Happy New Year! The New Year sees a continuation of the fallout from bankrupt crypto exchange FTX, with its new management now trying to claw bank charity donations and other investments made under former CEO SBF, who has denied fraud. $1.7 million has also been sent from Alameda Research controlled wallets to mixers days after SBF was released on bail. Not ideal. Gemini is facing a class action lawsuit with a group of its investors accusing them of fraud and other crimes, and Genesis has said it needs more time to sort out its problems, which include a $900 million debt to Gemini. And North Korean hackers are posing as VC firms and banks to steal from crypto startups….
Crypto API provider Wyre reportedly close to shutting down, 90% withdrawal limit
Crypto infrastructure provider Wyre is allegedly close to shutting down, reportedly emailing employees “We’ll continue to do everything we can, but I want everyone to brace themselves for the fact that we will need to unwind the business over the next couple of weeks.” CEO Ioannis Giannaros has reportedly said the firm is still operating “but will be scaling back to plan the next steps” amid reports employees are already being laid off. It has also modified its withdrawal policy, limiting its users to being able to cash out up to 90% of their crypto assets citing “the best interest of our community.” Some crypto companies have removed Wyre from their client offerings as a precaution.
Hey Wyre community, we want to provide you with an update regarding the current state of Wyre.
— Wyre 🔊 (@sendwyre) January 7, 2023
Crypto firm Juno urges users to withdraw after ‘uncertainty’ with custody partner
Fiat-to-crypto on-ramp solution provider Juno has taken what it says to be preemptive action due to ‘uncertainty’ about its custody partner, urging its users to sell or self-custody the crypto on its platform. Juno tweeted it that it doesn’t hold any of its customer’s crypto, and relies on its “crypto partner” for those services, which is understood to be Wyre. Wyre is a regulated money service business in the United States which is currently facing problems, as above. Juno last said it still holds $1.25 million of customers’ crypto assets and that it has been actively reaching out to encourage its users to either withdraw or self custody their assets. As additional safeguards, Juno has also temporarily disabling crypto buying on its platform and increased withdrawal limits. Juno said it plans to “transition to a new crypto partner” but has yet to release information on this.
2/ Juno as a platform doesn’t custody crypto assets & relies on our crypto partner for these services.
Due to uncertainty with our crypto partner, we have taken preemptive action in the interest of our customers.
— Juno (@JunoFinanceHQ) January 4, 2023
Genesis tells clients it needs more time on financial woes after Gemini demands action
The interim CEO of crypto market maker and lender Genesis has sent a letter to clients saying they are looking at solutions to prop up its finances and resume withdrawals and new lending but aren’t at a solution yet. “While we are committed to moving as quickly as possible, this is a very complex process that will take some additional time.” This came two days after a Twitter exchange between Barry Silbert, CEO of Genesis owner Digital Currency Group, and Cameron Winklevoss, co-founder of the Gemini crypto exchange, in which Winklevoss criticised Genesis’ handling of its problems. Winklevoss posted an open letter to Silbert on Twitter accusing him of “engaging in bad faith stall tactics” with regard to Genesis’ $900 million debt to Gemini. “We are asking you to publicly commit to working together to solve this problem by January 8th, 2023”. Genesis’ current financial issues result from $175 million locked in its FTX trading account.
So @BarrySilbert claims his company sent a proposal to #Gemini Earn credit committee last Thurs. the 29th. I’m guessing it was garbage since we never got that ‘fulsome’ update over the weekend. @cameron has been vocal, where are @tyler and @DerarIslim hiding? Take the gloves off!
