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 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.
- "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.
Developer of Mutant Ape Planet NFT project charged in $2.9 million rug pull
The U.S. Attorney's Office of the Eastern District of New York announced fraud charges against Aurelien Michel, a 24-year-old French national living in Dubai. Michel, under the alias "James", had created an NFT project called Mutant Ape Planet, which minted in February 2022. He collected $2.9 million in proceeds from the project, which promised an extensive roadmap: hundreds of thousands of dollars to be put towards marketing, community raffles, merchandise, a project crypto token with staking features, metaverse land acquisition, etc. However, none of this ever came to be.
Michel said in his defense that he "never intended to rug but the community went way too toxic". In a press release, an IRS Special Agent stated, "Michel can no longer blame the NFT community for his criminal behavior."
Mutant Ape Planet — though clearly based on it — is unaffiliated with the Mutant Ape Yacht Club project, a Yuga Labs-created spin-off of their own Bored Ape Yacht Club.
- "Non-Fungible Token (NFT) Developer Charged in Multi-Million Dollar International Fraud Scheme", U.S. Attorney's Office of the Eastern District of New York
Genesis lays off another 30% of staff
After a round of layoffs in August that impacted 20% of their employees, Genesis is laying off another 30% of their employees.
Genesis is currently in a really bad spot, halting withdrawals from their lending arm in the wake of the FTX collapse and warning of bankruptcy shortly afterwards. The company owes $900 million to customers of Gemini, and Gemini's CEO recently sent an open letter to Genesis's parent company demanding the funds be returned.
Silvergate bank takes $718 million loss liquidating debt during FTX collapse
Silvergate, a Californian bank that primarily serves the crypto industry, and which was FTX's primary banking partner, scrambled to cover $8.1 billion in withdrawals during the chaos surrounding the FTX collapse. This forced the bank to sell some assets at steep losses, liquidating debt at a $718 million loss. This loss far exceeds the bank's total profits since at least 2013, writes the Wall Street Journal.
Silvergate announced that they would be cutting 40% of their staff — around 200 employees. They also announced that they would be taking a $196 million impairment charge on assets they purchased from Diem — Facebook's blockchain-based payment system once known as Libra. "Given the significant changes in the digital asset industry landscape, this charge reflects the Company’s belief that the launch of a blockchain-based payment solution by Silvergate is no longer imminent," they wrote.
Silvergate's stock plunged 41% on the news.
- "Silvergate Raced to Cover $8.1 Billion in Withdrawals During Crypto Meltdown", The Wall Street Journal
- "Silvergate Capital cutting headcount 40%, takes $196M impairment charge", Seeking Alpha
- "Silvergate Announces Select Preliminary Fourth Quarter 2022 Financial Metrics and Provides Business Update", Seeking Alpha
New York Attorney General sues Celsius CEO Alex Mashinksy for defrauding investors
As Celsius bankruptcy proceedings continue on, the New York Attorney General has come out with a lawsuit against the company's founder and CEO, Alex Mashinsky. Attorney General Letitia James accuses Mashinsky of "engag[ing] in a scheme to defraud hundreds of thousands of investors", promoting his company as a "safe alternative to banks while concealing that Celsius was actually engaged in risky investment strategies".
The lawsuit seeks to permanently bar Mashinsky from engaging in similar business in the state, and seeks disgorgement, damages, and restitution.
- "Attorney General James Sues Former CEO of Celsius Cryptocurrency Platform for Defrauding Investors", New York Attorney General
Sports company Fanatics jettisons its majority stake in NFT company Candy Digital
"Over the past year, it has become clear that NFTs are unlikely to be sustainable or profitable as a standalone business," wrote CEO Michael Rubin in an internal email explaining the decision to sell off Fanatic's share in NFT company Candy Digital. Candy Digital has created NFTs in partnership with MLB, Stranger Things, WWE, and various Nascar teams.
Fanatics purchased a 60% stake in Candy Digital in a $100 million Series A round in October 2021. Now, they've sold the stake to a group of investors led by Galaxy Digital for an undisclosed amount, in what Rubin wrote was "a rather straightforward and easy decision". He highlighted Fanatics' ability to "realize [when] things aren't working", he wrote in the email.
Logan Paul threatens to sue CoffeeZilla for exposing his (alleged) grift
Influencer-turned-(alleged)-crypto-grifter Logan Paul has threatened to sue scam researcher CoffeeZilla, who has exposed Paul's "CryptoZoo" blockchain game project as his latest (alleged) scam. Paul's (alleged) scam history is not to be confused with any of the other long list of (alleged) crypto scams perpetrated by his brother, Jake, which CoffeeZilla has also helped expose.
After many attempts over the span of a year to contact Paul, directly and via his manager (who CoffeeZilla did speak with), Paul has claimed that CoffeeZilla made no attempts to get his side of the story. Instead of addressing any of the many well-researched claims about the flagrant (alleged) grift that Paul has been perpetrating, he has instead reacted in typical (alleged) cryptoscammer fashion: by threatening to sue CoffeeZilla.
NFTs reportedly stolen from influencer CryptoNovo, flipped for at least $525,000
Crypto influencer CryptoNovo tweeted, "I just got hacked!!! Are you kidding me!?!" with a screenshot of valuable CryptoPunk NFTs being transferred from their account. An attacker apparently transferred from CryptoNovo's wallet two or three CryptoPunks, one Bored Ape, one Mutant Ape, three Meebits, and two CloneX NFTs — all "blue chip" NFTs that fetch high prices.
The thief quickly flipped all of the NFTs for around 417 ETH ($525,000). It's unclear if one of the CryptoPunks was stolen, as it was transferred to a wallet to whom CryptoNovo has previously made transfers, but that NFT too was sold for 75 ETH ($94,200).
The thief made a pretty penny, but the loss to CryptoNovo is more substantial based on how much money they spent on the NFTs. They had purchased the Bored Ape in August 2021 for 30 ETH (then around $100,000), and CryptoPunk #4608 in September 2021 for 290 ETH (then $850,000).
The attack appears to have been phishing-related.