It remains to be seen what the impact of a Genesis bankruptcy may have on its parent company, Digital Currency Group (DCG). DCG owes Genesis more than $1.65 billion, according to bankruptcy filings, including a $1.1 billion promissory note created to absorb Genesis losses in the Three Arrows Capital collapse.
Genesis files for bankruptcy
The Genesis cryptocurrency lending platform filed for bankruptcy, following weeks of turmoil after the FTX collapse. Genesis halted withdrawals shortly after FTX's failure, and shortly afterwards warned of possible bankruptcy if they couldn't raise at least $1 billion in new capital. The past few months have also featured a public conflict between Genesis, along with its parent company DCG and DCG's CEO and founder Barry Silbert, and the Winklevoss twins behind the Gemini crypto exchange.
- "Genesis, a Crypto Lending Firm, Files for Bankruptcy", The New York Times
Founder of Bitzlato crypto exchange charged for processing more than $700 million in illicit funds
US authorities arrested and charged Anatoly Legkodymov, the founder of the Bitzlato cryptocurrency exchange. Although the exchange is relatively unknown, the justice department alleges that it was instrumental to darknet criminal marketplaces, including Hydra Market. The DOJ alleges that users of Hydra Market processed more than $700 million in cryptocurrency through Bitzlato, which also helped to facilitate more than $15 million in ransomware proceeds. Although Bitzlato claimed not to serve users in the United States, the DOJ claims that the exchange "did substantial business with U.S.-based customers".
- "Founder and Majority Owner of Bitzlato, a Cryptocurrency Exchange, Charged with Unlicensed Money Transmitting", U.S. Attorney's Office, Eastern District of New York
Three Arrows Capital founders seek funding for an exchange to enable customers to trade claims against firms 3AC helped to bankrupt
Kyle Davies and Su Zhu, the founders of the bankrupt Three Arrows Capital crypto hedge fund, have joined forces with Mark Lamb and Sudhu Arumugam, the founders of the CoinFLEX platform, which is undergoing restructuring due to its own solvency issues. Davies and Zhu are still on the run from liquidators. What a dream team.
The group is seeking $25 million to create a cryptocurrency exchange they're calling "GTX" for now — which they write in the pitch deck is "because G comes after F".
Not only that, but the exchange plans to focus on claims trading — that is, the trading of claims held by creditors against debtors who are undergoing bankruptcy proceedings, like FTX, Celsius, BlockFi, or Mt. Gox (throwback!). The fact that 3AC was a major catalyst in kicking off the string of bankruptcies we saw throughout 2022 was not lost on observers, with Nic Carter of the Castle Island venture capital firm commenting that the endeavor "is akin to arsonists returning to the scene of the crime and offering to charge their victims for buckets of water".
NFT GOD's wallet drained, accounts used to phish others after malware infection
According to NFT GOD, his computer was infected with malware when he clicked a sponsored link in a Google search when he went to download the streaming software OBS. This is similar to an attack in April 2022 where scammers stole millions using malicious Google ads.
According to NFT GOD, not only did the hackers drain his crypto wallet of his NFTs and crypto, including his beloved Mutant Ape, but they also hijacked his accounts to send out phishing links to his substantial followers.
The person who purchased the stolen ape (for 16.65 ETH, ~$25,800) said he was willing to sell the ape back to NFT GOD for the same price they paid for it, which seemed to be taken as good news by NFT GOD.
LendHub reports $6 million hack
In a Twitter thread, LendHub published a message stating that "hackers stole about 6 million US dollars of assets from Lendhub". They wrote that they had "locked the hacker's attack address", but whatever they meant by this was not enough to stop the thief from transferring 1,100 ETH (~$1,562,000) to Tornado Cash to tumble.
Security firm SlowMist attributed the attack to a token that had been replaced with a new version, but whose original version remained active on the platform. The attacker was able to mint and redeem tokens in the old market, while borrowing against them in the new one, ultimately making off with the majority of the assets on the platform.
Nexo raided by Bulgarian authorities
Bulgarian prosecutors raided more than 15 locations in Sofia, Bulgaria in relation to the Nexo cryptocurrency lender. A spokesperson for the prosecutors has said that the raids are "part of a pre-trial investigation aimed at neutralising an illegal criminal activity of crypto lender Nexo". These activities reportedly include setting up of an organized crime group, tax crimes, money laundering, banking activity without a license and computer fraud. Bulgarian authorities allege that Nexo has processed $94 billion through its platform over the past five years.
Authorities charged four individuals with various crimes shortly after the raid. Two were arrested and released on bail; authorities are still looking for the other two. Police have also confiscated money, computers, and crypto assets.
Within a 24-hour period after the raid was announced, Nexo experienced $45 million in withdrawals — about the same amount they normally process in an entire week — as customers rushed to get their money off the platform.
FTX liquidators get liquidated
As they tried to close an Alameda position on the Aave defi lending project, liquidators in charge of recovering customer funds lost $72,000 due to an error in their approach. The liquidators first removed extra collateral that was supporting the position, which resulted in two liquidations in nine days. The total loss was 4.05 aWBTC, which is priced at around $75,000 based on prices at the time of the transactions.
This SNAFU unfortunately means that those assets won't be available to be repaid to FTX customers, although this loss is relatively small compared to the total amount owed.
SEC charges Gemini and Genesis for allegedly offering unregistered securities
The SEC filed charges against Genesis Global Capital and Gemini, two crypto firms that collaborated to create Gemini's embattled Earn lending program. According to the SEC, their lending program constitutes an offer and sale of securities and, as such, should have been registered. Other companies, such as (now bankrupt) Celsius, have in the past shut down similar products in the US due to concerns over regulatory action; it's not clear why Gemini thought their product would pass muster.
On November 16, Gemini halted withdrawals from Earn after Genesis halted withdrawals after FTX collapsed. Since then, Gemini and Genesis have been engaged in a very public battle, with Gemini's founders accusing Genesis and its parent company of misconduct and demanding the return of the $900 million in Gemini customer funds.
- "SEC Charges Genesis and Gemini for the Unregistered Offer and Sale of Crypto Asset Securities through the Gemini Earn Lending Program", U.S. Securities and Exchange Commission
Coinbase lays off nearly 1,000 people in second round of layoffs over the last year
After laying off 1,100 people in an 18% staffing cut in June 2022, Coinbase CEO Brian Armstrong wrote that "in hindsight, we could have cut further at that time." The company announced that they would be laying off around 950 people, which is approximately 20% of their employees.
Like the first round of layoffs, they were performed via email to employees' personal emails, because access to internal systems had already been cut off. The public blog post acknowledged that the strategy "feels sudden and harsh".
Huobi performs 20% layoff, reportedly requires employees to take salary in stablecoins
The major cryptocurrency exchange Huobi confirmed they planned to lay off 20% of employees, shortly after Huobi's advisor and somewhat its public face, Justin Sun, denied any layoffs were planned.
Crypto reporter Colin Wu has also reported that the company is requiring all employees to begin accepting their salaries in Tether or USDC stablecoins, or face dismissal. Rumors on Twitter emerged that internal communications channels had been shut down to quell dissent over the change.
Some crypto advocates commenting on the change maintained that there should be no difference to employees if they receive salaries in stablecoins vs. real money, but none seemed able to elucidate any legitimate reason that an exchange might find itself unable to pay salaries except in stablecoins.
At least they're not being asked to take salaries in USDD, the Tron-based stablecoin associated with Justin Sun. USDD depegged even further from its peg (which has been unstable since around October 2022), dipping to around $0.97.