— DivineCynic74 (@DivineCynic74) January 2, 2023
Winklevoss Twins, Gemini Face Class-Action Lawsuit Over $900 Million Crypto Mess
A group of investors have filed a class-action lawsuit against Gemini and its founders Tyler and Cameron Winklevoss, accusing them of fraud and other crimes. The lawsuit, filed in Manhattan federal court, claims that the U.S. cryptocurrency exchange offered unregistered securities in the form of interest-bearing accounts. Investors reportedly alleged in the lawsuit that Gemini and the twins violated the Exchange Act. Brendan Picha and Max J. Hastings, who are pursuing the class action on behalf of other impacted clients accuse the Winklevoss twins of selling Earn “with repeated false and misleading claims, including that the [accounts] were a secure manner of earning interest.” The document said “Gemini refused to honor any further investor redemptions, effectively wiping out all investors who still had holdings in the program, including plaintiffs.” Read More: Winklevoss twins sued by Gemini investors over $900M crypto crisis
Digital Currency Group under investigation by US authorities: Report
Digital Currency Group, or DCG, is reportedly under investigation by the United States Department of Justice’s Eastern District of New York and the Securities and Exchange Commission (SEC). Authorities are reportedly looking into internal transfers between DCG and its subsidiary crypto lending firm Genesis Global Capital, which owes crypto exchange Gemini $900 million. The two companies had jointly operated Gemini Earn, which allows crypto investors to earn 8% interest on their crypto loans at the exchange. Prosecutors have reportedly already requested interviews and documents from both companies, while the SEC is also running a similar early-stage inquiry. DCG subsidiaries include Genesis Global Capital and Genesis Custody, Grayscale Investments, media outlet CoinDesk, crypto exchange Luno and Bitcoin mining company Foundry.
Alameda wallets funnel over $1.7M via crypto mixers overnight
$1.7 million worth of crypto funds has been sent out from Alameda wallets and sent through various mixing services. 30 cryptocurrency wallets linked to Alameda Research became active on Dec. 28 after four weeks of inactivity. This sudden movement happened just days after Sam Bankman-Fried was released on bail and has raised suspicions amongst the crypto community. Not least because the authorities were unable to prevent this despite the matter being sub-judice. It seems the entity behind these fund transfers used extensive planning to hide transaction routes.
Sharp-eyed users may have noticed a number of interesting movements from Alameda wallets in the past 24 hours.
These wallets had been inactive for multiple weeks before they 'woke up' last night.
Over $1M has been sent through crypto-mixers by Alameda wallets.
— Arkham | Crypto Intelligence (@ArkhamIntel) December 28, 2022
Sam Bankman-Fried denies moving funds from Alameda wallets
Sam Bankman-Fried, the former CEO of the now-defunct FTX exchange, has denied moving funds tied to Alameda wallets, days after he was released on a $250 million bond. His tweet was in response to a news story which reported that a wallet address that started with 0x64e9 had received over 600 Eth from wallets that belonged to Alameda. On-chain transactional records showed part of the funds were swapped to USDT while the rest was sent to a mixing service. One on-chain investigation conducted by DeFi educator BowTiedIguana has claimed that SBF has reportedly cashed out $684,000 in crypto via an exchange in Seychelles, whilst under house arrest. The same investigation reported on a series of wallet transactions that were allegedly linked to SBF.
None of these are me. I'm not and couldn't be moving any of those funds; I don't have access to them anymore.https://t.co/5Gkin30Ny5
— SBF (@SBF_FTX) December 30, 2022
Did disgraced crypto founder Sam Bankman-Fried just cash out $684k to a crypto exchange in the Seychelles while under house arrest?
His release conditions are that he not spend more than $1,000 without permission from the court.
Let's examine the evidence on chain 👇
— BowTiedIguana (@BowTiedIguana) December 30, 2022
FTX Wants to Claw Back Bankman-Fried’s Gifts to Charity
The new management of bankrupt crypto exchange FTX is now trying to claw back former CEO Sam Bankman-Fried’s millions of donations to charity. This might be easier said than done, as some of the funds have already been spent by the recipient charities. One challenge in recovering donations is reportedly determining when the exchange became insolvent, assuming it was even solvent to begin with. If a donation was made when FTX was already unable to pay its bills, that money might have to be returned due to bankruptcy law. It also depends if donations were sent from FTX’s charitable arm FTX Foundation, which could give charities added protections, instead of FTX itself. This isn’t the first time FTX has sought to recover SBF’s donations. It has also taken steps to get back the millions in political contributions made by Bankman-Fried, which allegedly came from FTX customer funds, a claim SBF has denied.
Companies and investors may need to return billions in funds paid by FTX
The collapse of FTX Group may bring more problems yet to companies. An insolvency attorney has indicated that clawback provisions could force business and investors to return billions of dollars paid in the months leading up to the exchange’s collapse. This could reportedly include the $2.1 billion paid by FTX to Binance when Binance exited its Series A investment in FTX. It isn’t yet known how the assets would be valued, the bankruptcy court could determine the return of the crypto assets or the fiat equivalent of the value of the crypto transferred.
