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Molly White (molly0xfff@hachyderm.io)'s status on Tuesday, 31-Dec-2024 09:20:29 JST Molly White

Newsletter: Adversary cases from the FTX collapse further expose how crypto companies do business: with secret acquisitions of “grey area” businesses, buying influence, and creative accounting.
https://www.citationneeded.news/not-just-one-bad-apple/
#crypto #cryptocurrency #FTX

In conversation about 4 months ago from hachyderm.io permalink
- Adrianna Tan and Rich Felker repeated this.
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  Molly White (molly0xfff@hachyderm.io)'s status on Tuesday, 31-Dec-2024 09:22:32 JST Molly White
  in reply to
  
  The roughly thirty FTX adversary cases, filed against business partners, customers, effective altruist organizations, and political action committees, pull back the curtain on how cryptocurrency companies do business.
  #crypto #cryptocurrency #FTX
  In conversation about 4 months ago permalink
  Attachments
  1. Over a year after Sam Bankman-Fried’s trial, perhaps one of the most memorable moments to stick with me was an unexpected one: a brief exchange between prosecutors and BlockFi founder Zac Prince. (FTX’s collapse bankrupted the crypto lender, which had loaned FTX entities hundreds of millions.) BlockFi's Zac Prince: [With] crypto firms, it was much less common to have audited balance sheets because of issues with getting audits as a cryptocurrency firm. Prosecutor: Just to be clear, some of the balance sheets you received from crypto firms were what is called unaudited balance sheets. Prince: I would say the majority of balance sheets that we received from cryptocurrency firms were unaudited. This casual statement about lending hundreds of millions based on scrawled estimates and a “trust me, bro” underscored the deception in crypto executives’ post-collapse claims that FTX was a rare bad actor with aberrant business practices, a black sheep among scores of legitimate businesses. On the contrary, many of FTX’s activities were business as usual in an industry where regulatory enforcement and proper audits were rare, but maximal leverage and risk-taking were par for the course.
    https://media.hachyderm.io/media_attachments/files/113/744/574/990/186/498/original/3c2cf74d1b220eaa.png
  2. I’m not so much fascinated by the specifics of the FTX adversary cases two years post-bankruptcy, where the debtors work to claw back the remaining traces of FTX’s exorbitant spending. Instead, I’m interested in the pulling back of the curtain on the cryptocurrency industry’s day-to-day operations. Shady practices have become so commonplace as to be open secrets, only questioned during occasional brushes with those from more strictly regulated financial sectors — who often react with horror when given a peek at the crypto industry’s standard operating procedure. In the span of only a few days in November 2024, the FTX bankruptcy estate filed over thirty adversary cases.1 Several target political action committees and non-profits that received hundreds of thousands or millions of dollars from FTX as part of the company’s political influence campaigns and reputation polishing efforts. Others target other cryptocurrency exchanges where Alameda Research or affiliated entities were trading — sometimes secretly — and where account balances haven’t been released back to the bankruptcy estate. Some target FTX customers engaged in criminal behavior. And some target employees, contractors, or business associates of FTX and its entities.
    https://media.hachyderm.io/media_attachments/files/113/744/574/998/208/525/original/9c5a2c3253eadf0f.png
  Rich Felker repeated this.
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  Molly White (molly0xfff@hachyderm.io)'s status on Tuesday, 31-Dec-2024 09:23:58 JST Molly White
  in reply to
  
