The Crypto Compass

Master Ventures
9 min readJul 18

--

Introduction

Welcome back to another edition of the Crypto Compass! This is your quintessential guide to unravel the dynamic and often unpredictable world of cryptocurrencies. In this week’s whirlwind of events, we’ll sail through a multitude of stories that reflect the industry’s constant evolution, its triumphs, tribulations, and everything in between. From a significant court ruling in favor of Ripple’s XRP to a continued resurgence in digital asset investment, the sector is buzzing with developments that could reshape the future of digital currencies.

We’ll delve into the high-stakes legal drama ensnaring Alex Mashinsky, former CEO of the now-bankrupt Celsius Network, who faces severe charges of federal securities fraud. Not forgetting the corporate tremors that have struck the world’s largest cryptocurrency exchange, Binance, leading to an extensive wave of layoffs amidst an executive exodus.

So, fasten your seatbelts as we embark on this exciting journey, unpacking the most consequential news shaping the crypto industry’s horizon. Whether you are a seasoned investor, a crypto enthusiast, or someone intrigued by the digital currency space, we have you covered!

XRP Declared Not a Security: Unpacking the Implications

Source: https://messari.io/report/weekly-recap-ripple-coinbase-wallet-and-more?referrer=all-research

In a landmark decision, on July 13, 2023, the district court declared XRP, Ripple’s digital token, is not an investment contract and thus not in and of itself a security. This brings closure to a protracted legal battle between the U.S. Securities and Exchange Commission (SEC) and Ripple, which started in December 2020 when the SEC accused Ripple of conducting an unregistered security offering for XRP.

Source: https://messari.io/report/weekly-recap-ripple-coinbase-wallet-and-more?referrer=all-research

Ripple’s programmatic sales of XRP on crypto exchanges, where buyers were uninformed of their investment into a common enterprise, were ruled as non-violations of securities laws. In contrast, Ripple’s direct institutional sales, which the court deemed as an infringement of securities laws, hold potential ramifications for sales from 2021 through the present day. Between 2013 and 2020, Ripple reportedly made $757.6 million from programmatic sales and $728.9 million from institutional sales. From 2021 onward, Ripple is known to have sold an additional $14 billion worth of XRP, which are now considered unregistered securities sales.

However, Ripple celebrated this partial victory, focusing on the acknowledgment that XRP is not a security and its programmatic sales on exchanges were not a security offering. The ruling also holds significant implications for Coinbase and Binance in their imminent legal battles against the SEC.

Source: https://messari.io/report/weekly-recap-ripple-coinbase-wallet-and-more?referrer=all-research

The crypto markets greeted the news with elation. XRP’s price skyrocketed 70% to $0.80, and the share price of Coinbase closed at $107, reflecting a 24% daily increase. Furthermore, other tokens under SEC scrutiny in cases against Coinbase and Binance experienced a favorable price surge following the ruling.

The judgment, however, leaves some questions unanswered. The court effectively evaded ruling on secondary sales, thus leaving an open point. The ruling stated that Ripple’s XRP payments to employees were not deemed an investment contract as Ripple didn’t receive payments from these distributions, heralding a significant victory for Decentralized Autonomous Organizations (DAOs) and their contributors who are mostly paid in project tokens. This outcome also carries positive implications for airdrops as there is no payment from the receivers of the tokens.

Inevitably, the SEC is expected to appeal in the second circuit, where there is a chance the positive rulings could be overturned.

This momentous ruling brings some clarity to the ever-evolving crypto landscape, emphasizing the necessity of detailed legal and regulatory understanding in an environment that is increasingly scrutinized by authorities. As we navigate through these intricate regulations, we invite you to stay tuned for further updates on this crucial development and its far-reaching implications in our Crypto Compass.

Digital Asset Flows

Source: https://etp.coinshares.com/en/knowledge/market-activity/fund-flows-17-07-23

The past four weeks have seen a surge in inflows into digital asset investment products, totaling US$742m, marking the most substantial inflow since the final quarter of 2021. Notably, last week alone witnessed inflows worth US$137m, largely due to late updates to prior weekly data. Trading volumes on these investment products soared well above the year’s average of US$1.4bn, peaking at US$2.3bn last week. Consequently, these volumes represented a much larger proportion of total crypto volumes, making up 11% compared to the 2% average.

