NFT Market Expands in Alcohol, Athletics and Art; Regulators Warn Against Crypto Risks; U.S. Agencies Target Crypto Fraud

By Lauren Bass, Kayley Sullivan & Veronica Reynolds on September 10, 2021

In this issue:

• Alcohol, Athletics, and Art: NFT Adoption Continues to Expand

• US, UK and Thailand Regulators Warn of Crypto Risks, Act Against Exchange

• DOJ and SEC Actions Target Crypto Fraud Scheme and Crypto Exchanges

Alcohol, Athletics, and Art: NFT Adoption Continues to Expand

By Lauren Bass

To celebrate National Rum Day, a privately held liquor label has reportedly launched a platform from which it will auction a specially designed non-fungible token (NFT) – a 3D video that details the history and journey of the label. Sale proceeds will be donated to an initiative that helps Black-owned establishments obtain liquor licenses. In related news, having previously launched several NFTs, an international brewery has reportedly expressed interest in leveraging the NFT market and creating virtual “brand activations”. According to the company’s global head of technology the brewer’s intention is to build more “loyal and engaged communities” through the digital metaverse.

In athletic industry news, a Spanish football club has reportedly become the first European league to mint an NFT of each of its players. According to reports, once purchased, the unique player collection can be used by owners to create and compete in virtual fantasy football tournaments on Sorare, a French fantasy football digital trading platform. In arts and entertainment news, earlier this week a prominent female rapper reportedly launched an exclusive NFT collection on OneOf, a new “green” NFT platform built on the Tezos blockchain and backed by music moguls. According to press releases, the NFTs start at $5, and each purchase includes the chance to win an instant “golden ticket,” which provides the winner access to exclusive concerts and other VIP experiences.

A recent fine arts auction of Yuga Labs’ “101 Bored Ape Yacht Club” NFT collection has reportedly generated a $19 million bid. According to reports, the collection also includes a feature that allows the artwork’s characteristics to mutate, thereby increasing the rarity and value of the digital collectible. In other art NFT news, a hacker reportedly posed as the pseudonymous English artist/activist Banksy to auction an NFT titled “Great Redistribution of the Climate Change Disaster” through the street artist’s official website. According to reports, however, once the scam was revealed, the hacker returned the $336,000 in Ethereum that the winning bidder had paid.

For more information, please refer to the following links:

US, UK and Thailand Regulators Warn of Crypto Risks, Act Against Exchange

By Kayley B. Sullivan

In a recent Investor Alert, the U.S. Securities and Exchange Commission (SEC) issued a warning to consumers about the risks associated with digital asset and crypto investment scams. The announcement highlights the “devastating losses” faced by retail investors due to scams that exploit the rising popularity of digital assets. The SEC urged digital asset investors to understand and evaluate risks as well as to look out for warning signs of possible frauds, including “guaranteed” high investment returns, unlicensed or unregistered sellers, investment opportunities sounding “too good to be true,” skyrocketing account values and fake testimonials.

In another warning to cryptocurrency investors, Charles Randell, the chair of the U.K.’s Financial Conduct Authority (FCA), gave a speech this week commenting on cryptocurrency scams and the role of the FCA in combating the associated harm to consumers. Among other things, Randell urged that legislation is needed to address risks in online advertisements for digital financial products. Randell also noted that cryptocurrency regulations should consider how to make it harder for digital tokens to be used for financial crime, how to support useful innovation, and the extent to which consumers should be free to buy unregulated, purely speculative tokens and to take the responsibility for their decisions to do so.

Last, according to a statement on its website, Thailand’s Securities and Exchange Commission (Thai SEC) will ask its Ministry of Finance to revoke the digital asset trading license of Huobi Thailand. The Thai SEC reports that Huobi Thailand has failed to comply with local regulations related to its operations and management structure and to fix such system flaws after they were identified more than five months ago.

For more information, please refer to the following links:

DOJ and SEC Actions Target Crypto Fraud Scheme and Crypto Exchanges

By Veronica Reynolds

According to a press release from the U.S. Department of Justice (DOJ), an Ohio man pled guilty this week to one count of wire fraud for his role in orchestrating a multimillion-dollar cryptocurrency fraud scheme whereby he raised over $30 million from investors under fraudulent claims that the money would be invested in a fund that used a proprietary cryptocurrency trading algorithm. According to the press release, in reality the defendant reported falsified returns while using investor funds to bankroll his lavish lifestyle. The defendant agreed to make restitution of at least $30,667,738.79; agreed to forfeiture of $36,268,515; and faces a potential maximum prison sentence of 20 years.

The U.S. Securities and Exchange Commission (SEC) filed a complaint this week alleging that between July and September 2017, two men, using a Cayman Islands-registered company, conducted an unlawful unregistered securities offering through a token offering, primarily to raise funds for the company. The defendants allegedly raised funds from over 7,200 investors worldwide, with over 30% of the investors residing in the U.S. The SEC alleged that the “RvT tokens” at the time of sale, could not be used to purchase any products or services. According to a press release, the SEC alleged that the “offers and sales of RvT, which raised the equivalent of $18 million in digital assets from investors, were not registered with the SEC and did not qualify for any exemption from registration.”

According to reports, the SEC has been looking into the marketing and business activities of two large cryptocurrency exchanges in recent weeks. In one instance, the SEC is reportedly investigating the world’s largest decentralized exchange, which facilitates swaps between Ethereum-based coins and other tokens. In another instance, the SEC has reportedly issued a Wells notice to one of the largest centralized cryptocurrency exchanges in the U.S. related to the exchange’s planned cryptocurrency lending program. According to a blog post, as a result, the exchange will delay the launch of the program.

For more information, please refer to the following links: