NFT news: BAYC breaks Ethereum, OpenSea accepts APE, NFTs are like Papyrus

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Yuga Labs had their massive land NFT sale for their Otherside MMO, which doesn’t even exist yet. The sale, on April 30, was a mess for anyone trying to buy, but a complete success for Yuga, which netted $320 million in APE. Ethereum became unusable for other projects during the sale. [Amy Castor]

Yuga Labs say they have refunded everyone for failed transactions — but those who paid ridiculous gas fees for transactions that did go through are stuck with the cost. [Tweet]

In total, Yuga spent 90.57 ETH ($265,000) on roughly 640 refunds. The largest individual refund was 2.6 ETH ($7,500). [Etherscan]

On Reddit, u/Atariconcarne has the perfect analogy: “It is like paying for your cheeseburger combo with a credit card and the guy with the paper hat at the register saying ‘Your 5 bucks transaction fee wasn’t enough. Want to try again for 10?’” [Reddit]

Ethereum doesn’t work, sure, but this is also what happens when you change plans at the last moment and upload crap to the blockchain. Yuga Labs’ smart contract had no optimizations for gas fees. [Tweet

If Yuga Labs can’t pull off a land auction without putting buyers through hell, how are they going to create an MMO? I expect Otherside to work at least as well as Axie-Infinity, which netted the DPRK $600 million. Bridges are the smart contract pinata!  

Burn it with fire!

Speaking of Axie, the Ronin hackers are laundering their funds through Tornado Cash. Nicholas Weaver argues that Tornado Cash needs to be sanctioned to prevent the DPRK from profiting from the theft. Let’s hope someone from OFAC reads his post and takes action. [Lawfare]

$450 million of WETH in users’ Ronin wallets is still unbacked. After VCs put in $150 million to stabilize the situation, we haven’t heard anything from Sky Mavis on how they are going to fix this yet. In March, they promised all users would be refunded.  

Axie-Infinity resembles a multi-level-marketing scheme. u/ale23arg on Reddit talks about how he earns income as a scholar: “im a manager in the US as well i peaked at about 22 scholars and now im holding around 12….” [Reddit]

Bored and empty

Bored & Hungry, the Bored Ape-themed burger pop-up in Long Beach, Calif., was only planning on being open for 90 days. Now, much to the horror of their neighbors, they have officially announced: “We are here to stay.” [Amy Castor, Instagram

The Chronicle’s Cesar Hernandez visited Bored & Hungry for a bite. “What’s most infuriating to me is that this restaurant model inspires the same hollow dread as some ghost kitchens. It’s a soulless attempt to capture the zeitgeist, combining pop culture with food trends.”

Whilst there, he asked one of the cashiers what he knew about NFTs: “He looked at me with a puzzled expression. ‘Not much, I just got hired to work here.'” [Chronicle]

While the pop-up opened with long lines, that’s apparently no longer the case. “I drive by this every day, and it’s almost completely empty,” Michael Narciso, who lives in the area, tweeted.

The NFT market is flatlining!

The Wall Street Journal’s Paul Vigna reports that “the NFT market is collapsing,” with daily average sales down 92% from a peak in September, according to data from NonFungible. [WSJ]

Believe me, I wish the NFT market would collapse, but it’s important to take these reports with a grain of salt — VCs are still pumping huge money into the space. They have investments to cash out on! 

To prove his point, Vigna pointed to a Snoop Dogg curated NFT that sold in April for $32,000 in ETH. It’s now up for $25.5 million ETH, and the highest current bid is for $210, he said.

This isn’t a great example, said Molly White. The original $32,000 sale was WAY higher than most resales of NFTs from this collection. Weird, but “less weird if we assume the original minter is wash trading.” [Twitter thread]

Enuff with celebs promoting NFTs

Last month, Tonight Show Host Jimmy Fallon, who also owns a Bored Ape NFT, tweeted about Moonbirds. He also changed his Twitter profile photo to a Moonbird owl — previously, it was a Bored Ape. Nobody will say if Fallon received a free Moonbird or not. [Buzzfeed]

Fallon isn’t alone. There is a long list of celebs mysteriously acquiring high-value NFTs and giving fans the (false) impression that they purchased these as an investment. A more likely scenario: they received the NFTs as gifts in exchange for promoting the projects. This is wrong and bad on many levels.

