Even an Employee Called It a Ponzi 🙊

In today's edition: 🕵️ Celsius' examiner report, 💻 Shanghai's new testnet, 📄 a letter to Silvergate, 🎙️ a new Unchained Premium episode, and more!

February 01, 2023

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On the Pod…

Show highlights:

  • why the current environment in Washington makes it difficult to pass new legislation

  • whether the opinion of members of Congress on crypto has changed in the aftermath of FTX’s alleged fraud

  • how Elizabeth Warren and others are using the FTX collapse to prove their anti-crypto stance

  • why Miller believes that this year Congress will be “absolutely obsessed” with crypto

  • why Sheila thinks Ripple could win its case against the SEC

  • why they believe the SEC’s failure to approve a spot Bitcoin ETF is a logical inconsistency 

  • how OFAC sanctioning Tornado Cash sparked many conversations among researchers and policymakers

  • how MiCA took an appropriately slow approach to imposing DeFi regulations

  • the impact of China and India adopting digital currencies 

  • why Miller thinks China’s digital yuan is “the apotheosis of a totalitarian technology” 

What’s Poppin’?

7 Revelations From Celsius’ Examiner Report

The final examiner’s report on Celsius confirms that the company was operating akin to a Ponzi scheme, was never a profitable entity and, like FTX, used customer deposits at its own discretion.

Ethereum’s Zhejiang Testnet Will Trial Staking Withdrawals

Ethereum developers announced the launch of the “Zhejiang” public testnet that will simulate staked ETH withdrawals. The testnet will go live on Feb. 1 at 15:00 UTC, while the Shanghai and Capella upgrades will be triggered six days after at epoch 1350.

Validators will be able to trial withdrawing staked ETH in a practice environment following the process. The lack of any existing functionality for withdrawing ETH from the deposit contract has contributed to the surge in popularity for liquid staking services on Lido, Coinbase, Kraken and Binance.

Celsius’ Creditor Committee Denies Rejecting Bids for Assets

Attorneys representing the official unsecured creditor committee for bankrupt crypto lender Celsius denied that bids for its crypto assets were rejected by the firm. In a Twitter Space on Tuesday, attorney Gregory Pesce said called these assertions “categorically false.”

Pesce was referring to a Jan. 27 post by Celsius creditor Tiffany Fong, leaking bids from Binance, Galaxy Digital and three other crypto firms for Celsius’ crypto assets. A statement from a Celsius attorney earlier that day had called any bids received for the firm’s assets uncompelling, leading many to the conclusion that Celsius had outright rejected them.

“We're trying to mitigate the effects of that leak,” said Pesce, adding that the firm was investigating how a significant investor might have been involved in that process.

NFTs Stuck in Limbo as Rally Shuts Down Ethereum Sidechain

Social token platform Rally plans to shut down its Ethereum sidechain which holds a significant amount of creator NFTs. The platform announced it was winding down in an email to clients on Tuesday, citing “macro headwinds” that were too overwhelming to overcome.

Rally’s decision to close its sidechain means the NFTs held on it will no longer be supported. As per Rally’s email, users looking to transfer their assets off the sidechain to the mainnet will not be able to do so after the site shuts, giving them less than 24-hours’ notice. Some members of the crypto community have accused Rally of orchestrating a rug pull.

Wormhole Voted In as Official Bridge From Uniswap to BNB

Bridge network Wormhole won a community vote to become the official governance bridge from Uniswap to the BNB chain. A snapshot of a governance vote that ended Tuesday showed that 62% of votes were in favor of Wormhole, while 37% of votes were cast in favor of its competitor LayerZero.

Uniswap plans to deploy version 3 of its decentralized exchange on the BNB chain to tap into DeFi on the Binance ecosystem. It aims to deploy v3 on BNB before its business source license expires on Apr. 1, after which other projects are free to use Uniswap’s code for commercial purposes.

