FTX

What to expect from crypto regulation in the wake of the FTX scandal • ZebethMedia

By zebethcontrolPosted on November 20, 2022Posted in Crypto, FTX, regulationNo Comments

At our TC Sessions: Crypto event last week in Miami, I sat down with Bitwise Asset Management General Counsel and Chief Compliance Officer Katherine Dowling, Perkins Coie Partner Sarah Shtylman and Paradigm Policy Director Justin Slaughter to talk about the crypto regulation landscape, with a specific focus on the U.S. What we didn’t know heading into the panel was just how much would change about the industry owing to the fallout from FTX’s collapse the week prior. Slaughter in particular felt the impacts of the FTX fiasco firsthand: Paradigm wrote down a $278 million investment in the exchange following its declaration of bankruptcy. We talked about that up front, but mostly as a jumping-off point to discuss the knock-on effects for the state of regulation, which was itself already a contentious mess, particularly when it comes to U.S. lawmakers and the various federal regulators involved in the market, including the SEC and the CFTC. The key takeaways that all three panelists essentially agreed upon is that the benefit of the FTX situation is that there’s now more impetus than ever to arrive at some kind of regulatory framework specific to crypto in the U.S., and that there’s now ample demand from the industry side, as well as an opportunity to further educate regulators since they’re looking for illumination coming out of the FTX collapse. On the incentive side, there’s harm reduction, since regulators and lawmakers don’t want more FTX scenarios to continue to unfold, as well as FOMO on the business being done abroad in markets where they’ve raced ahead to encourage crypto adoption. Check out the full panel above for much more.

recruitment or retention? • ZebethMedia

By zebethcontrolPosted on November 18, 2022Posted in Equity podcast, FTX, maven, Startups, women's healthNo Comments

Hello and welcome back to Equity, a podcast about the business of startups, where we unpack the numbers and nuance behind the headlines. This week, Alex and Natasha discussed the latest and greatest of this consuming news cycle. Our goal with the episode, as always, is to go beyond what you may see in a 140 character-take on [insert big story here]. And in today’s recording? That wasn’t hard at all. We started with our good news segment: 1) Maven, now valued at $1.35 billion, is answering a countrywide demand: More fertility benefits and 2) Alibaba eyes logistics growth in LatAm as China commerce slows. We love a chance to talk about growth, despite all odds and even trends! Then, right off the heels of our amazing debut crypto conference, we take a minute to talk about the FTX Fall out. Yep, we’re talking about how one African Web3 startup got screwed over and why SoftBank joined Sequoia in marking down its investment in the crypto exchange. We then turn to the latest in layoffs: Amazon’s 3% cut, cuts at Morning Brew and Protocol, and Musk’s latest attempt to recruit (or retain?) Twitter employees. We still don’t know what’s happening there, don’t ask us. Ok fine, you can. And we’ll end by throwing this gem here, with little to know context: I volunteer as tribute. And that’s wrap. As always you can follow the show @equitypod, leave us a rating on Apple Podcasts and, most importantly, be kind to your people. Talk soon! Equity drops at 7 a.m. PT every Monday and Wednesday, and at 6 a.m. PT on Fridays, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts. ZebethMedia also has a great show on crypto, a show that interviews founders, one that details how our stories come together, and more!

Bahama homes were purchased with FTX corporate funds • ZebethMedia

By zebethcontrolPosted on November 17, 2022Posted in bankruptcy, Crypto, FTX, Sam Bankman-Fried, SBF, StartupsNo Comments

A new bankruptcy filing, first reported by CNBC, shows that FTX’s corporate funds were used to purchase homes in the Bahamas among other personal items. The details arise less than a week after the now infamous crypto exchange filed for bankruptcy – a decision that founder and former CEO Sam Bankman-Fried said he regrets. FTX’s new CEO, Enron wind-down veteran John J. Ray III, said in the filing that he never in his career had “seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.” “From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented,” Ray said in the filing. The document states that corporate funds of the FTX group were used to purchase homes and other personal items for employees and advisors. Ray added that “certain real estate” was recorded in the personal names of employees and advisors, and “there does not appear to be documentation for certain of these transactions as loans.” The newly-installed chief executive makes it clear that he’s not blaming all FTX employees for the potential mishandling of funds. “Although the investigation has only begun and must run its course, it is my view based on the information obtained to date, that many of the employees of the FTX Group, including some of its senior executives, were not aware of the shortfalls or potential commingling digital assets.” If that possible lack of blame extends to the real estate transactions is not clear. He adds that current and former employees are some of the people most hurt by FTX, and that “these are many of the same people whose work will be necessary to ensure the maximization of value for all stakeholders going forward.” FTX’s downfall began last week after Binance backed out of a deal to acquire the crypto exchange as a result of a due diligence process. News reports that FTX was mishandling funds and under investigation soon bloomed into the company filing for bankruptcy. Bankman-Fried, meanwhile, claims that he is still hoping to raise a $8 billion lifeline for the company. “Everyone goes around pretending that perception reflects reality, it doesn’t,” Bankman-Fried said in a Twitter conversation with Vox reporter Kelsey Piper earlier this week. “Some of this decade’s greatest heroes will never be known, and some of its most beloved people are basically shams.”

