July 22, 2022       /       Unchained Daily       /       Laura Shin

Daily Bits✍️✍️✍️

• Blockchain.com slashed 25% of its workforce.
• Curve Finance’s founder hinted at a forthcoming stablecoin.
• Ethereum co-founder Vitalik Buterin discussed Ethereum’s roadmap at EthCC in Paris.
• Synthetix unveiled a bridge to move sUSD from Optimism to Ethereum.
• NFT Worlds, a Minecraft-based NFT game, will release a new plan by this weekend after Minecraft banned NFTs.
• A proposal to turn on Uniswap fees is seeing early enthusiasm from the community.

Today in Crypto Adoption…

• Epic Games will not be banning NFT integrations.
• Mercedes Benz launched a blockchain-based data sharing platform.
• South Korea postponed its 20% tax on crypto to 2025.
• Finland sold off $47 million in BTC and will donate the proceeds to Ukraine.

The $$$ Corner…

• Hashflow raised $25 million in a Series A, valuing the firm at $400 million.
• Crypto exchange KuCoin raised $10 million via strategic investment to incubate and build networks for crypto startups.
• NFX, a venture capital firm, added another $62.61 million fund for crypto investments.

What Do You Meme?

What’s Poppin’?

6 Reactions to the SEC Naming 9 Tokens as Securities

“Today’s charges are a further reminder that Web3 is not a law-free zone. Just last month, I announced the first-ever insider trading case involving NFTs, and today I announce the first ever insider trading case involving cryptocurrency markets,” U.S. Attorney Damian Williams said in the DOJ’s release.

Both regulators allege that during his time at Coinbase, Ishan Wahi helped coordinate the platform’s public listing announcement and used that information to successfully help him, his brother, and his friend trade. The DOJ estimates the trio made roughly $1.5 million in gains, while the SEC estimates $1.1 million. Interestingly, Crypto Twitter has known about this case for quite some time, as noted in the DOJ press release, which referenced an April tweet from Crypto Twitter stalwart @cobie, who had posted information about an “ETH address that bought hundreds of thousands of dollars of tokens exclusively featured in the Coinbase Asset Listing post about 24 hours before it was published, rofl.”

While the insider trading case built by the DOJ and SEC is interesting, there could be even bigger ramifications for the industry as a whole. In its press release, the SEC claimed that nine out of the 25 crypto assets Wahi and co. traded “were securities.” Explained Gurbir S. Grewal, the director of the SEC’s enforcement division: “In this case… a number of the crypto assets at issue were securities, and, as alleged, the defendants engaged in typical insider trading ahead of their listing on Coinbase.”

The decision to call out the nine assets (AMP, RLY, DDX, XYO, RGT, LCX, POWR, DFX, and KROM) inside an unrelated case, was immediately met with lots of opinions from the crypto community. For example:

• CFTC Commissioner Caroline Pham spoke out against the SEC’s decision via a statement, describing the SEC’s move as an example of regulation by enforcement and calling for a more “transparent process” in regards to digital asset rulemaking.
• Stephen Palley, a partner at Anderson Kill, described the decision as “some weasel-y weak ass tea” and asked: “How can you charge people with insider trading without charging the (massive, publicly traded) exchange for listing unregistered securities?”
• Cobie sounded off on Coinbase: “So yeah, it’s a bit shit that law enforcement will try to make an example out of these ppl (who yes obvs were doing something illegal/stupid) — but Coinbase who have neglected their duty and operated with insufficient processes enabling it gets to play hero & community steward.”
• Blockchain Association’s Jake Chervinsky cited worries for how messy this will become in court: “It’s hard to overstate what a mess this will be. The SEC’s jurisdiction turns on whether these assets are, in fact, securities. This means the case may require nine mini-trials, one for each asset, to resolve their security status. Without the issuers or exchange to defend any.”
• Coinbase published a petition calling for the SEC to develop a new regulatory framework for digital securities.
• Lawyer Jason Gottlieb predicted that the decision will lead to a less safe atmosphere for retail investors: “Seems to me that the SEC is helping itself to a whole bunch of injective relief against 9 projects, without actually bringing any actions against those projects, or giving them the ability to defend themselves against collateral consequences…It’s just going to cause more business to move outside the US, which makes it LESS safe for US retail, not more.”

For now, the SEC has yet to comment.

As for Wahi, his brother, and friend, they are in custody and face a max sentence of 20 years.

Recommended Reads

1. Not Boring on USDC
2. Delphi Digital on the future of crypto gaming
3. Esquire on reimagining books and web3

On The Pod…

Adam Cochran, partner at Cinneamhain Ventures, discusses the impact of 3AC’s impending liquidation. Show topics:

• why 3AC founders (and family members) are listing themselves as creditors
• what the “corporate veil” is and why it matters regarding 3AC
• where retail investors stand in the pecking order of creditors
• why Adam doesn’t believe we know the full story about 3AC’s downfall, despite liquidators leaking a 1,000-page report about it
• what creditors might do with 3AC’s yacht
• why Adam is less worried about the health of GBTC in light of recent 3AC filings
• what effect 3AC’s fall will have on Genesis and Digital Currency Group
• why creditors might prefer liquidations to be paid out in equity compared to cash in this environment
• how 3AC’s liquidation is impacting retail investors at Voyager and Celsius
• why there could be a crypto credit crunch coming soon

Book Update

You can purchase it here: http://bit.ly/cryptopians