Molly White's Citation Needed - Issue 43 – Laser eyes

Episode Date: November 30, 2023

Two crypto firms emerge from bankruptcy, and a Bored Ape party turns out even worse than it sounds. Originally published on November 9, 2023.

I'm Molly White, and you're listening to the audio feed of the citation-needed newsletter. You can see the text version of the newsletter online at newsletter.mollywhite.net. Issue 43. Laser eyes. Two crypto firms emerge from bankruptcy, and a Boredate Party turns out even worse than it sounds. This issue was originally published on November 9, 2023. The first trial of Sam Bankmanfried is over, and I have been reunited with my beloved pets. My pup Atlas was so excited to have me home that I'm pretty sure he levitated. My cats might have noticed I was gone.

Although crypto and mainstream media alike, not to mention this newsletter, were dominated by coverage of the trial, happenings continued to happen in the rest of the crypto world. Let's catch up on what we miss. But first, there have been a few changes around here. It's November, which means my year-long fellowship with Harvard's Library Innovation Lab has wrapped up. It was a wonderful experience, and I am so grateful to have had their support for the past year. Now it's time for me to set out on my own to see if I can maybe make this work focusing full-time on this without additional funding. It's a little terrifying, but mostly incredibly exciting.

I have a bunch of ideas rattling around in my head, including trying to do more audio or video since the post voiceovers and trial live streams have been really well received. Stay tuned, and if you have any ideas of your own for things you'd like to see, please send them my way. Paid subscribers can leave a comment in the comment section, and anyone can send me an email. By the way, you might have noticed a branding change to the newsletter, which has finally landed on a name. Citation needed. For those of you who are not already aware, I've been an active Wikipedia editor for going on two decades and more than 100,000 edits now. The Wikimedia movement has dramatically shaped my approach to research, writing, and technology.

Citation needed felt like a good homage to that, and it encapsulates well my fondness, or compulsion, to dig into claims and separate fact from fiction. I think the newsletter will probably remain at newsletter.mollywhite.net, partly because because I'm terrified that changing the domain might break something and ruin everyone's bookmarks. But citationneeded.mollywhite.net and citation needed.news will get you here now, too. Now let's dive in. First, a bird's eye view. Crypto prices have been up, particularly over the last month or so. This is great news for people who hold crypto, but it is also great news for those who want to draw new people in with the same old get-rich-quick promises.

Prices will never be this low again. Look, they're already starting to go up. You better buy now. Along with price, euphoria has been climbing as well. I've yet to see someone, unironically say, have fun staying poor, but if the trend continues, I suspect it isn't far away. If history is any guide, along with price increases and exuberance in the crypto world, comes an influx of FOMO, hype men, and, of course, scammers.

A DeFi project is already promising its users 70% annual yields. Quote, memories are proving to be extremely short in the crypto world, writes Bloomberg. This is bullish for Web 3 is going great, I suppose. In Bankruptcies, FTX As FTX's founder has been on the witness stand, the leadership team installed to replace him has been focused on the bankruptcy. They've been speaking optimistically, suggesting that FTCS customers are likely to see a majority of their assets return to them,

something that is not so likely in some of the other ongoing crypto bankruptcies. Recently, they've been busy accumulating funds by selling or seeking approval to sell cryptocurrencies and trust assets. Meanwhile, some have gotten extremely excited on rumors of a possible FTCS exchange reboot, as three crypto firms have been vying to acquire what remains of the company, and as SEC chaired Gary Gensler gave a rather tepid comment in an interview that seems to have been interpreted as a ringing endorsement of the idea. It's not entirely clear to me why people are so excited about this,

given that the FTX bankruptcy team has just spent a year talking about how the exchange was a pile of hot garbage led by incompetent fraudsters. Over in the Third Circuit, the U.S. trustee has been continuing to argue that FTX needs an independent investigator in the bankruptcy case. The trustee first requested this shortly after FTX's collapse, but was shot down in February when Judge Dorsey agreed with the FTX bankruptcy team that it would be too costly, likely to the tune of more than $100 million. The trustee is continuing to argue, now in appeal, that the bankruptcy court is required. to appoint an independent examiner because of the total amount of debts involved in the case. In an interesting development, a group of nine law professors have filed an amicus brief, agreeing with the trustee and also arguing that, quote,

there are serious questions about the independence of debtors' counsel, end quote, and the ability of the debtors to effectively investigate themselves. They've cited concerns that lawyers for the debtors also represented FTX, and Sam Bankmanfried prior to the company's collapse, and even suggested that one of the legal firms, Sullivan and Cromwell, may have advised the debtors to cooperate extensively with criminal prosecutors in Bankman Fried's trial, quote, to deflect attention from its pre-bankruptcy role with the debtors. Spicy. The professors argue that there has been, quote, extraordinary secrecy, end quote, surrounding the case,

