Unchained - Congressman French Hill on Crypto and His Top Pick for the Next SEC Chair- Ep. 677

Episode Date: July 19, 2024

In this episode of Unchained, Congressman French Hill provides an insider's perspective on the present and future of crypto regulation.  Hill delves into the ongoing legislation and the implications of the FIT21 Bill, shares his views on who should succeed Gary Gensler as SEC chair if Trump is re-elected, and discusses the controversial role of the CFTC in regulating the crypto industry. He also touches on the potential impacts of the Chevron doctrine being overturned by the Supreme Court, Trump’s evolving stance on crypto, and the latest developments in the Binance executive detention case in Nigeria. Show highlights: 00:00 Intro 01:26 How Rep. Hill's long-time passion for technological advancement led to his involvement in crypto and blockchain 04:00 The current state of ongoing legislation and why Rep. Hill is proud of the FIT21 bill 08:49 Who would be his top pick to chair the SEC if Trump is re-elected as president 11:42 Why he supports having the CFTC regulate the spot crypto markets  12:40 How he thinks teams should launch tokens in the US  15:02 How he thinks the overturning of the Chevron doctrine will impact crypto 20:02 Why Trump changed his mind on crypto, according to Rep. Hill 23:14 Why Congressman Hill is running for chair of the House Financial Services Committee 25:14 The update on Tigran Gambaryan, the Binance executive detained in Nigeria, whom Rep. Hill visited recently 28:13 Crypto News Recap Visit our website for breaking news, analysis, op-eds, articles to learn about crypto, and much more: unchainedcrypto.com Thank you to our sponsors! iTrustCapital Polkadot PlayFi Labs Guest Congressman French Hill Learn more about your ad choices. Visit megaphone.fm/adchoices

They swept up the entire banking industry without discussing that with the Federal Reserve of the Treasury. I find that wrong, you know, a little unbelievable, really, but certainly wrong. And that's why we again have strong democratic support in overturning the approach that Gary Gensler took. Hi, everyone. Welcome to Unchained. You're no hype resource for all things crypto.

I'm your host, Laura Shin. author of The Cryptopians. I started covering crypto nine years ago, and as a senior editor, Forbes, was the first mainstream reader reporter to cover cryptocurrency full-time. This is the July 19th, 2024 episode of Unchained. With I Trust Capital, you can buy and sell crypto in a tax-advant retirement account. Enjoy significant tax advantages, 24-7 access, and the industry's lowest fees. Video accounts for over half of total internet traffic. Playfie's protocol turns content into data with cutting-edge AI and blockchain. Learn more at PlayFi.AI.com. Pocod is the original and leading layer zero blockchain with over 2,000-plus developers,

and the Pocodot 2.0 upgrade will be a massive accelerator for the ecosystem. Join the community at Pocodot.network slash ecosystem slash community. Today's guest is Congressman French Hill. Welcome, Representative Hill. Great to be with you. Thanks, Laura, for the invite. You serve as vice chairman of the House, Financial Services Committee and Chairman of the Subcommittee on Digital Assets, Financial Technology, and Inclusion. How did you get into crypto? You know, I got into crypto because of my longtime passion with technological advance,

particularly in financial services. I've always been interested from the earliest part of my career. And how do you remove agency costs in financial transactions? How do you make it more secure? How do you have a better trail of those transactions? And so I've seen that as we've gone from paper to ACH to POS. And when blockchains first started being developed and the speed began to be, I'd say, more certain and applications more available, I really began studying how it could disintermediate something that's now did. but on a traditional operating system and not on a blockchain and looking at the advantages of that. And so that's how I first got interested in it.

And I chaired a financial technology and artificial intelligence task force on the House Financial Services Committee four or five years ago when Maxine Waters chaired the committee. And I've maintained that interest, which led to me becoming the chairman of the Digital Assets Subcommittee for the House Financial Service Committee in this Congress. And I'm also on Speaker Johnson's artificial intelligence task force, as well as co-chairing the financial services committees, own working group on AI and this Congress as well. So I give you that background to say that House members on both sides of the aisle for about five years have done a lot of intensive work in and around crypto, the use of blockchain, and how fintech is changing financial services. So we're maybe more, you know, a more literate group of people on this topic than the average member. But that education over the last two years resulted in our passing Fit 21 was 71 Democrats and all but one Republican. So we've come a long way in the last two or three years on talking about the promise of blockchain and tokenized payments. and creating a framework, I think, that will allow America to flourish in this space.

