A messy week in crypto with regulators cracking down on Binance; a crypto data platform doxxing its users and a law suit, a rug pull and fraud in crypto is down…
Regulators are cracking down on Binance after years of profits without consequences and its execs, and employees, are leaving…
Binance under increasing pressure from world’s regulators…
To add to the growing list of countries in which it’s facing legal challenges, Binance is now being probed in Australia. The Australian Securities and Investments Commission (ASIC) last week contacted the exchange’s employees outside their office, requesting internal communications and personal device data. The investigation is focusing specifically on Binance Australia’s former derivatives operations. A Binance spokesperson maintained that investigators did not visit their offices. Presumably there’s an unspoken ‘yet’ after that. ASIC confirmed an ‘ongoing’ investigation but has (so far) declined to disclose any operational details. Things aren’t currently looking up for the exchange, which had managed to go for years with almost no challenge.
“If the allegations against Binance are true, they implicate very serious criminal and civil misconduct, including national-security related issues” warned Alex Zerden, ex-U.S. Treasury Department official and CEO of advisory firm Capitol Peak Strategies “And given the exchange’s global footprint, the investigation into Binance and these allegations would likely span multiple jurisdictions and require sustained cooperation among multiple jurisdictions.” Regulators seem to be ganging together in a concerted effort to crack down on the exchange which hasn’t exactly been without its share of controversy.
Binance US execs leave under looming DOJ investigation
Binance executives are leaving. The relatively sudden departure of a number of senior figures is stoking fears of a US Justice Department investigation. Among those leaving are the general counsel, head of investigations, and chief strategy officer, each citing their own personal reasons for leaving. Of course it’s possible that the timing is a coincidence, but one assumes not…. Binance also reportedly laid off staff last week, intending to trim its US workforce. Founder CZ has dismissed the issue, tweeting “as markets and the global environment for crypto changes, as our organization evolves, and as personal situations change, there is turnover at every company”, but he has a tendency to be bolshy. Despite his stance, the WSJ has suggested executives fear legal action from the Justice Department. The company is after all already being sued by the SEC, whose Chair Gary Gensler’s attitude isn’t exactly pro- Binance: “Through 13 charges, we allege that Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure and calculated evasion of the law.” Elsewhere in other parts of Binance we’re seeing people leaving or looking for jobs elsewhere…
Crypto is cryptoing as usual, with an ‘intel to earn’ platform doxxing its users, Gemini sues Genesis, a missing CEO and the weekly rug pull…
Crypto data firm Arkham Intelligence Has Apparently Been Doxxing Users for Months
Crypto data firm Arkham Intelligence has upset a rather large part of the industry by unveiling a service to pay a bounty to find out the owners of anonymous digital wallet owners. The TL;DR, it’s going against every core tenet of the entire industry. Arkham’s new “Intel Exchange” is a bounty marketplace to reveal anonymous wallet identities.
Basically, any Arkham user could request specific info on the owner of any wallet and offer a bounty. Any other user can then share that info and get the reward. Arkham says it’s an incentive to reveal the owners of scam wallets. Which would be good, except it hasn’t placed any limits on which wallets can be doxxed. Any wallet’s privacy could be revealed, i.e. it’s a total privacy violation.
It then gets worse. Arkham has also apparently been exposing its users’ private information. Arkham’s referral URLs, claimed to be a random character sequence, were revealed to be a user’s email address encrypted in easily decoded Base64. Many are saying this could only be deliberate. Privacy advocate m4gicpotato worked this out. Their tweet on it: ‘ABSOLUTE LMAO. ALL #ARKHAM REFERRAL LINKS SHARED ON TWITTER IS DOXXING EVERYONE BECAUSE THE EMAIL IS IN THE REFERRAL URL’. Anyone who shared an Arkham referral link inadvertently exposed their email address. There’s also (as yet, unfounded) rumours, which may or may not just be fears, that Arkham has been sharing intel with the US government.
m4gicpotato shared that their investigation started after Binance’s announcement to host the public sale of Arkham’s ‘intel-to-earn’ ARKM token. This came after Binance delisted a number of privacy-focused cryptocurrencies in the EU. Binance may not be so pro user privacy either….
