{"id":24502,"date":"2023-01-06T09:59:18","date_gmt":"2023-01-06T09:59:18","guid":{"rendered":"https:\/\/davidgerard.co.uk\/blockchain\/?p=24502"},"modified":"2023-03-09T18:06:42","modified_gmt":"2023-03-09T18:06:42","slug":"crypto-collapse-gemini-vs-dcg-new-york-charges-mashinsky-in-celsius-voyager-sale-troubles-silvergate-troubles-wintermute","status":"publish","type":"post","link":"https:\/\/davidgerard.co.uk\/blockchain\/2023\/01\/06\/crypto-collapse-gemini-vs-dcg-new-york-charges-mashinsky-in-celsius-voyager-sale-troubles-silvergate-troubles-wintermute\/","title":{"rendered":"Crypto collapse: Gemini vs DCG, New York charges Mashinsky in Celsius, Voyager sale troubles, Silvergate troubles, Wintermute"},"content":{"rendered":"<p><i>By <\/i><b><i>Amy Castor<\/i><\/b><i> and <\/i><b><i>David Gerard<\/i><\/b><\/p>\n<ul>\n<li aria-level=\"1\">Our work is funded via our Patreons \u2014 here\u2019s<a href=\"https:\/\/www.patreon.com\/amycastor\"> Amy\u2019s<\/a>, and here\u2019s<a href=\"https:\/\/www.patreon.com\/davidgerard\/overview\"> David\u2019s<\/a>. Send us money and keep these newsletters pumping!<\/li>\n<li aria-level=\"1\">Our patrons can also get a couple of<a href=\"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2021\/05\/bitcoin-it-cant-be-that-stupid.png\"> \u201cBitcoin: It Can\u2019t Be That Stupid<\/a>\u201d stickers just by messaging one of us and asking.<\/li>\n<li aria-level=\"1\">David has<a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2020\/11\/26\/get-signed-copies-of-libra-shrugged-and-attack-of-the-50-foot-blockchain\/\"> signed author copies of his books<\/a> for sale.<\/li>\n<li aria-level=\"1\">Sign up on<a href=\"https:\/\/amycastor.com\/\"> Amy\u2019s blog<\/a> to see every new post she makes as it goes up, and<a href=\"https:\/\/davidgerard.co.uk\/blockchain\/#byemail\"> click here and enter your email address<\/a> for every new post on David\u2019s blog as it goes up.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2023\/01\/06\/crypto-collapse-gemini-vs-dcg-new-york-charges-mashinsky-in-celsius-voyager-sale-troubles-silvergate-troubles-wintermute\/hot-dog-twins-header\/\" rel=\"attachment wp-att-24503\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-24503\" src=\"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2023\/01\/hot-dog-twins-header.jpg\" alt=\"\" width=\"510\" height=\"315\" srcset=\"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2023\/01\/hot-dog-twins-header.jpg 680w, https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2023\/01\/hot-dog-twins-header-300x185.jpg 300w, https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2023\/01\/hot-dog-twins-header-348x215.jpg 348w\" sizes=\"auto, (max-width: 510px) 100vw, 510px\" \/><\/a><\/p>\n<p style=\"text-align: center;\"><small><i>We&#8217;re all trying to find the guy who did this, but in stereo<\/i><\/small><\/p>\n<p>&nbsp;<\/p>\n<h3>The blame game: Gemini versus DCG<\/h3>\n<p>We\u2019ve reached the stage in the crypto collapse where everyone is pointing at someone else. Everyone is a hero, and they\u2019re going to work ceaselessly to find the guy who did this to you \u2014 because it definitely wasn\u2019t them.<\/p>\n<p>Cameron Winklevoss of the Gemini crypto exchange published an open letter attempting to shame Barry Silbert, of Genesis and its parent company Digital Currency Group, into paying the $900 million that Genesis owes Gemini. [<a href=\"https:\/\/twitter.com\/cameron\/status\/1609913051427524608\"><i>Twitter<\/i><\/a><i>, <\/i><a href=\"https:\/\/web.archive.org\/web\/20230103161617\/https:\/\/twitter.com\/cameron\/status\/1609913051427524608\"><i>archive<\/i><\/a>]<\/p>\n<p><a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2022\/11\/25\/crypto-collapse-ftx-first-day-hearing-genesis-screws-dcg-silvergate-bank\/\">Genesis halted withdrawals on its crypto lending platform<\/a> on November 16 \u2014 they had a massive hole in their books after the collapses of Three Arrows Capital ($2.4 billion gone) and then FTX ($175 million gone).