Unchained - Gemini vs. DCG Is Heating Up. Could Gemini Force Genesis Into Bankruptcy? - Ep. 440

Episode Date: January 6, 2023

Ram Ahluwalia, CEO and cofounder at Lumida, talks about the ongoing dispute between Gemini and Digital Currency Group (DCG), specifically focusing on the actions and statements of DCG CEO Barry Silbert and Gemini’s cofounder Cameron Winklevoss. Ram discusses various aspects of the conflict, including the potential commingling of assets between DCG and its subsidiary Genesis and the options available to Gemini if DCG does not cooperate. Show highlights: how Cameron Winklevoss’s tweets attempt to put Barry Silbert in the same class of actors as Celsius and BlockFi whether the assets of DCG and Genesis are commingled what Gemini’s options are if DCG does not commit to cooperate whether Gemini will file an involuntary petition for Genesis to enter chapter 11 bankruptcy why Barry's statement that DCG didn't borrow $1.675 billion from Genesis is "very surprising" to Ram why it is relevant whether Genesis has a liquidity issue or an insolvency one whether a class-action lawsuit alleging Gemini's earn product is an unregistered security has any merit the essential role of the $1.1 billion promissory note and whether Genesis will drag DCG into bankruptcy if DCG goes under, what would happen to Grayscale whether Valkyrie is going to become the hero and save GBTC why DCG needs to accept the credit committee terms, according to Ram Thank you to our sponsors! Crypto.com Guest Ram: Twitter Ram Ahluwalia’s thread on Fir Tree and Valkyrie Previous appearances on Unchained: Genesis May Be Facing Bankruptcy. Could It Take DCG Down With It? Why Genesis Could Very Well Be Insolvent, Not Just Illiquid Previous coverage of Unchained on DCG and Genesis:  ‘The Last Big Whale’: Why the Crypto Contagion of 2022 Eventually Hit Genesis Adam Cochran on Why Crypto Prices Will Be Down Bad for the Next Six Months Is the Collapse of Crypto Lending Over, or Is It Just Starting? The Chopping Block: SBF Wants to Win in the Court of Public Opinion. Will He? Genesis: Unchained:  ​​Gemini Co-Founder Accuses DCG’s Barry Silbert of ‘Bad Faith Stall Tactics’  Genesis CEO Says Firm Needs More Time to Find a Solution Genesis Warns of Bankruptcy If Funding Plans Fail: Report Protos: Scoop: Larry Summers gives up advisory role at crypto firm DCG amid criticism Forbes: Gemini Faces Class-Action Lawsuit Over Unregistered Interest-Bearing Accounts WSJ: Crypto Lender Genesis Asks Binance and Apollo for Cash Decrypt: Grayscale Ethereum Trust Trades at Record 60% Low Against Ethereum - Decrypt The Block: DCG CEO Barry Silbert updates shareholders, says company will emerge 'stronger' FT: Crypto broker Genesis owes Winklevoss exchange’s customers $900mn Learn more about your ad choices. Visit megaphone.fm/adchoices

Hi everyone. Welcome to Unchained. You're a no hype resource for all things crypto. I'm your host, Laura Shin, author of The Cryptopians. I started covering crypto seven years ago and as a senior editor at Forbes was the first Mainstream media reporter to cover cryptocurrency full-time. This is the January 6th, 2020, episode of Unchained. Need to keep up with the biggest news in crypto? Get Unchained in your email Monday through Saturday. Go to Unchained Crypto.com. to subscribe. With the crypto.com app, you can buy, earn, and spend crypto in one place. Download and get $25 with the code, Laura. Link in the description. Today's guest is Rom Alawalia, CEO and co-founder at Lumida. Welcome, Rom. Pleased to be here.

Thank you for having you, Laura. This week, we saw tensions ratchet up even further between Gemini and Genesis slash DCG over the $900 million in assets in the Gemini Earned. which was lent to Genesis to produce a return. Gemini co-founder Cameron Winklevoss wrote a public letter to DCG CEO Barry Silbert in which he said, you have been engaging in bad faith stall tactics, among other things. What were the main points of this letter and what do you think its significance was? So overall, the picture for DCG is looking increasingly grim.

