Unchained - Three Crypto Bankruptcies: 3AC, Celsius and Voyager. What Happens Now?- Ep. 374

Starting point is 00:00:00 Hi, everyone. Welcome to Unchained, your 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 of Forbes was the first main tree media reporter to cover cryptocurrency full-time. This is the July 15th, 2022 episode of Unchained. Carnest the full power of the Avalanche network with Core, your new Web3 command center. Built by Ava Labs, Core is a very more than just a wallet. It's a non-custodial browser extension, engineered for users to seamlessly and securely experience Web3 like never before. Explore avalanche daps, NFTs, bridges, subnets, and more today. 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 Wasi Lawyer, a lawyer specializing in restructuring and insolvency. Welcome, Wasey Lawyer.

Starting point is 00:01:02 Hello, hi, Laura. Very happy to be here. So the crypto space is now seeing three big bankruptcy cases that are all happening simultaneously, Three Aros Capital, Voyager, and now Celsius. Before we dive into the details on these cases, Wassi lawyer, since you are an anon,

Starting point is 00:01:20 can you give us a short description of your professional background and how it is that you came to have expertise in these types of cases? Yeah, sure, Laura. I'm happy to sort of explain a bit more. So I'm an English train lawyer working in a sort of London-based law firm, and I've sort of spent most of the career working on distressed companies, restructuring and insolvency matters, mostly restructuring less than full-on insolvencies.

Starting point is 00:01:46 As you noted, I'm also an annon, so online by night, I lab as a penguin in a suit, building an NFT project. But in terms of professional background, I've worked on quite a number of sort of multi-billion dollar restructuring matters now. Not crypto-related so far. All right. So let us start with three euros capital. As recently as March, the crypto hedge fund and proprietary trading firm, which was run

Starting point is 00:02:13 by classmates and friends, Sue Zhu and Kyle Davies, managed about $10 billion in assets. At its peak, its AUM was $18 billion. And at the moment, it is in bankruptcy because of how many major entities, in crypto, it borrowed from, this will have ripple effects out onto the whole industry and already has. The story begins with the liquidation process ordered by a British Virgin Islands court back on June 29th. Let's just start by explaining what liquidation is and what in this case the liquidators are going to be doing. Yeah, okay. So sort of starting off with the liquidation process that sort of kicked off of the BVI. Actually, I think it may be sensible to start right before

Starting point is 00:02:56 liquidation process. So in order for a company to go into liquidation, it means that it's solvent. And someone has to kick-start an application to have the company wound up or put into liquidation. So when we look at what the liquidation order that's now public, that the BVI court has sort of handed down, what's happened is you've got Deribit as the creditors of Trier's Capital applying for provisional liquidation order. And at the same time, Trieros Capital themselves, Cal Davis, applied for a liquidation order from the court. So normally, one thing, it was actually fairly surprising for some of these insolvency practitioners in space, because you don't normally have a company going to liquidation quickly, and certainly

Starting point is 00:03:42 not one with, you know, $10 billion in assets. Normally what happens is for creditors, they start putting them to demands. They put in what is known as a winding up petition. They put in what is known as provision of liquidation application, which is what there bit put in. And the purpose of that is to sort of make sure that the assets are dissipated while everyone figures what the hell is going on in there. Now it seems that Sue and Cal, defauntals the 3AC, weren't keen to contest the liquidation thing at all. And they were sort of happy to say let's liquidate this company entirely. It's surprising because one would have

Starting point is 00:04:16 expected that to be some sort of bailout, some sort of discussion for a restructuring deal, but there wasn't any such thing in this case, which is for a lot of liquidation. So what does a liquidation mean? So I referred to earlier. What the company is bankrupted is mean is the end of it, because you can structure it, can save it, someone has come in and buy the assets, can figure out some sort of new financing.

