To make cheap EVs work, automakers are replacing decades of know-how with a move from Tesla's playbook

Alexa St. John
Thu, December 15, 2022 

Automakers might need to copy Tesla's playbook for battery sourcing. Here, a battery is installed in the Hummer EV.

Mandel Ngan/Getty Images

Auto companies need EV battery supply more than ever, but the costs are adding up.

Prices and a push to use local materials have carmakers investing in in-house battery supply.

This move copies what Tesla has long been doing for years.

With electric car battery costs on the rise, auto companies are doing everything they can to make their EV offerings more affordable for the masses in the coming years.

Making that happen may require forgetting much of what they've learned about supply chains over a century, and replacing it with a few pages from Tesla's playbook.

Automakers have been trying to evade today's EV woes by exploring different kinds of batteries to slash their dependence on the in-demand materials found in traditional lithium-ion setups. They've also been ramping up battery recycling efforts and working to return lithium, nickel, cobalt and more into the supply chain.

These solutions come with challenges in terms of timing and expense, at least in the near term. That means car companies are seeking an alternative and racing to secure their battery supply in the US.

That means making investments in battery material sourcing, battery production, and more, to reduce the global supply disruptions the industry saw from the pandemic.

"Almost all the major companies are investing in that for that very reason: to vertically integrate more and get more control of their supply chain," said Peter Maithel, auto industry principal analyst at Infor.

Volkswagen is building a battery cell factory at its Salzgitter site for its planned large-scale production of the Group's own battery cells.

Julian Stratenschulte/picture alliance via Getty Images

What's the rush?

In the past, car companies have expanded their supply chains across the globe, relying on slews of suppliers for each component of a car. Some of their key parts might come from the US, while others might come from Europe or Asia.

Historically, the breadth of those supply chains has reduced potential bottlenecks. But the pandemic — and other disruptions, like natural disasters — shed a light on just how vulnerable that can also make auto companies. If an auto parts plant across the world sees even a minor disruption, that could bring down a manufacturing line for days or weeks at a time.

The dawn of EVs, and the nuances in sourcing for these cars, brings those concerns and more to the forefront of automaker to-do lists. The US in particular has relied on foreign sources for battery supplies, components, and processing. China, meanwhile, has had a headstart in terms of sitting on the raw materials necessary to power EVs and controlling production of much of the world's battery cells, packs, and more.

But whether it's an unforeseen disruption like COVID-19 or a geopolitical issue, that leaves companies pretty vulnerable — and has encouraged them to bring manufacturing closer to home. There's been a general push to get away from that world-wide supply chain model anyway, driven by this summer's climate law.

"We've just seen an unprecedented amount of announcements, joint development agreements, early supply contracts from the automakers with battery materials providers, with battery manufacturers," said Matt Sculnick, executive director of Nomura GreenTech's advanced transportation team, "in a collaborative way that I don't think we've really seen."

Rivian manufactures its EVs in Illinois. Rivian

Good news for EV adopters — eventually

It's called vertical integration — and it's something Tesla has long been known for.

"Tesla is always the groundbreaker here, going directly to the source, going directly to the mines and negotiating supply contracts with the mines," said Alvarez & Marsal managing director Tony Lynch.

It's given Tesla an advantage in terms of having visibility into production, while GM and Ford and others scramble to get in on US mining deals and manufacturing.

It's complicated and time-consuming, but may ultimately be the best way car companies can get closer to lowering the cost of new EVs. Those sat at about $65,041 in November, according to Kelley Blue Book — when a new gas-powered car averaged $48,681 that same period.

More supply in general, but especially in the US, combined with more EV volumes, will drive that down.

Legacy Automakers Keep Taking Pages From Tesla's Playbook Despite CEO Controversy

Upwallstreet
Thu, December 15, 2022


According to BloombergNEF, battery prices rose for the first time in a decade. However, BloombergNEF experts don’t expect the rising costs for battery ingredients like lithium, cobalt, and nickel to impact vehicle prices anytime soon. Moreover, they expect it to be a temporary bump as BNEF predicts prices will drop in 2024, as more lithium production comes online.

Still, it's not good news for both legacy automakers as well as EV start-ups that desperately need profits from EVs to come as soon as possible to offset intense capital costs.

With rising costs and global pressures, automakers are trying to localize production and secure an in-house battery supply. Therefore, automakers seem to be taking another page from Tesla’s playbook despite the EV pioneer not doing so well in face of its share price dropping 61 percent since the beginning of the year, underperforming Ford and GM.


Forgetting everything they know

Automakers have been trying to evade the electric trend by exploring different kinds of batteries, ramping up battery recycling efforts and working to return lithium, nickel and cobalt into the supply chain. But, the existing knowledge does not help much in this equation as a new electric world comes with a new set of rules that is forcing automakers to vertically integrate and get more control of their supply chain.

Global supply chain is now a weakness

Historically, a global supply chain with a variety of players has reduced the risk pf potential bottlenecks. But natural disasters and most recently, the COVID-19 pandemic, revealed that such constitution makes automakers extremely vulnerable as even minor disruptions ended up halting the manufacturing line for days or even weeks.

Bringing manufacturing closer to home

This year, we’ve witnessed an unprecedented amount of joint development agreements, early supply contracts and similar announcements. These kind of agreements are always complex and significant time is needed for them to bear fruits but they seem to be the best way to make EVs more affordable.

Even the legendary automakers cannot pull it off alone. GM made a multimillion investment into Australia’s Controlled Thermal Resources (CTR) to extract lithium from California. Back in July, Ford Motor revealed it will buy lithium from Ioneer Ltd's (INR.AX) Rhyolite Ridge mining project in Nevada.

Worksport

Worksport Ltd. (NASDAQ: WKSP) is a company commited to changing the rules of the game both in the energy and automotive industry. With solar powered tonneau covers among its many intellectual properties, its subsidiary Terravis Energy Inc is developing a Non-Parasitic Electric Vehicle (NPEVTM) charging platform. Moreover, to minimize geopolitical risks that are very much in the air these days, the company added a manufacturing facility in the U.S. The 222,000-square-foot facility is expected to be up and running at full capacity soon.

Mercedes Benz

Automakers are also investing heavily into battery development in an effort to reduce their dependence on lithium and other highly prices and demanded battery ingredients.

On Wednesday, Mercedes-Benz unveiled its over $1.06 billion plan to adapt its entire global production network for electric powertrain systems from 2024.

With plants in Germany, Beijing and Romania, the premium automaker has set up its lines to produce both traditional combustion engines and EVs, but assembling batteries and motors on the same line is a more challenging task. The automaker stated that many of its component-making plants will continue making parts for internal combustion cars, as long as there is demand. Therefore, the automaker is striving for all-electric sales by the end of the decade but where the market conditions allow for it.

