News: The SEC swings into action, Marshall Islands SOV, Papua New Guinea, new stablecoins, Indian crypto legality, R3 and Ripple settle, Star Xu of Okex detained, KodakCoin

- by David Gerard - Leave a Comment

A judge rules that an ICO may indeed be covered by US securities law. (As was obvious to anyone who knew what the Howey test was.) The case is the criminal prosecution of Maksim Zaslavskiy’s RECoin and Diamond Reserve Club, which sold tokens backed by real estate and diamonds … that turned out not to exist. Zaslavskiy moved to dismiss the case on the grounds that his tokens weren’t securities, so weren’t in the SEC’s jurisdiction, and that securities law was too vague to be applied to ICOs. Judge Raymond Dearie didn’t buy it — “Simply labeling an investment opportunity as a ‘virtual currency’ or ‘cryptocurrency’ does not transform an investment contract — a security — into a currency.” The question of whether RECoin and Diamond Reserve Club really were securities will be a matter for the jury — but the judge considers the SEC’s claim can go forward.

The SEC also settled charges today against TokenLot, Lenny Kugel, and Eli L. Lewitt for acting as unregistered broker-dealers in the process of selling ICO tokens in their “ICO Superstore” — because ICOs are securities, so brokers have to register. TokenLot shut down in February 2018 after the SEC called, and gave everyone back their bitcoins and ether. TokenLot’s goodbye page (archive) talks about their “incredible journey” and blames “the ever changing regulatory landscape of the cryptocurrency space in our jurisdiction” — specifically, the bit of the regulatory landscape that fined them $569,000 and barred them from penny stocks and investment involvement for three years. Here’s the order.

And the SEC temporarily halted US trading in two pretend-ETFs, CXBTF and CETHF, for Bitcoin and Ethereum — they’re based in Sweden at Nasdaq Stockholm, but were also traded over-the-counter in the US. Here’s the order.

Remember when tiny biotech company Bioptix changed its name to Riot Blockchain, and got a sudden stock pump? The CEO, John O’Rourke, and major shareholder Barry Honig have been charged by the SEC with penny-stock fraud. So Riot’s COO is now the CEO. Here’s the SEC press release and the full complaint.

 

 

The International Monetary Fund warns the Marshall Islands against releasing the SOV cryptocurrency they were planning in February — and this is not the IMF strong-arming them, it’s the IMF pointing out to them that they have only one US dollar correspondent bank left, relations with that bank are shaky, and they will almost certainly lose that bank if they proceed with this terrible idea. The BBC article quotes me at length. The IMF report (PDF) is sensible and readable — Ctrl-F on “cryptocurrency” for the locally-relevant bits.

Papua New Guinea, another small country desperate for cash, is looking toward approving a Special Economic Zone for cryptocurrencies, to be run by Ledger Atlas. This was first floated in May. Ledger have basically bought themselves a semi-sovereign chunk of a country, to run as a libertarian paradise — “The preamble to the proposed legislation states explicitly the SEZ will restrict citizens constitutional rights to freedom from arbitrary search and entry; freedom or conscience, thought and religion; freedom of expression and publication; freedom of assembly and association; freedom of choice of employment; reasonable privacy; vote and stand for public office; reasonable access to official documentation; freedom of movement; and protection from unjust deprivation of property.” Because the market will take care of all that — on the blockchain!

Two new “stablecoins” are approved by New York — the Gemini Dollar (an ERC-20 token) and the Paxos Standard. The idea is money that flows at the speed of the Ethereum blockchain … but is properly regulated. (Gemini’s entire pitch is that it’s trustworthy and compliant.) Nobody is quite clear how either of these will work this way in practice, given the whole point of tokens is to flow freely — which was the problem with the Marshall Islands proposal. Both are backed by actual dollar deposits.

An actual economist, Professor Barry Eichengreen from UCB, writes on why “stablecoins” aren’t an answer to Bitcoin’s instability.

CNN: Bitcoin crash: This man lost his savings when cryptocurrencies plunged — Sean Russell, from Leeds in the UK, lost everything in the crash: “the paper losses on his initial investment have reached 96%.” He’s still hodling — “I have to be hopeful about something,” he said. “I need to keep my mind occupied, because when I just focused on the money I lost, it destroyed me mentally and emotionally.” And, you know what Mr Russell does by day? He’s a crypto consultant (archive) — advising others how to take on his bagholding. “Could 1 Bitcoin be worth £1 Million by 2020? Can you afford to miss out any longer?” His LinkedIn leads with “Professional Experience: Crypto-Currency Consultant.”

 

 

Scott Morrison, the new Australian Prime Minister, has a vague idea of what a cryptocurrency is — he was previously the Treasurer — and he’s not a fan. Unfortunately, he has an even vaguer idea of what a blockchain or DLT is, but he’s sure these will afflict banks with the punishment they deserve, by unspecified means. ICO Examiner found the video, where Morrison was asked about this by Tim Meyer of CryptoLabs, who sell mining rigs.

