collapse of Mt. Gox, a Tokyo-based virtual currency exchange that declared bankruptcy in 2014 after huge, unexplained losses of Bitcoin.

If cryptocurrency prices do not recover, “a lot of them will have to go back to work again,” Clinton Donnelly, an American tax lawyer specializing in cryptocurrencies, said of some of those gathered at Bam Bam.

Even so, Mr. Donnelly and other bar regulars said their belief in crypto remained unshaken.

Thomas Roessler, wearing a black Bitcoin shirt and drinking a beer “inspired by” the currency, said he had come with his wife and two young children to decide whether to move to Portugal from Germany. He first invested in Bitcoin in 2014 and, more recently, sold a small rental apartment in Germany to invest even more.

Mr. Roessler was concerned about the drop in crypto values but said he was convinced the market would rebound. Moving to Portugal could lower his taxes and give his family the chance to buy affordable property in a warm climate, he said. They had come to the bar to learn from others who had made the move.

“We have not met a lot of people who live this way,” Mr. Roessler said. Then he bought another round of drinks and paid for them with Bitcoin.

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Former Twitter Security Chief Files Whistleblower Complaints

By Associated Press
August 23, 2022

One of the allegations is also at the core of the attempted withdrawal of a $44 billion takeover bid for Twitter by billionaire Elon Musk.

A former head of security at Twitter has filed whistleblower complaints with U.S. officials, alleging that the company misled regulators about its cybersecurity defenses and its problems with fake accounts, according to reports by The Washington Post and CNN.

Peiter Zatko, Twitter’s security chief until he was fired early this year, filed the complaints last month with the U.S. Securities and Exchange Commission, the Federal Trade Commission and the Department of Justice.

The Post, which obtained the complaint, reported that among the most serious accusations is that Twitter violated the terms of an FTC settlement by falsely claiming that it had a strong security plan.

Zatko also accuses the company of deceptions involving its handling of “spam” or fake accounts, an allegation that is at the core of the attempted withdrawal of a $44 billion takeover bid for Twitter by billionaire Elon Musk.

Shares of Twitter Inc. slid 4% Tuesday.

Zatko didn’t immediately respond to a request for comment Tuesday but told the Post he “felt ethically bound” to come forward.

Zatko, better known as Mudge, is a highly respected cybersecurity expert who first gained prominence in the 1990s and later worked in senior positions at the Pentagon’s Defense Advanced Research Agency and Google. He joined Twitter at the urging of then-CEO Jack Dorsey in late 2020, the same year the company suffered an embarrassing security breach involving hackers who broke into the Twitter accounts of world leaders, celebrities and tech moguls, including Musk, in an attempt to scam their followers out of Bitcoin.

Twitter said in a prepared statement Tuesday that Zatko was fired for “ineffective leadership and poor performance” and that the “allegations and opportunistic timing appear designed to capture attention and inflict harm on Twitter, its customers and its shareholders.”

“What we’ve seen so far is a false narrative about Twitter and our privacy and data security practices that is riddled with inconsistencies and inaccuracies and lacks important context,” the company said.

The legal nonprofit Whistleblower Aid, which is representing Zatko, confirmed the authenticity of the document Tuesday, but said it is legally precluded from sharing it. The same group worked with former Facebook employee Frances Haugen, who testified to Congress last year after leaking internal documents and accusing the social media giant of choosing profit over safety.

A spokesperson for the U.S. Senate’s intelligence committee, Rachel Cohen, said the committee has received Zatko’s complaint and “is in the process of setting up a meeting to discuss the allegations in further detail. We take this matter seriously.”

Sen. Dick Durbin, an Illinois Democrat, said in a prepared statement that if the claims are accurate, “they may show dangerous data privacy and security risks for Twitter users around the world.”

Among the most alarming complaints is Zatko’s allegation that Twitter knowingly allowed the Indian government to place its agents on the company payroll where they had “direct unsupervised access to the company’s systems and user data.”

A 2011 FTC complaint noted that Twitter’s systems were full of highly sensitive data that could allow a hostile government to find precise geo-location data for a specific user or group and target them for violence or arrest. Earlier this month, a former Twitter employee was found guilty after a trial in California of passing along sensitive Twitter user data to royal family members in Saudi Arabia in exchange for bribes.