I'm glad you brought up Fit 21, which is the comprehensive market structure bill that passed out of the House at the end of May. As I wanted to talk about that and also ask you about another similar bill in the Senate by Senator Debbie Stavino. And I think Bozeman's the other one who's their work. working on, I guess it's like a revised version of the Digital Commodities Consumer Protection Act from 2022. And then this past winter, vice presidential nominee J.D. Vance was drafting a crypto bill. And then, of course, we also have the Lemus Gillibrand Stablecoin bill. And Kristen Smith of the Blockchain Association said recently that there is some chance that crypto legislation could be passed in Congress this year. What do you think are the odds of that?

And if so, which of these bills do you think would have the greatest chance? Well, that's, of course, Kristen has got her ear to the ground every second of every day on this topic. Since we've had the past year marking up last July passing in May the comprehensive Fit 21 bill, and we had a good bipartisan executive and legislative branch, I'm going to say compromise approach to stable coins, which we've not passed in the House, but we have a really good working draft with some consensus around it. I'm going to leave it like that. So we've made that kind of progress in less than a year. The Senate is a step behind that.

You've had tremendous leadership by Senators Loomis and Gilliland, for which I'm really grateful because they've been pioneers in the Senate. Drafting legislation, speaking out in favor of this, representing the interest of their state of Wyoming and New York, which are, places that absolutely want to encourage digital asset ecosystems to thrive. And I think that's positive. And we've had people who've spoken out on crypto in a positive way as a source of innovation. J.D. Vance, you mentioned, who had been in Silicon Valley working for Peters' venture capital company and Bill Haggerty. My good friend from Middle Tennessee also has spoken out favorably. and bills on the banking committee because the banking committee run by Sherrod Brown has not demonstrated a lot of leadership here. And then Senator Stabino and Bozeman have start, start, stop. And I was really

grateful that Chairman Stabinall has released a draft of her ideas for the commodity piece. It came out this week as we taped this, and I've actually not read it yet. But Kristen's optimistic because she sees. this movement. She sees the puzzle pieces getting in line. You said, what has an advantage? I always think an institution or advantage goes to the chamber that has passed a bill with strong bipartisan leadership. And remember, we got no statement of administrative position that was negative on fit, meaning President Biden did not threaten to veto fit 21. And we could have gotten a few more Democrats. We had, I don't know, 10 or 12 people not voting that day. So we could have been up in the 280s area in support of that legislation. So I think Bit21 is the good base text for a regulatory

framework, let other people criticize it, offer to amend it, you know, have other ideas. I'm open to that, of course. But we've tried to clear up the custody problem created by the SEC. We've tried to give the Commodity Future Trading Commission authority over spot Bitcoin and money for their operation at the commission. We've tried to direct the SEC to clear up all the confusion they seem to have about what's a security and what's not a security. So we've really answered a lot of questions in Fit 21. And then our stable coin text is also bipartisan and has extensive review and comments by the Treasury Department and the Federal Reserve. So I think, as well as others, state, state regulators, I think we could find a landing spot for stable coins as well on that

text. I'm not saying that out of ego. We welcome, Bozeman, Stabinall, Haggerty, Vance, Loomis and Joel ran to the table. But I hope those committees in the Senate, both banking and ag, use the few remaining days we have here in this Congress to help move this legislation. All right. Yeah, we'll see. She did say there were, you know, not that many days. So we'll see what happens.

So obviously, we're looking at this election coming up. And as I'm sure you're very well aware, the SEC has been a huge point of contention for the crypto industry. and I was wondering if Trump becomes president, then there is an opportunity to change who the chair of the SEC is. And I wondered if you had a preference for who that might be. If President Trump is reelected as president, I have no doubt that he will make a recommendation to the Senate for a new chairman of the commission. Chairman Gensler is a very bright, very talented financial executive with experience both at the CFTC and the SEC. but in my judgment, speaking personally, I don't think he's handled the innovation agenda, the capital formation agenda, which covers many topics, and certainly not how he's handled

