The Fintech files: Kraken’s ‘savage’ layoffs, more trouble for crypto hedge funds

One employee said: “I went to get a coffee, came back and was locked out [of my laptop] and checked the news and saw it advertised CNBC.”

Only several hours later did they hear from the company, via a message sent to their personal email address.

Another former Kraken worker in the US said the process had left members of their team “clueless and upset”.

A Kraken spokesperson said supporting laid-off employees was the firm’s “top priority” and said the shutdowns were done for safety reasons. Here is the announcement from 30 November in its entirety.

Worryingly for workers, Kraken’s method of laying people off via sudden IT shutdowns is becoming increasingly common at US tech firms.

Twitter employees recently experienced a similar experience when the firm laid off an estimated half of its 7,500 employees, according to The The Wall Street Journal.

But crypto companies in particular have faced repeated criticism when it comes to corporate processes, including auditing and HR, all of which fall under corporate governance rules that tradfi firms routinely follow.

Coinbase was criticized by its employees for doing similar to what Kraken employees reported in a round of job cuts in June, while two executives at bankrupt crypto lender Celsius recently hammered the firm’s corporate governance in an interview with United Nations.

Meanwhile, FTX’s administrator, John J Ray III, said the firm’s corporate controls and accounts were worse than Enron’s, whose liquidation he also oversaw.

And then they came for the hedges…

As if things couldn’t get worse for crypto, investors are now also shying away from the industry’s hedge funds, after BlockFi became the latest firm to file for bankruptcy amid significant exposure to FTX.

“At this stage no one really knows how far the effects of [FTX] will go,” said Marc P Bernegger, co-founder of crypto hedge fund AltAlpha Digital Financial news.

“Most investors are very reluctant to invest in crypto hedge funds in these turbulent times and are waiting on the sidelines.”

And according to CK Zheng, chief investment officer at ZX Squared Capital, investors in crypto hedge funds are still unsure how many more forced liquidations will be triggered after the collapse of FTX and BlockFi.

Yep.

What does SBF say today?

Sam Bankman-Fried’s lawyers could have been forgiven for thinking he had settled into speaking publicly after all that has happened.

But the former FTX boss – who many have argued should face jail time for the way he ran the now bankrupt firm – has continued to speak publicly with confidence.

So far, he has given interviews to more than half a dozen US-based media outlets and even let a reporter into his house in the Bahamas.

He has said he is “sorry” in almost every interview, and according to US Attorney Jeremy Hogan, he said things that are “incriminating”.

Hogan, founder of the law firm Hogan & Hogan, tweeted: “Why are his lawyers (or parents) letting him do this?”

In the case of technical redundancies, at least a16z approves

The latest round of tech layoffs, including those at Kraken, has left thousands of people out of work, sometimes in abrupt circumstances.

But two partners at Andreessen Horowitz, one of the best-known VC names and the world’s biggest crypto investor, were full of praise for Twitter CEO Elon Musk’s decision to turn away thousands of people — and the fact that others are likely to copy it.

Andrew Chen, a partner in the firm also known as a16z, tweeted that Musk’s move was “inspiring founders making tough decisions in the recent economic downturn”.

“I’ve heard from a lot of founders who cut fat, make big product moves, and go hardcore — and aren’t afraid,” he said. “A new playbook is being written in real time.”

Sriram Krishnan, a partner at the firm also known as a16z, added, also via a tweet: “I’m hearing from several CEOs how Elon Musk has changed the toolset/culture they thought was available to them.”

That shift includes “demanding more of their teams” and “cutting non-essential functions”.

Whether laid-off workers at Kraken, Twitter and others would shower Musk with the same praise is another matter entirely.

To contact the author of this story with feedback or news, email Alex Daniel