Cryptocurrencies, tokens, NFTs, virtual "assets" frauds

[LITTLEREDDOT]

Three Arrows co-founder Zhu Su accuses liquidators of misleading Singapore court​

Mr Zhu Su delivered an affidavit in person in Bangkok on Aug 19, according to a notarised document. PHOTO: ZHU SU/TWITTER

Aug 6, 2022

SINGAPORE (BLOOMBERG) - The fight between the founders of defunct crypto hedge fund Three Arrows Capital and the court-appointed liquidators charged with unwinding their assets has reached Thailand.
Mr Zhu Su, who along with co-founder Kyle Davies, has been evasive about his whereabouts since the spectacular collapse of their fund, delivered an affidavit in person in Bangkok on Aug 19, according to a notarised document seen by Bloomberg News.
In the affidavit, Mr Zhu accused the liquidators of misleading the High Court of Singapore about the hedge fund's structure. Three Arrows shifted its registration to the British Virgin Islands after having previously operated out of Singapore. Mr Zhu in April had also disclosed plans to move the fund's headquarters to Dubai.
A court in the British Virgin Islands in June appointed advisory firm Teneo to liquidate Three Arrows' assets. The fund's implosion and failure to meet margin calls precipitated a series of market declines and fuelled significant distress among its creditors. The fund's liquidators have accused the two founders of failing to cooperate with their efforts, court papers show, a characterisation Mr Zhu challenged on Twitter.
The liquidators have said in Singapore court that Mr Zhu and Mr Davies have provided "rather selective and piecemeal disclosures" about the fund's assets. Mr Zhu's affidavit alleges that the liquidators "had not provided an entirely complete or accurate version of events" to the Singapore court, which earlier this week formally granted a petition by Teneo to recognise the liquidation order in the country.
In the affidavit, Mr Zhu cites multiple different entities in his and his co-founder's financial universe. According to Mr Zhu, the liquidators have offered "inaccurate and misleading" representations of the operations, relationships and timelines associated with these entities in their petitions to the Singapore court.
Mr Zhu identified himself as a director of Three Arrows Capital Pte Ltd, or TACPL. This entity, according to Mr Zhu, first became a registered fund manager in Singapore "in or around" August 2013 and was licensed there until July 31, 2021.

He also described two feeder funds: Three Arrows Fund Ltd, or TAFL, registered in the British Virgin Islands, and Three Arrows Fund LP, or TAFLP, registered in the US state of Delaware. These entities fed into a master fund named in the affidavit as "the Company".
The entity formerly registered in Singapore, TACPL, ceased to be the investment manager for the master and feeder funds as of Sept 1, 2021, according to the affidavit. In its place, enter a fourth entity: ThreeAC Ltd, domiciled in the British Virgin Islands and which has operated as investment manager for those funds "since in or around August 2021".
The specifics of these representations matter, according to Mr Zhu, because the fund's Singapore entity, TACPL may not be able to fully comply with the liquidators' wide-ranging demands for information. TACPL is the entity of which Mr Zhu identified himself as a director.
TACPL is concerned "about the potentially draconian consequences arising from the liquidators' exercise of their wide powers", the affidavit said.
Mr Zhu noted that TACPL's officers and representatives, of which as a director he is one, could themselves face fines and imprisonment if they are found in contempt of the court.
Mr Zhu declined to comment beyond the affidavit. Representatives for Teneo did not return multiple requests for comment. The Singapore court was unable to immediately respond to a request for comment.

 

[LITTLEREDDOT]

Scammers, hackers stole US$3.3 billion worth of cryptocurrencies in last 12 months​

The amount is about a quarter of the US$20 billion worth of cryptocurrencies stolen over the last 10 years. PHOTO: REUTERS

Dominic Low

Aug 30, 2022

SINGAPORE - Individuals and firms lost about US$3.3 billion ($4.6 billion) worth of cryptocurrencies to scams and cyber attacks over the past 12 months that ended in August, according to an online database.
This accounts for about 15 per cent of the total of US$20 billion worth of cryptocurrencies that hackers and scammers stole over the last 10 years, based on Rekt Database, an online platform which records user reports of cryptocurrency losses.
The largest cryptocurrency heist that took place involved online game Axie Infinity in March this year, when hackers made away with US$625 million worth of cryptocurrencies. The criminals had targeted nodes - computers connected to the blockchain network - which support software that allows players to move funds in and out of the game.
In another high-profile incident, hackers stole US$602 million worth of cryptocurrencies from the Poly Network blockchain in August last year.
In its 6th annual Singapore Cyber Landscape 2021 report released on Monday (Aug 29), the Cyber Security Agency (CSA) of Singapore said the anonymity afforded by decentralised blockchain networks has made it difficult for regulators to track illicit activity and enforce laws across country borders.
"Furthermore, money trails associated with crypto laundering may appear only long after the incidents have taken place, as cyber criminals sit on stolen cryptocurrency in the hope that they can cash out unnoticed once law enforcement efforts die down," said CSA.

 

[LITTLEREDDOT]

US sought records on Binance CEO in late 2020 for crypto money laundering probe​

Founder and CEO of Binance Zhao Changpeng at the Viva Technology conference in Paris on June 16, 2022. PHOTO: REUTERS

Sep 2, 2022

LONDON - US federal prosecutors asked Binance, the world's largest cryptocurrency exchange, to provide extensive internal records about its anti-money laundering checks, along with communications involving its chief executive and founder Zhao Changpeng, according to a late-2020 written request seen by Reuters.
The Justice Department's money laundering section asked Binance to voluntarily hand over messages from Mr Zhao and 12 other executives and partners on matters including the exchange's detection of illegal transactions and recruitment of US customers. It also sought any company records with instructions that "documents be destroyed, altered, or removed from Binance's files" or "transferred from the United States."
The December 2020 request, which has not been previously reported, was part of a Justice Department investigation into Binance's compliance with US financial crime laws that remains ongoing, four people familiar with the inquiry said.
US authorities, the people said, are investigating whether Binance violated the Bank Secrecy Act. This requires crypto exchanges to register with the Treasury Department and comply with anti-money laundering requirements if they conduct "substantial" business in the US. The law, designed to protect the US financial system from illicit finance, provides for jail terms of up to 10 years.
In response to Reuters' questions about the letter and investigation, Binance chief communications officer Patrick Hillmann said, "Regulators across the globe are reaching out to every major crypto exchange to better understand our industry. This is a standard process for any regulated organisation and we work with agencies regularly to address any questions they may have."
Binance has "an industry leading global security and compliance team" with over 500 employees, including former regulators and law enforcement agents, Mr Hillmann added.
He didn't say how Binance responded to the Justice Department request. A Department spokesman declined to comment.

