Cantor Fitzgerald, the Tether-linked broker, agreed to pay the Securities and Exchange Commission (SEC) a $6.75 million penalty yesterday after it was charged with causing two special purpose acquisition companies (SPACs) that it controlled to make misleading statements to investors ahead of their initial public offerings (IPOs) that raised $750 million.

The SEC’s Division of Enforcement Acting Director, Sanjay Wadhwa, said that Cantor Fitzgerald “repeatedly” claimed it hadn’t approached merger targets in public filings despite having “substantive discussions with several private companies regarding a potential merger, including with the companies with which its SPACs eventually merged.”

The SEC press release notes that Cantor Fitzgerald neither admitted to nor denied the charges levied against it in the order and paid the civil penalty.

Read more: Why are Tether and Cantor Fitzgerald lending near identical amounts?

SPACs, otherwise known as blank-check companies, are shell corporations with no business operations that are used to merge with or acquire a private company. In this case, Cantor Fitzgerald used its two SPACs, CF Finance Acquisition Corp. II and CF Acquisition Corp. V, to raise millions before merging with View, Inc. and Satellogic Inc., respectively.

A Cantor Fitzgerald spokesperson told CNBC that, “No investor was ever harmed by the alleged issues described in the order,” and that it’s “pleased to have concluded this matter by mutual agreement with the SEC.”

Cantor Fitzgerald CEO and Chairman, Howard Lutnick, is now leading Donald Trump’s Commerce Department and was hired as co-chair for Trump’s transitional team.

A Wall Street Journal report revealed Cantor Fitzgerald acquired a 5% stake in Tether that was worth as much as $600 million. It also notes that the broker holds the majority of Tether’s $134 billion in assets in exchange for tens of millions of dollars in fees.

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President-elect Donald Trump has picked Paul Atkins to replace Gary Gensler as chair of the Securities and Exchange Commission (SEC). Once Gensler resigns effective January 20, many anticipate an abrupt change within the world’s most powerful and well-staffed securities regulator.

What should the crypto community expect to see under Atkins’ leadership, assuming he accepts Trump’s nomination?

For starters, the man has previous experience at the SEC — so he can skip orientation and get right to business. Atkins worked on SEC staff from 1990 to 1994. Years later, he earned a promotion to one of the SEC’s five Commissioner seats and served from August 2002 to August 2008.

Outside the SEC, Atkins has also worked in Big Law for the prestigious Davis Polk & Wardwell, assisting corporations with mergers, acquisitions, and securities offerings. Atkins also helped with compliance and regulatory investigations.

Read more: Gary Gensler and SEC probed over alleged politically-biased hiring

Goodbye Gary Gensler, hello Paul Atkins

The incoming SEC chair has libertarian, pro-crypto stances on regulation. Atkins co-chaired the Token Alliance, an altcoin-friendly division of the Digital Chamber of Commerce involved in political communications. He also founded Potomak Global Partners, an advisory for digital finance companies.

Paul Atkins’ previous experience as an attorney includes a stint working in white collar disaster clean-up. The Bennett Funding Group was a billion-dollar leasing corporation that conducted one of the largest Ponzi schemes in US history. After it imploded, Atkins assisted the court-appointed bankruptcy trustee by overtaking Bennett’s sole surviving subsidiary as crisis president. There, Atkins was able to stabilize the subsidiary’s finances.

As a pro-crypto and libertarian-minded lawyer with decades of experience in Washington DC, Trump’s selection of Paul Atkins could boost hopes that the new White House administration will be friendlier toward digital assets.

Outgoing chair Gary Gensler made himself the enemy of the digital asset industry through regulation by enforcement, failing to prevent the FTX fiasco, and years of failing to name which crypto assets are and are not securities.

Despite being Trump’s current top pick for SEC leadership, reports indicate that Atkins has not yet accepted the appointment.

If Atkins declines, other top contenders for SEC chair include Hester Pierce, Brian Brooks, Chris Giancarlo, Heath Tarbert, and Dan Gallagher, among others. 

Paul Atkins was on Protos’ original list of likely successors of Gary Gensler, published November 7.

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Recently, the Securities and Exchange Commission (SEC) settled with TrustToken and TrueCoin, previous operators of TrueUSD (TUSD), over allegations that the firms sent the backing for the stablecoin to “a speculative and risky offshore commodity fund.” 

The fund, which invested in “trade finance, structured trade, export finance, import finance, supply chain financing, and project financing of entities,” appeared to be offered by First Digital Trust in Hong Kong. Allegedly, “more than 99% of the assets backing TUSD” were placed in the speculative fund.

