How The Crypto Couple Went From Wannabe Tech Luminaries To Targets In The Biggest Financial Seizure In Justice Department History


Ilya “Dutch” Lichtenstein raised money from Mark Cuban and other well-known investors. His wife, Heather Morgan, built a following as a quirky rapper and social media luminary. 


By Cyrus Farivar, David Jeans and Thomas Brewster

Heather Morgan and her husband, Ilya “Dutch” Lichtenstein, seemed to lead a successful life as tech entrepreneurs and thought leaders. Lichtenstein invested in startups alongside heavyweights like Marc Benioff and had launched his own company backed by Mark Cuban. Morgan styled herself as a prolific thought leader, posting online articles about women in leadership, and even had an alter ego as a goofy YouTube rapper called Razzlekhan, who talked about success and money. 

But they had a secret, according to investigators with the IRS. Morgan, 31, and her husband, Lichtenstein, 34, were arrested in New York on Tuesday and charged with trying to launder $3.6 billion in bitcoin stolen by hackers from the Bitfinex exchange six years ago. If convicted of the charges against them, each could serve up to 25 years in prison. Court documents unsealed this week detail an elaborate scheme to launder and conceal the origins of the stolen bitcoins. Lichtenstein and Morgan are not charged with perpetrating the hack.

Forbes found that as the pair allegedly used a digital wallet to launder the cryptocurrency, they simultaneously styled themselves as self-made entrepreneurs, investing in companies together and, in Morgan’s case, establishing herself as a social media personality.

Since meeting about a decade ago, the two worked hard to gain a foothold in Silicon Valley and New York tech circles. Lichtenstein had proceeded through a series of failed ventures, including running a Ron Paul fan website and setting up a brain-boosting supplements business before co-founding MixRank, now a venture-backed sales and marketing company. Lichtenstein left MixRank abruptly in 2016, the same year that Bitfinex was hacked. 

During that time, Morgan cast herself as an expert in “cold email” – unsolicited communications – and parlayed that into writing gigs and appearances at sales conferences. 

“She came across as a smooth operator but never in a way that raised suspicions,” said Travis Lybbert, a University of California, Davis economics professor, who hired Morgan as a research assistant in 2011. “She was a very confident young person, professional, who would look for opportunities and create them.”

People who knew the couple said they were shocked by the arrests. Lybbert, in a phone interview with Forbes, said Morgan had been a promising student whose understanding of the Middle East was impressive. She “earned a place” as a co-author on the academic book chapter that they wrote together, he said: “Lessons from the Arab Spring: Food Security and Stability in the Middle East and North Africa.” 

The professor said that he had given a guest lecture in one of Morgan’s classes when she was a student at UC Davis, and she approached him later, after her graduation, seeking research opportunities that could aid her “graduate studies in economics, especially in international and developmental economics.”

”She was always looking for the next thing and had really high aspirations for what she wanted to do professionally,” Lybbert said.

Lybbert also said that while he and Morgan were working together in 2011 and 2012, Morgan was ambitious and busy. After graduating from UC Davis, she traveled to Hong Kong, where she worked as an event planner, while also applying to graduate school in economics and starting her own copywriting consulting company, SalesFolk, Lybbert said.

According to Morgan’s LinkedIn page, she moved on from Hong Kong to Cairo, where she completed a masters degree in economics and international development at the American University. Morgan returned to California in 2013 and took a job with a company called Tamatem Inc., an Arabic-language mobile-games publisher, which was incubated in 500 Startups. At about the same time, Morgan launched SalesFolk. Archival copies of her website from June 2013 describe her as an “analytics ninja,” a “published author,” and as having seven years of copywriting experience.

It appears she crossed paths with Lichtenstein around this time. Listed as a testimonial at the bottom of her Salesfolk web page is a comment from Lichtenstein, who gave her services a glowing review, calling her “intense, brilliant, and laser focused,” and adding that “a single hour of brainstorming with Heather pays for itself immediately.” 

In 2014, Morgan began blogging on her own site, econgoat.com, where she described herself as a “shameless economist in pearls.” In a post on April 14, 2014, she wrote: “​​While my risk-loving behavior may have brought me more chaos than most people could handle, mixed with some failures, it also led me to my biggest wins.” A few months later, Morgan interviewed Lichtenstein for her own YouTube channel, asking him about his company, MixRank, in a video entitled “Get your first $1 million in enterprise sales with zero marketing spend.” 

By now, Morgan was getting recognition beyond her own websites. In August 2015, she was interviewed online by a sales management software company called Ambition, which described her as someone who was “rewriting the playbook on cold email outreach for [software-as-a-service] companies all over the world.” Brian Trautschold, now Ambition’s COO, who did the interview with Morgan, expressed shock that she had been accused of a federal crime. It’s “crazy,” he told Forbes in a phone interview. “She was speaking at SaaS conferences and there was no indication that the person wasn’t focused on consulting on email…It’s a shock, seven-plus years later, to see the other side of the story kind of come out.”

A few months before the Bitfinex hack in August 2016, Morgan became a freelance columnist at Inc. magazine, which described her as having gone from “sleeping on couches to creating a bootstrapped seven-figure business called SalesFolk.” The following year, she also became a contributor to the ForbesWomen section on Forbes.com, where she posted articles about topics ranging from music to food. In one post, Morgan discussed how she had a speech impediment growing up and was bullied by other students in school.

