Asia Express

Tencent builds the largest AI LLM model ever, South Korean authorities bust $83M crypto scam.

Our weekly roundup of news from East Asia curates the industrys most important developments.

$500B firm partners with Polygon 

South Korea’s Mirae Asset Security Token Working Group, with over $500 billion in assets under management (AUM), is collaborating with Ethereum layer-two scaling solution Polygon (MATIC) for security tokenization initiatives. 

According to a Sept. 7 press release, Mirae Asset Securities has signed a memorandum of understanding with Polygon Labs for “helping domestic and international tokenized securities networks.”

“Mirae’s foray into tokenization will undoubtedly help accelerate the mass adoption of web3 among other financial institutions,” commented Polygon Labs’ executive chairman Sandeep Nailwal.

Meanwhile, Ahn In-sung, head of the digital division at Mirae Asset Securities, wrote: “Through technical collaboration with Polygon Labs, Mirae Asset Securities aims to establish global leadership in the field of tokenized securities.”

Previously, Polygon Labs partnered with the Monetary Authority of Singapore (MAS) and key financial institutions in its Project Garden asset tokenization initiative. Last November, Project Guardian executed foreign exchange and sovereign bond transactions via Polygon.

Tencent launches the largest LLM model ever 

Tencent’s new Hunyuan Large Language Model (LLM) has over 2 trillion parameters. Previously, the largest LLMs have contained upwards of 175 billion training data parameters.

During the Chinese IT conglomerate’s Global Digital Ecology Conference on Sept. 7, Tencent unveiled its Hunyuan AI competitor to ChatGPT which is now available through Tencent Cloud. Users are able to directly connect their software APIs to Hunyuan, or use it as a basis for a variety of applications in mechatronics, customer service and enterprise operations.

Tencent claims that Hunyuan is capable of processing “tens of trillions” of data per day and can reduce risk analysis procedures in automobile manufacturing from four hours to less than 30 minutes. The company has invested a combined $31.4 billion into cloud and AI research and development within the past five years. The firm wrote: 

In response to the problem that large models are prone to babbling nonsense, Tencent has optimized the pre-training algorithm and strategy, reducing the illusion of the mixed-element large model by 30% to 50% compared with mainstream open source large models.

Coinbase introduces stricter KYC measures for Singaporean customers

Singaporean clients of cryptocurrency exchange Coinbase must now provide know-your-customer information (KYC) when sending crypto to addresses other than Coinbase. 

In accordance with MAS regulations, Coinbase’s Singaporean customers will need to provide info on recipients’ wallet type, counterparty exchange name, full name and country of residence when sending crypto off the exchange. In addition, users who receive external crypto on Coinbase will need to provide similar KYC information on the sender in order to access their deposits.

The new KYC checks will not affect transfers between Coinbase accounts. MAS’ anti-money laundering requirements for digital asset transactions took effect in January 2020 and were last revised in March 2022. It’s not immediately clear as to why the exchange only implemented the regulations just now. 

Shangdong Province’s Metaverse KPIs

Government officials in China’s Shangdong Province have set key performance indicators (KPIs) for local bureaucrats to expand the province’s metaverse industry to 15 billion Yuan ($2.05 billion) by 2025, or for a cyclically adjusted growth rate of 15% per annum. In addition, the KPIs include the incubation of 100 metaverse ecosystem projects, 3,000 metaverse-related patents, and at least 30 metaverse experiences at public service centers. The Shangdong People’s Government wrote: 

“[It is necessary to] build a Shandong cultural dedicated network, Shandong cultural big data center and cultural database to form a cultural tourism metaverse big data system. Focus on cultural tourism resources such as A-level tourist attractions, cultural centers, libraries, and museums, and develop a number of immersive tourism service products such as VR [Virtual Reality] cloud tours.”

80 Chinese crypto influencer accounts banned

Sina Weibo, one of China’s largest social media platforms with over 580 million monthly active users, has banned 80 Chinese crypto influencer accounts with a combined follower count of over 8 million. 

According to a Sept. 5 announcement, the accounts were banned due to “promotion of crypto trading activities” in accordance with eight legislations that together form China’s “Crypto Ban,” which has been in force since August 2021. One user commented:

“Even more [crypto] groups have been removed. A large part of those who were with me six years ago have now removed as well. Those who have not been removed have also been greatly restricted. Please go and promote them on Twitter. Weibo is no longer a good environment.

Though the Crypto Ban has been in effect for some time, China has only taken a harsh stance on enforcement starting this year. It has resulted in the removal of criminal enterprises, legitimate projects, and caused collateral damages to foreign investors alike.  

$83M crypto scam group busted in South Korea

South Korean police have busted a 110 billion Won ($83 million) crypto scam. 

Authorities say that on Sept. 5, 22 individuals were arrested on charges of deception and fraud. The unnamed group, accused of orchestrating a Ponzi scheme, allegedly solicited $83 million from 6,610 individuals based on promises of investment returns in the crypto markets as high as 300%.

An investigation subsequently revealed that business entities created by the group advocating token listings and entry into digital asset exchanges were falsified. Local news reported that assets linked to the unnamed group have been seized in criminal proceedings. A police official wrote: 

“We will strictly respond to various financial crimes that infringe upon the people’s livelihood by exploiting the desperate psychology of ordinary people who want to improve economic conditions and the virtual asset investment craze.”

OKX in final stages of licensing in Hong Kong 

According to local news reports on Sept. 3, cryptocurrency exchange OKX is in the advanced stages of receiving its virtual asset provider license from Hong Kong regulators. Zhikai Lai, the firm’s CCO, said that he expects OKX to receive the regulatory license by June 2024 and hopes to attract anywhere between 100,000 to 200,000 retail Hong Kong crypto investors within the first year. The executive noted:

“Banks have held a conservative attitude towards the virtual currency industry for many years. It was not until the government promoted Hong Kong as a global virtual asset center last year, and the Securities and Future Commission and the Hong Kong Monetary Authority gave a clear message that banks were required to prepare resources to focus on the industry. After that, their attitude became positive.”

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Thailand to give every citizen 10,000 Baht in crypto, Delio users unlikely to recover all funds, Vietnam is world’s No.1 country for crypto.

Our weekly roundup of news from East Asia curates the industrys most important developments.

Thailand’s crypto UBI

Thailand may soon have a national airdrop in the works where every citizen 16 years and older will receive 10,000 Baht ($285). 

According to local news reports on August 30, Thailand’s ruling Pheu Thai party will consult the Bank of Thailand in developing a “utility type 1” token necessary for the airdrop. The solution will be a know-your-customer (KYC), blockchain-based infrastructure that sources say will take at least six months to roll out. A 100 Baht fee will also be charged per user for the KYC process. In addition, the solution will require the approval of the country’s Securities and Exchange Commission. 

Real estate developer and crypto investor Srettha Thavisin was elected on August 22 as the incumbent prime minister of Thailand. During campaigning, Thavisin promised the exact 10,000 Baht per person basic income stimulus via “digital currency” if elected into power. In 2021, Thavisin’s firm, Sansiri, purchased a 15% stake in Thai asset tokenization provider X Spring for 1.6 billion Baht ($45.7 million). 

