Will Barry Silbert Bend to Cameron Winklevoss?
Weekly News Recap: 🤘 BlackRock CEO is bullish on Bitcoin, 🤝 Coinbase’s partnerships, ⛈️ Mashinsky in the eye of the storm, and more!
The year 2022 marked a grim milestone in the world of crypto crime, with stolen assets skyrocketing to an unprecedented $3.8 billion. The DeFi sector was the hardest hit, shouldering a staggering 82% of the total losses. Amid this concerning landscape, a promising solution has surfaced: the innovative ERC-7265 proposal.
In today's episode of Unchained, Laura talks with Philippe Dumonet, cofounder of DeReg, to dissect this potential game-changer. ERC-7265 proposes a 'circuit breaker' safety layer for DeFi contracts, a concept that could potentially change the way that security is approached in the crypto sphere.
Could ERC-7265 be the much-needed catalyst to enhance security and trigger the mass adoption of DeFi?
What are the potential security implications and could it inadvertently lead to the centralization of protocols?
Weekly News Recap
Winklevoss Shares Open Letter Targeting Barry Silbert
Cameron Winklevoss, cofounder of Gemini, issued a stern warning to Barry Silbert, CEO of Digital Currency Group (DCG), which is the parent company of the bankrupt crypto lender Genesis. Winklevoss has accused Silbert of fraud and trapping $1.2 billion worth of assets belonging to 232,000 Earn users. He proposed a repayment offer, threatening legal action if not accepted by July 6th, which as of press time Thursday had not received a response.
Winklevoss also criticized the SEC's refusal to license spot Bitcoin Exchange Traded Funds (ETFs), calling it a "disaster for US investors." He argues that the SEC's policy has pushed spot Bitcoin activity offshore to unregulated venues and into "toxic products" like the Grayscale Bitcoin Trust (GBTC).
Senior Binance Executives Resign Amid Regulatory Scrutiny
Several high-ranking executives at Binance have stepped down due to dissatisfaction with CEO Changpeng Zhao's approach to ongoing regulatory probes into the company, according to a Fortune report. The departures include General Counsel Han Ng, Chief Strategy Officer Patrick Hillmann, and Senior Vice President for Compliance Steven Christie. This follows the recent exit of Matthew Price, who was overseeing global investigations and intelligence for the company.
The resignations come at a critical time for Binance, which is under intense regulatory scrutiny globally. The executives' decision to leave, particularly from the legal and compliance units, could potentially escalate the regulatory pressure on the company.
Meanwhile, Binance.US, the American subsidiary of the world's largest crypto exchange, has experienced a user exodus following the recent actions from the SEC, leading to major cryptocurrencies trading at a discount of between 2% and 5%.
BlackRock CEO Envisions Bitcoin as a Global Asset Revolutionizing Finance
BlackRock CEO Larry Fink highlighted Bitcoin's potential as an international asset that could “revolutionize finance.” In an interview with Fox Business, Fink suggested Bitcoin could serve as a digital alternative to gold for hedging against inflation. This perspective marks a significant shift from his 2017 view of Bitcoin as an "index of money laundering."
In Bitcoin-related news, this week saw the introduction of the BRC-69 standard by Bitcoin Ordinals launchpad Luminex, promising to reduce inscription costs by over 90% and enable on-chain pre-reveal processes for collections.
Meanwhile, crypto traders are migrating from decentralized to centralized exchanges, with monthly dex volumes falling from 22% to 16.8% between May and June. This shift is attributed to the ETF-sparked Bitcoin rally and the growing interest in large caps like Bitcoin and Ethereum.
Coinbase Partners With TradFi Giants
Despite the SEC's stance on Grayscale, the race to offer a spot Bitcoin ETF remains high. After receiving notice from the SEC that their filings were inadequate, BlackRock and Valkyrie named Coinbase their surveillance-sharing partner in updated filings. These agreements will provide Nasdaq with supplemental access to Bitcoin trade data on Coinbase, enhancing its ability to detect potential market manipulation.
Meanwhile, the ProShares Bitcoin Strategy ETF (BITO) has seen a surge in inflows, pushing its assets under management (AUM) back above $1.04 billion. This renewed interest in digital asset investment products is likely spurred by the optimism surrounding the potential approval of a spot Bitcoin ETF. Despite a cooler market, the AUM across digital asset investment products has increased 69.5% year-to-date, reaching $33.4 billion in June.
Celsius Faces Regulatory Heat
The Commodity Futures Trading Commission (CFTC) has concluded that Celsius Network and its former CEO, Alex Mashinsky, violated U.S. regulations before the crypto lender's bankruptcy. The CFTC found that Celsius misled investors and should have registered with the regulator. The SEC and federal prosecutors are also investigating the firm. If the CFTC commissioners agree with the findings, a case could be filed against Celsius this month.
These probes coincide with a lawsuit from Celsius creditors accusing market maker Wintermute of aiding in wash trading, allegedly helping inflate the value of the CEL token.
Moreover, Celsius has begun converting its altcoins into Bitcoin and Ethereum, following approval from a New York court. The move, which involves the transfer of around $74 million in altcoins, aims to maximize value for creditors. However, the transition has not been smooth, with Celsius facing backlash over its decision to convert all creditors' altcoins.
Meanwhile, collapsed lender Voyager's committee of unsecured creditors has been billed $5.1 million by law firm McDermott Will & Emery for work completed from March to May. This brings the total compensation charged to the group to $16.4 million, surpassing the budgeted $11.2 million for the restructuring process. The news follows last week’s reveal that FTX has spent more than $200 million on legal fees.
In related news, defunct crypto lender BlockFi's bankruptcy plans are facing objections from FTX, Three Arrows Capital, and the SEC, with FTX claiming the proposals unfairly downgrade its substantial claims against BlockFi.
