Indian police arrest eight more in $300M crypto scam

The Chinese autonomous territory of Hong Kong is moving closer towards the issuance of stablecoin licenses, while 30 kilometers away on the Chinese mainland, the authorities in Shenzhen are warning against stablecoin investment scams. Hong Kong has set Aug. 1 as the effective date for its incoming Stablecoin Ordinance. Firms such as JD.com and Ant Group, an affiliate company of Alibaba Group, are understood to be interested in seeking licensing. Photo by ダモ リ on UnsplashSingle-digit license issuanceIn a recent interview with Chinese language newspaper Ming Pao, Christopher Hui, Hong Kong’s Secretary for Financial Services and the Treasury, outlined that stablecoin licenses are likely to be issued in 2025 following the passing of the Aug. 1 effective date, although he indicated that the number of licenses issued will remain in single digits. Hui hopes that stablecoins can address some of “the difficulties and pain points in the real economy,” like cross-border payments involving volatile local currencies. The official said that stablecoins can reduce transaction costs and facilitate cross-border transactions when based on fiat currencies and serving as effective payment tools. Yuan-based stablecoinsHui stated that the issuance of a stablecoin in Hong Kong which is based on the sovereign currency of another jurisdiction would only be permitted following “discussions with the relevant authorities."  It’s understood that the aforementioned Chinese e-commerce firms have been lobbying government for the approval of offshore yuan-based stablecoins. Last month, the Governor of the People’s Bank of China, Pan Gongsheng, acknowledged that stablecoins are disrupting global payments infrastructure. However, mainland China still has a mining and trading ban in place in relation to crypto, despite previous speculation that the country would open up to crypto. Hui expressed the view that where a stablecoin implicates another sovereign currency, there are additional risk factors that would have to be taken into account. Exploiting uninformed view of stablecoinsMeanwhile, 30 kilometers from Hong Kong, the authorities in Shenzhen have issued a warning to members of the public highlighting that scammers are exploiting the public’s uninformed view of stablecoins as a guise through which to lure victims into investment scams. They asserted that scammers are using new concepts, in this case stablecoins, for hype in an effort to peddle illegal fundraising, gambling, fraud and money laundering schemes.The Shenzhen Municipal Task Force Office for Preventing and Combating Illegal Financial Activities asked the public to report such schemes “engaged in illegal fundraising in the name of investing in stablecoins,” in order to enable the authorities to crack down on the illicit activity. The authorities added: "We urge the general public to remain rational in their investment decisions, avoid blindly trusting extravagant promises, develop a correct understanding of money and investment, stay alert to financial risks and avoid falling victim to scams." Last month, JD.com took to Weibo to warn the public that fraudulent JD stablecoins were being offered by scammers at a time when the company has yet to issue a stablecoin.

Huobi Delists USDD Stablecoin PairsHuobi Global, the Seychelles-headquartered cryptocurrency exchange, has made the decision to delist ten trading pairs, primarily involving tokens used in transactions with the USDD stablecoin issued by the TRON DAO Reserve.That’s according to an announcement published to Huobi’s website on Monday. These tokens are supported by TRON founder Justin Sun, who also acts as an advisor to Huobi. The delisting, effective from June 29, will impact several tokens, including the Cardano blockchain token ADA, Solana’s SOL, ApeCoin’s native token APE, MATIC from Polygon, FIL from Filecoin, and ETC from Ethereum Classic.Photo by Napendra Singh on UnsplashUnregistered securitiesAll of these tokens were offered on the Houbi platform in pairs with USDD. Additionally, trading pairs involving ARPA, GAS, QTUM, and ZKS with Bitcoin will also be removed from the platform. Huobi stated that these changes are aimed at providing users with an improved trading experience.Originating from China, Huobi has played a significant role in spot and derivatives trading for digital assets. The decision to delist these tokens follows their classification as unregistered securities in recent lawsuits by the US Securities and Exchange Commission against Binance and Coinbase. Prior to Huobi, Robinhood and eToro had already removed some of these tokens from their platforms.Stablecoins are designed to maintain a stable value by pegging them to less volatile assets like the US dollar. They achieve this by holding equivalent reserves of cash and cash-equivalent assets as collateral. Stablecoins are widely used by traders for transferring funds between exchanges and as a hedge against price volatility. This makes them some of the most heavily-traded tokens in the crypto space.USDD stabilityUSDD, the stablecoin at the center of this delisting, currently ranks as the eighth largest stablecoin by market capitalization, with approximately $750 million. Huobi is the primary exchange for buying and trading USDD, according to CoinGecko, a crypto market data provider. USDD is backed by various digital assets such as Bitcoin, Ether, and TRX, and it is issued by the TRON DAO Reserve. The TRON DAO Reserve operates as a decentralized autonomous organization (DAO), utilizing blockchain technology to automate voting and transaction processes.USDD is an algorithmic stablecoin, with the assets held in backing the coin over-collateralized to a level of 170%. Despite this, the stablecoin has had issues in maintaining its US dollar peg from time to time. The issue has been that the token is partly backed by the TRX token, the native token of the TRON ecosystem. If TRX backing is discounted, the stablecoin is only 49% backed.Reports indicate that Sun acquired a controlling stake in Huobi through a Hong Kong-based asset manager, reportedly paying around $1 billion in November. However, Sun hasn’t provided any details of any such ownership stake.Huobi’s decision to delist these trading pairs reflects the evolving regulatory landscape and the need for exchanges to ensure compliance with securities regulations. By removing tokens that have faced legal scrutiny, Huobi aims to maintain a robust and compliant trading environment for its users.

