Silvergate Faces US Fraud Probe Over FTX and Alameda Dealings (Bloomberg)
"US prosecutors in the Justice Department’s fraud unit are looking into Silvergate Capital Corp.’s dealings with fallen crypto giants FTX and Alameda Research, according to people familiar with the matter. The criminal investigation is examining Silvergate’s hosting of accounts tied to Sam Bankman-Fried’s businesses, said the people who asked not to be identified to discuss the confidential probe. The review adds to mounting scrutiny of the La Jolla, California-based bank, which has also drawn the attention of lawmakers."
Better Exchange Due Diligence Could Help Define Crypto’s 2023 (CoinDesk)
"The crypto industry lost a lot in 2022, but there’s plenty of optimism it will rebound stronger and better in the years to come. One reason for that optimism is more risk-conscious investing and better due diligence, according to Doug Schwenk, CEO of Digital Asset Research (DAR), a securities analyst operating within the digital assets space. “When prices were always going up, it became pretty easy for people in general to kind of ignore risk management,” said Schwenk. “With the collapse of Terra/Luna, FTX, Three Arrows Capital, Celsius Network, BlockFi, we've seen a lot of refocus in the industry on risk management.”"
The Unusual Crew Behind Tether, Crypto’s Pre-Eminent Stablecoin (WSJ)
"Tether Holdings Ltd. operates a $68 billion stablecoin at the heart of crypto’s alternative financial universe. Far more tether trades each day than bitcoin. Yet the company’s founders and owners are an unusual bunch with scant experience at that scale of finance. One founder was a child actor turned early crypto investor. Another founder and top shareholder practiced plastic surgery before turning to electronics importing and then crypto. One newer owner has gone deep into British politics."
BNY Mellon Names Caroline Butler CEO of Digital Assets (CoinDesk)
"Custodial banking giant BNY Mellon (BK) has promoted Caroline Butler to CEO of Digital Assets, the lender announced Thursday. Butler joined BNY Mellon in 2020 and most recently was CEO of Custody Services, where she led development of the bank’s integrated digital custody and administration platform for traditional and digital assets. The platform launched in October 2022, allowing fund managers to store keys necessary to access and move around their bitcoin (BTC) and ether (ETH), as well as the other traditional bookkeeping functions."
Coinbase Stock up 21% Following Lawsuit Dismissal (The Block)
"Shares of Coinbase have been rallying since Wednesday afternoon after a federal judge dismissed a lawsuit against the company. The stock was up by roughly 21%, trading at around $78.7 as of 1 p.m. EST Thursday, according to data from TradingView. The proposed class-action suit, filed in the U.S. District Court for the Southern District of New York in 2021, alleged that Coinbase facilitated the sale of unregistered securities."
Judge Dismisses Proposed Class-Action Lawsuit Alleging Coinbase Sold Unregistered Securities (CoinDesk)
"U.S. District Court Judge Paul Engelmayer has rejected claims in a proposed class action by customers who claim Coinbase sold them unregistered securities and also failed to register as a broker-dealer, according to a filing on Wednesday. The case is Underwood vs. Coinbase Global in the Southern District of New York. Coinbase CEO Brian Armstrong was also named as a defendant. The New York-based judge decided to toss out the lawsuit after finding that the plaintiff's claims made in their amended complaint filed last March “added numerous allegations that directly contradicted their initial Complaint.”"
Tether Denies It Borrowed $2B From Celsius, as Described in Court Report (The Block)
"Stablecoin issuer Tether is pushing back against assertions that it borrowed funds from failed crypto lender Celsius. According to a nearly 700-page report filed Tuesday from court-appointed examiner Shoba Pillay, Celsius at one point had lent approximately $2 billion to Tether. But Tether, which also invested in Celsius, denies it ever borrowed funds from the failed firm."
Zuckerberg’s Metaverse Division Loses $13.72 Billion in 2022 (Decrypt)
"Meta shares rose over 18% in after-hours trading Wednesday following a rosier-than-expected quarterly earnings report. But rising tides across Meta still couldn’t lift the tech giant’s embattled metaverse division. The company’s metaverse-focused Reality Labs lost a whopping $4.28 billion in 2022’s final fiscal quarter, Meta announced, marking a new low for the struggling department that has been repeatedly positioned as the company’s future. Wednesday’s announcement brought the metaverse division’s total 2022 losses to a staggering $13.72 billion."
Stargate to Reissue STG Tokens Following Alameda Wallet Hack (CoinDesk)
"Decentralized finance (DeFi) protocol bridge Stargate has proposed to reissue all Stargate (STG) tokens, according to a Wednesday blog post. Stargate will reissue STG on March 15. The reissue will “eliminate the risk of illegitimate STG transfers from compromised Alamada wallets,” according to Stargate DAO. Calls for the reissue come after StargateDAO uncovered a “significant threat” to its protocol owned liquidity (POL) and token holder security originating from security vulnerabilities at the failed crypto quant trading firm Alameda Research."
