Charges Laid and Warnings Issued as Regulators Crack down on BitConnect, Huobi, and More – Regulations Weekly

Lately, a day doesn’t pass in which regulators are not issuing new warnings/notices or guidance letters.  The past week was no different, as regulators from around the world scrambled to keep digital assets in check.  The following are each examples of this activity.

Panama To Follow El Salvador?

News of El Salvador making BTC legal tender has been covered extensively over the past few months – and rightfully so, as this was a landmark event.  While there have been past rumblings of Panama following in these steps, the veracity of these claims was just given a big boost as Panamanian Congressman Gabriel Silva shared a newly drafted bill for regulating cryptocurrencies.

Congressman Silva notes that the goal of this bill is to make Panama ‘compatible’ with blockchain technology such as digital assets.  If successful, he believes that this could result in the creation of not only thousands of jobs, but increase government transparency.

Bitconnect Founder Charged

Widely regarded as one of the most successful scams of all time, BitConnect has just found itself on the receiving end of various charges by the Securities and Exchange Commission (SEC).

Notably, BitConnect founder Satish Kumbhani was named in these various charges.  It is alleged that not only did the company illegally offer unregistered securities, it pledged exorbitant returns on investment through the use of a ‘proprietary trading bot’.  If this wasn’t bad enough, Kumbhani is believed to have treated investors funds as a personal bank account.

SEC New York Associate Regional Director Lara Mehraban, states, “We allege that these defendants stole billions of dollars from retail investors around the world by exploiting their interest in digital assets…We will aggressively pursue and hold accountable those who engage in misconduct in the digital asset space.”

It is believed that BitConnect was able to defraud investors of over $2 billion dollars over the course of a year.

SEC warnings

In a follow up to the announcement of its charges against BitConnect and its founder, the SEC also released an ‘investor alert’.  This took form as a communication meant to educate/warn investors of the dangers associated with digital assets.

For investors intrigued by digital assets, the SEC notes the following as being ‘red flags’ in its warning,

• Guaranteed high investment returns
• Unlicensed/unregistered sellers
• Skyrocketing account values
• Sounds too good to be true
• Fake Testimonials

The SEC pleads with investors to, “…verify that the individuals and firms offering an investment in securities are licensed/registered using the search tool on Investor.gov”. 

Uniswap Labs Under Investigation?

Decentralized Finance (DeFi) has caught fire this past year.  Decentralized exchange, Uniswap, has become one of the most popular examples of this.  Popularity is sometimes a double-edged sword however, as the exchange has seen its mother company, Uniswap Labs, being probed by the SEC, according to the WOJ.

While Uniswap Labs has not formally been charged with anything, it is believed that this probe is meant to unearth whether or not the exchange has remained compliant with existing regulations.

Huobi licence revoked

Binance isn’t the only popular digital asset exchange struggling to please regulators.  This week Huobi saw its operating license suspended by the Thai SEC, in addition to a recommendation that the MoF do the same with the company’s operating license.

This suspension is apparently the result of long-standing lapses in regulatory compliance – lapses which were made known to the exchange months ago.  Having failed to address these issues, Huobi is now being tasked with returning all client assets within a three month period.

Updated: September 10, 2021:

Huobi's team reached out to us with these comments:

“Huobi Thailand is based on the original Huobi Cloud Thailand project that was built by Huobi Cloud and its local Thai partner G.L.T. Huobi Cloud provides only technical product support and brand authorization to the entity. The current brand authorization and technical service contracts with Huobi Thailand have expired, and Huobi Cloud will no longer provide support for this project in the future.”