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Attorneys representing the current leadership of FTX, those representing the Bahamas-based trading operation still controlled by former CEO Sam Bankman-Fried, and the Bahamian government are all wrangling over hundreds of millions of dollars’ worth of assets kept in the island nation.

In a bombshell motion filed in a U.S. court late yesterday, attorneys representing the failed crypto exchange and its new CEO, corporate bankruptcy and restructuring specialist John 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 motion objects to an effort to loosen the automatic stay on payments to creditors before the bankruptcy process is completed, a window of time that takes years.  It was filed just hours before Bahamian authorities arrested Bankman-Fried in anticipation of a U.S. indictment and subsequent extradition for various charges to be announced later today.  

According to the motion, the company also minted new tokens shortly after filing for bankruptcy protection, around the same time an unknown actor withdrew hundreds of millions of dollars-worth of digital assets.

“[FTX] possess information that indicates that the Commission was involved in directing others to access the computer systems of [FTX] on or around November 12, 2022, that digital assets were transferred, that tokens were minted and that such actions were taken (or facilitated) by Messrs. Bankman-Fried and [Gary] Wang, perhaps among others, at the express direction of the Commission and Ms. Christina Rolle, Executive Director of the Commission,” Ray wrote to Bahamian Attorney General Ryan Pinder and Prime Minister Philip Davis in a Dec. 1 letter cited in the filing.

The letter continues to argue that, “Any transfer of assets of the FTX Global Debtors to accounts maintained by the Commission on or after November 11, 2022, constitute a violation of the automatic stay,” on payments to creditors by companies in bankruptcy, including foreign affiliates, according to U.S. law. “Violations of the automatic stay can result in damages, sanctions and penalties, which will be sought as and when necessary.”

Bahamian dealings the week of collapse

Attorneys for FTX argue that actions by lawyers representing the Bahamian subsidiary that Bankman-Fried retains more control of, as well as Bahamian regulators, are in violation of U.S. bankruptcy law forcing an automatic stay on debts until a judge can reach conclusions over who is owed what. 

Before putting the majority of his multinational corporate empire into bankruptcy Bankman-Fried also offered to place Bahamian customers ahead of all other FTX customers in direct communication with the country’s attorney general, Ryan Pinder, according to the filing. In the same exchange, Pinder said he was briefing Bahamian PM Davis on the matter.

A day before placing most of his companies into Chapter 11 protection, in which assets must be frozen in place, Bankman-Fried wrote to Pinder to apologize for the situation and told the attorney general, “we have segregated funds for all Bahamian customers on FTX. And we would be more than happy to open up withdrawals for all Bahamian customers on FTX, so that they can, tomorrow, fully withdraw all of their assets, making them fully whole.”

Bankman-Fried continued: “It’s your call whether you want us to do this — but we are more than happy to and would consider it the very least of our duty to the country, and could open it up immediately if you reply saying you want us to. If we don’t hear back from you, we are going to go ahead and do it tomorrow.”

‘What is the ongoing commitment to The Bahamas?’

Pinder’s response, if one came, is not included in the filing. But earlier in email exchanges from the week of FTX’s collapse — which included other FTX executives as well as Bankman-Fried’s father, Stanford Law Professor Joseph Bankman — the Bahamian attorney general pressed SBF on Binance’s onetime proposal to acquire FTX, as well as asking, “What is the ongoing commitment to The Bahamas?”

Twelve hours after Bankman-Fried’s offer to make Bahamian customers whole before any others, the FTX corporate Twitter account tweeted that, “Per our Bahamian HQ’s regulation and regulators, we have begun to facilitate withdrawals of Bahamian funds. As such, you may have seen some withdrawals processed by FTX recently as we complied with the regulators.”

Prior to becoming attorney general last year, Pinder was a wealth management attorney and former lawyer for Deltec Bank, the bank for stablecoin issuer Tether. On Nov. 27 Pinder delivered a national address forcefully attacking FTX’s current leadership and defending the Bahamian government’s response to the situation, which FTX’s current attorneys included in transcript form in support of their argument against the Bahamas.

In an email from Pinder to Bankman-Fried sent on the morning of Nov. 9, he asked the former CEO whether any FTX-affiliated company had “leveraged or exposed client assets in any way and for any purpose?”

As he’s done publicly, Bankman-Fried conceded in a one sentence response to the question that the company “did not intend to, but are concerned that poor risk management lead to a liquidity issue.” He also offered to brief Bahamian PM Davis and the Securities Commission in coming days.

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 world’s most powerful global financial watchdog group is preparing to instate strict propositions for regulating the crypto sector in early 2023, along with a timeline regulators should stick to for implementing them. 

