Silicon Valley Bank collapse causes crypto contagion concerns

Although it doesn't seem that it was exposure to the crypto industry that did in Silicon Valley Bank (unlike with fellow failed bank Silvergate), the crypto industry has been showing signs of concern that SVB's collapse may impact crypto businesses. In particular, there are fears around the fact that Circle, the company that backs the major USDC stablecoin, kept some of its cash reserves with SVB. Circle disclosed that around $3.3 billion, or around one-third of USDC's $9.88 billion in cash reserves backing USDC, was kept with Silicon Valley Bank.

SVB was also the preferred bank for various giants in the crypto VC world, including Andreessen Horowitz and Sequoia Capital. Pantera Capital also used SVB as a custodian.

Huobi Token flash crashes by 90%

Huobi Token, the token tied to the Huobi cryptocurrency exchange, experienced a flash crash in which the token price tumbled 90% from $4.60 to around $0.31 within about a ten-minute span. HT does not have a ton of liquidity, and so Huobi-linked executive Justin Sun reported that a "few users trigger[ed] a cascade of forced liquidations in the spot and HT contract markets".

Sun also announced that he had transferred $100 million to Huobi to provide more liquidity. He also announced that "Huobi will bear all leverage-through position losses on the platform resulted from this market volatility event of HT."

Although the token recovered quickly, the flash crash sparked rumors that Huobi was insolvent.

Blockchain.com shutters asset management arm

After launching an asset management business less than a year ago, Blockchain.com has announced they will be shuttering it. They blamed the ongoing "crypto winter" as contributing to the decision. The UK-based firm had planned to offer "algorithm-based risk-managed exposure" to Bitcoin, which may have proven challenging in a year of declining Bitcoin prices.

New York Attorney General sues KuCoin, claims ETH is a security

New York Attorney General Letitia James announced a lawsuit against the Seychelles-based KuCoin crypto exchange, after finding that users could trade on the exchange despite it not being registered in the state.

The NYAG took the additional step of alleging that ETH is a security. Many have argued that Bitcoin and ETH, the native token of Ethereum, are not securities because they are "sufficiently decentralized". The NYAG, however, wrote in the press release announcing the lawsuit that, "This action is one of the first times a regulator is claiming in court that ETH, one of the largest cryptocurrencies available, is a security. The petition argues that ETH, just like LUNA and UST, is a speculative asset that relies on the efforts of third-party developers in order to provide profit to the holders of ETH."

The NYAG is also going after KuCoin for offering a lending and staking product, a category of product that has recently been a focus of various enforcement actions. They claim that KuCoin did not comply with a subpoena.

Hedera Network halts access after exploit

The Hedera network turned off access to the Hedera mainnet on March 9 after observing "smart contract irregularities". They subsequently confirmed that the Hedera smart contract service had been attacked by exploiters who were able to transfer individual users' tokens to their own accounts. Some individuals using cold wallets even claimed their tokens had been stolen.

Hedera has not disclosed how much had been stolen. Total value locked (TVL) on the network dropped 33% from $36.1 million to $24.6 million.

Some balked at Hedera's ability to simply turn off user access to the network, despite claiming to be a decentralized project.

Turkish electric vehicle company Togg announces presale via NFT, then scraps the plan after customers have already bought in

Rendering of a red SUV-style car, with text below it reading, "NFT'nizi seçmeye hazır mısınız?"Promotional image for Togg's NFT collection, captioned "Ready to choose your NFT?" (attribution)
Turkish electric vehicle startup Togg announced that interested customers would be able to buy obtain pre-order rights for the limited run of their "100 Year Special Series" cars if they purchased one of the 2023 NFTs they planned to mint on the Avalanche blockchain. Based on rarity, NFTs began minting at between 10 and 30 AVAX ($200-$600) depending on rarity, which prospective customers purchased at its ~$20 price in anticipation of the early February sale. Many customers purchased considerably more AVAX, anticipating fierce bidding wars.