BNB Chain Developers Introduce Whitepaper for New WEB3 Storage Network (The Block)
UK Treasury Outlines Plans for Regulating Crypto Exchanges and Lenders (The Block)
"The UK Treasury published a consultation paper, which sets out plans to regulate crypto trading platforms and lenders as part of its financial services roadmap. The consultation is open for comment until April 30, aiming to give "confidence and clarity to consumers and businesses alike," the Treasury said in a release. It added that this approach hopes to mitigate the most serious risks of volatility and structural vulnerabilities, which have plagued some business models in the sector, bringing it in line with traditional finance."
Ethereum Staking Withdrawal Testnet for Shanghai Upgrade Goes Live Tomorrow (The Block)
"Ethereum staking testnet Zhejiang is going live tomorrow and will give users the first preview of what the withdrawal process and functionality will be like after the Shanghai upgrade. The testnet, which will go live at 10 a.m. EST on Wednesday, won’t immediately offer users the ability to try out any of the withdrawal features that will be implemented in the Shanghai and Capella testnet upgrades six days later. Users will be able try out depositing to validators and get a sense of how the user interface will behave."
Hong Kong to Require Stablecoin Licensing as Early as This Year (CoinDesk)
"Hong Kong is set to demand mandatory licensing for stablecoin issuers and won't allow algorithmic stablecoins, its top financial regulator said on Tuesday. Entities conducting regulated activity in Hong Kong will have to obtain a license to operate stablecoin services. The Hong Kong Monetary Authority (HKMA) laid out its regulatory plans after receiving feedback on a discussion paper published last year. Based on the 58 responses it received, the regulator said it will set up a regime to supervise stablecoins, which are cryptocurrencies whose value is pegged to other assets."
Celsius Failed to Report $800 Million in Losses as CFO Flagged ‘Possibly Illegal’ Behavior (The Block)
"Crypto lender Celsius operated a riskier business than advertised and failed to report hundreds of millions in losses, all while CEO Alex Mashinsky cashed out more than $68 million, according to a court-ordered report into its bankruptcy. "Behind the scenes, Celsius conducted its business in a starkly different manner than how it marketed itself to its customers in every key respect,” Shoba Pillay, who was appointed as the independent examiner, said in her nearly 700-page report released today. “Celsius abandoned its promise of transparency from its start.”"
Fidelity Digital Assets' Head of Institutional Crypto Exits Role (CoinDesk)
"Chris Tyrer, the head of institutional crypto at Fidelity Digital Assets, a unit of financial services giant Fidelity investments, has left his position, he announced in a LinkedIn post on Tuesday. The post does not say what his future plans may be. "Chris is a valued leader who has contributed to the successful and continued growth of the Fidelity Digital Assets business over his nearly four-year tenure," a Fidelity spokesperson told CoinDesk. "Fidelity remains committed to our work in the digital assets space and Fidelity Digital Assets’ continued potential for international growth.”"
Twitter Preps for Payments With Crypto Option as Musk Eyes Super App (The Block)
"Twitter is working to line up the necessary regulatory approvals needed to integrate payments into the platform, including future crypto capabilities, the Financial Times reported. The social media platform is applying for licenses and designing the software needed to bring payments to the platform as part of Elon Musk's drive to turn Twitter into a "super app," the FT said, citing people familiar with the company's plans."
Mastercard, Binance Launching Prepaid Card in Brazil (Reuters)
"Mastercard Inc and Binance said on Monday they are lauching a prepaid card in Brazil, Latin America's largest economy, as part of the crypto giant's efforts to "broaden the connection between traditional finance and crypto". According to a statement, the so-called Binance Card is currently in beta testing and should be widely available in the next few weeks, making Brazil the second country in Latin America to receive it after Argentina."
Judge Rules Identities of 2 Parties Who Backed Sam Bankman-Fried’s $250B Bond Can Be Revealed (CoinDesk)
"U.S. District Judge Lewis Kaplan ruled on Monday that the names of the two currently unidentified people who co-signed Sam Bankman-Fried’s $250 million bail bond can be made public. It's already known that the FTX founder's parents also co-signed, but the other names were kept private. The New York judge overseeing Bankman-Fried's criminal trial ruled in favor of four separate petitions by a number of news organizations seeking the names of these individuals, who signed onto the bond earlier this month. The ruling is stayed pending a possible appeal until at least Feb. 7."
FTX-Linked Alameda Research Sues Voyager Digital for Over $445M (The Block)
"Troubled crypto trading firm Alameda Research is suing failed crypto lender Voyager Digital for more than $445 million, seeking to recover loan repayments that it made after Voyager filed for bankruptcy protection. The filing, made in a federal bankruptcy court in Delaware on Monday afternoon, noted that the total amount Alameda's lawyers want back — $445.8 million — could go higher, if evidence of more payments from Alameda to Voyager is found. They're also seeking the repayment of legal fees."
