Cryptocurrencies, tokens, NFTs, virtual "assets" frauds

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Crypto's liquidity troubles spread to more platforms​

Total market value of cryptocurrencies which topped US$3 trillion in November has dropped to US$957 billion. PHOTO: REUTERS

June 24, 2022

NEW YORK (BLOOMBERG) - A broad-based sell-off in digital assets and the collapse of high-profile tokens TerraUSD and Luna have caused ripple effects across the crypto industry.
A wave of liquidations triggered fear of contagion risks. Major lenders Celsius Network and Babel Finance have frozen withdrawals, and Three Arrows Capital, a major crypto hedge fund, is facing liquidity troubles that rattled investors.
Total market value of cryptocurrencies, which topped US$3 trillion (S$4.17 trillion) in November, has dropped to US$957 billion, according to data from CoinGecko.
Below are the latest developments from the crypto fallout.
• Crypto yield firm CoinFlex pauses withdrawals
Crypto physical futures exchange CoinFlex said it paused all withdrawals on its platform, citing "extreme market conditions" last week and "continued uncertainty involving a counterparty," without disclosing the name. The firm said that the counterparty isn't Three Arrows Capital or any lending firm.
Founded in 2019, CoinFlex is a smaller crypto exchange focusing on derivatives trading. CoinGecko shows that it currently supports 34 crypto pairs for derivatives. The exchange's investors include Roger Ver, one of the most vocal Bitcoin Cash advocates.

CoinFlex provided an estimated time for withdrawals of June 30. A company representative didn't immediately respond to requests for comment.
• Voyager Digital sets limits on withdrawals
Crypto brokerage and exchange Voyager Digital is limiting customer withdrawals from its platform to US$10,000 and to 20 transactions during a 24-hour period.
The New York-based firm, which secured credit lines of US$485 million in the past week from Alameda Research to shore up protection for customer assets, announced the limits on its website. This week, it disclosed exposure of about US$660 million in loans to the troubled crypto hedge fund Three Arrows Capital, sending shares plunging as analysts raised the prospect of further damage.
Voyager shares trading in Toronto have plunged 95 per cent this year.
• Crypto lender Nexo taps Citigroup for M&As
Nexo, a crypto lender that has positioned itself as immune to the storms shaking decentralised finance, said it had hired Citigroup to advise on potential acquisitions.
The lender said it was seeking "best-in-class advice" from the bank, including on "liquidity restructuring deals," according to a blog post dated June 22.
Nexo has made an unsolicited offer to acquire assets of its competitor Celsius, which has frozen investor withdrawals. The offer "didn't come to fruition," a Nexo spokesman said in an email. Citigroup declined to comment.

 

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Tether - the coin that could wreck crypto​

Tether is the dominant issuer of stablecoins, a type of cryptocurrency pegged to a stable asset such as the US dollar. PHOTO: REUTERS


JUN 18, 2022

SAN FRANCISCO (NYTIMES) - Cryptocurrency prices are plummeting. A so-called stablecoin lost all its value in a matter of days. A newfangled crypto bank halted withdrawals, and investors have been plunged into financial ruin.
Now the crypto industry is grappling with an even grimmer prospect: The worst may be yet to come.
Concern is mounting over another potential vulnerability in the crypto market: Tether, a company whose namesake currency is a lynchpin of crypto trading worldwide.
Long one of the most scrutinised companies in the industry, Tether is facing heightened pressure from regulators, investors, economists and growing legions of sceptics, who argue it could be another domino to fall in an even bigger crash.
"Tether is really the lifeblood of the crypto ecosystem," said Professor Hilary Allen, a finance expert at American University. "If it imploded, then the entire facade falls down."
Tether is the dominant issuer of stablecoins, a type of cryptocurrency pegged to a stable asset such as the United States dollar. Unlike traditional cryptocurrencies such as Bitcoin and Ether, whose monetary value can fluctuate widely, stablecoins are typically designed to maintain a constant price of US$1 and are backed by large reserves of funds or financial engineering. This consistency allows crypto traders to conduct safe, predictable transactions without relying on banks or other financial gatekeepers.
But many of these coins are stable in name only. Last month, when cryptocurrencies melted down, the crash was triggered partly by the failure of TerraUSD, a stablecoin with a US$1 peg that was algorithmically linked to a sister cryptocurrency called Luna. When the price of Luna plummeted, TerraUSD also fell, creating a "death spiral" that shook the broader market.

By contrast, Tether claims its stablecoins are backed by cash and other traditional assets, making its reserves essential to the health of the crypto market. In theory, anyone who wants to exchange Tether coins for US dollars can do so quickly and easily.
But the company's financial statements show that a significant portion of its reserves is tied up in unsecured corporate debt known as commercial paper. Such financial instruments are riskier and harder to quickly convert into cash, especially during financial turmoil. In 2021, New York's attorney-general fined Tether US$18.5 million (S$25.8 million) and said the company had lied about its reserves, calling it "a stablecoin without stability".
Critics say Tether essentially acts as a loosely regulated bank. Traders hand over millions of dollars and, in return, receive millions of stablecoins, which they use to bet on more volatile cryptocurrencies such as Bitcoin or Dogecoin. Tether currently has 70 billion coins in circulation, making it more than three times the size of TerraUSD before the crash.

In a worst-case scenario, critics say, a downturn could spark the crypto equivalent of a bank run. Traders might all rush to exchange their Tether coins for dollars, only to discover that Tether could not fulfill those orders. Investors would lose billions of dollars, forcing them to sell their other crypto holdings, causing a potentially devastating panic that might spill into non-crypto markets.
Tether got a taste of that scenario last month. As cryptocurrencies plummeted, a flood of investors asked to exchange their Tether coins for dollars, forcing the company to pay out about an eighth of its reserves, or US$10 billion, over the course of 1½ weeks. On cryptocurrency exchanges, Tether briefly wavered from its US$1 peg.
Ultimately, the company said, it met the demand. Tether went on a victory lap, proclaiming it had weathered the crisis "flawlessly".
The crash was "the best story that could have happened to Tether", Mr Paolo Ardoino, the company's chief technology officer, said in an interview. "We are not fooling around, and we take risk management extremely seriously."

Then on Sunday (June 12), crypto bank Celsius Network announced it was halting withdrawals, causing digital currency prices to crash again. Tether had invested in Celsius in 2020 and lent it about US$1 billion in Tether coins, according to Bloomberg News. The company said this week that it currently had "zero exposure" to Celsius apart from a small investment. Still, as the market reeled, investors pulled out about US$1.6 billion from Tether.
More sceptics are speaking up. Last month, a top US banking official called for new rules governing Tether and its competitors, saying the TerraUSD crash highlighted the risks of loosely regulated stablecoins. Some traders are now putting their funds into alternative stablecoins, amid fears that the next crash could test whether Tether has adequate reserves.
"They had enough collateral to weather this run, but that does not mean they have enough to weather the next run," said Rutgers University economics professor Bruce Mizrach, who studies cryptocurrencies.
Even by crypto's often surreal standards, Tether has a peculiar history. The company was founded in 2014 by cryptocurrency evangelist Brock Pierce, who, as a child actor, starred in the Mighty Ducks movies. He and partner Reeve Collins later handed control of the firm to former plastic surgeon Giancarlo Devasini, who has stored some of Tether's assets in a bank in the Bahamas run by one of the creators of the Inspector Gadget cartoon.
At times, Tether has insisted that its stablecoins were fully backed by US dollars. But last year, New York Attorney-General Letitia James called those claims "a lie". A few years earlier, a cryptocurrency exchange affiliated with Tether had lost US$850 million in a business deal gone sour. To cover the losses, the exchange, Bitfinex, took loans from Tether's reserves, leaving the stablecoin partly unbacked, according to Ms James' investigation.
A Tether spokesman said the issue with the company's reserves boiled down to a "communications misstep".
Concerns about Tether have spread to Washington. When Treasury Secretary Janet Yellen testified before Congress last month, she noted Tether's wavering from its US$1 peg and called for greater regulation of stablecoins.

