Failed crypto company FTX announced today that its affiliate Alameda Research is suing asset manager Grayscale Investments in a bid to unlock investments that it says are being improperly withheld from its customers.
In a Monday statement, FTX’s new boss John J. Ray III—who is overseeing the bankruptcy process of the collapsed crypto exchange—said Grayscale had an “improper redemption ban” that was stopping customers from getting their money.
FTX went bankrupt in November in a spectacular crash after its team allegedly mismanaged the exchange by commingling funds and making risky bets with customer cash via Alameda.
Hundreds of millions of dollars in client cash is now missing—with a large amount presumed stolen—and its ex-CEO and co-founder Sam Bankman-Fried is facing a long list of criminal charges in American courts.
“FTX customers and creditors will benefit from additional recoveries, along with other Grayscale Trust investors that are being harmed by Grayscale’s actions,” said Ray.
FTX further alleged that in the past two years alone, “Grayscale has extracted over $1.3 billion in exorbitant management fees in violation of the Trust agreements.”
FTX said in Monday’s statement that if Grayscale had reduced those fees and allowed investors to withdraw their cash, then FTX’s shares would be worth nearly 90% more than now—at least $550 million.
FTX debtors are now seeking injunctive relief to unlock $9 billion or more in value for Grayscale shareholders.
FTX customer cash is locked up in Grayscale as they were drawn to its investment vehicle that enables investors to trade shares in trusts holding large pools of Bitcoin or Ethereum.
A Grayscale spokesperson told Decrypt that the lawsuit was “misguided.”
“Grayscale has been transparent in our efforts to obtain regulatory approval to convert GBTC into an ETF [exchange-traded fund]—an outcome that is undoubtedly the best long-term product structure for Grayscale’s investors,” the comment added.
Failed crypto hedge fund Three Arrows Capital (3AC) also found itself in trouble with Grayscale. The firm, which went bankrupt last year, held lots of Grayscale shares. But when its finances started to go pear-shaped, it couldn’t recover the cash.
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At least one metaverse executive hasn’t tired of insisting the digital realm remain open to all.
The Sandbox COO and co-founder Sebastien Borget highlighted how other metaverse firms like Roblox and Fortnite do not allow users to move their digital assets between platforms freely.
“That’s why we still need to say ‘open metaverse’ in opposition to the closed-walled garden platform,” he told Decrypt at this year’s NFT Paris.
The Sandbox, which first launched in 2012, allows users to purchase digital real estate as NFTs called LAND, which can then be customized and monetized in-game.
Ownership of in-game assets is also key. Unlike Web2 games, users should be able to move their creations or purchases from realm to realm and retain their digital property throughout.
“It is essential that users have true digital ownership of that content,” he told Decrypt. “They are the true owners of their avatar, but also their wearables, their equipment, their land, their house, and the content they create and earn as they engage.”
The COO told Decrypt that creators should get up to “95% or 100% of the revenue they bring and they generate as they contribute to the development.”
The Sandbox metaverse concert
The Sandbox is also set to host its first concert later this year. Borget was tight-lipped, revealing only that the project has been “in the works” for quite some time.
The Ethereum-based metaverse platform has already formed several relevant partnerships in the music industry.
Major label Warner Music Group—the record label hosting artists such as Cardi B, Ed Sheeran, and the Red Hot Chili Peppers—opened a virtual outpost in The Sandbox in January 2022. The space was earmarked for use as a metaverse concert venue and amusement park.
The move would again put Sandbox in competition with rivals such as Roblox and Decentraland.
Roblox recently partnered with the NFL to host a virtual Super Bowl concert, featuring a vocal performance and motion-captured movements from hip-hop artist Saweetie.
Decentraland rolled out the Metaverse festival as far back as July 2021, during the height of pandemic social distancing regulations.
The festival, hosted at KnownOrigin’s virtual headquarters within Decentraland, featured performances by electronic music artists such as Ookay, SNBRN, Fred Thurst (aka Dr. Fresch), Autograf, and Win and Woo.
The famous author of the best-selling book Rich Dad Poor Dad, Robert Kiyosaki, says the world economy is on the verge of collapse. He warned investors about the risks of bank runs, frozen savings, and bail-ins that may come next.
