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Imagine you're a crypto criminal who has just made it big by nabbing tens-of-thousands of Bitcoin in one of the most high-profile virtual exchange hacks in history. With multiple global cyber enforcement units on your trail, you'd lie low. Maybeeee even fake your own death.

Yes, but: That's not how the alleged Bonnie and Clyde of the 2016 Bitfinex hack played it. One of them has a dubious career as an amateur rapper and publicly displayed a life of wealth.

Driving the news: On Tuesday, the Department of Justice announced that it had seized over $3.6 billion in cryptocurrency related to the 2016 Bitfinex hack, arresting a couple in the process for conspiring to launder.

Of note: Ilya Lichtenstein, 34, and his wife, Heather Morgan, 31, weren't hiding out in Russia or China. Instead, the two were highly active in U.S. tech and cultural circles, with Morgan gaining heavy airtime yesterday for not-s0-catchy music released as "Razzlekhan."

Lichtenstein, according to his LinkedIn, co-founded a Y-Combinator startup known as MixRank. As a Forbes contributor, Morgan — ironically — authored a piece on how to "protect your business from cybercriminals." 

The duo weren't always clever when it came to online security — leading in part to the seizure. Many crypto holders, out of an abundance of caution, store the keys to their digital wealth offline rather than online or with a third-party.

Their private keys, however, were found in an encrypted cloud-storage account that law enforcement obtained via search warrant, the complaint states. A spreadsheet tracking the funds was also found in the storage.

Zooming out: Parts of the hack were undoubtedly sophisticated as the duo moved funds through an intricate web of accounts. But that hack occurred in 2016. Even more sophisticated laundering practices and technologies have since emerged.

Think privacy-focused wallets like Wasabi, as Tom Robinson, chief scientist at blockchain analytics firm Elliptic, tells Lucinda—technologies regulators are now grappling with how to oversee.

The DOJ notably did not accuse the couple of the actual hack. 

But, with this new announcement, the enforcement officials are emphasizing their technological know-how and ability to go after criminals — even as the criminals grow smarter.

Bottom line: Don't launch a rapping career if the feds are on your trail. Twitter will find you.

1 big thing: Bitfinex's Bonnie & Clyde 

Illustration of a coin wearing a set of joke glasses

Betterment is the latest fintech company to make a foray into digital assets, with its acquisition of automated crypto investing startup Makara.

Why it matters: From stock trading apps to digital wallets, seemingly everyone in fintech — and finance more broadly — is figuring out how to offer crypto exposure to clients.

Betterment president Mike Reust tells Ryan that prior to the acquisition, his company was planning to add an investment option for digital assets because it was already seeing customers trading crypto on their own.

"It’s become clear that crypto is interesting to customers and it's not going away," Reust says.

But the Makara deal will help it accelerate its entrance into the digital asset space, and do so in a way that aligns with its existing robo-adviser business.

Between the lines: Makara is one of the first SEC-registered automated investment advisers in the crypto space. But it’s basically like a robo-adviser for digital assets.

Rather than having users individually pick the coins they want to invest in, Makara offers up “baskets” or indexes of vetted cryptocurrencies and does the work behind the scenes of rebalancing assets and shifting to currencies its algorithms recommend.

Makara is only a couple of years old — it was founded in 2020 — but it was spun out of hedge fund Strix Leviathan, where the tech had been used to manage the fund’s crypto portfolio.

For Betterment, this offers clients the same type of long-term investing and portfolio management but just in a different type of asset class.

“This is a way to be more inclusive … but also give [clients] better outcomes than they were going to get on their own,” Reust says.

What’s next: In the short term, Makara will continue to operate and service existing clients, while also becoming available to Betterment clients. But the plan is to eventually offer an integrated crypto offering under the Betterment umbrella.

2. The BFD: A robo-adviser buys a crypto-adviser

Aside, the tech platform behind giving platform Daffy Charitable, raised $17.1 million in Series A funding, with Ribbit Capital leading the round.

Why it matters: Daffy is a non-profit, but well-known names and investors are betting that there is a business in encouraging people to give more of their wealth away — and perhaps in helping them save on their taxes, too.

How it works: The company seeks to give more folks easy access to setting up donor-advised funds — a highly popular kind of investment account that offers rich tax rewards most associated with the well-to-do.

