South Korea: Crypto Exchange Execs Indicted on Manipulation Charges

CoinFLEX’s Creditors Sue CEO and OPNX in Legal DisputeCreditors of Seychelles-incorporated crypto platform CoinFLEX have taken legal action against its CEO, Mark Lamb, alleging that his involvement in launching the claims trading platform OPNX violated his fiduciary duties to CoinFLEX.Photo by Sasun Bughdaryan on UnsplashDissatisfied CoinFLEX creditorsAccording to the civil action, which was filed in a Hong Kong court earlier this month, they view OPNX as a competing business to CoinFLEX. The lawsuit also implicates CoinFLEX investor Roger Ver.Lamb joined forces with Su Zhu and Kyle Davies, the founders of the now-defunct Singaporean crypto hedge fund Three Arrows Capital (3AC), to introduce a platform for trading bankruptcy claims, initially named GTX (later rebranded as OPNX). CoinFLEX co-founder Sudhu Arumugam also backed the project, with Leslie Lamb, Mark Lamb’s wife, installed as CEO.Lamb and CoinFLEX defended the project, claiming it would enhance transparency in financial markets and benefit CoinFLEX creditors. However, creditors argue that Lamb’s actions indicate a strategic move to distance himself and his associates from CoinFLEX. With that, they’re seeking to prevent him from representing CoinFLEX in the future.Complaint detailsThe creditors of CoinFLEX assert that OPNX was not authorized by CoinFLEX’s board or creditors and that Mark Lamb independently appropriated CoinFLEX’s intellectual property, technology, customer base, and employees to create the claims exchange.They accuse Lamb of entering into a harmful licensing and purchase agreement with OPNX’s parent companies, Open Technologies Holding LTD and Open Technology Markets LTD. Through their lawsuit, the creditors are aiming to nullify these agreements and place OPNX’s assets and profits into a trust.OPNX’s strugglesOPNX has faced difficulties from the point at which it was launched. While Zhu and Davies were once leading figures in the digital assets space, their reputations have been severely tarnished due to the manner of the 3AC collapse and its profound impact on the broader crypto market.In April the platform confirmed backing from various venture capital (VC) entities only for many of the VCs to turn around and deny any such involvement with the project. Having issued an investor and marketplace alert in relation to the firm in April, a short time later the Virtual Asset Regulatory Authority (VARA) in Dubai issued a formal reprimand to the business' founders.VARA followed up in August, applying a $2.7 million fine. OPNX had entered a bid for troubled Singaporean crypto lender Hodlnaut as part of that business restructuring process. The offer was turned down on the basis that the deal involved OPNX’s native OX token, which was deemed to be far too illiquid. A short time later, the OX unit price plummeted.Zhu was arrested in Singapore last month in connection with non-compliance related to 3AC’s bankruptcy, while Davies’ whereabouts remain undisclosed.CoinFLEX’s creditors also accuse Lamb of reaching a settlement agreement with Roger Ver, known as “Bitcoin Jesus.” Ver was one of CoinFLEX’s initial investors but later became entangled in a dispute over an $84 million debt he allegedly incurred on the platform due to market volatility. The lawsuit seeks to recover any benefits Ver received from the settlement.On X, a user called @CoinFLEXReal suggested that it has uncovered evidence that Lamb, Zhu, and Davies “used creditor assets as their personal piggy bank.”