And we'll get into that. It's a really unfortunate state of play for DCG, Gemini Erne and GBTC holders. The open letter that Cameron Winklow's posted on Twitter has a few notable highlights. I will call out two sentences in particular. One, he calls Barry's behavior as not only unacceptable quote, but also unconscionable. That's one. The second, this is a key sentence. He says, you referring to Barry, you took this money, the money of school teachers to, quote,

fuel greedy share buybacks, illiquid venture investments, and kamikaze gray scale NAV trades that ballooned the fee-generating AUM of your trust, all at the expense of creditors and all for your own personal gain. Now, those are obviously fighting words. What Cameron is doing is he's coming right up to the line of accusation of improprietor behavior without crossing the line. What Cameron has done with that second sentence, has put Barry into the same class of actors as Celsius and BlockFi. BlockFi, of course, has the SEC enforcement action. They're bankrupt. And Celsius, today was announced that the New York Attorney General is taking action. So what he's claiming is that DCG has borrowed customer funds from Gemini Earn through the subsidiary Genesis to engage in self-deafes.

healing, that's the reference to personal gain, by borrowing to fund this levered bet on GBT. So he is also using this term of unconscionable activity. So he is coming right up to the line. He's not saying he's committed fraud, but he is getting as close as you can to intimating that there's improper behavior. One other thing I noticed was that Cameron also told Barry that DCGs and Genesis his assets were beyond commingled.

Would you say that's accurate? This is a legal question, but let's look at the facts. Genesis was borrowing deposits from Gemini Earn and other creditors. Genesis then made loans, and the primary counterparty, the primary recipient of those loans, was DCG. So DCG, net net is borrowing from Gemini Earn. Now, what does he mean by commingled? or question we don't really get into. But the usage of the word commingled, he's being very deliberate

in that word choice. What other institution was recently taken down because of commingled funds? That's, of course, FTX and SBF. So he's being very deliberate in his work choice. Of course, this letter was reviewed by a number of outside counsel before it was published. And would you say that the demands by Cameron to get in a room with Barry are reasonable and also kind of like a standard way to hash this kind of thing out? Yes, it's extraordinary reasonable because Genesis is in default. They're past their three-day cure period. Notices of default have been sent to Genesis, which by accounts seem to be being ignored. And what DCG and Genesis and Gemini are attempting to do is an out-of-court workout. That's a great idea because it saves

significant amount in legal fees, number one. Number two, it creates all, it creates clarity for all the parties involved, as opposed to going through a public, lengthy court process where you don't have clarity on what the outcome of that would be. This also explains why there's been so little updating of the Gemini Earn blog site. It must be incredibly frustrating, of course, for anyone that's a Gemini Earned client. And now we know why, at least per Cameron's claim. it appears that DCG is not going to the table.

They're not engaging. Now, bearing DCG's defense, they are saying they've put some counterproposal on the table. So, you know, those are both sides of the story. And of course, Cameron has put out a date of January 8th, which is this Sunday for DCG and Genesis to reply by. And so, but if DCG does not, if by Sunday they haven't publicly committed to doing so, then what can Gemini do at that point? So, well, then Gemini can take action, such as filing involuntary petition for Chapter 11. So just to be clear, though, so DCG and Genesis won't ever say that they're not trying in good faith to seek a settlement.

