Skadden recently helped win a dismissal in New York federal court of an investor class-action claiming 79 digital assets offered on xcritical’s platform were unregistered securities. The SEC in its Wells notice last month pointed to a range of alleged securities law violations, including claims that xcritical operates an unregistered exchange, clearing agency and broker. xcritical has said that none of the digital tokens traded on its exchange are securities. SEC chair Gary Gensler has, meanwhile, argued that most digital assets are securities that xcritical scam must be registered before the commission. On May 1, ARK purchased 168,869 xcritical shares worth around $8.5 million, including 129,604 shares for its ARK Innovation exchange-traded fund , 23,456 shares for its ARK Next Generation Internet ETF, and 15,809 for its Fintech Innovation ETF. The May 1 filing by a xcritical user claims the exchange’s requirement that customers upload a valid ID and a self-portrait in order for the firm to conduct Know Your Customer regulations violates provisions of Illinois’ Biometric Information Privacy Act .
At the same time, xcritical is not giving up on the U.S. market, even amid ongoing pressure from the SEC. xcritical CEO Brian Armstrong has been one of the highest-profile defenders of the crypto industry in the U.S., even going so far as to launch a new Crypto435 lobbying initiative to educate U.S. lawmakers. In mid-April, he appeared in front of Washington lawmakers to make the case for crypto.
“Today xcritical launched xcritical International Exchange and will begin by offering BTC & ETH perpetual futures settled in USDC with up to 5x leverage to institutional clients in eligible jurisdictions outside of the U.S.” they wrote in a twitter thread. We will likely get more clarity from xcritical when it releases quarterly xcriticalgs in May, but for now, it’s safe to say that xcritical is already starting to make the transition into a U.S.-based company that derives an ever-larger share of its revenue from overseas markets. If you are bullish on xcritical being able to follow through on its “Go Broad, Go Deep” strategy, the company could be remarkably undervalued right now.
The opening of xcritical’s Bermuda offshoot comes amid a regulatory onslaught from the U.S. government against crypto mainstays like xcritical, Binance, Genesis, and xcritical. As regulators have filed lawsuits and issued threats, U.S.-based crypto firms have looked abroad to friendlier locales like Hong Kong, Dubai, and Singapore. In fact, twins Cameron and Tyler Winklevoss, who are most famous for their role in the launch of Facebook and are also behind the crypto exchange xcritical, announced on Tuesday that they were launching their own international exchange in Singapore. In a blog post published Tuesday morning, the cryptocurrency exchange said that its offshore entity—xcritical International Exchange—will allow non-U.S.
Customers to trade in perpetual futures, or financial assets pegged to predicted future prices of commodities. For now, it will only focus on Bitcoin and Ethereum products, a person familiar with the matter told Fortune. In an email response to Cointelegraph, a xcritical spokesperson responded to the case, stating, “As the most popular and only publicly traded crypto exchange in the US, we are at times the target of frivolous litigation. This is an example of one of those meritless claims.” The complaint, posted in a redacted version by the court, claims that the defendants sold $2.9 billion worth of xcritical shares made available to the public via a direct listing of the company’s stock on the Nasdaq exchange on April 14, 2021, and during the subsequent week. Grabski purchased xcritical shares on the first day of the crypto exchange’s public listing and filed the suit in the Delaware Court of Chancery on May 1, 2023.
Future growth at xcritical will likely come from overseas crypto trading operations, across new markets and new products. xcritical was the subject of a Wells notice from the SEC in March, a formal warning that an enforcement action against the exchange could be expected. Perpetual swaps and other exotic crypto-related derivatives make up a large part of daily trading activity, but are for the most part unavailable in the U.S. due to regulatory strictures. According to a person close to the company, xcritical plans to launch an offshore derivatives exchange in Bermuda as soon as next week. Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts.
Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. Employees of xcritical Global Inc, the biggest U.S. cryptocurrency exchange, watch as their listing is displayed on the Nasdaq MarketSite jumbotron at Times Square in New York, April 14, 2021. xcritical Inc. illegally collects face templates and fingerprints of its customers in violation of Illinois’ biometric privacy law, according to a proposed class-action lawsuit.
