Casey Wagner

Ben Strack

The SEC is going after the Tron network’s founder for allegedly selling unregistered securities in the latest action taken by US regulators against crypto industry players.



<a href="https://blockworks.co/tag/justin-sun" target="_blank" rel="noreferrer noopener">Justin Sun</a> orchestrated the “unregistered offer and sale, manipulative trading, and unlawful touting of crypto asset securities,” according to an SEC <a href="https://www.sec.gov/news/press-release/2023-59" target="_blank" rel="noreferrer noopener">press release</a> and legal documents filed Wednesday in the US District Court for the Southern District of New York.



The SEC’s probe extended beyond Sun, however, considering the regulator said it reached a settlement with eight celebrities, ranging from&nbsp;Lindsay Lohan to “Soulja Boy,” for allegedly promoting the tokens in question.&nbsp;



Sun founded the Tron network in 2017. The network launched its mainnet the following year and became a <a href="https://blockworks.co/tag/daos" target="_blank" rel="noreferrer noopener">DAO</a> in 2021.



The SEC alleges that starting in about August 2017, Sun distributed billions of <a href="https://blockworks.co/price/trx" target="_blank" rel="noreferrer noopener">TRX</a> and <a href="https://blockworks.co/price/btt" target="_blank" rel="noreferrer noopener">BTT</a> tokens to the public while creating secondary markets on which these assets could be traded.&nbsp;



Because Sun sold these as securities, the commission alleges, he was obligated to register these sales with the SEC, but never did.&nbsp;&nbsp;



The agency is also accusing Sun of “fraudulently manipulating the secondary market for TRX through extensive wash trading,” according to the press release. He allegedly accomplished this through the Tron network, as well as the BitTorrent Foundation, which owned accounts used in the trading, and Rainberry — whose employees transferred funds to facilitate the trading, the lawsuit claims.



The <a href="https://blockworks.co/tag/tron" target="_blank" rel="noreferrer noopener">Tron</a> network did not immediately comment on the charges. Sun did not immediately return multiple requests for comment, but <a href="https://twitter.com/justinsuntron/status/1638742625003130881" target="_blank" rel="noreferrer noopener">tweeted</a> Thursday that the &#8220;complaint lacks merit.&#8221; 



“While we’re neutral about the technologies at issue, we’re anything but neutral when it comes to investor protection,” Gurbir Grewal, director of the SEC’s Division of Enforcement, said in a statement. “As alleged in the complaint, Sun and others used an age-old playbook to mislead and harm investors by first offering securities without complying with registration and disclosure requirements and then manipulating the market for those very securities.”



An SEC spokesperson did not immediately return a request for further comment.&nbsp;



Including Soulja Boy (DeAndre Cortez Way) and Lindsay Lohan, a total of eight celebrities have found themselves in the crosshairs of regulators. The SEC additionally charged the following for allegedly illegally promoting TRX and/or BTT without disclosing a paid partnership: Jake Paul, Austin Mahone, Michele Mason (Kendra Lust), Miles Parks McCollum (Lil Yachty), Shaffer Smith (Ne-Yo), and Aliaune Thiam (Akon).



Each of the above individuals, with the exceptions of Cortez Way and Mahone, has settled with the SEC for $400,000, the agency said.&nbsp;



It’s <a href="https://blockworks.co/news/ripple-counsel-crypto-usa">not the first time the SEC has targeted a crypto company</a> for issuing a token it deems a security. Ripple has been battling with the agency in court for more than two years over its XRP token, which the vast majority of exchanges delisted when the lawsuit began in 2020.&nbsp;



Sun’s charges may be settled before going to trial.&nbsp;



Updated March 22, 2023 at 7:26 PM ET with additional context and quotes throughout, and March 23, 2023 at 9:25 am ET with Justin Sun&#8217;s comment.



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SEC Sues Tron Network Founder for Allegedly Selling Securities

Jon Rice

Tiresome marketing stunts are hardly new in crypto.&nbsp;



So it was no surprise when last week, two men notable partly for their dubious achievements (yet primarily for their capacity for inserting themselves into trending narratives) did what they do best.



They got lots of people to talk about them.



Balaji Srinivasan threw a million bucks at a silly bet. Predicting US hyperinflation and a price of a million dollars for one bitcoin within 90 days, he put his $1M up against some lucky rube’s 1 BTC. (Naturally, one of crypto’s biggest celebrities was chosen to hold the stakes.)



Justin Sun, meanwhile, made the alarming — and nonsensical — claim that he would buy Credit Suisse for $1.5 billion, shortly after UBS’ billion-dollar offer had been rejected.



Balaji Srinivasan was the CTO of Coinbase at one point, an exchange not noted for its technical prowess during busy periods, while Justin Sun’s TRON ripped off other <a href="https://www.plagiarismtoday.com/2018/02/01/the-multi-billion-dollar-plagiarism-scandal/">projects</a>’ innovations. Neither man has a resume that most people would consider entirely admirable, but both have made a very, very, large sum of money.



And it’s the grotesque flaunting of this cash that is the first hint that the two men have more in common than they might like to admit. A million here, a billion there… tweeted with barely a concern in the world, despite representing life-changing money to 99% of the people on this planet.



Without getting deep into the abject silliness of Balaji’s bet itself (as commentators noted, the least of your worries would be the price of a bitcoin, in that war-torn world) or the fact that no self-respecting bank would ever consider Sun’s proposal, both are perfect examples of carnival-barking pitchmen making headlines rather than sense.



Srinivasan is a bold prognosticator, a self-appointed tech Nostradamus, whose apparently prescient analysis of the COVID-19 pandemic’s early stages conferred upon him some sense of mystical power among a certain subset of the Twitterati.



He certainly sounds clever. He probably is clever. But above all, Balaji is a critic, a Trumpian media character whose calling seems to be to inject chaos into every system.



He’s adept at inserting himself into narratives, making controversial proclamations regarding crypto, or AI, or inflation, or whatever happens to be the trending topic of the day.



With this latest stunt, questions have abounded regarding Balaji’s intentions: Is he serious? Is he concerned? Is he shorting bank stocks? Is he heavy enough into Bitcoin that a small movement up could offset his wager?



Who knows. Who cares? It’s a silly gambit that got him lots of attention on Twitter, and even write-ups from serious media outlets like Fortune and CNBC.



Meanwhile, Justin Sun’s $1.5 billion offer for Credit Suisse was met with ridicule rather than astonishment.



Because this is the same Justin Sun who promised to give away a Tesla in an early marketing stunt (the giveaway was a complete <a href="https://cryptobriefing.com/tron-tesla-giveaway-flat/">flustercluck</a>, and it’s not clear he ever gave the car to anyone).



The same Justin Sun who canceled on Warren Buffett (although to be fair, that lunch eventually happened).



The same Justin Sun who “missed the launch” of the trip to <a href="https://twitter.com/justinsuntron/status/1473641965979897862">space</a> he won with a $28 million bid, promising instead that he’d take five people with him in 2022. (He didn’t.)



The same Justin Sun who <a href="https://cointelegraph.com/news/tron-obstructed-legitimate-attempts-to-claim-its-1-million-twitter-hack-bounty">bowed out</a> of a $1M bounty he promised for anyone who identified the Twitter hacker in 2020… who exploited the FTX drama with a stunt to “rescue investors” that only allowed withdrawals of Tron (TRX) tokens.



That list can go on and on.



Justin Sun was never going to buy Credit Suisse. Justin Sun can’t give away a Tesla without ballsing up the entire operation.



No, Justin Sun inserts himself into these conversations to fixate media attention on himself, and his cryptocurrency projects.



Which is precisely why Balaji and Justin are so similar, even though Balaji is the beneficiary of an adoring ensemble of fans who hang on his every five-dollar word, while Justin is roundly mocked by those accustomed to his antics.



Their currency is currency. They need to be part of the conversation. Their brands are, very specifically, tied to their adjacency to the national debate.



To what end?



Whatever it is, you can bet it’s not to make themselves poorer.&nbsp;



And you can safely ignore them. That ‘mute’ button on Twitter is there for a reason.



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Why Balaji and Justin Are Two Peas in a Pod

As stablecoin USDD continues to trade below its peg, Justin Sun’s Huobi Global is suffering the consequences.&nbsp;



The crypto exchange has lost 18% of its market share volume since 2020 and faces an “uphill challenge” to claw it back, according to <a href="https://marketing.kaiko.com/huobi-market-share-plummets-in-2022?ecid=AOKeC1bT368fiSsbn0gy6c0fbLHnD37-FKuzd0GB-S_g3dV_UjT75qNkijnRcupqoObDf8sZzeDl&amp;utm_campaign=Research%20newsletter&amp;utm_medium=email&amp;_hsmi=67605844&amp;_hsenc=p2ANqtz-8SeydFj-Lg3OgST_EZvzcCm-jNdvhg1exXW2Uu-nYUyPMLxbf0zMDteIzWQ6KJGy1FII45P16kz8zd-zVySaZrAgUxKg2G49ZdbzhCP7nO2IaKMv0&amp;utm_content=67605844&amp;utm_source=hs_email" target="_blank" rel="noreferrer noopener">research</a> from data provider Kaiko on Monday. By the end of 2022, Huobi represented 4% of the overall exchange market, down from 22% in 2020. 



Stablecoin USDD is issued by the TRON DAO Reserve, which stabilizes exchange rates for stablecoins issued on the TRON blockchain, founded by Sun.&nbsp;



Sun’s latest woes began when USDD failed to regain its peg after FTX’s collapse. It has remained below $1 since. By publication, USDD was trading around $0.98.



Huobi customers pulled over $100 million from the platform last week as solvency concerns mounted. Sun, who is Huobi’s majority <a href="https://blockworks.co/news/huobi-founder-sells-100-stake-to-justin-sun-fund-report" target="_blank" rel="noreferrer noopener">shareholder</a>, in turn moved $100 million of USDC and USDT from Binance to Huobi.&nbsp;



Though <a href="https://blockworks.co/news/huobi-stablecoin-plunges-70-as-justin-sun-readies-tron-replacement" target="_blank" rel="noreferrer noopener">USDD</a> could “still regain its peg,” according to Kaiko analysts, Sun’s exchange has gone down as “undoubtedly the biggest loser of the crypto bear market.”



USDD — which issuers <a href="https://usdd.io/?utm_campaign=Research%20newsletter&amp;utm_source=hs_email&amp;utm_medium=email&amp;utm_content=67605844&amp;_hsenc=p2ANqtz-9hhDIJvgHvH5UeIscgpCjkz1a8AhVMPUMj6Vq8KDcXh2s1VzRuwCZfX1zTOICkg4n77A7ZIX6BR0tXHpKHljevBlmYCO5Dx9eUmuxvGLy86G56DTs#/" target="_blank" rel="noreferrer noopener">claim</a> is backed with a collateral ratio of more than 200% in combination of TRON’s native TRX, bitcoin, USDC and USDT — has faced significant headwinds, Kaiko said.&nbsp;



“When looking at USDD-USDT order books, which is the highest volume trading pair, we can observe that market depth on the bid and ask side has been persistently imbalanced since early December,” analysts wrote. “The ratio of bids to asks (total volume of bids divided by volume of asks) was below 1 for most of the past month, which suggests heavy selling pressure is keeping the price down.”



Earlier this month, Huobi moved to lay off 20% of its staff in response to the continued selloff in cryptoassets.



Binance, which suffered its own crisis of confidence in December, when customers pulled $6 billion off the exchange, remains the top platform by market share. Of centralized exchanges, Binance holds 80% of market share relative to 11 other centralized platforms, including Coinbase and Kraken.&nbsp;



“Overall, the market has consolidated significantly with Binance dominating the majority of trade volume relative to both centralized and decentralized exchanges,” Kaiko analysts wrote.



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Justin Sun’s Woes Continue as USDD Depeg Sparks Huobi Concerns

Shalini Nagarajan

<div id="highlights-block_635f9dc3a54ad" class="highlights">
 <ul>
 <li>Justin Sun, who now plays a key role at Huobi, plans to replace HUSD with his own USDD</li>
 <li>HUSD&#8217;s recent plunge likely marks the end for the crypto exchange&#8217;s native stablecoin</li>
 </ul>
 
</div>



The swansong for Huobi Global&#8217;s dollar-pegged stablecoin is now playing out. HUSD fell to a low of <a href="https://www.coingecko.com/en/coins/husd" target="_blank" rel="noreferrer noopener">28 cents</a> this morning, four days after the crypto exchange <a href="https://www.huobi.com/support/en-us/detail/104921194018990" target="_blank" rel="noreferrer noopener">announced</a> it would delist the token.



Huobi, one of the largest crypto exchanges in the space, was recently <a href="https://cms.blockworks.co/huobi-founder-sells-100-stake-to-justin-sun-fund-report/" target="_blank" rel="noreferrer noopener">snapped up</a> by a Hong Kong-based asset management firm About Capital, which is <a href="https://cms.blockworks.co/huobi-founder-sells-100-stake-to-justin-sun-fund-report/" target="_blank" rel="noreferrer noopener">reportedly</a> spearheaded by Justin Sun. 



