Blockbytes Weekly - Week 13, 2023
The Arbitrum Foundation has agreed to inform the community the next time it writes itself a blank check
Arbitrum Foundation Sold ARB Tokens Ahead of 'Ratification' Vote
The Arbitrum Foundation began selling ARB tokens for stablecoins before the governance community of token holders had ratified its nearly $1 billion budget, causing a price drop for the ARB token.
Patrick McCorry of the Foundation said in a blog post that AIP-1 was a ratification of decisions it had already made, including receiving 7.5% of all ARB tokens.
Last week, ARB tokens were airdropped to hundreds of thousands of wallets to give owners a say in critical decisions, such as AIP-1.
The Foundation loaned 40 million ARB tokens to a market maker and sold 10 million tokens for fiat to cover operations.
McCorry said that AIP-1 was to inform the community of decisions already made and that the Foundation had already started spending the tokens it was earmarked to get.
This caused controversy within the Arbitrum community due to the miscommunication behind the Foundation’s first proposal.
SEC's Gensler Insists Clear Rules for Crypto Market 'Already Exist'
U.S. Securities and Exchange Commission Chairman Gary Gensler testified at the House Appropriations Subcommittee on Financial Services and General Government and stated that rules for the cryptocurrency market already exist but that the industry is still rife with non-compliance.
Gensler explained that the regulations already exist and are called “the securities regulation, and so there are disclosure regulations for when somebody tries to raise money from the public.”
Gensler has previously stated that most digital assets are securities, and he reiterated this point during his testimony.
The SEC has pursued a "regulation by enforcement" approach to crypto, cracking down on companies and projects pushing what the regulator deems unregistered securities.
The SEC has taken enforcement actions against Genesis, Gemini, Kraken, and Coinbase for violating securities laws.
Sam Bankman-Fried’s Legal Defense Is Being Funded With Alameda Money He Gifted His Father
Sam Bankman-Fried, the founder of the fallen cryptocurrency exchange FTX, is preparing for trial in October and is backed by powerful attorneys. It has been revealed that he is paying for his legal fees with a multi-million dollar gift he gave to his father, Stanford Law professor Joseph Bankman, funded by a loan from FTX's sister company, Alameda Research.
Bankman-Fried is facing 12 criminal charges, including wire fraud, money laundering, securities fraud, and bribery.
It is alleged that he misappropriated FTX customer funds through Alameda and received $2.2 billion in company loans, and $8.9 billion in customer deposits are still missing.
Bankman-Fried's defense costs are likely in the single-digit-millions range. He gave his father the money using his lifetime estate and gift tax exemption, a tax-free gift.
His lawyers are Mark Cohen and Christian Everdell, former federal prosecutors, and David W. Mills, a close family friend and colleague of Bankman's at Stanford.
Bankman-Fried's parents have reportedly leveraged their own assets to support their son financially, and his lawyers have argued that federal prosecutors give Bankman-Fried access to 56 million Robinhood shares he bought with money lent by Alameda.
He is expected to face new charges at a pretrial conference, including allegations that he conspired to bribe Chinese government officials with $40 million in cryptocurrency.
Vitalik Buterin Sends Hidden Message in First Polygon zkEVM Transaction
Polygon has launched the mainnet for its new zkEVM network, a scaling solution for Ethereum. Ethereum creator Vitalik Buterin sent out the first transaction with a hidden message to mark the occasion.
The message read, “Millions of constraints for man, unconstrained scalability for mankind.”
He also set the Ethereum network transaction gas limit to 69,042 and described my zkEVM developers as a ‘man of culture.’
This new network enables faster and cheaper transactions than Ethereum's mainnet. It is also compatible with the Ethereum Virtual Machine, meaning smart contracts can be moved to the zkEVM network.
Polygon's co-founder Mihailo Bjelic called it the "holy grail" of blockchain scaling.
A New Synthetic Bitcoin Is Coming to Ethereum
Badger DAO is introducing a new crypto asset called eBTC, a synthetic bitcoin asset on Ethereum that is backed by liquid-staked Ether and relies on immutable smart contracts.
This asset is designed to be more decentralized than other bitcoin assets on Ethereum, such as wBTC, which are in the custody of centralized entities.
eBTC is an over-collateralized debt position, meaning users must provide a higher value in staked ether to borrow it.
The debt position is determined by Chainlink's LSD/BTC oracle, with Tellor as the backup oracle.
Badger is working with RiskDAO to examine its risk exposures to different market conditions and to determine liquidation parameters and collateral ratios.
Euler Exploiter Says ‘Sorry,’ Returns Stolen $177M
The hacker responsible for exploiting the DeFi lending protocol Euler Finance recently sent a series of messages through the blockchain apologizing for stealing funds and promising to return all the stolen money.
The hacker, known as "Jacob," had used a series of flash loans to trick Euler's smart contract into believing it had fewer collateral tokens than debt tokens, resulting in a loss of $200 million.
In response, the Euler Foundation launched a $1 million reward bounty to incentivize the attacker’s arrest. An address associated with the Ronin bridge hacker attempted to trick the Euler hacker into sending over their private key information through a phishing scam.
However, the Euler team then sent an on-chain message to the Euler hacker, warning them of the probable phishing attempt and urging the return of the stolen assets.
On Saturday, the Euler attacker returned 51,000 ETH (about $88 million) to a wallet under the Euler team's control. More recently, four transactions of 7,800 ETH and $30 million in the DAI stablecoin have been returned to a wallet labeled Euler multisig 2. The hacker also pledged to return the rest of the money as soon as possible.
Bittrex Shuts Down US Crypto Exchange Due to 'Regulatory Environment'
Bittrex, an American cryptocurrency exchange, announced on Friday that it will be winding down its U.S. operations. Customers are advised to withdraw their funds by April 30, and trading will cease on April 14.
The exchange will continue operating its Bittrex Global platform for customers outside the U.S.
According to the CEO, the decision was made due to the "current U.S. regulatory and economic environment."
Bittrex is a small Seattle-based company and the 71st largest digital asset exchange.
Recently, U.S. regulators have been cracking down on the crypto industry, with the SEC issuing fines to Kraken, a Wells Notice to Coinbase, and the CFTC suing Binance.