Tag: Decrypt

Crypto collapse: Mt Gox payouts, Tether hooks up the feds, SEC says no to Coinbase, crypto media mergers

  • By Amy Castor and David Gerard

It’s not over until withdrawals are temporarily paused due to unusual market activity.

— Jacob Silverman

Tightening Tether’s tethers

Tether’s been under some regulatory heat after the reports of how useful USDT is for financing terrorists and other sanctioned entities. Even Cynthia Lummis, the crypto-pumping senator from Wyoming, loudly declared that Tether had to be dealt with.

The US government isn’t entirely happy with Tether’s financial shenanigans. But they’re really unhappy about sanctions violations, especially with what’s going on now in the Middle East. 

So Tether has announced that it will now be freezing OFAC-sanctioned blockchain addresses — and it’s onboarded the US Secret Service and FBI onto Tether! [Tether, archive; letter, PDF, archive]

Tether doesn’t do anything voluntarily. We expect they were told that they would allow this or an extremely large hammer would come down upon them.

There’s more to Tether’s criminal use case than sanctions violation. The most jaw-dropping chapter in Zeke Faux’s excellent book Number Go Up (US, UK) is when he traced a direct message scammer to a human trafficking operation in Cambodia that favored tethers as its currency. South China Morning Post follows up on this with an in-depth report on how Cambodian organized crime uses tethers. [SCMP]

Credit rating firm S&P Global rated eight stablecoins for risk. Tether and Dai got the lowest marks. S&P notes in particular the lack of information on Tether’s reserves. [press release; S&P; Tether report, PDF]

At least some of the claimed Tether backing in treasuries is held in the US with Cantor Fitzgerald — exposing Tether to US touchability. This has been known since February 2023, and was proudly confirmed in December 2023 by Cantor CEO Howard Lutnick: “I hold their Treasuries, and they have a lot of Treasuries. I’m a big fan of Tethers.” [Ledger Insights; Forbes]

Cointelegraph had a fascinating story on a company called Exved using tethers for cross-border payments from Russia! Then they deleted it, for some reason. Exved was founded by Sergey Mendeleev, who also founded the OFAC-sanctioned crypto exchange Garantex, which was kicked out of Estonia. Exved is working with InDeFi Bank, another Mendeleev venture. We’re not so sure the new OFAC-compliant Tether will be 100% on board with this. [Cointelegraph, archive; Telegram, in Russian; Protos]

SEC answers Coinbase’s prayers: “No.”

In July 2022 — just after crypto crashed — Coinbase wrote to the SEC proposing new regulatory carveouts for crypto.

The SEC took its sweet time responding. Eventually, Coinbase sued in April 2023 with a writ of mandamus, demanding a bureaucratic response. The court told the SEC to get on with it, or at least supply a date by which it would answer.

Finally, the SEC has responded: “the Commission concludes that the requested rulemaking is currently unwarranted and denies the Petition.” The SEC thinks existing securities regulations cover crypto securities just fine, and there’s no reason for special rules for Coinbase. [SEC rejection, PDF; Coinbase letter to court, PDF; Gensler statement]

Coinbase general counsel Paul Grewal welcomed the opportunity to challenge Coinbase’s dumb and bad proposal being turned down. [Twitter, archive]

4 (continued)

Binance founder and former CEO Changpeng Zhao will not be returning home to Dubai anytime soon. US District Judge Richard Jones ordered CZ to remain in the US until his sentencing on February 24. He can travel within the US, but he cannot leave. [Order, PDF] 

After being busted hard, Binance is still behaving weird. At the FT Crypto and Digital Assets Summit in London, the exchange’s new CEO Richard Teng refused to answer even basic questions, like where Binance is headquartered and whether it’s had an audit. “Why do you feel so entitled to those answers?” Teng said when pushed. “Is there a need for us to share all of this information publicly? No.” [FT]

CZ and Binance have been trying to dismiss the SEC charges against them. This is mostly loud table pounding, wherein Binance claims that what the SEC argued were securities are not really securities. [Doc 190, PDF, Doc 191, PDF]

