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Silvergate floodgates open

WHAT’S MOVING CRYPTO
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Aakash Athawasya
Tryna write some stuff @doodhwaladaily (will buy you milk if you ask nicely)
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Silvergate floodgates open

WHAT'S MOVING CRYPTO

Happy Friday Everyone! đź‘‹

Welcome to the +111 new subscribers who have joined this week. If you’re reading this but haven’t subscribed, join our community of +11.9k smart, fun & edgy investors 👇

Crypto prices have had a nice start to the year but below the surface, trouble keeps brewing.

Bitcoin miners continue dealing with headwinds from all angles, including lawsuits, resignations, and bankruptcy.

On the other hand, the network's high hash rate remains a source of confidence for the market.

Meanwhile, crypto titans Cameron Winklevoss (Gemini) and Barry Silbert (Digital Currency Group) are exchanging jabs amidst each of their firms' respective tailspins.

Having said that…let’s get to it!

  1. Silvergate floodgates open

  2. Coinbase settles anti-money laundering violations

  3. Who is SBF kidding?

1. Silvergate floodgates open

In a Twitter thread at the end of November, I flagged several warning signs at Silvergate suggesting the bank was quickly headed into a tailspin.

This week, news broke of an $8.1 billion run on the bank last quarter which dragged deposits down from $11.9 billion to $3.9 billion–all in just 3 months.

While Silvergate's CEO assures us the bank has enough cash to cover deposits (sounds familiar), a reported $150 million of its remaining assets are held by customers who went bankrupt thanks to over-leverage bets and a price-go-up attitude.

That doesn't exactly inspire confidence. Shares of dropped more than 40% yesterday.

Despite downplaying its FTX exposure in November, it turns out FTX was a major Silvergate customer holding nearly 10% of its deposits in the bank.

2. Coinbase settles anti-money laundering violations

A New York regulator has determined that Coinbase () violated anti-money laundering laws in 2018 and 2019 after it failed to perform complete background checks on customers opening accounts on its platform.

The result of the exchange's oversights was a slew of charged criminals slipping through the "serious deficiencies" in the firm's compliance practices to access its services to conduct illicit activities.

While the $100 million fine Coinbase was handed this week is a proverbial drop in the bucket relative to the cash on its balance sheet, it's still good for the largest crypto settlement since BlockFi in February 2021.

One half, or $50 million, will go towards the settlement while the other will be required to be invested towards addressing its compliance deficiencies over the next 2 years.

3. Who is SBF kidding?

Cartoon of the Day: Sam Bankman-FRAUD

"a regretful acknowledgment of an offense or failure"

– apology

Despite Sam Bankman-Fried's (SBF) red carpet apology tour (thanks NYT!), the disgraced former FTX CEO has pleaded guilty to 8 criminal charges.

The plea all but guarantees a lengthy trial (4+ weeks) and buys SBF more time to gain knowledge on what evidence the prosecution has against him so he can plan accordingly.

His lawyers also requested that the identity of the two people required by law to secure his bail be kept confidential, saying the public had no reason to know who they are.

The request was granted.

The trial has been set for October 2.

Mark your calendars.

What else we Grittin’ On?

MINERS. Bitcoin miners can't catch a break. But hashrate remains a positive indicator.

JURISDICTION. US and Bahamian liquidators are disputing over who has FTX jurisdiction. Central to the debate is who gets accessed to FTX's internal systems, like Slack.

WYRE. Crypto payment firm Wyre is shuttering its business. The company was once valued at $1.5 billion.

WATCHDOGS. Regulators in the US issued joint warnings to crypto lenders on risky activities. The statement was issued by both the FDIC and OCC.

SOURCES*
1. WSJ

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Disclaimer:The publisher does not guarantee the accuracy or completeness of the information provided in this page.  All statements and expressions herein are the sole opinion of the author or paid advertiser.

Grit Capital Corporation is a publisher of financial information, not an investment advisor.  We do not provide personalized or individualized investment advice or information that is tailored to the needs of any particular recipient.  

