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Web3 is Going Just Great

...and is definitely not an enormous grift that's pouring lighter fluid on our already smoldering planet.

Created by Molly White. Subscribe to her newsletter for weekly recaps.

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Prime Trust is insolvent

The Nevada Financial Institutions Division issued a cease and desist to the Prime Trust crypto custodian. Earlier in the month, the apparently embattled Prime Trust signed a non-binding letter of intent of acquisition with BitGo, but BitGo announced the deal was off on June 22. The same day, Stably announced that they had received a letter from Prime Trust announcing that deposits and withdrawals would be halted, which attributed the move to an order from the NFID.

Now, the cease and desist, filed June 21, has become public. It alleges that "the overall financial condition of [Prime Trust] has considerably deteriorated to a critically deficient level" and that "On or about June 21, 2023, Respondent was unable to honor customer withdrawals due to a shortfall of customer funds". The NFID alleged that Prime Trust "has materially and willfully breached its fiduciary duties to its customers by failing to safeguard assets under its custody and is unable to meet all customer disbursement requests."

Prime Trust had been a partner of the TrueUSD stablecoin, which halted minting on June 10 for undisclosed reasons.

Theme tags: Collapse, Law

Prime Trust halts withdrawals as acquisition falls through

The planned acquisition by BitGo of the Prime Trust crypto custodian fell through on June 22, as BitGo announced that they had "made the hard decision to terminate its acquisition" after "considerable effort and work to find a path forward". BitGo had announced its intention to acquire Prime Trust on June 8.

Shortly after BitGo's announcement, Prime Trust client Stably announced that they had received a letter from Prime Trust announcing that deposits and withdrawals would be halted. Prime Trust stated that the halt was by order of the Nevada Financial Institution Division, which had been issued the previous day.

Theme tags: Collapse, Law

Web3 influencer Elena tries to sell NFT collection of stolen art

Pixel art of three test tubes containing green, pink, and gold liquid on a dark purple background. On the right is a screenshot of identical pixel art from vecteezy.com Atomic Ordinals NFT on left; source of stolen artwork on right (attribution)
Web3 influencer Elena announced she would be launching an NFT collection titled "Atomic Ordinals", which would be inscribed on the Bitcoin blockchain. She claimed that the 200 images "fus[ed] my love for medicine and artistic expression fueled by a passion for emerging tech and education." She wrote, "I've spent countless hours pouring my heart and soul into each piece đŸ„ș" The NFTs were set to mint for 0.05 BTC, meaning the collection would have earned her around 10 BTC ($300,000) if it minted out.

As it turned out, Elena had actually directly copied the pixel art from various sources. When accused of copying it, she published a screen capture video claiming to show that she had created the artwork "pixel by pixel", but people were quickly able to find the true sources of the artwork.

Eventually, she came as close to an admission as she is apparently going to get in an announcement that she would be pausing the sale: "I have heard your concerns about the art and I will be working to fix the file quality and any images that might be seen as 'copied' as they were only retraces and I never had any ill intent whatsoever."

Theme tags: Art theft
Blockchain tags: Blockchain: Bitcoin
Tech tags: NFT

Binance cancels registration in the United Kingdom

Binance's footprint is shrinking even further, as the company has canceled its registration with the United Kingdom's Financial Conduct Authority (FCA). This means that the company will not be able to perform any regulated activities in the country.

Binance had applied for registration after being warned by the FCA in July 2021 to seek registration before launching its business in the region.

Since the beginning of June, Binance has also announced it will exit the Netherlands and Cyprus amid regulatory issues.

Theme tags: Hmm

Financial Times alleges Crypto.com is trading against its own customers

A report out of the Financial Times alleges that the Singapore-based Crypto.com exchange runs proprietary trading and market making teams. This is a controversial activity — though not uncommon in the crypto world — because of the conflicts of interest that are introduced when these functions are combined with those of an exchange. Speaking to CNBC about similar activities by other exchanges, US SEC chair Gary Gensler said, "These trading platforms, they call themselves exchanges, are commingling a number of functions. In traditional finance, we don't see the New York Stock Exchange also operating a hedge fund, making markets."

Sources cited by the FT allege that Crypto.com made "absolutely dramatic sworn statements that Crypto.com was in no way involved in trading" to other trading houses, and claim that employees were asked to lie about the existence of internal market makers. Crypto.com has refuted these allegations, and acknowledged that they run a market maker.

"This is not a controversial practice," Crypto.com said about the controversial practice.

Theme tags: Shady business

Machi Big Brother sues zachxbt

A grey outline of a penguin with four eyes, on a black backgroundzachxbt's avatar (attribution)
Crypto personality and creator of C.R.E.A.M. Finance Jeffrey Huang, aka "Machi Big Brother", has filed a defamation lawsuit against crypto sleuth zachxbt. Huang alleges that zachxbt has defamed Huang with false claims via a Medium article that accuses Huang of multiple pump-and-dump schemes that enriched Huang to the tune of 22,000 ETH (~$38 million at today's prices).

Huang is also annoyed at zachxbt's observations about the multiple hacks of C.R.E.A.M. Finance, which zachxbt wrote had been exploited three times "due to negligence". "Putting aside that Cream Finance was exploited two, not three times", Huang hilariously writes in the lawsuit, taking issue with the fact that zachxbt supposedly intentionally omitted that some funds were returned and that Huang claims to have been no longer involved with the project by that point. It's not made clear in the lawsuit which of the three hacks recorded on Web3 is Going Just Great — to the tune of $37.5 million (February 2021), $25–30 million (August 2021), and $130 million (October 27, 2021) — supposedly didn't happen.

Theme tags: Law, Reporting

Wyre finally shuts down

The crypto payments platform Wyre finally announced they would be winding down "due to market conditions". This came after a January announcement from the CEO, where it was not entirely clear whether the company was shutting down or just massively "scaling back".

Wyre had been a partner of Binance US, through which Binance was able to accept USD deposits. However, Binance US is now the target of SEC regulatory action, and has suspended US dollar deposits. Wyre wrote in their announcement that the closure "is not due to any regulatory agency direction". Sure thing.

Theme tags: Collapse

Binance to leave the Netherlands after failing to obtain license

As they are wont to do, Binance set up shop in the Netherlands without getting permission from the country's regulators. However, after being warned and then fined €3.3 million (~$3.35 million) in January, they apparently finally decided it was time to try to comply with requirements.

Sadly for them, they were unable to obtain a VASP registration in the country, and their "many alternative avenues to service Dutch residents in compliance with Dutch regulations" didn't pan out either. They announced that, effective immediately, they would no longer be accepting new customers from the region. Existing customers in the country will soon be only able to withdraw assets, and will not be able to purchase assets or trade on the platform.

Theme tags: Law

Binance US cuts staff following SEC lawsuit

The US arm of Binance has cut around 50 positions, amounting to approximately 10% of its US employees. In a message to employees, Binance.US CEO Brian Shroder explained, "Because of our preparation for a prolonged and very costly legal battle, the Board asked Management to right-size our organization and reduce our burn rate to ensure long-term viability".

Shroder is, of course, referring to the recent lawsuit from the SEC as well as a lawsuit from the CFTC that was filed in March.

Theme tags: Layoffs

Binance looks to exit Cyprus

Although Binance's Cyprus arm was only registered in October 2022, the company is already looking to deregister in the country. According to Binance, they're pulling back in smaller EU countries in order to "focus on our efforts on fewer regulated entities in the EU", where they will need to come into compliance with the recent MiCA legislation by the time it comes into effect.
Theme tags: Hmm

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