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CFTC Commissioner is not a big fan of DeFi; calls it ‘illegal’ since it defies archaic laws

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DeFi has gained significant traction this bull season. It has not only attracted a myriad of previously skeptic market players to rake in profits but has now come under the scrutiny of law enforcement agencies. In the latest development, the Commissioner of Commodity Futures Trading Commission [CFTC], Dan M. Berkovitz has called for a crackdown on unregulated derivatives platforms in the decentralized finance world.

CFTC exec just termed DeFi “illegal”

Berkovitz believes DeFi derivatives platforms may violate the existing Commodity Exchange Act [CEA]. In a keynote address, the commissioner was quoted saying,

“There is no intermediary to monitor markets for fraud and manipulation, prevent money laundering, safeguard deposited funds, ensure counterparty performance, or make customers whole when processes fail. A system without intermediaries is a Hobbesian marketplace with each person looking out for themselves. Caveat emptor—“let the buyer beware.”

He also opined that “unlicensed” DeFi markets for derivative instruments are a bad idea and that he does not see how it is legal under the act which requires futures contracts to be traded on a designated contract market [DCM] that are licensed and regulated by the CFTC.

Berkovitz went on to speculate that it is “untenable” to permit “an unregulated, unlicensed derivatives market” to function adjacent to, what he considers, “a fully regulated and licensed derivatives” market.

Acknowledging the lack of “safeguards’ in the market as well as customer protections, the commissioner said that it would not be fair to enforce the obligations, restrictions, and costs of regulation upon some DeFi while allowing their unregulated rivals to exist wholly free of such obligations, restrictions, and costs.

He said that DeFi should not be allowed to transform into “an unregulated shadow financial” market in a direct match with its regulated counterparts. He also urged that the CFTC along with other regulators of the country, need to concentrate more on the growing concern and address regulatory transgressions appropriately.

Uniswap [UN] displays recovery hints despite inching closer to support below $20

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The cryptocurrency market continued to struggle for an upward break. Popular DeFi token, Uniswap [UNI] also faced bearish pressure along with several top coins. Currently, the lower levels have continued to attract significant buying activity from the traders.

Owing to the market fall this week, the tenth-largest crypto-asset by market cap, UNI found itself inching closer to an important support level. It will be now interesting to see if the incoming volatility in the market manages to invalidate the bearish impetus.

Uniswap [UNI] noted a minor uptick of almost 1% over the past 24-hours and recorded a trading volume of $615 million. It was currently priced at $23.51 while holding a market cap of $13.55 billion, at the time of writing.

Uniswap [UNI] Daily Price Chart:

U

The recent market as displayed in the above Uniswap’s daily chart was indicative that bulls are far away. The placement of moving averages was also a cause of worry. Firstly, both the DMAs were hovering above the UNI price candles thereby resisting an upward price action. In addition, the 50 DMA [Pink] and the 100 DMA [blue] now appeared to be heading for a bearish crossover in the coming days which could trigger the price to spiral down even more.

UNI’s volume, however, remained moderate which could provide the coin with necessary support in case the price goes downhill.

UNI2 1

The dotted markers of Parabolic SAR below the UNI price candles gave some hope of bullish revival in the coin market that is at a crucial stage. The Chaikin Money Flow [CMF] also surged notably demonstrating a strong case of inflow of capital in the UNI market which could aid in price appreciation.

The RSI, however, depicted a grim picture of increasing sell pressure in the market and falling buying sentiment.

If the Uniswap bulls thrust the price above the current level, the momentum could pick up which could suggest a move towards the resistance levels of $34.26 and $43.17 after breaching the DMAs.

Conversely, if the price turns down yet again, it will further validate that market participants are offloading their tokens on rallies. In this case, the support levels of $16.81 could come into play, But if Uniswap fails to defend level, losses could trigger a fall to $7.48, a level last seen in the first week of the year.

Will Uniswap [UNI] break rangebound action to soar above $30?

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The cryptocurrency market has gathered steam over the past day. Uniswap [UNI] has closely followed the trend to amplify its weekly gains to nearly 6%.

Since the crash on the 19th of May, the digital asset shed the gains it made during the rallies in the first quarter of the year. It fell right back in early February levels. However, the UNI bulls are again trying to push the price above a crucial point of resistance as the market hinted at a recovery.

After posting gains worth 5.12% over the past 24-hours, Uniswap [UNI] was exchanging hands at $28.74. The defi token registered a market cap of $16.16 billion. and a 24-hour trading volume of $563 million.

Uniswap [UNI] Daily Price Chart:

UNI1

After a steep fall, Uniswap [UNI] began to oscillate within a tight range and a consistent upper ceiling, which, if broken, could be instrumental for the token. Both the moving averages hovered above the UNI candles.

