MATIC: Major Lawsuits and the Long-Term Trend
Updated
Primary Chart: Monthly chart of MATIC (Polygon) with Monthly Four-Year Uptrend
Fundamental Issues Arising from Recent SEC Legal Actions
Significant fundamental concerns have been brewing relating to Polygon / MATIC. The United States Securities and Exchange Commission (SEC), is the primary securities regulator in the US that handles securities registration, enforcement, and efficiency of capital markets. The SEC has recently named 13 securities that it alleges to be unregistered securities including the subject altcoin. This came as part of this agency's enforcement action (lawsuits) against Binance Holdings Limited, Changpeng Zhao, et al., as well as its action against Coinbase, Inc and Coinbase Global, Inc., essentially the Coinbase exchange.
The SEC alleges defendants' "blatant disregard of federal securities laws and the investor and market protections these laws provide." Section 5 of the Exchange Act requires entities meeting the definition of exchange to register with the SEC as a national securities exchange under the Exchange Act unless exempted. Similarly, broker-dealers are required to register with the SEC under the Exchange Act as well, 11 U.S.C. § 78o(a)(a) (typically, broker dealers are defined as persons engaged in the business of effecting transactions in securities on the account of others).
And offering and selling unregistered securities is also a major violation of the securities laws that carries severe legal consequences. Coinbase Inc., for example, is alleged to have never registered with the SEC as a broker, national securities exchange, or clearing agency. Accordingly, the SEC argues that Coinbase has unlawfully "evaded the disclosure regime" that federal law provides for securities markets.
All these legal actions depend on on a pivotal concept: whether the crypto assets involved are securities. Broker-dealers by definition effect transactions in securities, so determining whether crypto assets are securities is a vital prerequisite to determining whether the defendants unlawfully effected transactions in securities on the account of others. Similarly, the registration requirement for exchanges depends on entities meeting the definition of exchange, which requires that the exchange constitute, maintain or provide a market for buyers / sellers of securities. If none of the crypto assets are deemed securities, then much (if not all) of the enforcement action would fail. Conversely if any one of the crypto assets is deemed a security, then the enforcement action would succeed at least in part.
Further, if the altcoins are legally held to be unregistered securities, then the exchanges may have unlawfully failed to register as exchanges, which registration comes with heavy disclosure requirements, and defendants may be liable for engaging in multiple unregistered offers and sales of crypto assets deemed as securities as well as other illegal schemes.
Further panic has been arising from derivative effects of these actions. To illustrate, reports have also circulated that Robinhood, a widely used trading platform for retail, has been "delisting" (dropping from its platform) major crypto tokens, although SquishTrade will recommend readers research this issue further for confirmation. Even if such reports were not correct, they instill panic, and their effects plainly follow from the legal actions.
This discussion of fundamentals are presented solely for context. This post will not delve into further detail about the litigation nor will it discuss whether the legal actions are well grounded in fact or law. No speculation will be raised as to the probable legal outcome or ramifications of a particular adverse judgment against any crypto exchange defendant.
Instead, the focus will remain on price, which is the best and most efficient processor of all fundamental information available. It's not always efficient and timely, but it is likely faster processor of all fundamental information than the best research team on the planet.
Technical Analysis Focused on Longer-Term Trends
Polygon (MATIC) has fallen over -32% in the past 10 days since June 1, 2023. Since the swing high in February 2023, MATIC has plummeted approximately –67.55%. The recent sharp downdraft in various altcoins may appear formidable, p and befuddling especially to those focused on intraday or even daily time frames, i.e., trends of much smaller degree than the ones shown here. Further, with leverage or oversized positions, a position traders may be stunned and unable to manage their positions. This would be true even for an experienced trader who had the foresight and discipline to buy the December 2022 lows ($.75) who may still be significantly underwater at this point if profits were not taken in a strategic or programmatic way.
However, longer-term investors / position traders in this Ethereum-based Polygon network may do well to zoom out somewhat given the news. Doing so, they might discover that the very long-term trend remains higher in Polygon. Consider the 4-year uptrend line on the Primary Chart above. It hasn't been touched since November 2020.
Furthermore, the long-term Fibonacci retracement levels (logarithmic only) show that even the shallowest of the widely followed levels has held as support since the peak in December 2021. The shallowest retracement level, Fibonacci .236 proportion, is shown below in Supplementary Chart A at $.53.
