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Crypto exchange OKX released a second proof-of-reserves report, a month after its first, in a continuing effort among crypto exchanges to provide evidence they are handling customer funds safely following the collapse of FTX.

OKX said it will commit to publishing a report for more than 23,000 of its addresses around the 22nd of each month in a push for increasing transparency and trust, according to a statement shared with The Block.

The second report, dated Dec. 20, showed a bitcoin reserve ratio of 101% between OKX wallets of 113,754 bitcoin ($16,850 at time of writing) and a user balance of 112,192 bitcoin. This is a slight decrease since the November report that showed a 102% ratio.

The ether reserves ratio has increased since last month, from 102% to 103%, while tether remained at 101%.

The U.S. Securities and Exchange Commission’s acting chief accountant, Paul Munter, reportedly warned investors to be wary of crypto companies’ proofs-of-reserves.

The SEC statement followed accounting firm Mazars’ decision to temporarily cease all efforts for crypto exchanges. Mazars was criticized for reports not providing sufficient information.

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.

Securities and Exchanges Commission general counsel Dan Berkovitz will step down effective Jan. 31. While known as a decentralized finance hardliner, reports indicate that in his previous role at the CFTC he met and dined with disgraced FTX founder Sam Bankman-Fried.

Berkovitz was lobbied by Bankman-Fried just before joining the SEC, the Washington Examiner reported. Bankman-Fried currently faces a prison sentence of as much as 115 years stemming from an eight-count indictment.

“After thirty-four years of public service, it is time for me to pursue new and different challenges and opportunities,” Berkovitz said in an SEC announcement. He joined the SEC in November 2021 after leaving his role as a commissioner at the Commodity Futures Trading Commission.

Megan Barbero, a former Department of Justice attorney who is currently the SEC’s principal deputy general counsel, will take his place.

Berkovitz had previously criticized decentralized finance for lacking intermediaries to protect investors, calling it “a Hobbesian marketplace.”

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 Bank of England’s deputy governor said that crypto is integrating into traditional finance and should be regulated to protect retail speculators and the broader financial system. 

Sir Jon Cunliffe told Sky News that the central bank is considering steps to regulate the crypto “casino” to protect investors and mitigate systemic risk.

Concerning retail investors, Cunliffe shared the BoE’s stance that individuals should be able to safely speculate on crypto, as they speculate in traditional markets.

“I think for the majority of people, if they do want to be involved in speculation in [crypto] … for consumer protection and market integrity, they should have a place to do that where they get the protection they would get in a similar activity in the UK,” he said.

Cunliffe noted that crypto is becoming increasingly integrated into the traditional financial system, so it should be regulated sooner rather than later. 

“We had banks and investment funds and others who wanted to invest in it,” he said. “I think we should think about regulation before it becomes integrated with the financial system and before we could have a potential systemic problem.”

Meanwhile, the Bank of England is seeking a proof of concept for a sample wallet for a central bank digital currency and will take applications through Dec. 23.

© 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.

Episode 128 of Season 4 of The Scoop was recorded live with The Block’s Frank Chaparro and GSR CEO Jakob Palmstierna.

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

Founded in 2013, GSR is one of the oldest crypto market makers and is also an active venture investor.

In this episode of The Scoop, GSR CEO Jakob Palmstierna discusses how his firm is responding to the collapse of FTX and shares his forecast for what a crypto recovery might look like.

According to Palmstierna, GSR covered the losses of all of its customers who had funds stuck on FTX: 

“We announced that customers of ours that had funds locked in FTX, we would reimburse them so they didn’t have those losses, which is not ‘effective altruism,’ it’s about creating some stability within the market and being here for the future.”

Although 2022 was filled with calamities for the crypto industry, Palmstierna says the underlying technology is continuing to develop:

“Everything that happened over 2022 has very little to nothing to do with the underlying technology of crypto. There are well-funded projects out there, there are really good builders — it’s one of the biggest sections of talent density that we have seen since the early internet days.”

During this episode, Chaparro and Palmstierna also discuss:

• How firms overlooked counterparty risk
• The details behind Binance’s industry recovery fund
• Liquidity conditions without Alameda in the order books
  

Disclaimer: Beginning in 2021, Michael McCaffrey, the former CEO and majority owner of The Block, took a series of loans from former FTX and Alameda founder Sam Bankman-Fried. McCaffrey resigned from the company in December 2022 after failing to disclose those transactions.

