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U.S. Authorities Probe Shady Bitcoin Trading Practices

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U.S. regulators are cracking down on the cryptocurrency market, probing individual coins and projects including a newly launched investigation into possible manipulation of the bitcoin price. According to a report in Bloomberg, the U.S. Department of Justice (DOJ) has launched a criminal investigation to determine if traders are manipulating the price of bitcoin and other cryptocurrencies, known as altcoins.

DOJ prosecutors have teamed up with the Commodities Futures Trading Commission (CFTC), the regulatory body under whose jurisdiction bitcoin futures trading belongs, to investigate whether price manipulation is occurring. They are focusing most heavily on the No. 1 and No. 2 cryptocurrencies by market cap, bitcoin and Ethereum, respectively.

Wild West Stigma

The investigation is only fueling a stigma already attached to the cryptocurrency market as a Wild West ripe with illicit activities ranging from money laundering to now price manipulation. If cryptocurrency investors are wondering why the broader market can’t seem to get out of the doldrums, it could be the uncertainty that is exacerbated by developments like this one.

The bitcoin price has lost more than half its value from its December 2017 highs of nearly $20,000 and is hovering at about the USD 7,500 level. If the catalyst for the market recovery is institutional capital pouring into the market, investors may need to get used to the volatility. Now the market will either take a step backward or forward, depending on the mechanisms that are put in place to prevent further bitcoin price manipulation.

Investigators are probing specific nefarious behavior like a rush of fake orders to mislead other traders to buy or sell, a practice that is also known as spoofing. They are also looking into wash trading, an illegal behavior that also occurs in the equities and derivatives markets where an investor takes both sides of a trade — buyer and seller — to create false market demand.

Task Forces and Sweeps

Separately, a North American crypto-sweep is underway, led by the North American Securities Administrators Association. They’re probing the ICO and blockchain startup side of the market and have nearly 70 investigations happening this month alone. Member states and provincial securities regulators are hunting “fraudulent Initial Coin Offerings (ICOs), cryptocurrency-related investment products, and those behind them.”

Exchanges like US-based Coinbase have worked alongside regulators during tax season, while founders of rival bitcoin exchange Gemini, the Winklevoss twins, have launched a self-regulated cryptocurrency trade group, the Virtual Commodity Association. But prosecutors are worried that exchanges aren’t doing enough to uncover fraudulent trading activity in this loosely regulated cryptocurrency market.

Meanwhile, securities regulators like the SEC and lawmakers agree it’s not a good idea to rush into any regulatory policy, so as not to create another cumbersome policy like Dodd-Frank. In the meantime, the cryptocurrency market is largely being policed by regulatory task forces and sweeps.

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 70 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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Bitcoin

Bitcoin ETF Watch: VanEck, SolidX and CBOE Met With SEC on Monday

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Backers of a highly-touted bitcoin exchange-traded fund (ETF) application met with U.S. regulators last week to present a new case for why their proposed product should be approved. The contents of the meeting, which were published on the Security and Exchange Commission’s (SEC) website Wednesday, gave new reasons why the regulator should approve a specific rule change that would pave the way for the first crypto-backed fund to be listed.

Bitcoin Market Ready for ETF, Proponents Say

According to the SEC’s memorandum, the Office of Market Supervision met with members of VanEck, SolidX and CBOE on Monday. Rather than focus on regulation, the ETF backers argued that the bitcoin market is mature enough to list an ETF. The proponents also listed several examples of similar products that have been launched for commodities like gold and crude oil.

“Similar to commodity futures, the spot and futures prices [of bitcoin] are tightly linked,” the proponents argued, adding that “this is evidence of a well-functioning capital market.”

The proponents also urged the SEC to remain consistent in its definition of “significant markets,” arguing that bitcoin futures “is a significant, regulated market” when compared to the “dry bulk shipping market” that has already received regulatory approval for ETFs. The SEC has stated repeatedly that the bitcoin market lacks the significance and scale to protect investors against manipulation. VanEck and SolidX have long maintained that the bitcoin market is less susceptible to manipulation.

The meeting followed a closed-door gathering in late October that VanEck claimed had resolved issues regulators had identified in their previous disapproval orders. As Hacked reported, dozens of bitcoin ETF applications have been rejected outright by the securities regulator over concerns of market manipulation and investor safety.

Bitcoin ETF Unlikely Anytime Soon

Despite repeated efforts to convince U.S. regulators of the merits of a bitcoin ETF, the road to approval remains undetermined. That view was echoed recently by SEC Chairman Jay Clayton, who said the market must undergo important changes before an ETF becomes likely.