“Withholding such material information is illegal, and both the company and the influencer are on the hook for such deception,” Bonnie Patten, the executive director of consumer advocacy group Truth In Advertising, told BuzzFeed.

How are dozens of celebs acquiring Bored Ape NFTs? Are they getting them as gifts, without saying they are getting them as gifts? Because if that’s what’s happening, it’s a real sleazeball way of promoting the project. [Amy Castor]

Other stuff

Reddit co-founder Alex Ohanian, who owns a pile of APE and sits on the APE DAO foundation, compares NFTs to papyrus and the Gutenberg Bible. We only need to wait a few thousand years for NFTs to reach their full potential. The quote tweets on this are just fantastic. [Tweet]

OpenSea has started accepting APE. Why? Because the NFT marketplace is backed by a people (Coinbase, Creative Artists Agency, a16z, Ashton Kutcher) who stand to make a lot of money on APE. No surprise here. [Decrypt]

A few weeks ago, David Gerard wrote a popular story on how VCs cash out on the securities-fraud-as-a-business model. Everyone should read this — and then read it again. [David Gerard]

Apecoin shoots up 19% after Elon Musk provides a practical demonstration of how stupid NFTs are. (Hint: he changes his twitter profile pic to a collage of Bored Apes.) [CNBC] 

Asked on Reddit what the difference is between Zuck’s Metaverse and the old Second Life, u/AnimalFarmKeeper responds: “Second Life was as the name suggests an adjunct to the real lives of people. The Metaverse is largely touted as a place for those with no life.” [Reddit]

Last month, Zackxbt posted a leaked list of NFT and crypto shills. Vice reached out to the shills to learn more. Some get paid pretty well! Ashley Duncan is “earning more than she’s ever made in her life, pulling in more in two months than she used to make in an entire year by creating NFT projects, performing occasional consulting work, and pumping crypto.” [Vice]

Policy expert Elizabeth Renieris went on nonprofit ACT-IAC’s The Buzz podcast to dispel myths about Web3 for the government technology community. [The Buzz]

Coinbase opened up its NFT marketplace beta to the public, but so far, it’s hardly seeing the mad rush of users that was expected after bragging about all those early signups. [Bloomberg]

Kraken also wants to get in on the gold rush. It’s launching an NFT marketplace with zero gas fees. [Decrypt]

Me in the news 

I wrote a story for Artnet News on DAOs and the art market. Art dealers are seriously concerned about selling work to DAOs — their biggest fear is that the project will destroy the work and turn it into an NFT, so it only lives in the virtual world. [Artnet News, paywalled]

In another story for Artnet News, I spoke with several lawyers to get their feedback on a UK judge reportedly announcing that NFTs are property. Hint: Yes, NFTs are property. But there is nothing here that says if you own a token, you also own the thing the token points to. [Artnet News, paywalled]

NEWS: Wormhole hit by exploit, BAYC and its tangled celebrity web, HitPiece’s dirty dealings 

Software is inherently unforgiving. Stupid mistakes render stupid consequences. Recently, this led to one of the largest thefts in a DeFi protocol.

Wormhole, a bridge for connecting Ethereum and Solana and other DeFi blockchains, was hit by a hacker, who stole $326 million in cryptocurrency.

An exploit in the code allowed the attacker to mint 120,000 wETH (wrapped ether) on the Solana blockchain out of thin air. The hacker then exchanged 93,750 wETH for ETH on Ethereum and the rest for SOL, the native token of Solana, and USDC. (Elliptic, Cointelegraph)

Cross-chain bridges allow you to stake crypto (generally, ETH) so you can spend it like the native crypto on another blockchain. In the case of Wormhole, wrapped ETH, an ERC-20 token that represents ETH one-to-one, serves as a sort of I.O.U. The hack resulted in Wormhole sitting on lots of unbacked wETH. 

Wormhole developers offered the hacker a $10 million bug bounty for the return of the funds. Why the hacker would want to relinquish $326 million for $10 million, I’m not sure.

Security researcher Sam Sun explained how the thief carried out the heist: “Wormhole didn’t properly validate all input accounts, which allowed the attacker to spoof guardian signatures and mint 120,000 ETH on Solana, of which they bridged 93,750 back to Ethereum.” (Twitter)

How did the hacker even know about this vulnerability? According to DedmundFitzgrld: “The fix was pushed to GitHub a couple weeks ago but not deployed. So the attacker found the exploit by scanning the commits to GitHub. The vulnerability was out there for all to see.” (Twitter)

Jump, a high-frequency trading group with crypto ambitions, stepped in to save the day. The Chicago-based firm somehow came up with the funds to replace all of the 120,000 ETH. Apparently, it had a spare $326 million sitting around? (Twitter, Fortune)

What do we know about Jump? Last August, it bought Certus One, which helped develop the Wormhole bridge. Jump also executes some crypto orders for Robinhood. 