the digital assets space. He drug his feet on the exchange traded products on Bitcoin and Ethereum and basically had to be pushed into doing that by a federal court decision that described his process as arbitrary and capricious, and that's just not a good place to be. Hester Purse would always be my recommendation to become chair. I don't know that she's interested. She doesn't want me idly pushing her out on podcasts, but Commissioner has been such a terrific leader on both capital formation, orderly markets, and in this technology and innovation agenda, I think she'd make a great chair. All right. So in a moment, we're going to talk a little bit more

about the SEC and crypto, but first a quick word from the sponsors who make this show possible. Did you know you can buy and sell crypto with tax benefits in an individual retirement account or IRA? I trust capital makes this possible. But what does this mean? When you buy crypto outside an IRA, like on an exchange, you face taxes on gains. But in a Roth IRA, gains would be tax-free. I-Trust Capital also has the lowest. fees in the industry and 24-7 accessibility. Start now and maximize your retirement savings with I-Trust capital. PlayFi uses cutting-edge AI and blockchain technology to transform content into real-time data. Their AI agents watch games, live streams, sports, and more, converting

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which is seen as controversial in some parts of the crypto industry. So what do you think of that potential? move? Well, there was a lot of discussion about it for many years, and it was our judgment that that was the right place for it to land. Bitcoin is unambiguously considered a commodity, even by Gary Gensler. And so Chairman Venham and the CFTC don't have authority to do that, and so we are granting that authority and fit. I'll be very interested to see. if the Senate concurs, and that's why I'm very interested to reading Senator Stabenow's text. But that was a judgment that we took after a number of hearings and a lot of discussion.

So you are supportive of that. I am. Well, ever since the end of the initial coin offering craze, token teams have been reluctant to issue or even airdrop tokens to users in the U.S. What do you think would be the ideal way for new tokens to launch in the U.S.? Yeah. Well, this is really at the heart of the challenge with the how we test and how the Securities and Exchange Commission has worked. And entrepreneurs, folks with new ideas about issuing tokens, they have no clarity whatsoever about where to go.

And that's why we designed fit to outline how you would do venture capital in a token entity and how it would become decentralized on a function. blockchain. And we talk about levels of ownership, indications of control, decentralization definition. And we lay that out in the text to give the commission a clear blueprint, in my view. Certainly, it's more clear than today, which is zero. So it is certainly our suggestion of what a clear path is. And that should give token innovators a framework. And here's what I would propose. If someone has an existing application out on a blockchain or has a blockchain functioning, run your characteristics against the tests that we put in Fit21.

I think a lot of people will find that they are, in fact, decentralized on a functional blockchain without anyone in a position of control. and we lay all that out definitionally. And I think it's a great screen right now, even though the law has not been enacted, it's a terrific screen to test your idea against or an existing portfolio company against, if you're already in the venture capital business and backing a token-based company. And that's what I've encouraged. And I've asked people, please give me feedback on that.

And also give us a list of big names out there in the crypto space that you think clearly are decentralized. on a functioning blockchain that we can use as an example when we're talking with administration officials and our friends in the Senate to demonstrate how Fit 21 would work if it were actually enacted into law. So we recently saw the Chevron Doctrine overturned by the Supreme Court,

and I wondered what you thought this ruling would mean for the crypto industry, and I was curious to hear how you thought this ruling would play out under both a potential Trump administration and a potential Democratic administration, whether or not it will be Biden or a different Democrat. Yeah, good point. Very good nuance as we take the show.

Look, this has been a long time in coming. Justice Scalia, the late great Justice Scalia, said that supporting the majority of decision in Chevron was the worst mistake he made in his judicial career. That's a big statement. And so for four decades, we've dealt with a growing. deference that if an independent agency writes something down in a rulemaking, that it has the force of law and it's considered to be the intent of Congress. And of course, that's created a lot of fights along the way. And now that's reversing itself, which I think is good. Here's what I believe will happen in each of our authorizing committees. We'll do a study. We'll write our agencies

that are under our purview. We don't think these rules are in keeping with the statutory intent. you've issued this entire rulebook against this set of statutes, and we think you're out of sync here. And then we would make suggestions. We think you ought to put a notice out for rulemaking to correct that and go back this direction. But just to make clear, since Congress has not done that for crypto, then how would that affect crypto? Well, I mean, I think the best example of Chevron deference removal is Fit 21. No, this is Congress saying you've fouled this all up by operating under a set of rules that are not in keeping with this new industry, emerging industry. It's why we call it a fit for purpose regulatory structure.

