Amy and David answer your questions — bitcoin mining, ETH staking, FTX, Tether, and more!

By Amy Castor and David Gerard

We asked readers what they were curious about in crypto. We posted part one of our answers earlier this month. Now here’s part two! [Twitter; Bluesky]

Sending us money will definitely help — here’s Amy’s Patreon, and here’s David’s.

Q: An update on the carbon footprint of the crypto industry for 2023, if this hasn’t been done by someone else already? Thanks [Thomas Endgame on Twitter]

The news is still dismal. The bitcoin network’s annual carbon footprint is a shocking 76.79 million tons of carbon dioxide, comparable to the entire country of Oman, according to Digiconomist. [Digiconomist, archive]

In terms of energy, bitcoin uses as much electricity as the country of Ukraine — 137.68 terawatt-hours annually. Energy consumption was highest in the first half of 2022 — 204 terawatt-hours per year — but started to go down in July, after the crypto collapse.

The network currently produces 23.75 kilotons of e-waste per year, comparable to the entire Netherlands, and every bitcoin transaction uses enough water to fill a swimming pool.

This is why some of the good citizens of Texas are fighting back against the crypto mines there.

Q: Who’ll be left holding bags when Tether collapses? [Julius Cobbett on Twitter]

Tethers (USDT) function as substitute dollars on offshore crypto exchanges that have no access to US dollar banking.

The biggest holders of tethers are arbitrageurs, such as Cumberland, who pass tethers along to secondary users in exchange for bitcoins and other crypto. [CoinTelegraph, 2020; Protos]

If all tethers were suddenly switched off tomorrow, that would be nearly 100 billion “dollars” in liquidity instantly sucked out of the market.

Any secondary users stuck holding tether would find their virtual dollars suddenly worthless. Arbitrageurs would have nothing to buy and sell bitcoin with on offshore exchanges — they would have to switch over to a different stablecoin — and the price of bitcoin would likely take a serious hit.

We would expect to see a large number of bitcoin holders trying to dump their holdings on actual-dollar exchanges like Coinbase in a mad rush to get out of the market. It might look like a bunch of mice trying to squeeze out of a tiny hole.

Q. We all know crypto is garbage, why does YAHOO finance continue to have the BTC ticker and other crypto related garbage up? I’d have thought by now it would be gone. [Barsoapguy on Twitter]

Sadly, with bitcoin ETFs and so on still all over the finance press, it’s a relevant number to put up. Even if they just pull the number from whatever CoinMarketCap says.

Q. In the bankruptcy of FTX, about 7B of the $8.7B said to be “lost” has been found, and with Crypto making a comeback all creditors may become whole or better. But SBF rots in prison for decades? And BK firms make over a billion in fees? [Bill Hochberg on Twitter]

There are two misconceptions here — one is that John Jay Ray and his team have found all the money and everything will be fine. The other is that Ray and his lawyers are gouging the creditors and nobody can stop them.

FTX got itself into trouble because it had stolen the customer assets, then inflated its balance sheets with worthless FTT tokens — its own illiquid supermarket loyalty card points. The FTT made up a third of its balance sheet. When FTX filed for bankruptcy in November 2022, it had a shortfall of $8.7 billion.

As we wrote at the time, FTX’s debts were real, but its assets were fake. The FTT was unsaleable garbage, not something that Ray and his team could turn into cash.

In August 2023, Ray estimated his team had recovered $7 billion — but that included spurious dollar values for trash crypto assets. A lot of it will be FTT and other worthless tokens that aren’t realistically convertible to cash in those quantities.

In October 2023, FTX said it would refund up to 90% of “distributable assets” to creditors. That’s 90% of the amount of funds that FTX was able to recover — not 90% of the amount owed to creditors. [FTX]

Bitcoin has gone up in price since FTX fell over. The price of bitcoin was $17,000 when FTX filed for bankruptcy. Now it’s over $40,000. If FTX held onto its crypto holdings, instead of converting them into cash as soon as possible, they might have made some money. But bankruptcy lawyers typically don’t gamble on volatile markets.

Bankruptcy professionals are super expensive. Ray’s team has so far cost about $200 million. That’s a lot of money, and many people questioned this — but even the independent fee examiner said, yep, that looked about right for the ridiculous mess Ray had to sort out here.

An appeals court has ordered the appointment of an independent examiner reporting to the US Trustee, paid for out of the bankruptcy estate, which will likely cost another $100 million or so.

Q: Eth staking and destaking? It was not possible to unstake at launch, does it work now? Are stakers happy? How scammy is the whole thing? There was some stuff about OFAC compliance for stakers too? I don’t know? I might use an explainer? [Laventeot on Twitter]

Ethereum proof of stake uses validators rather than miners like bitcoin does. Every validator has a chance at winning this moment’s ETH. If your block is the winner, you get the block reward, transaction fees, and all the MEV you can steal.

You can set up a validator at the cost of staking 32 ETH. When Ethereum moved to proof of stake in September 2022, this 32 ETH couldn’t be unstaked. But since Ethereum’s Shanghai upgrade in April 2023, it is now possible to unstake your staked ETH.

Unstaking has a queueing mechanism to avoid there being too much churn. So when there’s a big dump — such as when Celsius Network destaked 30,000 ETH recently to hand back to their bankruptcy creditors — it can take days or even weeks to process. [Nansen]

The staking process seems to work as advertised and the stakers are pleased with it.

The process closely resembles an unregistered security in the US — the Ethereum Foundation (incorporated in Switzerland) promotes that you put in your ETH and you get a return on it from the efforts of others.

Some exchanges offer staking as a service — this is probably okay if the customers are accredited or institutional, and an excellent way to accumulate cease and desist letters from the SEC and state securities regulators if the customers are retail.

Anyone moving money — or, in FinCEN’s terms, “value that substitutes for currency,” including “convertible virtual currencies” — as a business in the US is required to comply with sanctions law. This is usually assumed to mean not validating transactions for sanctioned blockchain addresses listed by OFAC. US-based validators would be very foolish to flout this.

OFAC compliance in transaction processing doesn’t directly relate to the economics of staking in itself — US bitcoin miners would similarly be liable under law for processing transactions for sanctioned entities, even if OFAC hasn’t called them up yet.

Q: maybe a check-in on the enterprise blockchain pitch decks? is the same dead horse still being beaten? [Stephen Farrugia on Twitter]

Enterprise blockchain has gone back into hibernation. Corporate interest in non-cryptocurrency blockchain goes up and down with the price of bitcoin — lots of interest in 2017 and 2018, almost none in 2019 and 2020, and a sudden burst of interest in 2021 as the number went up.

The problem with enterprise blockchain is that it’s a completely useless idea. A blockchain doesn’t actually work any better than using a conventional database in any situation where you have a trusted entity who’s responsible for the system. If you’re a business, that’ll be yourself. Just use Postgres.

The main remaining interest in enterprise blockchain is inside banks. We’ve had many reports of bank fintech research units infested with coiners trying to do something — anything — that they can say is “blockchain.” Société Générale’s completely useless euro stablecoin is one recent example.

Q. Something on the way that Bitcoin Magazine and BitMEX bought commercial places on the Peregrine Mission One so they could say they’d “gone to the moon” … and the spacecraft is going to miss the moon. [BiFuriosa on Bluesky]

Private companies have of late been offering to send personal items — cremated remains, time capsules, and even crypto — to the moon. Astrobotic, which owns Peregrin-1, is one of them.

In May, BitMEX and Bitcoin Magazine announced they were going to send a physical bitcoin to the moon via Astrobotic — that is, a metal medallion with a bitcoin private key engraved onto it. They declared that this would mark a “defining moment for bitcoin as we explore the possibilities of Bitcoin beyond planet Earth.” [BitMEX, archive]

Peregrin-1 made it into space earlier this month — but it never managed to land on the moon. So when it burned up on re-entry to Earth’s atmosphere, everything onboard burned up with it, including the time capsules, the ashes of more than 200 people, and the bitcoin. [Gizmodo]

Dogecoin fans had earlier funded a similar effort to send a physical dogecoin to the moon in 2015, also via Astrobotic. As of 2023, they were still trying to get it sent up. If the physical dogecoin had been onboard, it would have met the same fate. [Twitter, archive]

Sadly, even the moon hates crypto.

Q. Why are people still falling for this nonsense? [Peter Nimmo on Mastodon]

Dude, they can get rich for free! Maybe.

Thankfully, fewer people are falling for the nonsense. Retail trade is one-eighth of what it was in the 2021 bubble. Most of the dollars boosting the price of bitcoin since 2017 have been fake.

By the end of 2017, a billion USDT was sloshing around in the crypto markets; today in 2024, we’re coming up to 100 billion USDT. Bitcoin’s price is largely manipulated.

Crypto media — CoinDesk, The Block, Decrypt, and others — play a major role in promoting the nonsense. These outlets, owned and/or financed by crypto companies, are the public relations machines for the crypto industry. The finance press treats these sites as specialist trade press rather than fundamentally a promotional mechanism.

Crypto has also put big money into lobbying efforts, so we see senators like Cynthia Lummis, Kirsten Gillibrand, and Rand Paul shamefully repeating the propaganda.

Crypto skeptics are a smaller group who try to warn people of the dangers of investing in crypto. So it’s important to send money to us. Instead of bitcoins, we spend it on useful things like wine to get through all this guff.

Q. Once Crypto blows over what will we salt our popcorn with? [EamonnMR on Mastodon]

We don’t expect crypto to ever disappear completely. We do expect the number to eventually go down to the point where fewer people pay attention.

Meme stocks blew out even harder than crypto did. The remaining devotees are like QAnon for finance, posting to Reddit with their theories of how much they’ll surely get for their deactivated BBBY shares when the Mother Of All Short Squeezes finally descends.

