High-leverage trader James Wynn has declared that the “lottery ticket” phase of memecoins is finished, arguing the sector is now saturated and structurally tilted toward insiders at the top.

James Wynn, the hyper-leveraged crypto trader who turned a roughly $7,000 bet on Pepe (PEPE) into about $25 million before later losing close to $100 million on Bitcoin and meme coin positions, now says the memecoin dream is effectively over. In a post on X to his more than 36,000 followers, Wynn wrote, “I’m pretty sure meme coins are dead, I’m pretty confident they’ll never really come back,” arguing that what “was once a niche of a lifetime if you lived through it from 2017-2024” has been saturated by supply and financialized extraction.

He claimed that going from “a few K into a million dollars is like winning the lottery now. Borderline impossible,” framing today’s memecoin landscape as a system where “they’ll all supply controlled (yes needed), but ultimately just profit making machines for people at the top.” Wynn’s pivot comes less than a year after he allegedly amassed between $80 million and $87 million through aggressive, 20x–40x leveraged trades on Hyperliquid, at one point running a 40x Bitcoin long worth roughly $1.25 billion that briefly showed around $100 million in unrealized profit before cascading liquidations erased nearly the entire haul.

Wynn’s rise, crash, and backlash

Wynn first rose to prominence in 2023 as a “high-risk leverage trader and memecoin maxi,” after parlaying a small PEPE position into tens of millions of dollars and then recycling those gains into even larger directional bets. According to reporting on his trades, he built his fortune on the very dynamics he now criticizes: thin-liquidity tokens, community-driven hype, and reflexive leverage that could push valuations from under $10 billion toward the $100 billion range for the wider memecoin sector in a single cycle.

In May 2025, Wynn’s luck turned violently. After opening a massive 40x Bitcoin long with an entry near $107,993, his position was progressively liquidated as BTC slid below $106,330 and then toward $104,150, crystallizing losses that reports put at nearly $100 million in less than a week and marking one of the largest documented on-chain trading wipeouts. Crypto.news later detailed how, despite losing almost $100 million, Wynn quickly returned to Hyperliquid, selling about $4.12 million in Hyperliquid (HYPE) tokens and re-entering with a new 945 BTC long using 40x leverage, a position sized around $99.7 million at the time.

Community reaction to his latest comments has been sharply divided. One X user, posting under the handle @0xVengeanceArab, dismissed Wynn’s comments by referencing alleged $25 million liquidations and multiple rug-like meme launches, telling him to “just shut fuck up,” while another, @wocknottriss, wrote that the trader has “been wrong about everything in the past 11 months,” calling his bearishness on memes a contrarian bullish signal.

Traders and builders active in the space argue that what has died is not memecoins themselves, but the uniquely forgiving market structure that allowed near-random tickets to 100x with minimal diligence. An account named Pump Research wrote in reply that “Memecoins aren’t dead, the easy money phase is,” adding that “what’s dying is low-quality launches with no community” while “projects with real holders who actually believe and stick around” are the ones surviving as capital gets choosier.

Analysts tracking the sector describe exactly that polarization. Research highlighted by 0x资讯 suggests that while total meme coin market capitalization climbed from around $20 billion in 2024 to as high as a projected $140 billion, the spoils have concentrated into a handful of blue-chip names like Dogecoin (DOGE), Shiba Inu (SHIB), and PEPE, with large numbers of low-quality tokens effectively zeroed out. Crypto.news has likewise chronicled how Dogecoin’s market cap alone punched through $60 billion during the last cycle as it rallied to roughly $0.428, cementing DOGE as a structural large-cap asset even as smaller memes came and went.

Even within PEPE, where Wynn first achieved notoriety, recent coverage shows a more mature, range-bound market rather than a casino where any wallet can spin a $7,000 ticket into life-changing wealth. As of early 2026, PEPE has traded near $0.0000043, down roughly 64% over the year but still supported by around $600 million in 24-hour volume, with technical setups focused on incremental mean reversion instead of parabolic blow-offs.

Other commentators see structural changes in token design as the final blow to the old memecoin fantasy. As one account, @yourr_finans, put it, going from “2,000 to 1 million tokens did more damage than any bear market,” with “lottery odds” moving from improbable to “actual lottery odds” as supply structures and launch mechanics were optimized to extract value for insiders while stapling tokens to nominal “utility.”