However, shortly after the NFT sales began, the platform crashed. Then, very soon after the sale began and Togg began addressing the issues with the platform, a series of earthquakes devastated portions of Turkey. As a result, Togg announced they would be postponing the sale until a later announcement.

On March 8, Togg announced that they had canceled their plans to conduct the pre-order process by NFT drawing, and that any NFT holders would not be prioritized in the pre-order.

This infuriated some customers who had purchased AVAX solely intending to use it to obtain a pre-order slot — particularly because AVAX is now priced below $15, meaning those who've been holding AVAX since purchasing it have lost 25%.

Gemini reportedly loses banking with JPMorgan

Both CoinDesk and Reuters have reported that JPMorgan Chase & Co. will be ending its banking relationship with Winklevoss-led Gemini cryptocurrency exchange. Gemini responded to the reports by tweeting "Despite reporting to the contrary, Gemini's banking relationship remains intact with JPMorgan," though they notably made no statements about whether they expect that to remain true going forward.

It's hard to say why JPMorgan might have severed ties with Gemini — it could be related to recent statements from regulatory agencies frowning on banks taking crypto companies as clients, although Coinbase noted that it continues to have an active banking relationship with JPMorgan.

JPMorgan is not Gemini's only banking partner, so despite the blow to Gemini, this will not cut them off from banking.

Silvergate bank collapses

California-based Silvergate bank had pivoted almost entirely to serving crypto clients, a move that proved fatal to them in the wake of the FTX collapse and ensuing contagion. On March 8, they announced that they would be shutting down. Although their shutdown is considered to be a "voluntary liquidation", they had little other choice after a bank run, increasing regulatory pressure on banks serving the crypto industry, and a general dearth of new clients in the crypto downturn.

Silvergate's collapse may worsen crypto's already tenuous relationship with US banks. Silvergate was one of the few "crypto-friendly" banks, and the clients it previously served — among them, Crypto.com, Bitstamp, and Paxos — may face challenges finding a reliable replacement.

Lido token price tanks after podcaster spreads inaccurate rumor of Wells notice

Chart of the LDO token price from March 2 to March 5, showing a decline from around $3 to a low of $2.45 before recovering to around $2.60LDO price from March 2 to March 5, via CoinMarketCap (attribution)
It doesn't take much to tank a token price, particularly lately as fear of SEC action in the Ethereum staking world has run high. Popular podcaster David Hoffman speculated on his Bankless podcast on March 3 that "I have wind that many, many, many Wells notices have been issued to many of the defi apps, orgs that we all know and love" in the last week, describing it as a "carpet bombing" and adding that "I think Lido got one". Although he clarified that they were only rumors, it was enough to spark panic, and the LDO token fell almost 20%, from around $3 down to around $2.45.

Hoffman later retracted the statement in a long tweet and apologized, and the LDO price recovered somewhat, though not to its initial level. However, he continued to claim that "there is at least one confirmed Wells Notice that has gone out recently, that isn't known to the public", but wrote that "the idea of a mass recent carpet bomb isn't correct".

WSJ alleges Tether, Bitfinex, and related companies used falsified documents to obtain banking

A report from the Wall Street Journal made serious allegations against the stablecoin operator Tether, sister company Bitfinex, and the web of companies behind it. According to journalists, companies behind Tether "turned to shadowy intermediaries, falsified documents and shell companies to get back in" to the global banking system in late 2018, after a series of governmental actions cut them and their banking partners off from the financial system.

Among other allegations, the WSJ outlined how Tether was repeatedly denied accounts at New York's Signature Bank, and so ultimately got an executive at an aviation fuel broker called AML Global to open an account that appeared to be used to fraudulently process transactions on behalf of Tether and Bitfinex.

Tether is the largest stablecoin in circulation, though its entire existence has been marred by questions around its legitimacy and the status of its claimed reserves.

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