News: Celsius CFO arrested, El Salvador journalists hacked, Senate vs. stablecoins

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104 degrees with a head full of steam

Israeli crypto mogul Moshe Hogeg, who was behind a series of failed crypto startups such as Sirin Labs, was arrested last week on charges of cryptocurrency fraud and sexual assault. There had been years of fraud allegations against Hogeg. [Haaretz; CoinDesk, 2019]

Seven others were arrested with Hogeg — one of whom was rumoured to be Yaron Shalem, CFO of crypto lender Celsius, and previously one of Hogeg’s employees.

In a Celsius “ask me anything” Twitter Space, the company would neither confirm nor deny that Hogeg had been arrested. [Twitter] Celsius CEO Alex Mashinsky also claimed to know nothing about his CFO being arrested — at a time when he must have known. [Twitter]

Finally, Shalem’s arrest was confirmed. CoinDesk has the arrest report. Celsius said only that “an employee” was under police investigation, but Shalem has disappeared from the Celsius team web page. [CoinDesk; Twitter]

Celsius scored $750 million of Series B venture capital funding — after they must have known of their CFO’s arrest, but before they admitted it publicly. I wonder if they told the investors. [CoinDesk]

Mashinsky was previously an advisor to Sirin Labs and several of Hogeg’s other failed ICOs. [Twitter thread] Mashinsky was also an investor in a pile of Hogeg’s companies where Shalem was the CFO — in fact, working with Hogeg is all of Shalem’s previous experience. Mashinsky claimed no ongoing involvement with Hogeg: “The guy you’re talking about has nothing to do with Celsius.” [Twitter]

There have been multiple reports of problems getting cryptos back out of Celsius. [Twitter; Twitter] Fortunately, 1 billion tethers were printed and sent to Celsius on Friday 26 November — presumably out of thin air as an unbacked loan, as previous tether issuances to Celsius have been.

Celsius is now offering interest rates of an eye-popping 17%. Where’s the money coming from? Let none say the P-word. [Celsius, archive of 26 November]

Mashinsky also appears to be an active trader on Bitfinex from the US — unless he just likes looking at the front page of the site. [Twitter]

In broader writing on the field — though also lots on Celsius specifically — I’m shocked to hear that the Ponzi-like interest rates offered by crypto lenders might not work out well! The reasoning is that financial assets are intangibles, and futures on financial assets going into contango (future value greater than present value) absolutely does not make sense without a massive unstated risk factor — e.g., that crypto is a quilt of red flags, and many of these schemes are going to be scams. “The trick in the game is to make losers feel like they are winners, and one of the means of getting them into the trade is by paying them a yield to take on risks they don’t understand.” Title contains salty language. [EZFKA, archive]

 

 

Wildcat banking, but on the blockchain

Senator Sherrod Brown and the Senate Banking Committee just have a few questions for Tether and the other stablecoin issuers. For Senator Brown’s opinions on stablecoins, Libra Shrugged chapters 10 and 14 may be useful reading. [press release; letter, PDF]

The World Economic Forum has released “What is the Value Proposition of Stablecoins for Financial Inclusion?” Ashley Lannquist of WEF tweets: ”We find no compelling added value from the use of stablecoins for financial inclusion.” Stablecoins present the same barriers as existing options, and sometimes higher ones — e.g., requiring a phone. DeFi does nothing useful. [WEF, PDF; Twitter]

WEF has also released “Blockchain-Based Digital Currency and Tools for Cross-Border Aid Disbursement,” which details blockchain’s uselessness in this scenario also. The paper includes a dig at Facebook’s Diem proposal for solving zero of the practical problems in the space, and at the World Food Programme’s single-user Ethereum initiative for still having talked zero other organisations into joining their blockchain project after four years. [WEF, PDF]

Reflections on Stablecoins and Payments Innovations: speech by Federal Reserve Governor Christopher J. Waller. He likes the idea of payment stablecoins — a category that doesn’t exist as yet, but might if anyone else tries doing a Libra — and he’s not convinced that stablecoin issuers should be required to be banks. [Federal Reserve]

 

 

Central banking, not on the blockchain

The Reserve Bank of Australia is not convinced by crypto hype. “I must say that I find these statistics somewhat implausible. I cannot help thinking that the online surveys they are based on might be unrepresentative of the population.” An Australian CBDC is unlikely soon — there’s no use case — though the RBA continues to keep an eye on the area. [RBA]

Fabio Panetta from the ECB argues the case for a CBDC euro. Mostly: just in case. [Financial Times] Panetta elaborates in a speech. [ECB]

