We are now allowing the posting of certain general crypto currency news. READ FOR DETAILs
There are some articles or news events that don't even mention dogecoin but effect all cryptocurrencies in general. E.g this one :https://research.tdwaterhouse.ca/research/public/Markets/NewsArticle/1314-L2N0L10WF-1. So we are going to start allowing these to be posted but with the tag CRYPTONEWS before the article. Remember this is only for articles that effect cryptocurrencies in general. An example of what NOT to post is "Breaking News MoonCoin now on Cryptsy". An example of what is ok to post would be "CRYPTONEWS [TD WaterHouse] Two Bitcoin exchange operators charged in money laundering scheme". This is because this is a huge event for most cryptocurrencies.
Hello! My name is Kristina Semenova, I am the Head of Investors Relation Department at Platinum, the world’s number one business facilitator. Our team knows how to start ICO/STO in 2019! Why are we so sure? Well, our experience speaks for itself: Platinum.fund But what is the difference between ico and sto? What is the cornerstone of ICO marketing strategy? You will know this after finishing the UBAI courses! Here’s just a quick preview of our Short Course lesson. Real World Examples Multinational accounting firm Ernst and Young found that $400 million of the $3.7 billion USD raised from ICOs (as of January 22, 2018) had been stolen. That is, up to 10% of all ICO funding is virtually being stolen from investors. Though ICO scams are the most common method of theft in the crypto world, some projects will actually operate for a period of time before disappearing with the money. Like in a Ponzi scheme, an exit scam may be planned for later, sometime after a manipulated pump; or some other time the team believes is most opportune to take the money and run. Giza: Giza marketed itself as a platform within which different cryptocurrencies could be stored securely. But after raising $2.4 million in one month, the team deleted the website and stopped replying to emails. Investors were duped by a very convincing whitepaper, and actors had been hired to appear in photographs promoting the project. No investor funds have ever been recovered. Centra: The SEC put an end to fundraising for the Centra ICO and charged the founders Robert Farkas and Sohrab Sharma with orchestrating a fraudulent ICO after they raised $32 million USD. They were promoting the ability to develop financial products backed by VISA and Mastercard, though it was later found that neither partnership was real. One of the major red flags in the Centra project was the use of celebrity endorsements for publicity, reportedly paying champion boxer Floyd Mayweather a significant sum to promote their project. Who wants to leave their Blockchain investment decisions up to Floyd Mayweather, regardless of his unbelievable skill as a boxer and regardless of his own financial success? He should still not influence where you invest your money! Ponzi Schemes: Bitconnect: This is the most infamous Ponzi scheme in the history of cryptocurrency, and certainly the most damaging. Bitconnect was a Bitcoin-based project that rose to an all-time high of $463 per token on the back of a fictitious trading bot. The Bitconnect scam operated by paying dividends to users, proportional to the number of tokens they held and the number of referrals they made. The BCC tokens were exchanged for the users’ Bitcoin, and the highly sophisticated and wildly successful trading bot would trade BTC for them and distribute profits as dividends. The value of the dividends offered was approximately 1% of the initial investment per day. In other words, that is approximately 3,780% per year in cumulative gain! The referral system was capitalized upon most heavily by many of the biggest crypto YouTube channels, including CryptoNick and Trevon James, both of whom are now under investigation by the Federal Bureau of Investigation. Shortly after the Bitconnect Token reached its all-time high, they received cease and desist orders from the security regulators of Texas and North Carolina, which caused the owners of the Bitconnect exchange to shut down operations, and the price to plummet. Davorcoin: Davorcoin was a lending platform very similar to Bitconnect. And Davorcoin was farcically promoted by the same Trevon James crypto Youtuber who promoted Bitconnect, and is currently under investigation by the FBI for promoting Ponzi schemes. The Texas State Securities Board, in likening Davor to Bitconnect, stated that “DavorCoin is telling investors they can earn lucrative profits by investing in a lending program based on a new cryptocurrency known as davorcoin. Investors allegedly purchase davorcoin and then lend it to DavorCoin”. Davorcoin promptly plunged from an all-time high of $180 to very close to zero after a cease and desist order was made against them on the 2nd of February 2018. Useless Ethereum Token: Despite brazenly stating in the name of the project that the token has no use, the UET managed to raise $340,000 in its crowdsale, and saw a significant pump of over 300% on the HitBTC exchange in February of 2018. The scam was an obvious case of pump and dump, with the total trading volume for UET crashing back down to as low as $3 per day, after reaching as high as $350,000 per day during the pump. It is currently an unfortunate consequence of the decentralized nature of cryptocurrency, but there is a distinct lack of recourse for scammed investors. It is wise to become as well-acquainted with the various indicators of good and bad ICOs as you possibly can. In weighing the factors that will allow you to avoid expensive mistakes, ask yourself in whose favor are the terms of the ICO slanted, yours or the teams? To what extent are you actually likely to profit from this investment? Cryptocurrency is inherently a grey area, whether you are investing in it or not. Investing is another inherently grey area, no matter what the area or object of investing might be. Laws and regulations are not always able to keep up. Trying to define and prove what was or was not a scam is not likely to be as simple as the scammed investor would want it to be. A project can be set up in certain ways to avoid being technically classified or provable as a scam, but the unprepared investor can still be burnt or scammed just as badly. Now we look at more individual indicators that can help you form a valid impression whether or not an ICO or even a fully-fledged exchange-listed coin is a scam or a bona fide investment opportunity. Common Signposts Contrasting Scam & Legitimate Projects Presale Bonus/Token Release If the ICO allots massive bonuses to team members, you may leave yourself open to getting dumped on by presale investors if you buy when the project tokens are listed on an exchange. Likewise, if the project has a short lock-up period for developers and founders, you run the risk of them selling as soon as the token is listed on a major exchange. The token release schedule for the founders of a worthwhile project should show long-term team commitment to that project. The Jibrel Network team tokens will be locked up for 5 years before release, and they had no early investor bonus in the main sale. Both of these factors instilled confidence in the JNT ICO investors, and the tokens were sold out weeks before the ICO was due to end. No Presale lock up If Presale investor tokens are not locked up at all for any period after listing, that could easily be a set up for an exit scam after the initial listing. No presale lockup for early investor tokens is a crystal clear warning, the project may be fatally rigged toward those in the inner circle, with little commitment to the long term health or success of that project. Unsolicited Offers or Unasked for Additions to Groups Characters running scam projects will often add you to Telegram groups out of the blue or send you unsolicited emails with information about their project. Telegram is the most widely used messaging app in the cryptocurrency community and you should familiarize yourself with it to keep yourself in the loop for specific projects in which you invest as well as all kinds of other relevant crypto info. You can adjust the settings on the Telegram app to disallow anonymous additions to cryptocurrency projects if you find yourself bombarded with offers by scammers. Reputable projects at the ICO stage will spread by word of mouth, or by eloquent and meaningful articles posted on their Medium page. A project with serious potential does not need to actively seek participants for their ICO like that. They will often be able to fill their ICO hard cap in a matter of hours, or even just minutes! Anonymous Team Alarm bells, again, immediately, if the project has minimal online presence. The individual team members could be mere fabrications. The entire project could be a farce by utterly inexperienced characters. What if the project leaders are simply unaware of the importance of a strong social media profile? That in itself would be too strange to ignore. Top-level projects will have team members with experience in crypto and the LinkedIn accounts for those members will be easily accessible right there on the project website. You should be able to easily see and evaluate each individual’s experience in their field and ascertain what they bring to the project team. Bitconnect’s anonymous team should have been the only deterrent prospective investors needed to discourage them from putting money into that doomed project. Ethhorse, a current project with anonymous founders and operators should be steered clear of at all costs for the same reasons. Community Atmosphere The subreddits or Telegram groups of scam projects will often feature moderators that do not allow any kind of criticism in the group chat. If, in the process of your due diligence, you encounter didactic admins that only wish to silence your questioning of certain aspects of the whitepaper or mechanism of the tokenomics , you should be concerned. Similarly if you see a coherent critical reply attacked by many different users who refuse to engage the substance of the point being made, that may be a subreddit infested with bots. Projects that have nothing to hide will allow free debate in the chat. Ideally, they hope to develop a positive community that is itself an asset to the long-term success and overall strength of the project. Good projects do not need to automatically brand all criticism as Fear Uncertainty and Doubt (FUD). Whitepaper One common tactic of scammers is to produce a whitepaper that uses too many buzzwords, and deliberately obfuscates and overcomplicates the explanation of the problem and/or its solution. A good whitepaper clearly and concisely lays out the problem and answer, as well as provides compelling arguments why a Blockchain solution is preferable to the current solution. Another point of concern is a whitepaper that gives unrealistic time frames and goals. Bitconnect’s almost comically optimistic profit projections are a prime example of this, as are the 1,354% yearly gains promised by Plexcoin. Respectable projects will set out development timescales in terms of quarters or years, rather than offering immediate profit projections, which are simply a red flag. Advisors/Connections in the Cryptoworld The most prestigious projects will already have partnerships made before the ICO stage, and the worst ones, i.e. the scams, will not mention any such partnerships. Icon (ICX) for example was spawned from a South Korean project named The Loop, a collaboration between 3 Korean universities and the DAYLIFinancial Group. They boasted an advisory panel consisting of the legendary investor Don Tapscott, Jehan Chu and crowdfunding expert Jason Best. On top of a solid team of advisors, good projects will also be visible at major Blockchain events such as the Consensus, and the World Blockchain Forum, etc. Scam projects will be unable to inspire this same level in confidence. As an investor, you should sense a certain presence and expect a certain feeling of trust that should guide you in your investments. After all, it is actually a people-to-people thing you are doing. Key Stress points upon the Timeline to Identify Scam Projects Post Whitepaper Release The period in the immediate aftermath of the release of the whitepaper can also be decisive in establishing the validity of a project. How a team copes with the roadmap that they have laid out for themselves is key. Valuable insight into the operational efficiency and commitment to the project can be gleaned from the quality of and amount of code committed to GitHub. If you have any experience in computer programming you can see how clean and orderly the code is, which gives insight into the skill of the developers, and in turn the quality of project leaders’ decision-making in hiring team members. Scam projects will have little or no code committed to GitHub, or at best it will be copied and pasted from other projects just to cover their tracks. Start of ICO Sometimes, a scam project, or other project in which you would be better off not investing, will change the terms of the ICO just before the ICO starts. The Key (TKY) ICO doubled the price of tokens on the day before the ICO was due to take place, because the price of NEO had risen so drastically. Currently, the TKY token price is still only half of its ICO price. Initial investors are faced with the prospect of a 50% loss on their investment. Exchange Listing Some particularly greedy scammers will create a scam project with the intent of selling tokens in the ICO for BTC and ETH, and then pumping and dumping their share of the tokens immediately after listing. The team of fraudsters behind Monero Gold used this method after the crowdfunding of their useless ERC-20 token. After listing on CoinExchange.io, the team dumped their tokens until the exchange finally ceased trading. Although it is not uncommon for ICO tokens to sold after listing (just like can happen with shares of stock after an IPO), if the price does not stabilize and massive sell walls are continually placed, a scam is likely taking place and the token is being dumped. Fake Ethereum Twitter giveaway You may have noticed Ethereum creator Vitalik Buterin’s twitter handle has been changed to Vitalik “Not giving away Eth” Buterin in recent months. This is because a group of devious scammers had created fake accounts with almost exact replicas of his profile (deviating by only one character). The fake accounts promised to deposit 1 whole ETH for every 0.1 ETH the potential sucker deposited into the wallet address provided by the scammer. These fake account “Ether giveaway” scam tweets were set up to be sent in just a matter of seconds after the real person tweeted, and usually always appear immediately after the tweet of the real public figure. Fake bot profiles then came into play, thanking the fake Vitalik, or fake Elon Musk, for holding up their end of the bargain and depositing the ETH as promised. One scammer, or group of scammers, managed to fill a wallet up with almost $20 thousand worth of ETH, which they transferred out, never to be seen or heard from again. Effect of Scam Customers, Upon the Affected Parties Of course, this is no fun for the targeted public figure either. They need to take steps to avoid being targeted again. This will mean changing their handle, their username, or making their accounts private. However, the injured party with whom we are most concerned is the unfortunate scammed social media user, who has no chance whatsoever of getting his or her funds back, ever. It is a harsh lesson to learn. But it is a fact of crypto reality. Nearly every one that trades crypto will at least be exposed to frauds or scams in one way or another. In this case, we think it is better to learn about scams by studying them, rather than learn from your own unfortunate and expensive experience. In the case of Mr. Buterin, these incidents were awful public relations for the Ethereum project. It had only been a few years since cryptocurrency as a whole was primarily associated with criminality and seedy transactions on the Darkweb. Any connection with unscrupulous behavior is best avoided at all costs. Negative associations could have been particularly damaging for Ethereum’s brand because the vast majority of ICO fraud is committed using the ERC-20 token as the template for the scam tokens. Any and all the scamming or fraudulent behavior in the cryptocurrency ecosystem is bound to have a negative impact on the speed at which mainstream uptake finally takes place. Cryptocurrencies, as an emerging asset class, will be painted in the worst possible light. Crypto is aiming to, and is in fact in the process of, causing great disruption in traditional centralized finance and business. Mainstream media organizations are also part of that traditional centralized economy. Press coverage will be damning. Something is happening here, but Mr. Jones doesn’t know what it is. Legal Recourse for Scams We clearly understand, there is a possibility of being scammed. We know the scams are happening. The SEC has made some arrests and actually charged people for operating fraudulent ICOs. But it is a struggle to deal with the flood of ICOs coming from anywhere at any time. The SEC filed charges against two founders of a purported financial services startup for orchestrating a fraudulent ICO that raised more than $32million from thousands of investors. As you know from the ICOs we have covered so far, the lack of regulation allows for direct contact and dealing between the entrepreneurs, business owners and potential investors. While we believe this is a blessing according to the founding principles of Bitcoin and other alternate Cryptocurrencies, because it frees us from traditional roadblocks, middle-men, and all kinds of time-consuming procedures; it also leaves investors in a place where there is often little to no hope of ever recovering funds lost in fraudulent schemes. Actions after a Successful ICO Good post-ICO practice is characterized by stringent security, well thought-out legal strategy and clear communication. Many projects have paid the price in damage to their reputation for failing to adequately guard customer information, leaving themselves open to phishing attacks by fraudsters. Investors in the Enigma project had half a million dollars stolen from them; and a whopping $8.4 million was defrauded from investors in Veritaseum via phishing attacks. After a successful token distribution, the team’s main focus is initially on switching the enterprise from one primarily focused on fundraising, to superficially at least, a fully-fledged, functioning business. This involves removing most of the token sale-related content from their main webpage, sending newsletters to all successful ICO participants, and sending refunds to those who may have missed the deadline or the hardcap. Then, with the stressful and complicated fundraising stage finally concluded, a portion of the funds raised can be assigned to fuel the growth of the project community. This can involve hiring community managers, forum admins, and social media managers to outsource the job of keeping investors in the loop. The founders can focus on growth strategy and product development. The cultivation of a thriving and energetic community is extremely important. The community will give you free marketing for your product and your business. Community members who believe in the project, and are engaged by professional moderators, can give you very effective promotion to other prospective investors. Communication with community members is a great way to test ideas and gauge sentiment related to various aspects of your project. The project leads must set aside adequate funds for lawyers. The project will need to address potential future or imminent problems with regulators, at the very least. The transition from fundraising project to full-fledged business can be incredibly challenging, and even more stressful than the ICO itself. The main thing to remember is that your pre-sale and ICO investors are not just silent investors waiting for a return. They are the early adopters of your solution, of your