(Reuters) – Bitcoin rose 5.54% to $19,897 at 22:13 GMT on Friday, adding $1,044 to its previous close.
Bitcoin, the world’s biggest and best-known cryptocurrency, is up 20.6% from the year’s low of $16,496 on Jan. 1.
Ether, the coin linked to the ethereum blockchain network, rose 2.98% to $1,458.8 on Friday, adding $42.2 to its previous close.
(Reporting by Siddharth Jindal in Bengaluru; Editing by Chris Reese)
By Luc Cohen and Jody Godoy
NEW YORK (Reuters) – Several FTX employees have turned to law firm Covington & Burling to help them deal with questions from U.S. authorities investigating the collapse of the cryptocurrency exchange and actions by its founder Sam Bankman-Fried, three people familiar with the matter told Reuters.
Arlo Devlin-Brown, a New York-based Covington partner and former Manhattan federal prosecutor, is acting as so-called pool counsel representing current FTX employees as individuals being asked to share information with prosecutors and regulators, said the people, who spoke on the condition of anonymity.
Companies facing wide-ranging investigations often hire pool counsel for employees. The use of pool counsel suggests that federal prosecutors in Manhattan probing FTX’s collapse may be interested in questioning a deep roster of employees.
Bankman-Fried, 30, was arrested in December on charges of stealing customer funds to plug losses at his hedge fund, Alameda Research, and lying to investors and lenders.
The one-time billionaire pleaded not guilty. Two close associates pleaded guilty and agreed to cooperate with prosecutors. Damian Williams, the top federal prosecutor in Manhattan, has urged others with knowledge of wrongdoing to come forward.
“It’s nerve-wracking to participate in an interview with the FBI and the U.S. Attorney’s office, regardless of your personal exposure,” said Sarah Krissoff, a former federal prosecutor in Manhattan and now a partner at Day Pitney.
Employers pay for pool counsel, which represents employees who tend not to have significant exposure to criminal charges themselves, but may be unnerved by the process of speaking with authorities, Krissoff explained.
The use of pool counsel enables a single legal team to gain expertise in the case, making it more efficient than having each employee retain individual lawyers, Krissoff said. She added that pool counsel must be swift to identify potential conflicts among their clients and urge individuals to find their own attorneys when appropriate.
The arrangement does not mean Covington is representing FTX, which has turned to Sullivan & Cromwell, another law firm.
FTX declared bankruptcy on Nov. 11 after a wave of customer withdrawals spurred by concerns the exchange had commingled funds with Alameda.
Many former FTX executives, including its former top lawyer Daniel Goldberg, have hired their own lawyers to guide them through the process of potentially cooperating with prosecutors.
Reuters could not determine how many FTX employees are being represented by Covington, nor what information – if any – the employees have provided to prosecutors, the Securities and Exchange Commission or the Commodity Futures Trading Commission, which are all investigating.
Spokesmen for Covington, Bankman-Fried and the U.S. Attorney’s office in Manhattan all declined to comment. FTX did not respond to a request for comment.
Devlin-Brown joined Covington in 2016 following nearly 11 years at the U.S. Attorney’s office in Manhattan. As a member of the office’s securities and commodities fraud unit he prosecuted Steven Cohen’s hedge fund SAC Capital Advisors, which pleaded guilty to insider trading.
He was later promoted to chief of the office’s public corruption unit, where he oversaw the cases against former top New York State legislators Sheldon Silver and Dean Skelos, who were convicted on corruption charges.
FTX is now run by corporate restructuring expert John Ray, who oversaw the liquidation of Enron. Ray has met with prosecutors, sources told Reuters in December.
In a Nov. 17 statement filed in bankruptcy court, Ray wrote that FTX needed employees to stay on to help “establish accountability, preserve value and maximize stakeholder recoveries.”
(Reporting by Luc Cohen and Jody Godoy in New York; Additional reporting by Angus Berwick in London and Dietrich Knauth in New York; editing by Amy Stevens and David Gregorio)
By Elizabeth Howcroft
LONDON (Reuters) – Chinese crypto entrepreneur Justin Sun is willing to spend $1 billion of his own funds on buying assets belonging to Digital Currency Group (DCG), the parent company of embattled crypto lender Genesis, Sun told Reuters.
Genesis froze customer withdrawals in November and said it was trying to avoid a bankruptcy filing. It owes its creditors more than $3 billion, according to a person familiar with the matter.
Genesis’ owner, DCG, is also the parent company of several high-profile crypto firms, including crypto asset manager Grayscale, and its website lists more than 160 companies in its venture capital portfolio. DCG is considering offloading parts of that portfolio to raise money, the Financial Times reported on Thursday.
Sun told Reuters in an interview he would be willing to spend up to $1 billion to buy some of DCG’s assets, “depending on their evaluation of the situation”.
Sun did not specify which assets he was considering buying.
His spokesperson did not disclose details of Sun’s wealth, but said it consisted of crypto and traditional currencies.
Digital Currency Group declined to comment.
Sun is the founder of a blockchain network called TRON and an advisor to the crypto exchange Huobi, which last week announced plans to lay off about 20% of its staff.
