Jman220
January 14, 2023, 1:12am
21
SlowPonyExpress is created and Bitcoin immediately starts mooning. Coincidence? I think not!
2 Likes
All I know is my corn and rum is more valuable now
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Really enjoying being above negative 50% again
I bought a bunch of BTC at 16.5, to the moon baby
Jman220
January 14, 2023, 3:15pm
26
You’ll know it’s at it’s new peak when boomers start talking about buying it again.
goofy
January 17, 2023, 8:22pm
27
Levine with some great stuff as usual on the SEC coming for Gemini. First, on the inherent contradiction at the heart of how crypto firms want to do business:
We covered this in 2021, when Coinbase Global Inc.’s similar crypto lending program was shut down by the SEC before it started. I wrote :
Is lending your Bitcoins a security?
Oh, sure, yes, absolutely. The rule in the U.S. is that an “investment contract,” meaning “the investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others,” is a security, and generally can’t be sold to the public without registering it with the Securities and Exchange Commission, delivering a prospectus with audited financial statements, etc. A Bitcoin lending program — in which (1) a bunch of people pool their Bitcoins, (2) some manager or smart contract lends those Bitcoins to borrowers who pay interest, and (3) some or all of the interest is paid back to the people in the pool — is pretty straightforwardly an investment contract and thus a security.
This is easy stuff. People in crypto don’t like it, but that’s because they are wrong. More specifically, they have an intuition like “if a crypto platform pays you interest on your crypto deposits and uses them to make loans, that is like a bank account, and a bank account is not a security.” But that’s because IT’S A BANK ACCOUNT. Like:
Securities regulator: Your Earn product is a security and needs to be registered with us.
Crypto platform operator: That’s ridiculous, Earn is just like a bank account, that’s not a security.
Banking regulator: Hi! I couldn’t help overhearing. Did you just say that YOU WOULD LIKE US TO REGULATE YOU AS A BANK?
Crypto platform operator: [screams, dives out window ]
As I wrote in 2021:
Coinbase obviously does not want to be regulated as a bank; it does not want to be subject to bank capital requirements (which require essentially 100% equity capital backing Bitcoin positions) or prudential regulation by bank regulators who like crypto about as much as the SEC does but have even more tools to crack down. You think the SEC is being annoying about not issuing formal guidance! A bank examiner could just call you up and say “we don’t think owning Bitcoin is a good idea, get rid of it,” and then where would Coinbase be?
So, right. Gemini has an Earn product where it gives its customers interest on their crypto; it gets that interest by lending their crypto to Genesis Global Capital LLC, a unit of Barry Silbert’s Digital Currency Group. Genesis, in turn, lends the crypto to, you know, Three Arrows Capital, Alameda Research, things of that nature. Oops! Last year Genesis lost a bunch of the money and eventually shut down withdrawals, including for Gemini Earn customers; Cameron Winklevoss has been sending Silbert some nasty open letters about it. I don’t really disagree with the nasty letters, but they are kind of absurd coming from Winklevoss: Sure, it was bad for Genesis to lose Gemini’s customers’ money, but it was pretty much equally bad for Gemini to let them? Nobody made good decisions here.
The SEC seems to see it my way, and last week it sued Genesis and Gemini, together, for this mess.
Also, Gemini made the SEC’s case a lot easier by going off and losing all the money that they were supposed to be keeping safe for their customers:
Meanwhile the Howey test of what makes an “investment contract” a security is the one I quoted above; it’s “the investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.” Gemini’s Earn customers invested money (their crypto) in a common enterprise (Genesis’s lending business) with a reasonable (?) expectation of profits (their promised yield) that would be derived from the efforts of others (Genesis’s lending decisions). The SEC says:
From its inception, Defendants have explicitly marketed the Gemini Earn program as an investment opportunity which led investors to reasonably expect to profit from their efforts. …
It is probably helpful to the SEC, in making this case, that Genesis and Gemini seem to have lost the money, or at least, uh, rendered it inaccessible. The SEC’s essential argument here is that Gemini Earn is an investment of money in a risky profit-seeking venture whose success depends on the efforts of Cameron Winklevoss and Barry Silbert; Gemini’s and Genesis’s essential argument is “no it isn’t, shhh, it’s just a nice 8% return on your money.” The fact that the money is gone, or at least temporarily indisposed, strengthens the SEC’s position. Ex post, it was definitely risky.
And lastly, the guys who ran Three Arrows Capital into the ground are back with a new business!
