Web3 Wavefronts - Digestible News on Crypto, DeFi and AI

IRS Criminal Investigation built a repeatable toolkit that pairs large-scale blockchain analysis with subpoenas and device forensics to trace illicit crypto flows and recover funds. Analysts use vendor tools, clustering, heuristics, and machine learning across billions of transactions to map laundering patterns including peel chains, timing correlations, liquidity footprints, chain hopping, and automated wash paths. Investigators serve subpoenas to exchanges and payment processors to obtain KYC records, exchange logs, IP logs, device identifiers, tax forms, and deposit histories and to anchor on-chain signals to identified subjects; courts have narrowed broad account requests in specific cases from roughly 480,000 accounts to about 13,000 while preserving investigatory needs. Field operations seize phones, laptops, and hardware wallets and use forensic extraction, chip-off techniques, and live-device mirroring to recover seed phrases, wallet files, screenshots, VPN logs, and messaging histories that link on-chain activity to travel, purchases, and communications. IRS CI funds targeted research on privacy and layer-2 protocols, issuing prototype awards up to $625,000 for reproducible methods and datasets and supporting techniques such as traffic analysis, channel heuristics, and endpoint fingerprinting on payment hubs. Partial deanonymization signals aligned with custodial data and subpoenaed cloud artifacts have met thresholds for subpoenas and search warrants in multiple cases. IRS CI participated in operations that disrupted over $10 billion in illicit crypto activity, with public seizures including approximately $1 billion tied to Silk Road funds, about $3.6 billion connected to the 2016 Bitfinex laundering case, about $4 billion from OneCoin fraud, and a $25 million MEV manipulation case in New York. Operational recoveries rely on precise key recovery, exchange cooperation, and cold-storage procedures that preserve evidentiary value, and investigations can span years from exploit to final recovery; interagency task forces and cross-border data sharing have reduced time from exploit to identification. Operation Hidden Treasure coordinates tax-evasion enforcement by auditing mismatches between reported income and observed on-chain activity, identifying large fiat ramps inconsistent with returns, links to known illicit clusters, and unreported mining, staking, or trading income; willful evasion charges carry statutory penalties of up to five years imprisonment and fines around $100,000, plus restitution and supervised release, and civil penalties, accuracy-related tax penalties, and FBAR violations can add further exposure. Exchanges, custodians, and infrastructure providers are advised to implement strengthened KYC and travel-rule procedures, wallet screening and address risk scoring at intake and payout, immutable logs for deposits, withdrawals, staking, and rewards, subpoena response playbooks with counsel sign-off, monitoring of cross-chain bridge activity and chain-hopping near cash-out points, and preservation of provenance and cost-basis records to reduce investigation scope and preserve civil enforcement options. Regulatory proposals and funding initiatives target broader tax and exchange reporting, enhanced analytical tools for privacy-focused technologies and Lightning channels, and enforcement that focuses upstream on infrastructure-level actors and persistent laundering patterns across multiple chains. Source: https://web3businessnews.com/crypto/irs-ci-crypto-tracing/

On April 7 Deputy Attorney General Todd Blanche disbanded the Justice Department’s National Cryptocurrency Enforcement Team and issued a memorandum redirecting federal crypto enforcement, ordering a pause or review of platform-focused investigations, moving crypto work out of the Market Integrity and Major Frauds Unit, and directing personnel and resources away from routine platform probes. The memorandum instructs prosecutors to prioritize investment fraud and instances where digital assets facilitate terrorism, drug trafficking, cartels, human trafficking, ransomware and hacking, and organized crime, and to treat intermediary liability as dependent on deliberate, complicit behavior rather than as a default theory. The directive signals that DOJ will defer more to financial regulators for rulemaking and supervision and will reserve criminal prosecution for actors and conduct that meet the newly stated priority categories. Blanche was confirmed in March 2025, signed an ethics agreement to divest crypto holdings within 90 days and to recuse from matters that could directly and predictably affect his financial interests, and held more than $150,000 in digital assets when the memorandum was issued, prompting ethics scrutiny and questions under federal conflict-of-interest statutes, including 18 U.S.C. 208, and recusal rules. Companies and legal teams are advised that platform-focused criminal risk is reduced but not eliminated, that DOJ will continue to prosecute intermediaries knowingly complicit in investor fraud or in facilitating the listed priority crimes, and that regulatory enforcement of AML, KYC, sanctions, registration, and the travel rule by FinCEN, OFAC, the SEC, and the CFTC will continue and may involve multi-agency coordination. Operational actions recommended to teams include auditing features and controls against the memo’s priority crimes, mapping abuse paths and documenting mitigations, strengthening fraud detection, disclosures, incident response, and investor remediation, maintaining engagement with SEC, CFTC, FinCEN, and OFAC, and tracking the status of DOJ matters to adjust litigation reserves, disclosures, and product roadmaps. Open issues to monitor include whether Blanche completed divestment within 90 days and honored recusal commitments, how many platform investigations will be reopened, closed, or redirected, and whether state attorneys general or foreign authorities will increase enforcement; internally DOJ will reallocate personnel and budgets, retrain prosecutors to apply investigative tools to prioritized crimes, and redeploy analytics toward national security targets. Markets and builders should expect near-term case review and reclassification activity, potential impacts on liquidity, listings, and banking access as legal overhangs change, continued compliance obligations under financial regulators, and an opportunity to harden controls, update disclosures, and resolve legacy exposures while monitoring a fluid enforcement environment. Source: https://web3businessnews.com/policy/doj-crypto-shift-blanche-scrutiny/