While Sun has denied being in charge of About Capital (as he initially did when he <a href="https://www.coindesk.com/markets/2019/11/12/despite-denials-tron-founder-confirms-investment-in-poloniex-crypto-exchange/" target="_blank" rel="noreferrer noopener">acquired</a> Poloniex), the controversial crypto entrepreneur is an official Huobi advisor following the deal. Sun told <a href="https://www.coindesk.com/video/justin-sun-usdd-to-be-one-of-the-settlement-stablecoins-on-huobi/" target="_blank" rel="noreferrer noopener">CoinDesk</a> earlier this month that Huobi would “probably list all the cryptocurrency against USDD,” a Tron-based stablecoin.



Huobi recently said all users&#8217; <a href="https://www.blockworksresearch.com/assets/husd" target="_blank" rel="noreferrer noopener">HUSD</a> would be converted to Tether (USDT) at a 1-to-1 ratio.&nbsp;The stablecoin was launched in September 2019, with its market capitalization briefly peaking at $1 billion in May 2021.



However, HUSD since failed to capture significant market share, hovering as low as $80 million last month. HUSD no longer features on Huobi but the token continues to trade on decentralized exchanges, with MDEX <a href="https://www.coingecko.com/en/coins/husd#markets" target="_blank" rel="noreferrer noopener">contributing</a> nearly 90% of the daily trade volume.



All this while Huobi may be undergoing a complete overhaul of its teams. China-based journalist Colin Wu <a href="https://twitter.com/WuBlockchain/status/1586308521418555392" target="_blank" rel="noreferrer noopener">reported</a> on Saturday that Sun’s TRON team appears to have taken charge of key divisions at the crypto trading firm, and Huobi’s current strength of 1,600 may be downsized as Sun believes there are too many employees.



In a <a href="https://twitter.com/justinsuntron/status/1586954207059329024" target="_blank" rel="noreferrer noopener">tweet</a> on Monday, Sun said his team was “extremely cautious” about the company’s future staff arrangements.&nbsp;Huobi didn’t return Blockworks’ request for comment by press time.



Huobi indeed appears to be in flux, but stablecoins have faced several headwinds over the last few months, including increased regulatory focus and changes in market perception from recent high-profile incidents like the collapse of Terra.&nbsp;&nbsp;



NEAR protocol recently <a href="https://cms.blockworks.co/near-nixes-algorithmic-stablecoin-usn/" target="_blank" rel="noreferrer noopener">shelved</a> its own algorithmic stablecoin USN to avoid another Terra-like situation.



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Huobi Stablecoin Plunges 70% as Justin Sun Readies Tron Replacement

Sebastian Sinclair

<div id="highlights-block_630dc74925e4c" class="highlights">
 <ul>
 <li>Huobi Group founder Leon Li was reportedly looking to offload his majority stake for more than $1 billion</li>
 <li>FTX CEO Sam Bankman-Fried and Tron founder Justin Sun were said to have held preliminary talks</li>
 </ul>
 
</div>



Sam Bankman-Fried has dispelled rumors of his crypto exchange FTX acquiring rival Huobi, after reports surfaced earlier this month indicating preliminary talks had taken place.



“Just to be explicit because apparently a lot of people are saying this: No, we are not planning to acquire Huobi,” Bankman-Fried, FTX’s CEO, <a href="https://twitter.com/SBF_FTX/status/1564263100597010438?s=20&amp;t=OkhxccjyfDwQ0qifwzVZeA" target="_blank" rel="noreferrer noopener">tweeted</a> on Monday.



Bloomberg earlier this month reported that Huobi Group founder Leon Li had sought to offload his majority stake for more than $1 billion, which would value the exchange at $3 billion.



<a href="https://cms.blockworks.co/crypto-moguls-compete-for-huobi-majority-stake-report/" target="_blank" rel="noreferrer noopener">Preliminary talks</a> reportedly took place between Huobi and FTX billionaire Bankman-Fried, as well as Tron founder Justin Sun, according to Bloomberg, which cited sources familiar with the matter.



Sun later denied his company would pursue an acquisition. “We have not engaged in any matters related to the Bloomberg story at this moment,” Sun <a href="https://twitter.com/justinsuntron/status/1558013871343824897?s=20&amp;t=sYMZb9Yjj2i3jJVQUqG5yA" target="_blank" rel="noreferrer noopener">tweeted</a>, emphasizing he had not held any negotiations with Huobi Group founder Leon Li.



Li was reportedly seeking a 60% takeover bid of Seychelles-headquartered Huobi. If a buyer was found at its purported valuation, it would be one of the largest crypto deals of the year. 



Huobi investors Sequoia China and Zhenfund were reportedly informed about the potential deal in a shareholders meeting last month.



In any case, industry participants have come to expect buyouts and takeover bids from FTX. The crypto derivatives and spot market exchange has scooped up businesses amid this year&#8217;s depressed market conditions.



FTX acquired Japan’s fintech firm <a href="https://cms.blockworks.co/ftx-acquires-liquid-group-expanding-presence-in-japan/" target="_blank" rel="noreferrer noopener">Liquid Group</a> for an undisclosed sum in February, Canadian crypto trading firm <a href="https://cms.blockworks.co/bankman-fried-belies-bear-bids-for-bitvo/" target="_blank" rel="noreferrer noopener">Bitvo</a> in June, and <a href="https://cms.blockworks.co/ftx-reaches-deal-to-acquire-blockfi-for-up-to-240m/" target="_blank" rel="noreferrer noopener">initiated</a> a complicated bailout of crypto lender BlockFi in July.



FTX also offered to acquire bankrupt lender <a href="https://cms.blockworks.co/ftx-offers-to-bail-out-voyager/" target="_blank" rel="noreferrer noopener">Voyager</a>, which later rebuffed the advance, labeling it a “<a href="https://cms.blockworks.co/voyager-lawyers-clash-with-bankman-fried-over-low-ball-buyout-offer/" target="_blank" rel="noreferrer noopener">low ball bid</a>.”



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Sam Bankman-Fried: No, FTX is Not Acquiring Huobi

David Canellis

<div id="highlights-block_62f9c087b20b4" class="highlights">
 <ul>
 <li>Sun claimed he was sent 0.01 ETH from an anonymous source via Tornado Cash, leading to Aave blocking his blockchain address</li>
 <li>Privacy advocates say the Treasury&#8217;s move to ban Tornado Cash is a violation of human rights</li>
 </ul>
 
</div>



Prominent crypto users reported being blocked by web apps of major DeFi (decentralized finance) protocols over the weekend, as the ecosystem continues reckoning with recent Tornado Cash sanctions.



Tron founder Justin Sun claimed he was &#8220;officially blocked&#8221; from lending protocol Aave after someone &#8220;randomly&#8221; sent him a small amount of ether via <a href="https://cms.blockworks.co/crypto-mixers-and-privacy-coins-can-they-resist-censorship/">crypto mixer</a> Tornado Cash. 



