Why Points Systems Could Be a Golden Opportunity 🎈
Weekly News Recap: 🔄 FTX's reorganization plan, 🎯 Warren targets crypto lobby, 🚀 Solana's market surge, 📉 Genesis saga, 🗽 Silk Road crypto seizure, 📊 ETF shifts, and more!
You are reading the Unchained Weekly newsletter, where we cover all the major news in the crypto space, providing insights into the market's latest trends, regulatory shifts, and technological advancements. Stay informed. Your no-hype resource.
In this episode of Unchained, Li Jin, cofounder of Variant Fund, delves into the emerging trend of points systems in the crypto industry.
She discusses why many projects are now favoring points over traditional tokens, the nuances of designing effective points systems, and their potential impact on user engagement and retention. While highlighting the opportunities these systems present, Jin cautions founders about the potential pitfalls and the importance of thoughtful implementation.
She emphasizes: "Points are one way of creating greater loyalty. The basis of loyalty is people already want to use your product, and a points program ideally just shifts that segment of users up one level of the loyalty tier."
Listen to the episode on Apple Podcasts, Spotify, Overcast, Podcast Addict, Pocket Casts, Pandora, Castbox, Google Podcasts, Amazon Music, or on your favorite podcast platform. We are also on Fountain now!
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Weekly News Recap
FTX Advances Reorganization Efforts
FTX has taken a significant step in its bankruptcy proceedings by filing an amended Chapter 11 reorganization plan. A key aspect of this proposal, presented to a Delaware court, is the valuation of customer asset claims based on market prices at the time of the bankruptcy filing. The strategy involves converting these claims into cash, using specific conversion rates determined by the exchange's value at that critical juncture.
Interestingly, the cryptocurrency market has witnessed a noticeable upturn since FTX's bankruptcy filing. For instance, FTX's Solana (SOL) holdings surged to $4.2 billion. This market rebound could have implications for the value of the claims under the proposed reorganization plan.
Furthermore, Galaxy Digital's assets under management have tripled to $5.3 billion, partly due to managing holdings of bankrupt crypto firm FTX, and the firm is now eyeing other bankrupt crypto firms' assets.
FTX's reorganization strategy also includes a plan to return up to 90% of recovered funds to creditors. The estate has emphasized its commitment to maximizing and efficiently distributing value to all creditors. However, as is common in high-profile crypto bankruptcy cases, the plan might face challenges and opposition from various creditor groups. A court hearing to discuss and potentially approve this plan is anticipated in 2024.
Meanwhile, FTX debtors reached a settlement with Bahamian subsidiary FTX Digital Markets, coordinating bankruptcy proceedings across jurisdictions for asset distribution to FTX.com customers.
Court Rejects Extension Request by Former FTX CEO Sam Bankman-Fried
A federal judge has denied the request of Sam Bankman-Fried, former CEO of FTX, to postpone his sentencing process. Bankman-Fried's legal team sought an extension, citing the possibility of a second trial on additional charges. This request included delaying a pre-sentencing interview scheduled for this week. Lewis Kaplan, the judge overseeing the case in the Southern District of New York, emphasized that there were no objections when the original sentencing date of March 28 was set.
Bankman-Fried, convicted last month on seven charges including fraud and conspiracy, is alleged to have misused funds from FTX customers, investors, and Alameda Research's lenders, and was found guilty by a jury in New York last month. The judge noted that sentencing could be deferred if the Department of Justice proceeds with a second trial on other charges.
Three Arrows Capital Founders' Assets Frozen, Creditor Recovery Estimated at Nearly 46%
The British Virgin Islands court has frozen up to $1.1 billion in assets belonging to the founders of Three Arrows Capital, Su Zhu and Kyle Davies, and Davies’ wife, Kelly Chen. The liquidator Teneo initiated this action to prevent them from handling their global assets. This move is linked to claims that the founders contributed to the firm's downfall.
Meanwhile, Teneo estimates a 45.74% recovery rate for creditors, with the estate holding $563 million in illiquid tokens, expected to be unlocked over three years. The firm's total assets are valued at $1.16 billion, against claims of $2.7 billion. The liquidators have been converting liquid tokens and NFTs to fiat, already realizing $66 million.
U.S. Court Levies $2.7 Billion Fine Against Binance and Former CEO Changpeng Zhao
A U.S. Court has ordered cryptocurrency exchange Binance and its former CEO Changpeng Zhao to pay a cumulative $2.7 billion in fines to the U.S. Commodities and Futures Trading Commission (CFTC).
The court found Binance in violation of the Commodity Exchange Act and CFTC regulations. Binance is to pay $1.35 billion in penalties and refund an equal amount for alleged "ill-gotten transaction fees." Additionally, Zhao faces a $150 million fine. The court also imposed a $1.5 million penalty on Binance's former Chief Compliance Officer, Samuel Lim, for aiding these violations.
Furthermore, Binance is required to enhance its compliance controls, including offboarding accounts not meeting KYC standards and establishing a robust corporate governance structure.
Listen to our recent Unchained episode with Dorothy DeWitt and Michael Dawson, where they discuss the implications, challenges, and potential outcomes of Binance’s compliance monitorship.
Solana's Stablecoin Volume Soars as Saga Phones Sell Out in the U.S.
In a remarkable week for Solana, the blockchain network has taken a significant lead in daily stablecoin transfer volume, surpassing major competitors like Ethereum, Tron, and BNB Chain.
Since December's start, Solana's stablecoin transfer volume has skyrocketed by 600% to $16.6 billion, marking a significant surge in activity and liquidity.
This growth is partly attributed to the JTO airdrop and the popularity of memecoins like BONK and WIF on the platform, driving increased retail activity and the highest daily active address numbers for Solana since summer 2022.
