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Author: Don Obrien

Financial Institutions Pursue Cryptocurrency and Blockchain Offerings, US Treasury Sanctions Russian Crypto OTC Desk, Multiple DeFi Platforms Hacked | BakerHostetler


[co-author: Lauren Bass]

Traditional Financial Firms Pursue Crypto and Blockchain Market Offerings

By Lauren Bass

Earlier this week, a major Dutch financial institution reportedly became the sixth broker-dealer to join forces with the first blockchain-based securities settlement service. According to press releases, the private, permissioned blockchain network hopes this new partnership will help increase the efficiency and reach of its pilot program, which currently operates under a No-Action Phase while it applies to the SEC for full clearing agency registration.

According to reports this week, a major U.S. financial services firm has minted its first non-fungible token (NFT) in collaboration with a celebrated European soccer coach. According to reports, the one-of-a-kind collectible will take the form of a digital animated soccer ball, signed by the coach, and will be awarded to one lucky sweepstakes winner.

In other financial news, to prepare for its U.S. expansion, a U.K.-based digital bank reportedly became the first enterprise client of a major shared workspace provider to lease office space using cryptocurrency. According to reports, the U.K. bank has signed a long-term tenancy on a Dallas office and plans to pay rent in bitcoin.

For more information, please refer to the following links:

States Target Crypto Lending Platform, Alleging Securities Laws Violations

By Veronica Reynolds

Late last week and this week, financial regulators from the states of Texas, New Jersey, Alabama and Kentucky each took actions against a well-known cryptocurrency trading, lending and borrowing platform. The state actions all relate to the platform’s “Earn Rewards” program, which the state regulators allege are interest-bearing accounts that are in violation of state securities laws.

In one example, the Alabama regulator alleges that the lending platform has engaged in the “sale of unregistered securities in the form of cryptocurrency interest-earning accounts” and alleges that these accounts expose investors to undue risk because they are not protected by certain federal programs designed to protect consumers investing in regulated securities. In another example, the Texas regulator alleges that the platform is “not disclosing material information necessary for investors to make an informed decision, including critical material information about the risks associated with purchasing its unregistered securities.”

The New Jersey and Kentucky regulators issued cease-and-desist orders against the company. The Texas and Alabama regulators will provide the company an opportunity to respond before cease-and-desist orders are issued.

For more information, please refer to the following links:

US Treasury Sanctions Russian Crypto OTC Desk, Issues Ransomware Advisory

By Joanna F. Wasick

On Monday, the U.S. Department of the Treasury (the Department) issued a press release announcing a set of actions focused on countering ransomware. As part of the announcement, the Department stated that the Office of Foreign Assets Control (OFAC) “sanctioned” Russian-based cryptocurrency exchange SUEX OTC, S.R.O. (SUEX), identifying it as having facilitated transactions involving proceeds from at least eight ransomware variants. OFAC added SUEX, and over 20 associated cryptocurrency public keys, to OFAC’s List of Specially Designated Nationals.

As a result of the designation, all of SUEX’s property and interests in property that are subject or become subject to U.S. jurisdiction are blocked, and U.S. persons are prohibited from engaging in transactions with SUEX and any entity that is owned fifty percent or more by SUEX, and in transactions involving any of the designated cryptocurrency public keys.

On the same day, OFAC issued an updated advisory to highlight the sanctions risks associated with ransomware payments and provided steps companies can take to mitigate such risks, including actions that OFAC would consider to be “mitigating factors” in any related enforcement action. Among other things, the “mitigating factors” include the implementation of a risk-based compliance program to mitigate exposure to sanctions-related violations.

For more information, please refer to the following links:

Cryptocurrency Hackers Continue to Plague DeFi Platforms

By Kayley B. Sullivan

According to reports, late last week, a non-fungible token (NFT) auction on SushiSwap’s MISO cryptocurrency platform was hacked as a result of a software supply-chain attack. The hacker reportedly got away with approximately $3 million in ether. According to a report of the incident released by SushiSwap, the hack may have resulted from faulty GitHub procedures.

In another reported incident, this week pNetwork, a cross-chain decentralized finance protocol that allows different blockchains to communicate with each other, also announced that it had been hacked. The hack reportedly resulted in a loss of 277 pBTC, a version of wrapped bitcoin, worth over $12 million. The attacker reportedly found a bug in the platform’s code, which has since been fixed.

In a third hack reported this week, decentralized finance platform Vee Finance was hit, losing 8,804.7 ETH and 213.93 BTC, for a total loss of around $35 million. According to reports, this is the second major attack on an Avalanche platform – the first being decentralized finance protocol Zabu Finance earlier this month.

For more information, please refer to the following links:



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