We're not saying have no rules. We're saying you need some rules. And you are not willing to use your exemptive relief to reflect reality. So the reason it's not quite a Chevron question is because crypto didn't exist then. you know, and so you're looking at decentralized peer-to-peer financial issues and the idea of issuing tokens connected to a business on a blockchain. These are not contemplated per se in the rules. So we're issuing guidance. But it does speak to this issue of rulemaking by enforcement, which is another side benefit of Chevron deference to the agencies because they can essentially make law

not by even going to the federal register and proposing a new rule. They just simply make a new rule by enforcement. And we call that regulation by enforcement, rule by enforcement. I think you'll see less of that. I think you'll see three things will happen. I think you'll see Congress go through the rulebook, connect it to the statute, and say, you're not in line here. And try to do that in a bipartisan way, by the way.

That'll be hard. but those will be the low-hanging fruit where both Democrats and Republicans agree, hey, this rule really doesn't keep with our statutory intent. Then more partisan ones, admittedly, big government versus small government. It's, I mean, Democrats line up on big government, I'd say more than Republicans. So it'll be big government, small government. And then you'll have the courts continuing to monitor this where private players take federal suit, against a rule using the Chevron removal.

And we'll be doing that in the appropriations process as well. I think it'll be interactive. I don't think it'll be revolutionary overnight. I think it's a lot of work. But I think in the Financial Services Committee, we're absolutely prepared to do that work and excited about it. And I just see it throughout the financial services space where I have a lot more intimate experience with how the rules have been proposed

versus what the law said. Yeah, yeah. Well, certainly the industry would appreciate what this would mean for how these decades old laws have, quote, unquote, been applied to their industry. I mean, you know, staff accounting bulletin 121. That's not how custody works. That's just a made-up rule by one agency, the SEC, at the staff level. And it's not even how custody works. I'm not sure people at the SEC can even properly describe how it should work. and they did not consult with the bank supervisors who are responsible for custody. So if you're concerned about a non-bank custodian, right? And they are, right, we have non-bank custodians of crypto wallets, correct? Then they should have written the rule about that. They didn't write the rule about that.

They didn't. And I don't think they have the authority to even write that rule, probably. But they might, under some narrow circumstances. But they swept up the entire banking industry. without discussing that with the Federal Reserve of the Treasury. I find that wrong, you know, a little unbelievable, really, but certainly wrong. And that's why we again have strong democratic support in overturning the approach that Gary Gensler took. We had a veto override just last week of it.

We didn't get two thirds. But we had 21 Democrats support us. It's now over in the Senate again. As you recall, Chuck Schumer, the majority leader of the Senate, voted with us on this world. this is all about Congress asserting its responsibility here. And if Congress has to work harder, God, that's great. I mean, the main thing is that we use it as a mechanism to get a more compliant administrative state.

And that'll benefit the American people. Yeah. So former President Trump expressed strong to its approval for cryptocurrencies back in 2019, but he's now embracing digital assets on this year's campaign trail. what do you think changed his stance? Like which, what messages do you think resonated with him? Yeah. Well, like a lot of Americans, I think people in the early years of crypto looked at it too narrowly,

and they didn't look at the technology. They looked at a headline. Is Bitcoin a store of value? Is Bitcoin digital goal? Is Bitcoin going to be a payment activity? was very narrowly cast back in 2019. Also, Facebook's effort at Libra of creating a private, non-bank, private currency run by Facebook, which is not a popular company on Capitol Hill or in the executive branch, just generally

speaking, you know the story there. You know, you have to go back in context, I think. So President Trump has, like a lot of Americans now learned from talking to business. people and entrepreneurs and innovators and venture capitalists, the whole benefits of blockchain and the whole idea around a tokenized payment source on a blockchain. And he has seen us in the house craft a payment stable coin legislation and the Fit 21 regulatory framework. Stephen Mnuchin, his Treasury Secretary, Jay Clayton, his SEC chairman, had none of those tools. These were just a emerging ideas inside the Trump administration at the time. So I think all the work is what's

changed President Trump's mind. He wants to be pro-innovation, pro-economic growth, pro-American technology, pro-jobs here. And certainly technology and blockchain and crypto fit in that category. And he's selected a vice president who's a former venture capitalist and someone who's pro-crypto. and he's been very attentive to this and interested in it and learning about it. And I think that's what we want out of our chief executives. Yeah, as you mentioned, J.D. Vance is probably more knowledgeable than any other person that's been on a presidential ticket before. And as for you, the current chair of the House Financial Services Committee, Representative Patrick McHenry has decided not to run for re-election at the end of this term.