Sam Bankman Fried Pleads Not Guilty, Trial Date Set By Court
The former CEO of FTX, Sam Bankman-Fried who allegedly used customers’ funds to prompt up his trading arm, Alameda Research, pleaded not guilty to eight charges. It has been alleged this is part of an agreement with U.S. law enforcement agencies. Judge Kaplan accepted SBF’s plead and set the trial date for October 2, 2023. If SBF is found guilty, he could reportedly face life or 115 years in prison. ‘Former Alameda Research CEO Caroline Ellison and former FTX CTO Gary Wang entered guilty plea deals with the U.S. government’ which wont help SBF’s case.
N. Korean Hackers Pose As VC Firms & Banks To Steal Millions From Crypto Startups
North Korean hackers have expanded their targets to include venture capital firms, cryptocurrency startups, and banks, according to a report by cybersecurity firm Kaspersky Lab. Hacking group BlueNoroff, affiliated with North Korea’s infamous Lazarus Group, stole millions of dollars in cryptocurrencies by building more than 70 fake domains and mimicking financial firms and venture capital businesses. The group is now experimenting with new file types and delivery techniques for its virus.
Crypto Bank Silvergate Downgraded by Wall Street Banks, Moody’s
Silvergate Capital, the former banking partner for FTX and many crypto companies, has seen worse-than-expected deposit outflows in Q4 which is expected to have implications on long-term profitability, J.P. Morgan has reported. Silvergate has also seen its ratings slashed. JPM cut its stock rating to neutral from overweight and reduced its price target to $14 from $30. Bank of America downgraded its shares’ rating to underperform, and Canaccord Genuity, Wells Fargo and Morgan Stanley have all cut their price targets. Ratings agency Moody’s downgraded its long-term deposit rating to junk status following the ‘announcement of significantly decreased crypto deposits, large losses to meet its liquidity needs, impairment of technology assets and layoffs.’ This could have implications for the many, largely US based crypto firms, that use its banking services.
Silvergate sold assets at loss and cut staff to cover $8.1B in withdrawals
Silvergate bank has reportedly sold its assets at a loss to cover $8.1 billion in customer withdrawals, following a bank run triggered by the FTX debacle. The bank reportedly lost $718 million in the process. It also announced the layoff of about 40% of its staff, 200 employees and is halting plans to develop a blockchain payments network. The bank said it held $3.8 billion of deposits on Dec. 31, down from $11.9 billion three months earlier, but up from a low of $3.5 billion.
U.S. Investigators Subpoena Hedge Funds in Binance Money-Laundering Probe
Federal prosecutors are reportedly investigating the relationship between crypto exchange Binance and U.S.-based hedge funds as part of a broader investigation into the exchange’s possible skirting of money-laundering guardrails. Authorities have not brought charges against Binance, which has faced intense scrutiny following competitor FTX’s collapse, and the subpoenas do not necessarily mean that charges will be brought against Binance or CEO CZ. This comes at a time when Binance faces intense media and regulatory scrutiny after it has acquired a reputation for allegedly circumventing regulations and finding legal loopholes. Read More: U.S. subpoenas hedge funds in probe of crypto exchange Binance
Binance Controlled 92% of Bitcoin Spot Trading Volume at End of 2022
A move to eliminate bitcoin trading fees and the collapse of rival exchange FTX has seen more investors move to Binance. Binance’s market share was 45% at the start of last year. A CryptoCompare report showed the exchange’s overall year-end crypto market share was 66.7% compared to Coinbase which came in second with a relatively tiny 8.2%. Binance also controlled 92% of Bitcoin spot volume dominance at the end of 2022. This despite Binance being under investigation by the U.S. Justice Department over compliance with anti-money laundering laws and sanctions.
