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.
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.
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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?
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.
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 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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Learn-to-earn platform Dohrnii Labs filed a police report in the United Arab Emirates accusing local crypto exchange Blynex of liquidating its tokens without authorization and failing to deliver a promised loan.
According to a statement shared with Cointelegraph, Dohrnii Labs deposited 12,649.99 Dohrnii (DHN) tokens — valued at more than $500,000 — with Blynex. On March 23, the company said it used 8,650 of those tokens as collateral for a 30-day loan in exchange for 80,000 of Tether’s USDt (USDT).
Dohrnii claims the exchange never delivered the USDT. Furthermore, the team said Blynex liquidated its entire 8,650 DHN position on Uniswap, receiving 149,151 USDT and causing a drop in the token’s market value.
Attempts to withdraw the remaining 4,000 DHN tokens were unsuccessful, the company said.
Source: Dohrnii Labs
Blynex claims it was automated risk management
Blynex co-founder Mike Baskes told Cointelegraph the incident was part of their “automated risk management system.” Baskes claimed their system detected a high risk that the collateral would drop significantly in the event of liquidation.
The Blynex executive said that when the tokens were sold, it only generated 145,000 USDT instead of its original amount. He noted that DHN token liquidity was limited, estimating just $315,000 available at the time of the transaction.
The executive claimed Blynex took action to prevent financial losses:
“Given this liquidity constraint, the system recognized a high risk of further loss if the collateral wasn’t liquidated immediately, as the tokens would be difficult to sell at a favorable price in the current market.”
Dohrnii Labs has challenged that explanation, calling Blynex’s justification “misleading” and alleging that the exchange liquidated collateral worth nearly double the value of the loan.
Related: Dubai Land Department begins real estate tokenization project
Dohrnii Labs threatens legal action against Blynex
In response, Dohrnii Labs filed the police report in the UAE and has threatened to take legal action against the crypto exchange.
A Dohrnii Labs representative told Cointelegraph that the police report was only a “first step.” The representative said if Blynex ignored their communications, they would legally escalate the matter:
“Since the project and the individuals responsible are based in the UAE, we are also getting in touch with local regulators, including VARA, ADGM, and other relevant authorities. Furthermore, we’re in contact with other affected projects and are actively exploring the possibility of joint legal action.”
The team said they want to ensure accountability through the legal system and regulatory oversight.
Dohrnii told Cointelegraph that Blynex attempted to settle the matter by offering them 80,000 USDT and allowing the withdrawal of 4,000 DHN tokens.
However, the exchange added a condition that the platform would drop all legal action. “That is unacceptable,” Dohrnii Labs said.
“The 4,000 DHN tokens in question are user deposits — not negotiable assets. The right to withdraw these funds should never be up for discussion,” Dohrnii Labs added.
Magazine: Ridiculous ‘Chinese Mint’ crypto scam, Japan dives into stablecoins: Asia Express
Chancellor Rachel Reeves is poised to deliver an update on the health of the British economy on Wednesday.
The spring statement is not a formal budget – as Labour pledged to only deliver one per year – but rather an update on the economy and any progress since her fiscal statement last October.
Politics Hub: Follow live updates
While it’s not billed as a major economic event, Rachel Reeves has a big gap to plug in the public finances and speculation has grown she may have to break her self-imposed borrowing rules.
Here, Sky News explains everything you need to know.
What is the spring statement?
The spring statement is an annual speech made by the chancellor in the House of Commons, in which they provide MPs with an update on the overall health of the economy and Office for Budget Responsibility (OBR) forecasts.
It is one of two major financial statements in the financial year – which runs from 1 April to 31 March.
The other is the autumn budget, a more substantial financial event in which the chancellor sets out a raft of economic policy for the year ahead.
Typically, the spring statement – which was first delivered by ex-chancellor Phillip Hammond in 2018 – gives an update on the state of the economy, and details any progress that has been made since the autumn budget.
Read more: What could be announced in the spring statement?
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Sam Coates previews the chancellor’s announcements
When will Rachel Reeves deliver it?
The OBR, which monitors the government’s spending plans, will publish its forecast on the UK economy on 26 March.
It is required to produce two economic forecasts a year, but the chancellor said she would only give one budget a year to provide stability and certainty on upcoming tax changes.
The OBR will also provide an estimate on the cost of living for British households, and detail whether it believes the Labour government will adhere to its own rules on borrowing and spending.
The chancellor will then present the OBR’s findings to the House of Commons, and make her first spring statement.
This will be responded to by either Conservative leader Kemi Badenoch or shadow chancellor Mel Stride.
