Global accounting firm Mazars is pausing its work with all cryptocurrency clients [Editor's note: the link may be paywalled; alternative source] worldwide, soon after it published several "proof of reserve reports" for digital-asset platforms. From a report: Earlier this month, a five-page letter from a partner at the South African affiliate of Mazars reported on the crypto exchange Binance's bitcoin assets and bitcoin liabilities. The letter wasn't an audit report, didn't address the effectiveness of the company's internal financial-reporting controls, and said Mazars did "not express an opinion or an assurance conclusion," meaning it wasn't vouching for the numbers.

An anonymous reader quotes a report from the Australian Financial Review: Members of the inner circle of power at collapsed cryptocurrency exchange FTX formed a chat group called "Wirefraud" and were using it to send secret information about operations in the lead up to the company's spectacular failure. On Monday (Tuesday AEDT) Mr Bankman-Fried denied being part of the chat saying, "If this is true then I wasn't a member of that inner circle (I'm quite sure it's just false; I have never heard of such a group). The news of the chat group heightens concerns about the prospect of wrongdoing by Mr Bankman-Fried and his colleagues. Last week, Mr Bankman-Fried said he no longer had access to many of his own private communications. He was scheduled to testify virtually before the House Financial Services Committee on the 13th, but was arrested by the Royal Bahamas Police Force the day before. That said, Forbes published a transcript of SBF's planned testimony, where he at no point admits fraudulent behavior and does not address the (multi-)billion dollar loans that helped contribute to the collapse.

Most recently, we learned that FTX's chief engineer made a secret change to the cryptocurrency exchange's software that allowed FTX to use client money.

U.S. Senators Elizabeth Warren (D-Mass.) and Roger Marshall (R-Kan.) are introducing a bill to crack down on money laundering and financing of terrorists and rogue nations via cryptocurrency. CoinDesk reports: If it becomes law, the Digital Asset Anti-Money Laundering Act (PDF) will bring know-your-customer (KYC) rules to crypto participants such as wallet providers and miners and prohibit financial institutions from transacting with digital asset mixers, which are tools designed to obscure the origin of funds. The act would also allow the Financial Crimes Enforcement Network (FinCEN) to implement a proposed rule requiring institutions to report certain transactions involving unhosted wallets -- wallets where the user has complete control over the contents rather than relying on an exchange or other third party.

Tether said it is winding down its practice of lending out its own stablecoins to customers by next year, addressing a broad risk to the wider crypto world. From a report: In a blog post published on its website Tuesday, the company said it would reduce secured loans issued and denominated in tether to zero throughout 2023. The growth in Tether's secured-loan program was the subject of a Wall Street Journal article earlier this month. With about $66 billion tether in circulation, tether is the market's largest stablecoin, a digital asset that is supposed to have a fixed value pegged to the U.S. dollar. The appeal of tether is that, unlike bitcoin and other cryptocurrencies that experience volatile price swings, one coin could be sold or redeemed for $1.

Tether isn't a household name, but it is a cornerstone to the crypto ecosystem. Traders often use tether as an easier way to buy crypto than through bank accounts or wire transfers. Stablecoin issuers take pains to demonstrate that they have ample funds available for redemptions. Cash and other safe financial instruments easily convertible into dollars make up the vast majority of the assets Tether lists in quarterly financial reports, but the company's secured-loan program has been growing. Tether can't be certain the loans will be paid back, that it could sell the loans to a buyer for dollars in a pinch or that the collateral it holds will be adequate. That could make it difficult for Tether to cover a large volume of redemptions in a crisis.

Longtime Slashdot reader UnanimousCoward writes: Forbes has published a transcript of SBF's planned testimony as well as a synopsis which, of course, will not happen now. At no point does he admit fraudulent behavior and does not address the (multi-)billion dollar loans that helped contribute to the flywheel Ponzi scheme. FTX founder Sam Bankman-Fried was arrested yesterday by the Royal Bahamas Police Force. He was set to testify virtually before the House Financial Services Committee about the exchange's collapse on Tuesday (today).

