Why Bitcoin Got Interested With Georgia » FINCHANNEL – The FINANCIAL

Why Bitcoin Got Interested With Georgia » FINCHANNEL – The FINANCIAL

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Yearly this year, Sam Bankman-Fried, FTX founder met Georgia’s Prime Minister Gharibashvili to discuss prospects for Georgia as regional office of FTX. 

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Georgia’s strategic location, stable and favourable business environment and opportunities for investors were discussed at the meeting, the government administration said, while Garibashvili tweeted his team had highlighted the country’s prospect to be an “outstanding platform” for the exchange platform.

The government head suggested to the founder of the crypto derivatives exchange to consider expanding its regional office or customer service in Georgia, which would serve a wider regional area. Garibashvili highlighted the Georgian government welcomed investors and was ready to facilitate foreign direct investment in the country.

The founder and CEO of FTX ($40 billion in assets) was one of the richest men in the crypto industry and has amassed $22.5 billion before turning 30 by profiting off the cryptocurrency boom. Untill now. 

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In November, the Bahamas-based FTX filed for bankruptcy after a liquidity crisis led to a mass exodus of customers from the platform. Bankman-Fried had allegedly transferred $10 billion worth of customer credit from FTX to sister firm Alameda Research, according to multiple reports.

Amid the company’s demise, Bankman-Fried’s estimated net worth plummeted from more than $15 billion to no material wealth in just days. The former billionaire issued a public apology admitting he had “f—ed up” and the new FTX CEO stated during court proceedings that he had never before seen “such a complete failure.”

Amid a probe into the collapse of the FTX cryptocurrency exchange, Turkish authorities have seized the assets of Sam Bankman-Fried and other affiliates, the Turkish Treasury and Finance Ministry announced on Wednesday.

On Niovember 30, Georgian Prime Minister met Changpeng Zhao, CEO of another Crypto Exchange market – Binance.

PM Irakli Garibashvili stated that the Government of Georgia stands ready to greatly support and facilitate the foreign direct investments (FDI) and that legislation of the country is ready to regulate the cryptocurrency exchange.

Daughter companies of the world’s largest cryptocurrency exchange – BINANCE – are operating in a number of countries, including Spain, Italy, France, Bahrain and United Arab Emirates (UAE). After the meeting with PM, Zhao said its office in Georgia will be hiring new people. 

Georgia Strives to Become a Crypto Hub The Georgian economy minister considers the synchronization of the country’s financial legislation with the EU directives as a first move toward reaching the ultimate goal of turning Georgia into a crypto hub. That vision of that has been featured in the small nation’s development strategy for 2020-2025 period which was approved by the executive power two years ago.  New legal framework will make it easier for major players in the global crypto industry to establish presence in Georgia. 

The latest regulatory development came after a meeting of Georgian Primer Minister Irakli Gharibashvili with other key participants in the crypto market, including representatives of the blockchain company Ripple and FTX. 

Binance already managed to organize first workshop for workers of National Bank of Georgia. 

Months before the war, a U.S. Treasury report warned that cryptocurrencies could “harm the efficacy of our sanctions,” in several countries. The blockchain analytics company Elliptic believes Russia could use crypto assets to “circumvent sanctions through state-sponsored cybercrime, concealment of wealth, and even crypto mining.” 

Cryptocurrency exchange Western officials believe Russians are siphoning fortunes into crypto, bypassing banks and diluting sanctions against President Vladimir Putin.

“The biggest misconception is that crypto exchanges, or at least Binance, is not implementing sanctions rules,” Zhao, known by his initials, C.Z., said recently in a long interview with Fortune. “That is completely false,” he tells us. “We implement sanctions exactly the same way banks do.”

Last month Zhao called Russia a “key market” for Binance, and the exchange has been fairly popular in that country.

The new rules expanded an earlier ban on digital wallets for Russian citizens containing more than 10,000 euros worth of assets.
Binance is Operational in Russia With Restrictions: Binance Exec. Chagri Poyraz, Binance global head of sanctions, discusses the role of the cryptocurrency exchange as tensions remain high over Russia’s invasion in Ukraine.