Robert Kiyosaki on Collapsing World Economy
The author of Rich Dad Poor Dad, Robert Kiyosaki, is back with more gloomy warnings about the world economy. Rich Dad Poor Dad is a 1997 book co-authored by Kiyosaki and Sharon Lechter. It has been on the New York Times Best Seller List for over six years. More than 32 million copies of the book have been sold in over 51 languages across more than 109 countries.
Kiyosaki said on Tuesday that the world economy is on the verge of collapse, warning of several risks that could hurt investors. He tweeted:
World economy on verge of collapse. Runs on banks next? Savings frozen? Bail-ins next?
He then urged investors to buy silver. “You can buy a real silver coin for about $25,” he noted, adding that he doesn’t make any money when people follow his advice and buy silver coins. The renowned author emphasized:
I simply want you prepared for what is coming.
In times of financial crisis, depositors may panic and withdraw their money all at once, which can cause a bank run and lead to frozen savings accounts. In addition, if a bank faces the issue of insolvency, it may impose a bail-in, where the bank uses depositors’ funds to keep itself afloat. All of this could hurt investors financially.
Kiyosaki often said he does not trust the Biden administration, the Federal Reserve, the Treasury, and Wall Street. He previously warned that the Fed’s action could destroy the U.S. economy and the dollar.
The Rich Dad Poor Dad author has also raised concerns many times about upcoming market crashes. He recently warned against investing in stocks, bonds, mutual funds, and exchange-traded funds (ETFs), noting that bitcoin, gold, and silver are the best investments for unstable times. He called gold and silver God’s money while bitcoin is “people’s money.”
Kiyosaki predicted that by 2025, bitcoin’s price will be $500,000 while gold will rise to $5,000 and silver will soar to $500. This year, he expects the price of gold to reach $3,800 and silver to hit $75. He said the holders of gold, silver, and BTC will get richer when the Fed pivots and prints trillions of dollars. In January, he said that we are in a global recession, warning of soaring bankruptcies, unemployment, and homelessness.
What do you think about Rich Dad Poor Dad author Robert Kiyosaki’s warnings? Let us know in the comments section below.
Kevin Helms
A student of Austrian Economics, Kevin found Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open-source systems, network effects, and the intersection between economics and cryptography.
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Many market observers expected a surge in the use of decentralized exchanges following the collapse of FTX, but analysts said many DEXs offer a less user-friendly experience than centralized ones.
Cryptocurrency exchange Coinbase’s trading volume has surpassed the popular decentralized exchange platform Uniswap’s this year, according to a report from crypto data firm Kaiko.
As of Friday, trading volumes for Coinbase had reached more than $185 billion, nearly double the $93 billion on Uniswap, Kaiko said. At one point in 2022, the exchanges’ respective volumes were nearly equal.
Following last year’s collapse of the FTX exchange and other centralized entities in the crypto ecosystem, market watchers anticipated seeing more traders pivot to decentralized exchanges (DEX), and at one point in 2022 that shift seemed to be occurring. But DEXs have presented challenges for users.
Data from analytics platform DefiLlama showed that November trading volumes on decentralized platforms surged to $113 billion, their highest monthly level since May, but they now seem unlikely to surpass $100 million this month, based on daily volumes.
Conor Ryder, research analyst at Kaiko, said the calls for a transition to DEXs look “a bit premature” as centralized exchanges (CEX) still serve a critical role in onboarding the average investor.
“Presumably the average investor has still been put off by the worse user experience on some of these DEXs, compared to the more straightforward experience on CEXs,” Ryder told CoinDesk in a direct message on Twitter. “I think CEXs will always be an essential part of the exchange landscape, whether we like it or not.”
Lucas Outumuro, head of research at blockchain analytics firm IntoTheBlock, said the initial spike in demand for noncustodial trading and decentralized finance (DeFi) at large after the meltdown of FTX has “waned out.” Outumuro highlighted that the daily number of new Ethereum addresses along with trading volume remained small on DeFi exchanges.
