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The FTX saga continued to unfold this past week with disgraced former CEO Sam Bankman-Fried now out on bail. Some of Bankman-Fried’s associates have pleaded guilty to fraud charges and are said to be cooperating with investigators.

More exchanges published proofs of reserves in the wake of the FTX collapse. Still, such transparency efforts by crypto exchanges were dealt a blow as reports emerged that a major accounting firm was no longer willing to work with them.

The week saw bitcoin continue its sideways price action amid a broader market lull, with crypto miners bracing for the impact of a year-long bear market.

For these and more, here are the biggest crypto news stories from the past week:

Bankman-Fried out on bail

Disgraced former FTX CEO Sam Bankman-Fried posted bail with a $250 million bond package after being extradited to the U.S. from the Bahamas earlier in the week. This came after Bankman-Fried had claimed to have only $100,000 to his name. He is due in court on Jan. 3.

Some of Bankman-Fried’s former associates at Alameda and FTX pleaded guilty to fraud charges. The past week saw unsealed court documents revealing the criminal charges laid against former Alameda Research CEO Caroline Ellison and FTX co-founder Gary Wang. The pair stood to face lengthy prison terms if found guilty, but may see reduced sentences for cooperating with investigators.

More crypto exchange proof of reserves

OKX published its second proof-of-reserves report on Dec. 23. It showed the platform had a reserve ratio of 101% of its customer’s bitcoin holdings.

Crypto exchanges have been publishing such reports in the wake of the FTX collapse as a way to help restore customer confidence. Still, the reports have been criticized for not showing complete pictures of the companies’ financial health. Meanwhile, the U.S. Securities and Exchange Commission said that it will increase its scrutiny of financial reports.

No Santa rally

Bitcoin and the general crypto market did not see significant price changes this past week. BTC continues to be locked in a sideways price action since losing the $20,000 level in early November. Bitcoin spent the last week trading in a tight $500 range between $16,400 and $16,900.

Crypto mining stocks did not do any better as they tracked lower than the BTC price. Mining stocks also saw downward price action after Core Scientific’s Chapter 11 bankruptcy protection filing.

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.

© 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.

Public Bitcoin mining firms have struggled under the weight of a year-long bear market and are set to end 2022 with a collective debt profile of more than $4 billion, according to a report by Hashrate Index.

Bitcoin miner Core Scientific is the hardest hit among the lot, according to the report. The company owes $1.3 billion to creditors and has filed for Chapter 11 bankruptcy protection, as reported by The Block. The troubled miner is trying to liquidate some of its inventory and plans to sell as much as 1 gigawatt worth of equipment.

Marathon Digital is another Bitcoin miner with a significant debt burden. The company owes about $851 million, but the bulk is in convertible notes, which means its creditors can exchange it for shares in the firm. The company also has $31.3 million of investments in now-bankrupt Compute North. Still, unlike Core Scientific, Marathon is reportedly not in danger of going bankrupt.

Many Bitcoin miners took out loans over the past year. Some were drawn against bitcoin and crypto holdings and have become difficult to service, with the prices of bitcoin and crypto declining significantly since the start of the year. Some now face the task of restructuring their loan agreements to avoid further financial turmoil.

© 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.

District Judge Ronnie Abrams withdrew her participation from legal proceedings around crypto exchange FTX’s disgraced former CEO and founder, Sam Bankman-Fried, amid a potential conflict of interest.

Abrams noted that her husband, Greg Andres, is a partner at Davis Polk & Wardwell — an FTX adviser in 2021. Additionally, the law firm has represented parties that may be opposed to FTX and Bankman-Fried.

“My husband has had no involvement in any of these representations,” Abrams wrote in a filing on Friday. “Nonetheless, to avoid any possible conflict, or the appearance of one, the Court hereby recuses itself from this action.”

Bankman-Fried was arrested on Dec. 12 and is accused of committing or conspiring to commit fraud on FTX’s customers and lenders, money laundering and conspiracy to defraud the U.S. and violate campaign finance disclosure laws.

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.

© 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 miners are preparing for what could be a volatile weekend in the U.S. as a brutal winter storm brought bitter temperatures and power outages across much of the country.

“Please be prepared for some ups and downs this weekend as we deal with the winter storm,” Neil Galloway, the Director of Mining Operations at Compass Mining, said on Twitter, adding that sites in Texas were offline. “Because your miner is offline, people can heat their homes and cook.”

