SEC sends a Wells notice to Coinbase

March 22, 2023

SEC sends a Wells notice to Coinbase

The SEC sent Coinbase a Wells notice, which is basically their way of saying "we're about to file a complaint against you, here's your chance to convince us not to."

According to Coinbase, the Wells notice related to "aspects of the company's exchange, our staking service Coinbase Earn, and Coinbase Wallet". It's not terribly surprising that the SEC might have Coinbase Earn in its crosshairs, as it has recently taken action against similar products, such as Kraken's staking service. In the wake of the action against Kraken, Coinbase seemed to try to pre-empt SEC arguments by sending an email to customers emphasizing things like "You earn rewards from the protocol, not Coinbase". It doesn't look like this has shifted the SEC's thoughts much, though.

This should be an interesting saga to watch, partly because Coinbase has expressed willingness in the past to go head to head with the SEC.

"SEC investigating Coinbase for its Earn product, wallet service and exchange activity", The Block

March 22, 2023

Lindsay Lohan, Jake Paul, and other celebrities charged for illegally touting Justin Sun's tokens

Tweet by Lindsay Lohan on February 11, 2021: "Exploring #DeFi and already liking $JST, $SUN on $TRX. Super fast and 0 fee. Good job @justinsuntron"

Tweet by Lindsay Lohan, for which she did not disclose she was paid $10,000 (attribution)

Celebrities Lindsay Lohan, Jake Paul, Soulja Boy, Austin Mahone, Kendra Lust, Lil Yachty, Ne-Yo, and Akon were all charged by the SEC for violating anti-touting laws that would require them to disclose if and how much they were being paid to promote securities. The alleged securities in question are TRX and BTT, two tokens both closely tied to Justin Sun, who was also charged in relation to the scheme.

With the exception of Soulja Boy and Mahone, the celebrities paid a total of more than $400,000 in disgorgement, interest, and penalties to settle the charges without admitting or denying them.

"SEC Charges Crypto Entrepreneur Justin Sun and his Companies for Fraud and Other Securities Law Violations", SEC press release

March 22, 2023

Justin Sun charged with offering unregistered securities and market manipulation

Justin Sun (attribution)

His (former?) Excellency Justin Sun has been charged by the US Securities and Exchange Commission for offering unregistered securities. His businesses, the Tron Foundation and two BitTorrent-related entities, were also named in the complaint. According to the SEC, Sun offered the unregistered securities TRX and BTT, and "fraudulently manipulat[ed] the secondary market for TRX through extensive wash trading". He also allegedly "orchestrat[ed] a scheme to pay celebrities to tout TRX and BTT without disclosing their compensation".

Eight celebrities were also charged with violations of anti-touting law.

"SEC Charges Crypto Entrepreneur Justin Sun and his Companies for Fraud and Other Securities Law Violations", SEC press release

March 20, 2023

SpankPay payments service for sex workers shuts down

(attribution)

Despite people periodically claiming that crypto is a panacea for the many issues that make it difficult for sex workers to get paid, the SpankPay crypto-based payments processor is calling it quits after their payment processor Wyre decided they didn't want to work with them, because their payment processor Checkout.com didn't want to work with them. As it turns out, it's tough to use crypto for censorship-resistance when you still need dollars at the end of the day.

In a tweet announcing the shutdown, SpankPay reassured customers, "Rest assured your money is safe and we'll get it to you as soon as possible" — always a scary thing to hear from a crypto company.

It seems that only the payments processing side of the business is shutting down, with projects including SpankChain and SpankMatch continuing to operate.

"SpankPay Adult Industry Crypto Payment Service Shuts Down", Decrypt

March 18, 2023

General Bytes crypto ATMs exploited for over $1.6 million

A General Bytes Bitcoin ATM, which has a bright orange face with the text "Bitcoin ATM" on it, and a screen showing multiple cryptocurrencies that can be purchased.

General Bytes Bitcoin ATM (attribution)

The largest manufacturer of Bitcoin ATMs, General Bytes, disclosed that attackers had stolen more than $1.6 million by exploiting a vulnerability in their software. The company released a statement on March 18 disclosing the breach, and urging operators of their ATMs to immediately upgrade their software to patch the devices.

In addition to standalone servers, General Bytes' cloud service was impacted, and the company announced that it would be permanently shuttering it. "It is theoretically (and practically) impossible to secure a system granting access to multiple operators at the same time where some of them are bad actors," wrote the company in their statement explaining the decision, apparently unaware that this is something software companies find themselves doing all the time.

This exploit was the second breach suffered by General Bytes this year, after hackers exploited a vulnerability in August 2022 that allowed them to steal customer funds. It's unknown how much was stolen in that attack. The company also patched multiple hardware and software issues in their ATMs in September 2021, after Kraken Security Labs discovered issues including poor security practices that would allow attackers to "walk up to an ATM and compromise it".

