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Another Twitter career bites the dust.

Tess Rinearson, head of the social media platform’s crypto team, has exited Twitter amid a massive number of both layoffs and employees quitting in the wake of billionaire Elon Musk’s acquisition of the company, according to Bloomberg.

A senior software engineer, Hamdi Allam, has also left Twitter’s crypto division, Bloomberg reported.

Internal strife and staff reduction have been rampant since Musk’s takeover of Twitter was finalized late last month.

Besides laying off a large number of employees, Musk, who is acting CEO of both Twitter and Tesla, recently told employees that if they couldn’t commit to a strenuous work schedule they should quit.

Twitter’s decision to allow users to use non-fungible tokens (NFTs) as their profile picture was made under Rinearson, said Bloomberg.

The social media platform also recently announced a trial program that allows users to tweet NFTs with an embedded click-through button that can then be used to buy digital assets from participating marketplaces.

It’s unknown what will happen to Twitter’s blockchain-enabled initiatives given the recent departures, fears over the platform’s collapse and Musk’s push to overhaul the company.

© 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

• In this weekly series, we dive into some of the most interesting data and developments across the Layer 1 blockchain landscape, from DeFi and bridges to network activity and funding
• The sudden collapse of FTX and Alameda has sent shockwaves throughout crypto, imparting significant capital losses to a wide range of parties including users, developers, investors, and more
• Among L1s, the Solana ecosystem was impacted most severely by the incident due to early investments from FTX and Alameda, along with the two companies’ roles in providing an extensive range of market-making and infrastructural services for the ecosystem
• Solana now faces a long and uncertain road to recovery, but steady network performance during the recent crisis offers a glimmer of hope that continued technical updates can lay the foundation for user interest and growth once more in the future 

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Sen. Ted Cruz said that Binance showed “at minimum ill intent” regarding the offer it made and quickly took back to buy FTX last week.

Noting the speed of Binance’s public offer to buy its troubled rival, then rapid withdrawal, Cruz told The Block, “All of that suggests at a minimum ill intent. And that’s worrisome. I think that is certainly worthy of considerable additional examination.”  

In a brief interview following an appearance at the Texas Blockchain Summit in Austin, Cruz added that it “could make a lot of sense” for FTX’s former CEO Sam Bankman-Fried to testify before the Senate Judiciary Committee, which he sits on. 

The House Financial Services Committee already announced a hearing on the FTX implosion and its implications for the broader digital asset industry earlier this week. The committee’s top Republican told The Block this week that Binance’s role in FTX’s demise is under congressional scrutiny.

But in Cruz’s view that doesn’t let FTX off the hook. 

“There’s no doubt that at least initial reports suggest that an enormous amount of financial mismanagement and potentially fraud was occurring and investors have faced billions in losses,” Cruz added.

As far as criminal charges, the senator said that it’s still too early to tell.

“If there was deliberate and intentional fraud that injured people — and on the face of it, it certainly appears to be the case — then, of course, there should be consequences and liability for that.”

Cruz spoke as the fallout from FTX’s bankruptcy protection filing last week continues to unravel. Among the latest revelations, the Ontario Teachers’ Pension plan announced the write-off of $95 million in FTX while Genesis Global Capital, the lending business of Genesis Trading, temporarily suspended redemptions and new loan originations as a result of its $175 million FTX exposure.

Mining in Texas

This was Cruz’s second consecutive appearance at the mining conference. On stage he called Texas an “oasis” for bitcoin and crypto in general. 

In August, the senator toured Riot Blockchain’s Whinstone site in Texas, one of the largest in the world. He also said that he has an automatic weekly buy of bitcoin and currently owns just under two BTC, not having sold any during the down market.

Cruz argued that bitcoin miners are an asset to Texas’s much-maligned power grid, echoing industry assertions that mining sites can easily turn off at times of peak demand, freeing up that energy for residents, while at the same time supporting the expansion of renewable energy sources.

“As we see additional investment in bitcoin mining, that will further expand our capacity, which is a beneficial hedge against extreme weather events, either extreme heat or extreme cold weather, where energy consumption typically rises dramatically,” he said.

Cautious approach to regulation

When it comes to regulation, Cruz argued that the government should “move slowly and carefully.”

“I think there’s a real risk of government regulators coming in with too heavy a hand and destroying a multitrillion-dollar industry,” he said.

Also in attendance at the conference was former Democratic presidential candidate Andrew Yang, who addressed the potential impacts of FTX’s collapse in regulation going forward.