Temasek Cuts Pay Following FTX AutopsySingaporean state-owned investment firm, Temasek Holdings, has announced a reduction in compensation for executives responsible for the company’s investment in the now-defunct cryptocurrency exchange FTX. Temasek, once the second-largest outside investor in FTX, faced scrutiny after the collapse of the exchange.Photo by Emilio Takas on UnsplashNo misconduct findingOn May 29, Temasek released a statement confirming the completion of its internal review of the $275 million investment loss incurred from FTX. The review determined that there was “no misconduct” within the company. However, both the investment team and senior management took “collective accountability” and experienced a reduction in their compensation.While acknowledging the inherent risks associated with any investment, Temasek emphasized the importance of continuing to invest in new sectors and emerging technologies to understand their potential impact on the business and financial models of existing portfolios. They recognized the need to adapt to an ever-changing world and explore avenues that could drive future value.It’s worth noting that the $275 million loss from the FTX investment constituted only 0.09% of Temasek’s portfolio value, which stood at over $293 billion at the time of the collapse.Temasek maintained that it conducted extensive due diligence before investing in FTX, emphasizing its commitment to a thorough review process. Chairman Lim Boon Heng stated in a May 29 interview with Bloomberg that there was fraudulent conduct intentionally hidden from investors, including Temasek. The negative outcome of the investment has been disappointing for the company and has had a significant impact on its reputation.Reputational damageSingapore Deputy Prime Minister Lawrence Wong echoed similar sentiments, highlighting the financial loss and reputational damage caused by the FTX collapse during a parliamentary meeting in November 2022.During the due diligence process, Temasek reviewed FTX’s financial statements, assessed regulatory risks related to financial service providers in the cryptocurrency market, and sought legal advice. The company also engaged with individuals who had firsthand knowledge of FTX, including employees, investors, and industry participants.In recent news, Temasek addressed and dismissed rumors about a $10 million investment in Array, a developer of algorithmic currency systems based on smart contracts and artificial intelligence. The company clarified that such reports were incorrect, refuting the circulating news articles and tweets.Temasek’s internal review process is certainly a move towards transparency and accountability. It indicates a willingness towards addressing the matter. That said, there are FTX creditor groups who fervently disagree with Temasek’s analysis.Class action lawsuitEarlier this year a number of FTX creditors filed a class action lawsuit against a number of venture capital (VC) firms, including Temasek. The FTX customers maintain that Temasek and others played a role in a conspiracy to defraud them. Venture capital firms have countered with the view that they themselves were victims as a consequence of the FTX collapse, suffering multi-million dollar losses.The fact remains that VCs get much further involved than merely handing over a check. They get involved with marketing, operations, and many other facets of the businesses of their portfolio companies. Meanwhile, other creditors suggest that Temasek has a responsibility to do right by the 1.4 million FTX creditors (a disproportionate number of them being Singapore-based) and to invest in a restructured FTX business, an option that represents the best opportunity for FTX customers to recover their funds.Temasek may have reached certain conclusions by way of their internal report on the matter but this is not likely to be the final analysis relative to its involvement in the fall of FTX.