Head of Crypto Payment Company Arrested For Laundering Money For Drug Cartels

October 26, 2019
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Ivan Manuel Molina Lee, the president of Crypto Capital, was arrested in Poland for crimes that include laundering millions for Columbian drug cartels. As detailed in UnTethered: How The Entire Crypto Bull Run of 2017 May Have Been a Mirage (And Why Its Resurgence May Be Too), Crypto Capital served as a major bank/payment processor for a murky cryptocurrency exchanged called Bitfinex.

Last year Bitfinex discovered that Crypto Capital had “lost” $851 million of the funds it was holding for Bitfinex customers supposedly by governmental seizure. At the time, Crypto Capital said that authorities in Poland, Portugal, and the United States were responsible.

A Polish newspaper seems to partially confirm that. $391 million was seized by Polish authorities, the newspaper says, thanks to cooperation with Europol, Interpol and US services, including the DEA.

Did You Own Bitcoin Before The 2018 Crash? This Bitter Group of Crypto Plaintiffs Think You May Be Entitled to $1.4 Trillion in Damages

October 8, 2019
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Tether USDTA group of plaintiffs whose Bitcoins suffered the great crypto crash of 2018, have a rough idea of how much damage was caused ($1.4 trillion) and who exactly was damaged, everyone.

The alleged culprit is Tether, a little understood company that’s supposed to issue fully-backed digital US dollars to make trading in the crypto marketplace easier. Instead, as alluded to in a deBanked May/June issue magazine story, Tether may be the ultimate illicit scheme. The company is under investigation by the New York Attorney General, Department of Justice, and CFTC, but still reigns supreme when it comes to buying and selling Bitcoins.

The plaintiffs, David Leibowitz, Benjamin Leibowitz, Jason Leibowitz, Aaron Leibowitz, and Pinchas Goldshtein, outline in their 95-page lawsuit filed on Monday that Tether is part fraud, part pump-and-dump, and part-money laundering.

Tether’s digital assets were used to buy up billions of dollars worth of other cryptocurrencies, they say, inflating demand and prices.

“As the cryptocurrency market reached a fever pitch, Tether’s mass issuance of USDT (Its digital asset) created the largest bubble in human history. When it burst, over $450 billion of value disappeared in less than a month. The fallout continues to affect the cryptocurrency market, including by causing prices to be lower than they would have been but for the manipulation.”

Plaintiffs define the class as “all persons or entities that held or transacted in cryptocurrencies, including but not limited to USDT, ether, bitcoin, and bitcoin derivatives, in the United States or its territories at any time from October 6, 2014, through the present.”

Tether had apparently been expecting such a lawsuit. Over the weekend it published a statement on its website saying:

We want to make clear our position that any claims based on these insinuations are meritless, reckless and a shameless attempt at a money grab. Accordingly, Tether will vigorously defend itself in any such action.

These baseless accusations are an attempt to undermine the growth and success of the entire digital token community, of which Tether is a key part. It is an attack on the work and dedication of not just Tether’s stakeholders, but thousands of our colleagues, too.

Trump Attacks Bitcoin and Cryptocurrencies

July 11, 2019
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President Donald Trump and Bitcoin

President Trump revealed his stance on cryptocurrencies over twitter on Thursday, and he’s no advocate.

“I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air. Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity. Similarly, Facebook Libra’s “virtual currency” will have little standing or dependability. If Facebook and other companies want to become a bank, they must seek a new Banking Charter and become subject to all Banking Regulations, just like other Banks, both National and International. We have only one real currency in the USA, and it is stronger than ever, both dependable and reliable. It is by far the most dominant currency anywhere in the World, and it will always stay that way. It is called the United States Dollar!”

New York Attorney General Turns Up The Heat On Tether, Bitfinex

July 9, 2019
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bitcoin bluesBitcoin is back over $12,500 but a growing chorus within the crypto faithful are pointing to a potential catastrophic event that could change the crypto markets forever.

It’s the potential implosion of Tether, a company spotlighted in a recent deBanked magazine story for its uncanny ability to create digital dollars out of thin air, and a new forceful response from the New York Attorney General’s Office over Tether’s attempt to weasel its way out of being investigated.

Specifically, Tether has raised several challenges to the OAG’s and New York Supreme Court’s jurisdiction, most recently through a motion to dismiss a formal investigation. The OAG, who believes the tactics are only being used to stall, wrote in papers submitted on Monday that “the delays must stop, and Respondents must produce the information they were originally directed to produce.”

The AG calls out Tether on its claims that its digital dollars (USDT) are fully backed 1:1 by real US dollars on deposit in a bank account, when in fact they are not. Additionally, they believe Tether is attempting to circumvent a court ordered injunction and is further bending securities laws in part by purportedly selling $1 billion of a new digital token to anonymous investors to cover losses that are already under investigation.

“This is an ongoing law enforcement investigation. The OAG is entitled to pursue it, without further impediment or delay,” they state in court papers, stressing yet again that Tether should no longer be allowed to delay the process.

Tether meanwhile, reportedly created another $100 million of USDT the same day the papers were filed. Should those funds be used to buy Bitcoin, Bitcoin’s value might continue to surge… in the short run.

