FTX is much worse than anyone imagined ??????; Musk to turn Twitter into a Bank? ??; FinTech investing just became a hell of a lot more difficult ??

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???Hey,?Linas here!?Welcome to a????weekly free edition????of my daily newsletter. Each day I focus on 3 stories that are making a difference in the financial technology space. Coupled with things worth watching & most important money movements, it’s the only newsletter you need for all things when Finance meets Tech.

If you’re not a subscriber, here’s what you missed this week:

1. The aftermath of the FTX collapse could be bigger than the earthquake ??
2. Contagion of contagion, or how Genesis could cause Crypto Armageddon ??
3. The contagion continues as FTX is a virus that’s soaring worldwide ??
4. There's no such thing as Smart Money ??
5. Klarna wants to dethrone Google and Amazon ??
6. Nike's chance to own the future, or how it has been winning the Web3 NFT game ??
7. JPMorgan + Mastercard, or why the future of Banking is Open ????
8. Ether, the ultrasound money? ??
9. Square + American Express, or a perfect ecosystem match ??
10. Marqeta is betting on Embedded Finance as The Next BIG Thing ??
11. YouTube to double down on Social Commerce. You should too ??

and more! Don't miss out and join the community here????

Last week (14-18 November) was something we haven't seen in FinTech for a while.?We will look at FTX which appears to be much worse than anyone imagined; Elon Musk who is planning to turn Twitter into a Bank; FinTech investing which just became a hell of a lot more difficult for everyone, and other interesting news and developments.

Without further ado, let us dive into what happened in the financial technology sector last week. Let’s connect the dots.

FTX is much worse than anyone imagined ??????

Breaking???Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information?- John Ray, the new CEO of FTX .

Ray has overseen some of the biggest bankruptcies ever, including the collapse of the energy giant Enron, and has 40 years of experience in restructuring companies.?He said he had never seen anything as bad as FTX. That tells you a lot.

More on this ???Today a 30-page FTX Bankruptcy court filing was submitted to the Delaware bankruptcy court. It’s hard to believe things at FTX were THAT BAD. Here are some shocking examples:

?? FTX lent Sam Bankman-Fried (SBF) >$1 billion for personal use.?They also loaned the Director of Engineering Nishad Singh $543M. $1.5B just like that.

?? The crypto exchange used customer (!!!) funds to buy houses for workers in the Bahamas?????Employees & executives put their names on homes purchased with company funds.

?? FTX didn't keep proper records of whom they employed and what those employees did.?Their total employee count was probably fake.

?? SBF made all business decisions on apps that auto-deleted everything after some time (Signal).?He encouraged all employees to do the same.

?? FTX had no cash management system.?Nobody had any idea how much cash was on hand at any given time, or even where all their cash was.

?? FTX didn’t keep any books or records of its digital assets.

?? Crypto assets deposited by customers weren't even recorded on the balance sheet.

?? The crypto exchange built software to hide the misuse of customer funds.

?? THE TAKEAWAY

There’s bad, and then there’s FTX Bad ???FTX was supposedly worth $32 billion, it was backed by top-tier venture capital firms and grew into one of the biggest exchanges in the world. Yet, now it appears it had far less documentation, structure, and organization than any fantasy sports league. Zooming out, it seems that SBF is a massive fraud (not to mention that nearly every SBF public statement was false) and FTX was nothing more than a Ponzi. More importantly, given the fact that the guy who ran Enron as it was failing is now saying FTX is much worse, tells you all. The worst part is that it’s just the tip of the iceberg.

Bonus: The aftermath of the FTX collapse could be bigger than the earthquake ??

Contagion of contagion, or how Genesis could cause Crypto Armageddon ??

WTF: Binance walks away from FTX takeover ????

Full court doc?here.

Elon Musk will turn Twitter into a Bank? ??

The news ???Elon Musk detailed his vision for?Twitter’s?plan to enter the payments market during a live-streamed meeting with Twitter advertisers, hosted on Twitter Spaces, TechCrunch reported.

More on this ???In short, Musk seems to want to turn Twitter into a bank, or as he said - a “high-yield money market account,” with debit cards, checks, and loans.

The goal is “enabling people on Twitter to able to send money anywhere in the world instantly and in real-time. We just want to make it as useful as possible”, Musk said. He added that the feature, along with “video content and compensating content creators” and improving search, is a “high priority.”

Twitter could reportedly set up a “high-yield money market account so that having a Twitter balance is the highest-yield thing that you can do,” according to Musk. Instead of traditional banks’ “complex and expensive” system of credit cards, savings and checking accounts, CDs, and the like, Musk says you’ll have “one balance on Twitter that can simply go positive or a negative.”

Furthermore, for places that don’t accept Twitter payments, Musk says you’ll get a debit card tied to your balance and even traditional checks if you want them. “If you address all things that you want from a finance standpoint, then we will be the people’s financial institution,” he added.

?? THE TAKEAWAY

The Super App ???Not sure about the bank, but it’s clear that Elon isn’t ditching its vision of turning Twitter into the Everything App. Because once you have social and have solved the money element, that’s it. I sense that indeed Twitter can become the Super App PayPal, Klarna, & Revolut always dreamed of…

Bonus: Twitter can become the Super App PayPal, Klarna, & Revolut always dreamed of ??