Furthermore, the complaint alleges that in 2022, TrueCoin and TrustToken were aware of redemption issues at this fund.

Importantly, this settlement didn’t include Techteryx, the firm that now owns TrueUSD. This firm has repeatedly denied that it’s under the control of Justin Sun, described as an “Asia markets advisor” for TrueUSD, though the former chief executive of TrustLabs has claimed that Sun tried to acquire the firm.

A review of an attestation for TrueUSD reveals that approximately 99.7% of the reserves for this stablecoin are still held at First Digital Trust, despite the allegations in the previous SEC settlement.

Read more: TrueUSD bank FlowBank forced into bankruptcy

The attestation further notes that Moore Hong Kong, the firm behind it, valued investments in that fund “at cost” and makes sure to note that its “procedures do not include an examination over the fair market value of the investments within the Fund.”

This means that even if the fair value of assets in that fund had fallen to zero, this attestation would continue to report the value at cost invested.

Additionally, the notes from Techteryx management signed by Jennifer Jiang (also of Sun-affiliated BiT Global, Sun-owned Poloniex, Sun-advised HTX, and Sun-owned BitTorrent), also state that these assets “may not be readily convertible to cash, subject to market conditions or fund performance.”

Currently, the reserves for the approximately $495 million in TUSD are made up of approximately $502 million held at First Digital and approximately $1 million in cash. 

Protos has reached out to TrueUSD to determine which fund it is currently invested in, but it did not immediately respond.

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During his speech at Bitcoin 2024, incoming US President Donald Trump promised to fire Gary Gensler as Chairman of the Securities and Exchange Commission (SEC).

“On day one, I will fire Gary Gensler and appoint a new SEC Chairman,” he declared to uproarious applause. “I didn’t know he was that unpopular. Let me say it again. On day one, I will fire Gary Gensler.”

Although there are some formalities to removing Gensler from office without showing cause — including the possibility of a legal challenge by the SEC itself — his resignation or involuntary departure seems likely at some point during 2025.

With Howard Lutnick co-chairing Trump’s presidential transition team and making recommendations for his replacement, several rumors have circulated about potential contenders.

Here are some popular guesses for candidates who might earn Trump’s endorsement to lead the SEC.

Read more: Trump discovered he was winning via Polymarket, says CEO

Hester Peirce

Currently one of five sitting SEC Commissioners, Peirce is well-known for her pro-crypto stance. She is often a dissenting vote in enforcement actions and publicly bemoans majority decisions by other commissioners, for example, to sue Coinbase, Ripple, Telegram, and others.

Nicknamed “Crypto Mom” by her fans in the industry, Peirce is an obvious candidate given that she already serves on the commission.

Brian Brooks

Brooks is another clear candidate for SEC Chair after Gensler vacates his seat. Brooks is the former Acting Comptroller of the Currency, a powerful bureau of the US Treasury, and a prominent executive in the crypto industry.

He briefly served as CEO of Binance.US and, importantly, saved face by resigning after only a few weeks on the job after he realized that Changpeng Zhao (CZ) was not complying with the Bank Secrecy Act (BSA). CZ later pleaded guilty to criminal violations of the BSA.

Read more: Gary Gensler and SEC probed over alleged politically-biased hiring

Chris Giancarlo

Giancarlo, the ex-Chairman of the Commodity Futures Trading Commission (CFTC), is one of two ex-CFTC leaders who is in line for a possible SEC Chair appointment. Giancarlo has favorable views on blockchain technology and is a co-founder of the Digital Dollar Project.

During his CFTC tenure, he approved the listing of bitcoin futures on the CME, defended his “Do No Harm” regulatory approach towards crypto in front of Congress, and earned the nickname “Crypto Dad.”

Heath Tarbert

Tarbert, like Giancarlo, is an ex-CFTC Chairman. Tarbert left the CFTC in 2021 to work for Citadel, a major market maker. Currently, Tarbert is the Chief Legal Officer and Head of Corporate Affairs at Circle, the issuer of the world’s second-largest stablecoin, USDC.

Paul Atkins

Atkins is a former SEC commissioner and currently co-chairs the Token Alliance, a pro-crypto advocacy group. He also runs a for-profit crypto consultancy, Patomak Global Partners.

Read more: Here’s why ‘news’ attacking Gary Gensler is all over crypto media

Dan Gallagher

From 2011-2015, Gallagher was a commissioner at the SEC. Nowadays, he is Chief Legal Officer at Robinhood. Both positions earned him positive reviews from the crypto community. He has maneuvered Robinhood’s crypto listings through SEC disclosures, emphasized the need for Congress to establish a regulatory framework for digital assets, and positioned himself as an advocate for responsible crypto innovation.

