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Issue 41 – This is not the Binance you're looking for

The crypto news outside of the FTX trial is... just more lawsuits against all the other crypto company founders.

Issue 41 – This is not the Binance you're looking for

It's way past time for me to pop my head out of the FTX trial rabbithole and bring you this recap of the news in the wider crypto world! Crypto and mainstream media alike have been captivated by the trial, but life goes on elsewhere in the crypto world. Some even seem to be hoping that if enough people ignore the trial, it might just go away — and perhaps with it, the stain on crypto's collective reputation. I wouldn't hold my breath.

If you've missed my FTX coverage, I've quarantined it over in the FTX Files section to allow people to manage their subscription preferences separately, if they want. Check it out! All trial coverage also includes an audio version narrated by a real human being (me) rather than the Substack robo-voice, in case you prefer listening to reading or find it more convenient. I'm considering incorporating that into my regular writing, too, such as these weekly recap issues — feedback welcome! I probably wouldn't start that until after the trial, though, given time constraints.

I'm not including any coverage of the FTX trial in this newsletter, to avoid duplication, though there is some FTX-adjacent stuff I'll cover. For those of you waiting for trial coverage, sit tight, it's on its way!

Finally, a quick plug: If you aren't a paid subscriber and would like to become one, check out the pay-what-you want subscription options. My writing here will always be paywall-free, but paid subscribers get the opportunity to join in the lively comments section and that warm fuzzy feeling that comes from knowing you're making it possible for me to keep doing this kind of writing.

With all that out of the way:

In the courts

Do Kwon, the founder of the decimated Terra/Luna project, is still sitting in jail in Montenegro, with no real news on an eventual release or extradition. The SEC has requested he be extradited to the US so they can question him, which Kwon has opposed: "An order mandating something that is impossible serves no practical purpose and risks undermining judicial authority." He's also argued that providing written testimony would violate his right to due process.1 However, he has suggested he might be open to being deposed if the SEC is willing to travel to Montenegro.

Su Zhu, a co-founder of the collapsed Three Arrows Capital hedge fund, was arrested while trying to leave Singapore, and imprisoned for four months. This imprisonment doesn't reflect the entirety of allegations against him, but is rather related only to the fact that he's refused to comply with liquidators. [W3IGG]

Alex Mashinsky, former CEO of Celsius, will be tried on the criminal charges against him in September 2024.2 Perhaps there will be a Celsius Files section of this newsletter by this time next year.

Voyager's former CEO Stephen Ehrlich has been sued by both the CFTC and the FTC over misleading statements about the now-bankrupt company. The FTC lawsuit, which also named Voyager as a defendant, pertained to misleading statements that led customers to believe accounts at the firm were FDIC insured. Voyager agreed to a $1.65 billion judgment to settle the charges, though it will be postponed until Voyager customers are repaid (to the extent possible). [W3IGG]

The JPEX collapse over in Hong Kong continues to unfold rather dramatically, with even more suspects arrested, and more supercars being seized, along with cash, gold, and other assets.3 One individual was arrested as he apparently tried to destroy documents by shredding them and bleaching them in his bathtub.4

After closing up shop due to an SEC investigation in July [W3IGG], the BarnBridge defi project has voted to comply with any demands from the SEC and pay any fines the regulator might impose. Any payout is not likely to be substantial, given the small and largely under-the-radar defi project has a treasury of only around $200,000.5 It's not terribly clear at this point why the SEC has tried to focus on such a small project, but perhaps that will become clearer if and when a public complaint is filed.

As Sam Bankman-Fried has been on trial for the FTX collapse, the person or group who stole around $477 million from the exchange only hours after it declared bankruptcy [W3IGG] has been hard at work. Those funds had been dormant for months, mostly just sitting in cryptocurrency wallets. Starting shortly before the trial, however, the thief began laundering them through various platforms, including THORSwap, which shut down its frontend interface to try to thwart the illicit activity [W3IGG]. Blockchain security firm Elliptic has said the methods of laundering the funds don't resemble those of the North Korean Lazarus group, which is generally pretty sophisticated, but instead may point to criminal groups with ties to Russia.6 Meanwhile, a recent Wired report suggests that quick action by some FTX insiders, even as the exchange was in chaos mid-collapse, may have prevented a further $300 million from being exfiltrated.

