behind closed doors this time, more people would be able to play Shrapnel next month.

“Anyone at ConsenSys will be able to play it on the show floor,” he says, referring to the conference in Austin, Texas, in late April.

EVE Online, MapleStory to get Web3 treatment

While Shrapnel was hogging the limelight, EVE Online creators CCP Games announced they raised $40 million in a round led by a16z to develop a new AAA title set in the EVE universe.

Name: Wendy O 
Anonymous: No 
Twitter followers: 330,000
Known for: crypto commentary, shitposting, trading analysis and community initiatives

Wendy is a former healthcare professional turned crypto trader and content creator, or what she describes as a “YouTube shock jock.” 

While the switch from health to crypto came about due to a number of reasons, one big factor was that the long commutes and working hours were taking her away from spending more time with her number one asset: her daughter.

“For seven years, I worked in infectious disease, HIV/AIDS, and I had a three-hour round trip commute four times a week. I was far from my daughter, and I just wanted to be close to her,” she says, adding: 

So then I bought some Bitcoin. And I was like, Oh, God, this is cool. Like, I didn’t really know, I just saw a number go up. And I was like, awesome. This is cool. This stands for liberty.”

Bridget Greenwood is the founder of The Bigger Pie, a U.K.-based networking organization that supports women in blockchain globally. She says that even venture capitalists with the best intentions still end up funding male founders at disproportionate rates.

“I stumbled over the appalling statistic that of all VC funding [in the U.K.], only 3% goes to female founders, 8% goes to mixed teams, and the rest goes to all-male teams,” she explains to Magazine.

“And that initial figure has gone down to 1.5% over the pandemic.”

“In more difficult times, it seems that VCs are falling back on what they know – which is to fund male founders. This is doubly frustrating, as research looking at the impact of COVID-19 points to the benefit of feminine leadership during challenging times.”

According to data from Pitchbook, the trend is international. Last year in the United States, startups with all-women teams received just 1.9`%, or around $4.5 billion, of the $238.3 billion in allocated venture capital. The 2022 figure was down from the 2.4% achieved the year before. 

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Coinbase could face SEC enforcement action for ‘potential violations of securities law’

Crypto exchange Coinbase received a Wells notice from the United States Securities and Exchange Commission (SEC) suggesting an upcoming enforcement action. According to Coinbase, the “legal threat” could potentially target its staking program, listed digital assets, wallet or Coinbase Prime services. The exchange’s chief legal officer, Paul Grewal, said the warning “comes after Coinbase provided multiple proposals to the SEC about registration over the course of months, all of which the SEC ultimately refused to respond to.” Coinbase CEO Brian Armstrong renewed calls for crypto users to “elect pro-crypto candidates” after the development.

FTX debtors agree to $95M sale of stake in Mysten Labs

As bankruptcy proceedings for FTX move forward, debtors of the defunct crypto exchange have approved an agreement seeking to sell $95 million worth of its preferred stock in Mysten Labs, the company behind the Sui blockchain. Court approval is still pending, as is the potential for other bids on the stocks. In a related headline, FTX is seeking to recover $460 million of allegedly misappropriated customer funds from venture capital firm Modulo Capital, which received a sizeable investment from Alameda Research last year. The investment was reportedly directed by Sam Bankman-Fried, who faces multiple counts in federal court related to alleged fraud during his time as CEO.

Our weekly roundup of news from East Asia curates the industry’s most important developments.

Chinese crypto billionaire sued by SEC

On Mar. 22, the U.S. Securities and Exchange Commission, or SEC, announced charges against Chinese blockchain personality and billionaire Sun Yuchen — better known as Justin Sun — and three of his wholly-owned companies Tron Foundation Limited, BitTorrent Foundation Ltd., and Rainberry Inc. (formerly known as BitTorrent).

The complaint alleges that Sun and his companies “fraudulently” manipulated the secondary market for Tron (TRX) tokens through “extensive wash trading”, citing more than 600,000 such trades, and paying celebrities to promote TRX and BitTorrent (BTT) tokens with zero disclosure.

Multiple prominent American celebrities, such as Lindsay Lohan and Jake Paul, were named as defendants in their alleged roles in promoting TRX and BTT without proper disclosure. Some have since settled with the SEC. In addition, the SEC alleges that bounty programs and airdrops used to promote TRX and BTT were unregistered investments. Gary Gensler, chairman of the SEC, commented:

“As alleged, Sun and his companies not only targeted U.S. investors in their unregistered offers and sales, generating millions in illegal proceeds at the expense of investors, but they also coordinated wash trading on an unregistered trading platform to create the misleading appearance of active trading in TRX.” 

