Hanlon’s Razor and The Presumption of Innocence: A look into the provenance of DX exchange.
You know that time when you got bumped by someone and he made you drop all the stuff you were carrying? He didn’t even say sorry, he just kept on running. You are pissed because your coffee is all over the book you were holding. You look up and hate everything about the former fellow human being and cast hopeful stares that karma will come into play and a truck will hit him at the next corner.
Then you remember something in the back of your head about the presumption of innocence. Maybe he was on the way to the hospital and his mother was dying? Maybe he was late for his wedding or court. There are a thousand scenarios you can think of other than “This man was out to get me!”
Or how about that time when you needed forms sent to a new doctor, but the old doctors office needs you to fax them forms that they emailed you, so that they can fax the 200 pages of records to the new doctor to comply with new HIPPA regulations? That is a serious waste of everyone’s time, certainly they are doing it so that the effort to leave your doctor is higher than your desire to do so.
Then you remember Hanlon’s Razor.
Never attribute to malice that which is adequately explained by stupidity.
The entire space of cryptocurrencies and digital consensus systems is wrought with this. The implosion of 2018 shows that there were thousands of projects manned by incompetent, unskilled, and undriven people who were lured by the dreams of Lambos and douchebag cruises. Prices followed bitcoin and ETH down, but it drove scrutiny up. All of a sudden people started asking questions about their once darling crypto project, only to find out that unicorn farts don’t actually exist.
But 2018 also showed that cryptocurrencies and other consensus systems are here to stay. The projects that made it through are the leanest, the strongest and the toughest and will probably go on to do great things.
But there are still the scams. At this point, anyone who says “Hello” or “Can you help me?” is an unsolicited private message on telegram is a scammer. If you don’t know this, you should get out.
Weird intro. Why am I talking about this?
I’m trying to point out that this is a space where even seemingly big names, may in fact be scams. Conversely, small groups may be the hardest working, most ethical projects on the planet.
A few months ago, I was made aware of a new project, the DX exchange. They made a media blitz all over the place. They were going to have cryptos, but they are also going to have “digital stocks”, i.e. digital stocks that they have backed up by real stocks that they own (think of Maduro and all the oil he says backs up the Petro, or say, Tether).
DX has been working the hype machine since mid May, or perhaps earlier. They were at Consensys with some pretty big promises.
- Fully regulated
- NASDAQ partnered
- No trading fees, with 10 euro monthly fee
- Launch in June 2018
This website gives a glowing description. I won’t bore you with link after link after link about its hype machine making the same points over and over again. DX exchange is going to finally legitimize cryptocurrencies by being regulated and trading both stocks and cryptos.
To much fanfare, the DX exchange finally launched on January 7, 2019. The results were not awesome. Extremely low volume, unhappy customers, stangely high fees. Just 30 minutes of browsing their telegram, these comments were found:
Here is where Hanlon comes in. Maybe they just didn’t beta test enough. Maybe all the hype and the hundreds of thousands of social media follows trying to jump on their site suprised them. There are a thousand reasons why the experience of using DX on the first couple of days might suck. But then a weird post showed up.
My first reaction was, “Get the hell out of here!” They are regulated. They are partnered with NASDAQ. Come on, this is just some disgruntled dweeb. But hey, I am who I am, so let’s check out the claims.
Lets start out with whether or not DX exchange is some new entity with brand new tech. Their webpage mentions how they are getting their digital stocks and cryptocurrency exchanges.
Digital Stocks are provided by Market Place Securities MPS Ltd,Cyprus Investment firm regulated by CySEC, license number 170/12. Crypto Currencies Exchange services are provided by Coins Marketplace Technologies OU regulated by the Estonian FIU, license number FVR000051 for providing services to exchange virtual currencies against fiat currencies, and license Number FRK000039 for providing a virtual currency wallet services.
Fair enough. The one good thing about governments, in this case, is that they love to grant licenses for some income. So lets look it up.
Who is SpotOption?
Looking around a little bit you can find some important articles about them. For example this one that talks about how they are releasing a cryptocurrency exchange that looks shockingly familiar to Dx users.
So DX is partly SpotOption. Let’s not pretend it is otherwise. Their license mentions it directly. So what?