Tesla’s flamboyant CEO is feared to be distracted

Although no one can argue that Tesla is the company who started all this EV frenzy, concerns are in the air as its CEO, Elon Musk, has sold another round of stock valued at $3.6 billion. What is worrying is that Musk stated in April that there would be “no further TSLA sales” to support his acquisition of Twitter acquisition. Since the takeover, thebillionaire has sold $23 billion of Tesla stock and is found by many to be distracted and even absent. Although Musk tried to address concerns on Tuesday, stating that he will make sure that Tesla shareholders benefit from Twitter long-term, this proclamation was overshadowed by the controversy surrounding the management of the never-boring social network. Tesla did an extraordinary job but as we all know too well, future is promised to no one, and therefore, taking pages from its book in this ever changing climate is not necessarily a good idea.

See more from Benzinga

Semiconductors, The Fourth Industrial Revolution and the End of Globalization

Getting EVs To Go Further Does Not Have To Be Entirely About Changing Battery Technology

Elon Musk's former right-hand man is taking the next big step in his plan to make EVs cheaper by recycling old batteries

Alexa St. John
Wed, December 14, 2022 

Redwood Materials employees taking a battery module apart.

Redwood Materials

The EV battery recycling giant just announced a new plant in South Carolina.

The plant will help carmakers get the materials they need to make EV batteries.

The news is also critical as car companies race to respond to this summer's climate law.

Electric vehicle battery recycling giant Redwood Materials is spending $3.5 billion on a new factory, and its location near the heart of the American "battery belt" is crucial to auto companies for a few reasons.

Run by Elon Musk's former right-hand man at Tesla, JB Straubel, Redwood recycles and refines the many precious materials — like lithium, nickel, and cobalt — found in used lithium-ion batteries from electric cars and consumer electronics, then sends them back into the supply chain.


The company's new plant, its second, will sit near Charleston, South Carolina. Redwood says it will break ground in the first quarter of 2023, have it up-and-running by the end of the year, and soon have it supply 1 million EVs annually.

While Redwood's flagship plant is near its Carson City, Nevada headquarters, this one's in the "battery belt": A stretch across the country, particularly in the Southeast, where car companies, battery makers, and more are setting up new EV development shops.

Redwood recycles and refines the many precious materials — like lithium, nickel, and cobalt — found in used lithium-ion batteries from electric cars and consumer electronics

Redwood Materials

Ford established its BlueOval City campus in Tennessee and two battery plants in Kentucky. GM, through its Ultium Cells joint venture with LG Energy Solution, is also investing in battery-making in Tennessee. Panasonic is building a new battery factory in Kansas. Hyundai is investing in EVs and battery production in Georgia.

Redwood's ramp-up is also crucial as the auto industry races to comply with this summer's massive climate law, which requires that car companies source and build certain percentages of their EVs domestically if they want their vehicles to qualify for tax credits.

But even without federal encouragement, the industry has worked to bring the various parts of the all-new EV battery supply chain to the US in order to drive down materials costs, and cut the sticker price for buyers.

With more and more demand for the materials to make these things, taking advantage of recycling can ease a supply crunch and eventually drive down costs. The more materials the industry can put back into the supply chain, the better.

Redwood takes the work a step further than many recyclers by next, remanufacturing the materials.

"The goal is to make the most sustainable battery materials," said Jackson Switzer, Redwood senior director of business development and one of Insider's 100 People Transforming Business. "To make the most sustainable battery materials, we need to get as much recycled nickel, cobalt, and lithium as we can into the front end of the system. You've got to scale the front end of the system, which is effectively, recycling."

CRIMINAL CRYPTO CAPITALI$M

Binance CEO Says There's No Way They'll End Up Like FTX in Leaked Letter to Staff

Kyle Barr
Thu, December 15, 2022 

Chenpeng Zhao in front of a desk with a microphone gives a thumbs up to the camera.


Changpeng Zhao has had to repeatedly reassure investors that everything is fine, and they can definitely handle billions of dollars in withdrawals from the Binance exchange.

The crypto exchange Binance, perhaps the last major crypto exchange standing after the FTX debacle, experienced a wave of withdrawals by spooked investors earlier this week to the tune of nearly $3.7 billion, according to blockchain analytics firm Nansen.

The crypto company now needs to reassure both its customers and its workers that everything will work out in the long run, despite the run on the crypto industry as a whole. In a letter to staff published by Business Insider, Binance CEO Changpeng Zhao, who often goes by CZ, wrote that even though the headlines certainly seemed dire, “we are in a strong financial position.” He later added “Binance will survive any crypto winter.”

He further claimed that the company regularly processes more than $1 billion in deposits or withdrawals day-to-day, and that they have enough in reserves to fulfill withdrawal requests. CZ had said they had seen even more withdrawals during the Terra/Luna fiasco back in May, so $3.7 billion in a week is practically nothing, right?



Of course, this wasn’t the only concern analysts had with Binance. An exchange of Binance’s touted “proof-of-reserves” has been largely criticized for how it didn’t reveal much about the exchange’s internal financial controls. On Tuesday, the exchange temporarily suspended withdrawals of the USDC stablecoin. Crypto users are very jittery right now since there have been plenty of cases this year where an exchange told users it was “temporarily” halting withdrawals before finally closing up shop, leaving users bereft of their crypto.

But Zhao reiterated his company’s earlier messaging that the exchange was simply converting its USDC to its native token BUSD “in order to retain large liquidity pools.” He added that the current processes his company uses to convert tokens is “clunky” since they have to go through a New York-based bank using actual U.S. dollars.

In a Twitter Spaces live chat Wednesday, Zhao said they had already seen the money “flowing back” and that the withdrawals was “very normal market behavior.”

“While we expect the next several months to be bumpy, we will get past this challenging period – and we’ll be stronger for having been through it,” he said in his letter to staff.

With the collapse of FTX and the end to Sam Bankman-Fried’s reign in the crypto sphere, there’s only two big exchanges left that are big enough to really matter, that being Coinbase and—still the number 1 biggest exchange by trading volume—Binance.

Binance was in the thick of things when FTX had finally reached the point of no return. Zhao had originally announced a tentative agreement to buy up Bankman-Fried’s beleaguered exchange once it became clear that FTX’s had built its castle on the loose sand of its own native FTT token. After taking a look at Binance’s internal finances, Zhao and co quickly backed out and worked to distance himself and his exchange from his erstwhile friendly rival and FTX. Bankman-Fried has since been arrested and faces federal charges in the U.S. for lying to both investors and customers about how his company allegedly abused users’ funds.

Though there’s no evidence to point to Binance making some of the same mistakes FTX did, the latest filings have revealed just how deeply Bankman-Fried’s company had been hit by the collapse of the Terra stablecoin earlier this year, according to charges filed by the Securities and Exchange Commission. It took until the exchange was underwater before folks got to take a real look under the exchange’s hood, so to speak. Without clear signs everything’s A-okay, investors still seem to trust Binance with their crypto, but for how long?

