A hacker drained nearly the entire

Bitcoin reserve backing one of crypto's

biggest side chains. Then another

blockchain rewrote history and a third

shutdown completely. We have a lot to

talk about today on the Daily Wolf.

Let's go.

What is up everybody? Welcome to the

Daily Wolf on Yahoo Finance. I am your

host Scott Melker, also known as the

Wolf of All Streets. We were off

yesterday for Labor Day, which is the

holiday that everybody celebrates, but

nobody understands when you don't labor.

We were not laboring yesterday, so we

did not have a show, which means that we

have to come back today and pretend that

it's Monday on a Tuesday and talk about

one Michael Sailor. First story of the

day right here. Strategy has repurchased

176 million of STRC and increased the

size of its digital credit securities

repurchase program from 1 billion to$2

billion. They still hold 845,50

Bitcoin and 6.5 billion of USD assets.

So the story here obviously is that they

spent money this week repurchasing STRC

trying to push that up back to par near

$100. Last I checked it was floating

between $97 and $98. So it is almost

there and this is seemingly starting to

work. The question being what will

happen when it does return to par? Will

they start using STRC once again as

their Bitcoin buying machine? But

perhaps the biggest story is how they

did this this week. They did not dilute

Micro Strategy or Strategy holders and

shareholders. They used the second cash

reserve that they've been building that

we've been telling you about to buy back

this STRC. So, they did not touch their

original cash reserve which is used for

these dividend payments and expenses.

They used the cash that they had raised

secondarily that gave them optionality

for buying back MSTR, buying back STRC,

buying Bitcoin. So that flexible USD

cash declined from approximately 1.61

billion to 1.44 billion. And once again,

their Bitcoin holdings remained

untouched. So they bought no strategy

this uh Bitcoin this week. They sold no

Bitcoin this week. It seems that

Strategy has found something else they

like at a discount, which is their own

securities. Now, as I've told you many

times, Strategy uniquely among the

Bitcoin treasury companies has the scale

and liquidity to defend its very complex

capital structure. The companies copying

it uh do not necessarily have those

advantages. Which leads us into the

second head scratcher of a story right

here. MetaPlanet shares fall nearly 10%

after option pool review and CEO

statement. Tokyo listed Bitcoin Treasury

firm details option pool cap 5-year lock

up and CEO share exercise after investor

question. So to break down for you what

happened here, first of all, if you

don't know, Metaplanet was effectively

the strategy of Japan. And when

MetaPlanet launched as one of the first

Bitcoin treasury companies, it was very

advantageous for Japanese investors to

buy this instead of buying Bitcoin

because of a massive tax advantage in

the way that Bitcoin was treated. Much

higher capital gains for buying and

selling Bitcoin than for buying and

selling a security. So Metaplanet

performed exceptionally well. It was one

of the darlings of the treasury boom.

Well, now they got planning to do. The

problem here is that they have a

executive pool of shares that was pegged

not at a fixed amount but at 20% of the

company's fully diluted share capital.

So if you understand how treasury

companies work, they effectively dilute

shareholders by creating more shares and

selling those to buy Bitcoin, which

works exceptionally well when MNAV is

high and increases Bitcoin per share.

Well, they pegged it at 20%.

So, what happens is every time that they

made new shares to dilute shareholders

to buy Bitcoin, they were also

effectively diluting shareholders to pad

their own pockets with the shares in

that executive pool that rose with it.

And now, if you want to know just how

crazy this is, by the way, they said in

their own filing that the mechanism

amplifies the dilution board by existing

shareholders. If you want to know how

bad this is, they froze it in August

because they realized it was so bad at

319,464,000

executive shares. That pool started at

46.5

million shares. So that means that the

pool of executive shares grew by

approximately 273.5

million shares, which is nearly 7 times

its original size, an increase of

roughly 595%.