High-profile crypto players have in the past publicly expressed interest in buying other firms or their assets when there were market concerns about those firms’ financial health, but such deals do not necessarily materialize.
When major crypto exchange FTX faced a rush of investor withdrawals in November, Binance said it had signed a no-nbinding agreement to buy FTX’s non-U.S. unit. A day later Binance said it dropped the plan after doing due diligence.
As FTX sought emergency funding, Bloomberg reported that Sun said he was prepared to provide “billions” in aid. That deal also did not take place.
(Reporting by Elizabeth Howcroft; Editing by Tomasz Janowski)
(Reuters) – Singapore-based crypto exchange Crypto.com said on Friday it had decided to reduce global workforce by approximately 20%.
The announcement comes after Coinbase Global Inc said on Tuesday it would cut about 950 jobs, or 20% of its workforce, as part of a restructuring plan.
(Reporting by Rhea Binoy in Bengaluru; Editing by Rashmi Aich)
By Elizabeth Howcroft
LONDON (Reuters) – Illicit use of cryptocurrencies hit a record $20.1 billion last year as transactions involving companies targeted by U.S. sanctions skyrocketed, data from blockchain analytics firm Chainalysis showed on Thursday.
The cryptocurrency market floundered in 2022, as risk appetite diminished and various crypto firms collapsed. Investors were left with large losses and regulators stepped up calls for more consumer protection.
Even as overall crypto transaction volumes fell, the value of crypto transactions related to illicit activity rose for the second year running, Chainalysis said.
Transactions associated with sanctioned entities increased more than 100,000-fold in 2022 and made up 44% of last year’s illicit activity, Chainalysis said.
Funds received by the Russian exchange Garantex, which was sanctioned by the U.S. Treasury Department in April, accounted for “much of 2022’s illicit volume”, Chainalysis said, adding that most of that activity is “likely Russian users using a Russian exchange.” A spokesperson for Chainalysis said wallets are tagged as “illicit” if they are part of a sanctioned entity.
Garantex did not immediately respond to an emailed request for comment.
The United States also imposed sanctions last year on cryptocurrency mixing services Blender and Tornado Cash, which it said were being used by hackers, including from North Korea, to launder billions of dollars worth of proceeds from their cyber crimes.
The volume of stolen crypto funds rose 7% last year, but other illicit crypto transactions including those related to scams, ransomware, terrorism financing and human trafficking, saw volumes fall.
“The market downturn may be one reason for this,” Chainalysis said. “We’ve found in the past that crypto scams, for instance, take in less revenue during bear markets.”
Chainalysis said its $20.1 billion estimate only includes activity recorded on blockchain, and excludes “off-chain” crime such as fraudulent accounting by crypto firms.
The figure also excludes when cryptocurrencies are the proceeds of non-crypto-related crimes, such as when cryptocurrency is used as a means of payment in drug trafficking, Chainalysis said.
“We have to stress that this is a lower bound estimate – our measure of illicit transaction volume is sure to grow over time,” the report said, noting that the figure for 2021 was revised to $18 billion from $14 billion as more scams were discovered.
(Reporting by Elizabeth Howcroft; Editing by Tomasz Janowski)
By Chris Prentice and Hannah Lang
NEW YORK/WASHINGTON (Reuters) – The U.S. Securities and Exchange Commission (SEC) on Thursday said it has charged Genesis Global Capital LLC and Gemini Trust Company LLC with illegally selling securities to hundreds of thousands of investors through their crypto lending program.
Genesis, a part of Digital Currency Group, entered into a deal with Gemini in December 2020 to offer Gemini customers the chance to loan their crypto assets to Genesis in exchange for earning interest, the SEC said. Beginning in February 2021, they raised billions of dollars’ worth of crypto assets from investors, the SEC said.
The firms violated securities laws through the offer and sale of crypto assets through their Gemini Earn product, the SEC said.
In December 2022, Genesis told investors they could not withdraw their crypto assets as volatility in the crypto markets prompted a liquidity crunch. At the time, Genesis had about $900 million in assets from 340,000 investors. The investors have been unable to withdraw their assets, the regulator said.
Investigations into other, related violations are ongoing, the agency said.
In February 2022, a subsidiary of rival crypto firm BlockFi Inc. agreed to pay $100 million to the SEC and 32 states to settle charges related to their offering of a similar interest-bearing product.
(Reporting by Chris Prentice and Hannah Lang; Editing by Daniel Wallis)
By Jonathan Stempel and Luc Cohen
NEW YORK (Reuters) – Eight major media outlets on Thursday asked the U.S. judge overseeing Sam Bankman-Fried’s criminal case to make public the names of two people who helped guarantee the FTX cryptocurrency exchange founder’s $250 million bond.
Saying the public interest “cannot be overstated,” lawyers for the outlets, including Reuters, said the public’s right to know Bankman-Fried’s guarantors outweighed their privacy and safety rights.
In a letter to U.S. District Judge Lewis Kaplan in Manhattan, the lawyers distinguished the case from another judge’s December 2020 decision not to reveal who guaranteed a bond for British socialite Ghislaine Maxwell, then accused and later convicted of aiding in financier Jeffrey Epstein’s sex crimes.