The Thailand Development and Research Institute said funding for the Thavisin Airdrop will come from tax collection in the 2024 fiscal year. The total budget estimate for the project is 560 billion Baht ($16 billion). 

The airdrop will not be equivalent to fiat Baht funds, however. Users reportedly can only spend the digitized tokens within four kilometers of their residence. The tokens will only be valid for a period of six months and cannot be converted into cash, nor be used to settle debts. Thavisin’s government is expected to assume office by the end of September.

Delio users’ assets slashed in half 

More bad news is coming for users of troubled South Korean Bitcoin lender Delio. 

According to local news reports on August 30, the South Korean crypto lending giant, which holds over $1.2 billion in Bitcoin and Ether, is expecting a recovery rate of just 50% to 70% on its assets. On June 14, Delio suspended deposits and withdrawals after disclosing significant counterparty exposure to fellow South Korean Bitcoin lender Haru Invest. 

On June 13, Haru Invest, too, suspended deposits and withdrawals after allegations of fraudulent activities arose surrounding its operator, B&S Holdings. Haru Invest is currently in bankruptcy proceedings. Likewise, Delio is currently under investigation by the country’s regulatory authorities for allegations of fraud, embezzlement, and breach of trust. The platform previously announced that it would resumes withdrawals, although no updates on such timeline has since been given.

Vietnam’s booming crypto market 

Vietnam is currently ranked first in the world in crypto adoption, with up to 19% of its 18-64 adult population using digital assets.

That’s according to an August 30 report authored by Vietnamese venture capital firms Kyros Ventures and Coin 68, together with Animoca Brands. Currently, the Southeast Asian country is the home to around 200 blockchain projects, and is expected to generate $109.4 million in revenue from crypto exchanges this year. The country’s crypto users are estimated to grow to 12.37 million by 2027. 

Among the highlights, 76% of Vietnamese crypto users say that they invest in digital assets based on advice from friends, a number 2.5 times higher than individuals surveyed in the U.S. Nearly 70% of respondents said the crypto bear market would last less than one year or has already ended. Almost half of respondents say that centralized exchanges offer just as much utility as decentralized ones, but 90% of crypto owners use decnetralized exchanges.

Binance Japan to list 100 coins

On August 30, Tsuyoshi Chino, CEO of Binance Japan, held an online business briefing discussing the exchange’s domestic expansion strategy. During the session, Chino said that Binance Japan would seek to list 100 coins and tokens “as soon as possible.” 

Local news reports note that Binance Japan currently provides spot trading of cryptocurrencies alongside staking “Simple Earn” programs. The use of margin trading is currently not available unless the exchange obtains a regulatory license. The presentation also revealed that its parent exchange, Binance, has surpassed 150 million in user count with an average daily trading volume of $65 billion. Earlier this year, cryptocurrency exchange Coinbase ceased operations in Japan, citing difficult market conditions.

Shenzhen’s 15 million Yuan for airdrops

In a government-sponsored conference promoting the digital Chinese Yuan central bank digital currency (e-CNY CBDC), officials from the City of Shenzhen pledged 15 million ($2.1 million) for municipal e-CNY airdrops over the next three years. Binqquan Wei, vice governor of Agricultural Bank of China Shenzhen, noted that during trials, the e-CNY has proven to be a highly efficient method for consumer transaction receipts via its immutable distributed ledger technology: 

“The platform [Our e-CNY CBDC] currently has more than 200 merchants, involving 11 key industries such as education and training, catering, pet services, elderly care, and sports.”

China’s central government has been heavily promoting the e-CNY CBDC as a means of stimulating the country’s ailing economy amid a looming recession. In its latest figures, the CBDC has surpassed $123 billion in cumulative transactions since 2021, with test sites running in 17 provinces and 26 districts. 

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Retail crypto trading is only days away in Hong Kong, but a mainland crackdown sees bounties offered for crypto firms and miners imprisoned.

Our weekly roundup of news from East Asia curates the industrys most important developments.

HashKey Hong Kong to commence retail trading 

Crypto exchange HashKey, the first licensed virtual asset provider in Hong Kong, will open its doors to residents for retail trading on August 28. 

According to local news reports, investors will only be allowed to invest up to 30% of their net worth into cryptocurrencies when using the platform. A risk control warning will be displayed if the limit is exceeded. However, Xiaoqi Weng, COO of HashKey, mentioned that the exchange “cannot validate users’ net worth,” and the limit is largely based on “self-verification” of assets. 

Weng also disclosed that the exchange will assess users’ investment background based on information submitted during know-your-customer verification. “[Investment] Beginners are limited in what they can purchase,” said Weng. 

At its debut, users can only trade Bitcoin (BTC) and Ether (ETH) on HashKey Hong Kong. The Hong Kong Securities and Futures Commission has not yet allowed margin trading of crypto products, nor crypto derivatives, among regulated exchanges, Weng noted. 

Dark side of China’s crypto crackdown

It appears China no longer wants any private blockchain firms operating within its borders and is on the warpath to get rid of them, no matter the consequences. The move comes amidst an increase in using crypto as a means of capital flight in an economic downturn.

Local media reports suggest that, legitimate or not, blockchain projects in China have literal bounties on their heads. First, third-party tracking firms tip off the police on undercover crypto projects in the country; if the report leads to arrest and asset forfeiture, the tracking firm stands to make millions of dollars in commission, if not hundreds of millions of dollars, for large-scale projects such as Multichain.

Then, after arrest, crypto executives are reportedly intimidated into handing over the project’s private keys and access to servers. Police then allegedly get third-party payment processors to “dump” the coins and tokens over the counter in exchange for Chinese Yuan.

Crypto executives are then charged with operating a “multi-level marketing scheme,” “pyramid scheme,” or “money laundering.” If convicted, the charges result in the seizure of all protocol-related assets by the state.

Sources claim that a portion of the funds goes into law enforcement agency revenue. Zhengyao Liu, a senior lawyer at the Shanghai Mankuen Law Firm, wrote:

“In fact, in the past two years, the profit-seeking law enforcement in crypto-related criminal cases, especially in crypto-related MLM cases, has been the main reason people do not trust the case-handling agencies. For example, the ‘contribution’ of crypto-related criminal cases to financial fines and confiscation revenues is more than 50% higher than in previous years in the Jiangsu Province.”

The crackdown has led to the termination of several protocols this year, with little recourse for non-Chinese users with funds stuck on these platforms. Unsurprisingly, it has sparked a wave of emigration among Chinese Web3 founders, and overseas law enforcement efforts to try and recover the “stuck” funds.

e-CNY green bonds debut 

Despite the draconian crackdown on private crypto activities, government-led blockchain efforts in China are doing quite well.

On August 18, the first digital yuan central bank digital currency (e-CNY CBDC) green bond was issued with a principal amount of 100 million Chinese Yuan ($14 million), a term of two years, and a coupon rate of 2.6% per annum. 

Facilitated by the Bank of Ningbo, the loans will be used to finance a 1.4 gigawatt (GW) and a 1.0 GW solar panel facility expansion project in Wuxi. 

The e-CNY CBDC has been repeatedly “shilled” for much of this year as a means of stimulating domestic spending amidst a financial crisis within the country. In the City of Tianjin alone, e-CNY transaction volumes have surpassed $17.5 billion in the first half of 2023, with over 302,000 merchants accepting the CBDC as a means of payment. 

