SEC snubbed as Voyager wins court approval for sale to Binance US

March 7, 2023 Coin Telegraph

approval

The ruling allows the crypto lender a path out of its bankruptcy, but it still has to undertake some due diligence with Binance US before the sale is final.

Bankrupt cryptocurrency lender Voyager Digital has won court approval to sell over $1 billion of its assets to Binance US.

The approval was granted by United States Bankruptcy Judge Michael Wiles on Mar. 7, which came after four days of arguments presented by Voyager and the U.S. Securities Exchange Commission (SEC).

Wiles said he would give the trading platform permission to close the Binance US sale and issue repayment tokens to impacted Voyager customers, which would give them back approximately 73% of what they're owed.

Wiles rejected a series of arguments by the SEC that the redistribution of the funds from Voyager to Binance.US would violate U.S. securities laws, according to a Mar. 7 report from Bloomberg:

“I cannot put the entire case into indeterminate deep freeze while regulators figure out whether they believe there are problems with the transaction and plan."

Peter M. Aronoff, a lawyer with the Department of Justice (DOJ) said it's considering appealing Wiles' decision.

The judge's decision comes just over a week after 97% of 61,300 Voyager account holders were found to be in favor of the current Binance.US restructuring plan, according to a Feb. 28 filing.

This is a developing story, and further information will be added as it becomes available.

Silvergate stock plunges 31% after delayed filing raises doubts over future

March 1, 2023 Coin Telegraph

10-K

Crypto-friendly bank Silvergate has delayed its 10-K filing, which reveals the financial health of the company. The news has sent its stock price down 31%.

Silvergate Bank has announced that it will delay the filing of its annual 10-K report, which has sent its stock price down over 30% after hours.

A 10-K report is a document required by the Securities and Exchange Commission which provides a comprehensive overview of the company's business and financial condition. The crypto bank stated that it would need an additional two weeks to complete the report for the 2022 fiscal year.

Silvergate explained in its late filing notice that it sold additional debt securities in January and February and expects to record further losses in the coming months.

"These additional losses will negatively impact the regulatory capital ratios of the Company and the Company's wholly owned subsidiary, Silvergate Bank (the "Bank"), and could result in the Company and the Bank being less than well-capitalized," the firm stated in its late notice filing.

"In addition, the Company is evaluating the impact that these subsequent events have on its ability to continue as a going concern for the twelve months following the issuance of its financial statements," said the company adding:

The Company is currently in the process of reevaluating its businesses and strategies in light of the business and regulatory challenges it currently faces.

The crypto bank added that they're process of conducting additional procedures and providing documentation as requested by its independent registered public accounting firm to complete a series of audits.

Silvergate explained that a number of factors have, or will have an impact on the financial health of the firm in the near future.

Among those include the substantial market volatility experienced in Q4 2022, several high-profile bankruptcies in 2022 which has disrupted investor confidence in cryptocurrencies and stricter regulatory oversight on banks offering digital asset services.

The firm added that customer retention may be an issue, in addition to any potential liabilities or restrictions of the company that may be brought about by litigation.

Silvergate's death spiral is going to be rough for crypto.

I don't think retail investors realize how much market maker money moved around quickly via SEN, and how many crypto exchanges were/are banking with them.

Stock almost down to its ATL after hours.
— Adam Cochran (adamscochran.eth) (@adamscochran) March 1, 2023

This is a developing story and more information will be added as it becomes available.

Layer1 CEO alleges co-founder is using majority power to ‘ransack’ company

February 7, 2023 Coin Telegraph

board member

The plaintiffs claim the Dolic and Ebel began to conduct unauthorized business activities when the corporate governance of its parent company, Enigma, collapsed.

The CEO of crypto miner Layer1 Technologies has filed a lawsuit against the firm’s two other board members — including co-founder Jakov Dolic — for allegedly commandeering Layer1's operations for their own gain.

