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Meanwhile, the tortured tale of Sam Bankman-Fried continued as the disgraced former FTX CEO pleaded not guilty to eight Federal counts, including wire fraud and campaign finance violations. U.S. District Judge Lewis Kaplan of the Southern District of New York ruled on a tentative October date for the anticipated weeks-long trial during Bankman-Fried's arraignment in a Manhattan courthouse Tuesday.

A report by brokerage firm Bernstein on Monday offered some hope for investors less concerned about the current crypto winter than digital assets' long-range upside. Bernstein said that despite bitcoin’s slump last year, it is up about 60 times from its 2014 low and roughly five times from its 2018 bottom. Ether is up 14 times from its 2018 lows, despite a 68% slide last year.

The crypto industry has a strong track record of fighting back from its lows and “taking punches when down,” the report said.

While the report added that the macro backdrop may be different this time, analysts Gautam Chhugani and Manas Agrawal noted optimistically that “crypto is probably among the few industries that can clock frontier-tech-like growth, in a broadly maturing tech landscape. And that it touches less than 5% of total internet users with “significant headroom for application led adoption.”

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Tron founder Justin Sun Has Significant Holdings in Valkyrie Digital Assets. Why?

By Sam Reynolds

Justin Sun talks a big game about Hong Kong and China, telling CoinDesk TV in October that he’s “optimistic” that one day crypto might return to China and later telling Bloomberg that its free-market oriented Special Administration Region of Hong Kong is in “embrace crypto mode.” Just as common law-based Hong Kong was the trial zone for free market capitalism for China, so will regulated crypto first kick off in Hong Kong before moving to the rest of China.

But where is Justin Sun’s money?

A significant amount is stashed away in the United States, as CoinDesk reported in December, in the treasury of Valkyrie Digital Assets, where Sun is one of its largest clients.

Specifically, it's in one of Valkyrie’s separately managed account (SMA) offerings, which are designed to give those more familiar with TradFi investment vehicles exposure to crypto.

There’s an angle to be examined if Sun’s outsized holdings domiciled in Valkyrie are a way to mask what the market perceives as institutional demand for crypto. But that’s neither here nor there at the moment.

For someone whose name is literally synonymous with the early days of crypto, it might be strange that they are parking so much capital in a vehicle that’s designed for boomer asset managers who are uncomfortable with self-custody to get exposure to digital assets.

Via Telegram, a spokesperson for Sun told CoinDesk that the Tron founder was looking to allocate "some of his wealth in U.S. holdings," and to support "regulated crypto industry growth."

Link to China

But the decision could stem from conditions in China.

The country’s unpredictable legal system, which is happy to confiscate the wealth of dissidents – both real and perceived – has led to the country’s rich parking money overseas for decades.

As soon as the British announced that it would return Hong Kong to the People’s Republic of China in the 1980s, real estate in Vancouver became the hottest commodity for the territory’s wealthy. Taiwanese who felt that the island would be absorbed into China in the future followed suit. And as China emerged as a global power, minting hundreds of billionaires in the process, its elite bought into North American real estate creating multi-million dollar hedges against China along the west coast in the form of luxury apartments.

While plenty of dirty money has flowed in too, the elite of legitimate means must feel vindicated as Beijing targets billionaires, and those who it feels have grown too powerful, like Jack Ma – who vanished after criticizing regulators and running afoul of Xi Jinping. Interest in Vancouver and other North American real estate has once again increased from Hong Kongers who fear that what little autonomy the territory has left will be removed in the coming years.

There’s nothing to say that Justin Sun has run afoul of the law in China. But he has also been quick to vote with his feet and ditch his PRC citizenship for various Caribbean passports as well as Malta. Now, he holds a Grenadian passport which he purchased along with a representative position to the WTO for the small island nation.

But Beijing’s mood can quickly change.

Authorities are cognizant of what an effective antidote crypto is to capital controls. The market for crypto in China is huge, although it doesn’t officially exist on the mainland, to the tune of hundreds of billions of dollars. Sun is a homegrown ‘success story’ for crypto, and his name is all over the market. Suddenly he could become persona-non-grata.

Reinstating citizenship?

While Sun isn’t a PRC citizen, that doesn’t really matter all that much to authorities in-country. Beijing has a history of forcibly reinstating citizenship for people it is targeting.

Gui Minhai, a Swedish-born Chinese citizen, ran a bookstore in Hong Kong that stocked plenty of titles critical of the Chinese Communist Party.

In 2015, he, and his business associates, some based in Thailand and others in Hong Kong, went missing. It was later revealed that they were victims of an extraordinary rendition back to China and later charged with various crimes like “providing intelligence to overseas operatives.” During this process, Gui had his Chinese citizenship forcibly reinstated, and Swedish citizenship canceled.

Should Sun ever find himself a target of Beijing’s scorn, which isn’t out of the realm of possibility considering how the CCP goes after vocal billionaires, up to the level of Jack Ma, his Grenadian passport isn’t going to do much to help him.

There’s no indication that will happen anytime soon, but smart businessmen like Sun are always hedging bets.

Self-custodying of wealth isn’t that safe when homes and offices can be raided, extraordinary rendition is on the table, and cryptographic keys can be compelled to be turned over to authorities. If it really wanted to, the government in Beijing could easily bully some Caribbean nations into giving up holding companies that store crypto (it’s got plenty of clout in that part of the world) for the types of people that would find their names in the Panama Papers.

But if that day comes, $500 million of Sun’s wealth will be safe and sound behind the U.S. legal system locked in Valkyrie’s treasury.

It’s a bit more complicated than just buying a few luxury apartments in California, but real estate is for boomers.

Important events.

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CoinDesk TV

In case you missed it, here is the most recent episode of "First Mover" on CoinDesk TV:

Sam Bankman-Fried Due in NYC Court for Arraignment; Gemini, Digital Currency Group Dispute

Investors, anticipating more spillover effects from the FTX collapse, have been closely watching a business disagreement between crypto exchange Gemini and Digital Currency Group (DCG) that has now resulted in its leaders trading public accusations. DCG is the parent company of CoinDesk. Meanwhile, FTX founder Sam Bankman-Fried is reportedly expected to plead not guilty at his arraignment in New York City today. DFD Partners President Bilal Little, Solana's Head of Strategy and Communications Austin Federa and Champel Capital Co-Founder Amir Weitmann joined "First Mover" to discuss the latest FTX-related developments.

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