First Arbitrum DAO vote spirals into disaster: DAO rejects $1 billion spending proposal, but Arbitrum already started spending

After a bumpy start to the airdrop that distributed governance tokens to Arbitrum users, the first use of those governance tokens arguably went even worse. Arbitrum submitted a proposal for DAO members to vote on various governance processes, as well as the distribution of 750 million ARB tokens to an "Administrative Budget Wallet" — tokens that were priced at around $1 billion.

The vote, which still has a day left before completion, is currently standing at 75% against and 25% in support. However, it was discovered that Arbitrum had already begun spending those 750 million tokens, including via the movement of a substantial amount of tokens, and "conversion of some funds into stablecoins for operational purposes".

Another Arbitrum team member subsequently published a post in which they claimed that the proposal was not really a vote but rather a "ratification" of decisions that had already been made by the Arbitrum team, leading many to question what the DAO was even for in the first place. Others questioned the fact that Arbitrum was receiving so much money to use however they liked, not subject to DAO approval.

Things got even messier when the Arbitrum Twitter account "clarified" that "40M $ARB tokens have been allocated as a loan to a sophisticated actor in the financial markets space", and the rest had been sold off for "operational costs". The loan of $52 million worth of ARB to an unnamed actor and the conversion of another $13 million to stablecoins led some to accuse the Arbitrum team of "selling off", cashing in far more than would likely be required for foundation costs in a brief period of time.

Dynasty Loop NFT games studio allegedly owes millions to employees

Dynasty Loop is a Montreal-based video games studio launched in 2020 to create NFT games. In March, gaming news outlet Polygon reported that the studio allegedly owed more than $2 million to its employees in unpaid wages and other expenses. Employees also told Polygon that they'd been asked to return equipment and couldn't access the office space, but that Dynasty Loop had told them they had not been laid off.

In April, four employees filed a lawsuit against the company, claiming around CAD$519,000 in unpaid wages.

Allbridge cross-chain bridge exploited for around $574,000

The Allbridge cross-chain bridge project was exploited for around 283,000 BUSD and 291,000 USDT (~$574,000). The thief was able to manipulate a vulnerability in the project's smart contract that allowed them to manipulate the price of assets in the Allbridge liquidity pool.

Allbridge announced that they were investigating the theft, and were working with law enforcement. Meanwhile, the project suspended operations and announced that they were preparing a user compensation plan.

Bittrex crypto exchange to close US operations

Bittrex, one of the oldest and largest cryptocurrency exchanges serving US customers, announced that it would be shuttering its US platform. "It's just not economically viable for us to continue to operate in the current U.S. regulatory and economic environment," explained CEO Ritchie Lai, who went on to blame "unclear" regulatory requirements that are "enforced without appropriate discussion or input". The exchange gave its customers until April 30 to withdraw their funds.

In October 2022, Bittrex was fined a combined $29 million by the US Office of Foreign Assets Control (OFAC) and the Financial Crimes Enforcement Network (FinCEN). The OFAC fine pertained to Bittrex's service of users based in Crimea, Cuba, Iran, Sudan, and Syria, who altogether performed $263 million in transactions using the platform. FinCEN's fine was imposed as a result of alleged "willful violations" of requirements around anti-money laundering and suspicious activity reports.

Bittrex will continue operations outside of the US, and currently operate in Europe, South America, and elsewhere.

Arbitrum airdrop plagued by downtime, bugs, and scams

A token airdrop from the popular Arbitrum Ethereum L2 illustrated many of the challenges with airdrops: events where tokens are automatically distributed to a group of crypto wallets, in this case based on how much they had used the platform. The tokens will ultimately be used for community voting on protocol changes, but also have value on the secondary market. Users were eager to snap them up, particularly as users speculated that the price could reach $10/token (as yet it has not, remaining around $1.38).

However, the airdrop had a bumpy start, with scammers latching on to the event to proliferate fake airdrop websites. Phishers reportedly scammed more than 10,000 people using these schemes. At one point, Twitter even suspended the real Arbitrum Twitter account after mistaking it for one of the many phishing accounts. Attackers also compromised a Discord account belonging to an Arbitrum developer, using it to post a phishing link to the official Arbitrum Discord server.

