18 November

“New FTX CEO John J. Ray III issued a scathing assessment of “unprecedented” poor management practices by his predecessor, Sam Bankman-Fried, in a series of filings in a Delaware court. Ray, who has previously supervised financial scandals such as Enron, criticized poor record-keeping and a lack of experience among senior managers, as well as the use of company funds to purchase real estate in the Bahamas.

Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here. From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented.

FTX did not keep appropriate books and records or security controls for its digital assets, used unsecured shared email accounts to access private keys, and to this day cannot provide a list of those working for the company.

Ray also criticized the use of software to conceal the “misuse of corporate funds,” a failure to reconcile blockchain positions daily, and the absence of independent governance between Alameda and the cluster of companies that includes FTX.com. In the Bahamas, FTX Group corporate funds were ‘used to purchase homes and other personal items for employees and advisors,’ and assets were assigned to staff personally with no record of them having to repay any loan.

Those attempting to salvage something from the wreckage of the complex network of scores of companies are now caught up in a complex jurisdictional tussle.”

See Also: FTX Affiliate Alameda Research Loaned $4.1B to Related Parties – Including $1B to Sam Bankman-Fried
See Also: FTX Ventures Was a Disorganized Mess With Missing Financials, Bankruptcy Documents Say

The Democratic senators sent letters to both FTX’s current and former CEO demanding answers about what went wrong at the bankrupt exchange – which they say ‘appears to be an appalling case of greed and deception.’ The letter kicks off an investigation into the collapse of FTX and the behavior of Bankman-Fried and his close-knit circle of fellow executives, who have been accused of self-dealing and fraud.

By Nov. 28, Ray and Bankman-Fried are required to provide Warren and Durbin with information and documents about FTX and its subsidiaries’ balance sheets, the cause of the exchange’s liquidity crisis, its rationale for buying bankrupt crypto exchange Voyager Digital, and whether reports that Bankman-Fried and other executives built a “backdoor” into FTX’s accounting system to allow them to alter financial records and move money around without alerting other people are accurate.

Warren and Durbin’s letter also demands answers – and internal communications – about the late-night hack on Nov. 11, which saw hundreds of millions of dollars drained from FTX-controlled wallets.

[Notably], Bankman-Fried’s father, Stanford law professor Joseph Bankman, helped Warren draft legislation for her Tax Simplification Act in 2016, and was previously a donor to her campaign.”

See Also: Sam Bankman-Fried Switches Legal Counsel as Investigations Into FTX Collapse Mount: Report
See Also: Binance’s Lack of Transparency on FTX Bid Could Influence UK Lawmakers’ Crypto Recommendations: Report
See Also: ‘Proof of Reserves’ Emerges as a Favored Way to Prevent Another FTX

Binance.US, the American arm of the world’s largest cryptocurrency exchange, is preparing to bid for bankrupt lending platform Voyager Digital. Voyager’s native token VGX jumped as much as 50% [following the news].

Thomas Braziel, managing partner at investment firm 507 Capital said matters are complicated by the fact Voyager is going to have a claim against the FTX estate for breach of contract.

A previous auction, which was completed around the end of last September, saw the now defunct FTX emerging as the “white knight,” winning out against rivals Wave Financial and Binance. Earlier this week, Binance CEO Changpeng “CZ” Zhao said his exchange is setting up an industry recovery fund to help rebuild the industry.”

See Also: Confusion Abounds As Binance and OKX Suspend Support for USDC, USDT on Solana, Then Backpedal

“The real beneficiaries are going to be people who have very big names and very large balance sheets. People like Fidelity and BNY Mellon.

In 2018, Fidelity launched its trading platform, Fidelity Digital Assets, which focuses on crypto-based institutional custody. Meanwhile, the New York-based BNY Mellon threw its hat into the ring, offering crypto custody services last month. Marenzi said that smaller crypto-native custody services players like Coinbase (COIN), on the other hand, may fall short of gaining institutional interest.

Very large asset managers and traders are going to be very careful about the contracts they sign and what they feel their custodian or the person holding their bitcoin is doing with it.”

See Also: Wells Fargo, HSBC Add Offshore Yuan to Blockchain Foreign-Exchange System

“Staking vanilla ether (ETH) is generating eye-catching yields for crypto hopefuls amid a broader market crisis with returns on most fixed-income crypto products dropping as low as 0%. Users simply staking staked ether (stETH) at staking service Lido are earning as much as 10.7% – an all-time high since the Merge event – with even higher returns for holders as the value of stETH increases.

The increased rewards have led to related borrowing strategies offering yields of as much as 25.5% on the Interest Compounding ether product (icETH) offered by Index Coop. The Interest Compounding ETH Index (icETH) enhances staking returns with a leveraged staking strategy. The strategy uses a user’s stETH tokens as collateral on DeFi lending service Aave to borrow wrapped ether (WETH) – a token that tracks ether – that is in turn used to purchase additional stETH tokens.

However, there are some caveats to these high yields. ‘Apart from smart contract risk, investors in icETH need to consider the liquidation risk from borrowing ETH from Aave and interest rate risk from the spread between borrowing cost and staking return.'”

With a few lines of code, developers can use SSX to integrate Sign-In with Ethereum, enable DAO logins, build a direct relationship with their users, and access the entire universe of decentralized identity patterns.

Sign-In with Ethereum (SIWE, pronounced “see-we”) has become the dominant standard for wallet-based login in web3. It empowers any user to begin the journey to control their own identity and enter a world that doesn’t rely on being locked to centralized identity providers.”

“ConsenSys, an Ethereum-software firm that helped engineer the Merge, is co-launching with 18 other firms the Ethereum Climate Platform (ECP) at COP27’s UN Climate Change Global Innovation Hub. The platform is built for the Ethereum ecosystem, and will aim to mitigate the excess energy consumption that the blockchain used before it went through the Merge in September.

The idea is to gather a bunch of capital and invest the capital into technologies that can have a significant positive impact.”