Cryptocurrencies, tokens, NFTs, virtual "assets" frauds

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Brothers accused of vanishing with $4.8b in bitcoins had made earlier 'hack' claim​

The Cajee brothers had claimed in 2019 that another crypto scheme they had going was also hacked. PHOTO: REUTERS

Ann Williams


JUN 29, 2021

SINGAPORE - The Cajee brothers, accused of vanishing along with some US$3.6 billion (S$4.8 billion) in bitcoins from their Africrypt cryptocurrency platform, had claimed in 2019 that another crypto scheme they had going was also hacked.
Mr Ameer Cajee, 18, and Mr Raees Cajee, 21, have not been seen since they told their investors in April that their Africrypt platform, which reportedly counted several high-profile South Africans and celebrities among its investors, had been hacked.
If it is true that a staggering US$3.6 billion has gone missing, according to lawyers for Africrypt investors, this could be the biggest crypto heist in history.
For the whole of last year, losses in the crypto sector through fraud and other crime were US$1.9 billion, down from a record of US$4.5 billion in 2019, according to crypto intelligence company CipherTrace.
Police have launched an investigation and said the brothers sold their Lamborghini Huracan, a luxury suite at one of South Africa's most expensive hotels and a rented beachside apartment weeks before their disappearance.
South African news site MoneyWeb reported on Tuesday (June 29) that this is the second hack the Cajee brothers have claimed. In a letter to clients in May 2019, the brothers said another investment platform they ran was also hacked and emptied of all bitcoins, which they blamed at the time on a breach of their biggest trading partner, Binance.
The letter sent to clients after the first "hack" was similar to that sent to Africrypt's clients on April 13 following the latest "hack", said MoneyWeb.

It gave no details of how much money was missing and warned clients that trying to get their money back using lawyers would "only delay the recovery process".
Lawyers for the brothers, meanwhile, said on Monday that their mandate to assist them has been terminated. The statement came just two days after their public defence of the brothers.
Mr Raees Cajee told Dow Jones on Monday, from a location he would not disclose, that only about US$5 million was missing, a fraction of what was reported. But MoneyWeb reported that just one address of several that were hacked had a balance of more than 71,000 bitcoins, worth about US$2.4 billion.
MoneyWeb quoted Mr Darren Hanekom of Hanekom Attorneys, representing some investors, as saying it was unlikely all the funds came from South Africans, and that it was more likely a money laundering operation for international players, of which the Cajees were just a part.
Mr Hanekom also said Africrypt bore all the hallmarks of a scam, with the Cajees posting pictures of their luxury cars and boasting on social media about their extensive experience in cryptos.
In an investor presentation, Africrypt boasted returns of 2 per cent to 11 per cent a month depending on whether its clients chose a passive, passive-aggressive or aggressive portfolio. In the 20 months to August last year, there was not a single losing month.
"This entity was offering exceptionally high and unrealistic returns akin to those offered by unlawful investment schemes commonly known as Ponzis," South Africa's Financial Sector Conduct Authority said last week.
"The public is urged to understand that unrealistically high returns suggest that the investment scheme is likely to be fraudulent."

 

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BitConnect founder charged in US with $2.69 billion cryptocurrency fraud​

Prosecutors said BitConnect ran a "textbook Ponzi scheme" by paying earlier investors with new investor money. PHOTO: REUTERS


SEP 2, 2021

NEW YORK (REUTERS) - The top United States securities regulator on Wednesday (Sept 1) sued the founder of the now-defunct cryptocurrency exchange platform BitConnect over his alleged role in fraudulently raising about US$2 billion (S$2.69 billion) from thousands of retail investors.
Expanding a civil case announced in May, the US Securities and Exchange Commission (SEC) charged BitConnect founder Satish Kumbhani, an Indian citizen, with lying about BitConnect's ability to generate profits, and violating registration laws meant to protect investors.
In a lawsuit in Manhattan federal court, the SEC also charged promoter Glenn Arcaro and his firm Future Money with fraudulently receiving more than US$24 million in "referral commissions" and other sums as BitConnect's top US promoter.
Arcaro pleaded guilty on Wednesday to a related criminal wire fraud conspiracy charge before US Magistrate Judge Mitchell Dembin in San Diego. His sentencing is on Nov 15.
The SEC lawsuit seeks to impose fines, recoup ill-gotten gains and other relief.
Founded in 2016, BitConnect created a digital token called BitConnect Coin that could be exchanged for Bitcoin, the popular cryptocurrency.
The SEC said investors in a BitConnect "lending programme" were told BitConnect used a "volatility software trading bot" that could generate returns of 40 per cent per month, and were given fictitious returns showing 3,700 per cent annualised gains.

But the regulator said investors lost much of their money after the price of BitConnect Coin sank 92 per cent on Jan 16, 2018.
Prosecutors said BitConnect ran a "textbook Ponzi scheme" by paying earlier investors with new investor money.
Kumbhani, 35, has lived in Surat, India but his whereabouts are unknown, while Arcaro, 44, lives in Los Angeles and incorporated Future Money in Hong Kong, authorities said.
Efforts to locate Kumbhani were unsuccessful. Arcaro's lawyer did not respond to requests for comment.
The SEC sued five other BitConnect promoters on May 28.
It has obtained judgments requiring two promoters, Michael Noble and Joshua Jeppesen, and Jeppesen's fiancee to pay more than US$3.5 million and 190 bitcoin. The other promoters have not responded to the lawsuit or not been served.

 

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24-year-old cryptocurrency hedge fund founder pleads guilty to fraud​

Stefan He Qin was charged with one count of securities fraud. PHOTO: BLOOMBERG

FEB 5, 2021

NEW YORK (BLOOMBERG) - A 24-year-old founder of two New York-based cryptocurrency hedge funds with more than US$100 million (S$133 million) in investments pleaded guilty on Thursday (Feb 4) to securities fraud.
Stefan He Qin was charged with one count of securities fraud, after duping investors by claiming he used a trading algorithm to take advantage of price differences for a number of cryptocurrencies, federal prosecutors said in an e-mailed statement.
Qin stole investor money from his Virgil Sigma Fund, and attempted to dip into his VQR Multistrategy Fund to pay back investors in the first fund, prosecutors said. He admitted trying to steal from yet another fund he controlled to cover VQR fund redemption demands, according to the statement.
"The whole house of cards has been revealed, and Qin now awaits sentencing for his brazen thievery," Ms Audrey Strauss, the acting US Attorney for Manhattan, said in the statement.
Qin's fraud relied on misrepresentations about his investment strategy to lure millions of investor dollars into the fraudulent cryptocurrency firms, prosecutors said. Qin, an Australian national, embezzled almost all the capital from the Virgil Sigma fund to pay for, among other personal expenses, a penthouse apartment. He faces as long as 20 years in prison.
"Mr Qin has accepted full responsibility for his actions and is committed to doing what he can to make amends," his lawyers Sean Hecker and Shawn Crowley said in a statement.
The US Securities and Exchange Commission filed a parallel civil case against Qin in December.

 

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MAS orders crypto exchange platform Binance.com to stop services in Singapore​

In recent months, Binance has come under intense scrutiny from regulators worldwide. PHOTO: REUTERS

Joyce Lim
Senior Correspondent

SEP 3, 2021

SINGAPORE - The Monetary Authority of Singapore (MAS) has ordered Binance to stop providing payment services in Singapore and to cease soliciting business from Singapore residents.
The regulator has reviewed Binance.com's operations and is of the view that the website's operator Binance "may be in breach of the Payment Services Act for carrying on the business of providing payment services to, and soliciting such business from Singapore residents without an appropriate licence", said a spokesman in response to media queries.
MAS also placed Binance.com on its Investor Alert List on Thursday (Sept 2) to warn consumers in Singapore that Binance is not regulated or licensed in Singapore to provide any payment services.
The list flags companies that are not licensed by the MAS, but may have given investors the impression that they were sanctioned by the Singapore regulator.
As at Sept 2, the MAS website listed 699 companies, including those registered overseas, which may have been wrongly perceived to be regulated by the MAS.
The spokesman added that MAS has been engaging Binance's local arm Binance Asia Services and expects the Singapore-registered entity to "immediately begin an orderly suspension" of its facilitation of transfers of digital payment token assets between the firm and its parent company Binance.
"BAS (Binance Asia Services) will inform its customers of the appropriate arrangements as soon as practicable," said the MAS spokesman.

The move comes about a month after Malaysia ordered Binance to disable its main exchange, Binance.com, and mobile applications in the country.
Calling it an illegal digital asset exchange, Securities Commission Malaysia had placed Binance and three other Binance entities, including the Singapore-registered Binance Asia Services, on its investor alert list last July.
In recent months, Binance - the world's largest cryptocurrency exchange by trading volume - has come under intense scrutiny from regulators worldwide, including in Malaysia, Britain, the United States, Italy and Thailand.