<\/p>\n<p>Gemini\u2019s Earn program, which was promising 8% interest, was a pass-through fund to Genesis \u2014 so Gemini had to halt withdrawals from Earn in turn. Gemini are now trying to reclaim $900 million from Genesis of Gemini Earn customers\u2019 cryptos.<\/p>\n<p>Cameron says Gemini can\u2019t even get a sit-down meeting with Silbert. \u201cEvery time we ask you for a tangible engagement, you hide behind lawyers investment bankers, and process.\u201d<\/p>\n<p>That\u2019s what borrowers do when they have no money to pay\u00a0 \u2014 they stop answering phones and hide from bill collectors.<\/p>\n<p>Sure enough, Genesis is broke. Genesis is laying off 30% of its staff, and it\u2019s weighing bankruptcy as an option. \u201cWhile we are committed to moving as quickly as possible, this is a very complex process that will take some additional time. We believe we can arrive at a solution,\u201d interim CEO Derar Islim told customers. [<a href=\"https:\/\/www.wsj.com\/articles\/crypto-lender-genesis-lays-off-30-of-staff-11672939434\"><i>WSJ<\/i><\/a><i>, paywalled; <\/i><a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2023-01-04\/genesis-says-it-needs-more-time-to-fix-crypto-lending-woes\"><i>Bloomberg<\/i><\/a>]<\/p>\n<p>The Winklevoss twins can try to extract a billion dollars from Silbert all they want \u2014 but Silbert doesn\u2019t have the money.<\/p>\n<p>Like every other firm that lost money in the crypto collapse, Gemini put its customers\u2019 money at risk because they failed to assess the risks. Gemini\u2019s archived Earn page claims they do a bunch of due diligence on their \u201clending partners,\u201d of which there was only one \u2014 Genesis. [<i>Earn, <\/i><a href=\"https:\/\/web.archive.org\/web\/20221114070103\/https:\/\/www.gemini.com\/earn\"><i>archive<\/i><\/a>]<\/p>\n<p>Gemini versus Genesis is like a Bernie Madoff feeder fund suing Madoff.<\/p>\n<p>In other news, DCG just told customers it\u2019s shutting down its $3.5 billion wealth management subsidiary HQ Digital \u2014 apparently due to the &#8220;state of the broader economic environment and prolonged crypto winter presenting significant headwinds to the industry.&#8221; [<a href=\"https:\/\/www.theinformation.com\/articles\/genesis-parent-company-dcg-shutters-its-wealth-management-division\"><i>The Information<\/i><\/a><i>, paywalled; <\/i><a href=\"https:\/\/twitter.com\/KateClarkTweets\/status\/1611146054438719488\"><i>Twitter<\/i><\/a>]<\/p>\n<h3>Three Arrows Capital: You&#8217;ve got mail<\/h3>\n<p>Zhu Su, co-founder of Three Arrows Capital, also took the opportunity to go after DCG. According to Zhu, DCG conspired with FTX to attack Terra and Luna, causing 3AC to collapse in turn. [<a href=\"https:\/\/twitter.com\/zhusu\/status\/1610093549651136512\"><i>Twitter<\/i><\/a>, <a href=\"https:\/\/archive.is\/wip\/F6JIr\"><i>archive<\/i><\/a>]<\/p>\n<p>Zhu is sure that <i>everyone else<\/i> was behind the collapse of 3AC \u2014 and not himself or the other co-founder, Kyle Davies, both of whom are in hiding.