Jump holds a heavy bag of Solano tokens. It can’t risk a lack of confidence in the market, so it likely borrowed a pile of ETH to fix the problem. Who did it borrow the funds from? One guess: Tether, who last year issued the firm $1.1 billion in USDT, according to one analysis

Qubit also hacked

Days before Wormhole was hacked, Qubit Finance was breached for $80 million in crypto. Similar to Wormhole, Qubit operates a bridge between Ethereum and the Binance Smart Chain network.

In this case, the hacker was able to exploit a security flaw in Qubit’s smart contract code that let them send in a deposit of 0 ETH and withdraw almost $80 million in Binance Coin in return. (Verge)

Qubit has been trying to convince the bank robbers to return the money. They started by offering a bounty of $250,000, and eventually upped it to $2 million — still, a piddling amount compared to what the hackers stole.  

Now, they are resorting to threats:

“If you don’t come forward to claim the generous bounty and return the funds, you will face lasting consequences that vastly outweigh the benefits of holding onto funds that you can’t readily access,” Qubit said in a tweet.

Bored Ape founders revealed

Buzzfeed just identified the two main founders of BAYC — Greg Solano, a 32-year-old writer and editor, and Wylie Aronow, a 35-year-old originally from Florida. The pair don’t have any dark pasts, as far as anyone knows. (Buzzfeed)

“These 2 amazing partners of mine,” Guy Oseary tweeted with a pic of them at Apefest. Oseary is the music industry veteran who represents them. He also represents NFT project World of Women. And he is a buddy of Jimmy Fallon, so that explains a few things.

Oseary says the founders were “doxxed against their will,” which is a bizarre statement given you are talking about the founders of a multi-billion-dollar enterprise.

As Buzzfeed puts it: “This reveals a unique problem with the idea of a billion-dollar company run by an unknown person: How do you hold them accountable if you don’t know who they are?”

A16z mulls buying a chunk of BAYC

Yuga Labs, the startup behind Bored Apes Yacht Club, is in talks with Andreessen-Horowitz (a16z), who is considering buying a major stake in the startup, which would value it at $5 billion. (FT

I’m losing count of all of the NFT projects a16z is funneling money into — over a dozen, for sure. The VC firm is a major force behind the frothy NFT market. 

Celebrities are shilling Bored Apes left and right to the point where it is downright nauseating and rumor has it the Bored Apes will make an appearance in the Super Bowl halftime show on Feb. 13.

The problem with investing in high-value NFTs is they are not easy to dump on retail. You have to find that special buyer with loads of disposable ETH. Fungible tokens, on the other hand, are much more liquid — especially if you can get them listed on Coinbase

This is why DAOs (with their ERC-20 governance tokens) and fractionalized NFTs are becoming the thing. It’s like the 2017 initial coin offering craze all over again. Only now we’re talking about Web3 and “democratizing” companies and JPEGs.

Sometime soon, expect Yuga Labs to issue an ERC-20 token with a huge pre-mine for investors. The token will likely represent its NFTs in some way or else give holders special access to future Yuga Lab NFTs — something like that. Bored Apes have been heavily pumped, so at this point, it’s just a matter of creating a fungible token to lure in suckers at a much greater scale. At the end of the day, it is all about creating the illusion of exclusivity or having access to something special.

Yuga Labs has talked about issuing ERC-20 tokens in the past, saying the plan was to work with law firm Fenwick and West and Horizon Labs — issuers of the ZEN token, which is already listed on Coinbase. So this is nothing new. It’s been in the works all along.

What a tangled Web we weave

We’ve been wondering a lot about why celebs are hyping Bored Apes. Who is talking them into this? What’s the deal? 

