The United States Securities and Exchange Commission (SEC) has reportedly opted not to appeal a recent court ruling in favor of Grayscale Investments.
The decision stems from the U.S. Court of Appeals for the District of Columbia Circuit, which directed the SEC to review Grayscale’s application for a spot Bitcoin exchange-traded fund (ETF).
This development was disclosed in an October 13 report by Reuters, citing an insider source. Bloomberg analysts, too, anticipate that the SEC will refrain from taking the matter to the Supreme Court, although this doesn’t guarantee automatic approval for Grayscale’s ETF application.
If these reports hold true, the SEC is obligated to comply with the court’s August order, requiring a thorough evaluation of Grayscale’s request to transform its Grayscale Bitcoin Trust into a spot Bitcoin ETF. Reuters anticipates that the appeals court will soon provide a detailed mandate outlining how the SEC should execute this ruling.
In response to these unfolding events, Bloomberg ETF analyst James Seyffart expressed his perspective via X (formerly Twitter), suggesting that the SEC is unlikely to appeal further.
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Seyffart anticipates that discussions between Grayscale and the SEC will commence in the coming week, with the hope of shedding more light on the next steps.
Looking ahead, Seyffart posits that we may learn in the next week or two about the deadline for the SEC to either approve or deny Grayscale’s spot Bitcoin ETF application.
Should the SEC reject the application, Grayscale would retain the option to appeal, potentially prolonging the process.
Approximately seven spot Bitcoin ETF applications currently await the SEC’s decision, indicating substantial interest in this investment vehicle.
In a separate X post on October 13, Seyffart reiterated his belief in a 90% probability of a spot Bitcoin ETF application receiving approval in January 2024, with specific reference to Cathie Wood’s ARK Invest.
Seyffart and Eric Balchunas, Bloomberg’s senior ETF analyst, previously estimated a 75% likelihood of an ETF application gaining approval in 2023, underscoring the growing momentum and expectations surrounding this evolving financial instrument.
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Alameda Research, the hedge fund sibling of FTX, allegedly lost around $190 million to avoidable scams, as revealed by former engineer Aditya Baradwaj.
On October 12, in a post titled “The Hacks”, Baradwaj, turned whistleblower, stated that Alameda’s rapid operational pace resulted in significant security breaches almost every few months.
One incident described by Baradwaj involves an Alameda trader who mistakenly clicked a malicious link on Google Search, leading to a loss of over $100 million.
The trader was finalizing a decentralized finance transaction at the time. In another instance, Alameda ventured into yield farming on a dubious blockchain, incurring over $40 million in losses.
Baradwaj points out that FTX founder, Sam Bankman-Fried, prioritized speed for Alameda and FTX, often sidelining standard engineering and accounting measures.
Consequently, coding was rarely tested, balance accounting was frequently left unfinished, and security checks for trading were only implemented when deemed necessary.
Disturbingly, sensitive data such as blockchain private keys and exchange API keys were stored in unencrypted files, accessible by multiple employees.
This lax security resulted in a major breach where an old plaintext file containing Alameda’s keys was exposed.
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This breach alone led to a loss of over $50 million as attackers managed to drain funds from some exchanges.
Baradwaj mentioned that incidents like these weren’t isolated; many more had occurred before his tenure.
The engineer’s revelations come in the backdrop of Alameda and FTX’s downfall in November the previous year.
Baradwaj criticized Bankman-Fried’s justification of dubious actions, labeling them as being driven by the “Effective Altruism” philosophy.
The ongoing fraud trial against Bankman-Fried has seen ex-CEO of Alameda, Caroline Ellison, testify.
Previous days witnessed former associates, Adam Yedidia and Gary Wang, presenting substantial evidence against him. Wang confessed to creating code that granted Alameda virtually unlimited credit from FTX.
Ellison detailed FTX’s alleged fund mingling with Alameda. Despite these claims, Bankman-Fried has pleaded not guilty and asserts his innocence.
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Weeks before the FTX crypto exchange’s collapse, its former CEO, Sam Bankman-Fried, was navigating tumultuous waters.
