Shalini Nagarajan

Cryptocurrency exchange Bitfinex’s derivatives platform has expanded its offerings to provide perpetual contracts for three popular commodity instruments.&nbsp;



Customers of the platform will now be allowed to trade commodities that are otherwise found on traditional financial exchanges. Usually these commodities are restricted to regular trading hours, but these will be available to trade on Bitfinex Derivatives around-the-clock using Tether (<a href="https://blockworks.co/price/usdt" target="_blank" rel="noreferrer noopener">USDT</a>).



UK crude oil, palladium and platinum are the three commodities that will be available on the platform. UK crude oil is used for refinement into diesel fuel and gasoline. It also serves as the benchmark for the light oil market in Europe, Africa and the Middle East.



Palladium is mainly used in manufacturing processes, including in uses for dentistry and jewelry. It primarily comes from the US, Russia, South Africa and Canada. Platinum too can be made into jewelry, but it can also be used for computer hard disks and in chemotherapy drugs used to treat cancer. Like any commodity, their prices are influenced by demand.



The launch of these three global commodities will add to Bitfinex’s more than 60 crypto perpetuals, including Tether gold perpetuals and silver perpetuals. They went live on the platform on March 15, and offer users up to 100x leverage, settled in USDT tokens, meaning traders have the option to execute trades much larger than their initial margin.&nbsp;



Founded in 2021, <a href="https://blockworks.co/tag/bitfinex" target="_blank" rel="noreferrer noopener">Bitfinex</a> offers almost 200 different tokens and 400 unique spot trading pairs. Its latest move appears to be a novel one, as it isn’t common for crypto exchanges to offer global commodity indexes to trade. 



“We anticipate great interest in these products, particularly among funds and professional investors seeking to take directional positions or to hedge risk,” Paolo Ardoino, chief technology officer at Bitfinex Derivatives, said in a statement.&nbsp;



The commodities will trade similarly to other crypto perpetuals. Both transactions and funding will be settled in USDT, and margin collateral will be denominated in USDT.



<hr class="wp-block-separator">
Get the day’s top crypto news and insights delivered to your email every evening.&nbsp;<a href="https://cms.blockworks.co/newsletter/?source=end" target="_blank" rel="noreferrer noopener">Subscribe to Blockworks’ free newsletter</a>&nbsp;now.
 
Want alpha sent directly to your inbox? Get degen trade ideas, governance updates, token performance, can’t-miss tweets and more from&nbsp;<a href="https://blockworks.co/newsletter/research" target="_blank" rel="noreferrer noopener">Blockworks Research&#8217;s Daily Debrief</a>.
 
Can&#8217;t wait? Get our news the fastest way possible.&nbsp;<a href="https://t.me/blockworks_news" target="_blank" rel="noreferrer noopener">Join us on Telegram</a> and follow us on <a href="https://news.google.com/publications/CAAqBwgKMPyTxgswn6_dAw" target="_blank" rel="noreferrer noopener">Google News</a>.
<hr class="wp-block-separator">

Bitfinex Offers Crypto Crude Oil Swaps With Up To 100x Tether Leverage

Sebastian Sinclair

Coinbase’s settlement with regulators on Wednesday has marked the industry’s largest in almost a year and one of the largest to date.



The New York State Department of Financial Services (NYDFS) found the exchange <a href="https://blockworks.co/news/coinbase-stock-up-after-settlement">violated anti-money laundering</a> laws in 2018 and 2019 by allowing customers to open accounts without complete background checks.



As such, Coinbase has agreed to pay a $50 million fine as well as a further $50 million that will go towards its compliance practices, per the agreement laid out in the settlement.



Coinbase’s latest regulatory snafu follows a previous <a href="https://www.cftc.gov/PressRoom/PressReleases/8369-21" target="_blank" rel="noreferrer noopener">$6.5 million settlement</a> in a civil penalty with the Commodities and Futures Trading Commission in March 2021. 



The exchange was accused of delivering false, misleading, or inaccurate reports relating to transactions on a trading platform it operated known as GDAX.



The settlement amount is similar to NYDFS previous money laundering-related fines of financial giants such as Deutsche Bank (<a href="https://www.dfs.ny.gov/system/files/documents/2020/07/ea20200706_deutsche_bank_consent_order.pdf" target="_blank" rel="noreferrer noopener">$150 million</a> in 2020) and Wells Fargo (<a href="https://www.latimes.com/business/la-fi-wells-fargo-new-york-fine-20181022-story.html" target="_blank" rel="noreferrer noopener">$65 million</a> in 2018).



What follows is a roundup of the industry’s most significant settlements with US regulators in relation to dollar amounts and terms laid out in the legal agreements stretching back to 2019.



<h3>BlockFi Fined $100 Million over interest-bearing products</h3>



In February of last year, now-bankrupt crypto lender <a href="https://blockworks.co/news/crypto-lender-blockfi-to-pay-100m-in-fines-to-us-regulators">BlockFi was ordered to pay $50 million</a> in fines to the Securities and Exchange Commission and a further $50 million to various state regulators.



It was alleged at the time the lender had illegally offered a high-interest yield product, known as BlockFi Interest Account (BIA), which had allowed users to lend out their crypto for up to 9.25% in annual percentage yield.



US customers were prohibited from opening any new interest-yielding accounts, and existing accounts were converted to “BlockFi Yield” under an existing regulatory-compliant framework.



BlockFi later <a href="https://blockworks.co/news/blockfi-bankruptcy-highlights">filed for Chapter 11 bankruptcy</a> on Nov. 28 following the collapse of FTX.



