The Bernie Madoffs of Bitcoin? As market heats back up

Why you should not trust Bitfinex

TL/DR: The founder of Bitfinex has a history of supporting ponzi schemes and the exchange was founded using stolen "swiss-cheese" source code. Read the first quote. Don't trust them.
There have already been arguments on here about whether or not Bitfinex is solvent in light of their recent and past issues, so I'll approach this from a different angle.
Take a look here at the first few posts in this thread. Here we see the founder of Bitfinex, "unclescrooge" - Raphael Nicolle, defending one of the biggest Ponzi scammers in Bitcoin's history and demanding apologies from those calling it out (he recently deleted the post itself, but it was quoted by the next person):
https://bitcointalk.org/index.php?topic=101345.0
INow that Pirateat40 closed down his operatations thanks to all the fud that was going on and growing on the forum, I expect everyone that spreads this fud, accused and insulted Pirate and the people that supported him to apologize.
Not only did Pirate brought us a great opportunity for investors (once in a lifetime actually), he did help stabilise and grow steadily bitcoin price, volume exchange, and thus contributed to the success of bitcoin. For that, Pirate, I want to thank you. You've done a wonderful work, and I hope you're stay around here.
Now, apologies on.
Here's some background on the pirateat40 Ponzi scheme for those unaware:
https://motherboard.vice.com/en_us/article/lawyer-reveals-details-about-the-man-behind-bitcoins-45-million-ponzi-scheme
So what does that mean? In the best case scenario, the founder of Bitfinex is a colossal moron who can't even identify a blatantly obvious ponzi scheme - and is certainly not someone you would trust with your money.
Worst case scenario, he knew what was going on and was looking for more victims to feed the scam - again, not someone who you would trust with your money.
Had I known about this history, I personally never would have put a dime on Bitfinex.
Here's some more info on the origins of Bitfinex - the gist of it is that the exchanged was bootstrapped on the stolen, leaked, bug-ridden source code of Bitcoinica (an exchange that itself was mysteriously "hacked" and all the money disappeared):
https://www.reddit.com/BitcoinMarkets/comments/2c4kkg/what_do_we_know_about_bitfinex/?st=j1o2gmfd&sh=28098796
There's much more to dig into about the exchanges history of bugs, incompetence, and questionable actions (example: https://www.reddit.com/Bitcoin/comments/36uxxz/bitfinex_has_been_hacked/crhcaov/). Oh, and remember that the owners see no issues with trading on their own exchange. There are many ways to take advantage of privileged info (stops and liquidations, bfx token trading, etc.) if an owner is dishonest, let alone more serious possibilities of fractional reserve and gambling with user funds. Someone who has no issues with ponzi schemes probably has no issues with the above, either.
This is just the surface of issues discovered, others here have far more knowledge of the history of issues that I do.
And a final parting quote for the next time you hear someone accused of spreading "FUD" about Bitfinex - here's another "unclescrooge" quote about those calling out pirateat40 as a scammer:
Fuck everyone that spreads FUD. You could have made great profits while helping stabilising bitcoin price. Now back to scammers at 2% a week and great volatility that make bitcoin look like a laughing stocks.
Fuck you. At least now you'll look ridiculous, that's my only pleasure.
https://bitcointalk.org/index.php?topic=101167.msg1108019#msg1108019
submitted by halfjump to Bitcoin [link] [comments]

