Greetings, crypto readers! This week was not without unexpected events in the busy crypto universe. From Gary Gensler’s vocal opposition to new financial legislation to Gala Games’ resilient bounce-back from a cyberattack; from legal fallout targeting Sam Bankman-Fried’s associates to NEAR’s ambitious plans for democratizing programming with AI. Let’s delve into these tales.

Gary Gensler Fumes Over New Financial Innovation and Technology Act

SEC Chairman Gary Gensler publicly voiced his displeasure with the Financial Innovation and Technology for the 21st Century Act, or FIT21, in a statement released on Wednesday.

Spearheaded by the Republican Party, FIT21 takes a comprehensive approach to regulating the broader crypto ecosystem, aiming to shift more regulatory responsibility to the Commodity Futures Trading Commission.

Last week, 60 crypto organizations, including Gemini, Kraken, Coinbase, and Digital Currency Group, signed a letter supporting the bill, stating that digital asset companies are currently constrained by securities laws that were crafted nearly a century ago.

What’s Got Gary So Angry?

SEC Chairman Gary Gensler is fuming because the proposed bill exempts cryptocurrency trading platforms from the definition of an exchange, stripping away historically proven frameworks and ultimately exposing investors to risk.

Gensler’s main gripe is that the HR 4763 bill undermines the classification of crypto assets as investment contracts. As a result, they would no longer be under the supervision of the SEC, potentially impeding initiatives aimed at safeguarding investors.

[FIT21] will create new regulatory gaps and undermine decades of precedent regarding the oversight of investment contracts, exposing investors and capital markets to immeasurable risk.

Gary Gensler

Gary argued that FIT21 could allow crypto firms to self-certify their crypto investments and products as “decentralized” and belonging to a special class of “digital commodities,” thus avoiding SEC scrutiny. According to Gensler, the SEC’s ability to challenge these self-certifications would be hampered by a lack of resources, potentially leaving the vast majority of the crypto market unregulated.

Unexpectedly, Donald Trump himself has come out in favor of the bill. According to Forbes, Trump and his advisors support the crypto market structure bill. Additionally, House Speaker Nancy Pelosi (D-CA) is also considering putting the cryptocurrency bill to a vote.

Hacker Returns Some Stolen Funds to Gala Games in ETH

The still unidentified hacker behind the $240 million Gala Games token exploit on Monday has returned some of the Ethereum (ETH) obtained from selling the tokens.

Around 5913 ETH, valued at roughly $22 million, was transferred from the hacker’s wallet back to Gala’s wallet on Tuesday morning. These funds were the proceeds from selling 600 million GALA tokens on the decentralized exchange Uniswap shortly after the exploit on Monday.

On Monday, CEO Eric “Benefactor” Schiermeyer announced on Discord that the crypto gaming startup believes it knows who is behind the attack and is working with authorities to bring the perpetrator to justice. The individual in question has not yet been publicly named, and Gala Games has not provided any further comments.

Attack Details

On Tuesday, Gala Games posted a blog update detailing the attack and the firm’s countermeasures. On Monday, a wallet with administrative access to the GALA token issuance contract minted 5 billion GALA tokens, worth about $240 million at the time, and began selling them on the open market.

About 45 minutes later, Gala managed to halt further sales from the wallet thanks to a function built into the contract’s v2 update last fall. The hacker had already sold 600 million GALA tokens by then, causing GALA’s price to drop by 20% as the market struggled with the influx of tokens.

We want to assure our community that the $GALA minting capabilities on GalaChain remain safe and uncompromised. Our internal controls and multi-signature security protocols are designed to protect against such incidents, and we continually enhance them to stay ahead of potential threats.

But what about the remaining 4.4 billion GALA tokens, Mr. Schiermeyer? That’s nearly 9% of the total 50 billion GALA tokens, currently frozen in the hacker’s wallet. On Monday, the CEO stated that they would be considered “effectively burned” since they are inaccessible and cannot be spent.

However, it turns out Schiermeyer’s declaration was a bit premature. The Gala node operator community will have a chance to vote on the matter. An upcoming Founder’s Node governance vote will decide if the blacklisted GALA tokens should be considered burned, given their tie to the dynamic GALA supply distribution model.

The Long Arm of Justice Targets Sam Bankman-Fried’s Accomplices

Prosecutors are recommending up to 7 years in prison for former FTX executive Ryan Salame, citing his role in the collapse of FTX. The defense is pushing for a lighter sentence of 18 months, emphasizing Salame’s cooperation and financial losses. Salame, guilty of significant campaign finance violations, is set to be sentenced on May 28.

Ryan Salame. Source: Bloomberg

Salame pleaded guilty last September, and sentencing is scheduled for May 28. The charges against him encompass breaches of campaign finance laws and the operation of an unlicensed money transfer enterprise. Prosecutors argue that a harsh sentence is necessary for justice and deterrence, highlighting the gravity of his crimes.

“The campaign finance crime is one of the largest in American history. The unlicensed money transfer business exchanged over $1 billion without proper oversight,” prosecutors stated.

Salame’s lawyers are advocating for a more lenient punishment — not more than 18 months. They contend he wasn’t the mastermind and lost most of his fortune due to FTX’s collapse. His attorneys emphasize his cooperation with authorities, including warning the Bahamas of potential fraud.

The former FTX executive has agreed to forfeit assets worth nearly $6 million, including a Massachusetts restaurant, as part of his plea deal. The sentencing memorandum contains 28 letters from acquaintances and relatives affirming his character and underscoring his philanthropic endeavors.

Salame’s trial signifies the commencement of the sentencing phase for prominent figures involved in the FTX scandal. Other notable individuals, such as Caroline Ellison, Nishad Singh, and Gary Wang, await their trials. The scandal, which came to light in November 2022, revealed massive embezzlement and misappropriation of client funds totaling $10 billion.

NEAR Plans to Create AI Making Programming Accessible to Everyone

Co-founder of Near, Illia Polosukhin, shared the company’s goal — granting dreamers without coding skills the ability to create decentralized applications (DApps) with the help of an artificial intelligence agent capable of coding for them.

Source: Cheeseburger

In an interview, Polosukhin unveiled the company’s vision, enabling users to become project founders even without programming skills.

Essentially, we wanted people to be able to just say what apps they need, and the computer will write the code and create the app from start to finish.

With Near’s new AI tool, anyone with an idea can bring it to life. For instance, if someone wants to create a freelance marketplace, the AI can assist with everything from crafting user stories and building freelancer profiles to developing smart contracts and the user interface.

More Info:

The AI will also be able to write middleware that connects everything. Moreover, creators can tweak the program and add extra features that the app might lack.

As Gensler grapples with FIT21’s implications and Gala Games navigates the aftermath of cyberattacks, the SBF team faces the long arm of justice. Meanwhile, NEAR’s ambitious plan to democratize coding with AI promises to revolutionize tech accessibility for all.

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