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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.

Zero Edge crypto casino enters liquidation after founder gambles away its seed money

Headshot of Richard KimRichard Kim (attribution)
Richard Kim, the founder of the Zero Edge crypto casino, resigned on July 2, 2024 after blowing most of the project's seed funding. Kim was a former executive of Galaxy Digital, and Galaxy was among Zero Edge's investors. Within a day of closing a seed financing round on June 20, Kim had begun putting the money into leveraged crypto bets, resulting in "the significant loss of company funds". On June 29, he admitted in an email to Zero Edge shareholders that he had blown around $3.67 million in company funds.

Kim admitted in an interview with CoinDesk at the time that "I really fucked up. I lost this money. It was grossly negligent. But I didn't intend to go run away with this money." He claimed that it all began when he lost $80,000 to a phishing website. "This triggered my old demons, the need to 'make it back' to preserve my reputation. ... [I] started down a negative spiral of leverage trading, raising more capital, and hiding the truth. ... By the seed round's close, I was ready to rebuild, to start fresh, putting past demons aside. But the moment I received the proceeds, something snapped. I felt compelled to make up for my missteps. Within days, millions were in leveraged longs. When bitcoin crashed, I experienced a complete wipeout."

What remains of the Zero Edge company has petitioned for voluntary liquidation in the Cayman Islands, where it was registered. Company liquidators tell a slightly different story from Kim: that Kim misappropriated most of the company's assets and then "disappeared".

Theme tags: Collapse, Shady business

ThorChain is insolvent

The ThorChain project is in crisis amid news that the project is insolvent. In order to prevent what would effectively be a bank run and likely death spiral, the project has paused portions of the protocol while determining how best to handle the problem. According to Twitter user TCB, the project has almost $200 million in liabilities, with only $107 million in assets — assets which can be quickly withdrawn or depleted in the case of a panic.

The team has announced that the pause will last for 90 days as they explore options to save the project.

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Tech tags: DeFi

Digital Currency Group settles with the SEC for $38 million over misleading statements surrounding Genesis collapse

The Digital Currency Group has agreed to settle with the SEC for $38 million over charges that its Genesis subsidiary misled investors. When the hedge fund Three Arrows Capital blew up and defaulted on a margin call in June 2022, DCG publicly downplayed the fact that their entire business was at risk, and overstated its ability to bail out the Genesis subsidiary by taking on its liabilities and doing some weird accounting maneuvering involving a $1.1 billion promissory note. In November, with further crypto market turmoil, Genesis could no longer meet withdrawal requests and collapsed. The company filed for bankruptcy the following January.
Theme tags: Collapse, Law

MakersPlace NFT marketplace shuts down

Citing "ongoing market challenges and funding difficulties", the MakersPlace NFT platform announced it will be shutting down after six years of operations. The company had raised $30 million in funding in August 2021 from investors including Eminem, Sony Music, and Coinbase Ventures.

They wrote in their announcement that, although they had some money left, the "prolonged downturn" in the NFT market was causing them to "anticipate significant challenges in securing further investment which would make it difficult". They said they would be returning unused funding to investors and shutting down most of the site's functionality immediately.

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Tech tags: NFT

Bitcoin mining company Rhodium Enterprises files for bankruptcy

The Texas-based Rhodium Enterprises bitcoin mining company has filed for bankruptcy, disclosing debts between $50 and $100 million and total assets between $100 and $500 million. The company had tried to begin restructuring, but was not able to reach agreement among shareholders, and so decided to enter bankruptcy.

Bitcoin mining has been an extremely challenging business in recent times, partly due to volatile crypto prices over the last few years, and due to diminishing miner rewards following the April halving event.

Rhodium Enterprises had been showing signs of trouble, including failing to make scheduled loan payments earlier this month. In December 2023, a dispute between them and a subsidiary of the Riot Platforms bitcoin mining group culminated in armed security removing Rhodium employees from a bitcoin mining facility in Rockdale, Texas, where Rhodium was leasing bitcoin miners. The case was later sent to arbitration.

