Losses arising from cryptocurrency hacks jumped nearly 60% in the first seven months of the year to $1.9 billion, propelled by a surge in funds stolen from decentralized finance (DeFi) protocols, according to a blog post from blockchain analysis firm Chainalysis released on Tuesday, Reuters reported. In the same period last year, stolen funds from hacking amounted to $1.2 billion. DeFi applications, many of which run on the Ethereum blockchain, are financial platforms that enable crypto-denominated lending outside of traditional banks. Chainalysis noted that the trend is not likely to reverse any time soon, given the $190 million hacking of cross-chain bridge Nomad and $5 million hacking of several Solana wallets already in the first week of August. "DeFi protocols are uniquely vulnerable to hacking, as their open source code can be studied ad nauseum by cybercriminals looking for exploits and it's possible that protocols' incentives to reach the market and grow quickly lead to lapses in security best practices," Chainalysis said in the blog. Much of the funds stolen from DeFi protocols can be attributed to "bad actors" affiliated with North Korea, especially elite hacking units like Lazarus Group, the U.S. firm wrote. Chainalysis estimates that so far this year, North Korea-affiliated groups have stolen approximately $1 billion of cryptocurrency from DeFi protocols.
Online retailer Enjoy Technology Inc. received approval from a U.S. bankruptcy court on Friday to sell its business to technology repair company Asurion LLC for $110 million, Reuters reported. U.S. Bankruptcy Judge J. Kate Stickles in Wilmington, Del., signed off on the sale at a hearing on Friday, saying it was a reasonable exercise of the debtor's business judgment and was a fair, arms-length transaction. Enjoy, a Palo Alto, Calif.-based startup, filed for bankruptcy protection on June 30 with $26 million in debt. Asurion offered to provide the company with a $55 million bankruptcy loan and to buy it. Enjoy had contacted more than 30 other potential suitors since filing for bankruptcy, but it canceled a planned auction after none of them chose to outbid Asurion. Founded in 2014 by former Apple Inc and JCPenney Co executive Ron Johnson, the company filed for chapter 11 protection less than nine months after going public through a special-purpose acquisition company (SPAC). Enjoy sells smartphones and other technology products in the U.S., U.K. and Canada, delivering products and providing tech support to customers' homes.
The Department of Justice (DOJ) was able to restore the funds of hospitals in Kansas and Colorado that had recently been victims of ransomware attacks, Crypto Briefing reported. The agency seized and returned almost half a million dollars from North Korean hackers to two hospitals in Kansas and Colorado after they were targeted by the hackers. The medical centers were attacked in May 2021 and April 2022 and paid their ransoms in bitcoin. In May 2021 and April 2022, state-sponsored North Korean hackers deployed a new strain of ransomware called “Maui” to lock the servers of two hospitals in Kansas and Colorado. The medical centers had to respectively pay ransoms of approximately $100,000 and $120,000 in bitcoin to the cybercriminals to regain the use of their computers. The Kansas hospital contacted the Federal Bureau of Investigation (FBI), which was then able to trace the cryptocurrency ransom to money-launderers in China. In May 2022, the FBI managed to gain access to the receiving accounts, seize the funds, and eventually return the money to the victim institutions. It is not clear where the extra $280,000 seized came from, nor is it clear how bitcoin’s price changes affected the overall amount seized. The statement also did not mention any arrests.
Data storage company Drobo is facing an uncertain future. Late last month, the brand and its parent company, StorCentric, both simultaneously filed for chapter 11 bankruptcy protection in California’s Northern Bankruptcy Court, Pop Photo reported. It’s sad news for one of the earliest names in both direct- and network-attached storage, but it’s not necessarily the end quite yet, as one or both companies could emerge rejuvenated. Should that happen, hopefully, the brand’s products will have been reworked to reflect the needs and realities of the current storage market. Founded in mid-2005 as Data Robotics, the company quickly came to be defined by its first product, the original Drobo “storage robot.” Launched in 2007, the device was lauded by the likes of Ars Technica, Engadget, TechCrunch, and more. And to be clear, the brand still certainly has its fans even today. But those heady early days and the company’s fortunes weren’t to last. While Drobo’s products had their standout features when compared to the competition — most notably, the ability to simply and easily mix drives of varying specifications within a single array — those same features have also proven to be an Achilles heel in other respects. Not surprisingly, the heady praise of Drobo’s early reviews couldn’t last, and public opinion likewise started to fragment. Within just five short years, the now eponymously-named Drobo found itself pitted against other early rivals like Synology, Thecus, and QNAP. It was also facing a new wave of consumer storage devices from better-known brands like Dell, HP, Netgear, and Seagate.
