FTX/Alameda: What Happened?
White Star Capital Digital Asset Fund - newsletter #104
We’re sure you have all seen coverage of recent FTX events that many are dubbing crypto's Lehman Brothers/ 2008 moment. So far, here is what we know.
What happened?
At a high level, what you need to know is that FTX is a crypto exchange and Alameda is a trading firm - they are independent entities both founded by Sam Bankman-Fried, and both were considered the top of their respective industries. Alameda is one of the largest market makers, and FTX's exchange was a cash machine from trading fees alone, and held the funds of many retail investors and companies. FTX fraudulently used those consumer funds for various purposes, including to loan to Alameda using FTT (its own token!) as collateral, and ended up with a ~$10bn (!) hole in their balance sheet. After this came to light, FTT's price collapsed and a bank-run ensued- both are now both insolvent and filed for Chapter 11 bankruptcy. To be clear, FTX is an exchange- not a bank- and was never authorised or known to be using customer funds for their own purposes. This, combined with the outward presentation of SBF as an altruistic industry hero (representing the crypto cause in Washington, investing in a number of crypto startups, and ostensibly altruistically buying up other mismanaged firms like Voyager, BlockFi etc) is where the outrage lies.
Contagion
Direct: FTX/Alameda invested in a significant amount of early-stage equity deals (including distressed buyouts during the Terra collapse), were market makers for multiple exchanges, and seemingly took out a significant number of loans (mostly collateralised with FTT which has since plummeted in value). Additionally, many funds and companies held portions of their accounts on FTX, which they will presumably not retrieve in the near future, if ever. Combined, this means we expect the contagion from these events to be significant. Some early indicators of how entrenched FTX and Alameda were in the crypto ecosystem can be found here, here, and here.
Indirect: In the week it unfolded, the total cryptocurrency market cap dropped 20%. Valuations of both equities and tokens will continue to fall as this escalates the crypto winter we were already experiencing, as seen in the falling price of BTC, Eth and other alt-coins over the past week.
The Case for DeFi
If anything else, this confirmed the need for decentralised finance. To be clear, FTX was a centralised entity- its transactions were not recorded on-chain and so did not have the transparency and accountability that blockchain technology was first intended to provide. This type of fraud is literally impossible in open-source, smart-contract based DeFi. That said, hacks and exploits can also occur in DeFi, which we also need to work to prevent (more here).
Further, FTX and Alameda held an outsized proportion of the FTT tokens in circulation, and so had a huge influence over the price, liquidity and utility of the token. WSC considers token distributions and does full audits of its CeFi investments.
🔦 White Star & Portfolio Spotlight
Lighthouse airdropped thousands of new beta access tokens this week
Connect to the portal or join the waitlist if you haven't already.
Paraswap launched a chat about PSP 2.0, Social Escrow system and ParaBoost
Compared to the original version 6, Paraswap has implemented several changes such as an increase in fee redistribution claim time and a commitment to explore the possibility of rollups as a method of claiming rewards.
Multis is live on Mirror
Multis will publish customer stories, product updates, and compliance content.
🏦 Enterprises & Institutions
Nike to debut its own platform for web3 wearables
Sports brand Nike is already one of the most successful brands in web3. Now it's going to sell virtual shoes on its own platform.
Yuga Labs acquires Beeple’s 10KTF, names him advisor
The Bored Ape Yacht Club creators have acquired the artist's NFT platform Wenew and its flagship NFT collection, 10KTF.
Uniswap overtakes Coinbase as Second-Largest Exchange Trading Ethereum last Tuesday
Last Tuesday, Uniswap became the second-largest exchange after Binance for Ethereum trading.
OpenSea launches copymint detection system, trait offers
OpenSea is launching a new copymint detection system today that can identify exact matches, flips, and fuzzy copies within seconds of a mint.
⚖️ Government & Regulation
NY Fed launches 12-week CBDC pilot program with major banks
Banking giants including BNY Mellon, Citi, U.S. Bank, and Wells Fargo will be issuing tokens and settling transactions through simulated central bank reserves as part of the pilot.
Bahamas’ supreme court approves ‘provisional liquidators’ for FTX
The Securities Commission of the Bahamas said it had to act “given the magnitude, urgency, and international implications of the unfolding events with regard to FTX.”
Australian Authorities Suspend License of FTX Australia
The FTX affiliate was established in the largest nation in Oceania eight months ago.
UAE regulator adopts blockchain to speed up commercial judgments
ADGM Courts aims to “massively transform the delivery of judicial services,” said CEO Linda Fitz-Alan while introducing blockchain technology for commercial courts.
US national crypto laws should look like New York’s, says state regulator
The superintendent of the New York Department of Financial Services highlighted her state’s stringent standards as the blueprint for federal legislation.
💰 Funding & Exits
Binance Labs Invests $4 Million in Ultimate Champions to Support Innovation in Web3 Gaming
Eventually, Ultimate Champions will be deployed on the BNB Chain and will land on the Binance Fan Token Platform, allowing players to supercharge their fan experience and better engage with their favourite teams.
Yakoa raises $4.8M to help detect NFT fraud for platforms and creators
Yakoa, an NFT fraud detection startup, has raised $4.8 million to build tools to fight intellectual property fraud in web3, the company exclusively told TechCrunch.
APWine raises $2.6 million as it builds a modular interest market in DeFi
Building a composable low-level yield tokenisation primitive for DeFi, Parisian startup APWine has raised $2.6 million in seed extension funding round
FTX and Avalanche co-led $5M round for Joepegs NFT marketplace
Although FTX collapsed last week, raises their ventures team contributed to are still being announced.
Y Combinator backs payment startup Ping in $15 million seed round
Freelancer-focused Neobank Ping closed a $15 million seed round backed by Y Combinator, Race Capital, BlockTower, Danhua Capital, Signum Capital and Goat Capital.
Buildspace raises $10M led by a16z to build Hogwarts for builders and dreamers
Other investors include Y Combinator, Balaji Srinivasan and Vayner Fund.
Crypto payments firm Ramp raises $70 million in 'more than 50% up round'
Crypto payments firm Ramp has raised $70 million in Series B funding as the founder claims its valuation has increased by more than 50% in a “very healthy” up round.
Thoma Bravo Leads $70M Fundraise for Blockchain Intelligence Firm TRM Labs
TRM Labs will use the capital, which brought total funding up to $130 million, toward product development and hiring.
Web3 gaming company Eterlast emerges from stealth with $4.5 million raise
The seed round was led by Supernode Global. Other backers included Immutable X, Stake Capital and Founders Factory.
🚀 Project Launches & Updates
Binance creates industry recovery fund to help projects struggling with liquidity
As the effects of the FTX crisis continue to affect the markets negatively, crypto exchange Binance is creating a fund to help potentially strong projects that are having liquidity issues.
Bitget Raises Its Protection Fund to $300M to Reassure Users After FTX’s Collapse
This is part of Bitget’s major efforts in building the trust of the crypto market after FTX’s collapse, leaving users with massive losses.
🔥 Other Bits We're Excited About
Adidas' Bored Ape NFT makes appearance With Messi, Benzema in New World Cup Trailer
Adidas’ own Indigo Herz Bored Ape NFT joins Messi and Benzema in a teaser trailer for Qatar's upcoming FIFA World Cup.
Game of Thrones is launching digital collectibles
BuildYourRealm is a digital collectible experience inspired by one of the most immersive worlds in TV history, created in collaboration with WarnerBrosNFT, GameOfThrones, daz3, and HBO.
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