An anonymous reader shares a report: The investment bank B Riley is so determined to persuade the troubled bitcoin miner Core Scientific to avoid filing for bankruptcy that it has offered as much as $72mn in fresh financing to keep the company from seeking a court-supervised Chapter 11 restructuring. "Bankruptcy is not the answer and would be a disservice to the Company's investors," B Riley wrote in a letter from early December. "It will destroy value for the Company's shareholders, reduce potential recoveries for the Company's lenders, deplete its limited resources and create massive uncertainty for all its stakeholders."

Core Scientific filed for bankruptcy anyway last week. Still, B Riley's aversion should be understandable. A series of players have succumbed to the ongoing crypto winter including FTX, BlockFi, Voyager Digital and Celsius with customer accounts largely frozen. The novel legal issues about digital asset ownership, the continuing problems in the sector and the deliberative nature of US bankruptcy proceedings have kept any of the major companies from exiting court protection yet. The costs are piling up and account holders are noticing. Lawyers, bankers and other advisers in the Celsius case that began in July recently submitted detailed fee requests to the New York federal bankruptcy court totalling $53mn.

Per US law, these official advisers will have these so-called "administrative expenses," subject to court approval, paid by the "estate" or the company which will naturally eat into the recoveries of account holders. Law firms involved including Kirkland & Ellis and White & Case which are usual powerhouses in corporate and private equity bankruptcies are involved in Celsius and have top lawyers billing more than $1,800 per hour. (This may remain a bargain as top lawyers in the FTX bankruptcy at Sullivan & Cromwell are charging in excess of $2,000 per hour).

The Bitcoin network hashrate has dropped by more than 38.8% from its peak, as many U.S.-based miners have been forced to switch down their facilities due to deadly blizzards. From a report: Bitcoin hashrate, the level of computing power used for mining and processing transactions, came in at 155.28 exahashes per second on Saturday, down from 253.88 exahashes on Wednesday, according to data from IntoTheBlock. A winter storm has claimed at least 32 lives across the U.S., as of Monday morning in Hong Kong, according to media reports.

Neal Stephenson coined the phrase "metaverse" in his 1992 book Snow Crash. 30 years later, Stephenson is part of a blockchain startup "optimized for the Open Metaverse" called Lamina1. This week they announced their "first-of-its-kind fund" for investing in early stage Layer 1 blockchain projects ("largely focused" on the Open Metaverse). .

The goal is "to provide broad economic access to global accredited investors looking to support the next era of the internet," according to the announcement — and to also provide Web3 builders "a vehicle for raising capital for their Open Metaverse ventures." The fund will be led by Lamina1's co-founder Peter Vessenes (who, among other things, was the first Chairman of the Bitcoin foundation), "offering investors a chance to join him at the forefront of the emerging Open Metaverse economy..."

"Investors and builders can both apply to participate immediately." The fund launch will be closely followed by the much-anticipated launch of Lamina1's testnet.... The L1EF fund works by allowing accredited investors to access and co-invest in companies and entrepreneurs through quarterly subscriptions.

Investments will be largely focused on the technology and experiences users can access in the Open Metaverse, ranging from immersive computing to open AI at scale. To support the rapid advancement and expansion of the Open Metaverse, L1EF is simultaneously focused on investing in builders and creators who will foster the quality tech and infrastructure necessary to support the protocol, and create immersive experiences that bring Lamina1's vision of an Open Metaverse to life. Some of these early stage projects include layer 2 protocols, DeFi, GameFi, marketplaces, bridges, and many more.

"We're thrilled to introduce L1EF to serve both creators and investors who are actively promoting the development of an Open Metaverse," said Rebecca Barkin, President of Lamina1. "Peter has a deep understanding and demonstrated success of growing economies around a chain, and his approach to grant builders early access to capital — right as we're preparing to place testnet in their hands — is in perfect alignment with our mission to build the open infrastructure that brings together the most powerful creative community on the planet...."

In addition to capital, projects that are part of L1EF will receive early access and support for Lamina1 developer tooling through the forthcoming Lamina1 Early Access Program.
"The team has a front row seat to all happening in the ecosystem," Vessenes said this week, "and essentially gets a 'first look' at what many of the most compelling creators and storytellers of our time are doing, building, making, and producing around the world.

"We want to share that front row seat with as many people as possible."


In 2004 Neal Stephenson answered questions from Slashdot's readers.

Core Scientific, one of the largest miners of Bitcoin, became the latest crypto company to file for bankruptcy as the industry reckons with a plunge in digital-asset prices. From a report: The Austin, Texas-based company listed $1.4 billion of assets against $1.33 billion of liabilities in its Chapter 11 petition, which was filed in the Southern District of Texas. The company's shares, already down 98% this year to trade at a fraction of a dollar, lost a further 40% on Wednesday morning.

