🤷‍♂️ 1 big thing: Venture investors undeterred 

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📉 2. Coinbase crumbles

Top coins

🏄‍♂️ 3. Catch up quick 

⏳ 4. Culture hash: Can't stop, won't stop

Hello. Pete steering the ship again today, with Brady back at the wheel tomorrow.

🚨 Situational awareness: Yesterday we covered TerraUSD, the algorithmic stablecoin, breaking from its $1 peg and sinking as low as $0.69. Things got worse today, seeing it briefly below $0.24.

This newsletter was edited by Pete Gannon. It is 1,025 words, a 4-minute read.

Crypto

green

Follow how cryptocurrency and blockchain are upending markets and the regulatory shifts. With Brady Dale.

Axios Crypto

1 big thing: Companies face abortion test

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2. Bonus Chart: States with abortion bans

3. What's happening

4. Worker exodus continues

5. Love for teachers

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6. What they're saying

🙏🏻 Welcome back! It's National Teacher Appreciation Day, so each of us here at Closer wants to reflect on the educators who helped shape our lives. But first, we look at how the future of abortion rights may pressure all companies to respond. 

Today's newsletter, edited by Pete Gannon, is 693 words, a 2½-minute read.

🔔 The dashboard: The S&P 500 closed up 0.5%.

Biggest gainer? Western Digital (+14.5%), after an activist investor publicly pushed the company to split off its flash-memory business.

Biggest decliner? Rockwell Automation (-14.5%), after missing expectations in the second quarter and cutting its earnings outlook.

Thanks to Sheryl Miller for copy editing today's (and every day's) newsletter.

Closer

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Catch up on the day's biggest business stories and look ahead to important trends. Led by Hope King and Nathan Bomey.

Axios Closer

😡 1 big thing: Multiplying risks

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💰 2. Charted: Driving the NFT market 

👋 3. He's back

🚴 4. Catch up quick

Top Coins

🧐 5. Culture hash

☕️ Good morning! It's Pete here. Brady is catching his breath until Thursday. But don't worry, we're all over this. Today we're talking fraud schemes, what's driving the NFT market, and the return of a name you know.

This newsletter was edited by Pete Gannon. It is 1,100 words, a 4-minute read.

🤭 1 big thing: Crypto's slide may get even uglier

An illustration of digital coins in an arrow pointing down.

📉 2. TerraUSD's hangover

🤝 3. Regulated crypto swaps

Illustration of a hundred dollar bill in the shape of a Rubik's cube

🏃‍♂️4. Catch up quick

🤣 5. Culture Hash: LOL 

🤭 Yesterday was not fun for investors. It's Pete again, and today we get into what is going on in markets, and, specifically, how crypto is getting caught in a broad flight from risk.

Brady will be back with you Thursday. But keep the emails coming: crypto@axios.com.

This newsletter was edited by Pete Gannon. It is 980 words, a 3.5-minute read.

National

Crypto has an Enron-sized scandal that threatens to completely undermine the trust proposition for its existence, regardless of Sam Bankman Fried's mea culpa tour.

Why it matters: The house of cards built by Bankman-Fried has drawn several parallels, including Enron, Theranos, Bear Stearns, Lehman Brothers and Madoff Investment Securities. 

In that vein, there’s nothing really new under the sun — even with the head-spinning volatility that’s come to characterize the nascent market for digital currencies.

We’ve sort of seen this movie before, and we suspect we know how it will end.

The big picture: FTX's "first day declaration" in bankruptcy court affirms the picture that’s emerged over the last month. 

Like Theranos/Madoff/Lehman, the principal spark for FTX’s downfall was its founder's staggering ineptitude and dishonesty, and the failure of anyone around him to notice (or at least care).

“The fallout from [FTX’s] co-mingled client assets, poor disclosure and missing internal controls should remind us that while the cast of characters and products may change, the script of financial market disorder remains painfully familiar,” Robin Vince, president and CEO of banking giant BNY Mellon, wrote in a Financial Times op-ed on Friday. 

