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A UK court has ordered Binance to trace cryptocurrency hacked from one of its users, Fetch.ai, according to an order made public on August 13.  

According to the documents, hackers accessed Fetch.ai’s crypto accounts on Binance on June 6, selling assets valued at $2.6 million to a linked account for a fraction of their value to evade withdrawal restrictions. 

The order requires Binance to find and freeze the crypto in question if it is on the platform. Binance’s notification was, apparently, how Fetch.ai learned of the hack in question.

In the order, the presiding judge denied the need to consider the possession of the private key and reinforced Fetch.ai’s property rights over the crypto in play: “I am satisfied that the assets credited to the first applicant’s accounts on the Binance Exchange are to be regarded as property for the purposes of English law.”

Beyond the controversy surrounding hacks of centralized exchanges, any interaction between law enforcement and Binance is a subject of curiosity.

Binance, the largest crypto exchange in the world, has been famously successful at keeping out of courts despite facing regulatory challenges in a growing roster of jurisdictions around the world, including the UK. The exchange has also been implicated in massive cash-outs of illicit funds, with reports emerging this year that the U.S. Department of Justice has begun investigating the exchange as a vector of money laundering. 

Even in this case, the presiding judge noted: “Binance Holdings Limited, who, as I have explained, are not registered in, and apparently have no presence in, the jurisdiction of England and Wales.”

Representatives for Binance did not respond to The Block’s request for comment as of publication time. 

© 2021 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.

Business magazine Fortune has raised over $1.3 million in its first-ever non-fungible token sale. 

Non-fungible tokens, or NFTs, are digital assets that exist on the blockchain and can represent different elements like audio and imagery. In this case, the magazine minted the cover of its most recent crypto-themed issue, designed by digital artist pplpleasr. 

The collection consisted of two parts: 256 limited-edition NFTs priced at 1 ETH each (around $3,000 at the time), and a set of three special-edition NFTs which were put up for auction on the OpeanSea marketplace. 

According to Fortune, the limited-edition NFTs sold out in a few minutes, some of which are already back up on sale on OpenSea. However, auctioning off the special-edition NFTs was a slightly rockier process. A surge in web traffic caused the OpenSea website to crash and many people were not able to place bids. 

Despite several other technical glitches, the collection in total brought in 429 ETH, more than $1.3 million. Fortune and pplpleasr have said they will donate half of the proceeds to nonprofit organizations and split the remaining amount. Fortune has said it plans to keep its proceeds in ETH for now. 

“I guess that makes us HODLers, fam,” senior writer at Fortune Robert Hackett wrote in a statement. 

© 2021 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 project Polygon (formerly Matic Network) has acquired Hermez Network — a ZK-Rollups-based Ethereum scaling solution — for $250 million. The two projects are also merging their native tokens — MATIC and HEZ — in the first ever such deal in the crypto space.

Sharing the news exclusively with The Block on Friday, Polygon said Hermez’s offerings will be merged into Polygon and the new project will be named “Polygon Hermez.” As part of the deal, Hermez’s 26 members of staff are also joining Polygon’s team of 80.

“This (to the best of our knowledge) is the first-ever full-blown merger of blockchain networks, where one network will completely absorb the other, including its token,” Polygon co-founder Mihailo Bjelic told The Block.

Earlier this year, two Ethereum projects, Keep and NuCypher, also merged their protocols, but they kept their brands independent of each other and did not merge their tokens.

As for Polygon and Hermez, they reached an initial agreement last week on August 4, when Hermez announced that it was in “discussions for a potential merger with a public network.” At the time, the two projects decided on a peg or swap ratio of their tokens based on their prices at 11:00 CET on August 4.

The peg, disclosed today, is 3.5 MATIC: 1 HEZ, meaning HEZ token holders will be able to swap their tokens for several of Polygon’s MATIC tokens. This will occur via the swapping contract that the projects will publish “soon.”

When asked if token holders had any say in the deal, Bjelic said Hermez’s largest token holders, constituting more than 90% of the total token holders, were aware of the peg and all of them agreed with it. The deal became possible as HEZ is still a “fairly early stage token,” he said.

Based on the August 4 prices of the tokens, Polygon has committed a total of 250 million tokens from its treasury for the merger, or roughly $250 million. This amounts for 2.5% of Polygon’s treasury, according to Bjelic. The total supply of MATIC tokens is 10 billion and the current price of the token is around $1.40, according to CoinGecko.

