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.
BINANCE.US CLEARED FOR VOYAGER DEAL: U.S. Bankruptcy Court Judge Michael Wiles approved Binance.US deal to take over thousands of accounts from bankrupt crypto platform Voyager Digital (VYGVQ), the Wall Street Journal’s Soma Biswas reported Tuesday, citing the ruling. The move comes despite staff from the Securities and Exchange Commission finding that Binance.US is operating an unregistered securities exchange and therefore could take enforcement action. Wiles said he would not delay the deal due to the SEC’s warning about potential future enforcement, especially since the agency did not offer any evidence that the companies could refute.
“The SEC didn’t say why they say Binance.US is operating as a securities broker. If we were to try to address the issue we’d have to guess,” Wiles said in his ruling.
SILVERGATE ANNOUNCES WIND DOWN OF OPERATIONS: Silvergate Capital (SI) announced Wednesday its intent to wind down operations and voluntarily liquidate the bank in an orderly manner and in accordance with applicable regulatory processes. In light of recent industry and regulatory developments, Silvergate believes that an orderly wind down of bank operations and a voluntary liquidation of the bank is the best path forward. The bank’s wind down and liquidation plan includes full repayment of all deposits. The company is also considering how best to resolve claims and preserve the residual value of its assets, including its proprietary technology and tax assets. In addition, Silvergate Bank made a decision to discontinue the Silvergate Exchange Network, which it announced on March 3. All other deposit-related services remain operational as the company works through the wind down process. Customers will be notified should there be any further changes.
Following the news on Wednesday, the California Department of Financial Protection and Innovation noted that Silvergate Bank, based in La Jolla, California, has voluntarily begun the process of liquidation.
"The Department of Financial Protection and Innovation is monitoring the situation closely to facilitate the safe and expeditious voluntary liquidation of Silvergate Bank," said DFPI Commissioner Clothilde Hewlett. "The Department is evaluating compliance with all financial laws, as well as safety and soundness obligations, and is working closely with relevant Federal counterparts."
COINBASE SAY NO CLIENT, CORPORATE CASH AT SILVERGATE: Coinbase (COIN) said in a Wednesday tweet, "We’re sorry to see Silvergate make the tough decision to wind down their operations. They were a partner & contributors to the growth of the cryptoeconomy. Coinbase has no client or corporate cash at Silvergate. Client funds continue to be safe, accessible & available."
Additionally on Monday, Coinbase and ACAMS announced a partnership to educate anti-financial crime professionals on the illicit-finance risks and compliance strategies associated with cryptocurrencies. Under the initiative, more than 60 Coinbase employees will take part in the new Certified Cryptoasset Anti-Financial Crime Specialist certification program, which trains participants on the AML controls and risk-management policies and procedures used across an array of stakeholder organizations in the crypto space.
RIOT PRICE TARGETS LOWERED: B. Riley lowered the firm’s price target on Riot Platforms (RIOT) on Monday to $8 from $11 and kept a Buy rating on the shares following the Q4 results. The company’s February production of 675 bitcoin, down 8.8% from January, came slightly below the firms’ estimates but was largely a function of global network hash rate assumption, the analyst said. The firm now thinks Riot will achieve its 12.5 EH/s target in the beginning of Q4, which is slightly more conservative than its previous estimate.
Meanwhile on Tuesday, Northland analyst Mike Grondahl lowered the firm’s price target on Riot Platforms to $9 from $10 and kept an Outperform rating on the shares after the company said it ended the quarter with 6,974 bitcoin on the balance sheet. The firm’s 2023 revenue and adjusted EBITDA estimates were both lowered following the update, though Northland noted it has bitcoin at $21,500 for the remainder of 2022 and 2023, which "may prove conservative."
NY AG SAYS ETHER IS A SECURITY: New York Attorney General Letitia James continued her efforts to crack down on unregistered cryptocurrency platforms on Thursday by filing a lawsuit against KuCoin for failing to register as a securities and commodities broker-dealer and falsely representing itself as an exchange. The Office of the Attorney General was able to buy and sell cryptocurrencies on KuCoin in New York even though the company is not registered in the state. Through this enforcement action, Attorney General James seeks to stop KuCoin from operating in New York and to block access to its website until it complies with the law.
“One by one my office is taking action against cryptocurrency companies that are brazenly disregarding our laws and putting investors at risk,” said Attorney General James. “Today’s action is the latest in our efforts to rein in shadowy cryptocurrency companies and bring order to the industry. All New Yorkers and all companies operating in New York have to follow our state’s laws and regulations. KuCoin operated in New York without registration and that is why we are taking strong action to hold them accountable and protect investors.”
KuCoin is a virtual currency trading platform that allows investors to buy and sell cryptocurrency through its website and app. On its platform, KuCoin investors can buy and sell popular virtual currencies, including ETH, LUNA, and TerraUSD, which are securities and commodities. This action is one of the first times a regulator is claiming in court that ETH, one of the largest cryptocurrencies available, is a security. The petition argues that ETH, just like LUNA and UST, is a speculative asset that relies on the efforts of third-party developers in order to provide profit to the holders of ETH. Because of that, KuCoin was required to register before selling ETH, LUNA, or UST.
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 Platforms, 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 11% this week to $19,970 in U.S. dollars, according to TradeBlock.
Published first on TheFly
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