The complaint said Twitter was also heavily reliant on funding by Chinese entities and that there were concerns within Twitter that the company was providing information to those entities that would enable them to learn the identify and sensitive information of Chinese users who secretly use Twitter, which is officially banned in China.

Zatko also describes “deliberate ignorance” by Twitter executives on counting the millions of accounts that are automated “spam bots” or otherwise have no value to advertisers because there is no person behind them.

Alex Spiro, an attorney representing Musk in his effort to back out of the deal to buy Twitter, said lawyers have issued a subpoena for Zatko. “We found his exit and that of other key employees curious in light of what we have been finding,” Spiro wrote in an email Tuesday.

Additional reporting by the Associated Press.

Source: newsy.com

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How The Federal Reserve’s Rate Hikes Affect Your Finances

Answers to some of the most common questions about the impact of the rate hike.

Higher mortgage rates have sent home sales tumbling. Credit card rates have grown more burdensome, and so have auto loans. Savers are finally receiving yields that are actually visible, while crypto assets are reeling.

The Federal Reserve’s move last week to further tighten credit raised its benchmark interest rate by a sizable 0.75 percentage point for a second straight time. The Fed’s latest hike, its fourth since March, will further magnify borrowing costs for homes, cars and credit cards, though many borrowers may not feel the impact immediately.

The central bank is aggressively raising borrowing costs to try to slow spending, cool the economy and defeat the worst outbreak of inflation in two generations.

The Fed’s actions have ended, for now, an era of ultra-low rates that arose from the 2008-2009 Great Recession to help rescue the economy — and then re-emerged during the brutal pandemic recession, when the Fed slashed its benchmark rate back to near zero.

Chair Jerome Powell hopes that by making borrowing more expensive, the Fed will succeed in slowing demand for homes, cars and other goods and services. Reduced spending could then help bring inflation, most recently measured at a four-decade high of 9.1%, back to the Fed’s 2% target.

Yet the risks are high. A series of higher rates could tip the U.S. economy into recession. That would mean higher unemployment, rising layoffs and further downward pressure on stock prices.

How will it all affect your finances? Here are some of the most common questions being asked about the impact of the rate hike:

I’M CONSIDERING BUYING A HOUSE. WHAT’S HAPPENING WITH MORTGAGE RATES?

Higher interest rates have torpedoed the housing market. Rates on home loans have nearly doubled from a year ago to 5.5%, though they’ve leveled off in recent weeks even as the Fed has signaled that more credit tightening is likely.

That’s because mortgage rates don’t necessarily move in tandem with the Fed’s increases. Sometimes, they even move in the opposite direction. Long-term mortgages tend to track the yield on the 10-year Treasury note, which, in turn, is influenced by a variety of factors. These factors include investors’ expectations for future inflation and global demand for U.S. Treasurys.

Investors expect a recession to hit the U.S. economy later this year or early next year. This would force the Fed to eventually cut its benchmark rate in response. The expectation that the Fed will have to reverse some of its hikes next year has helped reduce the 10-year yield, from 3.5% in mid-June to roughly 2.8%.

WILL IT BE EASIER TO FIND A HOUSE?

Sales of existing homes have dropped for five straight months, while new home sales plunged in June. If you’re financially able to go ahead with a home purchase, you’re likely to have more choices than you did a few months ago.

In many cities, the options are few. But the number of available houses nationwide has started to rise after falling to rock-bottom levels at the end of last year. There are now 1.26 million homes for sale, according to the National Association of Realtors, up 2.4% from a year ago.

I NEED A NEW CAR. SHOULD I BUY ONE NOW?

The Fed’s rate hikes typically make auto loans more expensive. But other factors also affect these rates, including competition among car makers, which can sometimes lower borrowing costs.

Wednesday’s rate hike won’t likely affect new-vehicle sales much because those buyers are mainly affluent customers who won’t be squeezed by a relatively small uptick in monthly payments, said Jonathan Smoke, chief economist for Cox Automotive. By contrast, he said, used-car buyers with weaker credit who pay higher loan rates could be hurt.

“Many used-vehicle buyers are already acutely feeling the impacts of higher prices for energy, food and rent,” Smoke said.

