A class action lawsuit filed on Oct. 6, 2019, against Bitfinex and its sister company, Tether, made waves in cryptocurrency headlines this week. The plaintiffs claim that the defendants manipulated cryptocurrency markets by issuing USDT, a stablecoin that Tether claims is backed 1:1 by US dollars, in amounts that exceeded Tether's fiat reserves. The lawsuit further alleges that Tether purposefully issued unbacked USDT and the defendants used the USDT to flood the Bitfinex exchange and purchase other cryptocurrencies, thereby artificially inflating demand for cryptocurrencies and creating the "largest bubble in human history." The suit claims that as much as half of the growth of the cryptocurrency market between 2017 and 2018 was driven by Bitfinex's and Tether's "manipulative scheme," and cites economists and numerous studies. The complaint alleges damages of more than $1.4 trillion related to the crimes of Bank Fraud, Money Laundering, Wire Fraud and more.

Also this week, prosecutors in the United States indicted Ho Jun Jia, who stands accused of Wire Fraud, Access Device Fraud, and Identity Theft for allegedly stealing the identities of multiple parties to gain unauthorized access to cloud computing services, which the defendant then used to run a large-scale cryptocurrency mining operation. At one point, one of the fraudulent accounts constituted a cloud provider's "largest consumer of data usage by volume." Ho allegedly racked up in total more than $5 million in unpaid cloud computing services. Ho allegedly executed the scheme by creating false emails and web domains and obtaining personally identifiable information, all used to execute a sophisticated social engineering campaign that gave him access to retail cloud provider accounts.

Late last week in San Antonio, Texas, a federal judge sentenced 30-year-old Alaa Mohammed Allawi to 30 years in prison for using cryptocurrencies to sell narcotics, including fentanyl, on the dark web. Allawi was ordered to pay a $14.32 million judgment based on the profits he generated by operating the criminal enterprise, as well as forfeit property worth around $28,000, multiple firearms, over $21,000 in cryptocurrency and his rights to a coffee and tea franchise.

On Oct. 2, 2019, the Securities and Exchange Commission announced a final judgment against PlexCoin proprietors Dominic Lacroix and Sabrina Paradis-Royer, who were ordered to pay nearly $7 million for selling unregistered securities to the public during an unlawful Initial Coin Offering (ICO). The ICO lured investors by disseminating false and misleading information about the size of the company's operations, how the money raised would be used, and the amount of funds that were raised. The money judgment reflects a disgorgement of monies received by the parties, as well as civil penalties.

And finally, yet another asset-backed token issuance has come under regulatory scrutiny. Karatbars, a German company that previously sold gold products online, raised $100 million in 2018 through an ICO selling KaratGold Coins (KBCs), a cryptocurrency supposedly backed by gold. There has been no independent verification that the tokens are, indeed, backed by gold. The company announced plans to launch a second ICO in December 2019, this time for the launch of a coin connected to a "cryptocurrency bank" in Miami. This put the company on the radar of the Florida Office of Financial Regulation, which is currently investigating Karatbars.

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