Our weekly roundup of news from East Asia curates the industry’s most important developments.
On Aug. 11, a Chinese individual known only as Mr. Chen was sentenced to nine months in prison after helping his friend, Mr. Lin, purchase 94,988 Chinese yuan ($13,104) worth of Tether (USDT) and earning a commission of 147.1 Yuan ($20.24).
Because Mr. Chen shared his personal bank information for the peer-to-peer fiat-to-crypto transaction, Chinese authorities considered the act to be money laundering and imposed a harsh sentence.
Chinese judge explains in a prior case why a Bitcoin lending agreement was legally invalid even in the event of a breach of contract. (Jstv)
Officially, Chinese authorities attribute the tough-on-crypto approach to a spree of data theft and the use of crypto to launder proceeds of crime. However, sources tell Cointelegraph that the crackdown is more related to the country’s stringent capital control rules, where Chinese nationals are prohibited from buying more than $50,000 worth of foreign currencies each year without a state permit. The same applies to large-sum Chinese yuan transactions with foreign banks.
The capital controls had been almost complete until the advent of crypto, sources say. The problem is further exasperated by a looming recession in China, making senior government officials wary of further money moving out of the country.
In July, Jingmen municipal police were tipped off about an online poker platform operating in the city. Raiding the offices, police discovered the group had “laundered” over 400 billion Chinese yuan ($54.93 billion) worth of gambling funds using cryptocurrencies and involving over 50,000 individuals.
However, the underlying criminal act that resulted in the “tainted money” was never mentioned. Unlike other jurisdictions, the act of gambling itself and the transfer of currencies abroad without applicable permits are deemed to be illicit activities. According to user reports, fiat-to-crypto transactions stemming as far back as 2021 are currently being audited by “special police task forces.”
Crypto projects and their Chinese founders are also disappearing at an alarming rate. The well-known Multichain incident aside, in May, employees of Chinese offshore yuan stablecoin issuer CNHC were detained by police following an office raid. They have not been heard from since. Commenting on the story, Wuwei Liang, a former employee of defunct crypto exchange CoinXP, claimed:
“Suddenly, despite there being no complainants nor victims, the Wuxi police who came to Beijing from across the province took away all the members of the CoinXP team of China’s domestic blockchain entrepreneurial team.”
Liang further alleged that Chinese police would resort to “intimidation” to force a confession and the surrender of a project’s private key. Armed with this as “evidence” police then charge the co-founder with “fraud and multilevel marketing,” bringing about a sham trial where the accused is convicted, resulting in the seizure of enterprise and user funds alike. (These allegations have not been proven in court.) We reported earlier on allegations of intimidation, detention, and even suggestions of the “kidnapping” of the defense counsel at the ongoing CoinXP trial.
CBDC printer goes brrrr
Don’t misinterpret the Chinese government, however; they are quite fond of blockchain, so long as they are the ones in charge.
In the interest of revitalizing China’s ailing economy via consumer spending, government officials have recognized the role of the Chinese yuan central bank digital currency and made its adoption a political priority. On July 27, the city of Suqian airdropped 20 million ($2.75 million) of digital yuan shopping vouchers to residents.
This was followed by a 10 million ($1.37 million) digital yuan food voucher airdrop by the city of Hangzhou, a 40 million ($5.49 million) digital yuan airdrop by the city of Shaoxing, a 30 million ($4.12 million) digital yuan airdrop by the city of Jianyang, and a 3 million ($0.412 million) digital yuan airdrop by the city of Ningbo, all within less than two weeks. At one test site in Chengdu, China’s largest food delivery platform, Meituan, reported a 65.5% daily increase in the number of digital yuan transactions on its platform.
So there are definitely real-world results to help revitalize the economy — something desperately needed right now. On Aug. 15, China announced it would stop reporting its youth unemployment figures after the metric reached a record 21.3% in June. Perhaps we can expect the (blockchain) printer to go brrr in the months ahead?
Chinese President Xi Jinping explains during the Shanghai Cooperation Summit why ‘”friendly nations” such as Belarus and Iran should develop their own CBDCs. (CCTV)
3AC creditors suffer humiliating defeat
Lawsuits can be tough, especially when it comes to matters such as liquidating a $3.5 billion Singaporean hedge fund through multi-jurisdictional litigation. This is why a high level of competency is generally required for the attorneys who take part in such proceedings.
And so, creditors of Three Arrows Capital (3AC) were dealt a significant setback on Aug. 11, when United States Bankruptcy Judge Martin Glenn said civil contempt rulings against 3AC co-founder Kyle Davies were invalid.
