ICYMI - Last week in crypto: China's new NFT Marketplace & the $5T Metaverse Report
How about Birds on the Moon?🦉🚀
Last week, the Chinese government launched a new NFT marketplace and new reports project a $5 Trillion valuation for the metaverse. Also, MoonBirds signed a new partnership deal with Hollywood talent agents UTA, and Coinbase reached a $100m settlement over “significant deficits”
Avraham Eisenberg Charged with Fraud, Market Manipulation
When Avi Eisenberg admitted in October that he was behind the Mango Markets scam, he may have been too smart for his own good. Unexpectedly, the FBI was listening.
On December 27, police in Puerto Rico detained Avraham Eisenberg. He is charged with market manipulation and fraud involving commodities. According to rumors, Eisenberg and his group were responsible for the $100 million Mango Markets scam.
The Department Of Justice, however, describes Eisenberg's "highly profitable trading strategy" in other words.
The tale of “A Highly Profitable Trading Strategy”
Avraham Eisenberg, who played a key role in the Mango Markets exploit that made him famous on Crypto Twitter in October, was reportedly detained by law enforcement yesterday in Puerto Rico. Eisenberg is charged with one count of commodities fraud and one count of commodities manipulation, according to the affidavit.
On Solana, there is a decentralized perpetual exchange called Mango Markets. By taking a sizable position in Mango's perpetual futures contracts on October 11, Eisenberg and his trading partners artificially increased the price of the illiquid MNGO token from $0.3 to $0.91. They then borrowed the protocol's assets using their sizeable unrealized profits as collateral and siphoned off more than $100 million from its cash reserves.
The exploiters then put forth a proposal in the Mango governance forum to return the majority of the money (and make Mango depositors whole as a result) in exchange for $47 million and the assurance that any criminal investigation would be dropped. Shortly after the plan was approved, Eisenberg revealed his involvement on Twitter, making the infamous claim that he had "operated a highly profitable trading strategy" the week before.
Eisenberg's outspoken and brazen demeanor might not have been to his advantage. Eisenberg's "highly profitable trading strategy" tweet is specifically mentioned in the affidavit against him, along with a number of others that demonstrate that he was aware of the regulations against market manipulation.
Eisenberg has only been charged in relation to the Mango Markets exploit so far, but the crypto community suspects the trader of engaging in similar activities on Curve, Fortress DAO, and Solend. There could be more indictments coming soon.
China launches national digital asset exchange for NFTs, metaverse
On the first day of the new year, China debuted a state-approved secondary trading platform for digital assets. The four tech giants Tencent, Ant, Baidu, and JD self-imposed a ban on the secondary trading of digital collectibles in mid-2022 due to concerns about the speculation surrounding non-fungible tokens (NFT).
With the innovation working group of the platform consisting of museums, travel agencies, and copyright holders, it is unclear what types of intellectual property are supported as there is only a live signup process for the new national trading venue.
In an effort to standardize the trading process and reduce speculation, the China Technology Exchange, Cultural Relics Exchange, and Copyright Service Centre jointly created the state-owned China Digital Assets Trading Platform.
One of the motivating factors is China's recognition of the significance of digital assets for the growth of the metaverse, whether for avatars, clothing, artwork, or museum pieces. There is a metaverse working group in addition to the innovation working group, which includes regional governments and state-owned businesses.
The Chinese government has previously emphasized numerous times the monetary risks associated with NFTs and the speculative nature of the NFT market. Despite not being subject to the same Chinese regulations as cryptocurrencies, NFT services launched by companies like Tencent have already been discontinued. This is because secondary trading has been voluntarily suspended.
Albeit, the more B2B use cases are sometimes overlooked in the consumer NFT hype. Blockchain applications frequently offer asset registration and verification services. That includes intellectual property as well; in the past, copyright blockchain applications were introduced by both Baidu and Ant.
The EUIPO blockchain, which records filings for trademarks and designs, was joined by the patent offices of Poland and Italy in November 2022. To protect its intellectual property, Algorand collaborated with Italy's music copyright organization SIAE.
The Chinese platform for trading digital assets, however, intends to take things a step further and serve as a reliable inventory service mechanism for digital assets that can be traded. The new trading platform would offer digital asset registration, verification, and rights monitoring through the China Cultural Protection Chain, though the full range of services it offers is not specified. Given the government's past position on the financial risks connected with speculative trading, it is unclear what limitations will be placed on the resale of digital collectibles.
Coinbase Agrees to a $100M Settlement Over 'Significant Deficiencies'
Coinbase has announced a $100 million settlement with New York's financial regulators over widespread flaws in its compliance systems, which were exposed by the company's explosive growth in the 2020 and 2021 bull markets.