UnTethered: How The Entire Crypto Bull Run of 2017 May Have Been a Mirage (And Why Its Resurgence May Be Too)

June 24, 2019
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This story appeared in deBanked’s May/June 2019 magazine issue. To receive copies in print, SUBSCRIBE FREE

untethered coverIn 2017, college bros gathered at a bar in downtown Manhattan. As a journalist from deBanked approaches, a 5’10” young 20-something with long shaggy brown hair is vaping outside on the sidewalk while staring intently at his phone. I stop. He pauses and eyes me up and down. “You here for the crypto meetup bro?” he asks. My age, about 15 years his senior, apparently gives the impression that I’m here as an investor. “There’s a few dudes in there that are gonna change the game,” he says. “We’re talking 10,000x.”

“Sweet,” I reply as I step inside. I locate the others that have gathered here to talk all things cryptocurrency and dive in, but quickly find that I speak a different dialect. Bitcoin, the coin I grew up with, is the uncool parent in an era where Ethereum and ICOs (Initial Coin Offerings) are all the rage. Dozens of tokens and coins are “mooning” (soaring to the moon) in value and everybody that’s in the know, which this group believes themselves to be, is going to be filthy rich.

Here, as with other meetups I had been to, required no understanding of the technology. Who you knew and how rich you got off your crypto investments shaped your standing and identity in the community. If you weren’t achieving at least 100x (A price increase multiple of 100) on an ICO investment, well then, what were you even doing bro?

The across-the-board surge in value at the time was validation to crypto communities like this one. Nobody dared question how the rise in value kicked off or why it was happening 8 long years after the birth of Bitcoin (Bitcoin was created in 2009). All that mattered is that it was happening now and they were fortunate to be a part of it. They weren’t being reckless about it, or at least that’s what they told me. Every time these investment pros wanted to take money off the table and book a winning trade, they’d convert their crypto to dollars.

If only it were that simple.

I would soon learn that when they sold a crypto, like Ripple’s digital asset known as XRP, for example, into dollars, they weren’t actually receiving any cash. Instead they were trading the Ripple asset for another digital asset called USDT. The value of XRP fluctuated all the time, but 1 USDT was always worth $1.

In theory, you could cash out into real money, but withdrawals could take weeks to be processed and those funds would be of no use if another crypto investment opportunity came along. Digital USDT, therefore, solved both problems, stability and liquidity in the crypto markets.

Thousands of crypto trades happen every minute. On Binance, a crypto exchange I log on to for my story, shows traders buying and selling cryptos with others in the market in real time and USDT is one of the biggest movers.

I am tempted to convert the fractions of Bitcoins in my possession to the digital equivalent of a dollar, USDT, but I can’t bring myself to do it. Instead I’m nagged by a strange letter, the T after USD. It stands for Tether and it’s not backed by the United States government, but on Binance and on crypto exchanges across the world, it is a glue that holds the market together. It’s the stable coin, the closest thing that exists to a real dollar in a virtual universe.

What the hell is Tether, I wonder?

Tether USDT

My research brings me to an unpopular opinion being pushed on twitter by an anonymous user (@bitfinexed) whose following is growing every day. USDT, the person tweets daily, is all a fraud.

bitfinex8,000 miles from the bar in New York City, a crypto exchange in Hong Kong named Bitfinex has become flush with a new batch of USDT, $100 million worth. Nobody moved them there. Rather Bitfinex’s affiliate company, Tether, has created them out of thin air. All of this newly minted USDT is soon used to purchase Bitcoin and other cryptos in huge chunks, sending prices soaring. Traders cheer the demand and everyone it seems is getting rich.

The market tolerates this sudden introduction of USDT because Tether claims that all USDT is backed by actual dollars held in reserve in a bank account. So $100 million in newly minted USDT is supposed to mean that a wealthy investor has deposited $100 million in real money into Tether’s bank account in exchange for $100 million USDT to trade with on Bitfinex. That keeps the value pegged at 1:1. Once an investor has access to their USDT on Bitfinex, it is used to buy up other cryptos.

That someone would exchange $100 million in real money for USDT is astounding. It demonstrates to the market that the uber wealthy see the value of crypto. Rumors abound that the investor is Goldman Sachs or a Saudi Prince or an international drug lord. Nobody knows and nobody has time to question it because tomorrow the same thing happens all over again, another $100 million in USDT appears and a buying frenzy of Bitcoin, Ripple, and Ethereum ensues, sending the entire crypto market in a frenzy.

Bitcoin Frenzy

By December of 2017, $1 billion worth of USDT exists. That’s $1 billion of buying power dumped into what was a relatively sleepy niche marketplace. Since market capitalization is not proportionally correlated with what’s actually invested, a billion dollars in buy orders can be enough to potentially drive the crypto market capitalization up by hundreds of billions of dollars in return. And that’s what happens.

Tether’s influence is apparent. Bitcoin, for example, was worth $1,000 at the beginning of 2017 and reached $19,000 by mid-December. Ethereum went from $8 to $1,400 in less than 13 months. Ripple went from 6/10ths of a cent to over $3.00.

