Legal Storms in Crypto: What Lies Ahead?

When it comes to the world of cryptocurrency, it’s not just about the coins and tokens. The legal battles that unfold can shake the very foundation of investor confidence and market stability. Recent developments, like the postponed sentencing of Avraham Eisenberg and Coinbase’s minor win against the SEC, are just a few examples of how the courtroom can impact the crypto trading markets. Let’s unpack what’s been happening in this legal maze and what it might mean for the future.

Eisenberg’s Trial Delayed

Avraham Eisenberg, dubbed the “Avi” of crypto fame, was found guilty of fraud and market manipulation thanks to his exploits on the Mango Markets decentralized exchange. His sentencing has now been pushed to April 10, after a request from his legal team. This isn’t the first delay; it was initially set for December, then moved to February before finally landing in April. The prosecution didn’t even bat an eye at the request.

Eisenberg’s shenanigans in October 2022 drained over $100 million from Mango Markets. While he did return about $67 million, he pocketed more than $40 million after the community voted on it. He’s been in the slammer for almost two years and could be facing up to 20 years if things go south for him.

Besides the criminal case, he might also be up against civil actions from the SEC and CFTC, which were put on hold in early 2023 but are likely to resume after his trial.

Kwon’s Phone and Social Media Under Fire

Meanwhile, the legal team pursuing Do Kwon is setting its sights on his email and Twitter accounts. They believe they might uncover “multiple terabytes of data” relevant to his case. Kwon, who allegedly defrauded investors during the Terra ecosystem collapse, faces a mountain of charges in the US for his actions back in 2022. He was recently extradited from Montenegro after a year-long back and forth between the US and South Korea.

The prosecutors have plans to submit recordings of Kwon, made without his knowledge, into evidence. These recordings were previously used in an SEC civil case against him and his company, Terraform Labs, which already found them guilty of fraud.

Coinbase’s Small Win Against the SEC

On another front, Coinbase managed to score a minor victory against the SEC. A judge has granted them an interlocutory appeal, allowing them to challenge an earlier decision that denied them a judgment. It’s a small win, but a win nonetheless, and all proceedings have been paused until the Second Circuit weighs in.

The SEC’s case against Coinbase revolves around whether certain transactions involving crypto assets qualify as investment contracts. There have been conflicting rulings in other cases, particularly with Ripple and Terraform Labs, leading to some ambiguity in how securities are defined.

FTX Denies Backpack’s Approval

Lastly, FTX is still in the news, even after Sam Bankman-Fried’s sentencing. They recently denied a claim from Backpack that it acquired FTX’s European arm. FTX stated that the acquisition was not approved by the US Bankruptcy Court and that Backpack acted without the company’s knowledge.

Backpack, founded by a Solana developer, announced the acquisition and promised to start paying creditors by February. However, FTX’s rebuttal puts a damper on that claim.

Reflecting on a Turbulent Legal Landscape

These legal battles paint a picture of the turbulent legal landscape in the crypto world. They illustrate the uncertainties and complexities that continue to shape both investor sentiment and market dynamics. As the market evolves, it’s essential to stay updated on these legal developments, especially for those of us deep in the crypto trading in the US.