Zhao said blocking all Russians from crypto exchange is ‘unethical’.

Western lawmakers have warned that individuals facing sanctions over Russia’s invasion of Ukraine could use crypto to bypass the punitive measures, Fortune reported. Blockchain analytics firm Elliptic recently announced that it had uncovered “several hundred thousand crypto addresses linked to Russia-based sanctioned actors.” Nasdaq-listed crypto exchange Coinbase in early March blocked 25,000 addresses related to Russian entities or individuals believed to be involved in illicit activity.

Crypto became a “helpful offramp that allowed Russians to preserve their wealth,” says Justin Newton, founder and CEO of Netki, a blockchain technology provider.

The small size of each individual transaction suggests that regular citizens looking to safeguard their savings—rather than oligarchs trying to bypass sanctions—caused Russia’s crypto trading frenzy, says Paul Mazzola, a banking and finance lecturer at Australia’s University of Wollongong. On Binance’s exchange, the average size of each trade peaked at $580 per transaction, which is “minuscule” compared to the average $2,198 per transaction in the U.S. during the same period, he says.

Crypto remains a means of survival for Russians fleeing the country, a population that likely numbers in the tens—if not hundreds—of thousands.

Crypto offers Russian citizens a “legal alternative” to help support their move outside of the country, says Newton.

Russians leaving the country, for instance, can move their crypto into a cold wallet (also known as a hardware wallet)—a physical device that keeps digital assets offline—and take it with them to their final destination, says Mason Jang, COO of crypto data provider CryptoQuant. 

Moving crypto is fairly straightforward, as long as an individual holds the private key to their crypto and doesn’t rely on an intermediary like a crypto custodian or exchange, says Chris DePow, a senior advisor of financial institution regulation and compliance at Elliptic. “They can write down or memorize the mnemonic phase associated with their crypto wallet… when they have access to a computer, [they can] regenerate that wallet with all of their holdings intact.”

NFX

In November 2022, Binance CEO Changpeng Zhao revealed on Twitter that his firm intended to sell its holdings of FTT, FTX’s token.  Binance received $529 million worth of FTT as part of a sale of its equity in FTX in 2021. 

Zhao published his tweet soon after a report from CoinDesk stating that the bulk of the holdings of Alameda, Bankman-Fried’s trading firm, were in FTT. Bloomberg and TechCrunch reported that any sale by Binance would likely have an outsize impact on FTT’s price due to the token’s low trading volume.The announcement by Zhao of the pending sale and disputes between Zhao and Bankman-Fried on Twitter led to a decline in the price of FTT and other cryptocurrencies.Shortly before, Zhao had criticized Bankman-Fried’s lobbying efforts.

On November 8, Zhao announced that Binance had entered into a non-binding agreement to purchase FTX due to a liquidity crisis at FTX. Zhao stated that Binance would complete due diligence soon and that all crypto exchanges should avoid using tokens as collateral. He also wrote that he expected FTT to be “highly volatile in the coming days as things develop”. On the day of the announcement, FTT lost 80 percent of its value.

On November 9, the Wall Street Journal reported that Binance had decided not to acquire FTX. Binance cited reports of FTX’s mishandling of customer funds and pending investigations of FTX as the reasons the firm would not pursue the deal. 

Amid the crisis, Bankman-Fried was no longer a billionaire, according to the Bloomberg Billionaires Index. The very next day, Bloomberg reported that the Securities and Exchange Commission and Commodity Futures Trading Commission were investigating FTX and the nature of its connections to Bankman-Fried’s other holdings.

Anonymous sources cited by Reuters stated that Bankman-Fried had transferred at least $4 billion from FTX to Alameda Research, without any disclosure to insiders or the public, earlier in 2022. 

The sources said that the money transferred had included customer funds, and that it was backed by FTT and shares in Robinhood.

An anonymous source cited by the Wall Street Journal stated that Bankman-Fried had disclosed that Alameda owed FTX about $10 billion which was secured through customer funds held by FTX when FTX had, at the time, $16 billion in customer assets.

