Ethernity Chain

Shalini Nagarajan

Swiss crypto-focused bank SEBA has hired a former JPMorgan banker to head its Asia Pacific division.



Amy Yu previously worked within JPMorgan’s prime brokerage services division for six years. She earlier held roles in other traditional financial institutions, UBS and Nomura.&nbsp;



Yu ventured into the world of crypto in 2018, joining crypto exchange BitMEX to develop services for institutional clients. Then she became head of sales for the Asia Pacific region at Genesis, which <a href="https://blockworks.co/news/genesis-in-chapter-11-wont-insulate-silbert-winklevoss-says">filed for bankruptcy</a> in January.



Her appointment to SEBA signifies the company’s intent to expand across Asia Pacific, and she will initially be based in Singapore, according to a <a href="https://www.seba.swiss/media-and-investors/SEBA-bank-appoints-amy-yu-as-apac-ceo" target="_blank" rel="noreferrer noopener">press release</a>. In November, Hong Kong became SEBA’s first strategic location to drive growth in the region, with a new office set up there. 



Yu joins the bank as someone with deep domain expertise in both crypto and traditional banking in the region, SEBA said.



“Following the recent opening of our office in Hong Kong, Yu has the successful track record and expertise to capitalize on this momentum and lead our business through the next pivotal phase of development in the region,” Franz Bergmueller, SEBA Bank’s CEO, said in a statement.



Backed by Swiss wealth management group Julius Baer and founded in April 2018, SEBA operates a universal suite of regulated banking services in the digital economy. Ahead of the Merge last year, the bank implemented <a href="https://blockworks.co/news/seba-bank-enables-ether-staking-as-merge-nears">ether staking services</a> for large clients.



Yu acknowledged the crypto industry’s troubles of last year in an <a href="https://www.bloomberg.com/news/articles/2023-02-07/crypto-bank-seba-hires-ex-jpmorgan-banker-as-asia-pacific-ceo" target="_blank" rel="noreferrer noopener">interview</a> with Bloomberg, saying there are lessons to be learned from the recent crisis.



The bank currently has just three staff members in Singapore, and future hiring will depend on how licensing goes, she added.



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Ex-JPMorgan Banker Hired as Swiss Crypto Bank’s APAC Head

A new US Federal Reserve rule has further cemented the central bank’s wariness about cryptoasset activities.



A <a href="https://public-inspection.federalregister.gov/2023-02192.pdf" target="_blank" rel="noreferrer noopener">statement</a> issued by the board of governors of the Federal Reserve System on Tuesday clarifies Section 9(13) of the Federal Reserve Act, in response to inquiries and proposals from state member banks regarding engagement in crypto-asset activities.



The board issued two directives stating that it will “presumptively prohibit” member banks from holding most cryptoassets as principal, including bitcoin and ether, and those looking to issue a dollar token will have to demonstrate they have safe controls in place.&nbsp;



Further, the rules cited that the cryptoasset sector is “largely unregulated or noncompliant” with regulation from the perspective of market conduct, and that issuing tokens on decentralized networks raises cybersecurity risks.&nbsp;



“In practice, this presumption could be rebutted if there is a clear and compelling rationale for the Board to allow deviations in regulatory treatment among federally supervised banks, and the state member bank has robust plans for managing the risks of such activities in accordance with principles of safe and sound banking,” the board said.



Still, member banks can provide safekeeping services for cryptoassets in a custodial manner if they are conducted in a safe manner.&nbsp;



The Fed Reserve has 12 regional banks across the US, which each oversee member banks in their own state. These members are state banks that have chosen to join the Fed Reserve System. For instance, the Federal Reserve Bank of Dallas <a href="https://www.dallasfed.org/-/media/Documents/banking/memberbanks.pdf" target="_blank" rel="noreferrer noopener">oversees</a> several entities including American State Bank, Comerica, Texas National and Big Bend Banks.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">I don&#39;t want to alarm, but since the turn of the year, a new Operation Choke Point type operation began targeting the crypto space in the US. it is a well-coordinated effort to marginalize the industry and cut of its connectivity to the banking system &#8211; and it&#39;s working&mdash; nic carter (@nic__carter) <a href="https://twitter.com/nic__carter/status/1622973966360133634?ref_src=twsrc%5Etfw">February 7, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Concerns have been floating that the US is clamping down on the digital asset industry, with various financial institutions like the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency <a href="https://www.fdic.gov/news/press-releases/2023/pr23002a.pdf" target="_blank" rel="noreferrer noopener">highlighting</a> significant risks associated with the sector.



In another such incident, crypto-focused bank Custodia’s application to become a member of the Fed Reserve was recently <a href="https://www.forbes.com/sites/genegrant/2023/02/06/white-house-cools-on-crypto-and-custodia-bank-rejected-by-the-fed/" target="_blank" rel="noreferrer noopener">rejected</a> due to its “novel business model and proposed focus on cryptoassets.”  Separately, the White House issued a <a href="https://www.whitehouse.gov/nec/briefing-room/2023/01/27/the-administrations-roadmap-to-mitigate-cryptocurrencies-risks/" target="_blank" rel="noreferrer noopener">blog</a> called “The Administration’s Roadmap to Mitigate Cryptocurrencies’ Risks,” calling on Congress to step up efforts to enact cryptoasset legislation.



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Fed Board Prohibits Member Banks from Holding Cryptoassets as Principal

Dubai’s crypto regulator has published its eagerly-anticipated regulations for the local industry — including an effective ban on anonymity-focused digital assets known as privacy coins.



The emirate’s Virtual Assets Regulatory Authority (VARA) released its <a href="https://www.vara.ae/media/Virtual%20Assets%20and%20Related%20Activities%20Regulations%202023.pdf" target="_blank" rel="noreferrer noopener">rulebook</a> on Tuesday. It  includes 10 fundamental principles and goals including licensing requirements, anti-money laundering obligations, stipulations on marketing and promotion and offenses like insider dealing.



VARA describes anonymity-enhanced cryptocurrencies as assets which prevent the tracking of ownership or transactions — an impediment for which crypto service providers currently have no way to effectively mitigate.



Dubai’s new <a href="https://www.vara.ae/media/Virtual%20Assets%20and%20Related%20Activities%20Regulations%202023.pdf" target="_blank" rel="noreferrer noopener">rule</a> means cryptocurrencies such as <a href="https://blockworks.co/news/crypto-mixers-and-privacy-coins-can-they-resist-censorship">Zcash (ZEC) and Monero</a> (XMR) won’t be allowed, nor can local entities create such coins. 



Japan similarly banned privacy coins in 2019 while a string of <a href="https://www.coindesk.com/markets/2019/11/26/another-crypto-exchange-is-dropping-privacy-coin-monero-over-compliance-risk/" target="_blank" rel="noreferrer noopener">exchanges</a> have delisted some offerings over the past few years, including Huobi and BitBay. Coinbase shed ZEC in the UK in 2019 and has so far avoided listing XMR altogether.



