DraftKings was secretly paid to run a Polygon network validator

November 30, 2023

DraftKings was secretly paid to run a Polygon network validator

In March 2022, Polygon boasted about how "The decision by DraftKings, a NASDAQ-listed company, to take an active role in day-to-day operations of a major network is an important adoption milestone for the blockchain industry." The company had agreed to run a validator on the network, and Polygon claimed in a press release at the time that DraftKings would be "an equal community member" among other validators.

However, it turns out that Polygon allocated tens of millions of tokens to the DraftKings validator — far more than they allocated to other validators — on which DraftKings earned a highly unusual 100% of staking rewards. Polygon also sent the company 2.5 million of their MATIC tokens (priced at just over $1.5 million at the time), and it's unclear if this was a purchase by DraftKings or a transfer as a part of the deal.

In October 2023, Polygon kicked DraftKings off the network as the validator had failed to maintain performance standards. Throughout the period that the DraftKings maintained the validator, they earned millions of dollars through the undisclosed partnership.

"Polygon Gave DraftKings Multimillion-Dollar Edge in Special Staking Relationship", CoinDesk [archive]

November 30, 2023

Crypto media outlet Forkast goes bust

(attribution)

The crypto media website Forkast has stopped publishing and laid off most of its editorial staff. The last post on the site is from November 22.

After raising $1.7 million in seed funding in 2021, the site seems to have run out of runway. It merged with the CryptoSlam data aggregator in January 2023, but that apparently didn't help it sustain operations. The company appears to be trying to rebrand as "Forkast Labs", and is offering crypto data feeds.

"Forkast lays off majority of editorial staff amid merger with CryptoSlam", The Block [archive]

November 29, 2023

BitStable decides to burn most tokens after public sale goes wrong

(attribution)

BitStable launched their BSSB token in a public sale only to watch as all tokens sold out in one block. Four entities acquired the majority of the BSSB tokens, an outcome that the team had been hoping to avoid in the interest of "fairness and integrity". As a result, the team announced that they would burn 75% of the tokens.

Some applauded the decision, seeing the token hoarding as an unfair tactic that deprived others who wanted the tokens of their opportunity to buy any. However, some — particularly those who succeeded in buying tokens in the initial sale — worried that they were being "rugged" as the team threatened to destroy their tokens. Others objected based on the "code is law" ethos: "Basically we used ur platform and ur rules - u said ur selling at 500k mcap valuation and now changed it to 3m mcap valuation after it sold out - straight rug material u can't do that lmao", wrote one person on Twitter.

Tweet thread by BitStable [archive]

November 29, 2023

SoFi neobank ditches crypto

(attribution)

After entering the crypto sector in 2019, the neobank SoFi is jettisoning the blockchain portion of its business by mid-December. Customers are being given the option to move their accounts to Blockchain.com; otherwise their assets will be liquidated.

The move is likely tied to its bank charter, which was conditionally approved with a two-year period in which it was required to receive approval for its crypto business. SoFi had previously described discussions with the Federal Reserve "to determine whether there is a path to conform our crypto-related activities to the requirements of the Bank Holding Company Act" — this move suggests they decided there was not.

"SoFi Is Exiting Crypto With Banking Regulators Stepping Up Scrutiny", Bloomberg [archive]
SoFi Technologies, Inc. Form 10-K, filed with the SEC

November 27, 2023

Hounax crypto scam steals $19 million

(attribution)

A scam Hong Kong cryptocurrency platform called Hounax swindled its customers out of HK$148 million (US$19 million). The group drew in customers by offering financial expertise on social media and awarding prize money to those who signed up to the platform. While some customers successfully tested whether they could withdraw their funds earlier on, the platform later stopped allowing customers to withdraw, or told them they would need to pay additional fees to do so.

The Hong Kong Securities and Futures Commission added Hounax to its warning list on November 1, a move that victims have criticized as much too late to stop the damage.

"Hounax scam: Hongkongers who lost HK$148 million to cryptocurrency platform say watchdog warning came too late", South China Morning Post [archive]

November 23, 2023

Bitcoiner spends $3 million on transaction fee

A Bitcoiner making a large transaction ended up spending 83.64 BTC (~$3 million) of the 139.42 BTC (~$5.1 million) transaction on transaction fees, effectively spending $3 million to send what ended up being a $2 million transfer. This apparent error has become the largest transaction fee in Bitcoin history.

