Two QAnon influencers running crypto scams steal more than $2 million from their followers

Research firm Logically published an investigation into two QAnon influencers who successfully convinced their follower to put more than $2 million into crypto scams. Telling their followers that they could predict the success of cryptocurrencies because of access to "secret military intelligence", they capitalized on QAnon conspiracy theories to defraud their followers through various pump-and-dump schemes. The influencers made claims including that they had personal connections with Elon Musk, Donald Trump, and John F. Kennedy, Jr. (who died in 1999, despite some QAnon theories), or that "aliens want us to trade cryptocurrency 'as an on-ramp to familiarize ourselves with the quantum financial system until we can evolve into 5D and trade assets with our consciousness'".

According to Logically, the "vast majority" of people following the influencers' investment advice "lost anywhere between several hundred and tens of thousands of dollars". One man lost more than $100,000, resulting in him also losing his house and construction business. The man ultimately died by suicide.

South Korea bans current and former Terraform Labs employees from leaving the country

A former employee of Terraform Labs, the company behind the Terra project that collapsed in May, found that he was banned from leaving the country. According to the former employee, he wasn't notified at all: "when i found out about this, the south korean prosecution told me they usually don't notify people of this because they might destroy evidence and/or leave the country beforehand".

He later clarified that he was willing to cooperate with the investigation against TFL, but was dismayed that employees who left long before the collapse were facing an exit ban, and that they weren't notified of the ban.

Terra is facing a class action lawsuit from Korean investors, and local news had previously reported that South Korean authorities had launched an investigation.

Lacoste Discord among the latest to be hacked

So, apparently polo shirts have NFTs now. Fashion brand Lacoste's NFT project is titled "Undw3", which is apparently supposed to be pronounced "underwater"—I guess if you say the 3 in French it sort of sounds like the English... word... "underwater"... anyway. The Discord for that NFT project was one of the latest to be hacked in a string of Discord hacks so prolific that I've basically stopped reporting on them individually. Like many recent Discord hacks, this one was accomplished by compromising a moderator's account. The account was then used to post a fake mint link, and users who signed the transaction approval found their assets transferred to the attacker.

Since the last post about an NFT project having its Discord compromised, five days ago, we've seen at least fifteen more projects suffer the same: Clyde, Good Skellas, Duppies, Oak Paradise, Tasties, Yuko Clan, Mono Apes, ApeX Club, Anata, GREED, CITADEL, DegenIslands, Sphynx Underground Society, FUD Bois, and Uncanny Club.

Hoo exchange pauses withdrawals

The Hong Kong-based cryptocurrency exchange Hoo announced that they would be pausing withdrawals, after so many customers tried to withdraw their crypto that they began to run out of funds in their hot wallet. The company assured customers in a blog post that the pause was temporary and that withdrawals would resume in 24–72 hours once transfers from a "backup multi-signature wallet and other assets" were complete, leaving one to wonder what those other assets might be. The blog post finished by stating, "The platform is trying to reconfigure medium- and long-term assets in an orderly and reasonable manner. Please don't worry and there will be no loss of your assets."

Defi insurer Bancor pauses their impermanent loss protection due to "hostile market conditions"

The defi insurance protocol Bancor announced on June 19 that they would be suspending their impermanent loss protection due to "hostile market conditions". The feature sought to protect users from "impermanent loss", a risk when a person provides liquidity to a pool, the ratio of deposited assets changes, and the person winds up with more of the token that's worth less.

Bancor wrote in their announcement that "Withdrawals performed during this unstable period will not be eligible for IL protection. Users who remain in the protocol will continue earning yields and be entitled to withdraw their fully-protected value when IL protection is reactivated." Many view this as Bancor holding their crypto hostage, because they would take a major loss if they withdrew while IL protection was paused.

The post goes on to say that "two large centralized entities" (likely Celsius and Three Arrows Capital) have rapidly liquidated their $BNT positions and withdrawn a large amount of liquidity; Bancor also wrote that another entity has opened a large short against $BNT.

Solend DAO passes proposal to take over the account of a large holder with a position that poses systemic risk

Solend DAO, the DAO behind the Solend lending protocol on Solana, just passed its first ever governance proposal. A whale used their platform to take out an enormous margin position, depositing 5.7 million Solana (currently worth $170 million) to withdraw $108 million in stablecoins. Their position represents 95% of all Solana deposits on the platform, and the position risks partial liquidation if Solana drops in price to $22.30.

