Crypto collapse: Binance hits reserves, FTX’s Singh sings, miners’ creative accounting, bitcoin markets are thin

By Amy Castor and David Gerard

“your honor please, sam is a growing boy and he needs his crimes. this is cruel and unusual punishment, sam is a very smart boy and i think if we just let him explain we can clear this all up and be home by dinner, around which sam tells us he expects more crimes” — Beeftweeter



The Binance shuffle

More documents have come out on Binance’s “Tai Chi” plan to subvert US regulation with the creation of Binance US. The new documents demonstrate how thoroughly entangled Binance US is with, and that they really aren’t separate at all. We all knew this, but it’s nice to have it all set out.

Regulators’ big worries are that Binance is another FTX waiting to blow, and that Binance US customers’ funds are commingled with Both of these are, of course, true.

Per the Wall Street Journal: “If U.S. regulators conclude that these links mean Binance has control over a U.S. company, they could claim the power to police Binance’s entire business, which, to many investors, has been a black box since the start.” [WSJ]

Forbes wrote about the “Tai Chi” plan in November 2020. Binance sued Forbes for defamation before withdrawing the suit. Binance later bought a chunk of Forbes.

Regardless, Forbes is not softening on Binance. From August 17, 2022, to early December 2022, 1.1 billion bridged USDC on Binance’s BNB chain were unbacked — there was no actual USDC behind the tokens.

The missing reserve was channeled to Cumberland — the crypto subsidiary of Chicago-based trading firm DRW, and one of Binance’s main liquidity providers. Cumberland may have assisted Binance to transform the USDC collateral into its BUSD stablecoin. Amber Group, Alameda Research, and Justin Sun’s Tron also received $100 million of shifted collateral from Binance.

Forbes details Binance’s long track record of trading the backing reserves for its bridged tokens. Patrick Hillmann, Binance’s chief strategy officer, says it’s fine — they’re just keeping a private set of books as well as the public set of books. That’s not a problem, right? [Forbes, archive]

Three US senators — Elizabeth Warren (D-MA), Chris Van Hollen (D-MD), and Roger Marshall (R-KS) — sent a scathing letter to Binance. They call the exchange a “hotbed of illegal financial activity,” extensively quoting Reuters’ coverage of Binance’s various shenanigans. They’ve requested a pile of documents from Binance and Binance US on company finances, compliance, and risk management practices. They want the documents by March 16. [Warren, PDF]

Your funds are safe with Binance. The exchange is trying again to get licensed in Singapore, but this time as a custodian. Binance rebranded its custody arm to Ceffu, a take on “SAFU,” earlier this month. [Nikkei Asia]

Coinbase is suspending trade in BUSD as of March 13. This is apparently due to “liquidity concerns.” [Twitter; CoinDesk]

Bitcoin miner accounting

We told you in August that bitcoin miners were fiddling their accounts. Marathon Digital Holdings and Riot Platforms have both delayed their 2022 10-K filings after unhappy letters from the SEC. Both companies will likely have to restate portions of their audited 2021 results and their currently-unaudited quarterly reports from 2022. [Marathon press release; Marathon NT 10-K; Riot NT 10-K]

Bitcoin miners are in desperate need of cash to fund operations and keep up with their exorbitant executive pay. Marathon sold nearly all of the bitcoins they mined in February — 650 BTC out of the 683 BTC mined. This is after selling 1,500 BTC in January, which marked the first time Marathon had sold any of its holdings. [Press release]

Riot started selling some of its mined bitcoin last year. [Reuters, 2022]

Update: Riot has now filed its 10-K. [SEC]

FTX: Singh sings

Nishad Singh, the former director of engineering for FTX and FTX US, has taken a plea deal. Singh pleaded guilty to six fraud and conspiracy charges, including conspiracy to make unlawful campaign contributions. [Doc 90 US v Singh, PDF]

The SEC and CFTC have also filed civil charges against Singh. [SEC press release; SEC complaint, PDF; CFTC complaint, PDF]

Here’s a list of Singh’s political donations. [OpenSecrets]

Singh allegedly wrote the “back door” that allowed FTX customer funds to be diverted to Alameda. He also withdrew $6 million from FTX for personal use and expenditures, including the purchase of a multi-million dollar house, and for funneling money to Effective Altruism organizations.

We’re still waiting to hear word of Sam Trabucco, former co-CEO of Alameda — he hasn’t tweeted since November, and he escaped before FTX entirely collapsed — and of Ryan Salame, former co-CEO of FTX Digital Markets and another enthusiastic political donor. We’re sure if they can just explain, it will all be fine.

In Sam Bankman-Fried’s criminal case, Judge Lewis Kaplan threatened to throw Sam in jail unless lawyers on both sides could come up with stronger bail restrictions. The government and the defense have agreed on almost a complete internet ban.

Sam can use a non-internet flip phone. He can’t contact any current or former FTX employees. His laptop will be restricted to particular sites, and his usage will be monitored.

All of this is one step up from the sort of isolated discovery laptop that you’d have in jail. Since Sam is at his parent’s house, their devices will be monitored too.

League of Legends is not on the approved sites list, but Sam is specifically allowed access to and, for all his Effective Sportsball needs. Substack and Twitter are not on the list, so he’ll need to write up more crimes on his Wikipedia user page or something. [Doc 100, PDF]

FTX in bankruptcy finally has an estimate of how much is missing from customer funds — $8.9 billion. Only $2.2 billion in customers’ assets have been located. Of that, only $694 million is in liquid assets such as fiat, stablecoins, BTC, and ETH. [Doc 792, PDF; press release]

FTX US also showed a shortfall of $116 million — it has $191 million in liquid assets but owes $335 million.

