Will FTX Rise From the Dead? π§
Weekly News Recap: ποΈ "ETH is not a security", π FTX's potential reboot, π Stablecoin legislation, π² Voyager's sale, and more β
βIs ETH a Security?β Why Gary Gensler Couldnβt Give Congress a Straight Answer
On this Friday's episode of Unchained, Jason Gottlieb, partner at Morrison Cohen, discussed the heated exchanges on Capitol Hill between SEC Chair Gary Gensler and the House Financial Services Committee regarding the agency's efforts to regulate the crypto industry. The episode also delves into the challenges crypto projects face when dealing with the SEC and the potential consequences for the industry.
Even though Gensler refused to answer the question about whether ETH is a security, Gottlieb didnβt hesitate: βETH isn't a security. It's frankly pretty obvious to me, but even if it were, it's too late to do anything about it at this point.β
Gottlieb also touches on how the SEC's lack of clear regulation is pushing crypto out of America and the agency's attempt to expand the definition of an exchange, which could have significant effects on DeFi.
Weekly News Recap
VC Firm Wants FTX to Reboot
Despite FTX's controversial collapse and accusations of fraud in November last year, the exchange may soon see a resurgence, as venture capital firm Tribe Capital is considering spearheading a $250 million fundraising campaign to bring it back to life. The VC, an investor in both FTX and its U.S. subsidiary FTX.US, plans to contribute $100 million and raise additional capital from external investors.
Tribe's cofounder Arjun Sethi reportedly met with FTX's committee of unsecured creditors in January to discuss an informal proposal for the relaunch. This move has raised eyebrows, given FTX's tumultuous past.
Also this week, The FTX committee of official creditors disclosed that it is collaborating with the firm's liquidators to examine options for rebooting or selling the exchange. The committee has urged interested parties to contact the debtors and the committee itself while awaiting the launch of a formal process.
This development follows last weekβs revelation by FTX's lead bankruptcy attorney, Andrew Dietderich, that the exchange has recovered $7.3 billion in assets and is looking at potentially restarting the exchange.Β
Meanwhile, basketball legend Shaquille O'Neal has been served in a class-action lawsuit against FTX founder Sam Bankman-Fried, following a three-month pursuit by the plaintiffs' lawyers.
Montenegrin Prosecutors Submit Indictment Proposal for Do Kwon
Prosecutors in Montenegro have submitted a proposal for the indictment of Terraform Labs cofounder Do Kwon and his chief financial officer Han Chang-Joon, according to Bloomberg Law.Β
Kwon was arrested in Montenegro last month for attempting to travel with forged documents and is currently in custody in Podgorica. He faces charges in both the U.S. and South Korea, both of which have filed requests for his extradition, though it is believed that South Korea will likely be granted priority in the extradition process.
Moreover, the Korean founder sent a $7 million payment to South Korean law firm Kim & Chang prior to UST and LUNAβs unraveling, according to another Bloomberg report citing local media outlet KBS News. South Korean prosecutors confirmed that the report "isn't false." However, the law firm has not provided specific details about the case, only stating that it offered legal advisory services and received a fee for doing so.
In a separate development, a US judge has denied Kwon's bid to block the Securities and Exchange Commission (SEC) from seeking records about Terraform Labs from the Singapore Monetary Authority. The SEC is pursuing records as part of its lawsuit against Terraform Labs and Do Kwon, alleging they offered and sold unregistered securities and engaged in a scheme that led to the stablecoin's collapse, wiping out at least $40 billion worth of market value. Kwon has also been charged with fraud by U.S. prosecutors in New York.
Stablecoin Legislation Heats Up in the US
The U.S. House Financial Services Committee has released a draft bill proposing a two-year ban on new stablecoins collateralized by other cryptocurrencies rather than fiat currency. The legislation also calls for federal banking regulators to establish interoperability standards between stablecoin payment systems and puts the Federal Reserve in charge of regulating non-bank stablecoin issuers like Circle and Tether. The bill is expected to generate debate and undergo revisions in the coming weeks.