The growth of stablecoins presents "the same kind of risks that we have known for centuries in connection with bank runs", she said.
Mr Ardoino said Tether was eager to work with regulators to devise a global framework governing disclosures that stablecoin issuers must make about their reserves. But Tether has resisted more aggressive proposals, which would subject it to regulatory requirements such as those of traditional banks.
"Everyone is freaking out - like, 'I lost my life savings'," said Mr Collins, who founded Tether with Mr Pierce and now runs a crypto venture called BLOCKv. "That is a tragedy, but it is just as much of a tragedy when someone says 'I went to a casino and lost my life savings'. But that does not mean let's regulate casinos out of existence."

 

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Troubled crypto lender Celsius Network seeks time to 'stabilise liquidity'​

Celsius, one of the biggest crypto lenders, has been struggling to raise funds in a fragile digital asset market. PHOTO: REUTERS

JUN 20, 2022

MUMBAI (BLOOMBERG) - Celsius Network will need more time to stabilise its liquidity and operations, the embattled crypto lending platform said in a blog post after it froze deposits last week.
Celsius, one of the biggest crypto lenders, has been struggling to raise funds in a fragile digital asset market hit by tightening interest rates, liquidity and the collapse of the Terra blockchain last month.
"We want our community to know that our objective continues to be stabilising our liquidity and operations," Celsius said in its blog on Monday (June 20). "This process will take time."
The firm has also paused Twitter Spaces and Ask Me Anything, also known as AMAs in crypto jargon, "to focus on navigating these unprecedented challenges", Celsius said in the post.
The rout in crypto markets, which has washed 70 per cent off the largest tokens by market value - Bitcoin and Ether - was accelerated by the crisis at Celsius as investors panicked about liquidations and a cash crunch.
Broader signs of stress were evident. Crypto hedge fund Three Arrows Capital suffered large losses while another lender, Babel Finance, also paused withdrawals. On Sunday, token holders of Solend, a lending app on the Solana blockchain, voted to temporarily take over the account of a large user who faced the threat of a large liquidation.

 

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Trouble at US$10b crypto hedge fund Three Arrows sparks contagion fears​

Representations of Ripple, Bitcoin, Etherum and Litecoin virtual currencies on a PC motherboard on Feb 14, 2018. PHOTO: REUTERS


JUN 20, 2022

BEIJING (CAIXIN GLOBAL) - Rumours of cryptocurrency hedge fund Three Arrows Capital being on the brink of insolvency have sent shock waves through the crypto space, with industry observers predicting more trouble for the decentralised finance (DeFi) sphere as contagion spreads.
Three Arrows, also known as 3AC, is one of the highest-profile players in DeFi - a crypto ecosystem aiming to bypass traditional financial intermediaries through blockchain technology. With an estimated US$10 billion (S$13.86 billion) in assets under management (AUM) in March according to blockchain analytics platform Nansen, the fund has invested in a number of crypto and DeFi firms.
One of the most popular activities in DeFi is holders of crypto assets, such as Ether (ETH), borrowing crypto loans from lenders by staking the assets as collateral, which Three Arrows has aggressively employed, pushing up its collateral positions.
The company, which moved its headquarters to Dubai from Singapore, had heavy exposure to staked ETH, or stETH, a derivative token offered by DeFi app Lido Finance that can be redeemable for exactly one ETH following an upgrade to the Ethereum network.
However, the recent meltdown of the crypto market has rapidly dragged down the value of tokens including ETH. Concerns about further declines have driven an increasing number of holders to swap stETH into ETH and cash out the latter, with selling pressure leading stETH to "depeg" from its relationship with ETH, and causing ETH to slump further. Three Arrows' ETH collateral positions now face forced liquidation, which happens when the ETH price drops below a certain threshold and more collateral cannot be provided by the firm.
Prices of ETH, the second-largest cryptocurrency by market cap after Bitcoin, breached the US$1,000 mark on Saturday (June 18) Beijing time, down more than two-thirds since early April and marking the lowest since January 2021, according to data provider CoinMarketCap.

Liquidity woes​

Signs that Three Arrows may be trying to raise funds to ease its financial trouble appeared when it began making a number of withdrawals from multiple DeFi platforms. In May, the company withdrew nearly US$400 million worth of stETH and ETH from decentralised exchange Curve Finance, according to data provided to Caixin by Nansen, which has been tracking a wallet it had tagged to the hedge fund.

Then on Tuesday, Three Arrows withdrew more than 80,000 stETH from DeFi lending platform Aave, and swapped 38,900 stETH for 36,700 ETH, representing a loss of 2,200 ETH. It continued to sell off the remaining stETH on Thursday and Friday on decentralised exchange 0x, according to Nansen's data. Since this is only one of the many wallets owned by Three Arrows, the overall scale of the fund's holdings and hence its selling could be much larger.
Some crypto analysts said Three Arrows' efforts to dig itself out of the liquidity crisis could prove futile. "It's obvious that Three Arrows is trying to save itself by selling ETH to repay loans such as stablecoins, but it could all be too late because it borrowed too much money and the selling pressure will further knock down ETH prices - a vicious cycle has already been created," Jiang Jinze, founder of Muse Labs, told Caixin. "This feels like a death spiral."
On Wednesday, Three Arrows co-founder Zhu Su said on Twitter that they "are in the process of communicating with relevant parties and fully committed to working this out," without providing details.


However, one of the fund's clients, Hong Kong-based crypto trading firm 8 Blocks Capital, has called out Three Arrows for misappropriating around US$1 million of its funds to answer margin calls. The firm's CEO, Danny Yuan, said in a tweet that his team had not been able to reach Three Arrows in recent days.
"What we learned is that they were leveraged long everywhere and were getting margin-called. Instead of answering the margin calls, they ghosted everyone. The platforms had no choice but to liquidate their positions, causing the markets to further dump," Yuan wrote on Thursday.
Three Arrows' troubles also spread to Finblox, a Hong Kong-based platform that allows investors to earn high yields through lending out their crypto assets. On Thursday, the firm said they would reduce withdrawal limits, citing concerns surrounding Three Arrows, which is an investor in the platform.
Zac Prince, CEO at New Jersey-based crypto lender BlockFi, said on Twitter Friday that it has liquidated "a large client that failed to meet its obligations on an overcollateralised margin loan," without naming the firm. Three Arrows, which made a strategic investment in BlockFi in 2020 and exited the next year, was a client of the lender, according to an April 2020 press release posted on the lender's website.
US-based Genesis Global Trading CEO Michael Moro also said in a Twitter thread on Friday that the crypto brokerage "mitigated our losses" with a large counterparty that failed to meet a margin call earlier in the week. Moro said Genesis sold and hedged all of the liquid collateral from the counterparty to minimise any downside and that no client funds were affected.

Neither Zhu nor co-founder Kyle Davies has responded to Caixin's requests for comment. In a report published by The Wall Street Journal on Friday, Davies said Three Arrows is exploring options including asset sales and a rescue by another firm.
Mark, co-founder of venture capital firm Wagmi Ventures, predicts the size of Three Arrows' AUM to plunge by between 70 to 80 per cent. Being a heavy investor in the Luna token, which lost almost all of its value in a collapse in May, Three Arrows had already suffered significant losses.
Some observers believe that the impact of Three Arrows' turmoil on retail investors should be limited - at least for now. "I think retail investors should be safe for now and aren't under too much pressure to dump their assets. The current situation would mostly impact institutional investors," Muse Labs' Jiang said.
"Generally, it's not a good look for the industry, but at the same time, Three Arrows is a prop shop. So there shouldn't be a whole lot of 'retail financial contagion,'" Will Corkin, co-founder of Hong Kong-based DeFi platform Mantra DAO, told Caixin.
"Three Arrows has been borrowing from institutions, and this loss should not involve retail investors. At the same time, their counterparties are relatively concentrated, meaning that the negotiation process would be relatively smoother," Yang Mindao, founder of crypto lending platform dForce, told Caixin.