France was the first country in Europe to grant Binance regulatory approval. State-endorsed blockchain courses for the unemployed and NFT diplomas helped push the country’s most vulnerable into crypto. Since the collapse of FTX and Binance’s $4.3 billion fine for money laundering, French President Emmanuel Macron’s relationship with CZ has fallen under scrutiny. [FT, archive]

London law firm Slateford helped to cover up Binance’s crimes and attempted to intimidate media outlet Disruption Banking from writing about Binance’s sloppy compliance hiring practices. (Disruption Banking told Slateford to get knotted and didn’t hear from them again.) [Disruption Banking]

Binance is finally removing all trading pairs against Great British pounds. [Binance, archive]

FTX: The IRS wants its money

FTX filed a reorganization plan in mid-December. The plan is 80 pages and the disclosure statement is 138 pages, but there’s a notable lack of detail on what happens next. None of the talk of starting a new exchange has made it into the current plan — this appears to just be a liquidation.

The plan treats crypto claims as their value in cash at the time of the bankruptcy filing on November 11, 2022, back when bitcoin was at $17,000 — less than half of what it is now.

Creditors will vote on the plan in 2024. The court must approve the plan before it is implemented. [Bloomberg, archive; Plan, PDF; Disclosure statement, PDF]

The IRS is demanding $24 billion in unpaid taxes from the corpse of FTX. John Jay Ray wants to know how the IRS came up with that ludicrous number — the exchange never earned anything near those amounts. The IRS originally wanted $44 billion, but brought the number down. Judge John Dorsey has told the IRS to show its working. [Doc 4588, PDF; Bloomberg, paywalled]

Three Arrows Capital

Three Arrows Capital was the overleveraged crypto hedge fund that blew up in 2022 and took out everyone else in crypto who hadn’t already been wrecked by Terra-Luna. After months of dodging culpability, co-founder Zhu Su was finally arrested in Singapore in September as he was trying to skip the country. 

Zhu was released from jail and appeared before the Singapore High Court on December 13, where he had to explain to lawyers for the liquidator Teneo what happened when 3AC went broke. The information will be shared with creditors. [Bloomberg, archive]

A British Virgin Islands court froze $1.1 billion in assets of Zhu and his co-founder Kyle Davies and Davies’ wife Kelly Chen. [The Block]

Teneo expects a 46% recovery rate for 3AC creditors on $2.7 billion in claims. [The Block]

Crypto media in the new Ice Age

Crypto news outlet Decrypt has merged with “decentralized media firm” Rug Radio. No, we’d never heard of them either. The two firms will form a new holding company chaired by Josh Quittner. Decrypt had spun out from Consensys in May 2022, just before everything crashed. It’s reportedly been profitable since then — though crypto sites always say that. [Axios; Axios, 2022] 

Forkast News in Hong Kong has merged with NFT data provider CryptoSlam and fired most of its staff. Forkast was founded in 2018 by former Bloomberg News anchor Angie Lau; it shut down editorial operations on November 30. [The Block] 

Crypto news outlets ran seriously low on cash in 2019 and 2020, just before the crypto bubble, and they’re struggling again. We expect more merges and buyouts of top-tier (such as that is in crypto) and mid-tier crypto outlets. We predict news quality will decline further.

Amy recalls the old-style crypto media gravy train and eating in five-star restaurants every night in Scotland and London while embedded with Cardano in 2017. Thanks, Charles! Nocoining doesn’t pay nearly as well, but these days crypto media doesn’t either. There’s probably a book in those Cardano stories that nobody would ever read.

Regulatory clarity

The Financial Stability Oversight Council, which monitors domestic and international regulatory proposals, wants more US legislation to control crypto. FSOC’s 2023 annual report warns of dangers from:

crypto-asset price volatility, the market’s high use of leverage, the level of interconnectedness within the industry, operational risks, and the risk of runs on crypto-asset platforms and stablecoins. Vulnerabilities may also arise from token ownership concentration, cybersecurity risks, and the proliferation of platforms acting outside of or out of compliance with applicable laws and regulations.

