Sky Mavis, the developers of the routinely mauled “play-to-earn” NFT-based game Axie Infinity, are now having to fight back accusations executives had transferred funds out of the main game as the attack was going on, before the company even announced that users had been swindled.
Bloomberg first reported this past Thursday about an apparent transaction Mavis CEO Trung Nguyen made, equivalent of $US3 ($AU4.27) million of Axie’s main token AXS, from the Axie blockchain over to crypto exchange Binance. This apparently happened while the blockchain was in the middle of a massive hack, and before it announced that they were freezing users’ ability to pull their own tokens out as well.
Hackers breached Axie Infinity’s sidechain Ronin Network March 23, stealing about $US600 ($AU853) million worth of ether and USDC stablecoin over the course of almost a week before they eventually closed the Ronin Bridge. It was the largest crypto theft ever in the history of crypto thefts (and it has a long, long history) and the FBI tracked the theft to a North Korean-affiliated collective called the Lazarus Group. In July, the hack was tracked back to fake job offers posted on LinkedIn, according to The Block.
In a series of tweets published just after Bloomberg released its report, Nguyen essentially confirmed that the transaction was his doing, saying that it was an attempt to “provide liquidity” for when Ronin users would eventually be able to withdraw their funds from the blockchain. His thread does mention the other top Axie execs who seemingly gave Nguyen over 750,000 in AXS that he then transferred over to the Binance exchange. This, the founder said, was to try and head off any short-sellers, even claiming founders deposited $US7.5 ($AU10.67) million from a shared wallet to Ronin Network “to avoid triggering any short-sellers watching.”
I personally transferred almost $3M to Binance, prior to the Ronin Bridge shutting down. This was a part of the plan to be able to provide liquidity so that Ronin users would be able to withdraw AXS, SLP and wETH as soon as possible. https://t.co/FlzLCMT8WS— Trung Nguyen (@trungfinity) July 28, 2022
Other than Bloomberg’s investigation, a separate video from crypto news YouTube channel Asobs also detailed the way Nguyen’s wallet name and transfer of funds was identified through similar names between Nguyen’s Twitter handle and his identifier on the crypto transfer. Asobs echoed Nguyen’s point that adding liquidity would aid users taking out their crypto after such a massive hack, but he further questioned how the company’s initial claims that only founders knew of the hack when Binance also apparently knew, and why there were other wallets also pulling their crypto.
Nguyen wrote the accusations of insider trading are “baseless and false,’ adding that the founding team deposited $US7.5 ($AU10.67) million from a known shared wallet to Ronin prior to when the bridge closed. The founder has also pointed out that the bridge has been reopened with users’ lost crypto returned to them. However, before the hack AXS was worth $US64 ($AU91), and now it’s worth closer to $US18 ($25), according to CoinMarketCap.
Though of course, there’s still a cloud hanging over the entire affair, especially with accusations that some in the company were selling off their tokens during the breach. In late June, Sky Mavis released a series of tweets claiming that before the company discovered the breach, employees were selling their tokens because the price of tokens spiked around 49%. The company further said that Sky Mavis nor Axie employees were made aware of the breach pre-official announcement, adding the founders “worked closely with Binance operations and provided liquidity for Ronin.”
There is really nothing left to say about a game that promised users they could play and make money at the same time, and during the pandemic it created a positive spin for itself with the idea that it offered jobs to laid-off workers in places like the Philippines. According to a recent report by Time, players said that their lives were practically ruined by the game, brought on with pyramid-scheme like promises they would be earning so much more than they would make in a regular job. But the model slowly dissolved as more players were brought on, leaving the low-level workers hurting for money and forcing them to grind for hours on end.