ARK 21Shares Updates Ethereum ETF Proposal with Cash Creation and Staking

ARK 21Shares has updated its application for a spot Ethereum exchange-traded fund (ETF), aligning it with the structure of its recently approved spot Bitcoin ETF. The revised proposal introduces a cash-creation model similar to its Bitcoin counterpart and includes plans for staking a portion of the ETF's Ether to generate additional income. This adjustment follows ARK 21Shares' and BlackRock's initiative to transition their spot Bitcoin ETFs to a cash creation and redemption model in December, a move prompted by discussions with U.S. securities regulators.

Under the amended proposal, ARK 21Shares would employ a cash-creation method, purchasing Ether equivalent to the order amount and depositing it into the trust's account to create shares of the spot Ether ETF. This change aims to streamline the creation process and bring the spot Ether ETF application more in line with approved spot Bitcoin ETFs. Despite potential impacts on arbitrage transactions, ARK 21Shares sees this adjustment as crucial for regulatory alignment and operational efficiency, as highlighted in the latest S-1 amendment filed on Feb. 7.

Additionally, the updated filing includes plans to stake Ether within the ETF, subject to regulatory approval, with staking rewards treated as income. While there are associated risks, such as the potential loss of Ether and extended lock-up periods, ARK 21Shares remains optimistic about the proposal's potential approval, with expectations set for a decision by May 24, alongside other applicants in the ETF space.

Also Read: BlackRock's Bitcoin ETF Achieved Top 0.2% Of All ETFs So Far This Year

NBA Faces Lawsuit Over Marketing Links With Failed Crypto Lender Voyager Digital

The National Basketball Association (NBA) is facing a class-action lawsuit over its marketing affiliations with Voyager Digital, a now-defunct crypto lender. Disgruntled investors of Voyager have filed a lawsuit, alleging that the NBA's endorsement of Voyager's promotional deals, particularly with the Dallas Mavericks, contributed to losses exceeding $4.2 billion. The lawsuit, filed in a Miami District Court, asserts that the NBA, by endorsing Voyager, failed in its duty as a "gatekeeper" and acted with gross negligence.

According to the plaintiffs, the NBA's widespread promotion of Voyager's unregistered securities renders it liable for the resulting damages incurred by investors. The suit also implicates the NBA for allegedly disregarding the risks associated with partnering with crypto exchanges amidst the pandemic-related financial challenges faced by sports leagues. The lawsuit extends its claims to McCarter & English, Voyager's law firm, accusing it of providing misleading legal opinions to assuage investor concerns about Voyager's offerings.

This legal action against the NBA stems from ongoing fallout related to Voyager's collapse and subsequent bankruptcy filing in July 2022. The lawsuit expands the scope of litigation beyond individual celebrities and sporting figures, targeting organizations like the NBA and legal entities like McCarter & English. As the legal proceedings unfold, the NBA and McCarter & English have yet to provide a response to the allegations.

TradeStation Crypto settles charges by SEC, 26 states over asset lending

TradeStation Crypto, a subsidiary of the Japanese Monex Group, has reached a settlement with the SEC and 26 states after facing charges related to an unregistered interest-bearing lending product. The SEC and state regulators will divide $3 million in penalties resulting from the case. The allegations stem from TradeStation Crypto's offering of a crypto lending product to U.S. investors between August 2020 and June 2022, wherein investors deposited or purchased crypto assets with the promise of receiving interest. The SEC concluded that this product constituted an unregistered security, with TradeStation Crypto exercising full discretion over asset utilization to generate interest payments.

In parallel, the North American Securities Administrators Association (NASAA) announced a settlement with TradeStation Crypto in 26 states, highlighting the collaborative efforts of state and federal authorities to protect investors. NASAA president Claire McHenry emphasized the significance of such joint investigations in safeguarding Main Street investors. This settlement follows a yearlong investigation conducted by eight states in coordination with NASAA, underscoring the regulatory scrutiny within the cryptocurrency sector. As TradeStation Crypto resolves these legal matters, its parent company, Monex Group, continues to navigate the crypto landscape, with recent acquisitions and plans to list its Coincheck exchange on the U.S. Nasdaq stock exchange, scheduled for July 2024.