The request reveals the broad scope of the US investigation into Binance. The probe's existence was reported last year by Bloomberg but until now little has been known about it.
Binance was launched by Mr Zhao, known as CZ, in Shanghai in 2017 and as of July controlled over half of the world's crypto trading markets, processing transactions worth more than US$2 trillion (S$2.8 trillion) that month. Born in China and educated in Canada, where he holds citizenship, Mr Zhao told Bloomberg in March that he will be based for the "foreseeable future" in Dubai, which that month granted Binance a licence to conduct some operations.
A series of Reuters articles this year revealed how Binance drove its explosive growth while keeping weak customer checks and withholding information from regulators. Reuters found that the gaps in Binance's compliance programme enabled criminals to launder at least US$2.35 billion in illicit funds through the exchange, which also served traders in Iran despite US sanctions. Until mid-2021, Binance customers could trade crypto by registering with just an email address.
Binance disputed Reuters' findings, calling them "outdated." The exchange said it is "driving higher industry standards" and seeking to "further improve our ability to detect illegal crypto activity on our platform." It said it did not consider Reuters' calculations of illicit fund flows to be accurate.

Increasing scrutiny​

Crypto exchanges are under increasing scrutiny in the US, where top government figures including Treasury Secretary Janet Yellen this year have publicly backed greater regulation of the sector. In February, the Justice Department established a national cryptocurrency enforcement team to "tackle the growth of crime involving these technologies," with a focus on exchanges.
That month, the founders of another exchange, BitMEX, pleaded guilty to violating the Bank Secrecy Act and were later sentenced to up to two and a half years of probation. BitMEX agreed to pay a US$100 million fine to settle separate charges for breaching the Act.
Since last year, over a dozen financial regulators around the world have issued warnings about Binance, saying it was either serving users without licenses or violating anti-money laundering rules. In July, the Dutch central bank said it had fined Binance over 3 million euros (S$4.18 million) for operating in breach of its financial crime laws. REUTERS

 

[LITTLEREDDOT]

5 things to watch out for when dabbling in cryptocurrency investments​

Irene Ng and Goh Eng Han

The Monetary Authority of Singapore has reiterated that cryptocurrencies are "highly hazardous" for retail investors. PHOTO: REUTERS

Sep 13, 2022

SINGAPORE - Cryptocurrency investments have received a lot of negative attention in recent times.
It started in May with the turmoil caused by the sudden collapse of a major US dollar-pegged stablecoin, the TerraUSD which is linked to another cryptocurrency Luna. This was followed by fluctuations in the value of Bitcoin, which touched US$19,000 recently, a far cry from its peak value of US$68,000 in November 2021.
Amid talk of a crypto winter, cryptocurrency exchanges from Bybit to Crypto.com have announced significant workforce reductions of up to 20 per cent.
Despite the negative press and restrictions imposed by the Monetary Authority of Singapore (MAS) on selling to retail investors, Singapore cryptocurrency investors remained active, ranking among the top 20 countries for crypto exchange visitor traffic, according to SimilarWeb.
Last month, the MAS signalled that it would further tighten restrictions through measures such as customer suitability tests. The authority also reiterated that cryptocurrencies are unsuitable for use as money and are "highly hazardous" for retail investors.
What can investors watch out for when dabbling in cryptocurrency investments?

1. Assess your risk appetite​

Talk to a reputable financial adviser and assess your risk appetite. Be familiar with the product that you want to invest in and what protections, if any, you may have.

Note that only a few cryptocurrency platforms are licensed by the MAS under the Payment Services Act 2019. They include Australia-based Independent Reserve. Even then, investors have the flexibility of buying cryptocurrency from offshore platforms not licensed by MAS. There are risks in using unlicensed platforms as they would not have undergone the strict licensing process meant to safeguard local investors.

2. Choose the right crypto-wallet​

Investors need to create a crypto-wallet to store cryptocurrency and trade on platforms. Users can even spend cryptocurrency in the physical world, including with Singapore dinnerware seller &glazed and pet food supplier Kibbles.
Some investors keep their cryptocurrencies in a crypto-wallet within their trading platform, while others store them outside the platform in what is known as "hot wallets" or "cold wallets".


Hot wallets are always connected to the Internet, and can be accessed via a mobile phone, tablet or computer. They are easily accessible and convenient to use, but they are also vulnerable to cyber-security threats being always connected. Popular wallets include MetaMask and Electrum.
Cold wallets, on the other hand, are not connected to the Internet. Typically, they take the form of offline external devices such as a smart card or a USB drive. But you need to keep the security keycode associated with the device safe. If you lose the keycode or the device, or if the device malfunctions, you may lose your cryptocurrencies.

3. Be mindful of crypto-bridge risks​

There are more than 12,000 cryptocurrencies in existence, but many operate within their own blockchain environment.
Crypto bridges, third-party connecting software, make different blockchains interoperable, allowing users with bitcoins to buy different cryptocurrencies or non-fungible tokens (NFTs) on another blockchain.
An NFT is a collectible digital asset that acts as a unique digital certificate of authenticity and ownership of a physical or virtual item.
But these third-party software might not have been securely developed. In June, hackers looted about US$100 million (S$14.7 million) from crypto bridge Horizon, in what is the third major bridge hack this year. In late March, Ronin Bridge lost about US$620 million to hackers. In February, hackers stole more than US$300 million from the Wormhole bridge.
The bottom line is: Even if a blockchain platform is secure, vulnerabilities in crypto bridges could result in money lost.
For this reason, more crypto exchange platforms are starting to develop and offer in-house bridging services.
Regulators have stepped in. The MAS, for one, is now requiring digital asset players to adopt the same cyber hygiene standards and technology risk management principles as traditional financial institutions. The MAS is also reviewing imposing more requirements to protect users.
In the meantime, users should disconnect from crypto bridges unless transacting. Compensation is not guaranteed for crypto bridge losses.

4. Watch out for gas fees​

These are transaction fees for the computational effort required to execute and record transactions. Transactions on the Ethereum blockchain have encountered astronomical spikes in gas fees during periods of high transaction volume.
For instance, a recent sale of virtual land Otherdeed NFTs worth US$320 million by Yuga Labs on the Ethereum blockchain incurred over US$120 million in gas fees. It is thus important to check gas fees and set fee caps to avoid overspending on cryptocurrency transactions.

5. Don't be fooled by stablecoins​

Stablecoins, which are pegged to fiat currencies like the US dollar, may not necessarily be stable when the going gets rough. Just like fiat currencies and stocks, significant world events or an economic downturn could affect the value of cryptocurrencies. Stablecoins are only as stable as the amount and type of assets that back them.
What's more, the quality of the reserve asset of stablecoins lacks international standardisation, necessary to retain markets' confidence in the ability of stablecoins to maintain their value.
The MAS is considering imposing requirements like secure reserve backing and timely redemption at par to instil confidence in stablecoins.
Savvy investors should watch this growing space and not be overly fixated on risky cryptocurrency speculation.

• Irene Ng is a technology lawyer based in Toronto, Canada.
• Goh Eng Han is a legal executive at Resource Law LLC.

