Underlying FOMO + Creative Thinking = LTC Pump

21.-ops.-Scrooge-McDuck.-Azizonomics

After weeks of almost completely flat trading, and and months of the $220-$240 range, it looks like at least some crypto volatility is back. Although Greek people are not buying bitcoin en masse, the psychological implications of a Greek bank holiday have triggered buying from other parts of the globe. We outlined what you can expect in the US/UK here, in our last post. There is an underlying FOMO in the crypto markets.

With traders back on exchanges, bitcoin was up to it’s usual pumps, dumps and general fuckery. While the MSM has been covering bitcoin, the real action has been in Litecoin (and some of the other alt-coin markets – which we don’t trade).

On Monday, there was a massive upward move in Litecoin (specifically on BFX), which ended up closing (possibly via margin call) a large number of the actual shorts which were open on the exchange. We are going to dig a bit deeper into this move, the previous tests which had been run on the exchange to see if it would be possible and how to identify such behavior in the future.

First, let’s take a look at the overall move (5m chart shown):

Screen Shot 2015-07-01 at 7.51.21 PMThe nearly 20% move mostly occurred during a short 20 minute time span (hey 1%/minute isn’t bad), congrats to those who were able to catch it.

So, why did this happen? What else was occurring? Bitcoin was feeling generally bullish, the (incorrect) msm stories of Greece buying bitcoin were flowing in, and everyone was screaming moon. With some underlying momentum, and general LTC bullishness after large recent gains, this was the perfect time for someone to execute their “plan”.

We first were clued into this person’s activities on June 14th, when we saw some unusual activity in LTC swaps on BFX.

Screen Shot 2015-07-01 at 7.45.52 PMAt this time, we saw a LTC pump (more below), accompanied with a large, rapid rise in LTC swaps, and then a subsequent rapid decrease in swaps. It immediately seemed clear what was going on, and it is absolutely genius. Anyone who trades on BFX knows that if you try to place an order on margin and there aren’t enough swaps left, you order vaporizes. If a person who is “bullish” (aka pumping) reserves all of the LTC swaps, then any asks in the order book will vaporize when they are reached, resulting in a far less stacked order book than appears on the surface. Couple that with underlying FOMO, stop loss triggers and margin calls, you are setting the market up for a nice move upward.

We then saw the same thing 2 days later.

Screen Shot 2015-07-01 at 7.45.59 PMAnd then the most recent (and hopefully not final) pump:

Screen Shot 2015-07-01 at 7.42.41 PMLined up with price, we can see the impact of this trader’s actions:

Screen Shot 2015-07-01 at 8.01.34 PMSo what actually went on here, simplified:

1) Trader borrows all of the LTC swaps available on BFX.

2) Trader runs panicbuyltc.exe (starts panic buying) LTC on BFX.

3) Any asks which aren’t actual LTC, but were to be placed on margin, disappear as the order book and stop losses are eaten through.

4) Profit

 

It appears as if the goal of this actor was to force margin calls/stop losses. If so, they succeeded massively. With LTC more than doubling in price, in less than a month, this actor has created themselves a nice Scrooge McDuck pile of cash to dive into. Thank you random trader, for you have helped bring back some excitement and volatility to the marketplace. If you were short, our condolences, but come on. There were over 200k LTC shorts on BFX a few weeks ago, and the price was maybe ~$2? You can only short something until 0, so what the fuck are you doing short a coin that actually has a community behind it, and has been battered down from ~$50 highs? Sorry bears, but you have had your fun, and definitely will again, but that number of leveraged shorts at this price is beyond silly.

Is Greece The Only Country About To Get Cyprussed?

Everyone is focused on Greece. We obviously didn’t have to tell you that, because you have internet connectivity if you are reading this. Bubble talk has already begun in the bitcoin community, and the pumps and dumps of the last 48 hours may be remembered as “the Reuters roller coaster” (although they should fact check before publishing). A novel idea, but we don’t believe that many Greeks are moving their trash cash into BTC at a rate that’s likely to impact the market. If you are Greek and reading this though, we suggest you head over to Coinbase and secure your wealth. While the msm is going to have a field day trying to tie bitcoin to Greece (as they did with Cyprus), let’s dig a bit deeper into the possible global implications of the upcoming (possible) “Lehman weekend”, and why not just the Greeks should be buying the coin hand over fist.

The capital controls narrative has been pushed all week, so it would be surprising if they weren’t implemented soon after all of the conditioning and herding the sheep have been going through. Of course, they are for our own protection, but for those who like to have control of their wealth, there is always plan ฿.