“Because of FTX and the problems and the headlines and the real people that got hurt, there’s going to be an appetite for regulation that in my mind might not hit the mark, because you want to be able to balance the very real concerns with the need to keep America the home of innovation,” Yang said. “But this is categorically a very, very negative thing for human beings and for the regulatory environment.”

With assistance from Stephanie Murray.

© 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.

Armies of developers, VC funders and CEOs descended upon Miami for two separate crypto conferences on Thursday as the shockwaves from FTX’s spectacular collapse continued to reverberate across the industry. While concern was palpable everywhere, speakers and attendees alike worked to find a silver lining in all the madness.

At the shiny new Solana Embassy in Miami’s Wynwood arts and entertainment district, amid bright neon lights, tropical plants, and displays paying homage to various NFT projects and DAOs, QuickNode co-founder Auston Bunsen assembled a crowd that included Blockchain.com CEO Peter Smith and Steven Goldfeder, the co-founder and CEO of layer 2 network Arbitrum developer Offchain Labs. Not surprisingly, FTX was on everybody’s mind. 

Blockchain.com’s Smith said he didn’t see any immediate winners in the aftermath of the collapse, but he tried to place the event in context, noting that it wasn’t the first exchange to fail.

“Having a big exchange blow up, that’s literally happened every down market we’ve ever been through, and usually it’s the number one exchange that blows up,” he said. “At the moment, your only job as a crypto CEO, running a larger company, is to make sure that you survive. It’s a survival of the fittest. We’re sort of all playing the Hunger Games of crypto right now.”

Back to basics

VC funders told developers that it was time to get back to basics and away from some of the excess that have characterized the past two years.

In a panel titled “Funding your web3 startup: What’s HOT, what’s NOT?” investors Marell Evans of Exceptional Capital, Jared Franklin of Costanoa Ventures and Bruno Faviero of Magna all agreed that it’s going to be a lot harder to raise cash post-FTX, at least in the near future.

“The top teams will continue to get funded,” Costanoa’s Franklin said, adding that he saw opportunities in security, insurance, and even the now-maligned centralized finance sector as other companies step up to fill in the gap left by FTX. “But there’s no doubt that this will have an impact and a chilling effect for probably a couple of years… The quality deals will still continue to get done. They’ll even be competitive. But a lot that’s not just won’t. And I think it’s relatively healthy. What’s unhealthy and unfortunate is the sentiment and the slower adoption that will take place, and the scrutiny.”

He said that layoffs at larger companies could spark a wave of innovation, as it will be less risky for people to go and start a company than to join a downsizing tech company. Arbitrum’s Goldfeder said he was hiring.

FTX’s close links to Miami were not lost on anyone, and it’s an opened-ended question as to how much of an impact the rapid demise of the exchange could have on the momentum. Blockchain.com moved its U.S. headquarters to Miami last year in what was a pandemic-fueled, hot crypto summer that saw a flurry of activity as the city sought to position itself as a global leader in the sector.

Focus on corporate governance

“It doesn’t matter if you’re a city selling an arena sponsorship or you’re a banking partner or you’re a VC investor, the net result of the FTX episode is going to be an increased focus on corporate governance, access controls and due diligence, and I think that’s going to be a net positive for the whole space,” Smith said. “I don’t think that it’s going to impact Miami in a particular way that it doesn’t impact any other city or any place. The bar for diligence and the bar for making sure that crypto companies have good governance is going to come back in fashion.

While Smith said he didn’t believe that there was a single crypto city, he said he loved the energy in Miami. He noted that the majority of the company’s engineering team was in the European time zone and Singapore.

“There’s a certain optimism about Miami that’s very unique, where people have this bias toward believing that the best days of Miami are in its future, rather than in its past,” he said, noting that crypto is spread out, decentralized and lives on the internet. “But the passion for crypto is probably uniquely high here in Miami, and that’s a really cool thing to be a part of.”

Across town at a separate conference hosted by TechCrunch, Devin Finzer, the CEO of NFT marketplace giant OpenSea, said he was thinking about education on the regulatory front.

‘Time to build’

“The challenge, and something we’re investing a ton in, is really ensuring that that message gets conveyed to government regulators and ensure that there’s not sort of one size fits all solutions applied to a technology that’s fundamentally very, very diverse in nature,” he said. “Treating NFTs as securities would be a blanket solution that doesn’t make sense.”

Pratima Arora, Chief Product Officer at Chainalysis, said it was “time to build” and still too early to know the full impact the collapse of FTX will have on the industry.

