NY Court Orders Longfin to Pay $223M to Investors After Blockchain Pivot Turns Securities Fraud

Longfin, a now-defunct crypto firm that raised $27 million in 2017, has been ordered by a Manhattan federal judge to repay $223 million to its investors along with interest in the alleged security fraud case. Longfin acquired an undervalued company back in 2017, after which its share prices surged by 1000%.

The judgment came on July 29, where the federal judge concluded that Longfin, along with its chief executive Venkata Meenaalli, CTO Vivek Ratakonda, and the director of two related companies, Suresh Tammineedi collectively owned a nine-figure sum. The case’s ruling has granted a default judgment, as requested by lead plaintiff Mohammad Malik in January. The judge in his decision noted that Malik:

“offered sufficient evidentiary support through declarations and exhibits submitted in support of his claim for damages, and no evidentiary hearing is required.”

A Brief History of the Case

Longfin launched an IPO as a Regulation A+ offering back in September 2017, which allowed the firm to raise funds from both accredited and non-accredited investors. It also obtained waivers from several registration requirements of the Securities Exchange Act of 1934. It went on to raise $27 million by December and called its IPO a successful event.

At the time, the firm also claimed that it had become the first publicly listed fintech firm under Reg A+ on Nasdaq. Soon after a successful IPO, Longfin acquired Ziddu.com, a cloud storage solution that claimed it had incorporated blockchain technology. The price of Longfin’s share surged by 1000% from $5 a share to $140 in early 2018. However, shareholders accused the company of issuing false and misleading statements, which led to the 1000% surge.

The firm is also accused of selling its shares after the surge, which prompted the Security and Exchange Commission (SEC) to look into the firm’s working and investigate any wrongdoing. The SEC started their investigation in April 2018, and soon after, the price of the shares crashed.

In September 2019, the SEC received a judgment in its favor against Longfin, where a New York federal court found that the crypto firm falsified documents and data to receive Regulation A+ offering.

The court also found that Longfin lied about primarily operating from the US and lied about qualifying shares and shareholders sold in the offering. The court found that $66 million in revenue generated by the firm came from “fictitious revenue and sham commodities transaction” equivalent to 90% of the company’s revenue.

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Author: Rebecca Asseh

Cellebrite Launches Crypto Tracer Solution Powered by CipherTrace for Tracking Illicit Activities

Cellebrite, a digital intelligence firm has released a cryptocurrency transaction tracing tool called “Cellebrite Crypto Tracer,” which would help law enforcement agencies, businesses, and analysts to trace crypto transactions being used for any illicit activity such as money laundering, terrorism, drugs, human trafficking, weapon sales, and ransomware schemes.

The firm has promised to offer its crypto transaction tracing toolkit to investigators, along with analysts and even those who want to lawfully use the toolkit to obtain evidence of any kind of criminal activity being carried out using cryptocurrencies.

As per a study conducted by Oxford University, over $76 billion in Bitcoin is being used to facilitate illegal activities. The use of digital assets, especially Bitcoin and privacy-centric coins, has been a significant hurdle for law enforcement agencies and remains one of the prominent reasons governments have a passive stance towards regulating cryptocurrencies.

How Does Cellebrite’s Crypto Tracer Solution Work?

The Cellebrite crypto tracer solution creates an array of data sets with attributable points. The toolkit collects data from open-source and private references, deception data, and human intelligence, which results in a data set of 522 million attributable points.

Leeor Ben-Peretz, chief strategy officer of Cellebrite, sheds some light on how the tracing solution aggregates and intelligently uses data to help users trace illicit activity. The firm claims that its solution, with millions of data sets, can pinpoint the origin of funds as well as where the fund is headed to and can determine if the destination is an exchange or a wallet. Peretz explained:

“Some of the major features of the solution include the ability to conduct risk scoring and profile hundreds of global exchanges, ATMs, mixers, money laundering systems, gambling services, and known criminal addresses and assign risk levels to transactions.”

The launch of the crypto tracing tool could not have been timed better. Just last week, Twitter experienced one of the worst cyberattacks in recent history, where the accounts of hundreds of prominent personalities like Elon Musk, Kanye West, Jay-Z, and many more were taken over by hackers.

All the accounts tweeted a fake bitcoin scam promising people to double the amount they send to the mentioned bitcoin address. While the scams look apparent to many, and Twitter managed to gain control within a few minutes, hackers still managed to get over $100,000.