For Wynn, the conclusion is that the sector “needs to evolve into something else,” even if he admits he doesn’t yet know what form that next speculative meta will take. Whether that future belongs to DOGE-scale brands, utility-wrapped memes, or entirely new cultural formats, the one constant is that the free lunch he and others feasted on from 2017 to 2024 is gone—and that the people now calling memecoins “dead” are often the same ones who helped build, and then break, the game.

In previous crypto.news coverage, the site profiled Wynn as “crypto’s boldest whale,” detailing his $1.1 billion Bitcoin perp bet on Hyperliquid and Moonpig (MOONPIG) punts that pushed the token’s market cap to about $80 million during one of its spikes. Another crypto.news report documented how Wynn’s side wallet later dumped roughly 10.9 million MOONPIG tokens worth about $120,000, underscoring the reflexive, whale-driven flows that have come to define the memecoin economy he now declares finished.

Moomoo crypto is now live in Texas, giving investors access to 52 cryptocurrencies with zero commission trading.

Moomoo announced the expansion of its cryptocurrency trading services to Texas on May 22, alongside the launch of its Direct Crypto Deposit and Withdraw feature for all US users. Texas investors can now trade 52 cryptocurrencies through Moomoo Crypto at zero commission, with a transaction fee as low as 0.49%.

“We are actively expanding access to crypto trading across the U.S. while continuing to build additional features aimed at enhancing the investing experience,” said Albi Mema, Director of Crypto Operations at Moomoo U.S. The Texas rollout extends Moomoo Crypto’s coverage to a fourth major US state, following California, New Jersey, and Pennsylvania.

What moomoo’s Direct Crypto Deposit and Withdraw feature does

The new wallet feature allows users to move supported digital assets between external Web3 wallets and their moomoo accounts in either direction. Users can bring crypto in from outside wallets, convert holdings into fiat, and deploy across moomoo’s broader lineup of equities and options within a single account interface.

Moomoo is a subsidiary of Futu Holdings (NASDAQ: FUTU). The Texas licence approval follows a graduated state-by-state licensing process requiring individual money transmitter or broker-dealer compliance before crypto trading is enabled for residents.

The launch positions moomoo to compete with retail multi-asset platforms that have struggled to retain crypto users as market conditions fluctuate. Crypto.news has reported on Robinhood’s Q1 2026 crypto revenue falling 47% year over year, highlighting how volatile digital asset trading volumes can be across retail platforms. Moomoo’s all-in-one strategy, bundling crypto with equities and options in a single account, is designed to reduce that cyclical exposure.

What the Texas launch adds to moomoo’s US crypto strategy

Texas is one of the largest retail investment markets in the United States by total brokerage account volume. Adding the state brings moomoo’s crypto service to four of the most active retail trading states in the country. Crypto.news has tracked how competing retail platforms are pursuing similar multi-asset consolidation strategies to maintain user engagement through market cycles.

The platform is offering a limited-time Bitcoin rewards programme for new crypto users as part of the Texas launch. The Bitcoin (BTC) price page tracks live movements for users who take up that programme during the launch window.

MoonPay ChatGPT app is now the first crypto onramp inside OpenAI’s platform, supporting Bitcoin, XRP and Solana.

MoonPay launched a dedicated app inside ChatGPT’s App Store on May 22, allowing users to generate cryptocurrency purchase links without leaving OpenAI’s chatbot. The company called itself “the first and only crypto onramp integrated in ChatGPT” in its announcement post.

The integration supports Bitcoin, XRP, Ethereum, Solana, USDC, and more than 100 other digital assets across more than 30 chains. Users complete KYC and payment on moonpay.com after the chatbot generates a checkout link, with payment options including card, Apple Pay, Google Pay, and bank transfer.

Bitcoin is facing a renewed supply test as on-chain dynamics show rising balance on spot venues and ongoing ETF outflows. In the latest week, exchange netflows rose by roughly 18,000 BTC, while spot BTC exchange-traded funds logged net outflows of nearly 16,000 BTC, a combination that produced around 34,000 BTC of local selling pressure across venues.

