In recent years, the cryptocurrency and decentralized finance (DeFi) sectors have soared in popularity, attracting investors and entrepreneurs alike with promises of innovation and financial freedom. Amidst the rapid growth, there are individuals exploiting the trend to deceive investors and misappropriate funds for personal gain. These fraudulent activities have not only eroded trust within the crypto community but have also resulted in prolonged legal battles as authorities work hard to hold the perpetrator accountable. This article delves into the upcoming major cases in the crypto world.
Changpeng Zhao’s Trial
Changpeng Zhao, the former CEO of Binance, has pleaded guilty to charges of money laundering violations. Consequently, he has stepped down from his position at one of the world’s largest cryptocurrency exchanges. Alongside a $50 million fine for Zhao and a staggering $4.3 billion fine for Binance, there were calls for an 18-month prison sentence for Zhao.
Zhao has been released from custody on a $175 million personal recognizance bond. Though he requested to travel to his home in the UAE, the Seattle federal court denied his request, citing significant flight risk. Zhao’s trial was initially scheduled for February 23, but it was postponed to April 30.
FTX Co-Conspirators Trial
Caroline Ellison, Sam Bankman-Fried’s former girlfriend, emerged as the key witness in the FTX case, leading to Bankman-Fried’s sentencing to a 25-year prison term. Following Ellison’s guilty plea in December 2022, as CEO of FTX’s sister hedge fund, Alameda Research, she provided crucial evidence to the government, including text messages, documents, and secret recordings. This evidence played a pivotal role in Bankman-Fried’s conviction on all seven charges.
Ellison pleaded guilty to two counts of conspiracy to commit wire fraud, two counts of wire fraud, conspiracy to commit money laundering, conspiracy to commit securities fraud, and conspiracy to commit commodities fraud. Additionally, her cooperation as a witness in the case against Sam Bankman Fried is anticipated to result in a reduced sentence. However, a definitive date for Ellison’s sentencing is yet to be determined.
Other significant witnesses in the FTX trial, including co-founder Zixiao Wang and engineering lead Nishad Singh, are expected to receive reduced sentences after pleading guilty. However, no specific dates have been set for their cases yet. Notably, the trial date for co-CEO of Digital Markets, Ryan Salame, has been scheduled for May 1. Salame reached a plea deal but did not testify against Bankman-Fried.
Terraform Trial
In a trial held in the Southern District of New York, Do Kwon, the founder of Terraform Labs, was convicted by a jury in a class action lawsuit brought by the US Securities and Exchange Commission (SEC). The SEC alleged that Terraform and Kwon misled investors about the stability of TerraUSD and amassed billions of dollars through the sale of digital securities. A significant portion of these securities sold were not registered with regulatory authorities. The collapse of two tokens, TerraUSD and Luna (which is closely associated with TerraUSD), resulted in the loss of over $40 billion in funds and prompted the company to declare bankruptcy.
The trial, which began on March 25 and concluded on April 5, ended with Do Kwon being liable for defrauding investors. Remarkably, the trial proceeded in his absence, as he resides freely in Montenegro. Both American and Korean authorities are actively seeking his extradition to their respective countries to stand trial for the charges against him. Presently, no sentencing date has been scheduled for his crimes.
Mango Markets Exploitation
On April 18, Avraham Eisenberg was convicted of wire fraud, commodities fraud, and commodities manipulation in the Southern District Court of New York. The case originated from Eisenberg’s execution of trades on October 11, 2022. In a span of just 20 minutes, he purchased $4 million worth of MNGO tokens, causing the price of Mango to surge by 1,300%. Eisenberg then borrowed $116 million against the unrealized profits from this price manipulation and withdrew the funds from the Mango markets.
Shortly after the exploit, Eisenberg returned $67 million to the Mango DAO community in exchange for their agreement not to pursue legal action, allowing him to keep the remaining assets. He subsequently fled to Israel from his residence in Puerto Rico. However, upon his return on December 26, 2022, he was arrested by US authorities and has been in custody since then. His sentencing has been scheduled for July 29, 2024, with the potential for a 20-year prison term.
Tornado Cash Conspiracy
The co-founders of Tornado Cash, Roman Storm, Roman Semenov, and Alexey Pertsev, are embroiled in serious allegations of money laundering and violations of various sanctions. Tornado Cash operates as a privacy mixer, concealing individuals’ public addresses during transactions. The Department of Justice (DOJ) has accused Tornado Cash of facilitating over $1 billion in money laundering, including hundreds of millions for the Lazarus Group, a hacker group with ties to North Korea.
In 2022, the U.S. Treasury imposed sanctions on Tornado Cash, and in 2023, the Department of Justice indicted Roman Storm and Roman Semenov on multiple counts, including conspiracy to commit money laundering, conspiracy to violate sanctions, and conspiracy to operate an unlicensed money transmitting business. Roman Storm was apprehended by the IRS and the FBI but was later released on bail. Roman Semenov remains at large, while Alexey Pertsev was arrested in the Netherlands in 2022. Pertsev awaits the final verdict, scheduled for May 14, 2024, with prosecutors seeking a 64-month jail term.
Celsius Alex Mashinsky’s Fraud
Alex Mashinsky, founder and CEO of bankrupt Celsius Network, and Chief Revenue Officer Roni Cohen-Pavon were charged with misleading customers and artificially inflating the value of the company’s native token, CEL. Additionally, the SEC sued Mashinsky and Celsius for allegedly raising billions of dollars through the sale of unregistered crypto securities. Mashinsky faces seven counts of crimes, including commodities fraud, securities fraud, and wire fraud. He pleaded not guilty in court, and the judge set his bail at $40 million. Cohen-Pavon was charged with wire fraud and market manipulation, pleading guilty to all four counts.
Both Mashinsky and Cohen-Pavon posted bail and are currently free. The trial for Alex Mashinsky is scheduled for September 17, 2024, while Cohen-Pavon’s sentencing trial is set for December 11, 2024.
SafeMoon Fraud
SafeMoon executives, including CEO John Karony, CTO Thomas Smith, and founder Kyle Nagy, were arrested by the Department of Justice on charges of wire fraud, money laundering, and securities fraud. The SEC also charged them for fraud and unregistered securities sales, as well as embezzling over $200 million of investors’ funds. Smith and Karony have been apprehended by the DOJ, while Nagy remains at large. The trial date is set for the spring of 2025.
Uniswap Wells Notice
On April 10, 2024, the SEC issued a Wells notice to Uniswap, a DeFi platform, alleging that it had acted as an unregistered securities broker and unregistered securities exchange. Following this revelation, the price of Uniswap’s native token, UNI, dropped by 9.5%. Hayden Adams, CEO of Uniswap, announced on X that he is prepared to contest the charges brought forth by the SEC.
Conclusion
The cryptocurrency and decentralized finance (DeFi) sectors face substantial problems in today’s crypto ecosystem. Prominent figures such as Changpeng Zhao, Sam Bankman-Fried, and Alex Mashinsky are facing claims ranging from fraud to money laundering. These instances serve as a sharp reminder of the increasing enforcement measures conducted by authorities such as the SEC and the Department of Justice.
