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BitDAO has launched the testnet for its modular Ethereum Layer 2 network project called Mantle with 37,000 developers already signed up for the launch, the DAO stated on Tuesday.

Dubbed “Wadsley,” the testnet will enable Mantle to test and implement new features for the chain before the mainnet launch scheduled for later in the year. The testnet is available to the public and developers have been urged to sign up to test their apps on the chain.

BitDAO announced Mantle in November as a modular Ethereum Layer 2 network. Modular networks have separate layers for handling network functions such as consensus, transaction execution and settlement. They are a newer take on blockchain design that is different from older monolithic chains where all network functions occurred on the same base layer.

BitDAO’s announcement on Tuesday reiterated that Mantle will deliver faster finality at cheaper transaction costs. The chain will also utilize multi-party computation, the announcement added. This type of computation sees the use of nodes specially designed to handle off-chain transactions correctly. Multi-party computation is one of the ways Layer 2 networks try to minimize the risk involved in transactions executed outside the base layer of a blockchain network.

BitDAO token utility

The Mantle launch is also expected to boost the utility of BitDAO’s governance token, called bit. This is because bit will function as the native token of the Layer 2 network. Improving bit utility has become a major focus for the DAO. The community voted in favor of a $100 million token buyback in December 2022.

A BitDAO spokesperson told The Block that using bit as the native token for Mantle will foster the growth of the DAO’s ecosystem. BitDAO is an outlier in the DAO space as it is set up to support a single DeFi project as is the case with most DAOs. Instead, BitDAO is an investment DAO that seeks to grow its ecosystem by supporting a network of projects. It holds the second-largest treasury among DAOs with $1.9 billion currently in its reserves.

“A large ecosystem of partners already exists and will continue to grow within BitDAO. Mantle is the blockchain that binds all of this together and helps build value for each moving part,” said a BitDAO spokesperson.

© 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.

Barry Silbert laid out a point by point rebuke of accusations made by Gemini President Cameron Winklevoss in an open letter earlier today that demanded the removal of the Digital Currency Group chief executive.

There is an ongoing spat over the frozen funds of Gemini’s Earn users, with Winklevoss saying 340,000 of them “have been defrauded by Genesis Global Capital LLC, together with its parent company Digital Currency Group.” He alleged that Genesis had misled the company, Earn users and the public about the com.

Silbert said DCG has never comingled funds with any of its subsidiaries, nor that it had a relationship with Three Arrows Capital but “Genesis had a trading and lending relationship with Three Arrows Capital, and Three Arrows Capital defaulted on its loans from Genesis. Separately, Three Arrows Capital was an investor in various Grayscale products,” Silbert wrote.

Winklevoss had said that Genesis was willing to “recklessly lend to 3AC because 3AC was using the money for the kamikaze Grayscale net asset value (NAV) trade.”

Silbert said DCG has never had a relationship with Three Arrows Capital but “Genesis had a trading and lending relationship with Three Arrows Capital, and Three Arrows Capital defaulted on its loans from Genesis. Separately, Three Arrows Capital was an investor in various Grayscale products,” Silbert wrote. 

Promissory note

DCG agreed to assign and exchange Genesis’s $1.1B unsecured loan receivable from Three Arrows Capital, the recovery on which was “highly uncertain,” with a promissory note from DCG.

“DCG did not receive any cash, cryptocurrency, or other form of payment for the promissory note. DCG effectively assumed Genesis’s risk of loss on the Three Arrows Capital loan with no obligation to do so,” Silbert wrote. “Of note, during the period following Three Arrows Capital’s default, DCG contributed approximately ~$340M of new equity across Genesis entities to provide it with additional capital.”

DCG did borrow capital from Genesis Capital, the lending arm of Genesis. 

“These loans were always structured on an arm’s length basis and were priced at prevailing market interest rates,” Silbert said. “In addition to the promissory note discussed in question 14 below, DCG currently owes Genesis Capital (i) $447.5M* in USD and (ii) 4,550 BTC (~$78M), which matures in May 2023.”

© 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.

Ondo Finance, a DeFi firm offering decentralized investment opportunities, has launched tokenized versions of U.S. treasuries and bonds. 

These tokenized products let stablecoin holders invest in bonds and treasuries, Ondo Finance noted in a company blog post. The three offerings upon launch include the U.S. Government Bond Fund, Short-Term Investment Grade Bond Fund and High Yield Corporate Bond Fund. 

“We envision these security tokens and protocols that support them as creating a compliant on-chain financial ecosystem supporting both permissioned and permissionless assets, ultimately improving the accessibility, transparency and efficiency of our markets,” Ondo Finance founder and CEO Nathan Allman said. 

Bond investors can net tokenized fund interests approved by smart contracts that are transferrable on-chain, according to the post. Ondo Finance earns a 0.15% annual management fee through these bonds.

Ondo Finance previously raised $10 million in a public token sale on July 6, 2022, The Block reported at the time. A few months before that, Peter Thiel’s investment fund co-led a $20 million Series A funding round for Ondo Finance in April 2022. 

© 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 Securities and Exchange Commission of Thailand is investigating the local unit of troubled crypto exchange Zipmex over its earn program because of concerns that appear to include how the company represented the interest payments it made.

The regulator is demanding clarity from Zipmex Company Limited, Zipmex’s Thailand unit, about how the program called “ZipUp/ ZipUp+” operated, according to a letter it sent to unit CEO Akalarp Yimwilai on Dec. 28 that was obtained by The Block. The letter states that Zipmex may have violated the country’s regulations by offering the earn program without approval.

Under Thailand’s Emergency Decree on Digital Asset Businesses, anyone who manages funds connected to digital assets needs to obtain a license from the country’s Ministry of Finance, the regulator said in the letter, citing section 26 of the Emergency Decree which establishes penalties that range from fines to imprisonment. Zipmex managed customers’ digital assets in the earn program by hiring Babel Finance, the regulator said.

The investigation appears to have been triggered by Zipmex Thailand’s representation of how the earn program was operated, according to a disclosure letter dated Nov. 30 obtained by The Block in which Zipmex told rescue investor V Ventures that Zipmex Thailand had gone beyond what it initially said about the program.

‘Marketing costs’

While the company first said that it was paying for the earn program “bonus” only with funds earmarked for marketing purposes, the disclosure letter suggests it had also deployed and managed customer funds — activities that would have required approval from the Thai regulator.

“When ZipUp was initially launched in Thailand, it was promoted that bonus payments derived from marketing costs supported by Zipmex Asia and that there was no deployment of funds,” the company said in the disclosure letter. “However, this was not the case and funds (both ZipUp and non ZipUp funds) were deployed and part of the proceeds received were used to pay the bonuses under the ZipUp program.”

Zipmex went on to say in the letter that it had reevaluated the risk, sought legal advice and implemented a new ZipUp+ structure in May. The service was eventually discontinued, and the company engaged an external consultant to conduct an investigation into the deployment of the funds in question.

“The SEC has also raised concern that ZLaunch and potentially ZipLock is a staking service and that Zipmex’s licensees do not extend to provision of staking products,” the company said in the disclosure letter. 

Deadline looms

When asked about internal communications obtained by The Block which suggested the Thai regulator had been told the earn payments were marketing costs, Zipmex chief marketing officer Proud Limpongpan said the marketing department does not touch the ZipUp product.

“No marketing personnel has any legal knowledge, treasury knowledge, or have communications with the SEC,” she said in an emailed response to questions from The Block. “Any inferences made to supposed internal documents are therefore inaccurate, have been taken out of context, and seem to have been illegally retrieved for the purpose of slander.”

Zipmex declined to comment on the letter from the Thai SEC and contents of the disclosure letter. The regulator did not respond to multiple requests for comment.

Zipmex had to halt client withdrawals in July due to its exposure to Babel Finance and Celsius, two beleaguered crypto lenders that froze customer funds in June. Zipmex estimated its total exposure to Babel and Celsius at $53 million.

The Block reported in August that V Ventures, an existing investor of Zipmex, was on the cusp of investing $100 million in return for a 90% stake in the company. V Ventures has since then injected some of the total funds in Zipmex for operating expenses, a person with direct knowledge of the matter told The Block. The deal has yet to entirely close, the person added. Client withdrawals are yet to open up as well.

