Bankruptcy

More than 186 US banks well-positioned for collapse, SVB analysis reveals

Rising interest rates, which brought down the U.S. banking system’s asset market value by $2 trillion, combined with a large share of uninsured deposits at some U.S. banks, threaten banks’ stability.

The perfect mix of losses, uninsured leverage and an extensive loan portfolio, among other factors, resulted in the fall of Silicon Valley Bank (SVB). Comparing SVB’s situation with other players revealed that nearly 190 banks operating in the United States are potentially at risk of a run.

While SVB’s collapse came as a reminder of the fragility of the traditional financial system, a recent analysis by economists showed that a large number of banks are at risk from uninsured deposit withdrawals. It read:

“Even if only half of uninsured depositors decide to withdraw, almost 190 banks are at a potential risk of impairment to insured depositors, with potentially $300 billion of insured deposits at risk.”

Monetary policies penned down by central banks can hurt long-term assets such as government bonds and mortgages, creating losses for banks. The report explains that a bank is considered insolvent if the mark-to-market value of its assets — once uninsured depositors are paid — is insufficient to repay all insured deposits.

Largest insolvent institutions if all uninsured depositors run. Source: papers.ssrn.com

The data in the above graph represents the assets based on bank call reports as of Q1, 2022. Banks in the top right corner, alongside SVB (with assets of $218 billion), have the most severe asset losses and the largest percentage of uninsured deposits to mark-to-market assets.

The recent rise in interest rates, which brought down the U.S. banking system’s asset market value by $2 trillion, combined with a large share of uninsured deposits at some U.S. banks, threatens banks’ stability.

“Recent declines in bank asset values significantly increased the fragility of the US banking system to uninsured depositors runs,” the study concluded.

Related: Breaking: SVB Financial Group files for Chapter 11 bankruptcy

As the federal government steps in to protect the depositors of SVB and Signature Bank, President Joe Biden assured no impact on taxpaying citizens.

However, one user pointed out to Biden on Twitter that “everything you do or touch costs the taxpayer!”

FTX debtors report $11.6B in claims, $4.8B in assets, with many crypto holdings ‘undetermined’

The presentation reported $25 million in donations — political and otherwise — from three of the FTX silos, but added “limited information” was available on crypto donations.

The debtors in FTX’s bankruptcy case have reported that the various company silos had more than $4 billion in scheduled assets as of November 2022, but said they were still investigating the firm’s crypto holdings.

In a March 17 filing with the United States Bankruptcy Court for the District of Delaware, FTX debtors submitted a presentation to the committee of unsecured creditors on its statement of financial affairs, which also detailed the scheduled assets and claims of the company. According to the filing, the West Realm Shires silo — which includes FTX US and Ledger X — FTX.com, Alameda Research and FTX Ventures had roughly $4.8 billion in scheduled assets and $11.6 billion in scheduled claims.

The data was based on petitioning financials from the four silos in November 2022. According to the report, Alameda held the majority of the scheduled assets at roughly $2.6 billion but ​​had “potentially material claims that have been filed as undetermined.” FTX.com had more than $11.2 billion in scheduled claims, but claims from FTX Ventures were undetermined.

Much of the data surrounding cryptocurrency holdings or transactions in the debtors’ report was not available. The presentation reported $25 million in donations — political and otherwise — from three of the silos, but added that “limited information” was available on crypto donations.

Of the crypto-collateralized loans — largely in FTX Token (FTT) — made by the FTX companies, debtors reported more than 53 million tokens, including Bitcoin (BTC), Ether (ETH), XRP (XRP), and USD Coin (USDC). However, they said that “additional tracing of wallet and blockchain activity remains an ongoing matter.”

An investigation into crypto transactions as part of payments to FTX company insiders was also reported to be “ongoing.” Former CEO Sam Bankman-Fried received more than $2.2 billion of the payments. 

Related: FTX influencers face $1B class-action lawsuit over alleged crypto fraud promotion

FTX’s bankruptcy case has been ongoing since the firm filed for Chapter 11 protection in November 2022. In addition, Bankman-Fried faces both criminal and civil cases for his involvement in alleged fraudulent activities at the company.

Banking crisis: What does it mean for crypto?

Cointelegraph breaks down the main events that led to the collapse of Silvergate, SVB and Signature Bank and explains what this all could mean for crypto.