Its British arm, Binance Markets, was in June banned from doing regulated business in the country over concerns that it was not doing enough to prevent money laundering and other financial crimes on its platform.
Japan's financial regulator has also issued a notice, warning that Binance is not registered to do business within the country.
In July, Hong Kong's Securities and Futures Commission issued a warning against Binance, stating that the cryptocurrency exchange was not licensed or registered to offer securities, after which Binance issued a statement to say that it would restrict Hong Kong users from trading derivative products.
Responding to MAS' notice on Binance.com, Binance Singapore, which operates under Binance Asia Services, said the notice has "no direct impact" on the services it provides.
"Binance Singapore (Binance.sg) is a separate legal entity from Binance.com, with its own local executive and management team and does not offer any products or services via the Binance.com website or other related entities, and vice versa.
"Binance Singapore is solely focused on growing the Singapore cryptocurrency ecosystem and servicing users in Singapore," Binance Singapore said in a statement.


In a separate statement, Binance.com said it is "actively working with the MAS to address concerns that they may have through constructive dialogue" and the company takes a "collaborative approach" in working with regulators.
"We take our compliance obligations very seriously. We are actively keeping abreast of changing policies, rules and laws in this new space. We will work closely with MAS and other global regulators to comply with the relevant regulatory standards," the statement said.
Binance Asia Services is currently exempted from holding a licence under Singapore's Payment Services Act for the provision of digital payment token services as its licence application is being reviewed.
It runs the Binance.sg platform, which offers Singaporeans and residents here trading pairs in Bitcoin, Ethereum and Binance Coin. It also provides Singapore-dollar deposit and withdrawal functionality via payments platform Xfers Direct.
Last month, Binance Singapore announced the appointment of MAS veteran Richard Teng as its new chief executive. Mr Teng was with MAS for 13 years and last served as its director of corporate finance. He was also chief regulatory officer at the Singapore Exchange.

 

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Bored Ape thefts on Instagram are crypto's latest hack headaches​

Scammers hacked Bored Ape's Instagram account and tricked users into accessing a fake website. PHOTO: REUTERS

PUBLISHED

May 10, 2022

NEW YORK (BLOOMBERG) - When it comes to crypto hacks, it seems like it is the same story every time. Scammers take advantage of a vulnerability in a blockchain's design and make off with millions, like in the over US$600 million (S$832 million) heist involving the play-to-earn non-fungible token (NFT) game Axie Infinity and the US$77 million theft that took place on April 30 on decentralised finance projects Rari Capital and Fei Protocol.
But a US$3 million hack disclosed on April 25 involving NFTs from the popular Bored Ape Yacht Club (BAYC) universe exploited a different kind of weakness that is not unique to blockchain. Scammers infiltrated the NFT collection's official Instagram account and posted a link to a fake website where users connected their crypto wallets for what they thought was an NFT launch.
In reality, they had unwittingly opened themselves up to theft. When the actual launch happened on April 30, users were again targeted when scammers posted links to fake websites that ended up cleaning users out of NFTs worth a collective US$6.2 million.
The incidents exemplify a growing trend in which social media is being used as a tool for amplifying and executing crypto and NFT scams. These thefts are not just hitting Instagram: Twitter, Facebook, and the chat platforms Discord and Telegram are also fertile ground for these manoeuvres, said Assistant Professor Ronghui Gu, chief executive officer of the blockchain security firm CertiK.
"We have seen more and more attacks and hacks in Web3 and the blockchain industry and many of them have new forms of attack, which we haven't seen before," Prof Gu said in an interview.
The escalating social media cyber threat combines with crypto-based crime hitting an all-time high last year, according to blockchain security firm Chainalysis' 2022 Crypto Crime Report. Illicit crypto wallets received US$14 billion, an 80 per cent increase from 2020. That is a cost crypto firms and tech giants cannot afford to ignore, and it ratchets up the pressure on them to shore up security and tighten safeguards.

Crypto copycats​

Spam bots and account impersonation are already well-known problems on Twitter. About US$2 million was stolen from customers over a seven-month period in 2020 and 2021 through crypto scams advertised by fake Elon Musk accounts, according to the Federal Trade Commission in the United States. These tactics are also rife on Crypto Twitter and other platforms upon which crypto users depend.

"They heavily rely on this social media to get information about all kinds of different crypto projects like NFTs," Prof Gu said, adding that he has seen fake Telegram accounts that claim to belong to his company, CertiK.
Malicious accounts posing as real crypto firms, projects and entrepreneurs often tout fake giveaways of cryptocurrencies or NFTs. They can also disseminate through spam bots, which are automated social media accounts that can make posts and tag users, just like profiles run by humans. Twitter maintains that less than 5 per cent of profiles are fake or spam, according its first-quarter earnings report - but that does not make them any less of a potential threat.
When Mr Musk announced in April that he was acquiring Twitter in a US$44 billion deal, he said he wanted to improve the social media platform by "enhancing the product with new features, making the algorithms open source to increase trust, defeating the spam bots, and authenticating all humans".

Identity theft​

It does not have to be a false account disseminating crypto fraud - real accounts belonging to companies can be compromised too. The official BAYC Instagram account used two-factor authentication, according to a statement from Yuga Labs, the developer of the NFT collection. But that did not keep the account from being hacked.
The breach of this extra security measure indicates that hackers likely gained access to the account by tricking an administrator through social engineering, according to Prof Gu. This practice involves using personal or professional information to gain someone's trust, enabling a scammer to then elicit more data or credentials for a sensitive or valuable account. Both an employee at a social media company and an individual user contacted by a scammer can fall victim to social engineering.
This kind of tactic has been used in hacks of Twitter accounts, with the most notable one being a 2020 incident in which profiles belonging to verified users like then-presidential candidate Joe Biden were used to post a fake Bitcoin giveaway. Twitter employees had been manipulated to provide the access needed for hackers to take over these accounts.


The breach of official crypto accounts has happened on Discord too. Prior to its official launch, NFT marketplace Fractal had its Discord channel infiltrated and used to spread a link to a fake token launch that stole about US$150,000 from users.

What to do?​

Crypto scams put more pressure on social media companies to boost security measures and hash out clearer policies on how they plan to better protect users.
When asked about these issues, Twitter, Discord and Telegram told Bloomberg that they all take action to mitigate fraud on their platforms and allow users to report suspicious activity. Meta Platforms, the parent company of Facebook and Instagram, declined to comment on crypto scams on these social media networks and the recent BAYC hack.
Although cutting out scams is difficult, it is not impossible, according to Mr Curt Dukes, an executive vice-president at the non-profit Centre for Internet Security. Requiring users to employ multi-factor authentication to protect their accounts and introducing a patch management system that helps identify and fix security flaws can help decrease vulnerability.
Companies can also provide better education to both employees and users on social engineering and make greater use of tools to verify that a user is human, such as adding a "Captcha" challenge requiring users to solve a puzzle or type in hard-to-read text in order to use the platform.
Mr Musk's plan to open-source Twitter's algorithms "definitely gives credibility to the platform", according to Mr Dukes. Allowing anyone to view Twitter's code would increase the chances of a security issue being spotted, he said.
As for cleaning out bots, there are machine-learning tools available that could be a big help for social media companies, but there are trade-offs involved, said Mr Adam Meyers, senior vice-president of intelligence at the cyber-security firm Crowdstrike. Algorithms can identify posting patterns indicative of a malicious bot account, Mr Meyers said in an interview. Doing so, though, could sharply cut overall user counts, which would not be ideal for a social media platform.
"If you're too good at stopping bots, then that's going to drive that number down," Mr Meyers said.

Steps for start-ups​

Crypto start-ups can also take concrete steps to improve their security as scams increase, according to Ms Kim Grauer, director of research at Chainalysis. While it is common for early-stage firms in the sector to prioritise other areas over cyber security, "the industry cannot grow so long as it has this kind of ubiquitous hacking happening", she said in an interview.
Besides hiring security specialists, crypto platforms could undergo code audits that can help identify potential risks for users, she said. For some crypto adherents, the ultimate solution lies in Web3 - a decentralised Internet based on blockchain that proponents see as a step up from the current state of affairs, where tech companies control the biggest online platforms.
Web3 platforms are owned and managed by users, and developers can build tools that can help with issues such as eliminating spam and verifying the identity of users. But a mass migration to a Web3 social media network is not realistic for the crypto industry, according to CertiK's Prof Gu.
Online communities like Crypto Twitter have helped boost mainstream adoption of NFTs and digital currencies. In addition to providing an easy way to promote projects and share information, these social media networks have earned some crypto companies millions of followers. For crypto start-ups, walking away from this kind of exposure is too big of a cost. But not taking steps to address security concerns can also exert a heavy toll.

