This Week in Crypto: The Latest on Sam Bankman-Fried

been denied bail related to multiple serious criminal charges. On Tuesday, he signed documents formally agreeing to be extradited to the US to face the courts there about those allegations, and on Wednesday, a Bahamian judge approved that petition. So what that means is, you know, we're out of stage of this ongoing ft X crypto winter that's about to get

even more interesting. We'll talk about those latest developments here as well as what's playing out at Finance, which is by far the largest crypto exchange in the world by volume, to help me contextualize all of the big stories this week, I am delighted to be joined by my colleague Bloomberg editor Beth Williams. What we're seeing is the depressed crypto prices combined with high energy costs are really squeezing bitcoin miners.

But so I feel like Sam Bagoon Free is running our lives right now, just in terms of you know, we wake up every day around the world look to see what thing has happened in terms of the dissolution of this former crypto empire, whether it's hearings or filings, what's the latest on that will face a slew of charges criminal and civil over the implosion of of f t X, which appears caused by alleged mismanagement and potential

misappropriation of funds. What we'll see is as as the backdrop of this these proceedings is going on, they will be further bankruptcy proceedings trying to get any of that money back. Are the crypto back with investors from you know, very large VC funds and investment funds to small time investors, all looking and hoping to get the money return that

has been locked since the bankruptcy. It does seem to your point that we're at a stage where things might move potentially very slowly, given you know that the U. S. Court system is now going to have to bring a bunch of people forward, possibly as witnesses what does that mean for what we might be thinking about in January and onward into I think you're right, at least in terms of looking at it in terms of crypto reporting from the you know, market and company perspective, it had been,

as you point out, very fast paced, very much development after development in terms of f t x is implosion and then these criminal charges and then Sam Bank and Free getting arrested, and now it's not that things won't proceed, but they sort of shift into a new phase where we're looking at sort of how it plays out in the legal framework, and as we've seen in past instances

in crypto and elsewhere, it can take a bit of time. Uh. In terms of the crypto world, we are still looking at potential contagion and where these events will lead in terms of potential regulation, which should be a big theme

going into after what we've seen this year. And one of the companies that we've been coveringing in that context is really a company that was around before FTX, and that's Binance, right which the world's largest exchange and you know, Binance over the past several months has been under a

lot of scrutiny for a couple of reasons. One, you know, the feud between Sam Bank Win Freed and the Binance ceo you know who goes by cz really spilled into public on Twitter, and you know, you could you could definitely point to kind of a timeline of how this very interpersonal battle between these two Crypto Titans or former titans had major consequences for the rest of the market.

But what are people worried about with Binance? So why have they been facing, you know, in some weeks withdrawals, What are some of the issues that they're dealing with in terms of their reserves, and how have they been trying to, as they would put it, defund the speculation around them. There was a few happening between spn f as as sand Bank and Freed's known and and c Z at Binance, And coming out of this implosion of f t X, you have Binance and c Z saying

you we're not like them. Are balance sheet is clean and you can trust our exchange. But the problem is with Crypto and with Binance in particular, there's a lack of transparency in exactly what they have or what they own. We don't know, we don't even know where they're based. They have many different affiliates around the world, but no

particular place that they call home. Even though c Z would seem to set himself apart from something like f t X plaguing Binance that plague f t X. If you're from an investing standpoint, you don't know what finance is doing with your crypto. You only can take what c Z says, and you have to, you know, believe it or not. And after we've seen you know, collapse after collapse this year, culminating in sand Bankman freed, which we're pre seated by reassurances that ended up not being true.

When we hear this from c Z and Binance, we wonder as well. He also faces several other charges related to money laundering. And so I think all of these things lead one to say, you know, fool me once, shame on me. You know, not that will be fooled by by by nancer CZ, but it causes investors to take pause. And that's why you're seeing some withdrawals from exchanges. Investors just don't know who to trust, right and you know, just to kind of reussories and recap what you're saying.