“It will take time to build back trust,” she said in an interview, stating that she didn’t think there is a fundamental issue with blockchain technology itself. “This could have happened in any industry, and in the past, we’ve seen it happen in a lot of industries. So it’s not new, but it pushes us to the next phase of maturity, and we need to hold ourselves to higher standards.”

Back at the Solana Embassy at QuickNode’s “#Nodevember” conference, there was some fear that regulators might misstep with a hasty, knee-jerk reaction, while other’s pondered which might be the next company to take a hit. Goose Wayne, a core contributor at the GooseFX super app on Solana, said he’s heard that many market makers have stopped activities on some centralized exchanges as they wait to see how the dust settles, who has the reserves and who doesn’t.

“I think instead of a prolonged pessimism, where everyone is waiting to see when the next big drop is going to be, FTX accelerated the fall of all the dominoes that were on their edge in this ecosystem,” Magna’s Faviero said in an interview. “Everything that was going to crash or come down is going to come down, and then it’s just going to be the just settling and only optimism from there. Then it’s only building and going up because all the damage will have been done.”

T-shirts and palm trees 

The Solana even was not without humor. Hidden in the back room at the Solana Embassy were t-shirts bearing a palm tree-adorned FTX Miami logo that those in the know eagerly collected. And in the final session, nervous laughter erupted with a closing question from an audience member: “If you launch a token, how do you avoid getting into trouble?”

One of the hottest items of off-menu swag today at the conference. It had been hidden away in a back room, and you had to know who to ask. too early to be a collector’s item? #ftx pic.twitter.com/qm9rYSkqfl

— Nathan Crooks (@nmcrooks) November 18, 2022

© 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, the issuer of the USDT stablecoin, said it was conducting a chain swap to move 1 billion USDT from Solana to Ethereum.

The chain swap will reduce the total amount of circulating USDT on Solana, but the company said on Twitter that overall supply of the stablecoin will not change.

Earlier this week, Binance suspended deposits of USDC and USDT from Solana but quickly resumed them shortly after. This announcement came after a rival exchange, OKX, delisted both USDC and USDT on Solana, and also stopped accepting deposits or withdrawals.

The Solana Foundation declined to comment on the situation and referred to an article Tether posted yesterday.

“Alameda’s heavy involvement in Solana doesn’t impact the underlying dynamics of how USDT functions and USDT issuance works whatsoever,” Tether said in the post, referring to the sister trading firm of FTX that filed for bankruptcy protection last week.

© 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 and Exchange Commission has started administrative proceedings against American CryptoFed, a Wyoming-based decentralized autonomous organization (DAO), to weigh a stop order to suspend the registration of the offer and sale of its Ducat and Locke tokens.

The SEC said a Form S-1 registration statement filed by American CryptoFed last year did not include required information about the company’s business, management and financial condition.

The agency also said the statement contained “materially misleading statements and omissions, including inconsistent statements about whether the tokens are securities.”

“An issuer seeking to register the offer and sale of crypto assets as securities transactions must furnish the required disclosure information to the SEC,” David Hirsch, chief of the enforcement division’s crypto assets and cyber unit, said in a statement. “American CryptoFed not only failed to comply with the disclosure requirements of the federal securities laws, but it also claimed that the securities transactions they seek to register are not in fact securities transactions at all.”

The SEC said an investigation was conducted by Martin Zerwitz and Michael Baker of the SEC’s crypto assets and cyber unit.

© 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.

Man Group, the biggest publicly traded hedge fund firm, is reportedly close to starting a crypto hedge fund.

The crypto hedge fund strategy has been in development for several months, Bloomberg reported, citing people with knowledge of the matter who asked not to be identified.

Man Group’s AHL trading division plans to start the fund as soon as the end of this year, the people said.

The crypto fund beginning operations is contingent on its assessment of counterparty risks, one of the people told Bloomberg. The effort is being led by money manager Andre Rzym. Man Group’s AHL already trades cryptocurrency futures.

This announcement comes amid the unraveling of crypto exchange FTX, one of the most significant crypto market events in recent years.

Centralized entities are seeing the most collateral damage from FTX. Several prominent lenders and crypto yield programs have suspended withdrawals this past week, and billions of dollars of user funds have been lost. FTX declared bankruptcy last week. 

© 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 prime broker FalconX will no longer use the Silvergate Exchange Network (SEN), according to an email sent by FalconX to clients and obtained by The Block.