Chief executive John Harney and DGF Investments Inc — a British Virgin Islands-based investment firm — filed the lawsuit against Dolic and fellow board member Tobias Ebel in Delaware’s Chancery Court on Feb. 2.

The lawsuit alleges that both Dolic and Ebel used a power vacuum at Layer1’s equity parent Enigma to seize control of the Bitcoin mining company and operate it as their "own personal fiefdom.”

Harney and DGF Investments Inc — which owns a majority stake in Enigma — claim the defendants have "usurped the authority" of Layer1's CEO and prevented Harney from "responsibly operating Layer1."

One of the accusations made against Dolic and Ebel alleges they executed “large unauthorized transactions” that were not recorded in Layer1’s financial reporting and that they use Layer1’s operations to mine Bitcoin (BTC) and keep the revenue for themselves:

“Dolic and his loyalists” have “wielded their majority board control to ransack Layer1, operating it for their own benefit and engaging in self-dealing transactions with impunity.”

The plaintiffs also claimed that Dolic continues to press the false narrative that he owns 77% of Layer1’s equity. In the filing, the plaintiffs argued that Dolic sold all of his Layer1 stock to Enigma for $16 million on Jan. 24, 2022.

*Harney and DGF Investments’ court filing in the Delaware court. Source.* *Bloomberg Law.*

Harney and DGF have stressed that without imminent judicial intervention to confirm that Enigma has 100% ownership of Layer1, there is nothing that can stop Dolic and Ebel from "operating" the company "for their own benefit."

The latest lawsuit filed against Dolic and Ebel alleges a breach of fiduciary duty, pursuant to section 226 of the Delaware General Corporation Law.

The Plaintiffs are hoping to seek relief from the court via an injunction, have their fees paid for by the defendants and order an appointed custodian to run the company.

Layer1 Technologies was the first United States-based Bitcoin mining company to have fully integrated renewable energy into its operations, according to a 2020 report.

Cointelegraph reached out to Dolic for comment but did not receive an immediate response.

Crypto lender Genesis files for Chapter 11 bankruptcy

January 20, 2023 Coin Telegraph

Bankruptcy

Crypto lender Genesis Global has become the latest firm to throw in the towel following the collapse of FTX, filing for Chapter 11 bankruptcy protection in New York.

Cryptocurrency lender Genesis has filed for Chapter 11 bankruptcy in the Southern District of New York.

The firm has estimated liabilities of $1 billion to $10 billion and assets in the same range, according to the Jan. 19 filing.

Earlier reports claimed the company had been considering filing for bankruptcy protection if it was unable to raise capital to stem its liquidity crisis.

In a Jan. 19 press release, Genesis said it had been engaged in discussions with its advisors "to its creditors and corporate parent Digital Currency Group (DCG) to evaluate the most effective path to preserve assets and move the business forward.”

“Genesis has now commenced a court-supervised restructuring process to further advance these discussions.”

The company’s Chapter 11 plan sees it contemplating a “dual track process” pursuing a “sale, capital raise, and/or an equitization transaction" that would apparently enable the business "to emerge under new ownership.”

The derivatives, spot trading, broker-dealer and custody businesses of Genesis are not part of the Chapter 11 proceedings and will continue operations according to the firm.

It also claimed to have more than $150 million in cash on hand that it believes "will provide ample liquidity to support its ongoing business operations and facilitate the restructuring process."

The restructuring process will be led by an "independent special committee" of the company's board of directors, and Genesis says the process is aimed at providing "an optimal outcome for Genesis clients and Gemini Earn users."

The firm suspended withdrawals from its platform in November 2022 amid market turbulence caused by the collapse of FTX. The move impacted users of Gemini Earn, a yield-bearing product for users of the Gemini cryptocurrency exchange managed by Genesis.

Gemini co-founder Cameron Winklevoss tweeted the bankruptcy is a "crucial step" toward Gemini users being able to recover their assets but claimed DCG and its CEO Barry Silbert "continue to refuse to offer creditors a fair deal" and threatened to file a lawsuit "unless Barry and DCG come to their senses."

