Twitter vigilantes hunt down crypto crooks


The main problem with amateur surveys is, of course, that they lack bite. Twitter threads or blog posts in which crypto detectives reveal their findings are only useful to warn potential victims or to shame perpetrators. The hope is that people will care enough about their reputation to make amends. This happened with Divergence Ventures, and earlier with the NFT OpenSea marketplace, which in September found itself at the center of yet another ‘insider trading’ scandal after an Twitter user accused his product manager of racking up NFTs by artists who were about to feature on the OpenSea homepage, taking advantage of the spike in the hype. The product manager was forced to resign.

But when shame doesn’t spur change, there’s not much you can do. Many of the behaviors exhibited by crypto-detectives take place in a regulatory vacuum. “Insider trading has a very specific meaning: the use of non-public information in stock market transactions,” said Nick Price, crypto asset litigation specialist at Osborne Clarke law firm. “These tokens are not stocks and shares. NFTs are unregulated, so it is not insider trading.

Cases of fraud, such as crypto theft or tampering with a smart contract, can be reported to the police, according to Price. But he says the level of scrutiny by the cryptocurrency community, and the quality of information it can crowdsource, is “unparalleled.” For example, in October, users of the DeFi Indexed Finance protocol said they unmasked the person who carried out a $ 16 million burglary on the network, although negotiations with the hacker to recover the funds ultimately failed. successful. The team is working “to determine which authorities have jurisdiction over the attack”, according to a recent Twitter post.

The blockchain’s open ledger is a big advantage for investigating mischief. This “leaves a much better audit trail than in other industries,” Price says. “There is more information out there for people who are ready to do technical analysis.”

That said, there are risks in relying on anonymous Twitter accounts to control a feverish, high-stakes online space. In May, @WARONRUGS, a Twitter-based watchdog who made a name for himself as a fiery scam hunter, reportedly escaped with nearly $ 500,000 in stolen crypto. Even excluding cases of extreme dishonesty, there are concerns that a system based on online calls is just too prone to abuse. Mitchell Amador, founder of Immunefi, a company that negotiates “bug bounty” agreements between hackers and DeFi developers, criticizes what he calls “the participatory panopticon” and highlights the abuses on Twitter including Harris, the young Divergence Ventures employee execute the portfolio used to orchestrate the airdrop operation. Harris, who is still a student, has been the target of dozens of mocking, mocking and insulting tweets. Divergence Ventures said she was not to blame for the company’s actions, but Harris deleted her Twitter bio and remained silent on social media anyway.

Gabagool acknowledges that there is a “sinister side” to Twitter policing. “I think for some people it reminds of a kind of ‘cancellation culture.’ But that really wasn’t my intention, ”he says. For him, self-regulation remains the best way to preserve DeFi’s space of freedom and innovation. Otherwise, he fears that “there is something else emerging. And I cannot guarantee that this alternative will be beneficial for the community, ”he said.

It may already be too late to avoid this scenario. In September, the United States Securities and Exchange Commission launched an investigation into Uniswap Labs, the developer of the DeFi Uniswap exchange. SEC Chairman Gary Gensler said some DeFi protocols could potentially be subject to securities regulation.

“The question is, are we using an open system that people themselves have created? Or are we using the long arm of the state? Said Amador. “Either way, we’ll end up with some form of regulation – there’s no doubt about that outcome. Right now, we are still in this period of adjustment.

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