The Fintech Files: FBI hunts CryptoQueen as Vauld signals more market turmoil

The crypto winter just got even chillier, after Three Arrows Capital became themost significant casualty of the downturn, going into liquidation following weeks of uncertainty.

It caps off a miserable second quarter for the sector, which has been suffering reverberations since stablecoin terraUSD and its paired token luna crashed in April. Bitcoinhoveredaround $19,000 on 5 July.

Three Arrows was co-founded by Zhu Su and Kyle Davies in 2012, and was one of the world’s biggest crypto-focused hedge funds.

Matters were made worse whenVauld, acryptocurrency lender backed by Peter Thiel and Coinbase, suspended withdrawals, trading and deposits.The platform said on 4 July that it froze operations after users pulled almost $200m over the last three weeks.

That comes after Celsius froze withdrawals in June. The crypto lenderis still locked in rescue talks and was forced to cut about 150 more jobs. It has 650 employees listed on LinkedIn. One source with knowledge of the matter told Financial Newsthat rescue talkswill continue… Plans [are] in the works.

Whether that involves a proposal to tap its customer base for support, revealed by FNrecently, remains to be seen.

Surprise surprise

Looking ahead to the third quarter, experts do not expect a swift recovery for crypto.

If the market sees relief, I do not think we will see a sustained rally, due to the current macro environment, said GlobalBlock analyst Marcus Sotiriou.

Meanwhile, Charley Cooper, managing director at blockchain firm R3, said thatsector leaders would likely continue to ignore growing pressure to mature into an innovative, yet responsible, industry. Cooper is the former chief operating officer at the US Commodity Futures Trading Commission.

Put it in the diary

On 6 July, Ill behostinga live webinar with Gwendolyn Regina, investment director at Binances blockchain, BNB Chain, and Ari Redbord of crypto intelligence group TRM Labs.

Theyll be sharing their considerable wisdom on how to navigate the increasingly stormy crypto landscape. Reserve your spot here.

Cryptos most wanted

In news that will excite podcast aficionados the world over, the Missing CryptoQueen aka Rucha Ignatova has been added to not one, but two global most-wanted lists.

Ignatova founded OneCoin, the companythat marketed a digital currency of the same name as the bitcoin killer. However, it has since been alleged to be a Ponzi scheme that defrauded vulnerable retail investors out of $4bn.

She has not been seen since 2017 and was the subject of a hugely popular BBC podcast, The Missing CryptoQueen, which tracked Ignatova and OneCoins story up until its publication in 2019.

Now, she has been added to both Europol and the FBIs 10 most wanted fugitive lists. FBI special agent Ronald Shimko said he hoped the publicity of the most wanted list will bring more awareness to the case.


Theres a $100,000 reward for anyone with informationthat leads to her arrest, so readers should look out for a woman who has brown hair and brown eyes but is likely to be wearing a disguise and who is, by many accounts, a master manipulator.

Easy, right?

Bros, cover your ears

Separately, the chief executive of California-based asset manager Research Affiliates called cryptocurrencies a Ponzi scheme on 30 June, claiming bitcoin and the blockchain technology underpinning the world’s largest digital asset help fuel illegal activity.

They are a Ponzi scheme that facilitates money laundering, Chris Brightman told FNwhen asked about his views on cryptocurrencies.

Regulations for the nations

It is just as well that regulators at least in Europe are finally getting their act together, then.

A landmark agreement at the European Union is set to bring stablecoins such as tether and USD coin into a stricter regime to make sure they can meet redemption requests during mass withdrawals.

The regulations agreed by lawmakers on 30 June, known as Markets in Crypto Assets or MiCA would usher in new capital reserve levels for crypto providers. They would also see stablecoins limited to 200m in transactions a day, should they become too large.

Transfers of bitcoin and other cryptoassets would also be subjected to the same money laundering rules as traditional bank transfers under the EU’s plans.

Meanwhile, the European Securities and Markets Authority will have powers to ban or restrict crypto platforms that are judged not to provide enough protection to investors, or threaten the financial stability of markets more broadly.

Adam Jackson, director of policy at the UKs fintech industry body Innovate Finance, said the deal put the bloc at the head of the global pack on speed and comprehensive scope.

However, there is a risk of a complex and disproportionate system that could deter innovation. The devil will be in the detail and there will be lots of detail when we get to see the final public text, he said.

The comprehensive nature of MiCA has always carried a risk of trying to do too much too soon in ways that may create disproportionate cost and restrictions for some and may have unintended consequences.

Meanwhile in the UK…

Trade body CryptoUK has said that the Treasury’s recent response to a consultation on travel rules for crypto service providers contained “some wins”, but needed addressing in other areas.

The main takeaway from the Treasury’s response is that it does not think all asset transfers need to provide information about the sender and receiver when they are between unhosted wallets. An unhosted wallet is a crypto wallet that does not come from a regulated provider.

The information checks are seen by some as necessary to prevent money laundering. Instead, the Treasury said service providers will only be expected to collect identity information when the transfer is deemed to pose a higher risk of criminal activity.

CryptoUK has gone out to its members for feedback on the issue, after having been “in extensive talks” with Treasury officials.

Further reading

FCAs failings on P2P lending raise concerns about crypto approach

A new trading rule to prevent another 2008 crisis is almost here and it could blindside 800 firms

Zar Amrolia, LSEs Julia Hoggett, JPMorgan and Swiss Exchange pick up top prizes at FNs Trading & Tech Awards

To contact the author of this story with feedback or news, email Alex Daniel