Twitter Vigilantes Are Hunting Down Crypto Scammers
Open source investigators are struggling to maintain law and order in the wildest recesses of cryptocurrency’s Wild West.
Gabagool saw that as dishonest. He wondered whether, as a Ribbon backer, Divergence Ventures might have had advance knowledge of the airdrop and then used that intel to milk millions out of it by converting the Ribbon tokens to ether. “They attempted to exploit that information to extract profit, and they did so while publicly stating to be very bullish and excited about Ribbon,” he says, comparing the actions to insider trading. Gabagool distilled his information in a tweet, which “kind of blew up” as soon as he fired it off, he says.
Divergence Ventures denied insider knowledge about the airdrop but later admitted to “crossing a line”; it eventually returned the ether to Ribbon. In the wake of the incident, reference to the Ribbon investment disappeared from Divergence Ventures’ website. Divergence Ventures did not reply to a request for comment, and Harris did not reply to several requests for an interview via Twitter.
> Gabagool is among an emerging breed of sleuths bent on spotting, tracking down, and exposing questionable practices in the budding DeFi world.
Cryptocurrency is intended as electronic money that users can exchange anonymously and without intermediaries. But that anonymity comes with transparency: Cryptocurrency transactions are inscribed in an open digital ledger, the blockchain, which provides a record of how assets flow through the system. Companies such as Chainalysis and Elliptic have created software to aid law enforcement investigations into illicit activities involving cryptocurrency. In contrast, these new amateur detectives rely on their hunches and tips from others, use free tools to examine blockchain activity, and broadcast their findings from pseudonymous Twitter accounts like Gabagool, Zach, and Sisyphus.
Gabagool says he noticed the questionable Ribbon activity while poring over Etherscan, a tool to keep track of blockchain transactions. He and other sleuths say they are animated by a penchant for investigative work, resentment, or frustration with the brazenness of some people in the space. They say they are trying to save DeFi from itself—by becoming its sheriffs.
DeFi is arguably the wildest recess of cryptocurrency’s Wild West. Its advocates cast it as a happy digital island where investors have eliminated financial middlemen to interact on a peer-to-peer basis. Practically, it can at times resemble the digital equivalent of touring Las Vegas high on LSD. DeFi protocols are often run as decentralized autonomous organizations: online-only operations that claim to be managed collectively by users rather than by a C-suite. Most DAOs provide financial services via self-executing software programs, which users can mix and combine to devise unique trading strategies. New shiny crypto-tokens are constantly launched, generally on the Ethereum blockchain; users earn tokens as interest by parking cryptocurrency on a decentralized exchange, or just by playing videogames. Non-fungible tokens, or NFTs—cryptographic stand-ins for memes and pieces of digital art—are sometimes accepted as collateral for cryptocurrency loans.
[. . .] Read more at Wired Magazine here.
But when shame doesn’t prompt change, there’s little one can do. Many of the behaviors that crypto-sleuths expose take place in a regulatory vacuum. “Insider trading has a very specific meaning—using nonpublic information when trading on the stock market,” says Nick Price, a crypto-asset disputes specialist at law firm Osborne Clarke. “These tokens are not stocks and shares. NFTs aren't regulated, so it is not insider trading.”
Cases of fraud, such as thefts of crypto or manipulating a smart contract, can be reported to the police, Price says. But he says the level of scrutiny coming from the cryptocurrency community, and the quality of the information that it can crowdsource, is “unprecedented.” . . .
[. . .] Read more at Wired Magazine here.
Gabagool acknowledges that there is a “sinister side” to policing by Twitter. “I think, for some people, it's reminiscent of a kind of ‘cancel culture.’ But that was really not my intention,” he says. For him, self-regulation is still the best route to preserve DeFi’s space of freedom and innovation. Failing that, he fears that “there will be something else that emerges. And I can't guarantee that alternative will be beneficial for the community,” he says.
It might already be too late to stave off that scenario. In September, the US Securities and Exchange Commission launched an investigation into Uniswap Labs, the developer of DeFi exchange Uniswap.
SEC chair Gary Gensler has said some DeFi protocols could eventually be subject to securities regulations.
“The question is, do we use an open system people created themselves? Or do we use the long arm of the state?” Amador says. “Either way, we'll end up with some form of regulations—there's no doubt about that outcome. Right now, we are still in that adjustment period.”
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Twitter vigilantes unmask major attack on Ethereum’s DeFi
Alleged Twitter vigilantes track them down cryptocurrency scammers. Earlier last month, a user posted an alert message to the network, which sparked a stormy storm in the world of digital currencies. The account was browsing under the nickname of Gabagool.Eth, as if to refer to the sopranos and the blockchain Ethereum. His profile picture was a fuchsia nebula.
Gabagool.Eth’s mission is to denounce a malicious maneuver that allegedly took place in the field of decentralized finance or DeFi. The DeFi ecosystem contains a myriad of blockchain-based applications, and offers cryptocurrency lending and trading services. The creators of DeFi protocols use the organization of « airdrops » in order to retain their users.
Completely unforeseen token distributions would take place, often to the benefit of users who have deposited a certain amount of cryptocurrency into the network . . "Continue reading
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