The Crypto Currier 17th January

This week's biggest news in crypto in the Crypto Currier:

Sam Bankman-Fried has been accused of arranging a "secret backdoor line of credit" worth $65 billion for FTX sister company Alameda Research. FTX management says $5 billion has so far been recovered, of which around $4.6 billion of liquid assets could be liquidated. The US SEC has filed a lawsuit against crypto lending platform Genesis and exchange Gemini for offering unregistered securities to customers through high interest paying program Gemini Earn. Crypto lender Nexo has been raided by Bulgarian police. And, Congo's most famous national park is betting on bitcoin mining to fund its vital conservation and sustainability efforts.?

Alameda Research had a $65B secret line of credit with FTX, $5 billion recovered

Former CEO of FTX Sam Bankman-Fried has been accused of arranging a "secret backdoor line of credit"?worth $65 billion for sister company Alameda Research. FTX attorney said the line of credit was financed using funds from FTX customers. He said it was a "secret way for Alameda to borrow from customers on the exchange without permission". He alleged the credit line was created by FTX co-founder Mr. Wang "by inserting a single number into millions of lines of code for the exchange, creating a line of credit from FTX to Alameda, to which customers did not consent”. SBF denied these allegations. SBF also denied any involvement in stealing FTX funds in a "pre-mortem overview" he published on a his new Substack, which is 100% worth reading if not 100% plausible. He stated that Alameda's illiquidity was the reason behind the collapse of FTX. SBF is the second-highest donor to Democratic causes, but says he also donated just as much to Republicans using "dark" money. FTX has so far reportedly recovered $5 billion of cash, crypto, and securities, with "plans to monetize over 300 other non-strategic investments" worth $4.6 billion. (Cointelegraph) and (Business Insider)

Huge?Crypto?Dump Potentially Incoming As FTX Plans To Sell Altcoins Worth $4.6B

New FTX CEO John Ray and his team are trying to find as many liquid assets as possible to make up for the customer losses caused by its collapse. "We have located over $5 billion of cash, liquid cryptocurrency and liquid investment securities" said FTX lawyer Andy Dietderich, who stated that FTX plans to "dump non-strategic holdings with a book value of $4.6 billion," which could lead to significant selling pressure in the crypto market. He also noted that the legal team is still working to create accurate internal records and that the sale may be pushed back a while. The recovered funds do not include assets seized by the Bahamas Securities and Exchange Commission, which Dietderich estimates at $170 million, however, Bahamian authorities claim could be worth as much as $3.5 billion. (Bitcoinist) (Read More)

SEC files lawsuit against Genesis and Gemini about interest-bearing product

The Securities and Exchange Commission has filed a lawsuit against crypto lending platform Genesis and exchange Gemini, accusing them of offering unregistered securities to customers through Gemini's interest-bearing product, Gemini Earn. Gary Gensler, SEC Chairlam claims that the companies raised billions of dollars worth of crypto assets through Gemini Earn "bypassing disclosure requirements designed to protect investors". Genesis Global Capital, the lending arm of Genesis owes Gemini $900 million in loans after it halted customer withdrawals in November, leaving Gemini client money stuck on the platform. This has led to some investors filing lawsuits against Gemini, accusing founders the Winklevoss twins of fraud, while others are suing them over the interest-bearing product. Gensler said "Today's charges build on previous actions to make clear to the marketplace and the investing public that?crypto?lending platforms and other intermediaries need to comply with our time-tested securities laws. Doing so best protects investors. It promotes trust in markets. It's not optional. It's the law". (Business Insider) Read More

A crypto lawyer's take by Charles Kerrigan, CMS: Gensler of course is right (you can’t contract out of regulation; disclaimers aren’t a free pass; same risk as tradfi, same regulation as tradfi.? Now the rubber hits the road – e.g. who owns what? (legally, regardless of what the balance sheet says); were investors mis-sold?; will any of the arguments that say the Howey test doesn’t apply to everything crypto actually work? Tl;dr – crypto firms make products but bankruptcy judges make the law…

Crypto?lender Genesis reportedly owes creditors $3bn

Crypto lending firm Genesis reportedly owes creditors $3 billion, according to the Financial Times. Parent company Digital Currency Group is reportedly considering selling assets from its $500 million venture capital portfolio to raise money and has reportedly struggled to find outside investment. Genesis laid off around 30% of its workforce earlier this month, as it struggled with the fallout from the FTX scandal. Creditors have raised concerns over the situation, with Gemini co-founder Cameron Winklevoss calling for the removal of DCG CEO Barry Silbert. (Finextra) Read More

