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SEC Director Shares Insight on State of Crypto Regulation

The SEC is very concerned about the possibility of market manipulation in certain crypto trading venues, a senior regulator revealed in an interview with CNBC. Brett Redfearn, the Director of Division and Trading at the SEC, shared insights on the state of crypto industry regulation, ranging from the categorization of assets as commodities or securities, to whether current systems can support this rapidly-evolving industry. In his first interview since joining the regulator, he said that the SEC is very interested in encouraging the development of a more sound regulatory structure.

The Lingering Question on Securities and Commodities

Determining whether a digital asset is a security or a commodity is not as obvious as it seems, said the former Global Head of Market Structure at JP Morgan. While the SEC continues to use the Howey Test to determine whether assets are securities, it hasn’t been easy, as most of these assets are complex and have multiple applications.

We continue to clarify where possible. I think that there will be more statements coming forward from the commission on this, but in the meantime we are highly encouraging any market participant involved in the space to really look at these products and run that test to determine whether or not they meet the prongs of being defined as securities.

So, when will the crypto industry get a definitive answer from the regulator on which assets are classified as securities? In keeping with the narrative from the SEC, Redfearn shied away from giving any exact timelines, instead stating that the commission will issue more statements on this topic moving forward. He also shied away from settling the biggest debate in the crypto industry today – whether Ether and XRP are securities. He did, however, promise that the SEC would release a statement on at least one of these products in the future.

Redfearn’s interview came days after SEC chairman Jay Clayton strongly suggested that most of the digital assets currently trading on exchanges are doing so unlawfully as commodities. In an interview with CNBC, he defined a security as an asset whose holders expect a return on their investment. Clayton insisted that any such asset was under the SEC’s jurisdiction and that it would regulate the offering and trading of those assets.

The two regulators affirmed the commission’s commitment to working together with any ICO issuer that comes forward. However, Redfearn said that the commission was “underwhelmed by the enthusiasm for coming within the regulatory structure right now.” Clayton, on the other hand, insisted that while the SEC will remain supportive of compliant industry players, it wouldn’t change its set regulations which have existed for decades just to appease the crypto industry.

The current infrastructure doesn’t need to be overhauled in order to accommodate the crypto industry, Redfearn continued. While admitting that some changes are needed, Redfearn stated that some of the current procedures such as registering as a broker-dealer or an alternative trading system are well laid out and that a number of firms have been in touch with the SEC on the same.

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FBI: “Call of Duty” Players Remotely Stole $3.3 Million in Cryptocurrencies

A group of “Call of Duty” players from Indiana are accused of stealing more than $3 million in cryptocurrencies after coercing an Illinois man to aid them in remotely hacking unsecured crypto wallets on more than 100 cell phones. Man Coerced Into Hack After SWATing Incident The episode began in Bloomington, Illinois, where a local man told the FBI he met the members of the would-be group of cybercriminals online playing Call of Duty. In the simulated warfare game, players are able to communicate with each other in real-time and with relative privacy. The group, based out of Dolton, Indiana, allegedly coerced the man from Bloomington into working for them using an intimidation tactic called “SWATing,” a nefarious, illegal, and dangerous phenomenon that has become increasingly popular in online gaming communities. SWATing is when police are called with a false report of a violent crime at someone’s home, which prompts a response from a SWAT team — oftentimes leading to door breaches, gunfire, and even the accidental deaths of unknowing victims. It’s often used as a decidedly dark method of payback, or, as in this case, to intimidate or threaten an individual. Afraid of further retaliation the man succumbed to the hacker’s requests, to which they handed over names, phone numbers, and other information that permitted him to remotely access the cell phones of their victims. According to the FBI affidavit, the man admitted to taking over the cell phones of more than 100 people. Once the group took over a phone, they were able to hack into a victim’s cryptocurrency account and drain their funds. The group is suspected of stealing at least $3.3 million in various cryptocurrency, including about $805,000 in Augur’s Reputation Tokens, according to the FBI. The suspects then allegedly moved stolen tokens through cryptocurrency networks, such as Ether or Bitcoin, to their own digital wallets. As of yet, the Chicago Sun-Times isn’t naming the suspects identified in the affidavit because they don’t appear to have been charged with any crimes. In an online interview the Bloomington man proclaimed his innocence — even going as far as to say that considers himself a victim: “I have done nothing but cooperate with Augur and the FBI,” he said. “I have never once profited from anyone [by] crypto-hacking, ever.” Crypto Thefts in First Half of 2018 Total Over $1.1 Billion According to recent study from cybersecurity firm Carbon Black, the total amount of cryptocurrency that has been stolen through cybercrime this year alone is over $1.1 billion — primarily through ransomware and exchange hacks. The firm’s report claims that many criminals are using the dark web to appropriate cryptocurrency from their victims, estimating that there are over 12,000 marketplaces with almost three times that number of crypto theft listings between them. Rick McElroy, security strategist at Carbon Black, spoke on the trend, noting how easy it is for cybercriminals to operate these days: “It’s surprising just how easy it is without any tech skill to commit cybercrimes like ransomware… It’s not always these large nefarious groups, it’s in anybody’s hands.” Part of the reason for this is the accessibility and user-friendliness of the tools of the trade. McElroy said that certain pieces of malware even come with customer service to aid would-be cybercriminals, adding that the malicious software costs an average of $224 but can be picked up for as little as $1.04. Many of the attacks against crypto users, companies, and exchanges originate from an organized group of criminals like those out of Indiana, however, McElroy says, they’re just as likely to be the product of a trained engineer who is out of work: “You have nations that are teaching coding, but there’s no jobs… It could just be two people in Romania needing to pay rent.” Image from Shutterstock The post FBI: “Call of Duty” Players Remotely Stole $3.3 Million in Cryptocurrencies appeared first on NewsBTC.

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