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| Hey Insiders! The slippery ground in the crypto market has frightened investors today, with a recent report showing that over $204M in funds have been lost in the attacks targeting decentralized finance (DeFi) platforms in Q2. Today's issue also covers several other big stories from the crypto industry, including FTX's talks with investors to relaunch the exchange, the Nevada state regulator's petition to appoint a receiver to Prime Trust, KuCoin's new identity verification obligations, and more. Enjoy your reading! Doğa
p/dogayurduneri | |
| 1 | | Bankrupt crypto exchange FTX's new CEO and chief restructuring officer, John J. Ray III, has announced that the firm started talks with investors about backing a potential relaunch of the exchange. The CEO said they are actively seeking interested parties to restart FTX.com. More: - A potential relaunch is expected to happen through structures like a joint venture.
- Ray's announcement came two months after FTX attorney Andy Dietderich revealed that the company was assessing the possibility of relaunching the exchange with its stakeholders.
- At the time, Dietderich also said that a possible restart would require a significant amount of capital.
- Since then, the bankrupt firm has filed many legal motions to recover funds from several entities, including the bankrupt crypto lender Genesis.
- A recent report from FTX's new management pointed out that the firm recovered around $7B in liquid assets so far.
- The relaunch plans were also confirmed through a staffing and compensation report filed with the U.S. Bankruptcy Court for the District of Delaware in May.
Zoom Out: - Before the bankruptcy, FTX was the third-largest crypto exchange.
- The company filed for Chapter 11 bankruptcy in November 2022, with all the 130 entities under the roof of FTX Group, following the claims that the former CEO, Sam Bankman-Fried (SBF), used customer funds in FTX to compensate for losses at the sister company Alameda Research.
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What the numbers say: Web3 portfolio app De.Fi's recent report has shown that over $204.3M funds were lost during Q2 in the hacks and scams targeting decentralized finance (DeFi) platforms, as opposed to $4.5M recovered. The figure accounts for a seven-time increase compared to the same period in 2022. The DeFi attacks in Q2 also took the total amount of loss in H1 to over $665M. De.Fi said the most common cause of losses is access control issues, responsible for $75.8M lost. Relevance: On the other hand, the total amount of loss declined compared to Q1 of the year. In early April, blockchain security firm CertiK reported that hackers stole over $320M in Q1 alone. The loss amount showed a nearly $115M decrease in Q2 from the first three-month period of 2023. Brands that should care: De.Fi's data also revealed that the top five hacks of Q2 by loss targeted Atomic Wallet, Fintoch, MEV-Boost, Bitrue, and GDAC. These platforms experienced losses of $35M, $30.6M, $26.1M, $23M, and $14M, respectively. Besides, the losses in these attacks accounted for more than half of the total loss in Q2. | | | |
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| 3 | | The U.S. state of Nevada's financial regulator, the Nevada Financial Institutions Division (NFID), has filed a petition to appoint a receiver to the crypto custodian Prime Trust to take over daily operations of the company and examine its finances, freezing all of its businesses. The filing was signed by Prime Trust's board and interim CEO. More: - The petition pointed out that Prime Trust owes its customers $85M in fiat currencies and $69.5M in crypto, as opposed to $3M in fiat and $68.6M in crypto on hand.
- The filing also stated that the company was operating with a $12M equity deficit.
- In the petition, the state regulator said the shortfall mainly stemmed from the use of customer funds to cover lost deposits, and the firm's condition would only progressively worsen if customers continued to withdraw.
- The receivership was requested both by the NFID and Prime Trust, and the two entities agreed upon the former Bank of Nevada CEO John Guedry, Meadows Bank Director Paul Huygens, or former Meadows Bank CEO Arvind Menon as possible receivers.
- Besides, the petition asked the court to prohibit Prime Trust, its officers, directors, and stakeholders from disposing of any company assets or conducting any transactions.
- Earlier in June, the NFID also issued a cease-and-desist order against Prime Trust after reviewing the company's solvency to prevent it from accepting funds from existing and new customers.
Zoom Out: - The regulatory tension around Prime Trust came shortly after digital asset trust company BitGo terminated its acquisition deal with Prime Trust.
- The two firms initially reached an agreement after Prime Trust faced financial difficulties due to its exposure to the bankrupt crypto lender Celsius.
- Prime Trust's subsidiary Banq also recently filed for Chapter 11 bankruptcy protection in the U.S. District Court of Nevada.
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| 4 | | The European Commission, the executive arm of the European Union (EU), has proposed a legal framework for a potential digital euro. The framework has revealed that the bloc views the digital euro as a currency serving like a digital wallet rather than an investment tool. More: - EU financial regulation chief Mairead McGuinness said the digital euro would doubtlessly bring advantages to both citizens and businesses across Europe.
