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FTX’s brand is so toxic it wants to jettison subsidiaries before they lose value by association. 

The company’s new leadership asked a federal bankruptcy judge for permission to sell off parts of the failed crypto empire’s business early next year — while those subsidiaries of FTX are still valuable.

Lawyers representing FTX filed a motion to begin an auction process for digital currency derivatives platform LedgerX, stock trading service Embed, as well as FTX Japan and FTX Europe.

“The longer operations are suspended, the greater the risk to the value of the assets and the risk of a permanent revocation of licenses,” lawyers from law firm Sullivan and Cromwell argued on behalf of the company in a motion filed Thursday evening.

LedgerX, which FTX acquired last year, was believed to be one of the few parts of the corporate family that remained liquid as parent company FTX and its closely linked investment fund Alameda Research hemorrhaged money. Lawyers for the company argue that the other affiliates they want to sell off could continue to lose staff and their good standing with regulators the longer they remain tied to the parent company, even though their business operations are separate and the subsidiaries are believed to be solvent.

FTX’s Bahamian operations, which Sam Bankman-Fried personally oversaw, and Alameda Research were the epicenters for alleged malfeasance, for which co-founder and majority owner Bankman-Fried was arrested and indicted on multiple charges of fraud earlier this week.

“It is a priority of [FTX] to explore sales, recapitalizations or other strategic transactions with respect to such subsidiaries and assets,” the motion said.

Proposed dates for the bidding and sale approval process vary by subsidiary, but preliminary bids are due from mid-January to early February. Final bids are due mid-February to mid-March, and auction dates run from late February to late March. After those auctions, the presiding judge, John Dorsey of the U.S. Bankruptcy Court for the District of Delaware, will hold hearings to approve winning bids.

Objections to the sale proposal are due Dec. 29, and a hearing on the topic is scheduled for Jan. 11.

If only one qualified bid is made on a business before the final bid deadline, FTX’s leadership proposes cancelling the auction and seeking approval for that bid.

A full list of dates follows. All dates are in 2023. 

Preliminary bid deadlines:

• Embed, Jan. 18
• LedgerX, Jan. 25
• FTX Japan,  Feb. 1
• FTX Europe, Feb. 1.

Final bid deadlines:

• Embed, Feb. 15
• LedgerX, March 1
• FTX Japan, March 15
• FTX Europe, March 15.

Auction dates:

• Embed, Feb. 21
• LedgerX, March 7
• FTX Japan, March 21
• FTX Europe, March 21.

Approval hearing dates:

• Embed, Feb. 27
• LedgerX, March 13
• FTX Japan, March 27
• FTX Europe, March 27.

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.

Rep. Patrick McHenry is urging the Treasury Department to issue clearer digital asset reporting rules as part of last year’s infrastructure bill and delay compliance requirements for the new rules. 

The North Carolina Republican called the section of the Infrastructure Investment and Jobs Act that broadly defined brokers of digital assets to increase tax collection from crypto transactions “poorly drafted” and warned it could be “wrongly interpreted as expanding the definition of a ‘broker’ beyond custodial digital asset intermediaries.” He filed his own bill last year to change digital asset reporting provisions in the infrastructure package.

“These provisions were the subject of much debate. Any rulemaking or guidance that fails to appropriately interpret these provisions will damage the privacy of American taxpayers and stifle innovation through rising compliance costs and unnecessary regulatory burdens,” McHenry, the incoming chair of the House Financial Services Committee, wrote in a letter addressed to Treasury Secretary Janet Yellen.

The crypto industry lobbied unsuccessfully to tweak the definition of a broker in the infrastructure bill President Joe Biden signed last year, arguing that it could encompass a variety of digital asset-related entities that would struggle to comply with the law. Treasury has committed to not applying the legal language as broadly as it could, in order to assuage industry fears of onerous requirements for miners or other ecosystem participants. But interpretations can change when departmental leadership turns over. 

