Bitcoin mining hardware manufacturer Bitmain stops paying employees
Bitmain, the manufacturer of popular Bitcoin mining equipment (known as ASICs), is apparently in such dire financial straits that it can no longer pay employee salaries. Local media reported that all "bonuses and incentives" were nixed by the Beijing-based company, and the firm is considering cutting all wages by 50%. They also wrote a letter to employees, informing them that they would not be paying out September salaries until a review later in the month.
Stars Arena exploited for $3 million
Stars Arena, an Avalanche-based dupe of the popular Friend.Tech project, suffered a serious exploit in which an attacker drained tokens priced at around $3 million.
Avalanche co-founder and CEO Emin Gün Sirer drew widespread mockery when announcing that "the amount lost is only $3m", apparently not perceiving that $3 million is a massive sum to most people. He also didn't mention that it constituted almost the entire total TVL of the Stars Arena project, which was left with less than $1 in tokens following the attack.
Stars Arena was fortunate, in that the hacker ultimately contacted them offering to make a deal. The attacker returned 90% of the funds, keeping $300,000 as a "bounty".
THORSwap temporarily shuts down web interface as FTX hacker tries to launder $131 million
The THORSwap decentralized exchange has put its web interface into "maintenance mode" in hopes of thwarting the thief who stole over $400 million from the FTX exchange as it was mid-collapse in November 2022. Those funds have remained largely for almost a year, until the thief began moving funds recently — interestingly, coinciding with the start of Sam Bankman-Fried's criminal trial.
The attacker tried to launder around $131 million of the stolen assets by routing them through services including Railgun and THORSwap. After "consultation with advisors, legal counsel, and law enforcement", THORSwap decided to pause its web interface in hopes of making money laundering more challenging for the attacker — although the thief could still interact with the THORSwap smart contracts directly, if they so chose.
Some criticized THORSwap for apparently caving on its censorship-resistant, decentralized ethos. Others, however, saw the move as understandable given the THORSwap developers reside in the United States, which has recently cracked down on mixing services that facilitate the laundering of illicit funds.
Gitcoin loses $500,000 in transfer SNAFU
After agreeing to allocate $500,000 to "MMM" (merchandise, memes, and marketing — no, really), Gitcoin screwed up sending the money so badly that it's gone forever. Whoever was in charge of making the transfer accidentally pasted the Gitcoin contract address into the recipient field, rendering the tokens permanently inaccessible. Such mistakes can be devastating, and yet are very common in the crypto world, where transfers are irreversible.
Bored Apes' Yuga Labs lays off employees
Even the best known NFT brand can't escape the effects of a collapsing industry. Yuga Labs, the company behind the blue-chip Bored Apes NFTs and related collections, and the acquirers of collections including CryptoPunks, has announced that it will be joining the many other companies in the crypto world performing layoffs. They did not disclose how many employees would be losing their jobs.
"It's a challenging time, not only for our industry but also for the global economy," wrote Yuga Labs CEO, apparently hoping that people ignorant to the past year of disaster across the NFT industry might be willing to attribute Yuga Labs' struggles to macroeconomic forces and not the implosion of the crypto — and particularly NFT — world.
BigWhale loses $1.5 million in private key leak
The defi staking and lending project BigWhale announced that the private key to one of their crypto wallets had been leaked, and 7,200 BNB (~$1.5 million) had been stolen.
In a long post on Twitter, the project promised "we will refund all investor funds down to the last cent". They also wrote that "Not only are we going to use the fullest extent of the law to go after the person or persons behind this hack / attack, we will also use ALL OTHER MEANS NECESSARY - and we do have such resources at our disposal, to go after the ones who are behind this. (We work with assets within the Russian government directly...)"
In a later post on their website, however, they wrote that they do "not bear legal liability to refund investors for the losses incurred unless the hacked funds are successfully recovered", attributing the incident to force majeure. They repeatedly claimed that they had not been involved in the theft. The project completely took down its website, redirecting it to this post.
Crypto.com fined $3.1 million in the Netherlands for operating without registration
Crypto.com spent around two years operating in the Netherlands without bothering to register as required by the Dutch central bank — or pay the supervisory fees they were supposed to be paying. On October 2, 2023, the central bank imposed a €2.85 million (US$3.12 million) fine on the company for the period of unlicensed registration. The company had registered with the regulator in July of that year.
The fine was announced in March 2024, and Crypto.com said it had appealed the penalty.
