China deepens crackdown on crypto and real-world asset tokenization

Hong Kong Authorities Unite to Form Crypto-Centric TaskforceAuthorities in Hong Kong are taking action to address recent mounting concerns surrounding illicit cryptocurrency activities, particularly in light of the recent JPEX scandal. The Hong Kong Police Force and the Securities and Futures Commission (SFC) have come together to establish a specialized working group dedicated to closely monitoring and countering suspicious activities connected to virtual asset trading platforms (VATPs).In a statement published by Hong Kong’s Securities and Futures Commission (SFC) on Wednesday (local time), the agency set out details of a collaborative task force which has been formed in the wake of a high-level meeting held on September 28.The collaboration draws on input from the SFC as well as a number of law enforcement divisions within the Chinese autonomous territory, including the Commercial Crime Bureau, Cyber Security and Technology Crime Bureau, and Financial Intelligence and Investigations Bureau.Photo by Cheung Yin on UnsplashGreater coordination and information sharingThe primary objectives of this alliance are to enhance coordination, foster information sharing, assess risks tied to VATPs, and, above all, safeguard the interests of the Hong Kong public.Christopher Wilson, Director of Enforcement at the SFC, underscored the regulator’s commitment to allocating resources to combat problematic VATPs and safeguard investor interests. Eve Chung, Assistant Commissioner of Police (Crime) at the Hong Kong Police Force, emphasized the significance of intelligence exchange and collaborative efforts in responding to the challenges posed by VATPs to protect the Hong Kong public.Knee jerk response to JPEX scandalIt would appear that the necessity for such a concerted effort became patently clear as a direct response to the errant activities of Dubai-based crypto platform JPEX within Hong Kong.Issues with the exchange first emerged in September when the platform outlined that it was having liquidity issues as a consequence of some third party market makers having withdrawn their services. JPEX subsequently raised withdrawal fees to an unreasonable level to deter customers from withdrawing funds from the platform.The saga has affected over 1,600 investors with more than $150 million in assets becoming unavailable to them. The case resulted in the arrest of at least 20 individuals, with local telecom providers blocking online access to the platform as requested by law enforcement.Earlier, on September 13, the SFC had issued a warning accusing JPEX and crypto influencers of disseminating false or misleading information on social media about their application for a virtual asset trading license in Hong Kong.The ongoing JPEX controversy has prompted regulators in Hong Kong to explore measures to strengthen regulations governing the cryptocurrency market. The establishment of the task force signifies a proactive stance to address these concerns and ensure swift, effective action against illicit activities in the crypto sector.In addition to the joint task force, the SFC has taken steps to enhance transparency by publishing a comprehensive list that includes licensed, deemed licensed, closing down, and application-pending crypto exchanges, along with a list of “suspicious VATPs.” This transparency initiative aims to provide clarity and protect investors by offering insights into legitimate and questionable cryptocurrency trading platforms operating in Hong Kong.

A settlement agreement between failed crypto lender BlockFi and bankrupt Singaporean crypto hedge fund Three Arrows Capital (3AC) has received approval from a U.S. judge. However, the specifics of the settlement remain sealed, citing concerns raised by yet another failed crypto platform, FTX. Dispute resolvedDuring a hearing on Feb. 6, New Jersey Bankruptcy Court Judge Michael Kaplan resolved the dispute, which saw BlockFi claiming $129 million owed by 3AC, while the Singapore-based firm contended that BlockFi owed it $280 million. Judge Kaplan's decision to keep the settlement agreement sealed stemmed from a perspective that unsealing it would be counterintuitive. BlockFi had filed a motion to seal the settlement terms last month. The U.S. Trustee objected to the seal, asserting that the debtors hadn't provided sufficient justification for sealing the agreement.Photo by mk. s on UnsplashSensitive settlement termsBlockFi justified the need for confidentiality, citing the sensitive commercial nature of the terms, which could potentially impact ongoing litigation involving FTX. The approval of the settlement now paves the way for BlockFi to proceed with distributions from the lending estate to its 100,000 creditors, with the firm owing up to $10 billion. Central to the dispute were preferential payments, transactions made just before bankruptcy that could have given the recipient more than they would have received through court proceedings. The resolution of counterclaims between BlockFi and 3AC follows mediation ordered by Judge Kaplan in October, likely culminating from a two-day hearing starting on Jan. 5 aimed at resolving the matter conclusively. This settlement follows another agreement between 3AC and Genesis, settling $1 billion in claims by 3AC. The company filed for bankruptcy in July 2022, attributing the extreme fluctuations in cryptocurrency markets as the reason for its collapse. Projected 46% 3AC creditor recoveryAccording to a December report to creditors by Teneo, it's estimated that 3AC creditors will receive approximately 45.74% of their claims from the bankrupt estate. As of Dec. 18, 2023, 3AC's assets were valued at $1.16 billion, while recognized claims for distribution stood at $2.7 billion. In an ongoing effort to secure 3AC's assets, a British Virgin Islands (BVI) court froze $1 billion in assets belonging to 3AC's founders, amid the liquidation process. This move is part of a broader strategy to seek recoveries from the founders and Kelly Chen, wife of one of the co-founders. 154 claims totaling $3.4 billion were filed against the 3AC estate, with $200 million not admitted for distribution and $322 million rejected or expected to be rejected. Additionally, claims worth $76 million are currently under dispute. BlockFi, along with eight affiliates, filed for Chapter 11 bankruptcy in November 2022. The firm cited significant exposure, including obligations owed to BlockFi by FTX-linked hedge fund Alameda Research, assets on the FTX platform and an undrawn credit line from FTX. 3AC’s collapse in June 2022, followed by FTX's downfall, led to BlockFi's bankruptcy filing in late November 2022. In a separate development, OPNX, a crypto bankruptcy claims platform launched by 3AC co-founders Su Zhu and Kyle Davies, announced its cessation of operations, with plans to shut down by Feb. 14.  