ICO's are the new IPO's. Making Ethereum the new GBLSE

First, I may need to provide some background, as many of you may not have been around in 2012 and 2013, so you may not remember GLBSE, BTC.TC, havelock, bitfunder and a few other "bitcoin stock exchanges". On those exchanges, companies could list securities like company shares and bonds, which where traded for bitcoin.
Initially, mining bonds where the most popular security, allowing people to invest in bitcoin mining without having to own and operate any hardware, while allowing miners to raise capital and sell off the risk of future difficulty increases. Revenue from mining was then paid to bond holders as "dividends". In theory, a sound concept and the precursor to cloud mining. In practice however, these bonds quickly became a mania. They where trading at prices that made no economic sense at all, anyone with a calculator could easily see it was impossible they would yield a positive ROI. Miners and scammers quickly caught on to that, and sold more bonds then they had hardware for. But they kept rising in price, and people kept buying them, expecting to sell them later with profit.
Soon after, all kinds of companies launched IPO's on these exchanges. Some where legit, many dubious, most where pretty obvious scams. It didnt matter, IPO's where as much a hype as ICO's today, and virtually never failed to sell out in record times, raising millions of dollars. Almost nothing was scrutinized, anyone scammer with a tiny amount of photoshop knowledge or anyone promising to achieve some ridiculous ROI had no problem raising millions.
After the companies, came the investment funds. Someone raised bitcoins through an IPO, and used that money to trade in other securities listed on that same exchange. Then they launched a second IPO for another fund, and used fund A to buy shares in fund B, and fund B to buy shares in fund A. Prices went through the roof. You couldn't make up stuff like that, it was hilarious.
Almost nothing that was traded on those exchanges, had any real value. A few notable exceptions include Asicminer, which raised money to develop an asic, actually managed to get it produced as one of the first ever bitcoin mining asics, sold in large quantities and made a huge profit, paying back investors through dividens many times the IPO value. It was the largest success story by far, but even that ended with an exit scam when the anonymous founder ran off eventually.
Around 2013, the SEC intervened, closed a few of the largest exchanges, charged and fined some of the operators and issuers. Other exchanges collapsed or vanished. Tens of thousands of BTC where lost. Im not aware of any company that was launched on any of those exchanges that still operates, except for the gambling site satoshidice (which was among the ones fined by the SEC).
What caused this to happen? The enormous rise in value of bitcoin created a group of early-investor millionaires, who believed in crypto currency, who where accustomed to double or triple digit gains in a very short time and who had money to burn. Many of them got rich "by accident", not because they did a lot of due diligence or understood the risk/rewards or even the technology. This gullibility was clearly seen with Trendon Shavers aka Pirateat40, who at that time operated a gigantic, half million bitcoin ponzi scheme by promising 7% weekly returns. These people where very likely to invest large sums of money in risky crypto related startups, expecting a repeat of the success of their early bitcoin investment. This created a self fulfilling prophecy where IPO's always succeeded, prices always went up, creating gigantic bubbles.
Fast forward a few years. Besides bitcoin millionairs, we now have ethereum and a few other altcoin millionaires. Instead of IPO's, we now have ICO's. Instead of GLBSE, we have ethereum as the enabling platform. Instead of tradeable funds, we will soon have things like iconomi. Instead of bubbles created by funds investing in each other, we will have blockchains that are denominated in each other. And instead of thinking security regulation can be avoided by denominating an investment in bitcoin, we have people thinking regulation can be circumvented by calling something a token.
Am I the only one having a terrible deja vue?
submitted by Vertigo722 to ethtrader [link] [comments]

Bitcoin achievements

Explanation
All achievements listed below are permanent upon accomplishment and stack. Achievements earned years ago are still valid today.
Mining achievements
Solo miner
Mined a valid block all by yourself.
CPU miner
Earned at least 1 BTC using just your CPU to mine.
Creative miner
Built your own custom mining rig composed of graphics cards.
Lazy miner
Earned at least 1 BTC in dividend from investment in mining stocks.
Virtuous miner
Earned at least 1 BTC by mining in a pool that processes transactions with below standard transaction fees, thus helping out people whose transactions would otherwise get stuck.
Price stabilizer achievements
Silk road stabilizer
Bought when the price dropped during the Silk road crash.
Fork fighter
Bought during the 11/12 march 2013 blockchain fork.
Ponzi plunge protector
Bought during the August 2012 pirateat40 Ponzi scheme collapse associated price crash.
Holder
Helped preserve the value of Bitcoin by not selling any Bitcoin in the six month period following the 266 dollar peak. Only valid for people who actually had any Bitcoin before the peak.
Superholder
Helped preserve the value of Bitcoin by not selling any Bitcoin in the six month period following the 2011 peak. Only valid for people who actually had any Bitcoin before the peak.
Popularizer achievements
Mother Theresa
Gave away at least 1 BTC in donations and tips, expecting nothing in return.
Shopaholic
Spend at least 1 BTC on items not directly Bitcoin related.
Businessman
Sold at least 1 BTC worth of items not directly Bitcoin related using Bitcoin.
Spreading the seed
Sold at least 1 BTC through local Bitcoins.
Bitcoin hoarder achievements
Bitcoin hoarder achievements are permanent upon achievement, even if you later let go of your Bitcoin.
Club Bitcoin
Own at least 1 BTC.
Fabulous Five
Own at least 5 BTC.
Interested investor
Own at least 100 dollar worth of Bitcoin.
Serious speculator
Own at least 1000 dollar worth of Bitcoin.
I did it for the children
Invest at least 10.000 dollar in Bitcoin, on behalf of other people.
Number of achievements unlocked
0 - You are literally Ben Bernanke.
1 - You may be new.
2 - You have a serious interest in Bitcoin.
3 - You have a serious interest in Bitcoin, and probably a serious stake in its success as well.
4 - You have a serious interest and stake in Bitcoin, and are likely partly responsible for its success.
5 - You have helped make Bitcoin the success it is today.
6-9 - You are likely a developer, early adapter or institutional investor.
10+ - You are literally Satoshi Nakamoto.
submitted by rational to Bitcoin [link] [comments]

