Weekly Crypto Recap (Jan 17th - Jan 23d)

Sonic Ecosystem Overviews

Bybit Hackers May Be Behind Solana Memecoin Scams – ZachXBT

Background
The Lazarus Group, suspected of the $1.4 billion Bybit hack, may also be linked to recent Solana memecoin scams, including rug pulls on Pump.fun. Onchain investigator ZachXBT found evidence suggesting that funds from the Bybit exploit were laundered through wallets previously associated with fraudulent token launches.

Key Points

• Lazarus Group's involvement: Blockchain security firms, including Arkham Intelligence, have identified North Korea’s Lazarus Group as the likely culprit behind the Bybit hack.

• Onchain findings: ZachXBT reported that $1.08 million from the Bybit exploit was bridged to Solana and distributed across multiple wallets linked to memecoin scams.

• Connection to Phemex hack: The same wallets were allegedly involved in the $29 million Phemex exchange hack in January.

• Solana memecoin scams: Solana’s Pump.fun platform has seen a rise in fraudulent memecoins, contributing to declining investor confidence and user activity.

Key Takeaway
Lazarus Group’s suspected involvement in Solana memecoin scams highlights the persistent security threats in crypto, raising concerns over the blockchain’s vulnerability to bad actors.

Ethereum 'Roll Back' Suggestion Sparks Criticism – Here's Why It Won’t Happen

Background
BitMEX co-founder Arthur Hayes suggested rolling back Ethereum’s chain to recover funds lost in the $1.4 billion Bybit hack, sparking strong opposition from the Ethereum community. Core developers and supporters dismissed the idea, emphasizing Ethereum’s commitment to decentralization and immutability.

Key Points

• Arthur Hayes' proposal: Hayes publicly questioned Ethereum co-founder Vitalik Buterin on whether he would support rolling back the chain to recover Bybit’s lost funds.

• Ethereum community backlash: The suggestion was met with fierce criticism, with many asserting that such an action would undermine Ethereum’s decentralized principles.

• Technical limitations: Ethereum operates on an account-based model, making a full rollback infeasible compared to Bitcoin’s UTXO system.

• Historical precedent: Some pointed to the 2016 DAO hack, but Ethereum’s response at the time involved an “irregular state transition,” not a rollback, resulting in the Ethereum Classic split.

Key Takeaway
Ethereum developers and its broader community firmly reject the idea of a rollback, as it would compromise the network’s decentralization and integrity, making such an event highly unlikely.

mETH Protocol Recovers $43 Million from Bybit Hack, Tether Freezes $181,000

Background
mETH Protocol has successfully recovered $43 million worth of cmETH tokens from the Lazarus Group following the $1.4 billion Bybit hack. Tether also announced freezing $181,000 in USDT tied to the exploit, marking one of the most significant recoveries from a Lazarus-related attack.

Key Points

• mETH Protocol’s recovery: The team retrieved 15,000 cmETH tokens by leveraging an 8-hour withdrawal delay, which allowed them to pause unauthorized transactions.

• Security efforts: Polygon’s security head, Mudit Gupta, alongside SEAL’s rapid-response team, played a key role in facilitating the recovery.

• Bybit’s response: Bybit confirmed that the recovery qualifies for a bounty under its newly announced program, with up to $4.3 million allocated to the contributors.

• Comparison to past hacks: The recovery surpasses the $30 million salvaged from the Lazarus-linked Ronin Bridge exploit, which took six months to reclaim.

• Tether’s intervention: CEO Paolo Ardoino announced that Tether froze $181,000 in USDT linked to the hack, continuing its efforts to combat illicit activities.

Key Takeaway
The swift recovery of $43 million from the Bybit hack highlights the growing effectiveness of security measures and rapid response teams in mitigating crypto-related exploits.

Bybit CEO Labels Pi Network a Scam, Citing Official Police Warning

Background
Bybit CEO Ben Zhou has called Pi Network a scam, refusing to list its PI token and citing a 2023 Chinese police warning. The project’s referral-based mining model and token lock-up mechanism have drawn comparisons to past Ponzi schemes like Bitconnect and Hex.

