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This week, the trial of FTX founder Sam Bankman-Fried began; crypto sector suffers more layoffs; Hamas-led attack stuns Israel; Ripple vs. continues US SEC
SBF faces trial
The Sam Bankman-Fried trial continues Tuesday, October 10 with testimony from former Alameda CEO Caroline Ellison.
Before the trial began on October 3, lawyers rejected a request for a Ukrainian FTX client to testify remotely. Prosecutors wanted this because most of FTX’s clients live in the US and a Ukrainian couldn’t travel due to wartime restrictions.
Bankman-Fried’s legal team cited concerns about the emotional impact of the Russia-Ukraine conflict and possible jury bias.
The trial began in New York and Bankman-Fried entered the courtroom accompanied by five lawyers. He faces charges related to fraud against clients and investors. Curiously, the prosecution made no plea offer.
Judge Kaplan hinted that the trial would possibly be quicker than expected and gave jurors strict instructions to avoid news related to the trial. Some of the jurors had affiliations with crypto entities.
Witnesses include former FTX CTO Gary Wang, as well as former executive Nishad Singh and attorney Daniel Fried. Ryan Salame, a former FTX executive who had pleaded guilty, seemed unwilling to testify against Bankman-Fried.
Unlimited Alameda Privileges on FTX
On the second day, federal prosecutors alleged that Bankman-Fried misled the public about FTX’s financial status. The defense, on the other hand, sought to blame Ellison and the volatility of bitcoin for the implosion of FTX.
Wang admitted to allowing unlimited withdrawals of funds by Alameda. He cited Bankman-Fried’s significant control in both companies. Bankman-Fried owned 90% of Alameda, while Wang owned 10%.
Wang, who primarily focused on coding, had a salary of $200,000 and owned 17% of FTX. He coded special privileges for Alameda Research on the FTX platform.
During the fourth day, Wang revealed information about Alameda’s $65 billion credit line and claimed that they had unlimited withdrawals from FTX. Alameda had various privileges in the exchange, including this important line of credit.
Bankman-Fried took great care to maintain Alameda’s reputation, even resorting to tactics such as promoting a fictitious insurance fund. Meanwhile, behind the scenes, Alameda tapped its extensive line of credit to withdraw client assets from the exchange.
A verdict is expected within four to six weeks.
FTX Hacker on the Move
The FTX hacker who exploited the platform for $413 million last November moved some of the stolen funds this week. Notably, THORSwap, a prominent DEX, suspended all trading on its platform and entered maintenance mode on October 6.
The THORSwap team cited increasing use of the platform to divert stolen funds. Following the THORSwap move, the FTX hacker converted 75,636 eth worth $124 million into tBTC (a packaged version of btc) and moved the tokens to the bitcoin network via Threshold.
Another round of layoffs for Chainalysis and Chia Network
Reports this week revealed a staggering $685.5 million in financial losses by cryptocurrency-focused entities during the third quarter (Q3) of 2023, primarily due to notable exploits in cross-chain protocols. This figure represents a significant increase of almost 60% compared to the second quarter.
Amid these considerable losses and the prevailing bear market, numerous cryptocurrency-oriented companies have been reducing their workforce. This week saw another round of layoffs.
Chainalysis decided to reduce its staff by 15%, parting ways with 135 employees from the previous 900. The move aims to reduce costs in anticipation of potential long-term growth. Notably, this isn’t their first experience with downsizing, as they also laid off 5% of their workforce earlier this year.
Chia Network, the entity behind the Chia blockchain, also decided to play the layoff card, parting ways with 26 employees while still contemplating an initial public offering (IPO) in the foreseeable future.
The company attributes this workforce reduction, which came after losing its banking partner in March, to difficult financing conditions exacerbated by the lingering crypto winter, skepticism in the crypto industry, and ongoing banking crises.
Meta and Ledger join the chorus of layoffs
Meta, Facebook’s parent company, is implementing job cuts within its Reality Labs division, responsible for overseeing its metaverse projects. This measure comes after the 13% workforce cut imposed by the company at the end of 2022.