Now that the well of dumb crypto money has dried up, venture capitalists are pivoting to AI as the next big thing. The tech is running out of steam, though. But the power consumption is likely to be even worse than bitcoin mining by 2027, and the AI grifters are using the same excuses for it as the bitcoin grifters. [Digiconomist]

Suckers are eternal. As long as money exists, fraud and get-rich schemes will be with us. And we’ll have something to write about.

Image: Hans at Pixabay, CC-0

Posted on January 27, 2024January 27, 2024 by Amy Castor 4

Crypto collapse: Mt Gox payouts, Tether hooks up the feds, SEC says no to Coinbase, crypto media mergers

By Amy Castor and David Gerard

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It’s not over until withdrawals are temporarily paused due to unusual market activity.
— Jacob Silverman

Tightening Tether’s tethers

Tether’s been under some regulatory heat after the reports of how useful USDT is for financing terrorists and other sanctioned entities. Even Cynthia Lummis, the crypto-pumping senator from Wyoming, loudly declared that Tether had to be dealt with.

The US government isn’t entirely happy with Tether’s financial shenanigans. But they’re really unhappy about sanctions violations, especially with what’s going on now in the Middle East.

So Tether has announced that it will now be freezing OFAC-sanctioned blockchain addresses — and it’s onboarded the US Secret Service and FBI onto Tether! [Tether, archive; letter, PDF, archive]

Tether doesn’t do anything voluntarily. We expect they were told that they would allow this or an extremely large hammer would come down upon them.

There’s more to Tether’s criminal use case than sanctions violation. The most jaw-dropping chapter in Zeke Faux’s excellent book Number Go Up (US, UK) is when he traced a direct message scammer to a human trafficking operation in Cambodia that favored tethers as its currency. South China Morning Post follows up on this with an in-depth report on how Cambodian organized crime uses tethers. [SCMP]

Credit rating firm S&P Global rated eight stablecoins for risk. Tether and Dai got the lowest marks. S&P notes in particular the lack of information on Tether’s reserves. [press release; S&P; Tether report, PDF]

At least some of the claimed Tether backing in treasuries is held in the US with Cantor Fitzgerald — exposing Tether to US touchability. This has been known since February 2023, and was proudly confirmed in December 2023 by Cantor CEO Howard Lutnick: “I hold their Treasuries, and they have a lot of Treasuries. I’m a big fan of Tethers.” [Ledger Insights; Forbes]

Cointelegraph had a fascinating story on a company called Exved using tethers for cross-border payments from Russia! Then they deleted it, for some reason. Exved was founded by Sergey Mendeleev, who also founded the OFAC-sanctioned crypto exchange Garantex, which was kicked out of Estonia. Exved is working with InDeFi Bank, another Mendeleev venture. We’re not so sure the new OFAC-compliant Tether will be 100% on board with this. [Cointelegraph, archive; Telegram, in Russian; Protos]

SEC answers Coinbase’s prayers: “No.”

In July 2022 — just after crypto crashed — Coinbase wrote to the SEC proposing new regulatory carveouts for crypto.

The SEC took its sweet time responding. Eventually, Coinbase sued in April 2023 with a writ of mandamus, demanding a bureaucratic response. The court told the SEC to get on with it, or at least supply a date by which it would answer.

Finally, the SEC has responded: “the Commission concludes that the requested rulemaking is currently unwarranted and denies the Petition.” The SEC thinks existing securities regulations cover crypto securities just fine, and there’s no reason for special rules for Coinbase. [SEC rejection, PDF; Coinbase letter to court, PDF; Gensler statement]

Coinbase general counsel Paul Grewal welcomed the opportunity to challenge Coinbase’s dumb and bad proposal being turned down. [Twitter, archive]

4 (continued)

Binance founder and former CEO Changpeng Zhao will not be returning home to Dubai anytime soon. US District Judge Richard Jones ordered CZ to remain in the US until his sentencing on February 24. He can travel within the US, but he cannot leave. [Order, PDF]

After being busted hard, Binance is still behaving weird. At the FT Crypto and Digital Assets Summit in London, the exchange’s new CEO Richard Teng refused to answer even basic questions, like where Binance is headquartered and whether it’s had an audit. “Why do you feel so entitled to those answers?” Teng said when pushed. “Is there a need for us to share all of this information publicly? No.” [FT]

CZ and Binance have been trying to dismiss the SEC charges against them. This is mostly loud table pounding, wherein Binance claims that what the SEC argued were securities are not really securities. [Doc 190, PDF, Doc 191, PDF]

France was the first country in Europe to grant Binance regulatory approval. State-endorsed blockchain courses for the unemployed and NFT diplomas helped push the country’s most vulnerable into crypto. Since the collapse of FTX and Binance’s $4.3 billion fine for money laundering, French President Emmanuel Macron’s relationship with CZ has fallen under scrutiny. [FT, archive]

London law firm Slateford helped to cover up Binance’s crimes and attempted to intimidate media outlet Disruption Banking from writing about Binance’s sloppy compliance hiring practices. (Disruption Banking told Slateford to get knotted and didn’t hear from them again.) [Disruption Banking]

Binance is finally removing all trading pairs against Great British pounds. [Binance, archive]

FTX: The IRS wants its money

FTX filed a reorganization plan in mid-December. The plan is 80 pages and the disclosure statement is 138 pages, but there’s a notable lack of detail on what happens next. None of the talk of starting a new exchange has made it into the current plan — this appears to just be a liquidation.

The plan treats crypto claims as their value in cash at the time of the bankruptcy filing on November 11, 2022, back when bitcoin was at $17,000 — less than half of what it is now.

Creditors will vote on the plan in 2024. The court must approve the plan before it is implemented. [Bloomberg, archive; Plan, PDF; Disclosure statement, PDF]

The IRS is demanding $24 billion in unpaid taxes from the corpse of FTX. John Jay Ray wants to know how the IRS came up with that ludicrous number — the exchange never earned anything near those amounts. The IRS originally wanted $44 billion, but brought the number down. Judge John Dorsey has told the IRS to show its working. [Doc 4588, PDF; Bloomberg, paywalled]

Three Arrows Capital

Three Arrows Capital was the overleveraged crypto hedge fund that blew up in 2022 and took out everyone else in crypto who hadn’t already been wrecked by Terra-Luna. After months of dodging culpability, co-founder Zhu Su was finally arrested in Singapore in September as he was trying to skip the country.

Zhu was released from jail and appeared before the Singapore High Court on December 13, where he had to explain to lawyers for the liquidator Teneo what happened when 3AC went broke. The information will be shared with creditors. [Bloomberg, archive]

A British Virgin Islands court froze $1.1 billion in assets of Zhu and his co-founder Kyle Davies and Davies’ wife Kelly Chen. [The Block]

Teneo expects a 46% recovery rate for 3AC creditors on $2.7 billion in claims. [The Block]

Crypto media in the new Ice Age

Crypto news outlet Decrypt has merged with “decentralized media firm” Rug Radio. No, we’d never heard of them either. The two firms will form a new holding company chaired by Josh Quittner. Decrypt had spun out from Consensys in May 2022, just before everything crashed. It’s reportedly been profitable since then — though crypto sites always say that. [Axios; Axios, 2022]

Forkast News in Hong Kong has merged with NFT data provider CryptoSlam and fired most of its staff. Forkast was founded in 2018 by former Bloomberg News anchor Angie Lau; it shut down editorial operations on November 30. [The Block]

Crypto news outlets ran seriously low on cash in 2019 and 2020, just before the crypto bubble, and they’re struggling again. We expect more merges and buyouts of top-tier (such as that is in crypto) and mid-tier crypto outlets. We predict news quality will decline further.

Amy recalls the old-style crypto media gravy train and eating in five-star restaurants every night in Scotland and London while embedded with Cardano in 2017. Thanks, Charles! Nocoining doesn’t pay nearly as well, but these days crypto media doesn’t either. There’s probably a book in those Cardano stories that nobody would ever read.

Regulatory clarity

The Financial Stability Oversight Council, which monitors domestic and international regulatory proposals, wants more US legislation to control crypto. FSOC’s 2023 annual report warns of dangers from:

crypto-asset price volatility, the market’s high use of leverage, the level of interconnectedness within the industry, operational risks, and the risk of runs on crypto-asset platforms and stablecoins. Vulnerabilities may also arise from token ownership concentration, cybersecurity risks, and the proliferation of platforms acting outside of or out of compliance with applicable laws and regulations.

Yeah, that about covers it. FSOC recommends (again) that “Congress pass legislation to provide for the regulation of stablecoins and of the spot market for crypto-assets that are not securities.” [Press release; annual report, PDF]

IOSCO, the body of international securities regulators, released its final report on how to regulate DeFi, to go with its November recommendations on crypto markets in general. IOSCO’s nine recommendations for DeFi haven’t changed from the draft version — treat these like the instruments they appear to be, and pay attention to the man behind the curtain. These are recommendations for national regulators, not rules, but look at the DeFi task force — this was led by the US SEC. [IOSCO press release, PDF; IOSCO report, PDF]

London-based neobank Revolut is suspending UK crypto services — you can no longer buy crypto with the app — citing a new raft of FCA regulations, which go into force on January 8. [CityAM; CoinDesk]

Crypto exchange KuCoin has settled with New York. The NY Attorney General charged KuCoin in March for violating securities laws by offering security tokens — including tether — while not registering with NYAG. KuCoin has agreed to pay a $22 million fine — $5.3 million going to the NYAG and $16.77 million to refund New York customers. KuCoin will also leave the state. [Stipulation and consent order, PDF; Twitter, archive]

Montenegro plans to extradite Terraform Labs cofounder Do Kwon to either the US or South Korea, where he is wanted on charges related to the collapse of Terra’s stablecoin. Kwon was arrested in Montenegro in March. Originally it looked like Montenegro was going to pass him off to the US, but the case has been handed back to the High Court for review. [Bloomberg, archive; Sudovi, in Montenegrin]

Anatoly Legkodymov of the Bitzlato crypto exchange, a favorite of the darknet markets, has pleaded guilty in the US to unlicensed money transmission. Legkodymov was arrested in Miami back in January. He has agreed to shut down the exchange. [Press release]

The SEC posted a new investor alert on crypto securities with a very lengthy section on claims of proof of reserves and how misleading these can be. [Investor.gov; Twitter, archive]

Santa Tibanne

It’s been nearly ten years, but Mt. Gox creditors are reportedly starting to receive repayments — small amounts in Japanese yen via PayPal. [Cointelegraph; Twitter, archive]

Some payouts are apparently bitcoin payouts — with the creditors not receiving a proportionate share of the remaining bitcoins, but instead the yen value of the bitcoins when Mt. Gox collapsed in February 2014. This means a 100% recovery for creditors! — but much less actual money.