Gemini sues DCG
Gemini Exchange has sued Digital Currency Group (DCG) and its CEO, Barry Silbert, alleging them of being accomplices in fraudulent activities against the exchange. The lawsuit states “Silbert knew that Genesis was massively insolvent, but did not disclose that fact to Gemini” adding “Indeed, Silbert went far beyond that fraudulent omission”. The suit claims “Silbert told Gemini that Genesis faced only a short-term mismatch in the timing of its loan portfolio, concealing the reality that Genesis had a massive hole in its balance sheet and would be unable to honour its obligations to Gemini and others, because DCG had not actually assumed the 3AC losses.” The suit claims that Genesis had ‘falsely represented’ the losses to now bankrupt crypto lender 3AC which totalled $1.2 billion. Co-founder of Gemini, Cameron Winklevoss, tweeted “DCG — and Barry personally – are direct participants in the fraud that has damaged Gemini and hundreds of thousands of Earn users.”
DCG retorted, calling the lawsuit “yet another publicity stunt from Cameron Winklevoss to deflect blame and responsibility from himself and Gemini, which operated the Gemini Earn program.” “Any suggestion of wrongdoing by DCG or any of its employees is baseless, defamatory, and completely false” DCG has stated.
The lawsuit comes on the heels of both Gemini and Genesis being sued by the US Securities and Exchange Commission, and a class-action lawsuit against Gemini over its Earn Program that promised up to a 7.4% yield.
Multichain, Missing $120 Million Of Cryptocurrencies And Its CEO, Pulls The Plug
Crypto bridge Multichain is the latest to fall. The platform has now ceased operations after a series of events: a $120 million hack, a missing CEO, and software failure. The team had reported an inability to reach its CEO, Zhaojun, amidst circulating rumours of his arrest in China. They had stated “The team has done everything possible to maintain the protocol running, but we are currently unable to contact CEO Zhaojun and obtain the necessary server access for maintenance.” Notably, Zhaojun is the only one with access to the necessary access codes to address the protocol’s technical issues. It isn’t good if only the CEO has access to private keys or codes, as we have seen with the fall of crypto exchange Quadriga, amongst others…
Unexplained recent activity on the protocol resulted in $120 million of crypto assets moved without explanation. The team had shared “The lockup assets on the Multichain MPC address have been moved to an unknown address abnormally. The team is not sure what happened and is currently investigating.” The company had advised its customers to temporarily cease using its platform while an investigation was taking place. Twitter users had theorised that Multichain had fallen victim to a hacking attempt. Some speculate the involvement of the missing CEO… $1.26 billion worth of cryptocurrencies is currently locked in the platform since its close, according to DeFi Llama data.
Cross-chain bridges had been popular, but prone to hacks due to inherent vulnerabilities and typically holding large liquidity. Last year these bridges accounted for $2 billion worth of stolen funds, representing 70% of all 2022 crypto hacks.
Crypto developer commits $2M rug pull fraud to fuel gambling addiction
A developer has allegedly performed a $2 million ‘rug pull’ to cover the costs of his gambling addiction. The Encryption AI (0xEncrypt) project’s value crashed from $2 million to $20,000 almost instantly. Unusually, this ‘rug pull’ was followed by an apology from the developer, blaming his online gambling addiction for the drastic move. He left a note saying he had lost $300,000 in online casinos and, while unable to guarantee a project relaunch or reparations, promised to “make every effort to become a better person” before vanishing and erasing the project’s social media presence.
Crypto drainers doing the rounds and going after crypto wallets
Four new cryptocurrency threats called Pink Drainer, Inferno Drainer, Pussy Drainer, and Venom Drainer have reportedly stolen $66.4 million in total since 2023’s start, outpacing the infamous Monkey Drainer, according to Scam Sniffer. The worst, Venom Drainer, has stolen nearly $27.5 million since February. These ‘crypto drainers’ trick victims into approving a malicious transaction that permits a smart contract to transfer wallet assets. Many crypto drainers are rented to phishing scam groups, taking a percentage of the stolen funds or charging a set fee. Inferno charges a 20% commission, while Venom requires a $1,000 initial fee. Furthermore, some drainers offer ‘add-ons’ mimicking popular NFT marketplaces. Scam Sniffer warns, “as one crypto drainer leaves another takes its place ‘because it’s profitable! […] And no one has been arrested so far.'” The are currently multiple crypto-draining services making the rounds on Telegram. The person behind Monkey Drainer pointed their “fellow cyber-gangsters” to Venom, touting it as a “flawless” service. They tend to pull the plug on one before getting caught. It can be assumed that people move from one drainer to the next…
Crypto crime is Down 65% Overall, but ransomware headed for huge year
Crypto analytics platform Chainalysis has released its mid year crypto crime report, revealing that crypto crime is down 65% from this time last year. Crypto inflows to illicit entities are down by 65% compared to this time in 2022, while inflows to risky entities, mostly mixers and high-risk exchanges, are down by 42%. This, compared to a 28% drop in legitimate uses of crypto. Crypto scammers have taken 77% or $3.3 billion less this year, bringing in just over $1 billion so far. The only growing sector of crypto crime is ransomware, extorting $175.8 million more than last year, with a total of $449.1 million extorted through June. The big decrease in scam revenue is linked to the disappearance of two major scams: VidiLook and Chia Tai Tianqing Pharmaceutical Financial Management. Both followed an “investment scam model of offering outsized returns” and seem to have exit scammed.
