Coinbase funds lawsuit against the Treasury Department over Tornado Cash sanctions

In the wake of OFAC adding Tornado Cash to the U.S. sanctions list in early August, Coinbase has announced they will fund a lawsuit against the Treasury Department to challenge the decision. Coinbase itself is not a plaintiff in a lawsuit, though two of the plaintiffs are Coinbase employees, who along with four other individuals filed suit in a Texas court. They say they previously used Tornado Cash for licit purposes, and are now suffering financial damages because they can't legally use the service.

In the suit, they argue that the Treasury Department overstepped its authority in what it can sanction, claiming that "Tornado Cash software, including the smart contracts, consists of immutable open-source software code, which is not property, a foreign country or a national thereof, or a person of any kind." They've also argued that the designation is unconstitutional under both the free speech protections of the First Amendment and the due process protections of the Fifth Amendment.

Crypto reacts to Queen Elizabeth's death

A pixel art illustration of Queen Elizabeth in skeletal form, inside a gilded frameQueenE 74 (attribution)
The news of Queen Elizabeth II's death resulted in the creation of at least 40 memecoins, multiple Queen Elizabeth-themed NFT collections, and special edition NFTs in various existing NFT projects.

Is there a way to include in one's will that you don't wish to be turned into an NFT or commemorated with a "Queen Inu" token when you die? Asking for a friend.

Company begins selling Celsius-themed Monopoly game... three months after Celsius suspends withdrawals

A Monopoly game themed after the company Celsius, with a large Celsius logo in the middleCelsiusopoly (attribution)
After what USA Strong Head of Sales & Partnerships described as "months and months" of work, apparently the company had decided they had sunk too much effort into the Celsius-themed game of Monopoly to scrap the project, and opted to push ahead. What could be more fun to any of the large group of users who have significant funds locked up in the platform than gathering around the table to play "Celsiusopoly", which they can buy for $99 (if they have that kind of money to spare). The center of the board is adorned with the Celsius logo and the slogan "Do Good. Then do well", and there is a "HODL Mode activated" square that might have been a lot funnier before the company involuntarily activated "HODL mode" for all its users.

If you were wondering who might decide to sell such a product, well, USA Strong's founder and CEO is none other than Krissy Mashinsky, wife of Celsius founder Alex Mashinsky.

Both the announcement tweet and the game product page were taken down shortly after the announcement, likely due to the less-than-enthused response from Celsius users.

Investors face $11 million loss in VBit Technologies/Advanced Mining Group, an alleged crypto Ponzi scheme

The Philadelphia Inquirer published a report on VBit Technologies, later Advanced Mining Group, a company that promised investors to buy and operate Bitcoin miners on their behalf and pay them out the returns. Much of the group's operations relied on a system of "affiliates" bringing in more investors — a sort of suspicious triangular-shaped scheme — and executives and top-performing affiliates enjoyed lavish rewards including expensive wines, six-figure sports cars, and fancy vacations.

However, customers trying to withdraw their "rewards" saw increasing delays in receiving their payouts — days, then weeks, then an indefinite pause. A COO hired by the group left the company only three weeks later. On June 27, the group sent an email to its customers explaining that there was a "potential pending settlement" with the SEC — the first customers heard of the existence of any investigation — and that they would no longer serve customers in the U.S. On July 15, the company promised to refund customers what they paid to sign up with the program, but no refunds or further updates have materialized.

The company has faced lawsuits in Washington state and Delaware, and apparently operated for two years after executives had acknowledged they were violating securities laws. The Delaware lawsuit describes the operation as a Ponzi scheme, and alleges that the company sold packages that would have required far more computing power than the company actually had access to.

David Bowie NFTs anger fans

A screenshot of a tweet by the official David Bowie account, which reads "Out of respect for the people of the UK and Queen Elizabeth II, we will be postponing the 'Bowie on the Blockchain' sale. We will update soon." Another user has screenshotted the tweet and crossed out "the people of the UK and Queen Elizabeth II" and replaced it with "David Bowie", making it read "Out of respect for David Bowie, we will be postponing the 'Bowie on the Blockchain' sale."Tweet by Jonathan Dean (attribution)
The latest entry in "group launches NFTs, fans hate it" comes from the David Bowie estate, who decided that "Bowie on the Blockchain" would be a cool idea to raise money for charity.

A tweet from OpenSea announcing the project received some positive replies, and a lot of other NFT projects trying to promote Bowie-themed NFTs they'd included in their collections. However, the tweet from David Bowie Twitter account seemed to be received almost universally negatively, with many commenters writing that they wished the estate would just raise money for charity without getting into NFTs, and others writing that they didn't think Bowie would have supported NFTs.

On September 10, the account announced that "Out of respect for the people of the UK and Queen Elizabeth II, we will be postponing the 'Bowie on the Blockchain' sale. We will update soon."

Flash loan attack nets attacker $370,000 from several sources

An attacker using the Avalanche blockchain successfully executed a flash loan attack impacting one contract and several other liquidity providers. The attacker made around $370,000 in USDC from the attack.

Binance plans to convert USDC and other stablecoins into their own BUSD stablecoin

Binance users who hold USDC (USD Coin), USDP (Pax Dollar), or TUSD (True USD) will find their holdings "converted" into Binance's stablecoin, BUSD, on September 29. The three stablecoins that Binance plans to convert are the second, fifth, and sixth largest stablecoins on the market as of September 5.

