🐻 Why does crypto hate the SEC? 👀

Plus, more Binance FUD ahead of us

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Rahul & Oleena
January 23, 2023

GM friends, this is Web3 Seems Legit. Happy Monday wherever you are. Crypto is back up and the degens are here to play. It’s going to be a slow and long rally back up, but it feels good to be back 😌.

In this issue:

  • The SEC's busy week. The SEC had quite a lot on their plates this week from placing charges on SBF, Nexo and Mango Market. But was any of it actually productive?

  • Genesis files for bankruptcy. As expected, the next domino to fall is Genesis Trading. What does this mean for Gemini and other creditors?

  • In other news: More Binance FUD, and Trump NFT pumps while NatGeo NFT fails.

The SEC's busy week

It’s been quite a week for the SEC who are working hard to make money during this bear market.

If you’re not familiar with the SEC, it stands for the US “Securities and Exchange Commission”. They oversee the regulation of securities, which includes stocks, bonds, mutual funds and sometimes crypto.

If cryptocurrencies are considered securities, then they would be regulated accordingly to the SEC rules. The tricky part is that the SEC has been unclear and inconsistent about what types of tokens are considered securities, though they have hinted in the past that a “vast majority” are.

Not only are they confusing, but they always seem to go after crypto projects after investors have been burned. Last week, the SEC charged Gemini and Genesis for supposedly selling unregistered securities through their product, Gemini Earn. But the service has already been disabled since December.

This week, they came out with a slew of new charges. First up on the chopping block (and most importantly) is Sam Bankman-Fried who was charged for defrauding FTX investors. You don’t say 🤔?

Next, we have Nexo. Just last week, this crypto lending and borrowing platform made headlines when Bulgarian police raided their office and announced an investigation for organized financial crime.

The SEC decided they wanted a piece of the action and charged Nexo for failing to register their crypto lending product. Within the same day, the charge was settled with a $45 million collection. So…who’s footing the bill? Nexo customer funds?

Lastly, we have the attacker of Mango Markets. Late last year, Avraham Eisenberg admitted to conducting a “highly profitable trading strategy” on the Solana-based DEX, Mango Markets. This scheme involved manipulating the price of $MNGO and draining $116 million worth of crypto assets from the platform.

Eisenberg has already been charged by the DOJ and CTFC for market manipulation, but can now add another badge to his chest for the SEC. According to the SEC, $MNGO, a governance token, was an unregistered security that Eisenberg manipulated.

With all this being said, the crypto community should be happy that regulators are cracking down on the bad guys, right? Well, not quite. All these charges are leaving us more confused and unsatisfied.

Genesis files for bankruptcy

As expected, another domino has finally fallen in this great crypto unravelling. Rumors have been swirling since the FTX fallout that Genesis Trading, a major crypto trading firm, was insolvent. As FTX’s largest unsecured creditor owed $226 million, Genesis was a ticking bomb that we all knew would blow up eventually. The added pressure from Gemini to pay back their customers also helped speed up the implosion.

Here’s a good overview thread of the Genesis saga 👇.

So for most folks following the story (or who have been reading this newsletter 😉), it should come as no surprise that Genesis has finally filed for Chapter 11 bankruptcy.

And boy, it’s a tangled, tangled mess.

Surprisingly, the crypto market was able to maintain its level since the news broke. Perhaps it’s because we all knew Genesis was insolvent long ago. But what happens now? How will the domino effect continue to play out? We’re not sure and we’re not excited to find out 😪.

In other news

The Binance FUD continues. Just announced, Binance's banking partner, SWIFT will no longer allow USD transfers below $100k. More on this story in the next issue...👀

Despite its quick crash since launch, the Trump NFTs are back up and surged over 800% in sales trading volume. Maybe the boomers are finally learning to buy NFTs?

National Geographic launched its first NFT collection, but it was anything but smooth sailing. At least they tried 🤷.

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