Original: Crypto Leaks

Compiled by: Bai Ze Research Institute

 

The original article comes from Crypto Leaks, an investigation company that broke the news about scandals in the crypto industry. The first two cases they broke were about ICP being manipulated by capital and maliciously shorted. In the SBF article, Crypto Leaks investigated the market doubts and conditions at the time and believed that the ICP token was obviously manipulated before and after its listing. As the "spokesperson" of Solana, which was extremely popular in 2021, SBF has the motivation and ability to destroy its biggest competitor, the IC network (but there is no substantial evidence, and there will be no evidence in the future).

This article is about Arkham, which provides a large amount of video evidence showing that Arkham received sponsorship and published a research report that deliberately discredited ICP. The DFINITY Foundation later cited this article to file a defamation lawsuit against Arkham and the New York Times. The publication date is June 9, 2022, and the translator has slightly deleted it.

Abstract:

• Review of the June 2021 ICP report by Arkham Intelligence using spy conversation videos and facts.

• The report is about the IC network launched by the DFINITY Foundation, whose native token is called ICP.

• At the time, Arkham was a fledgling company with no track record or apparent expertise in crypto research.

• Their only public team member is founder Miguel Morel — — We were unable to glean any information about him other than a LinkedIn page claiming he is a cryptocurrency investor and helped found a cryptocurrency business called Reserve.

• Arkham ICP reports that insiders did a "pump and dump" when the DFINITY Foundation launched the IC network, which is why the ICP price was high and then low. But they did not provide any substantive evidence.

•The report was posted on Twitter and was accompanied by a video produced in the style of a crime documentary.

• The report should have received no coverage due to its lack of objectivity and substance, but mysteriously found its way to the New York Times, which turned its report into a “fatal blow” to DFINITY’s reputation.

• Arkham founder Miguel claimed that the report was not paid for.

• However, spy videos we collected show that Arkham was commissioned to produce a "defamatory" report against ICP tokens, possibly by a competitor of the IC Network.

• The Arkham ICP report, along with the New York Times article, was subsequently used as the basis for an attack on the DFINITY Foundation.

• After the report was released, the Arkham team relocated to a mansion in Chelsea, London, England, apparently receiving a large amount of money from somewhere. The video shows a team of bodyguards guarding the unknown cargo entering the mansion.

Background

The Internet Computer (IC) blockchain was launched on May 10, 2021, and was developed by a large team at the DFINITY Foundation. There was a lot of excitement before the official launch of IC, as the IC network was claimed to be able to play the role of a "world computer", providing a decentralized alternative to traditional IT and supporting fully on-chain Web3 services, such as social networks.

After the mainnet was launched, its native token ICP could be transferred on the network, and cryptocurrency exchanges around the world began to create spot markets where users could trade ICP tokens. At the beginning of the mainnet launch and in the hours that followed, the price of the ICP token remained above $450, with a fully circulated market value of $230 billion, which was an indisputable high valuation. Then, the price began to fall.

As of June 28, 2021, the ICP price had fallen to $50, with a fully circulated market cap of $23.5 billion, which was arguably comparable to other competing networks at the time.

Then a previously unknown research firm — Arkham Intelligence, led by its unknown founder and CEO Miguel Morel — released the Arkham ICP Report.

The basic claim of the Arkham ICP report is that the DFINITY Foundation, a major contributor to the underlying technology of the IC network, along with related insiders somehow set a high initial price for the ICP token and performed a "pump and dump" when the token was listed.

However, it is highly unusual for an organization comprised of hundreds of renowned computer science researchers, cryptographers, and engineers to spend years developing a blockchain network only to abandon the vision at mainnet launch. Furthermore, the report is filled with unsubstantiated claims, inaccuracies, and glaring logical fallacies. To any experienced observer in the cryptocurrency space, this looks an awful lot like market manipulation designed to damage the reputation of DFINITY, a project that could have been sponsored by a competitor to the IC Network or a financial actor looking to short its tokens.