Supplementary Chart A
The next shallowest level is the Fibonacci .382 retracement (again on the highest degree of trend available here), which falls at $.19, also shown in magenta on Supplementary Chart A above and Supplementary Chart B below.
Supplementary Chart B
Of course, uptrends frequently retrace to .50 and .618 retracements as well. This could take MATIC to significantly lower levels shown in gold and green lines on the Primary Chart above.
But discussing such distant Fibonacci support levels under .085 might be getting a bit ahead of where price action trades now. As shown on the Primary Chart, the uptrend line for 4 years has not been tagged since November 2021. This is not to say that it won't be. SEC enforcement actions are not to be taken lightly by investors or the defendants.
A couple more long-term technical levels that are more dynamic should be mentioned. Supplementary Chart C shows an both an anchored VWAP from the all-time high and an all-time low (based on available data for Matic Network / TetherUS). Notice how the major low of 2022 tagged the anchored VWAP from April 2019 where the data begins on the chart. And MATIC's price found resistance at the VWAP anchored to the all-time high repeatedly, with one false break above it, confirming this level as strong resistance. So a trend-based analysis based on volume-weighted average price tells us that price remains in sideways consolidation within a very long-term uptrend—at least until price breaks and holds below the VWAP from the all-time low.
Supplementary Chart C
No one knows what will happen if price arrives at this uptrend line, but many trend-based traders and investors look for risk-defined entries at very long-term trendline support, with tight risk at / near the line itself to play for a sizeable bounce at a minimum or even a resumption of the larger-degree trend higher. But if the trendline is invalidated, the risk will have been kept small. Managing risk is vital since no one can say with certainty whether a trend will resume or whether it will resume at the trendline where it resumed after past countertrend moves. The same can be said for the key Fibonacci levels, each one providing a trend-based investor or analyst with another pivot to watch for support where a countertrend retracement may end and the shorter term trends realign with the longer-term trend.
Does this longer-term trend provide absolute reassurance, a guarantee of sorts, that many nervous crypto investors want concerning whether this long-term trend will remain intact? No. In fact, no such guarantees exist in financial markets—this holds true regardless of whether one is bullish, bearish or non-directional / neutral.
The aphorism in trading and investing is to make the trend your friend until the end, when it bends. Even long-term trends break, adjust, change, or reverse. To illustrate, consider that the upward trendline shown on the primary chart (monthly) could be broken and reconstituted if monetary policy continues to remain tight (or even to whipsaw as some argue). This may not mean a trend reversal on this very high degree of trend, it may just mean that the trend continues albeit at a less steep slope. Trends with steeper slopes have a tendency to be broken more easily than trends with less steep slopes (in downtrends or uptrends). This may be a result in part of the mean-reverting nature of price action on all time frames, from the shortest to the longest.
In technical analysis, trend continuation should be favored over trend reversal. Further, when bullish trend-based supports are reached, no one ever feels that good about going long because the news has been awful to get price down to that level. And here, the term "trend" refers to the 4-year trend shown on the Primary Chart, which may be deemed an extended primary trend (which typically fall between 6 months and two years but can extend longer) or even a secular trend given its duration. In short, if a countertrend move is occurring, traders and investors should consider it more likely for the trend to continue than for it to reverse on this time frame and degree of trend.
This is not a recommendation to buy or sell MATIC. Instead, this is an attempt at an objective conversation about longer-term trends in this altcoin in light of recent regulatory lawsuits involving whether it may be an unregistered security as held on most exchanges. SquishTrade at the time of writing holds no position in MATIC or any MATIC derivative.
________________________________________
Author's Comment: Thank you for reviewing this post and considering its charts and analysis. The author welcomes comments, discussion and debate (respectfully presented) in the comment section. Shared charts are especially helpful to support any opposing or alternative view. This article is intended to present an unbiased, technical view of the security or tradable risk asset discussed.
Please note further that this technical-analysis viewpoint is short-term in nature. This is not a trade recommendation but a technical-analysis overview and commentary with levels to watch for the near term. This technical-analysis viewpoint could change at a moment's notice should price move beyond a level of invalidation. Further, proper risk-management techniques are vital to trading success. And countertrend or mean-reversion trading, e.g., trading a rally in a bear market, is lower probability and is tricky and challenging even for the most experienced traders.