With other blockchain tracing providers such as Chainalysis also tracking the transactions of the wallets that received these funds. Now, with CypherTrace powered, Cellebrite’s tracing solution can help in locating the accused behind these hacks. However, cybercriminals have adapted to the evolving landscape of technology, and have become more sophisticated in their hacks and scams.

John Jefferies, a chief financial analyst of CypherTrace, believes as the cryptocurrency gains more mainstream adoption, the crimes associated with it will also see a rise. He said:

“As the market capitalization of crypto grows, larger financial crimes and nation-state scale. Regulatory reform, driven by the updated FATF guidelines, will force jurisdiction arbitrage as new laws are enacted, globally on unsynchronized timelines.”

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Author: Rebecca Asseh

Coin Metrics’ Trusted Volume Framework Reveals Only 14 Exchanges Are Reporting Real Trading Data

Coin Metrics, a crypto analyst firm, has released a new framework called ‘Trusted Volume Framework’ to evaluate how trustworthy is the trading volume clams made by various exchanges every year.

The analysts at Coin Metrics found that only a handful of exchanges, among hundreds, managed to cut when it comes to offering trading volume data. The study also found that a majority of the exchanges have been showing 10x the actual volume. Exchanges dwell into wash trading, and many other unethical means to show an inflated number to attract more customers.

Key Takeaways of the study revealed:

  • Fake trading volumes have been a black mark on the industry – it is difficult to find a single metric to easily sift through the reported numbers.
  • We’ve taken a data-driven approach to the problem and are excited to introduce a “trusted volume” metric to help identify the legitimate trading volume.
  • Our framework for measuring the reporting quality of exchange is broken down into three broad categories: volume correlation, web traffic analytics, and qualitative features.

As of June 2020, the passing exchanges for ‘trusted’ spot volume include Binance (and Binance US), Bitbank, Bitfinex, bitFlyer, Bitstamp, Bittrex, CEX.IO, Coinbase, Gate.io, Gemini, itBit, Kraken, and Poloniex.

Jon Geenty, a data scientist at Coin Metrics, commented on the growing trend of showing inflated numbers and said:

“Exchanges are especially notorious for boosting volume numbers to game ranking sites or other nefarious reasons. The industry is full of technical information that can be difficult to understand and, at times, misleading. We are working to create a more transparent environment for those within it and a safer, more trustworthy source for those hoping to learn more.”

How did Coin Metrics Evaluate Fake Volume?

Coin Metrics’ Trusted Volume Framework
Source: Coin Metrics

Analysts at Coin metrics did not collect data from top exchanges; instead, they collected trading volume data from trusted spot exchanges which included:

The Coin Metrics subjected these exchanges to three litmus tests, which included comparing the price feed for the exchange against the trusted exchanges. Any exchange with a 60% correlation with the trusted exchange ‘passed’ the test.

The second test assesses the exchange’s volume against the web traffic of the platform, so if an exchange is inflating its volume, then the ratio will be higher as well.

And for the third test, Coin Metrics checks qualitative measures taken by the exchange, like whether the exchange is un/regulated, whether the platform boasts KYC features and others.

Among the most popular exchanges which could not pass the test had only one contender in OKEx, which failed on all the tests.

It was revealed that, in the last 24 hours, the overall volume of the crypto market was $13.25 billion, while the exchanges combined showed a total trading volume of $113 billion.

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Author: James W

Fireblocks Users Can Send Crypto Instantly to FTX Exchange With Zero-Confirmation Program

  • Digital asset firm, Fireblocks introduces the ‘zero-confirmation’ deposits platform.
  • Institutional investors and big players expected to witness faster deposits and trading times.
  • Almeda Research-led crypto derivatives exchange FTX becomes the first to integrate the feature.

An announcement provided to the BEG desk confirms Fireblocks, a digital asset firm providing institutional-grade solutions to crypto traders, has introduced the “Deposit Acceleration program.” The program, announced on Tuesday, aims at reducing the time in making crypto exchange deposits by having zero confirmations on the blockchains.

Looking at the Bitcoin (BTC) blockchain, about 1-6 confirmations from miners are needed to verify the block and record the transactions. With Fireblock’s acceleration program, institutional investors will have room to make faster and larger transactions to crypto exchanges, on-chain, with zero confirmations needed. This incentivizes big players to enter the digital asset space.

Speaking on the launch of the zero-confirmation program, Stephen Richardson, VP of Product Strategy at Fireblocks said,

“The Deposit Acceleration Program is a great way to enable Fireblocks customers to trade on the exchange more actively because being able to deploy assets quickly with their exchange partners directly impacts their ability to drive return on capital.”

