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Twitter CEO Elon Musk announced this morning that “Verified accounts are now prioritised”. The tweet appears to indicate that accounts with blue checks will now feature more prominently in users’ Twitter feeds — and thus likely gain more followers and engagement than those without.

Musk’s program — in which people who pay $8 per month a rewarded with a blue check next to their name on Twitter — is controversial. The blue check previously indicated that Twitter had independently verified a users’ identity and that the user had some experience or authority in their field or profession. Under Musk’s new plan, anyone can buy one.

In addition, Musk appears to have given out some blue checks for free to celebrity accounts or handles with large followings even if they did not want it.

Verified accounts are now prioritized

— Elon Musk (@elonmusk) April 25, 2023

So, how does this rearrange Crypto Twitter? Put simply, there are now two classes of people: those with blue checks and those without.

And it appears that many of the most-followed accounts have received a blue check while some of the smaller, but often equally interesting, voices on Twitter are checkless. Crypto Twitter might see a bias toward blue-check voices from now, in other words.

The Block took a random sampling of well-followed accounts to see who got the blue carpet treatment and who is now standing outside the velvet rope.

Blue checks on Crypto Twitter

Vitalik Buterin — cofounder of Ethereum and subject of many crypto memes.

CZ — founder of Binance, prolific tweeter, and target of U.S.-based anti-crypto enforcement actions.

Brian Armstrong — CEO of Coinbase, the U.S.’s largest crypto exchange, and more recently a vocal antagonist of the SEC.

Sandeep Nailwal — co-founder of Polygon and founder of Crypto Relief, an India-based charity created during the Covid epidemic.

Tree of Alpha — white-hat hacker who once found a “potentially market-nuking” exploit on Coinbase.

db — prolific tweeter of crypto news.

Ryan Selkis — of Messari, the crypto research outlet.

FatMan — whose research did so much to expose the luna/Terra stablecoin scam, leading to its ultimate collapse.

Sam Bankman-Fried — the founder of the FTX exchange who is currently awaiting trial on criminal charges related to its collapse has had his access to the internet severely curtailed by a judge. And yet he has a blue tick, somehow.

Ben Armstrong — aka Bitboy Crypto, a crypto YouTuber known for his aggressive approach to his critics.

No-checks on Crypto Twitter

Jordan Fish (“Cobie”) — host of the “Up Only” podcast and famous for calling out low-quality projects.

ZachXBT — “The Sherlock Holmes of crypto,” as he was once called by CoinTelegraph, is famous for his investigation of scams.

Molly White — the writer behind Web 3 Is Going Just Great, a crypto-skeptic site that curates digital asset disasters.

Rektdiomedes — “Curatoor” of The Daily Degen, a substack newsletter for DeFi news.

© 2023 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.

A group of Genesis creditors rejected the restructuring deal agreed in February, throwing the months-long bankruptcy process into turmoil, parent company Digital Currency Group said. 

“More than two months after all parties agreed to a comprehensive settlement that was submitted by Genesis Capital to the bankruptcy court, a group of Genesis Capital’s creditors have reneged and raised all new demands,” DCG said in a tweeted statement. “We do not know if the hundreds of thousands of individual creditors are aware of this development, but the latest maneuver will prolong the court process.”

The crypto lender filed for bankruptcy protection in January after failing to recover from the financial hit inflicted by last year’s collapses of the hedge fund Three Arrows Capital and the crypto exchange giant FTX. The firm had halted withdrawals in November, days after FTX’s demise. 

Genesis’s bankruptcy deal 

Genesis and DCG reached a deal with their creditors two months ago. Reports suggested the agreement included proposals to wind down the Genesis loan book and sell the company’s bankrupt entities. 

Genesis owes over $3.6 billion to its top 50 creditors, including claims from Gemini, the exchange founded by the Winklevoss twins.

“DCG remains committed to reaching a fair outcome for all and while we look forward to a constructive mediation process, we will have to weigh any new demands against the concessions we’ve previously made,” the company said in today’s statement. 

© 2023 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 latest price moves in bitcoin (BTC) and crypto markets in context for April 25, 2023. First Mover is CoinDesk’s daily newsletter that contextualizes the latest actions in the crypto markets.

Trading volumes in the BTC/TUSD pair have surged over the past four weeks after the crypto exchange introduced zero trading fees for it.

The animated show about trash collectors in space was written by “Workaholics” producer Dominic Russo and stars “Napoleon Dynamite” actor Jon Heder.

