Daily Digest - 25 January 2023

Headlines

▌Genesis Seeks $20.9M From ‘Bitcoin Jesus’ Over Crypto Options Trades That Weren’t Settled

A unit of Genesis Global Capital, the crypto lender that filed for bankruptcy protection in New York last week, claims longtime blockchain-industry veteran and bitcoin cash (BCH) backer Roger Ver – sometimes referred to as “Bitcoin Jesus” based on his early evangelism for the industry – failed to settle cryptocurrency options trades. The allegation against Ver by GGC International Limited was contained in a Jan. 23 filing to the New York State Supreme Court in Manhattan. According to the filing, GGC seeks “money damages for defendant’s failure to settle cryptocurrency options transactions that expired on Dec. 30, 2022, in an amount to be determined at trial but no less than $20.9 million.”

Policy

▌EU Imposes Stricter And More Extensive Crypto Regulations For Banks

European Union lawmakers have agreed to several changes, including stricter new requirements for banks dealing with crypto and digital assets. The European Parliament’s Economic and Monetary Affairs Committee has voted on the matter that will put these restrictions in place. This measure was taken to limit the number of unbacked loans with Bitcoin (BTC) and Ethereum (ETH) that lenders could hold in front of the European Commission. Cross-party compromises will require banks to hold more capital to protect customers against crypto losses.

Cryptocurrency

▌BlockFi Moves To Sell $160 Million Bitcoin Miner-Backed Loans

US Commodity Futures Trading Commission (CFTC) Commissioner Christy Goldsmith Romero said that lawyers, accountants and other financial professionals should intervene long before the implosion of cryptocurrency companies such as FTX to prevent fatal mistakes within them. The way FTX operates is simply not possible with independent governance and gatekeepers in place. Keepers should seriously question the environment in which FTX was operating prior to the crash. She believes that the cryptocurrency industry should not wait for legislation. She also favors the establishment of an independent self-regulatory organization (SRO) to oversee the spot market for any digital commodity, suggesting that the SRO operate outside of the exchange.

▌Binance Admits To ‘Mistake’ of Storing Its Users’ Crypto Assets Inside Collateral Wallet

The world’s largest crypto exchange by volume is publicly addressing what it says is a mistake in handling customer assets. According to a new Bloomberg report, Binance said it mistakenly kept collateral for Binance-issued tokens alongside customer funds in the same wallet. Binance keeps reserves for tokens it issues, called Binance-peg tokens (B-tokens), in a digital wallet labeled “Binance 8.” According to a listing on Binance’s site, Binance 8 also holds some customer assets. The wallet’s reserves are also significantly higher than the number of B-tokens issued by Binance, which suggests that the collateral is being intermingled with customer assets instead of being kept in separate storage. The Binance spokesperson also said that despite the mixup, customer assets have been, and continue to be, held on a one-to-one basis.

▌Lazarus Group Responsible for $100M Horizon Bridge Hack

In June 2022, hackers exploited $100 million from the Harmony Horizon Bridge, the gateway between Harmony and other blockchains. The Federal Bureau of Investigation (FBI) confirmed on Monday through a press release that North Korea’s Lazarus Group and APT38 were behind the hack. The FBI’s investigations, in collaboration with the National Cryptocurrency Enforcement Team, and other agencies, confirmed that Lazarus Group and APT38 were responsible for the $100 million hack. Lazarus Group and APT38 are cybercrime groups associated with the government of North Korea. The hackers used the privacy protocol Railgun to sneak out over $60 million worth of Ethereum on Jan.13. The on-chain sleuth, ZachXBT, caught this activity and reported it on Jan. 16. The North Korean exploiters deposited the funds on three different exchanges, using 350+ addresses.