Caroline Ellison speaks on FTX-Binance war, SEC won’t appeal Grayscale BTC ETF: Hodler’s Digest, Oct. 8-14
Top Stories This Week
Caroline Ellison wanted to step down but feared a bank run on FTX
Caroline Ellison, former CEO of Alameda Research, testified for over 10 hours this week at Sam Bankman-Fried’s trial, offering deeper details on the events that anticipated the FTX debacle in November 2022. From Ellison’s testimony, jurors learned that she planned to leave Alameda months before its collapse, but feared a bank run on FTX amidst the crypto market downturn. The week also featured a recording presented as evidence in the case showing the exact moment Ellison told employees about Alameda’s use of FTX customer deposits. Among the key moments of Bankman-Fried’s trial were revelations of fabricated balance sheets in order to deceive crypto lenders, as well as BlockFi CEO Zac Prince’s testimony. Check out this week’s highlights from Cointelegraph’s team on the ground.
Months before the collapse of crypto exchange FTX, former CEO Sam Bankman-Fried was “freaking out” about buying shares in Snapchat, raising capital from Saudi royalty and getting regulators to crack down on rival crypto exchange Binance, according to evidence presented in court this week as a part of the ongoing criminal trial. Bankman-Fried believed Binance leaked an Alameda balance sheet to the media in 2022. According to a document from Nov. 6, 2022, Bankman-Fried wrote that Binance had been “engaging in a PR campaign against us.” It continued, saying that Binance “leaked a balance sheet; blogged about it; fed it to Coindesk; then announced very publicly that they were selling $500m of FTT in response to it while telling customers to be wary of FTX.”
SEC reportedly won’t appeal court decision on Grayscale Bitcoin ETF
The United States Securities and Exchange Commission reportedly has no plans to appeal the recent court decision that favored Grayscale Investments. The ruling requires the SEC to review the firm’s spot Bitcoin exchange-traded fund (ETF) application. The SEC’s supposed decision not to appeal doesn’t necessarily mean Grayscale’s application is set to be approved. If the reports are true, the SEC will need to follow the court’s August order and review Grayscale’s application to change its Grayscale Bitcoin Trust into a spot Bitcoin ETF.
Terraform Labs contends Citadel Securities had a hand in its stablecoin collapse
Terraform Labs has again pointed the finger at market maker Citadel Securities for its role in an alleged “concerted, intentional effort” to cause the depeg of its TerraUSD stablecoin in 2022. On Oct. 10, Terraform Labs filed a motion in the United States to compel Citadel Securities to produce documents relating to its trading activity in May 2022, when TerraUSD Classic depegged. In its motion, Terraform argued that the documents are crucial for its defense in the lawsuit filed by the U.S. Securities and Exchange Commission in February, which alleged Terraform Labs and its founder, Do Kwon, had a hand in “orchestrating a multi-billion dollar crypto asset securities fraud.” Citadel Securities has, however, previously denied trading the TerraUSD stablecoin in May 2022.
Mastercard announces successful wrapped CBDC trial results
Mastercard has completed a trial involving wrapping central bank digital currencies (CBDCs) on different blockchains, similar to wrapped Bitcoin and wrapped Ether. The trial was conducted with the Reserve Bank of Australia and the country’s Digital Finance Cooperative Research Centre CBDC. Mastercard said the solution allowed a CBDC owner to purchase a nonfungible token (NFT) listed on Ethereum. “The process ‘locked’ the required amount of a pilot CBDC on the RBA’s pilot CBDC platform and minted an equivalent amount of wrapped pilot CBDC tokens on Ethereum,” the payment processor wrote.
Winners and Losers
At the end of the week, Bitcoin (BTC) is at $26,892, Ether (ETH) at $1,551 and XRP at $0.48. The total market cap is at $1.05 trillion, according to CoinMarketCap.
Among the biggest 100 cryptocurrencies, the top three altcoin gainers of the week are Loom Network (LOOM) at 86.71%, Trust Wallet Token (TWT) at 16.72% and Tether Gold (XAUt) at 5.16%.
