Two US States Implore Indian Authorities to Seize Property of BitConnect Promoters

Two US States Implore Indian Authorities to Seize Property of BitConnect Promoters

Authorities from two U.S. states have implored the Criminal Investigation Department (CID) in India to seize the property of promoters of Bitcoin (BTC) investment firm BitConnect, the Times of India reported September 11. BitConnect, which ceased its operations in January of this year, was an open-source cryptocurrency and an investment program accused of being a Ponzi scheme. The accusations were based on the multi-level referral system and promise of astronomical returns on customers’ investments. The U.S. states of Illinois and Arizona are asking the CID to seize the property of the promoters, who are suspected of raising Rs 41,000 crore (around $5.6 billion) from investors. Most of the funds were purportedly poured into the firm after the demonetization of high-value banknotes at the direction of the Modi government in 2016. The CID claims that “those who invested in this virtual currency company after demonetization are suspected of laundering black money.” The agency added that it will request the probe of such investors by the enforcement directorate and income tax  authorities. Initially, the fraud scheme was reported by businessman Shailesh Bhatt, who claimed that he had been kidnapped and robbed of Rs 9 crore ($1.2 million) worth of BTC by local police. The CID said: “The investigation found that Bhatt had invested Rs 2 crore ($275,000) in BitConnect and after the company shut shop in January 2017, he kidnapped an employee of BitConnect, Dhaval Mavani, and extorted Bitcoins, Litecoins and cash worth Rs 155 crore ($25 million) from him.” At the end of August, Indian police arrested Divyesh Darji for allegedly promoting BitConnect and scamming investors. Darji, a resident of Surat city, reportedly said that he had been the India head of BitConnect. The CID claims that staff at the BitCoinnect office in Surat admitted that promoters had overall amassed “crores [tens of millions] of rupees from thousands of investors.” Following the cessation of BitConnect’s activities, a number of users in the U.S. launched a class action lawsuit against the company, seeking compensation for lost funds, reportedly amounting to $771,000. The suite alleges that the BitConnect tokens were unregistered securities in a “wide-ranging Ponzi scheme.”

Tokenized Securities: The Next Boom

Tokenized Securities: The Next Boom

Op-Ed The following opinion piece on token-as-securities was written by Benjamin Pirus, a crypto trader who has written many articles for different ICOs, crypto news outlets, and clients. 2017 was a special year in many ways. Not often in life are there opportunities to invest in an asset and see a profit increase of 1000% (or higher) in the span of a few days. Yet, this was common on and off for much of 2017 in the cryptocurrency space. Some argue that these days are now gone forever. However, there may be a case for one more exponential bull run in crypto, with tokenized securities leading the way. Also read: Philippines Okays PDAX Crypto Exchange Speaking objectively, 2018 has been a difficult year for the crypto space, with an overall market cap crash of over 75%, and regulatory fears and misunderstanding sprinkled throughout the year, likely keeping the market from a comeback. Crypto seems to have arrived at a crossroad, with many regulatory decisions to be made ahead. It seems as though the market cap will not reach new highs until several regulatory issues are sorted out and clarified. Tokenized securities will bring more clarity and stability to a market that currently needs more investors; investors that will only join in when they feel their investments will be safe. Many crypto investors have left the space with feelings of contempt. This can be in part attributed to the fact that cryptocurrencies are not currently backed by anything. The crypto market sees price action almost entirely based on speculation. When a person buys an altcoin, there is no certainty that price will fluctuate based on the success of the underlying company. Ripple is actually very well known in this aspect. Yes XRP and Ripple (the company) are connected. But XRP’s price action does not reflect the success of the Ripple company – a classic example of most crypto assets currently. Right now, altcoins are mostly utility tokens, with various roles in the projects they’re connected to. Their price valuation should be based on the demand for the tokens to be used for their intended purpose in said system. But at present, prices are speculative and not based on use. For the above reasons, many projects in the crypto space…

Chinese Holding Firm to Convert US Defense Department Data Center Into Crypto Mining Farm

Chinese Holding Firm to Convert US Defense Department Data Center Into Crypto Mining Farm