Binance claims the move is to "enhance liquidity and capital-efficiency for users", but the conversion and Binance's related decision to stop trading on spot pairs involving those same stablecoins seems like an attempt to increase the status of its own stablecoin against that of rivals.

Poolin suspends withdrawals from their wallet service

PoolinWallet is a crypto wallet service provided by Poolin, which runs the fourth-largest Bitcoin mining pool and third-largest Ethereum mining pool in the world. In the announcement they wrote that "Poolin Wallet is currently facing some liquidity problems due to recent increasing demands on withdrawals. But please be assured, all user assets are safe and the company's net worth is positive." The firm also urged users to ignore rumors of a rug pull.

Poolin users had been complaining about issues withdrawing from their Poolin wallets since at least August, which had sparked rumors of liquidity problems prior to the announcement. Poolin said in their announcement that they would announce their plans to resume withdrawals within two weeks. However, a week later, they instead told customers they would be receiving "IOU" tokens.

Bitcoiner gets 6–15 months in prison, warns others about making peer-to-peer Bitcoin trades

Mark Hopkins, also known as "Doctor Bitcoin" or "Rizzn", announced on social media that he would be spending between 6 and 15 months in federal prison "for the crime of selling Bitcoin a few years ago". His charge carried a maximum sentence of five years imprisonment.

In 2019, his home was raided in connection to a Nigerian lottery scam, for which he converted between half a million and $1.5 million to cryptocurrency over the span of half a year. He was ultimately charged with "illegally operating a cash-to-cryptocurrency conversion business", to which he pleaded guilty (by his telling, in an attempt to get charges against his family members dropped).

Hopkins claims that "any time anyone with a crypto trades p2p (i.e., not with an exchange), they're legally liable under this statute as it's currently interpreted", though authorities have claimed that Hopkins knowingly aided the lottery scammer by telling them "I'm set up as a marketing company, so tell them you're paying for a marketing campaign".

Islamic State tests out NFTs

In the apparent "first known nonfungible token created and disseminated by a terrorist sympathizer", a supporter of the Islamic State has minted an NFT with a message praising an attack on a mosque in Kabul, Afghanistan. According to former U.S. intelligence officials cited by The Wall Street Journal the NFT is likely an experiment with new funding and channels for propaganda.

The token was briefly listed on OpenSea, Rarible, and various other marketplaces before those marketplaces took it down. However, because it was minted on the blockchain, the token itself cannot be removed. "It's very much an experiment...to find ways to make content indestructible," said Raphael Gluck, a co-founder of a jihadist research group.

Crypto scam watchdog group launches NFT project, which is then exploited

An illustration of a man in a brown suit, brown fedora, and sunglasses, smoking a cigar and holding a noose.Bad Guys promotional artwork (attribution)
The group Rug Pull Finder aims to combat fraud, scams, and hacks in the NFT space, often investigating crypto rug pulls and offering audits for projects and smart contracts. They decided to launch their own NFT project, "Bad Guys", which is themed around a group of baddies who steal NFTs.

Ironically, a flaw in the project's smart contract allowed individual wallets to mint many NFTs at once, rather than one per wallet, allowing two people to game the system and snap up more than 450 NFTs rather than the one they were allowed. Rug Pull Finder wrote that "An exploit was shared with us 30 minutes before mint went live. After reviewing it with 3 different dev teams, we did not believe the credibility of the information sent to us... We were clearly wrong, and we are truly truly sorry".

Rug Pull Finder announced that they had reached an agreement with the people who gamed the mint, and would buy back the 366 NFTs the duo still held for 2.5 ETH (~$4,000).

Crypto security researcher OKHotshot wrote, "I think its concerning when security minded projects like RugPullFinder get their discord breached and their code exploited yet they're offering those exact services to customers."

Georgian Coinbase customers take advantage of 100x price bug

Some Coinbase customers in Georgia (the country, not the state) took advantage of an hours-long price bug where a misplaced decimal point altered the exchange rate of the Georgian Lari (GEL) to 100x its actual value. Users were able to sell their cryptocurrencies for GEL to receive, in some cases, thousands of dollars more than the trades were worth. According to Blockworks, some users exchanged $150 worth of crypto for $15,000, more than three times the national average salary in the country.

Some users who took advantage of the bug and withdrew funds to their bank accounts found their accounts frozen shortly after, when Coinbase noticed the error and began working to claw back the funds. According to Coinbase, about 1,000 users took advantage of the error.

Attacker exploits bug in ShadowFi to empty $300,000 liquidity pool

An attacker discovered that anyone could call the burn function on the liquidity pool contract for the ShadowFi project. They were able to exploit this vulnerability by calling the burn function and then taking advantage of the price difference (based on the new circulating supply) to remove all 1078 BNB (~$298,000) in the project's liquidity pool.

The project had only just launched that same day, after running a presale of their SDF tokens. The project promised to allow people to "Take your spending away from the floodlights of surveillance capitalism" and apparently involves sending people prepaid Visa cards to help them cash out their cryptocurrency without connecting a bank account or providing KYC information.

Holding company for Mercado cuts 15% of employees

2TM, the holding company for the Brazilian crypto exchange Mercado, announced they would be laying off 15% of their workforce — about 100 people. The company had previously laid off more than 80 employees in June. Mercado raised a $200 million Series B funding round in July 2021, which valued the company at $2.1 billion — the highest-valued crypto exchange in Brazil.

