CoinDesk Crypto

A Paris judge has officially ordered the trial of alleged BTC-e operator Alexander Vinnik to begin.

• In a report from the Moscow Times on Monday citing AFP, Vinnik’s lawyer and others said he will face charges of defrauding more than 100 people in six French cities from 2016 to 2018.
• Vinnik will also face charges of extortion, aggravated money laundering, conspiracy and harming automatic data-processing systems as the head of the now-shuttered crypto exchange BTC-e, an AFP source said.
• Billions of dollars-worth of bitcoin passed through BTC-e , some of which was allegedly used to launder money for criminals.
• Law enforcement agencies moved to halt operations of the exchange in 2017.
• Later the same year, Vinnik was detained by authorities in Greece and became the focus of a legal tug-of-war between the governments of Russia, the U.S. and France, all of which were seeking his extradition.
• On the day Vinnik arrived in France in late January he was immediately charged and prosecutors filed to launch the trial late last month.
• The suspect, who maintains his innocence, had hoped to be extradited to Russia where he would face less severe fraud charges for the amount of €9,500 ($11,200).
• Vinnik is also facing 21 charges from U.S. authorities ranging from money laundering and identity theft to facilitating drug trafficking.

See also: Latvian Police Seize Crypto Worth $126K in Bust of Suspected Cybercrime Ring

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The rain has come. The machines are humming. This should be the best time of the year for China’s bitcoin miners. The monsoon season, generally from June to October, brings excessive rain and thus cheap hydro electricity.

But this year is different, proving to be harder than ever for China’s bitcoin miners and mining farm operators who are estimated to dominate 65% of the global multi-billion dollar bitcoin mining industry. 

Since last summer, many mining farm operators rushed to build new facilities in China’s southwestern region in anticipation of a dramatic price rise with bitcoin’s halving. 

Related: Bitcoin Miners Saw 7% Revenue Increase in July

But mining difficulty has now almost doubled compared to the monsoon season last year, while block rewards have halved, meaning it is more difficult to mine, with less rewards. Bitcoin miners that have entered the market since last year have to wait much longer to see a return on their investment in mining hardware and facilities. 

Thomas Heller, global business director of mining pool F2Pool, summarized the situation in a recent blog post: “We’re halfway through 2020 and the mining industry has already faced several enormous challenges.”

“Miners had to battle off the macroeconomic black swan of March, pass through the smoke of the halving and a pandemic, and now they’re gearing up for the rest of the year’s competitive battlefield,” he wrote.

A year with a bitcoin halving and global epidemic rolled into one, it’s truly one of a kind.

Related: Marine Corps Bans Crypto Mining Apps From Government-Issued Mobile Devices

Read more: Bitcoin Mining Difficulty Sets New Record High 2 Months After Halving

Harder than ever

Many miners expected bitcoin’s price to rise sharply after the halving, said Kevin Pan, CEO and co-founder of the China-based PoolIn, one of the two biggest bitcoin mining pools in the world (along with F2Pool).

“In reality, not only there was not much price momentum driven by halving, there came the mega sell-off on March 12, which caused a large scale of forced liquidation and loss,” he said.

For two months after halving, bitcoin’s price largely remained static around $9,000. Although it jumped above $10,000 last week and is now changing hands over $11,000, it is still at a similar price level seen at this time last year. 

In contrast, the network’s mining difficulty rose to an all-time-level within two months after halving. It’s now almost twice as difficult to mine bitcoin compared to last July, while block rewards have halved.

Without a significant price breakout, bitcoin miner’s daily revenue has dropped by 70% compared to last year, said Pan, although the recent bitcoin price jump has helped improving the situation.

Indeed, Bitinfochart’s data shows bitcoin’s daily mining revenue was around $0.33 per one terahashes second (TH/s) of computing power in July 2019. It has since then declined to now around $0.1 per TH/s.

Overcapacity

Meanwhile, a surge in interest and investment in bitcoin mining since last year have led to a surplus of newly constructed mining facilities in China. 

In April, the oversupply issue had already shifted the hosting business from a seller’s market to a buyer’s market, with mining farms generally offering a 20% electricity discount compared to last year.

Pan estimates that during this rainy season, 20% to 30% of mining facility capacity in Sichuan and Yunnan provinces still remains unused. 

Read more: China’s Rainy Season Is Coming. This Time Bitcoin Miners Aren’t Investing

To be clear, bitcoin miners and mining farms can still make a profit. But they have to endure a much longer period than expected to break even on their investments.

A payback period of six months to a year used to be common for bitcoin miners in China, but if bitcoin maintains its current prices around $11,000, that could be extended to as long as two years. 

“In the eyes of many old Chinese miners, the electricity price right now is not only lower than the similar situation of the halving and hydro season in 2016, but also even lower than the electricity prices during the 2015 bear market,” said Heller of F2Pool. 

Lower electricity may be appealing to miners, but it also means mining farm operators are facing an “unprecedented investment challenge” as the business shifted to a buyer’s market, Heller said.  

Long-term bullish

Despite this year’s tough market environment, some are still bullish over the long term and are rolling out products to attract investors. Jiang Zhuo’er, CEO and founder of mining pool BTC.Top who also runs his own mining farms, recently launched joint-mining contracts dubbed B.top.

It essentially sells mining equipment by TH/s and farm electricity at cost to retailers who want to participate in mining. The company will not charge customers hosting and management fees until the mining profits they receive break even on their investment.

HashAge and Heng Jia, two long-running bitcoin mining farm operators with over a dozen facilities in Sichuan, also announced a partnership with Chinese crypto lending startup Babel last Friday.

Flex Yang, CEO and co-founder of Babel, said the firm is allocating up to $50 million in USDT as a loan for those who choose to host their miners at HashAge and Heng Jia’s facilities.

In contrast to previous crypto loans that require borrowers to pledge bitcoin as collateral, this new partnership accepts debtors’ miners hosted at HashAge and Heng Jia as collateral.

This effort is also one of the industry’s first in terms of treating specialized mining equipment, known as ASIC miners, as a tradable asset in crypto-based debt financing.

Luxor, a U.S.-based mining pool, rolled out a bitcoin hashrate price index earlier last month in an effort to provide better transparency into the traditionally opaque market of how much bitcoin mining equipment is changing hands. 

Floods

But rain cuts both ways for the mining industry. Flooding in China is among the worst in decades, and has affected over 50 million residents, with nearly four million people displaced and over 150 dead or missing. 

The good news is it could have been much worse. Pan said the flood has so far mainly affected the middle and lower reaches of the Yangtze river.

Since most mining farms in Sichuan and Yunnan are located along the upper reaches in the mountain area, which are some 1,200 km, or 800 miles, away from the middle reaches, there are fewer instances where facilities are directly flooded due to the rainfall.