They, in fact, are throwing indications out there. They're making attempts. And the interpretation from Cameron is that those are really faint, that they're not really sincere, and that these are, quote, stall tactics. So it appears that the strategy of DCG and Genesis is to buy time and avoid accepting the creditor committee terms because as soon as those creditor committee terms are accepted, DCG wouldn't affect being in a form of corporate indentured servitude

where the cash flows that are generated from grayscale and DCG are diverted to make coal, Gemini Earn, and other creditors over many years. Okay, yeah, talk a little bit about the what the creditor committee has demanded and whether or not you think that that solution is likely to happen. So I have no insight into the creditor committee terms of negotiation. In general, when you have this type of out-of-court workout, there are a few levers. So one levers pay us now X dollars. And the second levers pay us over time the remaining balance. The third lever is convert debt to equity. I can't imagine there's much interest in converting debt to equity. We've got retail investors

that thought they had a savings account. And these creditor classes have to be treated equitably and fairly. Otherwise, that can be contested in court. So the outline would be something like, hey, here's maybe 30 to 40 cents on the dollar, just inventing some numbers up today. And then the balance paid over time via the cash flows from DCG and Grayscale. So after Cameron's tweet, Barry wrote back, DCG did not borrow $1.675 billion from Genesis. DCG has never missed an interest payment to Genesis and is current on all loans outstanding. Next loan maturity is May 2023. And this is where he says that DCG did deliver to Genesis and to Gemini's advisors a proposal on December 29th that hasn't received a response. So why do you think it is that Barry

saying that DCG has not borrowed $1.675 billion? million dollars from Genesis. This is a very surprising statement because in the DCG letter to investors, Barry describes how they have a $1.1 billion promissory note that is due in 10 years in June 233. He doesn't name the counterparty to that. He does say in the immediately following sentence, I'm looking at the letter now, as we shared in our previous shareholder letter in August 22, DCG stepped in and, quote, assumed certain liabilities from Genesis related to three hours capital default. So I think Barry engaged in seller financing, meaning that they purchased the defaulted three hours capital receivable from Genesis. And they finance that using a promissory note, meaning that they would agree to pay Genesis back over 10 years.

That's my interpretation of it. it leaves more questions. Like, why isn't Barry stating who the counterparties? If he's saying he did not borrow $1.67 billion from Genesis, he is saying in the letter that he did borrow that dollar amount, then he can just simply state who the counterparties are. He has stated in the letter that $575 million was borrowed from Genesis, to be clear, and that low maturity is in May 23. He is disputing that he borrowed $1.1 billion from Genesis. Another thing that's very odd is, look, several creditors to Genesis have contacted me, and I've seen the balance sheet of Genesis, at least a balance sheet that they curate and present to their customers. So it's a certain redacted kind of

balance sheet. And you can see that there's a $1.1 billion plus asset on Genesis balance sheet. So you can see that these numbers do tie out to the DCG letter. And also that loan is treated as a loan to an affiliate. But it raises more questions. For example, if that is a 10-year loan, as stated in the DCG letter, is it the case that Genesis is treating that as a current asset? Now, Genesis would have an interest in treating that as a current asset so they could claim that they're not insolvent, so they could claim that their current assets exceed their current liabilities. And this would explain what Hasid pointed out some time ago, which is that the 10-year loan has a callable feature in the event of Chapter 11.

What Calable feature means is that if Genesis goes through Chapter 11, then that $1.1 billion is due upon demand, do it immediately. So it just raises further questions and Barry's not answering those questions. And you're talking about Haseeb Qureshi of Dragonfly Capital? That's correct. Okay. All right. In a moment, we're going to talk about a number of other developments involving Genesis,

but first a quick word from the sponsors who make this show possible. With the RBC Avion Visa, you can book any airline, any flight, any time. So start ticking off your travel list. Grand Canyon? Grand. Great Barrier Reef? Great. Galapagos? Galapagos? Switch and get up to 55,000 avion points that never expire. Your idea of never missing out happens here. Conditions apply. Visit rbc.com slash avion.

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On Wednesday, Genesis CEO, Darar Islam, wrote a letter to shareholders that the firm needs more time. In addition, this week, the company laid off 30% of its staff. What do these developments say to you about how likely it is that the company can actually pull through? Genesis is, of course, buying time. I don't think they need much time. Look, Lehman Brothers, in a three-day weekend, which is a far more complex institution, filed bankruptcy papers. So DCG is less complex than Lehman Brothers. Look, they're looking to buy time because as soon as the terms of the credit committee are accepted,

it would imply significant layoffs for DCG as well as Genesis. And it raises into question what happens to the GBT holdings. Would they be sold on the open market, et cetera? Yeah, so now we're talking about in Grayscale. there are so many different entities here that start with a G. Before we get into that, I do want to ask about a couple of things involving Gemini. One is that there's a couple of lawsuits or quasi lawsuits against Gemini. One is alleging that the earned product was actually a security and therefore it should have been registered with the SEC.