Describing the layoffs, a spokesperson for 2TM said that Mercado was suffering for playing by the rules. "The competitive environment remains deteriorated and unfair, lacking the approval of the legal framework for crypto-activities, as players following the law are penalized by companies that ignore local rules."

dYdX infuriates users by requesting "liveness checks" via webcam, cancels campaign due to "overwhelming demand"

The decentralized crypto exchange dYdX announced on August 31 that they would give users $25 if they completed a "liveness check", which is accomplished by taking webcam facial scans that can then be compared with scans from other accounts on the exchange in an attempt to combat Sybil attacks.

This infuriated many crypto users, who were horrified that dYdX would try to collect this kind of biometric data. "DYDX just nuked itself. I would never use this platform," wrote a prominent trader.

On September 1, dYdX tweeted that "Due to extremely overwhelming demand of the $25 deposit bonus promotion, we are ending the campaign, effective immediately. Thank you to the many thousands of new users that onboarded to dYdX today. We truly underestimated the amount of interest the campaign garnered." They made no mention of the backlash against the liveness checks, but quietly removed the mentions of the system from their website.

Bill Murray's NFT charity auction nets $185,000, which is then immediately stolen

Black and white photorealistic painting of Bill Murray. The only colors are the lenses in a pair of cardboard 3D glasses that Murray is wearing, and a green bowtie.Token #0 from Bill Murray's NFT collection (attribution)
Bill Murray auctioned off an NFT representing the right to drink a beer with him, during which a painter will paint a picture of the scene that the buyer can keep. The auction benefits Chive Charities, which is a veteran- and first responder-focused non-profit. The NFT sold for 119.2 ETH (~$185,000).

However, hours after the auction, a hacker gained access to Murray's crypto wallet and snagged the ETH for themselves. They also attempted to steal 800 NFTs from the remaining collection by Bill Murray, though a wallet security team was able to safeguard those NFTs in time.

Murray's team confirmed the theft, and said they are working with the police and Chainalysis to identify the hacker.

Attackers steal around $265,000 of user funds from KyberSwap exchange

An attacker was able to insert malicious code into the frontend of the decentralized exchange KyberSwap and steal $265,000 of user funds. The project used Google Tag Manager to allow code to be injected into the project frontend (often for analytics, ads, or marketing purposes), which was used by the attacker to insert malicious code into the project UI that specifically targeted whale accounts — that is, those with large balances.

Kyber identified and remedied the issue after two hours of investigating it, and only two wallets were affected. Kyber promised to compensate the users who lost funds, and also tried to tempt the hacker into returning funds by allowing them to keep 15% of the stolen money as a "bounty" (~$40,000).

Snapchat abandons its web3 plans

Snap Program Manager Jake Sheinman tweeted that "As a result of the company restructure, decisions were made to sunset our web3 team. The same team that I co-founded last year with other pirates who believed in digital ownership and the role that AR can play to support that." Snap, the company behind Snapchat, had been working on a feature that would enable users to import their NFTs and use them as augmented reality filters.

This news came amidst the announcement that Snap would be laying off 20% of its staff, a whopping 1,300 people.

Unable to recover from the April Rari exploit, Babylon Finance shuts down

In April, an attacker exploited vulnerabilities in the defi lending project Rari Capital to steal $80 million. The asset management project Babylon Finance was a major lending pool on Rari, and lost $3.4 million in the hack. After the incident, users withdrew more than 3/4 of the assets on the project.

Since April, Babylon tried to recover from the hack. However, they described it as "the domino that kickstarted a series of unfortunate events". Rari canceled their planned reimbursement, users withdrew their funds from Babylon Finance, the Fuse pool on Rari was abandoned, and the token price decreased from around $20 to around $5.

On August 31, Babylon Finance's founder Ramon Recuero published a blog post announcing that Babylon would be shutting down. They promised to distribute the remaining project treasury among holders. Users were told to withdraw their funds by November 15.

Lawyer Kyle Roche withdraws from several crypto class-action lawsuits after allegations that he was involved in "gangster-style" schemes to hurt competitor projects

Kyle Roche sitting in a dim restaurant setting, speaking and gesturing. A caption on the video reads "I'm just a crazy motherfucker".Roche in one of the secretly recorded videos (attribution)
Kyle Roche, a founding partner and namesake of the Roche Freedman law firm, has withdrawn from class-action lawsuits filed by the company against projects including Tether and Bitfinex, the Tron Foundation, and BitMEX. This change came less than a week after a whistleblower website alleged he had been paid to attack competitors of the Avalanche blockchain with lawsuits intended to harm them and reveal corporate secrets.

Although Roche has denied the claims by the site, and stated that someone deliberately got him drunk and then took clips of videos out of context, it probably doesn't look so good for a lawyer to be referring to jurors as "10 idiots", or plaintiffs in class-action lawsuits as "100,000 idiots".

Helium ditches its blockchain

Helium is a network of wireless hotspots that decided to bolt on a cryptocurrency layer a few years after it was created. Through this, they hoped to convince people to spend hundreds of dollars on Helium hotspots, which earn an average of 0.07 HNT ($0.37) a day (2.1 HNT/$11.24 a month) for supplying connectivity to internet of things devices.

