Centerfin Collective Weekly

Weekly Update Nov 18, 2022

Crypto fallout continues, UK inflation and budget

Crypto fallout continues


Under the scrutiny of John Ray, who was brought in to manage FTX through bankruptcy, we have learned that the situation was much worse than previously reported. In bankruptcy filings, he described almost no record-keeping or controls, along with many other transgressions. John Ray handled the bankruptcy of Enron 20 years ago and called the situation “unprecedented.” In addition, we learned this week that BlockFi and Genesis both announced a suspension of withdrawals from their platforms. It is still too early to tell how the situation will evolve from here; one of the more important issues is the state of Silvergate Bank, a regulated publicly traded US bank. We have long observed, sometimes in disbelief, how the silicon valley mantra of “move fast and break things” permeated crypto and fintech more broadly. Over the last week, we have discussed how this experience should bring about a more prudent approach, with increased scrutiny from investors and regulators. Specific to crypto, we think this rightfully leads to separating functions (e.g., exchange, custody, brokerage) into separate silos.


BTW, FTX claims are trading at 5-8 cents on the dollar in the distressed market.


UK inflation and budget


UK reported 11.1% year-over-year inflation in October, a 41-year high and above expectations. The new government also released its updated budget, which included tax increases on the wealthy and energy companies and cost of living adjustments (stimulus) for the lower-income, retired, and disabled population. While inflation in the US seems to be declining, this is not the case in other parts of the world. Inflation is a major headwind for the lower-income classes; hence, it is not surprising to see the UK attempt to address this.