The Breakdown First Five - Tuesday September 12, 2023

Welcome back to The Breakdown First Five — the 5 most interesting and/or important stories in bitcoin, crypto, and markets to start your day.

5. FTX Creditors Meeting

FTX have filed paperwork updating out the financial situation of the bankrupt exchange. The firm has $7B in assets including $1.2B in Solana tokens and over $200M in Bahamas real estate. Around $65B in non-customer claims have been filed, although $43.5B is claimed by the IRS which will likely be subordinated to customer claims. The filing showed that $2.2B was paid out to 50 “insiders”. Wednesday’s omnibus hearing will address potential liquidation of crypto.

4. Banana Gun Backfires

The launch of a token for telegram bot Banana Gun went extremely poorly, dropping by 99% within 3 hours. Traders suspected a rug pull but the truth was way more stupid. The token’s tax was incorrectly coded to print extra tokens rather than remove them. Banana Gun claimed to have passed two audits. One user easily identified the bug using ChatGPT. Some suggest the bug should be an easy fix, others suggest the entire project is cursed and should be deleted.

3. DeFi Education Fund vs Patent Trolls

The DeFi Education Fund is taking on a patent troll targeting DeFi protocols. The troll claims to own the rights to processes for “linking off-chain data to a blockchain”. According to the DEF, the troll tried to sell the patent as an NFT. Finding no buyers, they then sued MakerDAO and Compound in October. The DEF claim the patent wasn’t novel when it was issued in 2018.

2. Mr Gensler Goes to Washington

Gary Gensler is set to testify before the Senate today in a routine oversight hearing. His written remarks doubled down on the SEC’s strategy regulation by enforcement. Top of mind will be the SEC’s recent losing streak in the courts and a crypto custody rule proposal that has drawn complaints from tradfi institutions, finance industry groups and lawmakers.

1. Crisis Ripples Through Fortress

The Ripple acquisition of Fortress Trust is starting to look more like a bailout. On Thursday, Fortress had a security incident which lost customer funds, believed to be over $10M worth of Bitcoin. Ripple has confirmed that they stepped in to make customers whole as part of the deal. The details look very similar to Prime Trust’s 2021 “wallet incident”. Both companies provided custody to Swan Bitcoin and had common key executives.

Thanks for reading -NLW