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The other crypto bosses in US authorities’ crosshairs

Investigations are not necessarily an indication of wrongdoing

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The other crypto bosses in US authorities' crosshairs

Onetime crypto poster child Sam Bankman-Fried was on Thursday found guilty of defrauding customers of his now-bankrupt crypto exchange FTX, in a high-profile criminal case that rocked the industry.

But he’s not the only one in regulators’ sights. As token prices plummeted last year, the sector saw other stunning meltdowns that put several industry moguls into authorities’ crosshairs.

Investigations are not necessarily an indication of wrongdoing, and charges may not result in convictions. All the executives below have denied wrongdoing.

Changpeng “CZ” Zhao

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The U.S. Securities and Exchange Commission (SEC) sued Binance and its CEO Zhao in June for allegedly operating “a web of deception.” Binance and Zhao were also sued by the U.S. Commodity Futures Trading Commission in March for operating what the regulator alleged were an “illegal” exchange and a “sham” compliance program.

The SEC alleged that Binance artificially inflated its trading volumes, diverted customer funds, failed to restrict U.S. customers from its platform and misled investors about its market surveillance controls.

The company has said the SEC’s lawsuit was “unjustified by the facts, by the law, or by the Commission’s own precedent.” Zhao, a billionaire who was born in China and moved to Canada at the age of 12, called the CFTC’s complaint “unexpected and disappointing” and said it contained an “incomplete recitation of facts.”

Do Kwon

A South Korean national, Do Kwon co-founded Terraform Labs and developed the TerraUSD and Luna currencies. The market value of TerraUSD and Luna was once estimated at more than $40 billion, and their downfall precipitated a wider collapse in token prices.

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Kwon faces multiple charges of fraud in the U.S. and was arrested in Montenegro earlier this year for allegedly forging documents, authorities said. The SEC has also filed civil charges against Kwon and Terraform Labs, accusing the two of “orchestrating a multi-billion dollar crypto asset securities fraud.”

Kwon has denied forging documents, according to a Montenegrin court press release. In an Oct. 30 court filing, Terraform said the “SEC is evidentiarily no closer to proving that the defendants did anything wrong.”

Alex Mashinsky

The founder and former CEO of crypto lender Celsius Network’s company filed for bankruptcy in July 2022.

He has pleaded not guilty to U.S. fraud charges that he misled customers and artificially inflated the value of his company’s proprietary crypto token. In January, New York state’s attorney general sued Mashinsky, also alleging fraud. A lawyer for Mashinsky at the time said he denied those allegations and “looks forward to vigorously defending himself in court.”

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Mashinsky also faces lawsuits from the SEC, the CFTC and the U.S. Federal Trade Commission (FTC) that allege he touted Celsius as safe even as the company took increasingly risky steps to deliver promised returns of as much as 17%.

Barry Silbert

Silbert is the boss of crypto group Digital Currency Group whose subsidiary Genesis Global Capital filed for bankruptcy in January.

He was sued by New York Attorney General Letitia James last month along with Genesis and DCG, alleging that they defrauded customers of more than $1 billion.

Silbert called the allegations baseless and said he would fight the lawsuit in court.

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“Last year, my and DCG’s goal was to help Genesis weather the storm… and position Genesis for success going forward. It is unfortunate that this lawsuit omits that fundamental fact,” he said.

Stephen Ehrlich

Stephen Ehrlich’s Voyager Digital is another casualty of last year’s crypto meltdown. The CFTC and the FTC have accused him of misleading customers about the safety of their assets while taking “excessive risks” that led to the crypto lender’s demise.

Ehrlich has said he was being used as a “scapegoat for the bad actions of others at different companies.”

“Having spent nearly my entire career working in regulated markets, including more than 10 years at public companies, I have never had a single blemish on my record,” he said in a statement last month.

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Justin Sun

The SEC in March charged Chinese cryptocurrency entrepreneur Justin Sun and his companies including the Tron Foundation with fraud, accusing him of artificially inflating trading volume for his companies’ crypto tokens and concealing payment to celebrities to promote those tokens.

Sun said in a post on social media platform X that the complaint “lacks merit.”

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World’s first hydrogen-powered commercial ferry to run on San Francisco Bay for free ride

World’s first hydrogen-powered commercial ferry to run on San Francisco Bay for free ride

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World's first hydrogen-powered commercial ferry to run on San Francisco Bay for free ride

The world’s first hydrogen-powered commercial passenger ferry will start operating on San Francisco Bay as part of plans to phase out diesel-powered vessels and reduce planet-warming carbon emissions, California officials said Friday, demonstrating the ship.