At its peak, the market cap of the entire cryptocurrency market was nearly $1 trillion, a stunning valuation that finally caused the investing public to second guess itself and burst the bubble.

And just like that, the market crashed.

But not all at once. On the way down, newly issued USDT continued to flood the market. When they were used to buy other cryptos, prices would suddenly spike and the market would experience brief rebounds. To traders, this anonymous investor was either a white knight trying to save the market or a madman who continued to dump his billion dollar fortune into rapidly declining digital assets at his own peril.

crypto crash

Any short term recovery lost steam, however, and the bulletproof can’t-lose attitude of crypto culture was breached. The same college students touting their previous prowess took to social media to bemoan the irrationality of a sudden bear market and the loss of their fortunes. The meetups that became a staple of 2017 suddenly dried up. Twenty-somethings on Telegram complained that the events might even cause them to find a job. The horror, they half joked.

By April 2019, $2.6 billion worth of USDT existed on exchanges around the world, all brought into existence by Bitfinex’s affiliate, Tether. That meant that somewhere $2.6 billion was supposedly sitting in a bank account as a reserve to guarantee the value. Without it, the dramatic rise or fall of the crypto markets would probably never have been possible.

Tether’s influence and size was enough to attract the interest of American regulators. In December 2017, at the height of the bubble, the US Commodity Futures Trading Commission sent subpoenas to both Bitfinex and Tether. And in November 2018, right after Bitfinex’s Chief Strategy Officer suddenly resigned, Bloomberg News reported that the US Department of Justice was investigating whether Tether had been used to prop up Bitcoin or manipulate the market. Tether’s loyal fans chalked it all up to FUD (Fear Uncertainty and Doubt) and spun the investigations as proof that governments felt threatened by the future new world order.

Tether NY AGBut that was until April 25, 2019, when the New York State Attorney General bolstered the worst fears that a handful of critics had been screaming for years, that Tether may not be all it’s cracked up to be.

Bitfinex and its affiliate’s long struggle with finding a stable banking relationship had led the company to split its holdings. A significant share was on deposit at a small Bahamian bank while over $1 billion had been sent to a Panamanian payment processor (without a contract) named Crypto Capital for safekeeping, the AG alleges. Those funds were comprised not only of Bitfinex’s client deposits but were also co-mingled with reserves held to back USDT. The arrangement was such that if Bitfinex customers ever began requesting fiat currency withdrawals beyond what they had on hand, Crypto Capital was supposed to send payment on Bitfinex’s behalf to satisfy the request.

As the crypto bear market continued into mid-2018, Bitfinex went calling on Crypto Capital to pay its customers that wanted to be paid out in cold hard cash. Crypto Capital, much to their surprise, refused, putting Bitfinex in the precarious position of not being able to pay customers. As the public began to turn on Bitfinex, Bitfinex executives pleaded desperately with Crypto Capital.

By the Fall of that year, Bitfinex finally learned what the holdup at Crypto Capital was. The money was gone. According to Crypto Capital, $851 million had been seized by governmental authorities in Portugal, Poland, and The United States. Bitfinex says the supposed seizure is all a ruse and that they have been swindled out of the money.

In any case, rather than advise the public of the lost funds, Bitfinex allegedly contemplated borrowing the remaining funds it had on hand in reserve to back USDT to pay out Bitfinex customers and sustain its operations. The arrangement may have been Bitfinex’s only hope to cover its $851 million loss and survive, Tether be damned.

The New York Attorney General was not impressed with Bitfinex’s plan to raid its USDT reserves and successfully persuaded a New York Supreme Court judge to order an injunction preventing Tether from extending a $900 million line of credit to Bitfinex.

But Bitfinex had other plans in the works.

Suspiciously, on April 24th, one day before the New York Attorney General filed its action, $300 million worth of new USDT was created, loaded up on Bitfinex, and used to buy up massive chunks of crypto. No one can be sure that anyone truly deposited $300 million in real money with Tether to make this possible. Regardless, there appeared to be an immediate impact. Bitcoin, Ethereum, and Ripple all rose in value by more than 50%. Several news outlets ran headlines that said “Bitcoin is Back.”

As the situation continued to unfold, Tether revealed that it did not actually hold $1 in currency for every $1 in USDT it created. Proceeds of Tether sales, they admit, are used to fund operations, make investments, and buy assets. The USDT foundation was unraveling in real time.

On April 30th, a little known Arizona Businessman named Reginald Fowler, who once held a small stake in the Minnesota Vikings, was indicted along with an Israeli woman named Ravid Yosef for bank fraud and for running an unlicensed money transmitting operation tied to virtual currency trading. The US Attorney for the Southern District of New York states that “Reginald Fowler and Ravid Yosef allegedly ran a shadow bank that processed hundreds of millions of dollars of unregulated transactions on behalf of numerous cryptocurrency exchanges.” The duo, the US Attorney continues, used the financial system for criminal purposes through lies and deceit.

DOJ Fowler

Fowler’s business is believed to be tied to Crypto Capital, the same company that owes $851 million to Bitfinex. During his arrest, investigators found roughly $14,000 in counterfeit $100 bills in his office and learned that $60 million of client funds had been diverted from his business to his personal bank accounts.