So, uh, obviously shareholders had a lot

of questions and interestingly they

froze it in August, but they did not

restore the allocation to where it stood

when MetPlanet began its Bitcoin

strategy, which seems like you would

probably try to roll that back. Now,

interestingly, the CEO, Gervich,

exercised rights that produced 64

million shares

and now owns approximately 6.2% of

MetPlanet. So yeah, he exercised rights

that produced 64 million shares when the

original pool as I told you was 46.5

million shares. Now also there's a huge

shareholder in Metaplanet called MMXX

Ventures. And it came out that the CEO

although he does not have control has a

meaningful percentage of that and MMXX

sold MetPlanet shares during the

company's Bitcoin driven rally when it

was massively going up. and MetaPlanet

has not fully disclosed MMX's ultimate

ownership of how much the CEO personally

benefited, which creates a separate

conflict of interest question alongside

the expanding executive option pool. So,

this is precisely why Strategy's

financial engineering can never be

copied by another company, which I've

told you for years. Strategy has a

multi-year lead here. Deep liquidity and

different securities designed for

different investors. Metaplanet

basically copied the visible part but

not all of the sensible parts

underneath. Now whether they

intentionally meant to pad their pockets

or not that remains to shareholders to

decide and whether they're comfortable

with that dilution remains uh for

shareholders once again to decide. But I

couldn't imagine owning a company that's

purposely diluting shareholders to buy

Bitcoin and then also purposely diluting

shareholders to pay the executives for

the right to create more shares and buy

Bitcoin, right? Like there's guys right

now sitting at Bitcoin treasury

companies somewhere who have done

nothing in a year and a half except for

watch a chart who are getting paid

millions of dollars and that's why

Bitcoin treasury companies are largely

fundamentally broken. Now what a crazy

story. MetaPlanet shareholders are

questioning who controls their company

across crypto networks. The more

alarming question is who controls the

ledger? Which brings us to the biggest

story of the weekend. Bitcoinbased

Liquid Network says $320 million

withdrawn and hack. This is going to be

a Netflix movie at some point. So Liquid

is a Blockstream developed Bitcoin side

chain. For those of you who don't know,

Blockstream was founded by Adam Back,

who many believed was Satoshi Nakamoto.

We are talking about the OGs of OGs of

Bitcoin. Definitely the high priests of

this asset class. Those who should

understand security better than anyone

else. And once again, oops, you got some

splain in to do, right? What happened

here? Gosh, I it's so hard to even

unpack all these things because it's

such nonsense. So, users deposited

Bitcoin into a federation controlled

wallet and they receive LBTC to use on

liquid. So effectively you have LBTC

that's backed by LB that's backed by BTC

one for one and then you can go use LBTC

to earn yield and do other things. So

what happened here is a purported white

hack, white hat hacker, so luckily this

person was a white hat and communicated

with them, exploited a bug in elements,

which is the software underlying liquid.

That bug allowed approximately 4,000

LBTC to be created without depositing

any actual BTC. And then the attacker

sent the fake 4,000 LBTC to something

called Sides Swap for the normal

withdrawal process. and the LBTC was

burned and the Liquid Federation

released nearly 4,000 genuine Bitcoin,

which is approximately 95% of Liquid's

reported Bitcoin reserve. So, first of

all, they were able to do this through a

software exploit. They didn't need to

hack keys. It's yet another novel way

that a massive exploit has happened. But

like, even with all of that, is there no

human being that sees, oh, 4,000 of the

4,200 Bitcoin that we have total are

being withdrawn? Maybe we should check

on this. How does this happen? I

understand in a world of AI how AI can

find these exploits and can steal money.

I don't understand how there's no human

guarding the walls on some of the

biggest and most famous protocols that

we have. So, like I said, there's a

white hat hacker. So, interestingly,

they communicated through uh through

signatures and messages on the Bitcoin

network doing nerd things. And then

these nerds uh sent back 3,400 of the

4,000 Bitcoin back to the other nerds.

Uh they kept 600 Bitcoin as a tip

because they're the good guys. 600

Bitcoin. It's a lot, right? And Liquid

Liquid still has not announced the full

restoration of normal bridge uh

operations. I mean, this was effectively

the blockchain version of printing

counterfeit casino chips and

successfully exchanging them for almost

all the real money in the cashier's

cage. like take a bunch of chips from

outside, bring them in, and go take 95%

of all the money in the casino. That's

what happened here. So, the good news is

that the hacker says he's a good guy.

The bad news is that the good guy still

has 600 Bitcoin, and he doesn't seem to

want to give him back. I too would like

to be a good guy.

