Silvergate bank takes $718 million loss liquidating debt during FTX collapse

Silvergate, a Californian bank that primarily serves the crypto industry, and which was FTX's primary banking partner, scrambled to cover $8.1 billion in withdrawals during the chaos surrounding the FTX collapse. This forced the bank to sell some assets at steep losses, liquidating debt at a $718 million loss. This loss far exceeds the bank's total profits since at least 2013, writes the Wall Street Journal.

Silvergate announced that they would be cutting 40% of their staff — around 200 employees. They also announced that they would be taking a $196 million impairment charge on assets they purchased from Diem — Facebook's blockchain-based payment system once known as Libra. "Given the significant changes in the digital asset industry landscape, this charge reflects the Company’s belief that the launch of a blockchain-based payment solution by Silvergate is no longer imminent," they wrote.

Silvergate's stock plunged 41% on the news.

New York Attorney General sues Celsius CEO Alex Mashinksy for defrauding investors

Alex Mashinsky sitting onstage, wearing a Madonna microphone and a t-shirt reading "Banks are not your friends." with the Celsius logoAlex Mashinsky (attribution)
As Celsius bankruptcy proceedings continue on, the New York Attorney General has come out with a lawsuit against the company's founder and CEO, Alex Mashinsky. Attorney General Letitia James accuses Mashinsky of "engag[ing] in a scheme to defraud hundreds of thousands of investors", promoting his company as a "safe alternative to banks while concealing that Celsius was actually engaged in risky investment strategies".

The lawsuit seeks to permanently bar Mashinsky from engaging in similar business in the state, and seeks disgorgement, damages, and restitution.

Sports company Fanatics jettisons its majority stake in NFT company Candy Digital

"Over the past year, it has become clear that NFTs are unlikely to be sustainable or profitable as a standalone business," wrote CEO Michael Rubin in an internal email explaining the decision to sell off Fanatic's share in NFT company Candy Digital. Candy Digital has created NFTs in partnership with MLB, Stranger Things, WWE, and various Nascar teams.

Fanatics purchased a 60% stake in Candy Digital in a $100 million Series A round in October 2021. Now, they've sold the stake to a group of investors led by Galaxy Digital for an undisclosed amount, in what Rubin wrote was "a rather straightforward and easy decision". He highlighted Fanatics' ability to "realize [when] things aren't working", he wrote in the email.

Logan Paul threatens to sue CoffeeZilla for exposing his (alleged) grift

A pixel art bear with a duckling(?) headA "Bearling" zoo creature from Paul's promised CryptoZoo game (attribution)
Influencer-turned-(alleged)-crypto-grifter Logan Paul has threatened to sue scam researcher CoffeeZilla, who has exposed Paul's "CryptoZoo" blockchain game project as his latest (alleged) scam. Paul's (alleged) scam history is not to be confused with any of the other long list of (alleged) crypto scams perpetrated by his brother, Jake, which CoffeeZilla has also helped expose.

After many attempts over the span of a year to contact Paul, directly and via his manager (who CoffeeZilla did speak with), Paul has claimed that CoffeeZilla made no attempts to get his side of the story. Instead of addressing any of the many well-researched claims about the flagrant (alleged) grift that Paul has been perpetrating, he has instead reacted in typical (alleged) cryptoscammer fashion: by threatening to sue CoffeeZilla.

NFTs reportedly stolen from influencer CryptoNovo, flipped for at least $525,000

A pixel art human head, wearing a grey hoodie and with a brown goatee, on a red-brown background.CryptoPunk #4608 (attribution)
Crypto influencer CryptoNovo tweeted, "I just got hacked!!! Are you kidding me!?!" with a screenshot of valuable CryptoPunk NFTs being transferred from their account. An attacker apparently transferred from CryptoNovo's wallet two or three CryptoPunks, one Bored Ape, one Mutant Ape, three Meebits, and two CloneX NFTs — all "blue chip" NFTs that fetch high prices.

The thief quickly flipped all of the NFTs for around 417 ETH ($525,000). It's unclear if one of the CryptoPunks was stolen, as it was transferred to a wallet to whom CryptoNovo has previously made transfers, but that NFT too was sold for 75 ETH ($94,200).

The thief made a pretty penny, but the loss to CryptoNovo is more substantial based on how much money they spent on the NFTs. They had purchased the Bored Ape in August 2021 for 30 ETH (then around $100,000), and CryptoPunk #4608 in September 2021 for 290 ETH (then $850,000).

The attack appears to have been phishing-related.

Coinbase settles with New York regulators, set to pay $100 million

Coinbase agreed to a $100 million settlement with the New York State Department of Financial Services over charges that the company violated anti-money laundering laws by performing insufficient background checks. Coinbase will pay a $50 million fine, and has committed to spending another $50 million to strengthen its KYC program.

Early last year, Coinbase was ordered by regulators to hire an outside monitor to oversee compliance. Under the settlement agreement, Coinbase will be required to continue the monitoring for at least another year as it works to improve its compliance.

