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Bankman-Fried’s FTX says no talks to acquire Robinhood

By Manya Saini, John McCrank and Krystal Hu

(Reuters) – Sam Bankman-Fried’s FTX crypto exchange said it is not in talks to acquire Robinhood Markets Inc, after a report https://www.bloomberg.com/news/articles/2022-06-27/sam-bankman-fried-s-ftx-seeking-to-buy-robinhood-hood on Monday claimed the exchange was exploring such a deal.

Bloomberg News reported on Monday FTX was discussing internally how to buy the app-based brokerage and that Robinhood had not received a formal takeover approach, citing people with knowledge of the matter.

“There are no active M&A conversations with Robinhood,” Bankman-Fried said in an emailed statement.”We are excited about Robinhood’s business prospects and potential ways we could partner with them.”

Robinhood declined to comment. The retail-trading platform’s shares were down 5% in extended trading after jumping over 14% on the report.

Last month, the founder and chief executive of FTX revealed a 7.6% stake in Robinhood but said he did not have any intention of taking control of the retail-trading platform.

Robinhood’s dual-class shares give its founders control of 64% of the voting shares outstanding, making it virtually impossible for takeovers without their support.

The popular trading platform has come under pressure this year as trading volumes ease from 2021’s frenetic pace – when retail investors used it to pump money into shares of so-called meme stocks such as GameStop and AMC Entertainment.

That slowdown, along with a sell-off in high-growth technology stocks, has driven a near 50% slump in Robinhood shares this year. The company had a market valuation of nearly $7 billion as of Friday’s closing price.

FTX’s U.S. arm announced in May it would launch a stock trading platform by the end of the summer. Last week, it acquired partner Embedded Financial Technologies for an undisclosed amount, which would add custody, execution and clearing services to its equity trading platform.

FTX and its billionaire founder Bankman-Fried have rescued other players during the crypto market’s recent crash. It provided crypto lender BlockFi with a $250 million revolving credit facility to help the firm avoid a liquidity crunch.

(Reporting by Manya Saini in Bengaluru, John McCrank and Krystal Hu in New York; Editing by Aditya Soni and Richard Chang)

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Bitcoin miners sell their holdings amid crypto winter’s chill

By Lisa Pauline Mattackal and Medha Singh

(Reuters) – Bitcoin miners have been forced to tap into their cryptocurrency stashes as a plunge in prices, rising energy costs and increased competition bite into profitability.

The number of coins miners are sending to crypto exchanges has been steadily climbing since June 7, researchers at MacroHive noted, in a sign that “miners have been increasingly liquidating their coins on exchanges.”

Several publicly listed bitcoin miners collectively sold more than 100% of their entire output in May as the value of bitcoin tumbled 45%, an analysis by Arcane Research https://tmsnrt.rs/3nhYdHA found.

“The plummeting profitability of mining forced these miners to increase their selling rate to more than 100% of their output in May. The conditions have worsened in June, meaning they are likely selling even more,” said Arcane analyst Jaran Mellerud.

Bitcoin sales by public miners https://fingfx.thomsonreuters.com/gfx/mkt/gkplgejyyvb/bitcoin%20mining.JPG

Bitcoin miners, who run networks of computers to earn tokens by validating transactions on the blockchain, are typically staunch crypto “HODLers” and collectively own around 800,000 bitcoins, according to CoinMetrics data.

The crypto mining space rapidly expanded in 2021 as bitcoin more than quadrupled in value, but this growth has further pressured margins as the process is designed to grow more difficult as the number of miners increases.

“Over the past six months, hash rate and mining difficulty have increased while the price of bitcoin has dropped. These are both negatives for existing miners as both work to compress margins,” said Joe Burnett, analyst at bitcoin mining firm Blockware Solutions.

High energy prices are also hitting miners, which by some estimates use more electricity than the Philippines, according to the Cambridge Bitcoin Electricity Consumption Index.

“If you’re not at a very low-cost electricity area at this point, you’ve got to shut down,” noted Chris Brendler, senior research analyst at D.A. Davidson.

Bitfarms, Riot Blockchain and Core Scientific are among companies that announced sales, with Bitfarms’ chief executive officer saying the company is “no longer HODLing daily bitcoin production.”

Shares of publicly listed miners have been battered even more than bitcoin, with the Valkyrie Bitcoin Miners ETF falling 59% this quarter compared to 53% drop for bitcoin.

Some miners, including Bitfarms, are using proceeds to negotiate financing agreements to fund operations and make payments on expensive mining equipment.

If miners have already paid two-thirds or even 70% of the price of these millions of dollars in machines, they wouldn’t want to miss the final installments, which makes them desperate for financing, Brendler said.

Given their significant bitcoin holdings https://tmsnrt.rs/3xUJesg, some analysts point to miner sales as another factor weighing on bitcoin prices.

Valuations and holdings of public bitcoin miners https://fingfx.thomsonreuters.com/gfx/mkt/lbvgnxmrqpq/Pasted%20image%201656347748285.png

LIGHT AT THE END OF THE TUNNEL?

Miners using older and more energy-intensive machines, and without the balance sheet and access to financing of publicly listed players are already struggling.

Bitcoin’s mining difficulty decreased 2.35% this week, Glassnode data showed, indicating the network had adjusted after some miners turned off their rigs.

This takes some pressure off those that have not given up.

“Bitcoin mining is a zero-sum game. If you can continue running when others cannot that means you have a larger share of the pie,” said Charlie Schumacher, spokesperson for the largest publicly listed miner Marathon Digital Holdings Inc.

Marathon has not sold bitcoin since October 2020, he added.

“Bitcoin bottoms have been marked at the end of miner capitulation, that could be a sign that the miners that can survive this capitulation have a light at the end of the tunnel,” Burnett said.

