China NFT Weekly: China’s Burgeoning NFT Black Market

Digestible news on the latest developments across the fields of Web3, NFTs, blockchain, and metaverse in China and beyond, compiled for you every week by Pandaily.

This week: Babel Finance lost $280 million trading customer funds, Binance CEO sues Bloomberg’s Hong Kong publisher for defamation, NFT black market swells under China’s crypto crackdown, and more.

Babel Finance Lost $280 Million Trading Customer Funds

Babel Finance, the troubled Hong Kong crypto lender that abruptly suspended withdrawals last month amid a broad crypto market crash, has reportedly suffered heavy losses due to proprietary trading with customer funds. The Block and CoinDesk first reported the story.

  • The firm lost around 8,000 bitcoin and 56,000 ether in June in forced liquidations during a crypto market crash that sent the price of bitcoin below $20,000.
  • Babel Finance was one among many crypto companies heavily afflicted by the market contagion in June. Its decision to halt withdrawals came after that of Celcius Network, a blockchain-based financial services provider, and Voyager Digital, a crypto investing app, with hedge fund Three Arrow Capital also receiving margin calls from several lenders.
  • “In that volatile week of June when BTC fell precipitously from 30k to 20k, unhedged positions in [proprietary trading] accounts chalked up significant losses, directly leading to forced liquidation of multiple Trading Accounts and wiped out ~8,000 BTC and ~56,000 ETH,” according to a restructuring deck issued by the company.
  • The company is trying to convert hundreds of millions of dollars in debt into equity in order to obtain a revolving credit facility to raise funds. (The Block, CoinDesk)

READ MORE: Read all of our articles on Babel Finance!

Binance CEO Sues Bloomberg’s Hong Kong Publisher for Defamation

Binance CEO Changpeng Zhao on Monday filed a lawsuit against Modern Media CL, Bloomberg Businessweek’s Hong Kong publisher, claiming defamation over an article that accused the exchange of running a “ponzi scheme.” CoinDesk and Cointelegraph first reported the story.

  • On June 23, Bloomberg Businessweek published a profile of Zhao: “Can Crypto’s Richest Man Stand the Cold?” However, in Hong Kong, Modern Media published a Chinese article with a different headline: “Zhao Changpeng’s Ponzi Scheme.”
  • The headline, according to Zhao’s representative, was designed to spur “hatred, contempt and ridicule” for the chief executive.
  • Zhao called for the edition’s removal from newsstands and for a restraining order to stop the publisher from perpetrating the message.
  • The chief executive also filed a motion for discovery – a legal request that asks the court to mandate that the opposing council and party turn over a given piece of material or information – against Bloomberg LP and Bloomberg Inc. in the US District Court for the Southern District of New York.
  • This is not the first time that Zhao and Binance have sued the media. In 2020, Binance sued Forbes over allegedly defamatory statements but dropped the suit last year.
  • Modern Media is an independent entity that licenses Bloomberg’s content. Zhao’s filing is a personal suit and has nothing to do with the exchange or company, as confirmed by Binance when approached by Cointelegraph. (CoinDesk, Cointelegraph)

RELATED: Read all of our content on Binance!

NFT Black Market Surges Under China’s Crypto Crackdown

Traders have begun to turn to off-the-book transactions of secondhand NFTs amid China’s regulatory clampdown on crypto and secondary trading of digital assets. Nikkei Asia first reported this story.

Hong Kong University of Science and Technology to Roll Out VR Classes Ahead of Metaverse Campus Launch

The Hong Kong University of Science and Technology (HKUST), one of the world’s top research institutions, has announced the launch of a virtual reality classroom in a bid to create a digital campus in the metaverse. SCMP first reported this story.

  • The VR classroom will also host the opening of HKUST’s Guangzhou campus on September 1, an academic at the institution told SCMP.
  • “A lot of guests might be overseas and can’t attend [the opening], so we will host it in the metaverse,” said Pan Hui, chair professor of computational media and arts at the Guangzhou campus.
  • The virtual classroom is part of a bigger plan to build MetaHKUST, a virtual campus that connects the school’s Hong Kong and Guangzhou campuses, allowing students and professors to interact with each other without geographical constraints.
  • “[Using Zoom] feels like you’re just looking at a 2D screen. But through virtual reality, you can feel as if you’re there. I think interaction is very important for learning. How you interact with students around you will increase your learning outcome,” said the professor.
  • In addition to taking classes in the metaverse, students also have the option to attend opening days and even commencement in the virtual space, while receiving their diplomas and transcripts in the form of NFTs. (SCMP)

Tether Says Says It Holds No Chinese Commercial Paper

Tether Holdings Ltd., the company behind the world’s largest stablecoin, said its portfolio of reserves does not contain any Chinese commercial paper. Bloomberg and The Wall Street Journal first reported the story.

  • Tether said in a blog post on Wednesday that it has reduced its commercial paper exposure to around $3.7 billion from $30 billion in July 2021.
  • The company said it plans to further decrease its commercial paper holdings to around $200 million by the end of August, and to zero by early November at the latest.
  • Tether Holdings Ltd., issues and operates the US dollar-pegged token USDT. In June, the company refuted speculation that 85% of its token was backed by Chinese or Asian commercial paper. It has also been steadily increasing its exposure to US Treasure bills since then.
  • There is evidence that Tether’s reserves included short-term loans to large Chinese companies, according to Bloomberg.
  • Some short sellers have said they believe that most of Tether’s commercial-paper holdings are backed by debt-ridden Chinese property developers, according to a previous report by The Wall Street Journal.
  • While designed to maintain a steady value pegged to the dollar, tether fell as low as 94 cents during the crypto market crash in May. (Bloomberg, The Wall Street Journal)

Dubai Police Launch Second Round of NFTs

The Dubai police are launching a second round of NFTs, as the first government entity in the UAE to apply blockchain technology to the fields of security and strategic communication. Forkast first reported the story.

  • An official spokesperson said the second batch of the NFTs will be launched in October via GITEX, a meeting platform targeting clients in the tech industry.
  • The move is in line with the government’s growing interest in digital assets, as “NFT-related Information documented on a blockchain cannot be falsified or copied at all,” said Brigadier Khalid Nasser Al Razooqi, Director of the General Department of Artificial Intelligence at Dubai Police.
  • 150 new NFTs will be made available free of charge on the Dubai Police’s social media platforms to participants who provide their digital wallet addresses.
  • As many as 22.91 million people worldwide have indicated their interest in obtaining the police department’s first batch of NFTs.
  • Al Razooqi further said that the Dubai Police had received more than 7,000 direct messages from participants on its social media platforms. (Forkast)

That’s it for this week’s newsletter – thanks for reading! As always, we welcome any feedback on how to make this newsletter better. Write to us at See you again next week!