dYdX Utilizes $9M Insurance Fund Following Alleged Targeted Attack on YFI

The decentralized exchange (DEX) dYdX experienced a significant financial event on November 17, requiring the use of its insurance fund. The exchange had to cover $9 million worth of customer liquidations following a dramatic market fluctuation. Antonio Juliano, the creator of dYdX, labeled the event as a “targeted attack,” suggesting a deliberate attempt to destabilize the exchange’s financial stability.

Before November 17, the price of Yearn Finance (YFI) token surged by over 170%, only to plummet by 43% on the day of the incident. This abrupt price drop has raised concerns within the crypto community about potential market manipulation or even an exit scam. The focus of the alleged attack was on long positions in YFI tokens on the dYdX platform, leading to nearly $38 million in holdings being liquidated.

Juliano emphasized that the v3 insurance fund, despite the substantial payout, remains well-funded with $13.5 million. He reassured users that their funds were not impacted by the incident. In response to community concerns, dYdX announced that no user funds were affected and that an investigation is underway. Furthermore, dYdX is conducting a thorough review of its risk parameters and considering changes to both the v3 and potentially the dYdX Chain software to enhance security and prevent similar occurrences.

The crypto community has expressed alarm at the sudden market shift, with some speculating about insider involvement in manipulating the YFI market. Concerns were raised about the sufficiency of the remaining insurance fund and the steps dYdX is taking to prevent future attacks. There were claims that developers controlled multiple wallets holding a significant percentage of YFI tokens, though these claims were not conclusively backed by Etherscan data.

dYdX’s commitment to transparency in its investigation process is crucial in maintaining user trust. The team is collaborating with several partners to uncover the specifics of the incident and is expected to provide updates as new information emerges.

Image source: Shutterstock


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Gensler Alleged Crypto Hypocrisy

The cryptocurrency community has criticized Gary Gensler, the current chair of the Securities and Exchange Commission (SEC) and a former professor at the Massachusetts Institute of Technology (MIT), after a video from 2018 surfaced in which he stated that cryptocurrencies are comparable to commodities or cash and are not securities. This has led to criticism of Gensler from the cryptocurrency community. As a result of this, hypocrisy allegations have been leveled at Gensler since his present position seems to contradict his prior views.

Gensler explained initial coin offerings (ICOs) and the Howey test in the video, which was taken from a seminar entitled “Blockchain and Money” that took place during the Fall Semester of 2018 at the university. He made the observation that “three-quarters of the market are not ICOs or not what would be called securities,” and he identified the markets in the United States, Canada, and Taiwan as countries that adhere to criteria that are comparable to those of the Howey test. The next statement that he made was that “three-quarters of the market is non-securities, it’s just a commodity, cash, and crypto.”

Gensler briefly admitted that initial coin offerings (ICOs) may ignite a discussion over securities, but he ultimately came to the conclusion that “three-quarters of the market is not particularly relevant as a legal matter.” However, in his present capacity as chairman of the Securities and Exchange Commission (SEC), Gensler has adopted a more harsh attitude on cryptocurrencies, with the SEC starting a series of high-profile investigations against crypto businesses in recent months. Gensler’s stance on cryptocurrencies reflects the SEC’s increased scrutiny of the industry.

The crypto community reacted swiftly to Gensler’s apparent shift of viewpoint, and many members were keen to point it out. “Wow” was all that Coinbase CEO Brian Armstrong had to say in response to a message that was published by cryptocurrency researcher “zk-SHARK.” In a tweet sent at his 658,900 followers, Erik Voorhees, the inventor of the cryptocurrency trading website ShapeShift, inquired as to when someone will be imprisoned for fraud. Farokh Sarmad, the inventor of the Web3 podcast Rug Radio, referred to Gensler as “disgusting” in a tweet that he sent out to his 346,200 followers, and a systems engineer who went by the handle “JD” demanded that Gensler provide an explanation for his shift in position.

On the other hand, not all members of the cryptocurrency community were on board with these comments. U.S. attorney Preston Byrne claimed that Gensler’s opinions as a professor should not be used against him in his present function as a law enforcement, since Gensler works in a different capacity than he did when he was a professor.

The continuous regulatory ambiguity that surrounds the cryptocurrency business is brought to light by the controversy over Gensler’s position on cryptocurrencies. As the Securities and Exchange Commission (SEC) and other regulatory authorities continue to probe crypto firms, many participants in the industry are advocating for clearer standards and laws to assist enable the growth and development of the sector.