More than 600 <a href="https://twitter.com/PeckShieldAlert/status/1558426649196392448" target="_blank" rel="noreferrer noopener">addresses</a> were hit with the same 0.01 ETH ($19.25) &#8220;dust attack,&#8221; according to analytics unit PeckShield, including crypto exchanges and public figures such as Coinbase CEO Brian Armstrong and Jimmy Fallon.



Last Monday, Tornado Cash was placed on the Office of Foreign Assets Control&#8217;s blacklist over its usage by North Korean hacker crew Lazarus Group to launder stolen digital assets. The ban made it illegal for US citizens to interact with its Ethereum smart contracts.



Read more: <a href="https://cms.blockworks.co/crypto-mixers-and-privacy-coins-can-they-resist-censorship/">Coin Mixers and Privacy Coins: Can They Resist Censorship?</a>



OFAC in total sanctioned 45 Ethereum addresses associated with Tornado Cash, many of them USDC contracts, leading MakerDAO co-founder Rune Christensen to <a href="https://cms.blockworks.co/makerdao-plans-to-yolo-usdc-into-eth/" target="_blank" rel="noreferrer noopener">float ditching the stablecoin</a> from its treasury altogether. 



Days later, Dutch financial crimes agency FIOD <a href="https://cms.blockworks.co/netherlands-arrests-suspected-tornado-cash-dev-days-after-us-sanctions/" target="_blank" rel="noreferrer noopener">arrested a 29-year-old</a> Tornado Cash developer in Amsterdam over their suspected involvement in facilitating money laundering via the platform.



Sun <a href="https://twitter.com/justinsuntron/status/1558397647165091840?s=20&amp;t=mn2AWJKRtgIM9YCb79zYrA" target="_blank" rel="noreferrer noopener">tweeted</a> his ban on Friday. &#8220;This address is blocked on app.aave.com because it is associated with one or more blocked activities,&#8221; the screenshot reads. Ethereum proponent Anthony Sassano said he experienced similar treatment.



Aave later responded to the social media outcry with its own Twitter thread. The firm explained it had implemented a API maintained by compliance startup TRM Labs to ensure it&#8217;s in line with US sanctions. 



<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">4/8 We have been made aware that the API may have made incorrect calls about which wallet should be included in block-lists, in this case including those wallets that were sent “dusted” ETH by third parties interacting with the Tornado Cash contracts without consent.&mdash; Aave (@AaveAave) <a href="https://twitter.com/AaveAave/status/1558537742497337344?ref_src=twsrc%5Etfw">August 13, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div><figcaption>Aave later clarified that TRM Labs&#8217; API did not make incorrect calls, but rather Aave&#8217;s front-end implementation was responsible for the errors.</figcaption></figure>



TRM Labs&#8217; API identifies &#8220;all wallets that have interacted with Tornado Cash contracts post-sanctions, even so-called &#8216;dusted&#8217; self-custodial wallets,&#8221; Aave said.



This explains why some users were unable to access the protocol&#8217;s front-end, even though its web app is hosted by peer-to-peer protocol Inter-Planetary File System.



Web apps for other popular DeFi protocols, including decentralized exchange Uniswap and automated market maker Balancer, also <a href="https://cryptoslate.com/defi-protocols-aave-uniswap-balancer-ban-users-following-ofac-sanctions-on-tornado-cash/" target="_blank" rel="noreferrer noopener">reportedly</a> blocked users flagged by TRM Labs&#8217; database.



&#8220;The team [Aave] mitigated these issues by immediately addressing this, and we continue to evaluate responsible and reasonable risk mitigation given the circumstances,&#8221; Aave said. Sassano later tweeted to confirm his block had been lifted.



<h3>DeFi still weighing full impact of Tornado Cash sanctions </h3>



While their web apps rely on centralized services, Aave, Uniswap and Balancer are non-custodial, peer-to-peer platforms powered by immutable smart contracts.



This means anyone at all can spin up alternative front-ends that don&#8217;t utilize automated block lists like TRM Labs&#8217;, allowing blocked users to interact with their permissionless protocols. 



Still, seeing high-profile individuals such as Sun indirectly impacted by the Treasury&#8217;s recent ban is somewhat troubling. The department&#8217;s move has been called into question by activists and <a href="https://twitter.com/ErikVoorhees/status/1556716202394693633?s=20&amp;t=HOszweeeWz71RYhI1GOjpA" target="_blank" rel="noreferrer noopener">proponents,</a> who say &#8220;<a href="https://coincenter.substack.com/p/us-sanction-of-tornado-cash-curtails" target="_blank" rel="noreferrer noopener">hair-raising precedent</a>&#8221; is an &#8220;unconstitutional restriction on free speech.&#8221;



Privacy advocates argue Tornado Cash is intended to preserve sensitive information relating to a user&#8217;s wallet, including the amount stored, where funds are <a href="https://twitter.com/RezaJafery/status/1556751888896258049?s=20&amp;t=HOszweeeWz71RYhI1GOjpA" target="_blank" rel="noreferrer noopener">sent and received</a>, and general DeFi activity.



Digital rights advocacy group Fight for the Future last week wrote that the Treasury made a &#8220;clumsy attempt&#8221; to sanction Tornado Cash, compromising human rights and the US&#8217; first amendment.



&#8220;The Internet is feeling the chilling effects of this choice: the&nbsp;<a href="https://github.com/tornadocash" target="_blank" rel="noreferrer noopener">open source code</a>&nbsp;used to run Tornado.cash has been taken down from Github,&#8221; the group said. &#8220;Unfortunately it seems that such an effect is exactly what the US government was seeking.&#8221;



Commonplace sanctioning of smart contracts could have wide-reaching repercussions for DeFi and the blockchain industry writ large, <a href="https://twitter.com/LeXpunK_Army/status/1558869220615766016?s=20&amp;t=HOszweeeWz71RYhI1GOjpA" target="_blank" rel="noreferrer noopener">proponents say</a>.



<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">There is nothing wrong with using a tool just to have your privacy better protected. Using TC is like using VPN or Tor to help improve your online privacy. The creators of these technologies are not doing anything wrong. They simply created a tool to help improve privacy&mdash; Bobby Ong (@bobbyong) <a href="https://twitter.com/bobbyong/status/1558276760617177088?ref_src=twsrc%5Etfw">August 13, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Fireblocks CEO Michael Shaulov believes technology built over the past decade to catch bad actors has led to increased threat intelligence sharing between industry and law enforcement. Although, the systems in place are not perfect, he said.



