Alameda’s Portfolio Is Revealed - Taylor Swift Was Close to Signing a Deal With FTX

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Crypto Weekly News Recap

The news that Sam Bankman-Fried had hired Ghislaine Maxwell’s attorney indicated that the former FTX CEO seems to understand just how serious the case against him could be.

This may also be why he and his lawyers did not respond to a request from Senators Sherrod Brown and Pat Toomey to appear at next Wednesday’s Senate Banking Committee hearing about FTX by the 5pm ET deadline on Thursday.

Additionally, on Wednesday news broke that prosecutors are investigating whether he engaged in market manipulation around the prices of Terra and Luna, resulting in their collapse last May.

To break down how the legal process for him could go, why he hasn’t been arrested yet, what kind of charges he might face and what types of prison sentences those entail, I spoke with Vy Le, partner and head of regulatory and policy at Bain Capital Crypto.

“Right now I feel pretty comfortable saying that enough facts have come to light to suggest that there probably was fraud committed,” she said on this Friday’s episode of Unchained, adding that this could result in a substantial prison sentence for Bankman-Fried. Be sure to tune in to find out what might be happening legally that hasn’t been made public yet.

Taylor Swift Rejected a $100 Million Sponsorship Deal With FTX

The Financial Times reported that FTX attempted to strike a nine-figure sponsorship deal with Taylor Swift that included an NFT arrangement. Despite negotiating with the pop star, the talks fell through before FTX’s eventual collapse in November. Apparently, former FTX CEO Sam Bankman-Fried is a big fan of Taylor, or as one employee told the FT, a big fan of “Tay Tay.”

FTX also had extravagantly expensive deals with many celebrity figures such as Tom Brady, Gisele Bündchen, Naomi Osaka, Shaquille O’Neal, and Steph Curry. The report calls into question FTX's internal decision-making, which led to clashes between Bankman-Fried's inner circle and more experienced executives.

Bloomberg reported that Alameda Research, the trading arm of Sam Bankman-Fried’s FTX, invested around $1.15 billion in Bitcoin mining company Genesis Digital Assets over four rounds between August 2021 and April of this year. And the FT revealed a spreadsheet of venture investments FTX and Alameda had made as of November, totaling $5.4 billion, including $500 million to Anthropic, an AI safety and research company, $270 million to IEX, and $400 million to Brazilian asset manager Modulo Capital. 

Additionally, a Solana developer noted that FTX had been hosting all NFTs minted on its exchange using a web2 API. As a consequence, the metadata is now broken and no one can access their NFTs, which has caused frustration among users of the platform and has resulted in many questions being asked about how the issue will be rectified.

Genesis Owes at Least $1.8 Billion

CoinDesk reported that cryptocurrency lender Genesis owes creditors at least $1.8 billion, raising concerns about the future of the company. 

The ailing crypto lender owes $900 million to customers of crypto exchange Gemini, and the other $900 million to a group of creditors represented by law firm Proskauer Rose. According to the report, there’s a third group of creditors being represented by Kirkland & Ellis, but the amount in loans to which this group can lay claim is unknown.

Meanwhile, Genesis’s sister company, Grayscale is being sued by hedge fund Fir Tree Capital Management in order to obtain information about “potential mismanagement and conflicts of interest” at the investment firm.

Grayscale Bitcoin Trust (GBTC) traded at a 47% discount on Wednesday, marking an all-time-low for Grayscale’s product, and putting more pressure on the group’s troubled financial situation.

On Wednesday morning, Genesis's interim CEO Derar Islim wrote a letter to customers, suggesting that the reactivation of withdrawals from the lending unit should be expected to come not in days, but in weeks.

Silvergate CEO Responds to Accusations of Mismanagement

In response to a class-action lawsuit that alleges Silvergate Bank was an accomplice in the FTX collapse, CEO Alan Lane sent a letter to shareholders to reassure them about the bank's due diligence practices, risk management, and reserves.

The lawsuit claims Silvergate is responsible for allowing FTX to direct customer deposits to Alameda Research. Lane asserts the bank followed regulations for suspicious activity and conducted significant due diligence.

Senators Elizabeth Warren, John Kennedy, and Roger Marshall signed a letter directed to Lane asking about Silvergate’s “egregious failure” of its responsibility to monitor for and report suspicious financial activity carried out by its clients.

US lawmakers are also seeking answers about FTX. In a letter directed to the board of governors of the Federal Reserve, Senators Warren and Tina Smith expressed concern about the interconnectedness of crypto and the traditional banking system, and the fact that regulators are not closely monitoring the industry.

Investment banking companies Morgan Stanley and Raymond James downgraded their ratings of Silvergate, and the shares fell approximately 20% since the start of the week.