Miners are becoming the backbone of grid energy and this is where it all starts. This is where #bitcoinmining shows the community what we can give back to them when there's a need.💪

— Neil Galloway 🧭 (@BitcoinNeil) December 23, 2022

Riot Blockchain said that it was closing down its Rockdale facility in Texas because of extreme weather conditions. Core Scientific, which filed for bankruptcy protection earlier this week, said it would be “participating in multiple power curtailments to help stabilize the electrical grid.”

“BTC production is expected to decrease during this time,” the company said on Twitter. 

The National Weather Service reported blizzard conditions and an “arctic blast” from the Midwest to Northeast, with Lake-effect snow around the Great Lakes region. Temperatures will be 25 to 35 degrees below average from the region east of the Rockies to the Appalachians, while gusty winds will produce “dangerously cold wind chills” across central and eastern parts of the U.S. over the holiday weekend.

“In some spots, the wind gusts could approach or exceed 60 MPH resulting in damage and power outages.” the agency said. “These winds atop existing snow cover will produce ground blizzards.”

PowerOutage.us, a website that tracks power outages in the U.S., already was showing that hundreds of thousands of clients were without power on Friday afternoon. The outages appeared to be worst in Maine, New York, Pennsylvania, Virginia and North Carolina. 

We are asking for everyone’s help in ensuring the power grid remains stable for us all. pic.twitter.com/thtxMNv1jP

— Tennessee Valley Authority (@TVAnews) December 23, 2022

A utility in Tennessee asked customers to reduce consumption, while some users on Twitter reported spiking spot prices.

“Miners off, furnace back on,” one user wrote, saying the temperature had plunged to -4 degrees Fahrenheit. “Yes, that’s 5-min spike to $1.12/kWh.”

Damn. Heating my house with #Bitcoin miners ⚡️ vs -4°F winter storm 🥶 creating chaos on the grid.

Yes, that's 5-min spike to $1.12/kWh. 💸💰💸

Miners off, furnace back on. ☹️ pic.twitter.com/qNiTMomw8p

— Keith Mukai (@KeithMukai) December 23, 2022

With reporting assistance from Catarina Moura.

© 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.

Caroline Ellison, the former CEO of Alameda Research, told a federal court in New York that she knowingly misled lenders about how much the firm had been borrowing from the collapsed FTX crypto exchange and knew that her actions were wrong, Bloomberg News reported, citing a transcript of a plea hearing on Dec. 19.

“From 2019 through 2022, I was aware that Alameda was provided access to a borrowing facility on FTX.com, the cryptocurrency exchange run by Mr. Bankman-Fried,” Ellison said, according to the transcript cited by Bloomberg. “In practical terms, this arrangement permitted Alameda access to an unlimited line of credit without being required to post collateral, without having negative balances and without being subject to margin calls on FTX.com’s liquidation protocols.”

Ellison said she and former FTX CEO Sam Bankman-Fried had agreed to hide the arrangement by creating false financial statements and that she knew that Alameda accounts with negative balances signified the firm was borrowing funds from FTX customers.

Ellison and FTX co-founder and former CTO Gary Wang pled guilty to multiple charges earlier this week related to the collapse of Alameda and FTX. Bankman-Fried extradited to the U.S. from the Bahamas and appeared at federal court in New York on Thursday, where a judge said he’d be released on a $250 million bond package while he awaits trial. 

Wang, at his plea hearing, said he had been “directed” to make changes in code he knew would give Alameda special privileges, Bloomberg reported.

“I knew what I was doing was wrong,” Wang said in a transcript cited by Bloomberg.

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.

© 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 Internal Revenue Service is delaying new requirements that require third-party settlement organizations like PayPal and Venmo to report transactions that exceed a minimum threshold of $600 in aggregate payments until next year. 

“The additional time will help reduce confusion during the upcoming 2023 tax filing season and provide more time for taxpayers to prepare and understand the new reporting requirements,” acting IRS Commissioner Doug O’Donnell said in a statement that described the current year as a “transition period.”

Introduced as part of the American Rescue Plan of 2021, the regulation significantly lowered the tax reporting threshold for business transactions to $600 per year from a previous level of “more than 200 transactions per year, exceeding an aggregate amount of $20,000.”