&#8220;In theory, Tornado Cash has a lot of interesting properties for anonymizing your transactions,&#8221; Shaulov told Blockworks in an interview. &#8220;But in practice, we all know that the people that were using it for a sizable part of the activity were not the good guys.&#8221;



Shaulov mused on the idea of a continuously updated database &#8220;at the wallet level,&#8221; with the addresses made public in a bid to aid other platforms and protocols from engaging with tainted wallets.



Shaulov, who spent four years in Israeli intelligence developing monitoring software for law enforcement, likened the Treasury&#8217;s actions against Lazarus and Tornado Cash to that of a game of &#8220;cat and mouse&#8221; across DeFi.



&#8220;Chasing after bad people on the internet is not a new thing,&#8221; he said, adding that banning protocols like Tornado Cash wasn&#8217;t a real solution.&#8221;



&#8220;It&#8217;s open source,&#8221; Shaulov said in relation to Tornado Cash&#8217;s code. &#8220;What prevents the next person from basically spinning that contract another 50,000 times?&#8221;



Shaulov then suggested increased intelligence sharing between all related parties, such as Tornado Cash, Uniswap and the Treasury, who could then programmatically blacklist all wallets belonging to terrorists, for example.



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<hr class="wp-block-separator">

DeFi Web Apps Block Users Hit by Tornado Cash ‘Dust Attack’

Jack Kubinec

<div id="highlights-block_62f64485b1178" class="highlights">
 <ul>
 <li>“Justin Sun wants to sow dissent, confusion and FUD in order for him to benefit financially,” one former ETH Foundation member said</li>
 <li>Low trade volumes and sinking prices have set Poloniex&#8217;s Ethereum fork tokens on a rocky path </li>
 </ul>
 
</div>



Figures around crypto <a href="https://cms.blockworks.co/ethereum-proof-of-work-fork-proposal-is-a-retail-trap-researchers-say/" target="_blank" rel="noreferrer noopener">have eye-rolled</a> at recent interest in a proof-of-work (PoW) Ethereum hard fork ahead of <a href="https://cms.blockworks.co/the-investors-guide-to-the-ethereum-merge/" target="_blank" rel="noreferrer noopener">the blockchain’s Merge to proof-of-stake</a> (PoS). Not Justin Sun.



The prominent — and deep-pocketed — figure stands defiantly in support of a long-lasting Ethereum blockchain powered by PoW.



Sun, the flamboyant founder of the <a href="https://cms.blockworks.co/tag/tron/" target="_blank" rel="noreferrer noopener">Tron network</a>, is waging a media campaign in support of a contentious Ethereum hard fork.



On Monday, Sun listed an IOU token representative of an eventual PoW-powered ether, ETHW, on his Poloniex exchange, despite the Merge still being about a month away. Current ETH holders can deposit their real ether onto Poloniex and receive ETHW and another token, ETHS, the latter denoted as PoS-powered ether.


<div class="wp-block-image">
<figure class="alignright size-medium"><img decoding="async" loading="lazy" width="300" height="207" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/08/justin-sun-300x207.jpeg" alt="JUSTIN SUN, FOUNDER OF TRON AND CEO OF BITTORRENT" class="wp-image-6365" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/08/justin-sun-300x207.jpeg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/08/justin-sun-300x207.jpeg?w=372 372w, https://blockworks-co.imgix.net/wp-content/uploads/2021/08/justin-sun-300x207.jpeg?w=378 378w, https://blockworks-co.imgix.net/wp-content/uploads/2021/08/justin-sun-300x207.jpeg?w=317 317w, https://blockworks-co.imgix.net/wp-content/uploads/2021/08/justin-sun-300x207.jpeg?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/08/justin-sun-300x207.jpeg?w=600 600w" sizes="(max-width: 300px) 100vw, 300px" /><figcaption>Justin Sun, Tron founder and BitTorrent CEO</figcaption></figure></div>


Sun floated the possibility of <a href="https://twitter.com/justinsuntron/status/1555112296006922240?s=20&amp;t=BvxOZwt9lGb1GJ42cT_ZJA" target="_blank" rel="noreferrer noopener">airdropping ETHW tokens</a> to developers who switched to the PoW chain. The entrepreneur’s freewheeling spending habits and rivalry with Ethereum make his interest in unsettling its ecosystem unsurprising, but the crypto influencer is struggling to sow doubt in PoS ahead of the Merge.



Three other crypto exchanges have listed ETHW and ETHS since Poloniex debuted the pair on Monday, Gate.io, MEXC and Digifinex, while BitMEX is readying to open trade, complete with leverage, in the next few days.



ETHW has bombed already, currently trading below half its all-time high recorded just after its listing, at around $71 as of 8:00 am ET — a whopping 96% below ether, which has climbed more than 10% since Monday.



ETHS has stuck closer to ether, however it still lags ETH by 4%, indicating those who’ve taken Sun up on his gambit are mostly dumping their tokens before the Merge — ETHW especially so.



The supporting platforms have altogether reported about $108 million in trade for the ether fork tokens so far, split evenly between the two, per CoinGecko. Poloniex and MEXC reported more than 90% of that volume.



<h3>Justin Sun sewing Ethereum discord is on brand</h3>



Years before Tron, Sun founded an app named Peiwo aiming to become China&#8217;s answer to Snapchat, but the platform <a href="https://www.scmp.com/tech/apps-social/article/3020282/cryptocurrency-entrepreneur-justin-sun-ran-hook-app-his-us46" target="_blank" rel="noreferrer noopener">evolved</a> into more of a dating app.



Sun has butted heads with the Ethereum camp since he entered crypto in 2017. Insiders say Tron initially <a href="https://www.plagiarismtoday.com/2018/02/01/the-multi-billion-dollar-plagiarism-scandal/" target="_blank" rel="noreferrer noopener">leveraged</a> a Java implementation of the Ethereum client for its own software, and Sun has been criticized for allegedly plagiarizing the Filecoin and IPFS white papers, including a <a href="https://twitter.com/VitalikButerin/status/982194680258486273" target="_blank" rel="noreferrer noopener">dig</a> directly from Ethereum co-founder Vitalik Buterin.



Nevertheless, Tron&#8217;s native token, TRX, is the 17th largest cryptocurrency by market value, boasting capitalization of $14 billion at its peak in 2018. Ether&#8217;s market value sits at almost $238 billion, second behind bitcoin&#8217;s $467 billion.



Sun’s wealth — fueled by TRX — has become the backbone of his personal brand.&nbsp;In 2018, he bought BitTorrent for $120 million in a cash <a href="https://www.engadget.com/2018-07-25-blockchain-company-tron-buys-bittorrent.html?guccounter=1&amp;guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&amp;guce_referrer_sig=AQAAAIJ29pytQL3dyGikrxG7FglvybWIcVbVkqMikM5lEiycvex7IpYTCwRA0pC4_jZLo0fSur003bOT2WXmxkxF7-rkowXbSqTSh8m84vGuCFCRxD76lKv6-UxdF0hxo5OLcFJpayUYGafT-6Xk3dEzONYoQw96Y5z9QzM1n2h8k_S3" target="_blank" rel="noreferrer noopener">deal</a>, a move to bring users of the peer-to-peer torrenting tool under the Tron umbrella. 