product; they are the community and promoters of your project; and they are the individuals with a vested interest in the financial success of your venture. The ICO environment is not as heavily regulated, so quarterly and/or semi-annual reporting is not required the way it is in the traditional world. That means your own style of effective communication about the progress and key developments on your project matters even more. In the ICO world, you communicate with your press releases, social media, and Medium posts. You also communicate by the very nature of your relations with your exchange, and relationships with your cornerstone investors. Effective communication and good business relationships can play a prominent role in the success or failure of your venture (by token liquidity and valuation). If your investors start to lose interest, and stop trading your token on the exchange, liquidity will dry up and cause increasingly volatile price swings. You need to keep certain things in mind, and follow effective practices to maintain a happy and motivated community. Social Media & Medium In addition to your website, your social media & Medium blog most likely formed a significant part of your ICO preparations. Your purpose pivots after the ICO from one of promotion to one of communication. Consistent, informative and material Medium blogs, also Facebook and Twitter updates, ensure that investors remain engaged and well-informed of what the company is up to. Frequent activity in this space makes investors feel much more comfortable. You can foster a kind of organic community expansion that is consistently advertising your project to potential new members. Cornerstone Investors & Exchanges As we mentioned, your relationship with investors in the ICO world is different from that of the traditional silent IPO minority equity partners. Consistent, Transparent & Honest communication is incredibly important here. Even if an ICO is struggling to overcome a problem or whatever issues are occurring, honest communication from the team is key to business survival. You should think of and treat your exchange like a business partner too, a very important one at that. Exchanges provide liquidity for you and your investors. That liquidity is like the blood for your business. Many top exchanges demand nothing less than absolute honesty and integrity, it is imperative to maintain strong and comfortable relationships with exchanges. Everything we have said so far, also applies to your Telegram channel and forums too. These give you another great opportunity to build a thriving community. Team members and investors can enjoy lively debates in their Telegram channels. This can be constructive discussion, or critical commentary too. But it is always valuable as a direct link between the team and the community. It is always good to know how people are feeling and what they expect from you and your project. You are able to use your Telegram channel and forums to consistently adapt your marketing and communication strategy. Keep your investors as happy and comfortable as possible, and you will be more likely to attract new investors and allocations. Other forums around the internet operate more or less in the same manner as Telegram. After a successful funding round with the hardcap reached and time to spare, legal counsel has been secured, and the community is flourishing, the team will prepare for their first listing by paying the exchange fee and waiting for the announcement by the exchange. Unless they are willing to pay exorbitant fees for an immediate listing on Binance for example, teams will usually settle for an initial listing on a second-tier exchange. The fee charged by an exchange depends on many different factors that we will cover in more detail in the next section. ICO Company actions after a Successful ICO Real World Case Study The Basic Attention Token (BAT) project, when used in conjunction with the Brave Browser, allows users to pay micro-fees in BAT to their most-used sites. The idea was conceived by Brendan Eich, the inventor of Javascipt and former CEO of Mozilla Firefox. Investors absolutely pounced on it at ICO and the project raised an amazing $35million in under 30 seconds. The BAT/Brave project has delivered on time on nearly all of its targets, helped in no small part by having a working product, the Brave Browser, for over a year before the token launch. The project secured a listing on the premier exchange, Binance, in November 2017. A project can suffer through a disappointing funding phase and, for example, fail to reach 75% of its hardcap. The team will be only partially funded. Though they may be able to initiate the project, the value proposition of the token has been compromised, potentially forever. The market has spoken. There is limited faith in the team’s ability to complete or carry out their project. Failure to reach a hardcap is a serious obstacle on the project road map. This will mean massive revisions to the timescales for development and listing. Such a project may have to be content listing on decentralized exchanges for a period of time and they will lose any post-ICO hype that could have helped the project price to “moon” early on. There is less money to be allocated. Each section of the business will be underfunded compared to the original plan. There can be delays in code development, exchange listing, marketing and community development as well. Calling the Tezos ICO a disappointment might seem strange considering they raised over $232million. But this open-source, smart contracts fintech platform became a victim of its own success post-ICO by devolving into multiple class-action lawsuits between the founders and its foundation chairman. They suffered from a distinct lack of clearly defined roles and expectations on key positions. There was infighting at the boardroom level. This all caused an as yet unresolved delay in listing and development. This is also one example why a capped ICO can be more desirable for investors than an uncapped ICO. If the team have a set amount of capital to work with, an amount that isn’t absolutely ridiculous, like in the case of Tezos, perhaps the resultant greed and discord is less likely. Although it may not be so easy for speculative investors to make a profit from an uncapped ICO with such a massive initial market cap, it is a very impressive feat of fundraising nonetheless. Tezos’s post ICO market cap of $232million is already 64th of all projects, and would have to perform brilliantly on listing to maintain this position. Company actions after a Failed ICO Failed ICOs can mean either fundraising initiatives that have failed to reach the softcap and will therefore not be economically viable, or fraudulent projects whose sole intention was to steal from investors and do an exit scam. We’ve already covered scams and fraud projects in detail, but what happens when an ICO just fails to raise the requisite funds? Projects that are legitimate, with honest founders and developers, refund the ETH or BTC deposited by investors as quickly as possible if the softcap is not reached. The same process that is followed by ICOs that are oversubscribed is employed by those that have failed to raise enough capital. The process of returning funds back to the sender ideally should take a period of days, but more likely will take a few weeks. The Sappy Network, advised by Dan Tapscott, failed to come anywhere near to their funding goals. They are currently in the process of sending all investor funds back to the wallets from which they came. The statement from the founders read as a textbook example of how you should react to failure with the founder stating “In the spirit of transparency and honesty, we are sharing with the community that we did not reach the soft cap, and thus we will be honoring our terms and conditions and returning the Ethers to all contributors” Exchange Listing A bottleneck developed in the ICO market after the explosion of crypto prices in 2017. There was a massive increase of ICO teams on all stages along the pathway from start-up to fully listed crypto asset. Certainly, a huge part of the value proposition for both the token and the project depends on securing a listing on an exchange. It is precisely the liquidity of the token as a valuable asset on a free market exchange, that determines or even defines its value. The liquidity is what makes tokens attractive to investors, but that liquidity simply does not exist without a platform for the exchange. Unfortunately for new projects, the balance of power is heavily weighted in favor of large centralized exchanges that can pick and choose which tokens to list, and the timescale within which listing will occur. Each large exchange has its own list of pros and cons as well as its own specific procedure for coin/token listing. They also have their own particular ethos regarding the type of projects they prefer to list. ERC-20 tokens will be available for trade immediately on decentralized exchanges (IDEX Forkdelta) but those platforms are generally quite low volume, and certainly not a long term solution. Projects must often pay huge fees to be listed on the larger centralized exchanges. At first those fees will be prohibitive. The usual route is to initially list on a more reasonably priced smaller exchange like Kucoin or Gate.io. Listing Process Major centralized exchanges have the power to list anything they want, and they also each have a unique structure that projects must adhere to if they wish to be listed. Each potential new listing will undergo a rigorous examination by the exchange operators to test the feasibility for listing the token. An exchange will likely have forms available on its website that you can fill out to give them all the necessary initial information. If a particular project and token qualify for listing, the team will invariably be put under a NDA, Non-Disclosure Agreement, to avoid any insider trading or other regulatory problem s. In the case of larger exchanges like Binance, there is a period within which owners of a newly listed coin or token can transfer them to the exchange in preparation for trading. This is a fantastic opportunity for traders to make use of the likely pump that occurs after a new token is listed on a large exchange. It is common to see up to 100% increases on the first day of trading, and a subsequent dump of up to 50% or more can follow. This allows traders holding the coin already, to sell for a good profit, and maybe buy back in at a much lower price too, if they think that is a good idea. Exchange Fees There are no definitive figures available to the public regarding fees that major exchanges charge new projects to list. Binance, Bitfinex, Kraken and Bittrex have all been quoted as saying that they do not charge any fee at all but this is almost definitely untrue. Knowledgeable industry insiders estimate between $500,000 and $1,000,000 USD for listing on a top-tier exchange. (There have been more rumors of 7 figure exchange listing fees since January 2018 too). This figure will vary greatly from project to project. Various factors can affect how an exchange determines the fee for a particular project. These are some of the most important ones: Market Maker Service Required Whether or not the client project requires liquidity services directly from the exchange, or can connect proprietary ones via API, will lead to a huge reduction in listing cost. Type of Token (ERC-20 NEP-5 or DAG) Not all tokens are created equal in the listing process. ERC-20 tokens and BTC based tokens have code architecture that will almost certainly be preferred by the exchange. NEO based tokens (NEP-5) such as Ontology will be far most costly to integrate because separate new wallets have to be built to facilitate NEO transactions. The costs involved in integrating Direct Acyclic Graph projects such as Nano into the exchange structure are even worse. Expected Daily Volume Exchanges derive their profits largely from transaction fees and withdrawal fees. The trading volume a new token is likely to bring in will have a great influence on the computation of the exchange listing fee. Exchange Listing Procedures Evaluation Different exchanges have different rules for new listings. A new project must of course abide by specific rules for that exchange before they are allowed to list there. There are procedures that must generally be followed for the most noteworthy exchanges. You can get a good idea of the hurdles to be overcome before listing can take place. Ongoing relationship with Exchanges Exchanges, usually Huobi or Kucoin, will sometimes make it essential for newly listed tokens to engage in “trading competitions” after listing. Competitions can last between 2 weeks, or a month or more, aiming to increase the trading volume for that token, thereby increasing trading fees collected by the exchange, and giving the project extra publicity too. The whales may have made a nice profit already and be very happy about it; but the project token can still get stuck in a long period of stagnation and a loss of post-ICO hype. Once a coin or token has been successfully registered for trading on a particular exchange, the project must focus on maintaining regulatory compliance and paying things like annual maintenance fees too. Exchanges can investigate and delist coins or tokens to see if they have fallen below a certain standard set by the exchange. The exchange is concerned about such things as: an extended period with an extremely low volume; a team member connection to an exit scam; or other such immoral/illegal behavior. Post ICO Company Evaluation After a presumably successful ICO, the necessary funds have been obtained, and the real business, the real team challenge is now, to bring the project to life as a bona fide disruptive Blockchain endeavor! The core advantage of the ICO method of funding business startups is the lack of regulatory hurdles to navigate with regards to fundraising and fund allocation. The funds that have been raised have, in effect, been freely given to the project leads to do with what they will in a no-strings-attached transaction. Of course, there are still strings attached in that the team are tasked with making that money grow for the investors. But there is no regulatory oversight of the process. The regulatory freedom is a double edge sword. It gives a good team freedom to work however they want; and it also allows for unscrupulous thieves to use the ICO process to defraud investors of their ETH and BTC. Advantages of being Post ICO From Investor Perspective You should have little to fear in terms of fraud from a project in which you have invested, if you have done your due diligence correctly. You can expect the tokens to be distributed, and the exchange listing to take place as expected. And you know your project is totally legitimate. There are different ways to think about your ICO tokens after the crowd sale has concluded. If you are a speculative investor looking for a quick flip, you can gauge the correct moment and sell anytime you like, assuming the ICO has been well-received by the markets. From Team Perspective The post-ICO period is, from the point of view of the team, a period where stress and responsibility for the safety of investor funds is passed, in the form of ICO tokens, from the team to the investors themselves. This responsibility for tokens is replaced with the stress of building the actual company itself, and succeeding in the business as planned. A small portion of the responsibility for the project’s success is also passed on to the exchange that has listed the tokens. This is especially true if market makers have been employed by the team or the exchange to provide liquidity. After the ICO has concluded, all funds are released to the project team immediately, so they can start building their business brand, and tackling each step on the road map right away. The freedom with which startups can operate is one of the main reasons behind the explosion in Blockchain businesses in 2017. With the ICO funds safe, and money being put to work on various areas essential to the growth of the project, and the tokens already distributed to investors, the risk of fraud is greatly diminished. If KYC and Anti-money Laundering procedures have been followed correctly during the ICO phase, the risk of phishing attacks and theft will also be marginal now. At any rate, with tokens safely delivered to all participants, the responsibility has passed from the team to the investor. From Team Perspective The release of all funds and the freedom to allocate them with no supervision, as cited above, is certainly a tremendous advantage empowering the team to fulfil the entire breadth of their vision unimpeded. But it does have its drawbacks. If there is a mistake made in the allocation of funds, or an unforeseen problem arises, there is nowhere to turn to, and no means of generating further money via crowdfunding. The ICO is over; it is finished. The project simply has to work with what it has. Your community can sometimes turn against you when the market is going down. Times like that just add to the already intense pressure of presiding over a startup Blockchain business. Solution: DAICO The DAICO, or Decentralized Autonomous Organization Initial Coin Offering, is a means to integrate a more specific, rigorous and regimented smart contract schedule into the ICO process. Doing so will eliminate fraudulent ICOs, exit scams, pump and dumps, and many of the other disadvantages listed above. The DAICO method, proposed by Ethereum creator, Vitalik Buterin, will merge the core concepts of both an ICO and a DAO to leverage the most relevant features of both, in order to solve the main problems in the ICO method. For example, to eliminate the risk of an exit scam, the release of funds will be spread out over a period of time, with the next allotment only being released when a certain set of parameters are met. Buterin explains that the DAICO method will provide user protection in a manner not present in the current ICO model, ensuring funds are not misspent or used in any way contrary to the intention of investors. In simpler terms the DAICO will operate as follows: The DAICO will start with a smart contract by its executors that can set whether this is to be a capped or uncapped round of fundraising (amongst many other options) as well as including KYC requirements. After these settings have been configured, the DAICO is set into “contribution mode” and presented to the public. This stage will function identically to a normal ICO with ETH exchanged for project tokens. Once the funding period has elapsed, or the hardcap has been met, investors will have the ability to set the “tap” for the collected funds. This will set the amount per second, or amount per minute, that will be available to the executor to develop that specific portion of the project to which those funds have been assigned. If investors believe at any point that the team is misspending funds or otherwise wasting time, etc., the investors have significant options to take. Of course they could choose to release more funds to the team. But, they could also stop the tap altogether, and stop the entire ICO, by voting, and actually release all unused funds back to their own wallets from which the investment had first been made! Learn more on how to market any ICO and STO, get better understanding of security token definition and learn what a scam project is! Follow the link to read the full article: UBAI.co Contact me via Facebook or LinkedIn to know more about our services: LinkedIn Facebook
The premise of cryptocurrency is simple, a new ICO launches, claiming to offer lucrative returns for investors. Investors can’t believe their luck and clamor to buy in. The business runs for some time on the back of the invested capital, but, sooner or later, disaster strikes and the company shuts down, often with no explanation. After a while, it becomes obvious that the company is gone for good, along with the invested funds. The poisoned chalice of crypto’s decentralized nature often means that investors are left in the dark when trying to recoup or trace their pilfered funds.