Sleek Secures $5M seed funding to propel Web3 social networking offeringHong Kong-based startup Sleek has successfully raised $5 million in seed funding to advance its Web3 social networking platform, aiming to further the ownership economy and introduce blockchain-powered social media accessible to a broad audience.Photo by micheile henderson on UnsplashIncentivized networking through ‘SocialFi’Officially launched in April of this year, Sleek aspires to reshape human connections by simplifying networking, infusing a sense of fun and fostering productivity. The platform provides users with an expansive environment where they can exchange information, connect with new contacts and participate in incentivized networking through innovative Web3 social finance (SocialFi) business models.In essence, SocialFi employs blockchain technology with the objective of monetizing social interactions. The concept has come to broader attention in recent months as a consequence of the emergence of Friend.tech, a novel way for creators to monetize content, by way of tokenizing attention. Sleek enables users to directly monetize their content and social capital, emerging as a new generation of creators within the Web3 landscape. Sleek Co-Founder Chase Guo explained to The Block how it differs from other Web3 social networks:“Most of the time, this strategy [bootstrapping a platform using tokens or incentives] does not result in unique content generation and sustainable growth. People are here for the airdrop and leave once they cash out. Sleek took a very different approach — build a real use case first with die-hard fans.”Sleek CardAt the forefront of Sleek’s offerings is its flagship product, Sleek Card, specifically designed to empower Web3 professionals in face-to-face networking. Each Sleek Card generates a blockchain wallet and a decentralized identity for users, streamlining the onboarding process into the Web3 space.Utilizing NFC technology and a proprietary messaging bot, Sleek Card allows users to capture data and manage contacts, resulting in robust on-chain social graphs. Notably, Sleek Card has facilitated over 300,000 connections, establishing itself as a key player in the Web3 landscape. The platform has also formed strategic partnerships with prominent entities such as Solana Hacker Houses, Coinfest, Digital Art Fair and NFTNow, bringing innovative event experiences to life.Both of the startup’s founders spoke about the body of work Sleek is involved in. Co-Founder Tania Tse stated:“We are launching monetization models in our platform that are only possible through the blockchain, so talented creators from various verticals who don’t have a full team supporting them can earn sustainably.”Chase Guo added: “Leveraging our own experiences and lessons learned, we are building applications alongside our users to power the future of Web3 social.”Looking ahead, Sleek plans to unveil an open marketplace in the first half of 2024, empowering domain experts to become creators by tokenizing their knowledge into liquid and accessible assets. This strategic move aligns with Sleek’s vision for a more equitable, user-centric and transparent digital social landscape.Broad industry backingSleek’s investor roster includes well-known names such as Shima Capital, Spartan Group, Symbolic Capital, Genblock Capital, Big Brain Holdings, Market Across, Emirates Consortium, Arkstream, Perridon, GBV and various angel investors. Notably, Binance Labs, the venture capital arm of Binance, invested in Sleek through the Binance Labs Incubation Program in 2022.