Changpeng Zhao Won't Rescue Binance by Selling out Crypto Self-Custody




Daniel Kuhn
Thu, December 15, 2022 

In the aftermath of the collapse of FTX, many are justifiably concerned about the solvency of crypto exchanges. Sam Bankman-Fried’s fraudulent bucket shop may have been an outlier – court documents filed earlier this week by U.S. authorities allege that some $8 billion in FTX customer deposits were transferred to and lost by SBF’s “hedge fund” Alameda Research.

But following a decline in crypto prices, a drawdown of debt between highly interconnected firms and several bankruptcy filings that have locked up billions worth of assets in legal proceedings, it’s reasonable to wonder if there is as much money held on centralized, largely unaudited crypto exchanges as there should be.

This article is excerpted from The Node, CoinDesk's daily roundup of the most pivotal stories in blockchain and crypto news. You can subscribe to get the full newsletter here.

This is part of the reason why users are taking possession of their own coins in recent weeks. Binance, the industry leading centralized crypto exchange, in particular has seen a significant drawdown in funds. Some of its largest clients, such as Jump Trading, have taken coins out, and the exchange moved to temporarily halt USDC withdrawals amid the surge (potentially to execute a token swap to its own stablecoin).

See also: And Then There Was One – Changpeng Zhao – CoinDesk's Most Influential 2022

Earlier this week, Binance CEO Changpeng "CZ" Zhao referred to this trend as “business as usual.” He also reportedly told employees to brace for a few “bumpy” months ahead. The exchange had published a so-called “proof-of-reserves” report conducted by auditing firm Mazars showing, depending on which figures you include, it was either over- or under-collateralized in its bitcoin holdings.

Not to draw an unnecessary comparison to FTX, but CZ’s public comments this week are reminiscent of Bankman-Fried’s attempts to quell fears in early November amid a “run” on the exchange before it filed for bankruptcy protection. On Nov. 7, SBF tweeted that client funds were safe and backed by deposits – a message he deleted after it became clear FTX was deeply in the red. It’s a comparison CZ himself is drawing.

“With Sam Bankman-Fried’s arrest, I think people generalize. So if you get hurt by one bank, you're gonna think all the other banks are bad. If one politician is corrupt, you think all politicians are corrupt,” he wrote. “But the fact is that because one bank is bad doesn't mean all the other banks are bad. And just because one politician is bad doesn't mean all the other politicians are bad.”

This is all well and good – except that crypto exchanges are not, in fact, banks. As my colleague David Z. Morris notes, the term “run on the bank” has been misapplied when talking about recent withdrawals on crypto exchanges. The phenomenon is similar: withdrawals beget withdrawals, fears over insolvency can compound and become self-fulfilling. But unlike banks, users simply have to take it as a matter of faith that exchange operators haven’t misused or lost customer funds.

Centralized crypto exchanges reintroduce an element of trust that trustless protocols like Bitcoin and Ethereum remove from finance. Users take on the risks, even if rare, of hacks, frozen withdrawals and other business failures, Casa’s Nick Neuman said recently. And so, amid a period of uncertainty, Zhao’s primary responsibility is to reestablish confidence in his exchange.

Binance has certainly made moves to keep funds on its platform. On Wednesday, crypto critic Bitfinex’ed tweeted a screenshot of a Binance offering to pay 50% APR on staked USDT, seemingly to keep assets on the exchange. Later in the day, Zhao took to Twitter Spaces to criticize self-custodying crypto, alleging that “99% of people … will end up losing” their funds if they have to be responsible for their own keys.

This is no doubt a challenging time for Zhao. On Monday, Reuters reported the U.S. Department of Justice was nearing the end of a multi-year investigation into Binance – one of several ongoing probes into the firm from global law enforcement agencies. Federal prosecutors may ultimately charge CZ and other Binance executives with money-laundering violations, a risk that has accelerated withdrawals.

His comments spreading fears about self-custody are entirely unjustified. Not only is it seemingly in allegiance with U.S. Sen. Elizabeth Warren’s recent Digital Asset Anti-Money Laundering Act that would put unnecessary guardrails around so-called un-hosted wallets but also contradictory to Zhao’s comments just last month calling self-custody a “fundamental human right.”

See also: Self-Custodial Onboarding Will Be the Norm in Web3's 2023 | Crypto 2023

Rebuilding trust in Binance, stymying outflows, should not come at the expense of crypto’s principle innovation – enabling people to “be their own bank.”

FTX’s collapse was a startling turn of fate for what was once one of the most-trusted crypto companies. Bankman-Fried has gone from being the industry’s J.P. Morgan to its Bernie Madoff. It’s an event that has caused irreparable damage to crypto’s public standing. Binance, too, has an outsized role in the industry – and hopefully it is not another FTX.

But if Zhao has to make low blows to a fundamental attribute of crypto to rescue is own exchange’s reputation, then it deserves to fail. To take an old line from Zhao, “some things are better left unsaid. Recommend no more news like these, for the sake of the people, our industry (and your business)."

CRIMINAL CRYPTO CAPITALI$M TOO

Shaq — who starred in an FTX commercial in June — says he 'was just a paid spokesperson' for the exchange and doesn't believe in crypto

Matthew Loh
Thu, December 15, 2022 

Shaquille O'Neal gives a speech during an event at Doolittle Complex basketball courts in Las Vegas, Saturday, Oct. 23, 2021.

Erik Verduzco/Las Vegas Review-Journal/Getty Images

Shaquille O'Neal said he was paid to appear in an FTX ad and was never involved in the firm.


In the ad, he said he was "making crypto accessible to everyone" and that he was "all in."


O'Neal was recently named in a lawsuit accusing FTX of using celebrities to trick investors.

NBA legend Shaquille O'Neal said he doesn't believe in cryptocurrencies and was merely paid to endorse the now-imploded exchange FTX, per a Thursday report by CNBC's Make It.

"A lot of people think I'm involved, but I was just a paid spokesperson for a commercial," O'Neal told the outlet.

The former basketball star, who's now an angel investor and businessman, starred in an FTX commercial released on June 2. In the ad, O'Neal said he was excited to partner with the exchange to "make crypto accessible to everyone."



"I'm all in. Are you?" O'Neal says in the ad.

O'Neal told CNBC that his friendship with fellow NBA great Stephen Curry was one of the reasons he agreed to appear in the FTX ad. Representatives for Curry did not immediately respond to Insider's request for comment.

"People know I'm very, very honest. I have nothing to hide," O'Neal said, per CNBC. "If I was heavily involved, I would be at the forefront, saying, 'Hey.' But I was just a paid spokesperson."

When asked by the outlet if he was bullish on crypto, O'Neal said: "No."

O'Neal is one of several celebrities named in a class-action lawsuit that was filed on November 15 against FTX, its big-name endorsers, and its founder, Sam Bankman-Fried.

