Galaxy’s $1 Billion Solana Coup | Elizabeth Warren’s ‘Shrinking Iceberg’

Designed as an alternative to the ether blockchain, solana was championed by Sam Bankman-Fried, the FTX founder, who told Forbes in 2021 that he was “basically” a “fanboy.” The allure was solana’s potential to process hundreds of thousands or even millions of transactions a second. Bankman-Fried loaded up on the blockchain’s sol token, and current management found about 59 billion of the coins by August 31, 2023, when they were worth about $20 each, up from $15 around the time of the FTX bankruptcy. Starting in October, sol took off and is now quoted at $166. 

That’s not doing FTX’s former customers much good. In September, the crippled exchange hired billionaire Michael Novogratz’s Galaxy Digital Holdings to help manage the crypto pile. The sols had a problem, most of them could not be sold right away, they could only be liquidated in monthly batches between 2025 and 2028. That created a high-return possibility for investors with patience and deep pockets. The plan was to sell off the sols in several transactions, and when the winners of the first batch in a March sale were announced, Galaxy, it turns out, was not only the auctioneer but one of the buyers as well. It paid $620 million to purchase what would have been 9.7 million sols if it paid the same $64 per token as other buyers. At current prices, the tokens are worth $1 billion more than that, and Galaxy also participated in the second of three auctions. In both cases, the sols were put into a fund that Galaxy is managing for a 1% annual fee.

FTX tells Forbes that the participation of Galaxy on both ends of the auctions was approved by the bankruptcy court and that the firm paid at least as much as other bidders. Should creditors be upset? Rob Hadick, general partner at the Dragonfly venture-capital firm, says “It’s not unheard of, or even that uncommon, for an investment bank to participate in multiple parts of a sale or liquidation event, like what happened here.” He adds, however, “It’s clearly bad optics that will raise eyebrows from any creditor committee…Things like unfair access to information and disincentivization of robust price discovery are valid concerns."

Read the full story: This Crypto Billionaire’s Fund Could Reap More Than $1 Billion From The FTX Bankruptcy

Salame, the former co-CEO of Bahamas-based affiliate FTX Digital Markets, was also sentenced to three years of supervised release and must pay more than $11 million in fines (more than $6 million in forfeiture and more than $5 million in restitution), according to prosecutors. Salame conspired with Bankman-Fried and employees at FTX, Alameda Research and an entity referred to as North Dimension to “transmit FTX customer funds without a license” and also conspired with Bankman-Fried and fellow FTX executive Nishad Singh to make campaign contributions that hid Bankman-Fried’s association with the donations, prosecutors said.

Three other former executives—FTX cofounders Singh and Gary Wang, as well as former Alameda Research CEO Caroline Ellison—also pleaded guilty to various financial crimes. The three have yet to be sentenced.

“In the area of crypto, notwithstanding spectacular frauds like Sam Bankman-Fried and what seems to be kind of coordinated efforts at suppression by the Biden administration, Bitcoin continues to grow in its durability and its usage. So decentralized tokens, systems of value continue to grow. The current U.S. position of resistance and suppression is an outlier. I think it's an outlier in global development.

“I think it's an outlier in America’s historical receptivity to innovation. And it's an outlier in American politics because it seems to be confined not just to one party because there are a lot of Democrats who are very open to this despite a small but vocal minority that oppose it. And it's unsustainable."

“I think it says that the Elizabeth Warren wing is a shrinking iceberg. When the Senate majority leader Chuck Schumer signs the rebuke of 121, that's a pretty good statement. Now, Machiavelli might say he can sign it because he knows the White House will veto it, but I think it's a pretty good rebuke, and you have to think that the banks are supportive of that as well. Notwithstanding some parts of the banking system that may be resistant to digital asset innovation, forcing them to reserve a hundred percent against their holdings effectively means banks can't be a player in this innovation. I think the rejection of this is there. So the White House may veto this, but I think it puts them in an increasingly untenable position against the tide of history, against the tide of innovation.”

“It's a generational divide as well. I think this view of anti-crypto armies is an octogenarian point of view that the next generation up just doesn't have this innovation. One of my favorite authors is Doug Adams, who wrote the Hitchhiker's Guide to the Galaxy series of books. Adams has a quote, which I'm going to mangle here, but it basically says, ‘Anything that's invented before you turn 35 is super cool, worthy of enormous amounts of time and attention, and might be the vocation for the rest of your life. But anything that comes about after you're 35 is a dangerous suspect that needs to be suppressed.’ ’’