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Episode 98 of Season 4 of The Scoop was recorded remotely with The Block’s Frank Chaparro and Brevan Howard Co-Heads of Ventures Peter Johnson and Colleen Sullivan.

Listen below, and subscribe to The Scoop on Apple, Spotify, Google Podcasts, Stitcher or wherever you listen to podcasts. Email feedback and revision requests to podcast@theblockcrypto.com.

In August, it was reported that asset management firm Brevan Howard raised over $1 billion to invest in the crypto industry.

In this episode of The Scoop, Brevan Howard’s Co-Heads of Ventures Peter Johnson and Colleen Sullivan break down their investment thesis and explain what segments of the crypto market they believe are seeing the most interest from existing brands.

While traditional financial institutions are slowly moving their way into the crypto ecosystem, Sullivan points out that many traditional brands have already fully entered crypto via NFTs, metaverse experiences, and gaming:

“Look at Goldman, JPMorgan, Citi, they’re all involved in crypto to a certain extent — not to the degree we would have thought — but the institutions that are here are the Gucci’s, the Nike’s, the Tiffany’s, the Dolce and Gabbana, Balmain, Balenciaga.”

Blockchain gaming is one subset of the crypto market that Brevan Howard has recently been allocating to; just last week the firm co-led a $40 million Series A for Web3 gaming startup Horizon Blockchain Games.

Outside of gaming, the digital asset opportunities Brevan Howard is looking to invest in relate to practical use cases. As Johnson explains,

“What we’re really excited about right now is moving beyond just speculative trading and where are the real world use cases that we’re seeing crypto start to gain adoption.”

During this episode, Chaparro, Johnson, and Sullivan also discuss:

• Why decentralized derivative platforms are an exciting opportunity
• What qualities Johnson and Sullivan look for in founders
• How regulation will make the crypto space more efficient

This episode is brought to you by our sponsors Tron

About Tron
TRON is dedicated to accelerating the decentralization of the internet via blockchain technology and decentralized applications (dApps). Founded in September 2017 by H.E. Justin Sun, the TRON network has continued to deliver impressive achievements since MainNet launch in May 2018. July 2018 also marked the ecosystem integration of BitTorrent, a pioneer in decentralized web3 services boasting over 100 million monthly active users. The TRON network completed full decentralization in December 2021 and is now a community-governed DAO. | TRONDAO | Twitter | Discord |

© 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.

Financial turbulence in the UK following last month’s announcement of unfunded tax cuts has caused a spike in trading of crypto against the British pound. 

UK government bonds and the pound have tumbled since Chancellor of the Exchequer Kwasi Kwarteng’s Sept. 23 “mini budget.” The surge in yields on longer-term government debt spilled over into a crisis for pension funds as they were forced to rapidly adjust their portfolios — before the Bank of England (BOE) responded with a package of bond buying to ease the pressure. 

British assets fell again today after BOE Governor Andrew Bailey cautioned pension funds that support will end in three days. A later report from Financial Times, citing bankers briefed by the BOE, said the emergency bond-buying program could continue past this week’s deadline 

Crypto volumes increase against GBP

This turmoil in the UK has coincided with a notable increase in bitcoin trading against the nation’s currency. Volume increases have been particularly clear on the centralized crypto exchange Bitfinex.

BTC/GBP volume, measured in BTC, has increased alongside financial worries in the UK

Additionally, ether volumes have increased against the pound — most notably, again, on Bitfinex.

There has also been a notable increase in ETH/GBP volume, measured in ETH

Just arbitrage?

While some are speculating that this data shows UK investors are fleeing into crypto, that may not necessarily be the case.

“Ultimately, when GBP is volatile, some traders could make more money arbitraging against BTC/USD pairs,” explained The Block’s VP of Research, Larry Cermak.

“So it doesn’t necessarily mean people are buying BTC or ETH and dumping GBP,” he continued. “It could also just mean market makers and traders are trying to arbitrage the difference.”

© 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.

An exploiter who stole roughly $116 million from Mango Markets on Oct. 11 put forward a governance proposal that, if it passes, would give them roughly $70 million in the form of a bounty reward.  

Voting for the governance proposal is currently live and ends on Oct. 14 at 9:12 p.m. EST. The attacker has also used their stolen MANGO tokens — which amount to 0.66% of the total supply — to vote yes on the proposal. 

The proposal states that the attacker would send back various tokens valued at approximately $50 million, at the time of this writing. The sending of those funds is contingent on Mango Markets using its remaining $70 million USDC treasury to pay back all users without bad debt, and any remaining bad debt. If passed, the attacker would be able to keep the remaining funds after covering the difference.  

The remaining funds from the initial exploit that would be kept by the attacker total approximately $70 million.  

No criminal investigation pursuits or freezing of funds would be allowed against the attacker, if the proposal passes and all obligations are met.  

© 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 asset manager Grayscale Investments has filed its opening brief in a lawsuit over the Securities and Exchange Commission’s rejection of its application for a spot bitcoin exchange-traded fund.