Yes, but: What is specific to crypto is an untested, interconnected, and interdependent ecosystem that's ripe for contagion and dramatic spillover effects. And since this fuse was lit, the fire is spreading faster, and wider.

This matters a lot when it comes to crypto’s long-term prospects — and why it could take a very long time for investors (especially small ones) to trust the industry again. 

What they're saying: FTX's downfall "will radically transform the crypto ecosystem, further shaking trust and raising doubts around its ongoing prospects," analysts at Moody's wrote last week.

The firm's failure "has left a market share void that will prove difficult to fill without a renewed client interest in crypto assets, a scenario to which we currently assign a very low probability."  

Crypto firms are in damage control. Voluntary audits are suddenly in vogue again, with crypto exchanges scrambling, trying to stem a raft of outflows. But even these have limitations in what they can prove.

Flashback: Crypto was birthed in the glum aftermath of the 2009 crisis; its principal selling point was its decentralized nature.

The idea was that individuals couldn't trust traditional finance, and granting smaller players more power to make their own decisions without the influence of bigger players. 

The bottom line: The crypto industry was already facing a trust deficit. And this has set it back far.

Crypto industry licks wounds in D.C. following FTX collapse

FTX’s spectacular implosion could crush support for a central bank-issued digital currency

FTX downfall threatens crypto existence

The crypto industry was already facing a trust deficit, and this has set it back far.

Sam Bankman Fried, CEO of FTX Cryptocurrency Derivatives Exchange, speaks at a Bloomberg event in July 2022. 

Sam Bankman-Fried, founder and chief executive officer of FTX Cryptocurrency Derivatives Exchange, during an interview on an episode of Bloomberg Wealth with David Rubenstein in New York, US, on Wednesday, Aug 17, 2022. (Jeenah Moon/Bloomberg via Getty Images)

Cryptocurrencies

Economy & Business

Layoff and hiring freezes are cascading across America, after a record boom lulled many employers and employees into a false sense of security.

Why it matters: In statement after statement, companies warn they're preparing for dire times.

Twitter today is taking the extreme step of locking its offices and suspending employees' badge access, as new CEO Elon Musk begins mass layoffs expected to cut deep into the platform's 7,500 employees.

In an ominous email to staff, Twitter said cuts will begin at noon ET: "In an effort to place Twitter on a healthy path, we will go through the difficult process of reducing our global workforce on Friday."

Internal plans earlier this week had Musk looking to cut 3,700 Twitter staff, or about half the workforce, Reuters reports.

The email said employees not laid off will find out via their work email. Staff who are losing their jobs will be notified with next steps to personal email addresses.

What's happening: During the past decade, tech workers got used to high salaries, plush benefits and tons of opportunity. Workers in other industries were paying a heavy price for the pandemic. But tech continued to prosper.

So it's still a little hard for most people in Silicon Valley, and the wider tech industry, to get their heads around just how tough times could be getting for them.

Tons of layoffs and freezes are being announced or leaked as companies race to prepare for bleak months ahead:

Amazon announced a "pause on new incremental hires in our corporate workforce," citing the "unusual macro-economic environment."

Lyft said it will lay off about 680 employees, or 13% of staff, and blamed inflation and the slowing economy. Co-founders Logan Green and John Zimmer told staff of "the tough reality."

Stripe CEO Patrick Collison said the payments company will lay off 14% of its workforce, returning to February's headcount of 7,000: "We were much too optimistic about the internet economy's near-term growth ... and underestimated ... a broader slowdown."

Apple has paused hiring for many jobs outside R&D, Bloomberg reports.

CNN Worldwide employees are expecting layoffs after chairman and CEO Chris Licht warned in a memo last week of "unsettling" changes in light of "widespread concern over the global economic outlook."

The bottom line: Tech is the most forward-looking of all industries, Axios' Felix Salmon notes. You don't hire for where you're at today — you hire for where you aspire to be tomorrow.