And the other one is what's called a request for a class action arbitration, just a different way. kind of of doing a class action lawsuit. And three Gemini Earn users have filed that against Genesis and DCG, saying that Genesis failed to return Gemini Earned users' digital assets as required under the firm's master agreements. Do you think that either of these lawsuits have any legs? Yes. Let's start with the master agreements. So the master agreement has a representation to solvency. What does that mean? It means that Genesis is reping to any creditor that they're solvent. And this is why you see, including the communication this week and including the DCG letter to shareholders, that they keep insisting that Genesis has a

liquidity issue and not a solvency issue. If Genesis was found to be insolvent and they took customer creditor funds in, then they would be in violation of contract law. So one of those claims, which you pointed out, I think has merit under the basic question around how did DCG fill the impairment or the hole that occurred on Genesis's balance sheet due to the defaulted three-horse capital balance? You can only fix an equity hole by adding new capital. DCG has not added enough capital to repair the damage from the defaulted loan. There was a set of transactions and called around this $1.1 billion loan, which appears to an attempt to restore to solvency. So I think there's some merit there, but again, I have not seen the line items on Genesis

is Pallenshe. The second question around, was this a securities offering? I believe it was. Look, what is a security? It's when you offer an investment contract to a part, with an expectation of profit and you rely on the efforts of others. Those are the prongs of the Howie test. By the way, the loan agreement acknowledges or at least contemplates the possibility that the loans could be considered securities. So, you know, Gem and I had very good lawyers when they drafted that agreement. And what it says, by the way, is that if these loans are treated as securities,

then the loans are unwound and have to be paid back immediately. Of course, that's a moot point. now because Genesis has suspended all withdrawals. But I do think that that exposes liability. And of course, it's been publicly reported that state attorney generals are investigating Genesis. It's been alleged that the SEC is also investigating Genesis, which would be very ironic since DCG filed suit against the SEC. But my layman interpretation is that that is an unregistered security offering made to the public with insufficient risk factor disclosure, such as a PPM. Okay. Wait, I'm sorry, PPM. Can you define that?

A PPM is a private placement memorandum. So when you invest in a private company, you receive, depending on the nature of the filing and so forth, but there's a disclosure of risk factors. And if you invest in a startup or you invest in a credit instrument, the PPM would have 10 to 20 pages of risk factors. There is a, is no PPM, the disclosure merely states that Genesis is the counterparty to the loan. So if you're a retail investor, how do you have sufficient information to underwrite the credit risk? And beyond that, what business do you have investing in a commercial credit operation? The standard for offering a security to the public is very specific. That standard is called the S1 filing. And that S1 filing is what

we also call an IPO. Clearly there's no S1 filing here. Clearly there's no IPO. It looks like an unregistered securities offering made to the public. Okay. Yeah. So now let's talk about DCG and by extension, Grayscale, which we kind of got up to at a certain point.

Do you think that Gemini could force Genesis into Chapter 11 bankruptcy? And if so, what would happen to DCG and Grayscale? Yes, Gemini could force Genesis into Chapter 11 through involuntary petition. it just takes three other creditors that have a minimum bolus of exposure. And my understanding is that other creditors are already taking this line of action that are outside the creditor committee. So that is likely the course of action if there's no resolution by the Sunday January 8th. That $1.1 billion promissory note that DCG cites in their investor letter, it is a noose

around DCG's neck because it links Genesis to DCG. because Genesis' primary asset is this loan to DCG, a $1.1 billion. So it gives a pathway for creditors to Genesis to have a claim on DCG itself. Wow. And so essentially that would also then take DCG under? Well, then you have to start asking questions around, is DCG going to be exposed to Chapter 11? But now it makes sense why Barry is saying they did not borrow from Genente.