Let’s refer to the following paper:

Resolving Globally Active, Systemically Important, Financial Institutions

We recommend reading the entire document, as it contains a large amount of good information. The paper outlines both the US and UK’s bail-in plans, and how the failure of a SIFI (systemically important financial institution) will be resolved. A quick Google search will result in similar results for most, if not all, G20 nations. See Canada and Australia.
Note: Investopedia definition of an unsecured creditor – An individual or institution that lends money without obtaining specified assets as collateral. This poses a higher risk to the creditor because it will have nothing to fall back on should the borrower default on the loan.
I.e.: Anyone who has fiat money that they “deposit” into a bank.
From the paper’s executive summary:
Screen Shot 2015-06-18 at 8.55.10 AM
Screen Shot 2015-06-18 at 8.55.18 AM As the paper notes, “The unsecured debt holders can expect that their claims would be written down to reflect any losses that shareholders cannot cover”. This is mentioned again, a page later.
Screen Shot 2015-06-18 at 9.02.09 AM
Note (in the following excerpt), that the goal is to “[avoid] the need for a bailout by taxpayers”.
Screen Shot 2015-06-18 at 8.56.49 AM Screen Shot 2015-06-18 at 9.02.17 AM
And again, more about the strategies being developed, and how losses will be apportioned to shareholders and unsecured creditors. The goal is clearly stated, that such a resolution will not have any cost to taxpayers (via government bail outs). Why go after money after it has been paid in taxes, when you can just grab it right from accounts?
Screen Shot 2015-06-18 at 9.02.33 AM Screen Shot 2015-06-18 at 9.03.11 AMAnd then that miserable, hyphenated word shows up, “bail-in”. This is in reference to the UK regime’s strategy.
Screen Shot 2015-06-18 at 10.24.23 AM
And, although wordy, the US strategy is equally bad, if not worse (if you are a creditor or equity holder of any kind).
Screen Shot 2015-06-18 at 10.28.24 AMNo need to summarize any of this, it’s all written in their own words.
There is plenty more of interest in the document, but for the sake of brevity let’s stop here.
Now how does this all relate to Greece? Whether or not capital controls are implemented or bail-ins are initiated this weekend, when it happens, it shouldn’t be news. The writing has been on the wall for years, and anyone with a little Google-fu can find the relevant information on the internet, sourced directly from the Central Banks and financial institutions themselves. While the MSM is pumping “this weekend” as some type of big event, they are kind of like the weather man in the sense that they can always be wrong and never get fired. But, just like the weather, that freak storm is going to come one day.
Unless you are already in Bitcoin, you don’t own your money. At least they are nice enough to tell you that though, right on the paper it says “note”.
DEFINITION of ‘Debt Instrument’A paper or electronic obligation that enables the issuing party to raise funds by promising to repay a lender in accordance with terms of a contract. Types of debt instruments include notes, bonds, certificates, mortgages, leases or other agreements between a lender and a borrower.Debt instruments are a way for markets and participants to easily transfer the ownership of debt obligations from one party to another. Debt obligation transferability increases liquidity and gives creditors a means of trading debt obligations on the market. Without debt instruments acting as a means to facilitate trading, debt is an obligation from one party to another. When a debt instrument is used as a medium to facilitate debt trading, debt obligations can be moved from one party to another quickly and efficiently.
In summary: While the people of Greece may not have a significant impact in BTC buy volume in the coming days, the psychological impacts felt globally after they are Cyprussed should start to push educated investor’s money into non bail-inable crypto-currencies. When we look back on these interesting times we live in, many will wish they bought BTC at $1,200 and rode it all the way down (then back up again), rather than having unspecified amounts directly taken from their bank accounts. As the famous saying goes, “if you don’t hold it, you don’t own it”. Holding bitcoin, and your own private keys securely, is an excellent hedge against upcoming financial turmoil. Just remember, if you decide to go boating, don’t bring a paper wallet. If you do, make sure it’s laminated. We wouldn’t want any accidents to happen.
Screen Shot 2015-06-18 at 11.14.21 AM

Life Is A Pump And Dump, Front Run The XCP Pump

Spend enough time in the right niches of the bitcoin community, and you are bound to hear “life is a pump and dump” almost too frequently. Unfortunately for traders, the only pumping bitcoin has been doing recently has been in the amount of outstanding USD swaps and margin longs on BFX. Three months of stability, but not everywhere. Some of the more savvy traders have moved over to 1broker to take advantage of the side effects of Central Banking Gone Wild (Summer Edition), but there has still been plenty of action in crypto. A quick look at the Altcoin section of Bitcoin Wisdom shows that quite a few of the “leading” alts have been pumped, and are now being dumped, by bitcoiners with a lot more free time on their hands than we have.

Screen Shot 2015-06-13 at 2.53.50 AMOur focus at shitco.in is on the technology that will revolutionize finance, not some shitty, illiquid altcoin that’s going to be dumped on a new cryptocoiner, likely giving them negative feelings about the whole space.

Last week, while everyone was Reddit arguing over the block size non-issue, a rather substantial piece of news slipped under the radar.

But one thing first about the block size argument, because the drama there is almost worse than the OKC drama (we are waiting for more). Keep arguing and making yourself look bad people, it’s excellent theater. If a suitable conclusion isn’t reached, I’m sure Satoshi will re-appear (re: Dorian situation) and give us the answer (and maybe even GitHub the code for us).

