Web3 is Going Just Great

The apparent operator of the bot tweeted at Chang, accusing him of theft: "We would like to discuss a bounty with you. We are offering a 10% bounty of any funds stolen from our bot, which are yours to keep if you return the remaining 90%." In other tweets they suggested they might try to take legal action against Chang for the "theft".

Revolut had previously been one of the crypto platforms to limit US trading in Solana, Cardano, and Polygon tokens after the SEC identified those tokens as securities in lawsuits against Binance and Coinbase.

The platform later partnered with other companies to produce NFT collections for franchises including The Matrix and Game of Thrones, the latter of which featured hilariously bad artwork. The company then pivoted to a broader web3 focus as the NFT bubble collapse led the broader crypto downturn.

However, their promised web3 platform never materialized, and now the project has reached "the end of [its] runway".

Nifty's is not to be confused with Nifty Gateway, a separate NFT platform run by the embattled Gemini crypto platform.

The project was audited by SolidProof and InterFi. The project announced that they intended to relaunch the token, and asked the exploiter to consider returning 80% of the funds, keeping 20% as a "bug bounty".

One such service is LeetSwap, which describes itself as the "The #1 DEX ecosystem for elite degens built on the leetest blockchains", and which recently launched its service on Base. On August 1, LeetSwap was exploited after an attacker discovered a function that allowed them to manipulate token prices on the project for a profit of around 342 ETH (~$624,000).

LeetSwap attempted to contact the hacker via social media, asking them to return all but 50 ETH (~$92,000, or around 15% of the stolen funds).

Someone intending to transfer Tether stablecoins amounting to $20 million apparently didn't think it was important to double-check the address, and fell for such an attack.

However, only 51 minutes after the theft, the victim had managed to get Tether to add the thief's address to its blacklist, freezing the assets and thwarting the attack. The rapidity of the freeze led various people to question who the victim might be who could get Tether to intervene so quickly.

A pseudonymous crypto user called "Bald" announced that they would be selling $BALD tokens on the Base network, and the token — apparently named after the hairless Coinbase CEO Brian Armstrong — quickly skyrocketed in price. However, the token deployer emptied tokens priced at around $25.6 million from the liquidity pool two days after launch in apparent rug pull. The token price quickly plunged by around 90%.

Conspiracy theories emerged that the Bald account was in fact operated by Sam Bankman-Fried, the former CEO of FTX who is on house arrest under strict supervision and without access to most websites as he awaits trial later this year.

In addition to the unregistered offerings charge, the SEC alleges Heart and PulseChain misappropriated $12.1 million to fund Heart's lavish lifestyle. Among other things, he purchased a McLaren sports car, five luxury watches, and a $4.3 million 555-carat black diamond called "Enigma", allegedly using funds from the sale.

Curve itself lost $61 million to the exploit. AlchemixFi was exploited for around $13 million in assets, and JPEG'd suffered a $11 million loss. MetronomeDAO suffered a $1.6 million loss, Ellipsis Finance lost $68,600, and Debridge Finance lost around $24,600.

Altogether, somewhere between $88 million and $100 million was taken, though some exploits appeared to be whitehat actions intended to preserve funds. The primary exploiter also later returned some of the stolen funds, refunding the entire amount to AlchemixFi and 90% of funds to JPEG'd in exchange for a 10% "bug bounty".

Blockchain security firm SolidProof had audited Kannagi in June.

However, serious flaws in the Pond0x contract resulted in traders losing at least $2.2 million as people discovered that anyone could transfer coins belonging to other people. People quickly began rushing to steal coins from one another.

Pauly0x responded by blaming the traders who bought and sold the tokens, and spent the following day variously posting on Twitter that he was teaching people a lesson, that it wasn't his fault that people lost money, and suggesting that the flaw was part of a bigger plan for the project. "No one stole your tokens lol. The contract is literally designed as such," he wrote to angry traders accusing him of a rug pull. He added to the website a message reading, "GREED KILLS".

