Authored by Jeffrey Tucker via The Epoch Times,

Looking back, it’s utterly bizarre how the world of science could have gone so silent even as the world locked down and lives were shattered by the billions by governments the world over. The silence was deafening. We went from a March 2, 2020, letter signed by 800 public health experts associated with Yale University—which warned against quarantines and closures—to a strange disappearance of nearly all clear voices a few weeks later. And so things stood for the better part of two years.

Governments were allowed to create vast carnage based on a novel experiment with absolutely no precedent in history and no scientific literature that backed it. Even the World Health Organization’s pandemic plan included nothing like lockdowns as a solution to a widespread pathogen. At the time, it was obvious to me and others that the silence was due not to broad agreement with the policies but to something else.

That something, sad to say, was money.

We are more and more discovering the heightened role that the crypto exchange FTX played in funneling money to major public health outposts and academics at Johns Hopkins and Stanford University, as well as its family connections to the Columbia University department of public health. And before that funding spigot opened up, there was the Gates Foundation which had clearly pivoted from seemingly nonpartisan research to full support for the lockdowns.

To be sure, there is no one explanation for the disaster. The whole profession had already been infected by the intellectual virus of mechanistic rationalism and modeling. The idea was that if you slap some math and equations together and let the computer take over, you can gain a picture of disease outcomes under various scenarios. Such models are easily manipulated with small changes in variables.

Deborah Birx relied on these entirely in her push to get the Trump administration to greenlight the lockdowns. And there can be no doubt about that history now that Trump’s Twitter account is alive again. The end of the censorship allows us to see how he was pressured to throw out his best instincts and instead adopt a lockdown policy, not just for two weeks but for months after, even to the point of criticizing Governor Brian Kemp of Georgia for opening up that Trump considered to be “too soon.”

(As an aside, the restoration of Trump’s account also allows us to see that his last two tweets urged all Jan. 6, 2021, protesters on Capitol to stay peaceful and respect the blue. It’s no wonder the ancien régime at Twitter wanted his account blocked and blasted away.)

Having studied this trajectory closely, it seems impossible to overlook the political motives here. No question that many elites in many places had whipped themselves up into a frenzy to the point that they were willing to crush the whole of society and even give up two years of education for kids in order to drive Trump from office. The plot was to get him to make the initial call himself based on telling him lies about virus severity and the effectiveness of lockdowns. No question that he was hornswoggled.

However, in addition to these factors, one cannot neglect financial factors. Quite plainly, the grant money at the time and for two years later was clearly on the side of lockdowns and the Democrat Party, plus the elite media and their narrative line that openness equals death and lockdowns/masking/mandates were public-spirited.

Vast numbers of scientists who could have and should have spoken out remained silent, or, worse, lent their voices in support of the outrage. Much of the reason has to do with how science is funded at the university level. It’s all about getting the next grant. It’s tragic but there is a strong motivation here to curate one’s opinions in a way that paves the way for future funding sources.

This is why it is not necessary that every sellout scientist be in receipt of direct funds from Gates, FTX, or the pharmaceutical industry. All that needs to happen to control a whole sector of opinion is for the word to get out on the streets that a funding source is there with countless millions and is ready to fork over.

As a result, even the smartest and most credentialled people can be easily made to fall in line. And no question that FTX quickly picked up the reputation of somehow being concerned about “pandemic planning” and so the whole of the industry lined up with their palms out. After all, FTX promised $100 million in grants!

This is why, the Washington Post reports, “The shock waves from FTX’s free fall have rippled across the public health world, where numerous leaders in pandemic-preparedness had received funds from FTX funders or were seeking donations.”

The seeking part is key here. But so is the money trail. FTX funded the later stages of the single biggest trials for repurposed therapeutics for COVID. Countless lives hung in the balance on these trials. Many physicians the world over had experienced great outcomes in dire circumstances from generic drugs such as HCQ, Ivermectin, fluvoxamine, and others, especially when used with other vitamins and zinc. Testing them was crucial.

The results were backed by a predictable media blitz: such therapeutics don’t work. Meanwhile, the study has been severely criticized not only for poor study construction but also for the conflicts of interests of top researchers who also consulted with pharmaceutical companies.

This is all very significant because there is a strong sense that the reason for the neglect of therapeutics—by the National Institutes of Health, Gates Foundation, and also major media, which smeared anyone who suggested there might be a better way—might all trace to the economic motive of shutting down cheap alternatives to vaccines.

Independent journalist Alexandros Marinos has mapped out the timeline of the study:

The Gates Foundation was first in, followed by Rainwater and FastGrants. FastGrants is a program established by the Charles G. Koch Foundation that also ended up giving money to Imperial College modeler Neil Ferguson, who first drove lockdown propaganda in the UK and United States. FTX modeled its own grant-giving program on FastGrants and then picked up the funding burden later in the process. (There is supreme irony here: the lie all over the internet was that the Great Barrington Declaration was funded by Koch, whereas in fact that money stream was going to the opposition!)

