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Bitgrail’s founder contributed to $150M loss, Italian authorities allege

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Italian authorities have found Bitgrail’s founder responsible for fraudulent activity related to the 2018 hack of the platform that resulte in the loss of $150 million.

Francesco Firano, the sole director of now-defunct cryptocurrency exchange Bitgrail, is accused of taking over customer funds prior to reporting the theft of crypto from the exchange.

According to a Dec. 21 announcement by the Postal and Communications Police — a cybercrime unit of the State Police of Italy — Firano kept the platform intact for months despite having identified a major security breach involving Nano cryptocurrency:

“In keeping the platform open, despite having identified illicit withdrawals of Nano coins, and not informing the Nano team […] FF continued to attract new users, who rose from 70,000 to about 217,000 within a few months, benefiting from the notoriety of being the first and only Italian exchange to deal with [Nano].”

Firano subsequently denied allegations by the police, claiming that the authorities provided false information about the matter. “The postal police went into hiding instead of correcting the articles, Firano argued on Twitter. The executive also noted that he was not arrested by the police.

The announcement seems to indicate that Firano withdrew 230 Bitcoin (BTC), worth 1.7 million euro, or about $1.9 million, at the time, just three days before reporting the larger theft of Nano that occurred in prior months. The BTC was traced to Firano’s personal account at The Rock Trading exchange platform. While the authorities noted that there were attempts to convert the money, the majority of the funds remained in the company’s accounts. Authorities have stated that the actual hackers who stole the Nano remain unidentified. In a preliminary injunction, Firano was barred from holding managerial positions or conducting business activities, but his liberty of movement is otherwise not restricted.

The latest news follows years of controversy around Bitgrail’s hack — one of the largest hacking incidents in Italy. In February 2018, Firano officially announced that 17 million Nano, formerly known as Raiblocks, was stolen in a hack. Nano developers subsequently provided an official comment showing that Firano asked for the altcoin’s ledger to be altered the next day after reporting the hack.

In January 2018, the Italian Bankruptcy Court sentenced Firano to return as much of the assets as possible to his customers after local authorities seized more than $1 million in his personal assets.

Correction: A previous version of this article incorrectly claimed that Firano was associated with The Rock Trading. In reality, the funds were sent to his standard personal account at the exchange.





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Regulation

New York authorizes first Yen stablecoin operator in the US

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New York has given the first authorization to a stablecoin backed by the Japanese Yen to operate in the U.S.

Per a Dec. 29 announcement, the New York Department of Financial Services has granted Japanese firm GMO-Z.com a charter to handle U.S.D. and Yen-backed stablecoins in New York. 

Given New York’s status as a global center, the NYDFS is the most prominent state financial regulator in the U.S. It is also one of the most aggressive. A pass to operate in New York often opens up the rest of the country. 

GMO’s charter is as a limited liability trust company rather than a full bank, the principle difference being in authorization to handle deposits. While a stablecoin operator typically needs the ability to hold reserves of the pegged asset, GMO’s charter limits its rights to hold other kinds of deposits not central to its ability “to issue, administer, and redeem” its stablecoins. 

The right to issue such non-depository charters has been a bone of contention between state regulators like the NYDFS and national banking regulators in the U.S. 

GMO president and CEO Ken Nakamura said: “We’re breaking ground with our move to issue the first regulated JPY-pegged stablecoin, which many see as a safe haven asset.” 

The NYDFS recently made changes to its famous BitLicense, including a conditional format that buddies up newly licensed firms with existing licensees. The first conditional BitLicense went to PayPal, facilitating the launch of its new crypto services earlier this fall with the help of longstanding licensee Paxos.