6/ Unless Barry and DCG come to their senses and make a fair offer to creditors, we will be filing a lawsuit against Barry and DCG imminently.
— Cameron Winklevoss (@cameron) January 20, 2023

Both Genesis and Gemini are facing charges from the United States Securities and Exchange Commission (SEC) for allegedly offering unregistered securities through the Earn program.

Fears are mounting over Genesis' parent company DCG as it may have to sell part of its $500 million venture capital portfolio to try to offset Genesis' liabilities.

On Jan. 17, DCG halted dividend payments in a move aimed at "reducing operating expenses and preserving liquidity.” The sale of its crypto media outlet CoinDesk is also reportedly being weighed which could net DCG $200 million.

Class action against Kim K, Mayweather over EMAX dismissed… for now

December 8, 2022 Coin Telegraph

class action

Despite dismissing the case, the judge acknowledged the lawsuit reflects a potentially dangerous trend of fraudulent-like promotional schemes.

A federal judge in California has dismissed a class action lawsuit against reality TV star Kim Kardashian, boxing champ Floyd Mayweather and the founders of EthereumMax, explaining that the submissions failed to meet the “heightened pleading standards” for fraud claims.

The judge has, however, left room for the plaintiffs to refile the proposed class action lawsuit if certain provisions are amended.

In the original Jan. 7 court filing submitted by Scott+Scott Attorneys At Law, the plaintiffs argued that Kardashian, Mayweather, and also former NBA superstar Paul Pierce didn’t disclose they were being paid to promote EthereumMax (EMAX).

The plaintiffs alleged that they promoted it with the objective to “artificially inflate the price of the token” through the use of “false or misleading statements.”

Kim Kardashian promoted EMAX in a Jun. 2021 post on Instagram, while Floyd Mayweather wore the EMAX logo on his boxing trunks in a boxing match against YouTube star Logan Paul in the same month.

According to reports, Judge Michael Fitzgerald dismissed the lawsuit on Dec. 7 on the grounds that the fraud allegations lacked merit and that investors at the end of the day also have the responsibility to conduct due diligence on their investments.

“But, while the law certainly places limits on those advertisers, it also expects investors to act reasonably before basing their bets on the zeitgeist of the moment.”

However in his dismissal, Judge Fitzgerald acknowledged the power that celebrities have been afforded by new technologies and social media platforms in establishing potentially fraudulent promotional schemes.

“This action demonstrates that just about anyone with the technical skills and/ or connections can mint a new currency and create their own digital market overnight,” Fitzgerald reportedly wrote in his dismissal.

Celebrities now have the ability to “readily persuade millions of undiscerning followers to buy snake oil with unprecedented ease and reach,” he added.

But despite Judge Fitzgerald’s dismissal, the investor’s fight may not be over. Fitzgerald reportedly stated that he’d allow the plaintiffs to refile the lawsuit if the investor’s legal team amended a few provisions from its original filing, with the Judge making reference to the reciting of a provision under the Racketeer Influenced and Corrupt Organizations Act (RICO).

Kardashian has already been bitten once before over her promotion of EthereumMax on her social media account.

On Oct. 3, Kardashian reached a $1.26 million settlement with the U.S. Securities Exchange Commission (SEC) after allegedly failing to disclose her $250,000 paid promotion by the EthereumMax.

Mayweather's legal team has long denied any affiliation with the EthereumMax, with his Attorneys stating that the investor’s filing did not “identify a single statement made by Mayweather about eMax tokens or EthereumMax.”

Genesis denies ‘imminent’ plans to file for bankruptcy

November 22, 2022 Coin Telegraph

Bankruptcy

The lending firm claims it's having "constructive conversations with creditors" and plans to resolve the situation without the need for a bankruptcy filing.

Cryptocurrency lending company Genesis has refuted speculation that it is planning an "imminent" bankruptcy filing should it fail to cover a $1 billion shortfall caused by the fall of crypto exchange FTX.

