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Osprey Funds, which provides asset management services, accused Grayscale Investments of “unfair and deceptive acts and unfair competition.”

Osprey said Grayscale’s advertisements were misleading when it said the Grayscale Bitcoin Trust (GBTC) would be converted to an exchange-traded fund, despite regulators having rejected that as a possibility, the firm said in a complaint filed in a Connecticut court on Monday. Bloomberg News first reported the legal filing.

Grayscale is pushing for the Securities and Exchange Commission to convert its GBTC product into a spot exchange-traded fund, which the agency rejected in June.

Grayscale later challenged that decision in a lawsuit against the SEC. In a response brief, the SEC had said its rejection was “supported by substantial evidence.”  

“Grayscale launched campaign after campaign to convince participants in the markets, including their investment advisors, to engage Grayscale’s asset management services by telling them that a conversion to an ETF was inevitable, and thus Grayscale’s services would provide the only avenue offering benefits of such asset management services with access to an ETF structure,” Osprey said. “Grayscale knew that this message was false.”  

Osprey also alleged that Grayscale had been able to keep about 99.5% of the market share despite charging “more than four times the asset management fee” that Osprey itself charges because of Grayscale’s “false” advertisements. 

A Grayscale spokeswoman called the lawsuit “frivolous,” in an emailed statement. 

“The conversion of GBTC to an ETF is the best long-term product structure for Grayscale’s investors, and approval of a spot Bitcoin ETF in the United States would directly benefit our industry peers,” the spokesperson said.  

© 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.

Bitcoin mining stocks tracked by The Block were mostly lower on Monday, with two gaining and the other 17 declining.

Bitcoin fell 4.2% to $22,724 by market close.

Here is a look at how the individual miners performed today:

© 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.

Crypto investment firm Pantera is rotating back into altcoins from bitcoin and ether for the first time since spring.  

The firm moved from altcoins to ether last year “to try to avoid further drawdowns” but has started to rotate back into some altcoins it believes will “outperform ETH over the coming cycle,” according to co-Chief Investment Officer Joey Krug.

The move comes as cryptocurrencies have seen a modest rally in January after last year’s rout, when bitcoin lost more than 60% of its value. Pantera’s Liquid Token Fund fell 80% in 2022.

“This was a very brutal year for risk assets in general,” Krug said.

The Liquid Token Fund—which typically invests in 15 to 25 liquid tokens at a time — is back up this month, rising some 47% so far this year, the firm said in an investor call last week.

By comparison, the Bloomberg Galaxy Crypto Index fund was down 72% in 2022 and up nearly 40% in January, Pantera said.

Pantera was founded in 2013, making it one of the oldest investment firms in the crypto industry.

With assistance from Frank Chaparro.

© 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 four-bedroom Victorian brownstone in Washington, D.C. linked to former FTX CEO Sam Bankman-Fried is up for sale for $3.3 million.

The home was bought in April for the same amount by Guarding Against Pandemics, a nonprofit group founded by Bankman-Fried’s brother, Gabe, according to news reports.  

The 2017 home is located at 420 3rd St. NE and described as “an entertainer’s dream home,” It includes four gas fireplaces, an elevator, a built-in wine fridge and a wet/dry bar. The residence is about a 15-minute walk from the U.S. Capitol. 

The crypto exchange FTX collapsed in November and filed for bankruptcy protection, with founder Sam Bankman-Fried facing criminal and civil charges involving wire fraud and campaign finance law violations. Bankman-Fried has said he has less than $100,000 in the bank.

FTX sister trading firm Alameda Research donated more than $12 million to the pandemic prevention nonprofit, according to CNBC.  

Disclaimer: Beginning in 2021, Michael McCaffrey, the former CEO and majority owner of The Block, took a series of loans from founder and former FTX and Alameda CEO Sam Bankman-Fried. McCaffrey resigned from the company in December 2022 after failing to disclose those transactions. 

© 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.

Prosecutors shared copies of Sam Bankman-Fried’s messages to FTX CEO John Ray III and an unnamed witness in new court documents on Monday, as lawyers seek to restrict the FTX founder’s communication with former employees of his failed crypto exchange.

Bankman-Fried appears to have contacted a witness in the case asking to establish a “constructive relationship,” according to messages included in new court documents. The recipient of the message is redacted.

“I know it’s been a while since we’ve talked. And I know things have ended up on the wrong foot. I would really love to reconnect and see if there’s a way for us to have a constructive relationship, use each other as resources when possible, or at least vet things with each other,” Bankman-Fried wrote.

The Justice Department wants to amend the conditions of Bankman-Fried’s bail to restrict his access to encrypted messaging services and bar him from communicating with former employees of FTX and Alameda Research, suggesting he tried to influence witnesses in the case.

Bankman-Fried, who attacked the new FTX chief executive in the press before he reached out to talk, faces decades in prison if he is convicted. Bankman-Fried stepped down as CEO of FTX in November when the firm filed for bankruptcy protection.

