Jack Niewold Profile picture
Feb 8 19 tweets 6 min read
What do:

• $4 billion in missing $BTC
• Female rapper RAZZLEKHAN
• Forbes magazine
• the US Department of Justice

Have in common?

A thread on the 2016 Bitfinex hack, its resolution, and the implications.

The strangest crypto story of the year (so far, at least):

🧵👇
This story starts with the infamous Bitfinex hack.

In August 2016, a (still unknown) hacker gained access to the exchange, allowing them to authorize around 2000 unapproved transactions.

They stole 119,754 $BTC, then worth about ~$72 million. It tanked the market by nearly 40%
What happened next? It's unclear, but those coins were likely sold in a P2P/OTC deal between the hacker and a third party.

It was just another one of several previous (smaller) hacks of Bitfinex, and in the eyes of the public, the exchange never really regained rust.
Although most customers hadn't been hacked, the exchange slashed account balances across the platform by 36% to stay solvent.

To even out this account rebalancing, losses were reimbursed in the Bitfinex exchange token, LEO.

Remember this--it's important.
Nothing much happened publicly until 2020, when Bitfinex put up a bounty of $400 million for the now $1.3 billion in missing $BTC.

The hacked Bitcoin moved around a bit, but no one was able to trace it back to any identity.
On January 31st, on-chain observers began to see strange activity around the wallets holding the funds from the hack.

It seemed strange to many observers as the funds were consolidating without any privacy-seeking behavior (mixing, use of Monero, Tornado Cash).
Today, the DOJ announced that the hacked $BTC, now worth $3.6 billion had been recovered.

No one had ever really lost track of the $BTC even as those controlling the wallets had tried to hide their trail using now-defunct AlphaBay, Monero, and gift cards.
Although they knew where the funds were, they didn't yet know who was behind the hack or how to recover them.

Tracing exchange accounts to India-based emails, they linked the $BTC to the business and personal accounts of two people: Ilya Lichtenstein and his wife Heather Morgan.
Now that they had identities, they got a warrant to break into the cloud data provider account of Lichtenstein, a dual-citizen of Russia and the US.

Lucky for the DOJ, Ilya stored the private keys in plain text on that service, which contained the $3.6 billion in BTC.
But here's where the story gets weirder.

While they were $BTC billionaires on paper, the couple had laundered the money via, among other things, purchasing $500 gift cards from Walmart, Uber, Hotels.com, and Playstation.

They couldn't even access most of the money
On top of that, the couple was relatively well known.

Heather Morgan was a serial entrepreneur and angel investor who had written for both Inc and Forbes magazine on entrepreneurship and social persuasion.

But her side gig? RAZZLEKHAN, amateur rapper.

And Ilya Lichtenstein was publicly known as well: a cofounder of MixRank, a Y-Combinator backed startup that helps companies analyze marketing data around customers and competitors.

Today, they were both taken into DOJ custody.
As to the $BTC? Well, hypothetically it'll be given back to Bitfinex, who plan to buy back their exchange token in a long-overdue (but maybe ineffective) way to repay customers.

Their token, LEO, is mooning on the news and has made its way into the top 25 cryptos.
This has big implications for both LEO and BTC, as it represents a huge block of BTC that will come on the market.

With selling methods like TWAP as well as OTC deals, it's likely that it doesn't affect the $BTC market too much, but $4 billion is a decent chunk.
Also, now the federal government has nearly $4 billion in crypto on their balance sheet.

Yeah, it's not technically 'theirs.'

But on the other hand, it kind of is. It also shows us that the DOJ is both closely examining and deploying massive resources to the crypto industry.
It's a good reminder that exchanges aren't 100% safe, that $BTC isn't private, and that you should store your keys offline.

An insane saga. Another day in crypto.
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More from @JackNiewold

Feb 10
Solidly Swap has officially deployed.

Andre Cronje's DEX governance experiment teased as ve(3,3) is underway, and in 1 week, tokens will begin to come onto the market.

