FTX clawbacks, Genesis silver lining?

Remember when Sam Bankman-Fried admitted to being a significant donor to the Democratic and Republican parties? Well, the recipients of the tainted money have been formally asked to return the funds to FTX’s creditors. So far, we know of three prominent Democratic groups—the DNC, the Democratic Senatorial Campaign Committee, and the Democratic Congressional Campaign Committee—that have returned SBF-related donations in December 2022. Will the rest follow suit?

While FTX seeks repayments, Digital Currency Group and its bankrupt subsidiary, Genesis Global Trading, have agreed to a restructuring plan. The good news is that Genesis account holders will get most of their money back if the deal goes through.

This week’s Crypto Biz revisits familiar stories surrounding FTX and Digital Currency Group and breaks down crypto’s lack of public trust.

FTX seeks to recover political donations by the end of February

The rise and fall of Sam Bankman-Fried was shrouded in extreme controversy after we learned that the FTX founder was a massive donor to the Democratic and Republican parties. Now that bankrupt FTX is recovering cash and liquid cryptocurrencies, the company’s new management wants to recover all political donations from SBF and his cronies. “FTX Debtors sends confidential messages to political figures, political action funds and other recipients of contributions or other payments made by or at the direction of FTX Debtors, Samuel Bankman-Fried or other officers or principals of FTX Debtors,” wrote FTX attorney Andy Dietderich. “These recipients are requested to return such funds to the FTX debtors by February 28, 2023.”

DCG Offloads Grayscale Shares to Raise Capital: Report

Grayscale products were a hot commodity during the bull market in 2021. Now even Grayscale’s owner is offloading shares to preserve capital and liquidity in the middle of the bear market. Citing US securities filings, the Financial Times reported on February 7 that Digital Currency Group (DCG) sold shares in several Grayscale products, including the Ether investment fund, possibly to avoid a deeper liquidity crisis at the holding company. Digital Currency Group confirmed the sale, but attributed it to “ongoing portfolio rebalancing.” DCG’s financial problems are well known by this point. Much stems from subsidiary Genesis, which filed for bankruptcy on Jan. 19, reportedly owing $3 billion to creditors.

Genesis creditors expect 80% recovery under proposed restructuring plan

Speaking of Genesis, creditors can expect to get 80% of their money back – but only if a recently proposed restructuring plan goes smoothly. On February 6, Genesis announced that it had reached an “agreement in principle” with DCG and its creditors, which would eventually pave the way for customers to recover most of their deposits. Under the proposed deal, DCG will exchange a $1.1 billion promissory note due in 2023 for convertible preferred stock and refinance existing debt to free up $526 million. The Winklevoss twins’ Gemini exchange will also contribute $100 million to Gemini Earn users whose funds are frozen with Genesis. Although everything goes according to plan, the relationship between Gemini and DCG seems irretrievably broken.

Crypto ad deals for Super Bowl LVII fall apart after FTX collapse: Report

Don’t expect a crypto Hail Mary during the Super Bowl this weekend, as the NFL has reportedly scrapped any plans to advertise the industry on game day. According to a report by the Associated Press, the league considered running four crypto-focused commercials during the Super Bowl. Crypto will now get “zero representation” during the big game due to all the bad press surrounding the industry. It seems like a million years ago, but Super Bowl LVI in 2022 featured commercials from FTX, eToro, Crypto.com and Coinbase. Even comedian Larry David was tapped to advertise FTX. He is now facing a class action lawsuit for allegedly pumping the crypto exchange without due diligence.

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