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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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CEO of crypto media outlet The Block resigns after it's revealed he took tens of millions in loans from Sam Bankman-Fried

The Block is a cryptocurrency-focus media outlet that was originally founded in 2018 by Mike Dudas. In 2020, Michael McCaffrey became CEO of the company, and in 2021 he led a buyout to make the company employee-owned. Dudas says that at the time, he believed "McCaffrey's family was wealthy and loaned him money to buy out [his stake] and the VCs so the team could assume full independent ownership."

Now it has come to light that McCaffrey had actually taken a series of loans amounting to $43 million from Sam Bankman-Fried, founder of the now-collapsed FTX exchange and Alameda trading firm. According to McCaffrey and various others at The Block, he was the only one who knew of the arrangement.

The original $12 million loan was used for the company buyout. Another $15 million loan in January 2022 went towards company operations. A third $16 million loan was used... to buy personal real estate in the Bahamas.

Meanwhile, The Block's disclosures page reads, "It is critical that The Block is fully transparent about our own financial holdings so as to avoid any appearance of bias or impropriety. The most valuable asset that we hold and strive to earn again every day is our reader's trust. Therefore, we have implemented a financial disclosure policy that is industry leading."

Theme tags: Reporting, Shady business

Class action lawsuit against Jimmy Fallon, Paris Hilton, Justin Bieber, Gwyneth Paltrow, and others accuses them of undisclosed NFT promotions

Paris Hilton, wearing a neon green dress, sits onstage next to Jimmy Fallon, who is at his desk on the Tonight Show. He is holding up two cardboard printouts of Bored Ape NFTs.Paris Hilton and Jimmy Fallon talk up their Bored Apes in an excruciating segment of The Tonight Show in January 2022 (attribution)
A class action lawsuit against the company behind Bored Apes and its executives, those on the board of "Ape DAO", a whole host of celebrity promoters and brands, and the MoonPay service has accused the group of a scheme to employ celebrities to promote Bored Ape NFTs and ApeCoin without proper disclosures. The suit goes on to claim that MoonPay, a service known for brokering big-ticket celebrity crypto purchases, was used to obfuscate payoffs, and itself benefitted from the publicity earned from brokering these deals. The suit alleges that each of the "promoters" were compensated in some way, either through direct payments or via financial stake in MoonPay.

The promoters listed in the lawsuit are: talent manager Guy Oseary, digital artist Beeple, Madonna, Paris Hilton, Jimmy Fallon and related entities, Justin Bieber, Gwyneth Paltrow, Serena Williams, Diplo, Post Malone, Snoop Dogg, Kevin Hart, the Chainsmokers, Steph Curry, Future, The Weeknd, DJ Khaled, and Adidas.

Theme tags: Law
Blockchain tags: Blockchain: Ethereum
Tech tags: NFT

Former Love Island Australia contestant Vanessa Sierra rug pulls her NFT project

A simple illustration of a blue blob shape wearing a rainbow pastel beanie and beige hoodie with a yellow smiley face on it, smoking a cigarette.SmolBoy #128 (attribution)
After a stint on Season 2 of Love Island Australia, Vanessa Sierra has made a career as a successful OnlyFans performer. In 2021, she also began offering crypto trading tips in a Telegram channel that now has more than 10,000 subscribers, and in March 2022 she launched her first NFT project: "Smol Boyz Land". The project was supposed to involve acquiring metaverse land, and was based around her opinion that "it's clear statistically and exponentially that [metaverse land] prices will trend upwards". What could go wrong?

An investigation by OKHotshot has reported that Sierra rug pulled the NFT project, using project funds to wash trade her own NFTs before cashing out. In total, she withdrew 120 ETH (at the time worth around $316,000; today worth around $151,000). Throughout, Sierra claimed that "absolutely none of the funding has been taken by founders".

In addition to the allegations around her NFT project, OKHotshot identified other shady behavior by Sierra, such as pumping-and-dumping other NFTs she'd purchased, and placing lowball offers in $DAI on big-ticket NFTs, hoping that their owners would mistake them for ETH.

After OKHotshot published the thread, Sierra blocked them on Twitter, and deleted the NFT project's Twitter account and website.

Theme tags: Rug pull, Shady business
Blockchain tags: Blockchain: Ethereum
Tech tags: NFT

Digital Surge enters administration

The Australian crypto broker Digital Surge entered voluntary administration several weeks after suspending withdrawals in the wake of the FTX collapse. In their announcement, executives proposed a "proposed rescue plan" that will be voted upon by customers, and which would involve cash infusions from the company's directors.

