Shalini Nagarajan

Crypto exchange Coinbase currently holds over $25 billion in bitcoin, establishing itself as the world&#8217;s largest bitcoin custody entity, with nearly 5% of all bitcoin in circulation.



Coinbase&#8217;s holdings are roughly equivalent to the stash held by Satoshi Nakamoto, the enigmatic individual or group credited with creating bitcoin and authoring the original white paper in 2008, according to Arkham Intelligence.



The identified sum was spread across 36 million deposit and holding addresses used by Coinbasein, Arkham reported in a Saturday <a href="https://twitter.com/ArkhamIntel/status/1705254948324233270">post</a> on X. The largest cold wallet identified held about 10,000 bitcoin.



<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">Arkham has now identified $25B of Coinbase Bitcoin reserves (~1M BTC) on chain. This makes Coinbase the largest Bitcoin entity in the world on Arkham, with almost 5% of all BTC in existence &#8211; about as much as Satoshi Nakamoto. <a href="https://t.co/7sDOczS7WT">pic.twitter.com/7sDOczS7WT</a>&mdash; Arkham (@ArkhamIntel) <a href="https://twitter.com/ArkhamIntel/status/1705254948324233270?ref_src=twsrc%5Etfw">September 22, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



But the blockchain analytics company suggested that the exchange probably holds thousands more bitcoins that have not been categorized yet, based on latest financial data from Coinbase. Ongoing analysis will aim to uncover these additional addresses.



Coinbase’s custody of ether (<a href="https://blockworks.co/price/eth">ETH</a>) is significantly smaller when compared to its bitcoin holdings. As per Arkham&#8217;s <a href="https://platform.arkhamintelligence.com/explorer/entity/coinbase">data</a>, the exchange held about $2.6 billion in ether.



The fact that Coinbase may hold as much bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) as <a href="http://blockworks.co/tag/satoshi-nakamoto">Nakamoto</a> is notable because it is widely believed that the mysterious bitcoin creator mined <a href="https://blockworks.co/news/on-chain-billionaires-buterin-nakamoto">an impressive amount of bitcoin</a>, with estimates ranging from 600,000 BTC (equivalent to $13 billion) to as much as 1.1 million BTC ($23.8 billion) during the cryptoasset&#8217;s early years. 



Tracking the whereabouts of all these bitcoins is considered somewhat challenging due to their dispersion across numerous addresses.



Should the upper estimate prove accurate, Nakamoto would find themselves among the top 50 billionaires globally, closely trailing Chanel chairman Alain Wertheimer.



The identity of the Bitcoin creator has remained unverified, although <a href="http://web.archive.org/web/20150405000614/http://p2pfoundation.ning.com/profile/SatoshiNakamoto">one public profile</a> which claimed association with Nakamoto indicated a location in Japan.



In Nakamoto&#8217;s writings, they <a href="https://www.reddit.com/r/btc/comments/kv6vib/the_strange_story_of_satoshi_nakamotos_spelling/">variously used</a> both American and British English spellings, as well as idiomatic expressions. This has led some to question whether the inventor&#8217;s claimed Japanese identity is accurate.



There have also been observations regarding the timestamps on Nakamoto&#8217;s comments, which have led some to speculate that they might not have been located in Japan while working on Bitcoin.



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Bitcoin held by Coinbase rivals Satoshi Nakamoto’s in size

Andrew Thurman

Michael Bodley

Months of market teases ended when blockchain analytics platform Arkham released its long-awaited ARKM token today.&nbsp;



Arkham airdropped tokens in varying amounts to early entrants and beta testers of the new bounty platform. The token was also made available via Binance.&nbsp;&nbsp;



As expected, the airdrop proved to be enormously popular, with over 47,000 addresses having claimed 23.7 million tokens worth over $15 million at press time. Both the token contract <a href="https://etherscan.io/address/0x6e2a43be0b1d33b726f0ca3b8de60b3482b8b050">address</a>, as well as the claims <a href="https://etherscan.io/address/0x08c7676680f187a31241e83e6d44c03a98adab05">contract</a>, have been among the largest gas guzzlers on the Ethereum chain for the day, per Nansen data.&nbsp;



While the new asset has exceeded its initial exchange offering (IEO) price of $.50 and its fully diluted valuation ran as high as $800 million in the opening hours of trading, it has since retreated in the face of significant sell pressure from airdrop recipients.&nbsp;