And so I'm guessing that makes you one of the likely candidates to replace him. Are you considering running for chair of the House Financial Services Committee? And if so, and if Trump and Vance come, you know, into the president, into the White House, then, you know, what would your priorities be? What would your vision be for what crypto might look like in the U.S.? Well, first, I am running to be the chairman of the committee for Republicans in the next Congress or ranking member if we don't hold the House. But I really have every instinct politically of my political experience and also being, a good poll reader. I think we stand a very good chance of holding the majority in the house,

possibly expanding it. But I'm interested in doing that because of my lifelong dedication to finance and investments and technology and innovation. I've devoted my whole life to that. I've been a venture capitalist. I've been a private equity partner. I've been a commercial bank CEO. I've been a payments entrepreneur starting a payment company. So I've done a lot of things in my career. And so I'm very excited about the opportunity to share that experience with my colleagues in the House. So that's part of my pitch. Priorities. Gosh, if we have the Senate and President Trump's reelected as president, I hope that if we are unsuccessful in passing a stable coin piece of legislation and Fit 21 this year, that that'll be the first bill our committee can send to him to his desk

for Senator in 2025. So we're committed to carrying this work on into the next Congress. Time is short in this Congress, but I am with Kristen. I am an optimist. I hope that we can get it done in this Congress, but that'll be my priority in the new year. Okay. And last quick question, I just have to ask because I know you did go to Nigeria recently on behalf of Binance's VP of Global Intelligence and Investigations, Tigger and Gambarian, who also, he served in the IRS for decades. And I wondered what you could tell us about the status of his case and what he might be released back to the U.S. I visited Tigran in Koojah prison in Abuja, Nigeria about three weeks ago.

He was sick. He feels horrible. Obviously, he's severely depressed. He's had malaria. He's had double pneumonia. He's being wrongfully detained. He's not guilty of anything. He is a employee of Binance that was kidnapped by the government of Nigeria to try to leverage

beating up on Binance with concerns they have about Binance is operation in Nigeria, which is their right is a country to complain about finance and work with them, but not kidnapping American citizens. And so we have called for his immediate release. They did drop one of the charges. The judge in Nigeria recently has now subpoenaed the medical records from the doctor who refuses to release them. We are pressing the government of Nigeria at the top level, the president, the national security advisor of the foreign ministry, a minister through our diplomats. We want Tegrin released, no strings attached, and back in the United States. Congressman McCormick of Georgia and I have introduced a resolution demanding this

in the House, and I'm urging Speaker Johnson and Majority Leader Scalia to get that scheduled for a vote. We want Nigeria to know that everybody in Congress is focused on this and it's reprehensible how they've approached this. We love Nigeria as a partner. against terrorism in the Lake Chad Basin. We want Nigerians to thrive. We want their democracy to thrive. We want their economy to improve. We want poverty to be eradicated.

We want to be their partner, but there is no excuse in kidnapping an American citizen. All right. Well, thank you so much for coming on Unchained. You bet. Great to be with you. Thanks for the invitation, Laura. Don't forget.

Next step is the weekly news recap. Today presented by Wondercraft AI. Stick around for this week. in crypto after this short break. Pocodot is the original and largest layer zero blockchain with over 2,000 plus developers. The anticipated Pocodot 2.0 upgrade will be a massive accelerator for the ecosystem. Upgrading the infrastructure with eight times higher transaction throughput and twice as fast block times, tailored court time for the needs of every protocol, trustless bridges to multiple

chains, and revised tokenomics with a token burn to reduce inflation. Perfect for GameFi and DeFi to build, grow, and scale. scale. Get your Web3 ideas to market fast. Think big, build bigger with Pocodot. Join the community at poca dot network slash ecosystem slash community. Welcome to this week's crypto roundup. In today's recap, we'll cover Germany's BTC sale conclusion, Mount Gox distributions, Ethereum ETF fees, state Street's new initiatives, a major hack on Wazir X, Lefye's security breach, the FTX and CFTC settlement, Tornado cash developer Alexei Pertsev's bail denial, and the SEC ending its investigation into hero systems. Thanks for tuning in to the weekly news recap. Let's begin. Germany's BTC sale