<\/p>\n<p>Teneo, the British Virgin Islands <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2022\/07\/15\/crypto-collapse-celsius-real-liabilities-and-fake-assets-voyager-still-bankrupt-3ac-owns-cryptodickbutt-1462\/\">liquidators for 3AC,<\/a> have been having some issues getting Zhu and Davies to respond to their queries. So Teneo went to court in October 2022 asking to be able to serve the pair in the U.S. Chapter 15 bankruptcy via email, or even via Twitter. This was finally granted on December 29. [<a href=\"https:\/\/storage.courtlistener.com\/recap\/gov.uscourts.nysb.312810\/gov.uscourts.nysb.312810.55.0.pdf\"><i>Motion<\/i><\/a><i>, PDF; <\/i><a href=\"https:\/\/storage.courtlistener.com\/recap\/gov.uscourts.nysb.312810\/gov.uscourts.nysb.312810.79.0.pdf\"><i>Order<\/i><\/a><i>, PDF<\/i>]<\/p>\n<p>On January 5, Teneo finally served Zhu and Davies via Twitter and email. Said Teneo: \u201cThe founders have unfortunately resisted cooperating in these efforts, and as such, we have received authority from courts in both the US and Singapore to serve them targeted and comprehensive discovery demands through email and their frequently-used Twitter accounts.\u201d Who says crypto doesn\u2019t bring innovation? [<a href=\"https:\/\/twitter.com\/3ACLiq\/status\/1611018579532742657\"><i>Twitter<\/i><\/a><i>; <\/i><a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2023-01-05\/3ac-liquidators-demand-documents-from-founders-via-twitter\"><i>Bloomberg<\/i><\/a>]<\/p>\n<h3>FTX: what happened to the lawyer<\/h3>\n<p>We were wondering why FTX\u2019s lawyer, Daniel Friedberg, hadn\u2019t been arrested yet. It turns out that after Friedberg resigned from FTX on November 8 \u2014 after FTX closed withdrawals, but before the November 11 bankruptcy filing \u2014 FBI agents called him on November 14, and he met with the Department of Justice, the FBI, and the SEC in New York on November 22. \u201cI want to cooperate in all respects,\u201d he told the FBI. [<a href=\"https:\/\/www.reuters.com\/business\/finance\/ftxs-former-top-lawyer-aided-us-authorities-bankman-fried-case-2023-01-05\/\"><i>Reuters<\/i><\/a>]<\/p>\n<p>Friedberg has not been charged. Instead, he expects to be called as a government witness when Sam Bankman-Fried <a href=\"https:\/\/amycastor.com\/2023\/01\/04\/ftx-bahamas-vs-john-jay-ray-bankman-fried-pleads-not-guilty-doj-seizes-ftx-assets\/\">goes on trial in October (maybe).<\/a><\/p>\n<p>Friedberg previously worked at Canadian poker site Ultimate Bet with Stuart Hoegner, now general counsel at Tether. Ultimate Bet shut down after being fined $1.5 million for cheating its players. [<a href=\"https:\/\/www.pokernews.com\/news\/2022\/11\/ultimate-bet-scandal-42623.htm\"><em>PokerNews<\/em><\/a>]<\/p>\n<p>Sam Bankman-Fried has just entered the scrum to get back his <a href=\"https:\/\/amycastor.com\/2022\/12\/24\/ftx-updates-how-sam-bankman-fried-got-bail-and-more\/\">multiply-pledged<\/a> Robinhood shares, which <a href=\"https:\/\/amycastor.com\/2023\/01\/04\/ftx-bahamas-vs-john-jay-ray-bankman-fried-pleads-not-guilty-doj-seizes-ftx-assets\/\">the Department of Justice seized<\/a> a couple of days ago. \u201cMr. Bankman-Fried has not been found criminally or civilly liable for fraud, and it is improper for the FTX Debtors to ask the Court to simply assume that everything Mr. Bankman-Fried ever touched is presumptively fraudulent.\u201d He really, really needs the shares so he can pay his lawyers.<\/p>\n<p>These are the Robinhood shares that Sam bought using money he\u2019d borrowed on an IOU from Alameda, which he owned 90% of \u2014 that is, he was using Alameda as his personal piggy bank. Alameda\u2019s CEO, Caroline Ellison, already <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2022\/12\/22\/ftx-sam-bankman-fried-out-on-bail-ellison-and-wang-cop-pleas\/\">confessed to extensive fraud at the company.