Crypto.com was hardly the first exchange to fall afoul of the regulator: Binance was fined $3.35 million in July 2022 for the same, and Coinbase was hit with a $3.6 million for the same in January 2023. Binance later shut down their Dutch operations after failing to obtain a license.
Former FTX auditor Prager Metis sued by SEC for hundreds of alleged violations
The U.S. Securities and Exchange Commission filed a lawsuit against auditor Prager Metis, who they allege violated auditor independence rules and aided and abetted their clients' violations of federal securities laws. According to the SEC, Prager Metis included indemnification provisions in more than 200 audits, reviews, and exams, which renders the firm no longer independent in its investigations of those clients.
Prager Metis is among the auditors who audited FTX, and was noted by FTX's CEO-in-bankruptcy John J. Ray III for advertising itself as "the first CPA firm to officially open its headquarters inside the metaverse".
None of the clients involved with the faulty audits were disclosed in the lawsuit, and the SEC has not issued any statements connecting the charges to the FTX collapse.
Three Arrows Capital co-founder Su Zhu jailed for four months
Co-founder of the collapsed Three Arrows Capital hedge fund, Su Zhu, was arrested in Singapore while allegedly trying to leave the country. He and his cofounder Kyle Davies have been uncooperative with investigations into the June 2022 implosion of the fund, and were both sentenced to four months imprisonment as a result. Davies has not been arrested because his whereabouts are currently unknown.
Three Arrows Capital fell apart in June 2022, and was among one of the first major collapses that set off a domino effect of crypto company failures throughout that summer and the rest of the year.
Chase UK to block payments for crypto
Chase Bank’s UK branch has decided it will completely block debit card purchases and bank transfers that it identifies as being "related to crypto assets", a move they say is motivated by an increase in crypto scams targeting UK customers. Chase customers who want to buy crypto will have to use some other bank, Chase has said.
The change is scheduled to go into effect on October 16.
JPEX appears to be a $191 million fraud
After the Hong Kong-based JPEX exchange limited withdrawals amidst what appeared to be an impending collapse of the platform, things are now looking a lot more like fraud.
Police have received more than 2,200 complaints pertaining to the exchange, involving $191 million (and counting) in possible losses. Eleven people, including various crypto influencers who had promoted the exchange, were taken in for questioning. However, police have said those eleven people were not likely central to the fraud, and that the leaders of the JPEX project are on the run.
According to the South China Morning Post, "The alleged case of financial fraud involving HK$1.37 billion is the largest of its kind in Hong Kong's history."
Upbit briefly suspends Aptos transactions after people were able to deposit counterfeit tokens
Upbit, a major South Korean cryptocurrency exchange, suddenly suspended deposits and withdrawals of the Aptos $APT token after some users were able to deposit and withdraw fake versions of the token that were intended to spoof the original. Because of a bug in how Upbit verified tokens, transfers of the spoofed token were identified as transfers of the native Aptos token, which could have caused a massive loss if users began redeeming the fake Aptos tokens as though they were real.
However, a bug on the part of the counterfeiter prevented massive losses. The spoofer used only six decimal places instead of eight, meaning that those who tried to redeem the fake tokens only received $250 instead of $25,000.
Upbit later re-enabled Aptos transactions after patching the bug.
Huobi exchange hacked for $8 million
Justin Sun confirmed on September 25 that his crypto exchange Huobi (recently rebranded to "HTX") had been hacked for 5,000 ETH ($8 million) the prior day. He reassured customers that the exchange would be covering the shortfall, and that "all user assets are #SAFU".
Sun offered a bounty to the hacker to return 95% of the funds, also promising to hire them as a "security white hat advisor" for the exchange. Otherwise, he threatened to go to law enforcement.
Two weeks later, the thief returned the funds, with a note that their hot wallet key had leaked. Huobi paid the $410,000 bounty.
Mixin Network discloses $200 million hack
The operators of the Mixin Network disclosed that hackers had stolen around $200 million in funds in the largest known hack of the year (to date). Mixin Network is a cross-chain project that boasts zero transaction fees.
In their announcement, Mixin wrote that "the database of Mixin Network's cloud service provider was attacked by hackers", leading to some confusion as Mixin is supposed to be a decentralized network that ostensibly shouldn't have a centralized cloud database.
Mixin announced they would be suspending deposits and withdrawals pending analysis of the incident. They also told users that they would be compensated "up to a maximum of 50%" on assets that had been stolen from them, and receive "tokenized liability claims" (that is, IOUs) for the rest.
