In this issue
- Spotlight: the Bankman-Fried trial
- NFTs: Can penguins fly?
- The Google vision
From the Editor’s Desk
Dear Reader,
And so it begins.
It’s the most hotly anticipated date in the crypto calendar for anyone who’s been watching the FTX saga unfold. After ten months of quite jaw-dropping revelations, the criminal trial of Sam Bankman-Fried, founder of the failed cryptocurrency exchange — once one of the world’s largest with a valuation of US$32 billion — began in New York on Tuesday.
Shorn of his trademark locks and sporting the courtroom chic of a gray suit instead of his customary baggy shorts and T-shirt, Bankman-Fried nonetheless radiated a certain upbeat energy, according to a courtroom report from U.K. newspaper The Guardian.
And well… kudos to him. Because, if found guilty, he faces decades in prison for his part in the FTX collapse.
Expect more salacious news to emerge in dribs and drabs as the six-week trial plays out and witnesses including his former colleagues, romantic partner and parents — all entwined in the messy web of his personal and business relationships — are called to the stand.
But where does it all leave crypto? The 2022/23 financial year was annus horribilis for the industry. It wasn’t just Bankman-Fried and FTX that eroded public trust in crypto. Starting with the collapse of Terra’s stablecoin last May, there has been one calamitous failure after the next with US$2 trillion wiped off the market in that time.
Of course, Bankman-Fried and others including Terra co-founder Do Kwon, Three Arrows crypto hedge fund founder Su Zhu & Celsius Network lending platform CEO Alex Mashinksy are all innocent until proven guilty. But those who are found guilty of wrongdoing in a court of law have a lot to answer for. And in the court of public opinion, judgment may have already passed on the entire sector.
Regardless of the verdict in Bankman-Fried’s trial, the onus is now on the rest of the industry to build back public trust and prove to the wider world that crypto is defined by positive actors, rather than those who have tarnished its name.
Until the next time,
Angie Lau,
Founder and Editor-in-Chief
Forkast.News
1. Bankman-Fried faces monumental fraud trial
The globally anticipated trial of founder and former chief executive of crypto exchange FTX, Sam Bankman-Fried kicked off this week. The man once hailed as the “white knight” of crypto industry stands trial on charges of wire fraud and conspiracy to commit money laundering.
- Prosecutors argued in Wednesday’s opening statement that Bankman-Fried’s success was based on deceit, with Thane Rehn, the assistant U.S. attorney for the Southern District of New York Thane Rehn labeling it as “a massive fraud.”
- The defense countered by attributing issues to startup challenges and placed responsibility on Caroline Ellison, co-CEO of Alameda Research, a crypto trading firm founded by Bankman-Fried, who has already admitted to fraud.
- Jury selection, led by U.S. District Judge Lewis Kaplan, began on Tuesday and included questions about potential jurors’ knowledge of or involvement in the case. By Wednesday morning, 12 jurors and six alternates were selected for the trial.
- Potential witnesses for the trial may include SkyBridge Capital Managing Partner Anthony Scaramucci, ex-CEO of Alamaeda Research Sam Trabucco, and representatives from crypto exchange Binance.
- Adam Yedidia, a former Alameda Research employee, testified that he might have unknowingly written code for FTX that was used in a crime.
- The wider fallout from the FTX collapse is still playing out. Bankman-Fried stands accused of seven criminal charges, including money laundering, industrial scale fraud and political financing violations.
- Hundreds of thousands of FTX customers lost an estimated US$9 billion as the Bankman-Fried empire collapsed last November. NBA basketball star Steph Curry, comedian Larry David and numerous other celebrity pals and FTX endorsers were — and still are — caught in the rubble of Bankman-Fried’s resignation and then arrest.
- So large was Bankman-Fried’s largesse before the fall that Wall Street author and Bankman-Fried biographer Michael Lewis claims he even weighed giving a US$5 billion bung to former U.S. President Donald Trump to pull out of the 2024 White House race.
Forkast.Insights | What does it mean?
The cryptocurrency industry is multifaceted, and its representatives vary in their credibility and intentions.
Bankman-Fried, once hailed as a beacon of legitimacy in the volatile world of cryptocurrencies, experienced a dramatic fall from grace in 2022. His trajectory sharply contrasts with other figures like Do-hyung Kwon of the Terra-Luna project and Su Zhu of Three Arrows Capital, a former Web3 venture capitalist. Bankman-Fried’s ascendancy was notable, with his image gracing the covers of reputable publications like Forbes and Fortune. His credibility transcended the crypto sector, as he successfully courted trust from prominent U.S. politicians, athletes, celebrities, and regulators.
Yet, there’s a shared flaw in these narratives: the concentration of power in a single individual or entity. This stands in stark contrast to the decentralized ethos that blockchain technology celebrates.
The enigmatic creator of Bitcoin, Satoshi Nakamoto, may have foreseen the potential pitfalls of centralized leadership. By choosing to remain anonymous and later disappearing altogether, Satoshi ensured that Bitcoin, rather than any individual, remained at the forefront of the cryptocurrency conversation.
Despite its roller-coaster history of price swings, Bitcoin has proven resilient, eventually bouncing back stronger after every major downturn. This resilience is emblematic of its decentralized nature, free from the potential misgivings of central figures.
Bankman-Fried’s rebound is not as certain, especially with his reputation now marred by allegations that may be remembered as one of the most significant cryptocurrency scandals. Yet, his brainchild, FTX, might still find a way to navigate past the storm and regain its standing in the crypto world.