Among other rules, entities can’t describe themselves as virtual asset businesses unless they are licensed by the VARA to do so. Large proprietary traders that actively invest $250 million or more in crypto must register with the VARA.



Reasons for license revocation include violation of any directive or if an entity is insolvent. The regulator also sets fees for various services, in the range of 40,000 dirhams ($10,889) to 200,000 ($54,449) dirhams.



Violating rules related to market conduct can lead to fines of up to 20 million dirhams ($5.4 million) for individuals and up to 50 million dirhams ($13.6 million) for a virtual asset service provider, such as exchanges or payment processors.



The VARA’s regulations apply to virtual asset businesses and activities within the emirate of Dubai, including special development zones and free zones, but exclude the Dubai International Financial Centre which has its own regulator.



A recent report showed Dubai has attracted more than <a href="https://blockworks.co/news/dubai-free-zone-now-home-to-more-than-500-crypto-startups">500 crypto companies</a> to its digital asset ecosystem. But crypto-friendliness hasn’t exactly meant that the wealthy Middle Eastern city has been easy on new businesses wanting to set up shop.&nbsp;



Tim Buyn, global government relations officer at OKX’s parent firm, <a href="https://blockworks.co/news/crypto-seeks-freedom-in-the-uae-is-it-a-regulatory-rug-pull">told Blockworks</a> in August that the due diligence process “has easily over 100 data items or documents” that need to be turned in.



The VARA’s ambitions include positioning Dubai as a regional and international hub for virtual assets in a manner that would boost its competitive edge locally and internally. It also hopes that its business-friendly regulatory landscape would attract investments and motivate businesses to set up their operations in Dubai.



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Privacy Coins To Be Banned in Dubai

Sebastian Sinclair

Bitcoin (<a href="https://blockworks.co/price/btc" target="_blank" rel="noreferrer noopener">BTC</a>) is painfully close to recording an ominous first in its 14-year history: its premiere “death cross” on the weekly price chart.



Two major moving averages (MA) are about to converge: its 200-week and its 50-week. Technical analysis suggests it is extremely bearish for the 50-week MA to cross below a 200-week MA — hence the “death” part.



Death crosses are lagging indicators. The pattern is typically used by investors and traders as a signal that a trend change from bullish to bearish is about to, or has, taken place.&nbsp;



Bitcoin switched from a <a href="https://blockworks.co/news/bitcoin-halvings-bull-market" target="_blank" rel="noreferrer noopener">heady bull market</a> to a stifling bear market sometime in late 2021 or early 2022 — the impending death cross would solidify that switch and mark the most visceral reversal in its history.



Bitcoin narrowly avoided a death cross back in November 2015 (the early days of a bull run), when just $9.96 separated the 50-week and 200-week MAs ($9.96 was about 2.6% of bitcoin’s price at the time).



As of 12:50 am, ET, just $115 separated the two. That’s just 0.5% of bitcoin’s price — its closest ever point.



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
<iframe class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/12682843/embed#?secret=G2xm4cVqHH" data-secret="G2xm4cVqHH" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">Bitcoin&#8217;s first ever weekly &#8220;death cross&#8221; will occur when the light blue line sinks below the dark blue line, likely sometime in the next few days</figcaption></figure>



Death crosses can be seen on any asset chart. Following the bursting of the dotcom bubble — in Sept. 2001 — the S&amp;P 500 printed such a pattern about a year and a half after the index peaked. Prices eventually bottomed out 300 days later.



It&#8217;s important to note that technical analysis should not be used in isolation. And depending on who you ask, technical analysis is either useful or junk science (Blockworks requested comments from three different analysts about the death cross — all declined to weigh in on technical analysis).



Still, charting remains popular in crypto circles as there’s often little else to go on (<a href="https://blockworks.co/news/crypto-doesnt-care-about-fundamentals-is-that-sustainable" target="_blank" rel="noreferrer noopener">fundamental analysis remains elusive</a> in crypto compared to traditional equities, which boast price-to-earnings, price-to-book ratios and other useful metrics).



Ether (<a href="https://blockworks.co/price/eth" target="_blank" rel="noreferrer noopener">ETH</a>), on the other hand, is still some ways from printing such a melancholic pattern. Although it has seen a weekly death cross before: in June 2019, one and a half years after 2017-2018 bull market topped out.



Some 18 months later, ETH&#8217;s 200MA and 50MA would conversely cross “bullish” in December 2020 with a so-called “golden cross” — the opposite of a “death cross.”&nbsp;



Crypto sprung back to life around the same time.&nbsp;



It’s not all gloom and doom for bitcoin. Chartists are right now frothing over a supposedly bullish golden cross on bitcoin’s daily moving averages, which occurred earlier this week, proving technical analysis can be a “glass-half-full-half-empty” discipline.



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<iframe class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/12682924/embed#?secret=suvannHGJ1" data-secret="suvannHGJ1" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">Bitcoin&#8217;s last death cross on the daily was on Jan. 14, 2022. It&#8217;s now worth 46% less</figcaption></figure>



David Canellis contributed reporting.



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Bitcoin Price Dollars Away From First Ever Weekly ‘Death Cross’

Upstart NFT marketplace Blur continues to outstrip incumbent OpenSea as anticipation grows for its token launch next week.



The Ethereum-based protocol, geared towards seasoned traders, was only launched in October but it already boasts a 46% slice of the total weekly market share against OpenSea’s 36%.



Blur has topped daily trade volume across the NFT sector every day throughout February so far, averaging roughly $14.3 million compared to OpenSea’s $11.3 million, per a Dune Analytics dashboard. 



Blur&#8217;s trade volumes also eclipsed OpenSea throughout early January and for most of December. 



OpenSea, launched in December 2017, has historically dominated the NFT segment. Blur still lags behind OpenSea based on number of trades, rather than by monetary value of trade volumes.



Data indicates that Blur boasts a smaller group of highly dedicated traders processing large amounts; the same dashboard shows 33,540 Blur traders over the past week compared to OpenSea’s 116,278.



