Tag: Decred

News: Crypto Fyre Fest collapses, Virgil Griffith pleads not guilty, lawyers push to exhume body of Quadriga’s dead CEO

Only three weeks to go before David Gerard and I meet up together in Vancouver for work on a QuadrigaCX documentary. I hope the jet lag doesn’t take too much out of him. (He’s traveling from London.) I want to see what happens when he has a few drinks.  

Massive Adoption
(Photo: @crypt0fungus)

The comedy gold medal of the week goes to Massive Adoption, a bitcoin conference that’s now being called the Fyre Festival of crypto because of the packages sold. Jacob Kostecki promised roundtrip flights, hotels and parties for $300-$400. In a shock to all (note the sarcasm), he called the whole thing off. But don’t worry, your refunds are coming. It may take months, but they’re coming. Promise. I swear. So sorry about all this.

David Gerard was the one to originally report on #CryptoFyreFest. I wrote two stories for Modern Consensus on the topic. You’ll find them here and here.  

Our friend Jacob appears to have alienated more than a few casual strangers on the internet. His own brother Jedrek has been speaking out about him on social media. According to Jedrek, Jacob has left a trail of debt and broken promises behind him. And yes, Jacob confirmed to me in a DM that Jedrek is indeed his brother.

Jacob’s behavior reminds me a bit of Gerald Cotten’s when he was running HYIP schemes on TalkGold: Collect people’s money, and then later, tell them the scheme/event has collapsed. Blame it on something external to your control. (Jacob, for instance, is now pointing fingers at everyone, even me.) Apologize profusely and start issuing refunds in good faith, but slowly and over a long period, until people finally give up and go away. 

Also, I can’t help but notice the strong resemblance of the Massive Adoption logo to that of this media consultancy firm.

Virgil’s pot of gold?

Virgil Griffith, former head of special projects for Ethereum Foundation, pleaded not-guilty on Thursday to conspiring to violate the International Emergency Economic Powers Act. He flew to New York from his parent’s house in Tuscaloosa, Ala., to enter his plea. I guess this means he is planning to go to trial? I have to wonder where all the money is coming from. Brian Klein, Griffith’s high profile L.A. lawyer, has made several trips to New York and these legal services don’t come cheap. Griffith’s parents and sister have already put up $1 million for his bail. 

Telegram’s ICO investors surface

The SEC alleges that Telegram ran a scheme whereby wealthy investors—including several Silicon Valley heavyweights—would get tokens at a steep discount, then dump them on crypto exchanges to bilk retailers. More of those possible investors are now surfacing in court docs. As reported in CoinDesk, they may include:

QuadrigaCX

The law firm representing QuadrigaCX’s former users are nudging the RCMP to dig up the corpse of Gerald Cotten, the exchange’s dead CEO, to make sure it’s really him and not some random dead guy from India. Everybody is mouthing the word “exit scam,” and this is likely the easiest way to find out. Of course, if the body is exhumed and it’s not Cotten, you can expect a Netflix series soon. (My story in my blog.)

Also, Quadriga’s fifth trustees report is out. Basically, it says that big four accounting firm EY, the collapsed exchange’s court appointed trustee, spent half a million U.S. dollars on fulfilling law enforcement requests in the second half of 2019. The small pile of what’s left of Quadriga creditor’s money continues to shrink. (My story in my blog) 

Reggie Fowler and the mysterious sealed document

Alleged Bitfinex money mule Reginald Fowler was supposed to plead guilty to one count and have the other three counts dropped. But something weird happened when the Arizona businessman stepped before a New York judge on Jan. 17. According to Bloomberg, Fowler was supposed to surrender ~ $371 million in more than 50 accounts. The deal fell apart when he only agreed to forfeit whatever was in the accounts.

Now, according to a Jan. 31 court filing, the U.S. Government has officially withdrawn its plea offer. Nobody knows the full details of what happened that day, but a mysterious sealed document, which appeared in his court filings on Jan. 30, might contain some clues. His trial begins April 28. 

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Spammers gonna spam

In part two of “Decred fires its publicist because Ditto PR could not get the altcoin project a Wikipedia page” David Gerard, who happens to be a longtime Wikipedia administrator, fires back. He wrote an entire blog post calling Ditto out on their no-coiner conspiracy claims. (Ditto originally alluded to Gerard in saying that “a few influential no-coiners have admin power and are intentionally censoring crypto pages.”) He also wrote an article on Wikipedia Signpost, where he talks about the “ongoing firehose of spam” Wikipedia has had to put up with following the 2017 crypto bubble.

Wikipedia has set rules governing what stays up on the site and what gets taken down, and those rules have nothing to do with the site’s administrators. Ditto should know this, as opposed to hiding behind some mad-capped nocoiner conspiracy theory.