concludes as Matt Gox distributions begin. Germany has finally concluded the sale of nearly 50,000 Bitcoins, generating $2.88 billion. The sale, conducted with the support of the federal criminal police office and exchanges such as Bit Stamp, Cracken, and Coinbase, was part of efforts to offload assets seized from the defunct piracy website, Movie 2K. Despite the continuing legal proceedings, German authorities said that the sale of valuable items before the conclusion of ongoing criminal proceedings is always legally required when there is a risk of a significant loss in value. In related news, Mount Gawks creditors have started receiving Bitcoin distributions. Cracken confirmed receiving Bitcoin and Bitcoin cash transfers from the Mount Gox Rehabilitation trustee, with distributions

expected to reach creditors within 7 to 14 days. The trustee has now reimbursed over 13,000 creditors following a transfer of over 48,000 BTC to Cracken. In addition, bankrupt exchange blockfi will start processing crypto distributions via Coinbase this month. However, non-U.S. clients are currently ineligible for the distributions due to regulatory constraints. Meanwhile, on Tuesday, U.S. spot Bitcoin ETFs saw substantial net inflows of $423 million, the largest daily amount since early June. BlackRock's Ibit led the pack with $260 million. This marked the eighth consecutive day of positive flows for Bitcoin ETFs. In addition, the Bitcoin ecosystem has been the top performer in the crypto market over the past

week. Data from Artemis shows a 29% rise in the fully diluted valuation of the Bitcoin ecosystem sector, which includes projects such as Stax, Core, Orde, and SATs. The SEC's closure of its investigation into stacks, which will cover later, contributed to a 40% increase in its token, STX. Grayscales' Ethereum ETFs will charge highest and lowest fees. Grayscale has announced a 2.5% annual fee for its primary proposed spot, Ethereum ETF, which is roughly 10 times higher than the planned fees of its rival Ethereum ETFs. The fee will apply after Grayscale converts its Grayscale Ethereum Trust, ETH, into an ETF. By contrast, other firms are offering significantly lower fees.

Six out of the 10 ETFs that are waiting for approval will have fee waivers, and even without the waivers, they will all charge between 0.15% and 0.25%. However, Grayscale is also launching the Ethereum Minitrust, which will be priced much more competitively. Seated with 10% of Ethie's assets, equating to over $1 billion, the mini trust will waive its fees for the first six months or until it reaches $2 billion in AUM. After that, it will charge a 0.15% fee, the lowest of all. State Street explores stable coin and deposit token initiatives. State Street, a financial services and banking giant based in Boston, is exploring blockchain-based payment settlements, according to a Bloomberg report.

The firm, which recently reported higher than expected revenue and interest income, is considering creating its own stable coin that would be pegged to an asset such as the dollar and run on a blockchain. Additionally, State Street is a value. the development of a deposit token that would represent customer deposits on a blockchain, according to an anonymous source cited by Bloomberg. State Street is also looking at joining digital cash consortiums and exploring settlement options through its investment in blockchain payment startup finality, which is expanding into the U.S.

In related news, Hong Kong plans to introduce stable coin legislation by the end of the year, following the conclusion of a public consultation on the matter. Indian Exchange halts withdrawals after 230 million hack. Wazir X, an Indian crypto exchange, experienced a major security breach resulting in the theft of approximately $230 million in crypto assets. The hack targeted one of the exchanges multi-sig wallets, leading to significant losses in various cryptocurrencies, including Shiba Inu, Ether, and Madik. In response, Wazir X temporarily paused all withdrawals of both crypto and Indian rupees to save guard user funds. The incident was initially detected by cybersecurity firm's Cyber's alerts, which observed the unauthorized transfers. The attacker converted the stolen

assets to Ethereum and utilized Cryptomixer Tornado Cash to obscure the transaction's origins. Despite the breach, Wazarex has resumed operations, confirming that the protocol is now fully operational. The exchange is collaborating with law enforcement and industry experts to recover the stolen funds and ensure enhanced security measures. LeFi suffers $10 million theft. On Tuesday, decentralized finance protocol LeFi experienced a hack resulting in a loss of over $10 million. The attacker exploited a vulnerability in a smart contract, targeting wallets set to infinite approval settings.