<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="559" src="https://cms.blockworks.co/wp-content/uploads/2023/02/Screen-Shot-2023-02-08-at-04.47.13-1024x559.png" alt="" class="wp-image-46666" srcset="https://cms.blockworks.co/wp-content/uploads/2023/02/Screen-Shot-2023-02-08-at-04.47.13-1024x559.png 1024w, https://cms.blockworks.co/wp-content/uploads/2023/02/Screen-Shot-2023-02-08-at-04.47.13-300x164.png 300w, https://cms.blockworks.co/wp-content/uploads/2023/02/Screen-Shot-2023-02-08-at-04.47.13-768x419.png 768w, https://cms.blockworks.co/wp-content/uploads/2023/02/Screen-Shot-2023-02-08-at-04.47.13-1536x839.png 1536w, https://cms.blockworks.co/wp-content/uploads/2023/02/Screen-Shot-2023-02-08-at-04.47.13-2048x1118.png 2048w, https://cms.blockworks.co/wp-content/uploads/2023/02/Screen-Shot-2023-02-08-at-04.47.13-428x234.png 428w, https://cms.blockworks.co/wp-content/uploads/2023/02/Screen-Shot-2023-02-08-at-04.47.13-470x257.png 470w, https://cms.blockworks.co/wp-content/uploads/2023/02/Screen-Shot-2023-02-08-at-04.47.13-389x212.png 389w, https://cms.blockworks.co/wp-content/uploads/2023/02/Screen-Shot-2023-02-08-at-04.47.13-80x44.png 80w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption class="wp-element-caption">Trade volumes on both OpenSea and Blur have grown, but Blur&#8217;s has grown faster (<a href="https://dune.com/hildobby/NFTs" target="_blank" rel="noreferrer noopener">source</a> Dune user @hildobby)</figcaption></figure>



Unlike OpenSea, which is a straightforward NFT marketplace, Blur also acts as a marketplace aggregator, allowing its users to trade NFTs on a variety of platforms via a single portal, including its own.



Blockworks <a href="https://blockworks.co/news/blur-could-unseat-nft-marketplace-opensea" target="_blank" rel="noreferrer noopener">previously reported</a> that Blur’s boom is likely inspired by the upcoming launch of BLUR, set for Feb. 14, alongside its third and final airdrop for points which can eventually be redeemed for the token.



BLUR will serve as the platform’s native cryptocurrency. The specific functions of the token remain largely unknown though indications suggest it will play a role in governance.



<h2>Blur airdrops to be swapped for crypto</h2>



Blur is powered by a team of engineers from the likes of Square, MIT, Brex, Five Rings and YCombinator. It <a href="https://www.crunchbase.com/funding_round/blur-d734-seed--e55673d6" target="_blank" rel="noreferrer noopener">raised</a> $11 million in early-stage funding last March.



The team has been busy preparing its token launch, with its supply to be initially distributed through airdrops marketed as “care packages&#8221; for users who&#8217;ve actively traded NFTs. 



In order to claim the drops, traders were incentivized to list NFTs for sale on Blur.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Blur Bidding Pools have reached a new ATH of $42m, or, around 2/3 of Aptos TVL! <a href="https://t.co/UjmXKlvYXW">pic.twitter.com/UjmXKlvYXW</a>&mdash; Blur (@blur_io) <a href="https://twitter.com/blur_io/status/1622679475602477056?ref_src=twsrc%5Etfw">February 6, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div><figcaption class="wp-element-caption">The value of Blur&#8217;s bidding pools is approaching the total value locked of buzzy blockchain Aptos</figcaption></figure>



A similar approach was implemented for the second airdrop. Blur&#8217;s final airdrop, which has run from early December, is pegged to distribute more than twice the number of care packages. 



Users are instead earning reward points based on their NFT bidding activities.



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Blur NFT Volume Beats OpenSea Again, With 30% of the Traders

British neobank Revolut is pushing ahead with its crypto offerings by giving its customers across the UK and Europe the ability to earn staking rewards.



Customers in supported countries can now earn up to 11.65% annual percentage yield (APY), paid in the respective tokens, on four cryptocurrencies: ether (<a href="https://blockworks.co/price/eth" target="_blank" rel="noreferrer noopener">ETH</a>), cardano (<a href="https://blockworks.co/price/ada" target="_blank" rel="noreferrer noopener">ADA</a>), polkadot (<a href="https://blockworks.co/price/dot" target="_blank" rel="noreferrer noopener">DOT</a>) and tezos (<a href="https://blockworks.co/price/xtz" target="_blank" rel="noreferrer noopener">XTZ</a>), Revolut said in a statement Tuesday.



Revolut is currently offering the most yield on DOT. Staking the token directly to the network as a Polkadot validator generates around 14.43% APY, which means staking DOT via Revolut leaves nearly 3% yield on the table.



Funds are to be held with “trusted custodians” while the platform will manage a user’s private keys. Blockworks has reached out to Revolut to learn more.&nbsp;



Revolut’s staking rewards rollout comes as the platform takes another shot at tapping potential growth from the digital asset sector. The fintech unicorn first dabbled in crypto by allowing users to acquire BTC, ETH and litecoin (<a href="https://blockworks.co/price/ltc" target="_blank" rel="noreferrer noopener">LTC</a>) back in 2017. 



Revolut has since expanded its list of supported digital assets significantly, now advertising more than 90 tokens. It also enabled bitcoin withdrawals to personal wallets in 2021.



Revolut CEO Nikolay Storonsky <a href="https://www.bloomberg.com/news/articles/2022-11-02/revolut-crypto-revenue-plunges-yet-ceo-storonsky-still-believes" target="_blank" rel="noreferrer noopener">said</a> in November that while crypto had contributed 30% to 35% of the firm’s total revenue in 2021, that figure had fallen to around 5% last year.



Still, Revolut’s push for diversifying its digital asset revenue streams echoes sentiment shared by Coinbase CEO <a href="https://blockworks.co/news/coinbase-ceo-touts-subscriptions-to-curb-reliance-on-trading-fees" target="_blank" rel="noreferrer noopener">Brian Armstrong</a> last August.



At the time, Armstrong said his company would shift the way it drums up dollars, which has mostly hinged on fees taken from trading activity when times are good.



Revolut offers a number of products and services including banking, brokerage for traditional equities and digital assets. The firm says it serves 25 million customers across 200 countries, leveraging 29 in-app fiat currencies.



Revolut has raised a total of $1.8 billion in funding over 19 rounds and is valued at roughly $33 billion, <a href="https://my.pitchbook.com/profile/104383-72/company/profile#insights" target="_blank" rel="noreferrer noopener">Pitchbook</a> data shows.



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Revolut Doubles Down on Crypto With Staking Rewards — But Not in US

Meme stocks are once again drawing the attention of traders — coinciding with a 2023 jump in value in meme cryptocurrencies, including sector stalwarts Dogecoin and Shiba Inu.



The emerging sentiment— underscored by amped-up meme asset trading volumes — lingered into Tuesday’s session. The continuing investor interest appears to be bucking a downturn in meme equities late in Monday’s trading session in New York.



Longtime meme stock <a href="https://www.tradingview.com/chart/?symbol=NYSE%3AAMC">AMC</a> finished Monday’s trading session 12% higher at $6.80 — after rising to a peak of $7.26. Most of that double-digit pop was erased on Tuesday as the US movie theater chain’s equity dropped 8%. But the NYSE-listed asset was still posting a 57% gain on the year. 



Home retailer Bed Bath &amp; Beyond (<a href="https://www.tradingview.com/chart/Nm6c3U35/?symbol=NASDAQ%3ABBBY">BBBY</a>) climbed an eye-watering 92% to $5.85 to start the week — before giving 36% back to hover around $3.70 in Monday’s after-hours trading hours. The stock gave up another 48% on Tuesday.  