"General Bytes Bitcoin ATMs hacked using zero-day, $1.5M stolen", BleepingComputer
"Hackers steal crypto from Bitcoin ATMs by exploiting zero-day bug", BleepingComputer
"Kraken Security Labs Identifies Vulnerabilities In Commonly Used Bitcoin ATM", Kraken Security Labs

March 17, 2023

Thousands lose money to iEarn Bot crypto scam

(attribution)

According to a report by the BBC, a scam called iEarn Bot has impacted thousands of victims across multiple countries. In the scam, victims are convinced to sign up for an "AI intelligent quantitative trading robot" called iEarn Bot, which appears to successfully trade cryptocurrencies on their behalf. However, after a time, victims realize they are not able to withdraw their supposed earnings, nor the funds they've put in.

According to the BBC, dozens of high-profile individuals in Romania, including members of the government and academics, lost money to the scam after it was promoted by technology expert Gabriel Garais — who also says he lost money in the scheme.

iEarn Bot claims to be a US-based company, although its website is full of false information. The person named as the company's founder told the BBC he has nothing to do with the scheme, and companies and institutions listed as "strategic partners" say there is no such partnership.

The BBC identified one cryptocurrency wallet that received payments from around 13,000 others totaling nearly $1.3 million.

"Thousands may have lost out to crypto trading app", BBC

March 17, 2023

Thwarted hacker asks security firm to reimburse gas fees

(attribution)

File this one under "the audacity".

On March 17, blockchain security company BlockSec observed an attacker trying to exploit a vulnerability in the NFT lending project Paraspace. Although they had successfully identified a vulnerability that could have allowed them to steal 2,900 ETH (a bit over $5 million), their attempt to execute the hack failed because they didn't correctly estimate what it would cost them in gas fees.

After observing the attempt, BlockSec executed a whitehat rescue, where they successfully executed the same attack to remove the funds from Paraspace and secure them until they could return them to the project team.

Incredibly, the exploiter sent an on-chain message to BlockSec: "hey man, I am the one who made the contract you just copied, I couldn't make it work for a stupid gas estimation error. since I lost a lot of money trying to make it work, it would be cool to get at least some of them back... best of luck". Altogether, the would-be attacker spent around 0.7 ETH (~$1,200) on gas fees while trying to pull off the hack.

"BlockSec prevents $5 million from being stolen on Paraspace", The Block

March 15, 2023

International group of law enforcement agencies shuts down ChipMixer

Law enforcement from the United States, Germany, and the European Union worked together to take down the ChipMixer cryptocurrency tumbler, which they allege had been used to launder $3 billion since 2017 related to "ransomware, darknet market, fraud, cryptocurrency heists and other hacking schemes". The US Department of Justice also charged an individual with money laundering, operating an unlicensed money transmitting business, and identity theft in connection with the project.

According to the US DOJ, ChipMixer had been used to process, among other things, proceeds of the massive March 2022 Axie Infinity hack by a North Korean cybercrime group.

US law enforcement seized two domains and a Github account tied to the organization, and German law enforcement seized ChipMixer's back-end servers and $46 million in cryptocurrency.

"Justice Department Investigation Leads to Takedown of Darknet Cryptocurrency Mixer that Processed Over $3 Billion of Unlawful Transactions", press release

March 14, 2023

Phishers take advantage of fears surrounding the USDC de-peg

(attribution)

When USDC deviated from its dollar peg on March 10, phishers were quick to devise a scheme to take advantage of holders' fears. A group launched a website appearing to be the blog belonging to Circle, the company that backs USDC. On the fake blog, they announced a supposed defi exchange where users would be able to exchange their USDC for stablecoins like Tether.

Holders trying to use the exchange approved transactions which they didn't realize allowed the phishers to drain their ETH. So far, the scammers have stolen around 74 ETH ($130,500).

"'Circle Swap' scam exploits USDC depeg fears, drains ether from wallets", Protos

March 13, 2023

Over $35 million lost as contagion from Euler hack spreads throughout defi

Contagion from the massive exploit of the Euler project has spread to around a dozen defi projects, including Balancer, Angle Protocol, Yearn Finance, InverseFinance, and others. Some are still evaluating if and how they may be affected, and how much they've lost.

Around $11.9 million of tokens were sent from the Balancer defi liqiuidity project to Euler during the attack, prompting Balancer to pause the project.

The Angle Protocol decentralized stablecoin project also disclosed that almost half of the total value locked in the project — around $17.6 million in the USDC stablecoin — were sent to Euler during the hack.

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