Good morning. The collapse of crypto exchange FTX wiped out millions of its customers’ crypto holdings and turned its billionaire founder into a pariah now facing criminal fraud charges in New York. But the fall of Sam Bankman-Fried and his Bahamas-based exchange, which at its peak held more than $10 billion in customer deposits, hasn’t fundamentally changed how crypto works or is regulated. The sector is still the Wild West of finance.

Terrorists and money launderers use cryptocurrencies to cover their tracks. Hackers frequently find ways to steal digital coins. Worldwide trading is still concentrated in a huge offshore exchange, Binance, which has been accused of some of the same risky practices as FTX.

Although it roiled the crypto world, FTX’s collapse didn’t alter the legal or regulatory landscape. Unlike past crises that spurred U.S. lawmakers into action, this one has legislators divided over how, or even whether, to address crypto markets.

• Another possible reason FTX hasn’t led to more action? For all the hype around it, crypto is still small—with a global market capitalization of about $1 trillion—compared with mainstream markets and the financial system. So while individual investors are often at risk, the sector hasn’t so far posed a systemic danger.
   
• The potential risks to individual investors: These are behind ongoing efforts by the SEC to bring the sector to heel. Another FTX could happen because crypto’s basic business model is rife with conflicts of interest, SEC Chair Gary Gensler said in an interview. “There is a lot of interconnectedness, centralization and leverage in the system, and noncompliance,” Gensler said. “It’s a recipe for more investors to get harmed going forward.”
   
• Congress is divided over what, if anything, to do. Republicans tend to favor legislation that would impose customized rules on crypto. But top Democrats are content letting the SEC and other regulators police the system, said Ian Katz, a policy analyst at Capital Alpha Partners. “If they really felt like there were more Main Street mom-and-pop types getting hurt, there would be more of a drive to get something done,” Katz said.
   
• In case you missed it: Crypto sector seeks lawyers, compliance officers after reputational hits
   
• Listen to the podcast series: The Trial of Crypto’s Golden Boy

Secretive Hamas commander known as ‘the Guest’ is Israel’s prime target

Over the past two decades, Israel has tried to assassinate Mohammed Deif several times, maiming him in attacks and killing his wife and baby son. The commander of the armed wing of Hamas on Saturday inflicted in return one of the deadliest-ever Palestinian blows on Israel.

His real name isn’t believed to be Deif, which in Arabic means “guest” in reference to his nomadic lifestyle, but Mohammed al-Masri, according to the U.S. government, which designates him a terrorist.

The brutality of the attacks by the Izz ad-Din al-Qassam Brigades, directed by Deif, have shocked even hardened Israelis. Militants mowed down revelers at a music festival, murdered entire communities of people on the Gaza border and kidnapped children and the elderly.

Meanwhile, pressure mounts on Biden to freeze $6 billion in Iranian oil proceeds. 

A growing number of lawmakers are calling on President Biden to take tougher actions against Iran to hold it accountable for its support of Hamas militants. Several Democratic senators joined their Republican colleagues Wednesday to press the Biden administration to freeze the roughly $6 billion in Iranian oil proceeds slated to be released to Tehran as part of a prisoner swap deal last month, and lawmakers from both parties are also calling for other steps to pressure Iran, including tighter enforcements of sanctions on its oil exports.

Sen. Sherrod Brown, chairman of the Senate Banking Committee, was among the Democrats calling for such steps. Sens. Joe Manchin of West Virginia, Jon Tester of Montana and Bob Casey of Pennsylvania have also called for refreezing of the fund. Treasury Secretary Janet Yellen said Wednesday that nothing was off the table in terms of possible future actions, without specifying steps.

• Blaming Israel for Attacks Sparks Backlash Across U.S.
• As Israel Bombards Gaza, Fears of Humanitarian Disaster Mount
• U.S. Families With Loved Ones Missing in Israel Turn to Washington for Help
• 'Why Do You Have to Go?’ Israelis Prepare Their Children for War

• The U.S. has informed three major Asian chip makers that they can maintain their current operations in China for the foreseeable future, though significant tech upgrades would prove difficult.
   
• Chinese battery companies critical to electric vehicles are pursuing deals with U.S. free-trade partners South Korea and Morocco, seeking to tap growing demand in America and bypass rules aimed at shutting them out of the market.
   
• Illumina must unwind its $7.1 billion acquisition of cancer-test developer Grail, the European Union’s competition watchdog said.
   
• U.K. regulators fined former Barclays Chief Executive Jes Staley more than $2 million and banned him from senior roles in banking, saying he had given misleading statements about his ties to Jeffrey Epstein.

Belgium plans $1.8 billion Ukraine fund using taxes on frozen Russian assets

Belgium is creating a $1.8 billion fund for Ukraine using tax revenue from profit generated by seized Russian central bank assets, its prime minister said on Wednesday.

The decision is the first significant step in helping Ukraine by making use of roughly $280 billion in Russian assets that were frozen under Western sanctions in the first days of the war.

Most of the Russian central bank assets are held in the European Union. Of that, roughly two-thirds is held at Belgian-based clearinghouse Euroclear, according to Belgian officials.

• The federal deficit is even bigger than it looks. Student-debt cancellation complicates the numbers as higher interest rates make borrowing costlier
   
• The Pentagon announced a new batch of weaponry and other materiel for Ukraine’s effort to fight off Russia’s invasion, amid rising obstacles in Washington to future military and financial support.
   
• Negotiations between Hollywood studios, streamers and striking actors stalled Wednesday after less than two weeks, dampening hopes that the industry could soon return to work.
   
• The United Auto Workers union went on strike at a Ford Motor pickup-truck plant in Kentucky Wednesday evening, escalating its nearly four-week labor action by hitting the automaker’s largest factory.
   
• After a historic run-up in prices, the luxury rental market in the Miami area is seeing a significant slowdown.
   
• The conflict in Israel and rising tensions across the Middle East are raising risks to the global oil market, as demand for crude is set to rise to a record in 2023, according to the International Energy Agency.

Israeli cyber companies rally as digital, physical assaults continue

Disruptive cyberattacks in Israel are growing, hitting business and government websites as Israeli soldiers mass at the Gaza border. Cybersecurity companies in Israel, concerned about more digital attacks in the coming days, are finding ways to keep products and services available.

Executives from Israeli security providers described frantic efforts to support their employees after the weekend’s cross-border incursion from Gaza by Hamas gunmen, who killed more than 1,200 people and took over 100 more hostage. Palestinian authorities said 1,055 people have been killed so far in retaliatory airstrikes on Gaza. Israel has called up more than 300,000 reservists, some of whom staff critical functions at cyber companies and their customers.

• House Republicans narrowly picked Rep. Steve Scalise as their nominee for speaker, but some of rival Rep. Jim Jordan’s backers said they wouldn’t support the party’s choice, setting the stage for another unpredictable leadership fight on the House floor.
   
• Walgreens Boots Alliance named Tim Wentworth as its new chief executive, picking a healthcare veteran to steer the pharmacy chain as it faces a profit squeeze and labor pressures.
   
• Goldman Sachs has agreed to sell specialty lender GreenSky to a group of investors, a major step in what has become a costly retreat from the Wall Street bank’s grand ambitions to serve the masses.

Follow us on X at @WSJRisk. Follow Risk & Compliance editor David Smagalla @DSmagalla_DJ and reporters Mengqi Sun @_MengqiSun, Dylan Tokar @dgtokar and Richard Vanderford @VanderfordRich.

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