The Thai SEC has given Zipmex until Jan. 12 to respond to the letter.

“In case of failure to deliver within such specified time, the SEC would deem that you do not wish to clarify and will proceed with further actions as deem appropriate accordingly,” it 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.

Four lawmakers lambasted a prominent law firm’s role in FTX’s bankruptcy proceedings and called for an independent examiner to oversee the investigation into the crypto exchange’s collapse. 

Sens. Cynthia Lummis, R-Wyo., Elizabeth Warren, D-Mass. Thom Tillis, R-N.C. and John Hickenlooper, D-Colo., criticized law firm Sullivan & Cromwell in a letter to Judge John Dorsey of the U.S. Bankruptcy Court for the District of Delaware, after they say the firm advised the now failed cryptocurrency exchange for years leading up to its collapse.  

“As legal counsel is often central to major financial scandals, given their role in drafting financial agreements, risk management compliance practices, and corporate controls, it is perfectly reasonable to have concerns about the impartiality and manner that Sullivan & Cromwell will approach any investigation of FTX with,” the lawmakers said. 

Punchbowl News first reported the letter, which was sent Monday. 

Sullivan & Cromwell is representing FTX in its bankruptcy proceedings. The law firm received $8.5 million from non-bankruptcy work from FTX from July 2021 through to the November filing, according to Bloomberg Law.  

Lawmakers questioned whether the “firm’s lawyers be able to effectively investigate their current and former partners who were central in FTX’s conduct.” 

“Additionally, given their longstanding legal work for FTX, they may well bear a measure of responsibility for the damage wrecked on the company’s victims. Put bluntly, the firm is simply not in a position to uncover the information needed to ensure confidence in any investigation or findings,” they said. 

FTX filed for bankruptcy in November, and U.S. authorities brought charges against its former CEO Sam Bankman-Fried soon after. The Justice Department said Bankman-Fried used billions in customer funds of FTX customer funds for his personal use, to go towards political contributions and to repay billions of dollars in loans owed by a crypto hedge fund founded by Bankman-Fried called Alameda Research. The Securities and Exchange Commission and the Commodity Futures Trading Commission also brought their own charges.

Former Alameda Research CEO Caroline Ellison and FTX co-founder Gary Wang are cooperating with prosecutors, with the former submitting written testimony asserting that Alameda misled lenders as to the financial status of the firm. 

Sullivan & Cromwell did not immediately respond to a request for comment.  

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.

Coinbase jumped 7% after saying it would cut staff, with Needham calling it “necessary” and holding onto its buy rating. 

The exchange is cutting 950 employees, which should reduce operating costs by about 25% versus the December quarter. 

“We view the cost reductions as a positive for the stock and a necessary step given the uncertain volume picture in 2023,” Needham analyst John Todaro wrote in a note. “We remain positive on 1) interest income from the expansion of USDC and 2) the staking opportunity coming out of the Shanghai Upgrade which we model a slight boost to ETH staking revenue in Q3/Q4 ’23. Reiterate BUY and $73PT off 4x EV/Rev on our ’23 est.”

Coinbase is the latest crypto company to announce layoffs. Last week, Genesis and Silvergate also said they would cut jobs as the industry continues to struggle with the fallout from numerous bankruptcies and a slump in crypto prices since 2021. 

“We view Coinbase as an attractive way to play the growing crypto asset universe, which includes overlap in the high growth areas of stablecoins, decentralized finance (DeFi), non-fungible tokens (NFTs), borrow/lend applications, and ‘yield farming,'” the analyst wrote. “We expect Coinbase to grow its trading revenue as the market-leading, fiat-crypto on-ramp in the quickly growing crypto ecosystem.”

Todaro wasn’t fully positive about the company. “However, we believe there is still fallout from FTX and so remain cautious on volumes for the first half of ’23,” Todaro wrote.

The firm also lowered its December and 2022 full-year revenue estimates on expected lowered volume for retail and institutions.

© 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 and ether held onto gains as altcoins traded lower, while traditional markets rose modestly. Coinbase popped following its latest layoff announcement. 

Bitcoin was trading around $17,270 at 9:45 a.m. EST, up 0.1% over the past 24 hours, according to TradingView data. 