Show description: JPMorgan is running a program to test institutional spot bitcoin execution and a limited set of crypto derivatives while assessing product scope, risk controls, and regulatory fit before any launch decision. Internal workstreams are mapping where spot trading, futures, and options would sit within existing desks and approvals and are designing to integrate crypto access into the bank's existing risk, compliance, and capital frameworks. The bank does not plan to offer custody and would allow clients to pledge bitcoin and ether as collateral for secured lending and financing subject to eligibility lists, haircuts, and legal enforceability, with custody remaining with established custodians. A JPMorgan survey showed electronic traders active in crypto rose to 13 percent from 9 percent and those planning to engage increased to 16 percent from 12 percent, which is informing product consideration. U.S. policy guidance permits national banks to act as riskless intermediaries for crypto transactions under compliance and supervision, and JPMorgan is aligning dealer models, booking practices, and counterparty onboarding with that framework. Markets, risk, and legal teams are testing revenue sensitivity, client demand thresholds, capital usage, documentation, governance, and control frameworks; the program has no go-live date and remains gated by internal approvals. JPMorgan is using prior tokenized work, including structuring and settling a short-term commercial paper issue on Solana, to inform trade lifecycle controls, reconciliations, and counterparty risk practices. Existing bank dealers and prime brokers, including Standard Chartered in the U.K. and Goldman Sachs on derivatives, currently offer crypto services; if JPMorgan proceeds it would add routing choices and balance sheet intermediation options for large orders and hedging strategies. Institutions could see increased liquidity, reduced slippage for large orders, expanded hedging tools, and the ability to use bitcoin and ether as collateral for financing, subject to haircuts and eligibility rules. JPMorgan will monitor client adoption, collateral eligibility and haircut schedules, trade booking and capitalization practices, and adherence to regulatory guardrails, and final availability will depend on sustained client flows and cleared internal risk approvals. Source: https://web3businessnews.com/crypto/jpmorgan-institutional-crypto-trade/

Show description: Charles Hoskinson publicly backed Night and described it as a fourth‑generation cryptocurrency. Night launched on December 9, 2025. The token recorded a 24‑hour gain of 24.2 percent and a seven‑day gain of 54 percent, with 24‑hour trading volume of about $8.558 billion, market capitalization near $1.75 billion, and fully diluted value near $2.5 billion. On‑chain activity showed over 11,000 transactions and more than 1,500 makers across a recent 12‑day window, and the token’s early price movement showed low correlation to Bitcoin. Midnight describes Night’s technical design as a hybrid proof‑of‑stake architecture that aims to produce predictable finality, higher throughput, and bounded resource use to stabilize fees. Midnight positions Night to provide standardized proofs, verifiable data flows, and identity‑aware workflows for use cases including compliant tokenized asset issuance, permissioned settlements, attestations, and reporting, and describes the stack as modular and upgradable. Testnet activity is live, a mainnet target is set, and a Glacier distribution drop is planned with eligibility broadened to holders of BTC, ETH, SOL, ADA, and XRP. Wider institutional adoption is contingent on third‑party audits, custody coverage, exchange listings, developer tooling, enterprise pilots, asset manager partnerships, and cloud provider alignment. Delivering sustained low fees and high throughput under real‑world load remains a delivery risk until independent usage and dashboards confirm performance. Multiple competitors are pursuing scaling, privacy‑preserving computation, and identity‑aware access, and regulatory posture and custody readiness will affect institutional flows. Technical market levels cited to monitor sentiment include acceptance above $0.10 for continuation, pullback zones around $0.075, and an invalidation level near $0.06. For builders, opportunities exist to provide tooling, compliance layers, custody integrations, and enterprise pilots that enable institutional use. Night’s token mechanics anchor governance and utility within Midnight, making protocol upgrade paths, auditability, and change management material for institutional evaluation. Liquidity is currently substantial, and its durability depends on exchange depth, broad custody support, and enterprise distribution deals. Credibility of the fourth‑generation characterization depends on whether Midnight delivers a hybrid consensus that sustains low fees under load and an auditable universal proof layer that institutions can integrate; if those outcomes do not materialize, market repricing could follow once usage and regulatory clarity are assessed. Source: https://web3businessnews.com/crypto/hoskinson-night-fourth-gen-crypto/

