Market Watch: Kraken Exits Japan, Argo Blockchain Secures $100 Million Bailout, Defrosting and BitKeep Security Incident Updates and More
A cocktail of adverse factors ranging from the collapse of the Terra ecosystem, Chapter 11 bankruptcy filing of FTX entities, miners’ strain and an undermining macro environment have collectively tied down the digital asset sector. Crypto market data provider RootData estimates that nearly 100 crypto-related projects have shut down, filed for bankruptcy, disappeared or had their websites shut down this year alone. A separate report prepared by crypto market aggregator CoinGecko on November 29 found that 3,322 of the more than 8,000 cryptocurrencies listed on the platform since the November 2020 market bull have also met their demise in the same cycle. The figure equates to roughly 41.50% of coins previously listed on the platform’s tracking dashboard failing. The report additionally presented that apart from 2021, an average of 947 cryptoassets listed each year for the stretch between 2018 and 2022 have been found to be incorrect. Here are Wednesday’s leading headlines:
Kraken plans second exit from Japan, citing an unsuitable crypto market
Barely a few days after the news that Japan’s Financial Services Agency is considering lifting its ban on foreign-issued stablecoins, Kraken has revealed that it will deregister from the market regulator, effectively ceasing to be a crypto-asset exchange operator at the end of January. This is the second time the exchange, which managed services in the Asian market through a subsidiary company Payward Asia, has ended operations in the region after an initial period between 2014 and April 2018. The exchange explained in a Wednesday post that the decision is part of the effort to “prioritize resources, ” adding that “current market conditions in Japan [combined] with a weak crypto market globally” has made the Japanese business that was relaunched in October 2020 unsustainable. The exchange team notified users that some trading functions will be available after deposits have been stopped on January 9 until the exit date. It’s worth noting that Kraken laid off around 1,100 employees – about 30% of its workforce – on November 30, prompting the adjustment to low trading volumes and fewer customer registrations.
US Department of Justice arrests Mango Markets exploiter
Elsewhere, legal action has finally been taken against the Mango Markets operator months after the security incident. Crypto trader Avraham Eisenberg came forward shortly after the exploit on the Solana-based decentralized exchange that resulted in the draining of $113 million on October 11th. the exchange’s native token MNGO, artificially inflating its price (relative to the USDC stablecoin) by 1300%. They then took huge loans against inflated collateral from the platform’s asset pool which had deposits from Mango Markets investors resulting in insolvency. After negotiations with the exchange, Eisenberg agreed to return $67 million of the lost sum, while the Mango community voted to let him keep $47 million as a bounty.
A complaint filed in the Southern District of New York and unsealed Tuesday revealed that the Federal Bureau of Investigation (FBI) arrested Eisenberg in Puerto Rico on Boxing Day. Eisenberg, who called his exploits “lawful open market actions” in his plea, has been charged with one count each of commodity manipulation and commodity fraud. FBI Special Agent Brandon Racz noted that Eisenberg said the manipulation was legal even though he knew it was not, hence his flight to Israel to evade law enforcement. No similar arrest announcements have been made for the rest of his team. In November, Eisenberg attempted a similar move on DeFi protocol Aave by betting on a price drop after taking out a loan of 40 million Curve Finance’s native token CRV from Aave, but the attack failed.
DeFrost Finance to deploy smart reimbursement contracts
DeFrost Finance, the DeFi protocol that was hacked last Friday in a potential case of a cover-up, according to blockchain security firm PeckShield, shared in a December 27 update its next steps to refund the affected community. The platform’s V2 product was drained of funds in a first attack that the team said was via a flash loan, while a second attack was carried out on V1. The Defrost Finance Team previously confirmed that all V1 hacked funds have returned and will now review on-chain data to determine user balance prior to the attack. The team also noted that all Ether tokens in the address will be converted to DAI and all stablecoins will be crossed to Avalanche from Ethereum.
In a similar development, BitKeep CEO Kevin Como on Tuesday warned users in a letter posted on Chinese news outlet Odaily.com that their private keys are still at risk following the recent security incident. Wallet users began reporting unauthorized fund transfers to their accounts on December 26. Not long after, the BitKeep team said that attackers had hijacked some APK package downloads and that some users may have installed them. Como and the team informed all users who downloaded BitKeep 7.2.9. APK malware to instantly transfer their assets to recognized wallets, while encouraging those affected to create new wallet addresses, as their previous ones may be compromised. In the wake of the incident, BitKeep has contacted several blockchain security firms to help trace the lost funds. The last exploitationif reported losses were north of $13 million, it comes barely three months since the wallet was drained of $1 million worth of BNB tokens through an exchange-enabling service.
Argo to resume trading in ADSs and unsecured notes as Galaxy Digital throws a lifeline
Earlier this month, Argo reported that it was in advanced talks to redeem some of its assets and complete an equipment financing transaction to strengthen its liquidity position and avoid bankruptcy. The mining company has agreed to sell its largest Helios mining facility in Texas to Galaxy Digital for $65 million, according to a Dec. 28 statement to CoinDesk. The report also detailed that the miner has received a $35 million loan (secured by the mining equipment) from the Novogratz-led investment company bringing the bailout to $100 million. Argo CEO Peter Wall noted that the deal with Galaxy would “help reduce [its] debt burden and maintaining access to the unique power grid in Texas” as his life to fight another day. An earlier agreement to sell its equity worth $27 million in October did not materialize.
The 180 megawatt (MW) Texas facility will be Galaxy’s flagship in the mining sector. The tech-driven financial service is nearing completion of its proprietary mining facility in Texas and previously bought crypto self-custodian platform GK8 at a discount from bankrupt crypto lender Celsius on December 13. Argo had plans to expand the Helios facility’s capacity and computing power to 800 MW and 20 exahash/second (EH/s) respectively. This expansion will, at least on paper, make the new owner, Galaxy, one of the largest bitcoin miners.
Wednesday’s statement further revealed that as part of the arrangements, Argo has entered into a hosting agreement with Galaxy that will allow the computers to continue running at the Texas-based facility for two years. The company announced yesterday that it had requested a suspension of trading for its ADSs and unsecured notes traded on Nasdaq when the London Stock Exchange was closed for trading on the said day. Argo is one of the mining companies exploring unconventional options as a last resort to remain operational. Others, such as Core Scientific and Compute North, have filed for bankruptcy. Connecticut-based miner Greenidge recently revealed it agreed to restructure its $74.7 million debt with lender NYDIG, but the issue of bankruptcy remains unresolved.