Chinese holding company Wuhan General Group (China), Inc. has entered negotiations to transform a U.S. Defense Department facility into a crypto mining farm, according to a press release published September 11. Per the press release, in case of a successful outcome to the negotiation, the company will receive the first order of rigs in late October, with more to come in the following months. In converting the facility, Wuhan General Group is reportedly planning to benefit from low electricity rates in the U.S., a cool climate, and high-speed Internet, which is crucial for mining operations. The 55,000 square foot data center with more than 3MW of power can reportedly accommodate up to 1,300 mining machines, with 12,000 to be added after its upgrade to a 30MW facility in 2019. Per the company’s estimation, the mining farm would produce around $3.5 million based with the initial 1,300 mining machines per month. Ramy Kamaneh, CEO of Wuhan General Group, said: “We had planned to build this operation three months ago, but with the bearish cryptocurrency market, we took a step back to reassess our strategy. The decision to wait for market stability was a good one, especially considering many cryptocurrency machines are no longer profitable in the current market. We acted in the best interests of the Company and its shareholders and firmly believe that the market has bottomed and a bullish market is starting again.” In May, Australian startup IoT Blockchain and mining hardware distributor Royalti Blockchain Group revealed their joint plan to turn a disused power station into a “Blockchain Applications Complex,” while a Bitcoin (BTC) mining operation would span two hectares. The nearby Hunter Energy Power Station will reportedly provide cut-price power for the project. Some U.S. states are known for low energy costs, which make them a destination for mining companies. In July, New York state regulators approved a new electricity rate scheme for cryptocurrency miners that would allow them to negotiate contracts. The Massena municipal utility introduced a new rate structure for crypto miners, considering contracts on a case-by-case basis, which would protect other utility customers from increased rates.

IMF Urges Marshall Islands to Reconsider Adopting Digital Currency as Second Legal Tender

IMF Urges Marshall Islands to Reconsider Adopting Digital Currency as Second Legal Tender

The International Monetary Fund (IMF) has warned the Republic of the Marshall Islands (RMI) about the risks of adopting a cryptocurrency as a second legal tender, according to an official press release published on September 10. In the report, the U.S.-based agency backed by the United Nations addresses the government of the Republic of the Marshall Islands, stating that the introduction of digital currency as an official form of legal tender will pose risks to the country’s financial integrity, as well as relationships with foreign banks. By adopting digital currency as a second official currency after the U.S. dollar, the Bank of Marshall Islands (BOMI) — the only local commercial bank of the country — will elevate the risk of losing “the last U.S. dollar correspondent banking relationship (CBR)” as a result of heightened diligence by banks in the U.S., the statement says. Since the Marshall Islands are “highly dependent on receiving and spending U.S. grants,” the IMF states that the loss of important banking relationships could harm the country’s economy. Moreover, the IMF believes that the costs of adopting cryptocurrency, such as the development and enforcement of anti-money laundering (AML) and counter financing of terrorism (CFT) policies, are “considerably smaller” than any potential financial gains: “The potential benefits from revenue gains appear considerably smaller than the potential costs arising from economic, reputational, AML/CFT, and governance risks. In the absence of adequate measures to mitigate them, the authorities should seriously reconsider the issuance of the digital currency as legal tender.” The IMF urged Marshalese authorities to reconsider issuing a digital currency until the government is able to provide and implement “strong policy frameworks” in regards to economic, reputational, AML/CFT, and governance risks. The Republic of the Marshall Islands — with a population of roughly 53,000 — first revealed plans to release its own cryptocurrency dubbed the Sovereign (SOV) in February 2018. As officials then claimed, the Sovereign currency would be “another step of manifesting [their] national liberty.” The Sovereign is set to be an alternative to the official currency of the U.S. dollar, and is planned to be distributed via Initial Coin Offering (ICO).

US Authorities Ask India to Seize Property of Bitconnect Promoters

US Authorities Ask India to Seize Property of Bitconnect Promoters

News The authorities of two U.S. states have reportedly asked Indian officials to seize the property of the promoters of Bitconnect since citizens of their states have invested in the company and lost money. One promoter has already been arrested and the investigators are tracking down another promoter. Also read: Yahoo! Japan Confirms Entrance Into the Crypto Space US States Want Bitconnect Promoters’ Property Seized The authorities of the U.S. states of Illinois and Arizona wrote to India’s Criminal Investigation Department (CID) officials in the state of Gujarat, “asking them to seize the property of the promoters of a cryptocurrency investment firm, Bitconnect,” the Times of India reported on Tuesday, September 11. The promoters are “suspected to have made off with Rs 41,000 crore [~US$5.66 billion] of investors’ money,” the publication noted and quoted a CID official saying: Authorities of the US states of Illinois and Arizona wrote to us asking us to seize the property of the promoters of Bitconnect, as citizens of these states have invested in the company and lost money. 800% Annual Return Promised Satish Kumbhani. The CID investigators say two Bitconnect promoters, Satish Kumbhani and Divyesh Darji, began their crypto operations in December 2016, after the country’s demonetization. Investors transferred their BTC to the firm and “were issued bitconnect coins in return, which they could trade and on which they received interest,” the publication described, elaborating: [The promoters] lured in thousands of investors by promising 800% returns per annum on investments. Divyesh Darji. Darji made a commission of 10% on investments he brought in, the CID official detailed. “He was fluent in English and ran several social welfare programmes. He had a big following and Kumbhani hence roped him in,” the news outlet conveyed. “Darji had brought in investments of Rs 4,100 crore [~$566 million] while the total amount invested in Bitconnect could be around Rs 41,000 crore.” “At the time, one bitconnect coin was worth about $360 and people invested their bitcoins due to the attractive returns promised,” the CID official said. On September 10, bitcoinnect was delisted from crypto-to-crypto exchange Tradesatoshi, the last exchange that the coin was trading on, TNW reported. According to Coinmarketcap, the last recorded price for the bitconnect coin was approximately $0.68. One Promoter Arrested, One Being Tracked…