<h3>Bitfinex parent pays $18.5 million over alleged $850 million cover-up</h3>



Roughly one year before BlockFi’s settlement, crypto exchange Bitfinex’s parent <a href="https://www.reuters.com/world/americas/bitfinex-tether-owner-pays-185-mln-fine-settle-nyag-cryptocurrency-cover-up-2021-02-23/" target="_blank" rel="noreferrer noopener">agreed to pay</a> an $18.5 million fine to the New York Attorney General&#8217;s office to settle charges it had engaged in a cover-up to hide the loss of hundreds of millions in client funds.



Hong Kong-based iFinex Inc, also the parent of stablecoin issuer Tether, was required to halt trading activity with New Yorkers as part of the deal.&nbsp;



Bitfinex was accused of having sent $850 million to Panama-based payments processor Crypto Capital Corp without first telling clients. After funds went missing, it was alleged the exchange siphoned $700 million from Tether’s stablecoin reserves to cover the shortfall.



As part of the agreement to settle, Bitfinex and Tether did not admit or deny wrongdoing.



In October, 2021, Tether <a href="https://blockworks.co/news/tether-settles-with-cftc-for-42-5m">settled with the CFTC for $42.5 million</a> over the agencies allegations that Tether misrepresented the reserves backing of USDT.



<h3>Block.One pays $24 million to settle charges over unregistered ICO</h3>



Block.One, the company behind the EOS cryptocurrency, reached a settlement with the Securities and Exchange Commission in October 2019, <a href="https://www.sec.gov/news/press-release/2019-202" target="_blank" rel="noreferrer noopener">agreeing to pay</a> a $24 million fine for conducting an unregistered securities sale



Its initial coin offering of 900 million EOS tokens first began way back in June 2017, and is considered the largest ICO in history, having raised some $4.1 billion.



As per the legal agreement, Block.One later settled the charges without admitting or denying the findings by the federal regulator.



<h3>Telegram fined $18.5 million, forced to repay $1.2 billion from ICO sale</h3>



Also in October 2019, the SEC filed a complaint against the parent of social media platform Telegram, alleging the company raised more than $1.2 billion from the illegal securities sale of 2.9 billion Grams — a proposed utility token.



At the time, the SEC alleged Grams had been sold via an initial coin offering to some 171 initial purchasers around the globe and sought to restrain Telegram from any further sales.&nbsp;



The US Southern District Court of New York later agreed with the SEC’s findings in March 2020 and issued an injunction barring any further sale of Grams. Without admitting or denying the allegations, Telegram agreed to pay $18.5 million in a civil penalty.



Up until last year, Telegram was also required to notify the SEC before embarking on any further issuance of digital assets. Telegram was also forced to repay the $1.2 billion back to investors.



Although Telegram was prohibited from pursuing its centralized blockchain development plans, the underling open-source code was used to launch <a href="https://blockworks.co/news/ton-standout-in-rocky-crypto-markets">the community-driven TON project</a>. The team behind Telegram’s Messenger app is now building upon the same technology it previously developed in-house.



<hr class="wp-block-separator">
Get the day’s top crypto news and insights delivered to your email every evening.&nbsp;<a href="https://cms.blockworks.co/newsletter/?source=end" target="_blank" rel="noreferrer noopener">Subscribe to Blockworks’ free newsletter</a>&nbsp;now.
 
Want alpha sent directly to your inbox? Get degen trade ideas, governance updates, token performance, can’t-miss tweets and more from&nbsp;<a href="https://blockworks.co/newsletter/research" target="_blank" rel="noreferrer noopener">Blockworks Research&#8217;s Daily Debrief</a>.
 
Can&#8217;t wait? Get our news the fastest way possible.&nbsp;<a href="https://t.me/blockworks_news" target="_blank" rel="noreferrer noopener">Join us on Telegram</a> and follow us on <a href="https://news.google.com/publications/CAAqBwgKMPyTxgswn6_dAw" target="_blank" rel="noreferrer noopener">Google News</a>.
<hr class="wp-block-separator">

Coinbase’s $100M Settlement, Largest Since BlockFi

<div id="highlights-block_632aceee04a40" class="highlights">
 <ul>
 <li>Tether&#8217;s lawyer argued the request was burdensome and unreasonable</li>
 <li>The judge said the documents requested are “undoubtedly important” to assess the stablecoin’s backing</li>
 </ul>
 
</div>



A US Judge has ordered Tether to prove what backs its stablecoin as part of a market manipulation <a href="https://casetext.com/case/in-re-tether-bitfinex-crypto-asset-litig" target="_blank" rel="noreferrer noopener">lawsuit</a> alleging USDT artificially inflated crypto prices.&nbsp;



Judge Katharine Polk Failla in a Tuesday <a href="https://storage.courtlistener.com/recap/gov.uscourts.nysd.524076/gov.uscourts.nysd.524076.247.0.pdf" target="_blank" rel="noreferrer noopener">court order</a> asked Tether to produce “undoubtedly important” documents relating to the assessment of USDT’s backing with US dollars. The court believes the evidence is necessary to substantiate Tether’s claims of maintaining a treasury that fully backs its stablecoin.



Tether will now be required to produce documents to establish its USDT reserves, including account statements of banks and other institutions linked to its funds. Other documents would include general ledgers, balance sheets, income statements, cash-flow statements and profit and loss statements.&nbsp;



In response, Tether said the instruction was a &#8220;routine discovery order&#8221; and doesn&#8217;t substantiate the plaintiffs&#8217; &#8220;meritless claims.&#8221;



&#8220;We had already agreed to produce documents sufficient to establish the reserves backing USDT, and this dispute merely concerned the scope of documents to be produced,&#8221; the <a href="https://tether.to/en/new-order-to-produce-reserves-backing-a-routine-discovery-matter-in-a-meritless-case/">company</a> said in a statement.



USDT is the largest stablecoin by market capitalization in the world and the third biggest digital asset overall, after bitcoin and ether, with almost $68 billion in circulation. The question of what exactly backs each token has dogged the project for years; Tether initially claimed that every USDT token was backed 1-to-1 with US dollars.