Read More>> Fireblocks launches a digital asset transfer network to facilitate faster transactions

Fireblocks efforts to reduce onboarding times

One of the oldest crypto exchanges still running today, Bitstamp, partnered with Fireblocks to deploy one confirmation transactions and deposits on the exchange. Since integration with Fireblock’s solutions, the exchange witnessed a 30% boost in its overall volumes traded from the Fireblock’s institutional gateway.

Now, FTX crypto derivatives exchange is the first platform to integrate Fireblock’s zero-confirmation trades and deposits. Sam Bankman-Fried, CEO and Founder of FTX, said,

“We’re really excited about partnering with the Fireblocks team to solve some of the core latency issues around moving digital assets on-chain. As the first member of the program, we now have the fastest settlement venue for institutional traders.”

Adding to the fast deposits, which allows institutions to onboard their funds and allows traders to trade arbitrage opportunities, the Deposit Acceleration program also impacts the derivatives market positively. This is a crucial addition as it allows crypto derivative traders to mitigate losses from failed margin positions and unlocking the ability to trade during volatile markets.

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Author: Lujan Odera

Blockchain Analyzer, CipherTrace Rolls Out Predictive Risk Scores To Flag Risky Transactions

CipherTrace, a blockchain tracing firm, is launching a new software with real-time analytics and predictive risk-scoring, which can help exchanges freeze crypto transactions whose source of origin is dubious or associated with someone with a recorded criminal history. The software would analyze the transaction before its confirmation on the blockchain.

The software, if it works as advertised, could prove to be a big boon for exchanges who fall prey to scammers often using their platform to launder scammed cryptocurrencies. The software would help different business entities from avoiding any such transactions.

Cybercriminals often launder cryptocurrencies by using mixing tools or gambling websites to help obscure stolen funds. However, the blockchain tracing firms like CipheTrace have also made significant progress and can trace the source of the criminal funds despite them using these tactics.

The newly developed predictive risk scoring tool is one such example of the progress made by the blockchain tracing firms. The tool is expected to reach the clients by July end.

The Timing Could Not Have Been Better

The launch of the crypto transaction freezing tool comes just days after a massive collaborative attack on Twitter, which resulted in the hacking of more than 100 prominent Twitter accounts, including that of Jeff Bezos, Elon Musk, Kanye West and many more crypto-related accounts as well. The scammers tweeted a bitcoin address asking followers to send Bitcoin to these addresses to get it doubled in return.

While the scam looked evident from a distance but given they were tweets from famous people with millions of followers, scammers managed to siphon $120,000 in Bitcoin before Twitter and exchanges like Coinbase sprung into action and started freezing transactions. In contrast, Twitter disabled tweets from all blue tick account for a few hours.

John Jefferies—a chief financial analyst at CipherTrace, explained how the newly developed tool would enable exchanges and business entities to steer away from any suspicious transaction entering into their system. He explained that transactions would be scored using a money monitoring system. He said:

“Exchanges, [crypto] ATMs, [over-the-counter] desks, hedge funds, and other [virtual asset service providers] use our software to score transactions as they flow into their platforms. By ingesting data from the blockchain, our AI scores transactions from low to high money laundering risk based on whether the funds have been tainted.”

“When transactions enter the mempool, CipherTrace can see these risky transactions and know where they came from before they are written to the blockchain. This allows our customers to ‘see into the future’ and stop the funds while they’re on route to a [virtual asset service provider].”

If the CipherTrace tool detects a transaction involving any address involved with suspicious activity, then the tool would deem it risky and place it under one of the categories, namely criminals, dark market, gambling, malware, ransomware, or mixer.

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Author: James W

ESET Discovers Trojan Attack Targeting Cryptocurrency Traders Using Apple’s MacOS

The Internet security firm, ESET, has discovered a new trojan attack targeting crypto traders who use applications from Apple’s macOS.

According to the findings, the malware targets crypto wallets and is integrated with pseudo digital asset trading apps, which can easily be confused for the legit platforms.

Dubbed ‘GMERA,’ and not the first time the malware was used. Researchers from Trend Micro, another cyber sec firm, had come across it back in September 2019 when it had posed as Stockfolio, a Mac-built stock investment app.

Upon digging deeper, ESET researchers found that GMERA operators had integrated the malware with macOS’ Kattana crypto trading application. They then created a replica of the firm’s website to promote four new copycat apps, namely; Trezarus, Licatrade, Cupatrade, and Cointrazer. Notably, these malicious apps direct users to a ZIP archive containing the trojan zed versions, which in turn target crypto wallets once downloaded.