This episode is brought to you by our sponsors Tron, Ledn, Athletic Greens

About Tron
Founded in 2013, Huobi Global is one of the largest virtual asset exchanges in the world. Huobi Global serves millions of users across international markets. Since its establishment, Huobi Global has committed to providing first-class virtual asset investment services. Huobi Global’s robust infrastructure, product innovation and capital strength provide a truly customer-centric and secure trading environment to help our international users to achieve their investment objectives. Please refer to Huobi’s official website for more information: huobi.com.

About Ledn
Ledn was founded on the unshakeable conviction that digital assets have the power to democratize access to the global economy. We help you to experience the real-life benefits of your Bitcoin without having to sell it. Start a savings account, take out a loan, or double your Bitcoin. For more information visit Ledn.io

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© 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.

Defunct crypto exchange FTX has sought assistance from a U.S. bankruptcy court in an ongoing fight over ownership of about $450 million in Robinhood Markets stock.

Specifically, 56 million shares are owned by Emergent Fidelity Technologies, an entity 90% owned by disgraced FTX founder and former CEO Sam Bankman-Fried and organized in Antigua and Barbuda, according to a court filing.

The parties trying to gain control of the Robinhood shares — frozen on brokerage ED&F Man Capital Markets in November — are failed crypto lender BlockFi, FTX creditor Yonathan Ben Shimon and Bankman-Fried.

© 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 U.S. Securities and Exchange Commission’s acting chief accountant, Paul Munter, warned investors to put little faith in crypto companies’ proof-of-reserves.

“We’re warning investors to be very wary of some of the claims that are being made by crypto companies,” Munter told The Wall Street Journal, adding: “Investors should not place too much confidence in the mere fact a company says it’s got a proof of reserves from an audit firm.”

Munter also noted that the SEC is scrutinizing crypto companies’ supposed financial reports more closely. “We are increasing our understanding of what’s going on in the marketplace,” Munter said. “If we find fact patterns that we think are troublesome, we will consider a referral to the division of enforcement.”

Munter’s statements come about a week after accounting firm Mazars — a subject of scrutiny — temporarily ceased all efforts for crypto exchanges.

© 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 start-up accelerator co-founded by Legislative Council of Hong Kong member Johnny Ng Kit-chong is looking to help 1,000 web3 startups set up shop in the city within the next three years.

G-Rocket’s new initiative, “Hong Kong Web3.0 Hub,” coincides with the special administrative region’s concerted push to put itself among the leaders in the virtual asset industry.

150 start-ups — primarily founded by Chinese entrepreneurs based elsewhere — have signed up for the accelerator’s new program, G-Rocket’s co-founder and CEO, Casper Wong, told the South China Morning Post earlier this week.

G-Rocket’s program helps web3 startups obtain office space, banking — through virtual bank ZA Bank — and government resources.

G-Rocket is a subsidiary of Ng’s venture capital firm, Goldford Group.

Hong Kong pushing into crypto

Crypto-related news out of Hong Kong has been frequent in recent weeks.

CSOP Asset Management, a China Southern Asset Management subsidiary, listed the first bitcoin and ether exchange-traded funds on the Hong Kong Stock Exchange a week ago. 

Earlier this month, Hong Kong passed a law introducing a licensing regime for virtual asset service providers. The Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Bill 2022 applied traditional customer due diligence and record-keeping requirements to VASPs when conducting certain transactions.

Additionally, Switzerland-headquartered Seba Bank expanded into Hong Kong with a new office late last month.

© 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.

Andreessen Horowitz-backed crypto gaming unicorn Mythical Games has filed a suit alleging that three former high-level executives violated their fiduciary duty by using company contacts and strategy to secure $150 million in funding.

Mythical Games filed the lawsuit in the Superior Court of the State of California in Los Angeles County’s Central District on Thursday. The suit names Rudy Koch, Chris Ko and Matthew Nutt of Fenix Games as defendants.

Koch, Ko and Nutt all worked at Mythical Games until departing last month. Koch was the company’s co-founder, Nutt was chief operating officer and head of game studios and publishing, while Ko was a senior vice president for strategy and investments.