According to data from IntoTheBlock, the daily number of newly created Ethereum addresses reached some 228,000 on Nov. 24, their highest level since May 2021, but has retreated to less than 90,000 daily.
The chart shows the daily number of newly created Ethereum addresses retreated to less than 90,000 daily. (IntoTheBlock)
“Getting onboard into Coinbase is much more similar to what people are used to with other tech or finance platforms, whereas getting into Uniswap is a completely different flow,” Outumuro told CoinDesk in a Telegram message. “This makes adoption take a little longer as new users may feel intimidated.”
JPMorgan strategists wrote in a note in November that slower transaction speeds, pooling of assets, and order-traceability features are likely to limit institutional participation. The analysts noted the absence of a limit order/stop loss feature on DEXs, their dependency on price oracles that source data from centralized exchanges, vulnerability to hacks, and exploits, the need for over-collateralization and systemic risks from the cascade of automated liquidations as hindrances to widespread adoption.
“While there has been some increase in the share of DEX in overall crypto trading activity in recent weeks, this is more likely to reflect the collapse in crypto prices and the deleveraging/automatic liquidations that followed the FTX collapse,” the authors wrote.
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Axelar, the blockchain network that helps developers build cross-chain crypto apps, is expanding its product suite with the introduction of Axelar Virtual Machine (VM) – a generalized environment for building interconnected blockchains.
“Axelar Virtual Machine will allow developers to build their dApps (decentralized apps) once – whether on EVM, Cairo VM, Cosmos or another ecosystem – and run them on all chains,” Axelar said in a statement.
Most blockchains today are walled gardens; apps built on one chain typically lack access to data or services on another. Different blockchains can use different programming languages, and operating across chains generally means using headache-inducing infrastructure like bridges and oracles.
Axelar describes itself as “Stripe for Web3” – just as Stripe provides a one-stop-shop for Web2 developers to bake virtually any banking institution into their apps, Axelar aims to help Web3 developers integrate seamlessly across different chains.
Axelar’s main product offering is a network that was purpose-built to communicate with a growing set of different blockchains. The Axelar network and its accompanying application programming interface (API) help developers build crypto apps that work with assets on all of these chains.
But building cross-chain crypto apps remains complex – each time a developer deploys on a new chain they need to run through a lengthy set-up process and re-tool their code for chain-specific quirks. By Axelar CEO Sergey Gorbunov’s estimate, cross-chain developers spend “70% of their time” prepping their code to deploy on new chains “versus actually coding the application logic.”
“We kind of took a step back and said, ‘OK, how can we simplify all of these issues for the ecosystem?’” Gorbunov told CoinDesk. “This is where the idea of creating an excellent virtual machine – an interoperability layer – came about.”
The Axelar Virtual Machine
A virtual machine is like a software version of a physical computer – it is a place to build applications that read and write data in a shared space. (The Ethereum Virtual Machine, for instance, hosts programs – called smart contracts – that can alter the state of the Ethereum ledger.)
Axelar says its new VM will extend upon the protocol’s cross-chain mission by providing a framework for building blockchains that – like the Axelar network – can natively swap assets and messages between one another. Blockchains connected to Axelar’s new VM will be able to talk to one another, and app builders that develop VM-compatible apps will be able to deploy their software onto VM-compatible chains.
Taking the Stripe analogy a step further, Gorbunov describes the new Axelar VM as a Web3 version of Google’s Kubernetes – a popular toolkit that provides building blocks for developers to spin up and scale web apps.
“Kubernetes allows you to program how you want to deploy your application in the Web2 world. Like what are the regions where it needs to be deployed? What are the application servers? What are the databases behind it?” Gorbunov explained. “Similarly, using the [Axelar] virtual machine, we can let [Web3] developers specify their deployment configurations and then upload their code. And then with one transaction, that code will get pushed to all the chains interconnected through the Axelar protocol.”
Over the next six months as Axelar begins to roll out its VM, Gorbunov says his team will be “working with app developers and protocol developers to build templates” that will allow developers to roll out their apps with certain deployment conditions pre-configured.