There are still 140,000 bitcoins from Mt. Gox waiting to be released. If payouts are made in bitcoins and not just yen, we expect that claimants will want to cash out as soon as possible. This could have adverse effects on the bitcoin price.

Trouble down t’ pit

In the Celsius Network bankruptcy, Judge Martin Glenn has approved the plan to start a “MiningCo” bitcoin miner with some of the bankruptcy estate. He says that “the MiningCo Transaction falls squarely within the terms of the confirmed Plan and does not constitute a modification.” [Doc 4171, PDF]

Bitcoin miners are racing to buy up more mining equipment before bitcoin issuance halves in April or May 2024. Here’s to the miners sending each other broke as fast as possible [FT, archive]

Riot Platforms subsidiary Whinstone sent its private security to Rhodium Enterprise’s plant in Rockdale, Texas, to remove Rhodium employees and shut down their 125MW bitcoin mining facility. The two mining companies have been brawling over an energy agreement they had made before prices went up. [Bitcoin Magazine]

More good news for bitcoin

The UK is setting up a crypto hub! ’Cos that’s definitely what the UK needs, and not a working economy or something. [CoinDesk]

Liquid is a bitcoin sidechain set up by Blockstream at the end of 2018. It was intended for crypto exchange settlement, to work around the blockchain being unusably slow. It sees very little use — “On a typical day, there are more tweets about Liquid than there are transactions on its network.” [Protos]

A16z, Coinbase, and the Winklevoss twins say they’ve raised $78 million as part of a new push to influence the 2024 elections. [Politico]

Little-known fact: coiners can donate to the PAC in tethers. All they have to do is send them via an opaque Nevada trust structure to hide the origins of the funds. And this is perfectly legal! [FPPC, PDF, p. 85, “nonmonetary items”]

Ahead of the SEC’s deadline to rule on a bitcoin ETF, Barry Silbert, CEO of Digital Currency, has quietly stepped down from the board of DCG subsidiary and ETF applicant Grayscale and is no longer chairman, according to a recent SEC filing. Silbert will be replaced by Mark Shifke, the current DCG senior vice president of operations. US regulators are suing DCG over the Gemini Earn program co-run by its subsidiary Genesis. [Form 8-K]

Ordinals are an exciting new way to create NFTs on bitcoin! ’Cos who doesn’t want that? The bitcoin blockchain immediately clogged when it was actually used for stuff. Now TON, the blockchain that is totally not Telegram’s, no, no no, has ordinals — and it’s getting clogged too. [The Block]

Image: Mark Karpeles with aggrieved bitcoin trader outside Mt. Gox in Tokyo in 2014.

Posted on December 28, 2023December 28, 2023 by Amy Castor 1

John Jay Ray sues FTX inner circle for $1 billion, prosecutors want Sam Bankman-Fried’s bail revoked

We just posted an update on the latest happenings with FTX. This one is on David’s blog. [David Gerard]

In recent months, John Jay Ray III and his team have filed a pile of more actions to claw back funds for FTX creditors.

Ray is suing the FTX inner circle for $1 billion in fraudulent transfers. Among their bizarre plans, SBF and the gang wanted to turn the Island of Nauru into a doomsday bunker for effective altruists.

In other news, FTX and Genesis are settling, several media outlets are still battling to keep the court from permanently sealing FTX’s creditor list, and it’s looking like Sam is about to have his bail revoked. The prosecution is fed up with his efforts to “taint the jury pool.” Leaking Caroline’s diary to NYT reporters was the last straw for them.

Image: Caroline Ellison, Sam Bankman–Fried, Nishad Singh, and Gary Wang

Posted on July 30, 2023July 30, 2023 by Amy Castor 0

Crypto collapse: Venture capital goes home, Coinbase, Tether backing, FTX sues Hollywood VCs, 3AC on the beach

By Amy Castor and David Gerard

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“My survey of three card monte tables suggests they’ve always got at least one patron but you won’t see anyone playing at the big casinos which just shows the system is rigged.”
— crossestman

Crypto’s not dead! Look, it’s still twitching

Crypto venture capital investments have gone full crypto collapse, from $21.6 billion in 2022 to just $0.5 billion so far in 2023. This Fortune article includes the funniest graph of the week: [Fortune, archive]

Investors are leaving the crypto sector without any plans to return. [Bloomberg]

Crypto trading is at its lowest level since October 2020. The Block puts the volume for May 2023 at $424 billion. For comparison, May 2021 was $4.25 trillion and May 2022 was $1.4 trillion. [The Block]

Volume numbers are considerably less if you take into account that unregulated crypto exchanges are known for faking their volumes. Crypto trading is all but dead. We know this because exchanges run by normal finance guys don’t see any trading. [Bloomberg]

Traditional finance groups want to start their own crypto exchanges run in a non-clown-shoes manner. A nice ambition — but that was Gemini’s pitch and even they still had to resort to risky garbage. [FT]

The Winklevoss twins marketed Gemini as an exchange that played by the rules — one that serious money people could trust. But after the failure of FTX and the Genesis bankruptcy — in which Gemini is the largest creditor — they lost that trust. Maybe they could pivot to AI? [Bloomberg]

Crypto.com halted services for institutional traders in the US on June 21. The exchange cited “limited demand” as the reason. [news.bitcoin.com]

The rest of crypto is also desperate. Reddit founder Alexis Ohanian is still pushing play-to-earn games and touts Axie Infinity as a huge success. Gamers hate play-to-earn and think it’s vacuous horse hockey. [Twitter, archive]

Universe.xyz is the latest NFT market to shut down, taking all the images on the site with it. As more NFT markets shut down, your apes are in danger of going blank forever. [Twitter, archive]

TechMonitor asks: “Is crypto finally dead?” We should be so lucky. With quotes from David. [TechMonitor]

Coinbase: We didn’t do it, nobody saw us, and it wasn’t even a thing

Coinbase has responded to the SEC’s complaint with 177 pages of chaff. [Doc 22, PDF]

Paragraph 2 makes the claim that in approving Coinbase’s original S-1, the SEC approved Coinbase’s business. Let’s quote again this line from the S-1, signed off by Brian Armstrong: [SEC]

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

Coinbase argues that Congress is looking into cryptos, therefore existing laws don’t matter. Paul Grewal, Coinbase’s general counsel, has told Bloomberg how Coinbase’s big hope is that new laws will save their backsides. This is correct — Rep McHenry’s new crypto markets bill is indeed Coinbase’s only hope. [Bloomberg]

Coinbase claims that with this complaint, the SEC is working well outside its remit and that its ideas about whether crypto tokens are securities are entirely novel. Never mind the SEC’s repeated wins in court whenever a crypto issuer is dumb enough to take the matter that far. [Doc 23, PDF; CoinDesk]

Earlier, Coinbase filed a writ of mandamus demanding that the SEC consider its proposal for new crypto regulations. The SEC says it’ll have something to report within 120 days. Judge Cheryl Ann Krause expects a decision on Coinbase’s proposal from the regulator by October 11. [Doc 30, PDF; Doc 32, PDF]

Tether: Yes! We have no Chinese commercial paper

CoinDesk finally got access to documents from the New York Attorney General related to Tether’s reserves from March 31, 2021. [CoinDesk; CoinDesk, PDF; CoinDesk, PDF; CoinDesk, PDF; CoinDesk, PDF; Bloomberg]

The NYAG claimed that Tether had been lying about its reserves — which it had been. Tether and Bitfinex settled with New York for $18.5 million in February 2021.

The settlement required Tether to publish a breakdown of its reserves quarterly for two years. But what the public got to see in May 2021 were two skimpy pie charts, showing where Tether had parked its alleged $41 billion in backing reserves at the time. [Tether, archive]

CoinDesk then filed a Freedom of Information request for the fully detailed version of Tether’s report to the NYAG on its reserves.

Tether fought the release of the documents for two years. In February, they lost in court and decided not to go ahead with an appeal. So the NYAG sent Coindesk the documents on June 15. New York also sent the same documents to Bloomberg and Decrypt.

In June and July 2022, Tether vigorously denied that it held money in Chinese commercial paper — loans to Chinese companies which most money market funds avoid. It also said in September 2021 that it had no debt or securities linked to Evergrande, a cash-strapped Chinese real estate company. [Tether, 2022; Tether, 2022; CoinDesk, 2021]

Bloomberg called out Tether’s wider claims of no involvement in Chinese commercial paper as nonsense. [Bloomberg, 2021]

It turns out that Tether did hold Chinese commercial paper in 2021, and quite a lot of it. It held securities issued from banks around the world — but mainly China, including debt issued by the Industrial & Commercial Bank of China, China Construction Bank, and Agricultural Bank of China. ChainArgos took a close look at the funds and put together a spreadsheet. [Google Docs]

The Tether press releases on the FOIed docs are a hoot. Lots of table pounding. [Tether, archive; Tether, archive]

We give CoinDesk a bit of stick from time to time. But we also read the site every day and follow the livewire feed. They get all the credit for doggedly pursuing this one.