Last year, the New York Attorney General (NYAG) ended an investigation into Tether and its parent company Bitfinex with an <a href="https://cms.blockworks.co/tethers-settlement-with-the-nyag-a-positive-for-industry/" target="_blank" rel="noreferrer noopener">$18.5 million</a> settlement agreement. The NYAG found they commingled company and customer funds to obfuscate $850 million in losses resulting from police action on one if its payment processor partners, <a href="https://www.coindesk.com/business/2022/04/25/reggie-fowler-pleads-guilty-in-crypto-capital-corp-case-tied-to-bitfinexs-missing-millions/" target="_blank" rel="noreferrer noopener">Crypto Capital Corp</a>.



According to the NYAG, this meant USDT was not fully backed for a period of time following November 2018. Tether now claims that USDT tokens are “100% backed by its reserves,&#8221; and part of the settlement demands Tether submit quarterly reports detailing its reserves to the NYAG, which are also published on its <a href="https://tether.to/en/transparency/#reports" target="_blank" rel="noreferrer noopener">website</a>.&nbsp;



<h3>Tether backs USDT with commercial paper — but from which companies?</h3>



Still, Tether <a href="https://cms.blockworks.co/the-historic-significance-of-tether-16b-bank-run/" target="_blank" rel="noreferrer noopener">weathered a run</a> on its reserves earlier this year as markets rushed to redeem billions of dollars in USDT for cash amid tumbling prices. The company claims to have never denied processing any redemptions, particularly as a result of lacking liquidity.



However, while its attestations and other reports do provide a general skeleton for Tether’s reserves — split between assets such as US and other Treasurys, cash and bank deposits, money market funds — the specific makeup of Tether’s commercial paper (short term corporate debt) holdings has <a href="https://cms.blockworks.co/tether-pushes-back-timeline-on-audit-report/" target="_blank" rel="noreferrer noopener">never been revealed</a> via a complete financial audit, making the recent court order for detailed information all the more interesting.



The court noted allegations that Tether issued USDT “completely unbacked and printed out of thin air,” and that this “unbacked USDT” was used to inflate bitcoin’s price by being transferred to Poloniex and Bittrex.



Tether representative Elliott Greenfield of Debevoise &amp; Plimpton had requested the court to deny the “untimely and unreasonable” request, saying the plaintiffs have “shown no good cause” to ask for documents. According to Greenfield, the “overbroad” requests were burdensome as they related to all crypto transactions associated with Poloniex and Bittrex.&nbsp;



“Plaintiffs offer no justification for such extraordinary requests, merely stating that they must assess whether the transactions were strategically timed to inflate the market,” the lawyer added.



But the judge denied Tether’s attorney, saying the court agreed that the documents sought by plaintiffs address the core of the allegations.



David Canellis contributed reporting.



This report was updated on Sept. 21 at 11:52 pm ET.



<hr class="wp-block-separator">
Get the day’s top crypto news and insights delivered to your email every evening.&nbsp;<a href="https://cms.blockworks.co/newsletter/?source=end" target="_blank" rel="noreferrer noopener">Subscribe to Blockworks’ free newsletter</a>&nbsp;now.
 
Want alpha sent directly to your inbox? Get degen trade ideas, governance updates, token performance, can’t-miss tweets and more from&nbsp;<a href="https://blockworks.co/newsletter/research" target="_blank" rel="noreferrer noopener">Blockworks Research&#8217;s Daily Debrief</a>.
 
Can&#8217;t wait? Get our news the fastest way possible.&nbsp;<a href="https://t.me/blockworks_news" target="_blank" rel="noreferrer noopener">Join us on Telegram</a> and follow us on <a href="https://news.google.com/publications/CAAqBwgKMPyTxgswn6_dAw" target="_blank" rel="noreferrer noopener">Google News</a>.
<hr class="wp-block-separator">

US Judge Orders Tether to Prove What Backs USDT

David Canellis

<div id="highlights-block_62bdee0e19b57" class="highlights">
 <ul>
 <li>Bitcoin and ether were some of the worst performing top-50 cryptocurrencies this month</li>
 <li>Stablecoin dominance is way up, with the top four dollar-pegged tokens now making up more than 15% of the digital asset market</li>
 </ul>
 
</div>



Bitcoin dropped below $19,000 this morning, having shed up to 6% over the past day as benchmark indexes NASDAQ 100 and S&amp;P 500 remain muted.



Bitcoin (BTC) is trending toward prices last seen two weeks ago when it collapsed to $17,600, its lowest since December 2020 when the bellwether digital asset was on its way toward smashing its 2018 record high.



Grimmer still, bitcoin has been one of the worst performing top-50 tokens this month, according to price data compiled by Blockworks. Today’s drop also directly follows MicroStrategy’s additional $10 million <a href="https://cms.blockworks.co/microstrategy-buys-the-bitcoin-dip-draws-criticism-from-analysts/">bitcoin purchase</a>, suggesting CEO Michael Saylor bought the dip too early.



Bitcoin’s price is down about 40% since June 1, landing it in the bottom third of the top 50. Second-largest cryptocurrency ether was the fourth-worst performing, dropping 47% from $1,940 to $1,030 as of 12:30 pm ET.



For scale, the worst performing of the top 50 cryptocurrencies — decentralized finance token AAVE and BTC fork bitcoin cash — lost 51% of their value this month. Meanwhile, the tech-heavy NASDAQ 100 fell 8% in June alongside the broader S&amp;P 500, plagued by macroeconomic factors such as inflation and persistent global supply chain headaches.



Bitcoin dominance, which measures how much of the digital asset market is BTC, dropped more than seven percentage points in June, to 43.5%. Ether dominance broke down more than twice as much, now floating around 15%.



