The United States Securities and Exchange Commission has filed an emergency lawsuit in a Brooklyn federal court in an attempt to prevent a somewhat popular ICO from spending the money that was raised from the issuance of its cryptocurrency.News of this emergency filing instantly led to a massive dump for Veritaseum, which raised a total of nearly $15 million from an Initial Coin Offering in mid-2017 and early-2018, and this emergency lawsuit may be emblematic of an imminent crackdown on unregistered securities that were offered through the course of the 2017 and 2018 ICO craze.SEC Targets ICO That Attempted to Flout Registration Requirements for Cryptocurrency OfferingThe emergency lawsuit, which was filed on August 12, claims that cryptocurrency company Veriaseum and founder Reginald Middleton fraudulently raised $14.8 million USD while attempting to flout regulatory requirements by characterizing the cryptocurrency (VERI) as things like gift cards and software.Furthermore, the filing also notes that the defendants knowingly mislead investors about the business venture and offered investors fictitious data about the company’s revenue.“Defendants knowingly misled investors about their prior business venture and the use of offering proceeds; touted outsized—but fictitious—investor demand for VERI; and claimed to have a product ready to generate millions of dollars of revenue, when no such product existed”The complaint notes that of the $14.8 million that was raised throughout mid-2017 and early-2018, only $8 million is left.Furthermore, the SEC also claims that the founders engaged in manipulation of the VERI cryptocurrency in an effort to make its price action look more appealing to investors.“[The Defendants] placed a series of manipulative trades in VERI Tokens to increase their price and to induce investors to buy more tokens,” the filing notesVERI Token Price Plummets 60%At the time of writing, Veritaseum is trading down over 60% at its current price of $6.54, which marks a steep pullback from its year-to-date highs of $23.Additionally, this pullback is also an extension of the massive drop that the VERI token has seen since setting its all-time-highs of nearly $500 in January of 2018 when the aggregated crypto markets reached a peak before the massive drop commenced.Importantly, this SEC lawsuit is likely the first of many, and it is highly probable that the agency will begin targeting more ICOs that raised a significant amount of funding during the last bull run in the near-future.Featured image from Shutterstock.
Archives for August 13, 2019
Korean tech giant Samsung has added Bitcoin support to its Blockchain Keystore SDK. This will eventually allow users to use Bitcoin with applications via the company’s secure storage hardware featured on supported devices.In addition to adding Bitcoin, the Samsung Blockchain Keystore SDK will also support the Klaytn network too. Klaytn is the blockchain effort by Korea’s largest social messaging company, Kakao.More Bitcoin Support Comes to Samsung DevicesWhen Samsung first revealed its cryptocurrency support earlier this year, Bitcoin proponents were dismayed to learn that the tech giant did not appear to be supporting their favourite crypto asset. However, that has slowly changed with the company revealing more plans to allow the number one digital currency a place on its flagship range of devices.The latest step towards full support is the launch Bitcoin functionality with the firm’s SDK that interacts with the safe storage system featured on the newest Galaxy models. According to a page on the company’s developer-facing website detailing the feature, those requesting early access to the Blockchain Keystore SDK will now be able to interact with decentralised applications using both the Bitcoin and Klaytn blockchains, as well as Ethereum.The page was actually updated on August 8 but the company has been so quiet about it that it was not noticed by NewsBTC until Reddit user ThatOfficeMaxGuy pointed it out via the social news platform earlier today.According to the post, the Blockchain Keystore SDK will allow Android applications direct communication with the cryptocurrency-focused keystore featured on more modern Galaxy devices. This will allow users to sign transactions, as well as directly reference blockchain addresses.The SDK is not production ready for now. This is likely why the firm has decided not to make any big announcements regarding it. The launch of the SDK itself last month was accompanied by similarly little fanfare.The Blockchain Keystore SDK is currently being offered to developers via an application process only. Samsung hopes to provide full access by the end of 2019. According to one of the FAQs on the website:“Official version of Samsung Blockchain SDK will be announced by the end of 2019. In the meantime, developers can request a partnership to use the beta version of the Samsung Blockchain SDK.”A huge name like Samsung supporting Bitcoin functionality and putting the cryptocurrency literally in the palms’ of millions of users could do wonders for its adoption around the world. That said, there do appear to be some restrictions on who will be able to access the features.Understandably, only those in possession of Samsung’s newest Galaxy handsets will benefit from the Blockchain SDK. Also, it is restricted to use in Canada, Germany, South Korea, Spain, Switzerland, USA, and UK. Finally, only applications interacting with either the Ethereum, Bitcoin, or Klaytn networks will be supported initially. Related Reading: Samsung News Bodes Well For Ethereum (ETH), Even Amid Price CrumbleFeatured Image from Shutterstock.
