News: Eran Eyal and Shopin charged again, some Cryptopia money found, Richard Heart and Hex, exhuming Gerald Cotten

  • And so this is Christmas — and that relative is gonna talk Bitcoin at the dinner table. The spine of the Attack of the 50 Foot Blockchain paperback (US, UK) can take their head clean off in a single swipe! (Of course, two more heads will promptly pop up, both still talking Bitcoin.) Be prepared!


The SEC continues methodically through all the ICOs. This week, it’s Shopin from 2017. Eran Eyal and his company have been charged with running an unregistered offering of securities, and fraud — lying about their development plans, and Eyal misappropriating $500,000 of investor funds for his own use.

The complaint is completely routine, and nobody who’s been following ICOs will be surprised by any of it. Stephen Palley says: “The SEC’s ICO enforcement work has quickly become indistinguishable from other types of enforcement litigation. Crypto’s novelty receives no special treatment. Like any other securities offering — you have to register, you can’t make misstatements, and you can’t misuse funds. These allegations here are like in scores of other SEC complaints. Some leeway might have been granted early on while the government was getting its bearings, there’s going to be precious little for people who took money and didn’t use it as promised.”

Eyal has previous form — his company Springleap was charged by the New York Attorney General in August 2018 for stealing $600,000 of investors’ money through misrepresentation. Eyal pleaded guilty on Thursday. He had previously sent a lawyer’s letter to several media outlets, offering “reimbursement” for removing articles about the cases against him.



QuadrigaCX creditors want Gerry Cotten’s alleged dead body exhumed, and propped up on trial for his crimes — I’m sorry, for post-mortem autopsy to confirm his identity. To be fair, if ever there was a “death” that warranted a permanent prefix of “alleged”…

From last month — the Globe & Mail details Cotten’s history of fraud since age 15.

The Cryptopia exchange was hacked, and went into liquidation. The liquidator, Grant Thornton NZ, has recovered nearly NZ$7.2 million for disbursement to creditors — $10.9 million incoming, $3.7 million so far in expenses ($823,164 to Grant Thornton) — but finding out who it should go to is a mammoth task. Especially as Cryptopia didn’t require a lot of identifying information from customers.

Amy Castor: Canada’s Instacoin Bitcoin ATMs now offer a slew of stablecoins, including tether. You can buy or sell cryptos at these machines — with transactions up to C$1,000 being anonymous. They’re street-corner crypto exchanges, though with swingeing fees — C$5 per Bitcoin transaction, around C$1 for other coins, and 4-7% fees in the offered exchange rates.

What I don’t get is — why would you buy tethers at an ATM? They’re only useful for crypto trading. Amy got onto the president of Instacoin, and he couldn’t explain why either. Bitcoin ATMs are for street-corner money laundering — but I really don’t see how tethers help with this job.



A bitcoiner foolishly believes the narrative — and is actually surprised when he can’t use his bitcoins in Argentina. He couldn’t even sell them face-to-face for actual money he could use.

From the cryptocurrency that brought you “why hasn’t Bitcoin reached mass adoption in Argentina?”, here’s the newest hit: “why hasn’t Bitcoin reached mass adoption in Venezuela?”

How to make number not go down? Binance has recently taken to selectively disabling shorting on certain tokens, when bad news comes out. They haven’t disabled long margin trades, though — so you can’t bet on prices going down, only on them going up.

Stephen Palley opines that Richard Heart’s Hex token is — despite the claims of Ponzi-like interest rates — not a Ponzi! Though it’s really obviously an unregistered securities offering under the Howey test. “You don’t ever get your Ether back. Never. Ever. Just a bunch of Hex. So: is this really a CD? No. No sweetheart, it’s not a CD. It looks to me more like wealth transfer to somebody else’s Ethereum wallet based on a promise that network effects and a magic pool of liquidity will make Hex worth a lot of money some day … if this thing is still operating in a couple of months I will be really, really surprised. It has ex parte Temporary Restraining Order written all over it.”

Alex Krüger offers a short thread on Hex, stupidity and greed.


UK crypto payments startup Bottle Pay is shutting down — due to the evil EU regulators forcing the 5th Anti-Money-Laundering-Directive (5AMLD), which takes effect in January 2020, upon them! There is the minor detail that 5AMLD was ratified in 2018, and Bottle Pay didn’t launch until June 2019 — but I guess time flowing in a forward direction is just old-paradigm thinking.

Crypto is not a Ponzi scheme! It’s just a great platform to build other Ponzis on — in this case, the BitClub cloud mining scam. These guys took in $722 million. Here’s the indictment.

The Netherlands officially recognises crypto! It’s raising the penalties for online fraud, including cryptocurrency fraud, to match those for conventional fraud.

Surprisingly, it turns out that just printing money isn’t that great a business to be in. De La Rue, who’ve printed all Bank of England notes since 1860, is going broke — they lost the contract to print UK passports, and then they did a large run of banknotes for Venezuela … who didn’t pay them.

In chapter 11 of Attack of the 50 Foot Blockchain, I described Intel’s “Proof of Elapsed Time”  blockchain consensus mechanism — where you use a DRMed timer running in the Software Guard Extensions (SGX) “enclave” on an Intel CPU to tell you when you can verify a block of transactions. Which is why I called it “Proof of Buying an Intel CPU” — you “decentralise” by making Intel the trusted third party. Well, SGX has just been broken — undervolt the enclave, corrupt the memory, extract the keys. Intel has released new microcode that works around this particular attack.

“Right now computer do not have write access to human brains. But in the future they will. Then the one person that controls Ethereum will be able to read and write to human brains and well.” This guy clearly injected four whole bitcoins.



I’m doing the Blockchain Debate Podcast against Jimmy Song — on the question “Bitcoin will attain global store of value status by 2040.” We’re recording on Wednesday — please suggest further questions!

Decrypt gets quotes from me! Explaining Wikipedia to them again. What will happen to the Bitcoin price? No, “institutional investors” is just narrative, i.e. wishful thinking. What the UK General Election means for cryptocurrency in Britain — bugger-all, because the narratives won’t be any more connected to reality than they are now.



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