Contagion spreads​

The global cryptocurrency market cap, which peaked at US$3 trillion in November, dropped to below US$900 billion on Saturday, according to CoinMarketCap. The turmoil in the crypto space comes as US stocks entered a bear market earlier this week, with the S&P 500 Index declining more than 20 per cent from its recent peak in January.
Observers believe stock market declines would only add to the woes of the crypto industry, which had already witnessed two high-profile blow-ups since May. First, the collapse of the Terra ecosystem when its algorithmic stablecoin TerraUSD crumbled from its dollar peg has taken down its sister token Luna.
Then about a month later, Celsius Network LLC - a widely used centralised crypto lending platform that had offered depositors a sky-high 18.63 per cent annual percentage yield - froze customer withdrawals, swaps and transfers between accounts, citing "extreme market conditions." The lender said on its website that it has 1.7 million users.
As forced liquidation of large volumes of collateral will send cryptocurrency prices down even faster, a domino effect could be created across the industry that could spell trouble for many more crypto platforms and investors.
"Many of these crypto firms haven't been around for long - they were established in 2019 or 2020, and haven't fully experienced many rounds of bull-to-bear market transitions. In my opinion, many of them are relatively inexperienced in risk management and leverage control," Muse Labs' Jiang said.

"Three Arrows won't be the last to blow up. Many small exchanges and quantitative funds have put all their money in stETH or centralised finance firms (such as Celsius). They generate high returns, but at the same time, it's risky," Wagmi's Mark, who only gave his first name, told Caixin.
Hong Kong-based Babel Finance became the latest major crypto lender to freeze withdrawals, saying on Friday that it is facing "unusual liquidity pressures" amid major fluctuations in the crypto market.
"The continued deleveraging in the industry as a result of various liquidations will shrink overall credit in the system and deplete liquidity," Ross Liang, a blockchain analyst at Hong Kong-based crypto asset manager Amber Group, told Caixin.

 

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Cryptocurrency rout nowhere near the end, say analysts​

There are no key prudential tools against uncontrolled capital flights from crypto and digital asset valuation death spirals. PHOTO: REUTERS

Claire Huang
Business Correspondent

PUBLISHED

JUN 20, 2022

SINGAPORE - Blow after blow, a continuous string of bad news for cryptocurrencies in the past week brought digital asset darling Bitcoin to its knees over the weekend, and observers say the end is not yet near despite a rebound in prices.
Bitcoin, the most popular cryptocurrency in the world, on Monday (June 20) rebounded to hover at the US$20,000 (S$27,743) mark, up from this year's low of US$17,592.78 on Saturday (June 18). The digital asset now makes up about 43 per cent of crypto's total market capitalisation, according to CoinMarketCap.
The price of Ethereum, the second-largest cryptocurrency by market cap after Bitcoin, also rebounded on Monday to cross the US$1,000 level. It went below US$1,000 on Saturday (June 18) - its lowest level since January 2021.
But observers believe the crypto market turmoil is not over.
The vast majority of operators, brokers, lenders and investors in cryptocurrencies are unregulated, said Mr Willie Tanoto, Fitch Ratings' financial institutions director.
So, there are no key prudential tools against uncontrolled capital flights from crypto and digital asset valuation death spirals - a vicious cycle where a drop in the value of a digital asset leads to liquidation, fuelling further drops.
In a traditional regulated market, there are tools to help maintain asset reserves in the event of volatility, limits are imposed on the level of risks an asset can have, and measures are in place to avert a systemic failure, said Mr Tanoto.

"With no lender of last resort in place and a government-led bailout unlikely, given the blurred lines of national boundaries in cryptocurrencies, and given authorities' frequent admonishments against speculating in cryptocurrencies, the market may face continued volatility unless confidence in the long-term value of crypto-assets is restored," Mr Tanoto added.
The total market cap of crypto, which had hit nearly US$3 trillion in November last year, had at one stage plummeted to US$877 billion on Monday, based on CoinMarketCap.
Mr Manuel Jaeger, co-founder and head of crypto at private market exchange ADDX, noted that this is the first time the crypto market is facing steep declines due to a wider economic downturn, unlike previous crypto winters that were driven by internal factors such as the level of confidence in the long-term prospects.

"With the survival of a number of well-known crypto companies falling into question over the past two weeks, the risk of a contagion spreading to other crypto platforms cannot be written off," he said.
But Mr Raks Sondhi, managing director at crypto exchange Independent Reserve Singapore, holds a more cheery view, saying Bitcoin and Ethereum tend to recover and beat their previous all-time highs.
"Many crypto investors have a long-term investment horizon and are not concerned about short-term fluctuations. According to our Independent Reserve Cryptocurrency Index, 50 per cent of investors (polled) are planning to hold over the next 12 months," he said.

The crash in the crypto market came on the back of a growing stream of bad news involving popular crypto lender Celsius Network, crypto hedge fund Three Arrows Capital and newly-minted unicorn Babel Finance.
Celsius last week suspended withdrawals and tranfers, while Three Arrows, which previously put up a strong performance record, failed to meet margin calls by lenders, among others.
Dragged down by the shocking collapse of TerraUSD and sister token Luna in early May, Three Arrows' US$200 million investment in Luna was wiped out, but its liquidity woes were compounded by volatility in the broader crypto market. It is now reportedly looking at options including an asset sale or rescue by another firm.

On Friday, Babel Finance announced the pausing of withdrawals led by unusual liquidity pressures.
The latest crypto firm to fall into trouble is Solend, a lending app on the Solana blockchain. Its token holders on Sunday voted to temporarily take over the account of a large user who faced the threat of a large liquidation.
Adding to mounting woes in the crypto world is the slew of job cuts from prominent names such as Coinbase, crypto.com, BlockFi and Gemini. The firms are under pressure to cut costs in a bear market after rapidly expanding the past year or two.
When asked which players have better chances of survival, Mr Jaeger said companies likely to survive will be those that are well-resourced, have stayed prudent in spending and have sustainable revenue sources that are not dependent on promising high returns.

 

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Distressed crypto lender Babel Finance wins reprieve on debt repayments​

More than US$2 billion has been wiped off the value of cryptocurrencies since they peaked last year. PHOTO: REUTERS

JUN 21, 2022

NEW YORK (BLOOMBERG) - Babel Finance, the distressed crypto lender which froze withdrawals last Friday (June 17), said it has won a reprieve on debt repayments as it battles to survive a tumultuous slump in cryptocurrency markets.
Hong Kong-based Babel has "reached preliminary agreements on the repayment period of some debts, which has eased the company's short-term liquidity pressure", it said in a statement sent to Bloomberg on Monday and later posted to its website.
Co-founder Flex Yang told Bloomberg that the company "will disclose to the public" once they have made progress.
Babel is in talks with large institutions about potential solutions that include setting up a new entity to take over some of the debts, a source with knowledge of the matter said, asking not to be identified as he is discussing private information.
Babel's difficulties highlight the turmoil sweeping the crypto industry, where at least one more major lender has frozen withdrawals and a prominent hedge fund is trying to stave off collapse.
Babel cited "unusual liquidity pressures" for its decision to halt withdrawals.
The source familiar with Babel's plans did not say when the company might open its platform for withdrawals or name the lenders it is in discussions with.