In that 2019 Forbes post, she hinted at previous legal issues: She wrote that during a business trip to Asia, she received unspecific “legal threats,” learned that her employees were “fudging numbers,” and was bullied by longtime friends. Forbes removed her as a contributor in September 2021 during a routine semiannual review. 

It was because of professional setbacks like these, she wrote in the Forbes post, that she decided to become a rapper, adopting the name Razzlekhan. In an Instagram post in January 2019, Morgan is wearing a black leather jacket while another woman stands behind her. “So some people in the tech world are a little bit worried about me rapping and are not sure if I should have a rap song, also some corporate people,” she said. “But you know what, I remember just as many people telling me not to take a risk, not to start a company, not to be an entrepreneur.” Many of Razzlekhan’s YouTube videos have been made private or been removed since Tuesday evening.

Since the Bitfinex hack in 2016, the couple’s online posts show an extravagant lifestyle. Morgan documented their jet-setting from Panama to Malaysia and Mexico on social media platforms. 

The same month the alleged hack took place, Morgan posted a photo to Instagram. She and Lichtenstein are sitting on a blue satin couch, laughing. “I always love getting into trouble w/ this crazy guy,” she wrote. “Thanks for always inspiring me to be a better entrepreneur!”

Lichtenstein, for his part, had established himself as a minor player in the New York tech investment world, where, according to the Justice Department, he was living in an apartment at 75 Wall Street, an exclusive block where a typical condo is valued upward of $1 million. 

It was an image of success he had been building for a decade. After graduating with a major in psychology from the University of Wisconsin-Madison, Lichtenstein had sought like-minded entrepreneurs and went to Silicon Valley, where he met other techno-libertarians, according to his trail of now-defunct websites and businesses identified by Forbes. One of his more notable sites was RonPaulFan.com, which contained a stream of news and support for the one-time Republican presidential candidate who became a famous advocate for cryptocurrency. According to the site’s banner, it was the “#1 source for all Ron Paul news.” 

Lichtenstein also dabbled in selling brain supplements around this time, claiming to have created one called Instant Focus that promised to “turbocharge your productivity,” which he said helped him “code longer and be more productive” in a post on Hacker News in October 2010. He also launched weight loss sites, including MyNaturalWeightLossDiet.com, which was pushing colon cleanses and acai supplements, and what appeared to be a series of dating websites, adultfriendgrinder.com and findgeekgirls.com.

While those enterprises failed to get off the ground, he found more success as co-founder of MixRank, a data-driven-marketing startup, which was accepted into the Y Combinator accelerator program in 2011. At the time, Lichtenstein was trying to establish himself as a Silicon Valley thought leader, in a blog entitled Influence Hacks. In one post he wrote, “The amount of money you make has nothing to do with how hard you work … What markets really reward is RISK.” 

Among early MixRank backers were billionaire investor Mark Cuban and the 500 Startups venture capital fund, according to Pitchbook, but both sold their stakes to an undisclosed buyer sometime between 2012 and 2015. MixRank’s other founder, Scott Milliken, didn’t immediately respond to requests for comment at the time of publication. In an email, Cuban said he “never met” Lichtenstein.

Later, Lichtenstein founded a blockchain-based cybersecurity company called Endpass and an investment business called DemandPath, alongside Morgan. In just over a decade, he was also investing in startups. Those included Routable, where he was an angel investor alongside more than a dozen other investors, including billionaire Bay Area heavyweights like Scott Belsky, Box founder Aaron Levie and Salesforce founder and co-CEO Marc Benioff. There is no indication that Lichtenstein knew or communicated with the other investors.

In one LinkedIn post from 2021, Lichtenstein wrote that he was “proud to have been among the earliest investors in Routable.” Omri Mor, cofounder and CEO of Routable responded, “Proud to have you with us from the start.” Mor didn’t respond to requests for comment. 

Lichtenstein has not been nearly as prolific on social media as his wife. Over the past decade, his Twitter account was quiet for nearly seven years, from 2013 until 2020. But in January 2021, he complained about what he called “#BigTechCensorship.” Last month, he took aim at the venture capitalist Marc Andreessen, lampooning him over a meme he posted. “How wild that billionaires who can do anything in the world choose to prioritize posting second rate memes on Twitter?” 

Reached by phone, Liechtenstein’s father, Yevgeniy Lichtenstein, declined to speak about his son’s predicament. “I don’t want to discuss it, I’m sorry,” the elder Lichtenstein said.

A 20-page affidavit written by Christopher Janczewski, a special agent with the Internal Revenue Service, accuses Morgan and Lichtenstein of moving the stolen bitcoins “through thousands of transactions to over a dozen accounts” in their own names and businesses. One of those companies was SalesFolk, Morgan’s copywriting consulting company, according to the affidavit.

In June 2019, Morgan allegedly changed a personal bitcoin account to a business account that she had at a specific virtual currency exchange (identified in court documents as “VCE 7”), “in order to receive less scrutiny from VCE 7 about her transactions as she liquidated her BTC in greater volume,” the affidavit reads.

But it was Lichtenstein’s use of a cloud-storage account that led to the unraveling of the alleged plot. The government decrypted a file there that contained a list of 2,000 virtual currency addresses, along with corresponding private keys. Almost all of those addresses were linked to the Bitfinex heist, according to the Justice Department, which said the crypto also passed through entities owned by Morgan. 

Lichtenstein and Morgan’s counsel, Anirudh Bansal, did not respond to Forbes’ requests for comment.

