Dragonfly partners talk about recent hot topics: Bybit hacked, presidential encryption, end of meme

The industry's attitude towards celebrity tokens is gradually shifting towards aversion.

Organize&Compile: Deep Tide TechFlow

host: Haseeb Qureshi, Dragonfly Managing Partner Robert Leshner, Superstate CEO and co-founder Tarun Chitra, Robot Ventures Managing Partner Tom Schmidt, Dragonfly General Partner

Podcast source: Unchained Original title: "Crypto Circus Never Ends: Hacks, Grifts, and Kanye's Coin?" Broadcast date: February 24, 2025

Summary of Key Points

The discussion content of this issue includes:

1、 Bybit hacking incident:

Bybit Encountered the largest cryptocurrency hacking incident in history, resulting in a loss of $1.5 billion, suspected to have been carried out by North Korea's Lazarus Group. Hackers exploit vulnerabilities in multi signature technology to quickly transfer funds to the Ethereum network. Bybit CEO Quickly respond, promise to meet user redemption needs, and receive bridging loan support from Binance and Bitget.

2、 Libra scandal:

The Libra Meme, supported by Argentine President Javier Milei, plummeted 95% due to insider trading and market manipulation scandals. Expose the operational tricks behind the issuance of Meme coins, including KOL private equity and robot sniping.

3、 Celebrity Token Controversy:

Kanye West originally planned to launch the YZY token, but it was postponed due to time sensitivity. Celebrity tokens have frequently exploded, such as Dave Portnoy being accused of running away in the Greek and Greek 2 projects and directly selling them, causing heavy losses to investors. The industry's attitude towards celebrity tokens is gradually shifting towards aversion.

4、 The decline of Meme market:

Recently, the Meme market sentiment has been sluggish, and retail investors are gradually realizing the essence of its zero sum game. Haseeb believes that Meme's cycle has ended.

5、 Improvement of supervision environment:

The US SEC announced the withdrawal of its lawsuit against Coinbase and the restructuring of its cryptocurrency division to focus on combating digital fraud. Hester Peirce proposed regulatory policies for industry cooperation, sending a positive signal. CFTC nominates Brian Quintenz as new head, or promotes a more friendly cryptocurrency regulatory framework.

6、 Infrastructure construction and ecological stability

Solana and the Ethereum ecosystem have not been affected by Meme's downturn, with developers focusing on infrastructure and application innovation. The developer conference on Solana indicates that there are still long-term builders in the market.

The largest cryptocurrency hacking incident in history

Haseeb：

Last week, we experienced the largest cryptocurrency hacking incident in history, with Bybit cold wallet being hacked and losing $1.5 billion.

Bybit stated that they were attacked while transferring funds from the cold wallet to the hot wallet. This operation is a routine fund transfer carried out by the exchange to meet the withdrawal needs of users. Although Bybit uses multi signature technology and relies on the multi signature system provided by Ledger, the transaction content displayed on the frontend does not match the actual transaction content seen on the signer's device when signing transactions.

This attack technique is very similar to the previous hacking incidents targeting Rexerx and Radiant Capital, so the industry generally suspects that this incident may be related to Lazarus Group. Lazarus Group It is a hacker organization associated with the North Korean government that has been involved in multiple large-scale cryptocurrency theft incidents, including the Axie Infinity hacking attack several years ago.

Bybit's response measures and industry reactions

Haseeb：

Bybit CEO Ben officially confirmed the hacking incident on Twitter and stated that the company has sufficient balance sheets to cover the losses, fully meeting the redemption needs of all users. He conducted a live broadcast about 30 minutes after announcing the hacking incident, which was the first time he had publicly responded so quickly in a similar situation.

In the live broadcast, he told everyone, "We have no problem at all and can still fulfill all withdrawal requests. Although there is a liquidity crunch, we have obtained a bridging loan, which shows on the chain that the funds come from Binance and Bitget

About 6 hours after the hacking incident, the outflow has stabilized, and the market seems relatively reassured about Bybit's situation. In addition, we have also seen many people come forward to support Bybit, including the heads of CZ and other exchanges. Many people simulate this event with FTX, but the difference is that Bybit was able to fulfill redemption requests this time.