<a href="https://blockworks.co/tag/arkham-intelligence">Arkham</a>’s token launch represents a bet on the development of a marketplace focused on the&nbsp; purchase and sale of crypto intelligence. Its formation —&nbsp;perhaps controversial to those opposed to payments for personal data, for example — has resulted in a bounty system through which analysts are paid for uncovering valuable data and information.&nbsp;



In the hours since launch, ARKM has seen more than $150 million in trade volume, only $8.2 million of which comes from on-chain liquidity. Uniswap v3’s ARKM/WETH pool is by far the most popular.&nbsp;



Binance floated ARKM with a token purchase hard cap of $15,000. Indications were that before the launch, would-be buyers staked significant amounts of <a href="https://blockworks.co/price/bnb">BNB</a>, Binance’s native token, in a bid to hit that maximum.&nbsp;



ARKM, an ERC-20 token, grants its holders some say in Arkham Intelligence Exchange’s governance. It also provides discounts for using the core functions of the marketplace — including setting and fulfilling bounties, as well as exchanging corresponding data.&nbsp;&nbsp;&nbsp;



The launch drew criticism from some crypto quarters, however.&nbsp;



Andrew Smith, the founder of VRRB Labs, told Blockworks Arkham definitely has the “right to roll out a service that unmasks owners of digital wallets, as it’s public information.”



But Smith said “providing financial incentive to users to unveil the identities behind wallet addresses is an unsavory practice, and a bad look.”



Though Arkham has said it will monitor submissions and vet incoming information, industry participants suggest there is little limitation in terms of what is for sale. The Arkham Foundation is overseeing the process.&nbsp;



The intelligence market launch <a href="https://blockworks.co/news/arkham-intelligence-doxxing-users-isnt-that-smart">has landed Arkham in some public hot water</a>, particularly because of a bug that allowed users’ email addresses to be identified. Arkham later said it had fixed the problem.



“We’re very excited about the launch of the Arkham Intel Exchange and the Arkham Oracle,” Arkham representatives told Blockworks in a statement. “These are the kinds of products that will take on-chain analysis to the next level of usability and utility.” The firm declined to comment further.



Arkham also rolled out an AI-enabled oracle product on Tuesday that ties into its new intelligence platform. The product appears to be designed to allow a user to input a prompt into the oracle, which would return on-chain results, including wallet addresses.



<h2 class="wp-block-heading">Market moves, thus far</h2>



While the comparative dearth of on-chain data makes it difficult to measure precisely how many ARKM claimants have sold their tokens and how many are buying, some details do provide insight into how the market views the new token.&nbsp;



Notably, while the claims contract has been interacted with over 47,000 times, there are roughly 31,000 token holders. Per a Dune Analytics <a href="https://dune.com/chrislee/arkham-intelligence-airdrop-dashboard">dashboard</a> from analyst Chris Lee, over 70% of claimants received fewer than 200 tokens. Five addresses received more than 100,000 ARKM tokens.&nbsp;



Liquidity has, thus far, remained robust. Blockchain analysis indicates that Wintermute has been retained as a market maker. According to Nansen data, Wintermute received roughly 15 million ARKM tokens, the majority of which was sent to <a href="https://blockworks.co/tag/binance">Binance</a> and the rest were retained in trading addresses.&nbsp;



Of the five <a href="https://etherscan.io/advanced-filter?tkn=0x6e2a43be0b1d33b726f0ca3b8de60b3482b8b050&amp;txntype=2&amp;amt=100000%7e10000000&amp;fadd=0x08c7676680F187A31241E83e6d44C03A98AdaB05">addresses</a> that received over 100,000 tokens, all appear to have moved their stakes to market. One sent over 180,000 tokens to Binance and <a href="https://debank.com/profile/0x32ba3fd50fc7f6e8d62c5359299e488518c051e9/history">received</a> $137,000 USDT shortly after; another <a href="https://debank.com/profile/0xf0dff6c2c30ba13a2cb43e048fa7f98b1bc38d2f/history">sold</a> their claim for ETH over a period of an hour; two others <a href="https://debank.com/profile/0x467a1c29179252fe7e8e3ed75571a58ee0542336/history">sent</a> tokens to <a href="https://debank.com/profile/0xb28bfea0fe4b60a93de53dbae8ce07e34fb8374c/history">Binance</a>; and the last <a href="https://debank.com/profile/0x14ff0bc9417b6796f79768729002a793b51205b8/history">sold</a> directly on-chain via 1inch for USDT.&nbsp;



Despite the sell pressure from both smaller and larger holders, the asset remains up nearly 25% from its IEO price at $.66 at the time of publication. 