FBI tracks $41M in North Korean crypto

On August 22, the U.S. Federal Bureau of Investigation announced the identification of 1,580 BTC ($41 million) stolen from various projects by North Korean hackers. The six displayed wallets include funds stolen from the $60 million Alphapo hack in June, $37 million stolen from CoinsPaid in June, and $100 million stolen from Atomic Wallet in June. The FBI wrote: 

“Private sector entities should examine the blockchain data associated with these addresses and be vigilant in guarding against transactions directly with, or derived from, the addresses. The FBI will continue to expose and combat the DPRK’s use of illicit activitiesincluding cybercrime and virtual currency theftto generate revenue for the regime.”

The agency said it believes North Korea will attempt to cash out the stolen funds. Criminal investigations into North Korean hackers’ role in the Harmony’s Horizon Bridge and Sky Mavis’ Ronin Bridge exploits last year are still ongoing.

Chinese Bitcoin mining magnate sentenced to life in prison

Yi Xiao, a former vice chairman of the Jiangxi Provincial Political Consultative Conference Party Group, has reportedly been sentenced to life in prison by the Hangzhou Intermediate People’s Court for unrelated charges of corruption and abuse of power in a Bitcoin mining enterprise.

According to local news reports on August 22, Yi Xiao operated a 2.4 billion Chinese Yuan ($329 million) Bitcoin mining enterprise under the corporate name Jiumu Group Genesis Technology from 2017 to 2021. Despite knowing about a ban on cryptocurrencies, Xiao amassed over 160,000 Bitcoin miners with other corporate executives and, at one time, 10% of the City of Fuzhou’s entire electricity consumption. 

Xiao was convicted of using his public office to secure preferential subsidies, capital, and electricity supply for Jiamu Group. The former official also used his position to fabricate statistical reports to conceal the operations’ true nature.

Starting this year, China has been cracking down harshly on crypto activities amid a spree of data theft and money laundering incidences involving digital assets. Earlier this month, a Chinese national was sentenced to nine months in prison for purchasing $13,067 worth of Tether (USDT) for an acquaintance.

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Sources reveal the real reason China is ramping up efforts to stamp out Bitcoin and crypto. And a year’s worth of 3AC court orders nixed.

Our weekly roundup of news from East Asia curates the industrys most important developments.

On Aug. 11, a Chinese individual known only as Mr. Chen was sentenced to nine months in prison after helping his friend, Mr. Lin, purchase 94,988 Chinese yuan ($13,104) worth of Tether (USDT) and earning a commission of 147.1 Yuan ($20.24).

Because Mr. Chen shared his personal bank information for the peer-to-peer fiat-to-crypto transaction, Chinese authorities considered the act to be money laundering and imposed a harsh sentence.

Officially, Chinese authorities attribute the tough-on-crypto approach to a spree of data theft and the use of crypto to launder proceeds of crime. However, sources tell Cointelegraph that the crackdown is more related to the countrys stringent capital control rules, where Chinese nationals are prohibited from buying more than $50,000 worth of foreign currencies each year without a state permit. The same applies to large-sum Chinese yuan transactions with foreign banks.

The capital controls had been almost complete until the advent of crypto, sources say. The problem is further exasperated by a looming recession in China, making senior government officials wary of further money moving out of the country.

In July, Jingmen municipal police were tipped off about an online poker platform operating in the city. Raiding the offices, police discovered the group had “laundered” over 400 billion Chinese yuan ($54.93 billion) worth of gambling funds using cryptocurrencies and involving over 50,000 individuals.

However, the underlying criminal act that resulted in the tainted money was never mentioned. Unlike other jurisdictions, the act of gambling itself and the transfer of currencies abroad without applicable permits are deemed to be illicit activities. According to user reports, fiat-to-crypto transactions stemming as far back as 2021 are currently being audited by special police task forces.”

Crypto projects and their Chinese founders are also disappearing at an alarming rate. The well-known Multichain incident aside, in May, employees of Chinese offshore yuan stablecoin issuer CNHC were detained by police following an office raid. They have not been heard from since. Commenting on the story, Wuwei Liang, a former employee of defunct crypto exchange CoinXP, claimed:

“Suddenly, despite there being no complainants nor victims, the Wuxi police who came to Beijing from across the province took away all the members of the CoinXP team of China’s domestic blockchain entrepreneurial team.”

Liang further alleged that Chinese police would resort to “intimidation” to force a confession and the surrender of a projects private key. Armed with this as “evidence” police then charge the co-founder with “fraud and multilevel marketing,” bringing about a sham trial where the accused is convicted, resulting in the seizure of enterprise and user funds alike. (These allegations have not been proven in court.) We reported earlier on allegations of intimidation, detention, and even suggestions of the “kidnapping” of the defense counsel at the ongoing CoinXP trial.

CBDC printer goes brrrr

Don’t misinterpret the Chinese government, however; they are quite fond of blockchain, so long as they are the ones in charge.

In the interest of revitalizing Chinas ailing economy via consumer spending, government officials have recognized the role of the Chinese yuan central bank digital currency and made its adoption a political priority. On July 27, the city of Suqian airdropped 20 million ($2.75 million) of digital yuan shopping vouchers to residents.

This was followed by a 10 million ($1.37 million) digital yuan food voucher airdrop by the city of Hangzhou, a 40 million ($5.49 million) digital yuan airdrop by the city of Shaoxing, a 30 million ($4.12 million) digital yuan airdrop by the city of Jianyang, and a 3 million ($0.412 million) digital yuan airdrop by the city of Ningbo, all within less than two weeks. At one test site in Chengdu, Chinas largest food delivery platform, Meituan, reported a 65.5% daily increase in the number of digital yuan transactions on its platform.

So there are definitely real-world results to help revitalize the economy something desperately needed right now. On Aug. 15, China announced it would stop reporting its youth unemployment figures after the metric reached a record 21.3% in June. Perhaps we can expect the (blockchain) printer to go brrr in the months ahead?

3AC creditors suffer humiliating defeat 

Lawsuits can be tough, especially when it comes to matters such as liquidating a $3.5 billion Singaporean hedge fund through multi-jurisdictional litigation. This is why a high level of competency is generally required for the attorneys who take part in such proceedings.

And so, creditors of Three Arrows Capital (3AC) were dealt a significant setback on Aug. 11, when United States Bankruptcy Judge Martin Glenn said civil contempt rulings against 3AC co-founder Kyle Davies were invalid.

Judge Glenn explained that the subpoenas issued by law firm Teneo on behalf of creditors to Davies via Twitter starting in December were made on the basis that Davies held U.S. citizenship. However, it emerged earlier this month that Davies renounced his U.S. citizenship to acquire Singaporean citizenship a few years prior.

“Because Mr. Davies’ United States citizenship was a prerequisite for valid service on him in the manner effected, he was not properly served with the subpoena issued by this Court.”

As a result, the U.S. court could not exercise jurisdiction against Davies, with Judge Glenn suggesting that creditors attorneys bring a motion to a Singaporean court to compel Davies’ compliance instead. It has been over a year since 3AC filed for bankruptcy.

