🕵️♀️ Sam Bankman-Fried Is Scrutinized; Alameda Fights Voyager
Weekly News Recap: 💰 SBF misuses Robinhood shares, 👊 Alameda and Voyager fight it out, ⛏️ BlockFi's mining business, 🏦 Gemini is under investigation, and more!
Wait, why am I receiving two emails in one day?
On Unchained, we run two newsletters: Unchained Daily, which goes from Monday through Saturday, and Unchained Weekly (this one!), which recaps all the major crypto news of the past week. (It’s narrated on the podcast, so if you’re looking for the links to the stories heard on the show, they’re all in here!)
If you want to receive only one of the newsletters (for example, receive the daily and not the weekly, or vice versa), just go here and select whichever you want!
Why the Celsius Examiner Report Shows 'a Complete Disaster in Almost Every Way'
“Celsius was a complete disaster in almost every way imaginable and almost from the very beginning,” said Kadhim Shubber, investigative reporter at The Financial Times, recapping the independent examiner’s 476-page report on Celsius.
In Friday’s episode of Unchained, Shubber explains the egregious way the CEL token was used at Celsius — “Ponzi-like” in the words of an employee — to personally enrich executives, how employees knew that what was happening was, if not illegal, then at the very least not compliant, and how the claims former CEO Alex Mashinsky made to customers didn’t line up reality.
Be sure not to miss this jaw-dropping episode, as well as the end, which features stand-up jokes by comedian and Unchained social media manager Ginny Hogan about another bit of Celsius news from this week.
Weekly News Recap
SBF Is Accused of Misusing Robinhood Shares
Sam Bankman-Fried, the founder of bankrupt crypto exchange FTX, is facing allegations of criminal misuse of customer property and concealing his actions by the Department of Justice. According to federal prosecutors, Bankman-Fried used 56 million Robinhood shares as a means to misuse customer money, which they outlined in a letter to U.S. bankruptcy judge Lewis Kaplan. The shares were acquired with FTX co-founder Gary Wang through a foreign special purpose vehicle with no connection to FTX or Alameda.
The prosecutors have taken control of the Robinhood shares and other assets, worth over $700 million.
Despite these accusations, Bankman-Fried's legal team is arguing that he should still have access to his crypto assets, claiming that the government has found no evidence that he was behind unauthorized transfers made by Alameda wallets.
SBF is not only being restricted financially but also in communication. A recent court ruling by Judge Kaplan has banned SBF from having any communication with current or former employees from FTX and Alameda, aside from immediate family members. The ruling came after the crypto mogul was accused of attempting to contact a potential witness in his case through the encrypted messaging platform Signal, who is believed to be FTX US general counsel Ryne Miller. Judge Kaplan deemed the restrictions necessary until a further determination can be made, which will be discussed by both legal teams on February 7th. The restrictions were originally put forth as a modification of Bankman-Fried's bail. According to the court filing, the judge believes the evidence supporting the restrictions was "clearly and convincingly sufficient".
Judge Kaplan has also ordered that the names of the two people who co-signed the $250 million bail bond for Sam Bankman-Fried should be revealed to the public. Previously, only the fact that Bankman-Fried's parents were among the co-signers was known, but the identities of the others were kept confidential. The judge has now ruled in favor of various news organizations that submitted petitions to make the names public. However, the ruling is temporarily suspended pending a possible appeal until at least February 7th.
And, for those who are house hunting, it may be your lucky day, as a house in Washington, D.C. with ties to SBF is now available for purchase, listed at a price of $3.3 million.
Alameda Sues Voyager for $446 Million
Alameda Research, the former trading subsidiary of FTX, is taking legal action against Voyager Digital, seeking to recover $445.8 million. According to the lawsuit, Alameda claims that it repaid Voyager that amount in September and October, just prior to its own bankruptcy, and is now looking to retrieve those funds to repay creditors through a process known as a clawback. In its claim, Alameda alleges that Voyager played a role in its own alleged misconduct by acting as a lender in the crypto industry, either knowingly or recklessly.
However, Voyager and its creditor committee denied this motion. The creditors are expecting Alameda's clawback request to be either reclassified as equity or made secondary to all other claims. The creditors argue that Alameda's false statements about its financial strength were the main reason for Voyager's purchase of loans from its insolvent balance sheet.
BlockFi Is Granted Approval to Sell Crypto Mining Assets
A US Bankruptcy Court for the District of New Jersey has given the green light for crypto lender BlockFi to sell off its cryptocurrency mining equipment.
In a recent filing, the court deemed the sale of these assets to be fair and reasonable in the current circumstances. BlockFi has set a deadline of February 20th for interested parties to submit their bids, and all bids must be filed with the court by March 2nd. Creditors have until March 16th to raise any objections to the sales to qualified bidders.
Additionally, BlockFi was allowed to offer bonuses to its top employees by Judge Michael Kaplan, who cited the need to retain and maximize the company's estate.
Gemini Is Under Investigation
The New York State Department of Financial Services is looking into allegations against crypto exchange Gemini regarding claims about its connections to the Federal Deposit Insurance Corporation (FDIC) in reference to its Earn accounts.
According to a report by Axios, some customers were under the impression that their funds in the Earn accounts were insured by the FDIC, based on Gemini's references to the agency in its communications. However, it seems that Gemini was referring to its deposits at external banks rather than its own products, leading to confusion and claims of misleading behavior. The Federal Deposit Insurance Act prohibits entities from implying that an uninsured product is FDIC-insured through the use of "FDIC" in its name or advertisements.
