The shocking bankruptcies of Celsius and FTX destroyed many lives: early adopters who had the foresight to understand the unique value propositions of Bitcoin (BTC) and cryptocurrencies were left with virtually nothing when both platforms halted withdrawals, shut down their doors and eventually declared bankruptcy. Although there is still hope that creditors will recover some of their money, the road to recover financial losses is expected to be long. While they wait, creditors are agreeing to sue these companies for various alleged violations.
This week’s Crypto Biz delves into recent lawsuits targeting Celsius co-founder Alex Mashinsky and several venture capital firms that backed FTX during previous investment rounds. We also survey the latest news surrounding the United States Securities and Exchange Commission (SEC) and end on a positive note about a potential blockchain use case.
This week’s episode of Crypto Biz delves into recent lawsuits against Celsius co-founder Alex Mashinsky and several VCs that backed FTX in previous funding rounds. We also look at the latest news around the United States Securities and Exchange Commission (SEC) and end on a positive note about a possible use case for Blockchain technology.
Celsius Creditors Committee Proposes to Sue Mashinsky and Other Celsius Top Executives
Celsius, the bankrupt loan platform Once a darling of yield-seeking cryptocurrency investors, it has been accused of “fraud, recklessness, mismanagement and self-serving conduct” by former clients. In a lawsuit filed in bankruptcy court on February 14, attorneys representing Celsius’s creditors proposed to sue co-founder Alex Mashinsky and to other former executives for such misdeeds. “Mr. Mashinsky, Mr. Leon, Mr. Goldstein, Mr. Beaudry, Ms. Urata-Thompson and Mr. Treutler breached their fiduciary duties to Celsius,” the attorneys wrote of the Celsius executives. “Those parties were aware that Celsius was promising his clients interest payments that he could not afford and did nothing to remedy the problem.” It seems that Mashinsky’s problems have only just begun.
1-In connection with its investigation, the UCC has identified significant claims and causes of action that Celsius has against Alex Mashinsky and other insiders for breaching their fiduciary obligations, fraudulent transfers, and other causes of action.
— Celsius Official Committee of Unsecured Creditors (@CelsiusUcc) February 14, 2023
Sequoia Capital and Paradigm among VCs facing “sensitive” demand from FTX investors
Clients of the bankrupt cryptocurrency exchange FTX are turning their attention to the financiers and promoters of the platform to recover some of the huge losses they have suffered. According to Bloomberg, FTX users have filed a class action lawsuit against venture capital firm Sequoia Capital and private equity firms Thoma Bravo and Paradigm – the three companies participated in the massive USD 900 million Series B round from FTX in July 2021. Meanwhile, a separate class action lawsuit filed in California on February 14 alleged that Silvergate Bank and its CEO Alan Lane were liable for “aid and abet” to Sam Bankman-Fried to carry out his fraud. It seems that FTX VCs and investors are about to suffer the consequences of the failure of the stock market.
SEC Targets Cryptocurrencies Operating as “Qualified Custodians”
America was always supposed to be a bedrock for innovation and first-mover advantage. However, in the case of cryptocurrencies, regulators are acting with an iron fist. In addition to stablecoins and staking protocols, the SEC reportedly has “qualified custodians” under the microscope in its regulatory guidelines and enforcement actions. According to Bloomberg, the SEC is working on a proposal that would make it more difficult for cryptocurrency firms to act as “qualified custodians” on behalf of their clients. In practice, this could discourage hedge funds and private equity funds from continuing to work with crypto custodians.
Yesterday, our Division of Examinations announced its 2023 examination priorities.
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—Gary Gensler (@GaryGensler) February 8, 2023
Siemens issues $64M digital bond on a public blockchain Siemens issues $64M digital bond on a public blockchain
Blockchain’s use cases may have extended to bond offerings after German engineering company Siemens issued a digital bond using distributed ledger technology. On Feb. 14, Siemens disclosed that it sold $60 million worth of digital bonds directly to investors, which included DekaBank, DZ Bank and Union Investment. The company said blockchain-based bonds have several advantages compared to traditional bond sales. “For instance, it makes paper-based global certificates and central clearing unnecessary,” Siemens said. “What’s more, the bond can be sold directly to investors without needing a bank to function as an intermediary.” It’s important to note that the bonds were still paid for using traditional methods because the digital euro is not yet available.
Blockchain technology use cases may have extended to bond offerings after German engineering firm Siemens issued a digital bond using distributed ledger technology. On February 14, Siemens revealed that it had sold $60 million worth of digital bonds directly to investors, including DekaBank, DZ Bank, and Union Investment. The firm said that blockchain-based vouchers have several advantages compared to traditional voucher sales. “For example, it makes global paper certificates and central clearing unnecessary,” Siemens said. “What’s more, the bond can be sold directly to investors without the need for a bank to act as an intermediary.” It is important to note that the bonds continued to be paid using traditional methods because the digital euro not yet available.
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