IRS Wants $24B From FTX

SNX Ends Inflation | Warren Crypto Bill

Marco Manoppo & Karon Pangestu
December 13, 2023

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Happy Humpday 🐪. The music seems to be stopping a bit as Bitcoin pull back to $41,000. That said, the total crypto market cap still remains above $1.6T as BlackRock and Fidelity hash out their Bitcoin ETF redemption models.

In Today's Email:

What Matters: $24B FTX tax liabilities 💸
Case Study: Sen. Warren’s crypto bill 📜
Governance & Features: SNX ends inflation 📊

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Narratives: We’re most likely due for a substantial pullback — tread carefully and TP accordingly if price action starts affecting your long-term decision making behavior.

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WHAT MATTERS

FTX: IRS Wants $24B Tax Payment

State of play: The IRS states that FTX and its affiliated entities owe $24B in income taxes, employment taxes, and penalties for the years 2018 to 2022.

The FTX bankruptcy estate management has labelled this claim as 'absurd and meritless.'

The IRS initially claimed around $44B from FTX in April, but revised it to $43B in September, before further reducing it to $24B in November.
FTX and EY responded to over 2,300 IRS requests and provided most of the requested documents, with the remainder to be submitted by January 15, 2024.
The IRS asserts that its estimated claims are presumed correct, placing the burden of proof on FTX to demonstrate otherwise.
FTX's recent filing urges approval of its proposed schedule to prevent indefinite delay in victim compensations, with the next bankruptcy hearing set for today.
FTX's lawyers state that in its existence, FTX never distributed dividends or earnings, nor earned enough to justify the IRS's $24B tax claim, highlighting that FTX incurred significant losses instead.

Why it matters: This could affect the FTX reboot plan, as FTX is filing for Chapter 11 bankruptcy (reorganization):

The company that is filing for Chapter 11 typically proposes a plan to keep operating while repaying creditors over time.
Tax debts are often included in the reorganization plan and may need to be paid in full, but the terms might be renegotiated.
In the US. taxpayers bear the burden of proof to validate the accuracy of their tax returns, not the IRS.

For builders and investors: The tweet below explains it well.

this irs request is so blatantly insulting to creditors, americans, anyone
the arrogance of the us government that flies in the face of any law is staggering
their demands literally are trying to supersede the recovery of user funds at the same time the sec sues exchanges to… twitter.com/i/web/status/1…
— Mike Dudas (@mdudas)
9:26 PM • Dec 11, 2023

CASE STUDY

Elizabeth Warren’s Crypto Bill

State of play: Elizabeth Warren's crypto bill is gaining momentum with five new co-sponsors. The bill will significantly expand the Bank Secrecy Act to enforce bank-like KYC regulations on non-custodial software, including FOSS.

Alex Thorn, the head of Firm-wide Research at Galaxy shared his thoughts:

The bill proposes expanding the Bank Secrecy Act to encompass open-source software, including non-custodial wallets, miners, and validating nodes.
The bill could effectively outlaw crypto in the US by requiring centralized compliance functions impractical for non-custodial and decentralized software.
It would be impossible for miners or validators to perform KYC on every public blockchain transaction.
The bill aims to apply the Bank Secrecy Act to non-custodial wallets, including many that are free and open-source, noting that "unhosted" digital wallets are simply regular wallets.
Requiring non-custodial open-source software like Bitcoin Core to comply with bank-like regulations is a significant attack on Bitcoin, effectively amounting to a ban in the US.

What’s next: Daniel Kuhn from Coindesk argues that Warren’s crypto bill Is unlikely to pass:

Warren's bill is unlikely to pass due to typical US governance issues like partisan politics, infighting, and gridlock.
Industry lobbyists at Coin Center, have noted the law would likely be unconstitutional.
Warren's bill, centred on surveillance instead of broader blockchain issues highlighted by FTX, is unlikely to pass amid a push for more comprehensive crypto regulations in the US.

