Blockchain Bites: BlockFi Hacked, Sued, BitMEX Down

A SIM swapping exploit revealed BlockFi customer names and addresses while BitMEX is hit with RICO accusations.

AccessTimeIconMay 19, 2020 at 4:28 p.m. UTC
Updated Sep 14, 2021 at 8:43 a.m. UTC

Today, BlockFi disclosed a SIM-swapping attack that revealed personal information related to a large swath of the firm's clients. While customer funds are secure, BlockFi said, their names and addresses were compromised along with their activity histories.

This security breach comes on the heels of a cryptojacking exploit targeting European supercomputers researching COVID-19. Elsewhere, class-action lawsuits have been brought against and chip-maker Nvidia, while the little-known firm BMA is suing BitMEX for allegedly orchestrating the largest financial crime in American history. Here's the story:

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Top Shelf

BlockFi Hack
BlockFi said an attacker got hold of users' data by compromising an employee's phone and taking control of the person's phone number through a SIM-swap attack. The New York-based crypto lending platform announced in a memo to users on Tuesday that a hacker – whose identity remains unknown – gained access to some of its retail marketing systems for just over an hour early on May 14. The hacker accessed confidential data such as names, dates of birth, postal addresses and activity histories but was unable to withdraw user funds or access other sensitive account information including bank account details, Social Security and tax identification numbers.

BitMEX Down
The trading engine for BitMEX, formerly the largest bitcoin derivatives exchange measured by open interest, went down on Tuesday, according to the exchange’s status page. BitMEX supported roughly $2.2 billion in bitcoin futures trading volume over the last 24 hours, according to Skew, and is investigating the incident.  

RICO Violations?
BMA LLC, the Puerto Rican company that two weeks ago filed a lawsuit again Ripple, has accused the BitMEX derivatives exchange of orchestrating the largest financial crime in American history. The filing envisions a vast racketeering conspiracy designed to reap billions in illegal profit through wire fraud, money laundering, unlicensed money transmission, interstate transport of stolen property and violations of the Racketeer Influenced and Corrupt Organizations Act, or RICO. CEO Brendan Blumer speaking at the launch of the Voice social media network (Photo from CoinDesk archives) CEO Brendan Blumer speaking at the launch of the Voice social media network (Photo from CoinDesk archives)

EOS Class-Action
A cryptocurrency investment fund has launched a class-action lawsuit against and EOS' high command, arguing the "fraudulent scheme" failed to deliver on its primary promise of decentralization. In a recent filing, plaintiffs argue CEO Brendan Blumer, CTO Dan Larimer, former Chief Strategy Officer Brock Pierce and former partner Ian Grigg purposefully misled investors and artificially inflated the EOS token price during the yearlong ICO, which raised a total of $4.1 billion between June 2017 and June 2018. Last year, reached a settlement with the Securities and Exchange Commission over running an unregistered security sale. 

Misleading Games
A recent filing shows that disgruntled investors are still pursuing action against Nvidia, the multinational chip-making giant, accused of under-reporting its sales of hardware used to mine cryptocurrency. The shareholder class-action lawsuit accuses CEO Jensen Huang, CFO Collette Kress and Jeff Fisher, senior vice president and head of gaming, of misleading investors by saying increased sales of its chips came from gamers rather than the unsustainable 2017 crypto mining boom. 

Smashing Private Keys
Tornado Cash, a privacy tool for obfuscating the history of ether transactions, is now fully permissionless. Developers used a cryptographic method known as multi-party computation (MPC), to eliminate their private keys and make the protocol completely trustless. 

Vitalik Buterin photo from CoinDesk archives
Vitalik Buterin photo from CoinDesk archives

Monopoly Busting Blockchain
Vitalik Buterin has called for lawmakers to be more accommodating to blockchain protocols, saying they can help antitrust agencies fight monopolies and anti-competitive behavior. Together with a Harvard economist, the creator of Ethereum argued in a newly-published paper that blockchain and antitrust agencies "share a common goal" in decentralizing economies. 

