Daily Digest - 11 January 2023

Headlines

▌Members of the British House of Lords call for stronger encryption supervision

FSMB has given more powers to British regulators (such as the Financial Conduct Authority) to supervise encrypted assets. The bill also regulates stablecoins used for payments and limits the promotion of cryptocurrencies to UK citizens. The second reading on Tuesday gave Lords lawmakers a chance to express concerns about the bill and the draft amendments. Alan Smith, a member of the House of Lords, said that "the recent collapse of FTX demonstrates the volatility of the market and the vulnerability to fraud." He compared cryptocurrencies to online gambling. Still others pointed out that cryptocurrencies will require a whole new approach to regulation. Jonathan Hill, MP for the House of Lords, said, "The continued development of digital assets represents not only a financial revolution, but a technological and conceptual revolution that cannot simply be fitted into existing regulatory categories and approaches."

Policies

▌Thai Securities and Exchange Commission is investigating the income plan of encryption exchange Zipmex

According to a document obtained by The Block, the Thai Securities and Exchange Commission is investigating the earnings plan of the troubled cryptocurrency exchange Zipmex, and regulators have asked Zipmex Company Limited, a subsidiary of Zipmex in Thailand, to file a complaint against the company named "ZipUp/ ZipUp+". A clear description of how the program works. The document states that Zipmex may have violated state regulations by hiring Babel Finance to manage customers’ digital assets in the benefit plan, which offered the benefit plan without approval. In the document, the regulator cited Article 26 of the emergency decree, which stipulates that under Thailand’s emergency decree on digital asset business, anyone who manages funds related to digital assets needs to be licensed by the country’s Ministry of Finance. The range of penalties stipulated in the decree includes fines jail. According to previous news, due to its exposure to Babel Finance and Celsius, Zipmex stopped customer withdrawals and frozen customer funds in July last year. Zipmex estimates its total exposure to Babel and Celsius to be $53 million.

Cryptocurrency

▌Zhu Su: The class action lawsuit against Terra and Do Kwon has been voluntarily withdrawn

Zhu Su, co-founder of Three Arrows Capital (3AC), issued a document stating that the class action against Terraform Labs, Luna Foundation Guard (LFG), Do Kwon and their affiliates has been voluntarily withdrawn. Lead plaintiff Matthew Albright filed a notice with the U.S. District Court for the Southern District. According to the notice, the case was voluntarily dismissed without prejudice to the interests of the defendant. In August, victims of the Terra incident filed a class action lawsuit accusing the defendants of falsely promoting the UST algorithmic stablecoin, Terra (LUNA) and other related Terra tokens. It should be noted that two other class action lawsuits against Terraform Labs and Do Kwon, filed by law firms Bragar Eagel & Squire, P.C. and Scott+Scott, are still ongoing.

▌Gemini terminates its crypto income product, requires Genesis to return all outstanding assets

The cryptocurrency exchange Gemini said in an email on Tuesday that it had terminated the master loan agreement (MLA) between its customers and Genesis. Genesis is required to return all outstanding assets in the program. Existing redemption requests remain unaffected and remain pending fulfillment by Genesis." On Tuesday, Gemini founder Winklevoss wrote another open letter calling for the removal of DCG CEO Barry Silbert and accusing DCG and Genesis of accounting fraud.

▌DCG CEO Letter to Shareholders: Borrowing $1.1 Billion from Genesis, Promissory Notes Due in 2032

DCG CEO Barry Silbert disclosed in a recent letter to shareholders the debt to subsidiaries: DCG and Genesis have a $1.1 billion promissory note due in 2032, and DCG still owes subsidiaries 4.475 billion in cash, which is borrowed at an interest rate of 10% to 12% from January 2022 to May 2022, plus 4,550 bitcoins (worth approximately $78 million). Silbert said the loans were made on an arm's length basis and priced at prevailing market rates. As for DCG's role in Genesis's attempted restructuring, Silbert said: "Due to the outstanding loans and promissory notes owed by DCG to Genesis, DCG executives (including members of the Genesis board of directors) do not have any decision-making power in this matter." Founder Cameron Winklevoss has publicly called on the DCG board to oust CEO Silbert.

▌Many U.S. senators questioned the impartiality of law firms in the FTX bankruptcy case

Senators Elizabeth Warren, Cynthia Lummis, Thom Tillis, and John Hickenlooper wrote to Judge John Dorsey of the Delaware Bankruptcy Court, calling for the appointment of an "impartial examiner" to participate in FTX's bankruptcy proceedings, and criticized Sullivan & Cromwell lawyers. The firm advised FTX for years and still brought it out of business. "Because legal advisors are often at the center of major financial scandals, they are concerned with the fairness and manner in which Sullivan & Cromwell conducted its investigation into FTX given their role in drafting financial agreements, risk management compliance practices, and corporate controls," the lawmakers said in the letter. Sullivan & Cromwell represented FTX in its bankruptcy proceedings. According to filings from July to November 2021, the law firm received $8.5 million in compensation from FTX for its non-bankruptcy work, according to Bloomberg Law.