Investing in scaling solutions

Polygon has further committed $1 billion from its treasury to ZK-based solutions. “We consider ZK cryptography the single most important strategic resource for blockchain scaling and infrastructure development, and we have a clear goal of becoming the leading force and contributor in this field in years to come,” said Bjelic.

ZK-Rollups are a type of scaling technology that helps bundle transactions onto a network, e.g. Hermez in this case, and publish their validity proof on Ethereum. This reduces the load on the Ethereum blockchain because transactions are executed outside the mainnet, and it makes for cheaper transactions.

Polygon, on the other hand, offers several Ethereum solutions. Hermez will be Polygon’s fourth solution after Polygon Commit Chain, Polygon SDK, Polygon Avail, and now Polygon Hermez, said Bjelic. Polygon Commit Chain is its flagship proof-of-stake blockchain built on top of Ethereum. Polygon SDK is a software development kit for building Ethereum-compatible blockchain networks. Polygon Avail, on the other hand, is a scalable data availability layer for standalone chains and sidechains, and the new Polygon Hermez solution is a ZK-Rollups-based Ethereum Layer-2 scaling solution.

As part of Polygon, Hermez will “focus on developing the zkEVM technology to provide native smart contract scalability inside a ZK-Rollup,” Antoni Martin, business development lead at Hermez Network, told The Block. “This merger should accomplish our shared objective to create a more inclusive financial system that is secure, decentralized, and permissionless, on top of Ethereum. We are committed to working hard to make this dream possible,” Martin said.

There are over 350 projects in the Polygon ecosystem, as The Block Research reported recently, and the Hermez merger will help them to have more scalability for their applications, said Bjelic.

© 2021 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.

Dark web users have developed a new tool to test whether funds will be snared by anti-money laundering checks.

Known as Antinalysis, the tool can be used by cybercriminals to identify which bitcoin addresses may be linked to criminal activity.

Elliptic, the blockchain analytics company, highlighted the existence of the new tool in a blog post published this morning. Elliptic is one of several well-capitalized companies that trace illicit funds using blockchain analysis, making it tricky for criminals to launder stolen funds.

“Antinalysis seeks to help crypto launderers to avoid this, by giving them a preview of what a blockchain analytics tool will make of their bitcoin wallet and the funds it contains,” wrote Elliptic co-founder Tom Robinson, in the blog post.

The Antinalysis site runs on Tor, an anonymous version of the web; charges $3 per bitcoin address scanned; and, according to Robinson, “claims to offer highly accurate results.” It was created by the one of the developers of Incognito Market, a darknet marketplace focused on the sale of narcotics.

Subverting traceability

Despite its well-founded reputation as a popular store of value among criminals, cryptocurrencies have become steadily less effective as a medium for money laundering — in large part thanks to the likes of Elliptic and Chainlysis, which between them have raised hundreds of millions of dollars.

This trend is underscored by the massive recent seizures announced by law enforcement agencies around the world.

In a recent example, police in the United Kingdom announced a $250 million coup as part of an ongoing investigation into international money laundering. Cybercriminals are consequently turning to cryptocurrencies promising greater anonymity, such as Monero.

The news that blockchain analysis is now being turned to the advantage of criminals is, therefore, a potential cause for concern. But Elliptic’s Robinson appeared to shrug it off.

“Elliptic’s own evaluation of the results returned [by Antinalysis] for a range of bitcoin addresses shows that it was poor at detecting links to major darknet markets and other criminal entities. This is perhaps not surprising — providing accurate blockchain analytics requires significant investment in technology and data collection, over long periods of time,” he wrote in the blog post.

One person involved in crypto law enforcement told The Block that while Antinalysis may pose issues for police on the trail of stolen digital assets, it is “only as good as the dataset.”

© 2021 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 Delaware-based digital finance firm Kryptoin has filed for an ether (ETH) exchange-traded fund (ETF), according to a Securities and Exchange Commission (SEC) filing. 

As per the ETH ETF filing: 

“The Trust’s investment objective is to provide exposure to Ethereum at a price that is reflective of the actual Ethereum market where investors can purchase and sell Ethereum, less the expenses of the Trust’s operations. In seeking to achieve its investment objective, the Trust will hold Ethereum (or “ETH”), and in seeking to ensure that the price of the Trust’s shares is reflective of the actual ETH market, the Trust will value its shares daily as determined by the CF Ether-Dollar US Settlement Price, which is an independently calculated value based on an aggregation of executed trade flow of major ETH spot exchanges.”

