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The legal misadventures of Dr. Craig Wright
Kleiman v. Wright continues: Craig Wright was ordered by the court to produce details of the Satoshi stash — the Bitcoin holdings he claims to have mined with Dave Kleiman in the early days of Bitcoin — by 3 February. Or else. Wright tells the court the “bonded courier” has arrived with the keys — “a third party has provided the necessary information and key slice to unlock the encrypted file” — and he’s passed the information on to Dave’s estate, we good now OK? [Notice of Compliance, PDF]
The Kleiman estate replies that Wright just sent a list of Bitcoin addresses, and nothing else that was asked for — such as who the bonded courier was. And Wright has messed them around and run out the clock so much that they would like another three months for discovery and depositions — including further questions for Wright himself. nChain, Wright’s employer — that is, Calvin Ayre — seems to be calling the shots here, so the Kleiman estate might want to add nChain as a party in the litigation. [Kleiman v. Wright docket; Plaintiffs’ Motion for Ninety Day Extension, PDF]
Wright’s lawyer, Andres Rivero, says that Wright did not in fact receive the private keys to the Satoshi stash — the cryptographic keys that are the things you have when you “have” a bitcoin. It’s not clear when — or if — the keys themselves will supposedly arrive. It’s possible that there is literally no evidence that this isn’t all just a made-up excuse for the repeated failure of Wright’s past claims. [Decrypt]
Wright’s defamation cases aren’t going so well either — he lost against Roger Ver in August 2019 for lack of jurisdiction (and because there was “no evidence at all of any actual reputational harm that the Claimant has suffered”), and his case against anonymous Twitter user “Hodlonaut” has just been dismissed for the same reason. If Wright wants to proceed against Hodlonaut, he will have to do so in Norway — where Hodlonaut started his own proceedings against Wright in July last year. Wright’s defamation suit against Bitcoin podcaster Peter McCormack — who is a UK resident, so the UK is definitely the jurisdiction — is apparently still in motion. [Twitter; Twitter; Twitter; Decrypt]
Other legal blockchainery
Reggie Fowler — the US money mule for Bitfinex, Tether, and many other crypto businesses — had his plea deal hearing on Friday. According to a post from someone who went along, Fowler was going to plead guilty on one charge, and have the others dropped — then he decided he wasn’t going to. The judge apparently asked him repeatedly if he understood what he was charged with. The eventual trial is in April. [Inner City Press, CoinDesk, Fowler docket]
There are now four class action lawsuits against Bitfinex and Tether, alleging price manipulation in the Bitcoin market in violation of RICO — as well as the suits that Leibowitz et al. filed in October, and Young and Kurtz earlier this month, there’s now similar suits from Bryan Faubus and Joseph Ebanks. All are marked as connected — which doesn’t mean they’ll definitely be merged, but does at least mean the plaintiffs are likely to work together. [Faubus, Ebanks]
The US Justice Department has announced that Roger Knox has pleaded guilty to securities fraud. Knox isn’t a crypto guy — but he was a client of Michael Gastauer, who ran dubious money transmitter WB21, who still have $9 million of funds from the collapsed Quadriga crypto exchange. Coincidentally, a couple of weeks ago, Amy Castor was getting weird threats from Twitter anons on the subject — and wonders if Gastauer is worried Knox will talk about their work together. Amy has an article on this out shortly in Modern Consensus. [Justice Department press release, Twitter thread, Twitter thread, Modern Consensus front page]
In SEC v. Telegram, it turns out that Telegram was, in fact, still selling Gram tokens after the $1.7 billion private offering that Telegram claimed was exempt from registration as a security, under Regulation D 506(c). The SEC found the invoices to Telegram, from Da Vinci Capital and Gem Limited, for sales commissions from mid-2018 — and that’s bad, because you can’t sell a Reg D offering via other entities that are selling the securities on commission. Telegram maintains the commissions were “finder’s fees,” and the salesmen weren’t being underwriters — though calling a legally-defined action by a different name tends not to make any difference in court. [CoinDesk via Yahoo]
After a conference with the SEC and District Judge Kevin Castel, Telegram will produce some of the banking records the SEC requested, after redacting private information under foreign laws — but they want five to seven weeks to do this. The SEC suggested 26 February, and the judge has concurred. [Case docket; order, PDF]
When Telegram contacted the Gram investors in October 2019 about the SEC filing its suit, the company told the buyers that there was $1.31 billion left that they could possibly hand back, as a termination amount. The rest has been spent — and that’s the spending the SEC wants full details of. [SEC filing, PDF]