Yeah, that about covers it. FSOC recommends (again) that “Congress pass legislation to provide for the regulation of stablecoins and of the spot market for crypto-assets that are not securities.” [Press release; annual report, PDF]

IOSCO, the body of international securities regulators, released its final report on how to regulate DeFi, to go with its November recommendations on crypto markets in general. IOSCO’s nine recommendations for DeFi haven’t changed from the draft version — treat these like the instruments they appear to be, and pay attention to the man behind the curtain. These are recommendations for national regulators, not rules, but look at the DeFi task force — this was led by the US SEC. [IOSCO press release, PDF; IOSCO report, PDF]

London-based neobank Revolut is suspending UK crypto services — you can no longer buy crypto with the app — citing a new raft of FCA regulations, which go into force on January 8. [CityAM; CoinDesk]

Crypto exchange KuCoin has settled with New York. The NY Attorney General charged KuCoin in March for violating securities laws by offering security tokens — including tether — while not registering with NYAG. KuCoin has agreed to pay a $22 million fine — $5.3 million going to the NYAG and $16.77 million to refund New York customers. KuCoin will also leave the state. [Stipulation and consent order, PDF; Twitter, archive] 

Montenegro plans to extradite Terraform Labs cofounder Do Kwon to either the US or South Korea, where he is wanted on charges related to the collapse of Terra’s stablecoin. Kwon was arrested in Montenegro in March. Originally it looked like Montenegro was going to pass him off to the US, but the case has been handed back to the High Court for review. [Bloomberg, archive; Sudovi, in Montenegrin]

Anatoly Legkodymov of the Bitzlato crypto exchange, a favorite of the darknet markets, has pleaded guilty in the US to unlicensed money transmission. Legkodymov was arrested in Miami back in January. He has agreed to shut down the exchange. [Press release]

The SEC posted a new investor alert on crypto securities with a very lengthy section on claims of proof of reserves and how misleading these can be. [Investor.gov; Twitter, archive] 

Santa Tibanne

It’s been nearly ten years, but Mt. Gox creditors are reportedly starting to receive repayments — small amounts in Japanese yen via PayPal. [Cointelegraph; Twitter, archive] 

Some payouts are apparently bitcoin payouts — with the creditors not receiving a proportionate share of the remaining bitcoins, but instead the yen value of the bitcoins when Mt. Gox collapsed in February 2014. This means a 100% recovery for creditors! — but much less actual money.

There are still 140,000 bitcoins from Mt. Gox waiting to be released. If payouts are made in bitcoins and not just yen, we expect that claimants will want to cash out as soon as possible. This could have adverse effects on the bitcoin price.

Trouble down t’ pit

In the Celsius Network bankruptcy, Judge Martin Glenn has approved the plan to start a “MiningCo” bitcoin miner with some of the bankruptcy estate. He says that “the MiningCo Transaction falls squarely within the terms of the confirmed Plan and does not constitute a modification.” [Doc 4171, PDF]

Bitcoin miners are racing to buy up more mining equipment before bitcoin issuance halves in April or May 2024. Here’s to the miners sending each other broke as fast as possible [FT, archive] 

Riot Platforms subsidiary Whinstone sent its private security to Rhodium Enterprise’s plant in Rockdale, Texas, to remove Rhodium employees and shut down their 125MW bitcoin mining facility. The two mining companies have been brawling over an energy agreement they had made before prices went up. [Bitcoin Magazine]

More good news for bitcoin

The UK is setting up a crypto hub! ’Cos that’s definitely what the UK needs, and not a working economy or something. [CoinDesk]

Liquid is a bitcoin sidechain set up by Blockstream at the end of 2018. It was intended for crypto exchange settlement, to work around the blockchain being unusably slow. It sees very little use — “On a typical day, there are more tweets about Liquid than there are transactions on its network.” [Protos] 

A16z, Coinbase, and the Winklevoss twins say they’ve raised $78 million as part of a new push to influence the 2024 elections. [Politico] 

Little-known fact: coiners can donate to the PAC in tethers. All they have to do is send them via an opaque Nevada trust structure to hide the origins of the funds. And this is perfectly legal! [FPPC, PDF, p. 85, “nonmonetary items”]

