Roger Ver has filed a lawsuit against virtual currency exchange OKCoin in the amount of $570,000 for breach of contract.

Ver claims OKCoin violated the terms of a contract for work on the Bitcoin.com website of which OKCoin was responsible for redesign and SEO in 2014. In 2015 OKCoin announced it would no longer be supporting the Bitcoin.com domain. 

OKCoin allegedly forged Ver's signature on an alternate contract that allowed the company to terminate the contract within 6 months instead of the 5 year duration the original contract states. Something OKCoin's former CTO backed up in this Reddit post.

That equates to 570,000 at 10,000 per month for the remaining 57 months of the contract and the amount being sought in the lawsuit. OKCoin CEO, Xu Mingxing, is named individually as the defendant in the filing.



Algei


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In an announcement this morning, the Winklevoss owned Gemini exchange is starting its bitcoin auction service today at 4:00 PM EST (8:00 PM [UTC]).

The auctions will continue every day at the same time including weekends and holidays and they plan to begin offering other digital assets soon as well.

Auctions are nothing new to the world of bitcoin (contrary to the announcement), in fact some of the original bitcoin sales years ago were conducted on eBay. Since then other initiatives like Cherry Pop http://www.cherryrace.com and have come and gone failing to gain enough momentum to stick around.

[the] Auction aims to facilitate high volumes of trading by finding the price at which the greatest aggregate buy demand and aggregate sell demand can be fulfilled. Because this occurs at a single final auction price, neither party has to pay to cross the bid–ask spread.

States the announcement and all  trades are covered by pre-funded accounts. The goal appears to be to overcome price slippage.
The service kind of sounds like a Localbitcoins/eBay type mix for high volume.

Who's Invited?

All verified Gemini customers can enter Auction-Only Market and Auction-Only Limit Orders to buy or to sell beginning at 5:00 p.m. ET the prior day until 4:00 p.m ET for that day’s Auction. (E.g., for Wednesday’s Auction, you can place orders between Tuesday at 5:00 p.m. ET and Wednesday at 4:00 p.m. ET).
There you have it.





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Paxful CEO Ray Yousef, CTO Artur Shaback, and Ivan Suhharev were all three arrested Saturday in Miami Beach Florida according to the Miami Beach police department.

The primary purpose of the arrests were improper exhibition of  a firearm and the actual route cause of the altercation with authorities when Shaback made himself visible from the balcony of an apartment complex in Miami Beach.

According to Florida statute 790.10 governing the activity:

...any person having or carrying any dirk, sword, sword cane, firearm, electric weapon or device, or other weapon shall, in the presence of one or more persons, exhibit the same in a rude, careless, angry, or threatening manner, not in necessary self-defense, the person so offending shall be guilty of a misdemeanor ...

The offenses are misdemeanors which will be accompanied by a fine not to exceed $1,000 or jail-time of no more than 1 year. Most likely a plea bargain will occur with a small fine.

Ray Youssef (Youssef, Mohamed Azab) has a bit more of a legal battle in front of him being charge with possession of cocaine and hash with intent to distribute, according to the arrest records.

Arrest Records

BookDate: 09/17/2016 BookDate 09/17/2016 BookDate 09/17/2016
Defendant: SCHABACK, ARTUR Defendant SUHHAREV, IVAN Defendant YOUSSEF, MOHAMED AZAB
DOB: 02/03/1988 DOB 02/27/1988 DOB 02/18/1977
Charge1: WEAP/FA IMPROP EXHIB Charge1 WEAP/FA IMPROP EXHIB Charge1 COCAINE/POSSESSION
Charge2 HASH/SELL/POSS/W/INT
Source: Miama-Dade County 

The marijuana charge (HASH/SELL/POSS/W/INT) is a second to third degree felony and the problem here is that weapons were found with the controlled substance (haven't these guys heard of Colorado?) and that packs a penalty of 5 to 15 years in prison,

Headline Hype

Now before any of this gets too hyped up in the news, let get a couple things straight. These guys were in the privacy of one of their own homes, not in public, and the intent charge is almost a clockwork charge added to any possession charge in an attempt to solidify the original charge of possession. This is common practice.

Certainly not a situation anyone ever wants to find themselves in, but this is more silliness than it is the dramatic headline the local ABC news affiliate in Miami Beach makes it out to sound. 