So what's going on? Are Solidly tokens going to moon? And how should you play the launch?

🧵👇
First, a TL;DR on Soldily Swap:

It's new type of DEX, with tokenomics (veTokens) designed to maximize cooperation and fee revenue. It's been airdropped to the top 25 protocols by TVL on $FTM

For a more comprehensive look, check out the thread below:
Solidly launched last night at midnight, but with next to no fanfare. Dani Sestagalli drama really slowed down the hype.

And it takes a while for DEXes to get rolling.

For now, there's almost no liquidity in the system, so trading won't get going until LPs come onboard.
Read 15 tweets
Feb 9
With a circulating market cap of just $16 million, Vesta ($VSTA) has managed to grab an insane amount of attention on Crypto Twitter.

The bull case? It's got the most stacked list of angel investors you've ever seen.

The bear case? The FDV is about $500 million.

My thoughts👇
With a circulating market cap of just $16 million, Vesta ($VSTA) has managed to grab an insane amount of attention on Crypto Twitter.

The bull case? It's got the most stacked list of angel investors you've ever seen.

The bear case? The FDV is about $500 million.

My thoughts👇 Image
Well, maybe not.

When a protocol has this much VC action, its often assumed that people got in early at ludicrously low valuations.

The token becomes available to the public, and even if it drops in price, VCs can still make a killing Image
Read 11 tweets
Feb 1
A MEGATHREAD ON THE SUPERCYCLE

🧵👇
AN OVERVIEW:

With most of Crypto Twitter bearish right now, it seems like a big chunk of the market thinks that this crypto cycle is over.

Simultaneously, industry insiders see this latest move as confirmation of a supercycle.

Wait, a confirmation?

How?
1. THE CASE FOR THE SUPERCYCLE:

Three Arrows Capital @zhusu was one of the first to set forth the idea of a supercycle in the crypto mainstream.
Read 24 tweets
Jan 29
I bought some more $SPELL at $.0054

Here’s why:

🧵
I never really liked $TIME, I very intentionally never covered it.

Why? Fundamentally, $TIME performs a human-overseen operation (similar to a VC fund), but on crypto rails.

It requires trust, it’s never been democratic in its operation. It didn’t even start out as a DAO.
And that’s where $TIME fell apart: they introduced a bad actor to this human-overseen operation and thus investors lost confidence.
Read 16 tweets
Jan 26
The result of the drama around @danielesesta and his protocols?

A proposal has been put in place to merge $SPELL and $TIME into one protocol.

Whether you hold $TIME or hold $SPELL, here's what you need to know and whether or not it's viable.

(thread👇)
To get you up to speed:

$TIME is the largest $OHM-fork by Mkt Cap. It has been used as a playground for Daniele (Dani) Sestagalli's VC ambitions and more 'creative' ideas.

It previously offered 5-figure APYs to stakers. But now trading below its treasury value, it's in turmoil.
Abracadabra Money ($SPELL) is a lending platform that lets users take out positions against crypto collateral and yield-generating positions.

This allows users to take out loans that pay themselves off.

These loans charge interest & get liquidated, fees go to $SPELL holders.
Read 18 tweets
Jan 25
The final info on ve(3,3) came out last night.

The brainchild of @andrecronjetech and @danielesesta (now officially named Solidly) is fully public and just needs someone to press 'deploy.'

Here's a breakdown of the new alpha and why I'm more bullish on it than ever:

Thread 👇
To get you up to speed, Solidly (token: $ROCK) is a new AMM with improved incentive mechanics (based on OHM and CRV) that:

• make protocols less beholden to liquidity providers
• improve fee revenues for $ROCK holders
• is issued as a locked NFT to the top 25 $FTM protocols
Based on the docs, Solidly will be a direct competitor to Curve: a protocol designed for more efficient swaps for both stables and normal crypto assets.

A more complex liquidity model means that it's structured for fee revenue instead of attracting mercenary liquidity to pools.
Read 16 tweets

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