Source: https://a.storyblok.com/f/155294/x/c1228a3987/digital-asset-fund-flows-weekly-17-07-23.pdf

Regionally, North America led the inflow activity, with the US and Canada recording inflows of US$109m and US$28m, respectively. Meanwhile, Europe saw minor outflows, with Switzerland being the only exception where minor inflows were recorded.

Bitcoin remains the preferred choice among investors, accounting for 99% of all inflows with a total of US$140m. At the same time, short bitcoin investment products continued to see outflows, marking the 12th consecutive week with a loss of US$3.2m. The combination of recent price appreciation and continued outflows has seen the total assets under management of short bitcoin fall from its April peak of US$198m to just US$55m.

Interestingly, Ethereum’s recent price surge didn’t translate into inflows. Instead, it experienced outflows of US$2m last week, maintaining its status as the asset with the highest outflows year-to-date. In the altcoin realm, Solana, Polygon, and Litecoin saw minor inflows ranging from US$0.3m to US$0.5m.

These developments suggest a continued bullish sentiment towards Bitcoin among investors, while Ethereum and other altcoins are yet to experience a similar degree of enthusiasm. As the cryptocurrency market continues to evolve, these investment patterns provide valuable insights into investor preferences and market trends. Stay tuned for further updates in the upcoming editions of our Crypto Compass.

Former Celsius CEO Arrested Amidst $4.7 Billion Settlement and Multiple Fraud Charges

Source: https://www.cnbc.com/2023/07/13/former-celsius-ceo-arrested-company-agrees-to-pay-4point7-billion-settlement.html

In a significant development in the crypto industry, Alex Mashinsky, the former CEO of Celsius Network Ltd., was arrested on charges of federal securities fraud. The embattled crypto exchange, now bankrupt, has agreed to a $4.7 billion settlement with the Federal Trade Commission (FTC), marking one of the most substantial in FTC’s history.

Federal prosecutors unsealed seven charges against Mashinsky and a key executive, Roni Cohen-Pavon, accusing them of fraud and securities manipulation. The charges involve securities, commodities, and wire fraud, along with various securities manipulation and fraud charges. If convicted, the duo could face decades in prison.

This litigation is concurrent with charges announced by the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission against Mashinsky and the bankrupt crypto exchange. The allegations include scheming to defraud investors out of billions.

In a statement by U.S. Attorney Damian Williams, Mashinsky is accused of misrepresenting the safety of Celsius’s yield-generating activities, the platform’s profitability, the sustainability of Celsius’s high rewards rates, and the risks associated with depositing crypto assets with Celsius.

The SEC’s proceedings suggest that Celsius and Mashinsky misled investors and manipulated the price of Celsius’s exchange token, CEL. The agency also alleges that Celsius misrepresented its central business model and risk factors to investors, falsely claiming that the company did not engage in risky trading and handed most, but not all, of its revenue to investors. Contrarily, it is alleged that Celsius had experienced “hundreds of millions of dollars” worth of defaults on its institutional loans.

The arrest of Mashinsky and the record-breaking settlement shine a spotlight on the ongoing regulatory scrutiny of crypto exchanges. The definition of a security and the SEC’s oversight over crypto markets remain hotly contested topics within the industry.

Despite the severity of these allegations, Mashinsky’s counsel, Jonathan Ohring, insists that his client “vehemently denies the allegations” and “looks forward to vigorously defending himself in court against these baseless charges.”

Earlier this year, Mashinsky was accused of orchestrating a $20 billion fraud against investors. This scandal and the subsequent charges lay bare pervasive, longstanding issues that plagued the crypto exchange before it filed for bankruptcy in 2022.

As the landscape of cryptocurrency continues to evolve under increased regulatory scrutiny, this case underscores the need for transparency, accountability, and robust regulatory compliance within the crypto industry.