Bithumb’s largest shareholder executive found dead following allegations
The Vice President of the the largest shareholder of South Korean Cryptocurrency exchange Bithumb was reportedly found dead in front of his home at 4am on 30th December. Mr. Mo had been named as a primary suspect in an investigation launched by South Korean prosecutors for his alleged involvement in the embezzlement of funds at Bithumb- related companies, and for alleged manipulation of stock prices. It is suspected he may have taken his own life due to the nature of the criminal allegations brought against him. There has however been a notable number of unexpected deaths within the crypto community in the last three months. Read More: 검찰 수사 받던 ‘빗썸 주주회사’ 부사장 극단 선택
According to Money Today, the vice president of Vidente, the largest shareholder of South Korean cryptocurrency exchange Bithumb, committed suicide by jumping off a building while being investigated by South Korean prosecutors, suspected of corruption and price manipulation.
— Wu Blockchain (@WuBlockchain) December 30, 2022
UK Law Enforcement Assembling Dedicated Crypto Unit
The UK’s National Crime Agency is putting together a specialised crypto cell as part of its National Cyber Crime Unit (NCCU). The NCCU crypto cell “will be dedicated to a proactive cryptocurrency remit with the right tools and capabilities to target UK-based subjects” according to a job posting for the role of “cryptocurrency investigator”. This comes as Andrew Gould, a detective chief superintendent with the City of London police said “There are now officers in every force and every regional organized crime unit who are trained and equipped to [investigate crypto crimes]”. He also said that mounting costs of crypto investigation tools and a struggle to retain staff when the private sector will pay more, are challenges facing the UK’s police force.
Over 1,400 Chinese firms operating in blockchain industry, national whitepaper shows
The state-owned China Academy for Information and Communications Technology published a “2022 Blockchain Whitepaper” which claims that more than 1,400 blockchain firms are currently based in mainland China. China and the US together represent a 52% market share in terms of global blockchain enterprises. The CAICT also disclosed that around 48 post-secondary institutions across China have introduced “blockchain engineering” related degrees and certifications. The Chinese government has included blockchain developments on its official national agenda.
DeFi sees exploits and exit scam drama in the last week of 2022
The last week of 2022 saw a series of exploits, insider job accusations and exit scam drama affecting DeFi companies. Defrost Finance, a decentralized leveraged trading platform on the Avalanche blockchain, was exploited by a DeFi flash loan attack causing $12 million in losses. The hacker reportedly returned a portion of the funds the next day. Security analytics firm Certik concluded that the $12 million of funds drained were a part of an exit scam, which Defrost Finance denies. The day after saw multi-chain wallet Bitkeep exploited for $8 million by hackers with exploiters luring its users through phishing websites. Custodial investment platform Midas will close operations due to a $63.3 million deficit in its DeFi portfolio. Data shows that DeFi’s top 100 tokens had a volatile and bearish week.
Ferrari cuts ties with crypto sponsor ahead of 2023 Formula One season
Scuderia Ferrari, Ferrari’s F1 racing division has cut ties with its crypto sponsors. Ferrari exited its multi-year partnership deals with Velas Blockchain ($30m) and chip manufacturing giant Snapdragon, resulting in a cumulative $55 million loss ahead of the 2023 season. This sees Ferrari join the growing list of Formula One racing teams to end partnerships with their crypto sponsors. Mercedes saw a $15 million loss after suspending its partnership with now bankrupt exchange FTX and blockchain firm Tezos ended its sponsorship of Red Bull Racing citing strategy misalignment. Read More: Ferrari facing $55 million loss after splitting with two premium partners
Metaverse to possibly create $5T in value by 2030: McKinsey report
A report by McKinsey & Company has estimated the potential of the metaverse to generate up to $5 trillion in value by 2030. For the metaverse to reach its full potential, the report says ‘devices (augmented reality/virtual reality, sensors, haptics, and peripherals); interoperability and open standards; facilitating platforms; and development tools’ would all be needed. So far, a majority of initiatives around the metaverse have seen low to medium adoption, at best, with some total flops. However, McKinsey thinks “The metaverse is simply too big to be ignored”.
LG Electronics partnership to bring interoperable metaverse platforms to TVs
LG Electronics has partnered with cloud-based technology platform Oorbit and PIXELYNX, a company building an integrated music, gaming, and Web3 ecosystem, to bring the metaverse to its TVs. This will in theory allow viewers to be able to explore interconnected virtual worlds, concerts, and AI multiplayer games through their TVs (LG only), making it, in theory, easier to interact in the Metaverse.
— Oorbit (@OorbitOnline) January 4, 2023