Regulation
Why SEC Is Unlikely To Probe Roaring Kitty As He Exploits Loophole
Keith Gill, better known by his online moniker “Roaring Kitty,” is back in the spotlight for his trading activities involving GameStop Corp. (GME). However, Gill is reportedly leveraging a loophole in market regulations, causing concern among market experts. Moreover, legal experts believe that the SEC can’t target Roaring Kitty due to the ‘gap in rules’.
Legal Experts On SEC Vs Roaring Kitty
Daniel Hawke, a partner at Arnold & Porter Kaye Scholer and former head of the SEC’s market abuse unit, commented on the matter. He said, “What he’s doing is exploiting a gap in the rules.” This statement underscores the intricacies of Roaring Kitty’s actions, which, while controversial, appear to exploit regulatory grey areas rather than outright breaking the law.
Gill’s influence over retail investors is substantial. He uses his online presence and celebrity status to draw attention to GameStop, encouraging a surge in trading activity. Yet, as Hawke noted, “The rules that exist do not permit the SEC to prosecute that conduct unless there is an element of deception.”
Unlike traditional pump-and-dump schemes, Gill does not explicitly endorse investing in GameStop or make unfounded claims about its financial health. Instead, his posts are often cryptic memes or updates on his trading position. This complicates the SEC’s ability to pursue a case against him.
Moreover, the ambiguity surrounding Roaring Kitty’s actions leaves a significant grey area in market regulation. Furthermore, some market observers accused Gill of market manipulation. On the contrary, others argue that his conduct is not significantly different from that of Wall Street fund managers who publicly discuss their holdings.
Steve Sosnick of Interactive Brokers remarked that Gill’s actions resemble those of an activist investor. This brings into question the fine line between market manipulation and advocacy. Whilst, American Economic Liberties Project’s Matt Stoller took a firmer stance. He stated, “This is obviously market manipulation.”
The flurry of opinions highlights the controversy and complexity of Gill’s situation. Now, the challenge for the SEC is to determine whether Roaring Kitty’s influence and trading activity amount to deception, a key element required for any potential prosecution.
Also Read: GameStop Price Prediction as Roaring Kitty Plans Livestream
Controversy Escalates As Options Data Gets Disclosed
Meanwhile, Roaring Kitty’s trading position in GameStop remains substantial. According to a post on his Reddit account, he holds $557 million in shares and options contracts. However, questions about his trading activities persist, such as whether he is backed by other investors and how he financed his GameStop purchases.
The scale of Roaring Kitty’s position and the scrutiny it attracts add another layer of complexity to his trading strategy and its potential ramifications. The controversy intensified after renowned investor Ross Gerber cautioned Gill about his short-term position in GameStop.
Moreover, Gerber highlighted the risks Gill faces, particularly with his $115.7 million stake in GameStop, including $65.7 million in call options expiring on June 21. In a post on X (formerly Twitter), Gerber stated, “Kitty better be careful exposing such a short-term position with so many enemies. Where would he get all the money… he’s got to sell the options soon.”
Furthermore, SEC Chair Gary Gensler addressed questions about Gill’s activities. He also emphasized that while disclosure is crucial, it “doesn’t necessarily protect a bad actor.” This stance reflects the broader regulatory concern about the need for transparency without providing a shield for potentially harmful market behaviors.
Experts have also pointed out the challenges Roaring Kitty might face in cashing out his GameStop options. The number of open contracts in GameStop surged to 145,000 by the end of May, a significant increase from the 15,000 recorded earlier in the month. Hence, the size of Gill’s position and the heightened attention on GameStop could complicate selling the options or taking delivery of the underlying shares, potentially reducing their value.
Also Read: Meme Coin GameStop ($GME) Jumps 118%, Roaring Kitty Eyes Billionaire Status
The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.
The newly elected Indian government under Prime Minister Narendra Modi will present the Union Budget later this month on July 23. India’s crypto industry is looking forward to this budget with high hopes expecting some tax reliefs along the way. Furthermore, the crypto industry is also looking for clear guidelines from the Indian government.
India Budget: Will Govt. Reduce Crypto Tax Burden?