Starting point is 00:04:39 But that's not the case of triage. At the end of the liquidation, TRIA is going to cease to exist as a company. And in this case, professional third party, the global advisory firm, Taneo, have been appointed as liquidators. In order to note that Tenao has been appointed by the creditors

Starting point is 00:04:55 of TRIA. arrows and not the founders. The founders themselves put forward their own nominee as their own nominee for a liquidator and what they caught it eventually was they went with the creditors choice, which is a smart one which would make all the creditors feel a lot more comfy because you want a liquidator that is aligned with the creditors, rather than one that's sort of appointed by the company, especially in situations such as this. So what's the liquidator doing now? Liquidators are coming in to the, to three arrows capital. They're going to assess what assets are available, how much are owed to the creditors.

Starting point is 00:05:29 And then the next steps, they'll probably start holding a, you'll call a creditors meeting and sort of provide an update on what exactly is going on. The sub-status company, the initial findings, etc. And after that, their responsibilities are simply liquidated the assets in three hours capital, wind on the company, and pay out the proceeds in accordance with the insolvency priority of payments. And so what will be the priority of which creditors? will be paid first, or is it that everybody is going to get kind of like the same percentage of the assets? That's a really good question, Laura. So this normally is, you know, what they call some liquidation,

Starting point is 00:06:06 waterfall, priority of payments. And assuming we're all unsecured creditors of three hours capital, and all they have are unsecured creditors, then yes, we would basically recover pro rata, what is known as pirate pursuit. So if three hours capital has a million dollars in there, and they owe us a million each with a cut of five hundred dollars. But what happens is that pretty much every jurisdiction in your statute that comes in, a statutory regulation to sort of come in to modify that. So you would normally have your insolvestment practitioners, let's say Pinao, they would be paid out first. Good for them. The lawyers will be paid out first. Certain employees who would pay out first is normally a sort of protected class there. Tax liabilities would be

Starting point is 00:06:51 paid out first. And then from there, you have potentially secured creditors, secured creditors will be paid out ahead of the unsecured creditors out of the commensual that is secure. But apart from that, creditors in the same class would share recovery's pro rata. And then, so I'm sorry, so that would mean that companies like Voyager and Genesis, where would they rank? Unfortunately, it appears that Voyager's unsecured creditor against Triarro's capital. So they would share with all of the unsecured credits of three hours capital. Unfortunately, not very high up.

Starting point is 00:07:26 And I wouldn't expect them to be recovering that much, to be honest. Okay. So do you have any sense at the moment, for those who are unsecured, what amount it is that they might be able to expect or what percentage of the assets that they had loaned that they might expect? We can't say that because we don't know how much assets are triadish capital.

Starting point is 00:07:49 We don't know the value of those assets. And that's actually, you know, that's a point we're going to need more clarity from liquidators, because if I may, I'm happy to chat about the sort of assets that might be entry out of capital. So the easiest bids, right, if cash in the bank account, that's simple. And you've got liquid crypto assets. Let's say you've got Bitcoin, you've got E, you've got Solana, stuff that you can sell, and the BVI court order specifically gave the liquidators the power to sell these crypto assets into US dollars, USDT, and USC.

Starting point is 00:08:25 They would also have, and this is the interesting bits, they would also have a lot of illiquid assets. For instance, you would expect them to have a large, large amount of Luna 2. They would likely have a lot of tokens. They would likely have a lot of equity in private companies, which they cannot be easily sell. They would also probably have NFTs, and this whole Sari-9 capital thing is a whole discussion into itself.

Starting point is 00:08:50 Serenai being a sub fund of three hours capital. And finally, there's also the contract rights. And that's kind of what Sue came out to tweet about, right? He's, this will be it for a bid. And they showed up to accuse of the creators of breaching the duties because they didn't exercise certain, certain, warrants for stuck wear tokens. So this is what assets they're in there right now. And it's not easy to value all of them at this moment.

