Alrighty, another big one. Let’s take a look at what transpired over the last seven days in crypto and Web3 in this edition of The Chainsaw’s Weekly Wrap.
This week in Web3
As the crypto world begins to digest the fact that Sam Bankman-Fried (SBF) is actually an unhinged, deceptive mega-fraud, the tech world put one of their most famous grifters, Elizabeth Holmes of Theranos, behind bars for 11 years.
The transparency of blockchain tech proved useful to UK police who traced Bitcoin (BTC) records to track down scammers involved in the “biggest ever” fraud operation. More than 100 people were arrested for their association with the now-defunct iSpoof website which exploited more than 200,000 potential victims.
Unfortunately for everyone in the crypto space, the financial contagion from the epic implosion of FTX seems to have no end in sight. The news that one of the most colossal companies in the crypto space, Digital Currency Group (DCG) sought an emergency US$1 billion loan before halting withdrawals at its leading firm Genesis Global sent the market into a fluster.
Despite DCG CEO Barry Silbert attempting to calm everyone down with an open letter, the market isn’t convinced that everything over DCG is alright, with many market participants believing that either DCG itself or one of its subsidiaries Genesis Global or Grayscale could be the next big domino to fall in the wake of FTX.
While Silbert struggled to keep his head above water, and SBF hung out with the local authorities in his 40-million-dollar Bahamas penthouse, Binance CEO Changpeng Zhao (CZ) was hard at work saving the crypto industry. On Thursday, Binance announced a whopping US$1 billion ‘industry recovery fund’ to help bail out firms injured in the FTX explosion. CZ said that the fund could increase to US$2 billion “if the need arises”.
The seemingly unstoppable Binance also confirmed that it would be placing a bid on bankrupt crypto lender Voyager. FTX was formerly the frontrunner set to acquire Voyager, but we all know why FTX won’t be following that up.
FTX under the microscope
A wrap up of this week just wouldn’t be complete without a really hard look at all of the FTX drama, which continues to unfold in a blockbuster-style series of twists and turns. Last weeks’ bankruptcy filing revealed that FTX had been illegally spending hundreds of millions to acquire property in the Bahamas for “key insiders”.
Who are these “key insiders” you ask? Why it’s none other than SBF’s own parents, who are both Law Professors at Stanford Law School. Turns out, mum and dad, alongside other senior executives at the company all bought luxury property valued at around US$121 million.
The bankruptcy proceedings shed some more light on the financial trainwreck that we now called FTX, revealing that the defunct exchange has just US$1.2 billion in cash reserves, a pretty far cry from the US$3.1 billion it owes to its 50 top creditors alone.
Now, if you were thinking that the FTX dumpster fire couldn’t get much bigger, you’d be wrong. After SBF did a relatively unhinged Twitter DM interview with Vox, SBF’s (now-former) lawyer decided that the 30-year-old vegan was simply too much to handle and decided to drop him as a client.
Crypto Twitter was pissed
In a revelation that left the broader crypto community with their mouths open, SBF announced that he would be speaking at the New York Times Dealbooks event next week.
Predictably, Crypto Twitter was furious.
“RIP rule of law in the United States,” wrote popular trader CryptoCred.
“In 2008, Bernie Madoff was arrested within 24 hours of his fraud being revealed — in 2022, Sam Bankman-Fried will be attending the NYTimes dealbook summit after his fraud was revealed,” wrote Fintwit.
“How did this dude steal billions of dollars and is now speaking at a summit as a free man? Make it make sense,” wrote investing personality WSBChairman.
SBF also penned an apologetic letter to FTX employees, which as expected, was received very poorly by the broader crypto community, who most likely won’t be satisfied until SBF faces criminal prosecution. Outside of apologising to former-employees, SBF blamed the collapse on his “irrational decisions” and “shitty” circumstances.