Axelar’s most recent fundraising round valued the company at over $1 billion. According to Axelarscan, a tool that tracks Axelar network activity, the protocol is currently connected to 32 different chains – including Ethereum, Polygon, Avalanche, and Arbitrum – and has processed $86 million in asset transfers over the past 30 days.
UPDATE (Feb 28, 00:17 UTC): Changes language in the ninth paragraph to more accurately reflect that blockchains “connect” to the VM (Axelar’s VM is not a toolkit for building brand new blockchains).
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The global financial crime watchdog’s plenary, made up of 206 members including observer organizations like the UN, also agreed to take stock of what jurisdictions have been doing so far.
The Financial Action Task Force has agreed on an action plan to drive the “timely implementation” of its global standards for crypto, a report from its recent plenary meeting shows. “The Hash” panel discusses the potential outcomes for crypto regulation across the world.
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The Financial Action Task Force has agreed on an action plan to drive the “timely implementation” of its global standards for crypto, a report from its recent plenary meeting shows.
The plenary for the global money-laundering and financial crimes watchdog is made up of 206 members, including observer organizations such as the International Monetary Fund, United Nations, and Egmont Group of Financial Intelligence Units.
In Friday’s document, the watchdog noted that many countries have failed to implement its norms, including its controversial “travel rule,” which requires services providers to collect and share information on crypto transactions.
“The plenary thus agreed on a road map to strengthen implementation of FATF standards on virtual assets and virtual asset service providers, which will include a stocktake of current levels of implementation across the global network,” the FATF said, adding that a report on its findings is due in the first half of 2024.
FATF published its updated standards for crypto in 2019, but last June, it said only 11 of 98 surveyed jurisdictions were enforcing the travel rule and urged them to act faster.
The report also noted that strong crypto regulation is key to disrupting financial flows from ransomware exploits, adding that “criminals responsible are getting away undetected with large amounts of money, predominantly using virtual assets.”
In its country-specific recommendations – mostly addressing sanctions compliance – the FATF said Jordan “should continue to work on implementing its action plan to address its strategic deficiencies” for assessing money-laundering risks involving crypto.
Read more: Few Crypto Firms Even Trying to Comply With FATF’s ‘Travel Rule’
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Camomile Shumba is a CoinDesk regulatory reporter based in the UK. She previously worked as an intern for Business Insider and Bloomberg News. She does not currently hold value in any digital currencies or projects.
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Software engineers and members of the development lab Ripplex want to create a cross-chain bridge for the XRPL network to bolster cross-chain transfers between different blockchain networks. According to a recent GitHub draft, the proposal outlines how the cross-chain bridge could function and suggests ways to prevent transaction replay.
Ripplex Dev Proposes XRPL Cross-Chain Bridge Technology
According to a recent draft submitted to Github, developers want to create a cross-chain bridge for the XRP Ledger (XRPL). The technology would allow cross-chain transfers and provide blockchain interoperability between XRPL and various networks. “In this proposal, a cross-chain transfer is not a single transaction,” the GitHub draft details. “It occurs on two chains, requires multiple transactions, and involves an additional server type called a ‘witness.’”
If a cross-chain bridge is implemented for XRPL, the blockchain will join numerous networks that leverage this technology, including Ethereum, Avalanche, Solana, Binance Smart Chain, and others. The proposed design by XRPL developers includes a new server type, three new ledger objects, and eight new transactions. The summary also describes a method to “prevent the same assets from being wrapped multiple times (prevent transaction replay).” Mayukha Vadari, a software engineer and Ripplex developer, shared the proposal on social media.
“We just published an official XRPL Standards spec for cross-chain bridges,” Vadari said. “Check it out and let me know if you have any thoughts.”
The cross-chain idea follows the push to create an Ethereum Virtual Machine (EVM) sidechain in October that is compatible with the XRP Ledger and Ripple transaction protocol (RTXP). Currently, XRP, XRPL’s native cryptocurrency, is the sixth-largest digital currency by market capitalization. However, over the last seven days, it has lost 7.7% against the U.S. dollar.
Ripple Labs is also dealing with a legal battle with the U.S. Securities and Exchange Commission (SEC), and some suspect a settlement between the two parties is possible. XRP, a token issued in 2012, has been accused of being unregistered security by the SEC. The U.S. regulator charged Ripple Labs in 2020, accusing the firm and executives of selling unregistered security without permission from the SEC.