The complaint, filed by investor Edwin Garrison, alleges that FTX used celebrities such as O'Neal, Curry, and fashion model Gisele Bündchen to attract investors to a Ponzi scheme, per court documents seen by Insider.

The crypto world was shaken when FTX filed for bankruptcy on November 11, and as its new CEO John Ray reported a litany of gross mismanagement practices at the firm.

The SEC has charged Bankman-Fried with fraud and accused him of funneling billions of dollars of customer funds into his own crypto hedge fund.

O'Neal warmed this year to the idea of endorsing crypto

Before appearing in the FTX commercial in June, O'Neal had publicly expressed skepticism toward cryptocurrencies. He told CNBC in September 2021 that he didn't understand crypto.

"So I will probably stay away from it until I get a full understanding of what it is," he said, per the outlet.

He also told Front Office Sports in June 2021 that he was wary of crypto endorsement offers.

"I always get these companies that say: 'Hey, we'll give you $900,000 in crypto to send out a tweet.' So I have to say: 'OK, if you're going to give me a million dollars worth of crypto, then why do you need me?'" O'Neal told the outlet. "A couple of my friends got caught up in a little scam like that one time."

However, he started teasing the idea of getting involved in crypto-related content in February, musing on Twitter that he could change his handle to SHAQ.SOL — a reference to a cryptocurrency run by blockchain platform Solana.

The NBA hall of fame member did not disclose how much money he received for appearing in the June FTX commercial.

Representatives for O'Neal did not immediately respond to Insider's request for comment.

Shaq appears to not know what being a corporate spokesperson means as he distances himself from crypto


Jakub Porzycki/NurPhoto—Getty Images

Alena Botros
Thu, December 15, 2022

Basketball legend turned businessman Shaquille O’Neal is attempting to distance himself from crypto after being a paid spokesperson for failed exchange FTX and targeted with a lawsuit for it.

“A lot of people think I’m involved, but I was just a paid spokesperson for a commercial,” O’Neal told CNBC Make it this week.

In that commercial, O’Neal said he partnered with FTX to help make crypto “accessible to everyone.” It was an unexpected alliance considering that a year earlier he told CNBC that he was avoiding the crypto craze.

“I don’t understand it,” O’Neal said at the time. “So I will probably stay away from it until I get a full understanding of what it is.”

His reasoning? He was skeptical of all the stories of people making big money quickly.

“Every time somebody tells me one of those great stories, I like it,” he said. “But from my experience, it is too good to be true.”

Last month, clients of FTX withdrew billions of dollars' worth of holdings after the CEO of rival exchange Binance tweeted that Binance would sell its holding of FTX’s FTT token. Soon after, FTX filed for bankruptcy, and its CEO Sam Bankman-Fried resigned after news reports that he had allegedly co-mingled funds of FTX clients with another one of his ventures.

This week, Bankman-Fried was arrested and charged with several counts of conspiracy and fraud. With its collapse, many FTX users have been unable to withdraw their money from the platform—and it's unclear if they’ll ever get that money back.

In his interview with CNBC this week, O’Neal said his friendship with Golden State Warriors player Steph Curry is why appeared in FTX’s ad. A spokesperson for Curry declined CNBC’s request for comment.

Curry, along with several other celebrities like football star Tom Brady and his soon to be ex-wife, supermodel Gisele Bundchen, were named in the same lawsuit as O’Neal over FTX.

The lawsuit, filed in Miami by Edwin Garrison last month, seeks class action status on behalf of himself and FTX users against Bankman-Fried and FTX’s celebrity endorsers. The complaint describes FTX as a “Ponzi scheme,” and claims that its celebrity spokespeople had endorsed unregistered securities.

“People know I’m very, very honest,” O’Neal said. “I have nothing to hide. If I was heavily involved, I would be at the forefront saying, ‘Hey.’ But I was just a paid spokesperson.”

In his FTX commercial, he said he’s just an everyday guy who checks his FTX account—and that he’s “all in.” But when asked this week if he’s bullish on crypto, he just said no.
O’Neal, who is widely known as Shaq, hasn’t shared how much he was paid to be FTX’s spokesperson. But Kevin O’Leary, a regular on ABC’s Shark Tank investor show, who was also among FTX’s celebrity spokespeople, said he was paid around $15 million. O’Leary told CNBC that he put nearly $10 million in crypto, was given $1 million in FTX equity, and $4 million was taken in taxes and other fees— all of it lost when the company collapsed.

FTX's massive $256 million real-estate empire is up for grabs as Bahamian and US lawyers squabble over who should control it

Robert Davis
Thu, December 15, 2022

Cryptocurrency company FTX has had naming rights to the home of the Miami Heat since 2021. Now Miami-Dade County, which owns the arena, wants a bankruptcy judge to terminate the deal after FTX's collapse

Miami Herald / Contributor

Lawyers representing the US and the Bahamas disagree on who should control FTX's massive real estate portfolio.

FTX execs allegedly spent more than $256 million acquiring properties on the island nation.

A lawyer monitoring the case told Insider that the timing of the assets' disposal is more important than venue.

Lawyers representing the US and the Bahamas are at odds with one another over who will control the massive real estate empire of Sam Bankman-Fried, the disgraced former head of the now-bankrupt crypto exchange FTX, according to court filings reviewed by Insider.

Bankman-Fried's real estate holdings — all of which are owned by an FTX subsidiary called FTX Property Holdings, LLC — have become a central part of the bankruptcy case against the crypto exchange as an unspecified number of creditors seek to recover billions of funds from the business. The real estate holdings represent some of the most tangible assets that can be liquidated and redistributed to creditors as lawyers for FTX say that billions of the crypto exchange's assets remain unaccounted for.

According to a court filing from December 12, Bahamian lawyers asserted that Bankman-Fried spent more than $256 million to acquire 35 properties on the island. Reuters first reported in November that Bankman-Fried's purchased tens of millions of real estate in a swank luxury resort community on the island called Albany. FTX had also planned to build a new headquarters on the island, although that project was put on hold in April, according to local reports.

The same lawyers also argued in the December 12 filing that the island nation should have jurisdiction over the liquidation of FTX's real estate assets because Bahamian law does not recognize the legitimacy of a foreign bankruptcy proceeding.

"FTX Property Holdings is a Bahamian corporation that does only one thing, [which is to] own real property located in The Bahamas," the filing reads in part. "All of its known assets and creditors are located in The Bahamas. It has no connection whatsoever to the United States. Respectfully, this court is not the best forum to resolve the issues this case would present."

On the other side, FTX's new CEO, John J. Ray III, who also led the asset recovery efforts when Enron folded in 2001, argued in a hearing before the House Financial Services Committee on December 13 that the case needs to stay in the US in order to maximize the asset recovery for the more than 1,000 creditors who lost billions of dollars because of the company's alleged fraud.

"We are working around the clock to locate and secure the property of the estate, a substantial portion of which may be missing, misappropriated, or not readily traceable due to the lack of proper record keeping," Ray told the committee.