"Given the current context of severe market volatility, Babel Finance's management will continue to communicate closely with customers, counterparties and other partners, and provide updates in a timely and transparent manner," said the company in the statement.
The halt on withdrawals marked a sudden reversal of fortunes for Sequoia Capital China-backed Babel, which less than a month ago announced an US$80 million (S$111 million) funding round that put its valuation at US$2 billion.
The company had an outstanding loan balance of more than US$3 billion at the end of last year.
With more than US$2 billion wiped off the value of cryptocurrencies since they peaked last year, a wave of liquidations now represents an existential threat to many industry participants.
Celsius Network, the rival lender that froze deposits earlier this month, on Monday said it needs more time to stabilise its liquidity and operations.
"This process will take time," it said on its blog.
Crypto hedge fund Three Arrows Capital has hired legal and financial advisers after this year's crypto sell-off left it with huge losses, its co-founders told the Wall Street Journal last week.

 

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The music has stopped for crypto firms​

Coinbase said it would rescind job offers and extend a hiring freeze to battle the economic downturn. PHOTO: NYTIMES

JUN 21, 2022

SAN FRANCISCO (NYTIMES) - No one wanted to miss out on the cryptocurrency mania.
Over the past two years, as the prices of bitcoin and other virtual currencies surged, crypto start-ups proliferated. Companies that market digital coins to investors flooded the airwaves with TV commercials, newfangled lending operations offered sky-high interest rates on crypto deposits and exchanges like Coinbase that allow investors to trade digital assets went on hiring sprees.
A global industry worth hundreds of billions of dollars rose up practically overnight. Now it is crashing down.
After weeks of plummeting cryptocurrency prices, Coinbase said last Tuesday (June 14) that it was cutting 18 per cent of its employees, after layoffs at other crypto companies such as Gemini, BlockFi and Crypto.com. High-profile start-ups like Terraform Labs have imploded, wiping away years of investments. On June 12, an experimental crypto bank, Celsius, abruptly halted withdrawals.
The pullback in the crypto ecosystem illustrates the precariousness of the structure built around these risky and unregulated digital assets.
The total value of the cryptocurrency market has dropped by about 65 per cent since autumn, and analysts predict the sell-off will continue. Stock prices of crypto companies have cratered, retail traders are fleeing and industry executives are predicting a prolonged slump that could put more companies in jeopardy.
"The tide has gone out in crypto, and we're seeing that many of these businesses and platforms rested on shaky and unsustainable foundations," said former Federal Reserve official Lee Reiners, who teaches at Duke University Law School. "The music has stopped."

Cryptocurrencies are digital coins exchanged using networks of computers that verify transactions, rather than a centralised entity like a bank. For years, they have been marketed as a hedge against inflation caused by central banks flooding the economy with money.
Bitcoin, the most valuable cryptocurrency, has a built-in limit to its supply. But now with stocks crashing, interest rates soaring and inflation high, cryptocurrency prices are also collapsing, showing they have become tied to the overall market.
As people pull back from crypto investments, the outflow is exposing the unstable foundations of many of the industry's most popular companies.
Many of these companies are equipped to survive a downturn in cryptocurrency prices. But cutbacks are likely to continue as they adjust their strategies after years of excessive growth. Among the most vulnerable may be start-ups that launched their own cryptocurrencies, as prices plummet across the board.
Some industry experts have long said the exuberant growth of the past two years was not going to last forever, comparing it with the late-1990s dot.com boom. At the time, dozens of dot.com companies were going public amid hysteria over the early promise of the Internet, even though few of them made money.
When confidence evaporated in the early 2000s, many of the dot.com companies went bust, leaving just the biggest - such as eBay, Amazon and Yahoo - standing. This time, investors predict there will be more survivors.
"You certainly have some overhyped companies that don't have the fundamentals," said investor Mike Jones at venture firm Science. "But you also have some really strong companies that are trading way below where they should."

There have been warning signs that some crypto companies were not sustainable. Sceptics have pointed out that many of the most popular firms offered products underpinned by risky financial engineering.
Terraform Labs, for example, offered TerraUSD, a so-called stablecoin with a fixed value linked to the United States dollar. The coin was hyped by its founder, Mr Do Kwon, who raised more than US$200 million (S$278 million) from major investment firms such as Lightspeed Venture Partners and Galaxy Digital, even as critics warned that the project was unstable.
The coin's price was algorithmically linked to a sister cryptocurrency, Luna. When the price of Luna plummeted in May, TerraUSD fell in tandem - a "death spiral" that destabilised the broader market and plunged some investors into financial ruin.
Celsius' announcement that it was freezing withdrawals had a similar effect. Celsius had aggressively marketed its bank-like lending service to customers, promising yields as high as 18 per cent if they deposited their crypto holdings with the company.
For months, critics wondered how Celsius could sustain such high yields without putting its depositors' funds in jeopardy through risky investments. The company drew scrutiny from several state regulators.
In the end, a drop in crypto prices appeared to put the company under more pressure than it could withstand. With the price of bitcoin tumbling, Celsius announced that it was freezing withdrawals "due to extreme market conditions".
The company did not respond to a request for comment.
The market instability has also triggered a crisis at Coinbase, the largest US crypto exchange.
Between the end of 2021 and late March, Coinbase lost 2.2 million active customers, or 19 per cent of its total, as crypto prices dropped. The company's net revenue in the first three months of the year shrank 27 per cent from a year earlier, to US$1.2 billion. Its stock price has plunged 84 per cent since it went public last year.
This month, Coinbase said it would rescind job offers and extend a hiring freeze to battle the economic downturn. Last Tuesday, it said it would cut about 1,100 workers.
Coinbase's chief executive Brian Armstrong informed employees of the layoffs in a note last Tuesday morning, saying the company "grew too quickly" as crypto products became popular. "It is now clear to me that we overhired," he wrote.
A Coinbase spokesman declined to comment. "It had been growth at all costs over the last several years," said Mr Ryan Coyne, who covers crypto companies and financial technology at the Mizuho Group. "It's now turned to profitable growth."
Gemini, a crypto exchange led by billionaires Tyler and Cameron Winklevoss, also announced this month that it was laying off 10 per cent of its workforce. In a memo to staff, the Winklevoss twins said the industry had entered a "crypto winter".
But they also expressed optimism about the future of the industry. "The crypto revolution is well under way and its impact will continue to be profound," they wrote in a memo. "But its trajectory has been anything but gradual or predictable."
Last year, Singapore-based exchange Crypto.com aired a now-notorious TV commercial starring actor Matt Damon, who declared that "fortune favours the brave" as he encouraged investors to put their money in the crypto market.

Earlier this month, Crypto.com's CEO Kris Marszalek announced that he was laying off 5 per cent of the staff, or 260 people. Last Monday, BlockFi, a crypto lending operation, said it was reducing its staff by roughly 20 per cent. Gemini and BlockFi declined to comment.
A Crypto.com spokesman said the company remains focused on "investing resources into product and engineering capabilities to develop world-class products".
Some of the companies have remained defiant. During Game 5 of the NBA Finals last Monday night, Coinbase aired a commercial that alluded to past boom-and-bust cycles.
Crypto is dead," it declared. "Long live crypto."