Axel Adler Jr., a BTC researcher, said the data point to a persistent local supply imbalance even as price movements suggested a rebound. “BTC exchange and ETF activity continue to show a local supply imbalance,” Adler noted in his assessment of the week’s flow figures, underscoring that the pressure could resurface if absorption by buyers does not improve. He added that the weekly netflows imply that the market may need a shift back toward neutral or negative exchange balances before sustained upside momentum can take hold. Read his full analysis.

Bitcoin weekly exchange netflows. Source: CryptoQuant

The same period also saw spot ETF activity retreat, with net outflows of around 16,000 BTC. Adler noted that institutional flows did not absorb the exchange supply as hoped and, instead, reinforced a risk-off mood that can cap rallies in the near term.

The magnitude of the combined pressure—roughly 34,000 BTC across exchanges and ETFs—highlights the fragility of near-term upside without stronger spot demand. As Adler framed it, the market faces a critical test: can buyers step in sufficiently to absorb ongoing inflows and prevent a renewed slide in supply pressure?

Bitcoin open interest, CVD, and funding dynamics. Source: Velo chart

The wider market context added to the caution. Glassnode analyst cryptovizart pointed out that daily ETF trading volume has cooled to below $20 billion, down from more than $50 billion in late 2025. The softer activity in traditional finance channels suggests fading speculative demand through these venues and weaker spot absorption during rallies. Read the note.

Key takeaways

• Weekly BTC exchange netflows rose by about 18,000 BTC, while spot BTC ETFs logged roughly 16,000 BTC in net outflows, creating ~34,000 BTC of near-term selling pressure.
• Institutional ETF activity has cooled, with daily ETF trading volume dipping below $20 billion from above $50 billion in late 2025, signaling fading speculative demand through traditional channels.
• Open interest on BTC futures declined to about 250,000 BTC during the rebound, before ticking up to roughly 254,000 BTC, suggesting that the rally was driven largely by short-covering rather than new bullish positioning.
• Funding rates cooled to around 0.0026, remaining in positive territory, indicating less crowded long leverage even as the market experiences intermittent pressure.
• Analysts highlight a mixed signal: while some metrics show cooling selling pressure, sustained upside will likely depend on a renewed burst of spot demand and a rise in open interest toward the $80,000 level.

Derivatives dynamics and the path to momentum

The rebound rally toward the $77,800 area came after a brief dip below $75,000, aided in part by a shift in risk appetite following reports of a potential US-Iran peace deal. On-chain and derivatives data paint a picture of a cautious market where buyers have not yet fully absorbed supply. Aggregated Bitcoin open interest fell from about 268,000 BTC during the dip and then hovered near 254,000 BTC, signaling that the move higher was largely driven by short-covering rather than a broad reloading of bullish bets.

Meanwhile, the aggregation of funding rates softened during the advance, sliding to around 0.0026 from earlier peaks near 0.008—still positive, but a sign that long positions are less crowded than in prior rallies. A separate perspective from Rei Researcher on CryptoQuant notes that the daily funding rate has remained negative since February 2026, implying ongoing pressure from short traders in the shorter horizon. Taken together, these signals suggest BTC is stabilizing around the mid-to-upper $70k range even as near-term headwinds persist.

BTC price, spot CVD, aggregated open interest, and funding rate. Source: Velo chart

In the broader context, Glassnode reported that spot CVD and futures CVD metrics have moved higher—up 77.2% and 35.5% respectively—while price momentum softened. The development underscores a market where selling pressure is easing somewhat on a relative basis, but real momentum will likely require a renewed influx of spot demand and a climb in open interest.

Volatility, risk, and what to watch next

Looking ahead, the critical question for BTC remains whether fresh buyers can step in to absorb ongoing exchange and ETF flows. If spot demand fails to strengthen or if open interest fails to rise in tandem with price, the current relief rally risks stalling or reversing. Observers will be watching for shifts in ETF activity, potential catalysts that can restore risk appetite, and any signs that institutional sentiment is ready to re-engage spot markets on a larger scale.

