Web3 is Going Just Great

On July 6, an attorney posted in the project's Discord server to say that BarnBridge and "individuals associated with the DAO" were under investigation by the U.S. Securities and Exchange Commission. The attorney wrote: "To reduce potential further legal liability, existing liquidity pools should be closed, and no more liquidity pools should be started. All work on Barnbridge related products should stop, and individuals should no longer be compensated for any work they do related to Barnbridge until further notice." Decentralized!

It's not terribly surprising that BarnBridge chose to drop the facade of decentralization when the SEC came knocking, however. A recent case by the CFTC against the Ooki DAO suggests that the mere veil of "decentralization" will not be sufficient to avoid legal liability for the actions of a DAO. However, it is interesting to see the SEC now (at least allegedly) going after a relatively small player in the defi world.

So anyway, that's exactly what happened. NFTPerp announced that they would be sunsetting their popular beta project after accruing bad debt.

How they're going about it has been controversial among the successful traders on the platform: essentially, those who were in profit will lose their unrealized gains, while those who had lost money in their trades will have their losses waived. "Nftperp stealing profits from winner [unrealized profit and loss] to backstop losers UPNL is insane to me", wrote one commenter. Another wrote, "If anyone else is considering NFT perps, please have the 'what happens when the illiquid market goes to zero overnight' plans clearly in place from the beginning."

Not to be deterred, the team is already preparing to launch a "v2". May it go as well as their first attempt.

However, shortly after the DAO was created, the governance token was exploited. Attackers were able to take advantage of a flaw in the smart contract, with two exploiters stealing around 35 ETH (~$69,000). The DAO paused the contract to prevent further thefts.

File this one under "adding insult to injury".

Now, it's happened again, and some reports are throwing around even more massive numbers like $42 billion. In reality, the exploiters were able to mint massive quantities of tokens on multiple networks, with their wallet balances showing numbers in the billions. However, complete lack of liquidity for these tokens meant their "billions" are worth substantially less.

According to crypto research firm Beosin, the attackers have so far cashed out around 5,196 ETH (~$10.1 million) in liquid assets. Poly Network suspended services shortly after the attack.

According to Phillips, it took months before he was able to get in touch with Huobi and convince them to act on the leak. Phillips first notified Huobi of the leak in June 2022, and after repeated efforts to contact the company, the credentials were only revoked in June 2023.

Huobi has tried to downplay the hack, first stating that the user data leak was "on a small scale (4,960 individuals)" and "does not involve sensitive information and does not affect user accounts and fund security". They also claimed the leaked OTC data was test data. "The log shows that only [Phillips] has downloaded, and [Phillips] has also stated that he has deleted. Therefore no leakage is actually caused," they wrote.

According to CoinGecko, Huobi is the seventeenth-largest cryptocurrency exchange by volume.