Blockchain technology is claimed to be according to blockchain proponents to be one of the most impactfull discoveries in the recent history. It is promised to have a massive potential to change how we handle online transactions. Despite some skeptics, the majority of experts agree that blockchain has the potential to disrupt the banking and financial industry, and many other ones! To put it simply, blockchain enables decentralized transactions across a P2P network. There are applications where those propertied can be very useful, but there are many cases where blockchain migh not be the best solution even though it is hyped to be solution for very many application (remember to ask Do you need a blockchain? often).
This 16 Blockchain Disruptions (Infographic) by bitfortune.net tries to help you understand how the blockchain technology can and will improve 16 different industries, from music to government.
Infographic by bitfortune.net
1,206 Comments
Tomi Engdahl says:
Song Jung-a / Financial Times:
South Korean prosecutors believe Do Kwon, who founded the collapsed TerraUSD and LUNA, is hiding in Serbia, traveling via Dubai from Singapore in October
https://www.ft.com/content/4b0a1d1f-f6f2-4879-a9a3-e45174a63f27
Tomi Engdahl says:
Jonathan Weil / Wall Street Journal:
Mazar’s recent Binance “proof of reserve” report only covers a small set of financial data, raising fresh questions about Binance’s ability to meet obligations
Binance Is Trying to Calm Investors, but Its Finances Remain a Mystery
Crypto exchange has begun releasing data to shore up confidence following collapse of FTX
https://www.wsj.com/articles/binance-is-trying-to-calm-investors-but-its-finances-remain-a-mystery-11670679351?mod=djemalertNEWS
Binance recently made a commitment to transparency, but it has a long way to go before it discloses enough meaningful information to give investors confidence in its future, accounting and financial specialists say.
The world’s largest cryptocurrency exchange is seeking to reassure customers about the safety of their holdings after the collapse of FTX. Binance’s position means its success or failure will weigh heavily on the entire crypto market.
“It’s important for us to show users that the coffers are not bare, like at FTX,” said Binance’s chief strategy officer, Patrick Hillmann.
Over the past month, Binance has publicized details about its crypto wallet addresses. It has hired an outside accounting firm to prepare a “proof of reserve report” covering a portion of its assets and liabilities, including a small set of financial data. And it has promised more information will be forthcoming.
“When we say proof of reserves, we are specifically referring to those assets that we hold in custody for users,” Binance says on its website. “This means that we are showing evidence and proof that Binance has funds that cover all of our users assets 1:1, as well as some reserves.”
“I can’t imagine it answers all the questions an investor would have about the sufficiency of collateralization,”
The report said its purpose was to show customers that the assets covered in the report “are collateralized, exist on the blockchain(s) and are under the control of Binance.”
In an interview, Binance’s Mr. Hillmann said the Mazars letter covered all the bitcoin assets and bitcoin liabilities for the company’s Binance.com exchange—although the Mazars letter itself didn’t say this. Mr. Hillmann also said the Mazars letter didn’t cover any assets or liabilities at Binance’s U.S. operations.
Tomi Engdahl says:
Reuters:
Sources: US prosecutors are split on charging Binance and its executives over possible money laundering and sanctions violations and have discussed a plea deal
Exclusive: U.S. Justice Dept is split over charging Binance as crypto world falters, sources say
https://www.reuters.com/markets/us/us-justice-dept-is-split-over-charging-binance-crypto-world-falters-sources-2022-12-12/
Some DOJ prosecutors believe evidence justifies filing charges against executives including CEO Zhao
DOJ officials have discussed possible plea deals with Binance’s attorneys
Binance is under investigation for possible money laundering and criminal sanctions violations
Binance says it has no insight into the “inner workings of the US Justice Department”
WASHINGTON, Dec 12 (Reuters) – Splits between U.S. Department of Justice prosecutors are delaying the conclusion of a long-running criminal investigation into the world’s largest cryptocurrency exchange Binance, four people familiar with the matter have told Reuters.
The stakes are high for the deeply troubled crypto sector. If the investigation goes against Binance and Zhao, it could loosen Binance’s grip on the industry. Its hold has been strengthened by the recent collapse of rival exchange FTX.
The charges under investigation are unlicensed money transmission, money laundering conspiracy and criminal sanctions violations, the four people said.
Little has been revealed about the case.
The new reporting shows that the case has shadowed Binance for most of its five years in existence, shaping Zhao’s management of the company while he drove its explosive growth around the world.
Reuters has investigated Binance’s financial crime compliance over the course of 2022. The reporting showed that Binance kept weak anti-money laundering controls, processed over $10 billion in payments for criminals and companies seeking to evade U.S. sanctions, and plotted to evade regulators in the United States and elsewhere.
Binance has disputed the articles
Launched by Zhao in Shanghai in 2017, Binance now dominates the crypto industry. The exchange processed trades worth around $1.6 trillion in October, about half of the entire crypto market’s trading volume. That sum dwarfed its former challenger FTX, which handled $230 billion in trades that month, according to data site CryptoCompare.
FTX imploded in early November, triggering a wave of public demands for greater regulation of the cryptocurrency industry. Founder Sam Bankman-Fried had boasted his exchange was the “most regulated,” but he based it in the Bahamas, where oversight was light, and secretly used customer deposits.
Tomi Engdahl says:
New York Times:
Source: US prosecutors charge Sam Bankman-Fried with wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy, and money laundering — A statement by the government of the Bahamas said Mr. Bankman-Fried was arrested after prosecutors in the United States filed criminal charges.
https://www.nytimes.com/2022/12/12/business/ftx-sam-bankman-fried-bahamas.html
U.S. House Committee on Financial Services:
FTX CEO John Ray’s testimony to the US House: FTX and Alameda commingled customer assets, insiders were paid $1B+, FTX US was not run independently, and more — Chairwoman Waters, Ranking Member McHenry, distinguished members of the Committee: thank you for the invitation to appear before you today.
https://financialservices.house.gov/uploadedfiles/hhrg-117-ba00-wstate-rayj-20221213.pdf
Tomi Engdahl says:
Bloomberg:
FTX lawyers says Bahamas officials worked to help SBF regain access to FTX Trading’s systems, asking him to mint a coin and transfer funds to island officials — Bahamas government officials are working closely with failed crypto magnate Sam Bankman-Fried and trying to help him regain access …
Bahamas Told Bankman-Fried to Mint New Crypto as FTX Collapsed, Lawyers Say
https://www.bloomberg.com/news/articles/2022-12-12/ftx-says-bahamas-trying-to-help-bankman-fried-access-key-systems
US lawyers claim Bahamas asked SBF to mint new crypto coins
FTX, Bahamas regulators file dueling bankruptcy court papers
Bahamas government officials worked closely with Sam Bankman-Fried and tried to help him regain access to key computer systems of bankrupt FTX Trading, lawyers for FTX said in a court filing before the failed crypto magnate was arrested on Monday.
Tomi Engdahl says:
Steven Ehrlich / Forbes:
A look at a draft copy of Sam Bankman-Fried’s planned House testimony, including accusations against John Ray and screenshots from a chat with Changpeng Zhao — Sam Bankman-Fried, founder of collapsed crypto exchange FTX, was scheduled to testify Tuesday before the U.S. House of Representatives Committee on Financial Services.
https://www.forbes.com/sites/stevenehrlich/2022/12/13/exclusive-transcript-the-full-testimony-sbf-planned-to-give-to-congress/
Tomi Engdahl says:
U.S. Securities and Exchange Commission:
The SEC charges Sam Bankman-Fried with defrauding investors and concealing diverting FTX customer funds to Alameda while raising $1.8B+ since at least May 2019 — Defendant concealed his diversion of FTX customers’ funds to crypto trading firm Alameda Research while raising more than $1.8 billion from investors
SEC Charges Samuel Bankman-Fried with Defrauding Investors in Crypto Asset Trading Platform FTX
https://www.sec.gov/news/press-release/2022-219
Defendant concealed his diversion of FTX customers’ funds to crypto trading firm Alameda Research while raising more than $1.8 billion from investors
CNBC:
Bahamas AG Ryan Pinder and US SDNY Attorney Damian Williams confirm Bahamas police arrested Sam Bankman-Fried, who is under indictment and could be extradited — – The cofounder and former CEO of bankrupt crypto trading firm FTX was arrested in the Bahamas after the U.S. attorney …
FTX founder Sam Bankman-Fried arrested in the Bahamas after U.S. files criminal charges
https://www.cnbc.com/2022/12/12/ftx-founder-sam-bankman-fried-arrested-in-the-bahamas-after-us-files-criminal-charges.html
The ex-CEO of bankrupt crypto trading firm FTX was arrested in the Bahamas after the U.S. Attorney for the Southern District of New York shared a sealed indictment with the Bahamian government.
His arrest is the first concrete move by regulators to hold individuals accountable for the multibillion-dollar implosion of FTX last month.
Sam Bankman-Fried is expected to be extradited to the United States.
Tomi Engdahl says:
Reuters:
The SEC says a secret change to FTX code allowed Alameda to borrow FTX funds irrespective of the collateral value, giving a “virtually unlimited line of credit”
Exclusive: How a secret software change allowed FTX to use client money
https://www.reuters.com/technology/how-secret-software-change-allowed-ftx-use-client-money-2022-12-13/
Dec 13 (Reuters) – In mid-2020, FTX’s chief engineer made a secret change to the cryptocurrency exchange’s software.
He tweaked the code to exempt Alameda Research, a hedge fund owned by FTX founder Sam Bankman-Fried, from a feature on the trading platform that would have automatically sold off Alameda’s assets if it was losing too much borrowed money.
In a note explaining the change, the engineer, Nishad Singh, emphasized that FTX should never sell Alameda’s positions. “Be extra careful not to liquidate,” Singh wrote in the comment in the platform’s code, which it showed he helped author. Reuters reviewed the code base, which has not been previously reported.
The exemption allowed Alameda to keep borrowing funds from FTX irrespective of the value of the collateral securing those loans. That tweak in the code got the attention of the U.S. Securities and Exchange Commission, which charged Bankman-Fried with fraud on Tuesday.