The researchers went on to highlight that anyone who is not very familiar with Kattana’s website can, therefore, easily be compromised:

“For a person who doesn’t know Kattana, the websites do look legitimate.”

The GMERA Malware

To fully understand how it works, ESET researchers analyzed samples from Licatrade whose functionality is pretty similar to the other malware. As per the findings, GMERA installs a shell script on the target’s computer, giving the hackers access to a user’s system through the app.

They then leverage HTTP to create C&C or C2 servers to initiate communication between them and the compromised machine. In doing so, they can steal information such as location, crypto wallets, and screen captures stored in the user’s database. Following these findings, ESET raised the issue with Apple leading to the revokement of Licatrade’s certification.

Also Read: Twitter Hacker Managed to Scam Only 12 Bitcoin After Duping Major Accounts Using ‘Internal Tools’

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Author: Edwin Munyui

Human Rights Foundation and Crypto Custody, Casa, Partner to Help Activists Use & Secure BTC

The Human Rights Foundation has partnered with Bitcoin security firm Casa to help activists protect their bitcoin holdings and donations used in the fight against human rights abuses around the world. Casa would offer its multi-signature self custody solution to help the foundation save donations in Bitcoin.

Alex Gladstein, Chief Strategy Officer at Human Rights Foundation, in a release stated that Bitcoin could help the activists raise the necessary funds to help people around the world, especially in these troubled political climates. He said:

“Bitcoin has enormous potential to help activists raise funds to fight human rights abuses in difficult political environments, but storing it in a safe yet accessible way has always been a challenge.”

He added:

“With software like Casa, organizations can keep their Bitcoin secure while maintaining full control, without the risk of losing funds due to a mistake. Activists must control the private keys to their Bitcoin, so they can always get their funds to where it’s needed when it’s needed.”

Casa Would Offer Educational Resources For Activists to Understand Bitcoin Better

The partnership between Casa and Human Rights Foundation would see the bitcoin security company offering educational resources to activists and non-profit organizations to help them understand different aspects and potential of Bitcoin, and how they can use it in their fight against human rights abuses.

The partnership would also conduct various workshops where Casa will be offering its insight and expertise in the field of cybersecurity and bitcoin security to help activists protect their funds and use it efficiently.

Casa combines proven technologies with hardware wallets and risk diversification to ensure the safety of one’s bitcoin. The partnership between the two firms can also pave the way for future use of bitcoin and other cryptocurrencies for social welfare work. If this partnership turns into a success story, other organizations would even fancy their chances of incorporating bitcoin into their operations.

Nick Neuman, CEO at Casa, commented on how Bitcoin could prove to be a great aid over fiat in the current system and explained:

“Sadly, human rights organizations face unique challenges when it comes to managing their funds, including having their bank accounts frozen, as we saw in 2019 when HSBC froze the account of Hong Kong pro-democracy group Spark Alliance due to political pressure.”

He concluded:

“But Bitcoin changes the game. As long as it is protected within a highly secure self-custody solution, Bitcoin enables activists to receive and spend funds in a way that governments and corporations can’t control. Bitcoin also provides significantly more freedom for moving funds around the world and, since it’s not subject to the fees and friction of international transfers, more money is available more quickly to fund projects that make a real difference.”

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Author: James W

AMR Filling Reveals Fidelity Investments Owns 10.6% Stake In Canadian Bitcoin Miner, Hut8

Fidelity, a digital asset management firm, holds over 10% of the recently-listed Canadian firms, Hut8, according to reports from TheBlock. The former’s, which is also invests in Bitcoin mining, investment in Hut8, aims at increasing its hash rate with the purchase of new MicroBT and Whatsminer mining equipment.

In an official filing by Hut8 – an alternative monthly reporting (AMR) – to Canadian top securities authority, Ontario Securities Commission (OSC), on Friday, disclosing Fidelity Investments holds 10.6% of shares in the company in a mix of common shares and common share purchase warrants. AMR is filed by Canadian companies to disclose their institutional investment partners.

Welcoming a new investor in the company through an underwritten public offering on June 25 forced the filing of the AMR. The total offering is 5,750,456 units, with each unit representing one common share and one common share purchase warrant. Each Hut8 unit in the round costs $1.45, bringing the total raised in the firm to $8.34 million.