There's no evidence that Finance isn't fine. The problem for some more skeptical investors is that they've also not presented any evidence that they are fine, right like, this is this is the kind of the tension around the fact that crypto and the crypto industry is like you can just look at the blockchain and see what we're up to, which only it works up to a point, and that

point stops when it's like internal company financials. And so there's been this outpouring of requests for should crypto companies be formally audited? Right like? Should they really have to go through much more rigorous reviews and scrutiny as it

relates to their financial health? In an attempt to give investors a little bit more reassurance and interesting fact, Finance had retained an accounting firm not to do an audit, but to at least to say kind of provide a statement of like, yeah, this looks fine as far as we can tell, and that firm mas ours sometimes when US Mazars, depending on the side of the Atlantic that you're on, have now decided they're just not going to

do any crypto stuff anymore. In a very short amount of time, they went from being introduced as you know, the accounting firm for cou coin, Binance, a couple of others, and then they were like, oh nope, we've changed our minds, which again is not the most reassuring thing to happen in crypto this year, right, And as you point out, even what they were providing was not a complete snapshot, but it was something, and it raises an interesting question

just in terms of accounting. You can sort of understand. It's fascinating you've got crypto companies that want these so called proof of reserves, which is a way of showing at least the assets they have at a snapshot point in time, if not a full picture, and then you have accounting firms where perhaps maybe there's a lack of transparency that they can't even get through that makes them perhaps paused before they want to proceed on this work.

I want to talk about the World Cup, just very briefly, because I feel like we have to because that final match was wild, and also because there was an absolutely stunning photograph of you know, Messy celebrating scoring a goal and then in the background just see crypto dot com.

Because again, it wasn't a major sporting event unless there was some kind of sports sponsorship, and our colleague Carly Wanna, who has been on this podcast before, had written previously kind of of the curse of some of these crypto sponsorships, like what you know just as a as the person who edits our wonderful Crypto newsletter? What did Carly right

for the newsletter? As an update to that after the World Cup Final she was talking about sports sponsorships and how you know f t X was one of the biggest sports sponsors Tom Brady, Steph Curry all over the Super Bowl, which was started the year on a little

bit of a hot brighter note. They've had to backtrack a bit and the sports teams affiliated with them and organizations have also severed ties that made it a little bit more challenging for some company like crypto dot com to gain a lot of enthusiasm and gained attention, but maybe not the same kind of mojo as it might

have otherwise. And what she is wondering was wondering in the newsletter is we've seen sports sponsorship deals decline pretty precipitously from the first half of the year, So I find it fascinating just looking at the year in crypto From the sports angle, you look at the book ends of the Super Bowl, which was called by some the Crypto Bowl, uh, and football super Bowl of Crypto American football, something I know a little bit better than the other kind.

But then you have the other kind where you know, crypto dot com is sort of an afterthought or maybe it gives people a little heartburn when they see it. Actually And as you are a person who also is a big baseball fan, what's going on with the Washington Nationals? Are they still sponsored by Tara and Luna as far

as I know? And uh Tara is. Last I saw was you could see it on on some of their luxury seats, and that was quite something in the spring as that was the beginning of the baseball see reason and um, that was the beginning of the major collapses of of the terror implosion that caused this wave of contagion that ultimately ended up with the collapse of f t X. We'll be right back with more of the week's top stories, and you'll hear more from Bloomberg Deputy

editor for Crypto, Beth Williams. Beth, you know we've talked about exchanges, but one of the other players in this market and not just a player like an essential parts of the ecosystem are, of course, the bitcoin miners. And I feel like our colleague David Pan probably didn't expect to spend most of his year writing about how bad the financials of so many of these companies were. You know, just this week we had yet another bitcoin miner file

for bankruptcy, Like what's been going on over there? When I think of miners, I think of distressed when it when it comes to crypto. This week we saw Core Scientific, which was one of the biggest bitcoin miners, file for bankruptcy after warning that it was under distress. What we're seeing is the depressed crypto prices combined with high energy

costs are really squeezing bitcoin miners. And then of course you've got a backdrop of an increasing interest rate environment, so that any kind of financing is going to get more expensive. You add that all together and it's a it's just a grim environment for miners. Uh. And we even saw another major minor called Greenage, also warned that it may be headed that down that path. It's trying to do a debt restructuring, but a lot of these do have debt, so you've got debt, you've got high costs,