During a detention hearing Tuesday before a federal magistrate judge, Morgan and Lichtenstein were ordered released on bond, over prosecutors’ objections. The objections included the fact that Morgan allegedly “tried to lock her cellular phone to prevent law enforcement examination” and that the pair “engaged in extraordinarily complex laundering” of some of the bitcoins stolen from Bitfinex. In the end, however, Chief Judge Beryl Howell ordered the husband and wife to remain in custody. A hearing has been scheduled for Friday.

In August 2019, Morgan gave a lecture on “How to Social Engineer Your Way Into Anything” to a group in New York City. When asked by an audience where the line should be drawn in social engineering, Morgan responded: “I do believe that the ends justify the means sometimes,” she said. “My end goals aren’t bad or evil. I’m not trying to scam someone out of money or get someone hurt in any way.”

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Seized Russian Dark Web Sites—Trump’s Dumps, Ferum Shop—Raked In $263 Million In Bitcoin, Ether And Litecoin Sales From Stolen Credit Cards

Topline

Amid a growing wave of cryptocurrency seizures and government cybercrime crackdowns, Russian authorities have taken down massive swaths of the illicit credit card market as the nation looks to bolster legal cryptocurrency adoption, shutting down four sites this week that together have pulled in hundreds of millions of dollars from the sale of stolen credit cards, according to cybersecurity firm Elliptic.

Key Facts

Four illicit websites seized by the Russian Ministry of Internal Affairs on Monday made more than $263 million in cryptocurrency proceeds from the sale of stolen credit cards, representing roughly one-fifth of the global market for illicit cards, according to an Elliptic analysis released Wednesday.

Among sites taken down, Ferum Shop was the world’s largest marketplace for stolen credit cards, making an estimated $256 million in bitcoin since its launch in 2013, according to Elliptic, while marketplace Trump’s Dumps, which infamously used former President Donald Trump’s likeness to help sell raw magnetic strip data from stolen cards, raked in about $4.1 million since 2017.

Notices posted on both websites Wednesday morning warned users that the platforms had been seized by police and were pending criminal investigations, while in another seized marketplace, dubbed SkyFraud, Russian authorities left an emoji-laden message buried in the sites’ source code teasing, “Which of you is next?”

Investigators on Monday asked a Mascow court to arrest six members of an unnamed hacking group for allegedly circulating illegal “means of payment,” according to state-owned Russian news agency TASS, but it’s still unclear whether the suspects are directly linked to the dark web credit card sites.

The seizures come less than a month after Russian authorities seized the then-largest illicit credit card dealer, UniCC, which facilitated some $358 million in transactions over nine years.

According to Elliptic, closures and seizures of carding sites this year have already accounted for almost 50% of sales in the dark web market for stolen credit cards—part of a broader slowdown in illicit dark web activity as tightening cryptocurrency regulation makes it more difficult to launder funds.

Key Background

Earlier this week, Russia’s government said it had reached an agreement with its central bank to draft legislation recognizing cryptocurrency as a form of currency by February 18, largely as an effort to help curb cybercrime. According to a draft document, the move would force users to undergo identity checks conducted by the country’s banking system or licensed intermediaries and make it a criminal offense to transact cryptocurrencies without the checks. “The establishment of rules for the circulation of cryptocurrencies and control measures will minimize the threat to the stability of the financial system and reduce the use of cryptocurrencies for illegal purposes,” legislators said, lamenting that a complete ban on cryptocurrencies would be “impossible.”

Big Number

$214 billion. That’s roughly the value of Russia’s crypto market, representing about 12% of the total value of the world’s cryptocurrencies, according to United Kingdom broker GlobalBlock. 

What To Watch For

Amid simmering tensions with Russia over state-sanctioned cybercrime, President Joe Biden is reportedly slated to release an executive order that will task federal agencies with regulating cryptocurrencies as a matter of national security as soon as this month.

Tangent

Russia’s not alone in cracking down on cybercrime. U.S. authorities arrested a New York City couple on Tuesday for allegedly conspiring to launder $4.5 billion worth of bitcoin stolen during a hack of cryptocurrency exchange Bitfinex in 2016, $3.6 billion of which federal authorities have recovered in what the Department of Justice is calling the largest financial seizure ever. According to court filings, 34-year-old Ilya Lichtenstein and his wife, Heather Morgan, 31, conspired to launder the proceeds of 119,754 bitcoins by employing “numerous sophisticated laundering techniques”—including using fake identities to set up online accounts and running computer programs to automate transactions.

Editor’s Note: Heather Morgan was a ForbesWomen contributor from July 2017 until Forbes ended the relationship in September 2021, and was never an employee.

Further Reading

Feds Seize $3.6 Billion In Stolen Bitcoin, Arrest Couple Five Years After Massive Crypto Exchange Hack (Forbes)

Internet’s Biggest Marketplace For Stolen Credit Cards Will Shut Down (Forbes)

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Feds Seize $3.6 Billion In Stolen Bitcoin, Arrest Couple Five Years After Massive Crypto Exchange Hack

Topline

U.S. authorities arrested a New York City couple Tuesday for allegedly conspiring to launder $4.5 billion worth of bitcoin stolen during a hack of cryptocurrency exchange Bitfinex in 2016, $3.6 billion of which federal authorities have recovered in what the Department of Justice is calling the largest financial seizure ever. 