In addition, the Post notes, FTX “awarded $1.5 million to Stanford University’s Center for Innovation in Global Health in July for seed grants intended ‘to catalyze research and innovations that prepare for and help prevent the next pandemic.’”

Also: “The Future Fund’s commitments included $10 million to HelixNano, a biotech start-up seeking to develop a next-generation coronavirus vaccine; $250,000 to a University of Ottawa scientist researching how to eradicate viruses from plastic surfaces; and $175,000 to support a recent law school graduate’s job at the Johns Hopkins Center for Health Security.”

We don’t know how much money Gates/FTX gave to JHU’s Center for Health Security (which had sponsored Event 201) but it was enough to cause the Center’s head Tom Inglesby to completely reverse his earlier position against lockdowns to become a leading champion of them.

“Overall, the [FTX] Future Fund was a force for good,” Inglesby told the Post. “The work they were doing was really trying to get people to think long-term … to build pandemic preparedness, to diminish the risks of biological threats.”

Following the money trail from FTX to the public health establishment will undoubtedly reveal more in the way of information, especially considering that Sam Bankman-Fried’s brother Gabe ran a lobbying organization entirely devoted to “pandemic planning.”

No question that this whole machine became an industrial behemoth over two years. When I first started Brownstone Institute, my phone and email began to blow up with offers of money and funding, but always with a proviso. I had to connect our scientists with their network of scientists in an already established system.

There was no question in my mind what was going on: I was being told to play ball in exchange for large checks to make this fledgling nonprofit work. In some way, this astonished me: I was being offered a path to riches provided I would gut the whole mission! And this was happening even before we had published any of our research!

So, yes, I saw how this system works firsthand. Of course I completely rejected the idea simply because going along would defeat the whole point of founding an institute in the first place. And yet the presumption on the part of the contacts was that surely this was just another racket in a space full of them and I would be happy to give up all principles for generous funding. I never considered it even for one instant.

There is a grotesque tragedy to all of this. Great people gave up all their principles and integrity in exchange for grants and grease from big shots who used their money and power to wreck the world over two years, and they were able to do it with very little professional opposition. And yet here we are today. Who are the real stars in the world of science today? Not those on the Gates/FTX gravy train. It is the men and women who stuck their necks out to do the right thing.

The NASA official in charge of the Orion lunar spacecraft program says humans could live on the moon for lengthy periods this decade.

Speaking with the BBC, Howard Hu told host Laura Kuenssberg that Wednesday’s launch of the Artemis rocket, which carries Orion, was a “historic day for human space flight,” according to the BBC.

Orion is currently about 134,000km (83,300 miles) from the Moon.

The 100m-tall Artemis rocket blasted off from the Kennedy Space Center as part of Nasa’s mission to take astronauts back to Earth’s satellite.

Sitting atop the rocket is the Orion spacecraft which, for this first mission, is uncrewed but is equipped with a ‘manikin’ which will register the impacts of the flight on the human body.

Wednesday’s flight followed two previous launch attempts in August and September that were aborted during the countdown because of technical woes. -BBC

“It’s the first step we’re taking to long-term deep space exploration, for not just the United States but for the world,” said Hu, adding “And I think this is an historic day for Nasa, but it’s also an historic day for all the people who love human space flight and deep space exploration. “

“I mean, we are going back to the Moon, we’re working towards a sustainable program and this is the vehicle that will carry the people that will land us back on the Moon again.”

Program manager for Orion at NASA, Howard Hu, tells #BBCLauraK they believe humans will be living on the Moon by the end of the decadehttps://t.co/Z1BCKTGMHl pic.twitter.com/hSuELrAnrK

— BBC News (UK) (@BBCNews) November 20, 2022

According to Hu, if the current Artemis flight was successful, the next one will be manned, while a third would be where astronauts could actually land on the Moon.

The current mission was proceeding well, he told the BBC, with all systems working and the mission team preparing for the next firing of Orion’s engines (what is known as a burn) at lunchtime on Monday to put the spacecraft into a distant orbit of the Moon.

Mr Hu admitted that watching the mission from Earth was not unlike being an anxious parent, but he said seeing the images and the videos coming back from Orion “really gives that excitement and feeling of, ‘wow, we are headed back to the Moon'”. -BBC

Recommended reading for life on the moon…

Authored by Juliette Fairley via The Epoch Times (emphasis ours),

Five months after filing a lawsuit against the Goleta Water District in Santa Barbara, attorneys have secured a six-figure award in favor of five plaintiffs resulting from the utility’s restrictive COVID-19 employee vaccine mandate.

“This was fairly early on that they offered this judgment that the plaintiffs were the prevailing parties, which means they did not want to litigate this case clearly and go to discovery,” said Mariah Gondeiro, an Advocates for Faith & Freedom lawyer.

“I believe that we can use it in other cases as a precedent.”