In bankruptcies

BlockFi, the crypto lender that went bankrupt in November 2022 [W3IGG] shortly after its would-be rescuer FTX filed for bankruptcy, has received approval from its bankruptcy judge to begin repaying customers.7 It's not yet clear how much creditors will receive in repayment, because the firm is still battling over assets with other crypto companies (including FTX).

Celsius, another bankrupt crypto lender, is looking to try to start repaying customers by the end of the year.8

The Genesis institutional crypto lender has received final approval from the court to pay $175 million in a settlement agreement with FTX. The team in charge of overseeing FTX's bankruptcy had originally sought $3.9 billion in claims on Genesis, so this is a substantial reduction from that amount.9 Some FTX creditors are pretty unhappy about all of this, having expressed their opinions that this was a terrible deal.

The not-always-reliable New York Post cited anonymous sources and leaked internal documents to accuse Gemini's twin founders, the Winklevosses, of withdrawing crypto assets equivalent to around $282 million. "It is unclear if the withdrawn funds were Gemini corporate assets or from the Winklevoss twins' personal crypto stash," wrote the Post, who noted that they were not Gemini customer funds.10 The duo tweeted a lengthy reply, in which they claimed that the $282 million withdrawal was in fact them holding back money belonging to Gemini Earn users (so maybe actually customer funds?) as a "liquidity reserve", in what they claim resulted in "$282 million less exposure to Genesis when Genesis halted redemptions on November 16, 2022". They went on to accuse the Post of "launder[ing] the lies of Barry Silbert and DCG in exchange for clicks". The Winklevosses are engaged in a bitter feud with Genesis, its parent company DCG, and DCG's founder and CEO Barry Silbert.11


ETFs, or exchange traded-funds, have been a hot topic in the crypto world for a while as they might be a path to convince more buyers to hop on the crypto bandwagon. They've been particularly relevant lately, as regulators have been tasked with reviewing a whole slew of applications for them, and as Grayscale scored a victory in their ETF-focused legal battle with the SEC.

However, the SEC has — once again — delayed decisions on a pile of Bitcoin and Ethereum spot ETF applications, much to the annoyance of many in the crypto world.12

Meanwhile, some members of the house (Mike Flood [R-NE], Tom Emmer [R-MN], Wiley Nickel [D-NC], and Ritchie Torres [D-NY]) have sent a letter to SEC Chairman Gary Gensler to try to pressure him into approving spot Bitcoin ETFs, which seems to me like a rather inappropriate (though hardly out of character) thing for them to be doing.13 Gensler testified in front of the House Financial Services Committee the subsequent day, facing the usual barbs from crypto-friendly representatives who accused him of a "crusade against the digital assets industry". Coinbase showed up to lobby, even handing out cans of branded cold brew coffee outside of Congress.

Twet:  Eli Tan @elitanjourno Coinbase handing out cold brew on Cap Hill
Tweet by Eli Tan.

One bright spot in all this for crypto advocates was the approval of Ethereum futures ETFs, several of which launched on October 2. However, despite the fanfare around their launch… nobody really seemed to want them. One crypto trading firm described the launch as a "shocking disappointment". They tried to come up with explanations for the flop, offering that "perhaps crypto traders are too distracted right now listening to soundbites from SBF's ongoing trial".14 Yeah, that's probably it.

