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Crypto Capital’s NFL defendant open to guilty plea, but not for $371M

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The legal team for Reginald Fowler said the former minority owner of the Minnesota Vikings is open to a guilty plea regarding his involvement in Crypto Capital’s alleged shadow banking practices, provided forfeiture is not part of the deal.

The company is a key player in the ongoing court case over Bitfinex’s failure to disclose the loss of $850 million in customer funds. The exchange claims the funds were deposited with Crypto Capital before being seized by government authorities in various countries.

According to Law360, Fowler’s lawyers stated that a January plea deal with the U.S. government “blew up” because it left the former NFL team owner on the hook for $371 million. The legal team made the comments during a phone status conference held on Oct. 15 in the Southern District of New York.

Authorities originally charged Fowler with bank fraud, illegal money transfers, and conspiracy connected to Crypto Capital’s alleged shadow banking practices in 2019, and later added a charge for wire fraud in February.

The $371 million demanded as part of the plea deal is reportedly based on the proceeds generated by Fowler’s alleged crimes. However, his legal team has argued that Fowler’s actions did not generate losses for any victims, and his holdings are not subject to forfeiture.

The federal judge overseeing the case, Andrew L. Carter Jr., stated that Fowler could still accept a guilty plea and later contest the forfeiture of the assets:

“Even if the government doesn’t extend any offer, Mr. Fowler could plead to the indictment, without admitting the forfeiture allegation, and there could be a separate proceeding.”

Fowler is accused of acting as an unlicensed money transmitter and lying to financial institutions regarding the purpose of his accounts. Through the Panama-based firm Crypto Capital, he allegedly provided shadow banking services to numerous cryptocurrency exchanges, including Bitfinex, Binance, and QuadrigaCX.

Fowler has pleaded not guilty to all charges. Others connected to the case include Crypto Capital’s president, Ivan Manuel Molina Lee, whom Polish authorities arrested in 2019 on suspicion of money laundering and having ties to an international drug cartel. The same year, in the United States, authorities indicted Oz Yosef, also a former executive at Crypto Capital, on conspiracy to commit bank fraud and conspiracy to operate an unlicensed money transfer service.

Fowler is out on $5 million bail — which seems to be the going rate for alleged crypto offenders. Unless he accepts a plea deal, his trial is scheduled to begin in January 2021.



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Philippines’ central bank isn’t ready to pull the trigger on a CBDC

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Philippine central bank governor Benjamin Diokno has announced that the institution’s “exploratory” study of central bank digital currency study suggests that much more work is needed to make a digital peso a reality.

During the summer, Bangko Sentral ng Pilipinas had confirmed it was investigating the feasibility and potential policy implications of issuing its own CBDC, or digital counterpart to the physical peso.

In a press briefing, Diokno reportedly rejected the possibility that a CBDC could be issued any time in the near future. The study so far has suggested that ongoing research is needed to look into capacity-building and the creating of networks between other central banks and financial institutions. 

So far, the bank’s study has covered basic issues surrounding CBDCs, focusing on implications for monetary policy, legal frameworks, payments and settlement systems, financial inclusion, and regulatory oversight.

The governor has said that CBDC research at the BSP could benefit from a study of the business models of private-sector digital currencies in the Philippines, as well as the use of industry sandboxes. The central bank plans to look into how to improve the country’s existing payment system and to draw upon other central banks’ CBDC research worldwide.

CBDC research in the Philippines has emerged against the backdrop of the central bank’s Digital Payments Transformation Roadmap, which aims to switch over 50% of retail payments into digital form by 2023, and to ensure that 70% of citizens have a bank account by the end of the period.

Ongoing CBDC research could require technical input from the International Monetary Fund and Bank of International Settlements, in the BSP’s view. 

The central bank remains committed to the view that CBDCs are superior to private digital currencies, and has indicated that its digital innovations will continue to evolve within the existing structure of fiat currencies. 



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Russian officials must now declare crypto holdings

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Russia’s public officials will be mandated to declare all private crypto assets holdings from New Year’s Day, 2021.

The requirements were announced on Oct. 20 by the office of Russian prosecutor general, Igor Krasnov, following a meeting with 15 fellow prosecutor generals representing member states of the Shanghai Cooperation Organization (SCO).

“Starting next year, civil servants will be required to declare [virtual] currencies on an equal basis with other assets,” Krasnov said.

In 2018, Russia’s labor ministry announced that public officials would not need to declare virtual asset holdings in their tax reports due to the unregulated status of crypto. As such, concerns have lingered that crypto assets may be the financial instrument of choice for bribery and corruptions

Over the past three years, the Prosecutor General’s Office claims to have confiscated more than $440 million worth of undisclosed, non-crypto assets from public officials.

The new requirements follow new laws signed by President Vladimir Putin in July that will classify crypto assets as akin to physical commodities from 2021 — recognizing virtual currencies in the country for the first time.

While the laws do not recognize cryptocurrencies as legal tender, they will legitimize crypto-related activities across Russia.

Alongside SCO member states Russia, India, Kazakhstan, China, Kyrgyzstan, Pakistan, Uzbekistan, and Tajikistan, the prosecutor generals of Afghanistan, Belarus, Mongolia, Iran, Azerbaijan, Cambodia, and Armenia — which are non-member partners and observer states to the SCO — were also present at the meeting. The gathering centered on the topic of combating corruption.

The Russian announcement on crypto reporting suggests similar laws may soon be enacted across the Eurasian region.

In August, Russia’s Federal Financial Monitoring Service claimed it had developed a way to “partially” de-anonymize transactions using Bitcoin (BTC), Ethereum (ETH) and the popular privacy coin Monero (XMR). The agency also noted that several “overseas countries have also shown interest in the system,” suggesting it is looking to sell the system to allied nations.



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US crypto derivatives merchants need to leave customer funds alone, says CFTC

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Per guidance released Wednesday evening, the Commodity Futures Trading Commission (CFTC) is advising businesses trading in crypto derivatives to hold customer funds very carefully.

The new guidance continues the CFTC’s interest in carving out rules for custodianship of virtual currencies — an area obviously distinct from any other asset class. Per the commission: 

“Custodians of virtual currencies are typically not subject to a system of comprehensive federal or state regulation and oversight, which includes safeguarding of these novel assets, and this raises potential risks to the protection of customer funds held at such custodians.”

The specific provisions of the guidance limit the locations that a “futures commission merchant” (FCM) can deposit customer virtual currency at to “a bank, trust company, or another FCM, or with a clearing organization that clears virtual currency futures.”

Moreover, the CFTC warns FCMs that they need to keep any such deposits in accounts clearly marked as customer funds, and will not allow gains in one account to make up for losses in another.

Effectively, the guidance seems most determined that customer crypto funds remain safe and untouched, barring FCMs from trading such funds in order to make collective gains. How big of a problem FCM trading of crypto deposits has shown itself to be goes unaddressed, but you can certainly imagine some catastrophic results of a crypto futures dealer deciding to play some volatile markets using crypto funds.

The CFTC has been busy trying to assemble a holistic framework for crypto assets. At the beginning of this month, the commission promised to protect the “burgeoning market” for these assets, an announcement that came immediately after the announcement of their pursuit of BitMEX for operating an unregistered derivatives exchange in the U.S. 



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