Here are the key takeaways from SBF's draft testimony, as highlighted by Forbes: - Bankman-Fried is being ghosted by FTX's court-appointed CEO John Ray.
- Bankman-Fried says that FTX.US general counsel and former Sullivan & Cromwell partner, Ryne Miller, put intense pressure on Bankman-Fried and others to rush into filing for Chapter 11.
- Bankman-Fried believes that John Ray and law firms managing the bankruptcy, including Sullivan and Cromwell, are dusting off the Enron playbook in an effort to reap enormous fees from FTX's bankruptcy.
- The Chapter 11 team is not playing nice with foreign regulators.
- Bankman-Fried thinks that John Ray and the U.S. Bankruptcy Court is bullying the Bahamian government and overstepping its rights as the main domicile for FTX International.
- Bankman-Fried devotes seven pages to a section he calls "Misstatements," detailing instances where John Ray and team are disseminating false and inaccurate information about the companies he created.
- FTX did not have a risk management team.
- Bankman-Fried claims that there are signed Letters of Intent (LOIs) from prospective investors that could recapitalize the exchange.
- Binance CEO Changpeng Zhao orchestrated a negative public relations campaign to bring down FTX.
- Having eliminated FTX as its largest global competitor, Binance is now averaging approximately 70% of global cryptocurrency volume.
- Bankman-Fried wants to set the record straight on false reports of hard partying at FTX and on his own drug usage. He says he has never been drunk in his life, and has been on an antidepressant for the last decade.

Binance has seen withdrawals of $1.9 billion in the last 24 hours, blockchain data firm Nansen said on Tuesday, as the world's biggest crypto exchange said it had "temporarily paused" withdrawals of the USDC stablecoin. From a report: Scrutiny of how crypto exchanges such as Binance and its now-bankrupt former rival FTX handle customer deposits is under close scrutiny from users and regulators. FTX's founder Sam Bankman-Fried was charged by the U.S. Securities and Exchange Commission on Tuesday with defrauding investors. Binance, whose dominance of crypto was cemented by the fall of FTX, last week tweeted a so-called proof-of-reserves report by audit firm Mazars. The report showed its holdings of bitcoin exceeded customer deposits on a single day in November. The $1.9 billion ethereum-based withdrawals marks the largest daily outflow over a 24-hour period since June 13, the Nansen data showed, and accounted for the majority of the funds being pulled in the last seven days.

The Royal Bahamas Police Force arrested FTX founder Sam Bankman-Fried, a press statement said. CoinDesk reports: The arrest came after the U.S. filed criminal charges against Bankman-Fried, the statement said, and the nation expects the U.S. to request The Bahamas extradite Bankman-Fried in short order. "As a result of the notification received and the material provided therewith, it was deemed appropriate for the Attorney General to seek SBF's arrest and hold him in custody pursuant to our nation's Extradition Act," the statement, attributed to Attorney General Ryan Pinder, said. "At such time as a formal request for extradition is made, The Bahamas intends to process it promptly, pursuant to Bahamian law and its treaty obligations with the United States."

A tweet from the U.S. Attorney's Office for the Southern District of New York confirmed that prosecutors in the U.S. indicted Bankman-Fried, though the indictment remains under seal. In the Bahamas' statement, Bahamas Prime Minister Philip Davis said the country would continue pursuing its own investigation into FTX's collapse, alongside the U.S.'s criminal charges. Bankman-Fried was set to testify virtually before the House Financial Services Committee about the exchange's collapse on Tuesday.

The testimony of the new FTX CEO, John Ray III, is now public (PDF), and it includes some shocking revelations about the nature of the cryptocurrency firm. The court documents show that Alameda Research borrowed FTX customer funds for trading and investment purposes without any limits. Watcher Guru reports: In the court documents, Ray relayed a detailed account of how Alameda Research would utilize FTX customer assets. Subsequently, the firm utilized them for the purposes of trading and investment. The document noted, "The ability of Alameda, the crypto hedge fund within the FTX Group, to borrow funds held at FTX.com to be utilized for its own trading or investments without any effective limits." As the shocking statement was reported under inappropriate business practices that Ray has uncovered amidst his disappointment.