Banks are getting in on capitalising on digital assets…
18% of central banks consider retail CBDC in 3 years
There might be 24 central bank digital currencies (CBDCs) by 2030, according to worrying finds by a Bank for International Settlements 2022 survey. The survey suggests “another 15 retail and nine wholesale CBDCs” might emerge by 2030. The survey, covering 94% of global economic output, shows central bank interest in CBDCs increased from 90% to 93% over a year. Almost 60% of central banks have accelerated their research on CBDCs. They’re primarily driven by fear of the rise of cryptoassets and stablecoins after initially being spurred on by what they saw as the threat of Facebook’s Libra/ Diem digital currency, and China’s CBDC, which is years ahead. Only 18% of central banks anticipate issuing a retail CBDC within three years. Central banks believe wholesale CBDCs could ease cross-border payment bottlenecks and that CBDCs should coexist with fast payment systems due to added features like programmability and offline payments. As usual, central banks and governments are good at listing the benefits of CBDCs, which apply to banks and governments. The benefits to them are numerous, mostly centred around control and immense access to data. The overwhelming threat of CBDCs to all users is not stated.
New York Fed, Citi, Wells Fargo, HSBC, others complete digital currency trial
The Federal Reserve’s New York Innovation Center, along with ten financial institutions, has disclosed the successful outcomes of a proof of concept for commercial bank deposit tokens and a wholesale central bank digital currency (wCBDC) on a shared distributed ledger technology platform. The Regulated Liability Network project is hoping to create a single market infrastructure that could unite banks, and possibly central banks, globally. This aligns with the Bank for International Settlements’ idea of a Unified Ledger. The RLN aims to capitalise on the potential of cost and speed efficiencies of tokenisation and reduce reconciliation processes.
UK banks keen to explore national platform for tokenised securities
The UK’s industry body for banking and financial services, UK Finance, has warned the UK is lagging behind other countries in adopting tokenised securities and urged the government to make strides in this field. “Securities tokenisation is likely to transform financial markets, through delivering lower costs, lower risks, and wider market access,” says Bob Wigley, Chair of UK Finance, further warning that “without continued bold action the UK risks falling behind other jurisdictions.” It has also released a report suggesting a strategy for how the UK could lead in this space, particularly calling for the UK government to issue bonds via blockchain, in the same way the Hong Kong Monetary Authority and the European Investment Bank have been doing. There’s also a call for an exploration into potential industry interest for a national infrastructure dedicated to tokenised securities, as well as asking the Treasury to expedite the launch of a much-needed Sandbox to encourage further innovation.
Crypto regulation getting somewhere?
UK Law Commission recommends ‘distinct’ legal category for crypto
The UK’s Law Commission has proposed the establishment of a distinct category of personal property for cryptocurrencies and digital assets. This recommendation is part of a broader analysis of common law, aimed at accommodating cryptocurrencies, NFTs and other digital assets within the legal frameworks of England and Wales. The creation of a unique property category for digital assets is the foremost of the commission’s recommendations.
MiCA’s stablecoin transaction cap stifles crypto adoption, say lawyers
The European Union’s Markets in Crypto-Assets (MiCA) legislation could potentially hamper stablecoin use due to daily transaction caps. One provision of the law limits private stablecoins, like Tether (USDT) and Circle’s USD Coin (USDC), to 200 million euros in daily transactions. Stablecoins are, in theory, designed to mirror fiat currencies and reduce cryptocurrency volatility. However, following recent failures of significant stablecoins. Some regulators are justifiably focused on stablecoin regulation, due to their “stronger links to the traditional financial system.” The success of MiCA will largely depend on its enforcement and adaptability in the swiftly changing crypto industry.