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Terra founder Do Kwon has branded the charges from South Korean prosecutors against him as “politically motivated” — and reiterated, once again, that he isn’t on the run.

“We are a little bit disappointed in the way that prosecutors are attempting to create new regulation through criminal court proceedings, whereas that should be within the job description of the legislature, or at the very least the financial regulators,” he said on crypto podcast UnChained, hosted by Laura Shin, on Tuesday. 

Kwon is currently wanted by authorities in his native South Korea for allegedly violating the country’s Capital Markets Act. The charges stem from the collapse of the Terra ecosystem and its algorithmic stablecoin, created by his company, Terraform Labs. In May, the TerraUSD stablecoin lost its peg to the U.S. dollar, resulting in the crash of the entire ecosystem and the wiping out of approximately $40 billion in value.

Kwon claimed that he has not seen a copy of the arrest warrant and that all the information he knew about the charges had come from media sources. Besides allegedly violating the Capital Markets Act, he is not sure what other charges he is facing, if any. 

“We don’t think that any of the charges pertaining to the Capital Markets Act are applicable because the government’s stance has been that cryptocurrencies shouldn’t be governed by the Capital Markets Act because they’re not securities,” he said. “We don’t believe these are legitimate charges and are politically motivated.”

Where is Do Kwon?

Kwon was questioned about his whereabouts — a hot topic on the ongoing story.

“I could answer that, but the problem is that I don’t want there to be a bunch of guesswork in terms of which country and which city I have been living in,” he said. “The easier that I make it for people to figure out my location, the harder it is for me to continue regular life.”

Despite being a wanted man, Kwon has repeatedly stated in interviews that he is not on the run and is willing to cooperate with authorities. However, his current location is unknown following reports citing Singapore authorities that he had fled the city-state in September.

“The main reason why I don’t want to talk about my location to the media is because, when the crash happened in May, there were lots of situations where personal security was threatened,” he told Shin, noting that “people broke into my apartment building.” He said this happened at both his home in Singapore and in South Korea. “Every time the location where I live becomes known, it becomes almost impossible for me to live there,” he explained.

Missing money?

Kwon disputed claims surrounding $65 million in bitcoin belonging to the Luna Foundation Guard (LFG), a non-profit supporting the Terra ecosystem, being moved to crypto exchanges KuCoin and OKX in September. He said that just because funds were moved into an exchange doesn’t mean they were sold. 

South Korean authorities asked the exchanges to freeze the funds, but it’s not the only transactions about which questions are being asked. “There’s been allegations that we moved LFG funds into a Gemini custody wallet and then it’s sitting there or something like that. All we did was to confirm a trade with a market maker and transfer the bitcoin to an address at the market maker’s instruction,” Kwon said.

He added that he had hired an on-chain analysis company that has been provided with all LFG’s trading data. In the next couple of weeks, it will publish a report that “is going to provide a lot more clarity.” 

“There isn’t any embezzlement or theft of the funds or anything to that effect that seems to be cycling through the media,” he said.

Shin also drew attention to tweets by Kwon and the LFG in May that promised the return of funds for pre-collapse holders of Terra, prioritizing the smallest holders first. However, Kwon said he doesn’t have a lot of clarity on how long this process could take and likened it to a “goodwill effort” rather than a “refund.”

“Right now LFG is not at a state where it can make clear disposal of its assets. There is pending civil litigation against LFG,” he said. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

At the start of the year, SolChicks was flying high. The crypto-powered, play-to-earn game — which stars a cast of 10,000 cartoon chicks in an array of costumes — was one of the hottest prospects to have been built on the Solana blockchain. Through a sale of its chicks tokens in November 2021, the game’s Hong Kong-based developer Catheon Gaming raised $55 million. And all for a game that, even now, remains in beta-testing.  

Since January, the price of the chicks token has fallen from around $0.16 to less than $0.004, according to CoinGecko data — a decline that mirrors the performance of the wider crypto market. The price of bitcoin, over the same period, has more than halved, while Solana’s token SOL has plummeted from over $170 to just $30. NFT trading volumes are also down sharply from their peak last year.  

