Crypto Bears

2022-09-01 20:31:26 ​GameFi Rug Pull and Accidently Closed Exchange - Beware of Risks in Crypto

In a matter of 24 hours, developers of a play-to-earn (P2E) GameFi project apparently rug-pulled their investors, and a Solana (SOL)-powered exchange mistakenly shut itself down - all reminding us of risks in the crypto space.

Per blockchain security firm PeckShield data, GameFi (P2E blockchain-powered games) project HeroCat appears to have rug-pulled its investors. The game’s token, HeroCat Token (HCT), has lost more than 99.9% over the past week, according to data by CoinGecko.

PeckShield said that HCT, which is developed on the Binance Chain, “made a big sale and transferred” around USD 151,000 worth of the binance USD (BUSD) stablecoin. HeroCat has yet to release any updates about the current situation.

Meanwhile, a Solana-based DeFi project has accidentally closed itself due to a developer mistake. "Decentralized options exchange" OptiFi said they closed down the project during a routine upgrade yesterday.

"We accidentally closed the OptiFi mainnet program and it's not recoverable," the project's official Twitter account said, adding that the mistake resulted in the loss of USD 661,000 in funds, most of which was from team members.

In a post-mortem, the team said they wanted to upgrade the protocol on August 29 but canceled the operation when the deployment took longer than expected due to network congestion. They then noticed that a new “buffer” account had been created and that OptiFi had already transferred a little more than SOL 17.2 (USD 558) tokens to it.

The team attempted to shut down the OptiFi program to recover those assets. The scheme worked, but instead of closing it temporarily, the program had been shut down permanently.

"We will return all users’ deposits and settle all user positions manually according to PythNetwor oracle at 8 AM UTC on Sep 2nd," the team said. Open / Comment

2022-08-28 01:15:24 ​178 South Korean Darkweb Users Arrested on Suspicion of Crypto-powered Drug Trading

Police in Seoul, South Korea, have arrested 178 people on suspicion of buying and selling drugs online using cryptoassets as a means of payment.

According to JTBC, Seoul Metropolitan Police officers said they had arrested 12 suspected drug dealers and 166 of their alleged customers, stating that the individuals had all made use of darkweb portals and crypto payments.

The officers also stated that they had seized tokens, some USD 8,500 worth of cash, 12kg of marijuana, and significant amounts of drugs such as synthetic cannabinoids, ketamine, and MDMA (ecstasy).

A number of the drug payments appear to have been carried out in bitcoin (BTC), and the vast majority of alleged drug buyers were described as being in their 20s and 30s – although a small number of individuals were aged 40-59.

The officers explained that the individuals had all made use of a darkweb platform that allowed would-be dealers to post for free, but demanded 10% commission on all transactions – which were paid in crypto and carried out through the platform.

While the traders have been identified, the darkweb platform operators have thus far eluded capture.

Police officers stated that the platform made use of darkweb technology, cryptoassets, and messaging platforms such as Telegram, making it a natural choice for younger individuals – and less of a draw for older people.

And officers warned:

“Young people with high levels of internet literacy can easily buy narcotics online. But while they may think they leave no trace of their actions if they buy narcotics using cryptoassets, this isn’t the case. We have launched a dedicated investigation team and offenders will eventually be caught.”

Like many other East Asian nations, South Korea has extremely tight narcotics laws. The police force has recently established a unit named the Darkweb and Cryptosset Special Investigation Team.

Officers also indicated that they believe that some darkweb-related individuals may have links to some of Seoul’s busiest night spots.

Per Newsis, a spokesperson pledged to “identify darkweb operators” and “expand” the police’s “investigation” – as well as investigate “whether or not these operators are related to major clubs and entertainment establishments in Seoul.” Open / Comment

2022-08-16 22:30:00 ​Celsius Coin Report Reveals USD 2.8BN Crypto Shortfall

A newly released report from the troubled crypto lender Celsius (CEL) shows that the company is short on its crypto obligations to customers by around USD 2.8bn.

According to the report, Celsius has a net coin position of negative USD 2.845bn, split between coins such as bitcoin (BTC), ethereum (ETH), USD coin (USDC), CEL, and various other coins. The largest negative position was a USD 2,155 deficit for BTC.

