FBI's crypto sting

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Trump’s crypto project, World Liberty Financial, has submitted a governance proposal to Aave, aiming to build on the DeFi platform and share fees with AaveDAO. The plan includes launching on Ethereum, supporting stablecoins and major tokens like Ether and Wrapped Bitcoin.

TL;DR

FBI's crypto sting: FBI's fake token busts a pump-and-dump scheme, leading to 18 arrests.

VCs bet on prediction markets: Blockchain-based prediction markets are back, but regulation is still a hurdle.

FBI's crypto sting: How a fake token busted fraudsters

In a creative sting, the FBI launched its own cryptocurrency, NexFundAI, to bust a massive pump-and-dump scheme. The operation, dubbed “Operation Token Mirrors,” led to charges against 18 individuals and companies for manipulating crypto markets.

Why it matters: This marks a new level of sophistication in law enforcement’s approach to tackling crypto crime, exposing how easily markets can be manipulated in this space.

What happened: The FBI’s fake token, NexFundAI, traded for just one day, generating $4,600 in artificial volume, uncovering fraudulent tactics involving bots and algorithms. The sting led to arrests of key figures from companies like Saitama, which once boasted a $7.5 billion market cap while secretly profiting from market manipulation.

The bigger picture: As crypto fraud grows, authorities are stepping up with innovative methods to track and expose scammers, signaling a new era of crypto enforcement.

What’s next: Expect more undercover operations as law enforcement catches up to the rapid growth and fraud in cryptocurrency markets.

VCs are betting big on prediction markets again

Why blockchain has venture capitalists revisiting this once-failed idea.

At the end of the last decade, blockchain-based prediction markets seemed like a revolutionary idea. But clunky platforms and a lack of users caused many to flop. Now, VCs are giving prediction markets a second look, fueled by a more mature digital infrastructure.

Why it matters: Platforms like Polymarket have gained traction, attracting over 100,000 users and $1.5 billion in wagers, mostly around the 2024 U.S. presidential election. This success has venture capitalists excited, despite the platform generating little revenue and being unavailable in the U.S.

What they’re saying: “Blockchain is easier and cheaper to use now,” said Joey Krug, a partner at Founders Fund. The use of stablecoins like USD Coin allows platforms like Polymarket to scale globally while avoiding issues like fraudulent credit card chargebacks.

The competition: Other prediction markets, like Limitless and Speculate, are emerging, with backing from Coinbase Ventures. Even Coinbase is exploring whether to offer its own prediction markets, depending on demand.

Regulatory challenges: Despite the enthusiasm, platforms like Polymarket face steep regulatory hurdles. Kalshi, a rival startup not currently using blockchain, recently won a court battle to legally offer election bets in the U.S., setting a precedent for how prediction markets could overcome regulatory constraints.

The bottom line: With VCs pouring funds into the space, blockchain-based prediction markets might finally live up to their early hype—if they can navigate the regulatory minefield and keep users engaged post-election.

News ☕️

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WEB3 NOTES

Read: The endless downfall of a crypto power couple (The New York Times)

Watch: What a 36 hour hackathon looks like after 20 hours (April Seven Walker)

Listen: How North Koreans infiltrated the crypto industry to fund the regime (Unchained)