COVID-19–related issues are squeezing storage conglomerate StorCentric as it seeks to reorganize the company and look for a buyer for its business, TechTarget.com reported. On June 20, StorCentric filed for chapter 11 bankruptcy protection, according to a petition filed in northern California's U.S. Bankruptcy Court. In a separate petition filed the same day, Drobo, the external storage company that is part of StorCentric, also filed for chapter 11 bankruptcy protection. The extent of the reorganization is unclear, but in a statement StorCentric said that it plans to continue providing service to customers. He added that StorCentric acquired several companies before the COVID-19 pandemic. When supply chain issues hit, the company didn't have time to effectively cobble its acquisitions together. The supply chain issues appear to have affected StorCentric early in the pandemic. In a March 2020 blog post by CEO Mihir Shah, StorCentric leadership suggested the pandemic and its effects on the supply chain were negatively affecting its business. By July 2021, the pandemic had taken "a devastating impact on the company's business," shutting down its assembly and integration facility, according to the Chapter 11 first-day declaration statement. In the first quarter of 2022, several special purpose acquisition companies approached StorCentric for a potential acquisition, going so far as signing a letter of intent before the funding fell through.
CoinFlex said that it has taken legal action to recover $84 million in losses from a single customer and is in talks to sign a joint venture with another crypto exchange in a bid to revive its fortunes, Bloomberg News reported. The crypto exchange paused withdrawals on its platform last month after a counterparty, which it later identified as longtime crypto investor Roger Ver, failed to repay $47 million from a margin call. CoinFlex said in a blog post on Saturday the total owed by the investor had since risen after calculating a final tally of losses from “significant” positions in the exchange’s native FLEX token. The blog post didn’t mention Ver by name. “The individual first asked us to liquidate his account, but then continued to tell us for some considerable time afterwards that he wanted to send significant funds to the exchange to take physical delivery of the futures positions,” CoinFlex Co-Founders Sudhu Arumugam and Mark Lamb wrote in the post on Saturday. “It is clear to us now that he was wasting time and hoping for a bounce in the market that never materialized.” The pair said CoinFlex had commenced arbitration proceedings in Hong Kong to recover the $84 million, a process which they expect could take approximately 12 months before a judgment is reached. Ver, who earned the nickname “Bitcoin Jesus” for his early investment in crypto, declined to comment on the case. He told Bloomberg last month that he had no outstanding debt with CoinFlex. In a June 28 tweet he said that an unidentified counterparty owed him “a substantial sum of money.”
Voyager Digital Ltd. marketed its deposit accounts for cryptocurrency purchases as safe, protected by the nation’s banking insurance system in the event of a failure, the Wall Street Journal reported. This week, when the company tumbled into bankruptcy, customers learned they didn’t exactly have the protection they expected and a banking regulator began an inquiry. Voyager, a brokerage and lender, was caught in a spiral of plunging crypto prices that is collapsing hedge funds and companies and which blew a hole in its assets. Bitcoin, for example, has lost more than half of its value so far this year. Voyager froze all activity, including withdrawals on $350 million in customer deposits that are stored at Metropolitan Commercial Bank, a small New York bank. Voyager said customers would be able to access those dollars after “a reconciliation and fraud prevention process is completed.” It wasn’t clear how long that would take. The funds are expected to be paid in full to the customers. That may not be the case for crypto assets held at Voyager. Still, some customers online said they were only just learning their deposits weren’t insured by the Federal Deposit Insurance Corp. in the way they thought. Voyager had marketed the accounts as protected by that national safety net, an attractive pitch in the volatile world of cryptocurrency. Read more. (Subscription required.)
