Cracks At Kraken | Andreessen’s Crypto Lobbying Push

CRACKS AT KRAKEN

One of crypto’s largest exchanges has recently undergone a leadership shift, with COO Dave Ripley replacing Jesse Powell, Kraken’s founder, who had led the company for more than a decade, while the rest of its C-suite remains largely unoccupied. The company is currently in search of a chief operating officer, a chief product officer, a chief technology officer, a chief compliance officer and it hasn’t had a chief commercial officer since June 2021. One recently departed executive called the C-suite turnover, “a seismic shift for a company at that scale in that amount of time.”

Kraken had emerged as one of the preeminent crypto exchanges, with backers such as Digital Currency Group and Tribe Capital and a reported valuation of $10.8 billion. It has ambitions of rivaling Coinbase and going public in an initial public offering. But in the past two years, Kraken has seen wholesale departures from its top echelons, including CEO Jesse Powell, whose whimsical management style and idiosyncratic personal views prompted a New York Times exposé about a culture war going on inside the 3,000-person crypto exchange.      

A16Z’S CRYPTO LOBBYING PUSH

The venture capital giant A16Z has raised $7.6 billion for investments in what it considers to be Web3 technology and has more than 80 portfolio companies, making it uniquely vested in political outcomes related to crypto. Since the firm, also known as Andreessen Horowitz, announced a crypto lobbying blitz in Washington a year ago, dispatching its team on a week-long tour last October, its leaders have donated almost $2.2 million to financing the campaigns of more than a dozen lawmakers and a political action committee (PAC) that supports them, according to a Forbes analysis of Federal Election Commission data. The bulk of these contributions, $2 million, went to a single super PAC, the blockchain-focused GMI, which poured money into other PACs that paid for ads and canvassing on behalf of crypto-friendly lawmakers. Campaign financing is just one of several ways A16Z is pushing its agenda in Washington. In the past year, it has published more than a dozen blog posts, whitepapers and studies that promote its crypto motivations and those of its portfolio companies. It also has sent letters to federal agencies, organized fundraisers for lawmakers and hired former SEC officials to further its interests.

While other venture firms have poured similar campaign financing dollars into this election cycle—employees of Sequoia Capital contributed $7 million, and Founders Fund staffers (excluding Peter Thiel) contributed $3.5 million—few of A16Z’s peers have mirrored its strategy and solely targeted crypto-friendly candidates.

Source: Forbes Digital Assets, powered by Nomics.  Prices as of 4:00 p.m. on October 21, 2022.

FTX-VOYAGER DEAL DRAWS OBJECTION, INVESTIGATION FROM TEXAS

Texas is trying to add requirements to the FTX acquisition of assets from Voyager Digital, which is operating under federal bankruptcy court protection, claiming both cryptocurrency exchanges are not complying with state laws. Documents filed in the bankruptcy case on October 14 also revealed that FTX and its principals, including CEO Sam Bankman-Fried, are under investigation by the Texas State Securities Board. The state alleged in a limited objection to the asset purchase that FTX and Voyager are operating money-transmission businesses without required licenses. FTX, whose U.S. subsidiary last month agreed to pay $1.4 billion to acquire Voyager’s cryptocurrency assets and use them to help bail out investors in an effort to gain new clients, denied the state’s allegation that it was operating improperly.

Bankman-Fried also drew criticisms from industry insiders this week after sharing a regulatory proposal that, commentators claim, hamstrings decentralized finance.

SILVERGATE EARNINGS CATCHING CRYPTO WINTER CHILL

Silvergate Capital on Tuesday reported a hit to deposits and depressed volume on its payments network, which is used by top crypto exchanges to fund customer accounts. Deposits came in at $13.2 billion, up 13.5% from a year earlier but down from $13.5 million in the second quarter. Despite the tumbling crypto market, the bank’s digital asset customers grew to 1,677 over the quarter. The reduced deposits likely reflect depressed crypto trading volume and possibly a shift away from digital assets by institutional investors. Average digital-asset customer deposits shrank to $12 billion, down from $13 billion in the second quarter. Silvergate’s net income came in above analyst estimates at $43.3 million, according to data from Bloomberg, up 84% from the third quarter last year. Earnings per share on the adjusted basis used by Wall Street, however, landed at $1.28, missing forecasts of $1.40.

On the earnings call, Alan Lane, CEO of Silvergate, also announced a delay to the company’s planned stablecoin launch, which was slated for this year. The company did not provide an updated timeline. In January, the bank purchased Meta’s abandoned Diem project for $182 million. Lane assured listeners that the delay is tied to regulatory uncertainty, rather than technology issues.

BLOCKCHAIN 50: CALL FOR 2023 NOMINATIONS

For four years, the Forbes Blockchain 50 list has chronicled the institutional adoption of technology popularized by bitcoin. Since the inaugural roundup in 2019 the enterprises on our list—often household names like Walmart and Boeing—have moved beyond test projects and now rely on distributed ledgers in key parts of their businesses to improve efficiency and transparency. Now is your chance to help us find the best possible honorees for next year’s issue. We look for businesses valued at $1 billion or more or those that generate at least $1 billion in annual revenue and have made meaningful use of the technology. Read more here.

ELSEWHERE

How Binance CEO And Aides Plotted To Dodge Regulators In U.S. And U.K. [Reuters]

DeFi Exchange Mango Markets Will Soon Start Refunding Users For $114M Exploit [CoinDesk]

Aptos Ruffles Feathers As It Enters Crowded Layer 1 Race [The Defiant] 

Nina Bambysheva
Reporter
Forbes Money & Markets

Steven Ehrlich
Editor 
Forbes CryptoAsset & Blockchain Advisor

Follow us on Twitter & Facebook