FT Cryptofinance: Kraken’s Jesse Powell joins list of crypto resignations

Hello and welcome to the FT Cryptofinance newsletter. This week we take a look at Jesse Powell’s decision to step down as Chief Executive of Kraken.

The crypto industry is not as young as its supporters would like you to believe. It’s been busy growing up with a slew of C-suite names that have become synonymous with the Krypto brand itself.

But the market’s near-unprecedented crash earlier this year has not only cost thousands of people their jobs (to you, Coinbase, Gemini, Crypto.com and a few others), its ramifications are now creeping over some of crypto’s most vocal and controversial personalities .

This week, Jesse Powell, the controversial industry pioneer in his 40s, said he was stepping down as CEO of crypto exchange Kraken. He joins MicroStrategy’s Michael Saylor, Genesis’ Michael Moro and Alameda’s Sam Trabucco in stepping down from senior positions during the current recession.

These resignations come shortly after some far more serious industry disasters that have captured Alex Mashinsky, chief executive of bankrupt crypto lending platform Celsius, and Su Zhu and Kyle Davies, the brains behind Three Arrows Capital, the notorious crypto hedge fund also went bankrupt.

Most of them were active social media influencers, using platforms like Twitter to preach the merits of digital tokens. As prices soared, they contributed in their own way to the culture of the industry.

Powell was a prime example of how that social media accessibility and confidence in Crypto’s millennial vision of transformed society could combine into a heady brew.

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He capitalized on Crypto’s libertarian ethos as an outspoken critic of “awakened” politics and oversaw a Kraken “culture” promoting cult-like allegiance to “The mission“.

According to a June tweet, some “Krakenites” were dissatisfied with certain aspects of stock market life, including what Powell called “First World issues,” like . . . *checks notes* . . . “whether someone can identify as another race and use the N-word”.

As the thread continued, he defended his freedom of speech. Powell also said he “debated a little bit because [he’s] open”. He later signed that “people are triggered by everything and cannot adhere to the basic rules of honest debate. Back to dictatorship”. OK.

Why are top executives looking at the door? It is often said that important events in life make you think about what really matters. Powell wanted to retire from day-to-day business, Trabucco recently bought boatand Saylor is keen to focus on buying bitcoin.

But a successful religion needs its prophets and its profits. Her departure coincides with more sensitive issues.

MicroStrategy — the once-obscure software company that’s now a de facto Bitcoin ETF — has been staring at billions in losses this summer after spending the last few years betting big on Bitcoin. Saylor also has a tax problem to solve.

Moro left Genesis when the crypto broker paid $2.4 billion in costs of lending to Three Arrows Capital.

The New York Times reported that Kraken is under federal investigation for possible violations of US sanctions on Iran. Powell himself had blasted the Treasury Department’s recent designation of crypto-mixing service Tornado Cash, which allegedly facilitated billions worth of laundered crypto, calling it “unconstitutional.”

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In traditional finance, the void left by a charismatic CEO is usually filled by a more sober individual who is less responsive to colorful comments that get them in trouble with regulators or employees.

But crypto can be different. Powell plans to focus on advocacy for the industry. Saylor wants to be an evangelist too, and I wonder what he’s been up to for the past two years.

The industry is currently going through one of its periodic downturns. Many of the industry leaders, like FTX’s Sam Bankman-Fried, Coinbase’s Brian Armstrong, and Galaxy Digital’s Michael Novogratz, are still preaching on social media. We’re waiting to see who else shows up to lead it out of the wild.

Will the string of crypto executive resignations continue? Check out this section and email me anytime at [email protected]

Weekly Highlights

  • Another week, another crypto hack. This time the number was called by Market Maker Wintermute. Managing Director Evgeny Gaevoy said $160 million of the platform’s DeFi operations have been compromised, but Wintermute is “solvent” with “double the equity left.” Going forward, the company plans to stick to the DeFi faith and “keep moving forward through this bear market.”

  • A case to watch: The Securities and Exchange Commission has filed a lawsuit against Ian Balina in Texas, alleging he failed to disclose compensation he received from an unregistered initial coin offering in 2018. In a court filing this week, the regulator claimed jurisdiction over ether transactions validated by a network of nodes “more densely clustered in the United States than in any other country.” After the merger, some commenters said they were concerned about Ethereum’s “censorship resistance.” You can read all about it in my recent account of the network’s proof-of-stake shift and what it means for the future of crypto.

  • Binance announced a new global advisory body led by former U.S. Senator and Ambassador to China Max Baucus, which includes former ISOCO Secretary General David Wright. The board will advise on “complex regulatory, policy and social issues facing the entire crypto industry.” Chief Executive Changpeng Zhao described the board as “a testament to our focus on compliance, transparency and ensuring a collaborative relationship with the world’s regulators,” but the exchange has faced a number of standoffs with regulators around the world, including the Netherlands and the United Kingdom and Singapore.

  • The Crypto Council for Innovation, a crypto advocacy group, this week created the Digital Future Award to recognize U.S. congressmen who are leading “a complex and nuanced set of issues” related to digital assets. Honorees include Senators Ted Cruz and Cynthia Lummis and Congresswoman Maxine Waters.

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Soundbite of the week: Consumer protection at its finest

There is usually a noteworthy quote in this section of my newsletter, but this week it is different. Below is a screenshot documenting Binance’s efforts to protect its consumers from Terra 2.0.

A consumer warning on Binance's website

Binance Luna Alert © Binance website

As I read the warning, I thought of that classic Simpsons scene where Homer eats fugu, the fish that could make a great meal but could also kill him. “Yes, yes, it’s poisonous, potentially deadly, but if cut properly, it can be quite tasty.”

Binance said it employs strict security protocols and maintains high standards for the tokens listed, and encouraged users to understand all the risks involved and act with caution.

data mining

Tether, the world’s largest stablecoin provider, came under renewed pressure to open its doors to regulators this week. A New York court has ordered Tether – and its sister company Bitfinex – to produce documents related to the hedging of the Tether stablecoin.

However, the good news for Tether is the fact that Bitcoin trading in Tether (USDT) has surged in recent months following this year’s crypto market crash.

According to data compiled by data analysis platform CryptoCompare, Bitcoin-USDT trading volume in Bitcoin has roughly doubled since May, when the stablecoin’s peg to the dollar was briefly lost as a result of mounting selling pressure as crypto prices crashed.

Column chart of BTC USDT trade volume in BTC (Mn), showing Bitcoin to Tether trading has skyrocketed over the past few months

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