Bitfinex, meanwhile, does not plan to go down quietly. On May 17th, they announced they had raised $1 billion from anonymous investors in just 7 days to recapitalize the company back to sustainable health by selling a new crypto called UNUS SED LEO tokens. Bitfinex called the demand for these tokens “overwhelming” and that the sale represented a “new milestone for Bitfinex and the greater Blockchain community.”

On social media, nobody believes them. The unusual token name and spelling led to them being branded “Unused” Leo tokens. Dozens of users called for their arrest, but most just called their token sale a scam. The jig, in the hearts and minds of the crypto faithful, is up.

Tether’s value on exchanges, meanwhile, goes the opposite way. The value of USDT jumps to $1.01, making it worth more than 1 US Dollar. Traders, in a sense, have no choice but to keep up the lie, because a collapse of USDT might mean a collapse of the entire crypto market.

So as the market’s framework falls apart and may never have been real to begin with, the market itself rallies.

The correlation between USDT and the entire crypto market dawned on executives of Bitfinex in October 2018. When Crypto Capital refused to give back the $851 million, a senior Bitfinex executive wrote, “Please understand all this could be extremely dangerous for everybody, the entire crypto community. [Bitcoin] could tank to below $1,000 if we don’t act quickly.”

Below: Yours truly wearing crypto socks I got for free at a crypto meetup in Brooklyn.”HODL,” an intentional misspelling of “HOLD,” is a rallying cry for the crypto faithful to hold on to their tokens and coins in spite of declining values

Back in New York City, the May 2019 surge in crypto prices, still less than half of the all-time highs, jolts awake a dormant online chat group that used to organize crypto meetups. One user calls attention to a particular gathering scheduled to take place on May 6th. It emphasizes discussion on blockchain instead of trading.

The response from those still following, however, is tepid. One of the group’s original chief proponents calls crypto a “f***ing scam.” Another user ponders if free alcohol is incentive enough to sit through “fools” talking about “blockchain revolution bullshit.”

A joke about losing money prompts another to claim they were never in it for the money in the first place. “I’m in it for the tech bro,” he says.

Yet another, who admits he has been holding onto to his near-worthless crypto through the whole bear market, hopes that the rally this time will finally last.

“To the moon!”

This story appeared in deBanked’s May/June 2019 magazine issue. To receive copies in print, SUBSCRIBE FREE

Since this article was first written, more than $900 million worth of fresh USDT has been created and dumped into the crypto market. The value of the cryptocurrency market has soared with it.

Bitcoin: $5,350 on May 1 to $10,696 on June 23.
Ethereum: $162 on May 1 to $309 on June 23.
XRP (Ripple): $0.31 on May 1 to $0.47 on June 23.

Some Bitcoin journalists have pegged the sudden market increase to activity in India and Facebook’s announcement of a Libra coin.

However, the correlation between the creation of USDT and the value of Bitcoin remains extremely suspicious.


George Popescu Steps Down From Lampix

May 13, 2019
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George Popescu is stepping down from Lampix, the augmented reality lamp company he founded, according to an announcement. Lampix raised $14.2 million through its sale of PIX tokens in a 2017 Initial Coin Offering (ICO). PIX sold at a price of 12 cents each but the value has since plummeted by more than 95%.

Popescu will be replaced by Salvatore Buccellato, who has been the Chief Revenue Officer since the summer of 2018.

“As outgoing CEO I am really proud to have taken Lampix from an idea/prototype to the successful manufacturing of the Lampix commercial development kits,” Popescu said in a published statement. “I strongly believe that it is good practice for companies to regularly have new CEOs who bring new ideas, new resources and a fresh outside vision to the company. During and after the full transition I will of course remain involved with the company as needed.”

Lampix was profiled in deBanked’s November/December magazine issue as a poster child for the murky world of crypto fundraising. At the time, Popescu was involved in several other ICOs in addition to Lampix. Among them was Restart Energy (which raised $30 million), Opiria, First Blood, AirFox (which later settled charges with the SEC for selling unregistered “securities”), and DropDeck Technologies, whose user funds were lost due to a software bug that also affected numerous other companies. Popescu was also advisory board chairman to Gatecoin, a Hong Kong-based crypto exchange which closed on March 20, 2019 following a 2016 hack.

Signature Bank Partners with trueDigital

December 4, 2018
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BlockchainToday, Signature Bank unveiled a proprietary digital payments platform for its commercial clients, according to a statement released by the bank. The platform, called Signet, is designed to allow Signature Bank’s commercial clients to make real-time payments in U.S. dollars, every hour of the year.

“The ability to transmit funds between approved, fully vetted commercial clients of the bank at all times is very valuable, especially in light of the increasing speed and frequency at which they conduct their business,” said Joseph J. DePaolo, President and Chief Executive Officer at Signature Bank. “Signature Bank has made a commitment to invest in its technology infrastructure, and the Signet Platform is indicative of this investment,”

This commitment by a bank to embrace technology is consistent with other banks of late. Chase and PNC have partnered with OnDeck’s ODX to streamline their online lending processes and other banks have partnered with fintechs recently as well.