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</div><figcaption class="wp-element-caption">A number of meme equities and meme tokens are trouncing the S&amp;P 500 in 2023 so far. </figcaption></figure>



Daily gains were knee-capped in after-hours trade on Monday following an announcement by company executives over their intention to sell convertible shares in order to avoid loan default and <a href="https://www.bloomberg.com/news/articles/2023-02-06/bed-bath-beyond-plans-share-sale-in-effort-to-avoid-bankruptcy">prevent bankruptcy</a>. Still, BBBY is up more than 30% so far this year, marking a notable recovery from its 80% decline since last year’s $30 peak.&nbsp;



Traders also demonstrated a renewed interest in meme stock pioneer GameStop (<a href="https://www.tradingview.com/chart/Nm6c3U35/?symbol=NYSE%3AGME">GME</a>), albeit demonstrated by a relatively smaller pop to start the week. GME jumped 7% higher on Monday to $24.70. Like the others, GME declined 11% Tuesday as traders booked a profit. The equity is still up more than 20% in the new year.&nbsp;



The GameStop short squeeze of January 2021 brought to light stocks with heavy Wall Street short floats —&nbsp; and sparked a movement driven by Reddit traders to drive up similarly beleaguered equities in a show of retail force.



<h3>More (meme) bark than bite?</h3>



Meme stocks and coins have gained renewed attention recently as worries about inflation and the macro environment have started to ease, according to Rob Alcorn, Clearpool’s chief executive.&nbsp;



“Meme coins generally distract attention from the real innovation happening in the digital asset space,” Alcorn told Blockworks. “Whilst very speculative, this is an indicator that retail sentiment is turning positive once again following an extended period of selling.”



The recent meme stock surge has mirrored an upward trend in their crypto counterparts. On the year, <a href="https://www.blockworksresearch.com/assets/doge">dogecoin</a> has this week clawed back more than 31% of its losses — and <a href="https://www.blockworksresearch.com/assets/shib">shiba inu</a> has roared back to the tune of 2023 gains of as much as 75%.&nbsp;



For context, both bitcoin and ether have risen by approximately 36% over the same time period.



That’s good news for the majority of dogecoin holders, now in the money or profiting from their original purchase.&nbsp;&nbsp;



Data from crypto intelligence firm <a href="https://app.intotheblock.com/coin/DOGE/deep-dive?group=all&amp;chart=all" target="_blank" rel="noreferrer noopener">IntoTheBlock</a> show, of roughly four million wallet addresses holding the asset, around 62% are in the money. Just 35% of those addresses are posting losses.



A majority of those addresses booking gains bought in at an average price of $0.008. The asset was last seen changing hands for around $0.09, representing a 1020% increase for those who bought then.&nbsp;



IntoTheBlock’s Global In/Out of the Money categorizes addresses by their current profit or loss status relative to the current market price. Addresses are classified as &#8220;in the money&#8221; if they are making a profit, &#8220;at the money&#8221; if they are breaking even or &#8220;out of the money&#8221; if they are underwater.



It’s a little hairier for those holding shib, Shibu Inu’s native token. 



Of the 1.2 million addresses analyzed, roughly 44.5% are showing a profit.



An additional 54% have bitten off more than they can chew.



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Dogecoin Owners Back in Green YTD as Meme Stocks Rip

Ben Strack

US regulators have reiterated warnings on their perceived risks of adding cryptocurrencies to retirement accounts.&nbsp;



The SEC and the Financial Industry Regulatory Authority (FINRA) on Tuesday again cautioned investors allocating to alternative assets in self-directed individual retirement accounts (IRAs), highlighting crypto as a risk.



“Crypto assets may be securities that are offered without SEC registration or a valid exemption from registration, and may not be accompanied by complete or accurate information to aid investors in making informed decisions,” regulators <a href="https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-alerts/investor-14" target="_blank" rel="noreferrer noopener">wrote</a>.



In making their case against crypto, regulators additionally alluded to liquidity concerns centered around digital assets. 



Many crypto trading platforms brand their entities as “exchanges” — which could contribute to incorrect investor impressions that those market makers have registered with the SEC, the warning said.&nbsp;



Crypto exposures in retirement accounts has been a <a href="https://www.wsj.com/articles/investors-who-bet-on-bitcoin-fund-in-retirement-accounts-pay-the-price-11675049243" target="_blank" rel="noreferrer noopener">touchy</a> subject of late. That’s in part due to <a href="https://blockworks.co/news/asset-managers-potential-gbtc-takeover">the underperformance of Grayscale Bitcoin Trust (GBTC)</a>, as well as <a href="https://blockworks.co/news/ontario-teachers-fund-sank-95m-in-failed-ftx-empire">write-offs</a> by pension funds invested in failed crypto firms <a href="https://www.ft.com/content/67048159-82aa-4e96-bfb3-f1764f632375" target="_blank" rel="noreferrer noopener">Celsius</a> and FTX.



Read More: <a href="https://blockworks.co/news/asset-managers-potential-gbtc-takeover">Your recap on all things GBTC as takeover attempts mount</a>



Tuesday’s regulatory guidance focuses on self-directed IRAs, plans that allow investment in more assets than other types of IRAs — such as real estate, private placement securities, precious metals and other commodities. These differ from 401(k) plans, which are employer-sponsored retirement savings plans that give employees a choice of investment options, typically mutual funds.&nbsp;



But warnings about crypto investments have not been isolated to the self-directed retirement space.&nbsp;



The Department of Labor said in <a href="https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/compliance-assistance-releases/2022-01" target="_blank" rel="noreferrer noopener">March 2022 guidelines</a> that the Employee Benefits Security Administration (EBSA) expects to investigate 401(k) plans that offer participant investments in cryptocurrencies and related products. 



Those guidelines have “chilled interest” by plan sponsors and fiduciaries in direct crypto investments for the time being, Castle Funds Director Dan Hoover <a href="https://blockworks.co/news/castle-funds-insurance-crypto">told Blockworks</a> last week.&nbsp;



Still, <a href="https://blockworks.co/news/fidelity-delves-deeper-into-crypto-by-allowing-bitcoin-in-401ks">Fidelity said last April</a> that the bank would give employers the option to offer bitcoin exposure to employees in their core 401(k) investment lineup. A Fidelity previously said it was set to launch its first plan sponsor clients by the end of 2022. 



The company had $9.6 trillion in assets under administration, as of Sept. 30, and manages employee benefit programs for nearly 23,000 businesses. 



A Fidelity spokesperson did not immediately comment on the demand for crypto exposure in retirement portfolios in the wake of FTX’s crash in November, which shook the industry.



“We are proud of the Digital Assets Account as a responsible solution to meet the demands of mainstream interest,” a firm representative told Blockworks in October. “In fact, client interest has not only been strong, but also spans across a wide range of industries and company sizes.”



Senators, including Elizabeth Warren, D-Mass., have repeatedly urged Fidelity — <a href="https://blockworks.co/news/senators-fidelity-stop-offering-bitcoin-401ks">as recently as November</a> — to stop its 401(k) sponsor partners from offering bitcoin exposure.



