Why are some lawmakers trying to revive the dying crypto scam?
Binance Boss Pleads Guilty and Kraken Charged with Violations of U.S. Laws
In recent months, the spotlight has been on the cryptocurrency industry and its big wigs after multiple incidents of fraud and violating U.S. laws and regulations. The month of November kicked off with a scandal as the scam artist Sam Bankman-Fried, manager of the once-upward scuttling crypto exchange FTX, was convicted on seven fraud and conspiracy counts. The situation worsened when the U.S Securities and Exchange Commission (SEC) charged the crypto trading platform Kraken with a series of legal violations.
According to the SEC, Kraken has been operating as a crypto “broker, dealer, exchange, and clearing agency.” This poses potential conflicts of interest against the interests of the customers. A day later, the government announced a $4-billion settlement of money laundering charges against Binance, the largest remaining crypto platform. As a part of the settlement, Binance has been asked to cease their business in the U.S., employ an independent compliance monitor for five years, and founder and CEO Changpeng “CZ” Zhao agreed to step down as chief executive along with paying a $50-million fine.
This settlement is indeed a big shake-up for the cryptocurrency industry. Binance founder and CEO pleaded guilty to a felony money-laundering charge and agreed to pay the $50-million fine, which makes it apparent that criminal behavior has affected the industry. Federal prosecutors are also looking for an 18-month imprisonment sentence for Zhao.
The move to press charges against Binance was done by the Treasury, Commodity Futures Trading Commission and Department of Justice. Interestingly, the SEC, which has a separate case against Binance, did not participate in the settlement. These cases and incidents highlight the growing trend of illegal activity in the cryptocurrency business. Numerous crypto firms have declared bankruptcies in the past year, further raising doubts about the industry’s future.
These events also indicate the growing engagement of crypto firms in the political sphere. Cryptocurrency firms are spending exorbitant amounts on lobbying in Washington and campaign donations to politicians. This has led to bipartisan support being garnered for the crypto industry. Despite questions surrounding the validity of crypto as an asset class, a lack of mainstream applications or uses and its frequent volatility, lobbyists are continuing to sway politicians.
In the face of mounting evidence that the cryptocurrency business is riddled with fraud and lacking in tangible utility, political defenders of the industry continue to make interesting, yet unsubstantiated claims to legitimize the industry. The crypto industry now stands as a significant player in Washington, employing influence peddling to maintain a status quo. With mounting evidence suggesting an inevitable crackdown, it is to be seen how the industry navigates the waters ahead.
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