Was SBF 'Spiteful' and 'Volatile'? 👀

In today's edition: New TCB pod, what's coming in crypto this week, mining difficulty increases, FTX's assets, SBF's bail signatories, and more!

Jan 16, 2023

The Chopping Block: Why Gemini Users Are Mad at Genesis and DCG

Welcome to “The Chopping Block!” – where crypto insiders Haseeb Qureshi, Robert Leshner, Tom Schmidt, and Tarun Chitra chop it up about the latest news.

Show topics:

Haseeb’s TL;DR of the ongoing situation between DCG, Genesis and Gemini
whether DCG committed fraud because of a misrepresentation of its financials
why DCG did Genesis a favor by absorbing the losses from exposure to Three Arrows Capital
what’s required to force an entity into bankruptcy
why Cameron Winklevoss would request Barry Silbert to step down as DCG CEO
the SEC’s probe into the investors of FTX and whether the regulators will fine them
whether there will be on-chain assets for trading FTX bankruptcy claims
what Tarun thinks of the future of NFTs and what needs to be built for them to thrive
why Robert thinks most NFTs are “hot garbage”
what the value behind NFTs is and whether they need a utility
whether the massive layoffs are good for the industry and how many companies over-hired during the bull market

Listen Now!

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What’s Poppin’?

What to Watch in Crypto This Week

by Samyuktha Sriram

Polygon Hard Fork
Bitcoin’s Price Back at Pre-FTX Levels

Weekend Recap

FTX Gets Green Light to Sell LedgerX and Other Assets

Bankrupt crypto exchange FTX was granted permission to sell some of its assets to repay creditors. A judge overseeing the bankruptcy proceedings approved the sale of the firm’s subsidiaries LedgerX, Embed Technologies, FTX Japan and FTX Europe, a Friday court filing shows.

FTX’s liquidators petitioned the court to sell these entities last month, saying the proceeds would help speed up the recovery process for the exchange’s creditors. Then, last week, a U.S. Trustee filed an objection to the proposed sale, arguing that it could hamper internal investigations into misconduct in FTX’s people and entities. The objection now appears to have been overruled, meaning these fully solvent FTX subsidiaries could soon be sold off to the highest bidder.

FTX said it has received an expression of interest from 111 parties regarding the sale of these business units.

Media Giants Demand Transparency in Bankman-Fried's Bail Signatories

A group of well-known news media outlets submitted a petition to the court handling the criminal case of Sam Bankman-Fried, requesting that the court reveal the identities of the individuals who signed his $250 million bail bond, other than his parents.

The media outlets, which include Associated Press, Bloomberg, the Financial Times, CNBC, Reuters, Insider, Wall Street Journal’s publisher Dow Jones, and the Washington Post’s publisher, argue that it is in the public interest to reveal the signatories since Bankman-Fried is accused of committing one of the largest financial frauds in history. Full story here.

Alameda Had a $65B ‘Secret Backdoor’ Line of Credit on FTX

Sam Bankman-Fried directed co-founder Gary Wang to open a $65 billion line of credit for Alameda Research on FTX, the New York Post reported on Friday. In a court hearing last week, Andrew Dietderich, an attorney for the now-bankrupt crypto exchange, revealed that the size of this credit facility was an astounding $65 billion.

According to Dietderich’s testimony, Wang created this “secret backdoor” by inserting a single number into millions of lines of code for the exchange – something that potentially explains why this feature went undetected by other employees at the crypto exchange. Wang pleaded guilty to charges against him last month, implicating Bankman-Fried in his own testimony.

Tron Founder Justin Sun Eyes $1B Worth of DCG’s Assets

Justin Sun, founder of the Tron blockchain, is considering the prospect of buying $1 billion worth of assets from major crypto conglomerate Digital Currency Group (DCG). A weekend report from Reuters, disclosed that Sun was willing to buy DCG’s assets “depending on their evaluation of the situation.” He did not disclose which assets in particular he was interested in.

Last week, DCG was said to be looking to sell some of its assets in light of the significant amount of debt that its subsidiary Genesis owes creditors. Sources said the DCG planned to offload a part of its $500 million venture capital portfolio, which includes stakes in Coinbase, Kraken and Circle.

Bitcoin Mining Difficulty Hits Another All-Time High

The Bitcoin Network saw a 10.26% increase in its mining difficulty this week, reaching a record high of 37.59 trillion on Sunday. Difficulty is a metric that measures how hard it is to solve the cryptographic puzzle tied to Proof-of-Work blockchains like Bitcoin. Essentially, a larger number of participants involved in block production leads to a higher difficulty adjustment, so that the average time new coins are mined remains more or less the same.

Higher mining difficulty will likely add to the pressure for existing miners competing for hashrate. The ongoing bear market has led to a number of publicly traded Bitcoin miners declaring bankruptcy over the last year.

North Korean Hackers Moved Over $60M This Weekend

Lazarus Group, a North Korean state-sponsored hacking group, moved 41,000 ETH worth $63.5 million from the Harmony bridge hack over the weekend. On-chain analyst ZachXBT reported the fund flows in a tweet, explaining that the stolen crypto was sent through the coin mixer Railgun and then deposited on three different exchanges.

The Harmony Horizon bridge exploit was one of the biggest in 2022, resulting in $100 million worth of stolen assets last June. The large-scale theft was later linked to the Lazarus Group by blockchain security firms Elliptic and Chainalysis. The government-backed cybercrime unit has stolen more than $1 billion in 2022 alone, accounting for 60% of all the money lost in DeFi hacks.

On Unchained Premium

Why Crypto Twitter May Be Wrong About FTX's Business

Laura Shin @laurashin

How do FTX creditors feel? @sunil_trades comes on Unchained Premium to discuss

Sunil Kavuri, an FTX creditor with a financial background, talks about the valuation of FTX, the lawsuit he filed against the exchange, and much more.

Watch Now!

In Other News…✍️✍️✍️

Brett Harrison, former president of FTX US, said that he decided to leave the company as a result of CEO Sam Bankman-Fried's emotionally unstable behavior.
Anthony Scaramucci revealed that he is investing in a new venture started by Brett Harrison.
Crypto exchange Gemini and its founders, Tyler and Cameron Winklevoss, are facing a class-action lawsuit for allegedly defrauding investors by falsely advertising unregistered securities.
Crypto lender Nexo (disclosure: a former sponsor of Unchained) denied the accusations made against it by the Bulgarian Prosecutor's Office, following the arrest of four individuals on Friday as part of an ongoing investigation into the company.
Grayscale submitted a new court filing criticizing the Securities and Exchange Commission for denying its application for a spot Bitcoin ETF, calling the regulator's central premise “unreasonable.”
Crypto lender Celsius's bitcoin mining unit is disposing of mining equipment worth $1.3 million to investment firm Touzi Capital as part of the bankruptcy process.
Crypto analysis company Arkham reported that over $1 million in assets have been liquidated from Alameda Research, the trading firm owned by Sam Bankman-Fried.
Popular web3 wallet MetaMask, developed by ConsenSys (disclosure: a former sponsor of Unchained), enabled staking for Ethereum through the wallet itself.