Shin was indicted with nine others as prosecutors froze $185 million in assets.

South Korean prosecutors indicted Terraform Labs co-founder Shin Hyun-Seung (aka Daniel Shin) and nine others on multiple charges, including violations of capital markets law.

The formal charges come after months of investigation into the Terra ecosystem’s dramatic implosion last year, which wiped out tens of billions in investor wealth. Bringing the charges, the Seoul Southern District Prosecutors’ Office said Tuesday that Terra was bound to fail because it was a “fictitious” project and its algorithmic stablecoin TerraUSD was not feasible from the beginning.

Two related Terra tokens collapsed last May: luna and TerraUSD, which was often known by its ticker UST. Unlike normal asset-backed stablecoins, UST was backed by luna, whose price was set by the market. The Prosecutors’ Office said the algorithm that helped keep UST at a stable price was impossible to get right.

The 10 people charged caused “astronomical damage” for investors while taking 463 billion won ($347 million) in profit, according to the prosecutors. Korean authorities are actively tracking these illegal gains and have frozen 247 billion won in assets so far, they said.

Daniel Shin’s assets frozen

The frozen assets are part of a “restitution” request that was accepted in court to compensate victims and not part of a “forfeiture” request that was recently rejected to put the money into the national treasury.

The indictment comes a day after the Seoul Southern District Court ruled that Terra Classic — as luna was renamed following its implosion — is not a security, per Korea’s Capital Markets Act. Still, prosecutors have called for the Supreme Court of Korea to rule on the matter.

Shin’s lawyers reiterated today that he split from the Terra project in 2020 and hasn’t had involvement in operations since. Prosecutors’ “premise that Shin continued with the business despite warnings from financial authorities is incorrect,” Shin’s lawyers told Korea Daily.

Shin co-founded Terraform with Do Kwon

Shin is not currently in custody, after a South Korean court in December rejected a request to arrest him, saying he wasn’t likely to destroy evidence or pose a flight risk. He will remain free for now, pending trial. 

Shin’s co-founder Do Kwon, on the other hand, was recently detained in Montenegro for attempting to travel with falsified documents and last week was officially charged.

Kwon is also wanted by Korea and the U.S., where the Securities and Exchange Commission sued him and Terraform Labs. Lawyers for Kwon recently requested a U.S. court to dismiss the SEC’s charges, partly for lack of jurisdiction.

© 2023 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 least four wallets from bitcoin’s early days have seen signs of activity in the past few days.

Arbitrum, currently the leading Layer 2 network on Ethereum, has initiated the distribution of its governance token allocations to eligible decentralized autonomous organizations within its ecosystem.

The core Arbitrum team previously designated 1.13% of the overall 10 billion token supply — equivalent to 113 million ARB tokens, with a current value exceeding $145 million — for distribution among qualified projects. This allocation for DAOs is distinct from the 11.6% of the token supply previously distributed as an airdrop to early Arbitrum users in March.

Arbitrum announced issuing the initial batch of tokens to DAOs that confirmed receiving test transactions on Twitter. Meanwhile, on-chain data from Arbitrum showed the foundation’s transfer of a substantial amount of ARB tokens to 125 DAO addresses today, with a few more distributions anticipated later.

Optimism — Arbitrum’s competitor in the Layer 2 niche — adopted a comparable approach, distributing its governance tokens to projects within its ecosystem shortly after its 2022 launch.

Arbitrum-based DAOs get rewarded

The governance tokens granted to DAOs may help bootstrap activity on the Arbitrum network. Such allocations can be used as components of their treasuries or for other objectives as decided by their communities via governance votes.

The projects to receive tokens include GMX, TreasureDAO, SushiSwap, Uniswap, Aave, Hop Protocol, Radiant Capital, Balancer, Gains Network, Synapse, MakerDAO, Vesta, Curve, Layer Zero, 1inch, Swapr, and many others.

As the Arbitrum Foundation persists in supporting other DAOs within its ecosystem, it encountered a brief controversy surrounding its own DAO. Proposal AIP-1 aimed to transfer 750 million tokens to the foundation for capitalization but was rejected due to reports that the foundation had already spent 50 million tokens without obtaining proper governance authorization.

Nonetheless, in the follow-up proposal AIP 1.1, the community consented to transfer the full 750 million ARB tokens to the Foundation — allocating them within its administrative budget for special grants.

