Crypto News 12/04/2023
A Snapshot of Some of the Latest Crypto News and Information. Cryptocurrency inflows, Tesla Cybertruck accepting crypto, hacks, exploits, and rug pulls, taxes, & North Korea.
We witnessed a significant surge in crypto fund inflows, with the total reaching a substantial $1.76 billion.
This surge in investments coincided with Bitcoin and Ethereum reaching their 18-month price highs. The crypto market is gearing up for an institutional bull run, and these inflows represent a record high since the launch of futures-based exchange-traded funds (ETFs) in the fall of 2021, as reported by CoinShares.
What's noteworthy is that the bulk of these inflows primarily targeted Bitcoin, the world's largest cryptocurrency, accumulating $133 million, followed by Ethereum at $31 million. This represents a notable increase from the previous week, where Bitcoin saw an inflow record of $312 million. Ethereum's uptick in investment pushed its five-week total to $134 million, marking a significant turnaround from a sustained period of negative sentiment surrounding the world's second-largest cryptocurrency.
According to CoinShares, this marks the tenth consecutive week of investments reaching $1.76 billion, amounting to around 4% of assets under management. Overall, assets under management have soared by 107%, reaching a remarkable $46.2 billion. Geographically, the majority of these inflows were concentrated in Canada, Germany, and the United States, recording inflows of $79 million, $57 million, and $54 million, respectively. However, there were outflows observed in specific regions, with Hong Kong experiencing a $15 million reduction in funds and some parts of Asia seeing net outflows despite the generally positive sentiment around Bitcoin.
The surging prices of both Bitcoin and Ethereum can be attributed to market excitement related to the upcoming Bitcoin halving and the potential approval of a spot Bitcoin ETF by the U.S. Securities and Exchange Commission (SEC). As Stefan Rust, the CEO of Truflation, noted, "Bitcoin is now at levels it has not seen since the tail end of the last bull run," highlighting the bullish sentiment prevailing in the crypto space.
An intriguing development regarding Tesla, the electric car manufacturer led by Elon Musk.
It suggests that Tesla might soon offer customers the option to purchase its highly anticipated Cybertruck using Dogecoin, a popular meme cryptocurrency. This revelation comes from a crypto enthusiast known as MartyParty, who diligently examined the code behind Tesla's Cybertruck checkout page, uncovering more than 50 references to Dogecoin as a potential payment method.
The Cybertruck, known for its futuristic and bulletproof design, comes with a hefty price tag, running into tens of thousands of dollars. MartyParty's discovery of Dogecoin references in the checkout page's code points to the possibility that Tesla is considering Dogecoin as an accepted payment method for this innovative vehicle.
It's worth noting that Dogecoin remains the sole cryptocurrency accepted by Tesla for specific products. However, there are some limitations associated with using Dogecoin for payments. Tesla acknowledges that Dogecoin transactions can sometimes take up to six hours to process, and once initiated, they cannot be canceled. Moreover, customers who send alternative cryptocurrencies like Bitcoin or Ethereum run the risk of losing their assets permanently, as these transactions cannot be reversed.
Elon Musk has long been associated with Dogecoin, publicly endorsing it as one of his favorite cryptocurrencies. However, it's important to mention that Musk has faced legal challenges, including a $258 billion lawsuit from Dogecoin investors who allege he engaged in cryptocurrency market manipulation by promoting the meme coin on social media. Musk and his legal team have defended against these claims, asserting that there is nothing unlawful about expressing support for a legitimate cryptocurrency with a substantial market cap.
While Musk has denied rumors of creating his own cryptocurrency token, his involvement in the crypto space remains a subject of interest, especially since his acquisition of the social media platform X (formerly known as Twitter), where crypto scams have been reported.
The security landscape within the blockchain sector for the month of November 2023
According to data from the SlowMist Blockchain Hacked Archive, this period saw a significant number of security breaches, totaling 47 distinct incidents. These incidents collectively resulted in substantial losses estimated at approximately $349 million. This data sheds light on the persistent challenges of safeguarding digital assets and underscores the critical need for continuous advancements and enhanced security measures in the rapidly evolving blockchain space.
Several notable incidents are highlighted within the report. On November 1, 2023, the decentralized finance (DeFi) lending protocol Onyx Protocol fell victim to an attack, resulting in a loss of 1,164.53 ETH, equivalent to around $2.1 million. The attacker employed methods similar to those used in a previous attack on Hundred Finance, manipulating interest rates to borrow more funds than expected. MistTrack analysis revealed that the stolen funds were subsequently transferred to Tornado Cash.
Another incident occurred on November 6, 2023, when a staking contract on the cross-chain financing platform TrustPad was attacked, leading to a loss of approximately $155,000. TrustPad later explained that the attack exploited a vulnerability in the "receiveUpPool" function, which failed to validate "msg.sender," enabling the attacker to manipulate "newlockstartTime" and exploit various functions for rewards and withdrawals.
On November 7, 2023, TheStandard.io, a decentralized over-collateralized stablecoin protocol, experienced an attack resulting in a loss of approximately $290,000. This vulnerability was linked to low liquidity in the PAXG pool, which the attacker exploited to manipulate the market. Remarkably, the attacker returned 243,000 EUROs to the protocol on November 9.