Over the past year, the value of Solana's SOL token has surged by 580%, reaching $84 at the moment of this report. Additionally, Solana's blockchain activity has recently seen a marked increase, with DeFiLlama's data indicating that the decentralized exchange (DEX) volume on Solana has exceeded that of Ethereum in the past week.
Simultaneously, Solana's Saga mobile phones have sold out in the U.S., fueled by the crypto community's keen interest in acquiring the BONK allocation offered with each device. Each phone includes 30 million BONK, a Shiba Inu-themed cryptocurrency, which has seen a dramatic price increase of over 600% in two weeks, making the BONK allocation more valuable than the phone itself. The surge in sales may lead Solana Labs to increase its focus on the Saga phone, with limited units now remaining for the EU market. The mania rose so high that a Solana Saga phone sold for $5,000 on eBay.
Moreover, the hardware wallet provider Trezor announced that it will now support Solana and SPL tokens, while Phantom, the most popular web3 wallet on Solana, expanded its services to include support for Bitcoin, Ordinals, and BRC-20 tokens.
Lastly, Circle’s Euro-backed stablecoin $EURC went live on Solana.
U.S. Court Finalizes $3 Billion Seizure in Silk Road Crypto Case
The U.S. Court of Appeals concluded a significant chapter in the Silk Road case, finalizing the seizure of cryptocurrencies worth about $3 billion. This includes 69,370 bitcoins, bitcoin gold, bitcoin SV, and bitcoin cash, initially hacked from the infamous Silk Road marketplace. The cryptocurrencies were seized from an individual known as "Individual X," who had consented to the forfeiture in November 2020. At that time, the seized crypto was valued at over $1 billion, with Bitcoin priced around $13,742. The Silk Road, operational from 2011 to 2013, was known for using Bitcoin to facilitate illegal activities, leading to the conviction and life sentencing of its creator, Ross Ulbricht.
Strategic Shifts in Crypto ETF Space: Industry Giants Adapt to SEC Preferences
This week, major players in the Exchange-Traded Funds (ETF) arena made significant strategic shifts.
BlackRock, ARK Invest, and WisdomTree amended their Bitcoin spot ETF proposals to align with the U.S. Securities and Exchange Commission's (SEC) preferences, a move seen as essential for regulatory approval.
These amendments include transitioning from in-kind redemptions to cash creation. According to Bloomberg ETF analyst James Seyffart, this change primarily affects backend transactions, with little impact on investors.
The SEC's recent meetings with fund managers indicate a preference for cash-based ETFs over in-kind redemptions. Despite this shift, BlackRock remains hopeful for a return to in-kind redemptions for its iShares Bitcoin Trust in the future, subject to regulatory approval.
In parallel, the crypto asset manager 7RCC has proposed an innovative Bitcoin ETF, combining bitcoin and carbon credits futures. This proposal aims to reflect Bitcoin's price and the value of Carbon Credit Futures, integrating cryptocurrency investments with its focus on ESG investing.
Meanwhile, Bitwise Asset Management launched a high-profile advertising campaign featuring Jonathan Goldsmith for its upcoming Bitcoin ETF, while Hashdex followed with a short video on X.
Lastly, the SEC has delayed decisions on multiple Ethereum-focused ETFs, including those from Hashdex and Grayscale, and is seeking public feedback on their potential listings.
Sen. Warren Escalates Pressure on Crypto Industry's Government Ties
Senator Elizabeth Warren has intensified her scrutiny of the cryptocurrency industry, focusing on its hiring of former defense, national security, and law enforcement officials.
Warren's letters to Coinbase, the Blockchain Association, and Coin Center demand details on their recruitment of these officials. She accuses the crypto lobby of using these hires to obstruct regulations targeting crypto's role in financing terrorism, particularly citing the Oct. 7 Hamas attacks.
Industry leaders argue they are exercising their rights to free association and government petition.
This move signifies Warren's ongoing efforts to implement stringent regulations in the crypto market, underscoring her stance on anti-money laundering and terror financing.
Her approach reflects a broader concern about the "revolving door" between government service and private sector lobbying, especially in emerging industries like cryptocurrency.
Coin Center executive director Jerry Brito referred to the letter as a “bullying publicity stunt,” while Kristin Smith from The Blockchain Association wrote on X: “The letter is yet another disappointing step taken by Sen. Warren to discredit our industry and the individuals who are working to build a more inclusive financial system and user-focused internet.”
In a related topic, Coinbase, together with a crypto-focused group including Kraken and Ripple, raised $78 million to support pro-innovation political candidates in 2024.
Genesis Secures Court Order to Maintain DCG Ownership Structure
A New York bankruptcy court has ruled in favor of Genesis, a bankrupt crypto lender, prohibiting its parent company, Digital Currency Group (DCG), from altering its ownership until the closure of Chapter 11 proceedings. This decision aims to preserve Genesis' tax benefits, linked to approximately $700 million in operating losses. The court recognized that maintaining the current ownership structure is crucial for Genesis to leverage “federal net operating loss carryforwards,” potentially enhancing its cash position and aiding successful reorganization.
Rehearing in Do Kwon's Extradition Process Due to Procedural Violations
A Montenegro appellate court has ordered a rehearing of Do Kwon's extradition case, finding significant procedural violations in the initial hearing. The court's decision delays the potential extradition of the Terra cofounder to the US or South Korea, where he faces fraud charges linked to the Terra blockchain's $60 billion collapse. The ruling, focusing on technicalities rather than the merits of the case, mandates a fresh examination of the extradition request. This development adds complexity to the ongoing legal proceedings surrounding Kwon and his associate, Han Chang-Joon, detained since March.