“What investors expect is that trading in the commodity that underlies that ETF makes sense and is free from the risk of manipulation. It’s an issue that needs to be addressed before I would be comfortable,” Clayton said during last week’s annual Consensus Invest conference in New York, according to CNBC.

Clayton said venues like the New York Stock Exchange and Nasdaq have “surveillance” mechanisms that can prevent manipulation on the exchanges. However, “those kinds of safeguards do not exist currently in all the exchange venues where digital currencies trade.”

The SEC has yet to reach a final verdict on the VanEck SolidX Bitcoin Trust. At last check, a decision was expected later this month, though the process could get dragged out until February, according to industry sources.

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.

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 691 rated postsSam Bourgi is Chief Editor to Hacked.com, where he leads content development for one of the world's foremost cryptocurrency resources. Over the past eight years Sam has authored more than 10,000 articles and over 40 whitepapers in the fields of labor market economics, emerging technologies, cryptocurrency and traditional finance. Sam's work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Contact: sam@hacked.com Twitter: @hsbourgi




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Interviews

GDPR “helps transparency” and “honesty”: Brendan Eich, Rafal Szymanski and Sam Kim on Digital Advertising in 2018

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When thinking of industries which could potentially benefit from decentralization and distributed ledger technology, digital advertising and marketing may not be the first to come to mind.

When looking at a list created for Forbes by Bernard Marr entitled ‘Here Are 10 Industries Blockchain Is Likely To Disrupt’ published July 2018, for example, these sectors didn’t even feature.

Despite this, there have been some prominent examples of blockchain based solutions that focus on the space. Both in the form of currently released tokens, as well as forthcoming projects and ICOs.

1. Brendan Eich, Founder of Basic Attention Token (BAT)

Basic Attention Token (or ‘BAT’) has been the subject of a large volume of press since its launch last year for a myriad of reasons, not least due to the success of the coin itself and its ICO. BAT has recently suffered like the rest of the cryptocurrency market, and yet still resides at a respectable 32nd place in the CoinMarketCap ‘top 100’ listings on its homepage.

A large reason for its success can be attributed in part due to the fact that it was created by much of the same team behind Brave: a free, open source web browser which supports mobile platforms iOS and Android. It’s also available on Windows, macOS and Linux.

The Brave browser incorporates ad-blocking software with the intention of reducing unwanted and intrusive marketing. The result is a promised increase in browsing speed, in addition to options for users to anonymously support their favourite websites.

Behind and within both teams sits Brendan Eich, best known as the creator of renowned and highly popular programming language JavaScript.

In September 2018, Eich wrote a letter to the U.S. Senate Committee on Commerce, Science and Transportation. According to the Brave website the letter, in summary, stated that “the character of GDPR is congruent with the United States’ understanding of privacy,”

More recently, in an interview with German marketing paper Horizont (46/2018, 15th November 2018) Brendan Eich took a shot at one of the most dominant forces in digital advertising at present – Google. In the piece, he stated that:

“All information from which the user’s digital fingerprint could be reconstructed remains on the user’s computer. And we go so far in this strategy that even at Brave we do not want this data… we believe that Google’s ‘Don’t be evil’ must be supplemented by a ‘Cannot be Evil’ policy urgently.”

2. Rafal Szymanski, Founder of EasyVisual and Global Tech Makers

EasyVisual is a mobile advertising network and Global Tech Makers (website under construction) is a company which “actively develops IT products in the B2B and B2C sectors.” We reached out to the founder of these companies, Rafal Szymanski, recently about digital advertising.

Specifically regarding GDPR, Szymanski stated that he believes that it “helps us to create a more transparent and honest market.”. This comes from a perspective of the market as an area which “has rather strict rules for us as people working in digital marketing.”.

Whilst many have seen this legislation as a potential obstacle for blockchain-based businesses in Europe, the words of both Szymanski and Eich echo those of a study performed by a UK university which I covered earlier this month.

He continued:

“Though on one hand, it may seem that now our opportunities are limited, it is not so. The opportunities are limited only for those who do not want to lead a fair game. If you are an honest player, newly applied principles can be viewed as new incentives for looking for new solutions and strategies that will meet the market’s requirements.

“To go forward you should be ready to introduce changes to your business if it is needed. And I don’t think that speaking about digital marketing in such a wide meaning, there is any sense to speak separately about the future of the industry domestically and internationally.”

Regarding new technologies in general and how they may be affecting the industry, Rafal talked about “virtual and augmented reality” and how it “can be used to improve customers’ experience, making ads more interesting for them”.

“AR as well as VR provide us with an opportunity to build interactive forms of advertising which will increase the effectiveness of our work. Though right now these technologies are not widely adopted in marketing and advertising, I hope that in the future it will happen.”

