Day: November 17, 2022

Ripple to consider deals for FTX assets: Brad Garlinghouse

 

Ripple CEO Brad Garlinghouse is reportedly interested in buying certain parts of collapsed crypto exchange FTX.

On the sidelines of Ripple’s Swell conference in London — was held on Nov. 16 and 17 — Garlinghouse told The Sunday Times that former FTX CEO Sam Bankman-Fried called him two days before the company filed for bankruptcy as he sought to round up investors to rescue the business.

The Ripple CEO said that during the call, the two discussed if there were FTX-owned businesses that Ripple “would want to own.”

“Part of my conversation was if he needs liquidity, maybe there’s businesses that he has bought or he has that we would want to own […] Would we have bought some of those from him? I definitely think that was on the table,” he said.

However, Garlinghouse admits that now that FTX has filed for Chapter 11 bankruptcy in the United States, a potential transaction for an FTX business will be “very different than it would have been one-to-one.”

“I’m not saying we won’t look at those things – I’m sure we will. But it’s a harder path to transact,” he added.

Approximately 130 companies affiliated with FTX, including FTX.US, were included in the bankruptcy filing in Delaware.

Some subsidiaries not included in the proceedings include crypto clearinghouse LedgerX, FTX Digital Markets, FTX Australia Pty, and payments processor FTX Express Pay.

Garlinghouse said he would be interested in buying the parts that served business customers.

Cointelegraph has reached out to Ripple for additional comment but has not received a response by the time of publication.

Related: Sam Bankman-Fried updates investors: ‘We got overconfident and careless,’ claims $13B leverage

It appears that Ripple’s executives, like many in the industry, are following the latest developments of the FTX saga.

On Nov. 10, Ripple chief technology officer David Schwartz directed a message on Twitter toward employees of FTX, suggesting that there would be room at Ripple for them, so long as they aren’t involved in compliance, finance or business ethics.”

FTX has recently appointed restructuring administration firm Kroll as its agent to track all claims against FTX and ensure interested parties are notified of developments throughout its Chapter 11 bankruptcy case.

 

FTX collapse won’t impact everyday use of crypto in Brazil: Transfero CEO

 

The crumbling of the FTX crypto empire may have damaged Brazilian retail and institutional sentiment toward crypto. However, its impact won’t affect everyday citizens — who will still use crypto for cross-border transactions.

Reflecting on the recent fall of FTX, Thiago César, the CEO of fiat on-ramp provider Transfero Group said that the exchange’s fall, like in many countries around the world, has hurt confidence around centralized crypto exchanges and crypto in general. 

Transfero Group is tied in closely with the Brazilian crypto ecosystem and FTX as it was the fiat on-and-off-ramp provider for the exchange and is also the issuer of Brazilian Stablecoin BRZ, which was listed on the now-defunct exchange.

César told Cointelegraph that the collapse of the exchange had removed a “big liquidity source” from the market, as FTX was ranked within the top three in terms of trading volume. 

He also noted that uncertainty surrounding centralized crypto exchanges caused a “big outflow of funds” from exchanges in Brazil, with many looking into self-custody — estimating at least 20% of trading volume has been lost on exchanges so far.

“A lot of people are trying to even liquidate whatever positions they have in crypto and we just hold money in the bank account.”

César noted the FTX saga will make crypto investment a “harder sell” for new investors and traders.

“For the crypto investor/trader of course. It’s a harder sell now. If you go to a person who is not crypto savvy and you try to convince him to invest, especially in Brazil — the population has always been very skeptical of crypto. Now it’s harder,” he said. 

However, he notes that for people that use crypto as a means for cross-border payments or the “internationalization of money,” there will unlikely be any impact from the FTX collapse.

“A lot of the crypto volume in Brazil derives from players that are willing to exchange their local currency into an internationally liquid asset denominated in dollars. So in that sense, the market will not die down because crypto is just rails for that.”

In October, a report from Chainalysis found that remittance payments and battling inflation were two of the most significant drivers of crypto adoption in Latin America.

Related: Brazilian SEC seeks to change its role in cryptocurrency regulation

César said the FTX collapse will likely be used by local exchanges “as a lobbying tool” to push for regulations aimed at bringing international exchanges in line.

César added that these crypto exchanges had been pushing for regulation in Brazil that would “segregate” local and international exchanges by taking away international exchange’s access to their global liquidity books.

“They were proposing that regulation would enforce for example, that liquidity on the books in Brazilian reais be segregated from international books.”

César explained that such regulation would hurt international exchanges as their main advantage comes from liquid, international global books.

In a Nov. 18 report from Reuters, Roberto Dagnoni, the executive chairman and CEO of Mercado Bitcoin said crypto laws in Brazil have been “kind of dormant” during the election period but now needed priority.