Key Points

• Chinese police warning: Zhou referenced an official 2023 report that accused Pi Network of targeting elderly individuals and leaking personal data.

• Ponzi scheme comparisons: Pi Network’s recruitment-based rewards and token lock-up feature have been likened to known scams like Bitconnect and Hex.

• Token price drop: PI launched at $0.67, briefly surged to $2, then crashed over 60% to around $0.69.

• Exchange listings: Despite concerns, exchanges like OKX, Bitget, and Gate have facilitated $620 million in PI trading volume.

Key Takeaway
Bybit’s refusal to list Pi Network’s token underscores growing skepticism around its legitimacy, even as other exchanges continue to support its trading.

Kanye West to Launch Memecoin YZY on February 23, Mimicking TRUMP Token

Background
Rapper Ye (formerly Kanye West) is set to launch a memecoin called YZY on February 23, reportedly modeled after the TRUMP token. The token will be tied to the Yeezy brand, following Shopify’s decision to cut ties with West.

Key Points

• Token distribution: Ye will control 70% of YZY’s supply, with 20% allocated to investors and 10% reserved for liquidity.

• Inspired by TRUMP token: The memecoin follows the trend of celebrity-backed tokens, similar to the TRUMP token.

• Yeezy ecosystem: YZY is expected to function as the official currency for the Yeezy brand.

Key Takeaway
Kanye West’s YZY memecoin enters the celebrity token market, aiming to integrate with the Yeezy brand, but its high insider allocation raises concerns about centralization.

LIBRA Memecoin Backers Lost $251M as Insiders Dumped – Nansen

Background
Nansen’s latest analysis reveals that LIBRA, a Solana-based memecoin endorsed by Argentina’s President Javier Milei, led to massive losses for investors after insiders cashed out. The token initially surged but later collapsed, raising concerns about politically-linked cryptocurrencies.

Key Points

• $251 million lost: Nansen data shows that 86% of traders suffered losses following the token’s rapid decline.

• Insider profits: Two addresses managed to secure over $5 million in profits by trading LIBRA on February 14.

• Market collapse: After reaching a $4.5 billion market cap, LIBRA lost 90% of its value due to heavy insider selling.

• Political fallout: President Milei distanced himself from the project, claiming he was unaware of its details amid public backlash.

Key Takeaway
LIBRA’s rapid rise and crash underscore the risks of politically-associated memecoins, where insider actions can trigger massive investor losses.

MANTRA Launches Accelerator for Tokenized Real-World Asset Startups With Google Cloud Support

Background
MANTRA has introduced RWAccelerator, a program designed to support startups focused on tokenizing real-world assets (RWAs). Backed by Google Cloud, the initiative offers funding, mentorship, and AI-driven tools to drive blockchain adoption in sectors like real estate and finance.

Key Points

• Startup support: RWAccelerator provides funding, mentorship, and AI-driven resources for RWA-focused startups.

• Google Cloud’s role: Selected projects will receive technical support, cloud credits, and engineering workshops from Google Cloud.

• Market potential: The World Economic Forum predicts that 10% of global GDP could be tokenized on blockchain by 2027.

• Program structure: Startups can apply for three tracks—infrastructure, tokenization, and DeFi, with the first cohort launching in Dubai in April.

• Regulatory milestone: MANTRA recently secured a Virtual Asset Service Provider (VASP) license from Dubai’s VARA, enabling it to offer financial services in the region.

Key Takeaway
MANTRA’s RWAccelerator, with Google Cloud’s backing, aims to fast-track innovation in tokenized real-world assets, reinforcing blockchain’s growing role in global finance.

Javier Milei’s $4.5B LIBRA Memecoin Scandal Sparks Federal Investigation

Background
Argentina’s President Javier Milei faces political turmoil after endorsing the Solana-based LIBRA memecoin, which skyrocketed to a $4.5 billion market cap before collapsing due to insider sell-offs. The scandal has triggered a federal investigation and potential legal actions.