 

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South Korea bans Terraform employees from leaving country amid probe​

Fifteen people, including former project developers, received travel restrictions, citing "legal sources". PHOTO: REUTERS

JUN 21, 2022

SEOUL (BLOOMBERG) - South Korea has banned current and former employees of Terraform Labs from leaving the country, suggesting prosecutors are stepping up their investigation into the TerraUSD stablecoin's collapse.
An official with the prosecutors' office in Seoul confirmed that "officials linked to the stablecoin's collapse" have received travel restrictions, but declined to disclose how many got the notice or describe the status of the investigation.
"Departure bans are normally imposed to have them included for questioning," the person said by phone.
Yonhap News reported that 15 people, including former project developers for the Anchor lending protocol, received travel restrictions, citing "legal sources".
South Korea's move comes a little more than a month after the high-profile implosion of algorithmic stablecoin TerraUSD, or UST. Around US$40 billion (S$55 billion) in market value was erased for holders of UST and its sister coin Luna when the stablecoin plunged far below its US$1 peg.
An investigation into the marketing of UST is underway in the US.
Daniel Hong, a former developer at Terraform, posted on his Twitter feed a government notice telling him that he was prohibited from departing the country from June 20 to July 19.

"Stop asking me why i couldn't make it to NYC frens, this is why: the Korean government imposed an exit ban for all ex-@terra-money employees today," he tweeted.
Prosecutors are also looking to invalidate Terraform Labs co-founder Do Kwon's South Korean passport, local broadcaster YTN reported on Tuesday (June 21).
Should that happen, Kwon, who is believed to be living in Singapore, would need to return to Seoul to turn in his passport within 14 days.
The authorities may also summon Kwon or issue seize and search warrants to collect related documents from his office, Yonhap reported.

 

[LITTLEREDDOT]

Do I have the right to sue? Five questions Luna investors should ask​

When referring to "misrepresentations", it is important to understand how TerraUSD and Luna defined their products. PHOTO: BLOOMBERG
Shaun Leong For The Straits Times

JUN 21, 2022

SINGAPORE - It has been described as the "Lehman Brothers" event of the crypto world and heralded to bring forth a cryptocurrency winter. The collapse of TerraUSD, one of the largest algorithmic stablecoins, has sent shockwaves across the world.
The stablecoin was not backed by fiat currency or financial assets, but by another token, Luna. TerraUSD and Luna are tokens that run on the Terra network, a blockchain-based project developed by start-up Terraform Labs, which is registered in Singapore.
TerraUSD was pegged to the US dollar such that if it falls below US$1, an investor can trade the stablecoin for an amount of Luna tokens worth up to US$1. The Luna token, the market value of which dropped by over 98 per cent within one day was in turn backed up by reserve Bitcoin. However, only 0.039 per cent of the Bitcoin are left in the reserves as most had been sold since the start of the crisis, leaving many Luna investors seeking recourse.
Here are five questions Luna investors should ask.

1. Do I still have the right to sue?​

To circumvent the problem of a worthless Luna, Terra created a new blockchain which 65 per cent of Luna holders voted in favour of on May 25. With the vote, users will be given new Luna tokens in place of their old ones on a new blockchain.
Based on current distribution, users will receive a proportionate percentage of new tokens, with more tokens promised to be vested at a later time.
Given this, the first obstacle that Luna investors may face is a claim that they have as a whole waived their right to sue for losses. It would not be surprising to see challenges made to question the legal basis of the vote, although it would be impossible to reverse the creation of the new blockchain and its consequential effects given that the new tokens can be traded on exchanges.

An investor claiming losses would likely have to show that the present - and quite possibly the future - value of these newly issued tokens, including those that are not yet vested, are worth less than the old Luna tokens. Luna investors might face a complex battle over the valuation of the old and new Luna tokens.

2. Do we have strength in numbers?​

A class action lawsuit has commenced in the South Korean courts against Terraform Labs, while another class action is reportedly brewing in the United States. However, the Terra user terms have a provision that states that investors have waived their right to participate in a class action suit.
It remains to be seen whether such clauses are enforceable under the relevant arbitration law.

Under the rules of the Singapore International Arbitration Centre, it is possible to have a "class action" arbitration, even if a defendant does not agree to one, where the disputes arise out of the same transaction or where the claims are compatible and closely related to each other. This applies similarly to both Singapore-based and international investors.

3. Where can we seek recourse?​

Luna investors would have to be strategic when selecting the forum to seek recourse.
The Terra user terms have an arbitration agreement that provides for disputes to be resolved by arbitration in Singapore.
An older version of the Terra user terms - dated July 12, 2018 - prescribes that "Singapore will govern any dispute related to these terms or your use of the forum" with an American Arbitration Association's clause.
Where parties pursue claims that fall beyond the scope of the arbitration agreement, they may attempt to bring a class action suit in Singapore courts, referred to as "representative proceedings" under Singapore's rules of court.
In a recent landmark decision, Withers KhattarWong secured a worldwide proprietary injunction for the first time over a non-fungible token, and it can be seen from that case that the Singapore Courts could decide matters over assets in the blockchain.
It would be interesting to consider how any Singapore proceedings would interact with the proceedings brought in South Korea and other countries.

4. What exactly was misrepresented?​

While TerraUSD was not backed up by fiat currency but by the Luna token (which was in turn backed by another token effectively - Bitcoin), there does not appear to be any universal authority on what constitutes a "stablecoin" or at least a legal definition of a "stablecoin" that is widely applicable across different countries.
There are technical representations in the TerraUSD and Luna Whitepaper.
When one refers to "misrepresentation", it is important to understand how TerraUSD and Luna defined their products, what was omitted and what were the reasons for incorrect details, if any at all, in their representation.

5. Who are we competing with?​

Luna investors would be considering how they could obtain compensation in the event of a successful claim, and in this regard, they could be competing among themselves in light of proceedings and judgments that might be obtained by different groups of investors from legal proceedings in different countries.
It has been reported that the South Korean authorities are looking into alleged tax evasion penalties constituting about US$78 million (S$108 million) against Terraform Labs and related individuals. This gives rise to the question of how potentially competing claims between the South Korean authorities and different groups of investors can be managed.

 

[LITTLEREDDOT]

Some Brits turn to gambling, crypto to make ends meet, charity warns​

British charity GamCare said it had increasingly received calls from people on state welfare who had gambled in the hope they could cover soaring bills. PHOTO: ST FILE

JUN 23, 2022

LONDON (REUTERS) - Britain's worsening cost-of-living squeeze is pushing some people into gambling and cryptocurrency investments in last-ditch attempts to make ends meet, a gambling charity warned on Thursday (June 23).
GamCare said it had increasingly received calls from people receiving state welfare payments who had gambled in the hope they could cover soaring energy and food bills, and lost.
The charity reported that some people who it had helped successfully in the past had relapsed into gambling again under the growing financial pressure.
British households are grappling with the highest rate of inflation out of the Group of Seven advanced economies, which hit a new 40-year high of 9.1 per cent in May. The Bank of England has warned of inflation exceeding 11 per cent by October.
A YouGov survey of more than 4,000 people commissioned by GamCare and published on Thursday showed 46 per cent were worried about their financial situation.
More than half of those polled said they had gambled over the past 12 months, and most of this group had lost money.
"Our helpline advisers are hearing that the cost of living is impacting people's gambling behaviours - particularly those gamblers who have recovered," said Ms Anna Hemmings, chief executive of GamCare.

"We also know that our team are hearing from more and more people who are reaching out for help around crypto trading."
Someone who paid in sterling to invest in Bitcoin six months ago to help hedge against the rising cost of living would have lost 55 per cent of their investment as of Thursday.
GamCare said 43 per cent of problem gamblers had invested in cryptocurrency, and 25 per cent out of this group said they wanted to invest more to chase losses - compared with only 7 per cent of the wider population of crypto investors.