Former Wealthfront CEO and Daffy co-founder Adam Nash notes that more consumers want to give, but face friction when actually trying to do so. 

Daffy attempts to make it simpler and more of a habit by instead asking users how much they'd like to give in, say, a year or month, then setting up the DAF to invest in the likes of stocks or crypto. The donor chooses which causes will eventually receive the funding.

Notably, Daffy also allows users to give stocks or crypto to the DAF.

Context: Daffy and its investors — including Coinbase Ventures and XYZ Ventures — aren't alone in their bet. Groundswell, a company focused on employee giving, raised $15 million in seed funding last year. Another dubbed Overflow raised a $10 million series A too last year.

"We think, as well as our investors do, that philanthropy is one of the sub sectors in fintech that's going to be increasingly a focus for the next decade, especially coming out of the pandemic," Nash tells Lucinda.

3. Betting on giving wealth away 

Illustration of a charity ribbon made from a hundred dollar bill. 

Apple to turn its hardware into credit card readers (Axios)

Apple officially announced plans to open its iPhone up as a contactless card reader and payment processor later this year, fanning worries that it could hurt Block, the parent company of Stripe. But payment processing is just a small part of Square's offering to merchants, Axios' Ryan Lawler and Hope King write.

American Express launches its first all-digital consumer checking account (TechCrunch)

Everything is converging: Digital wallet startups want to offer stock trading. Stock trading apps want to launch digital wallets. They all want to offer crypto. And now AmEx — one of the most prominent credit card companies — is getting into banking.  

FTX CEO Sam Bankman-Fried spent $5.2 million on two super PACs backing President Joe Biden last year. Finbold meanwhile notes that money spent on crypto lobbying in particular reached $4.9 million last year.

Japan’s messaging giant LINE to trial crypto payments for online merchants (Blockworks)

Trials will run March 16 through Dec. 26, enabling customers to use Line’s LINK token at LINE Pay online merchants. The company’s blockchain network will be used for the trial.

4. Credit score

Illustration of a credit card headed towards a goal post to score a touchdown.

• Compute North, a bitcoin mining infrastructure firm, raised $385m in equity and debt funding. The $85m in equity financing was co-led by Mercuria and Generate Capital, with participation from National Grid Partners. The $300m in debt was also provided by Generate Capital. http://axios.link/SXwO

• EasyKnock, a New York-based residential sale-leaseback platform, raised $57.2m from Blumberg Capital, Gaingels, Moderne Ventures, QED Investors and Viola FinTech. www.easyknock.com 

• Seyna, a Paris-based insurance platform, raised €33m in Series A funding led by White Star Capital and Elaia Partners, with Global Founders Capital, Allianz, and la Financière St James also participating. http://axios.link/ugmN

• Slyp, an Australian digital receipts startup, has raised A$25m from investors that include Sayers Group and Catch Group’s Gabby and Hezi Leibovich. http://axios.link/wyzE

• Thndr, an Egyptian investing app, raised $20m in Series A funding from Tiger Global, BECO Capital and Prosus Ventures. http://axios.link/UMhL 

• ComplYant, a Los Angeles-based digital tax assistant for small businesses, raised $5.5m in seed funding. Craft Ventures led, and was joined by Mucker Capital, Slauson & Co. and Techstars. http://axios.link/HTU9

• Fintern, a London-based lending startup, raised £8m in Series A funding led by international investment firm Hambro Perks. The round also included an equity investment from Fintern’s primary debt provider, Varengold Bank. http://axios.link/LtYJ

• TripActions agreed to acquire Comtravo, a travel management company serving the German, Austrian, Swiss, and Scandinavian regions. www.comtravo.com/en

5. Deals of the day

• Katie Haun’s new crypto venture firm hired former Polychain Capital  general partner Sam Rosenblum as a partner and deal team lead. 

6. It's personnel

Happy Wednesday, Fintech Deals readers. Can you believe we're halfway through this week?

Situational awareness: Crowdfunding site GoFundMe is at the center of a First Amendment maelstrom after taking down a campaign formed to raise money for an anti-vaccine-mandate protest in Canada.

And yes, somehow, Elon Musk is a part of this story.

Tell your fintech friends, family, crypto pals, and others about this newsletter. They can sign up here.

February 09, 2022

1 big thing: Bitfinex's Bonnie & Clyde