THE INFORMATION CONTAINED ON THIS WEBSITE IS NOT AND SHOULD NOT BE CONSTRUED AS INVESTMENT ADVICE, AND DOES NOT PURPORT TO BE AND DOES NOT EXPRESS ANY OPINION AS TO THE PRICE AT WHICH THE SECURITIES OF ANY COMPANY MAY TRADE AT ANY TIME.  THE INFORMATION AND OPINIONS PROVIDED HEREIN SHOULD NOT BE TAKEN AS SPECIFIC ADVICE ON THE MERITS OF ANY INVESTMENT DECISION.  INVESTORS SHOULD MAKE THEIR OWN INVESTIGATION AND DECISIONS REGARDING THE PROSPECTS OF ANY COMPANY DISCUSSED HEREIN BASED ON SUCH INVESTORS’ OWN REVIEW OF PUBLICLY AVAILABLE INFORMATION AND SHOULD NOT RELY ON THE INFORMATION CONTAINED HEREIN.

No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned.  

Any projections, market outlooks or estimates herein are forward looking statements and are inherently unreliable.  They are based upon certain assumptions and should not be construed to be indicative of the actual events that will occur.  Other events that were not taken into account may occur and may significantly affect the returns or performance of the securities discussed herein.  The information provided herein is based on matters as they exist as of the date of preparation and not as of any future date, and the publisher undertakes no obligation to correct, update or revise the information in this document or to otherwise provide any additional material.

The publisher, its affiliates, and clients of the a publisher or its affiliates may currently have long or short positions in the securities of the companies mentioned herein, or may have such a position in the future (and therefore may profit from fluctuations in the trading price of the securities).  To the extent such persons do have such positions, there is no guarantee that such persons will maintain such positions.

Neither the publisher nor any of its affiliates accepts any liability whatsoever for any direct or consequential loss howsoever arising, directly or indirectly, from any use of the information contained herein.

By using the Site or any affiliated social media account, you are indicating your consent and agreement to this disclaimer and our terms of use. Unauthorized reproduction of this newsletter or its contents by photocopy, facsimile or any other means is illegal and punishable by law.

For Full Terms of Use Click HERE. For the Privacy Policy Click HERE.

Gritcapital.substack.com (“Grit”) is a website owned and operated by Substack. Grit is paid fees by the companies that make investment offerings on this website. Be aware that payment of these fees may put Grit in a conflict of interest with the investor. By accessing this website or any page thereof, you agree to be bound by the Terms of Use and Privacy Policy, in effect at the time you access this website or any page thereof. The Terms of Use and Privacy Policy may be amended from time to time. Nothing on this website shall constitute an offer to sell, or a solicitation of an offer to buy or subscribe for, any securities to any person in any jurisdiction where such an offer or solicitation is against the law or to anyone to whom it is unlawful to make such offer or solicitation. Grit is not an underwriter, broker-dealer, Title III crowdfunding portal or a valuation service and does not engage in any activities requiring any such registration. Grit does not provide advice on investments or structure transactions. Offerings made under Regulation A under the U.S. Securities Act of 1933, as amended (the “Securities Act”) are available to U.S. investors who are “accredited investors” as defined by Rule 501 of Regulation D under the Securities Act well as non-accredited investors, who are subject to certain investment limitations as set forth in Regulation A under the Securities Act. In order to invest in Regulation A offerings, investors may be asked to fill out a certification and provide necessary documentation as proof of your income and/or net worth to verify that you are qualified to invest in offerings posted on this website. All securities listed on this site are being offered by, and all information included on this site is the responsibility of, the applicable issuer of such securities. Grit does not verify the adequacy, accuracy or completeness of any information. Neither Grit nor any of its officers, directors, agents and employees makes any warranty, express or implied, of any kind whatsoever related to the adequacy, accuracy, valuations of securities or completeness of any information on this site or the use of information on this site. Neither Grit nor any of its directors, officers, employees, representatives, affiliates or agents shall have any liability whatsoever arising from any error or incompleteness of fact, or lack of care in the preparation of, any of the materials posted on this website. Investing in securities, especially those issued by start-up companies, involves substantial risk. investors should be able to bear the loss of their entire investment and should make their own determination of whether or not to make any investment based on their own independent evaluation and analysis.