Hyperliquid Saved Itself a $15 Million Loss, but Sparked Criticism

A whale attacked decentralized perpetuals exchange Hyperliquid with a manipulation of the $JELLY memecoin. Was its response hypocritical or a necessary evil?

Perpetual swap DEX Hyperliquid suffered a whale attack and was on the brink of losing $15 million. It promptly responded in a way that generated a fair amount of controversy.

The founder and CEO of Ambient Finance Doug Colkitt joined the show to explain:

• How perp swaps work

• How a whale used the low-liquidity memecoin $JELLY to attack Hyperliquid’s vault

• How Hyperliquid’s response broke DeFi taboos around decentralization, oracles, etc.

• Criticisms of and justifications for the team’s decisions

• What can be done to prevent similar attacks in the future

Listen to the episode on Apple Podcasts, Spotify, Pods, Fountain, Podcast Addict, Pocket Casts, Amazon Music, or on your favorite podcast platform.

Now, let’s get into this week’s news! In today’s edition:

• 💲Everybody gets a stablecoin

• 🐙 Crypto exchange Kraken explores up to $1 billion debt package

• 🚀 Trump Media announces intention to partner with Crypto.com to launch ETFs

• 🧑‍⚖️ SEC only gets $50 million from Ripple

• 📉 Gamestop tanks on plans to buy bitcoin

• 💵 ICE partners with Circle on USDC

• 🏦 Major bank regulator removes key rationale for blacklisting crypto industry

Galaxy Slapped With $200 Million Fine Over Luna ‘Manipulation’ and ‘Fraud’

New York Attorney General Letitia James has fined Galaxy Digital and several subsidiaries collectively $200 million in disgorgement over three years because of its failure to disclose its sale of Luna tokens while it was promoting them to the public.

The monetary relief Galaxy will pay to the state of New York is $40 million within 15 days of the filing on March 24th, $40 million within one year of that date, $60 million within two years, and $60 million within three years.

The NYAG report said that in August 2020, Terraform Labs was looking for a “good advocate in the west,” so it struck a deal with Galaxy’s ventures team: it receive 18 million tokens over the course of a year, in monthly tranches, at a price of $0.22, representing a 30% discount on the market price with the tokens vesting monthly as well. This meant Galaxy would be able to sell the tokens they received every month.

From late 2020 until February 2022, Galaxy was often receiving tokens and quietly selling them on the public markets at prices sometimes as high as $90+. Meanwhile, founder and CEO Mike Novogratz and Galaxy Research were promoting LUNA to the public — sometimes without taking sufficient steps to verify that the statements were accurate. Novogratz also infamously got a LUNA-themed tattoo.

By the end of February 2022, it had profited hundreds of millions of dollars, but only had 2,060 LUNA left on its books. Terra/Luna collapsed just a couple months later.

Everybody Gets a Stablecoin

With stablecoin usage surging and growing momentum for a piece of legislation in Congress that will set the rules of the road for the digital dollar industry, more and more companies are looking to get into the game. On Tuesday, World Liberty Financial, a crypto project founded by family members of U.S. President Donald Trump, announced the launch of its own stablecoin, dubbed USD1, which will be backed by short-term U.S. Treasurys, U.S. dollar deposits, and other cash equivalents, the company said. 

The token will be issued on the Ethereum network and Binance Smart Chain, a blockchain created by Binance, the crypto exchange that has sought to forge closer ties to the president’s family. 

The Trump family launched World Liberty Financial in October, billing the entity as a decentralized finance, or DeFi, project that would help match crypto investors eager to borrow and lend from, and trade with, one another. 

Critics have said World Liberty Financial’s stablecoin launch poses a major conflict of interest for President Trump. “We haven’t had a president in recent memory ever sign legislation that could directly affect his financial interest,” said Kedric Payne, senior director of ethics at the Campaign Legal Center, an ethics watchdog group, to the Wall Street Journal. “It is a clear violation of the ethics norm.”

Not to be outdone, $5 trillion asset manager Fidelity is also in the advanced stages of testing its own stablecoin, according to the Financial Times.

Additionally, the state of Wyoming is making steps towards launching a stablecoin later this year, which could be the first fiat-backed and fully reserved token issued by a public entity in the U.S., state officials said at the DC Blockchain Summit on Wednesday.

The Wyoming Stable Token (WYST) is currently being tested on Avalanche, Solana, Ethereum, Arbitrum, Optimism, Polygon, and Coinbase's Base testnets, according to a press release. And finally, Custodia Bank, working with Vantage Bank, completed America’s first-ever tokenization of a bank’s U.S. dollar demand deposits on a permissionless blockchain by issuing, transferring, and redeeming stablecoins for a bank customer on top of Ethereum, according to a company press release.

Crypto Exchange Kraken Explores Up to $1 Billion Debt Package

Crypto exchange Kraken is exploring raising as much as $1 billion in debt ahead of a potential initial public offering, according to a Bloomberg report, citing people with knowledge of the matter.

The company is working with investment banks Goldman Sachs and JPMorgan Chase on the effort, which is still in preliminary stages, according to the sources. The two banks have also begun conversations with additional banks and direct lenders, the report said. 

