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Cod3x Updates: August 8, 2023
Note: This post marks the relaunch of the Cod3x’s email list via Substack. This allows us to take advantage of GitBook’s website interface and Substack’s email interface. The new plan, after a much needed break to refocus priorities, is: weekly updates on Cod3x progress, and longer form conceptual pieces on crypto law and art. If you’re up for that, thank you! If not, details on how to opt out are below.
The Cod3x’s Litigation Tracker provides a comprehensive listing of enforcement actions brought by the government against crypto firms, as well as challenges to government action by crypto firms. It is updated on a rolling basis and includes links, where available, to court dockets through Court Listener and press releases surrounding the cases, and for significant matters, links to major rulings.
See something missing? Let us know by responding to this email directly.
This week, the following cases were added to the Litigation Tracker:
Regulatory – DOJ
United States v. Russell, No. 1:23-cr-00152 (E.D.N.Y. 2023.04.06)
Short summary: Cryptocurrency investment fraud scheme by falsely promising to use money for cryptocurrency investments that would generate large—and sometimes “guaranteed”—returns. Instead Russell misappropriated funds for his own use and to repay other investors.
United States v. Kane, No. 1:23-cr-20172 (S.D. Fla. 2023.04.20)
Short summary: Conspiracy to manipulate the market for HYDRO, a virtual asset created by the Hydrogen Technology Corporation, and wire fraud, based on spoof orders and wash trading.
United States v. Shetty, No. 2:23-cr-00084 (W.D. Wash. 2023.05.17)
Short summary: Former CFO embezzled $35 million in company assets to his own crypto platform, HighTower Treasury, that he controlled as a side business, directly against conservative investment decision of the company. Nearly all funds lost.
United States v. Verner, No. 1:19-cr-00936 (S.D.N.Y. 2023.06.07)
Short summary: Conspiracy to launder approximately 647,000 bitcoins from the 2011 hack of Mt. Gox. Related action against these defendants in connection with BTC-e exchange.
United States v. Ichioka, No. 3:23-cr-00190 (N.D. Cal. 2023.06.22)
Short summary: Parallel enforcement action with SEC and CFTC. Wire fraud, tax fraud, securities fraud, and commodities fraud charges over crypto-based scheme "Ichioka Ventures." Falsely promised 10% monthly returns, defrauding 100+ people of tens of millions. Used funds for luxury items, personal expenses, and repaying older investors.
United States v. Oulahyane, No. 1:23-cr-00215 (S.D.N.Y. 2023.07.10)
Short summary: Wire fraud, CFAA, identity theft, and forfeiture charges based on operation of a spoofed OpenSea website to gain unauthorized access to victims’ cryptocurrency wallets to steal their cryptocurrency and NFTs.
United States v. Ahmed, No. 1:23-cr-00340 (S.D.N.Y. 2023.07.10)
Short summary: Fraud against Solana-based decentralized finance (DeFi) exchange, The Crypto Exchange, by senior security engineer who exploited the exchange's smart contracts and inserted fake pricing data to fraudulently cause that smart contract to generate approximately $9 million dollars’ worth of inflated fees.
United States v. Mashinsky, No. 1:23-cr-00347 (S.D.N.Y. 2023.07.11)
Short summary: Parallel enforcement action with SEC, CFTC, and FTC. Former CEO and ex CRO of Celsius, Alexander Mashinsky and Roni Cohen-Pavon, charged with securities fraud, commodities fraud, wire fraud, and market manipulation for defrauding customers and manipulating the company's crypto token, CEL.
Regulatory – SEC
SEC v. Ichioka, No. 3:23-cv-03093 (N.D. Cal. 2023.06.22)
Short summary: Parallel enforcement action with DOJ and CFTC. Securities fraud charges over crypto-based scheme "Ichioka Ventures." Falsely promised 10% monthly returns, defrauding 100+ people of tens of millions. Used funds for luxury items, personal expenses, and repaying older investors.
SEC v. Celsius Network Ltd., No. (S.D.N.Y. 2023.07.13)
Short summary: Parallel enforcement action with DOJ, CFTC, and FTC. Celsius along with former CEO Alexander Mashinsky, charged with securities fraud and unregistered sale of the company's crypto token, CEL.
SEC v. Quanstamp, Inc., File No. 3-21535 (Admin Proc. 2023.07.21)
Short Summary: Administrative settlement regarding ICO of QSP tokens in 2017, raising $28 million. Settlement includes $3.5 million in disgorgement, fines, and interest, and a requirement to burn all remaining QSP tokens in Quanstamp's treasury.
SEC v. Schueler, No. 1:23-cv-05749 (E.D.N.Y. 2023.07.31)
Short summary: Fraudulent and unregistered sale of the following tokens by Richard Scheuler a/k/a Richard Heart: Hex, PulseChain (PLS), and PulseX (PLSX), marketed as the first high-yield "blockchain certificate of deposit," promoted as an investment designed to make people "rich" by offering returns as high as 38 percent.
SEC v. Digital Licensing Inc., No. 2:23-cv-00482 (D. Utah 2023.07.26)
Short summary: Action against proprietors of "DEBT Box" that fraudulently sold investors unregistered crypto asset securities in the form of "node licenses" to permit them to "mine" a number of different cryptocurrencies supposedly tied to real-world assets like gold and oil; in reality the tokens were simply created ERC-20 tokens and were never mined and not tied to real world assets. Defendants instead used investor funds for personal luxury expenses.
Regulatory – CFTC
CFTC v. Ichioka, No. 3:23-cv-03095 (N.D. Cal. 2023.06.22)
Short Summary: Parallel enforcement action with DOJ and SEC. Fraud and unregistered commodity pool operator charges over crypto-based scheme "Ichioka Ventures." Falsely promised 10% monthly returns, defrauding 100+ people of tens of millions. Used funds for luxury items, personal expenses, and repaying older investors.
CFTC v. Ackerman, No. 1:20-cv-01183 (S.D.N.Y. 2020.02.11)
The CFTC issued a press Press Release noting the entry of a $54 million default judgment against Ackerman in connection with a fraudulent digital asset trading scheme.
CFTC v. Celsius Network, LLC, No. 1:23-cv-06008 (S.D.N.Y. 2023.07.13)
Short Summary: Parallel enforcement action with SEC, DOJ, and FTC. Celsius along with former CEO Alexander Mashinsky, charged with fraud and failure to register as a commodity pool operator in connection with the company's crypto token, CEL.
CFTC v. Todd, No. 1:22-cv-23174 (S.D. Fla. 2022.09.30)
The CFTC issued a Press Release noting the entry of a default judgment against Todd and four companies he controlled in an action against Digitex exchange and its founder for operating an unregistered futures exchange and failing to register as an FCM, KYC failures, and manipulation of the price of DGTX. Over $15 million in disgorgement and penalties ordered in default judgment.
Regulatory – FTC
Federal Trade Commission v. Celsius Network Inc., No. 1:23-cv-06009 (S.D.N.Y. 2023.07.13)
Short Summary: Parallel enforcement action with DOJ, CFTC, and SEC. Celsius along with former CEO Alexander Mashinsky and other executives, charged with unfair and deceptive practices, misappropriating customer funds in violation of the FTC Act, and violations of the GLB Act by obtaining customer financial information on false pretenses.
There are no section updates this week. If you have any requests for specific sections to be updated or added in the near future, please reply to this email to let me know.
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