Advocates for Faith & Freedom, a nonprofit law firm, filed their lawsuit in June alleging that the mandate discriminated against their clients who have religious beliefs that prevented them from submitting to the injection.

The settlement resulted not only in Goleta Water District paying $125,000 to five plaintiffs, plus attorney’s fees, but also in agreeing to a judgment in which the plaintiffs prevailed.

“It’s not really surprising because the reality is we’re starting to see this across the country,” Gondeiro told The Epoch Times. “Government officials are being held accountable for their discriminatory policies and I am hopeful that we’re going to continue to see these types of decisions because what they did was wrong, and they hurt a lot of people’s lives.”

Two of the employees remain water district workers. Three have moved on.

“They didn’t want to have to pay for testing and the ones that have already left don’t want their jobs back,” Gondeiro said.

Because they requested and were granted religious exemptions, the five plaintiffs had to choose between unpaid leaves of absence or paying for bi-weekly COVID-19 tests on their own time.

Read more here…

The Biden administration has extended the payment pause on student loan bills yet again. The relief has been in place since the start of the Covid pandemic and was set to expire at the end of the year. 

Bloomberg reported the White House extended the student loan repayment freeze until June 30, 2023. This allows tens of millions of borrowers to skip out on payments, as restarting repayments early next year would’ve been messy for the administration, which has promised forgiveness. 

I’m confident that our student debt relief plan is legal. But it’s on hold because Republican officials want to block it.

That’s why @SecCardona is extending the payment pause to no later than June 30, 2023, giving the Supreme Court time to hear the case in its current term. pic.twitter.com/873CurlHFZ

— President Biden (@POTUS) November 22, 2022

Any restart of repayments would’ve unleashed a student debt default wave for millions of borrowers. 

“Unless the [Education] Department is allowed to provide debt relief, we anticipate there could be a historically large increase in the amount of federal student loan delinquency and defaults as a result of the COVID-19 pandemic,” James Richard Kvaal, Department of Education undersecretary of education, said in a recent court filing.

Biden’s student loan forgiveness program calls for $10,000 cancellation of federal loans per borrower who made less than $125,000 in 2020 or 2021, which is now at the mercy of the courts.

Around 16 million people have been approved for federal student loan forgiveness — and some have already been emailed – though no debt cancellation has been completed due to litigation. Biden has asked for the Supreme Court to intervene.  

Currently, tens of millions of borrowers don’t have to make a payment until June of next year while the Biden administration is trying to fulfill its promise to cancel debt and avert a massive default wave that would surely hurt the president’s ratings ahead of the 2024 elections. 

Authored by Katabella Roberts via The Epoch Times,

The rate of corporate defaults for companies in the United States could soar if the economy tips into a “shallow recession,” S&P Global analysts warned on Monday.

According to S&P Global Ratings, the default rate for American companies could reach 3.75 percent by September 2023 if the Federal Reserve’s hawkish policy of raising interest rates prompts a shallow or mild economic downturn.

In a far worse scenario in which a more serious economic downturn occurs, default rates could reach 6 percent, the highest since March 2021, analysts said.

“Much will depend on the length, breadth, and depth of a recession should one occur, and if the Fed will continue to raise rates through a recession,” the S&P analysts wrote on Monday.

“The current pace of widening yields in secondary markets would continue, while consumption would contract, forcing businesses to dig into their cash holdings to ride out a deeper recession.”

Elsewhere on Monday, Deutsche Bank said that default rates on U.S. leveraged loans – those made by banks to companies or individuals who have considerable amounts of debt  – will hit a near-record high of 11.3 percent in 2024, while defaults on euro-leveraged loans will reach 7.1 percent.

Analysts at the bank said that the U.S. economy will likely slip into a recession in the second half of 2023, and companies will take a significant hit to their profit margins resulting in missed interest payments, and prompting increased default rates.

However, Deutsche Bank does not anticipate default rates to soar in 2023.

Fed May Have to Raise Interest Rates Higher

The warnings come shortly after James Bullard, president of the Federal Reserve Bank of St. Louis, warned that the Fed may have to raise interest rates as high as 7 percent in order to cool off red-hot inflation.

Doing so increases the cost of debt for Americans, including credit card debt, mortgages, and automobile financing, among others.

Speaking at an event in Louisville, Kentucky, on Nov. 17, Bullard noted that the central bank’s monetary tightening policy has so far had “only limited effects on observed inflation, but market pricing suggests disinflation is expected in 2023.”

Ultimately, though, Bullard said the final decision regarding interest rates was down to Fed Chairman Jerome Powell.

“If you do more now, you have less to do in the first quarter [of 2023]. If you do less now, then you have more to do in the first quarter. Generally speaking, it probably does not make a lot of difference in terms of macroeconomics,” he added.

In November, fed officials voted unanimously to initiate another 75-basis-point hike, to a target range of 3.75–4.00 percent, marking the sixth rate increase this year and the fourth consecutive 75-point increase in 2022.

The committee is scheduled to meet again on Dec. 13–14 for its final meeting of 2022, and analysts widely anticipate between a 0.50–0.75 percentage point hike.

