Suspicious $ARKM transfer case

About this article: This article was written in English by Jerry Peng and edited by Miko Ilas; the Chinese translation was done by Claude 3.7 sonnet and reviewed by Jerry Peng. At the time this article was written, some of the clues had already been discovered and posted by other Twitter bloggers, and those clues that were posted before others have been mentioned in the article as having been posted before others. The article caused a 30% fluctuation in the tokens in question. Arkham CEO Miguel Morel contacted Jerry Peng via 0xScope CEO Phillip Torres to answer questions, and as a result of this exchange, Arkham has modified the token locking methodology to make it more in line with the economics of its tokens. This article originally appeared on https://www.0xscope.com/blog-posts?slug=the-curious-case-of-suspicious-arkm-transfers

Cryptoanalytics firm Arkham is currently under intense scrutiny from the crypto community after crypto sleuth @EmberCN and rival firm Nansen began looking at recent transactions involving the $ARKM token.

On April 3, @EmberCN noticed 25 million ARKM ($62.5 million) being unlocked and transferred out of Arkham's ecosystem fund and treasury. Of this, 6 million ARKM ($15 million) was unlocked and transferred out of Arkham **'s Ecosystem Fund and Treasury. 6 million ARKM ($15 million) has been transferred to a major exchange. Meanwhile, according to Nansen's April 5 tweet thread, approximately 25.2 million $ARKM (worth approximately $56 million) has been transferred to multiple wallets that were not flagged on Arkham's wallet tracking platform.

In order to reveal the bigger picture beyond the initial allegations against Arkham, the 0xScope team conducted a deeper investigation and analysis of recent $ARKM transactions.

Prologue: $ARKM Goes Live on Coinbase + Bullish Whale Moves

On April 2nd, ARKM was listed on Coinbase. At that time, ARKM was positively bullish for the following reasons:

1. During the Coinbase listing $ARKM's centralized exchange withdrawals and fills showed a larger percentage of withdrawals, which could be a bullish sign for traders.
2. Key market makers increased their ARKM holdings. For example, GSR increased its $ARKM holdings from 3.15 million to 13.59 million. Meanwhile, GSR's address used to process centralized exchange fills holds 321,000 $ARKM, up from 79,000 previously.
3. Wintermute, another major cryptocurrency market maker, increased its $ARKM holdings from 469,000 to 2.02 million tokens.
4. On April 1 (the day before Coinbase shelved $ARKM), open positions in $ARKM trading on major crypto exchanges increased by 14%.

However, since the Coinbase listing, Arkham has made some $ARKM transfers that are puzzling to say the least.

Suspicious $ARKM Transfers and Their Implications

When Arkham first released $ARKM Token Economics, it allocated 40.5% of its total $1 billion supply of $ARKM to its investors, core contributors, and advisors. These tokens were locked for one year after they hit the exchange and unlocked linearly for three years thereafter, as per the Token Economics. The $ARKMs hit the exchange on July 18, 2023, so the first unlocking should take place in July 2024.

However, about three months before the first anniversary of ARKM's listing, Arkham violated the terms of its token economics. 0xScope team outlined the actual flow of ARKM tokens as of April 8th:

According to our research, only 355 million $ARKM are in locked contracts, well below the planned 40.5% $ARKM .

Below is a breakdown of recent $ARKM transfers based on surveys conducted independently by 0xScope and other investigators:

1. On April 2, Arkham Treasury sent $20 million $ARKM ($52 million) to address 0x1411, which transferred $5 million $ARKM ($52 million) to 0x0d25. This address then deposited $1 million $ARKM to a Wintermute deposit address on a major exchange. 0x0d25 still holds 0x0d25 still holds $4 million in ARKM, which may be used for future sell-off transactions. For more details, the flow of this token can be viewed on Scopescan.

1. On the same day, Arkham Treasury unlocked 200,000 $ARKM and sent them to address 0x9eac, which has not yet moved its $ARKM holdings.
2. At about the same time, the Arkham Ecosystem Fund unlocked and transferred 5 million $ARKM, all of which went to a major exchange through multiple addresses used by market maker GSR, as shown in this token flow diagram. One address of note, 0xe5d6, was used by GSR to deposit their Xai ($XAI) tokens through the Arbitrum chain.

1. In light of the recent significant $ARKM transfers, we recommend keeping an eye on addresses holding large amounts of $ARKM tokens, especially those that Arkham appears to still control, in order to get ahead of any sell-offs that may be triggered by these whale addresses. For example, on July 18, 2023, when $ARKM began listing on major exchanges, Arkham transferred 30 million of its tokens to the GnosisSafe address 0x0850, which, based on transactions conducted by the owner of that GnosisSafe, we conclude is owned by Arkham. As of today, 30 million ARKM stored at this address have not been transferred.
2. Additionally, a proposal on snapshot.org to authorize the Arkham Foundation to transfer 20 million $ARKM to Treasury Pool 1 was supported by 96 million votes from an address associated with Arkham, ensuring that the total number of votes exceeded the quorum requirement of 70 million.

The Bigger Picture: Changing Token Economics and More

Now that we have a more complete picture of $ARKM trading, not just the recent trades, but also delving into the relevant historical trades, we can deduce some of the potential headwinds and consequences that $ARKM traders should be aware of.

The 0xScope team analyzed the potential risks of $ARKM following the recent token shift.

1. Breaking Investor Trust

   The first consequence of the $ARKM token transfer is that there is solid evidence that Arkham did not follow the token distribution arranged at the time of its token debut. Here is a quick comparison of Arkham's initial token economics with the actual distribution revealed through its recent transactions. Through its recent actions, Arkham has ultimately broken the trust of the majority of its investors. It remains to be seen if the project intends to explain these changes to its community or continue the no comment policy it seems to have adopted over the past few days.

   

2. Bearish Impact on $ARKM Trading

   Those who purchased $ARKM for various reasons will now have to deal with the reality that the project's token economics program will not be followed, which increases the risk of the tokens being sold off in the market. Unless Arkham proactively rectifies this situation, this uncertainty regarding token distribution could create headwinds for future ARKM transactions.

3. A call for community vigilance

   Ultimately, Arkham's latest developments are most important to the community it has built. web3's novel approach to corporate organization empowers token holders to have a say in what happens to the projects in which they invest. This is where Web3 analytics tools such as Scopescan and Scopechat can help crypto investors remain vigilant about their crypto investments, by investigating irregular movements and keeping up to date with the latest whale movements of the tokens in their portfolios, among many other benefits.