The top three altcoin losers of the week are Mantle (MNT) at -17.27%, Rocket Pool (RPL) at -14.39% and Avalanche (AVAX) at -13.39%.
For more info on crypto prices, make sure to read Cointelegraph’s market analysis.
Read also
Most Memorable Quotations
“That’s our homework, actually. To really educate people about the benefit of using blockchain.”
Grace Sabandar, co-founder of the Indonesia Blockchain and Metaverse Center
“Crypto-assets markets, including DeFi, do not represent meaningful risks to financial stability at this point.”
European Securities and Markets Authority
“I was worrying about customer withdrawals from FTX, this getting out, people to be hurt. […] I didn’t feel good. If people found out [about Alameda using FTX funds], they would all try to withdraw from FTX.”
Caroline Ellison, former CEO of Alameda Research
“It’s alarming and should be a wakeup call for lawmakers and regulators that digital wallets connected to Hamas received millions of dollars in cryptocurrencies.”
Elizabeth Warren, U.S. senator
“Bitcoin and Ethereum may seem like opposites, but they can co-exist and complement each other.”
Willem Schroé, CEO of Botanix Labs
“People who believe SBFraud is a ‘good guy’ who made ‘mistakes’, and FTX grew too fast and it all got away from him, should NEVER be in charge of other people’s money.”
John Deaton, attorney and crypto advocate
Prediction of the Week
Ethereum losing streak vs. Bitcoin hits 15 months — Can ETH price reverse course?
The price of Ethereum’s native token, Ether, is trading around a 15-month low versus Bitcoin, and the lowest since Ethereum switched to proof-of-stake. The ETH/BTC pair dropped to as low as 0.056 BTC earlier this week. In doing so, the pair broke below its 200-week exponential moving average (200-week EMA; the blue wave) near 0.058 BTC, raising downside risks further into 2023.
The 200-week EMA has historically served as a reliable support level for ETH/BTC bulls.
ETH/BTC stares at similar selloff risks in 2023 after losing its 200-week EMA as support. In this case, the next downside target looks to be around its 0.5 Fibonacci line near 0.051 BTC in 2023, down about 9.5% from current price levels.
Conversely, ETH price may rebound toward its 50-week EMA (the red wave) near 0.065 BTC if it reclaims the 200-week EMA as support.
FUD of the Week
Mistake or money laundering? User pays $1.6 million for CrypToadz NFT
One of the CrypToadz NFTs, whose average price doesn’t exceed $1,000, was bought for an astonishing 1,055 wrapped Ether, an equivalent of $1.6 million. The CrypToadz collection was launched during the NFT boom of 2021 and surpassed a trading volume of $38 million worth of Ether during its first 10 days on the market. The price paid by the anonymous user for the NFT raised questions among the community. Two weeks ago, this item was acquired for 0.95 ETH (around $1,600), only to be sold for a price a thousand times higher.
USDR stablecoin depegs to $0.53, but team vows to provide solutions
Real estate-backed stablecoin USDR lost its peg to the United States dollar after a rush of redemptions caused a draining of liquid assets such as Dai from its treasury. USDR, backed by a mixture of cryptocurrencies and real estate holdings, is issued by the Tangible protocol, a decentralized finance project that seeks to tokenize housing and other real-world assets. During the crisis, a trader reportedly exchanged 131,350 USDR for 0 USD Coin, resulting in a complete loss on investment.
HTX claws back $8M in stolen funds, issues 250 ETH bounty to hacker
Huobi Global’s crypto exchange HTX has confirmed the return of the funds stolen by a hacker in late September and issued a 250 Ether bounty after resolving the issue. One of HTX’s hot wallets was drained of 5,000 ETH on Sept. 25, worth roughly $8 million at the time. Shortly after the hack occurred, the firm contacted the hacker and claimed to know their identity. HTX ultimately offered to pay a 5% bounty worth around $400,000 and not to take any legal action if they returned 95% of the funds before a deadline of Oct. 2.