Senators Press Silvergate on FTX After ‘Evasive’ Responses

U.S. Senators Elizabeth Warren, Roger Marshall and John Kennedy asked crypto bank Silvergate to provide more detailed information on its ties to FTX, in a letter seen by Bloomberg. The Senators said the bank’s previous responses had been “evasive and incomplete.” They argued that Silvergate’s reluctance to disclose information citing confidentiality restrictions was “not an acceptable rationale.”

Silvergate obtained a $4.3 billion loan from the government-sponsored Federal Home Loan Bank as a lender of last resort after FTX’s collapse in 2022 – lawmakers are now questioning how it intends to use these funds.

In a statement to the public addressing Silvergate’s exposure to FTX, CEO Alan Lane said the firm had no relationship with the exchange outside of deposits, which accounted for less than 10% of its total $11.9 billion.  

Bitcoin Records Strongest Monthly Performance Since 2021

January has been Bitcoin’s best month since October 2021, according to a Glassnode report on Monday. On-chain data shows that the leading digital asset’s rise has been fuelled by historic spot demand, coupled with a sequence of short squeezes.

Analysts noted that the recent rally brought a large number of market participants back into profit, while the crypto futures market resumed trading at a healthy level. The number of exchange outflows brought on by the collapse of FTX has also returned to neutral and is balanced by new inflows.

At press time, BTC was trading at $23,096, gaining 38.7% over the past one-month.

On Unchained Premium…

ProHashing's CTO, Steve Sokolowski, shares his insider insights about Genesis and BlockFi. We delved into his experience as a creditor in both companies and he talked about the misrepresentation of financials, undisclosed business practices, and the controversial ties between BlockFi and FTX.

In Other News…✍️✍️✍️

  • BlackRock, a leading asset management company, revealed that it holds a 7.2% stake in Silvergate Capital as of December 31, causing a significant increase in the latter's stock prices during Tuesday's trading session.

  • CME Group, the world-renowned derivatives trading firm, recorded an all-time high in its volume and open interest for bitcoin options.

  • The co-founder of Bitzlato, a  crypto exchange based in Hong Kong, announced plans to resume operations and allow partial withdrawals of user funds after the company was charged with money laundering and had its servers seized in a recent operation.

  • The Defiance Digital Revolution ETF, known as NFTZ and marketed as the first ETF for NFTs, is shutting down and will be liquidated by February 28th.

  • The co-founders of Bison Trails, Joe Lallouz and Aaron Henshaw, have left Coinbase. Bison Trails was created to run infrastructure on multiple blockchains and was acquired by Coinbase in 2021 to expand into infrastructure services.

  • Bitcoin miner Greenidge Generation successfully negotiated its debt restructuring with investment bank B.Riley and investment firm NYDIG, resulting in a significant decrease of $61 million in total debts. 

Today in Crypto Adoption...

  • ImmutableX is launching a new tool called the Immutable Passport, which aims to offer a comprehensive solution for gaming companies to transition their players into the web3 environment.

  • UK finance ministry proposes new crypto rules and seeks feedback from industry experts to protect consumers and become a crypto hub.

  • Swiss crypto leader Bitcoin Suisse partnered with Liquid Collective to offer liquid staking of Ethereum on its platform.

The $$$ Corner…

  • Blockchain security company Sec3 raised $10 million in a seed round led by Multicoin Capital. 

  • Addressable, an Israeli company, announced a $7.5 million funding round led by Viola Ventures and Fabric Ventures.

  • Abu Dhabi investment firm Venom Ventures Fund invested $5 million in Everscale, a Layer 1 blockchain.

  • Squid, a cross-chain liquidity protocol, closed a $3.5 million seed round to expand its operations.

What Do You Meme

📈 Your Market Update 📉

  • BTC is up .24%, trading at $23,008

  • ETH is down .2%, trading at $1,574

  • BTC dominance: 41.35%

  • Crypto market cap: $1.07 trillion

*All data as of today, 5 am ET

Recommended Reads

  1. Ram Ahluwalia’s take on the Celsius bankruptcy examiner report:

  2. Steven Goldfeder, cofounder of Offchain Labs (the entity behind Arbitrum) on ZK rollups vs. optimistic rollups:

  3. shivamadan.eth on Zero-Knowledge protocols:

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