Bankman-Fried not guilty plea | Crypto Bank Silvergate Takeover Bait?

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Also: MicroStrategy sticks to long-term Bitcoin strategy, but uses short-term selling for tax advantage

FTX FOUNDER TRIAL SET FOR OCTOBER

Sam Bankman Fried pleaded not guilty to eight criminal charges related to the collapse of his FTX crypto empire in federal court in Manhattan on Tuesday, setting the stage for one of the most high-profile white-collar criminal trials of all time. While the plea was expected, it puts the case on track for months of jockeying before trial. The trial itself has been given a tentative start date of October 2, and prosecutors have said they will produce the bulk of the evidence against the former billionaire within two weeks. This will give Bankman-Fried and his legal team insight into the evidence prosecutors have gathered against him. The judge also granted a request by prosecutors to bar Bankman-Fried from accessing or moving funds belonging to FTX and its associated hedge fund Alameda Research, both of which he founded.

This week, the Department of Justice also moved to to input more than $400 million in FTX-linked Robinhood stock as part of an effort to take possession of assets the company still holds after allegedly spending billions of dollars in customer money. Bankman-Fried’s attorneys argued in Delaware court deposit Thursday that the shares should be returned to the former CEO because the company that owns them, Emergent Fidelity Technology, is not part of the bankruptcy estate. Bankman-Fried owns 90% of Emergent.

SILVERGATE DEPOSITORS LEAK

Falling share price threatens crypto-friendly bank’s independence after company reveals more than two-thirds of its deposits are took of in the fourth trimester. Citing “a transformational change” in the cryptocurrency industry that led to multiple bankruptcies last year, Silvergate provided preliminary results for the last quarter that showed its customer deposits of digital assets – the bulk of its business – shrunk to $3.8 billion by the end of the year. $11.9 billion as of September 30.

The bank was quick to point out that it held $4.6 billion in cash and cash equivalents as of December 31, allowing it to more than meet withdrawals from all of its crypto-related clients. But the shrinkage of a company that held $14.1 billion in assets in the digital currency sector at the start of last year and a market capitalization that fell to $355 million from $4.5 billion dollars since then have put its continued existence as a stand-alone company in doubt. Shares lost more than a third of their value in the week to Friday afternoon, slipping to $11.12. Speaking on a conference call to explain its release of fourth quarter metrics, executives raised the possibility that Silvergate is a takeover target, Yahoo reported, based on its bargain price, and such a transaction could be encouraged by banking regulators.

COINBASE MOVES WITH NEW YORK

The country’s largest cryptocurrency exchange by trading volume has agreed to pay $100 million as part of a settlement with New York regulators who allege the company violated anti-money laundering laws by allowing users to open accounts without performing sufficient background checks. Coinbase will pay a $50 million fine for “significant deficiencies” in its compliance program, which violated state banking laws and regulations, the New York State Department of Financial Services announced Wednesday. The company has also agreed to invest an additional $50 million to help strengthen compliance over the next two years. In an enforcement action, the department said Coinbase’s compliance system “failed to keep up with the dramatic and unexpected growth” in the exchange’s business as the prices of cryptocurrencies like bitcoin increased. than doubled in 2021. Paul Grewal, Chief Legal Officer of Coinbase, said the company has taken “substantial steps to address these historical shortcomings.”

CELSIUS FOUNDER ATTACHED WITH FRAUD LAWSUIT

New York State for follow-up Alex Mashinsky, founder and former CEO of Celsius
CEL
Network, claiming it “engaged in a scheme to defraud hundreds of thousands of investors” by offering loan products promising returns of up to 17% with “minimal risk”. “These promises were false, but proved extremely popular,” according to the lawsuit filed Thursday in the state Supreme Court by Attorney General Letitia James. Celsius filed for federal bankruptcy protection on July 13 to stabilize its business after suspending withdrawals a month earlier. The company claimed it was unable to pay its customers because some of its assets were illiquid. The lawsuit asks that Mashinsky pay an undetermined amount of damages caused by fraudulent, deceptive and illegal acts and return all assets he acquired from them and return to investors. It is also seeking to ban him from working in the investment industry in New York. The action comes a day after investors in Celsius’ 600,000 Earn accounts were told they would be at the bottom of the list of creditors in the company’s bankruptcy filing.

SOMEWHERE ELSE

DCG, parent company of Genesis, is closing its wealth management division [The Information]

Huobi’s HT Token Waves as Exchange Confirms 20% Workforce Reduction [CoinDesk]

SEC Intervenes in Binance’s US Bid to Buy Bankrupt Crypto Lender’s Assets [Financial Times]