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  • Galois Capital Settles with SEC Over FTX Custody Issues

Galois Capital Settles with SEC Over FTX Custody Issues

Plus TrumpFi Tied to Donut Finance and Subify Founders

Author

Nathaniel Whittemore
September 04, 2024

The Breakdown First Five - Wednesday, September 4, 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.

Galois Capital Settles with SEC Over FTX Custody Issues

5. Deaton For Senate

Crypto Lawyer John Deaton has won the Republican primary for Senate in Massachusetts in a landslide. He will now face down the head of the anti-crypto army, Elizabeth Warren, in November. Deaton secured 64% of the vote, leaving his two competitors in the dust. Turnout was up and his margin was stronger than the previous GOP candidate, leading some to suggest the crypto vote could be as strong as it’s made out to be.

4. DPRK “Aggressively Targeting” Crypto Firms

The FBI has issued a PSA warning that North Korean hackers are targeting crypto firms with social engineering attacks. They warned that hackers are posing as both employees and executives in the crypto job market. The biggest prize they are going after is access to funds held in crypto ETFs, with the FBI uncovering research into attacks on related firms. That dev you found on Telegram could actually be a member of the Lazarus group.

3. BOJ Not Done Hiking

Bank of Japan Governor Kazuo Ueda reiterated that more interest rate hikes are on the table if the economy and inflation develop along their current path. The BOJ raised rates to 0.25% last month, sending the Yen soaring and rocking global financial markets. A further unwind of the Yen carry trade could be on the horizon, but at least markets are forewarned this time. Bitcoin plunged on the news, given the implied reduction in global liquidity.

2. TrumpFi Details

More details have been released about the Trump branded DeFi protocol, Liberty Financial. The code appears to be a fork of Donut Finance, which was drained for $2M in July. Under the hood, the protocol will be a pass through interface for accessing lending services on Aave. The project is linked to a cast of characters, including former pick-up artist Zachary Folkman and Chase Herro, the founders of OnlyFans competitor Subify. 

1. Galois Slapped By SEC

Defunct crypto fund Galois capital has settled with the SEC on allegations they stored crypto assets outside of a qualified custodian. That custodian was FTX, which Galois accessed using Fireblocks infrastructure. The fund had half their capital, some $40M, trapped in the FTX bankruptcy. This enforcement action raises questions of whether crypto funds in general are non-compliant, given the lack of qualified custodians available.