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Inside the cryptocurrency scam vortex

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On May 22nd, a crypto funding project called DeFi100 posted a message on its website: “We cheated on you and there is nothing you can do about it. HAHA. All of you Moonbois have been betrayed and there is nothing you can do about it. ”

Screenshots of the message immediately went viral on crypto Twitter (always anarchic, slightly ridiculous). A popular anonymous crypto tracking Twitter account called Mr. Whale estimated that DeFi100 ran away with $ 32 million. News agencies for cryptocurrencies as well as Yahoo Finance ran with the number. The project owners denied any foul play, and it soon became clear that the news was more of a website hack than a serious warning – but by then it was too late. Panic had set in and the price of the underlying coin was in free fall.

“We never stole funds,” a project representative told The Verge. “DeFi100 was a very small project and we didn’t hold funds from investors so there is no question of cheating people or running away with their money.”

There is little recourse if crypto investments are found to be fraudulent

DeFi100’s problems are a small part of the picture, but they are reminiscent of the dangers of the ongoing crypto boom. Although billions of dollars have been poured into this area over the past few months, there is still little chance if investments turn out to be fraudulent. Most importantly, the radical decentralization of the blockchain means there is simply no way to get your money back – and there are few assurances that an unproven provider will keep its promises once the transaction is complete. The result is a new gold rush in crypto scams as speculators seek increasingly obscure opportunities and riskier bets.

The DeFi100 project website is now back online, but rumors linger about what actually happened. Certik, a popular blockchain security leaderboard, is currently listing DeFi100 as a “rug pull,” which is a term for a scam in which the founders of a project collect and execute investment funds. (The project owners say a rug pull would be impossible as they never held investor funds.) It’s just one of a number of scams that today’s crypto holders have to watch out for, along with sketchy altcoins, Discord pump-and-dumps, Elon Musk impersonators and other malicious forms of cybercrime.

According to Maren Altman, a TikTok influencer with over a million followers who creates videos on cryptocurrency and astrology, there are three types of risks crypto owners should be wary of: bad investments, collapsing projects, and outright scams.

Subreddits like r / cryptocurrency are inundated with allegations of “fraudulent coins”

The first and most common type of risk are simple bad investments in obscure coins. Outside of big players like Bitcoin and Ethereum, there are thousands of smaller coins based on blockchain technology that promise huge rewards if the coin ever gains importance. Subreddits like r / cryptocurrency are inundated with allegations of “fraudulent coins”.

“I mean, I’m in a handful of those where it’s all about investment, it was a promise, development is ongoing and I’m still waiting,” she said.

Trying to research obscure altcoins can be confusing for inexperienced traders. Links to Discord servers for cryptocurrencies often pop up on Twitter, promising a simple pump-and-dump of a smaller crypto coin. Or, even more confusing, Twitter bots accuse Discord servers, which don’t exist, of pump-and-dumps in hopes of adding value for a separate coin. But while they promise easy money, the reality is less tempting.

Another risk is the often innocent but unfortunate mismanagement of funds. In a bullish crypto market everyone thinks they have a revolutionary idea with cryptocurrency. And of course, many of them don’t work out.

“Unresolved issues, contract errors or just a weak link in the development circle,” said Altman, “which leads to mismanagement of money and unpredictable investment by people.”

A very well-known example of this was the DAO project. It started with a lot of noise in the spring of 2016, only to be completely discontinued in the autumn of the same year. The project was launched by the Decentralized Autonomous Organization and was an attempt to build a venture capital fund on the Ethereum blockchain. Just a month or two later, a hacker found a vulnerability in the token’s code and ran away with $ 50 million. Traders started selling DAO tokens en masse, and the price never recovered.

Sometimes this mess can end in downright fraud. According to the Federal Trade Commission, crypto-based financial fraud is at an all-time high thanks to increasing interest in cryptocurrencies. And the line between a well-intentioned mistake and the crypto-Ponzi scheme is blurred. Just ask investors from OneCoin or PayCoin.