Fake NFTs listed under verified collections on Magic Eden marketplace

A simplistic drawing of a girl holding a broom with a carrot at the end of it. She has blue skin and there is a bird next to her.ABC #2157 (attribution)
Magic Eden, as with many NFT marketplaces, has a verification layer that shows popular projects as "verified" to reduce the chances of people being tricked by NFTs with the same images and names that are not a part of the official collection. However, someone was able to list NFTs they had arbitrarily created on the Magic Eden marketplace in such a way that they appeared as though they were a part of a verified collection of "ABCs" NFTs. The issue also affected a handful of other collections, including the popular "y00ts" collection.

Magic Eden acknowledged the issue in a tweet, asking users to contact their support if they had bought any of the fake NFTs. Various users on Twitter had reported buying the spoofed NFTs, paying 20–50 SOL ($266–$666) for fake NFTs that appeared as though they were a part of a verified collection that usually sold for around 165 SOL ($2,200).

Clicking in to the NFT details showed that they were a part of a different collection that was not verified, but they appeared in listings among the verified NFTs, and were in some cases quickly purchased by collectors who thought they were taking advantage of a seller's mistake in listing the NFT.

Crypto payments platform Wyre to shut down or "scale back"

Crypto payments platform Wyre inked a deal to be acquired by Bolt in a $1.5 billion deal in April 2022, but the acquisition was canceled in September after the two firms "mutually agreed to continue their partnership as independent businesses". However, Wyre only made it a few more months before CEO Ioannis Giannaros abruptly emailed employees on December 30 to inform them that he would be liquidating the company, terminating services, and that nearly all employees would be let go.

Giannaros told Axios that the company was "still operating but will be scaling back".

Hackers steal $3.2 million from GMX whale

A chart of the GMX price over a one day period on January 3, 2023. Around 3pm there is a sudden drop from around $41.50 to just above $38, which then rebounds to around $40 fairly quickly before drifting back up towards $41.50.GMX/USD on January 3 (attribution)
An apparent wallet compromise netted hackers 82,519 GMX tokens from a wallet belonging to a GMX whale. The hackers exchanged these tokens for 2,627 ETH ($3.18 million), then swapped the assets cross-chain.

The sudden sale of such a large number GMX tokens (which are comparatively illiquid compared to much larger cryptocurrencies like Ethereum) caused the price to suddenly drop from ~$41.50 to ~$38 per token, though the token price recovered fairly quickly. GMX is the native token for the defi exchange of the same name.

Users of several NFT marketplaces see porn, Big Bang Theory stills appearing instead of their NFT images

A grid of Goonie NFTs from the RetroGoons project. Most are illustrations of monkey figures, but one has been replaced with a photograph of a nude woman.A collection on Magic Eden during the compromise (attribution)
Users of NFT marketplaces and explorer applications including Magic Eden, NFT Explorer, and Rand Gallery were briefly shown pornographic images and still frames from the Big Bang Theory television show instead of the expected NFT images after someone compromised a third-party image caching service. The affected NFTs used images stored on the decentralized storage system IPFS, and the NFTs themselves were not impacted. However, a third-party caching service used by the NFT platforms caused in some cases very unexpected images to display instead.

"What the fuck is happening, why my 5 years old kid watching porn JPEGs on [Magic Eden's] website" tweeted one shocked user.

The issue was resolved fairly quickly, although some visitors continued to see the unsavory images for a while longer due to browser caching.

Streamer and crypto founder DNP3 admits to gambling with investor funds

DNP3 is a streamer known for giving away large sums of money to other streamers. He is also a crypto founder behind projects including CluCoin, the Xenia play-to-earn game, the Gridcraft play-to-earn game platform, and the Goobers NFT project.

On January 3, he released a statement on Twitter explaining that he had become addicted to gambling over the past year — specifically mentioning his use of the Stake cryptocurrency casino. He wrote, "Every dollar I could find I would put into Stake in hopes of winning big. Even when the big wins did happen it wasn’t enough. Eventually I lost everything. In addition to my own life savings, I also irresponsibly used investor funds to try and 'get my money back' from the casino which was wrong for so many reasons."

The impact on the projects he created — and those who put money into them — is not yet fully clear.

Hacker drains the wallet of the RTFKT crypto project's COO

A silver robot wearing a pink octopus as a hat, and with light pink wings and rainbow-colored pointy teethCloneX #17088, which the hacker flipped for almost $14,000 (attribution)
An attacker drained the wallet of Nikhil Gopalani, the COO of the Nike-owned crypto organization RTFKT. Most of the stolen NFTs were RTFKT NFTs, and the priciest were the nineteen CloneX NFTs that the thief flipped for between $5,850 and $13,960 each, for a total of 112.3 ETH ($136,000). Gopalani's wallet was also relieved of nineteen RTFKT Animus Eggs (priced at a cumulative ~$20,000 based on floor price) and eleven RTFKT x Nike Dunk Genesis CRYPTOKICKS NFTs (priced at a cumulative $3,300).

Gopalani tweeted that "I was hacked by a clever Phisher (same phone # as apple ID) & sold all my clone x / some other nfts... Obviously pretty upset and hurt by this and I havent really been able to move all day." He didn't provide further details, but a tweet by RTFKT CTO Samuel Cardillo suggested that Gopalani may have provided passwords or private keys to a phisher.