‘I’m worried about the overall lack of LP appetite going forward.’ • ZebethMedia

By zebethcontrolPosted on November 17, 2022Posted in Crypto, Double Down, Dragonfly Capital, FTX, Magdalena Kala, TechCrunch Sessions: Crypto 2022, Tom Schmidt, VentureNo Comments

During an unprecedented bull run, crypto-focused investors raised, and deployed, billions of dollars in capital. But now, not only are VCs operating in a bearish crypto market, they are navigating the fallout of the FTX collapse and the potential impact it will have on their investment strategies moving forward. Double Down founder and general partner Magdalena “Mags” Kala and Dragonfly general partner Tom Schmidt shared their views at ZebethMedia’s crypto conference in Miami on Thursday on what’s next in crypto in the wake of the FTX drama. Luckily, the pair each closed their respective funds this year — Schmidt’s firm closing on an “oversubscribed” $650 million vehicle — and Kala’s Double Down just one week before all the FTX goings-on went down. Both say they had already planned to proceed cautiously in deploying their capital, but now even more so. “I am worried about contagion risk and for the other shoes to drop,” said Schmidt, who counts a number of exchanges in his firm’s portfolio. “We’re still holding our breaths and taking a pause to reevaluate what we will do in the coming year.” “I’m more worried about builders not entering the space, builders leaving the space and the overall lack of LP appetite going forward,” he admitted. Kala said she feels fortunate to be sitting on dry powder in light of the current macro environment. “A lot of those who raised last year don’t want to have to raise again in 2023,” she said. “And so I think we will see a slowdown and higher bar for projects.” Schmidt said he has been “very slowly” deploying out of his firm’s third fund. “I have a reputation for being critical, and going deep to understand what’s happening,” he said. “Our long-term thesis is to use technology to create a new set of financial services, a financial substrate. And what we’re looking for are companies that fit that idea…at the same level of diligence.” A lack of diligence has been cited with regards to the FTX debacle, with many wondering how the crypto exchange managed to raise so much money despite what Schmidt called “red flags.” “The thing about FTX and Alameda is that it was so unbelievable when you heard it,” he said. “We were never fans. This was supposed to be blue chip and have blue chip investors backing them but the numbers never made sense. If you looked at how much they were making and how much they were spending on stadium sponsorships and donations, nothing really made sense.” In Kala’s view, the whole debacle highlights that “decentralization is actually needed.” But she is not surprised that many investors may have overlooked so-called red flags. “From a diligence standpoint, it can be that you see what you want to see,” Kala said. “In the moment you can be so taken by the narrative.” Schmidt believes that the past few years represented an “anomaly” in diligence and the traditional venture process. He recalls meetings with crossover funds backing a company, in some cases deploying 20x more capital than him, where the investor clearly did not have a fundamental understanding of what the company was doing. Overall, he does believe that regulation played a role in the FTX saga. “Certainly regulation could have helped. It was this certain environment that pushed them offshore,” Schmidt said. “I expect we’ll see more of an attitude adjustment…I’d like to see the U.S. be a leader on this front.” For Mala, “nothing has changed” with regard to the core fundamentals of crypto. She described FTX CEO Sam Bankman-Fried’s efforts when it came to regulation being “more like a dog and pony show.” “The real change is happening with real players,” she said. “But also the other thing that we see with VCs is that slowly we are having this change of guard who are actually knowledgeable [about crypto.]”

