SBF’s trial begins, more layoffs, Israel at war with Hamas, Ripple secures another victory | Weekly Recap

This week, FTX founder Sam Bankman-Fried’s trial began; the crypto sector witnesses more layoffs; a Hamas-led attack stuns Israel; Ripple vs. U.S. SEC continues.

SBF faces trial

Sam Bankman-Fried’s trial continues on Tuesday, Oct. 10 with testimony from former Alameda CEO Caroline Ellison.

Before the trial began on Oct. 3, attorneys declined a request for a Ukrainian FTX customer to testify remotely. Prosecutors wanted this because most FTX clients live in the U.S., and one Ukrainian couldn’t travel due to wartime restrictions. 

Bankman-Fried’s legal team cited concerns about the emotional impact of the conflict between Russia and Ukraine and potential jury bias.

The trial commenced in New York, with Bankman-Fried entering the courtroom accompanied by five lawyers. He faces charges related to fraud against customers and investors. Interestingly, no plea offer was made by the prosecution.

Judge Kaplan hinted at a possibly quicker trial than expected and gave jurors strict instructions to avoid trial-related news. Some of the jurors had affiliations with crypto entities. 

Witnesses include FTX’s former CTO, Gary Wang, as well as former exec Nishad Singh, and attorney Daniel Fried. Ryan Salame, a former FTX executive who had pleaded guilty, seemed unwilling to testify against Bankman-Fried.

Alameda’s unlimited privileges on FTX

On the second day, federal prosecutors alleged that Bankman-Fried deceived the public about FTX’s financial status. The defense, on the other hand, aimed to place responsibility for FTX’s implosion on Ellison and Bitcoin’s volatility.

Wang admitted to allowing unlimited fund withdrawals by Alameda. He mentioned Bankman-Fried’s significant control in both companies. Bankman-Fried held 90% of Alameda while Wang held 10%.

Wang, who primarily focused on coding, had a $200,000 salary and owned 17% of FTX. He coded special privileges for Alameda Research on the FTX platform.

During the fourth day, Wang revealed information about Alameda’s $65 billion credit line and claimed they had unlimited withdrawals from FTX. Alameda had distinct privileges on the exchange, including this substantial credit line.

Bankman-Fried took great care in maintaining Alameda’s reputation, even resorting to tactics like promoting a fictitious insurance fund. Meanwhile, behind the scenes, Alameda leveraged its extensive credit line to withdraw customer assets from the exchange.

A verdict is expected within four to six weeks.

FTX hacker on the move

The FTX hacker who exploited the platform for $413 million last November moved some of the stolen funds this week. Notably, THORSwap, a prominent DEX, suspended all swaps on its platform and went into maintenance mode on Oct. 6.

The THORSwap team cited the growing use of the platform to route stolen funds. Following the move from THORSwap, the FTX hacker converted 75,636 ETH worth $124 million to tBTC (a wrapped version of BTC) and moved the tokens to the Bitcoin network through Threshold.

Another round of layoffs for Chainalysis and Chia Network

Reports from this week unveiled a staggering $685.5 million in financial losses by crypto-focused entities during the third quarter (Q3) of 2023, primarily due to notable exploits on cross-chain protocols. This figure represents a major uptick of nearly 60% from Q2.

In the midst of these considerable losses and the prevailing bear market, numerous crypto-oriented companies have been downsizing their workforce. This week witnessed another round of layoffs.

Chainalysis decided to reduce its staff by 15%, parting ways with 135 employees out of their previous 900. The move aims to reduce costs in anticipation of potential long-term growth. Notably, this isn’t their first experience with downsizing, as they also bid farewell to 5% of their workforce earlier this year.

Chia Network, the entity behind the Chia blockchain, also decided to play the layoff card, saying goodbye to 26 employees while still eyeing an initial public offering (IPO) in the foreseeable future. 

The company attributes this workforce reduction, which came after it lost its banking partner in March, to the difficult funding conditions exacerbated by the persistent crypto winter, skepticism in the crypto industry, and ongoing banking crises.