Gemini founder writes open letter to Barry Silbert begging for the return of $900 million

Tyler and Cameron Winklevoss, both wearing Gemini t-shirtsTyler and Cameron Winklevoss, Gemini founders (attribution)
On November 16, Genesis halted withdrawals from its lending service shortly after the FTX collapse. Gemini, who partners with Genesis lending to power their Earn program, halted withdrawals hours later. On December 3, the FT revealed that Genesis owes Gemini's customers $900 million.

On January 2, Cameron Winklevoss — one of the twin brothers who operates Gemini — published an open letter on Twitter to Barry Silbert, the founder and CEO of DCG, which is the parent company of Genesis. DCG also has a substantial amount of money that they have borrowed from Genesis.

"More than 340,000 Earn users ... are looking for answers. These users aren't just numbers on a spreadsheet, they are real people. A single mom who lent her son's education money to you. A father who lent his son's bar mitzvah money to you. A husband and wife who lent their life savings to you. A school teacher who lent his children's college funds to you. A policeman, and so many more. All together, these people entrusted more than $900 million of their assets to you," wrote Winklevoss, without any apparent self-reflection on the fact that these words could just as easily have been (and should also be) addressed to him by those same customers of his service.

Bitcoin core developer claims his wallets were compromised, more than 216 BTC (~$3.6 million) stolen

One of the original Bitcoin core developers, Luke Dashjr, claimed on Twitter that attackers had managed to compromise multiple wallets — which he described as both hot and cold wallets — to steal all of his Bitcoins. Dashjr originally blamed the attack on a PGP key compromise, but later said the PGP compromise was only a part of a much broader hack where attackers also bypassed two-factor authentication and got access to what he had believed to be a cold wallet.

Dashjr complained on Twitter about having trouble getting in contact with the FBI about the theft. Some joked about the irony of a Bitcoin maximalist running to the FBI when his coins were stolen.

There are some questions about the veracity of Dashjr's claims, given his supposed security practices, the extent of the breach, and some of his odd comments on Twitter.

Swiss crypto broker Covario goes bust

Just before the holidays, employees of the Covario crypto broker based in Zug, Switzerland learned that their employer was no longer solvent. Attempts to secure a buyout had been unsuccessful, and the company is entering bankruptcy.

The firm had attempted to keep up appearances that all was well, spending lavishly and even opening new offices several weeks before entering bankruptcy. However, it turns out that employee pension contributions had not been being paid since early summer. Employee salaries had not been paid since October.

Tax loss harvesting service emerges to help collectors unload their worthless NFTs

If you bought an NFT for $1,000 and it's now worthless, you still have to find someone willing to buy it before you can claim it as a loss on your taxes. A project called "Unsellable" has emerged to fill that need—buying worthless NFTs for $0.01 (for a small fee) so that people can claim the losses.

"This tool really helped me unload those embarrassing early NFT Hype investments. Should shave about $1000 off my tax bill", a supposed user writes in a testimonial blurb on the site (although the testimonials appear to be faked).

Perhaps someone has finally found a viable crypto business model after all.

Wallets linked to Sam Bankman-Fried's Alameda Research unexpectedly begin selling off $1.7 million in tokens

Wallets known to be controlled by Alameda Research, the crypto trading firm founded by Sam Bankman-Fried and currently in bankruptcy with the other FTX companies, suddenly began selling off large quantities of mostly small altcoins on December 28. Whoever controls the wallets swapped the tokens for Tether stablecoins or Ethereum, then tumbled the funds through cryptocurrency mixers — a strong sign that this was probably not just the FTX liquidators consolidating wallets.

Altogether, an estimated $1.7 million was moved through various services to obfuscate the flow of funds.

3Commas finally owns up to API key leak

In October, several people reported losing more than a million dollars each from accounts that were connected to the 3Commas trading platform. 3Commas vociferously denied that there was any security breach of their crypto trading service, instead claiming that some of their users were at fault for being phished and having assets stolen. Now that someone has published the API key database that was exfiltrated from 3Commas, however, the company has finally owned up to the breach. They confirmed the data in the files was legitimate on Twitter, and wrote that they had contacted Binance, Kucoin, and other exchanges with whom they integrate to ask them to revoke all API keys connected to 3Commas.

3Commas did not come off looking very good after this incident, after they spent weeks denying any breach and accusing those who were concerned 3Commas had been compromised of spreading misinformation and "FUD".

Researcher zachxbt wrote that he had verified 44 victims who had lost a combined $14.8 million due to the leak, although he acknowledged that this was only the number of people he could verify and that the total number of people affected was likely much higher.

Midas Investments platform closes after revealing they're $63.3 million in the hole

Midas Investments announced suddenly that they would be shutting down their platform, which previously enabled users to deposit cryptocurrencies which would then be invested in various defi projects. The team revealed that they had only $51.7 million in assets compared to $115 million in liabilities, a fact they had not disclosed to most of their employees.

Users with assets on the platform will see a significant haircut in what they are allowed to withdraw. Midas intends to keep 55% of the Bitcoin, ETH, or stablecoins held by users in their accounts, as well as any rewards users had earned.

Lest the users be too upset that more than half of their assets no longer belong to them, fear not: Midas will be making up the difference in a new, valueless token that does not yet exist, but that will be associated with some future project that Midas has not described yet. You're welcome!