The Arkham ICP Report would not have received much attention, but apparently thanks to New York Times columnist Andrew Ross Sorkin, the report was published in conjunction with an article in the New York Times and a Dealbook newsletter, both of which promoted the report. By providing credibility to the report, the New York Times did tremendous damage to the reputation of the DFINITY Foundation, its leaders, and the IC ecosystem. It can be said that this caused the ICP token market value to lose tens of billions of dollars. Why the New York Times chose to promote the Arkham ICP Report is unclear, and it clearly does not deserve to be a credible source of information.

By all accounts, the DFINITY Foundation did not sell any ICP tokens in the weeks following the mainnet launch, and the project's founder, Dom, said he only sold a small portion of his tokens (5% of his holdings). In addition, simple common sense tells us that if the market price of ICP tokens is too high after the mainnet launch, then in any case, it will naturally fall through normal price discovery without the need for "internal dumping".

In this article, we explore the who and what behind the Arkham ICP report and the New York Times’ puzzling decision to publicize it. As we show through spy videos and other means, the deeper we look, the more puzzling the Times’ actions become.

Why did the New York Times support the Arkham ICP report?

The New York Times published the article "The dramatic collapse of cryptocurrencies is shocking". At the same time, they published "How ICP's proud ICO collapsed" in the Dealbook newsletter and pushed it to subscribers. (Note: After this article was published, the DFINITY Foundation filed a defamation lawsuit against the New York Times and Arkham Intelligence. The New York Times re-edited the title and deleted the word "ICO")

In "How ICP's Proud 1C0 Collapsed", the New York Times called Arkham Intelligance a credible "crypto analysis company" and promoted the Arkham ICP report, providing a link to the report. At the same time, although Arkham had not published anything before, more than a year later (as of June 2022), it has not published anything else.

The New York Times’ “How ICP’s Proud ICO Collapsed” repeatedly incorrectly referred to the IC network, which is undergoing a mainnet launch, as an “initial coin offering,” or “ICO” (involving an organization selling unusable tokens to the public to raise research and development funds, with the promise that this will make the tokens usable) — something that regulators in many countries have long banned — in an apparent effort to deliberately discredit the DFINITY Foundation for engaging in illegal activities.

The basic thrust of the article can be summed up in the words of Miguel Morel in a short video posted on Twitter promoting the Arkham ICP report. The video, with the usual “crime reveal” soundtrack from TV series as background music, makes his case that the DFINITY Foundation and insiders are “guilty”:

Our findings lead us to believe that DFINITY insiders were continually depositing and dumping billions of dollars of ICP tokens on exchanges while others watched their investments erode. If the available data in our analysis is accurate, we should propose that ICP tokens may be one of the most extreme cases of investor abuse in the history of cryptocurrency markets and financial markets as a whole.”

Miguel made a clear statement about the "crimes" of the DFINITY Foundation and its insiders. Although Arkham Intelligence only had 200 followers on Twitter at the time of publication, due to the publicity given to them by the New York Times, by May 2022, the Arkham Intelligence video had been viewed nearly 20,000 times and their "views" were well-known.

As we explained in the SBF piece, the Arkham ICP report was likely created for the specific purpose of causing harm to ICP, either by competitors or market manipulators looking to short ICP. So why would the New York Times and its star reporter Andrew Ross Sorkin, with their distinguished history and mission to seek the truth on behalf of their readers, lend credibility and deserved reputation to Arkham?

From the moment our investigators began collecting spy videos and understanding what was happening, something started to feel wrong…

Investigation of Arkham Intelligence

Arkham Intelligance appears to be named in homage to Gotham Research, a well-known and respected financial research firm. However, we do not believe that the New York Times confused the two when deciding to promote Arkham as a credible "crypto analysis firm." Arkham Intelligence has no prior record and has only publicly listed one employee, Miguel Morel, who also has no prior record.

Just investigating these two points raised serious red flags, and we later discovered even more serious problems.

Where the hell is Team Arkham?

They are registered in Delaware, USA and were established on March 4, 2021.

However, this founding date does not match their Twitter account, which was created in May 2019, two years ago, suggesting that the account was renamed. Their first tweet appeared on June 28, 2021, the same day as the New York Times article. This date also does not match Miguel Morel's LinkedIn profile, which says he joined Arkham in January 2020. But these inconsistencies with dates are just the beginning.