Ledger CEO Pascal Gauthier made a major announcement on October 5, revealing a possible 12% reduction in the company’s workforce, in a heartfelt letter to all employees.
Interestingly, despite Ledger’s rare achievement of raising capital in the first half of the year, the announcement noted the impact of the market, citing “macroeconomic headwinds” as an obstacle to revenue generation.
Yuga Labs and Yield Protocol affected
This week’s round of layoffs also featured Yuga Labs, the company behind the Bored Ape Yacht Club (BAYC) nft collection. The company began a corporate restructuring, which resulted in the departure of certain team members.
The general director, Daniel Alegre, communicated this news via email, although he omitted specific details about the number of employees affected. The restructuring mainly affected personnel based in the US. The company still has 120 employees.
While others laid off workers, the Yield Protocol defi project failed. This week they made the difficult decision to cease operations. By December 31, they will conclude all borrowing and lending activities despite raising $10 million from notable backers in June 2021.
The decision to close was influenced by a lack of interest in its fixed-rate debt product, along with growing regulatory challenges in the US, UK and Europe.
Israel and Hamas
The conflict between Hamas and Israel intensified on Sunday, October 8. The Israel Defense Forces launched deadly airstrikes immediately after a formal declaration of war in response to a surprise attack by Gaza militants on October 7.
Hundreds of Israelis and Palestinians were killed. according to CNN. Hamas has ruled the Palestinian territory of Gaza since 2007.
The conflict comes less than six months after Reuters reported that Hamas bitcoin-fundraising-2023-04-28/” data-type=”link” data-id=”https://www.reuters.com/world/middle-east/hamas-armed-wing-announces-suspension-bitcoin-fundraising-2023-04-28/” target=”_blank” rel=”noopener”>ceased fundraising through bitcoin, citing an increase in “hostile” activity against donors. Hamas had crypto-currencies-hamas-idCAKCN1S20FA-OCATC” data-type=”link” data-id=”https://www.reuters.com/article/ctech-us-crypto-currencies-hamas-idCAKCN1S20FA-OCATC” target=”_blank” rel=”noopener”>trusted in crypto funds for years.
In August 2020, the US Department of Justice reclaimed having dismantled “three cyber terrorist financing campaigns” and more than 300 cryptocurrency accounts, seizing millions of dollars in digital assets.
Ripple achieves another victory against the SEC
Ripple also took center stage this week, as developments emerged around its legal battle with the SEC. Notably, the San Francisco-based firm scored another victory in the lawsuit when Judge Analisa Torres denied the SEC’s motion to file an interlocutory appeal against the previous July 13 ruling.
Judge Torres issued the order on October 3 and provided details about the trial preparations. Torres noted that the case would go to trial, which would begin on April 23, 2024. Following the order, XRP rose 5%.
Ripple and Coinbase obtain MPI license in Singapore
Interestingly, just a day after Torres’ order appeared, Ripple scored another victory, this time in Singapore. The company received a full Major Payments Institution (MPI) license in the city-state. This move would allow them to provide regulated digital asset services in Singapore.
Ripple obtained its MPI license shortly after US-based exchange Coinbase obtained a similar license. Coinbase’s Singapore chapter received the license on October 2 from the Monetary Authority of Singapore (MAS). Both Ripple and Coinbase are looking to expand abroad amid regulatory uncertainty in the US.
The US regulatory landscape
As the US SEC’s attack on cryptocurrencies continued despite uncertainty, CFTC Chairman Rostin Behnam this week highlighted the importance of strong cryptocurrency regulation at the Futures Industry Association Expo 2023 .
Behnam compared crypto regulations to the need for a driver’s license or a license for healthcare professionals. He suggested classifying 70% of crypto assets as commodities and urged Congress to establish clear regulations on digital assets and expand the authority of the CFTC.
Meanwhile, US Representative Patrick McHenry, known for his pro-cryptocurrency stance, took on the role of Speaker Pro Tempore of the House of Representatives this week.
This occurred after the impeachment of House Speaker Kevin McCarthy and was the first time the United States witnessed the impeachment of a president. Even though McHenry’s appointment is temporary, cryptocurrency enthusiasts have seen it as a positive development for the cryptocurrency sector.