Celsius to Return Some Customers’ Money

In the Celsius chapter 11, Chief Bankruptcy Judge Martin Glenn ordered Celsius Network to return around $44 million worth of crypto back to a certain group of customers – ones who had their money in custody accounts, not in the interest-bearing accounts. (It has not yet been decided how the money in interest-bearing accounts will be handled.)

The decision could have some implications for FTX’s case, as was noted by Gabriel Shapiro, general counsel at Delphi Labs.

Additionally, Celsius received court approval to delay its submission of a chapter 11 reorganization plan to Feb. 15.

Speaking of bankrupt crypto companies, the judge overseeing the case of Three Arrows Capital approved subpoenaing the company’s cofounders Su Zhu and Kyle Davies, while the liquidators for the crypto hedge fund seized $35.6 million of the firm’s cash.

Signature Bank Tightens Crypto Deposit Caps Amidst Industry Turmoil

Crypto-friendly Signature Bank is planning to offload up to $10 billion of crypto-related deposits. The decision has to do with the turmoil in the crypto industry, as well as Signature’s share of crypto-related deposits reaching 23% mid-November. The bank’s plan is to reduce this to less than 20%, and eventually less than 15%.

Signature is placing a cap of on deposits from clients in digital assets at 2% of total bank deposits.

Binance Says It Has More BTC Than It Needs

Mazars, an international audit firm, has confirmed that Binance's Bitcoin holdings are fully backed, exceeding its liabilities. This finding was reached by assessing Binance's Proof-of-Reserves and Proof-of-Liabilities through a Merkle Proof verification process. 

Jesse Powell of Kraken, who raised doubts about Binance's statement last week, didn’t miss the chance to express his concerns about the audit. He said that it is “OBVIOUSLY not a traditional Proof of Reserves,” and hinted that Binance is hiding something.

Gary Gensler Says He Has the Tools to Regulate Crypto

Sidestepping questions about FTX in an interview on Yahoo Finance, Securities and Exchange Commission Chair Gary Gensler said, as he has said repeatedly in the past, the agency has the necessary authority to regulate cryptocurrencies. 

On Wednesday, a federal judge terminated an investors' class-action lawsuit against the creators of EthereumMax and public figures Kim Kardashian and Floyd Mayweather Jr. The dismissal comes three months after Kardashian reconciled with the SEC, paying a sum of over $1 million due to her promotion of the cryptocurrency. The judge expressed worries about celebrities' persuasive abilities to have their "undiscerning followers" purchase "snake oil.”

“Shanghai” Has a Tentative Date

Ethereum developers announced a timeline for their much-awaited next hard fork, “Shanghai,” which would make it possible to withdraw ether staked with network validators. 

At a meeting on Thursday, core developers set the tentative date of March 2023 for the completion of the Shanghai upgrade, which is formally known as the “Ethereum Improvement Proposal (EIP) 4895.” 

This upgrade seeks to provide greater flexibility and convenience to those who have staked ether on Ethereum since The Merge—the latest major upgrade of the blockchain. 

As has happened many times before, especially with The Merge, the proposed timeline may be delayed due to potential technical difficulties or other unforeseen issues. 

Developers also discussed EIP 4884, another hard fork that will enable “proto-danksharding,” a technology that will allow the network to significantly improve scalability.

Circle Terminates Plans to Go Public

Circle, the issuer of the widely-used USDC stablecoin, has ended its proposed merger with special purpose acquisition company Concord Acquisition Corp. and scrapped the deal that was originally valued at $4.5 billion. 

The intention was for Circle to be combined with the SPAC, and then listed on the New York Stock Exchange. Neither side revealed why the merger wasn't successful, but Circle CEO Jeremy Allaire still believes an IPO is in the company's future.

Maple Finance Cuts Ties With Insolvent Client That Was Exposed to FTX

Maple Finance, a major DeFi lending platform, announced it was cutting ties with Orthogonal Trading, a large client believed to have “misrepresented its financial position.” 

Maple's decision follows the collapse of FTX, which is forcing the hands of overextended crypto lenders and borrowers. Orthogonal had borrowed over $500 million from Maple and its default caused a secondary knock-on effect on Nexus Mutual, which potentially suffered losses of $3 million from exposure to the company. 

Fun Bits: Avenging the “Scammers”

Joma, the creator of NFT project Vaxxed Doggos, posted a hilarious video on Twitter mimicking how SBF handled funds on FTX. 

The video portrays a conversation between “Sam Bankman-Fried,” who repeats that he’s a philanthropist, and a customer who wants to deposit $8 billion in an exchange to trade. 

During the conversation, SBF is playing League of Legends, and when this customer finally gives SBF the $8 billion, the money is not-so-accidentally slipped into the hands of Alameda Research, represented by a person smoking and gambling the funds.

In a wise decision, the customer regrets giving his money to SBF and decides to ask for it back, but a bunch of FTT tokens get thrown in his face while SBF runs away. 

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