SEC Sued To Define Ether | Samouri Wallet Shut Down On Money Laundering Charges

The asset manager’s new short-term credit fund is hosted on the Ethereum blockchain.

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Mitchell Martin Senior Editor, Forbes Money & Markets
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Steven Ehrlich Director, Forbes Digital Assets
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METAMASK MAKER CONSENSYS SUES SEC TO FORCE AGENCY’S HAND ON ETHER

Ethereum developer Consensys sued the U.S. Securities and Exchange Commission to pre-empt an expected enforcement action and force the agency to clarify its position on whether ether is a security.

The maker of the popular MetaMask digital-asset wallet was put on notice earlier this month that the SEC planned to take action against it for illegally engaging in securities broker-dealer functions and offering unregistered securities. The Consensys suit seeks to forestall that threat and prohibit the regulator from asserting jurisdiction over ether, which has a $380 billion market value, second only to bitcoin.

In its complaint, filed in the district court for the Northern District of Texas, the Fort Worth, Texas-based firm disclosed that on April 10 it received a Wells Notice from the SEC stating the agency’s intent to bring an enforcement action against Consensys for allegedly violating the Securities and Exchange Act of 1933.

“This is an action that we’ve been contemplating for quite a while,” says Lubin. “It appears to us that the SEC is interested in slowing, harming or destroying Ethereum and in disconnecting American developers and users from the Ethereum network. We find it bizarre that Chair [Gary] Gensler hasn’t been able to say, unlike so many before him in the SEC and the CFTC, whether ether is a security. So we wonder if the court can be made to finally rule on that issue.”

U.S. TAKES DOWN SAMOURI WALLET ON MONEY LAUNDERING CHARGES

Washington’s war on crypto mixers–systems that attempt to hide the parties to token transactions–claimed the founders of Samouri Wallet, who were arrested and charged with conspiracy to commit money laundering and operate an unlicensed money-transmitting business. CEO Keonne Rodriguez and Chief Technology Officer William Lonergan Hill face up to 25 years in prison on the charges, even though Samouri itself was just software to create a digital wallet.

The U.S. Department of Justice alleged that Samourai facilitated more than $2 billion in “unlawful transactions and laundered over $100 million in criminal proceeds.” While Samourai was marketed as an online privacy service, the DOJ asserted, Rodriguez and Hill “intended and well knew, a substantial portion of the funds that Samourai processed were criminal proceeds passed through Samourai for purposes of concealment.” Samourai ran a computer server that supervised and facilitated transactions among users and created new bitcoin addresses used during transactions. Associated services helped users conceal ownership by coordinating exchanges of crypto among them and allowing multiple transfers of tokens to different addresses. The U.S. has seized its website.

The case may not be cut and dried. “There are a lot of tricky legal issues here,” said Zach Shapiroa, legal fellow at the Bitcoin Policy Institute. “This is where it’s really important that these guys have good lawyers, that both understand the technology and are going to be taken seriously by the judge and the prosecutors.”

The Treasury considers mixers to be to be money transmitters, subject to regulation under the Bank Secrecy Act, and Washington has not been shy about taking actions against them.

CURRENT PRICE OF TOP 5 COINS (7-Day % Change)

Coin

Price

Percent Change

Bitcoin (BTC)

$63,975

0.1%

Ether (ETH)

$3,148

2.1%

Tether (USDT)

$0.9999

0.1%

Binance Coin (BNB)

$602

7.6%

Solana (SOL)

$142

0.6%

Sources: Forbes Digital Assets, CoinGecko. Prices as of 6:00 p.m. on April 26, 2024.

ANCHORAGE DIGITAL READIES SYSTEM TO SETTLE CRYTPO-TRADFI TRANSACTIONS

Anchorage Digital Bank is stepping into the void left by the shuttered Silvergate and Signature banks, which served as bridges between the worlds of traditional finance and cryptocurrencies. Anchorage, based in San Francisco and federally chartered, is launching Atlas, a global network designed for the settlement of cash and digital-assets transactions. Anchorage is one of the largest crypto custodians, overseeing more than $50 billion in assets. Its investors include Apollo Global Management, Goldman Sachs, Andreesen Horowitz and GIC, Singapore’s sovereign wealth fund.

Atlas is designed to handle hundreds of digital assets around the clock. It provides direct blockchain settlement between wallets, instead of relying on intermediaries, ensuring assets remain with parties until the moment of settlement.

RISING METAVERSE SPENDING OVERSHADOWS META’S EARNINGS BEAT

Meta Platforms, a company that makes most of its money selling advertising and spends much of its income trying to make a place for itself in the metaverse, lost 8% of its value last week as investors reacted badly to the company’s tepid outlook for second-quarter sales and persistent unprofitable investments in its Reality Labs division. Although it reported better-than-expected first-quarter results, an indication that it might not meet Wall Street estimates for the current quarter and revelations of rising expenses for all of 2024 sent its shares tumbling. Meta, which changed its name from Facebook to signal its dedication to the metaverse in 2021, promptly reported five straight quarters of declining earnings before returning to growing profit at the start of last year. But Reality Labs, the metaverse division, has lost $37 billion during its 2.5-year existence, and the reminder that it is still burning cash rankled investors.

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