Anyway, so back to that news headline: Symbiont Raises $1.25M Seed Funding from Former NYSE CEO for ‘Smart Securities’ on the Blockchain

We recommend reading all of these full articles for full context.

As Bitcoin Magazine reports:

In March, Bitcoin Magazine reported that Counterparty founders had joined with MathMoney f(x) and its founder Mark Smith as co-founders of the new fintech company Symbiont

Symbiont has announced that it has secured $1.25 million of seed funding from influential financial market leaders including Duncan Niederauer, former CEO of the New York Stock Exchange (NYSE). A ‘Series A’ round of institutional investment is expected to close in the third quarter of 2015.

So why is this a big deal? Anyone who follows Counterparty would have seen this post on March 10: Announcing Symbiont – Building the Next-Generation Platform for Financial Markets

From that blog post:

[in regards to Counterparty]

With the approaching release of the Turing Complete smart contracts system on mainnet, we are at the point where less work needs to be done on the core protocol and more on tools and services that make use of it.

Symbiont is our next step in that direction. Because Symbiont’s technology platform will be based around Counterparty, the core Counterparty technology will remain open source, and will benefit from the greatly increased resources and sustainability this change brings.

We’re all very excited about the potential positive impacts not only to Counterparty, but to the blockchain’s adoption in the systems that power modern finance…

And then on March 31st, this was released: Symbiont Creates Ripple Gateway for Counterparty XCP

Symbiont.io, the blockchain based FinTech startup bridging the gap between mainstream finance and crypto-financial technology, has announced its first product: a Ripple Gateway for Counterparty, over which XCP, Counterparty’s native currency, or any other Counterparty asset may be sent.

“Symbiont is proficient with all of the most advanced technologies in crypto-finance, and is always ready to use the right tool for the job. With this marriage of the Counterparty and Ripple networks, each benefits from compatibility with the other, and the whole is greater than the sum of its parts,”…

In summary, Symbiont is working with all of the leading technologies in crypto-finance (so others besides Counterparty too). Being that the founders of Symbiont are also the founders of Counterparty, we would expect a large number of their projects to be XCP based. They also have an intimate knowledge of the technology, being that they built it.

For anyone who doesn’t know the intimate inner workings of Counterparty, here is a fact worth knowing (in regards to scarcity):

XCP is the fuel for smart contracts. When smart contracts are running, fuel is used for each execution step. Appropriately enough, this fuel is burned (destroyed). This means that the supply of XCP is continously decreasing. However, the cost of fuel adjusts proportionally as the supply of XCP goes down, so that it cannot reach 0.

So how does this relate to pumps and dumps? While everyone was busy fucking around with worthless alt coins, investors who look at the fundamentals and pay attention to worthy news, were busy accumulating XCP.

In addition to the data points mentioned above, also consider this. On February 4, 2015, Coindesk confirmed that the Counterparty developers had left Overstock’s Medici project.

Screen Shot 2015-06-13 at 3.33.17 AMFor perspective, here is the all time XCP chart:

Screen Shot 2015-06-13 at 3.55.56 AMIt’s pretty clear, with the XCP price near all time lows the last few months, that anyone who believes in the Counterparty technology should have been taking advantage of the sale. With a $1.25m seed round from very prominent investors, and a Series A coming in Q3 (estimated), Symbiont has plenty of funding and backing to pursue a variety of Counterparty based projects. The XCP all time high spike was caused by the Medici news, which was far less significant than the recent news regarding Symbiont, and the relationship they have with Counterparty. Granted, that ATH spike was definitely attributed to some FOMO from the simultaneous BTC bubble, we see at least some upward movement from here. We don’t have a target, don’t care to make one, aren’t investment advisers and don’t give investment advice.

By the way, can someone please make a decent charting website for XCP?

Disclaimer: We are long XCP. While everyone was out chasing unicorn dust in alts, we have been accumulating XCP, bitchez.

X – The Future Of Food Supply Chains

A little over a week ago, Coindesk came out with an excellent article titled: How Bitcoin’s Technology Could Make Supply Chains More Transparent

The piece outlines the potential future uses of bitcoin/blockchain technology, in respect to increasing transparency of supply chains (the article specifically refers to food products). If you haven’t given the article a read yet, we definitely recommend you do in order to grasp the full scope of this post (we aren’t going to rehash the article).

Exactly a year ago (this week), the Shitcoi.in staff were in Barcelona on a debaucherous journey. Somewhat pissed off, after looking for two bitcoin ATMs and turning up empty handed, we decided to grab food. As frequent Barcelona visitors, we have our favorite places to eat, but are always on the lookout for something new. Our preference is to only eat organic, locally sourced and sustainable.

The common theme of conversation on that trip was the ongoing decentralization of everything, and its direct impact on our lives. Our indecisiveness on where to eat led us to start drinking, and a few Estrella’s later we came up with the framework for what we would later decide to name – X.

X (which usually marks pirate treasure on a map, duh), was what we decided to call “reverse Uber for food”. That reverse Uber part might need a little bit of work, but we’re willing to adjust.