“While Mr. Bankman-Fried is accused of serious financial crimes, a public association with him does not carry nearly the same stigma as with the Jeffrey Epstein child sex trafficking scandal,” lawyers for the outlets wrote.
Media seeking to identify Bankman-Fried’s sureties also include the Associated Press, Bloomberg, CNBC, Wall Street Journal publisher Dow Jones, the Financial Times, Insider and the Washington Post. The New York Times has asked separately for the names.
A spokesman for Mark Cohen and Christian Everdell, who represent Bankman-Fried, declined to comment. Cohen and Everdell also represented Maxwell in her criminal case.
In seeking to keep the sureties’ names under wraps, Bankman-Fried’s lawyers said their client’s parents, who co-signed the $250 million bond, had been harassed and received physical threats since FTX’s early November collapse and bankruptcy.
The lawyers said there was “serious cause for concern” the additional sureties might suffer similar treatment if their names went public.
Bankman-Fried has pleaded not guilty to criminal charges that he looted billions of dollars at FTX, in part by diverting customer deposits to support his Alameda Research hedge fund, buy real estate, and make political donations.
His parents, Joseph Bankman and Barbara Fried, are Stanford Law School professors. Bankman, who has not been accused of wrongdoing, has hired his own lawyer in the case, according to a person familiar with the matter.
(Reporting by Jonathan Stempel and Luc Cohen in New York; editing by Jonathan Oatis)
(Reuters) – Bitcoin rose 6% to $19,005 at 21:04 GMT on Thursday, adding $1,075 to its previous close.
Bitcoin, the world’s biggest and best-known cryptocurrency, is up 15.2% from the year’s low of $16,496 on Jan. 1.
Ether, the coin linked to the ethereum blockchain network, rose 3.06% to $1,432.8 on Thursday, adding $42.6 to its previous close.
(Reporting by Siddharth Jindal in Bengaluru; Editing by Chris Reese)
By Chris Prentice, Angus Berwick and Luc Cohen
(Reuters) – The father of FTX founder Sam Bankman-Fried has retained a New York attorney in recent weeks, a source familiar with the matter told Reuters, as prosecutors probe Bankman-Fried’s alleged cryptocurrency fraud scheme.
Joseph Bankman, a tax law professor at Stanford Law School, has tapped Sean Hecker of Kaplan Hecker and Fink LLP, the source said.
Hecker, who focuses on white collar crime, previously represented a former top foreign exchange trader at Barclays accused of an alleged multi-billion-dollar fraud scheme. In a rare move, a federal judge tossed out that case immediately after prosecutors presented it.
Bankman had closely advised his son ever since Bankman-Fried launched his hedge fund Alameda Research in 2017, according to three former FTX executives. In his later consulting work for FTX, Bankman helped arrange meetings in Washington for his son, the sources said.
Bankman is cooperating with prosecutors, the source said, without elaborating. Reuters could not determine what information, if any, Bankman had given prosecutors. A spokesperson for Bankman declined to comment for this article. Bankman could not be reached for comment by phone and email.
While it is unclear if prosecutors view Bankman as having any personal liability in the alleged fraud scheme, the scrutiny of the case highlights that the net of individuals caught up in the FTX scandal is wide. Bankman-Fried, who was arrested and released on bail, has pleaded not guilty to fraud charges and is due to go to trial in October.
A spokeperson for the DOJ declined to comment about Bankman.
The Justice Department, Securities and Exchange Commission and Commodity Futures Trading Commission filed charges against Bankman-Fried last month. He is accused of diverting billions of dollars in FTX client deposits to Alameda to bankroll venture investments, luxury real estate purchases, and political donations.
He clinched a bail deal with prosecutors late last month that saw him released from jail in exchange for a $250-million bond, secured against his parents’ property. The deal required Bankman-Fried to remain in confinement with Bankman and his mother Barbara Fried at their home in Palo Alto, California.
Two other former top associates, former Alameda chief executive Caroline Ellison and former FTX chief technology officer Gary Wang, have both pleaded guilty to defrauding investors and agreed to cooperate.
Bankman was closely involved at Alameda and FTX, the former executives said. In 2017, he personally recruited Daniel Friedberg, who became FTX’s long-time top lawyer, one of the people said. Reuters reported last week that Friedberg had cooperated with prosecutors. He also accompanied Bankman-Fried in the Bahamas in early November while his son tried to secure emergency funding.
Both Bankman-Fried’s parents, as well as senior executives of the failed crypto exchange, bought properties in the Bahamas over the last two years, Reuters has previously reported. At the time, a spokesperson for the two said only that they had been trying to return the property to FTX.
Bankman’s spokesperson declined to comment when asked about the status of those properties.
(Reporting by Angus Berwick in London and Chris Prentice and Luc Cohen in New York; Editing by Megan Davies and Anna Driver)
By Luc Cohen
NEW YORK (Reuters) – Sam Bankman-Fried said he did not steal money and blamed the collapse of his now-bankrupt FTX exchange on a broad crash in cryptocurrency markets, in a highly unusual blog post on Thursday, a month after his arrest on U.S. fraud charges.
Federal prosecutors in Manhattan last month said Bankman-Fried stole billions of dollars from FTX customers to pay debts for his crypto-focused hedge fund, Alameda Research, purchase lavish real estate, and donate to U.S. political campaigns.
