Steven D. Merriman

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The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), on August 8, 2022, sanctioned virtual currency mixer Tornado Cash. OFAC alleged that it had been “used to launder more than $7 billion worth of virtual currency since its creation in 2019 [, including] over $455 million stolen by the Lazarus Group[,]” a Democratic People’s Republic of Korea (DPRK) state-sponsored hacking group that OFAC identified for sanctions in 2019, in what the agency characterized as the largest known virtual currency heist to date.[1]…

Continue Reading OFAC Takes Action Against Virtual Currency Tornado Cash in Novel Application of Sanctions Authorities

On October 15, 2021, the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) released guidance on sanctions compliance for the digital currency industry, the agency’s most detailed statement to date on its expectations for participants in this rapidly growing industry. This guidance expands on the five pillars of OFAC’s 2019 Framework by…

U.S. Developments

Litigation

New York Resident Indicted for Duping Investors with Fake ICO Scam

On November 6, the United States Attorney for the Southern District of New York announced a wire fraud charge against Asa Saint Clair, the operator of World Sports Alliance, which held itself out on its website as using sports to promote “economic development and social mobility” and claims an association with the United Nations. The U.S. Attorney, Geoffrey Berman, contends that World Sports Alliance is a “sham affiliate of the United Nations.”

According to the indictment, Saint Clair lured investors into loaning funds, through convertible notes, to World Sports Alliance so that the organization could conduct an ICO for a proprietary digital currency called IGOBIT. Saint Clair allegedly promised investors that they would receive guaranteed returns. According to the government, Saint Clair’s representations were false: Investor funds were not used to conduct an ICO and, instead, Saint Clair diverted the funds and used them to support a lavish lifestyle.

The press release from the United States Attorney’s Office can be found here and the indictment here.
Continue Reading Blockchain Week in Review: Week of November 8, 2019

U.S. Developments

Regulatory Updates

Texas Clarifies that Stablecoins Backed by Sovereign Currency Qualify as “Money” Under Money Transmission Statute

The Texas Department of Banking recently issued a Supervisory Memorandum clarifying how its money transmission statute applies to stablecoins backed by sovereign currency. The Department reiterated—consistent with its 2014 guidance—that Texas’s money transmission statute only regulates “money” or “monetary value” and that most virtual currencies fall outside the statute’s scope. But the Department stated that stablecoins backed by sovereign currency, such as Tether, qualify as “money” or “monetary value.” Under Texas’s statute, money or monetary value includes either sovereign-issued currencies or claims that can be converted into such currencies. The Department concluded that, unlike most virtual currencies, stablecoins backed by sovereign currency are money or monetary value because they represent claims that can be redeemed for currency. The Department explained that, as a result, entities doing business in Texas that hold stablecoins backed by sovereign currency for third parties—such as custodial wallet providers or intermediated exchanges—will most likely need a Texas money transmission license.…

Continue Reading Blockchain Week in Review: Week of January 7-11, 2019

Week of October 15-19, 2018

 U.S. Developments

Regulatory Updates

SEC Launches FinHub to Facilitate Public Engagement on FinTech Issues

On October 18, the SEC launched FinHub, a new “Strategic Hub for Innovation and Financial Technology.” The SEC envisions that the hub will provide the public with a singular resource for engaging with the SEC on emerging FinTech issues. The FinHub website consolidates the SEC’s speeches, publications, and regulatory actions on four key emerging technologies and issues: blockchain technology, digital marketplace financing, automated investment advice, and artificial intelligence/machine learning. Additionally, FinHub provides a portal through which the public can request assistance from SEC staff on securities issues raised by emerging financial technologies.
Continue Reading Virtual Currency / FinTech Week-in-Review

U.S. Developments

Regulatory Updates

SEC and CFTC Announce New Cooperation Agreement

On June 28, the Commodity Futures Trading Commission and the Securities and Exchange Commission announced a new Memorandum of Understanding meant to allow two agencies to further coordinate in areas of common interest.

Under the MOU, the two agencies agreed to identify areas of…