Some of Digital Surge's customers reported having entrusted the company with hundreds of thousands of dollars from their superannuation funds (retirement pension). "I lost everything," said one customer who had put his entire superannuation of more than AU$150,000 (~US$102,000) into his Digital Surge account, where it is now frozen.

Theme tags: Collapse

FTX-hosted NFTs break after website is redirected to a restructuring page

A Coachella NFT on the Magic Eden platform titled "Reflection '15 #47". The image for the NFT is a large grey square, because the image can't be loaded.Broken FTX NFT shown on an external NFT platform (attribution)
After FTX declared bankruptcy, the entire FTX.us domain was redirected to a page providing information on the bankruptcy proceedings.

However, NFTs that had been minted on the FTX platform relied on metadata from an API at that domain, meaning that the NFTs are now pointing to broken links. Owners of these NFTs can still see that the NFT exists, but images no longer work—even when viewing the NFTs in their own wallets, or when listing them for sale on other platforms.

Other projects that rely on the FTX NFT platform's API, such as the Coachella NFT project, also broke: the Coachella NFT platform shows 0 NFTs in existence. Those NFTs still show up where they are listed on external NFT platforms, although the images and metadata are broken.

Theme tags: Hmm
Blockchain tags: Blockchain: Ethereum, Solana
Tech tags: NFT

Koinly lays off 14% of staff

UK-based crypto tax company Koinly announced they would be letting go of 14% of their team. This amounted to more than 100 employees, including the entire London- and Sydney-based teams. The company attributed the decision to the crypto market decline, as well as "fewer people reporting crypto on their tax returns". Hmm.

The layoffs were reportedly "terribly" executed, with days of uncertainty and employees receiving little or no notice before being fired.

Theme tags: Layoffs

Swyftx lays off another 40% of employees

Following a round of layoffs in August that cut 21% of their workforce, Australian cryptocurrency exchange Swyftx has just performed another round of layoffs less than four months later. This time they're cutting 40% of their staff, around 90 people.

Swyftx's CEO admitted the company had grown too fast. He attributed the decision to the continued downturn in the crypto market and shaken trust as a result of FTX, though Swyftx says they had no direct exposure to the bankrupt crypto exchange.

Theme tags: Layoffs

Orthogonal Trading is insolvent, defaults on $36 million in loans

The unsecured lending platform Maple Finance published a blog post announcing that they were severing ties with Orthogonal Trading, who had "misrepresented its financial position" for a month. "It is now clear that they have been operating while effectively insolvent, and it will not be possible for them to continue operating a trading business without outside investment," wrote Maple.

On December 3, Orthogonal Trading admitted to Maple that they were unable to meet loan repayments. The group was unable to repay a $10 million loan due the following day. The group has $36 million in liabilities across various loans on Maple's USDC and wETH pools.

Orthogonal Credit, a sister group to Orthogonal Trading, published a blog post distancing themselves, writing that they were "shocked and dismayed" by Trading's misrepresentation. "We are speechless by the extent of the exposure and liquidity position of Orthogonal Trading’s book of business," they wrote. They attributed the insolvency to FTX exposure.

Theme tags: Collapse, Contagion
Tech tags: lending

Bybit lays off another 30% of employees

After reducing their staff by 20–30% in June, Dubai-based cryptocurrency exchange Bybit is doing another round of layoffs. This time the cut is estimated at around 30%, which is likely around 750 people based on their headcount.

In a Twitter thread, Bybit CEO attributed the layoffs to the "deepening bear market" and said the layoffs touch all departments.

"We are all saddened by the fact this reorganisation will impact many of our dear Bybuddies and some of our oldest friends," he wrote. On the bright side, they no longer have to be called "Bybuddies".

Theme tags: Layoffs

Genesis owes $900 million to customers of Gemini Earn

After a domino effect in which Gemini suspended withdrawals from its "Earn" lending product due to Genesis suspending withdrawals due to FTX's collapse, it's been revealed by the FT that Genesis holds around $900 million in Gemini customer assets.

Gemini has formed a creditor committee to try to recoup funds from Genesis, as well as Genesis parent company DCG.

Theme tags: Collapse, Contagion
Tech tags: lending

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