In governments and regulators

The SEC moved to file an interlocutory appeal of a July decision in its lawsuit against Ripple, and was shot down by the judge. This may not be the last we'll hear about it, given they could still appeal after the case is decided, but it's a loss for them for now, to be sure.15

The Inspector General of the Board of Governors of the Federal Reserve System published a postmortem report on the March 2023 failure of Silvergate Bank. The bank's "concentration in crypto industry deposit customers" was, unsurprisingly, highlighted as a factor leading to its eventual liquidation.16

In the UK, the Financial Conduct Authority has expanded its unauthorized firms "warning list" to include a whopping 12,200 names. Some of the new additions include the exchanges Huobi and KuCoin.17 [W3IGG]

The EU apparently feels it needs to spend $842,000 to decide what to do about proof-of-work mining.18

In Binance

Binance may be performing some Jedi mind tricks as they try to sidestep concerns over their Russia-based operations.

On September 27, the company announced it would sell its Russian business to a crypto exchange called CommEx. The thing is, no one had ever heard of CommEx, and a little digging revealed that the exchange had only been launched one day prior.19 Binance CEO Changpeng "CZ" Zhao denied the rampant speculation on Twitter that this was all some clever paper shuffling to allow Binance to continue operating in Russia with less scrutiny, writing that "I am not their UBO [ultimate beneficial owner], nor do I own any shares there."20 If you say so.

Meanwhile, Binance and CZ have come up a few times in the FTX criminal case. Documents revealed that Bankman-Fried believed it was CZ who had leaked a balance sheet21 that ultimately kicked off FTX's demise. A list by Ellison (original document, Twitter, Mastodon) titled "Things Sam is freaking out about" included the entry "getting regulators to crack down on Binance", and Ellison testified that "various regulators had been promising [Bankman-Fried] that [regulatory action against Binance] would happen for a while, but it never happened". Hmmm.

Speaking of criminal cases, rumors of a CZ indictment out of the US have swirled for a long time now, and there's still been no movement on that front. But now, rumors are swirling in Brazil too.22

In layoffs

Blockchain analytics firm Chainalysis is laying off 15% of their workforce (around 135 people), after already laying off 5% back in February.23

Wallet hardware company Ledger is laying off 12% of staff (around 88 people) only months after raising around $100 million.24

Yuga Labs, the company behind Bored Apes and other popular NFT collections, laid off an undisclosed number of employees. [W3IGG]

Ethereum blockchain infrastructure firm Blocknative is laying off 33% of staff (around 12 people).25

Blockchain platform Chia Network laid off 37% of employees (26 people).26

In layoff-adjacent news, the Beijing-based Bitmain manufacturer of bitcoin mining equipment has simply decided to stop paying its employees, and is considering halving employee salaries. [W3IGG]

As someone who worked in software during the crypto boom, and was on the receiving end of developers telling others it was foolish not to jump on the crypto bandwagon and work for a blockchain company, I just hope these folks didn't burn too many bridges on their way out.

The Web3 is Going Just Great recap

There were 17 entries between September 26 and October 12, averaging 1 entry per day. $6.51 million was added to the grift counter.a

Undercollateralized lending goes wrong


Goldfinch, a decentralized lending platform, is learning rather painfully why most lenders in the crypto world stick to overcollateralized loans. A borrower took out a $20 million loan in February, and is now threatening to default on it after they lost around $7 million of it investing in a failed real estate technology company and gambling (poorly) on the crypto markets. Awkwardly, the borrower is also an investor in Goldfinch.

This is the second loan to go bad for Goldfinch, after an African robotaxi company failed to repay a $5 million loan that they had used to try to bail out a floundering sister company.

Members of the Goldfinch project criticized the project's apparent failures, with one writing, "This is the second occurrence of a lack of transparency from a borrower or a lack of auditing capability from Goldfinch."

Houses aren't a good way to back your stablecoin


One might have expected it to be rather obvious that using highly illiquid assets (real estate) to back very liquid assets (crypto tokens) might end in disaster. Yet, the team behind "Real USD", or USDR, seems surprised that they are now suffering problems after USDR holders redeemed their tokens en masse for all the DAI stablecoins left in the treasury, leaving only the highly illiquid assets remaining.

Although the team behind USDR has been careful to describe this as a liquidity issue and not a solvency issue, their own dashboard shows that the project has an asset deficit of around $3.4 million.