Max Read did the smart thing — he followed the money trail, and mapped out the celebrity NFT complex. Jimmy Fallon (who was shilling his Bored Ape on National TV) is represented by talent and sports agency Creative Artists Agency. Lo and behold, CAA is an investor in OpenSea and recently signed a deal to represent the NFT collector 0xb1, who owns NFTs from Bored Ape Yacht Club and World of Women. There’s more. Lots more. Take a look at the map. (Substack)

Last week Justin Beiber bought a Bored Ape NFT for $1.3 million (500 ETH), as one of several purchases he made on OpenSea within a short period. As Dirty Bubble Media explains, all of the NFTs were gifted. They were bought by the InBetweeners project, a collection of NFTs owned by artist Gianpiero D’Alessandro, who has designed merchandise for Bieber, Snoop Dogg, and others. 

Bieber never disclosed any financial relationship between himself and the inBetweeners project. As Dirty Bubble points out, this is a big no-no, according to FTC rules. (Substack)

Gwyneth Paltrow also has a Bored Ape, thanks again to MoonPay Concierge. Every time someone buys a Bored Ape via MoonPay, they seemingly have to announce it on social media. (Twitter)

HitPiece and its shady founder

A new project called HitPiece appeared out of nowhere and started scraping Spotify and “staking” songs as NFTs — without the artists’ permission. 

Naturally, artists found out and started hurling obscenities at the project via social media. 

“Yo a bunch of industrial scene acts (including me) have NFTs for sale on the site hitpiece.com I did not put it online and I assume you probably didn’t either, fucked up,” Choke Chain tweeted.

“Each HitPiece NFT is a One of One NFT for each unique song recording. Members build their Hitlist of their favorite songs, get on leaderboards, and receive in real life value such as access and experiences with Artists,” Hitpiece said on its website. (NNE)

The brains — or lack of brains — behind HitPiece turns out to be music industry guy, Rory Felton, who has a history of shady dealings. (Twitter thread) 

Felton launched HitPiece in December along with music exec and former rapper Michael Barrin (aka “MC Serch”), and venture capitalists Ryan Singer and Blake Modersitzki. (Festival News)

Anyhow, Hitpiece.com has been taken down. If you go to the website, all you get now is a message that says, “We Started The Conversation And We’re Listening,” whatever that means. (archive)

Gamers hate NFTs!

Gamers want nothing to do with NFTs. They see NFTs as a cash grab and forcefully push back on any game company’s efforts to incorporate NFTs in anything.

Clueless to that trend, GameStop has teamed with Immutable X to launch an NFT marketplace. They’re also creating a $100 million fund for grants to build on the platforms. While Gamestonk investors might think this is great, it should thoroughly piss of GameStop customers. (Verge)

Team17, the outfit behind the many Worms games, pulled the plug on its MegaWorms NFT project (they wanted to create NFTs of all the Worms games characters) only 24 hours after announcing the project, due to extreme backlash from customers, fans, and teamsters. (IGN)

Notice the editor’s note on the IGN story: “The subject of NFTs is currently a very controversial topic in the gaming community. IGN urges community members to be respectful when engaging in conversation around this subject and does not endorse harassment of any kind.

Electronic Arts, another game publisher, is also backtracking from earlier NFT enthusiasm. (Eurogamer

Other NFT news

Nike sues online sneaker reseller StockX for selling NFTs of Nike shoes. (Reuters) 

How did OpenSea take over the NFT trade and become a multibillion dollar company? (Hint: they got lots of help from a16z.) (Verge)

One of the founders of Larva Labs, the project behind CryptoPunks, sold all of his v1 Punks for 260 ETH. In response, Larva Labs released an official statement saying the v1 Punks are worthless, because the project re-released all the Punks in 2017 to fix a bug.

The NFT community feels differently. They are saying that v1 Punks are the originals! What’s on the blockchain, stays on the blockchain. (NFT evening)

Coachella is selling lifetime festival passes for the first time — but you have to buy an NFT to get one. The music festival launched an NFT marketplace built by FTX US, with three collections of NFTs going on sale on Feb. 4th. (Verge)

This is part of a trend, I mentioned before. NFTs are being used to give people special access to clubs, events, restaurants, breweries, and whatnot. Wanna be part of the exclusive group? Buy our NFTs.

Tampa Bay Buccaneers quarterback Tom Brady is retiring after 22 seasons with the NFL. His business ventures, including NFT platform Autograph, will keep him busy moving forward. (Fortune)

Last year, a16z-backed Meta4 Capital created a new fund to invest up to $100 million in NFTs. In a twitter thread, Meta4Capital justifies spending money on “historically significant” or “iconic” NFTs, as if any of this means anything. It doesn’t. At the end of the day, an NFT is just a number in a database.