His actions were revealed in personal notes from ex-Alameda Research CEO, Caroline Ellison, presented in a New York trial.
Testifying, Ellison recounted that a significant crash in the Terra ecosystem in May 2022 spurred Bankman-Fried to contemplate closing Alameda and soliciting $1 billion in capital from a Saudi Prince recognized for his blockchain gaming investments via Saudi Arabia’s sovereign wealth fund.
Additionally, to boost FTX’s market presence, Bankman-Fried strategized on urging regulators to target rival crypto exchange Binance.
The specifics of this strategy remain undisclosed.
In terms of financing, Bankman-Fried pursued additional funds from BlockFi, having previously borrowed over $660 million.
Other focal points for him encompassed trading Japanese government bonds and purchasing Snap Inc stocks.
A curious note mentioned “Willie being happy”, potentially referring to William MacAskill, believed to be Bankman-Fried’s mentor.
Ellison shared that Bankman-Fried attributed Alameda’s challenges and flawed hedging to her.
She acknowledged that improved hedging could’ve benefited Alameda amidst the cryptocurrency downturn.
However, Alameda’s financial difficulties weren’t solely hedging-related; the company had substantial open-term loans and had drained billions from its FTX credit line.
Open-term loans are unique, allowing borrowers a prepayment choice while granting lenders a call option. By June, lenders began exercising their call options, compelling Alameda to repay vast amounts.
Ellison, following Bankman-Fried’s instructions, settled some of Alameda’s obligations using FTX client funds. By September 2022, Alameda’s debts to FTX had escalated to $13.7 billion, with open-term loans at $1.3 billion.
Compounding the financial maze, Ellison, upon Bankman-Fried’s directive, produced “alternative” financial statements for Alameda’s lenders.
These concealed the company’s fiscal obligations to FTX, presenting a rosier financial picture to stave off full repayment demands.
Ellison candidly communicated her fears during the trial, emphasizing her daily apprehensions about simultaneous loan calls and the potential mass exodus of FTX clients due to Alameda’s financial strain.
Bankman-Fried’s defense is slated to cross-examine Ellison on Oct. 12.
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Charles Hoskinson, founder of Cardano, has equated Sam “SBF” Bankman-Fried, ex-CEO of FTX, to the notorious fraudster Bernie Madoff.
He criticized the media for allegedly turning a blind eye to Bankman-Fried’s alleged wrongdoings.
Bernard Lawrence Madoff orchestrated the most significant recorded Ponzi scheme, valuing $64.8 billion.
Hoskinson’s reference to Madoff draws a parallel to what he perceives as the media’s oversight regarding SBF and FTX’s reported misappropriation of user funds.
On Oct. 9, Hoskinson took to X (formerly Twitter) to voice his concerns about the media’s portrayal of SBF, especially after FTX’s downfall.
He specifically mentioned Michael Lewis’s recent book on SBF, describing it as an “apology tour.” Hoskinson expressed frustration, stating it seems like some individuals are trying to publicly vindicate SBF.
FTX, once the third-largest crypto exchange, crashed in November 2022 after a notable fundraising round earlier that year.
While SBF attributed the failure to external factors and liquidity issues, U.S. enforcement agencies painted a different picture.
These investigations led to Bankman-Fried facing seven charges of conspiracy and fraud related to FTX’s collapse, which he denies.
The trial began on Oct. 3, revealing that Alameda Research, founded by SBF, might have had a covert route into FTX to channel users’ money since 2019.
Details from the trial also exposed SBF’s significant PR expenditure, including million-dollar engagements with celebrities like Tom Brady and Kevin O’Leary.
Other alleged spending involved private planes, Super Bowl commercials, and potentially a proposition to Donald Trump with a $5 billion offer to deter him from running for office.
The trial’s initial week mainly revolved around the mysterious disappearance of $8 billion from FTX’s user funds.
In unrelated news, an NFT from the CrypToadz collection sold for a staggering 1,055 Wrapped Ethereum ($1.6 million) on OpenSea on Oct. 9.