DISCLAIMER: This post contains commentary published solely for educational and informational purposes. This post's content (and any content available through links in this post) and its views do not constitute financial advice or an investment or trading recommendation, and they do not account for readers' personal financial circumstances, or their investing or trading objectives, time frame, and risk tolerance. Readers should perform their own due diligence, and consult a qualified financial adviser or other investment / financial professional before entering any trade, investment or other transaction.
Fundamental Issues Arising from Recent SEC Legal Actions
Significant fundamental concerns have been brewing relating to Polygon / MATIC. The United States Securities and Exchange Commission (SEC), is the primary securities regulator in the US that handles securities registration, enforcement, and efficiency of capital markets. The SEC has recently named 13 securities that it alleges to be unregistered securities including the subject altcoin. This came as part of this agency's enforcement action (lawsuits) against Binance Holdings Limited, Changpeng Zhao, et al., as well as its action against Coinbase, Inc and Coinbase Global, Inc., essentially the Coinbase exchange.
The SEC alleges defendants' "blatant disregard of federal securities laws and the investor and market protections these laws provide." Section 5 of the Exchange Act requires entities meeting the definition of exchange to register with the SEC as a national securities exchange under the Exchange Act unless exempted. Similarly, broker-dealers are required to register with the SEC under the Exchange Act as well, 11 U.S.C. § 78o(a)(a) (typically, broker dealers are defined as persons engaged in the business of effecting transactions in securities on the account of others).
And offering and selling unregistered securities is also a major violation of the securities laws that carries severe legal consequences. Coinbase Inc., for example, is alleged to have never registered with the SEC as a broker, national securities exchange, or clearing agency. Accordingly, the SEC argues that Coinbase has unlawfully "evaded the disclosure regime" that federal law provides for securities markets.
All these legal actions depend on on a pivotal concept: whether the crypto assets involved are securities. Broker-dealers by definition effect transactions in securities, so determining whether crypto assets are securities is a vital prerequisite to determining whether the defendants unlawfully effected transactions in securities on the account of others. Similarly, the registration requirement for exchanges depends on entities meeting the definition of exchange, which requires that the exchange constitute, maintain or provide a market for buyers / sellers of securities. If none of the crypto assets are deemed securities, then much (if not all) of the enforcement action would fail. Conversely if any one of the crypto assets is deemed a security, then the enforcement action would succeed at least in part.
Further, if the altcoins are legally held to be unregistered securities, then the exchanges may have unlawfully failed to register as exchanges, which registration comes with heavy disclosure requirements, and defendants may be liable for engaging in multiple unregistered offers and sales of crypto assets deemed as securities as well as other illegal schemes.
Further panic has been arising from derivative effects of these actions. To illustrate, reports have also circulated that Robinhood, a widely used trading platform for retail, has been "delisting" (dropping from its platform) major crypto tokens, although SquishTrade will recommend readers research this issue further for confirmation. Even if such reports were not correct, they instill panic, and their effects plainly follow from the legal actions.
This discussion of fundamentals are presented solely for context. This post will not delve into further detail about the litigation nor will it discuss whether the legal actions are well grounded in fact or law. No speculation will be raised as to the probable legal outcome or ramifications of a particular adverse judgment against any crypto exchange defendant.
Instead, the focus will remain on price, which is the best and most efficient processor of all fundamental information available. It's not always efficient and timely, but it is likely faster processor of all fundamental information than the best research team on the planet.
Technical Analysis Focused on Longer-Term Trends
Polygon (MATIC) has fallen over -32% in the past 10 days since June 1, 2023. Since the swing high in February 2023, MATIC has plummeted approximately –67.55%. The recent sharp downdraft in various altcoins may appear formidable, p and befuddling especially to those focused on intraday or even daily time frames, i.e., trends of much smaller degree than the ones shown here. Further, with leverage or oversized positions, a position traders may be stunned and unable to manage their positions. This would be true even for an experienced trader who had the foresight and discipline to buy the December 2022 lows ($.75) who may still be significantly underwater at this point if profits were not taken in a strategic or programmatic way.
However, longer-term investors / position traders in this Ethereum-based Polygon network may do well to zoom out somewhat given the news. Doing so, they might discover that the very long-term trend remains higher in Polygon. Consider the 4-year uptrend line on the Primary Chart above. It hasn't been touched since November 2020.
