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FTX Digital Markets, the crypto exchange’s Bahamian entity, commingled customer and corporate funds, according to a report filed in court earlier this month.

The joint provisional liquidators unwinding FTX’s bankruptcy in the Bahamas filed a lengthy report on Feb. 8 that said the company had “limited” accounting records and made “little distinction between what represents, potentially, client monies and corporate funds.” 

New FTX CEO John Ray has made similar claims about the lack of financial records across the firm’s more than 100 entities. Meanwhile, former FTX CEO Sam Bankman-Fried has pleaded not guilty to criminal charges related to the mishandling of customer funds, among other allegations. Two former executives have pleaded guilty to criminal charges.

FTX Digital Markets has approximately $219.5 million in multiple bank accounts, the liquidators said, but it’s not clear which funds were held for the benefit of FTX Digital Markets customers. 

“It appears that client monies have been commingled such that it may not be possible to clearly identify sums that constitute client monies as opposed to general corporate funds,” the report said. 

Millions of customers

The report was filed in court by Kevin Cambridge, a partner at PricewaterhouseCoopers Advisory’s Bahamas firm who was appointed as a joint provisional liquidator in the bankruptcy case. It said FTX Digital Markets may have more than 2.4 million customers in more than 230 jurisdictions around the globe, including 10,500 institutional customers. 

The liquidators also identified intercompany debts worth $276.2 million, the report said. That includes $256.3 million owed by FTX Property, which “appears to represent funds transferred by FTX Digital to fund commercial and residential property acquisitions” in the Bahamas. 

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.

© 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.

Bitcoin was trading at $25,108 by 11 a.m. EST, up 3.1% over the past day, according to TradingView data. That’s its highest price since June 2022.

Lower volatility in stocks and bonds, lower oil prices, and a weakening U.S. dollar have benefited bitcoin, according to Noelle Acheson, former head of market insights at Genesis. It’s also one of the most sensitive liquidity plays right now, she said.

Bitcoin is up almost 50% year-to-date, following recent gains and January’s extended rally. 

© 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.

Ethereum scaling solution zkSync launched its next development phase called “fair onboarding alpha,” which allows certain registered projects to deploy onto the mainnet. The team has also renamed its existing network called zkSync 2.0 to zkSync Era.

ZkSync is currently in the midst of launching its version of a zkEVM, a ZK-Rollup Layer 2 scaling solution that can support the Ethereum Virtual Machine (EVM). In October, the project was launched in its “baby alpha” phase and was for internal use only. At the end of this phase, the network was relaunched in what was called a regenesis event. This took into account changes to the code as a result of going through audits. The project has now moved to the second stage, the fair onboarding alpha.

During this onboarding alpha stage, registered projects will be able to deploy and test their apps on zkSync Era, with token bridging enabled for testing and deployment purposes. However, the mainnet will remain closed to end-users during this stage. Ongoing investments in audits and bug bounty programs will continue to ensure the security of the platform, the team noted. Once this phase is finished, the network will be opened up to all projects and users.

This comes as zkSync competitor Polygon recently said it planned to launch its zkEVM network in March.

Over the past year, Layer 2 projects like Polygon, Starknet, zkSync, and Scroll have been fiercely competing to develop a functioning ZK-based Layer 2 that can natively support Ethereum apps. While none of these projects have yet released a product for public use, that could soon change, with zkEVMs from Polygon and others like zkSync ready to go live in the coming months. Matter Labs is also expected to release a new roadmap soon.

© 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.

Crypto prices continue to climb higher, with bitcoin firmly above $24,000. Equities linked to cryptocurrency and blockchain technology traded down. 

Bitcoin was trading at $24,400 by 10 a.m. EST, up 7.4% over the past day, according to TradingView data. The leading crypto by market cap reached a six-month high above $24,200 on Wednesday. It remains steady above this point. 

