Another Crypto Custody Fail + Gary Gensler Testifies
All the news to know in crypto this week
GM! This week: Ripple steps in to acquire (and set the record straight on) crypto custodian Fortress Trust. Plus, SEC Chair Gary Gensler back in front of the Senate Banking Committee. Here’s everything you need to know for your crypto week. You can listen to Coinage Host Zack Guzman and Fox Business Reporter Eleanor Terrett discuss the news on our Twitter Space.
In Crypto Regulation…
SEC Chair Gary Gensler is kicking off the front half of his September congressional appearances on Tuesday in front of the Senate Banking Committee. Gensler is expected to be pressed on the SEC’s appeal against Ripple, and his agency’s continued attempts to block a spot Bitcoin ETF. (Coinage will be broadcasting the hearing live on our YouTube and Twitter accounts.)
In his prepared testimony, Gensler didn’t back down. He appears set to once again beat the drum on the idea that all of crypto is a security:
“Given that most crypto tokens are subject to the securities laws, it follows that most crypto intermediaries have to comply with securities laws as well,” Gensler wrote.
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In Crypto Fails…
Crypto custodian Fortress Trust was bought over the weekend by Ripple. At first, the purchase looked pretty routine except for the fact that Fortress had mentioned a minor security breach by a third-party vendor just days prior to the announcement of the deal. Importantly at the time, Fortress said no customer funds were impacted.
Fast forward a few days, and Ripple was singing a decidedly different tune, noting in a press statement that its decision to step in and acquire Fortress was specifically “accelerated” due to the loss of funds:
“Conversations accelerated last week following the security incident via a third-party analytics vendor, but this opportunity makes sense for Ripple in the long term,” said a spokesperson for Ripple, who clarified that the company — already a minority investor in Fortress — had discussed a potential acquisition with Fortress previously.
“Luckily, Ripple was in a position to act quickly to step in and make customers whole, and there have been no breaches to Fortress technology or systems. Fortress notified customers immediately of the incident when it happened — as they mentioned in their tweets,” the spokesperson continued.” - Coverage in The Block
Interestingly, Fortress is run by Scott Purcell, the former CEO of Prime Trust, another crypto custodian that filed for bankruptcy after the company lost access to a wallet and tried to gamble their way back to recoup customer funds. It obviously didn’t work out, because, you know, bankruptcy — but, you would think crypto custodians would be better at this whole custodian thing. Perhaps that’s partially why BitGo CEO Mike Belshe went off on Twitter calling out Fortress for not being forthcoming with the facts.
In FTX/SBF Trial Happenings…
Sam Bankman-Fried’s attorneys and the US government continue to battle over what should be allowed at trial. Late on Monday, SBF’s attorneys continued their complains that he is not getting sufficient access to a functioning laptop to review materials for his trial. They also pushed to add certain questions for jury selection, including getting potential jurors to weigh in on what they think about effective altruism (AKA the philosophy that one should make as much money as possible in order to maximize philanthropic endeavors.)
In our latest episode previewing SBF’s defense, Coinage digs into the question of just how bad Sam’s actions were. [SPOILER ALERT — even Bernie Madoff’s former prosecutor says SBF isn’t as bad as Bernie Madoff.]
In Other Headlines…
2024 US Voters Will Scrutinize Politicians’ Crypto Views: Brian Armstrong
People Won't Use Bitcoin To Buy Things, Says PayPal Co-Founder
Sam Bankman-Fried, DOJ Propose Jury Questions Ahead of October Trial
That’s everything we’re taking a look at this week!
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