Last week’s rapid collapse of Silvergate, Silicon Valley Bank (SVB) and Signature Bank has highlighted the fragility of the traditional banking sector while depriving crypto of its primary fiat on-ramps in the United States.

Most observers agree that the collapse of SVB, like the one of Silvergate, was largely the result of unfavorable market conditions and poor risk management. 

The shutdown of Signature was more controversial. According to multiple sources, the bank was not facing insolvency and had largely stabilized its capital outflow when U.S. regulators decided to take it over. Many in the crypto industry saw it as a political decision aimed at pushing crypto out of the United States.

Silvergate and Signature were the two leading financial institutions providing banking services to crypto companies in the United States. Following their shutdowns, it will be far more challenging for crypto companies to interact with the dollar-based financial system.

In the meantime, the collapse of SVB seems to have caused a ripple effect across the global banking sector. Credit Suisse, the second-largest Swiss financial institution, is going through a significant crisis that required the Swiss Central Bank to intervene with a $54 billion lifeline. 

If you want to know more about the ongoing banking crisis and how it affects cryptocurrencies, check out Cointelegraph’s latest video report on YouTube, and don’t forget to subscribe! 

Sam Bankman-Fried petitions court to prioritize reimbursing his legal fees

FTX’s legal counsel requested insurers to advance or reimburse Bankman-Fried’s defense costs and fees under the company’s directors and officers insurance.

Sam Bankman-Fried is seeking to use FTX’s insurance policies to cover his legal expenses, according to a court filing on March 15. 

The former FTX CEO’s legal counsel requested in a motion to permit insurers to advance or reimburse his defense costs and fees under directors and officers (D&O) insurance policies held with Relm Insurance and Beazley Insurance. As per the filing, the policies provide “priority of payment to individual insureds with un-indemnified loss like Mr. Bankman-Fried.” Meaning the former CEO would be on top of the FTX payout list. The filing read, in part:

“Based on the foregoing, Mr. Bankman-Fried submits that ample cause exists to lift and modify the automatic stay […] to allow Relm and Beazley to (a) reimburse Mr. Bankman-Fried for covered Defense Costs that have already been incurred under the D&O Policies, and (b) advance future covered Defense Costs unless and until the Defense Costs no longer qualify as Non-Indemnifiable Losses under the terms of the D&O.” 

According to Investopedia, directors and officers liability insurance intends to “protect individuals from personal losses if they are sued as a result of serving as a director or an officer of a business or other type of organization,” including covering legal fees and other costs as a result of a suit.

Related: SBF’s lawyers signal need to push back October criminal trial

Responses or objections to the motion must be filed by March 29, 2023. If required, a hearing will be held on April 12, 2023, at the United States Bankruptcy Court for the District of Delaware. If no responses or objections are filed, Bankman-Fried asks the court to grant the relief request without further notice. 

Bankman-Fried’s counsel noted that “there are multiple criminal, regulatory, insolvency-related and civil actions” involving the former CEO, including one criminal proceeding, three federal and state regulatory proceedings, and five insolvency-related proceedings, as well as seven legal actions.

On Feb. 23, Bankman-Fried was charged on four new criminal counts by a federal judge presiding over his case, totaling 12 criminal charges against him, including eight conspiracy charges related to fraud as well as four charges of wire fraud and securities fraud. His legal costs are estimated to be in the nine-figure range.

Cointelegraph previously reported that law firms, investment banks and consulting companies working with FTX on its bankruptcy case billed the crypto exchange a combined $34.18 million in January. FTX’s chief restructuring officer and new CEO, John J. Ray III, also received a substantial salary, charging $1,300 an hour, amounting to a total of $305,000.

BlockFi in no immediate danger, despite Silicon Valley Bank exposure: Report

Christine Okike, a lawyer representing BlockFi at its bankruptcy hearing, claimed that BlockFi is not in immediate danger and has sufficient funds to continue operating normally.

According to a lawyer representing the bankrupt crypto lender BlockFi Inc., the company is in a stable financial position with access to ample cash reserves, despite having over $200 million in exposure to Silicon Valley Bank, Bloomberg reported.

During a bankruptcy hearing on Monday, Christine Okike of Kirkland & Ellis claimed that BlockFi is not in immediate danger and has sufficient funds to continue operating normally, including paying employees and vendors.

