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Troubled crypto trading and lending firm Genesis owes its creditors at least $1.8 billion, CoinDesk reported Sunday.

The Financial Times first reported on Saturday that Genesis owes customers of Gemini’s Earn program $900 million. In addition to that, Genesis owes another $900 million to a group of assorted creditors, which law firm Proskauer Rose is representing, according to the CoinDesk report, which cited an anonymous source.

In addition to the Proskauer group, there is another ad hoc group of Genesis creditors being represented by law firm Kirkland & Ellis, CoinDesk reported. The amount owed to this group is unknown. Bloomberg reported last week that Proskauer Rose and Kirkland & Ellis are representing groups of Genesis creditors.

Law firm Latham & Watkins is representing the Gemini customers group, according to CoinDesk.

Genesis halted client withdrawals last month after taking large hits from FTX and earlier from Three Arrows Capital. The firm has been trying to raise funds and has hired investment bank Moelis & Company to explore its options, which include a potential bankruptcy.

U.S. state securities regulators are reportedly investigating Genesis. Alabama is said to be one of the states that is looking into whether Genesis “enticed residents to invest in crypto-related securities without making the proper registrations,” according to Barron’s. 

© 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.

Former FTX CEO Sam Bankman-Fried feels obligated to talk to lawmakers about the collapse of his crypto exchange, but he might not do it on their timeline.

The disgraced crypto boss said he needs to learn more about what caused FTX to implode and file for bankruptcy protection before he can appear at a congressional hearing on the topic. The House Financial Services Committee invited Bankman-Fried to testify at a Dec. 13 hearing.

“Rep. Waters, and the House Committee on Financial Services: Once I have finished learning and reviewing what happened, I would feel like it was my duty to appear before the committee and explain. I’m not sure that will happen by the 13th. But when it does, I will testify,” Bankman-Fried said Sunday on Twitter. 

Lawmakers have lauded Bankman-Fried’s “candid” explanation for the FTX crash in recent days. Committee Chair Maxine Waters, D-Calif., said she would welcome his participation in the hearing. A Waters spokesperson did not respond to a request for comment.

“We appreciate that you’ve been candid in your discussions about what happened at #FTX. Your willingness to talk to the public will help the company’s customers, investors, and others. To that end, we would welcome your participation in our hearing on the 13th,” Waters wrote in a tweet.

Rep. Patrick McHenry, R-N.C., who is likely to chair the committee next year, also pressed Bankman-Fried to appear at the hearing. The hearing is slated to be part of a series on the FTX catastrophe. McHenry’s office did not respond to a request for comment.

© 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.

Almost 255,000 Reddit digital collectibles were minted on Saturday, a new record that surpassed the more than 200,000 mints on both Aug. 30 and Aug. 31.

It brings the total number of digital collectibles — the term Reddit uses for its Polygon-based NFTs — in circulation to about 4.4 million, according to data from @polygon_analytics on Dune. 

Used as avatars on Reddit’s social networking platform, the polygon-based digital collectibles have been lauded as a successful introduction of NFTs to mainstream consumers. Having already introduced tokenized community points last year, Reddit announced its digital collectible avatar plans in July.

The company took pains to distance the offering from NFTs and crypto. The pieces sell for a fixed price rather than being auctioned and can only be paid for with fiat currencies. Its statement made no mention of NFTs.

The strategy appears to have paid off. While some of the digital collectibles have made their way onto secondary markets like OpenSea and had their floor prices soar, most holders acquire them through minting on Reddit.

To date, there’s only been about 40,000 recorded sales despite the millions of collectibles minted. More than 3.4 million holders have just one collectible in their wallets. 

Reddit partners with independent artists to release each collection. Five sets were responsible for the record mints on Saturday: The Singularity (98,000), Aww Friends (57,000), Meme Team (39,000), Reddit Cup 2022 (34,000) and Drip Squad (28,000).

© 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.

A crazy November has finally come to an end, but the fallout from the collapse of FTX will continue into the festive season and beyond. Legal action is continuing from the collapse of Terra in May, or about a million years ago in crypto-time, and will likely grab headlines for years to come as prosectors in South Korea try to untangle what happened.

FTX hasn’t quite hit that stage yet. Sam Bankman-Fried continues his bizarre media offensive, with more appearances scheduled for this week. Still, some of the interviewers people would most like to see him up against are struggling to get him to commit.

Here are the main stories and events to keep an eye on in the coming week. 

The Sam Bankman-Fried apology tour continues

Disgraced FTX founder Sam Bankman-Fried has more interviews set up for the coming week as he makes the media rounds apologizing for his company’s failure while claiming to know nothing about the internal mismanagement that caused it.

It’s not quite clear what’s driving him to seek out the spotlight, but it doesn’t appear to be letting up, much to the chagrin of many former FTX customers, who’d rather see him talking in court instead of on another Twitter space.

Nevertheless, he is scheduled to appear in an episode of The Scoop on Monday, a Rekt Twitter space on Tuesday as well as another Twitter space by Unusual Whales the following Monday.