The SEC said the tweak meant Alameda had a “virtually unlimited line of credit.” Furthermore, the billions of dollars that FTX secretly lent to Alameda over the next two years didn’t come from its own reserves, but rather were other FTX customers’ deposits, the SEC said.
The regulator, which called the exchange “a house of cards,” alleged Bankman-Fried concealed that FTX diverted customer funds to Alameda in order to make undisclosed venture investments, luxury real estate purchases, and political donations. U.S. prosecutors and the Commodity Futures Trading Commission also filed separate criminal and civil charges, respectively.
Police in the Bahamas, where FTX was based, arrested Bankman-Fried on Monday evening, capping a stunning fall from grace for the 30-year-old former billionaire. His company collapsed in November after users rushed to withdraw deposits and investors shunned his requests for more financing. FTX declared bankruptcy on Nov. 11 and Bankman-Fried resigned as chief executive.
Bankman-Fried has apologized to customers, but said he didn’t personally think he had any criminal liability.
The auto-liquidation exemption written into FTX code allowed Alameda to continually increase its line of credit until it “grew to tens of billions of dollars and effectively became limitless,” the SEC complaint said. It was one of two ways that Bankman-Fried diverted customer funds to Alameda.
The other was a mechanism whereby FTX customers deposited over $8 billion in traditional currency into bank accounts secretly controlled by Alameda.
“SAFE, TESTED AND CONSERVATIVE”
As Bankman-Fried grew FTX into one of the world’s largest crypto exchanges, consumer protection was a central tenet of his pitch for crypto regulation in the United States. Bankman-Fried stressed this theme in countless statements to customers, investors, regulators and lawmakers. FTX’s auto-liquidation software would protect everyone, he explained.
In congressional testimony on May 12, he called FTX’s software “safe, tested and conservative.”
“By quickly unwinding the riskiest, most undercollateralized positions, the risk engine prevents build-up of credit risk that could otherwise cascade beyond the platform, resulting in contagion,” Bankman-Fried testified.
He did not tell lawmakers about the software change to exempt Alameda. Indeed, he told investors that Alameda received no preferential treatment from FTX, the SEC complaint said.
Bankman-Fried had directed subordinates to update the software in mid-2020 to enable Alameda to maintain a negative balance on its account, the SEC complaint said. No other customer account at Alameda was allowed to do so, the complaint added.
In software tweaks made in August 2020, Alameda was designated as the “Primary Market Maker” or “PMM,”
To explain the change, Singh, the chief engineer, inserted a comment into the code: “Alameda would be liquidating, prevented.” He included a warning “not to liquidate the PMM.”
Only Singh, Bankman-Fried and a few other top FTX and Alameda executives knew about the exemption in the code
Bankman-Fried’s house of cards “began to crumble” in May 2022, the SEC complaint said.
As the value of crypto tokens plummeted that month, several of Alameda’s lenders demanded repayment. Since Alameda didn’t have the funds to meet these requests, Bankman-Fried directed Alameda to tap its “line of credit” with FTX to obtain billions of dollars in financing, the complaint said.
Tomi Engdahl says:
Bloomberg:
Memo: Changpeng Zhao tells Binance staff to expect a “bumpy” several months but the exchange “will survive any crypto winter”, following massive withdrawals — Binance Holdings Ltd. Chief Executive Officer Changpeng Zhao warned his colleagues to expect tough months ahead …
Binance CEO Zhao Warns Bumpy Road Ahead in Message to His Staff
https://www.bloomberg.com/news/articles/2022-12-14/binance-ceo-zhao-warns-bumpy-road-ahead-in-message-to-his-staff
Founder of Binance writes memo to staff after large outflows
Memo part of Zhao’s efforts to counter worries about Binance
Adam James / The Block:
Binance CEO addresses major USDC outflows, saying users can “withdraw any other stablecoin”; Nansen: users withdrew ~$1.6B on the Ethereum network in 24 hours
Binance CEO addresses USDC outflows: ‘feel free to withdraw any other stablecoin’
https://www.theblock.co/post/194398/binance-ceo-usdc-outflow
Binance CEO Changpeng Zhao has addressed major USD Coin outflows.
Some $1.6 billion has been withdrawn from Binance over the past 24 hours, on the Ethereum network alone.
After acknowledging that Binance has seen an increase in USD Coin withdrawals, Zhao explained that “to swap from PAX/BUSD to USDC requires going through a bank in NY in USD” and that “the banks are not open for another few hours” — at which point Binance expects the situation to be “restored.”
Some $1.6 billion on Ethereum has been withdrawn from the exchange over the past 24 hours, according to Nansen researcher Sandra Leow.
With USDC liquidity proving to be an issue on Binance, Tron founder Justin Sun deposited 100 million USDC to the exchange.
Seemingly dismissing concerns that customers may have any problems removing funds from the exchange, Zhao encouraged users to “feel free to withdraw any other stablecoin”
Tomi Engdahl says:
Stephanie Murray / The Block:
John Ray III tells the US House that FTX’s bankruptcy is “paperless” due to an “unprecedented” lack of documentation, FTX and Alameda are not distinct, and more — – New FTX CEO John Ray III said top executives at FTX had “free rein” over the company’s many entities.
FTX execs had ‘free rein’ over exchange, Alameda, CEO Ray says
https://www.theblock.co/post/194633/ftx-execs-had-free-rein-over-exchange-alameda-ceo-ray-says
New FTX CEO John Ray III said top executives at FTX had “free rein” over the company’s many entities, and moved hundreds of millions of dollars worth of assets out of the company after filing for bankruptcy, he said.
Ray appeared before the House Financial Services Committee one day after former CEO Sam Bankman-Fried was arrested in the Bahamas.
Sam Bankman-Fried and his top lieutenants had “free rein” over failed crypto exchange FTX and its sister trading firm, Alameda Research, the new FTX CEO said in a congressional hearing.
Testifying before the House Financial Services Committee on the collapse of FTX and its impact on crypto markets, John Ray III told lawmakers that there were no distinctions between FTX, Alameda Research and other entities which filed for bankruptcy protection last month.
“The owners of the company could really run free rein across all four silos,”
Once valued at $32 billion, FTX collapsed after a run on its native utility token last month. Ray took over as CEO of FTX after Bankman-Fried stepped down from that role. The new executive has described FTX’s financial situation as the worst mess he’s seen in his career, noting that the multibillion dollar business ran its accounting through the small business bookkeeping software Quickbooks, if it recorded financial transactions at all.
“It’s really unprecedented in terms of the lack of documentation,” said Ray, who called it a “paperless bankruptcy.”
‘Old-fashioned embezzlement’
Ray laid into how Bankman-Fried and other executives handled FTX. He cautioned that the company’s audited financial statements should not be trusted because the firm has lost so much cash.
“We’ve lost $8 billion,” Ray said. “I don’t trust a single piece of paper in this organization.”
Unlike Enron, another corporate collapse that Ray helped clean up, the scheme executives ran at FTX was “not sophisticated at all,” Ray said. He called the Enron catastrophe “highly orchestrated” in comparison to FTX.
“This is really old-fashioned embezzlement,” Ray said.
Ray also noted that Bankman-Fried should have “zero” role in FTX as the bankruptcy process unfolds. In media interviews Bankman-Fried has raised doubts about the accuracy of Ray’s court filings and complained that the company’s new leadership is ignoring him.
Bankman-Fried was hit with criminal and civil complaints from the U.S. Justice Department, Securities Exchange Commission and the Commodity Futures Trading Commission on Tuesday morning. Bankman-Fried is accused of giving Alameda special access to FTX customer funds and defrauding investors; he and other executives also gave themselves unpaid loans through Alameda. FTX’s new leadership has been cooperating with U.S. regulators and plans to “turn over any information that would be relevant to them,” Ray said.
Tomi Engdahl says:
Marcela Ayres / Reuters:
Brazil’s central bank plans to launch its digital currency in 2024 after a closed pilot program with financial institutions in 2023; the IMF approved the model
https://www.reuters.com/markets/currencies/brazil-central-bank-launch-its-digital-currency-2024-2022-12-13/
Tomi Engdahl says:
Jamie Crawley / CoinDesk:
US Senators Elizabeth Warren (D) and Roger Marshall (R) introduce the Digital Asset Anti-Money Laundering Act, including KYC requirements for wallets and miners — The proposal will bring know-your-customer rules to crypto participants such as wallet providers and miners.
US Senators Warren, Marshall Introduce Digital Assets Anti-Money Laundering Bill
https://www.coindesk.com/policy/2022/12/14/us-senators-warren-marshall-introduce-digital-assets-anti-money-laundering-bill/
The proposal will bring know-your-customer rules to crypto participants such as wallet providers and miners.
Tomi Engdahl says:
Marco Quiroz-Gutierrez / Fortune:
PayPal launches an integration with the MetaMask Web3 wallet that lets users purchase and transfer ether, rolling out to all US customers in the coming weeks — Users of the popular MetaMask Web3 wallet will soon be able to buy the second-most-popular cryptocurrency, Ether, via PayPal.
PayPal launches integration with MetaMask Web3 wallet for Ethereum transactions
https://fortune.com/crypto/2022/12/14/paypal-metamask-crypto-web3-blockchain-payments/
Users of the popular MetaMask Web3 wallet will soon be able to buy the second-most-popular cryptocurrency, Ether, via PayPal.
Similar to PayPal’s checkout feature at online stores like Etsy and eBay, the integration with ConsenSys’s MetaMask will let users buy and transfer Ether by logging in into MetaMask, tapping the “buy” button, and logging into PayPal before making a purchase.
The company said in a statement that select U.S.-based MetaMask customers will be able to use PayPal to buy Ether as of Wednesday, and that the feature will be rolled out to all U.S. users in the coming weeks.