Okike reportedly said:

“BlockFi is fine … We have access to cash to operate in the normal course, including paying employees and vendors.”

Okike also noted that BlockFi expects to gain access to a significant portion of cash held with Silicon Valley Bank later in the day. The majority of BlockFi’s exposure to Silicon Vally Bank is through third-party money-market mutual funds, which Okike claimed had no direct impact on the company’s operations. The bankruptcy case in question is identified as BlockFi Inc., 22-19361, and is being heard in the U.S. Bankruptcy Court for the District of New Jersey in Trenton. 

Related: Silicon Valley Bank collapse: Everything that’s happened until now

On March 10, California’s financial regulator shut down Silicon Valley Bank, a major financial institution catering to venture-backed companies. The shutdown makes it the first Federal Deposit Insurance Corporation-insured bank to fail in 2023. 

On March 11, a bankruptcy filing revealed that defunct crypto lender BlockFi had $227 million worth of uninsured funds allocated to a money market mutual fund (MMMF) offered by the troubled Silicon Valley Bank (SVB).

As previously reported by Cointelegraph, global banking giant HSBC has announced the acquisition of Silicon Valley Bank UK (SVB UK), a subsidiary of the now-collapsed Silicon Valley Bank, for just 1 British pound ($1.21). According to HSBC, as of March 10,, SVB UK had loans worth around 5.5 billion pounds ($6.7 billion) and deposits of around 6.7 billion pounds ($8.1 billion). 

Fed starts ‘stealth QE’ — 5 things to know in Bitcoin this week

Bitcoin and crypto react bullishly to news that the Fed is providing liquidity again after the failure of Silicon Valley Bank and Signature Bank.

Bitcoin (BTC) begins a new week with a bullish surge above $22,000 as the United States Federal Reserve injects liquidity into the U.S. economy.

In a move which can rival any classic Bitcoin comeback, BTC/USD is up a full 15% off the two-month lows seen on March 10.

The volatility — and temporary relief for bulls — is due to events in the U.S. after the failure of one bank and the forced shutting of another.

Silicon Valley Bank (SVB) and Signature Bank are the latest victims in a brutal year for financial institutions under the Fed’s rising interest rates — will the trend continue?

Despite Signature being crypto-focused and a major on-ramp from fiat, crypto markets have so far seen no reason to abandon optimism at the prospect of the Fed providing fresh money.

Not everyone believes this constitutes a “pivot” on interest rate hikes or overall policy.

As the dust continues to settle and news floods in from the ongoing events, Cointelegraph breaks down the main factors moving BTC’s price in the short term.

Fed bails out Silicon Valley Bank depositors

The story of the moment is, of course, the fallout from Silicon Valley Bank (SVB) failing on March 10.

Swallowing hundreds of billions of dollars in deposits, SVB was forced to take a massive $1.8 billion loss thanks to parking consumer funds in mortgage-backed securities, the price of which also suffered during the Fed’s rate hikes.

A snowball effect soon began as depositors became wary that something might be wrong regarding liquidity. Everyone attempted to withdraw from SVB at once, and the funds were unavailable, necessitating the sale of assets at a loss and an emergency funding round which ultimately failed.

The result has come from the Fed stepping in to backstop depositors’ money. On March 12, it announced the “Bank Term Funding Program” (BTFP).

“Depositors will have access to all of their money starting Monday, March 13,” an accompanying joint statement from the Department of the Treasury, Fed Board and Federal Deposit Insurance Corporation (FDIC) confirmed.

“No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.”

As market commentators were quick to point out, the decision effectively marks a return to Fed liquidity injections — quantitative easing (QE) — whereas before, liquidity was being withdrawn from the U.S. economy.

Risk assets rallied instantly on the news, as increasing liquidity ultimately increases investor appetite for risk.

Crypto was no exception, despite U.S. authorities announcing the sudden closure of Signature Bank in a move that some argue was a direct attempt to stop crypto markets from capitalizing on the SVB aftermath.

“We are also announcing a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state chartering authority. All depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer,” the joint statement read.

Reacting to the creation of the BTFP, popular commentator Tedtalksmacro described it as a form of “stealth QE.”

“Unofficial quantitative easing begins on Monday. This is so bullish,” part of subsequent Twitter posts added.

