More money, more problems for crypto • TechCrunch

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Welcome to Chain Reaction.

Do you believe in second chances? Well, new FTX CEO John J. Ray III hopes so. The disgraced new crypto exchange chief is open to restarting operations and possibly reviving the bankrupt firm, according to a new WSJ report. Time will tell if this happens and works for both FTX and the company’s customers and creditors.

In other news, if you hadn’t heard of a small eight-letter crypto exchange called Bitzlato before Wednesday, you’re not alone. But apparently the US Department of Justice knew what it was and followed it so closely that it uncovered enough information to arrest the founder, Anatoly Legkodymov, for allegedly processing more than 700 million dollars of illicit funds.

While this arrest sparked a number of jokes and confusion from members of the crypto community, who had no idea what Bitzlato was before the announcement, it also sparked a bit of annoyance. that the DOJ not take action on the biggest players in space.

Events like the FTX bankruptcy shook the crypto industry, but longtime crypto players didn’t seem to know what Bitzlato was before the DOJ announcement. According to known wallet data from Arkham, a crypto-intelligence tool, wallets associated with Bitzlato contain just over $11,000; at its peak, they contained over $6 million, making Bitzlato a very small player in the industry.

Overall, this arrest indicates that the DOJ – and the US government in general – is cracking down on the crypto space. As rapper Biggie Smalls once said, it’s like the more money we run into, the more trouble we run into.

More details below.

This week in web3

Solana co-founder sees potential for developers to lead his network in 2023 (TC+)

As the ecosystem of crypto developers grows, major ecosystems outside of the two major cryptocurrencies Bitcoin and Ethereum are growing, according to a new report. Solana saw the highest number of new developers contributing to the ecosystem, with an 83% increase in its number of developers, the fastest of any major blockchain. 2023 could well be the year other developers already relying on Solana will collectively lead the direction of the network, Solana co-founder Raj Gokal told TechCrunch.

DOJ accuses crypto exchange founder Bitzlato of handling $700 million in illegal funds

As mentioned above, little-known crypto exchange Bitzlato is in hot water. According to the DOJ, Bitzlato allowed users to trade cryptocurrency without verifying their identity. The Hong Kong-registered exchange advertised itself to customers saying that neither selfies nor passports [are] obligatory. The government said this lack of know-your-customer procedures has turned Bitzlato into a hotbed of criminal activity.

Ethereum’s move to proof-of-stake is attracting growing institutional interest (TC+)

Ethereums move from proof-of-work (PoW) to proof-of-stake (PoS) in September 2022 has increased interest in staking among a number of parties, including institutions. The success of the merger propelled Ethereum from a lagging smart contract platform to something that did things right, said Diogo Mnica, co-founder and chairman of Anchorage Digital, a crypto bank valued for the last time over $3 billion, at TechCrunch. Investor interest has increased and appetite has changed dramatically.

Crypto.com Cuts 20% Jobs Amid FTX’s Severe Industry Damage

Crypto exchange Crypto.com is cutting its global workforce by 20%, it said Friday, as it navigates economic headwinds and unpredictable industry events. It is the second major layoff at Singapore-headquartered Crypto.com, which cut 250 jobs in the middle of last year. The company did not specify which roles were being eliminated in the new round of layoffs, but blamed the collapse of FTX, whose embezzlement of customer funds and bankruptcy significantly damaged confidence in the industry.

Crypto in choppy year of slow capital deployment, investors say (TC+)

While some crypto-focused venture capitalists are bullish on 2023, others see it as a dangerous time. Many investors are trying to leave last year’s chaotic market behind and look to the future in an environment that is still investor-centric. But market competition will intensify as investors write fewer checks and become more selective.

The last capsule

Last week, Chain Reaction kicked off Season 2 with an episode featuring Ryan Wyatt, President of Polygon Labs, one of the biggest market shakers and Layer 2 blockchains in the crypto space that is building on top of the Ethereum ecosystem.

Next week, we’ll be posting our second episode with Mo Shaikh, co-founder and CEO of Aptos, a new layer-1 blockchain that raised a total of $350 million in funding in 2022.

Stay tuned.

Subscribe to Chain Reaction on Apple Podcasts, Spotify or your favorite pod platform to keep up with the latest episodes, and leave us a comment if you like what you hear!

Follow the Money ZK Proof-Focused Startup Ulvetanna Raises $15M in Funding Round Obol Labs Raises $12.5M in Series A Round Le=Nil; Foundation raises $22 million to create evidence-based marketplace Metahood raises $3 million to create metaverse-based real estate portal Sleepagotchi raises $3.5 million to gamify and reward people who sleep

This list was compiled with information from Messari as well as TechCrunch’s own reports.

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