TokenReporter: What's a stablecoin?

Hands on with the first bitcoin phone

We just posted a great video with the CEO of Pundi whose latest device, the “bitcoin phone” is an interesting effort at making real blockchain hardware. Check it out here.

What’s a Stablecoin?

Financial literacy is a hell of a thing. It isn’t really taught in schools, other than the odd project some teachers do on stock trades. No one really teaches personal finance practices, or teaches how banks work, beyond a week or so in social studies watching some scratched old filmstrip about how a credit union differs from a bank.

On top of that, there are whole other vagaries of the way things have been done that are clear as mud to most folks. Settlement? SWIFT? And most of these systems have grown up organically, as solutions to specific problems, tangled spiderwebs layered as badly as the power grid (which is its own unplanned nightmare.)

So as crypto and blockchains come into being, they’re at a unique opportunity to replace the old cruft with new systems that are potentially more sanely designed. At the same time, there’s a lot of people who plan nothing more than replacing the old way with a new way that slots right in.

We see it with the notion of “stablecoins”. A stablecoin is a currency pegged to another stable asset, like the US dollar. The idea is, by making the coin pegged to something non-volatile, the currency gains stability, and reduces financial risk. As you might expect, this causes a lot of frustration among people who worry about whether or not things are decentralized enough. A stablecoin based on a government-issued currency is centralized. A stablecoin based on another cryptocurrency would probably be decentralized, presuming that other currency was sufficiently decentralized.

All of this is relevant because the bank JP Morgan, whose head Jamie Dimon previously spoke regularly about how bad bitcoin is, had announced their own stablecoin recently. Historically, it makes sense that they might, they had published internal reports on long-term strategy for cryptocurrencies. Much of the document is educational, showing how the bank thinks about things like anonymity, or the utility of cryptocurrencies for policy credibility or providing liquidity in crises. (Imagine our surprise, they weren’t fans.)

JP Morgan’s stablecoin appears to be positioned to increase settlement efficiency for cross-border transactions, securities transactions, and could be used by large international corporations to replace the funds businesses hold around the world in subsidiaries. What remains to be seen is whether or not it actually gets used for any of these functions.

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Want to reach 5,000+ crypto fanatics? Email joanna@cabalpartners.com


News

Facebook wants a cryptocurrency

Facebook is “hoping to succeed where Bitcoin failed” is the line quoted in a report by the NYT. The idea is, with Facebook merging WhatsApp, FB and instagram, they could use their own coin as a payment system across all three platforms. It’s said to be a stablecoin tied to three different nation’s currencies. They aren’t the only messaging platform working on such a thing, Telegram had their ICO rounds and is working on TON, the Telegram Open Network blockchain.

Moscow to use Blockchain-based voting

How do you guard an election from meddling seems to be a question on the minds of a lot of Americans. In Moscow, they have an answer: Tass is reporting that a bill has been submitted to protect local elections using blockchain technology. The deputy of ruling party United Russia, Dmitry Vyatkin, emphasized that the technology would keep storage of the personal data of voters and the results of voting separate. “It will be impossible to connect them. This is exactly how blockchain technology works.” He insists that it would prevent electoral fraud.

Only 2 businesses in Ohio have used crypto to pay taxes

When we last talked about this, Ohio allowed taxpayers to pay through ohiocrypto.com , but only businesses are allowed to pay this way, not individuals. Robert Sprague answered questions about how it was working at a forum held by the Ohio State Associated Press, and said that only two tax payments have been received through the platform. He also stated that “We’re reviewing how [the program] might be either curtailed or might be expanded, and what our counter-party risk is with that vendor.”

TokenReporter: What's an STO?

This week we’re going to start digging out from under the bear market and talk about the next big thing in the crypto space: the STO.

Want the latest in crypto? Visit my new site, The Block.


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Typewriter.Plus offers white paper editing, website proofreading, and presentation management for startups. Our rates are low and our experts have worked at the New York Times, Gizmodo, and other amazing tech sites. Upload your document today or try our inexpensive Startup Pitch Pack.

Protecting over 1 million Crypto traders, investors and enthusiasts from fraud, MetaCert is the leader in crypto cyber security with easy-to-install anti-phishing tools. Try MetaCert for free.