For the upcoming union budget, the crypto industry has a few hopes such as the reduction in crypto taxes, allowing the off-setting of crypto losses against the gains in a given financial year, as well as treating capital gains in crypto at par with other asset classes. Lastly, the industry expects India to build a conducive environment for crypto firms, in order to compete with other global economies.
Back in 2022, the Indian government had imposed a hefty 30% tax flat on crypto gains. This was irrespective of one’s income tax slab. Additionally, the government imposes a 1% tax deducted at source (TDS) on every transfer of crypto assets.
Ashish Singhal, co-founder of cryptocurrency app CoinSwitch, stated that to make the most out of India’s Web3 opportunity, the Indian government must reconsider the cryptocurrency tax treatment in the upcoming budget. He said:
“The flat rate of 30 percent applicable on income from the transfer of VDAs needs to be re-examined to ensure parity with other tech-enabled sectors. Additionally, the threshold of Rs 10,000 or Rs 50,000 can also be looked at. Most crypto sellers (mainly individuals) are in the low-income bracket. Increasing the threshold will reduce the administrative burden on the tax department in processing refunds”.
A key advantage of investing in traditional assets like stocks, gold, and bonds is the ability to offset losses in one asset against gains in another within the same year and to carry forward unadjusted losses for future adjustments. In contrast, losses from one crypto asset cannot be offset against gains from another, nor can they be carried forward. As a result, the industry is seeking a major revision to this rule.
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Furthermore, during the pre-budget consultations, the Bharat Web3 Association requested the government in order to reduce the TDS from 1 percent to 0.01 percent.
“The Indian VDA market has seen a sharp decline in business over the past two years since the 1 percent TDS and capital gains tax were implemented. The 1 percent TDS has significantly impacted our business. We expect the upcoming budget to address our grievances and reduce the TDS and capital gains taxes on VDA transactions to reasonable levels, allowing us a level playing field to function and prosper,” said Shivam Thakral, chief executive officer, BuyUcoin, a cryptocurrency exchange.
Learning Lessons from US Regulations
The US SEC’s approach to regulation through enforcement has faced a strong backlash from the crypto industry players in recent years. Such regulatory measures have forced several token innovators and crypto developers to set up their base outside the US.
One of the primary criticisms of US crypto regulation is the lack of clear, consistent guidelines. This uncertainty has placed startups and established companies in a challenging position, unsure of compliance requirements and wary of abrupt legal repercussions.
As India advances in shaping its crypto regulatory framework, it can draw lessons from the US to sidestep potential pitfalls and cultivate a more favorable environment for digital assets. India should aim for a balanced approach, akin to the Goldilocks zone, promoting innovation while safeguarding investors through regulations that are neither overly stringent nor lax.
Emphasizing the practical utility of blockchain technology beyond speculation can spur the creation of impactful solutions in sectors such as finance, supply chain management, and public administration.
Also Read: Voice of Web3 by Coingape : Showcasing India’s Cryptocurrency Potential
The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.
A wave of controversy has erupted in the crypto community as Celsius Network faces backlash for suing users who withdrew funds prior to the company’s bankruptcy. David Schwartz, the Chief Technology Officer of Ripple, has weighed in on the matter. Moreover, he offered insights into why Celsius might have taken such drastic action.
Ripple CTO On Celsius’ Latest Move
According to a user on X, Celsius Network has initiated lawsuits against numerous users in New York courts. The user expressed frustration, stating, “Celsius Network has officially sued me and thousands of innocent users… because we happened to take our money off the platform 90 days before they declared bankruptcy.”
The crux of the issue lies in the concept of “clawback.” Clawback provisions allow bankrupt companies to recover funds withdrawn by users within a certain period before the bankruptcy filing. In this case, the period is 90 days. Hence, Ripple CTO Schwartz emphasized the legitimacy of these actions in specific contexts, particularly regarding “non-existent ‘profits.’”
He stated, “If you withdrew fake ‘profits’ that were never actually earned or generated, then you didn’t withdraw your own money.” A user responded to the Ripple CTO, highlighting the perceived injustice. They wrote, “Clawback attempt for people who had withdrawn within 90 days of filing for BK. Absolutely disgraceful behavior.”
