News: IOTA blackmail, Coinbase banking and lawsuit, ezBtc vanishes, Ross Ulbricht appeal fails, Wright motion denied, Butterfly Labs, TimiHealth

IOTA fans are behaving like deranged cultists again. Tangleblog emailed Sarah Jamie Lewis trying to blackmail her into writing about IOTA “in an open and scientific way”. Lewis responded at length — sciencing the hell out of IOTA’s dismal technical ineptitude. In particular, the fever dream of “co-ordicide” — all the stuff in the white paper about how the tangle will solve the Blockchain trilemma has been irrelevant for the past two years, because IOTA actually runs on a completely centralised “coordinator,” but they’re totally going to kill it any month now. This is a good technical analysis that you should read.

Tangleblog responded by adding misogyny to the deranged cultism — a bit of an IOTA tradition — though he did say “I have to admit, I’m neither a developer nor a consensus specialist” despite Lewis being both. Tangleblog finally deleted that response and apologised somewhat more properly — though he claimed this was all a “poker-play” and he totally planned all this, guys. Donate to Lewis and OpenPrivacy here.



Unbanking the exchanges — Barclays in the UK has dumped Coinbase. This is affecting deposits and withdrawals, as Coinbase no longer has access to the UK’s near-instant Faster Payments Scheme. Coinbase has signed up with ClearBank, and may have FPS access once more by the end of September. ClearBank were apparently behind Coinbase barring UK customers from trading ZCash. Coinbase still do Euro payments through LHV Bank in Latvia, though LHV isn’t yet able to offer FPS to Coinbase.

Coinbase is being sued over its initial listing of Bitcoin Cash — and the judge has ruled that third-party traders can sue an exchange if they think it damaged the market badly enough, so the case can go forward. “Coinbase indeed had a duty to maintain a functional marketplace.” And the Terms of Service don’t get Coinbase out of this one. David Silver: “It turns out that crypto actually has rules, and tort liability attaches to claims against crypto exchanges. Whoa Nellie! That’s a really big deal.”

Coinbase, desperate to drum up transaction volume, is offering conversion of an ever-wider range of *cough* minor altcoins to actual money — Algorand (which recently crashed), Cosmos, Dash, Decred, Ontology, Waves, Matic Network and Harmony. All are already on Binance, for what it’s worth. There’s no date as yet for a Coinbase listing.

UK-based decentralised crypto exchange Ethfinex has parted ways with parent company iFinex (Bitfinex/Tether) and rebranded as DeversiFi, in a “management buyout” — though Bitfinex CTO Paolo Ardoino is still on board as a “technical advisor.” DeversiFi CEO Will Harborne is the guy who told Ben Munster from Decrypt precisely how whales pump the Bitcoin price with tethers.

Tether is a whale’s game — of the 4 billion tethers in circulation, over 3 billion are held by 318 holders with 1 million or more tethers each.

Great podcast you should listen to — Cas Piancey talks to KeywordCrypto about Tether.

Why was “dollar-pegged stablecoin” BitUSD trading at $34 on Tuesday? Because CoinMarketCap, in the absence of good data, will try to kludge together an approximation from whatever scraps of information it can find — in this case, a wash-trading bot twiddling a dead altcoin on a bottom-of-the-barrel exchange.

BitMEX ran a two-page advertisement in The Times on 9 January 2019, the tenth anniversary of Bitcoin 0.1 being released. Using a logarithmic Y-axis on a graph of the price of Bitcoin got it written up as a chart crime in FT Alphaville. And now the Advertising Standards Authority has ruled the ad deceptive, particularly the log scale — “in the absence of clear explanatory information, the graph was unlikely to be familiar or readily understandable to the national newspaper audience to whom the ad was directed.” The advertisement “must not appear again in its current form.”

David Smilie and the ezBtc crypto exchange in Vancouver are having some issues sending out customer withdrawals, and other money they owe people. They currently seem to be about CDN$60 million down. The exchange went offline for “unexpected maintenance” in late July.



Ross Ulbricht, founder of the Silk Road darknet drug market, has filed a new appeal against his life sentence without parole for drug trafficking and money laundering. This one is substantially “my lawyers were incompetent” — the approach that Nicholas Weaver recommended long ago. Unfortunately, the appeal was immediately thrown out as moot — as the lawyers in question had not yet formally withdrawn from Ulbricht’s case.

Nicholas Weaver is also running a Kickstarter to rent a booth for Snake Oil Security at RSA 2020.

The SEC has frozen $8 million in assets held by Reggie Middleton of the Veritaseum ICO — they accuse him of misleading investors, falsely claiming to have a product ready to generate revenue, manipulating the VERI token price, and misappropriating investor funds.