Now, Helium is ditching its custom Helium chain in favor of a Solana-based token, and scrapping the blockchain entirely for the portions of its service that actually used the blockchain for anything beyond handling rewards.

Helium seems to have realized, finally, that blockchains tend to be slow as hell. In a blog post about the change, they wrote that "specific transactions, including Proof-of-Coverage and Data Transfer Accounting, are processed on-chain unnecessarily. This data bottleneck can cause efficiency issues such as device join delays and problems with data packet communications, which bloats the Network and causes slow processing times." They outline their plans to move these portions of the project to a "more traditional large data pipeline" — that is, infrastructure that's actually well-suited to that kind of processing.

DC Attorney General sues Michael Saylor and MicroStrategy for tax evasion

Michael Saylor sitting in front of a large model shipMichael Saylor (attribution)
DC-based Bitcoin evangelist and former CEO (now chairman) of MicroStrategy has been accused by the DC Attorney General of avoiding years of taxes by pretending to live in Florida, a state without personal income tax. The AG says he evaded more than $25 million in DC taxes this way, with the help of MicroStrategy (which is also named in the suit for helping to enable the tax evasion).

DC permits the court to impose "treble damages" on Saylor if he is determined to have evaded the taxes he owes, which could end up costing him and MicroStrategy more than $100 million in taxes and penalties.

Compound Finance breaks their cETH market for a week

Compound Finance released an update to change the price feed used by the Compound v2 protocol. Despite being audited by three firms, no one caught a bug that caused all transactions for ETH borrowers and lenders to revert, effectively freezing the entire cETH market on the protocol. Because code changes require a seven-day-long vote, the change can't be reverted until a new proposal passes. In the meantime, users with positions they can't access will need to add collateral or repay loans carefully in order to avoid being liquidated if the price of ETH drops by the time the market is operational again.

Thodex CEO arrested over a year after fleeing Turkey in the wake of the exchange's collapse

Faruk Fatih Özer, the CEO of the Thodex cryptocurrency exchange, swore that when they halted trading and shut off customers' access to accounts in April 2021, it was just to investigate suspicious activity. Then he disappeared, leaving behind a collapsed exchange and total losses estimated to be anywhere from $24 million and $2.5 billion in assets (depending who you ask). He left a statement in which he claimed that he was only on the lam in order to "work and repay my debts" to customers, after which he would turn himself in to Turkish authorities.

His plan to somehow work off anywhere from $24 million to $2.5 billion in debts was stymied when he was apprehended by Albanian authorities. He faces extradition to Turkey, where a prosecutor has asked for sentences of 40,564 years for him and other executives (just in case, I guess).

Thai SEC punishes Bitkub CTO for trading Bitkub Coin on insider information

The Securities and Exchange Commission in Thailand took action against Samret Wajanasathian, the chief technology officer of the Thai crypto exchange Bitkub. The SEC fined him 8.5 million baht (~$234,000), and said they would bar him from serving as a director or executive at any crypto firms for a year.

The SEC reported that Wajanasathian had purchased around $61,000 of Bitkub Coin ($KUB) just before it was publicized that the Siam Commercial Bank would purchase a 51% stake in Bitkub. After the announcement, the value of KUB rose 100%.

Earlier that week, the SCM had announced they would not be following through on purchasing the planned $500 million stake in Bitkub, due to concerns over "various issues" that were raised by the Thai SEC.

Crypto.com wants back the $7.2 million they accidentally sent a customer last year

Crypto.com somehow managed to not only send a woman AUD$10.5 million (US$7.2 million) in May 2021, but not notice it for months afterwards. The woman had requested a $100 refund, but someone accidentally entered an account number into the refund amount section and granted this woman a sudden windfall.

Rather than contacting Crypto.com about the error, she put the money into a joint account shared with her sister, and purchased her sister a five-bedroom home with nearly US$1 million of the funds.

Crypto.com only discovered the error in a December 2021 audit, and sued the woman for the erroneously-sent funds. She's just been ordered by the Victoria Supreme Court to sell the home and return the remaining money.

Unlike with many crypto transactions, erroneous transactions on centralized exchanges can typically be reversed by the exchange. However, Crypto.com would have had to notice the error much sooner, before the recipient transferred the funds elsewhere.

Hacktivists make NFTs out of the stolen passports of Belarusian officials

The inside and outside of a Belarusian passport, with a photo and the name of Alexander Lukashenko. Identifying details have been blurredOne of the NFTs (attribution)
A hacktivist group calling themselves the Belarusian Cyber Partisans managed to gain access to the entire passport records of Belarus last year. On August 30, they began selling NFTs created from the passport data of various Belarusian officials, including the country's authoritarian president, Alexander Lukashenko. Other passports include those of the head of the Belarusian KGB, Lukashenko's press secretary, and the country's prime minister.

The group is selling the NFTs for between 0.2 and 6.5 ETH ($300–$9,700), and say that all proceeds will go towards "our work in hitting bloody regimes in minsk & moscow".

OpenSea took down the NFT collection shortly after it was published.

OptiFi developer accidentally closes the project contract, irretrievably locking $661,000

OptiFi, a derivatives defi project, accidentally and permanently shut down the project smart contract, irretrievably locking up $661,000 — the project's entire fund. A developer had been trying to push an update to the project, and ran into issues related to Solana network congestion (a recurring issue). While trying to clean up from a partially-executed transaction, the developer accidentally ran a command that closed the project's primary smart contract.