While lawyers working on the case squabble over which jurisdiction will ultimately decide the case, other bankruptcy lawyers like John Pintarelli, a partner at Pillsbury Winthrop, an international real-estate law firm headquartered in New York City, told Insider that venue may not be the most important aspect.

Presumably, Pintarelli said, regulators and judges in both countries would work to secure the biggest payout possible for the creditors who are owed money. But, that total payout could change if regulators in one country or the other wait too long to liquidate the real estate assets, Pintarelli added.

"No one wants to be sitting on 'the melting ice cube,' as we call it," Pintarelli told Insider. "If real estate values are going down, you want to sell the properties as fast as you can to recover as much as possible for the creditors."

According to market data from brokerage BE Luxury Real Estate, the median sales price of Bahamian real estate grew from about $360,000 in 2020 to more than $630,000 through the first six months of 2021.

FTX initially filed for Chapter 11 bankruptcy protections in Delaware on November 11. In the filing, the company speculated there are more than 100,000 creditors seeking restitution, but another filing from November 14 said FTX "may have more than 1 million creditors" and has liabilities of about $6 billion.

SBF’s handcuffs aren't loosening up anytime soon



Jacquelyn Melinek
Thu, December 15, 2022 

Welcome back to Chain Reaction.

If you’re reading this, I’m willing to bet you probably weren’t arrested this week and are now sitting in a Bahamian jail. But, you know who was arrested and is sitting in a Bahamian jail right now? Yep, FTX’s former CEO, Sam Bankman-Fried.

Seems like the majority of the headlines have been on SBF and FTX lately -- and for good reason. This week’s chatter was surrounded by his anticipated testimony at the U.S. House Financial Services Committee’s hearing on FTX’s collapse, which he never spoke at because he was arrested the night before.

After being denied bail, SBF is being held in the Bahamas Department of Correctional Services in the prison’s max security infirmary with five other inmates in a “dorm-style setting,” according to The Nassau Guardian. And don’t worry, Bahamas’ acting commissioner of corrections Doan Cleare said SBF is in “good spirits” and that the prison is no longer infested with rodents.

Now we can all sleep soundly tonight.

Here are some of the biggest crypto stories TechCrunch has covered this week.

SEC, CFTC and SDNY attorney’s office charge FTX’s Sam Bankman-Fried with defrauding investors

The U.S. Securities and Exchange Commission (SEC) has officially charged disgraced FTX founder Sam Bankman-Fried (aka SBF) with defrauding investors, it revealed on Tuesday morning following his arrest in the Bahamas. The SEC said in a press release that in addition to being charged with fraud regarding equity investors in FTX, he’s also being investigated regarding other securities law violations — and noted that there are ongoing investigations pending against others involved as well. The SEC isn’t the only one getting a hand on this ball, however: Both the Southern District of New York’s attorney’s office and the Commodity Futures Trading Commission (CFTC) also filed charges against SBF in “parallel actions.”

US attorney says ‘we are not done’ charging individuals for FTX collapse

Multiple U.S. government agencies held a press conference Tuesday afternoon regarding the indictment of FTX’s former CEO, Sam Bankman-Fried. When asked whether the entities will bring charges against other individuals allegedly involved in the FTX collapse, Damian Williams, the U.S. attorney for the Southern District of New York, said during the event, “I can only say this: Clearly, we are not done.”

FTX’s new CEO, John Ray, details crypto exchange’s downfall in US House testimony (TC+)

As mentioned above, the U.S. House Financial Services Committee held a hearing Tuesday morning focused on FTX’s collapse. John J. Ray III, FTX’s CEO of four weeks, sat as the only witness for the hearing as SBF made an appearance in a Bahamian court for his arraignment. The four-hour hearing covered a lot of ground and left many questions unanswered, but several parts stood out from Ray’s testimony. Given that we presume you couldn’t catch the entire session live, feel free to crib off of our notes.

Sam Bankman-Fried's story keeps getting wilder and weirder as details emerge from his past and more people speak out.

Phil Rosen
Fri, December 16, 2022 

Anddddd it's Friday! Phil Rosen here, writing to you just before boarding my flight from New York to Los Angeles.

I've been keeping close tabs on FTX and its disgraced founder, Sam Bankman-Fried.

The more details that emerge, the more I feel like this is going to make a great Michael Lewis book (and movie) one day.

Today, I'm breaking down the latest on the tee-shirt-and-shorts wearing video-gamer and former billionaire.

sam bankman-fried
WASHINGTON, DC - DECEMBER 08: CEO of FTX Sam Bankman-Fried testifies during a hearing before the House Financial Services Committee at Rayburn House Office Building on Capitol Hill December 8, 2021 in Washington, DC. The committee held a hearing on "Digital Assets and the Future of Finance: Understanding the Challenges and Benefits of Financial Innovation in the United States."

Alex Wong/Getty Images


1. Bankman-Fried was meant to testify before Congress this week, but for obvious reasons (he was arrested, in case you missed that somehow), the show had to go on without him.

A deep roster of crypto voices sounded off in this week's testimony in Washington DC, as the Senate Banking Committee asked to hear more about the debacle.

We heard from Kevin O'Leary again, who said the market simply needs more (any?) regulation in order to thrive and move on from this fiasco. O'Leary has avoided laying any blame at SBF's feet, and also testified he believes rival exchange Binance intentionally put FTX out of business.

It'd be impressive if you guessed who showed up next — none other than early 2000s heartthrob-turned-crypto critic, Ben McKenzie. The star of "The O.C." has been among the loudest skeptics, and he had a lot to say about the industry, none of it good.

Among the highlights from his testimony include his assertion that the crypto market is "the largest Ponzi scheme in history."

Meanwhile, Congressman Ritchie Torres called Bankman-Fried a "pathological liar" during an interview with CoinDesk. He likened FTX to a college fraternity, with haphazard, reckless bookkeeping.

That aligns with the characterization by new FTX CEO, John Ray III: "I've just never seen an utter lack of record keeping."

Recall that Ray had been brought in to clean up bankrupt energy firm Enron in the early 2000s. He knows a thing or two about accounting scandals.

In his testimony to the House Financial Services Committee on Tuesday, Ray said it could take months to secure all the company's assets, and that his team has secured over $1 billion so far.

According to Ray, under Bankman-Fried's leadership the global conglomerate used QuickBooks to do its accounting.

However, one of the most intriguing anecdotes from this week, as Insider's Morgan Chittum writes, was something from Bankman-Fried's past, long before the fraud allegations.

Long before Bankman-Fried was in the crosshairs of regulators, he attended Crystal Springs Uplands, a top Silicon Valley prep school, and his senior class prank reportedly included making $100 bills with his face on them.

The kicker? The bills were called "Bankmans," Puck reported earlier this week.