In other words, after one years time, creditors have just found out that the jurisdiction where they filed to claim debtors assets had no jurisdiction over the debtors. 3AC co-founder Zhu Su, by the way, also has Singaporean citizenship and cannot be compelled by U.S. courts on this matter.

Now dont get me wrong, everyone makes mistakes, but often trivial mistakes have trivial consequences. Unfortunately, that wasnt the case here. Since the inception of proceedings, 3AC creditors have reportedly spent millions in legal fees, with some estimates going as high as $30 million. The proceedings have so far led to the recovery of several nonfungible tokens (NFTs) owned by 3AC, which were sold at two Sothebys auctions for a combined … $13.4 million.

In another setback, a Singaporean court ruled on Aug. 15 that the city-state would be the convenient forum for hearing 3AC creditors $140 million dispute with DeFiance Capital, and not the British Virgin Islands as suggested by Teneo. 3AC creditors allege that funds held with DeFiance Capital belong in the estate of 3AC, while DeFinance Capital says that its assets belong to its independent investors. Commenting on the double whammy, Su Zhu wrote:

“As the current acting liquidator for 3AC, we believe Teneo is repeatedly overreaching in their attempt to seize other investors’ funds. Even on a technical and legalistic approach, the DC [DeFiance Capital] and SNC assets rightfully belong to the feeder funds of 3AC,”

But in the overall context, winning a battle is easy; winning a war is difficult. On Aug. 16, Dubai regulators reminded Davies and Zhu that their new OPNX exchange for trading crypto bankruptcy claims remains unregistered in the Emirate and, correspondingly, faces a 10 million Dirham ($2.72 million) penalty for operating without a proper license.

Unlike in the U.S., Davies and Zhu actually own assets in the UAE vulnerable to seizure, including Davies prized chicken restaurant. Whether the co-founders can really keep their assets sheltered from the path of angry creditors (and regulators alike) remains to be seen.

Just before we published Asia Express, 3AC liquidators filed a committal order against Zhu Su in the court of Singapore.

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Man loses $10M after Chinese court rules Bitcoin lending is not protected by law, loads of Web3 founders get arrested, and Huobi rumors swirl.

Our weekly roundup of news from East Asia curates the industrys most important developments.

Chinese man’s $10M loss as court says Bitcoin lending not protected by law

A man in China’s Jiangsu province, identified as Mr. Xu, appears to be out of luck after a court ruled that his 341 Bitcoin loan ($9.9 million) to counterparty Mr. Lin is not protected by law according to local news reports on August 3.

Some time ago, Mr. Xu lent 341 Bitcoins to Mr. Lin after the latter approached him for a peer-to-peer loan. At the time, Mr. Xu lacked fiat funds, and so the parties settled on using Bitcoin for the borrowing through a written agreement. Shortly afterward, however, Mr. Lin defaulted on the loan, prompting Mr. Xu to sue in the Changzhou Zhonglou People’s Court. The case was dismissed. 

In supporting the judgment, Ming Wang, vice-magistrate of the Changzhou Zhonglou People’s Court, told reporters that Bitcoin is a digital commodity that does not hold the same legal status as fiat currencies. Therefore, the asset can neither be subject to a legal enforcement action, enter circulation, or be used to ” award compensation.”

“The lender bears ALL risks [when lending crypto],” Wang warned. That said, in another ruling dated Nov. 29, the Hangzhou Internet Court wrote that digital assets such as nonfungible tokens are “online virtual property” that should be protected under Chinese law. 

Aside from outright ownership, all forms of cryptocurrencies and transactions are currently illegal in China. The country has been cracking down on private blockchain initiatives in favor of the Central Government’s efforts to promote centralized blockchain, such as via the digital yuan CBDC. 

China’s disappearing Web3 founders 

Just last month, Chinese cross-chain bridge Multichain was still one of the biggest in the DeFi sector. While its reputation took a hit due to the disappearance of its co-founder, Zhaojun He, the protocol still had around $1.5 billion in total value locked at the start of July.

Then on July 14, investors’ worst fears came true after Multichain developers revealed that Zhaojun had been arrested by Chinese police nearly two months prior. Because Zhaojun held discretionary control of Multichain’s entire server-based and private keys, they said the protocol had to be shut down.

But the question left many readers pondering, how does the arrest of a single individual lead to the shutdown of an entire enterprise and the disappearance of enterprise funds? One anonymous user in the Multichain Telegram chat claimed:

“Its become a total supply chain. Third-party tracking companies will supply leads to the police to take them into custody as long as the [Web3] co-founder is in China and has money. Where do you think the police’s case came from? Third-party tracking companies make at up to 10 figures [CNY] from such tipoffs.” 

While Zhaojun is currently detained without any revelation of the charges or any news whatsoever the Multichain funds supposedly “stuck” in the protocol are on the move. Blockchain security firms, such as Bitrace and PeckShield, have revealed that since Zhaojun’s arrest, assets stored on the Multichain bridge had been swapped for stablecoins and transferred out of the protocol. The move prompted stablecoin issuers such as Circle and Tether to freeze over $63 million of suspicious transactions linked to Multichain.

In a series of screenshots seen by Cointelegraph, exchanges such as Binance are also investigating stablecoin deposits to its platform linked to the Multichain incident. Meanwhile, whoever is making the transfers has appeared to smarten up as well, with swaps of users’ assets now being done through privacy coins as opposed to traceable assets.

Some observers theorize that the circumstantial evidence points to the Chinese police moving the coins. For starters, the In a similar incident, Wuwei Liang, brother of CoinXP co-founder Liang Liang, wrote in regard to the ongoing criminal proceedings against his brother and the firm:

The virtual currency involved in the case [seized from CoinXP by police] was transferred to other wallet addresses by the Wuxi Public Security Bureau, and 20 Bitcoins disappeared during the transfer process and have not been recovered so far.”

Liang Liang’s trial is ongoing and the blockchain executive is currently charged with “illegal solicitation of public funds and running a “multi-level marketing” scheme. The latter, by the way, carries the penalty of civil forfeiture of all personal and enterprise assets if convicted, and the trial is not going well.

The crackdown appears to have started with China’s own state-blockchain centralization efforts this year. On May 31, Cointelegraph reported that offices of the Chinese offshore-yuan stablecoin issuer CNHC had been raided by police. Its executive had been reportedly detained and like Multichain, no news has been heard from them since.

Huobi in trouble once again Everything is just fine

If I could sum up with everything that goes on in blockchain from day to day using one phrase, it’d be “all is not, as it seems.”

On August 6, local news outlets in Hong Kong reported that senior executives of cryptocurrency exchange Huobi had been arrested by Chinese police. The exchange subsequently denied this as “fake news.” Chinese blockchain personality Justin Sun, the de-facto owner of the exchange, also labeled the news as fear, uncertainty, and doubt (FUD). 

But as Adam Cochran, partner of Cinneamhain Ventures, claimed on Twitter that Sun allegedly withdrew $60 million from the exchange after the news broke out. Cochran also claimed that some Huobi staff “are currently under criminal investigation,” citing an insider at Tron (Sun’s blockchain project) who has “first hand knowledge of the investigation.”