Used vehicle prices have begun to fall, he noted, and vehicle availability is beginning to return to normal levels.

The full amount of a Fed rate hike doesn’t always pass through to auto loans, according to Bankrate.com. New 60-month loans for new vehicles have risen about a percentage point this year to an average of 4.86%, Bankrate.com says, while a 48-month used-vehicle rate rose just under 1 point to 5.38%.

WHAT WILL HAPPEN TO MY CREDIT CARD?

For users of credit cards, home equity lines of credit and other variable-interest debt, rates would rise by roughly the same amount as the Fed hike, usually within one or two billing cycles. That’s because those rates are based in part on banks’ prime rate, which moves in tandem with the Fed.

Those who don’t qualify for low-rate credit cards might be stuck paying higher interest on their balances. The rates on their cards would rise as the prime rate does.

The Fed’s rate increases have already sent credit card borrowing rates above 20% for the first time in at least four years, according to LendingTree, which has tracked the data since 2018.

HOW WILL THIS AFFECT MY SAVINGS?

You can now earn more on bonds, CDs, and other fixed income investments. And it depends on where your savings, if you have any, are parked.

Savings, certificates of deposit and money market accounts don’t typically track the Fed’s changes. Instead, banks tend to capitalize on a higher-rate environment to try to boost their profits. They do so by imposing higher rates on borrowers, without necessarily offering any juicer rates to savers.

But online banks and others with high-yield savings accounts are often an exception. These accounts are known for aggressively competing for depositors. The only catch is that they typically require significant deposits.

HOW HAVE THE RATE HIKES INFLUENCED CRYPTO?

Like many highly valued technology stocks, cryptocurrencies like bitcoin have sunk in value since the Fed began raising rates. Bitcoin has plunged from a peak at about $68,000 to $21,000.

Higher rates mean that safe assets like bonds and Treasuries become more attractive to investors because their yields are now higher. That, in turn, makes risky assets like technology stocks and cryptocurrencies less attractive.

All that said, bitcoin is suffering from its own problems that are separate from economic policy. Two major crypto firms have failed. The shaken confidence of crypto investors is not being helped by the fact that the safest place you can park money now — bonds — seems like a safer move.

WILL MY STUDENT LOAN PAYMENT GO UP?

Right now, payments on federal student loans are suspended until Aug. 31 as part of an emergency measure that was put in place early in the pandemic. Inflation means that loan-holders have less disposable income to make payments. Still, a slowed economy that reduces inflation could bring some relief by fall.

Depending on the state of the economy, the government may choose at the end of summer to extend the emergency measure that’s deferring the loan payments. President Joe Biden is also considering some form of loan forgiveness. Borrowers who take out new private student loans should prepare to pay more. Rates vary by lender but are expected to increase

Additional reporting by The Associated Press.

Source: newsy.com

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The big default? The dozen countries in the danger zone

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LONDON, July 15 (Reuters) – Traditional debt crisis signs of crashing currencies, 1,000 basis point bond spreads and burned FX reserves point to a record number of developing nations now in trouble.

Lebanon, Sri Lanka, Russia, Suriname and Zambia are already in default, Belarus is on the brink and at least another dozen are in the danger zone as rising borrowing costs, inflation and debt all stoke fears of economic collapse.

Totting up the cost is eyewatering. Using 1,000 basis point bond spreads as a pain threshold, analysts calculate $400 billion of debt is in play. Argentina has by far the most at over $150 billion, while the next in line are Ecuador and Egypt with $40 billion-$45 billion.

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Crisis veterans hope many can still dodge default, especially if global markets calm and the IMF rows in with support, but these are the countries at risk.

ARGENTINA

The sovereign default world record holder looks likely to add to its tally. The peso now trades at a near 50% discount in the black market, reserves are critically low and bonds trade at just 20 cents in the dollar – less than half of what they were after the country’s 2020 debt restructuring.

The government doesn’t have any substantial debt to service until 2024, but it ramps up after that and concerns have crept in that powerful vice president Cristina Fernandez de Kirchner may push to renege on the International Monetary Fund. read more

Reuters Graphics

UKRAINE

Russia’s invasion means Ukraine will almost certainly have to restructure its $20 billion plus of debt, heavyweight investors such as Morgan Stanley and Amundi warn.