<\/a> Who could ever call any of that \u201cpresumptively fraudulent? [<a href=\"https:\/\/restructuring.ra.kroll.com\/FTX\/Home-DownloadPDF?id1=MTQzNjUxNQ==&amp;id2=-1\"><i>Doc 387<\/i><\/a><i>, PDF<\/i>]<\/p>\n<h3>Celsius Network: All your coin are belong to us<\/h3>\n<p>The New York Attorney General is suing Alex Mashinsky, ex-CEO of Celsius Network, on allegations of fraud. The complaint documents at length all the times that Mashinsky lied to investors. The state is demanding disgorgement, fines, and an officer\/director bar in New York. [<a href=\"https:\/\/ag.ny.gov\/press-release\/2023\/attorney-general-james-sues-former-ceo-celsius-cryptocurrency-platform-defrauding\"><i>press release<\/i><\/a><i>; <\/i><a href=\"https:\/\/ag.ny.gov\/sites\/default\/files\/mashinsky_complaint.pdf\"><i>complaint<\/i><\/a><i>, PDF<\/i>]<\/p>\n<p>In the Celsius chapter 11 proceedings, Judge Martin Glenn has ruled that \u201cEarn Assets in Earn Accounts constitute property of the Estates, and that the Debtors may sell stablecoins outside of the ordinary course of business.&#8221; [<a href=\"https:\/\/cases.stretto.com\/public\/x191\/11749\/PLEADINGS\/1174901042380000000067.pdf\"><i>Doc 1822<\/i><\/a><i>, PDF<\/i>]<\/p>\n<p>Celsius\u2019 terms of service for Earn accounts said that the company owned deposited cryptos \u2014 despite Mashinsky\u2019s statements to customers that these were their own cryptos. The judge ruled that the terms of service took precedence. The assets are now part of the general bankruptcy estate.<\/p>\n<p>Celsius wanted to sell stablecoins to pay operating expenses. Since $18 million of the stablecoins were in Earn accounts, and the court had ruled that Earn accounts belonged to Celsius, the judge agreed.<\/p>\n<p>What was going to happen with the stablecoins and Earn accounts was extremely contentious \u2014 as we\u2019ve covered at length previously (<a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2022\/11\/02\/celsius-network-bankruptcy-hearing-1-november-2022-stablecoins-kerps-and-ponzis\/\">November 1<\/a>, <a href=\"https:\/\/amycastor.com\/2022\/12\/07\/celsius-hearings-december-5-whose-stablecoins-are-these-kerp-bonuses-new-deadline-for-restructuring-plan\/\">December 5<\/a>, <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2022\/12\/08\/celsius-hearing-december-7-custody-and-withhold-accounts-and-a-partial-ruling\/\">December 7<\/a>). So the order is a single paragraph, but it\u2019s preceded by 45 pages of the judge\u2019s reasoning.<\/p>\n<p>At a hearing on December 20, Celsius discussed the company\u2019s financial position and ideas for a standalone reorganization plan (NewCo). Interim CEO Chris Ferraro says there are 30 potential bidders to buy Celsius\u2019 assets. The Unsecured Creditors\u2019 Committee says the initial bids have been sent to the various regulators for their approval. The judge wants to announce \u201ca path forward\u201d by mid-January.<\/p>\n<p>Celsius will run out of money as early as March. <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2022\/12\/10\/celsius-hearing-december-8-selling-gk8-to-galaxy-digital\/\">The sale of GK8 to Galaxy,<\/a> once it\u2019s approved, could extend that as far as April or May. The stablecoin sale will only add an additional month of runway. By June, the company will be dead in the water \u2014 unless they come up with a reorganization plan or find a buyer.<\/p>\n<p>Here\u2019s the presentation that Ferraro gave in court. Simon Dixon live-tweeted the hearing. [<a href=\"https:\/\/cases.stretto.com\/public\/x191\/11749\/PLEADINGS\/1174912202280000000035.pdf\"><i>Doc 1758<\/i><\/a><i>, PDF; <\/i><a href=\"https:\/\/twitter.com\/SimonDixonTwitt\/status\/1605218070213152769\"><i>Twitter<\/i><\/a>]<\/p>\n<p>Celsius has agreed to let Core Scientific shut off more than 37,000 bitcoin mining rigs that Celsius wasn\u2019t paying for anyway. It took Core filing for bankruptcy in December to resolve this issue. [<a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2023-01-03\/crypto-miner-core-scientific-to-shutter-over-37-000-celsius-rigs\"><i>Bloomberg<\/i><\/a><i>; <\/i><a href=\"https:\/\/www.cnbc.com\/2022\/12\/20\/bitcoin-miner-core-scientific-filing-for-bankruptcy-will-keep-mining.html\"><i>CNBC<\/i><\/a>]<\/p>\n<h3>Voyager Digital: everybody still hates