Major Crypto Companies Form DC Lobbying Group

Major Crypto Companies Form DC Lobbying Group

A number of blockchain funds, exchanges and startups plan to lobby Washington, D.C. lawmakers with the new Blockchain Association. The Washington Post reported Tuesday that this new organization would focus on both education and legal changes as part of an effort to normalize relations between crypto startups and lawmakers. Coinbase, Circle, Digital Currency Group, Polychain Capital and Protocol Labs are among the association’s founding members. One of the association’s first employees is former Senate aide and Overstock.com blockchain lobbyist named Kristin Smith. She told the Post that she would “guide” the organization as it starts out, saying, “I’ve been spending a lot of time doing a lot of the basic education work in this space … I’m excited to focus exclusively on these issues.” Further, Politico reported that Protocol Labs general counsel Marvin Ammori and Hangar founder Josh Mendelsohn will form part of the group’s leadership team. Coinbase chief legal and risk officer Mike Lempres told the Washington Post that the organization would bring companies together to advocate for reasonable regulation, saying: “The Blockchain Association is an effort to get the preeminent companies in the space together so [policymakers] know they’re hearing from companies that welcome regulation when it’s appropriate … We’re not companies looking to game the system, but trying to develop a legal and regulatory system that’ll stand the test of time.” The Blockchain Association will specifically focus on tax law and how know-your-customer/anti-money laundering rules relate to crypto exchanges and startups, at least at the beginning, according to the report. Coin Center’s executive director, Jerry Brito, told the Post that “it’s good to have more voices advocating for things we agree about,” regarding the cryptocurrency space. Capitol Hill image via Shutterstock The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Bitcoin Cash Hard Fork Debate Reconvenes After the Stress Test

Bitcoin Cash Hard Fork Debate Reconvenes After the Stress Test

News Over the last few weeks, there’s been a heated discussion within the Bitcoin Cash (BCH) community concerning the scheduled November 15 hard fork. There’s a strong disagreement between the BCH development teams, Bitcoin ABC, Nchain, and Bitcoin Unlimited in regard to the hard fork’s upcoming consensus changes. Fast forward to this week as Nchain has published the Bitcoin SV beta release, Coingeek’s Calvin Ayre speaks out against chain splitting rumors, and there have also been a few insightful studies done on Bitcoin ABC’s proposed canonical transaction ordering (CTOR) upgrade. Also read: Korean Banks to Limit Services for Crypto Traders Without Real-Name Verification Nchain Launches Bitcoin SV Beta Version Last week’s BCH Stress Test Day took everyone’s minds off of the ongoing upgrade debate taking place within the Bitcoin Cash community. It all started during the last week of July when Bitcoin ABC revealed the team’s roadmap and published the 0.18 ABC codebase in the second week of August. Nchain’s chief scientist Craig Wright was one of the first to oppose the upgrades proposed by the ABC team. Wright explained he was vehemently against adding the opcode called OP_CHECKDATASIG (CDS), and the implementation of canonical transaction ordering (CTOR). Wright detailed his team Nchain would create their own BCH full node client that would entail completely different upgrades within the codebase. Nchain disclosed the new client would be called Bitcoin SV (Satoshi’s Vision) and the full node client will restore the Satoshi opcodes OP_MUL, OP_LSHIFT, OP_RSHIFT, OP_INVERT, remove the 201 opcode script limit, and increase the base block size to 128MB. About a week and a half ago BCH miners, developers, and industry leaders met in Bangkok to try and hash out the differences, but the meeting didn’t pay off with any compromise between the disagreeing camps. At the time Nchain also launched the Bitcoin SV alpha release and revealed a new mining pool dedicated to the SV codebase. Now, this week Nchain has released the Bitcoin SV beta version on Github. Observers have noted that there was some newly added code related to the 128M increase, some revised release documentation, and some other minor changes.                  Coingeek & Calvin Ayre: We Will Fight Any Attempts by Anyone That Cause a Chain Split Coingeek’s Calvin Ayre. On…

Unconfirmed: UAE Preparing to Adopt Formal ICO, Fintech Regulations, Local Media Report

