So far, the stunt has resulted in two NFTs being minted by outside parties, for total proceeds of 7 ETH (~$9,400) — not quite the millions the drawing allegedly cost the NFT project creator. Meanwhile, Mexican authorities have said they are investigating whether the businessman committed a crime in intentionally damaging an artistic monument.
Someone claims to have burned a Frida Kahlo drawing to "transition it into the Metaverse" as NFTs
A businessman has published a video in which he burns a drawing that he claims is an original Frida Kahlo drawing worth more than $10 million — though its value and its authenticity have both been questioned. The entrepreneur created 10,000 NFTs from the drawing, which he's selling for 3 ETH (~$4,000) (reduced from the original 3.5 ETH/$4,700) for a hoped total of $40 million. He claims that in burning the artwork, he has "transitioned [it] into the Metaverse".
Crypto executive exodus continues
The wave of crypto executives stepping down from their roles is continuing, after Genesis' CEO left the company and Michael Saylor gave up his CEO title (but stayed on as chairman) in August.
Now, Genesis' managing director has stepped down after five years. Kraken CEO Jesse Powell relinquished his title, planning to remain at the firm as a chairman. Alex Mashinsky has resigned as the CEO of Celsius Network in the midst of bankruptcy proceedings. And FTX US president Brett Harrison will also be stepping down.
- "Genesis director to step down and move into advisory role", Cointelegraph
- "C.E.O. of Kraken, the Cryptocurrency Exchange, Steps Down", The New York Times
- "C.E.O. of Celsius, the Crypto Bank, Resigns", The New York Times
- "Brett Harrison will step down as FTX US president, move into advisory role", Cointelegraph
Eight state regulators file enforcement actions against Nexo
Crypto lending service Nexo was hit with a barrage of cease-and-desist lawsuits from eight states: California, Vermont, Oklahoma, Kentucky, Washington, South Carolina, New York, and Maryland. Several of them also tacked on fines, with Washington levying a hefty $1 million against the company, and Maryland fining them $5,000 per violation.
Nexo had previously been warned to stop offering services in New York state and to register under securities regulations, but hadn't done so. Several states called into question Nexo's "real-time audit", which they describe as bogus. Kentucky also noted in their lawsuit that when the company's holdings of their own $NEXO token was taken out of the equation, the company appears to be insolvent.
Four NFTs valued at at least $150,000 stolen from Jason Falovitch
Sports manager turned crypto entrepreneur Jason Falovitch is now perhaps best known for his influence in the NFT space. He co-founded the Leverage Game Media company along with Mark Cuban, a group that owns many NFT assets and helps promote NFT projects through their control of major sports social media pages. Falovitch also co-founded @NFT, a group of social media pages that earned a ban from Twitter in February after accusations that they promoted scammy NFT projects without proper disclosure.
On September 25, Falovitch tweeted "I got hackled last night on Opensea. Apes, doodles, eth. It's not pretty." Four NFTs had been stolen from his wallet — two Doodles, and a Mutant and Bored Ape — along with 6 ETH (~$7,750). The Mutant and Bored Apes were both resold, for 15.99 ETH (~$20,700) and 82.69 ETH (~$107,000) respectively. Factoring in Doodle floor prices, the hacker is looking at at least $150,000 in profit.
The loss, however, is larger for Falovitch, who spent ~$377,000 on the four NFTs based on the price of ETH at the times of purchase. Falovitch tweeted after the hack, "Now I'm over $1M hacked in ETH and NFTs." It's not clear if he's referring to other wallets he may control that were compromised, previous hacks he's suffered, or if he's massively overestimating the value of the stolen NFTs. He also tweeted that he discovered his car was broken into as he went to drive to the police department to report the NFT thefts.
Well-known crypto researcher zachxbt, who is known for helping victims of wallet hacks recover their assets, tweeted to Falovitch: "Karma for all of the people you rekt with the scams promoted on your Instagram page. Definitely won't be tracking this one."
IRS gets permission for summons to go after taxpayers who didn't report crypto transactions
The IRS was granted authorization to issue a "John Doe summons", which will require M.Y. Safra Bank to provide them with information on U.S. customers who may have failed to report taxable cryptocurrency transactions. This summons is specifically aimed at customers who used sFOX, a crypto broker that used M.Y. Safra Bank's services. The IRS was also previously authorized to serve a John Doe summons on sFOX directly.
The press release stated, "Based on its recent experiences with cryptocurrencies, the IRS has strong reason to believe that many virtual currency transactions are not being properly reported on tax returns."