OptiFi has promised to return user deposits and settle all positions. In a post-mortem, they wrote that they had learned that "Every deployment needs a rigorous process and single point failure can be avoided. Please don't rush like what we did, especially for defi projects". They further outlined a "peer-surveillance approach" in which three people would be required to deploy any changes together. They also asked the Solana team to implement a two-step confirmation for such a potentially destructive command.

Whistleblower website alleges that the creators of the Avalanche blockchain paid lawyers to attack competitors

Kyle Roche sitting in a dim restaurant setting, speaking and gesturing. A caption on the video reads "I'm just a crazy motherfucker".Roche in one of the secretly recorded videos (attribution)
An anonymous whistleblower website called "CryptoLeaks" has alleged that Ava Labs, the company behind the Avalanche blockchain, paid lawyers to sue competitors and obtain confidential information through legal discovery. The site includes secretly recorded videos of Kyle Roche, a founding partner of the Roche Freedman law firm which has filed class action lawsuits against numerous companies including Solana, Binance, and others. In some of the surreptitiously recorded videos, Roche is visibly drunk.

"A pact was formed that involved Ava Labs granting Roche Freedman a massive quantity of Ava Labs stock and Avalanche cryptocurrency (AVAX), now worth hundreds of millions of dollars, in exchange for Roche Freedman agreeing to pursue a hidden purpose," the site claims.

The site does include video clips of Roche saying some surprising things, although the clips are very short and devoid of context. The whole thing should be taken with a grain of salt.

Ava Labs founder Emin Gün Sirer dismissed the claims on the site as "conspiracy theory nonsense". Roche published a statement about the " numerous unsourced false statements and illegally obtained, highly edited video clips that are not presented with accurate context", in which he said that his statements about filing class action suits at the behest of Ava Labs were "false, and were obtained through deceptive means, including a deliberate scheme to intoxicate, and then exploit me, using leading questions. The statements are highly edited and spliced out of context."

CEO of Ragnarok metaverse game admits to treasury mismanagement, including nearly $2 million in trading losses and exorbitant salaries

Pixel art characters stand in a bar setting with a tiled floor made from hexagons. There are cardboard boxes, a jukebox, and a cook behind the bar.Ragnarok screenshot (attribution)
Ragnarok is a metaverse role-playing game that launched its character NFTs in April 2022. The project received $1.75 million in seed funding, plus another $17.5 million from NFT sales and royalties.

On August 26, CEO Fanfaron published a Substack post providing a breakdown of the project's finances, which he began by saying, "As a previous business owner, and because Ragnarok is a startup and not a DAO, our initial plan was never to operate our finances in public, which is why we have historically been closed and unwilling to share full accounting of our balance sheet." As the post went on, it became clear there might be other reasons they were reticent to publish it.

The post revealed that Fanfaron had lost $1.827 million buying ETH during the crypto downturn: "I made mistakes by buying ETH multiple times when I thought it was an advantageous investment for the project, but then to protect downside risk and with the plan to reinvest at a better time, I sold our position in ETH, multiple times.."

It also revealed that the project is paying its team members apparently enormous salaries: $5.4 million in team compensation, plus another $1.5 million spent to buy out a co-founder. "We're a scrappy startup," he wrote, after also acknowledging that he pays himself $50,000 a month ($600,000 a year) — a number he already reduced by $600,000 from his original salary of $1.2 million per year. He ultimately promised in the post to pay back his trading losses.

As for the game, well, it exists, which means it's already ahead of a lot of crypto games. They launched an alpha version of the game in late July after multiple delays, with Fanfaron explaining, "Our vision was to create something similar to WoW... we were, however, overeager and optimistic with regards to how much time it takes to create such a world." The alpha is a multiplayer pixel art world where characters can walk around and talk to each other, and interact with buildings. Battling, leveling, quests, missions, and breeding are apparently all yet to come.

Indian financial crimes authority searches the offices of CoinSwitch, the country's largest crypto company

Financial crime agents from India's Directorate of Enforcement searched the offices of CoinSwitch and the residences of some of its executives. CoinSwitch is the largest crypto company in India, and is backed by Andreessen Horowitz, Tiger Global, and Coinbase Ventures.

According to the CEO, there's nothing to worry about, the search had nothing to do with money laundering (that's specific), and the agency only executed the search to learn more about its business model and user onboarding. Seems like a pretty weird way to do that, but what do I know.

TechCrunch, however, reported that four people familiar with the investigation stated the investigation was to do with potential violations of foreign exchange laws, and that the agency suspects CoinSwitch acquired $200 million in shares in violation of forex laws.

eth.link service about to go offline because domain owner is in prison

Some people might be familiar with ENS, the "Ethereum Name Service", which seeks to be a web3 equivalent of DNS. If you've seen people with usernames ending in .eth, that's an ENS address. The problem is that .eth is not a functional top-level domain, and so many services relied on eth.link to surface these DNS records to other services.

However, the eth.link domain is only rented for a set period of time and needs to be renewed. ENS DAO tweeted that the domain's owner, Virgil Griffith, is "unavailable". By this, they mean that he is currently serving his first of five years in prison for helping North Korea evade sanctions. With Griffith "unavailable", the project has found itself at the mercy of GoDaddy. Welcome to the decentralized web3 we've all been promised!

Although GoDaddy previously allowed another person to renew the domain on Griffith's behalf, they reversed that decision, and now say they intend to allow the domain to expire on September 5.