 

[laksaboy]

Many shady Tiong crypto trading platforms operating in Sinkieland now.

We already know approved by MAS/HSA/MOE/CaseTrust means fuck all. It only lulls you into a false sense of security.

Here is one example:

https://www.jbex.com/about

https://www.uniwebpay.com/

Founded in 2013, Jubi.com is one of the world's earliest online digital asset trading platforms. In 2020, Uniweb Group Singapore acquired Jubi.com. Simultaneously ju.com launched, and in March of the same year, Jubi obtained the exemption of operation right from the Monetary Authority of Singapore.

 

[LITTLEREDDOT]

Kim Kardashian to pay $1.8 million to settle SEC crypto charges​

Kim Kardashian did not disclose that she had been paid to promote a crypto token sold by EthereumMax. PHOTO: REUTERS

Oct 3, 2022

NEW YORK - Kim Kardashian has found there is a price to be paid when influencers hawk investment opportunities like crypto to their adoring fans without disclosing they are getting paid to do so.
The Securities and Exchange Commission announced a US$1.26 million (S$1.8 million) settlement Monday morning with the celebrity for not disclosing she had been paid US$250,000 to promote a crypto token sold by EthereumMax.
Kardashian had promoted the crypto product as a good investment on her Instagram page in June 2021.
Kardashian, 41, became famous through her family's long-running reality TV show that chronicles their daily lives.
One of the hallmarks of her brand is promoting the products she uses and wears.
Last year, a number of celebrities began endorsing crypto assets in commercials.
The SEC has warned a number of times that investors should not buy any investment simply because it has the backing of a celebrity.

Regulators have a long history of going after paid celebrities and others for not disclosing that they have been compensated for promoting an investment product.
During the pandemic, a rush of celebrities and athletes joined forces with promoters of special purpose acquisition companies, or SPACs.
That led the SEC to issue an alert warning investors to be wary of the blank-check company stock offerings.
"Ms Kardashian's case also serves as a reminder to celebrities and others that the law requires them to disclose to the public when and how much they are paid to promote investing in securities," Gary Gensler, the SEC chair, said in a statement announcing the settlement.
Patrick Gibbs, an attorney for Kardashian, said in a statement that his client was "pleased to have resolved this matter with the SEC," and that the agreement allowed her to move forward with her business pursuits.
In the Instagram post from June 2021, Kardashian began by telling her followers: "This is not financial advice but sharing what my friends have just told me about the EthereumMax token!"
The SEC has maintained that crypto tokens are investment products subject to its regulatory oversight.
In the settlement order with Kardashian, the SEC said she was paid by EthereumMax through an intermediary.
The SEC also said that it gave Kardashian consideration for cooperating with regulators and that she has continued to cooperate with the investigation.
NYTIMES

 

[LITTLEREDDOT]

All those celebrities pushing crypto not so vocal now​

Basketball player Joel Embiid starring in Crypto.com's new ad titled Bravery Is A Process. PHOTO: SCREENGRAB FROM CRYPTOCOM/YOUTUBE


MAY 18, 2022

NEW YORK (NYTIMES) - In the latest commercial from the virtual currency exchange Crypto.com, titled Bravery Is A Process, star basketball player Joel Embiid walks through Philadelphia while his former college coach Bill Self lends the narration.
"Even when our path didn't make sense to everyone else, we kept going," Mr Self says in the ad, which made its debut on May 6. "We keep going, until our path is the one they wish they'd taken."
What the ad does not say: The crypto market is in the middle of a meltdown. Buyers beware.
Enthusiasm for crypto from Hollywood celebrities and top athletes reached a fever pitch over the past year. On social media, during interviews and even in music videos, they portrayed virtual currency as a world with its own hip culture and philosophy - one that was more inclusive than traditional finance and that involved the chance to make loads of money.
The US National Football League's Super Bowl was nicknamed the "Crypto Bowl" this year because so many ads - which cost as much as US$7 million (S$9.7 billion) for 30 seconds - featured the industry, several of them starring boldface names.
But after investors watched hundreds of billions of dollars disappear in a sell-off this month, those famous boosters now face intensifying criticism that they helped drive vulnerable fans to invest in crypto without emphasising the risks.
Unlike clothes or snacks or many other products hawked by celebrities, the crypto market is volatile and rife with scams.

"This is real money that people are investing," said Dr Giovanni Compiani, an assistant professor of marketing at the University of Chicago whose research has found that younger, lower-income investors tend to be overly optimistic about crypto's trajectory. "Those who promote it should be more upfront about the potential downsides."
So far, crypto's celebrity boosters have been largely silent about whether they have any second thoughts about their promotions.
Crypto.com declined to make Mr Embiid available to discuss his partnership with the company.

Hollywood star Matt Damon, who compared the advent of virtual money to the development of aviation and spaceflight in a critically panned but widely seen Crypto.com ad last year, did not respond to requests to weigh in.
No response either from basketball star LeBron James, who was featured in the company's Super Bowl commercial this year.


Actress Reese Witherspoon, an Oscar winner who declared online in December that "crypto is here to stay", did not respond to a request for comment.
Neither did actress and entrepreneur Gwyneth Paltrow, who lent her name to a bitcoin giveaway late last year.
Heiress Paris Hilton, who has nearly 17 million followers on Twitter who watch her coo over her lap dogs Crypto and Ether, did not respond to a request for comment.
Neither did several other famous crypto pushers, such as actress Mila Kunis and American football players Aaron Rodgers and Tom Brady (although Brady's and Rodgers' profiles on Twitter still feature laser eyes, a popular symbol of bitcoin bullishness).
A representative for tennis star Naomi Osaka, who became an ambassador for the crypto exchange FTX this year, wrote in an e-mail that "she sadly is overseas and not available".
Crypto's instability underscores a basic fallacy of celebrity marketing: A famous person's endorsement may be memorable but it does not make the product being pushed inherently worth trying.
"If I were Matt Damon or Reese Witherspoon, I would be questioning my willingness to take on this kind of gig," said Syracuse University associate professor of marketing Beth Egan.