In 2019, PayCoin founder Homero Joshua Garza was sentenced to 21 months in prison

OneCoin was launched in the mid-2010s and billed as an educational crypto trading service. It turned out that the OneCoin tokens bought by investors weren’t actually on the blockchain. It was accused of being a Ponzi scheme and its founders ran away with nearly $ 4 billion. It has been dubbed one of the greatest financial fraud cases in history. One of its founders, Ruja Ignatova, is still missing.

In 2019, PayCoin founder Homero Joshua Garza was sentenced to 21 months in prison and sentenced to restitution after creating his own cryptocurrency and offering it to investors with assurances that he had secured a capital reserve of $ 100 million. There were no reserves, and the entire project ended up losing $ 9 million.

But even with the significant drop in the value of large coins like Bitcoin and Ethereum in May 2021, cryptocurrency is more popular than ever, and legions of inexperienced traders are learning the hard way what a peer-to-peer financial service actually means.

Neeraj Agrawal, director of communications for Coin Center, one of the largest cryptocurrency stakeholders in the United States, told The Verge that wildly speculative coins (colloquially known as “shitcoins”) are now an integral part of the cryptocurrency space.

“The insane speculative rubbish coins will not go away,” says Agrawal. “It’s just part of the world now. And it remains for us, so to speak, to show that the really good projects are worth their existence, that there really is value here. “

That’s especially difficult when crypto celebrities like Elon Musk turn interest into the crazier end of the crypto space. Musk recently fueled the massive surge in interest in Dogecoin, a failed crypto coin invented as a hoax and named after the famous Shiba Inu meme. Musk’s tweets were also blamed for this month’s massive market downturn. It’s still unclear what impact Musk is having on the market, but his recent branding as the main character of crypto has resulted in a litany of Musk-themed scams. According to the FTC, people posing as Musk scammed at least $ 2 million from traders this year.

“A market really only needs two things … a seller and a buyer.”

“Perhaps that’s the biggest risk facing crypto users – your own stupidity,” joked Meltem Demirors, chief strategy officer at digital asset investment firm CoinShares. “I think people are just not used to taking responsibility for their financial lives.”

In fact, this month I was asked by both a family member and a close friend about an obscure cryptocurrency called Dogelon Mars. It’s currently worth $ 0.00000016, but the two people I was close to were considering buying a bunch of it because they mistakenly believed that based on the name and frankly confusing description, it was one of Musk’s own launches Coin trades.

Demirors told The Verge that Dogelon Mars was actually one of their favorite meme coins. “We need to remember that the whole point of a lot of things is license-free financial innovation,” she says. “And a market really only needs two things. It takes a seller and a buyer. “

She said this was the main explanation for the recent NFT explosion. People had crypto coins on hand and wanted to see what they could spend them on. It turned out they were looking to buy surreal internet art for millions of dollars.

“I always find it very funny when people are all about crypto and permissionless financial innovation, but the moment they lose money they become the most statist people imaginable,” Demirors said. “You really can’t have both. Like you bought this shitcoin. You have to make your bed now and lie in it. “

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Former US Treasury Secretary Larry Summers: Cryptocurrency Will ‘Do Better Regulated’ – Regulation Bitcoin News

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Former US Treasury Secretary and World Bank chief economist Larry Summers says cryptocurrencies will be better regulated rather than treated as a libertarian paradise.

Larry Summers sees crypto benefiting from strong regulation

Lawrence Summers, who served as Treasury Secretary in the Clinton administration and director of the National Economic Council of the White House in the Obama administration, spoke about regulating cryptocurrencies in an interview with Bloomberg on Friday. Summers, a former chief economist at the World Bank, is currently President Emeritus of Harvard University.