Kryptoin’s ETH ETF would function much like its proposed bitcoin ETF, which the firm initially filed for in 2019. Kryptoin amended its 2019 filing in April of this year, but the SEC opted to delay its decision on Kryptoin’s bitcoin ETF in June. 

If approved, Kryptoin’s Ethereum ETF would be listed on the Chicago Board Options Exchange (Cboe) — the exchange other companies have opted for when filing for a bitcoin ETF. 

However, the SEC has not approved a Bitcoin ETF in the United States to date, even though big names like VanEck, NYDIG and Fidelity have applied. 

Bitcoin ETFs exist abroad, though, such as with Canada’s Ninepoint and Purpose  products.

© 2021 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 hacker who exploited Poly Network for $611 million across three blockchains has returned nearly all of the stolen funds.

The only funds the hacker hasn’t returned are the $33 million in USDT that were frozen by Tether following the exploit. These can’t be moved until Tether authorizes it but the company is working on it.

“We’ll expedite the work with the project to return the funds,” Tether CTO Paolo Ardoino told The Block. He added that the company will likely burn the tokens and reissue them in order to pass them to Poly Network, rather than trusting the hacker to move the funds once unfrozen.

The funds have been returned over the course of two days. Yesterday, the hacker had returned around $256 million of the loot, including large amounts of BTCB, a bitcoin-pegged token on Binance Smart Chain, ether (ETH) and the stablecoin BUSD. 

The funds were stolen in the largest DeFi hack to date on August 10. They were hijacked from Poly Network, which is a cross-chain protocol that lets crypto users swap tokens among blockchains. The hacker effectively convinced the network to authorize a transaction sending large amounts of funds from three blockchains to their own accounts.

After their identity was reportedly narrowed down by blockchain security firm SlowMist, the hacker engaged in dialogues with the Poly Network team.

The two entities communicated by sending cryptocurrency transactions containing messages for each other. The hacker claimed they could have taken even more funds and asked for donations for people agreeing with their decision to hand the funds back. They also tipped one user to let them know that Tether had frozen some of the funds.

© 2021 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.

Public records show that U.S. Immigration and Customs Enforcement, a top government border security agency, wants to utilize “computer forensics software” developed by Coinbase.

Details of the planned contract award were included in an August 3 document, which is currently live in the SAM.gov database. Though sparse in specifics, the notice of planned contract action states the following:

“The Department of Homeland Security (DHS), U.S. Immigration and Customs Enforcement (ICE), Office of Acquisition Management (OAQ), intends to award a purchase order on a basis of other than full and open competition for computer forensic services. In accordance with FAR 13.106-1(b)(1)(i) and (ii), Coinbase, Inc. (DUNS number 081007539) is the only vendor who can reasonably provide the services required by the agency.”

“The estimated total dollar value for this requirement is $29,000.00 with an estimated
period of performance of one year, to commence on date of award. This requirement is LAW ENFORCEMENT SENITIVE[sic], therefore minimal information will be provided publicly,” the document later reads.

Though the dollar amount of the contract is relatively small, the existence of the pending deal reflects the growth of Coinbase’s analytics business line, though the company — which does the vast bulk of its business in the institutional and retail exchange and brokerage arena — remains a small player when compared to companies like Chainalysis. 

The Block reported last year that Coinbase was looking to serve as an analytics vendor to the U.S. government, using technology it obtained following its acquisition of the controversial intelligence firm Neutrino. Coinbase later scored contracts with the Secret Service and the Internal Revenue Service.

© 2021 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.

TaxBit, the U.S.-based crypto tax software provider, has raised $130 million in a Series B funding round. The round brings TaxBit’s valuation to $1.33 billion, making it the latest unicorn in the crypto space.

Venture firms Insight Partners and IVP co-led TaxBit’s Series B round. Insight Partners is an investor in firms such as FTX, ZenGo, and TradingView. IVP is a backer of companies like Coinbase, Robinhood, and Twitter. As part of the deal, IVP’s general partner Tom Loverro has joined TaxBit’s board of directors, while IVP’s general partner Ajay Vashee and Insight Partners’ managing partner Nikhil Sachdev have joined TaxBit as board observers.

Tiger Global, Paradigm, 9Yards Capital, Sapphire Ventures, Madrona Venture Group, and Anthony Pompliano also backed TaxBit’s Series B round.

The new round comes just five months after TaxBit raised $100 million in Series A funding in March. When asked why it raised funds again so soon, TaxBit co-founder and CEO Austin Woodward told The Block that the firm is already profitable, but investors were “actively preempting us and reaching out” given TaxBit’s growing business. So it decided to raise more funds to bring notable investors to its board and expand its operations further, said Woodward.