Key Facts

According to court filings, 34-year-old Ilya Lichtenstein and his wife, Heather Morgan, 31, conspired to launder the proceeds of 119,754 bitcoins—currently worth about $5 billion—that were stolen from the Bitfinex platform after a breach of the cryptocurrency exchange’s systems in 2016.

At the time, the unnamed hacker allegedly made more than 2,000 unauthorized transactions transferring the stolen cryptocurrency to a digital wallet under Lichntenstein’s control, authorities said Tuesday.

They allege Lichentenstein and Morgan then employed “numerous sophisticated laundering techniques”—including using fake identities to set up online accounts and running computer programs to automate transactions—to transfer about 25,000 stolen coins out of the wallet and into financial accounts jointly controlled by the couple over the next five years.

According to the DOJ on Tuesday, special agents obtained court-authorized search warrants to go through the couple’s online accounts and were able to find files containing the private keys required to access a digital wallet containing 94,000 bitcoins representing about $3.6 billion in stolen funds.

In a statement, Deputy Attorney General Lisa Monaco said the recovered funds marked the DOJ’s “largest financial seizure ever” and called the case proof that “cryptocurrency is not a safe haven for criminals.”

The couple has been charged with conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison, and conspiracy to defraud the United States, which carries a maximum sentence of five years.

Tangent

The price of bitcoin pared recent gains after the announcement, falling nearly 2% to $42,910.

Crucial Quote 

“Cryptocurrency and the virtual currency exchanges trading in it comprise an expanding part of the U.S. financial system, but digital currency heists executed through complex money laundering schemes could undermine confidence in cryptocurrency,” U.S. Attorney Matthew M. Graves said in a Tuesday statement. 

Key Background

Ransomware attacks on Colonial Pipeline and meatpacker JBS, which sparked widespread gasoline shortages and meat-plant shutdowns, placed a massive spotlight on anonymity concerns last summer. In both instances, the companies paid millions in bitcoin to hackers taking advantage of the cryptocurrency’s anonymized transactions. “The only way you can begin to get on top of the pervasive” ransomware problem is “to develop a pattern,” Sen. Roy Blunt (R-Mo.) said last summer after the DOJ seized $2.3 million in bitcoin as part of its investigation into Colonial Pipeline. At the time, Blunt called cryptocurrencies the “ransom payment of choice” for hackers and said lawmakers shouldn’t allow cryptocurrencies to operate “behind the scenes.”

What To Watch For

President Joe Biden is reportedly slated to release an executive order that will task federal agencies with regulating cryptocurrencies as a matter of national security as soon as this month.

Further Reading

U.S. Recovers Millions In Bitcoin Paid During The Colonial Pipeline Attack (Forbes)

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Tesla’s Bitcoin Investment Hits Nearly $2 Billion—Here’s How That Compares To Billionaire Novogratz’s Galaxy, Dorsey’s Square And More

Topline

Electric carmaker Tesla revealed in a public filing Monday that the value of its bitcoin holdings ballooned to nearly $2 billion by the end of December, confirming the firm helmed by billionaire Elon Musk sold no cryptocurrency in the latter half of last year and cementing its position as the U.S. corporation with the second-largest bitcoin stash. 

Key Facts

In its annual report released Monday, Tesla disclosed the market value of its bitcoin holdings skyrocketed to $1.99 billion as of December 31 after its $1.5 billion investment in the first quarter, representing roughly 10% of its liquid assets (including cash and marketable securities). 

Despite revealing an accounting loss of $101 million spurred by bitcoin’s volatility last year, the firm reported $272 million in profits from the sale of digital assets last year and said it “believes in the long-term potential of digital assets, both as an investment and also as a liquid alternative to cash.”

With about 43,200 bitcoins, Tesla owns more of the world’s largest cryptocurrency than eight of the top 10 corporate holders, according to Bitcoin Treasuries, but pales in comparison to MicroStrategy, the data analytics firm led by staunch bitcoin bull Michael Saylor, which owns 125,051 coins worth about $5.4 billion.

As of January 1, cryptocurrency mining firm Marathon Digital held 8,133 bitcoins valued at $375.8 million and billionaire Jack Dorsey’s Square, which started buying bitcoin shortly before Tesla in October 2020, owned 8,027 coins worth about $350 million.

Remaining top 10 holders include crypto-exchange Coinbase (owning 4,487 bitcoins worth nearly $200 million), billionaire investor Michael Novogratz’s digital asset financial services firm Galaxy Digital (with 4,000 coins worth $173 million) and a host of small mining companies, including Hut 8 Mining, Bitfarms, Riot and Hive Blockchain, which collectively own nearly $800 million in bitcoin.

List

  1. MicroStrategy: 125,051 bitcoins 
  2. Tesla: 43,200 bitcoins
  3. Marathon Digital Holdings: 8,133 bitcoins
  4. Square Inc.: 8,027 bitcoins
  5. Hut 8 Mining Corp: 5,242 bitcoins
  6. Bitfarms Limited: 4,600 bitcoins
  7. Coinbase: 4,487 bitcoins 
  8. Riot Blockchain: 4,464 bitcoins
  9. Hive Blockchain: 4,032 bitcoins
  10. Galaxy Digital Holdings: 4,000 bitcoins

Big Number

$10 billion. That’s roughly how much about 20 public companies with a market capitalization of more than $1 trillion have invested in bitcoin, according to London-based crypto firm Nickel Digital Asset Management.

