FreeCryptoCurrency.Me

“I personally bought about a quarter of the new Telegram bonds,” said Pavel Durov, the CEO of the popular but not-yet-profitable platform.

Crypto securities ruling could impact pricing of CEL token but won’t affect restructuring plans, the counsel said.

Synthetix is targeting a Q4 launch for the third version of its decentralized perpetual futures exchange and its newly announced front end, called Infinex, according to founder Kain Warwick.

“We’re talking like three months,” said Warwick in an interview at the ongoing EthCC event in Paris, when asked about the launch of Infinex. He added the team was confident that its launch will align with Perps V3, which is aimed at Q4. 

Synthetix operates as a decentralized protocol, facilitating the trade of synthetic assets and cryptocurrency derivatives. Its offerings include spot trading or perpetual contracts (perps), a type of futures contract that do not have an expiration date.

The Synthetix protocol is presently undergoing an upgrade to its third version. Upon the completion of this upgrade, its perpetual platform will also become operational on its architecture, under the name Perps V3.

While Perps V3 has been in development for some time, Infinex was only recently announced. On July 14, Warwick published a blog post explaining the necessity of creating a dedicated front end for the exchange with the aim to offer an experience similar to that of a centralized exchange, while still adhering to the ethos of self-custody.

“Our view is that those people who are trading on centralized exchanges, all things being equal, would prefer to trade on a DEX, but they’re not willing to forgo that user experience they have. If we can replicate the user experience while having similar fees, similar liquidity, the safety of not having custody of their assets — and having convenience and ease of use — will tip the scales,” said Warwick.

The team said Infinex will focus on making it easy for users to access decentralized perpetuals trading. It aims to provide a better user experience compared to other decentralized exchanges, mainly by eliminating the need to sign a blockchain transaction for every transaction.

Taking on centralized exchanges

Centralized exchanges have frequently encountered problems due to theft or mismanagement — from the Mt. Gox incident in 2014 to the FTX situation in 2022. Yet Warwick expressed doubts that even recent disasters may not be enough to scare users away from centralized exchanges toward their decentralized counterparts.

“The skeptic in me says that a new user coming into the space in 2024, FTX might be a distant memory at that point. We’ve got short memories in crypto,” he said. “What we need to do is make sure that they have an alternative that is safer and just as easy to use.”

Infinex will solely be providing perpetual trading services for now. Still, Warwick acknowledged that the exchanges that have dominated each crypto cycle have typically offered a variety of trading products in one place.

“Having just perps is not going to be enough, there’s no question. But I think, given where the market is now, launching with perps and really getting that right will be sufficient to bring some traders across. And then once you’ve got that foothold, then you can work out how you expand from there.”

On the regulatory front, Synthetix will not be following in the footsteps of other decentralized exchange services like Uniswap, dYdX and 1inch, which have implemented user restrictions on their front ends. Warwick stated that there would be no geographical restrictions or know-your-customer procedures for Synthetix products. He contended that since the front end isn’t directly providing the exchange services, its regulatory status remains a point of contention.

“I think that part of the reason for that is [dYdX is] still a full stack exchange, even if they’re a DEX. Right. You know, there’s a single entity that’s operating the front end that’s custodying assets and that’s actually executing the trades on the exchange itself,” said Warwick. “In our case, we’ve kind of teased those things apart. So I think it’s less clear in my mind. But I’m sure at some point there’ll be more clarity around this.”

© 2023 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.

For Shima Capital, which began investing in crypto in early 2021, deal flow and fundraising have come easy. It’s backed close to 200 startups, consistently ranking among the sector’s most active venture funds, and just last August announced a raise of $200 million for its debut fund, with backers including billionaires Bill Ackman and Alan Howard, former presidential candidate Andrew Yang and industry heavyweights like Animoca Brands and Dragonfly Capital.  

But Shima has had a harder time securing the services of an auditor, based on documents reviewed by The Block. 

The Puerto Rico-based company — which was originally based in Delaware — has flirted with several accountancy firms, but after more than two years of feverish investment, it doesn’t appear to have undergone a formal audit.