Chapter 11 bankruptcy allows a company to continue operating while it works out a plan to repay creditors. Core Scientific said in a statement that it intends to reach a restructuring agreement with a group of convertible bondholders and continue operating its mining and hosting business. The company contributes about 10% of the computing power to secure the entire Bitcoin network. It had 243,000 servers for Bitcoin mining with 143,000 for self-mining. It has provided hosting services to the largest miners in the industry.

Karl Sebastian Greenwood, co-founder of sham "Bitcoin-killer" OneCoin, pleaded guilty in Manhattan federal court to charges of conspiring to defraud investors and to launder money. "Greenwood was arrested in Thailand in July 2018 and subsequently extradited to the US," reports The Register. "OneCoin's other co-founder, 'Cryptoqueen' Ruja Ignatova (Dr. Ruja Ignatova -- she has a law degree), remains a fugitive on the FBI's Ten Most Wanted list and on Europol's Most Wanted list." From the report: "As a founder and leader of OneCoin, Karl Sebastian Greenwood operated one of the largest international fraud schemes ever perpetrated," said US Attorney Damian Williams in a statement. "Greenwood and his co-conspirators, including fugitive Ruja Ignatova, conned unsuspecting victims out of billions of dollars, claiming that OneCoin would be the 'Bitcoin killer.' In fact, OneCoins were entirely worthless." The US has charged at least nine individuals across four related cases, including Greenwood and Ignatova, with fraud charges related to OneCoin. Authorities in China have prosecuted 98 people accused of trying to sell OneCoin. Police in India arrested 18 for pitching the Ponzi scheme.

According to the Justice Department, Greenwood and Ignatova founded OneCoin in Sofia, Bulgaria, in 2014. Until 2017 or so, they're said to have marketed OneCoin as a cryptocurrency to investors. The OneCoin exchange was shut down in January 2017, but trades evidently continued among affiliated individuals for some time. The OneCoin.eu website remained online until 2019. In fact, OneCoin was a multi-level marketing (MLM) pyramid scheme in which network members received commissions when they managed to recruit people to buy OneCoin. The firm's own promotional materials claim more than three million people invested. And between Q4 2014 and Q4 2016, company records claim OneCoin generated more than $4.3 billion in revenue and $2.9 billion in purported profits. At the top of the MLM pyramid, Greenwood is said to have earned $21 million per month. Greenwood and others claimed that OneCoin was mined using computing power like BitCoin and recorded on a blockchain. But it wasn't. As Ignatova allegedly put it in an email to Greenwood, "We are not mining actually -- but telling people shit."

OneCoin's value, according to the Feds, was simply set by those managing the company -- they manipulated the OneCoin exchange to simulate trading volatility but the price of OneCoin always closed higher than it opened. In an August 1, 2015 email, Ignatova allegedly told Greenwood that one of the goals for the OneCoin trade exchange was "always close on a high price end of day open day with high price, build confidence -- better manipulation so they are happy." According to the Justice Department, the value assigned to OneCoin grew steadily from $0.53 to approximately $31.80 per coin and never declined.

More than 100 bitcoins tied to the defunct Canadian crypto exchange QuadrigaCX were transferred out of cold wallets thought to be beyond anyone's control over the weekend, after sitting dormant for more than three years. From a report: The company's bankruptcy trustee, Ernst and Young, did not initiate the transfers, CoinDesk has learned. QuadrigaCX went bankrupt in 2019 after the apparent death of founder and CEO Gerald Cotten. At the time of its collapse, Quadriga was believed to have owed thousands of customers nearly $200 million in various cryptocurrencies -- a staggering failure for what was once Canada's largest crypto exchange.

EY, which is acting as the trustee for Quadriga's estate, announced in February 2019 that it lost control of about 100 BTC after mistakenly sending the coins to Quadriga-operated cold wallets that the Big Four financial services firm said it couldn't access. At the time, the bitcoin was worth around $355,000 (C$470,000).

The world's biggest crypto exchange, Binance, is battling to shore up confidence after a surge in customer withdrawals and a steep drop in the value of its digital token. Reuters reports: The exchange said it dealt with net outflows of around $6 billion over 72 hours last week "without breaking stride" because its finances are solid and "we take our responsibility as a custodian seriously." After the collapse of rival exchange FTX last month, Binance's founder Changpeng Zhao promised his company would "lead by example" in embracing transparency. Yet a Reuters analysis of Binance's corporate filings shows that the core of the business -- the giant Binance.com exchange that has processed trades worth over $22 trillion this year -- remains mostly hidden from public view.

Binance declines to say where Binance.com is based. It doesn't disclose basic financial information such as revenue, profit and cash reserves. The company has its own crypto coin, but doesn't reveal what role it plays on its balance sheet. It lends customers money against their crypto assets and lets them trade on margin, with borrowed funds. But it doesn't detail how big those bets are, how exposed Binance is to that risk, or the full extent of its reserves to finance withdrawals. Binance is not required to publish detailed financial statements because it is not a public company, unlike U.S. rival Coinbase, which is listed on the Nasdaq. Nor has Binance raised outside capital since 2018, industry data show, which means it hasn't had to share financial information with external investors since then.