FTX versus the venture capitalists to the stars

John Jay Ray’s team at FTX seems to have found some more truly fascinating documents. FTX is suing venture capital firm K5 Global, its managers, Michael Kives and Bryan Baum, and various related entities to recover the $700 million that Sam Bankman-Fried put into the firm.

Kives worked at Creative Artists Agency from 2003 to 2018 as a Hollywood talent agent. He left in 2018 to found K5.

In February 2022, SBF attended a dinner party at Kives’ house, with A-list celebrities, billionaires, and politicians. He was deeply impressed with Kives’ “infinite connections” and even contemplated that Kives could work with FTX on “electoral politics.”

Less than three weeks later, SBF signed a “term sheet” agreeing to give Kives and Baum $125 million each personally and to invest billions of dollars into K5 over three years:

The Term Sheet was little more than a cursory list of investment ideas, and repeatedly stated that the actual “mechanics” of these very substantial investments would be later worked out “in the long form documents.”

SBF wired $300 million to K5 the next day. No due diligence was done on any of the deals — including $214.5 million for a 38% stake in MBK Capital LP Series T, whose gross asset value was just $2.94 million as of March 2022.

K5 were very close advisors. Kives and Baum joined FTX’s internal Slack chat. SBF reserved a room for them in his Bahamas luxury apartment. In May, Alameda transferred another $200 million to K5.

Sam didn’t worry too much about the fine details. In an August 2022 internal document, he wrote that “Bryan is ~100% aligned with FTX,” that “FTX is aligned with Bryan too,” and that “if there are significant artificial up-downs between FTX and K5 as entities, I’m happy to just true it up with cash estimates.”

SBF wrote that he was:

… aligned with Bryan and K5, and treats $1 to it as $1 to FTX even though we only own 33%, because whatever, we can always true up cash if needed, but also, who cares … There are logistical, PR, regulatory, etc reasons to not just merge K5 100% into FTX but I and Bryan will both act how we would if they were merged.

… Is Bryan an FTX employee, or a random 3rd party? The answer, really, is neither. The answer is that it’s sorta complicated and liminal and unclear. Bryan lives in the uncanny valley.

FTX and Alameda employees flagged K5’s “pretty bizarre” expenses at the time, such as “over $777k in design expenses” that had been billed to Alameda.

FTX wants the $700 million back as having been avoidable transfers. It may want even more money, as Ray’s team suspects that more interesting details will come out in discovery. FTX also wants K5’s claims in the bankruptcy disallowed until this matter is resolved. [Adversary Case, PDF]

More news from Chapter 11

Cameron Winklevoss tweeted yet another open letter to Barry Silbert of Digital Currency Group on July 4, demanding back Gemini Earn customers’ money. Winklevoss accuses DCG of “fraudulent behavior” and wants them to do the “right thing” and hand over $1.465 billion of dollars, bitcoin, and ether. If Silbert doesn’t pay up, Winklevoss threatens to sue on Friday, July 7. CoinDesk, which is owned by DCG, couldn’t get a comment from their own proprietor on the story. [Twitter, archive; CoinDesk]

After the deal for Binance.US to buy Voyager Digital fell through, Voyager gave up trying to sell itself and is liquidating. Here’s the liquidation notice. [Doc 1459, PDF]

Celsius is finally converting its altcoins to BTC and ETH as it pursues its plan to relaunch with the auction-winning consortium Fahrenheit. [CoinDesk]

If you have vastly too much time on your hands, here’s the full Celsius Network auction transcript — all 256 pages of it. [Doc 2748, PDF]

Customers of the bankrupt US branch of the Bittrex crypto exchange — which is being sued by the SEC — can withdraw those holdings that are clearly theirs … whatever that means. [CoinDesk]

Three Arrows Capital: What Su and Kyle did next

Crypto was taken out in 2022 by a one-two punch of Terra-Luna collapsing in May and then crypto hedge fund Three Arrows Capital collapsing in June.

Other crypto firms had invested in Terra-Luna and 3AC because they paid the highest interest rates! Now, you might think that investment firms would know that high interest means high risk.

3AC’s two founders, Su Zhu and Kyle Davies, just shut their office door in Singapore in late May 2022 and skipped the country, leaving their staff to tell investors the bad news.

What did Zhu and Davies do next? They spent the summer traveling around Asia, went surfing, and played video games. Davies is currently in Dubai and Zhu is back living in Singapore. [NYT]

Zhu and Davies insist they must have done nothing wrong because no government has filed charges yet. Uh huh.

3AC’s creditors think Zhu and Davies have done one or two things wrong. Teneo, the liquidator trying to clean up the 3AC mess, wants the pair fined $10,000 a day for contempt, saying that Davies has failed to respond to a subpoena. [CoinDesk]

The pair are suing Mike Dudas, the original founder of crypto media outlet The Block, for defamation. In the US, LOL. They allege Dudas said nasty things about their new crypto venture OPNX, though the suit doesn’t say what allegedly defamatory claims Dudas made. We expect the 3AC boys to have some trouble demonstrating they have a reputation to malign. Stephen Palley is representing Dudas. [CoinDesk]

Regulatory clarity

In the UK, the Financial Services and Markets Bill has passed. One part of this gives the Treasury greater powers to regulate crypto, likely via the Financial Conduct Authority. We should expect more detailed regulations within a year. [CoinDesk]

This comes not before time. UK losses to crypto fraud increased more than 40% to surpass £300 million (USD$373 million), according to Action Fraud, the national reporting center for fraud and cybercrime. [FT]

Europe’s MiCA is now law from the end of June 2023. It goes into application in one year for stablecoins and in 18 months for general crypto assets and virtual asset service providers. [EUR-Lex]

The European Central Bank keeps talking about doing a CBDC. This is good news for crypto! Or maybe it isn’t: [ECB]

Policymakers should be wary of supporting an industry that has so far produced no societal benefits and is increasingly trying to integrate into the traditional financial system, both to acquire legitimacy as part of that system and to piggyback on it.

The CFTC Division of Clearing and Risk sent out a staff advisory to registered derivatives clearing organizations on May 30, reminding them of the risks associated with expanding the scope of their activities. It specifically addressed crypto. [CFTC]

When the CFTC points out that market shenanigans are illegal in crypto just like they are in regular commodities, keep in mind that Avi Eisenberg is finally going to trial for allegedly committing those precise market shenanigans in DeFi. These are real go-to-jail crimes. [Bloomberg; Schedule, PDF; Case docket]

The Thailand SEC has banned crypto lending that pays returns to investors. It now also requires crypto trading firms to post the following warning: “Cryptocurrencies are high risk. Please study and understand the risks of cryptocurrencies thoroughly. because you may lose the entire amount invested.” [SEC Thailand, in Thai]

New York has settled with CoinEx after suing them in February for failing to register as a securities exchange. The company has to stop operating in the US — not just New York — return $1.1 million to investors, and pay $600,000 in penalties. [NYAG; Stipulation and consent, PDF]

The ETF trick will surely work this time

Guys, guys, the Blackrock and Fidelity bitcoin ETFs will change everything! They’re going to get surveillance of trading and market data from somewhere! This will surely answer all of the SEC’s previous objections to bitcoin ETFs! The market will be delighted!

… oh. The SEC has found these applications inadequate. [WSJ]

Blackrock and Fidelity are going to try again with Coinbase as the exchange supplying market surveillance. [CoinDesk]

But the trouble with monitoring at Coinbase is that Coinbase isn’t where the market is — the bitcoin market is at Binance. That’s where price discovery happens.

We expect these ETF applications to go no further than all the previous bitcoin ETF applications.

The good news for bitcoin continues its monotonous patter

Binance senior staff have been jumping ship. General counsel Han Ng, chief strategy officer Patrick Hillmann, and SVP for compliance Steven Christie all resigned this week. They specifically left over CZ’s response to the ongoing Department of Justice investigation. [Fortune]

Binance.US’s market share has dropped to 1%, down from a record 27% in April. Is Binance giving up on its US exchange? The market share nose-dived after the SEC sued Binance in June. [WSJ]

Fortune favors the internal trading desk: Crypto.com has been caught trading directly against its own customers. Dirty Bubble spotted the job ads for a proprietary trading desk at the firm in November 2022, of course. [FT, archive; Twitter, archive]

Russia is giving up on the idea of a unified state-run crypto exchange. Instead, it’s focusing on regulation for multiple exchanges. Russia is continuing to promote crypto as a way to evade sanctions for making international payments. When you’ve devastated your economy by embarking upon a very stupid war, that’s … a strategy? [Izvestia, Russian]

In crypto collapse news from the distant past, something’s happened in Quadriga! The government of British Columbia is seeking forfeiture of $600,000 in cash, gold bars, and Rolex watches that QuadrigaCX cofounder Michael Patryn has in a safe deposit box. The RCMP alleges the items are the proceeds of unlawful activity. [Vancouver Sun]

Posted on July 6, 2023July 7, 2023 by Amy Castor 0

FTX: John Jay Ray files second interim report, sues Daniel Friedberg

By Amy Castor and David Gerard

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Me: [turning to guy at gas station] so the polycule was mostly in the dark about the fraud. SBF had back door access
Guy: [pulling out taser from under seat] is that right
— Ed Zitron

“Attorney-1” was a bad boy

John Jay Ray III, the CEO of FTX in bankruptcy, has released a second interim report detailing how FTX skirted bank secrecy laws and commingled funds — and how an FTX lawyer, “Attorney-1,” served as Sam Bankman-Fried’s fix-it and hatchet man. [Report, PDF]

(We covered the first interim report, which came out in April, here.)