 

[LITTLEREDDOT]

Crypto world on edge after string of hacks with $3.2 billion stolen from DeFi projects​

Hackers have terrorised the crypto industry for years. PHOTO: REUTERS


SEP 29, 2022

NEW YORK - Not long after dropping out of college to pursue a career in cryptocurrencies, Mr Ben Weintraub woke up to some bad news.
Mr Weintraub and two classmates from the University of Chicago had spent the past few months working on a software platform called Beanstalk, which offered a stablecoin, a type of cryptocurrency with a fixed value of US$1. To their surprise, Beanstalk became an overnight sensation, attracting crypto speculators who viewed it as an exciting contribution to the experimental field of decentralised finance, or DeFi.
Then it collapsed. In April, a hacker exploited a flaw in Beanstalk's design to steal more than US$180 million (S$259 million) from users, one of a series of thefts this year targeting DeFi ventures.
Hackers have terrorised the crypto industry for years, stealing Bitcoin from online wallets and raiding the exchanges where investors buy and sell digital currencies. But the rapid proliferation of DeFi start-ups like Beanstalk has given rise to a new type of threat.
These loosely regulated ventures allow people to borrow, lend and conduct other transactions without banks or brokers, relying instead on a system governed by code. Using DeFi software, investors can take out loans without revealing their identities or even undergoing a credit check.
As the market surged last year, the emerging sector was hailed as the future of finance, a democratic alternative to Wall Street that would give amateur traders access to more capital. Crypto users entrusted roughly US$100 billion in virtual currency to hundreds of DeFi projects. But some of the software was built on faulty code.
This year, US$2.2 billion (S3.2 billion) in cryptocurrency has been stolen from DeFi projects, according to crypto tracking firm Chainalysis, putting the overall industry on pace for its worst year of hacking losses.

Many of the thefts have stemmed from flaws in the computer programs - known as "smart contracts" - that power DeFi. The programs are often built hastily, and because smart contracts use open-source code, which provides a publicly viewable map of the software, hackers have been able to orchestrate attacks on the digital infrastructure itself, rather than simply infiltrating someone's account. It is the difference between robbing an individual and emptying an entire bank vault.
"DeFi has introduced a whole other level for hackers to be able to access a platform," said Ms Erin Plante, vice-president of investigations at Chainalysis. "It is putting a lot of pressure on the space and restricting the innovation that is possible."
The breaches have shaken faith in DeFi during a grim period for the crypto industry. An epic crash this spring erased nearly US$1 trillion and forced several high-profile companies into bankruptcy. In August, thieves exploited a coding issue to drain US$190 million from a company called Nomad. Last week, crypto firm Wintermute said its DeFi division had been hacked, leading to losses of US$160 million.
Tracking the movement of stolen crypto is fairly straightforward. Transactions are recorded on public ledgers called blockchains, which anyone can analyse to find patterns. But it is significantly harder to regain access to lost funds.
The hacks have prompted many DeFi start-ups to explore preventive measures, including recruiting auditors to examine their code for vulnerabilities. Even as other types of crypto firms cut costs during the downturn, security and auditing companies have seen a huge surge in business.
Since crypto's inception, companies have struggled with security. In 2014, the first major Bitcoin exchange, Mt. Gox, was breached in a damaging attack that eventually led to the company's bankruptcy and the loss of billions of dollars in digital currency.
At the time, the industry was relatively small and uncomplicated. Now, hackers can attack a wider ecosystem, including an experimental economy of crypto-based video games, decentralised lending projects and newfangled coins. Last year, a hacker stole US$600 million from DeFi platform Poly Network; the thief eventually returned the money after negotiations with the project's leaders.
This year's hacks have caused far more damage. In March, a group sponsored by the North Korean government stole US$620 million in digital currency from the Ronin Network, a DeFi platform that powers the video game Axie Infinity. Around the same time, a hacker exploited a software flaw in a DeFi project called Wormhole to abscond with US$320 million.
"Many people are putting up platforms with a known vulnerability," said Mr Chris Tarbell, a former Federal Bureau of Investigation agent who now runs cyber-security firm Naxo. "In a target-rich environment, criminals are going to be opportunistic." NYTIMES

 

[LITTLEREDDOT]

Binance-backed blockchain probes $157 million hack of tokens​

The amount is an estimate and the money lost will be covered by a Binance backup fund. PHOTO: REUTERS


OCT 7, 2022

PORTLAND, Oregon - A major blockchain backed by Binance, the world's largest cryptocurrency exchange, is probing the potential theft of between US$100 million and US$110 million (S$157 million) of digital tokens native to the network.
The amount is an estimate and the money lost will be covered by a Binance backup fund, according to a spokesman for the network, BNB Chain.
The blockchain has been temporarily suspended and is working with security services to freeze transfers of stolen funds.
"We will suspend all deposits and withdrawals via BNB Chain temporarily until there are further updates," Binance said in a tweet.
Digital assets have suffered a series of hacks this year worth billions of dollars. A BNB Chain spokesman said at least US$7 million of stolen funds from the latest incident have already been frozen.
The token involved, BNB, fell as much as 3.3 per cent on Friday and was trading at around US$287 as at 9am in Tokyo. BLOOMBERG

 

[LITTLEREDDOT]

Celsius execs withdrew millions before bankruptcy, court filings show​

Celsius suspended customer withdrawals in June and filed for bankruptcy protection the following month. PHOTO: REUTERS


OCT 7, 2022

LONDON - Top executives at Celsius Network withdrew at least US$30 million (S$43 million) of cryptocurrencies in the month before suspending customer withdrawals from the platform, according to bankruptcy court documents filed by lawyers for the crypto lender in New York late on Wednesday.
Then chief executive officer Alex Mashinsky, co-founder Daniel Leon and chief technology officer Nuke Goldstein, and entities identified in the documents as their related parties, made a series of withdrawals in May totalling more than US$30 million, these filings allege. Transactions were denominated in Bitcoin, Ether, USDC, Celsius' own CEL token and "wrapped" Bitcoin.
Mr Mashinsky withdrew about US$10 million in cryptocurrency over the course of May, the filing shows. Mr Leon withdrew about US$7 million; net of deposits, his withdrawals amounted to about US$3.1 million, the documents show. The calculations include withdrawals by entities and people related to the executives, as designated by Celsius advisers.
Mr Goldstein withdrew around US$13 million. Lawyers for Mr Goldstein told Bloomberg that net of deposits, the withdrawals attributed to the CTO and related parties totalled about US$559,000.
A Celsius representative did not immediately respond to an e-mail seeking comment. Neither Mr Mashinsky nor Mr Leon returned multiple requests for comment.
The report, prepared by Celsius advisers, notes that some transactions marked as "withdrawals" may represent transfers from one Celsius account type to another. The company's advisers are continuing to analyse whether any transfers or withdrawals from the platform could be grounds for a lawsuit, according to the report.
Celsius, once one of the industry's most prominent lenders, suspended customer withdrawals in June and filed for bankruptcy protection the following month after making risky bets before the broader crypto market soured. The bankruptcy judge presiding over the case recently appointed an examiner to explore allegations of misconduct against the company and its executives.