Participation of North Korean hacker organizations and subsequent events

Haseeb：

This incident can be confirmed to be related to North Korea, which also means that we cannot foresee what will happen next. North Korea is unlikely to directly transfer assets to centralized exchanges. These stolen assets are still stored on the Ethereum network and there has been no further transfer action. Obviously, this is because North Korea is aware that these assets are being closely tracked globally, and the scale of this fund is too large to be effectively laundered through privacy protocols such as Tornado Cash.

These assets initially existed in the form of mETH and stETH, which are pledged Ethereum (stETH) and other related assets provided by Lido. However, they quickly converted all of these assets into Ethereum through DeFi platforms. I guess this is because Ethereum is the most liquid asset and also the least likely to be frozen. If you hold certain small currencies, you may face the risk of asset freezing due to governance issues, but this possibility is almost non-existent in Ethereum.

Although this is the largest hacking incident in the history of cryptocurrency calculated in US dollars, no one has proposed solving it through hard forks or other means. From these hacking incidents, we can observe a pattern that when the stolen amount is very large, it becomes even more difficult to escape. Ironically, if you steal $20 million or $30 million, it may be easier to hide; But if you steal a billion dollars, where will this money ultimately go? Who can help you handle it again?

Robert：

I'm also not sure how they handle these huge amounts of hacker gains. I believe there are some online analysts who have been tracking these events for years, but I speculate that they may eventually try to trade these funds for commodities like Russian oil.

Tarun：

I remember Richard Heart was sued by a certain organization as the largest holder of DAI because he obtained a large amount of Ethereum from Pulse Chain, but due to being blacklisted by many exchanges, he exchanged all of these Ethereum for DAI. I want to know if we will see a similar situation this time, which would be a good test to see if attackers will trust decentralized stablecoins.

Haseeb：

I don't think they will transfer all the funds at once. Richard Heart's operation is a slow process, not a one-time completion.

Robert：

This ultimately depends on the hacker's risk tolerance and tolerance for financial fluctuations. Richard Heart exchanged Ethereum because he needed stablecoins to pay for US dollar expenses.

Haseeb：

If I were North Korea, I would consider how to use this money and try to transfer it to places like Russia.

Robert：

They once attempted to bridge some assets to Bitcoin, but now there are not many decentralized ways to switch from Ethereum to Bitcoin.

Haseeb：

If these assets are secured through multi signature security, then if someone discovers that their protocol is being used to handle $1 billion worth of Ethereum, many people may choose to proactively report these funds, believing that they should be confiscated and handed over to law enforcement through governance structures. In this situation, almost no one would support North Korea.

Tarun：

We may see some very crazy on chain operations because they have no other choice. What I find interesting is Thorchain's situation. In the past, many hackers used Thorchain to borrow or bridge to Bitcoin, but now third-party chain validators have withdrawn, making it impractical to transfer large amounts of funds through it. Nowadays, Bitcoin's cross chain bridge technology is more imperfect than ever before, which may put them in a difficult situation.

Robert：

I imagine this as the scene of ancient pirates burying gold nuggets. They buried the gold nugget somewhere, drew a treasure map, and then came back to search for it thirty years later. North Korea may consider these stolen cryptocurrencies as "treasures" and use them again at some point in the future.

Haseeb：

This is an interesting hypothesis. Perhaps they will propose some kind of agreement, such as a 10% reward for the person who returns the assets. But I don't know how to whitewash these stolen assets. As an isolated country, North Korea makes any form of agreement negotiation very difficult, which is a very bad situation for both customers and Bybit. Although I believe Bybit's financial situation is robust enough, it would be a big problem if they are unable to raise enough Ethereum to meet redemption demands.

Many people speculate that Ben mentioned in the live broadcast whether Bybit will fulfill all redemption requests by purchasing Ethereum. At present, they have obtained a bridging loan through Biget and Binance, which is a positive signal in stark contrast to the collapse of FTX. But if we assume that no one is willing to do business with North Korea and there is no possibility of reaching any agreement, then Bybit may indeed need to purchase Ethereum in the market. If that's the case, this could be a positive for Ethereum prices as it would bring about a net purchase demand of approximately $1.5 billion, and with limited market liquidity, prices would naturally rise.

