by amy caster and david gerard
“She was stupid and let me keep all my NFTs in the divorce because she still loves me and is attached to me.”
— Drill
And I’m never wrong about this. I never have.
Goodbye, FTX
FTX will never be revived as a cryptocurrency exchange again. It will be liquidated. FTX attorney Andrew Diedrich said at a Jan. 31 hearing that the company expects to have “sufficient funds to pay all authorized customer and creditor claims in full.” . [Verge]
There may be some weasel-like language here — FTX has said elsewhere that customers have said: I don’t FTX.com customers will bear the majority of the losses and will be fully repaid. [Bloomberg, archive]
The “full amount” payment request is based on the dollar-equivalent price on the filing date, after the cryptocurrency market crashed in the days leading up to the filing date. Therefore, the creditor ends up getting 100% of what he owned at the exact moment he officially lost it. Some creditors feel this is unfair since FTX caused the crash, but most of them want their money free as crypto prices are rising again.
We also believe that a significant portion of the assets in question are illiquid altcoins that cannot be sold. Cryptocurrencies routinely hide vast amounts of horrible nonsense behind mark-to-market accounting.
“We hope this establishes a different narrative that this business has always been good,” Dietderich said. “It was an irresponsible fake created by a convicted felon. The cost and risk of creating a viable exchange from what Mr. Bankman Freed left in the trash was simply too high. .”
FTX still needs to sort out millions of claims, and creditors will need to prove their claims are legitimate if they want their money back.
FTX wins examiner
1 year ago, Judge John Dorsey was denied U.S. Trustee Requests Appointment of Examiner for FTX Bankruptcy. He said this would echo the efforts of John Jay Ray’s team and cost creditors an additional $100 million or so, which is just not necessary.
The trustee appealed, and a three-judge panel overturned the lower court’s decision, forcing FTX to bring in an examiner. [Opinion of the Court, PDF]
The law provides that if the trustee requests an investigator and the debtor’s debt exceeds $5 million, the court must appoint an investigator. The committee added that an examiner was needed given that Sullivan & Cromwell worked for FTX prior to its bankruptcy. (They currently work for John Jay Ray, who is managing the bankruptcy.)
Understand the appeals court’s arguments. Ray has one job and that is to collect funds from creditors. However, the examiner will be able to indicate what steps need to be taken to prevent this situation from happening again.
The appeals court says it is in the public’s interest to find out what happened. This information may also be used in future court cases. At FTX, there were many people who were up to their necks but were not prosecuted. still.
Enjoy FTX even more
Sam’s parents, Joe Bankman and Barbara Freed, are asking the court to dismiss FTX’s lawsuit alleging that millions of dollars transferred to them from their son’s company were fraudulently transferred. They claim that they are not company insiders because neither has ever held an executive position at the company. Therefore, the transfer was not fraudulent. And the $16 million property in the Bahamas wasn’t their home base. [Reuters, archive; Doc 20, PDF]
FTX was hacked in November 2022, shortly after declaring Chapter 11 bankruptcy, with $400 million in virtual currency stolen. The mystery of who did it may be solved: The Justice Department has indicted three people in a multi-year SIM-swapping phone hacking conspiracy that affected multiple companies. The indictment only mentions “Victim Company-1,” but according to Bloomberg, it is FTX. [Ars Technica; indictment, PDF; Bloomberg, archive]
In the criminal case, Sam Bankman Freed hired a new attorney, Mark Mukasey of Mukasey Young, in hopes of getting a lighter sentence on March 28th. Mr. Mukasey helped reduce the sentence of Trevor Milton, the founder of the Nikoka electric truck scam. He will only serve four years in prison instead of 11 years. He is also the defense attorney for Alex Mashinsky of Celsius. [Bloomberg, archive]
The reason Larry David was stupid enough to run an FTX Super Bowl ad was because his “friends” told him that cryptocurrencies were good and solid. He also received a portion of his fees in cryptocurrency. He regrets it very much. [Twitter]
Announcements from Chapter 11
Terraform Labs files for Chapter 11 in Delaware Bankruptcy Court to avoid potential penalties after SEC wins summary judgment on claims that TerraUSD and luna are unregistered securities did. Chapter 11 automatically suspends the payment of any judgments against Terraform. The company’s debt and assets both range from $100 million to $500 million. [Filing, PDF; first-day motion, PDF]
SEC Sues Genesis Trading and Gemini virtual currency exchange In November, it argued over the Gemini Earn product, claiming it was an unregistered security. Genesis hopes to settle with the SEC for a $21 million fine, which would constitute a typical unsecured claim in bankruptcy. SEC lawsuit against Gemini moves forward. [Doc 1220, PDF]
Celsius Network will emerge from bankruptcy, distribute remaining funds to creditors and close down. Creditors will also receive a stake in new Bitcoin mining company Ionic (Celsius). Newco Discussed earlier. Ionic is managed by Hut 8. [press release]
ETF
Spot Bitcoin ETFs give people who have already stopped buying Bitcoin a new way to not buy Bitcoin anymore.
It’s clear by now that ETFs are not the magic rocket fuel that will take Bitcoin to the moon. There is also no evidence that ETFs are attracting new liquidity, driving up the price of Bitcoin and forcing holders to cash out.
We love how Grayscale fought hard to bring a Spot Bitcoin ETF to the US, and the first thing that happened was GBTC depleted, with $4.3 billion outflows so far. did.
