Autor Cointelegraph By Derek Andersen

Celsius’ co-founder Daniel Leon follows Mashinsky out as crypto exec flight continues

S. Daniel Leon, who cofounded Celsius with Alex Mashinsky in 2017, has quit his job as the bankrupt crypto lender’s chief strategy officer, CNBC reported Oct. 4, citing unnamed sources and an internal memo seen by the outlet. Bloomberg later reported receiving confirmation of Leon’s resignation from the company. Leon’s resignation comes one week after Mashinsky’s and is part of an apparently growing trend. Celsius filed for bankruptcy July 13, while it was under investigation by six American states and a month after freezing withdrawals. The company was reportedly $1.9 billion in debt at the time of its bankruptcy declaration. Mashinsky resigned Sept. 27, saying in a statement, “I regret that my continued role as CEO has become an increasing distraction, and I am very sorry about the difficult financial circumstances members of our community are facing.” His financial dealings and handling of the firm’s final days of solvency were the subjects of intense scrutiny. Leon filed in U.S. bankruptcy court to have his 32,600 common shares of the company declared worthless on Sept. 5. Bids on Celsius assets will be accepted through Oct. 17, with an auction set for Oct. 20, if necessary. FTX CEO Sam Bankman-Fried was reportedly among the interested bidders.Related: Celsius bankruptcy proceedings show complexities amid declining hope of recoveryLeon has joined a steady stream of executives departing from the crypto sector as the crypto winter stretches on. Some execs, such as former MicroStrategy CEO Michael Saylor, Kraken CEO Jesse Powell, FTX US president Brett Harrison and Genesis CEO Michael Moro and managing director Matthew Ballensweig moved into less visible advisory roles. Others, such as former Alameda Research co-CEO Sam Trabucco, Ignite CEO Peng Zhong and bankrupt Voyager Digital’s chief financial officer Ashwin Prithipaul have changed direction entirely. All of those leaders have left their positions since July.

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Basel Committee crypto asset prudential treatment proposals get detailed responses

The comments period has ended for the Basel Committee on Banking Supervision (BCBS) “Second Consultation on the Prudential Treatment of Cryptoasset Exposures,” a document published in June 2022. International financial associations had a lot to say in response to it. Several did so at once in a joint 84-page comment letter released Oct. 4. In addition, there were a few lone voices, although they did not differ significantly in content from the conclusions made by the joint associations. All the commenters had the same basic message. Institute of International Finance (IIF) director of regulatory affairs Richard Gray, speaking on behalf of the joint associations working group that participated in the response letter, summed up the response when he told Cointelegraph in a statement:“Banks are already experts at risk management and consumer protection.”Some features and calibrations in the Second Consultation, according to the written response, “would meaningfully reduce banks’ ability to – and in some cases effectively preclude banks from – utilising the benefits of distributed ledger technology (“DLT”) to perform certain traditional banking, financial intermediation and other financial functions more efficiently.” The iterative approach to reserve requirementsThe Second Consultation is named in relation to a document published in June 2021 called “Prudential Treatment of Cryptoasset Exposures,” which itself was built on a 2019 document and the responses to it. In the 2021 paper, the Basel Committee on Banking Supervision divided crypto assets into groups and recommended different prudential treatment for each group. Group 1 in the committee’s proposal consisted of crypto assets that can subject to at least equivalent risk-based capital requirements the Basel Framework. Group 1a consists of “digital representations of traditional assets using cryptography, Distributed Ledger Technology (DLT) or similar technology rather than recording ownership through the account of a central securities depository (CSD)/custodian.” Group 1b consists of stablecoins and has “new guidance on application of current rules to capture the risks relating to stabilisation mechanisms.” Group 2 crypto assets were those that failed to meet any of several classification conditions. That included cryptocurrency. Those assets would be “subject to a newly prescribed conservative capital treatment.” The most salient new treatment was the 1,250% risk weight assigned to them, making it necessary for banks to hold capital equivalent in value to their exposure to the crypto in this class. Related: US central bank digital currency commenters divided on benefits, unified in confusionA recently released, undated BCBS document estimated bank exposure to crypto assets at the end of 2021 at 9.4 billion euros, or 0.14% of the total exposure of banks reporting crypto holdings. That figure drops to 0.01% as the crypto asset exposure of all banks monitored. Bitcoin (BTC) and Ether (ETH) made up almost 90% of that exposure.Second iteration of the prudential treatment After considering the comments to the 2021 paper, the BCBS made several changes to its proposals. These included the creation of a Group 2a of crypto assets that will be subject to modified market risk rules for meeting hedging recognition requirements. Group 2 crypto asset exposure is also limited to 1% of Tier 1 capital. A new, more liberal “narrowly passed” category was created for stablecoins, and Group 1 crypto assets were subject to an infrastructure risk add-on to risk-weighted assets.The joint associations working group that responded to the Second Consultation differed slightly from those involved in the response to the first. The new lineup included the umbrella group Global Financial Markets Association, the Futures Industry Association, IIF, International Swaps and Derivatives Association, International Securities Lending Association, Bank Policy Institute, International Capital Markets Association and Financial Services Forum. The authors of the response letter noted that a workable crypto asset prudential treatment is necessary for banks to engage the crypto sector, and without that, “un- and -lesser-regulated entities are likely to be predominant providers of cryptoasset-related services.” The letter went on to engage closely with the BCBS proposals, responding from the point of view of banks’ feasibility.IIF’s Gray told Cointelegraph:“We support a regulatory framework for cryptoassets that is appropriately conservative, but not so restrictive that it would effectively shut out involvement from banks. It is important for financial stability that regulated financial institutions are able to facilitate client activity in the crypto space.”Besides technical issues such as determining an acceptable Tier 1 exposure to Group 2 crypto assets, the letter drew attention to areas where the scope of the proposed framework was unclear. The Japanese Bankers Association expressed similar concerns in its response to the Second Consultation. American Bankers Association senior vice president and policy counsel Hu Benton wrote a technically detailed assessment of the proposed rules as well.

