Home » DCG’s check kiting comes home to roost, Nexo raided, Voyager sale to Binance progresses, unbanking the banked – Attack of the 50 Foot Blockchain

DCG’s check kiting comes home to roost, Nexo raided, Voyager sale to Binance progresses, unbanking the banked – Attack of the 50 Foot Blockchain

by admin

To Amy Castor When David Gerald

Blind Spot Market Live — Friday, January 13, 11:00 AM UTC

Izabella Kaminska’s new financial newsletter is The Blind Spot. On Friday we will be running Spot Markets Live, a large group text chat like the formerly FT Alphaville Markets Live. David’s is her January 13th at 11am UTC. He talks about the crypto market trash fire. You have to login to his website called Coodash. Sign up here. [The Blind Spot]

DCG, Gemini, Checkkite

How cryptocurrencies will work in 2022:

  1. Large Check Kitting Between All Players — Write a non-cashable check, then write a large non-cashable check to cover the first check.
  2. Count the face value of each uncash check as hundreds of millions of dollars in assets in your reserves.
  3. Pray that no one will try to cash it.

How cryptocurrencies will work in 2023:

  1. someone tried to cash

Gemini Cameron Winklevoss last week tweeted an open letter To Barry Silbert of Digital Currency Group. This week he tweeted another open letter — to DCG shareholders. Winklevoss directly accused DCG of wrongdoing and asked the board to remove Silbert as his CEO. [Twitter; Gemini, PDF, archive]

“How did we get here? Greed.” Okay, Cameron.

Cameron and Tyler Winklevoss knew that in July 2022, DCG issued a $1.1 billion internal IOU to Genesis. However, Gemini did not withdraw the customer’s money. Instead, everything could have been fine! Then in November he said FTX crashed and Genesis froze withdrawals. Levine: “If he trusted IOU in July, he’d be stupid now. Winklevoss certainly does. [Bloomberg; The Information, paywalled]

On page 4 of Cameron’s letter, he refers to Grayscale as “Barry’s Financial Hotel California.”Useful to know He’s reading Amy’s.

Silbert sent a letter to DCG shareholders shortly thereafter. His letter never mentions Winklevoss’ allegations. [DCGupdate, archive]

Silbert wants us to believe that the DCG subsidiary operates as a wholly independent company. “For the sake of full clarity, DCG does not direct any transactions, loans or borrowings for the Genesis business.” Sam Bankman-Fried said the same thing about FTX’s various businesses. .

Silbert claims the DCG loan to Genesis was structured on an arm’s length basis. His 1% interest rate on his $1.1 billion IOU is not the distance between independent companies.

“DCG has never had a relationship with Three Arrows Capital.” 30, 3AC had a $1 billion position in GBTC, according to Grayscale’s SEC filings. [SEC]

Silbert said DCG’s promissory notes to Genesis are not redeemable and do not contain other similar features of redeemable bonds.

On January 8, Gemini terminated its master loan agreement with Genesis and emailed its customers to that effect. This “requires Genesis to return all outstanding assets in the program”. Genesis has officially defaulted on the loan after failing to return his funds by January 10th. At this point Genesis can pull the pin and attempt to put Gemini into involuntary bankruptcy. [Twitter]

RedeemGBTC is a group of GBTC holders who are trying to pressure DCG Grayscale to step down as manager of the trust and liquidate GBTC shares back to Bitcoin. The problem is that regardless of whether his 90% of GBTC holders want liquidation, Grayscale has no legal obligation to do so. (DCG is the remaining 10%.) [RedeemGBTC; Blockworks]

Gemini added Tether trading to the exchange on January 10th at 6pm ET. Not available to customers in New York. [Gemini]

nexo is next

Nexo is another dodgy CeFi crypto “lender” targeting regular investors like Celsius and Voyager.

As is the norm in crypto, Nexo is only solvent when the $NEXO tokens, the loyalty card points of the supermarket inside, are counted as money.

Nexo did not offer services in their native Bulgaria, but this did not protect them. Thursday morning, January 12, at least some of Nexo’s offices and owners’ homes in Bulgaria – “more than 15 addresses,” said. public prosecutor’s office — raided by prosecutors, investigators, and…counterintelligence agencies. [BTV Novinite, in Bulgarian; Nova, in Bulgarian]

The Public Prosecutor’s Office said: Establishing and maintaining an international platform for exchanging and lending cryptocurrencies. The main organizers of this activity are Bulgarian citizens and the main activities are carried out from the Bulgarian territory. Cryptobanks operate through multiple registered companies, most of which are mailboxes, or shell companies. ” [Nova, in Bulgarian]

There are 300 people in the Attorney General’s Office working on Nexo cases, and 35 investigators from other agencies.

This action is clearly part of an international effort to investigate whether Nexo is part of a larger scheme for financial crime, money laundering and violating international sanctions against Russia. [Mediapool, in Bulgarian]

Dear Nexo owners, Antoni Trenchev (former reformist parliamentarian) and Costa Kanchev just so happened to move to Dubai in the fall of 2022.

Nexo’s current corporate strategy is to tweet through it. “Unfortunately, with the recent regulatory crackdown on crypto, some regulators have recently adopted a kick-first-question-later approach. It will be gone too.” Okay. [Twitter thread]

Nexo has already been sued by multiple US regulators. filed in September. Nexo completely exited the US market in December. [Bloomberg, 2022]

The Nexo website is still up and running. Are withdrawals valid for everyone? [nexo.io]

voyager for sale

New York Judge Michael Wiles has allowed Voyager Digital to enter into an asset purchase agreement with Binance US. Under the deal, Binance US will acquire over $1 billion in Voyager client assets and give creditors the opportunity to cash it out in his six months. Voyager still needs approval from creditors. The Committee of Unsecured Creditors considers this a big win. [Twitter thread]

Multiple regulators opposed the deal. But Voyager’s lawyers said regulators didn’t realize how hopeless Voyager was. Nothing. ” [Doc 831, PDF]

Voyager says it is processing CFIUS objections to the sale for national security reasons.

