Casey Wagner

In a major setback for its regulatory future, the crypto industry has lost what likely was its biggest and most-connected cheerleader in Washington.&nbsp;



FTX CEO Sam Bankman-Fried, who <a href="https://twitter.com/SBF_FTX/status/1491428843760263171?s=20&amp;t=G_OZUC2g2G95lG4SgYexcA" target="_blank" rel="noreferrer noopener">charmed the internet</a> with his nescience when it comes to formal business attire during his congressional appearances, has prided himself on being the industry’s leading voice on Capitol Hill for some time. The tables turned on Tuesday, though, when FTX rival crypto exchange Binance said it would acquire FTX.com, subject to due diligence checks.



Distrust in the 30-year-old billionaire ballooned.



“You don’t go from being worth $32 billion one day to being acquired by your biggest competitor the next without having done something wrong,” said Nic Carter, partner at Castle Island Ventures, during a Blockworks Twitter Spaces on Tuesday.



If FTX user funds were being used to finance Alameda Research, Bankman-Fried’s trading firm, there could be legal consequences. The Binance acquisition — which is pending due diligence and finalizing terms — does not apply to Alameda, nor to FTX’s US arm, FTX.US.&nbsp;



“There’s a good chance SBF does a little time [in jail],” Martin Shkreli, former hedge fund manager and convicted felon, said during an Up Only podcast <a href="https://www.twitch.tv/uponlytv" target="_blank" rel="noreferrer noopener">livestream</a> Tuesday. 



Even without Bankman-Fried, the industry is still well-positioned in DC, according to Kristin Smith, executive director of the lobbyist firm the Blockchain Association.&nbsp;



&#8220;There are a lot of us who are going to continue doing the work that we have been doing&#8230;the industry is well-positioned to continue to have a voice in Washington and to be a productive partner in figuring out the right path forward,” Smith <a href="https://twitter.com/BlockchainAssn/status/1590106866872651776?s=20&amp;t=oaz4yMqWKk4aKaDHeEWodQ" target="_blank" rel="noreferrer noopener">tweeted</a>.



Regardless, the crash of yet another high-profile and generally well-respected name in the space is not going to set regulators’ minds at ease. Daryl Kelly, founder of NTF platform LTD.INC, told Blockworks.



“Clearly there were concerns about FTX and its viability, but this just shows that even a seemingly dominant exchange run by someone who had been considered an industry giant just a week ago… is not immune to the vagaries of what is most certainly the most volatile market in the world,” Kelly said.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“How this will play out is anyone’s guess, but I imagine regulators are looking at this situation with a lot more scrutiny,” he said.</blockquote>



There could still be a silver lining to the situation, though, Ryan Rasmussen, DeFi research analyst at Bitwise Asset Management, said.&nbsp;



“One exciting development is the shifting tides on how centralized exchanges and lenders view transparency — Binance announced plans to publish proof-of-reserves, and Kraken already does — putting their cards on the table might have a competitive advantage,” Rasmussen said.&nbsp;



“If FTX had proof of reserves, any fears of insolvency sparked by Binance could have quickly been stomped out. Instead, Binance ate their lunch.”



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How the Fall of Washington’s Favorite Crypto Billionaire Will Change Regulation

Ornella Hernandez

<div id="highlights-block_62e2817c95490" class="highlights">
 <ul>
 <li>Shkreli was part of a crypto study group with other inmates</li>
 <li>&#8220;Web3 can add some value, but if it doesn&#8217;t, then it doesn&#8217;t really matter that much to me,&#8221; Shkreli says</li>
 </ul>
 
</div>



Martin Shkreli wastes no time. Just two months out of the Federal Correctional Complex in Allentown, Pennsylvania, the former hedge fund manager is making headlines again. This time for launching Web3 pharmaceutical software platform Druglike.



Shkreli and his co-founder Jason Sommer self-funded and built Druglike in eight weeks and debuted a working demo on Monday.



Druglike is a decentralized computing network, <a href="https://www.newswire.com/news/announcing-druglike-a-web3-drug-discovery-platform-21779057" target="_blank" rel="noreferrer noopener">according</a> to a press release, which provides resources for anyone looking to start or contribute to early-stage drug discovery projects.&nbsp;



The platform’s open-source software is free to use and runs on what it says is a novel blockchain consensus mechanism <a href="https://druglike.com/Druglike_Whitepaper.pdf" target="_blank" rel="noreferrer noopener">dubbed</a> “proof-of-optimization.”



Shkreli served four years out of an initial seven-year sentence for two counts of securities fraud and one count of conspiracy to commit securities fraud.



