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MicroStrategy sold bitcoin for the first time since it began to hold the asset on its corporate balance sheet, liquidating 704 bitcoin worth $11.8 million at the time of sale, according to a Form 8-K filing on Wednesday.

“MicroStrategy plans to carry back the capital losses resulting from this transaction against previous capital gains, to the extent such carrybacks are available under the federal income tax laws currently, in effect,” the company said in the filing.

MicroStrategy sold the bitcoin on Dec. 22, according to the document. The company followed by buying 810 bitcoin two days later, adding to the 2,395 bitcoin acquired between Nov. 1 and Dec. 24.

MicroStrategy now owns about 132,500 bitcoin acquired at an average price of $30,397. The company began holding the asset on its balance sheet in August 2020.

The company has sold about $46.4 million of shares out of a previously announced plan to sell up to $500 million in Class A common stock that it can use to increase its bitcoin holdings, according to the Dec. 28 filing.

© 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 U.S. Department of Justice launched an investigation into a hack of FTX. 

Hackers stole somewhere between $370 million and $400 million in crypto assets from the exchange’s wallets on Nov. 11, shortly after former CEO Sam Bankman-Fried filed for Chapter 11 bankruptcy protection and bailed from the company. This is separate from the $400 million that the Securities Commission of the Bahamas ordered to be transferred, though the two events happened around the same time.

The FTX hacking incident first became public knowledge in November when the exchange’s official Telegram admins reported that there had been “unauthorized access.” The amount lost is estimated to be over $370 million (and close to $400 million), per on-chain data cited by analytics firm Chainalysis.

The Justice Department is now investigating the case to uncover who was responsible for the breach. It is said to be separate from the fraud case against FTX co-founder Sam Bankman-Fried, Bloomberg first reported, citing a source familiar with the matter. It is unclear at this time if any suspects have yet been identified.

At one point, the wallet address connected with the hacker held more than $300 million in ether alone belonging to FTX reserves, almost all of which were sold off for bitcoin and could not be recovered.

The hack confusion

There was some confusion regarding the FTX hack and another transfer of $400 million in crypto assets from the exchange to The Bahamian regulators. The two events happened close to each other, leading media outlets to mistakenly report that the hack was an asset seizure. That wasn’t the case.

What actually happened is that the Securities Commission of the Bahamas ordered a transfer of $400 million from FTX as part of a safekeeping procedure, and while this did occur shortly after the hack took place, it was not connected in any way.

New FTX CEO John J. Ray III testified that the hack and another large asset transfer ordered by the Bahamian regulators were separate. This is verified by analytics firm Chainalysis, which is working with FTX to track down the assets.

“The $400 million stolen and hacked from FTX is completely separate from the $400 million held by the Securities Commission of the Bahamas. It’s totally understandable that people were confused by this, though,” a spokesperson from Chainalysis told The Block.

Ray also revealed in a prepared testimony document that FTX stored private keys to its wallets in an unencrypted manner, and had adopted very poor security controls — factors that could have easily allowed the hack to have taken place.

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.

© 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.

In case you missed it: Crypto prices plunged this year thanks to industry gaffes and the wider — and very damaging — macroeconomic environment.

The global crypto market capitalization plunged to below $900 million from over $2 trillion as cryptocurrencies entered a bear market in line with traditional markets. With that came some very memorable crashes. 

Bitcoin drops 65% year-to-date 

Bitcoin collapsed this year, beginning its decline in January as crypto became closely linked to macroeconomic events. Throughout all of this, the blockchain itself never once went down. 

Bitcoin was closely correlated with the Nasdaq 100, reaching 0.92 by the end of January, according to The Block’s data. The Nasdaq 100 slumped about 9% in January; bitcoin declined nearly 20% — bitcoin typically has a beta of up to three times U.S. stock indices, meaning it’s up to three times as volatile.

In March, the U.S. Federal Reserve increased the target range for the fed funds rate and said it would continue to increase it to bring down inflation to its target range of 2%.

“In support of these goals, the Committee decided to raise the target range for the federal funds rate to 1/4 to 1/2 percent and anticipates that ongoing increases in the target range will be appropriate,” the Fed said at the time. The central bank noted Russia’s invasion of Ukraine as having a profound effect on the economy and potentially causing upward inflationary pressure. 

Markets were spooked as it became likely the key interest rate would continue to increase. Indeed it did, as did inflation. 

The collapse of the Terra blockchain and the ensuing crypto credit crisis hit bitcoin hard, and it triggered the failure of some of the biggest names in the sector over the past six months, including hedge fund 3AC and crypto lender Celsius, among others. 