Starting point is 00:09:11 I'd be very interested to see how liquidator does that. And just out of curiosity, so is, was Sue correct in saying that they had breached their fiduciary duty by not exercising those warrants? Probably not. So it's incredibly difficult for a creditor and especially credit as a founder in this case of the company to liquid is generally just unformed liable as long as they're acting reasonably in good faith. And we have to know that what's the role of the liquidator here. The role of the liquidator is to preserve the assets of the company and maximize value for the creditors as old. And well, yes in this case too, is. the creditor. So you may ask, all right, so why don't they maximize value by exercise

Starting point is 00:09:54 with the stockware tokens? I think there's sort of two points to make here. One, the NEO probably aren't crypto-native and they've only just come into the company. So for them to sort of make a call as to whether this is a good investment, it may be also an ambit and it may just say we don't want to give up cash, which can be distributed. to creditors in exchange for these tokens, which may be locked, they may not be as liquid as we want them to be. So that's probably the first piece. And the second piece is, well, you're on liquidated. The job is to liquidate a company. It's not to make more investments. It's not to keep running the business. The name wasn't here to keep running three hours capital.

Starting point is 00:10:43 It's here to just sell stuff, get rid of stuff, liquidated into assets that can be distributed to creditors. So it's incredibly fascinating. So in a moment, we're going to talk about some of the other developments, both with 3A, as well as, of course, with Celsius and even Voyager. But first a quick word for the sponsors who make this show possible. Join over 10 million people using crypto.com. The easiest place to buy, earn, and spend over 150 cryptocurrencies. Spend your crypto anywhere using the crypto.com visa card.

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Starting point is 00:12:37 Put your Bitcoin to work in the robust DeFi ecosystem by bridging BTC to Avalanche today. With Core, you can also easily swap assets, display your end. NFTs in style, store your assets in a ledger-enabled wallet, and put real dollars into your crypto wallet in just a few clicks. Core is everything you need for a simple, secure, and convenient Web3 experience. Download the free Core browser extension from Google Chrome's App Store today. Back to my conversation with Wasey Lawyer. So subsequently, 3A filed for Chapter 15 bankruptcy.

Starting point is 00:13:14 Can you explain what that is? Yeah, sure. So, Chapter 15 is actually a recognition of procedure in the US. So when the rumors swirling around 3AC going down, there was some discussion announced sort of colleagues, other insolvency professionals around where 3AC might go into an insolency procedure. The obvious choices were A, BVI, because they were incorporated in BVI, B, Singapore, because the headquarters and their operations substantially on Singapore, and C, in the US, via perhaps a chapter 11, because, first of all, the US claims a very wide jurisdiction.

Starting point is 00:13:55 And secondly, I think I saw some documents where, or claims on Twitter that they have a fair bit of dealings with US counterparties. What happened eventually is they went to BVI. Company and the creditors went to BDI. Now, you've got a BVI order and this needs a BVI liquidation order and business be recognized around the world. So that's what the Chapter 15 procedure broadly was, which is they're taking this BVI called order and saying to the US, look, I've done this in the BVI. Now I need to recognize the fact that this country company is in liquidation. And the liquidators are now in control.

Starting point is 00:14:38 And the reason in this recognition is because that's how you exercise the liquidator's powers in the U.S. against U.S. assets. Because what happens in liquidation is Sue and Cal are out of the picture. They are still directs the company, but they have to disenfranchised. And the liquidator steps in, and the liquidator X basically wields all the power that Sue and Kyle used to mute. So I would expect a similar procedure that happened in Singapore, given the fact that there are operations on Singapore, the bank accounts are presumed being Singapore, I expected a recognition sort of recognition procedure

Starting point is 00:15:13 to be found in Singapore sooner or later. Okay, so it basically sounds like that was a positive development for creditors. Yes. Okay. So something is that even as we record, the whereabouts of Zhu and Davies have remained unknown, although it was revealed that they did leave Singapore.

Starting point is 00:15:33 Does that mean anything for the bankruptcy see and liquidation process? It's a really good question. And it's one that I've been asked a lot by my friends in the critical space, because you can talk forever about what a law is. But at the end of there, you kind of have to think about the practical repercussions and everything. So I guess it affects in some few levels.