Then, when the time for the airdrop came, the token claiming website crashed on the traffic, as did the Arbitrum block explorer. Those who were able to claim their tokens paid exorbitant gas fees, and some wallets attempting to estimate required gas fees malfunctioned, showing estimates in the billions of dollars.

Finally, the airdrop was widely gamed by people commandeering hacked vanity addresses to receive the airdrop tokens allocated to them, with at least $500,000 worth of tokens reportedly claimed by one attacker. Other attackers scrambled to compete with one another to claim tokens allocated to compromised wallets whose private keys had been shared publicly on Github and elsewhere, trying to be the first to siphon the funds. Two additional exploiters siphoned a combined total of more than 1 million ARB tokens from other wallets. One sold them for 713 ETH ($1.27 million); the other transferred the ARB tokens to other wallets.

US SEC shuts down Beaxy crypto exchange

The U.S. Securities and Exchange Commission charged the Beaxy crypto exchange and its executives for failing to register as a national securities exchange, broker, and clearing agency. They also added charges against Beaxy's founder, Artak Hamazaspyan, and his company for selling an unregulated security (the BXY token) and for misappropriating at least $900,000.

According to the SEC, the BXY token sale raised more than $8 million. At least $900,000 of that was misappropriated by Hamazaspyan, who used it for personal purposes, including gambling.

Some of the defendants agreed to permanent injunctions, and to pay fines of around $166,000 and disgorgement of around $62,800. The agreement also stipulates that the Beaxy platform shut down. The SEC announced they were continuing to litigate charges against Hamazaspyan for securities fraud and against Hamazaspyan and his company for the unregistered securities offering.

$8.9 million stolen from SafeMoon

If the pump-and-dump didn't get you, the liquidity pool compromise might have! Holders of the SafeMoon token were informed that the SafeMoon liquidity pool had been compromised, and $8.9 million had been stolen, after a code upgrade introduced a bug. The attacker was able to take advantage of the bug to artificially inflate the price of the SafeMoon token, then sell it to steal the erroneous "profit".

US CFTC sues Binance and CEO Changpeng Zhao

The US Commodity Futures Trading Commission (CFTC) filed charges against the crypto exchange Binance and its CEO Changpeng "CZ" Zhao for allegedly violating rules around trading and derivatives. Binance is the largest cryptocurrency exchange in the world.

The CFTC has alleged that "Binance has taken a calculated, phased approach to increase its United States presence despite publicly stating its purported intent to 'block' or 'restrict' customers located in the United States from accessing its platform... All the while, Binance, Zhao, and Lim, the platform's Chief Compliance Officer ('CCO'), have each known that Binance's solicitation of customers located in the United States subjected Binance to registration and regulatory requirements under U.S. law. But Binance, Zhao, and Lim have all chosen to ignore those requirements and undermined Binance's ineffective compliance program by taking steps to help customers evade Binance's access controls."

The CFTC is only one of several US groups looking into Binance, with the SEC also reportedly scrutinizing the exchange and the Department of Justice considering charges.

Kokomo Finance rug pulls

The Kokomo Finance project on the Optimism Ethereum layer-2 network rug pulled for $4.5 million in assets. The project positioned itself as a non-custodial lending platform.

After raising user funds, the project's creators drained its liquidity pools. They also convinced users to send funds to them with a technique known as "ice phishing". They then deleted their social media accounts and disappeared.

Latest Sotheby's NFT sale is decidedly tepid

A humanoid robot hangs suspended from cables attached to its back, pressing its hands against the side of the frame of the image"Eternity" by Anyma (attribution)
Despite Sotheby's estimates that the most popular piece in the "Oddly Satisfying" NFT collection would sell for €70,000–€100,000 ($75,500–$108,000), the "Eternity" NFT attained a highest bid of only €50,800 ($54,600). Altogether the full collection brought in $316,000, with 60% of the NFTs going for less than Sotheby's estimates. This is a marked change from the barn burner NFT sales at Sotheby's in 2021, including one in which a CryptoPunks NFT sold for $11.8 million.

It seems perhaps even Sotheby's prestige is not sufficient to overcome the NFT downturn.

No JavaScript? That's cool too! Check out the Web 1.0 version of the site to see more entries.