“Attorney-1” is very obviously Daniel Friedberg, who was FTX’s compliance officer and Alameda’s general counsel. A day after Ray released the interim report, FTX filed suit against Friedberg, alleging malfeasance in the course of his duties. The complaint details many of the same incidents in the report. [WSJ; redacted complaint, PDF]

In 2008, Friedberg was a colleague of Stuart Hoegner at Ultimate Bet, where the pair helped cover up a multi-million-dollar scandal in which the site cheated its players. Hoegner now works for Tether, a dubious stablecoin issuer.

SBF hiring Friedberg should have been the first clue that FTX.com was a massive fraud.

Friedberg resigned around the time the FTX Group filed for bankruptcy. Weeks later, he met with the FBI, the DOJ, and the SEC and told them he wanted to cooperate with any investigations.

There’s an interesting line in the interim report:

The Debtors have identified on Attorney-1’s hard drive a final copy of the false written testimony that Bankman-Fried provided to Congress.

FTX has access to the hard drive from Friedberg’s computer. Did Friedberg just leave the evidence behind when he quit FTX? Or did he willingly hand over his laptop to FBI agents? This hard drive seems to have had all sorts of interesting documents on it.

Friedberg hasn’t been charged with any crimes as yet — but based on Ray’s report and the ensuing lawsuit, we wouldn’t be surprised if there’s a sealed indictment out there waiting for him.

Following the money

FTX owes $8.7 billion in customer funds — over $6.4 billion of which is cash and stablecoins. According to Ray, Friedberg lent a helping hand when FTX executives “used commingled customer and corporate funds for speculative trading, venture investments, and the purchase of luxury properties, as well as for political and other donations designed to enhance their own power and influence.”

Ray details what he found about various FTX accounts and the flows of cash in and out of them. Tracking money flows was “extraordinarily challenging”:

… from the inception of the FTX.com exchange, the FTX Group commingled customer deposits and corporate funds, and misused them with abandon … Commingling and misuse occurred at their direction, and by their design.

Ray and his team have recovered $7 billion in “liquid assets” so far, which is astounding — though we’re not sure how liquid the crypto component of that will be in practice, or how much is unsaleable FTT tokens.

The report does not include FTX in Japan, Cyprus, or Singapore — areas where funds were properly segregated by law. It also does not address FTX.US, which Ray says is still under investigation.

No, no, it’s research

FTX lied to banks — a lot. Alameda Research had “research” in its name so that it could get bank accounts without immediately being flagged for enhanced due diligence as a money services business. FTX couldn’t get banking, so they used Alameda bank accounts to receive customer cash, right from the start.

But banks started asking inconvenient questions. When “Bank-1” — likely either Signature or Silvergate — asked why FTX was sending money to Alameda, an Alameda employee told them that “customers occasionally confuse FTX and Alameda” but that all wires through the account were to settle trades with Alameda.

This was false. In just 2020, one of Alameda’s accounts received more than $250 million in deposits from FTX customers and more than $4 billion from other Alameda accounts that were funded in part by customer deposits, says the report.

When banks started rejecting wires to Alameda accounts, FTX set up North Dimension so it could continue to funnel money to FTX. Friedberg and SBF told “Bank-1” that North Dimension was a crypto trading firm with substantial operations. In fact, it was an empty shell with no employees or operations.

Friedberg also engaged his old law firm to create a fake corporate register for North Dimension for the bank: “Specifically, after Bank-1 asked for a copy of the register, Attorney-1 directed a law firm to create a register.”

Time travel by document

In 2021, FTX Trading Ltd was planning to go public. As part of the paperwork for that, it needed an audited financial statement.

The problem was that from April 2019 when FTX.com first launched until the end of August 2020, FTX.com customers had been sending cash deposits to Alameda bank accounts. FTX needed to cover up the fact that they were just using Alameda to move customer and company funds around without any agreement to do so.

So in January 2021, Friedberg had his old law firm draft a “cash management agreement” to explain why Alameda held FTX cash. Friedberg created from this a fake “Payment Agent Agreement.”

FTX usually signed documents with DocuSign to provide an electronic record. In this case, to avoid a DocuSign timestamp, SBF wet-signed the document on behalf of Alameda and FTX on April 16, 2021 — backdated to 2019 “for the sole purpose of providing it to an external auditor.”

How did Ray’s team know the document was backdated? They found the original document file on Friedberg’s hard drive:

While metadata reflects that Attorney-1 created the Payment Agent Agreement on April 12, 2021, and that the executed version was last modified on April 16, 2021, the agreement purports to have an “Effective Date” of June 1, 2019 —nearly two years earlier.

The IPO never happened — but the fake document did help the FTX companies get more funding from “potential investors in connection with its $400 million Series C financing that closed in January 2022.”

Sam the philanthropist

SBF was famous for his Effective Altruism. He used FTX funds by preference:

The Debtors have been able to identify certain transactions that appear clearly to have been funded in part with commingled customer deposits. These include political and “charitable” donations, venture investments and acquisitions, and the purchase of luxury real estate for senior FTX Group employees in the Bahamas.

Sam’s charitable donations got a bit esoteric. The FTX Foundation gave one guy $300,000 to “Write a book about how to figure out what humans’ utility function is” — a question that LessWrong rationalist philosophy needs to answer so as to construct the perfect superintelligence to rule over us all. And that hopefully won’t turn out to be Roko’s basilisk. [LessWrong, PDF, 2004]

The Foundation gave someone else $400,000 to make YouTube videos to promote LessWrong rationalism and Effective Altruism.

Closer to home, the Foundation gave $20 million to the Guarding Against Pandemics PAC, which was run by Sam’s younger brother Gabe Bankman-Fried.

FTX sues Friedberg

Friedberg’s malfeasance was egregious enough that FTX is suing him for “damages caused by breaches of fiduciary duties, legal malpractice, and other wrongdoing, and to recover fraudulent transfers.”

The suit also alleges Friedberg paid off whistleblowers rather than deal with the compliance issues they raised.

Friedberg worked at FTX from 2017 until its collapse in 2022, the last 22 months of that as general counsel at Alameda and chief compliance officer at FTX. Joe Bankman, SBF’s father, pushed Sam to hire Friedberg and keep him “in the loop … so we have one person on top of everything.”

FTX paid Friedberg millions of dollars in salary and bonuses, and tens of millions in crypto — a $300,000 salary at FTX.US, a $1.4 million signing bonus, an 8% equity stake in FTX.US, and a $3 million payment from Alameda.

Plaintiffs want compensatory damages to be determined at trial, disgorgement of all of Friedberg’s compensation including the cryptos, punitive damages, and attorney’s fees.

Chief noncompliance officer

Friedberg’s putative job as chief compliance officer was to make sure the proper checks and balances were in place to prevent fraud, commingling of funds, and other wrongdoings. Per the complaint, he didn’t do any of that. Instead, “Friedberg actively participated in and facilitated such misconduct.”

Money was funneled to FTX insiders and booked as “personal loans” — which were never repaid, and which there was never any serious discussion of paying — “despite Friedberg’s false statement to the outside accountants that interest was paid quarterly on the loans.” Friedberg was involved in more than $2 billion in such “loans.”

Friedberg also encouraged the use of Signal for corporate messaging, preferably set to make messages disappear.

Ray is still appalled at how bad FTX’s accounting was:

Those entities that did produce financial statements used QuickBooks, Google documents, Slack communications, Excel spreadsheets, and other inadequate means for measuring the level of assets and liabilities held by the FTX Group. Entries in QuickBooks were often made months after transactions occurred, rendering real-time financial reporting and risk management impossible.

Hush money

Friedberg served as SBF’s fixer. He paid off whistleblowers and “retained” whistleblowers’ attorneys — that is, he paid them off too.

In November 2019, FTX and Alameda were hit with a class action lawsuit that accused the companies and their executives of racketeering and market manipulation. [Docket; Decrypt, 2019]

The lawsuit doesn’t name “Plaintiff’s Attorney-1” — but this is clearly Pavel Pogodin, who set up Bitcoin Manipulation Abatement for the sole purpose of filing crypto class actions.

Alameda said at the time: “The troll has no evidence of any wrongdoing, and will not further discover any — because there was no wrongdoing to discover evidence of.” [Medium, 2019]

Nevertheless, Friedberg took the suit seriously enough that he paid Pogodin off. (The details are redacted.) The suit was dismissed in December 2019.

As a California Bar member of flawless repute, Pogodin is happy to be paid not to do anything. He sent a letter in January 2022 threatening further possible action against FTX. Friedberg offered him “$1.6 million and $50,000 paid on a monthly basis.”

In sum, Friedberg arranged for the FTX Group to pay Plaintiffs’ Attorney-1 $3,320,000 through July 2022. Upon information and belief, Plaintiffs’ Attorney-1 provided no actual legal services to the FTX Group after signing the engagement letter.

An FTX.US employee on a $200,000 salary was fired after less than two months. She sent a demand letter in December 2021 claiming that “Alameda [was] nothing more than an extension of FTX, used to bolster investor confidence in FTX projects, and in turn drive up the prices of projects FTX had developed or invested in itself” and let employees insider-trade.

Friedberg gave this employee an “extraordinary settlement” (redacted in the filing) — and made a $12 million deal to retain Whistleblower-1’s attorney. Their only work for FTX was a three-page memo.