“TL;DR the Fed’s balance sheet will expand and that will increase USD liquidity.”

As Cointelegraph reported, crypto as a whole is highly sensitive to central bank liquidity trends — not just those in the United States.

Among those underlining this is Arthur Hayes, former CEO of derivatives exchange BitMEX, who, in a blog post earlier in the year, described how changing liquidity conditions would likely impact Bitcoin and altcoin performance.

Now, he was conspicuously bullish.

“Get ready for a face ripping rally in risk assets. MONEY PRINTER GO BRRR!!!” he told Twitter followers about the BTFP in one of several posts on March 12.

Speculation gathers over Fed interest rate “pivot”

With liquidity returning to the market, it was not just crypto wondering about the fate of the Fed’s quantitative tightening (QT) policy in place for the past 18 months.

Speculation was rampant on the day that this month’s decision on interest rate adjustments may yield either a reduction or see the Fed leave the current rate unchanged.

Previously, markets had been swinging between a 0.25% and a 0.5% increase to the benchmark rate at the March 22 meeting of the Federal Open Market Committee (FOMC).

“In light of the stress in the banking system, we no longer expect the FOMC to deliver a rate hike at its next meeting on March 22,” Goldman Sachs economist Jan Hatzius wrote in a note on March 12, quoted by CNBC and others.

David Ingles, the chief markets editor at Bloomberg TV, interpreted the comments as Goldman considering the Consumer Price Index (CPI) a “non event.”

Cointelegraph contributor Michaël van de Poppe, founder and CEO of trading firm Eight, looked closer to home, noting that the coming week would produce another price catalyst in the form of February’s CPI inflation data.

“’QE’ and ‘Bailout’ for the banks, which means temporary relief + potential good CPI and no more rate hikes (or 25bps) is fuel,” he wrote as part of Twitter comments on March 13.

“Markets now waiting for CPI to give the green light,” popular trading and analytics account Daan Crypto Trades continued.

“If CPI comes in hot we’ll see some chaos as we’d basically have an increasing CPI + Easing Fed. If CPI comes in below estimates I don’t see a reason for the market to hold back.”

More cautious was Alasdair Macleod, who, in light of the BTFP decision, warned against assuming that the Fed had abandoned QT for good.

“Initial market reaction to banking crisis is based on perceived Fed pivot. But this could be a mistake,” he tweeted.

“Irrespective of Fed monetary policy, contracting bank credit forces up the price of loans, if you can get one. Monitor money markets!”

According to CME Group’s FedWatch Tool, overall expectations still favored a further hike rather than a stagnating benchmark rate on March 22. However, 0.5% was off the table.

Fed target rate probabilities chart. Source: CME Group

BTC price jumps to $22.7K in blistering comeback

With that, Bitcoin was clearly bullish during the Asia trading session on March 13.

Ahead of the Wall Street open, BTC/USD traded at around $22,100 at the time of writing, having hit local highs of $22,775 on Bitstamp, according to data from Cointelegraph Markets Pro and TradingView.

The bulk of the recovery from its March 10 lows of under $20,000 came following the Fed liquidity announcement, but this entirely erased any trace of the SVB implosion.

BTC/USD 1-hour candle chart (Bitstamp). Source: TradingView

“Bitcoin recovered from the biggest US bank collapse since 2008… in just 3 days,” popular commentator Bitcoin Archive summarized.

Among traders, targets remained varied as volatility moved BTC/USD up and down before the opening.

Van de Poppe argued that $21,300 must hold to facilitate a long trade, potentially reaching $23,700.

“22.7K liquidity looks ripe for the taking,” fellow trader Crypto Chase continued.

“For any local longs, stops below 21K should be safe IMO. Back below there wouldn’t make much sense to me if this is going to keep ripping.”

Full-time trader Jackis noted that last week’s low had exactly matched the 0.618 Fibonacci retracement level from the 2023 highs above $25,000.

“No surprise we are pumping off of major monthly support,” Credible Crypto added about current price behavior on 4-hour timeframes.

Bitcoin’s weekly close thus came in far higher than expected at more than $22,000. For trader and analyst Rekt Capital, this “likely” put pay to the bearish double top pattern previously playing out on weekly timeframes.

“Weekly Close above $21770 likely invalidates the Double Top,” part of a tweet on March 12 read.

