Sun Flags Unjust Token Profits of Huobi Founder’s Brother

The Virtual Assets Regulatory Authority (VARA), the regulatory body which oversees the digital assets market within the emirate of Dubai in the United Arab Emirates (UAE), has taken corrective action against seven unlicensed crypto entities. Fines issuedAccording to an enforcement notice, published to the VARA website on October 8, the agency issued fines relative to a number of firms that it found were engaging in unlicensed virtual asset-related trading activity. The fines ranged from between 50,000 to 100,000 UAE dirhams (AED), equivalent to between $13,600 and $27,200 in U.S. dollars. The agency outlined that it was taking this corrective action in order to continue its enforcement efforts so as to safeguard Dubai’s virtual asset ecosystem. In its enforcement notice, the regulator did not disclose the names of the entities that have been sanctioned. The agency said that its investigations are ongoing, in partnership with local law enforcement.  A statement from the Regulatory Affairs and Enforcement division within VARA was provided, stating: “VARA will not tolerate any attempts to operate without appropriate licenses, nor will we allow unauthorized marketing of virtual asset activities. Our marketing regulations further emphasize Dubai’s commitment to ensuring transparency and always protecting stakeholder interests.”Photo by Alex Block on UnsplashCease and desist ordersIn addition to fines, VARA also issued the seven firms with cease and desist orders for breaching marketing regulations. Marketing by crypto firms is an area the regulator has been focusing on recently. Last month, VARA published a press release, outlining that it had updated its crypto regulations to specifically deal with marketing-related matters. Alongside that update, it issued a guidance document, clarifying the responsibilities of virtual asset service providers (VASPs) relative to marketing practices. A schedule of fines was provided in the case of a breach of the regulations, while the update set out a need for a mandatory disclaimer on marketing material to indicate that virtual assets are volatile and may lose their value, fully or partially. The Dubai regulator is not the first to home in on the marketing activities of crypto businesses. In the UK, the Financial Conduct Authority (FCA) enforced additional rules related to crypto marketing in late 2023. Some crypto businesses found the requirements too arduous and left the UK market as a direct consequence. Public warningIn its enforcement notice, the Dubai regulator also had a message for the trading and investing public, stating: “This public warning is VARA’s market notice to all to avoid engaging with any unlicensed firms.” The regulator added that interacting with unlicensed entities exposes both individual investors and institutions to both financial and reputational risk.  Furthermore, it warned of “potential legal consequences” for regulatory violations. “Only firms licensed by VARA are authorised to provide virtual asset services in/from Dubai, and the Authority remains steadfast in its commitment to protect consumers and investors, and to preserve market integrity,” the regulator further asserted. 

Hong Kong-based digital asset financial services firm HashKey Group has announced its intention to list its platform token, HSK, in Q3 2024. HSK tokenomicsThe company set out details of the HSK listing via a series of posts on the X social media platform. The HSK token is based on the Ethereum ERC-20 token standard. Total token supply will be capped at one billion, 65% of which will be allocated towards ecosystem growth. The team will be incentivized by the allocation of 30% of the supply while 5% will be held back in a reserve fund.  Regarding the token’s burning mechanism, HashKey revealed it retains the discretion to repurchase up to 20% of net profits from specified businesses and subsequently burn the acquired tokens from the total supply.Photo by Zoltan Tasi on UnsplashAirdrop imminentIn a statement shared with The Block, HashKey Group detailed that HSK will be integrated across its various products and applications. The community airdrop, launching in late June, aims to encourage user participation. The company stated:“HSK is scheduled to launch a community airdrop through HashKey's core businesses in late June, encouraging users to contribute to community building.” The company believes that HSK will incentivize ecosystem contributors when it comes to development of its layer-2 ecosystem chain, the HashKey Chain. That incentive structure, the company maintains, will result in contributors “providing robust support,” while acting as a “driving force for on-chain users and assets.”  Integration with external ecosystemsThe firm outlined that the HSK token is designed to integrate with external crypto ecosystems so as to best facilitate synergy between internal and external collaborations. HashKey Group boasts a comprehensive Web3 ecosystem, inclusive of infrastructure, middleware, AI, DeFi, GameFi and the Metaverse. HashKey Group’s core businesses include HashKey Capital, HashKey Tokenisation and HashKey NFT. It also operates HashKey Exchange, a licensed cryptocurrency exchange in Hong Kong, with the exchange business having reached a $500 million assets-under-management (AUM) milestone earlier this month.  HashKey Cloud, a Web3 infrastructure provider, formed a strategic partnership with the Aptos Foundation last month with a view towards progressing projects relative to decentralized identity (DID) and security token offerings (STOs). HashKey Global, a global exchange launched in April, has risen to ninth spot in terms of overall crypto exchange trading volume. In January, HashKey Group announced that it raised nearly $100 million in its Series A financing round, achieving a pre-money valuation above $1.2 billion. In September, the investment arm of the company, HashKey Capital, launched a $100 million fund focused on altcoins.