In early 2022, an attorney working at FTX for less than three months discovered that Alameda owned North Dimension. He flagged to Friedberg that North Dimension accounts were being used to fund FTX customer withdrawals and that Alameda didn’t have the proper money transmitter licenses.

Friedberg promptly fired him. The complaint details how the attorney was paid a large (redacted) severance package.

Other FTX news

John Ray’s team has so far racked up $200 million in fees — and the fee examiner thinks this is quite reasonable. Gotta pay the undertaker: [Bloomberg; summary report, PDF]

Without question, the fees incurred to date are remarkable, but so is the professionals’ performance. The Fee Examiner has been struck by the creativity, professionalism, and personal sacrifice of the Retained Professionals who sprung into action in November to begin transforming a smoldering heap of wreckage into a functioning Chapter 11 debtor-in-possession.

Over in the criminal case, SBF moved to dismiss 10 of the 13 charges against him. Judge Lewis Kaplan has told SBF to get knotted: “The Court has considered all of the arguments of the parties. To the extent not addressed herein, the arguments are either moot or without merit.” [Doc 136, PDF; Doc 148, PDF; Doc 149, PDF; NYT; Doc 167, PDF]

Sam wants to blame his troubles on Fenwick & West, the law firm used by FTX and Alameda, who apparently told him that all the hamfistedly obvious crimes he did were all totally legal. The DoJ and FTX objected, and Judge Kaplan has again told Sam to get knotted: “Neither Fenwick nor the FTX Debtors are part of the ‘prosecution team,’ and the government has no obligation to produce materials that are not within its possession, custody, or control.” [Bloomberg; Doc 150, PDF; Doc 151, PDF; Doc 151-1, PDF; Doc 156, PDF; Doc 159, PDF; Doc 166, PDF]

Over at Lightcone, who build and run LessWrong and the Effective Altruism Forum: “Funding is quite tight since the collapse of FTX.” They’re asking the users for $3 million to $6 million over the next year. [LessWrong]

Posted on June 29, 2023July 1, 2023 by Amy Castor 5

Crypto collapse: Treasury comes after DeFi, SEC comes after crypto exchanges, stablecoin bill, FTX first interim report

By Amy Castor and David Gerard

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“Please god let FTX go back into business, take a lot of money from crypto rubes, then collapse and lose everything again. Please let there be people who lost money in two separate FTX collapses.”
– Ariong

The Treasury brings good news for DeFi

The US Treasury released its “Illicit Finance Risk Assessment of Decentralized Finance.” The 42-page report examines DeFi from the perspective of anti-money laundering and sanctions laws. [Press release; Report, PDF]

This report is not about consumer protection — it’s about national security, sanctions busting, and terrorist financing. The Treasury is not happy:

“The assessment finds that illicit actors, including ransomware cybercriminals, thieves, scammers, and Democratic People’s Republic of Korea (DPRK) cyber actors, are using DeFi services in the process of transferring and laundering their illicit proceeds.

… In particular, this assessment finds that the most significant current illicit finance risk in this domain is from DeFi services that are not compliant with existing AML/CFT obligations.”

The report makes clear: blockchain analysis is not sufficient for KYC/AML. Calling something “decentralized” or a “DAO” doesn’t absolve you of responsibility. And almost everything in DeFi falls squarely in the ambit of existing regulation.

How’s regulatory clarity for crypto? Just fine, thank you:

“Through public statements, guidance, and enforcement actions, these agencies have made clear that the automation of certain functions through smart contracts or computer code does not affect the obligations of financial institutions offering covered services.”

The report recommends “strengthening U.S. AML/CFT supervision and, when relevant, enforcement of virtual asset activities, including DeFi services, to increase compliance by virtual asset firms with BSA obligations” and “enhancing the U.S. AML/CFT regulatory regime by closing any identified gaps in the BSA to the extent that they allow certain DeFi services to fall outside of the BSA’s definition of financial institution.”

Nicholas Weaver tells us the report “should be thought of as being as serious as a heart attack to the DeFi community, as this represents the US government regulation at its most serious. Indeed, the report can be summarized in a sentence: ‘If you want to continue to OFAC around, you are going to find out.’”

The SEC brings good news for Coinbase and DeFi

SEC chair Gary Gensler is fed up with Coinbase blatantly trading unregistered securities and not registering with the SEC as a proper securities exchange. So he’s going to update the rules.

The SEC has reopened the comment period for a proposal, initially issued in January 2022, that would update the definition of an “exchange” in Rule 3b-16 of the Exchange Act. [SEC press release; Fact sheet, PDF; Gensler statements]

Gensler’s comments are laser-targeted at Coinbase — and also DeFi:

“Make no mistake: many crypto trading platforms already come under the current definition of an exchange and thus have an existing duty to comply with the securities laws.”

He reiterates that “the vast majority of crypto tokens are securities” — the SEC’s position since 2017 — so “most crypto platforms today” meet the definition of a securities exchange. He adds:

“Yet these platforms are acting as if they have a choice to comply with our laws. They don’t. Congress gave the Commission a mandate to protect investors, regardless of the labels or technology used. Investors in the crypto markets must receive the same time-tested protections that the securities laws provide in all other markets.”

A regulatory framework for casino chips

On Saturday, The US House Financial Services Committee published an as-yet-untitled discussion draft bill for regulating stablecoins a few days before a hearing on the topic on Wednesday, April 19. [Discussion draft, PDF; hearing agenda]

The bill refers to stablecoins as “payment stablecoins.” This is utterly hypothetical. Nobody uses stablecoins to buy things. They’re chips for gambling on speculative assets in the crypto casinos.

This bill was a sudden surprise for a lot of people — but it appears to be a version of a draft bill that Senate Banking Committee Ranking Member Pat Toomey (R-PA) was circulating last year. [Stablecoin TRUST Act, 2022]

The bill divides stablecoin issuers into banks and nonbanks. Credit unions and banks that want to issue stablecoins would need approval from the financial regulator they fall under‚ the National Credit Union Administration, the FDIC, or the OCC. Non-bank stablecoin issuers would fall under the Federal Reserve.

For this bill, USDC or Pax Dollars, under the Fed, might pass muster. But Tether would be kicked out of anything touching the US because they wouldn’t be able to meet the transparency or liquidity requirements.

All stablecoins that circulate in the US would need to be backed by highly liquid assets — actual dollars and short-term treasuries — and redeemable within one day. That doesn’t leave much room for the issuers to turn a profit by putting the deposits in longer-term investments.

Custodia is not a bank under the Bank Holding Act, so for this bill, it would also be considered a non-bank. This bill would derail Custodia’s lawsuit against the Federal Reserve and the Federal Reserve Bank of Kansas City to try to force a Fed master account out of them.

The bill also calls for a moratorium on new algorithmic stablecoins until a study can be conducted.

Finally, the bill includes a request for federal regulators to study a central bank digital currency (CBDC) issued by the Fed. As we noted previously, FedNow would make a CBDC completely superfluous.

Hilary Allen, a professor of law at American University Washington College of Law, points out important shortcomings in the stablecoin bill. She argues that the bill is stacked in favor of stablecoins, and notes that the bill’s payment stablecoin definition could be a way of avoiding SEC jurisdiction. And while the bill calls for monthly attestations, it doesn’t say anything about full audits for stablecoin reserves. [Twitter]

FTX’s first interim report reads like Quadriga

John Jay Ray III, FTX’s CEO in bankruptcy, released his first interim report on the control failures at FTX and its businesses. Ray documents a shocking level of negligence, lack of record keeping, and complete disregard for cybersecurity at FTX. [Doc 1242, PDF]

The report confirms what we’ve been saying all along: all crypto exchanges behave as much like Quadriga as they can get away with. A few highlights:

FTX Group was managed almost exclusively by Sam Bankman-Fried, Nishad Singh, and Gary Wang. The trio had “no experience in risk management or running a business,” and SBF had final say in everything.
SBF openly joked about his company’s reckless accounting. In internal docs, he described Alameda as “hilariously beyond any threshold of any auditor being able to even get partially through an audit,” and how “we sometimes find $50m of assets lying around that we lost track of; such is life.”
FTX kept virtually all of its assets in hot wallets, live on the internet, as opposed to offline cold wallets, where they would be safe from hackers.
FTX and Alameda also kept private keys to billions of dollars in crypto-assets sitting in AWS’s cloud computing platform.
SBF stifled dissent with an iron fist. Ex-FTX US president Brett Harrison quit after a “protracted argument” with Sam over how FTX US was run. Sam cut Harrison’s bonuses, and when “senior internal counsel instructed him to apologize to Bankman-Fried for raising the concerns,” Harrison refused.

Ray and his team have so far recovered $1.4 billion in digital assets and have identified an additional $1.7 billion they are in the process of recovering. (We’re still waiting for him to ask for money back from The Block, but maybe that’s coming.)

In other FTX news, Voyager and FTX and their respective Unsecured Creditors’ Committees have reached an agreement on the money FTX paid to Voyager before FTX filed bankruptcy that FTX wants to claw back now — $445 million in cash will go into escrow while things are sorted out. [Doc 1266, PDF]

**Terraform Labs did nothing* wrong**

South Korean prosecutors have seized 414.5 billion won ($312 million) in illegal assets linked to nine Terraform Labs execs. None of the assets tied to Do Kwon have been recovered. Kwon converted everything to BTC and moved the funds — worth an estimated 91.4 billion won ($69 million) — to offshore exchanges. [KBS, Korean]

Who crashed UST in May 2022? Terraform Labs seems to have played no small part. In the three weeks leading up to the collapse, Terraform dumped over 450 million UST on the open market. [Cointelegraph]

Crypto mining: the free lunch is over

A bill limiting benefits and tax incentives for crypto miners in Texas unanimously passed a Senate committee vote and now it’s in the chamber. The bill was sponsored by three Republican state senators. Even they’re sick of the bitcoin miners. [SB 1751, PDF; CoinDesk; Fastdemocracy]

Bitcoin mining doesn’t create jobs — so Sweden has ended the 98% tax relief it gave data centers, including crypto miners. Crypto is outraged. [CoinDesk]

More good news for exchanges

The downfall of peer-to-peer bitcoin exchange Paxful is a comedy goldmine. Paxful cofounders Ray Youssef and Artur Schaback originally blamed Paxful’s closure on staff departures and regulatory challenges — but now they’re turning against each other in court.

