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As Crypto Halloween 2023 approaches, it’s time to gather around the bonfire and share some of the spookiest stories from the dark corners of the cryptocurrency world that have unfolded in 2023. These stories might not be your typical ghost tales, but they are equally chilling and hair-raising for anyone involved in the blockchain industry.
Legal and Regulatory Actions
SEC Sues Coinbase: In 2023, the SEC took legal action against Coinbase, alleging unregistered activities and issues with their crypto asset staking program, causing significant concern in the crypto community.
SEC Sues Binance US and Changpeng Zhao: The SEC continued their legal offensive by targeting Binance US and its CEO, Changpeng Zhao, over unregistered activities and the operation of staking programs, marking a notable regulatory escalation.
The Ongoing FTX Trials: Founder of FTX and Alameda Research, Sam Bankman-Fried, faced charges including money laundering and fraud, leading to the downfall of his crypto empires. His testimony revealed concerns about risk management and transparency issues in FTX, including borrowing funds and conflicts of interest.
Uncertainty on Bitcoin ETF Approval: Uncertainty surrounded the approval of a Bitcoin ETF, despite optimism sparked by BlackRock’s application. The SEC’s previous reluctance added doubt to the prospects of an ETF, which could potentially attract significant capital.
SEC Charges Genesis and Gemini In January 2023: In January 2023, the SEC charged Genesis and Gemini for their involvement in the unregistered offer and sale of crypto asset securities through the Gemini Earn Lending Program.
Financial Troubles: Layoffs and Bankruptcies in 2023
The crypto industry faces a crisis that began with the run on the stablecoin terraUSD in the spring. Many prominent crypto lenders have suffered due to customer withdrawals, risky practices, and the absence of regulation. This crisis has revealed the close connections among various industry players, leading to a series of bankruptcy filings in 2023.
Crypto Giants in Crisis
Blockchain.com Cuts Staff: Blockchain.com reduced its workforce by 28%, eliminating about 110 jobs after a prior round of layoffs in Argentina.
Coinbase Restructures and Sheds Jobs: Coinbase, the largest U.S. crypto exchange, restructures, cutting 20% of its workforce, approximately 950 employees, due to financial challenges and regulatory penalties.
Crypto.com Faces Layoffs and Troubles: Crypto.com, based in Singapore, faces a second round of layoffs, affecting 20% of its workforce, alongside operational issues, including a significant transaction misstep.
Digital Currency Group’s Division Closure: Digital Currency Group closes its wealth-management division and explores offers for CoinDesk, one of its holdings, with bids surpassing $200 million.
Genesis Crypto Lender Bankruptcy: Genesis, a crypto lending firm under DCG, files for Chapter 11 bankruptcy protection, blaming lending to FTX affiliate Alameda Research.
Luno’s Workforce Reduction: Luno, a crypto exchange under DCG, lays off 35% of its global workforce, known as “Lunauts.”
Huobi Announces Staff Reduction: Huobi crypto exchange plans to cut 20% of its staff while focusing on asset security amid increased net outflows.
Hacking and Scams: A Cryptocurrency Nightmare
In 2023, the cryptocurrency space experienced an alarming surge in hacking and scams. Leading security firm CertiK estimates that over $1.3 billion USD was lost to malicious activities. This concerning trend is further exacerbated as the holiday season approaches, providing fertile ground for scammers.
Multichain’s Suspicious Withdrawals: In July, the Multi Chain cross-chain bridge protocol suffered from mysterious transactions leading to the withdrawal of over $125 million in crypto assets. The incident led to the suspension of services, and suspicions of an inside job were raised. Multichain’s CEO was later arrested by Chinese authorities, adding intrigue to the case.
Euler Finance’s Flash Loan Attack: Euler Finance, a DeFi lending app built on the Ethereum blockchain, fell victim to a flash loan attack in March. The hacker, known as ‘Jacob,’ exploited the DonateToReserve function to withdraw $197 million. Notably, Jacob later returned the stolen funds, and a wallet linked to the North Korean Lazarus Group was involved, adding complexity to the situation.