Beyond crypto: Zero-knowledge proofs show potential from voting to finance
An emerging cryptographic technology may provide help with two gaping 21st-century needs: Privacy and truth.
Eleanor Terrett on impersonators and a better crypto industry
Fox Business producer Eleanor Terrett’s following exploded after she began providing commentary on the SEC v. Ripple lawsuit.
SBF’s alleged Chinese bribe, Binance clarifies account freeze: Asia Express
SBF allegedly bribes Chinese officials with $150 million to unfreeze accounts, Binance justifies blocking Hamas users, meanwhile, Huobi hacker returns all $8M in stolen assets.
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Politics
Laws may need to be bolstered to crack down on exploitation of child ‘influencers’, senior MP suggests
Laws may need to be strengthened to crack down on the exploitation of child “influencers”, a senior Labour MP has warned.
Chi Onwurah, chair of the science, technology and innovation committee, said parts of the Online Safety Act – passed in October 2023 – may already be “obsolete or inadequate”.
Politics latest: Follow live updates
Experts have raised concerns that there is a lack of provision in industry laws for children who earn money through brand collaborations on social media when compared to child actors and models.
This has led to some children advertising in their underwear on social media, one expert has claimed.
Those working in more traditional entertainment fields are safeguarded by performance laws, which strictly govern the hours a minor can work, the money they earn and who they are accompanied by.
The Child Influencer Project, which has curated the world’s first industry guidelines for the group, has warned of a “large gap in UK law” which is not sufficiently filled by new online safety legislation.
Official portrait of Chi Onwurah.
Pic: UK Parlimeant
The group’s research found that child influencers could be exposed to as many as 20 different risks of harm, including to dignity, identity, family life, education, and their health and safety.
Ms Onwurah told Sky News there needs to be a “much clearer understanding of the nature of child influencers ‘work’ and the legal and regulatory framework around it”.
She said: “The safety and welfare of children are at the heart of the Online Safety Act and rightly so.
“However, as we know in a number of areas the act may already be obsolete or inadequate due to the lack of foresight and rigour of the last government.”
Victoria Collins, the Liberal Democrat spokesperson for science, innovation and technology, agreed that regulations “need to keep pace with the times”, with child influencers on social media “protected in the same way” as child actors or models.
“Liberal Democrats would welcome steps to strengthen the Online Safety Act on this front,” she added.
‘Something has to be done’
MPs warned in 2022 that the government should “urgently address the gap in UK child labour and performance regulation that is leaving child influencers without protection”.
They asked for new laws on working hours and conditions, a mandate for the protection of the child’s earnings, a right to erasure and to bring child labour arrangements under the oversight of local authorities.
However, Dr Francis Rees, the principal investigator for the Child Influencer Project, told Sky News that even after the implementation of the Online Safety Act, “there’s still a lot wanting”.
“Something has to be done to make brands more aware of their own duty of care towards kids in this arena,” she said.
Dr Rees added that achieving performances from children on social media “can involve extremely coercive and disruptive practices”.
“We simply have to do more to protect these children who have very little say or understanding of what is really happening. Most are left without a voice and without a choice.”
Read more from Sky News:
Four killed as cable car crashes to ground near Naples
Two dead and five injured in shooting at Florida university
The researcher pointed to one particular instance, in which children were advertising an underwear brand on social media.
She said: “The kids in the company’s own marketing material or their own media campaigns are either pulling up the band of the underwear underneath their clothing, or they’re holding the underwear up while they’re fully clothed.
“But whenever you look at any of the sponsored content produced by families with children – mum, dad, and child are in their underwear.”
Dr Rees said it is “night and day” in terms of how companies are behaving when they have responsibility for the material, versus “the lack of responsibility once they hand it over to parents with kids”.
One of Arizona’s crypto reserve bills has been passed by the House and is now one successful vote away from heading to the governor’s desk for official approval.
Arizona’s Strategic Digital Assets Reserve Bill (SB 1373) was approved on April 17 by the House Committee of the Whole, which involves 60 House members weighing in on the bill before a third and final reading and a full floor vote.