with, quote, such basic items as lists of the debtor's creditors and parties in interest, who the debtors will indemnify, orders appointing ordinary course professionals, and who or what the debtors are investigating, end quote, filed under seal or with redactions. A hearing on the matter was held on November 8, but the court has not yet reached a decision. This probably shouldn't surprise anyone, but the debtor team has also been complying with FBI subpoenas. Celsius The Celsius bankruptcy case is over. On September 25, creditors overwhelmingly voted to approve a plan to distribute some cryptocurrency assets to creditors,

restart the Celsius company, and allocate equity in the new company to creditors. On November 9, the bankruptcy judge confirmed the plan. According to the plan, most remaining cryptocurrency assets, amounting to around $2 billion, will be distributed to the roughly 600,000 people whose assets have been frozen, since the company halted withdrawals over a year ago. The new company, just called NewCo, will continue Celsius' Bitcoin mining and staking ambitions. This seems like a pretty risky gambit to me, given the limited profitability of Bitcoin mining, especially as another Bitcoin having looms, and the questionable legality of staking services,

according to the SEC. The bankruptcy plan has been estimated to achieve Celsius's earned custom, a roughly 67% recovery, though this is dependent on the success of the new company and on the success of litigation, said company intends to pursue against founder Alex Michinsky, who is also facing criminal and civil cases. BlockFi. Also exiting bankruptcy proceedings is BlockFi, who is still in the process of trying to recover assets from FTX and Three Arrow's Capital, but who has begun paying out custodial

customers. BlockFi wrote in a press release that, quote, we are proud to say that BlockFi reached its effective date more quickly and efficiently than many other retail crypto companies, which I guess is a bragworthy achievement. I mean, you still went bankrupt, we'll be winding down, and are estimating recoveries for earned customers could be as low as 40% of their assets. In the Courts Abraham Eisenberg and Mango Markets Avi Eisenberg, the guy who allegedly stole $116 million from Mango Markets and then bragged about it online, was set to stand trial in his criminal case in December.

However, after a complaint from his defense team that Eisenberg's recent and unexpected move from his New Jersey jail to MDC Brooklyn has been interfering with their ability to prepare, the trial has been rescheduled to April 24. The case is being overseen by Judge Arun Subramanian. This case should be an interesting one to watch because it involves Eisenberg allegedly manipulating futures markets for the mango token to wipe out all liquidity on the protocol. Unlike Bankman-Feed's trial, in which prosecutors mostly avoided

explaining complex cryptocurrency concepts to the jury by focusing on the plain old fraud, It seems prosecutors may really have to get into the crypto weeds with this one. Ugo Labs and Ryder Rips Board Apes creators Yugo Labs have prevailed in their trademark infringement lawsuit against artist Ryder Rips and co-defendant Jeremy Cain. Rips will have to pay almost $1.6 million in disgorgement and damages for copying the board apes NFTs in what he tried to argue was an art project aiming at drawing attention to the racist imagery and illusions used throughout the board apes illustrations.

Because Rips and Cain were found by the judge to have been, quote, obstructive and evasive throughout their depositions and during their trial testimony, end quote, and quote, unnecessarily and inappropriately made disgraceful and slanderous statements about Yuga, its founders, and its counsel during litigation, including calling Yuga's counsel, criminals who support, quote, racism, anti-Semitism, bestiality, pedophilia, end quote, and accusing them of, quote, using cartoons to market drugs to young children, end quote, they were also ordered to pay Yuga's reasonable attorney's fees. Yuga and RIPS have been ordered to agree on fees once before, when Rips was ordered to pay some during an earlier decision, and Yuga argued that reasonable was

$223,000, while Rips argued it was 26,400. So we'll see how well that all goes. Gemini and Genesis The war between Gemini and Genesis rages on, and the latest skirmish is a lawsuit by the former against the latter, seeking to rest control of 62 million shares of grayscale Bitcoin Trust, currently priced at around $1.6 billion. At least according to Gemini, Genesis had pledged the GBTC shares as collateral for the Gemini-earned customer funds they were borrowing from Gemini. Needless to say, the bankrupt Genesis disputes that these belong to Gemini. In ETSs

Part of the recent Bitcoin price surge may be attributable to a window that some have speculated might invite the SEC approval of Bitcoin ETFs. Many in the crypto world seem to believe it's a foregone conclusion that Bitcoin spot ETS, will be approved, and it's just a question of when. They have latched on to an observation by Bloomberg analysts who noted that if the SEC wanted to approve all 12-spot ETFs at once, as some think would be fairest, they could do so during an eight-day window between deadlines. Also, BlackRock is hoping to launch a spot Ethereum ETF. They're now adding to around five other contenders in that particular space.

In Binance. It's come out that they've lost another exec, their head of UK operations, but that's hardly a surprise by now. What is a surprise is that two of the most pro-crypto-congress people out there, Senator Cynthia Lemmiss, a Republican from Wyoming, and Representative French Hill, a Republican from Arkansas, are now urging the DOJ to hurry it up and charge Binance and Tether. Evidently, the same Wall Street Journal about crypto-denominated terrorist financing by Hamas and others that sparked a letter by Elizabeth Warren also raised concern in Lemison Hill. Lemison Hill also wrote of concerns over the journal's article's accuracy, which I described last week. The journal has since issued a correction and amplification to clarify the research they were citing.

