Terraform Labs co-founder Do Kwon gets probed by Singaporean authorities

March 6, 2023 Coin Telegraph

Local police in Singapore sent an email on Monday saying that they have begun a probe connected to Do Kwon’s Terraform Labs.

Local authorities in Singapore announced they had begun a probe that is connected to Do Kwon’s Terraform Labs.

According to a Bloomberg report, Singaporean police sent an email on March 6, which said, “investigations have commenced in relation to Terraform Labs.” The email also added that the inquiries are “ongoing,” and Do Kwon is not currently in the city-state.

Last month, on Feb. 16, the United States Securities and Exchange Commission (SEC) accused Do Kwon and Terraform Labs of fraud in a new lawsuit.

Some voices in the crypto space have criticized this lawsuit as a way for the SEC to go after stablecoins with future lawsuits. Lawyers in the industry have even called the SEC’s comparisons of assets “wild."

Meanwhile, the SEC probe uncovered that Kwon removed around 10,000 Bitcoin (BTC) from the Terra platform and the Luna Foundation Guard, which he eventually changed into fiat. In total SEC allegations claim Kwon has laundered over $100 million worth of Bitcoin since the initial collapse of the platform.

At the time of writing, Do Kwon has made no comment. The Terraform Labs co-founder has been active on social media throughout the entire scandal. However, he has not tweeted since the beginning of February.

This entire saga has its roots back in May 2022 when the stablecoin UST dropped from its peg to the U.S. dollar. This caused the price to collapse to zero, which subsequently caused a major implosion in the digital asset market with a loss of nearly $40 billion.

Terraform Labs has also been under investigation by authorities in South Korea, where a warrant was out for Kwon’s arrest. South Korean police traveled to Serbia in their efforts to locate Kwon.

On Feb. 15, South Korean prosecutors requested a warrant for the arrest of a local e-commerce executive who they accused of accepting LUNA for promoting Terra Labs.

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Yield platform Stablegains sued for promoting UST: Finance Redefined

February 24, 2023 Coin Telegraph

Coin Telegraph

DeFi market saw another exploit this past week on the Platypus protocol, resulting in a loss of over $8 million.

Welcome to Finance Redefined, your weekly dose of essential decentralized finance (DeFi) insights — a newsletter crafted to bring you significant developments over the last week.

The backlash from the Terra implosion still haunts the crypto world, with the now-shuttered stablecoin yield platform Stablegains being sued for customer losses. The plaintiffs allege that the platform funnelled customer funds into Anchor Protocol without users’ knowledge or consent.

Platypus, the DeFi protocol that was exploited for over $8 million, is working on a compensation plan to recover some of the funds.

Florida’s Cogent Bank is proposing a $100 million participation in loans to MakerDAO’s RWA Master Participation Trust.

Bridge protocols were the primary target of exploits last year, amounting to hundreds of millions of dollars worth of stolen funds. Trustless bridges can mitigate the issue, enabling cross-chain transfers without needing a centralized custodian, potentially making it a safer option for interoperability.

After nearly four weeks of a bullish run, the DeFi market is fighting a brave battle against the bears. There were minor price drops, and the market’s overall slightly declined as bears had the upper hand toward the end of the week.

Yield platform Stablegains sued for promoting UST as a ‘safe’ investment

DeFi yield platform Stablegains is being sued in a Californian court for allegedly misleading investors and failing to comply with securities laws.

On Feb. 18, the plaintiffs, Alec and Artin Ohanian, filed a complaint in the United States District Court for the Central District of California, alleging that the shuttered DeFi platform diverted all its customer funds to the Anchor Protocol without their knowledge or consent. Anchor Protocol offered up to 20% yields on Terraform Labs’ algorithmic stablecoin, Terra USD (UST).

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Platypus to work on compensation plan after $8.5M attack

The $8.5 million Platypus flash loan attack was made possible because of code that was in the wrong order, according to a post-mortem report from Platypus auditor Omniscia. The DeFi firm is working on a compensation plan for users’ losses after a flash loan attack drained nearly $8.5 million from the protocol, affecting its stablecoin dollar peg.

In a tweet on Feb. 18, Platypus said it was working on a plan to compensate for the damages and asked users not to realize their losses in the protocol, saying this would make it harder for the company to manage the issue. Asset liquidations are also paused, the protocol said.

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MakerDAO voting on $100M loan participation with Florida commercial bank

Crypto lending platform MakerDAO is voting on a new proposal to bring another commercial bank into its ecosystem, strengthening the connection between DeFi and traditional finance.

As per MakerDAO’s governance forum, Cogent Bank — a Florida-based commercial bank — proposes to participate with $100 million in loans to MakerDAO’s RWA Master Participation Trust.

