July 19, 2022
Photo: Dania Maxwell/Bloomberg via Getty Images
Good morning, and welcome to Protocol Fintech. This Tuesday: Celsius’ restructuring plan, Goldman’s strong earnings and Wefox’s big round.
A yacht. A mansion. How far did the excesses of Three Arrows Capital’s founders go? Details are now emerging through bankruptcy filings. One of the founders was thinking particularly big before crypto prices tumbled. “Thinking about buying all the good-class bungalows in Singapore and turning them into parks & regenerative farming,” Zhu Su tweeted last year. He also mused about Elon Musk building a “self-driving” ship that would mine bitcoin at sea. Given how Tesla’s Autopilot has been going, I’m not sure I’d board that vessel.— Owen Thomas (email | twitter)
Android and Google Play are blank canvases. Developers are the artists who paint on them: During the past two years there has been a big debate between life and livelihood. A lot of people had to make a choice between the two. Those who could work from home didn’t have to make that hard choice because we could have both life and livelihood — and tech was the reason people could have both.
Celsius customers who have been locked out of their cryptocurrency accounts for more than a month may have to choose between taking a discount on what they are owed in cash or holding out for whenever token values recover. At a bankruptcy hearing Monday, attorneys for the crypto lending company detailed its plan to resurrect the business.
"This is not a liquidation," said Patrick Nash, an attorney with Kirkland & Ellis, representing Celsius. "We do not intend to force customers to take their recovery in fiat currency. All is not lost."
Celsius customers are angry. That much was acknowledged by Nash. "The anger and frustration has been exacerbated, in my view, by the company's relative silence" leading up to the bankruptcy, he said.
The financial picture for Celsius is not pretty. CEO Alex Mashinsky, who was on video in a suit and tie during Monday's hearing, detailed the company's significant cash shortfall in a bankruptcy court filing last week.
Celsius wants to mine itself out of trouble. The company has a bitcoin mining subsidiary, Celsius Mining.
Both Celsius and competing crypto lender Voyager, which filed for bankruptcy a week earlier than Celsius, hope to restructure as going concerns and will need customers to trust them with their money to do so. That could be a hard sell, given the anger that Celsius’ own attorney acknowledged Monday.
Restricting withdrawals "erodes customer trust" and makes it much harder to reorganize in bankruptcy court, wrote Adam Levitin, a law professor at Georgetown University who studies bankruptcy, in an op-ed published Monday by The Deal. "No customer will trust a financial services business that has lost his or her money," Levitin wrote. "When financial services businesses file for bankruptcy, they generally end up liquidating. The same is likely to be true for cryptocurrency companies." If Celsius wants to prove itself an exception to the rule, it will have to hope its customers’ hunger for crypto is stronger than their anger.
On Protocol: Bankrupt crypto hedge fund Three Arrows Capital owes $3.5 billion to creditors. The largest creditor, with a $2.3 billion loan, is a unit of crypto prime broker Genesis, which is owned by Digital Currency Group.
Coinbase got a regulatory thumbs-up in Italy. The company said Monday it has approval from Italian regulators to continue operating in the country, after the country's Organismo Agenti e Mediatori set new rules for firms offering crypto trading.
Dutch regulators hit Binance with a $3.4 million fine. The Dutch central bank, De Nederlandsche Bank, said Binance was operating without proper registration. The company said it is working with the regulators and will appeal.
The Consumer Financial Protection Bureau wants to prod banks to pay back more customers who are the victims of scams on Zelle and other money-transfer services. The agency is planning to release new guidance in the coming weeks.
Also on Protocol: The FBI issued a warning Monday for financial institutions and investors urging them to watch out for fake crypto apps, which have already cost victims more than $40 million.
Voyager and Celsius have the same law firm guiding their bankruptcies. Kirkland & Ellis, the world's largest law firm, is keeping busy in the crypto crash.
Goldman Sachs' consumer and wealth management unit, including the digital bank Marcus, posted record revenue of nearly $2.2 billion in the second quarter. That's up 25% from the same period last year, according to the company. Marcus is still reportedly bleeding money, though.
“Someone just called a brief sync up before a bigger meeting the ‘premint’ and I’m done for the day,” said Homebrew partner Hunter Walk, and … yeah.Rep. Jim Himes, a former Goldman Sachs banker, has been watching Congress get educated about crypto in real time: “Five years ago, if you'd said cryptocurrency, there'd be two people in this building who would know what the hell you're talking about,” he told CoinDesk.
German digital insurer Wefox raised $400 million in its series D round. Abu Dhabi’s Mubadala led the round, valuing the unicorn at $4.5 billion despite generally falling valuations in insurtech.
Lightspeed Venture Partners led a $25 million series A round in Robinhood’s European competitor Lightyear. Richard Branson also participated in the round.
New York crypto prime brokerage Hidden Road Partners raised $50 million in a series A funding round. Castle Island Ventures led the round, with participation from FTX and Coinbase Ventures.
Mysten Labs is looking to raise a $200 million series B round led by FTX Ventures, reports The Information. It would put the Palo Alto blockchain infrastructure startup at a $2 billion valuation.
DeFi lending protocol Morpho raised $18 million in a round led by A16z and Variant. The round, raised via a native token sale, also saw participation from Coinbase Ventures, Spark Capital, Standard Crypto, Cherry Crypto, Nascent and Semantic Ventures.
Indian startup FPL Technologies, known best for its OneCard credit card, raised over $100 million in a series D round. Temasek led the round with participation from Sequoia Capital India and Hummingbird Ventures. This puts the company at a $1.4 billion post-money valuation.
Financial infrastructure and data analytics company Pico raised $200 million from PE firm Golden Gate Capital. The company says it will use the funds primarily for M&A.
Android and Google Play are blank canvases. Developers are the artists who paint on them: Many people don’t realize the many ways developers benefit from Google Play and that the core DNA of Android is open. From the minute that developers get a creative idea, they have every tool they need to build the app, understand the security policies, launch the app and gain a global audience.
Thanks for reading — see you tomorrow!