The company’s legal argument centers around what it considers to be an uneven application of the law due to regulators approving bitcoin futures that are tied to spot market pricing.

On Tuesday Grayscale Chief Legal Officer Craig Salm told The Block that if the SEC is comfortable with futures contracts, which are priced by exchanges offering spot market trades, the agency should be comfortable with the underlying asset as well.

Salm argued that the allowance of futures without approval of a spot ETF is a, “Distinction without a difference in the context of bitcoin,” because, “CME bitcoin futures themselves are priced under the spot bitcoin market.”

The company further elaborated on its argument in the first brief filed in the suit. 

“The Commission has violated the [Administrative Procedure Act’s] most basic requirements by failing to justify its vastly different treatment of bitcoin futures ETPs and spot bitcoin ETPs,” said the brief.

The regulator rejected Grayscale’s bid to convert its flagship fund, GBTC, into an ETF in late June. The same day the decision came down, the firm announced it would appeal the decision, following through on earlier threats of legal action. 

Today’s brief contends that the SEC’s refusal to approve GBTC’s conversion harms its 850,000 investors who already own shares in the trust. 

“Given that the Commission did not approve the Trust to trade as an ETP on the Exchange, the value of its shares cannot closely track the value of the Trust’s underlying bitcoin assets—depriving Trust shareholders of billions of dollars in value,” said the filing.

The argument is one that Salm previewed in a previous interview. 

Many in the industry were hopeful the SEC would change its tune on spot bitcoin ETFs when it green lit futures-based bitcoin ETFs starting in October of last year. At the time, some thought it was a sign the SEC was taking a step closer to a physically-held product. However, hopes were quickly dashed as the SEC continued to reject applications for a spot bitcoin ETF, most recently with Tuesday’s rejection of WisdomTree’s proposal.

Grayscale planted the seeds of what would become its legal argument in a letter it sent to the SEC in November of last year, when the regulator began issuing a wave of new rejections. At the time, Grayscale said the SEC’s willingness to approve futures products but not spot could be a violation of the Administrative Procedures Act. 

The SEC’s rebuttal is due Nov. 9. 

With additional reporting from Colin Wilhelm.

© 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 hacker stole $100 million from Mango Markets, a trading and lending platform on Solana.

The exploit appeared to be the result of manipulation in the price of Mango Market’s native MANGO token via an oracle price manipulation attack, Mango Markets tweeted. The platform said it’s investigating and taking steps to have “third parties freeze funds in flight,” it tweeted.

The attacker first deposited $5 million in USDC to the platform, and then opened an abnormally large long position, according to blockchain security firm Hacken on Twitter. This caused the token price to jump nearly 1000% in less than an hour, which concurrently spiked the collateral value of the attacker’s account.

The attacker then used this manipulated collateral value in their account to borrow a large debt position across multiple coins on Mango Market’s borrowing and lending platform.

Since the price of the token and their collateral was manipulated much higher, they were able to borrow and steal roughly $114 million across various tokens, according to Hacken.

It also is disabling deposits on the front end to prevent users from using its platform and sent out a statement to the attacker to contact them regarding a bounty for the return of the funds.

© 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 examiner in the Celsius bankruptcy has filed a preliminary plan that estimates the total cost of her investigation could be as high as $5 million, and at the same time asked Celsius to pick up the pace of its disclosures.  

Shoba Pillay said the first priority of her investigation is to get a firmer grasp on the volume and extent of documents and data that her team will need to review and analyze. While the Jenner & Block lawyer recognized that Celsius is fielding multiple demands for information, she noted her requests must be prioritized to meet court deadlines.

“If the Examiner is going to meet the Court’s deadlines, the pace of access to documents will need to be accelerated,” she said in the plan filed today.

Her team has shared these concerns with Celsius and “is optimistic” that the bankrupt lender will respond promptly to her requests in the future. 

While Pillay said “any attempt to budget at this time is at best an educated guess,” since she hasn’t received the necessary documents to assess the work ahead, she can roughly estimate that the fees for her and her team will be between $3 to $5 million. 

As of now, she anticipates interviewing 15-25 witnesses, as well as talking with Celsius executives and employees in “non-interview settings” to facilitate the flow of information. She also plans to retain forensic and financial advisor Huron and intends to submit that request in the near future.

Her team will also monitor any government investigations into Celsius. State regulators have repeatedly expressed their concerns during the Chapter 11 process, and pointed out that Celsius is the target of a multi-state investigation into possible securities violations.

The work plan will be presented for approval to Chief Bankruptcy Judge Martin Glenn on Oct. 21. Parties in the case may file objections or comments up until Oct. 18.

The court appointed Pillay as an unbiased examiner after the government’s representative in the case, the U.S. Trustee, made repeated calls for greater clarity into Celsius’ business dealings. Pillay is tasked with completing an outside investigation into the lender’s business dealings, including its storage of crypto holdings, account management for customers, the status of its mining business and tax issues. That scope was narrowed through the court process due to concerns over incurring further costs for the already bankrupt estate.

