FTX Case: Court Mandates Independent Probe

Plus SEC Fast-Tracks Bitcoin ETF Options

Author

Nathaniel Whittemore
January 22, 2024

The Breakdown First Five - Monday, January 22, 2024

Welcome back to The Breakdown First Five — the 5 most interesting and/or important stories in bitcoin, crypto, and markets to start your day.

Ftx court case

5. Religious Rugs

A Denver pastor has been charged by the CFTC for selling his online congregation on a valueless crypto token. In a non-apology issued the pastor admitted to the grift, but said he was commanded by the lord to rug the token to fund a home renovation. The pastor said he asked the Lord where the liquidity would come from, “And the lord said, trust me.” Blessed be the rug merchants. 

4. Terraform Files for Bankruptcy

After detonating the Luna ecosystem and the entire crypto market in 2022, Terraform Labs have voluntarily filed for chapter 11 bankruptcy. The firm claimed to have between $100M and $500M in both assets and liabilities in preliminary forms. CEO Chris Amani said the firm would continue working towards its goals while dealing with “the legal challenges that remain outstanding.” Terraform are in litigation with the SEC and are facing a class action lawsuit in Singapore.

3. Coinbase on Good Odds

Bloomberg Senior Litigation Analyst Elliot Stein came away from last week’s Coinbase hearing with a positive view of the exchange’s chances. He believes the SEC’s struggles in the courtroom mean Coinbase has a 70% chance of winning the case. Not necessarily at this early stage, but by the time the trial is over. Stein also noted that the case could be headed for the Supreme Court, which could narrow the SEC’s jurisdiction permanently. 

2. ETF Options on the Fast Track

Applications to list options for the new Bitcoin ETFs appear to be getting accelerated consideration from the SEC. Filings were acknowledged by the regulator on Friday, just days after they were placed. CBOE Executive President Catherine Clay said options would open the door to hedge funds and that firms who wouldn’t normally speculate directly on crypto will have “something to play with.”

1. FTX Independent Examiner Ordered

An appellate court has ordered an independent examiner be assigned to investigate the FTX bankruptcy. This measure was initially rejected due to cost and the belief that a probe by new management would be sufficient. Judges ordered an investigation of the use of the FTT token to boost enterprise value and conflicts of interest with lawyers. The report will be made public with a view to revealing bad practices within the crypto industry. 

Thanks for reading -NLW