He’s also been invited by U.S. House Financial Services Committee Chair Maxine Waters to a hearing the following week, on Nov 13. It’s not clear if he’s going to show.

It may appear Bankman-Fried is willing to talk with anyone, but some people are not having much luck getting him to agree to a date. UpOnly co-host Cobie has been trying to get him on the show. Bankman-Fried has agreed, but refused to do it this week and said “it only makes sense to do it in a week or so.”

BlockFi Bankruptcy

Last week, crypto lender BlockFi filed for Chapter 11 bankruptcy protection. It claimed more than 100,000 creditors, including Ankura Trust, FTX US and the Securities and Exchange Commission, with between $1 billion and $10 billion in both assets and liabilities, according to its petition.

Its first day Chapter 11 hearing took place on Nov. 29, but don’t expect further updates soon: The next hearing is currently scheduled for Jan. 9, 2023.

More job cuts?

Crypto exchange Bybit is reducing its workforce as a result of the “deepening bear market,” it announced on Sunday. It will downsize across the board.

It’s not alone. Kraken cut 1,100 staff, or 30% of its workforce due to current market conditions on Nov. 30. Coinbase laid off more than 60 employees from its human resource department earlier in the month, while Metaplex also announced layoffs in the wake of the FTX collapse.

Amid fears that the bear market could worsen, more firms may follow suit.

Legal drama in Seoul

Last week the Seoul Southern District Court dismissed prosecutors’ warrants for the arrest of several leading Terraform Labs figures, including co-founder and current CEO of Chai Corp. Daniel Shin. This doesn’t mean they’re off the hook, only that they won’t remain in custody during proceedings.

Expect more developments from Seoul as investigators attempt to understand how Terra’s collapse in May wiped $50 billion in value from the ecosystem and who is responsible.

The location of Terra’s other founder, Do Kwon, remains a mystery.

This isn’t the only crypto case making its way through South Korean courts. Last week, web3 gaming company Wemade filed an injunction to prevent a planned delisting of its Wemix token from local exchanges Upbit, Bithumb, Coinone and Korbit.

It’s part of an ongoing battle between Wemade and South Korean crypto exchange organization DAXA, which has accused the company of circulating inaccurate information about their token.

We should find out the court’s decision on Dec. 7. 

© 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.

Crypto exchange Bybit is reducing its workforce as a direct result of “the deepening bear market.”

The Singapore-based crypto exchange’s CEO and co-founder, Ben Zhou, made the announcement on Twitter at 12:32 a.m. ET.

“The planned downsizing will be across the board,” Zhou tweeted, adding: “For our impacted colleagues, we will try to make this process as smooth as possible and take care of each individual’s needs as much as we can.”

Bybit is not alone in reducing its workforce as the blockchain and cryptocurrency industry struggles to regain its footing after a tough year — which saw the collapses of the Terra ecosystem, hedge fund Three Arrows Capital, major crypto exchange FTX and its sister firm Alameda Research.

San Francisco-based crypto exchange Kraken announced it was cutting 1,100 staff, or 30% of its workforce, on Nov. 30 — citing a need “to adapt to current market conditions.” Earlier in November, rival Coinbase, also based in San Francisco, said it was laying off more than 60 employees from its human resources department. Mexico-based crypto exchange Bitso also let go of an unspecified number of workers.

“It’s important to ensure Bybit has the right structure and resources in place to navigate the market slowdown and is nimble enough to seize the many opportunities ahead,” Zhou tweeted.

Bybit previously cut its workforce by an unspecified number in June.

© 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 founder and former CEO Sam Bankman-Fried “can only speculate” about what happened to billions in funds after FTX customers wired them to its sister trading firm Alameda Research, he told the Wall Street Journal in an interview published Saturday evening.

“One phrasing of it…would be to say that Alameda effectively sent those dollars from its FTX account to the user, but that’s a ledger transfer of course,” Bankman-Fried said. “Outside of that the answer is, they were wired to Alameda — I can only speculate about what happened after that.”

FTX is under scrutiny for its handling of client funds and its financial relationship with entities including Alameda. Just two days after FTX and more than 100 affiliated entities filed for Chapter 11 bankruptcy protection on Nov. 11, Reuters reported that at least $1 billion in customer funds had “vanished” from the crypto exchange, with FTX transferring billions in customer funds to Alameda.

When asked by Wall Street Journal reporter Alexander Osipovich how these accounting issues emerged, Bankman-Fried explained that back in 2019 -2020 the crypto exchange supported cryptocurrency wallets but not bank accounts to support the onboarding of fiat currency.

“So some of them would wire money to Alameda and then ask to be credited on their FTX account,” Bankman-Fried said. He estimates more than half of Alameda’s total position came through these wired customer funds to its bank accounts — and thinks this would be more than $5 billion.

“I can now go back and take a guess at…where they were ultimately spent, or used, or something,” Bankman-Fried said when asked to clarify that he did not know what happened to that $5 billion. “But dollars are fungible with each other, so it’s not like this one dollar bill over here that you can trace through from start to finish. What you get is more just omnibus pots of assets at various forms.”