The crunch comes in September when $1.2 billion of bond payments are due. Aid money and reserves mean Kyiv could potentially pay. But with state-run Naftogaz this week asking for a two-year debt freeze, investors suspect the government will follow suit. read more

Ukraine bonds brace for default

TUNISIA

Africa has a cluster of countries going to the IMF but Tunisia looks one of the most at risk. read more

A near 10% budget deficit, one of the highest public sector wage bills in the world and there are concerns that securing, or a least sticking to, an IMF programme may be tough due to President Kais Saied’s push to strengthen his grip on power and the country’s powerful, incalcitrant labour union.

Tunisian bond spreads – the premium investors demand to buy the debt rather than U.S. bonds – have risen to over 2,800 basis points and along with Ukraine and El Salvador, Tunisia is on Morgan Stanley’s top three list of likely defaulters. “A deal with the International Monetary Fund becomes imperative,” Tunisia’s central bank chief Marouan Abassi has said. read more

African bonds suffering

GHANA

Furious borrowing has seen Ghana’s debt-to-GDP ratio soar to almost 85%. Its currency, the cedi, has lost nearly a quarter of its value this year and it was already spending over half of tax revenues on debt interest payments. Inflation is also getting close to 30%.

Reuters Graphics

EGYPT

Egypt has a near 95% debt-to-GDP ratio and has seen one of the biggest exoduses of international cash this year – some $11 billion according to JPMorgan.

Fund firm FIM Partners estimates Egypt has $100 billion of hard currency debt to pay over the next five years, including a meaty $3.3 billion bond in 2024.

Cairo devalued the pound 15% and asked the IMF for help in March but bond spreads are now over 1,200 basis points and credit default swaps (CDS) – an investor tool to hedge risk – price in a 55% chance it fails on a payment. read more

Francesc Balcells, CIO of EM debt at FIM Partners, estimates though that roughly half the $100 billion Egypt needs to pay by 2027 is to the IMF or bilateral, mainly in the Gulf. “Under normal conditions, Egypt should be able to pay,” Balcells said.

Egypt’s falling foreign exchange reserves

KENYA

Kenya spends roughly 30% of revenues on interest payments. Its bonds have lost almost half their value and it currently has no access to capital markets – a problem with a $2 billion dollar bond coming due in 2024.

On Kenya, Egypt, Tunisia and Ghana, Moody’s David Rogovic said: “These countries are the most vulnerable just because of the amount of debt coming due relative to reserves, and the fiscal challenges in terms of stabilising debt burdens.”

Kenya’s concerns

ETHIOPIA

Addis Ababa plans to be one of the first countries to get debt relief under the G20 Common Framework programme. Progress has been held up by the country’s ongoing civil war though in the meantime it continues to service its sole $1 billion international bond. read more

Africa’s debt problems

EL SALVADOR

Making bitcoin legal tender all but closed the door to IMF hopes. Trust has fallen to the point where an $800 million bond maturing in six months trades at a 30% discount and longer-term ones at a 70% discount.

PAKISTAN

Pakistan struck a crucial IMF deal this week. read more The breakthrough could not be more timely, with high energy import prices pushing the country to the brink of a balance of payments crisis.

Foreign currency reserves have fallen to as low as $9.8 billion, hardly enough for five weeks of imports. The Pakistani rupee has weakened to record lows. The new government needs to cut spending rapidly now as it spends 40% of its revenues on interest payments.

Countries in debt distress at record high

BELARUS

Western sanctions wrestled Russia into default last month read more and Belarus now facing the same tough treatment having stood with Moscow in the Ukraine campaign.

Belarus bonds

ECUADOR

The Latin American country only defaulted two years ago but it has been rocked back into crisis by violent protests and an attempt to oust President Guillermo Lasso. read more

It has lots of debt and with the government subsidising fuel and food JPMorgan has ratcheted up its public sector fiscal deficit forecast to 2.4% of GDP this year and 2.1% next year. Bond spreads have topped 1,500 bps.

NIGERIA

Bond spreads are just over 1,000 bps but Nigeria’s next $500 million bond payment in a year’s time should easily be covered by reserves which have been steadily improving since June. It does though spend almost 30% of government revenues paying interest on its debt.