Collectively, crypto markets tanked 35% over the month, representing $453 billion in representative value lost.&nbsp;



Indeed, investors once again fled volatile assets to dollar-pegged stablecoins, with Binance USD, tether, DAI and USD Coin dominance surging between 42.5 and 64.5 percentage points.



Together, those four stablecoins make up more than 15% of all cryptocurrency value right now, practically matching ether, up from 10% at the start of the month.



<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" src="https://flo.uri.sh/visualisation/10510159/embed#?secret=hX62JXTQ2V" data-secret="hX62JXTQ2V" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div></figure>



<h3>Bitfinex’s LEO token proves most resilient — again</h3>



As for June’s winners, cryptocurrency exchange Bitfinex’s native token unus sud leo (LEO) continues to significantly outperform the overall crypto market. It is the only top-50 cryptoasset to have gained value in June, having risen almost 12%. On average, leading cryptocurrencies (sans stablecoins and asset-backed tokens) shed 32%.&nbsp;



Blockworks reported almost the <a href="https://cms.blockworks.co/how-cryptoasset-markets-have-changed-since-terra-crash/" target="_blank" rel="noreferrer noopener">exact same result</a> in the month following the disintegration of the Terra ecosystem; LEO was the only top-100 cryptocurrency in the green, although only by half a percent.



LEO is by far an outlier, even among its cohort. Rival exchange tokens issued by FTX (FTT), Huobi (HT), Binance (BNB) and KuCoin (KCS) are steeply in the red, respectively down 18%, 33%, 34% and 46%.



Bitfinex first issued LEO in 2019 in a private sale as a way to plug losses worth $850 million as a result of Polish raids on its then-payment processor Crypto Capital Corp. Those who bought LEO can recoup their investments by selling the token on public markets as its price appreciates, so the idea goes.



Similarly to other exchanges with native tokens, Bitfinex buys and burns LEO supply when trades occur on the platform. Just under 7% of LEO’s supply has been burned to date.



June’s price rise added almost $600 million to LEO’s market capitalization to make it the 15th largest token overall, ahead of prominent layer-1 tokens avalanche and matic, but still well behind Binance’s BNB.



A Bitfinex spokesperson previously told Blockworks: “LEO’s performance should be viewed as a metric of customer confidence and trust in the platform.”



They added correlation could be emerging between LEO&#8217;s price and the potential recovery of bitcoin stolen from the exchange in 2016. In February, US authorities seized $3.5 billion in BTC once belonging to Bitfinex and arrested alleged launderers, amateur YouTube rapper Heather &#8220;Razzlekhan&#8221; Morgan and her partner, Ilya Lichtenstein.



Bitfinex, a subsidiary of Tether parent iFinex, has pledged to spend at least 80% of those funds on buying and burning LEO – if the crypto indeed ends up back in the hands of the company.



<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" src="https://flo.uri.sh/visualisation/10510383/embed#?secret=0QY6BZVbwG" data-secret="0QY6BZVbwG" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div></figure>



<h3>Wrong-footed CoinFLEX aims to follow LEO’s path</h3>



Katie Talati, director of research at digital asset management firm Arca, agreed that authorities’ recovering bitcoin stolen from Bitfinex has been the main driver for LEO’s price appreciation this year, but noted there have been no new developments to the story since February.



“In addition, LEO is far more illiquid than other centralized exchange tokens which means it is subject to different price moves and might be why the price is more stable than others in the sector,” Talati told Blockworks in an email.



The resounding success of LEO — especially over the year to date — might bode well for smaller crypto exchange CoinFLEX. The firm is planning to issue a <a href="https://cms.blockworks.co/coinflex-plans-to-raise-missing-funds-with-new-token/" target="_blank" rel="noreferrer noopener">recovery token</a> to replace $47 million worth of assets lost after an alleged loan deal with early crypto proponent Roger Ver went awry. 



Token purchasers would help keep CoinFLEX solvent and are being offered a 20% annualized yield in return.&nbsp;



Arca’s Talati, however, isn’t totally sold on the idea: “I wonder who will buy the new issue since Coinflex’s customer base is much smaller, mostly market makers, almost no retail.”



It’s also unclear if investors will get their principal back as that is “based on CoinFLEX retrieving funds from their counterparty,” she added. Talati said the principal on the bad loan can be paid back in USDC or CoinFLEX’s native token FLEX, which presents risk for the investor as the token has very little liquidity.



“However, people are yield hungry and 20% is very competitive, so [we will] have to watch the sale to see what happens,” Talati said.



<hr class="wp-block-separator">
Get the day’s top crypto news and insights delivered to your email every evening.&nbsp;<a href="https://cms.blockworks.co/newsletter/?source=end" target="_blank" rel="noreferrer noopener">Subscribe to Blockworks’ free newsletter</a>&nbsp;now.
 
Want alpha sent directly to your inbox? Get degen trade ideas, governance updates, token performance, can’t-miss tweets and more from&nbsp;<a href="https://blockworks.co/newsletter/research" target="_blank" rel="noreferrer noopener">Blockworks Research&#8217;s Daily Debrief</a>.
 
Can&#8217;t wait? Get our news the fastest way possible.&nbsp;<a href="https://t.me/blockworks_news" target="_blank" rel="noreferrer noopener">Join us on Telegram</a> and follow us on <a href="https://news.google.com/publications/CAAqBwgKMPyTxgswn6_dAw" target="_blank" rel="noreferrer noopener">Google News</a>.
<hr class="wp-block-separator">

Stablecoin Dominance Surges in June as Crypto Markets Shed 35%

<div id="highlights-block_62a1c10bb98e8" class="highlights">
 <ul>
 <li>Terra’s UST’s fate hasn’t deterred traders from experimenting with TRON-powered algorithmic stablecoin USDD</li>
 <li>Bitcoin dominance has risen 15% to almost half of the entire crypto market</li>
 </ul>
 
</div>



It’s been a month since Terra’s algorithmic stablecoin UST <a href="https://cms.blockworks.co/?s=Terra" target="_blank" rel="noreferrer noopener">de-pegged</a> from the US dollar. At the time, Terra’s native token LUNA and UST were the ninth and 10th largest cryptocurrencies by market capitalization — together valued at $42 billion. Both tokens have since evaporated almost entirely, begetting a major market shakeup.



