The Disrupt Weekend

“Gary Gensler blew it again. After his agency failed to warn investors about Terra and Celsius—whose collapses this spring sparked a trillion-dollar investor wipeout—the Securities and Exchange Commission chair allowed an even bigger debacle to unfold right under his nose.

Cop-on-the-beat Gensler not only failed to spot the crime—he appeared set to go along with a legislative strategy that would have given SBF a regulatory moat and made him king of the U.S. crypto market.

According to Washington insiders, the reason behind SBF’s decision this summer to obtain control over BlockFi was to benefit from the troubled crypto lender’s recent settlement with the SEC—basically extending the amnesty BlockFi had received to FTX. Meanwhile, FTX’s recent tie-up with securities exchange IEX (of Flash Boys fame) would also help SBF’s empire come under the U.S. regulatory umbrella. All of this would clear FTX to have the U.S. market to itself as the company lobbied for legislation that could have torpedoed competitors like Binance as well as the emerging DeFi sector.

This appears to be what prominent House member Tom Emmer (R-Minn.) was referring to when he tweeted on Thursday that ‘@GaryGensler runs to the media while reports to my office allege he was helping SBF and FTX work on legal loopholes to obtain a regulatory monopoly.’

Gensler, a former campaign finance chair for Hillary Clinton, is of course not the only prominent Democrat who may have been willing to flex his influence on behalf of FTX. SBF, you may recall, was one of the biggest donors to President Joe Biden, while his parents—both Stanford law professors—have ties to the party. His mother, Barbara Fried, leads a group called Mind the Gap that helps raise Silicon Valley cash for Democrats, while his father, Joseph Bankman, drafted tax legislation for the powerful Sen. Elizabeth Warren (D-Mass). It’s not a stretch to imagine SBF sought to exploit these political ties to his benefit.

At a time when Gensler is already shrieking for more money and power to address the latest crypto crisis, this would be a good time for skeptics to ask why he failed to stop FTX in the first place—and if anyone else in high places had a role in enabling this debacle.”

“The collapse of FTX, already one of the most spectacular disasters in financial history, worsened as hundreds of millions of dollars were drained from the cryptocurrency exchange hours after it filed for bankruptcy.

More than $600 million was siphoned from FTX’s crypto wallets late Friday. Soon after, FTX stated in its official Telegram channel that it had been compromised, instructing users not to install any new upgrades and to delete all FTX apps.

FTX has been hacked. FTX apps are malware. Delete them. Chat is open. Don’t go on FTX site as it might download Trojans.

Many FTX wallet holders reported $0 balances in their and FTX US wallets. FTX’s API appeared to be down, which could account for this. According to on-chain data, various Ethereum tokens as well as Solana and Binance Smart Chain tokens exited FTX’s official wallets and moved to decentralized exchanges like 1inch. Both FTX and FTX US appear to be affected.

Suspicions – which are conjecture at this point – circulated online about whether, rather than an outside attack, someone inside the company might’ve been responsible. The simultaneous and sophisticated hacks of FTX and FTX US are indicative of a potential inside job.”

See Also: Tether Blacklists Mysterious FTX Wallets as Account Drainer Liquidates MATIC, LINK, AVAX Holdings
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A team at the jurisdiction’s Financial Crimes Investigation Branch are “working closely” with the Bahamas Securities Commission to investigate if any criminal misconduct occurred, an official notice on Sunday said.

The Securities Commission of the Bahamas had already suspended FTX’s registration and ordered assets tied to the exchange frozen on Thursday. FTX is also under investigation by the U.S. Securities and Exchange Commission and the Justice Department.”

See Also: Sam Bankman-Fried is ‘under supervision’ in Bahamas, looking to flee to Dubai

Serum is a pillar of Solana’s DeFi infrastructure: it’s the trading ecosystem’s primary central limit order book. Sam Bankman-Fried once called Project Serum, an on-chain crypto exchange that he created, the “truly, fully trustless” backbone of decentralized finance (DeFi) on the Solana blockchain. But trust in the fallen FTX chief’s once-mighty crypto liquidity engine has suddenly run dry.

On Saturday, DeFi protocols across the Solana ecosystem began unplugging from Serum for fear that they didn’t know who wielded control – a concern fueled by the late-Friday hack at FTX. The developers once associated with Serum have gone silent. Meanwhile, the protocol’s dependence on Bankman-Fried and his bankrupt companies Alameda and FTX loomed large.

The true power over Serum rested with FTX Group, which continues to hold the program update authority keys. There’s of course Serum’s not-so-secret ties to Bankman-Fried. But only his employees have the keys that control the protocol, two developers said.

The hack shows that someone malevolent has access to private keys at FTX. That would allow the hacker to rug the entire protocol. At this point things have gotten so crazy that anything is on the table.

Serum was nominally governed by the vote of a community of holders of the project’s SRM token. But apart from voting on token grants, Serum’s so-called decentralized autonomous organization (DAO) had little actual authority over the protocol. [Further], a small cadre of Alameda employees collectively decided how the Serum wallet would vote. It’s a sham that survives on backroom deals.’

FTX was heavily invested in the success of Serum. According to the Financial Times, Bankman-Fried’s exchange held $2.2 billion in SRM tokens as of earlier this week.

Despite its sluggish popularity and connections to Bankman-Fried, Serum isn’t the kind of project that Solana DeFi can walk away from and forget. Protocols that have been optimized for Serum still rely on it to function.

The community’s slapdash effort to wrest Serum from FTX Group skirts around a less heroic notion: few made much ado about the not so decentralized exchange’s many entanglements before this week’s dumpster fire began.”

“David Chaum, creator of the Bitcoin predecessor eCash and, more recently, the elixxir cryptocurrency, believes the democratic world can have a version of CBDCs that protects privacy. The concept, based on Chaum’s blind signature technique, has been outlined in a joint research paper. The project will be developed under the auspices of the Bank of International Settlements’ (BIS) Innovation Hub.

According to Morten Bech, head of the BIS Innovation Hub Swiss Centre, the project allows to avoid trade-offs between cyber resilience, scalability and user privacy.The system will also be scalable as it will be using an architecture that is compatible with, but not based on, distributed ledger technology.

It really becomes a choice: Are we going to have a kind of protection we are entitled to and that distinguishes us as a human rights-based democracy, or we basically are going to have the same thing as in China.

The eCash 2.0 model has two tiers when it comes to issuing central bank digital money: a central bank does it via commercial banks, which onboard users. To get some CBDC on their digital wallets, users need to request it from banks with which they already have accounts. Banks perform know your customer diligence and send a specific authentication code to the central bank so that money can be issued.

A central bank holds a blockchain-based ledger of all the valid coin identifiers, Yaksetig said, so no one can forge new coins, but transactions between wallets are not recorded on a blockchain. ‘There is no record of transactions whatsoever.’ However, users can voluntarily give up the privacy of their coins if they want law enforcement to trace stolen funds. For this, a user would need to reveal his unique cryptographic key to, say, the police, and then the police can see when these stolen coins are being spent.