First of all, the statute regarding the exhibition states the weapons must be displayed in a  rude, careless, angry, or threatening manner to one or more persons. Since its not likely anyone from inside the apartment called the police, it's safe to assume that bystanders that had a view of the private balcony caught a glimpse of a gun and called authorities. I'm not sure that is going to qualify as "in the presence of" and what were these "one or more people" doing invading their privacy of the confines of their home to begin with? It's rather possible the judge might throw this one right out the door. 

Which leads to the drug charges and not to condone this activity but without probable cause for a legal search and seizure this charge could get thrown out as well unless one of them invited authorities inside and granted them permission to search the premises. I somehow doubt this is the way things went down.

I'm sure the prosecution would argue that the firearms would justify probable cause but then again you have the defense that these folks were not in public nor were they threatening the public and its not illegal to own or play around with firearms in your house in the United States.

At the end of the day this is certainly not good news for the blockchain and vitual currency industry and an example of what not to do. That said, its not nearly the hyped up drama the mainstream media is already making it sound like.

We'll have more on this story as it unfolds.

Paxful

Paxful is a P2P bitcoin marketplace/exchange and payment processing platform that arrived in the blockchain space about a year ago when Backpage was denied services from both Mastercard and Visa. Paxful worked with Backpage to enable bitcoin payments on the classified advertisements platform making it the primary payment option outside of mailing money orders.



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On July 14th 2016 the United States House of Representatives introduced Resolution 835 which in summary would call for a national policy on virtual currency and blockchain technology.

For the intents and purposes of this article lets clarify what blockchain technology means. We mean public networks used for establishing an electronic trust, not private networks behind closed doors or database systems all of which are irrelevant for this topic of conversation. In the use of the term "the blockchain" we also refer to the bitcoin network.

On September 12th, 2016 the Resolution passed. 

Key Points of House Resolution 835

The resolution states specifically that the 114th Congress 2d session H. Res. 835 is "expressing the sense of the House of Representatives that the United States should adopt a national policy for technology to promote consumers’ access to financial tools and online commerce to promote economic growth and consumer empowerment.". 

The resolution was submitted by Representative Kinzinger of Illinois (Rep. Adam Kingzinger) which was referred to the Committee on Energy and Commerce .

The first very interesting point is this one.

....the growth of consumers’ use of mobile devices and the deployment of broadband access has supported the growth of financial technology products and services outside of traditional products and services offered by banks and other financial institutions in the United States increasing commerce and job growth

The two point of this particular resolution item is the acknowledgement of increased commerce and job growth. One of the most under-reported aspect of the industry is how banks and traditional financial institutions (eg. PayPal, Western Union, Square, etc...) contribute heavily to unemployment. 

An anti-money laundering compliance firm servicing the blockchain sector recently had its agreement with processing provider Square recently terminated after charging a payment for services rendered (AML training) to a technology startup company. The startup client was offering services related to the virtual currency and blockchain space and as a result the firm was told that Square (which uses Chase Paymentech) will not support services rendered in that industry. This was a financial compliance firm and one that had never had an issue with Square prior to this charge. 

This is one small example among hundreds, if not thousands, across the blockchain landscape where companies have gone out of business resulting in unemployment and financial loss due to the traditional financial service industry and banks freezing funds and closing accounts of businesses related to virtual currency or blockchain technology. 

They typically state Federal or state level compliance as the core issue and whereas that is sometimes accurate in isolated incidents for the most part this is a fallacy. There are various reasons for the behaviors stemming from fear of the technology to poorly trained and/or understaffed compliance teams but allot this activity comes down to money. The business model of this industry (blockchain) necessitates increased monitoring from risk and compliance teams at these institutions and organizations simply determine internally that its going to cost too much and that results in less money to present on quarterly reports. 

If the "compliance" excuses were accurate in the manner in which they present them, companies like Coinbase, Circle, and others wouldn't be operating. Note the aforementioned companies are all federally registered and/or licensed financial institutions in the United States. They manage to operate under the federal regulatory landscape, why can't the banks? The short answer is they can, they just choose not to.

It's not a matter of "they cannot" it is a matter of "they don't want to".

...identity theft is a rising concern for people in the United States as their personal information is targeted by criminal enterprises for monetization on the black market ... cyberattacks against domestic and international financial institutions and cooperatives continue...