Unconfirmed: UAE Preparing to Adopt Formal ICO, Fintech Regulations, Local Media Report

The United Arab Emirates (UAE) has approved a draft of regulations governing Initial Coin Offerings (ICO), local media outlet WAM reported Sunday, September 9 citing government sources. The reported move comes in addition to lawmakers in the country adopting plans for a regulatory sandbox aimed at attracting greater fintech activity. “The sandbox will act as an environment that attracts innovators to test innovative products, services, solutions and business models in a controlled space,” a report from the Securities and Commodities Authority (SCA) published September 4 reads, adding: “This can be achieved by adopting an approach of relaxing and / or waving regulatory requirements for participants in the sandbox, while at the same time, ensuring that appropriate consumer protection safeguards are in place.” The regulatory proposals regarding ICOs gained approval from the SCA in July, while WAM now reports the agreement will enter into law upon its imminent publication in the UAE’s Official Gazette, an official periodical containing all the country’s legislation. “The SCA Board of Directors has approved the SCA plan to regulate the ICOs and recognise them as securities,” WAM stated, noting: “The Board of Directors, having reviewed a study on the best international practices in this regard, has issued a directive that the procedures for trading digital token are to be regulated. The plan developed by the SCA includes a set of mechanisms as part of an integrated project to regulate digital securities and commodities.” The UAE has pursued an in-depth policy of fintech integration in recent years, with a particular emphasis on blockchain at both municipal and state level.

The Crypto IPO Race Is On: From Mining Companies to Exchanges

The Crypto IPO Race Is On: From Mining Companies to Exchanges

Last week, at least two crypto-related enterprises, a Silicon Valley stock and cryptocurrency trading platform Robinhood and Singapore-based crypto exchange Huobi, moved closer to going public by holding an initial public offering (IPO). The ‘old school’ way to collect investments might seem especially attractive in the context of mass adoption trends and a declining ICO market, which now sees its hardest slump in 16 months. But what is an IPO exactly, and which crypto-related companies have chosen to go public? What’s an IPO? For those who know what an Initial Coin Offering (ICO) is, the concept of initial public offering (IPO) — a more traditional way for a company to seek investments from broader audience in the public market — should seem familiar. The main difference between the two is that an ICO gives out tokens — whose use case is based on the company’s performance — while an IPO gives investors stock ownership in a company. An IPO, or stock market launch, is when a company sells its shares to institutional investors and retail (individual) investors. This process is significantly more regulated compared to the ICO market: An IPO has to be supervised by regulators — like the United States Securities and Exchange Commission (SEC) — and be underwritten by one or more investment banks. The so-called ‘underwriters’ manage the process, negotiate with the SEC and help its client get listed on a stock exchange. In the end, they collect commision on the raised funds. Once the company gets listed on a stock exchange, say the NASDAQ in New York, it goes public — i.e., its shares are traded freely in the open market. Importantly, the company is now bound to comply with the watchdogs and keep its investors in the loop by publishing information regarding internal operations. Holding a successful IPO includes a number of potential benefits, like attracting capital from a larger amount of investors, diversifying equity base and increasing the overall exposure and prestige of the company. Consequently, there are disadvantages as well, some of which include risks which include not enough capital being raised, legal costs and the requirement to disclose sensitive financial information. Normally, ICOs allow investors to pay with crypto — usually Ethereum (ETH) — hence remaining somewhat…

The Bank of Russia Says Its ICO Experiment Was a Success

The Bank of Russia Says Its ICO Experiment Was a Success

The Bank of Russia has successfully conducted an experiment on token issuance, an official said Monday during the Eastern Economic Forum in Vladivostok, Russia, news agency TASS reported Tuesday. Ivan Semagin, deputy director of the financial development department of the bank, told attendees of the forum that the regulator had tested conducting “an experimental ICO based on the existing infrastructure” in the Bank of Russia’s sandbox. Though the experiment was a success, there are still some issues, he said. “In the framework of the ‘sandbox’ … technically everything went well, but there were a lot of issues from a legal point of view,” he explained. He did not explain what these legal concerns were. The test was originally announced in May, when Russia’s largest state-funded retail bank, Sberbank, together with Russia’s National Settlement Depository (NSD), said they were working on a test ICO. The experiment was expected to involve a company named Level One as an ICO issuer, Sberbank as the “issuance coordinator and anchor investor” and the NSD as the custodian, recording and settling transactions, as well as safeguarding the assets. At the time, Sberbank senior vice president Igor Bulantsev said in a statement that “many Sberbank clients are interested in this type of investment, and we plan to promote this service proactively once the appropriate legislative framework comes into effect; we will be one of the drivers to institutionalize and popularize this type of transaction.” Russia flag image via Shutterstock The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.