A bankruptcy judge cleared the way for FTX to sell four key units including derivatives arm LedgerX, stock-clearing platform Embed and the crypto exchange’s European and Japanese outfits. Investment bank Perella Weinberg will oversee auctions for FTX, although court permission may be needed for any sales to be finalized. Meanwhile, publicly traded crypto miner Bitfarms (BITF) is looking for better terms on a $32 million loan it took from bankrupt crypto lender BlockFi. Bitfarms has $20 million in outstanding payments for the loan, secured by only $5 million in assets, and has threatened to stop paying the quasi-FTX subsidiary.
Crypto Exchange
The U.S. Securities and Exchange Commission (SEC) alleged crypto exchange Gemini and crypto lender Genesis Global Capital sold unregistered securities related to a shuttered yield-bearing platform called “Earn,” according to a lawsuit filed late Thursday. Gemini generated yield its Earn customers’ deposits by loaning those assets to CoinDesk sister company Genesis, which loaned them out again, in a move that allegedly falls afoul of securities rules. Meanwhile, Crypto.com is cutting 20% of its workforce – an estimated 800 employees – following a round of layoffs in mid-2022. Finally, Cathie Wood’s Ark has been on a Coinbase stock (COIN) buying spree, making it the 12th-largest holding for the ARK Innovation ETF (ARKK).
On Chains
Polygon announced a Jan. 17 hard fork to its proof-of-stake blockchain that, if approved, will address gas spikes and chain reorganization. “Although gas will still increase during peak demand, it will be more in line with the way Ethereum gas dynamics work now,” a Polygon rep said about the upgrade, which was first proposed in December. Separately, the bitcoin cash rallied following news a May hard fork will bring smart contract capability to the payments-focused Bitcoin sibling. So-called CashTokens could allow for recurring payments, derivatives trading and crowdfunding to happen on-chain. Finally, Citi said Solana is down but not out, citing its high developer activity, while traders are betting on Ethereum’s next major upgrade expected in March – the “Shanghai hard fork” – which will allow people to unstake their previously inaccessible ether (ETH).
Sound Bites
“The SEC is going to try to unwind the clock and make sure to the extent possible that customers are made whole, but that is limited by the assets that are available.”
– Former SEC senior trial attorney Howard Fischer, discussing the agency’s probe into crypto firms Gemini and Genesis, on CoinDesk TV’s “First Mover”
The Takeaway: Bankman-Fried’s Reality Break
(Getty Images)
Bankman-Fried’s latest effort at public self-exoneration, the first blog post for his newly-created Substack, will strike the informed reader as the fizzling, semi-coherent ejection of a mind trapped in a closed and degrading orbit around itself. Despite what financier Bill Ackman seems to think for some cockeyed reason, Bankman-Fried’s lie-packed and subtly unhinged disquisition is not worth your time to read, except as a set of symptoms manifesting from a psyche teetering along the event horizon of a black hole. So I read it for you.
Bankman-Fried’s “FTX Pre-Mortem Overview” repeats the same hamfisted evasions and outright lies that marked his pre-arrest public apology tour. Above all, his version of events is premised on the key omission: the corrupt nature of the relationship between Alameda Research and FTX. This includes the fact that Bankman-Fried continued to have insight into and control over the firm he owned, the firm’s misuse of customer deposits and the “secret exemption” that prevent Alameda from being liquidated earlier.
Here are a few highlights from the post that are simply false, or otherwise hint at Bankman-Fried’s extreme break with reality.
Bankman-Fried claims that he didn’t steal any money and that “nearly all of my assets were and still are utilizable to backstop FTX customers.” Meanwhile, in reality, he has argued that he should be able to retain his personal $450 million stake in Robinhood to pay for his own legal expenses. That’s despite the fact that the stake was acquired through a possibly fraudulent conveyance: a personal loan from FTX to a Bankman-Fried-co-owned holding company.
Bankman-Fried claims that “FTX International and Alameda were both legitimately and independently profitable businesses in 2021, each making billions.” Here again we seem to be in Sam’s personal mind-palace for special accounting. In the real world, we know that Alameda and FTX claimed losses of $3.7 billion dollars over the course of the pre-2022 bull market, the rare case of an under-performance so bad it smacks of fraud.
Bankman-Fried cites “billions of dollars in funding offers” from interested FTX buyers that “could have made all customers whole” if only his pesky lawyers hadn’t forced him to declare bankruptcy. This is simply laughable: Bankman-Fried seems to genuinely believe that he could have enticed someone to spend $10 billion dollars paying back the money he stole. Meanwhile, the only publicly acknowledged buyout offer, from Binance, was withdrawn as quickly as a hand burned by a hot stove as soon as the buyer got a look the books (which were probably more like a wad of napkins).
Bankman-Fried repeatedly refers to “illiquid assets” on the FTX balance sheet. Given what we know about how Bankman-Fried thinks about finance, this likely includes fraudulently marketed “assets” such as FTX’s own FTT token and Serum’s SRM token. These are not “illiquid” – they’re worthless.
Bankman-Fried cites Alameda’s declining share of FTX’s pre-collapse trading volume and liquidity as evidence of a potential FTX comeback. This is pure howling madness, like saying you can rebuild your car company because only 5% of the cars you made exploded on ignition and killed everyone inside.
Bankman-Fried descends even further into conspiracy theories about other people’s responsibility for his own crimes. Again he targets his bankruptcy counsel, hinting that Sullivan & Cromwell pressured him into bankruptcy for their own (unclear) benefit. This again directs attention away from the simple fact that he stole billions of dollars.
There’s plenty more where that came from – the entire thing is a tangled mess of self-deception, motivated by the even deeper self-deception that anyone will take it seriously.
As winter inevitably yields to spring, crypto winters eventually end as the prices of widely traded coins come back. The same goes for such in-game currencies as nine chronicles gold, or NCG.
When the price of the NCG token fell during crypto winter, Planetarium Labs, the publisher of the online game it represents, came up with a multipronged strategy to support the token’s price and reinforce a sense of confidence among investors. The best way to buttress its value, Planetarium Labs concluded, is to increase demand for the token by giving players more things to do with it and by burning revenue earned from players’ activities, denominated in NCG or its wrapped WNCG version. Continue reading.
*This is sponsored content from Planetarium
Off-Chain Signals
Alameda liquidators get liquidated on Aave as they try to consolidate funds (The Block)
Nexo, which is being investigated by Bulgarian authorities for alleged tax and money laundering crimes, has seen $158 Million leaves the lending platform (BeinCrypto)
Michael Bodley writes a long and considered piece about GBTC takeover attempts (Blockworks)
Most recent Crypto Critics Corner covers Nexo, SBF and the Genesis/Gemini dispute (YouTube – podcast)
What’s happening with Binance’s $2 billion recovery fund? (Protos)
Gorillas, militias, and Bitcoin: Why Congo’s most famous national park is betting big on crypto (MIT Tech Review – soft paywall)
House Republicans plan crypto panel in first move to oversee troubled industry (Politico)
Crypto crime hits record $20 billion in 2022, Chainalysis finds (Reuters)
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