Binance sued over the collapse of the TerraUSD stablecoin

A Utah resident has filed a lawsuit against Binance US and its CEO, accusing them of falsely advertising TerraUSD as a safe asset backed by fiat currency. The plaintiff named Jeffrey Lockhart alleged that because Binance isn’t registered as a securities exchange with the US government, it has limited obligation to disclose information about assets traded on its platform. “Crypto exchanges made massive profits by flouting securities laws and causing real harm to real people,” the law firm representing Lockhart said, according to Reuters.

A Binance spokesperson told the news organization, however, that the exchange is registered with the US Treasury Department’s Financial Crimes Enforcement Network and complies with all applicable regulations. “These assertions are without merit and we will defend ourselves vigorously,” they said. 

If you’ll recall, TerraUSD’s value collapsed in May, causing massive losses for investors who trusted its classification as a stablecoin that’s supposed to maintain its value of $1 per coin. Unlike other stablecoins backed by real-world assets, though, TerraUSD is an “algorithmic” stablecoin that’s not backed by fiat currency. Instead, it’s backed by a cryptocurrency called Luna and has a mechanism in place to restore its value to $1 if it ever falls. Investors were enticed to invest their money into TerraUSD due to the opportunity to make money with the Anchor lending program, which promised annual yields of 20 percent for deposits of the coin. Terra’s mechanism failed to protect its value, however, and it’s currently being traded at less than one cent. 

Lockhart is hoping for his lawsuit to be registered as a class action on behalf of all investors who purchased Terra from Binance. The world’s largest cryptocurrency exchange also paused bitcoin withdrawals for a few hours yesterday due to a “stuck on-chain transaction.” That came days after reports emerged, claiming that Binance had become a hub for fraudsters and drug traffickers and had helped launder $2.35 billion in illicit funds.

Automakers want Congress to drop the EV tax credit cap

The $7,500 federal EV tax credit has been used for several years to entice consumers to make greener car purchasing decisions, but it has expired for some automakers — and they feel the government needs to remove limits on that incentive. Reuters has learned the CEOs of Ford, GM, Stellantis and Toyota sent a letter to congressional leadership asking them to eliminate the sales-based tax credit cap. The move would help counter economic factors and supply shortages that have raised the costs of producing EVs, according to the companies.

The credit currently applies to the first 200,000 cars sold by any given brand. GM and Tesla have already reached the 200,000-unit mark, while both Ford and Toyota could hit the cap this year. This doesn’t affect state-level discounts. The companies hope Congress will replace the unit-based cap with a sunset date that would end the credit once the EV marketplace is “more mature.”

It’s not certain that enough politicians will warm up to the idea. Senator Joe Manchin, for instance, recently questioned the need for extended credits when EV demand regularly outstrips supply. And when the current Senate frequently shoots down bills without clear bipartisan support, any attempt to legislate the credit could fall apart.

The companies have strong motivations to act now, though. Republicans may regain control of one or both sides of Congress during this fall’s midterm elections, and car industry execs are concerned the shift in power could kill chances of extending tax credits. Former President Trump tried to axe the credit in his proposed 2020 budget, and had the support of Republicans — the chances aren’t high that the GOP will back an extension.

The customer tax breaks might not be as necessary as they once were, mind you. GM plans to sell a Chevy Equinox EV around $30,000, while Tesla has long-term plans for a $25,000 car. Although these models are years away and won’t compete with the lowest-priced conventional cars, they hint at a future where EVs are genuinely affordable without government subsidies.

Crypto lending giant Celsius ‘pauses’ withdrawals after token value plunges

Another big name in crypto finance is taking drastic steps in the wake of plunging currency values. As The Vergenotes, lending heavyweight Celsius Network has ‘paused’ all withdrawals, inter-account transfers and Swaps in response to “extreme market conditions.” The move is meant to stabilize the liquidity of assets and provide a better opportunity to meet withdrawal obligations, according the company.

The firm didn’t say when it would lift the freeze, or what would happen next. It promise to restore usual operations “as quickly as possible,” but cautioned that the effort would “take time” and could include delays.

Celsius has struggled like much of the cryptocurrency market. Its CEL token was worth $7 roughly a year ago, but had tumbled to $3 by early April and is worth just 21 cents as we write this. The company claimed on June 7th that it had the reserves and Ethereum to meet obligations, but CEL’s value was cut by more than half in just the few days after that initial announcement.

Critics have raised concerns about Celsius’ unusually high yields (currently over 18.6 percent for deposits) and its links to the failed stablecoin Terra. Its CFO was arrested in November over fraud, money laundering and sexual assault allegations. Regulators in Alabama, New Jersey, New York and Texas have also scrutinized Celsius’ activities, with New Jersey issuing a cease-and-desist order last September. Simply put, there have long been worries Celsius’ business was unsustainable — the activity pause doesn’t help matters.

Customers, meanwhile, might pay the price. Unlike a conventional bank, Celsius doesn’t have FDIC insurance to protect users. If it fails, the roughly 1.7 million people who use the lender might not have much opportunity to recover their lost finances. While some crypto asset regulation is in development, it might arrive too late for Celsius’ clients.