News: London Football Exchange and Perth Glory, Ripple pays MoneyGram to be its friend, Libra not dead, IOTA still halted, Sweden’s not-a-CBDC

- by David Gerard - Leave a Comment

 

 

Albion! Albion!

I glanced in passing at the London Football Exchange (LFE) a couple of years ago, when BBC Sport were researching a story on “blockchain” in sport. I thought it was pretty obviously just a generic ICO scam, with no sign of any connection to the real world. The BBC didn’t end up mentioning LFE in the story. [BBC, 2018]

I’m wishing I’d bothered at least writing up LFE now, because it just got interesting. Jim Aylward from LFE turns out to be multiply convicted fraudster James Abbass Biniaz. A crypto guy who turns out to be a serial scammer? I know, right? [BBC]

LFE was going to buy Perth Glory FC in Western Australia — an A-League club, but one that’s losing quite a lot of money — from its owner, Tony Sage, who was apparently going to become chairman of LFE … but was still in the process of doing due diligence on the sale.

That didn’t add up for Perth Glory’s fans — who went digging. The fans then got Perth’s biggest talk radio station, 6PR, on the case — and the story broke big on 6PR on 24 February, and that evening on national television. [ABC; 6PR, audio; Nine News, video]

6PR also got hold of some fabulous audio from Aylward, talking to LFE token investors — “we are totally manipulating the price at the moment, we control about 95 per cent of the token holders.” This recording is comedy gold. The programme also includes an interview with Ronan Evain, a fan of FC Nantes in France, another team that LFE were trying to buy. [6PR]

The sale of Perth Glory to the LFE was called off on 25 February. [6PR]

6PR has a nice ten minute audio segment outlining the story — how they think LFE tried to lead Tony Sage on with a “sweet story,” and Sage tells them how it looked to him. Gareth Parker, 6PR:

LFE have been running around, trying this same operation for more than two years, claiming to want to buy football clubs. They’ve never acquired a football club, I believe they never will acquire a football club. Because I don’t believe that that’s the point. I don’t believe that there will ever be an LFE marketplace where fans can trade tokens for merchandise. I believe that all of that is just a sweet story. There will be no football group. It’s just a story that they can tell so that people will pay real cash for their otherwise worthless cryptocurrency. [6PR]

 

 

Ripples in the stream

Good news for XRP! “MoneyGram continued to expand its strategic partnership with Ripple as the first money transfer company to scale the use of blockchain capabilities.”

How does this partnership work? It’s pay-for-play — Martin Walker was first to notice the bit where MoneyGram received “$8.9 million of benefit from Ripple” for Q4 and “$11.3 million of Ripple benefit” for all of 2019, as “Ripple market development fees”.  [Twitter, SEC 8-K filing]

Ripple invested $50 million in MoneyGram in June 2019, for a total cash inflow to MoneyGram of $29.3 million. What does Ripple get from this?

The Company is compensated by Ripple for developing and bringing liquidity to foreign exchange markets, facilitated by Ripple’s blockchain, and providing a reliable level of foreign exchange trading activity. [SEC 10-Q filing]

The Company is compensated by Ripple in XRP for developing and bringing liquidity to foreign exchange markets, facilitated by the ODL platform, and providing a reliable level of foreign exchange trading activity. We refer to this compensation as market development fees. [SEC 10-K filing]

Ripple pays MoneyGram $50 million to use their software and their crypto. Ripple gives MoneyGram the software for free. Ripple gives MoneyGram ongoing and increasing subsidies, to keep using the software and the crypto. Ripple then talks up its new real-world use case.

MoneyGram pushed $100 million total volume through xRapid between July and December 2019 — but continuing this arrangement, which MoneyGram still talk about as “nascent,” will require Ripple to get more clients, to increase the liquidity of XRP. [CNN, transcribed by Daily Hodl]

But I’m sure MoneyGram will be happy to continue as long as Ripple are paying them $3 million a month to care.

Trolly McTrollface has previously detailed Ripple’s similar pay-for-play “partnerships.” All of Ripple’s claimed partnerships with real companies appear to work like this — pay a company to run a fully-subsidised pilot programme, then tout this as evidence of Ripple’s uptake, so Ripple can sell off its massive XRP stash to retail suckers. This is all Ripple has for a business model. [blog post]

Ripple may have problems with the bit where they’ve been offloading XRP onto retail suckers — the private class-action suit claiming XRP is an unregistered security under US law is going forward. [Court order, PDF; Bloomberg]

Meanwhile, JP Koning writes up how Transferwise does international remittances in 11 seconds. Cryptocurrency — including XRP and Libra — really doesn’t have a use case for remittances, except evading regulation or pumping Ripple Labs’ bags. Koning notes that if Transferwise had an account directly with the central banks involved, money could move even faster. [blog post]