The compromised funds were swiftly moved through various transactions, including interactions with decentralized exchanges such as uniswap. LeFi promptly addressed the exploit by disabling the affected smart contract facet. In a tweet, the team assured users, there is currently no further risk to users. The only wallets affected were set to infinite approvals, representing a very small number of users. Following the incident, the LeFi team announced the protocol is fully operational again. Bridging and swapping on most of our partner protocols have resumed, they tweeted, adding that they are continuing to collaborate with law enforcement and industry participants

to trace and recover the stolen funds. FTX and CFTC agreed a $12.7 billion settlement. Bankrupt crypto exchange, FTC, and the U.S. Commodity Futures Trading Commission have reached a $12.7 billion settlement agreement. The settlement, pending approval from a Delaware judge, was disclosed in a court document filed last Friday, following months of negotiations. According to the filing, the settlement resolves ongoing litigation and disputes with the CFTC,

one of FTC's largest creditors. The CFTC has agreed to forego any recovery as long as FTCs adheres to its reorganization plan. Consequently, FTC will distribute up to $12.7 billion to its creditors, depending on the available funds. Andy Dieterick, lead counsel for FTCs, said that the CFTC's decision to forego its claim is intended to increase recoveries for customers and lenders. The settlement includes $8.7 billion in restitution and $4 billion in disgorgement, with the latter subordinated to the payment of other creditor claims.

A hearing on the settlement is scheduled for August 6th. Dutch court denies bail for tornado cash developer. A Dutch court has denied bail to tornado cash developer Alexei Pertsev as he prepares to appeal his money laundering conviction. In May, Pertsov was found guilty. of laundering $2.2 billion through the crypto mixer and sentenced to 64 months in prison. His lawyers argued that Pertsov needs access to a computer and the internet to prepare his defense, but the court maintained that his pretrial detention does not hinder his ability to prepare.

Despite the legal team's efforts, including presenting an 18-point plan to highlight the technical complexities of the case, their request for digital facilities for Pertsov while in prison was also rejected. His defense continues to argue. for his release so that he can better prepare for the appeal. SEC ends investigation of Bitcoin L2 Stacks and Hero Systems. The U.S. Securities and Exchange Commission has concluded its investigation into blockchain software developer, Hero Systems, previously known as Blockstack. The three-year probe, which examined $70 million raised through token sales from 2017 to

2019, ended without recommending enforcement action against the company. The decision follows the SEC recently ending investigations into stable coin issuer Paxos and software development firm Consencies, marking another loss for Gary Gensler's agency. Hero, which develops tools for the Stacks Layer 2 blockchain, welcome the news. Munib Ali, co-creator of Stax and the CEO of Trust Machines, confirmed that the SEC's inquiry included the Stacks protocol. Hero had initially treated its tokens as securities, but claimed it. in 2021 that the network had become fully decentralized, meaning it no longer required this classification.

Polygon schedules Maddoch to pull token migration. Polygon announced that its long-awaited token migration from Maddoch to Paul will occur on September 4th. Paul will replace Madic as the gas and staking token on the Polygon POS network. TestNet migrations began on Wednesday. Madic holders on Ethereum, Polygon ZK EVM networks, or centralized exchanges may need need to migrate tokens to POL, while those on the Polygon POS chain will have their tokens automatically upgraded. This migration is part of Polygons AgLayer overhaul, which aims to create a unified ecosystem using the Polygon chain development kit. And that's all. Thanks so much for joining us today. If you enjoyed this recap, go to UnchainedCripto.com. That is Unchangedcrypto.substack.com

and sign up for our free newsletter so that you can stay up to date with the latest in crypto. Unchained is produced by Laura Shin with help from Matt Pilchard, Juan Aronovich, Megan Gavis, Pam Majumder, and Margaret Curia. The weekly recap was written by Juan Aronovich and edited by Nelson Wang. Thanks for listening. Unchained is now a part of the Coin Desk Podcast Network. For the latest in digital assets, check out markets daily five days a week with host Noel Atchison. Follow the Coin Desk Podcast Network for some of the best shows in crypto.