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Pudgy Penguins NFT Project Ousts Founders as Mood Turns Icy – CoinDesk

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Pudgy Penguins is a collection of 8,888 unique penguins with proof of ownership stored on the Ethereum blockchain. (Screenshot: OpenSea)
There’s trouble brewing in the huddle.
The beloved NFT project Pudgy Penguins voted out its founders on Thursday after they allegedly failed to deliver on stated goals and drained the treasury of funds. And now at least one splinter group is arguing that the entire project should be decentralized, potentially an industry first.
Launched in July, Pudgy Penguins has become one of the most successful NFT projects, raking in over 45,400 ETH in sales on NFT marketplace OpenSea. (That works out to about $140 million in today’s ether (ETH) prices.) NFT stands for “non-fungible tokens,” a subcategory of cryptocurrencies that represents ownership in a unique asset, from art to real estate.
The collection of 8,888 chubby and flightless Antarctic creatures – donning accessories such as baseball caps and fishing rods – were available to mint last July for 0.03 ETH and sold out in less than 20 minutes.
According to Twitter user and Pudgy Penguins owner @9x9x9eth, Pudgy Penguins co-founder Cole Thereum “promised a game, a token, an educational book on NFTs and more” to the community last September.
“After a half year, they still have not yet set up the team, they are still in the stage of hiring,” 9x9x9 told CoinDesk via Twitter.
(9x9x9 publicly stated he has spent nearly 600 ETH on the collection and holds 242 Pudgy Penguins NFTs and one rare “banana” penguin, purchased for 100 ETH.)
Pudgy Penguins pseudonymous co-founders Cole Thereum and Twitter user @tubbyfat didn’t immediately respond to a request for comment via Twitter direct message.
On Wednesday evening, 9x9x9 published a Twitter thread claiming the Pudgy Penguins founders were looking to abandon the project and offered to sell him its shell for 888 ETH (about $2.8 million), an offer he turned down.
Since the tweets, the floor price of a Pudgy Penguin shot up from about 0.6 ETH ($1,860) on Wednesday evening to 1.7 ETH ($5,270) as of press time.
Now, the project has received buyout offers as high as 750 ETH ($2.3 million) from other prominent individuals in the NFT market, including Mintable co-founder Zach Burks, NFT collector @beaniemax and Netz Capital’s Luca Netz.
Others in the community are more wary of a buyout. NFT hedge fund Starry Night Capital’s @Vince_Van_Dough and eGirl Capital’s @loomdart – other prominent stakeholders in the project – have floated the idea of migrating the community to a new project called Wrapped Penguins.
The Pudgy Penguins founding team receives a small percentage in royalties from each NFT sale, meaning founders of successful projects can continue to line their pockets as long as trading volume persists.
Wrapped Penguins, available as a free mint on NFT platform Metadrop for current Penguin holders, would sever all ties with the original founding team with the new project in the hope of creating a parallel community that would be governed using a decentralized autonomous organization (DAO) framework.
A wrapper is a smart contract that takes an asset and issues a parallel asset, allowing the Pudgy Penguins NFT holder to hold an identical “wrapped” penguin. The Wrapped Penguins project has said the holder will be able to “unwrap” their token into the original NFT at any time.
Profile picture projects (PFP) such as Pudgy Penguins, Larva Labs’ CryptoPunks and Yuga Labs’ Bored Ape Yacht Club have driven the recent boom in NFT sales, often run by centralized founding teams who tease new releases for their holders.
Pudgy Penguins “could be the first pure decentralized PFP project ever,” 9x9x9 told CoinDesk.
The battle for control over the Pudgy Penguins project also raises governance questions surrounding NFT communities – or more broadly, what happens when founders fail to deliver on stated goals or the communities themselves experience infighting.
Recent events are reminiscent of battles that have plagued major blockchains such as Bitcoin and Ethereum, known in the industry as “hard forks.”
“In real life, stakeholders can use the board to dump a poorly performing CEO. This is the first attempt I’ve seen in crypto to do in essence the same thing,” tweeted Jordi Alexander, chief investment officer of Selini Capital. “The community forks everything out without the baggage of the CEO.”
Amid the turmoil, some Pudgy Penguin holders have used the spotlight to spread a popular Pudgy rallying cry: “I am my penguin and my penguin is me.”
DISCLOSURE
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.
Tracy Wang
Tracy Wang is a senior reporter at CoinDesk. She owns BTC, ETH, MINA, ENS, various stablecoins, and some NFTs.
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The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.
@2021 CoinDesk

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Tyler Hobbs' Fidenza NFT Project Gets $1M Pump Over 48 hours – CoinDesk

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DOJ Asks Congress for Tools to Limit NFT Money-Laundering Risk – PYMNTS.com

