Bittrex, Terraform Labs, and FTX News in StealthEX x CryptoDaily Digest

November 1, 2023

Crypto World

Maciej Zerelik

StealthEX, partnering with CryptoDaily, is thrilled to present our latest weekly roundup. With meticulous attention to detail, we’ve handpicked and distilled the most pivotal events and news of the past week in the crypto sector. Our dedication lies in keeping you informed. Embark on a journey with us to stay abreast of the most pressing and vital news from the crypto universe!

Bittrex Receives Court Approval for U.S. Shutdown Amidst Bankruptcy

Bittrex, a once-prominent crypto exchange, has been granted court approval to proceed with its revised bankruptcy plan, marking a significant turn in its Chapter 11 bankruptcy protection journey initiated in May. This decision came after a recent hearing in Delaware where Judge Brendan Shannon gave the green light for Bittrex’s liquidation strategy, detailing the repayment process for its remaining creditors. This move also aligns with the Securities and Exchange Commission’s (SEC) informal feedback on the issue.

Bittrex’s current predicament stems from accusations by the SEC, which claimed the exchange was operating without proper registration. To settle the matter, Bittrex agreed to a hefty fine of $24 million in August. Notably, the company had earlier secured a loan of 250 BTC to aid its bankruptcy proceedings, a move that received Judge Shannon’s approval.

While the U.S. arm of Bittrex faces legal challenges, its global counterpart, Bittrex Global, remains unaffected. Addressing the growing concerns about regulatory uncertainties in the U.S., Bittrex Global’s CEO, Oliver Linch, reassured users, emphasizing the platform’s commitment to serving those interested in a non-U.S. regulated digital assets exchange.

Historically, Bittrex held a significant position in the U.S. crypto exchange market, boasting a nearly 23% market share in early 2018. However, its dominance waned, dropping to less than 1% in 2021, and has faced challenges in regaining its former glory. This latest development underscores the dynamic regulatory landscape of the crypto industry and its potential impact on even the most established players.

Grayscale Bitcoin Trust Outperforms Nvidia

Grayscale Bitcoin Trust (GBTC) has made headlines with its impressive performance this year. Since the start of 2023, GBTC shares have skyrocketed by an astonishing 220%, surpassing even the tech behemoth Nvidia, which itself saw a commendable growth of 198%.

This surge in GBTC’s value has been a boon for early investors, particularly those who took the plunge in January 2023. At that time, the crypto sector e was riddled with uncertainties, largely due to the fallout from the FTX ecosystem’s collapse. However, GBTC shares have not only weathered this storm but have also outperformed Nvidia Corp (NVDA), a standout performer in the S&P 500 stocks. While Nvidia grew by 198% over the year, GBTC’s growth rate was an even more impressive 220%, with its share price touching $26.79.

Bitcoin itself has seen its value double, reaching the $35,000 mark. This is in stark contrast to traditional fixed-income instruments like government bonds, which have experienced a sharp decline.

A significant factor propelling GBTC’s exceptional growth is the anticipation of an open-ended Bitcoin exchange-traded fund (ETF). Even though the SEC has yet to give its approval, the potential of this investment vehicle has piqued the interest of many investors. This heightened interest in GBTC shares is directly linked to the rising demand for Bitcoin.

Another positive sign for GBTC is the narrowing discount of its shares compared to the trust’s net-asset value (NAV). This discount has reduced from a staggering 46% to a mere 13%. This shift indicates growing optimism among traders, who are buying GBTC sha

res and hedging against potential downsides by selling bitcoin in the spot/futures market.

With the SEC expected to greenlight several spot-based ETFs in the upcoming year, the future looks promising for Bitcoin and GBTC. However, with financialization, there might be additional selling pressures from institutional entities aiming to short this instrument.

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Terraform Labs Challenges SEC’s Lawsuit

Do Kwon, the founder of the Terraform ecosystem, and Terraform Labs have taken a bold step against the U.S. Securities and Exchange Commission (SEC). They have formally requested a federal judge for a summary judgment in the ongoing fraud case initiated by the SEC against them.