Tom： I noticed that the community has highly praised Ben's communication style. He quickly and directly conveys information to the public through live streaming, which is very rare in the industry. He did not use vague official language, but clearly told everyone, 'We have no problem, we will solve the problem, that's how things are.' This transparency is impressive.

Haseeb：

Such is the case. If we compare this incident to FTX, Bybit's handling of it is exemplary, while FTX's live streaming is completely a farce.

Robert：

The fundamental difference is that, FTX Bybit is a malicious participant engaged in large-scale fraud activities, which is also the reason for their funding shortage, while Bybit is a trustworthy victim who has been attacked by hackers.

Haseeb：

in full agreement. Usually in hacker incidents, the first reaction of victims is to blur the issue and not directly face the problem, allowing information to spread through various channels. Bybit responded quickly within just 30 minutes of the incident, clearly explaining the process and proactively communicating with the client to ensure everyone understood the situation.

This should become the standard practice for every company when facing a hacker attack. Firstly, it is necessary to control the pace of communication. Of course, the scale of this hacking incident is unprecedented, but compared to Bybit's balance sheet, the losses this time are not catastrophic. The current size of the cryptocurrency market far exceeds that of the past, and although this is the largest hacking incident in history, the losses only account for a few percentage points of Bybit's total assets.

Tom：

After the FTX event, Bybit We have launched a reserve proof system, which allows users to instantly check whether their assets are included in the reserve, greatly enhancing transparency. This incident did not involve any fraudulent behavior, so users do not need to worry about significant gaps in their balance sheets.

Haseeb：

I actually hope to find some evidence that this is an internal attack. Because if it is an internal attack, the possibility of recovering assets will be greater. Fortunately, the foundation of the industry is solid enough to withstand this crisis and ensure that the interests of all customers are not affected.

Hayden Davis&Libra Scandal

Haseeb：

Another big news is a coin called Libra. This project has received support from the new president of Argentina, Javier Milei, who is already a controversial figure. This incident is known as the biggest insider trading scandal since the FTX crash. So, what exactly happened to Libra?

Javier Milei publicly promoted the Libra token through a tweet. All of this happened very suddenly, with almost no warning. Subsequently, the market value of this Meme coin quickly soared to $4 billion, but plummeted by 95% in a short period of time. During the crash, Milei deleted his tweets. At the same time, there are reports that insiders took advantage of the market frenzy to sell tokens, estimating that they profited nearly $200 million through this wave of operations. As the event escalated, more chaotic details gradually surfaced.

The controversy surrounding this project is confusing. What is Milei's main position? What is the view of the Argentine government on this? Later on, we learned that, Milei I did not directly profit from this Meme coin, but rather from a private Argentine company launching this project, claiming it was for the benefit of the Argentine people or community, but the entire process was very opaque.

The core figure of this incident is a white male named Hayden Davis. After returning to Argentina, he became a businessman specializing in Meme. He is more like a 'coordinator' than a project initiator or direct promoter. In an interview, he mentioned that launching a Meme involves multiple roles, and his main role is to bring all parties together. He emphasized that he does not directly operate funds or own these assets.

In the cryptocurrency community of Argentina, Hayden Davis is considered an insider. He boasted in leaked private messages that he had paid funds to Karina Milei, Milei's sister. Karina is a prominent figure in Argentine politics. Hayden Even mentioning his influence on Javier Milei in a tweet, claiming, "I control that guy. If I give money to his sister, he will sign anything I say

Hayden controls the withdrawal of over $100 million from internal wallets. Afterwards, he underwent a series of interviews in an attempt to explain the entire operation process. In a Twitter livestream, he directly admitted that he had "sniped" during the Libra collapse, manipulating the market through robot trading. His statement is: "I don't know the true ownership of this money. I think it may belong to Argentina, or the KIP Protocol company that launched this project. I don't know whose the money really belongs to, nor do I want it. Tell me how to handle this money, and if you don't tell me, I will throw it back into the market

In the interview, he also explained in detail the operating mechanism of Meme, revealing many insider information that many people had never known before. He mentioned that most large Memes sell most of their tokens to KOLs and other institutional investors at prices below market value through private transactions before their launch. For example, like Melania Libra， Even TRUMP claims that these projects were privately funded up to $500 million during an internal meeting in Washington D.C.

