Cryptocurrencies about to crash again?

How will the cryptocurrency industry fail? Very slowly, the all at once.
Bitcoin prices are far off of their peak, but they've been relatively stable these past few months.
However, that isn't a true picture of the environment.
While prices seem to be locked in (the DoJ suspects price rigging), the entire cryptocurrency infrastructure, carefully built up over 10 years, is collapsing in a space of months.

Silvergate is (was?) the bank in crypto. It counted some of the industry’s biggest firms (in the U.S.) as its clients. The fact it’s now in a position where it may soon fold is not a good signal for the rest of the industry, and gives regulators a prime example of what happens if the banking sector gets too close to crypto.

Federal regulators are actually trying to prop it up, because they fear what will happen if Silvergate implodes.
Interestingly, the government is actively trying to get out of the cryptocurrency market at the exact same time, by selling a stockpile of seized bitcoins on the open market. Some in the government see a collapse happening soon.

Now, the former chief of internet enforcement at the U.S. Securities and Exchange Commission (SEC) has predicted FTX rival Binance, the world's largest crypto exchange, could see a run on deposits—potentially causing "devastating investor carnage."

Crypto is running out of banks, and it is running out of major exchanges, because of hacks and fraud.
Hackers alone have stolen more than $3 Billion in crypto in just the past year, and fraud is far worse than hackers.

7 users have voted.


usefewersyllables's picture


6 users have voted.

Twice bitten, permanently shy.

Bloomberg News then went further out on a shaky limb with this paragraph:

“Federal Deposit Insurance Corp. officials have been discussing with management ways to avoid a shutdown, according to people familiar with the matter. One possible option involves lining up crypto-industry investors to help Silvergate shore up its liquidity, said one of the people. FDIC examiners arrived at the firm’s La Jolla, California, offices last week, the people said.”

For starters, “FDIC examiners” are not investment bankers from Goldman Sachs or Perella Weinberg Partners. They don’t arrange mergers and acquisitions. If bank examiners from the Federal Deposit Insurance Corporation are on the premises of Silvergate Bank, it is because officials of that bank put a big red target on their bank for the Feds on March 1 when it made a filing with the Securities and Exchange Commission that stated that the bank had concerns about its “ability to continue as a going concern.”

2 users have voted.

Private justice

Judge John Dorsey is the presiding judge in the bankruptcy proceedings for Sam Bankman-Fried’s collapsed house of cards, which includes the now frozen crypto exchange, FTX; his now shuttered hedge fund, Alameda Research; and more than 100 opaque affiliates operating in the shadows around the globe. Undisputed is the fact that despite FTX being represented by some of the most prominent law firms in America as it built this criminal enterprise – notably Sullivan & Cromwell – more than 10.3 million user accounts were looted of more than $8 billion right under the nose of Big Law.

We say “notably Sullivan & Cromwell” in the above paragraph because not only did it work on more than 20 matters for the FTX group of companies for 16 months prior to its bankruptcy filing but its former law partner, Ryne Miller, served as General Counsel of FTX US since August of 2021. In addition, Sullivan & Cromwell has conceded that it personally represented Sam Bankman-Fried on his purchase of more than half a billion dollars of stock in Robinhood Markets (a stock trading app) – the rightful ownership of which is now the subject of multiple court battles. Equally problematic, an email by Sullivan & Cromwell law partner, Andrew Dietderich, has surfaced in a court filing indicating that just four days before FTX filed bankruptcy, Dietderich had told another law firm that FTX is “rock solid.” (Dietderich is now one of the key law partners involved in the FTX bankruptcy proceedings.)

Given this set of facts, justice for the defrauded customers and the public interest would obviously demand that the pre-bankruptcy legal interactions between Sullivan & Cromwell, the FTX group of companies and Sam Bankman-Fried (as well as all other questionable activities by others) be investigated by an independent examiner, as is required under bankruptcy law when requested by the U.S. Trustee and debts exceed $5 million. Instead, Judge Dorsey ruled against the U.S. Trustee’s request for an independent examiner in the FTX bankruptcy proceeding and has signed an order making Sullivan & Cromwell the lead counsel overseeing the FTX bankruptcy case.

By doing this, Judge Dorsey has effectively privatized justice while sitting on the bench of a federal court.

Sullivan & Cromwell is a 144-year old Big Law firm with more than 900 attorneys. Its headquarters is located in the financial district in lower Manhattan on Broad Street. It filed the FTX bankruptcy case, not in U.S. Bankruptcy Court in lower Manhattan, but in U.S. Bankruptcy Court in Wilmington, Delaware – a two-hour drive for its law partners, some of whom are billing as much as $2,165 an hour in the FTX bankruptcy matter. (For 19 days in November and 31 days in December, Sullivan & Cromwell has thus far billed $20 million in legal fees and more than $239,000 in expenses. Part of those expenses include more than $20,000 for “Conference Room Dining” and “Meals – Overtime.”)

Judges in U.S. Bankruptcy Court in Delaware, including Judge Dorsey, have previously ruled on multiple occasions against the appointment of an independent examiner when requested by the U.S. Trustee. This might explain the two hour drive to Wilmington, Delaware by Sullivan & Cromwell’s high-priced attorneys.

As Sullivan & Cromwell’s partners are billing and eating their way through what’s left of defrauded crypto customers’ money, Judge Dorsey had the audacity to make the argument in turning down the U.S. Trustee’s request for an independent examiner, that it would cost too much money.

2 users have voted.