Hi everyone, and welcome to Chain reaction.
Last week, we discussed $4.5 billion in new crypto funds from a16z. This week, we’re talking about the arrest that’s got everyone sweating in the NFT space.
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crimes of the future
The crypto space has evolved so rapidly over the past couple of years that builders generally seemed to believe the existing rules did not apply to them. Well, after years of fast-paced lawsuits, it looks like US prosecutors are starting to think it’s time to challenge that perception.
This week, the U.S. Attorney’s Office for the Southern District of New York arrested and filed charges against a former OpenSea executive who used his position to run NFT projects that were going to be listed on the market’s homepage. Community members discovered his actions by following his activity on public blockchains.
I would have loved to complain about this during the podcast, but the news broke while we were recording, so I’ll leave you with some thoughts here.
The arrest was pretty much a massive shock to people in the NFT space who generally believed that Nate Chastain had acted unethically, but that it couldn’t be a “misdemeanor.” insider” because the NFTs were not securities. It was a set-up that was held back by many, including Chastain’s boss at OpenSea who fired him.
“I think there’s been a mis-definition as insider trading. We don’t consider NFTs to be financial assets, so it doesn’t apply. It’s a very specific term for a very specific thing. specific,” said OpenSea Devin Finzer. Decrypt in September.
There are an awful lot of people reading SDNY’s press release very closely, which says it specifically charged Chastain “with wire fraud and money laundering as part of a scheme to commit a misdemeanor crime.” ‘initiated on non-fungible tokens’. In particular, they describe NFTs as “digital assets” later in the press release. Also, it’s worth remembering that it’s the DOJ — not the SEC — that accuses him, though it’s the Bureau’s Securities and Commodities Fraud Task Force that is handling this. affair.
Now, why don’t cryptocurrencies want NFTs to be classified as securities? Well, there are plenty of existing regulatory guidelines out there, and most believe it would fundamentally upend the industry if NFTs were unilaterally brought under securities law; it would certainly increase the barrier of entry for the creation of NFTs and reduce much of the experimentation currently taking place in space.
Another big reason why it would be bad for NFTs to be treated as securities is that it would mean a huge number of people have been doing illegal things for a very long time.
The NFT space has gone through this latest crypto bull run without any meaningful regulation applying to it. As NFT volumes begin to show signs of slowing down, there are fears that more regulation is imminent.
the last module
What’s up, it’s Anita here to give you a preview of the latest episode of our Chain Reaction podcast, where we unpack the latest web3 news, block by block for the crypto-curious.
This week, we talked about Coinbase’s new take on what can be one of the most anxiety-inducing aspects of corporate life: performance reviews. Our colleague, Amanda, wrote about how the crypto exchange tries to emulate Ray Dalio’s hedge fund, Bridgewater Associates, by allowing employees to exchange feedback and ratings in real time. Is this part of tech’s descent into a Black Mirror-style reality? Tune in to hear our thoughts.
We also recapped two recent crypto comeback stories, one from the founder and CEO of OnlyFans who left the company after trying to ban sexually explicit content from the platform and another from the architect of the highly unstable stablecoin, Terra.
Our guest this week was Outdoor Voices founder Ty Haney, who shared details about her move from athleisure to crypto with her new venture, Try Your Best. Haney announced on our podcast that the startup had just landed its second round of institutional funding.
follow the money
Where startup money is moving in the crypto world:
- New York-based enterprise blockchain startup digital asset took a strategic investment of an undisclosed size from Japanese banking giant SBI Holdings.
- InfStonesa blockchain infrastructure provider, raised $66 million in a round led by SoftBank and GGV.
- Indian music start-up NFT FanTiger pocketed $5.5 million for its funding round led by Multicoin Capital.
- livingcitiesa metaverse-focused social startup co-founded by Foursquare founder Dennis Crowley has raised $4 million in seed funding led by DCVC.
- from Zimbabwe ID Flex received an undisclosed amount of funding from Algorand for its blockchain-based identity system for the underbanked.
- Augmented reality game company Web3 Jadu raised $36 million in funding for its Bain Capital Crypto-led Series A.
- VillageStudio raised $2.3 million in a round led by Animoca Brands for its NFT-based Playken avatars.
- Web3 payment API Merge secured $9.5 million in seed funding led by Octopus Ventures.
- GoSatsan India-based bitcoin rewards platform, raised $4 million in a pre-Series A funding round from investors including Y Combinator, Accel, and Gossamer Capital.
- CAD management platform Utopia Laboratories closed a $23 million Series A led by Paradigm.
the week in web3
It’s been an unusually quiet week on Web3, and our team members in the US have taken time to enjoy the rare, uneventful long weekend. Still, some big names have made waves in space, for better and for worse.
- OnlyFans founder Tim Stokely is turning to crypto after leaving the company last December following controversy over his efforts to ban sexually explicit content from the platform. Anita written about the new “family-friendly” NFT startup he’s launching alongside another former OnlyFans executive that will let people buy, sell and trade virtual cards featuring influencers and celebrities.
- NFT platform OpenSea had fired Nate Chastain, its chief product officer, in September after he was accused of making high-profile trades on the platform. Now he’s been arrested and charged with insider trading; Lucas has the details.
Here are some of the crypto analyzes from this week that you can read on our TC+ subscription service (written by TC’s Jacquelyn Melinek):
Venture capital funding for crypto projects fell in May, but many investors remain optimistic
Venture capital funding in crypto plummeted month-over-month from April to May, but many investors aren’t worried. “For investors like us, it’s time to buy,” Stan Miroshnik, partner and co-founder of 10T Holdings, told TechCrunch. The pace of capital deployment may be more measured as investors and founders become more calculated, but VCs will continue to see robust activity, Miroshnik said. Even though there might be a gloomy sentiment in digital asset markets, true crypto-native funds will continue to invest heavily, Saurabh Sharma, chief investment officer at Jump Crypto, told TechCrunch.
As Crypto Becomes More Mainstream, Can It Stay Decentralized?
From first-time buyers of cryptocurrency to people learning more about NFTs, Bitcoin, and the general crypto ecosystem, there has been a global increase in awareness about crypto. But as it grows, regulators around the world will continue to watch the space more closely, but the headline speaks for itself: what does this mean for the future of crypto? A number of founders and industry executives weighed in on their thoughts.
Longtime Bitcoiner Dan Held Says This “Crypto Winter” Won’t Be As Harsh As Others
While cryptomarkets remain bearish, some longtime market participants, like Dan Held, director of growth marketing at Crypto Exchange Kraken, aren’t worried. Even though there is a lot of talk of a crypto winter circulating in the community, Held said the sentiment for this current market cycle is different. While he – and many others – have persisted through major market cycles over the years, the narratives have changed a lot, thanks to larger institutional players and massive amounts of capital entering the space.
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