The Supreme Court on Tuesday cleared the way for House Democrats to obtain former President Trump’s tax return – denying a request to block an order that he surrender his tax returns.

The move by the Supreme Court, which offered no explanation in terms of dissent or even a vote breakdown, follows an urging by the Biden administration to grant Democrats access to the documents.

In a 30-page brief filed Nov. 10, Solicitor General Elizabeth Prelogar said that earlier rulings finding House Democrats’ request had legitimate legislative intent were correct, and that the nation’s top court should not diverge from them, the Epoch Times reported earlier this month.

The brief had the stamp of approval a lower court, after US District Judge Trevor McFadden, a Trump appointee, who said the request from House Ways and Means Chairman Rep. Richard Neal served a valid legislative purpose since Neal would use the returns to examine whether new or adjusted legislation would be required by the IRS program that audits presidents.

An appeals court agreed with McFadden – after which Trump lodged an emergency application for a stay to the Supreme Court, which triggered a temporary block on Neal’s panel obtaining the documents.

The move appears to mark the end of the road for Trump’s efforts to block a House subpoena for his tax records.

Authored by Dave DeCamp via AntiWar.com,

Vice President Kamala Harris on Monday reaffirmed that an attack on Philippine vessels in the South China Sea would trigger a US response under the 1951 Mutual Defense Treaty between the US and the Philippines. The warning to Beijing came as she was visiting Manila.

“An armed attack on the Philippines Armed Forces, public vessels, or aircraft in the South China Sea would invoke US mutual defense commitments. And that is an unwavering commitment that we have to the Philippines,” Harris said while meeting with Philippine President Ferdinand Marcos Jr.

Harris’ warning came amid reports of a tense encounter between Chinese and Philippine vessels in the South China Sea. The Philippine Navy said a Chinese vessel blocked a Philippine naval boat on Sunday and forcibly seized what appeared to be Chinese rocket debris that the Philippine boat was towing.

For their part, China denied it was a forcible seizure and said its vessel took the debris after having a “friendly negotiation at the scene.” The incident happened near Thitu Island, a feature of a disputed archipelago in the South China Sea known as the Spratly Islands.

China, the Philippines, and several other Southeast Asian nations all have overlapping claims to the South China Sea. The US has inserted itself into the dispute by sailing warships near Chinese-controlled islands to challenge Beijing’s claims. The US has also formally rejected most of China’s claims to the waters while not picking a side between other claimants.

On Tuesday, Harris visited the Philippine province of Palawan, an island province on the South China Sea just outside of waters claimed by Beijing. There, she delivered a speech aboard a Philippine Coast Guard vessel. The visit is unusual and is clearly meant as a message to Beijing as Harris will be the highest-level US official to ever visit Palawan.

After her speech in the Philippines, Kamala Harris has to be reminded to greet the U.S. servicemen and women standing right behind her. pic.twitter.com/2nR0E2z4D8

— RNC Research (@RNCResearch) November 22, 2022

One purpose of Harris’ visit is to work to expand the US military presence in the Philippines under the 2014 Enhanced Defense Cooperation Agreement (EDCA). The agreement allows the US to build military facilities for US and Philippine forces, and Washington is looking to expand construction.

The work to strengthen the US-Philippine military alliance is part of the US effort to expand its presence in the region to counter China, as outlined by the Biden administration’s Indo-Pacific Strategy. Over in Indonesia, Secretary of Defense Lloyd Austin met with his counterpart to push for stronger military ties.

US @VP Harris now aboard @coastguardph‘s BRP Teresa Magbanua here in Palawan. She’s currently touring and being briefed by Filipino officials. She’s also set to deliver a speech here extolling the role of PCG & reiterating US support to PH | @davidyusantos pic.twitter.com/LN0q6QCWpz

— CNN Philippines (@cnnphilippines) November 22, 2022

The Pentagon said that Austin and his Indonesian counterparts agreed “to expand bilateral military training and education, including through hosting new language training courses, expanding cooperation for emerging defense leaders, and enhancing combined exercises.”

Update (1440ET): Digital Currency Group founder and CEO Barry Silbert has responded to market chatter and sent a reassuring note to shareholders.

The Block reports that Silbert told shareholders: “DCG will continue to be a leading builder of the industry and we are committed to our long-term mission of accelerating the development of a better financial system,”

“We have weathered previous crypto winters and while this one may feel more severe, collectively we will come out of it stronger,”

And continued:

“Genesis Global Capital, Genesis’ lending business, temporarily suspended redemptions and new loan originations last Wednesday, November 16 after market turmoil sparked unprecedented withdrawal requests.

This is an issue of liquidity and duration mismatch in the Genesis loan book.  Importantly, these issues have no impact on Genesis’ spot and derivatives trading or custody businesses, which continue to operate as usual.

Genesis leadership and their board decided to hire financial and legal advisors and the firm is exploring all possible options amidst the fallout from the implosion of FTX.

