Tag: Libra

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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Posted on by Amy Castor 0

News: Crypto Mom wants to give criminals a head start, IOTA’s meltdown, Lubin’s organism divides

As a reminder, I will be traveling to Vancouver on Feb. 22 to spend about a day and a half with David Gerard. We are being interviewed for a QuadrigaCX documentary. I know when we get there, we are going to wish we had more time to hang out and meet people in the area. Especially given how far Gerard has to travel (from London) and how beautiful Vancouver is. And with that, here is the news from the past week.

Crypto Mom wants to give criminals a head start

SEC Commissioner Hester Peirce (aka “Crypto Mom”) has unveiled her proposal to create a “safe harbor” for crypto startups, allowing them a three-year grace period after their ICO to achieve a level of decentralization sufficient to pass through the agency’s securities evaluations, specifically the Howey Test. (My story in Modern Consensus.)

Where to begin? Given that most, if not all ICOs are illegal securities offerings, this is like giving fraudsters free reign, so they can pump up their coins, cash in and leave the country. It’s like 2017 all over again. This whole notion of “sufficiently decentralized” is something that first came in mid-2018 when Bill Hinman, the SEC’s director, division of corporate finance, mentioned it in a talk he was giving about Ethereum. There is no clear way of defining “sufficiently decentralized.” It’s a murky concept to begin with. (See David Gerard’s story on Peirce. He goes into more depth and is not nearly so kind.)

Peirce is a Republican with libertarian leanings. Her term expires June 5. With a proposal like this and a nickname “Crypto Mom,” I can only assume she is buttering up for her next gig? Also, the odds of this rule passing are slim to none, especially given SEC Commissioner’s Jay Clayton’s strong criticism of ICOs in the past. 

IOTA’s meltdown

IOTA is in full meltdown mode. Apparently, IOTA founders Sergey Ivancheglo (aka Come-from-Beyond) and David Sønstebø were working on a ternary computing development project called Jinn. But it fell apart, and now the two can’t stop pointing fingers at each other. Ivancheglo says that he no longer works for foundation director David Sønstebø and is suing him for 25 million MIOTA (~ $8.5 million). Sønstebø wrote this really long Medium post, which I had trouble staying awake through. There is also a r/buttcoin Reddit post that spells out the full drama, if you’re in need of entertainment.

Given the maturity level demonstrated by this project in the past, I’m not surprised by any of this. The project has been a complete mess ever since they tried to roll their own crypto in 2017. I wrote about it for Forbes, and they attacked me with weird blog posts and other nonsense. Cofounder Dominik Schiener even threatened to slap me. And when confronted, he accused me of “leading the FUD race.” FT Alphaville actually covered this in a story titled “FUD, inglorious FUD” at the time. 

Researcher Sarah Jamie Lewis is calling on some journalist somewhere to do a deep dive on this sketchy project. “At a glance it’s really hard to not come to the conclusion that there is rampant criminal fraud afoot,” she said in a Twitter thread.

Ripple perpetual swaps

Bitmex has announced trading of XRP perpetual swaps. Bitmex co-founder Arthur Hayes apparently believes XRP is lowly enough to trade on his exchange. Boo-yaka-sha!

Speaking of Ripple, XRP lost almost half of its value last year. It’s a touchy topic for Galaxy Digital CEO Mike Novogratz, because he has invested $23 million into the coin. He recently told a group of financial advisers in Orlando that XRP will “underperform immensely again this year.” He suggested it’s because Ripple owns a giant pool of the coins and keeps selling them off in a situation he likened to shares. (CoinDesk)  

The total amount of XRP in circulation is 100 billion tokens. While Ripple was “gifted” 80 billion, its holdings are down to 56 billion, most of which are in escrow. The company unlocks one billion XRP each month, sells a portion and puts the rest back in escrow. Does that sound like shares to you?

Mastercard dumps all over Libra

Mastercard was one of several payments companies (along with PayPal, eBay, Stripe, Visa, Mercado Pago) to pull out of the Libra Association in October. In an interview with the Financial Times, Mastercard’s CEO Ajay Banga revealed why.