The crypto market is a new and emerging asset class that – due to the various innovation factors, its speculative nature, and the technological intricacies of each individual coin – makes assigning a value to any altcoins exceedingly difficult to pinpoint with any sort of accuracy.
The spread between the price of bitcoin on South Korean and U.S.-based crypto exchanges, which returned in June and hit 16-month highs, has disappeared once again.
A measure of how much more South Koreans pay for bitcoin, the spread, known colloquially as the “kimchi premium,” has reached remarkable levels, peaking at 54.48%, according to researchers at the University of Calgary. It then dropped and ultimately vanished, only to return again recently, running at around 5 to 10%.
But last week, local newspapers started to notice that bitcoin was back to trading lower in won terms. The Dong-a Ilbo, one of the country’s major publications, reported on August 5 that bitcoin was priced just 2.15% higher in dollar markets than in won on South Korean exchanges.
The deficit persists. On August 13, bitcoin was trading on Upbit at 13,678,000 won and quoted on CoinDesk at $11,429.14, which translates to 13,931,951 won, a difference of 253,951 ($208). That’s about 1.8% lower. At the end of the day on Tuesday in Korea, the gap had narrowed, but it remained.
The Dong-a Ilbo believes that the end of the kimchi premium has something to do with the fall of the Korean won. Since the end of July, the local currency has lost almost 3 percent of its value against the dollar.
At the same time, the regulatory environment is becoming more challenging for crypto exchanges in Korea. The banks are starting to more strictly apply AML guidelines and local regulatory requirements, such as real name accounts, while the authorities have recently said they are going to directly supervise the markets.
The University of Calgary researchers argue in an April 2019 paper that the kimchi premium is largely structural. Transfers between markets can take time, and this makes arbitrage difficult.
Profiting on the price difference is a risky trade due to the delay and the volatility of the coin, so the volume of these price correcting transactions is often too low to close the gap. The researchers also said that high transaction costs might disincentivize moves between the markets.
Exchange controls in Korea, though primarily administrative these days, do add friction and can slow the movement of funds needed to balance the arbitrage trade. The controls also have a way of making bitcoin more attractive to people in Korea, as the coin is transnational in nature and potentially a good vehicle for bypassing the exchange controls, the researchers added in their paper.
Korean won image via Shutterstock
Bitcoin has had near non stop bullish momentum throughout 2019, but the altcoin market hasn’t been near as fortunate – sans a couple of outliers. The sentiment surrounding altcoins is in the gutter, and prices of even top altcoins have continued to drop in USD value and even more so in their BTC ratios.
The U.S. Securities and Exchange Commission (SEC) is seeking to freeze the assets of Reggie Middleton, organizer of the $14.8 million Veritaseum (VERI) initial coin offering (ICO).
According to an emergency action filed Monday in the U.S. District Court for the Eastern District of New York, Middleton conducted a fraudulent and illegal ICO in 2017 and manipulated the securities’ value afterward.
A self-described “financial guru,” Middleton is accused of propagating false information about his businesses, as well as conducting trades in the open market that jacked up the price of VERI. The SEC further alleges he misappropriated at least $520,000 of investors’ money for personal use, as well as $600,000 to purchase precious metals to prop up another scam.
