Say goodbye to Q2 and the crypto hacks, scams and rug pulls that came with it

Follow me on Twitter @Jacqmelinek for breaking crypto news, memes and more.

Welcome back to Chain Reaction.

As if the pessimism around crypto weren’t enough, the industry is facing yet another quarter of hackers and scammers looking to make a quick buck. And to make things worse, it’s getting harder to trace and recover lost funds as well.

According to a new report, only $4.9 million was recovered of the $204.3 million the industry lost to hacks, scams and rug pulls in the second quarter.

The report, by web3 “super app” and antivirus solution De.Fi and data from REKT database, detailed that so far this year, the industry had recovered about $183 million, or nearly 28% of the $666.5 million lost to scams and hacks.

The report also found that exploits and rug pulls accounted for $55.3 million and $47.3 million, respectively, in Q2, highlighting that risks through bad actors are “rampant in equal measure.”

The TLDR? Be careful out there, because hackers are still hackin’ and scammers are still scammin’ — even in a bear market.

This week in web3

Q2 failed to bring a funding reprieve for web3 startups and unicorns (TC+)

We’re already halfway into 2023, which means we’re only a couple weeks away from brand new, sizzling data for the second quarter. However, it’s always wise to keep an eye on the horizon, so we’ve decided to draw the few conclusions about web3 and unicorn funding trends that we can from early data on the past three months.

Coinbase execs: As global crypto policy grows, U.S. has urgent need for legislation (TC+)

Coinbase, one of the largest crypto exchanges globally, has been around for 10 years. And while the company has grown its offerings, products and services, its policy talking points haven’t changed dramatically, Kara Calvert, head of U.S. policy at Coinbase told TechCrunch+. But what has changed, she said, is the “momentum and urgency” for digital asset legislation and rules at a federal level in the U.S.

AI and crypto integration is going to happen whether you want it or not (TC+)

As artificial intelligence continues to grow to new heights of popularity, industry players are considering new ways the technology could integrate with crypto and blockchains. During Coinbase’s State of Crypto Summit on Thursday, venture capitalists and AI experts shared their thoughts during a panel on what similarities and differences the industries have and how investors, builders and users can capitalize on it.

Crypto startup Pillow, backed by Accel and Quona, to discontinue all services

Singapore-headquartered Pillow plans to discontinue all its services and app in the coming weeks, it warned customers Friday, citing regulatory uncertainty that has claimed countless other crypto startups in recent quarters. It had raised about $21 million altogether and counted Accel India, Quona Capital, Elevation Capital and Jump Crypto among its backers. Pillow revealed its $18 million Series A funding in October last year.

Terraform Labs founder Do Kwon jailed four months in Montenegro

Another chapter was published in the long and bizarre saga of Terraform Labs’ Do Kwon. The disgraced crypto founder will spend four months in a jail in Montenegro for falsifying official documents. The next step for Kwon is still unclear as both the U.S. and South Korea have been seeking to extradite him over charges in both countries relating to the collapse of Terraform Labs.

The latest pod

For this week’s episode, Jacquelyn interviewed Jack Lu, co-founder and CEO of NFT marketplace Magic Eden. This is his second time on Chain Reaction, but the market has evolved a lot since the last time he came on in August 2022, so we’re excited to have him back!

Before co-founding Magic Eden in 2021, Lu worked as a product manager at Google and a consultant for Boston Consulting Group.

Magic Eden originally began as a Solana-based NFT trading platform, but has expanded its support to other blockchain networks like Polygon, Ethereum and Bitcoin. Today, it has grown into one of the largest NFT marketplaces, with over 8,000 collections, about $3 billion in NFT transactions and 22 million unique monthly visitors. In June 2022, Magic Eden raised $130 million in a Series B round that granted it unicorn status.

We discussed why Magic Eden expanded its support to other blockchains, adding BRC-20 token support to its secondary platform and how the company plans on staying competitive in the constantly changing market.

We also talked about:

  • NFT market volatility
  • Royalty fees
  • Web3 gaming expansion
  • Advice for NFT community

Subscribe to Chain Reaction on Apple Podcasts, Spotify or your favorite pod platform to keep up with the latest episodes, and please leave us a review if you like what you hear!

Follow the money

  1. Bitpanda’s crypto exchange separated from Bitpanda and secured $33 million
  2. Gaming platform Mythical Games raised $37 million in an extended Series C1 round
  3. Web3 gaming platform Pixion Games raised $5.5 million
  4. AI-powered crypto search engine Kaito raised $5.5 million in a Series A round
  5. Startale Labs raised $3.5 million in a seed round for web3 infrastructure for public goods

This list was compiled with information from Messari as well as TechCrunch’s own reporting.

To get a roundup of TechCrunch’s biggest and most important crypto stories delivered to your inbox every Thursday at 12 p.m. PT, subscribe here.

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