The Nasdaq-listed cryptocurrency exchange and the New York Department of Financial Services reached a $50 million settlement (NYDFS). Additionally, it pledged to invest an additional $50 million in improving its compliance systems.
Following the announcement of the settlement on Wednesday, Coinbase, whose shares have fallen 85% during the bear market, saw a gain of almost 14%.
According to the regulator, the company's rapid growth resulted in "significant deficiencies" in its Know Your Customer and Anti-Money Laundering controls, as well as backlogs in its transaction monitoring system and weaknesses in its sanctions enforcement controls.
One of the first exchanges to obtain a NYDFS BitLicense, widely regarded as the benchmark in U.S. crypto regulation, was Coinbase.
"Over the course of 2021, it became clear that Coinbase's compliance system was inadequate to handle the growing volume of Coinbase's business, a situation that was exacerbated by tremendous growth in its customer base," the NYDFS said — noting its "monthly transactions in November 2021 were 25 times January 2020 levels."
The organization "lacked the personnel, tools, and resources required to keep up with these alerts, and backlogs quickly grew to unmanageable levels."
The number of unreviewed transaction monitoring alerts in Coinbase's backlog grew to over 100,000 by the end of 2021. The number of customers who needed additional review "exceeded 14,000," the New York regulator continued.
What Coinbase Did
The company believes that its "investment in compliance outpaces every other crypto exchange anywhere in the world," according to Coinbase chief legal officer Paul Grewal, who ran through a list of compliance improvements and systems the business has built over the past two years. He added:
"We view this resolution as a critical step in our commitment to continuous improvement, our engagement with key regulators, and our push for greater compliance in the crypto space — for ourselves and others."
Grewal stated that this is particularly important at this time. Indirectly referencing the collapse of FTX, a competitor that had been robbed and left some one million customers missing up to $8 billion, he continued:
"We recognize that the crypto industry is at an inflection point right now and that every public move by a crypto company will receive intense scrutiny. We believe that New York — and the broader industry — needs more crypto players committed to compliance and working with regulators. That is one of the reasons why we knew it was important to bring this matter to a conclusion, even though it is never the type of agreement reached lightly."
Logan Paul Attacks YouTuber Coffeezilla — and Threatens to Sue Over CryptoZoo Allegations
It's difficult to avoid the conclusion that backing a Logan Paul project might not be a good idea after watching his video response to another YouTuber's three-part series calling out his CryptoZoo NFT game as a scam.
This has nothing to do with Stephen "Coffeezilla" Findeisen's claims that the as-of-yet-unreleased play-to-earn game was a scam involving cryptocurrencies.
More so, Paul, a media personality and YouTube star with 23.6 million subscribers, a WWE wrestling contract, and the ability to finish an eight-round exhibition boxing match with Floyd Mayweather on his feet, successfully defended himself by showcasing his poor business judgment.
That is, of course, just an opinion. (Especially considering Paul told Findeisen, "I'll see you in court," as he closed the video.)
It's difficult to imagine reaching for one's wallet, though, given that two major tenets of Paul's defense focused on the fact that Paul claims CryptoZoo hired developers who included a violent felon and a "conman who fooled billionaires, the Mormon Church, the owner of the New York Yankees, and now me."
Particularly given that Paul first points out his own shortcomings in that area before harshly criticizing Findeisen for missing these purported bad actors:
"I know what you're thinking: What type of idiot would work with an unsavory individual like [the alleged armed robber]? I guess that's what I get for trusting the team that I relied on to vet and manage [the alleged conman's] hiring process."
Paul continued by disputing the claim that the CryptoZoo game is unreliable.
It works like this in the long-delayed CryptoZoo: you purchase eggs for Zoo tokens, they hatch into animals like ducks and elephants, and you can then breed them to create hybrids that resemble CryptoKitties more than a little. The full game is coming, he assured, and the CryptoZoo animals can hatch.
The "to-earn" portion of the play-to-earn concept is derived from the breeding component. The rarer hybrids will produce tradeable Zoo tokens that can be spent.
Then, Paul claims that Findeisen, whose YouTube crypto scam exposés were featured in the New Yorker last year, secretly taped a call with Paul's manager Jeff Levin.
The pièce de résistance was finally unleashed by Paul:
"Jeff and I made no money and will never make any money on CryptoZoo. In fact, we only lost money trying to pick up the pieces… I do appreciate you calling out that rats under my nose stole the game code, millions of dollars and left Jeff and I abandoned with no team and knives in our back."
Crypto Accounts Vulnerable as Hackers Post Details of 235 MILLION Twitter Users Online
Hackers have stolen the data of 235 million Twitter users, raising concerns that accounts with a focus on cryptocurrencies may be a top target for online criminals.
