Unchained - If the SEC Sues OpenSea, Here's Why the NFT Platform Could Win Easily - Ep. 696

Starting point is 00:00:00 The fact that the SEC is suing OpenC at the same time that you have pretty smart people, also asking the SEC for a declaratory judgment, which gives them with clarity and clearance to engage in bona fide artistic activity, suggests that the current regulatory approach being adopted by the agency is maybe less than appropriate for the space and that maybe they're overreaching in the OpenC case. Hi, everyone. Unchained, you're a 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 at Forbes was the first matrimeter

Starting point is 00:00:40 reporter to cover cryptocurrency full-time. This is the August 30th, 2024 episode of Unchained. Today's episode is brought to you by Gemini, a U.S.-based crypto exchange built for new and advanced traders. Gemini is offering new customers $15 in BTC when they trade. Sign up today to earn your Bitcoin. FBTC is the fastest-growing omnichane BTC asset this summer. Join FBTC Points-inspired campaign where you can hold FBTC to earn sparks, lucrative yields, and token drops, all on your Bitcoin. With I trust capital, you can buy and sell crypto in a tax advantage retirement account. Enjoy significant tax advantages, 24-7 access, and the industry's lowest fees. Pocod is the original and leading layer zero blockchain with over 2,000-plus developers.

Starting point is 00:01:26 and the PogoDOT 2.0 upgrade will be a massive accelerator for the ecosystem. Join the community at PogoDot.network slash ecosystem slash community. Get ready for the world's largest crypto event, Token 2049 Singapore, from September 18th to 19th. Join over 300 speakers and 20,000 attendees. Visit token 2049.com for 15% off with Code Unchained. today's guest is Preston Byrne, managing partner at Burn and Storm. Welcome, Preston. Great to see you again. On Wednesday, NFT platform OpenC announced that the SEC had issued it a Wells notice, which notifies the company that the agency is contemplating suing OpenC. Although

Starting point is 00:02:11 the announcement was light on details, what do you think this Wells notice might be about? My guess is that the SEC is continuing its campaign of treating anything crypto like a security. And that means that in OpenC's case, I'm guessing they're going to allege that OpenC is running an unregistered exchange. We've seen this litigation. There's been a change in the SEC strategy over the last five or six years in this space. Initially, they were going after issuers of cryptocurrencies or underwriters of cryptocurrencies. And starting in 2023, they started going after exchanges, principally crack and Coinbase and finance. So if I had to guess, because the Wells notice hasn't been made public, it's a document which is provided to OpenC,

Starting point is 00:02:52 by the SEC, my guess is that they're probably going to make a similar allegation against them. And so that then means they'll go after the platform, but the actual issuers of whatever NFTs they're alleging our securities will not be given a chance to defend themselves in court? It depends on which issuers they choose to go after individually. It may be that they later decide that they're going to go after certain issuers for issuing what they deem to these securities. They've done this in the past with individual issuers to kind of set a precedent, even though it's not a legally binding precedent. It's more a precedent and enforcement practice. And this was in August of last year. They went after two projects, one called Stoner Cats and

Starting point is 00:03:34 one called Impact Theory. We can talk about those in a bit. But essentially, my guess is that the SEC's strategy, because they have limited resources, has been to focus on transaction intermediaries rather than issuers, because if you wanted to go after every NFT token issuer in the United States, you simply wouldn't be able to do it. There are simply too many of them. So they're trying to be efficient with their use of resources by targeting opency in this instance as an exchange. All right. So now let's talk about that Stoner Katz case. This was a well-known one because it involved celebrities, Ashton Kutcher and Milakunis. Can you summarize what that case was about and how the SEC concluded that the sales of Stoner Katz NFTs were securities offerings? Sure. So Stoner Katz was a television

Starting point is 00:04:16 show about a bunch of gonga smoking felines that lived together with an old lady in a house who was taking medical marijuana and the cats, you know, obtained access to the marijuana and as a consequence of that, they became hooked on the marijuana and so