“Hi Mr. Ray, I know things haven’t got off on the right foot, but I really do want to be helpful—whether on the funds, or on anything else,” Bankman-Fried wrote in a Jan. 2 email, the day before he pleaded not guilty to criminal charges. “As I’m guessing you’ve heard, I’m in NYC for the next day. I’d love to meet up while I’m here—even if just to say hi.” 

Bankman-Fried’s lawyers accused the government of having “sandbagged” the process of amending his bail in a letter on Saturday, claiming prosecutors made an effort to “portray our client in the worst possible light.”

Mark Cohen, who represents Bankman-Fried, has proposed that his client’s bail should be amended to bar him from contacting certain former FTX employees and others involved in the case, rather than a wider ban.

“It is time to move past such tactics and spin to the merits of the narrow question before the court as to the proper scope of the bail modification,” Cohen wrote. “The defense proposal balances the parties’ interests, permits the defendant to participate in his defense, and is consistent with the law and approaches taken in this circuit, and should be adopted.” 

Disclaimer: Beginning in 2021, Michael McCaffrey, the former CEO and majority owner of The Block, took a series of loans from founder and former FTX and Alameda CEO Sam Bankman-Fried. McCaffrey resigned from the company in December 2022 after failing to disclose those transactions. 

© 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.

LayerZero CEO Bryan Pellegrino denied accusations that LayerZero — in connection with its Stargate bridge — has two critical trusted third-party vulnerabilities.

“It’s 100% factually incorrect and I’d ask you speak to any auditor who has worked on the project,” Pellegrino told The Block.

He was responding to claims made earlier today by developer James Prestwich, founder and CTO of Nomad, a rival cross-chain protocol.

Prestwich said the two vulnerabilities stem from the LayerZero relayer, which is currently on a two-party multisig. The vulnerabilities can only be exploited by insiders, or team members who have known identities, and this was one of the reasons he released the report, as there’s a lower risk of an external exploit.

The first vulnerability would allow fraudulent messages to be sent from the LayerZero multisig. This type of exploit could result in theft of “all user funds,” Prestwich wrote on Twitter.

The second vulnerability would allow modifying messages after the oracle and multisig have signed off on messages or transactions. Similarly, Prestwich claims this vulnerability could result in the theft of all user funds.

Vulnerabilities common

Prestwich said the LayerZero team was “aware of the above vulnerabilities” and “chose not to disclose or otherwise address them.”

Stargate is open to both vulnerabilities and is actively being exploited by the LayerZero team to modify messages, he claimed. Stargate is a bridging protocol that’s one of the largest applications running on LayerZero and was built by the team as a proof of concept for the underlying protocol.

The first vulnerability can be mitigated by applications making some coding configurations. Permanent mitigation of the second vulnerability can’t happen because of the possible addition of new chains, he said.

LayerZero uses oracles and the two-party multisig system to ensure no fraudulent messages or transactions get sent.

In conversation with The Block, Prestwich acknowledged that trusted third-party vulnerabilities are common and not that big of a problem because trusted parties are often trustworthy. However, he said the real problem was LayerZero denying that this was possible and leveraging its access to patch issues with Stargate.

LayerZero dismisses claims

LayerZero’s Pellegrino slammed the report on Twitter, calling it “wildly dishonest.” He said the claims only apply to projects that use the default configurations on the network and that they don’t apply to any that set up their own configurations.

Pellegrino told The Block that it’s good that teams are able to choose how they want to set up their projects. He argued that they should have the ability to choose the settings that they want, depending on their security preferences.

He did acknowledge that most projects built on LayerZero currently use the default configurations. While this does include Stargate right now, a vote was recently passed to change this, and it’s in the process of being executed.

“I think everybody should pick and nobody should use the defaults unless you either trust the multisig to not act maliciously (most do) or are doing something where security isn’t number one priority,” he said.

As for the accusation that LayerZero hid these abilities, Pellegrino said that the team has been very public about them.

© 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.

Twitter is working to line up the necessary regulatory approvals needed to integrate payments into the platform, including future crypto capabilities, the Financial Times reported. 

The social media platform is applying for licenses and designing the software needed to bring payments to the platform as part of Elon Musk’s drive to turn Twitter into a “super app,” the FT said, citing people familiar with the company’s plans.

Payments would focus on fiat currencies “first and foremost” according to the FT, but built to allow for crypto capabilities to be added later. 

Esther Crawford is the executive overseeing the plan along with a small team. 

Musk has said since taking over that he wants Twitter to offer such capabilities as he looks to diversify the company’s revenue streams. 

© 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.

Sovereign Labs raised $7.4 million in a round led by Haun Ventures to enable developers to easily deploy zero-knowledge (ZK) rollups. 