A form ADV filed in May this year suggests the fund’s annual statements are subject to an annual audit. A spokesperson for Shima said the company is “currently in the process of engaging with multiple auditors” but didn’t provide answers to other questions.

Shima is run by Yida Gao, who in 2020 made Forbes’ 30 Under 30 list of budding young venture capitalists. Prior to forming Shima, he spent time as a general partner at Divergence Digital Currency and Struck Capital, two venture firms. He previously worked for New Enterprise Associates and Morgan Stanley. 

The documents reviewed by The Block — many of them published as part of an ongoing court case involving Gao and his former employer Adam Struck — paired with comments from people familiar with Shima underscore its struggles to find an auditor. 

Outside risk parameters

An investor presentation from the Summer of 2021 suggests Shima tried to engage auditing firm Richey May & Co. to perform tax and auditing services. Stephen Vlasak, a partner at Richey May, confirmed in an email that the firm had “never been officially engaged or issued any audit reports for Shima Capital.”

A slightly altered version of the same presentation suggests Shima then turned to BDO. Gao himself names BDO USA as Shima’s “potential auditor” in a court filing. In a separate investor update in 2022, BDO Cayman was named as Shima’s auditor. But the accountancy firm informed Shima in March 2023 that, after a policy change, the venture firm fell outside of BDO’s risk parameters. BDO’s U.S. and Cayman Islands units didn’t respond to requests for comment.

Next came Marcum LLP, which recently began appearing in Shima’s regulatory filings. Marcum was engaged earlier this year, according to a person familiar with the matter, but the accountancy firm ultimately determined that Shima lay outside its risk parameters. Marcum didn’t respond to multiple requests for comment. 

On June 21, Marcum was charged by the U.S. Securities and Exchange Commission with “systemic quality control failures throughout the firm.” Marcum agreed to pay a $10 million penalty to settle the charges. 

More than two years after Shima began investing in startups, its search for an auditor goes on. 

A spokesperson for the company didn’t respond to most of The Block’s questions, except to confirm that Shima is currently engaging with multiple auditors and to point out that securing an auditor in the U.S. has been “a huge crypto industry-wide challenge,” with formerly friendly outfits like Mazars and Armanino halting work in the sector after the disastrous collapse of FTX last year. 

To be sure, Shima is not the first crypto VC to struggle to get accounts signed off. Animoca Brands, the hyperactive web3 investment firm, finally produced a long-delayed set of audited accounts for 2020 in early June this year. In an earlier statement, Animoca chair Yat Siu said the company’s “financial auditing process required breaking entire swathes of new ground,” tackling questions about how to account for token sales and NFTs. 

Among the sector’s most active investors

When Shima unveiled its $200 million fund in August last year, Gao said in a statement that the company had identified a pocket of web3 founders that were too small for tier 1 investors. Shima planned to focus there, writing checks of $500,000 to $2 million.  

“We also observed that early-stage funds usually do not provide extensive value-adds for founders given limited resources. At Shima, we take the opposite approach and spend the necessary resources to provide our portfolio companies with surgical support typically found only with larger funds,” Gao said. 

Shima’s strategy seems to have resonated with founders. The venture firm racked up a dozen deals or more for six consecutive quarters until Q2 this year, when it made 9 investments.

Shima’s rise has not been without incident, however. Late last year, news broke that Gao had been sued by his former employer, Adam Struck of Struck Capital Management. 

Gao had been hired to help run Struck Capital’s blockchain investments in 2016. In the complaint, Struck alleged, among other things, that Gao had stolen proprietary materials to start a competing firm, Shima. Gao had also taken a position at a Cayman Islands-based Special Purpose Acquisition Vehicle that Struck alleged had links with authorities in China. Gao countersued, accusing Struck of breaching the terms of their partnership.  

In February of this year, The Financial Times examined investor presentations in which Shima initially touted outsized returns on an investment in BitClout, a blockchain-based social media outfit, only to scrub that reference in a subsequent version. Gao told the FT the change was due to “a clerical error” and noted he hadn’t had “a Grant Thornton or somebody audit my personal books.” The same article stated that BDO’s Cayman Islands unit had been engaged to prepare an audit of Shima’s 2022 financial results, which, at the time, were due “in a matter of months.” 

