SBF’s FTX saga put to bed as founder faces sentencing

👨‍⚖️ SBF’s courtroom sequel: Plus, Coinbase’s legal loss was DeFi’s gain

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FTX co-founder Sam Bankman-Fried | Getty modified by Blockworks

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Back in court

Crypto’s former golden boy will be sentenced this morning in Manhattan. 

FTX founder Sam Bankman-Fried faces a maximum sentence of 110 years for seven counts of fraud and conspiracy. In memos submitted to the court earlier this month, the government recommended the judge sentence Bankman-Fried to between 40 and 50 years behind bars. The defense team asked for a mere 6.5. 

Prosecutors say Bankman-Fried orchestrated a “historic fraud.” His defense team, which is now led by Marc Mukasey, argued he’s a philanthropic vegan who drove a Toyota. Even his psychiatrist wrote to presiding judge Lewis Kaplan, adding that the convicted fraudster “wore ragged t-shirts.” 

Victims and fans of Bankman-Fried were submitting letters to the court up until last night, and now it’s all in Kaplan’s hands. The hearing kicks off at 9:30 am ET and should only take a couple hours, but these attorneys are not known for being short-winded. 

Read more: FTX began to unravel one year ago today: A timeline

It’s a busy day in the Southern District of New York!

A few floors below SBF’s sentencing hearing, in the same courthouse, the US Securities and Exchange Commission’s trial against Terraform Labs and founder Do Kwon will continue today after an attempt from the defense to toss the whole thing on account of a mistrial was denied yesterday. 

Kwon is of course still in custody in Montenegro, and the defense team asked presiding Judge Jed Rakoff to clarify to the jury that Kwon’s situation is out of his hands. 

Rakoff agreed, although he added that there certainly is “evidence” that Kwon’s delayed extradition is thanks to his own doing. 

— Casey Wagner

Data Center

  • Ethereum turned inflationary again very briefly earlier this week but has since returned to net burning supply — currently $6.9 billion over the next year (30-day annualized).
  • Polymarket shows 34% chance that SBF will get between 20-30 years in prison and 31% chance to receive 30-40 years.
  • Ethereum Blob transaction count is at an all-time high after the launch of blob-native inscriptions. The mainnet has since been skipping more blocks.
  • The major indices are off slightly to start Thursday as investors braced themselves for economic data including weekly initial jobless claims and pending home sales.
  • Ark 21Share’s bitcoin ETF saw a record high day of inflows Wednesday, but Fidelity notched a record low day of inflows, $200 million and $1.5 million, respectively according to BitMEX data

Crypto is perfect when it’s entirely tangible or totally useless

The promise of this market cycle is caught between the always ephemeral memecoins and the very physical DePIN — Decentralized Personal Information Networks — projects. 

Both ends of the spectrum are finding legitimacy. The metaverse, meanwhile, feels like a relic of a cycle long gone.

Memecoins double as a never ending web of global lotteries, it’s been said. But they’re fundamentally dumb, and, ironically, that’s completely the point: Memecoins still better embody the velocity of crypto culture.

Read from our oped section: Slerf investor or not, no one deserves to lose money in crypto

Reckon Solana will capture markets and mindshare? Then native dog coins WIF and BONK would hypothetically offer amplified exposure to SOL, while granting access to the network’s DeFi markets (and other memecoins). 

Memecoin mania then stress-tests those protocols, kicking the tires on throughput, fees and overall efficiency.

Digital concerts and NFT galleries in Decentraland and The Sandbox are fun and quirky but there’s little room for the kind of camaraderie that comes with watching numbers go up and down with all the other holders on social media, Telegram and Discord. 

More tech-focused crypto fans have an increasingly established hobby in DePIN. 

In the same way that running full Bitcoin, Ethereum or Solana nodes demands physical hardware (mostly server-grade computers and robust internet connection), folks eager to profit from revenue-generating token economies can maintain devices for ad-hoc networks like mobile provider Helium and file storage protocol Filecoin.

