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Texas Securities Board Shuts Down Two Crypto Scams

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The state of Texas took decisive action today to shut down two cryptocurrency scams affecting residents of the great Lone Star State.

Texas sent emergency to cease and desist letters to two very different projects. While only one in the viewpoint of this analysis definitively qualifies as a scam, both companies marketed themselves in a highly misleading and deceptive manner.

The two projects in question specifically were Coins Miner, and Digitalbank respectively.

Digitalbank’s issues are somewhat more benign but still problematic. Essentially, they are being accused by Texas of selling unlicensed securities without a permit in Texas. In addition, they are accused of exaggerating the supposedly groundbreaking security of their “Photon Smart Key”(which claims to be a major step forward in security and offer peer to peer exchanges between other Photon Smart Keys using biometric data as an identifier), as well as ludicrously marketing their technology as endorsed by former President Barack Obama.

The allegations against Coins Miner are particularly egregious.

Specifically, they faked endorsements from a major crypto exchange and posted a video depicting fake facilities. They used a video recorded by a journalist out of context, and also allegedly ran a fraudulent car giveaway to those who put money into their platform.

Texas’s ability to stop this stems directly from the fact that Coins Miner allegedly spammed thousands of email accounts (including residents of Texas) in an attempt to get investments in their fake crypto mining scheme. They claimed that investors could expect to receive a minimum 240% return every twenty-four hours by investing with them.

They played up their fake affiliation with Coinbase as well, with one of the main operators of the scheme pretending to be “an official Coinbase trader”.

The scam takes on another twist if you factor in geopolitics. Basically, Coins Miner claimed to operate and be based in the United Kingdom, when in reality they were operating from Russia. Given the recent context of Russian cyber warfare in the US, it is questionable whether these were truly lone actors or were, in fact, operating on behalf of Vladimir Putin.

While this scam had just about as many red flags as humanly possible, it should serve as another warning to not get suckered into something that sounds too good to be true, because it probably is.

Although the readers of Hacked.com likely would not fall prey to such tactics, it’s sobering to think about the fact that operating these types of scams is still lucrative enough (and there are enough people who will fall for them) for bad actors to keep acting. Stay vigilant everyone.

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Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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Nouriel ‘Dr. Doom’ Roubini Argues Against Crypto at Senate Hearing

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Economist Nouriel Roubini is kicking cryptocurrencies while they are down. In his testimony today before the Senate Banking Committee today at a crypto and blockchain hearing, Roubini argued that cryptocurrencies are “the mother of all scams and (now busted) bubbles.”

The timing of today’s hearing before skeptical U.S. Senators couldn’t have been worse, with the broader cyrpto market having shaved billions of dollars from its value overnight.  Roubini took advantage of the current sell-off, using it to his advantage and pointing to double-digit declines in leading coins like “ETH, XRP and other key cryptocurrencies.” The ETH price is currently barely holding above $200, while XRP is down by 13%, with the total value of the market hovering at $201 billion.

Chief among Roubini’s argument is that cryptocurrencies aren’t scalable and that there is “massive centralization” in an “oligopoly” that’s extremely risky. In fact, in recent days, he accused Ethereum Co-Founders Vitalik Buterin and Joseph Lubin of being “criminals” for their ETH holdings and wealth. Buterin fired back, hitting Roubini — who earned the nickname Dr. Doom for predicting the housing crisis of 2008 — where it hurts.

Skeptical Senators

Senators peppered Roubini and Peter Van Valkenburgh, who is the director of research at Coin Center, a nonprofit dedicated to protecting the open blockchain networks, with questions about bitcoin. They were seemingly looking for a way to distinguish between opportunities for technological innovation, e.g. crypto derivatives, and challenges surrounding regulation and scams.

U.S. Senators are open-minded about hearing about use cases for crypto and blockchain technology that can help the unbanked but appear skeptical about profit potential in light of this year’s 70% downturn in the BTC price and the ability to stamp out scams.

