Thread by @sophie_frm_mars

What I know about the coinbase situation so far, with added context

So the last big crypto news story was FTX, Sam Bankman Fried's alleged fraud scam scheme that got a lot of high profile celeb endorsements inc Larry David lmao who are now getting caught in the crossfire for endorsing a scam

FTX has been repeatedly called the "crypto contagion" because it's wrapped up in so many crypto structures and so has drawn the legality of so much into question. That's important for later

In the last few weeks, some of the biggest historic US bank collapses have come from the set of real world banks that do the most crypto trading, with Silvergate then SVB (2nd biggest bank collapse) and then Signature (3rd biggest)

SVB triggered its collapse by selling off US treasury bonds at a loss to try to help meet rising interest rates, such an obviously panicky move that it caused an instant bank run. SVB's FTX involvement isn't the biggest but it may have still had an impact

Signature bank collapsed and was put under the management of the Federal Deposit Insurance Company (FDIC) by the NY Department of Financial Services (DFS). Signature's manager Barney Frank claimed that the bank was fiscally stable so didn't need to be shut down, but...

There are a few reasons Signature could have been shut down, one of which being it really strongly looking like they're doing crimes, and hey look it's our pal FTX again - Signature is subject to a class action lawsuit for FTX fraud

Sig being shut down despite Frank's claim that its financially sound has sparked a conspiracy theory among some crypto bros that the federal government is conducting a secret op to shut down crypto, which it KINDA is except not secret - it's investigating all the FTX fraud

It's just the FTX fraud has huge knock on consequences. For example the consequence that 3 huge crypto trading banks shutting down eliminates major routes for getting money in and out of crypto and puts strain on the remaining ones (i.e. Coinbase)

So a slow pulling out of coinbase and particularly out of USDC (a stablecoin supposedly pegged to the value of the USD) has been happening as more and more whales panic. Last week $3bn cashed out of USDC in 3 days. Yesterday a billion was taken out in a single transaction

So the current collapse that seems to be unfolding is basically about people realising their money will be trapped in crypto if the remaining exchanges shut down and cashing out which in turn hurts those exchanges in specific and crypto in general

Yesterday the value of USDC came unpegged from the value of the dollar, which is like the one thing it should not do

Today coinbase was served with violation of finance laws I won't go into bc we don't know the full details yet and most people won't care, and seemingly not in response but just simultaneously they've been experiencing a slow bleed for days already. They're fucked

With the Wells violation on top of that there's now a much faster bleed occurring and they may well be utterly dead in the water

There's currently speculation of basically insider trading as nobody at coinbase has bought shares recently and a bunch of them sold a TONNE of shares right before the big drop hit. It seems plausible but time will tell

The funniest thing about the "Operation Chokepoint 2.0" conspiracy theory is how it's a great example of when conspiracy theories are (at least partially) true. The federal govt is going after crypto rn, but not because they hate crypto, bc crypto does a lot of Financial Crimes

It's a perfect reminder that conspiracy belief is emotional, not rational, and conspiracy theories reflect intergroup social conflict. So if you see crypto as a financial system full of crimes the federal govt intervening is pretty innocuous, but if you...

See crypto as a tool of social mobility and liberation for the poor because you're a middle class aspirant who got radicalised toward libertarian capitalism by 2007/8 then it's a sinister conspiracy to curtail civil freedoms

I'm still anxious about the wider implications, since crypto is an international phenomenon. While it's only a little of the global economy, big banks going down have a nasty habit of acting like dominoes. I don't want to speak too soon but this could spin into another 2007/8

The bigger the economic ripples however, the more ironic it becomes that this all may be the indirect result of a guy with the ideology "if I get really rich I can save the world" getting exposed for massive fraud

Good time to remind everyone that the state exists to mediate class tensions in favour of the ruling class, that they will always bail out bankers& not the working class unless we organise & show them labour power. Look at France right now. That has to be the response

Of course this could still turn around and be less bad than it looks or just be contained to crypto. For now we can just enjoy coinbase imploding from a distance