  They include a case against Genesis Block, a self-described "grey area" crypto business secretly acquired by FTX, which is now trying to claim over $65 million of FTX money belongs to them in what the bankruptcy estate describes as a "baffling act of hubris".
  #crypto #cryptocurrency #FTX
  In conversation about 4 months ago permalink
  Attachments
  1. Genesis Block In early 2020, FTX entities acquired Hong Kong-based Genesis Block, an over-the-counter trading firm and cryptocurrency ATM operator. It served as a crypto on- and off-ramp in Asia, where the company publicly acknowledged they were operating in a “grey area”. “People were literally lining up around the corner with bags of cash at Genesis Block,” a former employee said. “Sometimes they shut the door saying they were out of bitcoin.” The company was a valuable asset for FTX, allowing them to circumvent capital controls and providing business connections in Asia. FTX’s ownership of Genesis Block was kept secret from the public and from regulators. FTX also used Genesis Block to make venture investments and operate various other entities they acquired or created in Singapore, the Philippines, and Mexico, so as to reduce regulatory exposure. (FTX employees helpfully put their reasoning in writing). While FTX was still in Hong Kong, Genesis Block was the nominal employer of several FTX personnel — including Gary Wang and Nishad Singh — in order to circumvent visa requirements.
    https://media.hachyderm.io/media_attachments/files/113/744/580/915/295/737/original/c20f4e147751fd8a.png
  2. Genesis Block co-founder Clement Ip has rather brazenly claimed he is owed $65.8 million held in an FTX account belonging to his partner’s company, Myth Success. However, FTX debtors say Myth Success was yet another shell company used by FTX to circumvent regulators, acquire companies without publicizing FTX’s involvement, and secretly trade on other platforms, and that it had no business operations of its own. As FTX collapsed, when its executives were desperately searching the couch cushions for money to satisfy withdrawals, Genesis Block and Myth Success acknowledged that the money in Myth Success’s accounts belonged to FTX, and transferred some of it back. However, the debtors allege that “Ip appears to have hoped that the fact of these transfers would be lost in the chaos and disarray of the FTX Group’s implosion”, and described his claim on the assets as “a baffling act of hubris”.
    https://media.hachyderm.io/media_attachments/files/113/744/584/325/319/419/original/4188b8476472a342.png
  Rich Felker repeated this.
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  Molly White (molly0xfff@hachyderm.io)'s status on Tuesday, 31-Dec-2024 09:24:53 JST Molly White
  in reply to
  
  There's a case against crypto exchanges run by Justin Sun (among the shadiest of Donald Trump's new crypto business partners), which is trying to dodge returning assets that FTX entities were secretly trading on his platforms.
  #crypto #cryptocurrency #FTX
  In conversation about 4 months ago permalink
  Attachments
  1. Finally, an adversary case against the Justin Sun-owned Huobi (now HTX) and Poloniex exchanges alleges that they are improperly holding on to a combined $27.5 million. Though both accounts belonged to Alameda Research, the Huobi account was opened in a former employee’s name, and the Poloniex account was nominally registered to Sam Bankman-Fried. A Huobi subsidiary also withdrew around $14 million from an FTX account in the preference period prior to its collapse, which FTX is trying to claw back, and various Justin Sun-affiliated entities have filed roughly $30 million in claims on assets held at FTX. The Justin Sun entities’ refusal to return assets are shrouded in the same sort of suspiciousness that tends to follow Sun everywhere he goes, and the excuses provided to the FTX debtors are troubling. First, a member of Huobi’s legal team member told the FTX bankruptcy team he didn’t work at the “correct” Huobi entity, and refused to identify which entity this was, or provide details for anyone who worked there. Then Huobi claimed Chinese police were investigating the Alameda-owned accounts on Huobi, but refused to provide any further information. At Poloniex, employees made “seemingly arbitrary” requests for the debtors, then claimed that Poloniex was undergoing an “internal restructuring” and cut communications. Personally, if I were on the FTX bankruptcy team seeking to regain access to funds held on Justin Sun-owned platforms, I’d be very concerned about whether the mone
    https://media.hachyderm.io/media_attachments/files/113/744/586/930/340/578/original/4d00d36a2ede75aa.png
  Rich Felker repeated this.
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  Molly White (molly0xfff@hachyderm.io)'s status on Tuesday, 31-Dec-2024 09:26:04 JST Molly White
  in reply to
  
  There are cases against fourteen political action committees and dark money groups, some of which were recipients of FTX's illegal straw donations as FTX tried to hide some of its political maneuvering.
  #crypto #cryptocurrency #FTX
  In conversation about 4 months ago permalink
  Attachments
  1. A Sankey diagram showing over $50 million flowing from FTX business entities, through various FTX executives, political action committees, and dark money groups, into fourteen PACs and dark money groups
    https://media.hachyderm.io/media_attachments/files/113/744/589/789/412/857/original/86dd87c99eaf19c8.png
  Rich Felker repeated this.
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  Molly White (molly0xfff@hachyderm.io)'s status on Tuesday, 31-Dec-2024 09:29:38 JST Molly White
  in reply to
  