In more ways than one, the bear market has taken a toll on Catheon. The startup’s headcount shrank rapidly over the summer thanks to a combination of layoffs and executive departures, according to people familiar with the matter. William Wu, Catheon’s CEO, confirmed that the number of full-time employees at the firm fell from 80 people to around 40.  

“We are now in a bear market and practically all revenue generating avenues have collapsed,” he said in an emailed statement. “Given the above, Catheon Gaming took prudent and proactive measures in August to right-size the headcount and prepare for a potentially long bear market, similar to what has taken place at many other tech companies both in crypto and elsewhere.” 

Several top executives are among those who have left the company, including Mark Aubrey, who joined the outfit in July from gaming giant Activision Blizzard, where he was a vice president and managing director in the Asia Pacific region. Aubrey, who did not respond to requests for comment, spent just two months in the role of co-CEO alongside Wu.  

Token troubles 

Catheon offers a striking example of the various knock-on effects that a so-called crypto winter — a popular phrase for a period of suppressed token prices — can have.  

Many startups in the web3 sector hold a substantial part of the funds they have raised in tokens. Catheon was no different. Before the trouble sparked by the collapse of the Terra ecosystem — an implosion that evaporated some $40 billion in value overnight — Catheon’s treasury held a diversified pool of cryptocurrencies, including bitcoin, ether, BNB, SOL and various stablecoins, according to Wu. A small amount of those stablecoins were parked in Anchor Protocol, the lending and borrowing platform built on Terra, according to people familiar with the matter.  

“The downturn in market prices for the cryptocurrency assets has reduced the value of the treasury but the company still has a significant amount of treasury and runway remaining,” Wu said.  

Catheon had hoped, earlier this year, to land at least $100 million through an equity-based fundraising effort, for which it had hired the investment bank Lazard. A pitch deck for that round, obtained by The Block, highlights the success of fellow play-to-earn game Axie Infinity, and outlined the opportunity for similar games built on Solana.  

Several sources told The Block that Catheon had, at one stage, drawn considerable interest from blue-chip venture capital backers. Ultimately, though, the fundraise failed.  

“With the deterioration in market conditions, we realized that a full equity raise process at a $100m+ size would likely to drag out and be at a significantly lower valuation,” said Wu, who also claimed that the company has more than 10 years of financial runway. “Subject to market conditions, we may consider running an equity raise process in 2023,” he added.  

P2E store pivot  

In the shorter-term, Wu and his remaining team have been focused on launching a new token, named catheon, with a wider range of use cases than chicks, which is of little practical use until the SolChicks game is fully up and running.  

The new token launch is part of a pivot away from focusing on a single game in favor of nurturing a portfolio of crypto-based titles. The plan is for the catheon token, which is due to launch Oct. 24, to facilitate transactions across a stable of games.  

“The data shows though that the most value is created not by single individual game titles, but rather, by building the deepest and widest gaming ecosystems,” Wu said, pointing to Gala Games, Wemix and ImmutableX as examples of startups taking the same platform approach.  

For the catheon token, Catheon plans to allow eligible chicks holders to swap their tokens for catheon on a 1:1 basis. Wu said he hopes this will benefit chicks holders “by significantly increasing their utility beyond the single game title token they purchased.” He added that there has been no pre-sale or private sale of catheon.  

The work on SolChicks continues, too. Last week, the company launched a “closed beta” version of SolChicks, giving exclusive access to a small group of players.  

Wu, despite the considerable setbacks his company has faced this year, sees a bright future for Catheon. As recently as July 25, it ranked eighth in a report produced by KPMG and HSBC highlighting the “leading 100 emerging giants” in Asia Pacific.  

“The recent transition from chicks to catheon was met with very positive feedback from our community and token holders and we are very optimistic about the future and continuing to be at the forefront of this industry,” Wu said. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Dapper Labs is now allowing users affected by the European Union’s sanctions against Russia to withdraw their NBA Top Shot, NFL All Day and UFC Strike NFTs from their Dapper Wallet to a Blocto Wallet, according to an email sent to users and seen by The Block.

The company also notes that its prior action to restrict accounts related to Russia was the result of a directive from Circle, the large peer-to-peer payments technology company behind the stablecoin USDC, which acts as Dapper’s payment processing and stored value service partner.