Lower volatility in stocks and bonds, lower oil prices and a weakening U.S. dollar have benefited bitcoin, according to Noelle Acheson, former head of market insights at Genesis. It’s also one of the most sensitive liquidity plays right now, she said.

Bitcoin is up almost 50% year-to-date, following recent gains and January’s extended rally. 

Ether and the broader crypto market were also in the green. ETH added 6.5% to trade above $1,670. Binance’s BNB gained 4.5%, Ripple’s XRP was up 2.1%, and Polygon’s MATIC soared over 8%. Dog-themed memecoins were also higher. Dogecoin and shiba inu gained 1.7% and 1.4%, respectively.

Crypto stocks

The recent equities rally appears to have run out of steam, at least for now. The S&P 500 and the Nasdaq 100 were down shortly after the open, both slipping 1.1%.

Coinbase shares were down 3.4% by 10:10 a.m. EST, according to Nasdaq data. COIN was trading below $67, having clocked double-digit gains in the previous day’s session. 

Crypto-friendly bank Silvergate was also in the red. SI shares dropped 4.5% to $21.50 from $22.40 at the close on Wednesday. Shares in Block, formerly Square, were down 2.5% to $80.66.

MicroStrategy bucked the trend, adding 0.3% to trade just below $300.  

© 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.

The Block Research’s Digital Asset Data and Infrastructure report analyzes two pillars of the emerging digital asset economy – data and infrastructure – to shed light on how firms are making the increasingly intricate digital asset economy navigable. It answers the two following questions: (i) How do data providers help industry participants extract value from a seemingly endless deluge of digital asset data?, and (ii) How do infrastructure providers make operating blockchain networks and accessing the applications built on top of them feasible for everyday users? 

The report builds on The Block Research’s 2021 Data and Infrastructure Report and is structured in four parts:  

Part 1 provides an overview of the different components of digital asset data and infrastructure. It segments their respective landscapes into several subcategories and highlights key considerations and developments relevant to firms and customers operating therein. 

Part 2 outlines the landscape of firms focused on providing digital asset data. It identifies the different classes of data that providers specialize in and compares the products and services of leading firms.  

Part 3 sheds light on the landscape of firms that operate core blockchain infrastructure. It identifies which components of the “web3 stack” they power and compares the products and services of leading firms. 

Part 4 provides closing thoughts. 

© 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.

Bitcoin miner CleanSpark bought 20,000 more mining machines, bringing the total count of its bear market spending-spree purchases to over 46,500.

The company expects to pay $32.3 million for the new generation Antminer S19j Pro+ units after discounts from manufacturer Bitmain, it said on Thursday.

That will equate to a price tag of $13.25 per terahash and add 2.44 EH/s to CleanSpark’s hashrate, which currently stands at 6.6 EH/s.

“As machines are delivered to us we will have rackspace waiting for them at one of our sites,” Chief Executive Zach Bradford said in a statement. “We exercise tremendous control over our infrastructure and, therefore, our ability to be highly efficient in the way we allocate our resources.”

The company is adding to the over 26,500 units it bought last year at discounted prices, leveraging the bear market. The new units will be shipped in batches to be delivered by the end of May.

CleanSpark said last week during its earnings call that it plans to keep buying new machines and sites as it looks to reach its end-year guidance of 16 EH/s — which it cut from 22.4 EH/s in December.

“We also expect to shift our strategy when the time is right and look towards future contracts,” Bradford said at the time. “We believe the tides are starting to shift and locking in prices for large orders will begin to be part of our strategy in the coming months.”

ASIC prices fell over 80% in 2022 but have more recently shown a very slight uptick, going from $13.86/TH in mid-January to $14.89/TH for machines with efficiency under 38 joules/terahash, according to data from Luxor.

The company is also looking to add on between 50-75 megawatts of either greenfield sites or acquisitions. 

© 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.

Nefta, a web3 infrastructure startup focused on gaming and entertainment sectors, raised $5 million in a seed funding round.