But Pan said there have been more regular instances of mining farms’ hydropower plants temporarily cutting off electricity generation because the increasing water reserve levels would otherwise cause pressure on the dam. 

The places that are suffering the most severe damage so far are provinces in Central China including Jiangxi, Hubei, Hunan and Anhui provinces, as illustrated in this multimedia article from the South China Morning Post.

Johnson Xu, chief analyst at Beijing-based research startup TokenInsight, said mining farm operators nowadays are more experienced in choosing the right location for construction, after witnessing events in previous years where facilities were destroyed by floods and mudslides.

“Chinese mining farms have already conducted thorough due diligence to pick the locations where potential flooding risk is minimal,” so the floods haven’t caused a major impact on the mining community, said Xu.

Read more: Bitcoin Miners Halt Operations as Rainstorm Triggers Mudslides in China

Tug of war

Another reason why there are too many bitcoin mining farms is the push by local governments in Sichuan for establishing the so-called “Demonstration Zone for Utilizing Excessive Hydropower Electricity” since late last year.

Mining farms and hydropower plants that choose to be based in these industrial parks can typically enjoy a stable operational environment with a steady and cheap power supply. In return, they give a portion of their profits to local governments as well as China’s State Grid, the state-owned utility monopoly. 

In previous years, many mining farms in Sichuan and Yunnan have been using what’s called “direct-supply” electricity. That means power plants sell electricity directly to mining farm operators without having to share the profits with other parties. 

As local governments have stepped up efforts to rectify the “direct-supply” model adopted by many power plants, this has created a sort of tug of war among local governments, hydropower plants as well as the State Grid, Pan said.

Some bitcoin mining farm operators using “direct-supply” electricity wish to sell their facilities at a low valuation given tough market conditions. This tug-of-war will continue to be a risk factor for potential investors in those mining farms.

“Overall, the latest regulatory policies in China tend to have a negative impact on those unregulated smaller mining farms, but positive towards firms who meet the local regulatory requirements,” Xu added.

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NetWalker ransomware, which last week triggered cybersecurity flash warnings from the Federal Bureau of Investigation (FBI), has extorted $25 million in bitcoin from its victims during the months of the pandemic, according to a report by McAfee and CipherTrace.

• NetWalker is a “ransomware-as-a-service” that gains its access through COVID-19 phishing emails, encrypts infected systems and steals internal documents. Ransomware operators then threaten to publish victims’ documents if they fail to pay up.
• Victims, most of whom are large organizations like companies and governments, appear to been obliging the hackers throughout the pandemic. McAfee and CipherTrace traced 2,795 bitcoin ($25 million) to NetWalker wallet addresses from March 1 through July 27.
• NetWalker’s developers refined their handling of bitcoin payments months before the pandemic began by swapping in SegWit addresses in place of legacy wallets, the report said. 
• “This transition into SegWit could indicate that they are utilizing a new hardware wallet to store their BTC or just an indication of a desire for cheaper transactions,” said Pamela Clegg, director of financial investigations at CipherTrace.
• Clegg told CoinDesk that “large amounts of bitcoin” – up to 640 – appear to be sitting in cold storage. She said that smaller amounts have been deposited at Russian crypto exchange CointoCard.org.
• The cybersecurity report follows last week’s warning from the FBI that NetWalker has been successfully exploiting COVID-19 in recent months. The FBI warns targeted institutions against paying hackers’ bitcoin ransom payments.

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When I answer the phone, Zephyr Teachout quickly explains our call might be shorter than planned. Both she and I are at the whim of her two-year-old toddler, who is sleeping and could wake at any time.

Teachout, a law professor at Fordham University in New York, is best known for her runs for governor of the state and for Congress from New York’s 19th district (both races she lost). She has also written numerous books, including her latest, “BREAK ‘EM UP: Recovering Our Freedom from Big Ag, Big Tech, and Big Money.” Our discussion comes the day after historic Big Tech antitrust hearings in Congress. 

Teachout sees the antitrust discussion as a flashpoint for understanding how democracy and corruption collide. To her, concentrations of private power, as with the Big Tech companies, can’t be fixed with, say, campaign finance reform. These companies are a threat to the public sphere and our ability as individuals to make decisions about the future.

Related: Central Banks Are Privacy Providers of Last Resort

We discussed the antitrust hearings in Congress, what she means by a “f–k-off economy,” and the “parallel governments” that massive companies have created for users of their services. She is not currently knowledgeable about blockchain and cryptocurrency, but sees them as potentially useful tools for achieving economic decentralization.

Our conversation has been edited for length and clarity. 

What was your reaction to the six-hour antitrust hearings yesterday?

Wow. It was a beautiful thing. Congressman David Cicilline [D-R.I.]was totally clear: “This is about democracy versus monopoly. You guys work for us. We’re serious. We’re going to do serious things. And we have some questions.” He had this totally electrifying tone. 

Related: Community Behind Privacy-Focused Smart Contract Forges Ahead After Settlement

And the committee came prepared. They had documents and they focused on the evidence at hand. It couldn’t have been more different than the Mark Zuckerberg Senate hearing after the Cambridge Analytica scandal, where senators were impressed with his earnestness and just made polite requests of him. 

See also: Why We Need a Federal Privacy Law

We have to see the documents to see whether actions these companies took are in fact illegal under current antitrust law. But there is evidence that suggests violations of existing antitrust laws and evidence of things that aren’t violations of laws but are deeply disturbing, for example where platforms use their power to copy or bully other companies.

What’s a striking example of that bullying power?

Amazon. [CEO Jeff] Bezos’ first answer as to whether they used their access to data to launch and boost their own competing products was “No.” And then there’s great reporting that said the answer should be yes. So Bezos said, ‘Well, our policy is no, but I can’t promise you it’s not done.’

Everybody understands that to sell online, you need to go through Amazon. Sellers truly do not have a choice unless they happen to start with a million dollars and want to make one. Now there’s a growing understanding that Amazon has this data insight into the companies that depend on it, and is directly competing with them. Bezos then was forced to make the concession that seemed clear all along: that these companies are competitors rather than partners. 

There is no such thing as no-governance regimes.

He always talks about the great partnerships, and I was reminded of the mob. Partnership can be a very loaded term depending on whom you’re talking to.

Obviously, the best way to stop companies like Amazon from doing that is by mandating that you’re either the platform or you’re competing on the platform. You can’t be both. You need structural responses like that, otherwise, you’re just playing whack-a-mole.

How do monopolistic companies create parallel government structures? 

There are clearly forms of private government that are smuggled inside our current public government and growing in power. If you ask somebody who is an Amazon seller what judicial system they care about, they care a lot about Amazon’s system and their own mechanisms for delisting sellers.