(Reporting by Medha Singh and Lisa Mattackal in Bengaluru; Editing by Lisa Shumaker)

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Celsius Network hires advisors to prepare for potential bankruptcy – WSJ

(Reuters) – Celsius Network LLC has hired restructuring consultants from advisory firm Alvarez & Marsal to advise on a possible bankruptcy filing, the Wall Street Journal reported https://www.wsj.com/amp/articles/celsius-network-taps-more-advisers-to-prepare-for-potential-bankruptcy-11656088078?mod=Searchresults_pos1&page=1 on Friday, citing people familiar with the matter.

The New Jersey-based cryptocurrency lending company froze withdrawals and transfers earlier this month due to “extreme” market conditions, in the latest sign of the financial market downturn hitting the cryptosphere.

A separate report from CoinDesk said https://www.coindesk.com/business/2022/06/24/goldman-sachs-raising-funds-to-buy-celsius-assets-sources on Friday that Wall Street bank Goldman Sachs was looking to raise $2 billion from investors to buy distressed assets from Celsius.

The proposed deal would allow investors to buy the assets at potentially big discounts if the cryptocurrency lender files for bankruptcy, according to the report, which cited two people familiar with the matter.

Celsius had $11.8 billion in assets as of last month. The company and Alvarez & Marsal did not immediately respond to Reuters requests for comment.

The market for digital assets has in recent months been roiled by extreme volatility as investors dump risky assets on fears that aggressive interest rate hikes to tame stubborn inflation could plunge the economy into recession.

(Reporting by Manya Saini in Bengaluru; Editing by Aditya Soni)

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Explainer-Can crypto holders recoup losses in court?

By Jody Godoy

(Reuters) – A downturn in cryptocurrency prices and crash of one stablecoin has led some investors to try to recover their losses in U.S. court. Here is how cryptocurrency litigation has fared so far and the challenges investors may face.

WHO IS BEING SUED?

Companies that created cryptocurrencies, exchanges that facilitated their sale, and individuals who promoted them have all been sued.

Kyle Roche, who represents cryptocurrency holders in several lawsuits, said U.S. claims over cryptocurrency often involve alleged violations of federal securities or commodities laws, which prohibit fraud and manipulation and require products and operators to be registered with U.S. authorities.

The latest lawsuit took aim at Terraform Labs, the company behind Terra USD, over the stablecoin’s recent collapse.

A crytocurrency investor sued the Seoul-based company and its Chief Executive Do Kwon on June 17, alleging they failed to register the company’s digital assets as securities and worked with several venture capital funds that backed Terra USD to defraud investors.

A Terraform Labs spokesperson called the claims meritless.

Tether, which is behind the world’s largest stablecoin, has been accused of rigging cryptocurrency markets in a lawsuit in New York. And Ripple, whose founders created the token XRP, has been hit with a lawsuit in California, claiming it sold unregistered securities.

Both lawsuits have survived motions to dismiss.

A spokesperson said Ripple disputes the allegations and will defend against them. Tether did not respond to a request for comment.

Cryptocurrency exchanges have been another target for investors seeking to recoup losses.

Binance U.S. was sued on June 13 by investors claiming it falsely marketed TerraUSD as a safe asset ahead of its collapse. And in March, investors accused Coinbase of selling 79 digital assets as unregistered securities.

Binance and Coinbase have denied the allegations.

Investors are also suing celebrities who have publicly touted cryptocurrency. A lawsuit filed in Los Angeles claims Reality TV star Kim Kardashian and boxing legend Floyd Mayweather Jr. engaged in a cryptocurrency pump and dump. Representatives for Kardashian and Mayweather did not respond to requests for comment.

LEGAL HURDLES

A wave of lawsuits brought in 2020 against exchanges alleging they fueled an illegal boom in digital coins largely failed after judges found some of the claims were filed too late or had too little connection to the United States.

Timing should not be an issue for newer lawsuits, but cryptocurrency holders seeking to sue overseas companies in U.S. court could still face hurdles.

Token holders won a default judgment in New York against Singapore-based exchange KuCoin, but dropped the case after a Singaporean court would not make the company provide information to enforce the judgment.

KuCoin did not respond to a request for comment.

Another potential hurdle for investors filing claims under securities or commodities laws will be showing their tokens meet the legal definition of those assets. Some courts have ruled that certain cryptocurrencies fit the bill, but the issue remains unsettled.

Cryptocurrency holders may face additional obstacles when going after exchanges. In the Coinbase lawsuit, the exchange has argued that it was not a party to the transactions, and that private litigants cannot enforce registration requirements.

HAVE ANY CRYPTO HOLDERS WON MONEY IN COURT?

While many cryptocurrency lawsuits are pending, the SEC has reclaimed some funds for investors in a handful of digital assets through settlements.

But even after a settlement, investors may face long waits and still end up with less than they shelled out.

Last year, blockchain company Block.one agreed to pay $27.5 million to settle token holders’ lawsuit alleging it had violated securities law.

More than 100 token holders filed claims worth more than $75.7 million, according to court filings. The settlement has not yet received final approval.

(Reporting by Jody Godoy; Editing by Noeleen Walder and Richard Chang)

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U.S. lawmakers to unveil bill barring U.S. data flows to high-risk countries

By Alexandra Alper and David Shepardson

WASHINGTON (Reuters) – A bipartisan group of U.S. senators plans to introduce legislation on Thursday that would give the Biden administration the power to block exports of U.S. personal data to countries like China that they say pose national security risks.

    The bill, cosponsored by Finance Committee chair Ron Wyden, a Democrat, and Marco Rubio, the top Republican on the U.S. Senate Intelligence Committee, aims to protect Americans’ sensitive personal information from being sold or transferred to high-risk foreign countries.

“Right now it’s perfectly legal for a company in China to buy huge databases of sensitive information from data brokers about the movements or health records of millions of Americans, and then share that information with the Chinese government,” Wyden said in a statement announcing the legislation. “That’s a huge problem for our country’s security.”

