Sky Mavis, the developers of the routinely mauled “play-to-earn” NFT-based game Axie Infinity, must now fight back against allegations that executives had transferred funds out of the main game while the attack was ongoing, before the company even announced that users had been defrauded.
Bloomberg first reported last Thursday about an apparent transaction Mavis CEO Trung Nguyen made, equivalent to $3 million of Axie’s main token AXS, from the Axie blockchain over to the crypto exchange Binance. This apparently happened while the blockchain was in the midst of a massive hack, and before it announced that it was freezing users’ ability to withdraw their own tokens as well.
Hackers breached Axie Infinity’s Ronin Network sidechain on March 23, stealing around $600 million worth of ether and USDC stablecoins over almost a week before finally closing the Ronin Bridge. It was the biggest crypto heist ever in the history of crypto heists (and it has a long, long story) and the FBI traced the theft to one North Korean-affiliated collective called the Lazarus group. In July was hacked traced back to fake job offers posted on LinkedIn, according to The Block.
In a series of tweets published shortly after Bloomberg released its report, Nguyen essentially confirmed that the transaction was his doing, saying it was an attempt to “provide liquidity” for when Ronin users would eventually be able to withdraw their money from the blockchain. His thread mentions the other top executives of Axie who apparently gave Nguyen over 750,000 in AXS which he then transferred to the Binance exchange. This, the founder said, was to try to fend off any short sellers, even claiming that the founders deposited $7.5 million from a shared wallet into the Ronin Network “to avoid triggering short sellers who were watching.”
Other than Bloomberg’s investigation, a separate video from the crypto news YouTube channel Asobs also detailed how Nguyen’s wallet name and transfer of funds were identified through similar names between Nguyen’s Twitter handle and his identifier on the crypto transfer. Asob’s echo Nguyenhis point that adding liquidity would help users cash out crypto after such a massive hack, but he further questioned how the company’s first claim that only founders knew about the hack as Binance also apparently knewand why there were other wallets that also withdrew their crypto.
Nguyen wrote that the insider trading allegations are “baseless and false,” adding that the founding team deposited $7.5 million from a known shared wallet to Ronin before the bridge closed. The founder has also pointed out that the bridge has reopened with users’ lost crypto returned to them. But before the hack AXS was worth $64 and now it is worth closer to $18according to CoinMarketCap.
Although, of course, there is still a cloud hanging over the whole affair, especially with allegations that someone at the company sold off their tokens during the breach. At the end of June, Sky Mavis released one series of tweets claimed that before the company discovered the breach, employees sold their tokens because the price of tokens rose around 49%. The company further said that Sky Mavis or Axie employees were made aware of the pre-official announcement of the breach, adding that the founders “worked closely with Binance operations and provided liquidity to Ronin.”
There is really nothing to say about a game that promised users that they could play and earn 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 their lives were practically ruined by the game, caused by pyramid schemes promising they would earn so much more than they would in a regular job. But the model slowly disintegrated as more players were brought in, leaving the low-level workers strapped for cash and forcing them to grind for hours.