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Web3 is Going Just Great

...and is definitely not an enormous grift that's pouring lighter fluid on our already smoldering planet.

Created by Molly White. Subscribe to her newsletter for weekly recaps.

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Abra crypto lender charged with securities violations, settles

The SEC charged the Abra cryptocurrency lending platform with failing to register the offers and sales of its retail crypto asset lending product, Abra Earn, and with operating as an unregistered investment company. Abra Earn was available to US customers from July 2020 until June 2023.

Abra settled the charges from the SEC by agreeing to an obey-the-law injunction, and agreeing to pay as-yet-undetermined civil penalties.

In January 2024, Abra settled claims from the Texas State Securities Board by agreeing to refund customers. As a part of the complaint, the TSSB had alleged that Abra was "insolvent or nearly insolvent", and had been making misleading statements. In June 2024, Abra settled with 25 state regulatory agencies, agreeing to refund up to $82.1 million to its US customers. Abra had begun winding down operations in the United States in mid-2023, after facing multiple state regulatory actions.

Theme tags: Law
Tech tags: lending

Users suffer losses after Polygon Discord hack

Some fans of the Polygon blockchain, or those looking for help with using it, suffered losses after hackers successfully compromised the project's Discord server. Discord hacks have become a major issue in the cryptocurrency world, and although Polygon is one of the largest projects to suffer a Discord compromise, it's far from the only project to do so.

One member of the Discord described losing more than $140,000 in tokens after clicking a link shared by a person appearing to be a member of the Polygon team, which advertised a token distribution to serve as a "pre-migration celebration".

Theme tags: Hack or scam
Blockchain tags: Blockchain: Polygon

McDonald's Instagram hacked, hackers claim $700,000 haul

Instagram page for McDonald's, showing the bio: "Sorry mah nigga you have just been rug pulled by India_X_Kr3w thank you for the $700,000 in Solana šŸ‡®šŸ‡³"Hacked McDonald's Instagram (attribution)
McDonald's Instagram account, as well as the Twitter account of a McDonald's marketing director, began promoting a memecoin called $GRIMACE (named for the restaurant chain's blobby purple mascot). The posts to McDonald's 5.1 million followers caused the token price to spike. Then, the attacker sold off their holdings, profiting around $700,000 and plunging the token price.

They then boasted about their haul on the compromised Instagram account, changing the bio to say: "Sorry mah nigga you have just been rug pulled by India_X_Kr3w thank you for the $700,000 in Solana šŸ‡®šŸ‡³".

The token stunt by the massive company was perhaps made more believable by McDonald's previous forays into crypto, including when they launched a McRib-themed NFT project in December 2021. The company had also joked about a "Grimacecoin" back in January 2022, in a reply to a tweet from Elon Musk.

Theme tags: Hack or scam
Blockchain tags: Blockchain: Solana

Crypto holder loses over $55 million to apparent phishing attack

Someone holding almost $55.5 million in the DAI stablecoin was apparently phished, signing a transaction to reassign ownership of their DAI stash to a phishing address. The victim appeared to realize their error several hours later, attempting to withdraw the tokens only to have the transaction fail since they were no longer the owner of the assets.

The attacker later moved the stablecoins to a new wallet, and exchanged about half of them for 10,625 ETH.

Theme tags: Hack or scam
Blockchain tags: Blockchain: Ethereum
Tech tags: DeFi

Former CEO of Heartland Tri-State Bank sentenced to more than 24 years in prison after putting bank funds into crypto scheme

Shan HanesShan Hanes (attribution)
Shan Hanes, the former CEO of the Kansas Heartland Tri-State Bank, was sentenced to 293 months (24 years, 5 months) imprisonment after pleading guilty to embezzlement by a bank officer. Hanes had fallen for a "pig butchering" scam, where he believed he could earn returns by "investing" funds under the bank's control into a cryptocurrency scheme.

Between May and July of 2023, Hanes transferred $47.1 million of the bank's funds to the fraudulent scheme. This ultimately led to the bank collapsing, with equity investors losing $9 million and the FDIC footing the bill. "There were people who lost 70, 80% of their retirement" as a result of their investment losses, stated a community member.

Hanes had also taken money from a local church, an investment club, and his daughter's college savings. These funds were reportedly used to buy cryptocurrency after those running the scheme told him they needed more money to "unlock" the returns on his investments ā€” a common tactic with these scams.

