Our weekly roundup of news from East Asia curates the industry’s most important developments.
SBF’s Chinese bribe scandal worsens
According to October 11 testimony from Caroline Ellison, co-founder of FTX-linked hedge fund Alameda Research, her colleague — disgraced FTX founder Sam Bankman-Fried — allegedly paid $150 million in bribes to Chinese government officials in 2021, higher than the $40 million disclosed initially.
Ellison said during the FTX trial that two years prior, $1 billion worth of Alameda Research’s digital assets on crypto exchanges OKX and Huobi were frozen by Chinese law enforcement as part of a money-laundering investigation. Senior FTX executives, such as chief operations officer Constance Wang and Alameda trader David Wa, were also involved in the incident. The individuals first tried to contact a Chinese lawyer to unfreeze the funds, which didn’t work.
The disgraced FTX founder will be on trial throughout October. (Wikipedia)
Then, FTX and Alameda staff allegedly created accounts on OKX and Huobi using the identification of a Thai prostitute to negotiate the return of funds. When that didn’t work out, Ellison accused Bankman-Fried of paying a $150 million bribe to unfreeze the accounts. The bribe was recorded as “the thing” in future Alameda balance sheets. According to Ellison’s testimony, the funds were immediately unfrozen following the bribe.
Presiding Judge Lewis Kaplan of the United States District Court for the Southern District of New York reminded the jurors that Bankman-Fried’s alleged bribery of Chinese officials is not within the scope of the ongoing FTX trial. Instead, a second trial relating to SBF’s bribery charges has been scheduled for March 11, 2024. The FTX trial will remain ongoing for the month of October.
Binance clarifies account freeze
Yi He, a co-founder of Binance, clarified on the Chinese social media app WeChat earlier this week that only accounts of users suspected of violating international sanctions will be frozen on the exchange.
The statement came after a wave of inquiries in response to local news reports that the exchange froze accounts of suspected Hamas militants per Israeli law enforcement’s request. Yi He explained:
“Hamas is a designated terrorist organization by the United Nations. Therefore, any organization, including banks and trading platforms, will need to cooperate on the receipt of freeze requests. This is not something Binance can decide on its own.”
The Binance executive commented: “I have no political biases, yet no trading platform can refuse such law enforcement requests. Palestine has an organized government. Hamas is a local militant group. They kill civilians; that’s the problem. Hamas is not Palestine; the freeze is targeted towards Hamas, not Palestine.”
Binance co-founder Yi He’s statement on Hamas account freezes. (WeChat)
In a follow-up post on October 11, Yi He further clarified that “Binance would not confiscate nor freeze assets of ordinary users. Rules are created by the strong; in the face of international regulations, Binance is a nobody.” She also pointed to the fact that, despite the ongoing war between Russia and Ukraine, the exchange has not frozen the accounts of ordinary Russians.
Crypto lending invalidated by second Chinese court
Crypto lending contracts in China are not protected by law because the underlying asset is illegal, a second Chinese court has ruled.
As narrated by the Nanchang People’s Court on October 10, plaintiff Mr. Ming lent 80,000 USDT to defendant Mr. Gang in April 2021 for the purpose of stablecoin trading. The loan was to be repaid within six months. Mr. Gang subsequently defaulted on the loan, leading to a civil lawsuit by Mr. Ming. Both the lawsuit and its appeal were dismissed.
In their decision, the presiding judge wrote:
“There are legal risks involved in participating in virtual currency investment and trading activities. If any legal person, unincorporated organization, or natural person invests in virtual currencies and related derivatives that violates public order and good customs, the relevant civil legal actions will be invalid, and the resulting losses shall be borne by them.”
The judge further explained that according to various legislation forming China’s crypto ban, “virtual currencies only exist in digital form, are not legal tender, and do not have legal compensation, such as Bitcoin, Ethereum, Tether, etc., and cannot be used as currency in the market. Virtual currency-related business activities are illegal financial activities that harm national financial order, financial security and social public interests, and are strictly prohibited.”
The ruling does not extend to the digital yuan central bank digital currency, which the presiding judge said “is a legal currency in digital form issued by the People’s Bank of China. It is operated by designated operating agencies and redeemed by the public. It is equivalent to banknotes and coins.”
Previously in August, a Chinese man lost $10 million worth of Bitcoin after the borrower defaulted on his Bitcoin lending agreement and a court ruled that the contract was invalid, citing similar reasons as the Nanchang People’s Court.
Chinese judge explains why the Bitcoin lending contract was invalid and therefore denied relief for breach of contract.
Huobi hacker returns all assets
According to a statement by Justin Sun, de-facto owner of cryptocurrency exchange HTX, formerly known as Huobi, a hacker has returned all of the 5,000 Ether ($8 million) stolen during a security incident last month.
“We have confirmed that the hacker has fully returned all funds, as promised, and we have also paid the hacker a white hat bonus of 250 ETH. The hacker made the right choice. We would like to express our gratitude to everyone in the industry for their help,” Sun wrote. On September 25, Huobi’s hot wallet was hacked for 5,000 ETH in an incident first detected by blockchain analytics firm Cyvers Alerts.
Sun subsequently offered a bounty and threatened legal action if the funds were not returned. During the incident, the blockchain personality also claimed that the exchange held around $3 billion in users’ assets. Last month, Huobi rebranded as HTX, raising community eyebrows due to the similarity of the name to the now-defunct crypto exchange FTX.
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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.
This is the moment the government finally woke up to the enormity of the threat faced by the UK and the inability of its hollowed-out armed forces to cope.
But make no mistake, today’s decision to increase military spending is not just about increasing the number of troops, warships and fighter jets or even ensuring they can use the latest drones, satellites or artificial intelligence breakthroughs.