Ahead of the SEC’s deadline to rule on a bitcoin ETF, Barry Silbert, CEO of Digital Currency, has quietly stepped down from the board of DCG subsidiary and ETF applicant Grayscale and is no longer chairman, according to a recent SEC filing. Silbert will be replaced by Mark Shifke, the current DCG senior vice president of operations. US regulators are suing DCG over the Gemini Earn program co-run by its subsidiary Genesis. [Form 8-K]

Ordinals are an exciting new way to create NFTs on bitcoin! ’Cos who doesn’t want that? The bitcoin blockchain immediately clogged when it was actually used for stuff. Now TON, the blockchain that is totally not Telegram’s, no, no no, has ordinals — and it’s getting clogged too. [The Block]

Image: Mark Karpeles with aggrieved bitcoin trader outside Mt. Gox in Tokyo in 2014.

Posted on by Amy Castor 1

News: COVID-19 shuts down crypto conferences, Libra activates plan B, investor sues bitcoin miner Canaan

Good news this week. I’ve started freelancing for Decrypt. I’m in their Slack channel, and it’s nice to feel part of a group again. That and a few freelance gigs mean I’m less freaked out about making ends meet after leaving my last gig. Although now, I’m worried about COVID-19 and its impact on crypto media and the world economy as a whole.

This newsletter is going to be a bit different. I’m going to focus on the bigger stuff—or things that are interesting to me while supplementing them with additional notes or thoughts I might have—and then list off a bunch of other news that has caught my eye.

Coronavirus, crypto conferences, and the hell to come

I wrote a blog post about how the new coronavirus is impacting crypto conferences. My story even got picked up in Charles Arthur’s Overspill newsletter. (He’s a former tech writer for The Guardian.) In a week’s time, things have only gotten worse, with more events canceling. The city of Austin has canceled SXSW, which had a blockchain track. MIT issued an official statement Thursday night that is was canceling any event larger than 150 people but somehow made an exception for the MIT Bitcoin Expo, March 7-8.

What’s shocking is that the school did this despite knowing the dangers—more than two dozen cases of COVID-19 in Massachusetts have been linked to a Biogen meeting in Boston with 175 attendees in late February. The news of this started coming out on Thursday, the very day MIT gave the green light for its expo. Even on Saturday, Boston Blockchain Week, scheduled for March 7-13, removed all events from its calendar.  

Digital Chambers has postponed its DC Blockchain Summit, originally scheduled for March 11-12. Bitcoin Magazine has postponed its Bitcoin 2020 event, March 27-28.

Coindesk has made it clear that it is absolutely not canceling its New York City-based Consensus conference until it is forced to do so. The event, scheduled for May 11-13, drew in 4,000 people last year and 8,500 the year before. Here’s the refund policy:

“If Consensus is cancelled due to guidance from health organizations and local/federal governments, attendees will receive a full refund on their ticket purchase within 60 days of CoinDesk making the announcement to cancel. Further, if an attendee is unable to attend because his or her home country is barred from traveling to the United States, we will also issue a full refund within 60 days.”

South Korea, China, US step up efforts to disinfect dirty fiat

The new coronavirus can live on paper money, says the WHO, so South Korea’s banks are taking banknotes they receive and putting them through a heating process to kill off any germs. China is doing something similar. And now the U.S. is taking any U.S. dollars that it gets from Asia, disinfecting them, and keeping them for 7-10 days before reintroducing them to the financial system. It is routine for banks to disinfect banknotes, but now they are stepping up the process. Bitcoin is a contactless form of payment, but unfortunately, you can’t buy toilet paper, rice, beans or baby formula with it. (Decrypt, Reuters)

Baseline protocol: coaxing the enterprise to use public Ethereum

The Baseline Protocol is a thrilling new enterprise blockchain initiative from ConsenSys, EY, Microsoft, and a handful of other projects looking to sell consulting hours.

In short, the initiative is an effort to get big companies to use the Ethereum public blockchain. Baseline is supposed to serve as a middleware with its secret sauce being privacy-preserving zero-knowledge proofs. ZKP is key because otherwise, why would companies want to put their private dealings on a widely shared blockchain?

But what actually goes on the blockchain? The answer: not a lot, and certainly not any actual documents. What goes on the blockchain is a hash of the file you share via some other means along with a timestamp, so you can check the authenticity of the document. ZKP serves to hide the transaction of tokens and business logic in smart contracts.

