This is the Milk Road, the green run that makes it easy to ski through the crypto slopes.
No double black diamonds here.
Here’s what we have for you today:
Gemini & Genesis have an agreement…sort of
Crypto founder gets hacked for millions in a hotel lobby
Ethereum is one step closer to its next big upgrade
SBF’s grounded from FB/Zoom
GEMINI USERS: YOU'RE 2 STEPS CLOSER TO GETTING YOUR $$$ BACK
Y’all ready for The Winklevii & Genesis Chronicles: Part 46?
Because boy, do we have some developments for you:
1) Gemini and bankrupt lender Genesis have a quasi agreement to start paying creditors back
2) Digital Currency Group is selling, at a discount, a bunch of holdings in trusts run by its subsidiary Grayscale
For a recap, Gemini chose Genesis as its lending partner for its Earn program, which let users earn interest on crypto they put on the platform.
But Genesis went kersplat, leaving Gemini high and dry with a ~$900M hole. It’s been an Ultimate Showdown between Gemini/the Winklevii and Genesis, its parent company DCG, and CEO Barry Silbert ever since.
Now Genesis & DCG are trying to raise funds to repay creditors $3.5B.
Let’s unpack this, school lunchbox-style.
1/ Cameron Winklevoss tweeted Monday that him and his twin’s crypto exchange, Gemini, have an understanding with Genesis
They specifically have an “agreement in principle,” legal-speak for a tentative deal that’s aaaaaalmost a contract but isn’t. Kinda like how an Edible Arrangement is aaaaaalmost a worthy V-Day gift but isn’t (do better, gents.)
It’s not legally enforceable, so for now it’s simply a “critical step forward towards a substantial recovery of assets for all Genesis creditors.”
DCG will convert that $1.1B 10-year IOU to Genesis into convertible preferred stock (“safer” shares with fixed rates of return that can convert into common stock)
It’s also gonna refinance its 2023 term loans and pay out $500M to creditors
And DCG will sell its equity in Genesis’ trading arm to Genesis’ holding company (that means mas dollars for Genesis to pay people back with)
AND Gemini is coughing up $100M more for Earn users to get their moolah back ASAP. As a treat.
2/ DCG is selling shares in crypto trusts that are operated by Grayscale
The Financial Times viewed U.S. securities filings that show:
DCG is offloading holdings in some primo crypto funds
It’s selling them at discounts steeper than Mount Everest
Sales were from Grayscale’s Ethereum fund; DCG sold 25% of its holdings for $22M
It sold those shares for $8 a pop, half of the shares’ true value ($16)
Grayscale rakes in some pretty pennies for DCG. It lets users invest indirectly in crypto via trusts, like the world's largest Bitcoin trust via GBTC, and turns a nice profit in management fees ($303M in January to September 2022.)
DCG selling off some of its shares in its prized stallion means it knows sh*t has hit the fan.
TODAY'S EDITION IS BROUGHT TO YOU BY CONSENSUS
Consensus, the world’s largest, longest-running and most influential gathering of the crypto and Web3 community is coming back to Austin, Texas April 26-28.
Year after year, Consensus brings together the industry’s developers, investors, founders, brands, policymakers, and more to confront differences, grapple with challenges and find agreement on how to best seize the opportunities this technology presents.
There could not be a more important time than now to do so.
Will you join us in this vital undertaking?
FOUNDER GETS HACKED FOR MILLIONS IN A HOTEL LOBBY
Eleven. The drama makes it feel like Mean Girls. Losing money makes it feel like “Honey, I Shrunk The Kids Bags”.
Well, buckle ladies & gents, crypto has another potential movie….
This is how the founder of Webaverse (an NFT project) got hacked for millions while meeting investors in a hotel lobby in Rome.
Here’s how it all happened:
Back in November, Ahad Shams (the founder) was in the process of closing a round of fundraising
One day he gets a message that the grandchild of Joseph Safra (former richest man in Brazil) is interested in investing
Mr. Safra agrees to invest, but there’s one condition: the founder must fly to Rome to meet in person and show him “proof of funds” (wtf)
The founder agrees and goes to Rome to meet with Mr. Safra and his “banker” (wtf x2)
They’re sitting in the hotel lobby when Mr. Safra asks to see “proof of funds”
Shams transfers $4m USDC into a fresh new wallet he made days before (good security practice) and shows Mr. Safra
Mr. Safra asks if he can take a picture of the crypto wallet. Shams thinks it's weird but agrees to let him (!!)
Mr. Safra and his banker then say they need to discuss the final steps privately outside
They were never seen again and moments later the $4M was transferred out from Shams’ crypto wallet.
Talk about a crazy multi-million dollar heist. This is The Italian Job meets The Tinder Swindler meets Gone With The Wind.
On one hand, you gotta feel bad for Shams for getting robbed of $4M. And the worst part is no one knows how it actually happened. Some have theories it was the picture Mr. Safra took, others think it could have been malware that was shared in a document beforehand. Who knows. But Sham has hired some blockchain investigators to help figure out.
On the other hand, he fell for the oldest trick in the book. This is the remix of the Prince of Nigeria calling you to wish you a happy birthday and saying he wants to send you a gift. But first he needs your social security number, the name of your first pet, and your mothers maiden name…
Stay safe out there!
ETHEREUM IS ONE STEP CLOSER TO ITS NEXT BIG UPGRADE
There’s currently 16M+ ETH being staked. This $26B+ worth of ETH helps keep the network secure, process transactions, and store data.
But here’s the thing: it’s all locked. (aka investors can stake, but can’t unstake)
Well, developers just successfully completed the first simulation for withdrawing staked ETH. And just like that, investors are one step closer to being able to unlock billions in ETH.
What’s next: Developers will run the same test on Sepolia and Goerli over the next few weeks. (no those aren’t STDs, they’re test networks).
Once those are done and developers have tried out all the bells & whistles, the big Shanghai upgrade will go live and users can start withdrawing staked ETH.
Why this matters: This will be Ethereum’s biggest upgrade since it went through the Merge last year. Plus, billions of dollars worth of ETH will be getting unlocked, so many are wondering what will happen to prices…
Some predict prices will soar because more people will stake their ETH once they know they can unstake it later. More staked ETH = less sell pressure = price go 📈
Others predict prices will crash when people rush to sell their unlocked ETH. Less staked ETH = more sell pressure = price go 📉
Only time will tell…
MILK AND COOKIES
Satoshi? More like Faketoshi. Craig Wright, who claims to be Bitcoin’s creator, is taking 15 developers to court, alleging they are obligated to modify Bitcoin’s code to recover the $2.4B a hacker stole from his company, Tulip Trading.
No apps for you, SBF. A federal judge rejected lawyers’ motion to let Samuel Bankman-Fried use apps like FaceTime, Zoom, and Facebook, during his house arrest. Flashback to having our flip phones confiscated when we were grounded…
That's a wrap for today. Stay thirsty & see ya tomorrow! If you want more, be sure to follow our Twitter (@MilkRoadDaily)
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In the shadow of greatness https://t.co/wboadKeI6w
— Milk Road (@MilkRoadDaily)
Feb 8, 2023
DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.