FT Cryptofinance: Kraken’s Jesse Powell joins list of crypto resignations

Hello and welcome to FT’s Cryptofinance newsletter. This week, we’ll take a look at Jesse Powell’s decision to step down as CEO of Kraken.

The cryptocurrency industry is not as young as its supporters would have you believe. It has been busy growing with a whole host of C-suite names that have become synonymous with the cryptocurrency brand itself.

But the near-unprecedented collapse of the market earlier this year didn’t just cost thousands of people’s jobs (here you are, Coinbase, Gemini, Crypto.com and many more), its effects are now creeping up on. some of the hottest and most controversial cryptocurrencies.

This week Jesse Powell, the 40-year-old controversial industry pioneer, said he will step down as CEO of cryptocurrency exchange Kraken. He joins MicroStrategy’s Michael Saylor, Genesis’s Michael Moro and Alameda’s Sam Trabucco to leave high-level positions during the current crisis.

These resignations come in the wake of some far more serious catastrophes in the industry, which have captured Alex Mashinsky, chief executive of bankrupt crypto lending platform Celsius, and Su Zhu and Kyle Davies, the brains behind Three Arrows Capital, the infamous crypto hedge fund. who also went bankrupt.

Most of them were active social media influencers, using platforms like Twitter to preach the virtues of digital tokens. In their own way, they have contributed to the culture of the industry as prices have soared.

Powell was a prime example of how accessibility on social media and trust in the millennial vision of the transformed society by cryptocurrencies could combine into an intoxicating blend.

He tapped into the libertarian ethos of cryptocurrencies as an outspoken critic of “awakened” politics, overseeing a “culture” Kraken that pledged sect-to-“loyalty.The mission“.

According to a tweet in June, some “Krakenites” were unhappy with some aspects of life during the exchange, including what Powell described as “first world problems” like. . . * check notes *. . . “if anyone can identify as a different race and be allowed to use the N word”.

As the thread progressed, he defended his free speech credentials. Powell also said he “she has been entertaining the debate for a while because.” [he’s] open-minded. “He later signed that” people are triggered by everything and cannot conform to the ground rules of honest debate. Return to dictatorship. “OK.

Why do top executives look at the door? It is often said that major life events give a pause to reflect on what matters. Powell wanted to take a step back from running the daily business, Trabucco recently bought a boatand Saylor wants to focus on buying bitcoins.

But a successful religion needs its prophets and profits. Their departures coincide with more embarrassing problems.

MicroStrategy, the once-obscure software company that is now a de facto bitcoin ETF, was staring at billions in losses this summer after spending the past two years betting big on bitcoin. Saylor also has a tax problem to solve.

Moro left Genesis as the cryptocurrency broker counted the cost of the $ 2.4 billion loan to Three Arrows Capital, which plummeted after its bold bitcoin bets went south in the wake of the broader market crash. cryptocurrencies earlier this year.

The New York Times reported that Kraken is under federal investigation for potentially violating US sanctions against Iran. Powell himself had opposed the Treasury’s recent designation of the cryptocurrency mixing service Tornado Cash, which would have facilitated billions of recycled cryptocurrencies, calling it “unconstitutional.”

In traditional finance, normally the void left by a charismatic CEO is filled by a more sober individual, less prone to colorful comments that get them into trouble with regulators or employees.

But cryptocurrencies could be different. Powell plans to focus on defending the industry in a big way. Saylor also wants to be an evangelist, leaving me to wonder what he thinks he’s been up to over the past two years.

The sector is currently experiencing one of its periodic downturns. Many of the industry leaders, such as FTX’s Sam Bankman-Fried, Coinbase’s Brian Armstrong, and Galaxy Digital’s Michael Novogratz, continue to preach on social media. We wait to see who else will emerge to guide him out of the desert.

Will the crypto executive resignation streak continue? Look at this space and always feel free to email me at [email protected]

Weekly highlights

  • Another week, another crypto hack. This time the number of the market maker Wintermute was called. The CEO Evgeny Gaevoy She said the platform’s DeFi operations had been compromised to the tune of $ 160 million, but added that Wintermute was “solvent” with “double that amount of residual capital.” Moving forward, the company plans to keep the DeFi faith and “keep moving forward through this bear market.”

  • A legal case worth looking at: The Securities and Exchange Commission filed a lawsuit in Texas against Ian Balina, claiming he did not disclose the compensation received from an initial unregistered coin offering in 2018. In a court filing this week the regulator claimed jurisdiction over the air transactions that were validated by a network of nodes “more densely clustered in the United States than in any other country.” After the merger, some commentators said they were concerned about Ethereum’s “censorship resistance” credentials. You can read all about it in my recent take on the network’s proof-of-stake change and what it means for the future of cryptocurrencies.

  • Binance has announced a new global advisory committee chaired by former US Senator and Ambassador to China Max Baucus and which includes former ISOCO Secretary General David Wright. The board will advise on “complex regulatory, political and social issues facing the entire cryptocurrency industry.” Chief Executive Changpeng Zhao described the board as “a testament to our focus on compliance, transparency and ensuring a cooperative relationship with the world’s regulators,” but the exchange faced a number of discussions with regulatory authorities around the world, including the Netherlands and the UK and Singapore.

  • The Crypto Council for Innovation, a cryptocurrency advocacy group, this week launched the Digital Future Award to recognize US members of Congress who are “leading the way on a complex and nuanced range of issues” related to digital assets. Among the award winners are Senators Ted Cruz and Cynthia Lummis and Congresswoman Maxine Waters.

The song of the week: consumer protection at its best

A noteworthy quote can usually be found in this section of my newsletter, but this week is different. Below is a screenshot documenting Binance’s efforts to protect its consumers from Earth 2.0.

A consumer notice on the Binance website

Binance’s Lunar Alert © Binance website

Reading the standard warning, my mind went to this classic Simpsons scene where Homer eats fugu, the fish that might be a great meal but could also kill him. “Yes, yes, it is poisonous, potentially fatal, but when sliced ​​correctly it can be quite tasty.”

Binance said it has strict security protocols and maintains high standards for the tokens it lists and has encouraged users to understand all the risks involved and trade with caution.

Data extraction

Tether, the largest stablecoin provider in the world, came under renewed pressure this week to open its doors to regulators. A New York court ordered Tether – and its sister company Bitfinex – to provide documents related to the support of the stablecoin tether.

The good news for Tether, however, is the fact that bitcoin trading in tether (USDT) has increased in recent months following the cryptocurrency market crash this year.

According to data compiled by the data analytics platform CryptoCompare, bitcoin-USDT trading volume in bitcoin has roughly doubled since May, when the stablecoin’s peg to the dollar was briefly lost due to increasing selling pressure in the wake. of the collapse of cryptocurrency prices.

BTC-USDT trading volume bar chart in BTC (mln) showing bitcoin trading in tether has increased in recent months

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