On January 1st of 2022, one Bitcoin would cost you about $46,000. By November 8th, that same coin went for about $18,500. And that’s when the year’s most dramatic crypto story was just starting: the collapse of the FTX exchange, which brought yet another round of existential threats to the crypto industry as a whole.
Now the traditional financial system is showing signs of fragility, and two major crypto banks (Silvergate and Signature) are among the three US banks that shut down within the space of one week.
2022 looked like death by a thousand scandals for crypto. There was the Luna / Terra crash, which wiped out billions in value practically overnight. There was Axie Infinity, the once-hot NFT game that lost $625 million in a hack. Celsius collapsed. Three Arrows Capital collapsed.
Tron backer Justin Sun is now facing charges filed by the SEC over celebrity crypto endorsements, sales of unregistered securities, and alleged market manipulation, while Terra founder Do Kwon is believed to have been arrested in Montenegro.
Remember when NFTs were cool and people thought their JPGs were worth millions?
All this happened, of course, as the overall economy began to crash back down to earth after a pandemic-created spike in stock prices — which also dampened society’s overall tolerance for chaotic, nonsensical gambling on internet money. As the economy began to even out and our collective risk tolerance went down, crypto went for many investors from a fun plaything to a dangerous bet.
Here’s all our coverage of crypto’s ups and downs through 2022 and 2023:
- FTX co-founder Gary Wang won’t face prison time.
During trial, prosecutors pressed Wang for creating code that allowed Alameda to have a negative balance in FTX’s database.
But the prosecution ultimately advocated for Wang during his sentencing on Wednesday, citing his cooperation in deciphering the FTX case, along with his work to create a tool to help the government to detect fraud, CNBC reports.
FTX is suing Binance to recover nearly $1.8 billion
Image: The VergeThe estate of now-defunct crypto exchange FTX has filed a lawsuit against Binance and its former CEO Changpeng Zhao in a bid to recover $1.76 billion. FTX alleges these funds were fraudulently transferred to Binance, Zhao, and other Binance executives in July 2021 as part of a shares repurchase deal with FTX co-founder Sam Bankman-Fried.
According to the filing, the transaction saw Binance sell back the 20 percent stake it held in FTX’s international unit and 18.4 percent in its US-based entity, which Bankman-Fried paid for using a mix of FTX and Binance-branded cryptocurrencies. The FTX estate alleges the share repurchase deal was conducted unlawfully because — following massive fraud by Bankman-Fried and other executives — FTX and its sister company Alameda were already insolvent at the time, and unable to fund the transaction.
Read Article >- FTX’s plan to repay customers $16 billion gets court approval.
Following a lengthy bankruptcy process, FTX says 98 percent of customers who lost assets in the collapsed crypto exchange will receive their money back within 60 days. Delaware Judge John Dorsey called the outcome a “model case for how to deal with a very complex Chapter 11 proceeding.”
The rise and fall of OpenSea
In April, on an overcast spring afternoon, I attended the seventh iteration of NFT.NYC, a haven for all believers in monkey JPEGs with a price tag and other NFTs. As rain pelted the Javits Center, the “Super Bowl of NFTs” felt abandoned.
“The amount of people here is definitely reduced from last year,” Ric Johnson, who was promoting an NFT that let people vote on whether Donald Trump should go to prison, politely told me. Big Mac, an attendee who only gave me his online pseudonym (crypto has a strong culture of anonymity), said that instead of the NFT “Super Bowl,” the conference felt more like the “preseason.” And Tom Smith, who was manning a booth that hawked NFTs of anthropomorphized cannabis plants, was even more direct: “It seems really freakin’ dead.”
Read Article >- Gemini Earn customers will finally get most of their funds back.
People who participated in Gemini’s lending program, which suspended withdrawals in the wake of the FTX collapse, will get “approximately 97 percent” of their money. Perhaps predictably, the Earn program also had some legal issues.