HypeHop.com is an experimental video site that pays you cryptocurrency for watching videos. It’s no-strings, and simple.

  1. Pick a video that interests you.

  2. Enter your BTC address.

  3. Keep your eyes on the screen and enable your webcam. Watch. That’s it.

Want to reach 5,000+ crypto fanatics? Email joanna@cabalpartners.com


Over the past few years folks trying to get projects funded via tokens walked one of two paths. In some cases, they attempted to create so-called utility tokens, tokens that had no monetary value outside of a closed system. These tokens, designed to skirt SEC regulations regarding securities, were a close but no cigar.

Other companies tried to create security tokens, essentially pieces of equity that, in theory, promised a price increase. Sometimes token floggers would launch one type of token and then release another or they’d tell the world - in a very wink wink way - that they were selling utility tokens but they were more than likely to go up in value.

ICOs, historically, offered nothing. They offered no voting rights, no rights of control, and they were not connected to the success of a business. The primary goal for ICO investors was the dead cat bounce - the moment when the ICO price doubled just before the initial investors pulled out.

A Security Token Offering is different. These are actual securities and they are backed by assets, profits, or revenue. This means a company is assuming that it will exist past the heady early days of ICO success.

STO tokens are also required to be compliant with KYC/AML requirements as well as securities law. They are, to a degree, just like standard stock certificates but digitized to a degree unfathomable to current equities traders.

Further, there are a number of built-in standards that ensure only certain people are able to trade them. While this might seem a bit heavy-handed, the goal is to reduce securities crime and ensure that the STO stays legal.

STOs are, in short, a quick way to go “public.” In a very real sense the STO is the next stage of IPO creation and should definitely be on your radar this year. While the technology isn’t quite mainstream, the ability to buy and sell liquid STO tokens will change the game for many startups.

We’ll be covering these concepts more over the next few weeks and hopefully bring you some solid companies doing solid work in the space.

Best,

JB

TokenReporter: Blockchain as file storage

This is one where I started thinking the other day about the blockchain startups that have attempted to be Dropbox replacements. Just as I was thinking about that, I started to see others who were talking about using the Bitcoin blockchain for it, and realized that we’d had recent examples in Bitcoin SV that show what happens when you do. It was very much a moment for embarrassment and head-shaking, almost on par with this one we wrote about last year.


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These videos, hosted on HypeHop, can earn you 50 cents per view. Please head over and check them out!

GoBambino - The Simplest Way to Plan Kids' Activities

CoinSwitch - Crazy Easy Exchange Access

IP Exchange - IP addresses for hire

Sponsors

Typewriter.Plus offers white paper editing, website proofreading, and presentation management for startups. Our rates are low and our experts have worked at the New York Times, Gizmodo, and other amazing tech sites. Upload your document today or try our inexpensive Startup Pitch Pack.

MetaCert - After eradicating phishing on Slack in 2017 for the crypto world, MetaCert is now protecting over 1 million Crypto enthusiasts from phishing scams worldwide. Install their new email security service for iPhone.

HypeHop.com is an experimental video site that pays you cryptocurrency for watching videos. It’s no-strings, and simple.

  1. Pick a video that interests you.

  2. Enter your BTC address.

  3. Keep your eyes on the screen and enable your webcam. Watch. That’s it.

Want to reach 5,000+ crypto fanatics? Email joanna@cabalpartners.com


Christ, what assholes

We've talked in the past about assholes using scantily clad women to market their shitty ICOs to wide-eyed marks who hear a too-good-to-be-true story that perfectly fills the empty hole where fulfillment and quiet, inner confidence ought to be.

And, we regularly hear the trope that cryptocurrency is really only necessary for illegal activity. That the only reason you'd want digital currency based on an immutable ledger is for nefarious acts – never mind that an immutable ledger is perhaps one of the stupidest tools to use in the commission of a crime, because it's there for all time as evidence, even if techniques like hierarchical keys and encryption keep work to keep identifying information private.

But this doesn't stop some trolls from doing abhorrent things anyway, in part to test the definition of 'immutable' and 'censorship-resistant', and part because, I imagine, they're just bad examples of human beings.

In the past, the Bitcoin blockchain has had links to kiddie exploitation added to it through OP_RETURN transactions. This was identified as early as 2013.