 

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Crypto hackers swipe $107 million in attack on DeFi projects​

The hacker drained funds from several Fuse pools by exploiting a so-called reentrancy vulnerability. PHOTO: REUTERS

MAY 6, 2022

NEW YORK (BLOOMBERG) - Crypto projects Rari Capital and Fei Protocol said they suffered a US$77 million (S$107 million) hack on Saturday (April 30), five months after their merger.
An unverified Twitter account for Fei Protocol said it was aware of an exploit targeting various pools belonging to its merged partner Rari Capital. The tweet was verified by Fei founder Joey Santoro in a post to the decentralised-finance project's Discord server.
"We have identified the root cause and paused all borrowing to mitigate further damage," the tweet said. Fei offered a US$10 million bounty to the hacker if they returned the remaining user funds, "no questions asked".
Meanwhile, the hacker has already started moving crypto to Tornado Cash, a service that allows users to mask transactions, according to Dr Lei Wu, chief technical officer of blockchain security firm BlockSec, and a review of activity on Etherscan.
The exploit is the latest to target a DeFi network, which is designed to allow users to bypass traditional intermediaries to borrow and lend digital assets with the added feature of anonymity. In February, hackers made off with US$320 million worth of crypto after an attack on Wormhole, a communication bridge between the Solana blockchain and other DeFi networks.
Fei Protocol is focused on building an algorithmic stablecoin, pegged to the value of the United States dollar, that can be more easily used by decentralised autonomous organisations, or DAOs. Rari Capital allows investors to lend, borrow and "farm" high yields via a permissionless interest-rate protocol called Fuse.
The hacker drained funds from several Fuse pools by exploiting a so-called reentrancy vulnerability, Mr Santoro said in a post on Fei's Discord, and promised to publish a detailed post-mortem of the attack "after further analysis".

A reentrancy attack occurs when a protocol's smart contract makes a call to an external smart contract, which is responded to by a return call from the external contract that seeks to exploit a vulnerability in the initial call's code.
One of the most well-known instances of this type of attack is the 2016 hack on The DAO, according to analysis by crypto developer Moralis, the fallout from which caused the Ethereum blockchain to split itself in two.

 

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Cryptocurrency-bridge hacks top $1.36 billion in little over a year​

Axie Infinity is a non-fungible token game where players earn tokens that can be exchanged for cryptocurrency or cash. PHOTO: AFP


APR 5, 2022

NEW YORK (BLOOMBERG) - The hack of a so-called bridge supporting Axie Infinity's play-to-earn game revealed last week highlights the increasingly problematic nature of the arcane software used within the burgeoning world of cryptocurrencies, blockchains and the metaverse.
Weaknesses in bridges, which allow tokens designed for one blockchain to be used on another, have led to more than US$1 billion (S$1.36 billion) in stolen cryptocurrency in a little more than a year across seven different incidents, according to data compiled by researcher Chainalysis.
In the case of the Ronin Bridge, which was recently hacked, the software was adopted to help Axie Infinity's network accelerate transactions and reduce costs since the underlying Ethereum blockchain was not able to handle the surging demand from gamers quickly or cheaply. "Bridges, in my opinion, are the single largest potential point of failure in crypto right now," said Mr Sam Peurifoy, head of interactive at Hivemind Capital, who also leads the play-to-earn guild Kapital DAO in Axie Infinity.
More than US$21 billion is locked on Ethereum bridges, data from Dune Analytics shows. In February, hackers stole around US$300 million from Wormhole, a bridge connecting Ethereum to the Solana blockchain. That same month, the Meter Passport bridge got hacked for several million dollars of crypto. In January, Qubit Finance, a project that enables cross-chain function was hacked. In addition to hacks, bridges have proven to be vulnerable to other unique problems.
Last year, the Optics bridge on the Celo network ended up being inoperable after its bridge development team effectively lost control of the project.
It is often hard to figure out who created a particular bridge or who operates it.
Developers can be anonymous, and the names of the validators - a handful of computers that secure the bridge's transactions - may be purposefully kept secret. Many are run by organisations with little security staff - it can take days for an issue to even be discovered. At Ronin, the roughly US$600 million theft happened on March 23 but was only discovered on March 29. Bridges are becoming increasingly vulnerable as the value of tokens going through them increases. Some 13 years ago, there was only the Bitcoin blockchain.

Now, there are thousands of blockchains, each with their own advantages - such as lower transaction fees - and with their own army of applications, ranging from non-fungible marketplaces to decentralised crypto exchanges.
Investors have to increasingly jump from one chain to another to earn yields or to buy art: Someone who has Ether token may wish to go onto Solana to purchase non-fungible tokens (NFTs) or to Polygon to play games, for example.
"I know it sounds like the cross bridges are a bit of a train wreck, but I don't think it's as bad as that," Mr Peter Robinson, a bridge expert at blockchain infrastructure builder ConsenSys, said in an interview before the Ronin hack.


Axie Infinity's Ronin was built to handle more demand from Axie gamers who are looking for ways to avoid Ethereum's expensive transaction fees.
"Bridges are an incredibly critical piece of infrastructure at this point," Mr Kanav Kariya, president of Jump Crypto, said in an interview after the Wormhole hack. "We are strongly moving towards a multi-chain world."

Back in February, Jump Crypto ended up providing more than US$300 million of Ether so Wormhole's users would not lose funds. A loss of a bridge can reverberate throughout a small blockchain's ecosystem of apps, all of which may end up with massive losses.
"We've invested billions of dollars into the crypto ecosystem," Mr Kariya said. "Given the possible ripple effects of such a critical piece of infrastructure having a loss, we thought it was critical to step in in the early stages."
Ronin's situation is a bit different. Axie Infinity, created by the Sky Mavis gaming studio, is the chain's main app, and Sky Mavis also built the Ronin Bridge. The firm said it will reimburse users, though exactly how remains unclear.
Ethereum co-founder Vitalik Buterin warned in January that bridges have "fundamental security limits". Mr Buterin advocates holding native assets on each blockchain they were designed for to keep them safe. But that may not be affordable for many.
One key underlying problem is that most bridges do not have insurance, and do not guarantee a reimbursement of funds if they are lost. "We don't provide implicit guarantees," Mr Yat Siu, co-founder of Animoca Brands and an investor in Sky Mavis, said in an interview before the Ronin hack.
"We think of it as more of a warranty service. If a product ended up being faulty, if you have a faulty car, we'll give you back your money."

 

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Bored Ape Instagram hack cost NFT owners $4 million​

This happened despite there being a two-factor authentication protection on the Instagram account. PHOTO: REUTERS


APR 26, 2022

NEW YORK (BLOOMBERG) - Hackers made away with about US$3 million (S$4.1 million) worth of some of the world's most popular non-fungible tokens (NFTs) after gaining access to the Instagram account belonging to the Bored Ape Yacht Club (BAYC) collection.
Once in, the hackers uploaded a post that linked to a cloned version of BAYC's official website and included an offer of free crypto tokens. Anyone who tried to claim the free tokens by authenticating and connecting their digital wallets to the fraudulent site instead gave the hackers free rein to access and transfer their NFTs and other cryptoassets.
"Yuga Labs and Instagram are currently investigating how the hacker was able to gain access to the account. We're still investigating," BAYC owners Yuga Labs said in a statement.
The Instagram account was protected with two-factor authentication, the company said. Instagram did not return a request for comment.
Hacked owners cumulatively lost four Bored Apes, six Mutant Apes and three Bored Ape Kennel Club NFTs - together worth roughly US$3 million, Yuga said. The average price of a Bored Ape, which rank among the most popular and sought-after, is currently more than US$430,000, per tracker DappRadar.
It is not the first time scammers have targeted affluent crypto owners, nor is it the first hack targeting BAYC. Earlier this year, 17 users of NFT marketplace OpenSea lost a slew of tokens to a phishing attack. Other people have been fooled by hackers selling them NFTs that turned out to be unauthorised fakes.
"In this case we saw a hacker hack an Instagram account in order to set up an elaborate fraud," said Mr Ari Redbord, a former federal prosecutor who is now the head of legal and government affairs at TRM Labs, a blockchain intelligence company. "We are seeing more and more hacks and scams perpetrated on crypto businesses - from exchanges to Axie Infinity to NFTs. One thing that many of these hacks have in common is social engineering and some degree of human error."

Assistant Professor Ronghui Gu, chief executive officer of blockchain security firm CertiK, said that since the BAYC Instagram account used two-factor authentication, it is likely that hackers gained access to the account by tricking an administrator through social engineering.
This practice involves using personal or professional information to gain someone's trust, enabling a scammer to then elicit additional data or credentials for a sensitive or valuable account.