A racist project called “Meta Slave” offered NFTs made from photographs of Black people (all algorithmically-generated). After a swift backlash, the project rebranded to also feature “white, Asian, etc.” NFTs. The project’s Twitter and Instagram accounts have been deactivated. The collection has also been removed from OpenSea where the NFTs were being auctioned. (Vice)

Artist bayneko airdropped NFTs of microscope pictures of SARS-COV-2 to all 96,186 users of NFT platform Hic et Nunc (HEN) who hold at least one NFT. The NFT description read: “Your wallet has been infected by SARS-CoV-2, the virus responsible for COVID-19… in an act symbolic of the invasive and ubiquitous nature of the virus and its psychological effects.” (Twitter thread)

Elsewhere in cryptoland

Quote of the day: “So much dumb stuff happens in crypto, and if you are a smart intermediary that dumb stuff is your profit margin. Crypto markets are lightly regulated and brutally Darwinian, and every day the smart find exciting new ways to take money from the dumb. The returns to smart are very high.” ~ Matt Levine (Bloomberg)

On that note, another day, another rug pull. Realux promised to democratize real estate at a “very low cost in a very easy way” using a complex system of tokens backed by real estate investments. After collecting everyone’s money, the project shut down and its creators vanished. (Motherboard)

Riot Blockchain, a large crypto miner located just outside of Austin shut down ahead of a cold blast. Bitcoin miners have been drawn to Texas because of the state’s cheap electricity. They’ve been lobbying Governor Greg Abbott to make things even easier for them. (Bloomberg)

How Facebook’s Diem died. A post mortem. (Washington Post)

Jeremy Allaire’s Circle, the company behind USDC, is running ads in everything. (Twitter)

The IRS is coming for you. Intuit CEO Sasan Goodarzi warned that Americans who invested in crypto or NFTs, and actively traded equities on commission-free websites, could be dumbfounded when they learn how much they own in taxes because “they were in essence gambling with their money.” (Bloomberg)

In a podcast, Sohale Mortazavi talks about his piece for Jacobin that went viral: “Cryptocurrency Is a Giant Ponzi Scheme.” (Youtube)

The CEO of US-based crypto exchange Cryptsy, Paul Vernon, was indicted on 17 counts, including tax evasion, wire fraud, money laundering, computer fraud, tampering with records, documents, and other objects, and destruction of records in a federal investigation. (IRS

This has been a long time coming. Cryptsy shut down in 2016, after announcing 13,000 BTC and 30,000 LTC were stolen two years prior. It was later discovered that “Big Vern” stole the money.

According to the indictment: “Between May 2013 through May 2015, Vernon used his control over Cryptsy’s accounts, known as wallets, to steal over one million dollars from Cryptsy’s cryptocurrency wallets. Once Vernon stole his customers’ funds from Cryptsy’s wallets, he deposited the funds into a personal cryptocurrency wallet and then transferred the same funds into his personal bank account.”

Sam Bankman’s FTX got a $400 billion funding round, valuing the company at $32 billion, as investors, including Softbank and Canada’s Ontario Teachers’ Pension Plan, hog piled into the madness. (I mentioned earlier that the exchange’s US arm also got a $400 million round.) (Bloomberg)

Taylor Monohan’s MyCrypto joined the Metamask team. ConsenSys acquired MyCrypto for an undisclosed sum and plans to merge MyCrypto with the MetaMask wallet. (Taylor appeared in the QuadrigaCX documentary “Dead Man’s Switch” along with me and David Gerard.) (Coindesk)

On the subject of QuadrigaCX — my review of Jennifer Robertson’s “Bitcoin Widow” was reprinted and is getting lots of attention. (Saltwire)

Steven Kimber, the Halifax author who helped author “Bitcoin Widow,” was interviewed on CBC radio about the book. He spent 50 hours listening to Robertson, he said. (CBC radio)

Douglas Johnston, a Winnipeg lawyer and writer, also reviewed “Bitcoin Widow.” His review was more critical than others. “This is autobiography, so it’s told in the first person. But Robertson puts herself at the forefront of far too much of the narrative.” (Winnipeg Free Press)

Also on the subject of Quadriga, Michael Patryn, the fraudster who was recently voted off his latest Ponzi scheme Wonderland, has been laundering his crypto. According to his wallet, he has been sending thousands of ETH through mixer Tornado Cash(Coindesk, Etherscan)