The idea is to create a phone app for finding local food that actually works, i.e: doesn’t show “eye candy” as a characteristic of the restaurant you are looking at (re-reading our notes actually made us lol at that part). Part of the solution was creating an intuitive interface with which the user could view hoards of data, including entire supply chain information. The other part of our solution is our sustainable revenue model, which is not ad based.

Here are some of the notes that we took originally.

Challenge: Eating healthy is tough in itself, eating healthy in a rush or while on vacation is even more challenging. While a Michelin star or a restaurant run by a student of Ferran Adria may denote an acceptable food consumption venue for some, these indicators are not an end-all for most. Today’s food app solutions are based around a centralized, crowd sourced “internet 1.0” architecture. Rather than attempt to fix this flawed model (as many have done in the past), we propose: building a new, decentralized system. In essence, re-inventing instead of repairing.

All of today’s apps (especially revolving around food) are terribly centralized, full of fake reviews/false information, can be out of date and don’t provide the information that most healthy hungry people want to see. Opening TripAdvisor is just about as useful as skimming through Time Out XXX, with “eye candy” apparently a relevant indicator of food quality.

Part of this re-inventing includes a viable revenue model, something many startups in the social media/app/tech space lack today. Restaurants typically pay a minimum of 2-5% (sometimes as much as 10% or more) in credit card fees to their credit card processors. By requiring our customers to pay via Bitcoin (directly in the app), we can still take a fraction (micropayment) of the total from each bill and save the restaurant money on their bottom line. The user is incentivized to use the app because of a) the content and b) a free item, which will be given to them by the restaurant for dining with them any booking/paying with X. The savings in credit card fees subsidizes the free item for the restaurant, and there is no worry of chargebacks.

What we are seeing today is the de-centralization for everything. From transport (uber), to energy (solar, wind, urban renewable) to food (urban gardening/local-organic) and across many other areas. As the details of the modern food industry, GMOs, antibiotics and corporpations etc…. add more here have been divulged to the general public, more people have sought to maintain a healthy lifestyle and avoid many types of products. Talk about Pacific ocean fish here. People are seeking fresh, natural, locally grown food. Today’s apps might show us what is “popular”, but gives us no way to actually judge the quality of the food we are eating.

Our “solution” would consist of 3 different pieces. What we would like to produce is a software package.

  • software at the customers site (could possibly be inventory tracking and realtime revenue tracking) Re: Moto – Chicago
  • cloud based processing and database – store and process all of the relevant data
  • app for smartphone – for the customer to interface with the cloud data

 

The goal is to keep things as simple as possible, as we believe simplicity = success.

 

What are consumers looking for?

  • Non GMO/Organic/Grass Fed
  • How fresh are the ingredients
  • Where is each ingredient sourced from
  • Can I research each of these on my own to verify
  • Where is the closest place I can get the best of all of the above?
  • ?? Maybe it can show how many tables are open??

Our software would require each restaurant to keep track of their ingredients via their “terminal”. This would be constantly updated to the cloud database for processing and retrieval via the app. The app would simply show a map of the users location and the closest restaurants that were “partners”. The different restaurants would be ranked via a proprietary algorithm, which would take into account the freshness and “organic’ness’” (we could create some key word here that could also be part of our app name) of each product that the restaurant used.

The goal is to stay away from the traditional metrics that we see on EVERY food site today (grubhub, tripadvisor, etc). We may want to also include a $, $$, $$$ ranking, but should try to keep the filters as simple as possible.

There is the possibility of programming a revenue tracking section to the “terminal” that would be housed at each restaurant. This would be used to help track revenue loss from expired ingredients and could be used to model future purchases from vendors.

OUR REVENUE MODEL:

Currently, restaurants pay anywhere from 2% – 10% in credit card fees to their processors. Using Bitcoin to pay, there will be a ~1% fee for transactions. An additional ~1% can be added on top of that (our processing fee) and there is still enough money left that promotions could be added without any loss for the restaurant. At this point, Bitcoin has passed the threshold into the mainstream, and the simple fact that using Bitcoin IS our revenue model will attract a large amount of media attention. The additional incentive for the restaurant owners is that there are no chargebacks with Bitcoin.

We even threw together some fun slides (here are a few of them):

X (food app) Presentation 1 X (food app) Presentation 2 X (food app) Presentation 3 X (food app) Presentation 4Obviously the idea is unfinished, we would love to revisit it. Just to clarify (in case you were wondering), yes, this is what we do for fun sometimes… Any VCs want to throw some money our way and move this forward? misinfo@shitco.in

Bears Dump On Bitlicense

Lawsky and the NYDFS released the final version of the Bitlicense today. While bitcoin community members have been internet fighting over regulation, the bottom line is that it was coming one way or another, deal with it. If individual companies feel that the current framework is too restrictive, Lawsky stated that the NYDFS would be willing to re-visit the license and amend it as necessary.

Taking a look through the license, there are a few things that we feel are important to point out.

