In this issue:

Banks Announce Blockchain Initiatives, Stablecoins Launch, France Passes New Law

Reports Detail Blockchain Solutions Across Industries, Provide New Data on Growth

New Reports Provide Details on Hacks, Ransomware and Criminal Use of Bitcoin

Enforcement Actions Involving Cryptocurrency Continue in US and Abroad

New York Attorney General Announces Action Against Bitfinex and Tether

Banks Announce Blockchain Initiatives, Stablecoins Launch, France Passes New Law

By: Joanna F. Wasick

Last week, a major French-based bank announced it will issue the first covered bond as a security token that is directly registered on the Ethereum blockchain. The issuance is the first pilot project of the bank’s internal startup program, which focuses on creating disruptive business solutions using blockchain technology. One of Japan’s largest banks has announced an initiative incorporating the Marco Polo blockchain platform to streamline trade finance – a traditionally labor-intensive, time-consuming process. The new system is touted as providing paperless, real-time connectivity and easier overall access. In Singapore, CapBridge 1exchange, the country’s first regulated private securities exchange, announced it will use blockchain to register and track the holdings of investors trading private securities on its platform. The exchange said that the initiative will provide more precision in recording and greater accuracy in investor identity verification, and it will enable investors to independently confirm and validate their shareholdings in real time.

New fiat-backed stablecoins continue to enter the market. U.K.-based payments platform Wirex is launching 26 stablecoins on the Stellar blockchain network. The stablecoins can be spent using Wirex’s own multicurrency debit card, which allows users to convert and spend cryptocurrencies in traditional credit and debit card point of sale systems. TrustToken also launched a new stablecoin, TrueAUD, which is now live and backed 1:1 by the Australian dollar. As with its other stablecoins, TrustToken allows traders a real-time view of the reserves backing the token. The company says three more coins will issue soon.

In France, a wide-ranging bill was adopted earlier this month that creates a more favorable environment for blockchain-related small and medium-size enterprises (SMEs). Among other things, the new law creates a legal framework for ICO issuers and guarantees that blockchain-related companies and projects can open French bank accounts, provided they opt in to being regulated.

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Reports Detail Blockchain Solutions Across Industries, Provide New Data on Growth

By: Diana J. Stern

Forbes’ first-ever Blockchain 50 list identified which billion-dollar companies are leading the way in applying blockchain technology to their lines of business – from commodities trade finance to proxy voting and tuna tracking. The media outlet’s lineup of cutting-edge corporates continues to generate buzz after it was released last week. In other news, International Data Corp forecasts that spending on blockchain solutions in the Asia-Pacific region, excluding Japan (APEJ), will ramp up to $2.4 billion by 2022. According to the report, blockchain spend in the APEJ leveled off at $284.8 million in 2018, which puts the CAGR at 77.5 percent over the five-year forecast period. The financial sector accounts for roughly half of that spend. Reports released on Monday indicate that the city of Guangzhou issued the first blockchain and AI-powered business license in China. The new blockchain-based system aims to make corporation formation more convenient by allowing entrepreneurs to scan a QR code and “start the company in one click.”

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New Reports Provide Details on Hacks, Ransomware and Criminal Use of Bitcoin

By: Jordan R. Silversmith

Earlier this week, the SEC’s Office of Investor Education and Advocacy and the Commodity Futures Trading Commission’s office of Customer Education and Outreach released an investor alert warning investors to be on the lookout for fraudulent digital asset and crypto trading websites. The alert outlines how fraudsters engage in advance fee fraud scams, where investors are asked to pay a bogus fee in advance on the promise of high guaranteed returns with little or no risk. The alert urged investors to look for warning signs such as complicated jargon, guaranteed high investment returns, pressure to buy and unlicensed sellers. Another report published this week provided details on white paper fraud in the blockchain industry. According to the report, freelance white paper writers have accused some crypto startups of misleading investors by requiring writers to fabricate and exaggerate facts and numbers.

