Crypto is going back: Ethereum front-runner charged, Coinbase looking to re-enact 2022 crash, Uniswap responds to SEC, the not-Telegram Open Network, Wyoming

  • By Amy Castor and David Gerard

The Three Stooges keep getting hired despite their long track record of workplace violence, poor teamwork, and property damage. If their history was stored on a blockchain ledger and viewable by potential employers, they would be incentivized to rein in the monkey business.




The alleged integrity of the Ethereum blockchain

Two dastardly alleged scammers, Anton and James Peraire-Bueno, have been arrested for wire fraud on the Ethereum blockchain! They … front-ran the front-runners. [Press release; indictment, PDF]

We gave an overview of how MEV works on Ethereum previously. Smart contract execution depends on the order of the transactions in a block. So if you can reorder transactions, you can put in your own transaction ahead of someone else’s to front-run them and take the profit they were hoping to make.

Front-running is a crime under US law. But the Ethereum Foundation couldn’t stop the front-runners. So it decided to embrace them! Front-running Ethereum’s users is now officially part of how Ethereum works. [Ethereum Foundation]

CoinDesk covered the original attack back in April: “a validator appeared to force a series of transactions into the block to steal funds the bot had planned to gain by front-running.” [CoinDesk]

The big problem in prosecuting financial crimes is that the details are complicated and obscure.

The DoJ will have to explain to a jury how Ethereum validation works, that you can order transactions in a block, that you can exploit that to front-run people, and that some front-running is officially part of the system, but only because they couldn’t work out how to stop it. And that this front-running is bad, for reasons.

We’re honestly surprised they managed to nail Avi Eisenberg on his complex DeFi trades.

In the DoJ’s favor, the present perpetrators allegedly forged digital signatures and did web searches to see if the funds they took would need laundering.

US Attorney Damian Williams announced that “the defendants’ scheme calls the very integrity of the blockchain into question.”

We think this is a bit much — given the alleged “integrity” was the Ethereum Foundation just declaring that crime was legal now.

A US Attorney should not be proclaiming a playground for crime like Ethereum as some bastion of integrity. Ethereum is the primordial slime of crypto fraud, where new frauds evolve and develop. It always has been.

These two guys did (alleged) crimes — but frankly, everyone here sucks.

Coinbase: nostalgia for 2022

Remember how in 2021 and 2022, crypto firms made massive loans to each other, rehypothecated the loans for money to make more loans, and everything worked out just fine and the whole system didn’t collapse the moment the slightest thing went wrong?

Yeah, us neither.

As retail investors continue not to come back to crypto trading, Coinbase, the largest actual-dollar crypto exchange, is desperate to find new lines of business. So why not try the precise thing that exploded last time? [The Information, paywalled]

Crypto has always been a boom-and-bust business. And right now, Coinbase is flush. That has allowed the crypto exchange to lend more money to big traders, which have struggled to borrow since the 2022 market collapse wiped out Genesis, Voyager and most other big crypto lenders.

By “flush,” they mean that a change in accounting rules let Coinbase file a $200 million profit for the first quarter of 2024 — even as no extra dollars flowed in.

Coinbase wants to get into this market niche because there are no stupid CeFi firms right now — they all collapsed. Maybe Coinbase can be the next stupid CeFi firm!

Crypto suffers both from too much money — illiquid cryptos accounted as millions and billions of “dollars” — and too little money — actual dollars that exist failing to come in from retail suckers so the holders can cash out.

This inspires crypto firms to put forth ever more elaborate duct-taped “how do you like that, Elon Musk?” financial engineering in the desperate and frantic shuffle to pretend there’s a “there” there.

So we now have The Information literally invoking by name Voyager and Genesis, who both died of bad loans to Three Arrows Capital. Because 3AC were taken out when the Terra-Luna Ponzi box fell over. And a huge number of other firms collapsed in the wake of Terra-Luna and 3AC.

What incredibly obvious time bomb will Coinbase end up lending to?

We are confident that the next stage of the crypto collapse will continue to be a Scrooge McDuck money bin of comedy gold.

Uniswap Wells response

In April, DeFi platform Uniswap received a Wells notice of impending legal action from the SEC.

They haven’t posted the Wells notice — but they have posted their response! [Twitter; blog post, archive; response, PDF, archive]

We particularly liked how Uniswap refutes the SEC’s allegation that it’s running (for profit) a trading platform for unregistered securities with a 43-page PDF explaining in precise technical detail how it runs (for profit) a trading platform for unregistered securities. This may save the SEC some work.