Ray revealed that access to those funds was not at all protected from management. The statement noted, "The use of computer infrastructure that gave individuals in senior management access to systems that stored customer assets," according to the documents. Furthermore, Ray revealed that "Private keys to access hundreds of millions of dollars in crypto assets," lacked property security or description. Conversely, Ray notes that assets were commingled, and the platform lacked proper documentation of nearly 500 investments made by the FTX group. UPDATE 12/12/22 00:13 UTC: FTX Founder Sam Bankman-Fried Arrested

The Block Chief Executive Officer Michael McCaffrey resigned after failing to disclose a series of loans from disgraced former FTX head Sam Bankman-Fried's Alameda Research. He was the only person with knowledge of the funding at the company. The Block reports: Bobby Moran, The Block's chief revenue officer, will step into the role of CEO, effective immediately, according to a company statement. "No one at The Block had any knowledge of this financial arrangement besides Mike," Moran said in a statement. "From our own experience, we have seen no evidence that Mike ever sought to improperly influence the newsroom or research teams, particularly in their coverage of SBF, FTX and Alameda Research."

McCaffrey received three loans in total, the first of which was in the amount of $12 million and was used in 2021 to buy out other investors in the crypto news, data and research provider. He took over day-to-day operations as the CEO at that time. A second $15 million loan in January was used to help fund day-to-day operations, while another $16 million earlier this year was used to purchase personal real estate in the Bahamas. In addition to stepping down as CEO, McCaffrey will step down from the company's board, which is set to expand to three people.

CoinDesk's Daniel Kuhn writes in an opinion piece: Despite the focus on FTX following its catastrophic collapse, it's remarkable how little we know about how the crypto exchange and its in-house trading firm Alameda Research actually operated. New CEO John Jay Ray III has called Sam Bankman-Fried's crypto trading empire the "greatest failure of corporate controls" he's seen. Wednesday, Coffeezilla, a YouTuber with a rising star who has made a career of shining a light on sketchy projects in and out of crypto, pressed Bankman-Fried for information related to how different customer accounts were treated at the exchange. It turns out, there wasn't much differentiation -- at the very least during the final days the exchange was in business, Bankman-Fried admitted. "At the time, we wanted to treat customers equally," SBF said during a Twitter Spaces event. "That effectively meant that there was, you know, if you want to put it this way, like fungibility created" between the exchange's spot and derivatives business lines. For Coffeezilla, this looks like a smoking gun that fraud was committed.

At the very least, this is a contradiction of what Bankman-Fried had said just minutes before when first asked about the exchange's terms of service (ToS). "I do think we're treating them differently," Bankman-Fried said, referring to customer assets used for "margin versus staking versus spot versus futures collateral." All of those services come with different levels of risk, different promises made to customers and different responsibilities for the exchange. According to FTX's ToS, everyday users just looking to buy or store their cryptocurrencies on the centralized exchange could trust they were doing just that, buying and storing cryptographically unique digital assets. But now, thanks to skillful questioning by Coffeezilla, we know there were instead "omnibus" wallets and that spot and derivatives traders were essentially assuming the same level of risk.

We can also assume this was a longstanding practice at FTX. Bankman-Fried noted that during the "run on the exchange" (pardon the language), when people were attempting to get their assets off before withdrawals were shut down, FTX allowed "generalized withdrawals" from these omnibus wallets. But he also deflected, saying what, you wanted us to code up an entirely new process during a liquidity crisis? Before now, Bankman-Fried had been asked multiple times about the exchange's ToS and often managed to derail the conversation. He would often point to other sections of the document that stated clients using margin (taking out debt from FTX) could have their funds used by the exchange. Or he would bring up a vestigial wire process in place before FTX had banking relationships. Apparently, according to SBF, customers had sent money to Alameda to fund accounts on FTX and somewhere along the lines this capital ended up in a rarely seen subaccount. This also had the benefit of inflating Alameda's books, another dark corner of the empire. Further reading: FTX Founder Sam Bankman-Fried Is Said To Face Market Manipulation Inquiry

Coinbase Chief Executive Officer Brian Armstrong said the cryptocurrency exchange's revenue is set to be cut by half or more this year as declining prices and the collapse of rival FTX rattle investors' confidence. From a report: The rapid downfall of FTX capped what was already a brutal year for the cryptocurrency industry, with speculators in retreat as prices of some of the most frequently traded tokens tumbled. Coinbase's shares have fallen more than 80% in 2022 and the company's third-quarter revenue was about one-fourth of what it was during the last three months of 2021, when the price of Bitcoin peaked.