The Bank of Jamaica’s CBDC trial continues, and they’re aiming for a national rollout in the first quarter of 2022. [JIS]

An IMF writeup on Nigeria’s new eNaira CBDC. [IMF]

Tanzania is FOMOing over the eNaira (Bloomberg now just uses “FOMO” in headlines as understood financial jargon, apparently) — “To ensure that our country is not left behind the adoption of central bank digital currencies, the Bank of Tanzania has already begun preparations to have its own CBDC.” [Bloomberg]

 

 

Monkey laundering

NFTs are full of fabulous possibilities — where “possibilities” is a word meaning “things they don’t do.” The actual real-world NFT market we have is reprehensible nonsense all the way down, and putting forward hypotheticals and research projects doesn’t make that go away.

Corporate NFTs are the purest manifestation of capitalism’s present crisis. Financial-engineer some insane assets, pray for magical returns. Disappear having been “hacked.”

If you have the skills to make money in an utterly unregulated market full of wash-trading sharks funded by venture capitalists, then you are equipped to get into NFTs.

The secondary market doesn’t really exist, and the apparent secondary market is wash trading to pump the prices or do a tax fiddle.

Dan Olson (Foldable Human) has done an interview on NFTs that repeats the obvious and sensible opinions on the area, once more for the ordinary people who haven’t heard it yet. [Benzinga]

Has anyone, apart from everyone, said Non-Fungible Tolkien yet? [Verge]

This is a must-read 147-part Twitter thread on NFTs. [Twitter]

 

 

Don’t take me down to Bitcoin City

El Faro is a newspaper in El Salvador that’s a massive pain in Bukele’s backside. Apple has warned fourteen El Faro staff that “state-sponsored attackers may be targeting your iPhone because of who you are and what you do.” Apple recently sued state-sponsored malware company NSO, whose software has been used by governments to tap dissidents’ and journalists’ phones. I wonder who would tap El Faro journalists’ phones. [El Faro, in English; El Faro, in Spanish]

The IMF predictably tells El Salvador that bitcoin is dumb and bad as a currency — for all the obvious reasons, but mostly its volatility. [IMF]

The Bitcoin Bonds idea crashed El Salvador’s usual bonds to 63.4 cents on the dollar. [Bloomberg]

According to the central bank, $33.2 million in remittances have been sent to El Salvador from the US via Chivo. [La Prensa Grafica, in Spanish]

 

 

Things happen

Himalaya Coin (H-Coin) is a Chinese ICO promoted by former dollar-store Rasputin Steve Bannon and exiled Chinese billionaire Guo Wengui, who was fined a billion dollars by the SEC and the New York Attorney General in September. Himalaya Coin zoomed to an alleged $27 billion market cap in two weeks — trading only on a single exchange, Himalaya Exchange — and is also planning a stablecoin, the Himalaya Dollar. [Bloomberg; Himalaya Exchange, PDF]

Bannon was arrested on Monday 15 November on charges of contempt of Congress, relating to the 6 January attempted coup. Bannon’s been released on his own recognisance, but had to surrender his passport; how this affects his Himalaya Coin promotion is not yet clear. [AP]

Norway’s energy minister Bjørn Arild Gram calls crypto mining difficult to justify — even with renewables — and is looking at the Swedish proposal to ban crypto mining. He supports an EU-wide ban on crypto mining. (Norway isn’t in the EU, but has to harmonise with it to a considerable extent — I don’t think he’s trying to grab all the crypto mining for Norway.) [Euronews]

A preprint on crypto wash trading, from Lin William Cong, Xi Li, Ke Tang and Yang Yang — “fake transactions on 29 cryptocurrency exchanges: abnormal first-significant-digit distributions, size rounding, and transaction tail distributions”; wash trading is “70% of the reported volume.” [arXiv, PDF]

The US Department of Justice has recovered $56 million in crypto from 2017 Ponzi scheme BitConnect. They’re selling it to compensate BitConnect’s victims. [press release]

The Mt Gox bankruptcy plan is confirmed: creditors will be paid out in bitcoins. A whole buttload of BTC is about to get dumped onto the market as soon as people get their bitcoins [Mt. Gox, PDF] 

Patrick McKenzie has written a great blog post about the rise of bank-to-bank transfers as a payment channel. It’s not about cryptos, but it’s highly relevant to our interests. This post is from Patrick’s newsletter, Bits About Money, that you can and should subscribe to. [Kalzumeus]

Here’s a two-part interview with me in Davar by Erez Raviv, translated into Hebrew. [Davar; Davar]

 

 

pump and dump

 



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