NFT Fraud & Money Laundering Case | Binance’s $500 Million Web3 War Chest

NEW MARKET, OLD SCHEMES

On Wednesday, Nate Chastain, a former high-ranking employee of dominant non-fungible token (NFT) marketplace OpenSea, was indicted for alleged fraud and money laundering in a case federal prosecutors in the Southern District of New York characterized as “insider trading in non-fungible tokens.” The indictment claims that Chastain would buy up NFTs in advance of their getting featured on OpenSea’s front page and resell them “at profits of two to five times his initial purchase price.” He was further accused of using anonymous digital currency wallets and anonymous accounts on OpenSea to conceal his purchases.

Though NFTs don’t seem to be covered by the Securities Act of 1934, which bars insider trading in stock and other financial securities, Forbes associate editor Jeff Kauflin explains in this article that prosecutors are now making it clear that they won’t let that technicality stop them from using federal fraud charges to go after unsavory practices in the novel market.

CRYPTO'S NEW MEGA FUND

Binance Labs, the venture capital arm of cryptocurrency exchange Binance, has closed a $500 million fund that will invest in Web3 and blockchain startups across three different stages: incubation, early-stage venture and late-stage growth—the latest bullish signal for crypto as investors are struggling to reconcile broad investments with sharp price declines resulting from a slew of macroeconomic challenges.

The largest digital asset by market capitalization, bitcoin, closed May, a historically strong month, with 20% losses. As of Thursday afternoon, bitcoin was trading at $30,248 while most major cryptocurrencies are trading sideways.

INSURERS ARE BEGINNING TO WARM TO CRYPTO INVESTING

Despite the recent carnage, 6%, or roughly 20 of the 328 chief investment and financial officers surveyed by Goldman Sachs, representing nearly half the $26 trillion global insurance industry, indicated they had invested in crypto or are considering doing so. In her first article since joining Forbes earlier this week, reporter Rosemarie Miller explained that the cryptocurrency came in fifth behind private equity, commodities and emerging market equities; while sitting just above middle-market corporate loans, traditionally consisting of loans from banks, finance companies and debt funds.

According to Mike Siegel, Goldman Sachs’ global head of insurance asset management and liquidity, this was the first time Goldman Sachs asked insurance companies about crypto. Notably, singling out U.S.-based insurers would increase the crypto interest level to 11% versus 6% for insurance companies globally.

Source: Forbes Digital Assets, powered by Nomics.  Prices as of 4:00 p.m. on June 3, 2022

‘CRYPTO WINTER’ HALTS HIRING SPREE

Tough times call for tough measures. This week, a number of crypto companies announced layoffs and hiring pauses. The largest crypto exchange in the U.S., Coinbase, had even rescinded a few accepted offers, citing the current market conditions. Earlier on Wednesday, the Winklevoss twins’ Gemini decided to lay off 10% of its staff.

While nearly the entire cryptocurrency market was impacted by a collapse triggered by several issues, ranging from an overall market downturn that saw stocks fall for five weeks straight, and the collapse of a $60 billion ecosystem powered by the Luna cryptocurrency, Coinbase’s difficulties likely predate the turmoil. Coinbase’s shareholder letter published on May 10 reported that revenues from the fourth quarter in 2021 dropped 27% to $1.17 billion in the first quarter of 2022; meanwhile, its operating expenses more than doubled to $1.72 billion.

BLOCKCHAIN 50 SPOTLIGHT

China Construction Bank: The world’s second-largest bank, with $4.7 trillion in assets, has so far processed $141 billion worth of transactions on private blockchains for everything from supply-chain financing to cross-border payments. Among its more recent products is EasyPay, designed to make it simpler for corporations to send large, paperwork-intensive transactions with fewer errors and less need for audits. If a company in Guangxi wants to buy palm oil from Labuan, Malaysia, the counterparties can load their trade contract, receipts and waybills into the shared ledger. Local CCB branches can then process both halves of the trade in parallel, instead of sequentially. The result: Total settlement time is reduced from two days to about ten minutes. The platform now connects 14,000 bank locations.

ELSEWHERE

CFTC Sues Gemini Over Bitcoin Futures Case From 2017 [CoinDesk]

Crypto Bosses Flex Political Muscle With 5,200% Surge in U.S. Giving [Bloomberg]

Farmers Fear Crypto Boss Sam Bankman-Fried Will Cost Them Sleep [Financial Times]

Michael del Castillo
Senior Editor 
Forbes Digital Assets

Nina Bambysheva
Reporter
Forbes Money & Markets

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