A German company called Unibright plans on playing “a major role” in developing Baseline. Interestingly, Unibright has its own token (UBT), which had a big pump recently. UBT couldn’t get listed on any major exchanges. Instead, it is traded mainly on the Estonia-registered Hotbit and decentralized exchange IDEX. (Decrypt, David Gerard)

Reggie Fowler pleaded not guilty to wire fraud

Arizona businessman Reginald Fowler flew from his home in Chandler, Ariz., to stand before a judge Thursday and plead not guilty to a new charge of wire fraud. He now faces five counts and plans to go to trial next year. Yes, that’s right. His trial date, originally scheduled for April 28, has been moved to Jan. 11, 2021, because his lawyers need more time to prepare for the case. Until then, he remains free on bond. (My blog.)

How did bitcoin mining maker Canaan get listed on Nasdaq?

That’s like, such a good question. Bitcoin mining machine maker Canaan Creative operates out of China. Last year, it became the first crypto company to be listed on the Nasdaq. Woot! But after an unexplained pump in February, the stock tanked. And then on Wednesday, Phillippe Lemieux, an investor in Canaan, filed a class-action lawsuit against the company, saying Canaan misled investors. Some of the most damning information in the suit comes from a blog post by Marcus Aurelius, or MAV, titled “Canaan Fodder.” Canaan had three prior unsuccessful attempts to list on Asian exchanges. MAV calls the Nasdaq listing a “dumping ground of last resort.” I’m sure CAN stockholders will be happy to hear that. (Decrypt)

UK’s FCA issues warning about Bitmex

U.K.’s financial watchdog, the Financial Conduct Authority, is warning Brits about Bitmex. Arthur Hayes’ bitcoin derivatives platform is promoting its services without authorization, the regulator said. Bitmex said it is trying to “assess” the situation.

The FCA issued a similar warning about Kraken, but that was soon taken down. Kraken CEO Jesse Powell said the regulator made a mistake and fixed it. “Seems like it might have been some scams pretending to be Kraken got reported,” he told Decrypt. (Decrypt)

Libra activates plan B

Plan B vs plan AFacebook’s Libra may issue multiple coins based on national currencies in addition to its original idea—a coin based on a basket of assets. If it does that, it’ll be just another PayPal, but on the Calibra wallet.

Bloomberg and The Information were the first to report on the news, and the financial press followed, all linking back to these stories. (The Information originally said the national coins would replace the original Libra token but has since issued a correction, stating that the national coins would run alongside the Libra token.)

This is not a new plan at all. David Marcus and Mark Zuckerberg talked about doing this back in October. In terms of technology, there’s no innovation here either. The big hurdles for Libra are proving to the world that it can comply with anti-money laundering laws. And so far, it hasn’t been able to do that. (Decrypt, David Gerard, Bloomberg, The Information)

Other stuff that caught my eye

“If they’re not outright scams, they’re normally cash grabs.” One former coiner describes his experience working for crypto projects. (Medium)

Looks like Massive Adtoption’s Jacob Kostechki has exited the crypto world and gone into real estate. He’s now tweeting under @_jake_i_am.

Haseeb Qureshi, a managing partner at crypto venture fund Dragonfly Capital, wrote a good article describing how flash loans work. Flash loans were behind two recent hacks—one for $350,000 and another for $600,000—of margin trading protocol bZx. (Medium)

More info coming out on who invested in Telegram’s $1.7 billion initial coin offering: A Russian oligarch, a former cabinet minister and the COO of Wirecard. (Coindesk)

In April 2018, The Reserve Bank of India banned banks from doing business with crypto companies. On March 4, India’s crypto community rejoiced as the country’s Supreme Court ruled that the RBI’s ban was unconstitutional. The RBI plans to fight the ruling. (Economic Times, Cointelegraph)

The hostile takeover of the Steem blockchain is comedy cold for nocoiners. (Twitter thread)

Stephen Palley offers his take on the Feb. 26 ruling in the Ripple lawsuit: His most ooph worthy comment: If the court’s reasoning is accepted, “purchasers of crypto on secondary markets can state securities claims against the issuer where they did not directly purchase the crypto.” (Twitter thread, court order)

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Coronavirus: Will crypto conferences survive? What about crypto media?