Yet, a short time after publishing the ICP report, the Arkhan team was still operating out of its headquarters, in the countryside outside of Austin, Texas, rather than the fancy office building you’d expect to find for a respectable research firm:

But after the ICP report went viral, the small team of several people moved out of Texas. Perhaps they made a lot of money, because they moved to a mansion in Chelsea, London, England. According to the initial advertisement, the mansion was rented for 32,500 pounds, or $43,000 per month.

One might think that “cryptoanalysis” might be a simple business, but Arkham is registered all over the United States: Delaware, California, New York, and even Colorado.

Arkham, Chelsea

Arkham's new headquarters in Chelsea, London, houses many Arkham team members or branches. Some of the new members include: Henry Fisher, head of the crypto project Reserve and current CTO of Arkham; Charlie Smith, former head of business development at Reserve and co-founder of Arkham; Jonah Bennet, a journalist and co-founder of an online magazine that hired several Arkham employees as contributors; Zachary Lerangis, current head of operations at Arkham; and Keegan McNamara, former TPM at Arkham.

There are three things worth noting.

First of all, the people here are in their early 20s.

Second, Charlie Smith and Keegan McNamara have now left Arkham and are launching new startups, which reflects the fluidity of Arkham’s membership and why it should not be viewed as a traditional company.

Third, three of the members are connected to a "stable currency" project called Reserve, and Miguel also said that he is the co-founder of the project...

What is Reserve?

Reserve is not a big tech project like the IC Network. Its goal is to provide a "stablecoin" that runs on the Ethereum network. Investors can buy the stablecoin through its RSR token, which has fallen more than 96.5% in value since its peak.

Crypto enthusiasts want to see reports written by thoroughly researched, unbiased and objective professional researchers, not by cryptocurrency entrepreneurs, which may lead to biased and inaccurate conclusions. It is particularly puzzling that their own token fell sharply at the same time as the ICP token, but they presumably would not claim that its price drop was due to insider trading.

As Bitcoin prices plummeted, the prices of many tokens fell in response, and this plunge began almost from the moment the IC mainnet was launched. From April 14, 2021 to July 20, 2021, BTC fell from $63,314 to $29,807. Its biggest drop began on May 10, 2021, the same day as the IC mainnet launch. However, Arkham's report completely ignores the impact of BTC on the price of ICP, even though it also caused their own RSR token to fall by 79.4%.

Granted they had direct experience with how crypto market volatility at the time affected token prices, when Arkham produced the ICP report they mysteriously made no mention of those market movements, instead choosing to spin a false narrative about DFINITY insider misconduct that was sufficient to suggest their actions were willful.

Information about Miguel Morel

At the time of the ICP report, founder and CEO Miguel Morel was the only publicly known Arkham employee. His LinkedIn profile at the time revealed very little information about his career and qualifications. Given that his resume had a university logo added to it, he appeared to have graduated from high school and attended college courses. Miguel claimed to be a co-founder of Reserve, but Reserve removed all information about Miguel from their website shortly after the Arkham ICP report was released.

Although Reserve did not list Miguel as a co-founder when Arkham published the ICP report, their website did include a blog post attributed to Miguel Morel, which was quickly removed.

While it is unclear what Miguel Morel meant when he claimed to be a “co-founder” of Reserve, such an affiliation reflects that he may have a pre-existing financial interest in cryptocurrency, which could make his claims far from impartial and objective.

Clearly, this is not a normal person that the New York Times could trust when promoting and endorsing an ICP report that could result in billions of dollars in damages.

Arkham's ICP report, has it been recharged?

The New York Times published their article and DealBook newsletter promoting the Arkham ICP report on June 28, 2021. A few days later, with the IC ecosystem and ICP tokens compromised, Miguel Morel posted his final tweet (at the time of writing), claiming that he was not sponsored to write the report, received no compensation of any kind, and that he did not hold or short ICP:

However, in a spy video we collected, Arkham employee Nick Longo said he believed the client had paid for the report to be produced (interested readers can go to the original article to watch the video, https://cryptoleaks.info/case-no-2).

Useful dialogue in this video:

Nick: This (ICP report) was a good opportunity to get attention, so we published it. I remember a client paid

Mysterious Man: (Pays) Go investigate ICP?