Celsius: “Answer the question, Mr. Mashinsky. It didn’t matter.”

KeyFi’s Jason Stone was a leading DeFi trader on the Celsius Network. At the time, Celsius was the third largest player in the DeFi market. stone sued celsius for not paying him, and Celsius counterclaimed.

The lawsuit between KeyFi and Celsius was heard before Judge Martin Glenn on Wednesday, January 11.

Alex Mashinski was in the stands and did not become Judge Glenn’s friend. It didn’t matter. ”

Mashinsky claims he never saw a Celsius general ledger spreadsheet during his time as CEO. have understood.

There were some live tweet threads from David Adler and the Cam Crews. [Twitter; Twitter]

The examiner’s final report on Celsius is due by January 30th. I don’t know if it’s been settled whether the examiner should investigate whether Celsius was acting as a Ponzi scheme. [Order, PDF]

Laughter is the best medicine, so SBF posting through it is effective altruism

Sam Bankman-Fried doesn’t just tweet anymore, he launches a substack. It’s all Caroline Ellison and her CZ’s at Binance’s fault, not Small Bean Sam’s. Also, FTX US is clearly completely solvent. [Substack]

This is really Sam’s — he tweeted the link. Sign up now for Sam’s new substack “mycrimes.txt”. [Twitter]

Nishad Singh, FTX’s top engineer, met with prosecutors during a proffer session. He’s the third of his FTX entourage to turn against Sam to save his own skin. [Bloomberg]

The FTX incident is so widespread that it could use up resources in the Southern District of New York. This includes potential bribery, campaign donation violations, and market manipulation, in addition to theft and fraud. [Twitter]

The SEC is now investigating the ventures that have invested in FTX, checking the “due diligence” they have vowed to go out of their way to do. [Reuters]

Unscrew bank deposits: Metropolitan jumps ship

The Federal Reserve, FDIC, and OCC issued a Joint Statement on Crypto Asset Risk to Banking Organizations on January 3.

bank-held or issue Crypto assets — for example, Silver Bank’s plan to issue a retail Diem stablecoin “is very likely to contradict safe and sound banking practices.”

Phrases such as “serious safety and sanity concerns” are a way for banking regulators to say “your charter is at risk.” [Federal Reserve, PDF]

Regulators did not want to “ban or block” just providing banking services to the cryptocurrency sector. However, on January 9th, the Metropolitan Bank of Commerce announced that it was “completely exiting the crypto-related vertical.” It has dumped all encryption clients and will not touch this area in the future.

Metropolitan was previously Voyager’s U.S. dollar bank and was thus involved in Voyager Digital’s bankruptcy. Voyager’s deposits he had FDIC insurance (if Metropolitan went bankrupt)—so Voyager lied to customers that they had his FDIC insurance just in case. Voyager failed!

Between Voyager, Silvergate Bank’s FTX issue, and regulatory letter, Metropolitan says “LOL nah.” [press release]

Signing banks are on track

The Silvergate Exchange Network is how many US cryptocurrency companies clear US dollar transactions between themselves. Signature Bank of New York operates a similar network called Signet.This is actually a private blockchain — apparently based on Facebook’s old blockchain Libra / Diem code. The Dirty Bubble summarizes the problems that Signet caused. [Dirty Bubble Media]

Access to Signet requires a “painful” KYC/AML process. This “heartbreaking” process is now possible with high-quality clients such as multiple FTX entities.

With these FTX-quality entities in Signet, you can do whatever you want and move your internal stablecoin dollars without meaningful restrictions or oversight. Nevermind that Signature has promised New York’s powerhouse surveillance to allow Signet to run. [NY DFS]

Signature was also heavily involved with the TrueUSD stablecoin, primarily used by Justin Sun and Alameda Research. [Medium; Cryptadamus]

Deltec’d realized that Signature had bank-lent to Binance in the name of the defunct company. husband! [Medium]

Signature has announced that it is looking to sell $10 billion of its $25 billion cryptocurrency customer deposits. CEO Joe DePaolo said, “We are more than just a crypto bank and we want to make that clear. [CoinDesk]

Silvergate Bank is doing well

Silvergate was bailed out by the Federal Home Loan Bank with a $4.3 billion loan backed by “government securities.” [American Banker; Silvergate]

Read by Francis Coppola Silvergate’s recent SEC 8-K filing. She says these filings after 10-Q of Q3 2022 are really bad news. [SEC 8-K; SEC 8-K; SEC 10-Q]

“The 10-Q shows significant losses in the fair value of available-for-sale securities. The lack of liquidity arises from insolvency. No. In these financial situations, Silvergate must feel heavily indebted, no wonder they had to sell their assets at a discount, Solvent Bank doesn’t have to do that.

“According to the 8-K filing, rather than sell assets to maintain liquidity, Silvergate first borrowed from the wholesale market (which would have been expensive, LOL) and then issued bonds to borrow. The financial results that close on January 17 will show a large increase in debt and a corresponding decrease in equity, since we know that the government bonds were issued at a significant discount. , the interest must be punitive, we are now slashing our expense base, which doesn’t look good to me.

“The open letter dated December 5 (8-K 12/5/22) is interesting. I’m sure this will come back to haunt them.”

image: Kites flown at the Morecambe Kite Festival 2011 By Dave Craven, CC-by-sa 3.0.

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