DeFiLabs claimed on Twitter that the platform "encountered an unexpected issue" while "undergoing maintenance and updates".

DeFiLabs had been audited by blockchain security firm CertiK.

After prominent Bitcoiner Jameson Lopp tweeted that the issue "look[s] more like a hack", CoinsPaid replied "Our team is aware of the issue... Please wait for the official announcement on this topic." Crypto researcher zachxbt responded, "The issue is you got hacked by North Korea that's what lol", referencing the increasing suspicion that the Lazarus group may be behind the disruption. Sure enough, CoinsPaid later confirmed that they had been hacked for $37.3 million, and announced that they suspected the Lazarus Group was behind it.

Some have been speculating that there are connections between this incident and the $60 million hack of the Alphapo crypto payments processor on July 22. Alphapo also provided services to various online casinos. Indeed, there seem to be connections between Alphapo and CoinsPaid, and they may in fact be operated by the same people.

EraLend paused various functions of their protocol while they investigated the attack, and said they were working with various security research organizations and law enforcement to investigate the theft.

The BlockSec security research firm warned other projects that re-used a portion of code to be cautious if they re-used a portion of code from SyncSwap, because they could also be vulnerable.

HypeDrop disabled withdrawals on their platform, and wrote on Twitter that they were experiencing "ongoing deposit and withdrawal issues" due to "an issue on the cryptocurrency provider's side."

If the vote passes, and it likely will given the massive supply of tokens available to the team, the team will have just decided to distribute around $60 million in remaining funds to themselves, leaving $12 million to the token holders.

One commenter on the proposal described the move as "a pure financial crime". Another wrote, "The community has already explained in painstaking detail why we're not interested in this. The pro-rata value is an extreme lowball and fails to account for many of the team's misuses of the treasury without the community's consent. The team also prematurely unlocked the team and VCs' vesting tokens, so they are the majority token holders, making this vote meaningless and a total farce."

Conic Finance announced that they had disabled deposits on the front-end of their project, and were working to patch the vulnerable smart contract. The team also attempted to contact the exploiter via blockchain message, asking if they "would be open to discussing any potential next steps".

As a photo produced by a federal agency, NASA's image is not copyrighted. However, NASA policy outlines "strict laws and regulations", including that "NASA is not approving any merchandising applications involving Non-Fungible Tokens (NFTs), as they are not consistent with the categories of products the agency is approved to merchandise... NASA does not wish for its images to be used in connection with NFTs."

The NFTs don't seem to be exactly flying off the shelves. The collection contains 500 copies, and according to the website, only 55 have been sold in the week following the project's release, garnering Mrs. Trump $4,125.

According to the court filing, the Secret Service was authorized to seize up to $58.5 million after establishing there was probable cause for wire fraud, bank fraud, or money laundering. The affidavit describes "organized, international criminal money laundering syndicates operating cryptocurrency investment and other wire fraud scams" which allegedly fraudulently induced victims to "transfer money into shell companies, at which point the money underwent a series of transfers, generally ending overseas, designed to conceal the source, nature, ownership, and control of the funds".

The scheme reportedly involved fake crypto sites that tricked victims into depositing money under the belief that they were investing it. Like many such scams, the sites appeared to show victims' investments increasing in value, inducing them to deposit more funds. However, when they tried to withdraw, they found they could not.

The announcement referred to wanting to "design a game that's more in line with what the community has been asking for", a nod to the backlash from the Neopets community when the company decided to go web3. In September 2021, one of the most popular Neopets fan communities tweeted, "The Neopets community overwhelmingly rejects the new NFT cashgrab project. We're hard pressed finding someone outside of the NFT community that wants this."

Holders of Neopets NFTs seemed somewhat split on the announcement that the NFTs would remain tradable on secondary markets, but would not be incorporated into any game. Some described the project as a "rug", and were disappointed that the NFTs they'd purchased would never be useful in-game. "Once an NFT has no use, the price tends to tank", one person (accurately) remarked. Another commented that they'd always viewed the NFTs as little more than a collectible, and were satisfied with it never going beyond that.

