Posted on

Hodler’s Digest, April 8–14: Top Stories, Price Movements, Quotes and FUD of the Week

Bloomberg calls Bitcoin a bubble yet again, and Facebook is seemingly looking for $1 billion from VC firms for its stablecoin.

Top Stories This Week

NYT Reporter: Facebook Seeking $1 Billion in Venture Capital for Crypto Project

According to a tweet by New York Times (NYT) tech reporter Nathaniel Popper, Facebook is reportedly looking to various venture capital firms to develop its digital token that has been previously reported on. Popper, citing unnamed sources familiar with the matter, said that Facebook is seeking $1 billion to develop its cryptocurrency project, which itself has not been publicly confirmed by the company. The Times reporter also noted that the project involves a stablecoin that would be pegged to a basket of foreign currencies held in bank accounts.

Chinese Traders Pay Extra for Bitcoin Through OTC Desks Amid Crypto Market Surge

Local Chinese social media sources said that Bitcoin’s (BTC) price surge last week has led Chinese traders to pay a premium in order to trade the cryptocurrency. According to an analysis of price spreads from cryptocurrency exchanges Huobi and OKEx, cnLedger highlighted how Chinese traders are paying more in order to acquire Bitcoin. Since China formally banned crypto trading in the country in 2017, investors have had to resort to creative methods in order to deal in Bitcoin. In the analysis, cnLedger notes that a principal way to avoid the ban is to buy stablecoins such as Tether (USDT) via over-the-counter (OTC) services and convert them into other cryptocurrencies

Top Stories This Week

Top-Subscribed YouTuber PewDiePie Partners With Blockchain

PewDiePie, the personality behind the most subscribed channel on YouTube, announced this week that he will start streaming on blockchain video platform DLive as of April 14. Dlive is a blockchain-powered broadcasting app with a rewards system for content creators and will become the exclusive platform for livestreaming the famous Swedish YouTuber, Felix Kjellberg — aka PewDiePie. The platform currently has 3 million monthly users and 35,000 active streamers, while PewDiePie on YouTube has over 93 million subscribers and 21 billion video views, as of April 2019. PewDiePie’s move to Dlive comes as the Swede faced backlash over his alleged ties to white supremacism, as his channel was mentioned by the Christchurch gunman prior to his attack on two New Zealand mosques.

Bitcoin at Most Overbought Level Since Record Bull Run: Bloomberg Analyst

Bloomberg Intelligence analyst Mike McGlone claimed this week that Bitcoin is at its most overbought level since its record highs in December 2017, citing BTC’s GTI Global Strength Indicator. Bloomberg writes that similar buy patterns in the past have resulted in multi-week downturns, citing McGlone as referring to Bitcoin as a bubble. McGlone states that the recent market growth came about due to a long-term price compression and low volatility, causing the price to be “released from the cage.” Bloomberg also cites David Tawil, president of crypto hedge fund ProChain Capital, who reportedly expects the market to continue its downward trend.

Top Stories This Week

Coinbase Crypto Exchange Debuts Visa Card for U.K. Customers

Major United States cryptocurrency exchange Coinbase has launched Coinbase Card, which will enable its United Kingdom-based customers to pay both in-store and online with cryptocurrency. The card itself is a Visa debit card that is powered by users’ Coinbase account crypto balances, allowing purchases to be made globally by instantly converting customers’ crypto funds into fiat. The Coinbase Card has also been released for iOS and Android, linking Coinbase accounts with the app and allowing users to select which wallet will fund their card, as well as allowing access for receipts, transaction summaries and spending categories. The card is issued by authorized and regulated electronic money institution Paysafe Financial Services Limited.

Winners and Losers

The crypto markets are holding slightly down by the end of the week, with Bitcoin around $5,099, Ethereum at $165 and XRP about $0.33. Total market cap is around $172 billion.

The top three altcoin gainers of the week are BunnyCoin, WomenCoin and Block-Chain.com. The top three altcoin losers of the week are dietbitcoin, Cryptrust and ContractNet.

Winners and Losers

For more info on crypto prices, make sure to read Cointelegraph’s market analysis.

Most Memorable Quotations

“This is a stark contrast to the development you see with things like EOS or with Ethereum with Casper, where they kind of adopt this lone samurai viewpoint.”

Charles Hoskinson, the co-founder of Ethereum (ETH) and IOHK, the company behind Cardano (ADA), speaking on the idea of development with open protocols

“I have learned about how blockchain is having a huge impact on supply chain management, and how an app in Britain can help the public report modern slavery at car washes.”

Princess Eugenie, the granddaughter of Queen Elizabeth, who founded the Anti-Slavery Collective in Britain in 2017

Most Memorable Quotations

“Blockchain is like a spreadsheet on steroids that can automate certain tasks, build greater transparency, speed and reliability, and provide a single source of transactional information.”

David R. Jarczyk, innovation principal and tax leader for blockchain at KPMG

“Now it’s a question of duration and I suspect when you have such a massive bubble, you’ll always have an overhang of people who need to sell.”

Mike McGlone, Bloomberg Intelligence analyst

FUD of the Week

Singapore Police Secure First Convictions Against OneCoin MLM Scheme Agents

Authorities in Singapore have charged two men for promoting crypto multi-level marketing (MLM) scheme OneCoin in what is touted as the first case of its kind for the city-state. The two unnamed men reportedly engaged in activities that incorporated a subsidiary in order to promote OneCoin, in addition to signing up new members and accepting investments in return for education courses and OneCoin tokens. Singapore’s central bank had previously added OneCoin to its Investor Alert List, and various governments around the world have also issued warnings against the MLM scam, advising consumers not to interact or invest in OneCoin. While one founder was recently arrested in the U.S., the other remains at large following the indictment.

