Welcome, once again, to your week in crypto. Granted, this may read like my week in crypto, but, as a faithful reader of Decrypt (you are, aren’t you?), some of the stories you’ve read may well be the ones I’ve written. So let’s make this our week in crypto. 

And what a week we’ve had: Telegram battled the SEC; hackers exploited a DeFi loophole to net nearly $1 million; and Cristiano Ronaldo’s ended up on the blockchain. 

Cristiano Ronaldo goes on the blockchain

Due to a strange contortion of the cosmos, beloved footballer Cristiano Ronaldo has ended up on the blockchain. Back of the net; goal!; score!; off-side! Choose your favorite soccer-related pun, but don’t let it distract you from the truth: Ronaldo is on the block, and he’s here to stay. 

To be more precise, his likeness has been uploaded onto Sorare, a fantasy football game that’s based on the blockchain, due to a licensing agreement with his soccer club, Juventus FC. The premise is smart: buy a Cristiano Ronaldo card, or win one in a pack, and you’ll have one of only 111 in existence. That’s because the card is a non-fungible token, or NFT, which means it can’t be duplicated or replicated.

Sure, you can copy-paste Ronaldo’s image into another file, and tokenize that, but it’s not the same. If it’s not Sorare-branded—and in today’s super-sized-extra-patty-no-cheese hyper-capitalist economy, that’s what matters—it’s not legitimate. Sorare hopes that, if their fantasy football game takes off, then the value of rare tokenized representations of soccer players will rise. Based on Ethereum, the tokens could be used elsewhere, even as collateral to secure DeFi loans.

Hackers stole nearly $1 million using flash loans on DeFi

This week, a hacker has exploited decentralized finance software tools to net $645,000. Another hack last week used the same modus operandi to grab $350,000. That means that the exploit has caused the system to lose around $1 million.

Hackers used “flash loans” to take money from DeFi programs. Here’s how Decrypt described the incident: “A clever set of instructions—all executed in one big transaction—enabled the trader to leverage current weaknesses in the DeFi ecosystem for their own gain. By using several decentralized financial tools, and a small dose of price manipulation, they were able to take home a lot of Ethereum.” I couldn’t have said it better myself. 

In fact, so big and clever were the hackers, that they caused bZx to shut down their system temporarily while they sort out the issue. One PR flack told Decrypt he saw the bZx team at a stall at ETH Denver. Following the hack, its booth was empty.

Don’t shoot the messenger

Telegram, the operators of the 300 million-strong messenger app, this week defended itself in a court case with the SEC from allegations that the $1.7 billion token sale for its upcoming blockchain network, the Telegram Open Network, constituted an unregistered securities sale. 

The U.S. District Court for the Southern District of New York, "reserved"—meaning the judge, Judge Kevin Castel, will be issuing a written ruling before April 30. The timing matters: Due to a peculiarity in the purchase agreements Telegram issued for Grams, investors could be entitled to claim their money back if the network doesn’t launch by April 30.

A bunch of companies, like Polkadot, Dfinity, and Kik, also raised money in SAFT sales, a fundraising mechanism that’s popular among crypto companies. Kik has been battling the SEC for its cryptocurrency, Kin, for roughly the same thing, since June. The court case near bankrupted Kik, which also ran a messenger app with a similar number of users to Telegram. Kik laid off the majority of its workers, was bought by another company that introduced ads into its app, and split from Kin. 

Yankun Guo, a lawyer who set up her own practice in Chicago to help early-stage startups, told Decrypt that Judge Castel has to weigh up the implications of impeding Telegram’s operations versus allowing the token sale to continue, she said, “which could signal to other companies that their activities are legal and potentially allowing illegal activity to occur.” 

That’s because, lawyers told Decrypt, the counsel for both sides is well equipped, and the project is large enough that it’s likely both sides will battle it until a court ruling is made. The SEC has settled other cases; indeed, this week it forced crypto project Enigma to return funds raised in a $45 million ICO to investors. But if the SEC and Telegram don’t settle, the judge would rule and the case would set a legal precedent, and potentially even result in new legislation being passed. All this would affect the future of token sales, crypto exchanges, and venture capitalists.

On the outcome of the Telegram hearing, Guo said, “The fact that Judge Castel had granted an emergency restraining order signals that he believes the SEC position has merit and is likely to succeed.”

John Berry, a partner at Munger Tolles & Olson LLP, told Decrypt that Judge Castel’s decision was purely to sustain the status quo. “He's got to issue his ruling on a thorny issue,” he said, but added that the longer Judge Castel delays his ruling, the more likely it is he’ll rule in favor of Telegram. 

In this case, the worn-out journalistic cliché applies: if Judge Castel issues his ruling too late, for investors, and Telegram, only time will tell.