Further analysis nonetheless gave April as the nearest point that Bitcoin could begin to effect a longer-term trend change.

“Great BTC reaction from ~$20000, the Range Low of this Macro Range,” Rekt Capital wrote.

“As long as ~$20000 holds, $BTC has a chance at challenging the Macro Downtrend in the coming weeks once again At the earliest this April.”

BTC/USD annotated chart. Source: Rekt Capital/ Twitter

USDC looks to regain $1 peg

In what could make investors breathe a sigh of relief this week, an early crypto casualty of the SVB implosion was back in the running on March 13.

USD Coin (USDC) — the second-largest stablecoin by market cap — had practically regained its U.S. dollar peg at the time of writing.

After dipping 20%, USDC traded at $0.99 on Bitstamp, as assurances from issuer Circle helped calm existing panic.

USDC/USD 1-hour candle chart (Bitstamp). Source: TradingView

In a Twitter thread on March 12, CEO Jeremy Allaire confirmed that BNY Mellon and an unnamed new banking partner would take over from where Signature and SVB abruptly left off.

“Trust, safety and 1:1 redeemability of all USDC in circulation is of paramount importance to Circle, even in the face of bank contagion affecting crypto markets,” he added in a press release, praising the actions of the Fed and U.S. lawmakers.

The largest U.S. exchange, Coinbase, confirmed that USDC conversions would begin on March 13.

“Despite the turbulence we have seen in the traditional banking sector recently, Coinbase continues to operate as usual. At Coinbase all client funds continue to be safe and accessible including USDC conversions which will resume on Monday,” it tweeted.

Other major stablecoins, which had come unstuck in step with USDC, also attempted to regain dollar pegs, with Dai (DAI) at $0.989 and USDD at $0.986.

Changpeng Zhao, CEO of the largest global exchange, Binance, additionally announced the conversion of some of its branded stablecoin, Binance USD (BUSD), to Bitcoin, Ether (ETH) and its in-house BNB (BNB), as part of its existing “Industry Recovery Fund.”

“With nearly $1B untapped, this means the market will have extreme buying pressure soon,” part of a reaction from on-chain data researcher, The Data Nerd read.

Sentiment rebounds as “short squeeze” risk rises

In a reflection of the extent to which crypto market sentiment remains extremely sensitive to macro events, the Crypto Fear & Greed Index returned to “fear” for the first time in two months on March 10.

Related: Watch these 5 cryptocurrencies for a potential price rebound next week

The latest events saw a dramatic turnaround, with the Index’s score going from 33/100 to 49/100 — classed as “neutral” — in a single day.

Crypto Fear & Greed Index (screenshot). Source: Alternative.me

On derivatives exchanges, however, bearishness remains. Over the weekend, funding rates hit the lowest since the aftermath of the FTX implosion in November 2022, data from on-chain analytics firm Glassnode shows.

“Longs are being paid to be long,” Tedtalksmacro summarized.

Bitcoin futures funding rates chart. Source: Glassnode

Overly negative funding rates have the ability to spark a “short squeeze” — an event where shorts are liquidated en masse in a cascade-like domino effect as the market majority expects the price to continue falling.

Crypto liquidations chart. Source: Coinglass

Cross-crypto short liquidations already totaled more than $150 million on March 12 alone, according to data from Coinglass, with the March 13 tally at $39 million.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Binance.US, Alameda, Voyager Digital and the SEC — the ongoing court saga

Court cases involving the SEC and some major crypto industry enterprises — Voyager Digital, Alameda Research and Binance.US — have continued to progress in 2023.

After a tumultuous year in crypto, court cases have inevitably followed. Bankruptcy, liquidity issues and fraud have caused the industry to fall under the microscope of regulators worldwide.

Voyager Digital, the former cryptocurrency brokerage; Alameda Research, the investment arm of FTX; and cryptocurrency exchange Binance have all ended up in the crosshairs of the United States Securities and Exchange Commission (SEC) in battles over assets and owed funds.

As 2023 trundles on, so too have many crypto court cases. Here is a brief round-up of the current status of some of the industry’s most pressing legal battles.

It all started with the Voyager bankruptcy

The situation around Voyager Digital began before the FTX liquidity crisis came to light. On July 5, 2022, the company filed for bankruptcy, initially attempting to “return value” to over 100,000 customers who had lost millions. 