They've also announced they will be pivoting to "CeDeFi". Yes, that is indeed short for "centralized decentralized finance". No, I am not joking.

Mango Markets exploiter arrested despite claiming all his actions were legal

A very close-up portrait of Avraham Eisenberg, who has curly red hair and a beardAvraham Eisenberg (attribution)
In October, an exploiter was able to manipulate collateral prices to extract tokens from the Mango Markets defi project, ultimately resulting in a $116 million loss for the project. The exploiter then tried to create a governance proposal in which he would agree to return some of the stolen funds in exchange for an agreement that the protocol would not try to freeze the tokens or pursue criminal charges.

It quickly became apparent that a man named Avraham Eisenberg was behind the exploit. In screenshots leaked from a conversation in a private Discord channel shortly before the attack, Eisenberg talked about the exploit he had planned. "I'm investigating a platform that could maybe lead to a 9 figure payday. Should I do it?" he wrote. When someone replied, "unles[s] it is highly illegal", Eisenberg responded: "Are there rules these days?" When someone suggested responsibly disclosing the vulnerability to the protocol, Eisenberg refused, saying the bug bounty was likely to be too small.

Eisenberg later owned up to the attack, tweeting a thread in which he wrote that he "was involved with a team that operated a highly profitable trading strategy last week. I believe all of our actions were legal open market actions, using the protocol as designed, even if the development team did not fully anticipate all the consequences of setting parameters the way they are."

The feds apparently disagreed with his evaluation, and arrested Eisenberg in Puerto Rico on December 26. He is charged with commodities fraud and commodities manipulation.

BTC.com suffers $3 million attack

In a press release, BIT Mining reported that their subsidiary BTC.com had experienced a "cyberattack" in which $700,000 of customer assets were stolen. They also reported that $2.3 million of company assets were stolen, though they said that some of these funds had been recovered. They wrote that they were working with Shenzhen law enforcement to investigate the attack, but provided few details on the attack vector.

BTC.com is the seventh largest Bitcoin mining pool, which also operates other crypto mining services. Its parent company, BIT Mining, is publicly traded on the NSYE.

Millions of dollars of user funds stolen in BitKeep wallet hack

BitKeep, a popular cryptocurrency wallet in Asia, suffered a hack in which at least $8 million in various cryptocurrencies were stolen from user accounts.

BitKeep has claimed that attackers were able to compromise a version of their software and introduce malicious code which enabled them to drain user funds. BitKeep recommended their users contact the team behind BNB Chain on social media to plead with them to freeze an address used by the hackers, although the attackers had already begun to tumble the funds.

This is the second BitKeep-related hack in the last few months. In October, hackers stole more than $1 million worth of BNB when the Swap feature of the BitKeep wallet was exploited.

Rubic cross-chain exchange hacked, $1.4 million in user funds stolen

The Rubic cross-chain exchange suffered an exploit in which attackers were able to siphon a total of around $1.4 million in user funds from their wallets. The exploit was enabled by an error by the project team, who erroneously added the USDC stablecoin address as a router, which allowed attackers to arbitrarily withdraw USDC held by Rubic users. The hacker then transferred the stolen funds through the Tornado Cash cryptocurrency mixer.

Rubic paused their project to limit further thefts, and stated they would pursue audits before coming back online. They also stated that they would "strive to compensate for the losses".

Police arrest two executives of shuttered AAX exchange

The Hong Kong-headquartered AAX cryptocurrency exchange suddenly halted withdrawals on November 13, claiming they were performing temporary system maintenance. However, withdrawals were never re-enabled, and customers quickly realized the exchange was unlikely to resume withdrawals. Some even began searching for the whereabouts of AAX execs, showing up at offices in Hong Kong and Singapore.

Now, Hong Kong police have arrested Liang Haoming and Thor Chan, two executives connected to AAX. Police have reportedly accused the men of using the maintenance excuse to halt customer withdrawals while dealing with a liquidity crisis.

Defrost Finance fails to rug pull

Defrost Finance, a defi trading platform built on the Avalanche Network, apparently tried and failed to rug pull its users. The project claimed on December 23 that they were "sad to announce that our V2 has suffered a hack, with an attacker using a flash loan function to withdraw funds". They later announced that this "hacker" had also managed to exploit the v1 version of their project. Altogether, it appeared that tokens valued at around $12 million had been stolen.

Observers were quick to notice that the "hack" was made possible by the addition of a fake collateral token, which was then manipulated to liquidate the protocol's users, suggesting the "hack" was likely an inside job.

On December 26, Defrost claimed that the "hacker" had miraculously returned the money. The announcement didn't seem to convince the project's users, who left comments like, "It was never hacked. You tried to rug your users".

Defrost Finance's team had previously run a project called FinNexus, which also suffered a "hack" in May 2021 that was widely believed to have been a rug pull.

The latest Pokémon knockoff is stopped in court

Knock-off Pokémon crypto products — including NFTs and blockchain games — have been so prevalent in the past two years that they've earned their own collection on this blog.

Now, it seems that The Pokémon Company International (TPCI) is doing something about it. They hired private investigators to try to locate and serve a company called Kotiota with legal papers, though ultimately were unsuccessful in finding their offices or any employees.