This is an emergency that requires the entire nation to take responsibility for – or at least an interest in – the defence of the nation and the importance of being able to deter threats.
Sir Keir Starmer signalled this fundamental shift in priorities when he told parliament: “We must change our national security posture because a generational challenge requires a generational response that will demand some extremely difficult and painful choices.”
He continued: “And through those choices, as hard as they are, we must also seek unity. A whole society effort that will reach into the lives, the industries, and the homes of the British people.”
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Starmer announces defence spending hike
Such a proposal is not something new.
The UK has a long history of being prepared for war.
The entirety of the Cold War era was framed around ensuring the UK had enough troops and reservists to fight a sustained conflict, supported by a vast industrial base to produce weapons and a society that was intrinsically resilient, with the ability to sustain itself with emergency food rations, power supplies and an understanding of the need to be prepared to respond in an emergency.
Back then, the threat was war – maybe even nuclear annihilation – with the Soviet Union.
Today the threat is just as stark but also far more complex.
Russia is the immediate danger. But China poses a long-term challenge, while Iran and North Korea are also menacing adversaries.
Most fundamentally though is the change in the UK’s ability to rely squarely on its strongest ally, the United States.
Donald Trump, with his resentment of shouldering the responsibility for European security, has made clear the rest of the transatlantic NATO alliance must take much more of the share of defending themselves.
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‘The world is becoming more dangerous’
He has also signalled that he may not even be willing to deploy America’s powerful military to defend every single member state – singling out those who pay far too little on their defences.
He has a point when it comes to Europe freeloading on the might of the United States for too long.
But the suggestion that European allies can no longer automatically rely on their American partner to come to their aid is enough to call into question the value of Article 5 of the NATO Alliance, which states an attack on one is an attack on all.
When it comes to deterring foes, there must be no such uncertainty between friends.
It is why countries across Europe are being urged by the new head of NATO to rapidly ramp up defence spending and adopt what NATO Secretary General Mark Rutte has called a “war mindset”.
The UK, who along with France are the only two NATO powers in Europe to possess nuclear weapons, has a bigger responsibility than most to heed that call.
Russia’s invasion of Crimea in 2014 was not a sufficient enough alarm bell.
Eve Russian President Vladimir Putin’s full-scale war in Ukraine in 2022 failed to shake the UK and most of the rest of Europe from their slumber.
Instead, it seems the return of Donald Trump to the White House, with all the unpredictability that he brings, is the final shock that has stunned the UK into action.
Of course, defence insiders know that increasing spending to 2.5% of GDP by 2027 is not soon enough.
But this – coupled with Sir Keir’s language about the need for a “generational response” – is a landmark moment.
The beginning of the correction of a strategic mistake made by Labour and Conservative governments over years to take a “holiday from history” and fail to find credible, capable armed forces and ensure society understands the importance of defence and the ability to deter.
Kemi Badenoch has said the US is acting in its national interest and the UK also needs to, ahead of Sir Keir Starmer’s meeting with Donald Trump.
The Conservative leader, giving a foreign policy speech in London on Tuesday, told Sky News’ political editor Beth Rigby the US is “not an authoritarian regime” and shares the same Western values as the UK, including free trade, free enterprise and free speech.
On Monday, the US sided with Russia on two UN resolutions when they declined to condemn Russia’s war in Ukraine, and backed a resolution for the conflict’s end that avoided labelling Russia as the aggressor or acknowledging Ukraine’s territorial integrity.
Ms Badenoch said the second resolution showed the US “acting in its national interests”.
“It is being realistic and we need to be so too,” she said.
“Now, that doesn’t mean we’re going to agree on everything. We disagree with them on that resolution, for example.
“But that is why I want the prime minister to be successful in his talks and find out what the thinking was behind that.”
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Putin hints at potential deals with US
‘Absolutely critical’ Starmer succeeds in DC
Ms Badenoch also said it is “absolutely critical” that Sir Keir succeeds in his talks on ending the war in Ukraine with Mr Trump on Thursday.
However, she did not provide details of exactly what he should succeed in.
Sir Keir is expected to discuss the importance of Ukraine’s independence, European involvement in peace talks and US security guarantees with Mr Trump.
Mr Trump, since becoming president just over a month ago, has called Ukrainian president Volodymyr Zelenskyy a dictator and suggested Kyiv started the war.
Image: The third anniversary of the Ukraine war took place on Monday. Pic: Reuters
Call for Starmer to cut development aid and welfare budget
Ms Badenoch urged Sir Keir to “repurpose” development aid in the short term and look to make welfare savings to fund increased defence spending.
She said 2.5% of GDP on defence is “now no longer sufficient” because any country that “spends more on debt interest than it does on defence, as the UK does today, is destined for weakness”.
“I will back the prime minister in taking these difficult decisions,” she added.
Her call came ahead of the prime minister’s unexpected statement on Tuesday lunchtime, in which he said UK defence spending will rise to 2.5% by 2027, and 3% in the next parliament.
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16:20
You can email James, Mark and Martha on trump100@sky.uk
The world has changed and the UK is not ready
Ms Badenoch said the UK must “accept reality” that the world has changed and “we can no longer hide behind vapid statements that were at best ambitious 20 years ago and are now today outright irrelevant”.
“It is time to speak the truth. The world has changed and the UK is not ready, so we must change too,” she said.
She accused the West of not doing enough to support Ukraine as “we were too ineffective, too indecisive and too often behind the curve”.
Because of that, she said: “Putin gained what he needed most, time. We now see the consequences.
“An end to the war is being negotiated while a fifth of Ukrainian territory is under enemy occupation.”
However, she said she was proud of the support her government gave Ukraine in the run-up to Vladimir Putin’s invasion and “in those first crucial weeks and months of the war”.