How to spot an exit scam
Many exit scams have tell-tale signs that investors should look out for. The financial content site Investopedia has a handy list of key characteristics. First, exit scams often have inconsistent or misleading information about the team behind the project. When scouting potential investment opportunities, investors should scour for information on key members of any ICO. It’s important to remember that online credibility can be faked by purchasing likes, profiles and followers on social media. Celebrity endorsements with verified accounts could also ring alarm bells for investors. A fake Twitter account purporting to be Elon Musk, with a supposedly verified twitter account, raised over $155,000 as part of a 2018 Bitcoin scam. Investors should verify the credentials of backers, team leaders and promoters of cryptocurrency projects. Although individuals may seem to be legitimate at first glance, brand new social mediaprofiles and few followers or connections should raise eyebrows. The most significant characteristic unifying exit scams in cryptocurrency is the promise of a huge return on investment (ROI) — chances are that it’s probably too good to be true. Investors should always look through even the smallest details of what they are required to invest and what the company purports to be able to give back to them. ICOs usually come with a white paper, setting out the design details of the project along with a business plan and other information. Investors should pursue all available information for ICOs, as any vagueness in the white papers should signal a big red flag. When investing in an ICO, it’s vital to get an understanding of the business model. Investopdia writes that anything powered by concept alone should be a warning to anyone tempted to buy in. Although cryptocurrency projects can and do launch off the back of technological advances, investors should be wary of projects looking to gather millions of dollars before taking a sober look at the project’s ability to return the investment from the published information. Heavy promotion of an upcoming ICO can also be a sign of an exit scam. Past scams have employed bloggers to promote via numerous forums. Ads both online and in print media could also be suspicious.
$2.9 billion PlusToken scam could be largest exit scam ever
A 2019 report shared with Cointelegraph by the cryptocurrency and blockchain forensics company Ciphertrace dubbed 2019 the year of the exit scam and highlighted the billions of dollars stolen in multiple scams this year alone. The report shines a light on what, if confirmed, could be the biggest crypto scam ever, with an estimated loss of around $2.9 billion after Chinese police uncovered an alleged Ponzi schemeinvolving the South Koreanwallet provider and exchange PlusToken. Although more is being uncovered about PlusToken, mystery still surrounds the key events. Ciphertrace reports that the platform has enshrouded several Chinese nationals, the government of Vanuatu, the Chinese police and the company’s co-founders — a South Korean man operating under the alias of “Kim Jung Un” and a Russian known only as “Leo.” The alleged PlusToken scam centers around an app with which the wallet provider claimed investors could invest in PlusToken (PLUS). According to the report, the firm claimed that the token, based on the Ethereumblockchain, was developed by a major technology company. PlusToken is also said to have falsely stated that it could deliver wallet holders an ROI of between 8% and 16% per month, with a minimum deposit of $500 in crypto assets. Ciphertrace also reported that no verifiable source of revenue existed other than the proceeds from new membership. Those were onboarded per the traditional method of a Ponzi scheme, which require a constant stream of new investment in order to support its semblance of growth. Investors were incentivized to recommend new users with an invitation, which was the only way to join. Although this was enough for some members to dismiss the legitimacy of the project outright, Leo, the company’s co-founder, published a press release that claimed he had met with Prince Charles, the future head of the English royal family, providing photos as proof. Ciphertrust reported that it had contacted the Prince Charles Foundation, which confirmed that Leo had indeed attended the event, but would not provide other information about the individual due to European Union General Data Protection Regulation, or GDPR. PlusToken’s fate was seemingly sealed on June 28, after members of the Chinese police touched down in Vanuatu, detained six people involved with the project and extradited them back to mainland China. Ciphertrace reported that the so-called “PlusToken Six” were either Vanuatu citizens or applying for citizenship at the time of their arrest. Soon after, PlusToken members found that they were unable to withdraw funds from their accounts. Customers were informed that withdrawals via the app were frozen due to “technical difficulties.” By June 20, the PlusToken app had ceased operations due to purported system maintenance. For investors, there seems to be no secure lead on the final resting place of the allegedly billions of dollars of stolen funds. The Chinese government has yet to comment. A July 12 post from PlusToken stated that the six Chinese individuals were simply service users and not actually involved with the running of the company itself, stating that users should ignore the rumors and not try to log in until they receive confirmation that the servers are back online.
On April 9, 2018, two ICOs — iFan and Pincoin — operating under the umbrella of company Modern Tech based in Vietnam, went silent after reports outed them as scams that had scalped 32,000 investors out of an alleged $660 million in tokens, according to Tuoi Tre News. Victims claim that the damages amount to roughly 15 trillion Vietnamese dong ($660 million) in token sales. Angered investors held a demonstration outside Modern Tech’s Ho Chi Minh City headquarters on April 8. One of the initial characteristics that could have alarmed investors was the fact that Pincoin offered service users bonuses for successfully bringing other people on board. Pincoin did initially pay out cash until January 2018, when the company switched to iFan tokens, TechCrunch reported. The owner of Modern Tech’s office building said that the company left its offices in March and that no one knew their current whereabouts. The firm left behind only an incomplete website that is now inactive. Modern Tech initially tried to pass itself off as a mere representative of both coins in Vietnam, prior to media reports confirming that seven of its Vietnamese executives were in fact behind the projects. TechCrunch reported that the ambiguous mission statement from the then-functional site is typical of the vague and jargon-filled copy used by exit scammers:
“The PIN Project is about building an online collaborative consumption platform for global community, base on principles of Sharing Economy, Blockchain Technology, and Crypto Currency”
Financial scam directory Behindmlm released a report in February 2018 that found its buy-in method was typical of an ROI Ponzi scheme. Pincoin’s website is currently down, though iFan’s is still online.
QuadrigaCX — regulators catch on
The death of 30-year old Gerald Cotten shook the crypto world — not only because Cotten was the co-founder and CEO of Canada’s largest cryptocurrency exchange, QuadrigaCX, but also because his control of the passwords and keys to accounts rendered all the assets on the exchange forever inaccessible after his death. Cotten took over $195 million of stolen cryptocurrency with him to the grave. Related:QuadrigaCX Users Lose $190M as Speculations Over Cotten’s Death Swirl Commenting on the May 9 Ernst & Young report, Ciphertrace said Cotten had played fast and loose with customer funds for many years in order to support a lavish lifestyle for both himself and his wife. Cotten allegedly exercised complete control over the exchange and used his position to perform “unsupported deposits” — i.e., fabricated transactions not represented by either fiat or cryptocurrency. Cotten also used significant volumes of customers’ cryptocurrency via transfers from the platform into other exchanges he controlled. As per the EY report, Cotten shifted significant amounts of fiat and cryptocurrency between alias accounts, although less than 1% of these transfers was supported by documentation. Ciphertrace notes that as the admin, Cotten was in a perfect position to hide his fraudulent activities. In a pattern that may now seem familiar, Cotten used customer funds to pay for QuadrigaCX operating costs after the company suffered liquidity issues due to his reported fraudulent use of user deposits. As QuadrigaCX began to struggle to stay afloat, EY reported that Cotten gambled customer funds in off-platform margin accounts to meet margin calls. The report also states that Cotten traded unsupported deposits for legitimate funds thereby generating artificial trading markets, abused his position to override Know Your Customer requirements and hoarded all passwords:
“The Monitor understands passwords were held by a single individual, Mr. Cotten and it appears that Quadriga failed to ensure adequate safeguard procedures were in place to transfer passwords and other critical operating data to other Quadriga representatives should a critical event materialize (such as the death of key management personnel).”
As of April 12, EY estimated that Quadriga held around $20.8 million in assets and around $160 million in liabilities. The debts and assets are spread over three subsidiary companies, 0984750 B.C. LTD. (the “Quadriga Estate”), Quadriga Fintech Solutions and Whiteside Capital Corporation. On July 31, the Supreme Court of Nova Scotia approved over $1.6 million in fees for parties seeking remuneration from the exchange, according to court documents.PDF) seen by Cointelegraph.
CFTC action launched after $147 million BTC scheme
On June 18, 2019, the United States Commodity Futures Trading Commission (CFTC) initiated a civil enforcement action against now-defunct Control-Finance Limited for a scheme involving $147 million worth in Bitcoin. It is alleged that Control-Finance Ltd. defrauded over 1,000 investors by laundering around 22,858 Bitcoin. In mid-September 2017, its website was abruptly taken offline, payments to clients were suspended and advertising content from social media accounts was deleted. The firm initially said that it would reimburse customers by late 2017. However, the company allegedly began transferring laundered Bitcoin by using the crypto wallet service CoinPayments. According to Ciphertrace’s Q2 2019 Anti-Money Laundering (AML) report, the CFTC complaint charges the company and its founder Benjamin Reynolds with:
“Exploiting public enthusiasm for crypto assets by fraudulently obtaining and misappropriating at least 22,858.22 Bitcoin from more than 1,000 customers through a classic high-yield investment (HYIP) Ponzi scheme called the Control-Finance Affiliate Program.”
Per the CFTC, the company claimed that investors who buy Bitcoin through the firm would be guaranteed daily profits thanks to their team of expert cryptocurrency traders. The complaint also stated that the firm falsely claimed market volatility would ensure funds invested through Control-Finance would result in profit. The CFTC also alleged that Control-Finance misleadingly promised that it could earn customers a 1.5% ROI daily and 45% monthly. Control-Finance is also reported to have sent partial amounts of new clients’ BTC deposits to other customers, which were disguised as profit from trading, a tactic typical of Ponzi schemes. The legal action seeking civil monetary penalties and permanent trading bans continues.
Co-owner of Bitmarket found shot dead after alleged exit scam
On July 8, the Poland-based exchange Bitmarket shut down, citing liquidity issues. According to Ciphertrace’s Q2 2019 AML report, the shutdown cost users around 2,300 Bitcoin, approximately $23 million. Users attempting to log on to the site were met with the following message:
“We regret to inform you that due to the loss of liquidity, since 08/07/2019, Bitmarket.pl/net was forced to cease its operations. We will inform you about further steps.”
Ciphertrace reports that Bitmarket had a history of partners pulling out. In 2015, the firm lost payment processors CashBill and BlueMedia after the companies' banks requested they end their working relationship with Bitmarket. PKO Bank Polski, Bitmarket’s own bank, also terminated its relationship with the firm only six months after Bank BPH had done so earlier in 2015. Bitmarket’s two founders, Marcin Aszkiełowicz and Tobiasz Niemiro, have contradicting accounts about the misplaced user funds. Aszkiełowicz claimed that the exchange had been hacked for 600 BTC in 2015, an incident from which the company was unable to recover. Niemiro, however, claimed that he was not responsible for activities on the exchange. Niemiro also purported to have been told that the company was purchased with a deficit of 600 BTC, which he allegedly repaid with his own money. Niemiro said he could not confirm that his partners had indeed used the money to purchase the 600 BTC. Two weeks after the interview, Niemiro was found dead in a forest near his home with a gunshot wound to the head, which the police deemed to be self-inflicted. The District Attorney’s Office stated that it is not looking into the involvement of third parties in Niemiro’s death, but are still actively investigating the misappropriation of funds.