 

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Bitcoin sinks over 50% from November peak with drop below US$32,000​

Rising interest rates are giving individual and institutional investors pause for thought about the crypto market outlook. PHOTO: REUTERS

May 10, 2022

MUMBAI (BLOOMBERG) - Bitcoin extended losses, dropping below US$32,000 for the first time since July 2021, putting its decline from a November record high to more than 50 per cent amid a global flight from riskier investments.
The world's largest digital token fell as much as 7 per cent on Monday (May 9) and traded at US$31,924 at around noon in New York. Ether fell as much as 7.7 per cent, while Solana dropped 12 per cent and Avalanche dipped 13 per cent.
Mr Michael Novogratz, the billionaire cryptocurrency investor who leads Galaxy Digital Holdings, warned that he expects things to get worse before they get better.
"Crypto probably trades correlated to the Nasdaq until we hit a new equilibrium," Mr Novogratz said on Galaxy's first-quarter earnings call on Monday. "My instinct is there is some more damage to be done, and that will trade in a very choppy, volatile and difficult market for at least the next few quarters before people are getting some sense that we are at an equilibrium."
Tightening monetary policy to combat runaway inflation and ebbing liquidity are turning investors away from speculative assets across global markets. Adding to the caution around digital assets, the value of TerraUSD or UST, an algorithmic stablecoin that aims to maintain a one-to-one peg to the dollar, slid below US$1 over the weekend.
"In the light of fears of rising inflation, most investors have taken a risk-off approach - selling stocks and cryptos alike in order to cut down risk," said Mr Darshan Bathija, chief executive of Singapore-based crypto exchange Vauld.
Rising interest rates are giving individual and institutional investors pause for thought about the crypto market outlook, according to Mr Edul Patel, CEO of Mudrex, an algorithm-based crypto investment platform. Bitcoin's 30 per cent drop in 2022 compares with a retreat of more than 10 per cent in global bonds and shares, and a 2.5 per cent advance in gold.

​

"The downward trend is likely to continue for the next few days," he said, adding that Bitcoin could test the US$30,000 (S$42,000) level.
Bitcoin's recent decline puts it at risk of firmly dropping out of the range where it has been trading in 2022, completely reversing the most recent bull run that drove the token to a record of almost US$69,000 in November. With its 40-day correlation with the S&P 500 stock benchmark at a record 0.82, according to data compiled by Bloomberg, any further hit to equities sentiment would risk dragging Bitcoin down as well.
A correlation of 1 means two assets move in perfect lockstep; a reading of minus 1 means they move in opposite directions.

 

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Crypto assets shed $1.11 trillion in market value in a month​

Digital asset prices have slumped, mirroring a plunge in equities on fears of aggressive interest rate hikes globally. PHOTO: REUTERS

May 12, 2022

BENGALURU (REUTERS) - Crypto assets bled nearly US$800 billion (S$1.11 trillion) in market value over the past month, touching a low of US$1.4 trillion on Tuesday (May 10), according to data site CoinMarketCap, as the end of easy monetary policy diminishes appetite for risk assets.
Bitcoin, which makes up for nearly 40 per cent of the crypto market, hit a 10-month low earlier on Tuesday, before rebounding to US$31,450, just six days after touching US$40,000. It was more than 54 per cent below its Nov 10 all-time high of US$69,000.
Digital asset prices have slumped, mirroring a plunge in equities on fears of aggressive interest rate hikes across the globe to stave off decades-high inflation. The tech-heavy Nasdaq was down 28 per cent from its November 2021 record high.
Total crypto market value was at US$2.2 trillion on April 2, well off of its all-time peak of US$2.9 trillion in early November, as per CoinMarketCap.
"Bitcoin remains highly correlated to the broader economic conditions, which suggest the road ahead may unfortunately be a rocky one, at least for the time being," blockchain data provider Glassnode said in a note.
Signs of weakness in stablecoins, typically a safer cryptocurrency, further spooked investors. TerraUSD, the world's fourth-largest stablecoin, lost a third of its value on Tuesday as it lost its peg to the US dollar.
Despite bitcoin's price slump, funds and products linked to it posted inflows of US$45 million last week as investors took advantage of price weakness, according to digital asset manager Coinshares in a report released on Monday.

"Enormous amount of liquidity that has inflated some of these cryptocurrencies," said Mr Sebastien Galy, senior macro strategist at Nordea Asset Management. He expects crypto, also correlated to high-growth stocks, to come under pressure as several central banks tighten their monetary policy.

 

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Crypto billionaires' vast fortunes destroyed in weeks​

Coinbase Global founder Brian Armstrong (left) and Binance CEO Zhao Changpeng both reported personal fortune losses. PHOTOS: REUTERS

MAY 12, 2022, 7:10 AM SGT

NEW YORK (BLOOMBERG) - It has been a long few weeks since the crypto crowd was partying in Miami.
Coinbase Global founder Brian Armstrong had a personal fortune of US$13.7 billion (S$19 billion) as recently as November and about US$8 billion at the end of March. It is now just US$2.3 billion, according to the Bloomberg Billionaires Index, after a sell-off in digital currencies from Bitcoin to Ether triggered a precipitous decline in the market value of Coinbase, the largest United States cryptocurrency exchange.
The firm's shares have tumbled nearly 86 per cent since their April 2021 initial public offering till Wednesday (May 11), after the company warned that trading volume and monthly transacting users were expected to be lower in the second quarter than in the first.
It has raised questions about Coinbase's ability to withstand the sharp decline in crypto prices, forcing Mr Armstrong to take to Twitter to defend the company. There is "no risk of bankruptcy" even amid a "black swan" event and users' funds are safe, said Mr Armstrong, the firm's chief executive officer.
Then there is Mr Michael Novogratz. The CEO of crypto merchant bank Galaxy Digital has seen his fortune plummet to US$2.9 billion, from US$8.5 billion in early November. He has been a champion of TerraUSD, the algorithmic stablecoin that is now at risk of a complete collapse amid a breakdown in the price of a crypto token in the same ecosystem, Luna.
"I am probably the only guy in the world who has got both a Bitcoin tattoo and a Luna tattoo," Mr Novogratz said at the Bitcoin 2022 conference in Miami on April 6.
Billionaire crypto fortunes that swelled over the last two years are disappearing after a sell-off that began with tech stocks spilled over into digital money. Bitcoin, the most popular cryptocurrency, and Ether have both fallen more than 50 per cent since their record highs late last year.

While almost all crypto holders have suffered wealth declines, some of the biggest and most visible losses are concentrated among founders of exchanges, where traders buy and sell digital currencies.
At least on paper, Mr Zhao Changpeng, the CEO of closely held Binance, has lost an even larger fortune than Mr Armstrong or Mr Novogratz.
He debuted on the Bloomberg wealth index in January with a net worth of US$96 billion, one of the world's largest. By Wednesday, that had shrunk to US$16 billion, using the average enterprise value-to-sales multiples of Coinbase and Canadian crypto firm Voyager Digital as a basis for the calculations.
Crypto exchanges in the US appear to be suffering more of a downturn than their global competitors. Trading volumes at Coinbase have steadily fallen since the beginning of the year, while more internationally focused Binance saw an uptick in volume last month. Binance's US-focused business, by comparison, experienced even steeper declines than Coinbase's.
Crypto entrepreneurs and brothers Tyler and Cameron Winklevoss, co-founders of rival crypto exchange Gemini, have each lost about US$2.1 billion - or roughly 40 per cent - of their wealth this year. The fortune of Mr Sam Bankman-Fried, CEO of crypto exchange FTX, has fallen by half since the end of March to about US$13 billion.
Mr Armstrong is not the only Coinbase billionaire losing money. Co-founder Fred Ehrsam, a former Goldman Sachs Group trader, is currently worth US$1.3 billion, down more than 60 per cent this year.
Mr Armstrong owns 16 per cent of Coinbase and controls 59.5 per cent of its voting shares, according to the company's 2022 proxy statement, while Mr Ehrsam has a 4.5 per cent stake and controls 26 per cent of its voting stock.
Coinbase's bonds have also plunged, recently trading in line with some of the riskiest junk-rated notes.