  There's a case against Anthony Scaramucci, who just announced he bought a new Lamborghini as he and his business partner are being accused of possibly "looting the [SkyBridge fund] assets for themselves", after Bankman-Fried bailed out their failing crypto fund.
  #crypto #cryptocurrency #FTX
  
  In conversation about 4 months ago permalink
  
  Rich Felker repeated this.
- Embed this notice
  Molly White (molly0xfff@hachyderm.io)'s status on Tuesday, 31-Dec-2024 09:32:57 JST Molly White
  in reply to
  
  Troublingly, the conditions that enabled FTX’s fraud remain unchanged today. With the same red flags waving across today’s cryptocurrency industry, it’s hard to avoid the conclusion that similar frauds have only yet to be discovered.
  #crypto #cryptocurrency #FTX
  In conversation about 4 months ago permalink
  Attachments
  1. From secretly acquiring “grey area” cash-for-crypto businesses to buying political influence to paying off lawyers, the FTX adversary cases describe incredibly shady practices that are far from as unusual as the crypto industry likes to claim. Remember: all of these activities happened while FTX ran Super Bowl ads about being a “safe and easy way to get into crypto” and Bankman-Fried described his business at every opportunity as “the most regulated crypto exchange by far”. Troublingly, the conditions that enabled FTX’s fraud remain unchanged today. Lack of auditing is the norm. Knee-jerk resistance to regulation remains the default industry-wide, and the industry refined Bankman-Fried’s early attempts at political influence, spending over $130 million to install handpicked surrogates in Washington to further reduce any chance of meaningful oversight. With the same red flags waving across today’s cryptocurrency industry, it’s hard to avoid the conclusion that similar frauds have only yet to be discovered. The primary difference may be that other firms haven’t faced their CZ moment yet: the pushing over of the first domino that causes the whole precarious thing to collapse.
    https://media.hachyderm.io/media_attachments/files/113/744/617/296/951/605/original/3d2bd514d10307e5.png
  Rich Felker and Adrianna Tan repeated this.
- Embed this notice
  Molly White (molly0xfff@hachyderm.io)'s status on Tuesday, 31-Dec-2024 09:34:14 JST Molly White
  in reply to
  
  All of this and more in the last Citation Needed issue of the year.
  If you like my writing and want to support my work, please consider signing up for a pay-what-you-want subscription! It really helps me to keep doing this.
  https://www.citationneeded.news/signup
  #crypto #cryptocurrency #FTX
  
  In conversation about 4 months ago permalink
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  Notavi (strydernotavi@aus.social)'s status on Tuesday, 31-Dec-2024 10:03:53 JST Notavi
  in reply to
  
  @molly0xfff Question - Is "One Nation" in that diagram the Australian Political Party of that name, or another entity?
  
  In conversation about 4 months ago permalink
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  Molly White (molly0xfff@hachyderm.io)'s status on Tuesday, 31-Dec-2024 10:03:53 JST Molly White
  in reply to
  - Notavi
  @StryderNotavi different, it's a US dark money group
  In conversation about 4 months ago permalink
  Attachments
  1. $15.5 million to One Nation, a 501(c)(4)g that has contributed heavily to Republicans and conservative causes, including efforts to restrict anti-racism curricula in schools and abortion access. The contributions were routed through Ryan Salame and Sam Bankman-Fried.
    https://media.hachyderm.io/media_attachments/files/113/744/738/013/670/166/original/e357368c2e1fa30e.png
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  Robert Jan Schutten (rjschutten@hachyderm.io)'s status on Tuesday, 31-Dec-2024 12:39:32 JST Robert Jan Schutten
  in reply to
  
  @molly0xfff Crypto: For criminals & fascists.
  
  In conversation about 4 months ago permalink
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  Aleksander (sumek@hachyderm.io)'s status on Wednesday, 01-Jan-2025 17:23:21 JST Aleksander
  in reply to
  
  @molly0xfff only this time they've bought themselves a government so the `discovered` part is less likely
  
  In conversation about 4 months ago permalink
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  Molly White (molly0xfff@hachyderm.io)'s status on Wednesday, 01-Jan-2025 22:57:38 JST Molly White
  in reply to
  - Aleksander
  @sumek it wasn't thanks to any government or regulator that the FTX fraud was discovered, either
  
  In conversation about 4 months ago permalink

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