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Ledger Saga: Another Crypto Scandal Waiting To Unravel?

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Ledger, a well-known cold wallet for cryptocurrencies, has come under scrutiny after users alleged it of withholding funds, some to the tune of $3 million USD.

Many investors have started moving money from centralized exchanges to hardware wallets since the FTX debacle. However, are those cold wallets actually secure?

One user took to Twitter to recount how one of his friends had supposedly lost money, and the situation still hadn’t been resolved.

The friend who goes by the name KAI wanted to replace USDT in Ledger with USDC. Ledger endorsed its partner firm Changelly which is one of the first exchanges listed on the cold wallet that allows users to exchange digital assets.

Although KAI never heard of it before, he reasoned that there shouldn’t be any issues as it was Ledger’s recommendation. But to be on the safe side, he first tested it out with a small amount which was successful. Later he converted the entire $3 million amount, but the money didn’t arrive.

KAI contacted customer care, who asked that he complete KYC, a request he found odd, given that Changelly had originally chosen to accept USDT without the KYC.

Even Ledger Live didn’t prompt him during the prior operation.

What made it more bizarre was that the Changelly team asked about the source of the funds, attribution of addresses, bank statements, etc. Yet, its status continued to show “received and under review” even though KAI gave all the necessary information.

He claimed this went on for a few weeks. According to KAI, if the other party is unwilling to accept, one can also send USDT back to the sending address.

Meanwhile, he emailed Ledger twice, who only said it had been forwarded to Changelly and asked him to wait.

Since November 11th, $3 million has been withheld for more than a month without reason. Was it a deliberate delay? Digging deeper KAI found out that Changelly had a poor customer track record.

Ledger’s Partner Firm Customer Ratings Were Mostly 1-Star

There are approximately 400 1-star reviews on the Trust Pilot customer review page found on the official Changelly website. Other customers have said that Changelly has also withheld or delayed the transfer of their funds due to KYC and other issues.

Numerous people on Reddit are also raising concerns about Changelly’s suspicious KYC practices. KAI is currently getting ready to contact the authorities in Hong Kong, the user claimed.

Amber Group Closes $300 Million Series-C, Aims To Protect FTX-Affected Clients

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Amber Group, a Hong Kong-based cryptocurrency trading startup, announced on December 16th in a Twitter thread that it has completed a $300 million Series-C financing that was backed by family offices and other crypto-native investors, including Fenbushi Capital US.

While investors increasingly view Crypto as an investable asset, despite the large price losses of major cryptocurrencies and the recent collapse in crypto markets, more conventional venture capital companies are joining the crypto bandwagon.

At the time of the Series B investment round, it had a pre-money valuation of $1 billion and raised $100 million. The company’s Series A round, which raised $28 million and included Coinbase Ventures as one of its investors, ended in 2019. The value was ten times more than that amount.

Another noteworthy fact is that a number of prominent financial and venture capital firms, including China Renaissance, supported Amber’s Series B investment.

However, the company said in the Twitter thread:

This new round of fundraising demonstrates investor confidence in Amber’s business and the commitment to shape our future together. As part of that future, it’s important for us to adapt and protect our clients in this challenging market environment.

FTX Collapse Affects On Amber Group 

In anticipation of a possibly lengthy crypto winter, Amber was working to finish an extension to its “Series B+ at a $3B valuation” prior to the collapse of FTX. It halted after a partial closing following the FTX collapse and then continued with Series C.

The FTX crisis affected Amber, just like it did other cryptocurrency trading companies. Although they did need to rebalance certain holdings, the company claimed that less than 10% of its total trading capital was with FTX when it collapsed.

According to the company’s statement:

While the vast majority of our clients and products remain intact, a few of our specific products would have experienced significant drawdowns as an aftermath of the FTX default, unless we could find ways to further protect those affected clients.

Because of this, they rapidly changed their fundraising plan. Additionally, the Series C investors understand that they are required to focus their efforts on providing top-notch services to their clients.

In order to concentrate on their core clientele and business areas, they will be reducing their mass consumer initiatives in the future. Moreover, with the support of their investors, their top priority for 2023 is to concentrate on their main customers and business.

Related Reading | SBF’s Desperate Bid; Files Another Bail Application 

Cryptocurrency Leash Tightening In UK? Here’s What Ashley Alder Has To Say

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Governments from all over the world are taking the initiative to regulate the cryptocurrency industry. Undoubtedly, the market has become exceedingly unstable as a result of the consecutive failures of crypto businesses this year. Regulators have voluntarily intervened as a result of clients losing billions. For instance, Australia’s crypto rules will probably get stricter in 2023.