“We urge Treasury to immediately publish the rules directed under Section 80603 and delay the effective date of Section 80603 to allow market participants to conform to any new requirements,” McHenry, the incoming chair of the House Financial Services Committee, wrote in a letter addressed to Treasury Secretary Janet Yellen.

The new law also directs the Treasury Department to incorporate digital assets into the definition of tax collection and reporting purposes, which McHenry says is a privacy concern. The Treasury Department did not immediately respond to a request for comment. 

“Given the significance of these issues, Treasury cannot evade the formal rulemaking process by issuing an interpretive final rule or merely issuing guidance,” McHenry wrote.

© 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.

Despite most mining stocks falling, Core Scientific continued its rally by finishing up 72% today. 

Bitcoin was valued at around $17,400 at the close on Thursday, according to data from TradingView. The cryptocurrency steadily fell from its position of roughly $17,800 yesterday.  

BTC/USD price chart by TradingView

Core Scientific continued its rally by finishing up 72% today. The firm’s shares gained 69% yesterday after B. Riley, one of its largest creditors, proposed a $72 million financing lifeline for the firm. Mawson Infrastructure Group ranked second in gains, rising 6.32%. 

CleanSpark fell the most today, down 16.67%, followed by both the U.S. and Canadian companies of Bitfarms, down 12.2% and 11.11%, respectively. 

Here’s how crypto mining companies performed on Thursday, Dec. 15:

© 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 Ren community, which oversees a DeFi protocol that issues wrapped crypto assets, is considering the minting of new tokens to raise capital after the collapse of Alameda Research left the project without access to its funds.

The community is also voting on the creation of the Ren Foundation, an organization that will lead the future development of the project. This vote is based on a proposal submitted to the DAO forum by Ren Ecosystem Advocate Maximillian Roszko.

As part of the vote, Ren DAO members will decide how many new ren tokens will be minted. The proposal suggested four options — 50 million, 100 million, 150 million or 200 million REN tokens — as well as a fifth option for rejecting the funding plan as a whole. At the current token price, Ren could raise from $4 million and $17 million.

Ren’s most popular wrapped asset is renBTC, a wrapped version of bitcoin. Wrapped tokens are versions of native Layer 1 coins that can be bridged to the Ethereum network. 

The REN token price is down 83% in the last one year. Image: CoinGecko

The Ren Foundation, if set up, will fund Ren 2.0 — a new version of the protocol to be rolled out as a community-run upgrade after sunsetting version 1.0. Ren was forced to retire the previous version after running out of funds.

Alameda acquired Ren in early 2021 and held the project’s treasury. The trading firm, alongside its sister exchange FTX, has since gone into bankruptcy. Ren previously stated that it only had funding through the end of 2022 following the Alameda collapse.

The funds realized from the sale of the newly minted tokens will be split between the Ren Foundation and darknode operators, ecosystem members who contribute their computing power to secure the network and receive rewards from Ren for contributing their computing power to the network.

The Ren community vote will end on Dec. 21. Data from the voting page on Snapshot shows early support for minting 200 million new ren tokens. This option so far has attracted 75% of the vote.

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 prices largely continued a slide that started with the Fed’s 50-basis point interest rate increase yesterday. Crypto-related stocks were down, although Silvergate bucked the trend. 

Bitcoin slipped 4% to trade around $17,400 at 12:30 p.m. EST today, according to TradingView data. Ether is down 5% over the past 24 hours, trading at $1,271 – the majority of losses also followed the Fed news. Binance’s BNB token has continued to trend lower today, dipping 3.5%. Dog-themed memecoins had a rough ride too, with dogecoin and shiba inu shedding 5.2% and 3.5%, respectively. 

BTCUSD chart by TradingView

Crypto stocks and structured products

U.S. stock indices were down across the board on Thursday. The S&P 500 fell 2.5%, while the Nasdaq 100 dropped by 3%.