On the evening of Jan. 7, Anatoly Legkodymov, founder of the cryptocurrency exchange Bitzlato, was arrested in Miami. The following day, the United States Department of Justice (DOJ) unsealed a complaint in federal court charging him with “conducting a money transmitting business that transported and transmitted illicit funds.” According to the DOJ, Bitzlato failed to meet U.S. regulatory safeguards, including Anti-Money Laundering requirements. 

Less than a month earlier, former FTX CEO Samuel Bankman-Fried was arrested in the Bahamas. In a statement, U.S. Attorney General Merrick Garland said, “The Justice Department has filed charges alleging that Samuel Bankman-Fried perpetrated a range of offenses in a global scheme to deceive and defraud customers and lenders of FTX and Alameda, as well as a conspiracy to defraud the United States government.”

Garland stated, “The U.S. Department of Justice will aggressively investigate and prosecute alleged criminal wrongdoing in the financial system and violations of federal elections laws.” But is it really a new day? Will U.S. law enforcement be able to go after alleged crypto criminals at home and abroad?

According to Oberheiden PC attorney Alina Veneziano, who represents executive clients under criminal investigation against U.S. Securities and Exchange Commission subpoenas and DOJ fraud allegations, the answer is yes.

“Attempts to reign in this new, unrestrained industry were inevitable,” Veneziano tells Magazine. She believes that federal government agencies are increasing their investigative efforts toward crypto crime and will utilize all the tools at their disposal — subpoenas, summons and inter-governmental sharing of information.

New York’s Emily Xie is exploring the new frontier of digital art by combining her skills and passion for computer science and generative art. 

In a little under two years, since she minted her first NFT in March 2021, she has caught the attention of prolific collectors, such as Punk6529, DC Investor and Bob Loukas, and recently left her software engineering job to pursue life as a full-time artist. 

“I studied art history, took studio art courses, but also studied computational science and engineering. I made all sorts of art growing up, but it was more in a traditional media way. As a software engineer, I was always hoping to combine my love for programming as well as my love for art and creativity,” says Xie. 

Discovering generative art

“I found that desire in generative art in around 2015–2016. It made a lot of sense making art with code. You don’t get any more of a direct and elegant combination than that of those two fields.”

“It’s so full of exploration. You’re engaging with technology in a way that’s creative because it exercises both sides of the brain, and that’s a rare thing to encounter.” 

Tax is a nightmare for compliance. And crypto taxes — which include a variety of innovative mechanisms and products that have no analog in traditional finance — are 10 times worse.

Complicating matters even further, the global industry operates across borders and jurisdictions. But there are definitely better and worse countries for the newly crypto-rich to base themselves as tax havens — even Americans who get followed around by the IRS with its hand out no matter where they are.

(The information provided is not legal or financial advice and should serve only as a starting point for further research.)

To start off, we need to define what income and capital gains are.

What is income for crypto tax?

Income tax generally covers things such as wages, dividends, interest and royalties. Within the context of digital assets, these might include income earned via mining, staking, lending, crypto-denominated salaries and even airdrops. 

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Sam Bankman-Fried petitions court to prioritize reimbursing his legal fees

Sam Bankman-Fried (SBF) is seeking to use FTX’s corporate insurance policies to cover his legal expenses, according to a court filing on March 15. As per the filing, the policies provide “priority of payment” to insured individuals such as Bankman-Fried. The move would put the former CEO on top of the FTX payout list. Another headline shows that Bankman-Fried’s inner circle received $3.2 billion in payments and loans from FTX-linked entities. The amounts exclude over $240 million used for the purchases of luxury properties in the Bahamas, political and charity donations, as well as “substantial transfers” to non-FTX subsidiaries. In another headline, FTX debtors reported $11.6 billion in claims and $4.8 billion in assets, meaning there’s a $6.8 billion hole in the exchange’s balance sheet.

Signature Bank closed by New York regulators for not providing data

Crypto-friendly Signature Bank was officially closed down and taken over by the New York Department of Financial Services on March 12 for “failing to provide consistent and reliable data.” The bank has been investigated by two United States government bodies over whether it took adequate measures to monitor and detect potential money laundering by its clients. Former member of the U.S. House of Representatives Barney Frank suggested that New York regulators closed Signature as part of a seeming show of force against the crypto market.

Our weekly roundup of news from East Asia curates the industry’s most important developments.

Chinese billionaire arrested in U.S. for $1B financial fraud 

According to an announcement published by the U.S. Department of Justice (DOJ) on Mar. 15, Chinese billonaire Ho Wan Kwok (aka Miles Guo and more commonly as Guo Wengui), has been arrested on a total of twelve charges, including wire fraud, securities fraud, bank fraud, and money laundering. Among many items, the DOJ alleges that Kwok/Guo “fraudulently obtained” more than $262 million from victims through cryptocurrency platform Himalayan Exchange.