Judge Glenn explained that the subpoenas issued by law firm Teneo on behalf of creditors to Davies via Twitter starting in December were made on the basis that Davies held U.S. citizenship. However, it emerged earlier this month that Davies’ renounced his U.S. citizenship to acquire Singaporean citizenship a few years prior.
“Because Mr. Davies’ United States citizenship was a prerequisite for valid service on him in the manner effected, he was not properly served with the subpoena issued by this Court.”
As a result, the U.S. court could not exercise jurisdiction against Davies, with Judge Glenn suggesting that creditors’ attorneys bring a motion to a Singaporean court to compel Davies’ compliance instead. It has been over a year since 3AC filed for bankruptcy.
In other words, after one year’s time, creditors have just found out that the jurisdiction where they filed to claim debtors’ assets had no jurisdiction over the debtors. 3AC co-founder Zhu Su, by the way, also has Singaporean citizenship and cannot be compelled by U.S. courts on this matter.
3AC co-founders Kyle Davies (left) and Su Zhu (right). (X/Twitter)
Now don’t get me wrong, everyone makes mistakes, but often trivial mistakes have trivial consequences. Unfortunately, that wasn’t the case here. Since the inception of proceedings, 3AC creditors have reportedly spent millions in legal fees, with some estimates going as high as $30 million. The proceedings have so far led to the recovery of several nonfungible tokens (NFTs) owned by 3AC, which were sold at two Sotheby’s auctions for a combined … $13.4 million.
In the last week, the liquidators of 3AC have spent millions in legal fees to find out:
(1) Kyle Davies is not a US citizen (2) 3AC and DeFiance Capital operate out of Singapore
Both nuggets of infomation are available on a document you can purchase for SGD 5.50. https://t.co/HZK5JjUFKS
In another setback, a Singaporean court ruled on Aug. 15 that the city-state would be the convenient forum for hearing 3AC creditors’ $140 million dispute with DeFiance Capital, and not the British Virgin Islands as suggested by Teneo. 3AC creditors allege that funds held with DeFiance Capital belong in the estate of 3AC, while DeFinance Capital says that its assets belong to its independent investors. Commenting on the double whammy, Su Zhu wrote:
“As the current acting liquidator for 3AC, we believe Teneo is repeatedly overreaching in their attempt to seize other investors’ funds. Even on a technical and legalistic approach, the DC [DeFiance Capital] and SNC assets rightfully belong to the feeder funds of 3AC,”
But in the overall context, winning a battle is easy; winning a war is difficult. On Aug. 16, Dubai regulators reminded Davies and Zhu that their new OPNX exchange for trading crypto bankruptcy claims remains unregistered in the Emirate and, correspondingly, faces a 10 million Dirham ($2.72 million) penalty for operating without a proper license.
Unlike in the U.S., Davies and Zhu actually own assets in the UAE vulnerable to seizure, including Davies’ prized chicken restaurant. Whether the co-founders can really keep their assets sheltered from the path of angry creditors (and regulators alike) remains to be seen.
Just before we published Asia Express, 3AC liquidators filed a committal order against Zhu Su in the court of Singapore.
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Zhiyuan Sun
Zhiyuan Sun is a journalist at Cointelegraph focusing on technology-related news. He has several years of experience writing for major financial media outlets such as The Motley Fool, Nasdaq.com and Seeking Alpha.
The new home secretary will host talks on how to stop people smuggling in her first major engagement in the role.
Shabana Mahmood will host the so-called Five Eyes security alliance, holding talks between counterparts from the US, Australia, Canada and New Zealand.
The security alliance discussion comes after an estimated 1,000 people arrived by small boat in Britain over the course of a single day, with French authorities saying 24 people were rescued while trying to cross the English Channel.
Ms Mahmood said the numbers, which take the yearly total to more than 30,000 in record time, were “utterly unacceptable” and that she expected migrant returns under a deal agreed last month with France to begin “imminently”.
Sir Keir will now be hoping to draw a line under the fallout of his former deputy’s departure, as well as a summer dominated by criticism of his government’s handling of the small boats crisis.
Ms Mahmood said the Five Eyes intelligence sharing pact would “agree new measures to protect our border”. The group will also discuss new measures to tackle child sexual abuse online, as well as the spread of deadly synthetic opioids, the Home Office said.
Ms Mahmood said: “Rebuilding our reputation on the world stage is how we tackle serious organised crime and secure our borders.”
“The Five Eyes might be drawn from different corners of the globe, but we are united by our alliance,” she added.