Binance previously <a href="https://www.binance.com/en/support/announcement/binance-completes-the-arkham-subscription-launchpad-and-will-open-trading-for-arkm-bd7486abdcbc4099b7ce6fb484052e05">said</a> that to “protect users from high volatility,” the exchange took an unorthodox step in capping the price limit at a multiple of ten of the initial purchase price — $0.05. The move may have been designed as a measure to ward off traders looking to drive up the price.



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Arkham’s airdrop choppy as traders eye ‘intelligence’ bounty odds

James Cirrone

Following the announcement of its <a href="https://blockworks.co/news/arkham-on-chain-intelligence-platform">new crypto intel marketplace</a> on Monday, Arkham Intelligence has seen a resurgence of complaints about the company’s method of generating referral links.



Twitter users quickly discovered that they could take appended data from Arkham’s referrals, plug the information into a Base64 decoder, and come away with the poster’s full email address.&nbsp;



To verify those claims, Blockworks took a number of referral links, including one posted by a Twitter user back in December 2022, and pasted them into a <a href="https://www.base64decode.org/">Base64 decoder</a>. Each one spat out a full email address.



Some users have even begun generating fake referral links and posting them to Twitter, as a way to have a laugh at Arkham. Blockworks happened upon fake emails such as elon@spacex.com and SamBankman-Fried@ftexchange.com, among others.



Arkham CEO Miguel Morel responded to the controversy at 6:22pm ET on Twitter, saying that Arkham engineered the links this way in its beta. He said it was so that the company could track which users were referring others so they could be rewarded.&nbsp;



Morel said that the referral links were “not a way to collect user emails—users already use their emails when they sign up for the platform and get a ref link. We do not use them for anything other than communicating with users and attributing referrals.”



He continued, “We should have changed this system after our user base increased exponentially. Going forward, all referral links will contain an encrypted version of the referrer’s email so that it cannot be reverse-engineered. This change is already live.”



M4gicpotato on Twitter was one of the first to point out Arkham’s error in an all-caps post, calling out the company for allowing users to unwittingly doxx their personal information.



<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">ABSOLUTE LMAO. ALL <a href="https://twitter.com/hashtag/ARKHAM?src=hash&amp;ref_src=twsrc%5Etfw">#ARKHAM</a> REFERRAL LINKS SHARED ON TWITTER IS DOXXING EVERYONE BECAUSE THE EMAIL IS IN THE REFERRAL URL. <a href="https://twitter.com/inversebrah?ref_src=twsrc%5Etfw">@inversebrah</a><a href="https://t.co/HM6veJOmNp">https://t.co/HM6veJOmNp</a> -&gt; bkatmis012@gmail.com <a href="https://t.co/1INvtXLEva">https://t.co/1INvtXLEva</a> <a href="https://t.co/m38VnNMS8k">pic.twitter.com/m38VnNMS8k</a>&mdash; m4gicpotato ⟁ (@m4gicpotato) <a href="https://twitter.com/m4gicpotato/status/1678462447005618176?ref_src=twsrc%5Etfw">July 10, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Another user, Matsumoto, shared a direct message conversation that allegedly took place with Arkham back in January. The company appeared to acknowledge the problem several months ago, though it seems to have taken no action to fix the issue since.



<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">&quot;we are aware&quot; <a href="https://t.co/f41WK40mLZ">pic.twitter.com/f41WK40mLZ</a>&mdash; Matsumoto (@MatsumotoWins) <a href="https://twitter.com/MatsumotoWins/status/1678474443218100229?ref_src=twsrc%5Etfw">July 10, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



On Monday, Arkham launched the Arkham Intel Exchange, a platform that enables users to purchase and auction valuable information pertaining to the cryptocurrency space. Twitter users quickly began to speculate that the practice would grant financial gain for unearthing personal and private information — a practice that could be dangerous if misused.



Concerns also emerged regarding a perceived lack of decentralization on the platform, stemming from the fact that the Arkham Foundation assumes the responsibility of reviewing and approving auctions and bounties.



Updated July 10th at 8:04pm with public comments from Arkham CEO Miguel Morel.



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Arkham Intelligence? Doxxing users isn’t that smart

Arkham Intelligence is debuting a marketplace where crypto sleuths can get paid for providing on-chain analysis to traders, researchers and even journalists.