Show description: Research finds futures contracts on major venues traded at an average premium to spot of roughly 7 percent annualized from 2019 through 2024. The basis behaved as a market-segmentation signal driven by differing pools of demand, leverage rules, and venue microstructure rather than a classical model-driven cost of carry. The basis widened during retail-driven bull runs and compressed after liquidation events, with perpetual swaps and quarterly futures showing different dynamics due to funding cadence and contract structure. Regulated venues such as the CME exhibited lower and less volatile basis levels, while crypto-native exchanges with higher allowable leverage and looser margin regimes showed larger and more variable premiums, indicating segmentation between institutional capital and smaller levered retail flows. Expansion of access via lower minimum contract sizes and micro futures correlated with increases in the basis. Fundamental factors including policy rates, volatility, and stablecoin funding explained part of cross-venue variation, while a substantial residual aligned with arbitrage capacity limits and operational costs such as KYC, capital controls, custody limits, transfer delays, and differing haircut regimes. Cash-and-carry arbitrage often proved unscalable in practice because funding, margin, and settlement frictions increased costs and slowed cross-market execution. Carry strategies produced positive average premiums but exposed allocators to funding liquidity risk and mark-to-market swings that created asymmetric drawdowns when margin calls, credit retractions, or haircut increases occurred. Empirical work documented venue-level distortions including thin liquidity, weak surveillance, wash-trading patterns, and price pushes by participants with cheaper funding that amplified basis levels on some venues. Policy prescriptions included harmonizing margin, collateral, and custody rules, broadening standardized access to regulated derivatives, and improving cross-market settlement and clearing to reduce frictions. Trading recommendations included treating the basis as a time-varying compensated risk, sizing positions to survive sudden basis spikes, precommitting de-risk thresholds, optimizing collateral across rails, diversifying funding lines, preferring venues with reliable margin and settlement mechanics, stress testing for historical basis blowouts including tightened credit and transfer delays, and building financing optionality with multiple lenders. Key metrics to monitor included cross-venue basis spreads and their stress correlations, term structure and perp funding rates, futures open interest by account size, roll slippage across venues, and stablecoin issuance and redemption activity. Near-term expectations included incremental policy harmonization, improved prime-brokerage services, and broader regulated retail access that may compress the gap over time while operational and cross-border settlement frictions persist. Source: https://web3businessnews.com/crypto/crypto-carry-market-segmentation/

Federal authorities and international partners dismantled E Note and seized production servers, prior server copies, full customer and transaction databases, mobile applications, and domains including e-note.com, e-note.ws, and jabb.mn, along with full ledgers, message logs, and service notes tied to more than $70 million in alleged laundering since 2017. The U.S. Attorney’s Office for the Eastern District of Michigan unsealed an indictment naming Russian national Mykhalio Petrovich Chudnovets as the alleged operator and charging him with money laundering conspiracy carrying a statutory maximum penalty of 20 years in prison. The FBI led the operation with assistance from the U.S. Attorney’s Office in Michigan, the German Federal Criminal Police Office, the Finnish National Bureau of Investigation, Michigan State Police, and the Michigan Cyber Command Center. Investigators prioritized cutting off live service, preserving logs and identifiers, and collecting historical artifacts to enable reconstruction of fund flow paths across wallets, intermediaries, and cashout partners and to support tracing, arrests, and asset recovery. Authorities allege E Note operated from 2011 through 2025, combined automated exchange workflows with hands-on brokering and a help desk to move funds quickly with limited customer screening, and facilitated fast conversions and brokered liquidity used by ransomware affiliates and other illicit actors. Recommended mitigation steps presented include confirming licensing and registration for fiat and crypto ramps, strengthening KYC and sanctions screening, implementing on-chain and off-chain transaction monitoring and wallet screening, and preparing playbooks for rapid legal response, data preservation, and cooperation with law enforcement. Source: https://web3businessnews.com/crypto/fbi-dismantles-e-note-exchange/