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DeFi security: How trustless bridges can help protect users

Blockchain bridges allow DeFi users to use the same tokens across multiple blockchains. For example, a trader can use USD Coin (USDC) on the Ethereum or Solana blockchains to interact with those networks’ decentralized applications.

While these protocols may be convenient for DeFi users, they are at risk of exploitation by malicious actors. For example, in the past year, the Wormhole bridge — a popular cross-chain crypto bridge between Solana, Ethereum, Avalanche and others — was hacked, with attackers stealing over $321 million worth of wrapped Ethereum (wETH), the largest hack in DeFi history at the time.

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DeFi market overview

Analytical data reveals that DeFi’s total market value dipped below $50 billion this past week. Data from Cointelegraph Markets Pro and TradingView shows that DeFi’s top 100 tokens by market capitalization had a mixed week, with most of the tokens trading in green while a few others bled in red.

Thanks for reading our summary of this week’s most impactful DeFi developments. Join us next Friday for more stories, insights and education in this dynamically advancing space.

Eclipse to Launch Rollup Blockchain for Polygon Network with Solana Compatibility

February 24, 2023 Bitcoin.com

The fate of dollar-pegged stablecoins in question: Law Decoded, Feb. 13–20

February 20, 2023 Coin Telegraph

Binance

The United States Securities and Exchange Commission (SEC) ordered Paxos Trust to stop issuing Binance USD. That could affect the whole stablecoins ecosystem.

New week, a new element of the crypto ecosystem is under attack. This time, the United States Securities and Exchange Commission (SEC) ordered Paxos Trust to stop issuing Binance USD (BUSD) — a dollar-pegged stablecoin. Paxos received a cease order from the New York Department of Financial Services (NYDFS).

With no other choice, Paxos announced that from Feb. 21, it would end its relationship with Binance for the branded U.S. dollar-pegged stablecoin BUSD. All existing BUSD tokens will remain fully backed and redeemable through Paxos Trust Company until “at least February 2024.” Customers can redeem their funds in U.S. dollars and convert their BUSD tokens to another Paxos-issued stablecoin, Pax Dollar (USDP). At the same time, the company “categorically disagreed” with the SEC’s opinion that BUSD is a security.

From disregarding the issue as “FUD” to calling it an attack against the Binance exchange, crypto community members laid down various theories on the allegations that BUSD is an unregistered security. Crypto analyst Miles Deutscher expressed the most obvious point of bewilderment — nobody expects profit when purchasing a stablecoin.

The situation may have far-reaching repercussions for the stablecoins in general. As Binance CEO Changpeng Zhao has already hinted, the industry may drop the American dollar as a peg currency altogether, switching to the euro, yen or Singapore dollar. However, some experts believe the scrutiny of Paxos was not a direct attack on stablecoins but preventive action against Paxos in particular.

SEC sues Do Kwon and Terraform Labs for fraud

The SEC has filed a lawsuit against Terraform Labs and its founder, Do Kwon, for allegedly “orchestrating a multi-billion-dollar crypto asset securities fraud.” According to the agency, Kwon and Terraform offered and sold an “inter-connected suite of crypto asset securities, many in unregistered transactions.” Kwon, a South-Korean national, is currently at large and believed to be in Serbia after leaving his residence in Singapore sometime in September 2022 following a Seoul court issuing an arrest warrant for him. Interpol reportedly issued a Red Notice for Kwon to law enforcement worldwide later in September.

Russia to roll out CBDC pilot with real consumers in April

The Bank of Russia is preparing to roll out the first consumer pilot for the nation’s central bank digital currency (CBDC) on April 1, 2023. The upcoming CBDC pilot will involve real operations and real consumers in Russia but will be limited to a certain number of transactions and customers. Following the first pilot stage, the Bank of Russia plans to determine how to scale the digital ruble further. The news comes amid some Russian officials claiming that the Bank of Russia is considering a gold-backed token targeting cross-border transactions.

Kansas state lawmakers look to cap crypto political donations at $100

The topic of campaign donations in crypto is undoubtedly something that will come up before the next electoral cycle in the United States. Still, Kansas state lawmakers are eager to address it beforehand. According to a new bill, no person would be allowed to make or accept crypto contributions of more than $100 for any political candidate in the state’s primary or general election. For donations under $100, the receiver would need to “immediately convert” the crypto to U.S. dollars, not use the crypto for expenditures and not hodl the funds.

Trading on major exchanges spiked following collapse of Terra, FTX: BIS report

February 20, 2023 Coin Telegraph

BIS

The report suggested that whales with Binance, FTX, and Coinbase “probably cashed out at the expense of smaller holders” by reducing their BTC stockpiles as retail investors bought.

A report from the Bank for International Settlements (BIS) suggested that trading activity on major exchanges increased in the days following the collapse of crypto firms FTX and Terraform Labs.

