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Bitcoin and other crypto prices are holding onto gains after better-than-expected inflation data ahead of the Fed’s last rate decision of the year.

Crypto stocks didn’t fare so well, however, with Coinbase hitting an all-time low. Silvergate sank almost 12%.

Bitcoin was trading at around $17,750 at 4 p.m. EST, up over 3% in the past day, according to TradingView data. Most of bitcoin’s gains followed the U.S. CPI data at 8:30 a.m. EST. 

BTCUSD chart by TradingView

Ether continues to trade above $1,300, having tacked on over 3.5% throughout the day. Binance’s BNB token pared some of its losses, although it is still down over the past day, dipping 2.1%. Binance resumed USDC withdrawal requests around midday EST. The exchange had temporarily stopped processing withdrawals due to inadequate reserves on the platform, according to Binance CEO Changpeng Zhao.

After today’s inflation data, markets are now trained on the U.S. Federal Reserve tomorrow. The central bank’s policy-setting committee — the FOMC — is set to announce its last interest rate decision of the year. A 50 basis point increase is widely expected after several 75 basis-point bumps.

Today’s CPI data materially increases the chances the Fed will raise rates by just 50 basis points tomorrow, Marc Arjoon, an analyst at CoinShares, told The Block. “A confirmation of this 50 basis points hike tomorrow will see a further marginal upside,” he said.

Ivan Kachkovski, executive director of crypto and FX research at UBS, echoed this. “Bitcoin and ether have recently been trading as risk assets such as U.S. micro-cap stocks, thus sensitivity to any slowdown in rate hikes beyond market expectations would likely be significant,” he said.

Arjoon expects Fed Chair Jerome Powell to be less hawkish tomorrow compared with his speech in November, which roiled markets at the time. 

Crypto stocks 

The S&P 500 and the Nasdaq 100 closed higher, up 0.7% and 1.1%, respectively.  

Coinbase slumped 9.2%, according to Nasdaq data. Shares of the exchange closed below $40 for the first time since debuting in April 2021 and hit an all-time low of $38.50 toward the end of today’s session. 

COIN chart by TradingView

Last week, CEO Brian Armstrong said revenue for 2022 will likely be down 50% year-on-year amid the ongoing market tumult, in line with analyst estimates.

Silvergate shares also sank, plunging 12% to $18.73, a more than two-year low. Block and MicroStrategy bucked the downtrend in crypto-related stocks, adding 7.3% and 2.9%, respectively. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

FTX previously stored private keys to crypto wallets without encryption during Sam Bankman Fried’s reign, leaving “hundreds of millions of dollars” vulnerable to theft or other malicious activity. 

The revelation was part of the prepared testimony to the U.S. House Financial Services Committee from from new Chief Executive John Ray III, who said he took steps to secure more than $1 billion worth of digital assets. 

Private keys are used to access and authorized funds held in crypto wallets, and they must be carefully stored on systems that simultaneously leverage encryption technology. When private keys are stored in an unencrypted fashion, they may have exposed the now-collapsed cryptocurrency exchange to unauthorized transfers, security experts say. 

“FTX storing private keys unencrypted would allow any employee with internal systems access, or any external actor who is able to obtain systems access, to move, and/or steal, customer funds relatively trivially,” Nick Neuman, CEO at non-custodial wallet provider Casa, told The Block.

Since keys were previously stored unencrypted on FTX, there are a variety of ways in which someone can acquire private keys, such as by hacking into a system or phishing attempts.

In November, exchange wallets belonging to FTX were seemingly hacked to the tune of an estimated $300-$400 million, per estimates from security firms: Halborn and PeckShield. While the identity of the hacker has still remained unknown, Bankman-Fried spoke of a “disgruntled employee” or a bad actor who may have stolen private keys to its crypto wallets.

A month after the crypto exchange he founded filed for bankruptcy protection, U.S. authorities have charged the former Bankman-Fried with fraud.

Disclaimer: Beginning in 2021, Michael McCaffrey, the former CEO and majority owner of The Block, took a series of loans from founder and former FTX and Alameda CEO Sam Bankman-Fried. McCaffrey resigned from the company in December 2022 after failing to disclose those transactions.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

U.S. authorities charged disgraced former FTX CEO Sam Bankman-Fried with fraud a month after the crypto exchange he founded filed for bankruptcy protection.

An eight-count indictment from the Southern District of New York court accused Bankman-Fried with committing or conspiring to commit fraud on FTX’s customers and lenders, money laundering and conspiracy to defraud the United States and violate campaign finance disclosure laws. The indictment follows civil charges from the Securities and Exchange Commission and the Commodity Futures Trading Commission. 