Starting point is 00:04:32 that was the sort of underlying basis for the show. The producers of the show, you're correct, Milak Kunis and Ashton Kutcher were involved. Vitalik Boudarin was also involved. Excuse my friend here who's just interrupted our podcast. So, deciding he wants to get involved too when we're talking about for audio listeners it's a cute is that a golden doodle or a toy a toy poodle has just jumped into my lap which is very uncharacteristic so stoner cats also issued a procedurally generated series of NFTs so it was you know the typical thing where they have various attributes and characteristics and people you know you've got a cat with the googly eyes you've got a cat that's brown you've got a cat and it's green that sort of stuff and what they did is they sold those. And they said that as part of the program, what they were going to do was issue these

Starting point is 00:05:20 NFTs and they were going to devuse the proceeds from those NFTs to develop the television show and other types of offerings. The SEC, or rather US federal law, has a test called the Howie Test, which is used to assess whether a particular thing being sold is an investment contract and therefore regulated as a security. That test is that there's an investment of money and a common enterprise with an expectation of profit arising from the efforts of others. And so the SEC said, well, you're selling these non-fungible tokens, right? They're not necessarily exchangeable one-for-one with each other like a coin or a cryptocurrency. But in our view, the sale of those things is sold with an expectation of profit from a common enterprise being the show and the efforts of others, which those profits will arise from the efforts of others, which chiefly are the producers of the show, creating demand for those NFTs.

Starting point is 00:06:12 by producing the show. So they brought an enforcement action on that basis. I'm not sure it was the strongest enforcement action in the world, but as it happens, the Stoner Cats project folded like a cheap suit, and the SEC got its enforcement precedent. And when you say you don't feel like it was necessarily the strongest case, what are the aspects that you felt were weaker? Well, I think there's a, I think there's a bona fide case to argue that selling merch, right, for a television show or a podcast or something else, is something that people do so that they can collect those things, because they like it because there's a predominantly consumptive use for the asset. If we compare that to another project that the SEC also enforced against called Impact Theory about the same time as StonerCats,

Starting point is 00:06:53 I think like two weeks before they announced the settlement. Impact theory was a financial offering. You were buying tokens. Those tokens were linked to particular rewards. There was no particular reason to hold them. There was no artistic value to the thing. And there, I think the SEC was on stronger ground to say, listen, the thing that you're selling here, that is in fact a security. and so we're going to bring an enforcement action against you on this basis. With Stoner Cats, it's much weaker, right? It's a much weaker case that they can bring. And I think OpenC is going to have some actually pretty strong defenses

Starting point is 00:07:22 in relation to its role as a host of user-generated content on the Internet from this civil litigation that's been brought by the SEC because it's pretty clear that the purpose that OpenC served, at least in my view, was to sell collectibles and artwork and other things and not to act as a financial exchange. Yeah, I did happen to see some commentary on Twitter where somebody said, oh, there were actual securities, even being marketed as securities that were being sold on OpenC.

Starting point is 00:07:52 And one was some example of like a, they screenshot an example of some kind of investment opportunity being sold as NFTs on OpenC. So, you know, in that case, like when it's something so obvious like that, is that something like you're basically saying that open C purpose was not to sell that. They weren't claiming that they were selling that. So you're saying that their purpose was to sell something of a different nature. Is that it? OpenC, I mean, OpenC had policies and procedures which prohibited the sale of securities on the platform. I was involved with one project that was debating selling an ownership interest in something via OpenC. And OpenC said no, because they

Starting point is 00:08:29 said, listen, this is an ownership interest. This is very clearly a security. It's not something that we want to be involved with because we don't want to be a registered securities exchange. This means that OpenC is actually in a funny, it's unlike, say, a finance or a Cracken or a Coinbase, OpenC is actually a platform for user-generated content, right? That's the stuff that's being sold. And what makes that more interesting than a traditional exchange case, and I'm not surprised the SEC is blind to this because they're not internet lawyers, they're financial lawyers, is that the U.S. actually confers immunity from civil liability on companies that host user-generated content and aren't otherwise attempting to procure a violation of federal criminal law.

Starting point is 00:09:07 and that's called Section 230 of the Communications Decency Act. That says that OpenC is not to be treated as the publisher or speaker of any content, which is posted by its users. And to the extent that the predominant quantity of content that's on OpenC was, in fact, artwork. And what the SEC is doing is it's cherry picking a couple of projects that snuck through their content moderation procedures and their policies and procedures around limiting the sale of securities on their platform in order to bring this enforcement action.

