GMETA rug pulls for $3.6 million
The GMETA project on BNB Chain saw its price plummet to near zero as the project creators drained the funds from the project. The contract creator was able to transfer large amounts of the token and swap them for the Tether stablecoin, cashing out a total of around $3.6 million.
Feds seize tens of millions from Deltec Bank in connection to fake crypto investment schemes
Documents unsealed on July 17 reveal that the U.S. Secret Service performed multiple asset seizures on U.S. bank accounts controlled by Deltec Bank, a Bahamian bank with close ties to the crypto industry. Deltec is known for its ties to the Tether stablecoin, and it has also done business with FTX/Alameda.
According to the court filing, the Secret Service was authorized to seize up to $58.5 million after establishing there was probable cause for wire fraud, bank fraud, or money laundering. The affidavit describes "organized, international criminal money laundering syndicates operating cryptocurrency investment and other wire fraud scams" which allegedly fraudulently induced victims to "transfer money into shell companies, at which point the money underwent a series of transfers, generally ending overseas, designed to conceal the source, nature, ownership, and control of the funds".
The scheme reportedly involved fake crypto sites that tricked victims into depositing money under the belief that they were investing it. Like many such scams, the sites appeared to show victims' investments increasing in value, inducing them to deposit more funds. However, when they tried to withdraw, they found they could not.
Neopets shuts down its Neopets Metaverse project
After announcing a Neopets Metaverse project — complete with NFT collections and two different crypto tokens — in 2021, Neopets has announced they will be "transition[ing] away from the Neopets Metaverse game and redistribut[ing] those resources to the development of a game that we feel can better reflect our values and vision." The announcement came along with an announcement that the company had raised $4 million, and undergone a major change in leadership. They reassured their community that its new project, "World of Neopets", will not have any NFTs and "is NOT built on a crypto model".
The announcement referred to wanting to "design a game that's more in line with what the community has been asking for", a nod to the backlash from the Neopets community when the company decided to go web3. In September 2021, one of the most popular Neopets fan communities tweeted, "The Neopets community overwhelmingly rejects the new NFT cashgrab project. We're hard pressed finding someone outside of the NFT community that wants this."
Holders of Neopets NFTs seemed somewhat split on the announcement that the NFTs would remain tradable on secondary markets, but would not be incorporated into any game. Some described the project as a "rug", and were disappointed that the NFTs they'd purchased would never be useful in-game. "Once an NFT has no use, the price tends to tank", one person (accurately) remarked. Another commented that they'd always viewed the NFTs as little more than a collectible, and were satisfied with it never going beyond that.
Five men, including inspector in bankruptcy proceeding, charged with kidnapping "Crypto King" alleged scammer
Five men are facing charges for allegedly kidnapping, confining, and beating Aiden Pleterski, the young, self-proclaimed "Crypto King" accused of losing $35 million in investor funds. One of the men, Akil Heywood, reportedly lost $740,000 to Pleterski's scam, and had been named by other investors to be an inspector in the bankruptcy proceeding, a role where he was intended to represent the interests of other investors. Perhaps that's what he was trying to do when he allegedly helped the group of other men kidnap Pleterski, beat him, and force him to record a video explaining what happened to the funds.
As an inspector in the bankruptcy, Heywood would have had access to details from the investigation by the bankruptcy trustee. Heywood is, incidentally, also charged with threatening the trustee in an attempt to get him to pay out $2 million in crypto. Shortly before the alleged kidnapping, Pleterski stated in an interview for the bankruptcy proceedings that Heywood had been "still, by the way, uttering threats, and very dangerous, violent threats, to me over Instagram comment sections and text messages".
Heywood has told reporters he is innocent.
Hector Network begins shutdown after Multichain collapse
Hector DAO, the governing body behind the Hector Network, voted to liquidate the project's $16 million treasury and distribute it to tokenholders, effectively putting an end to the project.
On July 14, a community manager wrote on Discord that "Hector Network ha[d] suffered significant damage to its ability to operate" after the Multichain collapse, and that the project faced a choice between liquidating the treasury and winding down or migrating to a new blockchain and trying to rebuild. The community chose the former.
According to a post on Discord, the winding-down process will likely take 6 to 12 months as the project appoints a liquidator, legal counsel, and auditor.