What are your thoughts on the potential impact of a cross-chain bridge for the XRPL network and the wider blockchain ecosystem? Share your thoughts in the comments section below.
Jamie Redman
Jamie Redman is the News Lead at Bitcoin.com News and a financial tech journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for Bitcoin, open-source code, and decentralized applications. Since September 2015, Redman has written more than 6,000 articles for cryptoflings.com News about the disruptive protocols emerging today.
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The Federal Trade Commission has objected to crypto broker Voyager Digital’s third attempt at a bankruptcy restructuring plan, saying it would unlawfully bar the company from being held accountable for “actual fraud, willful misconduct, or gross negligence.”
If the judge confirms the plan as it’s currently written, the FTC could technically be stopped from pursuing legal action or issuing fines against Voyager and its former employees. FTC attorney Katherine Johnson called the plan a “disguised discharge.”
In a court document filed Wednesday morning, Johnson wrote that the FTC has been investigating Voyager Digital “for their deceptive and unfair marketing of cryptocurrency to the public.”
Bankruptcy Judge Michael Wiles conditionally approved Voyager’s restructuring plan on January 13 and scheduled a hearing to confirm it next Thursday, on March 2, in Manhattan. Voyager Digital, which filed for Chapter 11 bankruptcy protection on July 6, filed its first restructuring plan in August, its second in October, and a third plan in December.
FTC bristles with new Voyager plan
It’s wording in a revision that Voyager’s legal team filed in January that the FTC takes issue with.
The plan estimates Voyager customers and creditors will see, at most, a 51% recovery of their assets.
It also specifies that any person or entity who has a legal claim against Voyager that predates confirmation of its restructuring plan “shall be precluded and permanently enjoined on and after the Effective Date from interfering with the use and distribution of the Debtors’ assets in the manner contemplated by the Plan.”
Voyager creditors have been through a roller coaster of a bankruptcy process so far.
The company was hit hard by the collapse of the crypto hedge fund Three Arrows Capital, or 3AC. It filed a default notice for 3AC’s outstanding loans, which totaled $673 million at the time, on June 27. Days later, Voyager filed for bankruptcy and began its restructuring process.
In August, Judge Wiles approved a motion for Voyager to return $270 million to clients. But that left more than $1 billion worth of assets left to be distributed among creditors.
By September, Voyager announced that Sam Bankman-Fried’s trading desk, Alameda Research, had acquired its distressed assets. But when FTX itself collapsed in November, Alameda went down with it and Voyager had to scrap that plan.
After reopening the bidding process, Voyager announced an agreement for Binance US, the U.S.-based arm of Binance, to acquire its distressed assets. The company even went so far as creating Binance US accounts for its U.S.-based clients—if they live in states where Binance US is allowed to operate. Customers who live in Hawaii, New York, Texas, and Vermont could have to wait up to six months longer than the rest.
Now it remains to be seen whether Voyager will have to submit a new or revised plan ahead of the March 2 hearing.
Solana Spaces, a company that used storefronts in New York City and Miami to pitch adoption of its namesake blockchain, said in a tweet Tuesday it will close its locations by the end of the month.
The startup reached “an inflection point” in the past two months and will pivot away from brick-and-mortar experiences and into non-fungible tokens (NFT), CEO Vibhu Norby said in the tweet. He indicated Solana Spaces will rebrand itself as DRiP, a boutique NFT distribution platform created by Norby, which he also promoted in his stores.
The closure comes seven months after Norby opened Solana Spaces’ first location in a glitzy mall in New York City’s Hudson Yards. Its staffers guided visitors through interactive stations that taught them how to get going on Solana, from setting up a crypto wallet to swapping tokens on a decentralized exchange. Norby later set up a second shop in Miami.
Some 60,000 total visitors came to the stores over six months and they completed 16,000 onboarding tutorials, according to a spokesperson for the Solana Foundation, which gave Norby a grant to help Solana Spaces launch. The spokesperson said the Foundation had no financial stake in the company.