Starting point is 00:09:34 I think OpenC is going to have a really good argument that they're civilly immune under federal law, which is not an argument that you would have in the case of Coinbase or Binance or Cracken, because there you don't actually have people posting user-generated content onto a facially neutral internet platform, which is designed for something else. You could post just as you could sell securities on Craigslist, right? You could go into the used boat section of Craigslist and say, hey, I've got a thousand shares of my new company that I'm selling. That doesn't turn Craigslist into a securities exchange. That means Craigslist is just being misused by somebody to sell a security on a platform which is not intended for securities exchange. So I think this is really a very different case than what you would normally have seen with any of the other big name exchanges and those enforcement actions.

Starting point is 00:10:21 And this one, I think, is actually a loser for the SEC as a result. Okay, yeah. And actually, for the Stoner Katz case, SEC Commissioner's Hesterperson, Mark Uyadeah made a dissent. did you read that or could you recall kind of what yeah some of the points they made there? Yeah, I did at the time, but that was a year ago. So actually I should have reread it before the podcast. Yeah, yeah. I'll just mention briefly some of the points was one, they were saying that the SEC,

Starting point is 00:10:50 I don't know if the, you know, the phrase is at fault is really the right phrase, but just that the responsibility is on the SEC to give artists some clarity around how to legally issue NFTs. That was one point they made. Another one was they actually said that they felt that the Stoner Katz NFT offering was more like fan crowdfunding is the phrase they used rather than a security sale. So, you know, it does seem that even within the SEC itself, there was disagreement about about how to approach that particular case. So in a moment, we're going to dive a little bit more into impact theory and some of the other cases involving. and the SEC, but first here's a quick word from the sponsors who make the show possible.

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Starting point is 00:13:15 Back to my conversation with Preston. So as you mentioned earlier, there was that other case about impact theory and you said that that was a stronger case. And so what is it about that case that you feel, you know, is more clear-cut? With impact theory, the NFT form was used, but the representations around what the NFTs were

Starting point is 00:13:35 were very clearly security-like in nature. They were promising people that if they bought a particular token, they would receive a particular reward in accordance to the particular schedule. And so that, when you run the analysis for the Howie test, right, it's a facts and circumstances-based analysis. And it doesn't matter whether you write us an investment contract on the back of the napkin

Starting point is 00:13:54 or whether you put it on a piece of paper, or whether you've put it in digital form and put it up on the blockchain. The question is, what is the underlying economic reality of the thing that's been sold and the manner of its sale? And so with impact theory, unlike Stoner Katz, there really was no other use for this thing. And the predominant use of it was as an investment product. You wouldn't be buying the impact theory tokens, really for any other reason, except for the fact that you wanted to make money.

Starting point is 00:14:19 With most of the art projects that you see, the procedurally generated art projects that you tend to see an NFT things that pudgy penguins, the milades, or this, the that. There are very few, if any, promises which have been made around what a project is going to do to cause those things to increase in value. A lot of the times you'll see just NFT projects that are AI-generated art, for example. I have a bunch, I have a giant collection of Marmot NFTs that I've collected that are totally stupid and they're totally wonderful and there was no promise made whatsoever in relation

Starting point is 00:14:50 to those things. So OpenC is in a position where it has to be a. able to support NFTs on Ethereum. I think the O, and other and other platforms, I think the overwhelming majority of those things, of those NFTs are being sold for consumptive use as art and not being bundled together with other things. And I know that OpenC had a moderation policy where they would boot off projects that were too security like. So impact theory was one of the, I don't know if they were booted off of OpenC, but that's an example of a project, which is very clearly within the SEC's jurisdiction. I'm not sure it puts OpenCC's jurisdiction because of

Starting point is 00:15:26 Section 230, but I am pretty sure that most NFT projects don't work the way that Impact Theory did. Yeah, and then there's also the case of Nate Chastain, the former OpenC product manager who was buying NFTs before he featured them on the OpenC main page, which he then would sell later at a profit. How does that particular case affect any potential lawsuit by the SEC? against OpenC? I don't think it really affects it at all. If memory serves correctly, that case involved wire fraud. So basically, if he was engaging in deceptive practices, he was taking advantage of confidential information in order to purchase and sell things in a manner where the market wasn't privy to the same information he was, and he had obtained that information through false