“The partnership between trueDigital and Signature Bank will quickly prove to be extremely beneficial and revolutionary for clients globally as they will now be afforded the opportunity to make instantaneous USD payments to one another in real-time at no cost per transaction,” said Sunil Hirani, Founder of trueDigital.

The new Signet platform uses blockchain technology and can be used to make payments across a wide variety of industries, initially focusing on power, shipping, real estate, auto and digital assets where costs, delays, operational risks and counter-party risks are significant, according to a trueDigital statement.

The platform is not designed for a very small company as transactions made on the Signet platform require a minimum account balance of $250,000. Also, the companies exchanging money must both have an account at Signature Bank.

The New York State Department of Financial Services has approved the Signet platform and deposits held on the platform are eligible for FDIC insurance, up to the legal insurable amounts defined by the FDIC.

Signature Bank  is a New York-based full-service commercial bank with 30 private client offices  throughout the New York metropolitan area. This year, the bank opened a full-service private client banking office in San Francisco. Signature Bank’s specialty finance subsidiary, Signature Financial, LLC, provides equipment finance and leasing. trueDigital is a New York-based fintech company that provides solutions to financial markets by utilizing blockchain-based technologies.

ICO Settles With SEC, Must Return Millions to Investors

November 16, 2018
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Magic LampA Boston based startup that raised $15 million in funds via an Initial Coin Offering (ICO) must return the money to token purchasers and pay a $250,000 fine, the SEC announced. AirFox, who must make those payments in accordance with an SEC settlement, introduced a plan in 2017 to provide free data to mobile phone users in return for eyeballing advertising. The SEC was careful to note that they had not accused AirFox of fraud, but rather of failing to register their tokens as securities.

Since the ICO, the value of AIR tokens have dropped by 94%.

1st Global Capital’s Activities Spilled into Cryptocurrency and ICOs

September 14, 2018
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Curious details are emerging in the wake of the 1st Global Capital bankruptcy and subsequent SEC charges. Among them is that $161,000 of company funds were used to purchase cryptocurrency.

Many of those purchases were made in February of this year for a total of $92,492. The cryptocurrency market has slumped since then. Bitcoin, for example, is down 35%.

In May, less than three months before 1st Global filed Chapter 11, a purchase of $61,000 in cryptocurrency was addressed to TraNexus Ireland LTD. TraNeXus is an Ireland-based travel technology blockchain company that is currently raising capital via an Initial Token Offering (aka an Initial Coin Offering, ICO). “TraNexus is committed to changing the way people travel and revitalizing the travel and tourism industry by making travel easier, greener, more valuable and more fun,” the company says of itself in a recent press release. 1st Global Capital owner Carl Ruderman is something of a vanguard in the global tourism business whose acumen includes ownership of Elite Traveler magazine.

Separately, 1st Global is alleged to have funded a $40 million merchant cash advance to an auto dealership in California. Though it remains unconfirmed, industry insiders say it wasn’t even a 1st position deal and that the dealership had multiple advances.

On Wednesday of this week, the SEC served a subpoena on a JPMorgan Chase in Miami demanding all documents and payments related to 1st Global, Ruderman, and his companies.

Bitcoin Continues to Drop Following Report That Goldman Scrapped Plan for Crypto Trading Desk

September 6, 2018
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bitcoin bluesBitcoin fell about five percent yesterday to below $7,000 after Business Insider published a story saying that Goldman Sachs is dropping its plan to open a trading desk dedicated to cryptocurrencies. The Business Insider story made this claim anonymously, citing people familiar with matter.


Update: Goldman Sachs CFO Martin Chavez discounted the Business Insider report on Thursday, calling it “fake news” at the TechCrunch Disrupt Conference in San Francisco.

“I never thought I would hear myself use this term but I really have to describe that news as fake news,” Chavez said on stage at the conference.

Chavez said Goldman is working on a type of derivative for bitcoin because “clients want it,” according to CNBC.

“The next stage of the exploration is what we call non-deliverable forwards, these are over the counter derivatives, they’re settled in U.S. dollars and the reference price is the bitcoin-U.S. dollar price established by a set of exchanges,” Chavez said.


The value of Bitcoin has continued to drop today, losing $1,000 in a 24 hour period. It is now at $6,409.30, according to CoinDesk.

A May 2018 story in Fortune indicated that Goldman Sachs had plans to open a Bitcoin-trading business in June of this year. That was postponed and it now seems that these plans have been shelved indefinitely. The sources in the Business Insider story said that Goldman Sachs sees the regulatory environment as ambiguous regarding cryptocurrencies.

In a tweet from the bank’s CEO Lloyd Blankfein last October, he wrote, “still thinking about bitcoin.” And he later said, according to CNBC, “No conclusion – not endorsing/rejecting. Know that folks also were skeptical when paper money displaced gold.” It seems that there is still no conclusion.    

When asked if the assertions in the Business Insider story are true – that plans for a cryptocurrency desk have been scrapped – Goldman Sachs representative Michael DuVally responded with the following comment: “In response to client interest in various digital products, we are exploring how best to serve them in the space. At this point, we have not reached a conclusion on the scope of our digital asset offering.”