The bill, which is modeled on a discussion draft released by Wyden last year, would direct the Secretary of Commerce to identify categories of personal data that, if exported, could harm U.S. national security.

If approved, the bill would also direct the Commerce Department to require licenses for bulk exports of the identified categories of personal data to other countries, and deny exports to high-risk countries. Data exports to low-risk countries would be unrestricted, according to a summary of the bill.

While the bill does not specifically list China as a high- risk country, it is an intended target according to a Wyden aide. The Chinese Embassy in Washington did not immediately comment.

Other cosponsors include senators Cynthia Lummis, Sheldon Whitehouse and Bill Hagerty.

The move comes amid heightened scrutiny of U.S. data flows to China. Last month, Reuters reported that the Biden administration had drafted an executive order that would give the Justice Department vast powers to stop foreign adversaries like China from accessing Americans’ personal data.

(Reporting by Alexandra Alper and David Shepardson in Washington; Editing by Matthew Lewis)

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Some Brits turn to gambling, crypto to make ends meet, charity warns

LONDON (Reuters) – Britain’s worsening cost-of-living squeeze is pushing some people into gambling and cryptocurrency investments in last-ditch attempts to make ends meet, a gambling charity warned on Thursday.

GamCare said it had increasingly received calls from people receiving state welfare payments who had gambled in the hope they could cover soaring energy and food bills, and lost.

The charity reported that some people who it had helped successfully in the past had relapsed into gambling again under the growing financial pressure.

British households are grappling with the highest rate of inflation out of the Group of Seven advanced economies, which hit a new 40-year high of 9.1% in May. The Bank of England has warned of inflation exceeding 11% by October.

A YouGov survey of more than 4,000 people commissioned by GamCare and published on Thursday showed 46% were worried about their financial situation.

More than half of those polled said they had gambled over the past 12 months, and most of this group had lost money.

“Our helpline advisers are hearing that the cost of living is impacting people’s gambling behaviours – particularly those gamblers who have recovered,” said Anna Hemmings, chief executive of GamCare.

“We also know that our team are hearing from more and more people who are reaching out for help around crypto trading.”

Someone who paid in sterling to invest in Bitcoin six months ago to help hedge against the rising cost of living would have lost 55% of their investment as of Thursday.

GamCare said 43% of problem gamblers had invested in cryptocurrency, and 25% out of this group said they wanted to invest more to chase losses – compared with only 7% of the wider population of crypto investors.

(Reporting by Andy Bruce, Editing by Kylie MacLellan)

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U.S. tech companies yank job offers, leaving college grads scrambling

By Sheila Dang

(Reuters) – One by one, over the last week of May, Twitter Inc rang up some members of its incoming class of new hires who had recently graduated from college and revoked the job offers in 15-minute calls, according to some of the recipients.

“It was traumatic,” Iris Guo, an incoming associate product manager living in Toronto, told Reuters. She received the bad news in a 10:45 p.m. video call that her position had been eliminated. Since then, she has raced to find new employment in order to secure her U.S. work visa.

More than 21,500 tech workers in the United States have lost their jobs so far this year, according to Layoffs.fyi, a website that monitors job cuts. The number of tech layoffs in May alone skyrocketed 780% over the first four months of the year combined, according to outplacement services firm Challenger, Gray & Christmas.

But recent college graduates like Guo, who graduated from the University of Waterloo and studied financial management and computer science, represent a new dimension to the cutbacks as their nascent careers are eliminated even before they begin. The trend reflects a new austerity sweeping across some parts of the tech industry such as crypto and venture capital-backed companies.

For crypto firms, the belt-tightening is due to the recent crash in cryptocurrency prices and venture capital-backed companies are also cutting costs to avoid going back to the market for additional funding, said Kyle Stanford, senior analyst for venture capital at Pitchbook.

Crypto firm Coinbase Global Inc laid off 18% of staff this month, payments firms Klarna and Bolt Financial collectively laid off over 900 people while major names like Meta Platforms Inc, Lyft Inc and Uber Technologies Inc have said they will slow or freeze hiring.

In what appears to be a counter trend to the Great Resignation of 2022, when legions quit for new jobs, some tech job-seekers now face cost cuts and hiring freezes amid four-decade-high inflation, a war raging in Ukraine and the ongoing pandemic.

In the case of those who were poised to join Twitter, the whims of billionaire Elon Musk have also caused stress. Musk has agreed to buy Twitter for $44 billion, but his recent tweets have raised questions about when and if the acquisition will be completed.

To be sure, hiring in the tech sector as a whole has remained strong, according to experts from staffing and consulting firms. Tech roles in the healthcare and finance industries are strong, as well as in the information technology field, said Thomas Vick, a Texas-based regional director for staffing firm Robert Half’s tech practice.

But for the incoming class of new hires out of college, losing their job offers now is especially damaging as they said they are locked out of companies like Meta Platforms, Alphabet Inc’s Google and other tech giants, which have already secured their new cohort of recruits.

Lucas Durrant, an electrical engineering graduate from Canada, was set to start his new job as a software engineer at Bolt last week. While on vacation a few weeks ago, he received an email stating that his offer was rescinded. Bolt announced it would begin layoffs in late May, citing economic conditions.

“It feels a bit like a race against the clock before we see a bigger economic downturn,” said Durrant. “Pretty soon, I’m also going to be competing against people graduating in 2023.”

LIMITED OPTIONS

At least 40 recent college graduates have lost job offers in the past few weeks, according to LinkedIn posts and Google spreadsheets that circulated online to help those affected find new positions.

As of Tuesday, 22 recent grads were listed on a spreadsheet as having offers rescinded from Twitter and nine people were listed on a separate spreadsheet for Coinbase.