In recent days, there has been chatter about intercompany loans between Genesis Global Capital and DCG.  For those unaware, in the ordinary course of business, DCG has borrowed money from Genesis Global Capital in the same vein as hundreds of crypto investment firms.  These loans were always structured on an arm’s length basis and priced at prevailing market interest rates.  DCG currently has a liability to Genesis Global Capital of ~$575 million, which is due in May 2023.  These loans were used to fund investment opportunities and to repurchase DCG stock from non-employee shareholders in secondary transactions previously highlighted in quarterly shareholder updates.

We appreciate the words of encouragement and support, along with offers to invest in DCG.  We will let you know if we decide to do a financing round.

Despite the difficult industry conditions, I am as excited as ever about the potential for cryptocurrencies and blockchain technology over the coming decades and DCG is determined to remain at the forefront.”

Silbert’s suggestions of ‘intercompany loans’ and ‘same vein as hundreds of other crypto firms’ sounds a lot like he is throwing the whole industry under the bus… or low-key threatening CZ to “do something” or the whole house of cards goes down.

*  *  *

As Jack Inabinet via ‘Bankless’ detailed earlier, crypto conglomerate DCG could be in trouble with Genesis on the verge of bankruptcy…

Dear Bankless Nation,

Not sure if you noticed, but November hasn’t been all that kind to the crypto industry!

The outlook this week doesn’t appear all that rosy either as people wonder if Genesis is on the verge of disaster. We’re kind of curious about that too… so let’s dig into what’s going down with Barry Silbert’s Digital Currency Group.

Et tu, Genesis?

Last week, Genesis froze its lending program.

Crypto Twitter (obviously) then began circulating rumors about impending Genesis disaster.

Not only has the solvency of Genesis, which was crypto’s only full-service prime brokerage, been called into question, but the backing of GBTC, a Bitcoin trust product, has come under similar scrutiny, after its trustee, Grayscale, stated it would not share its proof of reserves audit, citing “security concerns”.

UPDATE WE ARE SO SO SO FUCKED…@grayscale is refusing to show Proof of Reserves…

They hold their #BTC and #ETH on #coinbase…but won’t show blockchain data confirming ANY of their holdings.

“Teserves” are an excel spreadsheet 💀

— Crypto King (@Cryptoking) November 21, 2022

Crypto King @Cryptoking

UPDATE WE ARE SO SO SO FUCKED… @Grayscale is refusing to show Proof of Reserves… They hold their #BTC and #ETH on #coinbase…but won’t show blockchain data confirming ANY of their holdings. “Teserves” are an excel spreadsheet 💀

6:09 AM ∙ Nov 21, 2022

391Likes55Retweets

What do both Genesis and Grayscale have in common?

Well, they are both subsidiaries of crypto conglomerate Digital Currency Group (DCG).

DCG is rumored to have very little remaining liquidity after infusing $140M of fresh capital into Genesis last week, a necessary move after the firm’s lending group lost access to $175M locked in FTX accounts, an event that immediately preceded the freeze in withdrawals from Genesis’s lending platform.

All of this left Crypto Twitter to wonder: how bad can it possibly get?

Aaaand today we got our answer: Genesis is on the verge of bankruptcy…

But they don’t have any immediate plans to file bankruptcy. So… that’s bullish, right?

Unfortunately, probably not.

FTX’s collapse and the ensuing crypto credit crunch created an industry wide credit crisis, which caused a bank run on Genesis. Current bailout plans involve an infusion of an additional $500M, half the size of the firm’s original $1B ask, with Binance being cited as a source of potential funding (though the WSJ isn’t so sure a Binance deal is going to happen).

So, what is Genesis?

Let’s step back, and take a good look at what Genesis is and the firm’s potential sources of financial risk. For a more thorough description of the services Genesis offers, see this amazing tweet thread (that I have summarized below) by Ram Ahluwalia.

Genesis fulfills many of the same functions as a traditional brokerage, while tailoring its offerings towards institutional clientele. Offerings of prime brokerages, like Genesis, include lending and OTC services.

In traditional financial markets, prime brokers, such as Goldman Sachs, offset positions with a counterparty. Suppose a Goldman Sachs client wants to go long on $100M of US Treasuries: if Goldman Sachs fulfilled this order without hedging, they would be short $100M of US Treasuries. If yields begin to fall, Goldman Sachs will be at a loss, but if yields continue to rise, Goldman Sachs nets a profit from the position.

Instead of exposing itself to price fluctuations in the underlying security, Goldman Sachs would simultaneously enter into a long position with JP Morgan, quoting its client a slightly higher price (ask) than it receives (bid) from JPM.

This allows dealers to capture bid/ask spreads, without assuming directional exposure, when executing client orders.

As the pioneer of crypto OTC and prime brokerage markets, Genesis is not afforded the same access to robust inter-dealer markets as traditional financial institutions. Genesis attempted to offer the same services as its trad peers, despite a lack of similar risk management solutions.

