Market Watch: Kraken to Exit Japan, Argo Blockchain Secures $100M Bailout, Defrost and BitKeep Security Incident Updates, and more

A cocktail of adverse factors ranging from the collapse of the Terra ecosystem, Chapter 11 bankruptcy filing of FTX entities, miners’ strain and an undermining macro environment have collectively fettered the digital assets sector. Crypto market data provider RootData estimates that almost 100 crypto-related projects have closed, filed for bankruptcy, vanished, or their websites become defunct this year alone. A separate report compiled by crypto market aggregator CoinGecko on Nov 29 found that 3,322 out of the more than 8,000 crypto coins listed on the platform since the November 2020 market bull have also met their death in the same cycle. The figure translates to approximately 41.50% of coins previously listed on the platform’s tracking dashboard that have failed. The report additionally presented that except for 2021, an average of 947 crypto assets listed each year for the stretch between 2018 and 2022 have turned out to be failures. Here are Wednesday’s leading headlines:

Kraken plans second exit from Japan, citing an unsuitable crypto market

Barely a few days after news of Japan’s Financial Services Agency considering a lift on the ban of foreign-issued stablecoins surfacing, Kraken has revealed that it will deregister from the market regulator, effectively ceasing from being a crypto asset exchange operator at the end of January. This is the second time that the exchange, which administered services in the Asian market through a subsidiary Payward Asia, has wrapped up operations in the region after a first spell between 2014 to April 2018. The exchange explained in a Wednesday post that the decision is part of efforts to “prioritize resources,” adding that “current market conditions in Japan [combined] with a weak crypto market globally” have made its Japan business that relaunched in October 2020 untenable. The exchange team notified users that some trading functions will be available after deposits have been halted on Jan 9 until the exit date. Worth noting, Kraken laid off about 1,100 employees – roughly 30%of its workforce – on Nov 30, chalking up the adjustment to low trading volumes and fewer client sign-ups.

US Justice Department arrests Mango Markets exploiter

Elsewhere, legal action has finally been taken on the Mango Markets exploiter months after the security incident. Crypto trader Avraham Eisenberg came forward shortly after the exploit on the Solana-based decentralized exchange that resulted in draining $113 million on Oct 11. The DeFi investor worked with a team, as he would admit in the ‘outing’ tweet days later, to manipulate the exchange’s native token MNGO, artificially inflating its price (relative to USDC stablecoin) by 1,300%. They then took huge loans against inflated collateral from the platform’s asset pool which had deposits from Mango Markets investors resulting in insolvency. Following negotiations with the exchange, Eisenberg agreed to return $67 million of the drained sum whilst the Mango community voted to let him keep $47 million as bounty.

A complaint filed with the Southern District of New York and unsealed on Tuesday disclosed that the Federal Bureau of Investigation (FBI) arrested Eisenberg in Puerto Rico on Boxing Day. Eisenberg, who termed his exploit “legal open market actions” in his acknowledgment, has been charged with one count commodities manipulation and commodities fraud. FBI special agent Brandon Racz noted that Eisenberg said the manipulation was legal even though he knew it wasn’t hence his flight to Israel to evade law enforcement. No similar arrest announcements have been made for the rest of his team. In November, Eisenberg attempted a similar move on DeFi protocol Aave by betting on a price drop after taking out a loan of 40 million Curve Finance’s native token CRV from Aave, but the attack failed.

DeFrost Finance to deploy refunding smart contracts

DeFrost Finance, the DeFi protocol that got hacked last Friday in a potential case of a rug pull, according to blockchain security firm PeckShield, shared in a Dec 27 update its next steps towards refunding the affected community. The platform’s V2 product was drained off funds in a first attack which the team said was via a flash loan, while another second attack was carried out on V1. The Defrost Finance Team earlier confirmed the return of all V1 hacked funds and will now review on-chain data to determine the user balances before the attack. The team also noted that all Ether tokens in the address will be converted to DAI and all stablecoins will be crossed to Avalanche from Ethereum.

In similar developments, BitKeep chief executive Kevin Como on Tuesday warned users in a letter posted on Chinese news media Odaily.com that their private keys remain at risk after the recent security incident. Wallet users started reporting fund transfers on their accounts without authorization on Dec 26. Not long after, the BitKeep team said that attackers had hijacked some its APK package downloads and some users may have installed them. Como and the team advised all users who downloaded BitKeep 7.2.9. APK malware to transfer their assets immediately to reputable wallets whilst also urging the affected to create new wallet addresses as their previous ones may be compromised. In the aftermath of the incident, BitKeep has reached out to several blockchain security firms to help track the lost funds. The latest exploit, whose reported losses were north of $13 million, comes barely three months since the wallet was drained of $1 million worth of BNB tokens through a swap-enabling service.

Argo to resume ADSs and unsecured notes trading as Galaxy Digital throws a lifeline

Earlier this month, Argo reported that it was in advanced talks to cash in some of its assets and conduct an equipment financing transaction to strengthen its liquidity position and avoid bankruptcy. The mining firm has agreed to sell its largest mining Helios facility in Texas to Galaxy Digital for $65 million, according to a Dec 28 statement to CoinDesk. The report also detailed that the miner has received a $35 million loan (secured by its mining equipment) from the Novogratz-led investment firm bringing the bailout sum to $100 million.  Argo CEO Peter Wall remarked that the deal with Galaxy would “help reduce [its] debt load and maintain access to the unique power grid in Texas” as its lives to fight another day. A previous deal to sell its equity worth $27 million in October failed to materialize.

The 180 megawatts (MW) Texas facility will become Galaxy’s flagship business in the mining sector. The tech-driven financial service is in the process of completing its proprietary mining site in Texas and previously acquired crypto self-custody platform GK8 at a discount from bankrupt crypto lender Celsius on Dec 13. Argo had plans to expand the Helios facilities’ capacity and computing power to 800 MW and 20 exahash/second (EH/s), respectively. This expansion would, at least on paper, make the new owner, Galaxy, one of the biggest bitcoin miners.

The Wednesday statement further revealed that, as part of the arrangements, Argo has entered into a hosting agreement with Galaxy allowing its computers to keep running at the Texas-based facility for two years. The company announced yesterday that it had requested a suspension of trading for its ADSs and unsecured notes traded on Nasdaq as the London Stock Exchange was closed for trading on the said day. Argo is one of the mining entities exploring unconventional and last-resort options to remain operational. Others, like Core Scientific and Compute North, have filed for bankruptcy. Connecticut-based miner Greenidge recently disclosed that it agreed to restructure its $74.7 million debt with lender NYDIG, but the question of bankruptcy remains unaddressed.