Referred to as a “Coin Report,” the document was shared on Twitter by David Adler, a bankruptcy lawyer and partner at law firm McCarter & English, and shows Celsius’ consolidated liabilities, deployment, and assets on a per-coin basis as of July 29, 2022.

The document was filed as part of ongoing proceedings in the US Bankruptcy Court for the Southern District of New York. Celsius filed for bankruptcy protection under Chapter 11 of the US Bankruptcy Code on July 13.

Commenting on the newly released information on Reddit, several users expressed their strong dissatisfaction with Celsius and the way the company has been run.

“Quite simply an awful reading, I just want closure at this stage and to move on,” one user wrote, while adding that “the level of mis-management is astonishing […].” Others questioned if there is even a point in restructuring the company, saying it should just be liquidated as soon as possible so “everybody can move on.”

The newly released crypto deficit is similar to numbers revealed in a filing from Celsius from July 13. The filing at the time showed a total deficit of around USD 1.2bn, and a deficit in pure crypto terms of around USD 3bn for the crypto lender.

It is worth noting that some non-crypto assets could potentially be converted to crypto.

The old numbers were commented on yesterday by Simon Dixon, a major investor in Celsius and founder of fintech firm BnkToTheFuture, who repeatedly made the point that Celsius is “[USD]3bn crypto short.”

At the same time, Dixon also took the opportunity to hit back at critics who said he wasn’t justified in saying Celsius would “run out of money.” Citing the new coin report, Dixon said that,

Celsius has “now confirmed they run out of money by October.”

Following Celsius' withdrawal suspension in June, Dixon described himself as "a Celsius shareholder" and shared a "recovery plan", being vocal on the Celsius issue ever since. He argued at the time that “financial innovation like we did with Bitfinex” will be the best solution for Celsius.

Discussing the developments around Celsius on Twitter, some users pointed to the fact that the price of the CEL token has seen a substantial rise of well over 300% since Celsius filed for bankruptcy protection, and speculated that this could help the company’s financial position.

At the time of writing (12:45 UTC), CEL traded at USD 3.17, down 17% for the past 24 hours and up 118% for the past 7 days.

It has previously been reported that the crypto exchange FTX walked away from a deal with Celsius after getting access to its financial statements. According to a report from The Block, people with knowledge of the matter cited a “USD 2bn hole” in Celsius’ balance sheet as the reason FTX lost interest.

Since then, Celsius has repaid some debt, including USD 78.1m worth of USD coin (USDC) to the lending protocol Aave (AAVE). Open / Comment

2022-08-11 22:20:20 ​APE factor in Magic Eden’s plan to develop an exclusive for BAYC

Imagine a Solana SOL-based NFT marketplace planning to build one for an Ethereum ETH-based collection. Would it ever be possible to achieve?

Well, the leading Solana NFT marketplace, Magic Eden, seems not to think of impossible things. This is because the platform recently made an announcement that proposed to build a marketplace just for YugaLabs-owned collection, Bored Ape Yacht Club (BAYC)

Still on Ethereum?
Interestingly, there is a twist to the proposal. According to the proposal, Magic Eden does not plan to leave the marketplace as an ETH-backed one. In fact, it termed the proposal “A Marketplace for Apes, by Apes, built by Magic Eden.”

This meant that the native cryptocurrency of the BAYC, ApeCoin APE, would be used for transactions. So are there any reasons BAYC would consider or accept this proposal?

Well, Magic Eden addressed it. Besides its plan to develop it on the ApeCoin.com domain, the marketplace also made a few other points that may drive the ApeCoin DAO to consider.

The platform noted that it would be rewarding for the BAYC community to be in a marketplace where transaction fees are cheaper. It also added that it plans to build the marketplace at no extra cost to the collection community.

Magic Eden also stated that it plans to make the marketplace live in September 2022 with the approval of Yuga Labs and the BAYC community.

The platform included a few costs that users may incur. It had proposed a 1.5% base transaction fee with a 0.25% discount for trades made by BAYC holders, and other related Yuga Labs collections.

Interestingly, BAYC traders may have responded to the update positively. In the last 24 hours, there has been a 109.98% uptick in volume as it rose to $1.23 million based on NFTGo data.

However, its market cap and floor price had slightly declined—at 3.62% and 1.78%, respectively.

What’s in it for APE?
According to the proposal, APE users would also be an exception to paying the complete transaction fees. Magic Eden mentioned that there would be a 0.5% discount on the transaction fees for trades made with APE.