Crypto lender Nexo raided by Bulgarian police

Things haven't let up for crypto lenders. Bulgarian police have reportedly raided 15 of Nexo's offices. The authorities are investigating Nexo on suspicion of money laundering, tax crimes and offences involving unlicensed banking activities, according to Siyka Mileva, a spokesperson for Bulgaria’s chief prosecutors. Mileva alleged that one of Nexo’s clients is a person linked to financial terrorism. Also, that the?firm has processed over €94 billion in the last five years. The raid on the London-based firm comes a little over a month after Nexo announced that it was ending its US operations after 18 months of negotiations with state and federal regulators ended in what it called a “dead end.” Regulators in eight states filed charges against Nexo in the past, accusing the company of failing to register its Earn Interest Product. BehindMLM, an MLM and Ponzi reporting site claims authorities are apparently alleging Nexo’s founders had ties to OneCoin. Nexo has put out a statement rejecting all allegations. (Pymnts) and (BehindMLM) and (Finance Magnates) and (Fintech Futures)

Hodlnaut creditors reject the restructuring plan, prefer liquidation

Singapore-based crypto lender Hodlnaut is also facing difficulties and may be headed for liquidation. Its creditors have rejected a proposed restructuring plan and are instead seeking to liquidate the platform's assets. Creditors also rejected a plan that would have allowed the current directors to oversee the firm during a restructuring phase. One of Hodlnaut's key creditors, Algorand Foundation, called for the immediate liquidation and distribution of remaining assets among creditors in order to maximise value. The lender's troubles first surfaced in August 2022, when it suspended withdrawals citing market conditions and a lack of liquidity. It was later revealed that it had downplayed exposure to the collapsed Terra-LUNA ecosystem to which it lost $190 million. The investigation was based on complaints from investors between August and November 2022. (Cointelegraph) Read More

Illicit?crypto?transaction volumes notched all-time high in 2022

Illicit crypto transaction volumes reached a record high of $20.1 billion in 2022, according to blockchain analytics firm Chainalysis. This doesn't include the firms currently facing fraud allegations including Celsius, FTX, and Three Arrows Capital. 44% of the 2022 illicit transaction volume came from activity associated with sanctioned entities. The percentage of overall crypto activity associated with illicit transactions rose for the first time since 2019 to 0.24% up from 0.12% in 2021. As a percentage, this is lower than fiat. "On the other hand, we found that illicit transaction volume fell across more conventional categories of?cryptocurrency-related crime, except for stolen funds, which rose 7 percent year-over-year," said Kim Grauer, director of research at Chainalysis. (Business Insider) Read Mor e

Crypto?lenders morph into miners as repossessed rigs pile up

Crypto lenders are repossessing so many Bitcoin mining rigs that they're resorting to plugging them in and mining themselves. "Lenders are flooded with mining rigs," said Wolfie Zhao, head of research at TheMinerMag, a research arm of the mining consultancy BlocksBridge. "One way for the lenders to prevent further losses from the defaulted loans is to keep the collateralized machines running and generate some income." Lenders have been moving more rigs out of storage, said Mason Jappa, CEO of the crypto-mining services company Blockware Solutions. "Some lenders are already on the lookout for high-quality hosting sites," he said. "Lenders can recover some losses if they can find reliable bitcoin mining facilities with cheap electricity, but they are hard to find." One such, New York Digital Investment Group agreed to pay miner Greenidge Generation Holdings not only for its mining rigs but to operate them in exchange for debt reduction. (American Banker) Read More

MetaMask warns?crypto?users about wallet address poisoning

Digital wallet MetaMask has warned users about a new scam called “address poisoning”. The scam involves attackers sending tokens worth $0 to users' wallets, in hopes that they will copy the wrong address when sending funds. The attackers use wallet addresses generated from vanity address generators that match the first and last characters of the victim's wallet address. This can trick users into sending their funds to a near copycat of their own address. MetaMask advises users to always double-check their transactions before sending funds to ensure that they are sending to the correct address. (Cointelegraph) Read More

Crypto exchanges Coinbase, Blockchain.com and Crypto.com cut workforce?