These companies have their own intellectual property regime, their own punishment regime, and that is as important if not more so than the public one if you are caught within the web of one of these private, growing governments. 

See also: Thibault Schrepel – Blockchain Code Can Fill In When Antitrust Law Fails

This is a very old idea that we just forgot in 1980, but understood for most American history. It’s that private power always tends to form into a government of itself. And all governments have judicial systems. Sometimes systems are internal to the company, like Amazon’s appeals processor or Facebook’s content moderation system, about whether you get to be on the platform or not.

They also use the tool of arbitration, where a company is paying judges (or employees) who then don’t have to follow the rules of making evidence public. These mechanisms of arbitration and secret decision making make it really hard for people to tell stories about what’s actually happening inside these private regimes.

Mark Zuckerberg has said Facebook is now more like a government than a traditional company.

The funny thing is these guys basically tell you they want to be a government all the time. It’s like Oprah Winfrey used to say, “If you listen really closely, people tell you who they are and who they’re going to be.” They all say, “We want to govern you,” and because they are in an economic sphere, we don’t hear that as “Alexander the Great is coming for democracy.” But that’s what they’re doing.

You bring up decentralization a lot in the book. How might cryptocurrencies play a role in that?  

I think of these systems as incredibly important, but it all depends on what the governance mechanism is. When Amazon recently applied for a patent to use blockchain technology, which would basically require every seller to keep a ledger of where all their supplies come from, then basically the technology itself isn’t doing a lot of decentralization. The technology is in service of a centralized power. 

There is no such thing as no-governance regimes. When I talk to crypto advocates, they’ll often frame it as if it is a world with no governance. But there is never an absence of governance. In the end, someone controls supply. 

See also: Russian Activists Use Bitcoin, and the Kremlin Doesn’t Like It

Technology itself can’t do quite as much work as I think some of the advocates think. But again, let’s have that discussion, because I think there’s just unbelievably powerful ways in which it can be used for the good. 

My question for everybody is, really, when push comes to shove, who holds the trump cards? Who makes the decision? It’s never nobody. 

A core question about privacy is “Privacy from whom?”

You talk about developing a “f–k-off” economy. What do you mean by that?

I’m trying to take the economy back from the economists. They’ve been acting like priests for 40 years and telling us that we, as mere residents of this society, have no business messing with economic terms like monopoly or antitrust, and we should just trust their assessments of efficiency. When you take the economy back for people and not economists, then things like wages matter again.

See also: Social Media Bans ‘Highlight the Profound Censorship on Web 2.0’

We need an economy where people have the knowledge that if their boss is really awful, they can say “f–k off” walk away. For that to happen, you need there to be actual competitors you could walk away to. Sometimes people say, “Well, there’s plenty of competition. There’s five companies that do this thing.” But there isn’t a real sense that there are meaningful options. And people should have that. I want to reclaim the idea that freedom in the workplace is essential.

How do you see privacy being affected by a handful of companies controlling so much of our economy?

There’s good research that our privacy controls got a lot worse after Facebook merged with Instagram, because they no longer needed to compete to actually protect us better than the other. There’s a nice paper on this, “The Antitrust Case Against Facebook” by Dina Srinivasan, which argues that merger was followed pretty quickly by Facebook no longer keeping its old promises towards its users. I don’t think that antitrust is going to do everything for privacy, but I think antimonopoly more broadly and a concern about power should. 

Privacy means different things to different people. If you see Facebook and Amazon as forms of government, then Facebook or Amazon saying they’re protecting your privacy isn’t a really great comfort. Your government already knows everything about you. 

See also: Money Reimagined: China’s ‘Cold War’ Blockchain Strategy

A core question about privacy is “privacy from whom?” There is a privacy relationship between an individual and centralized power that isn’t just about an individual but the public at large or the formal forms of government.

We should move, as people are with facial recognition, towards an arena where some stuff just can’t be collected at all. We say you cannot just take out your spleen and give it to somebody or sell it. There are certain things we should have an absolute ban on collecting and are not governed by contract law. 

My fear is any privacy regime is trumped by contract law, because when people can individually contract stuff away you have asymmetries of power. Right now the existing tech behemoths have a huge incentive in maintaining a business model whose goal is to maximize the information they have about people and we need to be moving towards an opposing model. 

So what’s the path forward? 

We’re in this exciting moment where there’s a lot of new antitrust energy, but it’s pretty new. I have particular solutions, particular things that I think we should do. But more important is to change our overall politics to make them more fundamentally about antitrust. I bet you haven’t asked your lawmakers about what they think about power. We have to recognize that we’re not going to get to the policy solutions until we get the power dynamics in politics that we want.

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Another crypto hedge fund is winding down, Huobi launched a new unit to invest in DeFi and the Twitter hacker is reportedly a bitcoin millionaire.

You’re reading Blockchain Bites, the daily roundup of the most pivotal stories in blockchain and crypto news, and why they’re significant. You can subscribe to this and all of CoinDesk’s newsletters here. 

Top shelf

Fund Down
Neural Capital, a crypto hedge fund, has closed, having lost half its money since launching in 2017. Three people familiar with the matter said the fund’s crypto-assets were liquidated in December and the fund is in the process of refunding leftover money to investors, a process taking longer than expected. At its height, Neural Capital managed over $13 million from over 40 investors, including Greylock partner Joshua Elman and Expa partner Hooman Radfar. It joins several funds founded in 2017 that have announced closures in 2020, including Adaptive Capital, Prime Factor Capital and Tetras Capital.

Related: First Mover: July Was a Runaway Month for Crypto Returns

Banana Fund
U.S. prosecutors are seeking to return $6.5 million in bitcoin to victims of the “Banana.Fund” crowdfunding project, which the government described in court papers as a Ponzi scheme. In a forfeiture suit against the cryptocurrency account storing the funds, prosecutors allege Banana.Fund’s unnamed administrator admitted to investors his project had flopped, promised to return $1.7 million to them and then failed to do so. The operator then pivoted to a laundering and refund scheme that ultimately resulted in the U.S. Secret Service’s (USSS) seizure of 482 bitcoin (BTC) and 1,721,868 tether (USDT), court documents show.

Twitter Hacker
The 17-year-old thought to be behind the recent Twitter hack reportedly owns more than $3 million worth of bitcoin. The alleged hacker, Graham Ivan Clark, stands accused of 17 counts of communications fraud, 11 counts of fraudulent use of personal information, one count of breaking into an electronic device and another for organized fraud. His bail was set at $725,000. Federal officials are also charging Nima Fazeli and Mason John Sheppard with aiding in the “intentional access of a protected computer” and conspiracy to commit wire fraud and money laundering, according to criminal complaints published Friday.

