It’s October, and the year so far feels like a foggy dream. After spending the last two weeks in the wonderful city of Austin wandering around Zilker Park and Barton Springs and getting bitten by mosquitoes at dusk, I’m trying to get back into writing. Here is the crypto news for the week — not all of it, but stuff that I found interesting, and maybe you will, too.
“The Kurse” gets arrested
Ken Kurson, co-founder of crypto outlet Modern Consensus, was arrested Friday for cyberstalking. The criminal complaint outlines months of alleged batshit behavior while Kurson was going through a divorce in 2015. All of this came to light in 2018, when the FBI did a background check on him, blowing sky high his chances for a prestigious federal position.
I was employed by Modern Consensus earlier this year, but left due to a hostile and abusive work environment, which Kurson encouraged and supported. I made the decision to leave the day I stumbled on two articles, one in the Atlantic and another in the NYT, detailing his history of mistreating women. It was clear, at that point, I needed to get out.
In a tweet following the arrest, Deborah Copaken said dozens of women contacted her after she wrote her story in the Atlantic. I was one of them.
Kurson co-founded MC in January 2018 with Lawrence Lewitinn who went on to work for CoinDesk before I joined. Before his departure, Lewitinn hired Leo Jakobson, an old friend of his, who was my direct report.
CoinDesk hemorrhaging reporters
Six reporters have exited CoinDesk since July—during a pandemic, when media jobs are scarce. Some of the outlet’s dirty laundry was aired in a leaked memo penned by one of its employees last week. Here’s the bit that caught my eye: Among other grievances, the memo states that “DCG portfolio companies felt comfortable trying to direct our coverage…”
Digital Currency Group is CoinDesk’s parent company. It has investments in more than one hundred crypto companies. Despite moving into the same building as DCG in September 2019, CoinDesk promised its readers that the two companies would operate independently.
CoinDesk Chief Content Officer Michael Casey published the leaked memo in an upbeat blog post titled “How a Newsroom Learns and Grows From Its Mistakes,” In the post, he downplayed morale issues, saying only one or two reporters left due to internal tensions, and promised “big changes.”
In a recent Decrypt piece, Ben Munster sits down with CoinDesk reporter Leigh Cuen. The story offers clues on what it’s like working in crypto.
PayPal embraces crypto trading
Payments giant PayPal has entered the cryptocurrency market. According to a company press release, beginning next year, PayPal users can “buy, hold and sell” cryptocurrencies, starting with bitcoin, ether, bitcoin cash and litecoin, directly within the PayPal digital wallet.
Bitcoin skeptic David Gerard is baffled by the move. “If PayPal pursues this crypto trading market, I would expect trouble when—not if—mum-and-dad investors get ripped off,” he said in a blog post.
PayPal’s crypto service won’t allow users to transfer their cryptocurrency to another wallet—the only way out of the PayPal system is cash. What benefit then does this offer the user, if you can’t really control your own bitcoin?
None, Nicholas Weaver, a researcher at the International Computer Science Institute, told me. He points out that PayPal’s lawyers undoubtedly took note of the recent U.S. Department of the Treasury’s Office of Foreign Assets Control notice saying that companies that facilitate ransomware payments could be in violation of federal law.
“I suspect this is some Bitcoin/Libertarian VP’s vanity project,” Weaver said. He predicts PayPal is “going to call it a pilot program, see that nobody wants to actually use it, and quietly vanish it in the memory hole.”
What about Epik?
Curiously, earlier this month, just prior to announcing it was embracing Bitcoin, PayPal closed an account held by domain registrar Epik, home to several right-wing websites. (Here’s the unhinged letter Epik sent to PayPal, calling the move an “unwarranted abuse of civil liberty.”)
One source told Mashable the problem lies with Epik’s virtual currency “Masterbucks,” which can be used to purchase products sold by Epik or converted into U.S. dollars. On its website, Epik touts Masterbucks as “liquidity for the domain industry.” (Sounds eerily like QuadrigaCX bucks.)
The big question: if PayPal has concerns about compliance issues with Epik, why is it getting involved with crypto, potentially an even bigger compliance nightmare?
Armstrong not so “apolitical” after all
Brian Armstrong, the CEO of Coinbase, doesn’t want to touch on politics, unless it supports Trump—or some candidate other than Joe Bidden.
After making a big to-do about supporting Black Lives Matter and then telling employees they shouldn’t engage in politics at work, Armstrong tweeted a rambling blog post by Robert Rhinehart, the founder of Soylent, a company that makes a meal replacement drink, titled “Why I am Voting for Kanye West.”
In the post, Rhinehart, who has the writing style of a nine-year-old child, hails West, who suffers from bipolar disorder, as some kind of genius.
“I know, in my heart, that Kanye West, while he is not perfect, is the best person to lead America,” he writes. “Even if Kanye West was not running for president, I would vote for him.”
Armstrong referred to the post as “Epic.”
It is worth noting Coinbase’s connections with Soylent. Apparently, the crypto exchange’s employees were guzzling the foul concoction as far back as 2013. And at one point, you could purchase Soylent with BTC.
About Peter Schiff’s offshore bank
Gold bug, Bitcoin skeptic and libertarian economist Peter Schiff is in the hot seat for tax evasion. His Puerto Rican bank Euro Pacific’s anti-money laundering efforts are lax, and the bank’s customers include entities linked to a who’s who of financial and organized crime, according reports in the Age, the NYT and 60 Minutes Australia. The trio of news outlets say that Schiff’s bank is being probed by a team of international investigators.
I met the outspoken Schiff in person at the 2017 Nexus crypto conference in Aspen, where he gave his usual spiel on the upcoming economic apocalypse and dollar collapse. Naturally, he was there representing Euro Pacific Bank.
“It was fairly apparent that Peter Schiff was operating in a manner that was intended to attract customers who were looking to either evade tax or perhaps launder money,” John Chevis, former Australian Federal Police investigator, told 60 Minutes Australia. Schiff, who denies any wrong doing, stormed off of the 60 minutes Australia set when pressed for details.
Tether spins out another billion
Last week, Tether surpassed $16 billion in total liabilities, representing the total amount of tethers in circulation.
Tether began issuing its wildly popular stablecoin in 2015. It took more than two years to issue the first billion. By January 2020, Tether was at $4.5 billion worth of Tethers. And here we are today, with the company putting out as much as $1 billion worth of tethers every two weeks.
I’m sure all of these tethers are backed by real assets and generated by real demand, as the NYAG will eventually discover in its ongoing investigations — as soon as Tether/Bitfinex hand over that paperwork any day now.
Filecoin’s disastrous launch
Filecoin, a blockchain-based data storage network, raised more than $200 million in an initial coin offering three years ago.
After much anticipation and many delays, the mainnet finally launched on October 15. Since then, the price of the FIL coin has been a wild rollercoaster ride, soaring more than 100 percent at first, then tumbling 80 percent days later, as Cointelegraph explains.
But the bigger problem is the handling of the miners, who provide the storage for the system. Initially, they weren’t able to pull a profit.
Miners have to stake a large number of FIL tokens to start their mining operations. At first, they weren’t getting enough tokens to do this via mining rewards because they had to vest 100% of those rewards for six months. This forced them to buy tokens on the open market at high prices, if they wanted to ramp up to capacity.
As a result, two days after the platform launched, five of the largest miners switched off thousands of rigs in protest, according to 8btc.
Since the folks behind Filecoin didn’t foresee any of this, they are now scrambling to make changes. The latest system upgrade allows miners to access 25 percent of their block rewards immediately, per the Block.