Novel coronavirus is a real threat. We now know the incubation period for COVID-19 is up to 14 days, and people can spread the disease without showing any symptoms at all. The best way to keep from getting ill is to avoid close contact with other people. Ultimately, that means cutting back on air travel and opting out of large events. 

As a result, companies in all fields are canceling conferences in droves. They either can’t sell enough tickets or too many sponsors and speakers are starting to pull out. In some cases, entire cities are outright banning large indoor gatherings.  

Last week, Facebook canceled the in-person part of its F8 developer conference in San Jose, originally scheduled for early May. In 2019, more than 5,000 people attended F8.

Nvidia said Monday that it will not hold its GTC 2020 conference that had been scheduled for March 22-26 in San Jose. As many as 10,000 attendees were expected at the event, which centered around semiconductors, graphic chips, and AI technologies.  

Also, on Monday, Facebook and Twitter pulled out of SXSW Conference & Festivals, a sprawling 10-day event in Austin set to kick off on March 13. The event drew more than 400,000 attendees last year. SXSW says the event is still going as planned, even though an online petition is in the works to cancel it.  

Similarly, the crypto world is feeling the pain. Tron has postponed indefinitely its Nitron Summit due to coronavirus concerns. The event was scheduled to take place between Feb. 29 and March 1 in Seoul, South Korea.

Paris Blockchain Week, originally set to kick off on March 31, is postponed until December. Even that is risky, though. December is when the cold and flu season starts up again, and a coronavirus vaccine isn’t due out until sometime in 2021.  

How will crypto media fair?

Coindesk Consensus 2018
Consensus 2018 was a massive event. People waited in long lines to register.

If the trend continues — and likely it will — conference cancellations could hit some crypto media publications hard. I’m talking about Coindesk in particular. The company pulls in 85% of its revenue from conferences, according to a May 2019 report in The Information. Coindesk doesn’t feature ads on its site anymore, so events are its bread and butter.

It hasn’t always been that way. I remember ads for every bottom-of-the-barrel initial coin offering on the site a few years ago. I’m not sure why Coindesk stopped serving ads, but they seem to have completely disappeared from the site after its relaunch in November. 

Last year, Coindesk held one investor event in New York and another in Asia. But its flagship conference is Consensus. Held annually in Manhattan, Consensus is widely considered the most significant event in the cryptosphere, accompanied by lots of satellite conferences around the same time. This year, Consensus is scheduled for May 11-13 at the New York Hilton midtown.

In 2018, just coming down from the peak of the crypto hype cycle, Consensus drew in more than 8,500 attendees, each paying about $2,000 per ticket. Coindesk’s total revenue for the year was $25 million, so do the math — that’s $21 million in events alone. 

Consensus 2019 saw less than half that with only 4,000 attendees. But even at an estimated $10 million in revenue, that’s still a decent amount of money. Despite the drop-off, Kevin Worth, Coindesk’s CEO, told The Information that Digital Currency Group, which owns 90% of Coindesk, still planned on growing its media business.

Indeed, Coindesk has been on a bit of a hiring spree. Almost anyone who has been writing about crypto has gotten pulled into working for the media outlet. It will be interesting to see what happens if Coindesk ends up having to cancel Consensus 2020 and potentially even Consensus 2021 — or even if it sees a significant drop in attendees.

Oddly, Consensus is the only event listed on the Coindesk’s website at this time. The company’s other two events — “Invest: NYC” and “Invest: Asia,” as they were called last year — are conspicuously missing. I reached out to Coindesk this morning. If they respond, I’ll post their comments here.

Other media pubs also rely on events for revenue, though not to the extent that Coindesk does, and their events aren’t nearly so huge. 

Breakermag started planning an NYC event called Breakercon before it shuttered in 2019. The Block took over the event renaming it “Atomic Swap.” This year, The Block is now calling the one-day-event, scheduled for May 12, The Block Summit. Tickets cost about $800 and CEO Mike Dudas expects things to go as planned with 400 attendees.