The indictment document claims the detained former CEO “agreed with others to defraud customers of FTX.com by misappropriating those customers’ deposits and using those deposits to pay expenses and debts of Alameda Research, Bankman-Fried’s proprietary crypto hedge fund.”

The charges punctuate a rapid collapse for FTX that shook the crypto industry and destroyed Bankman-Fried’s reputation — while leaving hundreds of thousands of the exchange’s customers out of pocket. Bankman-Fried was arrested yesterday in the Bahamas, a day before he was scheduled to testify virtually before a House Financial Services Committee hearing into his company’s collapse. 

“Mr. Bankman-Fried is reviewing the charges with his legal team and considering all of his legal options,” Mark S. Cohen, counsel to Bankman-Fried, said in a statement to The Block.

Campaign finance

The campaign finance allegations accused Bankman-Fried of making “corporate contributions to candidates and committees in the Southern District of New York that were reported in the name of another person,” straw contributions meant to evade campaign finance disclosure laws. 

The charges came after a U.S. campaign watchdog accused Bankman-Fried of violating federal election laws last Thursday after he claimed in an interview last month that he secretly donated additional millions to candidates and political action committees than he disclosed. 

In the last two years, Bankman-Fried fraudulently undermined “the Federal Election Commission’s function to administer federal law concerning source and amount restrictions in federal elections,” according to the indictments. 

‘Free rein’

Bankman-Fried and his top lieutenants had “free rein” over FTX and Alameda, new FTX CEO John Ray told U.S. lawmakers at a congressional hearing today. 

“Frankly I was looked forward to getting his lies here on the record under oath,” said U.S. Congressman Patrick McHenry, opening the House committee’s hearing. “Nevertheless the arrest of Sam Bankman-Fried is welcome news.”

The SDNY announced it will hold a press conference at 2 p.m. ET to address the indictment.

Disclaimer: Beginning in 2021, Michael McCaffrey, the former CEO and majority owner of The Block, took a series of loans from founder and former FTX and Alameda CEO Sam Bankman-Fried. McCaffrey resigned from the company in December 2022 after failing to disclose those transactions. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Binance has resumed processing withdrawal requests of the USD Coin (USDC) stablecoin after pausing them for several hours.

Binance, the world’s largest cryptocurrency exchange platform by daily volume, temporarily stopped processing USDC withdrawals due to inadequate USDC reserves on the platform, according to Binance CEO Changpeng Zhao.

Binance holds a large majority of its stablecoin holdings, more than $11.5 billion in Paxos-issued BUSD, according to Nansen data. To increase its USDC reserves, it made efforts to swap its BUSD holdings with USDC.

However, any token swaps into USDC required routing funds through a New York bank which was not yet open, Zhao said. This hindered the exchange’s ability to process these transactions, so the exchange temporarily paused USDC withdrawals while it conducted a token swap. 

Users have been withdrawing large amounts of funds from Binance, including USDC and other stablecoins. Since yesterday, Binance has seen a net outflow of over $2 billion in various crypto assets, according to estimates from Simon Cousaert, director of data at The Block.

Binance claims to hold more than $60 billion worth of assets across all of its wallets. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Metaverse builders LandVault plan to monetize metaverse experiences by minting them as NFTs.

Its new decentralized protocol, Matera will put metaverse builds — think virtual shops or stadiums — on-chain and offer creators new options for revenue, payment and governance.

“Matera opens a completely new market for creators and investors to participate in,” said Sam Huber, CEO of LandVault. 

While many metaverse platforms like Decentraland and The Sandbox are on-chain and their virtual land is represented by NFTs, the actual experiences built on that land aren’t. Not only does this make it harder for creators to easily cash out from a build, LandVault argues, but it doesn’t allow retail investors to participate in the growth of the metaverse economy.

Matera will also put an experience’s governance on-chain. Contributors will receive tokens proportional to their input during the creation of an experience. Token holders can also vote on proposals that affect the project development and decide how to utilize the funds stored in the project treasury. 

Payments earned from users in an experience will be paid into a project treasury and can be reinvested or shared among stakeholders.

Despite continued scepticism of the metaverse, investment bank Citi estimates the metaverse could be a $13 trillion opportunity by 2030. But working out the economics of what to monetize is still in the early stages — and not everyone is in agreement.

The cost of land on popular platforms, for example, has been criticized for excluding would-be builders. Virtual land can cost thousands of dollars on blockchain platforms.