Read more:
Welfare cuts will save £5bn
The town where a third are out of work
Rachel Reeves is looking to plug gaps in the UK’s finances. Pic: PA
Why does it matter?
The UK economy is thought to be underperforming – potentially due to global factors, like Donald Trump’s trade tariffs – and there are rumours that the chancellor could consider breaking her own rules on borrowing in response.
The economy contracted slightly in January, while inflation has climbed to a 10-month high of 3%. Meanwhile, the government has committed to boosting defence spending to 2.5% of GDP by 2027 – an expensive task.
Ms Reeves’s fiscal rules mean she cannot borrow for day-to-day spending – leaving cuts as one of her only options. Her other “non-negotiable” is to get debt falling as a share of national income by the end of this parliament.
It is expected that welfare cuts will be part of the spring statement package to help the chancellor come within her borrowing limit.
Our deputy political editor Sam Coates said earlier in March there would be a “four-point plan” involving planning reform, Whitehall cuts, regulation cuts and welfare cuts. The government has already announced NHS England will be scrapped.
In short, the Treasury believes Ms Reeves must maintain £10bn in headroom after months of economic downturn and geopolitical events since last October’s budget.
It is widely expected the OBR will confirm that this financial buffer has been wiped clean.
Where can I watch the spring statement?
The spring statement will be delivered in the House of Commons on Wednesday 26 March, directly after Prime Minister’s Questions, which is usually finished by around 12.30pm.
You’ll be able to keep up to date on Sky News – and follow live updates in the Politics Hub.
The US Treasury Department says there is no need for a final court judgment in a lawsuit over its sanctioning of Tornado Cash after dropping the crypto mixer from the sanctions list.
In August 2022, Treasury’s Office of Foreign Assets Control (OFAC) sanctioned Tornado Cash after alleging the protocol helped launder crypto stolen by North Korean hacking crew the Lazarus Group, leading to a number of Tornado Cash users filing a lawsuit against the regulator.
After a court ruling in favor of Tornado Cash, the US Treasury dropped the mixer from its sanctions list on March 21, along with several dozen Tornado-affiliated smart contract addresses from the Specially Designated Nationals (SDN) list, and has now argued “this matter is now moot.”
Because Tornado Cash has been dropped from the sanctions list, the US Treasury Department argues there is no need for a final court judgment in the lawsuit. Source: Paul Grewal
“Because this court, like all federal courts, has a continuing obligation to satisfy itself that it possesses Article III jurisdiction over the case, briefing on mootness is warranted,” the US Treasury said.
However, Coinbase chief legal officer Paul Grewal said the Treasury’s hope to have the case declared moot before an official judgment can be made isn’t the correct legal process.
“After grudgingly delisting TC, they now claim they’ve mooted any need for a final court judgment. But that’s not the law, and they know it,” he said.
“Under the voluntary cessation exception, a defendant’s decision to end a challenged practice moots a case only if the defendant can show that the practice cannot ‘reasonably be expected to recur.’”
Grewal pointed to a 2024 Supreme Court ruling that found a legal complaint from Yonas Fikre, a US citizen who was put on the No Fly List, is not moot by taking him off the list because the ban could be reinstated again at a later date.
Source: Paul Grewal
“Here, Treasury has likewise removed the Tornado Cash entities from the SDN, but has provided no assurance that it will not re-list Tornado Cash again. That’s not good enough, and will make this clear to the district court,” Grewal said.
Six Tornado Cash users led by Ethereum core developer Preston Van Loon, with the support of Coinbase, sued the Treasury in September 2022 to reverse the sanctions under the argument that they were unlawful.
Crypto policy advocacy group Coin Center followed through with a similar suit in October 2022.
In August 2023, a Texas federal court judge sided with the US Treasury, ruling that Tornado Cash was an entity that may be designated per OFAC regulations. On appeal, a three-judge panel ruled in November that Treasury’s sanctions against the crypto mixer’s immutable smart contracts were unlawful.
US Treasury had a 60-day window to challenge the decision, which it did; however, the US court sided with Tornado Cash, overturning the sanctions on Jan. 21 and forcing the government agency to remove the sanctions by March.
Related: US Treasury under Trump could take a different approach to Tornado Cash
Its founders are still facing legal strife, however. The US charged Roman Storm and fellow co-founder Roman Semenov in August 2023, accusing them of helping launder over $1 billion in crypto through Tornado Cash.
Semenov is still at large and on the FBI’s most wanted list. Storm is free on a $2 million bond and expected to face trial in April.
Meanwhile, Tornado Cash developer Alexey Pertsev was released from prison after a Dutch court suspended his “pretrial detention” as he prepared to appeal his money laundering conviction.
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