His old school had a $56,620 annual tuition, its website shows, and there Bankman-Fried had a reputation as one of the top math students, and also led the "Puzzle Hunt Club," which Puck described as a "particularly nerdy group at an already nerdy high school."

CRIMINAL CRYPTO CAPITALI$M FALLOUT
FTX collapse shakes up Chicago crypto market, where its US trading platform was going to be the next big thing


Robert Channick, Chicago Tribune
Mon, December 12, 2022

When the FTX.US headquarters opened in a gleaming new Fulton Market tower in May, Mayor Lori Lightfoot and her retinue stopped by to officially welcome the cryptocurrency exchange to Chicago, a city positioning itself as a financial center for the booming digital assets.

It was supposed to be the start of something big.

The Chicago office was christened as the inaugural home to the U.S. trading platform for Bahamas-based FTX, a startup that had rocketed into a $32 billion global cryptocurrency exchange and the poster child for Bitcoin bravado. Six months later, FTX imploded in a massive bankruptcy and Chicago’s would-be crypto flagship was just another empty office.

“There’s no way to spin that this was good for the industry,” said Ben Weiss, 27, CEO of CoinFlip, a Chicago-based Bitcoin ATM operator and one of the city’s leading crypto companies.

The unfolding story of FTX’s precipitous downfall and alleged misuse of customer funds has shaken the nascent cryptocurrency industry to its digital asset core. The Chicago chapter is more about what didn’t happen.

FTX was launched in 2019 by Sam Bankman-Fried, a mop-haired millennial who parlayed an MIT degree and a brief run on Wall Street into one of the largest global cryptocurrency exchanges. Based offshore, FTX was able to bypass U.S. futures restrictions and offer a range of leveraged derivatives, generating huge trading volume amid volatile crypto price swings.

Bankman-Fried also marketed FTX into the mainstream with stadium naming rights deals, advertising campaigns and a high-profile Washington, D.C., lobbying effort. FTX made a splash with a Super Bowl TV commercial in February urging viewers: Don’t be like comedian Larry David, who dismissed crypto as the next big thing.

“I don’t think so,” said David, ostensibly playing the fool.

But FTX unraveled quickly when a run on deposits and cratering crypto prices left it with an $8 billion shortfall, forcing Bankman-Fried to resign and the firm to file for Chapter 11 bankruptcy Nov. 11. Investor assets were frozen and regulators are investigating whether FTX improperly used customer funds to cover losing positions at co-owned trading firm Alameda Research.

On Monday, Bahamian authorities arrested Bankman-Fried after federal prosecutors for the Southern District of New York filed criminal charges.

FTX generated $3.45 trillion in global trading volume this year, while FTX.US hit $65 billion before both exchanges came to a mandated halt in November, according to Nomics, a leading cryptocurrency index.

A U.S.-regulated exchange, FTX.US offered fewer products than the global exchange, but was the only FTX platform licensed for American investors to trade crypto. Daily trading volume on FTX.US ramped up sixfold this year, while registered users grew from 10,000 to about 1.5 million, according to a source familiar with the operation.

The U.S.-based platform was not part of the massive liquidity crunch that brought down the global FTX exchange, according to Bankman-Fried.

“To my knowledge, that’s fully solvent; that’s fully funded,” Bankman-Fried said in a Nov. 30 video interview with The New York Times’s Andrew Ross Sorkin. “I believe that withdrawals could be opened up today, and everyone could be made whole from that and none of these problems plague the U.S. platform.”

Launched in January 2021, FTX.US established Chicago as its headquarters in June of that year, setting up shop in temporary offices after Brett Harrison, a former software developer at Citadel Securities, was named inaugural president of the fledgling U.S. crypto exchange.

The permanent Chicago headquarters officially opened May 10, 2022, at 167 Green Street, a new 17-story Fulton Market office building, with Lightfoot and other Chicago officials on hand to cut the ribbon. FTX.US said it would fill out the 9,000-square-foot space on the 11th floor with 70 employees, but the larger promise was to boost Chicago’s standing as a crypto commerce center.

The company also pledged $1 million to launch a charitable initiative for Black Chicagoans in underserved neighborhoods.

The promises were broken Sept. 27, when Bankman-Fried made two surprise announcements in an email to employees: Harrison was leaving the company and FTX.US was moving from Chicago to Miami — four months after the Fulton Market grand opening.

The announcement came as a shock to about two dozen Chicago-based employees at FTX.US, whose jobs were essentially shifted to move it or lose it mode.

“I think a lot of people were blindsided at FTX, partners of FTX, people in the industry,” said Paul Hsu, 47, founder and CEO of Decasonic, a Chicago-based venture capital fund focused on blockchain innovation — the backbone of cryptocurrency technology.

Decasonic was based until recently in the same building where FTX.US was located, and Hsu spoke at the opening of the crypto exchange office in May.

Harrison, 34, who previously worked with Bankman-Fried at New York trading firm Jane Street, declined to comment.

While Bankman-Fried invited Harrison to head the U.S. trading platform, the lack of a formal management structure at FTX and a resistance to allowing the Chicago office to staff up ultimately fractured the working relationship, sources said.

Sources said Harrison’s departure from FTX.US was months in the works, with plans to start his own Chicago-based crypto firm.

When the Chicago office closed at the end of October, several employees had already moved to Miami, where the new FTX.US offices were set to open, a short hop from the parent company’s Bahamian enclave. FTX had established a high-profile presence in Miami, with its logo emblazoned on the NBA Heat’s arena through a 19-year naming-rights deal.

But a number of FTX.US employees were reluctant to take their talents to Miami, dragging their feet and exploring outside job opportunities, sources said. Within days, FTX would collapse, leaving a handful of early Chicago movers in Miami and out of a job.

“We have our portfolio companies looking through FTX.US alumni,” Hsu said. “We’ve seen some resumes come in for our job roles at Decasonic.”

The Miami move and subsequent bankruptcy also left the FTX.US charitable initiative with Equity and Transformation, a 12-month pilot program to give $500 per month to 100 formerly incarcerated Chicagoans in underserved neighborhoods, only partially funded and unable to launch this fall as planned.

Richard Wallace, founder and executive director of the nonprofit Chicago-based Equity and Transformation, did not respond to a request for comment, but the city said it is trying to find a new funding source.

“While the City currently has no role in the administration or funding of EAT’s program, with the news of FTX’s bankruptcy filing, the City is supporting EAT’s efforts to secure alternate funding for this important program so they can serve the returning residents who were selected to participate,” Kate Lefurgy, a spokeswoman for the mayor’s office, said in a statement.

With little regulation and no backing other than the faith of its fervent believers, cryptocurrency has taken investors on a wild ride during the pandemic.

Launched in 2009 by anonymous computer developers, Bitcoin operates on a decentralized peer-to-peer payment network. While there is no central bank, the encrypted digital transactions are verified by blockchain technology, a type of database that forms a permanent ledger of all transactions across the shared computer network.