Recently, Bitcoin Satoshi's Vision (Bitcoin SV) increased the size of OP_RETURN transaction data limits from original Bitcoin's 80 bytes to 100KB. Money Button, a digital payments button for websites, wants to make it easy to pay with crypto because it's instant, it's almost free, and transactions can't be reversed or blocked. They supported the 100KB limit increase as recently as January 26, 2019.

OK, so it’s a file system

By January 31, criminals "posted illegal content on the blockchain using Money Button". Just days after the transaction limit increased. Life comes at you fast.

One of the criticisms of cryptocurrencies in general is that it gives people the opportunity to watch libertarians discover in real-time why we have the regulations around finance that we do. Not that regulations are wonderful, or perfect, but that they all existed because of some bad result that took place without them, that the unregulated (Regulated by math! Smart Contracts!) space gets to re-discover all over again.

So far, this sounds like an argument for keeping transaction data limits small. But that isn't the history of computing: the history of computing is one where prices come down over time, processing power grows over time, and data storage capacity increases over time.

Currently, we have a lot of valuable resources stored in relatively few places, and places that are in someone else's control: half the Internet runs on AWS. Huge amounts of code lives in Microsoft's Github. Other people have stored their docs in Google Docs or Dropbox.

What if instead of those, data – files, computer code, dead drops – were all stored immutably? Perhaps it doesn't make sense for everything, but it makes sense for some. Take computer code for example. Lots of computer programming references pre-existing code. Those preexisting pieces of code reference frameworks. In turn it goes, until there are some primitives.

It's already beginning. Pagereturn.com is a Bitcoin file upload site that proclaims, "Once it's on the blockchain, it's there forever.." Pagereturn had this conversation posted on the blockchain:

And this idea isn't completely unique. @coinyeezy talked about the idea of Bitcoin-as-the-computer on February 4, 2019. We used to talk about the idea of a network computer, as a terminal for servers on an intranet. Then, we started to talk about the idea of the Internet as a computer, using local machines to solve problems like SETI or Folding@home. Now, we're thinking of the concept that the blockchain becomes storage for applications, and code repository. One of my thoughts is, the hypothetical miners for appropriate code snippets get replaced with search indices.

Blockchain wasn't conceived of initially as a filesystem. It's clear we're bending it into one. Indexing, and the sorts of uses that can happen when there are no terms of service, no capabilities to erase, are going to come to pass. Expect it to be movie storage at some point, the realization of what the Pirate Bay posted years ago, when they said, “All attempts to attack The Pirate Bay from now on is an attack on everything and nothing. The site that you’re at will still be here, for as long as we want it to.”

The problem with that plan is that the cloud is just a computer you don't own. The cloud is AWS or Google, or mirrors around the world, which are in someone else's hosting, and connected to power and data. With Bitcoin's blockchain, each upload is immutable without getting everyone to agree on rolling back transactions, so movies uploaded to it would remain forever, in every copy of the blockchain. Every application or code snippet written would be available.

It's an interesting idea; what happens when things that were ephemeral, across storage types (floppies in 8-inch, 5.25, 3.5, 1.8), storage longevity (magnetic media, optical bit-rot), and the failing of computers with the ability to access storage, when that all ceases to be a problem? What if the Blockchain really is the modern-day Library at Alexandria? And what if it can't be destroyed this time around?

TokenReporter: Another day, another exit scam

In what is one of the most ironic posts in recent crypto history, we present this from The Block:

Cryptocurrency exchange Liqui shuts down due to lack of liquidity

Liqui, a cryptocurrency exchange that has been operating since 2016, announced today that it is shutting down, citing a lack of liquidity as the primary reason. According to Liqui's announcement, the exchange "is no longer able to provide liquidity for the users left" and "do not see any economic point in providing you [users] with our services." Liqui users will have 30 days to withdraw their assets from the exchange. Liqui's announcement comes after a string of asset delistings, leading some traders to believe the exchange was attempting an exit scam

Read on for more Good, Bad, and Ugly…


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These videos, hosted on HypeHop, can earn you 50 cents per view. Please head over and check them out!