You see, he's trying to distance DCG from Genesis. He's trying to eliminate those obligations. And also, you can see this around the Grayscale Trust. Grayscale Trust removed Genesis as one of its authorized parties. So, Barry is looking into the future, and he's trying to take actions to limit his liabilities wherever he can. But the answer to your question on DCG, yeah, look, the picture is grim. rim, Genesis is insolvent. They had $2.5 billion loaned to three errors capital. It's defaulted. Not only that, we know that the value of three hours capital assets have declined over time. I have a tweet thread on this analyzing the holdings of the three hours capital for the bankruptcy docket. Those tokens are trading down worse than the overall market. So there should be yet another impairment that Genesis is experiencing here because they should expect to receive less recovery.

Wow. So, I mean, since you admitted that you believe that a Chapter 11 bankruptcy for Genesis is one of the more likely outcomes than it sounds like the same would happen to DCG? Well, it's, I think there's a real possibility that that could take place. Like, what we don't know is the terms on that $1.1 billion called the loan. If the term of the loan requires immediate payment, then yes, DCG is that great. risk because DCG is not going to have $1.1 billion in cash line around. DCG has something like $500 million in GBTC holdings that they could liquidate. And of course, the discount keeps widening, perhaps in anticipation of that. But they still would have a $600 million shortfall. Where is that cash going to come from? Grayscale generates maybe $170 million net income per year.

That's not sufficient cash flow. And there's a $575 million low. payable in May 23, which Barry acknowledges in the letter and its statement this week to its subsidiary genesis. So there's not enough cash to go around. There are too many obligations for DCG to me. DCG has $2 billion in loans outstanding, again, per their own letter. And if you value, if you sum up the value of DCG's assets, it does seem like they're well short of that. And so if DCG goes under, then presumably Gray Scale would go under and that would unwind all the investment trusts?

No, no, I don't think we're going to go that far. I don't think we're going to go that far. So, yeah, just to want to be very clear about that one, right? So the likely course of action would be in the Chapter 11 process, first, you know, liquid securities would be sold off first. That would include GBTC. They would attempt to auction and find an orderly transaction as opposed to dumping on the market. market, right? The other part is the appropriate response will be to seek a buyer of Grayscale

intact. It would be to auction off the business in whole. And that makes sense because Grayscale is a bona fide business, make $170 million in net income. Okay. Okay. So maybe that would happen. Well, in the meantime, we have some other interested parties that aren't actually traditional crypto entities who've been poking around here. The hedge fund Fur Tree has filed a complaint against Grayscale. It looks like they've taken an interest. And there's also Valky that's proposed becoming GBT's sponsor and manager. Talk a little bit about these developments and what you think the significance is. Yeah, they're really strange bedfellows coming together here and really putting their boot on the neck of DCG. So Fur Tree is a value investor. They're three. They're three

billion assets under management. They generally invest in value stocks like oil and tobacco. They don't appear to be long the crypto sector. Also, they have a short on tether. They were short on USDT. They initiated that short, or at least they announced that short March of last year. And they expect that that short will pay off about a year later. That puts us to three months from now. Of course, USDT is maintaining its peg. So my interpretation of the fir tree, complaint is that it's a way to add pressure is to shake the stools supporting the crypto market and DCG and Genesis is a weak stool. It's worth pointing out, it's weak, weak leg of the stool, it's worth pointing out that the fir tree complaint, one, alleges that DCG and Grayskill

isn't sincere about converting to an ETF, that they want to keep this as a cash cow. Second, they don't seek remedy from the courts, right? If you think that you want to change the behavior of Grayscale that you would ask the court for some kind of relief. Instead, they ask for information rights. They're asking for data, books, and records. So I believe Fertree is trying to shake the stool and making it more difficult for DCG to raise outside venture money. Because if you can raise outside money, then you can start plugging these holes and getting back to business. Valky has raised their hand and said, look, we can be the program managed for gray scale will charge only 75 bips, not 200 bips, one, and two, they would elect for the

