FTX is much worse than anyone imagined 🤯🤯🤯; Elon Musk will turn Twitter into a Bank? 😳; Wait, Crypto is Dead? 🤔
You're missing out big time... Weekly Recap 🔁
👋 Hey, Linas here! Welcome back to a 🔓 weekly free edition 🔓 of my daily newsletter. Each day I focus on 3 stories that are making a difference in the financial technology space. Coupled with things worth watching & most important money movements, it’s the only newsletter you need for all things when Finance meets Tech.
If you’re not a subscriber, here’s what you missed this week:
The aftermath of the FTX collapse could be bigger than the earthquake 🌋
Contagion of contagion, or how Genesis could cause Crypto Armageddon 😳
The contagion continues as FTX is a virus that’s soaring worldwide 🦠
Nike's chance to own the future, or how it has been winning the Web3 NFT game 👟
JPMorgan + Mastercard, or why the future of Banking is Open 👐🏼
Marqeta is betting on Embedded Finance as The Next BIG Thing 🚀
As for today, here are the 3 FinTech stories that were making a gigantic difference this week. This week was crazy, so definitely check out all the above stories.
FTX is much worse than anyone imagined 🤯🤯🤯
Breaking🔥 Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information - John Ray, the new CEO of FTX.
Ray has overseen some of the biggest bankruptcies ever, including the collapse of the energy giant Enron, and has 40 years of experience in restructuring companies. He said he had never seen anything as bad as FTX. That tells you a lot.
More on this 👉 Today a 30-page FTX Bankruptcy court filing was submitted to the Delaware bankruptcy court. It’s hard to believe things at FTX were THAT BAD. Here are some shocking examples:
FTX lent Sam Bankman-Fried (SBF) >$1 billion for personal use. They also loaned the Director of Engineering Nishad Singh $543M. $1.5B just like that.
The crypto exchange used customer (!!!) funds to buy houses for workers in the Bahamas🇧🇸 Employees & executives put their names on homes purchased with company funds.
FTX didn't keep proper records of who they employed and what those employees did. Their total employee count was probably fake.
SBF made all business decisions on apps that auto-deleted everything after some time (Signal). He encouraged all employees to do the same.
FTX had no cash management system. Nobody had any idea how much cash was on hand at any given time, or even where all their cash was.
FTX didn’t keep any books or records of its digital assets.
Crypto assets deposited by customers weren't even recorded on the balance sheet.
The crypto exchange built software to hide the misuse of customer funds.
✈️ THE TAKEAWAY
There’s bad, and then there’s FTX Bad 🥶 FTX was supposedly worth $32 billion, it was backed by top-tier venture capital firms and grew into one of the biggest exchanges in the world. Yet, now it appears it had far less documentation, structure, and organization than any fantasy sports league. Zooming out, it seems that SBF is a massive fraud (not to mention that nearly every SBF public statement was false) and FTX was nothing more than a Ponzi. More importantly, given the fact that the guy who ran Enron as it was failing is now saying FTX is much worse, tells you all. The worst part is that it’s just the tip of the iceberg.
Bonus: The aftermath of the FTX collapse could be bigger than the earthquake 🌋
Contagion of contagion, or how Genesis could cause Crypto Armageddon 😳
WTF: Binance walks away from FTX takeover 😳🥶
Full court doc here.
Elon Musk will turn Twitter into a Bank? 😳
The news 🗞 Elon Musk detailed his vision for Twitter’s plan to enter the payments market during a live-streamed meeting with Twitter advertisers, hosted on Twitter Spaces, TechCrunch reported.
More on this 👉 In short, Musk seems to want to turn Twitter into a bank, or as he said - a “high-yield money market account,” with debit cards, checks, and loans.
The goal is “enabling people on Twitter to able to send money anywhere in the world instantly and in real-time. We just want to make it as useful as possible”, Musk said. He added that the feature, along with “video content and compensating content creators” and improving search, is a “high priority.”