Wallet phished for $4.46 million in fake mining scam
Someone lost over $4.4 million of the Tether stablecoin after falling victim to a phishing scam that promised them fake mining rewards. A phisher lured in the victim, likely earning their trust and then promising high returns thanks to a "mining" operation. Typically, these projects fool their victims by showing them a growing balance on the platform's software, even as the phishers drain their wallets.
These types of scams draw in tens of millions of dollars each month, and one researcher has estimated around $350 million in Tether have been stolen in these types of scams since September 2021.
Balancer frontend compromised
Balancer issued an urgent warning to stop using its web interface, as it was evidently compromised by malicious actors who redirected the funds to themselves. Within 30 minutes of the tweeted warning, $240,000 had already been stolen.
This is the second theft from Balancer in a month, after it warned of a critical vulnerability on August 22, and that vulnerability was exploited for around $2 million several days later.
JPEX hikes withdrawal fees amidst possible collapse
"We believe that the platform will not collapse," wrote JPEX, amidst apparent collapse. JPEX is a Hong Kong crypto exchange that was advertising more than 20% APY on various staking products.
The JPEX cryptocurrency exchange was the subject of a September 13 consumer warning by the Securities and Futures Commission (SFC), who said they were promoting services to Hong Kong residents without proper licensure. The following day, attendees of the Token 2049 crypto event observed that JPEX had abandoned the booth they'd rented. Then, JPEX hiked their withdrawal fees to as high as $999, and limited withdrawals to $1,000.
According to the South China Morning Post, customers have filed at least 83 complaints about the exchange, pertaining to crypto assets priced at $4.3 million. Hong Kong police have disclosed they are investigating the firm.
JPEX released a statement that the SFC was "exerting undue pressure on our platform", and asserted that the watchdog should "bear full responsibility for undermining the prospects" of the crypto industry in the region. Later, they accused their "partnered third-party market makers" of "maliciously fr[eezing] funds". They announced that, as a result, they would be pausing their Earn product. They also suspended their platform's gaming feature.
PolkaWorld halts operations, blames community governance
PolkaWorld, a major community within the Polkadot blockchain project, has announced that they will have to suspend operations as a funding proposal was overwhelmingly rejected. In June, Polkadot changed their governance model to community voting, away from a model in which small groups of ostensible experts made decisions for the network. PolkaWorld has blamed the failure of their request for 16,842 DOT (~$70,000) to fund Q4 2023 operations on this new voting model, which shut down their request with 93.3% "no" votes.
"Personally, we believe decentralization only works for the 'informed', it's not for everyone, no offense meant," wrote PolkaWorld on Twitter.
Killer Whales crypto reality show launches about two years too late
Maybe they'd sunk too much money into producing Killer Whales to back out, or maybe its creators actually think that a Shark Tank-style crypto reality TV series is what it will take to return crypto to its former glory. A crypto-boosting show judged by crypto industry hustlers like Anthony "The Mooch" Scaramucci and shady operator Mario Nawfal has just published trailers for its scheduled January 2024 debut.
The trailer for the show features a duo pitching "Ape Water": Bored Ape-branded canned water that sells for $2.80/can. "We want to reimagine water... When you scan the can, that's when crypto and web3 is unlocked," says the booster. Revolutionary.
Even crypto Twitter seemed less than enthused, with one person writing that the show was "like Shark Tank, but cringe". Another wrote, "Just take a peep at the panel of judges it's full of crypto grifters and scammers".
Ethereum bungles "Holesky" testnet launch
Ethereum prepared to launch a new test network, called "Holesky", which was supposed to be massive compared to the mainnet in order to work on scaling problems. The launch was supposed to coincide with Ethereum's September 2022 "Merge", in which the network finally pulled off the long-awaited switch from proof of work to proof of stake.
However, the Holesky launch was a failure when developers misconfigured the network, causing it to fail to initiate. Developers announced they would try to relaunch the project a week after its intended go-live date. At least it was just a testnet.
Nouns DAO fractures in $27 million split
Nouns DAO, one of the most prominent Ethereum DAOs, has split into two projects after holders of around 56% of the Nouns NFTs in circulation voted to "ragequit". This means that they have forked into a new DAO, taking 16,757 ETH (~$27.3 million) of the original DAO's treasury with them.
Nouns NFTs have been popular since the project's launch in 2021, and in mid-2022 enjoyed a floor price of over 100 ETH (then over $150,000). Now they tend to sell for around 35 ETH (~$57,000). The DAO has used its substantial treasury to fund a wide range of projects, from creating Nouns short films, to distributing eyeglasses to kids, to partnering with Bud Light for a Super Bowl commercial in 2022.