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Down at the very bottom of the crypto crime report the Justice Department issued last week was a request that could make it a lot harder to buy and sell NFTs.
Citing examples of criminals using the sale of the popular nonfungible tokens that hold art, video, music and collectibles to launder funds, the Justice Department asked Congress to define some of all NFTs as “value that substitutes for currency” under the Bank Secrecy Act (BSA).
Doing so, it said in “The Role of Law Enforcement in Detecting, Investigating, and Prosecuting Criminal Activity Related to Digital Assets,” would “make clear that its key [anti-money-laundering (AML) and countering the financing of terror (CFT)] provisions — including the obligations to have customer identification programs and report suspicious transactions to regulators — apply to NFT platforms, including online auction houses and digital art galleries.”
See also: DOJ Seeks to Double Jail Time for Money Transmission Crimes
The impetus, the department said, is the “explosive growth in the demand and corresponding markets for NFTs, perhaps most notably in the area of digital art.”
Substantial Risk
This “presents substantial money-laundering risks,” it said, citing a February Treasury Department study on money laundering in the broader art market.
“NFTs can be used to conduct self-laundering, a sequence in which criminals purchase an NFT with illicit funds and then resell to a purchaser who pays for it with clean funds unconnected to a prior crime,” that report noted.
It also found that in most cases, “digital assets that are unique, rather than interchangeable, and that are used in practice as collectibles rather than as payment or investment instruments … are generally not considered to be virtual assets under [international regulations].”
The “nonfungible” part of NFT means that each is unique and cannot substitute for any other, as opposed to cryptocurrencies like bitcoin which all have the same uses and value.
NFT marketplaces “may take the view that this definition [of a ‘value that substitutes for currency’] does not apply to their activities — and that they are thus not subject to the BSA’s anti money-laundering and anti-terrorism laws, the department said.
Justice is asking Congress to amend the BSA “to make clear that its key AML/CFT provisions — including the obligations to have customer identification programs and report suspicious transactions to regulators — apply to NFT platforms, including online auction houses and digital art galleries.”
Already There
Redefining NFTs as “value that substitutes for currency” would allow the Treasury Department’s Financial Crimes Enforcement Unit (FinCEN) to “potentially seek to regulate such activity under its money transmission regime,” a trio of lawyers at Skadden, Arps, Slate, Meagher & Flom wrote in an April blog post.
That, according to Jamie Boucher, Eytan Fisch and Javier Urbina, would require NFT marketplaces to register as money services businesses (MSB) with FinCEN.
Some types of NFTs — notably those used to fractionalize tangible assets like physical artworks and real estate, but also other valuable art or collectible tokens — are likely securities, the Securities and Exchange Commission (SEC) has said.
See more: How Did NFTs Become SEC’s Newest Crypto Target?
In FinCEN’s view, the trio noted, those can be repurposed to fit the definition of “value that substitutes for currency” and thus may already require MSB licenses.
 
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FTX Talking With Investors for $1B Fundraising at $32 Billion Valuation – NFTgators

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Quick take:
Although Binance maintains its number one spot in terms of crypto transaction volume, FTX is catching up quick after rising to third, behind Coinbase. This could change soon given the steps FTX is taking in web3.
According to reports, Sam Bankman-Fried’s company is seeking $1 billion in a new round of funding at a valuation of about $32 billion. That values FTX twice the value of Coinbase— whose market cap stands at just over $14 billion, and at least 7-fold Binance’s most recent valuation of $4.5 billion.
And there is a good reason for the disparity in market share (volume-wise) and overall valuation. FTX is more than just a crypto exchange platform. 
The company has expanded its ecosystem to include stock trading, NFTs, crypto lending services and more, all forming significant operational synergies for the rapidly growing web3 company.
It explains why investors are placing such value on FTX. According to sources close to the $1 billion fundraising talks, the figure could change by the time the round is closed, CNBC reported, citing people who did not want to be named.
FTX has been one of the most active investors in the web3 space during the crypto winter. The company is in the process of acquiring the crypto lending platform Blockfi for a reported amount of $240 million.
Last year, it acquired crypto derivatives platform LedgerX allowing it to offer derivatives trading alongside traditional crypto exchange services.
Earlier this year, the company purchased Good Luck Games, the developer of the card battle game Storybook Brawl for an undisclosed amount. The acquisition added another perspective to FTX’s business pouncing on the rapidly growing web3 gaming sector.
The company also recently announced a partnership with online game retailer Gamestop to onboard the gaming community to web3.
In July, Bankman-Fried refuted claims that FTX was planning to buy retail stock brokerage platform Robinhood after Bloomberg published a report suggesting discussions were underway.
News about the new fundraising come hot on the heels of the company’s $900 million raise announced in July. FTX also raised $420 million in October 2021.
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