Now, it appears that the UK may do the same. In a recent Financial Times article, Ashley Alder, the incoming chair of the Financial Conduct Authority, noted that when the agency obtains expanded regulatory authority over the industry, crypto firms intending to establish enterprises in the UK will face an uphill battle.

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Ashley Ian Alder, Chief Executive Officer of the Securities and Futures Commission

He stated,

“I think it [crypto] should be regulated further.”

Money Laundering Easier With Cryptocurrency Firms

Alder noted that in his opinion, cryptocurrency platforms were “deliberately elusive,” encouraged money laundering on a large scale, and produced “massively unfavorable risk” while speaking at a cross-party Treasury Select Committee.

Alder, the current Chief Executive of the Securities & Futures Commission in Hong Kong, further explained,

“Our experience to date of [crypto] platforms, whether FTX or others, is that they are deliberately evasive, they are a method by which money laundering happens in size.”

The way businesses in the sector “package a whole set of activities which are generally isolated… gives rise to substantially unfavorable risk,” he continued, including the possibility of conflicts of interest and improper asset management.

The FCA has struggled with its current burden, on the other hand. It is currently in the middle of a transformation program. MPs questioned Alder on why only a third of people trusted the FCA’s leadership. Alder responded,

“You could only hope that would improve.”

The new Chair also admitted that there were “perennial doubts about operational efficiency” and a view that the FCA had not “secured appropriate protection for consumers.” Alder declared that he intended to relocate to the UK in January. Notably, the following month, he will take over as FCA Chair.

The UK has stated that it will extend tax benefits for investment managers to cover crypto assets, therefore it is important to keep this in mind. The U.K. should function as a major worldwide hub for cryptocurrency, according to Prime Minister Rishi Sunak. The Treasury declared it will expand its current tax relief to the cryptocurrency sector.

The UK will provide tax benefits for investment managers that use cryptocurrency

The FCA, however, chose not to address whether or not its incoming Chair’s opinions differed from those of the administration.

Genesis Block A Front For Alameda Research – New Evidence

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Mike Burgersburg of Dirty Bubble Media reported on December 9th that there is evidence to support the concerns that “Genesis Block was a front for Alameda Research,” which reveals that Alameda was processing and receiving the customer payments that were sent to Genesis Block.

Sam Bankman-Fried and his defunct companies FTX and Alameda Research are the subjects of new revelations daily. Before unexpectedly shifting most of his activities to the Bahamas in 2021, both of his companies were headquartered in Hong Kong.

His subsidiaries and affiliated businesses, such as Genesis Block, an over-the-counter crypto exchange, allowed him to maintain close links to Hong Kong. The important thing to remember is that Genesis Block has no connection to the independent crypto company Genesis Global, which offers services for institutional cryptocurrency trading.

One of the company’s sources previously reported that Genesis Block broke relations with FTX and started shutting down services early this year. But, Burgersburg argued that “customer transfers to Genesis Block were sent directly to Alameda’s addresses.”

Genesis Block Ties To Alameda Research

Burgersburg highlighted in his Twitter thread that the Financial Times recently reported that the OTC firm and FTX/Alameda are connected in a number of ways, including through shared offices and leadership.

According to the statement from Financial Times:

The FTX executives were joined by staff from Genesis Block, a crypto retail service company part-owned by FTX offshoot Alameda Ventures, which is separate from digital asset trading group Genesis and its parent company Digital Currency Group. 

Another point that points out the connection was when Bankman-Fried’s FTX filed for bankruptcy days later, the OTC firm announced that they were shutting down their trading portal and halting deposits.

Burgersburg claimed in the tweet’s comment section that there is proof that cryptocurrency purportedly given to the firm was transmitted directly to two addresses of Alameda Research.

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Source: Burgersburg’s tweet

Furthermore, blockchain transactions that passed through these addresses unambiguously prove that they were customer-facing addresses that accepted deposits and withdrawals. Over $20 billion in transactions have gone via the two addresses.

“This is not how we would expect a “hedge fund” wallet to behave.”

image 26
Source: Burgersburg’s tweet

Related Reading |  Cardano: ADA/USDC Pair To Trade In Binance.US

The Only Possible Outcome Of Ripple’s Battle Is A Ruling That XRP Is A Security

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In a closely followed legal dispute between Ripple and the US SEC, Gene Hoffman, Chief Operating Officer of Chia Network, tweeted on December 6th that he believes the only possible outcome is that a federal judge will rule that XRP was a security due to Ripple’s sale.

The SEC’s messiness in relation to the Hinman speech, he said, is not something he is justifying. He asserts that it is irrelevant to the MSJ/court issue and that the only situation in which it is relevant is when Ripple should have swiftly informed XRP owners of what he had stated.

This prediction was made in a Twitter spat from December 5th, when Gene claimed that Bill Hinman had informed the Ripple leadership that, in his opinion, XRP would be security, in 2019. Some crypto enthusiasts said that it was “completely irrelevant.” Gene claimed that its sales meet the Howey test.

In response, BRAND, the crypto holder and XRP aficionado, said on December 6th:

XRP is currently used for utility moving billions annually. Also, Ripple already settled a lawsuit with Fincen, who labeled XRP as a currency. The SECs can only hope the judge views early sales as security offerings. There is no outcome where XRP the token has deemed a security.

Is Ripple Token XRP A Security?

Famous XRP lawyer Bill Morgan recently argued that the SEC had reached a deadlock on the matter. The first requirement for Howey, according to the attorney, is a monetary commitment, and the second prerequisite is a common enterprise.

Morgan asserts that the SEC has an issue with common enterprises that it has attempted to conceal by defining the term inexactly. SEC also employs a variety of arguments to equate the words “enterprise” with “effort.”

According to the tweet’s comment section:

It relies on broad vertical commonality rejected in the second circuit. Secondly, it cannot prove pooling required under the Revak decision.

The characteristics of a for-profit business venture that Ripple claims are necessary for a common enterprise are not identified by the SEC. In his perspective, the SEC’s inability to differentiate between Ripple’s ODL company and the XRP is an example of how difficult this is for the SEC to do.

Moreover, where everyone is debating Ripple’s lawsuit. Michael Saylor, a prominent supporter of Bitcoin, is infamous for being uninterested in other currencies like Ethereum and XRP. Saylor recently discussed categorizing such coins as securities in a podcast appearance.

Saylor stated his opinion that XRP is an unregistered security in relation to the legal dispute between Ripple Labs and the SEC.

Related Reading | Bitcoin And Ethereum ETFs Filed By Hong Kong’s Three AUMs

Blockstream Eyes Another Funding Round – This Time At A Lower Valuation “Below $1B”

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Blockstream, a crypto infrastructure company, has set up an investment round that will raise “fresh funds at a lower valuation” than its previous one, which is about below $1 billion, as reported by Bloomberg.

A source with knowledge of the situation who wanted to remain anonymous because they were talking about private information revealed the valuation amount. “One of the people said the figure may change.”

In terms of blockchain infrastructure, Blockstream is at the top of the world rankings. Liquid Network, a sidechain developed by it, allows financial institutions to tokenize assets while facilitating quicker Bitcoin payments. Additionally, the colocation of Bitcoin mining operations is made possible by Blockstream Mining’s enterprise-class mining facilities.

The 2014-founded business with headquarters in Montreal is engaged in a collaborative initiative with Jack Dorsey’s Block Inc. Reid Hoffman, a co-founder of LinkedIn has also backed Blockstreamm according to Bloomberg’s report.

However, the lower valuation funding move was prompted by the closure of the FTX Exchange, which made it difficult for digital asset firms to find investors willing to support them financially. However, when the company obtained $210 million from investors, including Baillie Gifford and iFinex, in August 2021, its worth was $3.2 billion; today, it is nearly 70% lower.

The investment was received at the same time that Blockstream hired the core team to develop its ASIC division and purchased Spondoolies’ intellectual property(a producer of Bitcoin mining equipment).

Blockstream CEO Says, The Fund Is For Hosting Crypto Miners

Adam Back, the CEO of Blockstream, declined to respond to Blomberg about the amount of the investment round or value but stated that it would be used to increase the capacity to host cryptocurrency miners.

As miners sought large-scale hosting, he noted that they quickly sold out of all of their capacity and had a massive backlog of both current and potential clients. 

The report asserts that many cryptocurrency miners have been hard hit by the drop in the value of Bitcoin and other tokens, as well as the rise in electricity prices, which has resulted in loan defaults and the confiscation of computing equipment.

The CEO of Blockstream said:

While Bitcoin price and mining profitability are down, hosting rates have risen over the last quarters, and our mining services are a rapidly expanding, high-margin enterprise business for us.

The crypto industry is struggling to recover from this year’s downturn and is beset by worries about future contagion following FTX’s collapse, making venture finance more difficult to come by.

Not just Blockstream was thinking about flat or lower fundraising rounds, but so were companies like Amber Group and Blockchain.com.The previous record-breaking rate of investment into blockchain firms has been replaced by far colder circumstances during the crypto winter.

Related Reading | Bitcoin And Ethereum ETFs Filed By Hong Kong’s Three AUMs

TRON’s Justin Sun Vows To Make Huobi In The Top 3

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TRON Founder Justin Sun Huobi who is also the current member of the Huobi exchange’s global advisory board has laid out three strategies to enhance its position as the market leader and reclaim top ranks among other major players in the sector.

The exchange also announced its refreshed branding strategy, which would now be known as “Huobi” instead of “Huobi Global”, based on information from the rebranding launch event.

The three major development goals include global development strategy, technology drives development, and technology for good. It would also further its global footprint by, as Sun suggested “venture into the Caribbean” and moving its headquarter to the Caribbean.

In the conference, there was also discussions on ramping up Huobi’s investments in South-East Asia, Europe, and other regions to build a robust global ecosystem.

With the expansion strategy, Huobi, meanwhile, will continue to comply with regional regulations and strengthen its cooperation with nations.

That said, the exchange also drew attention for the mystery surrounding its ownership.

Puzzle Over TRON Founder’s Involvement in Huobi

Last month, Huobi Global said that co-founder and controlling shareholder Leon Li sold his stake in the company to a buyout firm managed by About Capital Management HK Co.

People familiar with the matter, on request for anonymity revealed nearly 60% ownership was purchased by Chinese-born cryptocurrency tycoon Sun for about $1 billion through the Hong Kong-based asset management About Capital.

Sequoia China and ZhenFund also sold their combined 28% stake in Huobi Global to About Capital, said the people.

The sources claim that Sun withheld his name from the agreement to evade Chinese investigation, where cryptocurrencies are largely outlawed. However, the TRON founder has consistently denied having any part in the sale of Huobi Global, and a spokesman for that firm has also disputed that Sun was the purchaser.

Huobi has established itself as one of the most well-known firm in the virtual assets market in the nine years since its foundation.

“With its refreshed branding, new roadmap, and the guidance of its global advisory board, I am confident Huobi can strengthen its market leadership and reclaim its top rankings alongside other industry heavyweights,” the TRON founder added.

Hbit Limited Fails To Withdraw Nearly $18 Million From FTX Exchange

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Hong Kong-based digital asset platform Hbit Limited revealed in an official announcement that it failed to withdraw $18.1 million worth of assets deposited on FTX, which is now bankrupt.

The crisis brought on by FTX’s downfall has spilled over into other markets and industries, and it shows no indications of calming down any time soon. 

Data from Crunchbase shows that throughout the course of its three years of business, FTX sold shares worth about $1.8 billion. FTX shares are virtually probably worthless as a result of the company’s bankruptcy and billions of dollars in debt to creditors.

Moreover, Sequoia Capital, Temasek, and Paradigm are the three main investors in FTX. Together they have invested over $600 million into this company, which is now collapsed due to mismanagement.

Additionally, many venture capital firms that invested in FTX have not revealed how much they had invested. Only a few of these firms that are investing in both FTX and other projects have disclosed this information publicly.

Hbit Limited Holding Into FTX Exchange

The Board of Directors has released a statement informing the company’s shareholders and potential investors that Hbit Limited holds approximately $18.1 million worth of cryptocurrencies in the Exchange FTX (of which $4.9 Million belong to it and $13.2 million belong to clients).

According to the Hbit Limited statement:

As FTX group entities, including FTX, has filed for bankruptcy protection in the United States on 11 November 2022, the cryptocurrency assets may not able to be withdrawn from FTX (the “Incident”).

In order to ensure the security of its shareholders and the company as a whole, it was announced that the Group would consult with lawyers “to make enquiries with FTX” and offer them advice. Additionally, they will try to withdraw these cryptocurrency assets as soon as possible.

The Board currently sees no harm to operating due to the Incident. As Hbit Limited is legally and operationally separate from other businesses of the Group, it will not have any effect on other assets or business lines of the Group. 

However, the Board expects that the Group’s finances will be negatively impacted if they cannot resolve this Issue. They will also talk with their auditors to find out how it would affect the Group’s financial standing.

Related Reading | Solana (SOL) DeFi Ecosystem Drops 96%, TVL Reaches $330 Million

Solana (SOL) DeFi Ecosystem Drops 96%, TVL Reaches $330 Million

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DeFiLlama, one of the most reliable TVL aggregators for DeFi assets, reports that The total value locked (TVL) in Solana (SOL) network’s DeFi ecosystem has fallen drastically from its peak of $10.17 billion in December of last year to only about $329 million as of November 14th- approximately a decrease of about 96%.

