Although Kraken argued against the order, describing it as an "unjustified treasure hunt", the judge determined that the IRS was justified in its request, and ordered Kraken to cough up the records. The IRS alleged that although the exchange has more than 4 million users, and has processed $140 billion in trades since its inception in 2011, only 288,330 of those users have filed tax returns.
Kraken ordered to turn over user information to U.S. tax investigators
Bad news for wealthy crypto traders on Kraken, who previously might have hoped to evade paying taxes on their past crypto trades. A judge has ordered the exchange to turn over information to the U.S. Internal Revenue Service on users who engaged in at least $20,000 in trades in any year between 2016 and 2020.
Huobi patches massive vulnerability after researcher allegedly tries for a year to disclose it
After the Huobi crypto exchange (finally) fixed a massive vulnerability, researcher Aaron Phillips published a blog post explaining what he had found. According to Phillips, two years ago, the exchange accidentally published a file containing Amazon Web Services (AWS) credentials, which could have allowed a bad actor to modify content on their websites and in their CDN, distribute malicious versions of their Android app, access user data and "whale reports" on high-value users, access OTC trade records and user data for OTC traders, and "carry out the largest crypto theft in history". "I had full control over data from almost every aspect of Huobi's business," wrote Phillips.
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.
Cardinal Labs shuts down
A little less than a year after raising $4.4 million in seed funding to build a Solana NFT protocol that allowed for NFT rentals and other such things, Cardinal Labs has announced they're shutting down.
"Product market fit continues to be difficult to find, and the reality is that members of our team are feeling the itch to explore other pursuits," they wrote. "We’d hoped that by now the rest of the world’s industries would have begun adopting blockchain tech at a larger scale, but that still feels a ways away."
Azuki community pays $38 million for recycled artwork that immediately drops in value
The blue-chip "Azuki" NFT brand opened sales on June 27 for its latest NFT collection, a 20,000-piece project called "Elementals". Eager to get in on the Azuki action, people snapped up the 2 ETH (~$3,750) NFTs, netting Azuki 20,000 ETH (~$38 million) in primary sales alone. All NFTs were sold in the presale, meaning only existing holders of Azuki NFTs were able to buy in to the new project. As is somewhat common, the artwork itself was not visible prior to sales, meaning people bought the NFTs without knowing what they would look like until the art was revealed.
The mint itself was plagued with issues, with many collectors complaining they weren't able to buy NFTs due to technical difficulties. A team member apologized for the issues, writing that they were "gutted over what happened" but that "we have an amazing reveal experienced planned that will kick off soon".
When the reveal happened, people were disappointed to say the least. They expected a unique look that would not "dilute" the value of the original Azuki collection, and were met with what many feel is a low-effort clone of the original Azukis. Some observed NFTs in the Elementals collection that appeared to be direct duplicates of ones in the original collection, which Azuki later wrote was a "technical glitch" that was quickly corrected. The floor price of the Elemental NFTs, as well as those of other Azuki projects, immediately suffered. While people paid 2 ETH for the NFTs, they're now going for 1.5 ETH (~$2,825) at floor, a 0.5 ETH (~$925) loss. The floor price of the original Azuki collection tanked from ~15 ETH (~$28,200) to ~9 ETH (~$16,920), a 6 ETH ($11,280) loss.
Azuki wrote an apologetic thread on Twitter, writing that they had "missed the mark... the mint process was hectic, the PFPs feel similar and, even worse, dilutive to Azuki." Perhaps they will wipe their tears with some of the 20,000 ETH they're sitting on.
Themis Protocol hacked shortly after going live
Themis Protocol is a lending platform that has had somewhat of an excruciating rollout, with users waiting ever longer for the platform to finally go live as they endured multiphased airdrops but no usable product. On June 16, the project finally launched in beta on Arbitrum, an Ethereum layer 2.
Only eleven days later, on June 27, the team boasted that the project "has grown to over $1m TVL in 2 working days". An hour after that, they announced that they would be suspending the protocol and beginning an immediate investigation into an apparent theft. Themis boasts in its documentation that "security is the highest priority" of the project, and lists multiple audits from PeckShield.
An attacker was apparently able to exploit the project, draining around 220 Themis-wrapped ETH (nominally worth ~$417,000). Due to liquidity issues, they could only swap these for around 94 ETH (~$178,000) and almost $190,000 in stablecoins, for a total haul of around $368,000.
Chibi Finance rug pulls for $1 million
Chibi Finance was a defi project built on the Arbitrum Ethereum layer 2 network. Its Twitter bio described the project as "ChibiVerse For Chads, by Chibis. Compound dem yields!" What's not to love.