In 2019, he paid $4.6 million to have <a href="https://www.wsj.com/articles/warren-buffett-finally-sits-down-for-4-6-million-charity-meal-11581014466" target="_blank" rel="noreferrer noopener">lunch</a> with Warren Buffett. In 2020, Sun <a href="https://www.artnews.com/art-news/market/justin-sun-picasso-warhol-christies-buyer-1234588521/" target="_blank" rel="noreferrer noopener">spent</a> $20 million on a Picasso and $6 million on a <a href="https://twitter.com/justinsuntron/status/1398261268159426566" target="_blank" rel="noreferrer noopener">Beeple</a> NFT, having <a href="https://twitter.com/justinsuntron/status/1370226049208836100" target="_blank" rel="noreferrer noopener">underbid</a> the $69 million Beeple auction won by another crypto entrepreneur.



And last December, Sun <a href="https://www.washingtonpost.com/business/2021/12/22/justin-sun-blue-origin/" target="_blank" rel="noreferrer noopener">sunk</a> $28 million for a spot on one of Jeff Bezos’ Blue Origin spaceship flights, although the trip hasn&#8217;t yet occurred. During this year’s crypto crash, <a href="https://cms.blockworks.co/sun-says-he-may-spend-5b-to-save-crypto-even-as-usdd-fights-to-hold-peg/" target="_blank" rel="noreferrer noopener">Sun pledged up to $5 billion</a> in mergers to save illiquid crypto firms, mimicking <a href="https://cms.blockworks.co/sam-bankman-fried-out-to-win-whole-crypto-market-early-ftx-backer-says/" target="_blank" rel="noreferrer noopener">FTX billionaire Sam Bankman-Fried</a>.&nbsp;



But many in the industry criticize Sun for amassing his wealth, estimated in the hundreds of millions to billions, through hype instead of innovation.



“Sun would partner with a toaster if he thought it would pump the price of Tron,” Daniel Keller, co-founder of Web3 computing company Flux, told Blockworks. “It’s all about the marketing and very little about the technology.”



Blockworks reached out to Sun for comment but did not receive a reply by press time.



<h3>Poloniex could benefit from a contentious hard fork</h3>



Tron is the second-largest blockchain by total value locked inside decentralized finance dapps (decentralized apps), according to DeFiLlama, with nearly $6 billion.



No. 1 Ethereum has nearly seven times more, and Sun has not been shy about his desire to dethrone it. Sun repeatedly casts Tron as the same as Ethereum but with faster and cheaper transactions.



Sun also has a long-standing rivalry with Buterin. The pair have repeatedly exchanged jabs on <a href="https://twitter.com/VitalikButerin/status/1039697887054053376?s=20&amp;t=G77jP_qWk9ieUvh2eEk1sA" target="_blank" rel="noreferrer noopener">Twitter</a>, and Sun even <a href="https://decrypt.co/5943/justin-sun-crashes-vitalik-buterin-speech" target="_blank" rel="noreferrer noopener">interrupted</a> a Buterin keynote in 2019, accompanied by a person in a Tron-branded avocado costume.&nbsp;



The 32-year-old founder retired from his formal position at Tron at the end of last year to take up an ambassador post for the Caribbean island of Grenada — technically <a href="https://protos.com/sun-grenada-his-excellency-justin-crypto-tron-diplomatic-immunity-switzerland/" target="_blank" rel="noreferrer noopener">granting</a> him diplomatic immunity in Switzerland under certain circumstances.



His past squabbles with Ethereum still lead many to question Sun’s motives in supporting a contentious PoW Ethereum fork.



<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">Why <a href="https://twitter.com/hashtag/TRON?src=hash&amp;ref_src=twsrc%5Etfw">#TRON</a> is better than <a href="https://twitter.com/hashtag/ETH?src=hash&amp;ref_src=twsrc%5Etfw">#ETH</a>: 1. 2000TPS vs. 25TPS 2. Popular sovereignty of token vs. Authoritarian rules 3. 100M Dapp users vs. Thousands 4. None fees vs. High fees 5. Coin burn vs. No coin burn 6. $2B bonus vs. Zero 7. High scalability vs Poor scalability <a href="https://twitter.com/hashtag/TRX?src=hash&amp;ref_src=twsrc%5Etfw">#TRX</a> <a href="https://twitter.com/search?q=%24TRX&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$TRX</a> <a href="https://t.co/W7jEjmx0wp">pic.twitter.com/W7jEjmx0wp</a>&mdash; H.E. Justin Sun🌞🇬🇩 (@justinsuntron) <a href="https://twitter.com/justinsuntron/status/1002542868005732353?ref_src=twsrc%5Etfw">June 1, 2018</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



“Justin Sun wants to sow dissent, confusion, and FUD [fear, uncertainty, doubt] in order for him to benefit financially,” Hudson Jameson, a former Ethereum developer liaison, said in a Twitter DM.&nbsp;



Sun denies these claims, tweeting this week that his support for an ETH hard fork is “solely for the public good and not for profit at all.” Sun’s Poloniex would hypothetically stand to gain from a successful ETHW launch on Poloniex, which has seen its daily trading volume fall by more than half over the past year, <a href="https://www.coingecko.com/en/exchanges/poloniex#statistics" target="_blank" rel="noreferrer noopener">per CoinGecko</a>.



A representative for Poloniex said the exchange holds the same views as Sun regarding the Ethereum hard fork and is not profiting from ETHW due to the platform&#8217;s zero-fee trading.



“This is more of a ploy for him to bring people to Poloniex than for him to grow out this [PoW] model,” Flux’s Keller said. “All the technology that has to be built on this new iteration should have been done two years ago.”



Trading volumes and sinking prices indicate ether holders aren’t buying Sun’s narrative. His seemingly ill-fated attempt to divide Ethereum may indicate the public’s reduced appetite for charismatic crypto influencers of Sun’s ilk. 