Oh man. So, Liquid halted its network to

stop the damage, but uh Kronos went a

bit further. They they changed the past.

That's our next story here. Kronos

rewrites history as Harmony abandoned

its blockchain. So, we have two stories.

Kronos executes controversial blockchain

roll back to recover crypto worth 111

million. I told you about this last

week. This was yet another

uh exploit where they manipulated a

thinly traded collateral and then they

borrowed against that collateral. So,

once again, wasn't really a hack, just

another way that people found to to

exploit. But what happens here is the

Kronos validators decided to halt the

chain and roll it back to a block before

the attack, reversing 111.2 million of

the exploits. So 9.2 million escape

before the intervention. Is that like

the white hat guy who gets to keep 9.2

million? Well, tip. Uh so they discarded

10,961

blocks, which is an hour and 54 minutes

of blockchain history. Nothing says

decentralization like rolling it back

two hours and pretending it didn't

happen, right? So that means that

unrelated transactions by ordinary

people were also rolled back. The

network did resume approximately 11

hours after the attack. So Kronos, okay,

that's one. Here's the other story I was

going to tell you. Once hyped Ethereum

rival Harmony wants to shut its

blockchain over AI threats. So I told

you about the hack on Harmony just a few

weeks ago. I think it was one of our

amazing how not to invest segments.

Uh well, they're going to completely

sunset their layer one now. they're

going to, you know, basically take a

snapshot and give people ERC20 tokens

and put it all on Ethereum. They've

basically just decided they're going to

totally shut it down because it's not

worth it. But they did point at the fact

that they think that they can't outpace

AI hackers, which is what I said. These

old uh these old, you know, chains that

don't really have security budgets or

anybody watching the walls once again

are easy targets for exploit. I think

the best part of this story is though

that the remaining organization for

Harmony plans a pivot into an AI video

remix economy.

They're going to go remix AI videos with

the money that's left uh as their new

business plan. So listen, this is two

endings to the same problem, which is

one had to roll it back, one's

sunsetting completely because in the AI

world, you cannot keep up with the

hackers.

I mean, Harmony's plan to recover from

its blockchain collapsing is remarkably

simple. Stop being a blockchain, right?

So, Recronos required validators to

rewrite the ledger. Tether's largest

pool of USDT reportedly requires only

two keys to control its uh contracts.

This is a pretty scary one. A two key

breach could hand control of 91 billion

USDT to hackers, reports, fines. So,

there's a new rating agency framework

for blockchains, and Tether got a really

bad rating because it came out

basically, and listen, I'm sure they'll

respond to this, but they have a two of

three multi multi-IG uh setup where

basically somebody could take control of

all of the Tether on Tron if they could

hack two people or get access to two

people's wallets and sign the

signatures. This would allow them to

mince new Tether and to transfer Tether

and to do all the bad things you could

possibly imagine. And so Tether

obviously is one of the you would view

as one of the most secure and stable

companies in all of crypto. So even

seeing that they might have a potential

security uh issue when it has not been

reported that this has been exploited by

the way uh should make you scratch your

head as to once again how secure we are

with all of this. And now we have our

final segment that you all love. It's

how not to invest. Hit it.

>> How not to invest. [music]

>> How not to invest.

Here's

the story. Hunter Biden and his laptop

enter the cryptosphere with new memecoin

called Laptop. The good news, America

has finally achieved bipartisan

agreement.

Every political family deserves its own

exit liquidity in the form of you. Yes,

Hunter Biden is launching his own

memecoin with a team. It's called

Laptop. Everybody knows about Hunter

Biden's laptop. It's politically driven.

If certain things happen like Democrats

winning elections and Bitcoin going to

new all-time highs, people will get

incentives and tokens. Interestingly, a

huge part of the pool will be air

dropped to people who have lost money on

the Trump token. All I can say when I

say how not to invest, this might go to

the moon. I have no idea, but I ain't

touching it. And non-financial advice,

do you really want to own Hunter Biden's

laptop coin? Come on. We saw what

happened with Trump coin. We saw what

happened with Melania. Even after they

went up, almost everybody lost money.

Oh, the grift never ends when it comes

to politics and crypto and we need it

to. That is all that I have for you

today. I will be back tomorrow,

Wednesday, for the next Daily Wolf.

Peace.