First, Libra Association’s key members refused to commit to avoid running afoul of local KYC/AML rules. Banga would ask them to put things in writing, and they wouldn’t. Second, he didn’t understand what the game plan was for making money. “When you don’t understand how money gets made, it gets made in ways you don’t like.” Finally, the financial inclusion bit struck him as odd. “I’m like: ‘this doesn’t sound right,’” he said.

This gives us a bit of insight into the lack of thought and planning Facebook put into its Libra project before going public with it. You would think a huge enterprise like Facebook would get this stuff right, but apparently not.

ConsenSys splits in two

images (1)Joe Lubin’s organism (that’s what he used to call it, an “organism) looks to be running into more funding trouble, so it’s going to spin off its venture arm. The company will basically become two separate businesses, a software business and an investment business. In the process, it’s also  cutting another 14% of its staff. This is after cutting 13% of its staff in December. (My story in Modern Consensus.)

At one time, ConsenSys had 1,200 employees. In mid-2018, it reportedly had 900. About 117 were let go in December, and likely another 100 in this last round. This is a company that midwifed many of the ICOs that fueled the 2017-2018 crypto bubble. I can still recall going to ConsenSys’ Ethereum Summit on a sweltering day in May 2017 and watching some guy on stage strip down to his boxer shorts. Such was the exuberance at the time.

ConsenSys now lists only 65 companies in its investment portfolio. When Forbes wrote this scathing article in late 2018, the company had 200 startups. Lubin’s science experiment is starting to unravel.

Justin Sun finally breaks bread with Buffet

On Thursday, Tron CEO Justin Sun tweeted a receipt and pictures to show he finally dined with Warren Buffet. This, after paying $4.6 million in a charity auction last year to have lunch with the multi-billionaire. They were originally supposed to meet in San Francisco six months ago, but Sun postponed. This time they had dinner on Buffet’s home turf in Omaha, so Buffet clearly learned his lesson. Other guests were Litecoin’s Charlie Lee, Huobi CFO Chris Lee, eToro chief Yoni Assia, Binance Charity Foundation Head Helen Hai. The bill was for $515 and Buffet left a $100 tip. (Modern Consensus.)

Craig Wright’s abuse of privilege

Craig Wright, the self-professed creator of bitcoin, is driving the attorneys representing Ira Kleiman and the judge bananas. In a document filed with the court on Feb. 2, plaintiffs claimed that Wright has asserted privilege over 11,000 company documents. That is only part of the problem, they said. “The vague descriptions of what is being withheld makes any meaningful analysis on a document by document basis impossible.”

Wright has also apparently claimed that the” bonded courier” is an attorney and any communications with this person of mystery is privileged as well. (Modern Consensus.)

Altsbit gets hacked

Exchange hacks are extremely rare. We don’t hear about them too often, only once every few weeks or so. The latest victim is a small Italian exchange called Altsbit, which had its hot wallet vacuumed clean last week.

This was especially bad for Altsbit, because for some inexplicable reason, the exchange was keeping almost all of its funds in its hot wallet, which is a terrible idea. Most exchanges keep the majority of their funds in offline cold storage for security purposes.

According to reports, the hackers stole 1,066 Komodo (KMD) tokens and 283,375 Verus (VRSC) coins. The combined value of both stands at about $27,000. That’s small potatoes compared to other exchange hacks, where hundreds of millions worth of coins have gone missing. Almost all of Altsbit’s trading activity was coming from the ARRR/BTC pair. (ARRR is the native token of the Pirate Chain.) Altsbit said in a tweet on Feb. 5, it was investigating details of the hack and would get back to everyone soon, but so far nada. The exchange was founded in April 2018.