 

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'Everything broke': What happened in the Terra Luna crypto crash​

TerraUSD, or UST, was a darling of DeFi - short for decentralized finance. PHOTO: REUTERS


MAY 12, 2022

LONDON (BLOOMBERG) - A celebrated experiment that combined maths and software to get a digital currency to behave like a dollar is crashing in dramatic fashion, posing the biggest test yet to decentralised finance and the will of its backers to defend it.
TerraUSD, or UST, is an algorithmic stablecoin, meaning it uses a complex combination of code, trader incentives, smart contracts and no small amount of faith to maintain its peg of one-to-one to the US dollar. It does this by working with a crypto token in the same ecosystem, Luna, which can be swapped for UST and vice versa by traders to keep the price of UST where it should be.
UST was a darling of DeFi - short for decentralised finance - a vision of banking and financial services based on peer-to-peer payments through blockchain technology.
The point of projects like UST is to enable crypto traders to make transactions easily and quickly without needing to leave the digital asset ecosystem, rely on intermediaries or worry about the value of their coins going up and down.
By using software programs to manage the token's volatility, the opportunities for profiting off arbitrage are even greater - DeFi lender Anchor Protocol was known for offering market-beating rates of up to 20 per cent to traders willing to deposit UST on its platform. In summary, it is the crypto dream.
A month ago, the future looked bright for Terra and its main backer Do Kwon: A consortium called the Luna Foundation Guard aimed at providing collateral for Luna - then at an all-time high value of US$119 - had bought more than US$1.5 billion (S$2.08 billion) in Bitcoin to shore up UST's peg, with its members reading like a who's who of crypto.
But on Monday, all of the mechanisms that were supposed to keep UST stable weren't. It fell to a low of 60 US cents on that day, and reached a further low of around 20 US cents in another crash on Wednesday, taking its market value down from US$18.4 billion to US$5 billion. At 10.56am on Thursday, it was trading at 60 cents.


Luna has lost nearly all of its value - trading at 63 US cents on Thursday from a high of US$119.18 last month.
"Many people were caught off guard," said Mr Nikita Fadeev, partner and head of crypto fund Fasanara Digital, which de-risked its position in advance of the crash. "Everything broke there. It is full capitulation."
Exactly why all of Terra's carefully-planned mechanisms failed to do their job remains unclear, and conspiracy theories abound about shadowy actors with untold wealth to play with.

But one thing is for certain: Mr Kwon is not going down without a fight.
He is now attempting to raise US$1.5 billion from new and old investors alike to provide more collateral to UST, hoping to rebuild the token's liquidity after it virtually disappeared from order books overnight.
Some suspect that US$1.5 billion will not even be enough, and it could take days, if not weeks, for UST to re-peg to the dollar.
"Once liquidity evaporated, this perpetuated the collapse of the stablecoin," said Ms Clara Medalie, research director at digital assets data provider Kaiko, in an e-mail.


In order for UST to re-peg, she said, buy orders from crypto traders will need to consume all of the asking price's liquidity to get it up to US$1.
"This morning, there is virtually nothing left."
Terraform Labs, which powers the Terra blockchain, is backed by firms including Galaxy Digital, Pantera Capital and other players in crypto.
Among the companies that were approached via a round robin in the latest financing attempt were Nexo and crypto banking app Cashaa, which declined to participate.


Meanwhile, crypto firm Celsius said it "was not and is not involved" in any Luna bailout, while Alameda Research, Galaxy, Jane Street and Jump Crypto were said to be among those in discussions over financing.
Anchor, now a shadow of its former self as the main driver of demand for UST on the Terra network, has proposed temporarily cutting its interest rate to a minimum of 3.5 per cent. While its total amount deposited sat as high as US$14 billion on Monday, it had around US$3.6 billion in UST still on its books by mid-afternoon in London on Wednesday.
Already, comparisons with the 2008 financial crisis have started to roll in. Hallmarks of shadow banking, such as circular market mechanics and extremely high leverage, are readily visible among Terra's ecosystem, something that academics fear could create a second, digital wave of failed lenders and wiped-out savings.
"It will get worse before it will get better - way too much UST is looking to exit, and the death spiral is very reflexive at these levels," added Mr Fadeev. "It's a long road ahead."

 

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Investors take huge hit as TerraUSD and Luna crash, dragging down cryptocurrency market​

TerraUSD, or UST, was tied to the United States dollar using an algorithm but lost its peg over the weekend. PHOTO: AFP

Claire Huang
Business Correspondent


MAY 12, 2022

SINGAPORE - Investors in the cryptocurrency universe were sent scrambling after the sudden and dramatic crash of stablecoin TerraUSD, known for its stability, triggered a sell-off that has spread to other digital tokens in the market.
TerraUSD, or UST, is a stablecoin - a breed of cryptocurrency known in the digital asset market to be more stable and has thus gained traction with traders.
It was tied to the United States dollar using an algorithm but over the weekend lost its peg after a series of massive withdrawals of UST from Anchor Protocol, which is like a decentralised bank for crypto investors.
Anchor Protocol had allowed crypto investors to earn returns of almost 20 per cent annually by lending out their UST holdings. On Thursday (May 12), investor jitters spread to other cryptocurrencies including Bitcoin and Tether, which is the largest stablecoin by market cap.
Tether, one of the first cryptocurrencies to peg its market value to a fiat currency, dipped below the peg to 98.5 US cents minutes before 6pm Singapore time. The surprise UST sell-off over the weekend had spooked investors, who started to dump both UST and its affiliated token Luna.
The move brought UST to its knees at 20 US cents on Wednesday, taking its market value down from US$18.4 billion (S$25.7 billion) to US$5 billion.
A 40-year-old industry player, who spoke on condition of anonymity, told The Straits Times he had invested a "seven-digit amount" in both the UST and Luna.

​

Based on his calculation, he believes Mr Do Kwon, the man behind UST and Luna, possibly needs around US$2 billion in additional funds.
"The key thing now is that Mr Do Kwon needs funds, and market makers have to agree to hold and stop selling the UST so that everything can go back to peg and things can be normal," the industry player added.
"Then those who want to exit UST can exit in an orderly fashion because currently, it's like a bank run. So if they can hold on long enough with emergency capital, they can actually pull through."


He noted that this is "not unlike any other financial crises" and could take a month or two to get back to normal. "The last time it depegged was in May last year and it took 10 days to recover from a 5 per cent depeg. Before that, a depeg in December 2020 took a week to recover from a price of 85 US cents."
The crypto player added that those who subscribe to Bitcoin might also take a hit because there may be a sell-off in Bitcoin as UST holds some Bitcoin as part of the Bitcoin's treasury. "But I think eventually, the market can absorb the impact."
Another crypto investor, who declined to be named, has likened this saga to the 1997 Asian financial crisis, where a series of currency devaluations and other events spread through many Asian markets.

The 32-year-old, who works in a private equity fund and has invested "seven figures" in UST, Luna and Bitcoin, said the current events have destroyed the good faith accumulated in the crypto world in the past few years.
"I'm not that sad about the money. What I am very sad about is that this episode has pushed crypto and the decentralised finance space back into the dark ages where the retail crowd's faith in these spaces has eroded," he said.
The investor, who has dabbled in crypto for over five years, said he is buying more Luna and UST. "If the entire project goes to nothing, there's not much of a difference if I buy more. But if it revives, then the gains are huge."
A 24-year-old fresh graduate who wanted to be known as Chloe said that "my brother and I used $2,000 to buy Luna at US$60" and there is not much choice left but to ride out the current sell-off as she "can't get anything back at this price".
Describing herself as "relatively inexperienced" in the crypto world, she said: "I also bought (other digital currencies like) Etherium and Bitcoin in small amounts, but I don't know what to do with them now."
As at 5.10pm Singapore time on Thursday, UST was trading at 55 US cents, up from an intraday low of 26 US cents, according to CoinDesk. Its sister token Luna was down by more than 98 per cent to over 6 US cents at 5.10pm, a far cry from an intraday high of US$7.69.

Mr Do Kwon, the founder of the company behind UST and Luna, tweeted over the past two days that he was close to announcing a recovery plan. PHOTO: BLOOMBERG

Based on CoinMarketCap, UST is the third largest stablecoin by market cap and 12th biggest cryptocurrency.
Terraform Labs, the company behind UST and Luna, was set up in Singapore in April 2018.
The company's co-founder and chief executive Do Kwon had posted on Twitter in a series of tweets over the past two days that he was close to announcing a recovery plan, and urged his followers to "stay strong".
He said "the only path forward will be to absorb the stablecoin supply that wants to exit before UST can start to re-peg" and that Terra is "here to stay".
For every one UST, an investor can redeem US$1 worth of Luna. This means pundits buy UST when it trades under US$1 and redeem this for US$1 worth of Luna. On the flipside, when UST trades above a dollar, investors can mint one UST with a dollar worth of Luna and sell the UST for a profit.

