Arrested for Writing Code?

August 15 2022       /       Unchained Daily       /       Laura Shin

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Daily Bits✍️✍️✍️

• Do Kwon gave an interview for the first time since Terra’s collapse.
• The S&P Global Ratings cut Coinbase’s credit rating due to weak earnings and competitive pressure.
• Aggregate open interest of ETH options hits an all time high.
• Indian authorities froze $46 million in assets of crypto lender Vauld and the company is seeking a legal way to challenge the decision.
• NFT marketplace OpenSea changed its policy for stolen assets.
• The CFTC charged a man in Ohio for running a $12 million Bitcoin Ponzi scheme.
• Binance froze assets worth $450,000 stolen in the Curve Finance exploit.
• Velodrome, a DeFi protocol that suffered a $350,000 exploit, revealed that a team member was responsible for the stolen funds.
• aUSD, a decentralized stablecoin built on Polkadot, depegged after Acala Network reported a configuration issue.

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Today in Crypto Adoption…

• Mastercard reported that crypto payments are being adopted worldwide, but much more needs to be built.

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The $$$ Corner…

• Leon Li, founder of crypto exchange Huobi, is reportedly looking to sell his majority stake at a valuation between $2 billion and $3 billion.
• Skynet Labs, a blockchain startup based in Boston, will shut down after failing to get new funding.
• Nexus Mutual DAO voted in favor of depositing $29 million of its treasury into Maple Finance.

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What Do You Meme?

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What’s Poppin’?

by Juan Aranovich

Dutch authorities arrested Alexey Pertsev, a developer of Tornado Cash, according to a statement released by the Dutch Fiscal Information and Investigation Service (FIOD) on Friday.

Tornado Cash is a virtual currency mixer that was sanctioned last week by the US Treasury for allegedly being used by hackers and malicious groups to launder money.

Pertsev is suspected of being involved in concealing criminal financial flows and facilitating money laundering. “These advanced technologies, such as decentralized organizations that may facilitate money laundering are receiving extra attention from the FIOD,” said the agency.

The arrest was harshly condemned on social media, as many industry leaders expressed their discontent with the situation.

• “In the case of Alexey’s arrest in Amsterdam, it’s theoretically possible there’s something at play other than just “software developer prosecuted for the crime of writing code”. It doesn’t look that way based on what we know now, but again, the benefit of the doubt costs little,” said lawyer Jake Chervinsky.
• “Privacy is a fundamental human right. Freedom of expression is a fundamental human right. The sanctioning of TC and the arrest of its developer is an assault on the above two rights,” said Bobby Ong, cofounder of CoinGecko.

Gabriel Shapiro, general counsel at Delphi Digital Labs, wondered whether the sanctions and the arrest are going to have some other ramifications, like censorship at the protocol level. “U.S. validators (which includes very powerful Coinbase) are gonna push for protocol-level censorship. They can’t self-help by merely avoiding facilitation of blocks containing U.S.-sanctioned txs, because under certain conditions they might be dramatically slashed from doing so.”

Following the arrest, the Tornado Cash Discord server was shut down, with no confirmation of whether it was shuttered by Discord the company, or the DAO leaders themselves.

In addition to Circle freezing USDC assets in Tornado Cash’s addresses, and dYdX blocking accounts tied to Tornado Cash, some users linked with TC started reporting that they were not able to use Aave, one of the most important decentralized lending and borrowing platforms. However, this blockage was related to a frontend client, and not to the Aave protocol itself. The team took immediate action and was able to successfully fix the issue within hours.

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Recommended Reads

1. SBF on how modern finance works
2. Karan Sirdesai on governance design
3. @TheEylon on some concerns about Ethereum

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On The Pod…

Tornado Cash Sanctioned. Did the Government Overstep Its Bounds?

Jerry Brito, executive director of Coin Center, talks about Tornado Cash, why it was sanctioned, and what this means for privacy in crypto. Show highlights:

• what Blender.io is and how it relates to Tornado Cash
• how hackers have used Tornado Cash to launder money
• whether the Office of Foreign Assets Control made a mistake, according to Jerry
• how Americans were affected by the sanctions
• why Jerry believes OFAC should have done an analysis to estimate how many people would be impacted by its decision
• whether the sanctions should have been aimed at North Koren wallets and not the protocol
• whether the sanctions are unconstitutional and whether Coin Center will litigate this
• how Jerry believes Circle freezing USDC complicated everything
• what the famous people who received 0.1 ETH from random accounts via Tornado Cash should do
• what would happen if someone forked the Tornado Cash code and deployed a copycat smart contract to a new address
• whether the sanctions signal the beginning of a privacy war on crypto
• how regulators are applying the same traditional rules with crypto as they use with centralized entities

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Book Update

You can purchase it here: http://bit.ly/cryptopians