As bitcoin, ethereum and other cryptocurrencies get increasing attention from investors, Wall Street and its traditional banks continue to adjust to the shift. Catch up on this week’s top stories highlighting the intersection of these old guard and new school areas of finance with this recap compiled by The Fly.
SIGNATURE BANK ACCUSED OF OVERLOOKING FTX FRAUD: Signature Bank (SBNY) has been accused by investment firm Statistica Capital of facilitating FTX’s commingling of customer accounts with its blockchain network, even though the bank had observed suspicious FTX transfers through its Signet blockchain payment network, Bloomberg’s Robert Burnson reported Monday, citing the complaint. Statistica alleged that Signature had "actual knowledge" of the FTX fraud since at least June 2020 and "substantially facilitated" the fraud by publicly promoting the exchange and failing to "close, suspend or otherwise limit" Alameda or FTX accounts that were in violation of terms of service.
Additionally on Tuesday, short seller Aurelius Value said in a tweet, “We are short $SBNY", along with a link to the report from Bloomberg.
HUT 8, US BITCOIN ENTER MERGER DEAL: Hut 8 Mining (HUT) and U.S. Data Mining Group, dba US Bitcoin, announced Tuesday that each of their Boards of Directors have unanimously approved a definitive business combination agreement under which the companies will combine in an all-stock merger of equals. The combined company will be named "Hut 8 Corp." and will be a U.S.-domiciled entity. The transaction is expected to establish New Hut as a large scale, publicly traded bitcoin miner focused on economical mining, highly diversified revenue streams, and best practices in ESG.
"Our established track record of creating shareholder value through organic growth and strategic acquisitions while maintaining a balance sheet-first approach has positioned us perfectly to advance our growth trajectory through this business combination," said Jaime Leverton, CEO, Hut 8. "Bringing together Hut 8’s operational track record and diversified revenue streams with US Bitcoin’s scalable mining sites, sizeable hosting business, and industry-leading managed infrastructure operations not only accelerates our diversified strategy and positions us for near-term growth, but also establishes us as a strong, U.S.-based player that is ready and able to seize additional opportunities as they arise."
New Hut will have access to approximately 825 MW of gross energy across all six sites with self-mining, hosting, and managed infrastructure operations. Pursuant to the agreement, shareholders of Hut 8 will receive, for each Hut 8 share, 0.2 of a share of New Hut common stock, which will effectively result in a consolidation of the Hut 8 shares on a 5 to 1 basis. Stockholders of USBTC will receive, for each share of USBTC capital stock, 0.6716 of a share of New Hut common stock. Based on the 5-day VWAP for the Hut 8 shares on the Nasdaq as of the last trading day prior to the date of this announcement, the aggregate consideration implies a combined market capitalization of approximately $990M. Upon consummation, existing Hut 8 shareholders and USBTC stockholders will each collectively own, on a fully-diluted in the money basis, approximately 50% each of the stock of the combined company. Following completion of the Transaction, Hut 8 and USBTC will each become wholly-owned subsidiaries of New Hut.
CLEANSPARK REPORTS Q1 EARNINGS: On Thursday, CleanSpark (CLSK) reported first quarter loss per share of (46c) on revenue of $27.8M, which compared to analyst estimates of a loss per share of (62c) on revenue of $30.1M. The company also reported holding $3.9M in bitcoin as of December 31.
"We have reliably grown, quarter over quarter, as we execute an operational strategy that we believe makes us one of the fastest growing, most reliable, and most efficient publicly traded bitcoin miners in North America," said CEO Zach Bradford. "While we faced headwinds due to depressed bitcoin prices during most of our fiscal first quarter, we persisted and grew. Our average hashrate rapidly increased, outpacing global hashrate, and we mined the most bitcoin ever in a single quarter. Last month we had our highest monthly production ever, at nearly 700 bitcoins. We are starting to see all the hard work we put in during our last quarter pay off and we expect to continue to deliver on our goals as we work toward our calendar year end guidance of 16 EH/s."