Regulations or positions of some countries about cryptoworld Because governments can sometimes be a bit touchy about attempts to create alternatives to the legal tender they enjoy a monopoly on printing, a wise investor might wonder about the legal status of cryptocurrencies. Indeed, the disruptive potential of these technologies has made governments around the world nervous, as they have struggled to devise appropriate regulations for the cryptocurrency realm without stifling innovation. Most potential investors have nothing to worry about from a legal standpoint, but it pays to do one’s homework. Regulations or positions of some countries about cryptoworld Some countries have banned or ruled unconstitutional the use of cryptocurrencies within their borders, while others have embraced them or even announced plans to issue their own. Of course, due to the inherently decentralized nature of cryptocurrencies, enforcement has proven difficult. Taxes levied on profits made trading cryptocurrencies vary based on their legal classification. Check the laws in your country, and make sure you abide by them when investing. Questions of legality in major markets have caused temporary dips in cryptocurrency prices over the years, but they have always recovered. Keep reading for a brief history of legal rulings and government announcements related to bitcoin that have helped shape the current ecosystem. February 2012 Payments services firms Paxum and Tradehill temporarily cease bitcoin exchange activities due to legal concerns raised by Canadian regulators. 28 March 2013 Cypriot investors drive up bitcoin prices seeking a refuge for savings when a government bailout program threatens to tap bank deposits. 14 May 2013 The United States Department of Homeland Security seizes almost $3 million from a subsidiary of the Mt. Gox exchange, claiming that the business is illegally engaged in money transmission without a license. 30 August 2013 Tradehill stops exchanging bitcoin, again due to regulatory uncertainty, indicating a growing need for government clarification on the legal status of cryptocurrency. October 2013 The U.S. Federal Bureau of Investigation arrests operator of Silk Road dark web marketplace Ross Ulbricht, alias “Dread Pirate Roberts,” charges him with computer hacking, money laundering, drug trafficking and attempted murder, shuts down the site and seizes over 170,000 bitcoins. In the wake of the shutdown, numerous other illicit marketplaces emerge, but are prone to exit scams in which operators abscond with bitcoins held in escrow. 18 November 2013 U.S. Senate holds hearing titled “Beyond Silk Road: Potential Risks, Threats, and Promises of Virtual Currencies.” Members express reservations about the potential illicit applications of cryptocurrencies so vividly illustrated by Silk Road, frustration at the difficulty of regulating something so difficult to understand, but ultimately hope that government will be able to create a system in which decent people have a “chance to try and play by the rules.” 22 November 2013 China’s central bank issues an equivocal statement on bitcoin that nonetheless greenlights Chinese participation in cryptocurrency exchange and investment, prompting huge price gains over subsequent weeks. 05 December 2013 Backpedaling somewhat in response to the widespread use of bitcoin to circumvent limits on capital outflows, China bans banks and other financial institutions from dealing with or offering services relating to bitcoin, ruling that it is not a currency. 25 March 2014 The U.S. Internal Revenue Service issues its first guidelines for bitcoin, ruling that it is to be taxed as property, not treated as currency. 10 April 2014 Under government pressure, Chinese banks begin to shut down accounts belonging to bitcoin exchanges. Prices drop 10%, but many exchanges exploit loopholes and offshore parts of their businesses to continue operating. July 2014 The state of New York announces plans to develop licensing requirements for businesses dealing in bitcoin or related services, which proves extremely unpopular with cryptocurrency advocates. 06 November 2014 Trendon Shavers, alias “pirateat40,” arrested for defrauding bitcoin investors in Ponzi scheme in 2012. 19 December 2014 Bitcoin entrepreneur and proponent Charlie Shrem sentenced to two years in prison for illegal money transmission charges related to the Silk Road marketplace. 25 January 2015 Coinbase navigates regulatory frameworks to win approval to operate a fully-fledged bitcoin exchange in 25 U.S. states and sets sights on further expansion. 25 March 2015 Hong Kong officials warn against potential fraud on exchanges, but indicate they will take a light hand regulating cryptocurrencies, classifying them not as legal tender but as “virtual commodities.” 29 May 2015 Ross Ulbricht receives sentence: life in prison without parole. Judge Katherine Forrest explicitly seeks to make an example of him and thereby discourage others from using cryptocurrency and the relative anonymity of the Internet to flout the law. 01 August 2015 Mark Karpeles, former Mt. Gox CEO, arrested in Japan and charged with falsification of records relating to the solvency of the exchange during its collapse. 10 August 2015 Deadline hits for compliance with New York regulators’ “BitLicense” rules, leading many exchanges to stop serving customers in the State. 22 October 2015 Crypto advocates hail a European court ruling that VAT does not apply to bitcoin and other cryptocurrency transactions, thereby classifying them as currency, not property. 10 November 2016 The state of North Carolina creates legislation to address bitcoin and money transmission, which regards businesses dealing in virtual currencies as subject to the same set of rules and licensing requirements that govern transmission 10 March 2017 The U.S. Securities and Exchange Commission denies Cameron and Tyler Winklevoss authorization to create a bitcoin-based ETF, citing inadequate regulation of cryptocurrency exchanges. 28 March 2017 The SEC denies the Winklevoss brothers’ second request for authorization of a bitcoin ETF, again citing concerns about the lack of regulation and potential for fraud on the exchanges. 01 April 2017 Japan recognizes bitcoin and other cryptocurrencies as legal tender and lays the groundwork for supportive regulations intended to permit legitimate investment while discouraging money laundering and terrorist financing. 04 September 2017 China prohibits fundraising via initial coin offerings, which it considers illegal. 07 September 2017 The European Central Bank rules out the possibility of Estonia launching its own national cryptocurrency, reaffirms the privileged status of the Euro as legal tender, and cites concerns that national cryptocurrencies would undermine financial regulations. 06 December 2017 Softening its initial stance, Russian regulators indicate that new rules may allow the purchase of cryptocurrencies, but forbid or heavily restrict mining activities. 07 December 2017 Regulators in South Korea ban trading in bitcoin futures as well as initial coin offerings(ICO), but will permit cryptocurrency exchanges to continue operations.
Hello! My name is Slava Mikhalkin, I am a Project Owner of Crowdsale platform at Platinum, the company that knows how to start any ICO or STO in 2019. If you want to avoid headaches with launching process, we can help you with ICO and STO advertising and promotion. See the full list of our services: Platinum.fund I am also happy to be a part of the UBAI, the first educational institution providing the most effective online education on blockchain! We can teach you how to do ICO/STO in 2019. Today I want to tell you how to sell and transfer cryptocurrencies. Major Exchanges In finance, an exchange is a forum or platform for trading commodities, derivatives, securities or other financial instruments. The principle concern of an exchange is to allow trading between parties to take place in a fair and legally compliant manner, as well as to ensure that pricing information for any instrument traded on the exchange is reliable and coherently delivered to exchange participants. In the cryptocurrency space exchanges are online platforms that allow users to trade cryptocurrencies or digital currencies for fiat money or other cryptocurrencies. They can be centralized exchanges such a Binance, or decentralized exchanges such as IDEX. Most cryptocurrency exchanges allow users to trade different crypto assets with BTC or ETH after having already exchanged fiat currency for one of those cryptocurrencies. Coinbase and Kraken are the main avenue for fiat money to enter into the cryptocurrency ecosystem. Function and History Crypto exchanges can be market-makers that take bid/ask spreads as a commission on the transaction for facilitating the trade, or more often charge a small percentage fee for operating the forum in which the trade was made. Most crypto exchanges operate outside of Western countries, enabling them to avoid stringent financial regulations and the potential for costly and lengthy legal proceedings. These entities will often maintain bank accounts in multiple jurisdictions, allowing the exchange to accept fiat currency and process transactions from customers all over the globe. The concept of a digital asset exchange has been around since the late 2000s and the following initial attempts at running digital asset exchanges foreshadows the trouble involved in attempting to disrupt the operation of the fiat currency baking system. The trading of digital or electronic assets predate Bitcoin’s creation by several years, with the first electronic trading entities running afoul of the Australian Securities and Investments Commission (ASIC) in late 2004. Companies such as Goldex, SydneyGoldSales, and Ozzigold, shut down voluntarily after ASIC found that they were operating without an Australian Financial Services License. E-Gold, which exchanged fiat USD for grams of precious metals in digital form, was possibly the first digital currency exchange as we know it, allowing users to make instant transfers to the accounts of other E-Gold members. At its peak in 2006 E-Gold processed $2 billion worth of transactions and boasted a user base of over 5 million people. Popular Exchanges Here we will give a brief overview of the features and operational history of the more popular and higher volume exchanges because these are the platforms to which newer traders will be exposed. These exchanges are recommended to use because they are the industry standard and they inspire the most confidence. Bitfinex Owned and operated by iFinex Inc, the cryptocurrency trading platform Bitfinex was the largest Bitcoin exchange on the planet until late 2017. Headquartered in Hong Kong and based in the US Virgin Island, Bitfinex was one of the first exchanges to offer leveraged trading (“Margin trading allows a trader to open a position with leverage. For example — we opened a margin position with 2X leverage. Our base assets had increased by 10%. Our position yielded 20% because of the 2X leverage. Standard trades are traded with leverage of 1:1”) and also pioneered the use of the somewhat controversial, so-called “stable coin” Tether (USDT). Binance Binance is an international multi-language cryptocurrency exchange that rose from the mid-rank of cryptocurrency exchanges to become the market dominating behemoth we see today. At the height of the late 2017/early 2018 bull run, Binance was adding around 2 million new users per week! The exchange had to temporarily disallow new registrations because its servers simply could not keep up with that volume of business. After the temporary ban on new users was lifted the exchange added 240,000 new accounts within two hours. Have you ever thought whats the role of the cypto exchanges? The answer is simple! There are several different types of exchanges that cater to different needs within the ecosystem, but their functions can be described by one or more of the following: To allow users to convert fiat currency into cryptocurrency. To trade BTC or ETH for alt coins. To facilitate the setting of prices for all crypto assets through an auction market mechanism. Simply put, you can either mine cryptocurrencies or purchase them, and seeing as the mining process requires the purchase of expensive mining equipment, Cryptocurrency exchanges can be loosely grouped into one of the 3 following exchange types, each with a slightly different role or combination of roles. Have you ever thought about what are the types of Crypto exchanges?
Traditional Cryptocurrency Exchange: These are the type that most closely mimic traditional stock exchanges where buyers and sellers trade at the current market price of whichever asset they want, with the exchange acting as the intermediary and charging a small fee for facilitating the trade. Kraken and GDAX are examples of this kind of cryptocurrency exchange. Fully peer-to-peer exchanges that operate without a middleman include EtherDelta, and IDEX, which are also examples of decentralized exchanges.
Cryptocurrency Brokers: These are website or app based exchanges that act like a Travelex or other bureau-de-change. They allow customers to buy or sell crypto assets at a price set by the broker (usually market price plus a small premium). Coinbase is an example of this kind of exchange.
Direct Trading Platform: These platforms offer direct peer-to-peer trading between buyers and sellers, but don’t use an exchange platform in doing so. These types of exchanges do not use a set market rate; rather, sellers set their own rates. This is a highly risky form of trading, from which new users should shy away.
To understand how an exchange functions we need only look as far as a traditional stock exchange. Most all the features of a cryptocurrency exchange are analogous to features of trading on a traditional stock exchange. In the simplest terms, the exchanges fulfil their role as the main marketplace for crypto assets of all kinds by catering to buyers or sellers. These are some definitions for the basic functions and features to know: Market Orders: Orders that are executed instantly at the current market price. Limit Order: This is an order that will only be executed if and when the price has risen to or dropped to that price specified by the trader and is also within the specified period of time. Transaction fees: Exchanges will charge transactions fees, usually levied on both the buyer and the seller, but sometimes only the seller is charged a fee. Fees vary on different exchanges though the norm is usually below 0.75%. Transfer charges: The exchange is in effect acting as a sort of escrow agent, to ensure there is no foul play, so it might also charge a small fee when you want to withdraw cryptocurrency to your own wallet. Regulatory Environment and Evolution Cryptocurrency has come a long way since the closing down of the Silk Road darknet market. The idea of crypto currency being primarily for criminals, has largely been seen as totally inaccurate and outdated. In this section we focus on the developing regulations surrounding the cryptocurrency asset class by region, and we also look at what the future may hold. The United States of America A coherent uniform approach at Federal or State level has yet to be implemented in the United States. The Financial Crimes Enforcement Network published guidelines as early as 2013 suggesting that BTC and other cryptos may fall under the label of “money transmitters” and thus would be required to take part in the same Anti-money Laundering (AML) and Know your Client (KYC) procedures as other money service businesses. At the state level, Texas applies its existing finance laws. And New York has instituted an entirely new licensing system. The European Union The EU’s approach to cryptocurrency has generally been far more accommodating overall than the United States, partly due to the adaptable nature of pre-existing laws governing electronic money that predated the creation of Bitcoin. As with the USA, the EU’s main fear is money laundering and criminality. The European Central Bank (ECB) categorized BTC as a “convertible decentralized currency” and advised all central banks in the EU to refrain from trading any cryptocurrencies until the proper regulatory framework was put in place. A task force was then set up by the European Parliament in order to prevent and investigate any potential money laundering that was making use of the new technology. Likely future regulations for cryptocurrency traders within the European Union and North America will probably consist of the following proposals: The initiation of full KYC procedures so that users cannot remain fully anonymous, in order to prevent tax evasion and curtail money laundering. Caps on payments that can be made in cryptocurrency, similar to caps on traditional cash transactions. A set of rules governing tax obligations regarding cryptocurrencies Regulation by the ECB of any companies that offer exchanges between cryptocurrencies and fiat currencies It is less likely for other countries to follow the Chinese approach and completely ban certain aspects of cryptocurrency trading. It is widely considered more progressive and wiser to allow the technology to grow within a balanced accommodative regulatory framework that takes all interests and factors into consideration. It is probable that the most severe form of regulation will be the formation of new governmental bodies specifically to form laws and exercise regulatory control over the cryptocurrency space. But perhaps that is easier said than done. It may, in certain cases, be incredibly difficult to implement particular regulations due to the anonymous and decentralized nature of crypto. Behavior of Cryptocurrency Investors by Demographic Due to the fact that cryptocurrency has its roots firmly planted in the cryptography community, the vast majority of early adopters are representative of that group. In this section we cover the basic structure of the cryptocurrency market cycle and the makeup of the community at large, as well as the reasons behind different trading decisions. The Cryptocurrency Market Cycle Bitcoin leads the bull rally. FOMO (Fear of missing out) occurs, the price surge is a constant topic of mainstream news, business programs cover the story, and social media is abuzz with cryptocurrency chatter. Bitcoin reaches new All Timehigh (ATH) Market euphoria is fueled with even more hype and the cycle is in full force. There is a constant stream of news articles and commentary on the meteoric, seemingly unstoppable rise of Bitcoin. Bitcoin’s price “stabilizes”, In the 2017 bull run this was at or around $14,000. A number of solid, large market cap altcoins rise along with Bitcoin; ETH & LTC leading the altcoins at this time. FOMO comes into play, as the new ATH in market cap is reached by pumping of a huge number of alt coins. Top altcoins “somewhat” stabilize, after reaching new all-time highs. The frenzy continues with crypto success stories, notable figures and famous people in the news. A majority of lesser known cryptocurrencies follow along on the upward momentum. Newcomers are drawn deeper into crypto and sign up for exchanges other than the main entry points like Coinbase and Kraken. In 2017 this saw Binance inundated with new registrations. Some of the cheapest coins are subject to massive pumping, such as Tron TRX which saw a rise in market cap from $150 million at the start of December 2017 to a peak of $16 billion! At this stage, even dead coins or known scams will get pumped. The price of the majority of cryptocurrencies stabilize, and some begin to retract. When the hype is subsiding after a huge crypto bull run, it is a massive sell signal. Traditional investors will begin to give interviews about how people need to be careful putting money into such a highly volatile asset class. Massive violent correction begins and the market starts to collapse. BTC begins to fall consistently on a daily basis, wiping out the insane gains of many medium to small cap cryptos with it. Panic selling sweeps through the market. Depression sets in, both in the markets, and in the minds of individual investors who failed to take profits, or heed the signs of imminent collapse. The price stagnation can last for months, or even years. The Influence of Age upon Trading Did you know? Cryptocurrencies have been called “stocks for millennials” According to a survey conducted by the Global Blockchain Business Council, only 5% of the American public own any bitcoin, but of those that do, an overwhelming majority of 71% are men, 58% of them are between the ages of 18 and 35, and over half of them are minorities. The same survey gauged public attitude toward the high risk/high return nature of cryptocurrency, in comparison to more secure guaranteed small percentage gains offered by government bonds or stocks, and found that 30% would rather invest $1,000 in crypto. Over 42% of millennials were aware of cryptocurrencies as opposed to only 15% of those ages 65 and over. In George M. Korniotis and Alok Kumar’s study into the effects of aging on portfolio management and the quality of decisions made by older investors, they found “that older and experienced investors are more likely to follow “rules of thumb” that reflect greater investment knowledge. However, older investors are less effective in applying their investment knowledge and exhibit worse investment skill, especially if they are less educated and earn lower income.” Geographic Influence upon Trading One of the main drivers of the apparent seasonal ebb and flow of cryptocurrency prices is the tax situation in the various territories that have the highest concentrations of cryptocurrency holders. Every year we see an overall market pull back beginning in mid to late January, with a recovery beginning usually after April. This is because “Tax Season” is roughly the same across Europe and the United States, with the deadline for Income tax returns being April 15th in the United States, and the tax year officially ending the UK on the 6th of April. All capital gains must be declared before the window closes or an American trader will face the powerful and long arm of the IRS with the consequent legal proceedings and possible jail time. Capital gains taxes around the world vary from jurisdiction to jurisdiction but there are often incentives for cryptocurrency holders to refrain from trading for over a year to qualify their profits as long term gain when they finally sell. In the US and Australia, for example, capital gains are reduced if you bought cryptocurrency for investment purposes and held it for over a year. In Germany if crypto assets are held for over a year then the gains derived from their sale are not taxed. Advantages like this apply to individual tax returns, on a case by case basis, and it is up to the investor to keep up to date with the tax codes of the territory in which they reside. 2013 Bull run vs 2017 Bull run price Analysis In late 2016 cryptocurrency traders were faced with the task of distinguishing between the beginnings of a genuine bull run and what might colorfully be called a “dead cat bounce” (in traditional market terminology). Stagnation had gripped the market since the pull-back of early 2014. The meteoric rise of Bitcoin’s price in 2013 peaked with a price of $1,100 in November 2013, after a year of fantastic news on the adoption front with both Microsoft and PayPal offering BTC payment options. It is easy to look at a line going up on a chart and speak after the fact, but at the time, it is exceeding difficult to say whether the cat is actually climbing up the wall, or just bouncing off the ground. Here, we will discuss the factors that gave savvy investors clues as to why the 2017 bull run was going to outstrip the 2013 rally. Hopefully this will help give insight into how to differentiate between the signs of a small price increase and the start of a full scale bull run. Most importantly, Volume was far higher in 2017. As we can see in the graphic below, the 2017 volume far exceeds the volume of BTC trading during the 2013 price increase. The stranglehold MtGox held on trading made a huge bull run very difficult and unlikely. Fraud & Immoral Activity in the Private Market Ponzi Schemes Cryptocurrency Ponzi schemes will be covered in greater detail in Lesson 7, but we need to get a quick overview of the main features of Ponzi schemes and how to spot them at this point in our discussion. Here are some key indicators of a Ponzi scheme, both in cryptocurrencies and traditional investments: A guaranteed promise of high returns with little risk. Consistentflow of returns regardless of market conditions. Investments that have not been registered with the Securities and Exchange Commission (SEC). Investment strategies that are a secret, or described as too complex. Clients not allowed to view official paperwork for their investment. Clients have difficulties trying to get their money back. The initial members of the scheme, most likely unbeknownst to the later investors, are paid their “dividends” or “profits” with new investor cash. The most famous modern-day example of a Ponzi scheme in the traditional world, is Bernie Madoff’s $100 billion fraudulent enterprise, officially titled Bernard L. Madoff Investment Securities LLC. And in the crypto world, BitConnect is the most infamous case of an entirely fraudulent project which boasted a market cap of $2 billion at its peak. What are the Exchange Hacks? The history of cryptocurrency is littered with examples of hacked exchanges, some of them so severe that the operation had to be wound up forever. As we have already discussed, incredibly tech savvy and intelligent computer hackers led by Alexander Vinnik stole 850000 BTC from the MtGox exchange over a period from 2012–2014 resulting in the collapse of the exchange and a near-crippling hammer blow to the emerging asset class that is still being felt to this day. The BitGrail exchange suffered a similar style of attack in late 2017 and early 2018, in which Nano (XRB) was stolen that was at one point was worth almost $195 million. Even Bitfinex, one of the most famous and prestigious exchanges, has suffered a hack in 2016 where $72 million worth of BTC was stolen directly from customer accounts. Hardware Wallet Scam Case Study In late 2017, an unfortunate character on Reddit, going by the name of “moody rocket” relayed his story of an intricate scam in which his newly acquired hardware wallet was compromised, and his $34,000 life savings were stolen. He bought a second hand Nano ledger into which the scammers own recover seed had already been inserted. He began using the ledger without knowing that the default seed being used was not a randomly assigned seed. After a few weeks the scammer struck, and withdrew all the poor HODLer’s XRP, Dash and Litecoin into their own wallet (likely through a few intermediary wallets to lessen the very slim chances of being identified). Hardware Wallet Scam Case Study Social Media Fraud Many gullible and hapless twitter users have fallen victim to the recent phenomenon of scammers using a combination of convincing fake celebrity twitter profiles and numerous amounts of bots to swindle them of ETH or BTC. The scammers would set up a profile with a near identical handle to a famous figure in the tech sphere, such as Vitalik Buterin or Elon Musk. And then in the tweet, immediately following a genuine message, follow up with a variation of “Bonus give away for the next 100 lucky people, send me 0.1 ETH and I will send you 1 ETH back”, followed by the scammers ether wallet address. The next 20 or so responses will be so-called sockpuppet bots, thanking the fake account for their generosity. Thus, the pot is baited and the scammers can expect to receive potentially hundreds of donations of 0.1 Ether into their wallet. Many twitter users with a large follower base such as Vitalik Buterin have taken to adding “Not giving away ETH” to their username to save careless users from being scammed. Market Manipulation It also must be recognized that market manipulation is taking place in cryptocurrency. For those with the financial means i.e. whales, there are many ways in which to control the market in a totally immoral and underhanded way for your own profit. It is especially easy to manipulate cryptos that have a very low trading volume. The manipulator places large buy orders or sell walls to discourage price action in one way or the other. Insider trading is also a significant problem in cryptocurrency, as we saw with the example of blatant insider trading when Bitcoin Cash was listed on Coinbase. Examples of ICO Fraudulent Company Behavior In the past 2 years an astronomical amount of money has been lost in fraudulent Initial Coin Offerings. The utmost care and attention must be employed before you invest. We will cover this area in greater detail with a whole lesson devoted to the topic. However, at this point, it is useful to look at the main instances of ICO fraud. Among recent instances of fraudulent ICOs resulting in exit scams, 2 of the most infamous are the Benebit and PlexCoin ICOs which raised $4 million for the former and $15 million for the latter. Perhaps the most brazen and damaging ICO scam of all time was the Vietnamese Pincoin ICO operation, where $660million was raised from 32,000 investors before the scammer disappeared with the funds. In case of smaller ICO “exit scamming” there is usually zero chance of the scammers being found. Investors must just take the hit. We will cover these as well as others in Lesson 7 “Scam Projects”. Signposts of Fraudulent Actors The following factors are considered red flags when investigating a certain project or ICO, and all of them should be considered when deciding whether or not you want to invest. Whitepaper is a buzzword Salad: If the whitepaper is nothing more than a collection of buzzwords with little clarity of purpose and not much discussion of the tech involved, it is overwhelmingly likely you are reading a scam whitepaper. Signposts of Fraudulent Actors §2 No Code Repository: With the vast majority of cryptocurrency projects employing open source code, your due diligence investigation should start at GitHub or Sourceforge. If the project has no entries, or nothing but cloned code, you should avoid it at all costs. Anonymous Team: If the team members are hard to find, or if you see they are exaggerating or lying about their experience, you should steer clear. And do not forget, in addition to taking proper precautions when investing in ICOs, you must always make sure that you are visiting authentic web pages, especially for web wallets. If, for example, you are on a spoof MyEtherWallet web page you could divulge your private key without realizing it and have your entire portfolio of Ether and ERC-20 tokens cleaned out. Methods to Avoid falling Victim Avoiding scammers and the traps they set for you is all about asking yourself the right questions, starting with: Is there a need for a Blockchain solution for the particular problem that a particular ICO is attempting to solve? The existing solution may be less costly, less time consuming, and more effective than the proposals of a team attempting to fill up their soft cap in an ICO. The following quote from Mihai Ivascu, the CEO of Modex, should be kept in mind every time you are grading an ICO’s chances of success: “I’m pretty sure that 95% of ICOswill not last, and many will go bankrupt. ….. not everything needs to be decentralized and put on an open source ledger.” Methods to Avoid falling Victim §2 Do I Trust These People with My Money, or Not? If you continue to feel uneasy about investing in the project, more due diligence is needed. The developers must be qualified and competent enough to complete the objectives that they have set out in the whitepaper. Is this too good to be true? All victims of the well-known social media scams using fake profiles of Vitalik Buterin, or Bitconnect investors for that matter, should have asked themselves this simple question, and their investment would have been saved. In the case of Bitconnect, huge guaranteed gains proportional to the amount of people you can get to sign up was a blatant pyramid scheme, obviously too good to be true. The same goes for Fake Vitalik’s offer of 1 ether in exchange for 0.1 ETH. Selling Cryptocurrencies, Several reasons for selling with the appropriate actions to take: If you are selling to buy into an ICO, or maybe believe Ether is a safer currency to hold for a certain period of time, it is likely you will want to make use of the Ether pair and receive Ether in return. Obviously if the ICO is on the NEO or WANchain blockchain for example, you will use the appropriate pair. -Trading to buy into another promising project that is listing on the exchange on which you are selling (or you think the exchange will experience a large amount of volume and become a larger exchange), you may want to trade your cryptocurrency for that exchange token. -If you believe that BTC stands a good chance of experiencing a bull run then using the BTC trading pair is the suitable choice. -If you believe that the market is about to experience a correction but you do not want to take your gains out of the market yet, selling for Tether or “tethering up” is the best play. This allows you to keep your locked-in profits on the exchange, unaffected by the price movements in the cryptocurrency markets,so that you can buy back in at the most profitable moment. -If you wish to “cash out” i.e. sell your cryptocurrency for fiat currency and have those funds in your bank account, the best pair to use is ETH or BTC because you will likely have to transfer to an exchange like Kraken or Coinbase to convert them into fiat. If the exchange offers Litecoin or Bitcoin Cash pairs it could be a good idea to use these for their fast transaction time and low fees. Selling Cryptocurrencies Knowing when and how to sell, as well as strategies to inflate the value of your trade before sale, are important skills as a trader of any product or financial instrument. If you are satisfied that the sale itself of the particular amount of a token or coin you are trading away is the right one, then you must decide at what price you are going to sell. Exchanges exercise their own discretion as to which trading “pairs” they will offer, but the most common ones are BTC, ETH, BNB for Binance, BIX for Bibox etc., and sometimes Tether (USDT) or NEO. As a trader, you decide which particular cryptocurrency to exchange depending on your reason for making that specific trade at that time. Methods of Sale Market sell/Limit sell on exchange: A limit sell is an order placed on an exchange to sell as soon as (also specifically only if and when) the price you specified has been hit within the time limit you select. A market order executes the sale immediately at the best possible price offered by the market at that exact time. OTC (or Over the Counter) selling refers to sale of securities or cryptocurrencies in any method without using an exchange to intermediate the trade and set the price. The most common way of conducting sales in this manner is through LocalBitcoins.com. This method of cryptocurrency selling is far riskier than using an exchange, for obvious reasons. The influence and value of your Trade There are a number of strategies you can use to appreciate the value of your trade and thus increase the Bitcoin or Ether value of your portfolio. It is important to disassociate yourself from the dollar value of your portfolio early on in your cryptocurrency trading career simply because the crypto market is so volatile you will end up pulling your hair out in frustration following the real dollar money value of your holdings. Once your funds have been converted into BTC and ETH they are completely in the crypto sphere. (Some crypto investors find it more appropriate to monitor the value of their portfolio in satoshi or gwei.) Certainly not limited to, but especially good for beginners, the most reliable way to increase your trading profits, and thus the overall value and health of your portfolio, is to buy into promising projects, hold them for 6 months to a year, and then reevaluate. This is called Long term holding and is the tactic that served Bitcoin HODLers quite well, from 2013 to the present day. Obviously, if something comes to light about the project that indicates a lengthy set back is likely, it is often better to cut your losses and sell. You are better off starting over and researching other projects. Also, you should set initial Price Points at which you first take out your original investment, and then later, at which you take out all your profits and exit the project. That should be after you believe the potential for growth has been exhausted for that particular project. Another method of increasing the value of your trades is ICO flipping. This is the exact opposite of long term holding. This is a technique in which you aim for fast profits taking advantage of initial enthusiasm in the market that may double or triple the value of ICO projects when they first come to market. This method requires some experience using smaller exchanges like IDEX, on which project tokens can be bought and sold before listing on mainstream exchanges. “Tethering up” means to exchange tokens or coins for the USDT stable coin, the value of which is tethered to the US Dollar. If you learn, or know how to use, technical analysis, it is possible to predict when a market retreatment is likely by looking at the price movements of BTC. If you decide a market pull back is likely, you can tether up and maintain the dollar value of your portfolio in tether while other tokens and coins decrease in value. The you wait for an opportune moment to reenter the market. Market Behavior in Different Time Periods The main descriptors used for overall market sentiment are “Bull Market” and “Bear Market”. The former describes a market where people are buying on optimism. The latter describes a market where people are selling on pessimism. Fun (or maybe not) fact: The California grizzly bear was brought to extinction by the love of bear baiting as a sport in the mid 1800s. Bears were highly sought after for their intrinsic fighting qualities, and were forced into fighting bulls as Sunday morning entertainment for Californians. What has this got to do with trading and financial markets? The downward swipe of the bear’s paws gives a “Bear market” its name and the upward thrust of a Bull’s horns give the “Bull Market” its name. Most unfortunately for traders, the bear won over 80% of the bouts. During a Bull market, optimism can sometimes grow to be seemingly boundless, volume is rising, and prices are ascending. It can be a good idea to sell or rebalance your portfolio at such a time, especially if you have a particularly large position in one holding or another. This is especially applicable if you need to sell a large amount of a relatively low-volume holding, because you can then do so without dragging the price down by the large size of your own sell order. Learn more on common behavioral patterns observed so far in the cryptocurrency space for different coins and ICO tokens. Follow the link: UBAI.co If you want to know how do security tokens work, and become a professional in crypto world contact me via Facebook to get all the details: Facebook
The U.S. regulatory agency, SEC, regularly works with foreign countries governments and regulatory agencies when enforcing laws on foreign companies. There is more than ample case law and literature that will verify this. That does not apply to all, or even most U.S. or other countries laws. Most laws do not give jurisdiction to one country over another. We will use the example of the world famous KimDotCom and his website Megaupload.