GoBambino - The Simplest Way to Plan Kids' Activities

CoinSwitch - Crazy Easy Exchange Access

IP Exchange - IP addresses for hire

Sponsors

Typewriter.Plus offers white paper editing, website proofreading, and presentation management for startups. Our rates are low and our experts have worked at the New York Times, Gizmodo, and other amazing tech sites. Upload your document today or try our inexpensive Startup Pitch Pack.

MetaCert - After eradicating phishing on Slack in 2017 for the crypto world, MetaCert is now protecting over 1 million Crypto enthusiasts from phishing scams worldwide. Install their new email security service for iPhone.

HypeHop.com is an experimental video site that pays you cryptocurrency for watching videos. It’s no-strings, and simple.

  1. Pick a video that interests you.

  2. Enter your BTC address.

  3. Keep your eyes on the screen and enable your webcam. Watch. That’s it.

Want to reach 5,000+ crypto fanatics? Email joanna@cabalpartners.com


The Good, Bad, and the Ugly

Good

U.S. Congressmen Introduce Two New Crypto Bills

Two Congressmen have introduced new bipartisan legislation to help prevent alleged crypto price manipulation and promote the US as the leader of tech innovation.

In a joint statement, Democrat Rep. Darren Soto of Florida and Republican Rep. Ted Budd of North Carolina expressed their belief in the “profound potential” of blockchain technology as “a driver of economic growth.”

“We must ensure that the United States is at the forefront of protecting consumers and the financial well-being of virtual currency investors, while also promoting an environment of innovation to maximize the potential of these technological advances,” Soto and Budd explain. According to them, these bills will “provide data on how Congress can best mitigate these risks while propelling development that benefits our economy.”

The Virtual Currency Consumer Protection Act of 2018 asks the Commodity Futures Trading Commission (CFTC) to explain how price manipulation occurs and to recommend ways to prevent it. The U.S. Virtual Currency Market and Regulatory Competitiveness Act of 2018 directs the CFTC to take a look at crypto regulations in other countries and to recommend improvements to the U.S. crypto market. Both bills will now go before the House of Representatives.

It’s not the first time the two Reps. worked together. Back in September, a group of 15 congressmen including Budd and Soto, issued a letter addressed to Securities and Exchange Commission (SEC) chairman Jay Clayton, asking him to clarify when initial coin offerings (ICOs) are considered sales of securities.

EU Increasingly Turns Pro-Blockchain: “Mediterranean Seven” and “Blockchain for Europe” Association Launch

When all eyes were turned on the Bitcoin melt-down that reached $3,288 on Friday evening, this week brought some much-needed blockchain cheer to the tech sector in Europe.

Seven southern European Union member states — Malta, France, Italy, Cyprus, Portugal, Spain, and Greece — have signed a declaration calling for the promotion of distributed ledger technology’s (DLT) in the region. The group dubbed the “Mediterranean seven” will work to implement the blockchain in education, transport, mobility, shipping, Land Registry, customers, company registry, and healthcare.

Back in April, twenty-one EU Member States and Norway agreed to sign a similar document. They created the European Blockchain Partnership (EBP) and a European Blockchain Services Infrastructure (EBSI). Both initiatives aim to support the delivery of virtual services across borders and ensure the highest standards of security and privacy. Since then, five more EU Member States have joined in.

This week revealed another pro-blockchain initiative in EU. Four companies — Ripple, EMURGO, Fetch, and NEM — have formed the “Blockchain for Europe” Association, which will act as a lobbying group for European blockchain organizations. Its responsibilities will include raising awareness about the benefits of the DLT and advocating for future “smart” regulation.

Bad

U.S. SEC Issues Cease & Desist Order and $50,000 Penalty against Crypto Assets Fund

The U.S. Securities and Exchange Commission (SEC) has issued a cease and desist order against CoinAlpha Advisors LLC, a Delaware-based digital assets fund. In addition, the company got slapped with a fine of $50,000.

According to the official SEC document, CoinAlpha filed for a “Notice of Exempt Offering of Securities” a month after it was set up, but the request was denied. The company acted as an unregistered securities dealer. It managed to raise over $600,000 from twenty-two investors spread across multiple U.S. states, in exchange for a limited partnership interest in their crypto-focused investment fund.