Additionally, if accepted, the marketplace launch could increase APE’s active addresses and improve its price, which has seen an 8.41% decline over the last 24 hours as per CoinMarketCap.

According to the analytic firm Santiment, there has been a sharp decrease in the APE volume. Similarly, its 24-hour active addresses have also plunged.

However, investors may want to watch where the proposal ends as Magic Eden slated three to four weeks for Yuga Labs to respond. If the marketplace sees the light of day, APE investors would likely expect it to take a positive toll on the cryptocurrency. Open / Comment

2022-08-03 22:30:00 ​MicroStrategy’s Saylor Says Stepping Down as CEO Will Let Him Focus More on Bitcoin

The bitcoin (BTC)-keen American software firm MicroStrategy could pivot even further toward BTC – despite the announcement that its co-founder Michael Saylor will step down as CEO on August 8.

In an earnings call, Saylor stated that after stepping aside as CEO to become the firm’s Executive Chairman, his focus would be on the firm’s “corporate strategy and innovation efforts” – and MicroStrategy’s “bitcoin strategy and related bitcoin advocacy and education initiatives.”

He added that he would continue working with the Bitcoin Mining Council and remarked:

“I will continue to act as an enthusiastic spokesperson for MicroStrategy and as our envoy to the global bitcoin community.”

Further, Saylor claimed that the “matter of CEO succession” had been in the pipelines for some time, explaining that the move had been “carefully considered and planned for at the board level for many years.”

The long-serving CEO explained that he “looked forward to leading the organization for the long-term health and growth of our enterprise software” – as well as its “bitcoin acquisition strategies.”

He went to pains to “reiterate” that MicroStrategy’s “strategy” was to “acquire and hold bitcoin long term,” adding that it does “not currently plan to engage in sales of bitcoin.”

Andrew Kang, the company’s Chief Financial Officer, explained that the company’s bitcoin “strategy” remains “simple”:

“Buy and hold for the long term, and that is it.”

Regardless, many will be concerned by Saylor’s move. The company posted second-quarter losses of around USD 1 billion – with a USD 917.8m impairment charge “related to the decline in the value of the bitcoin it holds,” Bloomberg noted.

The company says it owns “around” BTC 129,699 (USD 2.99bn). And with crypto winter still to subside, the company has faced no shortage of criticism for its aggressive BTC buying strategy.

The same media outlet explained that MicroStrategy shares had fallen some 2.3% in post-market trading, with stock traders apparently unimpressed by the news of the losses.

And with the company’s shares down some 50% this year, the company will be hoping that BTC prices rise sooner rather than later.

MicroStrategy’s current President, Phong Le, will succeed Saylor as CEO on August 8, the company disclosed.

In a press release, the firm explained that Saylor “will remain the Chairman of the Board of Directors and an executive officer of the company.”

Saylor was further quoted as stating:

“I believe that splitting the roles of Chairman and CEO will enable us to better pursue our two corporate strategies of acquiring and holding bitcoin and growing our enterprise analytics software business. As Executive Chairman I will be able to focus more on our bitcoin acquisition strategy and related bitcoin advocacy initiatives, while Phong will be empowered as CEO to manage overall corporate operations.”

In its Q2 report, the company put its BTC-related activities on the same pedestal as its core business analytics operations in a section named “Corporate Strategies.”

Here, the company explained, again, that it intended to “acquire and hold bitcoin long-term” and “purchase bitcoin through [the] use of excess cash flows and debt and equity transactions.”

It added that the “aggregate cost basis” of its BTC holdings was USD 4 billion.

At 8:04 UTC on Wednesday, BTC is trading at USD 23,045, up 0.5% in a day and 8.5% in a week. Open / Comment

2022-07-26 21:00:04 ​Lido DAO Votes Against Selling LDO 10M Tokens to Dragonfly Capital

The community members of Lido Finance, a decentralized finance (DeFi) protocol and third-party staking pool operator for Ethereum (ETH) 2.0, have voted against a proposal to sell LDO 10m tokens to crypto investment firm Dragonfly Capital for DAI 14.5m.

The vote, which concluded on Monday after a four-day voting period, ended with 609 DAO members participating, representing over 64m Lido DAO (LDO) tokens.

Of that tally, a total of LDO 43m voted against the proposal, while another 21m voted in support of it.