Grayscale Faces a Lawsuit Over GBTC’s Advertising
On a similar note, Osprey Funds, a digital asset management company, has filed a lawsuit against Grayscale Investments for “unfair and deceptive acts and unfair competition.”
The complaint alleges that Grayscale misled investors to believe that their Grayscale Bitcoin Trust (GBTC) would be converted to an exchange-traded fund (ETF). Osprey claims that the alleged false advertising allowed Grayscale to maintain a 99.5% market share while charging four times Osprey’s fees. Grayscale is currently contesting the SEC's rejection of the ETF conversion in a separate lawsuit against the regulator, with oral arguments scheduled for March 7.
Last week, Grayscale CEO Michael Sonneshein was on Unchained to discuss everything about the ongoing lawsuit against the SEC, and he said he was certain Grayscale had the best arguments to win the case.
Avraham Eisenberg Waves Bail
Avraham Eisenberg, the self-proclaimed $114 million exploiter of Mango Markets, a Solana DeFi protocol, has given up his right to bail at a recent hearing in New York.
He faces legal action from Mango Labs, who are seeking to recover the $47 million Eisenberg kept as a bounty, and has been charged by federal prosecutors with three crimes including commodities fraud, commodities manipulation, and wire fraud.
Eisenberg was arrested in Puerto Rico in December and was later transferred to New York, where he will remain in jail until February 14th at the earliest.
Silvergate Halts Dividends to Preserve Liquidity
Silvergate, the publicly traded cryptocurrency bank that’s come on everyone’s radar due to its ties with FTX, has temporarily stopped distributing dividends. The decision was made to maintain a highly liquid balance sheet and help the bank manage the recent market instability.
However, on Tuesday, after BlackRock revealed that it holds a 7.2% stake in Silvergate Capital as of December 31, the stock price of the bank experienced a significant increase.
Furthermore, three US senators sent a letter to Silvergate CEO Alan Lane, alleging that the bank’s dealings with FTX further introduced risk into the traditional banking system. They demanded more information about a large cash loan Silvergate took out from the Federal Home Loan Bank (FHLB) to shore up its accounts after mass user withdrawals. The senators raised concerns that if Silvergate were to fail, the FHLB could have priority over other creditors, including the FDIC insurance fund, which “could leave the FDIC, and therefore the American taxpayer, holding the bag,” wrote the Senators.
Ethereum Developers Hit Another Milestone for the Network’s Next Upgrade
Barnabas Busa, an Ethereum developer, revealed on Twitter that Zhejiang, Ethereum's first public testnet for withdrawals, is now operational. Participants can access funds from designated sources, generate private keys with the wagyu tools by Stakehouse to make staking easier, make deposits through launchpad, and monitor it through the beacon chain.
Six days after the launch of Zhejiang i.e on Feb 7, Shanghai and Caplla testnets will be triggered at epoch 1350. Following this upgrade, individuals will be able to experiment with partial and complete withdrawals, among other features.
Speaking of Ethereum, the total number of ether tokens in circulation fell to a new post-Merge low, with approximately 120.5 million tokens. This is possibly due to Ethereum’s burn mechanism, which is similar to a stock buyback in traditional companies, triggered by the spike in user activity.
Coinbase Temporarily Halts New NFT Mints
Coinbase NFT, an endeavor that has seen low transaction volumes, recently announced a temporary halt on new NFT releases following an artist's announcement on Twitter that their upcoming NFT drop would not be launching on the marketplace.
On a related note, the Defiance Digital Revolution ETF, known as NFTZ and marketed as the first ETF for NFTs, is shutting down and will be liquidated by February 28th.
Twitter May Integrate Crypto Onto Its Platform
The Financial Times reported that Twitter is pursuing regulatory clearance to incorporate payment options, including the possibility of crypto payments, on its platform.
The company is in the process of obtaining the necessary licenses and designing the software needed. The move is part of Elon Musk's attempt to turn Twitter into a "super app." A small team led by executive Esther Crawford is overseeing the project. Musk has previously stated that he wants to diversify the company's revenue streams by adding payment capabilities to Twitter.
FUN BITS
Ginny Hogan, Unchained’s new social media manager, happens to also be a standup comedian. She’s been posting hilarious videos on all our social media platforms. Here’s one from this week about the Celsius report.
.jpg){kind=link}
.jpg){kind=link}
If you enjoyed this, don’t forget to follow Unchained on all social media platforms. Find the links below ⬇️
🔗Join Unchained Premium to get access to:
🎙️ Behind-the-scenes interviews, in which I talk with crypto experts and entrepreneurs to learn all about the latest developments in the industry.
💬 A subscriber-only Telegram group, where you can talk with the other members of the Unchained community, build a network in crypto, and talk directly with me and the Unchained team!
📰 Transcripts of all the shows, for subscribers only.
If you liked what you read:
👍 follow me on Twitter, Facebook, Instagram, TikTok, Mastodon and/or LinkedIn
🎧 subscribe to Unchained on YouTube, Apple Podcasts, Spotify, Google Podcasts, Pandora or wherever you get your podcasts
👯♀️ share Unchained with a friend
and/or 📚buy my book, The Cryptopians: Idealism, Greed, Lies, and the Making of the First Big Cryptocurrency Craze