CEO of porn cryptocurrency disappears with investor money
nypost.com
nypost.com
However, this is weird: “Within hours they refunded me ethereum with a dollar amount equal to what I had contributed in early September, but since the coin has more than tripled in value since then, they kept the rest of my contribution, essentially stealing quite a lot of money from me.”
Yeah, that's bullshit. They owe you your money back, they don't owe you the gains that you would have gotten if you had speculated in Ethereum instead.
Edit: so if that is indeed the scam then essentially the claim of wanting the returns on ETH is saying that the mark deserves them because the gains were ill gotten via transferring the risk to the mark.
They would announce their miner, get massive presales in BTC, then 6 months later when customers are getting anxious they would start refunds. And, of course your refund is in the USD amount from your BTC at the price 6 months ago, not at current USD price. The miner company just stole your profits!
* Buy some of coin X
* Use that to buy some cash equivalent good that has a return policy (longer the better)
* If X appreciates by the time the return policy is up, you return the goods, collecting the gains.
* If X depreciates you sell the goods for cash in USD which likely won't have varied much in the intervening time.
* Repeat, and you will have effectively captured 100% of the increase of X while completely derisked.
But legally, ETH is not a currency. If they take this to court, the court will award the original USD price. They bought an asset worth $x. They are owed $x.
When we get away from this funny money "we're inventing currencies" bullshit, there is a law of the land. An asset was promised, and they are owed the value of that asset when purchased, in USD.
That's not true at all, outside of very specific asset-classes.
A better analogy: let's say we make a trade where I pay you in land, and you don't give me what I'm owed in that trade. I would expect my land back, not its dollar-value.
We do things this way, in the case of land, precisely because my land might turn out to e.g. have gold under it that might make it worth 100x more. If you conned me out of the land, and then found the gold, guess what? That's rightfully my gold.
Refunds aren't legally equivalent to suing for damages. If someone doesn't give you a refund for breaking a contract where you transferred an asset to them, your legal fallback isn't suing for damages; it's suing to get a court-order to execute a seizure in order to reclaim your property, or the things it has in turn been traded for by the contract-breaker. (You know, like repo companies do when you buy stuff on a credit card and then let it go to collections!)
https://thebusinessprofessor.com/knowledge-base/voidable-con...
In cases of fraud, the deceived party may also bring a tort, which is awarded in USD. But as for the actual contract, the court would rule that it never occurred, and so in the eyes of the law ownership of the ETH never changed hands.
It gets a little complicated with cryptocurrencies in that they effectively setup a separate ownership structure enforced by cryptography and independent of the laws of any one nation. So the court may rule that the Ethereum never changed hands and so still belongs to the original owner - but the blockchain says otherwise, and good luck convincing 51% of miners (many of whom are not U.S. citizens) that they should mine a transaction just to resolve this one case.
As an example, if I give a broker stock and then ask for it back, they have to give me the stock back, not the cash value at the time I handed it to them.
Also, I'd like to see what law you have in mind when you say ETH is not a currency. Is there some special legal recognition for "real" currencies? If so, what law specifically distinguishes them?
Legally I am with you 100% that the investors are out of luck. That's the price of "investing" in a highly speculative vaporware "currency".
Nope. "Legal tender" means just that. If you want to be repaid in something other than a jurisdiction's legal tender, you have to specify that in the contract.
Disclaimer: I am not a lawyer. This is not legal advice.
The term you are looking for is "legal tender". That's the thing that has the property that if you pay your debt with it, the debt is considered settled. US$ is legal tender, but ETH is not. Of course, one could try to sue for fraud and lost profits and stuff, and may even win if by some weird chance the contract specified refunds in ETH, but then good luck collecting on that judgement. More likely, contract didn't, and then tough luck.
as ETH is a volatile cryptocurrency and not US legal tender at all, while USD is the exact opposite: a fiat currency considered legal tender not only in the US but worldwide.
You lend me 1,000 USD and then demand it back 12 months later. Can I give you 1,000 euro or 1,000 swiss francs instead? I doubt it. You'll want 1,000 USD back, or at least the equivalent to what $1,000 USD is worth now.
So they should have provided ETH back, but didn't because it went up in value. Super dodgy and very convenient. I bet they would have provided it back in ETH had the value per coin fallen.