“I think the market is overpricing a lot of these risks,” investment firm abrdn’s head of emerging market debt, Brett Diment, said.

Currency markets in 2022
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Reporting by Marc Jones; Additional Reporting by Rachel Savage in London and Rodrigo Campos in New York; Editing by Susan Fenton

Our Standards: The Thomson Reuters Trust Principles.

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China’s Surveillance State Encounters Public Resistance

Chinese artists have staged performances to highlight the ubiquity of surveillance cameras. Privacy activists have filed lawsuits against the collection of facial recognition data. Ordinary citizens and establishment intellectuals alike have pushed back against the abuse of Covid tracking apps by the authorities to curb protests. Internet users have shared tips on how to evade digital monitoring.

As China builds up its vast surveillance and security apparatus, it is running up against growing public unease about the lack of safeguards to prevent the theft or misuse of personal data. The ruling Communist Party is keenly aware of the cost to its credibility of any major security lapses: Last week, it moved systematically to squelch news about what was probably the largest known breach of a Chinese government computer system, involving the personal information of as many as one billion citizens.

The breach dealt a blow to Beijing, exposing the risks of its expansive efforts to vacuum up enormous amounts of digital and biological information on the daily activities and social connections of its people from social media posts, biometric data, phone records and surveillance videos. The government says these efforts are necessary for public safety: to limit the spread of Covid, for instance, or to catch criminals. But its failure to protect the data exposes citizens to problems like fraud and extortion, and threatens to erode people’s willingness to comply with surveillance.

for mishandling data. But the authorities rarely point fingers at the country’s other top collector of personal information: the government itself.

Security researchers say the leaked database, apparently used by the police in Shanghai, had been left online and unsecured for months. It was exposed after an anonymous user posted in an online forum offering to sell the vast trove of data for 10 Bitcoin, or about $200,000. The New York Times confirmed parts of a sample of the database released by the anonymous user, who posted under the name ChinaDan.

In addition to basic information like names, addresses and ID numbers, the sample featured details that appeared to be drawn from external databases, like instructions for couriers on where to drop off deliveries, raising questions about how much information private companies share with the authorities. Of particular concern for many, it also contained intensely personal information, such as police reports that included the names of people accused of rape and domestic violence, as well as private information about political dissidents.

leaked databases used by the police in China that were left online with little to no protection; some contained facial recognition records and ID scans of people in a Muslim ethnic minority region.

Now, there are signs that people are growing wary of the government and public institutions, too, as they see how their own data is being used against them. Last month, a nationwide outcry erupted over the apparent abuse of Covid-19 tracking technology by local authorities.

Protesters fighting to recover their savings from four rural banks in the central Chinese city of Zhengzhou found that the mobile apps used to identify and isolate people who might be spreading Covid had turned from green — meaning safe — to red, a designation that would prevent them from moving freely.

“There is no privacy in China,” said Silvia Si, 30, a protester whose health code had turned red. The authorities in Zhengzhou, under pressure to account for the episode, later punished five officials for changing the codes of more than 1,300 customers.

posted on Weibo that he was refusing to wear an electronic bracelet to track his movements while in isolation, saying the device was an “electronic shackle” and an infringement on his privacy. The post was liked around 60,000 times, and users flooded it with responses. Many said the bracelet reminded them of the treatment of criminals; others called it a ploy to surreptitiously collect personal information. The post was later taken down by censors, the blogger said.

researcher on technology policy at Yale Law School and New America. “People are far more trusting overall in how government entities handle their personal information and far more suspicious about the corporate sector.”

Legal analysts said any disciplinary actions resulting from the Shanghai police database breach were unlikely to be publicized. There are few mechanisms in place to hold Chinese government agencies responsible for their own data leaks. For many citizens, that lack of recourse has contributed to a sense of resignation.

Occasionally, though, they notch small victories, as Xu Peilin did when she took on her neighborhood committee last year. She had returned to her apartment building in Beijing one day to find that the compound wanted residents to submit to a facial recognition scanner to enter.

“It was insane,” said Ms. Xu, 37, a project manager at a start-up company. She said it reminded her of one of her favorite television shows, the British science fiction series “Black Mirror.”

