Crypto can get weird: The 5 strangest stories of the industry in 2022
From Terra to FTX, 2022 has given us many weird crypto stories. While investors have been enduring a bear market that saw the crypto industry sink below the $1 trillion market capitalization mark, adoption in the space has been growing, and old mysteries were finally solved.
From the incredible short squeeze of a bankrupt company’s token to old anti-crypto arguments used by a major central bank, we’re getting weird with five stories the best fiction writers couldn’t dream up.
“Comedic rapper” charged over Bitfinex hack
Back in 2016, popular cryptocurrency exchange Bitfinex suffered a major security breach that saw attackers steal 119,756 Bitcoin (BTC), worth approximately $72 million at the time. It was one of the largest crypto hacks in history, and although Bitfinex continued operating, its reputation was damaged for years to come.
This year, Heather Morgan, known by her rap name “Razzlekhan,” and her husband Ilya Lichtenstein were arrested by the Federal Bureau of Investigation for allegedly conspiring to launder crypto connected to the Bitfinex hack.
During a court appearance in New York, the pair proclaimed their innocence and were released on multimillion-dollar bonds. The weird part of this story is the details surrounding Morgan’s work as a “comedic rapper” and social media influencer. One of her songs even says it is dedicated to “the entrepreneurs and hackers, all the misfits and smart slackers.”
Morgan, who calls herself the “crocodile of Wall Street,” was labeled a master of “deceit and deception” by federal authorities. While her home was being searched, Morgan allegedly asked federal agents for permission to retrieve her cat from under the bed and, while doing so, tried to lock her phone.
Morgan and Lichtenstein reportedly traveled to Ukraine in 2019 to attain false identities and create fake passports, and have “established financial accounts” in Ukraine and Russia.
She was a regular contributor to Forbes. The day before the Bitfinex hack, she posted a picture next to Lichtenstein with a caption saying she will “always love getting into trouble w/ this crazy guy.”
Bitfinex announced it had been hacked on August 2, 2016. https://t.co/Y7sJ7ZUrKB On Aug. 1, 2016, Heather Morgan posted a photo with Ilya Lichtenstein and the caption: "I will always love getting into trouble w/ this crazy guy." pic.twitter.com/EjVmRtiYof
— Jack Morse (@jmorse_) February 9, 2022Commenting on Morgan and Lichtenstein’s arrest, Dymtro Volkov, head of global innovations at crypto exchange CEX.io, told Cointelegraph that with the proper technical resources, “it is possible to track the flow of most funds moving on a blockchain network” and that “hiding a huge amount of stolen funds is actually quite a complex task.”
Notably, the pair isn’t being charged with the hack but laundering the stolen funds. The sordid details of the story have even caught the interest of filmmakers. Hulu is producing a true-crime limited series about Morgan’s life, and Netflix has ordered a docuseries on the story.
Bankrupt Celsius Network’s CEL token surges 4,000%
Shortly after cryptocurrency lending platform Celsius Network filed for bankruptcy, the price of its native utility token, CEL (CEL), jumped by more than 4,100%. In only two months, the price climbed from a bottom of $0.093 to a near $4 high.
The surge came amid rumors that Ripple, a company engaged in a legal battle with the United States Securities and Exchange Commission, could take over Celsius’ assets. Other rumors suggested Goldman Sachs planned to acquire Celsius for $2 billion.
FTX is still sucking up CEL liquidity.550k CEL moved from OkeX to FTX 25min ago.#CelShortSqueeze is quietly doing its thing behind the scenes. #celsius #CelsiusNetwork pic.twitter.com/T2l4pbrUfO
— CryptoChris (@Chris52508387) July 17, 2022Traders organized a massive short squeeze. Short squeezes occur when an asset’s price rises suddenly, forcing short sellers to buy back the asset at a higher price to close their positions.
The short squeeze was possible because a freeze on Celsius token transfers significantly reduced the circulating supply of CEL.
At the time of the short squeeze, Cointelegraph reported that FTX had about 5.1 million CEL tokens, amounting to 90% of the total circulating supply on exchanges.
It’s currently believed traders on FTX pulled off the short squeeze, but deleted tweets suggest that the origins of the movement may not be fully understood, and some believe Alameda Research was directly involved. We do know that at least some traders are still trying to get a CEL short squeeze going again, even after the token dropped to $0.50.
Binance’s letter of intent
Binance’s surprising letter of intent to acquire the collapsing FTX exchange is another weird story of 2022. At the time, many in crypto believed FTX was a solvent, well-run company. When Binance announced its intent to liquidate its holdings of FTX Token (FTT) following speculation regarding the solvency of FTX, what was seen as a rivalry between Binance and FTX soon turned into a potential buyout no one was expecting.
As FTX’s solvency was hardly being questioned, CEO Sam Bankman-Fried announced an “agreement on a strategic transaction” with Binance. It was a weird and unexpected revelation because, until that point, Bankman-Fried had dismissed concerns about the solvency of FTX.