The ENS DAO issued a series of tweets urging people to switch to a different service, given the risk that the domain could be snapped up. "If the name expires and is acquired by someone with ill intent, the damage they could do via phishing is substantial - so please update your links and alert your users of the issue immediately," they wrote.

The latest Pokémon-themed rug pull nets $708,000

It's not much compared to at least three separate crypto Pokémon ripoffs since February that have each taken millions, but apparently the love of Pokémon still drew people in to the tune of $708,000.

One might think the blatant rip-off of the Pokémon IP (which belongs to a notoriously litigious company) might have been a red flag, but nevertheless, people bought in to PokémonFi — a play-to-earn game that seems like a much worse version of the original thing.

The project and tokens first launched in April. After apparently running off with the money, the project deleted its Twitter account, though its website remained live.

Researcher zachxbt alleges that teenager who stole crypto worth $37 million in 2020 is responsible for a spate of crypto-related Twitter hacks

BirdPartner - The Secret Twitter Panel
Today, I will start to lease out access to my exclusive Twitter panel. This support hub allows you to request usernames, ban accounts, restore access to stolen/locked accounts, report instances of rule violations, and more.
Due to the extreme nature and power of the panel, access will be restricted to a limited amount of users at once. There are several packages; each becoming more discounted the bigger package you buy.Post on SWAPD advertising access to Twitter panel (attribution)
In 2020, a Canadian teenager used SIM swapping to steal US$37 million in Bitcoin and Bitcoin Cash from a single person. Canadian police announced his arrest in November 2021 after he tried to buy a rare gaming username, also writing that they had seized around $5 million of the stolen funds.

Now, crypto investigator zachxbt thinks the same individual is indirectly responsible for a slew of compromised Twitter accounts that have then been used to promote crypto scams, including those of Beeple, DeeKay, and others. According to zachxbt, he has been selling access to a Twitter admin panel, which allows employee-level access to Twitter tools. This might explain how many of the accounts were compromised despite being protected by multi-factor authentication. According to zachxbt, "It's still unclear as to how Redman gained access to the panel to make elevated requests & reset passwords. As of now it appears the method stopped working".

10% of Ethereum nodes at risk of being booted from cloud hosting provider

The virtual server provider Hetzner posted a clarification that using its service to mine Ethereum — either in its current form or in the promised proof-of-stake version — violates its terms of service and that the company has been "internally discussing how we can best address this issue".

16% of all hosting nodes (a category that makes up 62% of all nodes by network type) are hosted with Hetzner — 10% of all nodes. If 10% of all Ethereum nodes being supported by one company sounds awfully centralized to you, wait til you hear that 30% run on Amazon services.

SudoRare NFT exchange rug pulls for $820,000

Six hours after its launch, the team behind the new SudoRare NFT exchange took the money and ran, deleting the project website and social media. People had already warned about issues in the project contract that signaled it could be a scam, but those were either unseen or unheeded by the people who put a collective $820,000 of various tokens into the project.

At least one of the scammer wallets interacted with the Kraken crypto exchange, a U.S.-based exchange that requires KYC, so it's possible that Kraken could help identify the scammers — though they've not made any public moves to do so.

Group charged for stealing over $4 million in transaction reversal scheme

The U.S. Attorney's Office of the Southern District of New York announced charges against three men responsible for a scheme in which they stole millions from cryptocurrency exchanges and traditional banks. The group used stolen identities to buy cryptocurrency from various crypto exchanges, then convinced the banks that the fraudulent transactions were, well, fraudulent. The banks would refund the transactions to the thieves, who would then make off with both that and the cryptocurrency they had purchased.

The three men were charged with wire fraud, bank fraud, and identity theft charges, and face potential decades in prison if convicted.

Bank run leaves BendDAO with 5 ETH and a bunch of NFTs they can't sell

Honestly, who can blame BendDAO for failing to consider that the hype bubble around Bored Apes and other NFT projects might not last forever! "We underestimated how illiquid NFTs could be in a bear market when setting the initial parameters", the project wrote in a governance proposal.

BendDAO allows people to take out loans with their NFTs as collateral. However, if the floor price of those NFTs drops too far and the borrower doesn't pay back some of the loan to adjust its risk rating, other people can bid on the NFT.

The problem with this whole plan was revealed when lenders' confidence was shaken when it was reported that $5.3 million in Bored Apes were at risk of liquidation. Panicked users withdrew their assets from the platform, resulting in a bank run that drained the reserves to a low of 5 ETH (~$8,200). BendDAO had other assets, of course: the NFTs below the liquidation threshold. However, a lack of interested buyers willing to pay the minimum prices (95% of the collection floor price) left the project in a tough spot.

Since the extremely close brush with a liquidity crisis, the project has begun to consider a proposal that would reduce the threshold at which NFTs can be liquidated, reduce auction and liquidation protection periods, remove the 95% floor price bid requirement, and increase interest rates.

OpenSea's stale listing issue burns another collector

An illustration of a white penguin wearing a bow tie and gold crown on a light blue backgroundPudgy Penguin #2951 (attribution)
The same issue that led to OpenSea paying out $1.8 million to users who lost their NFTs is apparently still alive and well (despite OpenSea's introduction of an "Inactive listings" panel). Users who have listed NFTs for sale and never removed the listing have occasionally been surprised in a very bad way when their NFT suddenly sells for an old price — sometimes much different than the going prices for those NFTs.