He was asked why regulators around the world are “deeply skeptical” about cryptocurrencies. China, for example, is taking action against crypto activities. Summers began by stating that the word “crypto” implied a “desire for secrecy in relation to large financial sums” and stated:

When large sums of money happen in secret, there is a risk of money laundering, the risk of assisting various types of criminal activity, and the risk of innocent people being ripped off.

“The truth is, if we didn’t regulate flight safety, we wouldn’t have a viable aircraft industry,” he continued. “We wouldn’t have the transportation system we would have if we didn’t regulate car safety.”

He added that the blockchain-based payments industry “will be more solidly regulated rather than trying to be some kind of libertarian paradise,” noting:

I think the crypto community needs to recognize this and cooperate with governments, and when they do. I think this innovation can be one of the most important innovations of this time.

The former chief economist at the IMF pointed out that some people believe in the idea that cryptocurrency will be “some kind of libertarian paradise where we won’t be able to enforce banking rules like knowing your customers”. [KYC]where we can move money freely and avoid taxes. “

Summers said, “I think it’s a realization that all industries need to arrive with systemic importance,” added:

It’s not entirely dissimilar to the discussion about big tech companies. You need a regulatory framework. Not only do they need it to protect their consumers, they need it for their own protection.

He concluded by saying, “If we didn’t have a strong SEC, we wouldn’t have the New York Stock Exchange as the center of the world stock market,” and emphasized, “Even if people don’t like the rules of the time.”

What do you think of Larry Summers’ comments? Let us know in the comment section below.

Photo credit: Shutterstock, Pixabay, Wiki Commons

Disclaimer of Liability: This article is for informational purposes only. It is not a direct offer or solicitation to make an offer to buy or sell, or a recommendation or endorsement of any product, service, or company. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author are directly or indirectly responsible for any damage or loss caused or allegedly caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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Coal to cryptocurrency: An answer to grid volatility?

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A Midwestern utility company is testing a new tool to cope with variability on the web: mining bitcoins.

St. Louis-based Ameren Missouri, the state’s largest utility company with 1.2 million customers, began mining cryptocurrency in April. When demand is low and electricity is cheap, computers in a 20-foot metal container on site at the Portage Des Sioux coal-fired power station in Ameren race to “mint” a digital coin by looping through complex mathematical calculations.

Ameren Missouri executives see the initiative as research and development rather than a speculative bet on Bitcoin, the price of which has fluctuated sharply this year. It is seen as a pilot project designed to help meet electricity demand with an intermittent energy supply as more and more wind and solar projects go online.

Electric utilities around the world are increasingly tied to the energy-hungry cryptocurrency industry. In the US, however, Ameren is unique among investor-owned utility companies as it is directly involved in mining bitcoins.

Critics argue that the industry is a lifeline for aging fossil fuel power plants at a time when the deepening climate crisis calls for a quick switch to carbon-free energy sources (Energywire, June 24). The fact that Ameren mines bitcoins on-site at a giant coal-fired power plant – one of four that encircle the St. Louis metropolitan area – will almost certainly be scrutinized.

Ameren Missouri, based in St. Louis, says the effort could help reduce its carbon footprint. The utility has to respond to more fluctuating wind and solar power on the regional grid and is looking for ways to avoid having its power plants ramp up and down to meet demand as this is inefficient and can increase emissions.

Warren Wood, vice president of regulatory and legislative affairs for the utility, likened it to using cruise control on the freeway to driving in stop-and-go traffic in the city.

“We have pretty dramatic load changes from minute to minute, sometimes from second to second,” Wood said in an interview. “We need something that can ramp up and down really quickly to be a really effective tool for balancing.”

He is quick to point out that the pilot is initially funded by the utility shareholders and is free to Missouri fee payers.

Ameren initially tried to include $ 8,000 in electricity bills for 309,000 kilowatt hours of bitcoin mining-related energy use in its fuel reimbursement formula, but withdrew the application to the Public Service Commission after the state’s consumer advocate had questioned him earlier this year.

