Welcome to The Node. This is Daniel Kuhn and Prachi Vashisht, here to take you through the latest in crypto news and why it matters. In today’s newsletter:
Coinbase faced jabs and complaints after its newly debuted layer 2 blockchain, Base,failed to process transactions. The Ethereum-focused protocol is crucial to Coinbase’s strategy to move deeper into the developer space, but struggled to process transactions during the testnet rollout. Meanwhile, the automated crypto management tool, Collab.Land, airdropped its Collab token to over 2 million wallets on Optimism. This move has established a decentralized autonomous organization governed by COLLAB. On Friday, wealth management company, Metalpha Technology, announced its partnership with the Litecoin Foundation to lower carbon emissions for the proof-of-work network.
Enforcement, Oversight
The U.S. Drug Enforcement Agency seized $1.8 million in crypto from six Binance accounts tied to drug traffickers in 2022, according to court filings. The operation disrupted a narcotics sales pipeline in Michigan to Mexico using stablecoins. Meanwhile, on Thursday, the Montana State Senate passed a bill protecting crypto miners from a set of potential risks, including discriminatory utility rates. The legislation also prevents local governments from retroactively using zoning laws that target the mining industry. In other news, the International Monetary Fund (IMF) Executive Board’s top leadership is in “general” agreement that crypto is a threat to monetary sovereignty and stability. Finally, Mango Markets, the Solana-based decentralized exchange that has been offline since a $114 million exploit in October, announced two new features to improve security.
NFT Utility
A senior European Union official is asking the counsel to draft new policies for the metaverse, which consider issues such as nondiscrimination, user safety and data privacy. “We want to make sure that the developments that we see in virtual worlds are fully in line with our European values from the outset,” European Commission Director of Data Yvo Volman said at a Brussels event. Meanwhile Web3 music streaming platform Audius is adding TikTok support, allowing users to create accounts by simply linking their social media profile, as Web3 gaming startup hires the founder of gaming giant Electronic Arts (EA). Elsewhere, on Wednesday, Teneo, the liquidators of bankrupt crypto hedge fund Three Arrows Capital (3AC), will list NFTs worth millions of dollars for sale as a part of recovery efforts. And finally, good news for Degens, the second-largest lending platform on the BNB Chain called Venus Protocol will soon allow users to borrow against their Floki meme coin holdings.
Sound Bites
“We see this action as seriously concerning and would have significant ramifications for the entire digital asset industry.”
– Chamber of Digital Commerce founder Perianne Borning, on CoinDesk TV’s “First Mover”
The Takeaway: Political Genius?
One nagging question about Sam Bankman-Fried and his FTX Crime Family has always been – what was the endgame? Given the incredible extent of the theft taking place, how did Bankman-Fried and his inner circle of co-conspirators foresee escaping their giant con with their freedom and dignity intact?
New charges filed Thursday against the disgraced effective altruist support the idea that he hoped to curry enough favor in Washington, D.C. to somehow escape the consequences of his actions. This strategy doesn’t withstand scrutiny – but then again, neither do most of Sam Bankman-Fried’s apparent goals or strategies.
This helps drive home a tricky but important point about many of the crypto wunderkinds who ascended to the heavens in 2021 and fell to Earth in 2022. Bankman-Fried represented himself, and was lauded in the media, as some kind of genius.
Same goes for Terra con artist Do Kwon and Su “Bitcoin will only go up forever” Zhu, CEO of Three Arrows Capital. In fact, though, these people were putting on an act – an impression. They leveraged credentials, relationships and theatrical self-representations to create what you might call “a dumb person’s idea of what a smart person looks like.” This helped attract huge amounts of money.
But it’s now clear Bankman-Fried and the rest were and are not just unlucky but remarkably dumb.
Thursday’s superseding indictment from the U.S. Department of Justice adds very serious new charges, including investment fraud, banking fraud, wire fraud and election fraud, to Bankman-Fried’s already-long rap sheet. Sources told CNBC that Bankman-Fried could face an additional 40 years in prison based on the new charges, on top of the existing allegations.
The documents detail Bankman-Fried’s various false public statements about FTX’s risk management and custodial practices, which support both the investment and wire fraud allegations. Bankman-Fried is also accused of misrepresenting FTX’s operation and the purpose of fiat bank accounts to U.S. regulated banks, which is an extremely serious allegation more associated with Mexican cartels and global terrorists than tech startups.
Though, the most significant new charges address his “unlawful political influence campaign, which involved flooding the political system with tens of millions of dollars in illegal contributions to both Democrats and Republicans made in the names of others in order to obscure the true source of the money and evade federal election law.”
It might not be obvious, but this is a big, big deal. U.S. lawmakers, prosecutors and judges are understandably not huge fans of attempts to illegally subvert U.S. democracy (after all, they’ve created plenty of convenient, legal methods for doing so). The charges describe in depth the use of so-called “straw donors” to funnel FTX money (really, FTX user funds) to political campaigns by fraudulently representing them as donations from individuals, including two unnamed FTX executives.
Over the past few months, CoinDesk has been developing a reward system fo Consensus 2023 attendees to bring long-term value. We’ve partnered with Art Blocks Engine, TokenProof and Passage Protocol to launch the Consensus Multi-Year, Multi-Tiered NFT Ticket, coming on March 2. Learn more.
Zero Knowledge
Kudos for making it this far! On occasion, we’ll give our loyal Node readers the opportunity to claim DESK, our social token, which is a mechanism for returning the value of engagement directly to the users who create it.