Kotiota was engaged in unusually brazen Pokéfraud, sending legal letters to news outlets who had written about the real Pokémon games and insisting they be named as a developer. Their website falsely claimed Kotiota had been working on various recent Pokémon games, and the company had even forged an agreement with TPCI to claim they had a license agreement.

Kotiota had been planning to release a Pokémon-based play-to-earn blockchain game and collection of NFTs in January 2023, but an Australian court has barred the company from doing so, and ordered them to stop using the Pokémon brand or claiming to have developed the games.

FTX executives Caroline Ellison and Gary Wang plead guilty to criminal charges, are cooperating with investigation

Side-by-side photos of Caroline Ellison and Gary WangCaroline Ellison and Gary Wang (attribution)
Two of Sam Bankman-Fried's inner circle, Caroline Ellison and Gary Wang, have pled guilty to federal criminal charges and are cooperating in the case against Sam Bankman-Fried. Ellison was the CEO of Alameda Research, the trading firm founded by Sam Bankman-Fried in 2017. Wang was a co-founder of FTX alongside Bankman-Fried, and served as its CTO.

Ellison's and Wang's pleas were announced in a short message by U.S. Attorney Damian Williams, who did not elaborate on what the charges were. He again urged any others who had knowledge of criminal activity at FTX to come forward, and warned that these were not the last charges he expected to file.

Simultaneously with the charges from the Justice Department were civil complaints from the Securities and Exchange Commission, which alleged that both had been involved "in a multiyear scheme to defraud equity investors in FTX". In particular, the SEC accused Ellison of artificially manipulating the price of FTT, the FTX-issued token that formed a large portion of Alameda's balance sheet. The SEC accused Wang of creating a backdoor in FTX software that allowed Alameda to move customer funds from FTX for use in its trading activities.

The CFTC filed an amendment to their complaint against Sam Bankman-Fried, adding Ellison and Wang as defendants.

Paxful crypto marketplace delists ether, citing "scams that have robbed people of billions"

Peer-to-peer crypto marketplace Paxful announced that it will be delisting ether, citing "scams that have robbed people of billions".

So close. You're almost there.

Paxful CEO Ray Youssef said in an email to the platform's claimed 11.6 million customers that the decision was based on Ethereum moving from proof-of-work to proof-of-stake, not being decentralized, and spawning an ecosystem of scammy Ethereum-based altcoins. The email featured a header photo of Youssef himself posing triumphantly, and Youssef spent much of the subsequent day tweeting memes he made from pictures of himself.

With the loss of ether, the platform will only allow swaps of Bitcoin, Tether (USDT), and USDC — despite both Tether and USDC being Ethereum-based tokens.

Swan Bitcoin releases a new product to streamline the process of losing your house speculating on Bitcoin

"Convert home equity into Bitcoin", Swan Bitcoin advertises with their new home equity product. Relatively few details are available on the new loan product they're offering, but they advertise that you can close on the loan in "as little as 5 days", obtain loans with no income or credit check, and obtain loan amounts from $20,000 to over $1 million. What could go wrong?

"Rates starting at 7.5%, with 80% Bitcoin upside appreciation", they say. Downside risk is, naturally, not mentioned.

For those unfamiliar, Swan Bitcoin is a US-based Bitcoin-only crypto platform (although CEO Klippsten would surely yell at me for saying it is a "crypto platform", as he insists at every opportunity that "Bitcoin is not crypto").

Core Scientific Bitcoin mining firm files for bankruptcy

Core Scientific warned in October that it was teetering on the edge of bankruptcy, so it was no huge surprise when the company filed for bankruptcy protection on December 21. Core Scientific is one of the largest Bitcoin miners, responsible for around 10% of the computing power on the Bitcoin blockchain. The company operates around 143,000 miners, and host an additional 100,000.

Core Scientific is only one of many Bitcoin miners in distress, as low Bitcoin prices and other factors make mining much less profitable. Other mining firms, including Argo Blockchain and Greenidge Generation, have warned that they may face bankruptcy in the near future. Some firms, such as Iris Energy, have powered off a significant amount of their mining capacity.

Auros files for bankruptcy

Crypto market maker Auros filed for bankruptcy protection in the British Virgin Islands, not long after a missed loan repayment to the Maple defi lender in late November signaled something was amiss. At the time, Auros attributed the missed payment of 2,400 wETH (valued at ~$3 million at the time) to a "short-term liquidity issue as a result of the FTX insolvency".

Now, however, Auros is seeking a "light touch" liquidation path that would allow them to continue operations while they develop a restructuring plan. Meanwhile, they have missed another Maple loan repayment, this time for $7.5 million.

Court filings have revealed that "a significant proportion of the Company's assets" are frozen with FTX, leaving the company insolvent. These assets have an estimated value of $20 million.

Waves founder announces a new, "undepeggable" stablecoin as USDN even more dramatically de-pegs

A one year chart of the USDN price, showing it repeatedly dipping below the intended $1 peg, and becoming very unstable beginning in late August 2022USDN price over the last year (attribution)
Apparently adopting Do Kwon's belief that the solution to a crashing algorithmic stablecoin project is creating another project, Waves founder Sasha Ivanov has announced, "I will launch a new stable coin". This comes after Neutrino USD — aka USDN — has spent much of the year de-pegged, recently plunging dramatically to around $0.50.