When tomorrow doesn't come, that means layoffs.

Tech workers brace for massive wintertime layoff surge

In statement after statement, companies warn they're preparing for dire times.

Illustration of a cardboard box full of cursors.  

Layoffs

Layoff and hiring freezes are cascading across America, after a record boom lulled many employers and employees into a false sense of security.Why it matters: In statement after statement, companies warn they&#x27;re preparing for dire times.

From the Valley to D.C., Big Tech players like Facebook, Google and Amazon are under more scrutiny than ever as new technology develops and privacy and antitrust concerns grow in lockstep with companies’ ambitions.

Technology

The only thing moving faster than this year's crypto collapse is its aftermath.

Why it matters: Authorities, courts and lawmakers  — who for years largely observed the industry's rapid growth from the sidelines — are now elbowing each other out of the way to get involved as confidence in the industry crumbles, and new shoes drop. 

The latest: Sam Bankman-Fried, whose face became synonymous with crypto, was charged today with eight counts of fraud, conspiracy, campaign finance violations and money laundering.

Only a day earlier, the FTX founder was readying for a remote appearance before the House Financial Services Committee.

The intrigue: He was arrested by Bahamian authorities late Monday at the request of the U.S. Government. But that caught another part of the U.S. Government completely by surprise.

"My staff and I have been working diligently for the past month to secure Mr. Bankman-Fried’s testimony before our Committee tomorrow morning," committee chairwoman Maxine Waters (D-CA) said in a statement. 

SBF was still scheduled to appear, "but then he was arrested," Waters added.

The timing of arrest was "dictated by law enforcement," U.S. Attorney Damien Williams said in a press conference.

Meanwhile, a battle is heating up between FTX's U.S. bankruptcy team and Bahamian authorities: both are claiming jurisdiction, and openly accusing the other of foul play. U.S. regulators also jumped into the fray today.

The SEC filed a civil complaint, while the CFTC charged SBF and his companies with fraud, in connection with the loss of over $8 billion in FTX customer deposits.

The bottom line: Crypto, a once little understood corner of finance, now has everyone's attention.