However, according to Sun, Huobi is doing just fine. On August 1, Sun claimed that the exchange generated more than $85 million in profits in Q2 2023, with $100 million in profits projected for Q3 2023. Pretty impressive, considering that the exchange suffered an internal revolt just earlier this year after the firm allegedly slashed a vast majority of employment benefits.

But anyway swirling rumors around Huobi may be behind its USDT reserves declining to less than $100 million from $630 million last month, while its total assets have fallen to $2.5 billion compared to $3.1 billion in the same period.

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China launches world’s first blockchain satellite into space, meanwhile, McDonalds Hong Kong brings McNuggets into the Metaverse.

Chinese blockchain Sputnik’s maiden voyage

A Chinese satellite has become the first in the world to carry a blockchain imaging and screening system into orbit. 

According to local news outlet Red Star News on July 22, the Tai’an Star Era 16 was successfully launched into orbit from the China Jiuquan Satellite Launch Center. Developed by NationStar Aerospace Technology Co., the satellite features a visual blockchain on-orbit certificate storage system dubbed ‘ADAChain’ (not related to Cardano) developed in-house by NationStar. Researchers wrote: 

“The [ADAChain] can realize functions such on-orbit visual blockchain multi-signature authentication, on-orbit video visual broadcasting, and on-orbit visual remote sensing data storage certificate confirmation.”

The purpose of the satellite’s voyage is to “obtain rich spectral information on the surface of the target area,” in the fields of “precision agriculture, water resources management, mineral resource investigation, environmental monitoring, and emergency safety.” Blockchain technology will also assist in achieving the goals of “high spatial resolution, high spectral resolution, and high temporal resolution” in such satellite imaging. 

Digital Yuan CBDC expands to Hong Kong 

The Bank of China’s Hong Kong subsidiary has allowed individuals in the Special Administrative Region (SAR) to utilize the digital yuan central bank digital currency (e-CNY CBDC) for retail shopping. 

According to a July 20 report, over 200 merchants, such as shopping centers, pharmacies, convenience stores, and electronic stores have accepted the e-CNY CBDC as a means of payment from shoppers originating in Mainland China. The e-CNY CBDC is currently not available to Hong Kong users. 

As a SAR, Hong Kong maintains separate political, economic and social institutions from Mainland China. Advocates have previously called for the Hong Kong government to issue its own Hong Kong Dollar CBDC to compete with the likes of Tether (USDT) and USD Coin (USDC). Similarly, Chinese President Xi Jinping has emphasized the importance of CBDCs as a means of settling international trade in local currencies.

Terraform Labs struggles to get back on its feet

“Every time we would make a little progress, there would be some accusation or something that would derail us,” said Terraform Labs’ interim CEO Chris Amani in a Twitter Space on July 20. 

According to Amani, the arrest of the entity’s co-founder and former CEO Do Kwon in Montenegro has essentially shattered all momentum that the ailing network is trying to reestablish. In May 2022, the $40 billion Terra Luna (LUNC) ecosystem collapsed due to the implosion of its algorithmic stablecoin TerraUSD (USTC). Shortly afterward, Kwon created the Terra 2.0 (LUNA) ecosystem. The three tokens have a combined market cap of $1.3 billion at the time of publication. 

In its next phase, Amani says that nine projects built on the combined Terra Luna ecosystem are scheduled to launch within the next few months. None of the projects will reportedly issue their own tokens. In addition, Amani warned that the projects face stiff competition from other layer-one projects due to lacking a Luna Foundation Guard or protocol treasury for financial support. 

South Korean crypto lender shuts down amid criminal proceedings

South Korean crypto lender Delio says all of its company and customers’ assets have been seized in a raid conducted by prosecutors on July 18.

In the July 22 announcement, Delio announced it would pause all interest payments to users effective immediately after the asset seizures made it impossible for the company to continue normal operations. In June, the crypto lender suspended all withdrawals and deposits on its platform, citing exposure to counterparty and fellow South Korean crypto lender Haru Invest, which in turn suspended all transfers due to an issue with a “consignment operator,” B&S Holdings. 

Haru Invest is currently undergoing bankruptcy proceedings. Meanwhile, Delio is one of the largest crypto lenders in South Korea, with around $1.5 billion in customer Bitcoin (BTC), Ether (ETH), and altcoin deposits. Since June 30, the firm has been under investigation by the country’s Financial Services Commission on allegations of fraud, embezzlement and breach of trust.

The firm previously stated that it would enable the withdrawal of users’ assets without stating a specific timeframe. However, similar to the Multichain saga, it is unlikely the company can do so when customers’ assets have been seized as part of criminal proceedings.

In a July 23 blog post, Haru Invest CEO Hugo Lee wrote that B&S Holdings’ assets have also been seized by authorities and that the company is currently trying to recover the funds. All of the firm’s operations have been suspended, and the company is scheduled to liquidate its remaining assets in phases. Haru Invest currently has more than 80,000 users.

Indonesia’s national crypto exchange goes live

A national cryptocurrency exchange operated by the government of Indonesia will be the only legal venue for trading crypto assets in the Southeast Asian country. 

In a July 20 statement from the country’s Commodity Futures Trading Supervisory Agency, also known as Bappebti, the exchange is currently open for spot trading, with future plans to expand its offering to cryptocurrency futures and derivatives. All cryptocurrency exchange registered within the country could join the national exchange, which serves as a clearing house to ensure transactions abide by relevant regulations. 

Despite official support, Islamic organizations in Indonesia have previously deemed the use of cryptocurrency to be haram, or forbidden, for Muslim users. That said, there is no consensus from Islamic scholars regarding the matter. 

McDonald’s launches McNuggets Metaverse in Hong Kong

On the 40th anniversary of the introduction of chicken McNuggets, McDonald’s Hong Kong is partnering with Sandbox to launch a namesake metaverse to celebrate the occasion.

Dubbed “McNuggets Land,” the metaverse will allow users to interact with McNuggets-themed gaming characters and avatars. Randy Lai, CEO of McDonald’s Hong Kong, commented: 

“Rooted in Hong Kong for 48 years, McDonald’s has always strived to deliver innovative experiences and Happy Moments. To celebrate the 40th anniversary of Chicken McNuggets, we are excited to collaborate with The Sandbox to provide fun-filled Web3 Metaverse game experience.”

A reward pool of 100,000 SAND tokens and 10,000 vouchers for McNugget perks will be distributed to participants. Since its entry into then British Hong Kong in 1975, the franchise currently operates 250 restaurants around the city, serving more than 1 million customers per day. 

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The Multichain saga includes secret arrests, a suspicious exploit, and one man allegedly in control of $1.5B. Plus, Binance fires staff.

Decentralized Web 3 cross-chain router allegedly under control of one-man

Imagine a system where all your money is controlled by one man and his family and when there is cause for concern, the propaganda machine immediately goes ‘brrr’ to put on a facade that everything is just fine despite some alarming withdrawls. Sounds more like a one party state? No, welcome to blockchain, specifically, Multichain.

On July 14, Chinese decentralized cross-chain bridge protocol Multichain announced that it would cease operations after three years. The reason? The only person allegedly holding the private keys to over $1.5 billion in users’ crypto stored on Multichain was its co-founder and CEO Zhao Jun and later, his sister (name unknown). Both were arrested by Chinese police but it’s still not clear why.