As an inspector in the bankruptcy, Heywood would have had access to details from the investigation by the bankruptcy trustee. Heywood is, incidentally, also charged with threatening the trustee in an attempt to get him to pay out $2 million in crypto. Shortly before the alleged kidnapping, Pleterski stated in an interview for the bankruptcy proceedings that Heywood had been "still, by the way, uttering threats, and very dangerous, violent threats, to me over Instagram comment sections and text messages".

Heywood has told reporters he is innocent.

On July 14, a community manager wrote on Discord that "Hector Network ha[d] suffered significant damage to its ability to operate" after the Multichain collapse, and that the project faced a choice between liquidating the treasury and winding down or migrating to a new blockchain and trying to rebuild. The community chose the former.

According to a post on Discord, the winding-down process will likely take 6 to 12 months as the project appoints a liquidator, legal counsel, and auditor.

Soup was exposed by crypto sleuth zachxbt, who also described how the scammer had spent some of his ill-gotten funds on exclusive Roblox items that sell for "high 5 figs".

Geist paused their smart contracts on July 6, then reenabled the withdraw and repay functions on July 9, while waiting for news from Multichain. Now that Multichain has confirmed that the missing hundreds of millions will not be recovered, Geist has announced they will not reopen. If they were to do so, the platform would almost immediately take on bad debt as people exploited the price discrepancies.

Multichain added, "Just to be clear this is in no way an attempt to blame Chainlink oracles which worked as they should. There are no oracles for the Multichain assets themselves because there was the expectation to exchange them 1:1. Nobody is to blame except Multichain here."

The Multichain project claimed in a lengthy Twitter thread that the team attempted to keep the project running by using stored credentials on Zhaojun's home computer, thanks to access provided by his sister. However, they say that the July 6–7 movement of $130 million out of the project was an "abnormal" transfer by an unknown party. They claim that the July 9–10 transfer of around $107 million was his sister attempting to preserve assets by moving them into wallets she controlled. According to the team, his sister also was arrested on July 13, and "the status of the assets she has preserved is uncertain".

"Due to the lack of alternative sources of information and corresponding operational funds, the team is forced to cease operations," they wrote. They also claimed that they don't have control over the domain pointing to the frontend of the project, and so are unable to take the project offline, and resorted to pleading with GoDaddy for help in doing so.

"Honestly he deserves jail for this level of cryptography incompetence alone," wrote crypto personality 0xfoobar on Twitter.

Alongside the indictment from the DOJ, the Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), and Federal Trade Commission (FTC) each filed their own separate lawsuits against Mashinsky and Celsius.

These latest lawsuits join an existing lawsuit, filed in January 2023, against Mashinsky by the New York Attorney General.

According to Todd in a YouTube video, "We do not need to do KYC. [...] You should not have to give them because the U.S. government or whatever other [expletive] government in the world says that you need to. You do not need to. You just do not." Well, in that case.

Todd was also accused of trying to artificially inflate the price of the DGTX token by buying it on third-party exchanges, writing out his plans in excruciating detail with a customer who provided him funds to use on pumping the token.

However, they stated that the main reason they decided to shut down the project was the "significant and mounting regulatory challenges", pointing to the recent claim by the BarnBridge defi project that they were under SEC investigation. According to OptyFi, they are concerned that the $OPTY token or OptyFi vault tokens could be deemed securities, or that the OptyFi vaults themselves could be determined to be a "Mutual Fund type vehicle".

OptyFi promised to refund any tokens purchased during the most recent token sale, but many community members still accused the project team of rug pulling. OptyFi had previously raised $2.4 million in a seed funding round in January 2022.

This is the second apparent hack of Platypus Finance, following an $8.5 million hack only ten days after it launched in February 2023. The first hack also involved flash loans.