Currently living in a halfway house in New York City, Shkreli spoke with Blockworks over the phone about his new venture into Web3 and about his time in prison.&nbsp;



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Blockworks: What have you been up to since your release in May?&nbsp;


<div class="wp-block-image">
<figure class="alignright size-full is-resized"><img loading="lazy" decoding="async" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/07/photo1658961655-2.jpeg" alt="" class="wp-image-24807" width="233" height="333" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/07/photo1658961655-2.jpeg?w=466 466w, https://blockworks-co.imgix.net/wp-content/uploads/2022/07/photo1658961655-2.jpeg?w=210 210w, https://blockworks-co.imgix.net/wp-content/uploads/2022/07/photo1658961655-2.jpeg?w=180 180w, https://blockworks-co.imgix.net/wp-content/uploads/2022/07/photo1658961655-2.jpeg?w=183 183w, https://blockworks-co.imgix.net/wp-content/uploads/2022/07/photo1658961655-2.jpeg?w=153 153w, https://blockworks-co.imgix.net/wp-content/uploads/2022/07/photo1658961655-2.jpeg?w=56 56w, https://blockworks-co.imgix.net/wp-content/uploads/2022/07/photo1658961655-2.jpeg?w=35 35w" sizes="(max-width: 233px) 100vw, 233px" /><figcaption>Martin Shkreli</figcaption></figure></div>


Shkreli: I went to prison and had to close my software company [Godel Systems] down. So now that I&#8217;m back, one of the guys from there named Jason is my co-founder at Druglike. One of the [products] was this chemistry platform and a type of simulation platform. We have re-released that simulation platform under the name Druglike and we&#8217;re excited. The support from the community has just been wild. I mean, every VC in the community has called me in the last week or two, so I&#8217;m really, really happy.



Blockworks: Why was blockchain technology and a token needed to develop Druglike?



Shkreli: I don’t think it is needed. Our job is to make great software for chemists. That&#8217;s our only goal. At the end of the day, as a software company, what matters is that we make chemists happy, more productive, and that they can do things they couldn&#8217;t do before. And if this Web3 sphere of technologies is involved, great. If it&#8217;s not involved, that&#8217;s fine too. The only thing that we need to do is focus on the customer. I do think Web3 can add some value, but if it doesn&#8217;t, then it doesn&#8217;t really matter that much to me.



I think a lot of people feel that Web3 has sort of struggled to come up with real-world use cases other than tokens, token exchanges and collateralization. Of course, I believe in bitcoin and ether, but I think that people are trying to find software that can actually do something real.



Blockworks: What are some of the barriers to early-stage drug discovery that Druglike aims to tackle?&nbsp;



Shkreli: I think the biggest issue is that our competitors&#8217; software is really, really expensive, and our software is free. Basically, there are two or three companies that make real software. And what&#8217;s unfortunate is that I was the user of the software in my pharmaceutical life, which at the moment is over due to a judge&#8217;s decision, but in my past life I bought this kind of software. One, it didn&#8217;t work half the time — and two, it was so, so expensive that I could only afford one or two licenses.&nbsp;



The software in essence just calculates the energy of some molecules. It&#8217;s not something that is novel. People have known how to do this since the seventies. But computer power has increased so much.



Right now rival products are not on the web. You can&#8217;t just go to a Google of chemistry.&nbsp;



Blockworks: Are there certain Web3 projects or communities that you particularly like? I noticed your @zkEnrique7 Twitter profile has a Milady PFP.



Shkreli: It&#8217;s like a schizophrenic NFT. And I kind of like the irreverence and craziness of it. I think a lot of the other NFTs are trying to be polished, like interesting art or have a different stylistic ethos. I like the idea of having a subversive NFT that is sort of intentionally bad and intentionally kind of crazy. NFTs are fun, you know, for sure, but I, I don&#8217;t think they&#8217;re that serious.



In terms of serious crypto, I certainly think the zero-knowledge [ZK] world is going to be very important. Hence, the zkEnrique Twitter handle.



Blockworks: You created a whole new persona on Twitter… you’re a Reggaeton artist now?



Shkreli: Yeah, Twitter was always on my butt so I had to use a fake name. A lot of my friends in prison were Latino and we listened to a lot of music in Spanish. And I learned a little tiny bit of Spanish and I just had a lot of fun with those guys. They&#8217;re gonna be lifelong friends, and we all like crypto. One of the guys even had a Bored Ape.



Blockworks: What would you say to your critics?



Shkreli: It&#8217;s funny that people are like, oh, he’s becoming a crypto bro. I&#8217;m really a software entrepreneur that&#8217;s going to use a couple of Web3 technologies. That doesn&#8217;t mean that my whole life is now going to ride on and fall on some token. I want to grow its value, but it&#8217;s still a speculative piece of a larger sort of plan and play in software.



There are some people, as I&#8217;ve launched this thing, that have said — oh no, I hate this guy. He&#8217;s gonna rug pull. He&#8217;s a scammer — or something like that. And it&#8217;s frustrating. It’s the furthest thing from the truth. I certainly don&#8217;t need to hurt my reputation any more than I have in the past. So I&#8217;m trying to fix my reputation.



And the whole point of crypto is like, you&#8217;re anonymous, you&#8217;re private. You not only get a second chance, but you&#8217;re not even judged, right? And like that&#8217;s supposed to be the whole ethos of crypto, that nobody can be banned or censored or canceled.



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Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



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