Terra’s <a href="https://cms.blockworks.co/terra-looking-to-build-daos/" target="_blank" rel="noreferrer noopener">Do Kwon</a> and Celsius’ <a href="https://www.coindesk.com/layer2/2022/07/27/sky-high-yields-and-bright-red-flags-how-alex-mashinsky-went-from-bashing-banks-to-bankrupting-celsius/" target="_blank" rel="noreferrer noopener">Alex Mashinsky</a> both threw boisterous public personas behind their business interests before meeting spectacular meltdowns.&nbsp;



“What we’re starting to see is a more educated blockchain community,” Keller said, adding that investors will need to be more scrupulous ahead of the next bull market. “Make no mistake, there will be more Justin Suns.&#8221;



In any case, ether is gaining momentum as ETHW flounders. ETH topped $1,900 on Thursday for the first time in nine weeks after the protocol’s final test before the Merge, which occurred on the <a href="https://cms.blockworks.co/ethereum-steps-closer-to-pos-as-goerli-testnet-merge-goes-live/" target="_blank" rel="noreferrer noopener">Goerli testnet</a>, was successful.



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<hr class="wp-block-separator">

Justin Sun’s Plot to Divide Ethereum Off to Rocky Start

<div id="highlights-block_62f61778d47fe" class="highlights">
 <ul>
 <li>Huobi founder seeks a valuation of up to $3 billion</li>
 <li>It’s unclear whether affiliate firm Huobi Technology is part of the stake sale</li>
 </ul>
 
</div>



Leon Li, the founder and CEO of <a href="https://cms.blockworks.co/tag/huobi/" target="_blank" rel="noreferrer noopener">Huobi</a> Global, is in talks with investors to sell his majority stake in the cryptocurrency exchange, <a href="https://www.bloomberg.com/news/articles/2022-08-12/china-crypto-mogul-seeks-to-sell-huobi-stake-at-3-billion-value" target="_blank" rel="noreferrer noopener">Bloomberg reported</a> on Friday, citing unnamed sources.



Li, who co-founded Huobi in 2013, reportedly wants to sell about 60% of his stake. He’s aiming for a valuation between $2 billion to $3 billion, implying that a sale could generate over $1 billion, the report said.



FTX founder Sam Bankman-Fried and Tron founder Justin Sun are among potential investors that have held preliminary discussions with Huobi about the stake sale, it added.



As one of the world’s largest crypto trading platforms, Huobi often sees daily volumes <a href="https://coinmarketcap.com/exchanges/huobi-global/" target="_blank" rel="noreferrer noopener">above $1 billion</a>. The exchange slowly <a href="https://www.huobi.com/support/en-us/detail/54886961978434" target="_blank" rel="noreferrer noopener">pulled out of</a> servicing users in China — previously a hotbed of revenue and clientele — after the country declared crypto-related transactions illegal last year. 



It isn’t clear whether the stake involved includes the company’s Hong Kong-listed affiliate Huobi Technology, which manages digital assets for investors. Huobi Tech’s shares are down 45% so far this year, <a href="https://www.tradingview.com/chart/?symbol=HKEX%3A1611" target="_blank" rel="noreferrer noopener">TradingView</a> data shows.



Huobi, FTX and the Tron Network didn’t return Blockworks’ request for comment by press time.



Some well-positioned venture capitalists and investors considered the recent meltdown in cryptocurrency markets as a buying opportunity for new projects. Periods of turmoil in the market are also seen as the best time to develop new services in the crypto sector.



Bankman-Fried took it upon himself to go on a deal frenzy, announcing agreements to buy <a href="https://cms.blockworks.co/bankman-fried-belies-bear-bids-for-bitvo/" target="_blank" rel="noreferrer noopener">Canadian crypto trading firm Bitvo</a>, as well as <a href="https://www.financemagnates.com/cryptocurrency/ftx-us-to-acquire-embed-to-provide-white-label-brokerage-services/" target="_blank" rel="noreferrer noopener">Embed Financial</a> and <a href="https://cms.blockworks.co/ftx-reaches-deal-to-acquire-blockfi-for-up-to-240m/" target="_blank" rel="noreferrer noopener">BlockFi</a>. He also offered to bail out Voyager Digital, but the bankrupt crypto lender <a href="https://cms.blockworks.co/voyager-lawyers-clash-with-bankman-fried-over-low-ball-buyout-offer/" target="_blank" rel="noreferrer noopener">denied</a> what it termed his “low-ball” bid.



Sun — who prefers to be known as His Excellency after a 2021 diplomatic appointment from the Caribbean island nation of Grenada — said last month he was <a href="https://cms.blockworks.co/sun-says-he-may-spend-5b-to-save-crypto-even-as-usdd-fights-to-hold-peg/" target="_blank" rel="noreferrer noopener">prepared to join</a> Bankman-Fried in offering financial support to companies within the crypto ecosystem, saying that he and the Tron protocol he founded were “ready to serve.” Sun previously acquired a stake in crypto exchange Poloniex and file-sharing pioneer BitTorrent, now called Rainberry, for $140 million.



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<hr class="wp-block-separator">

Crypto Moguls Compete for Huobi Majority Stake: Report

<div id="highlights-block_62cc874c12cc5" class="highlights">
 <ul>
 <li>Justin Sun says he can step in to support struggling crypto firms as the liquidity crunch continues</li>
 <li>In mid-June, just months after its launch, algorithmic stablecoin USDD fell as low as $0.93 and has yet to recover to over $1</li>
 </ul>
 
</div>



Justin Sun, founder of the major blockchain network Tron, said he&#8217;s ready to join FTX CEO Sam Bankman-Fried in offering financial support to companies in the digital asset space that are struggling amid ongoing market volatility.&nbsp;



In a Tweet earlier this month, Sun said that he and the Tron protocol are “ready to serve.”&nbsp;



<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">We are friends with everyone and are always ready to serve. <a href="https://t.co/WBXwG5GDqL">https://t.co/WBXwG5GDqL</a>&mdash; H.E. Justin Sun 🅣🌞🇬🇩 (@justinsuntron) <a href="https://twitter.com/justinsuntron/status/1545369541269921792?ref_src=twsrc%5Etfw">July 8, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Sun said he could spend up to $5 billion on acquisitions, according to a report from The Block, but as Tron’s algorithmic stablecoin USDD struggles to recover from a recent depegging, one analyst questions Sun’s resources.



“I don&#8217;t think he&#8217;s saying he&#8217;s got this capital for the good of the industry, rather, I think it&#8217;s for publicity about how strong the foundation is at Tron,” Marcus Sotiriou, analyst at digital asset broker GlobalBlock, said. “When it actually comes down to it, I don&#8217;t think they would actually be able to use $5 billion.”&nbsp;



In mid-June, just months after its launch, USDD fell as low as $0.93 and has yet to recover to over $1.&nbsp;



The Tron DAO withdrew 2 billion TRX, Tron’s native token, to protect the USDD peg on June 13. On June 17, the DAO withdrew an additional 3 billion TRX to defend the peg. Withdrawing TRX is part of a broader strategy to limit liquidity for traders shorting TRX and prevent a collapse.



