Empire Newsletter: DJT and Kraken bring the drama

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I have the best coins

The new Trump memecoin isn’t real.

Crypto crossed over into the bizarro world when former President Donald Trump went all-in on crypto at an exclusive NFT-gated gala in May.

So, when independent news outlet Pirate Wires tweeted that Trump was launching an official token on Solana, DJT, to be spearheaded by his son Barron, sections of the crypto space were understandably buzzed.

DJT strangely already existed. It had been minted in late March, but DEX markets hadn’t really found much traction. That changed following the Pirate Wires tweet.

The token skyrocketed over the next half-day. Messari founder Ryan Selkis gave 50/50 odds that Trump was really behind the token in a CoinDesk report, with DJT topping out a few hours later, having multiplied in price seven times since before the Pirate Wires post, from $0.00003662 in SOL to $0.0002868.

DJT even briefly flipped the largest Trump-themed memecoin on the market, MAGA, reaching a $470 million market cap.

MAGA is back on top but is still nearly 60% below its all-time high set at the start of June

Meanwhile, betters on Polymarket wagered over whether the memecoin was official. At one point, the market placed the odds at 50%, mirroring Selkis’ comment.

It was in this confusion that money was made. But whales had to move fast.

Blockchain data tied to insiders tagged by onchain sleuths LookOnChain and ZachXBT seems to show three whales alone dumped $4.6 million in DJT in the day following the Pirate Wires’ tweet.

Altogether, those early whales appear to have scooped up 121.6 million DJT for about $450,000, which converts to implied profits of over 900%. Almost all of those tokens were acquired in the three days leading up to the initial DJT rumor posts on June 18.

The purple line is DJT’s market cap, the columns are dumps from the three identified whales, and the dotted lines highlight key milestones in the DJT fiasco

Luckily, they’d finished selling DJT a few hours before ZachXBT provided evidence that infamous “Pharma bro” Martin Shkreli himself was behind the token. The post netted a $150,000 bounty from Arkham Intelligence, and DJT immediately fell by almost 60% but has since recovered slightly.

Shkreli is now in damage control, providing either a detailed timeline of what he supposedly believed to be Trump’s involvement in the project earlier today, or a very strange Barron fan fiction, depending on how you look at it.

All this isn’t to show or imply any wrongdoing from anyone involved. It’s only par for the course for memecoins and crypto influencers.

What it does show is that it pays to move quickly in memecoin markets. The window for profiting can be incredibly thin — missing it can mean you’re the butt of the joke.

— David Canellis

Data Center

• Almost 12,000 addresses are currently holding at least some DJT.
• MAGA has over 35,000 holders split between Ethereum and Binance Smart Chain.
• ETH continues to inflate after the introduction of blobs, with an additional 42,078 ETH ($151.3 million) added to the supply in the past 30 days, at current prices.
• Crypto markets have bounced this morning, with BTC and ETH up 1.5% each.
• AI coins FET and AGIX are leading with 23%. They’ll soon combine into one super token alongside OCEAN.

Kraken the case

This week is about as dramatic as an episode of reality TV.

So let’s go over another hot topic on Crypto Twitter: The Kraken/CertiK situation.

On Wednesday, Kraken said it had received a Bug Bounty alert from a security researcher to address a bug allowing users to fake their account balance on Kraken. The security team, according to Chief Security Officer Nick Percoco, quickly addressed the issue.

But it didn’t end there.

The researcher who flagged the issue shared the bug with two colleagues, and they withdrew roughly $3 million from the Kraken accounts after the first researcher proved the bug by inflating their account with $4.

Still with me? It’s about to get spicy.

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A Kraken spokesperson told me that they’re “disappointed by this experience and are now working with law enforcement agencies to retrieve the assets from these security researchers.”

CertiK then came out as the security researchers, and now there are a lot of questions. For example, the two can’t seem to agree on the amount. CertiK maintains it never refused to return the funds (Percoco claimed they did, calling it “extortion”) but that the total amount “differs from what Kraken commanded.”

“After initial successful conversions on identifying and fixing the vulnerability, Kraken’s security operation team has THREATENED individual CertiK employees to repay a MISMATCHED amount of crypto in an UNREASONABLE time even WITHOUT providing repayment addresses,” CertiK wrote in a post on X.

The differing answers led to a skeptical — and not overwhelmingly positive — response to CertiK’s reveal and the amount of test transactions, not to mention the five day period in which the researchers conducted what they claim is white-hat security research.

Coinbase director Conor Grogan also pointed out that the US-based firm used Tornado Cash for some of the transactions. CertiK didn’t immediately return my request for comment on this.

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This whole ordeal has led, so far, to more questions than answers. Which — I’ll point out as a journalist — isn’t my favorite boat to be in, but alas.

CertiK provided the alleged transaction history of its process, including what happened in the five-day timeframe.

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I’m quite curious about the gap between the June 13 meeting between Kraken and CertiK and the June 18 meeting. Up until that break, the two seemed to be in almost daily communication. Kraken, however, said it won’t comment outside of its statement, blog post and Percoco’s thread.

Putting all of the questions aside: This has sparked an intense — but necessary — debate around what constitutes white-hat hacking, what’s fair when it comes to testing potential bugs (meaning amounts and transactions), and when does a firm or researcher take it too far.

These aren’t questions that’ll be answered by one-off Twitter takes. Still, they introduce an important dialogue that helps set other firms and researchers up for success the next time a bug’s found.

I have to admit, dear reader, I’m interested in your thoughts as well. Send me your thoughts over on X.

— Katherine Ross

The Works

• VanEck’s bitcoin ETF launched on Australia’s largest stock exchange.
• Michael Saylor posted that MicroStrategy completed its $800 million offering of senior notes.
• Binance faces a $2.25 million fine for failing to abide by India’s anti-money laundering rules, the country’s AML unit said.
• Jump Crypto donated $10 million to Fairshake’s PAC.
• Consensys co-founder Joseph Lubin said the firm plans to push forward with their lawsuit against the SEC.

The Riff

Q: Is the SEC dropping the Consensys investigation regulatory clarity?

Sort of? If you read between the legalese in the SEC’s letter to Consensys, the agency is saying that it doesn’t plan to pursue enforcement actions against the firm because it dropped the ETH investigation.

Specifically, though, it also basically says it’s not agreeing with whatever Consensys said in its June 4 letter. (Presumably, lawyers asked directly about the investigation.)

Pairing that with the assumption that the ETH ETFs will be fully approved by the end of summer, and we have some not-so-clear clarity that ETH is considered a commodity by the SEC. But Gary Gensler still seems to refuse to publicly acknowledge it as such.

This doesn’t mean Consensys is out of the woods. The letter doesn’t mention the Wells notice regarding its MetaMask Swaps and Staking products. Guess we’ll have to see what’s still up the SEC’s sleeve…

— Katherine Ross

Not really. But it could be the closest thing we’ll get for quite a while.

The SEC named all sorts of tokens as securities in its suits filed against Coinbase and Binance last year.

Many of those are tied to blockchains running proof of stake-style consensus, including Solana, Binance Smart Chain, Ton, Cardano, Tron, Near and Polygon.

Granted, those chains aren’t quite the same beast as Ethereum (many run delegated staking systems). It could be that SEC lawyers cook up new ways to go after them still.

But it’s hard not to believe dropping the Consensys probe hasn’t given layer-1s broad cover in the meantime. Can’t really say the same for services and protocols building on top of those platforms, though, especially ones with their own native tokens, like Uniswap.

— David Canellis

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