Rather than selling a product, Solana Spaces pitched its storefront as an interactive billboard for crypto brands like FTX, Phantom, and Orca that paid for exposure to mainstream audiences. Their advertising dollars paid for Solana Spaces operations; when the FTX exchange imploded it shook the company, but Norby insisted Solana Spaces could still sustain itself using his so-called “retail-as-a-service” (RaaS) model.
Just over a year ago, Norby’s first attempt at RaaS, the tech gadget-focused store b8ta, closed its doors after failing to reach a deal with its landlords. Solana Spaces’ New York location inhabited a former b8ta storefront.
Norby said he closed Solana Spaces’ brick-and-mortar operations because the behind-the-scenes administrative operations proved too burdensome and the potential for growth was too small.
“It’s a little less about the economics and more about where I thought this was going in the future,” Norby said.
The company will continue building DRiP, the NFT distribution platform Norby said attracted tens of thousands of signups during Solana Spaces’ in-person run.
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Ryan Wyatt has quickly become a prominent figure in the crypto space since joining Polygon Labs early last year—but he’s arguably better known for his past in gaming and esports.
Under the gamer tag Fwiz, Wyatt was a fixture in the early Call of Duty esports scene, working as a commentator and later VP of Programming for Major League Gaming. He even co-wrote a bestselling book about the popular esports team OpTic Gaming. He then launched and grew YouTube Gaming from 2014 to 2022 as the company’s Global Head of Gaming.
Given his prominence in the gaming world, what ultimately pulled him into crypto? On the latest episode of Decrypt’s gm podcast, Wyatt said he “really got into just simply the idea of digital ownership, this idea that we’re going to keep spending more money on digital items.” He recognized, he said, that people “want more autonomy and ownership” over their digital items as both spending and affinity grow—and that blockchain enables that.
“I was immediately sold, right? I think there’s an infinite amount of things that can be done in the space on this,” he said. “And that’s what made me jump in with such conviction.”
Wyatt, who joined Polygon Studios as CEO in February 2022 and recently shifted into the president role at the rebranded Polygon Labs, said that he’s come to understand why some people are “very spirited” about the economic angle of cryptocurrency. But for him, embracing Web3 was all about seeing the potential future impact of true digital ownership.
The prospective benefits for gamers are obvious, even if some video game fans have vocally rejected NFTs. Gamers already shell out for digital items in games like Fortnite and Call of Duty that they can’t resell or use in other games and worlds. Blockchain-based games can potentially give players that level of control with broader advantages.
Interestingly, Wyatt said he chose Polygon Labs above other potential opportunities due to the ability to work with creators and builders across a wide array of verticals. He helped grow the creator economy at YouTube and now wants to do the same for Web3 creators without being solely tethered to the gaming space.
“I wanted to expand outside of gaming, and see how all of this world is very interconnected,” he said. “That part, I felt pretty strongly about.” He added that while rival layer-1 platforms like Solana and Avalanche were certainly gaining steam, the Ethereum space already had established users and developers.
Wyatt also “loved” that the founders of Polygon—an Ethereumethe scaling network that enables faster and cheaper transactions than mainnet—acquired and integrated ZK scaling projects in 2021, signaling long-term ambitions. Furthermore, Wyatt believed he could help elevate Polygon by bringing his experience from the Web2 world.
“I also felt that where I could add value is helping with scaling, and helping add some of the non-Web3-native elements into Polygon to make it more multifaceted,” he said. “And so I just really clicked with Sandeep [Nailwal, Polygon co-founder] and the team because it felt like we were very complementary of each other’s skill sets and weaknesses.”
Earlier in his career, Wyatt wrote in his OpTic Gaming book that he hoped to lead a company someday. Now he’s doing it, albeit in a very different industry. And he thinks the next huge tech giant or luminary will come from this industry.
“I have no doubt,” he said, “even going as far as like, is the next Amazon already out there? Or that person—is Jeff Bezos out there? The next Jeff Bezos is out of Web3. Watch out. He’s coming. Hopefully, he’s building on Polygon.”
Listen andsubscribe to the gm podcast wherever you get your podcast.
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