Exchange Updates – WazirX Accuses Binance of Selling Them Down the River, DOJ Alleges SBF Attempted to Influence FTX Witness Testimony and More

The De Nederlandsche Bank (DNB) on Wednesday fined Coinbase around $3.6 million for failing to comply with registration guidelines from the principal banking authority between November 2020 and August 2022. The DNB imposed the administrative fine on Jan 18 upon consideration of the trading platform's established presence in the country and its overall leading status, a communication from the bank detailed. A spokesperson from Coinbase, which confirmed its exit from the Japanese market and separately announced a 10% job cut barely two weeks ago, objected to the penalty imposition. With a period of until Mar 2 to respond, the spokesperson added that the exchange is contemplating an appeal approach.

The dispute with the Dutch Central Bank is only a minor setback to Coinbase, which is still determined to extend its reach in Europe. The exchange widened the scope of its previous deal with the German's top-flight soccer club Borussia Dortmund on Jan 19 to make it the club's premium partner until the end of the current season. Coinbase will also, as part of the arrangement, promote its services and products at the club's stadium Signal-Iduna-Park. Though neither party revealed the financial specifics, the soccer club's managing director Carsten Cramer hinted at willingness from the side to further extend the length of the deal upon expiration depending on the course of the crypto space in coming months.

The latest on FTX's legal proceedings

In other developments around crypto exchanges, prosecutors in the case against Sam Bankman-Fried on Friday asked the court to restrict FTX ex-CEO's access to encrypted messaging services citing attempts to influence witnesses.

“I would really love to reconnect and see if there's a way for us to have a constructive relationship, use each other as resources when possible, or at least vet things with each other,” SBF wrote to FTX US General Counsel Ryne Miller on Signal almost two weeks ago.

The Department of Justice also requested, in the letter to the court, that SBF be barred from reaching out to former employees of his enterprises – FTX and Alameda. Earlier this week, the prosecution in the FTX bankruptcy case alleged that the disgraced crypto executive used as much as $400 million of FTX's customer deposits to invest in Modulo Capital, an investment firm.

FTX creditor matrix lists government agencies, venture, tech, and crypto firms

The bankrupt exchange, through its lawyers, submitted a 116-page creditor matrix this week. The document, filed by legal counsel representing Bankman-Fried and his enterprises, enumerated the names of all creditors, providing the first comprehensive listing of the various government entities and companies in several sectors that have financial claims against it. The breadth of brands featured was the most eye-catching part – banking, venture capital, hospitality, media, aviation, and more. The names of the 9,693,985 customers affected by the now-insolvent exchange were redacted from the list.

The affected entities within the digital assets industry included exchanges Bittrex, Coinbase, and Binance subsidiaries, analytics platforms Messari and Chainalysis, USDC issuer Circle, BAYC creator Yuga Labs, blockchain-based games builder Sky Mavis, and crypto-asset broker Voyager Digital. Government entities included Departments of Revenue across various states, the Department of Labor, and the Department of Justice. Some big tech companies, including Twitter, Apple, Netflix, Amazon, Google, LinkedIn, and Microsoft, featured as well. Financiers Wells Fargo Bank, Commercial Bank of Dubai, DBS Bank, Deutsche Bank AG, and State Street Bank were also listed.

The idea of an independent examiner into FTX won't benefit creditors

Political figures have been pushing for an independent examiner to be appointed for the FTX case, just as was done for the defunct yield-bearing products platform Celsius. However, lawyers for the exchange have vigorously opposed the idea, arguing it would cost north of $100 million to no benefit of the creditors. The US Trustee put forward the motion to appoint the examiner in a bid to ensure transparency around the investigation into the exchange.

FTX lawyers, on their hand, contend that the work of this independent entity would only duplicate the work of CEO John J. Ray III, government agencies, and the official committee of unsecured creditors. The committee filed its objection to the appointment on Jan 25, citing the exorbitant costs and the ongoing investigations conducted by various parties. On the same day, the joint provisional liquidators in the Bahamas and FTX US said that the appointment of an examiner would result in unnecessary costs and delays, rendering it an inadvisable course of action.

WazirX executives accuse Binance of attempting to throw them under the bus

The question of ownership of India's largest crypto exchange WazirX has in recent months borne a dispute between the exchange's operating company Zanmai and Binance, which previously announced in November 2019 that it had acquired the exchange. Late Friday developments around the contrariety issue paint a clear picture that Binance has consistently sought to distance itself as much as possible from the Indian exchange whose operation came into question last year in August. India's Enforcement Directorate agency carried out a raid on the locations of the exchange's director Sameer Mhatre at the time.

The Indian exchange was accused of facilitating money laundering activities in a scheme involving 16 fintech companies. Following the raid reporting, Binance CEO Changpeng Zhao categorically objected in a tweet that Binance didn't have a stake in the exchange's operating company Zanmai Labs.

WazirX execs disclosed to CoinDesk that Binance has been misinforming the public about its acquisition deal. The report detailed that Binance sent a letter to the Indian exchange with two demands having an ultimatum of Jan 31. The CZ-led enterprise demanded that Zanmai publish a pre-written statement that retracts WazirX co-founder Nischal Shcetty's remarks on Binance's role and responsibility regarding ownership. The letter also stipulated that the trading platform [WazirX] efface all mentions of Binance in its terms of service. Binance threatened to pull the plug on its service agreement with WazirX by next Friday (Feb 3) if these terms aren't obliged.

Zanmai responded that its assertion of Binance owning the exchange didn't include any falsehood. Schetty backed the response whilst providing partial proof to support the claims. The outturn of the dispute remains hangs in the balance but Binance's severance of the relationship with WazirX if its demands aren't met could cripple the latter's operations. The proof-of-reserves report published by the Mumbai-based exchange on Jan 11 revealed that an overwhelming 90% of its user assets are held in Binance wallets.

