From the cross-chain bridge hacks draining hundreds of millions of dollars in client funds to the Securities and Exchange Commission coming after the crypto Ponzi schemes, this corner of the market can’t take a break.
The developments add to an already torrid year for the cryptocurrency market, which has seen huge declines amid fears of tightening monetary policy and a lack of liquidity.
The flood of news is hard to track even for insiders, so here’s a rundown of what you’ve been missing since Monday.
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The The Securities and Exchange Commission filed a civil complaint on Monday accusing 11 people of creating and promoting an allegedly fraudulent cryptocurrency-focused pyramid scheme that raised over $ 300 million from investors.
The scheme, called Forsage, claimed to be a decentralized smart contract platform, allowing millions of retail investors to transact via smart contracts that operated on the ethereum, tron and binance blockchains. The SEC claims that for more than two years the organization has operated as a standard pyramid scheme, in which investors have earned profits by recruiting others to the deal.
In the SEC’s formal complaint, Wall Street’s leading watchdog calls Forsage a “textbook pyramid and Ponzi scheme,” in which Forsage aggressively promoted its smart contracts through online promotions and new investment platforms, all without selling “any real consumer product”. The complaint adds that “the primary way for investors to make money at Forsage was to recruit others into the program.”
The SEC said Forsage ran a typical Ponzi facility, in which it would use assets of new investors to pay for previous ones.
“As the complaint claims, Forsage is a large-scale and aggressively marketed fraudulent pyramid scheme for investors,” Carolyn Welshhans, acting head of the SEC’s Crypto Assets and Cyber Unit wrote in a press release.
“Scammers cannot circumvent federal securities laws by focusing their schemes on smart contracts and blockchains.”
Forsage, through its support platform, declined to provide a method of contacting the company and offered no comment.
Four of the 11 people accused by the SEC are the founders of Forsage. Their current whereabouts are unknown, but the last time it was known they lived in Russia, the Republic of Georgia and Indonesia.
The SEC also charged three US-based promoters who endorsed Forsage on their social media platforms. They were not named in the commission’s release.
Forsage was launched in January 2020. Regulators around the world have tried a couple of times to shut it down. The cease and desist actions were filed against Forsage for the first time in September 2020 by the Philippine Securities and Exchange Commission. In March 2021, the councilor for safety and insurance of Montana also tried. Despite this, the defendants would continue to promote the scheme by denying the claims in several YouTube videos and by other means.
Two of the defendants, both of whom did not admit or deny the charges, agreed to settle the charges, subject to court approval.
So-called blockchain bridges have become a prime target for hackers looking to exploit vulnerabilities in the world of decentralized finance.
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Cryptocurrency startup Nomad lost nearly $ 200 million in a devastating security exploit. Nomad is known as a “bridge”, where users can transfer tokens from one blockchain to another. The hackers exploited a security flaw that allows users to enter any value into the system and steal funds, even if there were not enough resources available in Nomad’s deposit base.
The nature of the bug meant that users didn’t need any programming skills to exploit it. Others have captured and deployed armies of robots to carry out mimic attacks.
“Without prior programming experience, any user could simply copy the attackers’ original transaction call data and replace the address with their own to leverage the protocol,” said Victor Young, founder and chief architect of crypto startup Analog. .
“Unlike previous attacks, Nomad hacking became a free game in which multiple users started draining the network simply by replaying the transaction call data of the original attackers.”
Blockchain bridges are a popular way to move tokens from networks like Ethereum, which has earned a reputation for slow transaction times and high fees, into cheaper and more efficient blockchains. But sloppy programming choices have made them a prime target for hackers looking to scam millions of investors. So far in 2022, more than $ 1 billion worth of cryptocurrency has been lost to fill the exploits, according to blockchain analytics firm Elliptic.
“I can only hope that developers and projects learn that they are running critical software,” Adrian Hetman, technical manager of security firm Web3 Immunefi, told CNBC.
“They have to keep safety first in every business decision because they are dealing with people’s money, many of which are locked in those contracts.”
Nomad said it is working with crypto security firm TRM Labs and law enforcement to track the movement of funds, identify attackers, and return stolen tokens to users.
“Nomad is committed to keeping its community up-to-date as it learns more in the coming hours and days and appreciates everyone who has taken swift action to protect the funds,” the company said in the statement.