In this case, a person successfully sold their Pudgy Penguin NFT for 8.69 ETH a year ago ($27,500 at the time of sale). Those particular NFTs have been having a comeback lately, and so the collector bought the same NFT back — this time for 20 ETH ($31,500 at the time of sale). However, an old listing from their previous ownership was still active, and someone was able to snap up the NFT from them for only 9.89 ETH ($15,600) within minutes.

The collector's near-instantaneous $20,000 loss has a happy ending for them, though — the person who bought the NFT was willing to reverse the trade.

Someone buys a Bored Ape, gets scammed out of it two hours later

An illustration of an ape with black fur, sticking out its tongue, wearing a tuxedo t-shirt and a gold stud earringBored Ape #887 (attribution)
In what might be a new record, someone bought a Bored Ape NFT for 70.69 ETH (~$116,000) and had it stolen from them less than two hours later. The scammer quickly flipped the NFT for 61.6969 ETH (~$101,000), then bridged the funds through RenBridge to cover their tracks.

Hodlnaut seems to have lied about their Terra exposure

When Terra was collapsing in May, concerned users of the Hodlnaut lending platform asked whether the firm was exposed. CEO JT wrote on Twitter, "Hodlnaut as a firm did not take any losses on UST, users who held/bought UST on our platform did". Their social media manager wrote, "[Holdnaut] had 0 company exposure to [Anchor Protocol]", referring to the Terra-based lending protocol.

However, documents from the legal proceedings surrounding the now-underwater firm revealed that Hodlnaut had 317 million UST, which it liquidated at a loss when the previously dollar-pegged UST hit $0.85. In the filing, they wrote, "Due to the market's lack of liquidity, the average exit price of UST to USDC was around 42 cents on the dollar, resulting in realized losses to Hodlnaut Trading Ltd of about USD 189.7M. As a result, Hodlnaut's total debt to depositors of USD 500M became backed by realisable assets of around USD 315M as of 13 May 2022 due to the de-pegging event."

Swyftx crypto exchange cuts 21% of staff

The Australian crypto exchange Swyftx laid off 21% of its workforce, affecting 74 employees. One such employee was on her honeymoon in Hawaii when she learned she was suddenly out of a job. The company blamed "an uncertain business environment, with levels of domestic inflation not seen in over two decades, rising interest rates, highly volatile markets across all asset classes, and the potential for a global recession" for the cuts.

Swyftx had announced in June that it would be merging with trading platform Superhero in a $1.5 billion deal.

Sub-primate lending: $5.3 million in Bored Apes used as loan collateral are at risk of being liquidated

Chart showing the floor price of the Bored Ape collection over the last 30 days. On July 20 the floor price was 92.7 ETH; it is now at 69.4 ETH.Bored Ape Yacht Club floor price over the last 30 days (attribution)
When people started sinking hundreds of thousands of dollars into Bored Ape NFTs, it wasn't long before people came up with the genius idea of using those NFTs as collateral for loans. BendDAO is one such platform offering the service, allowing people to post their Ape as collateral in exchange for a crypto loan equal to 30–40% of the Bored Apes collection's floor price. At one point, one borrower had 10,000 ETH (~$17.5 million) in loans from BendDAO against his 60-ape-strong collection (though he since repaid the loans).

However, NFTs in general haven't been doing so hot lately, and the Bored Apes haven't been immune from the slump. As the Bored Apes collection floor price has decreased, more than 15% of the apes used as collateral for BendDAO loans are in the "danger zone" — close to being auctioned off. These 45 apes are valued at roughly $5.3 million. Liquidation could lead to cascading liquidations, as the auctions could themselves cause the floor price to decrease.

As Bennett Tomlin put it, "I hate that y'all somehow created a risk for cascading liquidations of JPEG backed loans".

The FDIC sends cease and desist letters to FTX US and other entities who claim their products are insured

The Federal Deposit Insurance Corporation (FDIC) sent cease and desist notices to the FTX US crypto exchange and four websites that they allege are falsely claiming their products are FDIC-insured. Most people are familiar with FDIC insurance because it covers up to $250,000 per account with federally regulated banks, but crypto companies enjoy no such protections.

In July, the FDIC and Federal Reserve sent a cease and desist to Voyager, a company currently undergoing bankruptcy proceedings, which drew in customers with false promises that USD entrusted to the company were safe from any potential Voyager collapse thanks to FDIC insurance.

After choosing to keep the crypto, divorcee wants a do-over

A letter-writer seeking advice from the Financial Times wrote, "I got divorced last year and as part of the financial agreement, my ex-wife and I agreed that I would keep my cryptocurrency assets while she got the lion's share of my pension and other investments, and we split the family home. When we negotiated last autumn, the crypto market was riding high and I was convinced it would go higher still, but following the recent crash my digital assets have more than halved in value. I'm now considerably worse off than my ex and worried about my financial future. She says I only have myself to blame and won't discuss the matter further. Can I go to court to renegotiate our financial order?"

As expected, the lawyer consulted by the FT informed them that their chances of a do-over were pretty slim, and suggested that individuals negotiating a split with a partner don't take on all the high-risk assets like this person did.

As of August 20, Bitcoin was trading at around $21,200–70% lower than at its all-time-high of $69,000 in November 2021. Other major cryptocurrencies are faring similarly poorly, with ETH down 67% to $1,630 from its all-time-high of $4,890.