Key Background

Growing institutional adoption and heightened inflationary fears have lifted cryptocurrencies to meteoric highs during the pandemic, but not without bouts of crippling volatility. Shortly after Tesla lifted bitcoin to new price highs after announcing its $1.5 billion investment in February, prices crashed nearly 20% when Musk said prices seemed “a little high” on Twitter. Though bitcoin reached a new peak of $69,000 in November, the cryptocurrency has experienced several 20% drawbacks over the past year, including in May when the Tesla announced it would stop investing in bitcoin—and accepting it as a form of payment for its vehicles—because of the industry’s toll on the environment. At about $43,888 on Monday, the price of bitcoin is up 13% over the past year, but down 35% from its all-time high.

What We Don’t Know

Whether—or when—Tesla will once again invest in bitcoin, or accept it as a form of payment. On Monday, the firm said it “may increase or decrease our holdings of digital assets at any time” based on market and environmental conditions, but it gave no further details about its cryptocurrency future. 

Contra

“Investing in bitcoin puts a company’s cash at risk of unnecessary volatility and potential losses,” Jerry Klein, the managing director of $19 billion advisory Treasury Partners, wrote in emailed comments last week. Accounting rules require corporations to treat bitcoin as an intangible asset, Klein says, meaning firms must write down the value if the price declines, but can’t write up the value if the price appreciates. “This creates a no-win situation from an accounting standpoint,” he notes.

Further Reading

Tesla’s Bitcoin Investment Fell $1 Billion In Second Quarter Amid Crypto Market Crash (Forbes)

Billionaire Saylor’s MicroStrategy Bought $25 Million In Bitcoin During Last Month’s $500 Billion Crypto Market Crash (Forbes)

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VC Backer Replaces $325 Million In Stolen Crypto One Day After Solana’s Biggest Hack Ever

Topline

Venture capital firm Jump Capital said Thursday it replaced the $325 million worth of tokens allegedly stolen from its portfolio company Wormhole Portal, a platform that helps users transfer cryptocurrency between the Solana and Ethereum blockchains, in one of the biggest hacks ever to hit the booming—and largely unregulated—decentralized finance space.

Key Facts

Cryptocurrency-focused investment firm Jump Capital, which has raised more than $700 million in capital, tweeted Thursday afternoon that it had “replaced” 120,000 stolen Ethereum-based tokens “to make community members whole” and support Wormhole but provided no further details about the bailout.

Jump’s tweet came hours after blockchain platform Wormhole, which launched last August and holds roughly $1 billion in deposited funds, confirmed on Twitter that funds involved in the hack had been “restored,” and said on Telegram that “all funds are safe.”

Wormhole previously notified users of a possible hack on Twitter at about 4 p.m. ET Wednesday, saying its network was down for maintenance as the firm looked into a potential attack.

About an hour later, Wormhole said its network had been exploited and claimed about 120,000 tokens of a cryptocurrency known as wrapped ether, which tracks the value of the world’s second-largest cryptocurrency, ether, had been stolen—representing some $325 million in value.

In a message embedded onto the Ethereum blockchain, Wormhole offered the attacker a $10 million bounty to return the funds, according to blockchain analytics company Elliptic, which called the Wednesday incident the fourth largest cryptocurrency hack ever.

Soon after the heist, analysts at blockchain security firm CertiK said the hack represented the largest-ever attack on the Solana network and an “unfortunate reality” for the booming decentralized finance space, which has heated up among investors alongside the broader cryptocurrency industry over the past year, despite a growing number of similar hacks.

Crucial Quote

“[Jump] believes in a multichain future and that @WormholeCrypto is essential infrastructure,” Jump, which acquired Wormhole’s parent company for an undisclosed amount in August, tweeted Thursday, referring to the type of protocol Wormhole uses to allow users to swap tokens between different blockchains. “That’s why we replaced 120k ETH to make community members whole and support Wormhole now as it continues to develop.”

Tangent

Even though the space only started gaining traction in 2020, there have been more than $2 billion in direct losses suffered by decentralized finance services due to hacks and exploits, according to Elliptic on Wednesday. In August, hackers breached blockchain-based platform Poly Network and extracted more than $600 million in cryptocurrencies, marking DeFi’s biggest hack ever. Those funds were eventually returned .

What We Don’t Know

It’s still unclear who the alleged hacker is and whether Wormhole is still working to retrieve the stolen funds.

Big Number

$192 billion. That’s the market value of all decentralized finance tokens, according to cryptodata website DeFi Llama. The space shot past a $250 billion valuation for the first time ever in December but has since fallen amid a broader cryptocurrency market sell-off.

Key Background

Securities and Exchange Commission Chairman Gary Gensler has repeatedly said the decentralized finance industry, also known as DeFi, deserves more government scrutiny. Such platforms largely sidestep traditional intermediaries like central banks and exchanges for financial services and instead rely on blockchains and cryptocurrencies to process transactions. Gensler has said the practices can implicate securities, commodities and banking laws, and last year called on Congress to ramp up its authority over the cryptocurrency industry, which he likened to the “Wild West.” 