These candidates for SEC Chair are far more crypto-friendly than Gary Gensler. Although any appointed Chair must gain Senate confirmation, it’s likely that Trump will choose a pro-crypto government or business worker for the role, as opposed to Gensler’s famously anti-crypto stance.

Again, it’s worth reiterating that while Trump has expressed intentions to replace Gensler on “day one,” he must either show cause for job termination or risk a legal challenge to his expulsion by the Commission.

Currently scheduled to continue serving until June 2026, the particular process for removing Gensler from his leadership seat at the SEC remains unclear.

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Former Binance CEO Changpeng Zhao has moved to dismiss the Securities and Exchange Commission’s (SEC) amended lawsuit, claiming that the regulator can’t differentiate between crypto securities and Beanie Babies.

Binance and Zhao filed the motion to dismiss yesterday while alleging the SEC’s new filing “refuses to articulate any standard for courts, litigants, or market participants to know which crypto-asset transactions qualify as investment contracts, and which do not.” 

The SEC filed the lawsuit in June 2023 and amended it last month. It names Binance, BAM Trading Services Inc., and BAM Management US Holdings, alongside Zhao, as defendants. 

According to the motion to dismiss, winners and losers are being chosen “arbitrarily” by the SEC and “its non-test cannot differentiate securities from Beanie Babies at the pleading stage.” The filing then singles out five types of transactions that it believes the SEC has misinterpreted within its fresh allegations.

Read more: Binance founder CZ made over $25 million per day while in prison, report

The filing also wants to dismiss the SEC’s disgorgement request, calling it “meritless” and suggesting it would streamline the case by “avoiding burdensome and irrelevant discovery into Defendants’ finances.”  

It also asks the court to class the SEC’s request to limit Zhao’s participation in securities markets via BAM or Binance entities as “Moot.” Zhao was already banned from managing the Binance business as a part of his plea agreement.

Finally, its conclusion stated that, after 89 pages of court guidance, a hundred new allegations, and 16 months of expedited discovery, “the SEC’s amended claims still fail as a matter of law.”

“The problem is with the SEC’s legal theories, not the facts at its disposal,” it claimed.  

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On Thursday, an Eastern District of New York courtroom filled with over 70 bystanders to hear Richard Heart’s lawyers argue his case for dismissing the SEC’s lawsuit against him and his crypto projects HEX, Pulsechain, and PulseX.

At the outset, Heart’s lawyers contested jurisdiction, asking the judge to dismiss the lawsuit entirely because, in Heart’s view, the SEC lacks jurisdiction over him and the entities it is suing.

Heart says that, although he grew up near Pittsburgh, Pennsylvania, he lived in Finland and elsewhere abroad during the time periods in question. Moreover, he believes the unincorporated entities HEX, Pulsechain, and PulseX are not subject to the jurisdiction of US courts.

First order of business: Jurisdiction

Heart’s lawyers used a considerable portion of Thursday’s oral argument to argue their stance on the SEC’s lack of jurisdiction. They explained why Heart believes the SEC did not plausibly allege a domestic securities transaction, failed to satisfy pleading requirements, and failed to plausibly allege how HEX, Pulsechain, and PulseX transactions passed the US Supreme Court’s Howey Test.

According to one “Hexican” who attended the hearing live, “We pretty much won on that front that this is out of the SEC’s jurisdiction. You know, obviously you can’t sue open-source software.” Of course, whether or not the SEC has jurisdiction is up to the judge, not bystanders. She has not yet filed her determination.

That bystander also claimed that the SEC’s chronology of events contained errors that weakened the commissioners’ case during Thursday’s hearing.

For context, that same bystander soon fawned that Heart’s lawyers “adjusted the syntax of my mind” as “a chill ran up my spine.” He claimed the SEC was trying to “take away people’s right to transact” and glowed about how “it really felt we were part of something really special. I feel like Richard Heart changed the syntax of how the legal system is going to have to grapple with this new technology.”

Read more: Finland wants to detain Richard Heart, alleges millions in unpaid taxes

Next steps for HEX and Heart’s motion to dismiss

After discussing jurisdiction, Heart’s lawyers asked the judge to discredit the SEC’s fraud claims. 

The SEC’s stance is that Heart committed fraud by using investor funds for personal gain, selling Hexicans’ contributions of ETH and other altcoins to buy personal luxuries like watches.