DeFi Lab
Crypto exchange operator Huobi Group is forming a new fund to invest tens of millions of dollars of its own capital in the decentralized finance (DeFi) space. Huobi Group said in an announcement Monday it has launched a new business unit called Huobi DeFi Labs to manage the fund. The group will focus on research, investment and incubation of DeFi-related projects, and has brought on former banker Sharlyn Wu to lead the initiative.

Hacker Effects
A Spanish cryptocurrency payments app and card issuer has admitted it won’t be able immediately to repay users affected by Friday’s $1.4 million hack and has offered a compromise instead. Madrid-based 2gether said Sunday it hadn’t been able to find the funds to reimburse all users the €1.2 million stolen by hackers – 26.79% of the firm’s total funds – on Friday evening. The firm has offered to reimburse investors in native 2GT tokens at the issuance price of just under $0.06. “We can assure you, with a great deal of chagrin, that if we could face this theft with our own funds, we would,” the announcement reads.

Market intel

Related: Blockchain Bites: Dollar’s Decline, Ether’s Moneymakers and Coinbase’s Considerations

Tokenized BTC
The supply of tokenized bitcoin grew more than 70% in July. More than 20,000 BTC (~$225 million) are now tokenized using Ethereum-based protocols. Wrapped Bitcoin (WBTC) represents over 76% of the total tokenized bitcoin supply with over 15,500 BTC tokenized. The total supply grew by roughly $96 million in July, following June’s record growth.

Dex Volume
July trading volume on decentralized exchanges set its second consecutive record high, rising 174% from June, according to data from Dune Analytics. Aggregate trading volume on decentralized exchanges reached $4,32 billion in July, up from $1.52 billion in June. 41% of July’s volume came from Uniswap, on which traders speculate on assets ranging from “a better Bitcoin” to a coin named after fried chicken.

Opinion

Value Judgments
Crypto is inherently disruptive. In this week’s Crypto Long & Short newsletter, CoinDesk’s Galen Moore asks whether decentralization – and its attendant change making – creates or destroys value within the crypto space. “The “Robinhood Effect” may represent a threat to crypto from stocks, which also seem to now trade unencumbered by fundamentals, via onramps that broaden access,” he writes. 

DeFi Defines Ethereum
DeFi Dad, an organizing member of the Ethereal Summit and Sessions and DeFi super user, thinks Etheruem has found a narrative it can latch onto. “Five years ago, you could argue Ethereum was attempting to do too much. Even two to three years ago, that was still a valid hypothesis, with stagnant adoption,” he writes. 

Podcast Corner

Bitcoin, Sex and Feminism
Chaturbate is among the few traditional porn sites that has integrated crypto in a meaningful way. COO Shirely Lara joins CoinDesk’s Leigh Cuen for an in-depth discussion about bitcoin, sex and feminism.

Who won #CryptoTwitter? Related Stories

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Cryptocurrencies are working their way back Monday after Sunday’s big flash crash.

• Bitcoin (BTC) is trading around $11,417 as of 20:00 UTC (4 p.m. ET), gaining 2.1% over the previous 24 hours.
• Bitcoin’s 24-hour range: $10,913-$11,485
• BTC above 10-day and 50-day moving averages, a bullish signal for market technicians.

A bullish run for bitcoin past $12,131 was interrupted Sunday, as bitcoin endured a sudden drop, losing over $1,400 within a brief period of time.

Read More: Flash Crash: Bitcoin Price Slides by $1.4K in Minutes

Related: Ripple Snaps XRP Sales Slump With $33M of the Crypto Sold in Q2

“The market had rallied strongly from $9,000 to over $12,000,” said Rupert Douglas, head of institutional sales for crypto brokerage Koine. “The reaction down was purely to shake out the weak longs who had got in at the higher levels,” Douglas added. 

Indeed, hourly liquidations spiked to over $147 million on derivatives platform BitMEX on Sunday. As the price began trending downward, derivatives traders going long saw their positions automatically sold, the crypto equivalent of a margin call, on the Seychelles-based exchange. 

The highest BitMEX liquidation during the session was a $10 million long position. “There were a lot of high-levered long day traders who were liquidated and are licking their wounds as a result,” said John Willock, CEO of digital asset liquidity provider Tritum. 

The amount of spot bitcoin trading on Coinbase Sunday was higher than normal, at $318 million. In fact, Sunday was the second-highest volume day in the past month, following a $446 million day on July 27. 

Related: Travel Management Firm CWT Pays Out $4.5M in Bitcoin After Ransomware Attack

“The rest of the market seems to have had a big appetite to accumulate bitcoin at $1,000 off, now working its way back to $12,000 and beyond,” Willock added. “I see it as a stumble and we’re back on track.” 

Read More: Bitcoin Investors Unshaken by Sunday’s Flash Crash, Data Suggests

Bitcoin is still 5.8% off of its Sunday high, while ether is down 5%. 

Ether closing in on $400

The second-largest cryptocurrency by market capitalization, ether (ETH), was up Monday trading around $394 and climbing 4.4% in 24 hours as of 20:00 UTC (4:00 p.m. ET). 

Ether was not spared Sunday’s flash crash, falling as low as $325 before recovering. Some traders claim they took advantage of the dip. “We had expected ETH to fall back to the low $300s and accumulated there,” said Jack Tan, managing partner of Taiwan-based quantitative trading firm Kronos Research. 

Karl Samsen, vice president of capital markets for trading firm Global Digital Assets, told CoinDesk ether is separating itself from bitcoin and is actually helping push the alternative cryptocurrency, or altcoin, market. “Bitcoin is rebalancing itself, as it was the previous leader,” Samsen said. “Ether is tearing up the market, and it’s bringing alts up with it. We’re still very bullish on mid- to low-market-cap alts.”

Read More: Nearly $100M in Bitcoin Moved to Ethereum in July, Led by Retail Traders

Other markets

Digital assets on the CoinDesk 20 are all in the green Monday. Notable winners as of 20:00 UTC (4:00 p.m. ET): 

• xrp (XRP) + 10%
• qtum (QTUM)+ 8.3%
• bitcoin sv (BSV) + 7.1%

Read More: July Was a Runaway Month for Crypto Returns

Equities:

• Asia’s Nikkei 225 ended the day in the green 2.2%, boosted by Yahoo Japan Corp. stock up a mouth-watering 17.9%.
• Europe’s FTSE 100 closed up 2.2% as manufacturing activity on the continent shows signs of positive growth.
• The United States’ S&P 500 gained 0.90% led by tech stocks, including Microsoft, up 5% on possible social video app TikTok acquisition news.

