DAOwn the Drain

Good morning. Today we have an update on BlockFi's settlement with the SEC, a DAO treasury heist, Canada's expansion of AML policies to crypto, and more!

Bonus Content Coming Soon: I'm close to having my notes out from Messari's Crypto Theses for 2022. I'll include a link to my notes in this newsletter, however, the full report is definitely worth a read. The report is now in podcast form and can be found here.

Market Update (as of 8:03am ET):

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Top 5:

1. Update from BlockFi's CEO on the SEC settlement. The full thread from Zac Prince can be found below along with key takeaways. As a reminder, BlockFi is paying $50 million a piece to the SEC and state regulators to settle on issues related to their interest bearing accounts.

Key Takeaways:
- All client funds are safeguarded and none will be used to pay the settlement
- The settlement is specifically related to the BlockFi Interest Accounts (BIAs) and not any other BlockFi product
- Existing clients will still be able to earn interest, but will not be able to add funds to their account.
- New BIAs cannot be opened by US customers
- BlockFi is beginning the registration process with the SEC for a new crypto interest-bearing product, BlockFi Yield
- Once approved, all BIAs will convert to BlockFi Yield accounts and US customers will be able to open new accounts or add funds to existing accounts
- Official press release can be found here

SSS (sat-sized summary): The biggest piece of news from this announcement is that BlockFi is working with the SEC to register a crypto interest bearing product. Getting SEC approval (timeline estimate from Zac is 2-9 months) would be a huge step forward for the crypto industry.

2. Canada broadens scope of anti-money laundering rules to cover crypto. In a drastic move, the Canadian government is expanding the scope of their anti-money laundering and terrorist financing rules to prevent fundraising for truckers protesting COVID vaccination requirements. The expansion includes digital assets and cryptocurrencies and provides banks with the power to freeze or suspend accounts without a court order or any fear of civil liability. The general response from the crypto community has been outrage. I've included one of the tamer tweets on the topic from @punk6529 below.

SSS: The Canadian government is expanding existing anti-money laundering and terrorist financing laws to prevent funding for truckers protesting COVID vaccination requirements. The law allows banks to freeze accounts at will and is similar to laws in other countries, including the US. As a reminder, the government can't freeze your crypto wallet address or prevent you from spending or donating your capital.

3. British authorities seize NFTs for the first time, in a £1.4 million fraud probe. Her Majesty’s Revenue and Customs (HMRC), which sounds much cooler than the IRS, have seized $1.9 million worth of NFTs in a suspected tax fraud case. The perps attempted to claim back more value-added tax (essentially sales tax) than what they were owed using a web of stolen identities, forged invoices, and fake companies. It's the first seizure of NFTs by any law enforcement agency in the UK and goes to show that it is very difficult to get away with crimes committed on a blockchain.

SSS: Law enforcement agencies continue to take advantage of public blockchains to bust criminals that transact on them. While not impossible to get away with crypto related crime (see story #5), putting any type of criminal transaction on a publicly readable blockchain is not a good idea.

4. Singapore's DBS Bank to launch retail digital asset trading desk in 2022. On an earnings call on Monday, Southeast Asia's largest bank by AUM, announced they will be launching a digital assets trading desk catering to retail customers. The firm, which already offers institutional investors access to crypto trading, is working on a self-service trading platform similar to existing crypto-exchange platforms like Coinbase or Binance. The announcement follows several other moves into crypto by Southeast Asian financial institutions.

SSS: Financial institutions in Southeast Asian are expanding services or making acquisitions to provide their customers with access to crypto investing. I think these types of services are a preview of what's to come in the US market assuming a smidge of regulatory clarity is provided.

5. DAO suffers 'hostile governance takeover,' loses $470,000. Build Finance DAO, which focused on "decentralized venture building" has fallen victim to a hostile governance takeover that has given the hacker full control of the DAO, minting authority, and keys to the DAO's treasury. The perpetrator managed to propose a change to the DAO's governance structure that gave them the ability to mint governance tokens unilaterally. The proposal was not picked up by the DAO's Discord server bot and most of the community was not aware of the proposal until it was too late. Around $500K in crypto was taken resulting in little hope for Build DAO's future.

SSS: The hostile-governance takeover of Build Finance DAO saw a single user take control of the DAO and make off with the treasury's funds. It's a tough lesson in proper DAO governance and highlights the risks that users, customers, and investors face when working with this new type of organization.

Updates and other stories:
- Crypto apps soar in popularity after Super Bowl splurge...Read More
- Propy's sale of NFT-tied Florida home nets over $650K...Read More
- Cardano, Polkadot ETPs hit Frankfurt Stock Exchange...Read More

Top Sharers of the Crypto Top 5:
1. Donna Y. - Nashville, TN
2. Jake Y. - Greenville, SC
3. Forrest H. - Evansville, IN

External Resources:
1. Cryptopedia from Gemini - if you see a word, acronym, or phrase in this newsletter that you don't understand, there's a good chance you can find an explanation here
2. Crypto Explainer+ - intro level courses on Bitcoin, Ethereum, decentralized finance, NFTs, and more
3. Crypto Jobs! - looking for a new job? Check out this page from Anthony Pompliano with hundreds, if not thousands of listings

Disclaimer: The information contained in this newsletter shall not be understood or construed as financial advice. I am not an attorney, accountant or financial advisor, nor am I holding myself out to be, and the information provided is not a substitute for financial advice from a professional who is aware of the facts and circumstances of your individual situation.