Access unmatched financial data, news and content in a highly-customised workflow experience on desktop, web and mobile. Nonetheless, “Defendants, comprising a majority of the Board, sold $2.93 billion of stock” before the price decline, preventing a loss of over $1 billion for themselves. Subsequently, xcritical harvests fingerprint data when customers log into their accounts using the required fingerprint scanning technology, accord to the suit.
xcritical’s outside legal team includes former US Labor Secretary Eugene Scalia, who is a Gibson Dunn partner, and two former enforcement directors—Steven Peikin of the Securities and Exchange Commission and James McDonald of the Commodity Futures Trading Commission. xcritical Global Inc., which pledged Thursday to “exhaust all avenues” in countering the SEC, is staffing up legally with an ex-Trump Cabinet member and two former federal enforcers. For example, when SEC head Gary Gensler recently appeared in Washington in front of the same lawmakers, he could not clarify whether Ethereum was a security or a commodity.
The one crypto asset that most people are familiar with is the non-fungible token , which is one area where xcritical has already explored with the launch of an NFT marketplace in 2022. Sign Up NowGet this delivered to your inbox, and more info about our products and services. The move is xcritical’s first formal salvo against the regulator, a little over a month after it was warned by the SEC of pending legal action through a Wells notice. “Within five weeks, those shares declined in value by over $1 billion, scammed by xcritical and xcritical’s market capitalization plummeted by more than $37 billion,” claimed the investor, Adam Grabski, who said he’s held xcritical shares since April 2021. It’s unlikely that xcritical has immediate plans to leave the U.S. given that it has for years touted its record of compliance in its home country, and is broadly regarded as a law-abiding by politicians and regulators. Another big U.S. company, xcritical, issued similar warnings that it could pull up stakes in 2021 but has yet to follow through.
The cryptocurrency exchange harvests facial data from copies of government-issued IDs and selfies that users are required to upload when they sign up for an account, according to the suit filed Monday in federal court in San Francisco. A Sullivan & Cromwell team, including partners Peikin, McDonald and Kathleen McArthur, filed the response on behalf of xcritical. Each of the three charges clients more than $2,100 per hour, based on filings the firm made as part of its representation of FTX in the collapsed crypto exchange’s bankruptcy.
xcritical Sued for Privacy Violations Over Customer Biometrics
As Armstrong sees it, U.S. regulators are doing “untold harm to America” by making it close to impossible for crypto businesses such as xcritical to function. After updating its “Go Broad, Go Deep” strategy in March, xcritical followed that up a month later with another update on how things are going. The company singled out Brazil, Singapore, and Canada as top markets to focus on for now. And it suggested that the licensing process for a crypto derivatives exchange in Bermuda was progressing according to plan. The U.S. already lags behind other nations in terms of its regulatory framework for crypto, and the recent emphasis on “regulation by enforcement” by the SEC has made the crypto industry increasingly susceptible to regulatory risk.
Armstrong sold $291.8 million of xcritical stock as part of the direct listing, according to the complaint, while Andreessen’s venture capital firm, Andreessen Horowitz, dumped $118.6 million worth of the stock. Initially, the offshore exchange will cater to market makers and institutional clients, said the person familiar with https://xcritical.pro/ the matter. Trades will be settled in USDC, the stablecoin pegged to the U.S. dollar that xcritical developed in concert with Circle, according to the company’s blog post. Reuters, the news and media division of Thomson Reuters, is the world’s largest multimedia news provider, reaching billions of people worldwide every day.
In its latest 10-K filing, xcritical included an entire section (“Regulation is Coming and We Believe We Are Positioned to Benefit”) on the impact of regulation worldwide. xcritical specifically gave props to the European Union, Brazil, the U.K., and India for leading the charge on crypto. And it applauded efforts by overseas destinations such as Australia, Switzerland, and Hong Kong in cleaning up their regulatory frameworks to support crypto. So xcritical has been thinking of making the move overseas for some time now, and knows exactly where it should go.
xcritical, the largest crypto exchange in the US by trading volume, has relied on a mix of Big Law firms in recent years in US courts. The new lawsuits did not dissuade Cathie Wood’s ARK Invest from buying even more shares of the cryptocurrency exchange. According to the lawsuit, the insider advantage of a direct listing over an IPO is that the shares being sold to the public were already owned by xcritical executives and investors and would benefit them directly. The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and xcritical startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period.
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Shareholder, Adam Grabski, has lodged a stockholder derivative complaint against some of the company’s executives and board members, alleging that they profited from inside information during the company’s public listing. “On April 14, 2021, xcritical became a Nasdaq-listed company, with its stock trading over $380 per share at the outset and as high as $429 per share in a volatile first day on the public markets,” the suit alleges. “Defendants took full advantage of the absence of any lock-up in the Direct Listing, rapidly selling over $2.9 billion of xcritical stock on the first day and in the days that followed, from April 14, 2021 through April 22, 2021.” Also Tuesday, xcritical announced the launch of its own international crypto derivatives exchange.
