In a setback for the Securities and Exchange Commission (SEC), a federal judge has denied its motion to introduce evidence of the lack of clear regulations for cryptocurrencies and the role of FTX in the recovery of the hacked funds in the ongoing trial against Sam Bankman-Fried (SBF), the founder and CEO of FTX, a leading crypto exchange.
The SEC accuses SBF of violating securities laws by offering unregistered derivatives products to U.S. investors through FTX, which is based in Antigua and Barbuda. The SEC also claims that SBF misled investors about the security and liquidity of FTX, and failed to disclose that he had access to a backdoor that allowed him to manipulate the prices of the products.
SBF denies the allegations and argues that he acted in good faith and in compliance with the laws of Antigua and Barbuda, where FTX is licensed and regulated. He also points out that he helped recover most of the $150 million that was stolen from FTX by hackers in August 2020, by collaborating with other crypto exchanges and law enforcement agencies.
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The SEC wanted to present evidence to the jury that the lack of clear and consistent regulations for cryptocurrencies in the U.S. created confusion and uncertainty for market participants, and that SBF took advantage of this situation to evade oversight and accountability. The SEC also wanted to show that FTX’s recovery of the hacked funds was facilitated by FTX’s relationship with other crypto exchanges, especially Binance, which is owned by SBF’s friend and mentor CZ.
However, the Judge ruled that these issues were irrelevant and prejudicial to the case, and that they would only confuse and distract the jury from the main question of whether SBF violated securities laws by offering unregistered derivatives products to U.S. investors. The Judge said that the SEC had failed to establish a causal link between the lack of crypto regulations and SBF’s alleged misconduct, and that the role of FTX in the recovery of the hacked funds was not material to the SEC’s claims.
The trial is expected to resume next week, with both sides presenting their witnesses and experts. The jury will then decide whether SBF is liable for securities fraud and whether he should pay civil penalties and disgorgement of profits.
In a recent report, K33 Research, a leading cryptocurrency analysis firm, has predicted that ether, the second-largest digital asset by market capitalization, will continue to lag behind bitcoin in terms of price performance and adoption.
According to the report, ether faces several challenges that limit its growth potential, such as scalability issues, regulatory uncertainty, competition from other smart contract platforms, and a lack of clear use cases beyond decentralized finance (DeFi).
The report states that while ether has benefited from the explosive growth of DeFi in 2020 and 2021, it also faces increasing competition from rival blockchains that offer faster, cheaper, and more user-friendly alternatives for developers and users. Some of these competitors include Binance Smart Chain, Solana, Cardano, and Polkadot.
The report also notes that ether’s transition from a proof-of-work (PoW) consensus mechanism to a proof-of-stake (PoS) one, known as Ethereum 2.0, is a risky and complex process that could take years to complete and may not deliver the expected benefits. The report argues that PoS is less secure, less decentralized, and more prone to centralization than PoW.
Furthermore, the report claims that ether lacks a clear value proposition beyond being a utility token for the Ethereum network. Unlike bitcoin, which has a fixed supply and a strong narrative as a store of value and a hedge against inflation, ether has an uncertain monetary policy and a weaker brand recognition among mainstream investors.
The report concludes that while ether may still see some positive price movements in the short term, driven by speculation and hype, it will ultimately underperform bitcoin in the long run. The report expects bitcoin to maintain its dominance as the most valuable and widely adopted cryptocurrency in the world.