Play Ventures led the round by injecting $2.5 million — the single largest investment from its Future Fund — Nefta said Wednesday. Other investors in the round included Polygon Ventures, SevenX Ventures, Sfermion and Picus Capital.

Nefta is now valued at $32.5 million, founder and CEO Geeshan Willink told The Block. That’s a 225% jump in its valuation in the last eight months. Nefta was valued at $10 million last June when it raised $1 million in pre-seed funding from Picus Capital, said Willink.

Nefta wasn’t formally raising the seed round, according to Willink, who said SevenX Ventures first approached the firm last October. “That conversation went so well that we received a term sheet to follow in our seed round. Following this, we received the lead term sheet from Play Ventures,” he said. Nefta then met more investors and closed the round in January.

Nefta’s proposition

The startup was founded last year to provide tools to businesses looking to enter and grow in the web3 space. These tools include bespoke APIs, software development kits and white-label services to help businesses integrate digital assets, multi-chain wallets and custom marketplaces.

“We’ve seen great demand for our products over the last 12 months, and we’ll continue to scale our offering in accordance with this demand,” said Willink.

There are currently eight people working for Nefta and Willink plans to double the team in the near future. He is currently hiring across functions, including business development, account management and technology.

The seed round brings Nefta’s total funding to date to $6 million. As part of the deal, Kenrick Drijkoningen, general partner at Play Ventures, will join the Nefta board, said Willink.

© 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.

Web3 communications project Sending Labs raised a $12.5 million seed round led by Insignia Venture Partners, MindWorks Capital and Signum Capital. 

The deal, which closed last month after founders Mason Yang and Joe Yu began fundraising in August, featured participation from K3 Ventures, LingFeng Innovation Fund, UpHonest Capital and Aipollo Investment. The valuation was not disclosed. 

Yang and Yu founded MoboTap, the company behind the internet browser Dolphin, one of the earliest Android browsers, which counts over 200 million users across 130 countries. The founders said that when Google prepared to launch its own browser, it delisted Dolphin from the app store based on claims that it violated API access. 

“From our experience over a decade ago with Google to the recent shutdown of third-party access to Twitter, innovation will always be at the mercy of incumbents as long as we stay on the current infrastructure,” said Yu in a written interview with The Block. 

Dolphin was later reinstated after user complaints about the removal — Yu said that this was a key lesson for him on the power of community, and influenced his belief in web3’s long-held promise of decentralization. 

Web3 messaging

Along with the funding round, the company is also launching its two flagship products in beta. SendingMe is its encrypted chat platform where users can not only grow followers but also monetize a project of their creation through peer-to-peer swaps, marketplaces, airdrops and NFT auctions. The project says that the platform is powered by decentralized protocols. 

“Talk is cheap but our assets are not. If we want to upgrade our communications experience to include the ability to freely give, swap, and receive digital ownership, then it is imperative that all our chat content, not just our DMs, but also in community chat scenarios is safely guarded,” he said. “At the same time, this is the first step in our journey to reclaim ownership of our own data — by starting to bring the data back to user-owned edge devices instead of saving them on servers.” 

The other product is SendingNetwork, a software development kit for crypto application developers to build social features in keeping with the decentralized ethos of web3. This includes in-app and cross-app chats, notifications, wallet or Decentralized ID (DID) logins and NFT and token-based transactions. 

“The easiest way to think of SendingNetwork is as a parallel protocol integrated into L1 & L2 chains — a modified P2P architecture tailored to secured, high-performance message relays with the ability to execute smart contracts on different chains,” said Yu, noting it currently supports integration with Ethereum and Polygon. 

The funding will be used to accelerate its integration with other Layer 1s and Layer 2s — it plans to add Avalanche and Arbitrum as well as non-EVM chains like Solana and Sui. The extra cash will also be funneled toward the development of sector-specific SDKs and the launch of a community ambassador program. 

© 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.

Recent crackdowns by U.S. regulators in the crypto industry are a “planned set of product takedowns” and risk annihilating the young market, Compound Labs founder Robert Leshner said. They’re not wrong, either.