Tomi Engdahl says:
Financial Times:
Court filing: FTX Digital Markets co-CEO Ryan Salame told Bahamas’ securities commission on November 9 that FTX customer funds were used to cover Alameda losses — FTX executive told securities regulator crypto exchange was likely funnelling cash to Alameda trading firm
https://www.ft.com/content/921d0727-4c6e-48fd-a93b-5234940fe620
Tomi Engdahl says:
Bill Allison / Bloomberg:
The DOJ charges SBF with violating campaign finance laws, creating a showdown over what may be the biggest illegal infusion of money into US politics in decades
Bankman-Fried Accused of Record US Campaign-Finance Violations
https://www.bloomberg.com/news/articles/2022-12-13/bankman-fried-s-political-donations-may-be-biggest-campaign-finance-violation
Indictment alleges FTX head ran straw man donor scheme
FTX’s big three political donors gave $76 million since 2020
Sam Bankman-Fried, the second biggest Democratic donor in the 2022 election cycle, is charged with violating campaign finance laws, in what could be the biggest infusion of illegal corporate money into US politics in decades.
Tomi Engdahl says:
Matt Levine / Bloomberg:
The SEC sees SBF’s “carelessness” argument, after misrepresenting risk management and funneling customer money to Alameda, as a confession, not a fraud defense
How to Do Fraud at a Futures Exchange
https://www.bloomberg.com/opinion/articles/2022-12-13/how-to-do-fraud-at-a-futures-exchange?leadSource=uverify%20wall
Futures, risk, fraud, securities fraud and Wirefraud.
Tomi Engdahl says:
Wall Street Journal:
Tether plans to stop secured loans issued and denominated in its tether stablecoin at some point in 2023, after WSJ reported on the potentially risky practice
Tether to Phase Out Lending of Its Own Coins to Customers
https://www.wsj.com/articles/tether-to-phase-out-lending-of-its-own-coins-to-customers-11670961469?mod=djemalertNEWS
The rapid growth of Tether’s lending program raised concerns about its ability to meet redemptions in a crisis
Tether Holdings Ltd. said it is winding down its practice of lending out its own stablecoins to customers by next year, addressing a broad risk to the wider crypto world.
In a blog post published on its website Tuesday, the company said it would reduce secured loans issued and denominated in tether to zero throughout 2023.
The growth in Tether’s secured-loan program was the subject of a Wall Street Journal article earlier this month. With about $66 billion tether in circulation, tether is the market’s largest stablecoin, a digital asset that is supposed to have a fixed value pegged to the U.S. dollar. The appeal of tether is that, unlike bitcoin and other cryptocurrencies that experience volatile price swings, one coin could be sold or redeemed for $1.
Tomi Engdahl says:
Accounting and financial reporting is increasingly under scrutiny since Binance, FTX and other crypto outfits have caused alarm. Is Proof of Reserves enough?
Binance Pause On Stablecoin Withdrawals Shows Faults In Proof-Of-Reserves System
https://www.forbes.com/sites/seansteinsmith/2022/12/14/binance-halting-stablecoin-withdrawals-shows-proof-of-reserves-still-needs-work/?sh=6fb20e7b13d2&utm_campaign=socialflowForbesMainFB&utm_medium=social&utm_source=ForbesMainFacebook
Even as the FTX collapse continues to dominate crypto headlines, other components of the sector are (arguably) more important for its health going forward. It increasingly looks like FTX was fraudulently marketed and run from the very beginning, and the blockchain and crypto sector needs to think about moving on from this disaster.
Notably, the instability of massive withdrawals totaling nearly $3 billion over a 24-hour period, the pause of withdrawals of the USDCUSDC 0.0% stablecoin, and the possibility of legal charges being brought against Binance should be giving all market watchers cause for, at least, questions.
the concept of Proof-of-Reserves, an accounting process that seeks to add more transparency to the crypto space, has been thrust into the spotlight since November 2022. With organizations including Binance and Crypto.com embracing the concept – albeit attracting quite a few critiques along the way – and following in the footsteps of Kraken which spearheaded this reporting process, the question needs to be asked: Is PoR up to the task?
What is Proof-of-Reserves? Even trying to define what a PoR engagement is has proven to be difficult, with multiple firms and organizations putting forward alternate definitions, and with multiple crypto organizations issuing a wide array of information under the title of a PoR report. Due to the lack of standardization around crypto auditing, and lack of authoritative accounting standards directly connected to crypto accounting and reporting, the market is still working toward consensus around these topics.
In the aftermath of FTX, which came at the end of a devastating year for centralized exchanges and crypto issuers, there is a clear need for better reporting, real-time analytics, and less opacity with regards to how these firms operate. When looking at what has been occurring at Binance – massive withdrawals, halting withdrawals, and token swaps not providing promised benefits – improving the consistency and comparability around PoR is critically important.
What happened? Reported on December 13, Binance had suffered nearly $3 billion in withdrawals in the past 24 hours, causing the exchange to temporarily halt customer withdrawals of the USDC stablecoin.
CEO Changpeng Zhao attempted to assuage market jitters via a series of tweets, explaining that the pause in customer withdrawals was not due to the any leverage or margin issue, like those that started the unraveling of FTX. Rather, he stated that the withdrawals were due to the lack of traditional U.S dollars, and that once U.S. banks were open for business the issue would be resolved.
Any time that an exchange, crypto or not, has to pause withdrawals, investors and regulators are going to want to know – exactly – why this is the case. In the case of Binance it seems like a recently announced change, increasing the importance of Binance USD (the native token of the exchange), played part in this liquidity crunch; token swaps.
What do token swaps have to do with customer funds? In September 2022 Binance instituted a change in its stablecoin policy, where the exchange would automatically convert current user balances, as well as new deposits of USD Coin, Pax Dollar, and True USD into Binance USD. Binance USD is a stablecoin issued and managed directly by Binance, which after the revelations around how FTX utilized its native token, is certainly worthy of a second look.
Put simply, the promised benefits of this change did not manifest when Binance needed them the most.
Swapping assets for other assets, and having to pause customer withdrawals, all while rumors of legal charges swirl around the exchange in question is never a recipe for success.
Binance is simultaneously the worlds largest crypto exchange, and also a player in the space that has been dogged by allegations and investigations for years. Crypto needs, and deserves, reporting and standards that provide transparency, understandability, and can be applied consistently. The jitters and nervous questions caused by the pause of USDC withdrawals at Binance reinforce just how important getting crypto reporting right is for a healthy and liquid market.
Tomi Engdahl says:
In mid-2020, FTX’s chief engineer made a secret change to the cryptocurrency exchange’s software.
Exclusive: How a secret software change allowed FTX to use client money
https://www.reuters.com/technology/how-secret-software-change-allowed-ftx-use-client-money-2022-12-13/?utm_campaign=trueAnthem%3A+Trending+Content&utm_medium=trueAnthem&utm_source=facebook
Dec 13 (Reuters) – In mid-2020, FTX’s chief engineer made a secret change to the cryptocurrency exchange’s software.
He tweaked the code to exempt Alameda Research, a hedge fund owned by FTX founder Sam Bankman-Fried, from a feature on the trading platform that would have automatically sold off Alameda’s assets if it was losing too much borrowed money.
In a note explaining the change, the engineer, Nishad Singh, emphasized that FTX should never sell Alameda’s positions. “Be extra careful not to liquidate,” Singh wrote in the comment in the platform’s code, which it showed he helped author. Reuters reviewed the code base, which has not been previously reported.
The exemption allowed Alameda to keep borrowing funds from FTX irrespective of the value of the collateral securing those loans. That tweak in the code got the attention of the U.S. Securities and Exchange Commission, which charged Bankman-Fried with fraud on Tuesday.
Tomi Engdahl says:
Microsoft bans cryptomining from its cloud services to protect customers
Only customers with written permission from Microsoft can mine
https://www.techspot.com/news/96986-microsoft-bans-cryptomining-cloud-services-protect-customers.html
Microsoft has updated its licensing agreements to ban cryptomining from its online services. Any customers wishing to continue mining crypto on a Microsoft-hosted service will first need written permission from the company, but this will only be considered for “Testing and Research for security detections.”
To protect its cloud, Microsoft bans crypto mining from its online services
Windows giant fears coin crafting may upend its servers
https://www.theregister.com/2022/12/15/microsoft_online_services_cryptomining_ban/
A section headed “Acceptable Use Policy” states: “Neither Customer, nor those that access an Online Service through Customer, may use an Online Service: to mine cryptocurrency without Microsoft’s prior written approval.”
Tomi Engdahl says:
FTX Stored Private Keys Without Encryption; Left Funds Vulnerable
The Pandora’s Box that is the FTX debacle continues to churn out one astonishing revelation after another about the leadup to the exchange’s dramatic collapse.
https://cryptodaily.co.uk/2022/12/ftx-stored-private-keys-without-encryption-left-funds-vulnerable
#ftx #sbf #crypto
Tomi Engdahl says:
It may prove difficult for crypto exchanges to prove their reserves now that their main auditor has backed away.
https://markets.businessinsider.com/news/currencies/cryptocurrency-ftx-binance-proof-of-reserves-auditor-mazars-halts-work-2022-12?utm_campaign=sf-bi-finance&utm_medium=social&utm_source=facebook.com
Tomi Engdahl says:
Jälleen yksi opetus siitä, että jonkun toisen tilillä säilytetty valuutta on jonkun toisen omaisuutta.
Suomalaiset kryptoyhtiöt ilmi-riidoissa – ”Tappio tulee olemaan merkittävä”
https://www.hs.fi/talous/art-2000009273147.html
Monet suomalaiset ovat todennäköisesti menettäneet varojaan ”korkotili”-nimiseen palveluun tehdyissä sijoituksissa.
MONET suomalaiset ovat todennäköisesti kärsineet tappioita kryptomarkkinoilla toimivassa korkotilipalvelussa ilmenneiden luottotappioiden vuoksi. Nyt palvelun takana olevat suomalaisyhtiöt syyttelevät toisiaan korkotilisijoitusten ongelmista.
Suomen tunnetuin kryptosijoituksiin erikoistunut yhtiö Coinmotion lähetti perjantaina asiakastiedotteen, jossa se kertoi korkotilipalvelussa syntyneen luottotappioita. Coinmotionin mukaan toinen suomalaisyhtiö Tesseract on menettänyt korkotilipalvelussa olevia loppukäyttäjien pääomia.
”Yksittäisen loppukäyttäjän kärsimän tappion määrä ei vielä ole täysin varmuudella tiedossa, mutta Tesseractin antamien tietojen mukaan tappio tulee olemaan merkittävä ja vaihtelemaan virtuaalivaluuttakohtaisesti”, Coinmotion sanoo tiedotteessaan.
Coinmotionin marraskuinen ilmoitus tuli vain pari viikkoa sen jälkeen, kun yhdysvaltalaisen kryptopörssin FTX:n ongelmat tulivat julkisuuteen.
Coinmotion väittää, että Tesseract on sivuillaan julkaisemassaan markkinointimateriaalissa sanonut suojaavansa sijoittajia ylivakuudellisilla lainoilla. Coinmotionin mukaan kesäkuussa luottotappioihin johtaneita lainoja ei kuitenkaan ole suojattu näin.
Yhtiöt ovat erimielisiä jo tapauksen peruskäsitteistä. Wu nimittäin sanoo, että ”Tesseractin korkotiliä” ei ole olemassakaan. Hänen mukaansa tuotteeseen sijoittaneet asiakkaat ovat Coinmotionin eivätkä Tesseractin asiakkaita.
”Coinmotion oli instituutioasiakkaamme. Coinmotion on päättänyt itse, mihin tuotteeseen yksityisasiakkaidensa varoja ohjaa.”
”Hajautamme sijoitukset riskitason mukaan. Osa lainoista on ylivakuudellisia, osa alivakuudellisia ja osassa ei ole lainkaan vakuutta. Coinmotion tiesi tämän oikein hyvin, ja olen ihmeissäni, miksi he väittävät nyt asian tulleen yllätyksenä.”
SUOMALAISYHTIÖIDEN riita on jatkumoa kryptomarkkinoiden synkälle vuodelle ympäri maailmaa. Lukuisat kryptopalvelut ovat joutuneet kesän ja syksyn aikana vaikeuksiin.
Tomi Engdahl says:
Binance, alone at the top after FTX, stirs ‘too big to fail’ crypto worry
https://www.theedgemarkets.com/article/binance-alone-top-after-ftx-stirs-too-big-fail-crypto-worry
NEW YORK/PORTLAND (Dec 17): Now that Sam Bankman-Fried’s fall from grace is complete, uneasiness is growing around the dominance that his rival Changpeng Zhao’s Binance holds in the cryptocurrency market.
The worries surfaced again on Friday (Dec 16) as the accounting firm Mazars Group halted work for Binance and other crypto firms on reports that are meant to demonstrate that the companies hold the necessary reserves needed to cover any potential surge of customer withdrawals.
Zhao, who goes by his initials CZ, has insisted repeatedly that Binance doesn’t misuse customer funds like FTX allegedly did and that his exchange can process whatever amount of withdrawals comes its way. Binance has a longer track record than FTX, proof it’s been able to survive previous “crypto winters”, including a more than 80% plunge in Bitcoin from December of 2017 to the end of 2018.
Mazars’ move threatens to cloud an accounting picture many already found opaque — indeed it was likely the market’s lack of reassurance from Mazars’ “proof-of-reserves” reports that led the firm to halt all such work.
Weakness in crypto prices that followed headlines about CZ’s company this week reinforce concern that Binance has become a “too big to fail” player in a market where, unlike traditional finance, there’s no one to stop a potential failure, offer a bailout or soothe any contagion.
“I don’t think Binance is trying to cause problems, but that organisation is now a risk to all of us,”
“Anytime you have one player controlling substantial amount of volume, there’s a lot of systematic risks.”
Binance has increased its market share to 52.9%, its largest ever, and grown its share of derivatives trading to 67.2%, according to CryptoCompare.
a crush of withdrawal requests from clients. Binance’s BNB, the native token of the exchange, has also been hit hard, slumping some 20% since Monday.
In an email Friday, a spokesperson for Binance said that despite US$6 billion in net withdrawals between Monday and Wednesday, “we were able to fulfil them without breaking stride.” The spokesperson said Binance does not invest user funds, it holds clients’ crypto in segregated accounts and all assets are backed 1-to-1. Binance also maintains a US$1 billion emergency fund
CZ without a third-party expert to back up his own words. And in the post-FTX environment, trust in the proclamations of crypto billionaires is deteriorating faster than the value of their tokens.
Government scrutiny
Binance may well prove to be invulnerable to the type of run on the bank that’s toppled FTX and other firms this year, but CZ still faces legal risks and government scrutiny that could swell into existential threats to the business.
more funds tied to criminal activity flowed through Binance than any other crypto exchange.
Tomi Engdahl says:
#BigShort investor #MichaelBurry says audits of #cryptocurrency exchanges, including #Binance and #FTX, are “meaningless.” #POR #crypto #bitcoin
Big Short Investor Michael Burry Says Audits of Crypto Exchanges Like Binance and FTX Are ‘Meaningless’
https://news.bitcoin.com/big-short-investor-michael-burry-says-audits-of-crypto-exchanges-like-binance-and-ftx-are-meaningless/
Hedge fund manager Michael Burry, famed for forecasting the 2008 financial crisis, says the problem with auditing cryptocurrency exchanges, like Binance and FTX, is the same as when he started using a new kind of credit default swap. “Our auditors were learning on the job,” he described, adding that it’s “not a good thing.”
The executive was asked why Binance does not use one of the Big Four accounting firms — Deloitte, EY, KPMG, and Pricewaterhousecoopers (PwC) — to audit its books, and whether the crypto firm was unable to provide files and data for auditors to be comfortable giving their stamp of approval. The Binance boss simply replied:
Tomi Engdahl says:
Carly Wanna / Bloomberg:
Crypto.com’s 2022 World Cup sponsorship, a symbol of how aggressively crypto companies spent on ads to gain users, was largely overshadowed by FTX’s collapse
Crypto.com’s World Cup Win Is Overshadowed by FTX Industry Chaos
https://www.bloomberg.com/news/articles/2022-12-17/crypto-com-s-world-cup-sponsorship-undercut-by-bankman-fried-ftx-contagion?leadSource=uverify%20wall
Former rival FTX signed some of crypto’s bigger sports tie-ups
FTX’s collapse threatens to depress sports dealmaking
At Sunday’s World Cup championship final between France and Argentina, Crypto.com will have a highly coveted seat right on the sideline, with the digital-asset exchange’s name plastered on the wall just feet from both teams’ star players. For viewers still smarting from rival FTX’s implosion, the signage may put a damper on their revelry.
Crypto.com’s field position is a highly visible symbol of how aggressively crytocurrency companies once courted mainstream investors by pouring billions into advertising and sports sponsorships as the speculative mania peaked, culminating in a blitz by FTX during last year’s US Super Bowl. But the bubble has now burst, FTX is bankrupt, its former CEO is facing fraud charges — and Crypto.com is standing out as crypto’s remaining major sport
Tomi Engdahl says:
Casey Wagner / Blockworks:
Binance says Deloitte, E&Y, KPMG, and PwC are “currently unwilling” to conduct audits on private crypto companies, after Mazars stopped providing such audits
As Crypto Auditors Call It Quits, What Will Take Their Place?
https://blockworks.co/news/crypto-auditors-call-it-quits
The exchange is looking for another auditor to validate proof of reserves after reports that Mazars and Armanino are pausing work in the sector
As former popular proof-of-reserve audit firms Mazars Group and Armanino discard their crypto clients, the industry is left wondering who might fill the gap in the space. According to Binance, none of the big firms are yet willing to step up.
Mazars Group, which handled proof-of-reserves audits for exchanges KuCoin, Binance and Crypto.com, elected to stop providing the services because of “concerns regarding the way these reports are understood by the public,” according to reports.
The “Big Four” accounting firms — known to be Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers — are “currently unwilling” to conduct a proof-of-reserves audit for a private crypto company, a Binance spokesperson told Blockworks.
Deloitte currently works with Coinbase, which went public via direct listing in 2021, for its auditing and accounting services. Ernst & Young on Friday revealed a partnership with crypto tax and accounting technology provider TaxBit.
Mazars published a report on Binance’s proof of reserves last week as various exchanges sought to ease investor concerns following the crash of FTX. The report appears to have since been removed from the sites of Binance and Mazars.
Binance also faced a “stress test” this week, a spokesperson noted, during which it fulfilled $6 billion of net withdrawals over a three-day span “without breaking stride.”
The representative added that Binance would go forward with Merkle Tree proof of reserves efforts to show that its assets exist on the blockchain and are safely under the control of the exchange.
“The benefit of having the [proof of reserves] verified by an independent audit firm is that it can provide additional validation that exchange assets are equal to or greater than the exchange’s liabilities to its customers,” the Binance spokesperson told Blockworks. “We have reached out to multiple large firms…and we are still looking for a firm who will do so.”
Armanino says adios to proof-of-reserves
Armanino, the auditing firm for crypto companies such as FTX US and Kraken, is also set to exit the crypto space, Forbes reported Thursday.
The company conducted a proof-of-reserves audit for Kraken in February, as well as another one for the crypto exchange in August — expanding its coverage beyond bitcoin and ether to include tether (USDT), USD Coin (USDC), ripple (XRP), cardano (ADA) and polkadot (DOT).
Kraken has touted its efforts of proving reserves and liabilities, saying in a Dec. 12 blog post that certain transparency initiatives by other industry players have fallen short.
A representative did not immediately comment on how Kraken would proceed with such audits now that Armanino has reportedly halted its work in the sector.
Stablecoin issuers in the space are currently report working with traditional auditing firms.
Circle publishes its own monthly reserve report with attestations from Grant Thornton, the company said. In August 2022, Tether hired Italian accounting firm BDO Italia to produce its monthly stablecoin reserve reports.
Tomi Engdahl says:
Reuters:
Analysis: Binance’s filings in 14 jurisdictions show its operations are mostly opaque, do not disclose where Binance.com is based, offer little data, and more
Special Report: Binance’s books are a black box, filings show, as it tries to rally confidence
https://www.reuters.com/technology/binances-books-are-black-box-filings-show-crypto-giant-tries-rally-confidence-2022-12-19/
Tomi Engdahl says:
Associated Press:
The DOJ says Karl Sebastian Greenwood, who co-founded the $4B+ fraudulent OneCoin scheme, has pleaded guilty to wire fraud and other charges
Bogus ‘Bitcoin killer’ cryptocurrency founder pleads guilty
https://apnews.com/article/business-manhattan-fraud-429904f53ead84144532eb3a282a7845
NEW YORK (AP) — A co-founder of the fraudulent cryptocurrency OneCoin, a pyramid scheme that conned billions of dollars from investors worldwide, pleaded guilty to wire fraud and money laundering charges, U.S. prosecutors said Friday.
Touted as a “Bitcoin killer,” prosecutors said the purported cryptocurrency co-founded by Ruja Ignatova and Karl Sebastian Greenwood in 2014 in Bulgaria was actually worthless. Though marketed as a cryptocurrency, it was never mined using computers and there was no public and verifiable blockchain. The value of OneCoin was not set by supply and demand, but by its operators, they said.
Tomi Engdahl says:
Claire Boston / Bloomberg:
Binance.US agrees to acquire Voyager Digital’s assets out of bankruptcy in a deal worth $1.022B, subject to approval at a hearing on January 5
Binance.US to Buy Voyager Assets in $1.022 Billion Deal
https://www.bloomberg.com/news/articles/2022-12-19/binance-us-to-buy-voyager-digital-s-assets-for-1-022-billion
Crypto platform’s valuation fell after sale to FTX imploded
Deal values Voyager’s crypto portfolio at just over $1 billion
Crypto exchange Binance.US will buy Voyager Digital’s assets out of bankruptcy in a deal worth $1.022 billion, a discount to an earlier, failed sale struck with FTX.
Tomi Engdahl says:
Gené Teare / Crunchbase News:
Q&A with Coinbase Ventures’ head Shan Aggarwal on the impact of FTX’s collapse on his VC firm’s 400+ company portfolio, ramifications for the industry, and more
Coinbase Ventures: What The Most Active Investor In Crypto And Blockchain Has To Say About The FTX Fallout
https://news.crunchbase.com/fintech-ecommerce/coinbase-ventures-crypto-aggarwal-ftx-fallout-web3/
What does the world’s most active crypto and blockchain investor make of the spectacular collapse of the cryptocurrency exchange FTX?
What is Coinbase Ventures’ outlook on the industry in relation to the collapse of FTX?
Aggarwal: I think the collapse of FTX is very much a seminal moment in crypto, probably one of the largest cases of corporate fraud that have existed in business anywhere. As you’d expect from my perspective, we’ve seen the venture funding conditions tighten quite a bit as a lot of investors are looking to figure out the true extent of the fallout.
The silver lining we look at is that the FTX collapse actually motivates a lot of individuals to learn about and explore decentralized technologies, which are exactly the types of things that we are investing in. Ultimately, the goal and the mission of Coinbase is to create more economic freedom in the world.
Post-FTX, you saw a significant spike in volumes on DEXes, and Ledger recorded a record number of sales for their self-custodial hardware wallets.
I think our general outlook is: It’s a pretty jaw-dropping and eye-opening display of corporate fraud. It shakes consumer confidence in a lot of ways, and likely contributes to some of the negative narratives that have existed around crypto in the past.
But at the same time, in many ways it’s very validating for the technology and for the core ethos of why decentralized technologies need to exist in this world.
How does it impact your investing strategy going forward?
Aggarwal: It doesn’t impact or change our investment strategy too much. We have been investing actively in the space since 2018.
Are there other sectors which are weakened in crypto, based on the current environment — like the crypto lending space?
Aggarwal: First and foremost, we think about the dichotomy between centralized platforms and decentralized platforms. So the biggest category of companies that have been negatively affected are centralized platforms — that includes centralized exchanges, centralized custodians and centralized lending desks. Those businesses are largely based on trust. And a lot of trust has been shaken across the industry. And it’s a shame to see one actor and one entity have this type of a ripple effect, because it’s not indicative of the overall industry.
Regardless of the companies who have not been directly impacted, given the size and magnitude of FTX and the collapse, most entities in the group or space had some indirect exposure. Maybe they had some clients that had funds that were tied up on FTX, or they did business with FTX in some capacity.
Tomi Engdahl says:
Credit giant Visa today released a proposal that would let owners of the ether cryptocurrency set up automatic payments directly from their own, self-custodial wallets, a proposal that would not require banks or other centralized entities to be part of the picture.
Visa Proposal Would Bring Ethereum Users One Step Closer To Being Their Own Bank
https://www.forbes.com/sites/michaeldelcastillo/2022/12/19/visa-proposal-would-bring-ethereum-users-one-step-closer-to-being-their-own-bank/?sh=22aff5ba21b5&utm_medium=social&utm_source=ForbesMainFacebook&utm_campaign=socialflowForbesMainFB
Credit giant VisaV -1% today released a proposal that would let owners of the ether cryptocurrency set up automatic payments directly from their own, self-custodial wallets, a proposal that would not require banks or other centralized entities to be part of the picture.
Coming at a time when more than $2 trillion has been wiped off the cryptocurrency market value and following numerous high-profile bankruptcies of centralized exchanges and lenders, the proposal is the latest of a number of promising efforts to align digital assets with early proponents’ vision of a banking system shorn of layers of fee-grabbing intermediaries.
Visa’s head of central bank digital currencies and protocols, Catherine Gu, who co-wrote the proposal says that, “If one of the major use cases of blockchain is for payments, then the basic requirement is that the blockchain has to function just as good as today, if not better.”
The proposal, published on Visa’s website today, emerged from a competition among the company’s employees in February to solve the problem of how an ether owner could pay a bill with crypto at a future date while temporarily away from internet service.
Auto Payments for Self-Custodial Wallets
https://usa.visa.com/solutions/crypto/auto-payments-for-self-custodial-wallets.html
Tomi Engdahl says:
CoinDesk:
US-based crypto miner Core Scientific files for Chapter 11 bankruptcy in Texas, estimating its liabilities and assets at $1B-$10B and creditors at 1,000-5,000
Core Scientific, One of the Largest Bitcoin Miners, Files for Bankruptcy Protection
The publicly traded miner filed for Chapter 11 at Southern District of Texas bankruptcy court.
https://www.coindesk.com/business/2022/12/21/core-scientific-one-of-the-largest-bitcoin-miners-files-for-bankruptcy-protection/
Core Scientific (CORZ), one of the largest bitcoin miners by computing power, filed for bankruptcy as the crypto winter continues to take its toll on the industry.
The company filed for Chapter 11 at Southern District of Texas bankruptcy court. The miner’s estimated liabilities are between $1 billion- $10 billion, according to the filing. It has around 1,000-5,000 creditors, with the largest unsecured claim coming from investment bank B. Riley.
The miner’s estimated assets are between $1 billion – $10 billion, according to the filing.
The bankruptcy of Core Scientific, which accounts for about 10% of computing power on the bitcoin network, operating 143,000 mining runs and hosting another 100,000 is the biggest one yet and is set to send shockwaves in an already crumbling industry.
The company first warned of the risk of bankruptcy in late October, and said it wouldn’t be paying some of its loan installments, sending its shares plummeting about 80% on Nasdaq. In November, it reiterated that it may run out of money by the end of this year. The miner has been in talks to restructure its debt and raise capital, which appear to have failed.
Core Scientific is one of several miners struggling to keep afloat as rising energy prices increase costs, while stubbornly low bitcoin prices slash revenues. Compute North, another major firm in the space, filed for Chapter 11 bankruptcy in late September. The bankruptcy of Core Scientific Iris Energy (IREN) had to unplug about 72% of its computing power that was tied to just over $100 million of loans that it defaulted on. The loans were held by special-purpose non-recourse vehicles. Argo Blockchain (ARBK). Greenidge Generation (GREE) yesterday announced a debt restructuring deal with its lender NYDIG, but could still run out of cash in two months if it doesn’t secure additional funding.
Core Scientific has also been affected by the bankruptcy of lender Celsius’s mining arm, one of its biggest clients, and lender BlockFi
Celsius Mining filed for Chapter 11 bankruptcy in July
Core Scientific was running 243,000 machines in its facilities as of the end of October, split between 14.4 exahash per second (EH/s) of bitcoin self-mining hashrate, and 10 EH/s of hosted machines for other firms, according to the filing. That’s about 10% of the global hashrate, which stands at around 243 EH/s as of the time of writing.
Tomi Engdahl says:
Byron Kaye / Reuters:
A look at the Australian Securities Exchange’s blockchain project, abandoned in November 2022, to replace its combined trading, clearing, and settlement system — In a Sydney hotel conference room in May, Tim Hogben, the head of securities and payments for ASX Ltd , which runs the Australian stock exchange …
Australian stock exchange’s blockchain failure burns market trust
https://www.reuters.com/markets/australian-stock-exchanges-blockchain-failure-burns-market-trust-2022-12-20/
Tomi Engdahl says:
Jeff Kauflin / Forbes:
A profile of London-based crypto trading firm Wintermute in the aftermath of UST and FTX’s implosion and a $160M hack, as revenue dramatically declined in 2022
With Sam Bankman-Fried’s Hedge Fund Gone, Crypto Trading Firm Wintermute Emerges
https://www.forbes.com/sites/jeffkauflin/2022/12/20/with-sam-bankman-frieds-hedge-fund-gone-crypto-trading-firm-wintermute-emerges/?sh=672503122bbb
By deftly navigating crypto’s frontier markets and winning big on the collapse of Terra’s stable coin, Wintermute has grown into one of the world’s leading crypto trading firms. Now it must navigate a market littered with carcasses and landmines.
E
vgeny Gaevoy was contemplating what to do if terraUSD (UST), a cryptocurrency stable coin pegged to the value of one U.S. dollar, imploded. UST had about $15 billion in circulating coins, and its parent company was backed by highly regarded investors like Lightspeed Venture Partners. But as early as 2021, a small set of people had been tweeting about its potential demise, saying that algorithm-based stable coins not backed by government-issued currencies were doomed to fail.
This past February, 38-year-old Gaevoy said to himself, “If this happens, we want to be in the middle of it.” His company, London-based Wintermute, is a trading firm that does rapid buying and selling of digital assets, pocketing tiny fractions of a dollar in profits from millions of trades a day. The more the market moves up or down, the more money they make.
That month, Gaevoy and Marina Gurevich–his wife and Wintermute’s chief operating officer–made battle plans. Wintermute’s developers spent a month integrating their trading systems with Terra’s blockchain technology. Just as high frequency trading firms try to get the fastest possible access to stock market data, Wintermute set up its own servers and ran Terra software nodes to get a front-row view of UST’s transactions and price. They wrote 4,000 lines of code for new trading algorithms. Then on Saturday, May 7, when UST’s price slipped to $0.98, Gaevoy asked his team to set up night shifts for the coming week.
Two days later, UST’s stunning freefall began, and Wintermute unleashed its arbitrage strategy. Due to Terra’s design and the coin’s cratering price, Wintermute could buy UST for $0.80 and redeem it for $1.00 worth of luna, its sister cryptocurrency. Then it could quickly sell luna, snatching a profit margin of 10% to 15% on every trade. Wintermute’s traders were sweating profusely as they worked, since the air conditioning in their London office had broken and temperatures climbed above 85 degrees.
By the end of the week, UST had lost nearly all its value, and Wintermute had traded more than $250 million of it all the way down to about $0.10 a token, pocketing tens of millions in profits. Gaevoy didn’t cause Terra’s death spiral, but he greased the skids by being a major buyer of UST while people frantically tried to sell. During the coin’s descent, Terra founder Do Kwon, who is wanted by the South Korean government for violating financial laws (Kwon claims the charges lack merit and will likely be dismissed), had even loaned Wintermute millions of dollars’ worth of UST to help fund its trading, according to people familiar with the matter. Kwon apparently hoped the funding would make the market for UST more liquid and prevent it from freezing up.
While it had just 53 employees, Wintermute made $1.05 billion in revenue and $582 million in profits in 2021. Gaevoy owns a third of the company, putting his net worth at least in the hundreds of millions.
The recent fall of Sam Bankman-Fried’s exchange FTX and hedge fund Alameda Research, which was one of Wintermute’s close competitors, shocked Gaevoy and Gurevich as much as it did everyone else. “We knew they were a bit reckless and made big bets, but we could not have imagined the level of, frankly, stupidity that seems to have gone into their trading and management decisions,” Gurevich says.
Before Alameda’s crash, Wintermute was already one of the five largest crypto trading companies in the world, according to analytics firm Nansen.
While crypto fell into a bear market in 2018, it took Gaevoy and his two cofounders Yoann Turpin and Harro Mantel nine months to raise just $900,000 from angel investors. Trying to appeal to fellow crypto geeks, Gaevoy named the firm Wintermute after an artificial intelligence creature from the 1984 science fiction novel Neuromancer. The following year was terrible for Gaevoy and the crypto industry–retail investors had largely lost interest, and trading activity was extremely low after the 2017 bubble burst. Gaevoy only had $500,000 to trade with and brought in less than $1 million in revenue. His startup survived each month with just a few months of cash in the bank.
Tomi Engdahl says:
The Winklevoss twins’ crypto exchange drew investors to its stablecoin GUSD by promising tantalizing rates of return. Now those funds are frozen, and demand for Gemini Dollars is plunging.
Crypto Exchange Gemini Modifies Terms Of Service As Gemini Dollar, Its Own Stablecoin, Gets Caught In Market Contagion
https://www.forbes.com/sites/johnhyatt/2022/12/16/crypto-exchange-gemini-modifies-terms-and-services-as-gemini-dollar-its-own-stablecoin-gets-caught-in-market-contagion/?sh=4056ecfa71c5&utm_source=FBPAGE&utm_medium=social&utm_content=8447960070&utm_campaign=sprinklrForbes+Asia
Tomi Engdahl says:
Nansen analyst Andrew Thurman breaks down why Binance, the largest cryptocurrency exchange by trading volume, may be “tremendously well capitalized” but still veers towards financial obscurity.
Nansen Analyst: On-Chain Data Shows Binance’s Financials Are a ‘Black Box’
https://www.coindesk.com/tech/2022/12/20/nansen-analyst-on-chain-data-shows-binances-financials-are-a-black-box/?utm_content=editorial&utm_source=facebook&utm_term=organic&utm_medium=social
Andrew Thurman breaks down why the largest cryptocurrency exchange by trading volume may be “tremendously well capitalized” but still veers towards financial obscurity.
Binance, the top cryptocurrency exchange by trading volume, may be “tremendously well capitalized,” but its financials are still “very much a black box,” said an analyst at data insights company Nansen.
Andrew Thurman told CoinDesk TV’s “First Mover” that although the exchange has published that it holds $55 billion in customer deposits on-chain, “aside from that, we don’t have much on-chain or any kind of financial access or transparency into their entities.”
Binance has come under the media microscope after a large sum of funds, amounting to roughly $6 billion, moved out of the exchange last week during a 24-hour period.
Still, Thurman said, despite Binance being one of the first exchanges to issue a proof of reserves, via a report that has since been removed by its auditor Mazars, on top of being well-capitalized after the collapse of FTX it is difficult to pinpoint the exchange’s financial health. “In short, you can’t” tell whether users can see the exchange’s liabilities against its supposed $55 billion in assets, Thurman said.
“Proof of reserves doesn’t give you the full picture. It’s not a full audit,” Thurman said.
Whether BNB, Binance’s native token, could face the same fate as FTT, the native token of bankrupt exchange FTX, is still unclear, Thurman said. “You would have to see somewhere around $12 billion in net outflows for [Binance] to be stressed the same way FTX was prior to them halting withdrawals,” Thurman said.
What is evident is that “BNB is very popular on-chain,” Thurman said, and that “there’s real activity there.” However, “We have no idea what the liabilities are on Binance’s side or how BNB plays into that,”
“We know there’s at least $18 billion in real dollars there, even if you discount the value of all the various digital assets in aggregate that Binance has,” Thurman said.
Tomi Engdahl says:
Washington Post:
The SDNY says ex-Alameda CEO Caroline Ellison and FTX CTO Gary Wang pleaded guilty to federal charges, both are cooperating, and releases them on a $250K bond — Caroline Ellison and Gary Wang helped disgraced crypto mogul divert funds and are now aiding prosecutors
https://www.washingtonpost.com/business/2022/12/21/caroline-ellison-fraud-charges/
U.S. Securities and Exchange Commission:
The SEC charges ex-Alameda CEO Caroline Ellison and ex-FTX CTO Gary Wang for their role in defrauding FTX’s investors at SBF’s direction between 2019 and 2022 — The Securities and Exchange Commission today charged Caroline Ellison, the former CEO of Alameda Research, and Zixiao (Gary) …
SEC Charges Caroline Ellison and Gary Wang with Defrauding Investors in Crypto Asset Trading Platform FTX
https://www.sec.gov/news/press-release/2022-234
Washington D.C., Dec. 21, 2022 —
The Securities and Exchange Commission today charged Caroline Ellison, the former CEO of Alameda Research, and Zixiao (Gary) Wang, the former Chief Technology Officer of FTX Trading Ltd. (FTX), for their roles in a multiyear scheme to defraud equity investors in FTX, the crypto trading platform co-founded by Samuel Bankman-Fried and Wang. Investigations into other securities law violations and into other entities and persons relating to the alleged misconduct are ongoing.
According to the SEC’s complaint, between 2019 and 2022, Ellison, at the direction of Bankman-Fried, furthered the scheme by manipulating the price of FTT, an FTX-issued exchange crypto security token, by purchasing large quantities on the open market to prop up its price. FTT served as collateral for undisclosed loans by FTX of its customers’ assets to Alameda, a crypto hedge fund owned by Wang and Bankman-Fried and run by Ellison. The complaint alleges that, by manipulating the price of FTT, Bankman-Fried and Ellison caused the valuation of Alameda’s FTT holdings to be inflated, which in turn caused the value of collateral on Alameda’s balance sheet to be overstated, and misled investors about FTX’s risk exposure.
n addition, the complaint alleges that, from at least May 2019 until November 2022, Bankman-Fried raised billions of dollars from investors by falsely touting FTX as a safe crypto asset trading platform with sophisticated risk mitigation measures to protect customer assets and by telling investors that Alameda was just another customer with no special privileges; meanwhile, Bankman-Fried and Wang improperly diverted FTX customer assets to Alameda. The complaint alleges that Ellison and Wang knew or should have known that such statements were false and misleading.
The complaint also alleges that Ellison and Wang were active participants in the scheme to deceive FTX’s investors and engaged in conduct that was critical to its success. The complaint alleges that Wang created FTX’s software code that allowed Alameda to divert FTX customer funds, and Ellison used misappropriated FTX customer funds for Alameda’s trading activity. The complaint further alleges that, even as it became clear that Alameda and FTX could not make customers whole, Bankman-Fried, with the knowledge of Ellison and Wang, directed hundreds of millions of dollars more in FTX customer funds to Alameda.
“As part of their deception, we allege that Caroline Ellison and Sam Bankman-Fried schemed to manipulate the price of FTT, an exchange crypto security token that was integral to FTX, to prop up the value of their house of cards,”
Tomi Engdahl says:
Bloomberg:
Sam Bankman-Fried lands in the US to face criminal charges after being taken into custody on December 21, following extradition approval by a Bahamas judge — Sam Bankman-Fried is on his way to an airport to be flown to the US to face a litany of criminal charges after a Bahamas judge approved his extradition.
Sam Bankman-Fried Leaves Bahamas to Face US Criminal Charges
https://www.bloomberg.com/news/articles/2022-12-21/bankman-fried-paves-way-to-be-whisked-to-us-to-face-charges
He is flying to US after agreeing to extradition on Wed.