Meta and Ledger join the layoff chorus

Meta, the parent company of Facebook, is implementing job cuts within its Reality Labs division, responsible for overseeing its metaverse projects. This move follows the 13% workforce cut enforced by the company in late 2022.

Ledger CEO Pascal Gauthier made a significant announcement on Oct. 5, revealing a potential 12% reduction in the company’s workforce, in a candid letter addressed to all employees.

Interestingly, despite Ledger’s rare achievement of raising capital in the first half of the year, the announcement pointed to the market’s impact, citing “macroeconomic headwinds” as a hindrance to revenue generation.

Yuga Labs and Yield Protocol affected

This week’s round of layoffs also featured Yuga Labs, the firm behind the Bored Ape Yacht Club (BAYC) NFT collection. The company initiated a corporate restructuring, resulting in the departure of certain team members.

CEO Daniel Alegre communicated this development via email, although he omitted specific details regarding the number of employees affected. The restructuring primarily affected staff based in the U.S. The firm still has 120 employees.

While others laid off workers, the defi project Yield Protocol folded. This week, they made the tough decision to cease operations. By Dec. 31, they will conclude all borrowing and lending activities despite raising $10 million from notable backers in June 2021.

The decision to shut down was influenced by a lack of interest in their fixed-rate borrowing product, along with the rising challenges posed by regulations in the U.S., the U.K. and Europe.

Israel and Hamas

The conflict between Hamas and Israel escalated on Sunday, Oct. 8. Israel Defense Forces launched lethal airstrikes on the heels of a formal declaration of war in response to a surprise attack by Gaza militants on Oct. 7.

Hundreds of Israelis and Palestinians were killed, according to CNN. Hamas has ruled the Palestinian territory of Gaza since 2007.

The conflict comes less than six months after Reuters reported that Hamas ceased fundraising via Bitcoin, citing an increase in “hostile” activity against donors. Hamas had relied on crypto funds for years.

In August 2020, the U.S. Justice Department claimed to have dismantled “three terrorist financing cyber-enabled campaigns” and over 300 cryptocurrency accounts, seizing millions of dollars worth of digital assets.

Ripple secures another victory against SEC

Ripple also took center stage this week, as developments surrounding its legal battle with the SEC surfaced. Notably, the San Francisco-based firm secured another victory in the lawsuit when Judge Analisa Torres denied the SEC’s motion to file an interlocutory appeal against the previous July 13 ruling.

Judge Torres issued the order on Oct. 3, providing details about trial preparations. Torres noted that the case would go to trial, which would commence on April 23, 2024. Following the order, XRP surged 5%.

Ripple and Coinbase clinch MPI license in Singapore

Interestingly, barely a day after the order from Torres surfaced, Ripple clinched another victory, this time in Singapore. The firm received a full-blown Major Payments Institution (MPI) license in the city-state. This move would allow them to provide regulated digital asset services in Singapore.

Ripple secured its MPI license shortly after U.S.-based exchange Coinbase obtained a similar license. The Singaporean chapter of Coinbase received the license on Oct. 2 from the Monetary Authority of Singapore (MAS). Both Ripple and Coinbase are looking to spread abroad amid the regulatory uncertainty in the U.S.

The U.S. regulatory landscape

As the U.S. SEC’s crypto onslaught continued despite the uncertainty, this week, CFTC Chair Rostin Behnam stressed the importance of strong crypto regulation at the Futures Industry Association Expo 2023. 

Behnam likened crypto regulations to needing a driver’s license or licensing for health practitioners. He suggested classifying 70% of crypto assets as commodities and urged Congress to establish clear digital asset regulations and expand the CFTC’s authority.

Meanwhile, U.S. Representative Patrick McHenry, known for his crypto-friendly stance, stepped into the role of Speaker pro tempore of the House of Representatives this week.

This happened after the removal of House Speaker Kevin McCarthy, marking the first time the U.S. witnessed the removal of a Speaker. Despite McHenry’s appointment being temporary, crypto enthusiasts have viewed it as a positive development for the crypto sector.