Third time's the charm


Perhaps Platypus Finance will finally sort themselves out after suffering the third hack in nine months. I have no reason to think they will, but hey, why not dream.

They've just lost around $2.23 million in a series of hacks over the span of a few hours. Thanks to an error on the attacker's part, they were able to recover around $575,000, leaving the ultimate loss at around $1.7 million.

Platypus Finance was previously hacked for $8.5 million in February, and around $150,000 in July.

Who audits the auditors?


The SEC, apparently. Auditor Prager Metis is facing a lawsuit from the SEC alleging they violated auditor independence rules and aided and abetted their clients' violations of federal securities laws in relation to more than 200 audits. The firm routinely included an indemnification provision in their work, says the SEC, rendering them no longer "independent" as defined by auditing requirements.

Prager Metis is among the auditors who audited FTX, and was noted by FTX's CEO-in-bankruptcy John J. Ray III for advertising itself as "the first CPA firm to officially open its headquarters inside the metaverse".

Can't wait to strap on my VR headset and… meet with my accountant. (New Jersey Business Magazine)

The SEC hasn't disclosed any of the clients involved with the flawed audits, so it's not known if FTX's audit is among one of the problematic ones that drew the SEC's attention.

Everything else

  • CFTC and FTC sue Voyager CEO Stephen Ehrlich [link]
  • Black Hole Token exploited for $1.28 million [link]
  • FSL token rug pulls for $1.68 million within 24 hours of launch [link]
  • Trader Joe's sues Trader Joe [link]
  • 3Commas suffers another security breach [link]
  • UK's Financial Conduct Authority warns of Huobi and KuCoin [link]
  • Astrology-themed NFT project Lucky Star Currency rug pulls for $1.1 million [link]
  • Bitcoin mining hardware manufacturer Bitmain stops paying employees [link]
  • Stars Arena exploited for $3 million [link]
  • THORSwap temporarily shuts down web interface as FTX hacker tries to launder $131 million [link]
  • Gitcoin loses $500,000 in transfer SNAFU [link]
  • Bored Apes' Yuga Labs lays off employees [link]
  • Three Arrows Capital co-founder Su Zhu jailed for four months [link]

In the news

15 Minutes In Hell. "Episode 10 – Molly White".

I had the pleasure of joining on his new(ish) podcast! If you want to hear me talk about crypto, but can't stomach the subject for more than 15 minutes, have I got the podcast episode for you.

The Atlantic, "The Journalist and the Fallen Billionaire" and Wired, "Everybody's Talking About the Wrong Sam Bankman-Fried Book".

A couple of people cited my review of Michael Lewis's Going Infinite, a profile of Sam Bankman-Fried that seems to be aging quite poorly as the trial continues. Unless you ask Lewis, that is, who said in a recent interview with Time that "it kind of looks like the government's case maps pretty neatly onto the book". For some definitions of "kind of", I guess that's true. For example, it happens to involve the same defendant.

Money Stuff, "FTX Had Many Bad Spreadsheets" and "Ozempic Is Bad for Business" and The Register, "SBF on trial: The Python code that allegedly let Alameda hedge fund spend people's FTX deposits".

My reporting on the Sam Bankman-Fried trial has also been getting cited elsewhere, including in Matt Levine's Money Stuff, one of my own favorite newsletters.

Worth a read

SBF trial

If you just can't get enough of the SBF trial, I wanted to recommend a few places that I think are doing some exceptional reporting:

  • A group of journalists including Nikhilesh De, Danny Nelson, and others are covering it for CoinDesk, and they're doing a truly great job. They've got a daily newsletter too, if you really want to flood your inbox.

  • The Verge's crypto feed is pretty much all SBF trial these days. Don't miss Elizabeth Lopatto's reporting in particular. I really enjoyed her article "Is Sam Bankman-Fried's defense even trying to win?" She's an experienced trial reporter, so her insights have been really valuable.

  • David Z. Morris is covering the trial for Protos and doing a great job. He's also got a newsletter called if you're more of a newsletter person, though note that his Protos writing isn't being syndicated to his newsletter.