"Last year in 2021, we did about $7 billion of revenue and about $4 billion of positive EBITDA, and this year with everything coming down, it's looking, you know, about roughly half that or less," Armstrong said in a wide-ranging interview on Bloomberg's "David Rubenstein Show: Peer-to-Peer Conversations," when asked about the company's revenue. In additional comments provided after the interview, a Coinbase spokesperson further clarified that they expect 2022 revenue to be less than half of 2021 revenue. Coinbase has previously indicated it may see a 2022 loss of no more than $500 million based on adjusted EBITDA, a measure of earnings that excludes certain costs like interest and depreciation.

Canada's biggest pension fund, CPP Investments, has ended its nearly year-long effort of studying investment opportunities in the volatile crypto market, Reuters reported Wednesday, citing people familiar with the matter. From the report: The reasons behind CPPI's abandonment of crypto research were not immediately clear. CPPI declined to comment but said it has made no direct investments in crypto. It referred to previous comments on cryptocurrency by its CEO, John Graham, in which he sounded a note of caution. CPPI's Alpha Generation Lab, which examines emerging investment trends, had formed a three-member team in early 2021 to research crypto currencies and blockchain-related businesses, with a view to taking potential exposure, the people added.

The U.S. Federal Trade Commission (FTC) is investigating several unnamed crypto firms over deceptive or misleading crypto advertising, according to a Bloomberg report. Decrypt reports: "We are investigating several firms for possible misconduct concerning digital assets," the FTC spokeswoman Juliana Gruenwald Henderson said in a statement. Henderson declined to share further information about which firms are the subject of the probe or what had prompted the Commission to launch investigations.

According to the FTC's website, "when consumers see or hear an advertisement, whether it's on the Internet, radio or television, or anywhere else, federal law says that ad must be truthful, not misleading, and, when appropriate, backed by scientific evidence." Additionally, the agency enforces laws that require truth in advertising, including rules that individuals disclose when they have been paid for endorsements or reviews. "While we can't comment on current events in the crypto markets or the details of any ongoing investigations, we are investigating several firms for possible misconduct concerning digital assets" an FTC spokesperson told Decrypt.

Crypto broker Genesis and its parent company Digital Currency Group (DCG) owe customers of the Winklevoss twins' crypto exchange Gemini $900 million, the Financial Times reported on Saturday. Reuters reports: Crypto exchange Gemini is trying to recover the funds after Genesis was wrongfooted by last month's failure of Sam Bankman-Fried's FTX crypto group, the newspaper said, citing people familiar with the matter. Venture capital company Digital Currency Group, which owns Genesis Trading and cryptocurrency asset manager Grayscale, owes $575 million to Genesis' crypto lending arm, Digital Currency Chief Executive Barry Silbert told shareholders last month.

Gemini, which runs a crypto lending product in partnership with Genesis, has now formed a creditors' committee to recoup the funds from Genesis and its parent DCG, the report added. Separately, Coindesk on Sunday reported that creditor groups in negotiation with Genesis currently account for $1.8 billion of loans, with that number likely to continue to grow. A second group of Genesis creditors, with loans also amounting to $900 million, is being represented by law firm Proskauer Rose, CoinDesk said citing a source. Further reading: Sam Bankman-Fried Says He Will Testify Before Congress On FTX Collapse

An anonymous reader quotes a report from BleepingComputer: A previously undocumented data wiper named CryWiper is masquerading as ransomware, but in reality, destroys data beyond recovery in attacks against Russian mayor's offices and courts. CryWiper was first discovered by Kaspersky this fall, where they say the malware was used in an attack against a Russian organization. [...] CryWiper is a 64-bit Windows executable named 'browserupdate.exe' written in C++, configured to abuse many WinAPI function calls. Upon execution, it creates scheduled tasks to run every five minutes on the compromised machine.