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DeFi Hack Linked to North Korea

The DeFi world was rocked when Euler Finance fell victim to the biggest DeFi hack of 2023, with $197 million in funds stolen. Since then, the crypto community has been closely following the on-chain movements of the stolen funds, hoping to track down the attacker. Blockchain investigator Chainalysis recently identified that 100 ETH from the stolen funds was transferred to an address linked to North Korea.

The hacker responsible for the Euler Finance hack also transferred 3,000 ETH to Euler’s deployer account without disclosing their intent. However, no other transfers have been made at the time of writing, leaving many in the crypto community speculating whether the hacker was trolling or if they genuinely considered accepting Euler Finance’s bounty reward of $20 million.

While Chainalysis has linked the stolen funds to North Korea, it has also highlighted the possibility of misdirection by other hackers. It is unclear whether North Korea is actually involved in the hack or if the hacker was simply using the address to throw investigators off their trail.

The Euler Finance hack has raised questions about the security of DeFi platforms, as Euler Labs CEO Michael Bentley expressed disappointment in the hack, revealing that ten separate audits over two years had assured its security. The fact that the hacker was still able to access and steal the funds has highlighted the need for stronger security measures in DeFi platforms.

The use of DeFi platforms has skyrocketed in recent years, and the potential rewards have attracted many hackers seeking to exploit vulnerabilities in the system. This has led to an increase in DeFi hacks, with many experts calling for stronger security measures to protect investors’ funds. The Euler Finance hack serves as a reminder that even with multiple security audits, DeFi platforms are not immune to hacks, and investors should exercise caution when investing in these platforms.


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DeFi and Crypto Community Explode as Robinhood Halts GameStop (GME) Trades

Robinhood’s decision to stop the purchases of GameStop (GME) shares, along with AMC (AMC) and Blackberry (BBE) stocks, has spurred outrage from the cryptocurrency community. 

Although traders can still sell their shares, many are against the platform’s decision to delist GME, AMC, and BBE. Robinhood, along with other trading platforms such as Ameritrade has moved to cancel the purchase of GME, after GameStop rocked the trading world, soaring to unfathomable heights after a group of Redditors pushed its value up on subreddit r/WallStreetBets. Jeremy Gardner, the founder of the Blockchain Education Network, said: 

“It’s absolutely fascinating that a decade of crypto evangelism is perhaps on par (in terms of impact) with two weeks of Robinhood degenerate equity meme trading for waking people up to the inequities in our financial system.” 

A crypto enthusiast responded that he wished that it was crypto that made people realize the flaws in today’s current financial system, instead of GameStop. He responded to Gardner’s thread, saying: 

“I just hope this sentiment continues and doesn’t just sputter and die. I always thought it would be crypto that would wake people up, instead it was fucking GameStop.” 

Many have protested against Robinhood’s call, saying that this was a problem with centralized financial systems. Dave Portnoy, the infamous Barstool Sports founder who previously dipped his toe in Bitcoin and crypto, aided by the Gemini co-founders’ advice, said: 

“I will burn @robinhoodApp to the ground if they shut down free market trading.” 

Although Robinhood’s call to shut down GME, AMC, and BBE stocks have been viewed as infuriating, many have declared that this will be good for crypto and decentralized finance (DeFi). Eric Conner, the co-founder of ethhub, said: 

“We are getting the best DeFi ads for free.” 

Crypto and DeFi to benefit from GME’s bull run?

Gardner went a step further and predicted that the frenzy surrounding GameStop’s overnight success will likely ricochet off crypto, triggering a bull run. He said: 

“I think today likely will mark the beginning of the retail bull run on crypto this cycle. 24/7 trading, no censorship, and the incumbents tend to be long. Can’t say I’m looking forward to it but should be interesting.” 

While GME skyrocketing off the back of retail traders pumping its price up has served to convert many to the idea of decentralization, some DeFi experts are saying that there are still issues to be fixed within the sector. Jill Carlson, a major startup investor at Slow Ventures, provides a reminder that not everything in DeFi is rose-coloured glasses. She said: 

“Crypto UX is entirely and utterly broken. If you are actually using it (not via a third party) it is borderline unusable. Even for those of us who have been doing it for the better part of a decade.” 

In other words, the answer may not be as simple as transitioning from financial stocks to cryptocurrencies, which is what many have been quick to suggest. Even the experience of trading on decentralized exchanges is different from transacting with Bitcoin on crypto platforms like Coinbase. Although crypto exchanges lean more towards the decentralized side, they are not immune to centralized financial systems.

A clear example is when many crypto exchanges such as Coinbase, Binance, and Kraken, moved to delist and halt XRP trading on their platforms, in response to the SEC lawsuit against Ripple, in fear it may mean potential regulatory consequences for them too.

Image source: Shutterstock


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