The market still faces a delicate balance between supply pressure and demand absorption. If buyers re-enter with conviction and open interest climbs toward the levels that historically accompany durable upswings, BTC could eye the $80,000 mark in the months ahead. Until then, the data suggests a cautious stance: a quieting of selling pressure at the margin, paired with a need for stronger spot demand to convert relief rallies into sustainable upside.

The early mythology of crypto painted hackers as digital outlaws — anonymous figures draining protocols overnight and disappearing into the shadows forever. But decentralized finance has evolved into something stranger. Today, many DeFi exploiters do not simply steal and vanish. They negotiate. They send messages. They return partial funds. Some even attempt to reinvent themselves as “security researchers” after causing hundreds of millions in damage.

In traditional finance, bank robbers do not usually open dialogue with the institutions they rob. In DeFi, however, exploiters often become reluctant diplomats, engaging in public negotiations through blockchain transactions, governance forums, and encrypted chats. The line between criminality and opportunism becomes blurry, creating a psychological gray zone unique to crypto culture.

The result is one of the most underrated dynamics in Web3: DeFi exploits are not only technical events — they are social and psychological performances.

The Rise of the Negotiated Hack

One of the most unusual aspects of DeFi exploits is how often attackers return part of the stolen funds. In some cases, protocols recover nearly everything after offering a “bug bounty” to the exploiter. In others, attackers keep a percentage while returning the rest as part of an informal settlement.

This behavior seems irrational at first glance. Why would someone capable of stealing millions willingly give money back?

The answer lies in the structure of blockchain transparency.

Unlike traditional financial crimes, most DeFi exploits happen in public. Every transaction is visible. Wallets are traceable. Blockchain analytics firms monitor movements in real time. The exploiter may be anonymous, but the stolen assets themselves become radioactive. Moving large amounts of stolen crypto without detection is extraordinarily difficult.

As a result, many attackers eventually face a psychological pivot:

• Keep all the funds and become globally hunted
• Or partially cooperate and reshape the narrative

That second option has created a bizarre middle ground where exploiters attempt to transition from villain to negotiator.

The “Whitehat” Narrative

Crypto has developed a peculiar moral loophole: the “whitehat” claim.

After draining protocols, some attackers argue they were merely exposing vulnerabilities. They frame themselves not as thieves, but as security experts forcing the industry to improve. Even when exploits cause chaos, panic, and liquidity collapse, the attacker may later claim their intentions were protective.

Sometimes this narrative is partly true. Ethical hackers have historically uncovered vulnerabilities and received legitimate bug bounties. But DeFi blurred the distinction between responsible disclosure and financially motivated exploitation.

An exploiter may:

• Drain funds first
• Negotiate afterward
• Return some assets
• Then request immunity and rewards

In essence, they retroactively rewrite the story.

The psychology here is fascinating because it reflects a desire for legitimacy. Many exploiters do not want to see themselves as criminals. They prefer to imagine themselves as elite actors operating outside flawed systems. By adopting the “whitehat” label, they seek social validation from the same industry they attacked.

This becomes especially powerful in crypto because the ecosystem often celebrates technical brilliance, even when it appears in destructive forms.

Reputation Laundering in Web3

Traditional criminals hide their identities. Crypto exploiters sometimes build brands.

This phenomenon could be called reputation laundering — the process of transforming public perception after an exploit through selective cooperation, philosophical messaging, or strategic fund returns.

Some attackers publish manifestos explaining why the protocol “deserved” to be exploited. Others portray themselves as antiheroes, exposing greed, centralization, or weak security practices. A few even become respected figures later in the industry under new pseudonyms.

In Web3 culture, technical competence can sometimes overshadow ethics.

An exploiter who demonstrates exceptional blockchain knowledge may gain a strange form of admiration online. Communities occasionally romanticize them as genius coders rather than financial predators. This creates an environment where attackers may feel incentivized to manage their public image rather than simply escape.

The blockchain itself becomes a stage.

Every on-chain message, wallet interaction, or negotiation is watched in real time by the crypto community. Exploiters know this. Protocol teams know this. The audience becomes part of the psychology.

On-Chain Negotiations: Diplomacy Through Wallets

One of the most surreal developments in DeFi is the emergence of on-chain diplomacy.

Instead of courtroom negotiations, conversations happen through:

• Blockchain transaction messages
• Governance proposals
• Public wallet communications
• Twitter posts
• Forum threads

Protocols have openly negotiated with attackers, offering immunity deals or bounty agreements if funds are returned. In some cases, exploiters counteroffer.

The dynamic resembles hostage negotiation more than cybersecurity.

Why does this happen?

Because DeFi lacks many traditional enforcement mechanisms. Smart contracts operate globally, often without centralized control. Legal systems move slowly across jurisdictions, while crypto moves instantly. As a result, protocols frequently prioritize fund recovery over punishment.

This creates a psychological power shift.

The exploiter temporarily controls leverage, while the protocol attempts persuasion rather than force. Both sides understand that a partial recovery may be preferable to a total loss.

Ironically, decentralization unintentionally created environments where negotiation often becomes more practical than absolute justice.

The Ego Factor

Many DeFi exploits are not purely financial. Ego plays a major role.

Attackers often leave clues, messages, memes, or taunts. Some appear to enjoy demonstrating superiority over protocols managing billions in user funds. The exploit becomes proof of intellectual dominance.

In psychology, this resembles a performance of mastery.

The attacker is not only extracting money — they are proving they can outsmart entire teams, audits, and ecosystems. Public attention amplifies this behavior. Every exploit instantly becomes headline news across crypto Twitter, Telegram, and Discord.

For certain personalities, the recognition itself becomes rewarding.

This may also explain why some exploiters negotiate publicly instead of disappearing quietly. Remaining engaged keeps them central to the narrative. It transforms the event into an ongoing spectacle where the attacker maintains influence long after the initial exploit.

Why DeFi Keeps Repeating the Cycle

The uncomfortable truth is that crypto culture sometimes unintentionally reinforces these dynamics.

Protocols often:

• Celebrate returned funds as “successful resolutions.”
• Offer large bug bounties after attacks.
• Avoid aggressive legal escalation.
• Publicly thank exploiters for cooperation.

While understandable from a recovery standpoint, these responses may normalize exploit-driven negotiation strategies.

Attackers observe previous cases and learn:

• Exploit first
• Negotiate later
• Keep a percentage
• Rebrand afterward

This creates a dangerous incentive structure where gray-hat behavior becomes strategically attractive.

The industry may eventually need to confront a difficult question:

At what point does rewarding exploiters encourage the very behavior protocols claim to oppose?

The Human Side of Decentralized Crime

DeFi exploits are often discussed purely in technical language:

• Flash loans
• Oracle manipulation
• Reentrancy attacks
• Bridge vulnerabilities

But behind every exploit is human psychology:

• Fear
• Ego
• Rationalization
• Reputation management
• Social influence
• Moral ambiguity

That human layer is what makes DeFi exploits uniquely fascinating.

The blockchain did not remove human behavior from finance. It amplified it in public view.

Every exploit becomes more than theft. It becomes negotiation theater — a live demonstration of how anonymity, incentives, transparency, and online culture reshape morality in digital economies.

And perhaps that is the strangest part of all:

In crypto, hackers do not always want to disappear.

Sometimes, they want to be understood.

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TLDR

• XRP price has stayed under pressure for over a week as bearish trading conditions persisted.
• CryptoQuant data shows XRP liquidity on Binance has dropped close to zero.
• Lower liquidity suggests fewer sell orders are available on the exchange.
• Reduced supply on Binance may ease selling pressure in the short term.
• Analysts say low liquidity conditions can attract large buyers into the market.

XRP price has remained under pressure for over a week as trading activity slowed. New data from CryptoQuant shows liquidity on Binance has dropped close to zero. Analysts say the shift could reduce selling pressure and support a price recovery.

XRP Price Faces Supply Tightening on Binance

XRP has traded in a bearish range for several days as sellers dominated the market. However, fresh on-chain data points to a shift in supply conditions. CryptoQuant reported that XRP’s 30-day liquidity index on Binance has fallen sharply. The metric now sits close to zero after declining during the recent price drop.

Liquidity measures how easily traders can execute orders without affecting price levels. Lower liquidity often reflects thinner order books on exchanges. With fewer sell orders available, large buy orders can move prices more quickly. This condition often changes short-term trading dynamics.