Genesis Sources of Risk

We know that Genesis is no longer fulfilling withdrawal requests. But why?

Genesis is facing issues regarding liquidity – and potentially solvency.

Liquidity Issues

Much like a bank, which is primarily financed by demand deposits, Genesis relied on short-term funding sources, including Circle’s Yield program and Gemini Earn. Additionally (much like a bank), Genesis was involved in the maturity transformation of assets, meaning they made long-term loans with these short-term deposits.

Lending out funds for longer maturities enables Genesis to capture a spread between its cost of capital and interest income, providing the basis of a potentially profitable business model. This strategy, however, presents the risk that the bank-like entity does not have enough liquidity to fulfill unexpectedly high volumes of withdrawal requests.

During times of economic uncertainty, lenders typically look to recall outstanding credit from wherever possible and shore up their own cash/liquid asset reserves. Short-term deposit sources, like those used to fund Genesis, allow users to withdraw funds on demand and are among the first places lenders look for liquidity.

Immediately prior to Genesis freezing withdrawals, individuals and institutions (including Genesis) with funds on FTX suddenly lost access to capital they believed was liquid. Additionally, FTX’s mismanagement of user funds drew renewed ire towards crypto lending practices and increased calls from the industry to take a second look at undercollateralized and off-chain lending practices.

The FTX implosion created a need for liquidity to replace funds locked on the exchange and decreased crypto ecosystem participants’ willingness to lend to centralized blackboxes, decreasing available funding sources to Genesis.

Unfortunately, (much like a bank) Genesis extended loans with distant maturities to borrowers and did not have sufficient access to on-demand liquidity to fulfill the unusually high volumes of withdrawal requests that followed in the wake of FTX. 

Liquidity problems for Genesis are probably the best case scenario and likely result in near-term resumption of withdrawals! A potential solution, like the Binance deal contemplated above, is likely to proceed in this case, with withdrawals likely to be enabled soon afterwards.

https://t.co/7GtGZobR83 pic.twitter.com/qjn53NMXVY

— db (@tier10k) November 21, 2022

Solvency Issues

Genesis likely has counterparty exposure related to duration management activities and position hedging.

Duration is a measure of the interest rate sensitivity of the value of assets and liabilities to changes in interest rates. A higher duration implies a greater price sensitivity to fluctuations in interest rates, with higher rates having a negative impact on valuations and lower rates having a positive impact on valuations. Taking shorter-term sources of funding (lower duration) and making longer-term loans (higher duration) exposes financial entities to duration mismatch.

For Genesis, this means that for a given change in interest rates, the magnitude of impact on Genesis’s assets will be greater than that on its liabilities.

The solvency of Genesis, prior to managing its duration gap, is negatively correlated with changes to interest rates. Given the frozen state of crypto credit markets and increases in risk-free rates, driven by contractionary monetary policy, an unhedged Genesis would struggle with its solvency. 

While Genesis likely hedged against rising rates, insolvency of key counterparties to its duration management strategy would leave Genesis with directional exposure, increasing its own risk of insolvency.

Remember all of that Bitcoin that the Luna Foundation Guard purchased with UST?

1/ The LFG has acquired an additional 37,863 Bitcoins totaling ~$1.5 billion in OTC swaps with @GenesisTrading and 3AC. https://t.co/Ezzfwl7VFn

— LFG | Luna Foundation Guard (@LFG_org) May 5, 2022

Genesis received $1 billion of UST from this swap! While it is likely that Genesis would have attempted to hedge their exposure to UST, the insolvency of counterparties to this hedge would create directional exposure to UST. 

Today, that $1B of UST has a market value of only $23M!

Every crypto hedge fund explosion increases the probability that Genesis has directional exposure to crypto assets, including unsold UST.

Counterparty risks represent a much larger threat to Genesis than liquidity issues. While liquidity issues mean that Genesis has enough assets to repay all users in full, just not today, counterparty risk directly impacts Genesis’s solvency.

Failure of risk management strategies, due to counterparty insolvency, will negatively impact the solvency of Genesius and result in diminished payouts to its creditors!

Dubious Connections

Genesis, 3AC, GBTC, and DCG. What do these 4 words/acronyms/tickers have in common?

They were all involved in a complicated, intertwined GBTC trade.

Grayscale (a DCG subsidiary) is the trustee for GBTC. In exchange for its services, Grayscale earns a 2% annual fee, in perpetuity for all assets under management within the trust. SEC regulatory statements filed Q3 2022 indicate that Grayscale has made over $302M in YTD fee revenue from GBTC, compared to $433M over the same period in 2021.

Genesis (also a DCG subsidiary) was a primary lender to 3AC. According to an analysis of publicly available SEC and investor filings by DataFinnovation performed back in July, Genesis was essentially lending at its single counterparty limit to 3AC. 

The analysis speculates that in exchange for collateral, 3AC would borrow BTC from Genesis, return the BTC to Genesis to create GBTC (Genesis is the only Authorized Participant who can create shares of GBTC), and provide the GBTC back to Genesis to restart this circular process.

