Here's Why the SBF Defense Is in an 'Uphill Battle'
Weekly News Recap: Weekly News Recap: 🏦 FTX's bankruptcy chaos, 🚔 Voyager's legal quagmire, 🇮🇱 Binance & Israeli authorities freeze Hamas Accounts, 🛡️ Alameda's security woes, and more!
As the second week of Sam Bankman-Fried's high-stakes criminal trial unfolds, the spotlight is on Caroline Ellison's compelling testimony and the defense's struggle to counter it.
Ari Redbord, Global Head of Policy at TRM Labs, joins the discussion to dissect the courtroom dynamics, from the defense's attempts to discredit Ellison to the fiery sidebars that have become a hallmark of this trial.
Redbord also delves into a critical decision that could be a game-changer for the defense: whether SBF should testify. He said: “Conventional wisdom is you never have your client testify. I would probably be counseling him not to testify. But the reality is that sometimes you throw a Hail Mary.”
Weekly News Recap
FTX Faced Chaos During Its Bankruptcy
After declaring bankruptcy last year, the now-shuttered cryptocurrency exchange, FTX, was hit by a heist that saw more than $400 million siphoned off its wallets. Citing potentially lax security measures at FTX, a Wired report Monday described staffers scrambling to secure over $1 billion in assets, moving them to cold storage wallets provided by BitGo and in one case, the personal wallet of a consultant hired to help keep order in the aftermath of the collapse. In a classic glass-quarter-full scenario, an unnamed former FTX staffer described the “very, very crazy night” to Wired: “We worked on it, we got it done, and we saved a massive amount of customers’ money."
Adding to the turmoil, FTX cofounder Gary Wang testified the exchange fabricated the publicly advertised numbers in its ad-hoc so-called insurance fund, called the Secure Asset Fund for Users, or SAFU. In court TK, a prosecutor asked Wang if the real number was “higher or lower than the fake number?" Wang said: "Lower."
In related news, after FTX competitor Binance last November reportedly topped up its own SAFU account with $1 billion, the exchange rebranded its Binance Custody software to Ceffu, a play on the Secure Asset Fund for Users acronym. In September, the SEC reportedly looked into the rebranding of what CoinDesk called the “supposedly separate” custodian to try to better understand exactly if, and how separate it is.
Back in FTX-land, the exchange’s defunct trading arm, Alameda Research, is now facing its own security doubts. A whistleblower, who claims to be a former engineer at the company, alleged on social media that the firm lost $190 million due to inadequate security measures.
CFTC Charges Voyager Digital Former CEO
The U.S. Commodity Futures Trading Commission (CFTC) and the Federal Trade Commission (FTC) have filed lawsuits against Stephen Ehrlich, the former CEO of collapsed crypto lending firm Voyager Digital. Five months after Bloomberg reported Voyager had about $1.8 billion in customer claims, the CFTC accused Ehrlich and Voyager of "fraud and registration failures," with plans to seek restitution and permanent trading bans. Samuel Levine, the director of the FTC’s Bureau of Consumer Protection, said in a statement: “This action reminds companies and individuals: don’t play fast and loose with claims about FDIC insurance.”
The FTC has also reached a settlement with Voyager, imposing a $1.65 billion fee and permanently banning the company from handling consumer assets. The FTC's action centers on false claims that Voyager accounts were FDIC-insured. Ehrlich allegedly siphoned off millions to his wife, adding another layer to the case.
Binance and Israeli Authorities Thwart Hamas Crypto Funding
In a week marked by the escalating conflict between Israel and Palestine, Israeli authorities, joined forces with crypto exchange Binance, to freeze cryptocurrency accounts linked to the militant group Hamas, according to a report by Israeli tech and startup news site, Calcalistech. Following recent attacks that resulted in over 1,000 Israeli casualties, and another thousand Palestinian casualties in an Israeli retaliation, the accounts were used to raise funds for the group, according to the report. "With the outbreak of the conflict, Hamas initiated a fundraising campaign on various social networks," the Israeli police told the news site. Binance emphasized its commitment to "combat terror financing" and noted that it had been working "around the clock" to support these efforts.
In response to the war, crypto firms, including Fireblocks and MarketAcross, launched Crypto Aid Israel to support affected citizens.
The clampdown on Hamas' crypto activities is part of a broader focus on how the group and others use digital assets. Crypto analytics firm TRM Labs reported that Hamas had received nearly $800,000 in total through crypto, and Israeli Police's Lahav 433 is collaborating with intelligence agencies to shut down such channels. Showing the complexity of cracking down on crypto donations, Ukraine has reportedly raised a whopping $225 million in cryptocurrency from donors supporting its fight against Russia.
Binance's $1 Billion Recovery Fund Falls Short on Deployment
Binance's Industry Recovery Initiative (IRI), launched to aid crypto projects facing liquidity crises, has deployed less than $30 million of its $1 billion fund, according to Bloomberg. While 18 companies participated, only Aptos Labs, which emerged from the ruins of Facebook’s effort to build a global currency, fully invested their pledged funds. Binance CEO Changpeng Zhao had initially touted the fund as a transparent effort to support the industry. However, details about the 14 projects financed by the IRI remain undisclosed. "We didn’t identify many projects who would meet our criteria," said Dana Hou, Binance Labs’ business strategy lead. The exchange has since moved $985 million back to its corporate treasury, according to the report, signaling a shift in strategy. "We will keep funds available, as needed, but they will sit in our corporate wallets," a Binance spokesperson told Bloomberg.