Zhao Jun was reportedly arrested as early as May 21, but it appears that Multichain staff did not want you to know that… until now, when one discrepancy after another made it impossible to bury the truth.

The whole ordeal started on or around May 24, when Multichain users reported that funds had not arrived for nearly 72 hours after being sent. Admins immediately responded that the delay was due to a backend node upgrade “taking longer than expected,” and that “all affected transactions will arrive after the upgrade is complete.”

“Most routes are working as usual, as some routes (Kava, zkSync, Polygon zkEVM) are temporarily suspended. All affected transactions will arrive after the upgrade is complete. We sincerely apologize for the inconvenience caused.”

At that time, some users were already aware of CEO Zhao Jun’s arrest by Chinese police. In response, co-founder Alfred Xu decided to step in to quash the “rumors” and save users from “disinformation,” writing in the protocol’s Chinese Telegram channel:“Currently all team members are safe and sound; the main operations are proceeding as normal.”

Despite assurances, worries turned into a full-blown panic on May 25 when local news outlet PANewsLab reported that CEO was unreachable. This time, it was fellow co-founder DJ Qian who stepped in and assured that “user assets and staff are safe.” However, Qian also confirmed Zhao Jun’s disappearance. For the next month, Multichain continued to promote its cross-chain protocol. 

Fast forward to July 7, users began noticing over $100 million in unauthorized withdrawals from Multichain’s Fantom Ethereum bridge, along with funds from other sidechains. Around $65 million in Tether (USDT) and USD Coin (USDC) were frozen by their issuers, Tether and Circle, after the transactions led to widespread fear that Multichain was hacked. Some security experts began to suspect that the hack may be an inside job.

According to Multichain:

“User assets locked on the MPC addresses were transferred to unknown addresses abnormally. Login information from an IP address in Kunming was found on the cloud server platform, along with a series of operations transferring funds from the MPC addresses.”

Developers wrote that on July 9, Zhao Jun’s sister transferred the remaining assets from a router pool to wallet addresses controlled by her as an “asset preservation action.” Four days later, Zhao Jun’s sister was reportedly arrested by police (again it’s not clear why she was arrested). Because Zhao Jun and his sister were the only ones who had access to operational funds, users’ assets, Multichain servers, and even its website (which its own team is trying to shut down) “since inception,” the project’s own development team can no longer function.

“Later, the team established contact with Zhaojun’s family and learned that all of Zhaojun’s computers, phones, hardware wallets, and mnemonic phrases were confiscated by the authorities.”

Unfortunately, the worst may still be yet to come for Multichain’s users

To this day, we don’t actually know why Zhao Jun was arrested, what he had been charged with, or any details regarding his case (and no, I don’t think Multichain will tell us either). However, under Chinese law, funds seized as part of a criminal investigation may be considered proceeds of crime, opening a pathway to possible seizure by the state. In that case, it would be an absolute tragedy, unlike Multichain’s decision to leave its entire keys and access in the hands of one (or two) person.

Binance’s unusual anniversary gift to employees: Unemployment

On the sixth anniversary of the crypto exchange’s founding, Binance decided to give some its staff a gift to celebrate the occasion. However, most of the recipients wished they had never opened it.

On July 14, Changpeng Zhao (CZ), Binance’s CEO, shilled the sixth year anniversary event, stating, “We will always do what we think is in users’ best interests. We will continue collaborating with regulators. We will also defend what we believe is right,” for the path ahead. The same day, the Wall Street Journal (WSJ) reported that the exchange had reduced its staff count by as much as 1,000 in recent weeks, out of a total count of 8,000 before the layoffs.

According to employees, the layoffs were focused on the global and customer service sectors, with reductions possible of up to one-third of its overall staff count due to ongoing reorganization. The WSJ labels an ongoing U.S. Department of Justice investigation as “the most enduring” challenge facing the exchange.

In response, CZ wrote: 

“As we continuously strive to increase talent density, there are involuntary terminations. This happens in every company. The numbers reported by media are all way off. 4 FUD.”

The blockchain executive said that despite the layoffs, Binance is “still hiring.” On its website, the exchange currently lists 96 positions available at the time of publication. 

On July 17, the WSJ released a follow-up report claiming that the exchange had ceased employee reimbursements for items such as mobile phones, fitness and working from home, citing “current market environment and regulatory climate,” and the need to slash expenses. Binance is currently undergoing litigation with both the U.S. Securities and Exchange Commission and the U.S. Commodities and Futures Trading Commission on charges of offering unregistered securities and operating an unregistered exchange in the U.S. 

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China’s president Xi Jinping expands CBDC cooperation at SCO, Hong Kong’s crypto licensing costs surge, and Multichain is hacked yet again.

Chinese president shills CBDCs

On July 4, Xinhua News Agency, China’s state broadcaster, published a transcript of President Xi Jinping’s address to the Shanghai Cooperation Organisation Summit (SCO). The SCO is one of the world’s largest regional organizations for political, economic and security cooperation, and was established by China and Russia in 2001.

During the speech, President Xi welcomed Iran as a full organisation member, and praised the move for Belarus to join. He also talked up the importance of central bank digital currencies (CBDCs):

“The Chinese side proposes to expand the share of local currency settlements of SCO countries, expand sovereign digital currency cooperation, and promote the establishment of SCO development banks.”

In January, the People’s Bank of China reported that there were 13.61 billion digital yuan (e-CNY) CBDCs in circulation, representing around 0.13% of the monetary supply. Since then, the CBDC’s use has expanded to the country’s Belt and Road Initiative, various consumer airdrops, and as a means of payment for everyday transportation. However, experts have warned that despite the constant promotion, the currency has struggled to gain traction. 

On July 10, local news outlet East Money reported that a SIM card linked to the e-CNY CBDC will soon be available to Chinese consumers. Because the e-CNY CBDC digital wallet is embedded in the SIM card itself, individuals can pay for their phone bills via a point-of-sale machine even if their phone has no power. 

Hong Kong crypto licensing costs surge to HK$100M

According to a July 5 report by Tencent News, the combined labor, material, and technical cost associated with obtaining a Hong Kong crypto exchange license has surged to 100 million Hong Kong dollars ($12.77 million) since its inception on June 1.

However, even if the infrastructure is in place, insiders noted that the license application could still be denied or that the business opportunity will disappear once the license is approved. Tencent News wrote:

“Teams that left Hong Kong settled down in Malaysia last month. They can rent a large-floor work space at a monthly rent of 60,000 RMB ($8,296) in the local city center, and there are very cheap IT technicians in the local area. These emigrated teams believe that compared to Hong Kong, it is even more advantageous to do crypto projects in Southeast Asia.

All crypto exchanges in Hong Kong must obtain a regulatory license or cease operations in the administrative region by mid-next year. Since the announcement, exchanges such as Huobi, OKX, BitgetX, Hashkey Pro, and Gate.io have all applied for licensing in Hong Kong. 

Chinese cross-chain protocol hacked yet again 

On Jul. 7, the developers of Chinese cross-chain bridge protocol Multichain shared a worrying message, stating: “The Multichain service stopped currently, and all bridge transactions will be stuck on the source chains. There is no confirmed resume time. Please don’t use the Multichain bridging service now.” The same day, blockchain security firm PeckShield warned that over $126 million in funds had been drained from Multichain.

