2022 Week 28 — Bisonai Brief

Hi all 🙂

There has been tons of news in the industry, so as usual, we have picked out some of the most newsworthy pieces for you. You can find this newsletter on both LinkedIn and Medium.

In this week’s edition, we discuss the decision by Celsius to file for chapter 11 bankruptcy, Solana’s lawsuit, Ethereum’s merge date and rise in price and Animoca Brands’ hefty evaluation of almost US$6 billion despite the continued bear market.

In Korean news, Dunamu budgets almost US$400 million to aim for 10k Web3 jobs, SK aims to release a crypto and NFT wallet and in the North, CNN releases an expose on hackers and notes that there is ‘nothing holding them back’.

This newsletter is a summary of a number of largely unrelated news pieces from the crypto-verse that might be crypto/DeFi/NFTs/VCs/Macro but touch upon DeFi. It is aimed at people who want to stay abreast of some of the news but are not following along too closely. It is put together by Bisonai — a DeFi company in Seoul that bridges together AI + Blockchain.

If you’d like to get in touch, ping us at business@bisonai.com. ✉️ Previous newsletters can be found here.

[tl;dr]

  • Celsius filed for bankruptcy in order to “stabilize” its business.

Korea Corner

  • South Korean crypto giant Dunamu will invest US$365 million to generate 10,000 Web3 jobs during a downturn in the economy.

Celsius files for bankruptcy in order to “stabilize” its business.

Following notifications to specific US agencies, troubled cryptocurrency lender Celsius filed for bankruptcy, following earlier counsel from its previous attorneys to do so, according to Blockworks.

According to a corporate blog post, Celsius announced late Wednesday that it and specific subsidiaries had voluntarily filed applications for reorganization under Chapter 11 of the US Bankruptcy Code in the US Bankruptcy Court for the Southern District of New York.

“Celsius initiated a financial restructuring to stabilize the business and maximize value for all stakeholders, the lender said in its post. “Acting in the best interest of our stakeholders, including our entire customer community, is our top priority.”

In order to revive activity throughout its platform, the lender stated that it plans to “put forward a plan.” Last month, Celsius stopped processing withdrawals, citing “extreme market conditions” as the cause. According to Celsius, the majority of account activities will be suspended until further notice.

The lender, which at its peak had managed around $8 billion in crypto loans with about $11.8 billion in assets for over 1.7 million members as of May, has undergone this newest transformation.

According to reports, Celsius rejected legal counsel from its own attorneys who had advised it to file for bankruptcy, arguing that user support would enable it to do so.

A former crypto money manager and employee of Celsius has also filed a lawsuit against the lender on claims that the company stole customer funds to make up for losses in its lending business. Using information from Arkham Intelligence, it is estimated that the manager cost Celsius $61.2 million in liquidations.

Despite a 40-year inflation high, the price of Ethereum has risen beyond $1,600. Since the news that Ethereum will switch to proof of stake on September 19 surfaced, ether has increased by 40%.

Although it isn’t an all-time high, any positive news is welcome during the crypto winter. The market capitalization of Ether, the second-largest cryptocurrency, has increased by around 40% over the past week and surpassed $1,600 on Monday. Though well below the cryptocurrency’s $4,800 high from last November, this marks the first time since June 13 that ether has surpassed that threshold, according to CNET.

The prospects of a worldwide economic recession have been particularly harsh on Ether. The cryptocurrency has lost over 70% of its market cap since the start of the year as of last week, before ether’s comeback. According to CoinMarketCap, it temporarily fell to $993 on June 19 when it reached its lowest point. The nonfungible token market is based on ether, hence NFT values have also fallen during the past month.

At the time of writing, ether is worth $1,530, up 30% from where it was six days ago. The increase is particularly notable in light of the recent report that June’s inflation rate was 9.1 percent when compared to the previous year, the highest level since November 1981. A Federal Reserve eager to combat inflation has raised interest rates, which has resulted in a sharp decline in cryptocurrency value.

News that the Ethereum Merge, which would make the blockchain almost carbon neutral, is likely to be carried out on September 19 is thought to be the cause of Ether’s more noticeable bounce. During a recent conference call among Ethereum developers, the date was noted as being tentative, but it is possible that it will alter.

With the Ethereum Merge, the blockchain’s current proof-of-work mechanism will be replaced with a proof-of-stake one. What does all that crypto-jargon mean? The short version is that the energy-intensive aspect of blockchain mining — solving cryptographic puzzles — will no longer be involved. The carbon footprint of ethereum is predicted to decrease by 99.65 percent as a result.