  • Matt Levine has also been occasionally commenting on portions of the trial in his daily Bloomberg newsletter Money Stuff, which is worth a read even if you don't care about this trial. Sometimes a paywall pops up if you try to view his articles on the web, but the email newsletter subscription is free.

The New York Times. "Scrolls That Survived Vesuvius Divulge Their First Word".

For those of you who are sick of hearing about SBF, or perhaps for those of you who want to hear about technology actually accomplishing something cool and interesting for a change, check out how various computer scientists are independently working to see inside the incredibly fragile, charred, 2,000-year-old scrolls that were both preserved and damaged horribly in the eruption of Mount Vesuvius. Some 800 scrolls were discovered by builders in 1752, but have sat dormant for 270 years as scientists patiently waited for technology to progress to the point that something might be able to be recovered from the scrolls, which look more like a charred log you might find in a fireplace than like a scroll.

A scroll, not a campfire remnant (The New York Times)

That's all for now, folks. Until next time,

– Molly White


  1. I have been admittedly a little less on top of general crypto news than I would like to be as I try to keep up with the SBF trial, so I will be backfilling anything I missed as I get the opportunity.


  1. Memorandum of Law in Opposition filed on September 27, 2023. Document #59 in SEC v. Terraform Labs.

  2. "Ex-Celsius CEO Mashinsky's Fraud Trial Set for September 2024", Bloomberg.

  3. "Seven more arrested and another supercar seized over JPEX scandal", Protos.

  4. "Hong Kong, Macau police arrest 4 people 'relatively close to core' of JPEX crypto scandal; 1 found with destroyed documents in dramatic bust", South China Morning Post.

  5. "DeFi Protocol BarnBridge Prepares for SEC Action, Fines", CoinDesk.

  6. "The $477 Million FTX hack: a new blockchain trail", Elliptic.

  7. "Bankrupt Crypto Firm BlockFi Gets Court Approval for Restructure Plan", Decrypt.

  8. "Bankrupt Crypto Lender Celsius Eyes Creditor Payback by Year End", Decrypt.

  9. "Court approves Genesis settlement of $175M to FTX, expunges billions in claims", Cointelegraph.

  10. "Winklevoss twins secretly withdrew $280M in assets before crypto firm collapsed: sources", New York Post.

  11. Tweet by Gemini Trust Co.

  12. "SEC Again Delays Decision on Ark's Bitcoin ETF Filing", Decrypt.

  13. Letter by Representative Flood and others to SEC Chairman Gary Gensler.

  14. "Market Update – 12 Oct 23", QCP Capital.

  15. "SEC's Motion to Appeal Loss in Ripple Case Is Denied", CoinDesk.

  16. "Review of the Supervision of Silvergate Bank", Office of Inspector General, Board of Governors of the Federal Reserve System.

  17. "FCA crypto crackdown brings warning list up to 12,200 firms", Protos.

  18. "EU Seeks More Data on Crypto's 'Significant' Environmental Harm", CoinDesk.

  19. "Binance to Exit Russia With Sale to Crypto Exchange CommEX", The Wall Street Journal.

  20. Tweet by Changpeng Zhao.

  21. I use the term "balance sheet" loosely. Amusingly, the "balance sheet" that sparked panic in the markets was actually one of the seven "alternative versions" that Ellison had prepared to try to make FTX and Alameda's financial situation look less dire than in reality, but it was still enough to make people nervous.

  22. "Binance CEO Changpeng Zhao, Other Exchange Leaders at Risk of Brazil Indictment", Bloomberg.

  23. "Blockchain Analytics Firm Chainalysis Cuts 15% of Staff", CoinDesk.

  24. "Crypto Custody Firm Ledger Cuts 12% of Staff", CoinDesk.

  25. "Blocknative Reduces Headcount by Third, After Suspending Work on Relay Project", CoinDesk.

  26. "Chia Network Lays Off Third of Its Staff as Loss of Banker Delayed Going Public", CoinDesk.

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