In a statement, Twitter said it acknowledged that the rescinded offers could put candidates in a difficult position, and said it is offering compensation to those affected.

Coinbase pointed to a June 2 blog post that said the decision to rescind a number of offers was not made lightly, but was “necessary to ensure we are only growing in the highest-priority areas.”

Chloe Ho, a recent graduate from the University of California, Davis, and who is originally from Hong Kong, has until Sept. 29 to find a new job, or be forced to leave the United States. Ho had accepted a position as a content marketing specialist for an online grocery company called Weee! before the position was rescinded.

As a non-U.S. citizen who needs a new employer to sponsor her work visa, “my options are very limited,” she said.

Ho said she canceled a lease for a new apartment in the San Francisco Bay area, pulled out of vacation plans with friends and will now spend the next three months networking for a new job during the day and submitting applications at night. “I had planned everything around this job,” she said.

Many affected graduates took to LinkedIn to express their disappointment, detail how the rescinded offers upended plans for cross-country moves and ask for referrals to new companies.

Graduates who spoke with Reuters said they were surprised by the level of outreach from people offering to help. Still, the sting of losing their dream jobs has lingered.

One recent college graduate who was set to join Coinbase, and did not want to be named due to his ongoing job hunt, said that just a week before losing his job offer, he had received an email from Coinbase with reassurance that the company did not plan to walk back existing offers.

“I was disappointed for a few reasons. I didn’t think leadership would make that decision,” he said.

While the companies may be saving some money in the short term, they are risking “potentially catastrophic” reputational damage, said Brian Kropp, distinguished vice president of Gartner’s human resources practice.

“Just think about how unfair that is to people you’re rescinding the offer from,” he said. “You’re putting them in a painful situation.”

(Reporting by Sheila Dang in Dallas; Editing by Kenneth Li and Matthew Lewis)

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Crypto giant Tether to launch sterling-pegged stablecoin

By Elizabeth Howcroft and Tom Wilson

LONDON (Reuters) – Major crypto firm Tether said on Wednesday it will launch next month a “stablecoin” pegged to the British pound, a move that comes as London draws up plans to regulate the fast-growing type of digital currency.

Stablecoins are cryptocurrencies designed to keep a steady value against traditional currencies or commodities such as gold. They seek to avoid the volatility that makes bitcoin and other digital tokens impractical for most commerce.

Crypto markets were rocked last month when the value of terraUSD, a stablecoin that used a complex algorithm, collapsed, throwing a spotlight on the importance of stablecoins to the crypto trading world.

British Virgin Islands-based Tether’s dollar-pegged stablecoin is the third-largest by market capitalisation, with some $68 billion in circulation.

It is the predominant medium for moving funds between crypto and regular cash. Its tokens are underpinned by a mixture of dollars, government debt and short-term debt issued by companies.

As the demise of terraUSD sparked a sell-off in crypto markets, Tether broke its 1:1 peg with the dollar, shaking investors’ faith in a key cog in the crypto economy.

Britain plans to legislate to bring some stablecoins under the oversight of regulators, part of a plan to exploit the potential of crypto and blockchain technology to help consumers make payments more efficiently.

It said in May it will adapt existing rules to deal with major stablecoin collapses.

“We believe that the United Kingdom is the next frontier for blockchain innovation and the wider implementation of cryptocurrency for financial markets,” Tether Chief Technology Officer Paolo Ardoino said in a statement, adding that the company would work with UK regulators.

Britain’s finance ministry did not immediately respond to a request for comment.

In addition to its dollar-backed coin, Tether offers tokens pegged to the euro, offshore Chinese yuan and Mexican peso.

(Reporting by Elizabeth Howcroft and Tom Wilson; Editing by Hugh Lawson)

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Crypto fears now materialising, central bank body BIS says

By Marc Jones

LONDON (Reuters) – Recent implosions in the cryptocurrency markets indicate that long-warned-about dangers of decentralised digital money are now materialising, the Bank for International Settlements has said.

The BIS, the global umbrella body for central banks, sounded the warning in an upcoming annual report, in which it also urged more effort in developing appealing central bank digital currencies.

BIS general manager Agustin Carstens pointed to recent collapses of the TerraUSD and luna ‘stablecoins’, and a 70% slump in bitcoin, the bellwether for the crypto market, as indicators that a structural problem exists.

Without a government-backed authority that can use reserves funded by taxes, any form of money ultimately lacks credibility.”

“I think all these weaknesses that were pointed out before have pretty much materialised,” Carstens told Reuters. “You just cannot defy gravity… At some point you really have to face the music”.

Analysts estimate that the overall value of the crypto market has slumped more that $2 trillion since November as its troubles have snowballed.

Carstens said the meltdown was not expected to cause a systemic crisis in the way that bad loans triggered the global financial crash. But he stressed losses would be sizeable and that the opaque nature of the crypto universe fed uncertainty.

“Based on what we know, it should be quite manageable,” Carstens said. “But, there are a lot of things that we don’t know.”

CENTRAL BANK DIGITAL CURRENCIES (CBDCs)

The BIS is a long-term sceptic of cryptocurrencies and its report laid its vision for the future monetary system – one where central banks utilise the tech benefits of bitcoin and its ilk to create digital versions of their own currencies.

Roughly 90% of monetary authorities are now exploring CBDCs as they are known. Many hope it will equip them for the online world and fend off cryptocurrencies. But the BIS wants to coordinate key issues such as making sure they work across borders.

The immediate challenges are mainly technological, similar to how the mobile phone world needed standardised coding in the 1990s. But there is also the geopolitical issue as relations between the West and countries such as China and Russia wane.

“This (interoperability) is a topic that has been on the G20 agenda for quite some time.. so I think there is a good chance for this to move forward,” Carstens said, adding how there had been a number of “real-life” trials with different CBDCs over the last year.

