Block 1: Essential news

Mazars backs off in cryptos

After publishing evidence of reserves of cryptocurrency exchange platforms, including Binance, Crypto.com or even Kraken, the auditing firm has paused its activities in this ecosystem. Mazars has even removed the proof-of-reserve reports from each of these platforms, which theoretically provided evidence that client funds were safe. These reports, highlighting only the assets held by these platforms at a point in time, were heavily criticized especially since they did not display the debts they had incurred. Probably because of the fear that its reputation would be tarnished if there were any further obscure events following the FTX affair, Mazars decided to distance itself from the ecosystem, which doesn't help the cryptocurrency market regain investor confidence.

... Binance buys Voyager Digital

Binance's US subsidiary, Binance.US, announced it payed $1.022 billion to acquire the Voyager Digital platform, which was placed under Chapter 11 bankruptcy protection in the United States last July. This would, in principle, pay off the platform's 100,000 creditors. The final agreement of this takeover will be held on January 5, 2023, before the relevant bankruptcy court.

Binance strengthens its lobbying activities

Changpeng Zhao, the CEO of the Binance platform, has decided to join with its main structure the Digital Chamber of Commerce in the United States. The crypto giant joins the company Circle, the platform OkCoin and the behemoth Visa in this lobby group. With this activity, the goal is to build a favorable and efficient regulatory framework for industry players while protecting investors. The industry leader probably intends to regain the trust of legislators and regulators after a very painful FTX episode. To be continued.

Visa accelerates with Ethereum

Payment systems giant Visa has announced the development of a solution that allows users to make scheduled, automated transfers. While today it is possible to automate transactions on wallets hosted by cryptocurrency platforms, the challenge is now to enable it to self-hosted wallets (my article exploring the nuances between different wallets: Ethereum via a Core Scientific, has filed for Chapter 11 bankruptcy protection in the United States. Between massive investments in mining machines in 2021, the falling price of bitcoin in 2022, and the rising cost of electricity, the company finds itself over $1 billion in debt with negative cash flow. The company has 10% of the total computing power (Hashrate) of the Bitcoin network, making it one of the largest mining companies in the industry. A year ago, the company was valued at over $14 billion and now weighs $78 million, a 99% drop.

Crypto: A year of scams

Solidus Labs, a company that specializes in tracking and detection of scams in the cryptocurrency ecosystem, has published a report that contains a dark record for the cryptosphere in 2022. In its report, the company mentions that 350 cryptocurrencies were created every day as "Scam tokens," which are assets that are coded in a way to scam unsophisticated investors. This is 41% more than in 2021 and 80 times more than in 2020. This is made possible in part by the many technical idiosyncrasies that characterize the cryptocurrency ecosystem and discourage investors from understanding how it works. It is also made possible by the little regulation that frames the system and also by the speed and low cost required to create a cryptocurrency.

On the other hand, while these "scam tokens" are numerous, they make up only a very small portion of the total amount of the cryptocurrency market's valuation
.

Number of fraudulent cryptocurrencies
Solidus Labs

Block 2: Crypto Analysis of the Week

As a reminder, Bankman-Fried was arrested on Dec. 12 and eventually waived his right to contest the extradition request from the United States, where authorities have charged him of committing or conspiring to commit fraud on FTX customers and lenders, money laundering and conspiracy to defraud the United States and violate campaign finance disclosure laws. For their part, the closest accomplices in the FTX 3.0 scheme are already facing justice.

Caroline Ellison, the former CEO of trading firm Alameda Research, and Gary Wang, a co-founder and former CTO of FTX, both of whom have close ties to the former FTX boss, have pleaded guilty to federal criminal fraud charges.

In a statement released Wednesday night on Twitter, U.S. Attorney for the Southern District of New York Damian Williams said the duo were charged because of "their role in the fraud that contributed to the collapse of FTX." Ellison and Wang are also cooperating with the Southern District as the feds build their case against Bankman-Fried. Williams added that Ellison and Wang are cooperating with prosecutors and that he plans to file additional charges against others.

Statement of U.S. Attorney Damian Williams on U.S. v. Samuel Bankman-Fried, Caroline Ellison, and Gary Wang pic.twitter.com/u1y4cs3Koz

- U.S. Attorney SDNY (@SDNYnews) December 22, 2022

 

Williams also sent a warning to other potential accomplices in the FTX case. "If you were involved in misconduct at FTX or Alameda, it's time to step up. We are moving quickly and our patience is not forever." He added that Bankman-Fried was in the custody of the FBI and was on his way to the United States from the Bahamas.

The SEC's complaint against Ellison and Wang alleges that Ellison, under Bankman-Fried's direction, manipulated the price of FTT, FTX's native cryptocurrency, by purchasing large amounts of FTT on the open market to artificially inflate its price. Typically, as Bloomberg reports, when FTX acquired Blockfolio in 2020 for $84 million, 94 percent of the total was paid in FTT. The SEC alleges that Wang created the FTX software code that allowed Alameda to divert FTX's customer funds, and that Ellison diverted those funds to Alameda's trading business. So it appears that the trio: Bankman-Fried, Ellison and Wang, were at the heart of the scheme that defrauded millions of investors.

"As part of their deception, we allege that Caroline Ellison and Sam Bankman-Fried conspired to manipulate the price of FTT, a cryptocurrency exchange security token that was an integral part of FTX, to support the value of their house of cards," the SEC said. "We further allege that Ms. Ellison and Mr. Wang played an active role in a scheme to abuse FTX customer assets to support Alameda and post collateral for margin trading."

For now, U.S. Justice mentioned that Ellison and Wang face several decades in prison, will give up the money they earned from FTX and Alameda and will be prohibited from "issuing, purchasing, offering or selling any securities" except their own personal investment accounts. For its part, FTX remains in the bankruptcy process, with customers likely to wait months or years to see a partial or full refund of funds. Bankman-Fried faces up to 115 years in prison for the eight counts he is charged with, and we will soon find out how much SBF will actually be eaten by the U.S. justice system. Last we heard, Bankman-Fried was released on $250 million bail...

Block 3 : Gainers & Losers

The evolution of the Top 20 cryptocurrencies in terms of capitalization over one week.
(Click on the heatmap above to better visualize the changes)
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