“If Ameren Missouri wants to get into speculative commodities like virtual currencies, it should be done as an unregulated service where installment payers are not faced with their economics,” said Geoff Marke, chief economist for the Missouri Office of the Public Counsel, said on a file . “This endeavor goes beyond the scope of intended regulation of utility companies and, if allowed, creates a slippery slope that could ask fee payers to provide capital for virtually anything.”

However, executives said the initiative could benefit customers if the concept works. And they are encouraged after the first four months.

The pilot has also piqued the interest of Missouri’s top energy regulator, Public Services Commission Chairman Ryan Silvey, who said he was interested in convening a technical workshop on the matter before he even learned about the Ameren project.

Silvey, a former Republican senator, told E&E News that he has a personal interest in digital currency. And a recent piece of news about an aging hydropower dam in New York state being used to mine bitcoins made him think further about the potential of cryptocurrency as a network asset.

Silvey said it was appropriate for Ameren to take all risk of the project at this point as it has not been reviewed in front of the PSC and other parties. But Missouri law allows utility companies to run pilot programs and look for alternative sources of income that could be used to lower tariffs.

“When a company offers us a program that presents little or no risk for consumers to benefit from, I find it exciting,” said Silvey.

But can Bitcoin mining bring value to the web?

Joshua Rhodes, a research fellow at the Webber Energy Group at the University of Texas at Austin, has researched the impact of Bitcoin mining in Texas and changed his mind about the potential benefits. Texas has become a global hub for cryptocurrency mining after China announced a series of restrictions on digital currencies in May, some of which are aimed at curbing carbon emissions.

“I think that [miners] can add great value, especially how fast they can move up and down, ”said Rhodes. “They can move up and down faster than some traditional generators, which is of value … especially if they are able to monetize the crypto assets.”

According to Ameren, the mining operations at the Sioux plant initially only consume half a megawatt and, depending on grid conditions, can be started up within a minute and shut down again within 20 seconds.

“We talk for a minute or less to turn it on or off,” said Wood. “You really have a good mechanism to try to get a better balance of the grid between your generating resources and the load.”

Questions about coal

Bitcoin mining has been widely criticized for its enormous power consumption – more than 121 terawatt hours worldwide – an amount that exceeds the power consumption of countries like the Netherlands and Argentina, according to the Cambridge Center for Alternative Finance.

But industry defenders, including Twitter co-founder Jack Dorsey, claim that bitcoin mining can advance the energy transition and enable the development of renewable energy and energy storage by helping break down barriers to their disruption and lack of transmission are connected.

“Bitcoin miners as a flexible charging option could potentially help solve much of these disruption and congestion problems so that the grids can use significantly more renewable energy,” said Dorsey’s other company Square and shareholder Ark Invest in an April white paper.

Among the skeptics is Andy Knott, deputy regional director of the Sierra Club’s Beyond Coal campaign.

The Sierra Club recently began research into bitcoin mining and its impact on the power grid after news reports of bitcoin mining operations powered by coal waste, natural gas and nuclear power plants, Knott said.

These projects include a cryptocurrency miner in northwest Pennsylvania that plans to run its operations on waste coal.

“It clearly generates electricity demand, and what will it cover besides the existing electricity generation on the grid?” Said Knott.

However, Ameren officials said just because the pilot is physically housed at the Sioux plant doesn’t mean bitcoin mining is coal-tied. The aim of the project is initially to validate the concept.

Alex Rojas, director of distributed technologies at Ameren, said that because the mining operation is modular, it can be relocated to other locations on the utility’s grid, be it an underutilized substation or a wind or solar farm.

“Renewable energies that cannot be shipped, such as wind and solar energy, urgently need this capability,” he said. “Putting this technology in one place would be of great help.”

Rhodes didn’t reject the idea that mining bitcoins to balance electricity supply and demand can be a net benefit in terms of carbon emissions. But he said it depends on how this affects the shipping of different power plants.