The seed round, which closed in November 2022, also sees participation from investors including 1kx, Robot Ventures, Maven 11, according to a company release. Ekram Ahmed, head of communications at blockchain developer Celestia Labs, is a strategic advisor. 

What are ZK rollups?

A ZK proof is a cryptographic technique that confirms whether a statement is true or false without revealing that statement’s contents. ZK rollups leverage this technology for blockchain scaling, which makes blockchains run cheaper and faster, by bundling transactions together, verifying them off-chain and returning a proof to show they are all legitimate.

For developers trying to implement ZK rollups it can be an involved and complicated process, said Preston Evans, co-founder and chief technology officer at Sovereign Labs. 

“It’s pretty obvious to people in the space that rollups are the future of scalability but there’s no way for an average developer to go out there and meaningfully try to build one of them,” Evans said. “It’s the purview of PhDs in cryptography and people with very, very well-funded teams and that means we’re just never gonna get the diversity of applications that you need to actually build the products that you would want.” 

Sovereign Labs is trying to solve this challenge by building a software development kit (SDK) that enables developers to create new ZK rollups through using open-source reusable components that developers can leverage, making it easy to deploy on a variety of blockchains. 

Building a framework for ZK rollups

“In the web2 world, people are super used to building on frameworks, back-end frameworks like Node and front-end frameworks like React, nobody really fully understands the stack,” said Cem Ozer, CEO and co-founder at Sovereign Labs. “And that’s the beauty of building these systems rapidly comes from not understanding every component and that’s what we are trying to do with ZK rollups.” 

“There is no framework yet or a de facto standard that enables regular developers to be able to leverage them,” he added. 

The SDK is currently in the research and development phase but aims to support a range of blockchains. It will provide all the boilerplate information enabling developers to focus on the business logic. The current prototype integrates Celestia for data availability and Risc Zero for proving.  

Ozer and Evans have been responsible for building out the SDK so far. They plan to use the funds from the current raise for hiring and scaling the team to around seven. 

Sovereign Labs is just one of several startups seeking to optimize the developer experience of using ZK technology. Ulvetanna, a startup that builds hardware to increase the efficiency of ZK proofs, raised $15 million from investors. Similarly, Nil Foundation raised $22 million to develop a protocol enabling Layer 1 and Layer 2 blockchains and protocols to generate zero-knowledge (ZK) proofs on demand. 

© 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.

Cosmos-based Layer 1 blockchain Canto’s total value locked (TVL) doubled in January, reflecting a breakthrough for the emerging blockchain. 

On Canto, TVL — or the dollar amount of assets staked on the network — has risen to $137 million from $66 million on Jan. 1, according to DeFiLlama data. This 107% TVL surge came after an investment from Variant Fund, a VC firm, earlier this month.

With a growing TVL, Canto is now the fourth most-valuable Layer 1 blockchain in the Cosmos ecosystem, lagging behind Cronos, Kava and Osmosis.

Canto has been attracting attention for its focus on incentivizing the development of DeFi apps, which operate without taking fees from users and rely on Canto incentives. The network provides subsidies to incentivize liquidity providers and lenders who support its decentralized exchanges and lending market.

Activity surge

The network’s native decentralized exchange, Canto DEX, has seen a significant rise in daily trading volume in January, reaching $52 million, from less than $2 at the start of this month, CoinGecko data shows. 

Additionally, the amount of assets sent to Canto from bridges with Ethereum has increased by over $74 million in January, according to on-chain data provided on Dune. Meanwhile, the price of Canto’s native token has risen by several times during January. It currently trades at $0.4, up 500% from $0.08 during the month.

Although Canto’s approach to funding developers and public-good DeFi protocols has attracted interest from the crypto community and investors, the long-term sustainability of the network’s model is unclear due to its high inflation rate, as noted by researcher Kevin Peng from The Block. The circulating supply of Canto has increased by 158% since September, from approximately 164 million to approximately 424 million.

© 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.

Coinbase Wallet has added transaction previews for its users to include a visual representation of what actions they are taking when signing transactions, in the company’s latest move to help prevent common NFT scams.

Coinbase Wallet is the standalone non-custodial wallet offered by crypto exchange Coinbase and is separate from the wallet features contained in its main exchange app. The new feature comes within a week of experienced NFT user and Moonbirds founder Kevin Rose getting phished for more than $1 million of NFTs after signing a malicious transaction — something that this kind of new feature is designed to help prevent.

The transaction preview will show the user how their balance is expected to change based on the transaction they are signing, according to a blog post. Similarly, the wallet will highlight when a decentralized application (dapp) is requesting approval to withdraw tokens — including NFTs — from the user’s wallet. Both features are only available on the Ethereum and Polygon networks.

Coinbase Wallet has added wider support for Ledger hardware wallets and expanded wallet customization, letting its users create multiple sets of wallets that work across multiple blockchains. In a few weeks, it intends to make it easier to view and revoke token permissions (where a user allows an application to interact with tokens in their wallet).

© 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.