Suit Against Solana Claims it’s an Unregistered Security.

Solana (SOL) is alleged to be an unregistered security under the Howey test in a class-action complaint brought by a California citizen on July 1 in the US District Court for the Northern District of California. Lead plaintiff Mark Young, a SOL investor, is suing Solana Labs Inc., the Solana Foundation, Multicoin Capital Management LLC, Kyle Samani, Solana Labs CEO Anatoly Yakovenko, and Falconx LLC, as reported by Cryptoslate.

“Because Solana Labs and its insiders directly control more than 50% of the total SOL supply significantly, the underlying value of SOL depends primarily on the efforts taken by Defendants.”

According to the petition, the defendants made money from selling SOL securities to US retail investors while breaking the registration requirements of federal and state securities laws. The plaintiff claimed that the defendants knowingly made claims concerning Solana’s decentralized structure and overall circulating supply that were inaccurate or misleading.

The plaintiff also claimed that after buying SOL assets in 2019, Kyle Samani and Multicoin Capital Management promoted them before selling millions of dollars worth of SOL securities to regular investors through the OTC trading platform Falconx. The court documents further suggest that SOL’s specific circumstances support the finding that the coin satisfies the Howey test for security status.

“Purchasers who bought SOL securities have invested money or given valuable services to a common enterprise, Solana. These purchasers have a reasonable expectation of profit based upon the efforts of the promoters, Solana Labs and the Solana Foundation, to build a blockchain network that will rival Bitcoin and Ethereum and become the accepted framework for transactions on the blockchain.”

Not only is Solana being criticized for being an unregistered security, but Ripple Labs has also been sued by the US Securities and Exchange Commission (SEC) for selling what it considers to be an unregistered security, the cryptocurrency XRP. The SEC also sued two Ripple Labs officials on December 22, 2020, for marketing XRP as a security without registering with the SEC. Despite the lawsuit, some investors think this is a good moment to purchase XRP.

Additionally, Binance US was sued in June on allegations that it offered Terra (LUNA) and TerraUSD (UST), which were allegedly unregistered securities. For allegedly selling multiple unregistered crypto securities, Coinbase was sued in March.

As the crypto winter worsens, Animoca Brands’ valuation reaches $5.9 billion.

In a funding round, blockchain game developer and cryptocurrency investor Animoca Brands secured $75 million, giving the Hong Kong-based business a $5.9 billion valuation.

According to Animoca, among the investors in the round are previous backers Liberty City Ventures, Kingsway Capital, and 10T Holdings. This fundraising effort is the second round of the $358,888,888 round that was initially announced in January but was postponed to allow for due diligence. According to Animoca, the money will be spent on investments, acquisitions, product development, and intellectual property licenses.

The newest attempt by Animoca to raise funds comes as the cryptocurrency market continues to tank. Some of its counterparties are frantically trying to reclaim damages and retrieve assets as a result of the bankruptcy of Singapore-based cryptocurrency hedge fund Three Arrows Capital, according to Forbes.

Following the collapse of the Terra stablecoin and the Fed’s interest rate increases, which prompted investors to sell riskier assets, the market has experienced cascading losses. According to tracker CoinGecko, the market value of all cryptocurrencies has decreased by 70% from its peak of $3 trillion in November.

“There is no question that the fundraising environment has become more challenging, but at the same time the current crypto climate has also enabled some users to gain a better entry point to the open metaverse,” Yat Siu, cofounder and chairman of Animoca, said in an email. “Of course, we have to be a bit more prudent, but we have a long-term vision for this space and are both committed and patient.”

Just last week, blockchain game developer Planetarium Labs raised $32 million in funding headed by Animoca. Additionally, it has purchased Notre Game, a blockchain gaming company with its headquarters in Prague. In spite of the market downturn, the industry has remained comparatively resilient. Compared to a 26 percent decline in the overall crypto business, it only saw a 5 percent decline in unique active wallets in the second quarter, according to data from DappRader.

Yat believes that the wider industry will recover within the next one to two years. “Similar to how Covid has highlighted systemic problems in the physical world and driven more people to spend online, the current economic circumstances will highlight opportunities in the open metaverse,” he said.

Korean Corner

In the midst of a bad market, a Korean fintech company intends to add 10K Web3 positions.