Osprey Funds Sues Competitor Grayscale Over Bitcoin Trust Advertising (The Block)
"Osprey Funds, which provides asset management services, accused Grayscale Investments of “unfair and deceptive acts and unfair competition." Osprey said Grayscale’s advertisements were misleading when it said the Grayscale Bitcoin Trust (GBTC) would be converted to an exchange-traded fund, despite regulators having rejected that as a possibility, the firm said in a complaint filed in a Connecticut court on Monday. Bloomberg News first reported the legal filing."
Investors Who Bet on Bitcoin Fund in Retirement Accounts Pay the Price (WSJ)
"For many years, individual investors used the Grayscale Bitcoin Trust as a way to bet on bitcoin in their retirement accounts. Now they are paying the price. The $14.6 billion trust, known by its ticker GBTC, was one of the few options for individual investors to get exposure to bitcoin without having to purchase the cryptocurrency directly. But GBTC doesn’t have a redemption program like an exchange-traded fund. GBTC investors can sell their shares on the open market but they can’t redeem their shares for bitcoin, resulting in the fund’s shares trading at a premium or a discount to the underlying value of the bitcoin it holds."
Celebrities Who Endorsed Crypto, NFTs Land in Legal Crosshairs After Investor Losses (WSJ)
"Madonna sang the praises of nonfungible tokens, or NFTs, depicting cartoon portraits of bored apes. Tampa Bay Buccaneers quarterback Tom Brady appeared in commercials endorsing crypto exchange FTX, which collapsed suddenly in November. And Kim Kardashian gushed about EMAX tokens on Instagram. Now they and other celebrities are facing civil lawsuits from investors who suffered losses on virtual assets, as well as scrutiny by regulators for allegedly duping the investing public. The legal actions, which have prompted some agents to caution their clients against financial endorsements, could clarify the ground rules for crypto promotions, as well as the hurdles investors must clear to hold promoters liable when investments go south."
DOJ Claims Sam Bankman-Fried Tried to Influence Witness Testimony, Asks for Communications Ban (CoinDesk)
"Federal prosecutors wrote a letter to U.S. District Court Judge Lewis Kaplan on Friday, requesting that he modify the conditions of Sam Bankman-Fried’s bail to include a ban on private communications with current and former employees of FTX and Alameda Research. The Department of Justice’s (DOJ) request comes after Bankman-Fried reached out to at least one FTX employee – identified as Ryne Miller, the current general counsel for FTX US – to allegedly attempt to influence his future witness testimony."
Arbitrum-Based DEX Vest Comes Out of Stealth With Seed Round From Jane Street, Others (The Block)
"Vest Exchange came out of stealth and revealed plans to launch a decentralized perpetual futures exchange on the Arbitrum network. The exchange has closed a seed round for an undisclosed amount from Jane Street, QCP Capital, Big Brain Holdings, Ascendex, Builder Capital, Infinity Ventures Crypto, Robert Chen (Ottersec), Pear VC, Cogitent, Moonshot Research, Fugazi Labs and other angel investors."
Custodia Bank Denied Federal Reserve System Membership (CoinDesk)
"The U.S. Federal Reserve Board has denied Custodia Bank’s application for membership, claiming the crypto-focused institution’s “novel business model and proposed focus on crypto-assets presented significant safety and soundness risks.” “Custodia’s risk management framework was insufficient to address concerns regarding the heightened risks associated with its proposed crypto activities, including its ability to mitigate money laundering and terrorism financing risks,” the Fed added. The decision comes nearly 18 months after Custodia (formerly known as Avanti Bank) first filed its application for membership in the Federal Reserve System."
Silvergate Slides Pre-market After Suspending Preferred Dividend (The Block)
"Silvergate fell more than 6% before the open after announcing it suspended the payment of dividends on its 5.375% Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A. The company said it is trying to preserve capital as it attempts to maintain "a highly liquid balance sheet with a strong capital position as it navigates recent volatility in the digital asset industry." Silvergate's stock has been volatile this month after it reported a $1 billion fourth-quarter loss, and cut about 20% of its workforce. Crypto prices have been rising lately, but are still far from their 2021 peaks. The collapse of 3AC and FTX have led to ripple effects throughout the industry."
WazirX Says Binance Lied About Ownership as Dispute About India’s Largest Exchange Escalates (CoinDesk)
"Emails obtained by CoinDesk shed new light on the ongoing debate over the opaque and disputed ownership of WazirX, India’s largest crypto exchange. In November 2019, the ownership of WazirX was uncontested: Binance, the world’s largest crypto exchange by trading volume, published a blog post saying it had purchased the Indian exchange. WazirX’s executives talked openly about the acquisition. But last summer, when WazirX landed in hot water with the Indian government, the story started to change. In early August, WazirX’s Mumbai office was raided by Indian officials on suspicions that the exchange had helped 16 fintech companies launder money."