Now, Hong Kong police have arrested Liang Haoming and Thor Chan, two executives connected to AAX. Police have reportedly accused the men of using the maintenance excuse to halt customer withdrawals while dealing with a liquidity crisis.
Police arrest two executives of shuttered AAX exchange
The Hong Kong-headquartered AAX cryptocurrency exchange suddenly halted withdrawals on November 13, claiming they were performing temporary system maintenance. However, withdrawals were never re-enabled, and customers quickly realized the exchange was unlikely to resume withdrawals. Some even began searching for the whereabouts of AAX execs, showing up at offices in Hong Kong and Singapore.
- "2 executives of crypto exchange AAX arrested in Hong Kong: Report", CoinTelegraph
- "虛擬貨幣交易平台AAX倒閉 警拘兩男涉欺詐 主腦捲2.3億潛逃海外", 香港01 (in Chinese)
Defrost Finance fails to rug pull
Defrost Finance, a defi trading platform built on the Avalanche Network, apparently tried and failed to rug pull its users. The project claimed on December 23 that they were "sad to announce that our V2 has suffered a hack, with an attacker using a flash loan function to withdraw funds". They later announced that this "hacker" had also managed to exploit the v1 version of their project. Altogether, it appeared that tokens valued at around $12 million had been stolen.
Observers were quick to notice that the "hack" was made possible by the addition of a fake collateral token, which was then manipulated to liquidate the protocol's users, suggesting the "hack" was likely an inside job.
On December 26, Defrost claimed that the "hacker" had miraculously returned the money. The announcement didn't seem to convince the project's users, who left comments like, "It was never hacked. You tried to rug your users".
Defrost Finance's team had previously run a project called FinNexus, which also suffered a "hack" in May 2021 that was widely believed to have been a rug pull.
The latest Pokémon knockoff is stopped in court
Knock-off Pokémon crypto products — including NFTs and blockchain games — have been so prevalent in the past two years that they've earned their own collection on this blog.
Now, it seems that The Pokémon Company International (TPCI) is doing something about it. They hired private investigators to try to locate and serve a company called Kotiota with legal papers, though ultimately were unsuccessful in finding their offices or any employees.
Kotiota was engaged in unusually brazen Pokéfraud, sending legal letters to news outlets who had written about the real Pokémon games and insisting they be named as a developer. Their website falsely claimed Kotiota had been working on various recent Pokémon games, and the company had even forged an agreement with TPCI to claim they had a license agreement.
Kotiota had been planning to release a Pokémon-based play-to-earn blockchain game and collection of NFTs in January 2023, but an Australian court has barred the company from doing so, and ordered them to stop using the Pokémon brand or claiming to have developed the games.
FTX executives Caroline Ellison and Gary Wang plead guilty to criminal charges, are cooperating with investigation
Two of Sam Bankman-Fried's inner circle, Caroline Ellison and Gary Wang, have pled guilty to federal criminal charges and are cooperating in the case against Sam Bankman-Fried. Ellison was the CEO of Alameda Research, the trading firm founded by Sam Bankman-Fried in 2017. Wang was a co-founder of FTX alongside Bankman-Fried, and served as its CTO.
Ellison's and Wang's pleas were announced in a short message by U.S. Attorney Damian Williams, who did not elaborate on what the charges were. He again urged any others who had knowledge of criminal activity at FTX to come forward, and warned that these were not the last charges he expected to file.
Simultaneously with the charges from the Justice Department were civil complaints from the Securities and Exchange Commission, which alleged that both had been involved "in a multiyear scheme to defraud equity investors in FTX". In particular, the SEC accused Ellison of artificially manipulating the price of FTT, the FTX-issued token that formed a large portion of Alameda's balance sheet. The SEC accused Wang of creating a backdoor in FTX software that allowed Alameda to move customer funds from FTX for use in its trading activities.
The CFTC filed an amendment to their complaint against Sam Bankman-Fried, adding Ellison and Wang as defendants.
- Announcement from the U.S. Attorney's Office for the Southern District of New York
- "Two Executives in Sam Bankman-Fried's Crypto Empire Plead Guilty to Fraud", The New York Times
- "TECH FTX’s Gary Wang, Alameda’s Caroline Ellison plead guilty to federal charges, cooperating with prosecutors", CNBC
Paxful crypto marketplace delists ether, citing "scams that have robbed people of billions"
Peer-to-peer crypto marketplace Paxful announced that it will be delisting ether, citing "scams that have robbed people of billions".
