Cryptocurrency holders take a beating

Mass bitcoin sells, SEC warnings and Japanese exchange penalties

It’s been a rough week for cryptocurrency holders. Cryptocurrencies have experienced another sharp correction and there are some major factors that have investors swimming in a sea of red, sparking one more round of Fear, Uncertainty and Doubt (FUD) for the first quarter of 2018.

The value of bitcoin dipped just under $9500 and several noteworthy cryptocurrencies like Monero have also suffered a steep drop in value.

Reports indicate that the three main factors for this correction include massive sells of bitcoin by Mt. Gox, the Securities and Exchange Commission’s warning to ICOs being used to mask unregistered securities offerings and the penalties imposed on Japanese trading platforms by the Japanese government.

Massive sells of bitcoin by Mt. Gox trustee

Mt. Gox was one of the first cryptocurrency exchanges and grew to be the largest. However, in 2014 it had to file for bankruptcy due to a major hack of the exchange that resulted in losses of over $450MM.

In a snapshot of transaction reports tweeted by bitcoin investor Allistair Milne, there appears to have been a massive sell of bitcoins to the market at all time high (ATH) prices.

Nobuaki Kobayashi, the Tokyo attorney and bankruptcy trustee for Mt Gox’s funds, admitted to Bloomberg that he orchestrated these sells to benefit from the ATH prices of bitcoin and “secure a certain amount of money for distribution resources”.

The price of bitcoin took a serious plummet from its ATH at the end of 2017/early 2018 and several investors are maddened by Kobayashi’s actions and are blaming the sharp price correction on his actions back in February of this year.

Kobayashi is believed to still be holding about $1.7 billion of bitcoin and $197 million of bitcoin cash – and he might sell again, despite the mass anger.

SEC’s warning to ICOs being used to mask unregistered securities offerings

Chairman of the Securities and Exchange Commission, Jay Clayton, has issued another warning to Initial Coin Offerings (ICOs) that are using the nascent fundraising mechanism as an attempt to disguise unregistered securities as tokens.

Reports confirm that lawyers advising on ICOs could be in violation of their professional duties and could well be subject to corrective measures.

In remarks made at the Securities Regulation Institute, an event where lawyers gathered to discuss trends in securities law and litigation, Clayton said that it was “disturbing” for him to see lawyers “assisting promoters in structuring offerings of products that have many of the key features of a securities offering”, and where lawyers “have taken a step back from the key issues – including whether the “coin” is a security and whether the offering qualifies for an exemption from registration”.

Earlier this month, the SEC issued over 80 subpoenas to cryptocurrency companies including the $100 million cryptofund of TechCrunch founder Michael Arrington, according to CNBC.

Penalties imposed on Japanese trading platforms by the Japanese government

After a major hack resulting in losses of over $530MM, Coincheck Inc., Japanese exchange was ordered by Japan’s Financial Services Agency (FSA) to raise its standards for anti-money laundering and on its management structure. This Coincheck hack is the second major hack to hit a Japanese exchange after the much publicized Mt. Gox hack and debacle.

Around the same time, two Japanese exchanges, Bit Station and FSHO were asked to halt trading activities after receiving a notice from the FSA to cease operations for one month. Additionally, penalties were imposed on other exchanges, including GMO Internet Inc.

This regulation comes on the heels of criticism for the FSA for allowing 16 exchanges to continue their operations before being given a decision on their applications. These activities are indicative of the Japanese government’s progressive stance on cryptocurrencies even as the FSA is criticized.

Image from Shutterstock. 

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