Asked how long before international standards for CBDC interoperability might be agreed, he said: “I think in the next couple of years. Probably 12 months is too short.”

(Reporting by Marc Jones; Editing by Bernadette Baum)

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Crypto’s latest meltdown leaves punters bruised and bewildered

By Tom Wilson, Elizabeth Howcroft, Nupur Anand and Ece Toksabay

LONDON/MUMBAI/ANKARA (Reuters) – For Jeremy Fong, U.S. crypto lender Celsius was an ideal place to stash his digital currency holdings – and earn some spending money from its double-digit interest rates along the way.

“I was probably earning $100 a week,” at sites like Celsius, said Fong, a 29-year civil aerospace worker who lives in the central English city of Derby. “That covered my groceries.”

Now, though, Fong’s crypto – about a quarter of his portfolio – is stuck at Celsius.

The New Jersey-based crypto lender froze withdrawals for its 1.7 million customers last week, citing “extreme” market conditions, spurring a sell-off that wiped hundreds of billions of dollars from the paper value of the cryptocurrencies globally.

Fong’s long-term crypto holdings are now down about 30%. “Definitely in a very uncomfortable position,” he told Reuters. “My first instinct is just to withdraw everything,” from Celsius, he said.

The Celsius blow-up followed the collapse of two other major tokens last month that shook a crypto sector already under pressure as soaring inflation and rising interest rates prompt a flight from stocks and other higher-risk assets.

Bitcoin fell below $20,000 on June 18 for the first time since December 2020. It has plummeted around 60% this year. The overall crypto market has slumped to around $900 billion, down from a record $3 trillion in November.

The tumble has left individual investors across the world bruised and bewildered. Many are angry at Celsius. Others swear never to invest in crypto again. Some, like Fong, want stronger oversight of the freewheeling sector.

Susannah Streeter, an analyst at Hargreaves Lansdown, compared the turmoil to dotcom stocks crash in the early 2000s – with technology and low-cost capital making it easy for individual investors to gain access to crypto.

“We’ve got this collision of smartphone technology, trading apps, cheap money and a highly speculative asset,” she said. “That’s why you’ve seen a meteoric rise and fall.”

Graphic: Crumbling Crypto – https://graphics.reuters.com/FINTECH-CRYPTO/jnpweoxxxpw/chart.png

‘PACING IN THE DARK AT 2 A.M.’

Crypto lenders, such as Celsius, offer high interest rates to investors – mostly individuals – who deposit their coins with these sites. These lenders, mostly unregulated, then invest deposits in the wholesale crypto market.

Celsius’ troubles appear to be related to its wholesale crypto investments. As these investments turned sour the company was unable to meet client redemptions from investors amid the broader crypto market slump.

The redemption freeze at Celsius was akin to a small bank shutting its doors. But a traditional bank, overseen by regulators, would have some form of protection for depositors.

One of those impacted by the Celsius freeze was 38-year old Alisha Gee in Pennsylvania.

Gee invested “every last bit” of her paycheques in crypto since 2018, which have built up into a five-figure sum. She has $30,000 of deposits at Celsius – part of her overall crypto holdings – earning her interest of $40-$100 a week, which she hoped would help her to pay off her mortgage.

Just over a week ago, Gee got an email from Celsius saying she couldn’t make withdrawals. “I just was pacing in the dark at 2 a.m., just back and forth,” she said.

“I believed in the company,” Gee said. “It doesn’t feel good to lose $30,000, especially that I could’ve put towards my mortgage.”

Gee said she would continue to use Celsius, saying she was “loyal” to the company and hadn’t experienced problems before.

Celsius CEO Alex Mashinsky tweeted on June 15 the company was “working non-stop,” but has given few details of how or when withdrawals would resume. Celsius said on Monday it was aiming to “stabilize our liquidity and operations.”

GUARDRAILS

For some, enthusiasm for crypto is undimmed.

“I have seen multiple bear market cycles by now, so I am avoiding any knee-jerk reaction,” said 23-year old Sumnesh Salodkar in Mumbai, whose crypto holdings are down but still in positive territory.

For others, warnings from regulators across the world about the risks of dabbling in crypto have become reality.

Halil Ibrahim Gocer, a 21-year old in the Turkish capital Ankara, said his father’s crypto investments of $5,000 have tumbled to $600 since he introduced him to crypto.

“Knowledge can only take you so far in crypto,” said Gocer. “Luck is what matters.”

Another investor, a 32-year old IT worker in Mumbai, said he poured three-quarters of his savings – several hundred dollars – into crypto. Its value has plummeted by around 70%-80%.

“This will be my last investment in cryptocurrencies,” he said, requesting anonymity.

Regulators in countries around the world have been working out how to build crypto guardrails that can protect investors and dampen risks to wider financial stability.

The crypto market turmoil sparked by Celsius highlights the “urgent need” for crypto rules, a U.S. Treasury official said last week.

Fong, the UK investor who has lost access to his crypto at Celsius, wants things to change.

“A bit of regulation would be good, essentially. But then I think it’s a balance,” he said. “If you do not want too much regulation, this is what you get” he said.

(Reporting by Tom Wilson and Elizabeth Howcroft in London, Nupur Anand in Mumbai, and Ece Toksabay in Ankara. Editing by Jane Merriman)

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Cryptoverse: Crypto lenders face a DeFi drubbing

By Lisa Pauline Mattackal and Medha Singh

(Reuters) – Crypto lending may not be down and out, but it’s certainly on the ropes.

Crypto lenders have boomed over the past two years, attracting tens of billions of dollars in bitcoin, ether and other coins which they in turn lent out or invested, often in decentralized finance (DeFi) projects with sky-high returns.

But as crypto markets tumble, DeFi activity is being hit particularly hard, robbing lenders of their most lucrative returns and threatening to squeeze the whole sector – reaching far beyond Celsius Network, which grabbed the headlines last week when it froze withdrawals and transfers.