Is web3 really the new phase of the internet? • ZebethMedia

By zebethcontrolPosted on November 17, 2022Posted in Crypto, FTX, Marc Andreessen, sir tim berners-lee, web3, world wide webNo Comments

We are on the verge of a new phase of the web, or so the story goes. Its proponents have labeled it web3. While last week’s implosion of systemically important crypto exchange FTX showed that the tech industry is far from realizing that vision in terms of execution, the concept of web3 has been a fundamental driver for startups and venture capital over the past few years. If we are truly in the midst of a third wave, it’s important to understand the history of the web, how it evolved and how this new phase — if it is actually one — fits in this chronology. Is the so-called web3 the next logical step for the internet, one that will have a lasting effect on its evolution or something else altogether? We need to place what we call web3 in proper historical context and judge whether its rise truly marked an innovation cycle or is just a simple repackaging of existing tech to make it more palatable to an investor ecosystem hungry for the next big thing. It’s clear that one of the primary motivations for identifying a new phase of the web is the incredible wealth creation that accompanied the first two phases. Venture capitalists, entrepreneurs and operators in web3 continuously repeat the adage that web3’s current state resembles the early days of the internet. It follows logically, then, that early adopters and builders in the web3 space believe there is likely to be a significant financial reward for being one of the first in, just as there was with the earliest days of the web itself. As we wade through the history of the internet (yes, really!), consider how the web developed and grew, and whether you see a similar dynamic at play in crypto right now. In this tumultuous moment for the web3 vision, it’s worth examining whether the FTX collapse shows this new wave was a house of cards all along or whether the string of bankruptcies among web3 companies this year was simply a setback in the adoption of the inevitable future of the internet.

Maybe FTX was the real poster child for 2021’s startup excess • ZebethMedia

By zebethcontrolPosted on November 17, 2022Posted in due diligence, EC Blockchain, EC Cryptocurrency, EC Newsletter, EC venture capital, FTX, Startups, The Exchange, Venture, venture capitalNo Comments

If someone offers you a seat on a rocket, you don’t ask which seat. So goes one of Silicon Valley’s favorite platitudes, one that you can trace back (at a minimum) to former Google CEO Eric Schmidt and former Facebook COO Sheryl Sandberg. The idea is that if you are given a shot at working on something new and big, you just say yes and sort out where you fit in the organization later. The chestnut can apply in other circumstances. For example, if I was building a Very Cool Company that was perhaps set to break out and become the Next Big Thing, you might be more concerned about getting some of your capital into the business (a seat on my business rocket ship) than precisely how the business is run (asking which seat you are buying). The Exchange explores startups, markets and money. Read it every morning on ZebethMedia+ or get The Exchange newsletter every Saturday. Making a big bet on the future without knowing all the details can, per the Sandberg example, work out well. It can also … not. As with many business cliches, the rocket-seat philosophy is frequently over-applied. Instead of being reasonable advice to be bold in the face of uncertainty, it can also be used to make witless choices appear reasonable.

FTX exposure hits market makers and funds • ZebethMedia

By zebethcontrolPosted on November 16, 2022Posted in Crypto, EC Blockchain, EC Cryptocurrency, enigma, FTX, hedge funds, WintermuteNo Comments

The collapse of FTX is swiftly draining money from the crypto economy: Information reviewed by ZebethMedia indicates that market makers and funds that lost money on the exchange, until recently one of the largest cryptocurrency exchanges in the world, are more numerous than previously anticipated — and some might be in conversations with creditors soon. Dozens of market makers and fund managers in an invite-only Telegram chat responded to a poll titled “my/my firms [sic] current exposure to FTX.” ZebethMedia reviewed the results from the 147-member chat, dubbed “FTX creditors private.” Among the 70 respondents, 66% said they lost $25 million or less, 7% indicated that they lost between $25 million and $50 million, 6% lost $50 to $100 million, and 1% reported FTX-related losses of between $100 million and $500 million. The remaining 20% declined to provide a sketch of their potential losses, according to private documents reviewed by ZebethMedia. Who is in the cohort? “Anyone who was a big player was on FTX,” a source close to the matter said. “You couldn’t have a credible market-making business if you weren’t on that platform.” There are a few members of the chat who have spoken publicly, but the majority of the firms in the group have not gone public with their losses, the source said. “There’s a lot of funds out there who haven’t reported what they lost. There’s going to be a lot of contagion.” If the FTX collapse is anything like what happened with crypto exchange Mt. Gox (which was hacked and then filed for bankruptcy), what will result will be a long, drawn-out court case in which depositors try to recoup their losses. But some members of the chat are also exploring opportunities to sell claims of their FTX accounts. Individuals in the chat asked others if they’ve been able to sell their accounts over the counter, according to messages seen by ZebethMedia. Enigma Securities is looking to buy claims of individual or company accounts, according to group members. Enigma is a Financial Conduct Authority-registered crypto asset facilitator for liquidity, banking relations and custody solutions. “Enigma is looking to buy claims >10m via a Dutch auction as soon as this week. I can make an intro if anyone is interested,” one group member wrote on Tuesday.