The SEC has charged Boaz Manor and Edith Pardo over the BCT (Blockchain Terminal) token offering of 2017-2018. Manor ran the offering under a fake identity, “Shaun MacDonald” — to hide the fact that Manor had been convicted of hedge fund fraud in the past, as revealed by Frank Chaparro from The Block in 2018. I’m shocked, shocked to hear that an ICO promoter turned out to be a serial scammer! [SEC press release; SEC complaint, PDF; The Block]
The SEC warns that Initial Exchange Offerings (IEOs) are a trash fire, and you should stay the hell away from them. IEOs are when an exchange puts an ICO-like token up directly for trading on their platform — often with promises of how they’ll manage the token. Like ICOs before them, IEOs are likely securities under US law. Even if the IEO is registered as a security in the US — of which there are zero examples so far — the exchange would need to be registered as a trading venue for securities, and as a broker-dealer, if they don’t work to keep US buyers out. Investors may have no effective legal remedies in US courts against foreign exchanges that promote IEOs. Not even the crypto world seems surprised by this bulletin. [SEC investor bulletin]
Aaand it’s gone
Cobinhood crypto exchange users were made suddenly unhappy on 10 January — “COBINHOOD Exchange is shutting down and auditing all accounts’ balances from Jan 10 to Feb 9 in 2020. It will be re-opened on Feb 10, 2020. All COBINHOOD users can then retrieve their funds accordingly. Please DO NOT make any deposits; it may result in permanent loss.” [Twitter]
There’s rumours of a hack that Cobinhood have to investigate. Maybe they’ll reopen next month! Fingers crossed!
Cobinhood has been shaky and weird in the past. The exchange was rumoured to have filed for bankruptcy protection in May 2019, after well-known financial troubles — users suspected an exit scam, as the exchange had just taken $3.5 million in the Dexon ICO — but they seemed to recover. The CEO then posted a convoluted explanation of events that didn’t make a whole lot of sense. But the users came back, ‘cos you can’t keep a good gambling addict down. [Blockgeeks, Dexon, blog post]
Coding the deckchairs on the Titanic
The Council of the Libra Association has appointed a Technical Steering Committee — to develop this project that doesn’t have any fixed business specification as yet, and that regulators may never allow to launch. The committee are: Diogo Monica (Anchorage), George Cabrera (Calibra), Joe Lallouz (Bison Trails), Nick Grossman (Union Square Ventures) and Ric Shreves (Mercy Corps). It’s still not clear if any Association member other than Calibra has contributed paid developer resources — but if you ask, they’ll talk up the third-party wallet software that people have created. [Libra]
I only just found an awesome blog post by economist Michael Pettis from June 2019, that I didn’t pick up on previously — explaining a whole pile of ways in which Facebook’s Libra idea is dumb and bad, with obviously disastrous implications. Pettis thinks Libra’s not about international payments for coffee, or personal remittances — it’s about large international capital flows, and the Libra Reserve being large enough to pressure governments and central banks. Regulators saw these implications immediately, which was part of why they wanted to halt Libra literally within minutes of its June announcement. [blog post]
At least one million barrels of oil have been delayed after Venezuela demanded that certain maritime fees — which are currently paid in euros — had to be paid in Petros, starting this Monday, 20 January 2020. Buyers worry that such a payment may be in violation of sanctions. [Bloomberg]
Four US House representatives have introduced the “Virtual Currency Tax Fairness Act of 2020” — a bill to exempt cryptocurrency transactions under $200 from consideration for capital gains tax purposes, much as small foreign currency transactions are exempted. The bill was introduced by Suzan DelBene (D-WA-01) and David Schweikert (R-AZ-06), and is also supported by Darren Soto (D-FL-09) and Tom Emmer (R-MN-06). CoinCenter lobbied for the bill. It’s not clear if this new bill has the momentum to proceed — Schweikert’s 2017 bill to do the same thing died on the floor. [Bill, PDF; Schweikert press release; CoinCenter press release; 2017 bill]
Bitcoin satellite and mesh networks don’t work so well when you’re in a massive internet desert such as Iran — because of sanctions. “In situations where we don’t have physical connection none of these f—ing technologies help us.” [CoinDesk]
Blockchain, in a human face, forever — “Blockchain Crème” from Cosmetique Bio Naturelle Suisse. It’s real. A snip at 126.40 EUR! The same company sells a “Blockchain Serum” for a mere 140 EUR. [FT Alphaville, free with login; Blockchain Creme (archive); Amazon.de (archive)]
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