The total value locked (TVL) on ethereum, a metric that attempts to track the value of tokens deposited in a variety of DeFi protocols, has declined by $124 billion or 60% over the last six weeks, according to data provider Glassnode.

The crash has occurred in two large crypto slices, $94 billion lost during the collapse of the LUNA project – involving failed stablecoin TerraUSD – and another $30 billion in mid-June, said Glassnode, which attributed the falls to diminishing risk appetite.

“The current market conditions have put an enormous amount of pressure on operators that interact with decentralized finance protocols to generate their yield,” said Mauricio Di Bartolomeo, co-founder and chief strategy officer of crypto lender Ledn.

BITCOIN VS ETHER VS DOLLAR

Similarly, an index tracking crypto tokens linked to DeFi lending/borrowing protocols and exchanges, from research firm Macrohive, plunged 35% last week as investors pulled money from the formerly high-flying sector.

Some DeFi protocols, or projects, are starting to offer lower returns, with average lending and borrowing rates at one platform, Compound, down on the week across all but one cryptocurrency, the stablecoin Pax Dollar, Macrohive found.

In a further sign of the slowdown, ether – the token that underpins the ethereum network on which many DeFi protocols operate – last week dropped to its lowest level against larger peer bitcoin in 14 months

Versus the dollar, bitcoin has fallen 34% so far in June, while ether has lost over 40%.

The turmoil in this higher yielding part of the crypto market raises questions about the sustainability of the high interest rates crypto lenders offer to their customers, often in double digits.

TOO GOOD TO BE TRUE?

Some market players say crypto lenders should make clients aware of the risks of projects their money is pumped into.

“I expect users to demand more transparency if their assets are managed in DeFi space,” said Iakov Levin, CEO of crypto investment platform Midas Investments. “Crypto needs to find a more transparent model of retail yields.”

New Jersey-based Celsius, with over $11 billion of assets on its platform, cited market volatility when it suspended redemptions last week. A data trawl shows that it was invested in several DeFi projects that ran into difficulties.

“The DeFi market will no doubt suffer from this development because it also deals with cryptocurrencies and people will be more wary than ever about investing their assets in what they perceive as similar ecosystems,” said Yubo Ruan, founder and CEO of Parallel Finance, a decentralized lending protocol.

Ruan said if projects “promise rewards that sound too good to be true – there’s always a chance that they are”.

GRAPHIC: Crypto lending rates (https://graphics.reuters.com/FINTECH-CRYPTO/mopanrlwmva/)

(Reporting by Medha Singh and Lisa Mattackal in Bengaluru; Editing by Alun John and Pravin Char)

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Crypto lender Babel Finance wins debt repayment reprieve after withdrawal freeze

(Reuters) – Babel Finance, the Hong Kong-based crypto lender which suspended withdrawals and redemption of crypto assets on Friday, said it has reached an agreement with counterparties on the repayment of some debts to ease short-term liquidity.

Cryptocurrency valuations have plunged in recent weeks as investors dump risky assets in a rising interest rate environment. Bitcoin BTC=BTSP, which reached a record high of $69,000 in November, lost more than half its value this year.

In an update on its website on Monday, Babel said it carried out an emergency assessment of its business operations to determine the company’s liquidity status.

Crypto lenders gather crypto deposits from retail customers and re-invest them, proclaiming double-digit returns and attracting tens of billions of dollars in assets. However, lenders have been unable to redeem their clients’ assets during the recent meltdown.

“Babel Finance will actively fulfill its legal responsibilities to customers and strive to avoid further transmission and diffusion of liquidity risks,” the company said.

Babel, which has 500 clients and only deals in bitcoin, ethereum and stablecoins, raised $80 million in a funding round last month, valuing it at $2 billion. It had ended last year with $3 billion of loan balances on its balance sheet.

(Reporting by Akriti Sharma in Bengaluru; Editing by Richard Chang)

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Meta loses appeal in Russian court over ‘extremist activity’ tag -TASS

(Reuters) – A Moscow court on Monday rejected an appeal brought by Meta Platforms Inc after it was found guilty of “extremist activity” in Russia, the TASS news agency reported.

Russia in March found Meta guilty of “extremist activity”, but said the ruling would not affect its WhatsApp messenger service, focusing on the U.S. firm’s already-banned Facebook and Instagram social networks.

Meta did not immediately respond to an emailed request for comment.

(Reporting by Reuters; editing by David Evans)

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Crypto industry fears contagion as bitcoin slips under $20,000

By Alun John and Elizabeth Howcroft

LONDON/HONG KONG (Reuters) – The cryptocurrency industry was on edge on Monday as bitcoin struggled to stay above a key level, with investors fearing that problems at major crypto players could unleash a wider market shakeout.

Bitcoin, the world’s biggest cryptocurrency, was trading just under the symbolic level of $20,000 in early London trading hours – roughly the peak of its charge to its previous record in 2017.

Bitcoin had dropped on Saturday to as low as $17,592.78, falling below $20,000 for the first time since December 2020. It has lost almost 60% of its value this year and 37% this month alone in the cryptocurrency sector’s latest meltdown.

Its fall follows problems at several major industry players. Further declines, market players said, could have a knock-on effect as other crypto investors are forced to sell their holdings to meet margin calls and cover losses.

Crypto hedge fund Three Arrows Capital is exploring options including the sale of assets and a bailout by another firm, its founders told the Wall Street Journal in a story published Friday, the same day Asia-focused crypto lender Babel Finance said it would suspend withdrawals.[nL4N2Y42I2]

U.S. based lender Celsius Network this month said it would suspend customer withdrawals. In a blog on Monday https://blog.celsius.network/a-note-to-the-celsius-community-e5af1f5a7998, Celsius said it would continue working with regulators and officials, but that it would pause its customer Q&A sessions.

