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Binance on the Brink?, Trial of the Century, PE Zombies (Future of Finance | Week in Review)

A weekly five-point roundup of critical events in fintech, the future of finance and the next wave of banking industry transformation.
Future of finance

A weekly five-point roundup of critical events in fintech, the future of finance and the next wave of banking industry transformation.  

The Last Crypto Domino Might Finally Fall

What happened: Every big, troubled (and some that didn’t seem so troubled) crypto exchange or fund has fallen. Now everyone’s holding their breath as Binance, the world’s biggest crypto behemoth, loses transaction volume, employees, and faces a mountain of mounting civil and criminal probes.

Why it matters: “Binance is a frequent investor in third-party crypto projects and beyond. Binance has invested in X, formerly known as Twitter. Binance co-founder Changpeng Zhao—or CZ as his 8.6 million X followers know him—is the biggest face of crypto. ‘You just can’t quantify what would happen to the industry if Binance disappeared, given it has been responsible for fostering a huge amount of innovation and growth,’ said Anthony Georgiades, a general partner at Innovating Capital, a fund that invests in early-growth companies.”

What’s next: Somehow, some way, CZ will have to move into the shadows. Either by force, or because his company finally convinces him it can’t survive while he’s still in charge. (By Patricia Kowsmann, The Wall Street Journal)

How FTX Employees Realized the Company Was Doomed

What happened: FTX and its sister trading company Alameda Research imploded, leading to the trial that starts next week. Not everyone’s downfall was as swift as SBF’s.

Why it matters: The knowledge of the fraudulent events that took FTX down and led to SBF’s arrest — the use of customer funds to try to fix balance sheet holes — isn’t just some prosecutor’s theory. They’re the confessions of the company’s number two in the heat of the moment.

What’s next: The financial trial of the century so far? (By Thomas Barrabi, The New York Post)

The Private Equity World Prepares for a New Batch of Zombies

What happened: “Across the $12 trillion industry, hundreds of private equity firms are lumbering on years after their funds’ intended twilight with no new fundraising in sight — a cohort that investors and regulators have dubbed ‘zombies.’”

Why it matters: “If money managers don’t launch new flagship funds or find other ways to shore up their fees, they can eventually lose staffers en masse, leaving a skeleton crew behind to resolve old bets and manage bills. Funds — typically designed to last no longer than 12 years — end up going long past expiration dates, with firms sometimes sliding assets into continuation funds to keep managing them. It creates headaches for clients, who have to decide whether to press for an exit or hang on, hoping things turn around. The steep discounts to ditch problematic fund stakes prompt many investors to spend years crossing their fingers.”

What’s next: Has an illiquid asset class finally peaked? (By Dawn Lim, Bloomberg)

The Crypto-Trad Finance Cold War Has Gone Hot Again

What happened: Chase UK recently told customers it’d no longer allow them to use their debit cards to make cryptocurrency purchases, citing fraud concerns, leading to some harsh words from Coinbase CEO Brian Armstrong.

Why it matters: Because as much as Armstrong would love to make this about one company, it’s not. “The move from Chase UK has not happened in a vacuum. Other British lenders have taken similar steps to bar crypto transactions, citing the risk of fraud. Examples include NatWest, which placed limits on the amount of cash that can be sent to crypto exchanges, and HSBC, which banned crypto purchases altogether.”

What’s next: Guessing an American CEO’s pleas for government intervention in a foreign country will fall on deaf ears. (By Ryan Browne, CNBC)

Evergrande’s Grand Fall 

What happened: Evergrande’s former chairman is now in custody and Beijing has rejected part of the company’s proposal to break itself up, leading to liquidation concerns.

Why it matters: Because Evergrande is far from the only one. ​​”The renewed downturn in China’s property market is limiting options for real-estate firms there that may need to reorganize as they shoulder billions of dollars in debt. Concerns about potential regulatory intervention, such as the 11th-hour move in Evergrande’s plan, may further restrict restructuring solutions and prompt a wave of attempted liquidations by foreign creditors, according to watchers of China’s troubled property sector.”

What’s next: A real estate industry that helped drive the economy gets even worse. (By Alexander Saeedy, The Wall Street Journal)

A weekly five-point roundup of critical events in the energy transition and the implications of climate change for business and finance.