According to anonymous sources cited by the Wall Street Journal, the Chief Executive of Alameda Research Caroline Ellison told employees that Bankman-Fried was aware that FTX had lent its customers’ money to Alameda to help it meet its liabilities.

Resignation and aftermath

Bankman-Fried resigned as CEO of FTX on November 11 and was replaced by John J. Ray III, who has experience helping creditors recoup losses at other companies, including Enron. FTX and related entities filed for bankruptcy in Delaware on the same day.

One day after FTX declared bankruptcy, on November 12, Bankman-Fried was interviewed by the Royal Bahamas Police Force.

On 17 November, John J. Ray III, the CEO brought in as a liquidator, stated in a sworn declaration submitted in bankruptcy court that according to the firm’s records, Alameda Research had lent $1 billion to Bankman-Fried

Political donations

Bankman-Fried’s only campaign finance activity prior to 2019 was a $1,000 contribution in 2010 to Michael Bennet.

In the 2020 US election cycle, he contributed $5.2 million to two super PACs that supported the Joe Biden 2020 presidential campaign.[18] Bankman-Fried was the second-largest individual donor to Biden in the 2020 election cycle,second to only Michael Bloomberg.

Contributions from June 2021 through February 2022 were made to members of both U.S. political parties. They included direct donations to the Republican campaigns of senators Susan Collins of Maine, Mitt Romney of Utah, Lisa Murkowski of Alaska, and Ben Sasse of Nebraska. Journalist Matthew Kassel notes that Bankman-Fried had often donated to politicians who cultivate good Israel–US relations, but concluded: “it is unclear if his backing of pro-Israel candidates was coincidental or motivated by any personal interest in Middle East policy.”

In 2022, Bankman-Fried provided initial financial support for Protect Our Future PAC. Protect Our Future was launched as a Democratic political action committee with $10 million in initial funding aiming to support “lawmakers who play the long game on policymaking in areas like pandemic preparedness and planning”, according to Politico.

Bankman-Fried was the second-largest individual donor to Democratic causes in the 2021–2022 election cycle, with total donations of $39.8 million, only behind George Soros. Of this, $27 million was given to the Protect Our Future PAC.

Bankman-Fried said in February 2022 that his political contributions were not aimed at influencing his policy goals for the cryptocurrency ecosystem; however, FTX was circulating a list of suggestions to policymakers at the time.[18] He said in an interview that he would prefer the Commodity Futures Trading Commission take a larger role in regulating and guiding the crypto industry.[18] According to the New York Times, The CFTC has a reputation for favoring relatively relaxed regulations for the industry when contrasted with other regulators like the Securities and Exchange Commission.

Bankman-Fried pushed for regulations via the proposed Digital Commodities Consumer Protection Act (DCCPA) by extensively lobbying Congress, which was perceived as being favorable to FTX but harmful to the broader industry, especially its decentralized finance competitors.

In May 2022, Bankman-Fried stated that he planned to spend “north of $100 million” in the 2024 presidential election with a “soft ceiling” of $1 billion.In October 2022, he walked back his pledged spending, calling it a “dumb quote on my part”.

Contributions for the year 2022 went to members of both parties, with $35,872,000 donated to liberals (99.6%) and $155,000 to conservatives (0.4%).

In the aftermath of the FTX scandal, recipients of Bankman-Fried’s and other FTX executives’ political campaign contributions have been donating equal amounts to charitable organizations. Elected officials doing so include Senator Kirsten Gillibrandand Representatives Chuy García and Kevin Hern. A spokesperson for former Texas gubernatorial candidate Beto O’Rourke said that his campaign had received a $1 million donation from Bankman-Fried in October 2022, but returned the funds in early November, prior to the election.

Read Bankman-Fried’s full letter

“Hi all—

I feel deeply sorry about what happened. I regret what happened to all of you. And I regret what happened to customers. You gave everything you could for FTX, and stood by the company—and me.