Ms. Xu badgered her neighborhood committee by telephone and text message until it relented. For now, Ms. Xu said, she can still enter her compound using her key card, though she believed it was only a matter of time until the facial recognition devices became mandatory again.

“All I can do for now,” she said, “is continue to resist on a small scale.”

Zixu Wang contributed reporting.

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Bitcoin Plummets Below $20,000 for First Time Since Late 2020

Square, another payments company, bought $50 million of Bitcoin and changed its name to Block, in part to signify its work with blockchain technology. Tesla bought $1.5 billion of it. The venture capital firm Andreessen Horowitz raised $4.5 billion for a fourth cryptocurrency-focused fund, doubling its previous one.

Excitement hit a peak in April last year when Coinbase, a cryptocurrency exchange, went public at an $85 billion valuation, a coming-out party for the industry. Bitcoin topped $60,000 for the first time.

Last summer, El Salvador announced that it would become the first country to classify Bitcoin as legal tender, alongside the U.S. dollar. The country’s president updated his Twitter profile picture to include laser eyes, a calling card of Bitcoin believers. The value of El Salvador’s $105 million investment in Bitcoin has been slashed in half as the price has fallen.

Senators and mayors around the United States began touting cryptocurrency, as the industry spent heavily on lobbying. Mayor Eric Adams of New York, who was elected in November, said he would take his first three paychecks in Bitcoin. Senators Cynthia Lummis, Republican of Wyoming, and Kirsten Gillibrand, Democrat of New York, proposed legislation that would create a regulatory framework for the industry, giving more authority to the Commodity Futures Trading Commission, an agency that crypto companies have openly courted.

Through the frenzy, celebrities fueled the fear of missing out, flogging their NFTs on talk shows and talking up blockchain projects on social media. This year, the Super Bowl featured four ads for crypto companies, including Matt Damon warning viewers that “fortune favors the brave.”

That swaggering optimism faltered this spring as the stock market plummeted, inflation soared and layoffs hit the tech sector. Investors began losing confidence in their crypto investments, moving money to less risky assets. Several high-profile projects crashed amid withdrawals. TerraForm Labs, which created TerraUSD, a so-called stablecoin, and Celsius, an experimental crypto bank, both collapsed, wiping out billions in value and sending the broader market into a tailspin.

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EXCLUSIVE Texas securities regulator is probing Celsius account freeze – official

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WASHINGTON, June 16 (Reuters) – State securities regulators in Alabama, Kentucky, New Jersey, Texas and Washington are investigating crypto lender Celsius Network’s decision this week to suspend customer redemptions, Joseph Rotunda, enforcement director at the Texas State Securities Board told Reuters on Thursday.

Officials met and began investigating the matter first thing Monday morning, Rotunda said, adding he considered the probe to be a “priority.”

Celsius said that due to extreme market conditions, it was pausing withdrawals, swaps and transfers between accounts. The company said that doing so would put it “in a better position to honor, over time, its withdrawal obligations.” read more

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“I am very concerned that clients – including many retail investors – may need to immediately access their assets yet are unable to withdraw from their accounts. The inability to access their investment may result in significant financial consequences,” he said.

Alabama Securities Commission Director Joseph Borg also told Reuters that Alabama, Texas, New Jersey and Kentucky securities regulators were probing the matter. Celsius has been responsive to questions from the regulators, but that the investigation is in the initial stages, he said.

Borg added that U.S. Securities and Exchange Commission has also been in communication with Celsius.

The SEC declined to comment. The New Jersey and Washington state securities regulators did not immediately respond to requests for comment. A spokesperson for the Kentucky Department of Financial Institutions said it was their policy to not comment on ongoing enforcement actions and investigations.

Celsius and CEO Alex Mashinsky did not immediately respond to a request for comment.

Rotunda said he and his team learned of the move by New Jersey-based Celsius to freeze user withdrawals from the company’s blog post and announcement on Twitter on Sunday night, which said the company needed to take action to “stabilize liquidity.”

In September, regulators in Kentucky, New Jersey and Texas hit Celsius with a cease and desist order, arguing its interest-bearing products should be registered as a security. In February, the SEC and those same state regulators fined BlockFi $100 million for failing to register its crypto lending product.