In its suit, Mythical Games, which achieved unicorn status late last year after hitting a valuation of more than $1 billion, alleges that the company put the three named executives in charge of raising money for a new fund called Mythical Ventures. The company alleges a Mythical Games investor introduced the trio to Cypher Capital, based in the United Arab Emirates.

Then, instead of securing an investment from Cypher Capital for Mythical Ventures, the three executives used Mythical Games’ business plan and convinced Cypher Capital to invest in a separate endeavor, according to the lawsuit.

Koch, Ko and Nutt did not immediately respond to requests for comment.

A new ‘publishing platform’

A few weeks after departing Mythical Games, Koch, Ko and Nutt announced that they had founded a new “publishing platform” for blockchain games, calling it Fenix Games. They also said they had raised $150 million from Cypher Capital and Phoenix Group.

In its filed complaint, Mythical Games is seeking, among other things, “restitution of the ill-gotten gains” and “punitive damages.” The suit alleges the three former Mythical Games’ executives committed fraud through concealment while also breaching both their fiduciary duty and contract.

Mythical Games’ Head of Communications Nate Nesbitt declined to comment on details of the ongoing litigation, but provided a written statement by email.

“I can say that we believe very strongly in the protection of our intellectual property and corporate assets,” Nesbitt said. “In this instance, it was necessary to take these steps to rectify this situation and protect the company’s corporate interest, as is our duty to our employees and investors.”

Los Angeles-based Mythical Games’s most recent round of funding also raked in $150 million. The round, led by Silicon Valley venture-capital firm a16z, also included NBA legend Michael Jordan, the National Football League’s investment arm 32 Equity and RedBird Capital Partners, an investor in Skydance Media.

Mythical Games’ web3 gaming titles include Blankos Block Party and NFL Rivals.

© 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.

Most Bitcoin mining stocks tracked by The Block fell on Thursday.

Bitcoin was down and trading a bit under $16,800 by market close, according to data from TradingView.

BTCUSD Chart by TradingView

Here’s how crypto mining companies performed on Thursday, Dec. 22:

© 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.

U.S. prosecutors released more details on the criminal charges that former Alameda Research CEO Caroline Ellison and FTX co-founder and former CTO Gary Wang pled guilty to earlier this week.

The amount of fraud both admitted to technically comes with the possibility of spending decades in prison, according to unsealed guilty pleas from the pair for criminal charges connected to the collapse of the failed cryptocurrency exchange. But neither is likely to serve close to the maximum sentencing for their crimes after pleading guilty and cooperating with investigators. 

The U.S. Attorney’s Office for the Southern District of New York noted that the maximum sentences are provided for “informational purposes only,” with any sentence determined by a judge. Plea deals usually come with agreements in place between prosecutors and defendants in order to reduce the amount of prison time cooperating defendants face. 

Ellison, 28, pled guilty to two counts of conspiracy to commit wire fraud, two counts of actual wire fraud, one count of conspiracy to commit commodities fraud, one count of conspiracy to commit securities fraud and one count of conspiracy to commit money laundering. If she had gone to trial Ellison would have faced a maximum sentencing of 110 years in prison. 

Wang, 29, pled guilty to one count of conspiracy to commit wire fraud, one count of actual wire fraud, one count of conspiracy to commit commodities fraud and one count of conspiracy to commit securities fraud. If Wang went to trial he would face up to 50 years of hard time. 

Bankman-Fried released on bail

Bankman-Fried, 30, was himself extradited to the U.S. from the Bahamas yesterday, and currently faces up to 115 years in prison. He appeared at federal court in New York on Thursday, where a judge said he’d be released on a $250 million bond package — secured in part by Bankman-Fried’s parents’ Palo Alto, Calif., house — while he awaits trial, Reuters reported. He’ll have to surrender his passport and is required to be treated and evaluated for mental illness. He is next due in court on Jan. 3, Reuters said.

“Last week, we announced charges against Samuel Bankman-Fried for a sweeping fraud scheme that contributed to FTX’s collapse and for a campaign finance scheme that sought to influence public policy in Washington,” U.S. Attorney Damian Williams said in the statement. “As I said last week, this investigation is very much ongoing, and it’s moving very quickly.  I also said that last week’s announcement would not be our last, and let me be clear once again, neither is today’s.”

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.