Crypto risks destabilizing emerging markets, says the International Monetary Fund. (FT)

Binance builds a $1 million insurance fund. (Bloomberg)

El Salvador’s Chivo wallet keeps breaking. (The Block)

Silvergate Bank is paying $50 million in cash and 1,221,217 shares to buy Facebook Diem’s “intellectual property.” Silvergate wants to do a stablecoin running on the Diem blockchain. (press release, CNBC)

USDC, the second biggest stablecoin next to Tether, crossed 50 billion in circulation. (Circle)

Meanwhile, Tether is still sitting at 78 billion USDT. No new prints in 2022 yet. (Tether)

Bitcoin has climbed back to $41,500 despite no new Tether prints. (It was down to as low as $34,000 recently.) Retailers who bought BTC for $69,000 in November are still hurting.

Corey Doctorow on the great crypto crash event looming in the future: “If you think Coinbase is looking shaky and take your money out, you’d better hope they last for at least three more months, or you might have to give the money back to the bankruptcy trustees.” (Twitter thread)

Australian billionaire Andrew Forrest launched a criminal case against Facebook, alleging the company failed to prevent scam ads that used his image, and breached Australian AML laws over the spread of crypto fraud. (BBC)

The search for a crypto use case continues. (One Zero)

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News: Chaos in Wonderland, celebs shilling Bored Apes, how VCs get rich on Web3

It’s the end of January 2022, and everything in crypto land keeps getting nuttier. The news is filled with so much crypto and NFT stuff, I can barely keep up anymore.

BTC is at $38,000, after losing nearly half its value since its all-time-high of $69,000 in November. Tether has yet to save the day. It is still hanging around 78 billion, with no recent prints. 

Shares of crypto exchange Bakkt (BKKT) are down 90% since the company went public on NYSE in October. Shares in Coinbase (COIN) are also at a low, down 50% since its debut in April 2020. (Bloomberg)

The VCs and insiders have already made their money. It’s the retailers getting burnt once again. Paul Krugman calls crypto the new subprime. (NYT)

Things are not so wonderland in Wonderland

It’s been a tough few weeks for Wonderland. The drop in crypto set off “cascading liquidations” in the DeFi project after its TIME token sunk to record lows.

Wonderland’s founder Daniele Sestagalli and its chief developer “Sifu” also suffered liquidations — $15 million and $1.6 million respectively. (Crypto Briefing)

Following the calamity, Sifu — aka 0xSifu — was doxxed. Lo and behold, it’s Michael Patryn, the fraudster who helped launch QuadrigaCX. Patryn’s been watching over Wonderland’s treasury. Don’t worry. Your funds are SIFU! I wrote about this, as did David Gerard. (My blog post, David Gerard

The Wonderland DAO voted Sifu out of the project. Now they are considering winding down the whole big silly mess. Once you’ve been uncovered, best to move on to another Ponzi. (The Block)

What’s up with celebs and BAYC?

Jimmy Fallon was hyping his Bored Ape Yacht Club NFT on national TV, along with Paris Hilton, who also owns a Bored Ape Yacht Club NFT. (LA Times)

In case you were wondering, Fallon and many other celebs get their Bored Apes via MoonPay.

Justin Bieber also recently purchased a Bored Ape, for $1.3 million. (Benzinga)

It looks like Bieber didn’t buy that Bored Ape himself. All of the ETH in his wallet came from a single transfer of 916 ETH from the @inBetweenersNFT project. (Twitter thread)

We’ve lost a bunch of celebs to NFTs — Tom Brady, Serena Williams, Edward Snowden, Tony Hawk, Matt Damon, William Shatner, and more. (Gizmodo)

The founders of BAYC are so far a mystery. Nobody knows who they are.

A blog post has been circulating suggesting that the BAYC was started by a bunch of Nazis. There are a lot of ugly things about BAYC, but this is not one of them. 