SoftBank writes down nearly $100 million investment in FTX • ZebethMedia

By zebethcontrolPosted on November 14, 2022Posted in Crypto, cryptocurrency, FTX, Softbank, VentureNo Comments

As more details emerge regarding the events that led to FTX’s bankruptcy and stunning collapse, the cryptocurrency exchange’s investors are also being scrutinized. Namely, many people are asking just how could so many high-profile investment firms pour a collective $2 billion with apparently so little due diligence. The notorious Japanese investment conglomerate SoftBank, for example, is just one of many such firms that backed FTX after the startup raised a $400 million funding round in January, valuing the company at a staggering $32 billion. SoftBank, which invested as part of its Vision Fund 2, revealed days ago that it sunk just under $100 million into the company. That investment is now marked down to zero with SoftBank saying “it would not face a material markdown in the value of its stake,” according to MarketWatch. Of course it’s not the first time SoftBank has made an, er, error in judgment when it comes to its investment. It (in)famously poured at least $18.5 billion into WeWork, which along with its co-founder Adam Neumann, spectacularly fell from grace. SoftBank also put money in Katerra, a construction tech startup that also burned through more than $2 billion in funding before shutting down in June 2021. The firm also loaned $100 million to blood testing company Theranos in 2017 through a private equity arm. And it also pumped $500 million into digital mortgage lender Better.com before signing up to co-lead its never materialized SPAC. That company has been the subject of various scandals over the past year and has been struggling in the face of rising mortgage interest rates, a slowed housing market and volatile CEO. ZebethMedia has reached out to SoftBank for comment on its investment in FTX. On November 12, Nikkei Asia reported that SoftBank Group had “lost all the cumulative investment gains it had made through its Vision Fund business as global rate rises and a weakening economic outlook hammered the valuations of portfolio companies.” The publication went on to add that the “Vision Funds’ unrealized gains since the start of investment in 2017 fell to negative $1.46 billion in the July-September period, down from positive $8.49 billion three months ago, according to its quarterly earnings presentation.” SoftBank’s disclosure regarding its FTX investment came soon after Sequoia Capital also marked down to zero the value of its stake in FTX — “a stake that accounted for a minor percentage of Sequoia’s capital but as of last week likely represented among the most sizable unrealized gains* in the venture firm’s 50-year history,” as reported by TC’s Connie Loizos on November 9. But Sequoia had egg on its face for more than just putting capital into FTX. It also very recently (in late September) published on its website what Bloomberg described as a “ long, meandering profile of Sam Bankman-Fried, a.k.a. SBF, the now-disgraced founder of the bankrupt cryptocurrency exchange FTX.” Ironically entitled “Sam Bankman-Fried Has a Savior Complex — And Maybe You Should Too,” the 14,000 (yes, you read that right) piece was apparently “prominently displayed on the Sequoia website, right underneath the dictum, ‘We help the daring build legendary companies,’ ” as reported by Bloomberg. Unsurprisingly, as more details came out around the goings-on within FTX, that piece was taken down. Bankman-Fried stepped down from his role as CEO of FTX on November 10. The New York Times reported earlier today that “Pantera Capital and Galois became the latest hedge funds to announce losses tied to FTX, $130 million and $40 million, respectively.” Also among FTX’s long roster of investors are: NEA, IVP, Iconiq Capital, Third Point Ventures, Tiger Global, Altimeter Capital Management, Lux Capital, Mayfield, Insight Partners, Lightspeed Venture Partners, Ribbit Capital, Temasek Holdings, BlackRock and Thoma Bravo. Got a news tip or inside information about a topic we covered? We’d love to hear from you. You can reach TKTKT at TKTK or TKTKT. Or you can drop us a note at tips@techcrunch.com. If you prefer to remain anonymous, click here to contact us, which includes SecureDrop (instructions here) and various encrypted messaging apps.