- According to the document, digital currency would be used even in offline payments, offering similar privacy protection to cash.
- The bloc will mandate businesses in the Eurozone to accept the digital euro.
- However, the EU will block digital euro accounts from earning interest.
- The legislative proposal mainly aims to ensure that the cash will remain widely accepted in the region.
- The European Central Bank's (ECB) Governing Council will decide whether the digital currency will move to the realization phase in the fall.
Zoom Out: - Earlier in June, the EU also officially signed its most comprehensive, region-wide crypto regulations, the Markets in Crypto Assets (MiCA), into law after three years of development.
- The move marked the first attempt to regulate the crypto industry on such a scale.
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| 5 | | Bankrupt crypto exchange FTX has paused the sale of its $500M stake in the AI startup Anthropic. The firm initially planned to sell the stake for a nine-figure amount. More: - Perella Weinberg Partners, the investment bank acting as an adviser to FTX, informed the bidders about the halt.
- The pause came several months after the potential buyers weighed in on the private information about the Anthropic stake.
- The potential bidders had been asked to sign non-disclosure agreements (NDAs) before accessing the private information about finances.
- Anthropic, valued at $4.6B, was founded by former employees of OpenAI, the firm behind a popular AI-powered chatbot dubbed ChatGPT, in 2021.
- FTX and its sister company Alameda Research invested $500M in the startup before the bankruptcy under the management of the former CEO, Sam Bankman-Fried (SBF).
- The stake purchase was one of the biggest investments made by FTX, along with the $1.5B investment in crypto miner Genesis Digital.
Zoom Out: - In May, Anthropic raised $450M in funding to boost the development of its AI-powered chatbot, Claude.
- FTX, previously the third-largest crypto exchange, filed for Chapter 11 bankruptcy in November 2022, with all the 130 entities under the roof of FTX Group.
- The downfall followed the claims that SBF used customer funds in FTX to compensate for losses at Alameda Research.
- Most recently, the bankrupt exchange's new management also released a report showing that some of the company's transactions, including the venture capital (VC) investments, were partly funded by commingled customer deposits.
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| 6 | | Seychelles-based crypto exchange KuCoin has announced that it would make the Know Your Customer (KYC) identity verification measures mandatory for all clients as of July 15. KuCoin CEO Johnny Lyu said the move aims to make the platform better compliant with the applicable regulatory requirements. More: - As of July 15, users will have to provide information regarding KYC measures to fully access KuCoin's products and services.
- Otherwise, the clients will face limitations, will not be able to make deposits, and will be only able to withdraw.
- Services that will still be allowed without completing KYC procedures include spot trading sell orders, futures trading deleveraging, and margin trading deleveraging.
- KuCoin, launched in 2017, is currently the eighth-largest crypto exchange by trading volume.
- The platform caters to more than 27 million institutional and retail clients worldwide.
- The exchange does not serve users in several countries, including the U.S., Canada, Singapore, China, and Hong Kong.
Zoom Out: - KYC is a common regulatory process generally implemented by financial services providers, including banks and crypto exchanges, to identify and verify their customers by asking for some key personal information and documents.
- The process aims to improve trust in the industry, help service providers to assess the risks, and combat money laundering and terrorism financing.
- Several other crypto exchanges, including Binance and Bybit, also require customers to complete KYC verification in all services.
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| 7 | | Quick Hits: - Kubernetes doesn't need to be complex. Join us for a conversation about how to increase developer productivity & reduce your pull request time by 75%.*
- Japanese tech giant Sony's subsidiary, Sony Network Communications, has invested $3.5M in a Japanese Web3 startup, Startale Labs, to boost the widespread adoption of Web3.
- The U.K. Law Commission, a U.K.-based independent legal body, has proposed that digital assets, including cryptocurrencies and NFTs, are classified as a new category of personal property.
- Business intelligence firm MicroStrategy has bought an additional 12,333 Bitcoin (BTC) for around $340M, taking its Bitcoin reserve to 152,333.
- The U.K.-based neobank Revolut has reduced some of its crypto trading fees, citing customer feedback.
- It's never been easier for your sales organization to accelerate growth. Learn how AI and more can help you sell in a whole new way.*
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 | Staff Writer | | Doga is a tech and science editor who has been writing news for nearly 10 years. She worked for leading tech platforms and mainstrem media channels as an editor and presenter throughout his career. Then, she carried her know-how to more than one platform. She is a part-time cat lover and binge-watcher, and also fond of science, space, and emerging tech. She always has a story to tell. She is a bit addict to the laughter and -unfortunately- the '90s culture. | | This newsletter was edited by Aaron Crutchfield | |
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