Crypto Compliance Weekly Newsletter: January 23, 2023
Updated: Mar 10
This week, former FTX US president launches crypto software firm, DOJ prosecutes Bitzlato, Genesis files for bankruptcy, and SphereOne raises $2.5 million.
1. Architect, the new crypto software firm of former FTX US president
Brett Harrison, former head of FTX US between May 2021 and September 2022, is in the process of launching “Architect”, a new cryptocurrency software company which aims to “develop trading software for large institutions looking to access crypto markets” (Cointelegraph).
Harrison has raised 5 million from several investors, including Coinbase Ventures and Circle Ventures. Despite initially aiming to raise $10 million at a $100 million valuation, this $5 million funding represents a positive step in an environment where “venture funding for crypto startups plummeted 75% in the fourth quarter to a near two-year low amid the turmoil and a prolonged rout in digital tokens” (Bloomberg).
2. Bitzlato founder charged with unlicensed money transmitting
Anatoly Legkodymov, founder of Bitzlato, was arrested on January 17th in Miami, after the United States Department of Justice (“DOJ”) launched a “major internationational cryptocurrency enforcement action” against the China-based crypto firm (Cointelegraph).
The DOJ published a statement alleging that Bitzlato processed more than $700 million worth of illicit funds, which included $15 million in ransomware proceeds. Furthermore, the Department sustains that Legkodymov “helped operate a cryptocurrency exchange that failed to implement anti-money laundering safeguards and enabled criminals to profit from their wrongdoing, including ransomware and drug trafficking”. (DOJ)
The investigation is being prosecuted by the National Security and Cybercrime Section of the United States Attorney’s Office for the Eastern District of New York and the National Cryptocurrency Enforcement Team.
3. Crypto lender Genesis files for Chapter 11 bankruptcy protection
Crypto lender Genesis filed for Chapter 11 bankruptcy protection after suffering massive hits following the collapse of FTC and the hedge fund Three Arrows Capital. After failing to find interest parties for the emergency bailout of $1 billion that Genesis sought, the company decided to file for bankruptcy with a list of over 100,000 creditors, “with aggregate liabilities ranging from $1.2 billion to $11 billion dollars” (CNBC).
Additionally, to the billions of dollars of liabilities, Genesis and Gemini have been charged by the SEC “for the unregistered offer and sale of securities to retail investors through the Gemini Earn crypto asset lending program” (SEC).
4. SphereOne raises $2.5 million to build crypto platform
SphereOne is a crypto payment platform that allows users to make purchases with any cryptocurrency across any blockchain, prioritizing immediacy in transactions (Venture Beat).
The platform announced that it had closed a $3.5 million seed round led by Distributed Global, with the participation of Newark Venture Partners and Zero Knowledge. (PR Newswire)
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Canaria Consulting LLC is a boutique consultancy specializing in the development, enhancement, and maintenance of regulatory compliance programs for virtual currency firms. Canaria Consulting was founded in an effort to help virtual currency firms meet their regulatory obligations in a way that is tailored to the unique characteristics of virtual currency and decentralized blockchain technologies.