Coinbase dropped 5.5% by 12:35 p.m. EST, according to Nasdaq data. Shares in the exchange are trading at an all-time low amid ongoing market turmoil and concerns over contagion from FTX’s collapse. 

Jack Dorsey’s Block fell 6.9% to trade around $66.30, and MicroStrategy plunged 5.7%.

Silvergate bucked the downward trend, adding 1.8% to trade at $19.06.

Grayscale’s GBTC continues to trade at a discount of nearly 50% to its net asset value, with shares in the fund trading at a discount of 48.3% to the value of the bitcoin it holds, according to The Block’s data. 

Concern over the liquidity of Grayscale’s sister firm Genesis Capital persists. Although calls for the asset manager to liquidate some of its bitcoin fund have not materialized, one hedge fund has brought a legal case against the firm. 

© 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 privacy-focused web3 firm Aztec Network raised $100 million in Series B funding led by the web3 investment firm a16z. 

Aztec aims to fully encrypt the Ethereum blockchain to add more privacy and reduce computational redundancy. The firm will use the fresh raise to develop encrypted architecture that lets individuals properly use blockchains without exposing identifying information. In addition, Aztec intends to double its current team of 40 people, the co-founders told TechCrunch.

“What we’re building is a revolutionary piece of technology that transforms how we interact with each other online, in which the end user is the customer, rather than the product,” Aztec Network CEO Zac Williamson said in a statement. “End-to-end encrypted blockchains protect individuals, obviating the need for centralized financial systems.” 

Additional participants in the round include A Capital, King River, Variant, SV Angel, Hash Key, Fenbushi and AVG, according to a company blog post.

Aztec Network was originally founded in 2017 by Zac Williamson and Joe Andrews. 

© 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.

Decent, an NFT infrastructure protocol that helps artists monetize their work, raised $3.5 million in a seed funding round.

Crypto-focused venture capital firm Archetype led the round, with Y Combinator, Circle Ventures, Palm Tree Crew Crypto and its co-founder Kyrre Gorvell-Dahll (aka Kygo, a Norwegian DJ and music producer) also participating.

Angel investors, including Ilya Fushman of Kleiner Perkins and Ian Lapham of Uniswap Labs, also joined the round, Decent co-founder Will Collier told The Block on Thursday.

The funding was secured via an equity and token warrant arrangement, Collier said.

Decent was established last year as a curated NFT marketplace for artist releases. It launched the protocol last month, consisting of Creator HQ and a javascript SDK. “Creator HQ is a no-code creation and management hub for artists to customize and build unique NFT projects and manage their revenue, splits, metadata and more,” Collier said. “The SDK allows any developer to build on top of and customize our smart contracts and infrastructure with just a few lines of javascript — a far more globally known language than Solidity (which is what smart contracts are written in).”

Collier likened the Decent protocol with what Squarespace does for websites and Canva does for design.

With fresh capital in hand, Decent will expand its team of six by hiring one more full-stack engineer, Collier said.

The NFT/gaming vertical of the crypto sector continues to grab the most venture capital at the seed stage amid the so-called crypto winter, The Block Research wrote recently. The overall percentage of deals in this vertical also increased to 47% last month from 37% in October.

© 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.

Magic Eden, Solana’s biggest NFT platform, now supports Polygon NFT minting and trading. 

Magic Eden extended support for the Polygon network on Nov. 22 in an effort to add multi-chain functionality and future possibilities for blockchain gaming. Polygon is an Ethereum layer-2 protocol that undergirds many popular blockchain-based games such as The Sandbox.

The new support will allow for a framework for more blockchain-based games on Magic Eden, with new gaming brands joining the platform including Shatterpoint and Infinite Drive. Taunt Battle World, Planet Mojo and Kakao Games will follow in 2023. 

“We’re excited to officially bring our snappy, seamless NFT minting and trading platform experience to Polygon,” said Magic Eden COO Zhuoxun Yin in a statement. “Having projects with strong development teams and IPs, like Shatterpoint and Infinite Drive with Aston Martin, makes this integration even more meaningful by allowing us to reach a wider set of audience.”

