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.

Long-time Slashdot reader destinyland writes: A new book identifies "26 Lines of Code That Changed the World." But its cheeky title also incorporates a comment from Unix's source code — "You are Not Expected to Understand This". From a new interview with the book's editor:

With chapter titles like "Wear this code, go to jail" and "the code that launched a million cat videos," each chapter offers appreciations for programmers, gathering up stories about not just their famous lives but their sometimes infamous works. (In Chapter 10 — "The Accidental Felon" — journalist Katie Hafner reveals whatever happened to that Harvard undergraduate who went on to inadvertently create one of the first malware programs in 1988...) The book quickly jumps from milestones like the Jacquard Loom and the invention of COBOL to bitcoin and our thought-provoking present, acknowledging both the code that guided the Apollo 11 moon landing and the code behind the 1962 videogame Spacewar. The Smithsonian Institution's director for their Center for the Study of Invention and Innovation writes in Chapter 4 that the game "symbolized a shift from computing being in the hands of priest-like technicians operating massive computers to enthusiasts programming and hacking, sometimes for the sheer joy of it."

I contributed chapter 9, about a 1975 comment in some Unix code that became "an accidental icon" commemorating a "momentary glow of humanity in a world of unforgiving logic." This chapter provided the book with its title. (And I'm also responsible for the book's index entry for "Linux, expletives in source code of".) In a preface, the book's editor describes the book's 29 different authors as "technologists, historians, journalists, academics, and sometimes the coders themselves," explaining "how code works — or how, sometimes, it doesn't work — owing in no small way to the people behind it."

"I've been really interested over the past several years to watch the power of the tech activists and tech labor movements," the editor says in this interview. "I think they've shown really immense power to effect change, and power to say, 'I'm not going to work on something that doesn't align with what I want for the future.' That's really something to admire.

"But of course, people are up against really big forces...."

Binance has released its proof-of-reserves system, starting with bitcoin, in order to show that the exchange is healthy and solvent. From a report: This comes just weeks after rival exchange FTX collapsed, after seemingly swapping user funds for other, more illiquid tokens -- eventually leading to a liquidity crisis. Binance's goal is to show that it holds its users' assets in the same tokens that they have deposited. For bitcoin, Binance has provided a snapshot of account balances and the exchange's bitcoin reserves. It claims it has 582,485 bitcoin in its reserves, while its users have a net balance of 575,742 bitcoin -- giving it a margin of 6,743 bitcoin. It also provided a link for Binance users to verify their own bitcoin on the exchange.

A new working paper by Matthew Ferranti -- a fifth-year PhD candidate in Harvard's economics department and advisee of Ken Rogoff, a former economist at the IMF and the Federal Reserve Board of Governors who is now a Harvard professor -- has caused a minor splash. From a report: In it, Ferranti argues that it makes sense for many central banks to hold a small amount of Bitcoin under normal circumstances, and much more Bitcoin if they face sanctions risks, though his analysis finds gold is a more useful sanctions hedge. DFD caught up with Ferranti at Harvard's Cabot Science Library to discuss the working paper, which has not been peer-reviewed since its initial publication online late last month.

What are the implications of your findings?
You can read op-eds, for example in the Wall Street Journal, where people say, "We overused sanctions. It's going to come back to bite us because people are not going to want to use dollars." But the contribution of my paper is to put a number on that and say, "Okay, how big of a deal is this really? How much should we be concerned about it?" The numbers that come out of it are that yeah, it is a concern. It's not just you change your Treasury bonds by 1 percent or something. It's a lot bigger than that.

Rather than hedging sanctions risk with Bitcoin, shouldn't governments just avoid doing bad things?
There's not just one thing that gets you added to the U.S. sanctions list. If the only thing that could get you sanctioned, for example, was to invade another country, then most countries, as long as they don't plan to invade their neighbors, probably don't need to care about this at all, and so my research becomes less relevant. But it's kind of a nebulous thing. That might make countries pause and think about, "How reliable is the U.S?" The paper doesn't say anything about whether applying sanctions is a good or bad thing. There's a huge literature on how effective sanctions are. And I think the number that comes out of that is like a third of the time they work. Of course, they can have unintended consequences, like hurting the population of the country that you're sanctioning.

So why would a central bank bother with Bitcoin?
They're not correlated. They both sort of jump around, so there's diversification benefit to having both. And if you can't get enough gold to hedge your sanctions risk adequately -- think about a country that has very poor infrastructure, doesn't have the capability to store large amounts of gold, or countries whose reserves are so large that they simply cannot buy enough gold. Places like Singapore and China. You can't just turn around and buy $100 billion of gold.

Cryptocurrencies and NFTs have been formally disallowed from Grand Theft Auto Online's popular role-playing (RP) servers. That's according to a new set of guidelines posted on Rockstar's support site last Friday. From a report: In the note, the game's publisher says its new RP server rules are aligned with Rockstar's existing rules for single-player mods. Both sets of rules prohibit content that uses third-party intellectual property, interferes with official multiplayer services, or makes new "games, stories, missions or maps" for the game. This means RP servers based on re-creating Super Mario Kart in the Grand Theft Auto world, for instance, could face "priority in enforcement actions" from Rockstar. But the new RP guidelines surpass the existing single-player mod guidelines in barring "commercial exploitation." That's a wide-ranging term that Rockstar says specifically includes selling loot boxes, virtual currencies, corporate sponsorships, or any integrations of cryptocurrencies or "crypto assets (e.g. 'NFTs')."

Most addresses holding bitcoin (BTC), the largest cryptocurrency, are now in the red, the first time that's happened since the start of the coronavirus-induced crash of March 2020. CoinDesk reports: Just over 51%, or 24.6 million addresses of the total 47.9 million, are below purchase price on their investments, according to data provided by blockchain analytics firm IntoTheBlock. About 45% are in the money, which means they are boasting unrealized gains, while the rest are roughly at break-even. IntoTheBlock defines out-of-the-money addresses as those that acquired coins at an average price higher than bitcoin's going market rate of $16,067.

The bearish momentum looks overdone, according to Lucas Outumuro, head of research at IntoTheBlock. Previous bear markets ended with the majority of addresses being out of-the money. The percentage of out-of-the-money addresses stood at 55% in January 2019. Bitcoin bottomed near $3,200 around the same time and began a bull run three months later. Further reading: Silence From Digital Currency Group's Genesis Spooks Crypto

An anonymous reader quotes a report from Reuters: FTX founder Sam Bankman-Fried sold a stake in the company worth $300 million when the crypto exchange raised capital last year, the Wall Street Journal reported on Friday, citing the firm's financial records and people familiar with the transaction. At the time, Bankman-Fried told investors it was a partial reimbursement of money he'd spent to buy out rival Binance's stake in FTX a few months earlier, the report added. The Journal's report cited FTX's October 2021 funding round where the company had raised $420 million from a clutch of big name investors including Temasek and Tiger Global, valuing the crypto exchange at $25 billion.