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Source: DeFiLlama

When concerns arose at the beginning of November over FTX’s liquidity, TVL on the Solana network decreased rapidly, and the impact was so severe that in just one week, it had plunged to 63%. 

The data show that among the top Decentralized Finance projects on Solana, lending platform Solend lost 28.80% of its TVL on the last day and 88.47% of its TVL over the previous seven last days. 

In addition, Solend’s TVL monthly change is around 89.09%, and there are currently about $26.04 million locked in the protocol compared to $284.33 million on November 2nd.

Solana
Source: DeFiLlama

Tulip Protocol, the first yield aggregation platform based on Solana with auto-compounding vault techniques, lost around 67.01% of TVL during the course of the previous seven days. Similar losses were suffered by Raydium (50%), Marinade Finance (53.61%), and Friktion (60%).

Solana Ecosystem & FTX Bankruptcy: Facts

According to the Solana Foundation, as of November 6th, when FTX.com stopped processing withdrawals, it had $1 million in cash or cash equivalents. 

It has a limited effect on the network’s operations because it represents less than 1% of its cash or cash equivalents. Furthermore, it had no SOL custody on FTX.com.

The network said:

In light of the voluntary Chapter 11 bankruptcy proceedings that FTX/Alameda announced on November 11th, we do not know how these and other FTX/Alameda’s assets will be settled in the aftermath of the Chapter 11 proceedings.

Moreover, a recent evaluation by the Solana Foundation shows that the majority of the top blockchain-based ventures on this network (DeFi) have had minimal to no exposure to FTX. 

Even though many projects will inevitably face difficulties due to FTX, they also appear optimistic about how they can move forward.

In addition, the network asserts that:

During the events of the past week, the Solana network has not experienced any notable performance or uptime issues.

Related Reading | Hong Kong To Become Virtual Asset Hub Despite FTX Collapse

FTX Saga: Bahamas Calls For Liquidator And Freezes Assets

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The honeymoon between FTX CEO, SBF, and the Bahamas appears to be ended. On Thursday, the West Indian country’s Securities Commission issued a directive to freeze the assets of the troubled cryptocurrency exchange FTX.

The Securities Commission of The Bahamas stated in a statement, “Today the Securities Commission of The Bahamas took action to freeze assets of FTX Digital Markets and related parties.” The commission also suspended FTX’s operation registration and requested that a provisional liquidator be appointed by the Supreme Court of The Bahamas, according to the statement.

The letter, which was shared by the Nassau Guardian on Twitter, comes after a week of difficulties for Sam Bankman-Fried, a former cryptocurrency darling, and SBF’s exchange, previously among the biggest cryptocurrency exchanges in the world.

The organization claimed to be aware of claims that FTX’s assets were handled, managed, or given to Alameda Research improperly. The commission stated that FTX Digital Markets should be placed into provisional liquidation to “preserve assets and stabilize the company” and that these activities may have been illegal.

The agency further stated,

“The Commission is committed to working with the provisional liquidator to endeavor to obtain the best possible outcome for the customers and other stakeholders of FTX.” 

On November 6, 2022, Binance CEO Changpeng “CZ” Zhao announced that the largest cryptocurrency exchange in the world was selling its holdings of FTT, the native token of competitor exchange FTX. This is when the global exchange’s problems started.

Approximately 23 million FTT tokens, valued at $529 million, were held by Binance, according to Investopedia. FTT’s value dropped by 85.6% and is currently trading at $3.43, down from $24.01 the previous week, when Binance said it was liquidating its entire investment, triggering a run on the exchange.

FTX And Bahamas: A Short Lived Love Story

After relocating from Hong Kong, SBF’s exchange inaugurated its new offices there in September 2021, citing the Bahamas as one of the few nations that have established a thorough framework for cryptocurrencies.

The Bahamas has embraced digital currency, even introducing the Sand Dollar as its official digital currency. Companies like OKX and SBF’s global exchange built headquarters in the island nation thanks to welcoming crypto rules.

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FTX CEO Sam Bankman-Fried

Sam Bankman-Fried conducted a four-day seminar in the Bahamas in May of this year while the exchange was still settling into its new home there. Along with Wall Street, other notable attendees included Tom Brady, Gisele Bundchen, Bill Clinton, Tony Blair, Andrew Yang, Orlando Bloom, Apolo Ohno, Rick Fox, Udonis Haslem, and Liam Payne from One Direction.