Digital Chamber Fights Back Against SEC Overreach into NFTs

The Digital Chamber advocacy group is urging the U.S. Congress to protect NFTs from being classified as securities after the SEC’s scrutiny of OpenSea. Meanwhile, former Alameda Research CEO Caroline Ellison’s legal team has requested redactions in her sentencing hearing to protect personal information. In the UK, Olumide Osunkoya has been charged with running an illegal crypto ATM network, and in Singapore, authorities are also investigating illegal sales of Worldcoin accounts and tokens.

Digital Chamber Urges Congress to Protect NFTs

Crypto and blockchain advocacy group, the Digital Chamber, is urging the United States Congress to pass legislation that will classify certain non-fungible tokens (NFTs) as consumer products, shielding them from federal securities laws. This call to action came after a Wells notice was issued by the U.S. Securities and Exchange Commission (SEC) against the NFT platform OpenSea, which suggested that the regulator might take enforcement action.

The Digital Chamber criticized the SEC’s move as an overreach into the digital asset space and called for clear legal definitions. It also argued that many NFTs do not function as investment tools or securities. Instead, they compared NFTs to traditional collectibles or artwork, which can sometimes be sold for profit but are not considered financial products. 

The group is concerned that the SEC, under Chair Gary Gensler, is relying on regulation-by-enforcement in the absence of guidance from Congress, which could pose some risks to the NFT and digital asset industries.

While the SEC has not pursued any legal action against OpenSea just yet, previous enforcement actions in the space have targeted companies like Dapper Labs and DraftKings over allegations of offering unregistered securities. In 2023, the SEC also fined entertainment company Impact Theory for selling NFTs classified as unregistered securities, and ordered the firm to pay more than $6 million.

Overall, it is clear that the regulatory landscape for NFTs could shift a lot depending on the results of the 2024 U.S. elections. Donald Trump, the Republican frontrunner, has promised to remove Gensler from his role if he gets selected. There is also speculation that Democratic nominee Kamala Harris could adopt a different and more lenient approach to digital asset regulation than the current Biden administration.

Caroline Ellison Pushes for Privacy

There are also some new developments in the cases against FTX and Alameda Research executives. Former Alameda Research CEO Caroline Ellison’s legal team has filed a motion to redact the names and personal information of people submitting letters of support for her upcoming sentencing hearing on Sept. 24. 

In a Sept. 9 filing, attorney Anjan Sahni of WilmerHale requested that the court remove personally identifiable information from Ellison’s supporters because of concerns about harassment and doxing.

Ellison has largely stayed out of the public eye since testifying against former FTX CEO Sam Bankman-Fried in October of 2023, and pleaded guilty to multiple fraud charges in 2022. This filing from her lawyers was the first public reference to her sentencing hearing. Her legal team also requested the redaction of other sensitive details like her current living situation, medical treatments, and information about her partner and volunteer activities.

Sahni held firm that Ellison’s supporters should not be subjected to harassment for their involvement, especially considering Bankman-Fried’s past attempts to release her private information to the media. In addition to personal details, Ellison’s lawyer stated that medical information would be included as part of her sentencing recommendation.

If the sentencing proceeds, Ellison may become the third person involved in the FTX and Alameda case to face prison time. Sam Bankman-Fried was sentenced to 25 years in prison earlier this year, and former FTX Digital Markets co-CEO Ryan Salame is expected to serve a 90-month sentence starting in October. 

Despite facing a maximum sentence of 110 years, Ellison’s cooperation with authorities may result in a more lenient punishment. Other key figures in the case like FTX engineering director Nishad Singh and co-founder Gary Wang are also awaiting sentencing later this year.

Man Charged for Running Illegal Crypto ATM Network

Meanwhile, the United Kingdom’s Financial Conduct Authority (FCA) has charged Olumide Osunkoya with running an illegal network of cryptocurrency ATMs. This makes him the first person in the UK to face such charges. 

Osunkoya’s network processed £2.6 million, or $3.4 million, in crypto transactions between December of 2021 and September 2023. He also faces charges of violating the UK’s Money Laundering Regulations, forgery, and possession of criminal property.

Osunkoya is the director of Gidiplus Limited, and is accused of using false documents and facilitating illegal transactions through unregistered crypto ATMs. Gidiplus applied for registration as a crypto asset exchange provider in 2021 but was denied, with an appeal rejected the following month.

The FCA ordered the closure of all unregistered crypto ATMs in March of 2022, leaving no legally operated machines in the UK. Despite this, the FCA continued to take action against illegal ATMs throughout 2023. 

Osunkoya is due in court on Sept. 30. The FCA is fully committed to stopping illegal crypto ATM operations, and also warned users that these machines are very often linked to criminal activity.

Singapore Investigates Illegal Worldcoin Sales

Worldcoin is also facing some legal troubles. Authorities in Singapore are investigating people involved in the illegal sale and purchase of Worldcoin accounts and tokens, as there has been some concerns that the transactions could be linked to money laundering and terrorism financing. 

Singapore’s deputy prime minister and chairman of the Monetary Authority of Singapore (MAS), Gan Kim Yong, revealed that seven people are under investigation for offering Worldcoin-related services without proper licenses, which is a violation of the Payment Services Act 2019. While Worldcoin itself is not classified as offering a payment service under the Act, the unauthorized buying and selling of its accounts and tokens is considered a criminal offense.

Worldcoin is a crypto project that is known for capturing identity data through biometric iris scans, and has faced global regulatory scrutiny over its data collection practices. Despite facing investigations in countries like India, South Korea, Germany, and Brazil, Worldcoin continues to expand. The project had over 10 million users as of April of 2023. 

According to the Worldcoin Foundation, the individuals under investigation in Singapore are not affiliated with the company.

Singapore police previously warned the public against selling their Worldcoin accounts due to the risk of misuse by third parties for illegal activities. Gan Kim Yong also pointed out the importance of organizations handling sensitive personal data to comply with data protection laws in Singapore, especially with regards to biometric information, to prevent potential criminal activities.