LandVault sees creating incentives through protocols such as Matera as a way to encourage more building. “Matera stimulates the creator economy by enabling builders to create projects faster and find more liquidity,” said Huber.

It’s not the only way LandVault helps creators earn in the metaverse either. The company in its current form is the product of a merger between metaverse builders LandVault and in-game advertising firm Admix. Last month, it partnered with Decentral Games to introduce integrated advertising into its popular Decentraland-based flagship poker game. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Sam Bankman-Fried and his top lieutenants had “free rein” over troubled crypto exchange FTX and its sister trading firm, Alameda Research, the new FTX CEO said in a congressional hearing. 

Testifying before the House Financial Services Committee on the collapse of FTX and its impact on crypto markets, John Ray III told lawmakers that there were no distinctions between FTX, Alameda Research and other entities which filed for bankruptcy protection last month. 

“The owners of the company could really run free rein across all four silos,” Ray said. Ray was the sole witness after Bankman-Fried, the former CEO who had also been scheduled as a witness after high-profile negotiations to secure his appearance, was arrested in the Bahamas last night. 

Once valued at $32 billion, FTX collapsed after a run on its native utility token last month. Ray took over as CEO of FTX after Bankman-Fried stepped down from that role. The new executive has described FTX’s financial situation as the worst mess he’s seen in his career, noting that the multibillion dollar business ran its accounting through the small business bookkeeping software Quickbooks, if it recorded financial transactions at all. 

“It’s really unprecedented in terms of the lack of documentation,” said Ray, who called it a “paperless bankruptcy.”

Bankman-Fried was hit with criminal and civil complaints from the U.S. Justice Department, Securities Exchange Commission and the Commodity Futures Trading Commission on Tuesday morning. Bankman-Fried is accused of giving Alameda special access to FTX customer funds and defrauding investors; he and other executives also gave themselves unpaid loans through Alameda. FTX’s new leadership has been cooperating with U.S. regulators and plans to “turn over any information that would be relevant to them,” Ray said. 

Ranking Republican Rep. Patrick McHenry, R-N.C., called Bankman-Fried’s arrest “welcome news,” but noted it does not reveal what went wrong at FTX, and said he still wanted to hear from the former FTX boss. “I look forward to getting his lies here on the record, under oath,” said the North Carolina Republican. 

He and top current Committee Chair Maxine Waters, D-Calif., said they still plan to move ahead on legislation around digital assets. The two have negotiated to draft a comprehensive regulatory framework for stablecoins. 

“This committee will not stop until we uncover the full truth behind the collapse of FTX,” said Waters at Tuesday’s hearing. 

Disclaimer: Beginning in 2021, Michael McCaffrey, the former CEO and majority owner of The Block, took a series of loans from founder and former FTX and Alameda CEO Sam Bankman-Fried. McCaffrey resigned from the company in December 2022 after failing to disclose those transactions. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The Securities Commission of The Bahamas rejected recently appointed FTX chief John Ray’s allegations that Bahamian officials worked with former CEO Sam Bankman-Fried to shelter the failed crypto exchange’s assets from the U.S. bankruptcy process. 

The regulator issued a statement claiming Ray cited redacted email correspondence between Bankman-Fried and Bahamian officials “to create a false impression of communications between Mr. Bankman–Fried and the Commission.”

“These redactions are disturbing as Mr. Ray is aware that the full email reveals Mr. Bankman–Fried’s acknowledgment that he had ‘not briefed the Securities Commission,'” the commission said. 

In a U.S. court filing late yesterday, attorneys representing FTX and Ray imply that Bahamian officials and attorneys for Bankman-Fried may be breaking U.S. law by keeping large quantities of assets outside of the Chapter 11 bankruptcy process — and that the Bahamas government and the Bahamas Securities Commission may have helped.

The Bahamian regulator did not mince words in its response today. It claimed, among other things, that Ray “intended only to make headlines and advance questionable agendas.” It also finds Ray’s filings “disturbing” for allegedly intending to “wrongfully confuse” the actions of Bahamian authorities involved in the matter.

The Securities Commission of The Bahamas also noted that it continues to investigate FTX’s failure and is cooperating with law enforcement and regulators, both domestically and abroad. “Persons who are found to have engaged in misconduct will be held accountable in accordance with Bahamian law,” it said.

Disclaimer: Beginning in 2021, Michael McCaffrey, the former CEO and majority owner of The Block, took a series of loans from founder and former FTX and Alameda CEO Sam Bankman-Fried. McCaffrey resigned from the company in December 2022 after failing to disclose those transactions.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Tether intends to remove all secured loans from its backing in 2023 after The Wall Street Journal said that the stablecoin operator’s increasing roster of loans might make it unable to pay back redemptions in the event of a crisis.