FTX says most customers will get all their money back
Image: The VergeFTX says most customers affected by the cryptocurrency exchange’s collapse will get all their money back. Bankruptcy lawyers for the fallen firm say they’ve collected assets valued at up to $16.3 billion — more than they will need to repay the company’s estimated $11 billion debt.
John Ray III, the chief restructuring officer of FTX, says the company is “pleased to be in a position to propose a chapter 11 plan that contemplates the return of 100% of bankruptcy claim amounts.” Once the court approves the plan, FTX will begin distributing the funds within 60 days. FTX’s lawyers said earlier this year that they expect customers to “eventually be paid in full.”
Read Article >I have some questions about what Changpeng Zhao gave to the feds
Illustration by Cath Virginia / The Verge | Photos from Getty ImagesThere are a lot of differences between Changpeng Zhao and Sam Bankman-Fried, and now we can add one more to the list: the amount of time they’ll serve for their crimes. Bankman-Fried got 25 years; Zhao got four months.
There’s more. Zhao appeared in court in a tailored navy suit with a light blue tie when he spoke in his own defense. Bankman-Fried was shackled and in prison garb.
Read Article >- Feds arrest “Bitcoin Jesus” Roger Ver and accuse him of evading nearly $50 million in taxes.
You can read the details of Ver’s alleged misconduct here, but, with this news arriving as Binance founder Changpeng Zhao was sentenced for failing to establish adequate anti-money laundering protections, I’m reminded of this line from Ver, quoted in 2014:
“Money laundering is not a crime,” Ver says. “It’s just because certain men with guns don’t like what other people are doing with their own money, so they decide it’s okay to lock those people in a cage.
Early Bitcoin Investor Charged with Tax Fraud[www.justice.gov]
Binance founder Changpeng Zhao sentenced to four months in prison
Cath Virginia / The Verge | Photos from Getty ImagesBinance founder Changpeng Zhao was sentenced to four months in prison for failing to establish adequate anti-money laundering protections. Zhao, once the head of the largest crypto exchange in the world, pleaded guilty in November 2023.
Judge Richard Jones says that Zhao prioritized “Binance’s growth and profits over compliance with US laws and regulations.” While Jones doesn’t think Zhao is likely to reoffend, the scale of the crime is notable.
Read Article >- Y’all aren’t going to believe this, but Coachella is doing NFTs again.
In 2022, Coachella sold thousands of NFTs, including 10 digital “lifetime passes.” But it partnered with FTX US, Sam Bankman-Fried’s fall took the tokens with it, and owners were left chasing their promised benefits. Now Bitcoin is back, and Coachella’s trying NFTs again.
Each $1,499 NFT in the initial collection comes with a 2024 VIP Festival Pass and access to an exclusive bar.
Of 1,024 NFTs offered, three have been minted so far.
One of the Coachella NFTs. Image: Coachella - GameStop is pulling out of the NFT game.
GameStop will shut down the NFT marketplace on February 2nd “due to the continuing regulatory uncertainty of the crypto space,” reported by Decrypt yesterday.
That’s the same reason the company offered for shutting down its crypto wallet last year. The marketplace opened just a year and a half ago. The SEC was keenly interested in crypto throughout 2023, and took its first unregistered security enforcement against an NFT project in August.
GameStop ends its NFT ambitions. Screenshot: Wes Davis / The Verge First Bitcoin ETFs approved by US regulators
Take that, Satoshi! Nick Barclay / The VergeFifteen years after the genesis block was mined (and after one false announcement), the US Securities and Exchange Commission approved Bitcoin exchange-traded funds. Bitcoin has fully joined the financial system it was built to challenge. The decision will make 11 spot Bitcoin ETFs available to investors, such as those from Grayscale, Fidelity, BlackRock, and more.
“While we approved the listing and trading of certain spot bitcoin ETP shares today, we did not approve or endorse Bitcoin,” said SEC chairman Gary Gensler, in a statement. “Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto.”
