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From SBF to Taylor Swift, BlackRock, CZ and Binance: The top crypto stories of 2023

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From SBF to Taylor Swift, BlackRock, CZ and Binance: The top crypto stories of 2023

Euler Finance suffers $197 million flash-loan attack linked to whitehat’s bug-fix report

March also saw decentralized lending protocol Euler Finance hit by a flash-loan attack, resulting in a $197 million loss — including $136 million of staked ether, $34 million of USDC, $19 million of wrapped bitcoin and $8.7 million of DAI.

The attack exploited vulnerabilities linked to a bug fix implemented following a whitehat hacker’s report and caused the Euler token price to drop around 70%. The whitehat, “Kankodu,” was awarded $50,000 for the discovery, but the bug fix inadvertently created a new vulnerability that led to the attack.

Despite the significant loss, most of the drained funds were later recovered by Euler Finance after the exploiter accepted a bounty offered by the project.

Exploits on cross-chain router Multichain and crypto exchange Poloniex were also among the year’s largest.

Taylor Swift did her homework on FTX and dodged a bullet, said lawyer suing Tom Brady and Shaq

Lawyer Adam Moskowitz, leading a $5 billion class action lawsuit against celebrity promoters of the bankrupt FTX, highlighted Taylor Swift’s cautious approach in her dealings with the crypto exchange during an April episode of The Scoop podcast with Frank Chaparro.

Swift reportedly questioned if FTX was selling unregistered securities, a step most other celebrities, including Shaquille O’Neal and Tom Brady, didn’t take. Moskowitz’s lawsuit targets numerous high-profile individuals for promoting unregistered securities through FTX, and he expressed surprise at the lack of due diligence from most influencers.

However, New York Magazine later reported that Swift had signed on to be an FTX sponsor, and it was the disgraced former CEO Sam Bankman-Fried himself who decided to kill the deal, with Swift’s team left feeling disappointed.

BlackRock takes giant leap toward spot bitcoin ETF with SEC filing

In June, BlackRock filed a registration statement with the Securities and Exchange Commission for a spot bitcoin ETF. Known as the iShares Bitcoin Trust, the Delaware statutory trust will hold assets primarily consisting of bitcoin held by a custodian designated as Coinbase Custody Trust Company.

The ETF aims to offer a more accessible option for bitcoin investment, benchmarked against the CME CF Bitcoin Reference Rate from FCA-authorized crypto index Administrator CF Benchmarks, a subsidiary of Kraken.

The move followed BlackRock’s 2022 launch of a private trust for institutional bitcoin exposure, coming amid continued hesitancy from the SEC to approve spot bitcoin ETFs despite ongoing attempts by several investment firms.

21Shares/Ark Invest, Bitwise, VanEck, WisdomTree, Invesco/Galaxy, Fidelity, Valkyrie, Global X, Hashdex and Franklin Templeton are among those also seeking approval for a spot bitcoin ETF.

In October, the U.S. Court of Appeals for the D.C. Circuit also issued a formal mandate to assert its August ruling that the SEC needs to reconsider the bid from Grayscale Investments to convert its flagship GBTC fund into a spot bitcoin ETF. 

SEC sues Binance and Coinbase

The SEC initiated lawsuits against Binance and its former CEO Changpeng Zhao in June — alleging securities law violations.

The SEC also sued Coinbase, which followed one day after its Binance suit, accusing the crypto exchange of similar violations — operating without proper registrations and merging three functions typically separated in traditional securities markets: brokers, exchanges and clearing agencies.

The lawsuits also named several cryptocurrencies as securities, including SOL, ADA, MATIC, FIL, SAND, AXS, CHZ, FLOW, ICP, NEAR, VGX, DASH and NEXO.

The SEC previously issued Coinbase with a Wells notice — a formal notification informing individuals or companies that the SEC intends to bring an enforcement action against them — in March.

The agency also filed a fresh lawsuit against Kraken for allegedly operating an online trading platform without registering in November.

Ripple wins partial victory against the SEC

In July, a federal district judge sent the ongoing lawsuit between the SEC and Ripple to trial, refusing to grant a summary judgment on the status of XRP as an unregistered security.

Judge Analisa Torres ruled that XRP was not a security on the secondary market but would be a security when sold as part of an investment contract to institutional investors. Torres considered Ripple’s “programmatic” sales, which the firm used to sell XRP automatically on exchanges, as not constituting securities offerings as the buyers “did not invest in Ripple.”

Judge Torres denied the SEC’s motion for an interlocutory appeal of the case in October, noting it would not “materially advance the ultimate termination of the litigation.”

3AC co-founder Su Zhu arrested in Singapore

Su Zhu, co-founder of the defunct crypto hedge fund Three Arrows Capital, was arrested at Singapore’s Changi Airport in September for failing to comply with a liquidation investigation. Three Arrows Capital filed for bankruptcy amidst the 2022 crypto market turmoil and owes creditors over $3.5 billion.