Starting point is 00:16:12 pretenses. He was an employee at the company. He was using that information to trade, and that wasn't within the scope of his employment or authorized. So when you're dealing on, with tokens in the marketplace. And this is something that people do all the time. It's generally speaking best practice if you're holding insider information, even if the things aren't securities, that you're not trading on that material non-public information. Because if you do, someone can say, hold on a second.

Starting point is 00:16:37 When you authorize that transaction, when you signed off on it, there was a material omission or misrepresentation as to what you were doing. And I wouldn't have sold it to you if I had known otherwise. So there's a degree of honesty which is required. And if you have confidential information and you're using it in an unauthorized sort of way, you can get in trouble for that. That's a criminal problem rather than an SEC civil problem. So I don't think it has that much of an impact on this case.

Starting point is 00:17:02 If you were doing the same with securities, that's certainly an SEC problem from a civil enforcement perspective. And maybe they're going to allege that it's a civil enforcement problem from their perspective. But you can get in trouble for that if you're dealing with any other kind of asset as well. All right. And then there was also this class action lawsuit against Depper Labs that alleged that NBA topshot NFTs were securities offerings. That got settled for $4 million. I didn't know if that could have any bearing here, but I just wanted to mention it to see what you thought.

Starting point is 00:17:32 I mean, there's a lot of plaintiffs class action litigation in the NFT space where you have someone who bought a thing. They'll go to some lawyers. They'll say, I lost some money. That'll be your class representative. They'll bring the class action. They'll get a fee out of a settlement. $4 million, all things considered, is not a lot of money for a class action settlement for a project of Topshots size. In my opinion, Topshots isn't a security. It's something which is a collectible, a digital collectible.

Starting point is 00:18:00 Yes, there's a colorable argument that you can make that these things are securities. I think we could benefit from additional clarity, which provides some firm guidelines that issuers of digital collectibles can comply with because people have been collecting basketball cards. for 100 years, right, in sports cards for 100 years. So it's clearly a category of asset that people can buy that they're going to want to buy in the future, and we should carve out a space for that kind of commerce to thrive on the internet. So I don't think it's of much immediate relevance. It's certainly of no real legal consequence. If it settled out of court, didn't get resolved on appeal. You're not looking at any binding legal precedent being created there. It's $4 million to be blunt. It sounds like a nuisance payment being made by top shots in order

Starting point is 00:18:44 to make the case go away and have the issue be raised due to Cata. So I don't see that as being especially relevant to the Wells notice that's been issued to OpenC. The SEC has recently been dropping several different crypto investigations such as Ethereum 2.0, Stacks, Paxos, and I wondered what you thought was the likelihood that they would actually sue OpenC? I think if a Wells notice has been issued, that suggests that they are going to sue OpenC. That doesn't happen until the SEC is about three to six months away from filing a lawsuit. They've concluded their investigation. They've reached some preliminary conclusions and they're ready to rock. So in this case, I think we should expect to see a lawsuit against OpenC. And your listeners might be wondering, why is this different?

Starting point is 00:19:30 I think they must think they can win to be blunt, whereas in some of the other cases, they might think that the enforcement action is tenuous or it's dependent on very subtle interpretations of securities law or other types of violations which aren't in the agency's interest to pursue. But we can't, you know, without actually seeing under the hood, we don't know what the real answer to that is. Okay. Well, so then at the same time, we also have a recent lawsuit by musician Jonathan Mann, aka Song a Day Man, and conceptual artist Brian Fry, who both sued the SEC together to find out whether the art that they create as NFTs will be deemed securities. So, you know, assuming that the SEC does actually sue OpenC, how will the case that Song

Starting point is 00:20:16 a Day man and Brian Fry have brought against the SEC intersect with that potential lawsuit in the other direction? Yeah, Brian Fry, it bears mentioning, is also a professor of law, UK College of Law in Chicago. So he knows his stuff. He's a very confident internet lawyer, and I like him a lot. And they hired Jason Gottlieb, who's arguably the best litigator in the space. So that's quite a, for your listeners who aren't familiar with that case, it's worth looking into it.

