Weekly News Highlights | U.S. Treasury Department Blacklists Tornado Cash; Hotbit Announces Suspension of Deposit and Withdrawal Trading Functions

Organizer: Hu Tao, Chain Catcher

Important News

1. U.S. Treasury Department Blacklists Tornado Cash, Prohibiting U.S. Citizens from Using It

On August 8, the U.S. Treasury Department added Tornado Cash to its sanctions list, prohibiting all U.S. individuals and entities from interacting with Tornado Cash or any Ethereum wallet addresses associated with the protocol.

Subsequently, the GitHub account of Tornado Cash's founder was suspended, and Circle froze 75,000 USDC in Tornado Cash wallet addresses. Blockchain research firm Elliptic has marked all related addresses on the chain where Tornado Cash operates.

According to previous analysis by Slow Mist, 74.6% of the money laundering funds during security incidents in the first half of 2022 flowed to Tornado. (CoinDesk)

2. Dutch Authorities Arrest Suspected Tornado Cash Developer
On August 12, the Dutch Fiscal Information and Investigation Service (FIOD) arrested a 29-year-old man in Amsterdam. He is suspected of being involved in the development of Tornado Cash, concealing the flow of criminal funds, and facilitating money laundering. FIOD stated it would pay extra attention to decentralized organizations supporting money laundering.
Previously, the U.S. Treasury Department added Tornado Cash to its sanctions list, prohibiting all U.S. individuals and entities from interacting with Tornado Cash or any Ethereum wallet addresses associated with the protocol. (Source Link)

3. MakerDAO Co-Founder: Considering Selling All USDC in the Protocol Related to Tornado Cash Sanctions

On August 12, MakerDAO co-founder Rune Christensen stated that due to the sanctions on Tornado Cash, the consortium behind USDC, Centre, froze USDC funds in Tornado Cash wallets. MakerDAO may choose to sell all USDC exposure in the protocol, which could lead to DAI decoupling from the dollar, necessitating preparations for this situation. According to data from Makerburn, currently, 80% of the collateral backing DAI is Stablecoin, with 60% being USDC, and Maker's collateral includes approximately 3.44 billion USDC.
Previously, Vitalik Buterin responded to this proposal, stating, "Once ETH drops significantly, the value of collateral will drop sharply, but CDPs will not be liquidated, thus the entire system will face the risk of becoming partially backed." Rune Christensen mentioned that the recent U.S. Treasury sanctions on Tornado Cash are more severe than he initially thought. After the sanctions, the consortium behind USDC, Centre, froze USDC funds in Tornado Cash wallets. (Source Link)

4. Decentralized Exchange Curve Finance Hacked for $570,000, Curve Advises Users to Revoke Approved Contracts
On August 10, The Block reported that the frontend of decentralized exchange Curve Finance was hacked. Curve officials subsequently stated that the issue had been resolved and advised users to revoke any approved contracts on their platform.

Anonymous on-chain investigator ZachXBT reported that the hacker took approximately $570,000 and attempted to transfer the funds through the fully automated cryptocurrency exchange FixedFloat on the Bitcoin Lightning Network. Currently, the exchange has frozen and recovered about $200,000 of the stolen funds.

It is reported that the hacker allegedly changed the domain name service (DNS) entries of the protocol, cloned the website, and redirected the DNS points to their IP address, then added approval requests to malicious contracts to steal funds. (The Block)

5. Acala Hacked, Minted Over 1.2 Billion Stablecoin AUSD, Officials Urgently Vote to Suspend Network
On August 14, according to a tweet from 0xTaysama, Acala was allegedly hacked due to a vulnerability in the iBTC/AUSD pool, with the attacker’s wallet currently holding over 1.2 billion aUSD, causing AUSD to depeg and drop by 70%.