SB 1373 seeks to establish a Digital Assets Strategic Reserve Fund made up of digital assets seized through criminal proceedings to be managed by the state’s treasurer.
Arizona’s treasurer would be permitted to invest up to 10% of the fund’s total monies in any fiscal year in digital assets. The treasurer would also be able to loan the fund’s assets in order to increase returns, provided it doesn’t increase financial risks.
However, a Senate-approved SB 1373 may be set back by Arizona Governor Katie Hobbs, who recently pledged to veto all bills until the legislature passes a bill for disability funding.
Hobbs also has a history of vetoing bills before the House and has vetoed 15 bills sent to her desk this week alone.
Arizona is the new leader in the state Bitcoin reserve race
SB 1373 has been passing through Arizona’s legislature alongside the Arizona Strategic Bitcoin Reserve Act (SB 1025), which only includes Bitcoin (BTC).
The bill proposes allowing Arizona’s treasury and state retirement system to invest up to 10% of the available funds into Bitcoin.
SB 1025 also passed Arizona’s House Committee of the Whole on April 1 and is awaiting a full floor vote.
Related: Binance helps countries with Bitcoin reserves, crypto policies, says CEO
Utah passed Bitcoin legislation on March 7 but scrapped the cornerstone provision establishing the Bitcoin reserve in the final reading.
The Texas Senate passed a Bitcoin reserve bill on March 6, while a similar bill recently passed through New Hampshire’s House.
Magazine: Crypto ‘more taboo than OnlyFans,’ says Violetta Zironi, who sold song for 1 BTC
Slovenia’s Finance Ministry is considering a possible 25% tax on crypto trading profits for residents in the country under a new draft law now open for public consultation.
The bill proposes to tax traders when they sell their cryptocurrency for fiat or pay for goods and services, but crypto-to-crypto and transfers between wallets owned by the same user will be exempt, Slovenia’s Finance Ministry said in an April 17 statement.
Under the proposed legislation, crypto tax will be aligned with existing tax laws. Slovenia taxpayers will be required to keep a record of all their transactions for annual tax returns. The tax base would be calculated on profits by subtracting the purchase price from the sale price.
In a statement to the Slovenia Times, finance minister Klemen Boštjančič said it’s unreasonable that crypto trading for individuals isn’t currently taxed in the country.
“The goal of taxation of crypto assets is not to generate tax revenue, but we find it illogical and unreasonable that one of the most speculative financial instruments is not taxed at all,” he said in a statement translated from Slovenian.
New tax could stifle crypto in Slovenia, lawmaker says
Jernej Vrtovec, a member of Slovenia’s national assembly and New Slovenia opposition party, slammed the proposal in an April 16 statement to X, arguing it could stifle crypto growth in the country.
“Slovenia has the opportunity to become a crypto-friendly country, but with the government’s proposals, we will miss the train again,” he said in a post also translated from Slovenian.
“With excessive taxation, we will once again see young people and capital fleeing abroad. Taxes should encourage, not stifle.”
The proposal is open to public consultation until May 5. If Slovenian lawmakers pass the bill, it will go into effect on Jan. 1, 2026.
Slovenia introduced a 10% tax on crypto withdrawals and payments in 2023, but capital gains from occasional crypto trading are not taxed, according to the crypto tax platform Token Tax.
Related: NFT trader faces prison for $13M tax fraud on CryptoPunk profits
Crypto activity can also currently be exempt from tax if it’s considered a hobby. Business activity, such as mining or staking, is subject to income tax.
A previous bill proposed in April 2022 planned to levy a 5% tax on profits over 10,000 euros ($11,372), but it was never passed into law.
Slovenia issued the first digital sovereign bond in the European Union on July 25 last year. It had a nominal size of 30 million euros ($32.5 million) with a 3.65% coupon and a maturity date of Nov. 25 that year.
The number of crypto users in Slovenia is projected to reach roughly 98,000 in 2025, according to online data platform Statista, with a penetration rate of 4.6% among its population of 2.12 million people. While the projected revenue for the country’s crypto market is slated to hit $2.8 million.
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