In addition to freezing Middleton’s assets, the SEC asked the court to prohibit him from destroying or altering documents and place a lifelong ban his ever operating a public company or participating in a digital asset securities offering.
According to the complaint, Middleton failed to register the VERI ICO with the SEC and claimed the coins were not securities, but investments in a technology platform or his personal brand. At several points, Middleton described VERI tokens as prepaid fees, software, or compared them to WalMart gift cards. This obfuscation, the SEC alleges, was an attempt to “skirt” the law.
The allegations of market manipulation stem in part from “Middleton plac[ing] a series of secret, manipulative trades in VERI … artificially increasing VERI’s price by approximately 315% during just one day of trading. He then touted these price increases and returns to VERI holders,” the SEC said.
Also, allegedly, yikes: manipulating unregistered tokens is going to be considered by the SEC as market manipulation per 15 U.S.C. § 78i, which is not something we’ve seen before in an unregistered ICO complaint as far as I can recall.https://t.co/mfoRqeywlZ pic.twitter.com/O6ZrGEIpOk
— Preston Byrne (@prestonjbyrne) August 13, 2019
‘Rap star net worth’
Investors purchased 51 million tokens during the 2017 ICO, for 69,000 ether (valued at $14.8 million at the time), and continued to buy in based on Middleton’s material deceptions, the SEC said.
As part of a misinformation campaign, Middleton said he had brokered deals with airlines, ultra-high net worth individuals, and “one of the largest stock exchanges in the Caribbean” to sell VERI for its various stated use cases, according to the SEC. In total, he claimed to have sold $35 million worth of tokens for institutional use.
In fact, by June 2018, only 75 of the roughly 2 million tokens were “exchanged for research or any other services.”
Middleton instead fabricated trading volume on the EtherDelta exchange to pump VERI’s price, the regulator said. He would then publicize the increasing volume or price to entice more investments.
The SEC quotes an email Middleton sent to an employee, detailing the first known instance of market manipulation: “The EtherDelta market is not accurate because of the very, very low volume. I will try to push more volume in… [t]his time next month, I’ll probably have all (as in every single) hip hop and rap star/producer beat in net worth.”
An additional $8 million of funds raised during the ICO are missing. In 2017, Middleton claimed hackers stole and liquidated the 36,000 tokens from company accounts.
In a separate document. SEC attorneys wrote:
And in just the last two weeks, after they learned that a Commission enforcement action against them was likely, Defendants transferred over $2 million of the remaining investor proceeds, at least in part to fund other endeavors.
Specifically, Middleton allegedly began transferring 10,000 ETH (worth about $2.3 million) of investor funds to “other digital asset addresses,” and another 750 ETH (about $172,500) to his personal account days after the SEC informed Middleton’s lawyers they would recommend an enforcement action.
Deception image via Shutterstock
By CCN Markets: The privacy-focused cryptocurrency Zcash has fallen by nearly 15 percent this week as Bitcoin’s dominance approaches 70 percent.
According to CoinMarketCap, Zcash was trading at slightly over $66 seven days ago but is now just under $56, a decline of approximately 15 percent that forced its market cap below $400 million.
Among the leading 30 altcoins by market cap, Zcash’s decline is only eclipsed by Maker, a token residing on the Ethereum blockchain.
Zcash’s double-digit decline comes amidst plans by Coinbase UK to delist the privacy coin. This is about ten months since Coinbase Pro first announced support for the coin.
Convert all your Zcash by the 26th – or else
The cryptocurrency exchange reportedly asked its customers in the UK to convert their Zcash holdings into any other crypto or move it to another platform by August 26th. Users who fail to take the prescribed steps will see the Zcash forcibly converted to sterling pounds after the deadline has elapsed.
The move will only affect users of Coinbase UK. Other exchanges in the country remained unaffected, though the delisting has understandably raised questions about Zcash’s regulatory status.
Coinbase UK has yet to explain the move, prompting speculation that it is part of the cryptocurrency exchange’s efforts to access Faster Payments Scheme (FPS), a UK payments system designed to reduce transfer times.
