From Sam Bankman-Fried's quarter-billion-dollar bail to the arrest of the alleged Mango Markets manipulator, the last week of 2022 went out with a growl, not a whimper.
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Given that a short South Park-inspired sketch of FTX founder Sam Bankman-Fried's apology tour went viral on Twitter this weekend, it's probably not surprising that the disgraced founder of the exchange accused of stealing one million customers' funds was a big part of the holiday week's news.
But teetering crypto lenders, outraged customers, miner bailouts, crime stories and an exchange pullback made the last week of the year a perfect coda to the annus horribilis that was 2022.
To quote the South Park-style video clip:
"So, I'm SBF founder and CEO of FTX. My accidental theft of our customers' life savings to create a giant, over-leveraged, Ponzi slush fund for myself is a tragedy that should have never happened. And to all those affected, I want to say I'm deeply sorry: I'm sorry."
1. SBF on Bail
It's not so much that the disgraced FTX exchange founder Sam Bankman-Fried posted $250 million bail as that his parents posted their California home and everything else they own to get him out.
SBF surrendered his passport and will remain there under house arrest, with his movements monitored, until the trial. He also agreed not to move any crypto. Which means he is likely to be out for at least a year.
Why was he granted bail? It is solely based on the defendant's likelihood and ability to flee, and aside from his parents putting up "their last pair of cufflinks," SBF's notoriety is too great for him to flee.
It comes as two of his top lieutenants, Alameda Research's former CEO Caroline Ellison, and FTX's co-founder and ex-CTO Gary Wang, have flipped on him as they faced between 50 and 100 years in prison. Bankman-Fried reportedly plans to plead not guilty at his arraignment today.
2. Fighting for What's Left of FTX
A number of creditors are elbowing for first dibs on the exchange's remaining funds. First, a group of FTX customers filed a class action suit demanding first priority in repayment, arguing that billions stolen from the exchange was stolen property and as such should be returned to its rightful owners — as opposed to being dumped into a pool of remaining funds to be split among all creditors of FTX and Alameda.
Second, a group of 100 FTX lenders and investors with claims on FTX and Alameda funds was formed last month to push its own claims.
And third, bankrupt crypto lender BlockFi has laid claim to the 7.6% stake in trading firm Robinhood bought as it was used as collateral for a $546 million loan used for that investment. FTX Group, the post-bankruptcy umbrella company, wants those shares in the general pool of reclaimed funds for creditors.
3. Where's FTX's Money?
The Bahamas seized $3.5 billion of FTX customers' funds in order to "safeguard" it, the Securities Commission of The Bahamas (SCB) revealed on Dec. 29. That came from the bankrupt exchange's local arm FTX Digital Markets. The release suggests Bahamian customers will be prioritized.
FTX Japan announced that its customers would be able to withdraw funds by mid-February, as the regulated exchange held those funds separately.
And the Department of Justice launched a criminal investigation of the $370 million stolen from FTX by a hacker in the chaos of the bankruptcy handover of the company and the SBC seizing a very similar amount.
4. Gemini Sued over Earn Freeze
On Dec. 27, Cameron and Tyler Winklevoss' Gemini Trust Company was hit with a class action lawsuit over the exchange's Gemini Earn. The plaintiffs claim fraud, arguing that the program's interest-bearing accounts were actually securities — a position the Securities and Exchange Commission (SEC) has taken for more than a year — which would have provided investors much more disclosure of the risks associated with Gemini Earn.
Meanwhile, Cameron Winklevoss spent the holiday weekend getting angrier and more aggressive with Digital Currency Group's (DCG) CEO Barry Silbert. Gemini Earn offered customers 8% to park their funds in a crypto lending program that was actually run by Silbert's Genesis — which has frozen withdrawals, including $900 million from Gemini exchange customers. On Jan. 2, Winklevoss penned an open letter to Slibert, accusing him of negotiating in bad faith — which Silbert denied.
5. Mango Markets Exploiter Arrested
On Dec. 23, the Department of Justice announced that Avraham Eisenberg had been arrested in Puerto Rico on charges of commodities fraud. The case began in October, when Eisenberg announced he was part of a group that used a "highly profitable trading strategy" to drain $114 million from Mango Markets by manipulating the price of the decentralized exchange's (DEX) native MNGO token.
He'd made huge buys on other DEXs that pumped its price 1,300% and then used that to borrow other cryptocurrencies without intending to return them. He gave back $67 million of it in exchange for a promise not to press charges. Eisenberg said he was "using the protocol as designed, even if the development team did not fully anticipate all the consequences of setting parameters the way they are."
FBI Special Agent Brandon Racz apparently didn't feel bound by that agreement, accusing Eisenberg of commodities fraud and commodities manipulation for "engaging in a scheme involving the intentional and artificial manipulation of the price of perpetual futures contracts on a cryptocurrency exchange called Mango Markets, and other manipulative and deceptive devices and contrivances." He also accused Eisenberg of earlier flying to Israel to avoid arrest, which makes it unlikely Eisenberg will make bail.
6. Kraken Pulls Out of Japan Again
U.S.-based crypto exchange Kraken announced on Dec. 28 that it would pull out of the Japanese market, saying that "current market conditions in Japan in combination with a weak crypto market globally mean the resources needed to further grow our business in Japan aren't justified at this time."
It's the latest pullback for the exchange, which on Nov. 30 laid off 30% of its staff. And in September, CEO Jesse Powell announced his resignation as CEO, stepping into the Chairman's seat in order to focus more on big issues and less on day-to-day operations.
7. Bitcoin Miners Bailed Out
Crushed by tumbling Bitcoin prices and climbing power bills, a number of mining firms are in trouble — particularly those that borrowed to finance operations so they could hodl their BTC.
Bitcoin miner Argo Blockchain was saved from potential bankruptcy by a $100 million investment by Mike Novogratz' crypto finance firm Galaxy Digital, which will buy the Texas mining facility for $65 million — and lease its capacity back to Argo — and loan the firm $35 million. Meanwhile, investment management titan BlackRock doubled down on bankrupt Bitcoin miner Core Scientific, investing $17 million on top of its existing $38 million in debt.
8. Crypto Lender Nexo Fights for Vauld
One of the few crypto lenders that came out of the Three Arrows Capital and FTX collapses undamaged, Nexo turned directly to Vauld creditors on Dec. 26 after the Peter Thiel-backed firm rebuffed its acquisition offer. The talks had been going since July, when Vauld suspended withdrawals and sought protection from creditors in Singapore. It reportedly owes about $400 million to creditors, 90% of whom are retail investors.
9. True Believers Double Down
Two of crypto's biggest fans on Wall Street doubled down recently, with Michael Saylor's MicroStrategy announcing on Dec. 28 that it had bought another 2,500 BTC for $45 million in the past two months — a number that includes selling about 700 for the tax write-off, CoinDesk reported. The firm's now up to 132,500 BTC. That's worth about $2.25 billion on a $4 billion acquisition cost.
Meanwhile, Cathie Wood's ARK Invest added $5.5 million in Coinbase shares. The well-known investor has championed the Nasdaq-listed exchange, repeatedly buying even as the share price dropped more than 85% this year.