Fidelity has said it engages in “ongoing dialogue with regulators and policymakers” to ensure consumer protections and educational guidance for plan sponsors.



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SEC, FINRA Double Down on Warning of Retirement Account Crypto Risk

Jon Rice

Crypto news site The Block cut 27 staffers on Friday, according to four sources with direct knowledge of the layoffs.



In confirming the layoffs, Bobby Moran, interim CEO at The Block, said that &#8220;Friday was a tough day for our company. We parted ways with 27 incredibly talented and hard-working colleagues each of whom contributed to The Block&#8217;s success. We are genuinely sad to see them go.&#8221;



The Block made headlines in December 2022 following reports that Sam Bankman-Fried secretly channeled millions of dollars in loans through his trading company, Alameda Research, to Michael McCaffrey, The Block’s former chief executive. Bankman-Fried, the founder of <a href="https://blockworks.co/tag/ftx">FTX</a> and <a href="https://blockworks.co/tag/alameda-research">Alameda</a>, is now awaiting trial on multiple counts of fraud and conspiracy.



McCaffrey did not divulge the source of the funds publicly and resigned from his CEO seat shortly after the revelations.



The layoffs were spread over multiple company functions, including editorial, research, engineering, sales, revenue, and corporate operations, with almost half coming from editorial and research, according to a source familiar with the matter.



The Block is not profitable, according to an Axios <a href="https://www.axios.com/2022/12/09/bankman-fried-funded-crypto-news-site-block" target="_blank" rel="noreferrer noopener">investigation</a>, which found that a buyout of the company’s investors in April 2021 led by McCaffrey was financed by loans extended by Bankman-Fried’s Alameda Research. Those lines of credit reportedly were funneled to an LLC, MJMCCAFFREY LLC.



McCaffrey was succeeded by Bobby Moran, formerly the company’s chief revenue officer.



“No one at The Block had any knowledge of this financial arrangement besides Mike,” Moran <a href="https://www.theblock.co/post/193753/the-block-ceo-resigns-after-failure-to-disclose-loans-from-bankman-frieds-alameda" target="_blank" rel="noreferrer noopener">said</a> at the time.&nbsp;



His account was confirmed by McCaffrey, who <a href="https://twitter.com/McCaffrMike/status/1601304758228164608?s=20&amp;t=OFOOquf77lQ96zuWFkiRAA" target="_blank" rel="noreferrer noopener">tweeted</a> that he “didn’t disclose the loan to anyone. Absolutely no one at The Block knew about the financial arrangement between my holding company and SBF, including the editorial and the research teams.”



A source at The Block who was granted anonymity to discuss the situation candidly told Blockworks that &#8220;There&#8217;s no way McCaffrey was the only person who knew what was happening. Or if he did, some other people were very, very, very bad at their jobs.&#8221;



Following publication of this article Moran noted that &#8220;With regard to the financial arrangement between Mike [McCaffrey] and SBF, what I said in December still holds true — as far as we know, no one at the company knew about Mike&#8217;s actions. We are focused on moving the company forward.&#8221;



<h2>FTX is attempting to recover funds elsewhere</h2>



It’s unclear if FTX will attempt to clawback the money extended to McCaffrey, although it is <a href="https://www.theguardian.com/business/2023/feb/06/ftx-exchange-sam-bankman-fried-donations" target="_blank" rel="noreferrer noopener">trying</a> to recover political donations made by FTX executives.



There is no suggestion that The Block’s journalists were tainted by McCaffrey’s failure to divulge the source of his funds, or that The Block’s editorial coverage was influenced by the loans. Journalists at the company expressed shock and dismay at the time.



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<blockquote class="twitter-tweet" data-width="550" data-dnt="true">1) I&#39;m absolutely gutted by this news, which was briefed to the company this afternoon. Underpinning my shock are feelings of utter disgust and betrayal by Mike’s actions, greed, lack of disclosure. He&#39;s literal scum. He kept every single one of us in the dark. <a href="https://t.co/jIZCxtHrfc">https://t.co/jIZCxtHrfc</a>&mdash; Frank Chaparro (@fintechfrank) <a href="https://twitter.com/fintechfrank/status/1601295493102911488?ref_src=twsrc%5Etfw">December 9, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



It has been a tumultuous year for some crypto media companies, including CoinDesk, which has been repeatedly forced to report on the waning fortunes of its parent company, Digital Currency Group (DCG).



CoinDesk is one of the assets that may be <a href="https://www.wsj.com/articles/crypto-media-outlet-coindesk-taps-bankers-for-potential-sale-11674076000" target="_blank" rel="noreferrer noopener">sold off</a> as a result of the ongoing Genesis bankruptcy (another DCG portfolio company).



Although initial estimates for its price tag ranged as high as $300 million, some sources now believe the sale will be for significantly less than $100 million, with at least one estimate placing the final price south of $50 million. Updated Feb. 7th, 2023 at 7:36 pm ET: Added quotes from Bobby Moran.



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Crypto News Outlet The Block Lays Off 27 Staff

Bessie Liu

Prosecutors in the Southern District of New York (SDNY) have asked the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) to postpone their cases against the disgraced founder of FTX, Sam Bankman-Fried.&nbsp;



Prior to <a href="https://blockworks.co/news/5-highlights-ftx-bankruptcy">filing for bankruptcy</a> on Nov. 11, FTX was one of the biggest cryptocurrency exchanges in the world. After being arrested in the Bahamas in December, Bankman-Fried was extradited to the United States, where he currently faces eight federal charges related to financial fraud.



Additionally, the SEC filed a civil lawsuit against Bankman-Fried on Dec. 12 last year for violating anti-fraud provisions. A day later, the CFTC filed a lawsuit against the founder for fraud and material misrepresentations.



Attorney Damian Williams of SDNY noted in a court filing that civil lawsuits could allow Bankman-Fried to “improperly obtain impeachment material regarding the Government’s witnesses, circumvent the criminal discovery rules, and improperly tailor his defense in the Criminal Case.”



Williams also noted that it Bankman-Fried’s attorneys could benefit from civil proceedings and use the opportunity to improve his defense in the federal case. As such, he requested to temporarily halt civil cases while federal investigations continue.



Aaron Kaplan, the co-CEO of Prometheus, a NYC-based fintech company building a Federal Securities Law compliant, blockchain native, public market and custodial infrastructure for digital assets told Blockworks that in criminal white collar fraud cases, it is common to deny criminal defendants the ability to use civil cases for discovery.



“This can be used in the defense of the criminal matter,” Kaplan said. “Prosecutors regularly argue that abuse of civil discovery processes, including by way of depositions, is used by defendants to intimidate prospective witnesses in the criminal matter.”&nbsp;



This sentiment is shared by David Maria, the general counsel and chief legal officer at Bittrex.



“It is routine to seek to delay civil proceedings when criminal proceedings are pending. If the government doesn’t ask to stay the civil proceedings, the defendant facing criminal charges typically will,” Maria said.