Read Article >- Sam Bankman-Fried won’t face a second trial.
The Wall Street Journal writes that federal prosecutors won’t pursue the five leftover charges that District Court Judge Lewis Kaplan previously split off to avoid delaying the trial that resulted in a guilty verdict for Bankman-Fried last month.
The prosecutors justified the decision in a letter to Kaplan yesterday:
... Much of the evidence that would be offered in a second trial was already offered in the first trial and can be considered by the Court at the defendant’s March 2024 sentencing. Given ... the strong public interest in a prompt resolution of this matter, the Government intends to proceed to sentencing on the counts for which the defendant was convicted at trial.
- US judge rules there’s ‘no genuine dispute’ UST and other Terra Labs crypto assets are securities.
Terraform Labs founder Do Kwon is still in Montenegro waiting to be extradited, but the SEC’s case against him will proceed, with a January 29th scheduled start date.
The TerraUSD (UST) stablecoin, its linked Luna crypto token, and the whole Anchor Protocol crashed in May 2022, wiping out about $40 billion. According to the judge, while UST on its own is not a security, when combined with the Anchor Protocol, it is, while Luna joined investors in a “common, profit-seeking enterprise.”
OPINION AND ORDER - SEC v. Terraform Labs[DocumentCloud]
- In crypto, you have to take the good with the bad.
CoinDesk points out Binance’s year-end wrapup, noting that despite the guilty plea and $4 billion in fines for engaging in “Anti-Money Laundering, Unlicensed Money Transmitting, and Sanctions Violations,” its new CEO says the user base has grown by 30 percent to 170 million.
Meanwhile, former CEO Chaopeng Zheng’s wealth reportedly grew by $25 billion this year, but he remains stuck in the US awaiting sentencing. Yesterday, his lawyers filed a sealed request for permission to travel.
- The Solana Saga crypto phone’s surprising sellout and other Web3 updates:
Crypto wallet company Ledger’s Connect Kit software was compromised to insert a wallet drainer. Ledger’s CEO blamed a phishing attack on an ex-employee without explaining how their account still had access.
Even though the Solana Saga crypto phone flopped, selling only 2,500 units, it suddenly sold out in the US on Thursday. The Block reports each phone comes with 30 million “bonk” tokens. Their price has spiked to $0.000028 each, which adds up to more than the phone’s $599 price — assuming you can get the phone and sell them in time.
And Web3 is Going Just Great points out that a blockchain-linked online chess platform, The Immortal Game, has dropped NFT and play-to-earn features after finding out “that by offering large amounts of cash with no limit barrier to entry, we encouraged heavy cheating on the platform and degraded the user experience for our legitimate player base.”
- Feds seize crypto mixer tied to the North Korean hackers who robbed Axie Infinity.
CoinDesk and TechCrunch report U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) action against Sinbad.io, calling it a money laundering tool used by the “Lazarus” state-sponsored hackers used to move a “significant” portion of the $620 million in crypto stolen from Axie Infinity last year.
This follows sanctions against other mixing services like Blender.io and Tornado Cash.
Lazarus Group has operated for more than ten years and is believed to have stolen over $2 billion worth of digital assets... the DPRK has resorted to using illicit tactics, such as heists perpetrated by the Lazarus Group, to generate revenue for its unlawful weapons of mass destruction and ballistic missile programs.
Image: Screenshot of Sinbad.io - Binance’s CEO will have to stay in the US, for now.
Last week, Changpeng Zhao agreed to step down as CEO of the massive cryptocurrency exchange Binance — part of a plea deal with the DOJ for breaking anti-money-laundering laws.
However, one remaining disagreement has been where he will spend his time while awaiting sentencing for the felony charges. Despite agreeing to a $175 million bond, prosecutors consider him a flight risk and wanted to keep him in the US. That question isn’t fully answered, but Reuters reports a judge ruled CZ is staying the US for now while the court considers it, instead of being allowed to return to the UAE.