As a Non U.S. citizen, the U.S.'s Department of Justice does not have the jurisdiction to send their agents to New Zealand to arrest him for violating US copyright. They must legally have New Zealand extradite him. This is obvious, or should be to most people. Which is exactly why he is still in New Zealand and not in the U.S. either in court or jail. He has been able to fight extradition for the last 6 years, and hopefully that's how it stays. However, there are certain things which does fall under the jurisdiction of foreign countries. I'm not even going to try to list them here as that isn't important.
The most important thing however is how the U.S. extends jurisdiction when they should have absolutely no legal grounds. Specifically this falls under the Dodd-Frank Act. "Under the Dodd-Frank Act, U.S. courts have jurisdiction over claims of securities violations brought by the SEC or DOJ that involve: 1) Significant steps in furtherance of a violation that occurred in the United States even if the transaction took place outside the United States; or 2) Conduct outside the United States that has a “foreseeable substantial effect” within the United States.”
The U.S. has on more than one occasion claimed jurisdiction over a foreign cryptocurrency exchange. Once for a lawsuit against Mt. Gox (Japan) from 2014 which is still ongoing in the state of Illinois in federal court. More details can be found here.
Again last year when the SEC and DOJ sought charges against BTC-e, a Russian Exchange, and it's owner Alexander Vinnik. Accordingly BTC-e's assets including domain, etc. was seized by the U.S. and charged with operating an unlicensed money service business, money laundering, and related crimes. Details of this case can be found here.
We now also have BCC lawsuits happening. Two have already been filed and a U.S. Judge issued an order to freeze their assets, they were provided 10 days to turn them over. If they decide to not do it since they can’t just be forced as the banking system can, they will then face criminal charges; Not just a lawsuit. More information here.
Now you know shit is serious when the U.S. Government acts faster on something than any other time in the last 200 years. Look no further than Tether and Bitfinex. Most exchanges pair the USDT coins and not USD. This is done so foreign exchanges don't have to worry about U.S. banking laws that any company dealing with USD is legally obligated to do but they are still able to pair things against the US dollar which we all see it listed as USDT/BTC. A vast majority of people will never notice nor even give this a second thought. Exchanges do this specifically because using the USD would subject them to U.S. banking laws but since Tether "USDT" is a coin and not money, exchanges don't have to follow U.S. banking laws. This creates an extra layer of protection for exchanges and they are able to operate much easier without accidentally breaking those or other U.S. money-laundering, know your customer, etc. laws; While they are still able to pair coins with USD thanks to the coins being set 1:1 with the U.S. Dollar.
Many in the community remember last year when Bitfinex announced they announced they were stopping all user activity for U.S. citizen accounts. This was done for a very specific reason, and if you research what Bitfinex did after the last hack of $70 million USD, you will understand why. I'm sure a lot of people that weren't around when the hack occurred wouldn't believe what the exchange did to their customers.
Anyway back to subject on hand. Including using the aforementioned way that exchanges protect themselves by pairing with USDT and not USD; Tether further protects itself by separating itself into multiple entities; Tether Limited (“TLTD“) for U.S. citizens, Tether International Limited (“TIL“) for all Non U.S. citizens for the purpose of issuing, use, etc. of the Tether coin. Tether "TIL", Tether "TLTD" and Bitfinex (owned by iFinex Inc.) are incorporated in Hong Kong. Last but not least, and most important. Tether Holdings founded in 2014, and iFinex Inc. are both based in British Virgin Islands. These are the only parts of Tether and Bitfinex that receive real money, actual US dollars, Euro's, Yen, etc.
Any exchange, wallet, etc. that accepts actual money payments dealing with cryptocurrency knows that by accepting real money they must follow AML/CTF laws of whichever jurisdiction that would apply. Hence why most all exchanges pair with USDT and not USD. Furthermore, most people are also aware that the British Virgin Islands, Cayman Islands, etc. are considered tax havens which is where both holding companies are incorporated. There is much more about Tether if anyone wants to look further. Information released in the Paradise Papers links both companies and finally sheds light on the people behind this. It should be easy for anyone following along to see the possible implications. For our purpose, all we need is know how the companies are structured. Which is why the media just reported on January 31st 2018 that the U.S. issued subpoenas to both Bitfinex and Tether.
If you didn't know what company it was that was structured in this way with multiple sister corps, parent corps, locations, etc. Most people would be baffled as to why any company would go through all that trouble. What practical reason could a cryptocurrency company, in a unregulated world, have to do that in the first place? Fraud is rampant and no one seems to ever go to jail. Even if doing the same thing in any other business would likely result in criminal charges. So why would any company go through all that trouble if they had nothing to worry about. Even if their entire goal is to defraud people such as "B-Connect", why would any foreign company dealing with crypto go through that much trouble in such an unregulated market? Number one that is substantially more expensive financially and also much more work that would have to be done. Not including the additional time and cost to hide that stuff
This is where we need to ask ourselves a question. Putting aside any thought of Tether committing fraud or whatever else is alleged. Let's just look at the basic facts: If foreign exchanges, etc. aren't subject to outside laws because they are located in a different country. Why would any of them use a coin in place of real money for pairings? Wouldn't it be easier no matter what to just pair listing against the dollar. USD/BTC or whatever fiat currency is paired against cryptocurrency. That would just create more accounting and unnecessary additional steps to convert crypto to fiat? No business would adopt a model like that if there was not a fundamental need for the extra work/cost/etc.
We first had to ask that question before we can even ask the next one. So if exchanges are protected from foreign country laws just by using USDT. Why would Tether, Bitfinex, "B-Connect" International for that matter, stop doing business with U.S. citizens if they use USDT and are not based in the U.S.? Why would it matter then if they do business with them? Maybe the reason they ensure that no U.S. citizen can do business with them is because U.S. law does still apply to them if they transact with them. By now everyone knows "B-Connect" was a Ponzi scheme, and if you have paid any attention, the U.S. is going after them tooth and nail. Yes "B-Connect" did have U.S. locations however "B-Connect" International which is the holding company of the new "B-ConnectX" is already up and running and is unable to be shut down since US citizens are not permitted to use that service now.
There is a much more serious risk at hand. A risk that will make the 2014 Mt. Gox crime, which destroyed market cap by over 80% and didn’t recover until 2017, look like a weekend robbery at a convenience store. From 2014 until January 2017 a total of 10 million USDT had been created. No one would even question if they had 10 million USD in a bank account to back each coin up. When Well’s Fargo terminated them as a customer at the end of March, start of April, the total USDT supply increased to 44 million. December 1st when the Paradise papers were released 440 million Tether. Apparently within a week subpoenas were issued, that right there should indicate the severity of the problem.
December 31st 2017 supply was well over 800 million USDT. Fast forward a month and the total is 2.2 billion USDT at the end of January 2018 when the MSM finally picks up on it. NYTimes was the first to have an article of the US mainstream news. To add to the horror show playing out in front of all of us Tether is now issuing a new USDT and EURT on the Ethereum blockchain. The 2.2 billion are on the omni layer protocol which on the Bitcoin blockchain. Note: The new ERC20 USDT and EURT are not intended to replace the USDT that are bitcoin based but rather to compliment.
The implications of this reach much further than the cryptocurrency markets. If you are unaware how Market Capitalization works I will simplify this. If the entire cryptocurrency market capitalization is 500 billion that does not mean that the equivalent amount of money has been put into the system. According to a previous report from JP Morgan since 2009 a total of 6 billion $USD actually entered into the cryptocurrency market and that gave it a 300 billion market capitalization. If you want a more detailed explanation of market capitalization you can look here.
Now what does this all mean? What does this have to do with you or anyone else? You might be saying I don’t have any USDT so why do I even need to care or pay attention. Well simply explained, if $6Bn USD can create a 300 billion market cap. $2Bn USD that technically isn’t there could remove much, much more than $2Bn of hard assets and money from the cryptocurrency market.
Tether is acting as if they are the U.S. Federal Reserve without having to guarantee the USD like the Federal Reserve and U.S. government. In the last few months leading up to the recent all time high’s (ATH) many stories came out of people taking out second mortgages so they could invest in Bitcoin. Multinational corporations have become involved. Even governments have either knowingly or unknowingly invested into it. One of the key players here was also a key player in the 2008 global financial collapse. Only a couple things can happen:
1. Tether has 20%-100% of the USDT backed up with US dollars. Everything should be okay except cryptocurrency now has a central bank.
2. They don’t have US dollars to back it up. Exchanges lock the doors as everyone creates a run on the bank trying to get out before or during the crash, investors lose everything, all $$$ in the system is extracted out by Tether. That will have a detrimental effect on global markets and could trigger the collapse of the stock market bubble which will also take out the housing bubble.
No matter what, this is going to be a very painful ride. Even if they do have the money, the US will make sure it doesn’t continue. Chances of them having the $3Bn as one of their insider friends stated are slime to non existent.
On the bright side, we will witness the greatest theft mankind has ever seen.
Last updated: February 02, 2018
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Summary of the criminal complaint (of the undercover agents)
The government had multiple investigations into the Silk Road marketplace, an underground black market that allowed vendors and buyers to conduct illegal transactions over the intemet. One of these investigations was conducted in the Southern District of New York, and the other was conducted out of Baltimore in the District of Maryland. Both FORCE and BRIDGES were assigned to the Baltimore investigation and not the New York investigation. The two investigations were conducted independently of each other. Throughout 2012 and 2013, both FORCE and BRIDGES had significant responsibilities related to Baltimore’s investigation. In this capacity, FORCE was the lead undercover agent in communication with DPR. the owner, administrator and operator of the Silk Road website.l BRIDGES was the computer forensics expert on the Baltimore investigation. In their capacity as members of the Baltimore Silk Road Task Force, both FORCE and BRIDGES had significant exposure to and developed expertise in the digital currency known as Bitcoin. As will be described further herein, FORCE and BRIDGES abused their positions as federal agents and engaged in a scheme to defraud a variety of third-parties, the public, and the government, all for their own financial enrichment. With respect to former Drug Enforcement Administration (DEA) Special Agent FORCE, the investigation has revealed among other things that: a. FORCE created certain fictitious personas - that were not officially sanctioned - to communicate with DPR, the target of FORCE’s investigation. Using one of these personas, FORCE sought to extort DPR by seeking monetary payment, offering in exchange not to provide the government with certain information if DPR paid $250,000; b. FORCE acted outside the scope of his official role on the Baltimore Silk Road Task Force and created a fictitious persona named “French Maid.” Operating as “French Maid,” FORCE fraudulently represented to DPR certain information concerning “French Maid’s" true identity and offered to sell DPR information about the government’s investigation into Silk Road in exchange for approximately $100,000 worth of bitcoin, which DPR paid and FORCE deposited into his own personal accounts; Until October 1, 2013, DPR was known to FORCE and the rest of the Baltimore Silk Road Task Force only by his online moniker “Dread Pirate Roberts” or “DPR.” Ulbricht was known on the Silk Road site by the moniker “Dread Pirate Roberts” (DPR) and is referred to hereafter interchangeably as “DPR” and “Ulbricht.” c. FORCE stole and converted to his own personal use a sizeable amount of bitcoins that DPR sent to FORCE in FORCE’s official undercover capacity and rather than turning those bitcoin over to the government, FORCE deposited them into his own personal accounts; d. FORCE engaged in a series of complex transactions between various Bitcoin accounts (known as Bitcoin addresses), his personal digital currency accounts, and his personal bank accounts, including a $235,000 wire to an overseas account in Panama, all in an effort to launder and conceal the true source of the ill-gotten proceeds; e. FORCE used his official position as a DEA agent to illegally run criminal history checks on individuals for the benefit of a third-party digital currency exchange company, CoinMKT, in which FORCE had personally invested approximately $110,000 worth of bitcoin; f. FORCE functioned as the de facto Chief Compliance Officer for CoinMKT all the while employed as a DEA agent, even allowing himself to be featured in CoinMKT’s “pitch decks” to venture capital investors and allowing himself to be listed as CoinMKT’s anti- money laundering and/or compliance officer in order to benefit CoinMKT (a company in which FORCE had invested); g. FORCE improperly directed CoinMKT to freeze one of its individual customer’s accounts containing a large amount of digital currency, worth approximately $297,000, even though he lacked a sufficient legal basis on which to do so, and FORCE then illegally seized those funds and transferred them into his own personal account; and h. FORCE used his supervisor’s signature stamp, without authorization, on an official US. Department of Justice subpoena and sent the subpoena to a payments company, Venmo, directing the company to unfreeze his own personal account, which had been previously frozen due to certain suspicious activity. FORCE then sought to conceal evidence of his improper use of an official subpoena by directing the company not to contact the DEA and attempting to destroy copies of the subpoena. When the company did not comply, FORCE asked another agent on the Baltimore Silk Road Task Force. an IRS agent, to collaborate with him on seizing that company’s bank accounts. With respect to former US. Secret Service (USSS) Special Agent BRIDGES, the investigation has revealed among other things that: a. In late January 2013, members of the Baltimore Silk Road Task Force, to include BRIDGES and FORCE, gained access to a Silk Road website administrator account as a result of the arrest of a former Silk Road employee. On January 25, 2013, the Silk Road website suffered a sizeable theft of bitcoins, bitcoins which were moved into Mt. Gox, a digital currency exchange based in Japan; b. On February 12, 2013, BRIDGES formed and registered a personal limited liability company called “Quantum International Investments, LLC,” (Quantum), and on February 22, 2013, BRIDGES opened an account at Fidelity Investments (Fidelity) in the name of Quantum; c. According to records obtained from Fidelity, BRIDGES funded his Quantum Fidelity account exclusively with wire deposits from Mt. Gox in Japan. Specifically, between March 6, 2013 through May 7, 2013, BRIDGES’ Quantum Fidelity account in the United States received nine wire transfers from Mt. Gox totaling approximately $820,000; d. Despite having personally benefitted in the amount of $820,000 from a Mt. Gox account and receiving a large wire on May 7, 2013 from Mt. Gox, just two days later on May 9, 2013, BRIDGES served as the affiant on a multi-million dollar seizure warrant for Mt. Gox and its owner’s bank accounts; and e. Upon learning of the government’s criminal investigation into the Baltimore Silk Road Task Force based in the Northern District of California, and following an interview by the FBI as part of the criminal investigation, BRIDGES transferred over $250,000 out of his Quantum Fidelity account via wire transfers into another bank account held by himself and a third-party. Because this affidavit is for the limited purpose of establishing probable cause for the crimes proposed to be charged at the present time, it does not include certain additional facts known to me and the govemment’s investigation continues.