Additionally, the report highlights the prevalence of "rug pulls" during the month, with incomplete statistics indicating 24 such incidents. These rug pulls were concentrated primarily in the Binance Smart Chain (BSC) ecosystem, followed by the Ethereum (ETH) ecosystem.
The report underscores the importance of users thoroughly understanding the background and team behind blockchain projects before participating in them, emphasizing the need for caution and careful investment choices. Notably, liquidity exploitation incidents accounted for significant losses to project operators, with the combined losses from the Poloniex, HTX, and Heco Bridge incidents reaching $243 million, constituting approximately 69% of the total losses from security events in that month. This report serves as a reminder of the ever-evolving and complex security landscape within the blockchain sector.
The evolving landscape of cryptocurrency-related tax cases being investigated by the Internal Revenue Service (IRS) crime unit
The division's leader, Jim Lee, reveals a notable shift in the types of cases the unit is handling. In the past, the vast majority, upwards of 90%, of active crypto investigations pertained to money laundering. However, in the past year, approximately half of the digital asset probes have revolved around tax-related issues.
These investigations encompass a range of tax-related matters, including taxpayers failing to report income derived from capital gains or cryptocurrency mining activities. Additionally, some individuals intentionally avoid disclosing their cryptocurrency holdings. The latest annual report from the IRS's criminal investigation division, covering the period from October 1, 2022, through September 30, 2023, sheds light on these developments.
Since the 2019 tax year, the IRS has been requiring individuals to disclose their cryptocurrency transactions as part of a broader effort to crack down on tax evasion related to digital assets. The IRS's role was pivotal in the criminal case against Binance, the world's largest digital asset exchange. In a recent development, Binance pleaded guilty to anti-money laundering and U.S. sanctions violations, agreeing to pay a hefty $4.3 billion in a comprehensive settlement involving multiple government agencies, including the Justice Department, the Treasury Department, and the Commodity Futures Trading Commission. It's noteworthy that the IRS operates under the Treasury Department.
Let’s also highlights the involvement of the IRS in some of the largest seizures of digital assets, including the remarkable recovery of $3.6 billion worth of Bitcoin stolen during the 2016 hack of the crypto exchange Bitfinex. The shift in focus from primarily money laundering to tax-related cases underscores the IRS's commitment to enforcing tax compliance in the rapidly evolving world of cryptocurrency.
A concerning trend involving North Korean state-sponsored threat actors, collectively tracked as the Lazarus Group, who have been prolific in stealing cryptocurrency
Threat intelligence firm Recorded Future estimates that these North Korean hackers have pilfered more than $3 billion in cryptocurrency to date.
The Lazarus Group specializes in cryptocurrency-related intrusions and relies predominantly on spear-phishing emails to deceive their victims into authorizing malicious scripts and downloading malware. Notably, their tactics have evolved over time. In 2021, the group targeted cross-chain bridges of cryptocurrency platforms, compromising validator keys used for transaction signing. By 2022, they had shifted to using strategic web compromise as the initial access vector, trojanized decentralized finance (DeFi) applications, a fake cryptocurrency application for Android, and supply chain compromises.
The stolen amounts have witnessed a significant increase over time, with 2023 being labeled as the most prolific year for Lazarus. Their nefarious activities in the cryptocurrency space date back to at least 2017 when they stole a substantial $80 million from various South Korean cryptocurrency exchanges. However, their activities escalated dramatically in 2022, with estimated thefts exceeding $1.7 billion. Their targets included Ronin Network, Harmony, Qubit Finance, Nomad, and others, with significant sums siphoned from these platforms.
In 2023, the Lazarus Group continued to make headlines with multiple highly profitable cryptocurrency heists, including breaches of Atomic Wallet, Alphapo, CoinEx, CoinsPaid, and Stake.com. Moreover, they were linked to a cyberattack on the U.S.-based enterprise software company JumpCloud, known for providing an Active Directory replacement. This suggests a potential strategy to set up future attacks on cryptocurrency clients of the company.
To move the stolen assets, the Lazarus Group has developed an extensive money-laundering network that includes cryptocurrency mixers and money mules. Notably, the U.S. government has sanctioned three mixers, namely Blender, Tornado, and Sinbad, along with numerous individuals, for laundering billions in assets on behalf of the North Korean regime. Roughly half of these laundered funds are believed to support North Korea's ballistic missile program.
The Lazarus Group's tactics also involve using the accounts and personal information of phishing victims to register verified accounts at trusted cryptocurrency exchanges. This allows them to send the stolen cryptocurrency and cash out, further complicating efforts to trace and recover these ill-gotten gains. This underscores the ongoing threat posed by state-sponsored hacking groups and the critical importance of robust cybersecurity measures in the cryptocurrency ecosystem.
That’s it for this week’s crypto news. Be sure to subscribe to my substack to get more news updates, tutorials, and more! Become a paid subscriber to get access to my WEEKLY technical analysis lessons!
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