Schwartz tried clarifying the nuances by asking, “Are they just trying to clawback non-existent ‘profits’? Or are they trying to clawback returns of principal?” Further discourse revealed that Celsius is allegedly pursuing the return of both profits and principal amounts withdrawn within the 90-day period. The original poster detailed, “They started off asking for 27% of all principal as a settlement, which came across as a giant scam.”
Schwartz’s stance on such actions is clear: “Usually, in schemes like this, they don’t go after people who withdrew their own principal unless there’s evidence that they had inside information or connections.” Moreover, the lawsuit’s impact on users has been severe.
Also Read: XRP Price Decline To $0.40; Can The Ripple’s New Try It Feature Change That?
The Other Perspective
The original poster mentioned, “They are asking for outrageous sums of money, basically my entire net worth.” This sentiment is echoed by many in the crypto community, who fear the broader implications of such legal actions. Another user questioned, “Why would they let you keep profits off assets they are saying you didn’t have the right to have?”
Replying to the user, the Ripple CTO provided a different perspective this time. He argued that the losses suffered by users are a result of Celsius’ fraudulent activities. He stated, “Why should an innocent party bear the costs of Celsius’ fraud? Why should the victim have to suffer the additional loss of bearing the costs of a free option they never agreed to give anyone?”
The lawsuits have not only financial repercussions but also emotional ones. The original poster described the emotional turmoil caused by the lawsuits and the substantial legal fees incurred. “I have to spend thousands to retain an attorney,” they lamented.
As the crypto community watches closely, prominent figures like Coinbase CEO Brian Armstrong and TRON founder Justin Sun have been called upon to support the affected users. In addition, they also asked for aid from ZachXBT, a renowned crypto sleuth. The outcome of these lawsuits could set a significant precedent for the industry.
Also Read: Ripple CLO Slams US Authority Over Crypto Regulation Approach
The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.
The U.S. House will vote next week to overturn President Joe Biden’s veto of Staff Accounting Bulletin 121, also known as SAB 121. The bulletin has stirred controversy in the crypto industry. It mandates that firms custodying crypto record customer holdings as liabilities.
House Majority Leader Steve Scalise indicated the vote might occur on Tuesday or Wednesday. Following the veto, the vote is a constitutional obligation. The measure previously passed the House with a 228-182 vote.
Bipartisan Push to Overturn SAB 121 Veto
SAB 121 requires firms holding crypto assets for customers to list these as liabilities. This rule has raised concerns among banks and the crypto industry. They argue it could hinder their ability to safeguard digital assets.
The resolution to overturn SAB 121 has seen bipartisan support. In May, the Senate passed it with a 60-38 vote, including support from Senate Majority Leader Chuck Schumer. However, overturning a veto requires a two-thirds majority in the House and Senate.
From venture capital firm Paradigm, Alexander Grieve noted the challenge but saw potential. “Remember when Biden vetoed the SAB121 rollback? It’s back on the House floor next week.” He pointed out the previous bipartisan support for the FIT21 crypto market structure bill.
Also Read: Craig Wright Faces $1.9M Legal Bill As London Court Issues Freezing Order
Challenges Mount in Overturning Crypto Rule Veto
Despite bipartisan support, overturning the veto remains challenging. The House needs 290 votes, 60 more than the initial 228 votes in favor. Cody Carbone from the Chamber of Digital Commerce expressed doubts about reaching this threshold.
Carbone emphasized the difficulty of changing 60 members’ minds in a week. He acknowledged the efforts for consumer protection and good governance. However, he believes the attempt to override the veto will ultimately fail.
The crypto industry remains hopeful but realistic about the upcoming vote. They recognize the steep hill to climb to overturn the veto. The focus now is on rallying additional support in the House.
The outcome of the vote has significant implications for the crypto industry. If the veto is overturned, it could ease concerns about banks’ ability to safeguard digital assets. Conversely, if it stands, firms may need help complying with SAB 121.
The crypto industry has been vocal about its concerns. They argue that the rule could stifle innovation and hinder the growth of digital assets. The upcoming vote is crucial for determining the regulatory landscape for crypto.
Supporters of overturning the veto emphasize the importance of flexibility for financial institutions. They argue that SAB 121 imposes undue burdens on firms holding crypto assets. The vote will be a crucial indicator of congressional support for the crypto industry.
Also Read: Venezuela’s Digital Asset Remittances Hit Yearly $460 Million
The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.
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