Starting point is 00:15:52 I mean, firstly, how does it affect the role to liquidator? First of all, not much. They're still in charge now. So we can do whatever they want. They can deal with their best company. They can see recognition of all this. You can pay out creditors, they pay on employees, et cetera. So the liquidator sort of system is sitting happy.

Starting point is 00:16:10 It doesn't matter where Sue and Cal are. But practically, you'd say, wait a minute, Sue and Cal are holding on to all of these private keys, some of these assets may be off-exchange wallets, they may have private wallets, cold wallets. What do we do now? And this is a difficult question. It really is.

Starting point is 00:16:28 Because what you could do if they were in the jurisdiction that you are comfortable, let's say they were in the U.S., or they were in BTI or they were in Singapore, you go ahead and you seek a call order in order in order in order of the jurisdictions that say, Sue and Cal, you guys are directed as a company, please handle all the keys to the liquidates. And if they don't, they get found in contact with court,

Starting point is 00:16:49 and there's this actual criminal, there's actual jail time being trapped here. And you would think that they would probably, you know, comply right when they go to jail. As they run away, then make things a lot more difficult. There's your body where they are, and you start going after them in the jurisdiction of choice, and they just move countries. So that is difficult. I suspect that they will end up cooperating,

Starting point is 00:17:17 and this is not so much, this is more anecdotal, because they're fairly young guys. They don't want to straight out become fugitives, and what is likely to happen is, in my opinion. What may happen is to nail, we just offer them some sort of deal like here's a small amount of money for cooperating because that's cheaper than bringing you to court or trying to enforce all of these things. You also have kids. So that's another fair point. There's another point to make. If you've got kids, if you've got kids, you don't want them to

Starting point is 00:17:52 be, you want money in a bank account as clear. You don't want to be a fugitive. You don't want to be basically a pariah in the banking system. another question that I have about this whole situation is that Zhu tweeted sadly our good faith to cooperate with the liquidators was met with baiting and he talked he kind of had these screenshots of the letters that his lawyer sent to liquidators and I was wondering were Zhu and his lawyer in the right or were the liquidators okay and having you know gotten it was something like they got information from them and Zhu and his lawyer didn't realize that they were going to use it for something else.

Starting point is 00:18:30 It was something like that. But I just wondered, like, if you had any opinion and who was actually in the right. We didn't see the entire correspondence. We just saw few snippets coming out of Sue and his lawyers. My take on it is the liquid is they're fully in the right to request information of Sue. And in fact, that is what they should be doing. Because the liquidists have just come in.

Starting point is 00:18:55 They've only been appointed about two weeks. And three errands, capital is a massive. with a lot of, you know, contractual obligations that may be agreed on paper. Some of it is, you know, agree orally via emails, via WhatsApp, text messages, et cetera, et cetera. And it certainly should be the case that they should be asking Sue for information. And, you know, ideally, it is cooperative. The directors definitely should be cooperating liquidity in situations like this. And then a New York bankruptcy court ordered the remaining assets of 3A frozen.

Starting point is 00:19:24 How might this affect the outcome? It is actually just to stop. Sue and Cal from dissipating the assets and further if they have at all. So it's essentially just to protect the assets of the company. And so at this point, what would you say are the chances that any of 3AC's counterparties will get anything back? And why don't we focus on the unsecured creditors? Or, I mean, you can go through all the categories, actually, because that actually is still

Starting point is 00:19:50 interesting. I think the unsecured creditors are the big ones, because the secure ones are normally quite comfy, given the 30s, smalls are over-calationalized. Some of them are on chains, so you just sold off the assets and cut it out. You sort of liquidated the collateral and sort of got it out semi-quart comfy. It's the unsecured creditors, and I think the big one in all this would be Voyager. And Voyages and Calcorders, we can touch on that later. So I think this comes down to what assets are in there, what assets the liquidators able to realize.