Further Reading

Hacker Returns Nearly All $600 Million Stolen In Ethereum, Other Tokens After Major Crypto Heist (Forbes)

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$325 Million In Stolen Crypto ‘Safe’ After One Of Solana’s Biggest Hacks Ever—Ethereum And Sol Prices Still Plunging

Topline

Wormhole Portal, a platform that helps users transfer cryptocurrency between the Solana and Ethereum blockchains, said Thursday morning that more than $325 million worth of tokens allegedly stolen less than a day earlier were safe, but that didn’t stop the prices of ether and sol from plummeting after the hack—one of the biggest ever in the booming and largely unregulated decentralized finance space.

Key Facts

Blockchain platform Wormhole, which launched last August and holds roughly $1 billion in deposited funds, confirmed on Twitter early Thursday that funds involved in the hack had been “restored,” a few hours after the firm said “all funds are safe” on its Telegram channel.

Despite the funds’ retrieval, ether and sol prices were still plunging Thursday morning, down 6% and 11.5%, compared to a 5% drawback for the broader cryptocurrency market. 

Wormhole previously notified users of a possible hack on Twitter at about 4 p.m. ET Wednesday, saying its network was down for maintenance as the firm looked into a potential attack.

About an hour later, Wormhole, which did not immediately respond to Forbes’ request for comment, said its network had been exploited and claimed about 120,000 tokens of a cryptocurrency known as wrapped ether, which tracks the value of the world’s second-largest cryptocurrency, ether, had been stolen—representing some $325 million in value.

In a message embedded onto the Ethereum blockchain, Wormhole offered the attacker a $10 million bounty to return the funds, according to blockchain analytics company Elliptic, which called the Wednesday incident the fourth largest cryptocurrency hack ever.

Soon after the attack, analysts at blockchain security firm CertiK said the hack represented the largest-ever attack on the Solana network and an “unfortunate reality” for the booming decentralized finance space, which has heated up among investors alongside the broader cryptocurrency industry over the past year, despite a growing number of similar hacks.

Tangent

Even though the space only started gaining traction in 2020, there have been more than $2 billion in direct losses suffered by decentralized finance services due to hacks and exploits, according to Elliptic on Wednesday. In August, hackers breached blockchain-based platform Poly Network and extracted more than $600 million in cryptocurrencies, marking DeFi’s biggest hack ever. Those funds were eventually returned.

What We Don’t Know

It’s still unclear who the alleged hacker is and whether Wormhole paid the bounty for the safe retrieval of stolen funds.

Big Number

$192 billion. That’s the market value of all decentralized finance tokens, according to cryptodata website DeFi Llama. The space shot past a $250 billion valuation for the first time ever in December but has since fallen amid a broader cryptocurrency market sell-off.

Key Background

Securities and Exchange Commission Chairman Gary Gensler has repeatedly said the decentralized finance industry, also known as DeFi, deserves more government scrutiny. Such platforms largely sidestep traditional intermediaries like central banks and exchanges for financial services and instead rely on blockchains and cryptocurrencies to process transactions. Gensler has said the practices can implicate securities, commodities and banking laws, and last year called on Congress to ramp up its authority over the cryptocurrency industry, which he likened to the “Wild West.” 

Further Reading

Hacker Returns Nearly All $600 Million Stolen In Ethereum, Other Tokens After Major Crypto Heist (Forbes)

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Solana’s Biggest Attack Yet: $325 Million In Crypto Allegedly Stolen From $1 Billion Decentralized Finance Platform

Topline

Wormhole Portal, a platform that helps users transfer cryptocurrency between the Solana and Ethereum blockchains, said Wednesday afternoon a hacker had stolen more than $325 million worth of tokens in what experts call one of the biggest hacks ever in the booming $192 billion decentralized finance space—an area regulators seem keen to crack down on after a slew of high-profile heists.

Key Facts

Blockchain platform Wormhole, which launched last August and holds roughly $1 billion in deposited funds, notified users of a possible hack on Twitter at about 4 p.m. ET Wednesday, saying its network was down for maintenance as the firm looked into a potential attack.

About an hour later, Wormhole said its network had been exploited and claimed about 120,000 tokens of a cryptocurrency known as wrapped ether, which tracks the value of the world’s second-largest cryptocurrency, ether, had been stolen, representing some $325 million in value.

In a message embedded onto the Ethereum blockchain, Wormhole offered the attacker a $10 million bounty to return the funds, according to blockchain analytics company Elliptic, which called the Wednesday incident the fourth largest cryptocurrency hack ever.

Wormhole did not immediately respond to Forbes’ request for comment, but it said shortly before 7 p.m. that the network’s vulnerability had been “patched”; it’s still unclear who the alleged hacker is and how Wormhole users may have been affected by the heist.

Soon after the attack, analysts at blockchain security firm CertiK said the hack represented the largest-ever attack on the Solana network and an “unfortunate reality” for the booming decentralized finance space, which has heated up among investors alongside the broader cryptocurrency industry over the past year, despite a growing number of similar hacks.

Even though the space only started gaining traction in 2020, there have been more than $2 billion in direct losses suffered by decentralized finance services due to hacks and exploits, according to Elliptic on Wednesday.

Big Number

$192 billion. That’s the current market value of all decentralized finance tokens, according to cryptodata website DeFi Llama. The figure shot past $250 billion for the first time ever in December but has since fallen amid a broader cryptocurrency market sell-off.

Key Background

Securities and Exchange Commission Chairman Gary Gensler has repeatedly said the decentralized finance industry, also known as DeFi, deserves more government scrutiny. Such platforms largely sidestep traditional intermediaries like central banks and exchanges for financial services and instead rely on blockchains and cryptocurrencies to process transactions. Gensler has said the practices can implicate securities, commodities and banking laws, and last year called on Congress to ramp up its authority over the cryptocurrency industry, which he likened to the “Wild West.” 