“As the security threats we all face become more complex and span continents, we are stronger and safer together.”
She will be joined at the talks by US secretary of homeland security Kristi Noem, Canadian public safety minister Gary Anandasangaree, Australian home affairs minister Tony Burke and New Zealand minister Judith Collins.
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What PM’s reshuffle reveals about his priorities
The Prime Minister has told his new ministers to “go up a gear” in delivering on Labour’s agenda, part of which now involves a toughened immigration policy as he faces pressure in the polls from Nigel Farage’s Reform UK.
In Ms Mahmood’s first full day in the job, she met the head of Scotland Yard to receive a briefing on the policing operation in response to protests in London.
“Supporting Palestine and supporting a proscribed terrorist group are not the same thing,” she said.
“An honour to visit Sir Mark (Rowley) and the Metropolitan Police to see them at work policing protests yesterday.”
Almost 900 people were arrested in central London at a protest against the banning of Palestine Action.
The leader of Britain’s trade unions is to accuse Sir Keir Starmer of failing to deliver the change Labour promised during the election campaign last year.
In his keynote speech at the TUC conference in Brighton, general secretary Paul Nowak will claim that for too many people change still feels like a slogan, not a reality.
After a troubled first year in government that has seen Labour lose support to Reform UK, Mr Nowak will warn the lack of change cannot continue and the government must deliver on jobs, public services and living standards.
And he will claim Rachel Reeves’ budget on 26 November must include windfall taxes on bank profits and gambling companies, a wealth tax on millionaires and the lifting of the two-child benefit cap introduced by George Osborne during the coalition government.
Mr Nowak’s speech comes just days after the unionslost their champion in cabinet, Angela Rayner, prompting fears among delegates in Brighton that the government is poised to weaken its flagship legislation on workers’ rights.
Image: Paul Nowak. File pic: PA
The Conservatives have responded to Ms Rayner’s demise by writing to the new business and trade secretary, Peter Kyle, calling on him to scrap the Employment Rights Bill, claiming it will reduce jobs and mean more red tape and bureaucracy.
But Labour is losing support to Nigel Farage’s party, not the Tories, and will also – potentially – to left-wing parties in future. And in an unusual move, the new left-wing leader of the Green Party, Zack Polanski, will also address the TUC later.
Labour’s election manifesto last year showed a black and white photo of a shirt-sleeved Sir Keir on the front cover with the single word “Change” in red.
In his attack on the government’s first year in office, Mr Nowak will say: “The Tories took Britain to the brink. That’s why last July, the government was elected on a manifesto that promised change.
“But we have to be honest – for too many people, change still feels like a slogan not a lived reality.
“This can’t continue. Throughout our history, we’ve been at our best when we’ve been ambitious for working people.
“So today, my message to the government is simply this.
“Deliver the manifesto on which you won a huge majority last July. Deliver good jobs, decent public services and better living standards in every corner of the country. Deliver the change people voted for.
“And show working-class communities whose side you are on.”
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Could Rayner come back?
On the budget, which Labour MPs believe will be crucial to the government’s hopes of recovery in its fortunes, Mr Nowak will declare: “Introduce a windfall tax on record bank profits and gambling companies. And back it with new taxes on wealth.
“If billionaires can afford fleets of private yachts. Day trips into space. Weddings that shut down Venice – they can pay a bit more tax.
“Do what’s best for those who go out to work, day in, day out, and still can’t get by. Deliver the Employment Rights Bill and deliver it in full.
“And make it clear – a Labour government will never stand aside and watch a child’s potential be wasted because of poverty. Lift the two-child cap, and give our kids the future they deserve.”
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TUC to govt: ‘Deliver on workers’ rights’
And on the issue set to dominate this week’s conference, workers’ rights, Mr Nowak will say: “The government has a manifesto promise to make work pay.
“Stronger rights at work are overwhelmingly popular with voters across the political spectrum.
“The public knows decent work is the best way to deliver the reset this country needs.
“The best way to improve living standards.
“And the best way to rebuild our communities hit hard by low pay and insecure work.
“So here is our challenge to government.
“Deliver that Employment Rights Bill in full and deliver the change you promised at the election.”
But the Tories’ shadow business secretary Andrew Griffith, in a letter to Mr Kyle, claims the bill will be deeply damaging to economic growth and reduce living standards.
“Rather than proceed at this time with a measure which on the government’s own impact assessment will reduce employment and growth, now is the time to put the national interest first,” he wrote.
“Any credible ‘reset’ of this government requires that this bill be shelved and the government look afresh at measures to promote the growth and competitiveness of the UK economy.”