Twitter Vigilantes chase crypto scammers

The main problem with amateur examinations, of course, is that they lack teeth. The Twitter threads or blog posts where crypto-sluggish people reveal their findings are only good for warning potential victims or embarrassing the perpetrators. The hope is that people will care enough about their reputation to make it right again. It happened with Divergence Ventures and previously with the NFT marketplace OpenSea, which in September was at the center of another “insider trading” scandal after a Twitter user accused its product manager of hoarding NFTs of artists that were appearing on OpenSea’s website, thus taking advantage of the rise in hype. The product manager was forced to resign.

But when the shame does not change, there is little one can do. Many of the behaviors that crypto-sleuths reveal take place in a regulatory vacuum. “Insider trading has a very specific meaning – using non-public information when trading the stock market,” said Nick Price, a specialist in cryptocurrency litigation at law firm Osborne Clarke. “These tokens are not stocks and shares. NFTs are not regulated, so it is not insider trading.”

Cases of fraud, such as theft of crypto or manipulation of a smart contract, can be reported to police, Price says. But he says the level of control that comes from the cryptocurrency community, and the quality of the information that it can crowdsource, is “unprecedented.” For example, users of the DeFi protocol Indexed Finance said in October that they had exposed the person who had carried out a $ 16 million robbery on the network – even though negotiations with the hacker to recover the funds ultimately failed. The team is working “to determine which authorities have jurisdiction over the attack,” according to a recent Twitter post.

Blockchain’s open ledger is a great advantage for investigating misdemeanors. It “leaves a much better audit trail than in other sectors,” Price says. “There’s more information out there for people who are willing to do the technical analysis.”

That said, there are risks in relying on anonymous Twitter accounts to monitor a feverish, high-stakes effort online. In May, @WARONRUGS, a Twitter-based watchdog that made a name for itself as a fiery scam hunter, allegedly ran away with nearly $ 500,000 in stolen crypto. Even when one ignores cases of extreme dishonesty, some are concerned that a system based on online calling is just too prone to abuse. Mitchell Amador, founder of Immunefi – a company that mediates “bug bounty” deals between hackers and DeFi developers – is critical of what he calls “crowdsourced panopticon” and points to the Twitter abuse of Harris, the young Divergence Ventures employee who had run the wallet used to orchestrate the airdrop operation. Harris, who is still a college student, was hit by dozens of mocking, mocking and insulting tweets. Divergence Ventures said she was not to blame for the company’s actions, but Harris still deleted her Twitter bio and remained silent on social media.

Gabagool acknowledges that there is an “eerie side” of police work from Twitter. “I think for some people it’s like a kind of ‘cancellation culture’. But that was really not my intention, ”he says. For him, self-regulation is still the best way to preserve Defi’s space for freedom and innovation. If it does not succeed, he fears that “something else will emerge. And I can not guarantee that that alternative will be beneficial to society,” he says.

It may already be too late to avert that scenario. In September, the US Securities and Exchange Commission launched a study by Uniswap Labs, the developer of the DeFi exchange Uniswap. SEC President Gary Gensler has said that some DeFi protocols may eventually be subject to securities rules.

“The question is, are we using an open system that people have created themselves? Or are we using the state’s long arm?” says Amador. “No matter what, we end up with some kind of regulation – there is no doubt about that result. Right now we are still in that adjustment period. ”

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