This was actually the second attack to impact Rodeo Finance in a single week. On July 5, the same day as their public token launch, the project was exploited for around $90,000 thanks to a bug in a smart contract.

Oulahyane is charged with wire fraud, two counts of access device fraud, and aggravated identity theft.

AlgoFi had raised a seed funding round of $2.8 million in November 2021, and was backed by groups including Union Square Ventures, Arrington XRP Capital, Pillar VC, and Y Combinator. They had also received other investments from groups including Jump Capital and Coinbase Ventures.

AlgoFi accounts for over half of the value on the Algorand blockchain, which itself has experienced a marked decline from earlier this year.

People are becoming increasingly suspicious that the Multichain thefts may be an inside job, not least because Multichain's CEO suddenly disappeared in late May and hasn't been located since.

Like many platforms, Arkham Intelligence allows its users to earn rewards for referring new customers. Users are given a unique link to invite others to sign up, which then credits them for the referral. However, some people have observed that the unique string used to identify the user is simply their email address, base64-encoded. This is a simple way of encoding a piece of text, which is trivially reversed to expose the email address.

A user who noticed the encoding strategy tweeted: "ABSOLUTE LMAO. ALL #ARKHAM REFERRAL LINKS SHARED ON TWITTER IS DOXXING EVERYONE BECAUSE THE EMAIL IS IN THE REFERRAL URL". They then went on to decode some referral links from anonymous crypto personalities, writing "HOW DOES IT FEEL TO GET DOXXED???"

Arkham Intelligence quickly updated its referral program to use an encryption algorithm that can't easily be reversed in this way, and the CEO apologized for what he said was an early version of creating referral links that was never updated.

"hey isn't the most profitable use of this just to put a bounty on whale wallets and then kidnap people? like ... did that come up in any meetings?" wrote one Twitter user. "We are now one step closer to onchain assassination markets", wrote another. Others, however, were more optimistic, speaking about "doxx[ing] scammers", "democratiz[ing] tools [the government] already has", and, in the longer term, "accelerat[ing] privacy".

BitOasis wrote on their website that the license had in fact been suspended, but stated that they had not begun offering services to the segments covered by the license (institutional and qualified investors).

BitOasis is among the most popular crypto exchanges in the Middle East and North Africa (MENA) region.

The Arcadia Finance team paused related smart contracts to prevent further attacks, and began working with various crypto security projects to investigate the attack. They also sent on-chain messages to the attacker, threatening law enforcement action and suggesting they "return 90% of the funds... and walk away".

One victim lost 36 NFTs, among them a Bored Ape NFT they'd purchased for around $130,000. Altogether, the attackers successfully stole NFTs worth between $750,000 and $900,000, depending on how resale value is estimated.

The following day, Gutter Cat Gang announced that they'd regained control over the Twitter accounts and taken down the malicious tweets. They stated that they were working with law enforcement to investigate the theft, but to the dismay of some victims, did not describe any plans to compensate those who lost assets.

On July 6, an attorney posted in the project's Discord server to say that BarnBridge and "individuals associated with the DAO" were under investigation by the U.S. Securities and Exchange Commission. The attorney wrote: "To reduce potential further legal liability, existing liquidity pools should be closed, and no more liquidity pools should be started. All work on Barnbridge related products should stop, and individuals should no longer be compensated for any work they do related to Barnbridge until further notice." Decentralized!

It's not terribly surprising that BarnBridge chose to drop the facade of decentralization when the SEC came knocking, however. A recent case by the CFTC against the Ooki DAO suggests that the mere veil of "decentralization" will not be sufficient to avoid legal liability for the actions of a DAO. However, it is interesting to see the SEC now (at least allegedly) going after a relatively small player in the defi world.

Several hours later, Multichain wrote that they had stopped service, and that "all bridge transactions will be stuck on the source chains. There is no confirmed resume time."