Following the report, BTIG analyst Gregory Lewis lowered the firm’s price target on CleanSpark to $8 from $10 after its revenue miss but kept a Buy rating on the shares. The company continues to execute on their rig deployment strategy with January monthly BTC production of 697 BTC, which points to a healthy sequential gain in BTC mining, the analyst said.
KRAKEN SHUTTERS STAKING PROGRAM IN SEC DEAL: The Securities and Exchange Commission announced Thursday that it charged Payward Ventures, and Payward Trading, both commonly known as Kraken, with failing to register the offer and sale of their crypto asset staking-as-a-service program, whereby investors transfer crypto assets to Kraken for staking in exchange for advertised annual investment returns of as much as 21%. To settle the SEC’s charges, the two Kraken entities agreed to immediately cease offering or selling securities through crypto asset staking services or staking programs and pay $30M in disgorgement, prejudgment interest, and civil penalties.
According to the SEC’s complaint, since 2019, Kraken has offered and sold its crypto asset "staking services" to the general public, whereby Kraken pools certain crypto assets transferred by investors and stakes them on behalf of those investors. The complaint alleges that Kraken touts that its staking investment program offers an easy-to-use platform and benefits that derive from Kraken’s efforts on behalf of investors, including Kraken’s strategies to obtain regular investment returns and payouts.
"Whether it’s through staking-as-a-service, lending, or other means, crypto intermediaries, when offering investment contracts in exchange for investors’ tokens, need to provide the proper disclosures and safeguards required by our securities laws," said SEC Chair Gary Gensler. "Today’s action should make clear to the marketplace that staking-as-a-service providers must register and provide full, fair, and truthful disclosure and investor protection."
AULT, ECOARK ENTER SHARE EXCHANGE AGREEMENT: Ault Alliance (AULT) and Ecoark Holdings (ZEST) announced Thursday that they have entered into a share exchange agreement whereby, upon closing, Ecoark will acquire 100% of the outstanding equity of Ault Alliance’s subsidiary BitNile.com. BitNile.com’s metaverse platform will launch on March 1, 2023. The platform will incentivize users through a tiered rewards system supported by a revenue and reward model. At the closing of the agreement, Ecoark will acquire BitNile.com from Ault Alliance and other founders, in exchange for shares of Ecoark preferred stock. The Preferred Stock will have a stated value of $100M, be convertible into shares of Ecoark common stock, accrue dividends of 5% per annum for 10 years, and be entitled to certain other rights as set forth in the certificate of designation for the Preferred Stock. The closing of the agreement, pursuant to which Ault Alliance will be able to convert and vote up to 19.9% of Ecoark’s issued and outstanding shares of common stock, is subject to Ecoark’s receipt of a fairness opinion, each parties’ satisfaction of its due diligence review of the other party, completion of required stock exchange and regulatory approvals, and other customary closing conditions. The parties expect to complete the acquisition of BitNile.com during February 2023.
Ecoark’s CEO Randy May, stated, "I am grateful to continue our partnership with Todd Ault in structuring this mutually beneficial transaction. I feel there is tremendous potential with the unique metaverse offering of the Platform, and we believe this strategic acquisition will allow us to develop new partnerships leading to more rapid customer acquisition and premier content creation to enhance the Platform and grow revenue and profitability."
CRYPTO STOCK PLAYS: Cryptocurrency revenues have been pointed to as reasons to be bullish on Advanced Micro Devices (AMD) and Nvidia (NVDA) in select research. Ideanomics (IDEX), Riot Blockchain (RIOT), Overstock (OSTK), and SRAX (SRAX) are other stocks that have been touted, or promoted themselves, as a way to play the crypto theme.
PRICE ACTION: As of time of writing, bitcoin dropped roughly 7% this week to $21,884 in U.S. dollars, according to TradeBlock.
Published first on TheFly
See the top stocks recommended by analysts >>
Read More on SRAX:
