Coin Hebdo, back to this week’s crypto, NFT, Metaverse & Web3 news. On the program: The SEC indicts Do Kwon, Platypus USD is hacked, the SEC wants to regulate crypto custody, Paxos stops issuing BUSD.
SEC charges Do Kwon
The United States Securities and Exchange Commission (SEC) has filed suit against Terraform Labs and its creator, Do Kwon, following the collapse of TerraUSD, a supposed stablecoin.
This collapse wiped out more than $40 billion for investors. The charges painted a very different picture from what Kwon and his partners painted for investors and the media. Kwon and his team deceived investors about the stability of TerraUSD, presented as a stablecoin algorithmic guaranteeing a parity of 1:1 with the US dollar.
The token lost its peg in May 2021, causing panic among users. Kwon turned to an unidentified third party, apparently Jump Trading, for help. Jump bought massive amounts of UST to restore parity and ultimately profited around $1.3 billion from its relationship with Terraform.
Kwon and his team also claimed that a payment company korean called Chai used the blockchain Terraform to settle millions of transactions. The SEC says it was a lie. According to the SEC, Kwon’s team programmed a server to receive and process data on Chai’s actual transactions with Korean traders, then issue instructions to the blockchain Terraform for replicate those transactions as if they were originally made on that blockchain.
The SEC also alleges that UST tokens and other tokens associated with Terraform were unregistered financial securitiesincluding wrapped tokens created when switching from one blockchain to another and mirror tokens designed to replicate the price movements of actions listed on the stock exchange. Terraform violated US securities rules by not registering these various products.
Furthermore, Do Kwon reportedly has a secret stash of over 10,000 bitcoins that have been transferred to a wallet of Terraform and related entities. Since May 2022, the bitcoins in the wallet have been transferred to an anonymous Swiss bank and converted into fiat currency, and over $100 million in fiat currency has been withdrawn from the bank since June of last year.
Kwon’s exact whereabouts remain unknown, making his trial tricky. He was reportedly seen in Serbia And dubai, and South Korean prosecutors recently traveled to the country to discuss his case with local officials. His South Korean passport has been revoked and his name has been added to an Interpol wanted list.
Paxos must stop issuing the stablecoin BUSD
The New York Department of Financial Services (NYDFS) has ordered Paxos to stop issuing its stablecoin, Binance USD (BUSD)according to a Binance spokesperson.
NYDFS is reportedly investigating Paxos, and US Securities and Exchange Commission (SEC) plans to sue Paxos over BUSD, alleging it is an unregistered security. BUSD is a stablecoin anchored to the US dollar and was launched in 2019 by Paxos and Binance.
Paxos has announced that it will stop issuing new stablecoins BUSD from February 21, although it will honor redemptions of BUSD until February 2024. Existing customers and new customers will still be able to redeem their funds in US dollars or convert their BUSD tokens to Pax Dollar (USDP), which is a regulated US dollar-backed stablecoin also issued by Paxos Trust.
Paxos reassured that the funds are safe and fully backed by reserves in their banks. Pax Gold (PAXG) and its other businesses are not affected by the NYDFS order.
OpenSea updates its royalties
OpenSeathe largest NFT marketplace, announced a price drop citing a change in the NFT ecosystem. This announcement comes shortly after Blur encouraged creators to sign up on its platform instead of OpenSea.
OpenSea tweeted on Friday that it had “started to see significant volume and users move to NFT marketplaces that don’t fully enforce creator earnings“. The move is a response to other NFT marketplaces’ decision to cut revenue for creators, including Blur.
Blur’s CEO pleaded for creators to sign up on his platform this week, saying creators cannot earn royalties on Blur and OpenSea simultaneously. The OpenSea price drop is an attempt to strike the right balance between the incentives and motivations of all ecosystem participants.
The marketplace also allows sales through competitors with the same policies, so creators won’t have to choose between receiving revenue on OpenSea or Blur.
OpenSea reduced its fees to 0% for a while, while moving to a 0.5% model for creator earnings, with the option for sellers to pay more. “This move should attract more users to the platform and provide a more level playing field for creators.”.
OpenSea said this is the start of a new era for the platform and they look forward to testing this model and finding the right balance of incentives and incentives for all participants in the ecosystem. With lower fees and the new creator compensation model, OpenSea could position itself as a more attractive option for NFT creators and collectors.
Learn more: OpenSea scraps fees and cuts royalties to 0.5%
NBA star charged by SEC
Former NBA player Paul Pierce has settled charges brought against him by the United States Securities and Exchange Commission (SEC) for illegally promoting EthereumMax tokens. According to the SEC, Pierce promoted the token called EMAX without disclosing that he was paid to do so. Pierce has agreed to pay $1.4 million in damages, interest and penalties, and will not promote “titles ofassets crypto” during three years.
The SEC alleged that Pierce was paid over $244,000 worth of EMAX tokens to promote it on Twitter, and also tweeted misleading claims about EMAX. This case is similar to that of Kim Kardashian last year, where the SEC said it did not disclose payment received for promoting the EthereumMax token.
SEC Chairman Gary Gensler commented that this case reminds celebrities and influencers that they are required by law to disclose payment information when promoting financial securities to investors.
Platypus USD gets hacked
Platypus USD (USP) lost its dollar parity after a hack siphoned around $8.5 million from the token’s liquidity pools. The attack took place just weeks after Platypus issued the stablecoin.
The hack was allegedly carried out using an exploit of flash loanin which an attacker takes out a massive loan and settles it in the same block, sandwiching transactions that use capital to exploit other protocols in between.
The alleged attacker reportedly took out a $44 million flash loan fromAave V3 and allegedly mint around $41 million in US Platypus tokens. The striker then cashed in around $8.5 million in other stablecoins and repaid the loan. These actions all took place in the same block of transactions, according to on-chain data.
The security company Web3 Certik analyzed the situation and discovered that the vulnerability lies in the credit check in the MasterPlatypusV4 smart contract. Certik explains that the credit check does not take into account the value of the user’s debt, but only checks whether the debt amount has reached the maximum limit. Upon successful completion of the credit check, the contract allows the user to withdraw all deposited assets.
After the hack, at least $2.4 million USDC stablecoin was returned to the platform with the help of the company BlockSec. According to on-chain data, the majority of the stolen funds are currently frozen in the attacker’s smart contract, and an additional $380,000 from a second exploit attempt was accidentally returned to Aave.
SEC proposes new regulation on crypto custody
The US Securities and Exchange Commission (SEC) has proposed a rule that would require investment firms to retain crypto currencies with a qualified depositary. These custodians should meet certain requirements to ensure better protection of these assets.
The proposed rule is intended to extend the existing custody rule, which requires advisers to hold their clients’ assets with a qualified custodian, such as a bank or broker-dealer, and to include any asset client for which an adviser has custody. It also adds additional protections, such as surprise examsto these assets.
The proposed rule would cover all crypto assets, including those that are currently covered as a security and those that are not. Companies would also be required to segregate the assets of their investors and enter into a written agreement with qualified custodians to ensure customers receive certain protections.
SEC Chairman Gary Gensler warned that investment companies cannot rely on cryptocurrency platforms as qualified custodians. The new rule would ensure that client assets are properly segregated and held in accounts designed to protect them in the event of bankruptcy or insolvency of the custodian.
Learn more: The SEC proposes stricter regulation of all crypto assets
The news in brief:
- Bitcoin miner Iris Energy posted a net loss of $144 million.
- Robinhood’s Cryptocurrency Trading Volume Jumped 95% in January
- Larry Kramer and Andreas Paepcke of Stanford University co-signed bail for Sam Bankman-Fried.
- Tornado Cash developer Alexey Pertsev will remain in custody until the April hearing.
The article Crypto news for the week of February 13, 2023: Coin Hebdo #85 appeared first on Corner Academy