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Amber Group uses simple hardware to show just how fast, easy the Wintermute hack was

Amber Group has reproduced the recent Wintermute hack, the Hong Kong-based crypto finance service provider announced on its blog. The process was fast and simple, and used hardware easily accessible to consumers. Wintermute lost over $160 million in a private key hack on Sept. 20.Reproducing the hack can help “build a better understanding of the attack surface spectrum across Web3,” Amber Group said. It was only hours after the hack of UK-based crypto market maker Wintermute was revealed that researchers were able to pin the blame for it on the Profanity vanity address generator. One analyst suggested that the hack had been an inside job, but that conclusion was rejected by Wintermuteand others. The Profanity vulnerability was already known before the Wintermute hack.classy— wishful cynic (@EvgenyGaevoy) September 27, 2022Amber Group was able to reproduce the hack in less than 48 hours after preliminary setup that took less than 11 hours. Amber Group used a Macbook M1 with 16GB RAM in its research. That was far speedier, and used more modest equipment, than how a previous analyst had estimated the hack would play out, Amber Group noted. Related: The impact of the Wintermute hack could have been worse than 3AC, Voyager and Celsius — Here is whyAmber Group detailed the process it used in the re-hack, from obtaining the public key to reconstructing the private one, and it described the vulnerability in the way Profanity generates random numbers for the keys it produces. The group notes that its description “does not purport to be complete.” It added, repeating a message that has often been spread before:“As well documented by this point — your funds are not safe if your address was generated by Profanity […] Always manage your private keys with caution. Don’t trust, verify.”The Amber Group blog has been technically oriented from its inception, and has addressed security issues before. The group achieved a $3-billion valuation in February after a Series B+ funding round.