The drop in liquidity suggests that XRP supply on Binance has reduced. At the same time, demand levels appear to be holding steady. CryptoQuant data highlighted the rapid decline in available liquidity during the recent downturn. This shift occurred as XRP continued to trade lower across the broader crypto market.

Liquidity Crunch May Ease Selling Pressure

Market analysts state that reduced liquidity can limit selling pressure during weak price trends. Thin order books reduce the ability of sellers to absorb incoming buy orders. Analysts explained that low liquidity often attracts large buyers seeking price inefficiencies. These participants can enter positions with smaller capital inflows. Historical data shows similar liquidity squeezes have preceded price rebounds. In earlier cases, XRP recorded sharp upward movements shortly after supply tightened.

A CryptoQuant analyst stated that “liquidity near zero indicates reduced sell-side pressure.” The analyst added that such conditions can support upward price movement. The recent data follows a broader slowdown in exchange activity across crypto markets. Trading volumes have declined on several major platforms, including Binance.

XRP continues to trade under pressure despite the changing liquidity conditions. The token has not yet confirmed a reversal in price action. As of May 25, Binance data shows XRP liquidity remains near its lowest recorded level.

Bitcoin (BTC) needs fresh spot demand to absorb the rising BTC supply across exchanges and exchange-traded funds. Recent exchange inflows and ETF outflows created nearly 34,000 BTC in local selling pressure, while derivatives data showed the latest recovery was driven mostly by short covering. 

Bitcoin researcher Axel Adler Jr. said BTC exchange and exchange-traded fund (ETF) activity continue to show a local supply imbalance despite the latest recovery. The weekly exchange netflows climbed by roughly 18,000 BTC, indicating more coins were added to exchanges than were withdrawn. Higher BTC inflows increase the near-term selling supply.

Bitcoin weekly exchange netflows. Source: CryptoQuant

The spot BTC ETFs also recorded net outflows of nearly 16,000 BTC during the same period. Adler said that the institutional flows failed to absorb exchange supply and instead reinforced the recent risk-off phase in the market.

The two metrics generated around 34,000 BTC in sell pressure across exchanges and ETFs. Adler noted that the BTC exchange netflows likely need to shift back toward neutral or negative territory before the price rebounds gain stronger momentum.

Glassnode analyst cryptovizart also noted that daily ETF trading volume has dropped to below $20 billion, down from above $50 billion in late 2025. Lower trading activity points to fading speculative demand through traditional finance channels and to weaker spot absorption during rallies.

Spot BTC ETF trading volume. Source: Glassnode

Related: BTC price to attack $80K shorts on Iran peace deal: Five things to know in Bitcoin this week

Bitcoin open interest reset eases pressure

The rebound toward $77,800 followed a brief dip below the $75,000 support level, with buyers quickly reclaiming lost ground. The recovery also aligned with improving investor sentiment after reports of a possible US-Iran peace deal reduced broader market risk concerns and lifted appetite for risk assets.

BTC price, spot CVD, aggregated open interest, and funding rate. Source: Velo chart

Derivatives data showed the rally was largely driven by traders closing positions. Aggregated Bitcoin open interest fell to around 250,000 BTC from nearly 268,000 BTC during the rebound phase, then recovered slightly to 254,000 BTC on Monday. The decline pointed to short covering activity as bearish traders exited positions after BTC reclaimed support.

Aggregated funding rates also cooled during the move higher, dropping to around 0.0026 from recent highs near 0.008 while staying in positive territory. The reset reduced the immediate long-squeeze risk and showed that leveraged long positioning had become less crowded during the recovery.

Crypto analyst Rei Researcher noted that the daily funding rate has remained negative since February 2026, indicating that short traders continue to pay longs to hold positions. The analyst added that Bitcoin’s ability to stabilize near $77,500 despite persistent short-term pressure points suggests steady spot demand is absorbing supply on higher time frames.

Glassnode data also showed signs of cooling sell pressure. The price momentum weakened by 21.7% during the drop, while spot cumulative volume delta (CVD) and futures CVD climbed by 77.2% and 35.5%, respectively. The shift indicated that selling activity began to ease as market positioning became more balanced.

For BTC to build momentum toward the $80,000 level, open interest and spot demand need to rise in tandem with price.

