Celsius: Why So Shady? 🤨

In today's edition: 🎙️ New show on GBTC, 📄 Celsius' bids, 👊 FTX opposes the DOJ, 🤫 FBI's infiltration, 💻 Mango Markets' plans to relaunch, and more!

January 27, 2023

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New Pod Today!

Michael Sonnenshein, CEO of Grayscale Investments, gives an overview of his firm’s case against the SEC, which has denied requests to turn Grayscale’s bitcoin trust into an exchange-traded fund (ETF). With oral arguments kicking off March 7, Sonnenshein lays out what a worst-case “tender offer” would entail and whether DCG CEO Barry Silbert has any say over GBTC’s fate. 

Show highlights:

  • why Grayscale charges higher fees than, say, the average ETF

  • what Grayscale will do if it loses its case against the SEC

  • why Grayscale has not filed for Regulation M relief

  • Michael's comments on Gemini liquidating 31 million shares of GBTC

  • the reason behind the October 2022 timing of Grayscale changing GBTC's “authorized participant”

  • the relationship between Grayscale and DCG, and Barry Silbert's involvement in Grayscale's operations

  • why the trust agreement of GBTC was changed

What’s Poppin’?

Leaked Celsius Bids Show Binance and Galaxy Digital’s Term Sheets

The crypto community is questioning why bankrupt lender Celsius may have turned down seemingly fair bids for its assets from five major companies in the space.

FTX Opposes DOJ Investigation Into Crypto Exchange

FTX has objected to the U.S. Department of Justice’s request to investigate the exchange’s collapse, according to a Reuters report citing a court filing on Thursday. FTX’s liquidators opposed the investigation on the grounds that it is already conducting its own wide-ranging probe into former FTX CEO Sam Bankman-Fried and his family members.

FTX asked U.S. Bankruptcy Judge John Dorsey for help with securing documents from Bankman-Fried and other FTX insiders with information about the “misappropriated and stolen funds.” These include documents related to the $16.7 million real estate purchase in the names of Joseph Bankman and Barbara Fried.

FBI Disrupts Hive Ransomware Group

The U.S. Department of Justice announced the success of its months-long disruption campaign against the Hive ransomware group. The operation was the result of the Federal Bureau of Investigation’s covert infiltration of Hive’s computer networks, which prevented victims from paying $130 million in ransomware demands.

Blockchain analytics firm Chainalysis called the news a “huge victory” for cryptocurrency, cybersecurity and law enforcement. The Hive ransomware strain is responsible for collecting at least $100 million in victim payments since it was launched in 2021.

Moody’s Is Working on a Stablecoin Scoring System

Global credit ratings giant Moody’s plans to create a scoring system for stablecoins, according to a report from Bloomberg. The project, still in early stages of development, will analyse up to 20 stablecoins based on the quality of attestation on reserves backing them.

In an Unchained Premium interview last month, economist Garett Jones explained how a ratings framework could be applied to the decentralization feature of a stablecoin.

Stablecoins have become a large part of the crypto ecosystem, accounting for the majority of daily trading activity. As such, reserve attestations backing these tokens have become the subject of scrutiny from regulators across the world.

Mango Markets Plans Relaunch Amid SEC Scrutiny

Decentralized exchange Mango Markets will go ahead with its plans to relaunch the protocol, despite concerning language in an SEC complaint that labels its native MNGO token a security. A report from CoinDesk disclosed that the Solana-based project’s developers plan to proceed with their plans for “version 4” of the DEX, which will restart trading activity for the first time after the $116 million exploit in October.

The SEC has not accused Mango Markets of any wrongdoing, but has referred to MNGO as a “crypto asset security” in several instances in a complaintagainst the protocol’s exploiter Avraham Eisenberg.

Moreover, Mango Labs is suing Eisenberg for the $47 million he kept after the exploit, plus damages. 

Aave Clears 2.7M CRV Bad Debt From Exploit Attempt

DeFi protocol Aave has cleared the 2.7 million CRV tokens worth of bad debt it was left with after Avraham Eisenberg’s failed exploit attempt in November. The action followed a successful governance proposal that approved buying the CRV tokens required from the ParaSwap decentralized exchange aggregator.

Eisenberg, known as the Mango Markets exploiter, tried to execute one of his “profitable trading strategies” on Aave by borrowing $40 million worth of CRV using USDC. His large CRV borrow position was eventually liquidated, but left Aave with $1.6 million worth of bad debt.

Polygon’s Daily Active Addresses Surpass Ethereum

The number of daily active addresses on Polygon has surged to 349,200, exceeding Ethereum’s count of 340,970. According to data from Polygonscan, the Layer 2 network’s addresses are closer to 400,000.  

DeFiLlama data shared by crypto trader Narb showed that the Total Value Locked on the network surged to $1.2 billion from $994 million since the start of the year. Polygon’s native token MATIC surged 10% following news of the uptick in on-chain activity. At the time of writing, MATIC was trading at $1.10 with a market cap of $9.5 billion.

In Other News…✍️✍️✍️

  • Lawyers for FTX are asking the court for permission to subpoena former CEO Sam Bankman-Fried, his family, and key leaders at FTX.

  • The U.S. Securities and Exchange Commission (SEC), turned down a proposal for a spot bitcoin ETF submitted by ARK Investment Management and 21Shares.

  • The SEC is conducting an investigation to determine if registered investment advisers are adhering to regulations related to the safekeeping of clients’ crypto assets.

  • Democratic senators Elizabeth Warren and Ron Wyden criticized the Public Company Accounting Oversight Board for their involvement in the failed crypto exchange FTX, and called for the board to maintain rigorous standards for audit firms in the industry.

  • Authorities raided the offices of Bithumb as part of an ongoing investigation into alleged manipulation of the prices of an undisclosed cryptocurrency listed on the South Korean exchange.

Today in Crypto Adoption...

  • Senator Ted Cruz of Texas suggested making it mandatory for sellers on Capitol Hill to accept cryptocurrency as a form of payment.

  • Amazon is reportedly working on a new project involving non-fungible tokens (NFTs) that is planned to be rolled out in the upcoming spring.

  • Crypto custodian Aegis will provide custody for liquid staking derivatives issued by DeFi protocol Lido.

The $$$ Corner…

  • Spatial, a web3 hardware startup, raised $10 million in a seed round led by Blockchain Capital and backed by rap artist Jay-Z’s venture capital firm Marcy Venture Partners.

  • StoryCo, a web3 storytelling platform, closed a $6 million seed round led by Collab + Currency and Patron.

  • Ethos Wallet, a web3 wallet based on the Sui blockchain, garnered $4.2 million in a seed round.

What Do You Meme

📈 Your Market Update 📉

  • BTC is down .07%, trading at $22,983

  • ETH is down 1.65%, trading at $1,581

  • BTC dominance: 41.28%

  • Crypto market cap: $1.07 trillion

*All data as of today, 5 am ET

Recommended Reads

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  3. hangry on Maximal Extractable Value (MEV):

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