February 9, 2022       /       Unchained Daily       /       Laura Shin

Daily Bits ✍️✍️✍️

• Evaluating crypto-asset risks this year is a priority for the FDIC.

• AssangeDAO, a DAO formed to free Julian Assange, has raised more than $40 million in ETH.

• Polygon vesting protocol QiDAO was exploited for $13 million.

• Congressman Warren Davidson described Tether as a “time bomb” in a conversation with The Block.

• CoinList is launching a new Filecoin-based lending service that will decrease crypto miners’ capital costs.

• Web traffic to crypto exchanges is down 8% month over month.

• The US Treasury’s move to force stablecoin issuers into the banking industry was met with resistance in a House Financial Services Committee meeting yesterday.

Today in Crypto Adoption…

• Sotheby’s plans to auction off 104 CryptoPunks in a Feb 23 live auction.

• Robo advisor Betterment acquired Makara, a crypto-focused robo advisor.

• PayPal formed an inter-company crypto advisory council.

• Gaming giant Ubisoft is introducing its Rabbids franchise to the Ethereum-based metaverse game The Sandbox.

The $$$ Corner…

• Alchemy, a crypto infrastructure firm, raised $200 million in a round valuing the company at $10.2 billion.

• Anchor is asking Luna Foundation for $450 million to shore up its yield reserve treasury.

• Gala Games, a blockchain gaming studio, is allocating $5 billion to ramp up its NFT offerings this year.

What Do You Meme?

What’s Poppin’?

Let’s Talk About the Bitfinex Hack

US federal officials announced the seizure of over $3.6 billion worth of Bitcoin linked to the 2016 Bitfinex hack. Additionally, two individuals, Ilya Lichtenstein and Heather Morgan, were arrested in New York and are being charged with conspiracy to commit money laundering. The two, a romantic couple, are not being charged for the initial hack.

Deputy Attorney General Lisa Monaco noted that it was the Department of Justice’s largest financial seizure ever.

According to a press release from the Department of Justice (DOJ), Lichtenstein and Morgan allegedly transferred 25,000 of the 119,754 Bitcoin that was previously stolen from Bitfinex’s platform into personally controlled accounts through a “complicated money laundering process.” The remaining ~94,000 BTC were still in the wallet that directly received the proceeds from the hack.

The DOJ states that special agents were able to access the wallet containing the 94,000 BTC (worth $3.6 billion) after a court-authorized search of Lichtenstein’s online accounts. According to a statement of facts from the DOJ, law enforcement was able to decrypt the wallet via a file saved to Lichtenstein’s cloud storage account that held a list of 2,000 wallet addresses and private keys. From there, law enforcement could trace the BTC to Heather and Ilya’s personal accounts.

As for the $3.6 billion in BTC, it is currently being held by the DOJ (and most likely has been since February 1st – when multiple online sources reported on $3.5 billion in BTC being moved from the Bitfinex linked wallet).

Lichtenstein and Morgan were initially ordered released on bond after claiming their innocence yesterday afternoon, according to a report from CoinDesk. However, last night, their release was stayed, or put on hold. If released, they will be allowed to spend $10,000 a month on living expenses but will be forbidden from executing any cryptocurrency transactions as a condition for their bond.

From Bitfinex’s perspective, the firm announced yesterday that it has been “cooperating extensively” with the DOJ’s investigation. If DOJ returns the recovered Bitcoin to Bitfinex, the company plans to initiate a buyback of its UNUS SED LEO.

“If Bitfinex receives a recovery of the stolen bitcoin, as described in the UNUS SED LEO token white paper, Bitfinex will, within 18 months of the date it receives that recovery use an amount equal to 80% of the recovered net funds to repurchase and burn outstanding UNUS SED LEO tokens. These token repurchases can be accomplished in open market transactions or by acquiring UNUS SED LEO in over-the-counter trades, including directly trading bitcoin for UNUS SED LEO tokens.”

Bonus Recommended Reads:

• I wrote a piece on Medium covering the origins of the recovered funds and asking the question: who actually stole the original BTC? Because the DOJ does not explicitly say it was Heather and Ilya.

• While the DOJ is alleging Heather Morgan’s involvement in a $4.5 billion hack… the crypto industry is scratching its head at how someone with such an ~odd~ history as a (bad) rapper, social media influencer, and SaaS expert could be a criminal mastermind.

Recommended Reads

1. @CroissantETH on the countless use-cases of Ethereum:

2. Caitlin Long on why the Fed is incorrect about how stablecoins will fit into traditional finance:

3. @Cooopahtroopa on onboarding users to web3:

On The Pod…

Will Every Piece of Media Enter the Internet as an NFT? Variant Fund Says Yes

Variant Fund is a venture capital firm that describes itself as “a first-check crypto fund investing in the ownership economy.” Jesse Walden and Li Jin, co-founders and general partners at Variant, join Unchained to discuss the ownership economy, issues with web2 and web3, NFTs, the future of work, and more. Highlights:

• where Li and Jesse met and how their backgrounds as investors + founders led them to the crypto space

• how Li’s investing niche, which she describes as the passion economy, ended up intersecting with crypto

• why Li believes that web3 platforms will be better for creators than the current web2 ecosystem

• why Jesse was so inspired by Bitcoin after working in the music industry for so many years

• why Jesse believes that NFTs are the “port of entry” for the mainstream adoption of crypto

• what other use-cases exist for NFTs outside of the JPEG or PNG meme (and why Jesse is so excited about music NFTs)

• why Li believes that web3 tools can help fix the issues inherent to the “gig economy”

• Li and Jesse respond to criticisms of web3 coming from Jack Dorsey and Moxie Marlinspike

• how Variant Fund thinks about investing in crypto projects

• what token allocation Variant Fund targets when investing in crypto projects

• why mainstream platforms are experiencing backlash for integrating with NFTs and crypto

• what trends in NFTs, DAOs, and the ownership economy Jesse and Li think will pop in 2022

Book Update

You can purchase it here: http://bit.ly/cryptopians