Blockchain & Cryptocurrency , Cryptocurrency Fraud , Fraud Management & Cybercrime
Cryptohack Roundup: SEC Sends Wells Notice to OpenSea
Also: WazirX Seeks Moratorium to Restructure Debt After HackEvery week, Information Security Media Group rounds up cybersecurity incidents in digital assets. This week, the SEC sent OpenSea a Wells notice, WazirX sought protection from creditors, Ryan Salame reconsidered his guilty plea, objections to the FTX bankruptcy reorganization plan were filed, U.S. police recovered pig-butchering scam funds, and Colombia accused Worldcoin of privacy violations.
See Also: Revolutionizing Cross-Border Transactions with Permissioned DeFi
SEC Sends Wells Notice to OpenSea
The U.S. Securities and Exchange Commission sent a formal notice to non-fungible token marketplace OpenSea that the regulator will likely commence an enforcement action, said CEO Devin Finzer. A Wells notice is typically a prelude to a lawsuit for violations of securities law.
The SEC believes NFTs on OpenSea's platform are securities, Finzer said, arguing that targeting NFTs would hinder innovation. To support NFT creators and developers who may face similar legal challenges, OpenSea has pledged $5 million for legal fees. The SEC has previously suggested that NFTs might be involved in securities sales, as seen in its settlement with Impact Theory over allegations of unregistered securities offerings via NFT sales.
WazirX Seeks Moratorium to Restructure Debt After Hack
WazirX's Singapore-based parent company Zettai applied for a moratorium from the country's high court to restructure its debts following the $230 million exploit of the Indian crypto exchange in July. Zettai sought protection to pause creditor actions while it develops a plan to manage its liabilities and recover users' funds. If granted, this moratorium will provide a 30-day pause, and another hearing will determine the total duration. The restructuring would involve distributing the remaining assets proportionally among affected users and implementing mechanisms to recover stolen tokens. Zettai expects to finalize the plan in about six months, aiming to reopen withdrawals once the scheme is in place. WazirX has canceled trades and is attempting to recover the funds, which were likely stolen by the North Korean Lazarus Group.
Ryan Salame Seeks to Withdraw Guilty Plea
Former FTX executive Ryan Salame is seeking to withdraw his guilty plea in a criminal case involving campaign finance and money-transmitting crimes, alleging that prosecutors broke their promise not to investigate his fiancee, Michelle Bond. On Aug. 21, Salame filed for a writ of coram nobis, which would allow a court to overturn its previous judgment. He alleges he agreed to plead guilty to two felony charges in September after the government suggested it would not pursue Bond if he cooperated. But as the investigation into Bond has since resumed, Salame said the breach of agreement should lead to either the dismissal of charges against Bond or the withdrawal of his guilty plea.
Objections Filed on FTX Reorganization Plan
Recent filings in the FTX bankruptcy case show objections to the crypto exchange's revised reorganization plan from the U.S. trustee overseeing the case and a group of creditors. U.S. Trustee Andrew R. Vara identified 10 issues with the plan, despite FTX's reported claim that many creditors support it. His concerns include overly broad legal protections for those involved in the bankruptcy, unequal reimbursement for creditors based on claim size and the refusal to exclude costs related to a data breach at service provider Kroll. Vara said the estate should not cover the millions of dollars in costs associated with responding to the data breach. He also criticized the unequal distribution scheme, in which smaller creditors receive a lower percentage payout than larger ones, despite sufficient funds to pay all claimants equally. He contended that the plan's broad exculpation provisions offer excessive immunity to estate administrators and advisers.
Police Recover $5M Stolen in Pig-Butchering Scam
The U.S. Attorney's Office for the Eastern District of North Carolina seized nearly $5 million in Tether from a pig-butchering scam ring. The funds were linked to crypto addresses involved in laundering money stolen from these scams, in which victims were manipulated into investing in fraudulent projects. The stablecoin issuer said it has so far helped over 145 law enforcement agencies recover more than $108.8 million linked to illegal activities since its launch in 2014.
Columbia Accuses Worldcoin of Violating Data Protection Law
Colombia's top consumer protection agency, the Superintendence of Industry and Commerce, accused biometric cryptocurrency project Worldcoin and its parent company, Tools for Humanity, of violating privacy law. The investigation focuses on whether the collection of sensitive personal data, such as iris scans used to create World IDs, breaches Colombia's data protection regulations. If Worldcoin is found guilty, the SIC could impose fines, suspend operations for up to six months or order the shuttering of activities involving sensitive data. Co-founded by OpenAI CEO Sam Altman, Worldcoin requires users to scan their irises with an Orb device to verify their identity and rewards participants with WLD tokens. The project claims to have registered over 6.5 million users globally.