Shakespearean Drama in the Crypto World: Crime & Money
This issue can only be described as a drama… in fact, it has the intrigue, the shock value, and the over-the-top detail of an HBO straight-to-streaming series (minus the the disappointing ending).
This issue is one I thoroughly enjoyed writing. It is an issue that can only be described, as the title indicates, as a drama… in fact, it has the intrigue, the shock value, and the over-the-top detail of an HBO straight-to-streaming series (minus the disappointing ending).
Grab your favorite overpriced coffee and reading glasses and prepare to be both shocked and surprised. As always, make sure to tell a friend (or enemy, I don’t mind) if you like what you read.
The highlights
Terra-ble news for Do Kwon: South Korea issues Arrest warrant
Earlier this year the Terraform Labs cryptocurrency ecosystem completely collapsed in on itself, as it became little more than collateral damage in the overall global crypto downturn (a more accurate word would be freefall, honestly).
Recently, the founder of the doomed company, Do Kwon, has been hit with an arrest warrant from a court in South Korea for violation of the country's capital markets law.
In case you are like me, and forget everything, here’s a reminder of what happened to Terraform Labs:
TerraUSD (USDT) plummeted from its USD peg which, in turn, brought down the entire ecosystem faster than the lame attempt HBO made at wrapping up the Game of Thrones series (yes, that bad)
Another token in the ecosystem, LUNA, also nosedived to near zero
The company implosion triggered investigations into stablecoins from the USA and South Korea
After these two events, Mr. Kwon, in a stroke of “genius”, decided to create a new version of LUNA, which promptly lost 45% of it’s value after news of the arrest warrant
This arrest warrant came alongside 5 other warrants for those who were crucial to Terraform and the company operations. All 6 individuals are said to be in Singapore and “have plans to cooperate”, whatever that means. When Mr. Kwon was asked about jail time in an interview, he gave the weirdly cryptic answer of, “Life is long.” That totally sounds like a man who is ready to take responsibility for his actions.
Crypto Super PAC, true to name, Super Spends in Elections
Have you ever heard of the GMI Political Action Committee (PAC)? Yeah, neither have I, and they most likely would prefer it that way. The PAC is backed by some of crypto’s biggest players and is currently intent on spreading its grubby little fingers on the 2024 US Presidential Race. This news coming after dropping $10M in the recently passed congressional primaries.
Lately, the Super PAC has been touting their success and walking with the demeanor of a gym bro after an upper body day (you know the one, the guy that pretends he’s too big to fit through door frames). They are claiming to have had a successful run (despite other important factors existing like endorsements and incumbency, but I digress). According to the PAC, they backed 15 successful candidates (the most recent being D-Seth Magaziner in the Rhode Island primary).
GMI is a young Super PAC that is focused on supporting politicians who support technology innovations; specifically, crypto-focused innovations. What does GMI stand for, you ask? “Gonna make it”, and yes, it is as lame as it sounds (yet is a common mantra in crypto circles).
GMI’s team is a who’s who of the crypto universe and their founding donors and board of directors include:
CMS Holdens co-founder Dan Matuszewski
Framework Ventures co-founder Vance Spencer
FTX Digital Markets CEO Ryan Salame
FTX (donor)
Paradigm (donor)
Multicoin (donor)
A16z (donor)
According to GMI, they plan to keep supporting their candidates in the general elections despite most having real races and not Usain Bolt v. your unathletic cousin level-of-competition already.
Are You Smarter than a Crypto Scammer?
If you thought the internet was a place for the sketchiest people to hang around and spend time… you are right, and let me tell you why. According to Singaporean cyber-security firm, Group IB, the amount of domains that are being used to facilitate crypto-scams has rapidly multiplied in the first half of 2022. As well, they reported that more than 2,000 of these domains were registered.
The favored method seems to be using an evolved “hi, I’m a celebrity, and you should give me money” style approach to the potential victims. Specifically, the scammers have taken to using famous crypto-linked people to appear to offer a rare or can’t miss crypto investment opportunity (these celebrities include Elon Musk, Cristiano Ronaldo, etc.).
These scammers seemed to be supported by an underground market for software used to create fake YouTube-hosted crypto-streams and boost their traffic to make them look legit. There seems to be a whole marketplace for this in the form of an exchange platform, where you can buy hacked YouTube accounts, viewer boosting services, domain names, deep fake creation services, etc. It’s like The Silk Road for nerds who love chaos… and committing felonies, I guess.
So if a crypto deal seems too good to be true, it probably is. The next time a “Nigerian Prince” asks you for money so he can “release his riches from the bank” and “pay you a fee”, but ETH… maybe just delete the email.
The Fed has the Crypto World Shook
Unless you live under a financial rock (or you have a life and don’t pay attention to US economic policy), you’ll know that on September 21st, 2022, the Federal Open Market Committee (which cool people call “The Fed”) will be deciding on a rate hike (by the time you read this, that date will be long gone). The most recent inflation data came in much higher than expected, even though July CPI print had people convinced that inflation had peaked. It didn’t.
Researchers and industry insiders alike have the likelihood of a rate hike at around 20% (for a 100bps hike). Goldman analysts are stating they expect “50bp hikes in November and December, taking the funds rate 4-4.25% at year end.”
Crypto markets responded to the inflation data by trading lower, seemingly pricing in the possibility of a rate hike. The market now sits at around $890B, sliding under $1T after the lower than expected inflation data. Futherstill, since shortly after the CPI print, BTC price slid 16% to a limp $19,090USD and ETH slid about 23% to $1,343.
You thought it was tough now? Hang on, friend.
Final Word
To wrap this all up, the markets are tough and clearly crypto is not immune. As well, the idea that crypto is a hedge against inflation seemingly has been disproved time and time again. At the end of the day, for the most part, it’s all speculation (like the likelihood of getting ghosted on a dating app) and you need to invest with conviction. Good luck friends and, as always, if you like what you read, make sure to subscribe and tell a friend (unless you have none, then go make one).