Similar to a bank, Celsius gathers crypto deposits from retail customers and invests them in the equivalent of the wholesale crypto market, including “decentralized finance,” or DeFi, sites that use blockchain technology to offer services from loans to insurance outside the traditional financial sector. read more

Celsius promises retail customers huge returns, sometimes as much as 18.6% annually. The lure of big profits has led individual investors to pour assets into Celsius and platforms like it.

Mashinsky said in October Celsius had $25 billion in assets. That figure had fallen to around $11.8 billion as of last month, the Celsius website showed.

Celsius appears to have stumbled on some of its wholesale crypto investments, according to public blockchain information and analysts who track such data. As those investments soured, the company was unable to meet redemptions from customers fleeing amid the broader crypto market slump, analysts said. read more

Cryptocurrencies have lost more than $400 billion since TerraUSD, a major stablecoin pegged to the U.S. dollar, collapsed in May. Bitcoin sank to an 18-month low on Wednesday to $20,079.72. It has slumped about 70% from its record high of $69,000 in November. read more

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Reporting by Hannah Lang; Editing by Richard Chang, Nick Zieminski, Michelle Price and Diane Craft

Our Standards: The Thomson Reuters Trust Principles.

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Crypto Firms Quake as Prices Fall

SAN FRANCISCO — No one wanted to miss out on the cryptocurrency mania.

Over the last two years, as the prices of Bitcoin and other virtual currencies surged, crypto start-ups proliferated. Companies that market digital coins to investors flooded the airwaves with TV commercials, newfangled lending operations offered sky-high interest rates on crypto deposits and exchanges like Coinbase that allow investors to trade digital assets went on hiring sprees.

A global industry worth hundreds of billions of dollars rose up practically overnight. Now it is crashing down.

After weeks of plummeting cryptocurrency prices, Coinbase said on Tuesday that it was cutting 18 percent of its employees, after layoffs at other crypto companies like Gemini, BlockFi and Crypto.com. High-profile start-ups like Terraform Labs have imploded, wiping away years of investments. On Sunday, an experimental crypto bank, Celsius, abruptly halted withdrawals.

dropped by about 65 percent since autumn, and analysts predict the sell-off will continue. Stock prices of crypto companies have cratered, retail traders are fleeing and industry executives are predicting a prolonged slump that could put more companies in jeopardy.

stocks crashing, interest rates soaring and inflation high, cryptocurrency prices are also collapsing, showing they have become tied to the overall market. And as people pull back from crypto investments, the outflow is exposing the unstable foundations of many of the industry’s most popular companies.

OpenSea, the largest marketplace for the unique digital images known as nonfungible tokens, reached a staggering $13 billion valuation. And Wall Street banks such as JPMorgan Chase, which previously shunned crypto assets, and Fortune 500 companies like PayPal rolled out crypto offerings.

confidence evaporated in the early 2000s, many of the dot-coms went bust, leaving just the biggest — such as eBay, Amazon and Yahoo — standing.

This time, investors predict there will be more survivors. “You certainly have some overhyped companies that don’t have the fundamentals,” said Mike Jones, an investor at the venture firm Science Inc. “But you also have some really strong companies that are trading way below where they should.”

There have been warning signs that some crypto companies were not sustainable. Skeptics have pointed out that many of the most popular firms offered products underpinned by risky financial engineering.

Terraform Labs, for example, offered TerraUSD, a so-called stablecoin with a fixed value linked to the U.S. dollar. The coin was hyped by its founder, Do Kwon, who raised more than $200 million from major investment firms such as Lightspeed Venture Partners and Galaxy Digital, even as critics warned that the project was unstable.

The coin’s price was algorithmically linked to a sister cryptocurrency, Luna. When the price of Luna plummeted in May, TerraUSD fell in tandem — a “death spiral” that destabilized the broader market and plunged some investors into financial ruin.

drew scrutiny from several state regulators. In the end, a drop in crypto prices appeared to put the company under more pressure than it could withstand.

With the price of Bitcoin tumbling, Celsius announced on Sunday that it was freezing withdrawals “due to extreme market conditions.” The company did not respond to a request for comment.