Next, it contacts a command and control server (C2) with the name of the victim's machine. The C2 responds with either a "run" or "do not run" command, determining whether the wiper will activate or stay dormant. Kaspersky reports seeing execution delays of 4 days (345,600 seconds) in some cases, likely added in the code to help confuse the victim as to what caused the infection. CryWiper will stop critical processes related to MySQL, MS SQL database servers, MS Exchange email servers, and MS Active Directory web services to free locked data for destruction.

Next, the malware deletes shadow copies on the compromised machine to prevent the easy restoration of the wiped files. CryWiper also modifies the Windows Registry to prevent RDP connections, likely to hinder intervention and incident response from remote IT specialists. Finally, the wiper will corrupt all enumerated files except for ".exe", ".dll", "lnk", ".sys", ".msi", and its own ".CRY", while also skipping System, Windows, and Boot directories to prevent rendering the computer completely unusable. After this step, CryWiper will generate ransom notes named 'README.txt,' asking for 0.5 Bitcoin (approximately $8,000) in exchange for a decrypter. Unfortunately, this is a false promise, as the corrupted data cannot be restored.

European Central Bank officials argued on Wednesday that bitcoin is "rarely used for legal transactions," is fuelled by speculation and the recent erosion in its value indicates that it is on the "road to irrelevance," in a series of stringent criticism (bereft of strong data points) of the cryptocurrency industry as they urged regulators to not lend legitimacy to digital tokens in the name of innovation. From a report: The value of bitcoin recently finding stability at around $20,000 was "an artificially induced last gasp before the road to irrelevance â" and this was already foreseeable before FTX went bust and sent the bitcoin price to well down below $16,000," wrote Ulrich Bindseil and Jurgen Schaaf on ECB's blog.

The central bankers argue that bitcoin's conceptual design and "technological shortcomings" make it "questionable" as a means of payment. "Real bitcoin transactions are cumbersome, slow and expensive. Bitcoin has never been used to any significant extent for legal real-world transactions," they wrote. Bitcoin also "does not generate cash flow (like real estate) or dividends (like equities), cannot be used productively (like commodities) or provide social benefits (like gold). The market valuation of bitcoin is therefore based purely on speculation," they wrote.

Former FTX head Sam Bankman-Fried (SBF) selected cryptocurrency vlogger Tiffany Fong for a series of lengthy and candid telephone interviews. In the two interviews that had been released on YouTube at press time, SBF speaks about many of the major questions connected with the collapse of FTX. CoinTelegraph reports: The first interview was conducted Nov. 6 and released Nov. 29 on YouTube. [...] The recording began with SBF saying, "You don't get into the situation we got in if you, like, make all the right decisions." Taking her cue from that, Fong started her interview by asking about the "backdoor" that allowed SBF "to execute commands that could alter the [FTX] company's financial records without alerting others." SBF expressed surprise at the very idea. "And this is something I would be doing?" he asked. "That I can tell you is definitely not true. I don't even know how to code. [...] I literally never even opened the code for any of FTX." This set the tone for the rest of the conversation, in which Fong politely asked hardball questions and SBF answered with seeming openness.

SBF went on to comment on FTX's FTT coin. "I think it had real value. That being said, there are a few problems. [...] This was f*****g embarrassing given my background. [...] I think it was basically more legit than a lot of tokens in some ways. Its was more economically underpinned than the average token was," he said. "Illiquidity didn't cause the crash," SBF continued. Rather, it was "the massive correlation of things during market moves, especially when they are triggered by fear over the position itself." SBF agreed with Fong that "the recovery looks pretty slim" for international customers, while "U.S. is a hundred percent. If its Amazon account had not been turned off, "they could already be withdrawing." Speaking about his political activities, SBF said, "I donated about the same to both parties. [...] All of my Republican donations were dark." [...]