“That blog post trying to argue that the bored ape nfts are a Nazi project is the kind of thing no serious researcher of the far right should be sharing at face value. Getting bad QAnon-ish vibes from parts of the theory argued there,” Jared Holt said. Holt knows his Nazis, so I’ll take his word for this. He studies extremism at the Atlantic Council’s Digital Forensic Research Lab. (Twitter)

Twitter launches hex PFPs

Twitter will allow you to display your NFT in your profile pic in a hexagon — if you subscribe to Twitter Blue for $3 a month, you have an iOS device, and you use a supported wallet (Argent, Coinbase Wallet, Ledger Live, MetaMask, Rainbow, or Trust Wallet). (Twitter

The good news? You can easily mass-mute everyone with a hex-profile on Twitter. (PC Gamer)

For some reason, the Twitter PFP feature works with any NFT in a collection, not just verified ones. Justin Taylor, Twitter’s head of consumer marketing, encourages people to use unverified NFTs — plagiarize someone else’s work just to create an NFT and get a hex badge! (Twitter)

YouTube wants to capitalize on NFTs, too. It’s exploring new opportunities for revenue. YouTube’s CEO says she is looking to Web3 “as a source of inspiration,” noting crypto, DAOs and NFTs. (CEO’s letter, Verge)

OpenSea will refund, ask them

OpenSea is reimbursing users who lost money via an loophole on the platform. Hackers were buying NFTs previously listed for much less even though those listings didn’t appear active to the seller — if the seller neglected to delete the listing. The hackers then flipped the NFTs for huge profits.

OpenSea has so far reimbursed $1.8 million. However, many NFTs are still vulnerable, leaving the door open for bad actors, including one account named “opensee_​will_​refund_​ask_​them.” (Twitter)

On Jan. 27, OpenSea announced limits on free NFT minting — a feature that let you create NFTs without a gas fee, which you only had to pay if you sold the NFT — then reversed the decision hours later, after revealing that nearly all of the items created through the feature were either spam or plagiarized. (Vice)

Elsewhere in NFT land

MetaMask admitted last week that it neglected to patch an IP leakage issue that has been “widely known for a long time.” The issue exists in many wallets and NFT marketplaces, including MetaMask and OpenSea. (Alex Lupascu explains why this is so dangerous in a blog post.) Some researchers are now creating NFTs that grab a viewer’s IP and display it back to them, just to illustrate how NFT marketplaces like OpenSea allow attackers to load custom code when someone simply views an NFT listing. (Verge)

Neil Turkewitz interviewed “Bor,” a member of activist group @NFTtheft. The group hears from a lot of artists who claim they’ve made “life changing” money selling NFTs. But an inspection of those artist’s accounts on NFT marketplaces tells a different story. “Many times, they’ve only made a single sale. Most of the time, they haven’t sold any NFTs yet.” (blog post)

Another day, another NFT rug pull. Blockverse was a planned NFT Minecraft project, with access restricted to those who owned a particular NFT. The initial supply of 10,000 NFTs, priced at 0.05 ETH, sold out in minutes. A few days later, the founders deleted their website, Discord server, and game server, and took off with all the money. (PC Gamer)

Someone just came up with the idea of selling NFTs of colors. Why? Because you can. Behold the Color Museum, another example of how ridiculous some of these NFT projects have become. (Twitter thread)

LooksRare is a new NFT platform. It’s doing gangbusters! In fact, it’s the biggest rival to top NFT marketplace OpenSea. There’s just one thing — all of the buyers and sellers are the same people. CryptoSlam identified $8 billion sales on the platform that were wash trades. (Decrypt)

A German museum lost two CryptoPunk NFTs, worth $400,000 in crypto. Last spring, while trying to move them to another wallet, a cut-and-paste error sent the Punks to the wrong wallet address. Oops!(The Art Newspaper)

Melania Trump’s NFT auction didn’t go as planned. The sale came in under 30% of its starting bid, due to a crash in SOL, the token of the Solano blockchain. Sad! (NYT)

A disturbing trend is developing in the NFT world, wherein promoters seek to destroy physical art, so items only exist in the digital world. New Zealand auction house Webb’s is selling two NFTs of historic photos along with the glass negatives. If you buy the NFT, you get the glass negative along with a hammer to smash the artifact. (Webb’s auction portal, Newshub)

A French surgeon faces legal action after he tried to sell an NFT of an X-ray without the patient’s consent. The patient was shot in the November 2015 Paris attacks. The image was up for sale on OpenSea for $2,800. (Guardian)

Game developers have zero interest in NFTs, according to a survey by the Game Developers Conference. The comments at the end of the article are gold: “Burn ‘em to the ground. Ban everyone involved in them. I work at an NFT company currently and am quitting to get away from it.” (Kotako)

Crypto NFTs are rife with fraud. “We’re just seeing mountains and mountains of fraud in this area,” a special agent at the IRS’s criminal investigation division, said. (Bloomberg)

How VCs cash out on Web3

Fais Kahn wrote a blog post a few weeks ago on how VCs dump their shitcoins on retail by getting the coins listed on Coinbase. A16z is a Coinbase backer and holds a seat on the company’s board. Coinbase also has its own investment arm — Coinbase Ventures. Kahn’s post has gotten some attention! 