A recent report described how a “blockchain bandit” stole 45,000 ether – once worth more than $50 million – using a tactic described as “ethercombing,” where the attacker scans billions of Ethereum accounts to identify accounts with “weak” private keys that can be guessed by the attacker. The report recommends that wallet developers carefully audit their code to find any bug that might truncate keys and leave them vulnerable, and users should use discretion in choosing what wallet to use in order to minimize risk of theft. Another recent report indicates that the average ransom amount demanded by ransomware attacks rose by 89 percent in Q1 of 2019 to $12,672, a staggering increase from $6,733 in Q4 of 2018. According to the report, this reflects mounting infections of more expensive types of ransomware like Ryuk, Bitpaymer and Iencrypt, mostly used in bespoke targeted attacks on larger enterprise targets. And a final report published this week found that bitcoin accounts for 95 percent of crypto cases investigated by law enforcement. The report notes that bitcoin is the cryptocurrency of choice for criminals due to its high value and high transaction volume, which make it easier to trade and spend compared to other cryptocurrencies.

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Enforcement Actions Involving Cryptocurrency Continue in US and Abroad

By: Simone O. Otenaike

Earlier this week, the 20-year-old college student who stole more than $5 million in cryptocurrency from a Cupertino cryptocurrency entrepreneur by “SIM Swapping” or “SIM Hijacking” was sentenced to 10 years in prison in Santa Clara County, California. By hacking a phone number, the student was able to exploit “two-factor authentication” and intercept text messages with the security codes required to access the target’s bank or cryptocurrency accounts. The student is one of the first people in the country to be convicted of stealing cryptocurrency by hacking a victim’s cellphone. Meanwhile, this week, New York state prosecutors achieved their first conviction for money laundering involving cryptocurrency. The defendants in the case sold prescription-free counterfeit steroids and other controlled substances to customers for cryptocurrency and cash through their website, generating more than $2.8 million in revenue from 2013 to 2018. According to a press release, the defendants laundered cryptocurrency payments through one or more intermediary cryptocurrency “wallets” to obscure the source of the funds, and then converted the cryptocurrency into U.S. dollars using a cryptocurrency exchange.

According to a press release, two Nigerian nationals were recently indicted in the U.S. for conspiracy to commit wire fraud and money laundering and 11 counts of wire fraud involving bitcoin. The defendants encouraged victims to transfer bitcoin to private virtual currency wallets and promised investors 20-50 percent returns on investments with zero risk and instant withdrawals. After receiving bitcoin transfers from their victims, the defendants transferred the bitcoin to other accounts and then exchanged the bitcoin for Nigerian Naira. Over the course of six months, the defendants stole approximately $59,000 worth of bitcoin from three victims.

In Israel, a man was indicted for the alleged theft of $9 million worth of Dash, which, according to reports, is equivalent to over 0.85 percent of the total circulating supply of the cryptocurrency. The victim was reportedly an early cryptocurrency investor. In Brazil, The State Department of Drug Trafficking reportedly discovered a bitcoin mining laboratory while pursuing a suspected drug trafficker. Officials found mining equipment with an estimated value of more than $63,000. The owner of the mining equipment reportedly was fined for illegal use of electric power in the house.

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New York Attorney General Announces Action Against Bitfinex and Tether 

By: Joanna F. Wasick

Yesterday, the New York Attorney General’s office (NYAG) announced an action against iFinex Inc. and related entities tied to the cover-up of an $850 million loss they allegedly hid and facilitated. iFinex is both the operator of the major cryptocurrency exchange Bitfinex and the owner of Tether Limited, the issuer of Tether, a popular stablecoin (fiat/U.S. dollar-backed token). In its press release, the NYAG explained how Bitfinex lost control over the
$850 million when it provided the funds to a Panamanian entity without any written contract or assurances. According to the press release, rather than disclose the loss to investors, executives at Bitfinex and Tether arranged for Bitfinex to have open access to $900 million of Tether’s cash reserves. The NYAG’s court filings allege that Bitfinex treated those reserves as its slush fund, taking what it needed to hide both its extensive losses and its inability to handle customer withdrawals. A court order is now in place barring the iFinex defendants from any further violations of state law and ordering them to retain all documents tied to the case.

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