Binance Cuts Jobs Amid Regulatory Uncertainty and Executive Exodus

Source: https://www.reuters.com/technology/binance-lays-off-over-1000-employees-wsj-2023-07-14/

The world’s largest cryptocurrency exchange, Binance, has recently laid off a significant number of employees, according to a source familiar with the matter. This decision comes shortly after a wave of executive resignations within the company.

The job cuts occur amid uncertainty about the future of the cryptocurrency industry in the U.S., where regulators have been increasing their efforts to clamp down on activities they perceive as illegal. The Wall Street Journal reported that over 1,000 individuals had been laid off in recent weeks.

Binance CEO Changpeng Zhao disputed the reported numbers on Twitter, stating, “As we continuously strive to increase talent density, there are involuntary terminations. This happens in every company. The numbers reported by the media are all way off.” He also added that the exchange is still in the process of hiring new talent.

Last month, Binance and Zhao faced a lawsuit from the Securities and Exchange Commission (SEC), accusing them of running a “web of deception”. Binance has expressed its intent to rigorously defend itself. This lawsuit, along with a similar one against Coinbase Global, underscores SEC Chair Gary Gensler’s hardline stance toward the crypto industry.

Despite this, the industry has seen some positives, with a U.S. judge recently siding with crypto firm Ripple Labs, showing that the regulator’s battle might be more difficult than initially thought. Additionally, applications for spot Bitcoin exchange-traded funds (ETFs) from BlackRock and Fidelity are perceived as a vote of confidence for the industry.

A Binance spokesperson explained the layoffs, stating, “Over the last six years, we have grown from 30 to a team of almost 8,000 across the globe. As we prepare for the next major bull cycle, it has become clear that we need to focus on talent density across the organization to ensure we remain nimble and dynamic.”

The layoffs follow a series of executive resignations at Binance, including its Chief Strategy Officer, Patrick Hillmann.

Conclusion

As we conclude another captivating week in the dynamic world of cryptocurrencies, it becomes abundantly clear that the industry remains as vibrant and volatile as ever. From significant surges in digital asset investments to landmark court rulings, we’ve navigated through a slew of fascinating narratives that bear far-reaching implications for the sector’s future.

The unfolding drama around Alex Mashinsky and the Celsius Network has underscored the industry’s heightened regulatory scrutiny, reminding us of the importance of robust regulatory compliance. Meanwhile, the turbulence within the Binance hierarchy exemplifies the challenges that rapid growth and uncertain regulatory environments can pose, even for the industry giants.

Despite the hurdles, the crypto sector’s resilient spirit endures. The silver lining in this week’s news cycle has been the continued bullish sentiment towards Bitcoin, the XRP ruling favoring Ripple, and the resilient demand for crypto investment products.

As we anticipate another week of exciting developments, let’s remember that every twist and turn, every challenge and triumph, is a stepping stone shaping the industry’s future. The landscape of cryptocurrencies is continuously evolving, driven by a pioneering spirit and a persistent pursuit of innovation. And here at Crypto Compass, we’ll continue to be your reliable guide, helping you navigate this exhilarating journey. Stay tuned for more updates next week as we continue to chart the course of digital currencies together.

Want to learn more about blockchain technology and keep informed of the latest Master Ventures news? Consider following us on Twitter and Medium!

About Master Ventures

Master Ventures is a blockchain-focused venture studio helping to build the next generation of blockchain-based Web 3.0 system innovations within the crypto industry. Launched in 2018 by Founder and CEO Kyle Chassé, the company’s ethos can best be summarized in the acronym #BeBOLD: Benevolent, Open, Love, Decentralized.

Master Ventures co-creates with entrepreneurs and businesses worldwide to turn the best ideas into innovative and disruptive products. They do this by investing as strategic partners through offering advisory services to the projects they believe in. To date, Master Ventures has invested in over 40 crypto projects, including the likes of Kraken, Coinbase, Bitfinex, Reef, DAO Maker, Mantra DAO, Thorchain, and Elrond.

For any questions, please feel free to reach out to us on:

MV Website | MV Telegram| MV Twitter

Disclaimer: Master Ventures is not responsible for the content or accuracy of any information posted on Medium and shall not be responsible for any decisions made on such information.

--

--