Binance and OKX Navigate UK's Tightening Crypto Marketing Regulations
As the UK tightens its grip on crypto marketing, Binance faces yet another setback: its promotional partner, rather ostentatiously named Rebuilding Society, has been blocked by UK regulators. The clampdown comes as new, stringent marketing rules take effect, compelling crypto exchanges to adapt swiftly. Binance, known for its aggressive marketing strategies, now finds itself navigating a regulatory maze. Meanwhile, OKX is also making adjustments to comply with the UK's evolving crypto marketing landscape. Both exchanges appear keen to align their operations with the new regulations to avoid penalties and maintain market access.
State Regulators Weigh In on SEC vs. Coinbase Fight
This week, the legal battle between Coinbase and the U.S. Securities and Exchange Commission (SEC) intensified as the North American Securities Administrators Association (NASAA) filed an amicus brief supporting the SEC. The NASAA argued that digital assets should not be treated as "somehow special" and that Coinbase should be subject to the same regulatory obligations as other market participants. "The SEC’s case against Coinbase isn’t 'extraordinary,'" the association wrote, referencing the Howey Test, a legal framework often used by the SEC to classify transactions as investment contracts.
On social media, legal experts weighed in on the case. Former FDIC attorney turned Capitol Hill consultant, Todd Phillips, argued that the SEC’s strategy "doesn't make sense." Jake Chervinsky, the chief policy officer of advocacy group Blockchain Association, expressed confidence that Coinbase would win, writing that there are "the far better arguments" supporting the cryptocurrency exchange presented in amicus briefs by various crypto organizations. Chervinsky emphasized that the SEC's current stance "fails as a matter of text, history, precedent, and common sense."
BitVM Launches Aiming to Unveil New Horizons for Bitcoin Smart Contracts
Something called BitVM, as in “virtual machine,” emerged as a hot topic in the Bitcoin community on Monday. Software developer Robin Linus at Zero Sync, published a white paper on BitVM, describing what he says is a way to make the current version of bitcoin as programmable as Ethereum. Similar to how Ordinals was implemented last year to enable NFTs on the Bitcoin blockchain, BitVM wouldn’t require any hard to implement, controversial upgrades to Bitcoin’s core codebase. Not since Uniswap’s 2020 white paper on Automated Market Makers has a white paper caused this much of a stir. After initially offering a critical perspective on the white paper, Adam Back, the cryptographer and CEO of Montreal-based bitcoin development firm Blockstream, conceded he’d misunderstood the paper. He’s likely not alone.
Bob Bodily, the CEO of bitcoin NFT marketplace Bioniq Market, cautioned that "BitVM is VERY complex to understand and implement.” Muneeb Ali, the co-creator of bitcoin layer two solution, and potential BitVM competitor, Stacks, took issue with calling the technology described in the paper as a virtual machine, writing on social media: “This is very different from a full VM like on Ethereum or Solana.”
Speaking of Bitcoin, network transactions on the cryptocurrency market currently valued at $561 billion, have sharply declined to around 283,000 weekly, a level not seen since February, following the peak hype around Ordinals in September.
USDR Stablecoin Depegs
The Polygon-based stablecoin Real USD (USDR) has lost its peg to the U.S. dollar, plummeting to as low as $0.51. Issued by Los Angeles-based Tangible DAO, the stablecoin that was backed by illiquid real estate holdings, but relied on another stablecoin, called DAI, to achieve liquidity, ran out of token supplies, forcing it to tap into $6.2 million it says it had in a so-called insurance fund. The native Tangible token, TNGBL, which was offered as a reward to users who locked up their assets to help back the stablecoin, also saw a deep drop, further destabilizing the treasury.
The stablecoin's price, at one point, rebounded to $0.68 but fell back to $0.53, with a market capitalization of $40.9 million. The collapse may have been triggered by a rush of redemptions, eroding $11.8 million of DAI that was collateral for the stablecoin.
Adding to the chaos, a user on OceanSwap swapped 131,350 wUSDR tokens for less than $0.0001 in USDC, paying a gas fee of 0.0012 BNB ($0.25). Poor soul.
FUN BITS 😁
Trader Joe's Grocery Chain Cries Foul Over Crypto Doppelganger
In a twist that could only happen in the crypto world, American supermarket chain Trader Joe's is suing a decentralized exchange (DEX) that goes by the name "Trader Joe." The grocery giant alleges that the crypto platform intentionally mimicked its name. The DEX's cofounder, Cheng Chieh Liu, a Chinese citizen residing in Singapore, is named in the lawsuit. Lawyers for the Trader Joe's supermarket argue that the crypto platform created a narrative around a fictional "Trader Joe," closely associating it with the supermarket's brand. The DEX's logo even features a character donning a red cap, the primary color of the grocery chain.
So, next time you're shopping for avocados or altcoins, make sure you know which Trader Joe's you're dealing with!
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