Starting point is 00:20:22 I'm particularly interested in what they're going to do with the tokens that are to invest. thing because there's definitely a lot of money locked up in that. Are they going to auction to someone? Are they going to sell an OTC to someone else? How does that play out? That's a question lot for me. And the other big question about is, how about the monies that are owed to 3AC? Is 3A accredited to anyone else who maybe hasn't paid up money now that they know that 3AC has sort of gone into insolvency? So it's also the role for liquidator to investigate what claims can be made against potential trade counterparties, against potential persons that may have transacted the trierrero's capital in the past.

Starting point is 00:21:00 It's also the response to liquidators to pursue claims against sue and call themselves. Because one of the, and I checked this, before this call, one of the key principles, doctrines in insolvency law is that of wrongful trading or reckless trading, depending on what jurisdiction you're in. And it's essentially a principle which states that if a director knows or should have known, that a company is insolven or about to become insolven, and they continue trading anyway, that director could become personally liable

Starting point is 00:21:35 and be asked to contribute funds into the pool for creditors sharing. And the reason for this, obviously, is to stop directors that are deeply underwater from simply making very, very high-risk leverage bets to try and trade out of the whole. And it almost seems like exactly what Triero's capital did. Right, right. didn't work out super well. No, it didn't work out super well. So would you say that creditors will probably get nothing or what's your, if you were to make it?

Starting point is 00:22:08 They absolutely would. They would get something. The question is what they're getting. And I think, I think there's probably going to be a creditors meeting soon enough. And the moment creditors attended meeting and the liquidators provide an update, stuff is likely going to leak and will probably have a better picture of what asset. that's trierreras capital half and what sort of claims the liquid is pursuing. Because the liquidators are almost always making a call, they're always making a cause benefit analysis now. Like if I sue Carl, is my chances of recovery higher than, you know, simply not suing him. It's all about

Starting point is 00:22:44 maximizing the value that's of acting in good faith, you know, acting reasonably, etc. Okay. So let's switch gears just for the last question. Obviously this week, we also saw that Celsius filed for Chapter 11 bankruptcy. What is your take on kind of what this step means, in particular, for Celsius account holders? So chapter 11 is incredibly different from a liquidation proceeding. Chapter 11 is a bankruptcy proceeding in the U.S. And what is intended to do is for Celsius to sort of reorganize its debt, to reorganize its debt, reorganizes liability so that it will emerge as a company going forward. So we have this, so, so it's the same as Voyager. So Voyager and Celsius at the end of the insolvency procedures will remain as companies, whereas Triero's capital will not because it's being

Starting point is 00:23:38 liquidated. So now on to Celsius and what it means for account holders. So firstly, I have to stay up front. I don't know because we don't have as much details on Celsius yet as we do on Voyager. Voyager has a very detailed chapter of filing. They have a plan of reorganization that I'm happy to discussed briefly, whereas with Celsius, all the status, we're filing for Chapter 11 bankruptcy now, sort of washed the space. Yeah, and I should note that for

Starting point is 00:24:05 various reasons, we are recording this on Thursday at 11 a.m. Eastern time. So who knows if there will be more information in the hours following the recording of this show, but at the moment, this is what we have. Absolutely. And I mean, so the Chapter 11 documents have it filed,

Starting point is 00:24:20 it shows information that's, I guess, not very helpful, because you kind of it's kind of a tick box exercise for them to file the filing. And they tick the box and says that we have one to ten billion dollars available in asset for distribution and we have one to ten billion dollars in liabilities. You can see there's an incredibly large range. So you could have nine billion in liabilities, one billion assets. So we just don't know at this point.

Starting point is 00:24:44 Just tick the box which says that they have more than 100,000 creditors. So that's helpful. You know, we know that they have a ton of account holders. maybe the interesting point here, which you can discuss in the absence of further information, is this custody point, which has come up a fair bit recently. Like, Laura, you're sort of familiar with that. But you're talking about how for a centralized platform like Celsius, customers don't have custody over their assets?