Crypto exchange Coinbase is laying off 18% of its staff, or about 1,100 employees, according to a company SEC filing. In letter to staff, CEO, Brian Armstrong cited the looming recession, the ongoing crypto crash, and overly optimistic growth as the main reasons for the cuts. “As we operate in this highly uncertain period in the world, we want to ensure we can successfully navigate a prolonged downturn. Our team has grown very quickly (>4x in the past 18 months) and our employee costs are too high to effectively manage this uncertain market. The actions we are taking today will allow us to more confidently manage through this period even if it is severely prolonged”? he wrote. Blockchain .com?is also reportedly cutting 110 workers reprising 28% of its workforce, following a previous round of layoffs at the company, which let go of?150 workers in June?of last year. This comes after the company’s $270 million loss to failed crypto hedge fund Three Arrows Capital. Crypto .com is also reportedly cutting 20% of its workforce which is thought will impact around 700-900 employees. (Gizmodo) and (Pymnts) and (Coindesk)

Binance To Increase Workforce By 15%-30% Despite?Crypto?Winter

Crypto exchange Binance says it plans to increase its workforce by 15-30% in 2023, adding to the 5,000 employees they hired in the previous year. This comes as other exchanges have been laying off employees due to the market turmoil. Binance CEO CZ Changpeng Zhao said that they will "continue to build and hopefully we will ramp up again before the next bull market." Binance currently has 687 job openings on its website's career page. (Bitcoinist) Read More

Voyager cleared to sell?crypto?customer accounts to Binance

Cryptocurrency trading platform Voyager Digital, known for the interest it paid out to its users, has received court approval to sell its assets to Binance.US for $20 million as part of its latest liquidation plan in bankruptcy. The deal includes $1 billion worth of assets that Voyager holds on behalf of customers and will give account holders the option to cash out. The court approval is the next step forward for Voyager, which has been struggling due to the severe drop in crypto values this year. The deal cannot close until U.S. Bankruptcy Judge Michael E. Wiles approves the related liquidation plan. Customers will have the right to vote on the Binance deal in the coming weeks on if they support the liquidation plan. Voyager originally had a deal to sell its platform to FTX for $51 million, which fell apart when on the collapse of FTX. (American Banker) Read More

Silvergate hit with another class-action suit, this time for securities law violations

Silvergate Capital, the parent company of Silvergate Bank, and its CEO and CFO have seen another class-action suit filed against them, accusing them of violating the Securities Exchange Act of 1934. The suit claims that the bank failed to detect money laundering activities "in amounts exceeding $425 million" which would likely lead to regulatory repercussions. The suit also claims that the company's positive statements about its business, operations and prospects were "materially misleading" and caused its securities to trade at artificially inflated prices. The allegations of money laundering were based on a tweet by Marcus Aurelius Research, which reportedly contributed to a significant fall in Silvergate's share price. Digital asset deposits at the bank also decreased 68% from $11.9 billion to $3.8 billion in the last quarter of 2002. Silvergate has been facing recent increasing pressure, with another class-action suit being filed against them for their alleged role in transferring FTX user funds to Alameda Research. (Cointelegraph) Read More

Gorillas, militias, & Bitcoin: Why Congo’s most famous national park is betting on?crypto

The Virunga National Park in Congo is home to the world's first known Bitcoin mine operated by a national park, which runs on clean energy. The park, famous for its endangered mountain gorillas, is using the proceeds from the sale of Bitcoin to pay for park salaries and infrastructure projects such as roads and water pumping stations. Park director Emmanuel de Merode said “It’s not something we ever planned, but it’s been a lifeline.” He said that the mine is a result of a plan to build a network gradually after the park built a hydroelectric power station. Tourist revenue, which used to be 40% of the park's revenue, collapsed due to kidnappings, Ebola outbreak and the Covid-19 pandemic. The park is betting on bitcoin mining as a way to turn its coveted natural resources into benefits for both the park and locals and build a sustainable economy. The article is a good read. (Technology Review) Read More

Europol Seizes $1 Million, Arrests 15 In Massive Call Center Crypto Fraud

European authorities have detained 15 individuals suspected of running a large-scale crypto scam operation. The scam allegedly involved call centre networks that stole hundreds of millions of euros from victims by selling counterfeit digital currencies. The criminal gangs operating the call centres employed 200 "traders" who preyed on targets using languages in English, Russian, Polish, Hindi, and German to offer deceptive investment options in cryptocurrencies and commodities. It is alleged they defrauded their victims of at least 3,000,000 Euros per month. According to Europol, German victims have lost more than 2 million euros, but victims from other nations have also fallen prey to the fraudsters. It is claimed the criminal network ran a crypto pyramid scheme using social media to attract victims by offering "seemingly outstanding" bitcoin investments. (Bitcoinist) Read More