Mr Mashinsky stepped down from his position as CEO last month, followed by Mr Leon whose resignation from the firm was confirmed by Celsius on Tuesday. BLOOMBERG

 

[LITTLEREDDOT]

Binance blockchain hit by $817.5m hack, exposing crypto vulnerabilities​

The attack on the Binance Smart Chain network highlighted weaknesses in decentralised finance. PHOTO: REUTERS

Oct 9, 2022



WASHINGTON - Binance, the world's biggest cryptocurrency exchange, confirmed last Friday that US$570 million (S$817.5 million) had been stolen in a hack of a blockchain it runs that serves as a bridge for asset transfers between networks.
The attack on the Binance Smart Chain network highlighted weaknesses in decentralsed finance, or DeFi, where transactions are controlled by code.
"Software code is never bug-free," Binance chief executive Zhao Changpeng said in an interview with CNBC.
He emphasised that no users had lost money in the hack but said that so-called cross-chain bridges were particularly vulnerable to hacks and the industry needed to get better at learning from them.
"We have seen a series of attacks... targeting vulnerabilities in cross-chain bridges," Binance Smart Chain wrote in a blog post apologising to users. "We will openly share the details of the post-mortem and all lessons on how to implement more advanced security measures to shore up these vulnerabilities."
In August, blockchain research company Chainalysis estimated that US$2 billion worth of cryptocurrency had been stolen in 13 cross-chain bridge attacks, mostly in 2022. In March, an attack drained US$600 million from a bridge behind crypto-powered video game Axie Infinity. In February, US$325 million was stolen from the Wormhole network.

These exploits show that a reliance on code for control of DeFi platforms leaves these systems exposed and that in emergency situations, decentralisation can be an obstacle to quickly resolving issues. The Binance chain ecosystem is run by a community of users, known as validators, who hold tokens and can vote on proposed code changes.

"Decentralised chains are not designed to be stopped, but by contacting community validators one by one, we were able to stop the incident from spreading," Binance Smart Chain said in its statement. "This delayed closure, but we were able to minimise the loss."
Now, the Binance Smart Chain community will hold a vote on next steps, including whether to freeze the stolen funds and allot a bounty for catching the hackers, offering up to 10 per cent of the value of the stolen assets.
Mr Vitalik Buterin, a founder of the Ethereum network - and the second most popular cryptocurrency, Ether - has been a vocal critic of cross-chain bridges, noting that they have "fundamental security limits". NYTIMES

 

[LITTLEREDDOT]

Crypto Investment Firm Blockwater Technologies Defaults on DeFi Loan​

The South Korea-based crypto investment firm failed to make a payment on a $3.4 million loan to TrueFi, a decentralized lending protocol.​

By Krisztian Sandor
Oct 10, 2022

Falling dominoes (Getty Images)
South Korean blockchain investment firm Blockwater Technologies defaulted on a loan from TrueFi, a decentralized lending protocol, TrueFi said in a statement Sunday.
According to the statement, TrueFi issued a “notice of default” to Blockwater on Oct. 6 after it failed payment on a $3.4 million loan in Binance USD (BUSD) stablecoin.
Blockwater’s default seems to be the latest example of the crypto industry’s insolvency crisis. This year’s dramatic downturn of crypto markets, exacerbated by the implosion of the Terra blockchain, has led to the bankruptcy of multiple high-profile crypto firms, such as hedge fund Three Arrows Capital (3AC), crypto lender Celsius Network, digital asset broker Voyager Digital and crypto-mining data center operator Compute North.

Blockwater’s default on its debt came after TrueFi and Blockwater restructured the loan and extended the payment period in August. Blockwater managed to repay $654,000 of its outstanding debt after the restructuring efforts, but eventually missed payment. The remaining debt amounts to almost $3 million.
TrueFi determined that “a potential court-supervised administrative proceeding would lead to a better outcome for stakeholders given the complexity around the sudden insolvency,” according to the lending protocol’s statement.
“While we always prefer to pursue an out-of-court solution with distressed borrowers, in some instances an administrative proceeding is the best option in preserving value for stakeholders,” Roshan Dharia, head of lending at ArchBlock, which manages relationships between lenders and borrowers on the TrueFi protocol, told CoinDesk.
TrueFi remained in “active discussion” with Blockwater, and said that Blockwater’s insolvency does not affect the protocol’s other lending pools, per the statement.

 

[LITTLEREDDOT]

Crypto hackers set for record year after looting over $4.3 billion​

At least $1.03 billion has been stolen so far in October alone, with most of the targets being DeFi protocols. PHOTO: REUTERS

Oct 13, 2022

NEW YORK - Cryptocurrencies may have crashed in 2022 but they remain a digital cash machine for one potent constituency: hackers.
At least US$718 million (S$1.03 billion) has been stolen so far in October alone, taking the gross tally for the year past US$3 billion (S$4.3 billion) and putting 2022 on course to be a record for the total value hacked, according to blockchain specialist Chainalysis.
Most of the targets are so-called decentralised finance – or DeFi – protocols, which deploy software-based algorithms to enable crypto investors to trade, borrow and lend on digital ledgers without using a central intermediary.
Hackers have become adept at exploiting weaknesses in the security, coding and structure of DeFi marketplaces. And that is putting the onus on crypto players to find solutions given that DeFi is touted as important for crypto adoption.
"October is now the biggest month" for hacking activity in 2022, Chainalysis said on Thursday on Twitter, adding that bridges between blockchains are a big vulnerability too.
Two major exploits have roiled the crypto sector in recent days. One was a heist whereby a hacker spirited away about US$100 million from DeFi service Mango by manipulating the price of its token. The perpetrator wiped out depositors on the platform in the process.
Last week, two million Binance Coins – equivalent to nearly US$570 million – were effectively minted and taken by a hacker. About US$100 million was not recovered while the rest was frozen, according to a Binance statement.

DeFi platforms have become a frequent target of state-sponsored hacking. Earlier this year, Chainalysis estimated that North Korea-affiliated groups have stolen approximately US$1 billion of crypto from DeFi protocols. BLOOMBERG

 

[JohnTan]

Stick to buying property for investment instead of these NFT and crypto crap.

 

[LITTLEREDDOT]

12,100 crypto tokens in zombie trading limbo​

Over 12,000 tokens have become "zombies" this year, defined as tokens that have not traded for a month. PHOTO: REUTERS

OCT 16, 2022

When it comes to putting a number on 2022's crypto swoon, the one cited most often is US$2 trillion (S$2.9 trillion), the amount of digital-asset market value that evaporated in the downdraft.
But here is a figure that captures the breadth of the bear market: 12,100.
That is the number of crypto tokens that have ceased trading in 2022, according to data provider Nomics. The tokens are not dead technically, but like zombies, not quite alive either.
Most blockchain projects are built around bespoke digital coins, which often function as user rewards and compensate developers for their work, giving them incentive to stay involved. During 2021's price run-up, thousands of crypto start-ups issued new tokens to support these projects, and bullish sentiment meant there was ample demand for the market to absorb the vast majority of them and still drive prices higher.
That all changed in 2022, as macroeconomic conditions put investors off risk assets and token prices nosedived. The implosion of the Terra blockchain, as well as the collapse of hedge fund Three Arrows Capital and crypto firms like Celsius Network caused a further sell-off and cooled venture capital funding.
The biggest tokens, like Bitcoin and Ether, suffered major declines before eventually finding support. But for many coins backing fledgling, riskier and sometimes sketchier endeavours, the downturn has delivered the equivalent of a knockout blow.
Nomics found that over 12,100 tokens - more than twice as many as in all prior years combined - have become "zombies" this year, defined as tokens that have not traded for a month.