Circle promptly froze $63 million USD Coin (USDC) in suspected stolen funds, while Tether (USDT) froze $2.5 million in USDT. Changpeng Zhao, CEO of cryptocurrency exchange Binance, said that the hack did not affect its users as the firm had withdrawn all funds a while back.

It appears that malicious actors breached the protocol’s private keys and subsequently moved protocol assets elsewhere, although it took until July 10 for the funds to make another move, with a wallet address identified as “Fake_Phishing183873 ” receiving a stunning 10.2 million USDT and 67.76 wrapped Bitcoin (wBTC) from the Multichain address. Immediately after the hack, the price of Multichain tokens dropped by 20% from its highs and now trades at $2.62 apiece.

Multichain was previously hacked for $7.9 million in July 2021, due to another private key exploit. Interestingly, Zhao Jun, CEO of Multichain, has been missing for nearly two months after rumors surfaced that he had been arrested by Chinese police back in May. Around the same time, users reported that the on-chain transactions had abnormally long transaction times following a recent backend node upgrade. The protocol currently has a total value locked of $1.26 billion.

Singapore tightens grip on crypto activities

The Monetary Authority of Singapore (MAS) will require Digital Payment Token (DPT) providers to place clients’ assets in a statutory trust by the end of the year. In addition, DPTs will be prohibited from issuing crypto lending and staking services to retail investors. The MAS wrote:

“These measures are introduced following an October 2022 public consultation on regulatory measures to enhance investor protection and market integrity in DPT services. The consultation received significant interest from a wide range of respondents, with broad support.”

Crypto lending and staking services will still be allowed for institutional and accredited investors. Despite the new regulations, the MAS warned that “while the segregation and custody requirements will minimize the risk of loss of customers’ assets, consumers may still face significant delays in recovering their assets in the event of insolvency of the service providers.” The regulator is seeking public feedback on the proposed rule changes until Aug. 3. 

Thai crypto exchange raises $17.1 million

According to a recent filing, Thai cryptocurrency exchange Bitkub has sold 9.22% of its equity, amounting to 600 million Baht ($17.1 million), to Thai conglomerate Asphere Innovations PLC. During the transaction, it was disclosed that Bitkub held 31.9 billion Baht ($910 million) in assets and customer deposits, as well as 31.4 billion Baht ($890 million) in liabilities. The company recorded a total gross profit of 314.87 million Baht ($8.97 million) in the first quarter of 2023. 

Bitkub is Thailand’s largest cryptocurrency exchange, with nearly 90% in market share in 2021. Thai-based Siam Commercial Bank had previously signed an agreement to acquire 51% of the company that year for 17.85 billion Baht ($510 million). However, the bank canceled the deal in August 2022. Bitkub’s total assets decreased by 64% from Dec. 31, 2021, to Dec. 31, 2022.

Japanese video game conglomerate moves into blockchain gaming

On July 10, South Korean nonfungible tokens firm Line Next revealed it had signed a memorandum of understanding with Japanese video game giant Sega to remake one of Sega’s classic games on its Web3 gaming platform Game Dosi.

Launched in May, Game Dosi currently has six titles, including its in-house game “Project GD.” Through the platform, players can buy and sell NFT heroes and challenge other players.

Founded in 1960, Sega is one of the largest video game conglomerates in Japan with nearly $2 billion in annual video game sales. Its most iconic franchise is Sonic the Hedgehog, which also serves as the company’s mascot. 

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Hong Kong crypto ETFs grow 80% since December, Binance co-founder warns against FOMOing into MAV with leverage, Poly Network hacked again.

Hong Kong crypto ETFs’ rise to popularity

During a June 28 interview with Hong Kong’s public broadcast agency Radio Television Hong Kong, Peishan Li, chief executive and board member of Hang Seng Investment Management, disclosed that digital asset ETFs listed in the Special Administrative Region (SAR) of China have now surpassed $12 billion Hong Kong dollars ($1.532 billion) in assets under management (AUM). Li noted:

“At present, there is no clear goal [from our firm] to create an ETF with the theme of virtual assets, but it has paid close attention to the development of related asset classes, and is examining the possibility of deploying virtual currencies in existing investment products.”

According to figures provided by Li, the total AUM of Hong Kong crypto ETFs grew by 80% compared to Dec. 2022, with a daily trading volume of $1.7 billion HKD. This represents 6% of the daily trading volume of all stocks on the Stock Exchange of Hong Kong. The SAR previously allowed the listing of crypto ETFs in July 2022, which initially struggled in traction.

Binance co-founder warns of altcoin rout

On July 2, Binance co-founder and former Chinese television host Yi He warned “please don’t trust the community’s trading signals [that] blindly chase higher prices,” noting the price of major altcoins “have fallen by 80% to 90%” in recent times. The warning came just days after the exchange listed MAV, a permissionless decentralized finance token, and offered perpetual MAV contracts at 20x leverage.

Launched in March of this year, Maverick boasts an advanced automated market maker liquidity provider network, securing a $9 million founding round in June. The protocol is backed by prominent names such as Jump Crypto, Pantera Capital, Circle, and Gemini. Since its launch, the protocol has reached nearly $55 million in total value locked.

Shortly after the listing, MAV skyrocketed to $1.98 a piece on Binance before slumping to $0.43 apiece at the time of publication, which is still significantly above its initial listing price of $0.05. She wrote:

“According to the history of previous cycles, the first day of IEO [Initial Exchange Offering] is several times [return], and it is not in line with the current market situation to pull it up to 10 times or 20 times [return]. Please DYOR [Do Your Own Research]

Amid the retail frenzy, the Binance co-founder also warned, “The price of tokens is not controlled by Binance. The price is affected by both buyers and sellers. Please pay attention to investment risks.” Despite a thaw in crypto markets, the marketcap of coins and tokens excluding Bitcoin, has remained stagnant over the past year at around $550 billion.

Though not nearly as popular as her counterpart, Changpeng Zhao, Yi He is responsible for the overall marketing strategy and the brand image of Binance and is credited with the exchange’s rise to prominence, now serving the additional role of director of Binance Labs. She also happens to be Zhao’s partner, both on a business and a romantic level and they have two children together.

Chinese DeFi protocol hacked yet again

On July 2, Chinese DeFi protocol Poly Network announced it had been hacked yet again, with the breach affecting as many as 57 different asset types across 10 blockchains.

According to DeFi security analyst @0xArhat, hackers allegedly exploited a smart contract vulnerability allowing them to mint an unrestricted amount of tokens from Poly Network’s multi-chain pools. An estimated $42 billion worth of tokens were minted, although only $5 million have been reportedly cashed out. Developers wrote:

“We kindly request the assistance of cybersecurity professionals and individuals with relevant knowledge. If you possess any information that could aid us in this endeavor, we encourage you to actively contact us.”

Shortly after the hack, the total value locked on Poly Network plunged from $277 million to $176 million. Previously in August 2021, hackers stole at least $600 million from Poly Network in what cybersecurity firm SlowMist called “a long-planned, organized and prepared attack.”

Just two days later, however, the hacker returned almost all of the stolen funds and refused a $500,000 white hat bounty, saying, “I will send all of their money back,” and that the hack was just “for fun” because “cross-chain hacking is hot.”.