Bakkt gets into payments

Bakkt, the ICE-owned bitcoin options and futures exchange, isn’t making any money on bitcoin options, but that’s okay because it has another plan. It’s going into payments. The exchange is set to acquire loyalty program provider Bridge2 Solutions. The master plan is to integrate reward points, crypto, and in-game tokens into a single app, so consumers get an aggregate view of their digital assets. Eventually consumers will be able to spend those as cash via the Bakkt mobile app. But for that to happen, Bakkt will have to invest copious amounts of money into marketing to get merchants to adopt the new system of payment. (My story in Modern Consensus)

Other news

What’s happening with Jae Kwon? As Decrypt reported on Jan. 31, he stepped down as CEO of Cosmos to work on a project called Virgo with lofty aims. Cosmos pulled in $17 million in an ICO in 2017. Now Kwon is tweeting under three different monikers and the people within his company have come to find his behavior untenable. (Coindesk)

U.S. Marshalls is auctioning off $40 million of bitcoin (~4,041 BTC) on Feb. 18. (Coindesk.) If you want to put in a bid, you’ll have to deposit $200,000 in advance. Here is the registration form for anyone interested.  

Another study has come out showing that proof-of-stake is just as costly as proof-of-work. But instead of contributing to global warming, PoS requires stakers to put down tokens, lots and lots of them. It’s more evidence that blockchains aren’t economical.

If you have comments or feedback on this newsletter or a tip, drop me a line or DM me on Twitter at @ahcastor.

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Posted on by Amy Castor 0

News: CBDCs are what’s hot, Vodafone pulls out of Libra, more WB21 stuff, Quadriga update

Let me kick off this newsletter with some personal news — I’ll be in Vancouver in the third weekend in February to meet up with David Gerard, the bitter nocoiner we all know and love. We’re both being interviewed for a documentary on QuadrigaCX. It’ll be a quick trip, but I suspect we’ll have enough time for a bottle of champagne, or two. I can’t wait to meet him for the first time in person. Next, on to the news.

CBDCs are all the rage

The big excitement these days tends to be around central bank digital currencies, or CBDCs. Ever since Facebook announced its plans for Libra in June 2019, central banks have been leaping into the digital currency bandwagon, researching the possibility of launching their CBDC.

China wants to be the first advanced economy to launch a CBDC. (Other central banks, such as the Central Bank of the Bahamas and the Eastern Caribbean Central Bank, are well on their way with pilots up and running.) Lawmakers for Japan’s ruling party say they are planning to put a proposal for a digital yen in front of the government next month. (Oops! Apparently, Japan’s legislators are looking to issue a state-backed digital yen, not a CBDC, as I previously thought.) And the Bank for International Settlements says that in three years, one fifth of the world’s population will be using a CBDC. 

What’s a CBDC? While Libra is supposed to be backed by a basket of assets, a CBDC is a  an actual replacement for cash. In other words, it’s legal tender issued and backed by the state’s central bank—not the state itself. This is where things get a bit confusing. 

John Kiff, a senior financial sector expert at the International Monetary Fund, tells me the taxonomy for digital currencies is tricky and some definitions are still a bit fuzzy. He defines a CBDC as “a digital representation of sovereign currency that is issued by a jurisdiction’s monetary authority and appears on the liability side of the monetary authority’s balance sheet.” That should clarify things!

The general idea is, you should be able to use a CBDC to buy movie tickets, pay for groceries or buy a house. The big question here is, why would you want to use a CBDC if your debit card is more convenient and costs less to use? 

Apparently, all this CBDC stuff is nothing new. Aleksi Grym, head of digitalization at the Bank of Finland, said in a Twitter thread that we are going through the third historical wave of digital currencies. During the first wave, in 1993, the Bank of Finland launched a CBDC product called Avant. It was discontinued after 13 years. This February 2000 article in the Economist (paywall) describes the second wave of digital currencies, he said.

Taking us back through time, David Gerard has written a blog post detailing the history of Avant. CBDC advocacy hasn’t changed since the days of Avant, he argues. “CBDCs are the sort of thing the vendor loves — but I’ve yet to see the case for consumers.” Does that mean the debit card will win?  

Another blow to Libra, Tether Gold, Pornhub

Screen Shot 2020-01-25 at 8.31.12 PMVodafone dealt another blow to the Libra project, when it announced on Tuesday it had pulled out of the Libra Association, the independent governing council for Facebook’s planned cryptocurrency. The British telecom giant said that it wants to put the resources it originally intended for Libra into its African mobile money transfer service M-Pesa. The 28 companies originally joining the association had pledged to put in $10 million apiece. Vodafone is the eighth big company to pull out.