This is not the first time that US prosecutors have requested a halt in action from civil cases. In July 2018, the SEC <a href="https://financefeeds.com/us-govt-seeks-intervene-sec-case-ponzi-scammer-renwick-haddow/">paused its investigations</a> into crypto scammer Renwick Haddow after it was determined that both the civil and criminal cases were rooted in the same set of circumstances.



<h2>No contact allowed with the outside world</h2>



The former FTX founder pleaded <a href="https://blockworks.co/news/sam-bankman-fried-issues-not-guilty-plea">not guilty</a> to the charges against him in December last year. He is currently out on bail for <a href="https://blockworks.co/news/bankman-fried-bail-past-indictments">$250 million</a>.



Despite being under house arrest, many guests have been able to visit him in his family residence, including prominent financial journalist Michael Lewis — the author of Wolf of Wall Street.&nbsp;



It was also revealed that Bankman-Fried had been contacting past and present FTX and Alameda employees through messaging app Signal.&nbsp;



As the court believed that his messages were obstructive and could <a href="https://storage.courtlistener.com/recap/gov.uscourts.nysd.590940/gov.uscourts.nysd.590940.50.0.pdf">influence witnesses</a>, judges decided to forbid the founder from using any communication tools to contact the outside world, other than his immediate family members.&nbsp;



Bankman-Fried’s lawyers filed a joint request on Monday to modify his bail conditions so that he could be allowed to use unencrypted text messaging services under the circumstances that his phone was monitored.



This was met with resistance from federal officials, who have since denied his request “without prejudice,” meaning Bankman-Fried is free to make the same or a similar request again in the future.



Updated, Feb. 8 at 7:45 am ET, with additional comments.



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SDNY Wants SEC, CFTC To Postpone Cases Against Bankman-Fried

Casey Wagner

After a mixed trading session Tuesday, Federal Reserve Chair Jerome Powell sent markets clearly into the green. In his first public remarks since his post-FOMC press conference earlier this month, Powell set markets at ease during an appearance at the Economic Club in Washington, D.C.&nbsp;



The Nasdaq Composite and S&amp;P 500 indexes rose as much as 1.4% and 1.1%, respectively, during Powell’s interview with Carlyle Group co-founder David Rubenstein, where he discussed the latest “extraordinarily strong” jobs report and potential rate increases moving forward.&nbsp;



“The disinflationary process, the process of getting inflation down, has begun,” Powell said.&nbsp;



In terms of expectations for future interest rate decisions, Powell was tight lipped, noting that upcoming economic data will be a major influencing factor.&nbsp;



“What we said at the <a href="https://blockworks.co/news/federal-reserve-raises-interest-rates-25-bps">[FOMC] meeting</a> was we anticipate that ongoing rate increases would be appropriate,” Powell said. “All of these numbers we are throwing around here are contingent on upcoming data.”&nbsp;



Tech stocks and crypto led Tuesday’s midday gains, with bitcoin (<a href="https://blockworks.co/price/btc" target="_blank" rel="noreferrer noopener">BTC</a>) and ether (<a href="https://blockworks.co/price/eth" target="_blank" rel="noreferrer noopener">ETH</a>) rallying as much as 1.7% and 2.5%, respectively, before both paring gains slightly. Still, Powell tried to set market expectations in check, reinforcing the sentiment that future numbers are going to be important going forward. 



“The reality is we’re going to react to the data,” Powell said. “So if we continue to get, for example, strong labor market reports or higher inflation reports, it may well be the case that we have to do more and raise rates more than is priced in.”



Rubenstein also asked about the debt ceiling, an ongoing crisis in Congress that Powell also mentioned during his latest press conference following this month’s FOMC decision.&nbsp;



“The debt limit is really something for the fiscal authorities to take care of,” he said, noting that Congress has only one way forward: Raise the debt ceiling.&nbsp;



Powell suggested that he would not be entertaining the possibility of <a href="https://blockworks.co/news/a-new-york-congressman-wants-the-treasury-to-mint-a-1-trillion-coin-to-pay-off-us-debt">minting a trillion dollar coin</a>.&nbsp;



“As I said, this ends in only one way,” he added.



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Fed Chair’s Comments Spawn Market Volatility

Digital Currency Group (DCG) has reportedly been selling shares of some of Grayscale Investments’ crypto trusts in an effort to raise capital following the bankruptcy filing of Genesis.&nbsp;



Founded by <a href="https://blockworks.co/tag/barry-silbert">Barry Silbert</a>, DCG is the parent company of crypto lending firm Genesis, asset manager Grayscale Investments and media company CoinDesk, among others.



A quarter of DCG&#8217;s stock in the Grayscale <a href="https://grayscale.com/products/grayscale-ethereum-trust/" target="_blank" rel="noreferrer noopener">Ethereum Trust</a> (ETHE) has been sold, raising as much as $22 million in several trades since Jan. 24, the Financial Times <a href="https://www.ft.com/content/abee7e2e-1d18-4a68-aac5-665869db250f" target="_blank" rel="noreferrer noopener">reported</a> late Monday, citing filings. 



ETHE, which launched in 2017, has $5 billion in assets. The trust was trading at a roughly 54% discount to its net asset value on Monday, according to <a href="https://ycharts.com/companies/ETHE/discount_or_premium_to_nav" target="_blank" rel="noreferrer noopener">YCharts.com</a>.



Dave Nadig, a financial futurist at data firm VettaFi, said the trust issuer’s reported sale at such a steep discount highlights the need for a redemption window. Redemptions of shares for ETHE are not currently authorized.&nbsp;



“It’s not a great look, obviously, but on the other hand, if a corporation needs to raise cash, selling assets is a pretty time-honored way of doing so,” he told Blockworks.&nbsp;&nbsp;



DCG has also moved to sell a smaller number of shares in Grayscale&#8217;s Litecoin Trust, Bitcoin Cash Trust, Ethereum Classic Trust and Digital Large Cap Fund. 



Those four trusts have combined assets under management of roughly $700 million.&nbsp;&nbsp;



Spokespeople for DCG and Grayscale did not immediately return a request for comment.&nbsp;



Genesis <a href="https://blockworks.co/news/the-next-bankruptcy-domino-may-be-genesis">filed for bankruptcy</a> last month after taking a major hit during last year’s market turmoil. The company on Monday <a href="https://blockworks.co/news/genesis-agreement-will-see-gemini-contribute-100m-to-compensate-earn-users">reached an agreement</a> in principle with Gemini and other creditors on a restructuring plan, <a href="https://blockworks.co/news/fraud-winklevoss-silbert-dcg">following a public feud</a> with Gemini’s Cameron Winklevoss.&nbsp;



DCG’s reported sale of various Grayscale trust shares comes after the Financial Times said last month DCG was <a href="https://blockworks.co/news/dcg-selling-venture-capital-portfolio">looking to sell</a> some of its venture capital holdings, citing people familiar with the matter.