The company told the WSJ that its loans reached $6.1 billion, or 9% of Tether’s total assets, as of Sept. 30. The group’s consolidated total assets reached more than $68 billion in the third quarter. Tether claimed to make sure borrowers offer “extremely liquid” collateral for these loans, but now the operator plans to scrap them altogether. 

“Tether is professionally and conservatively managed, and this will be demonstrated once again by successfully winding down the lending business without losses — since all loans are over-collateralized by liquid assets,” the company said in a statement. 

The news comes after the collapse of crypto exchange FTX, and as exchanges and other entities attempt to reassure markets that they are solvent. “Tether’s reserves are extremely liquid with the majority of its investments, making up 82% of the total assets, being held in Cash & Cash equivalent and other short-term deposits,” the company said on Nov. 10.

USDT is one of the most popular stablecoins pegged to the U.S. dollar, making up 31.6% of the total Ethereum-based stablecoin supply, according to The Block’s Data Dashboard. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Sam Bankman-Fried contemplated closing Alameda Research in September, according to charges filed by the Commodity Futures Trading Commission. 

The disgraced former CEO reportedly drafted and shared a document titled “‘We came, we saw, we researched,” which questioned whether Alameda should be permanently shut down.

“I only started thinking about this today, and so haven’t vetted it much yet,” wrote Bankman-Fried. “But: I think it might be time for Alameda Research to shut down. Honestly, it was probably time to do that a year ago.”

Bankman-Fried was arrested last night by authorities in the Bahamas and this morning slapped with numerous charges of fraud and other wrongdoing by the U.S. Securities and Exchange Commission and the CFTC over the collapse of FTX and Alameda.

Bankman-Fried listed a number of reasons for closing the trading shop, including that Alameda doesn’t justify the current cost of capital, which is “really expensive” in this environment and that Alameda was not making enough money to justify its existence.

Downsides to closure

“[T]he fact that we didn’t hedge as much as we should have alone cost more in EV [expected value] than all the money Alameda has ever made or ever will make,” Bankman-Fried wrote.

He also listed downsides for closing the shop, noting that there would be “less liquidity on FTX,” according to CFTC complaint. The SEC charges from earlier in the day note that Alameda was one of FTX’s largest customer and received special privileges.

Bankman-Fried went so far as to draft a Twitter thread about Alameda’s closure, according to the filing. 

The former CEO concluded the document with: “I feel really uncertain what’s right! So I guess my plan is that, this coming weekend, we should just make a call, and enact it before next Monday, one way or another. Thoughts?”

Disclaimer: Beginning in 2021, Michael McCaffrey, the former CEO and majority owner of The Block, took a series of loans from founder and former FTX and Alameda CEO Sam Bankman-Fried. McCaffrey resigned from the company in December 2022 after failing to disclose those transactions.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Tether announced that it’s assisting crypto exchange Binance with a “chain swap,” which involves converting 3 billion USDT to the Ethereum network from the Tron network. 

“In a few minutes Tether will coordinate with Binance to perform a chain swap, converting from Tron to Ethereum ERC20, for 3B USDT. The tether total supply will not change during this process,” Tether said. 

In this case, Tether will be performing a chain swap from the Tron network to the Ethereum network.

USDT is issued as a token issued by Tether on the Ethereum, Tron and other blockchain networks and used to facilitate trading operations on cryptocurrency exchanges such as Binance.

Rebalancing reserves

Tether CTO Paolo Ardoino said the transaction is part of Binance efforts to rebalance USDT reserves from its cold wallets on Tron to Ethereum. Here, Binance will send 3 billion USDT from its Tron wallet to Tether’s treasury address on Tron. After this, Tether sends back the same amount of USDT Binance ERC20 cold wallets on Ethereum.

“Likely Binance has mostly USDT-on-Tron in its cold wallets and might want to rebalance its cold wallet, moving part of its Tether reserves to USDT-on-Ethereum,” Ardoino said.

The swap comes at a time when users have been withdrawing large amounts of assets from Binance. Since yesterday, Binance has seen a net outflow of over $2 billion in various crypto assets, according to estimates from Simon Cousaert, director of data at The Block.

Earlier today, Binance temporarily stopped processing withdrawals of another stablecoin — USDC — due to inadequate reserves on the platform, according to Binance CEO Changpeng Zhao.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.