Former FTX Boss Maintains Innocence, Nexo, DCG & Gemini Misfortunes Collide

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The past week in crypto has been mixed with new updates and ongoing controversies. A new scandal has emerged as new allegations have been brought against crypto lender, Nexo, with reports accusing the regulated CeFi of criminal activity. The FTX case continued to unfold, with founder Sam Bankman-Fried claiming his innocence. Additionally, the situation between DCG and Gemini has escalated. Despite the recent market recovery, the industry has seen another round of layoffs.

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Nexo implicated in new scandals

Nexo has become the latest to be embroiled in a scandal. Reports from January 12 showed that Bulgarian authorities had raided the company’s offices in Sofia, the Bulgarian capital. This was part of a large-scale investigation launched against the loan company for alleged illegal activities.

Authorities suspect the company of money laundering, tax crimes, illegal banking, computer crimes and facilitating transactions to circumvent sanctions against Russia. Investigations by international authorities revealed that several transactions handled by Nexo violated Western sanctions against Russia, with others involving the financing of terrorism.

According to a spokesperson for the country’s chief prosecutor, Siika Mileva, Nexo has processed a staggering $94 billion over the past five years. However, Mileva also claimed that one of Nexo’s clients was a figure known to fund terrorist organizations.

In a statement to Bloomberg, Antoni Trenchev, the co-founder of Nexo, clarified that the recent raid involved a third-party entity with ties to the company. He pointed out that this company has no direct interaction with Nexo customers. Other reports said four people had been apprehended in connection with the investigation. Nexo denied these developments, saying the investigation appeared politically motivated.

In the aftermath of these events, a large outflow of funds from the platform was observed as investors and customers jostled for exits. Over $46 million or 10% of total assets were withdrawn from the platform in 24 hours.

Progress of FTX bankruptcy proceedings

As FTX’s bankruptcy proceedings progressed, on January 12, creditors were notified of the positive developments. According to reports, the firm’s advisers uncovered a substantial amount of its assets, totaling almost $5 billion in crypto and fiat currencies. Andrew Dietderich, the bankruptcy attorney, said the assets are currently being liquidated.

The funds will be used to settle the claims of injured creditors, as well as other assets already discovered. It should be noted that the Bahamian Securities Commission (BSC) had previously identified FTX assets worth $425 million which will also be used in the debt settlement process. Additionally, on January 13, the Delaware bankruptcy court allowed FTX to liquidate four business units, including LedgerX and FTX Japan, to raise additional funds for the benefit of creditors.

As the FTX saga continues, a new player entered the fray last week. SkyBridge Capital announced its intention to buy back the 30% stake sold to FTX in September last year. SkyBridge chief Anthony Scaramucci revealed the plans on Jan. 13, saying they were awaiting approval from bankruptcy attorneys. He acknowledged that the process could be long, potentially stretching into the second half of 2023.

On Jan. 12, a federal court ruling added to FTX’s troubles as a judge invalidated the naming rights agreement between the bankrupt exchange and Miami-Dade County. Due to a breach of contract, FTX is legally obligated to pay Miami-Dade $17 million in damages over three years. Miami Heat can now remove the FTX brand from its NBA arena and other locations.

Sam Bankman-Fried insists he’s innocent, but that’s a hard sell

Amid these developments, Sam Bankman-Fried maintains his claim of innocence. With $8 billion in unaccounted client funds, the disgraced CEO insists he is innocent of crimes bordering on allegations of embezzlement and fraud. Last week, the disgraced American entrepreneur pleaded not guilty to numerous charges brought against him by the US DoJ, SEC and CFTC.

Sam Bankman-Fried maintains he is innocent of allegations suggesting he stole or misappropriated client funds, according to a post on Substack on January 12. The FTX founder also capitalized on circulating claims that Binance’s Changpeng Zhao (CZ) was behind FTX’s downfall. . CZ had previously denied these rumors.

A day after the post was published, US billionaire and hedge fund manager Bill Ackman claimed that Sam Bankman-Fried may be telling the truth. Ackman had taken to Twitter on Jan. 13 to provide a hypothesis on how the former FTX chief might be innocent despite numerous accusations of fraud and corruption.

However, the consensus within the crypto community stands in contrast to Ackman’s claims. Notably, Anthony Scaramucci, a close acquaintance of the former CEO, recently admitted he believed fraud was involved in the case after choosing not to comment on the matter since the start of the affair.