In a recent motion, the legal representatives for Do Kwon and Terraform Labs have argued that several of their products, including Terra Luna Classic (LUNC), TerraClassicUSD (USTC), Mirror Protocol (MIR), and its Mirrored Assets (mAssets), should not be classified as securities, contrary to the SEC’s allegations. They have urged Judge Jed Rakoff to dismiss the SEC’s case, emphasizing that the regulatory body has failed to provide substantial evidence to support its claims.

The motion highlights that after an exhaustive two-year investigation, which involved the exchange of over two million pages of documents and data, the SEC has not come any closer to proving any wrongdoing on the part of the defendants. Terraform Labs has further contended that the SEC has not been able to demonstrate that the company offered unregistered securities. They have pointed out that the SEC’s allegations are baseless and, in some instances, knowingly false.

The SEC’s lawsuit against Terraform and Do Kwon alleges that U.S. investors were misled and defrauded. The regulatory body claims that Kwon and Terraform transferred 10,000 Bitcoin to a Swiss financial institution and subsequently withdrew $100 million. SEC Chair Gary Gensler has commented on the case, emphasizing the need for full disclosure for crypto asset securities and accusing Terraform and Kwon of misleading statements that resulted in significant losses for investors.

UK Unveils Comprehensive Crypto Regulatory Framework

The UK government has taken a decisive step in the crypto domain by introducing a comprehensive regulatory framework for crypto assets and stablecoins. This move signifies the country’s evolving stance and commitment to the digital currency sector.

The government’s strategy adopts a phased rollout for crypto regulations. The initial phase will target fiat-backed stablecoins, with subsequent phases expanding the regulatory purview to other crypto facets, including algorithmic stablecoins. This structured approach aims to provide a balanced regulatory environment, adapting to the fast-paced changes in the crypto world.

Following the Financial Conduct Authority’s (FCA) new marketing regime, the crypto industry has been under close scrutiny. The FCA has proposed four potential pathways for crypto companies to promote their offerings.

The recent announcement builds on a consultation released by the Treasury in February 2023. By June, the Financial Services and Markets Act 2023 was enacted, positioning crypto as a regulated activity. The government’s dedication to addressing the crypto sector’s regulatory challenges is evident. The proposed regulations are slated for implementation in 2024, granting the industry sufficient time to adapt.

A vision set forth by Rishi Sunak in April 2022, who transitioned from finance minister to prime minister, aspires for the UK to emerge as a crypto-asset hub. The industry has expressed concerns over perceived delays in government action, and this recent move is likely to assuage those apprehensions.

The upcoming regulations will enforce strict admission criteria for crypto exchanges and mandate disclosure requirements for token issuers. The primary goal is to bolster transparency and safeguard market participants and consumers.

SBF’s Stand on FTX Customer Funds

The crypto world has been buzzing with the recent developments surrounding former FTX CEO, Sam Bankman-Fried, often referred to as SBF. This week, he took the stand in his criminal fraud trial, and the revelations have been nothing short of dramatic.

SBF’s defense team aimed to justify his actions during his tenure at FTX. However, the spotlight was on him when prosecutor Danielle Sassoon got the opportunity to cross-examine him. The core of the discussion revolved around SBF’s belief regarding the legality of his actions.

Mark Cohen, SBF’s lead defense lawyer, highlighted the dual roles SBF played, leading both FTX and his proprietary trading firm, Alameda Research. When probed about the intertwining of FTX customer deposits with Alameda funds, SBF made a startling revelation. He believed that channeling FTX customer funds through Alameda Research was entirely legal.

This statement raises eyebrows, especially considering the implications it has on the trustworthiness of crypto exchanges and their operations. Cohen further emphasized that while SBF might have made errors in judgment while helming FTX and Alameda Research, there was no intentional fraud.

The defense painted a picture of a young founder eager to scale operations in a rapidly evolving crypto landscape. In such a dynamic environment, mistakes were bound to happen. However, the crux of the matter was the co-dependency between Alameda Research and FTX customer funds. This relationship played a significant role in FTX’s swift downfall when withdrawal demands surged last November.

The trial also touched upon the topic of disappearing messages on the Signal app, hinting at potential evidence of misconduct. SBF’s responses during the cross-examination were cautious, often leading to prolonged pauses.

This article is not supposed to provide financial advice. Digital assets are risky. Be sure to do your own research and consult your financial advisor before investing.