NEW YORK, NEW YORK – JANUARY 03: FTX Founder Sam Bankman-Fried arrives for a hearing at Manhattan … [+]
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Also: MicroStrategy Sticks With Long-Term Bitcoin Strategy But Uses Short-Term Sale For Tax Benefit
FTX FOUNDER’S TRIAL SET FOR OCTOBER
Sam Bankman-Fried pleaded not guilty to all eight criminal charges related to the collapse of his FTX crypto empire in a Manhattan federal court Tuesday, setting the stage for one of the most high-profile white-collar criminal trials ever. While the plea was expected, it puts the case on track for months of pretrial jockeying. The trial itself was given a tentative start date of October 2, and prosecutors said they would produce the bulk of the evidence against the former billionaire within two weeks. That will give Bankman-Fried and his legal team insight into the evidence that prosecutors have collected against him. The judge also granted a request by prosecutors to prohibit Bankman-Fried from accessing or moving funds belonging to FTX and its associated hedge fund Alameda Research, both of which he founded.
This week, the Justice Department also moved to seize more than $400 million worth of Robinhood shares tied to FTX as part of an effort to gain possession of assets the company still holds after it allegedly blew through billions of dollars in customers’ money. Bankman-Fried’s lawyers argued in a Delaware court filing on Thursday that the shares should be returned to the former CEO because the company that owns them, Emergent Fidelity Technology, is not part of the bankruptcy estate. Bankman-Fried owns 90% of Emergent.
SILVERGATE’S DEPOSITORS FLEE
A plunging stock price is threatening the crypto-friendly bank’s independence after the company revealed that more than two-thirds of its deposits were withdrawn in the fourth quarter. Citing “a transformational shift” in the cryptocurrency industry that led to multiple bankruptcies last year, Silvergate provided preliminary results for the final quarter that showed its deposits from digital-assets customers–the bulk of its business–shrank to $3.8 billion at year-end from $11.9 billion on September 30.
The bank was quick to point out that it held cash and equivalents of $4.6 billion on December 31, allowing it to more than meet withdrawals from all its crypto-related customers. But the shrinkage of a business that held $14.1 billion of digital-currency-sector assets at the start of last year and a stock-market capitalization that has fallen to $355 million from $4.5 billion since that time, put its continued existence as a standalone company in doubt. The shares lost more than a third of their value for the week through Friday afternoon, sliding to $11.12. Speaking on a conference call to explain its release of the fourth-quarter metrics, executives raised the possibility that Silvergate might find itself a takeover target, Yahoo reported, based on its bargain price, and such a transaction might get a push from banking regulators.
COINBASE SETTLES WITH NEW YORK
The nation’s largest cryptocurrency exchange by trading volume has agreed to pay $100 million as part of a settlement with New York regulators who allege the firm violated anti-money-laundering laws by allowing users to open accounts without conducting sufficient background checks. Coinbase will pay a $50 million fine for “significant failures” in its compliance program, which violated banking laws and state regulations, the New York State Department of Financial Services announced Wednesday. The company has also agreed to invest an additional $50 million to help bolster compliance over the next two years. In an enforcement action, the department said Coinbase’s compliance system “failed to keep up with the dramatic and unexpected growth” of the exchange’s business as the prices of cryptocurrencies like bitcoin more than doubled in 2021. Paul Grewal, Coinbase’s chief legal officer, said the firm has taken “substantial measures to address these historical shortcomings.”
CELSIUS FOUNDER HIT WITH FRAUD SUIT
New York State sued Alex Mashinsky, the founder and former CEO of Celsius CEL Network, claiming he “engaged in a scheme to defraud hundreds of thousands of investors” by offering loan products promising yields of up to 17% with “minimal risk.” “These promises were false—but proved wildly popular,” according to the action filed Thursday in the state’s Supreme Court by Attorney General Letitia James. Celsius filed for federal bankruptcy protection on July 13 to stabilize its business after pausing withdrawals a month earlier. The company claimed it was unable to pay its customers because some of its assets were illiquid. The suit asks that Mashinsky pay an unspecified amount of damages caused by fraudulent, deceptive and illegal acts and that he disgorge all the assets he acquired by them and make restitution to investors. It also seeks to ban him from working in the investment business in New York. The action comes a day after investors in Celsius’ 600,000 Earn accounts were told they would be at the bottom of the list of creditors in the company’s bankruptcy case.
ELSEWHERE
Genesis Parent Company DCG Shutters Its Wealth Management Division [The Information]
Huobi’s HT Token Turbulent As Exchange Confirms 20% Headcount Reduction [CoinDesk]
SEC Intervenes On Binance US Bid To Buy Assets Of Bankrupt Crypto Lender [Financial Times]
Bankman-Fried’s Not Guilty Plea | Crypto Bank Silvergate Takeover Bait? – Forbes