Heart’s lawyers spent most of their time focusing on his repeated reminders to his fans that they should never expect to profit from the efforts of others. These prominent disclaimers, in addition to other factors, allegedly discredit the SEC’s fraud claims.

Within a few days, Judge Amon will decide whether the SEC’s case against Heart will continue as originally pleaded. The judge may grant or deny Heart’s motion to dismiss in full or in part.

Observers may watch the docket for her upcoming determination. A decision might take up to 90 days.

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Pro-Ethereum conglomerate Consensys has announced a mass round of layoffs that its founder and CEO Joe Lubin has primarily blamed on the Securities and Exchange Commission’s (SEC) “abuse of power” and “attacks.”

In a blog post announcing the 162 “right-size” job cuts — 19.5% of its 828 employees — Lubin also called out Congress for its “inability to rectify” Consensys’ legal woes.

The SEC is suing Consensys for several profitable business units that allegedly violate US law. In its June 28 suit, commissioners explained that Consensys’ Swaps feature of its MetaMask software acts as an unregistered broker that effects securities transactions on behalf of investors. Moreover, they say Consensys also sold unregistered securities through its MetaMask Staking.

Read more: SEC tries to expand crypto jurisdiction with Consensys lawsuit

For its part, the firm primarily argues that users control MetaMask software and do not rely on Consensys for these transactions. The SEC has counterargued in detailed court filings that the conglomerate’s suite of code, hosted services, nodes, relayers, and human-directed choices not only make MetaMask indispensable for many users but also demonstrate the company’s willful and profitable violations of law.

The main lawsuit is ongoing in the US District Court for the Eastern District of New York. The next meeting is scheduled for November 20 to set a schedule for evidence discovery.

Consensys has already lost one lawsuit against the SEC

Consensys has failed in many of its attempts to fend off SEC enforcement. Earlier this year, it preemptively sued the SEC after it received a Wells Notice.

On September 19, a federal judge dismissed that attempt. Lubin had asked a Texan court to rule that ETH transactions were somehow not securities transactions because they involved ETH, prohibit the SEC from suing companies for using ETH, and bless its Ethereum-friendly MetaMask wallet. The judge declined all of Lubin’s requests.

Consensys previously laid off 100 of its then-900 workers in January 2023. In 2018, when the company had some 1,200 workers, a layoff affected approximately 600 workers.

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Shortly after 3pm today in Boston, prosecutors charged 14 individuals with federal crimes involving at least four crypto companies: GotBit, CLS Global, MyTrade, and ZM Quant. According to the indictment, this enforcement action is “the first criminal prosecution of financial services firms for market manipulation and sham trading in the crypto sector.”

Employees at MyTrade, ZM Quant, and CLS Global were so eager to take on new clients that they even started to wash trade a token created by feds, NexFundAI. Caught red-handed in the act, law enforcement stepped in to shut down their trading accounts.

Allegedly, the targets of this indictment engaged in widespread fraud and manipulation of crypto asset prices by, among other things, pump-and-dumping under the guise of ‘market making.’ Four defendants have already pleaded guilty and authorities have already seized over $25 million worth of crypto assets.

The alleged market manipulation schemes involved 60 distinct crypto assets, including Saitama which once reached a $7.5 billion dollar market capitalization.

Among those crypto assets was NexFundAI, a token created at the direction of law enforcement as part of the investigation. Jodi Cohen, Special Agent in Charge of the Federal Bureau of Investigation, Boston Division, noted in the press release that “the FBI took the unprecedented step of creating its very own cryptocurrency token and company to identify, disrupt, and bring these alleged fraudsters to justice.”

The Securities and Exchange Commission (SEC) also filed a parallel civil action. 

Crypto market-manipulation-as-a-service

The SEC names Russell Armand, Maxwell Hernandez, Manpreet Singh Kohli, Nam Tran, and Vy Pham who allegedly hired so-called ‘market makers’ ZM Quant and Gotbit to provide, rather than actual market making, market-manipulation-as-a-service. This illegal conduct induced investment “by creating the false appearance of an active trading market,” according to the SEC. 

GotBit claimed to offer services as a market-maker – a controlled term that bad actors in the cryptocurrency industry borrowed for their own purposes to describe an array of non-market-making activities like proprietary trading and digital marketing services. 

Read more: Justin Sun directed wash trading scheme from his US apartment, SEC claims

In a pitch deck apparently from GotBit that was distributed by Virtual Versions, GotBit claimed “during the first minutes in the price discovery stage, we are going to push the price up to 10x to create FOMO and accumulate as much buying power as we can to reach extreme Xs and sell maximum tokens on the subsequent spike.”