Read More: Twitter Hacker Owns $3.4M in Bitcoin, Court Sets Bail at $725K

Commodities: 

• Gold is flat, in the green 0.07% and at $1,976 as of press time.
• Oil is up 0.90%. Price per barrel of West Texas Intermediate crude: $40.81

Read More: Electric Capital’s New $110M VC Fund Is 90% Institutions

Treasurys:

• U.S. Treasury bonds are mixed Monday. Yields, which move in the opposite direction as price, were down most on the two-year, in the red 5%.

Read More: Inside a Crypto ‘Ponzi’: How the $6.5M Banana.Fund Fraud Unravelled

Related Stories

• Bitcoin Investors Unshaken by Sunday’s Flash Crash, Data Suggests
• Flash Crash: Bitcoin Price Slides by $1.4K in Minutes

Ripple said Monday that it sold $32.55 million of its XRP cryptocurrency during Q2 2020, a 1,760% jump over Q1’s abysmal sales figures and the first signs of XRP sales growth in nearly a year. 

• In its Q2 Markets Report released Monday, Ripple reported a surge in over-the-counter (OTC) XRP sales as it reaped the benefits of new liquidity-providing integrations with telco Swisscom Blockchain, swap execution facility Zero Hash and the crypto bank Sygnum.
• “Programmatic sales” – the third-party trading practice whose mid-Q3 2019 halt contributed to three consecutive quarters of falling XRP sales – will remain paused as Ripple focuses on OTC markets, the issuer said. 
• XRP volume did not fare as well as sales figures in Q2. Average daily volume fell to 196 million from Q1’s 322 million. Total volume by dollar value nearly halved, to $17.86 billion, from Q1’s $29.68 billion.

Related Stories

• NetWalker Ransomware Gang Is Storing $7M in Bitcoin in SegWit Cold Storage
• Market Wrap: Bitcoin Rebounds to $11,400 After Flash Crash as Ether Closes In on $400
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• Matic Pledges $5M in Tokens to Entice DeFi Projects Into Building on Its Network

Travala.com on Monday entered a partnership with Booking Holdings subsidiary Agoda in the cryptocurrency-focused travel agency’s latest tie-up with its mainstream industry counterparts.

• Agoda’s 600,000 hotels are now bookable on Travala.com, on which users can pay for their vacations in up to 30 different cryptocurrencies, including bitcoin and the native ava token, Travala.com CEO Juan Otero told CoinDesk.
• Travala.com, which has the backing of Binance, forged a similar partnership with Expedia in early July. It’s been working to rebound from the revenue woes and booking lows of this spring’s COVID-19 lockdowns.
• Otero said “all the pent-up demand” made July a month for the record books: Travala.com generated $400,000 in revenue (“up 100% month-over-month”) and saw nearly 70% of all customer bookings paid for with crypto (“up +10% since June”).
• “Over 20% of the total bookings for July came via our integration with Expedia,” Otero said. “We’re expecting to see another nice boost with Agoda’s hotels too.”

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Ethereum’s scalable sidechain Matic Network has set aside $5 million for a new incubator fund aimed at attracting decentralized finance (DeFi) projects to build straight on its protocol.

• Matic said Monday the grants would incentivize promising DeFi projects to build on its protocol, rather than directly onto Ethereum.
• Grants will be paid in matic, a native staking token currently trading at $0.02, according to CoinGecko.
• Matic has already given out more than $1 million in grants, although it hasn’t revealed any of the beneficiaries.
• Matic Network is an Ethereum sidechain that can handle up to 65,000 transactions per second; it raised $5 million in an initial exchange offering in 2019.
• In a statement, Matic said building a DeFi space on its protocol would give projects scalability with ready access to the Ethereum mainnet.
• In a speech in June, Matic COO Sandeep Nailwal said the company had already had some DeFi projects move to its protocol.
• Crypto derivatives platform FTX said last week it was building a decentralized exchange (DEX) on Solana, another scalable network that would be interoperable with Ethereum.
• As with Matic, FTX said building a DEX on Solana gave it sufficient throughput while remaining plugged into the Ethereum DeFi space, worth over $4.2 billion at press time.

See also: Five Years In, DeFi Now Defines Ethereum

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• Crypto Firm Hacked for $1.4M Admits It Will Struggle to Reimburse Users

Crypto venture capital firm Electric Capital has closed its second fund at $110 million. Of the money raised, 90% of it is institutional capital.

“The early-adopter, forward-thinking investors are now significantly off zero and now everyone is looking at those guys and saying, ‘Oh, maybe we should be off zero as well,’” Electric Capital co-founder Avichal Garg told CoinDesk in an interview. 

The new fund includes multiple undisclosed university endowments, Garg said, a potential bellwether for traditional investors becoming more crypto-comfortable.

Related: Three Arrows, Framework Invest in DeFi Site Aave With $3M LEND Token Sale

Electric’s new fund will invest in startup equity, crypto tokens or a hybrid of the two. Checks will be in the $1 million to $10 million range and focus on seed and Series A rounds. The firm’s first round raised $35 million, said Garg and fellow co-founder Curtis Spencer.

Initial investments from the new fund include DerivaDEX on the equity side; token investments in base layers Celo and NEAR; and liquid holdings of bitcoin (BTC), ether (ETH) and maker (MKR).

The second fund will continue Electric’s three-pronged focus on Layer 1 protocols, decentralized finance (DeFi) and crypto-enabled businesses.

Read more: This a16z Alum Is Launching a VC Fund Focused on Platforms You Can ‘Own’

Related: This a16z Alum Is Launching a VC Fund Focused on Platforms You Can ‘Own’

The Silicon Valley-based Garg and Spencer began angel investing in crypto startups in 2016 after taking an early interest in bitcoin mining in 2011. After VCs began reaching out during the last bull run, the two decided to make it official, founding Electric in early 2018.

Current investments include Anchorage, Bison Trails, Bitwise, Coda, Elrond, Mobilecoin and others.

As for what drove institutional interest this time around, Garg said macroeconomic conditions played a major role.

“The thing that really tipped it was all the money printing that happened in March,” he said.

The Financial Times reported in April that VC giant Andreessen Horowitz (a16z) was targeting $450 million for its second crypto fund.

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A U.S. travel management firm has paid out a fortune in bitcoin after its corporate files were locked up in a ransomware attack.

• According to a report by Reuters on Friday, travel firm CWT paid the 414 bitcoin ransom (worth $4.5 million at the time) as part of a deal to recover sensitive files encrypted by the Ragnar Locker ransomware that makes files inaccessible until a bounty has been paid.
• Hackers said 30,000 of the company’s computers were caught up in the attack, although the number has since been disputed by a person familiar with the investigation, Reuters said.
• The conversation between the hackers and CWT was made public on Saturday, providing a rare insight into how the deal to recover the company’s files was struck.
• In the conversation, a CWT representative can be seen asking how to recover their files and what steps were needed to resolve the problem.
• The company subsequently confirmed in a statement its systems were back online and that the incident had passed, but declined to comment further due to an ongoing investigation.
• CWT also said it had informed relevant U.S. and European Union law-enforcement agencies immediately after becoming aware of the incident.