Final Bitlicense can be found here.

Screen Shot 2015-06-03 at 12.21.15 PMThis is great news for anyone worried about their exchange running a fractional reserve, trading with customer funds, etc. What it also appears to mean, is that US based exchanges can soon begin running a BFX style swap system.

Screen Shot 2015-06-03 at 12.22.50 PMThis aligns with FinCEN’s previous statement, which can be found here. While one day we hope that bitcoin will be recognized as legal tender, the regulators aren’t there just yet.

Currency vs. Virtual Currency

FinCEN’s regulations define currency (also referred to as “real” currency) as “the coin and paper money of the United States or of any other country that [i] is designated as legal tender and that [ii] circulates and [iii] is customarily used and accepted as a medium of exchange in the country of issuance.”3 In contrast to real currency, “virtual” currency is a medium of exchange that operates like a currency in some environments, but does not have all the attributes of real currency. In particular, virtual currency does not have legal tender status in any jurisdiction. This guidance addresses “convertible” virtual currency. This type of virtual currency either has an equivalent value in real currency, or acts as a substitute for real currency.

 

What we find to be the most important piece of the new Bitlicense is something that most will overlook. In the 2014 version (here), there was a part at the bottom of page 14 that caught our attention.

Screen Shot 2015-06-03 at 12.25.46 PMScreen Shot 2015-06-03 at 12.25.52 PM

 

 

Sneaky, sneaky… so once hyperbitcoinization sets in, and no one wants that dirty fiat, the original plan was to use the trash cash to continue supporting the ponzi.

This is NOT in the new Bitlicense, and we thank you for that Lawsky. Overall, this is an extremely exciting day for Bitcoin. Although not all welcome regulation, the proposed framework does not seem too restrictive business wise. Anyone with $5,000 per application (to pay for your background check and associated fees) is now free to send in their fingerprints and completed forms to the NYDFS to review.

The OKCoin Hindenburg Omen

no… not the TA kind.

Another day, another fun filled piece of OK Coin drama. Luckily we are just reporting on the actual events taking place, because we couldn’t make this shit up if we tried. When we left off, OKC had fired the last shot – presenting their research from Ben McGinnes to the public. We tried to give OKC the benefit of the doubt with this, knowing that the hole they won’t stop digging will eventually cave in. But as Vitalik Buterin quickly pointed out, their attempt to sweep the issue under the rug, has significant flaws:

My primary technical concern with the report: I am highly skeptical of this idea that it is “not possible” to manipulate timestamps. Particularly, the way I would do it is by shutting off internet access, maybe switching to a fresh linux installation, and setting the system time to whatever I want before making the document. Maybe not grandma, but uncle Bob could certainly do it; very few technical chops required except to realize that the steps are necessary in the first place. Why would that strategy fail?

As CZ later states:

The fact that OKCoin paid $20,000 USD for this “analysis” demonstrates the level of quality in their “proof” or “evidence”. It may also show a sign of desperation and/or stupidity. I am not sure which.

A few hours ago, CZ came forward with a full statement on Reddit. CZ’s post pastebin is here, in case that is deleted. Although he has interjected intermittently, CZ has chiefly remained silent on the issue (the only person at OKC to act like an adult, and he isn’t even working there anymore). We don’t blame him for coming forward today though, especially after his personal reputation was dragged into this as he was accused of forgery (a very serious crime).

CZ starts off by admitting a slight misstep on his part, something OKC has never done throughout this situation.

I made the mistake of using a simple gentleman’s agreement as the contract. Roger and I are friends. We have enough respect and trust for each other that we both thought a simple gentleman’s agreement would suffice. I did not expect OKCoin will delay or default on payments of $10k in size. For this I apologize. I also did not expect OKCoin would not pay my salary for the time I spent there.

This answers some of the questions that Reddit users had posted, as the contract did not specify venue, or have other legal nuances that a typical contract will include. Regardless, a contract is a contract, and should be honored under any circumstances.

CZ makes claims that OKC forged his signature on bank documents after his departure and hacked/gained access to his QQ, but these are unsubstantiated as of now. The following claims have also been made by CZ, and we feel that they are important for the bitcoin community to take in. We still don’t know if these claims are 100% true, but coming from a former employee (and others), smart traders should be able to form their own opinion. It is interesting how CZ refers to the database admin as “funding”, inferring that OKC may have some financial inconsistencies. The “fake volumes” portion is no surprise to most bitcoiners, these allegations have been ongoing for over a year.

Bots

I can confirm OKCoin runs bots on their exchanges, under instructions from Star Xu. These bots are managed by Chen (business and operations), Yu (programming), Wang (database admin, “funding”). Many employees and ex-employees of OKCoin are aware of these bots. I will not name them all here.

Fake Volumes

I can confirm some of the above bots are designed to pump up volumes. During certain periods, these bots have also been used in a manner to create orders that will only trade against themselves, not with user orders. This mode of operations was strongly resisted by even Chen and Liu (programming, matching engine), but Star Xu insisted on executing it.