Osipovich then asked Bankman-Fried how he could own 90% of Alameda and not know what was happening there, to which he replied that he was busy with FTX and also didn’t want to get too closely involved with Alameda due to concerns about conflicts of interest.

© 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.

Quick Take

• Rapid Insights provide a deeper analysis of the current crypto landscape in a timely fashion
• The Ankr protocol’s liquid-staking derivative, aBNBc, was exploited on December 1st through what appears to be a private key compromise
• Aside from a collapse in the price of aBNBc, the Helio protocol was also exploited as a secondary effect, with erroneously minted aBNBc being used to borrow excess amounts of the HAY stablecoin
• In this report, we analyze the original attacker’s movements on-chain and examine the impact of the exploit on other parts of the BNB Chain ecosystem

This research piece is available exclusively to
members of The Block Research.
You can continue reading
this Research content on The Block Research.

Crypto derivatives exchange and clearinghouse LedgerX is for sale, with Blockchain.com and Gemini among those interested in acquiring the firm, Bloomberg reported late Friday.

LedgerX is regulated by the US Commodity Futures Trading Commission (CFTC), and has been a subsidiary of FTX US since October 2021. LedgerX is one of the few solvent entities remaining in the FTX group of companies, Bloomberg noted.

At least 10 companies have expressed interest in purchasing LedgerX, the report said. These include the exchanges Blockchain.com, Gemini, Bitpanda and Kalshi, a CFTC-regulated platform specializing in trades based on the outcome of events. About six others could also have interest in buying the company, Bloomberg wrote, citing a person familiar with the matter.

Twitter direct messages sent to both LedgerX and its CEO Zach Dexter were not returned by press time.

LedgerX is planning to make $175 million available for use in FTX’s bankruptcy proceedings, Bloomberg reported on Nov. 29. It would come from a $250 million fund LedgerX was planning to use for a CFTC application aimed at getting regulatory approval to “clear crypto derivatives trades without intermediaries,” according to Bloomberg.

LedgerX was requesting CFTC approval to offer products that were not fully collateralized, an agency announcement shows. The derivatives exchange withdrew that application on Nov. 11 ⁠— the same day FTX and more than 100 subsidiaries filed for Chapter 11 bankruptcy protection.

In a Nov. 17 tweet, Dexter told customers LedgerX is “solvent and well-capitalized” and clarified that the entity LedgerX LLC did not file for bankruptcy. LedgerX has also stopped using the name “FTX US Derivatives,” which it started going by after FTX US rebranded the company following its acquisition.

© 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.

Trading firm Alameda Research was given outsized borrowing limits compared with other clients of FTX. 

Alameda was able to access high levels of borrowing on FTX when Sam Bankman-Fried launched the crypto exchange, he said in an interview with the Financial Times published on Saturday.

He didn’t specify how large the limits were compared with other clients, but noted the possibility that they continued after FTX’s founding.

The origins of the large borrowing limits stemmed from Alameda’s role as a main provider of liquidity on FTX at its founding, before other financial groups showed interest, he said.

“If you scroll back to 2019 when FTX was first started, at that point Alameda was 45 per cent of volume or something on the platform,” Bankman-Fried said in the interview. “It was basically a situation where if Alameda’s account ran out of capacity to take on new positions that would lead to risk issues for the platform because we didn’t have enough liquidity providers. I think it had fairly large limits because of that.”

He noted that by 2022, Alameda accounted for only 2% of trading volume on FTX. 

The discredited founder said that Alameda’s liabilities to FTX were about $10 billion at the time of its bankruptcy filings.

This is the latest in the series of admissions that he has made to the media since FTX filed for  Chapter 11 bankruptcy protection last month.

On Wednesday, Bankman-Fried told the New York Times that he “messed up big” and took responsibility for the lack of oversight that led to Alameda Research’s risky positions with FTX. In an ABC News interview on Thursday, the former FTX CEO admitted that he didn’t spend any time on risk management.

© 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.

Crypto brokerage Genesis owes $900 million to customers of Gemini, the crypto exchange run by Tyler and Cameron Winklevoss. 

Parent company Digital Currency Group (DCG), along with Genesis, owes the amount to the customers of the exchange, according to a Financial Times report.

Gemini is attempting to recover the funds, according to people familiar with the matter cited by the report, which added that the exchange is also forming a creditors’ committee to try to recoup the assets. 

Genesis is one of the partners in Gemini’s Earn program, where users could lend out their crypto for returns. After Genesis temporarily paused withdrawals earlier this month, citing market conditions, the crypto exchange halted redemptions from this program. It has since worked with DCG and Genesis to facilitate redemptions from the program, according to a report last week. 

The Financial Times report also noted that Genesis continues in its attempt to raise funds, for which it has hired investment banking boutique Moelis & Co. It attempted to raise $1 billion, but slashed that to $500 million amid Nov. 21 reports indicating it faced a possible bankruptcy filing. 

© 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.