Furthermore, the long-term Fibonacci retracement levels (logarithmic only) show that even the shallowest of the widely followed levels has held as support since the peak in December 2021. The shallowest retracement level, Fibonacci .236 proportion, is shown below in Supplementary Chart A at $.53.
Supplementary Chart A
The next shallowest level is the Fibonacci .382 retracement (again on the highest degree of trend available here), which falls at $.19, also shown in magenta on Supplementary Chart A above and Supplementary Chart B below.
Supplementary Chart B
Of course, uptrends frequently retrace to .50 and .618 retracements as well. This could take MATIC to significantly lower levels shown in gold and green lines on the Primary Chart above.
But discussing such distant Fibonacci support levels under .085 might be getting a bit ahead of where price action trades now. As shown on the Primary Chart, the uptrend line for 4 years has not been tagged since November 2021. This is not to say that it won't be. SEC enforcement actions are not to be taken lightly by investors or the defendants.
A couple more long-term technical levels that are more dynamic should be mentioned. Supplementary Chart C shows an both an anchored VWAP from the all-time high and an all-time low (based on available data for Matic Network / TetherUS). Notice how the major low of 2022 tagged the anchored VWAP from April 2019 where the data begins on the chart. And MATIC's price found resistance at the VWAP anchored to the all-time high repeatedly, with one false break above it, confirming this level as strong resistance. So a trend-based analysis based on volume-weighted average price tells us that price remains in sideways consolidation within a very long-term uptrend—at least until price breaks and holds below the VWAP from the all-time low.
Supplementary Chart C
No one knows what will happen if price arrives at this uptrend line, but many trend-based traders and investors look for risk-defined entries at very long-term trendline support, with tight risk at / near the line itself to play for a sizeable bounce at a minimum or even a resumption of the larger-degree trend higher. But if the trendline is invalidated, the risk will have been kept small. Managing risk is vital since no one can say with certainty whether a trend will resume or whether it will resume at the trendline where it resumed after past countertrend moves. The same can be said for the key Fibonacci levels, each one providing a trend-based investor or analyst with another pivot to watch for support where a countertrend retracement may end and the shorter term trends realign with the longer-term trend.
Does this longer-term trend provide absolute reassurance, a guarantee of sorts, that many nervous crypto investors want concerning whether this long-term trend will remain intact? No. In fact, no such guarantees exist in financial markets—this holds true regardless of whether one is bullish, bearish or non-directional / neutral.
The aphorism in trading and investing is to make the trend your friend until the end, when it bends. Even long-term trends break, adjust, change, or reverse. To illustrate, consider that the upward trendline shown on the primary chart (monthly) could be broken and reconstituted if monetary policy continues to remain tight (or even to whipsaw as some argue). This may not mean a trend reversal on this very high degree of trend, it may just mean that the trend continues albeit at a less steep slope. Trends with steeper slopes have a tendency to be broken more easily than trends with less steep slopes (in downtrends or uptrends). This may be a result in part of the mean-reverting nature of price action on all time frames, from the shortest to the longest.
In technical analysis, trend continuation should be favored over trend reversal. Further, when bullish trend-based supports are reached, no one ever feels that good about going long because the news has been awful to get price down to that level. And here, the term "trend" refers to the 4-year trend shown on the Primary Chart, which may be deemed an extended primary trend (which typically fall between 6 months and two years but can extend longer) or even a secular trend given its duration. In short, if a countertrend move is occurring, traders and investors should consider it more likely for the trend to continue than for it to reverse on this time frame and degree of trend.
This is not a recommendation to buy or sell MATIC. Instead, this is an attempt at an objective conversation about longer-term trends in this altcoin in light of recent regulatory lawsuits involving whether it may be an unregistered security as held on most exchanges. SquishTrade at the time of writing holds no position in MATIC or any MATIC derivative.
________________________________________
Author's Comment: Thank you for reviewing this post and considering its charts and analysis. The author welcomes comments, discussion and debate (respectfully presented) in the comment section. Shared charts are especially helpful to support any opposing or alternative view. This article is intended to present an unbiased, technical view of the security or tradable risk asset discussed.