Number go up!

BTC and ETH liquidity is at its lowest since the Terra-Luna collapse — there’s no volume because the supply of actual dollars has dried up. It’s easier to rig the price than it has been in a long time. [CoinDesk]

So that $1,000 drop in BTC/USD in five minutes around 02:00 UTC on March 3 was probably quite cheap.

Ethereum’s Shanghai Upgrade is likely to happen in April and will allow all that staked ether stuck in the validators to be unstaked and sold. Though a profitable validator is unlikely to just dump its stake. [CoinDesk]

The Mt. Gox bitcoins are finally being released … any time now! Probably. The latest deadline for claims is March 10, 2023. We’re sure that every Mt. Gox holder who’s been waiting for their bitcoins since 2014 will definitely keep hodling, and won’t immediately dump them. [Mt. Gox, PDF]

New Zealand has issued a restraining order to lock NZD$140 million of bitcoins stolen by BTC-e operator Alexander Vinnik. If these are recovered, they may be added to the Mt. Gox bankruptcy estate in due course. [Mt. Gox, PDF]

A National Bureau of Economic Research working paper from December 2022 discusses what manipulated nonsense the crypto trading markets are. “Abnormal first-significant-digit distributions, size rounding, and transaction tail distributions on unregulated exchanges reveal rampant manipulations unlikely driven by strategy or exchange heterogeneity. We quantify the wash trading on each unregulated exchange, which averaged over 70% of the reported volume.” [NBER]

Matt Binder: Don’t be fooled: Crypto is going up because of market manipulation — whenever you see cryptocurrency prices suddenly rise, that’s probably why. With quotes from David. [Mashable]

More good news for bitcoin

Bitcoin can wave goodbye to institutional money. Crypto is “effectively nonexistent” for big institutions, says Jared Gross, JPMorgan’s head of institutional strategy. “The volatility is too high, the lack of an intrinsic return that you can point to makes it very challenging.” [Bloomberg]

Illinois wants to adopt a strict crypto business regulation along the lines of the New York BitLicense. “It’s happening too often where there’s some scam or collapse that’s hurting consumers directly in their pocketbooks,” said regulator David DeCarlo. [CoinDesk]

Ohio’s Division of Securities has joined the multi-state settlement against Nexo. We haven’t heard any more from Bulgaria about what’s going on with the office raids and charges against Nexo. [Ohio]

A bunch of accountants from FTX’s old auditor Armanino has set up shop as The Network Firm, specifically to serve crypto firms. Good luck, guys. [CoinDesk]

Grayscale is proceeding to court to try to get GBTC converted to an ETF, after the SEC’s 73-page response brief in December 2022. Oral arguments are set for March 7. Good luck, guys. [CoinDesk]

Reuters says that Visa and Mastercard have paused new crypto partnerships. Sure took their time. Visa denies the report. Mastercard said its efforts “continue to be focused on the underlying blockchain technology,” which has the advantage of working worse than the existing alternatives, so it’s unlikely to lead to economic contagion. [Reuters; Twitter; CoinDesk]

Nearly all of the tokens launched on UniSwap turned out to be rug pulls. There’s a simple and obvious heuristic to apply here: if you assume all DeFi is scams, you’ll be right 97.7% of the time. [arXiv, PDF]

Oh no, your crypto’s all washed up! Why don’t you get into gold instead? Here’s an ad in the Financial Times that’s pitching gold to crypto bros. Or you could realize that gold’s not so great either, and invest in enterprises that do things in the economy. [FT]

Media stardom

New Kids on the Blockchain have their latest documentary out: “The Rise Of DeFi — Dark Side Of The Moon?” It’s very positive about the fabulous hypothetical future of DeFi, NFTs, and the Metaverse — but David is also in it, dousing the party. [YouTube]

Become a Patron!

Your subscriptions keep this site going. Sign up today!

6 Comments on “Crypto collapse: Binance hits reserves, FTX’s Singh sings, miners’ creative accounting, bitcoin markets are thin”

  1. Directly from the 10-K publisched by Riot:
    During the year ended December 31, 2021, we executed purchase orders totaling $480 million with Bitmain Technologies Limited (“Bitmain”) for 82,500 ASIC miners, including 30,000 of Bitmain’s latest generation Antminer model S19XP (140 TH/s) miners, and 52,500 S19j and S19j Pro miners, including 43,500 model S19j (90 TH/s) miners and 9,000 model S19j Pro (100 TH/s) miners. All miners subject to these purchase orders were delivered through December 31, 2022, except for 5,130 miners, which were delivered in January 2023.
    According to, all those miners have a negative ROI. Is this the kind of business model were you lose money on each transaction, but make up with the volume? Or is it the business modell were you just hope for the line to go up?

    1. I suspect they ordered them expecting positive ROI and got trapped.

      During 2021 and the first quarter of 2022, Bitcoin was staying pretty much in the $40k to $60k price range. Presumably the purchase orders made in 2021 were based on these prices.

      In the second quarter of 2022, the Bitcoin price slid to $20k, and it has remined roughly the same since then. Presumably the purchase orders were no longer eligible for refund if cancelled.

  2. It’s the kind of business model where you take money you can’t easily spend (because you got it by selling drugs) and “invest” it in a “legitimate business”. A 25% haircut is a reasonable cost in this sort of operation.

  3. The irony of the Bloomberg article is that literally days before, some cryptobro online was trying to argue that all the big traditional banks were big into cryptocurrency now and specifically cited JPMC. I ran back the numbers he quoted and it was basically all from a crypto-shill report that counted every pilot project ever announced, actual *or* planned, in its accounting.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.