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Home | BakerHostetler

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ADventures in Law

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<img decoding="async" loading="lazy" class="alignright wp-image-5528" src="https://theblockchainmonitor.bakerhostetlerblogs.com/wp-content/uploads/sites/24/2019/01/blockchain-iStock-908866958.jpg" alt="Abstract Digital network communication digital concept" width="483" height="200" />In this issue:
• <a href="#Blockchain">Blockchain Used in IPO and ATS, Bitcoin Fund Announced, APAC Trade Data Published</a>
• <a href="#Quorum">Quorum Acquisition Announced, Blockchain Initiatives Launch for Coffee and NASA</a>
• <a href="#Crypto">Crypto Crimes Continue in Ransomware, Fraud, Wash Trading and Tax Evasion Schemes</a>
<a id="Blockchain"></a>Blockchain Used in IPO and ATS, Bitcoin Fund Announced, APAC Trade Data Published
By: <a href="https://www.bakerlaw.com/RobertAMusiala">Robert A. Musiala Jr.</a>
According to reports, this week a Gibraltar-based cryptocurrency exchange, INX Ltd., has announced that the U.S. Securities and Exchange Commission (SEC) has approved the company’s planned initial public offering (IPO) in which the company will offer its securities using blockchain. According to the <a href="https://www.sec.gov/Archives/edgar/data/1725882/000121390020023078/ea125736-f1a11_inxlimited.htm">registration statement</a>, which has reportedly been deemed effective by the SEC, the company’s securities will be offered in the form of INX Tokens, “an ERC20 blockchain asset that is programmed using a smart contract that is compatible with the Ethereum blockchain.” The registration statement notes that “there is currently no public market for the INX Tokens and there is no plan to have our INX Token trade on a national securities exchange or any other exchange or trading platform, whether within or outside the United States.”
In related news, ASPD, a private “security token” that operates on the Tezos blockchain, has reportedly begun trading on the tZERO alternative trading system (ATS). Each ASPD represents fractional ownership in the St. Regis Aspen Resort, a five-star hotel located in Aspen, Colorado.
This week a major U.S. financial services provider reportedly took steps to launch “a new fund dedicated to bitcoin.” According to reports, while there is “little in the way of details” about the fund, “the minimum investment to join the pooled investment fund is $100,000.”
According to a recent blog post by blockchain analytics firm Chainalysis, “East Asia is the world’s largest cryptocurrency market, accounting for 31 percent of all cryptocurrency transacted in the last 12 months.” Some key findings reported in the blog post include the following:
<ul>
<li>Because China alone controls 65 percent of Bitcoin mining activity, the majority of all newly mined bitcoin originates in Asia-based addresses.</li>
<li>“The East Asia cryptocurrency market is dominated by professional traders, with roughly 90 percent of all volume transferred by East Asia in any given month attributed to professional-sized (above US$10,000 worth of cryptocurrency) transfers.”</li>
<li>“Tether is by far the most popular stablecoin in East Asia, making up 93 percent of all stablecoin value transferred by addresses in the region.”</li>
</ul>
For more information, please refer to the following links:
<ul>
<li><a href="https://www.law360.com/fintech/articles/1303757/crypto-exchange-gets-sec-nod-for-117m-token-offering?nl_pk=d839899d-0537-414a-b7cc-d6d00bb8e8ff&utm_source=newsletter&utm_medium=email&utm_campaign=fintech">Crypto Exchange Gets SEC Nod for $117M Token Offering</a></li>
<li><a href="https://cointelegraph.com/news/aspen-launches-on-tzero-amid-record-security-token-volume">Aspen launches on tZERO amid record security token volume</a></li>
<li><a href="https://www-forbes-com.cdn.ampproject.org/c/s/www.forbes.com/sites/michaeldelcastillo/2020/08/26/fidelity-president-files-for-new-bitcoin-fund/amp/">Fidelity President Files for New Bitcoin Fund</a></li>
<li><a href="https://blog.chainalysis.com/reports/east-asia-cryptocurrency-market-2020">East Asia: Pro Traders and Stablecoins Drive World’s Biggest Cryptocurrency Market</a></li>
</ul>
<a id="Quorum"></a>Quorum Acquisition Announced, Blockchain Initiatives Launch for Coffee and NASA
By: <a href="https://www.bakerlaw.com/VeronicaReynolds">Veronica Reynolds</a>
Leading blockchain software engineering firm ConsenSys announced this week its acquisition of Quorum, an opensource software and blockchain platform based on the Ethereum protocol, from a major U.S. bank. Quorum is designed for processing transactions within a permissioned network to address privacy and performance challenges. Reportedly, the acquisition by ConsenSys provides consumers with expanded features including digital asset functionality and document management. Moving forward, “all Enterprise Ethereum protocol technology at ConsenSys will fall under the ConsenSys Quorum brand, and developers will have the option to choose their underlying technology stack.”
An international coffee chain recently announced that consumers can now trace the origins of the coffee they buy from the conglomerate. The new product is built atop blockchain technology powered by a multinational technology giant. According to reports, a code on the bag of coffee will allow consumers to find out not only where the beans came from, but where they were roasted. Farmers will reportedly receive a reverse code that can be used to track produce.