The price of Bitcoin, which reached nearly $69,000 in November 2021, has fallen by 75%, hovering around $17,000 amid what industry analysts are calling a crypto winter, fomenting skepticism among some investors that digital assets have any intrinsic value.

Bitcoin remains the most valuable cryptocurrency, with a market cap of about $330 billion, according to CoinMarketCap, a price-tracking website for cryptoassets. Other major cryptocurrencies include Ethereum and Dogecoin, which was started in 2013 by a pair of software engineers as a joke, and now boasts a market cap of nearly $12 billion.

The total cryptocurrency market cap, which topped $2.8 trillion in November 2021, has fallen to about $850 billion, according to CoinMarketCap.

In 2022, World Business Chicago, the city’s economic development arm, made the fintech industry, including crypto, an area of focus. Last year, investment in Chicago’s fintech ecosystem more than doubled to nearly $4.6 billion, according to March research report issued by the agency.

Michael Fassnacht, president and CEO of World Business Chicago and the city’s chief marketing officer, who was on hand for the May ribbon-cutting at the new FTX.US offices, downplayed the role of the startup exchange in the city’s larger fintech aspirations.

“We didn’t even mention FTX in our research overview,” Fassnacht said in a statement. “We continue to believe that the broader fintech sector has a bright future in Chicagoland.”

At the state level, a bill that would create a special purpose depository trust for digital assets, providing a regulatory framework for banks and other custodial institutions to hold cryptocurrency accounts for clients, passed the House in April 2021, but stalled in the Senate last fall.

While the city has all but scrubbed FTX from its corporate memory, leading Chicago crypto players are still assessing the fallout from its demise.

The CME broke new ground when it began trading Bitcoin futures in 2017. Despite the crypto winter, the CME has seen an increased interest in trading crypto this year, with average daily volume up 17% over 2021. Some industry analysts believe the CME, one of the world’s largest futures exchanges, may see higher trading volume as investors migrate to a more established platform following the FTX implosion.

Terry Duffy, CME chairman and CEO, said the future of Bitcoin futures remains to be seen.

“Crypto markets are at a critical juncture,” Duffy said in a statement. “While we have seen several positive applications of technologies like blockchain, cryptocurrencies, as an asset class, still need to show their use case beyond just speculative tools. That said, crypto markets continue to have proponents who believe in the idea and the value of digital currencies. Exactly how these markets will continue to develop is yet to be seen.”

Bobby Zagotta, the Chicago-based CEO of Bitstamp USA, a rival cryptocurrency exchange, said FTX brought a lot of new investors into digital assets, but its collapse has set the industry back two years in terms of building trust with the investing public.

A former Kraken executive who previously helped launch Bitcoin futures trading at CME in 2017, Zagotta said more regulations are needed for the crypto industry. For Chicago, the “trading capital of the world,” Zagotta said other companies will be beneficiaries of a “smarter marketplace” in the wake of FTX’s demise.

“In the last two to three years, Chicago has really put itself on the map in terms of being an innovation hub, not just around blockchain or crypto, but around technology in general,” Zagotta said. “We’re all having to kind of reset and be very smart and deliberate about how we build our business from this very public fraud and flameout.”

Founded in 2015, CoinFlip moved into the Old Post Office last year and has about 260 Chicago-area employees. The fast-growing company has flourished during the crypto winter, and is projected to generate $150 million in revenue this year — a 67% increase — through its network of more than 4,000 Bitcoin ATMs across 49 states and Canada, which change cash into Bitcoin.

“It’s usually not bad for us when there’s uncertainty there because you might have more people cashing out, you might have more people going in,” said Weiss, a Deerfield native. “Volatility typically leads to more transactions.”

The collapse at FTX may also benefit the CoinFlip business model, which doesn’t hold customer funds. Weiss advocates “self-custody” of cryptocurrencies in a digital wallet, although there are security risks associated with that as well.

Gina Pieters, an economics lecturer at the University of Chicago and an expert on crypto assets, visited the FTX.US office and met with employees during its brief run in Chicago.

Most people outside the Chicago crypto community, she said, probably didn’t know the FTX.US office was ever based in the city before it abruptly took off for Miami, and its subsequent destination, bankruptcy.

While the FTX.US office was small and short-lived, its sudden demise will nonetheless negatively impact Chicago’s crypto ecosystem, Pieters said.

“I think it’s really hard to disentangle the FTX office in Chicago declaring bankruptcy and the broader implications that has for the city, given that the crypto industry is going to be muted for a while,” she said. “It will be a continuation of the crypto winter.”

CRIMINAL CRYPTO CAPITALI$M 

WHO'S THAT GIRL?!

Sam Bankman-Fried is in jail, but legal watchers are wondering: Where's ex-girlfriend Caroline Ellison?

Sindhu Sundar,Lakshmi Varanasi
Fri, December 16, 2022 

Caroline Ellison hasn't been heard from in public since Sam Bankman-Fried was arrested in the Bahamas.MARIO DUNCANSON / Contributor/ Getty Images/ Caroline Ellison's Twitter

Former Alameda CEO Caroline Ellison isn't named in prosecutors' charges against Sam Bankman-Fried


But the SEC's civil suit references her statements on the relationship between FTX and Alameda.


Conspiracy charges and civil claims against SBF show others in the crosshairs, legal experts said.

As Sam Bankman-Fried was taken away in handcuffs, some people who have been watching the implosion of FTX are wondering: Where's Caroline Ellison, his onetime girlfriend who ran his crypto hedge fund Alameda Research?

So far, legal watchers say US prosecutors and regulators have been tight-lipped: The criminal indictment made no mention of Ellison, and the SEC's civil complaint targeted just Bankman-Fried.


But in investigating what US Attorney Damian Williams called "one of the biggest financial frauds in American history," the government is almost certainly looking beyond Bankman-Fried, legal experts said.

"It would not surprise me if Ellison has already spoken with prosecutors," said Renato Mariotti, a partner at Bryan Cave Leighton Paisner, and a former federal prosecutor in Chicago. "And given the situation she's in, she has to be at least considering that move."

No charges or government complaints have been brought against Ellison so far. But her rise as CEO at Alameda, Bankman-Fried's other crypto company separate from FTX, may certainly put her in investigators' sights.

The SEC outlined her tenure at Alameda since she joined in 2018, citing news reports that quoted her as claiming FTX and Alameda were "at arm's length," but then telling Alameda employees last month that the firm's leadership knew it took FTX funds, a detail reported in The Wall Street Journal at the time.

The SEC's complaint on Tuesday claimed that Bankman-Fried "remained the ultimate decision-maker" at Alameda, even after Ellison took over the reins.

US Attorney Damian Williams, who heads the federal prosecutors' office in Manhattan that charged Bankman-Fried, told reporters on Tuesday that investigators are still on the case. Depending on what they uncover, the agency can bring new charges and target other defendants.