3AC Founders Pledge to Donate OPNX Future Earnings
In a surprising turn of events, Kyle Davies and Su Zhu, founders of the bankrupt hedge fund Three Arrows Capital (3AC), have pledged to donate future earnings from their new venture, Open Exchange (OPNX), to the creditors of 3AC. This pledge, termed a "shadow recovery process," was announced in a Twitter Spaces event on July 3rd. Davies cited "karma" as the driving force behind this decision. He said: "If we do bad and they do well, then that's great. And that's good karma, or whatever you want to call it."
However, this announcement has been met with skepticism by the crypto community and Teneo, the firm overseeing 3AC's liquidation. A Teneo spokesperson suggested the founders should focus on court-ordered activities already underway. Despite the controversy, OPNX, a trading platform for bankruptcy claims as well as spot and perpetuals, is reportedly seeing around $50 million in daily trading volume.
Court Orders Kraken to Disclose Data to IRS
The U.S. District Court for the Northern District of California has ruled that crypto exchange Kraken must provide the Internal Revenue Service (IRS) with account and transaction information spanning the tax years 2016 through 2020. The IRS initially requested this data in May 2021 to identify accounts that conducted at least $20,000 in digital asset trading in any year within the specified period. Kraken resisted, prompting the IRS to seek court enforcement. Despite Kraken's argument that the IRS request was an "unjustified treasure hunt," the court has now ordered the exchange to hand over approximately 160 million transaction records and information on 59,351 accounts. Judge Joseph Spero, who is overseeing the case, stated: "The Court concludes that this request is not overbroad. Nor is it unduly burdensome."
Kraken Cofounder Jesse Powell’s Home Searched by FBI
Late Thursday, the New York Times reported that the F.B.I. searched the home of kraken cofounder Jesse Powell in March. Three people with knowledge of the matter told the paper that the agency is conducting a criminal investigation into allegations that he hacked and cyber-stalked Verge Center for the Arts, a nonprofit that he founded. A spokesperson for Kraken said the investigation has nothing to do with the exchange.
Poly Network's Phantom Fortune: Hacker Mints Billions in Tokens
In a shocking exploit, the cross-chain bridge protocol Poly Network fell victim to a massive hack, with the perpetrator minting an estimated $42 billion in tokens across multiple chains. The hacker exploited a vulnerability in the protocol's smart contracts, creating a malicious parameter that allowed them to mint tokens on various blockchains, including Ethereum, Polygon, Avalanche, and BNB Chain.
Despite the staggering figure, the hacker's ability to cash out is limited due to low liquidity for most of these tokens. So far, they have managed to swap around $5 million worth of crypto through decentralized exchanges. This is the second major attack on Poly Network, which lost $600 million in a similar exploit in 2021. The Poly Network team has since suspended its services and urged users to withdraw liquidity.
Azuki Goes Through Turbulent Times Amidst NFT Rout
Last week, the launch of Azuki’s new collection, Elementals, drew criticism from holders for its striking similarity to the original Azuki collection, leading to a significant drop in floor price. Adding to the difficult situation, this week, Azuki DAO's governance token BEAN was exploited due to a contract vulnerability, resulting in a loss of 35 ETH. The exploit occurred during a community vote to hire a lawyer to recover 20,000 ETH from Zagabond, Azuki's founder. The community alleges that Zagabond has abandoned multiple projects, also known as "rug pulling.” As Azuki attempts to rebuild, the community remains divided, with some questioning the legitimacy of the DAO itself.
Things are not going great for other popular NFTs either. The blue-chip Bored Ape Yacht Club (BAYC) NFT collection saw its floor price drop to a 20-month low of 27.4 ETH (approximately $53,000), marking a steep decrease since the NFT boom in April 2022. However, at least NFT trading on Ethereum is seeing some benefits, trading volumes there experienced a significant surge in the last week of June, marking the highest weekly increase since February.
Others who are hurting are creators, since the royalties earned by them reached a two-year low, according to blockchain analytics firm Nansen.
DeFi Roundup
There’s a lot going on in the world of DeFi. Here’s a roundup:
A possible security breach at the Multichain bridge on the Fantom network has led to the withdrawal of tens of millions of dollars in tokens. The withdrawn assets include significant amounts of USDC, wrapped Bitcoin, wrapped Ether, and DAI. The funds have not been moved or sold beyond the initial wallets, and the Fantom Foundation is currently evaluating the situation.
Aave token holders are participating in a vote on a governance proposal to convert 1,600 ETH (approximately $3 million) from the protocol's treasury into wstETH and rETH, the liquid staking tokens of Lido and Rocket Pool, respectively.
Also, in response to concerns flagged by a Lido contributor regarding centralization within Rocket Pool’s Protocol DAO (pDAO), the liquid staking project has committed to pursuing full decentralization.
The team behind Magic Internet Money (MIM) and SPELL tokens is advocating for a transition from their current decentralized finance (DeFi) structure to a more centralized legal model to bolster protection.
Decentralized exchange, dYdX, launched its public testnet on Cosmos, allowing users to conduct market orders, generate private keys and place limit orders with advanced options, following a controversial decision to shift away from Ethereum last year.
Starknet, an Ethereum Layer 2 network, is set to roll out a substantial 'Quantum Leap' upgrade on July 13, aiming to drastically enhance the network's transactions per second rate.
Solana, which has been in the eye of the storm since the FTX collapse, witnessed a substantial 91% increase in the value locked in its liquid staking protocols like Marinade and Lido during the first half of the year.
FUN BITS 😁
The United Kingdom passed a bill on crypto last week. Hear it from Unchained’s Ginny Hogan.
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