Client Alert
We are excited to share the latest edition of Gibson Dunn’s digital assets update for September-October. This report highlights significant legal developments across various digital asset categories, including cryptocurrencies, stablecoins, central bank digital currencies (CBDCs), and non-fungible tokens (NFTs), as well as advancements in blockchain and Web3 technologies. We appreciate your interest in these updates.
ENFORCEMENT ACTIONS
UNITED STATES
President Trump Grants Pardon to Binance Founder Changpeng Zhao
On October 21, former President Trump granted clemency to Changpeng Zhao, the founder of Binance. White House press secretary Karoline Leavitt stated that Trump utilized his constitutional powers to pardon Zhao, who faced prosecution by the Biden Administration amid its campaign against cryptocurrencies.
DOJ Reaches Deferred Prosecution Agreement with Roger Ver
On October 14, the Department of Justice (DOJ) announced that Roger Ver, often dubbed “Bitcoin Jesus,” has entered into a deferred prosecution agreement to settle federal tax allegations. These charges were related to his purported failure to submit expatriation tax filings and pay taxes on capital gains from his global assets, which include bitcoins. Ver has paid nearly $50 million in taxes, penalties, and interest.
DOJ Indicts Cambodian Executive and Seeks Forfeiture of 127,271 Bitcoin
On October 14, federal prosecutors in New York unsealed an indictment against Chen Zhi, the chairman of Cambodia’s Prince Group, accusing him of wire fraud and money laundering in connection with forced labor schemes tied to crypto investment operations. The DOJ has also filed a civil forfeiture case seeking approximately 127,271 bitcoins, valued at around $15 billion, marking the largest forfeiture action in the agency’s history. Additionally, the Office of Foreign Assets Control (OFAC) has designated Zhi and his company as Specially Designated Nationals.
Imprisoned Founder of Pearl Tokens Defaults in SEC Case
On September 23, U.S. District Judge P. Kevin Castel ruled in favor of the SEC by entering a default judgment against Amir Bruno Elmaani, founder of Pearl Tokens. The SEC accused Elmaani of selling unregistered securities and illicitly minting millions of unauthorized Pearl tokens which he subsequently sold, negatively impacting the market value of other tokens. Elmaani previously pleaded guilty to tax evasion and received a four-year prison sentence along with over $5.5 million in restitution to the IRS.
Couple Ordered to Pay $6.8 Million in CFTC Case
On September 22, U.S. District Judge Aleta A. Trauger of Tennessee issued a consent order requiring Michael and Amanda Griffis to pay over $6.8 million to settle a CFTC lawsuit. The couple allegedly solicited participants for a commodity pool they called “Blessings Thru Crypto” and falsely claimed that investor contributions would be used for trading commodity futures, ultimately deceiving at least 145 individuals out of more than $6.5 million.
Promoter of Forcount Trader Systems Inc. Sentenced in Ponzi Scheme
On September 18, U.S. District Judge Analisa Torres sentenced Ramon Perez for his involvement as a promoter of the fraudulent crypto firm Forcount Trader Systems Inc. The accusations detail a $14 million Ponzi and pyramid scheme that misled thousands of investors globally into believing they were investing in a legitimate trading platform. Considering his cooperation with prosecutors, Perez received a sentence of one year and one day in prison, along with a restitution order exceeding $2.6 million.
CEO of Praetorian Group International Pleads Guilty to Criminal Charges
On September 17, the DOJ announced that Praetorian Group International’s CEO, Ramil Ventura Palafox, pleaded guilty to charges of wire fraud and money laundering in Virginia. Palafox allegedly operated a Ponzi scheme that defrauded over 90,000 global investors by falsely claiming that his company was engaged in bitcoin trading. He is facing a potential prison sentence of up to 40 years.
SEC and Gemini Trust Co. Reach Tentative Resolution in Lending Dispute
On September 15, the SEC and Gemini Trust Company informed U.S. District Judge Edgardo Ramos that they had reached an agreement that would resolve the SEC’s lawsuit against Gemini. The SEC had previously accused Gemini and Genesis Global Capital LLC of conducting unregistered securities offerings related to a crypto lending program. The specifics of the agreement have yet to be made public, and Gemini has maintained its innocence.
Court Approves Settlement Between CFTC and Voyager Digital’s Ex-CEO
On September 15, U.S. District Judge Lewis A. Kaplan approved a consent order wherein former Voyager Digital CEO Stephen Ehrlich agreed to pay $750,000 to resolve CFTC claims against him. The CFTC alleged that Ehrlich failed to register Voyager as a commodity pool and misled investors into believing the platform was a secure venue for high returns prior to its collapse in July 2022.