He’s been locked up in the Bahamas for more than a week
Tomi Engdahl says:
Jean Eaglesham / Wall Street Journal:
The SEC’s Paul Munter says the regulator is increasing scrutiny of audit firms working with crypto companies, warning investors to be “very wary” of some claims
SEC Heightening Scrutiny of Auditors’ Crypto Work
Regulator concerned about cryptocurrency companies overstating audit firms’ narrow reports
https://www.wsj.com/articles/sec-heightening-scrutiny-of-auditors-crypto-work-11671681693?mod=djemalertNEWS
The Securities and Exchange Commission is stepping up scrutiny of the work that audit firms are doing for cryptocurrency companies, concerned that investors may be getting a false sense of reassurance from the firms’ reports, a senior official at the regulator said.
“We’re warning investors to be very wary of some of the claims that are being made by crypto companies,” Paul Munter, the SEC’s acting chief accountant, said in an interview.
Increased scrutiny has led at least one audit firm to drop crypto clients, in some cases soon after producing reports on the companies’ assets and liabilities. Crypto companies are eager to get the blessing of an auditor to reassure their skittish clients.
The Wall Street watchdog is looking closely at how crypto companies are portraying their reports from audit firms, according to Mr. Munter. Many of these companies are closely held or based offshore, and so unlikely to fall within the regulator’s remit. The SEC is effectively sending a warning to audit firms, which don’t want to run afoul of their regulator, as well as putting investors on alert.
“We are increasing our understanding of what’s going on in the marketplace,” Mr. Munter said. “If we find fact patterns that we think are troublesome, we will consider a referral to the division of enforcement.”
The regulator is worried particularly about so-called proof-of-reserves reports, which aim to show that the crypto company has sufficient assets to cover customers’ funds. Companies have rushed to produce these reports in recent weeks, using the credibility of audit firms to try to reassure customers spooked by the collapse of crypto exchange FTX.
“Ultimately, our users want to know that their funds are secure and that our business is financially strong,”
Mazars last week said it was pausing doing proof-of-reserves crypto work and pulled copies of the reports from its website. A spokesman for the accounting firm said it had made the move “due to concerns regarding the way these reports are understood by the public.”
Other audit firms are also reassessing their work for crypto companies, concerned by the risk of lawsuits, reputational damage and heightened regulatory scrutiny, according to industry insiders.
“We’re rating the whole industry as high risk,” said Jeffrey Weiner, the chairman and chief executive officer of accounting firm Marcum LLP. “We’re being careful about which clients we keep, which clients we take on.”
Audit firm BDO is also looking at which clients to take on or retain
The high-profile scrutiny of FTX’s external auditors, after the crypto exchange filed for bankruptcy, showed the risks of signing off on numbers that may be unreliable. Two U.S. accounting firms, Prager Metis CPAs LLC. and Armanino LLP, audited units of the FTX empire, helping to reassure investors in the multibillion-dollar company.
John J. Ray, FTX’s new chief executive, last month said the audited statements couldn’t be relied on.
The common lack of effective internal controls at crypto companies, a factor in the FTX blowup, heightens the risk of errors in the financial statements. That is one reason why the biggest audit firms, which can afford to be most choosy about which clients they take on, have largely steered clear, according to industry insiders.
A look at 19 publicly traded crypto mining companies found none is currently audited by Deloitte, Ernst & Young, KPMG or PricewaterhouseCoopers, according to Bedrock AI, which makes software that analyzes financial filings.
“The Big Four firms have…rightly decided the risks [of auditing crypto companies] are extremely high,” said Jeffrey Johanns, accounting professor at the University of Texas at Austin, and a former partner at a Big Four firm. “They’re very reluctant to move into the space, especially at a lower level of service than a full audit, which in my view is the only level appropriate for these types of entities.”
One crypto giant apparently shunned by the Big Four is Binance. After it was dropped by Mazars, the exchange said it was still looking for another audit firm. Binance “reached out to multiple large firms, including the Big Four, who are currently unwilling to conduct a [proof of reserves] for a private crypto company,” the company said.
More Crypto Exchanges Verify Reserves, But Questions About Assets Remain
Binance, Kraken and other crypto companies are offering proof of reserves, which is often less thorough than a full audit
https://www.wsj.com/articles/more-crypto-exchanges-verify-reserves-but-questions-about-assets-remain-11670153687?mod=article_inline
Tomi Engdahl says:
Core Scientific Declares Bankruptcy as Crypto Winter Lingers
High electricity costs, low Bitcoin prices weighed on firm
Bitcoin miner’s bankruptcy is latest in digital asset space
https://www.bloomberg.com/news/articles/2022-12-21/core-scientific-files-for-bankruptcy-as-crypto-winter-lingers?utm_medium=social&utm_campaign=socialflow-organic&cmpid=socialflow-facebook-business&utm_source=facebook&utm_content=business&leadSource=uverify%20wall
Tomi Engdahl says:
Forbes:
A profile of stablecoin developer Tether, which has withstood huge redemption runs during the current brutal crypto winter, competition, and regulatory pressure
Inside Tether, Crypto’s (So Far) Unbreakable Buck
https://www.forbes.com/sites/stevenehrlich/2022/12/21/inside-tether-cryptos-so-far-unbreakable-buck/?sh=67fc283273fa
Amid crypto’s existential crisis, its largest liquidity provider, Tether, has withstood multiple multibillion-dollar redemption runs. Will competition from rival stablecoins like USDC and regulatory pressure force Tether to finally come clean?
ON
Monday, November 7, 2022 Tether executives received an unusual phone call from a long-time business partner, FTX CEO Sam Bankman-Fried.
Bankman-Fried, the youthful moppy-haired crypto executive who rode the crypto wave to a personal fortune of $26.5 billion sounded desperate. A news story in the trade press five days earlier revealed that underpinning the highly leveraged balance sheet of his trading firm Alameda Research was some $5 billion worth of a token Bankman-Fried had essentially invented called FTT. FTX and Alameda were big customers of Tether. To date Bankman-Fried had already minted $36 billion worth of its U.S. dollar based stablecoin USDT, almost half of the total amount created.
“He contacted us and asked for economic help,” says Ardoino. “He didn’t disclose details or exactly how much he needed, but we categorically refused.”
Ardoino says that something didn’t smell right about the request and that it was an easy decision to say no. “He suddenly asked for something that he had never asked for before, and he wasn’t talking about $10 million. The way he was talking suggested that he had a big issue. His request was in the billions.”
Within a few weeks of that desperate phone call FTT had fallen from $26 to less than $2, evaporating some $3 billion in market value. FTX and Alameda would soon file for bankruptcy protection and on December 12th, Bankman-Fried was arrested and indicted for 8 counts of money laundering and fraud.
For Tether, the controversial company behind the $66 billion stablecoin USDT, used in more than 50 percent of all bitcoin trading worldwide, Bankman-Fried’s demise was bittersweet.
FTX was Tether’s largest customer, but unlike Bankman-Fried who cultivated the media and hobnobbed with politicians, Tether has defiantly resisted regulatory scrutiny and is a constant source of media scorn.
But through crypto’s tumultuous 2022, Tether has persevered. In May, when TerraUSD, crypto’s then third largest stablecoin and its sister token LUNA, accounting for $45 billion in market value, suddenly collapsed, Tether was faced with $16 billion in redemptions from panicky crypto investors. While USDT dipped to as low as 95 cents during the panic selling, it met its redemptions and bounced back to full value within a week. During FTX’s more recent collapse some $3 billion in redemptions flooded in over the course of a few days, but Tether barely missed a beat. All of the redemptions were met 1:1 in US dollars.
“Everyone was looking at Tether as just a couple of Italians that are incapable of doing anything right,”
While Tether has so far proven its staying power in the marketplace, the stablecoin provider has yet to gain trust outside of crypto. Over the years it has been accused of everything from manipulating markets and placing customer funds in the personal accounts of its executives to propping up the price of bitcoin. In 2021 the CFTC and the New York Attorney General forced Tether to pay fines of $41 million and $18.5 million respectively for falsely claiming among other things, that USDT was backed by U.S. dollars one-for-one.
The company has never produced an audit and it refuses to disclose the exact mix of its collateral, which includes crypto tokens, loans, and other illiquid investments. By comparison its closest competitor USD Coin, run by Boston-based Circle Financial, publishes the specific Treasury securities, CUSIPs and maturity dates that support its $45 billion digital dollar.
But if crypto survives the current brutal winter, Tether, its dominant liquidity provider, must grow up. That is why Tether has recently been on a campaign to clean up its image.
Long accused of padding its balance sheet with questionable commercial paper, in June 2022 it pledged to eliminate all of what was once $30 billion of the asset from its reserves and put most of that into US Treasury bills and other cash equivalents. Then in August it hired top five accounting firm BDO with the goal of undergoing a full audit. Last Tuesday the company announced that it will stop lending out USDTs – whose loans amount to 9% of its assets – by the end of 2023.
Will this be enough to silence detractors who are even more skittish about the squirrely stablecoin provider in the wake of FTX’s collapse?
“There’s a difference between usually stable and always stable,” says Acting Comptroller of the Currency Michael Hsu. “Always stable is Fed money and central bank money. And if you’re in the always stable category, you don’t have to publicly defend yourself.”
T
he fact that stablecoins like Tether need to exist at all points to glaring weakness in bitcoin and other cryptocurrencies. After more than a decade the original cryptocurrency remains wildly volatile. In the last 18 months alone, bitcoin’s price approached $70,000 twice, before retreating more than 65% to a recent $17,000. On a daily basis it is not unheard of for its price to swing 5% or more.
Stablecoins were invented as a solution to this problem and another one crypto investors have long faced. Most crypto exchanges, especially those located overseas, have been shunned by banks, so doing business in U.S. dollars and other fiat currencies, is difficult if not impossible. Stablecoins live and move on top of various blockchains, just like bitcoin, avoiding central bank control. In the case of USDT, which only exists digitally, it is pegged to the U.S. dollar.
If stablecoins existing outside of the global banking industry makes you uneasy, consider that Tether, the world’s dominant stablecoin provider, is run by a cabal of shadowy characters.