Enter Lee Elbaz
The following description is what I have gleaned from a number of websites that popped up when I searched for SpotOption, Yukom, BinaryBook and BigOption (you’ll see why those were applicable search terms in a moment). Here they are if you want to peruse yourself:
It seems Ms. Elbaz likes to tell investors about ways to achieve huge gains at low risk. And then if they didn’t see huge gains, she would convince them to invest more by offering bonuses. Then she would tell people their funds were locked or delayed or some other thing due to the bonuses or whatever reason. She did this all under the guise of selling Binary Options. Binary options are nothing but gambling and have been made illegal in most first world nations, including Israel where Elbaz is from. They were probably popular in Israel becuase gambling (except the lottery of course!) is mostly illegal there. You know how the house always wins overall in Vegas…well this is how binary options work out too.
The link from Elbaz to SpotOptions is that Elbaz was the CEO of Yukom Communications, the FBI thinks she is also the owner despite someone else’s name being on the registration. The FBI also thinks she used an alias, Lena Green, as the CEO of BinaryBook and BigOption these are options brokerage companies that “hired” Yukom for communications. They would manipulate the trades such that clients would lose money (so they made money).
Where does SpotOptions come in? Well it turns out the FBI and Israeli police raided their offices in order to find more evidence of email from Elbaz because Google had turned over some already (if you care about your privacy, don’t use Gmail). This was because it seems that SpotOptions was hired to provide the software for Binarybook, but the FBI thinks they colluded to deceive investors so that they lost money.
So, in short:
- Alleged Fraudster Lee Elbaz is the CEO of Yukom which works with Binarybook and BigOptions as brokers for binary options.
- Binarybook worked with SpotOption which did the software side of things until Israel flat out banned binary options.
Is DX exchange just SpotOptions?
It would appear so to a large degree. As mentioned the digital stock part is just MPS Marketplace Securites which is literally SpotOptions.
But what about the crypto side? Coins Marketplace Technologies OU is an Estonian company. No problem there. A quick LinkedIn search shows that two SpotOptions developers work there.
What about Dx itself? It has about 30 people working there, 8 of which worked for SpotOption. There is also the COO of DX exchange, Raz Kaplan,who was the head of risk management at SpotOption. And this doesnt include someone who doesnt have a linkedIn account…. The former CEO of SpotOption (see wikipedia link above), Ran Amiran who is now the Director of Business Development at DX. Is Dx simply just SpotOption resorted? Well let’s just say the similarities far outweigh the differences.
Is that it?
Absolutely zero of this is a direct link between DX and Lee Elbaz (although it’s clear the the FBI thinks SpotOptions participated in fraud). Remember, presumed innocence. There is no evidence of wrongdoing by DX or SpotOptions from these links except making the decision to enter into the smarmy world of binary options and doing business with one of Elbaz’ firms. Binary options were legal in Israel until 2018. SpotOptions could simply have thought of Elbaz and her alleged empire of fraud as just another customer.
So what about the other claims? “Fully regulated in the EU”, “Partnered with NASDAQ”?
As far as I can find “fully regulated” means “we have a business license”. Dx has two, one for exchanging crypto into fiat, and one for holding other people’s crypto assets in a wallet. But I think these are just normal business licenses, like food vendors get, something that registers the business and its category. Much like if you happened to have a business of keeping minks or raccoon dogs, you would need a business license.
So regulation, to me, might imply audits, and compliance officers, and annual reports and such. But I dont think that is the regulation involved here. As far as I can tell on LinkedIn, there is no compliance officer.
So, regulated? Perhaps technically, but not in the way you expect when you hear that word.
What about this partnership with NASDAQ? I think the partnership is the same partnership you have when you buy Microsoft Office 365. NASDAQ offers a service that matches buy orders with offers on an exchange. They seem to be licensing this software, and thus, have a “partnership”. I can’t find any evidence of any other sort of partnership.
I’m sorry, but you will have to draw your own. I will not be using Dx for anything. To me, the entire operation and every claim they make is smarmy. They even act in a smarmy way when asked questions. I had been on their telegram for a couple of days. I asked one single question:
Question: Has DX exchange posted any responses to questions of propriety with regard to connections between Raz Kaplan, SpotOptions.com and accused fraudster Lee Elbaz? If they have, can someone link me to it?
I got no responses and within 5 minutes:
I was banned from the group and reported which seriously hinders my ability to write in any Telegram group. Why would they do that when they could have said something like “We have nothing to do with Lee Elbaz, she hired us for work and have fully complied with the desires of the FBI and Israeli police.”?
They didn’t say that.
But remember Hanlon’s Razor and the Presumption of Innocence.
If someone from DX exchange reads this, and finds that I have misconstrued something or if there are errors they would like to point out. Please engage and set me straight. I will happily post an update. When my Telgram doghouse days, that you caused are over, feel free to contact me there if you wish to talk about it.