In a shocking revelation, Caroline Ellison, co-founder of FTX-linked hedge fund Alameda Research, testified on October 11th that disgraced FTX founder Sam Bankman-Fried paid a staggering $150 million in bribes to Chinese government officials in 2021. This amount far exceeded the initial disclosure of $40 million. Ellison further disclosed that two years prior, Chinese law enforcement froze $1 billion worth of Alameda Research’s digital assets on OKX and Huobi as part of a money-laundering investigation. Constance Wang, FTX’s chief operations officer, and Alameda trader David Wa were also implicated in the incident. Attempts to unfreeze the funds through legal means failed, leading to an audacious move by FTX and Alameda staff. They allegedly created accounts on OKX and Huobi using the identification of a Thai prostitute to negotiate the return of the funds. When this strategy didn’t yield results, Ellison accused Bankman-Fried of resorting to a $150 million bribe. Astonishingly, the bribe was recorded discreetly as “the thing” in subsequent Alameda balance sheets. Judge Lewis Kaplan, presiding over the United States District Court for the Southern District of New York, made it clear that the bribery allegations are not within the scope of the ongoing FTX trial. A separate trial related to Bankman-Fried’s bribery charges is scheduled for March 11, 2024, while the FTX trial will continue throughout the month of October.
Yi He, co-founder of Binance, took to Chinese social media app WeChat to address concerns about account freezing on the exchange. She clarified that only accounts of users suspected of violating international sanctions will be frozen. This statement came in response to local news reports suggesting that Binance froze accounts of suspected Hamas militants at the request of Israeli law enforcement. Yi He explained that Binance, like other banks and trading platforms, must adhere to freeze requests involving designated terrorist organizations. She explicitly stated that Binance does not have the authority to make these decisions on its own. Drawing a distinction between Hamas and Palestine, Yi He emphasized that the freeze was directed at Hamas, not Palestine as a whole. In a subsequent post, she emphasized that Binance would not confiscate or freeze the assets of ordinary users. She clarified that Binance is subject to international regulations and must comply with them but stressed the importance of not freezing the accounts of ordinary Russians despite the ongoing conflict between Russia and Ukraine.
Chinese courts have once again ruled against the protection of crypto lending contracts, stating that they are invalid due to the illegal nature of the underlying asset. In a recent case decided by the Nanchang People’s Court, Mr. Ming lent 80,000 USDT to Mr. Gang for stablecoin trading. When Mr. Gang defaulted on the loan, Mr. Ming filed a civil lawsuit, which was eventually dismissed. The presiding judge highlighted the legal risks associated with participating in virtual currency investment and trading activities. Any investment in virtual currencies that violates public order and good customs renders relevant civil legal actions invalid, resulting in the bearer of such losses being responsible for them. The judge further explained that virtual currencies, such as Bitcoin and Ethereum, are not legal tender and lack legal compensation. Consequently, virtual currency-related business activities are deemed illegal financial activities that undermine national financial order, financial security, and social public interests. It is crucial to note that this ruling does not extend to China’s central bank digital currency, the digital yuan, which is issued and operated by designated operating agencies.
Huobi, now known as HTX, experienced a security incident in which its hot wallet was hacked, resulting in the loss of 5,000 ETH. Justin Sun, de-facto owner of HTX, confirmed that the hacker returned all the stolen funds, as promised, and a white hat bonus of 250 ETH was paid as a reward. Sun expressed his gratitude to the industry for its assistance during this incident. The hack was initially detected by blockchain analytics firm Cyvers Alerts. It is worth noting that during the incident, Sun claimed that HTX held approximately $3 billion in users’ assets. The recent rebranding of Huobi to HTX raised eyebrows in the community due to its similarity to the now-defunct crypto exchange FTX.
The East Asian crypto markets have been embroiled in scandals and legal challenges, highlighting the complexities of operating in this industry. The Alameda Research bribery scandal involving FTX’s Sam Bankman-Fried exposes the potential corruption and illicit practices that can occur behind closed doors. Binance’s clarification on account freezing sheds light on the delicate balance between regulatory compliance and user privacy. The Chinese courts’ ruling against crypto lending contracts undermines the legal protection of such agreements and raises questions about the overall legal framework for cryptocurrencies in China. Huobi’s security incident and subsequent return of stolen funds demonstrate the ever-present threat of hackers and the importance of robust security measures in the crypto industry. As East Asia continues to be a major player in the global crypto landscape, these developments serve as a reminder of the challenges faced by market participants and the need for continued vigilance and adaptation.