Rapture #258: Heat Continues to Rise for Offshore Crypto
The heat continues getting turned up in crypto, especially for the players who opted to primarily operate offshore. There has been major news items to come out regarding FTX, Binance, and Do Kwon in the past 48 hours.
Do Kwon hiding in Serbia
Do Kwon, the infamous leader of Terra Luna, is now reportedly hiding out in Serbia. Previously, he was rumored to have been in Dubai. The Southern District of Seoul stated that it would collaborate with authorities in Serbia to detain Kwon who has been charged with fraud and violations of capital markets law.
Serbia is an interesting place for Do Kwon to hide. Likely, he is positioning himself to get to Russia, as Serbia has been having regular consultations with Russia and historically has been aligned with the country.
I doubt he makes it to Russia, but we will see. I am sure many are interested in his whereabouts.
Binance under duress
Yet Do Kwon is not the only one in the hot seat. Differences of opinions amongst prosecutors are delaying an ongoing investigation pursued by the DOJ against CZ and Binance. The investigation originally began in 2018 and is being pursued by the Money Laundering and Asset Recovery Section, the US Attorney's Office for the Western District of Washington in Seattle and the National Cryptocurrency Enforcement team.
Binance's defense attorneys in recent months have been holding meetings with the US Justice Department. Three sources stated that the discussions have involved potential plea deals. Specifically, the charges being examined are criminal sanctions violations, money laundering conspiracy, and unlicensed money transmission.
Additionally, it was recently discovered that Binance did not meet its 1:1 ratio of reserves to customer assets. Liabilities would have been approximately $9.68 billion while assets would have been $9.43 billion, which is $245 million smaller.
According to nansen data, an on-chain analytics platform, there have been $902 million of net outflows from Binance in the past 24 hours, likely stemming from the fact that customers are worried about the health of the exchange. Furthermore, leading institutions like Jump are pulling their money from the exchange.
Offshore crypto seems to be under significant duress.
SBF arrested
The big news of the day.
Within the past few hours, the Bahamian government moved to arrest SBF. Bahamian authorities arrested SBF at the request of the US Government based on a sealed indictment filed by the SDNY, the big guns of investigative offices. The SDNY will look to unseal the document in the morning.
He will likely not be able to video in for the House Financial Services Committee hearing tomorrow because of this arrest.
SBF has been charged with Wire Fraud, Wire Fraud Conspiracy, Securities Fraud, Securities Fraud Conspiracy, and Money Laundering according to the NYT.
I don't want to sound too conspiratorial, but the whole SBF/Alameda/FTX saga stinks. I hope he gets to have his day in court so justice can properly be served.
Takeaways
This year, most of the major faces and players of offshore crypto have been shown to be frauds or are under investigation for severe crimes. While I absolutely think there are legitimate offshore players, I think the events of the past year will lead to a robust regulatory framework for the space that is spearheaded by the US.
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