Good coverage of coinbase situation here. Worth noting that there are more bank collapses and federal actions against crypto exchanges in there that I didn't mention before

https://twitter.com/Reuters/status/1638713522682048515?t=m_vAKEs9aYAdSi1nBuHW9g&s=19

A few people have caught on to this so let me confirm: YES, Barney Frank, the manager of Signature is also the co-author of the Dodd-Frank regulations in response to 2008. Couple of interesting things about that:

1) When the credit requirements from Dodd-Frank to ensure banks were stable enough to do business were being repealed under Trump, the SVB manager testified it would be good for "mid-sized" banks like his. I imagine he and Frank have probably met and I find that funny

2) Lots of people are speculating that Frank's claim Signature was stable was not a deliberate misrepresentation, but rather they assume that he was being misled by execs at the bank

These are a few minutes apart, and the market opens in 10 minutes

Coinbase is going the fuck down lmao

Okay, DELIGHTFUL Coinbase update, time to introduce a new character to the thread. Meet Cross River Bank, the bank that coinbase keeps (probably all) its clients' funds in
techcrunch.com/2022/03/30/cro…

So Cross River's trying to raise funds right now, and its main plan for that appears to be PPP loans. What are PPP loans? Paycheck Protection Program loans are a financial tool with incredible propensity to shady and predatory where they give money to small businesses to ensure..

paycheck continuity for employees during a credit gap. In other words they're basically payday loans for small businesses. Lmao commercial finance really is just a big game of fishy

anyway Cross River's PPP loans can be forgiven (paid off) by the federal government if they were legit and sound loans but the borrower just never paid it back, but a LOT, like a LOT a lot, like $300 million of PPP loans from CRB haven't been forgiven

worth saying that the fed NOT forgiving them doesn't declare certainly but strongly implies that the $300 million of loans they didn't forgive are in some way sketchy or criminal. Time will tell

ANYWAY the point is that Coinbase ($COIN i'm not fucking around any more get your money out now) has all its clients' funds in a bank over a $300 million hole that may collapse in a countable number of hours

QTing this into the thread because I'm gasping for air laughing

https://twitter.com/JimLawrence85/status/1639000983811379225

Very seriously though, if you have money in #COIN $COIN #USDC $USDC you actually want to get it out now or you will probably lose it entirely very soon. If you know people who do, it seems wise and caring to tell them to as well

just QTing for clarity

https://twitter.com/JimLawrence85/status/1639001247045898251

great article about the coinbase getting a Wells Notice, basically a declaration of an investigation by the SEC. As ever with the delusions of crypto bros, Coinbase answered with a mixture of self-victimisation and complete nonsense

https://twitter.com/JohnReedStark/status/1638976434772275224

this is just gonna become a broad bank collapse thread isn't it lol

https://twitter.com/PriapusIQ/status/1638999973084778517

This is one of the funniest things I've read in weeks. Of course they're securities, of COURSE they are, but also lol and furthermore lmao that the govt already ruled that and crypto bros think they'll be exempt from the law

https://twitter.com/Cryptadamist/status/1639023994195304448?t=7Ak1WPzLMcyPKPQsuQ7NBQ&s=19

Oh no holy shit the CEO of coinbase (lex luthor lookin ass) doesn't think coinbase trades in securities holy shit holy fuck this thing is gonna tank really hard and fast marketwatch.com/story/coinbase…

Binance has paused all trading

https://twitter.com/DeItaone/status/1639239371978158080

Left wingers the world over are saying that an economic collapse is coming, and the capitalists simply aren't interested in hearing it

https://twitter.com/johnmcdonnellMP/status/1639283035416801280

If you're seeing this at some point after crypto falls apart and you've lost money, hear this: the people with power were happy to let this happen to you. People like me are advocating for a world where everyone has plenty, which even napkin math can tell you is easily possible

you can't beat them by grifting, by voting, by storming the capital, by punching down on minorities, or by scamming others, but together we can make a better world from the ashes of the old