Starting point is 00:20:41 It's very serious business. There's no direct impact from one piece of litigation on the other. There are different facts. There are different parties. What I'd say is, though, the fact that the SEC is suing OpenC at the same time that you have pretty smart people, also asking the SEC for a declaratory judgment, which gives them with clarity and clearance to engage in bona fide artistic activity, suggests that the current regulatory approach being adopted by the agency is maybe less than appropriate

Starting point is 00:21:09 for the space and that maybe they're overreaching in the OpenC case. I think if they're really trying to suggest that OpenC can't operate a digital marketplace or an online marketplace for digital art because a handful of projects that might go on that marketplace are securities. Firstly, I think that that's a loser because I think OpenC is immune under Section 230 of the Communications Decency Act from this lawsuit. And I would be very surprised if they didn't try to raise that immunity in their answer to the SEC, when the SEC finally sues. And also, like, at what point are we in the United States going to get a regulatory regime that acknowledges

Starting point is 00:21:49 that people use the Internet for different purposes than they used it for in 1990 or 1980 or 1970? It's not, you know, it's not a bunch of nerds, you know, at DARPA, you know, trying to do packet switching anymore. It's not just office email. we have these new products which people are buying and selling, which are very closely related or very akin to things that they would collect in the real world. Because why? People spend most of their time online. You can't share your baseball card that's sitting in a drawer in your house with one of your buddies when you're out and about and show it to them on your phone or various other things. So these are new product categories for a new economy, which is being driven by new methods of exchanging information. And the SEC looks at it and says, well, it's all security, right? When it's it's, It's clearly and obviously not in any traditional definition of that term. So while all this is going on, Republican nominee Donald Trump is releasing his fourth NFT collection. And I noticed on the website they're calling them digital trading cards. However, they are not transferable until January 31st, 2025.

Starting point is 00:22:54 And they're also being marketed as being, quote, for individual enjoyment only, not for investment purposes. And it seems to me, just as a non-lawyer, like these statements are designed specifically to avoid the SEC's wrath. But I was just curious for your thoughts on, you know, how they're being marketed and just this contrast. I confess, I haven't looked that closely into the Trump digital trading card ecosystem. You see, that kind of language is pretty typical. It's scare language because ultimately what matters is the underlying economic reality of the transaction. absent any other promises about making money from purchasing these cards or Donald Trump saying, I'm going to go build an ecosystem and you can expect these cards are going to go up in value

Starting point is 00:23:42 as a result of my managerial efforts of that enterprise. I don't really think there's a strong argument that based on what I've seen before from the Trump ecosystem in terms of trading cards, it's just pictures of Donald Trump, you know, a picture of his face being photoshopped onto the body of a fireman or the body of a guy you know, Rambo or something like that. It's pretty corny stuff. And generally speaking, you're not looking at someone and saying, oh, and you can join the Trump club

Starting point is 00:24:07 and you'll get discounts on this and trying to bundle together all kinds of other benefits if you purchase the card, which is I think where a lot of these NFT projects get into trouble. And Trump doesn't need to do that because he's Donald Trump and because people will buy his merchandise because they're big fans of him from his political activities or for various other reasons. So I think that's probably kind of,

Starting point is 00:24:29 comparatively low risk. I confess I haven't looked at it. I'm certainly not advising on that project. So it's hard to know as just an external lawyer looking in what the underlying projects and tensions are. There's a lot that's unseen. But there's not everything I've seen about the Trump Trading Cards project to date hasn't really made me look at it and say there's a regulatory problem there. And lastly, obviously the SEC is kind of a very political figure at the moment because a lot of people who are democratic leaning would say that the SEC is almost purposely causing crypto voters to flock to Donald Trump as their preferred presidential candidate. So I just wondered if you had any thoughts on what this action by

Starting point is 00:25:18 the SEC so close to the election says to you either about the election itself or how a Trump or Harris presidency might handle crypto. I think most people in crypto who have opinions on U.S. election one way or the other are pretty set at this point. I don't think there's a big undecided middle looking to go one way or another. What we tend to find is that Trump people are going to in crypto are single issue voters. A lot of them aren't traditional Republicans or moderate Republicans in particular who are minded to support other parts of the platform. They just say, listen, it's going to be good for the industry because Donald Trump's embraced us. Similarly, I think a lot of the Harris supporters, to be blunt, aren't voting on crypto issues at all,

Starting point is 00:25:57 but they've decided that their personal efforts should put Kamala Harris in office because they think that she's the right candidate for president and their personal politics take precedence over their business interests. So I don't think it really moves the needle. I think it's very indicative of what we would expect under a second Harris administration or second Biden administration, whatever we want to call it, a continuation of what we've seen so far. If Kamala Harris is elected, she's going to put very crypto-hopper,

Starting point is 00:26:27 people in very senior positions in government. And so the power of the federal government is going to be leveraged against our industry. And we can expect to see more of this and not less. If President Trump gets into office, depending on who he appoints is the head of the SEC and also what market structure regulations they can get through Congress, so far they've proposed that they're going to have market structure regulations within the first hundred days. So that was a campaign promise he made. Pretty ambitious. But directionally, it's very different. from what we've heard from the Harris campaign, which is essentially said nothing of any utility to the crypto industry.

Starting point is 00:27:03 All right. Well, thank you so much for explaining it all on Unchained. Great to see you. Thanks so much. Don't forget, next up is the weekly news recap today presented by Wondercraft AI. Stick around for this week in crypto after this short break. Pocod 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

Starting point is 00:27:27 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 revise tokenomics with a token burn to reduce inflation. Perfect for GameFi and Defy to build, grow, and scale. Get your Web3 ideas to market fast. Think big, build bigger with Pocodot. Join the community at Pocodot.network slash ecosystem slash community. 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.

Starting point is 00:28:16 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. Welcome to this week's Crypto Roundup. In today's recap, we cover Telegram CEO Pavel Durab's arrest and its impact on Toncoin, Binances rebuttal against asset freezing claims, and Maker Dow's rebrand to Sky. We'll also update you on the latest from the Celsius and FTX bankruptcies, the SEC lawsuit moving to trial against Cracken, and Coinbase's base network reaching a milestone. own. Lastly, a crypto startup's unique method for detecting North Korean hackers goes viral. Thanks for

Starting point is 00:28:57 tuning in to the weekly news recap. Let's begin. Telegram CEO Arrest Sparks Market Reaction. Telegram CEO Pavel Durov was arrested at Paris's Le Bourget Airport on Sunday, following a cybercrime investigation by French authorities. According to the tribunal Judiceyre de Paris, the charges against Durov include providing unauthorized cryptology services, facilitating illicit transactions and other serious allegations such as distributing illegal content and money laundering. Dourov, now under judicial supervision and prohibited from leaving France, has undergone multiple interrogations, and an arrest warrant has been issued for his brother, Nikolai Durov. Duraev's arrest had an immediate impact on Toncoin, with the token dropping nearly 20%

Starting point is 00:29:44 after the news broke. In addition to the market downturn, the Tone blockchain suffered two outages in recent days. The network issues, which occurred on Tuesday and Wednesday, were attributed to heavy loads from the minting of dogs tokens. The network was back up and running after a few hours on each occasion. Binance CEO refutes claims of freezing all Palestinian funds. Binance CEO Richard Tang has denied allegations that the exchange has frozen all assets belonging to Palestinians, a claim made by no one's CEO Ray Youssef on X. Tang described the accusation as FUD, meaning fear, uncertainty, and doubt. He clarified that only a limited number of accounts linked to illicit activities were blocked and emphasized that Binance, like other financial institutions,

Starting point is 00:30:31 adheres to global anti-money laundering regulations. The controversy arose after Yusef shared a letter from Israel's National Bureau for Counterterror Financing about an asset seizure order. However, the letter did not specify who the recipient was. Maker Dow rebrands to Sky, amid controversy over stable coin control. Maker Dow, one of the most important and oldest decentralized finance protocols, has rebranded as Sky and announced the coming launch of its new USDA stablecoin and Sky governance token on September 18th. The rebrand is part of Maker Dow's broader endgame strategy aimed at simplifying the user experience and making the platform more accessible. Sky represents the complete transformation of Maker, said Rune Christensen, Maker Dow's founder, highlighting the intent of the