Things got a little hot under the collar for regulators in the Bahamas, who pushed back against Jon Ray III’s (the lawyer in charge of cleaning up FTX) claims that it gained unauthorised access to FTX’s books. A Wednesday statement from the Securities Commission of The Bahamas said that Ray had misrepresented its action through “intemperate and inaccurate allegations.”
Speaking of intemperate, both the New York Times and Wall Street Journal continue to stir the FTX pot with what many are calling lacklustre, softball coverage of the FTX saga. Elon Musk went as far as saying that WSJ were “giving foot massages to a criminal”.
While the headlines were dominated by SBF’s antics and the cringe-inducing numbers associated with the FTX drama, The Chainsaw put the call out to Australians who lost funds in the FTX collapse to show that there are real human beings behind the numbers.
Despite the overarching theme of this week being people losing money, there were still a few places where cash was being handed out.
Post-FTX adventure capital
In light of everything going down in the space, it’s no wonder that venture capital firms aren’t exactly handing cheques left, right and centre. Still, some of the braver firms still managed to find some extra dollars laying around to hand out to some seriously cool new projets.
- ‘T3rn’ a Polkadot-based protocol managed to raise US$6.5 million in a private token round led by Polygon Capital;
- Proximity Labs in collaboration with three other trading protocols unveiled a US$10 million developer fund to strengthen the decentralised trading ecosystem on Near Protocol (NEAR);
- Singapore-based crypto exchange Bybit announced a US$100M fund to support institutional clients, with Bybit offering up to US$10 million to institutional clients and market makers that decide to use the platform.
- A crypto privacy startup called Nucleo raised US$4 million in a funding round led by Bain Capital and 6th Man Ventures.
- NFT utility platform Tropee raised US$5 million in a funding round led by European Web3 firm Tioga Capital.
- Development company Anode Labs raised US$4.2 million to build a decentralised network that will look to pay people for their energy storage assets. The seed round is led by Lerer Hippeau and Lattice Capital.
Hesitation at its finest
Yeah so things really haven’t been all that dandy for crypto investors in the last seven days. With the extent of the FTX contagion still largely unknown, and numerous top industry players *cough* Digital Currency Group, scrambling for emergency billion-dollar loans, it makes a lot of sense that the market is a little hesitant to start piling money back into digital assets.
Bitcoin (BTC) started the week hovering just above its new support line of US$16k. On Tuesday, the flagship cryptocurrency briefly sunk to a new yearly low of US$15,360 before rebounding back above US$16,000 again on Wednesday. At the time of writing BTC is down 2.3% for the week as investors hold their breath in anticipation for some sort of news from Digital Currency Group.
Ethereum (ETH) soaked up the bulk of the volatility once again, with ETH trading down 2.7% for the week, with fears of increased OFAC compliance keeping its price from recovering significantly. At the time of writing the second largest cryptocurrency is changing hands US$1,187 a piece, trading in the same price range as it was at the very beginning of 2021.
While crypto struggled to hold ground, US equities managed to take back some much-needed ground. With Thanksgiving weekend around the corner and Black Friday sales kicking off, the S&P 500 closed up 2.8% for the week. The tech-laden Nasdaq followed in its footsteps, posting a 2.6% gain for the week.
Winners and Losers
Amid the FTX-induced misery that kept most crypto assets firmly in the red, a real blast from the past surfaced as the biggest winner for the week. The formerly staple crypto asset Litecoin (LTC) went on a spectacular 43% this week, surging from US$59 to US$80 in less than 24 hours. While it’s hard to pin down exactly what caused the spike in value, analysts are pointing to Litecoin’s upcoming ‘halving’ event that reduces rewards for miners.
LTC has since levelled out a bit and is currently being traded for US$77 apiece.
The biggest loser this week was sports and entertainment token Chiliz (CHZ) which closed the week down a rugged 29%. Closely following CHZ onto this week’s loser podium was the financial services token Chain (XCN) which ended this week down 19%.
That’s it for this edition of The Chainsaw Weekly Wrap. Have a great weekend from the crew here at The Chainsaw!
Anyway, here’s some memes.