Meanwhile, Roubini may be an expert on the economy, but he knows enough about cryptocurrencies and the community that he refers to as “crypto land” to be dangerous. The blockchain, he stated is “nothing more than a glorified database.” He complained about the blockchain only being able to handle five transactions per second, adding that 80% of mining is controlled by an oligopoly.

But in defense of the crypto market, Van Valkenburgh frequently gave Mr. Roubini a wake up call on topics like TPS in which he rebutted:

“We can do a lot more. There are multiple layers being built on top of Bitcoin today that do [robot-powered] batch settlement” in which thousands of transactions can be completed.

As for Roubini’s argument about centralization, Van Valkenburgh quipped that miners with power “can’t do much.” For instance, the number of bitcoins in circulation is fixed, so they can’t change that. Also, they “can’t reallocate or move other people’s funds on the blockchain.” The worst they can do, he stated, is to “slow down the network” via a denial-of-service attack, which is the internet is similarly vulnerable to.

Market Volatility

The instability in cryptocurrency market prices this year was the elephant in the room. But as investors in any emerging asset class could attest to, there can be a “struggle to price something new,” said Van Valkenburgh, pointing to “irrational exuberance” that had, in fact, gripped the market. But institutional capital beginning to come off the sidelines, into bitcoin first and eventually other digital currencies, which is a sign of a maturing market. “We could use ETFs regulated by the SEC. We could use better [custodial solution] in general,” he added.

U.S. Senators questioned Roubini and Van Valkenburgh about the risks for Main Street investors. One Senator described that while the Winklevoss twins may be able to shoulder the risk, families risking their savings may not.

The profile of the average cryptocurrency investor, however, is someone who is “technologically sophisticated” as they must know how to manage public and private keys, Van Valkenburgh explained. The market is attractive to millennials, which reflects the ideal time to take investment risk in someone’s life.

Meanwhile, crypto exchanges have adopted “know-your-customer” standards for consumer protection. One shortfall is these companies must gain a money transmission license on a state-by-state basis, which is a cumbersome process. As a result, a federal license that encompasses a solution for market manipulation “would be a wise choice to make America a leader and protect our consumers,” Van Valkenburgh said.

While the Senate hearing on crypto may have taken place on a tough market day, the price declines are rivaled by the fact that bitcoin, while imperfect, is working.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 67 rated postsGerelyn has been covering ICOs and the cryptocurrency market since mid-2017. She's also reported on fintech more broadly in addition to asset management, having previously specialized in institutional investing. She owns some BTC and ETH.




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Public Sale of Venezuela’s Oil-Backed Petro Cryptocurrency Slated for November

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After much controversy and speculation, the government of Venezuela has announced plans to take its state-backed petro cryptocurrency public.

Public Sale Announced

According to RT News, the public sale will commence Nov. 5, 2018, giving investors the opportunity to own a piece of Venezuela’s natural gas reserves. Government authorities describe the petro as an “instrument to consolidate Venezuela’s economic stability and financial independence, coupled with an ambitious and global vision for the creation of a freer, more balanced and fairer international financial system.”

President Nicolas Maduro claims the new cryptocurrency will not only strengthen the domestic economy, but revolutionize the global blockchain industry.

In addition to a public sale, Venezuela is incentivizing the usage of petro domestically by requiring all passport fees be paid in the virtual currency. This was confirmed on Friday by Venezuela’s Vice President Delcy Rodriguez.

Through a combination of public and private funding, the petro is intended to shore up Venezuela’s finances and give the government an additional source of revenue. The token sale could also help the South American country circumvent U.S. sanctions following its most recent election. The country hasn’t produced regular GDP data since 2015, but according to TradingEconomics, Venezuela’s economy shrank 13.2% in 2017. That followed a whopping 16.5% contraction the previous year. The economy has been in deep recession since mid-2014 as oil prices began to tank.

No Shortage of Controversy

To suggest that investors and market participants are skeptical of the petro would be an understatement. As Hacked reported last month, Venezuela has produced little evidence that the petro exists or that it raised $5 billion via pre-sale – something Maduro claimed back in March.