"During the bull market of 2021, there was plenty of money, attention, and liquidity for new and existing projects," said Mr Jacob Joseph, a research analyst at researcher CryptoCompare.
"However, in the ongoing bear market, even good projects with utility will struggle to sustain their operations as they lose access to capital and funding."
In 2018, a total of 136 tokens turned into zombies, while 766 coins earned that designation in 2019, far below this year's level.


It is difficult to know the scope or seriousness of the projects affected this time around, though a decent chunk are likely memes, short-term leveraged assets, or small personal projects done for fun, according to Mr Nick Gauthier, a co-founder at Nomics.
Many, such as a project called BoomSpace which purported to work on blockchain gaming, no longer have a live website. Elonmoon, a token for a game related to moon exploration, has a warning on tracker CoinMarketCap: "We have received multiple reports that some holders cannot sell their tokens. Please exercise caution and do your own due diligence!"
Even among active coins, trading can be thin. Of the more than 64,400 assets Nomics tracks, only about 13,800 had trading volume in a recent 24-hour period last week, Mr Gauthier said. And there are myriad coins that are not quite zombies yet but nearly so, and trading at a fraction of a cent - Terra Classic is one example - perhaps even offering those with a taste for adventure a chance at gains.

While many projects held their own coins as a reserve during the boom, the current environment suggests start-ups take a more cautious approach, perhaps holding more widely traded and valued coins like Ether or even cash as a back-up.
Still, with many predicting no let-up to the lacklustre market environment, the ranks of the zombies will likely increase, said professor of finance John Griffin at the University of Texas at Austin. Unlike other industries, it is not as noticeable in crypto when coins turn to zombies and projects become effectively defunct.
"There's no storefront to board up, no inventory to sell, no employees to claim unemployment," said crypto investor Aaron Brown. "Just people lose interest in a token and move on to other things."
This dynamic is one reason new coins keep getting birthed as others get abandoned, and why it is possible the next bull market will bring even more new tokens - many of which may become zombies in time.
"Since the cost of a crypto start-up is close to zero, and anyone in the world can try without discrimination or regulation, lots of people will keep trying," Mr Brown said. "Where do you think the dead coins are piling up? It's not like cyberspace is a warehouse with limited capacity."
BLOOMBERG

 

[LITTLEREDDOT]

US investigating bankrupt crypto hedge fund Three Arrows Capital​

Three Arrows founders Zhu Su (left) and Kyle Davies. PHOTOS: ZHU SU/TWITTER, KYLE DAVIES/TWITTER

Oct 18, 2022

WASHINGTON - US regulators are prying deep into the remnants of failed hedge fund Three Arrows Capital as they try to untangle the fallout of this year’s crypto crash.
Three Arrows, which operated from Singapore until at least early May, filed for bankruptcy in July after a broad sell-off in digital assets spurred in part by the collapse of the Terra blockchain.
The Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) are now looking into whether the money manager violated rules by misleading investors about the strength of its balance sheet and not registering with the agencies, according to two people familiar with the matter.
Scrutiny from the agencies, both of which declined to comment, can lead to monetary fines and other penalties for firms and individuals. A lawyer listed in bankruptcy court filings as a representative for Three Arrows founders Zhu Su and Kyle Davies did not immediately respond to an e-mail and a phone call seeking comment. The inquiries were made outside local business hours in Singapore.
The founders’ whereabouts remain unknown. Mr Zhu did not respond to a request for comment, and Mr Davies did not immediately respond to a message sent to him via Twitter. Teneo, an advisory firm appointed by a British Virgin Islands court to liquidate Three Arrows, which is also known as 3ac, declined to comment.
At its zenith, Three Arrows counted a few billion dollars under management, making it a major player in the crypto world. Known for its bullish stance, it was also a recipient of loans from firms across the industry, and was a venture investor in some of the industry’s best-known start-ups.
But the firm sustained losses on its position in the Terra blockchain project, which came crashing down as the so-called algorithmic stablecoin TerraUSD crumbled in May. As the token’s collapse spread across the broader crypto market over the following weeks, Three Arrows was unable to meet margin calls from its lenders and eventually declared insolvency.

Liquidators overseeing the wind-down of the firm, which until recently was one of the industry’s most prominent firms, have seized control of tens of millions of dollars of the fund’s assets. But this is a fraction of the billions of dollars that creditors, including bankrupt crypto lenders Voyager Digital and Celsius Network, said they were owed.
Teneo, the court appointed liquidator, has claimed that Three Arrows’ founders have not fully cooperated with the unwinding. It took the unusual step of asking a United States judge for permission to serve Mr Zhu and Mr Davies with subpoenas through their Twitter accounts and e-mail addresses because normal methods have failed, according to court documents filed last week.
Celsius is also facing scrutiny from US regulators. Lawyers for the firm this month disclosed that it had received a federal grand jury subpoena from a New York district court, as well as inquiries from the CFTC, SEC and Federal Trade Commission. The CFTC is investigating if Celsius failed to disclose how customers’ funds were used, and if some of its conduct amounted to market manipulation, according to a person familiar with the matter.
The regulator declined to comment on its probe of the crypto lender. A representative for Celsius said the firm is “cooperating with all regulatory inquiries, and regulators are key stakeholders in our reorganisation”. The firm declined to comment on the specifics of any inquiries.
Although the CFTC’s jurisdiction over crypto is generally limited to derivatives, the agency can take enforcement action if it believes there is fraud or manipulation in the underlying market. The SEC claims oversight over digital coins that qualify as securities under its rules. Both regulators also oversee investment firms.
The CFTC and the SEC are not the only authorities that have turned up the heat on Three Arrows. On June 30, the Monetary Authority of Singapore reprimanded the firm for allegedly providing false information and exceeding the limit on its assets under management.
Court documents earlier this month indicated that the liquidators of the fund had received permission to repatriate some assets from Singapore to the British Virgin Islands. BLOOMBERG

 

[LITTLEREDDOT]

Crypto retail investors to take risk test, barred from borrowing under proposed rules by MAS​

Crypto firms will have to separate customers’ assets from their own assets. PHOTO: REUTERS

Claire Huang
Business Correspondent

OCT 26, 2022

SINGAPORE - Singapore plans to rein in cryptocurrency speculation by retail investors by making it harder for them to start trading digital assets. Industry players will also have to ensure that the investments of retail investors are ring-fenced.
The proposed measures come on the back of a string of insolvencies of key crypto players such as lender Celsius and hedge fund Three Arrows, which were caught in the crash of stablecoin TerraUSD and its sister token Luna. Many retail investors got burnt in the process.
The Monetary Authority of Singapore (MAS) is now proposing that providers of digital payment token (DPT), or crypto services, must test a customer’s understanding of the possible risks of crypto trading before allowing them to invest.
Retail users must also not be allowed to borrow or use credit cards to purchase crypto.
Crypto service providers should also not use incentives such as giving away free tokens or gifts to court retail users. Celebrity endorsements should also not be allowed.
To differentiate retail investors who made most of their money from crypto speculation from those with a diverse portfolio, MAS has suggested that an individual has to have at least $1.8 million in other assets, whether these are property, equities or bonds, to be treated as an accredited investor.
Currently, an accredited investor is someone with at least $2 million in net personal assets. Under the proposed rule, the regulator will recognise up to only 10 per cent, or $200,000, of the investor’s net personal assets in crypto.

