The Ontario Teachers’ Pension Plan (OTPP), which wrote off a $95 million investment in the bankrupt cryptocurrency exchange FTX, will not “rush into” another crypto investment again, management told the Financial Times. CEO Jo Taylor said the massive investment fund is still trying to figure out what exactly happened with the FTX wipeout. Meanwhile, Abu Dhabi is opening its plans to build a “distributed ledger technology” financial sandbox to public comment, according to the country’s markets regulator. The DLT Foundations Regulations regulatory framework is tailored to attract crypto developers and token foundations. In February, the country kicked off a $2 billion initiative to support Web3 projects.
Safe Investing …
The U.S. Securities and Exchange Commission (SEC) is advising brokers and investment advisors they need to use heightened scrutiny when it comes to making crypto recommendations, according to a recently posted staff bulletin. This is not the first time the agency has made such comments regarding wealth managers’ fiduciary duty and the risks crypto represents for clients – although it’s notable the securities watchdog is not calling for an outright ban. Meanwhile, crypto trading legend Max Boonen launched a startup bringing U.S. Treasurys – and later, corporate debt instruments – on-chain. The company, called PV01 after bond market jargon, will offer bond tokenization services, which is something of a growing concern for the crypto industry.
Take Flight
Do Kwon, the founder of the failed Terra blockchain who was arrested in Montenegro last month, will soon officially be indicted for passport forgery after being caught while attempting to flee to Costa Rica. He was apprehended along with Terraform Labs Chief Financial Officer Han Chang-joon, who is reportedly out on bail in South Korea. Kwon faces criminal charges in both his native South Korea and the U.S., and it is not clear yet where or if he will be extradited to either country. Anyway, Kwon’s flight may have been grounded, but Solana’s annual carbon footprint still equals eight flights from London to New York, according to a new environmental dashboard created by the Solana Foundation.
Heading to Consensus? Connect with the Filecoin community ahead of the big event at the Filecoin Network Base, April 24-26, at the Riley Building in downtown Austin. Programming highlights include sessions on Web3 and gaming, developer workshops, and the latest updates on FVM, as well as partner office hours where you can connect with your peers and start building your big idea on the Filecoin network. And join our happy hours Monday and Tuesday evenings, from 7-9 PM CDT, featuring DJ sets with some vintage deep house vibes.
Spanning three floors packed with programming and networking opportunities, the Network Base, hosted by Filecoin Foundation, is your go-to spot for cross-chain collaboration and connection in Austin.Register today.
At Consensus 2023, Filecoin Foundation presents the Protocol Village, featuring presentations on the Filecoin Roadmap on Friday, April 28, starting at 1:45 PM CDT. See you there!
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The Takeaway: Swift and Grift
Angry victims of the FTX swindle are looking for restitution from the celebrity spokespeople who pitched the failed exchange, in a lawsuit that names Larry David, Tom Brady and Shaquille O’Neill, among others. One name not on that list is Taylor Swift, who was offered a reported $100 million sponsorship deal with the offshore crypto exchange – but dodged embarrassment and potential legal fallout by exercising some basic skepticism.
Swift reportedly asked FTX representatives, “Can you tell me that these [listed assets] are not unregistered securities?” in the course of negotiations, which ultimately failed. That’s according to Adam Moskowitz, the plaintiff’s lawyer in the FTX endorsements suit, speaking to The Block’s Frank Chaparro. Moskowitz describes learning about the incident in the discovery phase of the suit, and I haven’t seen confirmation from Taylor Swift’s camp.
But even if it’s a bit of a just-so story, there’s a wealth of wisdom in this little parable. It wouldn’t be the first time Swift showed herself to be a brilliant and sharp-elbowed businesswoman on top of her musical talent – for instance, having muscled her way free of an onerous publishing deal.
The lesson of her FTX adventure, though, is a bit more abstract than it seems. Swift’s question about unregistered securities was remarkably prescient, given that we’re now seeing aggressiveregulatorycrackdownson crypto exchanges. She has, it seems, been paying attention. But selling unregistered securities was not what brought FTX down – old-fashioned fraud was the culprit. Swift did not, it seems, ask FTX representatives “is your management team secretly sending user assets to an affiliated hedge fund?”
How, then, might her securities law question, largely unrelated to the risk that ultimately manifested, have led Swift to shy away from going into business with FTX? I’m speculating here, but one likely scenario is that she or her people weren’t satisfied with the way FTX handled this and other questions. For instance, maybe Bankman-Fried or his representatives were confused or uncoordinated or defensive – all useful signs of an organization that may have deeper problems. (Or maybe the Swift camp didn’t appreciate FTX’s boy wonder playing “League of Legends” during their meeting.)
Despite Moskowitz’s secondhand characterization, we can’t be sure this is how it actually went down. The negotiations between FTX and Swift were first reported back in December by the Financial Times. The deal would have netted Swift $100 million for placing FTX branding at concerts. According to the FT’s sources, though, there was skepticism of the deal within FTX because of its astronomical price tag (for comparison, FTX paid $135 million for naming rights to the Miami Heat stadium).
But taken at face value, the lesson of Moskowitz’s story is that maybe you don’t have to be completely up to speed on every single long-tail risk facing everything you invest in. What Swift did right wasn’t so much asking a specific question about the law or securities – it was asking any challenging and critical questions at all.
A truly canny investor won’t be entirely focused on the content of the answers to hard questions, but also on the way a question is addressed. Whether you’re able to do it face-to-face as Swift reportedly did or by turning a sharp eye to a company’s public communications, that’s a basic and crucial evaluation tool in business and investing at any level.
At least in my mind-palace version of events, Taylor Swift smelled a rat in the responses to her questions about securities law. By running in the other direction, she avoided a catastrophe.
There’s still time to save on the most important conversation in crypto and Web3! Register before Friday at 11:59 p.m. ET to save up to $500 on walk-up prices. Plus, take an extra 15% off with code NODE15. Register for Consensus 2023 today!
Hot Take
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.