Both projects are enjoying growth while metaverse land prices have found it difficult to maintain. Helium’s data credit burn rate — money spent by actual users — shot up at the start of the year and has stayed consistent. User counts are growing and they’re paying thousands of dollars per day to use Helium right now, whereas in June 2022 they only spent that much over a whole month.

Filecoin is otherwise currently storing 1.891 exbibytes of data, up nearly 300% from this time last year and 25% over the past six months. Overall protocol revenue is now at its highest point since last October but still a ways below peaks in 2022 and 2023.

For now, all hope for the metaverse seems to be riding on Yuga Labs’ BAYC virtual world, Otherside, which still hasn’t launched an open beta (only a series of playtests). 

Telling, however, is that BAYC floor prices have charted the opposite trajectory to memecoins like BONK and WIF — now at their lowest point since August 2021 in both ETH and dollar terms.

— David Canellis

DeFi scores a Coinbase court win

Coinbase — as anticipated — didn’t win its attempt to dismiss the SEC’s lawsuit on Thursday.

Read more: Court largely rules against Coinbase’s dismissal efforts in SEC case

The 84-page document was rife with interesting points. At one point, Judge Katherine Polk Failla said that “a crypto asset is necessarily intermingled with its digital network — a network without which no token can exist.” She said that it’s very different from, say, Beanie Babies. 

Scott Johnsson, general partner at Van Buren Capital, pointed out that her logic has some sticking points. A digital network is very broad phrasing from the judge, and there are networks outside of crypto that have offerings that can’t be used outside of that network.

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Specifically, Johnsson named the Pokemon Company, which creates and offers cards on its network. He posed the question: If someone collects a card online, then it’s a security? But a physical card — which could theoretically be bought for the same amount —- isn’t?

Then there’s the wallet offering.

Judge Failla ended further arguments on the topic by siding with Coinbase, scoring a win for DeFi. CEO Brian Armstrong was quick to say that the decision “ensures the onchain ecosystem will continue to innovate and create economic freedom around the world.”

Her ruling on this end will protect self-custody wallets. The SEC’s claims don’t prove “that Coinbase engaged in the business of effecting transactions in securities for the account of others’ through its Wallet application.”

While the court sided with the SEC over a large portion of the claims, this isn’t a total loss for Coinbase. In fact, it may be too early to call it a loss at all, since the two will now engage in discovery and Coinbase can further address the court’s concerns around staking and securities

But this doesn’t mean it won’t take some time, similarly to Ripple

— Katherine Ross

The Works

  • Former US Congressman Madison Cawthorn must pay roughly $14,000 after an ethics panel investigated him over cryptocurrency activities while in office, People reports
  • Remember QuadrigaCX? Investigators in Canada continue to probe the collapsed crypto exchange, seeking answers from one of its co-founders about cash and valuable assets he holds, Bloomberg reports
  • Elsewhere in legal land, a New York judge tossed a lawsuit aimed at a video streaming startup over allegations it lied about transforming into a blockchain-based, decentralized platform. 
  • Newly-designated crypto hype man Larry Fink is still bullish on the prospects of an ether ETF, even if the underlying digital asset were to be declared a security by US regulators. 
  • New York Mag has a new profile on DCG CEO Barry Silbert, declaring that the “crypto world has a new villain.” 

The Morning Riff

Call it the arm touch heard ‘round the world.

The NEAR Foundation highlighted this week how, during a recent conference appearance, NVIDIA founder Jensen Huang reached over and touched protocol co-founder Illia Polosukhin on the arm. 

The Foundation’s just-a-tad cheeky post made the rounds, eliciting one really good meme and more than a few eyerolls about attention-seeking.

Personally, I think the negative response is overblown. Crypto’s success has long been viewed through the lens of endorsement-via-proximity — looking at you, BlackRock. Maybe Huang’s just a super-friendly guy. 

— Michael McSweeney


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