Last year, a leaked investor pitch deck for The Block indicated that of the $5 million the startup wished to see in 2020, $3.4 million will come from subscription revenue; $1.1 million will come from ads and $500,000 from events. At least The Block has its revenue model spread out a bit, so it’s not so heavily dependent on a single event. 

Decrypt relies on Ethereum venture studio Consensys’ patronage to keep its doors open. Consensys holds an Ethereal Summit each year in New York City right before Consensus. That also appears to be on track for May 8-9.

Cointelegraph has a separate events division that does BlockShow Asia, which it’s been holding since 2016. This year the event is scheduled for Singapore in November. The outlet, which claims 6 million visitors a month, also makes money on ads and consulting.

My guess is that as the coronavirus spreads, we’ll see more crypto events being canceled. Some conferences are opting to go the “decentralized” route and put everything on video, but I just don’t see that being too popular. Most crypto people go to conferences to network and party — the talks, not so much. 

A bigger threat: Crypto ice age

The bigger problem here is the crypto ice age, a term that refers to the general slowdown in the space that set in after 2017 due to increased regulation and the plunge in the price of bitcoin. As David Gerard details in a recent blog post, crypto media publications and low-end blogs are now collectively chasing an ever-shrinking pool of ad funds.

In general, the media advertising model has gone the way of the dinosaur. Subscriptions work for some publications. But big outlets like the New York Times and the Wall Street Journal who employ the model successfully have hundreds of thousands of readers. The crypto world simply does not have that big of a following.

Events are a big deal for many crypto pubs, and if that important revenue stream dries up, it could push some outlets to the breaking point. Expect more layoffs in 2020 with some crypto pubs and blogs falling off the map completely.

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Posted on by Amy Castor 0

My story in Decrypt: “QuadrigaCX CEO traded millions in fake funds to fund luxury lifestyle, alleges trustee”

Ernst & Young released its fifth report of the monitor last night, and it was a doozy. I covered the report for Decrypt. If you have not read my story yet, check it out here.

The monitor’s report is 70-pages long, and I recommend finding a nice comfortable spot and reading all of it. It is page after page, paragraph after paragraph, of “What the hell?”

According to the report, from 2016 onwards, QuadrigaCX went completely off the rails. Gerald Cotten, the exchange’s now-deceased CEO, clearly had no interest in running a legitimate business. He treated customer funds like his own personal bank account—a bit like Bernie Madoff, only a lot more recklessly.

Cotten gambled with his customers’ money, went on lavish vacations, flew on private jets, and bought properties, an airplane, a yacht, whatever toys he wanted. Now most of the funds on the exchange are gone, and EY still has no clue as to where the cash proceeds went. The big question is, did Cotten really act alone?

QuadrigaCX co-founder Michael Patryn is not mentioned in the report. According to what we’ve been told, he completely stepped away from the business in early 2016. After that, Cotten allegedly became a recluse and ran the business into the ground single handedly.

EY has also released a three-part (1, 2, 3) sixth monitor’s report detailing the costs of professional services related to Quadriga’s Companies’ Creditor Arrangement Act. Moving forward, EY is now the trustee in Quadriga’s bankruptcy proceedings.

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Posted on by Amy Castor 0

“QuadrigaCX traders lost money on Cryptopia on the same day in January”—my first story for Decrypt

Screen Shot 2019-05-28 at 6.56.36 PM.pngI just had my first story published in Decrypt, and you should read it!

Some background — I had been getting a few direct messages from QuadrigaCX traders who also lost money on Cryptopia, the NZ-based altcoin factory that recently went kaput. This led me into researching Cryptopia and learning the two exchanges shared a few commonalities.

Oddly, the death of Quadriga CEO Gerald Cotten was announced on January 14, the exact same day Cryptopia was hacked. This could be a wild coincidence, but still, it’s weird.

Both companies were run by amateurs, both had dollar-pegged tokens—Quadriga used Quad Bucks and Cryptopia came up with the idea for NZDT on a lark—and they both experienced crippling banking issues.

The Canadian Imperial Bank of Canada froze accounts belonging to Quadriga’s third-party payment processor Costodian in January 2018. And ASB Bank closed Cryptopia’s NZDT account just weeks later—another weird coincidence.

More details in the article!

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Posted on by Amy Castor 0