A highlight from 394:Maple Finance Update::Silvergates FTX Saga::Sam Hires Defense::Mr Wonderful Defends Sam::Davies and Zu Subpoenaed::Gensler to Brief HFSC on FTX::Paraguays Miners
Here, encrypted, it's 10 p.m. Pacific time, my name is nicodemus and welcome back to the crypto overnighter, where we take a nightly look at the crypto NFT and metaverse space, and keep in mind nothing in this show should ever be considered financial advice. Last night, we spoke for a bit about maple finance and some of the difficulties that they were running into. And I wanted to give you a bit of an update. Nexus mutual is a peer to peer insurance alternative. And they are expecting to take a loss on their investment in a credit pool on maple finance. Now, listeners from last night will remember that maple finance is a decentralized lending platform. And now the company warned about a potential loss of 2461 eth, which is around $3 million due to orthogonal trading default. Nexus has started to withdraw all of their funds from the affected pool, which represents about 1.6% of their assets. In August, nexus deposited over 15,000 eth worth around $19.3 million. That went into the credit pool on maple finance following a community vote. However, more of nexus funds are potentially at risk due to orthogonal trading default debt and oros global's failure to repay alone. Now nexus mutual is warning that it may take a loss on its investment in the credit pool on maple finance. What that means is that the potential losses due to orthogonal trading default on its debt and maples credit dashboard shows that the defaulted debt represents 56% of the outstanding debt on the rapid Ethereum credit pool. At present, there is only $3.1 million in cash deposits that are not tied up in loans. That limits nexus ability to withdraw funds. Maple has a ten day waiting period before depositors can withdraw capital. This news comes as the collapse of the crypto exchange FTX continues to impact DeFi lending protocols. Have you been paying attention to silvergate bank because something's going on there? And now, silvergate has always been kind of interesting from a crypto point of view. One interesting thing that happened is when they closed their door on the Libra, DM stablecoin project, they bought the intellectual property and said that they intended to create a coin using those assets. Well, things started going downhill for them on Monday morning as the bank's shares plummeted 3%. What happened was that Morgan Stanley downgraded its rating on silvergate capital to underweight. That's due to the risks arising from the bankruptcy of the crypto exchange FTX. The banks analysts believe that silvergate faces significant uncertainty about deposit flows in the near term. They estimate that the bank's digital deposits have fallen in about 60% so far in the fourth quarter. The demise of FTX could also lead to litigation and headline risk across the crypto industry. Allen lane is silver bank capital CEO. He published a public letter that said that the bank conducted quote extensive due diligence on FTX and its related entities, including Alameda research. He added that the bank followed all of the relevant regulatory procedures and investigated any potential untoward activity. Lane said that speculation and misinformation being spread by short sellers and other opportunists is trying to capitalize on the market uncertainty. Silvergate disclosed one month ago that FTX deposits made up nearly 10% of their $11.9 billion in deposits from digital asset customers. However, the bank does not appear to be a creditor to FTX. Now, lane said that the bank has a resilient balance sheet and ample liquidity. He added that the lender carries cash and securities in excess of their digital asset related deposit liabilities. Silvergate stock is down 53% over the last month and was little changed in after hour trade on Monday. Well, since then, U.S. Congress has gotten involved. Three U.S. senators, Elizabeth Warren, John Kennedy and roger Marshall have written to silvergate. They want answers about its supposed role in facilitating transfers between the exchange FTX and Alameda research. The senators letter come after allegations were made that sbf made large transfers of customer funds from the exchange to Alameda research. FTX and other companies reportedly held around 20 accounts at silvergate, according to a bankruptcy filing. The senators letter said that there were, quote, reports that mister bankman freed secretly transferred some $10 billion of customer funds to his trading vehicle automated research to fund risky bets, violating both U.S. securities laws and FTX owned terms of service. They also said that they were concerned about surrogates role in these activities because of reports suggesting that silvergate facilitated the transfer of FTX customer funds to Alameda. Shares were down another 6.15% and have touched a new 52 week low in Tuesday morning trade, adding to their roughly 50% decline since the FTX collapse. Silvergate has issued a statement saying that it was quote the victim of FTX and Alameda research's apparent misuse of customer assets. They said that they believe their full cooperation will help set the record straight. Now the bank has until December 19th to officially respond to the senators. SPF has reportedly hired Mark Cohen, a former federal prosecutor as his defense attorney. His spokesperson said the former CEO has retained Cohen amid a flurry of civil litigation from investors in the crypto exchange and investigations by U.S. lawmakers and regulators. Now Cohen is a cofounder of the law firm Cohen and gresser and was a former assistant U.S. attorney for the eastern district of New York. He also worked on the defense team for Ghislaine Maxwell. Wait, didn't she get convicted? Anyway, FTX group filed for bankruptcy under chapter 11 in the district of Delaware on November 11th. This was following a reported liquidity crunch in which the firm claimed billions in leverage, making it unable to meet withdrawal demands. Filing in bankruptcy court suggested FTX could be accountable to more than 1 million creditors. After the company's collapse, SPF has made several media appearances and has spoken to reporters many times. Despite criticism from some in the crypto space. The former CEO has apologized for his role in the exchanges downfall. He said that he plans to make it up to affected team members, but has not yet offered a concrete plan to compensate investors. John ray became the exchanges CEO in November. Now, one defender SPF doesn't have to hire is Kevin O'Leary. Because it was in an interview with Yahoo finance today that Shark Tank's mister wonderful called for calm following FTX is collapse. O'Leary stated that the exchanges former CEO should be considered innocent and less evidence emerges that he committed fraud. He called for FTX to be audited to reveal where they exchange his money went so that investors can get their funds back. On November 30th and December 1st, SPF took several interviews in which he claimed that he was not guilty of fraud, which led to backlash within the crypto community. However, O'Leary defended him in a new interview, saying that he is quote innocent until proven guilty. O'Leary explained quote, I am of the ilk, and of the group of people that says, you're innocent until proven guilty. That's what I believe, and I want the facts. And so if you tell me that you didn't, you did or didn't do something, I'm going to believe you until I find out it's a falsehood.