In a move likely to ruffle feathers, given that lending is profitable, MAS is proposing that crypto companies licensed under the Payment Services Act cannot lend out retail investors’ DPTs at all. Crypto firms sometimes earn large amounts of interest by lending such DPTs to other players – a process known in the industry as staking – for example.
Another sticky problem is that crypto companies will also have to separate customers’ assets from their own assets – a practice that is not widely adopted.
The firms will also have to introduce risk management controls for tokens held by all investors and disclose the policies and procedures on how they select and list tokens.

The companies will have to disclose conflicts of interests. For instance, disclosure is needed if a company has financial interest in tokens that are listed on a trading platform, or if a player conducts market-making activities for tokens listed on its trading platform.
They will also have to ensure they put in place adequate complaints handling processes.
Similar to other financial institutions, DPT service providers will have to maintain high availability and recoverability of critical systems, as well as promote fair, transparent trading of tokens.
The proposals form one of two consultation papers published on Wednesday by MAS as it seeks to reduce the risk of consumer harm from crypto trading.
“Trading in cryptocurrencies or DPTs is highly risky and not suitable for the general public. However, cryptocurrencies play a supporting role in the broader digital asset ecosystem, and it would not be feasible to ban them,” MAS said on Wednesday. It added that the measures are meant to reduce the risk to consumers from speculative trading in crypto, so DPT service providers have to ensure proper business conduct and adequate risk disclosure.

The co-chairman of the Blockchain Association Singapore, Mr Chia Hock Lai, described the proposed measures as “comprehensive” but added that there needs to be a calibrated approach as the measures could have a knock-on effect and “we might run the risk of over-regulating”.
“For example, implementing a risk awareness test should negate the need to bar credit card payments and provision of incentives to retail customers,” he said.
Mr Chia noted that Singapore is not known to be a major hub for the retail crypto trading scene and he does not expect a significant impact on volumes at exchanges.
But he warned that “if all the proposals are implemented, it could be deemed as excessive by the industry”.
Some players say that separating their assets from those of their investors would force them to overhaul their business structures and “dramatically increase” costs.
Independent Reserve managing director Raks Sondhi said, however, that his exchange was prepared for the proposals and already isolates investors’ assets and does not do any lending.
The other consultation paper focuses on the development of stablecoins as a credible medium of exchange in the digital asset ecosystem.
The suggested measures in the two papers are to be part of the Payment Services Act, and stakeholders have until Dec 21 to submit their comments on the proposals.

 

[LITTLEREDDOT]

S’pore-based crypto lender Hodlnaut lost nearly $268.5m in TerraUSD collapse​

Hodlnaut, which operates out of Singapore and Hong Kong, halted withdrawals in August. PHOTO: REUTERS

Oct 31, 2022

MUMBAI – Embattled cryptocurrency lender Hodlnaut downplayed its exposure to the collapsed digital token ecosystem created by fugitive Do Kwon, yet suffered a near US$190 million (S$268.5 million) loss from the wipe-out.
The loss is among the findings of an interim judicial managers’ report seen by Bloomberg News. It is the first such report since a Singapore court in August granted Hodlnaut protection from creditors to come up with a recovery plan.
“It appears that the directors had downplayed the extent of the group’s exposure to Terra/Luna both during the period leading up to and following the Terra/Luna collapse in May 2022,” the report said.
Kwon’s TerraUSD algorithmic stablecoin and sister token Luna suffered a US$60 billion wipe-out in May as confidence in the project evaporated, exacerbating this year’s crypto meltdown. Hodlnaut’s Hong Kong arm made the near US$190 million loss when it offloaded the stablecoin as its claimed peg to the United States dollar frayed.
In a letter dated July 21, Hodlnaut’s directors “made an about-turn” about the impact and informed a Singapore police department that digital assets had been converted to TerraUSD, according to the report. Much of the latter was lent out on the Anchor Protocol, the report said, a decentralised finance (DeFi) platform developed on the Terra blockchain.
Deleted documents
An e-mail sent to Hodlnaut seeking comment triggered an automated response saying the firm would reply as soon as possible.


Hodlnaut, which operates out of Singapore and Hong Kong, halted withdrawals in August. A number of crypto platforms globally hit trouble as digital asset prices slid amid tightening monetary policy that stanched speculative fervour.
The judicial report said more than 1,000 deleted documents from Hodlnaut’s Google workspace could have helped shed light on the business. The judicial managers have not been able to obtain several “key documents” in relation to Hodlnaut’s Hong Kong arm, which owes $82.43 million to Hodlnaut Pte in Singapore.
About $776,292 appeared to have been withdrawn by some employees between July and when withdrawals were halted in August, the report stated. Most of the company’s investments into DeFi were made via the Hong Kong division, it added. BLOOMBERG

 

[LITTLEREDDOT]

Terra co-founder Do Kwon faces $79.8m lawsuit in Singapore after crypto crash​

Do Kwon was previously based in Singapore but is no longer in the Republic. PHOTO: BLOOMBERG

Jessie Lim

Nov 9, 2022

SINGAPORE - Terraform Labs’ co-founder Do Kwon is facing a US$56.9 million (S$79.8 million) representative action suit in Singapore over his alleged role in a wipeout of cryptocurrencies he created.
Mr Julian Moreno Beltran, a Spanish citizen, and Mr Douglas Gan, a Singaporean, filed the lawsuit in the Singapore High Court in September against the South Korean, whose full name is Kwon Do-hyeong, and three other defendants on the basis of fraudulent misrepresentation.
Mr Beltran and Mr Gan represent 359 plaintiffs who claim they had been misled into thinking the cryptocurrency TerraUSD, also known as UST, was designed to have a relatively stable price, and they suffered heavy losses after TerraUSD crashed.
The other defendants are listed as Terraform Labs, which Kwon co-founded, Greek co-founder Nikolaos Alexandros Platias, and Luna Foundation Guard (LFG). Terraform Labs and LFG are registered in Singapore.
According to court documents seen by The Straits Times, Mr Beltran and Mr Gan are represented by Mr Mahesh Rai, Mr Brandon Yap and Ms Shreya Kittur from Drew and Napier.
Kwon, Terraform Labs and LFG are represented by Mr Lawrence Teh and Ms Melissa Thng from Dentons Rodyk, and Mr Platias by Ms Mazie Tan of Rajah & Tann.
Kwon was previously based in Singapore but is no longer in the Republic. He is believed to be in Europe currently, according to the Korean Broadcasting System. An Interpol Red Notice was issued against him in September, requesting law enforcement agencies worldwide to locate and arrest him.