- "IRS Obtains Court Order Authorizing Summons For Records Relating To U.S. Taxpayers Who Failed To Report And Pay Taxes On Cryptocurrency Transactions"U.S. Attorney's Office, Southern District of New York
CFTC files suit against a DAO
The Commodity Futures Trading Commission fined the bZeroX blockchain project and its founders $250,000 for allowing illegal trading of digital assets, engaging in activities only allowed by registered futures commission merchants, and not performing proper KYC. They have also filed a civil suit against Ooki DAO, the successor to bZeroX, for violating the same laws.
This will certainly be interesting to watch. DAOs — decentralized autonomous organizations — are a popular form of web3 project governance where (typically) anyone who holds the governance token can vote on the actions of the DAO. There is little precedent in the way of filing charges against a DAO, and DAOs often don't have the liability protections of more traditional organizational structures.
- "CFTC Penalizes Blockchain Protocol $250K, Files Action Against Successor DAO", CoinDesk
- "CFTC Imposes $250,000 Penalty Against bZeroX, LLC and Its Founders and Charges Successor Ooki DAO for Offering Illegal, Off-Exchange Digital-Asset Trading, Registration Violations, and Failing to Comply with Bank Secrecy Act", CFTC
Man charged with seven felonies over crypto scams
The U.S. Attorney's Office for the District of Utah announced seven felony charges against a man who is accused of several crypto-related scams.
In one, he conned two victims for $1.7 million by claiming to sell a powerful Bitcoin miner that didn't exist; instead, a fake machine in the office was connected to a monitor displaying prerecorded video to make it appear as though the machine was mining cryptocurrencies.
In another, he created a business he claimed would "Bank the Unbankable" by providing financial services to people who couldn't access them. Instead, the millions of dollars were spent on unrelated businesses.
- "Spanish Fork Man and His Two Businesses Charged with Wire Fraud and Money Laundering Offenses", U.S. Attorney’s Office District of Utah
- "Utah Man Charged With 7 Felonies in Connection to Alleged $1.7M Crypto Mining Scam", CoinDesk
Compute North, one of the largest crypto mining datacenters, files for bankruptcy
Compute North has filed for Chapter 11 bankruptcy, in what may be a blow to the crypto mining industry. Compute North is a major datacenter provider, and have deals with crypto mining companies including Marathon Digital, Compass Mining, and others. Compute North had just raised $385 million in February through a Series C equity round and debt financing.
Wall Street Journal suggests that Coinbase tested proprietary trading
According to a report in the Wall Street Journal, US-based cryptocurrency exchange Coinbase tested a group to speculate on cryptocurrencies in hopes of earning funds for the business. The WSJ said they performed a $100 million "test trade" before ending the initiative. Some Coinbase employees described the project as proprietary trading — something Coinbase has testified in front of Congress to say they don't do. Prop trading is controversial because of the potential conflicts of interest, in which firms can end up effectively trading against their own customers.
Coinbase has refuted the WSJ claims in a blog post, accusing the paper of confusing "client-driven activities" with prop trading. In a statement to the WSJ, published in the article alongside the allegations, a Coinbase spokesperson said that "Coinbase does not, and has never, had a proprietary trading business. Any insinuation that we misled Congress is a willful misrepresentation of the facts".
- "Coinbase Tested Group to Speculate on Crypto", The Wall Street Journal
- "In response to the Wall Street Journal", Coinbase
Investors seek to recoup around $30 million from Canadian "Crypto King" in his early 20s
"[I] was a 20-something-year-old kid" said Aiden Pleterski, when asked why he kept his "investment" scheme going when he knew he couldn't repay his existing customers. Although he once described himself as the "Crypto King" in several articles he paid to have run, Pleterski is now undergoing a bankruptcy process and facing multiple lawsuits, where creditors are trying to first find and then recoup the more than CA$41.5 million (~US$30.5 million) they've collectively entrusted to him.
So far, the court has seized two McLarens, two BMWs, and a Lamborghini — only a few cars out of the eleven luxury cars Pleterski owned, plus another four he was renting. Investors have also asked about the CA$45,000-a-month (~US$30,000) lakefront mansion he was renting in Ontario, watches, and gold bars, hoping they could be liquidated to repay some of his debts.
Pleterski had promised investors that he would invest on their behalf, taking 30% of any capital gains, with a goal of achieving 10–20% gains biweekly. He also promised that any loss on the initial investment would be paid back in full. Pleterski had made some money in crypto as a teenager, but according to him, he lost most of the money he was given to invest in late 2021 and early 2022 "in a series of margin calls and bad trades". An investor claims that at one point, he was given pictures and videos of financial statements showing an account with $311 million, but when he checked with the company supposedly maintaining the account, they said they had no accounts with that kind of funds. So far, the court and investors alike have struggled to untangle Pleterski's mess — according to him, he was unorganized and didn't track his finances or debts.