“Recent events have reinforced the recognition that it is indeed urgent to address risks,” Dietrich Domanski, Secretary General of the Financial Stability Board, told the Financial Times on his final day in office after a five-year term. John Schindler, a director at the Federal Reserve’s financial stability division, is stepping up to take his place.

The collapse of crypto exchange FTX has turned regulators’ heads worldwide as governmental hearings pressed the topic of crypto supervision. 

“I think the work plan will reflect the urgency,” Domanski said. At the same time, Domanski noted that there are limitations to how quickly the FSB can operate while learning to understand crypto markets. “All of those who say, you should move faster, you should do more, I would invite them to follow a global co-operative process . . . and then tell me where there are spots that we could have moved faster.”

The FSB — comprised of central bankers, finance officials and regulators from G20 countries — met in Basel last week. Lessons from the FTX debacle featured prominently on the agenda. The group called for “ongoing vigilance and the urgency of advancing the policy work program by the FSB and the standard-setting bodies to establish a global framework of regulation and supervision, including in non-FSB member jurisdictions.”

Decentralized finance received particular attention, as the FSB promised to explore ways to fill the gaps in DeFi supervision.

The FSB published a report of high-level recommendations on regulating the crypto industry in October, which will continue influencing crypto regulation worldwide.

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 CEO Changpeng Zhao stepped in to reassure clients after the world’s biggest crypto exchange experienced more than a billion dollars of outflows.

After acknowledging that Binance has seen an increase in USD Coin withdrawals, Zhao explained that “to swap from PAX/BUSD to USDC requires going through a bank in NY in USD” and that “the banks are not open for another few hours” — at which point Binance expects the situation to be “restored.”

Some $1.6 billion on Ethereum has been withdrawn from the exchange over the past 24 hours, according to  Nansen researcher Sandra Leow. 

With USDC liquidity proving to be an issue on Binance, Tron founder Justin Sun deposited 100 million USDC to the exchange.

Seemingly dismissing concerns that customers may have any problems removing funds from the exchange, Zhao encouraged users to “feel free to withdraw any other stablecoin” — adding a folded hands emoji. Zhao also noted that no margin or leverage is involved in the stablecoin conversions.

© 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.

Dogami, a web3 game that enables players to adopt and raise virtual dogs, raised $7 million in a seed extension round. 

The fundraise was led by European venture capital firm XAnge. Other backers include Bpifrance, Blockchain Founders Fund and Wagram Capital, according to a statement from the company.

The equity round closed at the end of November, Dogami CEO and co-founder Max Stoeckl said in an interview with The Block. Earlier this year, Dogami raised $6 million in a seed round with backing from investors including Ubisoft, Animoca Brands, Tezos and GSR, and the new seed extension brings Dogami’s total funding to $14 million.

“There was a lot of due diligence,” Stoeckl said. “We underwent, I think, two months of commercial and legal DD. These investors turned upside down every stone and [it’s] also a good sign of legitimacy that this gives us.” 

What is Dogami?

Founded in the middle of last year, Dogami enables individuals to buy non-fungible tokens of 3D dogs, which they can adopt and raise. Dogami did an initial drop of 12,000 dog NFTs in the first quarter of this year. 

“All of this is basically rooted in a very strong backstory that describes where the Dogami come from,” Stoeckl said. “Dogami are not normal dogs, they come from outer space, and they come to earth with a purpose. They have to find the human with whom they bond and then when they have this magical bond, they get back their memory and they remember their legacy and where they come from.” 

This rich storyline created by a former Marvel writer will enable Dogami strip content for years to come, Stoeckl said. He is aiming for the game to reach a mass market audience, with the opportunity to extend into other branches of media like comics or videos. 

Doga House artwork from Dogami

Most recently, the startup launched DOGA House, which is a mobile game available to owners of Dogami NFTs on iOS and Android devices.

The average age of a Dogami player is 30, according to the company.

The Dogami universe

The Dogami universe has its own currency called DOGA, which is used for buying and selling NFTS and accessories as well as participating in events. 

The DOGA token is down 96% from its all-time high of $0.41 in March of this year and currently trading around $0.0147, according to data from CoinMarketCap. 

Some of the funds from the raise will be used for listing the token on more exchanges, Stoeckl said. 

“This week we have two listings already, Bittrex and Bitmart,” he said. “We are talking to a few other top 10 exchanges right now, for which we will also need some budget.” 

Dogami leverages the Tezos blockchain but may in the future explore wrapped tokens on other blockchains and cross chain transactions, Stoeckl said. 