As reported, Jacob Blish, Head of Business Development at Lido, put forward a proposal seeking to secure around two years of "operating runway" for Lido DAO in stablecoins. The proposal aimed to sell 2% of the supply of LDO from the treasury, which equates to LDO 20m, in exchange for algorithmic stablecoin DAI.

At a price of USD 1.452153 per LDO token, the DAO aims to raise USD 29m in DAI stablecoin.

The latest vote was only to determine whether to sell half of that amount, or LDO 10m, to Dragonfly. If passed, the DAO would have received DAI 14,521,530 in exchange for 1% of the LDO supply (or 10M tokens).

The voting has not come without its fair share of controversy. In the early days of the voting, a whale address cast their LDO 15m token power to back the proposal, creating a more than 99% approval rate.

This led to many speculating who the whale could be and whether they had any connection with Dragonfly.

While crypto researcher Larry Cermak said it could be an over-the-counter (OTC) desk, Nansen CEO Alex Svanevik shared a screenshot suggesting that the whale address that supported the vote was associated with trading firm Alameda Research, the parent company of the popular crypto exchange FTX.

Notably, Cobie, a well-known crypto investor and co-founder of Lido Finance, said VCs should not participate in DAO voting, claiming that this could lead to "cronyism and pillaging."

"VCs should be abstaining from any DAO votes to sell themselves tokens," he said on Twitter, "If the vote is 'Should we sell Misc Capital 10,000,000 tokens for [USD] 1?' Then Misc Capital should abstain from voting on this proposal. ... Right?"

Meanwhile, the LDO token has taken a hit over the past 24 hours, dropping by around 11% to USD 1.39. aT 8:17 UTC on Monday, it's down 8% in a week, up 116% in a month, and down 81% from its August 2021 all-time high. Open / Comment

2022-07-23 18:00:07 ​BlockFi had $1.8B in outstanding loans in Q2.

Crypto lender BlockFi outlined the total amount of loans and net risk exposure it carried at the end of Q2 2022 and shared how it is managing liquidity and credit risk.

Centralized crypto lender BlockFi disclosed that as of the end of Q2, it had $1.8 billion in outstanding loans from institutional and retail investors and $600 million in “net exposure.”

The disclosure came from its Thursday “Q2 2022 Transparency Report,” where the firm outlined its risks relating to liquidity and credit and shared details on its institutional and retail loan portfolios. Of the outstanding loans to borrowers — valued at $1.8 billion — the firm reported that $600 million are uncollateralized loans.

Institutional loans accounted for $1.5 billion of the total outstanding loans, while retail loans made up the remaining $300 million. The firm based its holdings and outstanding loan amounts on a Bitcoin (BTC) price of $19,986 as a reference point.

BlockFi said it has established guidelines to help it “maintain the liquidity necessary to meet all our obligations under our core business activities, which includes institutional and retail borrowing and trading activities.”

Those guidelines stipulate that it will hold at least 10% of the total amount due to clients upon demand in inventory, which will be ready to be returned to clients.

It will also hold at least 50% of owed funds in places that can be retrieved and returned to clients within seven days and will hold at least 90% of the total amounts owed to clients upon demand, either in inventory or in loans that can be called back within one year.

The new liquidity guidelines come a few weeks after BlockFi and crypto exchange FTXUS signed an agreement to send $400 million to BlockFi as a “credit facility” with the option to acquire the firm for up to $240 million based on performance triggers.

The deal came together after major crypto investment enterprise Three Arrows Capital reportedly defaulted on its loan from BlockFi.

In a Wednesday post outlining its risk management, BlockFi explained that it only provides uncollateralized loans to borrowers it considers “Tier 1” clients. Open / Comment

2022-07-14 23:00:01 ​Bitfinex Hack Suspect Heather Morgan Cleared to Seek Job and Get Paid Over USD 10K a Month

Heather Morgan, who was charged over laundering USD 4.5bn worth of bitcoin (BTC) stolen from the Bitfinex crypto exchange, won court approval to seek a new job while her case proceeds.

According to a Bloomberg report, a US judge has approved Morgan’s request to modify the conditions of her pre-trial release so that she “may engage in legitimate employment and receive income of greater than [USD] 10,000 per month.”