Assuming the euro gained 10% value in the interim, are you claiming as an investor before the investment vehicle was realized that you are rightfully owed $1100? Or the corollary, had the Euro tanked to 10% of value, would you accept $100 back without complaint?
I think you are conflating investment and ownership.
That grown value in Euros is value grown inside a corporation and either you own some of it, in which case you will get dividends, or you made an investment with some limited risk in which case it's your investment value that is relevant. I believe if someone lost your money without completing the terms of investment you would have legal recourse.
Had the ICO people given worthless ETH back they could have been sued for the difference, investment terms willing, IMO as a non-lawyer.
Both EUR and CHF are currently worth more than USD, so that might not be the ideal example to make your point.
Not exactly an apt comparison.
Or is it "all privilege, no responsibility"?
As in - how many people are making gains declarations when they liquidate cryptocurrencies? Wanting protections of a system but refusing to participate in some aspects of it is much like having your cake and eating it too.
That's a huge "if".
If they invested 1 eth token, give them back 1 eth token.
Depends on the contract potentially. It's why most larger business arrangements that could even possibly include such a refund (as part of the contract), will have specifications covering that. I'm curious what was in their agreement, if anything. For example, if it had a clause that allows for returning the dollar invested sum.
A court will usually find against you if you repay in a debased currency or similar however. If I tried to repay a loan, with no contract, in Venezuelan bolivars based on their former value on the date of the origination of the loan five years ago, that wouldn't get anywhere in a court of law, you'd lose easily.
All indications are that they're going to view these as securities.
Consider the equivalent situation in ForEx terms: you pay a Mexican company $10 USD for a product, and then, six months later—when the value of USD/MXN has gone up—you ask for a refund. You'd expect back $10 USD, right? Not some amount of USD equivalent to the amount of MXN $10USD would have bought six months ago.
In this case, they paid in in ETH. So you'd expect that ETH in at point-of-sale, would equal ETH out at point-of-refund. That would be giving the investor their money back—money denominated in ETH.
That's how this works. You can call things currencies but that doesn't make it so, the legal system is an arm of he state, and states have one kind of currency, they get to decide what it is, and the they have guns and jails if you don't like it.
Say I'm dealing with a subsidiary of a Mexican corporation that operates in the US. They ask for payment in MXN, but both they and I know they're going to send it to their parent corporation, converting it to MXN in the process. They and I also know that, to get the refund, they'll have to pull MXN out of their treasury and convert it back to USD. But I still did pay USD to the subsidiary—my card didn't automatically convert USD to MXN to pay them or anything.
I would expect, in this case, that my refund should happen from the subsidiary, and should be the original USD I transferred, even if that now costs them more to convert back than it was worth going in.
However, I would also expect that if the corporation entered bankruptcy, and was unwinding its debt obligations, then I, as a creditor, would probably only see the current MXN value of the parent corporation's liability to me. (Or rather, the subsidiary—who owes me the money—would unwind with no assets held to pay out, so I would then sue the parent corporation for said assets, and end up with MXN.)
Yeah, that's bullshit. They owe you your money back, they don't owe you the gains that you would have gotten if you had speculated in Ethereum instead.
I agree. If it had gone down instead of up, he'd have kept his trap shut on this matter instead of being upset.
If he had just come out and said 'give me Ethereum and I'll give it back in 6 months at the same USD exchange rate' there are a non-zero number of people who would have taken him up on that, maybe even paid for the service.
I agree. I wonder if the average take of each new ICOs is decreasing as awareness of then generally being scams increases?
[edit: I've changed my mind. They bought an asset for $x in USD, they are owed $x in USD]
Do you know where this was posted? I'd love to read the wording.
Here you can raise a tremendous amount of capital, given that the majority of seed rounds are $500k-$3MM, and with an ICO entities are raising tens of millions of dollars to build something that again has no actual working mvp to show usage.
Doesn't really seem like a sound investment ;)
Tokens have already been in use for a long time with chat sites, I suppose if one of them decided to re-create their tokens on the blockchain and offer an ICO they could make more money during this period than actually operating their service.
At least that would have some basis in reality in that there is an existing site that is generating revenue, profit, and visitors.
You're conflating the economics of currencies with the economics of companies.
Fiat currencies today are issued and backed by governments. When the government fails and the country falls into deep debt or other issues, they currency becomes devalued.