“There is a lot of credit being withdrawn from the system and if lenders have to absorb losses from Celsius and Three Arrows, they will reduce the size of their future loan books which means that the entire amount of credit available in the crypto ecosystem is much reduced,” said Adam Farthing, chief risk office for Japan at crypto liquidity provider B2C2.

“It feels very like 2008 to me in terms of how there could be a domino effect of bankruptcies and liquidations,” Farthing said.

Smaller tokens, which usually move in tandem with bitcoin, were also hurt. No.2 token ether was at $1,0752, having dipped below its own symbolic level of $1,000 over the weekend.

The fall in crypto markets has coincided with a slide for equities, as U.S. stocks suffered their biggest weekly percentage decline in two years on fears of rising interest rates and the growing likelihood of recession. [MKTS/GLOB]

Bitcoin’s moves have tended to follow a similar pattern to other risk assets such as tech stocks.

The overall crypto market capitalisation is roughly $877 billion, according to price site Coinmarketcap, down from a peak of $2.9 trillion in November 2021.

A fall in stablecoins – a type of crypto designed to hold a steady value – is also suggesting investors are pulling money from the sector as a whole.

Graphic: Bitcoin so far in 2022 – https://fingfx.thomsonreuters.com/gfx/mkt/lgvdwbwqapo/Bitcoin%20so%20far%20in%202022.png

(Reporting by Alun John, Editing by Shri Navaratnam and Ed Osmond)

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Bitcoin recovers, climbs 7.6% to pass $20,400

By Tina Bellon

(Reuters) – Bitcoin on Sunday rose around 7.6% to $20,404 from its previous close, signaling a recovery from a sharp drop on Saturday.

Bitcoin, the world’s biggest and best-known cryptocurrency, is now up 16.7% from this year’s low of $17,592.78 on June 18, when it tumbled on investor worries about growing troubles in the crypto industry and amid a general pull-back from riskier assets.

Andrew Brenner, head of international fixed income at National Alliance Securities, on Sunday said the rise in Bitcoin was likely the result of retail investors buying up the digital currency over the weekend, when few professional traders are working.

“Some buyers think now is a good time to get in because Bitcoin got down to a level which shows some near-term attractiveness,” Brenner said. He added that Bitcoin and other digital currencies remained extremely volatile.

Ether, the coin linked to the ethereum blockchain network, on Sunday rose more than 13% to $1,131 from its previous close on Saturday, which at $993 marked Ether’s lowest price since the beginning of this year.

The sell-off in the crypto market has coincided with an equities slide, as U.S. stocks suffered their biggest weekly percentage decline in two years on fears of rising interest rates and the growing likelihood of a recession.

Brenner said digital currencies were not a good investment at a time when the U.S. Federal Reserve tightens the supply of dollars by ending expansive monetary policy.

“As long as the dollar continues to show strength, digital currencies is not where you want to be,” Brenner said.

(Reporting by Akriti Sharma in Bengaluru and Tina Bellon in Austin, Texas; Editing by Nick Zieminski)

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Bitcoin drops 6.5% to below $20,000

(Reuters) – Bitcoin dropped 6.53% to $19,106.37 at 0734 GMT on Saturday, losing $1,334.33 from its previous close.

Earlier in the day, it sank as far as $19,047.61, its lowest point since December 2020.

Bitcoin is down 59% this year, while ether is down 73%.

(Reporting by Jahnavi Nidumolu in Bengaluru; Editing by Andrew Heavens)

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Babel Finance suspends withdrawals as crypto markets slump

(Reuters) – Hong Kong-based Babel Finance temporarily suspended the withdrawals and redemption of crypto assets on Friday, as the crypto lender scrambles to pay its clients after the recent slump in the digital currency market.

Cryptocurrency valuations have plunged in recent weeks as investors dump risky assets in a rising rate environment, with bitcoin, which reached a record high of $69,000 in November, having lost more than half its value this year.

“Recently, the crypto market has seen major fluctuations, and some institutions in the industry have experienced conductive risk events. Due to the current situation, Babel Finance is facing unusual liquidity pressures,” the company said.

Crypto lenders gather crypto deposits from retail customers and re-invest them, proclaiming double-digit returns and attracting tens of billions of dollars in assets. However, the recent meltdown has lenders unable to redeem their clients’ assets.

Babel, which has 500 clients and limits itself to bitcoin, ethereum and stablecoins, raised $80 million in a funding round last month, valuing it at $2 billion. It had ended last year with $3 billion of loan balances on its balance sheet.

Earlier this week, U.S.-based retail crypto lending platform Celsius Network froze withdrawals and transfers between accounts “to stabilize liquidity” as the collapse of cryptocurrency TerraUSD in May triggered a rise in redemptions.

(Reporting by Sameer Manekar in Bengaluru; Editing by Amy Caren Daniel)

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Elon Musk sued for $258 billion over alleged Dogecoin pyramid scheme

By Jonathan Stempel

NEW YORK (Reuters) – Elon Musk was sued for $258 billion on Thursday by a Dogecoin investor who accused him of running a pyramid scheme to support the cryptocurrency.

In a complaint filed in federal court in Manhattan, plaintiff Keith Johnson accused Musk, electric car company Tesla Inc and space tourism company SpaceX of racketeering for touting Dogecoin and driving up its price, only to then let the price tumble.

Musk is CEO of both Tesla and SpaceX.

“Defendants were aware since 2019 that Dogecoin had no value yet promoted Dogecoin to profit from its trading,” the complaint said. “Musk used his pedestal as World’s Richest man to operate and manipulate the Dogecoin Pyramid Scheme for profit, exposure and amusement.”

The complaint also aggregates comments from Warren Buffett, Bill Gates and others questioning the value of cryptocurrency.

Tesla, SpaceX and a lawyer for Musk did not immediately respond to requests for comment.