So close. You're almost there.
Paxful CEO Ray Youssef said in an email to the platform's claimed 11.6 million customers that the decision was based on Ethereum moving from proof-of-work to proof-of-stake, not being decentralized, and spawning an ecosystem of scammy Ethereum-based altcoins. The email featured a header photo of Youssef himself posing triumphantly, and Youssef spent much of the subsequent day tweeting memes he made from pictures of himself.
With the loss of ether, the platform will only allow swaps of Bitcoin, Tether (USDT), and USDC — despite both Tether and USDC being Ethereum-based tokens.
Swan Bitcoin releases a new product to streamline the process of losing your house speculating on Bitcoin
"Convert home equity into Bitcoin", Swan Bitcoin advertises with their new home equity product. Relatively few details are available on the new loan product they're offering, but they advertise that you can close on the loan in "as little as 5 days", obtain loans with no income or credit check, and obtain loan amounts from $20,000 to over $1 million. What could go wrong?
"Rates starting at 7.5%, with 80% Bitcoin upside appreciation", they say. Downside risk is, naturally, not mentioned.
For those unfamiliar, Swan Bitcoin is a US-based Bitcoin-only crypto platform (although CEO Klippsten would surely yell at me for saying it is a "crypto platform", as he insists at every opportunity that "Bitcoin is not crypto").
Core Scientific Bitcoin mining firm files for bankruptcy
Core Scientific warned in October that it was teetering on the edge of bankruptcy, so it was no huge surprise when the company filed for bankruptcy protection on December 21. Core Scientific is one of the largest Bitcoin miners, responsible for around 10% of the computing power on the Bitcoin blockchain. The company operates around 143,000 miners, and host an additional 100,000.
Core Scientific is only one of many Bitcoin miners in distress, as low Bitcoin prices and other factors make mining much less profitable. Other mining firms, including Argo Blockchain and Greenidge Generation, have warned that they may face bankruptcy in the near future. Some firms, such as Iris Energy, have powered off a significant amount of their mining capacity.
Auros files for bankruptcy
Crypto market maker Auros filed for bankruptcy protection in the British Virgin Islands, not long after a missed loan repayment to the Maple defi lender in late November signaled something was amiss. At the time, Auros attributed the missed payment of 2,400 wETH (valued at ~$3 million at the time) to a "short-term liquidity issue as a result of the FTX insolvency".
Now, however, Auros is seeking a "light touch" liquidation path that would allow them to continue operations while they develop a restructuring plan. Meanwhile, they have missed another Maple loan repayment, this time for $7.5 million.
Court filings have revealed that "a significant proportion of the Company's assets" are frozen with FTX, leaving the company insolvent. These assets have an estimated value of $20 million.
Waves founder announces a new, "undepeggable" stablecoin as USDN even more dramatically de-pegs
Apparently adopting Do Kwon's belief that the solution to a crashing algorithmic stablecoin project is creating another project, Waves founder Sasha Ivanov has announced, "I will launch a new stable coin". This comes after Neutrino USD — aka USDN — has spent much of the year de-pegged, recently plunging dramatically to around $0.50.
The USDN stablecoin remained within a few cents of its intended USD peg for about a year, before losing its peg in April. Since then, it has had a pretty bumpy road, spending much of the year more than a few cents off the dollar peg, and dropping much farther below it in early November.
A less-than-enthused commenter responded to Ivanov's Twitter announcement of a new coin, writing, "My brother in Christ more stablecoins to depeg is not the answer". "It will be undepeggable", replied Ivanov. Well, in that case.
Scammer steals fourteen Bored Apes from one victim, flips them for over $1 million
A scammer spent a month setting up a con in which they stole fourteen Bored Ape NFTs belonging to one individual. Posing as a casting director at a real film production company—complete with a fake website, a fake partner company, and fake individuals pretending to have signed deals with the company—a scammer was able to convince the collector that they were interested in paying $13,000–$17,000 to license a Bored Ape for use in an animation.
After some back-and-forth, with legitimate-looking contracts and falsified emails appearing to come from the real company's real founding director, the NFT collector was asked to use their crypto wallet to sign a contract, via the fake company partner website that had been set up.
When the collector did so, the smart contract drained the collector's wallet of its fourteen pricey Bored Ape NFTs, then accepted the highest offers that were outstanding on each of the Bored Apes, netting 852.9 ETH. The scammer converted the stolen ETH to the DAI stablecoin, making off with $1,075,000 in DAI.