My basic view is that the crypto financial system was built by a bunch of young people who left traditional finance because they really love building new toy financial systems and crypto offers them a fun sandbox in which to do it. If you went to those people and said “hey, can you design a system for trading claims on bankrupt crypto firms?” they would be like “sure that sounds really fun.” And a lot of them have a lot of time on their hands right now, what with their crypto firms having gone bankrupt. So, so, so :
The founders of a bankrupt crypto hedge-fund firm are seeking to launch an exchange where creditors to insolvent digital-assets firms, including their own, would be able to buy and sell claims.
Su Zhu, a co-founder of the bankrupt crypto hedge-fund manager Three Arrows Capital Ltd., said that he and others are seeking to raise $25 million in seed money for the new platform. A pitch deck to potential investors, seen by The Wall Street Journal, referred to the company as GTX, a poke at the fallen crypto exchange FTX.
Mr. Zhu said that GTX isn’t the final name of the company. The other founders include Kyle Davies, who co-founded Three Arrows, and Mark Lamb and Sudhu Arumugam, the co-founders of crypto exchange CoinFLEX. They are likely to finalize a name for the company next week.
Incredible. Also:
Mr. Zhu said some Three Arrows creditors would have the option to convert their claims into equity in the new claim-trading company.
I just! Absolutely magnificent stuff. “We were too good at taking your money, sorry about that, but to make up for our losses we’ll let you bet on our ability to take your money again.”
The biggest problem with the crypto financial system is that it is relatively bad at trading real stuff: Crypto exchanges are for trading crypto tokens, and without underlying cash flows or real-world businesses those have a distressing tendency to go to zero and bankrupt everybody. But if you build a crypto exchange whose central product is all the money people lost on the last crypto exchange , you are solving that problem. The net amount of money made in crypto fluctuates wildly, but the total supply of (1) money made in crypto plus (2) money lost in crypto can only really go up. If you build an exchange to let people trade their crypto losses, you will have a durable business.
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goofy
January 19, 2023, 8:32pm
28
lol what the hell. Levine today: FTX might be making a comeback?
This seems far-fetched and I do not personally have any idea how you could restart trading on FTX, attract new deposits, and get everyone to pretend everything is fine so you can earn back the money that Alameda borrowed/lost/stole. But I guess John Ray does? The Wall Street Journal reports :
FTX’s new chief executive, John J. Ray III, said he’s looking into the possibility of reviving the bankrupt crypto exchange as he works to return money to the failed company’s customers and creditors.
In his first interview since taking over FTX in November, Mr. Ray said that he has set up a task force to explore restarting FTX.com , the company’s main international exchange. Although top FTX executives have been accused of criminal misconduct, some customers have praised its technology and suggested that there would be value in rebooting the platform, he said.
“Everything is on the table,” Mr. Ray said. “If there is a path forward on that, then we will not only explore that, we’ll do it.” …
Mr. Ray said he would look into whether reviving FTX’s international exchange would recover more value for the company’s customers than his team could get from simply liquidating assets or selling the platform.
“There are stakeholders we’re working with who’ve identified what they see is a viable business,” he said.
I guess? I mean, conceptually, what you have to do here is convince big crypto investors to start trading again on FTX by (1) opening up some new entity where they can deposit money that won’t get thrown into the hole caused by Alameda and (2) convincing those investors that, this time, you won’t steal the money. I suppose installing a new CEO, filing for bankruptcy, and disclosing the hole in the balance sheet and the backdoors in the code is a way to build that sort of trust. Maybe John Ray had to burn FTX down to save it.
Also maybe it’s working :
FTX’s controversial FTT token surged by more than 30% after the bankrupt company’s new chief executive, John J. Ray III, said that he’s exploring the possibility of restarting the crypto exchange. …
Data from TradingView shows that FTT rose by more than 30% on rival exchange Binance. FTT was trading at around $2.38 on Thursday. That’s still down more than 97% from its record high of $84.18, according to pricing data from CoinGecko.
Given FTX’s stash of FTT, that’s like $100 million more for creditors right there, just from announcing it. Imagine if it works!
That’s amazing, particularly the last part about the FTT token increasing in price. Levine wrote about FTT yesterday and the hilarity of thinking it will ever be worth something:
In 2021, when FTT traded near $80 per token, and when FTX looked like a successful and widely respected crypto exchange, it … well, it would still have been a bad idea for FTX to lend money to Alameda secured by FTT tokens , fine, but it would not have been crazy to say things like “Alameda is worth many billions of dollars because of its huge stash of FTT tokens.” The FTT tokens were valuable, the source of their value — market confidence in FTX’s future cash flows and utility — seemed reasonable, Alameda had a lot of them, it’s all fine.
