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Listen up, friends. I’ve been busy this week—cooking up tales of scammers, money, and politicians.
Sit with mouths agape as I feed you slivers of news produced by Decrypt. Expect indigestion, discomfort, and—in a cruel twist of fate—hunger for more.
A new report by security researcher Harry Denley this week found that the largest proportion of cryptocurrency scam victims are in Nigeria. Mr. Denley analyzed 118,302 click-throughs to URLs that were deemed to be scams by Dune Analytics.
These scams, it turns out, were disappointingly routine. SIM-jackers, dodgy emails, and promises of lucrative airdrops reeled most people in. “In essence, the would-be promised a bunch of tokens through an airdrop, usually advertised to be worth a good amount of USD, and they’d be asked to provide information,” he said.
Decrypt bombardier Robert Stevens—hey, that’s me!—asked Denley, “Should exchanges be responsible for preventing known scammers—at least those logged on public blacklists—from using the service?” Denley said: “Exchanges are private for-profit entities for trading—they are not inherently security products.”
He continued, “from my experience on blacklisting addresses and domains, even if it's for the users best interest, there will always be that small group of people who lobby against you for ‘acting like police’ or ‘school-hall monitors,’ because they are ‘adults and can decide what they do with their money,’” he said.
News this week came from accountancy and consulting firm Grant Thorton—reprinted by old faithful, Decrypt—which asked to be released from its duties of interim receiver for the collapsed Canadian Einstein Exchange. The professional services firm described how Einstein Exchange only owns just $34,000 in assets.
That’s hardly enough to pay Grant Thornton for its help. In fact, not nearly enough to repay any of its debts whatsoever. Chief in point: Sammy Wu of the British Columbia Securities Commission claims Einstein owed its customers $12 million.
Grant Thorton’s latest report added to Wu’s claims, alleging that employee salaries were left unpaid for months, and that Einstein and its CEO, Michael Goturk was facing lawsuits of hundreds of thousands of dollars. Einstein’s lawyer, who quit the day Wu investigated the firm, is also awaiting payment. Grant Thornton said firms Amazon Web Services and Alphapoint are also unpaid.
Next up, Decrypt’s Adriana Hamacher linked Russia’s Federal Security Service, the FSB, to the loss of $450 million in funds belonging to clients of the closed WEX cryptocurrency exchange. Hamacher, whose investigation this week sourced evidence collected by the BBC—which published its story last week—discovered allegations from WEX co-founder Alexei Bilyuchenko. Bilyuchenko, wrote Hamacher, claimed that the platform’s closure at the end of 2018 was a direct result of the appropriation of clients’ funds by the FSB.
As Hamacher wrote: “In his statements, Bilyuchenko said he was forced to hand over information about customers’ digital wallets to unnamed FSB officials, shortly before the exchange ceased operations. This data would have enabled them to seize Bitcoin and other cryptocurrencies worth approximately $450 million at the time.”
Bilyuchenko said in the recordings that he was told the money would go to the FSB's Russia fund. Hamacher believes that the founder of messaging platform Telegram, Pavel Durov, lost money on the exchange.
Come on England!
Next up, I covered news this week from a long-awaited legal task force that had been commissioned by the British government and supported by top firms in the legal industry. The new report, from the UK Jurisdiction Taskforce of the Lawtech Delivery Panel advised that, under British law, cryptocurrencies can be considered property and smart contracts can be legally binding.
As I wrote on Monday: “The statement puts to bed years of uncertainty over the legal status of crypto assets. The British Court considers crypto assets 'information,' and the courts have historically been reluctant to call information property.”
The report also found that crypto assets “have all of the indicia of property,” and that the technology's distributed ledger and cryptographic authentication “do not disqualify them from being property.”
The report also found that smart contracts and decentralized autonomous organizations can have the same “contractual force” as “a more traditional or natural language contract”. In addition, it advised that “private keys can authenticate contracts in place of a written signature.”
The task force suggested its findings would affect legal rules “relating to succession on death, the vesting of property in personal bankruptcy, and the rights of liquidators in corporate insolvency, as well as in cases of fraud, theft or breach of trust.”
The wider significance of this, said my trusted legal source, Marc Jones, of law firm Stewarts, is that “They’re saying [to crypto companies], this is a place you can do business. If you want to set up a digital currency [or] use smart contracts—choose English law and English courts.”
To Binance and beyond
Crypto exchange Binance this week expanded operations in India after acquiring WazirX crypto exchange. “Various reports have quoted the acquisition price as being between $5 million and $10 million,” said Decrypt’s Rakesh Sharma. Sharma didn’t mention which reports, but I promise you he’s a good egg, and I’d probably back him in a fight if I ever met him. Binance CEO Changpeng Zhao told the Economic Times, “The young demographic in India gives an edge to adopt and build on new financial technologies.”
Last—but, perhaps, most—Decrypt’s very own Tim Copeland released “The inside story of Binance’s explosive rise to power” on the world. Tim starts, “就在不久前的一天，我被困在曼哈顿的一间廉价旅馆里.” Hang on—Tim doesn’t speak Chinese! He speaks excellent English, as evidenced by his beautiful passion piece last week on the infamous Binance hack.
This week, Chinese news outlet Chainnews translated Tim’s feature into Chinese. Though, granted, this isn’t “new” news, Tim’s effort deserves a curtain call, albeit one incomprehensible to those unable to speak Mandarin.