As an example of their good judgment, in 2016, the pair drew police attention when they were spotted in Miami aiming an A15 rifle off their penthouse balcony for photo purposes. Former employees allege “favoritism, erratic dismissals, lavish spending on travel and reports of routine cannabis usage on the job by Youssef himself.”

Paxful’s business model was based on price-gouging fees on gift cards, according to one former employee. You want 10 euros worth of bitcoin? That’ll be 20 euros worth of gift cards. Coincidentally, money launderers are usually quite happy to pay fees on the order of 50%. Schaback thinks Paxful is still a viable enterprise. [CBS, 2016; CoinDesk]

As you might expect, OPNX, the new exchange for tokenized crypto debt run by the founders of the failed Three Arrows Capital and CoinFLEX, has gotten off to a feeble start. Trading volume in the first 24 hours was $13.64. [The Block]

The Winklevoss twins made a $100 million loan to Gemini. The move came after Gemini had informally sought funding from outside investors in recent months without coming to any agreements. We can’t find if the loan was in actual dollars or in crypto — or if it was just an IOU. [Bloomberg]

Binance relinquished the financial services license for its Australian derivatives business, Oztures Trading, after the Australian Securities and Investments Commission said they were likely to suspend it. Customers have until April 21 to close their accounts. [ASIC]

Who were the unnamed “VIP” traders on Binance mentioned in the CFTC suit? Jane Street, Tower, and Radix. [Bloomberg]

The Mt. Gox payout window has opened! Slowly. [Mt Gox, PDF; The Block]

Cryptadamus thinks that Crypto.com’s Canadian bank accounts are frozen. [Mastodon]

Good news for bitcoin

The Ethereum Shanghai upgrade went through on April 12. You can now withdraw your staked ether! As we predicted, there wasn’t a rush for the exits. [CoinDesk]

Bitfinex money mule Reggie Fowler will be sentenced on April 20. His lawyer wrote a lengthy letter to the judge asking for clemency — no jail time — because Fowler lived a hard life and never did anything wrong before. Nothing he was busted in court for, anyway. [Letter, PDF]

Michael Saylor’s MicroStrategy has bought yet more bitcoin, digging itself ever deeper. The company purchased an additional 1,045 BTC for $23.9 million, or an average price of $28,016, between March 23 and April 4. [8-K filing]

Tether got its tendrils into the US dollar system via Signet — former Signature Bank’s real-time payments system. Tether instructed crypto firms to send dollars to its Bahamas-based banking partner Capital Union Bank via Signet. We’re not clear on whether this violated the New York settlement — though if they lied about who they were, it broke banking law. [Bloomberg]

Cross River Bank, the banking partner of Coinbase and Circle, built its business on buy-now-pay-later (BNPL) and pandemic loans. What could go wrong? [Dirty Bubble]

With its firm commitment to quality cryptocurrency journalism, CoinDesk is hot on getting into generating its hopium space-filler using AI text generators. [CoinDesk]

Media stardom

“Ukraine wants to fund its post-war future with crypto” — with quotes from David. [Techmonitor]

“A lot of ordinary people who got into crypto just lost everything in various ways or lost chunks of it,” Gerard said. “And this is a lot of why I think retail investors should just keep the hell away from crypto.” [Business Insider]

Posted on April 16, 2023April 16, 2023 by Amy Castor 0

Crypto collapse: Genesis bankrupt, CoinDesk for sale, Bankman-Fried attacks FTX lawyers, Bitzlato busted

By Amy Castor and David Gerard

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I think we made some tremendous progress in the six months before I left.
— Jeffrey Skilling, Enron

Media stardom

Amy’s first piece for Foreign Policy is out now! “The Crypto Dominoes Are Still Falling: The bankruptcy of Genesis shows the need for regulators to have teeth.” She advises that regulators be given the power to act much more quickly against obvious nonsense. [Foreign Policy, paywalled]

Genesis goes down — DCG is fine, fine

The lending arm of Genesis finally filed for chapter 11 in the Southern District of New York on January 19. This has been expected for months, as they froze withdrawals in November. [Amended Petition, PDF; docket on Kroll; press release; Bloomberg; Michael Lito declaration, PDF]

The corporate entities that filed were Global Holdco and its lending subsidiaries Genesis Global Capital and Genesis Asia Pacific, which managed Genesis lending for Three Arrows Capital. Genesis’ derivatives, spot trading, broker-dealer, and custody businesses were not part of the bankruptcy.

Genesis owes its top 50 creditors — mostly unnamed on the petition — over $3.4 billion. Gemini Earn clients are collectively owed $765.9 million. Other big claims include a $78 million loan payable from Donut (a “high-yield” DeFi platform — “high yield” is a euphemism for “Ponzi”) and a VanEck fund with a $53.1 million loan payable. [Reuters]

But fear not! Genesis has a plan to exit the bankruptcy by May 19. It will try to sell its assets at auction within three months. [Chapter 11 Plan, PDF]

The settlement proposal is written in a confusing and opaque manner — but DCG controls the bankrupt entities utterly. DCG is trying to declare its left hand solvent and its right hand bankrupt, and stick the creditors with the losses.

Page 50 of the chapter 11 plan (page 54 of the PDF) sets out the street corner shell game. Claims are shuffled between the bankrupt Genesis entities and the non-bankrupt DCG entities such that heads DCG wins, and tails the creditors lose. Any Gemini Earn creditor who accepts this settlement relinquishes all claims against DCG, Gemini, and the Winklevoss twins personally.

We think DCG screwed up by covering for Genesis in July 2022, when it took on the claim to 3AC and issued Genesis a $1.1 billion promissory note in return. It’s clear that nobody at Genesis could refuse the offer — that this was entirely in the control of DCG. Also, the 3AC loan was secured in part by shares of GBTC, as issued by DCG’s Grayscale. Genesis should have declared bankruptcy then.

In addition to the $1.1 billion note, DCG owes Genesis another $575 million, in cash and cryptos. The Genesis bankruptcy is all about shielding DCG from liability.

“This SHOULD be criminal,” Nicholas Weaver said. “You sell a billion dollars worth of unregistered investments (it is called ‘securities fraud’), they go sour, your victims should be able to go after you. But this is all designed to basically be a perfect crime: a billion dollar theft, in plain sight, and with legal protection.” He advises the unsecured creditors’ committee to reject the offer. [Mastodon]

Gemini Earn claims against Genesis are part of the bankruptcy. It’s unlikely the customers will get all their money back in chapter 11. The question is: will Gemini make Earn depositors whole, or will the Winklevosses argue that Earn depositors are creditors of Genesis?

Cameron Winklevoss is still fighting to get Genesis to pay up. He threatened to sue DCG over the bankruptcy: “Unless Barry and DCG come to their senses and make a fair offer to creditors, we will be filing a lawsuit against Barry and DCG imminently.” [Twitter]

As we noted previously, the SEC case against Gemini Earn makes Gemini and Genesis jointly and severally liable to pay back customers in full, should the SEC win or the defendants settle. And Gemini has the funds and isn’t bankrupt. So Cameron really wants DCG to pay.

Who wants to buy CoinDesk?

DCG’s crypto news site CoinDesk is exploring a partial or full sale. CEO Kevin Worth says that CoinDesk has received multiple unsolicited offers of over $200 million. We raised an eyebrow at this claim, but hey. We doubt the offers were in actual cash dollars, though. [WSJ]

CoinDesk claims it received $50 million in revenue in 2022. It’s unclear where from. Its main income source was events — which are not so huge in the crypto winter. There are a few ads on the site. Staff expansions in the past year, particularly at CoinDesk TV, won’t have been cheap.

CoinDesk has been propped up by DCG since 2016 when Barry Silbert bought the site for $500,000. We understand that CoinDesk was about to go broke when Silbert dived in and rescued it. CoinDesk was still a small crypto blog then, but Silbert took it into the big time just in time for the 2017 bubble.

CoinDesk’s job is to be a PR machine for Silbert’s empire — often quite explicitly. [CoinDesk memo, archive] The only reason to buy CoinDesk would be to make it your PR machine.

3AC and CoinFLEX — a remarkable team

Three Arrows Capital founders Zhu Su and Kyle Davies are looking to raise $25 million for a new crypto claims exchange. That is, an exchange for claims against bankrupt crypto companies. 3AC are, of course, experts in going bankrupt in a really big way.

Zhu and Davies were going to name their new thing GTX — a take on FTX because G comes after F. They claimed this was just a temporary name after everyone made fun of them.

The pair are working alongside CoinFLEX founders Mark Lamb and Sudhu Arumugam. CoinFLEX filed for restructuring in the Seychelles in June after it suffered $84 million in losses from a large individual customer — Roger Ver.

GTX will run on CoinFLEX’s software and a legal team will oversee the onboarding of claims for all the recent crypto bankruptcies —including Celsius, Voyager, FTX, and Mt. Gox. Creditors who transfer their claims to GTX will receive credit in a token called USDG. [The Block]

In its pitch deck, GTX estimated there was a $20 billion market for crypto claims, based on the notional value of those claims. “We can dominate the crypto claims market within 2-3 months of go-live.” [WSJ, paywalled; FT, paywalled; pitch deck, archive, PDF]

The pitch deck ends with a splash detailing 3AC and CoinFLEX’s extensive crypto market successes. This fails to mention that both companies went broke — and that 3AC went broke so hard they took out much of crypto all by themselves.

