DOJ Indicts KuCoin for $9B Laundering

The Breakdown First Five - Wednesday, March 27, 2024

Welcome back to The Breakdown First Five — the 5 most interesting and/or important stories in bitcoin, crypto, and markets to start your day.

5. Blast Hacked

A project on newly launched Ethereum layer 2 Blast was exploited for $62.5M. It appears a rogue developer simply transferred customer funds while still in control of the smart contract. Sleuthing from ZackXBT suggests the dev is a North Korean operative. Community calls for the chain to be rolled back in order to rescue funds and avoid yet more crypto funding flowing to North Korea. Overnight funds were returned. 

4. Microstrategy Pushes Highs

The squeeze continues as Microstrategy stock reaches a multi-decade high, but still another 50% move away from its March 2000 blow off top. The company is now a $31B behemoth, holding over 1% of total Bitcoin supply. It’s trading at a 2x premium to its current underlying Bitcoin holdings. This outrageous premium has led to 20% short interest driving a weeks long short squeeze.   

3. ETF Inflows Surge

The ETFs are back in action with $418M in net inflows, the highest in almost two weeks. GBTC outflows moderated to $212M but the big story is Fidelity, putting up back to back days with inflows above $260M. Fidelity and Blackrocks products are the best performing ETFs in history across 50 days and it’s not particularly close. Each is now a $10B fund, double the rate of asset accumulation for the third best ETF launch. 

2. House GOP Demands Answers on Prometheum

The weirdest story of the past year surrounded the supposed crypto exchange Prometheum and its regulatory blessing. House GOP committee members are now demanding answers from the SEC. 48 members of Congress signed the letter expressing concerns about the possibility that ETH could be labeled a security through this bizarre, backdoor process. They reasserted that ETH is a commodity, making it illegal for Prometheum to offer under their license. 

1. KuCoin Indicted

KuCoin and their two founders have been indicted by the DOJ. Prosecutors allege that $9B was laundered using the platform, had weak KYC/AML protocols and pretended not to service US customers. In a parallel lawsuit, the CFTC claimed that KuCoin failed to register as a derivatives platform. Their complaint claimed that Bitcoin, Ethereum, Litecoin and other unnamed tokens are commodities, suggesting they aren’t ceding ground to the SEC. KuCoin says funds are safe.