DegenTown NFT project rug pulls after promotion from Magic Eden

Cel shaded illustration of a humanoid figure with purple skin smirking. They have a roof of a house on their head with Japanese characters and lanterns hanging from it, and are wearing a grey cape with a black clasp. Behind them is fire and a night sky with a large moon.Degen Degen #4901 (attribution)
DegenTown, a collection of brightly-colored cel shaded humanoid figures, launched with much promotion from Magic Eden on their Launchpad minting service. Magic Eden aims to provide collectors with a level of trust in the project by requiring creators to disclose their identities to the company.

DegenTown first suffered issues in July, when the project's Twitter account was allegedly hacked, and users were tricked into approving a contract that drained their wallets. One individual behind the project promised they would compensate the users whose wallets were drained, but never did.

The project ultimately rug pulled instead, with Magic Eden acknowledging it in a blog post and Twitter thread on August 17. They wrote that they were "urging the original Degen Town founders to return the funds" — however, this is complicated somewhat by the fact that the identity of one of them is not known to Magic Eden. They explained, "Our prior policy was that we doxxed founders. NFTRamo claimed to be an advisor but we learned that he was actually the founder of the project and used being an advisor as a way of skirting our doxxing processes." This is not the first time their identity verification process was sidestepped — they introduced it after a serial rugpuller used their platform to anonymously sell and then rug pull another NFT project, but that same person was able to do it again only a few months later.

The DegenTown project minted 8,000 NFTs for 3 SOL apiece, bringing in $923,000. Beyond that, the creators took 7.5% in royalties on secondary sales. Magic Eden has said that they were able to get one of the two founders to return the funds they'd earned from the mint, and that they planned to use them to compensate buyers.

Bribe Protocol team disappears after raising $5.5 million

The Bribe Protocol promised a DAO infrastructure tool where "token holders get paid to govern", and raised $5.5 million in funding in January to work on their extensive roadmap. However, the project leaders have effectively disappeared. There are no posts on the project's Twitter account since May, their Medium page has been untouched since March, and the Discord is a ghost town aside from the occasional message asking about the status of the project and the inevitable reply that the developers had rug pulled.

Bribe Protocol was incubated by Advanced Blockchain AG and Composable. Composable might ring a bell, because in February its pseudonymous head of product, 0xbrainjar, was revealed to be Omar Zaki, who had settled with the SEC over charges that he had misled investors while operating an unregistered investment advisement company and hedge fund. At the time, he wrote that "I do not want a mistake in my youth to cloud all of the team's efforts", though the SEC charge was filed less than three years prior, when Zaki was 21.

An employee of Figment Capital, one of the investors in Bribe Protocol, claimed that the project had formally shut down and returned 86% of the funds raised from institutional investors, though "retail took a huge L". However, this doesn't appear to have been publicly announced by the project.

Bribe Protocol is, of course, not to be confused with the other Bribe Protocol, a defi project that was abandoned in May 2021.

Experienced crypto trader suffers $470,000 theft after signing malicious message

An experienced crypto trader lost $470,000 to a hack when they signed a malicious message that permitted an attacker to drain all of their USDC stablecoins from their crypto hot wallet. Unlike most crypto hacks that involve approving malicious contracts, this hack was perpetrated when the trader was tricked into simply signing a malicious message. Signing a message tends to be a safer and more common action with crypto wallets, and so traders are not always as careful, though as this trader discovered, it can still have catastrophic impacts.

Crypto.com reportedly lays off hundreds more employees than they announced, tries to hide it

In mid-June, Crypto.com announced they would be laying off 260 people, or around 5% of their employees. However, The Verge has reported that "hundreds more" employees were quietly laid off since then. They report: "Crypto.com has been trying to limit knowledge of the extent of these departures even within the company, with CEO Kris Marszalek refusing to answer a question about the total figure in a recent employees-only town hall meeting."

Marszalek also tried to discourage employees from leaking about the layoffs, saying at a company town hall: "A number [of employees laid off] makes for a great headline, it's a great thing to gossip about. [But] as co-owners of this company, you should ask yourself, 'is it in my interest for this number to be out there?'" One employee told The Verge that this did nothing to assuage their fears about the layoffs, and that "[it felt like] I got told to shut up and get back to work. It felt insulting."

One recent review on Glassdoor claims that Crypto.com had laid off "more than 1,000 employees", and alleged that "They've removed the company directory so we can't see the numbers go down."

South Korea moves to block sixteen unregistered crypto exchanges

The South Korean Financial Services Commission (FSC) reported to investigators sixteen unregistered crypto exchanges that were serving Korean users and hosting events marketing to Koreans. The exchanges include MEXC, KuCoin, CoinW, CoinEX, ZB.com, Bitglobal, Bitrue, Poloniex, BTCEX, Phemex, XT.com, Pionex, BTCC, DigiFinex, AAX, and ZoomEX.

Although the FSC informed the exchanges they needed to register and report their activities, the exchanges did not comply. The FSC has moved to block access to these exchanges in the country, including by asking communications authorities to block access to the exchanges' websites. The FSC pointed to the risk of user data leaks and money laundering as motivations for their action.

Those operating unregistered exchanges in the country could face up to five years imprisonment or a ₩50 million ($37,900) fine, and be barred from registering in the country for five years.