See also: Bitcoin’s Ransomware Problem Won’t Go Away

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• Crypto Hedge Fund Neural Capital Closes After Losing Half Its Money

Crypto traders didn’t need to work too hard to make money last month. They just had to be in the market. 

Every digital asset in the CoinDesk 20 ended the month in the black. Bitcoin benefited from bets against the U.S. dollar while ether, the native cryptocurrency of the Ethereum blockchain, gained from speculation over the future of “decentralized finance,” known as DeFi.

Bitcoin rose 24% during the month, its best July in eight years, and was changing hands as of late Sunday at around $11,100 – even after a flash crash earlier in the day that saw the price plunge about $1,400 in a matter of minutes.

Related: Bitcoin Investors Unshaken by Sunday’s Flash Crash, Data Suggests

The largest cryptocurrency by market value continues to benefit alongside gold as the ongoing economic toll of the coronavirus raises expectations of further rescue packages and stimulus from central banks and governments. Gold, seen by many investors in traditional markets as a hedge against inflation, has been hitting new records and on Sunday was closing in on $2,000 an ounce.

The credit-rating firm Fitch on Friday placed a “negative outlook” on the United States’ triple-A rating, writing in a press release that a “resurgence of inflation” could force the Federal Reserve to raise interest rates, “adversely affecting debt dynamics.” 

“Paper money hit a low versus non-quantitatively-easible money like gold and bitcoin,” Dan Morehead, CEO of the cryptocurrency investment firm Pantera Capital, wrote last week in a monthly letter.  

Bitcoin is now up 56% on the year, vastly outperforming the Standard & Poor’s 500 Index, which is up 1.3% in 2020. The gauge of U.S. stocks rose 5.5% in July. 

Related: Flash Crash: Bitcoin Price Slides by $1.4K in Minutes

Ether, the second-biggest cryptocurrency by market value, jumped 54% in July and is now trading around $380, its highest in two years. Ethereum has become the blockchain of choice for most of the biggest projects in DeFi, where decentralized lending and trading systems have now garnered some $4.2 billion in total value locked, quadruple the amount just two months earlier. 

“All this hype surrounding DeFi has further fueled Ethereum’s rise,” Jay Hao, CEO of the cryptocurrency exchange OKEx, wrote last week, noting that trading volumes had jumped on decentralized exchanges. 

“Even if the DeFi bubble were to burst, it seems that it cannot quell the enthusiasm for ether,” Hao wrote. “In actual fact, it may bolster its price further as the capital flows from DeFi tokens back into ether.”

July’s top-performing digital asset, Chainlink’s LINK token, surged 70%.

As CoinDesk Senior Markets Reporter Daniel Cawrey detailed in First Mover on Friday, LINK represents the leading “oracle” – an automated price feed – for many DeFi applications built atop the Ethereum blockchain. And the role is potentially so lucrative that many other projects are now vying to grab market share in the oracle race. 

Among the CoinDesk 20, the only tokens that didn’t post big price gains in July were the stablecoins tether and USDC, which by definition don’t move much because they’re pegged to the dollar. 

It’s somewhat ironic, since the outstanding amount of stablecoins has grown rapidly, swelling past $12 billion. 

“If you were in a stablecoin, you missed out the gains that bitcoin or ethereum or chainlink were giving,” said Joe DiPasquale, CEO of the cryptocurrency hedge fund BitBull Capital.  

Tweet of the day Bitcoin watch

BTC: Price: $11,225 (BPI) | 24-Hr High: $11,295 | 24-Hr Low: $10,956

Trend: Bitcoin’s bullish bias remains intact despite Sunday’s sudden flash crash. 

The top cryptocurrency by market value was trading in the green near $11,225 at press time, having dropped by $1,400 to levels under $10,700 yesterday. The price slide erased (or engulfed) the uptick seen in the preceding four trading days. 

Bearish engulfing candles like that formed Sunday are widely considered early signs of an impending bearish reversal. However, the drop looks to be nothing more than a healthy pullback, which often occur after a notable rally.

Bitcoin rose by $2,900 in the 11 days to Aug. 31, pushing the widely tracked 14-day relative strength index into overbought territory above 70. As such, a pullback was likely and expected. In the past, bitcoin has seen bigger price drops during bull runs. 

“The latest bitcoin pullback was only 15%. There were at least six pullbacks of 30%+ or more last bull market uptrend,” popular analyst Josh Rager tweeted early Monday. 

And while Sunday’s sell-off was the biggest single-day decline since May 10, it failed to take out the former hurdle turned-support of $10,500 (February high). Prices closed (UTC) well above that level on Sunday, confirming a bullish breakout for the week. 

Looking ahead, a re-test of $12,000 cannot be ruled out, as the 14-day RSI has rolled over to under-bought (or bullish) territory below 70.00. Upward momentum looks strong with the 10-day simple moving average (SMA) trending north.

The bullish outlook would only be invalidated if the cryptocurrency establishes a strong foothold under $10,500.

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Bitcoin investors appear to have shrugged off Sunday’s violent price crash, according to one data metric. 

• In just minutes, prices fell by around $1,400 from over $12,000 to sub-$10,700 levels Sunday.
• The rapid fall crowded out over $1 billion in bullish leverage from the futures market.
• Yet, as the cryptocurrency declined, users withdrew more coins from exchanges than they deposited, suggesting holders were not spooked by the big mover lower.

• Cryptocurrency exchanges witnessed a net outflow of 4,264 BTC on Sunday, marking a sharp rise from Saturday’s figure of 436 BTC, according to data provided by the blockchain intelligence firm Glassnode.
• Investors tend to pull funds out from exchanges when they expect a sustained price rally and move their coins to exchanges when they want to liquidate their holdings; for example, before an expected price drop. 
• As such, Sunday’s data would suggest that investors shrugged off the crash having confidence in bitcoin’s long-term prospects.
• Sunday’s flash crash is rumored to have been caused by an Asian whale, or big trader, who took profit on a long position after prices hit $12,000 amid thin volumes.
• The resulting small price drop is said to have set off a chain reaction of forced unwindings of long positions by exchanges, rapidly leading to the bigger decline.
• At the time of writing, bitcoin is back up near $11,200 – still up nearly 56% on a year-to-date basis.

Also read: Flash Crash: Bitcoin Price Slides by $1.4K in Minutes

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A Spanish cryptocurrency payments app and card issuer has admitted it won’t be able to immediately repay users affected by Friday’s $1.4 million hack and has offered a compromise instead.