Twitter could reportedly set up a “high-yield money market account so that having a Twitter balance is the highest-yield thing that you can do,” according to Musk. Instead of traditional banks’ “complex and expensive” system of credit cards, savings and checking accounts, CDs, and the like, Musk says you’ll have “one balance on Twitter that can simply go positive or a negative.”
Furthermore, for places that don’t accept Twitter payments, Musk says you’ll get a debit card tied to your balance and even traditional checks if you want them. “If you address all things that you want from a finance standpoint, then we will be the people’s financial institution,” he added.
✈️ THE TAKEAWAY
The Super App 👀 Not sure about the bank, but it’s clear that Elon isn’t ditching its vision of turning Twitter into the Everything App. Because once you have social and have solved the money element, that’s it. I sense that indeed Twitter can become the Super App PayPal, Klarna, & Revolut always dreamed of…
Bonus: Twitter can become the Super App PayPal, Klarna, & Revolut always dreamed of 🤯
Wait, Crypto is Dead? 🤔
RIP 🪦 Chetan Bhagat, an Indian author, columnist, and YouTuber that was included in Time magazine's list of World's 100 Most Influential People in 2010, recently wrote one piece that really got my attention.
Another one 😅 In addition to many other skeptics, he now joined the ranks of the Crypto is Dead squad:
Let’s debunk this real quick.
Not dead - just hiding 🫣 First and foremost, we have to understand that FTX is not about crypto, DeFi, or Web3 per se. It’s about fraud, scam, and a massive failure in corporate governance, control, and risk management. To equate it with the death of crypto is just mad.
Sure, crypto is going through a tough time right now, maybe one of the toughest ones out there. More importantly, it’s highly unlikely that all will be resolved anytime soon.
But that’s all part of the cycle.
Just look at this pile of 466 obituaries to date and ignore the noise.
✈️ THE TAKEAWAY
Ignore the noise 🤫 In essence, we have to realize that the crypto industry has a similar adoption curve to the internet. What’s surprising is not the similarity with tech - it’s its growth rate. The crypto space is growing at circa 113% per year in terms of users (see below). Even if it slows down to the 63% growth rate of network adoption the internet saw at the same stage, it’s going to lead to 4 billion users by 2030 or earlier. So let’s leave the RIP message and focus on building!
🔎 What else I’m watching
Zelle goes places 👀 Varo will offer the peer-to-peer payment network Zelle as part of its mobile app, the digital bank announced this week. With this launch, Varo says it has become the first all-digital bank to offer Zelle in its app without needing a partnership with a bank. Seems a good time to revisit this: When being late-comer is an advantage, or how Zelle dominated P2P payments 📲
Legal tender! 🗞The tiny Caribbean nation of St. Kitts and Nevis is considering adopting Bitcoin Cash as a legal tender, its prime minister said at a conference on Saturday. Terrance Drew said that he welcomes “the opportunity to dialog further with a view to exploring future opportunities to engage in Bitcoin Cash mining and making Bitcoin Cash legal tender here in St. Kitts and Nevis by March 2023." However, that could bring up opposition from the eight-member Eastern Caribbean Currency Union (ECCU), which supplies its current currency and the EC dollar. It also launched a central bank digital currency this year, DCash, so it may well view BCH as a potential competitor. It’s worthwhile to reread Bitcoin in El Salvador🇸🇻 is one of the greatest product-market fit failures ever 🤦♂️
💸 Following the Money
Daylight, the digital banking app built for America's LGBTQ+ community, has raised $15M in a Series A funding round led by Anthemis Group. CMFG Ventures, Kapor Capital, Citi Ventures, and Gaingels joined the round too.
Blnk, an Egyptian buy now, pay later (BNPL) startup, has raised $23.7M in equity and debt funding and a further $8.3M via securitized bond issuance.
Citi Ventures has made its first FinTech investment in India, joining a $60M raise in bank lending software house Lentra.
👋 That’s it for today! Thank you for reading and have a relaxing Sunday! And if you enjoyed this newsletter, invite your friends and colleagues to sign up: