FTX Lied About Customer Holdings 🤥

GM. This is Degen Scoop. It’s Thursday, here’s the scoop:

• FTX Lied About Customer Holdings 🤥

• Coinbase Trading Volumes Dip 👇

• FDIC Lacks Crypto Guidance For Banks 🏦

• Whale Moves 🐋

• Threads You CAN’T Miss 🧵

FTX Only Held $5B, Significantly Below The $20B Value Advertised

According to expert witness Professor Peter Easton, FTX held significantly less crypto than what they were publicly reporting. Easton, a Notre Dame Alumni Professor of Accountancy specializing in financial statement analysis, estimated that FTX's wallets contained around $5 billion, a number far smaller than the $20 billion that customers believed they owned. Even in October 2022, FTX's digital wallets consistently trailed customer account balances by billions of dollars.

Professor Easton's investigation into FTX and Alameda Research utilized bank statements, an FTX database, lender documents, and on-chain data. This resulted in a comprehensive financial picture that was better than official FTX methods. Despite the overwhelming evidence presented in the past few days, the defendant has pleaded not guilty to all charges. The discrepancies in reported balances could have significant implications for the case as the evidence begins to amount against Sam Bankman-Fried.

Coinbase Trading Volumes Dip, Revealed by Q3 Reports

Coinbase's cryptocurrency trading volumes in the U.S. have reportedly weakened more than expected in the third quarter, with a 17% sequential drop and a 52% year-on-year decline. The report highlights concerns about Coinbase's consumer take rate facing compression due to increased competition in a lower-volume crypto space. While the data isn’t pretty, this is more to do with the cyclical nature of the industry rather than Coinbase ineptitude.

Berenberg expressed a cautious stance, emphasizing threats to Coinbase's business from regulatory actions and litigations in the U.S., as well as potential future challenges amid the ongoing regulatory crackdown on cryptocurrencies. Despite increased regulatory scrutiny and a challenging market, Coinbase's shares are up more than 112% YTD, outperforming Bitcoin and the Nasdaq stock index. Retail is ready to engage in speculation once the macroeconomic elements begin to allow it again.

FDIC To Look Into Clearer Crypto Guidance Regulations

The U.S. Federal Deposit Insurance Corp. (FDIC) has been found lacking in preparing banks for the risks associated with cryptocurrencies, according to the agency's inspector general. A recent report highlighted the FDIC's lack of clear procedures, causing uncertainty for supervised institutions in determining appropriate actions regarding crypto. While guidance surrounding crypto policy is important, it’s unlikely they are causing systemic damage.

The inspector general noted that while the FDIC told some banks to pause their crypto activities, it failed to provide clear guidance on the duration or the criteria for ending the pause. In response to the findings, the FDIC has agreed to formulate a new strategy by January to address crypto-related risks and improve clarity in its procedures for supervising banks in the crypto space. Improved clarity allows for more understandable use of the technology which users are eager to use.

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Conclusion

Touch grass, hit the gym, and don’t forget about what’s really important outside of magical internet coins.

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DISCLAIMER: This newsletter does not constitute financial advice. This is strictly educational and should not be used to make any financial decisions. Be responsible and do proper due diligence before aping.