In related news, crypto trading firm Alameda Research provided emergency credit lines to the now-bankrupt crypto lender Voyager Digital Ltd., in which it owned a minority stake. Bankruptcy filings show Alameda was also a customer, the Wall Street Journal reported. Alameda, founded by the crypto billionaire Sam Bankman-Fried, borrowed $376.8 million worth of cryptocurrencies from Voyager, the filings in the New York bankruptcy court show, paying rates between 1% and 11.5%. Alameda “seems to be wearing every possible hat in Voyager’s bankruptcy,” as a creditor, shareholder and borrower, said Georgetown Law professor Adam Levitin. “There is a general phenomenon of a lot of recycled capital within crypto, and this is an example of that.” In an interview, Mr. Bankman-Fried said that Voyager had lent money to Alameda as part of its normal course of business, and that it was unrelated to the $75 million that Alameda recently lent to Voyager to ease the lender’s short-term liquidity crunch. “The money that was lent to Alameda is money that will ultimately be returned, and presumably used to pay back customers,” he said. The tight links between crypto firms are reverberating across the industry. Voyager’s bankruptcy was precipitated by the insolvency of the crypto hedge fund Three Arrows Capital — Voyager’s largest borrower, owing more than $650 million to the lender. Three Arrows defaulted on the uncollateralized loan on June 27. The Singapore-based hedge fund has been ordered to liquidate in the British Virgin Islands and sought protection from creditors in the U.S. on Friday. Read more. (Subscription required.)
Voyager Digital said that it had filed for bankruptcy, a week after the crypto lender suspended withdrawals, trading and deposits to its platform as it sought additional time to explore strategic alternatives, Reuters reported. In its chapter 11 bankruptcy filing yesterday, New Jersey-based Voyager estimated that it had more than 100,000 creditors and somewhere between $1 billion and $10 billion in assets, and liabilities worth the same value. "The prolonged volatility and contagion in the crypto markets over the past few months, and the default of Three Arrows Capital on a loan from the company's subsidiary, Voyager Digital, LLC, require us to take deliberate and decisive action now," Voyager Chief Executive Officer Stephen Ehrlich said in a statement. In a separate message to customers on the company Twitter handle, Ehrlich said the process would protect assets and "maximise value for all stakeholders, especially customers". A filing with the U.S. Bankruptcy Court Southern District of New York showed that Alameda Research was Voyager's largest single creditor, with unsecured loans of $75 million. Voyager announced Alameda's investment in October, describing the deal as "a strategic alliance" with "a clear pioneer" in the crypto industry. At the same time, Alameda Co-CEO Caroline Ellison said the partnership offered "endless mutually beneficial opportunities to grow both our businesses." Last week, Voyager said that it had issued a notice of default to Singapore-based crypto hedge fund Three Arrows Capital (3AC) for failing to make required payments on a loan of 15,250 bitcoin (approximately $324 million) and $350 million worth of USDC, a stablecoin. Later that week, 3AC filed for chapter 15 bankruptcy, which allows foreign debtors to shield U.S. assets.
Turmoil in the digital-assets ecosystem has grown in recent weeks, with losses in cryptocurrencies blowing holes in balance sheets and pushing firms near bankruptcy, the Wall Street Journal reported. After a pair of cryptocurrencies crashed, wiping out billions of dollars in value in May, a British Virgin Islands court this past week ordered a hedge fund that had survived several crypto downturns to liquidate. Another platform that counts the hedge fund as an investor capped withdrawals while evaluating how the hedge fund’s woes would affect its liquidity. A handful of crypto players have established financial ties throughout the market and added to risk by borrowing and lending digital assets among themselves, with at least one lender, Celsius Network LLC, drawing on collateral to do its own borrowing. “Everything is deeply, deeply intertwined; we didn’t have this in 2018,” said Chris Bendiksen, head of research at the London-based asset-management firm CoinShares, referring to a past crypto market downturn. While new to crypto, such problems are well-known in the traditional financial realm. During the 2007-08 global financial crisis, bank-lending practices including rehypothecation of assets — using collateral to borrow more money — left banks short on liquidity. In the aftermath, regulators tightened oversight.