When GBTC was trading at a premium to BTC, 3AC was essentially creating free money and using the profits to increase exposure to GBTC and other crypto assets. Assuming that the premium held, 3AC could theoretically repeat this arbitrage process forever. 

This trade proved highly profitable for DCG too, by increasing the AUM for Grayscale’s BTC trust and boosting fee revenue.

Unfortunately, this premium turned into a discount as GBTC sell pressure increased and demand for the product diminished. In combination with Luna’s death spiral, a previously sizable investment position in the 3AC portfolio, the end result is an insolvent 3AC.

Genesis is unlikely to fully collect on outstanding loans to 3AC, and given the lack of sophisticated counterparties within crypto, they may have non-negligible counterparty exposure to 3AC.

Known lending relations and potential counterparty exposure with 3AC (or other insolvent crypto funds) has created continued liquidity pressures for Genesis and remained a source of insolvency risk.

Grayscale FUD?

Not only is DCG dealing with issues pertaining to Genesis withdrawals and its solvency, but the conglomerate has also been forced to defend the backing of GBTC. This is a 100% self-inflicted wound for DCG, who refused to release wallet addresses holding Grayscale trust assets or their full proof of reserve audit. 

In the aftermath of the FTX saga and concerns about exchanges falsifying proof of reserve audits, Grayscale’s hesitance to produce its proof of reserve audits is an ABSOLUTELY TERRIBLE IDEA!

Quote from an a16z source on DCG/Genesis raise and lack of Grayscale reserve transparency:

“Complete lack of awareness… FTX changed everything. I’d be shocked if they raise a quarter of what they are looking for.”

— Andrew (@AP_ArchPublic) November 20, 2022

Third-party, on-chain attempts to verify the GBTC holdings were able to trace approximately 50% of BTC held by the trust.

TLDR
– Using public data and chain forensics, we have attributed 432 addresses holding 317,705 BTC to likely GBTC custody activity.
– This total is ~50% of GBTC reported current holdings.
– Additional work is necessary to ID the remaining addresses. pic.twitter.com/MMKzp2HBwQ

— 🏴∴Ergo∴🏴 (@ErgoBTC) November 20, 2022

Coinbase Custody, however, came to Grayscale’s defense, confirming that GBTC and other Grayscale products remain completely backed by assets under control of Coinbase Custody.

4) All digital assets that underlie Grayscale’s digital asset products are stored under the custody of Coinbase Custody Trust Company, LLC. Read more from @Coinbase’s CFO Alesia Haas, and CEO of Coinbase Custody Aaron Schnarch: pic.twitter.com/InBP9zPDkC

— Grayscale (@Grayscale) November 18, 2022

 Related analysis from Nansen’s Alex Svanevik found that Grayscale’s ETH product is likely fully backed by reserves held by Coinbase Custody, providing further confirmation that GBTC is fully backed.

Given that CB has 1/8th the spot volume of Binance, holding 1/3rd the ETH reserves (excl. Grayscale) seems reasonable.

CB probably also has other large custody clients.

So: my guess is that the Grayscale ETH is already sitting in what we’ve tagged as CB in @nansen_ai.

— Alex Svanevik 🐧 (@ASvanevik) November 19, 2022

It remains unlikely that Coinbase Custody would misrepresent the holdings of GBTC, given that such actions would be fraudulent and may expose Coinbase to legal repercussions. But after the FTX collapse and resulting scandalous accusations, Coinbase fraudulently representing the BTC holdings of Grayscale is not utterly inconceivable.

DCG Contagion?

While concerns surrounding Genesis’s solvency and Grayscale’s backings (as well as the general financial health of DCG) remain in question, failure of either of these groups would be disastrous for the crypto industry.

Genesis has a much larger footprint than FTX and provides (provided?) prime brokerage services that empower institutional investment in crypto.

Here are the notes I covered on the show. pic.twitter.com/DYHfvxdisU

— Simon Dixon (Beware Impersonators) (@SimonDixonTwitt) November 20, 2022

 Scenarios ending with Grayscale winding up its trusts result in billions of dollars of sell pressure for BTC, ETH, and other Grayscale assets, an event which would decimate crypto markets. This outcome, however, remains unlikely given the amount of fee revenue generated from the product and the profitability of the group.

5/ Between these two trusts, they own approximately

– 633.8K BTC (~$10.5B)
– 3.05M ETH (~$3.6B)

As well as ~$570M in altcoins held in other trusts.

Forced selling of these at one time would have potentially large negative impacts on the prices of crypto assets.

— Blockworks Research (@blockworksres) November 18, 2022

While it is unclear how the Genesis saga could unwind, the near-term fate of the broader crypto industry, once again, hinges on the solvency of another blackbox CeFi entity. Massive fallout will ensue if Genesis fails, especially considering the firm’s role as a nexus for institutional investment in crypto.