The information of these private equity transactions is usually disseminated among insiders, but it can also be leaked to others who have not participated in the transactions. These people use this information to profit through sniping when the token is officially launched.

Here we need to explain the meaning of 'sniper'. Sniper refers to the ability of some robots to quickly buy tokens before ordinary investors react, thereby pushing up prices when the tokens are first launched. This is because they knew in advance that the token was about to go online. When retail investors start pouring in to buy, the reaction speed of humans is much slower than that of machines, and these snipers will take the opportunity to sell tokens at high prices and profit from it. Due to the fact that Meme coins are usually issued at a low market value without auction or initial price clearing mechanisms, this operation has become very common.

According to Hayden Davis, 'If you don't target your own token, how can you make money? Do you think there are other ways?' He believes that all teams involved in the token supply chain believe that the only way to profit is to become internal controllers. These teams hope that Meme's popularity can last for one to two years, but the reality is that almost all Memes have a lifespan of no more than a few days. In these circles, there is a widespread cynical attitude that the entire cryptocurrency industry is nothing more than a zero sum game. To avoid external attacks on individual investors, they believe the best approach is for the team to first target the tokens themselves. Through this method, they can use the profits obtained from sniping to protect the stability of the token and repurchase it after completing the sniping.

On the day of the incident, the Argentine stock market fell by over 5%. At present, the opposition party has filed formal charges against Javier Milei. This incident is known as the 'crypto gate' and is a major political and financial scandal. I think this has caused serious damage to Argentina's reputation both internationally and domestically.

Robert：

I have watched clips of Hayden's interview, and they are simply outrageous. Each clip is even more absurd than the previous one, and he even publicly stated on the show that 'crime is good'.

Haseeb：

He is a typical 'crypto kid' with no moral sense at all.

Robert：

Do you remember the comparison between rationality and madness that we discussed about nine months ago? Hayden may be one of the craziest figures in the history of the cryptocurrency industry.

Tom：

I agree, I think Hayden appears very ignorant when speaking. Last week I went skiing and met some Argentinians who were very excited about it. Because in their view, this may be a situation similar to TRUMP. They see this as a huge opportunity, and when they see Milei promoting this project, they may think 'Oh, this is our TRUMP moment', but it turns out to be a huge scandal. Actually, it's a bit like if you go to a casino and lose money, who can be blamed? The rule of the casino is to take responsibility for winning or losing.

Haseeb：

This statement is too vivid. Such a ridiculous meme can trigger such a huge chain reaction, even impacting the entire country. The impact of this scandal has also affected the entire cryptocurrency industry. Later, it was discovered that the team behind Kelsier Ventures was not only responsible for the Libra token, but also for Melania. They also conducted sniping operations when Melania was launched, which was actually a routine they repeatedly used.

The latest developments in the Meteora and Solana ecosystems

Haseeb：

One interesting aspect of this story is that it also affects some people in the Solana ecosystem. Meteora is the launch platform for TRUMP and Melania. Recently, Meteora has attracted attention due to some investigations, and there seems to be controversy among some people related to the platform.

I need to explain that Meteora is a competing product of Jupiter. Jupiter It is a large DeFi aggregator on Solana, while Meteora focuses on providing launch services for new tokens. Meteora The chief developer Ben resigned after being investigated for possible involvement in certain violations, such as insider trading. However, I am not sure if these accusations are true or if they are just doubts raised by someone.

Robert： I saw on Twitter that someone dug up some of Ben's history, saying he had violated securities laws multiple times in the past. But is it really the case?

Tarun：

I am also not sure if these accusations are true. Ben is one of the co founders of Meteora, which was originally part of Jupiter. I actually knew Ben before the rise of the cryptocurrency industry, when he was running a startup in the insurance industry. I interviewed him in 2012. He did not venture into the field of encryption before 2021. The Meteora platform has been in existence for some time, but has yet to find a suitable market positioning. Later, with the collapse of FTX, Jupiter began to rapidly rise as it became the primary platform for trading Solana tokens. At that time, apart from FTX, most other exchanges did not support trading SPL tokens. And Meteora gradually developed into a platform focused on early project launches.

