December 23, 2022 Robert Paulson
Crypto Market May See Renewed Volatility as Whales Begin to Accumulate Bitcoin
"The crypto market has recently held steady, with bitcoin locked in the narrow range of $16,000 to $18,000 amid lingering macroeconomic uncertainty and FTX contagion fears. The perplexing tranquility may soon fade as bitcoin's historical volatility hits levels last seen before the late 2020 bull run and investors with ample capital supply begin to accumulate coins.
Not counting the moment leading up to the FTX fallout, which had slightly higher volatility than what we have now, this is the lowest level for realized volatility since the third quarter of 2020, just before the last bull run. Prior to that instance, volatility was this low at the bottom of the 2018 bear market.
The renewed accumulation of BTC by whales, or investors with ample capital supply and the ability to move markets, is another reason to expect some action in the market. Large wallets have accumulated over 400,000 BTC ($6.73 billion) since the cryptocurrency fell below the June low of $18,000 on Nov. 9.
Over the past week, large or 'whale-styled' wallets have experienced an inflow of over 70,000 BTC. Around 120K BTC was accumulated at the $16,100 level, which offers potential support given the scale of buying."
See Also: 5 cryptocurrencies to keep an eye on in 2023
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See Also: The CFP Board's Latest Report on Crypto Sets Standards for Advisors
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FTX Case May Bring SEC One Step Closer To Banning Crypto Exchanges
"It's no surprise that the SEC charged Ellison and Wang with securities fraud for manipulating the price of FTT, and for offering FTT as an unregistered security. That action follows a plethora of past moves taken by the securities regulator. But the complaint's language regarding FTT went notably further.
Wednesday's complaint labeled FTT "an illiquid crypto asset security," making the subtle—but crucial—point that the SEC views FTT as a security in itself, regardless of the manner in which it was offered or sold.
If the SEC can get courts to agree that crypto tokens like FTT are securities regardless of how they are offered, the agency would be able to go after more than just the projects that create those tokens. The SEC could target any intermediary that sells those tokens in any context. In such a scenario, major crypto exchanges like Coinbase, Kraken, and Binance would be exposed to immense legal liability, and either permitted to participate in crypto-wary registered exchanges like the New York Stock Exchange, or shut down.
The SEC has changed gears. Instead of going after projects, they want to go after the marketplaces and intermediaries."
See Also: SEC Calls FTT Exchange Token a Security
Caroline Ellison, Gary Wang Plead Guilty, Cooperating in FTX Investigation
"Two of Sam Bankman-Fried's closest former allies have flipped on him. Attorneys with the Southern District of New York announced Wednesday night that it had filed charges against FTX co-founder Gary Wang and the ex-CEO of Alameda Research, Caroline Ellison, securing their cooperation in their investigation into the spectacular collapse of FTX.
Meanwhile, the Securities and Exchange Commission separately announced that it was also charging the pair "for their roles in a multiyear scheme to defraud equity investors in FTX," and the Commodities Futures Trading Commission (FTC) announced that it had amended its fraud complaint, noting that Ellison and Wang "do not contest their liability" for engaging in fraud.
U.S. Attorney Damian Williams said both Ellison and Wang have pleaded guilty and are cooperating with the Southern District of New York. Wang, the commission said, created features in the code underlying the FTX trading platform that allowed Alameda to maintain an "essentially unlimited line of credit on FTX."
Caroline Ellison and Sam Bankman-Fried schemed to manipulate the price of FTT, an exchange crypto security token that was integral to FTX, to prop up the value of their house of cards.
Williams did not mention former FTX Digital Chairman Ryan Salame. Days before FTX and Sam Bankman-Fried filed for Chapter 11 bankruptcy protection, Salame alerted authorities in the Bahamas about FTX using customer funds to cover losses at Alameda Research."
See Also: Caroline Ellison Plea Agreement: $250,000 Bail, Surrender of Travel Documents, Forfeiture of Assets
Sam Bankman-Fried Released on $250M Bail Secured by Parents
"In his first court appearance since being extradited from the Bahamas, the former CEO was told he can live with his parents on $250 million bail secured by their Palo Alto house.
Bankman-Fried, who was brought to the U.S. overnight by the Federal Bureau of Investigation after his extradition from the Bahamas cleared on Wednesday, arrived at the courthouse in New York to face the U.S. felony charges for the first time. The case in the U.S. District Court for the Southern District of New York centers on accusations of fraud, money laundering and campaign-finance violations.