It may not be intentional, however, banks and other traditional financial institutions should exercise more caution and understand that certain activity that many of their compliance teams are currently engaged in inadvertently contributes to money-laundering and supports cyberattacks and identity theft by blocking the use of more secure technology like the blockchain and virtual currency.

With the blockchain you have the most secure method of value transfer and transaction recording currently known to mankind. There is nothing in comparison and nothing as secure. These organizations are not embracing the use of this technology but rather they are trying to build internal systems similar to blockchain while harming the companies working on innovative technologies in an effort no greater than self-enrichment and at the complete disregard to the safety of consumers and businesses alike.

...emerging payment options, including alternative non-fiat currencies, are leveraging technology to improve security through increased transparency and verifiable trust mechanisms to supplant decades old payment technology deployed by traditional financial institutions; and .... blockchain technology with the appropriate protections has the potential to fundamentally change the manner in which trust and security are established in online transactions through various potential applications in sectors including financial services, payments, health care, energy, property management, and intellectual property management

First of all in regards to the above excerpt from H. Res. 835 the phrasing of "alternative non-fiat currencies" cannot be ignored and how the word "currencies" was used rather than the typical "virtual currency" moniker used by United States government officials. Secondly to further strengthen the previous statement about security of blockchain technology, specifically with networks such as the blockchain underpinning bitcoin, the later portion of the paragraph states the supplement of old technology which is increasingly becoming further outdated.

Even with this knowledge banks and tradition financial service organizations continue to cause harm to innovative companies by shutting off access to banking and traditional financial services while promoting unsecure environments currently used for financial transactions. The word unsecure is emphasized since traditional security has been breached multiple times and appearing almost effortless at times. Earlier this year a theft of nearly 90 million was the result of cyber-criminals exploiting vulnerabilities within the Federal Reserve and the SWIFT network (a private network used by banks).

The bitcoin blockchain's security has never once been breached.

Resolution

To resolve these issues the House of Representatives have called for a national policy of which will encourage the further development of blockchain technology and its use. 

United States should prioritize accelerating the development of alternative technologies that support transparency, security, and authentication in a way that recognizes their benefits, allows for future innovation, and responsibly protects consumers’ personal information

The above appears to be just about the exact opposite of what banks are doing with initiatives such as the R3CEV consortium. They (R3/banks) are trying to continue along the lines of stale technology in use currently by internalizing networks and any related technology in an effort to eliminate transparency, reduce security by hosting a network rather than make use of a secure technology such as bitcoins blockchain, and worst of all they are trying to continue on with a fundamental flaw in traditional system technology in the persistence of attaching identities to transactions. All things which are in direct contradiction of H. Res. 835 and the exact opposite of blockchain technology. 

 the United States should support further innovation, and economic growth, and ensure cybersecurity, and the protection of consumer privacy

Another interesting point is the protection of consumer privacy which again is about as exact opposite of financial institution practices today. One issue with this is regulation and how this can be accomplished exactly as there are some legitimate hurdles however, the practices of today are not in line with what the federal regulation requires.

For example, Paypal does not need your social security number. They need a tax identifier such as an EIN or TIN of which an SSN can suffice but is not required by any stretch of the imagination. Additionally they only need this under certain conditions. It's not that they need this information, they want this information for their own business reasons. The Social Security Administration (SSA) advises against giving anyone your social security number unless it is for a large cash purchase in excess of $10,000 USD in which case it is federal law or an employer where this information can be delivered discreetly. 

Federal BSA reports many businesses are familiar with such as FinCEN Form 8300 are not what financial institutions such as PayPal are required to file. The Paypal's of the world file a streamlined version of  CTR, which is FinCEN Form 104. Form 104 does not require social security numbers unless no other form of tax ID is available and even then the report can be filed without it. Identification such as your drivers license or other federally acceptable documentation along with a tax identifier is sufficient. In fact this is written on Item 6, of Section A, of Part I of the currency transaction report Form 104.

The only time a social security number should be (emphasis on should) given is under one of three conditions.

  1. If you are involved in a transaction in which the IRS requires notification, or; 
  2. if you are engaged in a financial transaction subject to federal CIP rules.

An example of the first item would be buying a car with cash in excess of $10,000 and in this case it would be federal law. The second being financial institution account transactions that fall within a reporting or other regulated activity that requires a social security number, however this does not mean opening an account.