As a follow up, Ed Zitron wrote “Crypto, Web3 and The Big Nothing.” Most startups fail, and a liquidity event, if it does happen, can take years. “What Web3 allows founders to do is create companies that might do something and immediately capitalize on those promises. Instead of having to provide a service to users, you incentivize them by involving some sort of token — fungible or otherwise — that will theoretically increase in value as the company grows and does the thing it theoretically might do.”

Also referencing Kahn’s work, the FT wrote: “The Coinbase model, profit from companies it lists.” The FT did its own research. It found 20 tokens that Coinbase listed while holding an investment in a related project. Of those 20 projects, Coinbase disclosed only 12 as holdings on Coinbase Ventures.

“In the securities world, conflicts of interest have to be identified, disclosed and managed,” Tyler Gellasch, executive director of Healthy Markets, an investor focused nonprofit, told FT. “In crypto, it seems to be a free-for-all.”

Regulations

The SEC is taking a look into Celsius Network, Voyager Digital and Gemini Trust, companies with high-yield product offerings. These firms offer rates on tokens of 3% to as high as 18%. The question is whether these tokens are securities. The answer is, probably. (Bloomberg)

Alexis Goldstein has joined the Consumer Financial Protections Bureau, a federal agency created in the wake of the 2008 financial crisis. In her previous position as financial policy director at the anti-monopoly organization Open Markets Institute, she has been a vocal critic of crypto. (Read her Senate Banking Committee testimony on stablecoins if you haven’t already. It’s full of good info.) (Bloomberg)

Other news worth noting

Jennifer Robertson is getting criticized for “Bitcoin Widow.” Folks keep asking how she could have been so oblivious to Gerald Cotten’s shenanigans. Stephen Kimber, her ghostwriter, wrote an an entire article defending her. He points the finger back at Quadriga investors — the ones who actually lost money and are still waiting, three years later, to get a tiny portion of it back. “And yet no one asks them what the hell they were thinking, trusting this scam artist with their life savings?” (Halifax Examiner

FTX US gets a $400 million Series A with an $8 billion evaluation. Paradigm, Temasek, Multicoin Capital, and SoftBank led the round. The crypto exchange plans to use the funds to “accelerate its growth,” so it can leave Coinbase in the dust. (CNBC

Bermuda-based FTX also announced a $400 million Series C round, valuing the company at $32 billion. Existing investors included Japan’s SoftBank and Canada’s Ontario Teachers’ Pension Plan. FTX is one of Tether’s biggest customers. (FT)

The International Monetary Fund wants El Salvador to remove bitcoin’s status as a legal tender, dissolve the $150 million trust fund it created when it made BTC legal tender, and eliminate the $30 incentive for people to start using the digital wallet Chivo. It suggested there could be benefits to Chivo, but only if it uses actual dollars, not BTC.

The IMF warned President Nayib Bukele of the risks crypto poses — money laundering, corruption, etc. — and stressed that it would be difficult to get a loan from the institution. (IMF, Bloomberg 

Facebook Diem is having a fire sale, so it can return some money back to Diem’s investors. The project is officially dead. It’s just a matter of getting rid of the body. (Bloomberg, David Gerard)

Tether’s new accounting firm is the same as the old one. Moore Cayman is now operating under the MHA Cayman name. Also, the firm’s parent, MacIntyre Hudson, is under investigation in the U.K. (MHA announcement, Coindesk)

Texas Governor Greg Abbott thinks bitcoin miners can save the energy grid. (Decrypt)

In her latest blogpost, “Abuse and harassment on the blockchain.” Molly White says that in order to responsibly develop new technologies, we need to ask: “How will this be used for evil?” (Molly White)

Frances Coppola has returned to writing again after a break. She has taken a look at the Bitcoin ETF applications the SEC keeps rejecting. The problem isn’t the applications, it’s the market. (blog post)

This is fascinating. Ponzi schemer Stefan Qin was interviewed days before heading off to prison. The 24-year-old ran a crypto hedge fund until it imploded in late 2020 and lived in a posh $24,000/month NYC apartment — with extra bedrooms for all the sugar babies. (Youtube)

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