SEC - Page 329

Derebit, a major cryptocurrency derivatives exchange, was hit by a massive $28 million wallet hack, forcing it to halt withdrawals temporarily.

The hot wallet hack took place near midnight on 1 November and user funds have been protected by its reserves, according to a company tweet.

Deribit hot wallet compromised, but client funds are safe and loss is covered by company reserves

Our hot wallet was hacked for USD 28m earlier this evening just before midnight UTC on 1 November 2022.

— Deribit (@DeribitExchange) November 2, 2022

The tweet thread stated: “Client assets, Fireblocks or any of the cold storage addresses are not affected. It’s company procedure to keep 99% of our user funds in cold storage to limit the impact of these type of events.”

Hacktober to November

The platform halted withdrawals, including across Copper Clearloop and Cobo, to ensure the platform was fully secure before reopening.

Derebit’s Telegram chat added: “Due to our hot wallet policy we were able to limit loss of user funds.” It added it was in a “financially sound position” and that the hack would not impact ongoing operations.

CoinGecko data indicated Derebit’s daily trading volumes were $280 million, making it one of the largest cryptocurrency derivatives exchanges in the world.

Binance also temporarily halted transactions after being compromised in early October and fund transfers were temporarily suspended, with company chief executive Changpeng Zhao apologising for the incident.

At the Hong Kong Fintech Week event, Yi Gang, governor of the People’s Bank of China, outlined progress and gains in the nation’s adoption of its central bank digital currency.

In his speech, he stated China’s stablecoin could operate as a cash alternative in the country, adding privacy protection was “one of the top of the issue on our agenda.”

The news comes after China’s sovereign cryptocurrency launched in 2019, leading to widespread pilot programmes and adoption at retail stores nationwide, namely via its “red envelope,” or hongbao offering.

Authorities in Beijing later expanded the pilot programme to provinces with larger populations and later, noted total CBDC transactions surpassed $14 billion in the third quarter this year.

Introducing E-CNY

Yi explained China’s national cryptocurrency, E-CNY, could facilitate a two-layer payment system with anonymity for users. The tier-one option supplies the CBDC to authorised operators with institutional data. Tier-two options collect essential personal data for exchanging and circulating public services.

Additionally, China’s central bank would encrypt and store data with “managed-anonymity” and would not share data with third-party entities, Yi added.

The cryptocurrency would “meet the needs of domestic retail payment, enhance the development level of inclusive finance, and improve the efficiency of the currency and payment system.”

The bank would also facilitate “small-amount soft wallets and hard-wallets” for limited anonymous transactions “both online and offline,” Yi explained.

“Legitimate demand” for paper cash for fully anonymous payments would “be met at all times,” he added.

Speaking further about security, he concluded: “It is also important to keep in mind that anonymity and full disclosure are not as simple as black and white […] We must strike a delicate balance between protecting privacy and combating illicit activities”

The event is taking place 31 October to 4 November and has rallied members of the fintech community. Some of the region and world’s top thought leaders, executives, government officials, and experts to discuss the future of the special administrative region’s position in the global fintech industry.

MakerDAO and Balancer Labs co-founder Nikolai Mushegian has died aged 29, reports revealed on Friday last week.

He died after drowning due to riptides at Condado Beach in San Juan, Puerto Rico, El Nuevo Dia reported at the time. Authorities pronounced him dead at the scene following the rescue attempt on 28 October.

The beach has recently claimed the lives of roughly eight people last year and is widely considered a dangerous place for swimming activities.

The incident is under investigation by local authorities and a prosecutor working on the case.

Remembering Mushegian’s Legacy

The world-famous “Dai Architect” remains a key voice of the crypto space for his work with the industry, including MakerDAO forks Rico and Rai. He also collaborated on BitShares, a proof-of-stake blockchain network, and the automated market platform Balancer.

Rune Christensen, MakerDAO founder and chief executive, tweeted on Monday that his colleague had been “one of the only people in the early days of Ethereum and smart contracts” to predict potential hacks, leading to the development of security-based approaches to current designs.

“Maker would have been toast without him,” he concluded.

Cardano co-founder Charles Hoskinson added that Mushegian was a “very young and extremely bright man” with a wide range of interests and a deep understanding of technology.

He also actively campaigned on social media. One of his final tweets, hours before his death, alleged that the US Central Intelligence Agency (CIA) and Israel’s Mossad were blackmailing him.

User Danpub added that MakerDAO disrupted “the traditional financial system by offering users access to #ETH #USD loans without collateral,” indicating a potential conflict with the banking system.

Nik Bougalis, Ripple Lab’s director of engineering, announced in a shock tweet last Saturday he had left the firm. In a 22 October tweet, he said his 10-year career with Ripple would end “in a few weeks.”

“All good things…”

My decade-long journey at @Ripple has been a fantastic (if exhausting and all-consuming) one.

I got to work on a project that I love, towards a goal I believe in.

But that journey will be coming to an end in a few weeks.

🧵

— 𝙽 𝙸 𝙺 𝙱 (@nbougalis) October 21, 2022

He wrote at the time his 10-year career at Ripple had been “fantastic,” adding he would not join another blockchain, non-fungible token (NFT), or decentralised finance (DeFi) project.

I got to work on a project that I love, towards a goal I believe in. But that journey will be coming to an end in a few weeks. As for what’s next? I’ll talk about it when it’s time, but I am NOT joining another blockchain project/company, nor am I doing NFTs or DeFi”

The veteran software engineer and cryptographer developed the XRP Ledger (XRPL), an open-source project. He additionally managed the XLS-20 amendment, which added NFTs to XRPL set for launch in November.

Continuing, he stated Ripple’s operations would “be just fine” due to its team of “passionate individuals” contributing to the platform.

Ripple SEC Complaint

The news comes amid an ongoing lawsuit with the US Securities Exchange Commission (SEC), which saw last week’s inflows of XRP-based products increase with positive inflows of $800,000.

One of the biggest court cases involving a cryptocurrency, the SEC complaint accused Ripple’s XRP of operating as a security, leading over 3,000 XRP supporters to challenge the accusation in courts.

The official filing in December 2020 accused Ripple Labs and “two of its executives” with “significant” security holdings of raising $1.3 billion USD “through an unregistered, ongoing digital asset securities offering, citing company co-founder and executive chairman Christian Larsen.

The complaint also accuses company chief executive Bradley Garlinghouse of involvement in the alleged incident, which began in 2013 following investments across the United States and other global markets.

Stephanie Avakian, Direct of the SEC’s Enforcement Division, said in a statement,

“Issuers seeking the benefits of a public offering, including access to retail investors, broad distribution and a secondary trading market, must comply with the federal securities laws that require registration of offerings unless an exemption from registration applies. We allege that Ripple, Larsen, and Garlinghouse failed to register their ongoing offer and sale of billions of XRP to retail investors, which deprived potential purchasers of adequate disclosures about XRP and Ripple’s business and other important long-standing protections that are fundamental to our robust public market system.”

Marc P Berger, SEC Enforcement Division Deputy Director, concluded the registration requirements were “designed to ensure that potential investors […] receive important information about an issuer’s business operations and financial condition,” accusing Ripple of ‘failing’ over the years to satisfy the provisions.