Bitcoin dominance is on the rise and most cryptoassets are in decline, yet one exchange token has bucked the downtrend. While algorithmic stablecoins may not be completely dead, UST’s demise has changed the stablecoin landscape dramatically.



Tether (USDT) is still the largest stablecoin ($72.5 billion versus USD Coin’s $53.9 billion), but the past month was its most significant dollar-denominated reduction across its seven-year history. USDT’s supply is down 13% over the past month, the equivalent of nearly $11 billion, after big money traders flocked to redeem their tokens throughout May’s market chaos.



“The drop in USDT since the UST collapse is a reflection of the relative market confidence in its issuer Tether (based in the British Virgin Islands) compared to that of USDC (issued by the US-based Centre Consortium, founded by Circle and Coinbase),” Genesis Trading wrote in its May <a href="https://info.genesistrading.com/hubfs/monthly-reviews/2022/May-2022-Monthly-Report.pdf" target="_blank" rel="noreferrer noopener">report</a>.



Algorithmic stablecoins such as Magic Internet Money (MIM) and Frax are also significantly smaller. MIM’s total supply has shrunk 87% while Frax’s has fallen 43% — with $3.6 billion altogether leaving those two protocols.&nbsp;



MakerDAO’s DAI, while not strictly algorithmic, has given up 18% of its supply since UST de-pegged — even though it is <a href="https://daistats.com/#/" target="_blank" rel="noreferrer noopener">overcollateralized</a> on-chain by more than half. In fact, Circle’s USDC and Binance’s BUSD (issued by Paxos) are the only top 12 stablecoins not to lose market share following UST’s demise.&nbsp;



Clearly, market participants now favor asset-backed tokens — just not Tether (USDT). USDC has seen its circulating supply surge $5.4 billion, an 11% boost. BUSD grew by $555 million, about 3%.&nbsp;



But it seems some still trust algorithmic stablecoins. TRON’s Decentralized USD (USDD), launched by blockchain founder Justin Sun just days before UST crumbled, has attracted $491 million over the past month — a 230% increase in supply.



USDD holders have been able to lock their tokens inside lending platform JustLend for double-digit yield all month, a prospect which has been a <a href="https://cms.blockworks.co/every-top-cryptocurrency-is-down-except-justin-suns-tron/" target="_blank" rel="noreferrer noopener">boon</a> to TRX’s price. USDD’s market value is now $703 million, ranking it the 10th biggest stablecoin behind Waves’ Neutrino USD and ahead of Paxos’ gold-backed asset PAXG.



According to Genesis: “The jury is out on whether the UST collapse will turn out to be proof that algorithmic stablecoins are a flawed concept, or whether different design choices could be successful in the future.”



<blockquote class="wp-block-quote">“The event has highlighted the importance of understanding nuances in this space and that not all stablecoins are created equal.”</blockquote>



Still, the collective supply of the top 12 stablecoins at the time of UST’s de-pegging — not counting UST itself — is down by $9 billion.



<h3>Bitfinex’s LEO most resilient cryptoasset</h3>



According to price data reviewed by Blockworks, Bitfinex’s Unus Sud Leo (LEO) token was the best performing top 100 token (excluding stablecoins and wrapped tokens) by market value — the only token to increase in value over the month, albeit by half a percent.



Bitfinex raised $1 billion of USDT in 10 days with LEO’s private token sale in May 2019. The idea was to replace $850 million lost when the exchange’s embattled third-party payment processor Crypto Capital Corp was raided by authorities.



Bitfinex rebuys and burns LEO to reimburse investors who contributed to the sale, while regular Bitfinex users receive discounts on fees when holding LEO in their accounts. The company committed to eventually burning all one billion LEO tokens, of which it has already destroyed around 6.5% of the supply.



Crypto exchange tokens <a href="https://cms.blockworks.co/native-crypto-exchange-tokens-hint-at-first-sign-of-broader-market-recovery/">outperformed</a> much of the market in May. Many have burn mechanisms similar to LEO’s as a way to reward holders. KuCoin’s native token KCS has been the third-best top 100 crypto asset post-Terra, falling only 3.5%. But FTX’s FTT and Binance’s BNB weren’t so hot — both tanked 20%.



LEO’s price doubled earlier this year when US authorities revealed they <a href="https://cms.blockworks.co/couple-arrested-as-government-recovers-3-6b-in-stolen-bitcoin/" target="_blank" rel="noreferrer noopener">seized $3.5 billion in bitcoin</a> stolen from the exchange back in 2016. Bitfinex has said it will commit at least 80% of the recovered net funds to repurchase and burn LEO tokens within 18 months of the date of recovery.



A Bitfinex spokesperson told Blockworks LEO’s performance should be viewed as a measure of its customers’ confidence and trust in the platform.



<blockquote class="wp-block-quote">“We have also begun to see what may be a correlation between the performance of LEO, and the prospects of Bitfinex receiving the stolen bitcoin that was seized by the US authorities earlier this year,” they said.</blockquote>



Other top-100 tokens performing relatively well in Terra’s wake include TRX (down 3.5%) and monero (down 9%). Bitcoin came in at number five, falling 14% from nearly $35,500 to $30,400. BTC is currently range bound with no clear momentum.