The Reserve Bank of India directed lenders in April to wind down all business dealings with cryptocurrency exchanges within three months. The exchanges took the RBI to court — and the Supreme Court begins final hearings tomorrow, 12 September.

R3 and Ripple Labs have finally settled their long-running legal dispute over R3’s option to purchase a pile of XRP cheap. Terms were not disclosed.

How viable is the exciting world of bitcoin mining these days? Bitfarms in Canada provide us with a handy worked example, in the form of their Half-Year 2018 Consolidated Financial Results, released 30 August. A CPA on /r/buttcoin takes us through what a knife-edge business mining is of late. Their report for Israel breaks down income in more detail (English section starts on p5).

Dig this StackExchange thread, where someone tries to subtly ask if machine learning could defeat SHA256 cheaply. Various people try to gently explain what a hashing function is, and that you won’t get rich pointing an AI at Bitcoin mining.

Jack Dorsey of Twitter to Congress: perhaps blockchain will fix my social network.

Joe Lubin and Amanda Gutterman of Consensys put forward an incomprehensible pitch for Civil, a journalism on the blockchain ICO. If you use the Ethereum blockchain, you can use a token (that totally isn’t a security) to vote which facts are true and which journalists are ethical! I can’t see any possible problems with this, can you? We tried tracing the flows of cash and can’t work out just how much Consensys get paid from this ICO (in CVL tokens or ETH), working from the documents released by Civil — tips welcomed.

 

 

High Times, the magazine for stoners, is running an IPO! Not, you’ll note, an ICO. In fact, it’s a Regulation A+ crowdfunding stock offering. But they accept BTC and ETH.

KodakCoin news: WENN Digital is now called Ryde Holding — I wonder if, per the terms of the offering, they failed to buy WENN Media in time. ICOx Innovations considers KodakCoin a huge success! And is looking for other brands to sell ICOs to. “Many cryptocurrencies out there are in search of a way to be useful” and KodakCoin is no exception, but anyway.

This account on Wikipedia, “Rydekodakone,” had some interesting edits to the KODAKCoin article, until it was blocked. Of course, there’s nothing to link it with certainty to Ryde.

The Australian Securities Exchange was replacing its old CHESS clearance system with a blockchain-based thing from Digital Asset — this is now not set to go live until 2021.

Star Xu, CEO and founder of the OKEx crypto exchange, was detained by Shanghai police (translation), who were investigating possible fraud related to WFEE Coin, in which Xu is a shareholder. He was released after 24 hours. Cryptovenus tweets: “The real story behind this OKEx ordeal is the fact Star himself asked the police to come rescue him! This was because he was surrounded by users whom had lost money in Cryptos on OKEx.”

How crypto exchange marketing works, as trading slows right down — charge to list minor altcoins, but offer discounts if the coin can steer depositors onto the exchanges.

And the first half of this post is an excellent writeup of how corrupt the crypto trading markets are. (The other half is an ad for how Celsius are pure and wonderful, and you can safely ignore it.)

You know how the Kraken exchange shut down a call centre in Halifax, Nova Scotia? An anonymous purported insider writes: Kraken is Lying Through Their Teeth. “We’re not just talking a ‘call center,’ we’re talking 200+ staff that covered every aspect of the client experience at Kraken.”

The Wall Street Journal on enterprise blockchain — “There are myriad pilot programs, but none have yet succeeded in launching a mainstream, commercial product.” And that’s from Paul Vigna, who co-wrote a whole book, The Truth Machine (US, UK), about how great the blockchain was going to be in businesses and organisations.

How smart contract upgrades fail in practice. “Existing techniques to upgrade contracts have flaws, increase the complexity of the contract significantly, and ultimately introduce bugs.”

Database triggers are mostly bad, and smart contracts are bad for the same reasons. So, Microsoft Azure Blockchain gives us: Enterprise Smart Contracts! These execute “off-chain”. That is, they’re a separate program to manipulate your blockchain. Just like when you’re writing programs to manage real databases.

Remember how cryptocurrency TRON bought the meaningless shell of BitTorrent, Inc., after Bram Cohen had long given up and was working on ChiaNet? It seems a pile of other cryptos were eyeing it up. Something to do with the ICO money, I suppose. The actual BitTorrent protocol remains unaffected.

Preston Byrne on the price of ether. “Remember the future you were sold in 2017. Remember who sold it to you. Remember the fairweather folks who were made rich by these offerings, or worked for ICO mills, but now feign disapproval as the wind blows against them.”

You should definitely put everything you have into 44COIN. Funding secured!

 

 

 

 

https://twitter.com/piratebeachbum/status/1038423460475797507

 

 

 



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