So everything is ultimately backed by something to an extent. In this case if it's an ICO it is used for transact with this company on their product, which is the underlying backing. So if the company falls apart, it would stand to reason that the coin would drop in price, since it isn't backed by anything.
Not saying they are the same, simply pointing out that there is a link.
You can also look at the currencies of countries and their value compared to other currencies when they go through various economic turmoil.
There are three types of money: central bank reserves, physical currency and commercial bank money. The U.S. government (Fed and Treasury, respectively) directly controls the first two down to the cent. Commercial banks "make" the final one, but to get the right to do that they have to agree to Federal Reserve jurisdiction (internationally, this happens with central banks entering into swap agreements with the Fed, i.e. opening "accounts" with the Fed into which the Fed deposits U.S. dollars whose--since this needs to be said--quantities it gets to track).
A common misconception, but incorrect [1]. The Federal Reserve was created by an act of the Congress in 1913 [2]. Part of the confusion arises from private banks holding "shares" in their respective regional reserve banks. These "shares" are less "share of stock" than "you are regulated by us" membership accounts with an archaic label.
The history you mention, of a private organization gradually falling under the purview of public regulation, is closer to that of the Bank of England's [3].
> who lend money to the US treasury at interest paid as dividends
American banks are required to hold a lot of their capital in safe assets, i.e. U.S. Treasuries and things that look like Treasuries. So yes, banks lend money to the government and then get back interest. If you'd like, you can do this too [4].
[1] https://www.frbsf.org/education/publications/doctor-econ/200...
[2] https://en.wikipedia.org/wiki/Federal_Reserve_Act
[3] http://www.intriguing-history.com/bank-of-england-history/
[4] https://www.treasurydirect.gov/indiv/research/indepth/tbills...
In the end, we decided to go along with the ICO terminology because it was too hard to fight perception. We still do the right thing: We're selling an unregistered security, shares in our company, and will pay dividends.
In short though, people trying to do the right thing are punished, and the people that overhype and do the ridiculous approach are highly rewarded.
I am wondering if 2018 will bring a deflation, maybe even a burst to the crypto bubble. It's all fairy dust right now anyway.
That has been in use by companies for quite some time, just that the tokens were primarily used to actually work with the companies service, rather than trade them as an independent entity.
Of course if there were no "blockchain" they would simply issue tokens like everyone has in the past, where you exchange money to get a token, that you can use in the app, and that token is locked into that app. So you can't use it elsewhere, but it still has some value as long as the app and users exist since you can sell your tokens to other people if you no longer need them, assuming that transferring of tokens is allowed / acceptable.
But then it wouldn't be block chain, and it wouldn't get any hype =]
Games have been using this for years and years, so there's really no difference here.
One side likes to point out the internet bubble, the other side likes to say well look at the internet now. What's missed though is the massive companies that were built in the middle, that really changed our daily lives. Amazon, Google, Facebook, Apple, etc, these companies changed how we live our lives and then Banks and everyone else realized the benefits of offering connected services directly to a PC or a phone and again there were tremendous benefits to consumers and end users.
At the moment, there is no benefit, outside of a large remittance and some tax avoidance that can be accomplished through cryptocurrency, and certainly there's no functional product company in the crypto space, outside of the exchanges which make money through people simply trading currencies, but returning no real value back to the world.
If enough people make Pascal’s Wager, then god effectively exists.
All these ICOs are pump and dump schemes at best. This guy just seems to have ditched the formalities and simply stolen the money.
Of course, we are not a typical ICO. We are selling an unregulated security: equity in our company and we will pay dividends. We are only going this route because we are an extrajurisdictional company and traditional fundraising is incredibly difficult for such a setup.
Without a legal company, it would seem that under the law you are just some individuals conducting business. Is that not the case?
No, a company is any business organization. Corporations, partnerships, LLCs, etc., are particular legal vehicles, each of which is a kind of company. But a company need not have a particular legal vehicle.
Google's dictionary in search defines it as “a commercial business”, dictionary.com defines it as “a number of persons united or incorporated for joint action, especially for business”;
Wiktionary has both a business definition “Any business, whether incorporated or not, that manufactures or sells products (also known as goods), or provides services as a commercial venture” and a law definition “An entity having legal personality, and thus able to own property and to sue and be sued in its own name; a corporation.”
