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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!
Silvergate floodgates open
Coinbase settles anti-money laundering violations
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?
"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
2. Blockworks
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