• Madrid-based 2gether said Sunday it hadn’t been able to find the funds to reimburse all users the €1.2 million stolen by hackers – 26.79% of the firm’s total funds – on Friday evening.
• “We can assure you, with a great deal of chagrin, that if we could face this theft with our own funds, we would,” the announcement reads.
• Talks with an unnamed investment group reportedly fell through on Sunday.
• Rather than delay any longer, 2gether has offered to reimburse investors in native 2GT tokens – an ERC-20 token that confers incentives and premium access to holders.
• 2gether said users will receive the amount stolen in 2GT at the issuance price of just under $0.06.
• The company said it will then try to scrape the funds together to repay users in the crypto assets they’d lost – it didn’t provide a timeframe for when this could happen.

See also: Hacker Exploits Flaw in Decentralized Bitcoin Exchange Bisq to Steal $250K

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Online space strategy game “Infinite Fleet,” developed by Pixelmatic, has raised $3.1 million through a private security token offering (STO).

• Announced Friday, the round can be broken into two parts, with $2.75 million raised via Simple Agreements for Future Tokens (SAFTs).
• This portion of the funding was led by Litecoin creator Charlie Lee, Blockstream CEO Adam Back, Heisenberg Capital founder Max Keiser and others.
• And a smaller $250,000 portion of the total $3.1 million raise was allocated to investors on investment platform BnkToTheFuture.
• ​Pixelmatic was founded by its chief executive, Samson Mow, who is also CSO at Bitcoin infrastructure firm Blockstream.
• The SAFT funding brings rights to investors once the token has been created at a future date.
• A public sale of the firm’s token is expected in September via securities tokenization platform Liquid Securities (still in development) in a partnership with digital marketplace STOKR.
• Mow told CoinDesk that STOs would become a route “most projects follow in the future.”
• The project had planned to raise $3 million and was oversubscribed by $100,000 over a 24-hour sale period, according to the announcement.
• The humans vs. aliens space MMO game will use a digital token to drive its in-game economy.
• The game has been developed by a team of game designers who have worked on franchises such as Age of Empires, Homeworld, Company of Heroes and Dawn of War.

See also: Enjin’s New Minecraft Plug-in Lets Players Spawn Blockchain Assets

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• Twitter Hacker Owns $3.4M in Bitcoin, Court Sets Bail at $725K

Online space strategy game “Infinite Fleet,” developed by Pixelmatic, has raised $3.1 million through a private security token offering (STO).

• Announced Friday, the round can be broken into two parts, with $2.75 million raised via Simple Agreements for Future Tokens (SAFTs).
• This portion of the funding was led by Litecoin creator Charlie Lee, Blockstream CEO Adam Back, Heisenberg Capital founder Max Keiser and others.
• And a smaller $250,000 portion of the total $3.1 million raise was allocated to investors on investment platform BnkToTheFuture.
• ​Pixelmatic was founded by its chief executive, Samson Mow, who is also CSO at bitcoin infrastructure firm Blockstream.
• The SAFT funding brings rights to investors once the token has been created at a future date.
• A public sale of the firm’s token is expected in September via securities tokenization platform Liquid Securities (still in development) in a partnership with digital marketplace STOKR.
• Mow told CoinDesk that STOs would become a route “most projects follow in the future.”
• The project had planned to raise $3 million and was oversubscribed by $100,000 over a 24-hour sale period, according to the announcement.
• The humans vs. aliens space MMO game will use a digital token to drive its in-game economy.
• The game has been developed by a team of game designers who have worked on franchises such as “Age of Empires,” “Homeworld,” “Company of Heroes,” and “Dawn of War.”

See also: Enjin’s New Minecraft Plug-in Lets Players Spawn Blockchain Assets

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• Ripple Paid MoneyGram $15.1M in ‘Market Development Fees’ in Q2

Neural Capital, a hedge fund that traded cryptocurrency assets, has quietly shuttered. 

• The fund has lost half its money since launching in 2017 and is in the process of refunding leftover money to investors, according to three people familiar with the matter who asked not to be identified.
• The sources said the fund’s crypto-assets were liquidated in December and some cash is still being held up in escrow, months longer than expected.
• By 2019, Neural Capital managed over $13 million that drew investments of $250,000 on up from over 40 investors, including Greylock partner Joshua Elman and Expa partner Hooman Radfar, according to financial records.
• The fund withdrew its registration with the U.S. Securities and Exchange Commission in December and stopped submitting obligatory filings to the state of California and the federal agency this year.
• It joins a horde of funds to close in 2020, shy of the three-year mark, after forming around the time of the crypto boom of 2017 — notably, Adaptive Capital, Prime Factor Capital and Tetras Capital.

The fund’s managers, Arij “Ari” Nazir and Christopher Keshian, were new to the hedge fund industry and involved in more than one fund when they started Neural Capital.

• Nazir was a University of Virginia master’s student who interned for the White House in the spring of 2015 during Barack Obama’s second presidential term.
• Keshian, who graduated from the University of Virginia’s business school with Nazir in 2015, was chief executive officer of Decentralized Capital Corporation, a Panamanian fiat-to-crypto money transmitter, until 2017. 
• While managing the fund, Nazir and Keshian were advisors of Protocol Ventures, an institutional investor in multiple cryptocurrency funds that included Neural Capital, whose logo has been removed from Protocol’s website.
• Keshian also started Apex Capital, a Protocol-like crypto fund-of-funds, with Joseph M. Bradley, Neural Capital’s head of investor relations, as they were getting Neural Capital off the ground. Apex Capital failed to launch after unsuccessfully attempting to raise $100 million in assets through a digital token sale to meet minimum invested fund amount requirements.
• Keshian had a falling-out with Nazir and left Neural Capital by 2019, according to the sources.

Keshian told CoinDesk he has not kept in touch with Nazir since parting from Neural Capital. “Right now, I’m working on a project that is still very much under wraps,” said Keshian, declining to comment further.

Related: Crypto Firm Hacked for $1.4M Admits It Will Struggle to Reimburse Users

Nazir did not respond to requests for comment.

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The 17-year-old alleged ringleader behind the recent Twitter hack reportedly has more than $3 million worth of bitcoin – enough to pay his $725,000 bail.

• At Hillsborough County Courthouse, Florida, Saturday, the attorney representing Graham Ivan Clark said his client owned 300 bitcoin, the Tampa Bay Times reported Sunday.
• CoinDesk data shows this stash is worth $3.4 million at current market prices.
• Bail was set at $725,000 during Clark’s first court appearance on Saturday.
• Arrested Friday, authorities see Clark as the ringleader and mastermind of July’s “CryptoForHealth” Twitter hack – a coordinated attack of some 30 high profile accounts, including CoinDesk, that promised to double the money of users who sent cryptocurrency.
• In total, some $117,000 worth of cryptocurrency went to the hackers in one afternoon.
• Two accomplices have also been charged in California.
• In an investigation last year, authorities confiscated 400 bitcoin from Clark, but later returned 300.
• Although prosecutors have suggested Clark’s bitcoin stash was illegally acquired, his attorney has argued it was legitimate because the authorities returned it.
• Clark now stands accused on 17 counts of communications fraud, 11 counts of fraudulent use of personal information, as well as one count of breaking into an electronic device and another for organized fraud.