Quadcopter Communications offered by the National Aeronautics and Space Administration (NASA) just got a “lift,” with two U.S. technology firms winning a bid to build the Space Communication Reconstruction and Mapping with Blockchain Ledgering, dubbed SCRAMBL. The system design seeks to use blockchain to spread data among networking satellites in order to increase the efficacy of their communication and “overall awareness.” It will provide a solution for times where one communication node cuts out, allowing the rest to “quickly and dynamically adapt.” According to the project proposal, SCRAMBL could prove particularly useful for quadcopter drone swarms, “where common operational awareness is needed throughout and communication is minimal due to environmental factors.”
For more information, please refer to the following links:
<ul>
<li><a href="https://consensys.net/blog/press-release/consensys-acquires-quorum-platform-from-jp-morgan/">ConsenSys Acquires Quorum® Platform from J.P. Morgan</a></li>
<li><a href="https://cointelegraph.com/news/starbucks-to-let-customers-trace-their-coffee-s-provenance-from-bean-to-brew">Starbucks to let customers trace their coffee’s provenance from bean to brew</a></li>
<li><a href="https://www.bloomberg.com/news/articles/2020-08-25/starbucks-clients-can-now-trace-their-coffee-and-so-can-farmers?sref=323RPL5z">Starbucks Clients Can Now Trace Their Coffee, and So Can Farmers</a></li>
<li><a href="https://www.coindesk.com/nasa-funds-quadcopter-blockchain">NASA Is Bankrolling a Blockchain for Quadcopter Communications</a></li>
</ul>
<a id="Crypto"></a>Crypto Crimes Continue in Ransomware, Fraud, Wash Trading and Tax Evasion Schemes
By: <a href="https://www.bakerlaw.com/JoannaFWasick">Joanna F. Wasick</a>
Last week the former chief security officer of a popular ride-share company was charged with obstruction of justice and misprision of a felony in connection with the coverup of a major security breach in 2016. According to the complaint, after learning that personal identifying information of customers and drivers had been compromised, the defendant allegedly tried to conceal it from the government and the company’s new management team, and arranged to pay the hackers a ransom of $100,000 in bitcoin.
Also last week, the U.S. Commodity Futures Trading Commission (CFTC) filed papers seeking a default judgment against Benjamin Reynolds, a U.K. resident who allegedly stole 22,858 bitcoins through a Ponzi scheme. A complaint against Reynolds had been filed by the CFTC in June 2019, but he never answered or appeared in the case.
The Internal Revenue Service continues with its “soft letter” campaign to induce taxpayers to fix alleged discrepancies in their cryptocurrency-related tax filings. Following a flurry of warning letters earlier this year and last, new letters regarding unpaid or incorrectly filed cryptocurrency information were reportedly issued to multiple taxpayers in the middle of this month.
Police in South Korea recently raided and seized the country’s third-largest cryptocurrency exchange due to alleged fraud. According to a report from a local newspaper, the exchange’s owner and other managers were accused of “wash trading”—artificially inflating exchange volumes by using “ghost” accounts to make fake trades.
Distributed denial-of-service (DDoS) attacks continue against some of the world’s biggest financial service providers, including major money transfer service companies and, most recently, the New Zealand stock exchange. A recent report linked a slew of these attacks to the same hacker group, which demands ransom payments in bitcoin.
Earlier this week, Forbes reported that, according to the Federal Bureau of Investigation (FBI), a single ransomware variant, Ryuk, was used to steal $61 million in bitcoin since 2018. The article finds that a large portion of these bitcoin ransomware payments were “cashed out” at a  major global cryptocurrency exchange.
For more information, please refer to the following links:
<ul>
<li><a href="https://www.justice.gov/usao-ndca/pr/former-chief-security-officer-uber-charged-obstruction-justice">Former Chief Security Officer for Uber Charged With Obstruction of Justice</a></li>
<li><a href="https://www.law360.com/fintech/articles/1303437/cftc-seeks-572m-from-vanished-crypto-fraud-suspect?nl_pk=d839899d-0537-414a-b7cc-d6d00bb8e8ff&utm_source=newsletter&utm_medium=email&utm_campaign=fintech">CFTC Seeks $572M From Vanished Crypto Fraud Suspect</a></li>
<li><a href="https://www.coindesk.com/irs-ignoring-its-own-watchdog-sends-letters-about-crypto-taxes-once-again">IRS, Ignoring Its Own Watchdog, Sends Letters About Crypto Taxes Once Again</a></li>
<li><a href="https://www.coindesk.com/south-korea-crypto-exchange-coinbit-seized-allegations-fraud-wash-trading">South Korean Crypto Exchange Coinbit Seized Over Allegations of Massive Wash Trading</a></li>
<li><a href="https://www.zdnet.com/article/ddos-extortionists-target-nzx-moneygram-braintree-and-other-financial-services/">DDoS extortionists target NZX, MoneyGram, Braintree, and other financial services</a></li>
<li><a href="https://www.forbes.com/sites/billybambrough/2020/08/23/new-binance-exclusive-reveals-the-bitcoin-exchange-might-have-a-serious-problem/#155e560969fb">New Binance Exclusive Reveals the Bitcoin Exchange Might Have a Serious Problem</a></li>
</ul>

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Robert A. Musiala Jr.

Blockchain Technologies and Digital Assets

IPO Using ERC20 Tokens Approved, Report Details APAC Bitcoin Trading Data, Quorum Is Sold/Acquired, Blockchain Initiatives for Coffee and NASA, Crypto Crimes Continue

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