The Arkham Intel Exchange, which is being called an “on-chain intelligence marketplace,” is being paired with a token launch from Arkham.&nbsp;



The platform will work on a bounty system — anyone can post a bounty, and whoever fulfills it first will get paid in Arkham’s upcoming native coin, ARKM.



ARKM will go live on Binance Launchpad Tuesday, and people will be able to buy the token from July 11 to July 17. According to <a href="https://www.binance.com/en/support/announcement/introducing-the-arkham-arkm-token-sale-on-binance-launchpad-6ad1921b56fb4b369f9cf3e4449e62e2">Binance</a>, 5% of ARKM’s supply will be up for grabs, and each user can only pick up a maximum of $15,000 worth of tokens, about 300,000 ARKM.



To have access to the bounty, users will have to stake their funds “to request information on crypto addresses or entities,” according to a blog post from Arkham. After the initial bounty is set, more people can stake ARKM, thereby increasing the reward for potential bounty hunters, according to the product’s <a href="https://uploads-ssl.webflow.com/62879326fd745f7489b43224/64abc4471879916bc4e2aeb0_Arkham_Whitepaper_FINAL.pdf">white paper</a>.&nbsp;&nbsp;



Sellers can also auction off their intelligence that they’ve gained via their own investigations.&nbsp;



Arkham envisions typical bounties on the platform to include tasks such as finding a hedge fund&#8217;s wallet address, revealing the real identity of someone impersonating a notable individual, and victims of scams combining their funds to expose the perpetrator.



The Arkham Foundation will review and authenticate all submitted bounties and information for auction, and suspected spam submissions will be deleted. Additionally, bounties have a time limit.&nbsp;



“Any intel bought or sold on the Intel Exchange is subject to an exclusive 90-day access period, during which only the users who funded the bounties are given access to the intelligence submissions,” Arkham wrote in the blog <a href="https://www.arkhamintelligence.com/announcements/arkham-intel-exchange?utm_medium=email&amp;_hsmi=265688287&amp;_hsenc=p2ANqtz-8vbUIEQr7PF6Mv42kfDE5aZxbZ1u1pYD-n12LBt5YoFTIb-DHjtPDFR0KELJpvjFKW4WFN-kQ2TTYPdvl32g6g2D5lvQ&amp;utm_content=265688287&amp;utm_source=hs_email">post</a>.



It continued, “After the 90 days are up, the information is added to the Arkham platform, and granted to Arkham’s wider community.”



Arkham explained on <a href="https://twitter.com/ArkhamIntel/status/1678339414685253634">Twitter</a> that the 90-day window gives the original purchaser, the person who funded the bounty, enough time to capitalize on the information acquired.&nbsp;



Arkham will make money on this new platform by collecting a 2.5% fee on submitted bounties and auction payouts, and a 5% fee on bounty payouts and successful auction bids.



The narrative on Twitter was split between people who were excited about the new offering from Arkham and people who were framing it as a way to snitch on others.&nbsp;



One user explained that his years of work labeling addresses might finally have some monetary value.



<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">Suddenly, the years I&#39;ve spent on-chain and the hundreds of addresses I&#39;ve labeled acquired liquid value. <a href="https://t.co/xcYimrpZqD">https://t.co/xcYimrpZqD</a>&mdash; egornomic (@egornomic) <a href="https://twitter.com/egornomic/status/1678355078992867330?ref_src=twsrc%5Etfw">July 10, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Another user said this platform gives people “on-chain doxxing incentives” and urged people to remain anonymous. Others were dissatisfied with the perceived lack of decentralization associated with the Arkham Intel Exchange.



<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">Fuck this. It&#39;s not even the snitch-to-earn component that I&#39;m entirely against (it is useful as a decentralized whistleblowing dapp for public good). The submissions end up on Arkham + Arkham Fnd is the central arbiter. Someone should fork the contracts and decentralize this. <a href="https://t.co/hnfehiukd9">https://t.co/hnfehiukd9</a>&mdash; Hudson Jameson (@hudsonjameson) <a href="https://twitter.com/hudsonjameson/status/1678384583576891393?ref_src=twsrc%5Etfw">July 10, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



The intel platform is set to go live on Tuesday, July 18 following the conclusion of the initial sale of the ARKM token.