The gauge between the two appeared to decrease, as such the 50 DMA [Pink] declined mildly towards the 100 DMA [Blue]. The latter remained pretty steady. Hence, if a bearish crossover transpires, it would be damaging for the price of UNI in the near term.

Uniswap’s moderate volume, however, could aid in pushing the price upward.

UNI2

The Parabolic SAR’s dotted markers moved below the candlesticks and pictured an uptrend for the defi coin. The building up of a bullish momentum was depicted by the green closing bars of Awesome Oscillator.

RSI was still below the 50-median line and the buying pressure has been rising but very slowly.

If the UNI/USD pair turns down from the $30-level again but bounces off the immediate support area of $22.22, it would suggest that bulls are accumulating on dips. However, if the lower level is broken, Uniswap could potentially see severe losses and risk a downfall to another support point of $16.8, a level is last seen almost four months ago.

In the case of a strong market momentum leading to a bullish setup, UNI could target resistance levels of $37 and $43 after the surging past the daily moving averages.

Another Binance Smart Chain-based DeFi Platform Loses Millions In Exploit

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There is no respite for decentralized finance-based platforms on top of Binance Smart Chain [BSC]. This time, it was the AMM protocol called Belt Finance that suffered a loss of millions after software exploitation.

According to Belt Finance, a flash loan attack was initiated on the Binance Smart Chain’s 4Belt [USDT/USDC/BUSD/DAI] pool. The hacker reportedly created a smart contract that used popular decentralized exchange PancakeSwap for the purpose of flash loans and exploited its beltBUSD pool. The malicious entity, however, did not stop there and proceeded to attack its underlying strategy protocols as well as executed the contract 8 times to rake in a total profit of 6,234,753 BUSD.

The Binance Smart Chain-based defi protocol also revealed that beltBUSD vault users endured a loss of 21.36% of funds, while 4Belt pool users sustained a loss of more than 6% of funds. Other pools/vaults were not affected. Soon after detecting the attack, the defi platform paused withdrawals and deposits in a bid to prevent more losses. It added,

“While we are aware that this may cause our users inconvenience, it was done to prevent the same exploit from attacking our other vaults/pools. All other pools/vaults and all funds remain unaffected and safe from this attack, and we have now patched the attack vector that allowed this exploit of 4Belt and beltBUSD.”

Belt Finance also revealed that the team was devising a compensation plan that will be released within the next 48 hours.

According to the Rekt Blog, which analyses defi exploits, explained that the lost $6.3 million in a total of eight transactions.

Binance Smart Chain Weighs In

The bloodbath for the BSC does not seem to stop anytime soon. In just nine months, the network’s rise to prominence has attracted many platforms. However, several of these defi protocols operating on top of Binance Smart Chain’s decentralized finance ecosystem have suffered back-to-back hacks and exploits in a short period of time.

Binance Smart Chain had recently stated that the “well-organized hackers” behind the flash loan attacks and security breaches were targeting the platform specifically.

Binance Smart Chain believes hackers are specifically targeting it following back-to-back DeFi exploits.

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Binance Smart Chain believes hackers are specifically targeting it following back-to-back DeFi exploits.

Several defi protocols built on top of Binance Smart Chain [BSC] decentralized finance ecosystem have suffered one after another hacks and exploits in a short period of time that has stemmed especially this past month. The platform believes that the recent flash loan hacks were orchestrated against BSC specifically.

The platform said on the 30th of May,

“There are >8 flashloan hacks recently, we believe, an well organized hackers are targeting Binance Smart Chain now. It is very challenging time for the BSC community.”

In a series of tweets, Binance Smart Chain also went on to urge the team behind the decentralized applications [DApps] to work with their audit companies to do another health check.

It also asked the cloned and forked defi projects, to “double and triple check” the changes from the original version and employ necessary risk control measures to actively identify any peculiar activities in a real-time manner and halt the protocol if any such strange activity indeed occurs.

Binance Smart Chain’s Rise to Fame

Since its inception last September, BSC saw tremendous success. The activity on Binance Chain’s parallel blockchain has dramatically soared as it continued to make headlines as one of the more viable rivals to the Ethereum network which was riddled with scalability issues.

However, as BSC rose to popularity, so are the bad actors that have breached various protocols and managed to siphon off with billions in crypto.

Binance had recently stated that it was not responsible for exploits on BSC protocols. Samy Karim, who happens to be the coordinator of business and ecosystem development at the cryptocurrency exchange, had earlier stated that Binance Smart Chain is a public permissionless infrastructure that enables anyone to deploy. He went on to add,

“You have malicious actors there and hacks, and exploits in defi are not new and definitely not unique to BSC.”

In another related news, BSC had added the blockchain analytics and cryptocurrency intelligence company, CipherTrace for the purpose of tracking illicit transactions.