Coinbase CEO Brian Armstrong also believes that the FTX situation involved fraud and embezzlement of customer funds. Armstrong told Bloomberg on Jan. 11 that he believed the cause of the fiasco went beyond poor accounting. Amid these claims, a wallet affiliated with Alameda Research, the trading arm of FTX, received an additional $30 million in assets on January 12, prompting more questions.

The situation between DCG and Gemini is changing

While the crypto space has yet to see an end to FTX’s woes, the situation between Digital Currency Group (DCG) and crypto exchange Gemini developed further in the past week.

Following his open letter to DCG CEO Barry Silbert on January 2, Gemini co-founder Cameron Winklevoss wrote another letter to DCG’s board on January 10, calling for Silbert’s removal in as CEO. Winklevoss cited poor management decisions under Silbert.

Earlier, Winklevoss accused Silbert of using funds from its lending subsidiary, Genesis, for “Grayscale NAV kamikaze operations,” which led to asset losses for creditors, including the $900 million loan. from Gemini to Genesis. Winklevoss, along with other creditors, is demanding repayment of outstanding loans. Reports from January 12 suggested that DCG may consider selling some of its assets to pay off debt.

Grayscale got entangled in the situation, being a sister company of Genesis and a main subsidiary of DCG. The contribution could contribute to the underperformance of Grayscale Trusts, in particular the Grayscale Bitcoin Trust (GBTC) and the Grayscale Ethereum Trust (ETHE). Both are trading at record discount rates. As a result, approximately 20% of GBTC shareholders voted last week to redeem their shares for BTC.

Accusations emerge as SEC intervenes

Meanwhile, the US SEC came into the picture last week as the saga progressed. On January 12, the regulatory watchdog filed charges against Gemini and Genesis for allegedly offering unregistered titles to the public through the Gemini Earn program. Even so, the entire crypto scene thinks the agency needs to catch up.

Gemini co-founder Tyler Winklevoss has expressed disappointment with the SEC charges, noting they are counterproductive to the company’s efforts to realize the $900 million fund for Gemini customers. Earn. Winklevoss explained that the SEC should have informed Gemini of the additional regulatory requirements despite having been in talks with the exchange for months.

However, the SEC charges aren’t Gemini’s only legal concerns, as Rosen Law Firm, a New York-based law firm, filed a lawsuit against the exchange on Jan. 13 for failing to disclose. the necessary information on the risks associated with the Gemini Earn program.

New round of layoffs

Crypto markets have started the new year on a promising footing, but the incremental gains haven’t made up for the losses suffered since the start of the bear market. In response to tough market conditions, some companies continue to lay off staff to cut costs as revenues contract.

On January 10, Coinbase announced its decision to lay off another group of employees as it seeks to weather the bearish storm during the bear market. The US stock exchange has revealed that it will lay off 950 employees this time after laying off another 1,100 in June 2022.

Three days after Coinbase’s latest announcement, Kris Marszalek, CEO of Singapore-based exchange Crypto.com, revealed that his company would cut its global workforce by 20% due to unfavorable market conditions and recent events. Last June, they laid off 5% of their workforce, citing the unfavorable winter.

Binance remains unfazed

Amid this trend of layoffs, Binance is stepping up its human resources activities as it seems barely affected by the ravages of 2022. On January 11, CZ said the exchange is looking to increase its workforce by 30% in 2022, notwithstanding economic downturn. Two weeks ago, crypto journalist Jacob Silverman said the exchange had up to 700 open positions.

Moreover, Binance outperforms its competitors in terms of revenue, as evidenced by recent reports. CryptoQuant data from a January 10 report revealed that Binance’s revenue had increased 10x over the past two years.

Despite processing $12 billion in client withdrawals in the last two months alone due to the previously introduced FUD that followed immediately after the collapse of FTX, Binance appears stable and continues to grow. The company obtained a license to operate in Sweden on January 11.

End of the bear market or bull trap?

Meanwhile, the broader crypto market rallied, lifting asset valuations in the pre-FTX meltdown era. The market-wide rally, which was most pronounced on January 10, saw bitcoin (BTC) recover $21,000. Meanwhile, ETH soared to a high of $1,599 on January 14. Most of the assets also hit 2-month highs.

Two days after the rally gained momentum, BTC surged above 18%, leaving over 60% of its circulating supply in profit. The resurgence occurs despite a decline in its dominance. The asset printed seven consecutive bullish bars last week, sparking demand across the crypto.

Notably, as BTC soared above $19.5,000, over $141 million in BTC short positions were liquidated in the 24 hours leading up to January 14. While some supporters believe this could be the end of the bear run, others are more pessimistic about the recovery saying it’s a dead cat bounce.

The new week will provide a useful insight into the exact opinion.

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