“It can have a positive impact on emissions when operated properly,” he said. “It can also increase emissions when it doesn’t.”

Ameren’s executives did not specify how long the pilot would last or how its success would be defined.

However, Rojas, who leads Ameren’s research and development work, said the results so far are promising and he sees the potential to use bitcoin mining modules for grid balancing on the same scale as energy storage in California with 20 to 80 megawatts per location .

“Something similar could happen with that,” he said. “It’s that scalable.”

For now, the utility is content with keeping the project running unchanged.

So far, Ameren has mined about 20 “coins” and produces a new one about every 15 days.

The utility said it doesn’t care about the volatility of Bitcoin, which peaked above $ 63,000 in April and has hovered around $ 44,000 in recent weeks. That is still over 300% more than last year.

Rather, it sees the mining process itself as the primary value that is being created and bitcoins as a by-product.

“The goal is not to mine crypto,” said Wood. “It’s really running a data center that happens to be producing crypto.”

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US Senator Calls On SEC Chairman To Provide Regulatory Clarity On Cryptocurrencies – Regulation Bitcoin News

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A US senator has asked the chairman of the US Securities and Exchange Commission (SEC), Gary Gensler, to provide clear guidance on cryptocurrency regulation. The Senator stated that in many enforcement actions, “the SEC has failed to identify the securities involved or the reasons for their status as securities, which would have provided much-needed public regulatory clarity.”

US Senator wants the SEC to provide clear guidelines on crypto regulation

Senator Pat Toomey, ranked member of the U.S. Senate Committee on Banking, Housing, and Urban Development, wrote a letter to SEC Chairman Gary Gensler on Friday regarding the regulation of cryptocurrencies.

His letter followed Gensler’s testimony before the Senate Banking Committee last week. Toomey began:

I’m writing to address the concerns I raised at the hearing about the need for regulatory clarity around emerging technologies such as cryptocurrencies, including stablecoins.

“In order for investors to benefit from a fair and competitive market, regulators must proactively provide rules on how to get to industry,” the Senator said that the SEC “has instead adopted a strategy of regulation through enforcement in this area.” To date, the commission has launched more than 75 enforcement actions against the crypto industry, fines and penalties totaling more than $ 2.5 billion against crypto companies and individuals.

At the Senate hearing, Gensler extolled “the SEC’s success in pursuing crypto-related enforcement measures.” Toomey noted, however, that “in many of these enforcement actions, the SEC failed to identify the securities involved or the reasons for their status as securities, which would have provided much-needed public regulatory clarity.”

SEC Commissioner Hester Peirce is also concerned about the SEC’s approach to crypto regulation. She criticized her own agency in August for taking an enforcement-oriented approach to crypto regulation.

The Senator from Pennsylvania noted that the SEC’s approach was tied to Gensler’s belief that “the likelihood is pretty slim” that a given cryptocurrency platform has no securities. For example, Gensler told Senator Elizabeth Warren at the hearing that the Nasdaq-listed crypto exchange Coinbase (Nasdaq: COIN) could have dozens of tokens, which could be securities.

Recently, Coinbase was forced to abandon its plan to launch a loan product after the SEC threatened legal action and the company alleged it had received no explanation from the regulator. In the meantime, the security guard is in an ongoing proceeding with Ripple Labs and its executives as to whether XRP is a security.

Senator Toomey emphasized:

The SEC has a responsibility to do more than just provide probabilistic estimates.

The Senator concluded his letter with a list of questions for Gensler to answer for additional guidance on crypto regulation.

What do you think of Senator Toomey asking SEC Chairman Gensler to provide clear guidance on crypto regulation? Let us know in the comment section below.

Photo credit: Shutterstock, Pixabay, Wiki Commons

Disclaimer of Liability: This article is for informational purposes only. It is not a direct offer or solicitation to make an offer to buy or sell, or a recommendation or endorsement of any product, service, or company. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author are directly or indirectly responsible for any damage or loss caused or allegedly caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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