Nearly a month after its bankruptcy filing, it was revealed that Voyager had “deep ties” to Alameda Research. Alamada was also the largest stakeholder in Voyager, with an 11.56% stake in the company after two investments totaling $110 million.

The auction for Voyager’s assets began on Sep. 13, which saw some of the industry’s major players vying for their share of what was left of the company. This included the likes of Binance, CrossTower and FTX. 

Related: Gensler’s approach toward crypto appears skewed as criticisms mount

FTX prevailed in the auction after a $1.4 billion bid on the company’s assets. At the time, it was said that Voyager customers could recover 72% of their assets after the FTX deal — similar to current statements by some involved with Binance.US’s bid to acquire Voyager.

However, in late October, prosecutors in Texas objected to the Voyager auction and launched an investigation into FTX for potential securities violations.

The fall of FTX

Before any deals were finalized, the crypto industry received one of the biggest bombshells of the year when FTX, FTX US and Alameda Research filed for Chapter 11 bankruptcy in the U.S., with the resignation of co-founder and former CEO Sam Bankman-Fried following soon after, on Nov. 11. 

This incident sent shockwaves through the entire industry, with a domino of companies affected by their proximity to FTX. 

After this dramatic collapse, the SEC began questioning its oversight strategies for the crypto industry. FTX’s bid for Voyager was off the table, and FTX itself was also up for grabs.

Binance steps in

At the onset of the liquidity crisis, Binance’s co-founder and CEO Changpeng “CZ” Zhao was the first to come out with a proof-of-reserves concept post-FTX. The exchange even toyed with acquiring FTX, though ultimately did not proceed.

Around Dec. 19, it was revealed that Binance.US was set to acquire Voyager Digital assets for roughly $1 billion. 

Related: US accounting watchdog warns investors about proof-of-reserves reports

Shortly after, on Jan. 5, 2023, the SEC filed an objection to the Binance.US acquisition on account of wanting to see more details included in the billion-dollar deal between the two entities.

Although the SEC and lawmakers in Texas both opposed the Binance.US deal, a survey released in court documents revealed that 97% of surveyed Voyager customers favored the restructuring plan.

On March 7, bankruptcy judge Michael Wiles approved the deal and said the case couldn’t be put into an “indeterminate deep freeze” while regulators nitpick problems. However, the following day the game of ping-pong continued as the U.S. Department of Justice filed an appeal against the approval.

Alameda back on the scene

Meanwhile, on Jan. 30, Alameda Research opened a lawsuit against Voyager Digital for $446 million, claiming that Voyager “knowingly or recklessly” channeled customer funds to Alameda.

Following the initiation of this lawsuit, on Feb. 6, Voyager’s lawyers served a subpoena to Sam Bankman-Fried, along with former Alameda CEO Caroline Ellison, FTX co-founder Gary Wang and Ramnic Arora, head of product at FTX.

On Feb.19, Voyager creditors served Bankman-Fried with a subpoena to appear in court for a “remote deposition.“

On March 8, court documents revealed that Delaware bankruptcy judge John Dorsey approved that Voyager Digital will set aside $445 million in light of Alameda’s lawsuit. The next day, Alameda revealed that it plans to sell its remaining interest in Sequoia Capital to an Abu Dhabi fund for $45 million.

The situation between these three entities in relation to lawmakers and regulators in the U.S. is ongoing. 

Crypto Biz: Silvergate shutting down, Alameda suing Grayscale

Negative headlines surrounding Silvergate dragged Bitcoin’s price below $20,000. Meanwhile, bankrupt Alameda is planning to sue Grayscale and its parent company DCG.

With the Bitcoin (BTC) halving more than a year away, don’t expect crypto industry narratives to change anytime soon. Nay, crypto winter is still in full force, and the nasty headlines show no signs of abating. 

This week, Silvergate Bank’s parent company announced it would shut down and liquidate the crypto bank “in light of recent industry and regulatory developments.” This hardly comes as a surprise after most of Silvergate’s high-profile partners abandoned the company when the regulators came knocking.

The latest Crypto Biz newsletter documents the voluntary liquidation of Silvergate, a new lawsuit from Alameda Research targeting the Digital Currency Group (DCG), and “stale” Tether allegations from The Wall Street Journal.