Two-Thirds of Daily Crypto Trade Volume May Be Fake

August 27, 2018
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crypto tradingTwo-thirds of daily trade volume in cryptocurrency is faked, according to research published this month by the Blockchain Transparency Institute (BTI). This translates to $6 billion a day, according to the report. What this likely means is that the exchanges themselves are quickly buying and selling cryptocurrency to give the illusion of high activity on the exchange when, in fact, there may be relatively little.

The advantage of creating this illusion is to make it more attractive for actual cryptocurrency investors to buy on a given exchange, which is how the exchange makes money – from taking a percentage of each transaction. This practice of buying and selling to oneself (or to colluding parties) in an effort to mislead others, is called “wash trading,” and is illegal.

The report states that “over 70% of the CMC top 100 is likely engaging in wash trading by at least 3x their stated volume.” Given that most cryptocurrency exchanges are not regulated, this alleged wash trading may not come as a surprise to many. But if this is accurate, the magnitude of this fake trading is significant. Coinbase and Binance were not suspected to be wash trading, according to the report.    

The exchanges that are considered to be accurate by the report typically have a volume/user to unique visitor ratio of around between 2% and 5%, whereas suspect exchanges ratio ranged from 10% to over 655,000%.

Sylvain Ribes, a Cryptocurrency investor and writer who is cited in the report, wrote in a March 2018 Medium blog post of his surprise between the differences in trading volume among exchanges.

“Where I had expected mild differences between currencies, I found ridiculously massive discrepancies between exchanges,” Ribes wrote. “Not the kind that can be easily hand-waved away (‘oh well, their users must behave differently’), but the kind that can only be explained by some figures being overstated as much as 95%.”  

As Ripple’s XRP Drops, Legal Trouble Builds

August 15, 2018
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RippleRipple’s cryptocurrency, XRP, has dropped by about 90 percent from a high of $3.84 per token in January of this year to $0.29 today. When XRP hit its high of $3.84, Ripple co-founder Chris Larsen briefly became one of the richest men in the world because of his sizable ownership of the currency, his share then worth about $59.9 billion. But that status was short-lived, along with Ripple’s upward trajectory.

Of course, the decline of XRP is not unique in the world of cryptocurrency. Bitcoin has also had a dramatic decline in value throughout 2018.

Along with the decline in value of the XRP coin, Ripple has been plagued with lawsuits.

In May, XRP investor Ryan Coffey sued Ripple Labs and its CEO Brad Garlinghouse in a class action suit for allegedly engaging in the sale of unregistered securities. The company and Garlinghouse was said to have made at least $342.8 million through XRP sales that were created out of thin air.

In June, XPR investor Vladi Zakinov filed a class action lawsuit against the same defendants for the same thing. He alleged that the XRP token is a security controlled by Ripple.

And in July, XRP investor David Oconer sued Ripple Labs and Garlinghouse in a class action suit for essentially the same thing. Also in July, Plaintiff Avner Greenwald sued the defendants with similar charges.

The May lawsuit was transferred from state court to federal court by the defendants, Ripple and Garlinghouse. Plaintiff Coffey appealed this, but on August 10th, a California judge denied Coffey’s appeal and said that the case will remain in federal court.

This is advantageous for the defendants because it allows these similar class action lawsuits to be consolidated into one, according James Chareq, an attorney and partner at Hudson Cook who is very familiar with class action cases. Moving from state to federal court increases efficiency and reduces legal fees, he said.

Crypto and Blockchain Added to 2019 CFA Exam

July 18, 2018
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Managing Director for General Education and Curriculum at the CFA Institute
Stephen Horan, Managing Director for General Education and Curriculum at the CFA Institute

The CFA Institute, which creates the curriculum for the annual Chartered Financial Analyst (CFA) exams, has recently added cryptocurrencies and blockchain as topics for to its tests that are known for their difficulty. The tests are administered in over 170 countries, typically the first weekend in June, with an additional test for certain test takers in December.

Passing these exams provides a significant advantage to financial professionals like research analysts and portfolio managers who want to advance in their careers. There are three levels of exams. Over the past several years, Stephen Horan, Managing Director for General Education and Curriculum at the CFA Institute said that only 43 percent of test takers pass level 1. The level 1 exam weeds out the bulk of test takers and the pass rates for level 2 and level 3 tests are slightly higher. Ultimately, though, Horan said that less than 20 percent of those who start the CFA program pass all three exams.

Horan told deBanked that the institute decided to add cryptocurrencies and blockchain to the curriculum for level 1 and 3 curriculums because they got feedback from people working in the industry that it was relevant.  

“We started to hear that this is now mainstream, it’s not fringe,” Horan said.

As for the nature of what will be put in the curriculum, Horan said they are not making judgments whether cryptocurrencies are good or bad, but rather posing questions like “What are the functions of a currency?”

The new material for the 2019 exam will not be released until August. The six hour long exams have been given since 1963 and test takers generally study 300 hours for each exam.

CryptocurrencyThis development is surely a sign that cryptocurrencies and blockchain technology have  entered the mainstream. While suspicion about both of these technologies remains, it seems that they are here to stay.

Horan said that 279,000 people took one of the three exams last year, and these numbers have been steadily rising. More than 40 percent of test takers are in the Asia Pacific; within this region, one-third of these people are in China. Currently, about 150,000 have passed all three tests and they can call themselves “charter holders.”