Scammer "Soup" makes more than $1 million through Discord hacks
A Canadian named Dan, who goes by "Soup" online, made more than $1 million through various phishing scams targeting Discord projects including those belonging to the Pika Protocol and Orbiter Finance. In one scam, he impersonated crypto journalist Luke Hamilton, trying to convince victims to join a fake Decrypt Discord server so he could steal their credentials.
Soup was exposed by crypto sleuth zachxbt, who also described how the scammer had spent some of his ill-gotten funds on exclusive Roblox items that sell for "high 5 figs".
Geist Finance shuts down after Multichain-related losses
Defi lending project Geist Finance announced they would be shutting down after more than $200 million was drained from the Multichain project in two separate events in early July. Geist Finance had previously allowed people to borrow against assets bridged via Multichain, and had over $29 million TVL. However, price oracles are no longer reporting accurate prices of the bridged equivalents of tokens, which are now largely unbacked thanks to the missing assets, and trading at a massive discount to the original tokens.
Geist paused their smart contracts on July 6, then reenabled the withdraw and repay functions on July 9, while waiting for news from Multichain. Now that Multichain has confirmed that the missing hundreds of millions will not be recovered, Geist has announced they will not reopen. If they were to do so, the platform would almost immediately take on bad debt as people exploited the price discrepancies.
Multichain added, "Just to be clear this is in no way an attempt to blame Chainlink oracles which worked as they should. There are no oracles for the Multichain assets themselves because there was the expectation to exchange them 1:1. Nobody is to blame except Multichain here."
Multichain finally confirms their CEO was arrested in China
After a months-long saga involving "stuck" transactions, Multichain announcing they couldn't get in contact with their CEO, rumors that the whole team was arrested, and several suspicious transactions of more than $100 million each, Multichain has finally announced that their CEO — known only as Zhaojun — was arrested on May 21. According to the project, all of his devices, hardware wallets, and mnemonic phrases were taken by Chinese police during the arrest. "Since the inception of the project, all operational funds and investments from investors have been under Zhaojun's control. This also means that all the team's funds and access to the servers are with Zhaojun and the police," they wrote.
The Multichain project claimed in a lengthy Twitter thread that the team attempted to keep the project running by using stored credentials on Zhaojun's home computer, thanks to access provided by his sister. However, they say that the July 6–7 movement of $130 million out of the project was an "abnormal" transfer by an unknown party. They claim that the July 9–10 transfer of around $107 million was his sister attempting to preserve assets by moving them into wallets she controlled. According to the team, his sister also was arrested on July 13, and "the status of the assets she has preserved is uncertain".
"Due to the lack of alternative sources of information and corresponding operational funds, the team is forced to cease operations," they wrote. They also claimed that they don't have control over the domain pointing to the frontend of the project, and so are unable to take the project offline, and resorted to pleading with GoDaddy for help in doing so.
"Honestly he deserves jail for this level of cryptography incompetence alone," wrote crypto personality 0xfoobar on Twitter.
SEC, CFTC, and FTC sue Celsius; CEO Alex Mashinsky arrested
A multi-agency hammer came down on the bankrupt cryptocurrency lender and alleged Ponzi scheme that was Celsius. The co-founder and former CEO of the company, Alex Mashinsky, was arrested and charged with seven counts including securities and commodities fraud, wire fraud, and conspiracy to manipulate the price of Celsius' CEL token. The indictment also named Roni Cohen-Pavon, Celsius' former Chief Revenue Officer.
Alongside the indictment from the DOJ, the Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), and Federal Trade Commission (FTC) each filed their own separate lawsuits against Mashinsky and Celsius.
These latest lawsuits join an existing lawsuit, filed in January 2023, against Mashinsky by the New York Attorney General.
Digitex Futures CEO to pay $15 million over commodities violations
Adam Todd, the CEO of the Digitex Futures exchange, has been ordered to pay $3.9 million in disgorgement and $11.7 million in penalties. The Commodity Futures Trading Commission won a default judgment against him in their lawsuit alleging violations of the Commodity Exchange Act, including failing to register as a derivatives exchange, attempting to manipulate the price of the DGTX token, and failing to implement proper KYC and anti-money laundering programs.
According to Todd in a YouTube video, "We do not need to do KYC. [...] You should not have to give them because the U.S. government or whatever other [expletive] government in the world says that you need to. You do not need to. You just do not." Well, in that case.
Todd was also accused of trying to artificially inflate the price of the DGTX token by buying it on third-party exchanges, writing out his plans in excruciating detail with a customer who provided him funds to use on pumping the token.