Reg M, which would enable the redemption of GBT at the NAV of the underlying Bitcoin. And that mechanism would close the gap. So Valkyrey does appear to be like this white knight or this hero that could save GBT. However, per the trust agreements, there's no legal mechanism for. gray scale to change the program sponsor unless gray scale agrees to do so. So gray scale would have to terminate itself. There's some ongoing legal analysis around whether if you get a majority of GBT shareholders, can they make a legal motion to modify the program sponsor? We'll learn more about that. But even that, you know, is a difficult path to move. So all to say, I don't think

the furtree of the Valky really do much other than adding pressure on DCG. making it more difficult for them to raise money. They're trying to maybe dislodge the gray scale asset from DCG. All right. So we kind of address this question, but I just want to ask you a little bit more directly. So at this point in time, what would you say is most likely to happen in this whole situation? So January 8th is the key date. The Cameron's put out there and said, look, we need a response by this day.

They put some proposal. DCG has to accept or reject that proposal or counter and appears that they've countered. It doesn't look like that that proposal will be accepted, which would be very unfortunate. We can come back to why I think they ought to accept the credit committee terms, in which case then Gemini could, as agent, follow through an involuntary chapter 11. So Gemini really does have to go down that path if they're not getting good faith engagement from Genesis, because if they don't go down that path, then they're not representing the interests of Gemini Earn. and they could be exposed to liability.

So there's a shot clock on January 8th. There's another shot clock on these notices of default, which Genesis has received. I've been informed that from multiple creditors. It appears that they're ignoring that. Third, there are these additional class actions. And fourth, again, the longer this goes on, more regulators take a look at this.

Again, we saw the action from New York Attorney General against Celsius. That was about six months after Celsius suspended withdrawals, maybe five months after. So again, there's an SEC investigation allegedly. Time is not on the side of DCG. This is why DCG needs to accept the creditor committee terms. It'll be painful, like a substantial dilution, but the alternatives of shrinking the pie, paying out legal fees and more liabilities and the lack of clarity around what a potentially

disorderly liquidation of these assets could be through a bankruptcy process. They don't help the crypto sector. It doesn't help crypto jobs. doesn't help the crypto asset class. All right. Well, I guess we'll see if DCG ends up taking your advice. Okay, well, thanks so much for enlightening us around this grand saga and also for coming back on Unchained. My pleasure.

Thank you, Laura. Have good one. Don't forget. Next up is the weekly news recap. Stick around for this week in crypto after this short break. Welcome aboard via rail. Please sit and enjoy. Please sit and stretch.

Steep. Flip. Or that. And enjoy. Via Rail, love the way. Thanks for tuning in to this week's news recap. At his arraignment, Sam Bankman-Fried pleads not guilty. Sam Bankman-Fried, the former CEO of FFTX,

pleaded not guilty to eight counts of fraud, money laundering, and other financial crimes at a court hearing in Manhattan on Tuesday. The charges included wire fraud, violations of campaign finance laws, and securities fraud. If found guilty, the sentences for all the charges adds up to 115 years in prison. He has also been accused of violating political contribution laws by donating to candidates and committees in New York under another person's name. During the hearing, Judge Lewis Kaplan granted a request from Bankwin-Fried's lawyers to seal the names of two individuals who had secured his release on bail with a bond. Federal prosecutor Danielle Sasssoon told the court that Bankman Freed had worked with foreign regulators to transfer assets that FTX's U.S. management had been attempting to seize.