Horan said that some companies require that their employees have passed all or of some of the CFA exams, such as the investment management firm Eaton Vance. He also said that Fidelity is a big adopter of the CFA exams.

In addition to creating the exams, the CFA Institute also has a membership of finance professionals that supports continued education and networking. The company has 600 employees worldwide and is headquartered in Charlottesville, Virginia.

Ripple Sued Again for Alleged Sales of Unregistered Securities

July 5, 2018
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RippleRipple Labs Inc. and the company’s CEO, Bradley Garlinghouse, were sued again last week, according to a complaint dated June 27 and filed in San Mateo County, CA. The plaintiff is California resident David Oconer who alleges, in a class action suit, that Ripple and Garlinghouse “promoted, sold and solicited the sale of XRP.” XRP is Ripple’s digital asset. Furthermore, the suit contends that the defendants “raised hundreds of millions of dollars through the unregistered sale of XRP, including selling to retail investors, in violation of the law.”  

As Ripple has made efforts to distinguish itself as separate from XRP, including a recent logo change to XRP, the plaintiff Oconer asserts in the lawsuit that Ripple and XRP are, in fact, very much intertwined.

Ripple has faced a barrage of recent lawsuits that make similar allegations. One lawsuit filed in May by XRP investor Ryan Coffey was recently transferred from state court to federal court. It is now pending in the California Northern District Court under Case #4:18-cv-03286.

Facebook Reverses Cryptocurrecy Ad Ban

June 27, 2018
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facebook headquartersBack in January, Facebook decided to ban all ads for cryptocurrencies. Yesterday, the social media giant changed its mind. In a post on its blog yesterday, the company stated that it will now “allow ads that promote cryptocurrency and related content from pre-approved advertisers. But we’ll continue to prohibit ads that promote binary options and initial coin offerings.”

The official new policy read: “Ads may not promote cryptocurrency and related products and services without our prior written permission.”

“Advertisers wanting to run ads for cryptocurrency products and services must submit an application to help us assess their eligibility,” Rob Leathern, Facebook’s Product Management Director, wrote in the official blog post. “[This includes] any licenses they have obtained, whether they are traded on a public stock exchange, and other relevant public background on their business. Given these restrictions, not everyone who wants to advertise will be able to do so. But we’ll listen to feedback, look at how well this policy works and continue to study this technology so that, if necessary, we can revise it over time.”

The January ban, also laid out in an official company blog post, said: “Ads must not promote financial products and services that are frequently associated with misleading or deceptive promotional practices, such as binary options, initial coin offerings, or cryptocurrency.”

Facebook acknowledged in yesterday’s company blog post that the wording of its January ban was “intentionally broad” as they continue to work to better detect deceptive and misleading advertising practices.


Class Action Lawsuit Filed Against Ripple For Sale of Unregistered Securities

May 4, 2018
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Chris Larsen and Jo Ann Barefoot

Above: Ripple co-founder & chairman Chris Larsen speaks on stage at LendIt Fintech last month

Ripple’s digital token XRP is a security, a class action lawsuit filed in the Superior Court of California contends. The 32-page complaint brought by XRP investor Ryan Coffey, says the defendants, who include Ripple CEO Brad Garlinghouse, engaged in the sale of unregistered securities, highlighting that they earned over $342.8 million through XRP sales in the last year alone, securities that were created out of thin air.

“Defendants have since earned massive profits by quietly selling off this XRP to the general public, in what is essentially a never-ending initial coin offering (“ICO”). Like the better known initial public offering (“IPO”), in an ICO, digital assets are sold to consumers in exchange for legal tender or cryptocurrencies (most often Bitcoin and Ethereum). These tokens generally give the purchaser various rights on the blockchain network and resemble the shares of a company sold to investors in an IPO. Unfortunately, these ICOs have become a magnet for unscrupulous practices and fraud.”

The complaint alleges that Ripple executives have engaged in pumping schemes meant to increase the price of XRP through attempted bribes, rumors they’ve started, and hype on social media.

The attorney representing the lead plaintiff, James Taylor-Copeland, is no stranger to cryptocurrency. His twitter username is @TCryptoLaw and he runs the website

At LendIt Fintech last month, Ripple co-founder & chairman Chris Larsen said that the company was anti-ICO. “I think it’s a bad thing to get involved with from the founder’s perspective,” he said on stage during an interview with Jo Ann Barefoot, “because, you know, if you’re a founder and you can raise money many ways today, do you really want to do something where you’re going to have the SEC, you know, kind of threat hanging over your head for 10 years with strict liability? You just don’t want that. You know, that’s a problem.”

View the full class action complaint here

Chris Larsen on Crypto, Ripple, and ICOs

April 24, 2018
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Chris Larsen and Jo Ann BarefootAt LendIt Fintech, Ripple co-founder and Chairman Chris Larsen got real in his on-stage conversation with Jo Ann Barefoot. This is what you missed:

I think this is a fundamental shift in fintech and what we believe the big thing happening here is the development of a second internet. We call it the internet of value so that value, money, assets will begin moving as quickly and efficiently as data has been moving for the last 25 years

Using SWIFT is like sending a letter. You know, when drop it in the mailbox, you have no idea where it is, if it got there or not. So, getting away from that I think is profound. And what we would say is that, you know, a lot of the backlash from globalization today, it’s not because globalization is bad. It’s essential. It’s that it’s incomplete because globalization needs kind of 3 key systems to be working together and it needs interoperability and data.