Fake Proof-of-Reserve

I can confirm OKCoin removed a number of accounts (used by OKCoin bots) to pass the Proof-of-Reserve audit in Aug 2014. In essence, these bots trade on fractional (or fictional) reserves. Stephan Thomas was lied to during the audit. This is an unfortunate limitation of the proof-of-reserves method.

As a side note, Stephan Thomas specifically did not want any compensation for his audit efforts. Before the audit, OKCoin offered to make a donation in his name to a charity of his choice. He named a charity. After the audit was carried out, OKCoin never made that donation. Zane is aware of this. In fact, Zane followed up with Star several times after the fact, Star refused.

What the fuck is so difficult about OKC providing us with SOME proof of reserves? All they keep referring to is this shitty blog post (more on this later), which proves NOTHING. Let’s take a look at Kraken’s policies? Their extremely thorough policies are outlined, in detail, and even shortcomings are presented to their customers. And what is this about future audits being performed in a manner that should satisfy their customers?

We intend to perform regular audits on an ongoing basis. Since there is no universally trusted auditor, we may use a different auditor, or multiple auditors each time. This satisfies those who may doubt the credentials of a particular individual auditor.

They then walk through the steps to verify your individual account balance. As they note themselves, their audit isn’t perfect, but its pretty damn close. BRB while we go find Star’s mom to verify the OKC cold storage.

There have been unsubstantiated claims on Reddit that OKC never actually received the investments that they claim. Again, these rumors have NOT been proven true (yet), but a person can start to put the pieces together themselves if they wish. Pastebin of those rumors is here.

Edit: It has been confirmed that some of the above rumors are false. Mandra, Ce Yuan and VenturesLab have made investments in OKCoin.

And from CZ’s post today:

Opaque Financials

As the 2nd largest individual shareholder in the company at the time, I was never allowed to see a bank statement, even though my name is associated with several bank accounts of the company. In Jan, I asked strongly to see the bank statement where the VC investment money transfer was received, I was denied. I left shortly afterwards.

As many were curious before, this is the meaning of “different directions”. I could go on for a while. But will stop here. I feel sad we had to come to this.

 

We knew that a post from OKC would soon follow (in their typical fashion). Not long after, one popped up: OK Coin’s post (presumably Star) is here, in case that is deleted. This post appeared only 5 hours after CZ’s, and contains a considerable amount of text. One would guess that OKC began this post almost immediately after they saw what CZ had posted, and then released it to the world (and edited it). Let’s think about this for a second. The “leading global bitcoin exchange” should probably have their PR people write anything which represents the company, which should be sent to their legal department (which should be fluent in both English and Chinese) and then it should be approved for posting. That is, of course, assuming that its proper business etiquette to take anything like this into the public forum. Wouldn’t it be more appropriate to have an OKC lawyer post something if they felt the need to address the situation publicly?

The first part of OKC’s post is their same bullshit before about the video. Guys, no one cares. Next, they start attacking CZ and his skill set. Let me get this right OKC, you are telling us that a guy who has been using PGP to sign his e-mails since 1998 has no technical know how?

OKC mentions the following:

OKCoin has always had suspicions that CZ betrayed the company. Would you write a contract where the other side could cancel the agreement at anytime while you could only stop the contract after 5 years? Would you put yourself in a position where you provide resources to develop the website to only be taken away by Roger at anytime?

Given the conduct of the company throughout this matter, it wouldn’t be surprising if OKC knowingly entered the contract. They clearly don’t have their shit together management wise, and the first half of this post where they unprofessionally attack CZ as OKC is just more evidence of that (and how childish they are). Regardless of what an individual says, a company must take the high road.

On to OKC’s responses of CZ’s allegations:

OKCoin even offers a paid service to help high frequency traders by setting up co-location for our customers.

WOAH. MAJOR RED FLAG. As if the situation they already put themselves in with this contract isn’t enough, why the fuck would anyone trade on this exchange knowing this information? For more information on co-location:

This practice is known as collocation, and it’s employed by nearly every exchange in the U.S. For a fee, trading firms are allowed to place their trading computers in the same data centers that house an exchange’s computer servers. With sophisticated models built into these trading computers and little oversight on the exchange itself, the computers are almost guaranteed to be the first on any order should they choose to act on.

Wall Street Journal – Colocation: The Root of All High-Frequency Trading Evil?

HFT’s big advantage is co-location or speed which helps keep their bids and offers at the front of the order queue.

Fobes – High Frequency Trading: Is It A Dark Force Against Ordinary Human Traders And Investors?

 

This week, New York Attorney General Eric Schneiderman is expanding efforts to “shine a light on unseemly practices that cater to high frequency traders at the expense of other investors.”

Among them is the practice of allowing high frequency traders to co-locate their machinery in the exchanges, giving them a latency advantage over other firms outside those datacenter walls.