Silvergate Capital Corporation will ‘voluntarily liquidate’ Silvergate Bank

After months of uncertainty, Silvergate Bank’s parent company announced on March 8 that it would unwind its operations and liquidate its remaining assets. While this marked another blow to the crypto industry, the writing was already on the wall for Silvergate Bank. According to reports, Silvergate Bank had been negotiating with the Federal Deposit Insurance Corporation (FDIC) to avoid a shutdown. Apparently, those talks went nowhere. Like other crypto firms, Silvergate’s troubles began with the meltdown of FTX and ended with regulators investigating the bank’s alleged involvement in Sam Bankman-Fried’s doomed empire. By the time Silvergate went under, companies like Coinbase, Paxos, Gemini, Galaxy Digital and BitStamp had already cut ties.

Alameda Research files suit against Grayscale over ‘self-imposed redemption ban’

Here’s a headline you probably weren’t expecting: Bankrupt Alameda Research is suing Grayscale Investments and its owner, the Digital Currency Group, for its exorbitant fees and refusal to unlock shareholder redemptions. The lawsuit, filed in Delaware, alleges that Grayscale charged over $1.3 billion in management fees, supposedly violating trust agreements. The company also “contrived excuses” to prevent shareholders from redeeming their shares. The lawsuit seeks to “unlock $9 billion or more in value for shareholders of the Grayscale Bitcoin and Ethereum Trusts […] and realize over a quarter billion dollars in asset value for the FTX Debtors’ customers and creditors.” These sorts of allegations against DCG and Grayscale are nothing new. In January, Bitcoin billionaire Cameron Winklevoss accused DCG CEO Barry Silbert of orchestrating “a carefully crafted campaign of lies” to hide a hole in an associated company’s balance sheet.

Bitcoin ASIC manufacturer Canaan saw 82% revenue drop in Q4

In another sign of the times, Chinese Bitcoin miner and manufacturer Canaan reported a massive drop in revenue during the fourth quarter. The company’s sales plummeted 82.1% year-over-year to $56.8 million. During the quarter, Canaan sold 1.9 million terahashes per second worth of computer power for Bitcoin miners, down 75.8% compared to a year ago. Regarding profitability, Canaan was deeply in the red for the quarter — reporting a loss of $63.6 million. Overall, Canaan appears healthy enough to withstand a crypto winter that could last for the rest of the year. The company currently has $706 million in total assets against $67 million in liabilities.

Tether strikes at WSJ over ‘stale allegations’ of faked documents for bank accounts

Here’s how you know the bear market isn’t over: Mainstream media’s attacks against stablecoin issuer Tether show no signs of letting up. If you’ve been in crypto long enough, you know that Tether is the industry’s favorite conspiracy theory because people love to doubt the company’s collateral, the make-up of its reserve holdings and its association with crypto exchange Bitfinex. This week, a familiar Tether foe alleged that the stablecoin issuer faked documents and used shell companies to access the banking system. According to The Wall Street Journal, Tether and Bitfinex faked sales invoices and transactions as part of a ploy to open bank accounts. On the same day the report was released, Tether fired back, claiming the story was based on “stale allegations from long ago,” and “wholly inaccurate and misleading.”

Before you go: How will the Silvergate implosion impact crypto?

The fallout from the FTX collapse continues to impact crypto markets. Now, crypto-friendly lender Silvergate Bank is on the brink of insolvency after reporting a $1 billion net loss in the fourth quarter. That’s not the worst of it, though. Several major crypto companies, including Coinbase, Circle, Paxos, Galaxy Digital, MicroStrategy and Tether, have distanced themselves from the company as the United States Department of Justice investigates its involvement in the FTX debacle. On this week’s Market Report, I sat down with fellow analysts Marcel Pechman and Joe Hall to discuss how Silvergate could impact crypto sentiment. You can watch the full replay below.

Crypto Biz is your weekly pulse of the business behind blockchain and crypto, delivered directly to your inbox every Thursday.

US trustee appeals NY Judge’s approval of Voyager deal with Binance.US

The United States Department of Justice filed an appeal against the approval by a New York judge allowing a billion-dollar sale of assets from Voyager Digital to Binance.US.

The United States Department of Justice (DOJ) has filed an appeal against the latest decision in the case for the selling of assets between Voyager Digital and Binance.US.