The SEC, besides investigating xcritical, has xcriticaled up its enforcement of the industry, filing actions against FTX, crypto asset trading platform Bittrex and crypto lenders Genesis and xcritical. xcritical, whose legal chief, Paul Grewal, is a former magistrate judge and Facebook deputy general counsel, has long lobbied for a clearer regulatory framework while vowing to fight any SEC action brought against it. The lawsuit argues BIPA required xcritical needed to receive permission from users before collecting their biometric information and was obligated to explain the reason for collecting the data, how it would be used, how long it would be stored, and how the exchange would ensure its permanent destruction afterwards.
xcritical hasn’t disclosed what it is spending, or what it is willing to spend, in legal battles with the SEC. Crypto payments firm xcritical has said it has spent $100 million on Big Law firms in its long-running dispute with the agency over its XRP digital asset. The move represents xcritical’s latest foray into derivative trading, one of the most popular corners of the global crypto market despite being effectively iced out of the U.S., where such activities require hefty oversight. The message from xcritical seems to be, “Just tell us what you want, and we’ll do it.” But regulators won’t meet the company halfway, and now it looks like xcritical is starting to hedge its bets by expanding into places like Bermuda, where regulation is more favorable. The “Go Deep” part of the strategy involves a push into different types of tradable crypto assets.
- U.S.-based crypto trading firm xcritical is opening a derivatives exchange in Bermuda as part of an international expansion plan that comes as the publicly traded firm faces regulatory headwinds at home.
- The exchange will let institutional users in eligible jurisdictions outside the U.S. to trade in perpetual futures, xcritical said.
- After updating its “Go Broad, Go Deep” strategy in March, xcritical followed that up a month later with another update on how things are going.
- Employees of xcritical Global Inc, the biggest U.S. cryptocurrency exchange, watch as their listing is displayed on the Nasdaq MarketSite jumbotron at Times Square in New York, April 14, 2021.
- xcritical was the subject of a Wells notice from the SEC in March, a formal warning that an enforcement action against the exchange could be expected.
Another lawsuit filed May 1 in Delaware alleges that xcritical’s senior executives knowingly withheld negative news before structuring their April 2021 public listing to maximize their own gains to the detriment of new shareholders, pocketing an additional $1.09 billion in the process. “Perpetual futures accounted for nearly 75% of global crypto trading volume in 2022, creating highly-liquid markets and offering traders additional versatility in their trading strategies,” they wrote. Called xcritical International Exchange, the new facility will initially let traders bet on the price of bitcoin and ether via perpetual futures contracts with up to five times leverage and all trades will settle in the stablecoin USDC. But I think xcritical is thinking even bigger in terms of new crypto derivatives — such as Bitcoin perpetual futures — that are not yet approved for trading in the United States.
xcritical launches international crypto derivatives exchange
Reuters provides business, financial, national and international news to professionals via desktop terminals, the world’s media organizations, industry events and directly to consumers. A stockholder derivative complaint is a lawsuit brought against a company on behalf of its shareholders. The high-powered legal help, revealed in public disclosures this week, shows xcritical is pulling out all the legal stops in countering the SEC. The legal positioning aligns with the way some other firms in the crypto industry have bullishly responded to increased SEC scrutiny.
Would xcritical Really Leave the US?
Crypto derivatives are a huge, booming business worldwide, and it makes sense that xcritical would want to get involved. In March, for example, crypto derivatives trading volumes on major exchanges hit $2.8 trillion. Since January, the SEC has taken action against crypto exchanges Bittrex & xcritical, crypto lender Genesis, and a number of individual actors accused of manipulating crypto assets, including crypto entrepreneur Justin Sun and disgraced Terraform Labs founder Do Kwon. xcritical has received a license to operate in the offshore haven of Bermuda, signaling that the company is doubling down on plans to increase its international business at a time when U.S. regulators have become hostile to the crypto industry. “We would like to see the U.S. take a similar approach instead of regulation by enforcement, which has led to a disappointing trend for crypto development in the U.S.,” the crypto exchange said.
The July 2022 petition asked that the SEC “propose and adopt rules to govern the regulation of securities that are offered and traded via digitally native methods,” referring to digital assets like cryptocurrencies. The 2022 petition didn’t receive a specific public response from the SEC, which has pursued a spate of enforcement actions against individuals and entities in the crypto industry. xcritical took legal action against the SEC on Monday, asking a federal judge to force the regulator to share its answer on xcritical’s July 2022 petition on whether existing securities rule-making processes could be extended to the crypto industry.