Magic Eden recently hired Chief Gaming Officer Chris Akhavan, a game industry veteran formerly at the blockchain gaming startup Forte, to build out its web3 gaming endeavors. Magic Eden has over 50 gaming projects on the platform, with $2.3 billion in total NFT trades amassed to date, according to a Magic Eden spokesperson.

Weekly trading volume for web3 gaming NFTs comes in at $11.5 million, an 88.5% decrease compared to the same time last year, according to The Block’s Data Dashboard. 

© 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.

CSOP Asset Management, a China Southern Asset Management subsidiary, will list the first bitcoin and ether ETFs on the Hong Kong Stock Exchange on Friday. 

CSOP Bitcoin Futures ETF and CSOP Ether Futures ETF will track CME’s bitcoin and ether futures, the company said. The CSOP bitcoin and ether ETFs have received more than $74 million in initial investments — $54 million and $20 million, respectively — shaking off the slump in cryptocurrency prices and the fallout from high-profile collapses of FTX and others.

The approval of the ETFs is an “important milestone” for digital assets in Asia, said Tim McCourt, global head of equity and FX products at CME.

“The listing of these ETFs underscores the robust growth and increasing client demand for exposure to bitcoin and ether via CME Group’s transparent, highly regulated, and deeply liquid benchmark futures contracts,” he said, adding that both have seen a combined increase of 20% in average daily volume this year versus 2021. 

While these funds have attracted significant investment, crypto-focused ETFs have come under renewed scrutiny of late. Last month, Cosmos Asset Management announced it was delisting three ETFs and revoking a request for a third. 

Last week, VanEck CEO Jan van Eck said the underlying constituents of his firm’s Digital Asset Mining ETF had shrunk in market cap, prompting the firm to review the fund. Van Eck noted that the firm is usually slow to close a fund. 

© 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.

QCP Capital, a crypto trading firm based in Singapore, has at least $97 million stuck on FTX after the crypto exchange filed for bankruptcy last month.

In an effort to recoup some cash, QCP is attempting to sell a claim on the frozen funds to distressed asset buyers, two sources with knowledge of the matter told The Block.

Last month, QCP said it has exposure to FTX but did not disclose the amount. The firm at the time said it had active trading positions on FTX and was able to withdraw “a substantial amount of assets” while leaving some stuck. 

“We have sufficient equity to absorb the impairment from the position,” a QCP spokesperson said, while declining to comment on the value of the frozen funds. “The impairment does not impact our clients nor our counterparties. Withdrawals remain open and trading continues as usual. Our business remains profitable and healthy.”

QCP Capital operates a 24/7 trading desk with a focus on crypto derivatives. The firm, which also engages in proprietary trading and offers market-making services, says it has handled trades worth nearly $38 billion so far this year. QCP is currently an exempt payment services provider pending licensing from the Monetary Authority of Singapore as a major payments institution providing crypto services.

QCP is one of many companies to fall afoul of FTX’s sudden collapse. Multicoin Capital, Genesis Block HK and Galois Capital reportedly all also have funds stuck on the exchange. The impact on Genesis Block HK was so significant that the firm shut down its over-the-counter trading business last week after nearly 10 years.

FTX contagion

Contagion from the implosion of FTX has spread far and wide in the crypto world. FTX filed for bankruptcy protection on Nov. 11, leaving about 1 million creditors in the lurch. The exchange owes its top 50 creditors alone $3.1 billion, according to court filings.

Some FTX creditors have already sold their claims at knock-down prices to avoid a likely years-long bankruptcy process, as The Block reported last week. Apollo Global Management and Attestor are among the distressed asset investors to have held conversations about snapping up FTX claims. Thomas Braziel’s 507 Capital has already purchased several claims from hedge funds for cents on the dollar. 

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.