According to India's ED, 23 entities deposited Rs 370 crore (~$46.5 million) into FlipVolt, which the ED says were the proceeds of criminal activity. FlipVolt had "very lax KYC norms, no EDD [enhanced due diligence] mechanism, no check on the source of funds of the depositors, no mechanism of raising STRs [suspicious transaction reports], etc" and reportedly enabled the entities to launder the proceeds of crimes via the exchange.
India freezes assets of FlipVolt, Vauld's Indian exchange
India's Enforcement Directorate froze $46.5 million of assets belonging to FlipVolt, the Indian branch of the Vauld cryptocurrency exchange. Vauld had previously filed for protection from creditors — a process in Singapore that is similar to Chapter 11 bankruptcy in the U.S. — on July 8, only four days after suspending withdrawals. Vauld subsequently announced a shortfall of around $70 million due to the Terra collapse and other factors, and reportedly owes creditors $363 million.
Martin Shkreli dumps his project's token in "hack"
I've almost got to give it to him. When I wrote up Druglike, Martin "Pharma Bro" Shkreli's new "web3" project for drug discovery, and asked him some questions in the project Discord, I expected him to run into issues with the fact that he's trying to build a pharmaceutical software platform after being banned from the pharma business. But he seems to have exceeded my high expectations for this grift, pulling off a scam even before anything got off the ground.
The value of $MSI, Martin Shkreli Inu (really), plummeted 90% from $0.000014 to a mere $0.0000014 when a wallet owned by Shkreli suddenly dumped its tokens. The MSI token originally was a fan-made token, but Shkreli adopted it as the token "powering" Druglike (despite zero information as to how it's actually used to power the project). The MSI were swapped for 239 ETH (~$459,000).
Shkreli claimed via his Twitter persona "Enrique Hernandez" that "I got hacked last night." (Shkreli was banned from Twitter after being creepy to a journalist, and so now uses the thinnest of veiled identities to somehow evade Twitter suspension). Shkreli claimed that when he had tried to torrent a file called, no joke, [BigTitsRoundAsses] 17.12.14 - Jazmyn [1080p], he ended up with a remote access trojan. However, crypto research project Rug Pull Finder tweeted, "Bruh - why is the attackers wallet funded by you then".
Suspected Tornado Cash developer arrested in the Netherlands
A suspected developer of the Tornado Cash cryptocurrency tumbler was arrested in the Netherlands, according to the country's Fiscal Information and Investigation Service (FIOD). They said that he was "suspected of involvement in concealing criminal financial flows and facilitating money laundering". Wallet addresses used by Tornado Cash were sanctioned by the United States several days prior due to their use in laundering the proceeds of criminal activities.
It's not immediately clear from the statement whether the activities that led to the arrest involved more than just contributing to the Tornado Cash codebase, but it would be very concerning if not. There are complexities around the sanctioning of Tornado Cash — a fairly decentralized software project — that raise concerns about the criminalization of code. For many, it brings to mind the "Crypto Wars" (where "crypto" is referring to cryptography rather than cryptocurrency).
The largest Ethereum miner starts blocking Tornado transactions
The Ethermine mining pool is responsible for over a quarter of all Ethereum mining, making them the largest miner for that blockchain. On August 11, three days after OFAC added the project to its sanctions list, Ethermine stopped including Tornado Cash transactions in their blocks.
This came as a shock to some crypto enthusiasts, who were taken aback that such a large number of blocks in a "decentralized" and "censorship-resistant" project would reject Tornado Cash transactions. Others worried that more miners would do the same, which could eventually prevent Tornado Cash transactions from being validated at all.
Game studio pauses development on their game after sinking Kickstarter funds into crypto
Over 3,000 backers put a combined ~NZ$841,000 (~US$535,000) into Untamed Isles, a Pokémon-like MMORPG. Although the developers did eventually plan to add optional crypto elements for players who wanted them, it was not primarily a crypto game.
On August 11, about a year after the Kickstarter launched, the creators posted an update: they would be pausing development and putting the project on hold because they had run out of money. "We leaned into the crypto market and expanded rapidly off the back of the positive interest. When the crash came, we ended up heavily exposed with too short of a runway."
Project backers were not impressed by this announcement, with many asking for refunds — which the developers had promised if the game never launched. However, the game developers wrote that "Due to our cash reserves being empty, we are not in a position to refund our initial backers."
"Really disappointed by this- I put money into funding this game to back a game, not to throw money into the crypto market," wrote one backer. "Gutted and to be honest pretty appalled," wrote another.