Previous efforts to launch tokens for data companies in the crypto space have not always panned out, as demonstrated by the performance of SAN, CND, and LUNR, sourced from CoinMarketCap below.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1280" height="575" src="https://blockworks-co.imgix.net/wp-content/uploads/2023/07/Santiment-chart.jpg?w=1024&amp;h=1024" alt="" class="wp-image-61174" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2023/07/Santiment-chart.jpg?w=1280 1280w, https://blockworks-co.imgix.net/wp-content/uploads/2023/07/Santiment-chart.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2023/07/Santiment-chart.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2023/07/Santiment-chart.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2023/07/Santiment-chart.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2023/07/Santiment-chart.jpg?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2023/07/Santiment-chart.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2023/07/Santiment-chart.jpg?w=80 80w" sizes="(max-width: 1280px) 100vw, 1280px" /></figure>







<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1280" height="620" src="https://blockworks-co.imgix.net/wp-content/uploads/2023/07/Lunr-chart.jpg?w=1024&amp;h=1024" alt="" class="wp-image-61176" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2023/07/Lunr-chart.jpg?w=1280 1280w, https://blockworks-co.imgix.net/wp-content/uploads/2023/07/Lunr-chart.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2023/07/Lunr-chart.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2023/07/Lunr-chart.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2023/07/Lunr-chart.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2023/07/Lunr-chart.jpg?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2023/07/Lunr-chart.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2023/07/Lunr-chart.jpg?w=80 80w" sizes="(max-width: 1280px) 100vw, 1280px" /></figure>



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1280" height="606" src="https://blockworks-co.imgix.net/wp-content/uploads/2023/07/Cindicator-chart.jpg?w=1024&amp;h=1024" alt="" class="wp-image-61178" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2023/07/Cindicator-chart.jpg?w=1280 1280w, https://blockworks-co.imgix.net/wp-content/uploads/2023/07/Cindicator-chart.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2023/07/Cindicator-chart.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2023/07/Cindicator-chart.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2023/07/Cindicator-chart.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2023/07/Cindicator-chart.jpg?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2023/07/Cindicator-chart.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2023/07/Cindicator-chart.jpg?w=80 80w" sizes="(max-width: 1280px) 100vw, 1280px" /></figure>



Updated July 10, 2023 at 10:45am ET: Included further context for data-company tokens.



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Crypto sleuths have a new way to get paid: Arkham’s on-chain intelligence platform

Macauley Peterson

<div id="highlights-block_62c81d1c5cf68" class="highlights">
 <ul>
 <li>The 0xB1 team ran a Twitter account touting itself as “champions of the people of #DeFi”, while working for Celsius</li>
 <li>The fund’s trading strategies “resulted in apparent losses of $390 million when the asset manager returned capital,” according to Arkham Intelligence</li>
 </ul>
 
</div>



If you were paying attention to DeFi in late 2020 and early 2021 you would have likely come across the name 0xB1.



The trader or group of traders ran <a href="https://etherscan.io/address/0xb1adceddb2941033a090dd166a462fe1c2029484" target="_blank" rel="noreferrer noopener">the Ethereum wallet</a> beginning with this prefix, which has sent and received between $1.33 billion and $1.95 billion over its existence, <a href="https://dappradar.com/hub/wallet/eth/0xb1adceddb2941033a090dd166a462fe1c2029484/usage-stats" target="_blank" rel="noreferrer noopener">according to DappRadar</a>.



Yesterday, Jason Stone, CEO of staking software and strategies firm KeyFi, <a href="https://twitter.com/0x_b1/status/1545153652624691200" target="_blank" rel="noreferrer noopener">outed himself</a> as the manager of the wallet’s activities from August 2020 until April 2021, in conjunction with <a href="https://cms.blockworks.co/celsius-accused-of-market-manipulation-by-ex-employee/" target="_blank" rel="noreferrer noopener">a lawsuit</a> filed against Celsius in New York State. He <a href="https://twitter.com/0x_b1/status/1545153656751853572" target="_blank" rel="noreferrer noopener">revealed Thursday, via Twitter</a>, that the 0xb1 address was one of several created to receive Celsius’ customer deposits for he and his team to manage.



In November 2020, a corresponding Twitter persona (going by @0x_b1) was created that quickly garnered a significant following, while making no mention of Celsius, or the source of its capital.