© 2023 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.

Telegram CEO Pavel Durov confirmed that he owns toncoin, the cryptocurrency adopted by the messaging app. The price of toncoin has risen from $1.34 to $1.38, up 3% since he commented on the matter today.

Durov said in his personal Telegram announcement channel that he had bought a quarter of the $270 million of newly issued Telegram bonds, making the point that he is reinvesting in the company.

 

“Some people suggested I should have instead bought a house or a jet. But I prefer to stay focused on my work, without ‘owning’ anything (well, apart from Telegram, some Bitcoin and some Toncoin),” he added.

Durov has previously said he owns bitcoin. He spent around $1.5 million on 2,000 bitcoin a decade ago, which would be worth $60 million at current prices.

© 2023 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.

Responding to Ron DeSantis’ latest proposal to ban central bank digital currencies (CBDCs) in the United States if elected president, Akash Mahendra said such a decision could do “more harm than good.”

Mahendra, director at Haven1 Foundation and portfolio manager at the digital wealth platform Yield App, told The Block in an email that the digitization of money is inevitable, and CBDCs will eventually be integrated into existing payment systems. 

“Central bank digital currencies (CBDCs) have once again been thrust into the spotlight, this time in light of Ron DeSantis vowing to ban CBDCs in the U.S. if elected president,” Mahendra said. “Yet mixing pure politics with crypto could do more harm than good. At its core, cryptocurrencies offer unique features that have only just been made possible, with immutability, privacy, transparency, decentralization and scarcity — fundamentally different from CBDCs.”

“The digitization of money is the future, and it’s only a matter of time before CBDCs are integrated into existing payment systems,” he added. “However, if the U.S. government decides to establish a CBDC, it should be solely based on its technological advantages and merits.”

Mahendra cited examples in other countries such as Project Rosalind in the UK, where companies like Quant Network were selected to collaborate with the Bank for International Settlements and Bank of England to develop APIs for CBDCs and bring the concept closer to reality.

The portfolio manager believes that “cash and cryptocurrencies can co-exist alongside a government-issued currency.” However, “individuals should have the freedom to choose their preferred payment methods, including the choice not to solely use a CBDC,” he added.

Mahendra suggested that CBDCs could help over 7 million unbanked Americans, plus billions globally, while reducing criminal activity and cross-border fees.

“It’s been proposed that CBDCs will help over 7 million Americans, on top of billions of individuals across the globe who are unbanked, as well as reduce criminal activity by allowing the government to easily track payments. By improving the cross-border payment system that burdens immigrants with excessive fees, it could really make a difference in day-to-day lives,” he said.

DeSantis’ crypto pledges

The latest pledge by the U.S. presidential candidate, made at the Family Leadership Summit in Iowa on Friday, follows a similar move in March — when DeSantis touted a bill to ban any use of a Fed-backed digital currency in Florida, where he is currently Governor.

In early May, DeSantis claimed the Biden administration wants “to get rid of crypto,” and previously accused President Joe Biden of eyeing the technology for “surveillance and control.” While the Republican is an avid critic of centrally controlled digital currencies, he has expressed support for decentralized cryptocurrencies that the government has no control over.

On May 24, DeSantis officially launched his presidential campaign in a Twitter Spaces event with Elon Musk, promising to protect bitcoin if he is elected next year. “I just do not have an itch to have to control everything that people may be doing in this space, and I think the current regime, clearly, they have it out for bitcoin, and if it continues for another four years, they’ll probably end up killing it,” DeSantis said at the time.

© 2023 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.

Federal authorities in the U.S. executed multiple seizure warrants for accounts belonging to Deltec Bank, a Bahamian bank with ties to digital asset firms.

According to documents unsealed in federal court on Monday, the U.S. Secret Service executed multiple seizures of funds from U.S. bank accounts controlled by Deltec last month, citing probable cause for wire fraud, bank fraud, or money laundering.