 

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Cryptocurrencies crater as Terra collapses with Luna losing almost 100% of its value​

UST, which lost its peg to the US dollar, crashed to 20 US cents on May 11. PHOTO: AFP
UPDATED

MAY 12, 2022

NEW YORK (BLOOMBERG) - Cryptocurrencies extended their slide on Thursday (May 12) after a brief attempt at recovery, as the collapse of the TerraUSD stablecoin triggered a stampede out of many of the digital asset market’s most popular tokens.
The company behind TerraUSD, Terraform Labs, was set up in Singapore in April 2018.
TerraUSD, or UST, which lost its US dollar peg, crashed to 20 US cents on Wednesday, taking its market value down from US$18.4 billion (S$25.7 billion) to US$5 billion. It was trading at 36 US cents at 6.10pm Singapore time on Thursday.
UST-affiliated token Luna plunged by about 95 per cent on Wednesday and continued to erase its value on Thursday. By 6.10pm Singapore time, it was trading at 6.12 US cents, 99.9 per cent below its all-time high of US$119.18 hit just last month.
Bitcoin, the world’s largest cryptocurrency, was caught in the fire-sale of risky crypto assets as it fell another 8 per cent to US$26,570, having been near US$40,000 just a week ago and almost US$70,000 just last November. In the last eight sessions, it has lost a third of its value, or US$13,000.
Tokens like Avalanche and Solana, which underpin some key decentralised finance (DeFi) protocols like TerraUSD, also extended their declines. Earlier, they had posted double-digit percentage gains but the rally fizzled.
“UST’s collapse undercuts confidence in all liquidity protocols,” said Mr Aaron Brown, a crypto investor who writes for Bloomberg Opinion.

​

"If UST can fail, maybe Aave can too. Sort of like when (investment bank) Bear Stearns failed, it focused people's attention on whether Lehman would fail."
Backers of TerraUSD coin are reportedly struggling to win investor support for a rescue by raising about US$1.5 billion to shore up the token after it crashed from its US dollar peg. Talks stalled after big-name firms were approached by various individuals with connections to Terraform Labs in recent days, according to sources.
Terraform Labs co-founder and chief executive Do Kwon repeatedly alluded on Twitter to recovery efforts, saying on May 10 that he was “getting close” and encouraging his followers to “stay strong”. Mr Kwon did not respond to a request for comment.

"Is the market getting spooked by what is happening with Terra? The answer is yes," said Mr Craig Johnson, chief market technician at Piper Sandler. "Money market funds are important to investors and right now, we are questioning the third-largest money market fund in crypto land. People did not think we were going to break the buck on that and that has clearly happened."
Technicians say Bitcoin now needs to hold at US$28,000 - a break below that level could start a new wave of selling.
TerraUSD's troubles have been the dominant story in finance all week.
"The breaking of an inadequately robust or collateralised protocol is destroying value," said Mr Hugo Rogers, chief investment officer at Deltec Bank & Trust. "And this is having knock-on effects."

Sentiment was also crushed after data showed that United States consumer prices rose by more than forecast in April, indicating that inflation will persist at elevated levels for longer. The data point also suggests that the Federal Reserve will stay on its path of aggressive interest rate hikes, creating an unfavourable environment for cryptos and other risk assets.
"There is extreme fear across the crypto market," said Mr Marcus Sotiriou, an analyst at British-based digital-asset broker GlobalBlock.
The area around US$30,000 had been an "especially sensitive zone" for Bitcoin, wrote Mr James Malcolm, head of foreign exchange and crypto research at UBS.
That is where mining economics turn negative, "which could potentially lead to increased coin sales by this key cohort", he said.
"Below this, there is little technical support until the low-20ks, where margin calls kick in," he added



Meanwhile, Coinbase Global shares and bonds fell to new lows on Wednesday, signalling investor scepticism about the prospects of the crypto exchange in a bear market. The company reported lower-than-expected revenues, and warned that trading volume and monthly transacting users in the second quarter are expected to be lower than in the first.
Piper Sandler's Mr Johnson says this is another concern for crypto investors right now.
"It is the largest exchange here in the United States and it just turned a loss," he said, adding that Terra's troubles are all "snowballing in crypto land".
Still, a lot of crypto investors, cognisant of the fact that Bitcoin has gone through a boom-and-bust cycle before only to recoup losses over and over again, are preaching patience.
"Ultimately, every investor needs to size positions based on... risk level and time horizon," said Mr Alex Tapscott, managing director of the digital asset group at Ninepoint Partners. "We believe Bitcoin will recover and that we are still in the early stages of this new Internet of value. Keep calm and HODL (hold on for dear life)."

 

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askST: Why did TerraUSD, Luna crash and what does it mean for crypto investors?​

Crypto markets were shaken after the US Federal Reserve hiked interest rates on May 4 to curb inflation. PHOTO ILLUSTRATION: PEXELS

Kang Wan Chern
Assistant Business Editor

May 13, 2022

SINGAPORE - The cryptocurrency market plunged on Thursday (May 12) as panicked traders dumped their holdings, including the high-profile Bitcoin.
The world's largest cryptocurrency fell 12 per cent to US$27,000 to bring its losses to almost 60 per cent since hitting a peak of US$65,000 last November.
Markets continue to be volatile so any short-term recovery is unlikely with Bitcoin futures for July trading at around US$27,000, according to Asia Pacific Exchange, a regulated Singapore derivatives exchange that launched Bitcoin monthly futures contracts on May 5.
Bitcoin futures reveal the expectations of prices and are used by traders to protect their current positions from further downside.

Q: Why did crypto crash?​

A: Crypto markets were shaken after the United States Federal Reserve hiked interest rates on May 4 to curb inflation. That sparked an outflow of funds from crypto.
Slowing global economic growth, the Russia-Ukraine conflict and the prospect of further interest rate hikes catalysed those outflows.
The market was also spooked when the stablecoin TerraUSD (UST) saw its peg to the US dollar shatter this week. Until it crashed, UST was the world's third-largest stablecoin. Its fall caused panic in an already pressured crypto market.

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Q: How does the UST stablecoin work?​

A: Stablecoins are cryptos designed to have a relatively stable price.
There are generally two types - algorithmic stablecoins and those backed by an underlying asset like gold or the US dollar, said Mr Feroze Medora, director of trading at crypto exchange Gemini Apac.
UST is an algorithmic stablecoin and is dependent on the value of Bitcoin and Luna tokens, which it maintains as its reserves.


"As an algorithmic stablecoin, UST is meant to be pegged to the US dollar. However, when Bitcoin and Luna prices fell precipitously, UST lost the peg," said Mr Medora.
UST slipped below its one-to-one peg to the US dollar on Tuesday and dropped to 20 US cents before recovering to around 50 US cents on Thursday, according to CoinMarketCap.
TerraForm Labs, the company behind UST, is incorporated in Singapore but did not submit an application for a licence under the Payment Services Act, The Straits Times understands.
It is also not a notified entity, which means it has not been granted a temporary exemption from holding a licence by the Monetary Authority of Singapore (MAS).

Q: How will the crash change the way regulators view the market?​

A: MAS has consistently warned about the risk of trading in cryptocurrencies and bars crypto service providers from promoting their wares to the public.
"Cryptocurrencies are highly volatile and often not anchored on economic fundamentals. This means that it is highly risky and not suitable for retail investors," a spokesman for MAS told ST, adding that the authority is reviewing a regulatory approach towards stablecoins.
Mr Desmond Yong, chief strategy officer at the MAS-regulated crypto payment services company Digital Treasures Centre, said UST's crash will incentivise regulators to speed up their reviews of stablecoins.
"Regulators are also likely to place more focus on consumer protection and education on crypto for the retail investors in order to protect them from excessive exposure to the risk of crypto investing," he added.

Q: What should retail investors do?​

A: Volatility is expected as part of an emerging asset class, said Mr Adrian Chng, founder of Fintonia, a regulated fund manager that runs a Bitcoin fund.
"Professional investors and market participants should look more critically at algorithmic stablecoins and other decentralised finance protocols and entities promising high yields without fundamental economics to support these promised yields," he noted.
Mr Heng Koon How, UOB's head of markets strategy, said "cryptocurrencies are still a relatively nascent asset with Bitcoin created only in 2009 and has yet to go through the rigours of various economic cycles".
Crypto experts believe investors should adopt a long-term view of the sector.
Mr Rudy Lim, chief executive of blockchain company OIO Singapore, urged investors to focus on the long-term practicality of blockchain technology. "If investors believe in this space, they might want to take advantage of this opportunity by building their positions with the help of experts."
Mr Medora said: "In the long run, investing in crypto allows retail investors to have a stake in the development of digital infrastructure that will serve as the foundation for the emerging digital finance space."

