JPEGs Are Securities (Maybe)

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Good Morning,

We’ve retraced the entire market rally post Grayscale case decision. Literally, the crypto markets in the past few months have just been multiple Bart heads. Now, with the SEC delaying all spot Bitcoin ETF decisions, it seems likely that we’ll get back into sideways market.

As long as there’s no new capital coming in, the opportunities remain onchain — with Base and a slew of other L2 that will have launched or will be launching soon. Stay cautious!

-Marco

In Today's Email:

• What Matters: Are NFTs securities? 👨‍⚖️

• Founders Highlight: Sergey of Chainlink 👨‍💻

• Deal Flows: Argent-Starknet Venture Studio 🛠️

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WHAT MATTERS

Media Company Settles First SEC NFT Case

State of play: Impact Theory, an LA media company, has agreed to pay $6.1M to settle the SEC's first enforcement action involving NFTs.

• The SEC stated that Impact Theory marketed its NFT project, Founder's Keys, as a means to profit through early-stage investment.

• Impact Theory allegedly generated $30M from the sale of ~14K Founder's Keys in late 2021 and received almost $1M in royalties.

• The settlement mandates Impact Theory to pay a $500K fine, forfeit $5.6M (including interest), and destroy all its remaining Founder's Keys.

• In its marketing, Impact Theory reportedly equated its NFTs to investing in Walt Disney before the introduction of Mickey Mouse.

• The SEC also said that Impact Theory likened its NFTs to giving $20 to Mark Zuckerberg in his dorm room.

However, SEC Commissioners Hester Peirce and Mark Uyeda partially dissented from the Monday settlement in an official statement. Asserting the need for improved NFT guidance for investors and stated:

Why it matters: This settlement increases the risk of NFTs marketed as a means of profit as securities.

For builders and investors: Be extremely careful in your languages and stay away from “promising” any future profits.

• Explain your tokenomics or NFT use cases in an objective tone. Focus on how it will accrue value to the token, without making any statements related to price performance.

BUILDER-INVESTOR HIGHLIGHT

Sergey Nazarov, Co-Founder and CEO of Chainlink

Sergey Nazarov is the Co-Founder and CEO of Chainlink, the industry-standard crypto oracle platform that has helped enable trillions of dollars in transaction across DeFi and other crypto ecosystem.

Previous backgrounds: Nazarov immigrated to New York in the 1990s. He later earned a bachelor's degree in philosophy and management at
NYU and became a teaching fellow in 2010.

• He has several experiences as a VC. He was an associate at FirstMark Capital in 2009-2010 and a GP in QED Capital from 2011-2014.

• He started his first blockchain venture in 2014 with CryptaMail and Secure Asset Exchange.

• In late 2014, he established SmartContract, which ultimately led to Chainlink in 2017.

The big idea: Chainlink has become de-facto leading web3 oracle securing hundreds of billions in TVL across DeFi ecosystem. Now, Nazarov believes the future of crypto and smart contracts is in cross-chain solutions.

• In August 2021, Chainlink introduced the Cross-Chain Interoperability Protocol (CCIP)

• In July 2023, Chainlink announced that CCIP has launched under early access on Ethereum, Avalanche, Polygon, Arbitrum and Optimism.

• CCIP is an interoperability protocol that enables businesses to seamlessly move data and value between their backend systems and public or private blockchain environments.

Take a peek at our referral reward at the bottom of this issue. Share this newsletter and receive our list of 100 smart crypto investors' wallet addresses 👇

INSIGHTS

Web3 Losses Surpassing $1B in 2023

In 2023, Web3 incurred losses of $1.25B in 211 incidents, including a notable $23.4M in August, mainly due to vulnerabilities in projects connected to the newly launched L2, Base.

• Base experienced losses in four different projects, making it one of the most targeted chains alongside Ethereum and BNB Chain.

• Hacks consistently surpass fraud as the primary cause of losses. In August, hacks accounted for nearly $15.8M (67.7% of the monthly total), while fraud contributed $7.6M (32.3%).

• Ethereum faced the highest number of attacks, with five incidents occurring across protocols built on the network.

DEAL FLOWS

Argent & Starknet New Venture Studio

Deal flows remained weak this week 📉 — we saw $15M+ in deals.

Argent, a cryptocurrency wallet, and the Starknet Foundation, which operates the L2 network Starknet, are collaborating to establish Hito Studios, a new venture studio.

• Hito Studios aims to attract teams interested in building startups on Starknet by offering support and early-stage investment.

• Hito Studios will assist builders with various aspects including recruitment, engineering, legal matters, and growth.

• Founders will have access to Argent's network of investors for potential future funding.

Deal flows in the past week:

• Stroom, $3.5M Seed Round

• Raleon, $3.8M Seed Round

• DeForm, $4.6 Seed Round

• FirstMate, $3.75M Private Round

• BitOasis, Undisclosed $ Private Round

• MoonPay Ventures, Undisclosed $ AUM Early Stage Fund

QUICK BITES

• SEC delays spot Bitcoin ETF for all applicants.

• Binance APAC Head quits amid regulatory woes.

• Swift and Chainlink experiment with tokenization.

• Gemini opposes Genesis's bankruptcy plan.

• Binance Japan to offer 100 crypto assets early.

• OKX plans to enter India.

• Coinbase set to list PayPal stablecoin PYUSD.

• Digital Euro Plan to be led by the architect of MiCA crypto law.

• StarkWare re-enables access to funds locked after the upgrade.

• Binance to end support for BUSD, encourages conversion to FDUSD.

• Twitter (X) acquires payments processing license, including for crypto.

• Bloomberg Analysts estimate a 75% chance of a Spot Bitcoin ETF in 2023.

MEME & NOTEWORTHY READS

• Decentralised’s read on cycnical optimism.

• RedStone’s read on 2023 RWA market deep dive.

• Brian Armstrong’s read on the 10 crypto startups he would start today.

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Disclaimer: All the information presented in this publication and its affiliates is strictly for educational purposes only. It should not be construed or taken as financial, legal, investment, or any other form of advice.