FindLaw’s law dictionary gives “an association of persons for carrying on a commercial or industrial enterprise”
> It's not clear to me what a "business organization" means if it's not defined under law
It's a vague, broad category; the law mostly concerns itself with more specific categories.
Do you have examples of things that are talked about as companies that are not also legal entities? I have been reading the business press for decades, and I don't recall ever seeing it.
Sole proprietorships are not legal entity. (Their owner is a “legal entity”, but the business itself is not separately.)
Partnerships were not generally legal entities in the US prior to states adopting 1997 revisions to the Uniform Partnership Act model law (only 37 of 49 states who adopted the original law, apparently, have adopted the 1997 revision); I'm not sure if any of the states that don't use the 1997 RUPA still don't make partnerships legal entities.
Yes that is accurate. This endeavor relies on me getting our opsec right.
It won't shut down the operation because a successor will restore from backups and move on. But it will make me unhappy.
We are very much open to hearing of suggestions on how to improve things. Let us know: humans@pinkdate.is.
Your claim is that you can enter into an industry literally thousands of years old and use a little algorithmic magic to prevent sex trafficking where the world's collective police departments have consistently failed. And it's all done by an anonymous bunch of dudes. Pretending that they have an "extrajurisdictional company". Which, yes, is a criminal conspiracy. Except conducted on the web, and funded by an illegal securities sale.
It of course brings to mind this classic bit from the Wire: https://www.youtube.com/watch?v=pBdGOrcUEg8
I am not pretending algorithmic magic will prevent sex trafficking. I am saying that, to the best of our abilities, we will ban it from our platform. At least for underage trafficking, by checking IDs we are already far better than classifieds.
So we will do our part to fight against and not enable trafficking. We are not a free-for-all marketplace.
That is the extent of my claims!
Police are ineffective because they do not control the marketplace, unlike us. If governments wanted to shut down trafficking they have the option to legalize and regulate. That would harm illegal operations.
More accurately, you will do your part to fight trafficking as long as it doesn't get too much in the way of making money for yourselves and your investors. That is, people looking to profit off prostitution.
For the record, I'm entirely in favor of legalization and regulation. Which is why I think an international criminal conspiracy with a high-tech gloss is an absolutely terrible idea.
I'm yet to see a single real-world use case for crypto. Pretty much everything is hinged on the "promise" of crypto.
BTC itself seems to have zero momentum in actually implementing it for payments. All the stories I see about it are about its price as an asset.
It happens at a disturbing rate these days. Is it just me growing old(er), or is the world really becoming more and more unreal?
On its face . . . just the idea . . . how could anyone look at that one, out of all of the ICOs out there, and not think twice before sending in their money?
Therefore, a good rule of thumb is: the more embarrassing a service is, the more cheaters it will support.
"For each cryptocoin, a unique software protocol and accompanying network was necessary to enable its implementation, and as people saw the high incomes achieved from sales to fiat currency, mining and transaction fees, coin proposals came to be put forward by investors interested in profiting from coins, at least as much as by developers seeking to facilitate egalitarian movement of financial value and flexible independent storage of wealth.
In a further development, there was often out-and-out speculation, in which people would try to buy coins in a newly created coin simply to sell them on for an immediate profit, regardless of whether the network was ever profitable, or even built. During this period of "coin mania", huge sums were invested in coin infrastructure, and although many schemes came to nothing, the coin system rapidly expanded to nearly 4,000 coins in everyday circulation."
Inspired by the original;
https://en.wikipedia.org/wiki/History_of_the_British_canal_s...
For each canal, an Act of Parliament was necessary to authorise construction, and as people saw the high incomes achieved from canal tolls, canal proposals came to be put forward by investors interested in profiting from dividends, at least as much as by people whose businesses would profit from cheaper transport of raw materials and finished goods.
In a further development, there was often out-and-out speculation, in which people would try to buy shares in a newly floated company simply to sell them on for an immediate profit, regardless of whether the canal was ever profitable, or even built. During this period of "canal mania", huge sums were invested in canal building, and although many schemes came to nothing, the canal system rapidly expanded to nearly 4,000 miles (over 6,400 kilometres) in length.[1]
It's all gone a bit crazy recently and it's hard to see through the noise, but I do believe that something will come of this technology!