Rule of law

Hi friends. Tom Brady may be the GOAT to some, but he kind of fumbled his NFT project. Brady only sold about one-third of his collection one week after launch. Maybe he could get some advice from Logan Paul…?

Today: SEC vs. influencer, SEC vs. Ripple, and SEC vs….no wait, just a potential BTC price drop. Here we go.

—Angelina & Vincent

The SEC Sets its Sights on a Crypto Influencer

A string of words we never thought we’d say this often: It was a big week for the SEC. The agency alleged that crypto influencer Ian Balina broke federal securities law back in 2018—a claim that could potentially expand the SEC’s jurisdiction to include *checks notes* the entire Ethereum network.

Here’s the story: Between 2017 and 2018, Balina publicized multiple initial coin offerings (ICOs) on YouTube. According to the SEC, Balina promoted what the agency deemed an unregistered securities offering for SPKR tokens in 2018 without publicly disclosing that he was paid to do so by Sparkster Ltd., the Cayman Islands-based issuer of the SPKR tokens.

The SEC alleges that Balina was allowed to purchase 7,143 ether (worth around $5 million at the time) of SPKR tokens before publishing his YouTube promotion, and he was subsequently rewarded with a 30% bonus on his original token purchase for his marketing efforts.

The SEC also accused Balina of operating his own unregistered securities offering by creating an investment pool on Telegram to sell his own SPKR tokens.

Why this is a big deal: The SEC has gone after ICOs for years, but with Balina’s case, the SEC is also claiming that the ETH sent to Balina constituted a U.S. transaction (since most Ethereum nodes are in the U.S.). This would put the entire Ethereum network under the purview of the SEC.

One major caveat: It’s unlikely that a judge would weigh in on the SEC’s claim to this degree of oversight given the little legal weight that assertion has right now, University of Kentucky law professor Brian Fyre told Decrypt.

Next steps: Balina announced plans to take the SEC to court on Twitter—where many other crypto operators called foul on the SEC’s claim to Ethereum transaction regulation.

Still Waiting for the Bottom

As the temperatures begin to drop and pumpkin spice lingers in the air, crypto hodlers might consider preparing for more than just colorful leaves to fall. Recent data suggest crypto market prices are poised for a fall of their own.

The data in question: 1.69 billion BTC were moved to crypto exchanges between September 7 and 13—the largest weekly influx of bitcoin in 11 months. On September 14, BTC inflows experienced the largest single-day spike since March 2020, when bitcoin plunged as low as $3,600.

Why it matters: Investors moving their BTC from cold wallets to exchanges probably intend to sell their holdings. Exchanges being flooded with a particular cryptocurrency is a phenomenon generally associated with a drop in the asset’s price (because supply outstrips demand). No wonder bitcoin investors are currently worrying about a looming rally in selling pressure…

Throw the recent BTC sell-off from miners and whales into the mix, and it really does look like we haven’t yet seen the worst of this bear market. But at least retail investors are jumping at the opportunity to #btfd. The current number of small bitcoin holders is at an all time high.

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A Ripple of Anticipation…

After nearly two years, the tumultuous SEC vs. Ripple lawsuit could soon be over. Last Saturday, both parties filed motions for summary judgement, asking the judge to make a final ruling to avoid trial.

Quick refresher: In December 2020, the SEC sued Ripple Labs on allegations that it violated federal securities law by raising $1.3 billion through the sales of an unregistered security, Ripple’s XRP token.

Ripple effects: The ruling’s outcome will shape the all-important discussion about which cryptos are securities. Meanwhile, crypto Twitter is speculating that XRP was already classified as a commodity behind closed doors, given a CFTC commissioner’s recent visit to Ripple Labs.

A specific date for the ruling is TBD.

In other news:

• Celsius wants to sell the debt it owes to creditors in the form of IOU tokens.

• Crypto market maker Wintermute said it was hacked for $160 million because of a vulnerability in a service that tries to make DeFi more approachable.

• The U.S. House’s latest version of the stablecoin bill includes a two-year ban on algorithmic stablecoins.

• Crypto tanked again after the U.S. Federal Reserve raised interest rates by another 75 basis points.

And that’s what you need on your crypto radar. Stay with us for Sunday’s Coinsider Radar—a deep dive into the SEC’s approach to the new proof-of-stake Ethereum. See you then.