FTX's Collapse Was a Crime, Not an Accident

December 1, 2022

The biggest crypto news and ideas of the day

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Hello and welcome to The Node. This is Daniel Kuhn and Xinyi Luo, here to take you through the latest in crypto news and why it matters. In today's newsletter:

In the news: Sam Bankman-Fried claims he "didn't knowingly" commit fraud, LedgerX prepares $175 million for FTX bankruptcy proceedings and Kraken to lay off 30% of its workforce.
The Takeaway: David Z. Morris writes about SBF's laundry list of alleged crimes.

– D.K.

Today's must-reads

Top Shelf

FTX's Bankman-Fried 'Didn't Knowingly Commingle Funds': FTX ex-CEO Sam Bankman-Fried again clung to the narrative that FTX's collapse resulted from an untimely market crash and insisted that he had not knowingly committed any crimes during an interview with The New York Times' Andrew Ross Sorkin. (Read the full transcript of the interview here.)

Nothing new came to light in the DealBook interview, though when asked about customer deposits Bankman-Fried doubled down saying he "didn't knowingly commingle funds."
Meanwhile, LedgerX, an FTX subsidiary, is preparing $175 million for its parent company's bankruptcy proceedings, which would offer a little help to repay FTX's more than one million creditors (perhaps including BlackRock's Larry Fink).

Kraken Cut 30% of Workforce Amid Crypto Winter: U.S.-based crypto exchange Kraken said Wednesday it is laying off 30% of its global staff – around 1,100 people – in response to the crypto market downturn. Kraken said as recently as June it would hire 500 people as other companies laid off staff, indicating a worsening mass crypto layoffs trend.

Telegram CEO Building Wallets, Decentralized Exchange: In his Telegram channel on Wednesday, the messaging platform's founder and CEO Pavel Durov announced he's committing resources to build a decentralized exchange and non-custodial wallets that could reach millions of users. Telegram planned to develop a blockchain, Ton, and raised hundreds of millions in an initial coin offering (ICO), before it was shut down by securities regulators.

More recent crypto initiatives have fared better: The messaging app sold $50 million in usernames in less than a month through its blockchain-based auction platform, Fragment.
Separately, non-fungible token (NFT) trading is now available on decentralized crypto exchange Uniswap.

– D.K. and Xinyi Luo

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Putting the news into perspective

The Takeaway

(Midjourney/CoinDesk)

FTX's Collapse Was a Crime, Not an Accident

David Z. Morris, CoinDesk's chief insights columnist, makes the case that Sam Bankman-Fried belongs in prison. He runs down a list of the crypto exchange founders' alleged crimes. Read the full story.

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Overheard on CoinDesk TV...

Sound Bites

"It takes time to conduct an audit of the scope and scale that is required of Binance."

– Binance Chief Strategy Officer Patrick Hillman, discussing the exchange's proof-of-reserves strategy, on CoinDesk TV's "First Mover"

The news in a sentence

Headlines

Polygon APIs to Soon Deploy on Web 3 Indexing Service The Graph | Ton Steward Looks to Draw Projects to its Ecosystem With $126M Rescue Fund | Bitcoin Custody Firm Casa to Add Ethereum Support | The Ethereum Foundation Commences Shutdown of Ropsten Testnet | Meta CEO Mark Zuckerberg Still 'Long-Term Optimistic' on Metaverse | IBM and Australian Stock Market's Blockchain Projects Failed, a Blow to Private Ledgers

An Interview with Minima Co-Founder Paddy Cerri

In looking to find how crypto will return to its roots, we had the opportunity to speak with Paddy Cerri, the co-founder and chief architect of Minima, an ultra-light blockchain striving to create a censorship-resistant, completely decentralized network. In our conversation, we talk about what true decentralization looks like, why we should care about censorship resistance and how Minima plans to create a better protocol for everyone. Read the full interview here

*This is sponsored content from Minima.Global.

What others are writing

Off-Chain Signals

FTX's Sam Bankman-Fried Wants You to Believe He's Just an Idiot Boy Genius (Gizmodo)
Rising Tether Loans Add Risk to Stablecoin, Crypto World (WSJ - paywalled)
While Crypto Bro Scammed Clients, Reporters Scammed Readers (FAIR)
Why Didn't the Government Stop the Crypto Scam? (BIG by Matt Stoller)
FTX's Collapse Validates Gary Gensler's Crypto Skepticism (Bloomberg - paywalled)