 

 

Libra’s not dead! Look, it’s still twitching

The big names aren’t going near Libra. So the new signups to the Libra Association are e-commerce platform Shopify, who like the idea of international currency, and Tagomi, a cryptocurrency prime brokerage — and no, I’d never heard of them either. [Shopify, TechCrunch]

Libra engineering at the Stanford Blockchain Conference 2020 — a transcript of Ben Maurer’s talk on the Move smart contract language. This is most important for seeing the stories Libra are telling themselves internally — and that they’re feeding their own engineers economic gibberish that isn’t how anything in the real world works, but that does fit in with Libra’s weird Bitcoin-descended ideas. [diyhpluswiki]

Over in Europe, Valdis Dombrovskis of the European Commission is slightly frustrated at Libra’s lack of any concrete detail in answer to his questions — “as  Libra is still a project, and thereby a moving target, the information provided remains insufficient for determining the precise nature of Libra and, by extension, its relation with existing EU law.” [European Parliament, PDF]

ICO, ICO

In the 19 February hearing in SEC v. Telegram, Judge Kevin Castel said that the case is not about whether cryptocurrencies are securities under the Howey test — despite the amicus briefs from blockchain industry organisations. He was concerned about whether the initial buyers “were effectively agents or distributors, acting on behalf of Telegram as part of a single unified scheme with the public.” Telegram agreed to maintain the temporary injunction on issuing Gram tokens until 30 April, and Castel said he would definitely rule by then. [Twitter, CoinDesk]

Judge Castel also asked the CFTC if they thought Grams were a commodity or a security. Their answer: “ehh, yeah, but could be both? Why don’t you look up Howey.” Thanks, guys. [CFTC letter, PDF]

The 2017 Enigma ENG ICO settles with the SEC — Enigma has to return funds to investors via a claims process, register its tokens as securities, file periodic reports with the SEC, and pay a $500,000 penalty on top of that. This is how it works now. [SEC press release; administrative order, PDF]

Celebrity endorsements for ICOs aren’t doing well either. Steven Seagal, brand ambassador for the February 2018 Bitcoiin2Gen ICO — that’s “bitcoiin” with two I’s — has settled SEC charges of unlawfully touting a securities offering. He paid back the $157,000 he received, plus interest, and a $157,000 fine on top of that. Even if you can presume a celebrity face is being paid, they need to disclose what they’re being paid. [press release; order, PDF]

Kik Messenger’s KIN token’s uptake is somewhat less than organic — developers add KIN to their apps because the Kin Foundation pays them to. [Reddit, Google Docs]

Stephen Palley posts a detailed opinion on Hester Peirce’s ICO “safe harbor” proposal. [The Block]

IOTA can’t fail if it’s not running

IOTA’s central coordinator node is still switched off after the attack on their official Trinity wallet software. The IOTA Foundation has published a postmortem of the recent attack — and it radiates incompetence at every level. Dependent-Cantaloupe on Reddit /r/buttcoin analyses this Rube Goldberg machine of slapstick comedy. [Reddit]

The exploit was in third-party service Moonpay — whose code is downloaded as a blob and loaded into Trinity. Let’s just download and inject unverified third-party code directly into our crypto wallet.

The attacker collected users’ private keys for two and a half weeks. They started collecting keys on 11 February, when Moonpay noticed and locked them out. Moonpay informed IOTA on 12 February, and IOTA shut down the coordinator — the centralised node that every transaction goes through, because IOTA is a 100% centralised coin — four hours later.

The coordinator is not yet switched on. First, every IOTA holder has to authenticate themselves with the IOTA Foundation. You can ask for help on the IOTA Discord, which is suffering an attack of impostors pretending to be from the Foundation — because who needs secure messaging channels?

Trinity is written in node.js — and pulls in a zillion random libraries from NPM even when it’s running normally. Compromised libraries in NPM have been used to hack crypto wallets on multiple previous occasions, but IOTA have had enough of experts, or something. [The Register, npm blog]

The IOTA coordinator is still switched off. This hasn’t affected its value for minor altcoin traders in the slightest, of course. [Twitter]

 

 

Urgent temporary unscheduled maintenance news

FCoin exchange collapse postmortem — It has been [0] days since an exchange “hack” turned out to be insiders having stolen all the coins months before. [anchain.ai]

The ACX Exchange, in Australia, has been curiously unable to service withdrawals for several weeks. The ultimate punishment for not giving people their money is … they’ve been removed from the rolls of trade association Blockchain Australia. I warned you about these guys in May 2018. [Bitcoinist]