“Circle holds custody over customer funds and because they required immediate action, we had to comply with their direction in this instance and suspend accounts with connections to Russia, but we did not close any of these accounts,” the Dapper team wrote in the email. It also noted that its quick movement to remain compliant was made to prioritize the safety of the community. Dapper Labs was contacted for comment but did not respond by press time. 

The Block previously reported that Dapper Labs froze accounts with ties to Russia on October 7 after obtaining emails sent to affected users.

Dapper claims that it is “working to provide support to the maximum extent permitted by law as well as identifying solutions for account holders.” One such solution is the construction of “alternative NFT custody solutions” to afford users the ability to move NFTs off of Dapper.

Dapper is not alone in taking action against Russian-tied accounts, in line with new EU sanctions. Last week, Blockchain.com and Crypto.com sent out emails to affected users detailing account restrictions — with the former allowing a withdrawal period for custodial funds.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Crypto dwarfed other financial sectors in scam reports last year, according to a new report from the UK’s financial regulator.

There were 8,568 suspected crypto scams reported to the Financial Conduct Authority during the period running from April 1, 2021 to March 31, 2022, according to an annual enforcement summary published by the agency. That’s an approximately 36% increase from the same time the year before. That figure leads the board, more than doubling the runner-up scamming category of pension transfer to a new scheme. 

The data release is part of the FCA’s “ScamSmart” campaign, which includes warning consumers of the risks of investing in crypto. The FCA reiterated the importance of the project in its annual public review meeting earlier in October, along with that crypto investors should be ready to “lose all their money”.

The FCA opened 432 cases into potential crypto-related scams during the yearlong period of the report, and said that digital assets have the highest rate of customers, 79%, who have already invested money when reporting a possible fraud. 

Those high numbers may drive the FCA’s strategy of being, “tough at the authorisation gateway”. The approach caused some crypto companies to withdraw applications and prioritize approval in the EU instead. But the annual review report shows that digital asset companies aren’t the only ones finding it hard to receive business approval in the UK; overall one-in-five applications from financial firms looking to join the consumer investment market in 2021 to 2022 were withdrawn or not approved. 

“Setting high standards and acting quickly to crack down on problem firms will help ensure market and consumer confidence, supporting the integrity and growth of UK financial services,” Sarah Pritchard, the FCA’s executive director of markets, said in a press release. 

The national register shows 39 crypto asset firms legally operating in the UK; and 246 crypto asset companies currently operating that are not registered.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

NFT marketplace Rarible has introduced a non-fungible token (NFT) aggregator that enables shoppers to browse listings across several marketplaces and compare prices.

The aggregator, now public on Rarible’s homepage, displays a search bar that allows users to browse NFTs based on filters such as price, trending projects, recently-listed NFTs and auctions about to end. 

Rarible’s co-founders Alexei Falin and Alex Salnikov confirmed Rarible’s move into aggregation to The Block during the Ethereum Foundation’s recent Devcon conference in Bogotá, Colombia.

“It’s pretty much like Google for NFTs,” Falin told The Block, adding that the aggregator also helps users find the best prices across marketplaces and blockchains. 

The company also has made several social media posts about an upcoming announcement this Thursday. “Rarible’s second chapter. Coming next week,” according to a post on Rarible’s Twitter account on Oct. 13.

Rarible’s aggregator pulls in data about NFTs across several marketplaces. For example, the tool shows an Azuki NFT listed on OpenSea, LooksRare and x2y2 at a price of 11.99 ETH on each platform. Rarible does not charge any extra buying and selling fees through its platform for these transactions. 

Rarible’s aggregator also includes filters to narrow down NFT projects based on several criteria. Users can browse NFTs by blockchains including Ethereum, Solana, Tezos, Flow and Polygon, as well as the Layer-2 scaling solution Immutable X. The tool features filters to search NFTs based on edition type and buying method (auction, open to offers or immediate purchase).

NFT platforms have been adding aggregation tools this year as they compete to have the lowest fees. Uniswap labs acquired the NFT marketplace aggregator Genie in June, and OpenSea acquired NFT aggregator service Gem in April. 