TaxBit’s software helps automate tax reporting. Its clients include individual crypto users as well as enterprises and governments. FTX.US is the latest crypto exchange to partner with TaxBit. Woodward said “dozens” of exchanges and financial institutions are using TaxBit’s software. While TaxBit’s solution is currently U.S.-focused, Woodward said the firm is “very shortly” expanding in the U.K., followed by Canada, and Europe in the near future.

To that end, TaxBit is also hiring across various functions and is looking to “at least double” its current team of 80 people, said Woodward.

TaxBit’s funding news comes just two days after the U.S. Senate passed a trillion-dollar infrastructure bill that would subject crypto businesses to more stringent tax-reporting requirements. The bill identifies anyone who provides “any service effectuating transfers of digital assets on behalf of another person” as a broker for the purposes of tax reporting to the Internal Revenue Service.

Woodward said TaxBit saw this coming three years ago when it was founded in 2018 and that its software helps report tax obligations. Woodward further said that TaxBit also has a dedicated decentralized finance (DeFi) team that is working on solutions related to DeFi tax reporting.

Venture capital firms continue to pour money into crypto startups. This year alone, such firms have invested nearly $14 billion in crypto and blockchain startups, according to data compiled by The Block Research.

© 2021 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.

Dune Analytics, the Norway-based crypto data analytics startup, has raised $8 million in a Series A funding round.

New York-based Union Square Ventures led the round, with Redpoint Ventures and existing investors Dragonfly Capital and Multicoin Capital also participating.

This was an equity funding round that will help Dune to expand its team, launch a new data platform and support more blockchains, co-founder and CEO Fredrik Haga told The Block. Dune’s current team size is eight, and it is looking to increase it to around 25 by hiring mostly engineers, said Haga.

As for launching a new data platform, Haga said Dune needs to streamline its “tremendous” amount of available data in one place so that it is easy for users to analyze it. “We’re investing heavily in a new data platform to make this a reality,” he said.

Dune currently supports extracting data from four blockchain networks: Ethereum, Polygon, Optimism, and xDAI. Looking ahead, it is planning to support all Ethereum Virtual Machine (EVM)-based blockchains and other networks, said Haga, without disclosing specific names.

The Dune platform is accessible to the public for free, meaning users can create data charts of metrics they want to track. As for its business model, Dune also has a paid, subscription-based product, starting at $390 per month per user. Haga said “practically all top names” in the crypto space are Dune’s clients. Paid users get a more customized experience, such as private queries and data exports.

Crypto firms, including data startups, continue to receive investments from venture firms amid crypto’s growth this year. In recent weeks and months, crypto data firms such as Messari, Coin Metrics, Nansen, and DappRadar have all raised millions of dollars from notable investors.

Dune’s Series A brings its total funding to date to $10 million. Last September, the firm raised $2 million in seed funding. Haga declined to disclose the firm’s valuation.

© 2021 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.

Galaxy Digital has hired former SIX Digital Exchange CEO Tim Grant to run its European division, the firm announced Thursday.

Grant, who joins Galaxy as head of Europe next week, started his career with a nine-year stint at investment bank UBS before he dived into technology and digital assets. In 2005, he became CEO of blockchain firm R3 where he worked just shy of two years. He then founded a digital asset firm called DrumG Technologies prior to joining SIX.

SIX Digital Exchange provides infrastructure for digital asset platforms and is part of SIX Group, which operates the Swiss Stock Exchange. Grant became CEO in March 2020, before joining the board of directors of the Ethereum Enterprise Alliance — which the SIX Digital Exchange is part of — in April 2021.

At Galaxy Digital, the investment firm run by billionaire Mike Novogratz, Grant’s remit is to expand the firm’s presence in Europe and run its operations in the region.

In an interview with The Block, Grant said he plans to build out a team covering many of the businesses Galaxy operates stateside, including sales and trading, investment banking, and wealth management. 

“If you look at what we’ve done in North America, we’ve gotten one of the bigger banks such as Goldman and Morgan Stanley to have us on their platform,” he said, referring to two different deals announced earlier this year between the investment banks and Galaxy’s asset management unit. 

“I’ll be getting in front of the biggest allocators and asset managers in this jurisdiction. I’m not going to name any specific firms, but the largest hedge funds in London, no question.”

As The Block has reported, hiring in the crypto industry has ramped up this year, spurred on by heavy levels of funding and the lure of tokens.

© 2021 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.