The Himalaya Exchange included assets such as Himalaya Dollar (HDO), a purported stablecoin, and Himalaya Coin (HCN), a purported trading coin. According to the indictment, Guo told investors that HCN was 20% backed by gold and that he would personally compensate investors for “100%” of trading losses.

“If anyone loses money, I can say that I will compensate 100%. I give you 100%. Whoever loses money, I will bear it.”

Guo launched both HCN and HDO coins in an initial coin offering (ICO) around Nov. 1, 2021, when HCN was trading at around $0.10 apiece. Two weeks later, the Himalaya Exchange website stated that each HCN was worth 27 HDO, or $27, and had a total market cap of $27 billion.

With so many struggling to maintain emotional well-being during this crypto winter, self-improvement and mental health experts can help navigate the ups, downs and soul-shattering experiences that a long-term bear market can bring.

Mental health professional Elizabeth Sterbenz and wellness thought leader Srikumar Rao discuss with Magazine how to cope with the depreciation of crypto portfolios, move forward and illuminate intuitive happiness. Sterbenz is a licensed psychotherapist in California specializing in individual, couples and financial therapy. Rao is an international speaker and executive business coach with a PhD from Columbia University. He teaches a course at the Kellogg School of Management at Northwestern University that merges Eastern philosophies with modern business practices.

Learn how to ride a tsunami

Rao believes that crypto traders, developers and community members have been hit by a tsunami. They are struggling through a long-term crypto winter that shows no immediate signs of warming. They also celebrated a two-year NFT boom that was quickly followed by a devastating bust.

The community was recently gobsmacked when major figures in the cryptocurrency industry, like Sam Bankman-Fried and Do Kwon, were accused of fraudulent activities, discrediting the industry and harming investors. 

And the hits keep coming. Just weeks ago, the United States Department of Justice and other international authorities took down a Hong Kong-based crypto exchange and arrested its founder in Miami. 

Lark Davis, a self-described “cheeky” and “sarcastic” personality, has been actively involved in the world of cryptocurrency since 2017.

With his bold price forecasts, educational content and witty memes, the popular influencer has amassed an impressive social media following, boasting over 1 million followers on both Twitter and Instagram.

Although, if Davis’ Twitter and Instagram accounts are like the popular kids at school, his Facebook page is the quiet kid at the back of the classroom, with only 20,000 likes.

Davis was an English teacher before he dived into the crypto world.

He made the courageous decision to leave his job as a teacher in November 2017 during the “peak of the bull run.”

Wash trading on nonfungible token (NFT) marketplaces is back in the spotlight after critics claimed the fast-growing NFT marketplace Blur has incentivized the practice with its trading rewards scheme.

10% of Blur’s total token supply was distributed to users based on their trading activity in its second token reward scheme from Feb. 14. The platform has seen a surge in trading volume in comparison to other leading NFT marketplaces.

Skeptics claim that wash trading played a significant role, with CryptoSlam reporting around $577 million worth of NFTs have been wash traded back and forth in recent months and that 80% of trades on the platform are “inorganic.” However, opinions vary. 

A new Dune Analytics deep-dive by Hildobby argues that the vast majority of the platform’s trading volume is actually above board due to the way it has structured the rewards. But the analysis is far from a clean bill of health for the sector, with the same methodology suggesting that LooksRare and X2Y2, have 98% and 85%, respectively, of volume currently flagged as suspicious.

NFT marketplaces have accounted for a reported $73.8 billion worth of trading volume to date. However, Dune Analytics data suggests that more than 42% of the volume is fake, with $31.2 billion attributed to wash trading. 

Earlier this year, Joshua Browder, CEO of AI startup DoNotPay, attempted to bring a robot lawyer into a California courtroom, despite almost certainly knowing that it was illegal in almost all 50 states to bring automated assistance like this into a courtroom.

DoNotPay bills itself as the “world’s first robot lawyer” whose goal is to “level the playing field and make legal information and self-help accessible to everyone.” It helps to serve society’s lower-income segment to lower medical bills, appeal bank fees, and dispute credit reports. It claims to have helped more than 160,000 people successfully contest parking tickets in London and New York.

It was denied entry to the California courthouse, however, because “under current rules in every state except Utah, nobody except a bar-licensed lawyer is allowed to give any kind of legal help,” Gillian Hadfield, professor of law and director of the Schwartz Reisman Institute for Technology and Society at the University of Toronto, tells Magazine.

Still, in the age of ChatGPT and other stunning artificial intelligence devices, Browder’s attempt could be a foretaste of the future.

“The DoNotPay effort is a sign of what is to come,” Andrew Perlman, dean and professor of law at Suffolk University Law School, tells Magazine. “Certain legal services, including many routine legal matters, can and will be delivered through automated tools. In fact, it is already happening at the consumer level in numerous ways, such as via LegalZoom.”