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Blockchain tags: Blockchain: Bitcoin

Yield App declares insolvency, citing FTX losses

Yield App, a crypto investment platform, has announced that it will be entering liquidation proceedings. Citing "significant financial challenges", the project announced that the platform would be suspended pending liquidation.

In the immediate aftermath of the FTX collapse in November 2022, Yield App CEO Tim Frost had assured customers that "Yield App has no exposure to Alameda or the FTT token, and no signifiant exposure to FTX". However, Yield is now — going on two years after the FTX collapse — claiming to be suing "several hedge funds" that had lost money on FTX.

Theme tags: Collapse, Hmm

Australian NGS Crypto mining fund collapses

NGS Crypto, which sold "crypto mining packages" to interested investors, has been put into receivership. The Australian firm encouraged customers to set up a self-managed super fund — a type of retirement fund — to achieve returns they said were powered by crypto mining. The firms advertised returns of up to 16% annually, and promised that investors would receive 100% of their initial investment back at the term's completion — even "in the unlikely event that crypto mining becomes unprofitable".

NGS and its associated business is believed to have pulled in around AU$62 million (US$42 million) from around 450 Australians.

Theme tags: Collapse, Shady business

Australian DCA Fund collapses with up to $65 million owed to creditors

Liquidators have been appointed for three cryptocurrency companies owned by Ash Balanian. DCA Capital, Digital Commodity Assets, and the Digital Commodity Assets Fund have all entered liquidation after investors raised red flags about the fund's management and licensure.

So far, losses are estimated to affect around 100 investors, who have up to AU$100 million (US$65 million) in claims.

Balanian had boasted of his career experience as a former NASA mission planner, and targeted his fund to wealthy investors with a minimum initial deposit of AU$50,000 (~US$33,000).

Theme tags: Collapse, Shady business

Bored Ape-themed fast food restaurant shuts down

A photograph of a restaurant with a sign featuring a Bored Ape NFT and the text "Bored & Hungry". The building is vacant and a sign shows "Chile Verde Mexican Food coming soon"(attribution)
It's hard to believe that the hamburger joint themed around the owner's Bored Ape NFT failed to take off. Although there was novelty value in the themed restaurant, which for a time boasted that it accepted cryptocurrency payments, the excitement seemed to wear off quickly after a few early news articles. After a while, the restaurant's crypto payments became spotty, with employees saying the system was unwieldy and unpopular among customers.

Some more recent Yelp reviews described fairly mediocre food, which "[t]he NFTs don't make up for".

The restaurant opened in April 2022, a month after owner Andy Nguyen purchased Bored Ape #6184 for $268,000, along with three Mutant Apes for an additional combined $187,000. #6184 became the restaurant's logo, and the others were incorporated into the restaurant's branding. The NFTs haven't been resold since, although it's unlikely they could recoup close to their original purchase prices — Bored Apes have been averaging a little under $50,000 in recent sales, and Mutants around $8,500 each.

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Blockchain tags: Blockchain: Ethereum
Tech tags: NFT

Crypto exchange created by Three Arrows Capital founders to shut down

Who can believe this. OPNX, the crypto derivatives exchange created by the people who ran and then blew up the Three Arrows Capital hedge fund, will be shutting down. The exchange was originally announced in January 2023, with a tentative name of "GTX" — "because G comes after F", they said. It was created as an evolution of the CoinFLEX exchange, which had become insolvent and halted withdrawals in June 2022. Much of the exchange's focus was on allowing creditors of bankrupt cryptocurrency projects to trade their claims — including claims on Three Arrows Capital.

Now, as Su Zhu emerges from several months in jail, he, Kyle Davies, and the other executives of OPNX are shutting down the project. Traders have a week to settle their positions, and another week before the platform closes entirely.

Both Zhu and Davies are, of course, trying to promote a new crypto derivatives trading project.

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