Who will buy mtgox?

From the standardcrypto blog:
I worry about MtGox. This week I worry less than last week, because the chatter about insufficient liquidity is dimmed, and the Gox/Bitstamp difference has recently been as low as $4, and is now under $10. Maybe everything will be fine. I speculated a couple of weeks ago that even with a serious bitcoin net short position MtGox could engineer its own bailout by supporting litecoin.
Still, like my scoutmaster used to say before a backpacking trip: "Hope for the best, prepare for the worst."
A meltdown at MtGox would panic the bitcoin markets, antagonize US regulators, and slow down adoption. The bitcoin community should seriously think about how to avert, or at least cushion, worst case scenarios.
So, I worry.
I think, too, about just not hitting the publish button. After all, who wants to start a bank run on what is morally the bitcoin central bank? But I think there are enough people talking about potential problems at MtGox, and the situation has dragged on long enough, that I won't be adding too much fuel to the fire with my speculative maunderings. To my serious readers, especially those with money at Gox: please don't take this in the spirit of shouting fire in a crowded theater. Instead, understand a plea to treat a dangerous situation with the gravity it deserves, and ideally to stock up on fire extinguishers while there is still time.
To summarize the current situation, there is a problem withdrawing USD from MtGox, and here and there we see evidence of problems withdrawing EUR and even BTC.
http://www.google.com/#q=site:bitcointalk.org+mtgox+withdrawals
BTC therefore trades at a 8-15% premium on MtGox compared to the other major exchanges, and traders talk of "MtGox price" for bitcoin versus the price elsewhere.
http://bitcoincharts.com/
Big traders keep patronizing MtGox for several reasons. Habit/Inertia. The higher prices are great, if you believe MtGox will eventually solve it's problems, or that failing that you can beat the stampede to get out in time. MtGox has high volume, good for buying a large amount of bitcoin without moving the price too much. MtGox is bot friedly, and bot trading is profitable, so the bot traders stay. But every day, they're a little more antsy. The last Gox trader I talked said he watches Gox ask volume, and as long as it's over 30k he feels secure. It's well over 30k now. But change happens fast.
To understand the USD withdrawal problems, try to think like an AML/KYC (anti money-laundering/know-your customers rules) enforcer. A regulator's job, day to day, consists of attempting to open accounts under fake names or using fake documents, and then freezing accounts where that money resides, levying fines, and generally raining down bureaucratic hell on the offender.
MtGox doesn't hold customer fiat funds. Banks do.
MtGox doesn't have one bank account from customer. They pool funds from hundreds or thousands of accounts.
It's unknown how may total US bank accounts are held but MtGox, but my guess is not that many. Maybe tens. So every account freeze really hurts.
Unfreezing isn't easy, because it requires justifying all the cash inflows since the beginning of time, including when MtGox was being run with High School level IT as a trading card site for Magic nerds.
It doesn't take much to screw up accounting, and lose track of what funds came from where. When business is booming and you are on a roll, screw ups can be papered up by just sacrificing some profits. But that doesn't wash with hostile regulators, whose primary concern isn't how much funds are present but how and for whom the funds are accounted for. As little inconsistencies leak up, unfrozen accounts may be refrozen if the banking cops aren't satisfied.
My read on the situation is that USD withdrawal may never be a smooth and easy on MtGox, due to MtGox having fumbled the AML/KYC identity verification conditions in the early days. MtGox just don't have good relationship with any US bank, and while investigations proceed, they are unlikely to achieve one. And the investigations could continue forever for all intents and purposes, due to accounting irregularities early on.
So, the key question is does MtGox have enough bitcoin to support an orderly wind down with customers taking funds out in BTC, going forward.
Slow as molasses USD withdrawal isn't really a problem, as long as users can withdraw promptly via bitcoin, even if it is expensive bitcoin.
But how secure is the MtGox bitcoin position?
Absent audits from a creditable accounting company, there's no way to know for sure. There's a good write-up at
https://pay.reddit.com/Bitcoin/comments/1lc3is/pulled_article_from_tgb_5m_seizures_provide/
that covers the basics of what is known. The good news is that MtGox made huge bitcoin profits over its lifetime, which are more than enough to cover the holes in operating capital due to seized accounts and the lawsuit filed by Coinlab. The bad news is that no one knows if MtGox kept the bitcoin, or traded it for fiat. A worst case scenario has the MtGox operations team panicking when the bitcoin price was low (like 60-80) and cashing out to USD to cover the lawsuit+seizure shortfalls. Now the price is high again, but how much bitcoin do they actually have? As long as miners keep sending bitcoin to MtGox, and the bot traders are waving their magic wands, bitcoin withdrawals are probably safe for the time being, even if the bitcoin position is net short. But bank runs can come out of nowhere, or even be engineered by hostile players who want to drive the bitcoin price up and then down, by provoking a panic. We saw it in April, and we could see it again.
Who will buy MtGox?
Someone, I hope.
I think, for the right price, a deal could be made, and this would be very positive news for the bitcoin economy, .
Whoever buys MtGox would be buying a headache. They would have to deal with the mess of unknown and unverified account holders from back in the day. They might never get some USD accounts unfrozen, or at least have to wait a long time. There would be fines. And of course there is the matter of the Coinlab lawsuit.
But, it's a potentially very profitable headache. MtGox has enormous brand recognition and revenues to go with it, both bitcoin and fiat. And I think the right kind of buyer would inherit enormous goodwill for fixing what a lot of players known in their gut to be a serious problem. I think the ideal buyer would be an American credit union with a strong balance sheet, good IT, good relationship with regulators, and obviously bullish on bitcoin. I could also see a russian or chinese buyer. For the right kind of money, regulators can be made to see reason, and lawsuits go away.
If no one buys MtGox, the next best thing would be to bring back credit default swaps, like we had for PirateAt40 debt in 2012. A CDS mediated bankruptcy would still be painful for bitcoin, but it would be a lot more orderly.
As a parting thought, I'd like to take a second to recall everything good MtGox has done for bitcoin. MtGox took a lot of risks, and tGox put bitcoin on the map.
Maybe the MtGox operations team is just out of their depth, though well intentioned. Maybe they just want a nice payout, and for the stress to be over.
I know I would.
submitted by standardcrypto to BitcoinMarkets [link] [comments]