 

[LITTLEREDDOT]

Crypto's liquidity troubles spread to more platforms​

Total market value of cryptocurrencies which topped US$3 trillion in November has dropped to US$957 billion. PHOTO: REUTERS


JUN 24, 2022

NEW YORK (BLOOMBERG) - A broad-based sell-off in digital assets and the collapse of high-profile tokens TerraUSD and Luna have caused ripple effects across the crypto industry.
A wave of liquidations triggered fear of contagion risks. Major lenders Celsius Network and Babel Finance have frozen withdrawals, and Three Arrows Capital, a major crypto hedge fund, is facing liquidity troubles that rattled investors.
Total market value of cryptocurrencies, which topped US$3 trillion (S$4.16 trillion) in November, has dropped to US$957 billion, according to data from CoinGecko.
Below are the latest developments following the crypto fallout:
• Crypto yield firm CoinFlex pauses withdrawals
Crypto physical futures exchange CoinFlex said it paused all withdrawals on its platform, citing "extreme market conditions" last week and "continued uncertainty involving a counterparty", without disclosing the name. The firm said that the counterparty is not Three Arrows Capital or any lending firm.
Founded in 2019, CoinFlex is a smaller crypto exchange focusing on derivatives trading. CoinGecko shows that it currently supports 34 crypto pairs for derivatives. The exchange's investors include Mr Roger Ver, one of the most vocal Bitcoin Cash advocates.

CoinFlex provided an estimated date for withdrawals of June 30. A company representative did not immediately respond to requests for comment.
• Voyager Digital sets limits on withdrawals
Crypto brokerage and exchange Voyager Digital is limiting customer withdrawals from its platform to US$10,000 and to 20 transactions in a 24-hour period.
The New York-based firm, which secured credit lines of US$485 million in the past week from Alameda Research to shore up protection for customer assets, announced the limits on its website. This week, it disclosed exposure of about US$660 million in loans to the troubled crypto hedge fund Three Arrows Capital, sending shares plunging as analysts raised the prospect of further damage.
Voyager shares trading in Toronto have plunged 95 per cent this year.
• Crypto lender Nexo taps Citigroup for M&As
Nexo, a crypto lender that has positioned itself as immune to the storms shaking decentralised finance, said it had hired Citigroup to advise on potential acquisitions.
The lender said it was seeking "best-in-class advice" from the bank, including on "liquidity restructuring deals", according to a blog post dated June 22.
Nexo has made an unsolicited offer to acquire assets of its competitor Celsius, which has frozen investor withdrawals. The offer "didn't come to fruition", a Nexo spokesman said in an e-mail. Citigroup declined to comment.

 

[LITTLEREDDOT]

Crypto hackers steal $139 million with Horizon bridge attack​

The hack targeted crypto firm Harmony's Horizon bridge, which offers cross-chain transfers between Ethereum and Binance. PHOTOS: HARMONY ONE/FACEBOOK, REUTERS

JUN 24, 2022

NEW YORK (BLOOMBERG) - Hackers looted about US$100 million (S$138.89 million) from a so-called cryptocurrency bridge, targeting a key vulnerability in the digital asset ecosystem.
Harmony said in a tweet the hack of its Horizon bridge, which lets people swap coins between blockchains, took place on Thursday morning (June 23).
It has "begun working with national authorities and forensic specialists to identify the culprit and retrieve the stolen funds".
Horizon, which offers cross-chain transfers between Ethereum and Binance, marks the third major bridge hack this year.
In February, hackers stole more than US$300 million from the Wormhole bridge. In late March, Ronin Bridge lost about US$620 million to hackers.
Even before the Horizon hack, money stolen from bridges exceeded US$1 billion, researcher Chainalysis has estimated.
Harmony's native ONE token dropped 13 per cent over the past 24 hours, according to CoinGecko.

"The theft seems to have happened due to a private key compromise," said Mr Xuxian Jiang, chief executive officer of security firm PeckShield, which has been contacted by Harmony for support.
Harmony's bridge is managed and secured by four multi-signature wallets and an authentication from at least two of them is required to validate and execute a transaction, Jiang said.
The Ronin Bridge, linked to the popular play-to-earn video game Axie Infinity, employed a similar mechanism, with five out of nine validators required to sign off.
Bridges are particularly vulnerable to hacks, as their technology is complex and they are often run by anonymous teams.
The way they safeguard funds is often unclear.
The amount of money locked on bridges connected to the Ethereum blockchain declined 60 per cent in the last 30 days, to less than US$12 billion, per tracker Dune.
The drop was triggered by a wider crypto market slump and liquidity concerns surrounding lender Celsius Network and crypto-focused hedge fund Three Arrows Capital.

 

[LITTLEREDDOT]

Crypto broker Voyager issues notice of default to Three Arrows​

Three Arrows has failed to make the required payments on its loan of 15,250 Bitcoin and US$350 million USD Coin. PHOTO: REUTERS

June 28, 2022

NEW YORK (BLOOMBERG) – Crypto broker Voyager Digital said it has issued a notice of default to Three Arrows Capital, the troubled crypto hedge fund, on a loan worth roughly US$675 million based on Bitcoin's price on Monday (June 27).
Three Arrows has failed to make the required payments on its loan of 15,250 Bitcoin and US$350 million USD Coin, Voyager said in a statement.
The company intends to pursue recovery and is in talks on legal remedies as it weighs options to meet customer demands. It has hired Moelis & Company as its financial adviser in the process.
New York-based Voyager, which offers crypto trading and staking – a way of earning rewards for holding certain cryptocurrencies – and yield products, is among the companies that have taken a hit in the fallout from Three Arrows' liquidity problems.
Earlier this month, Voyager secured credit lines from the investment arm of Alameda Research, the trading firm founded by Mr Sam Bankman-Fried, as concerns about Three Arrows and the crypto sector rattled the market.
Voyager said it has accessed US$75 million of the credit line from Alameda and may further dip into the funds as needed to facilitate customer orders and withdrawals.
"We are working diligently and expeditiously to strengthen our balance sheet and pursuing options so we can continue to meet customer liquidity demands," said Mr Stephen Ehrlich, Voyager's chief executive said in the statement.

Three Arrows' law firm, Solitaire, did not immediately respond to a request for comment while Voyager declined to comment further.
Shares of Voyager, listed on the Toronto Stock Exchange, are down 95 per cent this year.

 

[LITTLEREDDOT]

Bitcoin miners sell their holdings amid crypto winter's chill​

Several publicly listed bitcoin miners collectively sold more than 100 per cent of their entire output in May. PHOTO: REUTERS

June 28, 2022

BANGALORE (REUTERS) - Bitcoin miners have been forced to tap their cryptocurrency stashes as a plunge in prices, rising energy costs and increased competition bite into profitability.
The number of coins miners are sending to crypto exchanges has been steadily climbing since June 7, researchers at MacroHive noted, in a sign that "miners have been increasingly liquidating their coins on exchanges".
Several publicly listed bitcoin miners collectively sold more than 100 per cent of their entire output in May as the value of Bitcoin tumbled 45 per cent, an analysis by Arcane Research found.
"The plummeting profitability of mining forced these miners to increase their selling rate to more than 100 per cent of their output in May. The conditions have worsened in June, meaning they are likely selling even more," said Arcane analyst Jaran Mellerud.
Bitcoin miners, who run networks of computers to earn tokens by validating transactions on the blockchain, are typically staunch crypto holders and collectively own around 800,000 bitcoins, according to CoinMetrics data.
The crypto mining space rapidly expanded in 2021 as Bitcoin more than quadrupled in value, but this growth has further pressured margins as the process is designed to grow more difficult as the number of miners increases.
"Over the past 6 months, hash rate and mining difficulty have increased while the price of Bitcoin has dropped. These are both negatives for existing miners as both work to compress margins," said Mr Joe Burnett, an analyst at bitcoin mining firm Blockware Solutions.