The market instability has also triggered a crisis at Coinbase, the largest U.S. crypto exchange. Between the end of 2021 and late March, Coinbase lost 2.2 million active customers, or 19 percent of its total, as crypto prices dropped. The company’s net revenue in the first three months of the year shrank 27 percent from a year earlier, to $1.2 billion. Its stock price has plunged 84 percent since it went public last year.

This month, Coinbase said it would rescind job offers and extend a hiring freeze to battle the economic downturn. On Tuesday, it said it would cut about 1,100 workers.

Brian Armstrong, Coinbase’s chief executive, informed employees of the layoffs in a note on Tuesday morning, saying the company “grew too quickly” as crypto products became popular.

“It is now clear to me that we over-hired,” he wrote. A Coinbase spokesman declined to comment.

“It had been growth at all costs over the last several years,” said Ryan Coyne, who covers crypto companies and financial technology at the Mizuho Group. “It’s now turned to profitable growth.”

memo to staff, the Winklevoss twins said the industry had entered a “crypto winter.”

commercial starring the actor Matt Damon, who declared that “fortune favors the brave” as he encouraged investors to put their money in the crypto market. Last week, Crypto.com’s chief executive announced that he was laying off 5 percent of the staff, or 260 people. On Monday, BlockFi, a crypto lending operation, said it was reducing its staff by roughly 20 percent.

Gemini and BlockFi declined to comment. A Crypto.com spokesman said the company remains focused on “investing resources into product and engineering capabilities to develop world-class products.”

Cryptocurrencies have long been volatile and prone to boom-and-bust cycles. In 2013, a Chinese ban on Bitcoin sent its price tumbling. In 2017, a proliferation of companies creating and selling their own tokens led to a run-up in crypto prices, which crashed after regulators cracked down on so-called initial coin offerings.

These bubbles are built into the ecosystem, crypto enthusiasts said. They attract talented people to the industry, who go on to build valuable projects. Many of the most vocal cheerleaders encourage investors to “buy the dip,” or invest more when prices are low.

“We have been in these downward spirals before and recovered,” Mr. Jones, the Science Inc. investor, said. “We all believe in the fundamentals.”

Some of the companies have also remained defiant. During Game 5 of the N.B.A. finals on Monday night, Coinbase aired a commercial that alluded to past boom-and-bust cycles.

“Crypto is dead,” it declared. “Long live crypto.”

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How Influencers Hype Crypto, Without Disclosing Their Financial Ties

Some of the projects that Mr. Armstrong promoted were small-time, experimental crypto ventures that eventually encountered problems. In those cases, he said, he considered himself a victim, too.

“They’re preying on the novice crypto influencer who just got popular and is trying to figure out what they should and shouldn’t be doing,” he said. “It’s hard to go from 12,000 followers to a million in one year and make all the right decisions.”

Mr. Paul rose to fame as a video blogger and an occasional actor; YouTube once reprimanded him for publishing footage of a dead body he found in a Japanese forest. Over the years, he has parlayed his internet fame into an eclectic array of entrepreneurial pursuits, including a line of energy drinks.

Mr. Paul became interested in crypto last year as the market for NFTs started booming. In a recent interview, he acknowledged that he was still learning how to navigate the crypto market, even as he tried to profit from the technology. “I’m an extreme ideas person, not much of an executor,” he said.

Mr. Paul was involved in some of the initial brainstorming for the Dink Doink project. But the venture was ultimately spearheaded by one of his roommates, Jake Broido, who gave Mr. Paul 2.5 percent of the tokens that were initially issued.

In a tweet last June, Mr. Paul called it one of the “dumbest, most ridiculous” cryptocurrencies he had encountered, and circulated a video of a cartoon character singing sexually explicit lyrics. “That’s why I’m all in,” he added. He also appeared in a shaky-cam video on Telegram in which he hailed Dink Doink as possibly his favorite crypto investment.

The campaign was a flop, and Mr. Paul was pilloried by YouTube critics. The price of Dink Doink hovered well below a cent, before falling even further in value over the summer. Mr. Paul said he had never sold his tokens or profited from the project. But he said he regretted promoting the coin without disclosing his financial stake. “I definitely didn’t act as responsibly as I should have,” he said.

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