BTC perpetual CVD data. Source: Glassnode

Related: Bitcoin risks drop to $72K as demand metric hits 2026 lows

TLDR

• A third-party module exploit drained about $3.2 million from 86 Gnosis Safe wallets.
• Squid confirmed it had no role in deploying or operating the vulnerable contract.
• The attacker bypassed security by using a fake validation string accepted by the module.
• Stolen funds were swapped through Uniswap V3 pools into a worthless attacker-created token.
• The attacker consolidated around $3.07 million in DAI into a single wallet.

A third-party module exploit drained about $3.2 million from 86 Gnosis Safe wallets across Ethereum and Base. Squid clarified it had no role in the vulnerable contract and distanced itself from the incident. Security firms Blockaid and PeckShield confirmed the attack unfolded within roughly two hours.

The compromised contract appeared on Basescan under the name SquidRouterModule. However, Squid stated the module was unrelated to its core infrastructure.

Squid Denies Involvement in Exploited Module

Squid co-founder Fig addressed the issue in a public post on X. He said, “The contract called SquidRouterModule is unrelated to Squid.”

The project explained that its core router remained separate and unaffected. It added that the team had no knowledge of who deployed the contract. The official Squid account also corrected early reports linking the exploit to its system. It stated that the module only shared the name and had no direct connection.

The team emphasized that the product was built by a third party. It said the module integrated with several protocols without prior coordination. Squid confirmed it had no contact with the developers behind the contract. The project maintained that its systems remained secure throughout the event.

Exploit Drained Funds Through Fake Validation and Swaps

According to investigators, the module accepted a caller-supplied string as proof of message security. This flaw allowed attackers to bypass signature verification. Once validated, attackers executed arbitrary calldata from affected Safes. This enabled unauthorized transfers of tokens without owner approval.

Blockaid reported that the attacker used Foundry-based exploit contracts. These contracts impersonated authorized delegates through the module’s DelegateBundler function. The attacker routed stolen assets through Uniswap V3 pools. They swapped tokens into a worthless asset labeled “u.”

After swaps, the attacker removed liquidity from those pools. They then consolidated the funds into about $3.07 million in DAI. PeckShield confirmed the funds now sit in a wallet starting with “0xa447…54859.” The firm also traced initial funding of 2.1 ETH to Tornado Cash.

The incident adds to growing crypto losses in 2026. DeFi platforms have recorded over $770 million in total losses this year. April alone saw around 30 separate incidents. These events resulted in more than $630 million drained from various protocols.

Squid recently raised $6 million in a funding round led by North Island Ventures. Ripple, Dialectic, and Borderless also participated. The project stated it has completed nine independent audits. It also reported 99.99% uptime with no prior exploit incidents.

Cross-chain compliance gaps at blockchain bridges are crypto’s most dangerous AML blind spot, ThetaRay CEO Brad Levy says.

Compliance teams monitoring crypto transactions lose the trail the moment assets cross a blockchain bridge. Brad Levy, CEO of ThetaRay, calls this the Cross-Chain Compliance Gap, the blind spot that emerges when funds move from Ethereum to a Layer 2 or alternative chain and the transaction data fragments at the crossing point.

“Somewhere between where Ethereum ends and an L2 or alternative chain begins, the data becomes fragmented as the money moves through blockchain bridges,” Levy said. In 2026, real transaction volumes are scaling through these routes and legacy banks are encountering a frontier their AML systems were never built for.

Why blockchain bridges are the gap no one is watching

TRM Labs has documented that most illicit actors in 2026 move assets through bridges and privacy tools within minutes. The structural problem: retail bank AML sees fiat, blockchain analytics tools see the crypto side, and neither sees the bridge.

“No one sees the bridge,” Levy said. “Since ThetaRay’s AI is agnostic to the rail, it provides the connective tissue that monitors the behavioral fingerprint of the individual across both worlds.”

ThetaRay recently flagged a UK retail customer declared as a packer, an occupation not associated with high-volume financial activity. The system found she had received over £134,000 from nearly 40 counterparties, including nine companies with no previous history, then executed regular crypto purchases multiple times a month, often on consecutive days.