- Announcement by Untamed Isles
Mailchimp bans a slew of crypto companies according to their no-crypto policy
The email marketing company Mailchimp reportedly suspended accounts belonging to several prominent companies and individuals in the crypto sphere, including crypto analytics tool Messari, blog Decrypt, wallet provider Edge, NFT artist Jesse Friedland, and the founder of the Cryptoon Goonz NFT collection.
Daniel Roberts, CEO of Decrypt, wrote on Twitter that they had used Mailchimp for more than four years, but that the company had "deactivated our newsletter account with no warning or explanation".
Mailchimp's acceptable use policy bans businesses offering "Cryptocurrencies, virtual currencies, and any digital assets related to an Initial Coin Offering". It's listed among other industries that they identify as having "higher-than-average abuse complaints, which can jeopardize deliverability" including work-at-home scams, make money online, and lead generation opportunities; gambling services or products; and multi-level or affiliate marketing. In an email reportedly sent to Friedland regarding his suspension, Mailchimp wrote, "We cannot allow businesses involved in the sale, transaction, trading, exchange, storage, marketing, or production of cryptocurrencies, virtual currencies and any digital assets."
In April, Mailchimp had experienced a security breach in which audience data was taken from around 100 accounts in finance and crypto-related industries.
OpenSea changes its policy, requires a police report to freeze NFTs
The dominant NFT platform, OpenSea, has changed its policy around NFTs that are reported as stolen. OpenSea now requires those who have reported an NFT as stolen to produce a police report within seven days, or else they will re-enable trading of the asset.
Some have praised the change as a good step towards preventing false reports, whereas others have complained that the change does not apply retroactively to assets that have already been frozen from trading on the platform. Others have raised concerns about the new requirement that they engage with police.
Coinbase stopped sending price notifications during crypto crash
Mother Jones has reported that the Coinbase crypto exchange stopped sending the email notifications that it had previously sent some users when the price of a cryptocurrency changed noticeably. Coinbase had been trialling these price change alerts in January, and some users had grown to rely on them to notify them when cryptocurrency prices changed noticeably. However, the company quietly stopped sending these emails sometime in February, before they were re-enabled for all users.
While the choice could be chalked up to the end of an A/B test, some legal experts have expressed concern about the sudden and unannounced change in behavior: "It's potentially illegal... This seems straight up deceptive. They said we'll email you price alerts and then stopped doing it without saying they were [going to stop]." He also noted that even if a customer didn't sue for damages, depending on the number of users who saw the alerts, "if they caused harm to people who didn't sell crypto that they would have sold, that is potentially actionable by regulators." Another expert observed that a traditional brokerage firm would likely be penalized by FINRA if they did something similar.
Celsius CEO Alex Mashinsky reportedly sells off some of his $CEL holdings during price increase and attempted short squeeze
A wallet identified as belonging to Celsius CEO Alex Mashinsky sold off 17,475 CEL (the native token of the Celsius lending platform) for around $28,000. Celsius is undergoing bankruptcy proceedings, and users remain without access to their cryptocurrency that's locked in the platform.
CEL enjoyed an all-time-high of around $8 in June 2021, but has been trading for less than half that for this year. The token hit $0.15 on the day Celsius announced they would be pausing withdrawals, but has, oddly, recently spiked above $2. Some have attributed this to the ill-advised attempts at a short squeeze by a group of people who believe that exchanges are somehow running out of CEL tokens to provide to short-sellers, and that a properly-coordinated short squeeze could somehow realistically send the token to $100. Protos did a useful explainer on why this is unlikely to work, but those pushing the idea have a fervency not unlike what was seen with those pushing the GameStop short squeeze, and enjoy dismissing those who question the strategy as "CEL shorters" who are trying to ruin any chance of a Celsius recovery.
All the same, Mashinsky can possibly thank the short squeeze folks for helping him pump his bags, and sell off a pile of tokens for over 10x more than what he previously could have.
Analytics firm Elliptic says RenBridge has been used to launder more than $540 million in proceeds from crimes over the last two years
Two days after OFAC sanctioned crypto tumbler Tornado Cash, the blockchain analytics firm Elliptic pointed to cryptocurrency bridges as a likely future target for sanctions if the Treasury Department continues its attempts to crack down on crypto money laundering. In addition to their purpose of allowing different currencies to be used cross-chain, cryptocurrency bridges are a useful tool for obscuring the path of cryptocurrencies, as it can be difficult for outside observers to link cryptocurrencies flowing into a bridge with the destination wallet(s) on the other end.
Elliptic singled out the RenBridge chain in particular, saying that at least $540 million in funds linked to crimes have been moved through the bridge in the last two years. $153 million of this, they say, originated from ransomware plots, and $53 million is allegedly linked to the Russia-based group behind the Conti ransomware.