Denver Couple Held Liable in $3.3 Million Crypto Fraud Case
Following a three-day bench trial, a Colorado state court judge ruled on September 12 that Eli Regalado, a pastor, and his wife Kaitlyn, along with their firm INDXcoin LLC, committed securities fraud under Colorado law. The court ordered them to pay over $3.3 million after they raised significant funds from the local Christian community, promising low-risk, high-reward returns through a platform called the “Kingdom Wealth Exchange,” which eventually failed. This case garnered attention when Regalado acknowledged in a video that some investor funds were used for personal home renovations.
California Man Sentenced for Involvement in Investment Scam
On September 8, Shengsheng He from La Puente, California, was sentenced to 51 months in prison after pleading guilty to laundering $36.9 million from American investors via an international crypto investment scam. Acting Assistant Attorney General Matthew R. Galeotti stated that He was part of a scheme that misled U.S. investors into believing they would earn high returns on supposed digital asset investments while stealing nearly $37 million. He was also ordered to pay nearly $27 million in restitution.
OFAC Imposes Sanctions on Southeast Asian Crypto Investment Scams
On September 8, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against a network of scam centers in Southeast Asia. These sanctions target operations in Myanmar and Cambodia linked to deceptive schemes, such as “pig-butchering,” which involve scammers gaining victims’ trust through fake romantic relationships, only to persuade them to invest in fraudulent crypto platforms.
INTERNATIONAL
Canada Penalizes Cryptomus with Record C$176.9 Million for AML Violations
On October 22, Canada’s financial intelligence agency, FINTRAC, imposed a landmark fine of C$176.9 million (about $126 million USD) on Xeltox Enterprises Ltd., operating as Cryptomus, for extensive anti-money laundering violations. The agency found that Cryptomus failed to report over 1,000 suspicious transactions and more than 1,500 large virtual currency receipts in a single month, linked to serious crimes such as ransomware and child exploitation. This enforcement action represents the largest in FINTRAC’s history.
FCA Initiates Legal Action Against HTX for Illegally Promoting Cryptocurrencies
On October 22, the Financial Conduct Authority (FCA) initiated civil proceedings in London’s High Court against HTX (formerly known as Huobi), claiming unlawful promotion of crypto asset services to consumers in the UK. The FCA asserts that HTX lacks the necessary authorization to operate in Britain.
Dubai VARA Imposes Fines on 19 Unlicensed Crypto Firms
On October 8, Dubai’s Virtual Assets Regulatory Authority (VARA) issued cease-and-desist orders and fines ranging from AED 100K to AED 600K (approximately $27K to $163K) against multiple firms allegedly operating without licenses or violating marketing regulations. VARA emphasized that only licensed entities are permitted to provide digital asset services within or from Dubai.
India’s FIU-IND Issues Notices to 25 Exchanges
On October 1, India’s Financial Intelligence Unit (FIU-IND) issued notices to 25 cryptocurrency exchanges, including Huione and Paxful, for violations of anti-money laundering laws, ordering them to take down their applications and URLs. The notices cited that these platforms were serving Indian users without mandatory registration.
South Korean Actor Sentenced for Embezzling Funds for Crypto Investments
On September 25, a South Korean court sentenced actress Hwang Jung-eum to two years in prison, with a four-year suspended sentence, after she confessed to embezzling funds from her management agency to invest in cryptocurrencies. Prosecutors stated that Hwang transferred company funds multiple times in early 2022, ultimately investing 4.2 billion won (approximately $3 million) in crypto.
Canadian Authorities Seize Approximately $40 Million in Crypto
On September 18, the Royal Canadian Mounted Police (RCMP) announced the seizure of 56 million Canadian dollars (around $40 million) from the crypto exchange TradeOgre. The investigation revealed that TradeOgre was operating without proper registration as a money services business and failed to identify clients, many of whom were linked to criminal activities. This seizure is reported to be the largest in Canadian history.
REGULATION AND LEGISLATION
UNITED STATES
Nasdaq Requests SEC Approval for Trading Tokenized Securities
On September 8, Nasdaq submitted a proposed rule change to the SEC, seeking permission for member firms and investors to trade tokenized equity securities and exchange-traded products on its platform. If approved, this would be the first instance of tokenized securities trading on a major U.S. stock exchange. Public comments on the proposal were due by October 14.
SEC’s CorpFin Offers No-Action Relief for DoubleZero’s Token Transactions
On September 29, the SEC’s Division of Corporation Finance issued a no-action letter indicating it would not recommend enforcement action if DoubleZero’s programmatic token transfers proceeded without Securities Act registration. The Division concluded that based on the circumstances presented, these transactions do not require registration under the Securities Act.