You can’t blame Vodafone. Who would want to throw $10 million into a project whose chances of getting off the ground — at least in the format originally intended — are slim to none? Facebook is facing too many regulatory headwinds at this point, and clearly Vodafone doesn’t want to take that risk. 

Elsewhere in the stablecoin world, on Thursday, Tether launched Tether Gold, a stablecoin backed by — you’ll want to sit down for this — real gold. That’s right. No longer do you need to bear the burden of worrying about where to safely store your personal stockpile of gold. Tether will take it off your hands and issue you I.O.U.s in it’s place. Similar to its fiat-backed cousin, Tether Gold is fully redeemable — under certain terms! If you want your full gold bars back, you’ll have to pick them up in Switzerland.  

PayPal stopped supporting payments to Pornhub in November, but that’s okay because now the world’s most popular porn site accepts tethers — the kind that run on the Tron blockchain. The big question here is, what are the webcam models going to do with all the heaps of tether they earn? At some point, they need to convert those to dirty fiat to buy groceries and pay rent. Somehow I don’t think that’s going to be easy. 

More WB21 stuff

I wrote a lengthy story on WB21 (now Black Banx) for Modern Consensus last week. Roger Knox, who was a client of WB21, the payment processor that is allegedly holding $9 million in QuadrigaCX funds, pleaded guilty to running a $165 pump and dump on Jan. 13. Three other individuals connected to the scam have also pleaded guilty. 

  • Matthew Ledvina, a Swiss attorney, pleaded guilty in Boston on Feb. 1, 2019. 
  • Milan Patel, a Swiss attorney, pleaded guilty in Boston on Dec. 3, 2018. 
  • Morrie Tobin, a California resident, pleaded guilty in Boston on Dec. 3, 2018. 

Michael Gastauer, who ran WB21, has not been formally charged, though he was named in the October 2018 civil suit along with Knox. I would assume plans are to indict him as well. It is not unusual for somebody charged by the SEC or law enforcement to cough up information in return for a lesser sentence. So all these guilty pleas probably don’t bode well for him. I’m just not sure if anyone knows where Gastauer is right now. But guessing by some of the schemes he has been involved with, he likely has access to plenty of money. If he is at large, he could stay that way for a while. 

WB21 also allegedly laundered money for cryptocurrency ponzi scheme OneCoin, according to a recent report in Financial Telegram.

Quadriga news

On Wednesday, Miller Thomson, the representative counsel for QuadrigaCX creditors, asked creditors for help in identifying any records — financial or otherwise — related to Crypto Capital Corp.

In a letter (archive) posted on its website, the law firm said it had received information that a “Panamanian shadow bank” may have been a payment processor for the exchange in the final quarter of its operation. In other words, sometime in Q4 2019.

Crypto Capital at one time listed Quadriga on its website as a client. The exchange’s now-deceased founder also admitted to using the firm in the past. In an email to Bloomberg News on May 17, 2018, Gerald Cotten wrote: “Crypto Capital is one such company that we have/do use. In general it works well, though there are occasionally hiccups.”

In other news

On the legal front, in a complaint filed Tuesday, the SEC charged blockchain marketplace Opporty for conducting an unregistered ICO. The company raised $600,000 preselling its OPP tokens to roughly 200 investors in the U.S. and elsewhere. Opporty sold the tokens to wealthy investors via a simple agreement for future tokens, or SAFT contract.  

SAFTs are a bad idea to begin with, but Opporty likely drew even more regulatory scrutiny to itself in describing its platform as some kind of magic do-it-all system. In its offering material, the company described its “ecosystem” as an “online platform that combines a blockchain-powered service marketplace, a knowledge-sharing platform, a system of decentralized escrow and a Proof-of-Expertise blockchain protocol.”

Elsewhere, the Blockchain Association has thrown its support behind Telegram. In a brief filed with the court on Tuesday, the advocacy group sided with the messenger app in the SEC v. Telegram lawsuit. It told the judge that a ruling in favor of the SEC would stifle innovation in the field and hurt investors. Those investors included prominent VC firms Benchmark and Lightspeed Capital, along with several wealthy Russians. Together they put up $1.7 billion in exchange for the promise of future grams. 