Partnering with Gap

Earlier this year, Dogami partnered with fashion brand GAP to offer branded accessories for players to buy. 

The Dogami team is exploring launching two new partnerships with brands next year, Stoeckl said 

Also on the roadmap is the development of the game environment and new animations, the company said in the statement. Most of the funds are going towards product development, Stoeckl said. 

The recent raise will give the startup around 21 months of runway, he added. 

“Bpifrance is delighted to support Dogami, an emblematic player in the Web3 ecosystem, in its next stage of development,” said Guillaume Simonaire, principal at Bpifrance, in the statement. “In less than a year, the teams have built a powerful and committed community of over 200,000 people paving the way for a global IP. With the release of the mobile game in early December, NFT owners will be able to experience the full power and functionality of their virtual pet.” 

© 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.

House Financial Services Committee Chair Maxine Waters, D-Calif., says she’s “disappointed” and “surprised” at the timing of Sam Bankman-Fried’s arrest, due to his scheduled appearance before her committee tomorrow.

“It’s about time the process to bring Mr. Bankman-Fried to justice has begun,” said Waters in a statement released in reaction to Bankman-Fried’s arrest. “However, as the public knows, my staff and I have been working diligently for the past month to secure Mr. Bankman-Fried’s testimony before our Committee tomorrow morning.”

The California Democrat went on to criticize the timing of the arrest, which unusually comes on the eve of Bankman-Fried’s testimony about the collapse before Congress.  

“Although Mr. Bankman-Fried must be held accountable, the American public deserves to hear directly from Mr. Bankman-Fried about the actions that’ve harmed over one million people, and wiped out the hard-earned life savings of so many,” the statement from Waters continued. “The public has been waiting eagerly to get these answers under oath before Congress, and the timing of this arrest denies the public this opportunity.”

Bahamian police arrested Bankman-Fried earlier tonight in anticipation of indictment by the U.S. Attorney for the Southern District of New York and extradition back to the United States. The federal prosecutor’s office will announce its charges tomorrow — likely multiple counts of alleged fraud — while Securities and Exchange Commission Enforcement Division Director Gurbir Grewal said in a statement that the regulator will jointly announce its own charges relating to securities laws against the failed crypto mogul.

The Financial Services Committee will still hear from current FTX CEO John Ray III tomorrow about his view on the company’s collapse. In written remarks that will begin his testimony, Ray details how FTX US did not actually operate separately from the main corporate entity, potentially violating law and refuting Bankman-Fried’s position that the U.S. affiliate did not need to be entered into the bankruptcy process. The committee is also expected to touch on other digital asset topics, including Binance’s role in the implosion and the broader state of industry.

© 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 was detained in The Bahamas, according to a statement from the Office of the Attorney General & Ministry of Legal Affairs that was distributed by local press.

The arrest followed receipt of formal notification from the U.S. that it has filed criminal charges against Bankman-Fried and is likely to request his extradition. 

“The Bahamas and the United States have a shared interest in holding accountable all individuals associated with FTX who may have betrayed the public trust and broken the law,” Prime Minister Philip Davis said in the statement. “While the United States is pursuing criminal charges against SBF individually, The Bahamas will continue its own regulatory and criminal investigations into the collapse of FTX.”

The news was confirmed by the U.S. Attorney’s Office for the Southern District of New York. 

“Earlier this evening, Bahamian authorities arrested Samuel Bankman-Fried at the request of the U.S. Government, based on a sealed indictment filed by the SDNY. We expect to move to unseal the indictment in the morning and will have more to say at that time,” the office said on Twitter.

Bankman-Fried had been expected to testify tomorrow at congressional 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.

MakerDAO, the decentralized autonomous organization behind the Maker DeFi project, is set to execute eight governance proposals that have been voted on by the community in what the protocol has called its “most important deployments of 2022.”

The DAO’s delegates voted on the proposals on Dec. 11. The bundle includes a compensation package for recognized delegates, the onboarding of Gnosis DAO (GNO) token as collateral for DAI and raising the DAI savings rate from 0.01% to 1%. The Block previously reported that the DAO was looking to adopt GNO as collateral for minting its stablecoin DAI.

Maker delegates are part of the MakerDAO ecosystem and have been given voting power by other community members to vote on their behalf. Every Maker (MKR) token holder can participate in  governance of the DAO. Some token holders do not wish to do so and delegate their voting power.

A total of 20 maker delegates will receive a total of 103,230 DAI ($103,230) following the execution of the proposal bundle. The compensation is a reward for the recognized delegates for voting regularly on governance issues.