As the process plays out, SPF is not gaining more allies. Reuters reported that Daniel Friedberg, FTC's former chief regulatory officer, provided information to U.S. prosecutors, the FVI, the Southern District of New York Court, and the SEC about the activities of FTC and its sister trading firm, Alameda research. Bankman Freed, who was released on a $250 million bail bond, will remain under house arrest at his parents' home in California. However, his bail conditions have been amended to prohibit him from accessing or transferring any FTX or Alameda associated assets. Notably, though, 12 SPF-linked wallet transferred $144,000 worth of assets to different destinations, which included transactions on January 2nd and January 3rd, raising suspicion. from industry watchers. Regulators in the U.S. sees FTX's stake in Robin Hood. The U.S. government seized 56 million Robin Hood shares, worth about $450 million from FDX. The share's

ownership is being disputed by FTCFRI and creditor Jonathan Ben Shimon. The Department of Justice believes these assets are not part of the bankruptcy estate and may be subject to forfeiture proceedings. The DOJ is also trying to seize FTCS assets held in accounts at Silvergate Bank. Speaking of the crypto-friendly bank, the Wall Street Journal reported that during their recent market downturn, Silvergate was forced to sell assets at a loss in order to meet $8.1 billion in withdrawal requests.

The bank also reduced its staff by 40%. An affidavit signed by Bankman Freed in an Antica court in December revealed that he used funds borrowed from Alameda research to purchase more than 7% of Robin Hood's stock. Additionally, the Southern District of New York created an FDX task force to trace and recover lost funds belonging to customers of the collapsed exchange. As part of the bankruptcy proceedings, the debtors of FTX will request the return

of seized assets worth $296 million from the Bahamas Monetary Authority. Moreover, the country's Securities Commission is disputing statements made by the new CEO of FTX, John Ray III, calling them unfounded and based on incomplete information. New York AG sues former Celsius CEO for fraud. The New York Attorney General filed a lawsuit against former Celsius CEO Alex Mishinsky, accusing him of defrauding investors of billions of dollars through false and misleading statements about the safety of his crypto exchange. The suit alleges that the fraud occurred between 2018 and June 2022 when the exchange froze with Rawls. The Attorney General is seeking to find Mishinsky, impose monetary damages,

and bar him from working in the securities industry or leading a company in New York. Moreover, bankruptcy judge Martin Glenn ruled that the tokens deposited in Celsius's interest-bearing accounts belong to the company. This means that Celsius can use its $4.2 billion in crypto assets as it sees fit. The decision affects 600,000 holders of high-interest accounts at Celsius who are now considered unsecured creditors. The ruling could also settle a case. key legal issue in the insolvency cases of Celsius and other companies that went bankrupt last

year, including FTX and BlockFi, since it determines the ownership rights of crypto assets at digital exchanges, trading firms, and other platforms. Many customers had argued that the crypto assets were not the property of the Celsius bankruptcy estate, but the firm argued that its terms of use granted ownership rights to Celsius. Judge Glenn mentioned that he has not yet made a decision regarding the legal ownership of approximately $700 million worth of cryptocurrency assets used as collateral for fiat loans to individual customers. 3AC founder claims DCG and FTX conspired. Cameron Winklevoss was not the only one to take a hit at Barry Silbert.

Su Zhu, the founder of Bankrupt Hedge Fund, 3 Aeros Capital, or 3AC, accused DCG of collaborating with FTX to attack Luna and Steeth, Lido's Ethereum liquid staking derivative. Zhu claimed that DCG, covered up its losses from 3AC's bankruptcy with a $1.1 billion promissory note due in 2032. He also alleged that DCG used tactics similar to FDX, misleading investors and attacking 3AC while avoiding questions about its own financial standing. It looks like Zhu's usage of Twitter backfired on him and his co-founder Kyle Davies. Following unsuccessful

efforts to contact them, liquidators ultimately served the 3AC founders subpoenaed. in a tweet, tagging their frequently used Twitter accounts. Coinbase settles for $100 million. Crypto Exchange Coinbase reached a $100 million settlement with the New York Department of Financial Services, following investigations into compliance failure. The NYDFS found that Coinbase had failed to adequately review customer identities and transaction alerts, along with the surge in customer growth. The exchange was fined $50 million and required to invest another $50 million into its

compliance program. Coinbase has positioned itself as a law-abiding exchange. However, the settlement shows that even exchanges with a reputation for following the rules are under increasing scrutiny from regulators. Stefan Ulley, CEO at Front Financial, told the block, there is a view that, okay, the regulators have made their point, and they will leave Coinbase alone for now. Finance U.S.'s deal to acquire Voyager's assets is questioned by the SEC. The U.S. Securities and Exchange Commission filed a limited objection to Binance U.S.'s proposed $1 billion acquisition of Voyager Digital. The regulator cited a lack of detail in the purchase agreement about the exchange's ability to close the deal, among other things. The move follows a warning from the Committee on Foreign