Florida Appeals Court Overturns State v. Espinoza, Bitcoin May Be Money After All
In 2016, a Florida judge dismissed money laundering and illegal money transmission charges against a bitcoin trader, arguing that bitcoin wasn’t covered by state statutes. Today, an appeals court reversed that decision. From January through February of 2014, Michell Espinoza was unknowingly selling A type of cryptocurrency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank. This term may also be used to reference either the network, protocol, or actual cryptocurrency. “ style=”box-sizing: border-box; text-decoration: none !important; cursor: help; border-bottom: 1px dotted rgb(149, 109, 193); position: relative;”>bitcoin to undercover agents with the Miami Police Department, which was working with the US Secret Service. Though one of the undercover detectives with Miami PD had implied that the bitcoin would be used to buy stolen credit card numbers, Espinoza continued with the sales, charging A transaction is a particular action that takes place on the blockchain. In a currency, the dominant transaction type is sending currency units or tokens to someone else; in other systems actions like registering domain names, making and fulfilling trade offers and activating contracts are also valid transaction types.” style=”box-sizing: border-box; text-decoration: none !important; cursor: help; border-bottom: 1px dotted rgb(149, 109, 193); position: relative;”>transaction fees for the privilege. He was subsequently charged with money laundering and illegal money transmission. But in July 2016, Judge Teresa Mary Pooler of the Eleventh Judicial Circuit of Florida dismissed those charges. Espinoza, she indicated in her ruling, couldn’t be punished under existing Florida statutes because bitcoin isn’t legally money: “Bitcoin may have some attributes in common with what we commonly refer to as money, but differ in many important aspects. While Bitcoin can be exchanged for items of value, they are not a commonly used means of An online marketplace which facilitates the exchange of crypto or fiat currencies based on the market exchange rate. “ style=”box-sizing: border-box; text-decoration: none !important; cursor: auto; border: none !important; position: relative; pointer-events: none !important;”>exchange … Their high A measure of how dynamic price movements are over time, for an asset like Ether or other virtual currency.” style=”box-sizing: border-box; text-decoration: none !important; cursor: help; border-bottom: 1px dotted rgb(149, 109, 193); position: relative;”>volatility is explained by scholars as due to their insufficient liquidity, the uncertainty of future value, and the lack of a stabilization mechanism. With such volatility they have a limited ability to act as a store of value, another important attribute of money.” She continued: “[I]t is very clear, even to someone with limited knowledge in the area, that Bitcoin has a long way to go before it is the equivalent of money.” Moreover, she put the onus on the legislature to create statues that more specifically address bitcoin and other virtual currencies: “The Florida Legislature may choose to adopt statutes regulating virtual currency in the future. At this time, however, attempting to fit the sale of bitcoin into a statutory scheme regulating money services businesses is like fitting a square peg in a round hole.” Perhaps unsurprisingly, the Refers to a summarized snapshot of all balances and data at a particular point in time on the blockchain, normally referring to the condition arrived at by the most recent block. “ style=”box-sizing: border-box; text-decoration: none !important; cursor: auto; border: none !important; position: relative; pointer-events: none !important;”>state appealed the decision. In an opinion filed today, January 30, Florida’s Third District Court of Appeal reversed Pooler’s ruling on Espinoza’s motion to dismiss, stating: “The trial court erred in dismission Count 1 [illegal money transmission] because Espinoza acted as both a money transmitter and a payment instrument seller and, as such, was required to register with the State of Florida as a money services business.” Additionally, the appellate court stated that the trial court should not have thrown out two additional accounts related to money laundering because “intent, or lack thereof, is a factual issue that should not have been resolved at the pleading stage.” The state, according to the appellate court, is “only required to provide sufficient facts to demonstrate that a reasonable jury could rule in its favor.” Regarding the first count, the appellate court took issue with Pooler’s characterization of existing statutes as vague. Pointing to chapter 560 of the Florida Statutes, it explained that the state defines “money transmitter” as “a corporation, limited liability company, limited liability partnership, or foreign entity qualified to do business in this state which receives currency, monetary value, or payment instruments for the purpose of transmitting the same by any means, including transmission by wire, facsimile, electronic transfer, courier, the Internet, or though bill payment services or other businesses that facilitate such transfer within this country, or to or from this country.” Bitcoin, it finds, is a payment instrument: “[B]ased on the undisputed facts, Espinoza was acting as a payment instrument seller or engaging in the business of a money transmitter, either of which require registration as a money services business under Florida law. Given the plain language of the Florida statutes governing money service businesses and the nature of Bitcoin and how it functions, Espinoza was acting as both.” Because the charges against Espinoza were dismissed before ever going to trial, the reversal means that the trial court must now hear the case. The article is from https://www.ethnews.com/ UEX official website：https://www.uex.com/ UEX official international group: https://t.me/uex_en Twitter: https://twitter.com/UexComOfficial Medium：https://medium.com/@UexOfficial Reddit：https://www.reddit.com/UexOfficial/ UEX customer service：https://uex.udesk.cn/im_client/?web_plugin_id=52234
For years, years, I wondered – ‘why me’ – you know, you know, kiddo – ‘why me’ – but there is no ‘why me’. What? As if there were, you know, ‘chosens’, there’s no ‘chosens’ – there’s no all–seeing, all–knowing powerful nothing. It happened. That’s it. I fell for it. I took its bait – hook, line, sinker. Didn’t I do it to myself? Wasn’t I the sucker? There’s no ‘why me’ – and once I realized that, that there was no, that there was no, no any kind of justice what so ever, until I acted, that gave my existence purpose. And now I’m gonna fulfill that purpose. I don’t want you getting involved. You’re deep enough as it is. Don’t be the sucker! – Bobby Mortaren; famous last words
I raced from the house to the hotel, at Walsenburg, where I struggled to make sense of everything that transpired. I poured myself over notes and records that I had brought along. Only my laptop’s glow illuminated the room. Every so often lights through I-25 swept across the bed. Every so often breezes stirred trees around the perimeter. Soon midnight passed. The world darkened, relaxing as it were into slumber. A knock rattled the door - and I could have shrieked if it weren’t for what remained of my nerves. All of a sudden, I felt so icy, so cold, that I stood, frozen, uncertain of how to proceed. Who was it? It couldn’t be good. Not the FBI. Not the Thules. Ache, already? I balked at chucking my laptop - whoever they were at the door, they’d find it, they’d find it. It’s the 21st century; evidence doesn’t vanish without a trace. As my heart pounded my chest, I reached that door and cracked it a notch. I braced for the kick certain to follow. It didn’t come. The hotel’s courtyard / lot spread, deserted except for my rented Wrangler. There wasn’t anyone - anyone who may have been my visitor. Yet - by my feet - at the edge of the threshold - my visitor had left a box. I poked at it with my pole and turned it over and over. It wasn’t postmarked. It wasn’t addressed. It had been delivered by hand and, suspecting what it was, I yanked it inside. Leaning onto and drooping against the door, I tore its lid. The box contained two floppies, a CD, and a stack paper. It was Blue Beelzebub - all of it, every part of it. As well as instructions: a How-To-Guide for destroying your future, fetched onto my doorstep, white-glove-style to boot, as promised. It may as well have been a bomb. ### How did Blue Beelzebub mutate into my obsession? Worse - did I expect to find its truth remarked into code from 1996? 1996! There wasn’t a lot to the internet way, way back when. But crime was crime no matter its era. Was it crime? And did the game start this way or that way then evolve into crime? Was it crime from its start? The programmer of Blue Beelzebub, a hacker by the avatar ‘ZuZu’, claimed to be legit. Their MO had been to create games not scams. Or so it appeared until Blue Beelzebub entered the story. If it were a product of malware, why had ZuZu devoted so much of their effort into its creation? Why had they boasted of the game’s nitty gritty details during its gestation? Why all of that trouble, if only a fraction of it would have been appreciated by those who played it? Even LVN, when they weren’t laundering bitcoin, expressed what may be described as passion for that game. Was it a game? By 1996 standards, its demos parlayed atrocious graphics and threadbare mechanics. The way it affected the player’s rig ensured nobody would be eager to replay it. The game passed every scan available yet it twisted the OS and hijacked the PC to serve as a node, a link into a yet-unknown and yet-unnamed network for purposes every bit as mysterious as the game itself. As I contemplated the reality of the situation, I settled onto the notion that that game may have been a gimmick to cover truly malevolent intentions. That had been the crux of LVN’s KickStarter and GoFundMe rackets - they always proposed plausible if lofty projects as if they were real, actual products people buy. However, case after case demonstrated that their pretense unraveled after scrutiny. Could it be, as far back as 1996, the creator(s) of Blue Beelzebub conceived of such a deception? FPS (of the type Blue Beelzebub reported to be) were the rage through the 90s. If so then their MO resembled that of a typical bait-and-switch scheme - bait them with a game, switch them with a virus. Then? What? Profit? ### In the summer of 2017, Czech authorities in conjunction with the EU, arrested LVN at their apartment south of Plzen. They seized the hacker’s laptop, PC, as well as their twenty thousand CD library. LVN was a hacker-for-fire; evidence presented at their arraignment demonstrated to the court that they had been paid by Russian and other Eastern European actors to pilfer bitcoin wallets. In addition to theft, the court entertained charges connected to a NiceHash heist of 64 million euros earlier that year. It was the breach of NiceHash’s security that brought my skills to the EU’s attention. For a few weeks, between March and May, I played my part to aid the investigation and the conviction of its mastermind. We discovered that the breach had been directed from inside NiceHash. We split the work: ‘brick and mortar’ detectives ran interviews and stakeouts while my fellow ‘white-hats’ and I toiled at the forensics. To meet our end of the bargain, we created a model of that cyber-attack, in order to construct and deconstruct its operation. As we realized how the crime had been executed, we identified the party responsible for it and built the authorities a solid chain-of-evidence - a chain-of-evidence that identified LVN as the perpetrator. LVN masterminded not just that NiceHash heist but a dozen scams at sites like KickStarter and GoFundMe. LVN traded exclusively through bitcoin. Their MO was to sow fake projects then to reap real funds submitted by backers - by backers who aimed to launder money via its exchange into bitcoin. Projects were advertised to those who sought the service; they were fraudulent through and through yet they appeared real enough to fool the maintainers of those sites and the public at large who may have been tricked by the scams. Under the supervision of the investigation at large, I pledged my dollars to a few of LVN’s projects, to see what the response would be. Soon, LVN and I exchanged emails. They wanted to speak face-to-face. In front of the experts, I played to type and gained access to a roster of services from that hacker-for-hire. As a result of the communication, the investigation brought into play anti trafficking & exploiting agencies from around the world and accelerated their goal to convict LVN. One of the projects LVN advertised didn’t fit into the mold in so far as it felt like a genuine hobby of theirs. LVN sought investors to fund their (re)development of a game, Blue Beelzebub. The project listed at KickStarter - removed but saved to my laptop - included a lightbox of images and demos as well as snippets of code. It discussed such esoterics as: updates to its physics engine and its video & audio renderer; upgrades to its arsenal and its gallery of foes; changing its play - expanding its levels and ditching its linearity. The details impressed me as they perplexed me. Why? I kept asking. What’s the idea? What’s the racket? Why create a game using twenty year old technology? I understood its esoterics perfectly for I came of age during the 90s. So much of what went into Blue Beelzebub felt familiar as it was familiar. An FPS - first person shooter - propelled by a fork of that fabled, 2.5D DOOM engine. Little wonder that its caps parlayed the look and feel of classic 90s PC games! Maybe it was yet another scam? Or - maybe - it was a hobby of a gamer / programmer? Could it be that LVN recalled those early DOS games and wanted to re-create the era? But that wasn’t everything. And as I mused & Googled I started to ask myself if there wasn’t more about Blue Beelzebub beyond the haze of my nostalgia. I failed to connect the dots although that did not shake the deja vu - somehow, someway, I recognized that game. ### Escape published my article about LVN’s conviction. Against the advice of my editor, I stalked its commentary, to see what, if anything, the story drew out of the woodwork. Its aside re: Blue Beelzebub attracted attention. I wasn’t surprised, to be honest, as I had inserted it into the text to draw reaction. And my rouse worked! But I wasn’t the only one who felt deja vu about the game. A commentator, who asked for anonymity, posted a link to 4CHAN about Blue Beelzebub. LVN had advertized the KickStarter for the game at a group devoted to indie developers. LVN never advertized their work at 4CHAN out of fear of exposure. So that thread where they didn’t ask for money confirmed my sense that it wasn’t, necessarily, a scam. As I scanned that thread, however, I realized what a rabbit-hole the business would be. After LVN’s post, anonymous replies went to and fro as they typically do. Then the tenor of the thread devolved into a war amongst those who were for vs. those who were against what LVN proposed to do with the game. It was a question about credit. At last - somebody revealed a truth I duly suspected of - that Blue Beelzebub wasn’t the work of LVN - that the game as it existed predated LVN by twenty years or so. The idea for Blue Beelzebub had floated about USENET c. 1995. The majority of the conversations extracted from the archives suggested that the game was vaporware. Its supporters countered that either a P/C or a DEMO existed and that a play-through had been uploaded to (early) YouTube. Everyone who added their opinion - pro & con - agreed that it was “inspired by Satan”, “took its cues from Crowley’s ‘Thelema’“, and that it included clips “replete with ever more corrupt” gore and snuff. A self-described player, whose rig they claimed had been “totaled” by the game, stated bluntly that it contained a “Chinese Sandwich”. Undeterred by the confusion, I kept at my search, ramming through the archives, pushing my way further back in time, from 1997 to 1995. USENET had been mirrored prior to its collapse yet its content was not indexed completely; a robust query of its posts required force and patience.... In spite of the odds, my effort worked, my persistence located the roots of Blue Beelzebub. It was a posted dated June 15, 1995 written by the game’s originator, a hacker by the name of ZuZu. According to their missive, they claimed to have produced “a proof of concept demo” for their “latest and greatest” game, Blue Beelzebub, and that it was “a legit game catering to those who worship and admire Lucifer and everything that stands for”. ZuZu listed, point by point, the substance of their creation. I wasn’t surprised to see, splattered across that post, the verbiage LVN usurped for their own advert. Except - they weren’t seeking funding. According to their missive, the game had been bankrolled “by entities of a foreign sort, who don’t want to be credited”. Rather, they were seeking “experts” willing to alpha & beta test the product. Blue Beelzebub and by extension ZuZu went rouge between 1997 and 2005. Then - October 31, 2005 - ZuZu submitted their last, known public statement. Broadcasted through their usual, over-the-top flamboyance, they wished for their “fans to learn and spread the word” that they “secured an exclusive”. They had convinced a devote of indie horror / FPS games to review Blue Beelzebub. The player they had snagged was famous for their day and their name I recognized as I read it. Bobby Mortaren - an internet pioneer par excellence. Mixing reviews and play-throughs together, his format had been lauded as visionary and just as imitated. Tweaked a bit by-the-by it continued to find use. His name, though, hadn’t been spoken of for a decade. Games had changed. Tastes had changed. He could have shifted into yet another venture so far as I knew. Mortaren posted his works to YouTube - to YouTube prior to its merger with Alphabet. As I considered the changes that transpired across the years, I wasn’t surprised to discover that all of my links to his works were dead. Eerily, though, it was impossible to locate his reviews directly via YouTube. So I tried Google and Bing. No result. Ditto with DuckDuckGo. Ditto with Wiki, SlideShare, BoardReader. Out of desperation I surfed into the remnants of Alta Vista - maybe its database saved the information? No. No. Futile - all of it. YouTube’s size was greater than USENET’s size. My task’s extent was altogether a colossal order of magnitude. If that which I pursued had not been deleted, then, it would be found ad finem omnia. So to dig further I opted for a quick & dirty hack - a bot. A bot scripted to sift and sort all YouTube’s content that matched keywords Mortaren and Blue Beelzebub. I ran it and waited for days then for weeks then for months. ### My extensive search corroborated the fact that Mortaren left the internet c. 2006. Assuming they may have continued via pseudonym, I enquired into the matter with colleagues who devoted themselves to games and / or to reviews. Only a few recognized their name; nobody was cognizant of their voice. An editor from ToplessRobot directed my attention to a defunct fansite’s messageboard where somebody asked why Mortaren vanished without a trace. To my shock, the reply was that Mortaren had been arrested by the FBI c. 2006. I could not fathom why. Nevertheless, if the revelation were correct, then, the resolution to the matter was tantalizingly viable. Arrests - and trials - were public. The LVN / EU case brought my forensic skills to the notice of the DOJ and the Treasury / Secret Service. The FBI, like its European counterparts, wanted to understand everything about bitcoin and how it might (might) be possible to trace transactions to individuals. As part of my freelance work, I already met and debriefed FBI agents re: the Czech hacker. Eventually ‘large’ talk gave way to ‘small’ talk amongst us. It was at that juncture that I broached the subject of Blue Beelzebub - namely, that LVN hatched a scheme to defraud investors (via bitcoin) ostensibly by promising to develop an update to that game. “They got exposed by players who recognized the game’s ill-repute,” I stated. “Apparently, the game’s infamy started after its reviewer, a fellow by the name of - er - Robby Mortaren? Bobby Mortaren? Well - they got arrested by the FBI.” Neither the game nor the reviewer elicited a reply - immediately, anyhow. A (censored) document, summarizing a DOJ investigation, worked its way into my mailbox. Mortaren had been under FBI surveillance from November 2005 to May 2006. Why wasn’t stated; just that the FBI obtained search warrants for computers & electronics. A federal judge issued an arrest warrant May 30, 2006; however, the DOJ withdrew the charges after Mortaren agreed to an immunity deal. Mortaren turned star witness at a trial that involved organized crime as well as rackets, cults, ritualized human & civil rights abuses and elements that suggested Satanism. The perpetrator(s) that the DOJ wanted to convict fled either to South America OR Eastern Europe / Central Asia. The trial evaporated; neither the charges nor the perpetrator(s) were detailed. Mortaren’s immunity deal with the DOJ wasn’t negotiable or retractable and included a complete internet ban. The document listed a PO BOX as Mortaren’s permanent address.