DeFi TVL crashes by over 37% in less than a Fortnight

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In what seemed like defi heading for another hot summer, instead felt the burn of the market-wide sell off.

It world of decentralized finance has been one of the biggest drivers of the surge in the broader cryptocurrency market over the past few months. However, the space has taken quite the beating after the series of massive corrections unfolded in the market last week.

According to the most recent DeFiLlama stats, the total value locked [TVL] across all decentralized finance platforms tumbled from an all-time high of $164.2 billion on May 10th to $95.5 billion two weeks later.At the time of writing, the TVL value had noted minor recovery and was found to be at $102.9 billion. However, it was still down by more than 37% in a period of fewer than two weeks.

DEFI

It all started with Tesla Technoking, Elon Musk blocking Bitcoin payments which sparked the first major instance of sell-off. Bitcoin also suffered a setback after the hackers of Colonial Pipeline siphoned off with $90 million in a BTC ransom. In addition, China’s back-to-back reports on crackdowns of the cryptocurrency space further proved damaging.

DeFi tokens crumble

The crash in the defi space’s TVL is a result of the depreciation in the value of the tokens. The correction in the market has hit investors hard, especially the newer cohort, most of whom forayed the ecosystem at the beginning of the bull season that started late last year.

Over the past week, these tokens have tanked way more than Bitcoin [BTC] and Ethereum [ETH]. Top tokens such as Uniswap [UNI], Chainlink [LINK], Aave [AAVE], Maker [MKR] was still down by more than 45%, 40%, 44%, and 24% respectively.

Several projects on the decentralized finance space this quarter either pulled the rug or executed an exit scam or suffered a flash loan. These were especially observed on multiple Binance Smart Chain protocols which further added to the investors’ woes.

DeFi protocol developers pull an exit scam; siphons off with $32M

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DeFi has witnessed spectacular growth off late. While it does bring in limitless opportunities for the participants in the market, it also tags financial perils along with it.

in 2021 alone, exit scams in the decentralized finance space have increased at a worrisome pace. This time investors fell victim to DeFi100, a decentralized finance protocol built on the Binance Smart Chain. Reports alleged that the founders had run away with $32 million in investors’ funds.

The entities had posted a vicious message on the website which said: “We scammed you guys, and you can’t do shit about it”

DeFi100

DeFi100’s only clarification following the incident was a tweet in which it said their website was hacked yesterday and the message was written by the hackers. Shortly thereafter, the website showed an error 404 message.

Some speculated that several projects are bound to show their true colors as the bull season fades and hence it there could be a huge increase in exit scams over these next few months. One crypto analyst urged market players not to invest in projects that are very new, backed by anonymous teams, made as memes, and lack real utility.

Another twitter user and a community member who goes by the pseudonym ‘CryptoDragon‘ stated,

“After the dev scammed everyone and posted this picture on the site, some angry people found his internet footprints and exposed his real identity and location. The scammer has now been reported to Interpol and local authorities.”

Defi 100’s native token crashes

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After the developers absconded from the project, Defi 100’s native token, D100 took a plunge to its lowest value. According to CoinGecko’s latest chart, the defi coin was down by more than 25% which drove its price to $0.040, at the time of writing.

Meanwhile, crimes have become more pronounced in decentralized sector as they continued to boom while attracting bad actors. Along the same line, the crypto intelligence company CipherTrace had recently stated that while losses from cryptocurrency theft, hacks, and fraud declined sharply in the first four months of 2021, the same cannot be said about the defi ecosystem. The report stated that crime in the burgeoning “decentralized finance” space hit an all-time high.

Binance Smart Chain DeFi PancakeBunny Suffers Flash Loan Exploit

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Another day, another flash loan attack on a defi protocol.

A Binance Smart Chain [BSC] decentralized finance [defi] yield optimizer project called PancakeBunny, has supposedly suffered an “economic exploit”. According to the PancakeBunny team’s official post on Twitter, the protocol was subjected to a flash loan attack from an external actor.

However, the platform clarified that none of the vaults on the platform were compromised.

“We would like to remind the community that no vaults have been compromised. The exploit was an economic exploit that attacked the price of BUNNY, using flash loans. We repeat, no vaults have been breached.”

The malicious entity reportedly borrowed “a huge amount” of Binance Coin [BNB] on DEX Pancakeswap and went on to manipulate the price of USDT/BNB as well as BUNNY/BNB. Subsequently, the hacker dumped all of the acquired BUNNY in the market which led to the crash in the token’s price.

PancakeBunny rebuffed reports that claimed that the attacker siphoned off with $1 billion worth of tokens but has not revealed the actual figures yet. According to calculations, the exploit drained over $200 million from the yield platform’s smart contracts. However, the blockchain security firm Certik said that the losses were around $40 million. Its tweet regarding the same read,

“An alert was published at Certik over an incident on PancakeBunny, which suffered from a FlashLoan attack and resulted in a loss of ~$40M (114K WBNB & 697K BUNNY). An illustration of exploited asset movements is presented & we are actively monitoring further TXs.”