Grayscale’s largest investment product is its Bitcoin Trust (GBTC), which launched in 2013 and has $14.5 billion in assets.&nbsp;



The cryptoasset manager has <a href="https://blockworks.co/news/grayscale-sec-illogical-denial-of-gbtc-conversion">sued the SEC</a> in an attempt to convert GBTC to an ETF, a process Grayscale executives said would help close the trust’s discount, which has exceeded <a href="https://ycharts.com/companies/GBTC/discount_or_premium_to_nav" target="_blank" rel="noreferrer noopener">40%</a> in recent months.&nbsp;



Grayscale CEO Michael Sonnenshein told investors in a December letter the firm would <a href="https://blockworks.co/news/no-gbtc-redemptions-but-considering-other-options">consider a tender offer for GBTC shareholders</a> if its bid to convert the trust to an ETF fails.



There is no concrete timeframe for a resolution to the legal wrangling, and <a href="https://blockworks.co/news/gbtc-takeover-attempts-explained">some GBTC shareholders</a> are growing impatient.



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DCG Dumps ETH Trust Shares Despite Steep Discount: Report

After a rocky 2022, bitcoin miners could be in for a lucrative year, at least if past market cycle patterns repeat.&nbsp;



The largest cryptocurrency posted a 64% loss last year, coupled with skyrocketing electricity costs around the world and a dramatic drop in mining profitability made 2022 a bust for most of the crypto mining industry. But a rebounding market and upcoming halving cycle could be the catalysts the industry needs for a turnaround.&nbsp;



The next bitcoin halving, expected in the second quarter of 2024, should create a positive imbalance between bitcoin’s supply and demand, <a href="https://medium.com/@cbendiksen?source=---two_column_layout_sidebar----------------------------------" target="_blank" rel="noreferrer noopener">Christopher Bendiksen</a>, bitcoin research lead at CoinShares, said in a <a href="https://blog.coinshares.com/end-in-sight-for-the-mining-capitulation-cycle-e33b9d2fc9b9" target="_blank" rel="noreferrer noopener">report</a> Monday. 



“Historically, there has been a recurring tendency for the halvings to be closely followed by bull markets, leading to the now famed four-year bull/bear cycles in bitcoin price,” Bendiksen said.&nbsp;



When market conditions are strong, miners restrict new supply by holding more bitcoin on their own treasuries, meaning the supply of newly mined bitcoin hitting the market is much smaller than the actual production amount, Bendiksen said. But when there are challenges in the market, miners are forced to liquidate their holdings.&nbsp;



“Because good times in mining tend to happen during bitcoin bull markets, and bad times tend to happen during bear markets, miner hoarding behavior happens right when demand is already overpowering supply, and vice versa,” Bendiksen said. “This adds further fuel to the volatility fire, both to the upside and the downside.”



Some bitcoin mining companies have already reported a stronger start to the year. Riot Platforms increased its production 62% year-over-year last month, the company said in an <a href="https://www.riotplatforms.com/investors/news-events/press-releases/detail/146/riot-announces-january-2023-production-and-operations" target="_blank" rel="noreferrer noopener">unaudited report</a> Monday. Riot reported selling 700 of its 740 mined bitcoin in January 2023, resulting in net proceeds of around $13.7 million, the company said. 



<a href="https://blockworks.co/tag/stronghold-digital-mining">Stronghold Digital Mining</a>, which has been publicly traded since October 2021, has paused all debt payments until July 2024, giving the firm runway for the next 18 months, the company said Tuesday. Holding off on debt payments means Stronghold can take advantage of the current distressed mining market, a spokesperson said. 



After <a href="https://blockworks.co/news/stronghold-loses-25-after-hours-as-q4-earnings-revenue-miss-mark">losing nearly 98% since its Nasdaq debut</a>, Stronghold has rallied more than 30% so far this year. Analysts surveyed by <a href="https://money.cnn.com/quote/forecast/forecast.html?symb=SDIG" target="_blank" rel="noreferrer noopener">CNN Business</a> give Stronghold a buy rating with a median price target of $2 per share, a roughly 257% increase from its current price of around $0.56. 



In yet another consolidation move spurred by the distressed market, mining companies <a href="https://blockworks.co/news/hut-8-halts-bitcoin-mining-facility-amid-energy-dispute">Hut 8</a> and US Bitcoin Corp announced merger plans Tuesday. The two companies will be wholly-owned subsidiaries of the new Hut 8 Corp. Hut 8’s shares will be consolidated five-to-one, per the <a href="https://www.prnewswire.com/news-releases/hut-8-and-us-bitcoin-announce-merger-of-equals-to-create-a-preeminent-digital-asset-mining-hosting-managed-infrastructure-operations-and-high-performance-computing-organization-301740489.html" target="_blank" rel="noreferrer noopener">press release</a>. 



“Once miners are better able to cover ongoing cash needs through mining revenue, the exacerbating effect from treasury liquidations on downside volatility is reduced, removing an ankle weight from the bitcoin price itself,” Bendiksen said. “This in turn has the potential to act as a virtuous cycle.



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Cutting Costs and Joining Forces, Bitcoin Miners Hoping for Rebound

A yield-automating protocol on Arbitrum was exploited over the weekend in an incident that <a href="https://blockworks.co/news/arbitrum-stablecoin-exploiter-snagged-300k">boosted</a> the hacker’s balance of their US dollar stablecoin Sperax (USDS).&nbsp;



But in a plot twist, the team said Tuesday all funds had been returned — pointing to a $300,000 USDC <a href="https://arbiscan.io/tx/0x0846e67921aeb52301c826344a44720d1242e8e71e28a3c8b651cd6db4088df5" target="_blank" rel="noreferrer noopener">transaction</a> — and that Sperax would soon provide a timeline to resume SperaxUSD transfers.



The “hybrid” stablecoin, which first notified its users of the attack on Sunday, published a report late Monday detailing what went down.&nbsp;



Although in its report SperaxUSD calls the person an “attacker,” the team has said separately in a tweet that the person associated with the address is “<a href="https://twitter.com/SperaxUSD/status/1622681658775244806" target="_blank" rel="noreferrer noopener">not a hacker</a>,” and that it pledged not to&nbsp; take any action if the funds were returned.



The team said the exploiter took advantage of an internal bug in the USDS token contract to change the balance to 9.7 billion on a multi-sig wallet.&nbsp;



Before the team could block the contract, the attacker managed to exchange about $309,000 USDs to USDT, USDC and WETH.&nbsp;



SperaxUSD said that on Dec. 13, it had upgraded the token contract to remedy an issue in the calculation of balances, which caused incompatibilities with DEXes.&nbsp;



The exploit began with the attacker sending funds to a Gnosis Safe address, a multi-signature smart contract wallet, which triggered a bug in the USDs token contract. That’s how the balance jumped to 9.7 billion tokens.



The attacker then began to sell USDs on Arbitrum, likely 10,000 at a time. Some three hours after the attack, the SperaxUSD team was able to pause the action.