In fairness to the journal, much of the error seems to have come from Warren's love. letter, which overstated the numbers in a way the journal had not, by claiming that Hamas and Palestinian Islamic jihad had, quote, raised over $130 million in crypto. The Web 3 is going just great, recap. There were 10 entries between October 23 and November 8, averaging 0.6 entries per day. 304.84 million was added to the Grift Counter. Himachil Pradesh Cryptoskam Almost all of the grift counter jump this week can be attributed to a massive cryptocurrency scam operating out of Himachal Pradesh, the northernmost state in India. Around 100,000 people fell victim to a scam that particularly targeted police and government officials,

some of whom in turn became promoters of the scheme and lent it legitimacy. Altogether, the scam pulled in around 2,500 crore, 300 million. It's not clear entirely when the scammers first began operating, but it could have been as far back as 2018. Indian police have arrested 18 people, including four members of police. The alleged ringleader, Supas Sharma, is still on the run. My eyes, they burn. After spending tens or hundreds of thousands on ugly ape pictures plus travel tickets to ape fest in Hong Kong, some members of the Bored Ape Yacht Club have been rewarded with photoceratitis.

The condition, better known as snowblindness or welders flash when induced by those things, can be incredibly painful, but is, fortunately, almost always temporary. This makes me feel better about all the laser-eyes jokes I can't help but make. Apparently, an event contractor seeking to produce the optimal swamp slash nuclear wasteland slash public restroom ambiance decided to install blacklights, but either didn't notice or didn't care that they were of the germicidal rather than entertainment variety. Reports quickly cropped up on Twitter of attendees who rushed to the hospital after experiencing searing eye pain. Quote, woke up at 3 a.m. with extreme pain and ended up in the

the ER, wrote one. Quote, I woke up at 4 o'clock and couldn't see anymore. Had so much pain and my whole skin is burned, needed to go to the hospital. Eugel Labs eventually acknowledged the reports, but downplayed them by claiming that, quote, much less than 1% of those attending and working the event had these symptoms. Eventually, they reported that lights, quote, installed in one corner of the event was likely the cause of the reported issues related to attendees, eyes and skin. Better late than never. The Department of Justice has unsealed an indictment charging the three executives of the massive safe moon pump and dump with conspiracy to commit securities fraud, conspiracy to commit wire fraud, and money laundering conspiracy.

Bolstered by B-List celebrity endorsements from the likes of Jake Paul, Nick Carter, Soljiboy, and Lil Yadi, the token peaked shortly after its March 2021 launch, before rapidly collapsing. Meanwhile, the executives siphoned funds they promised were inaccessible to them, which they used to buy luxury cars and real estate. Everything else. The CoinSpot Exchange was exploited. Wintermute declares their friendship over with Neer Foundation and Aurora Labs

after they refused to send $11 million. An MEV bot was exploited for almost $2 million. $1,000. UgoLab's social media lead resigns after racist and anti-Semitic tweets resurface. Sam Bankman-Fried is convicted on seven charges. Monero discloses that its community crowdfunding wallet was drained, and Ryder Rips loses board apes infringement lawsuit and is ordered to pay $1.6 million and legal fees. In the News I went on NPR's weekend edition to do a brief interview on what FTX's collab,

means for the cryptocurrency industry. It's titled, FtX is now defunct. Does Crypto have a future? I also went on the Crypto Critics Corner podcast in an episode titled Sam Bankmanfried's trial is going great. Casson Bennett of Crypto Critics Corner did a series where they invited various people reporting on the San Bankman Fried trial to come on their show and talk about it. It was a great series and I was delighted to be a part of it. I also talked to Wizzie Kim about how some of the chaos at FTX was hardly the anomaly many in the industry are trying to brush off, but rather, quote, pretty normal stuff for the crypto world where things are often being run by the seat of someone's pants. This is in Vox titled Sam Bankman-Fried's trial pulled back the curtain on

crypto. Worth a read. Ed Zichon has continued his excellent writing about the, quote, identical water brothers, end quote, and the shambolic situation over at Gemini and Genesis, in this case writing about the recent lawsuit from the New York Attorney General. That's titled A Billion Dollar Fraud in Plain Sight and can be found in his Where's Your Edat Newsletter. The Intercept has published some great investigative reporting about Cruise, the self-driving car division of General Motors. The organization unleashed its half-baked vehicles on the streets of San Francisco and

elsewhere, but according to journalist Sam Biddle, the company, news, they couldn't properly detect children, or sorry, small vulnerable road users. Protean magazine Palestinian poet Hiba Abu Nada wrote, I grant you refuge 10 days before she was killed by an Israeli air strike on Gaza. Protean has published an English translation. That's all for now, folks. Until next time, this is Molly White. Thanks for listening to this issue of the Citation Neutral.

newsletter. To learn how to support my work, visit mollywhite.net slash support. If you would like to read the text versions of these episodes, sign up to receive the newsletter in your email, or support my work on a recurring basis, go to newsletter.mollywhite.net.