Week In Crypto: Resignation, Resisting Arrest And A Surprisingly Upbeat Regulator

September 30, 2022
As the LUNA co-founder evades an arrest warrant, the CEO of bankrupt Celsius decides it’s time for him to go. Meanwhile, the head of a US regulator says bitcoin could double in value under the right legal framework.

As the LUNA co-founder evades an arrest warrant, the CEO of bankrupt Celsius decides it’s time for him to go. Meanwhile, the head of a US regulator says bitcoin could double in value under the right legal framework.

This week in crypto was marked by the surprise resignation of Alex Mashinsky, CEO of Celsius, who only two weeks ago was said to be leading the company on its “hero’s journey” to redemption.

The resignation was effective immediately and covered all positions held by Mashinsky at Celsius and its subsidiaries, except for that of director at parent company Celsius Network Ltd.

"I elected to resign my post as CEO of Celsius Network,” Mashinsky said in a statement.

“Nevertheless, I will continue to maintain my focus on working to help the community unite behind a plan that will provide the best outcome for all creditors — which is what I have been doing since the company filed for bankruptcy.”

Mashinsky said he is “willing and available” to continue working with the company and its advisors to reimburse customers and achieve the best possible restructuring.

“I believe we all will get more if Celsians stay united and help the Unsecured Creditors Committee (UCC) with the best recovery plan,” he said.

“I regret that my continued role as CEO has become an increasing distraction, and I am very sorry about the difficult financial circumstances members of our community are facing.”

As covered in a previous Week In Crypto, Celsius’ chief compliance officer, Oren Blonstein, had said that, under Mashinsky’s leadership, bankruptcy was only a small stumble in the company’s “hero’s journey”.

Mashinsky expanded on the theme, noting that many successful companies, including Pepsi, Delta and even Apple, have either suffered bankruptcy or have come close to it in their early days, only to triumph later.

Celsius may rise again following bankruptcy, but if that happens, it will rise without Mashinky, who founded the company and had served as CEO since 2017.

Terraform objects to Do Kwon arrest warrant

Over at Terraform Labs, issuer of the ill-fated LUNA token and TerraUSD stablecoin, another crypto CEO has been in the spotlight this week.

In September, VIXIO reported that Terraform co-founder and CEO Do Kwon had been issued an arrest warrant by South Korean prosecutors, alongside five other executives.

In the warrant, the prosecutors asked the defendants — all of whom were believed to be residing in Singapore, where Terraform is based — to come forward voluntarily.

If they did not return to South Korea, prosecutors said their passports would be nullified and they would pursue an Interpol Red Notice to facilitate their arrest in any jurisdiction.

As of this week, according to a report from Bloomberg, that Red Notice has now been issued, but Do Kwon is still at large.

Meanwhile, police in Singapore have confirmed that Do Kwon is not in the country, prompting speculation that he is evading arrest.

“I am not ‘on the run’,” Do Kwon responded on Twitter. “For any government agency that has shown interest to communicate, we are in full cooperation and we don’t have anything to hide.

“To be honest, I haven’t gone running in a while,” he added. “I need to cut some calories.”

This week, Do Kwon also objected to new allegations that he tried to “cash out” a $67m stash of bitcoin via the OKX and KuCoin exchanges the day after his arrest warrant was issued.

“What has been probably the most surprising in all this is the amount of misinformation that gets spread,” he said on Twitter.

“There is no ‘cashout’ as alleged. I haven't used KuCoin or OKX in at least the last year, and no funds of Terraform Labs, Luna Foundation Guard or any other entities have been frozen.”

South Korean authorities have requested that both exchanges freeze the funds in question.

However, according to Cointelegraph, KuCoin had already frozen the portion of the funds that it received, while OKX has reportedly ignored the authorities’ requests.

All of this prompted a Terraform Labs spokesperson to complain to the Wall Street Journal (WSJ) that Do Kwon is being treated unfairly.

“We believe that this case has become highly politicised, and that the actions of the Korean prosecutors demonstrate unfairness and a failure to uphold basic rights guaranteed under Korean law,” the spokesperson said.

Do Kwon is alleged to have violated South Korea’s Capital Markets Act through the sale and marketing of unregistered securities.

CTFC sees bitcoin doubling under its watch

Stepping away from the crypto C-suite, this week there was a bold prediction from Rostin Behnam, chair of the Commodity Futures and Trading Commission (CFTC).

Speaking at an event hosted by NYU School of Law, Benham said that if bitcoin were brought firmly into the jurisdiction of the CFTC, it could have significant implications for the asset’s pricing.

“Growth might occur if we have a well-regulated space,” he said, as quoted by CoinDesk. “Bitcoin might double in price if there’s a CFTC-regulated market.”

He went on to say that, with such assets placed outside the jurisdiction of the Securities and Exchange Commission (SEC), this would help entice institutional investors to enter the space via non-bank crypto exchanges.

“These incumbent institutions in the crypto space see a massive opportunity for institutional inflows that will only occur if there’s a regulatory structure around these markets,” he said.

“Non-bank [crypto] institutions thrive on regulation, they thrive on regulatory certainty, they thrive on a level playing field.”

Benham added that he is in favour of a bill put forward by the Senate Agriculture Committee that would see bitcoin and ethereum regulated by the CFTC as “digital commodities”.

Together, bitcoin and ethereum make up almost 60 percent of the total crypto market.

Bitso to the rescue in high-inflation Argentina

Finally, this week Bitso Argentina, a subsidiary of Mexico’s Bitso exchange, launched a new QR code-based payment system that will allow users to pay for goods and services using crypto-assets.

As explained by Bitso, the new payment option is interoperable with all other QR code-based payment systems in Argentina.

So if a merchant is able to accept payments via QR code, Bitso users can use the Bitso app to make payments directly from their crypto wallet using bitcoin, ethereum or DAI, a US dollar stablecoin.

Bitso then processes an exchange transaction so that the merchant receives the equivalent amount in Argentine pesos.

Last month, VIXIO reported that Argentina is seeing a surge in crypto usage as inflation continues to spiral out of control.

This month, Argentina’s official annual inflation rate hit 78.5 percent, making crypto an attractive safe haven for some in the country.

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