Schneiderman detailed several of the products and services that high frequency traders use to gain competitive advantage. These include early access to proprietary data feeds, which are faster and more accurate than what is publicly available, as well as co-location practices that allow firms to house their servers inside the exchanges.

Enterprisetech – NY Attorney General Cracks Down On HFT Exchange Co-Location

OKC claims that they do not use any “bots” of their own, but what is the wood chipper then? Do they pay some tweaked out Chinese guy to sit there and click the mouse really fast to clear margin calls?

CZ does not understand what an audit is? Well then, as a C level exec of the company, shouldn’t he be clued in? Sounds like OKC doesn’t know what an audit is, because they haven’t actually shown us anything since August 2014 (with no evidence). Take some notes from Kraken’s audit process above guys.

Regarding the cold wallet, WHY do you keep pointing us to that pos blog post? Words mean nothing, show us the public key. This is one of the three questions from shitcoin that OKC has still not answered.

After the recent BFX hack, users were able to track this wallet and this wallet to their cold storage. That is over 200,000 bitcoins, where are yours?

Moving on:

OKCoin is currently withholding CZ’s January 2015 and February 2015 salary due to the following reasons:

a) We are currently still in the process of transferring CZ’s ownership of our international entities. Once CZ has been removed from all documents, we can release the rest of CZ’s salary.

b) CZ until now, has not returned company property including the MacBook he was given.

c) CZ has not explained his forgery of the v8 contract.

However, since OKCoin pushed CZ out, OKCoin still agreed to pay his wage for January 2015 and February 2015

OKC admits to withholding CZ’s salary, and admits that they agreed to pay it.

a) One of your international entities? What, like the one in Singapore that doesn’t exist? This brings up another one of the 3 questions that shitcoin has for OKC which has not been answered yet. Can you please outline your corporate structure.

b) Maybe he isn’t giving back the company property until you pay him? You owe him $40,000 USD, that’s more than most American’s make in a year.

c) This just sounds like you are asking for ransom now.

 

Finally, OKC addresses something we have been inquiring about (kind of, they don’t answer any questions though).

OKCoin’s lawyer Li Ya Jun’s contact information can be seen on our website.

Heading over to the OKC website, he is now mentioned:

Screen Shot 2015-05-30 at 2.08.55 PMBut why are we going to take their word for it. As we have seen with OKC, it’s always best to check sources. A quick use of the old Google machine brings up the following law firm: http://www.jingzelaw.com/index.aspx

Heading over to the partners tab, WHERE IS HE!!!

Screen Shot 2015-05-30 at 2.21.47 PMWe wish that it just ended here and we found out that OKC is lying, but the actual truth is much more humorous. Some more searching lead us to this page – http://www.jingzecn.com/page/369.shtml

which appears to be some kind of mirror of the other site. Li Yajun can be found on this site, but we’ll get to that in a second. From the firm’s about us:

Our firm is made up by a group of expert-style lawyers

Excellent, a group of expert “style” lawyers. We know this is just nit-picking at a language difficulty, but we can’t help but laugh.

Finally, we come across Li Yajun. Yes, he is a partner… but look at his expertise and prior work experience. Quite the resume, but not who you would expect to represent “the leading global bitcoin exchange”, which should be considered a financial institution.

Screen Shot 2015-05-30 at 2.31.03 PMIt is clear that Li Yajun does exist, and that he is a lawyer, but this just opens OKC up to more easy bashing. If you are the “leading global bitcoin exchange”, wouldn’t you go out of your way to find a legal team who is well versed in cryptocurrency? Roger, as an individual, did so. I would hope that the “leading global bitcoin exchange” would have more resources dedicated to legal and compliance than an individual.

So, in the end, we still have 3 questions for OKC which haven’t been answered:

1. Can you show us your cold storage wallet and proof of BTC(XBT) reserves?

2. Do you have an English speaking lawyer that is interfacing with US authorities, to ensure that OKC is in compliance with US regulations?

3. Can you please outline your corporate structure for the community.

 

To all OKC traders who aren’t reading the writing on the wall. We are sorry for your future loss.

Recent OKC Temper Tantrum Makes Researcher $20k Richer

The last thing you want to do when it’s really nice outside is sit and read through/analyze documents. Even worse, is when you finish, and realize you just wasted hours of your life that you will never get back. If you haven’t guessed, yes… this is related to OK Coin.

Today, they took their turn in evidence presentation to the Bitcoin community and general public. In this Reddit post, the CEO (Star) gave his arguments, and side of the story regarding the document forgery. Pastebin here in case that is deleted. As expected, none of the other pressing issues the community has been hounding OKC about were even remotely addressed. Shitco.in has our own questions for OKC, they were outlined in this post.

As part of their evidence, OKC posted the following video:

Almost as if their goal was for this to be the focus of the post, the link and “subtitles” (Guys, you REALLY have to start learning proper English. Maybe, “walk through” would be more fitting.) take up a full 1/3 of the Reddit post. Most ADD Redditors probably stopped there. To anyone who doesn’t know Chinese, the video is pretty much worthless because you have to take their word for what is going on. They move so fucking fast through everything, and it looks like they used a potato to record it. Yes, we paused the video a million times to see what as going on, but if you are presenting “evidence”, it should be much more user friendly. The conclusion that they want us to draw, is that a former employee (CZ) is the culprit.