“While traditional rule-based systems would have classified these as isolated transfers, our AI connected the dots and flagged them as an unlicensed crypto exchange or illicit investment portal,” Levy said.

Crypto.news has reported on AML becoming the dominant enforcement axis in crypto in 2026, with fines exceeding $900 million in the first half of 2025 alone.

How criminals use chain-hopping to reset their financial history

Levy describes L2s and blockchain bridges as reset buttons, resetting the financial history of funds at each hop. By the time a legacy bank flags a fiat withdrawal as suspicious, the money has already moved through multiple chains.

“Criminals understand that a retail bank’s AML system isn’t talking to a Solana explorer in real time,” Levy said. “They reset their financial history by leveraging the complexity of L2s and bridges.”

Crypto.news has tracked CertiK research showing AML enforcement overtook securities classification as the primary risk axis for crypto businesses in 2026.

What the next two years will demand from banks and regulators

Levy’s outlook for the next 12 to 24 months is a structural shift he calls “converged monitoring,” collapsing separate Retail AML and Crypto Risk teams into a single AI-driven overlay that tracks an individual’s behaviour across all transaction types.

“Having separate teams for Retail AML and Crypto Risk will no longer be a viable strategy,” Levy said. The overlay he foresees maintains a risk profile for each individual continuously, not just when they cross a monitored threshold on a single rail.

Crypto.news has covered the US Treasury proposing AML rules for stablecoin issuers under the GENIUS Act, treating payment stablecoin operators as financial institutions under the Bank Secrecy Act.

Levy sees the direction as unambiguous. “If there are any blind spots between fiat and crypto over the next year, they will be viewed as governance failures,” he said.

Stanford cryptographer Dan Boneh says Bitcoin should prepare for quantum risk now, but warns a rushed post quantum migration could cause worse failures than the threat itself.

Bitcoin’s post quantum transition debate is escalating after Isabel Foxen Duke highlighted a fresh interview with Stanford cryptographer Dan Boneh, who argued that the bigger near term danger may be a buggy migration rather than an imminent quantum attack on the network.

In the interview, Boneh said, “Don’t panic, but don’t ignore,” framing quantum risk as a serious long range engineering problem rather than an immediate doomsday event for Bitcoin (BTC).

His most pointed remark was the one amplified on X: “If you try to aggressively move to a post quantum architecture, like for example by 2029, I think that would be a mistake for the blockchain,” adding that “a hasty transition to post quantum, in my mind, is more likely to cause a catastrophic bug than we’ll be attacked by a quantum computer.”

Why is Bitcoin discussing quantum now?

The immediate trigger is a March 30 whitepaper from Google Quantum AI, coauthored by Boneh, which said Shor’s algorithm against the 256 bit elliptic curve discrete logarithm problem on secp256k1 could run with “≤1200 logical qubits and ≤90 million Toffoli gates” or “≤1450 logical qubits and ≤70 million Toffoli gates.”

The paper added that, on superconducting architectures with ${10}^{-3}$10−3 physical error rates and planar connectivity, those circuits “can execute in minutes using fewer than half a million physical qubits.”

Boneh told Foxen Duke that Google’s estimates matter, but he still views a cryptographically relevant quantum computer before 2035 as possible yet unlikely under current funding levels. He said anything by the end of the decade “seems very aggressive,” though not impossible if the field were treated like a national priority.

That tension has already spilled into Bitcoin governance. BIP 361, titled “Post Quantum Migration and Legacy Signature Sunset,” says more than 34% of all bitcoin had revealed a public key on chain as of March 1, 2026, leaving those UTXOs theoretically vulnerable to a sufficiently powerful quantum attacker.

What is Boneh actually proposing?

The dispute is broader than timelines. Boneh argued Bitcoin should strongly consider hybrid signatures that combine existing elliptic curve cryptography with post quantum schemes, rather than forcing a binary jump. He also said he would prefer lattice based signatures over purely hash based designs because they preserve more room for threshold signatures and further cryptographic innovation.

That argument sits inside a wider industry push. In another crypto.news report, Coinbase advisers similarly warned that the threat is not immediate but preparation cannot wait. And in crypto.news coverage, the current consensus remained that no existing machine can break Bitcoin today, even as the estimated resource threshold is falling.