The firm has reportedly faced difficulties raising money for its lending unit and told investors it would have to file for bankruptcy, according to a Nov. 21 Bloomberg report citing people familiar with the matter.

A spokesperson for Genesis told Cointelegraph that there were no plans to file for bankruptcy "imminently" and that it continued to have "constructive" discussions with creditors.

"We have no plans to file bankruptcy imminently. Our goal is to resolve the current situation consensually without the need for any bankruptcy filing. Genesis continues to have constructive conversations with creditors."

On Nov. 16, Genesis announced it had temporarily suspended withdrawals citing “unprecedented market turmoil” after FTX's collapse. The company previously revealed on Nov. 10 it had around $175 million worth of funds stuck in an FTX trading account.

Reports have also suggested that crypto exchange Binance had been in talks to potentially bail out the Digital Currency Group-owned lender, but sources quoted in a Nov. 21 report from The Wall Street Journal claimed Binance had walked away from the deal as the business could create a conflict of interest.

Cointelegraph contacted Binance for clarification on the matter but did not immediately receive a response.

Circle marks a possible $3B loss from Binance stablecoin conversions

November 16, 2022 Coin Telegraph

Circle marks a possible B loss from Binance stablecoin conversions

Balance Sheet

Circle attributed its miscalculated financial projections to Binance implementing USDC to BUSD auto-conversions and the recent collapse of FTX.

Circle, the company behind the issuance of USDC Coin (USDC) said recent events have caused it to miscalculate its financial projections — referring to the collapse of FTX and a decision by rival exchange Binance.

In September, crypto exchange Binance announced it will auto-convert USDC to its own stablecoin Binance USD (BUSD), last week saw the collapse of FTX.

Circle’s 2022 miscalculated projection was noted in its amended S-4 registration statement which was filed to the United States Securities Exchange Commission (SEC) on Nov. 14.

The S-4 is a registration statement is a document that companies fill out and submit to the SEC before merging or taking over another company or providing an exchange offer.

Circle noted that while they were not able to assess how significant a role Binance’s auto conversion’s from USDC to BUSD played in USDC’s decline in circulation, they observed an approximate $3 billion increase in BUSD from Aug. 17 to Sept. 30, with the firm adding:

“We estimate that up to $3.0 billion of the $8.3 billion decline in USDC in Circulation from June 30, 2022 to September 30, 2022 was driven by the auto conversion by Binance.”

The stablecoin issuer added that the additional $13.5 billion USDC issued since Jun. 30 was a 36% reduction in comparison to 2021.

The first S-4 filing was submitted to the SEC in Aug. 2021, in which Circle planned to merge with capital markets firm Concord Acquisition. However, Concord decided to delay the merger in Oct. 2022 until “no later than Jan. 31, 2023.”

As for its business partnership with FTX, Circle has historically conducted payment processing services for FTX by issuing the now bankrupt trading platform with USDC and being a customer of Circle’s Payment API over the last 18 months, according to Circle CEO and co-founder Jeremy Allaire.

The stablecoin issuer said the financial impact that FTX has had on its balance sheet wouldn’t be any larger than its $10.6 million equity investment, which it will officially address in the next reporting period.

“The Company has suspended its services and transactions with the FTX Group and is in process of evaluating the impact on the provision of future services to the FTX Group and the potential indirect financial impact of the FTX Group bankruptcy,” the filing stated.

The $10.6 million figure comes as Allaire confirmed in an 11-part Twitter thread on Nov. 9 that Circle only holds a “tiny” equity position in FTX, which represented “no material exposure” on the company’s balance sheet:

5/ Circle is a tiny equity holder of FTX, and FTX is a tiny equity holder of Circle. Circle is also a tiny equity holder of Kraken, Coinbase and BinanceUS.
— Jeremy Allaire (@jerallaire) November 9, 2022

Allaire also added that “Circle has never made loans to FTX or Alameda, and has never received FTT as collateral, and has never held a position in or traded FTT.”

filing