 

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'Mom and pop' investors left high and dry in tech, crypto meltdown​

Having marched to the top of the hill first on the way up, they are the markets tumbling fastest on the way down. PHOTO: REUTERS
Jamie McGeever

PUBLISHED

May 13, 2022

ORLANDO (REUTERS) - It's almost a cliche that retail investors are always late to an investment boom - but the outsize exposure of household savers to frothier elements of frenzied markets since lockdown means they are feeling the hit from this bust more than most.
A string of surveys and investment flow snapshots show that retail investors have significantly ramped up holdings of tech stocks and cryptocurrencies, which are now joined at the hip more than ever.
Having marched to the top of the hill first on the way up, they are the markets tumbling fastest on the way down.
According to Vanda Research, nine of the top 10 stocks in a weighted average retail investor portfolio are US-listed tech, and account for more than 50 per cent of the entire portfolio. The portfolio is deeply out of the money, down 31 per cent since its peak in December.
The wilder world of crypto may not be retail investors' natural habitat, but they are exploring. A Charles Schwab UK survey in March showed that 57 per cent of new investors hold crypto assets, and a Morgan Stanley survey published this week showed that 31 per cent of retail investors in the European Union held cryptocurrency.
Loading up on tech and crypto was probably a better bet when the Federal Reserve and other central banks were pumping the world full of liquidity, interest rates were near zero, and governments were mailing out stimulus checks.
But that is not the case any more. The global liquidity drain is underway, the Nasdaq is down 30 per cent from its November peak, and Bitcoin is down 60 per cent.

​

Eben Burr, president of Toews Asset Management, says retail investors want to buy yesterday, but the closest they can get to that is buying the thing that did well yesterday. And that's illogical and irrational.
"There is more pain ahead in the short term, 100 per cent. If the market decline continues, it will become too painful, and retail investors will bail," said Eben Burr, president of Toews Asset Management. "Everyone has a breaking point."

"Can't lose"?​

Institutional investors now control the lion's share of the Bitcoin and crypto universe, but retail investors' nominal holdings are still higher than ever, and rising.

The Morgan Stanley survey showed that 16 per cent of EU retail investors' holdings is in cryptocurrencies, more than rental property (14 per cent), bonds (10 per cent), and commodities (8 per cent).
A survey last month by retail investment platform eToro showed that one in three retail investors plan to invest in crypto over the next 12 months, up from 18 per cent in October. Even baby boomers are on board - 11 per cent percent of those aged 55 and over plan to invest in crypto in the coming year.


In some ways, this should come as little surprise, given how much crypto has been seared into the public's consciousness.
US Senator Elizabeth Warren last week wrote to pension fund Fidelity questioning the "appropriateness" of its decision to add Bitcoin to its 401(k) retirement plan options due to crypto's "significant risks of fraud, theft, and loss."
The current market turmoil has brought these concerns into sharp focus. Blockchain analytics firm Glassnode said that Bitcoin at US$33,600 puts 40 per cent of investors holding it under water.
Meanwhile, Morgan Stanley's Sheena Shah points out that everyone who bought Bitcoin over the last year is in the red when it trades below US$28,000. On Thursday it fell as low as US$25,400.
'Mom and pop' investors may not be able to hold out for much longer. US household debt jumped US$266 billion (S$371.6 billion) in the first quarter to US$15.84 trillion. That's US$1.7 trillion higher than at the end of 2019, before the pandemic.

Meanwhile, the glut of US household savings accumulated during lockdown as government stimulus checks rolled in is quickly disappearing. The US personal savings rate fell to 6.2 per cent in the first quarter, the lowest since 2013.
But crypto enthusiasts like Anthony Scaramucci, founder and managing partner of SkyBridge, see it differently. He likens the current volatility to the early days of Amazon stock, which had several large drawdowns in its first decade of existence.
"Investors should be willing to stomach it. Everyone says they're long-term investors until they see short-term losses," President Trump's former director of communications told Reuters.

 

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Another stablecoin loses peg as algorithm fails to keep pace​

Deus Finance's team is trying to restore the peg for the DEI token. PHOTO: SCREENGRAB FROM DEI.FINANCE

May 17, 2022

PORTLAND, Oregon (BLOOMBERG) - Deus Finance's DEI token has lost its one-to-one peg to the United States dollar, becoming the latest failure of an algorithmic stablecoin during a period of crypto market stress.
DEI is currently trading at 70 US cents, according to data tracker CoinGecko. With a market value of about US$63.5 million (S$88.3 million), the token is tiny compared with the more than US$18 billion TerraUSD (UST) stablecoin that shook crypto markets when it became depegged last week.
Unlike after the UST break, the drop below the peg by DEI has not triggered concern about a broader crypto market contagion. Bitcoin fell less than 4 per cent on Monday, while popular decentralised finance tokens such as Solana and Cardano were down similar amounts.
Put out by Deus Finance, a marketplace for financial services, DEI is different from UST in that it is a fractional reserve stablecoin, backed by coin collateral, consisting of 20 per cent Deus tokens and 80 per cent of other stablecoins, such as USDC.
Deus Finance's team is working to restore the peg, according to a Tweet.
The depegging comes several months after Deus Finance was hacked, with some coins stolen.
UST is currently trading at about five US cents. Last week, even the world's biggest stablecoin, Tether - which is not algorithmic and claims to have full reserves - lost its dollar peg before regaining it.

Crypto bellwether Bitcoin is trading at less than US$30,000, down from over its all-time high of almost US$69,000 in November.

 

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Unstable coin​

The crypto infrastructure cracks​

A vicious sell-off in risky assets jolts stablecoins.​

The Economist

A cryptocurrency ATM in a convenience store in Miami, Florida. PHOTO: AFP

MAY 14, 2022

It has been a vicious year for financial markets, and more punishing still for crypto assets. More than half the market capitalisation of cryptocurrencies has been wiped out since November. On Thursday, Bitcoin traded at around US$29,000, just 40 per cent of its all-time high in November; Ether has slumped by a similar amount. The share price of the leading crypto-industry stock, Coinbase, an exchange, is half what it was a week ago, falling 26 per cent in a single day after it reported earnings and disclosed that users' deposits on its platform were not necessarily protected in the event that the firm went bust. The sell-off comes at the same time as tech stocks, high-yield bonds and other risky assets have swooned as the Federal Reserve has begun raising interest rates.
Much of the technology (and the jargon) of the crypto-sphere is bewildering, still, to most people in traditional finance. Yet the dynamics of recent days bear the hallmarks of spectacular financial collapses of old.
Take what has happened to stablecoins, a type of cryptocurrency that is pegged to another currency, sometimes a conventional one like the dollar. These are part of the plumbing of the crypto system: they act as a bridge between conventional banks, where people use dollars, and the "on-blockchain" world, where people use crypto. It is stablecoins' interaction with traditional finance that has led regulators to fret about the impact they could have on financial stability.
Added together all stablecoins, the largest of which are Tether and USD Coin, operated by Circle, are worth around US$170 billion (S$237 billion). Terra, a smaller stablecoin that had a market capitalisation of US$18.7 billion a week ago, has unravelled in recent days. Even Tether's peg came under pressure on Thursday. The events resemble the confidence crises that have preceded every bank run.
Every stablecoin has a mechanism to maintain its peg. The simplest (and safest) method is to hold a dollar in a bank account, or in safe, liquid assets like Treasury bills, for each stablecoin token. The token can be traded freely by buyers and sellers; when a seller wants to offload their stablecoin they can either sell it on the open market or redeem it for its dollar value from the issuer. USD Coin uses this method.
Others, like Terra, are called "algorithmic stablecoins" because they use an automated process to support the peg. But their main distinguishing feature is the way in which they are backed. Terra is backed with Luna, a cryptocurrency issued by the same firm that issues Terra. The theory was that holders of Terra could always redeem it for one dollar's worth of Luna. A week ago, when Luna was trading at US$85 a piece, that meant a Terra holder could redeem it for 0.0118 Lunas. The process was managed by a smart contract - lines of code that execute automated transactions - that created more Luna when a Terra holder wanted to redeem. If for some reason Terra was trading at less than US$1 then arbitrageurs would swoop in, buy a Terra, redeem it for Luna and sell them for a profit.
That system worked well enough as long as Luna had some market value. But on Monday the price of Luna began to slide. On Tuesday it was worth around US$30. The following day it fell to less than US$1.50. At present it is trading at about 3 US cents. As Luna fell, people began to sell Terra too - and arbitrageurs failed to swoop in to save the peg, by redeeming their Terra for Luna, instead staying away. The Terra peg broke and by Wednesday had dipped as low as 30 US cents, before recovering to 40 US cents.