Circle CEO Jeremy Allaire expressed concerns over the draft bill, tweeting, "the role of the dollar in the world is at stake." Meanwhile, Representative French Hill (R-Ark.), chairman of the subcommittee holding the hearing, praised the bipartisan effort, while Representative Stephen Lynch (D-Mass.) questioned the necessity of stablecoins and referred to the draft language as "outdated."
During the initial congressional committee hearing on Wednesday, Democrats voiced skepticism regarding the draft bill, casting doubt on the chances of successfully passing stablecoin legislation in the country.
Also, in the hearing, New York's banking regulator Superintendent Adrienne Harris refuted claims that Signature Bank's failure was due to its exposure to the crypto industry. Harris stated that the bank's collapse was not related to crypto, clarifying that only "20% of that 20%" of deposits leaving the bank were crypto-related. She emphasized that the majority of withdrawn funds belonged to normal commercial customers with uninsured deposits.Β
Coinbase Would Consider Locating Outside the U.S.
While the United States keeps debating on how to regulate digital assets, big crypto players continue to move forward. This week, Coinbase CEO Brian Armstrong stated that the crypto exchange might consider relocating from the U.S. if regulatory clarity for the industry doesn't improve, with "anything on the table" to ensure the company's growth.
Furthermore, Coinbase is one step closer to launching an offshore derivatives exchange after obtaining a license from the Bermuda Monetary Authority. The crypto exchange praised Bermuda for being "a highly respected and experienced financial regulator" and acknowledged its comprehensive digital asset regulation. Reports suggest that Coinbase's expansion, which includes trading perpetual swaps tied to cryptocurrencies, could occur as early as next week.
Voyager's Asset Sale to Binance.US Gets Green Light From US Government
The US government approved the majority of Binance.US's $1 billion deal to acquire assets from bankrupt crypto firm Voyager. According to recent court filings, the US government agreed to allow non-contentious elements of the deal to proceed before the appeal is heard. The remaining contentious elements, including the "exculpation provision," which would keep Voyager from being held liable for past or future civil or criminal liability to the government, will remain on hold. Voyager's creditor committee is now working with Voyager and Binance.US to expedite the process, pending District Court approval. The deal, announced in December, aims to return customer funds to Voyager's creditors through a voluntary restructuring process.
Dutch Court Grants Tornado Cash Developer Home Detention
A Netherlands court ruled that Alexey Pertsev, the Russian developer involved with the Tornado Cash privacy protocol, can await trial at home. Pertsev was arrested in August by the Dutch financial crime authority FIOD. "We are ecstatic that he can be set free," said Pertsev's lawyer, Keith Cheng, who emphasized the significance of privacy on Ethereum in Pertsev's defense. Pertsev will be released next Wednesday under electronic monitoring, wearing an ankle bracelet but without financial security. The U.S. Treasury Department previously sanctioned Tornado Cash, accusing it of raising funds for North Korea. Pertsev faces charges of laundering over 500,000 ether (ETH), which he denies.
EU Passes Landmark MiCA Crypto Regulation
In stark contrast to the American approach, the European Parliament has passed the Markets in Crypto Assets (MiCA) regulation, providing clarity and a unified framework for crypto businesses in the EU. MiCA, seen as a potential global standard-setter, has drawn attention from other jurisdictions and offers legal access to the entire EU market for licensed firms.
Russia Turns to Crypto MiningΒ
The Bank of Russia is working on a bill to introduce an "experimental legal regime" for cryptocurrencies in export-import transactions to find alternatives to the US dollar's dominance in global finance, especially in light of international sanctions. The plan includes the establishment of special organizations dedicated to mining crypto and processing payments for cross-border trade deals, although specifics remain to be hammered out.
Crypto trading and payments within Russia will stay banned, while the government is developing legislation to create a national agency for licensing and supervising cryptocurrency platforms operating in the country. New tax regulations for miners are also being formulated as part of this regulatory effort.