Financial regulators in Hong Kong are moving towards the presentation of stablecoin legislation following the completion of a consultation process. In February of this year, that consultation process, which received 108 submissions from professional bodies and industry stakeholders, was completed. It was run jointly by The Financial Services and the Treasury Bureau (FSTB) and the Hong Kong Monetary Authority (HKMA), culminating in the publication of the results of the process.Photo by Pat Whelen on UnsplashLegislative proposal publishedOff the back of that prior body of work, the regulators have now published a legislative proposal, incorporating responses to issues that were brought to light via the consultation process. The regulators concluded that going forward, stablecoin regulation should be considered primarily in terms of those stablecoin assets which operate on a ledger which runs on a decentralized basis. Additionally, no individual or unilateral entity should have the ability to tamper with or control those assets or the network upon which they exist. On this basis, the regulators intend to submit a bill relative to fiat-referenced stablecoins for consideration to the Legislative Council at a later stage in 2024. Before submitting any legislative proposal, the regulators plan to once again consult with stakeholders prior to finalizing any such proposal. As part of what they have set out thus far, regulators are looking to include a requirement for any stablecoin issuer to obtain a license in Hong Kong.  Reserve asset requirementsThey remain open to the idea that reserve assets backing an issued stablecoin could be held in an overseas jurisdiction. However, if the issuer is an overseas entity, it will be required to establish a local corporate entity in Hong Kong, with relevant management personal based within the Chinese autonomous territory. In light of feedback received during the consultation process, the regulator is looking at reducing the attestation frequency that each stablecoin issuer will be required to provide via an independent auditor in order to verify that the stablecoins issued are backed by the requisite amount of liquid assets.  Such reserve assets must be segregated from the working capital of the stablecoin issuer’s business, with the HKMA expressing a preference for a trust-like structure following input via the consultation process. Furthermore, reserve assets must be deemed to be both high quality and highly liquid, which would include cash, bank deposits and government issued securities where counterparty risk is minimized. On the basis that the Hong Kong dollar is pegged to the U.S. dollar, the regulator is content to allow issuers to use USD-denominated reserve assets if they prefer to do so. The legislative proposal also stipulates the need for issuers to have a minimum share capital of HK$25 million or 1% of the value of stablecoin in circulation.  The HKMA foresees crypto exchanges, securities firms and regulated banks having the ability to offer stablecoins to customers, so such offerings won’t be confined to dedicated stablecoin issuers.Back in March the HKMA introduced a stablecoin sandbox with a view towards learning what works best from a regulatory standpoint. It’s understood that a list of participants will be announced in the near future. Participating entities will be able to issue stablecoins in Hong Kong within that controlled sandbox environment, prior to full scale implementation once stablecoin regulation has been fully legislated for.

Arthur Hayes: Chinese monetary policy could ignite crypto marketArthur Hayes, Co-Founder of Seychelles-incorporated crypto exchange and derivatives platform BitMEX, suggests that China could inject a substantial amount of credit into its economy, potentially giving a boost to Bitcoin and the broader crypto market.Photo by Eric Prouzet on UnsplashPotential flood of yuan creditThe firebrand crypto OG outlined his thoughts on the matter in a blog post which was published on Monday. Hayes discussed how, although China has currently made credit expensive in order to hold back credit growth and inspire confidence in the economy, its monetary authorities might be gearing up to flood the economy with yuan credit, creating a favorable environment for cryptocurrencies.He outlined a series of factors contributing to this potential surge in Chinese credit. He pointed to the interplay between U.S. monetary policy and the Chinese yuan, emphasizing how recent U.S. actions are laying the groundwork for China to issue substantial credit, particularly to its struggling property sector.Describing U.S. policy as “weakening the dollar by issuing more Treasury bills,” Hayes noted the consequent decline of the dollar index (DXY) throughout November. He argued that the weaker dollar gives China the flexibility to increase yuan credit without significant depreciation, possibly even leading to yuan appreciation.If the Federal Reserve at a minimum holds rates and better still, starts to cut rates, China will be in a position to pursue the stimulus needed for its property market and for infrastructure spending.Hong Kong as the gateway to capital marketsAccording to Hayes, the global monetary dynamics set in motion by these factors could be advantageous for Bitcoin and the broader cryptocurrency market. He explained that the bulk of the financing will trickle down into speculation within the financial markets. If China starts printing yuan, the capital is likely to flow into global markets, supporting the prices of various risk assets.But how can this happen, given that speculation and crypto trading are prohibited in China? Hayes’ view is that Hong Kong is now China’s gateway to the global capital markets. Wealthy Chinese individuals now bank via Hong Kong. As we have seen, the autonomous Chinese territory has a workable regulatory framework in place and is now actively licensing crypto exchanges and brokers. Consequently Bitcoin and crypto, generally, could be among the risk assets benefiting from an influx of capital.Furthermore, the BitMex co-founder believes that as yuan credit becomes abundant, the global demand for dollar credit and liquidity may decrease. Given that the dollar is a primary funding currency, a fall in the price of credit could lead to a rise in fixed-supply assets like Bitcoin and gold in dollar terms.Hayes concluded what is a long and detailed blog post by stating:“I will continue moving money out of T-bills and into crypto because I want to get in now before it becomes apparent through the data that China’s money printer is going brrrrr.”He suggested that Chinese New Year, which occurs in mid-February of next year, could be the time in which that extra credit materializes in China. Hayes’ latest assertion comes on the back of a bold claim he made last month when he suggested that bitcoin could reach a unit price of $1 million by 2026.