Investments in the U.S. that would conduct a review of the deal that could delay or block it. The SEC's objections have been communicated to Binance U.S. Council with a revised disclosure statement set to be filed before the next hearing on the matter. The Texas State Securities Board and the Texas Department of Banking have also filed an objection to the sale, alleging that Voyager and Binance U.S. are not in compliance with Texas law. BlackRock bails out a Bitcoin miner. BlackRock has given a $17 million loan to crypto miner Core Scientific as part of a $75 million credit facility. The loan is part of a bankruptcy reorganization plan, where the holders of Corps' debt will receive a significant amount of the company's stock and the reorganized company in exchange for their

debt. BlackRock already holds $37.9 million of the miners secured convertible notes. Core Scientific shut down 37,000 mining rigs belonging to Celsius mining amid a long-running legal dispute between the two firms. Core Scientific had accused Celsius of failing to pay fees required for the use of power, which it claimed cost the company $28,840 per day. In response, Celsius agreed to have all of its mining rigs shut down, but insisted that the 37,000 affected rigs were its property. It should not be considered part of the bankruptcy estate. As Bitcoin miners keep struggling, Marathon decided to de-leverage and finished 2022 with $103.7 million in unrestricted cash after paying off all of its revolver borrowings in December. Bitcoin OG gets hacked.

Luke Dasher, a Bitcoin developer, reported that his wallet was hacked and over 200 Bitcoin, worth approximately $3.3 million were stolen. Dasher stated that his PGP key was compromised but did not provide further details on the hack. Cheng Peng Xia, CEO of Finance, said that his team will be monitoring the stolen assets and will freeze them if they are sent to the centralized exchange. Dascher also cautioned users about upgrading old versions

of the Bitcoin Notts wallet as he has lost faith in its security. Defy Protocol Uniswap was not hacked, but it got close. A blockchain security company, DDoB, discovered a significant flaw in one of its smart contracts, but the issue has since been resolved with the code being redeployed. The silver lining is that despite the recent bad news, the amount of crypto lost to theft, scams or attacks in December, with $62 million, the lowest amount for any month in 2022, according to blockchain audit firm, Asertic. Magic Eden displays incorrect images.

Magic Eden, the leading NFT marketplace on Solana, experienced an issue with its verification process when some NFTs displayed incorrect images, including adult content. The issue was traced back to a compromised third-party image cacher, and the marketplace has since implemented new layers of verification for NFT collections to prevent similar issues in the future. Time for fun bits. Was this Sam's true vocation?

This week, a spokesperson from the White House said the meetings held with Sam Bingman-Fried were focused on pandemic prevention. This statement was followed by crypto-twitter skepticism. Nick Carter said, totally normal for the White House to meet with a private citizen with no medical expertise for their views on pandemics. SPF and Bill Gates, the medical experts we never knew we needed, Jonathan Long said.

And Gabriel Haynes, who never disappoints when it comes to hilarious content, posted a funny video of him imitating Sam, using a high-pitched voice and laying out recommendations for preventing conditions. contagion. Those include using masks, getting vaccinated, and depositing $100 into an FTCS account. By the way, are we sure this is a pandemic and not a mislabeled outbreak? You tell me. All right. Thanks so much for joining us today. To learn more about ROM and the issues between

Gemini and DC-C-G, check out of the show notes for this episode. Unchained is produced by me, Laura Shin, with help from Anthony Youne, Mark Murdoch, Matt Pilchard, Warner Vanovich, Sam Shri-Rum, Pima Jimdar, Shoshank, and CLK transcription. Thanks for listening.