“The rules that currently exist have not been applicable to some players, so they can do whatever you want,” he said.

South Korea Freezes $104 Million in Assets Belonging to Terra Co-Founder – Bitcoin News

 

 

South Korea’s prosecutors have reportedly obtained a court order to freeze assets worth about $104 million belonging to Terraform Labs co-founder Daniel Shin. The authorities allege that he unfairly profited from selling cryptocurrency LUNA at high prices before the token crashed. Shin has denied the allegation.

South Korean Authorities Freeze Terraform Labs Co-Founder’s Assets

The Seoul Southern District Court reportedly approved local prosecutors’ request Thursday to freeze about 140 billion won ($104 million) in assets belonging to Terraform Labs co-founder Shin Hyun-seung, aka Daniel Shin. The pre-indictment freeze order is a precautionary measure to prevent a suspect from disposing of criminal proceeds before a trial.

The prosecutors have accused the Terra co-founder of making “unfair” profits of about 140 billion Korean won by selling pre-issued cryptocurrency LUNA, now known as luna classic (LUNC), without proper disclosure to investors. However, Shin reportedly told the prosecutors Thursday that he did not sell the crypto at its peak price before the token crashed.

Hwang Suk-jin, professor of information security at Dongguk University and a regular speaker on crypto policy at South Korea’s National Assembly, was quoted by Forkast as saying:

It’s a problem with pre-mining. It’s because they did not make proper disclosure in issuing the tokens.

The professor added that for example, if investors “thought 1,000 tokens have been issued and in fact 10,000 have been issued, investors inevitably suffer losses.”

Shin and Chai corp., a local payments tech company he founded, are currently under investigation for allegedly using customer information without consent in launching Chai’s Terra payment services. The payments company was reportedly raided by local authorities on Thursday.

South Korean prosecutors have also been investigating the collapse of LUNA since May and have issued an arrest warrant for Kwon Do-Hyung, aka Do Kwon, who co-founded Terraform Labs with Shin. Interpol has also issued a Red Notice for him. Last month, South Korean authorities said they have frozen crypto assets belonging to Kwon. However, Kwon denied that the frozen coins were his.

 

FTX is done — What’s next for Bitcoin, altcoins and crypto in general?

 

2022 was a tough year for crypto, and November was especially hard on investors and traders alike. 

While it was incredibly painful for many, FTX’s blowup and the ensuing contagion that threatens to pull other centralized crypto exchanges down with it could be positive over the long run.

Allow me to explain.

What people learned, albeit in the hardest way possible, is that exchanges were running fractional reserve-like banks to fund their own speculative, leveraged investments in exchange for providing users with a “guaranteed” yield.

Somewhere across the crypto Twitterverse, the phrase “If you don’t know where the yield comes from, you are the yield!” is floating around.

This was true for decentralized finance (DeFi), and it’s proven true for centralized crypto exchanges and platforms, too.

Who would have known that a few ill-timed bank runs would pull down the entire house of cards by proving that while exchanges appear to have high revenue and tons of tokens on their books, many are completely unable to meet user withdrawal requests?

They took your coins and collateralized them to fund highly speculative bets.

They locked your coins in centralized DeFi platforms to earn yield, some of which they promised to share with you.

They placed user funds, along with their own reserves, into illiquid assets that were hard to convert into stablecoins, Bitcoin (BTC) and Ether (ETH) when clients and platform users wanted to access their funds.

Not your keys, not your coins.

Never has the phrase rang truer.

Let’s explore a few things that are happening in the crypto market this week.

Investors withdrew a record number of coins from exchanges to self-custody

As Cointelegraph reported earlier this week, crypto investors panic-withdrew record amounts of Bitcoin, Ether and stablecoins from exchanges.

Separate reporting cited a sharp uptick in hardware wallet sales as investors realized the importance of self-custodying their portfolios.

If the number of insolvencies and “temporarily pausing of deposits and withdrawals” messages continue to pop up over the next few weeks, it seems likely that this trend of coins leaving exchanges and popping into hardware wallets will continue.

DEXs and DeFi saw an uptick in inflows, perhaps a sign of things to come

Cointelegraph also reported on the uptick in decentralized exchange (DEX) activity and inflow to DeFi occurring concurrently with the record outflows from exchanges. After the events of the past two weeks, trust in centralized exchanges and crypto companies could be broken, and the current and next wave of crypto investors could embrace the more Web3-focused DEX and DeFi protocols.

Of course, what DeFi and DEXs need are a more transparent framework and processes that ensure user funds are safe and being used “properly.”