Bakkt is a ghost town

The hope was that bitcoin options would lure institution money into the space and send the price of bitcoin through the atmosphere. The unfortunate reality is that literally, no one is trading Bakkt’s bitcoin options. (The bitcoin futures exchange is governed by the Intercontinental Exchange, the owners of the New York Stock Exchange.)

In the last full trading week of January, not a single bitcoin options contract was traded on Bakkt, Coindesk reported. Bakkt launched the first regulated bitcoin options contract on Dec. 9, having rolled out a cash-settled futures and physically settled futures in November and September, respectively. 

Other news

Chainalysis released a report on criminal uses of cryptocurrency in 2019. As long as you overlook some of the marketing fluff—e.g., 60 million Americans bought bitcoin last year—there’s some interesting takeaways. Like the bit about how crooks seem to cash out their bitcoins via over-the-counter trades going through Binance and Huobi. And how, for the first time in Bitcoin’s history, black market sales in crypto surpassed $600 million last year. (See my story in Modern Consensus.)

There’s been more than one news report claiming coronavirus is good for bitcoin. This is utter nonsense. The reason the price of bitcoin goes wildly up and down is because the markets are thinly traded, making them easy to manipulate. Literally, every time there is a crisis happening somewhere in the world, bitcoiners claims that’s good for bitcoin. 

Far right website @Zerohedge had their Twitter account suspended. They always post wild stuff, but apparently, they crossed a line. Buzzfeed said the site claimed without evidence that a scientist at the Wuhan Institute of Virology created the strain of the virus that has led the World Health Organization to declare a global health emergency.  

Bitcoin core developer @LukeDashjr weirdly commented on Twitter that “Masturbation is a very grave sin, arguably even worse than murder.” I thought he was joking, but apparently, /r/buttcoin has an entire collection of his bizarre quotes.

(Updated Feb. 3 at 9 a.m. ET with a few more details on Fowler.)

 

 

 

 

 

 

Posted on by Amy Castor 0

News: Kraken sets out to raise millions, Circle is cutting staff, Bitfinex scores another tiny victory in court

Crypto exchanges are struggling. Revenue growth is not what it was during the bubble of 2017, and regulators are cracking down. You can’t just list any old coin anymore without considering, “Is the SEC going to deem this a security?” And the cost of hiring lawyers, responding to subpoenas, and staying compliant is cutting into profits. So what are exchanges doing? They are laying off staff and/or trying to raise more money, while they hold out hope for the big institutional money that will come any day now.

Kraken and Bnk to the Future

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Recently, customers of Kraken got an interesting email offering a “rare, but limited opportunity.” Some folks thought the email was spam, but it was real.

Turns out, the San Francisco-based trading platform is partnering with Bnk to the Future as a way to raise funds by selling preferred shares of its stock. You can own a piece of Kraken for as little as $1,000. (In the US, you need to be an accredited investor, though.) 

The exchange hopes to rustle up $15.45 million. (Originally, it wanted to raise $10.2 million, but lifted the goal.) As of this writing, Kraken has raised $6.2 million from 942 investors. The crowdfund runs until June 20.

In December, Kraken tried to raise money at a $4 billion valuation, and it reportedly raised $100 million early this year, which it used to buy Crypto Facilities, a regulated London-based crypto derivatives exchange.  

In 2016, Bitfinex also used Bnk to the Future when it encouraged its customers to exchange their BFX tokens to shares in iFinex, the parent company of Bitfinex and Tether. BFX was the token that Bitfinex gave to its customers in compensation for funds they lost when the exchange was hacked. The exchange sold $57.39 million worth of iFinex shares in this manner, basically converting stolen funds to shares.

Bitfinex customers didn’t have much of an option. BFX tokens were dropping in value, and they wanted to get their money back.

Bitfinex/Tether and the NYAG law suit

Bitfinex joyously declared another small legal victory on May 22, when New York Supreme Court judge Joel M. Cohen granted a motion limiting the scope of the documents Bitfinex and Tether have to hand over to the New York Attorney General’s office.

The day prior, the companies had filed a motion to dismiss the case outright with three new court docs: a proposed order to show cause, a memorandum in support of the motion to dismiss, and an affidavit by their general counsel Stuart Hoegner.

Lawyers for the companies argued the Bitfinex platform does not allow New Yorkers to trade (putting it outside of the NYAG’s jurisdiction), the Martin Act doesn’t apply to them (because tether is not a security or commodity, they said), and the document requests were too onerous. The NYAG has seven days to respond, and the judge scheduled a hearing for the motion to dismiss on June 29. 

According to Hoegner’s affidavit, which I read late one evening, you can’t actually redeem tethers 1:1 unless you bought them directly from Tether, which means if you got them on an exchange somewhere, too bad. You won’t be too surprised to learn then, that I can’t find a single person who claims to have either bought or redeemed tethers via Tether Ltd.