Please note further that this technical-analysis viewpoint is short-term in nature. This is not a trade recommendation but a technical-analysis overview and commentary with levels to watch for the near term. This technical-analysis viewpoint could change at a moment's notice should price move beyond a level of invalidation. Further, proper risk-management techniques are vital to trading success. And countertrend or mean-reversion trading, e.g., trading a rally in a bear market, is lower probability and is tricky and challenging even for the most experienced traders.
DISCLAIMER: This post contains commentary published solely for educational and informational purposes. This post's content (and any content available through links in this post) and its views do not constitute financial advice or an investment or trading recommendation, and they do not account for readers' personal financial circumstances, or their investing or trading objectives, time frame, and risk tolerance. Readers should perform their own due diligence, and consult a qualified financial adviser or other investment / financial professional before entering any trade, investment or other transaction.
Note
Here is a linear chart (most of the charts above are logarithmic). It appears traders and market participants are seeing this trendline and price may be reacting off of it. Needless to say, it might be monitored as well given the reaction from it:Note
spy_master posted some excellent follow-up charts and insights in the comments. Please check those out!Note
Corrections: The .382 Fibonacci level is proper on the Primary Chart at $.2034 (it is not $.19 as shown in one portion of the post). So the .382 Fibonacci level (magenta) is shown correctly on the Primary Chart, correctly on Supplementary Chart B. Unfortunately, Supplementary Chart A contains a slight error showing that level incorrectly at $.19 (a difference of .0134).Note
Clarification / Amplifications: The description of the enforcement actions brought against Binance Holdings Limited, its Binance.US platform, Binance's affiliates and subsidiaries, including Binance Holdings Limited, Bam Trading Services Inc., BAM Management US Holdings Inc. and Changpeng Zhao) goes further than what was described above for *both* Binance and Coinbase. In both cases, the exchanges are accused of violating many SEC laws / regulations in the categories discussed above—unregistered exchanges, clearing agencies, broker-dealers, etc., as well as offers and sales of unregistered securities.But the claims against Binance go much further than the ones against Coinbase when reviewing the allegations of the complaints against each. To summarize, it appears Binance and its affiliates and CEO have been accused of false and misleading representations in their offers and sales of securities, in their representations about their volume / liquidity, and in their representations about controls and procedures to prevent self-dealing and manipulation in trading on the platform. There appears to be much more in the way of fraud / deceptive acts and statements in the Binance lawsuit. This seems unsurprising though.
Note
A former high-ranking SEC official (the chief of internet enforcement), John Reed Stark, just provided an update on social media today. Here are the key points:1. Binance and Changpeng Zhao just added a high profile criminal defense lawyer to their team. That lawyer is George Canellos, former Chief of the Major Crimes Unit in the U.S. Attorney's Office (S.D. New York) and former head of the SEC's New York Office and former SEC Enforcement Division Co-Director.
2. Stark explained: "Binance is clearly preparing for a criminal prosecution and continuing to hire the best defense attorneys in the world. But I doubt even Ironman, Captain America and the Hulk could get Binance out from their current perilous legal quagmire."
3. Another person asked Stark if this could be limited to just fines / criminal penalties. Stark replied, "It seems to me . . . that given the gravity of the fraud alleged by the CFTC and SEC (which might also be the tip of the iceberg of any criminal indictment), a DOJ prosecutor would certainly seek prison time for anyone convicted or pleading guilty to Binance-related crimes."
In yesterday's update, SquishTrade added a clarification along this line. Upon a cursory review of the two lawsuits, it is evident that the lawsuit against Binance, affiliates, and CZ goes significantly further (in terms of seriousness of conduct alleged) than the one against Coinbase Inc. The first thing that catches the reader's eye is that the suit against Binance / CZ, compared to the one against Coinbase, stands out for numerous mentions of deceptive / fraudulent acts and statements, fraud, misrepresentation, and self-dealing, etc. Both lawsuits are serious, involving securities law violations such as offers and sales of unregistered securities, maintaining and operating an unregistered exchange of securities, operating and performing purchases and sales for others as an unregistered broker-dealer. But the lawsuit against CZ, Binance and affiliates goes so much further in terms of seriousness / gravity with significant claims relating to fraud, deceit, misrepresentation, self-dealing, and so on. So it's helpful to see John Stark's view on this confirming that the lawsuit against Binance very likely has criminal implications. Hope this helps!