Kik has filed a 130 page response to the SEC’s July complaint about the Kin ICO — Kik deny everything, and say the SEC created a “highly selective and misleading depiction of the record”. Jason Gottlieb thinks that Kik’s territoriality arguments might have something to them.

There are some new documents in Kleiman v. Wright. The deposition of Jonathan Warren, creator of Bitmessage, confirms that the supposed messages between Craig Wright and Dave Kleiman are forgeries — they’re dated before Bitmessage’s first public release, and use features that weren’t in the software until later releases. The big one is the denial of Wright’s motion to dismiss on the basis that the Federal court did not have jurisdiction. Stephen Palley notes that Judge Bloom was deeply unimpressed with the contradictions in Wright’s sworn statements, quoting Sir Walter Scott: “Oh what a tangled web we weave when first we practice to deceive.” Palley: “Given the fact that a contempt motion is pending, the fact that he’s been thus savaged in no way bodes well.”



The UK Department of Work and Pensions blogged about “changing trends” in payments, and mentioned “DLT” in passing. CoinDesk proceeded to froth. Crowdfund Insider asked me for comment — my opinion is: there’s probably nothing to see here, and name-dropping Santander’s One Pay FX app that has almost no customers probably isn’t Good News for Blockchain.

In Australia, reprehensible cryptocurrency spruikers who should be tarred, feathered and run out of town on a rail are encouraging self-managed superannuation funds to buy Bitcoin — and the Australian Tax Office is having to warn people that this is bad.

Crypto investors in Israel are having trouble paying their taxes — because their banks are refusing to accept deposits of crypto trading profits from outside the country, out of fear the money is dirty.

In the US, the IRS is getting rather more strident with its notices to crypto investors who quite likely need to speak to their accountant, as absolutely soon as possible.

HMRC in the UK is seeking data from crypto exchanges too, with an eye to tax evasion — Coinbase, eToro and CEX.IO so far.

Data protection regulators internationally have called upon Facebook to protect personal data of users, and clarify Libra’s handling of personal data — particularly given Facebook’s awful track record.

The Woz and the crypto wonga — a fabulous tale of how Initial Sucker Offerings work in practice in that most stringent of cryptocurrency regulatory regimes, Malta.



Hey, remember Butterfly Labs — the company that sold Bitcoin miners it didn’t ship until it had “tested” them into uselessness, bought to suppress a bad review, and turned out to be run by convicted mail fraudsters? A pile of the same people tried coming back with an ICO a few months, called AMMBR. It didn’t go so well. For the buyers, anyway.

In the first quarter of 2019, mining hardware giant Bitmain made losses of $310 million (original) on total operating income of $1.082 billion.

Brenna Smith at Bellingcat traces the evolution of Bitcoin in terrorist financing. It’s still not very good for the job — doing things governments don’t like on a permanent immutable public ledger remains not so smart — and cash is still king, but, surprisingly, terrorists have greater than zero use for Bitcoin.

Trail of Bits security-audited 246 smart contracts, and has summarised their findings — “the aggregate data from every full smart contract security review we’ve ever done”

When was the busiest time for companies to claim they were pivoting to blockchain? The first quarter of 2018 — just after the peak of the 2017 crypto bubble. Or, at least, using the the words “blockchain,” “bitcoin” or “cryptocurrency(ies)” in their 8-K filings with the SEC. “We also caution investors that, despite corporate managers’ increasing use of the word blockchain in the 8-Ks, few firms have developed successful blockchain projects.”

Trying to pay with Bitcoin at a Mexico City “Bitcoin bar” didn’t go well — “Transactions under [1,000 pesos] are taking a day to two, in the course of today they will reach the wallet.” The owner of the bar has taken care to blame the customer, as is standard whenever Bitcoin is found yet again to be useless garbage as a currency.

TimiHealth, the Tokenized Health Data Ecosystem™, lets you “Own & Control Your Data” — with a patient data leak, but on the blockchain. But it’s okay! They don’t collect and store any of your personal information, except your DNA. TimiHealth claim that the data, which was available on an open web server — and not in fact on a “blockchain” — was a “test environment” with no actual data — except it included a lab report. TimiHealth’s story then changed to the data being from “a personal friend of the Timi team,” then that their patient data leak was “orchestrated” by “big tech companies.” And that their open web server was due to a “hack,” and not, e.g., incompetence. Timi eventually admitted that the data had been put there by their Android app during a test run.

Anthony Pompliano gets another famously dumb statement into FT Alphaville.


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