New year, new crypto shakes

[ad_1]

Hello and welcome to the first 2023 edition of the FTs Cryptofinance newsletter. This week we looked at whether crypto has turned over a new leaf after a dismal 2022. Spoiler alert: it hasn’t.

Some of the biggest names in the crypto industry have been embroiled in clashes with regulators and prosecutors in the early days of 2023, showing that the issues that plagued the sector in 2022 are already spilling over into the new year.

Reality never resets on January 1, and that truth applies to crypto. The shaking will continue, there will be more shoes to drop, more victims of the contagion, more customers learning their money is lost, Charley Cooper, chief executive of blockchain firm R3, told me via text message Thursday. .

Let’s start things off with Coinbase, an exchange listed in the United States.

The Brian Armstrong-led trading platform has reached a $100 million settlement with New York regulators over anti-money laundering failures. Half of these funds will be paid out as a fine, while the other half will be spent by Coinbase to improve its compliance systems.

The New York State Department of Financial Services said Coinbases systems for enforcing anti-money laundering rules were immature and inadequate. Coinbase called these shortcomings historic and said it has taken substantial steps to address them.

Meanwhile, we are only a week away from 2023, and three major crypto stores have already announced layoffs.

Crypto-focused bank Silvergate said it would cut its workforce by 40%. Shares of the company also fell 43% in Wall Street trading on Thursday after it said its digital asset clients withdrew more than $8 billion in deposits late last year in a crisis of confidence fueled by the collapse of FTX.

Similarly, crypto broker Genesis, which halted withdrawals from its lending program in November this week, cut staff by 30%, just days after the company said it needed more time to find a solution to his financial difficulties. Cryptocurrency exchange Huobi Global, one of the world’s largest crypto firms founded in China, said on Friday it planned to cut about a fifth of its staff as part of a restructuring.

Still with me? Well, there’s a lot more to come.

Celsius Network founder Alex Mashinsky was sued Thursday by the New York Attorney General. The former head of the bankrupt crypto lending platform is accused of defrauding hundreds of thousands of investors and flouting state securities laws.

The former senior Celsius official often used the slogan “unbank yourself”, but according to New York Attorney General Letitia James, he promised to lead investors to financial freedom, but led them down the path to financial freedom. financial ruin.

Mashinsky denies James’ allegations. A lawyer for Mashinsky said the former founder looks forward to vigorously defending himself in court.

Binance has once again found itself in the regulatory spotlight after the US Securities and Exchange Commission intervened in a billion dollar deal that would see its US subsidiary buy the assets of Voyager Digital out of bankruptcy. Wall Street’s top cop said there wasn’t enough information to show how Binance US would complete the deal, while Binance US said diligent review of the deal was to be expected and welcome .

Binance claims that its US subsidiary licenses its exchange technology, but maintains that they are independent companies. However, Binance and its network of global affiliates have come under intense scrutiny following the collapse of rival FTX, which renewed concerns about opaque relationships between related crypto entities.

Finally, U.S. federal prosecutors in Brooklyn released the fraud charges against Aurélien Michel, a 24-year-old French national accused of defrauding Mutant Ape Planet NFT investors of nearly $3 million in cryptocurrency. His attorney did not respond to a request for comment.

Kudos to you for getting this far, but enough for 2023. In the next section, I’ll catch you up with everything that happened over the Christmas holidays.

Thoughts on cryptos at the start of the year? Email them to me at [email protected].

Join FT Live in Davos where we’ll be hosting a number of in-person and digital events alongside the World Economic Forum’s annual meeting in January. The sessions will bring together leaders from the political, business and financial sectors to share their views on the big issues being discussed and the solutions that could pave the way for renewed growth, stability and resilience. Check out the events and register for free here

Christmas Highlights

Former FTX chief Sam Bankman-Fried has pleaded not guilty to eight criminal charges brought against him by the US Department of Justice. His plea comes after his former top associates pleaded guilty to fraud charges after agreeing to be cooperating witnesses. It’s not clear that prosecutors would want Bankman-Fried’s cooperation, as Bankman-Fried is almost certainly their primary target in this investigation, Peter Fox, partner at Scoolidge, Peters, Russotti & Fox, told me via email. -mail.

Remember when Solana-based DeFi platform Mango Markets was hacked for over $100 million? US prosecutors do. On Boxing Day, Avraham Eisenberg’s holiday season was cut short when he was arrested in Puerto Rico. On December 27, the authorities filed a complaint for fraud and manipulation of commodities. He has since been slapped with a detention order and did not respond to a request for comment.

On the eve of Christmas Eve, Donald Trump said he launched his NFT collection because he found some of the former president’s digitized art recreations rather cute. Good.

Soundbite of the Week: Bad Faith Dropout Tactics

A reminder: Genesis first halted withdrawals from its loan program in November. The program allowed clients to stake their cryptocurrencies in exchange for big returns. Crypto exchange Gemini, which used Genesis for its own earning scheme, was dragged into the debacle. Genesis owes Gemini customers $900 million.

Cameron Winklevoss, co-founder of Gemini, lost patience with Barry Silbert, head of Digital Currency Group, which is the parent company of Genesis and other companies including digital asset management firm Grayscale and media site CoinDesk cryptographics.

Winklevoss accused Silbert in an open letter Monday of bad faith stalling tactics.

Over the past six weeks, we have done everything we can to engage with you in good faith and collaboratively to reach a consensual resolution for you to repay the $900 million you owe…however , it now becomes clear that you engaged in bad faith stalling tactics.

Silbert responded to Winklevoss, saying DCG had sought to contact Gemini in late December but had not received a response. You can read the fallout from Twitter here.

Data mining: a note on the link

The last 12 months have been a truly terrible time for the crypto industry.

Bitcoin, the industry’s flagship cryptocurrency, has fallen by around two-thirds in 2022. Tether, the company behind the biggest crypto stablecoin USDT, is also feeling the effects of a prolonged market drought. .

According to figures shared by data provider CryptoCompare, the monthly trading volume of the bitcoin-tether pair fell to 6.6 million coins in December, its lowest point since April 2022.

[ad_2]