SEC Investment Management Opens Path for Crypto Custody through State Trust Companies
On September 30, the SEC’s Division of Investment Management issued a no-action letter stating that registered advisers or regulated funds could maintain digital assets and related cash with certain state-chartered financial institutions without facing enforcement actions.
SEC Plans Formal Proposal for “Innovation Exemption” by Year-End
On October 7, during a Futures and Derivatives Law Report event, SEC Chairman Paul Atkins announced the agency’s intention to initiate formal rulemaking for an “innovation exemption” aimed at providing tailored relief for crypto activities. Despite delays caused by the government shutdown, Atkins reaffirmed that establishing this exemption remains a priority by the end of the year or the first quarter of 2026.
NYDFS Updates Crypto Guidance Following Leadership Change
On September 30, Adrienne Harris, the former superintendent of the New York Department of Financial Services (NYDFS), announced new guidance replacing the January 2023 directive. The revised guidance continues to emphasize segregation and accounting, limited use, sub-custody, and disclosures, with greater specificity for sub-custodians. It also mandates that new sub-custody arrangements require NYDFS approval.
California DFPI Advances Crypto Rulemaking
On September 29, the California Department of Financial Protection and Innovation (DFPI) announced significant revisions to its proposed regulations under the Digital Financial Assets Law (DFAL), clarifying exemptions under the Money Transmission Act and introducing a certification for token listings on exchanges. The DFAL is set to become fully effective for licensing on July 1, 2026, establishing a comprehensive regulatory framework impacting various crypto sectors.
CFTC Launches Initiative for Tokenized Collateral in Derivatives Markets
On September 23, CFTC Acting Chairperson Caroline D. Pham announced an initiative aimed at allowing the use of tokenized collateral, including stablecoins, in derivatives markets. If successful, this initiative would enable traders to use such collateral to secure their contract obligations.
Treasury Department Seeks Public Input on Stablecoin Rules under GENIUS Act
On September 18, the U.S. Department of Treasury released an Advanced Notice of Proposed Rulemaking to gather public feedback on implementing the recently enacted GENIUS Act. This act directs the Treasury to create regulations fostering innovation in payment stablecoins while ensuring consumer protection and addressing potential financial stability risks. Comments are due by November 4.
SEC Approves New Standards for Crypto ETFs
On September 17, the SEC granted approval for proposed rule changes by three national securities exchanges to adopt generic listing standards for exchange-traded products (ETPs) that encompass commodities, including crypto ETFs. This approval aims to facilitate quicker market entry and reduce regulatory hurdles for crypto ETFs.
NYDFS Expands Blockchain Analytics Guidance for Banking Organizations
On September 17, the NYDFS broadened its previous virtual currency guidance, instructing state-regulated banking entities engaged in virtual currency activities to incorporate blockchain analytics as an additional risk management tool, covering aspects such as wallet screening and third-party risk monitoring.
California Enacts SB 822 to Safeguard Unclaimed Digital Financial Assets
On October 11, California Governor Gavin Newsom signed SB 822 into law, updating the state’s Unclaimed Property Law to explicitly include digital financial assets. This law establishes protocols for the transfer and custody of unclaimed cryptocurrency, protecting it from forced liquidation.
Florida Bill Proposes Investing State Funds in Bitcoin and Crypto ETFs
On October 15, Florida lawmakers introduced HB 183 (2026), which would empower the Chief Financial Officer to invest state funds in digital assets and ETFs, allowing the State Board of Administration to allocate up to 10% of Florida Retirement System assets to these investments. The bill is set to take effect on July 1, 2026, if passed.
Fed Explores Limited Master Accounts for Crypto Firms
On October 21, Federal Reserve Governor Christopher Waller announced that the Fed is considering a streamlined “payment account” for eligible institutions, including certain crypto firms, to gain direct access to Fed payment services. This account would have limitations, such as caps on balances and no interest or overdrafts.
INTERNATIONAL
European Regulators Grant Licenses to Prominent Crypto Firms
On October 23, major crypto firms Revolut, Blockchain.com, and Relai received licenses under the Markets in Crypto-Assets Regulation (MiCA) from various European regulators, allowing them to offer regulated crypto services throughout the European Economic Area. This move enables these firms to operate across multiple jurisdictions under a single authorization.