The Chamber of Digital Commerce also filed an amicus brief with the court, but with a broader focus, asking the court to come up with a better definition of digital assets.

Plaintiffs in a lawsuit naming Tether have requested the consolidation of three lawsuits claiming that Tether manipulated the price of bitcoin and related bitcoin futures markets. They filed a letter with the court on Jan. 16. Tether seems to be okay with it. 

French officials on Friday filed preliminary charges of money laundering and extortion against Alexander Vinnik, according to a report in the AP. The Russian nationalist was first arrested in Greece in July 2017, after he was accused of laundering $4 billion through the now-defunct exchange BTC-e. Greek authorities ruled that Vinnik should go to France, then to the U.S. and finally to Russia. Vinnik’s not happy about it. He was hoping to go straight to Russia, where he would face lighter sentencing.

Finally, Decred dumped it’s PR agency Ditto PR because they weren’t able to get a Wikipedia page for the project despite getting paid a retainer of $300,000. (It’s not clear if they were paid in DCR or dirty fiat.) Ben Munster covers the story in a hilarious article for Decrypt. And here is the full thread of Decred’s former publicist arguing their case. 

Updated Jan. 26 at 4 p.m. E.T. with a clearer definition of CBDCs and a quote from John Kiff.
Updated Jan. 27 at 10 p.m. E.T. to add a section about Quadriga.

 

Posted on by Amy Castor 0

News: Former Wex CEO arrested, CFTC probes BitMEX, Facebook’s Libra grilled in Washington

Since I’m now the editor of an ATM website, let’s start with bitcoin ATM news. LibertyX is adding 90 machines to its bitcoin ATM network. It now has over 1,000 machines.

Actually, these are not new machines. They are traditional cash ATMs that are bitcoin enabled. A software upgrade on the machines allows users to buy bitcoin with a debit card. The ATMs continue to dispense cash as well. 

According to CoinATM Radar, there are now 5,200 bitcoin ATM machines on this earth. Who the heck is using them? At least one operator, frustrated by a lack of business, has moved his Bitcoin ATM into his mother’s garage. 

In the exchange world —

Criminal in handcuffsDmitri Vasilev, the ex CEO of defunct crypto trading platform Wex, was arrested in Italy. Wex was a rebrand of BTC-e, an exchange that was shut down in 2017 for being a hub of criminal activity. BTC-e was also linked to the stolen bitcoin from Mt. Gox.  

Economist Nouriel Roubini — aka “Dr. Doom” — has stepped up his attack on crypto derivatives exchange BitMEX. In a scathing column in Project Syndicate, Roubini claims sources told him the exchange is being used daily for “money laundering on a massive scale by terrorists and other criminals from Russia, Iran, and elsewhere.” 

Days after Roubini’s column came out, Bloomberg reported that the CFTC was investigating whether BitMEX allowed Americans to trade on the platform. In fact, we know that crypto analyst Tone Vays, a New York resident, was trading on the platform until November 2018 when his account was terminated.

Regulators are cracking down on crypto exchanges. As The Block’s Larry Cermak points out, the situation is getting “quite serious.”

Elsewhere, Bitpoint, the Tokyo-based crypto exchange that was recently hacked, says it will fully refund victims in crypto, not cash. Roughly 50,000 users were impacted when $28 million worth of crypto vanished off the exchange. Two-thirds of the stolen funds belonged to customers of the exchange. 

U.S. crypto exchange Coinbase has killed off its loss-making crypto investment packages. After shutting down its crypto index fund due to a lack of interest, it closed its much ridiculed “Coinbase Bundle.” The product launched eight months ago with the aim of making it easy to purchase a market-weighted basket of cryptocurrencies. 

Malta-based Binance found itself $775,000 richer when it stumbled across nearly 10 million Stellar lumens (XLM). Turns out, the exchange had been accidentally staking (receiving dividends) on its customers lumens for almost a year. It’s planning to give the tokens away in an airdrop and will also add staking support for customers.  