Banks are not required to obtain your social security number just to open an account, they are required to make a reasonable effort to obtain a tax payer identification of which they may certainly refuse to do business with you if you refuse to give it but there is no law stating that they must obtain your information and in fact the regulations at 31 CFR § 103.34 specifically states that they are not liable if they cannot obtain this from you.

Despite all of this, consumers are required to provide this information online to obtain certain financial services and that activity has to be discontinued in its entirety. 

It is certainly recommended to present your tax payer information, such as your social security number, in the event of obtaining a bank account for your own ease of opening the account but the point being that it is not required and presenting this information online for any reason whatsoever is never recommended.

Note there are some other cases such as in the insurance industry where it is also acceptable to obtain SSN information.

Blockchain Technology

Blockchain tech has the ability to help change allot of these stale practices and that is certainly not gong to be done without a fight from the financial industry using the traditional methods in place now. Effort such as those from R3-CEV and organizations like it are trying to force old practice and methodology into new technology like blockchain and it fits about as well as a square peg in a round hole. 

The national policy that will be the ultimate result of H. Res. 835 may help clear the path for innovative public initiatives and companies to continue down the path of enabling blockchain technology to further permeate the financial industry as well health care, automotive, and others. This will allow consumers and companies opting for security and privacy to avoid the stale "R3Cev-type" efforts and current traditional technologies that have proven an inability to provide adequate environments.






Article by Dale Henry
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The bizarre drama of itBit continues. We'll try to sum this up as painlessly as possible.

About a year ago itBit happened with allot of promise. They took the charter route to avoid money transmission laws and stormed on to the scene as a new exchange. It all seemed to go downhill from there. 

In a whirlwind of self-destructive behavior capped off with a flock of employees running for the door the companies future seemed unclear. Not only has that not changed, it's gotten even more confusing and diluted.  

A wise man once told me that if you could explain what your company does in a single sentence your not going to get very far. I don't think you could sum the itBit fiasco up in the 5 page essay.

itBit Explained

We'll try anyway.  itBit began as an exchange to feature professional grade trading tools complete with FIX integration and all the trimmings. Then they were going to do that plus do OTC trading, then they started focusing heavily on OTC trading and where overwhelmed by the volumes, then they backed off of OTC trading. After this slow down they began turning away many professional trading companies. 

Somewhere in there they decided they were going to be a software company too and make a blockchain based financial product. They then announced their blockchain project would not use the blockchain. They announced it would not use bitcoin. It would not use a token. It would be private. It would not be based on blockchain code. It would be permissioned. 

Basically, it wouldn't be a blockcain at all, but they were going to call it Bankchain (an SAP AG copyright infringement mind you) and began promoting that. Then they up and pulled out of Texas, one of the largest and easiest States in the United States to deal with as far as bitcoin goes. 

Somewhere around there a flock of employees began jumping ship and just when you though you'd seen the worst of it, sure enough, more bizarre behavior was next. The latest goes as follows.

itBit is now only going to be part of what itBit was but we're not sure exactly what that means. Paxos (no not Paxful) has now been formed and will be a sister operation to itBit we assume since all the same mugs that were on itBit's website are now on the Paxos shell.

Paxos hasn't done anything, but they say they've done everything, however wasn't it itBit that actually did everything? Which wasn't much of anything?

I don't even think they know what's going on, just give this press release excerpt a read:

Paxos, a financial technology company delivering revolutionary blockchain solutions for global financial institutions, today unveiled its new brand. The name Paxos is inspired by a technical term that represents a process for reaching consensus. The name underscores the company's goal to leverage consensus-driven blockchain technology in transforming the way global financial institutions work together. The company's flagship service, Bankchain, is a cloud-based platform-as-a-service (PaaS) solution transforming post-trade market infrastructures and back office processes for its global clients. Bankchain was previously recognized under the itBit umbrella, but has become established as an offering under the Paxos brand.

Do they even know what they do?

First off ... wouldn't that be CBPAAS? Cloud-based-platform as a service?? (Hey they said it, not me) and secondly please change the name. Like immediately. We already have a Paxful in the industry and Paxos sounds like a blatant ripoff worse than Bankchain being copied from SAP (and I am sure they might eventually notice). I mean this is bad. 

Then take note of the "delivering revolutionary blockchain solutions for global financial institutions". Where are all of these solutions globally all over the place that they have been delivering? You'd think something of the magnitude of "delivering revolutionary blockchain solutions for global financial institutions" might have been mentioned a couple times by somebody somewhere in these places all over the world being delivered to. 