3. Sam Kim, CEO and Co-Founder of Lucidity Tech

Lucidity Tech is an open-source blockchain based protocol for the advertising sector which seeks to become a comprehensive service provider focused on transparency of data usage. According to the official website “the ability to have access to a transparent, clean set of data from across the programmatic supply chain is game-changing.”

The protocol utilises decentralized technology for absolute “accuracy, security and consensus” and like Rafal Szymanski, we reached out to the people behind Lucidity. Subsequently we got to speak directly with CEO and co-founder Sam Kim about his company, blockchain and digital advertising.

Kim “firmly believe[s] that transparency is the most pressing need of the industry today”, falling in line with the ethos of Lucidity at present, and elaborated with the claim that:

“It’s been the most important issue since programmatic advertising started. Advertisers today have to trust that they are getting what they paid for. But it’s very clear that it is not happening today.

“It’s like ordering steak at a restaurant but getting a salmon plate instead. And, they insist you pay for it anyway.”

This is because,

“They are activating their customer data to run CRM campaigns, look-a-like campaigns and use multi-touch attribution to conduct cross platform campaigns. But all of this investment is useless if your vendor decides to cheat you and run the advertisements outside of your desired location.”

The full version of this interview with Sam Kim will be published soon, and will feature content that’s completely exclusive to that you have just read.

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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4.5 stars on average, based on 12 rated posts




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Cryptocurrencies

SEC Chairman Says Most Crypto ICOs are Securities; Bloodbath For Tokens?

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It may be the wrong time for crypto investors to hold onto tokens issued by initial coin offering (ICO) projects.

On CNBC, Jay Clayton, the chairman of the U.S. Securities and Exchange Commission (SEC) emphasized once again that most ICOs that are being talked about by investors in the global cryptocurrency market are considered securities under U.S. laws.

If a token is sold during an ICO to investors in the U.S. and the token is acknowledged a security by the SEC, it could become subject to a penalty imposed by the SEC, which then could lead to the allowance of investors to file for refunds based on the value of their initial investment.

Bitcoin is Not a Security But Most Tokens are Securities

Dozens of ICOs are already being investigated by the SEC and in the months to come, the SEC expects to crackdown on more projects that raised money from U.S. investors through the distribution of unregistered securities.

The SEC chairman firmly stated that bitcoin is not a security and several SEC officials have also said that Ethereum is considered a non-security. But, most tokens that are in existence in the market are seen as securities by the commission, which leaves them vulnerable to investigations.

Clayton said:

“We don’t believe Bitcoin is a security. Many of the ICOs that you see and you talk about, they are securities. And if you’re going to offer or sell securities, you have to do so in compliance with our laws. We’ve been clear about that, the recent actions further emphasized that our securities laws to apply to the ICO space, and if people are going to raise money using initial coin offerings they either have to do so in private placement or register with the SEC.”

Most tokens, even those with active developer communities, strong products, partnerships, and user bases, are down on average 80 percent to 98 percent. Given the substantial decline in the price of tokens, low market cap tokens could appeal to traders in the market. But, some have fallen more than 90 percent against Bitcoin (BTC), which fell by 82 percent since its all-time high at $19,500, and the sell-pressure on tokens is increasing.

Currently, the SEC is employing a strategy of taking down the biggest ICOs in their respective sectors, as seen in its recent settlement with Paragon and and Airfox. It likely will not go after large-scale projects like Ripple (XRP) that could lead to a full-fledged lawsuit, and Ripple is already dealing with a federal lawsuit that will provide clarity on the regulatory nature of the asset.

The SEC’s stance towards ICOs is quite clear; but the guideline on which tokens are considered as securities and which are not remains uncertain. Airfox and Paragon both claimed to operate as utility tokens to prove that they are not securities but the SEC denied the justification.

As U.S. based attorney Stephend Palley wrote:

“PRG token sale was an unregistered securities offering; PRG tokens are securities and order provides detailed analysis of sale and remedial actions. Analysis applies to just about every token sale in the last 2 years.”

Not the Right Time

0x (ZRX) and Brave Attention Token (BAT), two tokens listed by Coinbase, are considered to be immune from the SEC’s crackdown on tokens. Coinbase explicitly described in June that it will only list tokens that are approved by the SEC as a non-security.

Apart from the two, there simply isn’t any guideline available to prove that a token is a non-security and as such, due to the regulatory uncertainty, it is not the right time to invest or hold onto tokens.

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.

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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3.8 stars on average, based on 4 rated postsJoseph Young is a finance and tech journalist based in Hong Kong. He has worked with leading media and news agencies in the technology and finance industries, offering exclusive content, interviews, insights and analysis of cryptocurrencies, innovative and futuristic technologies.




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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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