A Jaunt Down Financial Fraud Lane

Cas Piancey
Jun 6 · 10 min read

Not having done my fair share to publicly post content, it felt like the right time to offer a simple, opinionated piece about the past couple years in cryptocurrencies. Price is an obvious discussion point — because, 20k!!1 — but I think what’s been more interesting has been watching frauds, scams, and weird ethical decisions play out in real time. Considering the news of the SEC taking on Kik and Kin for $100 million and the FBI getting involved with QuadrigaCX, why not remember a few more?

The situations I’m going to list are the ones most memorable — none of which have been prosecuted in any way, shape, or form. IANAL and none of this is financial advice. It’s all conjecture and opinion and should not be taken as more than a thought experiment.


Charlie Lee Sells The Top (But Also Doesn’t)

Charlie Lee is the cryptocurrency creator we all love to hate. There are plenty of reasons to dislike the ethics and morals of Charlie: he told investors to hold, he sold in tranches near the top, the Litecoin Foundation is a disaster, and he doesn’t associate with the most savory of characters. But these attributes aren’t illegal — just gross. They’re also seemingly unprovable unless we get a glance at Charlie’s personal financials, and that won’t happen.

So, instead, I think it’s important to note Charlie Lee’s close ties to Coinbase, his decision to leave Coinbase after Coinbase accepted Litecoin, and whether or not that qualifies as a legitimate conflict of interest.

In early May of 2017, Coinbase decided they would begin accepting Litecoin in addition to Bitcoin.

In June, Charlie let the world know he’d be departing Coinbase to focus on “creating”. The Litecoin Foundation was mysteriously gifted 437 LTC the same day:

It would appear that this type of association and offering of an asset, while employing the creator, would have greater ramifications for Coinbase, but maybe they’ll both get away with dumping on retail.


CZ Gets Hacked, Has a Security Token, and DGAF

If you’re CZ, you’re currently sitting on top of the world, right? Everyone loves your exchange, you’re making ““money”” hand over fist, you’re in the regulatory safe-haven of Malta, and your employees largely accept payments in company scrip! Could it get any better?

Well, uh, yeah. In early June, CZ was invited to the Justin Sun — Warren Buffett epic lunch-off. He politely declined. Why? It’s likely that CZ never plans on taking a trip to America because LE and regulators might be watching and waiting. But if everything that is Binance is above board, how could this be the case?

A lot of what Binance does falls into a legal gray area, especially in a jurisdiction such as Malta, where the policy seems to be, “Do first, ask questions never.”

But some of what Binance and CZ do — for instance, releasing Binance Coin (BNB), claiming it isn’t a security, when it so clearly is — may fail to avoid SEC and US regulatory microscopes. I urge people to listen to CZ attempt to defend his position on Laura Shin’s Unchained podcast:

There are, of course, other questionable ethical decisions made on the part of CZ. After the hack of approximately ~$45 million dollars worth of coins from the exchange, CZ assured investors they were protected by the assets within the mysterious and famed, “SAFU Fund”. No one knows what’s in the SAFU Fund, nor what coins were sold, or if there ever was a SAFU Fund to begin with. Simply that investors were protected because Binance MAKES SO MUCH MONEY!!11!

There’s also the matter of the Binance Charity, which claims complete transparency while having partners such as the “Blockchain Association of Uganda,” which, spreads the good gospel of bLoCkChAiN in Africa, the “Malta Community Chest Fund,” which doesn’t even have an operational website, and honorable mention: “CryptoSavannah,” which appears to just be a blockchain-based company with a “Foundation” page that’s nonexistent.

Perhaps CZ and Binance have played their cards right and will fall outside the scope of US regulators. But, maybe not.


Did Somebody Say “Bananas”?

Bananacoin isn’t a well known scam, but it’s one of my favorites. Introduced — seriously — as a stablecoin, Bananacoin never actually reached the stable price it promised and has since floundered. “Pegged” to the price of a very specific variety of bananas (Lady Fingers, if you’re wondering) and in cahoots with banana plantations in Laos (I guess??), for some reason nothing seemed to materialize. Not sure if it ever garnered enough cash to be sought after in a lawsuit, but nonetheless enjoyable.

Read more about it in Frances Coppola’s fantastic article.


Coinbase Likes Sharing Info with Insiders and Hiring A**holes

There’s been at least two instances of clear issues with the way Coinbase lists tokens***, and likely many, many more. The two very clear examples are the listing of Litecoin with Charlie Lee still working there and holding many coins, the second — and imho more obvious — example is when Coinbase listed Bitcoin Cash. Let’s take a look at the charts!

Besides these more blatant financial considerations, it’s also key to remember the terrible ethics and morals of this company. Not only do they fail to attract coiners because of their KYC/AML implementation, but also hire the worst of the worst:

*** It has been pointed out to me that there have been countless blunders when it comes to Coinbase coin debuts, and in fact almost all coins offered have seen strange trading behavior in the days leading up to and following a listing. Shocking.