Ugly

Bitmain, Bitcoin.com, and Kraken Sued for Alleged Manipulation during Bitcoin Cash Hard Fork

The drama surrounding the Bitcoin Cash split isn’t over. A groundbreaking suit spearheaded by United American Corporation (UnitedCorp) is taking a legal aim at Bitmain and its cofounder Jihan Wu; Bitcoin.com and its CEO, Roger Ver; Kraken and its CEO, Jesse Powell.

UnitedCorp believes that the listed parties engaged in unfair methods of competition and actively worked to centralize the Bitcoin Cash network during and after the Nov. 15 hard fork.

“It is clear that’s what supposed to be a democratic process was not; it was hijacked by the ABC camp,” Lawry Trevor-Deutsch, VP of Corporate Affairs at UnitedCorp told MarketWatch.

According to the lawsuit, this “tight-knit network of individuals and organizations” manipulated the market. As a result, they hijacked the Bitcoin Cash network, centralized the market, and violated “all accepted standards, protocols, and the course of conduct associated with Bitcoin since its inception.”

News

U.S. SEC Delays Bitcoin ETF Decisions, Changes Deadline to Late February

The U.S. SEC has postponed its decision to approve or disapprove the VanEck/SolidX Bitcoin exchange-traded fund (ETF). According to the official statement published by the agency, the new deadline has been shifted to February 27, 2019. The SEC believes that a longer period would give it the time needed to review and consider the proposed rule change.

Back in August 2018, the SEC rejected nine ETF proposals from ProShares, Direxion, and GraniteShares. Despite this fact and the postponement, Gabor Gurbacs, the director of Digital Asset Strategy at VanEck, continues to remain “cautiously optimistic.” He told Cheddar:

“It’s fairly certain to us that America wants a Bitcoin ETF. We think that we’ve met all market structure obstacles and requirements on pricing, custody, valuation, and safekeeping, so we are cautiously optimistic.”

G20 Leaders Call for Global Cryptocurrency Taxation System

After their meeting in Buenos Aires, Argentina, the G20 leaders declared commitment to regulate cryptocurrencies. According to El Periodico, the final text of the G20 document calls for an "open and resistant" financial system. It also emphasizes the need to regulate digital assets to combat money laundering and corruption. 

“We will regulate crypto-assets for anti-money laundering and countering the financing of terrorism in line with FATF [Financial Action Task Force] standards and we will consider other responses as needed,” Section 25 of the official declaration reads.

Additionally, the countries pledged to work on monitoring the increasingly digital global economy and to address the impacts it has on the international tax system.

TokenReporter: Some news

Welcome to a new edition of TokenReporter. This week I have some interesting news.

Sponsors

Typewriter.Plus offers white paper editing, website proofreading, and presentation management for startups. Our rates are low and our experts have worked at the New York Times, Gizmodo, and other amazing tech sites. Upload your document today or try our inexpensive Startup Pitch Pack.

MetaCert - After eradicating phishing on Slack in 2017 for the crypto world, MetaCert is now protecting over 1 million Crypto enthusiasts from phishing scams worldwide. Install their new email security service for iPhone.

HypeHop.com is an experimental video site that pays you cryptocurrency for watching videos. It’s no-strings, and simple. 

  1. Pick a video that interests you.

  2. Enter your BTC address.

  3. Keep your eyes on the screen and enable your webcam. Watch. That’s it.

Want to reach 5,000+ crypto fanatics? Email joanna@cabalpartners.com


Ahoy,

Just wanted to let you all know that I am now editor-in-chief of The Block, a new crypto/fintech site produced by Mike Dudas. The Block is a great site with some great reporters including Larry Cermak and Frank Chapparo and if you want to learn more about crypto without suffering through flame wars and hype, this is the place to go.

I took the job for a single simple reason: I want to pull crypto out of the enthusiast gutter. As it stands, too many services and sites offer very little in the way of valuable information. I hope we can remedy that. This shouldn’t change anything about TokenReporter or HypeHop as I still love the operational side of the ecosystem and hope I can keep building.

Best,

JB


Good

2019 Will See More Institutional Players in Crypto, Says PwC Leader

Henri Arslanian, the PricewaterhouseCoopers (PwC) fintech leader for Asia, has predicted that more institutional players will enter the crypto industry in the next year.

In an interview with Bloomberg, Arslanian said that “there’s a lot of exciting things that the crypto ecosystem is looking forward to in 2019.”