He has pleaded not guilty.
“I didn’t steal funds, and I certainly didn’t stash billions away,” Bankman-Fried wrote in the blog published on Substack, in a rare public statement by a U.S. criminal defendant.
Defense lawyers typically advise clients to stay silent before trial because prosecutors may use their comments against them in court. His trial is scheduled to start on Oct. 2, 2023.
A spokesman for Bankman-Fried declined to comment.
In the post, Bankman-Fried did not directly address many of the other charges brought against him by federal prosecutors in Manhattan last month, namely that he misled investors and lenders about the financial conditions of FTX and Alameda.
He wrote that Alameda failed to hedge against an “extreme” crash in the crypto markets, which ultimately came to pass last year.
“As Alameda became illiquid, FTX International did as well, because Alameda had a margin position open on FTX,” Bankman-Fried wrote.
The 30-year-old onetime billionaire also said FTX’s U.S. wing is “fully solvent” and that its international unit has many billions of dollars in assets.
“If it were to reboot I believe there is a real chance that customers could be made substantially whole,” he wrote.
Last month, two of his closest associates pleaded guilty to defrauding the trading platform’s customers and agreed to cooperate with prosecutors’ investigation.
Caroline Ellison, Alameda’s former chief executive, said in her plea hearing that Bankman-Fried and other FTX executives received billions of dollars in secret loans from Alameda.
Bankman-Fried was released on a $250 million bond in December and put under house arrest at his parents’ Palo Alto, California home, which was pledged as collateral for his return to court.
(Reporting by Luc Cohen in New York; editing by Amy Stevens and Himani Sarkar)
By Nelson Renteria
SAN SALVADOR (Reuters) – El Salvador, which became the first country in the world to recognize bitcoin as a legal tender two years ago, approved on Wednesday a law that would regulate the issuance of other digital assets by both the state and private entities.
The bill, backed by ruling party lawmakers allied with President Nayib Bukele, aims to attract national and foreign investors while creating new financing opportunities for citizens, companies and the government.
Lawmakers in the unicameral Congress dominated by Bukele’s New Ideas party passed the proposal in an overwhelming majority vote of 62 in favor and only 16 opposed.
“The purpose of this law is to establish the legal framework that grants legal certainty to transfer operations to any title of digital assets used in public issuance offers,” according to the legislation.
Public offerings may be made by issuers using existing digital assets, with the opportunity to create new ones through them, the law indicates.
The law also establishes the creation of the National Commission for Digital Assets and the Bitcoin Funds Administration Agency, which will be in charge of managing, safeguarding, and investing the funds from public offerings of digital assets carried out by the government.
The provisions of the law are not applicable to digital currencies issued by central banks of any country or territory, whether so-called fiat currency issued by those banks or crypto-currencies.
It also would not apply to digital assets that by law are legal tender such as bitcoin, in addition to the video game ecosystem or Non-Fungible Tokens.
Bukele’s office did not immediately respond to a request for comment asking whether the new legislation would apply to the launch of bitcoin volcano bonds that the president announced in late 2021.
Nonetheless, President Bukele shared on Twitter a message from the country’s bitcoin office saying the law also paves the way for volcano bonds to be issued soon.
(Reporting by Nelson Renteria; Editing by Ana Isabel Martinez; editing by Diane Craft)
By Dietrich Knauth and Tom Hals
NEW YORK/WILMINGTON, Del. (Reuters) – Crypto exchange FTX has recovered more than $5 billion but the extent of customer losses in its collapse is still unknown, an attorney for the bankrupt company founded by Sam Bankman-Fried said on Wednesday.
The company, which was valued a year ago at $32 billion, filed for bankruptcy in November and U.S. prosecutors accused Bankman-Fried of orchestrating an “epic” fraud that may have cost investors, customers and lenders billions of dollars.
“We have located over $5 billion of cash, liquid cryptocurrency and liquid investment securities,” Andy Dietderich, an attorney for FTX, told a U.S. bankruptcy judge in Delaware at the start of Wednesday’s hearing.
Dietderich also said that the company plans to sell non-strategic investments that had a book value of $4.6 billion.
However, Dietderich said the legal team is still working to create accurate internal records and the actual customer shortfall remains unknown. The U.S. Commodities Futures Trading Commission has estimated missing customer at more than $8 billion.
Dietderich said the $5 billion recovered does not include assets seized by the Securities Commission of the Bahamas, where Bankman-Fried was located.
FTX’s attorney estimated the seized assets were worth as little as $170 million while Bahamian authorities put the figure as high as $3.5 billion. The seized assets are largely composed of FTX’s proprietary and illiquid FTT token, which is highly volatile in price, Dietderich said.
SELLING AFFILIATES
FTX’s legal team was in court on Wednesday to seek approval for procedures to sell affiliates LedgerX, Embed, FTX Japan and FTX Europe. FTX also wants approval from U.S. Bankruptcy Judge John Dorsey in Delaware to keep customer names secret for at least six months.
FTX’s founder, Sam Bankman-Fried, 30, was indicted on two counts of wire fraud and six conspiracy counts last month in Manhattan federal court for allegedly stealing customer deposits to pay debts from his hedge fund, Alameda Research, and lying to equity investors about FTX’s financial condition. He has pleaded not guilty.
