New Year, New Cryptocurrency ‘Shaking Off’

Hello and welcome to the first 2023 edition of the FT Crypto Finance newsletter. This week, we will see if crypto turns a new page after a grim 2022.

Some of the crypto industry’s biggest names have been entangled in clashes with regulators and prosecutors in the early days of 2023, revealing the problems plaguing the sector in the coming days. The year 2022 has spilled over into the new year.

“Reality never resets to January 1, and that fact applies to crypto. Charley Cooper, the chief executive officer of blockchain company R3, told me via text message on Thursday.

Let’s start with the US listed exchange Coinbase.

Trading venue led by Brian Armstrong reached a deal of 100 million dollars with regulators in New York about failures in combating money laundering. Half of that amount will be paid as a fine, while the other half will be spent by Coinbase to improve its compliance system.

The New York State Department of Financial Services said Coinbase’s systems for enforcing anti-money laundering rules were “immature and inadequate.” Coinbase called these omissions “historic” and said it had taken “substantial measures” to address them.

Meanwhile, we are only a week away from 2023 and three big-name crypto shops have announced their shutdown.

Crypto-Focused Bank Silvergate Says It Will cut up to 40% of the workforce. The company’s shares also plummeted 43% in Wall Street trading on Thursday after it said its digital asset clients withdrew more than $8 billion in deposits late last year in a “cheat”. crisis of confidence” due to the collapse of FTX.

Similarly, crypto broker Genesis – which halted withdrawals from its loan program in November – this week cut staff by 30%, just days after the company said it needed more time. time to find solutions to financial difficulties. Cryptocurrency exchange Huobi Global, one of the world’s largest crypto companies founded in China, said on Friday it is planning to cut about a fifth of its staff in one year. “restructuring”.

Still with me? Well, much more to come.

Celsius Network Founder Alex Mashinsky was hit with a civil lawsuit by the New York attorney general on Thursday. The former director of the bankrupt crypto lending platform is accused of defrauding hundreds of thousands of investors and violating state securities laws.

The former Celsius executive often used the slogan “free the bank,” but according to Letitia James, New York’s attorney general, he “promised to lead investors to financial freedom but led them to children.” financial ruin”.

Mashinsky denied James’ allegations. A lawyer for Mashinsky said the former founder “strongly wishes to defend himself in court”.

Binance again finds itself in the regulated spotlight after the U.S. Securities and Exchange Commission intervened in a $1 billion deal that would see its U.S. arm buy Voyager Digital assets in the wake of bankruptcy. Wall Street’s top cop said there wasn’t enough information to show how Binance US would close the deal, while Binance US said “a thorough review of the deal would be expected and welcomed.” .

Binance says its US branch licenses its exchange technology, but insists they are independent businesses. However, Binance and its global network of affiliates have come under intense scrutiny following the collapse of rival FTX, raising concerns about the unclear relationship between the crypto entities involved. conclude.

Finally, US federal prosecutors in Brooklyn have revealed fraud charges against Aurelien Michel, a 24-year-old French citizen accused of defrauding “Mutant Ape Planet” NFT investors for nearly 3 years. million dollars in cryptocurrency. His attorney did not respond to a request for comment.

Thank you for making it this far, but it’s still around 2023. In the next section, I’ll update you with all the crypto stuff that happened over the Christmas holiday.

Thinking about the start of crypto for the year? Email me at [email protected].

Join FT Live in Davos, where we’ll be hosting a number of live and digital events alongside the World Economic Forum’s Annual Meeting this January. The sessions will bring together policy, business and finance leaders to share insights on the major issues under debate and the solutions that can pave the way to growth, stability and stability. new determination and resilience. View the event and register for free here

Outstanding Christmas

  • Former FTX director Sam Bankman-Fried plead not guilty to eight criminal charges filed against him by the United States Department of Justice. His defense came after his former top associates pleaded guilty to fraud after agreeing to serve as a cooperating witness. Peter Fox, partner at Scoolidge, Peters, Russotti & Fox, told me via email: “It’s not clear whether prosecutors want cooperation from Bankman-Fried, because Bankman-Fried almost certainly is. their primary target in this investigation.

  • Remember when Solana Mango Markets-based DeFi platform was hacked over 100 million dollars? US prosecutors do. On Boxing Day, Avraham Eisenberg’s festive season is brought to a halting hiss when he was arrested in Puerto Rico. On December 27, the authorities filed a complaint of fraud and manipulation of goods. He has since been placed in custody and has not responded to a request for comment.

  • The day before Christmas Eve, Donald Trump said he launched his NFT collection because he found some digital art reproductions of the former president.cute type“. Nice.

Soundbite of the Week: The ‘bad faith’ delay tactic

As a reminder: Genesis suspends withdrawals from its loan program for the first time in November. This plan allows customers to stake their cryptocurrencies in exchange for large profits. Cryptocurrency exchange Gemini has been using Genesis for its own “make money” program. caught up in failure. Genesis owes Gemini customers $900 million.

Cameron Winklevoss, co-founder of Gemini, has run out of patience with Barry Silbert, head of Digital Currency Group, the parent company of Genesis, and other companies including digital asset management firm Grayscale and streaming website CoinDesk cryptocurrency information.

Winklevoss accused Silbert in an open letter Monday of “unfaithful stall tactics”.

“Over the past six weeks, we have done everything we can to communicate with you in good faith and work together to reach a consensus resolution for you to pay back the $900 million you owe. . . however, it is now clear that you have engaged in well-intentioned stall tactics.”

Silbert responded to Winklevoss, arguing that DCG attempted to contact Gemini in late December but received no response. You can read the Twitter fallout this.

Data Mining: A Note on tether

The past 12 months have been a really terrible time for the crypto industry.

Bitcoin — the industry’s leading cryptocurrency — has fallen by about two-thirds by 2022. Tether, the company behind the cryptocurrency’s largest stablecoin USDT, is also suffering from a prolonged market drought.

According to numbers shared by data provider CryptoCompare, the monthly trading volume of the bitcoin-tether pair fell to 6.6 million coins in December, the lowest level since April 2022.

Volume bar chart (millions of coins) showing Traders are switching to bitcoin-tether pairs less often


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