Crypto, you have our attention now

The only thing moving faster than this year&#x27;s crypto collapse is its aftermath.Why it matters: Authorities, courts and lawmakers — who for years largely observed the industry&#x27;s rapid growth from the sidelines — are now elbowing each other out of the way to get involved as confidence in the industry crumbles, and new shoes drop. The latest: Sam Bankman-Fried, whose face became synonymous with crypto, <a class="gtmContentClick" data-vars-link-text="was charged today" data-vars-click-url="https://www.axios.com/2022/12/13/sam-bankman-fried-criminal-fraud-money-laundering" data-vars-content-id="88bf46fa-28f1-4232-b955-a8b717910d21" data-vars-headline="Crypto, you have our attention now" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/2022/12/13/sam-bankman-fried-criminal-fraud-money-laundering" target="_self">was charged today</a> with eight counts of fraud, conspiracy, campaign finance violations and money laundering.<ul><li>Only a day earlier, the FTX founder was readying for a remote appearance before the House Financial Services Committee.</li></ul>The intrigue: He was arrested by Bahamian authorities late Monday at the request of the U.S. Government. But that caught another part of the U.S. Government completely by surprise.<ul><li>&quot;My staff and I have been working diligently for the past month to secure Mr. Bankman-Fried’s testimony before our Committee tomorrow morning,&quot; committee chairwoman Maxine Waters (D-CA) <a class="gtmContentClick" data-vars-link-text="said in a statement" data-vars-click-url="https://financialservices.house.gov/news/documentsingle.aspx?DocumentID=410026" data-vars-content-id="88bf46fa-28f1-4232-b955-a8b717910d21" data-vars-headline="Crypto, you have our attention now" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://financialservices.house.gov/news/documentsingle.aspx?DocumentID=410026" target="_blank">said in a statement</a>. </li><li>SBF was still scheduled to appear, &quot;but then he was arrested,&quot; Waters added.</li></ul>The timing of arrest was &quot;dictated by law enforcement,&quot; U.S. Attorney Damien Williams said <a class="gtmContentClick" data-vars-link-text="in a press conference" data-vars-click-url="https://www.axios.com/2022/12/13/ftx-bank-man-fried-sdny" data-vars-content-id="88bf46fa-28f1-4232-b955-a8b717910d21" data-vars-headline="Crypto, you have our attention now" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/2022/12/13/ftx-bank-man-fried-sdny" target="_self">in a press conference</a>.Meanwhile, a battle is heating up between <a class="gtmContentClick" data-vars-link-text="FTX&#x27;s U.S. bankruptcy team" data-vars-click-url="https://www.bloomberg.com/news/articles/2022-12-12/ftx-says-bahamas-trying-to-help-bankman-fried-access-key-systems" data-vars-content-id="88bf46fa-28f1-4232-b955-a8b717910d21" data-vars-headline="Crypto, you have our attention now" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.bloomberg.com/news/articles/2022-12-12/ftx-says-bahamas-trying-to-help-bankman-fried-access-key-systems" target="_blank">FTX&#x27;s U.S. bankruptcy team</a> and <a class="gtmContentClick" data-vars-link-text="Bahamian authorities" data-vars-click-url="https://twitter.com/SCBgov_bs/status/1602695706212458498" data-vars-content-id="88bf46fa-28f1-4232-b955-a8b717910d21" data-vars-headline="Crypto, you have our attention now" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://twitter.com/SCBgov_bs/status/1602695706212458498" target="_blank">Bahamian authorities</a>: both are claiming jurisdiction, and openly accusing the other of foul play. U.S. regulators also jumped into the fray today.<ul><li>The SEC filed a civil complaint, while the CFTC charged SBF and his companies with fraud, in connection with the loss of over $8 billion in FTX customer deposits.</li></ul>The bottom line: Crypto, a once little understood corner of finance, now has everyone&#x27;s attention.

Elon Musk took to Twitter on Wednesday in an attempt to lower the heat in a fight he picked with Apple on Monday.

Driving the news: "We resolved the misunderstanding about Twitter potentially being removed from the [Apple] App Store," Musk claimed in a tweet, after thanking Apple CEO Tim Cook for taking him around Apple headquarters Wednesday. "Tim was clear that Apple never considered doing so."

Details: The misunderstanding Musk referenced was based on his own tweet from Monday, when he claimed Apple had threatened to withhold Twitter from its App Store, "but won’t tell us why."

Apple did not respond to requests for comment, then or on Wednesday.

Context: Musk's series of tweets Monday, including another that publicly taunted Apple for pulling most of its ad spend on Twitter, were part of a broader narrative Musk is trying to paint that Apple is a monopoly and uses its power to censor voices, Axios' Sara Fischer writes.

Musk tries to dial down tensions with Apple

"We resolved the misunderstanding about Twitter potentially being removed from the App Store," he said today.

Elon Musk. Photo illustration: Muhammed Selim Korkutata/Anadolu Agency

Apple

<a class="gtmContentClick" data-vars-link-text="Elon Musk" data-vars-click-url="https://www.axios.com/2022/11/28/musk-threatens-war-apple-twitter" data-vars-content-id="8c4a8d12-b3f5-463c-a841-651f70c9b789" data-vars-headline="Musk tries to dial down tensions with Apple" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/2022/11/28/musk-threatens-war-apple-twitter" target="_self">Elon Musk</a> took to Twitter on Wednesday in an attempt to lower the heat in a fight he picked with Apple on Monday.Driving the news: &quot;We resolved the misunderstanding about Twitter potentially being removed from the [Apple] App Store,&quot; Musk claimed in <a class="gtmContentClick" data-vars-link-text="a tweet" data-vars-click-url="https://twitter.com/elonmusk/status/1598090996281413638?s=20&amp;t=KGHUqR6cMRm_Dp5oM8Dsbg" data-vars-content-id="8c4a8d12-b3f5-463c-a841-651f70c9b789" data-vars-headline="Musk tries to dial down tensions with Apple" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://twitter.com/elonmusk/status/1598090996281413638?s=20&amp;t=KGHUqR6cMRm_Dp5oM8Dsbg" target="_blank">a tweet</a>, after thanking Apple CEO Tim Cook for taking him around Apple headquarters Wednesday. &quot;Tim was clear that Apple never considered doing so.&quot;

