Happy New Year!

I wish I could start the year off by hitting your inbox with good vibes only – tell you that the crypto calamities of 2022 won’t bleed into 2023 – but I can’t.

Last year, my goal was to bring you crypto news in a pragmatic, hype-free, and entertaining way. My goal for 2023 is the same – which means giving it to you straight.

While I hope the worst of FTX is behind us, the aftershocks are still rippling through the industry. Things could get worse before they get better. In either case, we’ll be here to make sense of it all.

And if you’re too lazy to read this newsletter or need an excuse to take a lunch break during busy season, come join me on LinkedIn Live to chat about this week’s Triple Entry issue (more on that down below).

“Calc”-you-later, 🧮


P.S. A hearty welcome to our *checks notes* SIXTEEN HUNDRED THIRTY SIX (1,636) new subscribers! Whatever brought you to this party, I’m glad you’re here.

SBF Pleads “Not Guilty”

“Nooo, not more FTX news!”

Sorry, friends, we’re going to be hearing about FTX all year, whether we like it or not.The FTX saga is playing out like a nightmarish game of IRL Monopoly, in which Sam Bankman-Fried:

  • Gobbles up a bunch of properties (crypto trading volume)
  • Cheats by stealing money (and straight up creating Monopoly Money)
  • Gets caught cheating and goes “directly to jail”
  • Plays “get out of jail free” card on his next turn

But if you bought this card, did you really get out of jail “free?” 

And just like your annoying family member or friend that would deny cheating in Monopoly, SBF pleaded “not guilty” to fraud and conspiracy charges last week.

I’m no lawyer, but it sounds like SBF and his legal team face a “tough road,” especially considering that his plea counters the “guilty” pleas recently offered by those of Alameda Research CEO Caroline Ellison and FTX co-founder Gary Wang.

My guess is that his plea deals were so awful that he opted to plead “not guilty” so that he could go home to mommy and daddy’s to get a solid nine months of League of Legends games in before his October trial.

A few weird things about the case:

  • SBF’s lawyers asked the courts to conceal the identities of his $250 million bail co-signers, citing privacy and safety concerns
  • Sam can still use the internet freely (great, more annoying Twitter Spaces and media tours)
  • Crypto wallets linked to Alameda Research (SBF’s trading company) sat dormant for a few weeks, then suspiciously “woke up” once SBF was released on bail, trading over $1M through crypto mixers. Assistant U.S. Attorney Danielle Sassoon even had to ask the courts, on the government’s behalf, that SBF be prohibited from accessing or transferring any assets tied to FTX or its affiliated entities.

Meanwhile, FTX customers are trying to get their money back through a legal path that worked well in the WorldCom and Enron cases: going after the supposed enablers.

We told you things didn’t look good for the FTX auditors. 😅

How Barry Got Buried By Debt

Everyone is talking about the beef between the Winklevoss Twins’ (Winklevii?) and Barry Silbert, but few seem to be talking about how we got here and why it matters.

The TL;DR is that Barry’s company DCG owes the Winklevii’s company Gemini, specifically Gemini Earn customers, $900 million. Cameron Winklevoss called out Barry in an open letter on Twitter, in which he accused Barry of “bad faith stall tactics.”

But we’re (among other things) accountants and need the dirty details, so let’s get to the bottom of it!

Who are they?

If you don’t recognize the Winklevoss name, this might ring a bell:

“I’m 6’5, 220, and there’s two of me.”

Remember the two rowing bros from The Social Network who supposedly had the original idea for Facebook? That’s them! They recovered from their Facebook fumble and went on to found popular crypto exchange Gemini.

Barry Silbert started investing in crypto way back in 2012 and is currently the Founder and CEO of Digital Currency Group. Digital Currency Group is a behemoth crypto company whose portfolio includes (to name a few):

  • Genesis – go-to crypto prime brokerage
  • Grayscale – large digital currency asset manager
  • Coindesk – blockchain news outlet and organizer of Consensus
  • Foundry – digital asset mining and staking company
  • Luno – digital asset exchange and wallet provider

In other words, DCG is a big deal in the crypto world, and Barry Silbert probably deserves his self-proclaimed “King of Crypto” title.

How It Started

Our story begins with two DCG portfolio companies: Genesis and Grayscale. Genesis is the “who’s who” of institutional crypto lenders (think J.P. Morgan or Goldman Sachs, but lending to crypto hedge funds and exchanges).

Because the SEC hasn’t approved a Bitcoin ETF, Grayscale opened the Bitcoin Trust as a way for investors and investment managers to gain exposure to Bitcoin in tax-advantaged accounts (like IRAs). The Bitcoin Trust is sort of “backed” by bitcoin, but it doesn’t give you direct exposure to bitcoin, meaning it doesn’t trade 1:1.

In early 2021, the now-defunct crypto hedge fund Three Arrows Capital (3AC) filed a report with the SEC showing that they had acquired 6.1% of the Grayscale Bitcoin Trust (GBTC) – a position valued at over $1.31 billion at the time.

Why would 3AC acquire such a massive chunk of GBTC? During that period, GBTC was selling at a significant premium to BTC, so the hedge fund took advantage of a lucrative arbitrage opportunity. What did that look like?

Here’s where Grayscale’s sister company Genesis comes back in. Three Arrows took a bunch of money it had made from earlier trades, put it up as collateral to borrow bitcoin from Genesis, then turned around and deposited the newly-acquired bitcoin into the Greyscale Bitcoin Trust in exchange for shares of GBTC. They then sold the shares of GBTC at a ~30% premium and pocketed the juicy returns.