As all Ethereum transactions are public and immutable, the exploits of what was assumed to be a group of skilled proprietary traders — based on the scale and frequency of their on-chain activity — was closely followed. Nick Chong, now with ParaFi Capital, <a href="https://twitter.com/n2ckchong/status/1345640669386219522" target="_blank" rel="noreferrer noopener">called it</a> “by far one of the most interesting Ethereum addresses I’ve seen.”



Despite its notoriety, new research from Arkham Intelligence, shared with Blockworks, concludes that KeyFi lost millions of dollars of Celsius’ customer funds.



&#8220;These trading strategies resulted in apparent losses of $350 million when the asset manager returned capital compared to the value of the crypto assets Celsius originally sent at the time of return,” an Arkham spokesperson told Blockworks via email.



Arkham notes that the account’s fame took off shortly after the relationship with Celsius was put in place: “The DeFi giant soon became a crypto community folk hero.”



<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">1/ Without the people, there is no DeFi. We are champions of the people of <a href="https://twitter.com/hashtag/DeFi?src=hash&amp;ref_src=twsrc%5Etfw">#DeFi</a>, announce opening the 2021 year with a celebratory series of games commemorating the true year of <a href="https://twitter.com/hashtag/DeFi?src=hash&amp;ref_src=twsrc%5Etfw">#DeFi</a>, the year of the Ox, and the year of <a href="https://twitter.com/hashtag/0x_b1?src=hash&amp;ref_src=twsrc%5Etfw">#0x_b1</a>. With gratitude, Let the games begin!&mdash; 0xb1 (@0x_b1) <a href="https://twitter.com/0x_b1/status/1349428654019895303?ref_src=twsrc%5Etfw">January 13, 2021</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Starting in August 2020, Celsius began transferring the wallet, run by Stone’s KeFi group, hundreds of millions of dollars.



Based on <a href="https://markets.businessinsider.com/news/stocks/celsius-network-partners-with-chainalysis-to-confirm-audit-of-3-31-billion-in-assets-1029878591?v=1" target="_blank" rel="noreferrer noopener">a December 2020 audit</a> by analytics firm Chainalysis, KeyFi had over 10% of all Celsius&#8217; assets under management as the year came to a close, or roughly $365 million. The company continued to send additional funds in the following months, which were deployed into a wide variety of DeFi strategies, such as using ether as collateral in Compound Finance to borrow stablecoins which were deployed into &#8220;yield farming&#8221; strategies from the <a href="https://harvest.finance/" target="_blank" rel="noreferrer noopener">Harvest Finance</a> DAO.



But the operation’s track record was much rockier than widely assumed, Arkham said, noting that on two occasions — on Thanksgiving Day, November 26, 2020, and in late February 2021 — around 85,000 ether deposited by 0xB1 in Compound Finance were liquidated.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“Ultimately, it appears 0xB1 lost $61.19 million of what appears to be Celsius money in liquidations,” the researchers concluded.</blockquote>



The hole in Celsius’ accounts may be much larger when you factor in the interest owed to customers, Arkham added.



“As a result of Celsius&#8217; relationship with 0xB1, Celsius could have inadvertently ended up short of its customers&#8217; deposited assets, let alone the interest it guaranteed them. Furthermore, Celsius&#8217; business model relies on pocketing the spread between its returns and the interest it pays its users. Thus, Celsius users&#8217; account dashboards possibly informed them that they were accumulating crypto rewards that did not actually exist.”



Stone <a href="https://twitter.com/0x_b1/status/1545153669586468867" target="_blank" rel="noreferrer noopener">claims</a> that Celsius owes his firm money and that he “tried for over a year to quietly settle this dispute with Celsius.”



The report details other losses Celsius allegedly incurred through its use of DeFi protocols that ran into difficulties in 2021. Among them, the company lost around $70 million in June 2021 after <a href="https://stakehound.com/blog-post/fireblocks-eth-2-key-management-incident/" target="_blank" rel="noreferrer noopener">a key management mishap</a> by ether staking provider Stakehound and $50 million in December 2021, as a result of an <a href="https://cms.blockworks.co/?s=BadgerDAO" target="_blank" rel="noreferrer noopener">exploit of BadgerDAO</a>.



The report states that “Arkham was not compensated to publish this report, nor did Arkham or its leadership ever have any financial positions in CEL.”



Jason Stone could not be reached for comment. Requests to Celsius for comment have gone unreturned.



This story was updated on July 8, 2022 at 9:40 am ET, to reflect Arkham&#8217;s updated loss estimate for KeyFi&#8217;s activities.



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