Starting point is 00:31:17 rebrand to address previous user experience issues. However, the changes have sparked concerns within the defy community. The USDA stable coin will feature a freeze function allowing assets to be remotely locked, a capability that contradicts DeFi's decentralized principles. While Christensen clarified that the freeze function is optional and will not be active at launch, many Defy enthusiasts are uncomfortable with its inclusion. A.J. Scolaro, a senior analyst at Masari, argued that the feature is necessary for regulatory compliance and the growth of real-world asset-backed stablecoins. In addition, a journalist from Forsyte News was able to acquire Maker Dow's former handle on social media platform X during its rebrand and plans to keep it for its collectible value

Starting point is 00:32:02 and to boost traffic to their website. Discussions with Sky to return the handle are ongoing. Celsius and FTX bankruptcy updates. Celsius has distributed over $2.5 billion in liquid cryptocurrency and cash to approximately 251,000 creditors as part of its bankruptcy plan, covering around 93% of the total claims against the firm's value. About 121,000 eligible creditors still need to claim their distributions, with most having claims of less than $1,500. The distribution follows the United States Southern District of New York bankruptcy court's approval of Celsius' reorganization plan. In the FTX bankruptcy case, the U.S. trustee has raised objections to the exchange's amended reorganization plan, criticizing its broad legal protections and unequal treatment of smaller creditors.

Starting point is 00:32:54 A group of creditors also filed complaints seeking in-kind distributions to minimize tax burdens. The FTX bankruptcy plan's confirmation hearing is scheduled for October 7th. SEC lawsuit against Cracken can move to trial judge rules. A California federal judge has ruled that the SEC's lawsuit against the SEC's lawsuit against Cracken can proceed to trial. The SEC filed the lawsuit last November, alleging Cracken operated without registering as a broker, exchange, or clearinghouse, violating federal securities laws. U.S. District Judge William Oreck found that the SEC plausibly argued that some cryptocurrency transactions on Cracken could be considered investment contracts under securities laws.

Starting point is 00:33:35 While the judge agreed that cryptocurrencies themselves are not securities, he noted that contracts surrounding their sale could be. Cracken's motion to dismiss the case was denied, and both parties must propose a trial schedule by October 8th. In related news, ABRA settled with the SEC overcharges related to offering unregistered crypto asset securities through its ABRA-earned product, agreeing to pay civil penalties without admitting to or denying the allegations. Base surpasses 1 million daily active users. Base, Coinbase's Ethereum Layer 2 solution has exceeded 1 million daily active addresses for the first time, recording 1.1.1.1.5.2. Recording 1. 0.05 million of them on Saturday and 1.03 million on Sunday. This represents 71% growth in active addresses over the past 30 days, with the surge positioning base ahead of other major

Starting point is 00:34:24 layer 2 networks. Base now has more daily active addresses than Arbitrum, Linnea, and Mantle combined. The recent introduction of base names, which are unique on-chain identities built on the Ethereum name service, has driven activity with over 200,000 base names minted so far. Time for Fun bits. Crypto startup's hilarious North Korea spy test goes viral. A crypto startup has found a creative way to spot potential North Korean spies, asking job candidates to curse North Korea. According to Harrison Leggio, aka Pop Punk on X, the test is simple, asked the applicant to say, I hate Kim Jong-un F North Korea. When one candidate was asked, they immediately deleted the chat, raising eyebrows. The internet loved it, with users joking about adopting this North Korea litmus test

Starting point is 00:35:11 in their own hiring processes. The idea comes amid reports that North Korean hackers, posing as remote workers, are trying to infiltrate tech and crypto firms to fund their regime. And that's all. Thanks so much for joining us today. If you enjoyed this recap, go to unchained crypto.substack.com that is unchained crypto.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 Majumdhar, and Margaret Korea.

Starting point is 00:35:44 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.

Unchained - If the SEC Sues OpenSea, Here's Why the NFT Platform Could Win Easily - Ep. 696

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