Holders of the USDs token have two types of tokens: rebasing (where supply is adjusted to control price) and non-rebasing. This means that a rebasing holder’s USDs balance increases automatically upon a rebase, which is triggered weekly.&nbsp;



“Even though all the contracts that we develop go through multiple rounds of reviews and thorough testing, we still missed this edge case. We feel the attacker was just experimenting with the contract since the upgraded code is not published, however he/she did uncover a novel bug, it could have been an even worse situation (if it were planned),” the team said.



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Arbitrum Stablecoin Exploit Has Happy Ending: Funds Returned

Former Coinbase product manager Ishan Wahi and his brother are looking to get the insider trading charges leveled against them dropped, as their lawyers argue they did not have the “culpable state of mind necessary to commit securities fraud.”



A <a href="https://storage.courtlistener.com/recap/gov.uscourts.wawd.312176/gov.uscourts.wawd.312176.33.0.pdf" target="_blank" rel="noreferrer noopener">court filing</a> released Tuesday showed lawyers arguing that the Securities and Exchange Commission (SEC) is trying to gain regulatory jurisdiction over the crypto industry via the enforcement action against the former Coinbase employee and his 26-year-old “kid brother.” 



The SEC’s <a href="https://www.sec.gov/news/press-release/2022-127" target="_blank" rel="noreferrer noopener">complaint</a> alleges that the Wahis illegally traded “securities” under the Exchange Act, but cryptoassets cannot be deemed securities as they are not “investment contracts,” the lawyers said. As per the <a href="https://www.investopedia.com/terms/h/howey-test.asp" target="_blank" rel="noreferrer noopener">Howey Test</a>, an asset can be classified as a security if it is determined to be an investment contract.



“But here there are no contracts, written or implied,” they wrote. “The developers who created the tokens at issue have no obligations whatsoever to purchasers who later bought those tokens on the secondary market. And with zero contractual relationship, there cannot be an “investment contract.”&nbsp;



The Coinbase insider trading case is expected to be a landmark one, as it could determine which cryptoassets can be termed as securities. Coinbase itself has <a href="https://blockworks.co/news/ex-coinbase-employee-accused-of-insider-trading-pleads-not-guilty">denied that the nine tokens</a> the brothers traded — AMP, DerivaDEX, DFX Finance, LCX, Kromatika, Powerledger, Rally, Rare Governance Token and XYO — are securities.



The Wahis’ counsel further stated that neither the SEC nor Coinbase’s legal team considered the tokens at issue to be securities before the allegations were put forth. And so, the SEC should arrive at that decision before consequences are imposed, they added.



“The SEC’s parade of one-off enforcement actions against the likes of Kim Kardashian, DJ Khaled, Floyd Mayweather Jr., and now Ishan and Nikhil Wahi is—by contrast—a process designed to produce more heat than light,” they said.



Both brothers, along with their friend Sameer Ramani, were <a href="https://blockworks.co/news/sec-charges-former-coinbase-product-manager-with-insider-trading">accused of trading at least 25 cryptoassets</a> based on confidential information between June 2021 and April 2022, bagging them profits worth over $1.1 million.



Notably, Ishan Wahi and Nikhil Wahi had both <a href="https://blockworks.co/news/ex-coinbase-employee-accused-of-insider-trading-pleads-not-guilty">initially pleaded “not guilty”</a> to wire fraud, but Nikhil Wahi <a href="https://blockworks.co/news/ex-coinbase-managers-brother-takes-a-plea-bargain-in-insider-trading-case">resorted to a plea bargain</a> in September.



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Ex-Coinbase Employee Moves To Dismiss Insider Trading Case

Ethereum-based protocol Cryptex Finance is launching JPEGz, an NFT market capitalization index token that will track ten different NFT collections. The token will be powered by Chainlink and Coinbase Cloud on Ethereum layer-2 solution Arbitrum.



JPEGz comprises 10 popular NFT projects: Azuki Official, Bored Ape Yacht Club, CloneX, Cool Cats, CrypToads, CryptoPunks, Doodles, Mutant Ape Yacht Club, Vee Friends and World of Women.



&#8220;For the first time, users can mint price exposure to track 10 popular NFT collections using ETH or DAI without the need to hold the underlying NFTs themselves,” Joe Sticco, co-founder of Cryptex Finance, said in a statement.



Read More: <a href="https://blockworks.co/news/your-guide-to-nft-platforms">Everything You Need To Know About Buying and Selling NFTs</a>



Over the past 30 days, the prices of popular NFTs have mostly been trending downward, with a few outliers.&nbsp;



Bored Ape Yacht Club has seen its price drop by about <a href="https://nftpricefloor.com/bored-ape-yacht-club" target="_blank" rel="noreferrer noopener">4%</a>, CryptoPunks has seen a <a href="https://nftpricefloor.com/?sort=ranking&amp;dir=asc" target="_blank" rel="noreferrer noopener">4.2%</a> fall, and Cool Cats and CloneX have depreciated by <a href="https://nftpricefloor.com/cool-cats" target="_blank" rel="noreferrer noopener">21.5%</a> and <a href="https://nftpricefloor.com/clonex" target="_blank" rel="noreferrer noopener">12.7%</a>, respectively. On the other hand, the price of Azuki has increased by <a href="https://nftpricefloor.com/?sort=ranking&amp;dir=asc" target="_blank" rel="noreferrer noopener">16.4%</a>, according to information from <a href="https://nftpricefloor.com/" target="_blank" rel="noreferrer noopener">NFT Price Floor</a>.



Index tokens, such as the one to be launched by Cryptex, diversify risks for investors by exposing them to a broader market of cryptoassets rather than one single asset. In this case, even if the price of one NFT collection drops, others may still remain profitable. This token type can be compared to an index fund in traditional finance.&nbsp;



Investors interested in NFTs but unwilling to take the risk of picking one over another can purchase fractional interest via JPEGz in any investment amount, or as a vehicle for dollar-cost averaging.&nbsp;



“Arbitrum’s collaborative NFT community has been growing rapidly, and now thanks to JPEGz, traders will have access to an indexing fund that directly tracks top NFT projects, allowing investors of all levels to have [a] stake in the largest NFTs projects globally,” Offchain Labs’ Chief Marketing Officer Andrew Saunders said in a press release.&nbsp;



The JPEGz token can be minted worldwide starting today on the Cryptex Finance dapp on Aributrum and can be swapped on Uniswap and Slingshot DEXes. The token will have a 1.5% minting and 1.5% burn fee — which will be applied to all transactions to fund Cryptex Finance DAO activities.



Because JPEGz is a synthetic index token, you can mint any amount of JPEGz in proportion to the collateral deposited, Sticco told Blockworks.



“Minting a fractional amount of tokens would have been difficult if JPEGz was a basket of tokens, but that&#8217;s not the case because JPEGz is a synthetic asset,” he said. “The same goes for burning. You can burn as many tokens as you like.”



“We are excited to see how JPEGz plans to accelerate with Arbitrum and drive scale over the coming months,” Saunders said.



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