Tether, the stablecoin issued by Bitfinex/Tether, is now running on Algorand, a new blockchain protocol. It’s also running on Omni, Ethereum, Tron and EOS. Presumably, running on a plethora of networks makes tether that much harder to shut down. It’s sort of like whack-a-mole. Try to take it off one network, and tether reappears on another. 

There are now officially more than $4 billion worth of tether sloshing around in the crypto markets. That number almost doubled when Tether inadvertently issued $5 billion unbacked tethers when it was helping Boston-based crypto exchange Poloniex transfer tethers from Omni to Tron. Oops.

Also interesting —

David Gerard is working on a book about the world’s worst initial coin offerings. He recently uncovered another cringe-worthy project. “Synthestech was an ICO to fund research into transmutation of elements, using cold fusion — turning copper into platinum. Literally, an ICO for alchemy. Turning your gold into their gold.” 

Facebook’s Libra had a busy week.

U.S. Secretary of Treasury Steven Mnuchin gave a press briefing on crypto at the White House. (Here’s the transcript.) He is concerned about the speculative nature of bitcoin. He’s also seriously worried Libra will be used for money laundering. He said the project has a long, long way to go, before he feels comfortable with it. 

Unlike bitcoin, which goes wildly up and down in price, Libra would have a stable value, because it would be pegged to a basket of major currencies, like the dollar, euro, and yen. Although, nobody is quite sure how that will work and what currencies it will be pegged to. Tether has a stable value, too, of course.

After his talk, Mnuchin flew off to Paris, where he met with finance ministers from six other powerful countries at the G7 summit. Everyone there agreed they need to push for the highest standards of regulation on Libra. 

Meanwhile, David Marcus, the head of the Libra project, got a grilling in Congress over privacy and trust issues. (You can watch the Senate hearing here and the House Financial Services Committee hearing here.) Nobody believes Facebook will keep its word on anything.

All of this is happening, of course, just after the social media giant got a $5 billion slap on the wrist for privacy violations following the Cambridge Analytica scandal.

The dumb tweet of the week award goes to Anthony Pompliano, co-founder of a digital asset fund Morgan Creek Digital, who says dollars aren’t moved digitally, they are moved electronically. For some reason, he has 250,000 followers on Twitter. The historic tweet even made it in FT Alphaville.

Apple co-founder Steve Wozniak has joined an energy-focused blockchain startup in Malta. The Mediterranean island nation is gung-ho about blockchain. It is also a haven for money laundering and the place where a female journalist who tried to expose government corruption was blown up in 2017. 

U.S authorities have charged former Silk Road narcotics vendor Hugh Brian Haney with money laundering. The darknet market was shut down in 2013. Special agents used blockchain analytics to track down Haney and seize $19 million worth of bitcoin. 

This clever young man has made a business out of helping crypto exchanges inflate their volume. 

ConsenSys founder Joseph Lubin is being sued by a former employee for $13 million. The employer is alleging fraud, breach of contract and unpaid profits.

Former bitcoin core developer Peter Todd is being sued for allegedly touching people inappropriately.

And finally, bitcoin ransomware Ryuk is steadily making its way into China.  

 

 

Posted on by Amy Castor 0

News: NYAG calls Bitfinex out, Bitfunder founder off to jail, Roubini pissed at Bitmex

A few people asked me where I’ve been lately. I’ve been working! I recently started a full time job. I’m the editor of a website about ATM machines. I recently wrote “Spanish authorities: bitcoin ATMs expose hole in AML laws” and “Bitcoin ATMs: Why Vancouver doesn’t want them.” (By the way, if you are curious how criminals use bitcoin ATMs to clean money, this moneylaunder.com article does a nice job of explaining the process.) 

I also write a newsletter on money. You should sign up for it. 

On to the news — 

Much ado about exchanges

Crypto exchange Bitfinex is doing a lot more business in New York than it’s led us all to believe. The NYAG’s recent court filings — a Memorandum of Law and an affirmation from assistant Attorney General Brian Whitehurst, along with 28 pieces of evidence — reveal a full picture of the company’s dealings in the state.  