The four companies FTX intends to sell are relatively independent from the broader FTX group, and each has its own segregated customer accounts and separate management teams, according to FTX court filings.
The crypto exchange has said it is not committed to selling any of the companies, but that it received dozens of unsolicited offers and plans to hold auctions beginning next month.
The U.S. Trustee, a bankruptcy watchdog that is part of the Department of Justice, has opposed selling the affiliates before the extent of the alleged FTX fraud is fully investigated.
In addition to selling affiliates, a company lawyer on Wednesday said FTX will end its seven-year sponsorship deal with the League of Legends video game, which started in 2021.
Bankman-Fried has acknowledged shortcomings in FTX’s risk management practices, but the one-time billionaire has said he does not believe he is criminally liable.
In addition to customer funds lost, the collapse of the company has also likely wiped out equity investors.
Some of those investors were disclosed in a Monday court filing, including American football star Tom Brady, Brady’s former wife supermodel Gisele Bündchen and New England Patriots owner Robert Kraft.
(Reporting by Dietrich Knauth in New York and Tom Hals in Wilmington, Del.; Editing by Alexia Garamfalvi,l Matthew Lewis and Mark Porter)
By Dietrich Knauth
(Reuters) – Bankrupt crypto lender Voyager Digital received initial court approval on Tuesday for a proposed $1 billion sale of its assets to Binance.US, and said it will seek to expedite a U.S. national security review of the deal.
U.S. Bankruptcy Judge Michael Wiles in New York allowed Voyager to enter into an asset purchase agreement with Binance.US and to solicit creditor votes on the sale, which will not become final until a future court hearing.
Voyager attorney Joshua Sussberg said during Tuesday’s court hearing that Voyager was responding to concerns raised over the holidays by the U.S. Committee on Foreign Investment in the United States (CFIUS), an interagency body that vets foreign investments into U.S. companies for national security risks. He said Voyager intends to address any issues that would lead CFIUS to oppose the transaction.
“We are coordinating with Binance and their attorneys to not only deal with that inquiry, but to voluntarily submit an application to move this process along,” Sussberg said.
CFIUS said in a Dec. 30 court filing that its review “could affect the ability of the parties to complete the transactions, the timing of completion, or relevant terms.”
The Binance transaction includes a $20 million cash payment and an agreement to transfer Voyager’s customers to Binance.US’s crypto exchange, Sussberg said. Customers would then be able to make withdrawals for the first time since July.
Voyager estimates the sale will allow customers to recover 51% of the value of their deposits at the time of Voyager’s bankruptcy filing.
If CFIUS blocks the transaction, Voyager will be forced to repay customers with the crypto it has on hand, resulting in a lower payout for Voyager users, Sussberg said.
Washington has increasingly used CFIUS to stymie Chinese investment in the United States.
Binance is owned by Changpeng Zhao, a Chinese-born Canadian citizen, and has no permanent headquarters. The company has been the subject of a money laundering probe by U.S. prosecutors. Binance.US, based in Palo Alto, California, has said that its separate American exchange is “fully independent” of the main Binance platform.
In addition to CFIUS, Voyager’s proposed sale was also opposed by the U.S. Securities Exchange Commission and state securities regulators. Glenn allowed Voyager to proceed despite those objections, saying that the securities regulators will be allowed to object to final approval of the sale in the future.
Voyager filed for bankruptcy in July, months after the crash of major crypto tokens TerraUSD and Luna sent shockwaves across the digital asset industry.
Voyager initially planned to sell its assets to FTX Trading, but that deal imploded when FTX went bankrupt in November amid a frenzy of customer withdrawals and fraud allegations that led to the arrest of founder Sam Bankman-Fried.
(Reporting by Dietrich Knauth; Editing by David Gregorio and Josie Kao)
By Luc Cohen
NEW YORK (Reuters) – The brother of a former Coinbase Global Inc product manager was sentenced on Tuesday to 10 months in prison after pleading guilty in September to a wire fraud conspiracy charge, in what U.S. prosecutors have called the first insider trading case involving cryptocurrency.
Nikhil Wahi admitted last year that he made trades based on confidential Coinbase information. Federal prosecutors in Manhattan say Ishan Wahi, the former product manager, shared confidential information with his brother and their friend Sameer Ramani about new digital assets Coinbase was planning to let users trade.
Ishan Wahi has pleaded not guilty. Ramani, who was also charged, is at large.
U.S. District Judge Loretta Preska handed down the sentence.
The sentencing comes as U.S. prosecutors and regulators ramp up their scrutiny of cryptocurrency companies and executives. Last month, FTX founder Sam Bankman-Fried was charged with eight counts of fraud and conspiracy over the collapse of the now-bankrupt exchange, a Coinbase rival.
Bankman-Fried has pleaded not guilty. Two of his closest associates, Caroline Ellison and Gary Wang, have pleaded guilty and agreed to cooperate with prosecutors.
The crypto sector is also struggling, after a plunge last year in the value of bitcoin and other digital assets due to rising interest rates and worries of an economic downturn.