This purchase raised eyebrows, especially since the NFT was bought for approximately $1,600 just two weeks prior.
Funding for this transaction originated from a wallet with transactions anonymized by Tornado Cash, an Ethereum coin mixing service.
Speculations abound on whether this was a genuine error or a possible instance of wash trading.
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Prominent cryptocurrency advocate, Arthur Hayes, recently voiced his predictions on the future of Bitcoin, global economies, and market behaviors on Impact Theory with Tom Bilyeu.
According to Hayes, by 2026, Bitcoin’s price could soar between $750,000 to $1 million.
Hayes paints a picture of a looming financial crisis, which he believes could be more severe than the Great Depression.
He predicts an unprecedented bull market, impacting stocks, real estate, cryptocurrencies, art, and more.
This surge, he claims, is a result of the U.S. government’s habitual response to economic crises: bailing out, leading to structural issues in the economy.
By continuously resorting to central bank printing, inflation surges and natural market growth-correction cycles are stifled.
“Government interventions, in attempts to save the system, erode parts of the free market every time a financial crisis emerges over the last 80 years,” Hayes argues.
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Hayes identifies key factors supporting his Bitcoin forecast:
- Mounting Debt and Inflation: Hayes states that escalating government debt, roll-over needs, and waning productivity are only met with money printing. Though this results in bull markets, the fallout is typically rampant inflation. Hayes warns of a ‘massive top’ in 2026, followed by a depression-like scenario.
- U.S. Banking System’s Insolvency: He points to the $7.75 trillion U.S. debt due for roll-over by 2026 and altered dynamics in U.S. bond yield curves. Historically, nations like China and Japan were primary U.S. debt buyers. This has changed, which Hayes believes will intensify U.S. troubles. The U.S. banking system, in Hayes’ view, is effectively bankrupt due to past regulatory actions. Hayes emphasizes the banking system’s inability to buy more debt, given its structural insolvency.
- Attractiveness of Bitcoin as an Investment: As traditional financial systems become more unstable, investors may pivot towards alternative assets like Bitcoin. Hayes says, “In an economy with negative real rates, individuals will seek other assets, including cryptocurrencies.”
Hayes forecasts Bitcoin trading between $25,000 and $30,000 in the near future.
By 2024, he anticipates a potential financial crisis to drive rates near 0% or escalating government expenditure causing investors to hunt for superior returns.
He suggests that the U.S., Europe, and possibly Hong Kong’s approval of a Bitcoin exchange-traded fund, combined with Bitcoin’s halving event, could propel its price to $70,000 by mid-2024.
From this point, he foresees Bitcoin skyrocketing to between $750,000 and $1 million.
However, Hayes also acknowledges a potential 70% to 90% drop in Bitcoin’s price post this bull run, mirroring past trends.
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The North American Securities Administrators Association (NASAA), a consortium of securities regulators from North America, recently expressed its stance on digital assets.
In a filing on October 10 in the United States District Court for the Southern District of New York, NASAA supported the U.S. Securities and Exchange Commission’s (SEC) assertion that digital assets should not receive any preferential treatment under securities laws.
This perspective emerges in the wake of a lawsuit filed by the SEC against Coinbase in June, in which the crypto exchange was accused of breaching federal securities regulations.
Coinbase retorted, asserting that its digital assets and related services shouldn’t be categorized as securities and accused the SEC of overstepping its boundaries.
However, NASAA’s general counsel, Vincente Martinez, defended the SEC’s stance, stating that it wasn’t “novel or extraordinary.”
He emphasized that the SEC’s viewpoint aligns with its longstanding public stance and remains well-grounded in existing laws.
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Central to the lawsuit is the Howey test, which determines what constitutes an investment contract. Coinbase contests that digital assets don’t meet the full criteria of this test.
Yet, Martinez believes the Howey test is versatile enough to account for technological progress in securities markets, such as securities traded on blockchains.
He urged the court to dismiss Coinbase’s attempt to misinterpret established laws to dodge regulatory responsibilities.