FTX also had some of the blame, selling about $1 billion (22 million shares) of GBTC. Genesis knows he’s sitting on a pile of GBTC, but he’ll probably have to scrap it at some point to fill the big hole in the books. Sam Bankman Freed is dumping Bitcoin from his cell. [CoinDesk]
Grayscale is currently experimenting with the introduction of a covered call ETF based on the options of the Bitcoin Trust ETF (GBTC). [FT, archive; Form N-1A]
Covered ETFs are designed to reduce risk. This involves selling a call option on an asset held by the ETF, in this case Bitcoin. If you own Bitcoin or a Bitcoin ETF, you are “covered” even if the price of Bitcoin rises and your call option expires in the money. [Investopedia]
Round Hill Investments has a Bitcoin Covered Call ETF (YBTC) that has already begun trading. [FT, archive]
The Bitcoin ETF turns out to be good news for CME Bitcoin Futures, a cash-only bet that never touches Bitcoin. Traders don’t have to touch Bitcoin themselves and use CME futures to bet on the price and hedge their bets with ETF stocks. [FT, archive]
The Bitcoin ETF market is fierce, thanks to the SEC approving 11 ETFs at the same time. Invesco and Galaxy Asset Management have lowered their Spot Bitcoin ETF fees from 0.39% to 0.25%. We also waived fees down to 0% for the first six months or $5 billion in assets). [Press release]
We talked about the risks of holding ETFs. A large pile of Bitcoins in a storage facility. Valkyrie added BitGo as his second custodian to mitigate this risk. [CoinDesk]
Tether has plenty of money
Tether has released its certificate for the quarter ending December 31st. The company reported profits of $3 billion. Of this amount, $1 billion was due to interest on U.S. Treasuries, and $1.85 billion was due to increases in the value of Bitcoin and precious metal reserves. So the actual cash profit is $1 billion. [Tether, archive]
This is a snapshot of what Tether told its accountants, this time BDO Italia, about its assets at the end of 2023. This is not a proper audit at all and gives Tether a lot of wiggle room to fabricate things. What has been done in the past has been extensively documented.
Tether issues Tether as a loan to its largest customers, and the only backing is the loan itself. In other words, Tether is printing Tether out of thin air. This way, no new real dollars flow into the system.
We believe that most of the recent Tether issuance is done through loans. Anyone with real dollars invests that money in ETFs.
Tether now claims that it has sufficiently overcollateralized ($4.8 billion in secured loans against $5.4 billion in excess reserves) that the loans are no longer at risk.
Tether is proud to announce that we have achieved our goal of removing collateralized loan risk from our token reserves. Although such secured loans are widely overcollateralized, Tether had accumulated enough excess reserves to cover its entire exposure. This is in response to concerns the community has expressed in the past regarding this part of the portfolio.
This is being read by many as like Tether currently doesn’t have any of those loans at all, but that’s not their very accurate wording.
Who is breathing down Tether’s neck that they need to make this statement and be reassured? Not the “community” in any way.
How much would it cost, 1 AK, CZ, $600?
Cryptocurrency use cases continue to be discovered such as cryptocurrencies for Hamas. OFAC’s press release announcing the fifth round of sanctions against the Hamas organization emphasizes the cryptocurrency perspective. [Treasury]
Following the Oct. 7 Hamas attack on Israel, three families of American victims are suing Binance, former CEO Zhao Changpeng, Iran, and Syria over funding for the attack. The filing accuses Binance and CZ of allowing Hamas to use their platforms for financial transactions and payments. “Incredibly, Binance has done everything in its power to protect users associated with Hamas and other terrorist organizations from regulatory scrutiny, especially if they are ‘VIPs,’ which has resulted in huge profits for Binance.” It’s the users. ” [Semafor]
extreme bingo
It turned out that bitcoin mining stocks It’s a bad investment. J Capital, a stock short trader, released a report on Hut 8, linking it to the penny stock ring. The stock (USBTC) has lost two-thirds of its value since Christmas. [J Capital; Protos]
The U.S. Energy Information Administration is requesting details of energy consumption from February to July 2024 from U.S. Bitcoin miners. Bitcoin in the US already uses as much energy as the state of Utah. [EIA]
The International Energy Agency predicts that global electricity demand from data centres, cryptocurrencies and AI will more than double over the next three years, equivalent to the electricity use of all of Germany. [Bloomberg, archive]
More good news for Bitcoin
OPNX was an exchange for trading distressed crypto debt founded in early 2023 by the founders of defunct crypto hedge fund Three Arrows Capital and defunct crypto exchange Coinflex. It is closed – users have until February 14th to withdraw funds from the platform. 3AC’s Zhu Su blames the closure of FTX for which he is demanding a complete recovery of funds. Also, Dubai regulators did not like OPNX. Also, OPNX didn’t actually have any users. The highest amount he paid in one day was $624,000. [CoinDesk]
Congresswoman Maxine Waters is concerned that Facebook is once again trying to abolish Libra. Meta has filed five trademark applications related to digital asset services and blockchain technology. Waters wrote a letter asking them to explain themselves and reassure Congress that they have no intention of starting crypto again. [Letter, PDF]
The US Department of Justice has indicted Sam Lee, the founder of Australian crypto Ponzi scheme HyperVerse, on charges of securities fraud and wire fraud. The one with the fake CEO. Rodney Barton and Brenda Chunga were also charged. Mr. Lee is currently safely staying in Dubai. [press release]
Coinbase has hired former British Conservative Prime Minister George Osborne as an advisor. In fact, it’s hard to think of a better fit. [FT, archive]
