Terraform Labs Found Guilty of Fraud

The Breakdown First Five - Monday, April 8, 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.

5. Coinbase Wins Appeal

Coinbase has won an appeal in a class action brought by customers, with judges finding a lack of evidence that secondary token sales are governed by securities law. Despite a strong reaction on crypto twitter, this decision has nothing to do with the SEC case and is of questionable value as precedent. Still, a win is a win and any finding that tokens are not securities is welcome for the embattled crypto exchange.  

4. Pantera Records 66% Q1 Return

Pantera Capital has reported a 66% Q1 return on their liquid token fund, basically in line with Bitcoin. Portfolio managers spent the quarter rotating out of Bitcoin and Ethereum in favor of Solana and a long tail of altcoins. Separately, the deal to acquire locked Solana tokens from the FTX estate has closed, with Pantera filling their $250M fund at $64 per token. 

3. Blackrock Adds Goldman

Blackrock has added five new authorized participants to make markets for their Bitcoin ETF. The newcomers include Goldman Sachs, Citigroup, Citadel and UBS, bringing the number of APs to nine. This is essentially all the major players, implying that missing out on the Bitcoin ETFs is no longer a viable strategy in the face of their success. Even Goldman, which dismissed Bitcoin as an investable asset class in the WSJ last week is getting on board.  

2. Genesis Cashed Out

The rumors are true, Genesis cashed out $2.1B worth of GBTC over recent weeks. New court filings confirmed the massive liquidation concluded on Tuesday, with Genesis purchasing 32,000 Bitcoin with the proceeds. The Bitcoin stash will be distributed to creditors once bankruptcy plans are approved. This seems to be the last major bankruptcy estate to exit GBTC, suggesting that major outflows could be over. 

1. Terraform Labs Liable for Fraud

A jury has decided that Terraform Labs and Do Kwon defrauded investors. The civil case brought by the SEC turned up the details of a secret deal with Jump Trading to maintain the UST peg, flying in the face of Kwon’s claim that the stablecoin is "automatically self-healing.” The jury found that Terraform had been reckless but that Kwon had intentionally committed fraud. Kwon was not present for the trial, still in Montenegro endlessly battling extradition.