Note
This linear / arithmetic chart was posted a few days ago as a compliment to the log charts in the main post. Since price seemed to respond to the TL, it may be worth considering going forward, at least until these trendlines are broken.Note
This linear chart has been discussed in a couple of the updates in early June 2023. It still seems to be providing support for now. Yet the convergence of the down TL and the upward TL form a triangle that represents a narrowing range.Note
And here is the log-chart version w/ triangle patterns too:Note
Check out this ETH analysis and let me know what you think:
Note
XRP skyrockets +72% this week as most crypto followers already know. And Coinbase will once again allow XRP to trade on its exchange. It appears that the ruling was in favor of Ripple Labs Inc. (XRP) in part and in favor of the SEC in part—news reports state that the ruling gave the SEC a "partial victory" on an issue.Note
Caution is warranted in drawing hasty conclusions. Having read portions of the decision, it appears that the court's decision in SEC v. Ripple Labs, Inc. found that XRP sales to institutional investors was the sale of an unregistered security! Here is the specific portion of the decision where the court ruled in favor of the SEC and found that offers and sales of XRP were in violation of securities laws given that XRP was an unregistered security (investment contract) in transactions involving institutions:"Therefore, having considered the economic reality and totality of circumstances surrounding the Institutional Sales, the Court concludes that Ripple’s Institutional Sales of XRP constituted the unregistered offer and sale of investment contracts in violation of Section 5 of the Securities Act."
It is unclear how this could further encumber crypto tokens with legal uncertainty, but it seems that a court has now adopted an argument that a crypto token IS in fact a security in at least one narrow context—sales to institutional buyers who were participating in the venture via an investment. This is really interesting.
Of course, the part everyone is focusing on is that the court found that Ripple Labs, Inc. did not violate securities laws in other offers, sales and distributions—especially the programmatic sales to public buyers on digital exchanges. The programmatic sales were blind bid/ask transactions where buyers could not have known if their payments went to Ripple or any other particular seller of XRP. Programmatic sales represented less than 1% of global XRP trading volume. This was distinguishable b/c the programmatic buyers in blind bid/ask transactions didn't see their funds going to Ripple as an investment. Interesting distinction!
This may be relevant to *parts* of other pending SEC enforcement lawsuits only to the extent those lawsuits involve claims of securities violations from offers / sales of unregistered securities. The other lawsuits pending are described in the main post above and were brought against Coinbase, Inc., and Coinbase Global Inc., Binance Holdings Limited, its Binance.US platform, Binance's affiliates and subsidiaries, including Bam Trading Services Inc., BAM Management US Holdings Inc. and Changpeng Zhao.
Key distinction to note is that the lawsuits against Binance Holdings Limited and its affiliates involve claims of fraud / deceptive acts / false and misleading statements. Here is an excerpt from the June 11, 2023 update above:
"But the claims against Binance go much further than the ones against Coinbase when reviewing the allegations of the complaints against each. To summarize, it appears Binance and its affiliates and CEO have been accused of false and misleading representations in their offers and sales of securities, in their representations about their volume / liquidity, and in their representations about controls and procedures to prevent self-dealing and manipulation in trading on the platform. There appears to be much more in the way of fraud / deceptive acts and statements in the Binance lawsuit."
Yes, the claims against Binance and its affiliates also involve alleged violations of offers / sales of unregistered securities, so the Ripple Labs, Inc. case could be relevant to that specific portion of the Binance case. But the Ripple Labs case deals mainly with unregistered offers/sales of unregistered securities. So the Ripple Labs case is unlikely to apply at all to the SEC's claims for fraud, misrepresentation and deceptive acts against Binance.
In summary, several issues would appear to continue to create material legal uncertainty and headwinds for crypto offers and sales.
(1) The court did rule narrowly in favor of the SEC on at least one issue, and found that in a certain specific context, XRP sales were sales of unregistered securities in violation of federal securities law.
(2) To the extent the court ruled in favor of XRP, the court's decision, once it becomes final, could be reversed on appeal. An appellate court could easily take a different stance on these issues given their broad policy implications.
(3) The Binance lawsuits go much further than simply offers / sales of unregistered securities as they include claims for fraud / deceptive acts. These fraud and misrepresentation claims should not be affected in any way by rulings on offers/sales of unregistered securities involving cryptocurrencies.