A person then claimed on Twitter to be the owner of the wallet, verifying the claim by signing a message from the wallet that paid the fee. They claimed that they had been hacked, and that an error on the attacker's part led to the huge fee payment. AntPool, the mining pool that mined that block and earned the huge fee, later agreed to return the fee, though it's not clear if or how they verified that the person to whom they're returning the fee wasn't in fact the attacker who had obtained control of the wallet.

A similar fee overpayment incident occurred in September, when the Paxos crypto firm erroneously paid a $500,000 fee to send $1,865. They attributed the huge fee to a bug in their software, and the F2Pool mining pool (who had mined the block and received the fee) opted to return the overpayment.

November 22, 2023

KyberSwap hacked for $50 million

(attribution)

The KyberSwap decentralized exchange was hacked by an attacker who stole large sums of ETH, wETH, and the USDC stablecoin. Altogether, the assets are valued at around $54.7 million. The attacker was able to exploit a complex bug in a feature for liquidity pool providers. Prior to the hack, KyberSwap had approximately $80 million in TVL.

Shortly after the attack, the thief sent a message: "Negotiations will start in a few hours when I am fully rested." The KyberSwap team later responded to offer a 10% bounty, also seeming to praise the attacker: "You have done one of the most sophisticated hacks ser. That was high EV and everyone missed it."

The thief had other plans, though, ultimately issuing a list of "demands" which included "complete executive control" over the company and "surrender of all ... assets" to the hacker. They wrote that they had big plans for the network, and although they planned to dismiss all executives, they wrote that employees would be offered double salaries to continue their work. The hacker signed the message "Kyber Director".

Meanwhile, KyberSwap regained around $4.7 million after negotiations with the operators of front-running bots, who agreed to return 90% of the funds they obtained through frontrunning the hacker's transactions.

"KyberSwap offers 10% bounty to hacker following $47 million exploit", The Block
"KyberSwap DEX Hacked for $48 Million, Attacker Teases Negotiations", CoinDesk
On-chain messages between the attacker and KyberSwap
On-chain message from the attacker

November 22, 2023

HTX (fka Huobi) and Heco Chain hacked for $115 million

(attribution)

Justin Sun confirmed that HTX (formerly Huobi) and its related Heco Chain protocol were hacked for a combined $115 million. It's been a rough few weeks for Sun, whose Poloniex exchange was hacked for around $120 million on November 10, and a rough few months for HTX, which was hacked for $8 million in late September.

HTX suspended withdrawals as they investigated the hack, and wrote that the company would "fully compensate for HTX's hot wallet losses". Security firm Cyvers said they believed the theft was enabled by a private key leak.

"Justin Sun Confirms HTX, Heco Chain Exploited After $100M in Suspicious Transfers", CoinDesk [archive]

November 21, 2023

Binance fined over $4 billion, founder pleads guilty and resigns

(attribution)

Binance founder Changpeng "CZ" Zhao pleaded guilty to money laundering charges and agreed to step down as CEO of Binance, the largest global cryptocurrency exchange. He will pay a $50 million fine and faces the possibility of 18 months in prison.

Binance agreed to pay $4.3 billion in restitution for widespread wrongdoing including failure to implement proper anti-money laundering programs, unlicensed money transmitting, and sanctions violations. Binance will be allowed to continue operating, but will be subjected to a three-year-long monitorship program to ensure AML and sanctions compliance.

Simultaneously with the DOJ action, Binance reached agreements with the CFTC, FinCen, and OFAC on ongoing legal issues. Notably, the SEC lawsuit was not among those settled.

CZ posted a long thread on Twitter, admitting "I made mistakes, and I must take responsibility," carefully sidestepping mentioning what any of those mistakes were.

"Binance and CEO Plead Guilty to Federal Charges in $4B Resolution", U.S. Department of Justice [archive]

November 21, 2023

Aragon DAO votes to sue its founding team

(attribution)

Aragon is a prominent project that creates DAO infrastructure. Ironically, its own DAO-based governance has been fraught, with the group facing a governance crisis in May over conflicts between the DAO and the Aragon Association (a small group of "stewards" for the project).

Now, after the Aragon Association decided without consulting the DAO to dissolve itself and wind down the project's governance tokens (while keeping some of the funds), the DAO has voted to sue the group. The DAO has accused the group of improperly taking investors' money to put it "into their new secretive company". They've allocated $300,000 to legal efforts.

"A DAO is funding a lawsuit against its own founding team", The Block [archive]
"Aragon DAO votes to fund legal action against its founders", CoinTelegraph [archive]
Proposal to sue the Aragon Association

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