Reminder that Elizabeth Warren is one of the worst legislators of all time
Lifetime stats for Warren Bills:
- 305 introduced, 0 became law
- 1766 Co-sponsored, 45 became law
She’s just an IRL engagement-bait troll
— Julian Fahrer (@Julian__Fahrer)
6:49 PM • Dec 11, 2023

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INSIGHTS

Aptos Releases 25M APT Valued Over $200M

TokenUnlock

Aptos unlocked 24.8B APT yesterday worth over $200M and representing 8.9% of its circulating supply, according to data from TokenUnlocks.

A TokenUnlock spokesperson noted that the tokens might not be claimed immediately due to changes in the vesting schedule from staking rewards or if the team delays claiming them upon unlocking.
The unlock reveals that the distributed tokens will be allocated to four distinct groups: The Foundation, core contributors, community, and investors are the ones getting the unlocked tokens
After releasing the same quantity of APT tokens on Nov. 12, the APT price dropped 13.4% from $7.82 to $6.77 in nine days before rebounding.
APT currently trades at ~$8.3, up ~6.5% since the last unlock.
Aptos faced a five-hour outage in October, leading exchanges like Binance, OKX, and Upbit to temporarily halt APT transactions.

Why it matters: Projects with a low token free float need to handle significant token unlocks properly in order to maintain the strength of its community, incentive, and grant capital — this is usually done via staking, OTC deal, and other bespoke deals.

FEATURES & GOVERNANCE UPDATE

Synthetix Ends SNX Token Inflation

$SNX Inflation? Not anymore. Synthetix Governance has slashed it to 0️⃣.
Get ready for a straightforward staking experience - No weekly claims for stakers, and non-stakers benefit from buyback and burn.
Inflation was transitory, but only for Synthetix.
blog.synthetix.io/the-end-of-syn…
— Synthetix ⚔️ (@synthetix_io)
6:12 PM • Dec 11, 2023

Synthetix community approves governance proposal SIP-2043 to terminate SNX token inflation.

Inflation cessation in Synthetix will lead to new strategies like token buybacks and burns, starting with the Andromeda software release.
Synthetix stakers will no longer need to claim weekly inflationary token rewards.
Synthetix plans to use trading fees for buybacks and burns, reducing the token supply by using protocol-generated fees to acquire and burn SNX tokens.

Why it matters: Inflationary rewards in Synthetix once used to boost liquidity and growth, which were terminated as they became less effective as the protocol matures.

Other notable feature updates:

Aevo launches aeUSD.
Clip launches on Linea L2.
Gyroscope launches GYD.
Botanix launches a testnet.
Hashflow DEX launches 2.0.
LogX launches on Mantle L2.
Hourglass goes live on Blast L2.
Obol launches Mainnet Open Beta.
Mantle launches Mantle LSP and mETH.
Crypto Volatility Index launches CVI V4.
Fore Protocol launches on Arbitrum mainnet.
StarkDeFi launches an AMM on Starknet Mainnet.
QuickSwap launches QuickSwap Bonds on the DEX.
Helium Mobile launches a nationwide plan in the US.
Ethereum Reserve Dollar (ERD) launches the USDE stablecoin.

QUICK BITES

KuCoin settles with NY for $22M.
Line raises $140M to expand NFT feature.
Web3 Universal Privacy Alliance launched.
IRS demands $24B in unpaid taxes from FTX.
Aptos unlocks 25M APT tokens worth more than $200M.
SSV launches its permissionless staking network mainnet.
Celestia to integrate data availability layer with Polygon CDK.
Coinbase launches a new digital asset project for institutions.
Starknet developers to receive slice of network operator fees.
BlackRock & Fidelity hash out Bitcoin ETF redemption models.
Swarm launches trading platform for tokenized real-world assets.

NOTEWORTHY READS & MEME

Qiao Wang’s read on degens are pioneers.
Rain&Coffee’s read on the evolving research around intents.
1kx’s read on wallet infrastructure: empowering the next generation of dApps.

points points points
— foobar (@0xfoobar)
1:29 AM • Dec 13, 2023

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