Lido DAO Faces Lawsuit; Spot Bitcoin ETFs May Impact Crypto Exchanges; FTX Spends Heavily on Bankruptcy Fees
Summary:
A class action lawsuit has been filed against Lido DAO, alleging that the organization misled investors into participating in an unlisted securities offer. Meanwhile, ETF analysts warn approval of spot Bitcoin ETFs could financially harm crypto exchanges like Coinbase due to lower transaction fees. Additionally, recent reports reveal crypto exchange FTX paid an extensive sum of $118.1 million in fees to bankruptcy attorneys and advisors over a three-month period.
A lawsuit alleging Lido DAO deceived investors into partaking in an unlisted securities offer has been initiated through a class action. At the same time, ETF analysts are warning that the emergence of spot Bitcoin exchange traded funds (ETFs) could inadvertently harm crypto platforms like Coinbase by causing a drop in transaction fees. Additionally, recent reports reveal that between August and October, crypto marketplace FTX distributed a hefty sum of $118.1 million to insolvency attorneys and advisors.
A previous Lido patron launched a class action complaint against the Lido DAO, citing the DAO conducted an unregistered security and should be held accountable for participants' losses during the cryptocurrency market downturn. Filed in a San Francisco District Court on December 17, the suit accuses Lido DAO of offloading tokens onto uninformed investors during the trough of the bear market. The document alleges that establishment commenced as a "common partnership" of institutional investors, prior to exploiting a promising "exit" opportunity by selling Lido tokens to the general public.
The lawsuit reinforces its assertion that Lido operates as an unlisted security, invoking remarks from Securities and Exchange Commission Chair Gary Gensler. The document indicates that the Lido token's control lies with "a central group […] and the general public expects to profit from that group's efforts." Lido currently asserts over $19 billion in cryptocurrency in its contracts, ranking it as the largest liquid staking derivative platform on the market, as suggested by DeFiLlama.
Whilst the cryptocurrency sector impatiently anticipates the potential authorization of a spot Bitcoin ETF in the United States, some analysts are cautioning this could inadvertently induce undesirable repercussions for cryptocurrency exchanges.
Several industry experts have forecasted that a spot BTC ETF could potentially initiate trading in early 2024, theorizing that Bitcoin's forthcoming block reward halving in April, compounded with this event, could potentially drive BTC upwards of $100,000.
Yet this projection is not as hopeful for traditional cryptocurrency exchanges, as detailed by ETF Store president Nate Geraci and Bloomberg ETF analyst Eric Balchunas. They propose that an approved spot Bitcoin ETF in the U.S. will lead to a "massacre" for cryptocurrency exchanges, with the analyst expressing this sentiment on X (previously Twitter) on December 17.
Geraci argues that retail spot Bitcoin ETF traders will gain from institutional trade execution and tariffs. In contrast, he suggests those using crypto platforms will receive "retail trade execution and commissions" and emphasizes the necessity for this to improve in order to compete with a spot Bitcoin ETF.
According to Bloomberg ETF analyst Eric Balchunas, a spot Bitcoin ETF will operate at a trading cost of 0.01%, the average rate for ETF trading. Comparatively, transaction costs on platforms like Coinbase can tally up to 0.6%, varying on the type of cryptocurrency, transaction size, and trading pairs.
Exemplifying the potential for the establishment of a spot Bitcoin ETF to increase price competition within the crypto industry, Balchunas suggests that approval will funnel funds back to investors from platforms that invest substantial capital into promoting their services at high-profile events such as the Super Bowl.
As revealed in recent filings, from August to October, crypto marketplace FTX lost roughly $53,000 per hour just on insolvency attorneys and advisors. Court submissions between December 5 and December 16 attest that the insolvency attorneys billed a collective sum of at least $118.1 million over these three months. Across 92 days, this reflects a daily loss of $1.3 million or $53,300 per hour.
An initial report submitted on December 5 by court-appointed fee examiner, Katherine Stadler, identified "significant areas of concern" regarding the charges presented by larger advisory firms, including Sullivan and Cromwell, Alvarez and Marshall, and others from May to June. Sullivan and Marshall received criticism over their staffing levels, an apparent excess in meeting attendance, fees associated with non-working travel time, and various technical and procedural deficiencies.
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Published At
12/18/2023 11:32:52 PM
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