Earlier on Tuesday, Coinbase – one of the world’s largest cryptocurrency exchanges – said it would cut 950 employees – about 20% of its workforce – in a third round of layoffs since last year.
Prosecutors had recommended Nikhil Wahi be sentenced to between 10 and 16 months in prison, arguing that he earned nearly $900,000 in profits from the scheme. His defense lawyers had proposed he be spared prison time, arguing he was motivated by his desire to repay his parents for funding his college education and that he had never been arrested before.
(Reporting by Luc Cohen in New York; Editing by Lisa Shumaker)
(Reuters) – Coinbase Global Inc said on Tuesday it will reduce its workforce by about 950 employees as part of a restructuring plan, in a third round of layoffs for the cryptocurrency exchange since last year.
The company said it expects to incur about $149 million to $163 million in restructuring expenses. Its shares reverse coursed to fall 2.3% premarket after rising more than 5% on the layoffs announcement earlier.
Last year, rising interest rates and worries of an economic downturn wiped out more than a trillion dollars from the crypto sector. The slump also forced key industry players such as Three Arrows Capital and Celsius Network to shut shop.
However, the bigger blow came after larger crypto exchange FTX filed for bankruptcy protection in November. Its swift fall has sparked tough regulatory scrutiny of how major exchanges hold user funds.
“We also saw the fallout from unscrupulous actors in the industry, and there could still be further contagion,” Coinbase Chief Executive Brian Armstrong said in a blog post.
“We will be shutting down several projects where we have a lower probability of success.”
Coinbase said it had no additional comment on the projects it was planning to shelve.
The crypto world’s woes have continued this year, marked by plunging deposits, layoffs and multiple legal hurdles.
Last week, crypto lender Genesis also slashed 30% of its workforce in a second round of layoffs in less than six months.
Coinbase in November cut more than 60 jobs in its recruiting and institutional onboarding teams, after slashing 1,100 jobs, or 18% of its workforce, in June.
Shares in the company lost roughly 86% of their value last year, in line with the downturn in the fortunes of the sector.
(Reporting by Manya Saini in Bengaluru; Editing by Saumyadeb Chakrabarty, Shounak Dasgupta and Shinjini Ganguli)
By Lisa Pauline Mattackal
(Reuters) – Bitcoin’s looking steady in 2023. But it’s only been a week.
Cryptocurrencies have crept into the new year, licking their wounds after the carnage of 2022. The overall global crypto market cap has risen 5% to $871 billion since Jan. 1, but it’s still down over 57% from this time last year.
Bitcoin itself has gained 4.3% since the start of 2023, though stuck in a narrow range between $16,500 and $17,300. The world’s biggest cryptocurrency is eerily subdued, with its 7-day volatility dropping to levels not seen since October 2018, according to Refinitiv Eikon data.
“It will be a year for the patient, as we do not anticipate prices nearing former all-time highs in 2023,” said Vetle Lunde, senior analyst at Arcane Research.
Cryptocurrency spot trading volumes remain similarly muted after slumping about 48% in December versus the previous month to $544 billion, their lowest level since December 2019, CryptoCompare data showed.
While lower trading volumes are common around the turn of the year, the crypto market apathy has been exacerbated by a “general exodus” of active retail investors, according to Arcane Research.
For some market players, though, subdued sounds pretty good after the bitcoin bloodbath of 2022.
“I feel encouraged by the floor we’ve seen forming under bitcoin, it shows there’s a lot of demand around $16,000 and $17,000 levels,” said Callie Cox, investment analyst at investment platform eToro.
So what happens now?
Graphic: Calm on crypto front https://www.reuters.com/graphics/FINTECH-CRYPTO/WEEKLY/jnpwywelqpw/chart.png
THE BULL’S TALE
Marcus Sotiriou, analyst at digital asset broker GlobalBlock, pointed to tightening Bollinger bands – a technical indicator tracking price and volatility – on bitcoin charts.
The bands are at their tightest since July 2020, and such tightening has historically preceded aggressive moves to the upside for bitcoin, he added.
This possible scenario was echoed by Arcane Research’s Lunde.
“These low volatility periods rarely last for long, and volatility compression periods have previously tended to be followed by sharp moves, even in stagnant markets,” he said.
Additionally, funding rates for perpetual bitcoin futures have been positive since Dec. 19, according to Coinglass data, meaning traders are betting on prices to rise and will pay to keep their long positions open.
THE BEAR’S TALE
On the other hand, cryptocurrencies remain at the mercy of macroeconomic headwinds as worries whirl around a slowing global economy.
“The weaker economic outlook means people have less disposable income to invest in what they deem as risky assets like crypto,” said GlobalBlock’s Sotiriou.
Economic uncertainty could send investors running for the safety of the U.S. dollar, which tends to be inversely correlated to bitcoin, said Dalvir Mandara, quantitative researcher at MacroHive.
“The macro backdrop is still bearish for crypto,” Mandara added in a note on Thursday.
Meanwhile, crypto corporates face the fallout from the collapse of Sam Bankman-Fried’s FTX exchange.
Some major firms have started laying off employees in a bid to save costs, while Silvergate Bank reported an $8 billion drop in crypto-related deposits which sent its shares plunging nearly 43%.
(Reporting by Lisa Pauline Mattackal in Bengaluru; Editing by Pravin Char)
By Carolina Mandl
NEW YORK (Reuters) – Hedge funds last year posted their worst performance since 2018, mainly dragged down by equities as portfolio managers struggled to place their bets amid market turmoil, industry data provider HFR said on Monday.
Overall, hedge funds fell 4.25% last year, according to the HFRI 500 Fund Weighted Composite Index, which tracks many of the biggest global hedge fund performances.
Equity hedge funds notched the worst performance in 2022 among the four main hedge funds categories tracked by HFR. Still, their 10.37% loss still managed to beat the S&P 500 , which fell 19.4% in its worst year since 2008.
Event-driven hedge funds, including those that bet on company mergers or restructurings, and relative value funds, which trade on asset price dislocations, also ended the year with losses of 5.04% and 0.9%, respectively.
Crypto hedge funds tanked 55.08%, after posting positive returns in only three months of the year. Despite their massive losses, crypto hedge funds account for a tiny part of the industry’s $3.8 trillion in assets.
While equity and crypto portfolio managers faced challenges last year, hedge fund investors found bright spots to get return. Macro hedge funds outperformed the industry, HFR showed. The HFRI Macro Index rose 9.31%, mainly driven by commodities, quantitative and trend following strategies, the data provider said.
“Investors need to look under the surface to understand the industry performance last year. Long-short hedge funds are the biggest asset-weighted part of the industry,” said Patrick Ghali, managing partner of hedge fund advisory firm Sussex Partners. “Overall, I believe it was a good year for hedge funds.”
Macro hedge funds trade globally a broad range of assets, such as bonds, currencies, rates, stocks and commodities. This allowed them to smartly place their bets amid asset price dispersion caused by rising interest rates and surging inflation.
Reuters reported earlier this year that investors consider macro hedge funds are likely to outperform the industry again this year, as a volatile environment for markets persists.
Last year’s turmoil also proved to be good for multi-strategy hedge funds, which are allowed to trade across different assets and markets. Kenneth Griffin’s Citadel posted gains of 38.1% in its flagship fund Wellington, while D.E Shaw’s Composite Fund went up 24.7% and Millennium rose 12.4%.
(Reporting by Carolina Mandl, in New York; Editing by Chris Reese and Lincoln Feast.)
By Dietrich Knauth
(Reuters) – Executives of bankrupt crypto lender BlockFi Inc have repaid an investor $15 million to settle a threatened lawsuit over the company’s cratering equity value in summer 2022, the company’s attorneys said Monday in bankruptcy court.
The settlement resolved claims by the investor, identified only as “Counterparty A,” who had purchased equity shares that were issued as part of executive compensation packages, BlockFi attorney Joshua Sussberg said at a bankruptcy court hearing in Trenton, New Jersey.
The shares were sold at a discount to the company’s January 2022 valuation of $6 billion to $8 billion, but their value plummeted over the summer as the collapse of two cryptocurrencies caused widespread havoc in crypto markets.
The BlockFi investor threatened to sue, alleging that BlockFi and its executives should have been more transparent about contagion risks in the cryptocurrency market, according to Sussberg.
BlockFi believed the investor’s claims were “specious,” but it reached a confidential settlement on Aug. 23 under which BlockFi executives repaid $15 million to the investor, Sussberg said.
The largest payment under that settlement was made by BlockFi founder Zac Prince, who repaid $6.144 million.
BlockFi’s dramatic decline in value was made apparent by an emergency loan extended by crypto exchange FTX on July 1. That loan gave FTX an option to buy BlockFi for $240 million, essentially setting a maximum value for existing equity.
As the company’s value plummeted, BlockFi laid off 20% of its employees. BlockFi will soon seek court approval of an employee bonus package intended to keep remaining staff from fleeing during its bankruptcy and to compensate employees who had previously received company equity as part of their pay, Sussberg said.
FTX’s buyout price meant that Prince’s equity stake lost $412.82 million in value, and caused him to miss out on a planned $600,000 bonus payment, Sussberg said. Prince and other executives will not be included in BlockFi’s upcoming employee retention plan.
New Jersey-based BlockFi filed for bankruptcy protection on Nov. 28, a direct casualty of FTX’s collapse weeks earlier. FTX founder Sam Bankman-Fried has since been arrested on fraud charges and he has pleaded not guilty.
BlockFi and FTX have been embroiled in a dispute over $465 million shares of online broker Robinhood Markets Inc that BlockFi claimed as collateral on an unpaid debt owed to it by FTX affiliate Alameda Research. That dispute further complicated when the U.S. Department of Justice seized the shares, and a BlockFi attorney said Monday that DOJ was in the process of seizing assets held by two or three BlockFi customers based in Washington state.
(Reporting by Dietrich Knauth in New York, Editing by Alexia Garamfalvi and David Gregorio)
By Luc Cohen
NEW YORK (Reuters) – Sam Bankman-Fried may find it hard to argue the fraud charges against him should be tossed because of uncertainty as to how U.S. law treats cryptocurrency, as other high-profile defendants in criminal cases involving digital assets have done.
That is because Manhattan federal prosecutors’ charges against the founder of now-bankrupt crypto exchange FTX have largely sidestepped an ongoing debate as to whether cryptocurrencies should be regulated as securities or commodities, legal experts told Reuters.
Bankman-Fried, 30, was indicted on two counts of wire fraud and six conspiracy counts last month in Manhattan federal court for allegedly stealing FTX customer deposits to pay debts from his hedge fund, Alameda Research, and lying to equity investors about FTX’s financial condition. He has pleaded not guilty.
“It’s a pretty simple deception,” said Shane Stansbury, a professor at Duke University School of Law and former Manhattan federal prosecutor. “You really don’t need to get into the weeds of how we view cryptocurrencies.”
The question of whether cryptocurrencies are considered securities, like stocks or bonds, or commodities – a category that in the United States encapsulates foreign currency trading as well as raw materials such as crude oil – remains largely unresolved.
But the uncertainty is irrelevant to most of the charges leveled against Bankman-Fried, according to experts. While he faces one count of conspiracy to commit securities fraud, that charge alleges he misled FTX’s equity investors, and does not touch on the nature of the assets traded on the exchange.
He also faces two wire fraud charges and two related conspiracy counts for allegedly providing false information to Alameda lenders about the hedge fund’s financial health and for the alleged theft of customer assets.
“There’s no need to establish that what the customers ultimately bought with fiat currency was a security or commodity or whatever,” said Mark Kasten, counsel at Buchanan Ingersoll & Rooney in Philadelphia. “Customers put money into the platform and the money was supposed to be used in a certain way. And according to the allegations in the indictment, it wasn’t.”
A spokesman for the U.S. Attorney’s office in Manhattan declined to comment.
Bankman-Fried’s defense lawyers did not respond to a request for comment. The onetime-billionaire has previously acknowledged shortcomings in FTX’s risk management practices, but has said he does not believe he is criminally liable.
DEBATE COULD DECIDE REGULATION
Gary Gensler, the U.S. Securities and Exchange Commission (SEC) chairman, has said bitcoin is a commodity but that other digital assets behave more like securities – defined broadly as contracts in which investors profit from others’ efforts – because their value derives from promotion.
The debate matters to cryptocurrency companies because it could determine which agency regulates the trading of digital assets. The U.S. Commodity Futures Trading Commission (CFTC) is seen by many crypto players as potentially friendlier than the better-funded SEC.
San Francisco-based blockchain payments company Ripple is contesting a 2020 SEC lawsuit accusing it of conducting an unregistered securities offering by arguing its XRP token is not a security and thus not subject to SEC oversight. The case is ongoing.
Damian Williams, the top federal prosecutor in Manhattan who took office in 2021, has made enforcement of cryptocurrency-related financial crimes a centerpiece of his tenure.
Last year, in the first-ever insider trading cases involving digital assets, his office brought wire fraud charges against Nathaniel Chastain, a former employee of non-fungible token (NFT) marketplace OpenSea, and Ishan Wahi, a former manager at cryptocurrency exchange Coinbase Global Inc.
Both have pleaded not guilty and argued the charges should be dismissed because insider trading charges must involve securities or commodities. In bringing wire fraud charges in both cases, prosecutors avoided taking a position on how cryptocurrencies or NFTs should be classified.
A judge in October denied Chastain’s lawyers’ motion to dismiss the charges.
It is unlikely Bankman-Fried’s lawyers will attempt a similar argument because the wire fraud charges are more straightforward, Kasten said.
He said the Massachusetts Institute of Technology (MIT) graduate’s defense would likely focus on the arguments that he had no intent to commit fraud, that other executives at FTX and Alameda bore the blame, and that he was not involved in the day-to-day operations of the companies.
But prosecutors could also prove wire fraud charges by establishing that a defendant willfully blinded himself to the consequences of his actions, said Victor Hou, a partner at Cleary Gottlieb and former Manhattan federal prosecutor.
“Wire fraud is a powerful and frequently used weapon in the prosecutor’s arsenal because it captures an exceptionally broad range of illegal conduct,” Hou said.
(Reporting by Luc Cohen in New York; Editing by Daniel Wallis)
(Reuters) – A U.S. Trustee filed an objection on Saturday to plans by bankrupt crypto exchange FTX to sell its digital currency futures and clearinghouse LedgerX, as well as units in Japan and Europe, according to a court filing.
FTX filed for bankruptcy protection in November and said last month it planned to sell its LedgerX, Embed, FTX Japan and FTX Europe businesses. On Tuesday, FTX founder Sam Bankman-Fried pleaded not guilty to criminal charges that he cheated investors and caused billions of dollars in losses, in what prosecutors have called an “epic” fraud.
The filing by U.S. Trustee Andrew Vara called for an independent investigation before the sale of the units, arguing that the companies may have information related to FTX’s bankruptcy.
“The sale of potentially valuable causes of action against the Debtors’ directors, officers and employees, or any other person or entity, should not be permitted until there has been a full and independent investigation into all persons and entities that may have been involved in any malfeasance, negligence or other actionable conduct,” the filing said.
FTX said in a court filing last month that the companies it planned to sell are relatively independent from the broader FTX group, and that each has its own segregated customer accounts and separate management teams.
(Reporting by Anirudh Saligrama in Bengaluru; Editing by Matthew Lewis)