GTX gets full points for audacity, and here’s to Zhu and Davies going to jail.

FTX: Judge says Sullivan & Cromwell can stay

Amy and Molly White live-tweeted the FTX hearing on Friday, January 20. It was about FTX’s applications to retain various bankruptcy professionals, mainly Sullivan & Cromwell. [Twitter; Twitter, Agenda, PDF]

Judge John Dorsey ruled FTX could continue using Sullivan & Cromwell, despite claims the law firm was too conflicted. [Order, PDF; Motion, PDF]

The US Trustee and the UCC had originally objected to S&C on the grounds the firm failed to make relevant disclosures regarding its prior dealings with FTX. But leading up to the hearing, the parties worked things out, and now the UST and UCC are on board. The only remaining objections came from FTX creditor Warren Winter, with a joinder from FTX creditor Richard Brummond. [Objection, PDF; Joinder, PDF]

In support of Winter’s objection, former FTX (and Ultimate Poker!) lawyer Daniel Friedberg filed a hilariously terrible declaration. Friedberg describes how shocked he was to learn that $8 billion of FTX customer money was missing. After reviewing his “ethical obligations” — a bodily organ hitherto unknown to Mr. Friedberg — he resigned. He tries to imply that S&C took FTX into bankruptcy so they could loot the corpse, helped from the inside by S&C’s former law partner, Ryne Miller. [Declaration, PDF]

Because Friedman filed his declaration late, White followed with an emergency motion to adjourn the hearing, so the court would have more time to chew on it. [Motion, PDF]

S&C’s James Bromely said Sam Bankman-Fried was behind all of this troublemaking. Friedberg’s declaration came hot on the heels of social media posts by SBF attacking the law firm. SBF is living in his parent’s home with an ankle bracelet and Friedberg has been questioned by the FBI. The pair were part of the inner circle that brought down FTX, said Bromely:

“If you are Mr. Bankman Fried or Mr. Friedberg, there is a concern about what is going on and what could happen to them. They can’t throw stones at the US attorney’s office. But they can throw stones at the Debtor’s counsel who are providing information to the prosecutors and the regulators, which is exactly what is happening.”

As far as Friedberg goes, Bromely added: “He’s got a checkered past. It takes a lot of guts for him to put something in writing that says, ‘I was the chief compliance officer at FTX.’”

Judge Dorsey dismissed everything in the Friedberg declaration saying, “It’s full of hearsay, innuendo, speculation, and rumor… certainly not something I would allow to be introduced into evidence in any event.”

FTX CEO John Jay Ray III said in his declaration S&C are not the villains. The villains are being pursued by criminal authorities. [Ray declaration, PDF]

We concur that S&C may be conflicted. But they’re competent to do the job, they’ve already spent 70 days on the case, which new counsel would have to do over, and it’s not like someone else would be cheaper.

The Trustee also wants to appoint an examiner in the case. The examiner motion will be heard on February 6.

FTX: mycrimes.blog

A new mycrimes.blog just dropped, with more drafts from Sam’s forthcoming book* If Caroline and CZ and John Ray and Sullivan & Cromwell Did It. SBF claims that FTX US was solvent when he passed it off to the lawyers, Sullivan & Cromwell. John Jay Ray III responds: “This is the problem, he thinks everything is one big honey pot.” [Substack; WSJ]

FTX secretly channeled a $50 million loan to Deltec Bank in the Bahamas, in a deal struck with Deltec chair Jean Chalopin. “Deltec is emerging as a central figure in the scrum of lawyers, banks and unwitting associates FTX pulled into its orbit.” Our regular readers will recognize Deltec as the known banker for Tether, who have occasionally claimed to hold more dollars for Tether than are documented in the entire Bahamas banking system. [Forbes, paywall]

It was obvious to executives and software developers at FTX that financial arrangements between FTX and Alameda were somewhat odd as early as 2020. FTX employees have been leaking documents to the New York Times. [NYT]

CFTC commissioner Christy Goldsmith Romero gave a speech on FTX’s failure and the nature of public trust in crypto firms. She goes in hard, particularly after the professional gatekeepers: “lawyers, accountants, auditors, compliance professionals and other gatekeepers for crypto firms failed customers in their essential duties.” Venture capitalists and pension funds too. She wants Congress to give the CFTC more power over crypto exchanges. [CFTC]

Romero also went after FTX’s venture capital backers on Bloomberg TV: “What kind of due diligence did they conduct? Why did they turn a blind eye to what should have been really flashing red lights?” [Bloomberg]

_{* c’mon, you know he will}

Bitzlato: Ladies and gentlemen, we got ’em

Everyone heard about the huge Fed announcement of an international cryptocurrency bust and went … who the hell is Bitzlato? Some tiny Hong Kong exchange run by some Russian living in Shenzhen? [Press release; order, PDF; affidavit, PDF]

Bitzlato, formerly called ChangeBot, was a small exchange with a peer-to-peer service, similar to LocalBitcoins. Its user base was Russian crooks doing crooked things with fake accounts. Users with valid Know-Your-Customer info would create “drop” accounts which they would then sell to crooks. So Bitzlato could say it had KYC, even if it didn’t do anything.

Bitzlato was not systemic to the crypto economy. But it was important to the Russia-based ransomware economy, and it was the exchange of choice for users of the Hydra darknet market that was busted in April 2022.

The Feds basically enacted Nicholas Weaver and Bruce Schneier’s 2021 plan to take out ransomware: hit the very few exchanges willing to touch such tainted coins. [Slate, 2021]

The fun part of the FBI affidavit is the tales of Bitzlato’s criminal customer service, page 10 onwards:

•‌ On or about December 27, 2017, a user with the username “Dude Weed” wrote to Bitzlato’s customer service portal, stating: “I have a bitcoin wallet in my account on the Hydra site. I also have a wallet here … How do I recharge a Hydra wallet”? The user also provided transaction details. Based on my training and experience, this query reflects the user’s desire to send funds from Bitzlato to Hydra. A Bitzlato representative responded: “Hello dude weed,” apologized for the delay in the transaction, and stated that “The transaction successfully went online.” The Bitzlato representative provided a link to an online blockchain explorer, reflecting a completed Bitcoin transaction whose total amount was then equivalent to approximately $14,600.

•‌ On December 17, 2020, a Bitzlato representative asked a user to provide his identity documents. The user protested, writing, “I don’t quite understand why you need a photo of this card? It’s not mine[.]” In further conversations, the user clarified that “everyone on the site trades with other people’s cards … they often discuss so-called ‘drops.’” The user commented that he had been told to create an account using credentials supplied by an online cryptocurrency training course that he had found on Instagram. The Bitzlato representative asked the user to provide his true identity documents and, rather than terminate that user, said the user could keep trading on Bitzlato.

Image: Cameron Winklevoss on Instagram

Posted on January 21, 2023January 26, 2023 by Amy Castor 1

Declaration of John Jay Ray — FTX is worse than Enron

John Jay Ray III took over FTX in the wee hours of November 11. Hours later, he filed for Chapter 11 in a Delaware court.

The new CEO filed his first-day declaration this morning. It’s incredible. David Gerard and I summarize it — this one is on David’s blog. [David Gerard]

In his 40-year career, Ray, who oversaw the Enron liquidation, has never seen “such a complete failure of corporate controls.”

Ray has divided SBF’s empire into four silos, but the accounting is all unreliable because he’s gotten the numbers from SBF.

Ray and his team will have to create a balance sheet and financial statements from scratch using what records they have of cash transactions.

FTX Digital Markets, the company’s Bahamas subsidiary, filed a for Chapter 15 in SDNY. Ray’s team is asking the court to move the Chapter 15 case to Delaware.

Ray thinks the filing in SDNY was shenanigans by SBF and unnamed agents of the Bahamas government!

SBF’s late night DMs with a Vox reporter, published the next day, make it looks like he was in on the plot.

Posted on November 17, 2022November 17, 2022 by Amy Castor 0

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Independent Journalist

Tightening Tether’s tethers

SEC answers Coinbase’s prayers: “No.”

4 (continued)

FTX: The IRS wants its money

Three Arrows Capital

Crypto media in the new Ice Age

Regulatory clarity

Santa Tibanne

Trouble down t’ pit

More good news for bitcoin

Crypto’s not dead! Look, it’s still twitching

Coinbase: We didn’t do it, nobody saw us, and it wasn’t even a thing

Tether: Yes! We have no Chinese commercial paper

FTX versus the venture capitalists to the stars

More news from Chapter 11

Three Arrows Capital: What Su and Kyle did next

Regulatory clarity

The ETF trick will surely work this time

The good news for bitcoin continues its monotonous patter

“Attorney-1” was a bad boy

Following the money

No, no, it’s research

Time travel by document

Sam the philanthropist

FTX sues Friedberg

Chief noncompliance officer

Hush money

Other FTX news

The Treasury brings good news for DeFi

The SEC brings good news for Coinbase and DeFi

A regulatory framework for casino chips

FTX’s first interim report reads like Quadriga

Terraform Labs did nothing* wrong

Crypto mining: the free lunch is over

More good news for exchanges

Good news for bitcoin

Media stardom

Media stardom

Genesis goes down — DCG is fine, fine

Who wants to buy CoinDesk?

3AC and CoinFLEX — a remarkable team

FTX: Judge says Sullivan & Cromwell can stay

FTX: mycrimes.blog

Bitzlato: Ladies and gentlemen, we got ’em

**Terraform Labs did nothing* wrong**