The USDN stablecoin remained within a few cents of its intended USD peg for about a year, before losing its peg in April. Since then, it has had a pretty bumpy road, spending much of the year more than a few cents off the dollar peg, and dropping much farther below it in early November.

A less-than-enthused commenter responded to Ivanov's Twitter announcement of a new coin, writing, "My brother in Christ more stablecoins to depeg is not the answer". "It will be undepeggable", replied Ivanov. Well, in that case.

Scammer steals fourteen Bored Apes from one victim, flips them for over $1 million

A Bored Ape with grey fur, wearing a red baseball cap, a green army jacket, and a blindfold over its eyesBAYC #2060, which the scammer claimed to want to license (attribution)
A scammer spent a month setting up a con in which they stole fourteen Bored Ape NFTs belonging to one individual. Posing as a casting director at a real film production company—complete with a fake website, a fake partner company, and fake individuals pretending to have signed deals with the company—a scammer was able to convince the collector that they were interested in paying $13,000–$17,000 to license a Bored Ape for use in an animation.

After some back-and-forth, with legitimate-looking contracts and falsified emails appearing to come from the real company's real founding director, the NFT collector was asked to use their crypto wallet to sign a contract, via the fake company partner website that had been set up.

When the collector did so, the smart contract drained the collector's wallet of its fourteen pricey Bored Ape NFTs, then accepted the highest offers that were outstanding on each of the Bored Apes, netting 852.9 ETH. The scammer converted the stolen ETH to the DAI stablecoin, making off with $1,075,000 in DAI.

Over 100 Bitcoin moved from dormant QuadrigaCX wallets in "unauthorized" transfer

QuadrigaCX was a Canadian crypto exchange that shut down and filed for bankruptcy in early 2019, with hundreds of millions more in liabilities than in assets. It later became apparent that the exchange's founder, Gerald Cotten, had taken customer funds for his own personal use. Cotten reportedly died shortly before the exchange's collapse, though there have been questions around whether he may have faked his own death to pull off an exit scam. Poor accounting processes have made the bankruptcy process — which is still ongoing — a nightmare for those in charge of trying to locate and recover assets.

Now, someone has moved 104 BTC (priced at $1.75 million today) from what is supposed to be a Quadriga cold wallet. In 2019, Quadriga's bankruptcy trustee Ernst & Young revealed they had erroneously transferred these roughly 100 Bitcoin to that wallet, which they could not access. Oops.

Most of the stolen BTC was transferred to a privacy service to obfuscate its ultimate destination. Ernst & Young subsequently confirmed the transfers were "unauthorized transactions" and not performed by them.

Raydium exploit results in ~$5 million loss

An exploit on the Solana-based Raydium decentralized exchange project resulted in a total loss to the platform of $4.4 to $5.5 million. The attacker's actual spoils were less — somewhere around $2–3.5 million.

Raydium claims the exploit was a trojan attack, though they've provided no further evidence to substantiate this. According to Raydium, a trojan allowed an attacker to compromise the private key belonging to the pool owner account. With control over the private key, the attacker was able to withdraw a mix of assets from the pools. They bridged at least $2 million to Ethereum and tumbled them through Tornado Cash; another $1.5 million remained on the Solana chain, where some projects began freezing assets.

Raydium has offered a 10% "bug bounty" to the hacker if they return the stolen funds.

Auditing firm cuts ties with crypto clients, deletes Binance's "proof of reserves" report they issued days prior

The accounting firm Mazars Group has ceased working with cryptocurrency clients, including Binance, KuCoin, and Crypto.com. A statement from the firm attributed their decision to "concerns regarding the way these reports are understood by the public".

On December 7, a branch of Mazars Group had published a "proof of reserves" report for Binance — though it only accounted for Bitcoin, and did not reflect liabilities for Binance's lending product. On December 9, Crypto.com also published a "proof of reserves" report that had been produced by the firm.

As of December 16, the Binance audit — which had been hosted on Mazar's website — had been deleted.

"Proof of reserves" reports have been offered by various cryptocurrency exchanges in lieu of proper audits, but have reasonably failed to reassure many customers of those exchanges. These reports do not involve the scrutiny that would be applied by a full audit — they only reflect a snapshot of assets at a point in time, and do not show a firm's liabilities.

Donald Trump teases a "major announcement" that's just NFTs

Social media post by Donald Trump: "MAJOR ANNOUNCEMENT! My official Donald Trump Digital Trading Card collection is here! These limited edition cards feature amazing ART of my Life & Career! Collect all of your favorite Trump Digital Trading Cards, very much like a baseball card, but hopefully much more exciting. Go to collecttrumpcards.com/ & GET YOUR CARDS NOW! Only $99 each! Would make a great Christmas gift. Don't Wait. They will be gone, I believe, very quickly!"Donald Trump NFT announcement (attribution)
It's finally happened. The siren song of NFT grifting proved too much for Donald Trump.

Trump supporters got all excited when Trump posted on social media to tease a "major announcement". Was he going to run for speaker of the House? Return to Twitter? Unveil a presidential running mate?