“Law enforcement has been investigating organized, international criminal money laundering syndicates operating cryptocurrency investment and other wire fraud scams,” the affidavit reads. “Victims were fraudulently induced to transfer money into shell companies, at which point the money underwent a series of transfers, generally ending overseas, designed to conceal the source, nature, ownership, and control of the funds.”

The Secret Service was authorized to seize up to $58.5 million, and the seizures took place on June 13 and June 15, according to the affidavit. The accounts that were subject to the seizure warrants were custodial accounts with another bank, Mitsubushi Bank UFJ Trust in New York, but opened by Deltec on behalf of corporate clients.

International fraud scheme

The Secret Service alleges that the customers whose funds Deltec held there were shell companies at the heart of an international fraud scheme involving the faking of crypto sites in order to trick victims into depositing their digital assets or cash into accounts, believing that they invested it.

As part of the scheme to invest, the victims are further told that they can expect to make a sizable return on their investments,” an affidavit from the Secret Service reads. The spoofed websites would display an increase in the victim’s account balance in order to coerce more deposits, but victims could not make any withdrawals.

Mitsubushi Bank flagged the accounts Deltec kept with them on behalf of those shell companies, Axis DigitalLimited and GTAL, after they could not obtain information on the companies from Deltec. Federal law enforcement identified allege at least 74 shell companies received wire fraud proceeds and transferred them to one of the custodial accounts, which then transmitted them to other accounts in the Bahamas “and structured the transfers in such a way as to avoid scrutiny that typically applies to international wire transfers.”

“By law, banks operating in the United States are required to keep such Know-Your-Customer information regarding their customers. Law enforcement has also not yet been able to identify the registered agents, business locations, or business purposes of Axis DigitalLimited and GTAL,” the affidavit states.

Attorneys for the U.S. government no longer had concerns about making public the seizure warrants public as of Monday.

© 2023 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.

Digital assets prime brokerage FalconX is partnering with UK-based crypto index provider CF Benchmarks to provide access to regulated crypto derivative markets via swaps, options and non-deliverable forwards that settle to single asset reference rates.

“Derivatives benchmarked against resilient and regulated indices are the primary route institutions take to gain exposure to the crypto asset class,” CF Benchmarks CEO Sui Chung said in a statement.

The contracts provide exposure to bitcoin settled against the CME CF Bitcoin Reference Rate, and to ether settled against the CME CF Ether-Dollar Reference Rate, according to the statement. 

“Regulated derivatives are critical instruments for institutional investors to safely access digital assets,” FalconX chief product officer Baris Cetinok said. 

© 2023 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.

DeFi mortgage protocol PWN raised $2 million in funding, reaching a valuation of  $42 million, the firm’s Chief Marketing Officer Tereza Starostová told The Block.

Backers included Digital Finance Group, IQTEC, Starkware, Nethermind, Safe Ecosystem Foundation, Dialectic, Next Web Capital, Patricio Worthalter, Christoph Jentzsch, Danny Ryan, Tim Beiko, Alex Van de Sande, Lefteris Karapetsas, Luis Cuende, Anthony Sassano and Eric Conner.

Dialectic, and angels Patricio Worthalter, Tim Beiko, Will Harborne, Kenneth Ng and Chris Waclawek previously funded PWN.

PWN plans to use the funds to build out its DAO to help give control of decentralized mortgage financing over to its community, as well as to deploy EVMs, collateral value assessment improvements, customized loan flow and other accessibility features, Starostová said.

Growing demand for loans

“With growing adoption of cryptocurrencies and the rise of the crypto-native movement, the demand for these loans will only increase,” PWN co-founder Josef Je said in a statement. “An infrastructure-building protocol like PWN represents an undeniable opportunity enabling DeFi mortgages at scale.”

PWN is a peer-to-peer platform that allows individuals to back loans using digital assets, such as cryptocurrency and NFTs, as collateral. Borrowers can use any ERC token as collateral without the risk liquidation before the loan expires. 

© 2023 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.

Long one of crypto’s big ideas, tokenization may finally be ready for prime-time. Wall Street is diving in, creating tokens for a range of real-world assets. One advantage: relatively little regulatory scrutiny. Jeff Wilser reports.