This afternoon, FTX asked for our help. There is a significant liquidity crunch. To protect users, we signed a non-binding LOI, intending to fully acquire https://t.co/BGtFlCmLXB and help cover the liquidity crunch. We will be conducting a full DD in the coming days.
— CZ Binance (@cz_binance) November 8, 2022Binance CEO Changpeng Zhao added to those concerns when he tweeted, “This afternoon, FTX asked for our help. There is a significant liquidity crunch. To protect users, we signed a non-binding LOI, intending to fully acquire FTX.com and help cover the liquidity crunch. We will be conducting a full DD in the coming days”.
The deal fell through the next day after Binance conducted its due diligence, with the reasons becoming clear soon after.
European Central Bank spreads FUD
In late November, the European Central Bank (ECB) published a blog post in which it argued that Bitcoin’s recovery from $17,000 to $20,000 was likely an “artificially induced last gasp before the road to irrelevance.”
The ECB said that Bitcoin is “rarely used for legal transactions” and that “real Bitcoin transactions are cumbersome, slow and expensive.” The central bank daringly wrote that Bitcoin has never been used “to any significant extent for real-world legal transactions.”
Related: The most eco-friendly blockchain networks in 2022
According to the ECB, Bitcoin has benefited from “waves of new investors” while not being suitable as an investment. It doesn’t generate cash flow or dividends, nor can it be productively used or “provide social benefits.”
The statement argues that blockchain technology has “created limited value for society” and that the “Bitcoin system is an unprecedented polluter.” It also suggested that cryptocurrency promotion bears a “reputational risk for banks.”
Every point the ECB brought up has been used to attack the cryptocurrency community, and every single point has been rebuffed.
I clicked on this article with an open mind, willing to have my mind changedBut it opens with a provable lieThe vast majority of Bitcoin usage is for legal spending, for-profit speculation, and gambling - not "illegal transactions"It's not 2012 anymore... This is a joke. pic.twitter.com/037aehMyEN
— FatMan (@FatManTerra) November 30, 2022The ECB has recycled several crypto myths that have been used to hold the industry back. The post comes as the ECB accelerates progress on developing a digital euro. One of the post’s authors, Ulrich Bindseil, has authored numerous posts on central bank digital currencies.
Besides the recycled myths, what’s weird is the ECB’s unclear angle, as many don’t consider CBDCs to be competing with cryptocurrencies, which are often seen as a way to exit the shortcomings of fiat currency systems.
Speaking to Cointelegraph, Anton Bukov, co-founder of 1inch Network, said the ECB’s post was good for the cryptocurrency community, as it means the “government came to the second or even third stage of Gandhi’s thought: First they ignore you, then they laugh at you, then they fight you, then you win.”
Central African Republic’s crypto plan
The Central African Republic (CAR) became the second country to adopt Bitcoin as a legal tender earlier this year, allowing around 5 million residents to use the flagship cryptocurrency alongside the country’s fiat currency, the Central African CFA franc.
The move came after Central African Republic President Faustin-Archange Touadéra signed a bill into law establishing a regulatory framework for Bitcoin as legal tender. While the crypto community initially celebrated the move, the weird side of this soon became apparent.
Although the CAR is a mineral-rich nation, its people are among the poorest in the world. It has been devastated by a decade-long civil war, and it is estimated that nine out of 10 residents don’t even have access to the internet. CAR’s decision was accompanied by little to no explanation, with President Touadéra tweeting a simple “more to follow.”
More to follow. Vires in Numeris. #Bitcoin #BTC Unité, Dignité, Travail#RCA #CAR #crypto #Cryptomonnaies
— Faustin-Archange Touadéra (@FA_Touadera) May 21, 2022The tweet was referring to an anouncement about the country’s “visionary” plan to create a “fantastic opportunity for anyone who believes in crypto investing.” That opportunity is the Sango project, which appears to now be an initial coin offering for the country’s CBDC.
The project claims that the country’s treasury will have a dedicated Bitcoin reserve and allow citizens to have a “voice and chance to shape the future” through a governance system. Citizenship can be acquired by locking fixed collateral in Sango. Other benefits include e-residency, land ownership and 0% income tax for digital assets.
While attracting foreign investment is an intelligent move from CAR, a Bitcoin-based initial coin offering from a war-torn country is a weird development. CEX.io’s Volkov told Cointelegraph that cryptocurrencies are “well positioned to help emerging economies fill gaps in the services their domestic financial systems are lacking” and could help connect domestic financial systems to global markets. Volkov added that the move may help the country’s economy:
“Making crypto legal tender, or at least creating a legal framework that defines its usage, allows financial companies to introduce cheap and fast financial services that customers can access even with unreliable access to the internet.”He also said cryptocurrencies can have a “hugely positive effect on countries with developing financial systems looking to participate in the global economy.”
The stories covered in this article make it clear how unpredictable the cryptocurrency space can be during bear and bull markets. If anything, anyone following what’s going on is enjoying a rollercoaster ride they will never forget.