“The law is not intended to track personal transactions such as sharing the cost of a car ride or meal, birthday or holiday gifts, or paying a family member or another for a household bill,” the IRS said, adding that the new reporting requirements would go into effect on Jan. 1, 2023. “The change under the law is hugely important because tax compliance is higher when amounts are subject to information reporting.”

The IRS said that care must be taken “to help ensure that 1099-Ks are only issued to taxpayers who should receive them.”

Digital assets

In a separate statement on transition guidance for broker reporting on digital assets, the IRS said that brokers will not be required to report additional information with respect to dispositions of digital assets until final regulations are issued.

Brokers are still required to comply with existing laws and regulations, the agency added, clarifying that taxpayers are still required to report income received from transactions involving digital assets.

© 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.

Donald Trump’s recent NFT drop was ridiculed. Bigly. But the former U.S. president seems to have had the last laugh and may have provided the digital asset community a valuable lesson if they can get past the snark.  

Trump managed to sell out his collection in a matter of hours in a market where NFT trading volumes have declined more than 90% from earlier this year. 

And while speculation runs rampant on Twitter and in the media about the identity of those who own a large number of valuable Trump NFTs, with other Twitter users pointing to evidence that suggests the collection used copyrighted material, more than 70% of buyers were likely purchasing their first NFT, according to data from Dune Analytics.  

Like other brands with avid fanbases, Trump followed the strategy of attaching potential benefits — what some in the crypto world call “utility” — to each NFT, a growing trend as fewer consumers appear interested in buying NFTs that are little more than a digital portrait of an animated character.  

“The chance to meet Trump if you own the right NFT is a great benefit,” said Jon McNaughton, an artist who launched his own unsanctioned Trump NFT collection earlier this year.   

By current market conditions, the former president’s NFT drop was a success. Even with questionable artwork and the predictable outrage that surrounds the ever-divisive former commander in chief, thousands of people spent $99 on a digital trading card.  

Trump’s backing

Although McNaughton — who’s known for painting Trump and other conservative figures — spent several months working on “The Trump Legacy Collection,” his January launch failed to generate a fraction of the attention or sales.  

“They have a big advantage with President Trump himself backing it up,” he said.  

Trump didn’t just back the drop — he teased it as a “major announcement” beforehand and then wrapped the collection in a sweepstakes with several different prizes, including a chance to meet the twice-impeached former president. There’s also a golf outing, Zoom calls and autographed memorabilia up for grabs. 
 
The former president isn’t the only public figure to employ the sweepstakes formula successfully. This week, NBA legend Scottie Pippen sold out a 1,000-piece NFT collection in 77 seconds. Owners of the NFTs automatically got a chance to win limited edition sneakers or a trip to Pippen’s hometown.  

McNaughton called the “Trump Digital Trading Card” collection “fun,” but he said it was fashioned using “highly Photoshopped digital images.” McNaughton said he hand “painted new characters and elements,” “used elements from existing paintings” and strove to create “layers of political nuance,” all in order to give depth to each of the 4,547 NFTs in his collection.

‘No comparison’ 

“From an artistic perspective, there is no comparison,” he said.  

From a sales-volume point of view, there also is no comparison. After launching roughly a year ago, McNaughton’s collection has generated about $36,000 in sales volume, according to OpenSea data. Trump’s Digital Trading Cards collection has driven more than $9 million in trading volume in about a week’s time, according to OpenSea.

Screenshot of NFTs from “The Trump Legacy Collection” on OpenSea.

While McNaughton partially blames poor marketing and a general lack of awareness and exposure, he believes other practical reasons held his collection back.   

“Our biggest failure was not allowing purchase with a credit card. If we could do it over again, we would launch on Polygon so there would be low gas fees and people could buy with credit card,” he said. “At the time, with Ethereum, the gas fees were $50 to mint. My audience was clueless on how to set up a crypto wallet and mint with Ethereum.”  

Trump managed to spur a media storm with his announcement, generating tons of free press. He also attached the potential to win prizes to each token. Then, as with Reddit’s highly successful NFT drive, which has raked in millions of dollars, the former president’s team made it easy for consumers without crypto wallets to buy his digital trading cards.   

© 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.

Paxos, a blockchain and trust company, has successfully reclaimed $20 million worth of gold tokens held in the wallets of an unknown attacker who hacked FTX in November.

