Hotbit's Hot Mess: How Not To Run A Crypto Exchange
Hey there! Welcome back to Cold Storage, your weekly crypto digest that's more reliable than a GPS in a city full of one-way streets. I'm Charles, your personal guide through the labyrinth of blockchain buzz, here to shine a light on the twists and turns of the past week's crypto happenings.
Here's a sneak peek at the headlines we'll be sinking our teeth into:
Hotbit exchange hits a hot mess, suspends operations.
Tornado Cash dev, Alexey Pertsev, stands his ground against Chainalysis data.
Another DeFi exploit leaves investors reeling.
Binance's "Pig Butchering" saga ends with a twist.
South Korean scammer gives new meaning to 'fake it till you make it'.
Nevada man faces hard time for alleged role in CoinDeal scam.
So, whether you're sipping your morning coffee or taking a well-deserved break, let's dive into the rollercoaster ride that is this week's crypto news!
Ho Crypto Exchange Suspends Operations, Urges Users to Withdraw Funds
On May 22, 2023, Hotbit, a prominent cryptocurrency exchange, announced the suspension of its operations, citing a range of issues that have compromised its operational conditions over the past year. In an official statement, Hotbit urged its users to withdraw their funds before June 21, 4:00 am UTC. The announcement followed the deterioration of the exchange's operating conditions, which began in August 2022 when a former team member was subjected to an investigation. This probe reportedly forced Hotbit to halt its business for several weeks.
The exchange attributed its decline to various incidents within the crypto space, including the collapse of FTX and the banking crises that led to the USD Coin (USDC) depegging event. These incidents, Hotbit claimed, resulted in a consistent outflow of funds from centralized exchanges, significantly impacting its cash flow. The Hotbit team expressed concerns about the increasing complexities associated with centralized exchanges, stating that they are "unlikely to meet long-term trends." The team further suggested that the future of exchanges may lie in becoming more decentralized or fully embracing regulation. In addition to these industry-wide challenges, Hotbit cited repeated cyberattacks and the exploitation of "project defects by malicious users" as key factors contributing to its downfall.
Following the announcement, several community members reported difficulties withdrawing their funds from the exchange. Concerns were also raised about the proliferation of phishing links posing as the official Hotbit exchange on Google. Now, as Hotbit winds down its operations, other exchanges like Coinbase and OKX are stepping up their game, with the former launching a campaign to "update the system," and the latter ambitiously planning to "rewrite the system" entirely. (Read more: https://cointelegraph.com/news/hotbit-exchange-halts-operations-urges-users-to-withdraw-funds)
Next up, let's dive into a legal entanglement.
Tornado Cash Dev Fights against Chainalysis Data
In the face of adversity, the developer of Tornado Cash, Alexey Pertsev, is standing his ground against money laundering charges in the Netherlands stemming from data provided by Chainalysis. Pertsev's lawyer Keith Cheng is hopeful about his client's innocence and is grateful that the Dutch court has allowed him to directly question Chainalysis about their methods. Pertsev has denied the charges and plans to take the case all the way to a trial in 2024 if necessary. The crypto community is rallying behind him, confident that Pertsev can clear his name and protect open-source coding from government interference. While this legal drama unfolds, Tornado Cash has come under a suspicious attack that saw its token TORN plunge in value. As we watch this case, the main question on everyone's mind is: can Chainalysis deliver a solid explanation that holds up in court? (Read more: https://finance.yahoo.com/news/news/tornado-cash-dev-facing-dutch-114203563.html)
While we're on the topic of suspicious activities, here's another one for you.
Yet Another DeFi Exploit - Over $7.5M of ETH Compromised
DeFi isn't slowing down in the hackers' playground - the latest exploit saw over 4,000 ETH (~$7.5M) go missing. It appears that Jimbos Protocol was targeted due to a lack of slippage control, resulting in a serious ETH hit. This isn't the first DeFi exploit - it seems to have opened up a vulnerability ripe for hackers. So, if you're considering diving into DeFi, ensure solid security protocols are in place, otherwise, you might be signing up for a massive financial headache. (Read more: https://cryptopotato.com/4000-eth-7-5m-compromised-following-latest-defi-exploit/)
Let's move on to a story that's a bit of a wild ride.
Binance Cleared of Charges in "Pig Butchering" Crypto Scam
Binance, one of the world's top cryptocurrency exchanges, has had a whirlwind of a month. First, they were slapped with a $10 million fine by the CFTC, and now they've been cleared of any involvement in a lawsuit linked to a controversial "Pig Butchering" crypto scam. This scam, orchestrated via the popular dating app Tinder, allegedly led a Texan woman to lose over $8 million.
The lawsuit, filed by the woman in March 2021, targeted Binance and other defendants including Poloniex, TD Bank, and Abacus Federal Savings Bank. But the judge wasn't having it, ruling that there was insufficient evidence to implicate Binance in the scam. Sounds like a plot straight out of Futurama, doesn't it? On a serious note, it's becoming increasingly clear that governments worldwide are becoming more vigilant about these types of scams — in 2021, the FBI received over 4,300 complaints that resulted in $429 million in losses. (Read more: https://bitcoinist.com/binance-cleared-of-crypto-scam-charges/)
And speaking of scams, let's take a look at another situation that's been making waves.
South Korean Man Poses as Crypto Expert to Scam Housewives and Office Workers
In a shocking turn of events, South Korean police have arrested a 38-year-old man suspected of running a crypto scam that allegedly targeted housewives and office workers. The man is accused of duping his victims out of around $218,000 by posing as a director of a famous stock trading company, a successful crypto trader, and even a qualified civil servant!
Operating the scheme from September 2019 to August 2022, he used investment- and crypto-themed group chats on the KakaoTalk chat app platform to lure unsuspecting victims. Crypto scams are on the rise in South Korea, and the police are not taking it lightly. In response, they formed a crypto scam-fighting unit in March, and even the President has pledged to wage an “all-out war” against traders using crypto for illegal activities, such as drug dealing. (Read more: https://cryptonews.com/news/s-korean-police-bust-crypto-scammer-who-preyed-housewives-office-workers.htm)
And last but not least, let's wrap up with another tale of justice being served.
Nevada Man Faces Time Behind Bars for Alleged Role in CoinDeal Scam
The US Department of Justice (DOJ) is showing that it's not playing around when it comes to crypto scams. They recently charged a Nevada man, Bryan Lee, with a multitude of charges related to his role in the multi-million-dollar CoinDeal investment scheme. Lee is accused of working in cahoots with CoinDeal leader Neil Chandran to swindle 10,000 investors out of $45 million with false promises about the company’s potential acquisition by "wealthy buyers". If found guilty, Lee could face up to 110 years in prison.
While it's no secret that crypto is a hotbed for scammers and other unsavory characters, it's encouraging to see regulators cracking down on these activities. Just remember, if you're thinking about investing in crypto, do your due diligence and steer clear of shady promises of easy money. You've been warned. (Read more: https://cryptonews.com/news/nevada-man-faces-time-behind-bars-for-alleged-role-coindeal-scam.htm)
What did you think of this weeks edition?