Well I saw it coming. DeFi exploits that would rock the crypto world…last
week crypto saw one of the largest exploits ever.. which will have major implications
for the crypto ecosystem as a whole. So are you ready to dive down the wormhole?
Well you don’t really have a choice, unless you turn us off…because it’s time for Chico Crypto!!
Yes I did predict these major defi “hacks” would come..all
the way back in September of 2020, right when DeFi started to take off, I posted this video.
“WARNING!! Billion Dollar DeFi HACK Is Coming…” and I explained that there would
eventually be hacks and exploits coming which would total more than a billion
dollars due to protocols and dapps rushing out code and skipping audits
Well it only took about a year for this to happen. August of 2021
Poly Network was exploited for over 600 million dollars, and I posted this
video “BEWARE! Another Hack Will Happen...$1 Billion SOON!!?....
Well lucky Poly Network had a nice exploiter who ended up returning the funds….but
I predicted another big one was coming, as DeFi protocols, especially cross chain bridges
were still rushing out their code, and not doing due diligence with audits.
And last week, another big one happened. Wormhole was exploited for over 326
million dollars. Although it was patched up and fixed within days. But let me tell you,
the repercussions aren’t over for this, and there is much more to this story than meets the eye.
So what exactly happened and why is this of such importance to the entire ecosystem?
Well it involves two of the crypto ecosystem’s biggest protocols. Ethereum and Solana. Yes
wormhole is a bi directional bridge for Solana. The bridge allows asset transfers of erc20
over to Solana, and vice versa the newly minted SPL tokens back over to Ethereum.
Now the hacker and exploiter found a bug on the Solana side of the bridge.
This bug allowed them to mint 120 thousand wrapped ethereum on Solana. They were then able
to bridge over 80 thousand of the newly minted wrapped eth over to the ethereum blockchain,
and the rest of the 40k wrapped ETH was traded on the Solana blockchain.
Now why is this so devastating? Well let’s talk about Solana 1st. Number
1 this bridge was highly promoted by the Solana leaders. Solana’s twitter promoted
it on multiple occasions and then SBF, sam bankman fried also promoted wormhole…but
just Last month throughout January his own project Serum, and wormhole put on a hackathon together
called convergence where both wormhole presented and SBF spoke…
Number 2, 40k wrapped Ethereum on Solana is a large large number. There are a
number of Solana-based DeFi platforms that accept ETH as collateral and if someone
doesn’t jump in to backstop the 40k ETH, those platforms may become insolvent.
In an interview with Coindesk, George Harrap,
founder of DeFi protocol Step Finance on Solana said this regarding the exploit “"If nobody
backs it and the coins are truly gone then Wormhole ETH is worth
0 and everyone who has a balance of it becomes worthless, DeFi protocols, users, everyone,"
Well luckily someone did JUMP in to backstop the loss. Wormhole tweeted last week “All funds have
been restored and Wormhole is back up.” So who saved Solana? Well Jump Captial did who purchased
Certus One, the wormhole development company back in August. They tweeted “JumpCrypto believes in
a multichain future and that WormholeCrypto is essential infrastructure. That’s why we replaced
120k ETH to make community members whole and support Wormhole now as it continues to develop”
Jump capital backstopping and replacing the entire 120k ETH? Remember that a cool
326 million dollars? Where in the funk are they getting that type of funds??
Well, just last September, Jump Capital did a funding round, where they raised $350 million
dollars, where they funds would be allocated with an increased focus on “crypto” companies.
Now, is JUMP going to take a whole round of funding from investors to save wormhole?
Well yes they might be, but that isn’t going to be made public
as that would be a contractual breach of contract and use of investor funds. That money was raised
to invest in crypto companies to provide returns for the investors… not to bailout crypto companies
Well, Bitfinex’d, the infamous crypto sleuth has an interesting theory. He tweeted “Solana/Wormhole
need to come up with 120,000 ETH to restore the 'pegging'. There's a good chance they're not going
to say where the 120,000 ETH is coming from. 1. Undisclosed loan from crypto
exchanges with customers Ethereum. 2. Crash the price of ETH to reduce costs.
3. Use money that has been raised recently to slowly buy back the missing ETH.
Bitfinex/Tether fraud is a good candidate to help Solana with #1. Bitfinex/Tether has a history of
loaning out customers crypto for a fee, to traders and people trying to get forked tokens cheap..
Now Bitfiinex’d was correct, Jump Crypto hasn’t explained where the 120k ETH is coming from.Just
that they replenished the contract with the missing ETH…
Sooo is Bitfinex’d onto something when saying Bitfinex and Tether
are a good candidate to help with a loan for that amount of ETH!?
Well Jump Crypto and Tether are very close. They have ties and business deals
that go deep within the Solana ecosystem.
In November of last year, Protos put out a research piece called the Tether papers
which dove into the entities acquiring all the Tether that has been created.
The article states “Still, the question of who exactly buys Tether directly from its parent
company Bitfinex has remained unanswered since its inception way back in 2014. Earlier this year,
Protos shed light on that mystery by reporting that just two companies,
Alameda Research and Cumberland Global, were responsible for seeping roughly
two-thirds of all Tether into the crypto ecosystem. Today, we reveal a lot more.
Now before we get into that reveal…we need to remember, Sam Bankman is big on Solana,
but he was also big on Wormhole, doing a hackathon in collaboration with them
just last month. Well if you didn’t know SBF is also behind Alameda Research…the entity that
Protos found is one of the two entities…sucking up a majority of the USDT. The article states
“One of Alameda’s most notable moves was its participation in ‘Ethereum killer’ Solana’s
$314 million token sale earlier this year, alongside Polychain Capital and CoinShares.
Alameda Research’s lead brain Bankman-Fried is one of Solana’s most vocal proponents. Solana’s native
token SOL has since grown to become the fifth most-valued cryptocurrency at press time, just
behind Tether. Tether sent almost $36.7 billion in USDT to Alameda Research. $31.7 billion (86%) was
received in the past year. Alameda Research accounted for 37% of all outbound volume.
Now let’s get into the reveal…down further in their research piece it talks about
Jump Crypto!! “Last September, Chicago-bound trading giant Jump Trading
made a widely publicized crypto push by investing in decentralized exchange Serum,
on Solana. Yes Sam’s Serum who did the hackathon with Wormhole just last month!
It then says “Serum and Jump had inked a deal for an undisclosed amount that would
see the outfit provide the liquidity necessary to make Serum-powered platforms like Mango Markets
usable. Since then, Tether has issued Jump: At least $1.1 billion in USDT on Solana this year,
equal to almost 99% of all USDT that exists on that blockchain. Jump Crypto
is considered the top liquidity provider to Mango Markets and Solana overall.”
Jump and Tether aka Bitfinex are highly connected….Jump
is crucial to Serum, the exchange Solana, as they are the facilitator of Tether on the blockchain.
Thus before the hack there were many positions tied up using
Ethereum and USDT across the blockchain. They couldn’t unwind the positions… It was either
let the entire house of cards come collapsing down on Solana, or bailout the bridge…
Now, I’m not saying Bitfinex theory is True by no means. That's just his theory...…I just find
it oh so suspicious that 120 thousand ETH, worth over 326 million dollars
was pumped back into the contract is SNAP. Only…Deep. Deep pockets have that laying around…
Did those deep pockets come from Jump crypto themselves? Did they waste an entire funding
round on a single bailout?? Or did they come from the deepest pockets in the crypto game? Tether
and Bitfinex’d?? It’s highly likely we won’t ever figure out the entire story…until the Tether house
of cards, and the whole crypto markets, come crashing down. Cheers I’ll see you next time!!