On June 27, the developers set the governance role to a malicious smart contract, which used a "panic" function to withdraw funds from the Chibi project. They then quickly swapped the funds to 555 wETH (~$1.05 million), bridged them to the Ethereum main chain, and laundered them through Tornado Cash.
Chibi Finance has since deleted its website and Twitter profile. Meanwhile, some crypto influencers who had promoted the project caught heat for doing so.
Prime Trust placed into receivership
Nevada's Financial Institutions Division and the Prime Trust crypto custodian requested that Prime Trust be placed into receivership, according to the NFID. A week earlier, the NFID had issued a cease and desist, ordering Prime Trust to halt operations and alleging that the company was insolvent.
In the filing, NFID alleges that Prime Trust discovered in December 2021 that it couldn't access some customer wallets, and so "purchased additional digital currency using customer money from its omnibus customer accounts" in order to satisfy withdrawals from said wallets.
Prime Trust reportedly has liabilities of around $82.8 million in fiat currency, plus another $860,000 of digital asset-denominated liabilities. "[Prime Trust] is in an unsafe financial condition and/or is insolvent. Additionally, [Prime Trust's] condition will only progressively worsen as customers continue to withdraw," wrote the regulator.
Eco-travel company We Are Bamboo loses millions of customer funds gambling on crypto
New Zealand-based We Are Bamboo may have been an ethical travel company, but they certainly weren't an ethical handler of customer funds. In late October 2022, the company abruptly announced it would be closing up its eco-travel business — without refunding customer funds due to the force majeure clause of the contract.
Now, a report from the New Zealand Herald suggests that the company's director Colin Salisbury took more than NZ$3.24 million (~US$2 million) in customer funds, put it into multiple cryptocurrency platforms over a period of almost two years, and lost it all. Another ~US$800,000 was lost in at least four fraudulent crypto platforms which just "ceased to exist".
We Are Bamboo tried to blame the collapse of their business on the COVID-19 pandemic and on a group of customers whose "actions and online influence have broken us". "Our intentions here are not to play the victim but simply share with you the levels to which this group has gone to ensure our downfall, and made it their sole purpose to attack us, our families, our staff, and our customers with the intent to destroy Bamboo," they wrote. However, a liquidator in the We Are Bamboo bankruptcy says they discovered the cryptocurrency transactions, which explained the true demise of the company.
Salisbury reportedly engaged in the crypto trading because he was concerned that the US dollar might lose value. Guess he found out the hard way what crypto could do for the value of his customers' funds.
Former NRL star and convict Jarryd Hayne reportedly loses more than $500,000 to a Bitcoin scam run by fellow inmate
Quick tip: if you're in jail and a fellow inmate who is serving twelve years for running a Ponzi scheme asks you to invest in a Bitcoin scheme, don't do it. Then again, on the list of "things Jarryd Hayne shouldn't have done", this ranks fairly low.
Jarryd Hayne is a convicted rapist once known for his careers in rugby league and, briefly, American football. He's serving several years in jail, after being convicted of rape, winning an appeal, being retried, and once again being found guilty.
Hayne is one of several inmates apparently convinced by the Ponzi schemer inmate, Ishan Seenar Sappidee, that he could make them massive returns. Hayne provided around AU$780,000 (~US$521,000) in Bitcoin to the enterprising inmate, who apparently amassed more than AU$2 million (~US$1.3 million)from at least seven inmates.
Alleged SpireBit crypto scam loses one senior his life savings
According to a report from NPR, a crypto investment scam called SpireBit drained the life savings of a 74-year-old man in California. The scheme followed a familiar pattern: an online ad followed by some personalized recruiting convinced the man to put a relatively modest sum into an online account with a platform supposedly showing his crypto investments. After seeing those investments skyrocket, the man was convinced to put in more and more money, seeing massive returns. Only once he had put in his life savings did he try to withdraw, and discovered he could not. Ultimately, he realized the platform was a sham.
SpireBit claimed to be partnered with established companies within and outside of the crypto ecosystem, and took on the name of a real company as its supposed "parent" firm. Its online footprint was convincing at a glance, but a little digging revealed LinkedIn profiles using stock photos as portraits.
After NPR began poking around, the UK's Financial Conduct Authority issued a warning that SpireBit "is an unauthorised firm that uses the details of a genuine FCA-regulated firm when offering products and services. This makes the unauthorised firm appear as if it is regulated."
NPR could not determine how many people had fallen for the scheme, or how much money had been lost in total.