“They’re opening up in a lot of ways a new front in the war against crypto,” Leshner told The Scoop’s Frank Chaparro in a podcast. “The argument that they’re making in both cases is that Kraken and Paxos are not following investor protection guidelines. Namely, there are risks that are not being disclosed. And what’s interesting about this is this is a somewhat valid argument.”

“Genuinely, people don’t actually know what’s happening under the hood of Kraken or where their assets are going and how it works,” he said. “This is the problem at FTX. It was a problem in Celsius, and it was the problem that made all of the dominoes that fell. You didn’t actually know what was happening within their black box.”

The New York Department of Financial Services this week ordered Paxos to stop issuing BUSD, and last week Kraken agreed to end its staking operations after settling with the Securities and Exchange Commission. In early January, the Federal Reserve, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. put out a joint statement that reminded banks of their safety and soundness obligations and outlined risks they see in the cryptocurrency sector.

“If there’s an argument that USD coin and tether are securities and this winds up being contested over months and years, if it doesn’t go the right way in a lot of ways, I think it’s an Armageddon scenario for a lot of crypto,” said Leshner, whose Compound Labs is an open-source autonomous protocol for developers. “The majority of online activity is stablecoins and for the U.S. government or a U.S. agency to start to put a tight leash around stablecoins, it jeopardizes a lot of the foundations of DeFi and crypto and what makes these networks exciting in the first place.”

© 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.

After more than 20 years holding the reins at Signature Bank, co-founder Joseph DePaolo will be stepping down as CEO and president as part of a reshuffling of the bank’s leadership.

Signature Bank — known to be friendly to crypto clients — announced today that DePaolo, its current CEO and president, will transition to a senior advisory role this year. The firm’s chief operating officer, Eric Howell, will step into the president role, effective March 1, and will eventually take the reins as CEO following DePaolo’s transition into the senior advisor role, the company said in a release.

“This succession plan is an integral part of a long-standing commitment by the board of directors to ensure Signature Bank’s distinctive business model continues to thrive and differentiate without interruption,” said the company.

Howell joined the commercial bank in 2013 as a controller and has continued to increase his responsibilities at the firm.

“I have been fortunate to work closely with Eric since he became CFO. I have witnessed him tackle every ascending role he has held within the Bank with a keen sense of confidence, gumption and business acumen,” said Scott Shay, co-founder and chairman of the board at Signature Bank, in the release.

Signature’s crypto links

Signature was the first FDIC-insured bank to launch a blockchain-based digital payments platform called Signet, which enabled clients to make real-time payments in U.S. dollars using blockchain technology. It was also the first blockchain-based solution approved for use by the New York Department of Financial Services (NYDFS).

Earlier this week, the NYDFS-regulated stablecoin issuer Paxos was ordered to cease the minting of its Binance U.S. dollar stablecoin (BUSD) by the organization. It was a surprise regulatory move that shocked the industry.

Regulatory action against crypto companies in the U.S. has intensified in recent months. Crypto exchange Kraken settled with the SEC over the failing to register the offer and sale of its “crypto asset staking-as-a-service program” last week, paying a $30 million fine in the process. Also, Lender Nexo is set to close down its earn program in the U.S. following a settlement with the SEC.

Signature Bank significantly pared back its crypto operations last year and started to limit crypto transactions. In December, the firm said it would introduce caps to reduce the concentration of deposits from clients in the digital asset industry to below 20% of total bank deposits.

The bank reported $110.36 billion in assets and $88.59 billion in deposits as of December 31, 2022, the release said. Collapsed crypto exchange FTX was one of Signature Bank’s clients; however, the crypto exchange’s deposits with Signature amounted to less than 0.1% of the bank’s overall deposits, according to a report from Coindesk.

“We are not just a crypto bank and we want that to come across loud and clear,” said DePaolo at an investor conference in New York late last year.

© 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.