Oh, and here’s one more piece of relevant information: Genesis was the only authorized participant that could issue Grayscale shares at the time. In other words, Genesis basically loaned funds to customers, accepted deposits of their own funds, then issued shares of marketable securities in return.

Why would DCG, Genesis, and Grayscale offer this arbitrage opportunity? Ultimately, they made the bulk of their money from taking 2.5% of assets under management (AUM), so their goal was to hold as much crypto as possible.

How It’s Going

Three Arrows Capital milked the heck out of this arbitrage opportunity until March of 2021, when the GBTC premium flipped from a premium to a discount. (Notice that we’re at -45% discount today – ouch!)

They pivoted by investing their winnings into riskier assets like Solana (SOL), Avalanche (AVAX), and, uh…LUNA. Yes, the same LUNA that went straight to zero in a glorious dumpster fire blaze last year.

You’re probably starting to put the pieces together now. Three Arrows Capital went belly up back in July after LUNA’s collapse. Apparently, the LUNA collapse may have also triggered FTX’s ultimate downfall; on-chain data shows $4 billion of FTT outflows from Alameda to FTX, which may have been collateral for “loans” FTX gave Alameda to bail them out.

Back to Barry, DCG, Genesis, and Gemini

This hole goes pretty deep, so let’s drop our shovels and bring it back to where we started.

Genesis loaned $2.36 billion to 3AC using only 80% collateral, so it lost ~$472 million (20% of $2.36 billion) when 3AC failed. Genesis also had $175 million locked in its FTX trading account.

All these blows forced DCG to step in to keep its lending desk afloat by extending a $1.1 billion promissory note with a ten-year maturity, in addition to an existing intercompany loan made at “arm’s length” for $575 million due in May.

These loans and other outstanding debt bring DCG’s total outstanding liabilities to over $2 billion.

That number may not be a big deal in a bull market, but where do you find that kind of dough in deep bear market territory? The options aren’t great; both put DCG $1B shy of what they need.

DCG is fighting to keep Genesis from filing bankruptcy, probably because, if it doesn’t, the $1.1B promissory note becomes instantly callable (DCG has to repay the loan) in bankruptcy proceedings.

To top it all off, Bloomberg reports that our boys from the SEC and CFTC showed up to the party. The SEC and Department of Justice are “scrutinizing transfers between [DCG] and [Genesis]” as well as “what investors were told about those transactions.”

In short, things look bleak for Barry Silbert and DCG.

Spotlight 🔦 – Triple Entry Lunch Break – Live!


Sometimes I lament the primarily one-way interaction of writing an email newsletter. Sure, you can reply to this newsletter (it’s my personal address and I read every reply) but it’s not a naturally conversational medium.

Well, here we are in the new year and it’s time to try new things! I’ve decided to start doing a LinkedIn Live edition of this newsletter. I’m calling it the Triple Entry Lunch Break, a half-hour livestream where I break down the main story (or stories) from the newsletter, with the added bonus of chopping it up with all of you who comment live. You’ll either learn a bunch while you munch your lunch, or watch in awe as I publicly embarrass myself — guaranteed to be entertaining either way.

Eventually I hope to invite people onto these so hit me up if you like what’s going on and want to be featured in the stream sometime!

Don’t miss the first one at noon MST TODAY, Jan. 10th! Hit the image to go to the event.

Quick logistical note – since this is on LinkedIn Live, you will need a LinkedIn account to watch and comment, and it looks like LinkedIn won’t let you do it on mobile unless you have their app. Sneaky of them.

The Water Cooler 🚰

Things worth talking about at the office water cooler…if you 1) talk to people, 2) still work in an office, and 3) have a water cooler.

💲💲💲 Featured Funding Find: AI + Accounts Payable = Big $$$

Headlines Only, Plz

ICYMI – Vic.ai raises $52M in Series C led by GGV Capital, ICONIQ Growth, Cowboy Ventures, Costanoa Ventures

What is this?

Vic.ai is (for now) primarily an automated accounts payable tool, using algorithms developed on historical data for public companies to select invoices and expenses of a particular confidence threshold before automatically sending for approval.

This series brings the company’s total funding to $115 million, which CEO Alexander Hagerup says will improve customer acquisition and augment the platform’s capabilities from just accounts payable to include purchase order match, payment execution and “spend intelligence” capabilities.

Why we noticed this:

First of all, we know this is over a month old and isn’t a crypto funding story. However, we wanted to cover it because it’s been mostly crickets on the crypto funding news front recently. Which maybe isn’t such a bad thing – after the last few months, a break is called for.

But also the conversation about AI has been going nuts lately, especially since ChatGPT launched, and we wanted to add our voices to the throng of people posting hot takes with no idea what they’re talking about.

Also also, remember (or if you’re new here, review) that one of our core focuses here at Multisig is the future of the accounting and finance industry as a whole. Crypto, of course, has major implications for that future, but so does AI.

And lest you hear any trace of “AI is comin’ for your jobs!” alarmism here, let us dispel that right away. To wit: real live accountants reviewed the initial data sets that trained the Vic.ai algorithm, and real live accountants are processing the current invoices the company is using to maintain those same algorithms.

In any case, automating back-office functionality is not new. We’re just entering a new era where AI tools are able to accelerate this automation. And as is often the case with the adoption curve of new technologies, companies will want to devise a sensible strategy for implementing them, but often doing it correctly will mean delaying until a specific use case for the technology shows up. Accounting and finance verticals are prime areas for back-office automation use cases.

We can reasonably expect a lot more of this type of thing in the near future. Keep an eye on competitors like Upflow, Glean AI, Tipalti, and YayPay in the accounts receivables management and automation space.

Extraordinary Items

P.S. If you’re not following us on Twitter, you can fix that.

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