Bankman-Fried's release was secured by equity in his parents' Palo Alto, California, home, and a long list of requirements was included for him to remain free while he faces charges. He's not allowed to make financial transactions for more than $1,000, can't open new lines of credit, can't leave the house except to exercise and must go through substance-abuse and mental-health treatment, according to the agreement. Bankman-Fried has already given up his passport, and he'll be fitted with a tracking device.
Judge Gabriel Gorenstein argued that the monitoring device "would go very far to provide assurance" that he would stay put and that Bankman-Fried's fame would make it difficult for him to flee into hiding.
The cooperation of Ellison and Wang – who admitted playing active roles in the company's fraud – is likely to be key in the case against Bankman-Fried. They've admitted that the senior management was aware of lawbreaking in the movement of customer funds between the two firms."
See Also: Who Will Pay Sam Bankman-Fried's $250 Million Bond?
See Also: SBF received special treatment inside Bahamian jail: Report
See Also: FTX Investors' Loss Is Wall Street Lawyers' Gain
Ripple CEO Compares Wells Fargo Billions Mismanagement with FTX Collapse
"The world is (appropriately) outraged by SBF and FTX's fraud, but when Wells Fargo mismanages billions in customer funds as well, it's barely a blip on the radar.
On Dec. 20, the United States Consumer Financial Protection Bureau (CFPB) ordered Wells Fargo to pay more than $2 billion in redress to consumers, as well as a $1.7 billion civil penalty. According to the CFPB, the bank's conduct led to billions of dollars in financial harm to its customers and cost thousands of customers their vehicles and homes.
Over several years, Wells Fargo systematically charged its customers with ill-assessed fees and interest charges on auto and mortgage loans, unlawful surprise overdraft fees and incorrect charges to checking and savings account. There are 16 million affected customers in the case."
Marshall Islands Legally Recognizes DAOs as Domestic Limited Liability Companies
"The law recognizes decentralized autonomous organizations and enables legal entities registered in the country to formally adopt DAO structures and governance tools. The government hopes this latest move will encourage the growth of decentralized entities and their accompanying elements within the state.
The DAO Act of 2022 will allow DAOs to incorporate under Limited Liability Companies (LLCs), enabling them to identify as DAO LLCs. Additionally, the novel act allows for the creation of an investment fund for the government of the Marshall Islands to continue education and training around DAOs and their integration into the economy.
With this adoption of the DAO Act of 2022, The Marshall Islands commits its courts and its resources to the burgeoning world of decentralization, and recognizes the unique place that decentralized autonomous organizations can hold not just in the blockchain space, but in the broader economy as well."
See Also: Brazil's President Signs Crypto Regulations Into Law
Aave DAO Votes to Integrate Chainlink Proof of Reserves to Tighten Network Security
"Although the decentralized lending protocol's data is inherently on-chain, introducing Chainlink's PoR would help mitigate the risk of attacks on the Aave protocol.
Decentralized lending protocol Aave will implement a "proof of reserve" system to protect bridged assets on Avalanche. PoR smart contracts will give an extra layer of security to Aave's Avalanche implementation, but can also help mitigate attacks on bridged assets on the network.
Leveraging Chainlink Proof of Reserve, Aave can verify that bridged assets accepted on the platform are fully collateralized before allowing users to borrow against them."
Tron's Justin Sun Was Secret Top Client of Crypto Asset Manager Valkyrie
"Tron founder Justin Sun is one of the richest figures in crypto, and a good chunk of his bitcoin (BTC) is stored in one place: U.S.-based Valkyrie Investments. The altcoin kingpin had more than $580 million of BTC stashed with the crypto asset manager at one point in August, according to a private financial document that CoinDesk reviewed. That amounted to over 90% of money at Valkyrie's largest division, Valkyrie Digital Assets LLC, the document shows.
In other words, Valkyrie Investments, a money manager that pitches crypto products to Wall Street investors, mostly relied on Justin Sun, a controversial Chinese crypto billionaire. (The current state of Valkyrie's assets is unknown.) Sun has also said he's one of Valkyrie's biggest shareholders.
The financial lives of individuals are almost always nobody's business. Sun's previously undisclosed, outsized percentage of Valkyrie's assets under management (AUM) is an exception. The depth of the relationship is a matter of public interest because it raises questions about Valkyrie's reliance on a single client for growth.
Having one whale in an SMA doesn't necessarily pose a threat to clients with money in other products. But it could become problematic for the asset manager's fee revenue – and its ability to pay staff – if that client ever decided to leave.
Sun viewed Valkyrie as the Tron ecosystem's access route to U.S. investors, according to his public statements. In September 2021 he said Tron would work with Valkyrie to list its Tron trust on over-the-counter markets and ultimately help it create a Tron ETF. Both steps would mainstream the cryptocurrency in the U.S. Neither event has come to pass."
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