New York Curbs Mining; Bankman-Fried Depicts Wipeout

(Bloomberg) — Top partners at Sequoia Capital apologized to investors for backing FTX, whose bankruptcy had its first US court hearing. Former CEO Sam Bankman-Fried in a letter outlined a crash in collateral to $9 billion from $60 billion.

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An attorney representing Bankman-Fried’s collapsed FTX Group said a “substantial amount” of its assets “have either been stolen or are missing.” Identifiable information of FTX’s top creditors is being kept secret for now.

New York Governor Kathy Hochul signed one of the most restrictive pieces of legislation in the US against crypto mining, citing environmental concerns.

Crypto markets have steadied, taking Bitcoin back above $16,000, though investors remain alert for contagion from FTX. Ark Investment Management’s Cathie Wood stuck by her bullish forecast of $1 million for the coin by 2030.

Key stories and developments:

Bankman-Fried Says Collateral Crashed by $51 Billion as FTX Fell
Sequoia Capital Says Sorry for FTX But Defends Vetting Process
New York Governor Hochul Signs Moratorium to Curb Crypto Mining

(Time references are New York unless otherwise stated.)

El Salvador Closer to Issuing Bitcoin Bonds (12:05 p.m. HK)

The country’s presidency dispatched a digital-securities bill to lawmakers, taking the nation a step closer to raising $1 billion via the world’s first sovereign blockchain bond.

The legislation calls for a digital-assets commission and a Bitcoin Fund Management Agency to oversee crypto-related debt sales. The proposed blockchain bonds, with a minimum investment of just $100, are meant to help finance the construction of the Bitcoin City project.

New York Governor Signs Moratorium to Curb Crypto Mining (11:10 a.m. HK)

Kathy Hochul signed one of the most restrictive laws in the US on regulating cryptocurrency mining, with the bill triggering a two-year moratorium on new permits for crypto-mining companies.

“I will ensure that New York continues to be the center of financial innovation, while also taking important steps to prioritize the protection of the environment,” Hochul said in a statement.

Bankman-Fried Says Collateral Crashed by $51 Billion as FTX Fell (8:30 a.m. HK)

Bankman-Fried, disgraced founder of the now collapsed crypto exchange FTX and trading house Alameda Research, apologized to staff in a letter that outlined a crash in “collateral” to $9 billion from $60 billion.

“I didn’t mean for any of this to happen, and I would give anything to be able to go back and do things over again,” he wrote in the message sent to employees Tuesday and obtained by Bloomberg News.

Sequoia Capital Says Sorry for FTX But Defends Vetting Process (7:20 a.m. HK)

Top partners at the venture capital firm apologized to their investors in a conference call Tuesday for backing FTX, according to people familiar with the meeting.

Roelof Botha, the firm’s global leader, opened the call, and he and his colleagues were repentant for backing the company, with investments totaling $214 million in FTX.com and FTX.us across two funds. Alfred Lin, the partner who led the FTX deal, provided an update on the situation. Shaun Maguire, another partner who focuses on crypto, gave an overview of the sector.

Cathie Wood Holds On to $1 Million Target for Bitcoin (7:10 a.m. HK)

“Bitcoin is coming out of this smelling like a rose,” said the ARK Investment Management CEO as she defended her forecast.

Wood also said that crypto infrastructure is “working beautifully.” She added that digital-asset manager Grayscale Investments is now the crown jewel of Barry Silbert’s once-$10 billion Digital Currency Group conglomerate.

Crypto ATM Operator Coin Cloud Discussed Equity From Genesis (6:30 a.m. HK)

Genesis had provided an unsecured loan of around $100 million to Coin Cloud, according to people with knowledge of the situation. In the latest discussions, Genesis had considered injecting equity into Coin Cloud, said the people.

Coin Cloud recently hired advisers to help rework about $125 million of the ATM operator’s debt.

FTX Allowed to Hide Identity of 50 Biggest Creditors (5:40 a.m. HK)

US Bankruptcy Judge John Dorsey agreed to let FTX redact the names of the 50 biggest unsecured creditors owed a total of $3.1 billion.

The US Bankruptcy Code normally requires the names be filed in documents available to the public. Representatives for FTX argued those creditors are also customers and disclosure would allow rivals to steal their business.

Crypto Collapse Opens 1,350% Gap Between Stocks, Price Targets (3:25 p.m.)

Predicting the price of a stock a year from now is hard, even for Wall Street’s best analysts. But for investors who bought into the bullish expectations behind cryptocurrency-related stocks at the beginning of this year, those forecasts now look like pipe dreams.

For 10 crypto stocks tracked by Bloomberg, with at least three analyst price targets at the start of 2022, the average return needed to reach their 12-month price target from Jan. 1 is nearly 1,350%. To put that in perspective, it took Amazon.com Inc. more than eight years — from 2013 to its record high in late 2021 — to return investors that amount.

Genesis Balance Sheet Reveals Web of Loans Across Silbert Empire (2:40 p.m.)

The troubled brokerage Genesis Global has $2.8 billion in outstanding loans on its balance sheet, with about 30% of its lending made to related parties including its parent company, Barry Silbert’s Digital Currency Group, according to people familiar with the matter.

Among them, a lending subsidiary named Genesis Global Capital had been lending money to Genesis Global Trading — the brokerage unit that has become a key counterparty to institutions across the crypto industry. In a letter to shareholders on Tuesday, Silbert said that intercompany loans were made “in the ordinary course of business.”

‘Substantial’ FTX Assets Are Stolen or Missing, Attorney Says (12:00 p.m.)

A “substantial amount” of FTX Group’s assets “have either been stolen or are missing,” an attorney representing the firm told a bankruptcy court Tuesday.

“Unfortunately, the FTX debtors were not particularly well run, and that is an understatement,” James Bromley, co-head of the restructuring practice at law firm Sullivan & Cromwell, told a judge in Wilmington, Delaware.

Binance CEO Zhao Seeks Middle East Cash for Crypto Recovery Fund (9:50 a.m.)

Binance Chief Executive Officer Changpeng “CZ” Zhao and several deputies met with investors in Abu Dhabi last week in an effort to raise cash for a crypto industry recovery fund, according to people familiar with the matter.

Zhao and his team held meetings with potential backers last week, including with entities affiliated with United Arab Emirates National Security Adviser Sheikh Tahnoon Bin Zayed, who oversees a large financial empire, said the people, who spoke on the condition of anonymity because the talks were private.