HTX experiences $258 million outflow post-hackHTX, the digital-asset trading platform associated with Chinese-born crypto mogul Justin Sun, has witnessed a substantial net outflow of $258 million since resuming operations after a significant security breach.According to Bloomberg, data from DefiLlama indicates that the outflow occurred between the exchange’s restart on Nov. 25 and Dec. 10, signaling unease among some clients following last month’s cyberattack. In November, HTX reported a loss of $30 million in crypto tokens due to the breach, prompting a temporary suspension of withdrawals and deposits.Towards the end of last month, the platform re-enabled withdrawal services for major cryptocurrencies, gradually bringing the exchange back to full service, supporting withdrawal of all digital assets.Photo by Amritanshu Sikdar on UnsplashMultiple hacksJustin Sun is also associated with the Poloniex exchange and the HECO Bridge, a network established by HTX for blockchain transfers. Both Poloniex and HECO fell victim to hacks in November, resulting in the theft of approximately $200 million in crypto. It’s worth noting that hackers had previously stolen $8 million from the HTX platform in September.HTX, which was formerly known as Huobi up until a business rebrand in September, boasts an average trading volume of $1.5 billion in the past 24 hours, securing its position as the fifteenth largest exchange when measured in terms of trading volume.Increased vigilanceIn the wake of several high-profile crypto platform failures in 2022, digital-asset investors are increasingly vigilant about monitoring flows and reserves at virtual currency exchanges. In particular, that trend gained momentum after the FTX platform’s collapse last year due to fraud.November turned out to be the most damaging month this year so far in terms of platform digital asset theft. Exit scams and exploits encountered during the month totaled a staggering $363 million in losses.In October, the UK’s Financial Conduct Authority (FCA) included HTX, alongside KuCoin, on a warning list, due to their promotion of services in the UK, without having obtained the required regulatory approvals.A third of reserves in BitcoinDefiLlama data reveals that Bitcoin constitutes the largest portion of HTX’s reserves, accounting for approximately 33%. Tron’s TRX token, launched by Sun in 2017, represents around 32% of the reserves. HTX’s native exchange coin, HT, makes up 14%, followed by a Sun-backed token named stUSDT at 12%.In August, Travis Kling, Founder of Ikigai Asset Management, had this warning relative to Sun and HTX:”Justin Sun is a criminal. There’s a hole in Huobi, a hole in TUSD and a hole in Tron DeFi. Act accordingly.”TRX, at the center of U.S. fraud allegations against Sun, prompted a March lawsuit by the Securities and Exchange Commission (SEC), accusing him and his firms of market manipulation to inflate the token’s trading activity. Sun dismissed the suit on the X social media platform back in March, stating that it “lacks merit.” On Sunday, Sun claimed that the Tron blockchain network which he founded had reached a new milestone of 200 million users.Despite security firm BlockSec reporting the recovery of the $8 million stolen in September, hackers still appear to control the $30 million taken last month. The ongoing situation raises concerns about the security measures and resilience of HTX in the face of persistent cyber threats.