Ether, on the other hand, sank 30% over the month — about average for the top 100. Bitcoin dominance rose almost 15% to now represent nearly half of the digital asset market, while ether dominance fell almost 9% to just under 18%.



On Wednesday, the second largest cryptoasset by market cap took an important step toward its planned Merge, as the Ethereum Ropsten testnet <a href="https://cms.blockworks.co/ethereum-ropsten-testnet-successfully-merged-to-proof-of-stake/" target="_blank" rel="noreferrer noopener">successfully transitioned</a> to proof-of-stake.



As for the losers: LUNA aside, the native digital asset for Terra-powered lending protocol Anchor was the worst hit, down 91%. Tokens for lending platform Convex Finance and privacy blockchain Secret Network collapsed 66% and 62% respectively, while move-to-earn project StepN fell 60%.&nbsp;



Alternative networks Oasis and Avalanche both drained by 55%, decentralized finance governance token Yearn lost 54% of its value, while metaverse project ApeCoin and layer-11 assets NEAR, MINA and solana all halved in price.



While crypto markets fell throughout April in the lead up to UST’s de-pegging, all digital assets are worth 20% less since the stablecoin went kaput, representing $336.6 billion in value lost.



<hr class="wp-block-separator">
Get the day’s top crypto news and insights delivered to your email every evening.&nbsp;<a href="https://cms.blockworks.co/newsletter/?source=end" target="_blank" rel="noreferrer noopener">Subscribe to Blockworks’ free newsletter</a>&nbsp;now.
 
Want alpha sent directly to your inbox? Get degen trade ideas, governance updates, token performance, can’t-miss tweets and more from&nbsp;<a href="https://blockworks.co/newsletter/research" target="_blank" rel="noreferrer noopener">Blockworks Research&#8217;s Daily Debrief</a>.
 
Can&#8217;t wait? Get our news the fastest way possible.&nbsp;<a href="https://t.me/blockworks_news" target="_blank" rel="noreferrer noopener">Join us on Telegram</a> and follow us on <a href="https://news.google.com/publications/CAAqBwgKMPyTxgswn6_dAw" target="_blank" rel="noreferrer noopener">Google News</a>.
<hr class="wp-block-separator">

How Cryptoasset Markets Have Changed Since Terra Crash

Jacquelyn Melinek

<div id="highlights-block_6202a9e31b921" class="highlights">
 <ul>
 <li>Both crimes carry a total maximum sentence of 25 years in prison</li>
 <li>It’s the department’s largest financial seizure ever, Deputy Attorney General Lisa Monaco said in a statement</li>
 </ul>
 
</div>



The US government has recovered the majority of the cryptocurrency stolen during the 2016 Bitfinex hack and arrested a married couple allegedly linked to it.



In 2016, hackers stole 119,755 bitcoin, worth approximately $5.3 billion at the current price, from the cryptocurrency exchange. The <a href="https://www.justice.gov/opa/pr/two-arrested-alleged-conspiracy-launder-45-billion-stolen-cryptocurrency" target="_blank" rel="noreferrer noopener">Department of Justice said</a> Tuesday that law enforcement had recouped more than $3.6 billion so far. 



This is the department’s largest financial seizure ever, Deputy Attorney General Lisa Monaco said in a statement. “[Today’s arrests] show that cryptocurrency is not a safe haven for criminals,” Monaco said.



New York residents Ilya Lichtenstein, 34, and Heather Morgan, 31, were arrested for conspiracy to launder cryptocurrency and money that was stolen during the hack six years ago. They were also charged with conspiracy to defraud the US.



Both crimes can carry a total maximum sentence of 25 years in prison. They are scheduled to make their first appearances in a Manhattan federal court Tuesday afternoon.



<blockquote class="wp-block-quote">“In a futile effort to maintain digital anonymity, the defendants laundered stolen funds through a labyrinth of cryptocurrency transactions,” Monaco said. “Thanks to the meticulous work of law enforcement, the department once again showed how it can and will follow the money, no matter what form it takes.”</blockquote>



Lichtenstein and Morgan allegedly conspired to launder 119,754 bitcoins that were stolen from the platform after a hacker breached the systems and made over 2,000 unauthorized transactions.&nbsp;



“Those unauthorized transactions sent the stolen bitcoin to a digital wallet under Lichtenstein’s control,” according to court documents. “Over the last five years, approximately 25,000 of those stolen bitcoin were transferred out of Lichtenstein’s wallet via a complicated money laundering process that ended with some of the stolen funds being deposited into financial accounts controlled by Lichtenstein and Morgan.”



The remainder of the stolen funds, about 94,000 bitcoins, remain in the wallet used in the hack.



At the time of the theft, bitcoin was trading at $612, valuing the heist at $73.39 million — less than one 70th of its current worth.



Bitfinex <a href="http://12:37https://support.bitfinex.com/hc/en-us/articles/4417401349657-2016-Security-Breach-Bitcoin-Recovery-Frequently-Asked-Questions-FAQ-" target="_blank" rel="noreferrer noopener">said</a> it hoped to work with the U.S. Department of Justice to retrieve the stolen bitcoin. &#8220;We will provide further updates on our efforts to obtain a return of the stolen bitcoin as and when those updates are available,&#8221; the company said.



Prior to this, global law enforcement and other private sectors helped Bitfinex recover about 27.66 and 6.5 bitcoin in February 2019 and December 2021, respectively.



The complaint alleges the couple used a handful of laundering techniques, including using fictitious identities to set up online accounts and utilizing computer programs to automate transactions.



“Financial crime strikes at the core of our national and economic security,” Acting Executive Associate Director Steve Francis of Homeland Security Investigations said in a statement. “With a hack of this magnitude, public and private sector collaboration is crucial to ensure continued consumer confidence in our financial system.”