Binance<\/h3>\n<p>Voyager wants to accept a bid from Binance US for a \u201c363 sale\u201d of assets in bankruptcy. The sale would be for $20 million of incremental value (actual money) and the assumption of $1.022 billion of Voyager\u2019s liabilities. Voyager will seek court approval for the asset purchase agreement at a hearing on January 10, 2023. [<a href=\"https:\/\/www.prnewswire.com\/news-releases\/voyager-announces-agreement-for-binanceus-to-acquire-its-assets-301706065.html?tc=eml_cleartime\"><i>PR Newswire<\/i><\/a><i>; <\/i><a href=\"https:\/\/document.epiq11.com\/document\/getdocumentsbydocket?docketId=977811&amp;projectCode=VDH2&amp;docketNumber=748&amp;source=DM\"><i>Notice of successful bidder<\/i><\/a><i>, PDF; <\/i><a href=\"https:\/\/cases.stretto.com\/public\/x193\/11753\/PLEADINGS\/1175312232280000000077.pdf\"><i>rescheduling<\/i><\/a><i>, PDF<\/i>]<\/p>\n<p>It\u2019s going to be controversial.<\/p>\n<p>The CFIUS (Committee on Foreign Investments in the US) may block or delay an unspecified sale of Voyager assets over possible \u201cnational security concerns.\u201d The filing doesn\u2019t indicate the specific concerns \u2014 but it\u2019s gonna be the Binance bid. Changpeng \u201cCZ\u201d Zhao, who is Canadian and Chinese, owns Binance US indirectly through a series of corporate shells. This also suggests the CFIUS wouldn\u2019t be happy with Binance swooping in to rescue Celsius either. [<a href=\"https:\/\/document.epiq11.com\/document\/getdocumentbycode?docId=4131180&amp;projectCode=VDH2&amp;source=DM\"><i>Doc 797<\/i><\/a><i>, PDF; <\/i><a href=\"https:\/\/www.reuters.com\/markets\/deals\/us-review-could-delay-or-block-binance-deal-voyager-digital-2022-12-30\/\"><i>Reuters<\/i><\/a>]<\/p>\n<p>The Texas State Securities Board objects to selling Voyager to Binance. There\u2019s a new affidavit from Enforcement Division Director Joe Rotunda \u2014 we commend to you <a href=\"https:\/\/amycastor.com\/2022\/10\/16\/crypto-collapse-40-states-chasing-celsius-for-possible-securities-fraud-texas-chasing-voyager-and-ftx-for-possible-securities-fraud\/\">his previous affidavit in Voyager<\/a> \u2014 about what a dismal organization Binance is, based on TSSB\u2019s investigations of Binance since August 2019:<\/p>\n<ul>\n<li aria-level=\"1\">There is no effective separation between Binance and Binance US;<\/li>\n<li aria-level=\"1\">Regulators have great difficulty in getting information out of Binance;<\/li>\n<li aria-level=\"1\">CZ, owner of Binance, has previously refused to provide necessary information about his personal finances to Texas;<\/li>\n<li aria-level=\"1\">Binance is sloppy as hell with sanctions and keeping criminals out;<\/li>\n<li aria-level=\"1\">Binance US offers staking, which almost certainly constitutes an unregistered security \u2014 but the company specifically wants to open staking to the Voyager customers it hopes to acquire with this purchase.<\/li>\n<\/ul>\n<p>[<a href=\"https:\/\/cases.stretto.com\/public\/x193\/11753\/PLEADINGS\/1175301042380000000098.pdf\"><i>Doc 815<\/i><\/a><i>, PDF; <\/i><a href=\"https:\/\/cases.stretto.com\/public\/x193\/11753\/PLEADINGS\/1175301042380000000177.pdf\"><i>Doc 817<\/i><\/a><i>, PDF<\/i>]<\/p>\n<p>Vermont and New Jersey join in Texas\u2019 objection. They also note that Binance is not licensed to operate in four states (Hawaii, New York, Texas, and Vermont) that contain Voyager customers, neither Voyager nor Binance are in compliance with state laws, Binance\u2019s solvency is unclear, New Jersey still bars Voyager\u2019s Earn product from the state, and Binance US may transfer customer crypto outside the U.S. [<a href=\"https:\/\/cases.stretto.com\/public\/x193\/11753\/PLEADINGS\/1175301042380000000085.pdf\"><i>Vermont filing<\/i><\/a><i>, PDF; <\/i><a