The hack was discovered by Alon Gal, a co-founder of the cybercrime intelligence firm Hudson Rock, who stated: "This is one of the most significant leaks I've seen."
Concerningly, the information, which includes users' email addresses, Twitter handles, and follower numbers, has been freely posted on a hacking forum.
Gal worries that Crypto Twitter accounts will be the main targets of hackers, making those with the domain name.eth particularly vulnerable.
So-called "OG" accounts with catchy usernames and high-profile accounts with lots of followers may also be targeted by malicious actors.
There is a genuine concern that these anonymous Crypto Twitter users could be "doxxed," particularly if the email address they used to sign up for an account contains information that reveals their true identity.
Gal claims that this database will serve users other than hackers as well:
"It goes without saying that agencies around the world will use this database as well to further harm our privacy."
This is Elon Musk's most recent setback since he became the CEO of Twitter in late October. Users recently agreed in a public poll that he should resign from his position.
It's very likely that the hack occurred before his $44 billion purchase agreement for the social network was finalized.
However, regulators in both Europe and the United States could impose sizable fines as a result of a leak of this size.
Metaverse set to create $5T in value by 2030: McKinsey report
The hype surrounding emerging crypto sub-ecosystems, like nonfungible tokens (NFTs), was somewhat dampened by the 2022 bear market, but the Metaverse is still well-positioned for long-term disruption. According to a McKinsey & Company report, the metaverse has the potential to create up to $5 trillion in value by 2030, taking into account the numerous consumer and business-focused use cases it may support.
The report emphasized the need for four technology enablers, including devices (AR/VR, sensors, haptics, and peripherals), interoperability and open standards, facilitating platforms, and development tools, for the Metaverse to realize its full potential. The success of Metaverse is, however, tempered by a stronger emphasis on enhancing the human experience in order to provide satisfying experiences for customers, end users, and citizens.
The highest adoption levels across various industries have been observed for metaverse initiatives related to marketing, learning, and virtual meetings. However, a McKinsey survey of senior executives conducted in April 2022 revealed that the majority of Metaverse-related initiatives had low-medium adoption rates.
The report's conclusion, which highlighted the effects the metaverse can have on both personal and professional lives, was that it "is simply too big to be ignored." By 2030, more than half of live events, with a potential value of $5 trillion, could take place in the metaverse, according to a prediction by McKinsey.
One-third of singles who responded to a survey expressed interest in dating in the virtual world, which puts Metaverse in a good position to host contemporary romantics. A recent study by the online dating service Dating.com revealed the following:
“With advancements in dating app technology and the metaverse, more daters are open to making connections that span different cities, countries and even continents.”
With the advent of the Metaverse, singles are more willing to date people from various geographical locations.
Bluechip NFT project Moonbirds signs with Hollywood talent agents UTA
On January 6, co-founder of PROOF Kevin Rose tweeted about the agreement, stating that the goal was to expand the recognition of the Moonbirds brand beyond the Web3 market.
In February 2022, early-stage Facebook and Twitter investor Kevin Rose and designer Justin Mezzell established the NFT-focused business. The company's catalog also includes the Proof Collective and Oddities NFT collections.
When announcing the move on Twitter on January 6, Rose hinted that the deal's objective was to generally make the Moonbirds name more well-known, rather than just as a major player in the Web3 industry.
“What does UTA bring to the table? They are 1,400 people strong, with divisions in film, television, music, video games, sports, books, branding and licensing, speaking, marketing, fine arts, broadcast, and more,” he said.
Rose elaborated on the decision by saying that UTA will represent PROOF and assist with "vetting, brokering, and executing partnerships and expansion opportunities across a variety of fields."
10,000 8-bit owl-themed avatar NFTs make up the Ethereum-based Moonbirds project, which was introduced in April 2022. Data from CryptoSlam shows that it has produced secondary sales totaling about $619.5 million so far.
With that amount, Moonbirds is the eleventh most popular NFT collection, behind only CloneX ($794.9 million) and Doodles ($553 million), which are its closest rivals.
Moonbirds' 24-hour sales volume has decreased significantly (by a whopping 57.86%), with $442,747 worth of Moonbirds NFT transacting hands during that time period, despite the ostensibly bullish UTA announcement. However, trading volumes are still up 63.74% over a seven-day period.
The decision by Moonbirds to pursue Hollywood deals is in line with that of other well-known NFT companies.
Larva Labs, the company that founded CryptoPunks, was the first to pave the way when it signed a deal with UTA in September 2021 to represent the company's intellectual property in the areas of TV, film, video games, licensing, and publishing.