I think all new technologies start with a, you know, screw the government, disruption, tear everything down. So, I think that’s natural and then, you know, the internet started that way too and then it has to sort of grow up. And particularly, it’s solving real world problems. Real world problems are always more complicated than that. And then when you switch to finance, this is different. Right? You know, the internet was mostly technology. Mostly. It’s just now kind of crashing into regulatory issues.

I think on some of the other things like ICOs, we’re pretty anti-ICO. I think it’s a bad thing to get involved with from the founder’s perspective because, you know, if you’re a founder and you can raise money many ways today, do you really want to do something where you’re going to have the SEC, you know, kind of threat hanging over your head for 10 years with strict liability? You just don’t want that. You know, that’s a problem.

[..]From building currencies, digital assets, ICOs typically say, “Okay. There’s a currency for this use case and none other.” That’s kind of the opposite of the way it should go. Currencies need to be as liquid as possible. And so, they’re going to have as many use cases as possible. For XRP for example, the kind of early beachhead has been cross border payments, but we see that as just the beginning of something that really has a multitude of use cases. To get as liquid as possible, that’s what drives utility and value at the end of the day. So, I think in all fronts ICOs are problematic and that’s why you’re seeing the regulators crack down on them, not everywhere, but I think they’ll be transformed. They’ll probably look like, you know, IPOs at the end of the day.

Crypto Hype Man Ian Balina Hacked

April 16, 2018
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Cryptocurrency and ICO hype man Ian Balina has been hacked, according to a statement he published on social media. Balina’s self-reported fortune totaled $3.2 million just days earlier.

“I’m not worried about the money,” Balina tweeted. “I learned my lesson. I only care about catching the hacker.”

Balina is famous in the crypto world for his investment analysis and opinion on ICOs, in part because he managed to turn the $36,000 he had in cryptocurrency in May 2017 to $5.3 million by early January 2018. That rise was catalogued through his daily Instagram posts. The recent bear market cut into his profits significantly but his activity on social media had not let up. As of yesterday, he was still a millionaire.

Now his worth is uncertain.

Balina was previously mentioned on deBanked for having interviewed George Popescu about his ICO for Lampix. The value of Lampix, which Balina said he did not invest in, is down 77% from its ICO price.

Twitter Bans Crypto Ads As Its CEO Praises Bitcoin

March 28, 2018
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cryptocurrency banFollowing in the footsteps of Facebook and Google, Twitter banned cryptocurrency ads on its platform as of Tuesday. Facebook initiated this policy on January 30 and Google did the same on March 14.

“Under this new policy, the advertisement of Initial Coin Offerings (ICOs) and token sales will be prohibited globally,” a Twitter spokesperson told CNBC.

As with Facebook and Google, the rationale behind the ban is to protect users from fraud related to cryptocurrencies.

“We are committed to ensuring the safety of the Twitter community. As such, we have added [this] new policy for Twitter Ads relating to cryptocurrency,” the spokesperson said.

Ironically though, Twitter CEO Jack Dorsey has praised Bitcoin and said as recently as last Wednesday, to The Times UK:

“The world ultimately will have a single currency. The Internet will have a single currency. I personally believe that it will be Bitcoin, probably over ten years, but it could go faster.”

Google and Facebook also have complex relationships with cryptocurrencies.

According to Cointelegraph, even though Google banned cryptocurrency ads, it owns a handful of companies that rely heavily on the use of cryptocurrencies, like Storj, which runs on the company’s native SJCX cryptocurrency, or Veem, which uses Bitcoin for its payments.

Meanwhile, in a post from January 4 of this year, Facebook founder Mark Zuckerberg wrote of cryptocurrencies as a promising counter balance to an increasing centralization of power among technology behemoths:

“There are important counter-trends to [centralization] — like encryption and cryptocurrency — that take power from centralized systems and put it back into people’s hands. But they come with the risk of being harder to control. I’m interested to go deeper and study the positive and negative aspects of these technologies, and how best to use them in our services.”

Google Will Ban Cryptocurrency Ads

March 14, 2018
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Today, Google updated its list of banned advertising content to include “cryptocurrencies and related content (including but not limited to initial coin offerings, cryptocurrency exchanges, cryptocurrency wallets, and cryptocurrency trading advice).”

This comes as Facebook made the same decision at the end of January. While Facebook’s prohibition of cryptocurrency-related ads came into effect immediately, the Google ban will not begin until this June.     

The value of Bitcoin dropped by 9.1 percent in the wake of this news. Critics contend that this overarching ban may hurt the legitimate use of cryptocurrencies, while crypto detractors are pleased that cryptocurrency fraud will soon be significantly restricted.

In June, Google will also prohibit ads related to Binary options, a type of financial contract that promises either a fixed amount of compensation or nothing at all.