Cleanup, aisle FTX • ZebethMedia

By zebethcontrolPosted on November 14, 2022Posted in Equity Monday, Equity podcast, FTX, Startups, VentureNo Comments

Hello, and welcome back to Equity, the podcast about the business of startups, where we unpack the numbers and nuance behind the headlines. Here’s what we got into on our Monday episode, a weekly kick-off of sorts: Stocks are mixed around the world, up in parts of Asia and Europe, but down sharply in the United States to start the week. Crypto prices have recovered modestly, but remain sharply depressed from the last week. The FTX damage continues to reverberate. Speaking of crypto, the FTX saga continues. The latest includes a hack on Friday, and a massive emission of new FTT tokens that was so poorly received that major exchanges pulled deposits of the now-radioactive security. All the exchange drama has led to other exchanges taking fire, and Coinbase looking great in contrast. Elsewhere in tech-land: Fake meat raises a bunch more money, Klarna is doing some neat product work, India has unbanned VLC, which was a head-scratcher to begin with, and e-commerce infra startups are still raising capital! And that’s all the time we had this morning! More Wednesday! Equity drops at 7 a.m. PT every Monday and Wednesday, and at 6 a.m. PT on Fridays, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts. ZebethMedia also has a great show on crypto, a show that interviews founders, one that details how our stories come together, and more!

FTX and Avalanche co-led $5M round for Joepegs NFT marketplace • ZebethMedia

By zebethcontrolPosted on November 14, 2022Posted in Avalanche, blockchain, Crypto, crypto ecosystem, FTX, NFT, NFT market, NFT marketplace, NFTsNo Comments

Although FTX collapsed last week, raises their ventures team contributed to are still being announced. Joepegs, an NFT marketplace on the Avalanche blockchain, raised $5 million in a seed round led by now-defunct FTX Ventures and the Avalanche Foundation, its co-founders who go by the pseudonyms Cryptofish and 0xMurloc, exclusively told ZebethMedia. “The funding from FTX Ventures was completed in June, and have since been transferred out of FTX prior to recent bankruptcy events,” the team said in a statement. The marketplace launched in May and has grown rapidly to the largest NFT marketplace on Avalanche with over $3.4 million in secondary NFT sales and 12,000 users. It also has an in-house production unit, Joe Studios, as well as an NFT Launchpad, which has on boarded over 50 projects to the Avalanche ecosystem, the company said. The co-founders also founded and remain involved in the operations of Trader Joe, a decentralized exchange on Avalanche (not to be confused with the American supermarket chain), which launched in early July 2021 and has a total trading volume over $88 billion. “As we started building this, we realized very quickly that in order to deliver a platform that really helps users discover great NFTs we have to invest in a lot more platform capabilities so that’s what the fundraise will go toward,” 0xMurloc said. “On top of that, we also create a lot of content on our end. We did this at the start to fill a need. Marketplaces are only as good as the content in the ecosystem.” Joepegs also invests in the operational side, beyond Avalanche, to partner with different traders, projects and artists “across the ecosystem,” 0xMurloc said. “That is something we do ferociously.” Earlier this year, Avalanche dove further into the NFT space after partnering with the largest NFT marketplace, OpenSea, which now operates on the blockchain alongside other platforms like Joepegs and Kalao. With about $408.2 million in total sales, Avalanche is the seventh-largest blockchain by NFT sales volume, CryptoSlam data shows. “People are focused on what is happening to the greater market,” 0xMurloc said. “Yes, there are less people playing with crypto and the NFT market as a whole right now, but, we do see that the interest from creators, brands and projects to dive deeper into web3 and NFTs – that appetite is not softening.” There are a lot of companies, creators and artists who are “eager to explore this form of commerce and community building,” 0xMurloc added. “We’re very bullish on the future of NFTs and what it could bring,” Cryptofish said. “The idea that you can have clothing backed by NFTs is very bullish. You see that with Azuki with their skateboards and Nike sneakers and we want to be on the forefront of NFT innovation with digital stuff and clothing.” As more alternative NFT products come out, NFT markets will have to adapt to accommodate, Cryptofish added. “Our vision on NFT marketplaces will have to be like Amazon over time. Initially it was a bookstore and now they’ve branched out to sell everything. That’s how I see things going.” In the short term, the team plans to continue driving in-house content and has new collections coming up in the near future, 0xMurloc said. “Longer term, we want to branch into different flavors of NFTs and explore what Fish mentioned, whether it’s fashion, physical merchandise or gaming. We’re excited about what’s to come.”