With help from Sam Sutton
In recent weeks I’ve written about “on-chain analysis“ of cryptocurrency, and what it can and can’t tell regulators about the mechanics of crypto’s financial crisis.
Analysis is an important part of the crypto industry. In theory, the shared public blockchain behind each cryptocurrency should give the system more transparency than traditional finance, and firms scour its data for important information about how currencies flow. In practice, however, that data can only tell you so much, and even experts are often forced to rely on guesswork to fill in their understanding of what really happened.
Now, the courts are in for a crash course in the limits of on-chain analysis, courtesy of DFinity Foundation, a Swiss nonprofit that works on a blockchain network called the Internet Computer.
Last week, Dfinity sued the New York Times and Arkham Intelligence, a crypto research firm, in the Southern District of New York, alleging defamation and unfair trade practices related to a June 2021 Times article about a crash in the price of the blockchain’s tokens.
The complaint alleges a plot — aided behind the scenes by an unnamed “uber-wealthy” party — to orchestrate misleading coverage of the Internet Computer project. The alleged goal was to suggest that insiders profited as the price of the tokens plummeted, while average investors were left holding the bag.
According to the complaint, the Times article relied on Arkham’s misleading analysis of the project’s blockchain records.
Among the arresting details, the complaint alleges that the authors of the offending Arkham report have fled from Austin to London, where they “reside—frat boy style—in a huge mansion.” It also cites a website called “CryptoLeaks.Info” that purports to show people affiliated with Arkham making incriminating confessions in…