The 70-foot (21-meter) catamaran called the MV Sea Change will transport up to 75 passengers along the waterfront between Pier 41 and the downtown San Francisco ferry terminal starting July 19, officials said. The service will be free for six months while it’s being run as part of a pilot program.

“The implications for this are huge because this isn’t its last stop,” said Jim Wunderman, chair of the San Francisco Bay Area Water Emergency Transportation Authority, which runs commuter ferries across the bay.

“If we can operate this successfully, there are going to be more of these vessels in our fleet and in other folks’ fleets in the United States and we think in the world.”

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Sea Change can travel about 300 nautical miles and operate for 16 hours before it needs to refuel. The fuel cells produce electricity by combining oxygen and hydrogen in an electrochemical reaction that emits water as a byproduct. 

The technology could help clean up the shipping industry, which produces nearly 3% of the world’s total greenhouse gas emissions, officials said. That’s less than from cars, trucks, rail or aviation but still a lot — and it’s rising.

Frank Wolak, president and CEO of the Fuel Cell & Hydrogen Energy Association, said the ferry is meaningful because it’s hard to reduce greenhouse gas emissions from vessels.

“The real value of this is when you multiply out by the number of ferries operating around the world,” he said. “There’s great potential here. This is how you can start chipping away at the carbon intensity of your ports.”

Backers also hope hydrogen fuel cells could eventually power container ships.

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The International Maritime Organization, which regulates commercial shipping, wants to halve its greenhouse gas releases by midcentury.

As fossil fuel emissions continue warming Earth’s atmosphere, the Biden administration is turning to hydrogen as an energy source for vehicles, manufacturing and generating electricity.

It has been offering $8 billion to entice the nation’s industries, engineers and planners to figure out how to produce and deliver clean hydrogen.

Environmental groups say hydrogen presents its own pollution and climate risks. For now, the hydrogen that is produced globally each year, mainly for refineries and fertilizer manufacturing, is made using natural gas.

That process warms the planet rather than saving it. Indeed, a new study by researchers from Cornell and Stanford universities found that most hydrogen production emits carbon dioxide, which means that hydrogen-fueled transportation cannot yet be considered clean energy.

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Yet proponents of hydrogen-powered transportation say that in the long run, hydrogen production is destined to become more environmentally safe.

They envision a growing use of electricity from wind and solar energy, which can separate hydrogen and oxygen in water. As such renewable forms of energy gain broader use, hydrogen production should become a cleaner and less expensive process.

The Sea Change project was financed and managed by the investment firm SWITCH Maritime. The vessel was constructed at Bay Ship and Yacht in Alameda, California, and All-American Marine in Bellingham, Washington.

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Webb Telescope shows pair of intertwined galaxies glowing in infrared

Webb Telescope shows pair of intertwined galaxies glowing in infrared

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Webb Telescope shows pair of intertwined galaxies glowing in infrared

The Webb Space Telescope has captured a pair of intertwined galaxies glowing in the infrared.

The observatory operated by NASA and the European Space Agency photographed the two galaxies 326 million light-years away, surrounded by a blue haze of stars and gas.

A light-year is 5.8 trillion miles. The pictures, released Friday, marks the second anniversary of Webb’s science operations.

The neighboring galaxies, nicknamed Penguin and the Egg, have been tangled up for tens of millions of years, according to NASA. They’ll eventually merge into a single galaxy.

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The same interaction will happen to our own Milky Way and the Andromeda Galaxy in 4 billion years, the space agency said.

Considered the successor to the aging Hubble Space Telescope, Webb is the biggest and most powerful astronomical observatory ever launched.

It rocketed away in 2021 and underwent six months of commissioning, before its first official images were released in July 2022. 

It’s positioned 1 million miles (1.6 million kilometers) from Earth. “In just two years, Webb has transformed our view of the universe,” NASA’s Mark Clampin said in a statement.

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US senators call out Big Tech’s new approach to poaching talent, products from smaller AI startups

US senators call out Big Tech’s new approach to poaching talent, products from smaller AI startups

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US senators call out Big Tech's new approach to poaching talent, products from smaller AI startups

In the race to stay ahead in artificial intelligence, the biggest technology companies are swallowing up the talent and products of innovative AI startups without formally acquiring them.

Now three members of the U.S. Senate are calling for an investigation.

San Francisco-based Adept announced a deal late last month that will send its CEO and key employees to Amazon and give the e-commerce giant a license to Adept’s AI systems and datasets.

Some call it a “reverse acqui-hire.” Others call it poaching. Whatever it’s called, it’s alarming to some in Washington who see it as an attempt to bypass U.S. laws that protect against monopolies.