In November 2022, though, when FTX was hurtling toward bankruptcy and Bankman-Fried was seeking rescue financing, I thought it was pretty weird for him to market Alameda’s stash of FTT tokens as being worth hundreds of millions of dollars. Once you are days from bankruptcy, you can’t expect to get hundreds of millions of dollars for your stock . Your stock is probably going to be wiped out in bankruptcy. FTT is close enough to FTX stock that, in November 2022, FTX could not really count on getting much money for it.
Now it’s January 2023 and FTX is very much in bankruptcy and still , when FTX’s advisers list its $3.3 billion of liquid crypto assets, the second-biggest single holding (behind $685 million of Solana tokens) is $529 million of FTT. Those tokens are valuable to the extent that (1) FTX comes back as a popular exchange and the FTT tokens let holders get valuable discounts on FTX fees and (2) FTX comes back as a popular exchange and uses some of its fee revenue to buy back FTT tokens. How likely are those outcomes? How likely do you think FTX’s bankruptcy advisers think those outcomes are? FTX is going around showing the world the code that allowed Alameda to take all of its customers’ money. Confidence in FTX is not coming back, not if FTX’s current managers have anything to say about it. They are going to have a hard time shopping their stash of FTT tokens. The explanation undermines the recovery.
And yet, here we are! Crapto is magical, don’t let your dreams be dreams, anything is possible.
goofy
January 31, 2023, 8:15pm
31
Levine with some more great stuff about the Celsius (“either the banks or lying or Celsius is lying”, oops!) bankruptcy, reviewing a bankruptcy court’s report:
Even worse, though, is the stuff about Celsius’s own CEL token. Celsius created CEL tokens, and sold them for cash to raise money, and also distributed them to insiders (Mashinsky) who sold them for more money; meanwhile Celsius was “market making” in Celsius tokens and pushing up their price. If you squint, what that sentence means is something like “Celsius took its customers’ real money and gave it to Mashinsky in exchange for some magic beans.” I mean, that is an argumentative and somewhat extreme way of putting it. On the other hand here are some actual quotes from the bankruptcy report!
During the height of Celsius’s market making, Celsius often sought to protect CEL from price drops that it attributed to Mr. Mashinsky’s sales of large amounts of his personal CEL holdings. As a result of Mr. Mashinsky’s sales, Celsius often increased the size of its resting orders to buy all of the CEL that Mr. Mashinsky and his other companies were selling. These trades caused Celsius’s former Chief Financial Officer to write “[w]e are talking about becoming a regulated entity and we are doing something possibly illegal and definitely not compliant.” As one employee noted in an internal Slack communication: “if anyone ever found out our position and how much our founders took in USD could be a very very bad look . . . We are using users USDC to pay for employees worthless CEL . . . All because the company is the one inflating the price to get the valuations to be able to sell back to the company.”
Yeesh! And:
In 2022, Celsius employees routinely discussed that CEL was “worthless,” stating that its price “should be 0,” and that Celsius should “assume CEL is $0 since we cannot liquidate our current CEL position,” and questioning whether any party (other than Celsius itself) was purchasing CEL.
And:
In April 2022, Celsius’s Coin Deployment Specialist described Celsius’s practice of “using customer stable coins” and “growing short in customer coins” to buy CEL as “very ponzi like.” A few weeks later when Celsius made another push to prop up the price of CEL, Celsius’s former Vice President of Treasury asked where the cash was coming from to make the CEL purchases and Celsius’s Coin Deployment Specialist replied, “users like always.” This same employee explained that at the time he made this statement, Celsius had “negative equity” and therefore necessarily was using customer funds when it made these purchases.
Aaaaahhhh! You can’t! You can’t send messages like that! If you find yourself messaging your boss to say things like “our business is very Ponzi like” and “we have negative equity so we’re using customer funds to buy worthless coins so our founder can cash out,” no! Stop! If you have written sentences like that, don’t send them to your boss! Print them out and get yourself a lawyer and a whistle-blower deal! My lord. This is not legal advice but what are you even doing?
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When I originally told you this all itt ETH was 1320.
2 Likes
Fuck yeah man soon I’ll be at -40%
goofy
February 9, 2023, 2:04am
37
In a very
Luxury brand Hermès International SA won its lawsuit against the digital artist behind “MetaBirkin” nonfungible tokens after convincing a Manhattan federal jury that Mason Rothschild’s sale of the NFTs violated Hermès’ rights to the “Birkin” trademark.
The nine-person jury returned a verdict on Wednesday, awarding Hermès $133,000 in total damages. They also found Rothschild’s NFTs aren’t protected speech under the First Amendment.
Look, do you know what is a good “artistic experiment that examines how society places value on status symbols”? Hermès . Hermès is running a constant sophisticated experiment in how society places value on status symbols: It produces status symbols, tries to price them to extract maximum value, tries to balance exclusivity against maximizing revenue, etc. You don’t need some computer guy to come along and be like “ooooh ooooh ooooh these handbags sell at a premium to their cost of production, what is society even doing, ooooh, ooooh.” Hermès does that! That’s Hermès’s whole business! They’re not confused about what they’re doing! The people who buy Birkin bags aren’t confused about what they’re doing! Rothschild didn’t need to clarify or examine it! Hermès is doing it fine!
Obviously Rothschild’s experiment instead examined how society placed value on computer images that imitate Birkin bags , and for a while the answer was “society values those pictures a lot because they are somehow status symbols.” In some sense anyone who does any scam is running an artistic experiment that examines how much money people are willing to give them, but that is not a defense!
I guess the next step is to seize the MetaBirkins and shred them? In the metaverse or whatever? And take a video of the shredding and sell that as an NFT? Man what an embarrassing time the NFT boom was.
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I’m pretty fully on the side of the luxury handbag monstrosity here. That’s how much I hate scammers.
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goofy
February 13, 2023, 7:51pm
39
Levine on regulating crypto, and why the SEC’s hands are no longer tied now in a way they kinda were in 2021:
When crypto is popular and exciting and going up, if you are a regulator who says “no, we must stop this,” you look like a killjoy. Investors want to put their money into stuff that is going up, and they are mad at you for stopping them. Politicians like the stuff that is going up, and hold hearings about how you’re stifling innovation. Crypto founders are rich and popular and criticize you on Twitter and get a lot of likes and retweets. Your own regulatory employees, who have an eye on their next private-sector jobs, want to be leaders in crypto innovation rather than just banning everything.
When crypto is going down and so many projects are evaporating in fraud and bankruptcy, you can kind of say “I told you so.” There is just a lot more appetite to regulate, or I guess just to shut everything down. “You are stifling innovation,” the indicted founder of a bankrupt crypto firm can say, but nobody cares.
He notes the SEC is starting to take more enforcement actions against crypto companies, including forcing Kraken to shut down their Ethereum staking program and telling Paxos (a stablecoin issuer) they’re going to sue them over their Binance USD stablecoin.
goofy
February 24, 2023, 3:04am
40
A throwback to Top Shot, the first big & hilarious NFT bubble that got so many of us started on them:
Judge refused to dismiss a lawsuit against Dapper for offering unregistered securities, finding it at least plausible that they might meet the Howey test for securities:
The offering of Dapper Labs’ NBA-branded “Top Shot” non-fungible tokens might be securities, a federal judge ruled Wednesday.
The ruling on a motion to dismiss comes a year and a half after a class-action lawsuit was filed against Dapper Labs and its CEO, Roham Gharegozlu, in New York. The lawsuit alleges Gharegozlu and Dapper Labs violated federal securities laws by offering a non-fungible token (NFT) collection – the NBA Top Shot Moments – without first registering with the U.S. Securities and Exchange Commission (SEC).
Levine wrote extensively about this today and I think he has a really good & clear explanation about why this kinda makes sense, in terms of Dapper having control over the entire ecosystem of Top Shot (the marketplace, the blockchain - it’s all theirs) and how that makes their NFTs a bit more security-like than a typical jpeg you might trade on Ethereum. Also covers some great stuff about how they took forever to get withdrawals up and running so you could, you know, actually cash out the money you put on their platform, and the chef’s kiss is citing their own marketing tweets:
The “expectation of profits” prong is, I think, the weakest: What if you were just buying these Moments because you love watching basketball highlights and you want to “own,” in some abstract sense, copies of limited editions of some of those highlights? But as with everything in crypto, there are awkward tweets where NBA Top Shot’s Twitter account promoted not the coolness of the highlight videos, but the amounts of money involved in Top Shots trading. The opinion quotes some of them, and adds:
Each Tweet promotes a recent sale or statistics of recent sales of Moments on the Marketplace. And although the literal word “profit” is not included in any of the Tweets, the “rocket ship” emoji, “stock chart” emoji, and “money bags” emoji objectively mean one thing: a financial return on investment.
Well, there you go, a court ruling that the “rocket ship” emoji “objectively mean[s] one thing: a financial return on investment.”
lol, they fucked around and I hope they find out