Today’s distribution to DAOs was not a grant; instead, it was a free complimentary allocation provided to projects that operate as DAOs and add value to the Arbitrum network — akin to the user airdrop.

© 2023 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.

Hydrogen, a platform that offered a token called hydro that was supposed to grant holders the ability to build apps and businesses on a set of “Hydro protocols” on the Ethereum blockchain, has been forced to pay $2.8 million in fines and damages after an enforcement action by the U.S. Securities and Exchange Commission.

The settlement, which received a final judgment from a New York federal district court judge on April 20, also requires former Hydrogen Chief Executive Michael Kane to pay $260,000 in fines and interest.

It follows a final judgment in September last year in which Tyler Ostern, the former CEO of Moonwalkers, a company that acted as a “market maker” for newly issued tokens, was forced to pay $42,000 after he was accused of manipulating the market by using a bot that issued multiple buy and sell orders, often canceling them before they were executed, to fake the appearance of robust trading in hydro.

The case is just the latest in more than 127 actions since 2013 in which the SEC has made the argument that standard crypto marketing and trading activity is the equivalent of issuing unregistered securities.

A crypto bounty program may be an unregistered security

The parts of SEC v. Hydrogen Technology Corp. that will be of most interest to crypto companies are the sections in the complaint that describe how the SEC regards routine token launch activity. It says that bounty programs (where users must complete a marketing task to receive free tokens), employee compensation and sales on secondary markets, should all have been registered as securities. Failing to register the sale of a security with the SEC is against the law.

“The hydro distributed by Hydrogen and Kane through the bounty programs, employee compensation and sales in the crypto asset trading market, including through Ostern, were offered and sold as investment contracts, and therefore were securities whose offer or sale required registration with the SEC unless an exemption from registration was available. Hydrogen and Kane did not file a registration statement with the SEC for their offers or sales of hydro, and no exemption from registration was available,” the complaint states.

The company considered launching as an initial coin offering, but decided against that to avoid “causing SEC problems,” according to the complaint. Instead, a majority of the tokens were allocated to employees, developers and Hydrogen’s own treasury. An airdrop was then planned in hopes of creating a broad market into which the company and its executives could sell their tokens.

‘Plenty of excuses to pump price and sell into the FOMO guys’

Hydro was listed on 17 different platforms and exchanges: “Hydrogen and Kane used a strategy of listing hydro on as many low-trading volume platforms as possible in order to able to eventually have hydro listed on larger-volume and more-established trading platforms,” the complaint says.

With that done, Kane and Hydrogen began selling their tokens while Moonwalkers’ bot began buying them. The SEC quotes from their internal conversations, which describe a classic pump-and-dump scheme:

For example, on October 11, 2018, just days after the hydro market manipulation began, Ostern told Kane that he was “starting off slow, trying to keep the sell pressure minimal until [he could] build enough capital to really get the market moving upward” and indicated that they would “have plenty of excuses to pump price and sell into the FOMO [fear of missing out] guys down the road.” Two weeks later, Ostern told Kane about his “volume shenanigans” on a popular, high-volume crypto asset trading platform, and bragged that it had taken his bot “about 3 seconds” to generate the illusion that “a million” hydro tokens had been bought and sold — “[a]round half” of which Ostern admitted was “fake.”

Hydro’s lack of functionality

Worse, although Hydrogen marketed hydro as having the ability to become an “API key” to a non-blockchain business built on one of the Hydro platforms’ on-chain apps, it turned out to have no functionality at all, according to the SEC:

… as Kane acknowledged in a private communication with Ostern in late January 2019, Hydrogen’s “API clients” were not required to use hydro in any part of the Hydrogen platform. Ostern replied, “Oh really? So everything is fiat [currency] and the token has no real utility?” — to which Kane responded, “not right now…”

The company made $2.2 million in profit from the scam.

Another giveaway that Hydrogen knew it should have registered hydro with the SEC was Kane’s skittishness about whether hydro actually provided any value or not. The complaint says that Kane told one Hydrogen board member that hydro “WILL have value.” Then, in a February 17, 2018, email, the same board member wrote to Kane: “[a]s everyone has acknowledged that these digital assets [hydro] may accrete in value over time, your contention that this [the airdrop] was merely a software delivery is tenuous.”

“A few days later, at a Hydrogen board meeting, the same investor and board member insisted several times that it was ‘ridiculous’ for Hydrogen to continue to claim hydro tokens had no value.”

Here’s Hydrogen’s internal chart showing how it saw the legal risks of launching its token:

© 2023 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.