Now, however, more than half of the project has opted to leave, with some leavers citing flawed decisionmaking and lack of leadership. As for the new fork, some Nouns owners may choose to "ragequit" — that is, forfeit their NFT and cash out their portion of the treasury (around 35.5 ETH, or $57,850, apiece). Some arbitrageurs have been buying Noun NFTs for months, hoping to use this ragequit functionality to profit.
NFL quarterback Trevor Lawrence, others settle FTX class action claims
Jacksonville Jaguars quarterback Trevor Lawrence has agreed to settle claims against him made in a class action lawsuit by FTX customers who say his endorsement of the fallen crypto exchange contributed their decision to use it. Also settling are finance YouTuber and crypto shills Kevin Paffrath and Tom Nash. The terms of the settlements were not disclosed.
Lawrence, Paffrath, and Nash are far from the only people facing class actions over their endorsements of FTX. Tom Brady, Gisele Bundchen, Steph Curry, Shaquille O'Neal, Larry David, are also facing lawsuits over their activities in promoting the firm.
Remitano hacked for $2.7 million
Crypto exchange Remitano suffered a hack in which $2.7 million in Tether (USDT), USDC, and Ankr was drained from the exchange's hot wallets across three blockchains. Luckily for them, Tether was able to freeze $1.9 million of the stolen funds, substantially reducing the attacker's profits.
Remitano acknowledged the hack, writing that they had suffered a "data breach from a third-party source". They have claimed that users' assets will not be affected by the theft.
Remitano is a peer-to-peer crypto exchange focused on emerging markets, including Nigeria, Pakistan, Venezuela, and Malaysia.
Crypto booster Mark Cuban hacked for $870,000
Billionaire crypto evangelist Mark Cuban apparently fell victim to a hack when an attacker was able to siphon around $870,000 in multiple cryptocurrencies from a wallet belonging to him. Cuban later acknowledged the hack to DL News. "They must have been watching," he said, explaining that "I'm pretty sure I downloaded a version of MetaMask with some shit in it".
This isn't the first time Cuban has been burned by the crypto industry. In June 2021, he lost "enough that I wasn't happy about it" in the collapse of the Titan stablecoin. Cuban is also a defendant in a class action lawsuit related to his endorsement of Voyager, a crypto broker that collapsed in July 2022.
Genesis closes trading entirely
After announcing on September 5 that Genesis would be closing their U.S. spot trading business in a "decision ... made voluntarily and for business reasons", Genesis has now announced that they will be closing all trading. They again write that "This decision was made voluntarily and for business reasons" - the kind of statement that gets less believable the more they repeat it.
Although Genesis Global Capital filed for bankruptcy in January 2023, portions of its business were excluded from the bankruptcy and continued to operate.
SEC charges Mila Kunis-backed Stoner Cats NFT project
In a rather amusing press release, the SEC announced they had charged "Stoner Cats 2 LLC" with conducting an unregistered securities offering when they raised $8.2 million selling NFTs that were intended to finance an animated web series called Stoner Cats.
The series was developed by Mila Kunis and her production company, and she, Ashton Kutcher, and Chris Rock all performed in the show, which ultimately aired six episodes accessible only to those who hold the NFTs. The premise, according to the SEC, is "house cats that become sentient after being exposed to their owner's medical marijuana".
The SEC determined that the project had marketed the NFTs as an investment in a web series enterprise, and had therefore violated securities laws by not registering with the SEC. Stoner Cats 2 LLC agreed to a cease-and-desist order, and will pay a $1 millon penalty.
OneCoin cofounder gets 20 years in prison
Karl Sebastian Greenwood, co-founder of the notorious OneCoin ponzi scheme, was sentenced to 20 years in prison after pleading guilty to fraud and money laundering charges. He will also forfeit $300 million, much of which he spent on real estate, luxury vacations, and a yacht.
OneCoin operated out of Bulgaria, and was founded by Greenwood and "Cryptoqueen" Ruja Ignatova, the latter of whom has been on Europol's most wanted list since May 2022. The fraud amounted to around $4 billion and affected at least 3.5 million victims.
- "Co-Founder Of Multibillion-Dollar Cryptocurrency Scheme “OneCoin” Sentenced To 20 Years In Prison", press release by the U.S. Attorney's Office, Southern District of New York [archive]
Binance.US CEO Brian Shroder bails as the company cuts 1/3 of its employees
Brian Shroder, the CEO of Binance's US entity, has left the crypto exchange as it faces an existential lawsuit from the U.S. SEC. Shroder is only the latest exec to leave Binance and its various regional arms in what is becoming a mass exodus in recent months. The company has also lost its general counsel, chief strategy officer, head of investigations, a senior VP of compliance, and two leaders of Binance's Russian arm.