Nike: ICP is the first, there are other crypto projects

Johan Bennett was more forthright about Arkham’s reasons for producing the ICP report.

What can You-Know-Who: Arkham gain from this?

Johan: They charge for the report, they are hired to do it. That's how they make money.

Johan: I think they were hired specifically to do this, and certainly not to choose this one from among many blockchains. I think they were hired by unhappy users or investors.

Mystery Man: In the case of Arkham, is there some way that the New York Times could generate revenue by publishing the article, or is it for the common good?

Johan: No, I think they were hired by the client to write it.

Video evidence shows that the report was sponsored to blame the DFINITY Foundation and "insiders" involved in the ecosystem for the decline in ICP prices. The report only randomly grabbed a few large ICP transactions and then claimed that these transactions were insiders selling without other evidence. The report never questioned why the initial price of ICP was so high, nor did it explain why the price would not naturally fall if it was too high.

Not only does the report look like it could have been created for a paying client, but its strong claims are deliberately made without a reasonable basis:

Nick: We have done some investigations for clients like ICP and basically inferred who owns these wallets, but these are just inferences…Insiders sold all the tokens, we didn’t…

Mysterious Man: Evidence?

Nick: Yeah

Arkham's investor is Tim Draper

Tim Draper is a well-known American billionaire with a huge cryptocurrency portfolio. His investment in cryptocurrencies began with a large holding of Bitcoin, and later expanded to emerging projects such as Ripple, BCH, Tezos, and Aragon. His son Adam Draper "inherited" his ambitions and holds a large number of cryptocurrencies such as Bitcoin, Monero, and Ethereum through his own venture capital fund Boost VC. For the Draper family, the IC Network and the DFINITY Foundation may be seen as a direct threat to their family property, because the innovative IC Network can be seen as a direct competitor to all common blockchains.

Nick: We had some angel investors at the time?

Mysterious man: Can you tell me your name?

Nick: The most important one is Tim Draper.

Miguel Morel has publicly claimed that the Arkham ICP report was unsponsored and produced for the crypto community. However, not only does it appear likely to have been commissioned by an unknown party for unknown reasons, but as Nick Longo reveals below, it was produced using Tim Draper’s funds:

Nick: When we were focusing on ICP (reporting)... we raised a lot of money, a Series A round, several million dollars, and we still had some money left from our original angel investors.

Suspicious activity at Arkham Chelsea HQ

The Arkham team moved from their rural Texas home to the Chelsea mansion after publishing their ICP report, but something interesting happened. Travel bags filled with goods arrived at the mansion, containing unknown goods. Miguel's handbag was sometimes carried by security, but always accompanied by security guards, who nervously checked back and forth on the way until they were sent inside the house:

Arkham has caused multiple damages to the IC ecosystem

We found that many cases involved parties who believed Arkham’s claims simply because they felt that the New York Times endorsed Arkham’s claims, and then directly took offensive actions that harmed the IC ecosystem, exacerbating reputational damage. This extended to class action lawsuits, one of which is shown below:

Survey Summary

As this investigation has shown, the New York Times’ description of Arkham as a respected “cryptoanalytics firm” greatly misled crypto enthusiasts. Not only does Arkham seem to lack the skills required to write a professional report, but almost every aspect of the organization is highly suspicious. While the investigation of this case brought solid evidence to the world, even a basic, cursory investigation of the organization would show that they are untrustworthy, from the strangely misplaced dates on their profiles to the complete lack of any historical record of them or their founder on the internet.

Endorsing Arkham and its report in this way could reduce the market value of ICP tokens by billions of dollars. As we have shown, Arkham may have been paid for the report by a competitor or someone shorting ICP, and the company’s major investors are also investing in blockchains that are competitors to the IC Network. While the false statements may please customers and may please their major investors, the result is clearly damaging to the reputation of the IC ecosystem and harming the interests of ICP holders.

Within two weeks of the publication of the article, the DFINITY Foundation sued The New York Times and all members of the Arkham Intelligence team through the United States District Court for the Southern District of New York for assault and defamation. In the end, the DFINITY Foundation won the case.