href=\"https:\/\/cases.stretto.com\/public\/x193\/11753\/PLEADINGS\/1175301042380000000081.pdf\"><i>New Jersey filing<\/i><\/a><i>, PDF<\/i>]<\/p>\n<p>New York notes that neither Binance nor Voyager is licensed to operate in New York \u2014 though Voyager unlawfully signed up New York customers anyway \u2014 and wants the purchase blocked until Binance obtains a suitable New York license (presumably a BitLicense). [<a href=\"https:\/\/cases.stretto.com\/public\/x193\/11753\/PLEADINGS\/1175301042380000000089.pdf\"><i>New York filing<\/i><\/a><i>, PDF<\/i>]<\/p>\n<p>Other objectors include:<\/p>\n<ul>\n<li aria-level=\"1\">Alameda-in-bankruptcy says the sale would make a mess of the bankrupt companies\u2019 loans to each other, which\u00a0 need to be resolved first;<\/li>\n<li aria-level=\"1\">The U.S. Trustee says the sale is too hasty and needs more due diligence;<\/li>\n<li aria-level=\"1\">The SEC has filed a limited objection, wondering how Binance can afford this, and wanting more detail on how Voyager and Binance will safeguard customer assets;<\/li>\n<li aria-level=\"1\">Oracle \u2014 yes, the computer company \u2014 wants clarity on how Voyager\u2019s NetSuite contracts with Oracle will carry over.<\/li>\n<\/ul>\n<p>[<a href=\"https:\/\/cases.stretto.com\/public\/x193\/11753\/PLEADINGS\/1175301042380000000092.pdf\"><i>Alameda filing<\/i><\/a><i>, PDF; <\/i><a href=\"https:\/\/cases.stretto.com\/public\/x193\/11753\/PLEADINGS\/1175301042380000000087.pdf\"><i>Trustee filing<\/i><\/a><i>, PDF; <\/i><a href=\"https:\/\/cases.stretto.com\/public\/x193\/11753\/PLEADINGS\/1175301042380000000080.pdf\"><i>SEC filing<\/i><\/a><i>, PDF; <\/i><a href=\"https:\/\/cases.stretto.com\/public\/x193\/11753\/PLEADINGS\/1175301032380000000054.pdf\"><i>Oracle filing<\/i><\/a><i>, PDF<\/i>]<\/p>\n<h3>Silvergate is doing just great<\/h3>\n<p><a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2022\/11\/25\/crypto-collapse-ftx-first-day-hearing-genesis-screws-dcg-silvergate-bank\/\">We\u2019ve talked before about Silvergate Bank<\/a> \u2014 how they are the main actual-money bank for crypto in the U.S. If anything happens to them, all of U.S. crypto is screwed.<\/p>\n<p>In just the two months since FTX collapsed, customers have withdrawn $8.1 billion from Silvergate. The bank had to sell off assets at a loss to cover the cash demand. Silvergate has now laid off 40% of its staff. [<a href=\"https:\/\/www.wsj.com\/articles\/silvergate-raced-to-cover-8-1-billion-in-withdrawals-during-crypto-meltdown-11672895207\"><i>WSJ<\/i><\/a><i>, paywalled<\/i>]<\/p>\n<p>U.S. senators wrote to Silvergate on December 5 asking about Silvergate\u2019s relationship with FTX, and whether Silvergate had noticed any of the glaring red flags \u2014 such as how money for FTX was being sent to Alameda accounts. Silvergate responded with four pages of non-specific non-answers. [<a href=\"https:\/\/twitter.com\/AlderLaneEggs\/status\/1605345687146598400\"><i>Twitter<\/i><\/a><i>, <\/i><a href=\"https:\/\/web.archive.org\/web\/20230105205258\/https:\/\/twitter.com\/AlderLaneEggs\/status\/1605345687146598400\"><i>archive<\/i><\/a>]<\/p>\n<h3>Silvergate: Libra is even deader<\/h3>\n<p>In January 2022, Silvergate <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2022\/02\/07\/news-world-wildlife-nft-diem-sale-details-eccb-dcash-offline\/\">bought the remaining assets of the Diem Foundation<\/a> \u2014 formerly <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/libra\/\">Facebook\u2019s Libra cryptocurrency project<\/a> \u2014 for $50 million in cash and $150 million in shares.<\/p>\n<p>Silvergate is writing this expense off entirely. They\u2019ve been unable to get the regulators to go along with their plan for a Diem dollar stablecoin for use by ordinary retail consumers. So they\u2019ve all but shut down the Diem unit, and will be taking a $196 million impairment charge for Q4 2022.