Pillay’s work proposal says a number of interested parties have suggested expanding that scope. Still, she said she does not have enough information presently to weigh in on the issue. Any expansion of scope would be circulated to other parties in the process, including the creditor committee, which originally objected to spending large swaths on an examiner, and Celsius counsel. This work plan may also be modified down the line with court approval. 

© 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 senior U.S. bank regulator Brian Brooks, now a crypto company CEO, decried the current leadership at federal regulatory agencies as “overtly hostile to crypto.”

“This is in fact a political issue,” Brooks said. “The leadership in power at the moment is devoted to reining this in if not destroying it, and a number of the things I’ve heard, even in the last 24 hours in D.C., have convinced me of that.”

Brooks, now the CEO of digital asset service company Bitfury, was Comptroller of the Currency in the waning days of the Trump administration. He made the remarks during an onstage interview at D.C. Fintech Week, a conference in Washington hosted by Georgetown University’s Law Center.

He went on to compare the current state of the digital asset industry to the financial sector following the 2008-09 global financial crisis and Silicon Valley following the dotcom bubble burst. Brooks compared the collapse of Celsius, Terra, and Three Arrows Capital to the financial meltdown caused by overleveraging in parts of the financial sector during the crisis, which he argued represented a relatively small portion of the overall financial sector.

“It actually does not take much to blow up a financial market,” said Brooks. “The truth is that the entire financial crisis was caused by a very slight uptick in defaults inside the Fannie Mae book.”

“Those things represented maybe two percent of crypto market and bitcoin fell 80%,” added Brooks, speaking of the bankrupt crypto projects.

© 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.

Banking platform Step, which caters to a teenaged and young adult clientele, has secured $300 million in new debt funding.

Triplepoint Capital and Evolve Bank & Trust led the funding round, the company said in a press release.

The funding round announcement coincided with the company’s launch of a crypto investment platform aimed at minors and young adults, who with the consent of a parent or legal guardian, will be able to buy and sell bitcoin, with additional stocks and cryptocurrencies to join the platform soon, according to Step.

In addition, the company launched a financial literacy program, Money 101, a six-lesson course that spans the banking sector to cryptocurrency investing, said Step.

With the funding secured, Step’s raise now totals $500 million, including debt and equity financing, from investors such as Crosslink Capital, Stripe, Coatue, General Catalyst, Triplepoint Capital, Charli D’Amelio, Stephen Curry, Justin Timberlake, Will Smith, The Chainsmokers, Alex Rodriguez, and others.

© 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 every bitcoin mining stock tracked by The Block trended downward on Tuesday.

Bitcoin was trading at around $19,000 by market close, according to data from TradingView.

Argo Blockchain fell 14.51% on the London Stock Exchange, followed by TeraWulf (-13.08%), HIVE Blockchain (-10.02% on the Toronto Stock Exchange) and Bitfarms (-9.22% on the Toronto Stock Exchange).

Bit Digital was down 3.67% after news that a Blockfusion facility, hosting 17% of the company’s mining fleet, was ordered to shut down due to a zoning ordinance.

Here’s how crypto mining companies performed on Tuesday, Oct. 11:

© 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’s Sam Bankman-Fried appears committed to doing due diligence on a possible bid for distressed lender Celsius, but whether his firm will ultimately throw a proposal into the ring is not necessarily assured.

At DC Fintech Week, Bankman-Fried zoomed in for a fireside chat on distressed assets, talking about his recent role as a market consolidator.

Indeed, FTX has been on a buying spree, most recently placing the winning bid for bankrupt lender Voyager’s assets. Bankman-Fried said the firm is “pretty comfortable with where that ended” and is hoping to start returning assets to customers “very shortly.”

But Voyager is only one of a multitude of major industry bankruptcies, including Celsius, fund Three Arrows Capital and mining infrastructure firm Compute North. Bankman-Fried said there could be more spending on the horizon.

“There’s going to be bankruptcies that are getting started that we may or may not end up playing a role in, but I think that we’ve probably made most of the moves that we anticipate making for now,” he said.

Celsius is still in its exclusivity period, where the firm might propose its own plan for a restructure, but once that lapses, it could face a similar auction process to Voyager. Reports have circulated that Bankman-Fried is thinking of throwing FTX’s hat in the ring, but his comments today were reserved, saying he has yet to do a “deep dive” into the possibility of bidding for Celsius. 

“I would say on prior we will almost certainly take a look at places like that, we will almost certainly want to at least be aware of what’s going on,” he said. “I don’t know whether that ultimately ends up meaning that we will do something there or not.”

With bankruptcies like Voyager and Celsius, Bankman-Fried said FTX approaches the process by trying to get a sense of what it would take to solidify the business, assessing its options and assessing how much impact it can create relative to the amount of its balance sheet it would have to deploy.

Those questions will be easier to answer later in the process if Celsius enters the auction phase. Until then, an outside examiner is currently conducting an investigation into Celsius’ financials with a report on the way. 

© 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.