Southwest Airlines has been in damage-control mode since its December cancellations meltdown, working to defend its reputation. Now, that episode has an actual price tag.

Driving the news: The airline said today the snafu cost it $800 million in the fourth quarter (around $620 million on an after-tax basis), driving it to a net Q4 loss.

And it expects to take another $300 million to $350 million hit to revenue for the current quarter as well: Canceled return trips from those nixed flights bled into January, and bookings are lower than usual for February, it said.

Southwest's stock closed down 3.2% today. It has been steadily recovering since falling 10.8% in the middle of the chaos in late December.

Flashback: The airline canceled 16,700 flights between Dec. 21 to 31, stemming from extreme winter storms grounding flights, and then exacerbated after its scheduling systems got overwhelmed by the deluge of flight changes.

The big picture: Southwest has a strong reputation, a fact noted by both executives and analysts on its earnings call today. And its efforts since the December debacle to defend it appear to be working.

Between public apologies, the airline has been concentrating on customer refunds and reimbursements for those affected.

And it is confident that business will be back to normal in March.

What they're saying: "The good thing is our customers are very loyal, and we're seeing that," CEO Bob Jordan said on the call.

"We had a sale recently. That sale went really well... We're seeing our customers redeem [rewards points] quickly at an even faster than typical rate for something like that, this gesture of goodwill."

The bottom line: Despite the Q4 loss, Southwest reported a full-year net income of $539 million for 2022. And it said today that it expects March 2023 managed business revenues to be roughly restored to March 2019 levels.

Southwest is telling investors it sees clear skies ahead.

Southwest lost $800 million from cancellation meltdown

A Christmas travel snafu cost Southwest $800 million in the fourth quarter.

Illustration of descending plane with a dollar sign vapor trail

Southwest Airlines

Southwest Airlines has been in damage-control mode since its <a class="gtmContentClick" data-vars-link-text="December cancellations meltdown" data-vars-click-url="https://www.axios.com/2022/12/27/southwest-airlines-flight-cancellations-travel-schedule" data-vars-content-id="c9ec12fd-2b21-48dc-9723-89f7164fe3ad" data-vars-headline="Southwest lost $800 million from cancellation meltdown" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/2022/12/27/southwest-airlines-flight-cancellations-travel-schedule" target="_self">December cancellations meltdown</a>, working to defend its reputation. Now, that episode has an actual price tag.Driving the news: The airline <a class="gtmContentClick" data-vars-link-text="said today" data-vars-click-url="https://www.southwestairlinesinvestorrelations.com/news-and-events/news-releases/2023/01-26-2023-114537893" data-vars-content-id="c9ec12fd-2b21-48dc-9723-89f7164fe3ad" data-vars-headline="Southwest lost $800 million from cancellation meltdown" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.southwestairlinesinvestorrelations.com/news-and-events/news-releases/2023/01-26-2023-114537893" target="_blank">said today</a> the snafu cost it $800 million in the fourth quarter (around $620 million on an after-tax basis), driving it to a net Q4 loss.

Pete Gannon

Stories

Southwest lost $800 million from cancellation meltdown

Crypto, you have our attention now

FTX downfall threatens crypto existence

Musk tries to dial down tensions with Apple

Tech workers brace for massive wintertime layoff surge

Newsletter editions

🤦‍♂️ Pain

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😈 The dark side

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