Certick

Further making the situation worse, the hacker left a rabbit-related pun as a note after the execution of the transaction that read “Aren’t Flashloans Earitating”

Notably, the BSC-based defi project is led by Mound, a startup that secured $1.6 million from the exchange’s venture capital and incubator arm, Binance Labs recently.

DeFi Token, BUNNY Free Falls

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The native token, BUNNY was trading above $230 before the incident. However, it slashed its gains by more than 80% over the past 24-hours and was currently trading at $31.48, according to CoinGecko.

Yearn.finance TVL smashes past $4B TVL while YFI token hits above $80k

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Yearn.finance and its native token YFI has broken many records this quarter, and there is no stopping it.

Thanks to Ethereum’s meteoric rise, decentralized finance [deFi] protocols, and their native tokens have been on a surge lately. The digital asset management platform, Yearn.finance has recorded yet another milestone as collateral locked in it surged to a new ATH.

According to the deFi platform’s latest edition of the weekly newsletter, the total value locked [TVL] in it has surpassed $4 billion. Since the beginning of the year, the TVL figures have maintained a consistent rise and have not seen any significant downturn. As of the 12th of May, Yearn’s TVL was found to be at $4.48 billion.

YFI TVL

The report mentioned that Yearn.finance’s TVL doubled from $2 billion to $4 billion in a period of just 32 days. This in contrast to the deFi protocol’s jump from $1 billion to $2 billion in total value locked which took a whopping 226 days.

Yearn’s blog also stated,

“Yearn is continuing to see parabolic and continuous growth among its products with no indication of growth slowing down. The Iron Bank product has seen notable increases since the start of April, in conjunction with sustained growth of our v2 yVault product line.”

Yearn.Finance’s Native YFI Records ATH

yfi

Its governance token, YFI, however, had a rocky start in the starting of 2021. Despite a minor breakout, Yearn.finance’s native asset has traded below $40k for the most part of the first quarter. It was amidst the crypto rout in the last week of April, that YFI gained some serious upward momentum that has been in continuation to this day.

In a matter of just two weeks, YFI has doubled in terms of its price and broke above $82k following a short-term period of consolidation. Despite a lackluster price movement for almost two quarters, YFI became the best performer of the week, among its peer deFi tokens, as it accrued gains of nearly 60% over the last 7-days.

DeFi Protocol Rari Capital Loses ~$10M In High Profile Exploit

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Decentralized finance [DeFi] protocol, Rari Capital was exploited on Saturday after an attacker siphoned off with nearly 2600 ETH, or approximately $10 million.

In a post-mortem report, the Co-Founder of Rari Capital, David Lucid revealed that the funds were extracted from the protocol’s Ethereum Pool before the malicious entity was stopped when the contracts were halted. The net loss equated to 60% of all users’ funds in the said Ethereum Pool.

What exactly unfolded at Rari Capital’s ETH Pool?

The Rari Capital Ethereum Pool deposits ETH into Alpha Finance’s ibETH token as one of the DeFi platform’s yield-generating strategies. This strategy is essentially involved in tracking the value of its ibETH as ibETH.totalETH() / ibETH.totalSupply(). The exploit was related to this ibETH vault inside which the attacker reportedly executed a few steps repeatedly. Following are the steps that were carried out on loop:

  1. Ether [ETH] flashloan from the non-custodial decentralized exchange, dYdX was noted.
  2. Ether [ETH] deposited into the Rari Capital Ethereum Pool.
  3. The value was manipulated by inflating it artificially high.
  4. More Ether [ETH] was withdrawn from the platform’s Ethereum Pool than the attacker deposited because its balances were artificially inflated.
  5. In the end of ibETH.work, the value of ibETH.totalETH() bounced back to its true value, which resulted in the Rari Capital Ethereum Pool’s balances to lower than they were prior to the exploit. The malicious entity ended up withdrawing a lot more than it deposited since the balance was artificially pumped.

The Rari Capital contributors were unable to understand that ibETH.totalETH() could be manipulated for the duration of these external calls from ibETH.work. Furthermore, the exploited code was reportedly audited by blockchain security platform, Quantstamp.

While talking about few steps to implement to mitigate the risks of attacks in the future, Lucid stated,

“Of course, we hope to enlist more top auditing firms other than Quantstamp and Omniscia. We already have another audit planned with OpenZeppelin.”

Rari 1

The native token behind the deFi protocol, the Rari Governance Token [RGT] crashed by more than 20% following the exploit. It was currently exchanging hands at $13.86 after the drop. It also negated its weekly gains by 5.96%.