Sam Bankman-Fried, clean-shaven in a blue suit and dressed in a white shirt, listened to his lawyer pleads not guilty to the alleged “epic” fraud in New York.
An October trial date is still reeling from the collapse of Bankman-Fried’s $32bn cryptocurrency trading platform, FTX.
His personal fortune of $16bn was wiped away in the bankruptcy of FTX. However, other crypto billionaires are trying to protect their empires amid a “crypto Winter” that has been created.
The collapse of FTX, which was the second-largest digital coin exchange in the world, has brought a number of shocks to companies that had their funds frozen after it filed for bankruptcy. As investors lose faith in speculative cryptocurrency, others have had to deal with a rush of withdrawals.
Bitcoin’s price has dropped more than 55 percent in the past 12 months. This has wiped out more than $1 trillion of all cryptocurrencies and sent businesses that rely on amateur speculators into crisis mode.
Tensions rose in the industry last week as battle lines were drawn between cryptocurrency billionaires who wanted to survive the downturn.
Cameron Winklevoss (one-half of the Winklevoss twins), launched a vicious attack on a rival crypto founder. He accused him of “bad faith”
Cameron Winklevoss is a 41-year-old ex-Olympic rower and chiselled former Olympic rower. He issued a public rebuke of Barry Silbert, the billionaire head of cryptocurrency company Digital Currency Group. Tyler Winklevoss and Cameron Winklevoss have been at odds with Silbert following the freezing of customer deposits by Genesis, the digital coin lender Genesis.
Gemini had made deposits with Genesis to earn interest for clients. In the wake of FTX’s failure, Silbert’s exchange stopped withdrawals on November 16. Gemini, in turn, has stopped investors from withdrawing their funds through its earn product.
This dispute is a result of cryptocurrency billionaires quickly becoming ex-billionaires, as their fortunes haemorrhage or prices fall.
According to Deutsche Bank analysts, “Looking ahead the crypto ecosystem remains very fragile.” “In many ways the crypto boom echos the ‘irrational excess’ that characterized the dotcom bubble.
According to Bloomberg and Forbes data, more than $100 billion has been taken from some of crypto’s most wealthy figures. Forbes estimates that Changpeng Zhao (founder of Binance,)’s net worth plummeted last year from $65bn down to $4.5bn. Since the collapse of FTX, the world’s largest cryptocurrency exchange has been in defensive mode. Its auditor Mazars dropped it last month as a client.
Their worth has plummeted from $4bn to $1bn per twin, the Winklevoss Winklevoss. Rumours have it that the Winklevoss twins paid $11m to purchase 1 percent of the global supply of Bitcoin in 2013.
Silbert, 46, the founder of the cryptocurrency investment conglomerate Digital Currency Group, which owns Genesis is believed to have lost his net worth due to the company’s crisis. His empire includes Genesis, the crypto lender, Coindesk and Grayscale, a publicly traded Bitcoin investment fund. It was worth more than $10bn last year and had at one point more than $50bn under its management.
Two publicly traded funds are part of his crypto empire, one which tracks the price of Bitcoin and the other digital cryptocurrency Ethereum. However, both are traded at a significant discount. GlobalBlock analyst Marcus Sotiriou says that Grayscale’s Ethereum Trust trades at an unprecedented 60pc against ethereum. This shows a lack of investor confidence.
Others crypto entrepreneurs are also in crisis mode. Silvergate Bank, a US-listed Bank that served as a gateway into financial markets for many cryptocurrency companies including FTX, reported on Thursday that it had received $8 billion in withdrawals. Its shares dropped 40 percent. Brendan Blumer, a crypto-founder worth billions, is one of its largest shareholders.
Coinbase, the most well-known consumer exchange in New York, has agreed to pay $100m to settle a money laundering complaint. According to Bloomberg data, Brian Armstrong, Coinbase founder, has seen the value of his net worth plummet from more than $10bn down to just under $1bn. Coinbase lost over 90 percent of its value in the years since its $100bn float in 2021.
Michael Saylor, a cryptocurrency evangelist and ex-billionaire who has seen his personal wealth plummet, is another. Michael Saylor, a well-known crypto evangelist, is known for shaming critics of digital currencies and telling them to “have fun remaining poor”. In 2021, Microstrategy (a publicly traded company), embarked upon a crypto buying spree.
He owns over 17,700 Bitcoin. They are worth more than a quarter of one billion dollars. This is half the amount they were last year. Microstrategy’s 23 percent stake has plunged to 68 percent in the past 12 months. The company now has a value of $1.4bn. The company, which had promised to never sell its coins again, disposed of 700 coins in December for tax purposes.
Many crypto believers have become quiet. Elon Musk, who once believed in the value of Bitcoin, ordered Tesla’s July 2017 sale of 75pc its $1.5bn digital currency holdings. This narrowly avoided a loss.
In the midst of market panic, the dispute between Genesis and Gemini is a flashpoint in the industry. Crypto entrepreneurs are on the defensive.
Cameron Winklevoss, who last week claimed that Genesis funds were borrowed from Silbert’s other businesses, further alleges that these funds were used to “fuel greedy stock buybacks and “kamikaze trades” for “personal gain”. Silbert replied that his company had “delivered…a proposal on December 29th, but has not received any response”.
He alleges that Silbert refused to meet with him over Christmas to discuss how to solve the cash crisis. Cameron Winklevoss stated, “Your behaviour is not only unacceptable but unconscionable after six weeks.”
There are two sides to the row: crypto insiders. David Siemer is the co-founder and CEO of Wave Financial, a cryptocurrency asset manager. He claims DCG has “inflicted yet more reputational damage and actual market damage on the broader sector” that has already been ravaged by numerous scandals and disputes.
The litigious twins sued Zuckerberg for stealing their idea for Facebook. They later settled for $65m.
Silbert isn’t the only one under threat. Customers are suing the Winklevoss twins for allegedly dealing in unlicensed securities via their interest-earning product that was linked to Genesis.
In the cryptocurrency industry, there are many founders who point fingers and take legal action. No one wants to be the “next FTX”.