Its chief technology officer, Paolo Ardoino is Tether’s front man. All information about Tether to the media runs through him. Tether’s chief financial officer, Giancarlo Devasini is the company’s controlling shareholder with an estimated 40% of Tether’s parent, DigFinex, which also owns crypto-exchange Bitfinex, according to sources familiar with its finances.
Besides common ownership, both Tether and Bitfinex share the same CEO, CFO, CTO and general counsel.
In total, Tether has about 50 employees, while exchange Bitifinex has 200.
T
here are two ways to obtain Tether, known as USDT in crypto parlance. It can be purchased on any of the hundreds of crypto exchanges around the world that list the digital asset, or it can be minted directly from Tether itself using a smart contract it controls that operates on several different blockchains. The latter approach is reserved for high-rollers, a minimum of $100,000 of USDT must be minted per transaction. Devasini is said to be involved in these large transactions and Sam Bankman-Fried for example was known to personally call to mint large amounts of USDT for Alameda. Sometimes the issuances can be as high as $500 million.
Such a business can be highly lucrative. On the revenue side, the minting and redemption of USDT is an important profit center for the company. It charges a 0.1% fee per transaction. Forbes estimates that Tether has taken in no less than $109 million in fee income since inception in 2014, most of that coming in the last two years when its market capitalization soared from $5 million to more than $84 billion in May 2022.
But the real money comes from how Tether invests its billions it receives to mint USDT. Theoretically Tether should merely take customer funds and park them in cash and Treasurys fulfilling its pledge that its reserves are backed 1:1 to the U.S. dollar. However, Forbes found that Tether began creating models for diversifying its reserve assets as early as 2015.
Why does Tether need to invest in risky assets outside of U.S. Treasury’s and money market funds? Ardoino says that Tether is obligated to make a profit in order to obtain certain business licenses. “One of the most important things for our company, and one that speaks about the difference between us and Circle (USDC issuer), is making sure that the business model remains profitable,” says Ardoino, who expects the stablecoin company to earn in excess of $600 million this year.
Like other stablecoins, the biggest portion of Tether’s reserves has always been in “cash and cash equivalents and other short term deposits and commercial paper.” According to its current reserves breakdown, 82.45% of its assets are in cash and cash equivalents of which, 70% is in treasuries. That leaves 17.5% invested in various riskier assets, including secured loans, which Tether has long been loath to disclose details on.
Tether has never had a definitive audit of its $66 billion in reserves,
“Genesis recently halted withdrawals. Voyager is a public company, then you have Celsius and BlockFi, which was this behemoth praised by many parties. Three Arrows, which was seen as the perfect traders,” says Ardoino. “Everyone was always better than Tether.”
Astonishingly, Ardoino points to Tether’s $18.5 million 2019 settlement with the New York Attorney General’s office as proof that his company has staying power. In that case, Tether secretly used its customers’ collateral to give sister company Bitifinex an $850 million emergency loan because the crypto-exchange’s bank Panama’s Crypto Capital had its own funds seized by government regulators. In response Tether said at the time, “The loan was made to ensure continuity for Bitfinex’s customers. It has since been repaid early and in full, including interest. At no point did the loan impact Tether’s ability to process redemptions.”
Of more serious concern to Ardoino, Devasini and van der Velde, is the state of the overall cryptocurrency market, of which Tether is a key liquidity provider. Stablecoins are critical for active traders, but the crypto winter has seen Tether’s market capitalization fall by more than 25%. This is exacerbated by the fact that significantly higher interest rates now provide numerous alternatives outside of crypto and DeFi for traders parking idle cash reserves. Yields on USDT at major crypto exchanges currently average 2%.
If crypto recovers Tether is likely to see other competitors vying for its spot. Besides USDC, which already has 29.8% market share and is preferred by Wall Street firms like BlackRock and BNY Mellon, mega exchange Binance itself has created its own stablecoin BUSD. Then there is the prospect that at some point a big FDIC-insured bank or central bank offers a digital dollar.
“We don’t plan to be the biggest stablecoin in the market forever. If tomorrow JPMorgan decided to create their JPUSD or whatever, they will be bigger than us in two seconds,”says Ardoino. “We want to be used by Turks, Venezuelans, and Argentinians. The only thing that matters to us is that our product is getting used by people in emerging markets and developing countries. They are the ones that really desperately need access to the dollar.”
Tomi Engdahl says:
Alameda Research CEO Caroline Ellison is a math whiz who loves Harry Potter, fringe political philosophy and taking big risks. She is also one of the supporting players in Sam Bankman-Fried’s FTX catastrophe.
Meet Caroline Ellison, The ‘Fake Charity Nerd Girl’ Behind The FTX Collapse
https://www.forbes.com/sites/davidjeans/2022/11/18/queen-caroline-the-risk-loving-29-year-old-embroiled-in-the-ftx-collapse/?sh=fe58fcf791f0&utm_medium=social&utm_campaign=socialflowForbesMainFB&utm_source=ForbesMainFacebook
Tomi Engdahl says:
Magic Eden exec sees NFT gaming like the ‘early days of mobile gaming’
https://techcrunch.com/2022/12/20/magic-eden-exec-sees-nft-gaming-like-the-early-days-of-mobile-gaming/
Blockchain games have grown exponentially over the past year as a new and innovative alternative to the traditional gaming world. While the two areas have been widely separated, some market players see an integrated future.
“I was around in the very early days of mobile gaming, right after the iPhone came out, the App Store came out,” Chris Akhavan, chief gaming officer at NFT marketplace Magic Eden, said to TechCrunch. “I remember the attitude back then amongst traditional gaming companies was that mobile games were stupid.”
These gaming conglomerates viewed mobile games as “really small, unimpressive games” that people wouldn’t want to play, Akhavan said. “Largely, a lot of the big traditional gaming companies ignored mobile [games] for the first couple of years and that created opportunities for new mobile gaming companies like King, which is now owned by Activision, to create that margin and grow substantially.”
As that happened, big gaming companies became hyperfocused on the mobile gaming space and began acquiring smaller games to compete, Akhavan noted.
Tomi Engdahl says:
Caroline Ellison, the former CEO of Alameda, pleads guilty to charges that carry up to 110 years in prison following FTX collapse
https://www.businessinsider.com/caroline-ellison-faces-110-years-in-prison-after-guilty-plea-2022-12?r=US&IR=T
Caroline Ellison, former Alameda Research CEO, pleaded guilty to charges that carry up to 110 years in prison.
Per her plea deal, she has pleaded guilty to seven charges, including wire and securities fraud.
She has also agreed to pay restitution of an amount to be determined by the courts
Caroline Ellison, the former CEO of Alameda Research, pleaded guilty to charges that carry up to 110 years in prison after striking a plea deal with the Justice Department.
It’s not likely that she will serve anywhere near the statutory maximum for the charges she pleaded guilty to because of the plea agreement she struck with prosecutors in the Southern District of New York, dated December 18.
Ellison faces seven charges that collectively carry a maximum prison sentence of 110 years. These include conspiracy to commit wire fraud, securities fraud, and commodities fraud. She also faces a charge of conspiracy to commit money laundering.
Tomi Engdahl says:
Ellison and FTX executive Gary Wang pled guilty to criminal charges earlier this week, as FTX founder Sam Bankman-Fried faced eight criminal counts.
Caroline Ellison Admits She And Bankman-Fried Conspired To Deceive FTX Customers And Investors, Reports Say
https://www.forbes.com/sites/jonathanponciano/2022/12/23/caroline-ellison-admits-she-and-bankman-fried-conspired-to-steal-from-ftx-customers-and-mislead-investors-reports-say/?utm_campaign=forbes&utm_source=facebook&utm_medium=social&utm_term=Gordie&sh=de823a05cdec
Tomi Engdahl says:
Freddy Brewster / Los Angeles Times:
FOIA emails detail Sam Bankman-Fried’s courtship of US federal regulators, including hiring former regulators and dining with ex-CFTC Commissioner Dan Berkovitz — Before his mid-December arrest, cryptocurrency billionaire Sam Bankman-Fried repeatedly claimed that he was a responsible business leader …
Emails reveal Sam Bankman-Fried’s courtship of federal regulators
https://www.latimes.com/politics/story/2022-12-26/sam-bankman-fried-cftc-sec-revolving-door
ALAMEDA, Calif. —
Before his mid-December arrest, cryptocurrency billionaire Sam Bankman-Fried repeatedly claimed that he was a responsible business leader who sought more regulation of cryptocurrency and wanted his industry to be part of the mainstream financial system.
But now that the Commodity Futures Trading Commission, the Securities and Exchange Commission, and the Justice Department are prosecuting the 30-year-old for fraud, the extensive professional relationships he cultivated with current and former federal regulators risk embarrassment for all involved.
As chief executive of FTX, a crypto exchange, Bankman-Fried hired multiple former federal regulators who helped connect him with top officials at the CFTC, the agency that he hoped would be charged with regulating his industry, emails show.
Tomi Engdahl says:
Which Public Bitcoin Miners Owe the Most Money?
https://hashrateindex.com/blog/which-public-bitcoin-miners-owe-the-most-money/
The public bitcoin mining companies collectively owe more than $4 billion, and the biggest of them has already declared bankruptcy due to its unsustainable debt burden.
Tomi Engdahl says:
Financial Times:
BAYC, Doodles, Pudgy Penguins, and other NFT projects are diversifying into real-world assets, including toys, albums, and sports teams, to generate new revenue — Creators of best-selling internet collectibles have responded to a crash in the value of crypto and digital assets by seeking new revenues …
NFT creators diversify into real-world assets to generate new revenues
https://www.ft.com/content/69da37d1-11de-430f-8a86-ea51bd2ae82b
Tomi Engdahl says:
Sujeet Indap / Financial Times:
Lawyers working on crypto bankruptcies, including FTX and Celsius, are charging more than $1,800 per hour, leading some creditors to criticize the process — Advisers in Celsius case bill $52mn for four months’ work — The investment bank B Riley is so determined to persuade …
Lawyer fees mount in crypto bankruptcies
https://www.ft.com/content/0c9a1df4-2a3e-4aa8-9733-53dd4507d765