Some in the crypto space have been encouraging people to withdraw their funds from any type of staking or lending platform, as liquidations and failures to repay debt spreads through the tightly-interconnected ecosystem. On June 16, yield farming platform Finblox implemented a very low cap on the amount of funds customers could withdraw, citing exposure to the apparently insolvent Three Arrows Capital.
- "Babel Finance Suspends Withdrawals, Citing 'Unusual Liquidity Pressures'", CoinDesk
- Notice from Babel Finance
The exchange then announced they would be delaying the withdrawals of most popular cryptocurrencies for 36 hours "to avoid unnecessary panic withdrawal". A follow-up blog post the next day announced they would be allowing users to withdraw, but only up to $500 a day. They later adjusted the withdrawal limits to a more flexible model, but left them in place.
As an apology to their customers, AEX promised "AEX Shareholder Badges" to the people with the most funds in their platform. They also announced a Texas Hold'em Carnival to show their "appreciation" of their users, but they canceled it the same day. Perhaps focusing on the liquidity issue is the right choice...
Finblox announced that all users would only be able to withdraw up to $500 a day, up to a monthly maximum of $1,500—quite a change from the $50,000/day withdrawal limit for some of their users. They also wrote that they would be pausing reward distributions, and delaying their referral program and deposit rewards, and preventing newly registered users from creating new crypto addresses.
Finblox ended the message to their users by saying they would "do everything in its power to protect our users' funds and reinstate our services in full", but such a dramatic move seems to suggest the platform is another domino to fall as companies collapse throughout the crypto ecosystem.
Hacker steals over $1.2 million from Inverse Finance, their second such exploit in under three months
Inverse Finance is a borrowing and lending protocol that was hit with a different oracle manipulation attack in early April, which resulted in a $15.6 million loss.
8 Blocks Capital calls on platforms to freeze Three Arrows Capital's funds after the firm goes silent
When 8BC contacted 3AC to make a withdrawal on June 13, they never received a reply. "We didn't think much of it at the time. After a while, the market stablized so we no longer needed the funds. We thought maybe they were just busy." The following day, 8BC noticed $1 million missing from their accounts. When they tried to contact 3AC, they again received no response.
According to Yuan, "What we learned is that they were leveraged long everywhere and were getting margin-called. Instead of answering the margin calls, they ghosted everyone." He called on platforms that still have assets from 3AC to freeze those assets, "so that those who 3AC owes can be paid back in the future after legal proceedings."
These internal values include requiring employees to believe in "The Mission", "to accelerate the worldwide adoption of cryptocurrency". Their culture explainer also includes various points (emphasis in the original):
- "We will engage in lobbying, as a single-issue donor, supporting controversial politicians and legislation that furthers The Mission, possibly to the detriment of other civil rights causes"
- We will advertise with and sponsor controversial television programs, podcasts, influencers and events, if it furthers The Mission
- We may incorporate firearm and self-defense training in to corporate retreats
- Should we aim to be exemplary in terms of stereotypical team diversity measurements? No.
The culture document goes on to say that "Someone Must be Offended, Some of the Time":
- "Krakenites are welcome to request (and deny) personal language and communication preferences of each other"
- Everyone is responsible for their own feelings
- Being offended doesn't necessarily make you right
- Being offended doesn't necessarily make you "harmed"
- Words nor silence are ever "violence"
- We do not call someone's words toxic, hateful, racist, x-phobic, unhelpful, etc.
Throughout the document are various notes to clarify that although some of what they're describing definitely sounds like they might be breaking the law, they're definitely not breaking the law: e.g., "Note: We are committed to eliminating all forms of discrimination against legally protected groups in every jurisdiction in which we operate."
Making matters worse, 3AC co-founder Su Zhu tweeted during the mass sell-off to promote stETH, which certainly gives the appearance that he was trying to pump the price to improve price or liquidity. BlockFi later confirmed that they had liquidated some positions that 3AC held with them.
Speculation about 3AC has swirled, with little comment from 3AC or its executives besides a June 14 tweet from Zhu: "We are in the process of communicating with relevant parties and fully committed to working this out". Meanwhile, other organizations including 8 Blocks Capital have reported that they've been unable to reach 3AC about money they're owed.