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“I’m very concerned about the massive consolidation that’s going on in AI,” U.S. Sen. Ron Wyden, an Oregon Democrat, told The Associated Press.

“The technical lingo is ‘up and down the stack’. But, in plain English, a few companies control a major portion of the market, and just concentrate — rather than on innovation — trying to buy out everybody else’s talent.”

So-called “acqui-hires,” in which one company acquires another to absorb talent, have been common in the tech industry for decades, said Michael A. Cusumano, a business professor at the Massachusetts Institute of Technology. But what’s happening in the AI industry is a little different. 

“To acquire only some employees or the majority, but not all, license technology, leave the company functioning but not really competing, that’s a new twist,” Cusumano said.

A similar maneuver happened at the AI company Inflection in March when Microsoft hired its co-founder and CEO Mustafa Suleyman to head up Microsoft’s consumer AI business, along with Inflection’s chief scientist and several of its top engineers and researchers.

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That arrangement has already attracted some scrutiny from regulators, particularly in Europe. Wyden also wants U.S. regulators to investigate the Amazon-Adept deal.

He and fellow Democratic Sens. Elizabeth Warren of Massachusetts and Peter Welch of Vermont sent a letter Friday urging antitrust enforcers at the Justice Department and the Federal Trade Commission that “sustained, pointed action is necessary to fight undue consolidation across the industry.”

“What is going on here is instead of buying startups outright, big tech companies are trying a new play,” Wyden said in an interview before sending the letter. ”They don’t want to formally acquire the companies, avoiding the antitrust scrutiny. I think that’s going to be the playbook until the FTC really starts digging into these deals.”

The DOJ and FTC said they received the senators’ letter but declined further comment.

President Joe Biden’s administration and lawmakers from both parties have championed stronger oversight of the tech industry in recent years, likely scaring off big acquisitions that might have sailed through in earlier eras.

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U.S. antitrust enforcers, for example, plan on investigating the roles Microsoft, Nvidia and OpenAI have played in the artificial intelligence boom, with the Department of Justice looking into chipmaker Nvidia and the Federal Trade Commission scrutinizing close business partners Microsoft and OpenAI.

Tech giants, including Microsoft, Amazon and Google, are trying to be conservative and not make too many acquisitions in the AI space, Cusumano said. “It seems clever. I would think, though, that they’re not fooling anybody,” he said.

For smaller AI startups, the problem is also that building AI systems is expensive, requiring costly computer chips, power-hungry data centers, huge troves of data to train upon and highly skilled computer scientists.

Adept, which aims to make AI software agents that help people with workplace tasks, said it was trying to do two things at once — build the foundational AI technology as well as the products for end users.

But continuing on that path “would’ve required spending significant attention on fundraising for our foundation models, rather than bringing to life our agent vision,” it said in a statement explaining the Amazon deal.

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“They may have made a decision that they have no real future and just don’t have deep enough pockets to compete in this space, so they probably prefer to be acquired outright,” Cusumano said. “But if Amazon is not willing or not able to do that, then this is kind of a second-best approach for them.”

Wyden has long taken an interest in technology, helping to write the 1996 law that helped set the ground rules for free speech on the internet. He said he generally favors a straightforward approach that encourages innovation, with guardrails as needed.

But in the AI industry, he said, “companies like Microsoft, Amazon and Google, either own major parts of the AI ecosystem or they have a leg up thanks to their massive resources.”

The letter asks enforcers to examine how tech giants are entrenching their AI dominance “through partnerships, equity deals, acquisitions, cloud computing credits, and other arrangements.”

John F. Coyle, a law professor at the University of North Carolina, said he believes that Amazon hiring Adept employees without buying the company is clearly a move to avoid antitrust problems. But that type of hiring isn’t a “reverse acqui-hire,” he said.

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Acqui-hires are typically face-saving moves that can be spun into success stories, Coyle said, and provide an alternative to liquidating a business. A smaller company can say it was sold to Amazon or Facebook parent Meta Platforms and spin it as a positive, for example, even if wasn’t the founders’ original plan.

“This isn’t an acqui-hire. This is a straight up poach,” Coyle said of Amazon and Adept.

This doesn’t just happen in the tech world, he said, calling the move “a version of a very old story.” In his class, Coyle said, he teaches students about a case from the 1950s involving an advertising agency in New York City. Some employees left to start a new business and poached roughly 100 others to come to work for them.

“There are innumerable instances where one company went and raided another to take all their employees,” Coyle said. “That existed before the acqui-hire, that is going to happen after the acqui-hire.”

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