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Welcome back to Chain reaction.
Do you believe in second chances? Well, FTX’s new CEO, John J. Ray III, hopes so. The new chief of the disgraced crypto exchange is open to the idea of restarting operations and possibly reviving the bankrupt company, according to a new report. report by WSJ. Time will tell if that happens and works out for both FTX and the company’s customers and creditors.
In other news, if you hadn’t heard of a tiny eight-letter crypto exchange called Bitzlato before Wednesday, you’re not alone. But apparently the US Justice Department knew what it was, and followed it so closely that they uncovered enough information to arrest its founder, Anatoly Legkodymov, for allegedly handling over $700 million in illicit funds.
While this arrest caused some jokes and confusion among members of the crypto community, who had no idea what Bitzlato was prior to the announcement, it also caused some annoyance that the DOJ is not taking any action against bigger players in the space.
Events like FTX’s bankruptcy shocked the crypto industry, but longtime crypto players didn’t seem to know what Bitzlato was before the DOJ’s announcement. According to data from known wallets from Arkham, a crypto intelligence tool, wallets linked to Bitzlato hold just over $11,000; at their peak, they held over $6 million, making Bitzlato a very small player in the industry.
All in all, this arrest indicates that the DOJ – and the US government in general – is cracking down on the crypto space. Like the rapper Biggie Smalls once said, “It’s like the more money we face, the more problems we see.”
More details below.
This week in web3
The Solana co-founder sees opportunities for developers to lead his network in 2023 (TC+)
As the crypto developer ecosystem expands, key ecosystems are growing beyond the two major cryptocurrencies – Bitcoin and Ethereum, according to a new report. Solana saw the highest number of new developers contributing to the ecosystem, with an 83% increase in developer numbers, the fastest of any major blockchain. “2023 could well be the year when other developers already building on Solana collectively lead the direction of the network,” Solana co-founder Raj Gokal told TechCrunch.
DOJ sues crypto exchange founder Bitzlato for handling $700 million in illicit funds
As mentioned above, the little-known crypto exchange Bitzlato is in hot water. According to the DOJ, Bitzlato allowed users to trade cryptocurrencies without verifying their identity. The Hong Kong-registered exchange advertised itself to customers by saying that “neither selfies nor passports [are] required.” The government said this lack of know-your-customer procedures made Bitzlato a hotbed for criminal activity.
Ethereum’s shift to proof-of-stake is attracting increasing institutional interest (TC+)
Ethereum’s shift from proof-of-work (PoW) to proof-of-stake (PoS) in September 2022 increased interest in staking among a number of parties, including institutions. The success of the Merge propelled Ethereum from “a smart contract platform that was lagging” into “something that did things right,” said Diogo Mónica, co-founder and president of Anchorage Digital, a crypto bank last valued at more than $3 billion. TechCrunch. “Investor interest grew and appetites changed dramatically.”
Crypto.com to cut 20% jobs amid ‘significant damage’ to industry from FTX
Crypto exchange Crypto.com is cutting its global workforce by 20%, it said Friday, as it navigates continued economic headwinds and “unforeseen” industry events. This is the second major layoff at Singapore-based Crypto.com, which cut 250 jobs in the middle of last year. The company did not say which positions were being cut in the new round of layoffs, but blamed the collapse on FTX, whose misappropriation of customer funds and bankruptcy have “significantly damaged confidence in the industry”.
Crypto in for a ‘tumultuous year’ of sluggish capital deployment, investors say (TC+)
While some crypto-focused venture capitalists are optimistic for 2023, others see it as a dangerous time. Many investors are trying to leave last year’s chaotic market behind and look to the future in a still investor-focused environment. But competition in the marketplace will increase as investors write fewer checks and become more selective.
The latest pod
Last week, Chain Reaction season 2 launched with a episode with Ryan Wyatt, president of Polygon Labs, one of the largest market shakers and layer-2 blockchains in the crypto space building on top of the Ethereum ecosystem.
Next week we release our second episode with Mo Shaikh, co-founder and CEO of fita new layer-1 blockchain that raised a total of $350 million in funding by 2022.
Follow the money
- ZK proof-focused startup wolf tooth raises $15 million in a starting round
- Obol Labs raises $12.5 million in a Series A round
- The =nil; Foundation raises $22 million to build an evidence-based marketplace
- metahood raises $3 million to build a metaverse-based real estate portal
- Sleeping gatchi raises $3.5 million to gamify and reward people for sleeping
This list was compiled using information from Messari and TechCrunch’s own reporting.