His supporters were surprised — and not exactly thrilled — when the announcement turned out to be a collection of 45,000 NFTs (sorry, "digital trading cards") featuring artwork of himself in heroic outfits and poses. The NFTs are "just" $99 apiece, and money goes to Trump, not his campaign.

Even some of his strongest supporters were nonplussed. Steve Bannon said, "I can't do this anymore," and opined that he should fire whoever advised him to make the collection. A source working for Trump said that he is "supposed to be running for president right now", and questioned how "fleecing our supporters for $99" was in service of that goal.

Nevertheless, the NFTs seemed to sell decently well, with more than 30,000 minted by that evening.

Binance withdrawals surge due to concerns over the company's reserves

Binance, the largest cryptocurrency exchange in the world, processed at least $1.9 billion in withdrawals in a 24-hour period—considerably more than it processes in a typical day. In fact, the company briefly had to pause withdrawals of the stablecoin USDC because they needed to swap various stablecoins in order to continue to process withdrawals—something they could not do while the New York-based bank was closed.

These mass withdrawals signal concerns about Binance, whose users are looking for reassurance that the company is not engaged in similarly shady practices as their now bankrupt rival FTX. Recent news that the US Department of Justice is considering criminal charges against the company has not helped reassure customers.

Sam Bankman-Fried arrested

Sam Bankman-Fried pictured from the shoulders upSam Bankman-Fried (attribution)
Sam Bankman-Fried has been arrested by Bahamian authorities, who said in a press release that they took the action "follow[ing] receipt of formal notification from the United States that it has filed criminal charges against SBF and is likely to request his extradition".

Argo Blockchain faces possible bankruptcy

When the company accidentally published draft bankruptcy documents to its website, Argo Blockchain was forced to reveal that it is in last-ditch negotiations to raise capital. The company stated that they were still hoping to avoid a Chapter 11 filing, but that they were "at risk of having insufficient cash to support ongoing business operations within the next month". The company has been trying to raise $25–35 million since late August, and when a $27 million equity deal fell through in early November, the miner acknowledged it might soon have negative cash flow.

As a result of the inadvertent publication of bankruptcy documents, the London Stock Exchange and Nasdaq paused trading on the company's stock. The company published a statement saying they had requested trading be re-enabled, since they had not actually filed for bankruptcy (yet).

U.S. Department of Justice is considering filing criminal charges against Binance

Reuters has reported that the U.S. Department of Justice is considering filing criminal charges against Binance executives, including CEO Changpeng Zhao ("CZ"). This comes as a part of a four-year-long criminal investigation into money laundering and sanctions evasions. According to Reuters, DoJ prosecutors are "split" on whether to take aggressive actions against Binance executives, or to spend more time reviewing evidence.

Reuters reports that Binance's defense attorneys have argued, among other things, that "a criminal prosecution would wreak havoc on a crypto market already in a prolonged downturn." Well then.

Decentraland adds that one feature we've all been waiting for: landlords

A square made up of blue, grey, and red pixels representing a land mapThis Decentraland plot just sold for $19,000 (attribution)
If the idea of dropping thousands of dollars to "own" a plot of "land" in the Decentraland metaverse doesn't do it for you, have I got news for you: Decentraland has just introduced official support to allow its users to become a part of the rentier class. Exciting!

In case you were wondering, I checked, and yes. Someone has already come up with the concept of metaverse mortgages.

Personally, I'm excited to see other horrific parts of the system of homeownership get recreated virtually. Metaverse homeowners associations. Metaverse building permit red tape. Metaverse NIMBYs. Metaverse property liens. Metaverse neighborhood watch.

Lodestar Finance attacked and drained of nearly $7 million in assets

The Arbitrum-based crypto lending platform Lodestar Finance was attacked by an exploiter who was able to manipulate the price of the plvGLP token, allowing them to "borrow" the entire available liquidity of the Lodestar platform with the inflated token. The attacker made around $6.4 million in profit. Some of the stolen tokens were burned—hence the difference between the attacker profit and the loss to the platform.

According to Lodestar, they think they may be able to recover around $2.4 million of the stolen funds. Meanwhile, they have attempted to contact the thief to try to negotiate the return of stolen funds. "We will generously reward your collaboration," they wrote on Twitter.

CEO of crypto media outlet The Block resigns after it's revealed he took tens of millions in loans from Sam Bankman-Fried

The Block is a cryptocurrency-focus media outlet that was originally founded in 2018 by Mike Dudas. In 2020, Michael McCaffrey became CEO of the company, and in 2021 he led a buyout to make the company employee-owned. Dudas says that at the time, he believed "McCaffrey's family was wealthy and loaned him money to buy out [his stake] and the VCs so the team could assume full independent ownership."

Now it has come to light that McCaffrey had actually taken a series of loans amounting to $43 million from Sam Bankman-Fried, founder of the now-collapsed FTX exchange and Alameda trading firm. According to McCaffrey and various others at The Block, he was the only one who knew of the arrangement.

The original $12 million loan was used for the company buyout. Another $15 million loan in January 2022 went towards company operations. A third $16 million loan was used... to buy personal real estate in the Bahamas.

Meanwhile, The Block's disclosures page reads, "It is critical that The Block is fully transparent about our own financial holdings so as to avoid any appearance of bias or impropriety. The most valuable asset that we hold and strive to earn again every day is our reader's trust. Therefore, we have implemented a financial disclosure policy that is industry leading."

