GTX brings Act 2 of crypto circus

In Token Issue this week, we check out 3AC founders' new venture for trading bankruptcy claims and analyze potential solvency issues at Huobi. [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 Deepti Sri Crypto journalist Hi {NAME} For what feels like an eternity, FTX has been dominating crypto headlines, leaving us all feeling suffocated. For a change of pace, we have a new announcement from the folks who brought you Three Arrows Capital (3AC). To recap the disaster that was 3AC last year: the Singapore-based “crypto hedge fund” was forced into liquidation after it failed to meet margin calls. The collapse took down several crypto players whose only fault was lending money to 3AC. Since the fund filed for bankruptcy last year, its founding team, including Su Zhu and Kyle Davies, have been on the run and refusing to talk to investigators. Now, the big brains behind that fiasco are back with a new crypto exchange - and they've brought along some familiar faces. Mark Lamb and Sudhu Arumugam, the founders of CoinFLEX - a crypto exchange that also sought bankruptcy protection last year - will be joining Zhu and Davies for the new venture. So brace yourself for Act 2 of the Zhu and Davies crypto circus. The new firm, tentatively called GTX, will trade bankruptcy claims from creditors of failed crypto companies. The name of the exchange is a play on "FTX," with one of the pitch decks stating "because G comes after F." The jokes write themselves at this point. Ironically, 3AC's own US$3 billion in bankruptcy claims - which includes Davies' wife as well as Zhu himself as creditors - could potentially be traded on the exchange. GTX's pitch also reveals that the crypto assets in the bankruptcy dispute are currently valued at up to US$20 billion, primarily from platforms that have failed in the past such as FTX, BlockFi, and Celsius. After a tough 2022, it may be a challenging task for crypto companies to regain investor trust and shake off negative reputations, even if some of them are undeserved. Even as Zhu and Davies are building their new venture, another crypto platform looks like it could potentially mimic the fates of UST and FTX. This latest problem comes in the guise of an algorithmic stablecoin. Act 3, anyone? – Deepti  ---------------------------------------------------------------  THE BIG STORY [Does Huobi have a ticking time bomb on its hands?]( Huobi has released a proof-of-reserve snapshot showing that it holds over 9.7 billion Tron tokens (TRX) with a value of US$544 million as of November 12, 2022. Huobi’s total exchange reserves are currently estimated at US$2.9 billion. TRX is issued by the Tron network, and both it and Huobi are majority-controlled by Tron founder Justin Sun. Holding such a large amount of a token issued by a related company is what contributed to the collapse of FTX and Alameda Research in November last year. TRX also has a sister token called USDD, which was modeled after Terraform Labs’ UST and Luna. And USDD depegged twice in 2022. Could the failure of USDD drag TRX down with it? If it does, what would that mean for the exchange's solvency?  --------------------------------------------------------------- ⭐ TO THE STARS A look at what’s pushing Web3 forward [Fork that Polygon]( Polygon announced a hard fork on January 17 that is set to lower the frequency of gas fee spikes and chain reorganizations. The fork was approved with the participation of only 15 validator teams in the voting process. (There can be up to 100 validators active at any given time.) The benefits of the fork are expected to draw more users, developers, and businesses to the Polygon platform, making it a more attractive option for those looking to use Ethereum-based applications. As a result, the value of Polygon's native token MATIC increased nearly 15% in the past week. This follows the implementation of a testnet upgrade on January 12 called [Bedrock]( by Optimism, an Ethereum Layer 2 scaling solution. Optimism developers shared that the upgrade will make the protocol the most cost-effective, rapid, and minimal codebase for an Ethereum-equivalent rollup ever.  --------------------------------------------------------------- 🌙 TO THE MOON Promising crypto projects we’re noticing. [The world’s fastest on-chain order-book exchange]( Blockchain platform [DeSo]( recently launched DeSo DEX, an on-chain order-book exchange that can process 40,000 matches per second and execute transactions as well. This is in addition to the release of [Openfund]( a Web3 funding platform. DeSo DEX offers instant liquidity to founders and allows them to access capital for growing their startups by providing a secondary trading platform for Openfund tokens. This allows founders to take advantage of multi-chain approaches while keeping a bird’s eye view of their token liquidity. The DEX is also gasless, which means that users do not have to pay any transaction fees. It is compatible with Ethereum and other blockchain wallets, giving users an alternative to centralized exchanges. Sewer Pass among top three NFTs over past week [Sewer Passes]( are NFTs issued by the Bored Ape Yacht Club (BAYC). They provide access to the upcoming Dookie Dash game and can be used to purchase items and upgrades. Each Sewer Pass contains a variety of attributes such as the player’s name, the number of resources collected, and a score based on the player’s performance. The NFTs reached a trading volume of over US$4 million within a couple of hours of listing. According to data from Nansen, Sewer Pass ranked as the third-most sold collection over the past week, following Mutant Ape Yacht Club and BAYC. --------------------------------------------------------------- 🌏 BACK TO EARTH The week’s biggest roadblocks SEC files lawsuit against Gemini and Genesis The US Securities and Exchange Commission (SEC) has filed a [lawsuit]( against Gemini and Genesis, accusing the two crypto firms of offering and selling unregistered securities to retail investors through the Gemini Earn program. Under the program, users would deposit crypto assets into Gemini, which in turn would deposit them into Genesis to be lent out to borrowers. The yield generated from the loans would then be returned to Gemini and then back to the clients. The program, which had previously been perceived as a low-risk investment opportunity, has led to a crisis for thousands of investors following Genesis’ post-FTX issues. Gemini co-founder Tyler Winklevoss [tweeted]( his dissatisfaction with the SEC's allegations. He wrote that Gemini had been in discussions with the SEC regarding the Earn program for over a year and the regulator had never mentioned the possibility of a lawsuit.  --------------------------------------------------------------- STILL A PONZI SCHEME ChatGPT4 expected to declare NFT a synonym for scam. - [@JeanBtColbert]( Popular NFT influencer [NFT God]( suffered a significant phishing attack from malware embedded in a Google ad. When NFT God attempted to download OBS, a popular open-source video streaming software, through a Google search, he clicked on a fraudulent sponsored advertisement instead of the official website. The influencer said he lost a “life-changing” amount of his net worth. Both his personal and professional accounts were hacked, along with his crypto wallet. Hackers also used NFT God's accounts to send phishing links to his followers. The phishing attack occurred because NFT God had used a hot wallet setup with Ledger on his new computer instead of a more secure cold wallet. See also: [How crypto is killing seed phrases to usher in mass adoption]( --------------------------------------------------------------- MORE TO CHEW ON 1️⃣ [Coinbase to halt operations in Japan amid crypto slump]( The crypto exchange announced that it will halt its Japanese operations and review its business in the country. Coinbase users will still be able to withdraw their fiat and crypto holdings until February 16, after which all remaining assets will be converted to Japanese yen. 2️⃣ [HashKey Capital’s US$500 million deal]( The Web3-focused asset manager has closed its third fund at US$500 million, having raised capital from sovereign wealth funds, family offices, and corporations. The new fund will support global crypto and blockchain initiatives and focus on opportunities in emerging markets. 3️⃣ [Crypto.com slashes 20% of global workforce]( The Singapore-based crypto exchange has reduced its headcount due to current market conditions. The development follows Crypto.com laying off around 260 employees last year, though CEO Kris Marszalek said that those dismissals did not take into account the recent FTX developments. 4️⃣ [Animoca-backed Forkast News and CryptoSlam announce merger]( Hong Kong-based media firm Forkast News and US-headquartered data analytics company CryptoSlam have merged to form Forkast Labs, which focuses on Web3 asset valuation. The platform’s data indices, APIs, and business intelligence products aim to help investors evaluate crypto assets more accurately.  --------------------------------------------------------------- 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? Switch to a different frequency or get new content through our [preference center]( or [unsubscribe](. 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