Hong Kong launches Web3 Task Force

On June 30, Hong Kong announced the establishment of a Web3 Task Force spearheaded by Paul Chan Mo-po, the SAR’s Financial Secretary. The team is comprised of 15 industry veterans, along with regulators and government officials, all with a term of two years. According to officials, the Web3 Task Force will be dedicated to the sustainable and responsible development of emerging Web3 technologies in Hong Kong, along with the submission of proposals to the government.

Chan commented: “The blockchain technology behind Web3 has the characteristics of disintermediation, security, transparency and low cost, and can solve many difficulties and pain points in finance, transactions, business operations and even life.” He continued that “an international financial center” and a “metropolis” such as Hong Kong should embrace the development of Web3, though albeit under “suitable regulation.”

On July 3, Animoca Brands’ CEO Yat Siu was appointed to the Task Force. Previously, the crypto executive stated that crypto VC [Venture Capital] is only struggling “from an American perspective” and that the industry is actually “very vibrant” in both the Middle East and Asia.

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Huobi Global’s woes intensify, OPNX exchange volume up 2.5M%, 3AC is dead — long live 3AC Ventures, South Korea crypto contagion update.

Huobi co-founder sues own company for copyright infringement

According to local news reports on June 21, Leon Lin Li, former co-founder of cryptocurrency exchange Huobi Global, has filed a copyright infringement lawsuit against the company in Hong Kong. Li claims that despite selling his majority stake to an entity controlled by Chinese blockchain personality Justin Sun last November, his company, X-Spo, still possesses trademark rights associated with the term “Huobi Global,” and that “Huobi Global,” the actual exchange, has been using the trademark without authorization. 

Though it’s not immediately clear why Li seeks litigation against the very company and brand he previously built, a series of heated exchanges between Li and Justin Sun last month may offer some hints.

On May 16, Sun published a series of allegations against Wei Li, Lin Li’s brother. In the Twitter post, Sun accused Wei Li of “receiving millions of Huobi (HT) tokens through “abnormal means” at zero cost and of “consistently selling off these HT tokens and cashing out.” To which Lin Li replied: “I hope Huobi can provide evidence. If it is confirmed that it is zero-cost HT was obtained through illegal means, I will personally pay 10 times the HT [amount] to Huobi company.”

Hodlnaut’s last voyage? 

According to a recent court filing, the fate of whether troubled Singaporean crypto lending firm Hodlnaut is to be dissolved or restructured will be sealed on August 7. Last August, Hodlnaut halted operations after disclosing that it lost over $300 million of its client’s assets from the implosion of the $40 billion Terra Luna ecosystem in May 2022. 

The firm faces approximately $300 million in claims from creditors, who mostly wish to see the firm dissolved. That said, both co-founders Juntao Zhu and Simon Lee want to continue Hodlnaut’s operations, even though the company had reportedly lost 69% of users’ deposits. Last November, Singaporean police began a probe into Hodlnaut’s activities as the firm initially denied exposure to the Terra Luna ecosystem. 

South Korean crypto lending contagion

On June 22, South Korean crypto lending firm Haru Invest announced that it would be terminating a portion or all of its current staff count just days after suspending users’ deposits and withdrawals. The move comes after the firm accused its consignment operator, B&S Holdings, of fraudulent operations. 

“It comes with a heavy heart to inform you that we will be minimizing the operations of Haru Invest and its affiliated companies to prevent further damages that are likely to be incurred.”

Last week, fellow South Korean crypto lending firm Delio, with over $9 billion in self-reported assets under management, also announced it would suspend withdrawals, citing exposure to Haru Invest. The firm has since clarified it will resume withdrawals, albeit with no schedule disclosed. During an extraordinary investors’ meeting on June 17, CEO Jung Sang-ho disclosed for the first time that Haru Invest is claiming bankruptcy.

In addition, Haru also claims that it has filed a criminal complaint against B&S Holdings as well as civil litigation. But it appears that Haru itself does not know exactly what is happening. In a letter to investors on June 20, CEO Hugo Lee wrote:

“We’ve been explaining about the current situation and progress through the company statement three times so far, but we understand that it’s still far from enough. We are sorry about this as well.”

3AC co-founders stage unlikely comeback

While some firms’ (and individuals’) reputations may be devastated by bankruptcy, it can be a simple nothingburger for others. On June 21, Kyle Davies, co-founder of bankrupt Singaporean hedge fund Three Arrows Capital (3AC), wrote in a tweet:

3AC is dead, long live 3AC Ventures.”

The same day, OPNX, a platform for trading claims against bankrupt crypto entities founded by Davies and fellow 3AC co-founder Su Zhu, said that 3AC Ventures had become the firm’s “new ecosystem partner.” Interestingly, given that the use of leverage by Zhu and Davies played a pivotal role in 3AC’s $3.4 billion downfall last year, 3AC Venture’s website states:

“3AC Ventures is focused on superior risk-adjusted returns without leverage.”

On June 24, 3AC Ventures introduced its first investment, an inaugural project dubbed “Raiser,” that allows users to borrow funds based on their on-chain creditworthiness. “Borrowers raise funds by issuing zero-coupon bonds. Lenders buy these bonds to earn a fixed income. Traders can trade these bonds in the secondary market,” the developers wrote in an introductory thread.

Almost one year later, 3AC is still undergoing bankruptcy proceedings, but it appears that clawing money back has become harder than ever. On June 15, 3AC creditors filed a motion to hold Kyle Davies in contempt of court; however, the motion would only apply to Davies, and not Su, as the latter’s Singaporean citizenship does not subject him to U.S. jurisdiction. The two’s current whereabouts are unknown, and no criminal complaints have been yet filed against the two blockchain personalities. 

OPNX: Aspiring blockchain underdog

On April 5, Su Zhu and Kyle Davies’ crypto derivatives claims exchange OPNX, which is based in Hong Kong, saw a meager $13.64 volume traded on its first day of debut. By late-June, that number had (apparently) risen to $34.1 million. Following the traction was a near 200% rise in the price of OPNX’s native OX tokens to $0.03 in the past month, pushing its fully diluted market cap to nearly $300 million.Heck, the firm even has its own stablecoin now.

Let’s face it, nobody, perhaps not even Davies or Zhu themselves, expected OPNX to succeed from the get go. But successful underdogs often have a deep grudge against those who “punched down” the hardest while they were out on their luck. Which may be why on June 22, OPNX filed a defamation lawsuit against venture capitalist Mike Dudas, alleging the publication of defamatory comments against the exchange from February to March 2023.

Around the same time, the exchange unveiled its new “Justice Tokens,” (JT), citing “one of the biggest challenges the industry faces is the current prevalence of defamation,” Based on its tokenomics, one JT will exist for each defamation case, it will be an ERC20 token with a maximum supply of 1 billion. Three quarters will be distributed to OX stakers, 20% will be given to JT-OX liquidity providers, and 5% will be airdropped to Milady nonfungible tokens holders. At the time of publication, it’s unclear if Davies plans to issue tokens to build rapport against review bombers of his Dubai restaurant during possible litigation proceedings.

“The resulting defamation and harassment greatly deters entrepreneurs and innovators. The presence of these people is a clear net good to the industry.”

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