Giancarlo Joins 
Former U.S. Commodity Futures Trading Commission (CFTC) Chairman J. Christopher Giancarlo is advising a coronavirus relief effort. The Open Initiative is prepared to grant more than $200,000 to tech-driven – and preferably blockchain – solutions to the current crisis. 

Libra Hire
Libra has added a former U.S. government official as its general counsel, its second add from the Financial Crimes Enforcement Network (FinCEN). Announced by the Libra Association Tuesday, Robert Werner joins the project with "a wealth of regulatory, financial crime compliance and enforcement experience" from his previous roles as FinCEN director and director of the Office of Foreign Assets Control (OFAC).

European supercomputers programmed to search for a coronavirus vaccine were hijacked last week to mine the privacy crypto monero. The hackers had gained entry via stolen remote access credentials from individuals authorized to operate the machines, and many of the affected computers are still down pending investigation. 

Black Market Mixing
Bitfury’s crypto analytics unit Crystal Blockchain issued a report showing bitcoin mixing services are on the rise. According to the report, the share of bitcoin sent to mixers by darknet entities rose to 20% in Q1 2020 as compared to just 1% in Q1 2019, The Block reports. 

DTCC's Jennifer Peve, image from CoinDesk archives
DTCC's Jennifer Peve, image from CoinDesk archives

Eying Blockchain
Depository Trust & Clearing Corporation (DTCC), a giant of financial markets infrastructure, is studying whether distributed ledger technology (DLT) could accelerate its processing of securities. DTCC revealed two projects Monday aimed at integrating DLT with capital markets: Ion, a proof-of-concept alternative settlement service and Whitney, a security token method of private securities issuance and exchange. The corporation handles nearly $2 quadrillion in securities every year, almost the entirety of the U.S. securities market. 

tBTC Bug
After pausing the tBTC protocol, which brought Bitcoin onto Ethereum, developer Matt Luongo clarified his decision without going into detail as to what went wrong. The Thesis team said it discovered a bug, but will not disclose details until all funds have been safely withdrawn from this iteration of tBTC. The team is helping users withdraw deposited BTC.

Proof of Societal Value
“Much ink has been spilled on the question of bitcoin’s energy footprint. But amid the clarifying details and the energy mix calculations we have lost sight of the most important questions,” CoinDesk columnist Nic Carter writes in his latest op-ed. Central to the debate are the inefficiencies baked into the global energy sector, including line-loses and the overbuilding of energy infrastructure in Chinese provinces, as well as bitcoin’s considerable consumption and CO2 externalities. Ultimately, it’s about tradeoffs. The Bitcoin network is an open system, “which is paid for,” both in fees and energy consumption. 

Market Intel

Difficult Adjustments?
Days after the biggest non-event of the year, the Bitcoin halving, holders are counting down to the next milestone on the blockchain: the latest "difficulty adjustment," expected Tuesday around 5 p.m. ET. This automatic mechanism occurs roughly every two weeks, and is expected to make mining easier. “And like the halving, it's expected to be uneventful,” the First Mover team said. However, it's an essential way to regulate the network, enticing miners to stay on, reducing confirmation times and also ensuring more equitable payouts. You can get First Mover in yer mailbox here.

Bitcoin Burst
Wrapped Bitcoin on the Ethereum blockchain in the form of the WBTC ERC20 token has doubled to nearly $23 million worth in tokens in the last two weeks. This follows a vote at Maker to introduce the token as a form of collateral on the protocol. (Decrypt)

Yesterday, Tether, the largest stablecoin tied to the U.S dollar, had fallen below par value for the longest stretch since bitcoin hit 12-month lows in March. This deviation is partially explained by increased demand for bitcoin and bitcoin futures, with investors trading in stable assets for the cryptocurrency. Tether’s dip below $1 also coincides with a brief respite of new token issuances. 

The Breakdown

Albert Wenger on World Historical Shifts
Albert Wenger is a partner at Union Square Ventures and the latest guest on The Breakdown podcast. The conversation touches on core ideas in Wenger’s “World After Capital,” an evolving digital book project that looks at a set of megatrends as the world moves between economic paradigms from the Industrial Age to the Knowledge Age. 

Who Won #CryptoTwitter?

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