The South Korean finance giant anticipates that the investment would be able to generate 10,000 employment in the Web3 sector over the course of the next five years, according to local news source the Korea JoongAng Daily. In addition to generating jobs, the investment, according to CEO Lee Sirgoo, would boost domestic industry’s competitiveness.

“We plan to strengthen the competitiveness of domestic industry through an active investment and creation of jobs of the newly growing future industries, like blockchain, non-fungible token (NFT) and the metaverse,” Sirgoo said

According to Dunamu, it would establish offices in all of the major cities in South Korea to use the funds. To attract fresh minds to the blockchain technology industry, the company will also create a training program. Students who just graduated from college and intend to launch 500 new firms will be given preference under this program.

The declaration comes after the South Korean government revealed that it had set aside KRW223.7 billion (or about $117.1 million) to invest in projects related to the metaverse. Under the Ministry of Science and ICT, government investment is a component of the Digital New Deal project.

However, this is not Dunamu’s first investment of this nature. Dunamu disclosed an investment of more than $46 million in 26 different blockchain firms in a similar program from earlier in 2019. Notably, that investment was made following a weak market in which many companies dealing with digital assets struggled.

Leading South Korean telecom operator, SK, aims to release a blockchain wallet for cryptocurrency and NFTs.

In order to create a digital wallet that can support cryptocurrencies, nonfungible tokens, and digital credentials, South Korean telecom giant SK Telecom has joined forces with other blockchain companies.

On July 11, SK Telecom announced that its blockchain division would be working with AhnLab Blockchain Company and Atomix Lab to create and run a Web3 wallet. The company claims that in addition to being able to store digital assets, Soulbound Tokens, or SBTs, will be used to validate credentials, including memberships and certificates.

Atomix Lab will employ secure multiparty computation encryption for the blockchain wallet before continuing to provide technical assistance while SK Telecom and AhnLab Blockchain Company “take over the operation.” Atomix Lab will then carry on to provide technical support. The personal wallet is the “greatest hurdle to the spread of the blockchain ecosystem,” according to Woo-Hyun Jung, CEO of Atomix Lab, and the project intends to strike a balance between security and practicality.

The introduction of a user-friendly crypto wallet by SK Telecom, one of the biggest mobile operators in South Korea, could have an impact on adoption there. About 30 million South Koreans, or about 58 percent of the country’s population, have mobile subscriptions through SK Telecom as of December 2021. In order to solve certificates in the midst of the epidemic, the company also debuted a wallet for blockchain-powered digital certificate storage in 2020.

‘Nobody is holding them back’ — Increased risk of cyberattacks by North Korea

Now to news in the other Korea, as the nation struggles with protracted economic sanctions and resource limitations, cyberattacks by North Korea against cryptocurrencies and digital companies will only advance in sophistication over time, reports CNN.

According to former CIA analyst Soo Kim, North Koreans now view the practice of earning cryptocurrency income abroad as a “way of life.”

“In light of the challenges that the regime is facing — food shortages, fewer countries willing to engage with North Korea […] this is just going to be something that they will continue to use because nobody is holding them back, essentially.”

The DeFi Edge highlighted that these crypto attacks often target bridges, concentrate on Asian-based businesses, and frequently start by attacking naive staff in a lengthy Twitter exposé about North Korean hackers.

The nation has been implicated in some of the costliest hacks in recent crypto history, such as the $620 million Axie Infinity compromise and the $100 million Harmony protocol hack.

According to research published on June 29 by Coinclub, North Korea is home to up to 7,000 full-time hackers who work to collect money through cyberattacks, ransomware, and crypto-protocol intrusions.

A 39-year-old American computer programmer named Virgil Griffith was sentenced to more than five years in jail in April for breaking US sanctions against North Korea after giving a speech on how to circumvent sanctions at a blockchain conference there in 2019. In a statement provided to the judge prior to sentencing, Griffith admitted his involvement and expressed “deep sorrow” and “shame” for his conduct, which he blamed on a compulsive need to visit North Korea “before it fell.”

Thanks for your readership! If you’d like to get in touch, email us at business@bisonai.com. 📧

Previous newsletters can be found here. Until next time, have a great week ahead!

About Bisonai

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Originally published at https://bisonai.substack.com on July 20, 2022.

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Bisonai Technology Group focuses on solving hard technical problems with the use of Blockchain and Artificial Intelligence. https://bisonai.com/

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Bisonai

Bisonai Technology Group focuses on solving hard technical problems with the use of Blockchain and Artificial Intelligence. https://bisonai.com/