<\/p>\n<p>CEO Alan Lane said on the Q4 preliminary earnings call that there were still staff working on the Diem project \u2014 but \u201cthere\u2019s significant headwinds to launching something in the near future, so we&#8217;ll have to look at the expenses that we&#8217;re incurring.\u201d [<a href=\"https:\/\/seekingalpha.com\/news\/3922273-silvergate-cutting-headcount-40-takes-196m-impairment-charge\"><i>Seeking Alpha<\/i><\/a>]<\/p>\n<p>If anyone wanted to give David money to publish an updated second edition of <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/libra\/\"><i>Libra Shrugged<\/i><\/a>, the final chapter would be an epic of corporate slapstick.<\/p>\n<h3>So much for crypto attestations<\/h3>\n<p>We now know why Paris-based accounting firm <a href=\"https:\/\/amycastor.com\/2022\/12\/18\/crypto-collapse-binance-is-not-so-fine-ftx-delaware-vs-ftx-bahamas-celsius-voyager-gemini-tether\/\">Mazars backpedaled out of crypto<\/a> at the speed of light \u2014 the SEC is looking into accountants\u2019 work for crypto companies. The SEC is concerned that companies might be overstating what the narrow reports say when the crypto companies do things like call a document an \u201caudit\u201d when it\u2019s just an \u201ceverything is fine\u201d letter that doesn\u2019t even list numbers. [<a href=\"https:\/\/on.wsj.com\/3vc1Sec\"><i>WSJ<\/i><\/a><i>, paywalled<\/i>]<\/p>\n<h3>It was hot, the night we burned Wintermute<\/h3>\n<p>Now that FTX has gone belly-up, the cryptocurrency world is in dire need of a new crypto derivatives platform \u2014 one that can suddenly burst into the big time, the way FTX did in 2019. And to prop up crypto the way FTX did.<\/p>\n<p>In December, there was a huge publicity push for the idea of London-based Wintermute starting up such an exchange \u2014 though there\u2019s been no mention of the idea since. [<a href=\"https:\/\/www.forbes.com\/sites\/jeffkauflin\/2022\/12\/20\/with-sam-bankman-frieds-hedge-fund-gone-crypto-trading-firm-wintermute-emerges\/\"><i>Forbes<\/i><\/a>]<\/p>\n<p>A crypto \u201chedge fund,\u201d Wintermute was founded by Evgeny Gaevoy in July 2017. His wife Marina Gurevich is the COO.<\/p>\n<p>Wintermute is amply qualified for the role of FTX substitute. It\u2019s run by fast talkers who are very good at getting hacked \u2014 or \u201chacked\u201d \u2014 and doing bad trades that lose a fortune.<\/p>\n<p>Wintermute lost $160 million in a September 2022 \u201chack\u201d on their DeFi operation and another $59 million in FTX \u2014\u00a0in fact, they have a seat on the FTX Unsecured Creditors\u2019 Committee. [<a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2022-09-20\/wintermute-hacked-for-about-160-million-in-its-defi-operations\"><i>Bloomberg<\/i><\/a><i>; <\/i><a href=\"https:\/\/www.coindesk.com\/policy\/2022\/12\/15\/wintermute-venture-cap-octopus-given-seats-on-key-ftx-creditor-committee\/\"><i>CoinDesk<\/i><\/a>]<\/p>\n<p>Gaevoy claims to have made tens of millions of dollars in profits on the <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2022\/05\/10\/terras-stablecoin-does-a-2008-crisis-ust-crashes-and-takes-bitcoin-with-it\/\">failing TerraUSD stablecoin<\/a> via \u201carbitrage\u201d in May 2022, while everyone else was losing their shirts. Remember how SBF\u2019s origin myth was a supposed arbitrage?<\/p>\n<p>Gaevoy\u2019s supporters, and those who invested in Wintermute, love to claim that Gaevoy is a mathematical genius \u2014 all the same stories we heard about SBF. \u201cHe\u2019s very smart &#8230; it\u2019s almost like the cliche of the extremely smart Russian mathematician type,\u201d Jeremy Liew at Lightspeed Venture Partners told Forbes. Compare Sequoia Capital\u2019s <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/2022\/11\/13\/ftx-files-for-bankruptcy-and-the-fallout-begins-whos-next\/\">ludicrous paean to the video-gaming financial genius of Sam Bankman-Fried.