Falin and Salnikov founded Rarible in 2019. The startup announced in June 2021 that it had closed a $14.2 million Series A funding round led by Venrock and CoinFund.

Rarible expanded its offerings for gaming NFTs in September through a partnership with Immutable X, adding the ability to buy and sell NFTs related to titles such as Gods Unchained, Guild of Guardians and Illuvium. 

Additional reporting by Callan Quinn. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Ethereum scaling solution zkSync rolled out a critical integration for its zkEVM technology called validity proofs ahead of its mainnet launch on Oct. 28.

This integration is live on the zkSync 2.0 testnet, and marks the completion of a final necessary step leading up to its formal launch.

This integration is what “many development teams have been waiting for,” Matter Labs, the project’s developer, wrote in a Medium post. The integration of validity proofs will enable developers to fully test out the technology that is needed for core functions of the network, such as proof generation, aggregation and on-chain verification.

Validity proofs are the underlying technology that enables increased scalability capabilities for zkSync, without compromising on security. The proofs themselves “guarantee correctness of program execution” and the actual state, or history of the network, zkSync wrote. The proofs are then sent to Ethereum which in turn verifies the proofs for correctness and security.

ZkSync’s mainnet launch on Oct. 28 will initially not have any external projects or applications.

The goal is to conduct audits and security checks, ensuring that the validity proofs are operating correctly.

The next stage after the testnet is the Fair Launch Alpha, where developers will be able to port and develop on the mainnet for further testing in a live environment. This is expected to come later this year.

The Full Alpha, which is the following stage after the Fair Launch Alpha, will allow actual users to bridge over following security checks, and should be launched by the end of 2022.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The firm overseeing the liquidation of collapsed hedge fund Three Arrows Capital wants a U.S. court to grant a subpoena for the firm’s missing founders through their Twitter and email accounts due to founders’ alleged failure to cooperate with requests for information. 

U.S. bankruptcy proceedings in parallel with foreign bankruptcy proceedings in Singapore and the British Virgin Islands have led to a liquidation of 3AC handled by financial advisory firm Teneo – a process complicated by the unknown location of firm’s founders Su Zhu and Kyle Davies and their alleged reluctance to engage in court processes.

New court documents filed on Friday in the Southern District of New York show that representatives for Teneo want to compel the founders and others involved with 3AC to produce records and testify in order to get a fuller picture of the fund’s assets. Until now, Teneo representatives contend that Zhu, Davies and other investment managers have provided only “selective and piecemeal disclosures” through their lawyers.

“The Founders, through counsel, implausibly insist that the meager information provided to the Foreign Representatives [Teneo], which amounts to an incomplete list of assets and selective disclosures regarding the means to access certain digital assets electronically, represents all of the documents in their possession relating to the Debtor,” said the filing.

The subpoenas would compel 3AC to produce documents “to identify the existence of, location of, and method of accessing and controlling the assets” of the fund, including account information, seed phrases and keys, among other information.

Teneo representatives previously requested that the Singapore law firm representing the founders accept service of papers. The firm, Advocatus Law, resisted. 

“The Founders’ recent use of their Twitter accounts and the Founders’ use of those accounts for purposes related to the Debtor makes those Twitter accounts a reasonable means to provide the Founders notice of discovery in this action,” the motion filed Friday reads. 

Teneo representatives also say in the filing that they plan to seek an order in the British Virgin Islands to serve Zhu and Davies and require them to attend an examination. 

Meanwhile, U.S. regulators are said to be taking a closer look at 3AC, according to a new report from Bloomberg. The Commodity Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC) are investigating whether 3AC misled investors on the financial health of its balance sheet and failed to register with proper authorities, according to people familiar with the matter. 

The scrutiny comes amid a high-profile liquidation of the hedge fund, which previously boasted billions under management before incurring significant losses due to its heavy positions in the algorithmic stablecoin TerraUSD, which crashed earlier this year. Since then, it’s entered into Chapter 15 bankruptcy proceedings in the Southern District of New York, a status that enables the protection of its U.S.-based assets as it winds through foreign bankruptcy proceedings in the British Virgin Islands. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Aptos, a new Layer 1 network, has announced its mainnet is launching soon, but no precise date has yet been announced.

