Weekly Wrap: Russia and El Salvador Create Crypto Structures

Hacker Drains $42M From Fenbushi Founder’s Wallet

In a Wednesday tweet, Bo Shen, co-founder of blockchain-focused VC firm Fenbushi Capital revealed that his wallet had suffered an exploit. Per the post, the attacker drained the Chinese investor’s account of assets worth up to $42M.

“A total of 42M worth of crypto assets, including 38M in USDC were stolen from my personal wallet ending in 894 in the early morning of November 10 EST. The stolen assets are personal funds and do not affect Fenbushi related entities, Shen announced.

Shortly after Bo Shen shared the news, blockchain security firm SlowMist chimed in to verify his claims. The company’s report stated that the exploit had taken place due to a mnemonic phrase, that is a seed phrase compromise. As such, the hacker was able to drain the affected address of 8,233,180 $USDC, 1,607 $ETH, 719,760 $USDT, and 4.13 $BTC.

This attack is the second time Shen has suffered losses at the hands of malicious actors. The VC has involved the FBI and lawyers in the case.

“Civilization and justice will eventually prevail over barbarism and evil. This is the iron law of human society. It’s just a matter of time,” said Shen.

Russia to Establish National Crypto Exchange

According to a local report from Nov 23, Russia is working on a draft policy for a national crypto exchange. Despite their unfavorable stance towards crypto regulation thus far, the Ministry of Finance and the Central Bank of Russia are behind the ongoing effort.

Per the publication, members of the lower chamber of the Federal Assembly of Russia, the State Duma, are deliberating over the issue. Indeed, lawmakers are looking to review existing regulations to accommodate an exchange. Market stakeholders are part of the discussion as Russia’s current crypto policy “Digital financial markets” may see a complete overhaul.

The revamped policy will establish a regulatory structure for a national crypto exchange. However, the plan is to first prepare a document looking into current market conditions. The document will then make its way to the government and the Bank of Russia for discussion. Sergey Altuhov, a member of the Economic Policy Committee lightly touched on the nation’s motivation for the forthcoming move;

“It makes no sense to deny the existence of cryptocurrencies, the problem is they circulate in a large stream outside of state regulation,” he said. “These are billions of tax rubles of lost tax revenues to the federal budget.”

Binance Commits $2B to its Industry Recovery Initiative

Following crypto exchange FTX’s historic fallout, another key industry player stepped up to aid platforms in a liquidity crisis due to the crash.

Indeed, Binance announced plans for an industry recovery fund and has since followed through. In a Thursday blog post, the exchange pledged $1B to the initiative. Binance claimed that it could raise that figure to $2 billion in the future should the need arise and did so shortly after.

“Yesterday, #Binance allocated ANOTHER $1 billion to the industry recovery initiative. All in BUSD,” CEO Changpeng Zhao announced in a tweet.

Thus far, Jump Crypto, Polygon Ventures, Aptos Labs, Animoca Brands, GSR, Kronos, and Brooker Group have also delivered an initial commitment totaling $50M. Binance noted that roughly 150 firms have put in applications for aid beneath the project. Per the report, the scheme should run for about 6 months and will feature a flexible investment structure.

The initiative will include instruments such as crypto tokens, fiat currencies, equity, debt, or credit lines depending on individual needs.

El Salvador Creates National Bitcoin Office

According to a LinkedIn post from November 25, El Salvador’s government has established a National Bitcoin office as it furthers its Bitcoin strategy. Dubbed the ONBTC, the office will be in charge of all developments relating to the country’s dealings with the premier cryptocurrency.

Indeed, the ONBTC will handle all aspects of plans, programs, and projects with ties to Bitcoin for the growth of El Salvador’s economy. It will coordinate all efforts to set up proper regulation for the nation’s crypto scene. The ONBTC will also have to assess and keep track of all persons seeking meetings with Bitcoin-friendly President Nayib Bukele regarding Bitcoin and Blockchain implementation in El Salvador.

Notably, the office will be able to partner with other nations concerning Bitcoin-related issues.

“The new agency will work as a specialized administrative unit, with functional and technical autonomy within the Presidency of the Republic,” the post read.

Bukele will appoint the Director of the agency who in turn will hire other necessary personnel.

Kraken Founder Criticizes Absence of Liabilities in Binance Proof of Reserves

Kraken Founder and soon-to-be ex-CEO Jesse Powell blasted Binance over its recently published proof-of-reserves in a tweet on Saturday. The FTX saga sheds light on the need for transparency from exchanges to prevent more cases like the beleaguered firm’s. As such crypto exchanges have been publishing proof-of-reserves, and sharing wallet addresses to verify their holdings of user assets.

Powell’s issues with the trend focus mainly on the failure to include liabilities in the audit. Indeed, Binance’s proof-of-reserves system allows clients to verify their assets using a Merkle tree. However, Powell pointed out that the system did not include customer accounts with negative balances.

“This is simply ‘here's a hash of your record in the BTC spreadsheet’. ok... but what's the point? The whole point of this is to understand whether an exchange has more crypto in its custody than it owes to clients. Putting a hash on a row ID is worthless without everything else,” he said.

At writing, Binance is yet to acknowledge or reply to the Kraken boss’ criticisms.

Mango Market Hacker Leaves Aave with $1.6M Bad Debt in Failed Exploit

Avraham Eisenberg, the trader behind October’s $100M Mango Market hack attempted a similar exploit with crypto lending platform Aave.

Eisenberg outed himself after the Mango attack as his actions were entirely above board. The trader took a similar approach to the Aave attempt, working within the confines of the code. However, he failed this time, losing millions in the process.

From Nov 14 Eisenberg gathered a loan of 92M curve tokens from the platform using $50M worth of USDC as collateral. Subsequently, he began building a massive short position; swapping the CRV for USDC on CEX OKX to borrow more CRV and repeat the process. Analysts suggest that his goal may have been to bring down the token’s price to drive CRV-collateralized loans to liquidation.

Curve founder Michael Egorov had a $48M loan that would have been liquidated had CRV dropped under $0.29. However, Eisenberg’s plans were cut short after an address connected to Egorov added 20M more CRV in collateral. Despite his apparent failure, Eisenberg’s scheme did leave Aave with $1.6M in bad debt.