Twitter Vigilantes Look for Crypto Scammers


The main problem with amateur investigations is, of course, that they lack teeth. Twitter threads or blog posts where crypto-sleuths reveal their know-how are only good for warning potential victims or embarrassing perpetrators. The hope is that people will pay enough attention to their reputations to get paid. That happened at Divergence Ventures, and earlier in the NFT market at OpenSea, which in September found itself at the center of another “insider trading” scandal following a Twitter users accused its head of the product of hiding NFTs from artists about to be featured on the OpenSea homepage, thus profiting from the rise in hype. The product chief was forced to resign.

But if the embarrassment doesn’t change immediately, little can be done. Many of the traits exposed by crypto-sleuths occur in a regulatory vacuum. “Insider trading has a very specific meaning — using non-public information when trading the stock market,” says Nick Price, a crypto-asset dispute specialist at law firm Osborne Clarke. “These tokens are not stocks and shares. NFTs are not regulated, so they are not insider trading.

Cases of fraud, such as crypto theft or manipulation of a smart contract, can be reported to police, Price said. But he says the level of scrutiny that comes from the cryptocurrency community, and the quality of information that can be crowdsourced from it, “is unprecedented.” For example, in October users of the DeFi protocol Indexed Finance SAYS they uncovered the mask of the man who committed $ 16 million in network theft — although the hacker’s negotiations to recover the funds ultimately failed. The team is working “to determine which authorities have jurisdiction to attack,” according to a recent Twitter post.

The open ledger in the blockchain is a huge advantage in investigating damage. This “leaves a much better audit trail than other sectors,” Price said. “There’s a lot of information out there for people who are willing to do technical analysis.”

As such, there are risks of relying on anonymous Twitter accounts to control a feverish, high -stakes online space. In May, @WARONRUGS, a Twitter-based watchdog who made a name as a blazing scam-hunter, allegedly fled with nearly $ 500,000 in stolen crypto. Despite discounting the chances of severe dishonesty, some are concerned that a system based on online call-outs is too easy to abuse. Mitchell Amador, founder of Immunefi — a company that brokers “bug bounty” deals between hackers and DeFi developers — was critical of what he called a “crowdsourced panopticon” and pointed to the Twitter abuse inflicted on Harris , the young Divergence Ventures employee with the running wallet used to orchestrate the airdrop operation. Harris, who is still a college student, has been the target of numerous taunts, ridicule, and insulting tweets. Divergence Ventures said he was not to blame for the company’s actions, but Harris still deleted his bio on Twitter and kept quiet on social media.

Gabagool acknowledged that there is a “harmful side” to Twitter policing. “I think, for some people, it’s reminiscent of a kind of‘ cancel culture. ‘ But that is not really my intention, “he said. For him, self-regulation is still the best route to preserve the space of freedom and innovation in DeFi. In the absence of that, he fears that there will be something else will arise. And I cannot guarantee that the alternative will be beneficial for the community, ”he said.

It may be too late to prevent that scenario. In September, the U.S. Securities and Exchange Commission launched an investigation at Uniswap Labs, the developer of the DeFi exchange Uniswap. SEC chair Gary Gensler said some DeFi protocols will eventually be possible under securities regulations.

“The question is, are we using an open system that people have created themselves? Or are we using the long arm of the state?” Amador said. “Either way, we have some form of regulations – there’s no doubt about that outcome. For now, we are still in that adjustment period. ”


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