Different from Pump Fun, Meteora platform allows project issuers to manage and control their funding pool and liquidity to a certain extent. This design does make sniping operations easier to some extent. However, I think Ben's situation is more like the founder being kicked out by the board of directors, rather than an ordinary developer being fired. If you view this as a case of corporate governance, the expulsion of the founder typically involves more complex power struggles.

The Decline Trend of Meme

Haseeb：

I think this story has cast a shadow over the entire Meme. After the Libra incident, the launch of TRUMP and Melania gave people a bad impression of Meme coin. After these events, people seem to realize that, Hayden The essence of Meme promoters revealed in the interview and how these large-scale Meme coin issued games are detrimental to retail investors. This change has changed the atmosphere in the cryptocurrency field, raising doubts about the operation of Meme coin, and making it less certain whether retail investors can continue to participate in this so-called 'casino'.

Robert： People used to think that Meme games could be won, but now that the truth has been revealed, everyone sees the ugly truth behind it and realizes that this is a completely controlled game, and they are victims who cannot win at all.

Haseeb： In absolute numbers, the trading volume of Pump.Fun is still strong, but overall, market volatility has decreased. The current sentiment has completely shifted towards the aversion towards Meme. Previously, people would say that tech coins and wind coins were actually Meme, but now this view seems to have lost its effectiveness, and people are beginning to realize the need to rebuild real projects.

Tarun：

I think this indicates that Meme with less control seems to be able to survive, while Meme coins that require a lot of liquidity management face more challenges. Therefore, we see Pump Fun's trading volume has not significantly decreased.

Robert：

I think this is a turning point, Meme Coin has attracted a large amount of funds, but now the attractiveness of Meme coin has declined, and these funds will flow into other vertical markets in the cryptocurrency field.

Tom：

I agree with Tarun's viewpoint. People like fair and transparent games, and when they feel they can no longer profit from them, the market naturally collapses. Just like the previous ICO and NFT craze, if people no longer feel excited and think there is no opportunity, the entire market will be affected.

Haseeb：

Indeed, the differences between Pump. Fun and some managed releases are quite interesting. Libra It can be said to be a celebrity coin, although it is not formally so, in fact, its relationship with Milei makes it a celebrity coin.

Controversy and Hypocrisy in Celebrity Token Projects

Haseeb：

I think it is certain that the craze for celebrity tokens has passed, or rather rapidly cooled down. Recently, I heard that Kanye West seems to be planning to launch a Meme, which is a celebrity token, but he seems to realize that now is not a good time to launch it.

I heard that he originally planned to launch on Monday, but later postponed it to Friday. It is said that the team is discussing whether it is too close to the timing of the Milei incident, and obviously they are adjusting to some extent based on the news cycle. What makes me laugh is that this new token is called YZY Token.

Even more outrageous is that Yeezy's CFO accidentally leaked this plan to CoinDesk. He sent an email using Yeezy's official email, detailing the token's plan and requesting confidentiality from CoinDesk, but CoinDesk refused the request and directly published a report.

Regarding token economics, 70% of the tokens will be held by Kanye himself, 10% for liquidity, and 20% for investors. These 20% have now been sold to investors.

Robert：

Just a few days ago, he tweeted that Celebrity Coin was an exploitation of the community and had no value. Within a few days, it was rumored that he was going to issue his own token, which was extremely hypocritical.

Haseeb：

As an industry, we must unite and not support this token. As long as no one buys, we can completely end this phenomenon.

Robert：

The problem is that once the token is released, it will be snapped up and then sold by someone, ultimately only a few people will profit.

Haseeb：

We have seen similar cases, such as Dave Portnoy launching a token called Greed, holding 35% of the supply himself, and then selling it all at once, causing the price to plummet.