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MicroStrategy takes its BTC maximalism to the next level with new engineer hire

MicroStrategy, the business intelligence and tech company that holds the world’s largest Bitcoin (BTC) reserve, is hiring a Bitcoin Lightning software engineer to create a Lightning Network-based software-as-a-service platform.The new engineer will be responsible for building a Lightning Network-based platform to address enterprise cybersecurity challenges and enable new e-commerce use cases, according to a job posting linked to the MicroStrategy website. Besides “an adversarial mindset,” the applicant should have certificates, knowledge of tools and programming languages, and experience with decentralized finance technologies.MicroStrategy is looking to hire a Bitcoin Lightning Software Engineer to build a Lightning Network-based SaaS platform. #bitcoin pic.twitter.com/XFYrkIaFA9— Neil Jacobs (@NeilJacobs) September 30, 2022MicroStrategy, founded in 1989, began a Bitcoin buying spree in August 2020 that has culminated in a reserve of 130,000 BTC, worth $2.57 billion at the time of writing. The purchase of the final 301 BTC of its holdings was announced on Sept. 20, paying around $3.98 billion for the entire reserve. Bitcoin profitability for long-term holders recently hit a four-year low. MicroStrategy now holds 0.62% of all the BTC that will ever exist. MicroStrategy co-founder and former CEO Michael Saylor is well known as a Bitcoin maximalist and defender of the cryptocurrency. Saylor resigned as CEO on Aug. 2 but remains the executive chair of the company. Saylor said the change would:“Enable us to better pursue our two corporate strategies of acquiring and holding Bitcoin and growing our enterprise analytics software business.”Saylor and MicroStrategy were sued at the end of the same month for tax evasion by the office of the Washington, DC attorney general.Related: How high transaction fees are being tackled in the blockchain ecosystemThe Lightning Network is a Bitcoin layer-2 protocol designed to raise payment throughput and lower transaction fees. It has been making slow progress in facilitating peer-to-peer transactions since it debuted in 2018.

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Judge orders SEC to turn Hinman documents over to Ripple Labs after months of dispute

Ripple Labs scored a victory in its continuing legal battle with the United States Securities and Exchange Commission (SEC) on Sept. 29 as U.S. District Court judge Analisa Torres ruled to release the documents written by former SEC corporation finance division director William Hinman. The documents predominantly relate to a speech Hinman delivered at the Yahoo Finance All Markets Summit in June 2018. Hinman stated in his speech that Ether (ETH) was not a security. Ripple Labs considers the speech a key piece of evidence the case the SEC has brought against it alleging sales of Ripple’s XRP violated U.S. securities laws — though time has yet to tell whether it will be as meaningful as the company suggests. The circumstances surrounding the speech and Hinman’s actions leading up to it are a source of considerable confusion.JUST ADDED to our Document Library:✅THE HINMAN CALENDAR (REDACTED), produced by the @SECGov’s FOIA office to @StuYoungXRP (1/17) https://t.co/Cf6vezXOJZ— CryptoLaw (@CryptoLawUS) September 28, 2022Judge Torres’ decision overruled SEC objections to releasing the documents following District Court Judge Sarah Netburn order declaring that the emails and drafts of the speech were not protected by deliberative process privilege, as the SEC has claimed. The SEC then claimed attorney-client privilege over the documents, which was overruled by Netburn in July. Judge Torres’ ruling overruled the SEC’s objections to that decision.This is why the crypto market should be thankful @Ripple is fighting this case. If you add up the legal fees Ripple has paid to finally get a ruling from Judge Torres it is likely $2-3 million and they still don’t have the documents. Next step: SEC asks to certify or Mandamus. https://t.co/yXiUAoGNJA— John E Deaton (216K Followers Beware Imposters) (@JohnEDeaton1) September 29, 2022

The SEC filed suit against Ripple Labs and its current CEO Brad Garlinghouse and previous CEO Chris Larsen in December 2020, saying the company’s cryptocurrency XRP is a security because the company used it to raise funds in 2013. The case is a relatively rare example of an SEC action that goes to trial, thus potentially leading to a precedent-setting decision, rather than ending in a settlement. Judge Torres agreed with Judge Netburn on EVERY single issue related to the HINMAN EMAILS.Relevance: CheckAttorney-Client Privilege: CheckDPP: CheckSome days I’m proud of this profession. :)#TurnOverTheEmails https://t.co/KoGrgm953S— Jeremy Hogan (@attorneyjeremy1) September 29, 2022

The case was initially seen as going badly for Ripple, and the company has pursued a variety of strategies to defend itself. Ripple Labs and the SEC filed motions Sept. 17 for a summary judgment in the U.S. District Court Southern District of New York.

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