Class action lawsuit against Jimmy Fallon, Paris Hilton, Justin Bieber, Gwyneth Paltrow, and others accuses them of undisclosed NFT promotions

Paris Hilton, wearing a neon green dress, sits onstage next to Jimmy Fallon, who is at his desk on the Tonight Show. He is holding up two cardboard printouts of Bored Ape NFTs.Paris Hilton and Jimmy Fallon talk up their Bored Apes in an excruciating segment of The Tonight Show in January 2022 (attribution)
A class action lawsuit against the company behind Bored Apes and its executives, those on the board of "Ape DAO", a whole host of celebrity promoters and brands, and the MoonPay service has accused the group of a scheme to employ celebrities to promote Bored Ape NFTs and ApeCoin without proper disclosures. The suit goes on to claim that MoonPay, a service known for brokering big-ticket celebrity crypto purchases, was used to obfuscate payoffs, and itself benefitted from the publicity earned from brokering these deals. The suit alleges that each of the "promoters" were compensated in some way, either through direct payments or via financial stake in MoonPay.

The promoters listed in the lawsuit are: talent manager Guy Oseary, digital artist Beeple, Madonna, Paris Hilton, Jimmy Fallon and related entities, Justin Bieber, Gwyneth Paltrow, Serena Williams, Diplo, Post Malone, Snoop Dogg, Kevin Hart, the Chainsmokers, Steph Curry, Future, The Weeknd, DJ Khaled, and Adidas.

Former Love Island Australia contestant Vanessa Sierra rug pulls her NFT project

A simple illustration of a blue blob shape wearing a rainbow pastel beanie and beige hoodie with a yellow smiley face on it, smoking a cigarette.SmolBoy #128 (attribution)
After a stint on Season 2 of Love Island Australia, Vanessa Sierra has made a career as a successful OnlyFans performer. In 2021, she also began offering crypto trading tips in a Telegram channel that now has more than 10,000 subscribers, and in March 2022 she launched her first NFT project: "Smol Boyz Land". The project was supposed to involve acquiring metaverse land, and was based around her opinion that "it's clear statistically and exponentially that [metaverse land] prices will trend upwards". What could go wrong?

An investigation by OKHotshot has reported that Sierra rug pulled the NFT project, using project funds to wash trade her own NFTs before cashing out. In total, she withdrew 120 ETH (at the time worth around $316,000; today worth around $151,000). Throughout, Sierra claimed that "absolutely none of the funding has been taken by founders".

In addition to the allegations around her NFT project, OKHotshot identified other shady behavior by Sierra, such as pumping-and-dumping other NFTs she'd purchased, and placing lowball offers in $DAI on big-ticket NFTs, hoping that their owners would mistake them for ETH.

After OKHotshot published the thread, Sierra blocked them on Twitter, and deleted the NFT project's Twitter account and website.

Digital Surge enters administration

The Australian crypto broker Digital Surge entered voluntary administration several weeks after suspending withdrawals in the wake of the FTX collapse. In their announcement, executives proposed a "proposed rescue plan" that will be voted upon by customers, and which would involve cash infusions from the company's directors.

Some of Digital Surge's customers reported having entrusted the company with hundreds of thousands of dollars from their superannuation funds (retirement pension). "I lost everything," said one customer who had put his entire superannuation of more than AU$150,000 (~US$102,000) into his Digital Surge account, where it is now frozen.

FTX-hosted NFTs break after website is redirected to a restructuring page

A Coachella NFT on the Magic Eden platform titled "Reflection '15 #47". The image for the NFT is a large grey square, because the image can't be loaded.Broken FTX NFT shown on an external NFT platform (attribution)
After FTX declared bankruptcy, the entire FTX.us domain was redirected to a page providing information on the bankruptcy proceedings.

However, NFTs that had been minted on the FTX platform relied on metadata from an API at that domain, meaning that the NFTs are now pointing to broken links. Owners of these NFTs can still see that the NFT exists, but images no longer work—even when viewing the NFTs in their own wallets, or when listing them for sale on other platforms.

Other projects that rely on the FTX NFT platform's API, such as the Coachella NFT project, also broke: the Coachella NFT platform shows 0 NFTs in existence. Those NFTs still show up where they are listed on external NFT platforms, although the images and metadata are broken.

Koinly lays off 14% of staff

UK-based crypto tax company Koinly announced they would be letting go of 14% of their team. This amounted to more than 100 employees, including the entire London- and Sydney-based teams. The company attributed the decision to the crypto market decline, as well as "fewer people reporting crypto on their tax returns". Hmm.

The layoffs were reportedly "terribly" executed, with days of uncertainty and employees receiving little or no notice before being fired.

Swyftx lays off another 40% of employees

Following a round of layoffs in August that cut 21% of their workforce, Australian cryptocurrency exchange Swyftx has just performed another round of layoffs less than four months later. This time they're cutting 40% of their staff, around 90 people.

Swyftx's CEO admitted the company had grown too fast. He attributed the decision to the continued downturn in the crypto market and shaken trust as a result of FTX, though Swyftx says they had no direct exposure to the bankrupt crypto exchange.