Crypto platforms in general have been struck by a number of exploits, including several that took place this year.&nbsp;



Earlier this month, hackers stole <a href="https://cms.blockworks.co/in-second-largest-defi-hack-ever-blockchain-bridge-loses-320m-ether/" target="_blank" rel="noreferrer noopener">120 ether, or $320 million</a>, from the Wormhole protocol in the <a href="https://defiyield.app/rekt-database" target="_blank" rel="noreferrer noopener">second-largest</a> DeFi hack to date.&nbsp;



At the end of January, DeFi (decentralized finance) protocol Qubit Finance lost millions of dollars to a hack after 206,809 Binance Coin, roughly <a href="https://cms.blockworks.co/defi-protocol-qubit-finance-loses-80m-in-hack/" target="_blank" rel="noreferrer noopener">$80 million</a>, were stolen.



The DOJ was not available for comment on Tuesday.



This story was updated on Feb. 9, 2022, at 12:50pm ET, with additional details on the stolen funds and Bitfinex&#8217;s efforts to recover them.



<hr class="wp-block-separator">
Get the day’s top crypto news and insights delivered to your email every evening.&nbsp;<a href="https://cms.blockworks.co/newsletter/?source=end" target="_blank" rel="noreferrer noopener">Subscribe to Blockworks’ free newsletter</a>&nbsp;now.
 
Want alpha sent directly to your inbox? Get degen trade ideas, governance updates, token performance, can’t-miss tweets and more from&nbsp;<a href="https://blockworks.co/newsletter/research" target="_blank" rel="noreferrer noopener">Blockworks Research&#8217;s Daily Debrief</a>.
 
Can&#8217;t wait? Get our news the fastest way possible.&nbsp;<a href="https://t.me/blockworks_news" target="_blank" rel="noreferrer noopener">Join us on Telegram</a> and follow us on <a href="https://news.google.com/publications/CAAqBwgKMPyTxgswn6_dAw" target="_blank" rel="noreferrer noopener">Google News</a>.
<hr class="wp-block-separator">

Couple Arrested as Government Recovers $3.6B in Stolen Bitcoin

Sam Reynolds

<div id="highlights-block_619b55f348d7b" class="highlights">
 <ul>
 <li>El Salvador to issue $1 billion tokenized bond via Blockstream’s Liquid sidechain with $500 million allocated to construction of the city and $500 million used to buy more bitcoin </li>
 <li>Bitcoin City will have no tax aside from a VAT and would be powered via geothermal energy from a nearby volcano</li>
 </ul>
 
</div>



El Salvador’s President Nayib Bukele announced over the weekend that his country is planning to build the first ‘Bitcoin City’, a nearly tax-free utopia for Bitcoiners funded by a bitcoin-based bond and geothermal powered bitcoin mining.&nbsp;



The country plans to fund construction of the city and the infrastructure for bitcoin mining via a $1 billion tokenized bond. The only tax in the City will be a 10% value-added tax to help fund construction and pay for overhead down the road. This bond is issued by Blockstream’s Liquid Network side chain and processed by iFinex. $500 million of the bond, which carries a coupon rate of 6.5%, would be earmarked for construction of the city and necessary mining infrastructure, while the other half of the bond would go towards buying more bitcoin.&nbsp;&nbsp;



<figure class="wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio"><div class="wp-block-embed__wrapper">
<iframe loading="lazy" title="Bitcoin City coming soon BTC City🔥🚀🧑🏼‍🚀" width="1024" height="576" src="https://www.youtube.com/embed/UUoW-rlbVwM?feature=oembed" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe>
</div><figcaption>El Salvador&#8217;s President Nayib Bukele at the launch event for Bitcoin City</figcaption></figure>



After a five-year lockup period, El Salvador can begin to sell its crypto holdings purchased via the bond to pay an additional dividend to holders. After a 10-year period, Blockstream CSO Samson Mow estimates the APY will be 146% based on the assumption that bitcoin will be worth $1 million by then. For that to occur, the approximately 20.5 million bitcoin circulating supply in 10 years would be valued in USD at over $20 trillion, or roughly twice the current market cap of gold. 



Mow believes that the $500 million of the bond that is earmarked for buying bitcoin — assuming that other nations follow El Salvador&#8217;s lead — will accelerate its price appreciation by taking coins off the market. El Salvador&#8217;s announced purchase amounts to around 8,500 bitcoins, less than 0.4% of the 2.3 million bitcoins <a href="https://app.krowntrading.net/cryptos/markets" target="_blank" rel="noreferrer noopener">currently on exchanges</a>, although that number has been gradually trending downward for the past four months.



During a presentation with El Salvador’s President Bukele, <a href="https://twitter.com/MigueVaquerano/status/1462273300961370120" target="_blank" rel="noreferrer noopener">Mow said</a> that El Salvador will become “the Singapore of Latin America” and one of the most important financial centers of the world.&nbsp;El Salvador&#8217;s <a href="https://www.macrotrends.net/countries/SLV/singapore/gdp-per-capita" target="_blank" rel="noreferrer noopener">gross domestic product</a> per capita for 2020 was $3,799, while the <a href="https://www.macrotrends.net/countries/SGP/singapore/gdp-per-capita" target="_blank" rel="noreferrer noopener">GDP per capita</a> of Singapore was $59,798 in 2020.



The nearby <a href="https://goo.gl/maps/cHnurxSxZug8ECAG9" target="_blank" rel="noreferrer noopener">Conchagua volcano</a>, which powers the new bitcoin mining operation was connected to Blockstream&#8217;s orbiting bitcoin node last week.



