Intro/Disclaimer: Since late 2022, I’ve prepared weekly updates for attorneys at my firm to stay abreast of the latest Web3 legal developments. The biggest stories are included in Bi-Weekly posts on the firm’s BitBlog, where we provide tl;dr overviews and insights into the biggest stories from the past two weeks. I post the weekly updates on my personal blog every Tuesday, where I also provide links to more obscure legal developments and otherwise discuss industry trends and stories. Please note, the views and opinions I express, both on BitBlog and my personal blog, are solely my own. They do not reflect the official stance or endorsement of my firm.
It was the last week before most people turn on their out of offices for the holidays, but while everybody was focused on whether there would be a government shutdown, there was no slowdown in Web3 legal developments. The major news was regarding the SEC’s latest Wells notices despite expected turnover at the agency in less than a month, and Chair Gensler’s favorite “crypto-security asset” broker/dealer was also in the headlines. All while Web3 policy folks argued over what level of “decentralization” should be enshrined in law in any digital asset legislation in 2025.
Here’s everything that happened last week in Web3 legal:
CyberKongz NFT Project Receives SEC Wells Notice
The entity behind the CyberKongz NFT/gaming project have revealed after 2 years of cooperating with an SEC investigation, it has received a Wells notice from agency staff. CyberKongz said on their official social media accounts that they remain committed to defend any future lawsuit. While the substance of the Wells notice has not been made public, the company behind the NFT project noted frustration with the SEC labeling its April 2021 contract migration as a “sale” and other frustrations with the SEC staff seemingly having misunderstandings about basic blockchain functionalities.
Tl;dr: There is no way to know what the SEC will claim to be an illegal security offering in a project like this that has interplay between a variety of assets such as the Genesis CyberKongz, derivative baby CyberKongz, the $Banana utility token, the gaming assets, or something else. The SEC also apparently recently sent a Wells notice to investment firm Unicoin, so it appears the agency is getting ready to drop a series of actions before the resignation of Chair Gensler and Commissioner Lizárraga in January of 2025. There are rumors that companies are being pressured to settle before the change in SEC leadership, but it remains to be seen on if there will be a wave of lawsuits and/or settlements before January 20 or if these threatened actions will fade into the background.
OTHER STORIES
Coinbase Responds to Anti-Trust Allegations: Coinbase has filed its response to the request for TRO filed in the wBTC case, straight up saying the reason Coinbase delisted the asset is because of prior alleged Justin Sun skullduggery. It’s strong enough that the TRO effort failed, but the timing still doesn’t time, with the Justin Sun involvement known in August and delisting not occurring until after Coinbase had a competing product in November.
Prometheum Tried to Force Detractor to Pump Their Platform: I missed this, but apparently back in November, Prometheum sued (using the founders’ daddy’s law firm) an individual with less than 1,000 followers for calling the company “scammers” online. Now, the defendant is claiming the company sent his mother a demand to have her son issue an apology containing the sentence “[u]pon reflection, Prometheum has taken an innovative approach to digital assets allowing for further evolution of the industry. I am excited for the future!” Only a complete cornball loser could come up with a retraction post like that.
Prometheum Tries to Raise $20 Million: In crazy timing, Prometheum also issued a press release that it raised $20 million in new funding. But somebody dug into it, and as of the release timing, the company only disclosed raising about half of the $20 million round, and paid placement agent “Network 1 Financial Securities” a $932,450 sales commission on that half, plus 3% for expenses. So not a bad day for the China affiliated firm.
FTX To Repay Customers: It looks like the FTX customer repayments will start within 60 days of January 3rd. If you all could please use those proceeds to buy my bags, I would appreciate it. Thanks in advance.
Digital Chamber Issues Proposed SEC Policy: The Digital Chamber’s Token Alliance Leadership Committee has released its proposal on fixing the SEC’s approach to crypto. There has been some pushback from others especially with regard to the Hinman speech which some view as picking winners and losers and others view as largely correct to focus on removal of reporting obligations for tokens functioning in open and decentralized manners.
Aave and Polygon In Proxy Dispute Over Bridge Proposal: Polygon is considering deploying the money currently held in bridge contracts to make money for the ecosystem. Which people have issues with, because even the safest deployment strategies have SOME risk. Which lead to Aave contributors suggesting retracting polygon pool eligibility. Polygon’s founder gave a cogent explanation of the situation from his viewpoint. The whole thing is fascinating to watch in real time what happens behind closed doors in TradFi.
UK Regulator Goes After Memecoin: The UK Financial Conduct Authority said the SOL memecoin “Retardio” creators are not authorized to provide financial services in the country. The response from the creators was pretty directly on-brand (before they got suspended from Twitter, likely as a result of the financial regulator’s actions).
Pudgy Penguins Token Claim: Pudgy Penguins opened up claiming for their $PENGU tokens. I just wish the SEC would protect people from this free money. Apparently this was done from the U.S. entity as well without any offshore structuring, so maybe U.S. token drops are back?
Quantum Computing Threat: With the Google announced quantum computing breakthrough, people are worried about the threat is represents to Bitcoin. Listen, if quantum computing advances to the point it can break the cryptography backing Bitcoin before a post-quantum cryptographic solution is found, it can break any system so global banking is probably the first layer of concern before magical internet money.
Crypto.Com Drops SEC Lawsuit: Apparently crypto.com has dropped its lawsuit against the SEC after its CEO met with President-Elect Trump. I get why they did it from a business perspective but wish they had stuck it out to fight the good fight. Administrations change, but case law is permanent.
Decentralization Op-Ed: Miles Jennings from a16z wrote a nice op-ed that the north star for digital asset projects should remain decentralization, even as the administration changes to be less hostile to centralized actors in crypto.
Song A Day Amicus: One of the Plaintiffs in the NFT issuer case against the SEC creates a song a day and mints it as an NFT. So of course, he gave a song a day treatment to a recent amicus brief filed in support of his case. Jealous.
Hawk Tuah Class Action: There was a class action filed against the issuers of the $HAWK token promoted by Hailey Welch, AKA, the “Hawk Tuah Girl.” Plaintiffs firms are about to learn the ease of suing digital asset issuers but the difficulty in collecting any judgment from them.
Wall Street Journal Covers Crypto De-Banking: According to a recent Wall Street Journal article, of the 160 crypto hedge funds interviewed, 75% reported issues with basic banking services the past 3 years. None of the 20 other alternative investors surveyed (like in real estate or private credit) reported similar issue.
Fake Satoshi Sentenced to Prison Time: Craig Wright, who a UK court found falsified claims he was the inventor of Bitcoin, has been sentenced to a 1 year suspended sentence in prison because he won’t stop suing people over his provenly false claims. Almost have to respect the never say never attitude.
Jump Trading Fined for Terra/Luna: A Jump Trading subsidy (Tai Mo Shan) was fined $123 million for its role in trying to maintain the Terra/Luna peg with a $20 million inflow. Seems like the 2022 crashes are all getting finalized, which is nice to move on from all that.
Tether Invests in YouTube Competitor: Tether has apparently invested $775 million into streaming platform Rumble. These types of moves kind of remind me when gambling legalization was happening and legal betting companies bought sports media companies. Not a terrible strategy for Tether, tbh. M&A continues.
CONCLUSION
If you have any questions or would like me to write about anything else, let me know on Twitter (X?) or Warpcast. As always, I am an attorney, I am not your attorney. For legal advice, you should always consult (and pay for) an attorney.
The NFTtorney 