Sam Bankman-Fried’s failed exchange was exploited to the tune of $400 million shortly after it filed for Chapter 11 bankruptcy protection last month. Among the stolen assets were Paxos Gold (PAXG), tokens that are backed by real gold in Paxos’ custody.

Paxos quickly froze 11,184 Paxos Gold (PAXG) worth $20 million from four hacker-controlled wallets. Now, about six weeks later, the team has fully reclaimed the assets.

Paxos acted yesterday to move the stolen tokens from addresses labeled as “FTX Accounts Drainer” by Etherscan to a null address and burned them, security firm PeckShield noted based on on-chain data. After this, it minted the same amount into another wallet, thus finishing the reclamation process. 

Still, the Paxos recovery represents only a small portion of the heist. At one point, the FTX drainer wallet held $302 million in ether alone belonging to the FTX reserves, almost all of which were sold off for bitcoin and could not be recovered.

The new FTX chief John Ray III revealed in prepared testimony that FTX stored private keys to its wallets in an unencrypted manner, and had adopted very poor security controls — factors that could have easily allowed the hack to have taken place.

© 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 governance members of Ren, a project that oversees a tokenized bitcoin called renBTC, voted to mint 180 million REN tokens ($10.8 million). They will be used as fresh capital to fund a new Ren 2.0 protocol after the collapse last month of Ren’s main backer, Alameda Research. 

In November, the Ren team announced that it would shut down operations as a centrally run project — referred to as Ren 1.0 — because of funding issues. 

Ren was acquired in February 2021 by Alameda, but its collapse removed Ren’s main source of financial support. The team then decided to wind down operations for its existing protocol (Ren 1.0) and replace it with a new community-run alternative (Ren 2.0), it said. To fund transition to the second version, the team requested new funding in the form of fresh REN tokens.

The Ren governance vote 

On Dec. 15, the Ren team proposed to mint fresh tokens that would act as capital for the Ren 2.0 project. The Ren protocol put the proposal on the Snapshot platform to be voted on by governance members, or existing REN token holders.

As part of the now-approved vote, members were presented with four options for how many tokens to mint: 50 million, 100 million, 150 million or 200 million. There was also an option to reject the proposal. 

In order for the proposal to pass, it required at least 51% of the voters to choose one of the first four options, before reaching its weighted average value from all votes combined. 

Only 5.12% of voters rejected the proposal, according to data from Snapshot. The majority of voters, 80.78%, selected the option for 200 million tokens. A small portion of 1.08% voted in favor of 150 million tokens, 2.05% chose 100 million tokens and 10.97% were in favor of 50 million tokens. Using a weighted average of these results, it is estimated that 180 million Ren tokens will be created with a value of about $10.8 million at current market prices.

The approval of minting new tokens will be the first step for the Ren protocol team. With the mandate, the team plans to transition to a new version of the protocol. Still, making such a major change carries certain risks.

As the version 1.0 is retired, it’s possible that holders of wrapped bitcoin (generated with Ren) may not be able to recover their original bitcoin, the team warned. According to on-chain data, there’s still $12.5 million worth of renBTC that exists on Ethereum and is at risk of getting stuck.

© 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.

Leading NFT marketplace OpenSea is actively delisting Cuban artists and users to comply with U.S. sanctions.

“We comply with U.S. sanctions law,” an OpenSea spokesperson told Artnet News. “Our terms of service explicitly prohibit sanctioned individuals, individuals in sanctioned jurisdictions, or services from using OpenSea.”

The confirmation came after Twitter account NFTcuba.ART shared a screenshot of an email explaining that an account had been “disabled due to activity that goes against our Terms of Service.”

Sanctions in ‘decentralized’ industry

Though most distributed ledger technology is inherently decentralized, the crypto industry still features large centralized platforms that comply with international sanctions.

Earlier this month, Reuters reported that the U.S. Justice Department was weighing the possibility of charging the biggest crypto exchange, Binance, with money laundering and sanctions violations.

Near the end of November, crypto exchange Kraken agreed to a $362,o00 settlement for violating U.S. sanctions against Iran.

In October, Dapper Labs let users with connections to Russia withdraw their NFTs after temporarily freezing them to comply with EU sanctions. Additionally — and perhaps most notoriously — that month also saw the U.S. Treasury Department sanction open-source crypto mixing software Tornado Cash, an unprecedented move with wide-reaching privacy implications.

© 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.