DOJ Probes Silvergate Over FTX-Alameda 👨‍⚖️

GM folks 👋🏻 - Happy Friday. I’m writing this issue with 6 shots of espresso as I’m trying to fix my circadian rhythm. The crypto space might function 24/7, but my body doesn’t. That said, I’m following the wise words of bbno$: “I’m in two time zones, find the money where I’m at”.

Enough with the digression ✋. In other news, the total crypto market cap is stuck at ~$1.1 trillion, Silvergate faces DOJ probe over FTX, and Coinbase stock jumped.

In Today's Email:

• What Matters: Silvergate faces DOJ probe 📓

• Founders Highlight: Machine learning for web3 smart contracts 🤖

• Deal Flows: Sorare $150M licensing deal with The Premier League ⚽

WHAT MATTERS

DOJ Probes Silvergate Over FTX and Alameda 📓

State of play: Silvergate has been under a lot of fire lately. The bank who’s known for providing services to crypto businesses is facing a probe by the DOJ. The investigation is looking into Silvergate’s dealings with FTX and Alameda. The bank hasn’t been accused of any wrongdoing. Stock fell significantly post market close on Thursday 📉

• SBF has previously stated that Alameda bank accounts were used to move FTX funds. It was a way for FTX to work around banks’ rule and regulation, and this was made possible via Silvergate’s services. Uh oh…

• Silvergate is notable for its private blockchain called the Silvergate Exchange Network (SEN). SEN helps crypto firms conduct transactions with one another while having banking access in an efficient manner.

• As a result, this investigation might potentially provides the DOJ with a deeper look into transactions between exchanges.

Why it matters: It’s difficult to state how powerful crypto exchanges are. They are essentially full-fledged financial institutions but without the regulations and guardrails. I’m against overregulation for decentralized infrastructure, but centralized exchanges deserve all the regulations they can get 👨‍⚖️

• They’re sort of like a bank, but without proper rules surrounding how they handle reserves, custody, and rehypothecation 🏦

• They can transfer capital across jurisdictions much quicker, with much less oversight. This opens up potentiality for corruption, money laundering, a much more. Just yesterday, the owner of Bithumb was arrested in South Korea over alleged embezzlement.

• In emerging markets, the flow of capital running through these exchanges can even be larger than most banks in those countries.

For builders: Don’t repeat Solana builders mistakes of trusting FTX. Verify, don’t trust. If you ever need to do business with centralized exchanges, make sure that you do proper counterparty diligence on how they’re structured. Receiving investments or participating in their launchpad might be a great growth hacking strategy, but I won’t recommend anything further.

For investors: A decentralized Silvergate would be a great idea. Basically, no one has truly solved the problems of having banking access for crypto companies. As a result, smaller banks with weaker controls entered the market to service these businesses. We can wait for the bulge bracket banks to slowly make their ways into crypto, or we can brainstorm a new on-chain product (or at least partially) that minimizes the need for centralization, while providing similar services to banks.

BUILDER-INVESTOR HIGHLIGHT

Ron, David, Ethan, and Arnaud - Founders of ChainML

Ron Bodkin, David Mueller, Ethan Jackson, and Arnaud Flament are the founders of ChainML. They’re building a tamper proof, scalable protocol for decentralized machine learning and data-driven computation in web3. Wow, that’s a mouthful. 

Simply put: ChainML is developing tools to simplify AI/ML usage in smart contracts.

Three of them, specifically Ron, David, and Arnaud were previously at Teradata — a multi-cloud data platform for enterprise analytics.

Previous backgrounds:

• Ron Bodkin was formerly a VP of AI Engineering and a Technical Director at Google 👨🏻‍🔧

• David Mueller was formerly a Director of Data Science at Coupang 📊

• Ethan Jackson was formerly a Machine Learning Scientist at Vector Institute 👨‍🔬

• Arnaud Flament was formerly a VP of Software Engineering at Ripcord 🧑🏻‍💻

The big idea: Currently, there’s not enough data storage or computational power to run ML on-chain. Some projects might use AWS to solve this problem, but that opens them to centralization and censorship.

ChainML aims to solve this by leveraging decentralized databases, oracles, and compute networks. To learn more about the technicalities, click here. ChainML last raised a $4M round.

DEAL FLOWS

Sorare $150M Licensing Deal

Deal flows are on fire 🔥 — we saw over $350M in deals. Most of the deals conducted were for Seed Round, but a bulk of that deal is Sorare’s massive $150M licensing deal with the English Premier League.

Sorare $150M Licensing Deal: Sports betting is the original digital casino. Before crypto, college kids were using sports betting app to trade during math lessons. Now, digital trading card company Sorare has inked a deal with the English Premier League to provide NFT offerings.

• Sorare has 3 million users. Those who own NFTs will be able to build their own teams and compete in a fantasy competition that generate rewards based on real-world performances. The deal will last for 4 years.

• Sorare previously raised a $680M Series B round at a valuation of $4.3 billion in September 2022. If you think that’s an insane figure, don’t be surprised when I tell you that SoftBank was involved 👴🏼

Deal flows in the past week:

• HatchFi, $1.2M Pre-Seed Round

• Rysk Finance, $1.4M Pre-Seed Round

• Vest Exchange, Undisclosed $ Seed Round

• Value.co, $2.7M Seed Round

• Sumi Network, $3M Seed Round

• Squid, $3.5M Seed Round

• Bunzz, $4.5M Seed Round

• Archimedes, $4.9M Seed Round

• Oh Baby Games, $6M Seed Round

• Addressable, $7M Seed Round

• Sovereign Labs, $7.4M Seed Round

• Hypernative, $9M Seed Funding

• Sec3, $10M Seed Round

• Pow.re, $9.2M Series A

• Giga Energy, $10M Series A

• Blockjoy, $12M Series A

• VitaDAO, $4.1M Token Round

• Fungify, $6M Unknown Round

• Senken, $7.5M Unknown Round

• Bibliotheca DAO, $3.9M Community Round

• YGG Japan, $2.95M Private Round

• Brave Group, $2.3M Strategic Round

• Everscale, $5M Strategic Round

• Simba Chain, $30M Strategic Round

• TeraWulf, $32M Equity Offering

• Breed VC, $20M Fund I

• Akerna Corp, Undisclosed $ Stock Acquisition

QUICK BITES

• Silvergate probed by the DOJ over FTX-Alameda dealings.

• Tether’s ownership investigative piece by the WSJ.

• BNY Mellon names its new crypto CEO.

• Coinbase gets out of class-action lawsuit.

• Tether denies borrowing $2B from celsius.

• BNB Chain introduces new web3 storage network.

• Binance re-enters South Korean market.

• IMF-G20 plans to work on crypto regulation.

• Logan Paul named in proposed class action lawsuit.

• SBF negotiating bail conditions.

• MicroStrategy books impairment charge on Q4 BTC holdings.

MEME & NOTEWORTHY READS

• QCP Capital’s thread on the FOMC update.

• Fisher8 Capital’s report on the state of crypto and sport.

• Andre Cronje’s article on the death of DeFi and RWA.

Jokes aside, Munger is great, but if you’re 99 and got the FAANG boom wrong you might want to focus on grandkids and charitable endeavor instead…

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Disclaimer: All the information presented in this publication and its affiliates is strictly for educational purposes only. It should not be construed or taken as financial, legal, investment, or any other form of advice.