Five major stories made headlines in crypto this past week. Former FTX executive Ryan Salame pleaded guilty to two counts related to his conduct at FTX as former Celsius CEO Alex Mashinsky’s home and assets were ordered frozen. Meanwhile, the Lazarus group got away with a $41 million dollar heist, while a different crypto investor lost $24 million to a phishing attack. Also, why is Texas paying bitcoin miners not to mine bitcoin? And is a regulation-friendly alternative to Tornado Cash possible?
Let’s take a closer look at each story in this recap.
$65 million lost across two major incidents
The FBI has attributed a recent theft of $41 million from the crypto sports betting platform Stake.com to the North Korea-affiliated Lazarus Group. This incident on September 4 is one of several high-profile heists orchestrated by the group, with its thefts totaling over $200 million this year. The Blockchain Association's director Ron Hammond highlighted the escalating concern surrounding such attacks, which have prompted legislation like the Crypto-Asset National Security Enhancement and Enforcement Act (CANSEE). This act is designed to combat money laundering and other crypto-facilitated crimes.
Meanwhile, in a separate incident, an Ethereum user lost $24 million, apparently due to a phishing attack, making it one of the most significant individual crypto phishing events recorded. Security firms believe the individual was deceived into authorizing malicious transactions through a phishing link.
Another former FTX executive pleads guilty
Former FTX executive Ryan Salame pleaded guilty in a New York federal court to charges of conspiracy to make unlawful political contributions and conspiracy to operate an unlicensed money transmitting business. Released on a $1 million bond, Salame admitted to making $10 million in political contributions under the guise of loans. He also agreed to surrender $1.6 billion in assets and forfeit two properties and a Porsche.
Salame is the fourth individual to plead guilty in relation to the crypto exchange FTX's collapse. He, along with co-conspirators, made over 300 illegal political donations, often using straw donors, according to prosecutors. Previously, Salame was investigated for potential campaign finance violations related to his girlfriend Michelle Bond's 2022 congressional race. Despite his guilty plea, Salame does not intend to testify at the upcoming criminal trial of former FTX CEO, Sam Bankman-Fried.
Mashinsky’s assets ordered frozen
The assets and property of former Celsius CEO Alex Mashinsky have been frozen following an order from The U.S. District Court for the Southern District of New York, under Judge Jed Rakoff. This order encompasses funds at Goldman Sachs, Merrill Lynch, and SoFi Bank, as well as a residence in Austin, Texas.
Mashinsky's arrest in July stemmed from allegations that he defrauded customers and misrepresented the profitability of Celsius. The company, which declared bankruptcy last year, is under scrutiny from various regulators, including the Securities and Exchange Commission, which accused Celsius and Mashinsky of fraudulently raising funds and misleading investors about the company's financial health. Both the Commodity Futures Trading Commission and the Federal Trade Commission have also filed lawsuits against Mashinsky. Despite these charges, Mashinsky, who posted a $40 million bond in July, maintains his innocence.
Paying mining companies not to mine
In August, two prominent Bitcoin mining companies, Riot Platforms and Iris Energy, received substantial energy credits from the state of Texas for voluntarily reducing their power consumption during peak demand periods. Riot Platforms, which operates North America's largest bitcoin mining facility in Rockdale, Texas, curtailed its power usage by over 95% and was compensated with a record monthly sum of $31.7 million. In contrast, Iris Energy was awarded $2.3 million in credits for the voluntary curtailment at its Childress site.
Riot's strategy to curtail power usage led to substantial revenues in August totalling $40.2 million, after accounting for the credits and the earnings from mining 333 bitcoin valued at $8.5 million. In comparison, Iris Energy mined 410 bitcoin, translating to $11.4 million in revenue, and, factoring in the credits, spent $4.3 million on electricity, resulting in a profit of $7.1 million.
While Riot has focused in the past on sheer scale, Iris Energy emphasizes sustainable mining, sourcing 97% of its energy from renewables and 3% from renewable energy credits. These actions by both companies are in response to a Texas state program incentivizing bitcoin miners to lower energy consumption during grid congestion periods.
Tornado Cash founder pleads not guilty as Vitalik offers an idea
Tornado Cash co-founder Roman Storm pleaded not guilty in a New York District Court to charges of conspiracy to commit money laundering. If convicted, he could face a maximum prison sentence of 20 years. Tornado Cash has been described by prosecutors as a cryptocurrency mixer that laundered over $1 billion in illicit funds. The decision to sanction Tornado Cash by the U.S. Department of the Treasury has been criticized by crypto enthusiasts, with the Blockchain Association labeling it as "unprecedented and unlawful."
In related news, Ethereum co-founder Vitalik Buterin, alongside Ameen Soleimani, Jacob Illum, Matthias Nadler, and Fabian Schar, recently co-authored a research paper introducing a privacy protocol named Privacy Pools. This protocol, which might serve as an alternative to Tornado Cash, is designed to ensure transactional privacy on blockchains while complying with regulations. It uses zero-knowledge proofs to confirm the legality of user funds without disclosing their full transaction history. The goal is to maintain a balance between privacy and regulatory requirements.
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