High energy prices are also hitting miners, who by some estimates use more electricity than the Philippines, according to the Cambridge Bitcoin Electricity Consumption Index.
"If you're not at a very low-cost electricity area at this point, you've got to shut down," noted Mr Chris Brendler, senior research analyst at DA Davidson.
Bitfarms, Riot Blockchain and Core Scientific are among companies that announced sales, with Bitfarms' chief executive saying the company is "no longer holding daily bitcoin production".

Shares of publicly listed miners have been battered even more than Bitcoin, with the Valkyrie Bitcoin Miners ETF falling 59 per cent this quarter compared with the 53 per cent drop for Bitcoin.
Some miners, including Bitfarms, are using proceeds to negotiate financing agreements to fund operations and make payments on expensive mining equipment.
If miners have already paid two-thirds or even 70 per cent of the price of these millions of dollars in machines, they would not want to miss the final instalments, which makes them desperate for financing, Mr Brendler said.
Given miners' significant Bitcoin holdings, some analysts point to miner sales as another factor weighing on Bitcoin prices.

Miners using older and more energy-intensive machines, and without the balance sheet and access to financing of publicly listed players are already struggling.
Bitcoin's mining difficulty decreased 2.35 per cent this week, Glassnode data showed, indicating the network had adjusted after some miners turned off their rigs.
This takes some pressure off those that have not given up.
"Bitcoin mining is a zero-sum game. If you can continue running when others cannot that means you have a larger share of the pie," said Mr Charlie Schumacher, spokesman for Marathon Digital Holdings, the largest publicly listed miner.
Marathon has not sold Bitcoin since October 2020, he added.
Mr Burnett said: "Bitcoin bottoms have been marked at the end of miner capitulation, that could be a sign that the miners that can survive this capitulation have a light at the end of the tunnel."

 

[jw5]

A lot of potential scams.

 

[LITTLEREDDOT]

S'pore-based crypto hedge fund Three Arrows Capital in liquidation: Source​

Three Arrows Capital is one of the higher profile crypto investors to have run into difficulties in recent months. PHOTO: REUTERS

June 29, 2022

LONDON (REUTERS) - Crypto hedge fund Three Arrows Capital (3AC) has entered liquidation, a person familiar with the matter told Reuters on Wednesday, in the latest sign of the market downturn hurting the crypto industry.
Singapore-based 3AC is one of the higher profile crypto investors to have run into difficulties following the sharp sell-off in the market for digital currencies seen in recent months.
Crypto broker Voyager Digital issued 3AC with a default notice on Monday after it failed to make payments on a loan of 15,250 bitcoin (approximately US$324 million) and US$350 million worth of USDC, a stablecoin.
A British Virgin Islands court order also dated on Monday ordered 3AC's liquidation.
Consultancy firm Teneo have been appointed as liquidators.
Top cryptocurrency bitcoin has plunged some 37 per cent in June, trading around US$20,000 on Wednesday, compared with its all-time high of US$69,000 in November 2021.
News of 3AC's liquidation was first reported by broadcaster Sky on Wednesday.

On June 15, 3AC's co-founder sought to address liquidation rumours in a tweet, saying the company was "fully committed to working this out", without going into further detail.
3AC did not immediately respond to a request for comment.

 

[LITTLEREDDOT]

Crypto crash widens a divide: 'Those with money will end up being fine'​

No crypto investor has fully escaped the downturn. PHOTO: REUTERS

June 30, 2022

ENGLEWOOD, Colorado (NYTIMES) - The cryptocurrency market was in ruins. But Tyler and Cameron Winklevoss were jamming.
The billionaire twins, best known for their supporting role in the creation of Facebook, twirled and shimmied across the stage with their new cover band, Mars Junction, at a concert venue outside Denver last week, the latest stop on a coast-to-coast tour. Tickets cost US$25.
The Winklevosses, who are 40, were moonlighting as rockers just weeks after their US$7 billion (S$9.75 billion) company, Gemini, which offers a platform for buying and selling digital currencies, laid off 10 per cent of its staff. Since early May, more than US$700 billion has been wiped out in a devastating crypto crash, plunging investors into financial ruin and forcing companies like Gemini to slash costs.
Cryptocurrencies have long been held up as a vehicle for economic empowerment. Enthusiasts promote the digital coins - which are exchanged using networks of computers that verify transactions, rather than through a centralised entity like a bank - as a means for people of all backgrounds to achieve transformational wealth outside the traditional finance system.
But for all those supposedly egalitarian principles, crypto's collapse has revealed a yawning divide: As employees of crypto companies lose their jobs and ordinary investors suffer huge losses, top executives have emerged relatively unscathed.
No crypto investor has fully escaped the downturn. But a small group of industry titans accumulated immense wealth as prices spiked over the last two years, giving them an enviable cushion. Many of them bought Bitcoin, Ether and other virtual currencies years ago, when prices were a small fraction of their current value. Some locked in their gains early, selling parts of their crypto holdings. Others run publicly traded crypto companies and cashed out of their stock or invested in real estate.
By contrast, many amateur traders flooded into the crypto market during the pandemic, when prices had already started soaring. Some poured in their life savings, leaving them vulnerable to a crash. Thousands also flocked to work for crypto companies, thinking it was a ticket to new riches. Now many of them have seen their savings vanish or have lost their jobs.

The fallout from the crypto crash follows the pattern of other financial downturns, said Todd Phillips, director of financial regulation and corporate governance at the Center for American Progress, a liberal think tank.
"No matter what, those with money will end up being fine," he said.
The combined fortunes of the 16 richest crypto billionaires exceeded US$135 billion in March, Forbes estimated. As of this week, the total was about US$76 billion, but most of the loss was suffered by a single billionaire, Zhao Changpeng, CEO of the crypto exchange Binance, whose US$65 billion fortune shrank to US$17.4 billion.

Cameron and Tyler Winklevoss, whose wealth stood at US$4 billion apiece before the crash, were each worth US$3.3 billion this week, according to Forbes.
For retail investors like Ben Thompson, 33, the reality is different. Thompson, who lives in Sydney, lost about US$45,000 - half his savings - in the crash. He had dabbled in crypto since 2018 and planned to use the money to open a brewery.
"A lot of people who seemed quite reputable had a lot of confidence," Mr Thompson said. "The smaller people get taken advantage of."
The uneven effects of the crash are evident even within crypto companies. Coinbase, the largest crypto exchange in the United States, went public in April 2021 when interest in digital currencies was surging. As part of the company's public listing, CEO Brian Armstrong sold nearly US$300 million of stock. In December, he reportedly bought a US$133 million estate in the Los Angeles neighborhood of Bel-Air.
In total, six of Coinbase's top executives have sold shares worth more than US$850 million since April 2021, according to Equilar, which tracks executive compensation. Emilie Choi, the chief operating officer, has reaped about US$235 million, while Surojit Chatterjee, the chief product officer, has sold US$110 million in shares. Coinbase's stock, which peaked at about US$357 in November, now trades at US$51.

Coinbase went public in April 2021 when interest in digital currencies was surging. PHOTO: NYTIMES
This month, as Coinbase grappled with falling prices and declining consumer interest in crypto, it laid off 18 per cent of its staff, or about 1,100 workers. Mr Armstrong said the company had "over-hired."
Coinbase also rescinded hundreds of job offers. Some of those new hires had already quit their previous jobs, or were relying on Coinbase to maintain their work visas.
A Coinbase spokesman declined to comment on the layoffs and the rescinded offers. She said that many of the share sales were part of the direct-listing process and that executives "maintain large positions in the company reflecting their commitment."
Still, unlike Coinbase, the vast majority of crypto companies are privately held, meaning their value is less tied to day-to-day price swings. That has provided executives at some companies a measure of protection.
"My personal net worth probably hasn't been affected too much," said Ivan Soto-Wright, CEO of MoonPay, a US$3.4 billion crypto payments start-up. "We're sitting on a significant cash reserve."