“A lot of elements are changing at the global level. If you look at 2018, a number of jurisdictions provided more regulatory clarity than have before. Countries from Hong Kong to Switzerland, Gibraltar to Malta…I expect many of those to take place as well in 2019,” said Arslanian.

Arslanian declared that he expected “many more big banks” to enter the space along with institutions. Undeniably, his predictions fall on fertile ground. Big players are already taking interest in crypto. Despite murmurs of a possible delay, early 2019 is scheduled to see the launch of Bakkt, a Bitcoin futures trading and custody platform created by the Intercontinental Exchange (ICE). Moreover, the world’s second-largest stock exchange, Nasdaq, plans to roll out Bitcoin futures in the first quarter of 2019.

Bad

Crypto Mining Malware Hit 4,000 Percent in 2018, McAfee Reports

Cryptocurrency hackers were busy in 2018, but it wasn’t with launching ransomware attacks. The McAfee Labs Threats Report December 2018 has shown a massive increase in crypto mining malware activity this year. After a temporary slowdown in Q2, the growth of coin miner malware returned to unprecedented levels in the third quarter. In fact, it rose by over 4,000 percent in 2018.

According to the report, crypto-criminals are using new cryptojacking malware and primarily target those who use “routers or IoT devices such as IP cameras or video recorders as crypto miners.” The choice of IoT devices may come as a surprise given their low CPU processing power. Still, the growing volume of the devices and their “lax security” make them easy targets for hackers.

WSJ Reveals Crypto Projects Show Signs of Plagiarism and Fraud

The Wall Street Journal has just revealed the results of a study of hundreds of crypto projects. Their findings are more than a little disturbing.

The WSJ took a close look at white papers of 3,291 projects that announced an initial coin offering (ICO) from ICOBench.com, Tokendata.io, and ICORating.com. The analysis of these documents showed that 16 percent (513) of the documents plagiarized content and promised implausible returns. If this wasn’t enough, they also listed fake team members to boost their credibility. In an attempt to lure investors, more than 2,000 whitepapers contained enticing language, such as “nothing to lose, guaranteed profit, return on investment, highest return, high return, funds profit, no risk, and little risk.”

Ugly

Biotech Billionaire Philip Frost Settles with SEC over Crypto Penny Stock Scam

Dr. Philip Frost, a billionaire and a CEO of Opko Health Inc., has just agreed to a proposed settlement with the Securities and Exchange Commission (SEC).

Back in September, the SEC charged a group of 10 individuals and 10 associated entities for running classic pump-and-dump schemes that defrauded investors and generated over $27 million from unlawful stock sales. Frost, Opko Health, and the Frost Gamma Investments Trust were accused of “violating antifraud, beneficial ownership disclosure, and registration provisions of the federal securities laws.” 

Without actually admitting or denying the allegations, Opko agreed to an injunction from certain violations of the SEC Act of 1934 and a $100,000 penalty. The company also promised to perform certain undertakings related to the Exchange Act. Moreover, Frost will need to pay $5.5 million to the SEC and is permanently barred from participating in offerings of penny stocks, with certain exceptions.

News

Bithumb Acquitted of Charges in $355,000 Hacking Lawsuit

South Korean court has just set an arguably dangerous precedent, ruling in favor of a crypto exchange Bithumb over an investor in a lawsuit filed by the latter.

Ahn Park had sued the exchange for his loss of $355,000 in an alleged hack on Nov. 20, 2017. In the suit, Park faulted Bithumb’s negligence and inadequate security safeguards for the theft. He claimed the exchange failed to protect his assets and that Bithumb’s support team did not fulfill its obligations as a “financial services” firm.

In his ruling, the judge stated that due to the volatile nature of cryptocurrencies, it “is not reasonable to apply [Korea’s] Electronic Financial Transactions Act to a defendant who brokers virtual currency transactions without the permission of [South Korean regulator] the Financial Services Commission.” Also, he added, “We cannot enforce a high level of security like a bank.”

The ruling must have come as a relief for the exchange which otherwise could have faced an onslaught of similar lawsuits from other investors. It’s worth noting that recently Bithumb had gone through a major hack that resulted in a theft of tokens worth $30 million. Although the company recovered the tokens worth $13 million with the help from industry peers, a startling $17 million is still missing.

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