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Laying rest to one and a half weeks of suspense, yesterday pirateat40, the pseudonymous operator of the Bitcoin Savings and Trust investment scheme, has officially announced that he is in default 1.BST was a high-yield investment scheme that opened in November 2011 2 and offered its customers interest rates of up to 7% per week, claiming to be able to offer such returns by “selling BTC to a Global Bitcoin Stock Exchange Shuts Down For Good . by Vitalik Buterin. October 10, 2012 . was the name typically used to refer to a forum poster who went by the names Trendon Shavers and his forum handle pirateat40. He managed Bitcoin Savings and Trust (BST), an investment scheme that offered interest rates of up to 7% per week. The scheme Bitcoin Savings & Trust, an invite-only operation run by the psuedonymous pirateat40, advertises a seven percent weekly return on deposits of more than 25,000 BTC, a sum worth more than $275,000 Shavers, a regular member of a popular Bitcoin online forum under the username "pirateat40", began soliciting other forum members in late 2011 to invest in his digital hedge fund, Bitcoin Savings First Public Bitcoin Fund Listed on Toronto Stock Exchange - April 9, 2020. Trendon T. Shavers (known on BitcoinTalk as Pirateat40) manages the secretive operation for about eight months, accepting only large deposits of bitcoin (50+ BTC) and paying out “interest” weekly. On August 17, 2012, Pirateat40 announces a halt to the operation

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