Simultaneously, Binance.US announced it would be cutting 1/3 of its employees, or more than 100 people. This is the second staffing cut since the SEC lawsuit was filed in June — Binance.US cut around 50 positions, then around 10% of employees, shortly after the lawsuit was announced. The primary Binance entity also fired more than 1,000 people in July.
- "Binance.US CEO Leaves Embattled Crypto Exchange", The Wall Street Journal [archive]
CoinEx hacked for $70 million
Various blockchain watchers noticed suspicious transfers from a hot wallet known to belong to the CoinEx cryptocurrency exchange. CoinEx later confirmed a "security incident" involving "unauthorized transactions", and disclosed that around $70 million was stolen. Outside researchers have suggested that the thieves appear to be a part of the North Korean state-sponsored hacking group, Lazarus.
CoinEx is based out of Hong Kong, and was recently forced to stop serving US customers as part of a settlement with the New York Attorney General which also required them to pay a $1.7 million fine.
Developer steals $1 million from the group behind Milady NFTs
A developer working on an NFT project spearheaded by Remilia, the DAO behind the Milady NFT project, stole around $1 million from the group by diverting fees generated by their new Bonkler "experimental finance art project". According to leader Charlotte Fang, the developer "also seized codebases and coordinated with two others on the team in an attempt to seize control of our social media, followed by demands for a significant portion of our treasury, including the NFT reserves." Fang stated that they believed they knew the thief's identity and had filed a lawsuit against them, and promised that they "will now be dealt with through the heavy hand of the law".
Remilia is a very controversial group, particularly after it was exposed that leader Charlotte Fang was a major figure in a white supremacist cult known as Kali Yuga Accelerationism (abbreviated "kaliacc"), and involved in a 4chan suicide cult.
Fang announced the theft on September 11 in a tweet accompanied by a glitch art image derived from a photo of the Twin Towers engulfed in flames and smoke shortly after the 9/11 terrorist attacks.
Banana Gun bot launches token, sparks rug pull fears as they disclose a bug
The team behind Banana Gun, a Telegram bot to help "snipe" token launches, launched a token associated with the project on September 11. Only hours later, they announced in a tweet that they'd uncovered a bug in their smart contract that meant that when people sold tokens, the 4% tax that was meant to go to the project was also kept in individuals' wallets.
The team wrote in an announcement that they had no choice but to sell the treasury wallet to drain the liquidity pool, which is locked to... well, stop the project team from draining the project and rug-pulling. At the time of announcement, the project team had around 950 ETH (~$1.5 million) in the treasury wallet.
Some pointed out that they could simply set the tax to 0% and carry on without the hefty sales tax, but that didn't seem to appeal to the project's creators. Some also speculated that the team might just take the money and run after draining the LP.
Fortress Trust hit by "security incident", bailed out by Ripple
Fortress Trust is a crypto custody and blockchain infrastructure company, founded by Scott Purcell. Purcell is also known for founding Prime Trust, which later lost over $75 million in customer funds, squandered another $8 million gambling on Terra/Luna just before its collapse, and then filed for bankruptcy in August 2023. Purcell is also embroiled in a lawsuit from former company Banq, now also bankrupt, which alleges he stole trade secrets and other valuable material to start Fortress.
On September 7, Fortress Trust disclosed that several customers had been "impacted by a third-party vendor" compromise. On September 8, Fortress Trust announced they had been acquired by Ripple. On September 11, The Block reported that Ripple had covered undisclosed losses to customers as a part of the acquisition deal. The losses were later disclosed to be around $15 million, and the third-party vendor was said to be a company called Retool, who blamed the compromise on a social engineering attack against one of their employees.
- Tweet thread by Fortress Trust [archive]
- "Ripple Acquires Crypto-Focused Chartered Trust Company Fortress Trust", CoinDesk [archive]
- "Ripple made Fortress customers hit by security incident whole as part of acquisition", The Block [archive]
- "Episode 125 – How to Steal Almost $100 Million: Prime Trust goes Bust", Crypto Critics' Corner [archive]
Paxos pays $500,000 fee to send $1,865
A wallet on the Bitcoin blockchain paid a 19.82 BTC ($499,171) fee to transfer 0.074 BTC ($1,865). Put another way, they spent 270x the transaction value to pay the fee. Bitcoin transaction fees are required to make any action on the Bitcoin blockchain, and people can opt to pay higher fees to incentivize their transactions being processed sooner. 19.82 BTC is far outside the realm of someone just hoping to get a speedy transaction, however — the next-highest transaction fee in that block was 0.006 BTC ($159.20).