The the contradiction of the "today unveiled its new brand." followed by the "Bankchain was previously recognized under the itBit umbrella".

So it's a new, but old brand of workflow Cloudware. No not just old because it was itBit but because it takes a step backwards by taking all of the blockchain parts out of blockchain technology and sugarcoats some normal Cloudware as "blockchain".

Wait! There's more!

Not only all of the above but they also are digitizing gold. No, that idea isn't original either, they swiped that from BitGold. Even so, where the hell did Gold come from? 


Apparently this might have to do something with Euroclear, at least this is what they (itBit/Paxos) say.

Starting to see the dilemma here? Anyone want to take a stab at a single sentence to sum this up? Actually I can sum it up in a single word.

Disaster.


You can go visit their website too, htttp://www.paxos.com where you'll find a very itBit-ish looking site with the same mugshots as itBit had but nothing more than a few lines of self-proclaimed greatness. No product demo, no case studies, no customer stories, and not much of anything at all other than what was one the Bankchain website but now Gold being digitized has now gotten place on a pedestal. 

Note we started this up talking about FIX integration and pro-grade virtual currency tools and now we're talking about digitizing gold. All over the course of about a year. 

Dare I ask what's next? 

I think the 8 million different directions makes it clear there's a lack of organization at this firm(s), that's putting the exodus of its employees aside of course. I cringe at the thought of what might be next, this can't possibly get any worse... can it?

itBit/Paxos appear (from the outside anyway) like an unstable organization lacking direction. That's not saying they are, but just what the general "view" seems to be of the firm(s). Given all of the bizarre behavior in the past and now this, it seems to be for good reason.

After going over it all one thing has become clear. We're beginning to think our previous 5 page essay assessment was drastically underestimated. 





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After years of destroying anything related to bitcoin in the App-Store, then giving in to popularity and allowing bitcoin related apps only to turn around and begin removing them once again the later is at least possibly clear.

They're in bed with Circle. 

Actually I guess that would be the other way around since Apple certainly doesn't need Circle, but apparently the two have forged some sort of agreement that will feature the Circle wallet. 

And.....

Circle for iMessage will be about as exciting as the last 4000 P2P "payment" applications on earth to the regular Joe. However, what's cool here is that payment will be sent through the blockchain (we assume) and that makes it suck less than the other 4000 apps.

However... are you going to be able to make payments to businesses this way? That's the question. In everything available on the topic thus far, this is going to be a strictly peer-to-peer system so we'll have to see. Thus far companies have been able to make use of the blockchain for international payments but have had to rely on expertise from bitcoin/blockchain consultants on both sides to get it done and while in many cases this is still saving thousands of dollars, it's hardly as efficient as it could be.

In Laura Shin's Forbes article on this topic she states that:

"Circle is one of several companies quietly using the Bitcoin network for efficiency and low-cost and bypassing the traditional banking system when it can."

First of all don't get me wrong here, I like Laura's writing and she's covered bitcoin for a long time so I mean no disrespect when I say this but Circle has been anything but quiet about anything in regards to bitcoin or its use of the blockchain. What they did do was start not promoting bitcoin as much as they once did to sort of slip a little bit of space between the blockchain world and the FinTech world. 

That said, she does make a good point that there are many companies using the blockchain and bitcion for many things quietly. 

It's humorous really when you see companies like IBM trying to sell Cloudware disguised as a block-anything and call it "secure" when it's "security" is flawed before it has a chance to be secure and let us not forget that just a few years ago they had no clue as to what "blockchain" even was. Then of course you have R3CEV who's made some of the more ridiculous statements like "we reject storing data on the blockchain" when that's exactly what blockchain people recommend you don't do.

However, I will hold back on R3CEV because they filed a patent. They may have come up with something new and earth shattering. We'll have to wait and see. 

International Payments

Another bonus with the Circle for iMessage app is the international payments. Other apps cannot do this or do this poorly so this is a bonus and you can chalk that one up to bitcoin and the blockchain. That is what makes this possible.

You don't need Circle if you know your way around the blockchain, but for the average person, its needed. Let's face it as simple as sending bitcoin may seem to those used to doing it, its rather complicated for an ordinary person who's never done it before.

One thing is certain, the Circle iMessage union is a positive move forward for bitcoin. Circle for iMessage is available for iOS 10.



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