Later, he released Greed 2. After the Greek crash, the market value of this new token reached $20 million at one point, but soon collapsed again. He sold it again and stated on Twitter Spaces that this process was a lesson for followers, Meme It's just pure exploitation, and they criticize those who trade as lazy, only wanting to make quick money and unwilling to find real jobs.

Tarun： This is actually financial dominance, even more evident than what we discussed before.

Haseeb：

I have recently expressed a similar opinion on Twitter, stating that I believe Meme's cycle has come to an end. I once mentioned on the show that this is like a casino, where each slot machine is owned by different people, and this model is simply unsustainable. Each slot machine owner will do their best to extract profits from players.

Regulatory Dynamics and the Future of the Cryptocurrency Industry

Haseeb：

The recent negative news has made me feel very tired. People have grown tired of those Memes that have no practical value and are now turning their attention to more promising projects, which may be one of the reasons for the rebound in the cryptocurrency market last week. However, today's market has experienced a decline, which has also had a certain impact on cryptocurrencies. Nevertheless, good news has come from the regulatory side.

We have been saying that this year could be a year of reversal in the cryptocurrency regulatory environment, and now there has finally been substantial progress. The biggest news this morning is that the US Securities and Exchange Commission (SEC) is withdrawing its lawsuit against Coinbase. This is undoubtedly a significant positive for the entire industry, indicating that the changes we are anticipating are happening.

SEC The reason for the previous lawsuit against Coinbase was to accuse it of being an unregistered securities broker and exchange, suspected of facilitating the trading of unregistered securities. However, now these charges are being withdrawn, and we may also see other similar cases filed by the SEC being withdrawn one after another. Previously, people speculated that the case may be resolved through narrowing down the scope or reaching a settlement, but completely withdrawing the case is clearly a more positive signal. This indicates that the SEC is beginning to support the development of benign participants and is willing to collaborate with them to create a healthy digital asset ecosystem.

In addition, we have also seen Brian Quintenz nominated as the new head of the US Commodity Futures Trading Commission (CFTC). The CFTC may become the primary regulatory body for cryptocurrencies in the future. Quintenz Formerly the head of crypto policy at a16z Crypto, he has been committed to opposing excessive administrative regulation for the past four years, which is undoubtedly an exciting day and also foreshadows that the crypto industry may usher in more positive changes in the future.

Robert：

first, SEC Reorganized the encryption department originally targeting benign participants and transformed it into a team dedicated to combating digital fraud. This means that the SEC will focus more on cracking down on truly illegal behavior, rather than continuing to relentlessly pursue companies that comply with the rules. This is the change that the industry has been anticipating for the past four years.

Secondly, SEC Commissioner Hester Peirce issued a statement detailing the changes they hope to promote. I hope to collaborate with the policy team in the cryptocurrency industry to promote the healthy development of the entire industry. The document covers multiple areas such as broker dealer rules, custody rules, trading rules, and safe harbor rules. They expressed their hope to engage in dialogue with the industry and jointly formulate effective policies. This constructive attitude contrasts sharply with the rigid stance of a few weeks ago.

Haseeb：

I hope that in this context, we can see more favorable policies introduced to prevent benign participants like Coinbase from being subjected to unnecessary attacks. Meanwhile, regulatory agencies can also allocate more resources to combat truly illegal activities. The reason why we have fallen into the quagmire of Meme in the past is largely due to the fact that under the leadership of Gary Gensler, regulatory agencies have devoted all their time and resources to cracking down on the largest market participants through case law, while neglecting the regulation of illegal behavior in public.

Tarun：

I attended a Solana developer conference this week, and participants hardly talked about Meme. This indicates that there are still some people in the ecosystem who focus on infrastructure and application development and are not too concerned about short-term market fluctuations. I believe that any successful ecosystem requires such builders to exist.

Haseeb：

At present, the sentiment in the infrastructure sector is relatively stable. We have not seen any large-scale capital outflows from Solana, nor have we found significant differences in trading volume on DEX between Ethereum and Solana. The volatility performance of the two is relatively consistent.

Tom：

I think this situation may be like when the last Meme was launched, and no one is willing to pay anymore. This sluggish market sentiment may deter others. But if Yeezy is really the last celebrity coin, I can accept it.

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