Caveat / Disclaimer: None of this constitutes legal or financial advice. They are the musings of this author paying only halfhearted attention to the crypto legal proceedings in several different cases.
Note
Sam Bankman-Fried was found guilty on all seven criminal counts he faced in his fraud trial. He could face up to dozens of years in prison, and the theoretical maximum sentence he faces for such crimes is about 115 years. The jury is reported to have reached its verdict swiftly late on Thursday afternoon after only a few hours of deliberation. One of the federal prosecutors made the following statement after the verdict was issued: "While the cryptocurrency industry might be new and the players like Sam Bankman-Fried might be new, this kind of corruption is as old as time. This case has always been about lying, cheating, and stealing, and we have no patience for it." The criminal counts were for wire fraud and conspiracy to commit wire fraud against both FTX customers and Alameda Research's lenders, and they also included other counts related to money laundering and securities fraud.Note
Several months ago (June 2023), an update was provided to this post distinguishing between the lawsuits against Coinbase, Inc. and the lawsuits and charges against Binance Holdings Ltd. and related entities. This update noted that the counts and charges against Binance Holdings and CZ were much more serious, especially in terms of criminality and consequences, than the counts against Coinbase, Inc. Admittedly, no one could have foreseen the extent of the possible criminal consequences for CZ and the types of charges for which consequences were applied (via plea agreements). The eventual charges that were resolved by the fines, penalties and pending sentencing involved allowing darknet (criminal) actors, hackers, terrorists and others to operate and transmit funds on the Binance platforms or exchanges.Last week, as many already know, CZ resigned from his role as CEO of Binance Holdings Limited (Binance), and its subsidiaries / affiliates. This was part of a deal in which Binance paid $4.3 billion in fines / penalties to resolve charges brought by the US Justice Department. CZ also paid a hefty $50 million fine as well.
Reports indicate that CZ may also face up to 10 years in prison. The question in the last few days has been whether to allow CZ to return to the UAE to visit family before his sentencing. But if no extradition treaty exists between the US and UAE, this could mean that CZ would never return or be sentenced. Should the US federal judge allow CZ to return home for a bit before sentencing? Let me know your opinion in the comments, though ultimately, none of our opinions will matter.
Note
Today's news reports indicate that a federal district judge has reversed the magistrate judge's ruling allowing CZ to return to the UAE to see his family before sentencing. The last update on Nov. 26, 2023, queried whether the court involved in CZ's criminal cases should allow him to return to UAE before sentencing. A magistrate judge had earlier ruled that CZ could return to UAE to visit his family before his sentencing. The federal district court judge reversed this ruling. So CZ will not be allowed to return to UAE before sentencing. The reversal decision preventing his return reasoned that CZ was in fact a flight risk despite a $175 million bond. Two issues at stake here are flight risk and the lack of extradition treaty with the requested destination country, the United Arab Emirates (UAE).
Bail presumably addresses flight risk. Bail reportedly had been fixed at $175 million, which by any measure is massive compared to a data set including the average or median bail amount for all criminal defendants in the US, including high-profile ones.
Yet one must compare the $175 million bail amount relative to CZ's overall net worth since the purpose of bail is to affect flight risk. CZ's net worth was reported as still in the billions—$17.2 billion in a Fortune magazine article dated October 27, 2023. Even if this net worth is one or two billion too high, it still shows that the bail amount likely would not affect CZ's decision whether to return back to the US for sentencing of his own free will if he had been allowed to return to UAE. And if no extradition treaty exists b/w the US and UAE, then CZ could walk free by avoiding the US and other countries with which the US has extradition treaties.
These last several updates have continued to focus on the legal proceedings against high-profile crypto-world actors and entities such Binance's affiliates and subsidiaries, including Binance Holdings Limited, Bam Trading Services Inc., BAM Management US Holdings Inc. and former CEO Changpeng Zhao (CZ) as well as a note on SBF. They have been more newsworthy than the long-term chart of MATIC, which has remained in the long-term uptrend shown nearly six months ago when this was published.
Note
Former FTX founder and crypto billionaire was sentenced this week to 25 years in federal prison. No parole opportunity for federal prison, though early release could be possible. What do you think of this sentence? While the trial and conviction just focused on his conduct and actions that caused harm at FTX, the sentencing phase looks at all aspects of SBF's character and life including the crimes. Do you think this was too harsh or just right given what happened?
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