EOS Represents Everything Wrong With Cryptocurrency

From its inception, EOS has been a pariah of cryptocurrencies. Whether it’s the backing of Brock Pierce and block.one, the collusion for false governance with Bitfinex, co-mingling ICO funds with no-KYC exchanges, or never getting a promised audit, EOS dumps bullshit over and over again on retail traders and those not fluent in the language of deception. With the additional help of perennial huckster Dan Larimer, EOS has gone on to maintain a top ten position among traded coins and tokens, and prides itself as “a better Ethereum”. Sure, whatever. Who gives a shit?

There are far too many problems with EOS to establish a “single point of failure.” Similar to IOTA, cryptographers find the reality of it laughable

and similar to Ethereum, its main use case appears to be as a platform for shitcoins to be wash traded on garbage exchanges.

Most nocoiners have little to say about EOS just due to the obvious grotesque nature of it: founders suck, use case sucks, future outlook sucks. Whether any regulatory agency or lawsuits materialize has little to do with the fact that $4 billion went into a project and there’s zero to show for it.


Brock Pierce is An Evil Clown

Finally, something everyone can agree on. Or, wait, can we? Everyone except the executives of Blockchain Capital, who graciously allowed him to help found the firm, the good folks at Noble Bank (the former bank for Tether), the coiners who created Tether, The Bitcoin Foundation (he’s still Chairman of the Board — very cool Bitcoin Foundation!)… Here’s a list of projects Brock helped invest in via Crypto Currency Partners:

Wow, looks like your whole ecosystem is co-sponsored by a guy arrested in Spain with Marc Collins-Rector! Congratulations!

Will Brock be prosecuted? I doubt it. And it’s not because he shouldn’t be. His exploitation of Puerto Rico and posturing as though saving it while simultaneously utilizing their IFE loophole (International Financial Entity) was nasty at best, and disturbing at worst. And I’m not even going to get into his tattered history — that’s for the rest of the world to judge.


KodakCoin and the Long Awaited Blockchain That Will Never Be

KodakCoin announced itself in January of 2018, just as the cryptocurrency hype-train came to a crashing halt. Kodak partnered with a company called Wenn Digital to… bring the blockchain to photography? The concept — which doesn’t make any sense because, hey, blockchain — is that photographers could enforce a “live operational copyright infringement management system” through a public database. How? F*ck you, that’s how.

For a snapshot of how this played out on the stock market, take a look:

Repercussions for this will likely be minimal, besides stalling the eventual bankruptcy of Kodak by a few weeks or months — the blockchain isn’t live yet and likely never will be (because the concept doesn’t make any sense).

David Gerard, the epitome of all that is hate for the coin community, has followed along. Check it out, if you have a chance.


Garlicoin — Probably Some Shit You’ve Never Heard Of

No, but really:

and also:

but at the same time:

All around trash. Will someone get in trouble for it? **shrug** Doubt it. The liquidity for the “Garlicoin market” was always garbage and what remains is rotting in the steaming heap that is TradeSatoshi.


Are These Adorable Little Sh*ts Actually Illegal Securities?

CryptoKitties is infamous for briefly crippling the Ethereum Blockchain by overburdening it with, ya know, like, a few thousand transactions. CryptoKitties similar to nanopets — but on the blockchain! It’s almost like playing Pokémon, but instead of fun, it’s boring, and instead of compelling, it’s more about how much money you’ll lose.

This is another bad idea brought to you by Barry Silbert and his friends at the Digital Currency Group, who ushered these very special investments into the world:

With the SEC starting to sue, is it time to reassess whether or not these crypto-collectibles are securities? Doesn’t sound like a bad idea. Besides, what do they have to lose:

Listen to the founding members of CryptoKitties confidently discuss their brilliant idea while sitting in front of kids at Harvard. Imagine paying for this education.


Tether ETH Tether Tron Tether TetherTether

I don’t think Tether should be on this list considering that they’re under investigation by the CFTC, DoJ, and now being glared at by the NYAG. But there’d be uproar if they weren’t included.

Instead of listing reasons and going into depth about why Tether screams “trouble,” I’ll provide a list of relevant links to anyone interested (with a summary as to why it’s pertinent underneath). They are in no particular order.

This is a court ordered detention of Reggie Fowler, who has since been released on bail. Reggie — a former part-owner of The Vikings — is accused of bank fraud and counterfeiting. He apparently was working with Crypto Capital Corp, a long time capital provider (in some form or another) for iFinex, Tether, QuadrigaCX, and many other cryptocurrency exchanges and operators.

Warning: paper is not peer-reviewed. Compelling and pointed academic paper that presents an argument as to why and how Tether could be used to manipulate markets. Long read.

Early website created to showcase examples of likely Tether market manipulation.

Phil resigns, is never replaced. Why?

Bitfinex and Tether are subpoenaed.

NYAG looks into Bitfinex

Noble Bank, Tether’s primary ““bank””, suddenly stops being a primary anything and vanishes without a trace.

In 2018, money is seized in Poland, likely linked to Crypto Capital Corp.

No one declares iFinex ownership of Tether until the Panama Papers prove it.

Tether admits it isn’t fully backed in court.

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Cas Piancey

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“It is only when the tide goes out that you learn who’s been swimming naked.” — Warren Buffett