Elvira Naiullina, head of the Bank of Russia, announced the central bank's intentions, while her deputy, Alexey Guznov, confirmed that discussions with the government are underway to determine which organizations are eligible to participate, and how to vet their business models and banking partners.Β
Flashbots Launches MEV-Share
Flashbots introduced the beta version of its MEV-Share protocol, designed to distribute Maximal Extractable Value (MEV) profits to Ethereum users. Integrated with Flashbots Protect, an RPC tool that defends against MEV, the protocol gives users control over the execution of their transactions on the Ethereum network.Β
Users can adjust privacy settings and manage order flow sharing while maintaining privacy and earning MEV redistribution rewards. The MEV-Share protocol is available for all MEV niche participants, and the code will be open-sourced following the beta phase. If you are interested in learning more about MEV and particularly how it is being distributed back to users, don't miss Unchainedβs Tuesday episode where we did a deep dive on the topic.
Market Responds Positively to Shanghai Upgrade
Following Ethereumβs Shanghai upgrade on April 12, the network has seen a significant uptick in interest, as staked ether (ETH) deposits have outpaced withdrawals for the first time since the upgrade's activation. Data from Nansen reveals that, since Monday, the amount of deposits has been consistently higher than withdrawals.Β
Analysts believe that the heightened interest can be attributed to the reduced risk of staking ETH, as the Shanghai upgrade allows for withdrawals of locked coins at will.
In related staking news, decentralized staking service RocketPool has made it easier for users to become validators by creating 8-ETH bonded minipools, which further incentivizes participation in the network.Β
Arbitrum Rejects Governance Proposal to Return Tokens
The Arbitrum community has overwhelmingly voted against the controversial AIP-1.05 proposal, which demanded the return of 700 million ARB tokens from the Arbitrum Foundation to the DAO treasury. About 84% of voters, using 118 million ARB tokens, rejected the proposal, which faced criticism as an unnecessary "power play," with some members believing it could jeopardize the Arbitrum Foundation's future if the DAO faced challenges in approving further funding.
AIP-1.05 also called for the disclosure of the terms of a $10 million over-the-counter (OTC) deal with market maker Wintermute. However, this was also opposed, as Castle Capital founder "Atomist" argued that such disclosure could deter private entities from engaging with Arbitrum in the future.
MakerDAO Approves $500 Million USDC Transfer to Coinbase Custody
MakerDAO voted to transfer up to $500 million in USDC stablecoins to Coinbase Custody, which will pay a 2.6% annual yield on deposits. The decision is part of MakerDAO's strategy to diversify its reserves and increase revenues by investing in traditional financial assets; the move follows an earlier decision to move up to $1.6 billion of USDC to Coinbase. As per the approved proposal, the assets in the account cannot be rehypothecated and must be kept in cold crypto wallets.
Mystery Exploit Drains $10 Million From βOGβ Crypto Wallets
MetaMask developer Taylor Monahan recently uncovered a large-scale wallet-draining operation that has affected crypto wallets on over 11 blockchains. The unidentified exploit has drained more than 5,000 ETH, valued at around $10 million, from long-term users' wallets. Monahan said, "This is NOT a low-brow phishing site or a random scammer. It has NOT rekt a single noob. It ONLY rekts OGs." The victims' private keys were created between 2014 and 2022, and their on-chain activity indicated a more "crypto native" profile. The exploit is not MetaMask-specific and appears to involve compromised seed phrases. While the source remains of this exploit is unknown, Kaspersky recently reported serious vulnerabilities in Apple's operating system that could compromise crypto asset security.
In related news:
The hacker who stole nearly $9 million from Safemoon's liquidity pool last month agreed to return 80% of the funds, totaling $7.1 million, while keeping 20% as a bug bounty.
Soulja Boy was accused of promoting multiple scam NFT projects on social media, according to research by internet investigator ZachXBT, who found 73 promotions and 16 NFT drops by the rapper, many of which turned out to be scams.
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