Starting point is 00:25:13 Sort of. So when you are someone who has deposited monies or assets into something like Celsius, you ideally want there to be a custodian relationship when everything goes under. Because what happens, you know, you can recall we discussed earlier that the unsecured credit is all sharing the pool. If assets are being deemed to be held in custody, they are not sharing that pool. So you kind of get all of those assets back. It doesn't go to other creditors. You've got to share with other creditors.

Starting point is 00:25:43 Oh, if they're segregated, you mean. If they're segregated, exactly. So the sort of bad news for people generally. is that I think Celsius is quite explicit about the fact that as long as you have this positive money and you're earning interest on it, your funds aren't held in custody. They are not segregated in insolvency and you approve as an unsecured creditor. I think the equivalent here is, let's say, your average bank depositor, right? If you deposited money into your average, into your local bank, you're actually an unsecured

Starting point is 00:26:17 creditor of the bank. and the reason you're protected is because your statutory rights or insurance that protect you up to a certain amount. Okay. So basically, at the moment, it doesn't look so good for Celsius customers? It doesn't look so good for Celsius customers. Celsius has all a lawyered up with the same firm as Voyager, Cardinald. I think we can maybe look at a Voyager finding to see what Celsius might look to do because I think at this point, there is a certain capacity around what Salsis has done.

Starting point is 00:26:51 We know that they have made some fairly high-risk trades. They've sort of made some they've put money into this GPTC, stick E, etc.

Starting point is 00:27:01 And that didn't play out very well for them. But I think at this point we're not very clear where the whole their balance sheet has come out of. Whereas I think in Voyager's case it's not very clear

Starting point is 00:27:10 where the shortfall has come from. Okay. All right. Well, then I guess we'll have to see as more news trickles in where we think this is headed. But anyway, this has been like an information-packed episode. I so appreciate that you came in on and chained.

Starting point is 00:27:29 Thank you. Thank you very much. I'm glad that I was helpful. Don't forget. Next up is the weekly news recap. Stick around for this week in crypto after this short break. Is your Web3 experience hindered by inadequate crypto wallets and browser extensions? Ava Labs has created Core, a free, non-custodial,

Starting point is 00:27:47 browser extension engineered for Avalanche users to have a more seamless and secure Web3 experience. The best-in-class Avalanche Bridge now offers native support for the Bitcoin network. Put your Bitcoin to work in the robust DeFi ecosystem by bridging BTC to Avalanche today. With Core, you can also easily swap assets, display your NFTs in style, store your assets in a ledger-enabled wallet, and put real dollars into your crypto wallet in just a few clicks. is everything you need for a simple, secure, and convenient Web3 experience. Download the free core browser extension from Google Chrome's App Store today. Join over 10 million people using

Starting point is 00:28:31 crypto.com, the easiest place to buy, earn, and spend over 150 cryptocurrencies. Spend your crypto anywhere using the crypto.com visa card. Get up to 8% cash back instantly, plus 100% rebates for your Netflix, Spotify, and Amazon. Amazon Prime subscriptions. Download the Crypto.com app now and get $25 with the code Laura. Link in the description. Thanks for tuning into this week's news recap. Celsius files for Chapter 11 bankruptcy reveals $1.2 billion deficit.

Starting point is 00:29:07 In addition to Celsius filing for bankruptcy, later on Thursday, as more news trickled out, Bloomberg reported that Celsius's largest creditor, Fero's Capital, aka Lantern Ventures, actually seems to be connected to FTX founder and CEO, Sam Bankman-Fried. Faro's Capitals, Chief Executive Officer, Tara McColle, is a co-founder of Alameda research and worked at another organization with SBF. Three additional staff had also worked for SPF-linked organizations, though Alameda told Bloomberg the trading firm currently has no relationship with Lantern Ventures. Similarly, Celsius revealed that it had a $1.2 billion hole in its balance sheet.