Any debt raised is set to help fuel the company’s growth and isn’t for operational needs, according to one of the sources cited in the report. As little as $200 million could be raised, they said.

Kraken provided details on its annual financial performance for the first time back in January as one of several companies in the crypto industry that is readying for a potential IPO and could go public over the next 12-18 months. The company reported an adjusted EBITDA of $380 million based on $1.5 billion in revenue, which more than doubled its 2023 performance of $671 million.

Trump Media Announces Intention to Partner With Crypto.com to Launch ETFs

Trump Media and Technology Group (TMTG) has announced a non-binding agreement with Crypto.com to launch exchange-traded funds (ETFs) through its fintech brand Truth.Fi. The partnership will utilize Crypto.com's broker dealer Foris Capital US to create ETFs focused on digital assets and “made in America” securities.

The planned ETFs will include a unique basket of cryptocurrencies featuring bitcoin (BTC), Crypto.com’s native token cronos (CRO), and other crypto assets, according to a press release. The funds are expected to launch in 2025, across the US, Europe, and Asia. Crypto.com will provide backend technology, custody services, and cryptocurrency supply.

TMTG plans to invest up to $250 million of its cash reserves in these ETFs and accompanying Separately Managed Accounts (SMAs), with investment firm Charles Schwab serving as custodian. The products will be available to Crypto.com's reported 140 million users, subject to definitive agreement and regulatory approval.

The partnership with Crypto.com comes as the community behind its Cronos blockchain continues to reel following a controversial vote where Crypto.com went against its community’s wishes to push through a proposal to reissue 70 billion tokens that were supposedly taken out of circulation in 2021. Part of the rationale for re-minting the tokens, an unprecedented step for the crypto community, was to create a CRO-backed spot ETF.  “It is a spit in all CRO holders’ faces,” wrote one CRO validator, who voted against the re-minting proposal, to Unchained on Telegram. 

SEC Only Gets $50 Million From Ripple

Ripple Labs has agreed to pay a $50 million fine to end the U.S. Securities and Exchange Commission’s years-long investigation into the Ripple-linked firm, the company’s chief legal officer Stuart Alderoty said on Tuesday.

“The SEC will keep $50M of the $125M fine,” Alderoty wrote in a post on X, formerly known as Twitter, referring to the penalty Ripple Labs was ordered to pay by a New York court in August over unregistered XRP sales to institutional investors.

Alderoty said that Ripple has meanwhile agreed to drop its cross-appeal of the U.S. District Judge Analisa Torres’ decision, which found that XRP is “not necessarily a security on its face,” especially within the context of programmatic sales to unknown buyers.

The SEC, under the leadership of former Chair Gary Gensler, sought a $2 billion penalty against Ripple Labs for what it claimed were unregistered securities transactions. The SEC first brought its lawsuit against Ripple Labs during U.S. President Donald Trump’s first administration.

Gamestop Tanks on Plans to Buy Bitcoin

Video game company turned memestock GameStop’s shares fell sharply on Thursday after the retailer announced plans for a private offering of $1.3 billion in convertible senior notes to use toward “general corporate purposes,” which could include investing in bitcoin.

Investors reacted negatively to the announcement, while analysts questioned the timing of the decision.

"We find it hard to understand why any investor would pay more than 2X cash value for the potential for GameStop to convert that cash into bitcoin, particularly since the same investors can invest in bitcoin or a bitcoin ETF themselves," noted Wedbush Securities analyst Michael Pachter to Seeking Alpha.

Intercontinental Exchange Partners With Circle to Explore New Product Offerings 

Intercontinental Exchange (ICE), the parent company of the New York Stock Exchange, is exploring using Circle’s USDC stablecoin and USYC tokenized money market fund to develop new products and services.

"We believe Circle’s regulated stablecoins and tokenized digital currencies can play a larger role in capital markets as digital currencies become more trusted by market participants as an acceptable equivalent to the U.S. dollar," said Lynn Martin, president of the New York Stock Exchange, in a statement. "We are excited to explore the potential use cases for USDC and USYC across ICE’s markets.”

This news comes as the total stablecoin market, led by Tether’s USDT with a $144 billion dollar market capitalization, continues to set all time highs. The tokenized treasury market continues to grow as well, surpassing $5 billion for the first time as the assets are increasingly used for leverage in margin trades.

Major Bank Regulator Removes Key Rationale for Blacklisting Crypto Industry

The Federal Deposit Insurance Corporation (FDIC) appears to be following in the OCC’s footsteps by also moving to extinguish the use of reputational risk as a way to supervise banks.

The FDIC is "actively working on a new direction on digital assets policy," said Travis Hill, who was appointed acting chair of the FDIC in January by President Donald Trump, in a letter sent to Rep. Dan Meuser, R-Pa. on Monday.

Hill had previously urged the agency to take a more open approach to crypto. In his letter, he said banking regulators should not use reputational risks as a way for "supervisory criticisms."

"While a bank's reputation is critically important, most activities that could threaten a bank's reputation do so through traditional risk channels (e.g., credit risk, market risk, etc.) that supervisors already focus on," Hill said in the letter obtained by The Block.

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