“Out of an abundance of caution for our customers, we will not be using Silvergate SEN and wires, effective immediately and until further notice,” the email said. “This action is based on publicly available information on Silvergate and is consistent with other market players.”

In response to a request for comment, FalconX co-founder and CEO Raghu Yarlagadda told The Block that “the market is in a heightened risk environment. We are being extremely cautious.” 

In response to a request for comment, Silvergate said its banking platform was built to withstand periods of market volatility and it “remains committed to solving problems for their customers,” but did not specifically comment on FalconX.

Silvergate shares are down nearly 11% and have been falling since disclosing its exposure to FTX through deposits last week.

“Silvergate has no outstanding loans to, nor investments, in FTX, and FTX is not a custodian for Silvergate’s bitcoin-collateralized SEN Leverage loans,” Silvergate CEO Alan Lane said last week. “To be clear, our relationship with FTX is limited to deposits.”

SEN allows Silvergate clients to send U.S. dollars and euros 24 hours a day. The network has been a key driver of growth for the bank, handling over $445 billion in volume year-to-date, according to The Block’s data dashboard.

“Any assets sent via SEN or to Silvergate via wire transfer will be deemed an invalid settlement, and you will owe FalconX the full settlement amount,” the FalconX email said. “FalconX otherwise continues to operate as usual.”

FalconX will accept settlement in the USDC stablecoin, according to the email.

Goldman Sachs analysts have slashed Silvergate’s price target to $40 from $64. The stock is down 20% since its FTX exposure disclosure.

Updates with comment from Silvergate.

© 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.

NFT protocol Metaplex laid off staff due to to the “indirect impact” of the collapse of crypto exchange FTX.

While the company said its treasury was not directly impacted and that its fundamentals remain strong, it will take a more conservative approach moving forward, CEO and co-founder Stephen Hess said on Twitter.

Metaplex is an ecosystem of tools on Solana that NFT creators can use for mints, airdrops and storefronts. Following FTX’s demise, many NFT companies have scrambled to reassure their communities about any possible exposure to the once-popular crypto exchange.

“We will be re-focusing our efforts on a few key initiatives: Royalty Enforcement, Creator Studio, Fusion, Compression and continued improvement of dev tools and SDKs,” Hess said. 

Concern about possible fallout has centered on whether brands were storing treasuries on FTX, as happened with Solana-based gaming metaverse Star Atlas. None of the top NFT collections by all-time trading volume reported funds in the exchange, though Yuga Labs said it moved 19,700ETH off of FTX on Nov. 9.

Source: The Block Research, Breadcrumbs, Etherscan

FTX’s sister trading firm Alameda Research participated in Metaplex’s $46 million token sale in January this year. The round was co-led by Jump Crypto and Multicoin Capital.

On Nov. 17 Jump Crypto responded to speculation that it was shutting down, stating it is still actively investing and trading. Around 10% of Multicoin Master Fund’s total assets under management is stuck on FTX, according to documents obtained by The Block, while its third VC fund also has exposure in excess of $25 million.

Metaplex did not respond to a request for comment by the time of publication. 

© 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.

Centralized exchanges still standing after the fall of FTX rushed to show proof of reserves. It’s a nice show, but it’s not enough, experts say.

Proof of reserves — or showing exactly what an exchange holds — is an attempt at the type of transparency that was, as recent bankruptcy filings showed, badly lacking at FTX. And so to reassure customers in the wake of the failed exchange’s collapse last week, exchanges including Binance, OKX and Crypto.com held up their proof amid social media choruses of “not your keys, not your crypto” and calls for greater clarity around the reserves of such exchanges.  

On the face of it, the transparency is a welcome move. But proof of reserves is just a single snapshot and doesn’t show the full picture, experts say.

Assets are shown at a fixed point in time, which gives opportunities for manipulation, Bank of America wrote in a Nov. 17 note regarding proof of reserves.

What’s missing?

The exercise also has limited value because it’s just a single facet of many interconnected financial metrics, Wayne Trench, CEO of exchange OSL, said.

“They don’t reveal audited fiat reserves, client and company liabilities, company loans, or much of the other required information necessary to ascertain a firm’s financial health,” Trench noted.  

OSL is owned by BC Technology Group, a public company based in Hong Kong that is subject to regulations and regular audits. While acknowledging that traditional structures aren’t bulletproof either, the company stressed that regular and transparent audits, the segregation of client assets in bankruptcy remote trusts, and being subjected to tier-one regulatory supervision and oversight currently provide significantly higher levels of investor protection.   

