My colleague, the intrepid reporter/editor Nik De recently wrote a column about how amateurish the crypto industry seems as details come to light from Sam Bankman-Fried’s ongoing criminal trial. To some extent you can almost, almost forgive the crooked dealings at SBF’s twinned exchange and trading shop businesses. After all, FTX and Alameda Research were managed by a close-knit crop of longtime friends of SBF, who all had limited experience in finance and who were guided, seemingly, by the genuine utilitarian desire to make the world a better place.
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Last week, during Alameda CEO Caroline Ellison’s multi-day testimony, she admitted guilt to sending Alameda’s business partners cooked books and running a longhaul scheme to defraud FTX investors and customers — including deceiving CoinDesk’s sister company Genesis, the lending subsidiary of Digital Currency Group. I’m not going to bite my tongue just because we share a parent organization. In Ellison’s testimony, Genesis — nominally a victim of SBF’s scheme — is an unsympathetic participant.
See also: Could Sam Bankman-Fried’s Saga Happen Without Crypto? | Opinion
New York Attorney General Leticia James today filed lawsuits against Genesis and DCG, as well as their principal managers, ex-CEO of Genesis Michael Moro and DCG founder and Chief Executive Barry Silbert, accusing the firms of lying to customers, each other and the general public. It’s a complicated case involving another crypto exchange Gemini, century-old securities law and Gemini’s retail-focused crypto lending platform called “Earn.”
What’s painful about this particular lawsuit, apart from the familiar connection, is that this was supposed to be the big leagues of crypto. There was real money on the line (Earn customers are estimated to have lost upwards of $1 billion) and well-established firms involved. Before a unit of Genesis declared bankruptcy this year, the firm’s employees were widely considered to be “the adults in the room,” the people who knew business best.
At its height, DCG was compared to Standard Oil, a firm that grew oligarchically big. Only it turns out The…
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