In response, Acala officials tweeted, "We have noticed a configuration issue affecting aUSD in the Honzon protocol. We are conducting an emergency vote to suspend Acala's operations while we investigate and mitigate the issue." (Source Link)

6. Cryptocurrency Exchange Hotbit Announces Suspension of Deposit, Withdrawal, and Trading Functions, Law Enforcement Freezes Part of Hotbit's Funds

On August 10, cryptocurrency exchange Hotbit announced the suspension of deposit, withdrawal, and trading functions, with no specific timeline for resumption. The reason is that former Hotbit management participated in a project last year that law enforcement now believes may have violated criminal law. Since the end of July, several senior Hotbit executives have been summoned by law enforcement and are assisting in the investigation.

Additionally, law enforcement has frozen part of Hotbit's funds, preventing it from operating normally. Hotbit stated that all user assets on Hotbit are safe and will resume normal services immediately after the assets are unfrozen. Hotbit is working to continue cooperating and following up on the progress of the law enforcement investigation and will announce the results as soon as possible. (Source Link)

7. National Internet Information Office: Centralized Rectification of Virtual Currency Speculation Chaos, 12,000 Violating User Accounts and 105 Websites Closed

On August 9, according to the "Internet Information China" WeChat public account, in accordance with the spirit of the "Notice on Further Preventing and Handling Risks of Virtual Currency Trading Speculation," the National Internet Information Office urged and guided major website platforms to effectively implement their main responsibilities, maintain a high-pressure crackdown on virtual currency trading speculation, and increase self-examination and correction of information content and accounts that induce virtual currency investment. Websites like Weibo and Baidu closed 12,000 violating user accounts, including @ICE暴雪创始人 and @币圈爆爷, and cleaned up over 51,000 pieces of violating information such as "Investing in Bitcoin is Easy Money."

The National Internet Information Office strengthened supervision and inspection, closing 989 Weibo, Tieba accounts, and WeChat public accounts that induce netizens to invest in "virtual currency," "virtual assets," and "digital assets" under the guise of "financial innovation" and "blockchain," such as @飞哥的故事江湖 and @绝对盘感比特币.

Additionally, local internet information departments were guided to interview over 500 business entities involved in virtual currency promotion and speculation, requiring a comprehensive cleanup of information content promoting virtual currency trading. The National Internet Information Office, together with relevant departments, will close 105 websites and platforms that specifically promote virtual currency marketing, publish tutorials on cross-border speculation, and "mining" of virtual currencies, such as "币头条." (Internet Information China)

8. Bloomberg: FTX and Sun Yuchen Negotiating to Acquire Li Lin's Huobi Stake for $3 Billion
On August 11, it was reported that Huobi founder Li Lin is seeking to sell his majority stake in the trading platform for $3 billion. FTX and Sun Yuchen have made initial contact with him, and shareholders such as ZhenFund and Sequoia China learned of Li Lin's decision at the July shareholders' meeting, with the deal potentially closing as early as the end of this month.
In response, a Huobi spokesperson confirmed that Li Lin is negotiating with several international institutions regarding the sale of his stake but declined to provide specific details. An FTX spokesperson declined to comment, while Sun Yuchen tweeted that he has not yet negotiated with Li Lin regarding the sale. (Bloomberg)

9. Asset Management Giant BlackRock Launches Private Trust, Directly Offering Spot Bitcoin Risk Exposure

On August 11, it was reported that asset management giant BlackRock launched a private trust to provide U.S. institutional clients with direct spot Bitcoin risk exposure. This trust will be offered to institutional clients in the U.S. and will become BlackRock's first product to directly access Bitcoin prices.
Additionally, BlackRock stated in a statement, "Despite the sharp decline in the digital asset market, we still see strong interest from some institutional clients in how to efficiently and economically acquire these assets using our technology and product capabilities." (Source Link)

10. Conflux Initiates Community Proposal CIP-102 to Change Its PoW Mining Algorithm to Ethash

On August 10, public chain Conflux initiated community proposal CIP-102, planning to change its PoW mining algorithm to Ethash to make it easier for Ethereum miners to switch their computing power to Conflux. (Source Link)

11. U.S. Regulators Propose Requiring Large Hedge Funds to Report Their Cryptocurrency Risk Exposure via PF Forms

On August 10, according to The Wall Street Journal, a joint proposal released by the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) on Wednesday requires large hedge funds to report their cryptocurrency risk exposure through a confidential document known as the PF form.