Japan Considers Regulatory Changes for Crypto Services by Banks
Reports from October 21 indicate that Japan’s Financial Services Agency (FSA) is contemplating regulatory adjustments that would permit banking-group securities subsidiaries to register as crypto asset service providers and allow banks to buy and hold cryptocurrencies as investments. The FSA is expected to require enhanced risk disclosures for retail customers.
UK FCA Seeks Feedback on Fund Tokenization
On October 14, the UK FCA published a consultation paper requesting input on new rules for fund tokenization and direct-to-fund transactions. The paper outlines the FCA’s proposals for operating tokenized funds and direct dealings in both conventional and tokenized authorized funds, with feedback due by November 21.
UK FCA Examines Regulatory Handbook Rules for Crypto Companies
On September 17, the FCA released a consultation paper seeking opinions on the application of existing regulatory rules to firms engaged in regulated crypto asset activities. The document details proposed standards concerning senior management, systems, controls, and consumer protection measures.
UK Allows Retail Access to Crypto ETPs
On October 17, the London Stock Exchange welcomed its first crypto ETF, following the FCA’s decision in August 2025 to lift a prior ban on selling crypto exchange-traded notes to retail investors. Issuers have begun making Bitcoin and Ether ETPs available to retail customers, with WisdomTree confirming UK retail access for its BTC and ETH ETPs starting the week of October 20.
EU Considers Centralized Crypto Supervision under ESMA
According to reports on October 6, the European Commission is preparing reforms that would transfer additional oversight authority from national regulators to the European Securities and Markets Authority (ESMA), specifically concerning crypto supervision, as part of a broader capital markets package.
EBA Publishes Report on Addressing Money Laundering Risks in Crypto
On October 9, the European Banking Authority (EBA) released a report focusing on combating money laundering and terrorist financing risks associated with crypto-asset services. The report emphasizes lessons learned from recent cases and suggests enhanced approaches for supervising crypto-related activities.
EBA Comments on Proposed Changes to Liquidity Requirements for Reserve Assets under MiCA
On October 10, the EBA published opinions regarding the European Commission’s proposed amendments to draft Regulatory Technical Standards (RTS) related to liquidity requirements for reserve assets of asset-referenced and e-money tokens under MiCA, expressing concerns over potential relaxations of liquidity criteria.
Australia Proposes Regulation for Digital-Asset & Tokenized Custody Platforms
On September 25, Australia’s Treasury introduced the Treasury Laws Amendment (Regulating Digital Asset and Tokenized Custody Platforms) Bill 2025 Exposure Draft, aiming to implement a comprehensive regulatory framework for digital asset platforms. This legislation will require crypto exchanges and certain service providers to obtain Australian financial services licenses, with ASIC as the primary regulator.
Australia Offers Licensure Exemptions for Stablecoin Intermediaries
On September 18, ASIC announced a new initiative to support innovation, exempting certain licensed intermediaries from needing additional regulatory approvals when distributing stablecoins issued by an AFS licensee.
Hong Kong Regulators Issue Joint Circular on Virtual Asset Activities
On September 30, the Hong Kong Securities and Futures Commission (SFC) and the Monetary Authority (HKMA) published a joint circular outlining requirements for intermediaries engaging in virtual asset services. The circular offers clarifications on the applicability of previous joint circulars and provides guidance on staking services for licensed intermediaries.
Pakistan Opens Path for Licensure for International Crypto Firms
On September 13, the Pakistan Virtual Assets Regulatory Authority (PVARA), established in July 2025, invited expressions of interest from global crypto firms looking to obtain licensure in the country. Firms must already be recognized by major regional regulators, positioning Pakistan as a significant player in the crypto market with over 40 million users and a substantial trading volume.
India Remains Cautious on Comprehensive Cryptocurrency Regulation
On September 10, reports indicated that India is reluctant to implement comprehensive legislation for cryptocurrency regulation. Concerns from the Reserve Bank of India about granting legitimacy to cryptocurrencies could pose systemic risks. The government believes current tax laws sufficiently deter illegal activities related to digital assets.
Dubai VARA Consults on Crypto-Assets Reporting Framework
On October 10, the Dubai Virtual Assets Regulatory Authority (VARA) published a consultation paper regarding the implementation of the Crypto-Asset Reporting Framework (CARF) developed by the OECD, detailing timelines, due diligence procedures, and enforcement considerations.
DFSA Seeks Input on Enhancements to Crypto Token Regulatory Framework
On October 1, the Dubai Financial Services Authority (DFSA) released a consultation paper aimed at gathering feedback on proposed modifications to the existing suitability assessment process for crypto tokens.
ADGM FSRA Consults on Staking Regulatory Framework
On September 30, the Financial Services Regulatory Authority (FSRA