The Block got hold of a court transcript from the Bitfinex court hearing on May 16. “Tether actually did invest in instruments beyond cash and cash equivalents, including bitcoin,” a lawyer for Bitfinex told the court.

Wait, what? Bitcoin? Tether invested in bitcoin?

The entire purpose of tether is to be a stable asset that traders can use to escape market volatility. Yet, Tether is taking its reserves—money that it was supposed to keep an eye on, so that tethers always remained fully backed—and investing it in a highly volatile asset. What if bitcoin crashes? What then of the stablecoin? 

We learn something new about Tether everyday, it seems. According to CoinMarketCap, every 24 hours, the entire $3 billion supply of tethers changes hands 7.5 times, but not really, because most of that volume is fake.

The Block analyst Larry Cermak posted a graph of exchanges that trade tether, and some of the ones with the highest volume are obscure platforms nobody has heard of. “If I were to make an educated guess, at any given time, only a maximum of 15% of the total Tether volume is real,” he tweeted. In other words, it is all wash trading, i.e., trading bots simultaneously buying and selling tether to create the appearance of frenetic activity.

As far as I can tell, tether’s actual value is on par with horse manure—giving true meaning to the word “stablecoin”—just not as good for the roses. 

Circle and Poloniex

Circle, the Boston-based company that bought crypto trading platform Poloniex in February 2018, is laying off 30 people—10 percent of its workforce. The company blames the layoffs on an “increasingly restrictive regulatory climate.”

Last week, I mentioned that Poloniex geofenced nine altcoins, meaning people in the US will no longer be able to trade those coins on the exchange after May 29. Circle said  recent guidance from the SEC was a trigger for the move. I took another look and realized that one of the coins was Decred—a fork of bitcoin. Why Decred?

It’s possible the project’s premine and governance structure look a little to shareholdery, and Circle, which is backed by Goldman Sachs, is not in a position to risk listing any coins on Poloniex that might be construed as securities.

QuadrigaCX

I finally got around to writing up QuadrigaCX Trustee’s Preliminary Report. Ernst & Young basically says the money is all gone. Also, it adds that Quadriga’s financial affairs were a complete mess, and they’ll probably never sort everything out properly.

Remember the photo of 1,004 checks sitting on a stovetop? EY finally deposited those into a disbursement account on April 18. What a surprise for this trader to learn the money was freshly sucked out of his bank account two years later!

Also interesting, Black Banx (formerly WB21), the third-party payment processor allegedly holding $CA12 million in Quadriga funds is now issuing Visa cards without Visa’s consent. Antony Peyton, the finance journalist who had a thug show up on his doorstep last time he wrote about them, has been researching the company.

Cryptopia

New Zealand crypto exchange Cryptopia went belly up on May 14. Turns out, for the last nine months—since before the January hack that put it out of business—Adam Clark, the exchange’s former founder and programmer, has been building a new crypto exchange. According to his LinkedIn profile, he’s been working on Assetylene since September 2018. So, if you lost your money on Cryptopia, you can try again on Assetylene. I’m sure they’ve got their security issues sorted out by now.

Meanwhile, the funds that were stolen from Cryptopia are on the move. Whale Alert, who has been keeping on eye on the transfers, says funds from Cryptopia recently went to Huobi, where they were likely traded for other coins. Whale Alert also noted 500 ETH going to decentralized exchange EtherDelta.

Elsewhere in cryptoland

Facebook is getting ready to launch its GlobalCoin cryptocurrency payments system in 2020. They probably want to do something like PayPal combined with social media. David Gerard asks: “Why are on earth are they doing this as a cryptocurrency?” As he explains, nothing about putting this on a blockchain makes any sense whatsoever.

Bestmixer.io, one of the largest crypto mixers and tumblers, was shut down by Dutch authorities with the help of Europol and Luxembourg law enforcement. According to Europol’s press release, it was responsible for $200 million in money laundering.

Well, this is a shocker. The SEC has again delayed the VanEck bitcoin ETF proposal. Here is the order. The new deadline for the SEC to make a decision is August 19, and it can delay one more time for a final deadline of October 18, Jake Chervinsky tweeted. It’s been eight years, and the SEC has yet to approve any bitcoin ETFs in the US.  

Bitcoin is set to overtake the existing financial system—or maybe not. In a recent report, the European Central Bank says crypto poses no threat to financial stability in the euro zone. A “very low” number of merchants currently allow buying of goods and services with bitcoin, and there is no “tangible impact on the real economy.”

The IRS is planning to publish new tax guidance for crypto holders and traders. The last time it issued guidance was November 2014, back when it said crypto would be treated as property and you had to report earnings as capital gains.

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Posted on by Amy Castor 2