A lawyer for Johnson did not immediately respond to requests for comment on what specific evidence his client has or expects to have that proves Dogecoin is worthless and the defendants ran a pyramid scheme.

Johnson is seeking $86 billion in damages, representing the decline in Dogecoin’s market value since May 2021, and wants it tripled.

He also wants to block Musk and his companies from promoting Dogecoin and a judge to declare that trading Dogecoin is gambling under federal and New York law.

The complaint said Dogecoin’s selloff began around the time Musk hosted the NBC show “Saturday Night Live and, playing a fictitious financial expert on a “Weekend Update” segment, called Dogecoin “a hustle.”

Tesla in February 2021 said it had bought $1.5 billion of bitcoin and for a short time accepted it as payment for vehicles.

Dogecoin traded at about 5.8 cents on Thursday, down from its May 2021 peak of about 74 cents.

The case is Johnson v. Musk et al, U.S. District Court, Southern District of New York, No. 22-05037.

(Reporting by Jonathan Stempel in New York; Editing by Leslie Adler)

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Analysis-U.S. crypto-lending firms likely to see greater regulation after Celsius troubles

By Hannah Lang and Katanga Johnson

WASHINGTON (Reuters) – Liquidity troubles at crypto lending platform Celsius Network, which have left its 1.7 million customers unable to redeem their assets, will increase U.S. regulatory pressure on the sector, which was already on the defensive amid other crises this year.

The industry has been battling scrutiny over concerns that digital assets are being used to evade sanctions on Russia and the May collapse of cryptocurrency TerraUSD, which sent the market plunging and raised systemic risk worries.

New Jersey-based Celsius’s move this week to freeze withdrawals, citing “extreme” market conditions, has spotlighted other problems with the crypto sector: weak investor safeguards.

Securities regulators in Alabama, Kentucky, New Jersey, Texas and Washington have opened an investigation into the Celsius decision, the director of enforcement for the Texas State Securities Board told Reuters on Thursday.

Crypto executives say recent problems show U.S. regulators have been too slow to provide the clarity necessary to protect everyday Americans, but they expect that to change fast.

“We are now seeing the consequences of regulators failing to provide clarity,” said Perianne Boring, founder and CEO of the Chamber of Digital Commerce. “I am hopeful that recent events will accelerate efforts to deliver clearer policies to the industry and certainty to those who invest in digital assets.”

Recent turmoil in the cryptocurrency market underscores the “urgent need” for regulatory frameworks that reduce digital asset risks, a U.S. Treasury official said on Thursday.

Crypto lenders gather crypto deposits from retail customers and re-invest them. Sometimes touting double-digit returns, such products have attracted tens of billions of dollars in assets. As its investments soured amid the crypto market slump, however, Celsius was unable to meet redemptions.

Unlike traditional financial firms, crypto lenders operate in a regulatory grey area which means their deposits are not insured by the government, a risk Celsius discloses on its website. Like many peers, Celsius has not registered with the Securities and Exchange Commission (SEC), meaning it was subject to few risk management, capital and disclosure rules.

As a result, its customers had little visibility over how it was investing their assets, and it’s unclear if they will get them back.

“At bare minimum, depositors/investors need to understand the risks they are taking,” said Todd Phillips, director of financial regulation at the Center for American Progress, a Washington think tank.

Celsius CEO Alex Mashinsky tweeted on Wednesday that the company was focused on customer concerns.

While bank regulators believe they need Congress to give them oversight of crypto companies, securities regulators had begun cracking down on lending products over the past year or so.

To be sure, Celsius has been on their radar. In September, regulators in Kentucky, New Jersey and Texas hit Celsius with a cease and desist order, arguing its interest bearing products should be registered as a security.

The SEC meanwhile last year blocked a Coinbase Global Inc plan to launch a lending product and sued lending platform BitConnect for fraud.

In February, the SEC and state regulators fined BlockFi $100 million for failing to register its crypto lending product. The SEC said the deal should provide a roadmap for other crypto lenders to register their products, although its unclear how many companies are poised to follow.

The SEC and regulators in Kentucky, New Jersey, and Texas did not immediately respond to request for comment on Thursday. On Tuesday, SEC chair Gary Gensler warned that some crypto product returns my be “too good to be true.”

Registering crypto lending products would not eliminate all risks to investors, but would increase transparency around such products and ensure some risk management controls, said experts.

Many companies, though, want to avoid that burden, putting the onus on regulators to bring enforcement actions, which take years to build. Still, lawyers said the SEC would likely increase such efforts.

“Given the SEC’s general aggressiveness under Gensler…the agency is likely combing through the statutes to find claims that can be brought regarding crypto lending,” said Howard Fischer, a partner at law firm Moses & Singer.

Some industry executives welcome more regulation, which would see the best companies rise to the top. In February, rating agency Fitch said increased disclosures and requirements would be “credit positive” for the lending sector.

“Investors wants to know that their assets are secure,” said Mike Belshe, CEO of BitGo, a digital asset trust company. “We’re going to see a shakeout of healthy companies that manage risk well.”

(Writing by Michelle Price; Additional reporting by Andrea Shalal in Washington; Editing by Nick Zieminski)

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Exclusive-Texas securities regulator is probing Celsius account freeze – official

WASHINGTON (Reuters) – The Texas State Securities Board has opened an investigation into crypto lender Celsius Network’s decision this week to suspend customer redemptions, its director of enforcement Joseph Rotunda told Reuters on Thursday.

“The team met and began investigating the freezing of accounts first thing on Monday morning,” Rotunda said in an email, adding he considered the probe to be a “priority.”

“I am very concerned that clients – including many retail investors – may need to immediately access their assets yet are unable to withdraw from their accounts. The inability to access their investment may result in significant financial consequences.”

(Reporting by Michelle Price; Editing by Richard Chang)