Bitcoiner Jameson Lopp speculated that the transaction "looks like an exchange or payment processor with buggy software" based on its transaction history. "The address in question that made the fee calculation error has the characteristics of a withdraw-only hot wallet from an enterprise," he wrote.
His observations were well-founded, as it later came out that the wallet belonged to the Paxos blockchain company, who attributed the overpayment to a bug. Luckily for Paxos, the miner who snapped up the outsized fee agreed to refund it.
- Bitcoin transaction on Blockchain.com explorer [archive]
- Tweet thread by Jameson Lopp [archive]
Vitalik Buterin's Twitter account hacked to promote crypto scam
The Twitter account belonging to Vitalik Buterin, inventor and effective leader of the Ethereum project, was hacked to promote a crypto scam. A tweet posted to his compromised account advertised a "commemorative NFT" to celebrate the impending release of "proto-danksharding", which is the actual name for an upcoming change to the Ethereum protocol.
However, the link was a scam, and anyone who connected their wallet risked having their wallet drained of its cryptocurrency and NFTs. Some blue-chip NFTs were stolen, including two CryptoPunks (a collection with a floor price of around 47 ETH, or $76,800). Altogether, stolen assets surpassed $650,000 in value within a few hours of the theft according to zachxbt, though this counts notoriously difficult-to-value NFTs.
The tweet was taken down within twenty minutes of being posted. All in all, posting a link to a wallet drainer was probably among the least effective things the attacker could do with the Twitter account of a person whose word can dramatically move markets.
It did seem to be something of a stark warning to some in the crypto world, however, who expressed sentiments along the lines of "if Vitalik can get hacked, anyone can."
NFT startup Glass shuts down a year after raising $5 million
The NFT startup Glass was operating under the assumption that YouTubers and others who post video content for fans online might want to mint those videos as NFTs, which their fans could then buy. Unfortunately for them, they have since "come to the conclusion that there is not sustainable demand for video NFTs".
In September 2022, the startup managed to raise $5 million from investors including TCG Crypto and 1kx. Either that money's run out, or they're cutting their losses early.
Founder of the Thodex crypto exchange sentenced to 11,196 years in prison
As of writing, the April 2021 $2 billion Thodex exit scam is the second largest exit scam recorded in the Web3 is Going Great leaderboard. Thodex was one of the largest crypto exchanges in Turkey, until its CEO, Faruk Fatih Özer, disappeared along with $2 billion in customer funds.
He was arrested in August 2022 after a year on the run. Now, he and his brother and sister have all been sentenced to 11,196 years in prison – sentences so over the top that one has to wonder if perhaps Turkish prosecutors are worried the Özers are some kind of crypto-focused vampire crime family. They will also pay a 135 million lira fine (~$5 million).
CFTC goes after three defi projects
The CFTC has announced charges and settlements against defi projects Opyn, ZeroEx, and Deidex for various commodities law violations. The projects will pay $250,000, $200,000, and $100,000, respectively, to settle the charges. They have also agreed to cease and desist the activities.
The CTFC stated: "Somewhere along the way, DeFi operators got the idea that unlawful transactions become lawful when facilitated by smart contracts. They do not."
Fourth FTX exec pleads guilty, agrees to forfeit $1.5 billion
Former CEO of FTX's Bahamian entity, Ryan Salame, has pleaded guilty to two criminal charges in the ongoing case against FTX and founder Sam Bankman-Fried. Salame (pronounced "Salem") is the fourth exec to plead guilty, following pleas from Caroline Ellison and Gary Wang in December 2022, and another from Nishad Singh in February 2023.
As part of the deal, Salame has agreed to forfeit $1.5 billion. He will also pay $5.6 million restitution to FTX debtors and $6 million to the U.S. government, and will forfeit two homes in the Berkshires and a 2021 Porsche 911. According to the New York Times, he is not cooperating with the investigation.
Salame's sentencing is scheduled for March 2024.
Victim loses around $24 million in phishing scam
A crypto phisher hit it big today when they lured in a victim with a massive wallet balance. The victim wallet was drained of 4,851 rETH and 9,579 stETH, both wrapped versions of ETH used for staking. Altogether, the tokens are priced at around $24 million.
The wallet address used by the phisher has been associated with multiple crypto phishing websites which attempt to convince users to authorize transactions, often by impersonating known crypto projects or promising token airdrops.