 

[LITTLEREDDOT]

Crypto market-maker Genesis latest to be hit by Three Arrows' woes​

Crypto broker Genesis faces "hundreds of millions" of dollars in potential losses due to exposure to Three Arrows Capital. PHOTO: REUTERS

Claire Huang
Business Correspondent

June 30, 2022

SINGAPORE - The collapse of Singapore-based cryptocurrency hedge fund Three Arrows Capital is dragging crypto broker Genesis Trading into the financial mire as well.
New York-based firm Genesis faces "hundreds of millions" of dollars in potential losses due to exposure to Three Arrows, or 3AC, and crypto financial services provider Babel Finance, CoinDesk noted on Thursday (June 30).
Genesis Trading is owned by Digital Currency Group, the same company behind CoinDesk.
The report comes a day after news that 3AC, one of the major hedge fund players in crypto, was ordered on Monday (June 27) by a British Virgin Islands court to liquidate after creditors sued it for failing to pay its debts.
Founded in 2012 by Mr Zhu Su and Mr Kyle Davies, 3AC is incorporated in the British Virgin Islands.
Teneo Restructuring is reportedly managing the liquidation process.
The plunge in cryptocurrency prices in recent weeks has wiped out billions of dollars in value and sent the total market capitalisation under US$900 billion (S$1.25 trillion) - a threshold that has shocked investors.

Prices fell after the crash of Singapore-based Terraform Labs' algorithmic stablecoin TerraUSD and affiliate token Luna in early May, both of which 3AC was exposed to as a key backer of Terraform.
Investors spooked by surging inflation, rising interest rates and fears over global growth fled the market, which in turn triggered a liquidity crisis that has engulfed big names in the business such as crypto lenders Celsius and BlockFi.
The cascading impact from 3AC is being widely felt.

Crypto broker Voyager Digital issued 3AC with a default notice on Monday after it failed to make payments on a loan of 15,250 Bitcoin (about US$324 million) and US$350 million worth of stablecoin USDC.
Earlier this month, The Financial Times said BlockFi and Genesis had liquidated some of 3AC's positions.
3AC had borrowed from BlockFi but was unable to meet the margin call.

On June 17, Genesis chief executive Michael Moro confirmed that "a large counterparty" had failed to meet a margin call but no client funds were impacted.
Crypto firm Babel, which was valued at US$2 billion in late May, has declined comment.
It suspended withdrawals two weeks ago due to extreme market conditions and liquidity pressures.
Earlier this month, it said it reached preliminary agreements with counterparties on some debt repayments.
Mr Willie Tanoto, financial institutions director at Fitch Ratings Asia-Pacific, said the various crypto players and blockchains have unregulated and leveraged exposures to one another.
"The market value of crypto assets has fallen by some 70 per cent from its peak and the magnitude of such losses means they very likely exceeded typical collateral margins and internal provisions against credit losses that are in place," he added.
Moreover, when there are outsized losses that are compounded with leverage, it is inevitable that losses will need to be borne by not just the primary holders but also by their lenders, depositors and credit counterparties, said Mr Tanoto.
He added that while there could be indirect repercussions - something that could happen for any asset class - conventional markets have more established regulations and better disclosures to better manage risks.

 

[LITTLEREDDOT]

Crypto broker Voyager issues notice of default to Three Arrows​

Three Arrows has failed to make the required payments on its loan of 15,250 Bitcoin and US$350 million USD Coin. PHOTO: REUTERS

JUN 28, 2022

NEW YORK (BLOOMBERG) – Crypto broker Voyager Digital said it has issued a notice of default to Three Arrows Capital, the troubled crypto hedge fund, on a loan worth roughly US$675 million based on Bitcoin's price on Monday (June 27).
Three Arrows has failed to make the required payments on its loan of 15,250 Bitcoin and US$350 million USD Coin, Voyager said in a statement.
The company intends to pursue recovery and is in talks on legal remedies as it weighs options to meet customer demands. It has hired Moelis & Company as its financial adviser in the process.
New York-based Voyager, which offers crypto trading and staking – a way of earning rewards for holding certain cryptocurrencies – and yield products, is among the companies that have taken a hit in the fallout from Three Arrows' liquidity problems.
Earlier this month, Voyager secured credit lines from the investment arm of Alameda Research, the trading firm founded by Mr Sam Bankman-Fried, as concerns about Three Arrows and the crypto sector rattled the market.
Voyager said it has accessed US$75 million of the credit line from Alameda and may further dip into the funds as needed to facilitate customer orders and withdrawals.
"We are working diligently and expeditiously to strengthen our balance sheet and pursuing options so we can continue to meet customer liquidity demands," said Mr Stephen Ehrlich, Voyager's chief executive said in the statement.

Three Arrows' law firm, Solitaire, did not immediately respond to a request for comment while Voyager declined to comment further.
Shares of Voyager, listed on the Toronto Stock Exchange, are down 95 per cent this year.

 

[LITTLEREDDOT]

US FBI adds Bulgarian 'Crypto Queen' to most-wanted list​

Damian Williams, the top federal prosecutor in Manhattan, speaks at a press conference to announce the addition of “Cryptoqueen” Ruja Ignatova to the FBI’s most-wanted fugitives list. PHOTO: REUTERS

Jul 1, 2022

WASHINGTON (AFP) - A Bulgarian woman dubbed the "Crypto Queen" after she raised billions of dollars in a fraudulent virtual currency scheme was placed on the FBI's 10 most-wanted list on Thursday (June 30).
The Federal Bureau of Investigation put up a US$100,000 (S$130,000) reward for Ruja Ignatova, who disappeared in Greece in October 2017 around the time US authorities filed a sealed indictment and warrant for her arrest.
The 42-year-old, who is also a German citizen, was behind one of the most notorious scams in the frequently treacherous world of crypto currencies.
In 2014, she launched OneCoin, ostensibly aiming to replace Bitcoin as the world's leading virtual money.
Tapping a global network to market the coin to friends and family in exchange for their own payouts, she and co-conspirators pulled in at least US$3.4 billion and possibly over US$4 billion, according to court documents.
Officials said that OneCoin was not backed by any secured, independent blockchain-type technology as other crypto currencies are.
Instead, they said, it was a classic Ponzi scheme, in which early investors are encouraged to find others and then paid out by receipts from later investors.

"OneCoin claimed to have a private blockchain," said FBI Special Agent Ronald Shimko in a statement.
"This is in contrast to other virtual currencies, which have a decentralized and public blockchain. In this case, investors were just asked to trust OneCoin," he said.
Ignatova disappeared in 2017 as international investigators began to close in on her group.


"Investigators believe Ignatova may have been tipped off that she was under investigation by US and international authorities," the FBI said on Thursday.
"She travelled from Sofia, Bulgaria, to Athens, Greece, on Oct 25, 2017, and has not been seen since."

An FBI "Most Wanted" poster shows Ruja Ignatova. PHOTO: AFP
On May 11, Europol announced it had added Ignatova to its most wanted list, and offered a €5,000 (S$5,200) reward for information on her whereabouts.
But on Thursday, she was no longer on the list. It was not clear why or when she came off it, and authorities in Europe and the United States have not shown evidence of whether she is alive or dead.
Her brother Konstantin Ignatov was arrested at Los Angeles International Airport in March 2019, and later pleaded guilty to wire fraud in a deal with US authorities.
His sentencing has been delayed for what the Justice Department said in court filings was ongoing cooperation in the investigation.
Another partner, Sebastian Greenwood, was detained in Thailand in 2018 and then extradited to the US, where he remains in jail awaiting trial.
Another accomplice, US attorney Mark Scott, was convicted in November 2019 of laundering US$400 million for the group.