and you've got low bitcoin prices. It's a very bad combination. And a lot of these folks borrowed money from other players in the crypto ecosystem who are themselves kind of facing distress. And you know, that kind of brings us back to this idea of interconnection. We've just published sort of a year in review Year in Crypto that was

that was really defined by two graphical elements. Shout out to our colleagues who worked on this for several weeks, and one of the things that really struck me is you could really see those interconnections, right like how you go from a terror Luna collapse to a three Arrows collapse to everything happening with FTX and then a bunch

of names scattered in between. Does that concentration surprise you given that, you know, when you were coming into crypto, everybody was like it's old decentralized, Like you know, there's there's no one single point of failure. It does surprise me. Um, But it also, I guess in a way doesn't because even though it's it is meant to be decentralized, it's meant to that there is supposed to be this mainstream appeal trying to bring in sort the little guy, the

little investor. It is very concentrated. It always was very concentrated, and I think even some of the bitcoin whales, you know, you could see that ownership of some of the bigger tokens is very concentrated. This is something I found out

over time. It's an all for one, We're all in it together sort of in some ways, and some of these big players they relied on each other, even though they sometimes point fingers at each Other's a lot of egos involved, but at the end of the day, there's this sort of faith that they all had in this sort of new new thing. And as long as everybody had that faith and everyone was still willing to keep keep it going, it all worked great. And then as soon as there was a little bit of crack showing,

it's stunning how quickly it all unraveled. So I am nos all persuaded that everyone in crypto is in it together, just based on like public statements of CEO is going on Bloomberg TV and saying that other CEOs or complete criminals and should be in jail immediately. That's another thing that doesn't seem to have reassured a lot of retail investors about what's going on in the market in some ways, and perhaps this is just my my own opinion, but it's it's sort of a lack of maturity in dealing

with business. This is business that had become multi multibillion dollar business. It's not a sandbox. But I think some of these executives treated it that way or they felt that they could make these comments but there would be no consequences. And I just think there's a lot more in the sort of traditional business environment and world. There's

a sense of how you comport yourself. There's a sense of how you communicate, there's a sense of even how you compete, and it's just totally warped in different in crypto uh, such that sometimes in quote competing or or communicating,

they end up sabotaging or self sabotaging. You've just made me think kind of as a closing thought about an episode we did earlier this year in which we talked to a person who's an executive recruiter for like very senior positions, right like you know, the C suite on and one of the things that she said, is there's a time and a place for different kinds of CEOs.

Like sometimes in the beginning, you want to have that CEO who's got that big personality and as a trash talka and it's super competitive, but that's not necessarily the CEO you want if you are being called to testify on Capitol Hill, or you know, have to be in repair and clean up and restore credibility and confidence mode.

And so I think it will definitely be interesting to see in twenty three whether any of these folks either higher media consultants or executive coaches, or if we see another round of executive shake ups in the way that

we did in the summer. This is true. We we were even talking about that before, as you say, in the summer, before even what happened with their t X, we saw a number of C suite executives depart or be replaced, and the thought that we had going forward was that again, yes, if this industry is to mature, perhaps a new skill set needs to be used to get the industry to that next level. We'll see if it happens. Yes, it's like the famous closing words of journalists, well,

you know, too early to tell, but we'll see. Thank you, Beth, It's always a pleasure to have you on the show. Thanks. You can find more of Beth's work on the Bloomberg Terminal, on Bloomberg dot com and on Twitter. And Beth is the main editor for the twice weekly Bloomberg Crypto newsletter, so you definitely want to sign up for that. This is Bloomberg Crypto, a daily podcast from Bloomberg and I

Heeart Radio. For more shows from I Heart Radio, visit the i Heart Radio app, Apple Podcasts, or wherever you get your podcast. Send us your comments, questions, or suggestions for the show to Crypto at Bloomberg dot net. The supervising producer of Bloomberg Crypto is Vicky Vergelina. Our senior producer is Janet Babin. Our producers are Mohammed Farup and Sharon Barriro. Our associate producers are Ty Butler and Moses on Them. Desta wonder At is our engineer. Original music

by Leo Sidron. I'm Stacy, Marie Ishmael have a great legit