High-profile streamers bail on MrBeast-promoted Creator League after learning there are blockchains involved
A group of high-profile streamers and social media influencers agreed to join eFuse's "Creator League", where they would lead community e-sports teams. The project was announced on September 2, and was promoted by mega-influencer MrBeast. Only days later, the project has been put on hold after some of those influencers balked once they learned blockchains were involved.
YouTuber CDawgVA publicly withdrew from the project on September 3, writing, "I was not told or made aware at any point that there was Blockchain technology and was only made aware of that information when the event went live. I was given assurances that it had nothing to do with NFT's. Given my vocal hatred of such tech, I would never agree to join had I known that."
The creator of the OTK Network, which had agreed to participate in the League, wrote: "We were told there was no NFT/crypto component but looks like that may not be the case."
Creator League issued a statement attempting to downplay its blockchain usage, emphasizing that people who purchased "Creator Passes" were not buying cryptocurrency or NFTs. "The Creator League is not an NFT project and we have never sold tokens," they insisted. "Those buyers who remain uncomfortable with the blockchain technology can request a refund," they continued.
Now, Creator League has been postponed. eFuse, the company behind it, has also just announced a 30% layoff amid company restructuring.
Stolen LastPass vaults possibly cracked to enable crypto thefts
In November 2022, popular password management tool LastPass disclosed that hackers had stolen "password vaults" containing data belonging to more than 25 million users. Although the vaults themselves are encrypted, some experts now believe that these vaults are being cracked to enable access to crypto credentials stored within.
A report by cybersecurity expert Brian Krebs outlines how various experts have come to this conclusion after analyzing a long string of crypto thefts perpetrated against people with otherwise strong security practices. Altogether, the thefts suspected to have been enabled by the LastPass breach amount to more than $35 million.
- "Experts Fear Crooks are Cracking Keys Stolen in LastPass Breach", Krebs on Security [archive]
GMBL.COMPUTER crypto casino exploited hours after launch
The brand new Arbitrum-based defi casino GMBL.COMPUTER was exploited for around 471 ETH (~$770,000). The project, which promises to "generate yield from casino games", had officially launched only hours earlier. The GMBL team later stated that they believed the exploit was due to a flaw in the platform's referral system, where people could place bets without depositing any funds and use them to generate referral bonuses.
GMBL offered a "bug bounty" to the attacker, inviting them to return 90% of the stolen funds in exchange for a promise not to pursue legal action. The exploiter later returned 235 ETH (~$382,000), or half what they had stolen.
GMBL promised that "we are going to thoroughly test everything again before re launching".
MetaMask phishing scammers hijack government websites
Phishing scammers hoping to lure victims into visiting fake websites resembling that of the popular MetaMask crypto wallet have adopted a new approach: compromising government websites. CoinTelegraph identified websites on domains belonging to the governments of countries including India, Nigeria, Egypt, Colombia, Brazil, Vietnam that had been compromised and modified to redirect to these scam sites. Some of them included the websites of the Nigerian postal service and, ironically, of Egypt's Consumer Protection Agency.
Once victims visit the fake site, they're prompted to connect their MetaMask wallets to access various services, which would allow the scammers to steal any assets in the wallets.
Genesis to close U.S. spot trading business
Although Genesis Global Capital filed for bankruptcy in January 2023, portions of the larger business were not included in bankruptcy proceedings and continued to operate. One such portion was Genesis's U.S.-focused spot trading platform, at least until an email to clients announcing that their accounts would be closed at the end of the month.
"The decision was made voluntarily and for business reasons," the email claimed.
Genesis is a subsidiary of the Digital Currency Group (DCG) conglomerate, which has since the beginning of the year seen its Genesis platform enter bankruptcy, shuttered its TradeBlock subsidiary, and is reportedly approaching a deal to sell its CoinDesk crypto media outlet.
Nima Capital accused of rug pull
"Even VCs are rugging now", remarked someone on Twitter as Nima Capital was observed selling 9 million $SYN (priced at ~$3.7 million before the sudden sale caused the token price to drop) and removing all stablecoin liquidity from the Synapse decentralized blockchain bridge. In April 2023, Nima had entered into a deal with Synapse to lock $40 million of liquidity in the project in exchange for the $SYN tokens, with an agreement to not sell the tokens for twelve months. However, it appears they've just dumped their tokens seven months early. Not only that, Nima Capital took their website offline and made their Twitter account private in typical rug-pull fashion.