“Bitfinex is pleased to announce that on Friday, February 28, 2020, it repaid $100,000,000 of the outstanding loan facility to Tether. Bitfinex made this payment in fiat wired to Tether’s bank account. This payment is all on account of principal. Interest on all amounts due under the facility agreement has been prepaid up to March 2020.” I’m sure we can all take Bitfinex’s word for this. [Bitfinex blog]

Israel launches a quality improvement programme for crypto exchanges! Four people from the management of Israeli exchange Bitin have been arrested on charges of money laundering and tax evasion. [Globes, translation; Globes, translation; Facebook]

 

 

No, Sweden isn’t doing a CBDC

The Riksbank, Sweden’s central bank, is trialing a central bank digital currency (CBDC), with e-krona on R3’s Corda we’re-calling-it-a-blockchain-this-year software!

Well, except that there are no krona in the trial, and no actual users — everything is simulated.

This isn’t Riksbank doing a CBDC. It’s a limited simulation of a portion of the Swedish financial system, with a mobile app interface for testers to pretend to be end users.

“The bank was keen to emphasize that no decision has been made to proceed with a central bank digital currency (CBDC), and the project is intended as a learning experience.”

It looks like Accenture got Riksbank to bung them some money for a project that only provides a “solution” to generating press release fodder. But if there’s one thing Accenture can supply, it’s a rigged demo. [Riksbank, PDF; Ledger Insights]

“There doesn’t seem to be a lot of benefits if you look at a DLT system and the current efficient centralized system for the sole purpose of interbank payments,” said Scott Hendry of the Bank of Canada at a recent central bankers’ conference in Ukraine. This is how central bankers politely say “no, even if we do a CBDC it’s not good news for Bitcoin, you idiots.” [CoinDesk]

Aleksi Grym went on the Central Banking Tech Talk podcast, to talk about CBDCs, the Avant card, and his opinion that we already have CBDCs, we just don’t do anything so silly as trying to put them on a blockchain. [Central Banking]

Here’s a heartwarming slice of nocoining from Aleksi from 2018 — “The great illusion of digital currencies.” [Bank of Finland]

Things happen

Other SEC commissioners, rejecting the Bitcoin ETF from Wilshire Phoenix and NYSE Arca that wanted to mix Bitcoin and short-term Treasuries: “no, 2+2 still makes 4, and this is still manipulated nonsense.” [SEC order, PDF]
Hester Peirce: “I think sophisticated market investors can judge for themselves if 2+2 makes 5, or even 6. As Bruce Springsteen sang, ‘it’s just like Sister Ray said.'” [Dissenting Statement of Hester M. Peirce]

Reggie Fowler apparently funded an unnamed professional sports league with money allegedly acquired through “false and fraudulent pretenses”. That would be the Alliance of American Football, which collapsed part way through its first season after its funding disappeared — just as Fowler’s accounts were frozen. [Amy Castor; superseding indictment, PDF]

In Kleiman v. Wright, Dr Craig Wright continues to throw up a chaff of nonsense — this time, that he can’t provide information because it’s under privilege which he doesn’t detail. The Kleiman estate responds. [Reply memorandum, PDF]

Cryptocurrency scams are rife in Uganda — where an estimated 200,000 Ugandans have lost $1 billion to crypto scams in the past two years. Most of these are just offers to sell them crypto, where the scammer takes the buyer’s money and disappears. [Ozy]

 

 

Hot takes

Bank of England Staff Working Paper No. 855: Blockchain structure and cryptocurrency prices by Peter Zimmerman. As long as cryptocurrency has limited transaction capacity, then speculation on the price and usefulness as cash are in conflict. [Bank of England]

“Congestion Attacks in Payment Channel Networks” by Ayelet Mizrahi — you’ll be shocked to hear yet again that the Lightning Network couldn’t hold up to any sort of sustained attack. [blog post]

Jon Evans from TechCrunch on Decentralised Finance — “DeFi seems to me more like cosplaying a financial system than an actual viable alternative. I don’t see it crossing that divide any time soon, if ever … Please don’t start talking about Venezuela or Zimbabwe. Unlike you, I actually spent time in Zimbabwe during hyperinflation.” [TechCrunch]

Haseeb Qureshi writes how DeFi and particularly flash loans — where you loan someone vast amounts of ether with no collateral as long as you’re paid back in the same stacked transaction — are key to DeFi as an opportunity for crypto grifters at every level all killing each other — opportunist attackers, providers, miners. “DeFi is not stable on a PoW chain, because all high-value transactions are subject to miner reappropriation.” [blog post]

Cas Piancey has been making short advertisements for Bitcoin. [YouTube]

 

 

https://twitter.com/ILCryptoLawyer/status/1232605607653445633

 

 

 



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