Starting point is 00:29:47 That includes an estimate that its holdings of the CEL token are worth $600 million. After the news of the bankruptcy filing, the CEL token was down more than 10%. However, some analysts told Coin Dusk, they believed that this could be a fresh start for the company and that the token price may rebound as the bankruptcy process goes on. Celsius mining, the BTC mining subsidiary of Celsius, also initiated voluntary Chapter 11 protection on Wednesday. This was not the only entity that joined its parent company seeking bankruptcy protection, as six other subsidiaries followed the same path. In March, Celsius Mining had submitted a draft registration statement with the U.S. SEC to become a publicly listed company. However, these plans will not be fulfilled due to these recent developments.

Starting point is 00:30:38 The crypto lender also made other news this week. The firm has repaid in full its debt to defy protocols maker, compound, and Avey. After doing this, Celsius reclaimed hundreds of millions of dollars worth of collateral, especially in Bitcoin, ether, and steith, the liquid staking derivative of ether. On Tuesday, Celsius reclaimed 416,000 steith from Ave, worth more than $400 million, and the markets are fearing a massive sell-off of that collateral. As a consequence, the steith discount, which is the difference between the price of steith versus the price of ETH, widened to 4%.

Starting point is 00:31:15 Inflation hits a 40-year high. The U.S. Consumer Price Index, or CPI, reached 9.1% in June, its highest number in more than 40 years. The increase in the prices of gas, food, and housing were the most significant contributors to this month's CPI. The Consumer Price Index measures the overall change in consumer prices over time, based on a representative basket of Google's goods and services. Persistent high inflation is not good for a country, especially if it's unintended. The Fed, which is responsible for controlling inflation, is now pressured to push further with higher interest rates, which is the only tool it has to achieve its goal of price stability. There's almost nothing in an economy that can escape this decision from the Fed as the interest

Starting point is 00:32:03 rate represents the price of money. For crypto, it would mean that there is less money for investments in new projects, less innovation, and a potential sell-off to purchase safer assets. The fear of a huge increase in the interest rate is already in. The market is already pricing in an 85% probability of a 100-bips increase or plus 1% in the Fed's rate in the next meeting, which will be on July 27th. The last time the Fed hiked 100 bibs was in 1984, said macroeconomic researcher Jim Bianco. One of the main narratives around BTC, is that it is supposed to serve as an inflation hedge because of its monetary policy. However, the inflation rate is at its highest in decades, and BTC has not been able to serve that purpose.

Starting point is 00:32:50 Market has shown Bitcoin should be thought of as a monetary debasement hedge, not necessarily a hedge against CPI inflation, said Will Clemente, a Bitcoin analyst. OpenC lays off 20% of its staff. Thursday afternoon, OpenC announced it would be laying off 20% of its employees. This was communicated internally by OpenC's CEO Devin Finser in the company Slack. We have entered an unprecedented combination of crypto-winter and macroeconomic uncertainty, said Fencer. He added that OpenC would now be in a position to resist up to five years of a crypto winter. OpenC volumes are down to about $12 million worth a day, whereas this past winter, they were above $100 million daily.

Starting point is 00:33:34 Coinbase loses market share to its competitors. Coinbase, the largest crypto exchange in the U.S., and the first to be publicly listed, is struggling amid market conditions. The crypto exchange continues to lose market share to its global competitors, according to research analyst Dan Dulliv. Coinbase seems to be having troubles both in relative and absolute terms. In November 2021, it had a monthly trading volume of $7 billion, whereas the estimate for July puts it at roughly $1.2 billion a month. If we compare the same months, Coinbase had 5.3% of the global trading volume in November, and now it only accounts for 2.9%.