Tangent

In August, hackers breached blockchain-based platform Poly Network and extracted more than $600 million in cryptocurrencies, marking DeFi’s biggest hack ever. Those funds were eventually returned.

Further Reading

Hacker Returns Nearly All $600 Million Stolen In Ethereum, Other Tokens After Major Crypto Heist (Forbes)

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Cathie Wood Buys More Robinhood And Tesla, Tells Investors To Take ‘Advantage’ Of Volatility

Topline

Widely-followed stock picker Cathie Wood of Ark Invest, looking to bounce back as her funds continue to underperform, is using recent market volatility to buy the dip on big growth names like Tesla and Robinhood—both of which have seen shares struggle amid the wider sell-off in January.

Key Facts

The founder and CEO of Ark Invest purchased a total of 2.58 million shares of popular stock trading app Robinhood after the stock plunged to a record low of less than $10 per share on Friday following a dismal quarterly earnings report.

Wood purchased more than 2 million shares for her $12 billion flagship ARK Innovation ETF, with a total stake in Robinhood worth nearly $200 million, according to Morningstar data.

Robinhood is down nearly 70% since going public last year but Wood has continued to buy shares of the company since late October—when the stock plunged below its IPO price of $38 per share.

Another of Wood’s big trades in recent days: Adding to her position in Tesla for the first time since June 2021, buying roughly 55,000 shares—worth nearly $50 million—of the electric vehicle maker.

Tesla’s stock has fallen over 20% so far this year amid a wider selloff in growth and tech stocks, but Wood’s latest purchase may be a sign that she thinks shares are down to a more reasonably priced level.

Elon Musk’s electric vehicle outfit is Wood’s biggest holding in her flagship fund, making up about 8% of the ARK Innovation ETF—a position worth over $900 million, according to Morningstar data.

Surprising Fact:

The Ark Invest founder also sold 70,000 shares worth of Spotify on Friday, amid the latest controversy surrounding the company. Several artists have boycotted the music streaming platform in light of false Covid-19 claims spread on Joe Rogan’s podcast. Wood still holds a sizable stake in Spotify—it is one of her flagship fund’s top ten holdings—worth almost $500 million, according to Morningstar. 

Crucial Quote:

Amid the wider sell-off in tech stocks, Wood told investors last week that “innovation is on sale,” though she remained unswayed by the recent market swings. “We use volatility to our advantage,” she said. “We concentrate towards our highest conviction names and that tends to work very well as we go through these corrections.”

Key Background:

After rising to fame in 2020, with her flagship fund surging nearly 150%, Wood’s performance has since gone downhill. The ARK Innovation fund fell 24% in 2021—losing over a fifth of its value–while the S&P 500 was up 27%. So far this year, the fund is down another 20%. With the Federal Reserve tightening its monetary policy and preparing to raise interest rates, investors have largely dumped riskier growth stocks, with shares of tech companies particularly hard-hit. The Nasdaq Composite index subsequently fell into correction territory in January, more than 10% below its record highs last November.

Further Reading:

Robinhood Shares Plunge Amid Gloomy Revenue Outlook Just One Year After Meme Stock Mania (Forbes)

Cathie Wood Doubles Down On Growth Stocks After Fund Loses A Fifth Of Its Value In 2021 (Forbes)

Stocks Just Had Their Worst Month Since March 2020: January’s Wild Ride In 8 Numbers (Forbes)

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Billionaire Saylor’s MicroStrategy Bought $25 Million In Bitcoin During Last Month’s $500 Billion Crypto Market Crash

Topline

MicroStrategy, the data analytics firm helmed by billionaire cryptocurrency bull Michael Saylor, announced its latest big investment in bitcoin on Tuesday morning, yet again doubling down on its unprecedented commitment to the world’s largest cryptocurrency even as the Securities and Exchange Commission cracks down on how the firm has reported operating profits amid bitcoin’s recent price crash.

Key Facts

In a regulatory filing on Tuesday, Virginia-based MicroStrategy, which owns more bitcoin than any other corporation in the world, disclosed it purchased approximately 660 bitcoins for about $25 million in cash, or $37,865 per coin, between December 30 and January 31.

The company, which started buying cryptocurrency for its balance sheet in August 2020, says it now holds approximately 125,051 bitcoins, purchased for nearly $3.8 billion, or an average price of $30,200 per coin.

MicroStrategy has helped fund its bitcoin purchases using debt and proceeds from a $1 billion stock offering previously disclosed in June.

Shares of MicroStrategy jumped about 4% Tuesday morning after the announcement, but they’ve plunged more than 30% this year amid a broader-market rout that’s pushed the price of bitcoin down nearly 20%.

MicroStrategy’s latest investment comes as bitcoin struggles near a six-month low after a series of sell-offs, sparked largely by the Federal Reserve’s removal of pandemic-era stimulus measures, tanked prices about 50% below an all-time high of about $69,000 set in November.

The market difficulties have also coincided with regulator scrutiny around how MicroStrategy has accounted for its bitcoin stash—and its massive losses—on its financial reports, with the Securities and Exchange Commission in December asking MicroStrategy to stop adjusting its profits to exclude accounting losses related to bitcoin’s plunge.