Reuters also visited the tiny hamlet of Atapirire – the supposed site of a booming oil industry that will be used to back-stop the petro – to investigate the government’s claims. At the time, no evidence of the petro was found.

The controversy continued last week after Joey Zhou, one of Ethereum’s developers, accused the Venezuelan government of plagiarizing parts of the petro whitepaper. In a tweet that appeared Oct. 2, Zhou said petro was a “blatant Dash clone,” referring to the Dash cryptocurrency. The whitepaper not only took an algorithm from Dash but provided a near-identical description of its proof-of-work specifications.

Nevertheless, these concerns haven’t stopped the government from doubling down on the petro and what it has to offer. Back in August, the Central Bank of Venezuela devalued its national currency, the Bolivar, by 95% and created a new petro-backed currency called the sovereign bolivar. The currency devaluation follows years of hyperinflation and economic chaos that has strangled the socialist republic.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

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Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 643 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Cryptocurrencies

Blockchain Capital’s Bogart on Why It’s Been ‘Best Week’ for Crypto

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Now that Yale University has earmarked an allocation to cryptocurrencies, it could be the start of an institutional wave. Although the Yale endowment, whose value is is a whopping $29.4 billion, isn’t investing directly in bitcoin or another digital currency, it’s gaining exposure through a couple of leading crypto venture funds.

The development plus a couple of other positive headlines should have ignited a rally, but instead, the bitcoin price is little changed. Blockchain Capital Partner Spencer Bogart isn’t deterred by the subdued market reaction, suggesting instead that this has been the best week of 2018 for crypto, telling CNBC:

“We have a week of amazing news with TD Ameritrade, Ric Edelman and Yale and it has almost no impact on price.”

Subdued Market Moves

Indeed, the market reaction was subdued.

Source: TradingView

Meanwhile, at year-end 2017, the market ignored any negative developments while crypto prices were in the midst of a bull run. This time around, it’s the opposite dynamic in which the market isn’t reacting to “amazing news,” he said. Nonetheless, the events over the last week will serve as the “building blocks to bring more institutional capital into this space,” Bogart added.

Institutional crypto research firm Omni Research went a step further, pointing out how endowments the size of Yale are generally “risk-averse,” not to mention other headwinds described in the below tweet. He’s right, as it was like turning the titanic when pension funds like Calpers began making allocations to risky hedge funds at the turn of the century. Calpers has since exited hedge funds amid hefty fees, something they wouldn’t encounter in a blockchain industry that centers on decentralization and removing friction from the process. Now Yale could inspire a chain reaction among other pension and endowment investment committees to consider crypto.

“Crypto Bonfire”

Meanwhile, Bogart noted that the next phase of the endowment wave will see these institutional investors “go direct into the markets” once the crypto market has sifted the wheat from the chaff and more of the infrastructure, e.g., custody, has been built. For now, Yale’s Chief Investment Officer David Swensen has bet on Andreessen Horowitz and Paradigm crypto funds.

Despite the fact that the bitcoin price remains 70% below its peak, Bogart believes the No. 1 cryptocurrency, as well as the broader crypto market, is “close to bottoming,” saying:

“It’s going to take a little bit of time. But each of these news items is a piece of kindle that we’re going to throw onto a future crypto bonfire when we have the next bull market.”

The bitcoin price is headed into the weekend trading fractionally higher.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 67 rated postsGerelyn has been covering ICOs and the cryptocurrency market since mid-2017. She's also reported on fintech more broadly in addition to asset management, having previously specialized in institutional investing. She owns some BTC and ETH.




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Hacked.com and its team members have pledged to reject any form of advertisement or sponsorships from 3rd parties. We will always be neutral and we strive towards a fully unbiased view on all topics. Whenever an author has a conflicting interest, that should be clearly stated in the post itself with a disclaimer. If you suspect that one of our team members are biased, please notify me immediately at jonas.borchgrevink(at)hacked.com.

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