Teneo, the fund’s liquidator, said in a statement on Sept. 29 that it had received a committal order against Zhu after he failed to cooperate with the firm’s liquidation investigation, despite an earlier Singapore court order compelling him to do so. The order sentenced Zhu to four months in prison.

On Nov. 28, he was allowed to serve the rest of his sentence under house arrest. He was released on Dec. 20, having served two-thirds of the sentence. The whereabouts of Zhu’s fellow co-founder, Kyle Davies, remain unknown.

Photographs obtained by The Block show the moment Zhu was arrested.

Su Zhu was apprehended at Changi Airport. Image: The Block Pro.

SBF guilty on all counts as jury rules he defrauded investors

Sam Bankman-Fried, the former CEO of FTX, was convicted on all seven criminal counts on Nov. 2 — including wire fraud and conspiracy — related to defrauding FTX’s customers, lenders and investors.

The verdict came after a trial scrutinizing his management of the crypto exchange and its sister trading firm, Alameda Research. Bankman-Fried’s testimony failed to sway the jury despite his claims of oversight lapses and business errors.

He now faces a maximum sentence of 115 years in prison, with Judge Lewis Kaplan scheduling sentencing for March 28. Bankman-Fried also faces five further charges, including bank fraud and operating an unlicensed money transmitter business, in a trial also scheduled for March.

DOJ settles criminal case against Binance for $4.3 billion

The U.S. Department of Justice settled with crypto exchange Binance in November, concluding a criminal investigation into allegations of money laundering and sanctions violations — marking one of the largest corporate settlements in U.S. history. The settlement involved $4.3 billion in penalties and included criminal charges against CEO Changpeng Zhao.

The DOJ had been investigating Binance and its executives since at least December 2022 over concerns about money laundering and sanctions violations, with scrutiny on the firm increasing throughout 2023 from additional financial regulatory bodies. 

Changpeng ‘CZ’ Zhao pleads guilty and steps down as Binance CEO

Changpeng Zhao, commonly known as “CZ,” co-founder of Binance, agreed to step down as CEO as part of a plea deal with the DOJ. Binance veteran Richard Teng, with extensive experience in the regulatory sector, was named as his successor.

Zhao pleaded guilty to violations of the Bank Secrecy Act and will pay a $50 million fine. Zhao also posted a $175 million personal recognizance bond and faces a potential prison sentence of up to 18 months. 

Zhao’s sentencing is scheduled for February 2024, and he will have to stay in the U.S. ahead of the hearing, at least until a further review is conducted. If Zhao fails to show up at the court in February 2024, as outlined in the appearance bond document, he will face up to 10 years’ imprisonment and a fine of $250,000.

Zhao also stepped down as Binance.US board chairman.

Do Kwon’s extradition to South Korea and the US approved

The Higher Court in Montenegro approved the extradition of Terraform Labs co-founder Do Kwon to either South Korea or the United States in November, with the final decision on the destination to be made by Montenegro’s Minister of Justice.

Kwon, currently serving a four-month prison sentence in Montenegro for document forgery, faces charges related to financial crimes in both countries following the 2022 collapse of the Terra ecosystem, including its native cryptocurrency Luna and algorithmic stablecoin TerraUSD — which wiped out some $40 billion of investor wealth in a matter of days.

The Appellate Court in Montenegro later canceled the approval of Do Kwon’s extradition, accepting the appeal of the Terraform Labs co-founder’s defense attorneys and annulling the Nov. 17 decision of the High Court. The case has now been returned to the initial court for a retrial.

Number go up

After the trials and tribulations of a tumultuous 2022 for the crypto market, it is ending 2023 in a much better place. Bitcoin is up over 160% since starting the year at around $16,600, according to The Block’s price data. Ether lagged behind the number one cryptocurrency by market cap but is still up over 90% after starting the year at $1,200. The supply of bitcoin and ether moved in the last year also fell to a record low

Solana was the biggest gainer of the top ten cryptocurrencies by market cap, up over 1,000% from $9.80 in January. With anticipation over a spot bitcoin ETF, a Bitcoin halving event and a potential new crypto bull cycle underway, 2024 may have plenty in store for crypto degens and institutional investors alike.

Disclaimer: This article was produced with the assistance of OpenAI’s ChatGPT 3.5/4 and reviewed and edited by our editorial team.

Disclaimer: The Block is an independent media outlet that delivers news, research, and data. As of November 2023, Foresight Ventures is a majority investor of The Block. Foresight Ventures invests in other companies in the crypto space. Crypto exchange Bitget is an anchor LP for Foresight Ventures. The Block continues to operate independently to deliver objective, impactful, and timely information about the crypto industry. Here are our current financial disclosures.

© 2023 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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