Good morrow, pilgrims, this is Colton from Hedgehog, the smart asset manager for web3 and beyond. Remember that our app helps you buy over 85 assets with a single deposit and automatically buys and sells on your behalf in response to market movements.
I just want to let you all know that I’m incredibly thankful to those of you who read this newsletter and use our app, and I’m especially appreciative that we’re not being sued by the SEC for flagrantly ignoring existing securities law. It’s been a craaaazy week regarding that last bit, with one big victory and one new battlefront for the SEC, and I’m just grateful to be watching from the sidelines.
Binance CEO cops to money laundering
If you were unaware, Changpeng “CZ” Zhao has signaled that he intends to plead guilty to money laundering and other financial crimes, and will pay restitution upward of $4 billion in addition to potentially facing criminal charges personally. In addition, he will abdicate his role as CEO and let former Global Head of Regional Markets, Richard Teng, take over.
Now, before we look to start a run on their treasury, CZ reminds us that the SEC does not allege that Binance manipulated markets or misappropriated customer funds like a certain felon with a hyphenated last name (“your funds are SAFU”), but that the complaints specifically target the inappropriate solicitation of US customers without a US entity, and accounts using Binance to launder illicit transactions routed through various on-chain addresses.
On the one hand, this is great for the digital asset industry as a whole: cleaning out bad actors and enforcing US regulations against foreign cheaters is a healthy activity and helps to redeem the industry when it comes to working with legitimate institutions. On the other hand, we have to ask why there was room for this kind of gray area solicitation and why US customers felt they had to turn to a Chinese exchange to get access to markets that were exciting to them. Which brings us to our next big story of the week:
SEC squares off with the Kraken
Looks like the SEC is back at it again with the white vans full of G-men and they’re coming after Kraken once more. The speculation is that the SEC is having big trouble trying to sue Coinbase for largely the same complaints in the 2nd Circuit of New York, and so they want to double up and hope for a better mix of judge, jurisdiction, and execution in the 9th Circuit of California.
Of course, founder Jesse Powell is having none of it, and is kinda mad that he spent $30m settling claims with the SEC earlier this year. It’s really sad that the SEC is coming after these firms because as far as we know, they tried their darndest to register Alternative Trading System Broker-Dealers and to meet the letter of the law as it was written, but our lawmakers and regulators declined to map a clear path forward and kinda set this trap for responsible business people trying to give the public access to new technologies and exciting distributed services.
It makes me worry about Hedgehog, to be honest. I talked to the SEC in May and showed them the app and addressed all the concerns they laid out to me in their letters. Are they still gonna turn around and sue me next year? This is why entrepreneurs are choosing to go open up shop in other countries where the rules are more straightforward and the guidance is clear.
Either way, I’m grateful for the trailblazers who always get bloodied for being first through the briars.
As always, thankful for my health and happiness, for your business and support. What are you thankful for this year?
Keep hedging,
— Colton</p>