To Mr. B. Mortaren: Sir, I apologize. Blue Beelzebub. Were it not for the fact that you may be the only person left to recall that game, I would not have stretched my resources so thin to find you. If you are not able to assist my research, is anyone? I was part of an EU investigation re: bitcoin, theft & fraud, as well as trafficking & exploiting vagrants. Through that investigation I came into contact with a hacker; they claimed to be working on Blue Beelzebub; they sought funds to upgrade it. While disturbing to say the least, that game did not strike me as part of the hacker’s MO. So I pried further into the matter and discovered, to my astonishment, that Blue Beelzebub dated to the mid 90s and that you reviewed & posted the demo at YouTube. I am curious about that game. I cannot get it out of my head. Who was the programmer? Who was the developer? Where did they get the money? What were their goals? What was the game about, if the game was about anything? A DOJ document summarizing your immunity from prosecution was brought to my attention. I suspected, as I matched the timeframe of the FBI’s surveillance and arrest, to the demo, that these matters are related. I was not able to find a link, due to the fact that all records, transcripts, etc., were sealed by request of the FBI. If, for any reason what so ever, we cannot communicate about this matter, would it be possible to contact a surrogate or anybody with the information I seek? With All Due Respect JK
### Due to limits that existed at YouTube’s debut, videos posted from 2005 to 2010 were capped to 10 minutes. Both image and sound playback quality were kept low to spare bandwidth. A lack of (accessible) software and hardware to edit video forced vloggers to improvise. Mortaren had always used a webcam and mic from the 90s to shot their videos ‘live’, i.e., without edits. YouTube retained the majority of Mortaren’s content; however, after a check of the dates and the poster’s IDs, I determined that Mortaren’s videos had been reposted c. 2006 by another user. If the titles / numbers were correct then there were seven parts to the demo Mortaren recorded for Blue Beelzebub. Of seven, six remained. Specifically, the 5ifth - which must have been filmed as evidenced by the discontinuity between 4ourth and 6ixth - defied my ability to trace. The reposter stated that “the 5ifth wasn’t part of the review package”. Yet, as I perused copies of replies they had saved, commentary that referenced material that doesn’t appear anywhere else, I strongly suspected that a 5ifth had been posted for a while and, for whatever reason, Mortaren removed it prior to 2006. 1irst - details facts re: the game: the developer, the programmer, the system requirements, etc. “If your rig’s able to run DOOM, Blue Beelzebub works,” they state then add: “although, prepare yourselves, kiddos, the game takes a very, very long time to install”. Passingly, he adds that a fan of his had ditched the game after they experienced “a catastrophic system failure” that they blamed “on either a bug or a virus or both”. The executable and its auxiliary files pass every virus and malware checker Mortaren throws at it. 2econd & 3hird - demonstrates the game play or what passes for it. Mortaren prefers to record his reviews live so that his fans experience the game exactly as he does. His videos contain hints / cheats if they are discovered as he plays. He describes Blue Beelzebub as a DOOM-GUY-ESQUE player who moves through an enshadowed monochromatic maze. “There’s no backwards, I, I, I don’t believe it! Did they forget to give us backwards? There’s forwards and left, right. Kiddos, you gotta do a circle to go backwards.” He continues to berate the game, adding: “Yeah, there’s only forwards. And you know, I gotta say it, the programmer may think they’re the money’s nuts for it.... But it’s so weird that going forwards causes the view to bob up and down or side to side. What’re they trying to do? Are they trying to replicate a player’s gait? Takes me right out of the game. Let me tell y’all why. Like I said, the programmer’s got to be thinking they’re the monkey’s nuts but it’s that bizarro attention to detail that’s so jarring as I consider the lack of detail given to the graphics. Guys. Guys. Guys. You gotta think about what you present.” Mortaren piles his criticism of the graphics and the sounds, comparing both unfavorably to DOOM. Especially frustrating is the invariance of the black & white textures throughout the maze. He praises the response of the maze to the player as he notes, while attempting to draw the maze, that its passages shift at random. Then more and more criticisms were strewn at the game, including its lack of weaponry, its lack of powerups / extras, its lack of anything. “A game can’t be about going through the maze, guys, there’s got to be a point - something to do!” Finally, he voices the suspicion that he had been duped by ZuZu. 4ourth - the demo gets interesting. Mortaren finds an area of the maze where the textures differ. The video’s pixilation - perhaps due to the webcam - perhaps due to the way the reposter preserved it - masks the bulk of the alteration. I detect a change of shade, though, from black & white to blue. “Well it can’t be for nothing that the wall is blue. Jeez!” As he cracks the joke, to his shock (an explicative slips), the sounds became those of “eerie, drone-like notes fading into reverb” and the monitor displays a still-shot. Mortaren zooms into the image; I recognize it as coming from the shock-site, ROTTEN. After that alteration, every blue-hued texture Mortaren faces produces other images, increasingly nihilistic and graphic, usually of the dead or the dying, often of celebrities, suicides, accidents, wrecks. 5ifth - ? 6ixth - the segment starts at an awkward jump. It must have been split from the 5ifth video and while Mortaren does not state why, explicitly, the tone of the voice suggests that something serious transpired. “Sorry, kiddos, I turned the webcam away - a first - I guess this ZuZu accomplished something.” When he returns the webcam to the monitor, it is apparent that in addition to tone the substance of the game itself altered. The player stands at the center of a room Mortaren describes as “a vault with a hole at its floor”. The 2.5D renderer prevents the player from gazing inside the hole. But by directing the player to walk the hole’s circumference it is possible to catch bits of its contents. A sharp, blue light shoots out of the hole; the way it cast light at the ceiling suggests there might have been “water”, as if the hole were a well of sorts. What shocks Mortaren is that the room fills with children. The renderings of faces make each of the children unique. However: “the ghastliness of the imagery resembles how faces voxilate like with Delta Force games”. Further, he notes, after a pause that echoes my own consternation and trepidation, “I’ve seen these kids. Yeah, I’ve seen these kids from those, those photographs the game stopped everything to show us. Jeez!” The children stand statue-like as the player walks about them. They serve as obstacles that block movement, otherwise, inert, unresponsive, “not that the player interacts with the kids as there’s no other keys available except A, W, D”. The video continues, then, Mortaren shrieks. The playback jostles as if it were about to stop. When everything resettles, he speaks, calmly and evenly, that “there’s a kid that’s different ... animated. You gotta see it, kiddos, I can’t say if it’s awful because it’s awful or if it’s awful because it’s awful....” The webcam zooms into the monitor; the child rendering appears to show it breathing, haphazardly, with their mouth agape. And then, then the child moves and the player like the viewer alike slip an explicative. “I take it back, everything, this is truly and utterly awful.” 7eventh - the coda feels like the set’s longest but is the shortest. “Right now I’m running. I don’t have a weapon, jeez! I’m running as fast as this keyboard allows but my health is shrinking.” Mortaren stops and rotates the player to face backwards. The animated child is behind and striking the player using a technique that resembles “Hanna-Barbera laziness - or who knows - who knows, kiddos, it could be part of the style”. Just as it is with DOOM, as the player’s health decreases, the view gets redder and the avatar gets bloodier. Mortaren aims into the maze; there is no exit, there is no weapon, no upgrade to assist, all that exists is the floor where the player drops, dead. The 7eventh adds a post-script recorded after the demo. It shows Mortaren’s PC, open and split to pieces. “The game installed a virus,” he declared then described its symptoms. “Immediately upon my player’s death, the PC rebooted. After the BIOS, instead of going into DOS, it starts a telnet session and tries to connect via IP. Of course it doesn’t get a reply since my PC uses dial-up. So it freezes, pinging and pinging a server somewhere that it cannot reach.” Mortaren concludes by theorizing that if Blue Beelzebub were a virus, it must have been designed to target high-end systems with LAN / Ethernet ports. I jot the IP and attempt to connect to it. Strangely, it will not load yet it will not issue an error of any kind. Chrome, FireFox, Edge, etc., freeze. WHOIS is not able to resolve the owner. Nevertheless, it yields the location of the server, a site approximately 50 miles north east of Trinidad, Colorado. I reject the result; users of tracers already know that they rely on ISP databases to match IP / location - and how often are those databases updated? - and how often are those updates distributed? The decade that passed between today and the video, and between the video and the creation, assures that there must have been a drift re: the location of the IP. ### I will not reveal the particulars of when, where, and how I received the call. “The coordinates.” Into my ear spoke a voice that my investigation made familiar. “Check the coordinates.” “Coordinates?” “Blue Beelzebub.” “Yes,” I replied and Mortaren implied we’d meet. Mortaren had traced my whereabouts through the blogosphere. He wanted to talk about the game yet feared the government “and or others” eavesdropping. I admitted off-handedly that as I sunk into my work with the DOJ, my paranoia tipped. “What’s the deal with the game, anyway?” “What do you want on your Chinese Sandwich?” My impression settled onto a mixture of intrigue and trepidation. The matter felt so cryptic as to defy credulity. Coordinates? Blue Beelzebub. Chinese Sandwich? Nevertheless, even as we talked (brief as the conversation was) I put together that by coordinates + Blue Beelzebub Mortaren referred to the IP the game telnet’ed.
Two charged with money laundering Officials say Faiella ran “underground Bitcoin exchanger” BTCKing, while Shrem is CEO and Compliance Officer of BitInstant, a bitcoin exchange. In addition to running BitInstant, Shrem is also vice president of the Bitcoin Foundation, one of the main trade groups focused on the digital currency. By Emily Flitter NEW YORK (Reuters) - Two men who operate bitcoin exchange businesses have been charged with money laundering for helping drug merchants exchange $1 million (603.2 thousand pounds Federal prosecutors in New York announced charges against Charlie Shrem and Robert Faiella, both operators of bitcoin exchange businesses, for attempting to sell $1 million in the digital currency... Two men who operate bitcoin exchange businesses have been charged with money laundering for helping drug merchants exchange $1 million (603.2 thousand pounds) in cash for bitcoins, the digital Two men who operate bitcoin exchange businesses have been charged with money laundering for helping drug merchants exchange $1 million in cash for bitcoins, the digital currency, U.S. prosecutors
Abel, who was apparently less central to the scheme, has only been charged with conspiracy to offer and sell unregistered securities, a charge that carries a maximum prison term of 5 years. This is an important effort, since money laundering is a tool used to facilitate various criminal activities, ranging from tax evasion to terrorist financing to drug dealing, to hide the proceeds ... Experts predict that Bitcoin ATMs ( BATMs ) will face stricter regulations worldwide, with countries including Canada and Germany already moving to tighten up anti-money laundering requirements. A ... • Bitcoin Exchange and Operator Charged with Engaging in Money Laundering; and • CFTC Enters Settlement with Alleged Spoofer Two Years After CME Group Exchanges First Resolved Disciplinary ... The exchange operated as an anonymous, no-questions-asked alternative to the global banking system using Liberty dollars - one of the most widely used digital currencies. The site and others ...