Solana developers have been frustrated on its network, and are exploring moving over to Aptos, which is one of the most anticipated Layer 1 launches. The blockchain, founded by former Meta employees, has also attracted the attention of FTX Ventures, which led a $150 million raise for Aptos in July. 

Aptos has had its first transactions on mainnet, though it’s not live for users. It originated from the Facebook blockchain initiative Libra. The most talked about aspect of Aptos compared to other blockchains is its Move coding language, which is supposedly more developer-friendly and offers safeguards for asset management.

Aptos has been undergoing a vigorous incentivized testnet program since May, which was comprised of three separate phases.

Aptos has a “focus on user experience, upgradeability, and state-of-the-art technology”, it wrote on its Medium page.

“There is already a robust ecosystem of hundreds of projects and hundreds of thousands of community members that have made Aptos their home,” the protocol said.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Flashbots strategy lead Hasu called the lack of neutral relays on the Ethereum ecosystem a failure — Flashbots, meanwhile, remains at the center of the censorship debate over U.S.-sanctioned Tornado Cash.

“It’s a failure of the Ethereum ecosystem that one month after The Merge, there is still no neutral relay. All the relays that exist are vertically integrated builder relays,” Hasu tweeted.

Flashbots provides maximal extracted value (MEV) relay services to Ethereum blockchain validators. Because it operates in the U.S., it censors all transactions from Tornado Cash, which was sanctioned by Department of the Treasury’s Office of Foreign Assets Control (OFAC) for money laundering. A growing number of staking services are relying on Flashbots to extract the greatest value from block validation, making censorship more widespread.

Many developers also don’t trust builder relays given a lack of insight as to whether those relays are configured to favor themselves over network participants, Hasu said. 

The stir over censorship ultimately led to the recent resignation of Flashbots co-founder Stephane Gosselin. He told The Block that he hoped “Validators will avoid connecting to relays that perform censorship.”

Flashbots acknowledged its role in the issue of censorship, and said it will take steps to mitigate the problem. Soon after Gosselin’s departure the company announced it would release SUAVE, a protocol aimed at progressively decentralizing block building by open sourcing development. 

In addition, Flashbots product lead Robert Miller previously said the service is working to reduce supremacy by establishing protocols to submit blocks to other relays, and that Flashbots will issue a grant for the creation of a relay monitor with which users may evaluate the MEV marketplace.

However, despite these efforts, the number of blocks proposed by Flashbots continues its upward trend, with 48% of all blocks on Ethereum proposed by the MEV service in the last 24 hours based on its Transparency Dashboard.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Mango Markets is proposing to pay back users with different tokens following a $114 million hack last week. 

The platform will use a snapshot of balances from an hour before the attacker made his first deposit on Oct. 11 at 6:19 p.m. ET. Mango Markets presented the motion in a Discord community call this morning. The DAO will have 72 hours to vote on the proposal once it’s published.

Self-proclaimed digital art dealer Avraham Eisenberg admitted to being the person behind the hack, claiming he did nothing illegal. The Mango community voted over the weekend to allow Eisenberg to keep $47 million while returning the remaining $67 million. The attacker’s accepted bounty proposal was contingent on returned stolen funds being used to pay back all users who were affected during the controversial exploit.

Hackers are having a field day in the web3 sector. October is in the lead for the most crypto funds stolen in a single month, according to Chainalysis. The blockchain analytics firm reported 11 different hacks totaling $718 million this month as of Oct. 12.

One of the primary goals of the repayment strategy is to minimize the difference between the tokens users had prior to the exploit and the tokens they will receive, Mango Markets co-founder Daffy Durairaj said in Discord.

All perpetual futures, or borrowed funds, will be settled based on the time of the snapshot, and the Profit and Loss (PNL) will be converted to USDC.

Mango Markets will then go through each token it has in its treasury, in order from least to greatest, and pay back borrowed amounts in that order. The price of the tokens when paid to users will be used to calculate their total repayment.

The plan to distribute the tokens with the smallest balance first is to minimize price impact and volatility for users.

The MANGO token will be paid out last, as the price of MANGO has changed the most since the snapshot, down about 50% since the exploit, Durairaj said.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.