<\/a><\/p>\n<p>If Wintermute wants to set up an offshore crypto casino, they\u2019ll need a way to get actual dollars in and out \u2014 their very own Farmington\/Moonstone Bank arrangement, to keep that money fresh and clean. Wintermute will also likely need to come to some arrangement with Tether.<\/p>\n<p>The inside scoop on Wintermute suggests it runs as smoothly as FTX as well: \u201cstaff with real experience come for a month and are quickly gone &#8230; when 4 (yes f-ing 4) people message you to tell you about how much of a sh-tshow a firm then you know it is bad. Most of my knowledge was from people complaining in interviews\/ their clients coming to me (Imma eat their lunch), but this takes the cake.\u201d [<a href=\"https:\/\/twitter.com\/quant_arb\/status\/1605617772653793280\"><i>Twitter<\/i><\/a><i>, <\/i><a href=\"https:\/\/archive.is\/OVwkg\"><i>archive<\/i><\/a>]<\/p>\n<p>Why is it that every time you look inside a crypto firm, there\u2019s nothing in the box but cobwebs and dead snakes?<\/p>\n<p>Gaevoy insists Wintermute doesn\u2019t take careless risks the way FTX and Alameda did. We would suggest caution.<\/p>\n<p>&nbsp;<\/p>\n<br><br><div align=\"center\"><p><a href=\"https:\/\/www.patreon.com\/bePatron?u=8420236\"><img src=\"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2021\/10\/become_a_patron_button.svg\" alt=\"Become a Patron!\" title=\"Become a Patron!\" width=217 height=51><\/a><br><p style=\"align:center;\" class=\"patreon-badge\"><i>Your subscriptions keep this site going. <a href=\"https:\/\/www.patreon.com\/bePatron?u=8420236\">Sign up today!<\/a><\/i><\/p><\/div>","protected":false},"excerpt":{"rendered":"<p>We\u2019re all trying to find the guy who did this, but in stereo.<\/p>\n","protected":false},"author":1,"featured_media":24503,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1],"tags":[3016,2653,3324,2493,1481,568,916,3378,3286,1275,3364,2031,2085,3380,3333,1798,652,2890,3382,3051,1328,2011,3383,3381,3079,3379,1370,594,123,2491,33,1545,3050,3061,551,745,2391,2697,328,3369],"class_list":["post-24502","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorised","tag-3ac","tag-alameda","tag-alan-lane","tag-alex-mashinsky","tag-barry-silbert","tag-binance","tag-celsius","tag-chris-ferraro","tag-core-scientific","tag-cz","tag-dan-friedberg","tag-dcg","tag-diem","tag-evgeny-gaevoy","tag-farmington-state-bank","tag-ftx","tag-gemini","tag-genesis","tag-jeremy-liew","tag-kyle-davies","tag-libra","tag-libra-shrugged","tag-lightspeed","tag-marina-gurevich","tag-martin-glenn","tag-mazars","tag-new-jersey","tag-new-york","tag-oracle","tag-sam-bankman-fried","tag-sec","tag-silvergate-bank","tag-su-zhu","tag-teneo","tag-texas","tag-united-states","tag-vermont","tag-voyager-digital","tag-winklevoss-twins","tag-wintermute"],"jetpack_featured_media_url":"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2023\/01\/hot-dog-twins-header.jpg","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/posts\/24502","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/comments?post=24502"}],"version-history":[{"count":24,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/posts\/24502\/revisions"}],"predecessor-version":[{"id":26061,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/posts\/24502\/revisions\/26061"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/media\/24503"}],"wp:attachment":[{"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/media?parent=24502"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/categories?post=24502"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/tags?post=24502"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}