There are signs that's coming — the conspiracy counts against Bankman-Fried show that a grand jury already found that prosecutors showed evidence that at least two people agreed to participate in an alleged criminal scheme. Though the indictment offers few insights beyond Bankman-Fried's role, that's not unusual during an ongoing investigation, said Rebecca Mermelstein, a partner at O'Melveny & Myers LLP.
Cooperating witnesses?

It's unclear what kind of charges, if any, Ellison herself may be facing. The conspiracy counts against Bankman-Fried suggest that federal prosecutors may be pursuing others whom they consider to be potential co-conspirators, particularly on counts against him like conspiracy to commit wire fraud, and conspiracy to commit securities fraud.

Those who fear being caught in the government's snare may often cooperate as witnesses in the investigation in hopes of securing some kind of leniency, said Anil Mujumdar, a professor at the University of Alabama school of law, and a former white collar defense attorney.

"Typically, people in her position — if they are aware of misconduct, or even if they may have participated — they can help the government make the case against another defendant by trying to engage in early plea negotiations, and exchange information in return for a potentially lighter sentence," Mujumdar said.

An attorney for Ellison, Stephanie Avakian of the law firm WilmerHale, did not respond to Insider's request for comment Wednesday on the charges against Bankman-Fried, or Ellison's current whereabouts. Until recently, she was living in a luxury penthouse in the Bahamas with Bankman-Fried, and eight other members of his inner circle, according to a report in CoinDesk.

Sam Bankman-Fried joined a New York Times conference by video link before his arrest.Michael M. Santiago/Getty Images

Since Bankman-Fried's crypto empire began unraveling in November however, Ellison has stayed away from the public eye.

That Ellison is being talked about in stories about a large potential fraud is a jarring turn of events for someone who was once vice president of Stanford's Effective Altruism club, where she set her sights on understanding how to allocate money for the betterment of the world.

In fact, she and Bankman-Fried initially bonded over their interest in so-called effective altruism when they first met as colleagues at the trading firm Jane Street Capital. Both had also been raised by university professors. While Bankman-Fried's parents were professors at Stanford Law School, Ellison's were economists based at Massachusetts Institute of Technology.

Once Bankman-Fried had designs on launching his own crypto trading firm, he convinced Ellison to come on board. Ellison was one of his few female colleagues and the two eventually entered into a polyamorous relationship with others in his inner business circle, according to a CoinDesk article that relied on anonymous sources. Bankman-Fried has said he dated Ellison for about six months, but denied having a polyamorous relationship.

Ellison largely remained in the shadow of Bankman-Fried, but officially took over as CEO of Alameda Research in April 2022 after her colleague Sam Trabucco stepped down.

Alameda ex-CEO Caroline Ellison taps SEC's former top crypto regulator as lawyer in FTX investigation


Bethany Biron
Sat, December 10, 2022 

Caroline Ellison, left, and Stephanie Avakian, right.Twitter/@carolinecapital, WilmerHale

Caroline Ellison hired Stephanie Avakian and law firm WilmerHale to represent her in the FTX investigation, per Bloomberg.


Avakian was a top regulator at the SEC, where she increased oversight of cryptocurrency.


She also led major cases against companies including Tesla, Theranos, Facebook, and Wells Fargo, among others.

Alameda Research ex-CEO Caroline Ellison has retained a former top cryptocurrency regulator for the US Securities and Exchange Commission as the federal investigation into the downfall of FTX continues.

Bloomberg first reported that Ellison hired Stephanie Avakian, chair of the securities and financial services department at law firm WilmerHale and the SEC's former enforcement director. Sources close to the matter told Bloomberg that Avakian, as well as fellow WilmerHale lawyers, will represent Ellison.

During her tenure at the SEC from 2016 to 2022, Akavian led a team that worked on several high-profile cases against major companies and notable figures. They include Elizabeth Holmes for making fraudlent claims to investors to raise $700 million for Theranos, Elon Musk for tweeting misleading statements about a plan to take Tesla private, and Facebook for misleading investors about the risks of misusing user data.

Akavian was also instrumental in increasing cryptocurrency regulation while at the SEC, leading cases against companies like Robinhood and Ripple Lab.

Avakian and WilmerHale will represent Ellison during the federal probe into her former company, Alameda Research, the trading firm and corporate sibling of fallen cryptocurrency exchange, FTX.

Prior to FTX filing for bankruptcy in November, Alameda borrowed $3.3 billion worth of funds from the cryptocurrency exchange and lent them to FTX founder Sam Bankman-Fried and companies he controlled to cover losses and make risky bets, according to court documents.

Ellison has remained an elusive figure in the collapse of FTX, staying mum and largely unreachable during its downfall. As noted by Bloomberg, while Bankman-Fried has publicly placed blame on Alameda in numerous interviews, Ellison has stayed silent. Some have speculated she may be cutting a deal and cooperating with authorities, according to New York magazine.

The Senate Banking Committee said earlier this week that if Bankman-Fried does not appear before lawmakers next week to testify, he will be subpoenaed.

"As the Founder and CEO of FTX Trading Ltd. at the time of its collapse and the founder, principal owner, and former CEO of Alameda Research, you must answer for the failure of both entities that was caused, at least in part, by the clear misuse of client funds and wiped out billions of dollars owed to over a million creditors," Senate Banking Chairman Sherrod Brow, said in a public statement to the former billionaire on Tuesday.

The Block CEO resigns after reports of undisclosed loans from Alameda Research

Lachlan Keller
Sun, December 11, 2022 


Michael McCaffrey, the chief executive officer of cryptocurrency news outlet The Block, resigned after media website Axios reported early Saturday, Hong Kong time, that he had received three undisclosed multi-million dollar loans from Alameda Research, the brokerage arm of failed digital assets exchange FTX.com.

See related article: Disgraced FTX founder SBF to speak at New York Times Dealbook Summit despite controversy

Fast facts

The company’s chief revenue officer, Bobby Moran, will lead the company following McCaffrey’s departure, according to a statement released Saturday.

Moran said that no one outside of McCaffery knew of the three loans totaling US$43 million from February 2021.

McCaffrey’s limited liability company, MJMCCAFFREY LLC, took the first loan of US$12 million from Alameda in 2021 to buy out investors. He chose not to disclose the loan in fear of compromising the news outlet’s objectivity in covering FTX, he claimed in a Twitter thread shortly after the revelation, confirming Axios’ report.

The second loan, worth US$15 million, helped fund day-to-day operations, while a US$16 million third loan was used to buy personal property in the Bahamas, where FTX is based, McCaffrey said.

McCaffrey has also stepped down as the company’s sole board member, which is expanding to three people.

The Block hopes to buy out McCaffrey’s majority stake in the company as part of its restructuring.

Since FTX filed for Chapter 11 bankruptcy in November, its collapse has led to market contagion spreading in the cryptocurrency industry.

See related article: SBF’s parents, FTX executives bought Bahamas property worth US$121 million: Reuters