Synapse posted on Twitter that they were "investigating unusual activity" on the wallets of one of their liquidity providers, and were "working to get in touch with them".
The $SYN token plummeted almost 25% after the sell-off, later recovering somewhat.
Crypto casino Stake hacked for over $40 million
Attackers managed to make transactions from hot wallets operated by the Stake betting platform, stealing approximately $15.7 million from their Ethereum wallet and around $25.6 million from BSC and Polygon. Blockchain analysis project Cyvers attributed the theft to a private key leak, though Stake co-founder Edward Craven later denied that. Craven claimed that the attack was achieved through a "sophisticated breach" targeting a service the company uses to approve transactions.
Stake acknowledged the attack on their Twitter account, writing that "We are investigating and will get the wallets up as soon as they're completely re-secured."
Stake is an Australia-based cryptocurrency casino and sports betting platform that has enjoyed endorsements from various celebrities, and which shelled out $100 million in 2022 for an endorsement deal with Drake.
On September 6, the FBI announced that they believed the Lazarus Group was behind the theft. Lazarus is a group of North Korean state-sponsored hackers allegedly responsible for crypto hacks totaling hundreds of millions of dollars.
Gala Games co-founders sue each other over claimed hundreds of millions in losses
The two co-founders of blockchain gaming company Gala Games are suing each other. One lawsuit, filed by Gala Games CEO Eric Schiermeyer, alleges that Gala's director Wright Thurston stole $130 million in $GALA, directing it through his company and then into a "complex web of obfuscatory transactions" between September 2022 and May 2023. According to the lawsuit, at one point, Thurston explained that he was selling some of the $GALA tokens in order to purchase ammunition for firearms. The lawsuit also outlines how Gala issued the GALA v2 token in May 2023 in order to hide the alleged theft from Gala's token holders.
In a competing lawsuit, Wright Thurston alleges that Schiermeyer unilaterally misused over $600 million in company funds in wasteful actions that were "often for his own personal benefit", including to buy a private jet and hire architects and designers for personal real estate projects.
The $GALA token dropped 5% on the news of the lawsuits.
Starknet upgrade leaves $550,000 inaccessible
"The wallets that did not upgrade in time will lose their assets," a StarkWare customer support representative said on Discord to an individual inquiring why they could no longer access their cryptocurrency. The company had been urging users to upgrade their wallet software for months, but not everyone expected they might lose access to funds if they weren't carefully monitoring their wallet software's social media channels.
After user backlash over a cumulative $550,000 in funds that were inaccessible to people who hadn't heard about the breaking change, Starkware re-enabled the ability for people to upgrade their wallets – leading some to question why it was ever disabled in the first place if it could be trivially re-enabled to prevent the loss of half a million in assets.
Blockchain gaming streamer loses life savings after exposing private key on stream
Brazilian blockchain gaming streamer Fraternidade Crypto says he lost his life savings after accidentally exposing his crypto wallet seed phrase during a livestream pertaining to Bitcoin and blockchain games. Presumably not realizing it was on the same screen he was streaming, he opened a text file containing a password for a gaming account so he could log into it. However, the file also contained his MetaMask private key, which was displayed to the roughly 70 viewers of the stream.
Apparently realizing his mistake, Fraternidade Crypto ended the stream, and says he tried to relocate the crypto to a new wallet. It was too late, however, and someone watching had already taken the around 86,000 MATIC (~$50,000) and various NFTs in the wallet.
Fraternidade Crypto posted an emotional video after the fact, explaining that the stolen funds were his life savings. He said he planned to file a police report, and also offered a reward for the return of the funds.
Fortunately, he was able to recover the stolen MATIC, though he says he has not been able to recover the NFTs, which have "incalculable value as they are NFTs, estimated value of approximately 15k dollars still lost".
Impact Theory to pay $6.1 million for unregistered NFT offering in an SEC first
Entertainment company Impact Theory has agreed to a $6.1 million payment to settle charges from the SEC that its sales of its "Founder's Keys" NFTs constituted an unregistered crypto asset securities offering. This is the first time the SEC has taken action against issuers of NFTs as unregistered securities offerings.
As a part of the agreement, Impact will destroy all remaining Founder's Keys NFTs, forgo royalties from future secondary sales, and publish a notice of the order on its websites and social media.
Founder's Keys in the rarest tier have recently sold for $1,500 apiece, and promised to give their holders access to Impact Theory's self-help content, which supposedly taught viewers how to "unlock their potential and pursue greatness". According to the SEC, the company encouraged holders to view the tokens as an investment into the business.