BTCUSD chart by TradingView

Ether traded about $1,334, adding 0.6%, while altcoins like Ripple’s XRP and Polygon’s MATIC traded lower, falling by 1.4% and 2.3%, respectively. Solana’s SOL and Polkadot’s DOT both shed 2.3%.

Dog-themed memecoins had a mixed 24 hours. Dogecoin fell 1.2%, while shiba inu jumped 5%.

WOO Network’s token jumped 20% following the release of its latest tokenonmics.

Crypto stocks

The S&P 500 was little changed while the Nasdaq was up 0.3%.

Coinbase jumped more than 3% after announcing job cuts affecting about 25% of its workforce.

Investment bank Needham remains positive on Coinbase, saying the move was necessary. The firm maintained a price target of $73 for the stock and a buy rating. 

“We view the cost reductions as a positive for the stock and a necessary step given the uncertain volume picture in 2023,” analysts wrote in a note, adding there is still potential for fallout from the FTX collapse and “remain cautious on volumes for the first half of 2023.”

Silvergate, which announced layoffs of its own last week, gained about 3%.

Block and MicroStrategy were trading lower.

Shares in Grayscale’s bitcoin trust (GBTC) were trading at a discount to the net asset value (NAV) of 38.5% on 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.

Gemini CEO Cameron Winklevoss demanded the removal of Digital Currency Group CEO Barry Silbert in an open letter, escalating an ongoing spat over the frozen funds of the exchange’s Earn users.

“I’m writing to let you know that Gemini and more than 340,000 Earn users have been defrauded by Genesis Global Capital LLC, together with its parent company Digital Currency Group” he wrote, alleging that Genesis had mislead the company, Earn users and the public about the company’s solvency and financial health. 

Earlier in January, Winklevoss had accused Silbert of stalling efforts to reclaim funds for Gemini Earn users, accusing the head of “bad faith stall tactics” and comingling funds at his conglomerate.

The letter lays out what the company believes happened in relation to DCG’s involvement with failed hedge fund 3AC. Winklevoss said that Silbert failed to take action to absorb the shock following 3AC’s collapse. 

“He chose not to fill the $1.2 billion hole,” he wrote. “Instead he pretended to.”

He also demanded the removal of Silbert as CEO, saying there is “no path forward” with him in control of the company. 

DCG did not immediately respond to a request fort comment from The Block.

This is a developing story.

© 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 National Tax Service (NTS) of South Korea has reportedly launched a “special tax investigation” into Bithumb Korea and Bithumb Holdings.

On Jan. 10, tax agents raided Bithumb’s headquarters in Gangnam-gu, Seoul to investigate if Bithumb complied with tax regulations on cryptocurrency activity, Yonhap News Agency, a major South Korean news agency, first reported.

The tax officials are investigating possible tax evasion by examining domestic and international transactions made by Bithumb Korea, Bithumb Holdings and their affiliates, the report said. The probe is led by the 4th Bureau of Investigation of the Seoul Regional Tax Service, a department within NTS.

This is not the first time that Bithumb has faced a tax probe. NTS launched an investigation into the firm in 2018 and collected 80 billion won ($64 million) in income tax.

© 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.

Coinbase shares dipped during pre-market trading following the firm’s decision to cut 950 staff.

Shares in the crypto exchange fell 3.1% in the early session, trading around $37 by 8 a.m., according to data via Nasdaq. COIN closed above $38 yesterday, up 15%.

COIN chart by TradingView

Shares dropped just over 4% following the decision to cut 20% of its workforce. After a brief recovery, COIN traded down again.

The announcement won’t have come as a surprise to some. Analysts at Cowen anticipated further job reductions in a note last week. 

Coinbase’s latest layoffs affected 950 employees and reduced its operating expenses by 25%. The exchange cut 1,100 jobs, or 18% of its workforce, in June 2022 and 60 employees in November 2022 — bringing the total number of cuts to a little over 2,100.

The exchange estimates its plan will cost between $149 million and $163 million in restructuring expenses, according to its 8K filing.

The new expenses consist of $58 to $68 million in cash charges related to employee severance and other termination benefits and between $91 million and $95 million in stock-based compensation expenses.

© 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.