The TerraUSD stablecoin was meant to have a constant US$1 value in a complicated arrangement with sister token Luna.
Terraform Labs also ran Anchor Protocol, a lending and borrowing platform where users could earn returns of almost 20 per cent annually by lending out their UST holdings.
However, in May, due to a loss of business confidence, many investors began withdrawing their funds in Anchor, causing the value of UST to crash to a low of 20 US cents, resulting in the wipeout of its market value amounting to billions of US dollars.

The US$56.9 million sum which the claimants are seeking is the difference in value between the sum in US dollars they believed their assets were worth and the value of their assets after the crash.
Most of the claims are in the range of hundreds of thousands of UST. The plaintiffs are also seeking aggravated damages for fraudulent misrepresentation.
They allege that Kwon and Mr Platias, who was head of research at Terraforms Labs, had claimed that UST was stable by design, and it would be able to maintain its peg regardless of market size, volatility or demand.
They cited a white paper by the pair, which was published a year before the launch of UST in 2020, in which they claimed the cryptocurrency they were proposing would maintain a stable price due to their algorithm.

Ms Liesel Chong, a senior lawyer at Gloria James-Civetta & Co, said there is a high threshold to prove fraudulent misrepresentation.
She said: “The person who made the representation must have done so knowing that it is false, or without belief in its truth, or recklessly as to its truth.”
The next case conference, during which the court is expected to set timelines and give further directions, is expected to take place on Nov 16.

 

[LITTLEREDDOT]

Binance plans to buy rival FTX in bailout as crypto market crumbles​

Binance will conduct due diligence in coming days as the next step toward an acquisition of FTX.com. PHOTO: REUTERS

9 Nov 2022

WASHINGTON/LONDON - Crypto giant Binance signed a nonbinding agreement on Tuesday to buy FTX’s non-US unit to help cover a “liquidity crunch” at the rival exchange, in a stunning bailout that raised fresh concerns among investors about cryptocurrencies.
The deal between high-profile rivals Sam Bankman-Fried, FTX’s chief executive, and Binance CEO Changpeng Zhao came as speculation about FTX’s financial health snowballed into US$6 billion (S$8.4 billion) of withdrawals in the 72 hours before Tuesday morning.
The pressure on FTX came in part from Mr Zhao, who had tweeted on Sunday that Binance would liquidate its holdings of the rival’s token due to unspecified “recent revelations”.
“It’s scary to think that FTX, which is one of the largest crypto exchanges in the world, was bitten by liquidity concerns and Binance, their biggest rival, is coming to their rescue,” said Mr Dan Raju, CEO of Tradier, financial services provider and brokerage.
The move, a dramatic reversal in fortunes of billionaire Bankman-Fried, 30, is the latest emergency rescue in the world of cryptocurrencies this year, as investors pulled out from riskier assets amid rising interest rates. The cryptocurrency market has fallen by about two-thirds from its peak to US$1.07 trillion.
Major cryptocurrencies initially rallied on the news of the deal on Tuesday, but those gains were quickly erased.
FTX token – which gives holders discounts on FTX trading fees – was last trading at US$5.33, having slumped by more than three-quarters. Bitcoin, the biggest digital token, was down 11 per cent.

In a blog, Coinbase Global assured investors it had minimal exposure to FTX after its shares fell more than 10 per cent.
Mr Bankman-Fried, whose net worth is US$16.6 billion according to Forbes, had said just months ago he had billions on hand to help struggling digital asset platforms.
In May, he revealed a 7.6 per cent stake in Robinhood Markets, capitalising on the trading app’s weakened share price. Tuesday’s developments left FTX investors scrambling to figure out what the deal with Binance means for their investment in FTX, according to sources familiar with the matter.

In a note to investors late on Tuesday, shared on Twitter and verified by a source familiar with the situation, Mr Bankman-Fried tried to reassure FTX investors, saying that “protecting shareholders is our highest priority” ,but said details of the deal were “still being hashed out”. FTX did not immediately respond to a request for comment.
The companies did not disclose the terms of the deal, and it remains to be seen whether it will close.
Binance, the world’s biggest crypto exchange, will conduct due diligence in coming days as the next step toward an acquisition of FTX.com. The United States operations of Binance and FTX are not part of the deal, said Mr Bankman-Fried, who is from California but lives in the Bahamas where FTX is based.
It is not clear how regulators will regard a deal between the two crypto exchanges.

US antitrust enforcers could insist on probing the merger, antitrust experts said. “They could sue to stop it if they think it has an adverse effect on US customers,” said Mr Seth Bloom, an antitrust expert at Bloom Strategic Counsel.
Binance is also under investigation by the US Justice Department for possible violations of money-laundering rules, Reuters reported last week, one of a series of investigations this year into Binance’s troubled history with financial regulatory compliance.
Last month, Reuters revealed fresh details about Binance’s strategy for keeping regulators at arm’s length and continuing disarray in its compliance programme. Binance said in response that it was helping drive higher industry standards and was seeking to improve its ability to detect illegal crypto activity.
A spokesman for the US Commodity Futures Trading Commission said the agency is monitoring the situation. The Federal Trade Commission declined to comment.
Two of the most powerful moguls in the crypto industry, Mr Bankman-Fried and Mr Zhao, known by his initials CZ, have had a turbulent relationship.
In late 2019, Binance invested in FTX, then a far smaller exchange, before exiting the investment in July last year. By then FTX had mushroomed into a growing rival to Binance, which dominates the crypto industry with more than 120 million users.
Tensions between Mr Zhao and Mr Bankman-Fried surfaced in recent days, with a public disagreement playing out on Twitter, following a report by news website CoinDesk on a leaked balance sheet from Alameda Research, a trading company founded by Bankman-Fried that has close ties with FTX.
The pace of withdrawals proved to be too much, however.
“On an average day, we have tens of millions of dollars of net in/outflows,” Mr Bankman-Fried wrote in a message to staff sent on Tuesday morning, saying how that amount had run into billions.
FTX did not respond to a request for comment on the message to staff.
In a tweet announcing the deal on Tuesday, Binance’s Mr Zhao that FTX had “asked for our help” after “a significant liquidity crunch”.
Mr Bankman-Fried said his teams were working on clearing out the withdrawal backlog: “This will clear out liquidity crunches. This is one of the main reasons we’ve asked Binance to come in.”
“A *huge* thank you to CZ, Binance,” Mr Bankman-Fried wrote. REUTERS