Starting point is 00:34:13 Dolove targets coin to be priced at $42. As of today, the stock is worth $53.42. Last month, Coinbase was downgraded by Goldman Sachs, which gave a recommendation to short the company with a price target of $45. VC funding for crypto is down 22%. According to a report from the block research, venture funding for blockchain-related projects suffered a 22% decline in the last quarter, going from $12.5 billion to $9.8 billion. This was the first time that the sector took a dive in VC funding since the second quarter of 2020. However, to put the drawback into context, crypto venture funding accounted for $629 million in Q2 of 2020. even though this quarter's numbers were down against the previous quarters, they are still 15 times higher than only two years ago. The reason for this decline is most likely a combination

Starting point is 00:35:09 of the macroeconomic environment, the possibility of interest rate hikes, and recession, and the state of the crypto market in general, with many companies going bankrupt and laying off employees. Something worth noting is that VC funding is a lagging indicator. This is because there might be a considerable time between when the deals are announced and when they are made public. It appears that smaller projects were the ones that suffered the most. The deals under $50 million accounted for 50% of the total amount invested during the first quarter, and they now account for only 44%. Voyager token soars amidst short squeeze. Since Tuesday, the token of distressed crypto company Voyager has experienced a massive spike in its price. BYG was trading at roughly 15 cents,

Starting point is 00:35:54 reaching a high of 94 cents, which accounts for over a 500% increase. It is now settled at around 40 cents. It appears that a short squeeze was behind this massive appreciation. Pumping coins of insolvent businesses seems to be becoming a meta, CK Chung, investment analyst at Defiance Capital, told CoinDesk. Similar pumps have happened to Tara's LUNC token and Luna's CEL token, mostly because of a short squeeze. CZ wanted to help, but received harsh criticism. On Monday, Binance CEO TankP.

Starting point is 00:36:29 Peng Zhao tweeted that a potential exploit had been found on Uniswap. According to the wallet provided by CZ, Hacker was able to steal 7,574 ETH, which are worth nearly $8 million. Immediately after CZ's tweet, the Uni token fell by as much as 21%. However, Hayden Adams, CEO and founder of Uniswap, confirmed that this had nothing to do with the vulnerability of Uniswap's code. This was a fishing attack that resulted in some LP NFTs being taken from individuals who approved malicious transactions, he said. Chainlink God, a crypto influencer, said that CZ's tweet seems like an incredibly irresponsible thing to tweet, considering the fact that it was not an exploit. Finance was also in the news this week because the platform experienced a massive spike in Bitcoin trading volumes

Starting point is 00:37:18 after the implementation of the zero fee policy went live last Friday. This provided the incentives to perform wash trading, a market manipulation strategy. For that reason, CZ said Binance would exclude BTC trading from VIP calculations in order to remove all incentives to wash trade. And according to Reuters, Binance continued to allow trading in Iran despite being banned by the U.S. government to operate in that country. Time for fun bits. Elon Musk tries to terminate the deal with Twitter, but he is laughing about it. Elon Musk decided to terminate the deal to purchase Twitter for $44 billion. In the letter sent by Musk's lawyer, it said that Twitter has not complied with its contractual

Starting point is 00:38:01 obligations. This refers to Musk's contention that Twitter allegedly didn't disclose the number of bots that are part of its platform. Despite Musk's intentions, it doesn't look like he is going to have it easy. The Twitter board is committed to closing the transaction on the price, and the terms agreed upon with Mr. Musk and plans to pursue legal action to enforce the merger agreement, said Twitter's board chair Brett Taylor. However, Musk took it quite lightly and posted this meme on Twitter, which reads, they said I couldn't buy Twitter, then they wouldn't disclose bot info. Now they want to force me to buy Twitter in court. Now they have to disclose bot info. All right, thanks so much for joining us today. To learn more about

Starting point is 00:38:44 Wasi lawyer and the bankruptcies of 3C, Celsius, and Voyager, check the show notes for this episode. Earlier this week, on the chopping block, Salana's founder, Anatola Yaakovenko, discussed the saga phone, plus responded to Andre Kronia's question, Is Solana actually a blockchain? You can watch this show on YouTube or on any podcast platform. Unchained is produced by me, Laura Shin, without from Anthony Youne, Matt Pilchard, Kwaneranovich, Pamma Jimdar, Shashonk, and CLK transcription. Thanks for listening.

Unchained - Three Crypto Bankruptcies: 3AC, Celsius and Voyager. What Happens Now?- Ep. 374

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