TRX was intended to eventually be used to redeem USDD, similar to the relationship between LUNA and UST, but the <a href="https://usdd.io/USDD-en.pdf" target="_blank" rel="noreferrer noopener">latest version</a> of the stablecoin white paper abandons any algorithmic stability mechanism in favor of an overcollateralized model relying entirely on arbitrage incentives on external markets.



According to Tron’s <a href="https://tdr.org/#/" target="_blank" rel="noreferrer noopener">website</a>, its DAO has $2.3 billion in reserves — if the protocol uses a significant amount of reserves to bail out other members of the industry, USDD’s stability could be further threatened, Sortiriou said.&nbsp;



“If Tron’s stablecoin was to be in jeopardy…it would have huge implications as it&#8217;s now grown into quite a significant size, but I don&#8217;t think it would be that catastrophic because we&#8217;ve already had the collapse of Luna and UST, which was a combined value of $100 billion,” Sotiriou said. “It&#8217;s apparent now how algorithm stablecoins can&#8217;t be fully trusted.”&nbsp;



Sun’s offer comes as Bankman-Fried continues to dish out cash to help struggling sectors of the crypto industry as the aftermath of the collapse of Three Arrows Capital and Celsius’ insolvency struggles.&nbsp;



FTX agreed to <a href="https://cms.blockworks.co/bankman-fried-belies-bear-bids-for-bitvo/" target="_blank" rel="noreferrer noopener">acquire Bitvo</a> and <a href="https://www.prnewswire.com/news-releases/ftx-us-acquires-clearing-firm-embed-to-enhance-ftx-stocks-301572039.html" target="_blank" rel="noreferrer noopener">Embed Financial</a>, and the exchange extended a <a href="https://cms.blockworks.co/blockfi-inks-250m-credit-deal-with-ftx-to-ease-liquidity-fears/" target="_blank" rel="noreferrer noopener">$250 million credit line</a> to BlockFi. Alameda Research, founded by Bankman-Fried, <a href="https://cms.blockworks.co/voyager-to-borrow-500m-from-alameda-amid-insolvency-rumors/" target="_blank" rel="noreferrer noopener">loaned $500 million</a> to Voyager.



Reports suggest FTX also aims to <a href="https://cms.blockworks.co/ftx-denies-claims-to-acquire-robinhood/" target="_blank" rel="noreferrer noopener">acquire Robinhood</a>, although Bankman-Fried, who personally acquired a <a href="https://cms.blockworks.co/ftxs-sam-bankman-fried-spots-opportunity-in-troubled-markets/" target="_blank" rel="noreferrer noopener">7.6% stake</a> in the investing app in May, has denied these claims.



Sun did not immediately respond to Blockworks’ request for comment.



Correction, July 12, 2022 at 8:26 am ET: USDD does not use an algorithmic stability mechanism like TerraUSD did.



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Justin Sun Says He May Spend $5B To Save Crypto Even as USDD Fights To Hold Peg

<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.



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How Cryptoasset Markets Have Changed Since Terra Crash

<div id="highlights-block_6290f00d3381f" class="highlights">
 <ul>
 <li>Bitcoin has dropped 4.6% over the past week, from around $30,300 to $28,900</li>
 <li>Stablecoin dominance has surged as crypto traders seek shelter from volatility</li>
 </ul>
 
</div>



Cryptocurrency markets have shed 7% of their collective market capitalizations over the past week, while equities are enjoying a relief rally.



Of the top 10 cryptocurrencies by market capitalization (sans stablecoins and wrapped bitcoin), Ethereum rival Avalanche has been the hardest hit. Avalanche’s native token, AVAX, is down 22% since last Friday — plunging from $29.55 to $23.01 at press time.



XRP lost 7%; Polkadot is down 3.3%; and Binance Coin dropped 2.5%, according to TradingView data compiled by Blockworks. Dogecoin is now trading even thanks to a 7% surge on Friday.



Market leader bitcoin has fallen 4.6% over the past seven days, from around $30,300 to $28,900 at 11:50 am ET.



Cardano (ADA), Solana (SOL) and Ether (ETH) all sank more than 12% – the latter weighed heavily by a seven-block “<a href="https://twitter.com/koeppelmann/status/1529458000011972610" target="_blank" rel="noreferrer noopener">reorganization</a>” of its experimental beacon chain earlier this week.



Ethereum’s beacon chain is meant to facilitate the network’s switch to a <a href="https://cms.blockworks.co/proof-of-work-vs-proof-of-stake-whats-the-difference/" target="_blank" rel="noreferrer noopener">proof-of-stake</a> protocol, dubbed “The Merge.” Some industry insiders are now concerned that more work must be done to ensure the new network is secure come The Merge, which is tipped to happen sometime in August.



While crypto has felt big losses, benchmark equity indices such as the NASDAQ 100 and the S&amp;P 500 are rising after seven straight weeks of red. The tech-heavy NASDAQ is up 6% this week, while the S&amp;P has recovered 5.5%. 



<h3>TRON bucks trend to become only top cryptocurrency in the green</h3>



As it turns out, TRON is the only top 10 crypto project to make gains over the past week. The blockchain’s native token TRX is up 11%, jumping from $0.073 to $0.081.



TRON founder Justin Sun at the beginning of May launched a Terra-style algorithmic stablecoin, and stablecoin giant Tether just deployed a token tied to the Mexican peso. Both projects utilize the long-serving blockchain.



In fact, TRX is the best performing top project in May by far. Every cryptocurrency in the top 10 by market capitalization (again, not counting stablecoins or wrapped bitcoin), has collapsed more than 19% in the month-to-date — TRX is up 30%.



The same goes for TRX in the year-to-date. BTC is down almost 38% in 2022; ETH is down 52%; but TRX has risen 7.5%. The entire crypto market has tanked 46% in that time, representing $1 trillion lost from its collective capitalization. Crypto is now worth about $1.18 trillion overall.



But while TRX is an outlier, altcoins across the board are still draining fast. This has caused BTC dominance (which measures how much of the crypto market is bitcoin) to almost hit 46.5% at 11:50 am ET – its highest point since October 2021, according to TradingView’s <a href="https://www.tradingview.com/symbols/CRYPTOCAP-BTC.D/" target="_blank" rel="noreferrer noopener">CryptoCap dominance index</a>.



Bitcoin dominance is up 16% year-to-date, while ether dominance is down almost 10%, now sitting at 18%.



But those moves pale in comparison to stablecoins Tether (USDT) and Circle’s USD Coin (USDC). USDT’s dominance has surged 78% this year, while USDC’s has exploded 128%, as traders seek shelter from more volatile cryptocurrencies.



Together, those two dollar-pegged tokens are now roughly 11% of the total crypto market, up from 5.5% at the start of the year.



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