The statement released on Fidelity Investments purchase reads:

“Fidelity holds 8,396,138 Common Shares and 2,054,956 common share purchase warrants, as a result of which Fidelity deemed to hold 10,451,094 Common Shares representing approximately 10.58% of the outstanding shares of that class.”

This raise is aiming to better Fidelity’s Bitcoin mining hash rates with part of the investment set to purchase new mining equipment, including MicroBT’s, Whatsminer M30S, M31S, and M31S+.

Fidelity Investments in Bitcoin

The latest partnership is significant to Fidelity as it aims to expand its cryptocurrency operations. The asset management company, which holds over seven trillion in AUM, opened a new entity in London at the tail end of 2019 to help institutions onboard Bitcoin as assets.

Notwithstanding, in January this year, the company released a job listing looking for a Bitcoin mining engineer in a bid to boost operations.

On the other hand, Hut8 is struggling to make profits since launch as the Canadian mining firm witnessed a third successive drop in revenues at the end of Q2 2020.

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Author: Lujan Odera

India’s Tech Giant, TSC, to Launch ‘Quartz’ Crypto Trading Solution For Institutions

Tata Consultancy Services (TCS), a subsidiary of India’s largest tech firm, Tata, announced the launch of a crypto solution enabling traditional financial institutions to offer digital asset services to customers.

According to a spokesperson at the firm, the new solution, dubbed “Quartz Smart Solution for Crypto Services,” will offer the best security services and compliance structure to allow seamless cryptocurrency trading. According to a press release on TCS official blog, the Quartz solution is explained as

“a next-generation, digitally-powered offering for banks and investment firms to provide secure and seamless cryptocurrency trading to their clientele.”

The solution offers an array of features to financial institutions and banks, including support for multiple cryptos, a link to fiat currency exchange, and a digital asset transfer platform.

The project is the brainchild of Quartz, a startup incubated by TSC, which builds decentralized ledger solutions to traditional finance problems. The smart solution aims at providing the “best-in-class hardware security module” to beef up security and verification of transactions.

The platform integrates multi-signature feature wallets and provides the infrastructure to build secure OTC exchange desks. Finally, a close audit and blockchain forensic checks ensure that transactions made on the Smart Solution for the Crypto platform are appropriately verified and authenticated.

Crypto is spreading into the traditional finance world with hedge funds and investment institutions taking the risk and placing big bets in the industry. R Vivekanand, Global Head, Quartz, TCS concurs on this analogy stating his company is ready to take on the challenge of providing these services.

“We are excited to offer them our robust, secure, and scalable solution for trading, storing, and transfer of these assets,” Vivekanand said.

“We believe Quartz is well ahead of the curve in providing such a solution that allows customers to transact in multiple cryptocurrencies and digital assets, backed by best-in-class security features.”

India is taking a step forward in blockchain, and the Supreme Court lifted digital asset development after the recent blanket ban on crypto by the Royal Bank of India (RBI).

Throughout 2019, TCS announced a number of development strategies and projects in the blockchain arena, including Quartz integration of RippleNET allowing banks and financial institutions to transfer funds freely; and the security settlement platform to enable cross border transfers.

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Author: Lujan Odera

Currency.com Obtains DLT License From Gibraltar Financial Watchdog for Tokenized Exchange

Currency.com, a Belarus based crypto firm, has obtained a distributed ledger technology license granted by the Gibraltar Financial Services Commission, according to an announcement on July 6. This license would allow the platform to use blockchain for either storing or transmitting value to others in provision with the dealer.

Squires, the CEO of Currency.com, explained how the newly obtained license would reinforce clients’ belief in the firm while offering them better prospects of expanding and reaching new customers. He said:

“For our European clients, we’re aware that they have a preference for a recognizable legal framework for the venue through which they trade (Gibraltar is based heavily on the laws of England and Wales), so we intend to engage with clients and entities in the EU using this license.”

He elaborated further on the plans of expansion and said:

“We have several regions we’re keen to extend into, and we have the technical capacity and team to do so easily. That said, we are very cautious about any market entry to make sure that we protect both our clients and our brand. Once we have built our European expansion through Gibraltar, we’ll be moving on to other large markets for sure.”

He also lauded Gibraltar for regulating cryptocurrencies and crypto platforms, given how strict the governance around digital assets is. He noted:

“Our Gibraltar license is an important endorsement for the platform and further confirms our adherence to the most stringent standards, providing the highest level of safety and security for our traders.”

The EU regulations and guidance are considered to be among the strictest ones, and thus efforts made by the likes of Gibraltar helps in pushing the adoption.

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Author: Hank Klinger