<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">Today I setup a <a href="https://twitter.com/hashtag/BlockstreamSatellite?src=hash&amp;ref_src=twsrc%5Etfw">#BlockstreamSatellite</a> Base Station at the <a href="https://twitter.com/LaGeoSV?ref_src=twsrc%5Etfw">@LaGeoSV</a> Berlin geothermal plant, where the Volcano <a href="https://twitter.com/hashtag/Bitcoin?src=hash&amp;ref_src=twsrc%5Etfw">#Bitcoin</a> Mine is located. The facility is now connected to our satellite network &amp; receiving Bitcoin blocks from geosynchronous orbit. <a href="https://twitter.com/hashtag/Bitcoin?src=hash&amp;ref_src=twsrc%5Etfw">#Bitcoin</a> + 🌋 + 🛰 ! <a href="https://t.co/rVKLGy84PO">pic.twitter.com/rVKLGy84PO</a>&mdash; Samson Mow (@Excellion) <a href="https://twitter.com/Excellion/status/1461260747573452803?ref_src=twsrc%5Etfw">November 18, 2021</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



<h3>A regulatory oasis for <meta charset="utf-8">Bitfinex and Tether?</h3>



El Salvador plans to create a new securities law to support the tokenized bond issuance. In a release, iFinex’s role is described as bringing “expertise in adhering to and advancing cryptocurrency laws and regulations; working cooperatively and effectively with law enforcement and regulators; and, issuing and facilitating the trading of digital assets, including cryptocurrencies.”



According to a release from Blockstream, iFinex’s Bitfinex Securities will be processing the bonds, which may be purchased using BTC, USD, and USDT (Tether).



iFinex’s parent, Bitfinex has been <a href="https://cms.blockworks.co/tethers-settlement-with-the-nyag-a-positive-for-industry/" target="_blank" rel="noreferrer noopener">fined by the New York Attorney General</a> over irregularities in reporting on Tether’s reserves. Tether is <a href="https://cms.blockworks.co/tether-remains-stable-amid-reports-of-doj-probe/" target="_blank" rel="noreferrer noopener">currently being probed</a> by the Department of Justice over allegations of bank fraud, and it is understood that the probe is regarding Tether’s banking relationships in its early days, when it banked with a number of institutions in Taiwan. Tether still provides an address in Taiwan on its FinCen registration, despite having no apparent connections to the country.



Blockstream did not make Mow available for comment, nor was the company able to share the bond’s prospectus with Blockworks.



<hr class="wp-block-separator">
Get the day’s top crypto news and insights delivered to your inbox every evening.&nbsp;<a href="https://cms.blockworks.co/newsletter/?source=end" target="_blank" rel="noreferrer noopener">Subscribe to Blockworks’ free newsletter</a>&nbsp;now.
<hr class="wp-block-separator">

El Salvador Plans ‘Bitcoin City’ Funded by Bitcoin Bonds and Powered by a Volcano

<div id="highlights-block_6169a0e222938" class="highlights">
 <ul>
 <li>CFTC has determined that Tether Limited&#8217;s stablecoin, USDT, was not fully backed by dollar reserves for 17.5 months between 2016 and 2018, and that Tether and its parent Bitfinex were commingling funds during this time</li>
 <li>While Tether has indicated that it will pay the fines, it still maintains that USDT was always fully backed — albeit not always in cash</li>
 </ul>
 
</div>



Tether Limited has settled with another US regulator, agreeing to pay a $41 million fine for “making untrue or misleading statements and omissions” about the backing of its stablecoin tokens.&nbsp;



The Commodity Futures Trading Commission today issued an order settling charges with Tether saying its stablecoin was only backed by reserves for 6.5 months during a period of two years between 2016 and 2018 and that the company commingled funds between its reserve accounts and corporate accounts.



“The order also finds that, instead of holding all USDT token reserves in US dollars as represented, Tether relied upon unregulated entities and certain third-parties to hold funds comprising the reserves,” the CFTC said in a <a href="https://www.cftc.gov/PressRoom/PressReleases/8450-21" target="_blank" rel="noreferrer noopener">press release</a>.&nbsp;



The order also highlighted that Tether failed to provide an audit of its reserves. While various accounting firms under the employ of Tether and parent company Bitfinex have provided attestations about the reserves behind Tether, the stablecoin issuer has yet to provide an audit — which carries significant legal weight.&nbsp;Bitfinex was also fined $1.5 million in the CFTC settlement.



For its part, Tether maintains that the CFTC investigation and order found no issues relating to Tether’s current operations.&nbsp;



“There is no finding that tether tokens were not fully backed at all times—simply that the reserves were not all in cash and all in a bank account titled in Tether’s name, at all times,” Tether said in a <a href="https://tether.to/statement-on-tethers-settlement-with-the-cftc/" target="_blank" rel="noreferrer noopener">statement published on its website</a>. “As Tether represented in the Order, it has always maintained adequate reserves and has never failed to satisfy a redemption request.”



This fine from the CFTC comes months after Tether’s settlement with the New York Attorney General, in which the stablecoin issuer agreed that, for a period, it did not have one-to-one reserves to cover the issued USDT tokens. At the time, the company loaned Bitfinex $850 million to cover losses Bitfinex incurred when authorities seized accounts belonging to a payment processor called Crypto Capital. Part of this settlement involved the company being barred from offering its services to residents of New York or companies domiciled in the state.



Since the NYAG settlement, the market cap of USDT has more than doubled to a total of over $70 billion. 



Tether <a href="https://cms.blockworks.co/tether-remains-stable-amid-reports-of-doj-probe/" target="_blank" rel="noreferrer noopener">is also currently being probed</a> by the US Department of Justice for allegedly misleading the banks it once had a relationship with to the nature of its business.



At time of publication, USDT currently remains stable at a one-to-one peg with the USD, according to data from <a href="https://www.coingecko.com/en/coins/tether" target="_blank" rel="noreferrer noopener">CoinGecko</a>.