Related: DeFi platforms see profits amid FTX collapse and CEX exodus

A steady flow of bad news could present a nice opportunity

Currently, Ether’s price looks a bit soft from a technical analysis standpoint, and the recent news about the FTX thief holding the 31st largest Ether spot position, plus concerns over censorship, centralization, the United States Office of Foreign Assets Control enforcement on this “whale” and other Ethereum-based protocols that have exposure or bankruptcy proximity to FTX and Alameda could stir up a bit of FUD that impacts the altcoin’s price action.

Uncertainty on when the Shanghai upgrade will be enacted and investor concerns about when staked coins can actually be withdrawn are also interesting conversations that could turn short-term sentiment against Ether.

The thesis is pretty simple. ETH has held support around $1,200–$1,300 pretty well through all of the previous months of bearish market developments, but will the potential challenges mentioned above lead to a test of the level again?

Stakers are essentially spot long and earning yield, so at this juncture, opening a low-level short position with taking profits orders at $700–$600 could possibly be rewarding.

This newsletter was written by Big Smokey, the author of “The Humble Pontificator Substack” and resident newsletter author at Cointelegraph. Each Friday, Big Smokey will write market insights, trending how-tos, analyses and early-bird research on potential emerging trends within the crypto market.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Missionaries and Mercenaries

When a company gets founded, it does so by a bunch of “missionaries”. Founders seldom are in it solely for the money (though that is obviously one big reason they are there). They found companies because they are “missionary” about the purpose that the company wants to achieve (it doesn’t matter what this mission is – it varies from company to company).

As they start building the company, they look for more missionaries to help them to do it. Rather, among early employees, there is a self selection that happens – only people who are passionate about the mission (or maybe passionate about the founders) survive, and those in it for other purposes just move on.

And this way, the company gets built, and grows. However, there comes a point when this strategy becomes unsustainable. A largish company needs a whole different set of skills from what made the company large in the first place. And some of these skills are specialist enough that it is not going to be easy to attract employees who are both good at this specialisation and passionate enough about the company’s mission.

These people look at their jobs as just that – jobs. They are good at what they do and capable of taking the company forward. However, they don’t share the “mission”, and this means to attract them, you need to be able to serve their “needs”.

For starters, they demand to be paid more. Then, they need the recognition that the job is just a job for them – they need their holidays and “benefits” and “work life balance” and decent working hours and all that. These are things people who are missionary about the business don’t necessarily need – the purpose of the mission means that they are able to “adjust”.

The choice to move from a missionary organisation to a more “mercenary” organisation (not just talking of money here, but also other benefits and perks) needs to be a conscious one from the point of view of the company. At some point, the company needs to recognise that it cannot run on missionary fuel alone and make changes (in structure and function and what not) to accommodate mercenaries and let them grow the business.

The choice of this timing is something a lot of companies don’t get right. Some do it too late – they try to run on missionary fuel for way longer than it is sustainable, and then find it impossible to change culture. This leads to a revolving door of mercenaries and the company unable to leverage their talents.

 

Others – such as Twitter – do it way too early. One thing that seems to be clear (to me) from the recent wave of layoffs at the company, and also having broadly followed the company for a long time (I’ve had a twitter account since 2008), is that the company “went professional” too early.

There was a revolving door of founders in the initial days, until Jack Dorsey came back to run the company (apart from running Square) for a few years. This revolving door meant that the company, from its early days, was forced to rely on professional management – mercenaries in other words. Over a period of time, this resulted in massive bloat. The company struggled along until Elon Musk came in with an outlandish bid and bought it outright.

From the commentary that I see on twitter now, what Musk seems to be doing is to take the company back to “missionaries”. Take his recent letter for example. He is demanding that staff “work long hours at high intensity“. A bunch have resigned in protest (in addition to last week’s layoffs).

The objective of all these exercises – abrasive management style, laying off half the people first, and then putting onerous work conditions on the rest – is to simply weed out all the mercenaries. The only people who will agree to “work long hours at high intensity” will be “missionaries” – people who are passionate about growing the company and will do what it takes to get there.

Musk’s bet, in my opinion (and based on what I’ve read elsewhere), is that the company was massively overstaffed in the first place, and that there is a sufficient quorum of missionaries who will stay on and take the company forward. The reason he is doing all this in public (using his public twitter account to give instructions to his employees, for example) is the hope that these actions might attract potential missionaries from outside to beef up the staff.

I have no clue if this will succeed. At the heart of it, a 16 year old company wanting to run on missionaries only doesn’t make sense. However, given that the company had been listing (no pun intended), this might be necessary for a temporary reboot.

However, one thing I know is that this needs to be an “impulse” (in the physics sense of the term). A short and powerful jab to move the company forward. At an old company like this, running on missionaries can’t be sustainable. So they better fix the company soon and then move it on a more sustainable mercenary path.