Why does it matter? Because his means NYAG has jurisdiction to push ahead with its investigation into Bitfinex and Tether’s ongoing shenanigans. Decrypt’s Ben Munster also points out that Bitfinex “loaned tethers to a New York trading firm.” There’s an open question as to whether the funds were ever paid back.  

Also, Bennet Tomlin had a good thread on the NYAG’s filing.

By the way, there are now nearly $3.9 billion tether sloshing around in the markets, pushing up the price of bitcoin, which briefly crested $13,000 on July 10. 

I nearly missed this bit of news from a few weeks ago: Ireland-based cryptocurrency exchange Bitsane went poof!, leaving its 246,000 users high and dry. Users began having issues withdrawing crypto from the exchange in May. And on June 17, the exchange’s website along with its twitter and facebook accounts vanished.  

Bitmarket, the second largest Polish crypto exchange, has shut down citing a loss of liquidity. Approximately 1,300 bitcoin are stuck on the exchange, and users are rightfully pissed off. They have formed a Facebook group and are planning a class-action lawsuit. The exchange was acting goofy before the shutdown. Reddit user u/OdoBanks says users were asked to change passwords and provide additional KYC for withdrawals.

Founder of bitcoin stock exchange Bitfunder will be spending 14 months behind bars for lying to the SEC about a hack that cost clients 6,000 BTC. Instead of telling his customers the truth in 2013, operator Jon Montroll misappropriated funds to hide the losses.  

Cryptocurrency exchange hacks don’t happen too often — only once every few weeks. Japan’s Bitpoint is the latest to make headlines. The exchange’s hot wallets were hacked to the tune of $32 million worth of crypto, most of which were customer funds. On Monday, the exchange found another $2.3 million missing on exchanges “that use the trading system provided by Bitpoint Japan,” according to Japan Today. 

(Update, July 15, 11:30 a.m. EST — previously, I indicated Bitpoint located $2.3 of the missing funds, but actually the exchange found more money missing.)

Speaking of Japan, the country’s top regulator says 110 crypto exchanges are waiting for licenses right now. Under Japanese law, crypto exchanges need to register with the Financial Services Agency to operate in the country. As of now, there are only 19 licensed exchanges in Japan. The FSA has been slow to license after the Coincheck hack. 

Binance burned 808,888 of its native BNB tokens — about $24 million worth. This is the eighth burn of BNB coins, which are totally not a security. The price of the remaining BNB goes up every time there is a burn. Keep in mind, until any crypto is converted to fiat, its value is completely theoretical. 

Screen Shot 2019-07-14 at 11.26.10 PMBitMEX, the Hong Kong-based bitcoin derivatives exchange, has finally released the tapes (round 1 and 2) from its “Tangle In Taipei,” a July 3 debate between Bitmex CEO Arthur Hayes and NYU professor Nouriel Roubini. The two have been going at it online.

A man is suing Gemini — the NY exchange operated by the Winklevoss twins — after $240,000 was stolen from his money market account and wired to Gemini, where it was used to to purchase crypto on the exchange.  

Due to heightened oversight on online crypto exchanges, users are increasingly asked to fork over their IDs and addresses. The shift is giving peer-to-peer exchanges, which typically don’t impose such KYC checks, a boost, according to Bloomberg. 

Other interesting stuff

Founders of the Tezos crypto platform object to sharing emails between them regarding the Tezos “fundraiser” because they are married. Steven Palley has the full story. 

New York City’s Monroe College was hit with a ransomware attack that shutdown the college’s computer systems. The attackers want the college to fork over $2 million worth of bitcoin to free up the computers.  

President Trump blasted bitcoin on Twitter. He is no fan of Facebook’s Libra either. There’s only room in this country for one currency, and that’s the almighty dollar.

The Federal Trade Commission has fined Facebook a gobsmacking $5 billion for privacy violations. It’s the biggest fine in FTC’s history. Surprise, surprise, Facebook’s stock went up on the news. 

An angry mob burned down the home of a man behind bitcoin ponzi scheme in South Africa after he admitted all the money was gone. 

Finally, police in China cracked down on a cartel of illicit bitcoin miners who stole nearly $3 million worth of electricity. A local power company tipped off authorities after they noticed a peculiar surge in power use.  

Posted on by Amy Castor 0