According to a Feb. 20 bulletin on “crypto shocks and retail losses,” the BIS reported that while the price of Bitcoin (BTC), Ether (ETH), and other tokens dropped in 2022, the number of daily active users at some exchanges including Coinbase and Binance “increased markedly” following news of the collapse of Terra and FTX. The bank suggested that “users tried to weather the storm” by moving their investments into stablecoins and other tokens likely not looking bearish at the time.

In contrast, the BIS reported that whales at the aforementioned exchanges “probably cashed out at the expense of smaller holders” by reducing their BTC stockpiles as retail investors bought crypto. The bank said analysts had looked at the number of downloads of crypto investment apps, noting that roughly 75% of users had downloaded an app when the BTC was more than $20,000 and assuming each user bought $100 in BTC the first month and each subsequent month.

“Data on major crypto trading platforms over August 2015–December 2022 show that [...] a majority of crypto app users in nearly all economies made losses on their bitcoin holdings,” said the BIS report. “The median investor would have lost $431 by December 2022, corresponding to almost half of their total $900 in funds invested since downloading the app.” The bank added:

“While the crypto collapse may have affected individual investors, the aggregate impact on the broader system was limited.”

The market crash of 2022 has had industry leaders and regulators speak out on various concerns, from the lack of oversight at a major exchange like FTX to how the crypto market could grow to have the potential to impact traditional financial markets. In the United States, several bankruptcy cases are underway for firms including FTX, Celsius Network and Voyager Digital, while authorities have been moving forward with criminal charges against former FTX CEO Sam Bankman-Fried.

SEC Alleges Do Kwon Relocated 10,000 Bitcoin (BTC) As Terra (LUNA) Ecosystem Imploded Last Year

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Crypto Hedge Fund Galois Capital to Shut Down due to FTX Losses

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Yield platform Stablegains sued for promoting UST as a ‘safe’ investment

February 20, 2023 Coin Telegraph

anchor protocol

The stablecoin yield platform is being sued for customer losses following exposure to the Anchor Protocol and UST collapse last year.

Decentralized finance yield platform Stablegains has been sued in a Californian court for allegedly misleading investors and failing to comply with securities laws.

On Feb. 18, plaintiffs Alec and Artin Ohanian filed a complaint in the U.S. District Court for the central district of California.

In it they alleged that Stablegains, a DeFi platform launched in August 2021, diverted all of its customer funds to the Anchor Protocol without their knowledge or consent.

Anchor Protocol offered yields of up to 20% on the Terraform Labs algorithmic stablecoin, Terra USD (UST).

“As an early supporter of and investor in TFL [Terraform Labs], Stablegains is intimately familiar with UST and LUNA. In fact, Stablegains, Inc. falsely advertised UST as a safe investment.”

Stablegains offered a 15% gain for its customers, pocketing the difference from yields offered by Anchor Protocol.

The plaintiffs are also claiming that Stablegains broke federal securities laws, alleging that UST was a security:

“Stablegains plainly failed to comply with federal and state securities laws. Stablegains failed to disclose that UST is in fact a security.”

The complaint added that the firm failed to register with the U.S. Securities and Exchange Commission either as a securities exchange or as a broker-dealer.

The Ohanians stated that there were “disastrous consequences for Stablegains’ customers,” following the collapse of the UST ecosystem in May 2022. UST de-pegged from the dollar causing a broader run on DeFi and crypto markets in May and an eventual loss of around $18 billion from the Terra/Luna ecosystem.

Following the collapse, Stablegains allegedly altered its website and promotional material touting UST as “safe” and “fiat-backed,” effectively conceding that UST was none of those things, the complaint stated.

Instead of liquidating assets and returning funds to customers, Stablegains , “retained the majority of the devalued assets deposited by its users, unilaterally opting to redirect them into Terra 2.0,” it added.

We’re discontinuing the Stablegains service. Please withdraw your remaining funds.

See the anticipated timeline + a letter from the team here: https://t.co/ebx4Z78sp1
— Stablegains (@stablegains) May 21, 2022

On May 22, Stablegains discontinued its services, apps, and support for Anchor Protocol, requesting that users withdraw their funds. As reported by Cointelegraph, Stablegains was hit with a similar lawsuit at the time.

The specific amount sought in damages was not detailed, however, the plaintiffs did demand a trial.

On Feb. 16, the SEC filed a lawsuit against Terraform Labs and its founder, Do Kwon, for allegedly “orchestrating a multi-billion dollar crypto asset securities fraud.”

Terra

Yield platform Stablegains sued for promoting UST as a ‘safe’ investment

Platypus to work on compensation plan after $8.5M attack

MakerDAO voting on $100M loan participation with Florida commercial bank

DeFi security: How trustless bridges can help protect users

DeFi market overview

SEC sues Do Kwon and Terraform Labs for fraud

Russia to roll out CBDC pilot with real consumers in April

Kansas state lawmakers look to cap crypto political donations at $100

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