2. From NFTs to toys, Pudgy Penguins soar
The Pudgy Penguins non-fungible token project has seemingly solved the mystery of how NFTs can generate sustainable revenue, all while onboarding an entirely new audience to NFTs.
- The Pudgy Penguins CEO Luca Netz announced that 2,000 Walmart stores across the United States are now carrying Pudgy Penguins toys and plushies.
- Earlier this year, Pudgy Penguin toys were sold on online retail platform Amazon and sold over US$500,000 worth of toys in three days.
- Pudgy Penguin toys are projected to bring in US$10 million in sales by the end of the year.
- In the past 30 days, Pudgy Penguins and the Lil Pudgys NFTs have combined to trade for over US$4.16 million on secondary markets.
- Toy owners are directed to a new digital game called Pudgy World, where they’ll create a digital penguin and claim NFT traits.
Forkast.Insights | What does it mean?
After purchasing the Pudgy Penguins last year for US$2.5 million, CEO Luca Netz said that he would make the Pudgy Penguins the face of NFTs. In just over a year he may have a case thanks to his aggressive marketing that has helped put his NFT brand in front of millions of customers across the United States.
Last week Netz announced that 2,000 Walmart stores would be selling Pudgy Penguins toys and plushies, believing that this will serve as a “Trojan horse” for NFT mass adoption. Let’s face it, NFTs aren’t cool anymore, but toys and plushies never go out of style.
It’s through these toys that the Pudgy Penguins hope to drive brand awareness, all while giving customers their first NFT experience with free NFTs in a new digital game called Pudgy World.
Netz isn’t relying on just toy sales. He also launched a clothing line called Igloo earlier this year, hoping multiple verticals will lead to numerous revenue streams for an NFT project.
They haven’t forgotten about their NFT holders, who really are the lifeblood of the business. The toys that are carried in stores are all modeled after Pudgy Penguin and Lil Pudgy tokens, and the owners of the associated NFT earn royalties on toy sales.
The final piece of the Pudgy Penguins puzzle is a new licensing platform that will be released this year called Overpass. This will be a decentralized licensing platform that will let NFT holders connect with businesses to loan out their IP, similar to the Bored Ape Yact Club’s Made by Apes. By building a brand that brings sustainable value to holders, Pudgy Penguins just may succeed as the face of NFTs for years to come while serving up the blueprint to success for future projects.
3. Google Cloud weaves through Web3’s wild web
In a recent interview with Forkast, James Tromans, head of the Web3 department at Google Cloud, unveiled the company’s strategic thrust into the Web3 space. He shed light on how the tech giant is bridging the divide between traditional internet services and the burgeoning decentralized world.
- Google Cloud’s interest in Web3 traces back to 2018, Tromans said. The company is now well-poised to connect not just startups but also significant players like the Chicago Mercantile Exchange and HSBC to Web3 solutions.
- Google Cloud has carved out a clear product and engineering roadmap for Web3. Central to their offering are tools like its blockchain node engine and specialized data analytics capabilities designed for Web3 applications.
- Tromans said Google’s blockchain strategy was spearheaded by a small group of developers within the company. Their objective was to make blockchain data more approachable and user-friendly for traditional software engineers. This effort led to the indexing of data from key blockchains like Bitcoin and Ethereum.
- Tromans, who has a background in AI, sees promising intersections between AI and Web3. From enhancing code quality to boosting smart contract security and reimagining decentralized digital identity, AI’s potential to transform the Web3 landscape is significant.
- While acknowledging the ideological differences between die-hard decentralization advocates and a major Web2 entity like Google, Tromans said he believes in the coexistence of centralization and decentralization. He envisions a future where the distinctions between Web2 and Web3 fade, emphasizing the technology’s utility over political discourse.
Forkast.Insights | What does it mean?
Cloud data storage services are a huge source of revenue for the tech giants that dominate the market. The top three cloud service providers Amazon, Microsoft and Google generated US$54 billion in cloud sales combined in Q2 this fiscal year. Throw in the next two biggest cloud service providers Alibaba and IBM and you have a 72% market share for Big Tech.
Big Tech’s vice grip on the cloud computing market hasn’t been flying by without notice from the industry and regulators. This week, the U.K. communications regulator has directed the cloud computing industry to its antitrust watchdog after a study raised concerns about the market dominance of leading firms, The Guardian reported.
Proponents of Web3 — a new phase of the internet built around decentralized blockchain technologies, the metaverse, and non-fungible tokens (NFTs) — criticize the dominance of these so-called Web2 companies for the monopolistic effect they exert over user-generated content, online social interaction and once-shared internet architecture.
The marriage between Webs 2 and 3 therefore seems an uneasy one. Yet, Google Cloud has its own dedicated Web3 department. It’s headed by former FX trader at Citi James Tromans. He sees Google Cloud’s storage infrastructure as an on-ramp into Web3 for institution finance and a staging ground for blockchain startups to scale up.
As a former AI engineering lead at Google Cloud, he’s also perfectly placed to comment on the various potential use cases for AI he sees emerging in blockchain services. He said during the interview with Forkast that ChatGPT blew up the moment he transitioned into Web3, joking that he should now leave the blockchain space to see if his departure has a similar effect.
Asked how he is received within decentralization circles as a representative of a Web2 giant, Tromans said he doesn’t see centralization and decentralization services as being mutually exclusive. Instead, he said, they are both a set of options that consumers should be able to choose from according to their individual needs.
“When we stop talking about Web3 and Web2 as separate things and we just talk about the web again, that’ll be when we reach mass adoption,” he said.