Big Number

$4.9 billion. That’s the value of MicroStrategy’s bitcoin holdings on Tuesday given prices of about ​​$38,930 per coin.

Tangent

In October, MicroStrategy posted a loss of $36.1 million for the third quarter, but it also reported that it would’ve made $27.7 million if it excluded accounting losses from bitcoin, which totaled more than $65 million. The SEC sent a letter to MicroStrategy in December saying it objected to the treatment and asking the firm to remove the adjustment in future filings. MicroStrategy, which has previously said“ it believes the inclusion of such losses may “distract” investors, said it would comply in a response two weeks later.

What To Watch For

MicroStrategy is set to report fourth-quarter earnings after the market closes Tuesday. 

Chief Critic

“Volatility in bitcoin shows that companies cannot rely on cryptocurrencies as sound corporate cash investments,” says Jerry Klein, the managing partner of $9 billion advisory Treasury Partners. “Corporate investors get none of the sweets, but all of the indigestion by investing in bitcoin.” Accounting rules require corporations to treat bitcoin as an intangible asset, Klein says, meaning firms “must write down the value if the price declines, but they can’t write up the value if the price appreciates.” Tesla and billionaire Jack Dorsey-led Square have also reported accounting losses related to their bitcoin holdings.

Key Background

Thanks to its growing bitcoin investment—rivaled only by Tesla’s 42,000 coins—MicroStrategy has minted a stunning turnaround since the dot-com bubble tanked its stock price roughly two decades ago. Shares have skyrocketed nearly 200% since the company first started buying bitcoin. However, prices have also been incredibly sensitive to the nascent crypto market’s outsized volatility. Battered more recently by the SEC’s growing scrutiny, the stock has crashed nearly 64% from a 21-year high in February 2020, when recently skyrocketing bitcoin prices plummeted after Tesla CEO Elon Musk said on Twitter its prices seemed “a little high.”

Surprising Fact

After peaking at nearly $3 trillion in value on November 10, the crypto market now sits at a total market capitalization of about $1.9 trillion, according to crypto data website CoinGecko.

Further Reading

SEC Objects To MicroStrategy Accurately Valuing Its Billion-Dollar Bitcoin Stash (Forbes)

Bitcoin’s Biggest Corporate Backer Announces $94 Million Investment Amid $250 Billion Crypto Market Crash (Forbes)

‘Seized The Opportunity’: Canada’s Bitfarms Bought $43 Million In Bitcoin During $300 Billion Crypto Crash (Forbes)

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India Plans To Regulate Cryptocurrencies With A Hefty 30% Tax On Gains

Topline

India’s government on Tuesday announced plans to impose a 30% tax on income gained from digital assets like cryptocurrencies and non-fungible tokens (NFTs), in a move that will assuage earlier concerns about the country imposing an outright ban on cryptocurrencies.

Key Facts

Income generated from the transfer of any virtual assets will be taxed at 30% along with an additional 1% tax deduction at source during such transfers, finance minister Nirmala Sitharaman said in her annual budget speech in Parliament on Tuesday.

The tax on cryptocurrencies—unlike the U.S.—will be separate from taxes levied on capital gains from other sources like investment in stocks and funds.

Crypto investors in the country will also not be able to offset their losses from cryptocurrencies against any other source of income.

Sitharaman also stated that individuals who receive digital assets as gifts would also be taxed under the proposal.

All proposals are included as part of India’s annual budget bill which is expected to be passed by the parliament later this month, before going into effect on April 1.

Sitharaman also said that India’s central bank will issue the Digital Rupee—its own digital currency on the blockchain—sometime during the 2022-23 financial year.

What To Watch For

The budget proposals have triggered some confusion about the legality of cryptocurrencies in India, as the government’s Cryptocurrency Bill is still in its drafting stage and is yet to be introduced in parliament. While the opposition party has sought clarification from the government, Sitharaman told the press that the cryptocurrency bill is still being formulated but she did not want to wait for the regulation to go into effect before “taxing people who are earning profits.” Most observers however believe that Tuesday’s budget will assuage concerns about a potential ban on cryptocurrencies.

Crucial Quote

Sumit Gupta, the co-founder, and CEO of one of India’s largest crypto exchanges, CoinDCX, tweeted: “Taxation of Virtual Digital Assets or #crypto is a step in the right direction. It gives a lot of clarity. India’s focus on digital innovation and promotion of blockchain is welcome. The details need to be studied to comment further. But it’s great news for crypto investors in India”

Key Background

Ahead of Tuesday’s budget announcement, there was a lot of speculation about the incoming cryptocurrency regulation in India. The Reserve Bank of India, the country’s central bank, had reportedly been pushing for a complete ban on all cryptocurrency transactions. Despite these concerns, investments in digital assets had been rising steeply across the country. Last month,  Binance-owned Indian exchange WazirX reported that yearly trading volume on its platform exceeded $43 billion in 2021, at a “1,735%” growth from 2020. However, the steep tax rate and inability to offset losses against other income sources means that the government may be trying to dissuade investment in the volatile assets instead of outright banning them.

Further Reading

‘Crypto tax’ is here. India imposes 30% tax on proceeds of digital assets (Hindustan Times)

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Bitcoin (BTC) $ 27,455.36 0.51%
Ethereum (ETH) $ 1,644.94 1.25%
Litecoin (LTC) $ 64.34 2.80%
Bitcoin Cash (BCH) $ 228.91 8.06%