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The last week of December 2023 has been quite eventful for the world of crypto regulations and bankruptcies. tl;dr:

  • Celsius’ bitcoin mining pivot: The crypto lending platform Celsius has received approval from its community to use $225 million worth of its treasury funds to invest in bitcoin mining operations.
  • SEC’s sanctions in DEBT Box case: The Securities and Exchange Commission (SEC) has been ordered to pay sanctions for lying to the court in its case against DEBT Box, a decentralized exchange platform that the SEC accused of violating securities laws.
  • Terra’s stablecoins ruling: A judge has ruled that Terra’s stablecoins, which are pegged to various fiat currencies, are securities and subject to SEC regulation. This could have implications for other stablecoin issuers and users.
  • SBF’s second trial: The prosecutors in the case against Sam Bankman-Fried (SBF), the founder and CEO of FTX, a crypto derivatives exchange, have decided not to pursue a second trial after he was convicted and now faces sentencing on all counts.

Courts approve Celsius Networks’ $225M bitcoin mining pivot

Celsius Network was founded as a crypto lender in 2017 and pitched users to “unbank yourself on the blockchain.” Five years later, Celsius filed for Chapter 11 bankruptcy in July 2022 after freezing customer withdrawals when crypto prices fell. The company was cleared to exit bankruptcy in Nov 2023, expected to return ~$2B to customers. This week, the court approved Celsius plan to form “a public company focused solely on bitcoin mining” with $225M in fiat.

Read more / see Celsius Network’s pitch deck→

SEC faces sanctions for misrepresenting facts in DEBT Box case

The SEC faces sanctions for misrepresenting facts in an attempt to secure a restraining order and asset freeze against crypto firm, DEBT Box. Initially, the SEC convinced the court to freeze DEBT Box’s assets, arguing the company was moving out of regulatory reach to Dubai. The SEC complaint alleged the project defrauded investors of nearly $50M, but several of their claims were proven false:

For instance, the bank closed some of the accounts (not the company itself), and the transfer of operations had started months prior to the suit (not immediately before it). DEBT Box offered customers so-called “node licenses” to receive revenue from mining without running an actual mining operation. The SEC has alleged this constituted selling unregistered securities.

Judge sides with SEC, ruling Terra’s stablecoins are unregistered securities

The SEC claimed that Terraform Labs and Kwon “orchestrated a multi-billion-dollar fraud,” and a federal judge has ruled in their favor that Terraform Labs and its former CEO, Do Kwon, offered and sold two unregistered securities. Judge Rakoff, however, granted summary judgment for the defendants over the alleged unregistered offer and sale of security-based swaps.

FTX founder Sam Bankman-Fried will not face second trial

Prosecutors have decided against pursuing a second trial against disgraced FTX founder Sam Bankman-Fried, who awaits sentencing after being convicted on all counts. SBF was found guilty on all counts and faces up to 110 years in prison. After the collapse of FTX, a whopping $8 billion in customer funds were missing; later, it was revealed that SBF funneled customer deposits to everything from luxury real estate to political donations. One of FTX’s last investor pitch decks heralded the company as the “leading digital assets exchange,” with over $14.7B daily volume in 2021.

Read more / see FTX’s pitch deck→