MicroStrategy’s president and chief executive officer Michael Saylor first entered bitcoin in 2020 when he decided to begin adding cryptocurrency to MicroStrategy’s balance sheet as part of an unorthodox treasury management strategy.
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Later Tuesday, MicroStrategy announced that CEO Michael Saylor will step down from his role to become the company’s Executive Chairman. Company president Phong Le will take over from Saylor.
Saylor has been the chief executive officer since he launched the company in 1989. MicroStrategy went public in 1998.
MicroStrategy shares have fallen more than 48% this year. Bitcoin fell more than 51% over the same time period.
“I believe dividing the roles of President and CEO will allow us to better pursue our two business strategies of acquiring and holding bitcoin and growing our business analytics software business. As Executive President I will be able to focus more on ours. bitcoin acquisition strategy and bitcoin-related advocacy initiatives, while Phong will have the power of CEO to manage overall business operations, “Saylor said in the statement.
The announcement comes as the company announces its second quarter earnings, in which its total revenue was down 2.6% from a year ago. The company also reported a $ 918 million devaluation on the value of its digital assets, presumably mostly bitcoin.
MicroStrategy may technically be in the business of enterprise software and cloud-based services, but Saylor said the publicly traded company also serves as the first and only exchange-traded bitcoin fund in the United States.
“We’re kind of like your non-existent spot ETF,” Saylor told CNBC on the sidelines of the Bitcoin 2022 conference in Miami in April.
Late Tuesday, early Wednesday
The Solana logo displayed on a phone screen and the representation of cryptocurrencies can be seen in this illustrative photo taken in Krakow, Poland on August 21, 2021.
Jakub Porzycki | NurPhoto | Getty Images
And then on Tuesday evening, unknown attackers arrived looking for hot wallets linked to the Solana blockchain.
Nearly 8,000 digital wallets have been drained of just over $ 5.2 million in digital coins, including sol token of solana and USD Coin (USDC), according to blockchain analysis firm Elliptic. Twitter account Solana Status confirmed the attack, noting that as of Wednesday morning approximately 7,767 wallets have been affected by the exploit. Elliptic’s estimate is slightly above 7,936 portfolios.
Solana’s sol token, one of the largest cryptocurrencies after bitcoin and ether, fell roughly 8% in the first two hours after the initial detection of the hack, according to data from CoinMarketCap. It is currently down by around 1%, while trading volume has increased by around 105% in the past 24 hours.
As of Tuesday evening, more users began reporting that assets held in “hot” wallets – that is, Internet-connected addresses, including Phantom, Slope and Trust Wallet – had been drained of funds.
said the ghost Twitter who is investigating the “reported vulnerability in the solana ecosystem” and does not believe it is a Phantom-specific problem. Blockchain auditing firm OtterSec tweeted it the hack hit multiple wallets “on a wide variety of platforms”.
Elliptical chief scientist Tom Robinson told CNBC that the root cause of the breach is still unclear, but “it appears to be due to a flaw in some wallet software, rather than the solana blockchain itself.” OtterSec added that the transactions were signed by the actual owners, “suggesting some sort of compromise of the private key.” A private key is a secure code that grants the owner access to their cryptocurrencies.
The identity of the attacker is still unknown, as is the root cause of the exploit. The violation is in progress.
“Engineers from multiple ecosystems, with the help of several security companies, are investigating the dry wallets on solana,” according to the Solana statea Twitter account that shares updates for the entire solana network.
The solana network strongly encourages users to use hardware wallets, as there is no evidence that they were affected.
“Don’t reuse your seed phrase on a hardware wallet – create a new seed phrase. Empty wallets should be treated as compromised and abandoned” read a tweet. Seed phrases are a collection of random words generated by a crypto wallet when it is first set up and grant access to the wallet.
A private key is unique and links a user to their blockchain address. A seed phrase is a fingerprint of all a user’s blockchain assets that is used as a backup if a crypto wallet is lost.
The Solana network has been seen as one of the most promising newcomers to the cryptocurrency market, with backers like Chamath Palihapitiya and Andreessen Horowitz advertising it as a challenger for ethereum with faster transaction processing times and increased security. But lately it has faced a number of problems, including downtime during periods of activity and the perception of being more centralized than Ethereum.