- Coinbase CEO figures it’s time to stop looking for crypto criminals now that Binance has pleaded guilty.
What if we really have already found every criminal who runs a cryptocurrency exchange?
Now that Binance reached a $4 billion settlement with the DOJ and ditched its CEO Changpeng Zhao, Coinbase head Brian Armstrong said to CNBC in an interview, “The enforcement action against Binance, that’s allowing us to kind of turn the page on that and hopefully close that chapter of history.”
Coinbase is also being sued by the SEC for allegedly selling unregistered securities, by the way.
- A Montenegro judge agrees to extradite collapsed crypto founder Do Kwon.
But now the question is: to where? Kwon faces charges in both the US and South Korea in connection with the collapse of the Terra stablecoin and its sister token Luna.
Kwon was arrested in Montenegro in June and spent four months in prison for attempting to use a fake passport. Federal prosecutors in the US filed additional charges against Kwon following his arrest, accusing him of wire fraud, commodities fraud, securities fraud, and more.
A Montenegrin Justice Minister must now decide whether to extradite Kwon to the US or South Korea.
- The SEC is suing Kraken.
Another one of the world’s largest cryptocurrency exchanges joins Coinbase and Binance in facing charges of operating as an unregistered securities exchange, as well as accusations (PDF) of commingling customers’ crypto assets and cash with its own and even allegedly paying expenses directly from bank accounts that held customer cash.
Kraken agreed to pay a $30 million fine in a settlement when it ended its crypto staking program in the US earlier this year; we’ll see if this case ends up costing it more.
- ‘OpenSea 2.0’ starts with mass layoffs as the NFT balloon deflates.
CEO Devin Finzer says OpenSea is “shifting to a smaller team with a direct connection to users.” Decrypt reports about 50 percent of employees are impacted. When it laid off 20 percent of its employees last year, around 230 people remained.
This chart shows OpenSea activity peaked with over 50,000 active wallets (around the time it was valued at $13 billion) and $140 million in daily volume, which has dropped to fewer than 8,000 active wallets and $2.3 million in volume.
Data on OpenSea active wallets, volume, and transactions since January 2021. Image: DappRadar Sam Bankman-Fried found guilty of fraud
Photo Illustration by Cath Virginia / The VergeFormer cryptocurrency kingpin Sam Bankman-Fried has been found guilty of fraud. A New York jury delivered the verdict on November 2nd, concluding a trial that has seen Bankman-Fried defend himself against claims that he criminally mismanaged his crypto exchange FTX and trading firm Alameda Research.
After more than a month in trial, the jury took four and a half hours to decide Bankman-Fried’s fate, declaring him guilty on all seven charges, including wire fraud, conspiracy to commit wire fraud, and conspiracy to commit money laundering. He is set to be sentenced by Judge Lewis Kaplan on March 28th of next year and faces decades in prison.
Read Article >- “...getting caught in a lie by a judge is very bad.”
That’s what experienced litigator Mitchell Epner wrote about this incident during the cross-examination of Sam Bankman-Fried. Elizabeth Lopatto’s summary of SBF’s final day of testimony captures it as part of being “vivisected” on the stand.
It was not until Judge Lewis Kaplan intervened to ask if Bankman-Fried had ever been told by Yedidia about that money, in words or in substance, that Bankman-Fried admitted he’d been told.
Trying to worm his way past tough questions by answering a slightly different question doesn’t seem to work as well for SBF in court as it did with investors and interviewers.
- The defense rests.
Sam Bankman-Fried’s lawyers are done calling witnesses in the big FTX fraud case over the cryptocurrency exchange’s collapse last year. The lawyers are likely preparing to make their closing arguments, and Elizabeth Lopatto will have more reports from the courtroom later today, following last night’s story on all the things SBF conveniently doesn’t remember.
Sam Bankman-Fried doesn’t recall
Elizabeth Lopatto
