The biggest crypto news and ideas of the day |
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Sam Bankman-Fried's attorneys have lost their third bid to have the former FTX CEO released from jail ahead of trial. Judge Lewis Kaplan argued SBF has enough time to prepare for the trial and poses a flight risk, saying he "could be looking at a very long sentence." SBF has pleaded not guilty to several fraud-related charges, and was revoked bail after being accused of witness tampering. Meanwhile, the estimated payout to FTX creditors has more than tripled this year, with former users and investors expected to receive an average of $0.37 on the dollar. FTX holds about $7.3 billion in assets including $3.4 billion in crypto, $200 million in Bahamian real estate and a valuable stake in Amazon-backed AI startup Anthropic. Finally, past and present CoinDesk reporters and editors Ian Allison, Nick Baker, Nikhilesh De, Reilly Decker, Sam Kessler, Cheyenne Ligon, Sam Reynolds and Tracy Wang won several Gerald Loeb awards, a top prize in financial and business journalism, for their reporting on FTX. |
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Su Zhu, co-founder of defunct hedge fund Three Arrows Capital, was apprehended at Changi airport in Singapore on Friday, according to the company's liquidator Teneo. 3AC, as the massive trading firm was called, collapsed in 2022 contributing to a drawn out contagion and liquidity crisis across the industry. Zhu and co-founder Kyle Davies (whose whereabouts are reportedly unknown) were sentenced to four months' imprisonment for failing to comply with a court order, and in September were banned by Singapore's Monetary Authority from running a capital markets firm for nine years. Dubai's crypto regulator reprimanded the pair in May over their unlicensed new venture, a bankruptcy exchange called OPNX, which has seen its native token drop 40%. |
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Stablecoin issuer Circle wrote a "friend of the court" brief in support of major crypto exchange Binance in its legal battle with the U.S. Securities and Exchange Commission, arguing securities laws shouldn't spread to stablecoins. In June, regulators accused Binance of a litany of legal violations, including breaking financial rules over "investment contracts" by marketing and offering yield on the Binance-branded BUSD stablecoin. Circle Chief Legal Officer Heath Tarbert (a former chair of the Commodity Futures Trading Commission, which is also suing Binance) said dollar-pegged assets like BUSD and USDC fall outside the SEC's domain, in part because users do not expect a profit. Binance CEO Changpeng Zhao filed to dismiss the SEC case last week. |
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The staking market on Ethereum, Tezos, Cosmos, Solana, Cardano and others, as investors tackle regulation and uncertain conditions. Where Liquid Staking Meets Tokenization The staking powerhouse dominates the market for liquid tokens. Is this a problem? Marin Tvrdić, a protocol relations contributor at Lido, responds. Opposing Centralization in Ethereum Staking Nix.eth argues that dominant decentralized staking provider Lido is exploiting a flaw in Ethereum that threatens some of the industry's core values. |
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Crypto custody tech company Fireblocks has purchased tokenization firm BlockFold reportedly for $10 million (though deal terms were not officially disclosed). The acquisition will expand the non-custodial software provider, Fireblock's, capabilities around trading, tracking and issuing traditional assets like stocks and bonds on-chain. Tokenization has become a hot topic among some bankers, and Boston Consulting Group predicted the market for tokenized assets could spike to $16 trillion by 2030. |
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Cryptocurrency exchange Gemini said it withdrew $282 million of its Earn users' funds from crypto lender Genesis Global Capital in August last year to hold in a "liquidity reserve." The company was responding to a recent New York Post article, which claimed co-founders Cameron and Tyler Winklevoss "secretly withdrew" more than $280 million in personal and corporate funds before a liquidity crisis shut down Gemini's lending platform. "As a result of our risk management, Earn users had $282 million less exposure to Genesis when Genesis halted redemptions on November 16, 2022," Gemini said, referring to CoinDesk's sister company that froze Gemini's Earn customers' access to assets and filed for bankruptcy in January 2023. |
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The Takeaway: Misleading Position | This article is part of CoinDesk's "Staking Week." Graeme Moore is the head of tokenization at the Polymesh Association. U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler has long taken the position that the majority of crypto tokens should be treated as securities. In March 2023, Gensler stated:
"The investing public is investing anticipating a return, anticipating something on these tokens, whether they're proof-of-stake (PoS) tokens, where they're also looking to get returns on those proof-of-stake tokens and getting 2%, 4%, 18% returns. Whatever they're promoting and putting into a protocol, and locking up their tokens in a protocol, a protocol that's often a small group of entrepreneurs and developers are developing, I would just suggest that each of these token operators ... seek to come into compliance, and the same with the intermediaries."
This is a false or misleading position as proof-of-stake, or PoS, tokens are not securities – even if some PoS token holders purchase them as investments with the expectation of profit. Even if most token holders purchase PoS tokens due to an economic incentive, not every purchase made as an investment is an investment in a security. People often treat sneakers as investments, but this doesn't make buying a pair of Yeezy's automatically the same as buying a stock.
PoS tokens are a critical component of proof-of-stake consensus mechanisms. Their function is to secure the blockchain by providing economic incentives to align participants' behavior. Staking PoS tokens enables token holders to benefit economically from their tokens, but the primary purpose is to secure the network.
Gensler is wrong to blanket an entire token class as securities only because some can be loosely bent to fit provisions of the Howey Test. He would classify your house as a security if he could, citing that it is an investment in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others (contractors, painters, landscapers).
An increase in disclosures required for investors looking to purchase PoS tokens could make sense, so that individuals can decide if it's the right investment for them. However, classifying things that are not securities as securities is where we must draw the line. PoS tokens, as United States District Judge Analisa Nadine Torres pointed out in the recent XRP ruling, could be sold in such a manner that would necessitate an investment contract (i.e. sales by an insider team to investors clearly expecting profit), but the actual tokens themselves are not securities simply because some people expect their price to appreciate. Read the article online. – Graeme Moore @MooreGrams |
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Future 'Shock'? Phemex Probably Won't Be Even Mildly Surprised Phemex, a centralized exchange making moves to partially decentralize, is celebrating Bitcoin's 15th anniversary by placing a big bet: If the bellwether token is worth $50,000 or more on October 31st, the exchange will pay out 1,000 BTC to Phemex Soul Pass holders. To do the easy math, that's $50 million. Sure, it's unlikely that BTC's dollar-denominated value will double in the short term – but would you bet that much that it won't? In the more likely scenario that BTC stays in its current $25,000 to $30,000 trading range – where it has been, given a little leeway, since March – Phemex is still giving away 1 BTC. Continue Reading |
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Catharsis or Cardiac Arrest? |
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FTX Creditors Could Get 37 Cents on the Dollar