Under the proposal, hedge funds with over $500 million in net assets must report more information regarding their investment risks, portfolio concentration, and borrowing arrangements. The PF form was created after the 2008 financial crisis to allow regulators to detect bubbles and other potential systemic risks in the opaque private fund network.

Cryptocurrency data may be added to hedge funds' reporting requirements, reflecting regulators' concerns that extreme volatility in cryptocurrencies could ultimately affect the prices of other assets, especially if more traditional financial institutions begin investing in cryptocurrencies. (Source Link)

12. South Korean Internet Giant Naver's Zepeto to Build ZepetoX Metaverse Project on Solana
On August 10, it was reported that Naver's metaverse platform Zepeto is collaborating with Solana and Web 3.0 developer Jump Crypto to build ZepetoX, a cryptocurrency-based metaverse project.

It is understood that Zepeto will build the platform on the Solana chain and plans to launch its first NFT land sale in the coming months. The Zepeto metaverse project, created by South Korean internet giant Naver, reached an average of 20 million monthly users earlier this year. (Forkast)

Important Financing/Venture Capital News

1. LongHash Ventures to Launch Second Fund of $100 Million to Invest in Web3 Infrastructure

On August 10, LongHash Ventures CEO Emma Cui announced the launch of a second fund of $100 million to support Web3 infrastructure. Cui stated that LongHash Ventures is still raising funds and plans to raise $100 million for its Fund II by the end of this year, investing in Web3 infrastructure projects from Pre-Seed to Series A, covering sectors such as DeFi, NFT, GameFi, and the metaverse.

It is reported that LongHash Ventures has invested in over 60 crypto projects to date, including Polkadot, Astar, Acala, and Balancer. (Source Link)

2. Zero-Knowledge Proof Project RISC Zero Completes $12 Million Seed Round Financing, Led by Bain Capital Crypto
On August 9, it was reported that zero-knowledge proof project RISC Zero announced the completion of a $12 million seed round financing, led by Bain Capital Crypto, with participation from Geometry, D1 Ventures, and Cota Capital. The funds raised will be used to build a developer-friendly scalable blockchain.

It is reported that in March of this year, RISC Zero launched a zero-knowledge proof virtual machine that enables developers to build zero-knowledge proofs and execute them on any computer using various programming languages. (Source Link)

3. CreatorDAO Completes $20 Million Seed Round Financing, Led by a16z and Initialized Capital

On August 9, it was reported that the decentralized autonomous organization CreatorDAO completed a $20 million seed round financing, led by a16z and Initialized Capital, with participation from Paris Hilton and musicians The Chainsmokers.

It is reported that CreatorDAO invests in creators in exchange for a certain percentage of their future income, and the DAO structure allows for crowdsourced investment decisions and rewards contributions to the DAO, such as mentoring and collaboration. (Coindesk)

4. Messari Plans New Round of Financing at $300 Million Valuation, Seeking to Raise $35 Million

On August 9, it was reported by The Block, citing informed sources, that crypto data analysis and research firm Messari plans a new round of financing at a $300 million valuation, with one source stating that the company is seeking to raise $35 million. A year ago, Messari raised $21 million in a Series A round led by Point72 Ventures.

In early August, Messari announced the acquisition of Dove Metrics, a crypto financing database under Blackrose Capital, although transaction details have not yet been disclosed. Currently, Messari has integrated the Dove Metrics dashboard into its platform and will continue to develop dashboards with additional features in the future. (Source Link)