Terra blockchain capitulation 

TerraUSD lost its peg to the U.S. dollar in May, throwing the idea of algorithmic stablecoins into question and taking down the entire Terra blockchain in the process. 

TerraUSD worked in conjunction with luna, where a holder could burn one dollar of Luna at any given time to mint one terraUSD. Vice versa, one TerraUSD was always exchangeable for a dollar’s worth of Luna.

If terraUSD lost its peg to the U.S. dollar, a trader could buy up terraUSD from the open market and then trade it against the protocol for a dollar’s worth of luna. As a result, the trader captures 10% arbitrage profit that way, and the peg is restored. Conversely, if terraUSD was trading at $1.10. Traders would buy a dollar’s worth of Luna from the open market, mint terraUSD, and then sell it to capture 10% profit on the other side

However, overwhelming selling pressure in May broke the blockchain’s system, sending both coins to near zero or below.

Beyond the arbitrage function, a non-profit based in Singapore called the Luna Foundation Guard had been raising funds — mostly bitcoin — to serve as a “forex reserve” for terraUSD. The foundation raised reserves of around $3.5 billion before the collapse.

The foundation said it would lend out around $1.5 billion in bitcoin to defend the terraUSD peg; it was all in vain. Luna and terraUSD still trade on some exchanges, albeit with minimal volumes. 

FTX collapse

FTX’s exchange token, FTT, grabbed headlines in November as immense selling pressure sent the token below $1. 

The token collapsed amid a high-profile standoff between FTX and Binance. Binance CEO Changpeng Zhao said in a tweet on November 6 the exchange would begin selling off its FTT holdings.

Zhao said this was due to “recent revelations” — a reference to a report from CoinDesk that revealed details of Alameda Research’s balance sheet — the crypto trading firm owned by FTX’s Sam Bankman-Fried.

Alameda CEO Caroline Ellison had offered to buy Binance’s FTT holdings at $22 per token, and the market quickly jackknifed through this level. Several days after this, following a failed acquisition from Binance, the exchange filed for chapter 11 bankruptcy. 

FTT is currently trading at $0.87, according to Coinbase. Ouch.

© 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.

Yuga Labs, creators of the popular Bored Ape Yacht Club NFTs, received a counterclaim in an ongoing lawsuit against an artist and his business partner who allegedly forged “copycat” versions of their NFT collection. 

Yuga Labs filed the lawsuit in June, accusing artist Ryder Ripps and the founder of NFT marketplace Not Larva Labs, Jeremy Cahen, of copying their NFT collections and devaluing the original Bored Ape products. The pair have responded to the complaint, denying many of the allegations. 

“Each of these NFTs is an entry on a decentralized digital ledger and entirely unique by design, making them both non-fungible and impossible to copy,” the court filing from Dec. 27 says.

Ripps and Cahen claim that their take on the BAYC collection, called RR/BAYC, does not infringe on the copyright owned by Yuga Labs. Furthermore, they claim they “used conceptual art to critique hateful imagery” they saw used by Yuga Labs.

Yuga Labs did not immediately respond to a request for comment on the latest development.

“Our lawsuit [holds] Ripps and Cahen accountable for their obvious and blatant theft of Yuga Labs’ trademarks,” a Yuga Labs spokesperson told The Block earlier this month. “They intentionally misled consumers and made millions by using Yuga’s intellectual property to market and sell copycat NFTs. We will continue to prove these facts as the case progresses.” 

The U.S. District Court of Central California denied a motion in favor of Yuga Labs earlier in December.

Yuga Labs is also facing a lawsuit on a different front. Californian law firm Scott + Scott filed a class-action suit against Yuga Labs and almost 40 people and companies, alleging they were part of “a vast scheme” of undisclosed celebrity endorsements to promote products like BAYC. A Yuga Labs spokesperson denied this.

© 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 wallet addresses associated with collapsed trading firm Alameda Research traded several crypto tokens for ether and USDT on Wednesday morning before swapping for bitcoin, according to on-chain data.

Etherscan transaction data show these Alameda-linked wallets sold Lido, Polygon, Uniswap and other tokens for ether and USDT before bridging to the Bitcoin network.

Crypto sleuth ZachXBT identified four bitcoin wallets where the funds are being consolidated. Data from Blockchair shows these wallets hold a combined total of 47.6 BTC, which is currently worth about $800,000.

These fund movements come within days of former FTX CEO Sam Bankman-Fried’s release on bail. As previously reported by The Block, Bankman-Fried secured a $250 million bail bond package.