Telegram’s use case for Tether

The tether stablecoin has launched on TON, the blockchain originally developed by messaging company Telegram, bringing the total number of blockchains that tethers run on to 15. This is great for wash trading and chain swapping. And, we presume, Telegram users sending crypto payments to each other. There’s only 60 million USDT on TON at present. [Tether; Bloomberg, archive]

Telegram created TON as the blockchain for its GRAM token, which was offered in an ICO in late 2017 and early 2018. TON was supposed to go live in October 2019 — but the SEC went after Telegram for this blatant dump of unregistered securities on retail. In April 2020, the SEC’s injunction was made permanent. Telegram was forced to return $1.2 billion to US investors and pay a $18.5 million fine.

Telegram abandoned TON because they couldn’t have any involvement with TON without breaking the injunction. So a totally independent group of all the same people started FreeTON to set up a network using Telegram’s old blockchain software.

FreeTON then changed its name to TON and was adopted by Telegram as their official blockchain.

It’s important to note that TON is a totally independent bunch of guys — the Russian investors who put money into TON when Telegram was trying to do it as an ICO — that Telegram has just gone into partnership with. TON certainly won’t be used for laundering proceeds of crime or sanctions evasion.

Home on the range

Caitlin Long’s battle for a master account for Custodia Bank of Wyoming continues. A year ago, the Fed rejected Custodia’s application for a master account because the Fed had serious concerns about backing crypto wildcat pseudo-dollars with central bank money. Custodia argued it was entitled to a master account anyway. A federal judge sided with the Fed, and now Custodia is appealing the ruling. [Doc 321, PDF]

Wyoming state legislators are loudly upset and will do … something? Possibly they will allow Wyoming SPDI banks such as Custodia to transform into state trusts. [Cowboy State Daily]

Meanwhile, Senators Cynthia Lummis (R-WI) and Kirsten Gillibrand (D-NY) have put in a new stablecoin bill. This bill just happens to allow state banks to issue stablecoins themselves — which would give Custodia the bank-backed wildcat dollar they were hoping to issue. You might think that was the point of the bill. This version doesn’t seem much more popular than their 2022 attempt, which even the crypto industry didn’t much like. [press release]

And now, a word to our sponsors

My tawdry launderette

BTC-e founder and ex-fugitive Alexander Vinnik has pleaded guilty to money laundering conspiracy. BTC-e was the favored exchange for crypto-using criminals for many years. [DoJ]

Tornado Cash developer Alexey Pertsev just got 64 months in the Netherlands. This seems to have in fact been a conviction for writing the code. [CoinDesk]

Why bother with darknets when you can just run your Colombian cocaine money through Tether? The main guy charged is Cartier family scion Maximilien de Hoop Cartier, who ran OTC desk Vintech Capital — and he used Vintech to launder the cash. [DoJ; indictment, PDF]

Bitcoin mining on half the pay!

The bitcoin halving happened at 00:09 UTC on Saturday, April 20, when block 840,000 was appended to the blockchain … followed by a surge in transaction fees. The price did not get any closer to the moon. [CoinDesk]

Bitmain, manufacturer of most bitcoin mining chips and administrator of a couple of mining pools, seems to control a solid majority of bitcoin mining. Antpool seems to generate the candidate blocks used by several smaller “independent” pools — Pool, Binance Pool, Poolin, EMCD, and Rawpool. Decentralized! [Protos]

Back in the early days of bitcoin, “cloud mining” was a common scam — I have a money printing machine, but instead of just printing money I’ll rent it to you and I’ll get less money! The “cloud miner” would then disappear with the investor’s money. Anyway, Geosyn Mining LLC and its principals, Caleb Joseph Ward, and Jeremy George McNutt, just tried the same scam. Though at least Geosyn bought some mining rigs. Ward and McNutt took in $5.6 million and actually paid out $354,400 even though the mining business never turned a profit. The SEC is charging them with fraud. [Press release; complaint, PDF]

Susie Violet Ward, a.k.a. DecentraSuze, crypto blogger for Forbes and CityAM and head of Bitcoin Policy UK, accuses Jackie Sawicky of having bribed us to write about the Texas Coalition Against Cryptomining. Yeah, non-crypto-promotional media doesn’t work like that. [Twitter]


Binance was busted in November 2023 and agreed to appoint compliance monitors. These have finally been appointed. Forensic Risk Alliance will be monitoring for the Department of Justice and Sullivan & Cromwell will be monitoring for FinCEN. [Bloomberg, archive; WSJ, archive]

The compliance monitors are only to stop money laundering from going through Binance. The exchange itself continues to be a free-for-all of wash trading and market manipulation. Two traders turn out to be most of Binance’s volume, and one of those appears to be DWF — who deny wash-trading, because of course they do. [WSJ, archive; The Block]


