BitBoy, SBF, and pizza: The collapse of FTX gets surreal

In Token Issue this week, we look at FTX once again. As the CEO sits in the Bahamas, the rest of the industry looks for stability. [Read from your browser]( Token Issue Welcome to Token Issue! Delivered every Friday, this free newsletter breaks down the biggest stories in Asia’s crypto scene and beyond. View past issues [here]( or [sign up here]( to receive future newsletters. Written by Scott Shuey Crypto journalist Hi {NAME} I am not a fan of crypto influencer Ben Armstrong, aka [BitBoy]( but I have to admit that over the last week, his show has become one of the best out there. Normally, Amstrong’s ego and toxic commentary keeps me away. But this weekend, he dropped his normal influencer persona and did some journalism. He did things a journalist normally does, such as tracking down a newsworthy person - in this case Sam Bankman-Fried (SBF), the [man at ground zero]( of the FTX collapse. He went to the hotel where SBF was staying in the Bahamas and [got kicked out](. He talked to [local government officials]( about why FTX has been allowed to operate in the Bahamas and [tracked down real estate plots]( that have been allegedly bought with FTX client funds. He then went to a casino, won some cash, and tried to [send SBF a pizza]( in his hotel room. All completely normal things that journalists do. Well, it used to be normal for journalists to do that - minus the casino and the pizza. Reporting on SBF from mainstream media has been [notoriously light and fluffy]( with many news organizations painting an image of SBF as the scion of prominent lawyers just trying to make the world a better place. Caroline Ellison, his sometime-girlfriend and CEO of Alameda Research, is getting the same treatment. She’s been labeled [“a mathematical genius who loves Harry Potter,”]( not the “CEO of a failed hedge fund.” Watching Armstrong try to chase down and talk to SBF about what happened made for captivating viewing, especially as the contagion from the bankruptcies of FTX and Alameda Research continues to cascade through the markets. You’ll find a lot more news about that further down in this newsletter. The number of creditors is expected to be in the millions, but if you want to know who the biggest whales caught in the bankruptcy were, you can read about it in [this analysis]( by Gabriel Gareth Foo, a Research Associate at Spartan Labs. In the end, this weekend’s chase was over much too quickly. While Armstrong actually got SBF and FTX’s bank, Deltec, [to agree to talk to him]( they both ultimately pulled the usual stalling tactics. Deltex [“needed more time to review his questions”]( and SBF agreed to do a Twitter Space with him “sometime in the next two weeks.” They’ll now try to ghost Armstrong, and he’ll have to hunt them down. Again. He’ll probably enjoy it. If you’re tired of reading about all this crypto craziness, maybe it’s time to start looking at something with ties to the real world. How about a nice club? Our Big Story today is from Deepti Sri, who writes about where you can actually use your NFTs for something other than a profile pic. – Scott  ---------------------------------------------------------------  THE BIG STORY [Can NFT-based private clubs disrupt a centuries-old model?]( A new type of private members' club has emerged within Asia’s Web3 community with more substance than just status symbols. Similar to traditional membership models, these NFT-based counterparts offer holders a variety of benefits. They aspire to be conduits for creativity through programs that center around the arts, current affairs, and networking - coupled with exclusive, private encounters.  --------------------------------------------------------------- ⭐TO THE STARS A look at what’s pushing Web3 forward [Animoca to invest $2b in metaverse business]( Hong Kong-based Animoca Brands is planning to launch a US$2 billion fund focused on backing metaverse businesses, co-founder Yat Siu told Nikkei Asia. The VC and software firm made 66 investments in the first half of the year. It has over 340 portfolio investments. [Hodl Law sues SEC]( It was bound to happen. A law firm calling itself Hodl Law (seriously, they named it that) is suing the US Securities and Exchange Commission (SEC) for “declaratory relief that the Ethereum network and ether digital currency unit are not securities or investment contracts.” The firm makes the claim that - despite the SEC having 14 years to decide if cryptocurrencies either are or are not securities - the agency is trying “to be deliberately ‘confusing’ to maintain maximum flexibility to prosecute at will (and without fair notice).” The lawsuit is drawing the type of attention you’d expect. [John Reed Stark]( former chief of the SEC’s Office of Internet Enforcement, called the lawsuit absurd. [Nouriel Roubini]( a well-known anti-crypto commentator, called it bogus. No one seems to think this lawsuit will win, but its popularity online is helping highlight a growing complaint from those working with the crypto industry: The US’ failure to clarify its rules governing crypto is beginning to cause problems globally. JP Morgan has analyzed what regulators are planning following the fall of FTX and what it means for decentralized finance. You can find that [here]( courtesy of economist Alex Krüger. [Binance acquires Sakura Exchange]( Binance has purchased Japanese crypto firm Sakura Exchange BitCoin, according to a blog post on the former’s website. The crypto major did not announce the value of the deal. Sakura is regulated by the Financial Services Agency (FSA), meaning Binance now has regulatory authority in eight countries. Just last year, the FSA had warned that Binance was not authorized to operate in Japan.  --------------------------------------------------------------- 🌙TO THE MOON Promising crypto projects we’re noticing. [Game7]( Game7, a gaming [DAO]( based in San Francisco, has launched a US$100 million grant program to help accelerate the development of blockchain-enabled games. “We have allocated 20% of our committed treasury to fund each of these crucial components so the gaming industry can focus on building sustainable game economies," said Ronen Kirsh in a press release. Game7 is backed by a US$500 million commitment by global community BitDAO and blockchain gaming platform Forte. The DAO will disperse US$20 million in grants every year for five years. --------------------------------------------------------------- 🌏BACK TO EARTH The week’s biggest roadblocks 1️⃣ [The Genesis Bankruptcy]( US crypto brokerage Genesis said earlier this week that it was trying to avoid insolvency even as it talked to lawyers about restructuring. The lending arm of Genesis Trading suspended customer withdrawals earlier this month after FTX declared bankruptcy. Genesis said it had about US$175 million in funds locked in the Caribbean exchange. 2️⃣ [BlockFi: the antithesis of FTX?]( Lawyers for BlockFi told a US Federal Bankruptcy judge on Tuesday that the crypto lender was “the antithesis of FTX” and that it aims to return customer funds as soon as possible. BlockFi has become the latest crypto exchange to fail this year and the first since the collapse of FTX, which it was deeply entangled with. It had loaned US$680 million to Alameda Research, FTX’s sister company, before the crypto crash in May. BlockFi then received a US$400 million credit facility from FTX in July, which included an option for acquisition. Alameda, which is now bankrupt, has not repaid its loan, and BlockFi had US$355 million in assets in FTX when the exchange halted withdrawals.  --------------------------------------------------------------- STILL A PONZI SCHEME “Bahamas AG says the government has been ‘shocked at the ignorance of those who assert that FTX came to the Bahamas because they did not want to submit to regulatory scrutiny.’ - statement” [Mario Nawfal]( founder and CEO of IBC Group What’s shocking, I tell you, is that anyone believes that a company like FTX would choose a country with no history of overseeing a crypto exchange for any reason other than to avoid regulatory scrutiny. The Bahamas had only enacted laws allowing crypto in late 2020, the year before FTX arrived. But not surprisingly, Bahamas Attorney General Ryan Pinder felt the need to defend his country as arguments over bankruptcy jurisdiction broke out between the island nation, the US, and Antigua and Barbuda (where FTX is incorporated). Had anyone bothered to ask a local, as did [Jessica Mathews at Fortune Magazine]( they would have told them that this type of scenario is well-known on the islands. “[Bahamaians] are used to very wealthy people moving there for their own motives or needs, taking what they need, and - as one person told me - either shitting the bed and leaving, or making a lot of money and staying,” wrote Mathews. --------------------------------------------------------------- MORE TO CHEW ON 1️⃣ [‘Deepest sadness’: Crypto founder Tiantian Kullander dead at 30]( Tiantian Kullander, co-founder of Amber Group, died at the age of 30 on November 23. The Amber Group is a digital assets company that provides investing, financing, trading, payments, and other services and was valued at over US$1 billion last year. In 2019, Kullander was included in the Forbes 30 Under 30 list. 2️⃣ [Terra co-founder Daniel Shin’s Chai raided by South Korean authorities]( South Korean prosecutors raided Chai Corporation, the digital payments company of Terra co-founder Daniel Shin, on Tuesday. The authorities said they suspect Shin of taking illegal profits worth about US$105 million from selling Luna, the sister coin of TerraUSD. The value of both coins collapsed in May. Chai said in May that it had [severed its connection with Terra]( in 2020. 3️⃣ [Bitfront to halt operations]( Trading on Bitfront, a US-based crypto exchange backed by Japanese tech firm Line, will be suspended by the end of the year, the company said in a statement. It will halt withdrawals on March 31, 2023. 4️⃣ [Kraken cuts 30% of staff]( Jesse Powell, co-founder and CEO of Kraken, announced in a blog post that the crypto exchange was laying off around 1,100 people, which is about 30% of its workforce. 5️⃣ [SBF hid political donation to Republicans]( In more SBF news, the FTX founder revealed in an interview with crypto blogger Tiffany Fong that he donated money to US Republicans and obfuscated it in order to avoid public scrutiny and having reporters "freak the fuck out." The size of the donations is unclear, but in 2020, SBF donated over US$11 million to the campaign of Joe Biden.  --------------------------------------------------------------- That’s all for this issue - we hope you liked it. WAGMI! P.S. Don't miss out on the biggest tech news and analysis. Add newsletter@techinasia.com to your address book, contacts, or safe sender list. Or simply move us into your inbox. Too many emails? 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