FTX $500M Bankruptcy Fees Breakdown

Babylon $70M Raise | $473M in Hacks & Rug Pulls

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Good Morning.

The market is quite boring but the drama continues. Elon rebutted the rumor that said he has discussed crypto with Trump, crypto political pressure on Washington ramps up, and Caitlyn Jenner launched a meme token.

and oh… Izzy Agalea launched one too 🤦

In Today's Email:

  • What Matters: FTX $500M bankruptcy fee 💸 

  • Founders Highlight: Nicholas of Fortunafi 🎱 

  • Deal Flows: Babylon’s $70M funding 💰

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Narratives: Meme continues.

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WHAT MATTERS

FTX Lawyers-Advisors Rack Up $500M in Fees

State of play: FTX lawyers and advisors have seen $500M+ in fees approved as bankruptcy costs rise. Those overseeing the process have asked for over $700M, though many requests have been reduced by 20%.

  • The FTX estate’s special counsel, Sullivan, and Cromwell, leads with $254M in approved fees out of $360M billed. Financial advisors Alvarez and Marsel follow with $133M in approved fees.

  • Other firms and advisors, including AlixPartners and Quinn Emanuel Urquhart & Sullivan, have collectively charged $57M in fees.

  • The Official Committee of Unsecured Creditors has requested $81M in fees and $1.5M in expenses, while the Ad Hoc Committee has requested fees of under $5M.

  • FTX CEO John Ray III has charged $5.6M at an hourly rate of $1,300.

  • RLKS Executive Solutions, the estate's chief officers, have billed $26M.

Sullivan and Cromwell (S&C) is facing a class action lawsuit alleging its close involvement with FTX prior to its collapse makes the firm partially responsible.

  • The class action alleges that S&C, outside counsel for FTX, gained knowledge of the exchange's workings and supported its fraudulent behavior.

  • The lawsuit claims S&C represented Emergent, a vehicle used to buy Robinhood stock with FTX customer funds while representing former FTX CEO Sam Bankman-Fried.

  • In January 2023, several U.S. Senators raised concerns about S&C's impartiality regarding the exchange.

Why it Matters: The bankruptcy estate typically covers the enormous fees incurred in the proceeding. These fees, classified as administrative expenses, are accorded high priority for payment, often superseding other claims.

For builders and investors: FTX creditors getting their capital back should be a nice boost to the current market, although it’s a bummer that they won’t be getting the underlying tokens but the dollar value instead.

BUILDER-INVESTOR HIGHLIGHT

Nicholas Garcia of Fortunafi

Intro: Nicholas Garcia is the founder and CEO of Fortunafi, an on-chain financial institution that delivers an all-in-one liquidity solution for stablecoin issuers, protocol treasuries, and traditional entities.

Previous background: Garcia started his career at Wells Fargo and Zenefits as a financial analyst. He then served as the head of finance at Shippo before founding Space Whale Capital and Fortunafi.

The big idea: Garcia, through Fortunafi, aims to enable on-chain lending, access to yield, and grow the greater DeFi and stablecoin ecosystems.

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INSIGHTS

$473M Lost in Hacks and Rug Pulls in 2024

Credits to CoinDesk for the original report.

State of play: In 2024, crypto losses from hacks and rug pulls totaled over $473M across 108 incidents, as reported by security service provider Immunefi.

  • This month alone, $52M was stolen, primarily from Gala Games and SonneFinance, which were hacked for $21M and $20M, respectively.

  • However, the total lost funds reflects a 12% decrease compared to May 2023.

  • DeFi remains a key attack vector for hackers. CeFi did not witness a single attack in 2024.

  • Over $2B was lost to hacks and exploits last year, approximately half of the previous year's total.

  • Ethereum accounted for the highest volume of hacks, with 9 incidents leading to 43% of total losses, followed by BNB Chain with 19%.

DEAL FLOWS

Babylon $70M Funding From Paradigm

Deal flows slowed down a bit this week, we saw $140M+ in deals 💼 

The Bitcoin staking protocol Babylon secured $70M in funding, with venture firm Paradigm leading the round. Other participants included Bullish Capital, Polychain Capital, Hashkey Capital, Mantle, Galaxy, and Hack VC.

  • Babylon develops infrastructure enabling PoS systems to acquire staking capital from Bitcoin.

  • Using a modular design and slashing functionality, the platform allows stake-based systems like blockchains, Layer 2s, DA layers, and oracles to integrate Bitcoin as a staking and restaking asset.

  • The co-founder of Babylon said that the funding “will accelerate our mission to make Bitcoin the security backbone of PoS systems."

  • On February 28, Binance Labs invested an undisclosed sum in Babylon.

  • Polychain Capital and Hack VC co-led an $18 million Series A funding round in December 2023.

Deal flows in the past week:

QUICK BITES

  • Biden campaign ramps up the crypto industry.

  • EOS approved plans to cap supply at 2.1 billion.

  • Pudgy Penguins to release mobile game in 2025.

  • Aptos integrates Chainlink’s CCIP and data feeds.

  • TRUMP token sinks after he was found guilty in NY.

  • a16z backs crypto super PACs with a $25M donation.

  • LayerZero adds Solana to its cross-chain bridge network.

  • Do Kwon reached a 'settlement in principle' with the US SEC.

  • Sahil Arora pockets $380K from fake Iggy Azalea meme coin.

  • Grayscale filed an amended registration for its spot ETH fund.

  • Sen. Lummis & Rep. McHenry pressed Biden not to veto SAB 121.

  • A16z Crypto donates $25M more to pro-crypto super PAC Fairshake.

  • SEC’s Peirce proposes a US-UK crypto regulatory cross-border sandbox.

  • Bitwise suggests Trump was the only one aware spot ether ETFs would be approved.

  • SEC told spot Ethereum ETF issuers to get the first round of draft S-1 forms in by Friday.

NOTEWORTHY READS

  • Matti’s read on cryptotainment era.

  • Decentralised’s read on the data must flow.

  • Mason Nystorm’s read on the verticalization of the web3 social stack.

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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.