On March 8, the U.S. Trustee for Region 2 made the appeal to the U.S. District Court for the Southern District of New York against the approval of Voyager Digital’s Chapter 11 bankruptcy plan.

The Chapter 11 plan was confirmed only a day prior, on March 7, by U.S. bankruptcy judge Michael Wiles. This plan would have allowed the former crypto brokerage company to sell billions of dollars in assets to Binance.US in an effort to regain liquidity to pay back customers. 

After Wiles told Bloomberg that he could not put the case into an “indeterminate deep freeze while regulators figure out whether they believe there are problems with the transaction and plan.“

He also reportedly said that through the current plan, “Voyager’s customers would see an estimated 73% recovery.” Moreover, a poll released in a court filing on Feb. 28 revealed that 97% of Voyager customers favor the Binance.US deal. 

Related: US lawmakers argue SEC accounting policy places crypto customers at risk

Nonetheless, the U.S. Securities and Exchange Commission (SEC) has been outspokenly against this deal. The financial regulator said the asset restructuring plan and Binance.US’ acquisition could breach securities law.

In a court filing from Feb. 24, the Texas State Securities Board and the Department of Banking objected to the deal with Binance.US.

If U.S. regulators successfully block this deal, Voyager can liquidate. The initial bankruptcy was filed on July 5, 2022, as the brokers attempted to restructure and “return value” to more than 100,000 customers.

Former Jane Street, PIMCO traders raise $15M for ZK proof-of-solvency protocol

The team said it has already lined up clients, including CoinList, Bitso and TrueUSD.

A team of former Jane Street and PIMCO traders have raised $15 million to produce a proof-of-solvency protocol for centralized exchanges, stablecoin issuers and other asset managers in the crypto space, according to a press release from the team shown to Cointelegraph. Called “Proven,” the new protocol allegedly uses zero-knowledge proofs to reveal an institution’s assets and liabilities without revealing the personal data of customers.

According to the press release, the Proven team consists of quantitative traders, portfolio managers, and researchers from Wall Street firms Two Sigma, Elm Partners, Pimco, Jane Street and others. The initial $15 million seed round was led by crypto-oriented venture capital fund Framework Ventures.

Jane Street was also the former employer of Sam Bankman-Fried, who is accused of fraud after the collapse of his crypto exchange, FTX. Proof-of-solvency protocols attempt to make exchanges more transparent in order to avoid another FTX-like disaster.

Richard Dewey, co-founder of Proven, expressed hope that the new protocol will allow crypto firms to regain the trust of the public while simultaneously protecting privacy, stating:

“The last few months have highlighted an issue that has long plagued both traditional financial and digital asset firms – efficiently fostering trust with customers while maintaining a necessary level of privacy. […] We designed Proven to be a win-win solution that enables customers and regulators to have confidence […] while at the same time protecting sensitive customer information.”

The Proven team said that it already has a list of pilot clients, including CoinList, Bitso, TrueUSD and M11 Credit.

Related: Polygon launches ID product based on ZK proofs

Since the collapse of FTX last year, many centralized exchanges, stablecoin issuers and other crypto custodians have sought to increase transparency by providing cryptographic proof of assets and liabilities. However, providing these proofs has turned out to be a challenge. Although most firms have been able to verify their on-chain assets, liabilities incurred off-chain have been much more difficult to prove to a skeptical public.

Gate.io, OKX, Kraken and other exchanges have attempted to disclose liabilities through cryptographic Merkle trees. This has allowed users to prove that their balances were included in the company’s liability statements. However, this has also been criticized for allegedly allowing companies to falsify liabilities by including negative balances.

Zero-knowledge (ZK) proof of solvency allegedly fixes this problem by allowing the exchange to use ZK proofs to show that customer balances are non-negative, according to app developer sCrypt’s technical explanation of the concept.

However, not all experts on zero-knowledge proofs agree that this process will work. For example, Aleph Zero blockchain founder Matthew Niemerg told Cointelegraph in a statement:

“While zero-knowledge proofs can be used to provide guarantees regarding on-chain balances, they become rather limited in auditing the solvency of a firm unless all liabilities are published (using cryptographic techniques) on-chain. Even then, there are no assurances that all liabilities are disclosed. In short, cryptography will not solve this problem in the even more pathological situation when the party being audited is deceitful.”

So, the debate over whether centralized participants can ever be truly transparent continues to rage.