See also: Twitter Hack Takes Down Joe Biden, Elon Musk Accounts in Widespread Bitcoin Scam Attack

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U.S. prosecutors are seeking to return $6.5 million in allegedly scammed bitcoin to victims of the “Banana.Fund” crowdfunding project, which the government described in court papers as a Ponzi scheme.

In a forfeiture suit against the cryptocurrency account storing the funds, prosecutors allege Banana.Fund’s unnamed administrator admitted to investors his project had flopped, promised to return $1.7 million to them and then failed to do so. The operator then pivoted to a laundering and refund scheme that ultimately resulted in the U.S. Secret Service’s (USSS) seizure of 482 bitcoin (BTC) and 1,721,868 tether (USDT).

The lawsuit, filed July 29 in the U.S. District Court for the District of Columbia, seeks to grant the federal government formal ownership of the assets so it can return them to the victims.

Related: Wanted Wirecard Exec Said to Be Sheltered by Secret Service in Russia

The suit did not identify the operator of Banana.fund. But several victims of the alleged scam, and documents reviewed by CoinDesk, show the outfit was run by a British national named Richard Matthew John O’Neill aka “Jo Cook.”

One of the victims, Mike Koenen, told CoinDesk that since at least May 2018 he has been pushing the USSS to investigate Banana.Fund and O’Neill.

Documents reviewed by CoinDesk show that by November 2019, agents with the USSS San Francisco field office were email-canvassing likely victims for information on Richard O’Neill. Law enforcement had frozen O’Neill’s Poloniex account over a year before. 

Neither O’Neill nor the Department of Justice responded to requests for comment.

Related: Third Centra Tech Founder Pleads Guilty to ICO Fraud

The forfeiture suit represents perhaps the most substantial development yet in a little-known scheme that ran through the height of bitcoin’s historic late-2017 price pump and apparently went belly-up within months of the market’s pop, the documents reveal.

Peeling back the fraud

Banana.Fund’s white paper describes a crowdfunded business development company that shepherds fledgling startups through their earliest stages while offering operational transparency to their seed investors.

O’Neill told CoinTelegraph in January 2017 that Banana.Fund would “use blockchain for what it is good for: implementing transparent and irreversible global transactions.” In his view, he was “creating a level playing field for all users to pursue their business ideas, free of charge.”

Investing in O’Neill’s own business idea was not free of charge, however.

The buy-in started at 0.02 BTC, said Telegram user Dutch_Giant, who heard about Banana.Fund on the now-defunct message board MoneyMakersforum.

“The bigger deposit you made, the bigger part of the business you got,” Dutch_Giant said. He put in 0.024 bitcoin – “about $60 at the time.” 

Other investors went even bigger on O’Neill’s crowdfunding darling, internal documents show. One user invested 82 bitcoin and nine others contributed 10 bitcoin or more. In all, 417 investors claim to have lost a combined 481 bitcoin, worth almost $5.5 million today, to Banana.Fund.

Those figures come from a spreadsheet of “verified refund claims” that O’Neill began compiling on Jan. 2, 2018, when he emailed Banana.Fund investors that they could be refunded nearly three times the dollar value of their original investment – but not their value in bitcoin. 

“Banana.Fund is a failed project,” O’Neill said in a project announcement whose text was shared with CoinDesk and referenced in the criminal complaint. He claimed that while Banana.Fund had already spent around a third of investors’ $600,000 pie on overhead, he had ridden the remaining bitcoin through late 2017’s heights and could now refund them triple their original investment in USDT, a stablecoin that usually trades 1-for-1 with the dollar.

“We’ve failed up!” he said. He claimed to have $1,730,000 in USDT for refunds. “Pure dumb luck.” 

His investors would have been far luckier had they never locked their bitcoin up in Banana.Fund, the DOJ points out. Banana.Fund’s founder, referred to in the suit only as “Person 1,” only “stated that due to the increased value of bitcoin, investors would receive more than their initial investment in U.S. dollars, although, realistically, they would all still lose money because of the increased value of bitcoin.”

A calculated risk

Prosecutors allege that “Person 1” had an account balance of $11 million and could therefore easily pay back even Banana.Fund’s biggest investors. They further allege that “Person 1” spent the weeks leading up to his USDT conversion “buying and selling multiple coins for personal gain” and attempted one withdrawal to buy a house.

O’Neill “literally gambled with our BTC on Poloniex and he had few good trades,” said another victim of the alleged scam, Kris Zelisko, who invested 1.01 bitcoin in Banana.Fund. “Also, BTC went up in the meantime.”

Prosecutors also allege “Person 1” engaged in a year-long bitcoin laundering scheme that spanned over 40,000 trades and seven different cryptos, and in a two-week spree generated $540,000 in profit from the Banana.Fund pot.

“Person 1” never paid the vast majority of investors back, the prosecutors alleged.

Dutch_Giant said that a number of Banana.Fund users were well aware of the risks involved with “Jo Cook” enterprises. “Cook,” he said, had a track record of operating crowdfunded-oriented website scams that nonetheless paid some investors out.

“It was a reasonably calculated bet,” he said. 

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Crypto exchange operator Huobi Group is forming a new fund to invest tens of millions of dollars of its own capital in the decentralized finance (DeFi) space.

• Huobi Group said in an announcement Monday it has launched a new business unit called Huobi DeFi Labs to manage the new fund.
• DeFi Labs, which initially comprises of four staff, will focus on research, investment and incubation of DeFi-related projects.
• The exchange recently hired former banker Sharlyn Wu as its chief investment officer to lead the initiative.
• Previously, Wu spent three years leading the blockchain investment arm at China Merchant Bank International (CMBI), the overseas branch of one of the biggest banks in China.
• During Wu’s term, the CMBI invested in several crypto and blockchain firms, including wallet startup Bitpie and public blockchain project Nervos.
• “It is exciting to see the power of the permissionless economy unleashed at global scale,” Wu said. “However, there are still many problems to be solved at the theoretical and technical levels.”
• The new fund comes at a time crypto VCs are upping their investments in DeFi-related protocols.
• Last week, Injective Protocol announced the raise of $2.6 million led by Pantera, while Polychain and Three Arrows backed another DeFi protocol, KeeperDao, in a seven-figure seed round.

Also read: Gate.io, Huobi Enter Booming Crypto Options Scene

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