The pattern of these fund movements has drawn speculation from the crypto community. The entity controlling the wallets has used mixers like ChangeNow and FixedFloat to move the funds. Crypto mixing services are used to obfuscate the flow of cryptocurrencies by making it difficult to identify the owners of the tokens and the origins of the funds being transferred. They do so by mixing different transfer inputs and outputs.

This is also not the first mysterious fund transfer from FTX and Alameda since the saga began. Tokens worth $352 million were mysteriously removed from FTX coffers right after the exchange filed for bankruptcy in November. This alleged hack is currently the subject of a U.S. Department of Justice investigation.

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.

© 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.

Bitcoin miner Argo Blockchain agreed to sell its Helios mining facility to Galaxy Digital for $65 million. 

The company has been trying to avoid bankruptcy as it struggles with cash flow issues alongside a good part of the industry. High energy costs combined with lower bitcoin prices and increasing difficulty have contributed to a loss of profit and squeezed margins.

Argo warned investors in October that it would need extra capital to keep operations going for the next few months after a deal fell through.

The miner was temporarily suspended from trading on the London Stock Exchange earlier this month after accidentally posting it had filed for bankruptcy protection. Trading was again suspended on Nasdaq Tuesday in anticipation of the announcement. 

The bitcoin mining industry has seen profit margins shrink over the past few months. In September, bitcoin mining hosting company Compute North filed for bankruptcy. Last week, giant Core Scientific also filed for Chapter 11 bankruptcy protection. 

© 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.

Authorities are not buying that code was law in the $114 million exploit of a decentralized exchange. 

Federal authorities have arrested Avraham Eisenberg in Puerto Rico for his exploit of decentralized exchange Mango Markets, unsealing charges against him in the U.S. District Court for the Southern District of New York. 

Eisenberg was charged with commodities fraud and commodities manipulation, the complaint shows.

Eisenberg led a team to exploit Mango Markets in October for $114 million by, according to an affidavit against him, manipulating the price of the exchange’s native token, MNGO. Eisenberg bought a massive position in MNGO, inflating the price of that token by 1,300%, which allowed him to borrow other tokens with larger market caps and more stable value via the same platform with no intention of paying them back.

When MNGO’s price fell again, Eisenberg’s position no longer had enough value to cover the debts he had taken in those other tokens. At the time, he came forward as the user behind the massive price move in MNGO, saying he was “using the protocol as designed, even if the development team did not fully anticipate all the consequences of setting parameters the way they are.” Subsequently, Mango users voted to let him keep $47 million of his bounty, while he returned the other $67 million. 

Despite that decentralized settlement, authorities are charging Eisenberg with criminal market manipulation, conflicting with the DeFi notion that code can be its own law. No word on potential criminal charges for the rest of his team. 

© 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.

Coinbase fell 8% to an all-time low of $32.65 in a slow day of trading alongside the S&P 500 and Nasdaq.

Other crypto-related stocks fell, including Galaxy Digital and MicroStrategy.

Bitcoin dropped 1.1% over the past 24 hours, while ether declined 0.7%.

© 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.

Decentralized exchange (DEX) Trader Joe launched its mainnet on Arbitrum, its first move expanding to a chain beyond Avalanche.

The expansion from Avalanche’s most widely used application by volume is a significant trend for crypto protocols. They are launching on multiple chains in the hopes of growing and reaching a larger user base from a diminished pool as Layer 1 blockchains see a drop in transactions.

Trader Joe plans to continue its expansion to other chains that have strong decentralized finance (DeFi) activity and expected ecosystem growth, Trader Joe’s pseudonymous Marketing and Communications Lead Blue told The Block.

The DEX’s goal is to increase the usage of its new Automated Market Maker (AMM) model, a technology that’s the biggest such innovation since Uniswap V3, Blue claimed. Uniswap V3 currently has the highest cumulative trading volume across all DEXs, according to DeFiLlama.

Arbitrum and Optimism, both of which are Layer 2s built on top of Ethereum that inherit its security properties, have seen consistent growth in transaction count this year, according to The Block Data. Meanwhile, Layer 1 blockchains have seen a decline in the same timeframe.

© 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.

Daily spot market trading volume for crypto exchanges fell below $10 billion for the first time since December of 2020, according to The Block’s Data Dashboard.

Spot trading volume fell to $9.2 billion on Dec. 25 before continuing its decline to $8.5 billion on Dec. 27.

The last time daily spot trading volume was below $10 billion was on Dec. 17, 2020, when the price of bitcoin had surged past $20,000 for the first time just the day before, The Block previously reported. Bitcoin trades now around $16,800. 

NFT transactions have also fallen alongside crypto trades, with The Block data showing that NFT sales have decreased every month since April. 

© 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.