Morgan, who also calls herself the 'Crocodile of Wall Street' and goes by the rapper name Razzlekhan, was accused of conspiring with her husband Ilya Lichtenstein to launder USD 4.5bn worth of bitcoin stolen from the infamous Bitfinex hack.

As reported, the self-proclaimed "serial entrepreneur" duo, arrested in early February, was initially granted bail by a New York judge, a decision that was later overruled by a Washington judge. However, in mid-February, a judge in Washington released Morgan from detention on bail while denying bail to her husband.

At the time, the judge reportedly said the motivation for both to flee “has increased exponentially,” adding that “the evidence strongly suggests that Mr. Lichtenstein has more facility and skill” than Morgan, who allegedly had no access to the stolen crypto since they were controlled by her husband. Open / Comment

2022-07-09 21:00:03 ​Twitter Says It Won't Let Elon Musk Go as 'Dogecoin CEO' Terminates Deal

A major legal battle, involving the crypto community's preferred social media platform Twitter, and Dogecoin (DOGE) advocate, Tesla's Elon Musk, is in the works.

After the serial entrepreneur said he's terminating his agreement to buy Twitter in a USD 44bn deal, the company vowed to fight back.

"The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plans to pursue legal action to enforce the merger agreement. We are confident we will prevail in the Delaware Court of Chancery," Bret Taylor, Chairman of Twitter, said, without elaborating any further.

Musk accused the social media giant of breaching their agreement and making false statements

In a filing, Musk said he has sought the data and information necessary to "make an independent assessment of the prevalence of fake or spam accounts on Twitter’s platform."

However, per the star entrepreneur, "Twitter has failed or refused to provide this information."

"Sometimes Twitter has ignored Mr. Musk’s requests, sometimes it has rejected them for reasons that appear to be unjustified, and sometimes it has claimed to comply while giving Mr. Musk incomplete or unusable information," according to the filing.

Meanwhile, per Reuters, Twitter has a strong legal case against Musk.

Delaware courts have set a high bar for acquirers being allowed to abandon their deals, but target companies often choose the certainty of a renegotiated deal at a lower price or financial compensation rather than a messy court battle that can last for many months, Reuters reported, citing three corporate law professors.

"If it goes to court, Musk has the burden to prove more likely than not, that the spam account numbers not only were false, but they were so false that it will have significant effect on Twitter's earnings going forward," Ann Lipton, associate dean for faculty research at Tulane Law School, was quoted as saying. Open / Comment

2022-07-05 23:52:25 ​BlockFi announces deal with FTX US, including 'option to acquire' for $240M.

According to CEO Zac Prince, BlockFi signed agreements with FTX US totaling $680 million — for a company that had a $5 billion valuation in June 2021.

FTX US has inked a deal with BlockFi that will give the crypto derivatives exchange the option to purchase the lending firm.

In a Friday Twitter thread, BlockFi CEO Zac Prince said the crypto lending firm had signed agreements with FTX US for a $400-million revolving credit facility as well as the option to acquire BlockFi “at a variable price of up to $240 million based on performance triggers.” According to the CEO, the deal was reached as part of an effort “to bolster liquidity and protect client funds” at BlockFi.

The agreements are still subject to shareholder approval. Prince said volatility in the crypto market, “particularly market events related to Celsius and 3AC,” which had a negative impact on BlockFi, led to the decision. The crypto lending platform suffered roughly $80 million in losses the week following Celsius pausing withdrawals, and, after considering “ various unattractive options” for recovery, partnered with FTX US.

“All of our products and services — including funding and withdrawals, our trading platform, credit card and global institutional services — continue to operate normally, with incremental capital strength behind them,” said Prince.

In a Friday blog post, BlockFi criticized reports from Thursday claiming FTX intended to purchase the firm for $25 million. According to the CEO, the $400 million credit facility, $240 million acquisition price and “other potential consideration” totaled $680 million — for a company that had a $5 billion valuation in June 2021. Prince hinted the report was due to “an inappropriately leaked call” and “purely personal conjecture by a single party.”

BlockFi was one of the first firms to liquidate some of Three Arrows Capital's positions in June after the company reportedly failed to meet margin calls from its lenders. Amid the market downturn and extreme price volatility, the crypto lending firm announced that it would be laying off 20% of its 850-strong staff, retaining roughly 600 people. It’s unclear if a FTX US acquisition would change this decision. Open / Comment