Furthermore, Martinez critiqued Coinbase’s reference to the “major questions doctrine,” which posits that the SEC requires congressional authorization on matters of substantial political or economic gravity.
Challenging Coinbase’s portrayal of the digital asset sector as a vital segment of the American economy, Martinez countered that most digital assets, barring a few exceptions, lack a practical economic purpose beyond speculation.
He remarked, “As a class of assets, digital assets are not economically useful.”
He also accused Coinbase of exaggerating the magnitude and relevance of the digital asset industry, especially the segment under securities regulators’ purview.
Concluding, NASAA, comprising 68 members including securities regulators from all U.S. states and several from Canada, Mexico, and U.S. territories, joined the SEC in urging the court to reject Coinbase’s motion to dismiss the lawsuit.
Martinez highlighted the significant interest of NASAA and its members in the case’s outcome.
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Cryptocurrency exchange Bitstamp is set to halt its services for Canadian customers from January 8, 2024, as announced by Bobby Zagotta, Bitstamp USA CEO and global chief commercial officer.
Following this decision, all Canadian accounts will be deactivated, and customers have been advised to withdraw their funds and close their accounts before the stipulated date.
Despite this move, Bitstamp emphasizes its commitment to the safe return of assets, stating, “your crypto assets always remain yours.”
Bitstamp’s departure from Canada is not an outright exit but a strategic pause.
The company cites its ongoing expansion strategies and the need to concentrate on regions with favorable regulatory conditions as the primary reasons.
Zagotta mentioned, “We aim to revisit the Canadian market in the future.
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But at present, we can’t dedicate the necessary resources to meet new Canadian regulations.”
Furthermore, while refocusing on aligning with global regulations, Bitstamp remains dedicated to its international clientele.
Decisions about their operations in particular nations will hinge on regulatory dynamics and market scenarios.
This pivot in strategy is concurrent with Bitstamp’s reported endeavors to procure funding for scaling its worldwide operations.
There are indications that the exchange has been in fundraising mode since May 2023, with goals like introducing derivatives trading in Europe by 2024 and intensifying its footprint in the UK.
Established in 2011, Bitstamp stands as one of the pioneering cryptocurrency exchanges.
It has an extensive global reach, catering to countries like the US, Singapore, South Korea, and Japan, among others.
As per CoinGecko, Bitstamp’s daily trading volume is approximately $114 million. This figure, however, pales in comparison to its rival Binance, which boasts a daily trade volume nearing $4 billion.
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Blockchain data highlighted by Coinbase director, Conor Grogan, shows that in 2021, Alameda Research redeemed over $38 billion in Tether USDT tokens, even though their assets under management didn’t match this value. At the 2021 crypto market’s peak, the USDT creation by Alameda exceeded its recorded assets.
Grogan also pointed out probable USDT redemptions ordered by FTX were from Alameda’s stash, approximately 3.9 billion USDT. Most of these redemptions coincided with Terra’s algorithmic stablecoin downturn.
In January 2021, Alameda’s former co-CEO, Sam Trabucco, addressed reports about major USDT mints by Tether.
He detailed how Alameda capitalized on arbitrage opportunities due to USDT’s value fluctuations on different exchanges.
He explained that the value at which USDT trades compared to $1 tends to be volatile.
When juxtaposed with BTC/USD trades, Bitcoin-to-USDT trades often show a minor deficit in basis points.
Trabucco emphasized that the BTC/USDT and BTC/USD markets are better indicators of USDT’s trading position than any individual exchange’s USDT/USD market.
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Unlike USDT, other stablecoins like the USD Coin (USDC) have a steadier premium.
This is attributed to the USDT creation and redemption process.
As only certain firms can directly create and redeem USDT, most traders obtain and trade USDT via the markets, bypassing Tether’s treasury.
Highlighting Alameda’s trading strategies, Trabucco mentioned that when USDT’s value exceeds $1, a well-equipped firm like Alameda would be inclined to sell, and they did so extensively.