Deribit to set up headquarters in Dubai

Crypto exchange Deribit is relocating its headquarters to the emerging crypto hub of Dubai in an effort to solidify its position as a market leader in the options space. The crypto options market leader said it seeks to leverage the much-improved regulatory environment for digital assets in the region, where exchanges Binance, Komainu, and Bybit are already licensed. The platform is also aiming at a potentially wider pool of liquidity and trading volume in the region.

The move out of Panama and Amsterdam to a Dubai-based office staffed by a team of ten individuals will happen sometime this summer. Chief Legal, Compliance and Regulatory Officer David Dohmen told Bloomberg the exchange also has plans to expand Deribit's presence into other jurisdictions such as Brazil, the United Kingdom, and Singapore. To settle fully, Deribit is seeking a Full Market Product license under the jurisdiction of the Virtual Asset Regulatory Authority (VARA) regime in Dubai. The firm is taking this move as part of its comprehensive strategy to restore user trust in the aftermath of the failure of FTX. Deribit sits atop a highly-skewed crypto options market, thriving with a dominant share of nearly 95%, per data from The Block.

Binance to enforce stricter rules for NFT listings starting next month

Binance recently announced it is modifying its requirements for non-fungible token (NFT) listings on its Binance NFT Marketplace. A Jan 19 post from the exchange explained that based on feedback and the most recent reviews, effective Feb 2, it will delist all NFTs that were listed on the platform prior to Oct 2 last year and would have demonstrated an average daily trading volume below $1,000 between Nov 1, 2022, and the end of this month. The delisted digital assets will then be restored to the user's wallet under the ‘Collected NFTs' section.

NFT creators will be subject to a maximum daily issuance limit of five digital collectibles in compliance with platform guidelines, and such an individual must have at least two followers. The exchange also encouraged users to report tokens and collections that potentially violate its NFT minting rules and terms of service. Notably, Binance is facing rising scrutiny from regulatory bodies due to allegations of inadequate compliance with Know Your Customer (KYC) regulations and potential involvement in processing illicit funds. The FinCEN bureau of the Treasury department  in a Jan 18 order, identified Binance among platforms receiving counterparties for transactions with the closed crypto exchange Bitzlato.

Cock Foster brothers exit from NFT Marketplace Nifty Gateway

Co-founders of NFT marketplace Nifty Gateway Duncan Cock Foster and Griffin Cock Foster are set to exit their roles at a time of concerns that potential legal battles facing the platform's parent company Gemini are brewing. Duncan Foster announced the decision to move on from the platform on a Twitter thread on Wednesday, suggesting it's not the end as they could spring up a new project again. Gemini, to which the marketplace was sold in 2019, is involved in a legal tussle with the bankrupt Genesis Global.

The conflict between the two firms, which the US SEC has since accused of selling unregistered securities via the Gemini Earn Program, arose over alleged unpaid debts of over $900 million. The duo said they have been preparing for their exit scenario for months now and believe the transition will be smooth. Following their departure, the co-founders appointed vice president of engineering Eddie Ma as the new technical lead for Nifty Gateway and director of collector services Tara Harris is set to handle the non-technical issues. The co-founders also announced that they will unveil a roadmap for the future of the platform soon and will remain in an advisory role.

Last August, in an almost similar legal affair, crypto exchange Uphold was accused of owing around $783.9 million to the liquidation trust of the now-defunct crypto investment platform Cred. The exchange filed to dismiss all counts against it, including working with the bankrupt crypto lending service's co-founders, Daniel Schatt and Lu Hua and others, to promote the CredEarn program. Uphold insisted that it had nothing to do with Cred's risky approach or CredEarn's solvency issues, as the program “was owned, managed, and operated independently” by the latter.

3AC founders are raising funds for a new exchange

Last week, the two founders of bankrupt hedge fund Three Arrows Capital (3AC), Su Zhu and Kyle Davies, communicated their intent to launch a new cryptocurrency exchange to support cross-asset trading on a public marketplace. The pair, alongside the co-founders of troubled business CoinFLEX Mark Lamb and Sudgu Arumugam, said they were looking to raise $25 million to establish this new entity named GTX. The new exchange will target the crypto claims market, which the founders have approximated to be worth over $20 billion, as per the pitch deck.

Users of the exchange would be able to trade options for claims against bankrupt firms, with the presentation claiming that FTX users are currently selling their claims at around 10% of the face value for quick liquidity rather than waiting for more than ten years for the bankruptcy proceedings to be completed. Alongside its planned revolution, GTX aims to disrupt this market by providing a legal team that will streamline and automate the process of onboarding claims, making it the go-to marketplace for FTX and other bankrupt companies' claims.

Crypto community deprecates the idea

CoinFLEX, whose technology would be used to create the exchange, had its own troubles last year and eventually filed for restructuring in Seychelles. 3AC, on the other hand, was a victim of a contagion effect from the Luna crash. It, therefore, came as no surprise that most within the community questioned the co-founder's comeback scheme. CoinFLEX users voiced their dissatisfaction with the direction CoinFLEX is heading, criticizing the decision to collaborate with two entities that have been accused of fraudulent activities.

Nic Carter, a partner at Castle Island Ventures, termed Zhu and Davies' business venture as an analogy to “arsonists returning to the scene of the crime and offering to charge their victims for buckets of water.” A second announcement from the pair confirmed that ‘GTX' wouldn't be the final name for the new firm because of its uncanny similarity to FTX. The update also informed that it could be CoinFLEX that morphs into the new entity.