After this, we have a sliver of the report which was written by Ben McGinnes. Again here, we have to analyze the specific format that OKC chose to insert this into the Reddit post, because to us it is just hilarious. Someone went out of their way to write a 20 page report not making you look like total assholes, and you bury the link directly to the PDF in a 3 character hyperlink? Then there is a link to the site where the report is posted, but users have to click another link just to view it? Click here to view the report. Yes OKC, we gave that PDF more exposure than you did (by 6 characters).

The report that Ben presents is extremely thorough, very well documented and very professional. Overall, it looks like a very solid and well researched piece of work (great job Ben). We took the time to look through the sources, read through everything and fully digest the information presented. The entire report is interesting, but the most relevant part to our readers would be the conclusion:

Screen Shot 2015-05-28 at 11.46.03 PMScreen Shot 2015-05-28 at 11.46.42 PM

In summary, we have OKC admitting that there was a file modification, but because it wasn’t Star – its OK! Roger’s cryptographic dis-proof of fraud bounty hasn’t been collected, and OKC tries to sweep this under the rug by paying out their bounty and attempting to make a public event out of this “conclusion”. The key word from the last sentence, attempting. Honestly guys, we have had more posts on the front page of Reddit (for longer) than the “leading global bitcoin exchange” regarding this topic.

Even if the v8 of the document were “real”, OKC would still owe Roger money for the months they managed the domain. If OKC thinks that this makes them look any less sketchy, they must have some fine narcotics in China because this is even more incredible than before this recent temper tantrum. CZ was the CTO of OKC, a C level exec of what should be considered a financial institution. While we are aware that fraud in existing financial institutions runs rampant, shouldn’t there be some sort of cross check system within any organization for legally binding contracts? How does it change the situation that there was a fraudulent document introduced, that was signed off on by a then acting officer of the company? Oops, sorry. We mean “officer of the brand”. To us (and probably the legal system), this still constitutes fraud.

We still would appreciate answers to the following 3 questions:

1. Can you show us your cold storage wallet and proof of BTC(XBT) reserves?

This Reddit post outlines your policies, as if it is meant to ensure users their funds exist. Even more hilarious, are the posts in that thread of people bashing OKC months ago.

2. Do you have an English speaking lawyer that is interfacing with US authorities, to ensure that OKC is in compliance with US regulations?

3. Can you please outline your corporate structure for the community.

OKC Races the NSA To Beat Cryptography

In a dramatic turn of events over the weekend, the OKC/Ver situation that had “gone nuclear” on Friday, appears to be more of a long lasting Fukushima type incident than an atoll test. Read our overview of part 1 and part 2 if you aren’t all caught up.

We thought the story couldn’t get any more ridiculous, but thanks to the public actions of “the leading global bitcoin exchange”, we are in full blown unicorn territory. In what appears to be a move of desperation, the OKC CEO (Star) took to Reddit in an attempt to clear the air. Pastebin is here, in case that post is removed. Ironically, but not surprisingly, this posting only inflamed the situation further.

In what appears to be the only attempt at negotiation OKC is capable of, they are now offering $20,000 USD to anyone who can prove they are right, and Roger is wrong.

OKCoin will reward $20,000 USD to anyone with authentication skills confirming that the digital and hardcopy of v8 are genuine and signed from December of 2014 by our former employee.

Ok, so at first glance that might not seem too insane… but if you take about .5 seconds to think about the situation, is it ludicrous. In summary, OKC is taking on the NSA in their attempt to break cryptography. If you were one of the individuals who failed the Cicada 3301 challenge, here is your next opportunity.

For those of you that are just joining us, the last few days have been a smorgasbord of deliciousness in the drama that makes up bitcoin.

OKCoin, we at shitcoin, would like to ask you the following:

1. Can you show us your cold storage wallet and proof of BTC(XBT) reserves?

This should be trivial, at best. Stop hunts aside, the community wants answers.

2. Do you have an English speaking lawyer that is interfacing with US authorities, to ensure that OKC is in compliance with US regulations?

3. Can you please outline your corporate structure for the community. Mark Karpeles (of all people – and we thank you Mark, in a non satirical way) posted the attached research paper.

We could go on, and on… and on. Let’s just leave it here for now though.

Although short, this post took a considerable amount of time to complete because we kept deleting quality shit in order to keep the butt hurt level down. It probably would have been much more humorous had we left some of the original content, but we don’t want to rock to boat too hard. We are hardcore bitcoin believers, that’s why this shit is so hilarious. Yajun Li, we want to ask you: Have you reviewed the investment contracts that Tim Draper sent over via Googe Translate? How does a term sheet look after you run it through Google Translate? Does Lawsky use Google Translate as well to communicate with OKC? How do you say business suicide in mandarin?