Our weekly roundup of news from East Asia highlights the most significant developments in the industry. In this edition, we cover the worsening Chinese bribe scandal involving FTX and Alameda Research, Binance’s clarification on account freezes, a Chinese court ruling on the invalidation of crypto lending contracts, and the return of stolen assets by a hacker to HTX (formerly known as Huobi).
Firstly, we delve into the ongoing FTX trial, which has taken a new turn with Caroline Ellison, co-founder of FTX-linked hedge fund Alameda Research, testifying that her colleague, disgraced FTX founder Sam Bankman-Fried, allegedly paid $150 million in bribes to Chinese government officials in 2021, a significantly higher amount than the initial $40 million disclosed. Ellison reveals that two years prior, $1 billion worth of Alameda Research’s digital assets on crypto exchanges OKX and Huobi were frozen as part of a money-laundering investigation by Chinese law enforcement. Senior FTX executives, including COO Constance Wang and Alameda trader David Wa, were also implicated in the incident. Attempts to unfreeze the funds through a Chinese lawyer were unsuccessful, leading Bankman-Fried to allegedly pay a $150 million bribe, which resulted in the immediate release of the frozen funds. However, Judge Lewis Kaplan clarifies that these bribery allegations are not within the scope of the ongoing FTX trial, and a separate trial relating to SBF’s bribery charges has been scheduled for March 2024.
Next, we examine Binance’s clarification on account freezes. Co-founder Yi He explains on Chinese social media app WeChat that only accounts of users suspected of violating international sanctions will be frozen on the exchange. This clarification comes after the exchange faced inquiries regarding news reports that it froze accounts of suspected Hamas militants at the request of Israeli law enforcement. Yi He emphasizes that Binance has to cooperate with law enforcement on such freeze requests as Hamas is designated a terrorist organization by the United Nations. She asserts that Binance’s actions are targeted towards Hamas and not Palestine as a whole. Yi He further reassures users that ordinary accounts will not be affected, citing the ongoing conflict between Russia and Ukraine where Binance has not frozen the accounts of ordinary Russians.
Moving on, we explore a significant ruling by a Chinese court regarding the invalidation of crypto lending contracts. The Nanchang People’s Court dismisses a civil lawsuit filed by Mr. Ming against Mr. Gang, who defaulted on an 80,000 USDT loan for stablecoin trading. The court states that there are legal risks associated with participating in virtual currency investment and trading activities, and if these activities violate public order and good customs, any resulting civil legal actions will be invalid. The judge further explains that virtual currencies like Bitcoin and Ethereum are not legal tender and do not have legal compensation. They are considered illegal financial activities that harm national financial order and social public interests. This ruling echoes a similar case in August where a Chinese man lost $10 million worth of Bitcoin due to the invalidation of a lending contract.
Lastly, we touch on the return of stolen assets by a hacker to HTX (formerly known as Huobi). Justin Sun, the de-facto owner of HTX, announces in a statement that the hacker has returned all 5,000 Ether ($8 million) that was stolen during a security incident. Sun expresses gratitude to the industry for their assistance and rewards the hacker with a white hat bonus of 250 ETH. The hack was detected by blockchain analytics firm Cyvers Alerts, and Sun had offered a bounty and threatened legal action if the funds were not returned. The incident also raised questions as Huobi recently rebranded as HTX, drawing attention due to the similarity of the name to the now-defunct FTX exchange.
In conclusion, this week’s roundup highlights the latest news from East Asia, including the unfolding scandal surrounding FTX and Alameda Research, Binance’s clarification on account freezes, a Chinese court ruling on the invalidity of crypto lending contracts, and the return of stolen assets to HTX. These developments continue to shape the cryptocurrency industry in East Asia and impact market participants globally.
