In a shocking revelation, Caroline Ellison, co-founder of Alameda Research, testified on October 11 that Sam Bankman-Fried, the disgraced founder of FTX, allegedly paid $150 million in bribes to Chinese government officials. This amount was significantly higher than the initial disclosure of $40 million. Ellison also revealed that $1 billion worth of Alameda Research’s digital assets on cryptocurrency exchanges OKX and Huobi were frozen by Chinese law enforcement two years prior, as part of a money-laundering investigation.
The incident took an even more bizarre turn when FTX and Alameda staff attempted to negotiate the return of the frozen funds by creating accounts on OKX and Huobi using the identification of a Thai prostitute. When this strategy failed, Bankman-Fried was accused of paying the hefty bribe to unfreeze the accounts, which was recorded as “the thing” in future Alameda balance sheets. The funds were promptly unfrozen following the alleged bribe.
Yi He, a co-founder of Binance, took to the Chinese social media app WeChat to clarify the exchange’s policy on freezing accounts. This statement came in response to news reports that Binance had frozen accounts of suspected Hamas militants at the request of Israeli law enforcement. He emphasized that Binance can’t refuse such law enforcement requests, especially when it involves designated terrorist organizations like Hamas.
He further specified that the freeze was directed towards Hamas, not Palestine as a whole, and that Binance would not freeze assets of ordinary users. He emphasized that Binance is obligated to cooperate with international regulations and maintained that Binance is a neutral party that follows the rules set by those in power.
A second Chinese court has ruled that crypto lending contracts are not protected by law due to the underlying asset’s illegality. In a recent case, plaintiff Mr. Ming lent 80,000 USDT to defendant Mr. Gang for stablecoin trading. When the loan defaulted, Mr. Ming filed a civil lawsuit, which was ultimately dismissed. The presiding judge highlighted the legal risks involved in virtual currency activities and stated that any investments that violate public order and good customs are invalid.
The judge further explained that virtual currencies, such as Bitcoin and Ethereum, are not legal tender and cannot be used as currency in the market. These currencies are considered illegal financial activities that harm national financial order, financial security, and public interests.
In a surprising turn of events, a hacker who managed to steal 5,000 Ether ($8 million) from Huobi’s hot wallet returned all the funds. Justin Sun, the de-facto owner of the cryptocurrency exchange HTX (formerly known as Huobi), confirmed the return of the funds and even awarded the hacker a white hat bonus of 250 ETH. Sun expressed gratitude to the industry for their support during this incident.
The hacking incident, first detected by blockchain analytics firm Cyvers Alerts, prompted Sun to offer a bounty and threatened legal action if the funds were not returned. It is worth noting that Huobi recently rebranded as HTX, which raised some eyebrows due to its similarity to the now-defunct crypto exchange FTX.
These recent developments in East Asia highlight the complex and ever-evolving landscape of the cryptocurrency industry. The bribery allegations against the FTX founder, the clarification of Binance’s freezing policy, the ruling on crypto lending contracts in China, and the return of stolen funds by the Huobi hacker all demonstrate the legal and regulatory challenges faced by the crypto community.
As the industry continues to grow and innovate, it is crucial for participants to navigate these challenges while upholding the highest ethical standards. Transparency, compliance with regulations, and responsible behavior are key to building trust and ensuring the long-term sustainability of the cryptocurrency ecosystem.