The FTX examiner’s report is out. 234 pages of crime, crime, crime! We’ll go through this more closely later. It’s good. [Report, PDF]

FTX customers — or at least those whose claims were deemed valid — are likely to get repaid the dollar value of their claims as at November 11, 2022, in full — plus interest! Crypto holders are, of course, whining that bitcoin went up since then so they should rightfully get back so much more on their gambling. And never mind that in November 2022, they were looking at pennies on the dollar. [Bloomberg, archive; Doc 14300, PDF]

How are our friends the Effective Altruists doing? Well, the castle that Effective Ventures didn’t technically buy with donations of stolen FTX customer money as such is up for sale. This is likely because Effective Ventures had to give $26.8 million of what definitely was stolen FTX customer money back to the bankruptcy estate. [Rightmove, archive; Bloomberg, archive]

Effective Ventures was investigated by the UK Charity Commission over its FTX links. The Commission found that they made some mistakes, but fixed them as far as was reasonably possible. Giving back the FTX money was very much in their favor. The Commission is quite used to charities being run by well-meaning incompetents, and Effective Ventures certainly reaches that bar. [Charity Commission]

Sam Bankman-Fried was interviewed in Brooklyn MDC by Puck News! The interview is a vapid and self-serving rehash of Sam’s late 2022 crime confession tour. We can see why Puck jumped at the chance of an interview, but the end result adds nothing to the historical record. You can read it in return for your email address if your curiosity overwhelms your judgment. [Puck News, paywalled]

Standee Store is here to satisfy all your many, many life-size cardboard cutout Sam Bankman-Fried needs. [Standee Store]




We were shocked to hear in 231 pages of detailed judicial opinion that Prof Dr Dr Craig Wright might not in fact be Satoshi Nakamoto and instead appears to be some sort of — dare we suggest it — perjuring fraud. [Approved judgment, PDF, archive]

There’s another 150 pages detailing precisely how Wright forged the documents, with breathtaking ineptitude. [Forgery allegations, PDF, archive]

We also enjoyed the FT Alphaville summary. [FT, archive]

Said Justice James Mellor:

I recognise that Dr Wright will disagree with my findings and this Judgment and, true to the form he displayed on numerous occasions during his oral evidence as regards the expert evidence, he may well allege that I didn’t understand his technical explanations or other aspects of the technology.

Before he went into law, Justice Mellor was an engineer, with a degree from Cambridge. He would have perfectly well understood every technical detail in the trial. Can you imagine sitting through Wright’s arrogant technobabble, knowing precisely what charlatanry this was and not being able to say so until the end?

Container drivers

The SEC has approved several ETH ETFs. The ETFs are just waiting on their S-1 filings. [SEC, PDF; The Block]

Grayscale has withdrawn its application to convert its Ethereum Futures Trust (ETHE) into an ETH ETF. [SEC filing, PDF]

Grayscale’s planned Bitcoin Mini Trust (BTC), a spinoff from GBTC, will have a 0.15% fee. That will be lower than any other Bitcoin spot ETF. It also makes a grab for the “BTC” ticker. [CoinDesk; SEC filing]

The good news for bitcoin never stops

US political donations are already bigger in 2024 than in the 2020 election cycle. We expect to be in work for a while. [Bloomberg, archive; Washington Post, archive]

Latest in the Celsius Network bankruptcy: their bankruptcy service company, Stretto, had a data breach following a phishing attack. Creditor names, email addresses, mailing addresses, and claim amounts were all leaked. Celsius has paused the distributions and creditors are very upset. [Doc 4834, PDF]

Crypto lender Cred went bankrupt in 2020. Three executives have now been arrested for wire fraud — CEO Daniel Schatt, CFO Joseph Podulka, and CCO James Alexander. The indictment isn’t linked, but the press release is quite detailed. [DoJ]

Sam Altman’s left pocket is doing a deal with Sam Altman’s right pocket — WorldCoin is hooking up with OpenAI. Meanwhile, WorldCoin is running out of its “orb” eyeball scanners. [Bloomberg, archive; Semafor]

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3 Comments on “Crypto is going back: Ethereum front-runner charged, Coinbase looking to re-enact 2022 crash, Uniswap responds to SEC, the not-Telegram Open Network, Wyoming”

  1. “ Cartier family scion Maximilien de Hoop Cartier”. Oh come on. This can’t be real. You will have to convince me you didn’t toss a Sam Spade novel in a blender for that.

  2. Jus ran ‘cross tha site 4 1stX.
    Incisive, caustic commentary.
    Lacks 4 nothing.
    Ya got weepy tears, ya got snickering,
    reflexiv tears– pure Grk theater.

    Keep it Up & Chuffed, Mate!

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