With their ability to initiate USDT creations and redemptions, they could place significant bets.
This was a strategic move for Alameda, ensuring both profit for the company and stability for USDT’s value, keeping it close to the $1 mark.
Alameda leveraged these arbitrage chances by creating USDT tokens and cashing in on the premium.
In 2021, Sam Bankman-Fried also mentioned Alameda’s active redemptions of USDT for U.S. dollars.
Cointelegraph is awaiting Tether’s response regarding the exact number of USDT tokens minted upon Alameda’s request.
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The hacker, dubbed “FTX Drainer”, who previously stole over $400 million from FTX and FTX.US in November, might be exploiting the media frenzy surrounding Sam Bankman-Fried’s fraud trial to further conceal the stolen assets, as per Hugh Brooks, CertiK’s director of security operations.
As Bankman-Fried’s trial commenced, the “FTX Drainer” initiated a series of transactions, moving millions in Ether obtained from the theft.
Recently, the hacker shifted about 15,000 ETH (equivalent to approximately $24 million) to three fresh wallet addresses.
Brooks suggests that the trial’s widespread media coverage might be serving as a distraction, allowing the hacker to stealthily move the assets.
He theorized that the perpetrator might have assumed the trial would consume so much of the Web3 sector’s attention that tracking the stolen funds would become more challenging.
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FTX’s valuation once stood at $32 billion.
However, following the hack, it filed for bankruptcy on November 11. On the same day, FTX staff noticed significant fund withdrawals from their wallets.
A Wired report dated Oct. 9 unveiled that on realizing the hacker had access to several wallets, FTX’s team shifted a significant portion of the remaining assets, between $400 million to $500 million, to a private Ledger cold wallet.
This strategic move probably thwarted the hacker from pilfering close to $1 billion.
Brooks has also shed light on the hacker’s evolving tactics. Initially, on November 21, the hacker tried laundering the stolen money using the “peel chain” method, which involves dispersing decreasing amounts to fresh wallets.
However, the hacker now adopts a more intricate technique, splitting the funds across numerous wallets. This makes tracing more time-consuming.
As of now, the identities of individuals or groups responsible for the hack remain elusive, and investigations persist.
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U.S. prosecutors have urged the court overseeing Sam Bankman-Fried’s trial to prevent his defense from raising arguments about the possible recovery of FTX customer funds invested in Anthropic.
Bankman-Fried directed $500 million into the AI startup, Anthropic, in April 2022. The U.S. government, however, intends to demonstrate that these funds were siphoned from FTX customer deposits.
Anthropic has recently been in the spotlight, aiming to secure new investment, with major companies like Amazon and Google showing interest.
This could boost the firm’s valuation to between $20-$30 billion.
Prosecutors stress that this surge in valuation could also amplify the worth of Bankman-Fried’s stake, which might facilitate the recovery of assets for those impacted by FTX’s bankruptcy.
A letter presented to Judge Lewis Kaplan reveals that the U.S. government and Bankman-Fried’s attorneys have debated issues likely to emerge during witness cross-examination.
The defense is prepping to introduce evidence about the present value of Bankman-Fried’s 2022 investment in Anthropic.
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Prosecutors argue that such evidence could be utilized to claim that FTX customers and other affected parties might be fully compensated.
This notion has been previously termed by the court as an “impermissible purpose”.
They further state, “Such evidence would… be wholly irrelevant, and present a substantial danger of unfair prejudice.”
The crux of the case against Bankman-Fried lies in accusations of wire fraud, involving the use of FTX customer deposits for various investments.
The prosecution holds that any successful investments Bankman-Fried made are ultimately inconsequential to the charges being examined.
While the government aims to present evidence of Bankman-Fried’s alleged misuse of customer funds leading to significant deficits for FTX, they do not plan to provide details on the final losses post the FTX bankruptcy completion.
The Bankman-Fried trial, reported by Cointelegraph’s Ana Paula Pereira from New York, commenced by exploring the disappearance of around $8 billion of FTX customer assets from the defunct crypto exchange.
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