CoinShares CFO Richard Nash echoed those sentiments and said sharing of proof of reserves is a beneficial practice.

“It is not, however, infallible,” Nash stressed. “It supports delivering trust and transparency, two concepts which have never been more relevant in the digital asset space than over the last two weeks.”

Nash noted that CoinShares is publicly listed on the  Nasdaq First North Growth Market and that its proof of reserves  “sits alongside our annual financial statement audit work.”  

“What conclusions, if any, can be drawn about the financial health of the entity holding custodial assets when a proof-of-reserves is not a full balance sheet view,” Nash asked.

While exchanges were quick to hold up their proof of reserves, not one has shared proof of liabilities or outstanding debts.

Reserves, by the numbers 

Binance, Crypto.com, OKX, Deribit, Kucoin, Bitfinex, and Huobi posted proof of reserves following the FTX’s collapse. The Block broke down the total value of reserves in dollars and each reserve asset, using data via Defi Llama.

Most reporting exchanges – except for Binance and Crypto.com – detailed a majority of clean reserves with clean total value locked (TVL) — with limited assets issued by the exchange. Kraken only posts reserves semi-annually and its last filing, dated June 30, has not been included as such. 

Binance 

Binance reported the largest reserves of any exchange. According to data via Defi Llama, the exchange giant’s reserves clocked in at over $65 billion. 

The exchange’s total reserves — as of Nov. 11 — include 475,000 BTC, 4.8 million ETH, 17.6 billion USDT, 21.7 billion BUSD, 601 million USDC, and 58 million BNB.  

Binance holds a significant portion of its reserves in BUSD and BNB, worth around $35 billion. Most of its BNB holdings are on the Binance Smart Chain via its BEP20 token standard, though some 15 million BNB tokens held in reserve were issued via the Ethereum network.  

The Binance stablecoin, BUSD, is issued by Paxos and not by the exchange itself.  

The exchange’s reserves are split across four blockchains: Bitcoin, Binance Smart Chain, Ethereum and Tron. 

Binance’s reserves on the Ethereum blockchain are not limited to the chain’s native asset, ether. The exchange also holds stablecoins USDC, USDT, and BUSD on the chain.  

The Ethereum blockchain was unaffected by recent market events. While digital asset prices have fallen sharply, the underlying network has continued to process transactions. 

Crypto.com 

Crypto.com’s $2.46 billion in reserves is comprised of 25% bitcoin, according to Defi Llama. Tether’s USDT and ether make up 5% and 18%, respectively.  

The exchange raised eyebrows when its revealed 21% of its reserves were made up of Shiba Inu, a dog-themed memecoin susceptible to speculative price swings. The token traded higher in line with dogecoin when Elon Musk’s takeover of Twitter was completed. Shiba Inu is currently trading at $0.000009. 

Crypto.com’s reserves are split across Bitcoin and Ethereum. Shiba Inu is a token on the Ethereum blockchain. 

OKX 

The majority of OKX’s reserves are held in stablecoins, with $2.43 billion USDT and $195 million USDC. According to Defi Llama, the Seychelles-based exchange also has 91,000 BTC reserves. 

62% of OKX’s reserves are held on Ethereum, with 27% held in bitcoin. Tron and Arbitrum make up 5% and 3%, respectively. 

Some chains, like Polygon, aren’t displayed; this blockchain represents a much smaller portion of the firm’s total reserves.  

Bitfinex

Bitfinex reported reserves of $5.06 billion, $3.26 billion of which was in bitcoin. The exchange’s remaining reserves were $1.49 billion worth of ether, $88 million in USDT, and $55 million in USDC.

The majority of the exchange’s reserves are split across three chains: Bitcoin, Ethereum and Tron. The majority of its holdings are in bitcoin, with the remaining held mostly on Ethereum — through ether, stablecoins and other tokens on the network — with a small amount on Tron. 

Huobi  

Huobi reported reserves of over $3.11 billion, according to Defi Llama. The exchange’s reserves include 43,200 BTC, 274,000 ETH, 820 million USDT, and 9.7 billion TRX. 

Broken down by the chain, most of Huobi’s reserves are held on Ethereum-native assets, comprising 43% of the total. Bitcoin and Tron account for 34% and 23%, respectively.  

Huobi holds assets from other chains, including Algorand, Avalanche, Polygon, Litecoin, EOS, and Solana. These chains each comprise 1% or less of the exchange’s reserves. 

© 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.