FinTech investing just became a hell of a lot more difficult for everyone ??

The news ?? Assure, a popular FinTech platform for administering special purpose vehicles (SPVs), earlier this week informed clients that it is shutting down, Axios reported. It’s strange that other outlets haven’t been covering this.

It’s a pretty big deal, so let’s take a look at why it happened and what’s the impact.

The USP ???Founded in 2012, Assure was able to handle back-office tasks for both SPVs and traditional private equity funds. It claimed on its website to have completed more SPVs and private transactions than any other such administrator.

For those who aren’t familiar with?SPVs, think of them as investment pools designed to invest in a specific company. They have boomed in popularity over recent years and were being used not only by individual deal sponsors but also by institutional investors like VCs or family offices.

What happened? ???According to Axios, Assure did not provide users with a reason for the shutdown, which takes effect at the end of the year, beyond writing:

The industry has evolved considerably over the decade since we founded our company.?Current market conditions have resulted in Assure evaluating its business model.

The reality is a bit different though. Following the news, those who used the platform complained that Assure was one of the most incompetently run companies in the venture space. One LP ran a deal with them with the intention to move much more over, but it was such a disaster that they decided to not work with them any further.

At the core, it seems that Assure stunk generally and wasn’t doing what it promised to do. Furthermore, they went too cheap with their pricing and then couldn’t deliver as well as AngelList or Carta. When the funding dried up, it had to shut down inevitably,

Change in SQ ???Assure going out of business will surely change the status quo for the SPV market. Here’s a brief review of what others are doing and what migration services are available:

• Allocations.?They paid Assure to be the preferred partner.?Allocations has compensated Assure to allow Assure to provide some transition assistance on behalf of its clients, and some services you elect to receive from Allocations may be completed for a fee. Click?here?to get started.
• Vauban from Carta?is offering migration services. Vauban from Carta & Carta are fully staffed to assist with migrations and future SPVs.?Move to Vauban.
• AngelList.?Details on the AngelList migration service?here. Get started by completing?this form.
• Sydecar?is not accepting Migrations.?In a letter to their customer base they stated that they won’t be taking over existing Assure SPVs onto their platform at this time.

?? THE TAKEAWAY

The impact ???Assure was the 2nd biggest provider for SPVs after AngelList, hence, for those that do syndicates as well as VCs, it’s a pretty big deal, not to mention the industry as such. Furthermore, we also have to talk about how much of a mess all these SPV managers will face when trying to deliver K1s, trying to distribute shares at IPO, etc. Assure crested an incredible amount of liability for a lot of people that won’t even be felt in full for several years. And that’s disappointing, to be honest… Further, despite this being a monumental mess for fund managers (and for LPs too), companies like Vauban are here to help - so definitely check them out. Zooming out, this also means more consolidation in the market that should effectively benefit leading players like AngelList and the aforesaid Carta (the owner of Vauban).

Extra Reads & Quick Bites for Curious Minds??

• Zelle goes places ???Varo?will offer the peer-to-peer payment network?Zelle?as part of its mobile app, the digital bank announced this week. With this launch, Varo says it has become the?first all-digital bank?to offer Zelle in its app without needing a partnership with a bank.?Seems a good time to revisit this:?When being late-comer is an advantage, or how Zelle dominated P2P payments ??
• Legal tender! ??The tiny Caribbean nation of St. Kitts and Nevis is considering adopting Bitcoin Cash as a legal tender, its prime minister said at a conference on Saturday.?Terrance Drew said that he welcomes “the opportunity to dialog further with a view to exploring future opportunities to engage in Bitcoin Cash mining and making Bitcoin Cash legal tender here in St. Kitts and Nevis by March 2023."?However, that could bring up opposition from the eight-member Eastern Caribbean Currency Union (ECCU), which supplies its current currency and the EC dollar.?It also launched a central bank digital currency this year, DCash, so it may well view BCH as a potential competitor.?It’s worthwhile to reread?Bitcoin in El Salvador???? is one of the greatest product-market fit failures ever ?? ♂?

Money Moves??

• Daylight, the digital banking app built for America's LGBTQ+ community, has raised $15M in a Series A funding round led by Anthemis Group.?CMFG Ventures, Kapor Capital, Citi Ventures, and Gaingels joined the round too.
• Blnk, an Egyptian buy now, pay later (BNPL) startup, has raised $23.7M in equity and debt funding and a further $8.3M via securitized bond issuance.
• Citi Ventures has made its first FinTech investment in India, joining a $60M raise in bank lending software house?Lentra.

Continue reading by subscribing to?Linas's Newsletter.?You will receive fresh news about FinTech with hot takeaways every day.

P.S.?You might enjoy my earlier pieces as well:

?? The Perfect Pitch Deck: How Coinbase Raised Seed Capital and Began Journey Towards $100B Worth Public Company

???A Wise pitch deck that led to London’s biggest and most successful direct listing ever

?? Lessons FinTechs can learn from Spotify going into audiobooks ??

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About: I am?a business developer, sales professional, FinTech strategist, as well as Cryptocurrency and Blockchain enthusiast. I'm highly passionate about Financial Technology and Digital Innovation, and strongly believe that it will change the world for the better. Apart from my daily job at a global payments startup where I'm leading the company's expansion into Europe, I'm an active member of the FinTech community and a TechFin evangelist.

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