I didn’t mean for any of this to happen, and I would give anything to be able to go back and do things over again. You were my family. I’ve lost that, and our old home is an empty warehouse of monitors. When I turn around, there’s no one left to talk to. I disappointed all of you, and when things broke down I failed to communicate. I froze up in the face of pressure and leaks and the Binance LOI and said nothing. I lost track of the most important things in the commotion of company growth. I care deeply about you all, and you were my family, and I’m sorry.

I was CEO, and so it was my duty to make sure that, ultimately, the right things happened at FTX. I wish that I had been more careful.

I want to give you a better description of what happened—one I should have written out as best I understood it much earlier.

Piecing things together recently, making approximations—I don’t have full data access right now to get precise answers—and marking everything to market, regardless of liquidity, I believe that the events that led to the breakdown this month included:

1) A crash in markets this spring that led to a roughly 50% reduction in the value of collateral;

a. ~$60b collateral, ~$2b liabilities -> ~$30b collateral, ~$2b liabilities

2) Most of the credit in the industry drying up at once;

a. ~$25b collateral, ~$8b liabilities

3) A concentrated, hyper-correlated crash in November that led to another roughly 50% reduction in the value of collateral over a very short period of time, during which there was very little market bid-side liquidity;

a. ~$17b collateral, ~8b liabilities

4) A run on the bank triggered by the same attacks in November;

a. ~$9b collateral

5) As we frantically put everything together, it became clear that the position was larger than its display on admin/users, because of old fiat deposits before FTX had bank accounts:

a. ~$9b collateral, ~$8b liabilities

I never intended this to happen. I did not realize the full extent of the margin position, nor did I realize the magnitude of the risk posed by a hyper-correlated crash. The loans and secondary sales were generally used to reinvest in the business—including buying out Binance—and not for large amounts of personal consumption.

I deeply regret my oversight failure. In retrospect, I wish that we had done many many things differently. To name a few:

a) being substantially more skeptical of large margin positions

b) examining stress test scenarios involving hyper-correlated crashes and simultaneous runs on the bank

c) being more careful about the fiat processes on FTX

d) having a continuous monitor of total deliverable assets, total customer positions, and other core risk metrics

e) Putting in more controls around margin management.

And none of this changes the fact that this all sucks for you guys, and it’s not your fault, and I’m really sorry about that. I’m going to do what I can to make it up to you guys—and to the customers—even if that takes the rest of my life. But I’m worried that even then I won’t be able to.

I also want to acknowledge those of you who gave me what I now believe to be the right advice about pathways forward for FTX following the crash. You were right, of course: I believe that a month earlier FTX had been a thriving, profitable, innovative business. Which means that FTX still had value, and that value could have gone towards helping to make everyone more whole. We likely could have raised significant funding; potential interest in billions of dollars of funding came in roughly eight minutes after I signed the Chapter 11 docs. Between those funds, the billions of dollars of collateral the company still held, and the interest we’d received from other parties, I think that we probably could have returned large value to customers and saved the business.

There would have had to be changes, of course: way more transparency, and way more controls in place, including oversight of myself. But FTX was something really special, and you all helped make it that. Nothing that happened was your fault. We had to make very hard calls very quickly. I have been in that position before, and should have known that when shitty things happen to us, we all tend to make irrational decisions. An extreme amount of coordinated pressure came, out of desperation, to file for bankruptcy for all of FTX—even entities that were solvent—and despite other jurisdictions’ claims. I understand that pressure and empathize with it; a lot of people had been thrust into challenging circumstances that generally were not their fault. I reluctantly gave in to that pressure, even though I should have known better; I wish I had listened to those of you who saw and still see value in the platform, which was and is my belief as well.

Maybe there still is a chance to save the company. I believe that there are billions of dollars of genuine interest from new investors that could go to making customers whole. But I can’t promise you that anything will happen, because it’s not my choice. In the meantime, I’m excited to see some positive steps being taken, like LedgerX being turned back on.

I’m incredibly thankful for all that you guys have done for FTX over the years, and I’ll never forget that.

—SBF”

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