Delisting $ZEC was probably a pre-condition of Coinbase getting access to the UK’s ‘faster payments’ system back …
(i.e. it wasn’t a regulatory requirement, but a banking one)
— Alistair Milne (@alistairmilne) August 12, 2019
Why did Coinbase suspend Faster Payments Scheme?
Late last month the cryptocurrency exchange announced that it was temporarily suspending support for the FPS with regards to deposits and withdrawals being made in the sterling pound.
At the time, Coinbase UK gave no indication that it was planning to delist any coin.
Speaking exclusively to CCN, Greenspan also cast doubt on Coinbase UK being forced to delist Zcash in order to work with banks and other financial institutions:
“Hard to imagine that any particular financial institution will specifically hinder business operations with Coinbase solely due to their dealings with Zcash in particular, especially given their overall business operations that have exposure to all types of crypto assets.”
Bitcoin price has been rallying throughout 2019, and most believe that the crypto asset is about to embark on its greatest bull run yet. As global economic tensions and uncertainty rise, so does the price of gold and its digital counterpart Bitcoin. The rise has only further driven Bitcoin’s safe-haven asset narrative, suggesting it’s the best store of value during times of economic collapse.Before the economy can collapse, the price of both Bitcoin and gold have begun to pull back, showing a continued correlation between the two safe-haven assets. Given gold’s longevity, it’ll always be favored as an economic hedge, but will this latest drop start to cause investors to question Bitcoin’s safe haven narrative or does the continued correlation only further solidify that the narrative has legitimacy?Continued Correlation Between Gold and Bitcoin Price Movements Only Further Cements Safe Haven NarrativeThroughout much of 2019, Bitcoin price has grown substantially, making it the best performing asset of the year thus far. In recent weeks, as a trade war brewing between the United States and China heats up, gold – the long lauded safe-haven asset investors move capital into during economic downturns – has started to rise ahead of a potential economic collapse. The crypto asset skyrocketing alongside gold has only further driven the recent narrative surrounding Bitcoin as a safe-haven asset itself, due to its hard-coded digital scarcity.Related Reading | Prominent Investor: Mainstream Finance Is Now Considering Bitcoin As a Safe Haven Asset The positive sentiment and interest from institutional investors as a safe-haven asset has helped Bitcoin price climb as high as $13,800 before it was rejected. Over the last few weeks, the crypto asset has maintained much of its bullish momentum and made another attempt at retesting the former high.Gold, on the other hand, had a bull flag breakout, which has now been rejected back down to levels below where the breakout occurred. With Bitcoin price following gold with such parity, it’s not too surprising to see that BTC value has also fallen further, and has dipped below $11,000 on some exchanges. Price action has bulls trying to push the price of the leading crypto asset back above the important psychological price level.Gold, which rallied over $100 since the start of the month, saw a rejection that retraced roughly 50% of the gains. Since August 1, Bitcoin price rose from around $10,000 to $12,000 where it topped out, making the current price level a 50% retracement that is right in line with gold’s drop.The two assets have been tightly correlated for some time, and the more they show correlation the stronger Bitcoin’s safe-haven asset narrative becomes. Bitcoin, along with gold, has recently joined the same conversation as other safe-haven assets such as the Japanese yen and Swiss franc, all sought for their long-term relative stability, sans Bitcoin – known for its notorious volatility.Related Reading | Bitcoin Store of Value Narrative Turning Toward Safe Haven Asset The increase comes from both institutional investors warming up to Bitcoin as they consider gold, and crypto investors taking an increased interest in gold as the global economy reaches the bring of potential destruction. The increased demand has caused more crypto exchanges, such as eToro and PrimeXBT, to offer gold prominently alongside Bitcoin to crypto traders.
Bitcoin derivatives provider Seed CX has begun testing its margin swaps products with users, the company said Tuesday.