In the second, undated, phone interview, SBF addressed the use of FTX customer funds by Alameda Research. Struggling for words, SBF said that he should have thought more about "what a hyper-correlated cross-scenario looks like. It's the oldest game in the book in finance. [...] There was no one person in charge of monitoring risk positions at FTX." Fong pressed for specifics from the situation, with little success. SBF took a moderate position on the role of Binance CEO Changpeng Zhao (CZ) in the FTX downfall. "Things would certainly be a lot more stable and there would be a lot more ability to generate liquidity [...] and I don't know for sure." Asked about the impact of the collapse of FTX and surrounding scandal on him, SBF said, "I wake up each day and think about what happened, and I have hours per day to ruminate on it. [...] It's different than what it seems to other people."

Newly-bankrupt crypto lending platform BlockFi has filed a lawsuit against Sam Bankman-Fried's holding company Emergent Fidelity Technologies seeking his shares in Robinhood that were pledged as collateral earlier in November. CoinTelegraph reports: The suit was filed on Nov. 28 in the United States Bankruptcy Court for the District of New Jersey just hours after BlockFi filed for Chapter 11 bankruptcy in the same court. As per the filing, BlockFi is demanding Emergent turnover collateral as part of a Nov. 9 pledge agreement that saw Emergent agree to a payment schedule with BlockFi that it has allegedly failed to pay.

BlockFi names the collateral as "including certain shares of common stock." In May, Bankman-Fried acquired a 7.6% stake in the online brokerage firm Robinhood, buying a total of $648 million in Robinhood shares through his Emergent investment company.

Coinsquare, one of Canada's largest cryptocurrency exchanges, may have been breached, but the company claims customer assets are "secure in cold storage and are not at risk." CoinDesk reports: The exchange, which touts itself as "Canada's trusted platform to securely buy, sell and trade Bitcoin, Ethereum, and more," emailed customers Friday to report a "data incident" in which an unauthorized third party accessed a customer database containing personal information. According to the email, the breach exposed "customer names, email addresses, residential addresses, phone numbers, dates of birth, device IDs, public wallet addresses, transaction history, and account balances." Although the email was sent Friday, Coinsquare discovered the breach last week and notified customers via Twitter. "No passwords were exposed. We have no evidence any of this information was viewed by the bad actor," the email stated.

Coinsquare suspended activities on its platform after detecting the vulnerability last week, triggering speculation of possible liquidity issues, given the momentous implosion of multi-billion-dollar crypto exchange, FTX, earlier this month. Full service was restored on Friday, according to a tweet. "We want to reiterate that 100% of client funds are safely held in cold storage and are not used for business activities," the company tweeted.

BlockFi, a cryptocurrency lender and financial services firm, filed for bankruptcy on Monday, becoming the latest company in the crypto industry hobbled by the implosion of the embattled exchange FTX. From a report: BlockFi had been reeling since the spring, when the collapse of several influential crypto firms pushed the market into a panic, sending the value of cryptocurrencies like Bitcoin plunging. In June, FTX agreed to provide the company with a $400 million credit line, which BlockFi's chief executive, Zac Prince, said would provide "access to capital that further bolsters our balance sheet." The deal also gave FTX the option to buy BlockFi.

But that agreement meant that BlockFi was financially entangled with FTX, and its stability was thrust into uncertainty this month after a series of revelations about corporate missteps and suspicious management at FTX. A few days after the exchange collapsed, BlockFi suspended withdrawals, explaining that it had "significant exposure" to FTX, including undrawn amounts from the credit line and assets held on the FTX platform. BlockFi is not the first crypto lender to collapse in a devastating year for the industry. After the spring crash, in which Bitcoin fell 20 percent in a week, two other lenders, Celsius Network and Voyager Digital, filed for bankruptcy. BlockFi, which is based in Jersey City, N.J., was created in 2017 and, as of last year, claimed more than 450,000 retail clients who can obtain loans in minutes, without credit checks. "We are just at the beginning of this story," Flori Marquez, a co-founder of BlockFi, told The New York Times in September. But its business has attracted close scrutiny from regulators.