UK ‘Fully Behind’?Stablecoin?for Wholesale Settlements, Treasury Official Says

The U.K. government claims it is “fully behind” the idea of a stablecoin for wholesale settlements between banks, according to economic secretary Andrew Griffith. Griffith stated that the stablecoin, a digital asset backed by fiat currency, would not be issued by the government but by a third-party provider. He further added that the government is working towards establishing a regime for the wholesale use of stablecoins for payment purposes and that they are "a long way down the road" with the plan. The Financial Services and Markets Bill, which is currently being debated in Parliament, would give regulators more power over crypto assets including stablecoins. (Coindesk) Read More

Russia to begin work on CBDC settlement system as sanctions endure

Russia's central bank is reportedly planning a cross-border settlement system using a Central Bank Digital Currency (CBDC) in response to ongoing sanctions. The bank is reportedly set to study two potential models in the first quarter of 2023, one of which involves countries entering into bilateral agreements with Russia to integrate their CBDC systems. Some believe Russia’s CBDC will be limited by politics more than technology. Alexey Voylukov, Vice President of the Association of Banks of Russia, said that introducing a digital ruble won’t change or improve Russia’s global political situation and the trials for the CBDC platform can only be undertaken with countries that are friendly with the Russian government, as well as having the requisite level of technology. (Cointelegraph) Read More

Iran and Russia want to issue new?stablecoin?backed by gold

Iran and Russia are reportedly working together to jointly issue a gold-backed stablecoin. Russia's news agency Vedomosti alleges two countries are creating a "token of the Persian Gulf region" that would serve as a payment method in foreign trade. The stablecoin aims to enable cross-border transactions and would operate in a special economic zone in Astrakhan, where Russia has started to accept Iranian cargo shipments. Both countries have banned their residents from using cryptocurrencies like Bitcoin and stablecoins for payments, but are actively working to adopt crypto as a tool of foreign trade. (Cointelegraph) Read More

Abu Dhabi-based Venom Foundation launches $1B fund for Web3 and?blockchain

A new $1 billion fund has opened in Abu Dhabi to invest in protocols and decentralized applications (DApps) that focus on payments, asset management, DeFi, and GameFi products and services to build on proof-of-stake-based blockchain platform Venom. Abu Dhabi-based blockchain platform, Venom Foundation, and investment manager, Iceberg Capital have partnership to create the Venom Ventures Fund. Iceberg Capital will provide incubation programs, industry connections, and support for marketing, exchange listing, and technical, legal and regulatory support. (Cointelegraph) Read More

DOJ investigating if 2 brothers used 11 fake identities to triple-count deposits

The Department of Justice is reportedly investigating two crypto developer brothers behind a solana stablecoin exchange, over alleged fraud. The Macalinao brothers reportedly crafted 11 fake identities to triple-count crypto deposits. They reportedly passed the deposits between each other to create a fake DeFi ecosystem. The alleged scheme was meant to increase the total value locked of Solana in 2021. "TVL can only count if protocols are built separately, so I devised a scheme to maximize Solana's TVL: I would build protocols that stack on top of each other, such that a dollar could be counted several times,"? Ian Macalinao said in an unpublished blog. (Business Insider) Read More

This Google Chrome security flaw could affect billions of users and crypto wallets

Cybersecurity researchers have found that Chrome and Chromium-based browsers, used by 2.5 billion people, have a vulnerability that allows threat actors to steal sensitive files including crypto wallets and login credentials. A potential attack scenario could be a threat actor creating a fake crypto wallet and website that requests users to download recovery keys. In reality, victims would be downloading a symlink to a sensitive file or folder on the user's computer. Google has since fixed the issue with the release of Chrome 108. (TechRadar) Read More

Miss Universe contestant represents El Salvador with?Bitcoin-inspired costume

El Salvadoran actress and model Alejandra Guajardo represented the country in the preliminary competition of Miss Universe 2022 in a costume featuring Bitcoin. The costume featured a giant colón, one of the accepted currencies until 2001 and cocoa beans. She carried a staff topped with a physical Bitcoin. The pageant announcer said, "This look represents El Salvador’s history of currency. For a long time, cocoa was used, and then the colón, until it was replaced by the U.S. dollar. In 2021, El Salvador became the first country in the world to use Bitcoin as legal tender. You don’t need a sash to walk around dressed as cash." (Cointelegraph) Read More

Disclaimer:?The Crypto Currier offers information, not advice or recommendations.? We do not recommend any particular investment or investment strategy and focus on use cases and applications of the technologies rather than investment. You should carry out your own independent research including your own independent verification of facts and data. We write the Currier carefully but we can’t guarantee the accuracy or completeness of any information we publish and we accept no liability for any act or omission by a reader of our content.