The proposal allows Solend to temporarily take over the whale's account to liquidate the position "gracefully", rather than allowing the liquidation to happen as it normally would. This stems from the concern that the partial liquidation (20%, or around $21 million) would "cause chaos" on both Solend and the Solana blockchain more broadly. The proposal outlined concerns around Solend potentially ending up with bad debt, and liquidators "spamming the liquidate function" and potentially taking down the Solana chain.

The proposal elicited strongly negative reactions from many in the crypto community, who feel that a project taking over a user's account flies in the face of the concept of defi and sets a dangerous precedent. Others blame Solend for allowing the position in the first place, given the level of systemic risk. Some have also pointed out that Solend may be exposing themselves to legal risk by retroactively changing the terms of the loan.

The proposal succeeded hours after it was proposed, with one whale providing 1 million votes out of the 1.15 million votes in favor.

Magic Internet Money stablecoin wobbles

A stablecoin called Magic Internet Money (yes, really) is one of the latest to have trouble maintaining its peg. The stablecoin is issued by the Abracadabra lending platform, which was founded by Daniele Sesta. Some may recognize the name from the Wonderland project failure in January, during which it was also discovered that the pseudonymous chief developer on the project was Michael Patryn, a shady character with a history of financial crimes.

On June 17, $MIM began to lose its $1 peg, and on June 18 it dropped below $0.91. Later on June 18, it returned above $0.95, but continued to be priced below its intended peg.

The supply of $MIM dropped precipitously in the wake of the Terra collapse, as traders lost confidence in algorithmic stablecoins more broadly. Amidst plummeting markets, rumors have surfaced that Abracadabra is "nearly insolvent" due to bad debt left over from the Terra crash. Sesta has refuted the claim, writing on Twitter that the "treasury has more money than the debt" and that the rumors were simply people "spread[ing] FUD [to] try to recover your losses from shorting a bit". The project announced that it would be implementing "peg stability measures", including increasing interest rates on one of their lending markets.

MakerDAO halts Aave–DAI direct deposit due to concerns over risk

MakerDAO voted to disable the Aave—DAI direct deposit module, which previously allowed users to mint DAI (MakerDAO's stablecoin) and deposit it into the Aave lending protocol. According to a MakerDAO team member, 100 million of the 200 million DAI borrowed on the Aave project is borrowed by Celsius and collateralized primarily by stETH. Celsius paused withdrawals several days before MakerDAO's decision, and is apparently underwater. stETH is Lido-staked Ether, which also has been encountering issues amidst the market downturn and heightened withdrawal pressures.

The same MakerDAO team member wrote in the forum that "Contagion risks in DeFi are increasing", and that the project wanted to "cut exposure" to projects that were in trouble. "We could be dealing with Lehman's moment in crypto," he wrote.

Three Arrows Capital looks for a bailout

The Wall Street Journal reported that Three Arrows Capital, a crypto hedge fund that was rumored to be insolvent several days earlier, was indeed pursuing last-ditch options to make good on their debts. 3AC had major exposure to Luna, a token that plunged in value during the collapse of the Terra ecosystem in May, and lost around $200 million in that catastrophe. The collapse of other projects and the plummeting prices of cryptocurrencies in general exacerbated 3AC's situation, causing them to take losses in other risky plays they had made, and ending with them unable to pay off debts to creditors.

According to the WSJ, 3AC has hired legal and financial advisors to pursue solutions including asset selloffs or rescue by another firm, and is trying to extend the deadlines for outstanding debt repayments.

Babel Finance suspends withdrawals and redemptions

Babel Finance is the latest crypto finance platform to suddenly limit customer withdrawals. Citing "unusual liquidity pressures" and "conductive risk events" to crypto institutions, Babel announced that they would be "temporarily suspending" redemptions and withdrawals for an indeterminate period. Babel Finance had just completed a $80 million Series B round, with a valuation of $2 billion, in May.

Some in the crypto space have been encouraging people to withdraw their funds from any type of staking or lending platform, as liquidations and failures to repay debt spreads through the tightly-interconnected ecosystem. On June 16, yield farming platform Finblox implemented a very low cap on the amount of funds customers could withdraw, citing exposure to the apparently insolvent Three Arrows Capital.

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