It is unclear what will happen to Terra now. Its market cap has sunk to US$4.5 billion. Its founders have supposedly propped it up by selling off some of the US$3.5 billion worth of Bitcoin they had in reserve, and are trying to come up with a new way to restore the peg.
Its unravelling has had wider consequences. For one, the broken peg put pressure on other stablecoins, notably Tether, the biggest, which briefly dipped to 95 US cents on Thursday. That jeopardises the plumbing of the crypto system as a whole. The perception that these assets might not be stable will deter widespread adoption, and damage trust in them.
Perhaps reassuringly for the crypto universe, though, the flight from stablecoins has not been indiscriminate - just as in bank runs past, where depositors would flee the bad banks for the good. Holders have sold off Terra and Tether, which has previously been fined by New York's Attorney-General for misleading investors about the amount and quality of the assets backing its stablecoin.
But they have seemingly bought tokens perceived to be of higher quality, like USD Coin, which publishes regular audited reports on what backing it holds. The trouble with Terra did not even upset the other major "algorithmic" stablecoin, Dai.

Still, the failure of the Terra and Luna system does not come at an auspicious time. That the rout in cryptocurrency has troubled stablecoins - a core part of the crypto-financial plumbing - may augur ill for the resilience of the system writ large. And there are strains appearing in the traditional financial system.
The stock and bond market routs have caused some risky issuers to delay planned debt sales, citing poor "market conditions". Others could not attract investors even at double-digit yields. The era of free money in America has come to an end, and cracks are appearing in all kinds of financial markets.

 

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Some young investors get burnt by cryptocurrency crash, regret recklessness; experts raise depression fears​

Kanchanara/Unsplash

• One investor, Mr Low, lost about S$40,000 in the crash in just days, about 90 per cent of his total investment and a third of his savings
• The crash involving stablecoin Luna has led to concerns about suicide ideation and reckless behaviour
• One enraged investor, who reportedly lost US$2.3 million in the crash, tried to break into the Seoul home of a businessman involved in the technology behind the cryptocurrency
• Holding funds in a related token, TerraUSD, was particularly popular among some Singaporeans
• Some platforms that allow users to deposit and borrow cryptocurrencies were offering an interest rate of about 20 per cent a year for deposits of TerraUSD

BY DARYL CHOO
BY KIMBERLY LIM
Published May 17, 2022


SINGAPORE — He was just having his breakfast when he opened up his cryptocurrency exchange application and was shocked to see his Luna tokens at US$5.28 (S$7.35) and spiralling downwards last Thursday morning (May 12). In early May, the tokens were trading above US$85 apiece.
Confused, the man, who wanted to be known only as Mr Low, immediately messaged friends who had invested in Terra, a related cryptocurrency, hoping to find out what was happening.
He said: "A few friends told me that it will repeg (to the US dollar) and Luna will stabilise, so I just held."
Mr Low, who is in his late twenties, had recently lost his job as a business associate at a consumer health company due to company cutbacks, and said that he had lost close to S$40,000. This was 90 per cent of his total investment and a third of his savings in a matter of days.
He said: "Initially, it was a lot of confusion. I was not aware, unlike now, of why the market was reacting that way and why UST (TerraUSD) had depegged (from the US dollar) and Luna was spiralling. There was some blind hope that it would repeg, so I just kept holding and not selling."

Over the past week, the cryptocurrency market went into a full meltdown after investors were spooked by the collapse of TerraUSD, or UST, one of the world’s largest so-called stablecoins.
Stablecoins are digital tokens pegged to the value of traditional assets, such as the US dollar. Often promoted as a stable means of exchange, these coins are often used by traders to move funds around when speculating on other cryptocurrencies.
Last Tuesday, TerraUSD broke its 1:1 peg to the US dollar and fell as low as 75 US cents, according to price site CoinGecko. Its price is now hovering around just nine US cents.
Unlike other stablecoins that have reserves in traditional assets, TerraUSD maintains its peg through a complex algorithm that involves the use of another cryptocurrency token, Luna.
Luna, once ranked among the top 10 most valuable cryptocurrencies, has since plunged to virtually zero from an all time high of US$119.18 set on April 5 this year.
Luna and TerraUSD are tokens that run on the Terra network, a blockchain-based project developed by start-up Terraform Labs, that is based in Singapore.

The crash had led to concerns about suicide ideation and reckless behaviour, with one enraged investor, who had reportedly lost US$2.3 million in the crash, attempting to break into the home in the South Korean capital Seoul of Terraform Labs’ co-founder and chief executive officer, Do Kwon on Monday.
In a series of tweets on Saturday, Mr Do wrote that he feels “heartbroken about the pain” caused by the crash, adding that he has not profited from this incident and has not sold any TerraUSD tokens during the crisis.
The stability of such cryptocoins was once the cornerstone of the crypto ecosystem, with the United States Federal Reserve estimating a collective market value of all stablecoins at US$180 billion in March this year.

“
Mentally I am okay, my faith reminds me that life is bigger than a financial portfolio, and though I was irresponsible in risk management, I would accept the mistake and move on and not harp on it.
Cryptocurrency investor Mr Low, who lost about S$40,000 in the crash
”

TODAY spoke to seven Singaporeans, aged in their 20s and 30s, whose investments in TerraUSD and Luna, ranging from S$1,500 to S$6,000, took a tumble last week.
While some were aware of the risks involved in cryptocurrencies and were sceptical when they entered the market, others had a larger risk appetite or believed that it was "risk-free".
Holding funds in TerraUSD was particularly popular among some Singaporeans, as some platforms that allow users to deposit and borrow cryptocurrencies were offering an interest rate of about 20 per cent a year for depositing TerraUSD on their platform.

And these holdings were “risk-free” because the TerraUSD tokens are pegged to the US dollar and would not lose their value, or so the investors thought.
Mr Low said that he had friends who were invested in the Terra ecosystem.
"At the time, this meant you unlocked a savings rate that beat the Singapore banks by 400 times on an annual basis. And that it was 'risk free' so lots of people jumped onto the boat. They are coping just fine as a majority of their losses are purely paper profits," he said.
Another investor, who wanted to be known only as Ashton, 37, who works as a technician, said that he lost about S$6,000 from the crash, but his portfolio was still mainly in other coins such as bitcoin and ether.

LUNA CRASH HAS RAISED CONCERNS ABOUT SUICIDE IDEATION​

However, many others saw their life savings wiped clean over the span of two days, prompting suicidal thoughts in some of them. Some personal finance writers have raised concerns about suicide ideation following the crash of Luna.
At least one member of a Telegram group chat centred around the local Chain Debrief cryptocurrency online publication have spoken about attempting suicide, which has been a “cause for concern” for Mr Jacky Yap, the publication’s founder.

He told TODAY in an interview last Friday: “We remind everyone to not do anything foolish, and if anyone needs to talk to someone, they can always reach out to us. We also remind everyone that we all have earning power and that whatever is lost can always be earned back.”
Indeed, this is a trend happening in other parts of the world, with moderators of the Reddit threads on Terra and Luna pinning a post with suicide hotline numbers, over concerns voiced in the thread.
The Woke Salaryman, a page on personal finance, with more than 316,000 followers on Instagram and almost the same number of likes on Facebook, posted a series of graphics on Tuesday reassuring people who lost money to the crash.
The graphics were captioned: “ We typically don't like to post three times a week. But this is important”.
The post on Facebook had garnered more than 10,000 shares and 8,900 reactions five days after it was posted. The co-founders behind the page also received several direct messages on social media platforms, with fellow investors airing their grievances.
Speaking to TODAY in a Zoom interview last Friday, Woke Salaryman co-founder He Ruiming said: “Quite a few people sent direct messages to us. We are in quite a few crypto groups as well so I see quite a lot of people talking about being depressed, saying that everything is hopeless now. So we thought it would be important to put out a message.
“People came to confide because they knew I invested as well. They asked me: ‘What should I do?’ By the time the news came out, there was already very little people could do.”

YOUNG INVESTORS TRYING TO MOVE ON​

Some were “mentally prepared” for the crash, while others are looking for ways to move on.
Mr Low said: “Mentally I am okay, my faith reminds me that life is bigger than a financial portfolio, and though I was irresponsible in risk management, I would accept the mistake and move on and not harp on it.”
Personal finance writers and bloggers are urging young investors to try to find ways to recover from the crash.
Mr Timothy Ho, managing editor and co-founder of investing website Dollars and Sense, said: “If you are young, it’s not the end of the world. Maybe you lost money that could have paid for one to two holidays to Europe which you didn’t get to go due to the pandemic, or the down payment to a car. It’s okay to move on.”
Many emphasised the importance of having a diversified portfolio, which should be a key takeaway from the crash.
“Having a diversified portfolio is vital because if you lose a huge chunk of your portfolio at once, it’s hard to recover. A diversified portfolio may not give us the highest possible returns, but will protect us in bad times like this,” Mr Ho said.

 

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