Theme tags: Hack or scam, Law

FutureNet founder arrested for alleged crypto fraud

Roman ZiemianRoman Ziemian (attribution)
Roman Ziemian, a co-founder of the alleged crypto pyramid scheme FutureNet, was arrested in Montenegro, where he was living under a false identity. He had previously been arrested in Italy in October 2022, but fled the country after being released to home confinement. Ziemianā€™s co-founder, Stephan Morgenstern, had also fled authorities after being arrested and released to home confinement in Greece, but was arrested again in Albania in August 2023.

Ziemian was wanted on international warrants from Poland and South Korea. FutureNet, which was established in 2018 and purported to be a crypto trading platform, is alleged to have defrauded numerous people of a combined $21 million. Victims were encouraged to buy "participation packages", and earn rewards for referring others to the scheme. Polish authorities warned that FutureNet might be a pyramid scheme in 2019, and South Korea began an investigation into the company in 2020.

Ziemian faces fraud, money laundering, and theft charges, which could be punished by life imprisonment in South Korea.

Theme tags: Law

Twitch streamer DNP3 pleads guilty to wire fraud after gambling away funds invested in crypto charity project

Still frame of streamer DNP3 speaking into a microphoneAustin "DNP3" Taylor (attribution)
In January 2023, Twitch streamer DNP3 issued a statement admitting that he had gambled away investor funds while chasing losses. "Eventually I lost everything. In addition to my own life savings, I also irresponsibly used investor funds to try and 'get my money back' from the casino," he wrote. He had founded crypto projects including CluCloin, the Gridcraft metaverse project, and the Goobers NFT project.

Now, Austin "DNP3" Taylor has pleaded guilty to wire fraud after stealing around $1.14 million in investor funds from his CluCoin project, which had claimed it would "help others in need". DNP3 himself had built up a reputation of making generous gifts while livestreaming. He transferred the stolen funds to online casinos, where he then gambled them away.

Taylor faces up to 20 years in prison. The statement from the U.S. Attorney's Office announced that authorities would be notifying identified victims via NFT, and encouraging them to submit statements to the FBI.

Theme tags: Hack or scam, Law, Shady business

Crypto holder loses $100,000 to "Coinbase support" scammer, found via a Google ad

After encountering issues trading his cryptocurrency holdings on Coinbase, a man in his 60s decided to contact Coinbase support for help. He Googled "Coinbase" and clicked on a promoted result that displayed a Coinbase support phone number. After calling the number, the man was convinced to share his Coinbase password and to open his online banking account with the person on the other end, who was in fact a scammer impersonating Coinbase's customer support. By the time the man realized what was happening, thanks to a fraud alert from his bank, he had lost $100,000 in bitcoin, ether, and US dollars.

Scammers impersonating crypto company support representatives are everywhere on social media and elsewhere. Now, it seems, they are purchasing Google ads to rise to the top of Google search rankings. While Google says they attempt to remove fraudulent advertisers, some slip through the cracks.

While phishing attacks like this are prevalent both in crypto and in tradfi, crypto platforms often do not have similar safeguards as major banking platforms to try to thwart unauthorized transactions, nor do they have the same ability to reverse transactions that are made.

Theme tags: Hack or scam

SEC charges promoters of NovaTech pyramid scheme

Cynthia and Eddy Petion, with a car behind them printed with the NovaTech brandingCynthia and Eddy Petion (attribution)
Following a lawsuit from the New York Attorney General in June, the SEC has filed a lawsuit against the promoters of the NovaTech crypto pyramid scheme and affinity fraud. Cynthia and Eddy Petion particularly targeted victims of Haitian descent, promoting their schemes in Creole, leveraging their victims' religion, and promising them "financial freedom" and "freedom from the plantation".

The SEC's lawsuit also targets six other promoters of the NovaTech scheme, all of whom the agency says used "religious overtones" when attracting new investors. Ultimately, the scheme was revealed to be a Ponzi scheme, with new investors' money being used to pay out previous investors, as the promoters also took money for themselves.

Theme tags: Law

FTX settles complaint from the CFTC with $12.7 billion payout

FTX will pay $8.7 billion in restitution and another $4 billion in disgorgement to settle the lawsuit from the CFTC, which was filed shortly after FTX collapsed in November 2022. All $12.7 billion, or what is available of it among FTX's remaining assets, will go to creditors rather than to the agency.

Defendants Sam Bankman-Fried, Caroline Ellison, and Gary Wang, as well as the FTX and Alameda Research companies, will be prohibited from commodities trading, including trading bitcoin, ether, USDT, or other assets considered "digital asset commodities" by the CFTC. However, with Bankman-Fried already beginning a 25-year prison sentence, and Ellison and Wang due to be sentenced, this may be low on their list of worries.

Theme tags: Law

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