Strap in anon. This could get bumpy!

*  *  *

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Brazilian President Jair Bolsonaro has filed a lawsuit asking a court to invalidate 250,000 votes from “malfunctioning ballot boxes,” according to Gazeta Do Povo

According to the petition, an audit carried out at the request of the Liberal Party found that the old ballot boxes “cannot be considered” due to having identical identification numbers.

According to the lawsuit, the 2009, 2010, 2011, 2013 and 2015 models of the voting machines presented “insurmountable operating problems, with emphasis on the very serious failure in the individualization of each URNA LOG file and its repercussions in later stages, such as the Digital Record of the Vote (RDV) and the issuance of the Ballot Box (BU), and, consequently, in the absence of certainty as to the authenticity of the voting result,” (translated).

⚠️ATENÇÃO: O presidente Jair Bolsonaro entrou com uma ação no TSE nesta terça-feira (22) em que pede a anulação dos votos em “urnas com mau funcionamento” (cerca de 250 mil). Representação é baseada na auditoria do PL – o presidente da sigla deve falar à imprensa em instantes. pic.twitter.com/6IRxYSlJR1

— wendal carmo (@euwendal) November 22, 2022

According to Bloomberg, the court has given Bolsonaro 24 hours to decide whether he will only include the 1st round of votes in his complaint.

Three weeks ago Bolsonaro refused to concede the election to challenger Luiz Inácio Lula da Silva, saying at a news conference: “As president and as a citizen I will continue to follow all the commandments of our constitution.”

Shortly after the election, truck drivers loyal to Bolsonaro blocked roads in over a dozen Brazilian states causing disruptions – including the road to São Paulo’s international airport, leading to the cancellation of many flights.

Meanwhile, tens of thousands of Brazilians came out to protest against Bolsonaro’s defeat in the October election, and have asked for the armed forces to intervene.

“I’m fighting for my country, for my daughter and three grandchildren,” 63-year-old Domingues Carvalho told AP after protesting for 15 days straight. “I’m fighting for my country, for my daughter and three grandchildren,” he added.

“I’ll stay here as long as necessary. We are peaceful but we will never, ever leave our country in the hands of communists.”

Bolsonaro called the protests in his favor a “popular movement” resulting from “indignation and a sense of injustice” over the election.

Meanwhile, in response to Bolsonaro’s lawsuit:

A report compiled by 11 RNC lawyers who witnessed widespread issues in Arizona on Election Day 2022 reveals that Maricopa County had far more problems than they are reporting.

Mark Sonnenklar, an attorney for the Republican National Committee Integrity program in Arizona, and 10 other ‘roving’ RNC attorneys reported observing problems ranging from tabulators rejecting ballots to hours-long lines for voting, Just the News reports.

The 11 attorneys visited 115 out of the 223 vote centers in Maricopa County on Election Day and found that 72 of them (or 62.61%) “had material problems with the tabulators not being able to tabulate ballots,” Sonnenklar reported, “causing voters to either deposit their ballots into box 3, spoil their ballots and re-vote, or get frustrated and leave the vote center without voting.”

Box 3 — also called “Door 3” or “Slot 3” — is a separate box on the tabulators into which ballots not counted by the machines were placed for later tabulation. Maricopa County, however, has admitted that “in some voting locations, ‘Door 3’ non-tabulated ballots were commingled with tabulated ballots,” according to a letter from the Arizona attorney general’s office to the county. -Just the News

“In many vote centers, the tabulators rejected the initial insertion of a ballot almost 100% of the time, although the tabulators might still accept that ballot on the second, third, fourth, fifth, or sixth attempt to insert the ballot,” reads the report. “However, many ballots were not able to be tabulated by the tabulators at all, no matter how many times the voter inserted the ballot.”

According to Sonnenklar, the reports “directly contradict the statements of County election officials that (1) printer/tabulator issues were limited to only 70 of the 223 vote centers, (2) the printer/tabulator problems were resolved as of 3:00 p.m., and (3) the printer/tabulator issues were insignificant in the entire scheme of the election.”

Meanwhile, 51% of voting centers had “significant lines,” with many voters waiting multiple hours before receiving a ballot.

“[B]ecause Republican voters significantly outnumbered Democrat voters in the County on election day, such voter suppression would necessarily impact the vote tallies for Republican candidates much more than the vote tallies for Democrat candidates,” Sonnenklar wrote.

A letter from Arizona Assistant AG Jennifer Wright to the Maricopa County Attorney’s Office notes that the department had “received hundreds of complaints,” including “first-hand witness accounts.”

According to the letter, some of the information is “[b]ased on sworn complaints submitted by election workers employed by Maricopa County” and “the plethora of reports from election workers, poll observers, and voters.”

The letter gave the county until Nov. 28, the day counties are required to certify their elections, to respond. -Just the News

Of note, Maricopa, Cochise and Mohave counties have all decided to delay the certification of their elections until the Nov. 28 deadline due to the irregularities in Maricopa.