In May, Multichain suffered a bizarre slew of issues, culminating in the project team admitting that their CEO had gone missing and could not be contacted. So far, they have not reported his return.

This is also not the first hack suffered by Multichain. In January 2022, the project, bafflingly, publicly announced a security vulnerability that was affecting their tokens, without first instructing users to safeguard their tokens. Attackers quickly followed the instruction manual provided to them by Multichain, making off with around $3 million in assets.

So anyway, that's exactly what happened. NFTPerp announced that they would be sunsetting their popular beta project after accruing bad debt.

How they're going about it has been controversial among the successful traders on the platform: essentially, those who were in profit will lose their unrealized gains, while those who had lost money in their trades will have their losses waived. "Nftperp stealing profits from winner [unrealized profit and loss] to backstop losers UPNL is insane to me", wrote one commenter. Another wrote, "If anyone else is considering NFT perps, please have the 'what happens when the illiquid market goes to zero overnight' plans clearly in place from the beginning."

Not to be deterred, the team is already preparing to launch a "v2". May it go as well as their first attempt.

LoveMake wrote on Twitter that "I am dyslexic and didn't notice that the Burnt Toast acc was scam. It was very similar to the original & Verified." They appeared to blame Twitter's new verification process, writing, "@Twittersupport can you explain the meaning of the word 'verified'? we're waiting for days every time we change pfp or display name and then I got scammed by verified account with exact the same name and pfp as Doodles founder in million views thread?"

Several days later, they posted a thread again criticizing the prevalence of crypto scammers on Twitter. "I put millions $ into web3 projects, with over 90k$ into Twitter ads. I was rugged many times and finally robbed but not broken. Thanks to twitter the most profitable web3 activity now is a scam. Shouldn't Twitter pay more attention to its own security?"

However, shortly after the DAO was created, the governance token was exploited. Attackers were able to take advantage of a flaw in the smart contract, with two exploiters stealing around 35 ETH (~$69,000). The DAO paused the contract to prevent further thefts.

File this one under "adding insult to injury".

The developer reportedly posted a message to Telegram, apologizing for taking the funds. "I must confess that I have fallen into a severe addiction to online gambling and casinos," the developer reportedly wrote. "Despite being only 22 years old, I have struggled to overcome this addiction, and unfortunately, I have lost nearly $300,000 over the past few months, including after the launch of [Encryption AI]."

They added, "Although I cannot guarantee when or if I will be able to make amends and relaunch [Encryption AI], I promise that I will make every effort to become a better person." Oh, well, in that case.

Now, it's happened again, and some reports are throwing around even more massive numbers like $42 billion. In reality, the exploiters were able to mint massive quantities of tokens on multiple networks, with their wallet balances showing numbers in the billions. However, complete lack of liquidity for these tokens meant their "billions" are worth substantially less.

According to crypto research firm Beosin, the attackers have so far cashed out around 5,196 ETH (~$10.1 million) in liquid assets. Poly Network suspended services shortly after the attack.

Although Kraken argued against the order, describing it as an "unjustified treasure hunt", the judge determined that the IRS was justified in its request, and ordered Kraken to cough up the records. The IRS alleged that although the exchange has more than 4 million users, and has processed $140 billion in trades since its inception in 2011, only 288,330 of those users have filed tax returns.

According to Phillips, it took months before he was able to get in touch with Huobi and convince them to act on the leak. Phillips first notified Huobi of the leak in June 2022, and after repeated efforts to contact the company, the credentials were only revoked in June 2023.

Huobi has tried to downplay the hack, first stating that the user data leak was "on a small scale (4,960 individuals)" and "does not involve sensitive information and does not affect user accounts and fund security". They also claimed the leaked OTC data was test data. "The log shows that only [Phillips] has downloaded, and [Phillips] has also stated that he has deleted. Therefore no leakage is actually caused," they wrote.

According to CoinGecko, Huobi is the seventeenth-largest cryptocurrency exchange by volume.