Other governance actions contained in the bundle include the onboarding of multiple BlockTower credit vaults and the removal of the renBTC vault. The latter action removes renBTC as collateral for minting DAI. MakerDAO is also set to make a few changes to its open market committee and Starknet bridge parameters.

Offboarding renBTC

MakerDAO’s decision to offboard the renBTC vault comes as Ren, a DeFi protocol used for wrapping and bridging crypto assets, is winding down its version 1.0. Wrapping is a process where native Layer 1 tokens like bitcoin are tokenized so they can be used on a network like Ethereum. Bridging, meanwhile, is the process of transferring crypto tokens from one network to another.

Ren’s future was thrown into disarray amid the collapse of FTX and sister trading firm Alameda Research, which had acquired it last year and held the project’s treasure. Funding expected to run out at the end of the year, and the project recently stated that it was sunsetting its version 1.0 in favor of a community-owned upgrade. Users have since been warned to unwrap their wrapped assets to avoid suffering losses.

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.

Whether or not FTX executives played a role in client withdrawals that took place after the exchange saw its assets frozen is now under investigation by Bahamian authorities, Bloomberg News reported, citing sources.

FTX former CEO and co-founder Sam Bankman-Fried was interviewed in his Nassau residence a number of times by investigators, sources with knowledge of the matter told Bloomberg. The probe seeks to better understand if Bankman-Fried and co-founder Gary Wang had knowledge or involvement in the transactions.

Bahamian authorities are studying relationships between FTX.com, which is registered locally as FTX Digital Markets Ltd., and sister trading firm Alameda Research.

Bankman-Fried is set to provide virtual testimony before Congress tomorrow, opting out of an in-person appearance in light of what he said was an “overbooked” schedule.

© 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.

Senate lawmakers blasted former FTX CEO Sam Bankman-Fried for declining to appear at a hearing this week, calling his decision an “unprecedented abdication of accountability.”

The Senate Banking Committee will investigate the collapse of crypto exchange FTX at a hearing on Wednesday. Bankman-Fried, who will testify at another congressional hearing Tuesday, has declined an invitation to testify before the key Senate panel. 

“Virtually every CEO, financial regulator, and administration official for Republicans and Democrats has agreed to testify in front of both the Senate and House when called upon – that is how congressional oversight works,” Committee Chair Sherrod Brown, D-Ohio, and ranking Republican Sen. Pat Toomey, R-Pa., said in a statement. “He has declined in an unprecedented abdication of accountability.”

The lawmakers added that Bankman-Fried’s lawyers have indicated he would duck the subpoena, escalating the standoff to potentially add contempt of Congress charges to the embattled crypto mogul’s other legal troubles. But the process could prove lengthy, meaning that the senators are continuing to negotiate with Bankman-Fried’s lawyers in order to secure his testimony. They noted that they’ve offered two dates to appear before their committee. 

“Given that Bankman-Fried’s counsel has stated they are unwilling to accept service of a subpoena, we will continue to work to have him appear before the Committee,” Brown and Toomey said. “He owes the American people an explanation.”

Actor and prominent crypto skeptic Ben McKenzie Schenkkan, law professor Hilary Allen, television personality and paid FTX spokesperson Kevin O’Leary, and Cato Institute expert Jennifer Schulp are currently scheduled to testify at the hearing.  

House hearing

Bankman-Fried, who resigned as CEO of FTX when the firm filed for bankruptcy protection last month but maintains more control over the Bahamas-based subsidiary FTX Digital Markets that ran a substantial amount of his crypto trading business, will appear virtually before the House Financial Services Committee on Tuesday for a separate hearing on the FTX collapse. The former FTX and Alameda boss cited his busy schedule and worries about being hounded by paparazzi as reasons why he will not travel to Washington, D.C. for the hearing. 

The former CEO said during a Twitter Spaces interview that he expects the back-to-back House and Senate hearings will be “very materially similar.” Bankman-Fried hinted he could change his mind on cooperating with the Senate committee the same way he did with House Financial Services. 

“I am open and willing to have a conversation with the chair or the ranking member about the hearing if they believe it’s important that I attend,” Bankman-Fried 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.

Most bitcoin mining stocks tracked by The Block declined on Monday, though half a dozen were higher.

Bitcoin prices were around $17,100 by market close, according to data from TradingView.

BTCUSD Chart by TradingView

TeraWulf’s shares were down more than 33% after the company said that it increased its hashrate guidance for early 2023 by 16% and raised $10 million to pay down a convertible promissory note.

Digihost’s stock also fell by -11% while CleanSpark’s rose 7.9%. 

Here’s how crypto mining companies performed on Monday, Dec. 12:

© 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.