In an effort to look inside Binance's books, Reuters reviewed filings by Binance units in 14 jurisdictions where the exchange on its website says it has "regulatory licenses, registrations, authorisations and approvals." These locations include several European Union states, Dubai and Canada. Zhao has described the authorisations as milestones in Binance's "journey to being fully licensed and regulated around the world." The filings show that these units appear to have submitted scant information about Binance's business to authorities. The public filings do not show, for example, how much money flows between the units and the main Binance.com exchange. The Reuters analysis also found that several of the units appear to have little activity. Former regulators and ex-Binance executives say these local businesses serve as window dressing for the main unregulated exchange. Binance Chief Strategy Officer Patrick Hillmann said the Reuters analysis of the units' filings in the 14 jurisdictions was "categorically false."

Binance's Hillmann did not comment on the Reuters estimates. "The vast majority of our revenue is made on transaction fees," he said, adding that the exchange has been able to "accumulate large corporate reserves" by keeping expenses down. Binance's "capital structure is debt free" and the company keeps its money made from fees separate from the assets it buys and holds for users, Hillmann said.

Further reading: Binance US To Buy Bankrupt Voyager Digital's Assets for $1 Billion

Slashdot reader lowvisioncomputing shares a story from the CBC about an elaborate heist discovered "when the chief administrative officer of a southwestern Manitoba rural municipality [population: 3,300] noticed the series of unusual cash withdrawals from its bank account...." It began with a job advertisement. A seemingly legitimate company, with a professional website and a Nova Scotia address, claimed it was looking for cash processors. The contract was for one month. Employees could work from home.

They were told they would receive payments to their credit cards, which they would be expected to move to their bank accounts. They would then withdraw the payments, convert them into bitcoin, and send that to another account.... The majority of the 18 people hired were young and lived in various communities across the country.... Anyone who did an internet search for the company would find a professional website, with information matching what was provided in the employment agreement.

In early December 2019, the cybercriminals sent a phishing email to multiple people at the municipal office of WestLake-Gladsone, a municipality about 150 kilometres west of Winnipeg, on the southwestern shore of Lake Manitoba. At least one person clicked on the link, which allowed the hackers to get into the municipality's computers and bank accounts. But weeks went by and nothing happened, so the municipality didn't report it to the police. It was only after the money disappeared that the municipality discovered the two incidents were connected, said Kate Halashewski, who at the time was the assistant chief administrative officer for the Municipality of WestLake-Gladstone....

Court documents say that on Dec. 19, 2019, a person logged into the municipality's bank account and changed the password, along with the personal verification questions. Over the next 17 days, the cyberattackers added the 18 "employees" hired as payees and began systematically making withdrawals, transferring the money to the employees' credit cards. Dozens of withdrawals were made, totalling $472,377, according to court documents — a considerable amount for a municipality with an entire annual budget of $7 million.

Those withdrawals weren't discovered until Jan. 6, when Halashewski saw 48 bank transfers — each less than $10,000 — going to unfamiliar accounts.... Once they'd completed the initial transfers and conversion, the bitcoin was then sent to the private account of the scammers — who cybersecurity experts say likely aren't in Canada....

The municipality finally announced it had lost nearly half a million dollars in an Oct. 12, 2020, news release.... No arrests have been made in connection with the WestLake-Gladstone cyberattack and RCMP say it is no longer under active investigation.

Microsoft has quietly banned cryptocurrency mining from its online services, and says it did so to protect all customers of its clouds. The Register reports: The Windows and Azure titan slipped the prohibition into an update of its Universal License Terms for Online Services that came into effect on December 1. That document covers any "Microsoft-hosted service to which Customer subscribes under a Microsoft volume licensing agreement," and on The Register's reading, mostly concerns itself with Azure. Microsoft's Summary of Changes to the license states: "Updated Acceptable Use Policy to clarify that mining cryptocurrency is prohibited without prior Microsoft approval." Within the license itself there's hardly any more info.

A section headed "Acceptable Use Policy" states: "Neither Customer, nor those that access an Online Service through Customer, may use an Online Service: to mine cryptocurrency without Microsoft's prior written approval." Microsoft appears not to have publicized this decision beyond the Summary of Changes page and, in recent hours, in an advisory to partners titled: "Important actions partners need to take to secure the partner ecosystem." That document states "the Acceptable Use Policy has been updated to explicitly prohibit mining for cryptocurrencies across all Microsoft Online Services unless written pre-approval is granted by Microsoft," and adds: "We suggest seeking written pre-approval from Microsoft before using Microsoft Online Services for mining cryptocurrencies, regardless of the term of a subscription." Microsoft told The Register it made the change because "crypto currency mining can cause disruption or even impairment to Online Services and its users and can often be linked to cyber fraud and abuse attacks such as unauthorized access to and use of customer resources."

"We made this change to further protect our customers and mitigate the risk of disrupting or impairing services in the Microsoft Cloud." Permission to mine crypto "may be considered for Testing and Research for security detections."

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.