Justin Sun Just Got a Lifeline

Hi! In today’s edition:

• 🛑 SEC, Sun seek legal pause

• ⚠️ FTX’s bankruptcy bill swells

• 💰 Tornado Cash creator gets dough for defense

• 📜 Howey Test is put to the test

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SEC, Justin Sun Seek Lawsuit Stay

The U.S. Securities and Exchange Commission and Justin Sun, alongside his companies Tron Foundation, BitTorrent Foundation, and Rainberry (formerly BitTorrent), are looking to resolve an ongoing legal dispute outside the courtroom. 

In a development that has parallels with legal maneuvering in a case involving the SEC and Binance, the regulator, together with Sun and his entities, on Wednesday filed a joint motion requesting a 60-day stay of legal proceedings.

Both sides argued that the pause would allow them to consider a potential resolution that could conserve judicial resources and also serve the public interest.

The SEC’s allegations against Sun include claims that the TRX and BTT tokens were illegally distributed, that markets were manipulated through wash trading, and that undisclosed payments were made to celebrity endorsers.

FTX Bankruptcy Costs Approach $1B 

FTX’s collapse was arguably already in the history books on account of the shady practices that caused it, but the exchange’s implosion will now also be known as one of the costliest bankruptcies in recent U.S. history.

Court records reviewed by Bloomberg show that $948 million has been paid to legal firms and financial advisors involved in cleaning up the mess made by Sam Bankman-Fried and his associates, which cost the exchange’s customers around $8 billion. 

FTX’s law firm, Sullivan & Cromwell, has received $248.6 million, while financial consulting firm Alvarez & Marsal has been paid roughly $306 million.

To put that into perspective, the costliest bankruptcy in U.S. history to date is that of failed investment bank Lehman Brothers, the bill for which was some $6 billion. 

At the time of its collapse, Lehman had assets worth around $691 billion and was the fourth-largest investment bank in the U.S. FTX, by contrast, had between $10 billion and $50 billion of assets at the time of its bankruptcy filing.

FTX's costs are also nearly double the combined bankruptcy bills racked up by other big, bust crypto firms such as Celsius, BlockFi, Genesis, and Voyager, which total $502 million. 

Ethereum Foundation Donates to Tornado Cash Creator’s Defense

The Ethereum Foundation has donated $1.25 million to support the legal defense of Alexey Pertsev, co-creator of the crypto mixing protocol Tornado Cash.

The donation comes as Pertsev prepares to appeal his money laundering conviction in the Netherlands, where he was sentenced to 64 months in prison last May.

“Privacy is normal, and writing code is not a crime,” the Ethereum Foundation wrote on X.

Pertsev, who was only recently released from pre-trial detention to prepare his appeal under electronic monitoring, expressed his gratitude to the foundation for its donation.

“I’m very grateful that I can now completely focus on preparing my appeal,” Pertsev said. “This means the world to me.” 

Is the SEC About to Reverse Its Position on Howey?

A group of lawyers on Monday argued before the U.S. Securities and Exchange Commission’s Crypto Task Force that most cryptocurrency activities should fall outside of the agency’s jurisdiction. 

The main subject of their recommendations was a re-evaluation of how the regulator applies the Howey Test, an 80-year old legal standard set by the Supreme Court used to determine when an asset is a security, to crypto.

Given the about-face on crypto amid the change of direction at the SEC, which has seen legal cases dropped and investigations wound up, will the Howey Test be the next domino to fall?

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• 🛡️ Bybit and Safe Custody are trading blame over Bybit’s recent $1.5 billion hack, with Bybit citing a compromised Safe wallet developer and Safe insisting its smart contracts had no vulnerabilities.

• 🔍 The U.S. Securities and Exchange Commission has officially closed its investigation of Gemini, having decided not to pursue enforcement action against the exchange after years of scrutiny.

• 📊 Solana futures exchange-traded funds appeared on the Depository Trust and Clearing Corporation’s fund listing on Wednesday, fueling optimism about a potential spot Solana ETF approval following recent SEC acknowledgments of multiple filings.

• 💲 Bank of America CEO Brian Moynihan this week confirmed that the lender is ready to launch its own stablecoin if Congress legalizes it, as Wall Street giants race to capitalize on digital assets under a pro-crypto Trump administration.

• 🕵️‍♂️ Crypto investigator ZachXBT joined Paradigm as an incident response advisor, leveraging his onchain forensic skills to help the venture capital firm’s portfolio projects while maintaining his independent investigations.

• 🐦 Pump.fun’s X account was hacked again on Wednesday to promote a fake PUMP token whose market cap spiked to $5 million before crashing.

• 💵 Circle CEO Jeremy Allaire is calling for all issuers of U.S. dollar-backed stablecoins to register in the U.S., arguing that regulatory oversight should apply regardless of jurisdiction.

• 📜 Former U.S. Congressman Patrick McHenry, a key advocate of crypto regulation, joined a16z as a senior advisor to help navigate the policy landscape for startups and emerging tech firms.

• 🏛️ A U.S. House committee on Wednesday advanced a resolution to repeal an Internal Revenue Service rule requiring “custodial brokers” to report user data, with Republicans arguing that it burdened innovation and Democrats accusing them of weakening tax enforcement.

• 👮 Market maker Gotbit founder Aleksei Andriunin was extradited to the U.S. on Tuesday to face fraud charges over allegations that his firm had manipulated token prices for paying crypto projects.

• 💳 Ondo Finance is integrating its tokenized U.S. Treasuries product with Mastercard’s Multi-Token Network, giving businesses seamless access to real-world assets and yield opportunities.

• 🔥 The Avalanche Visa Card launched, allowing users to spend AVAX, wrapped AVAX, USDT, and USDC at any retailer accepting Visa, boosting crypto adoption in everyday transactions.

• 🎁 Raise secured $63 million in funding led by Haun Ventures to expand its blockchain-based smart card program and digital gift card ecosystem.

• 🔐 Zero-knowledge protocol startup Ligero garnered $4 million and launched Ligetron, a high-speed zero-knowledge virtual machine claiming 1,000 transactions per second per graphic processing unit and massive efficiency gains, positioning itself against Aztec Noir and Polygon Miden.

• 📊 Phantom acquired token and NFT data platform SimpleHash, marking its third acquisition in eight months as it expands blockchain data capabilities for millions of users.

1. Travis Kling, CIO of investment firm Ikigai, on Solana as a casino 

2. The Bull Case for $MKR $SKY by Taiki Maeda, founder of DeFi-focused HFA Research

3. DL News: Bitwise highlights four crypto trends amid death of ‘memecoin carnival’

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