Notable Crypto Hacks in 2023:
- Atomic Wallet suffered a $100 million hack in June, linked to the North Korean Lazarus Group.
- Curve Finance was exploited in July, with hackers swiping $61 million from trading pools.
- Stake.com, a prominent online casino and sports betting platform, lost $41.3 million in a hack in September.
- CoinsPaid experienced a $37.3 million hack in July, orchestrated by hackers linked to the Lazarus Group.
- Bitrue, based in Singapore, was hit for $23 million in April, claiming it was less than 5% of its reserves.
- South Korean exchange GDAC lost $13.9 million in an attack on its hot wallet in April.
- Long-standing DeFi protocol Yearn suffered an $11.5 million theft in April due to a vulnerability.
- In February, MyAlgo, an Algorand web wallet, lost $9.2 million to a hacker who compromised an API key.
Economic Turmoil and Geopolitical Intrigue
Binance Freezes Hamas-Linked Accounts: Binance, a crypto exchange, froze accounts related to Hamas militants at Israel’s request. This action targeted Hamas, a UN-recognized terrorist group, not Palestinians. It aligns with anti-terror measures for banks and platforms.
Russia-Ukraine War’s Crypto Impact: The Russia-Ukraine conflict disrupted crypto adoption. Supply chain issues and increased prices affected markets, causing ripples in Russia and Ukraine’s crypto economies. Both saw sharp drops in crypto transactions.
Federal Reserve Rate Hikes and Crypto: In 2023, Federal Reserve rate hikes affected the crypto market. Higher rates lured funds to traditional investments, reducing crypto demand. The actual impact depends on economic conditions, geopolitics, and market sentiment, closely monitored by investors.
Cryptocurrency Rollercoaster: The Rise and Fall of Coins
The world of cryptocurrencies and blockchain holds promise, but it’s not without its share of failures. Many cryptocurrencies launched with the aim of bringing new utilities have encountered challenges. Between 1,700 and 2,500 cryptocurrencies might have already failed by March 2023, with reasons ranging from lack of investment and trading volume to developer abandonment, hacks, and rug pulls.
The Concept of ‘Dead Coins’
Cryptocurrencies that have failed are often referred to as ‘dead coins.’ These are characterized by a lack of liquidity, abandonment by developers, or involvement in scams. Despite losing all value, dead coins can still be listed on crypto exchanges, posing a significant hazard to investors.
Cryptocurrency Meltdowns in 2023
Luna (LUNA) and TerraUSD (UST): LUNA was once a prominent crypto on the Terra blockchain, reaching a high market cap of $44.8 billion. However, Terra’s ecosystem collapsed in May 2022, causing both LUNA and its stablecoin, UST, to plummet. LUNA was removed from many exchanges, marking a significant crypto failure.
Worldcoin’s Eyeball Hunt: Worldcoin (WLD), backed by OpenAI and Sam Altman, introduced ‘Proof-of-Humanness.’ Users’ iris scans generated biometric blockchain code, sparking privacy concerns despite promised data deletion.
Shibarium Launch Uncertainty: Shibarium, Shiba Inu’s anticipated Layer-2 blockchain, faced technical…
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**Hot Take: The Cryptocurrency World’s Dark Tales of 2023**
In 2023, the cryptocurrency world has been plagued by legal battles, financial troubles, hacking and scams, economic turmoil, and the rise and fall of various coins. The SEC has taken legal action against major players like Coinbase and Binance US over unregistered activities and staking programs. Financial difficulties have led to layoffs and bankruptcies for prominent crypto companies like Blockchain.com and Coinbase. Hacking and scams have reached alarming levels, with billions of dollars lost to malicious activities. Geopolitical events, such as the Russia-Ukraine conflict, have impacted crypto adoption. Additionally, many cryptocurrencies have failed due to various reasons, leading to the concept of “dead coins.” The cryptocurrency world in 2023 is filled with both horror and resilience as it navigates through these challenges.
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