Key Points

• Political fallout: After Milei’s endorsement, LIBRA surged but plummeted 97% within hours as insiders allegedly dumped nearly $100 million.

• Federal investigation: The Anti-Corruption Office is investigating the scandal, while opposition lawmakers have threatened impeachment proceedings.

• Legal concerns: Over 200 investors across multiple regions are exploring a potential class-action lawsuit against those involved.

• Milei’s response: The president distanced himself from the project, later claiming that Argentine citizens did not lose money and that the majority of investors were from China and the U.S..

Key Takeaway
The LIBRA memecoin crash has not only rattled investors but also placed President Milei at the center of a deepening political and legal crisis, with potential global repercussions.

Dave Portnoy Pumps and Dumps Another Solana Memecoin, Then Launches a Sequel

Background
Barstool Sports founder Dave Portnoy launched and quickly dumped his own Solana-based memecoin, GREED, before relaunching a second version, GREED2, which also plummeted. His actions have drawn criticism, as he previously assured followers he would not engage in pump-and-dump schemes.

Key Points

• GREED token crash: Portnoy launched GREED, which hit a $41.5 million market cap, but he later sold all his tokens, tanking the price by 99% in four seconds.

• Rapid sequel launch: Minutes after dumping GREED, Portnoy introduced GREED2, which reached a $7 million market cap before dropping 90% in five hours.

• Contradictory claims: Portnoy had previously stated he would not rug pull or dump tokens, yet he has repeatedly traded and profited from volatile memecoin movements.

• Memecoin "crime season": His actions follow a broader trend of questionable token launches, including Trump’s memecoin and the LIBRA scandal linked to Argentina’s President Milei.

Key Takeaway
Portnoy’s involvement in memecoins highlights the speculative and often chaotic nature of the space, where high-profile figures can influence market swings for personal gain.

FTX’s Initial $1.2B Payout Process to Creditors Is Underway

Background
FTX has begun distributing $1.2 billion in repayments to creditors with claims below $50,000, marking a significant milestone in the bankruptcy proceedings. These payments include 9% annual interest accrued since November 2022 and are being processed through BitGo and Kraken.

Key Points

• Payouts to small creditors: Creditors with claims under $50,000 have started receiving payments, amounting to 119% of their adjudicated claim value.

• Total planned distribution: Around $16 billion in repayments will be made, with larger claims set to be processed in Q2 2025.

• Payment platforms: Funds are being distributed in U.S. dollars via BitGo and Kraken, with Kraken also providing trading-fee credits to users.

• On-chain evidence: Arkham Intelligence has identified wallet outflows linked to the repayments, confirming that distributions are underway.

Key Takeaway
FTX’s creditor repayment process is progressing, with small claimants receiving more than their original claims, while larger payouts are set to follow later this year.

Binance Co-Founder CZ Dismisses Crypto Exchange Sale Rumors

Background
Binance co-founder and former CEO Changpeng Zhao (CZ) denied rumors that the exchange is for sale, calling them misinformation spread by competitors. Co-founder Yi He also dismissed the speculation, implying that Binance is instead open to acquiring other exchanges.

Key Points

• CZ's response: Zhao refuted the rumors on X, stating that Binance is not for sale and attributing the speculation to rival exchanges.

• Asset movement speculation: Concerns arose after a sharp reduction in Binance’s asset holdings, but the company clarified it was an internal treasury adjustment.

• Regulatory scrutiny: Binance is facing legal challenges in France, where authorities are investigating allegations of money laundering and tax fraud.

• US legal update: Binance and the SEC agreed to pause their legal case for 60 days, potentially signaling progress toward a resolution.

Key Takeaway
Despite regulatory challenges, Binance remains firm in its stance that it is not for sale, with leadership instead suggesting a continued focus on expansion and acquisitions.