Investors can now onboard to try out Seed CX’s swaps product matching platform during the testing period through its subsidiary Seed SEF, a regulated swap execution facility (SEF), the company announced
Seed CX’s CEO Edward Woodford told CoinDesk that the testing would allow market participants to test both their connections to the marketplace, as well as the products themselves “to ensure they are working as expected.”
“We’re very excited to have begun user testing of our physically-settled bitcoin derivative product,” said Seed CX president Brian Liston in a statement. “We’re at the final step.”
Woodford told The Block that the company could launch its live swaps product over the next three months.
“The three-month timeline is not firm, as we are waiting on regulatory approval and therefore it is not in our hands to control,” he clarified to CoinDesk, adding:
“We are ready from a technology standpoint. The other factors that can influence our timeline is the regulators’ views on these products.”
In his statement, Liston said that once testing is concluded successfully and regulators have reviewed, the company “will be able to launch a much needed margined, physically-settled digital asset derivative to U.S. customers.”
Race to market
A number of firms are looking to offer physically-settled bitcoin derivatives, in which clients receive the actual bitcoin underlying a contract on expiration, in the U.S. To date, LedgerX is the only one to provide swaps and options products, which it offers to both institutional and retail clients.
However, Seed CX wants to become the first to offer physically-settled products on margin, meaning investors can enter a leveraged position.
The company has previously announced its intention to offer bitcoin forwards, a product similar to the bitcoin futures that Intercontinental Exchange’s Bakkt, LedgerX and ErisX are hoping to offer customers. TrueDigital is also looking to launch bitcoin forwards.
While futures are standardized contracts traded on an exchange, forwards can be customized between parties and are traded over-the-counter. Clients can use both to bet on the price of bitcoin at some future date.
According to Tuesday’s press release, Seed CX intends to offer nine different contracts simultaneously: four weekly contracts, three serial monthly contracts and two quarterly monthly contracts. Weekly contracts will expire on Fridays, while the monthly and quarterly monthly contracts will expire on the third Friday of the relevant months.
Seed CX, the parent firm to Seed SEF, launched a bitcoin spot trading market in January, offering institutional clients trading and settlement services.
Seed CX office courtesy Seed CX
XRP is flashing red this Tuesday morning with a long-term price indicator turning bearish for the first time in over a year.
At press time, the third-largest cryptocurrency by market capitalization is currently trading at $0.2955 on Bitfinex, representing a 1 percent drop on a 24-hour basis. More importantly, however, the 50-day moving average (MA) of XRP’s price has crossed below the 200-day MA.
That is the first “death cross” or a long-term bearish crossover since April 2018.
Technical analysis theory considers the death cross as an advance warning of a major sell-off. In reality, however, the crossover is the result of a major price slide – the MA studies are based on historical data and tend to lag price.
This is evident from the fact that XRP fell from $0.52 to $0.28 in 3.5-weeks to July 16 and the bearish crossover has happened today.
Put simply, the long-term MA crossovers are lagging indicators and have limited predictive powers at best.
In fact, the death cross has worked as a contrary indicator in the past, as seen in the chart below.
XRP fell from a record high of $3.30 to $0.45 in three months to April 1, 2018, and the 50- and 200-day MAs produced charted the death cross on April 9 following which XRP picked up a bid and rose to a high of $0.96 by April 24.
Take note of the fact that the 14-day relative strength index (RSI) was reporting oversold conditions with a below-30 print on April 1. An oversold RSI indicates the sell-off is overdone and potential for a corrective bounce, which happened after the confirmation of the death cross.
This time, the RSI is hovering at 37.00 (above right). A reading between 50 and 30 indicates bearish conditions.
Further, the pennant breakdown, a bearish continuation pattern, confirmed earlier this month indicates the path of least resistance is to the downside.
Therefore, the latest death cross could end up bolstering the already bearish setup.
XRP could drop below the support at $0.2825 (April 25 low) in the short-run and extend losses toward the September 2018 low of $0.25.
The short-term outlook would turn bullish if prices rise above $0.34097 (July 20 high), invalidating the bearish lower highs setup.
Disclosure: The author holds no cryptocurrency assets at the time of writing.