According to the SEC, ZM Quant employees Baijun Ou and Ruiqi Lau, Gotbit employee Fedor Kedrov, and CLS Global employee Andrey Zhorzhes self-traded, manipulated markets, and engaged in trading practices with no economic purpose to create artificial trading volume each day.

At times, according to the complaint, these employees generated quadrillions of transactions and billions of dollars of fake trades.

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The Mango Market DAO failed to pass a proposal to pay off the Securities and Exchange Commission’s (SEC) $700,000 settlement after a major voter withdrew their vote hours before the deadline.

The proposal required 2% of participants to vote ‘yes’ so that $669,684 USD from the Mango DAO escrow account could be used to settle with the regulator.

According to X user @Henry_E__, the vote passed the 2% minimum threshold with 100 million votes. However, someone withdrew 80 million votes hours before the deadline and the vote failed to pass. Only three voters were registered by the time the deadline had passed. 

Read more: MNGO from FTX estate vote for Mango Markets buyback proposal

At this point, the vote could not be saved because, as Henry pointed out, no new ‘yes’ votes can be submitted 24 hours before the deadline. In this period, votes can only be withdrawn or submitted against the proposal. Another 52.2 million ‘yes’ votes were required for a successful verdict. 

Mango DAO still has a chance to pay the SEC

Despite the failure of this proposal, there is another vote, identical to this one, that has passed the quorum threshold with two days left until the deadline. This proposal currently has 210 million ‘yes’ votes from five voters and may result in the Mango DAO voting to pay the SEC.  

The SEC charged Mango DAO, Blockworks Foundation, and Mango Labs with various securities violations relating to unregistered offerings of MNGO and unregistered brokering. 

Last month, the SEC settled these charges. As part of the settlement, all three parties were not required to admit to or deny, the allegations put forward by the SEC. It was also agreed that all MNGO tokens would be destroyed. 

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TrustToken and TrueCoin have reached a $700,000 settlement with the US Securities and Exchange Commission (SEC) after being accused of defrauding investors of stablecoin TrueUSD (TUSD).

The SEC’s complaint, filed on Tuesday, alleges that the firms sent TUSD’s dollar backing to “a speculative and risky offshore commodity fund” and that after TrueUSD was acquired by Techteryx in late 2020, TrueCoin remained involved in the stablecoin’s operations until July 2023. During that period, the SEC believes the firms continued to insist that TUSD was backed “one-for-one by US dollars.”

This settlement does not include TrueCoin and TrustToken admitting or denying the allegations contained in the complaint.

Read more: What’s up with TrueUSD and the rest of TrustToken’s stablecoins?

“By the fall of 2022, TrueCoin and TrustToken became aware of redemption problems at the commodity fund,” the complaint continues. Despite allegedly becoming aware of these issues, the firms continued to represent TUSD as “backed dollar-for-dollar.”

Additionally, TrueCoin is said to have received “a portion of the interest earned on the TUSD reserves” from Techteryx.

This fund was apparently investing in a Hong Kong trust, which invested in “trade finance, structured trade, export finance, import finance, supply chain financing, and project financing of entities.” Allegedly, a memorandum for this fund included a note that it was “speculative” and stated that it was only suitable for those who could “bear the risk of losing most or all of their investment.”

By September 2024, “more than 99% of the assets backing TUSD were invested in the risky Commodity Fund.” The fund appears to be provided by First Digital Trust in Hong Kong, a long-time TrueUSD partner.

Read more: TrueUSD bank FlowBank forced into bankruptcy

Funds held at First Digital Trust are currently described in the attestations for TrueUSD as invested “in other instruments to generate yield, which are made up of investments that may not be readily convertible to cash, subject to market conditions or fund performance.”

• First Digital offers its own stablecoin, First Digital USD (FDUSD), which claims to be “a 1:1 USD-backed stablecoin.”
• The complaint also cites TrueFi (a not-really-DeFi lending market where investors could lend TUSD) as evidence that TUSD was offered and sold as a security.
• Alameda Research was one of the lead investors in the TRU token, which had some utility in TrueFi.

As part of the settlement with the SEC, TrueCoin and TrustToken have agreed to $163,766 in civil penalties each. TrueCoin has also agreed to $340,930 disgorgement with a prejudgement interest of $31,538.

Got a tip? Send us an email or ProtonMail. For more informed news, follow us on X, Instagram, Bluesky, and Google News, or subscribe to our YouTube channel. Quotes in bold are our emphasis.

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