Canadian Crypto Exchange QuadrigaCX Officially Declared Bankrupt

QuadrigaCX, the embattled Canadian crypto exchange, has officially been declared bankrupt. The exchange’s bankruptcy was reportedly approved by the Nova Scotia Supreme Court following the court monitor’s earlier recommendation to do so. At the time, Ernst & Young’s legal team had put forward the argument that the restructuring process should instead be shifted to bankruptcy proceedings, meaning that the monitor will now have enhanced investigative powers. QuadrigaCX had previously filed for creditor protection when it apparently lost access to its cold wallet funds following the unexpected death of its founder in December 2018.

Electrum Faces Another Fake Wallet Attack, Users Reported to Lose Millions of Dollars

Bitcoin wallet service Electrum faced another Denial-of-Service (DoS) attack on its servers this week. According to media outlets, this most recent attack has resulted in the loss of millions of dollars (the exact sum unconfirmed) with a single user allegedly losing about $140,000. The attack works by referring users to fake versions of Electrum software by employing a malicious botnet of more than 140,000 machines. The company has recommended that its users upgrade their software versions older than 3.3 and not download software from any source besides the official site. Last December, Electrum faced a similar attack that led to a loss of about $937,000 worth of Bitcoin.

Best Cointelegraph Feature

Will China Ban Crypto Mining?

After this week’s relatively unexpected publication by a Chinese government agency about a possible ban on crypto mining, Cointelegraph takes a look into how serious the idea is, and who and what will be affected in what is unarguably the largest crypto mining sector in the world.

Facebook, Twitter and Telegram: A New Crypto Paradigm or a Glorified Voucher Program?

As more unconfirmed news surrounding Facebook’s secretive crypto project surfaced this week, Cointelegraph analyzes what it would mean for one of the biggest, and possibly most untrusted, institutions in the world to issue their own cryptocurrency.

Posted on

QuadrigaCX’s Legal Representatives Create Affected Users Committee

QuadrigaCX’s legal council has formed a dedicated committee to help provide guidance in representing affected clients of the exchange.

A new committee appointed by law firms Miller Thomson and Cox & Palmer will provide guidance in representing affected clients of major Canadian cryptocurrency exchange QuadrigaCX. The development was announced in a court notice on March 19.

In the filing, Miller Thompson reveals that it has established the Official Committee of Affected Users of now-shuttered QuadrigaCX, comprising of seven users affected by the shutdown of the trading platform following the sudden death of its co-founder, Gerald Cotten, last December.

At the time, the exchange reported that it was not able to access its cold wallet holdings, as Cotten had purportedly been the sole person with access to wallets’ keys. With the allegedly inaccessible crypto accounting for the vast majority of the exchange’s assets, QuadrigaCX now owes over $198.4 million to an estimated 115,000 users.

The newly formed committee is set to help the law firms represent all affected users in the court proceedings against QuadrigaCX. The committee can reportedly “retain advisors, experts and consultants to provide advice to and to assist the Official Committee of Affected Users and Representative Council in the exercise of their duties in relation to the Purpose.”

The committee members have varying fields of expertise and include such industry players as Eric Bachour, a creditor of now-defunct cryptocurrency exchange Mt. Gox, and Magdalena Gronowska, who has advisory experience in economic policy development for the Government of Ontario.

Miller Thomson and Cox & Palmer were appointed as QuadrigaCX’s legal representatives in February by a decision rendered by the Supreme Court of Nova Scotia, Justice Michael Wood. The representative council was set to be responsible for “managing communications with users; acting as user liaison for the monitor [Ernst & Young]; advocating for user interests before the court; identify[ing] potential conflicting interest amongst users; and advocating for user privacy.”

As Cointelegraph reported yesterday, QuadrigaCX’s co-founder Michael Patryn was reportedly involved in multiple criminal activities in the past. Patryn and his partner, Lovie Horner, remain two of QuadrigaCX’s largest shareholders, although he has not had any involvement in the company’s operations since 2016 due to a fundamental disagreement with Cotten.

Posted on

Court Grants Quadriga Deadline Extension, $145M in Crypto Still in Limbo

A Halifax court has granted an extension to QuadrigaCX’s creditor protection deadline. The story of the now-defunct crypto exchange that has most gripped the space so far in 2019 is therefore set to continue.

According to court documents, QuadrigaCX’s CEO, Gerard Cotten, died with the only knowledge of how to access the firm’s crypto cold storage solution. There is an estimated $145 million missing, a large potion of which is owed to the exchange’s customers.

Quadriga Given a Month and a Half to Find Missing Crypto

Much talked-about digital asset exchange platform QuadrigaCX has been granted an additional 45 days worth of creditor protection. The decision was made by a Nova Scotia Supreme Court Justice, Michael Wood, earlier today.

Wood also approved the motion to allow for the appointment of a chief restructuring officer to oversee the now-insolvent firm. However, the Justice was keen to point out that said officer would need to be monitored by a court-appointed delegate to ensure that professional fees did not run up too high. This monitor is also to have access to transnational data stored with Amazon Web Services, which may help in finding the missing funds.

The decision to extend the creditor protection afforded to Quadriga may well be a response to the recent report by “Big Four” auditing firm, Ernst & Young. It states that the company had successfully identified six of the supposed cold storage wallets used by Quadriga yet they were largely empty. In fact, apart from one single payment of $500,000 into them, there have been no deposits made in any since April 2018.

According to Toronto-based news publication The Star, of the US$145 million total missing, over US$52 million is owed to Quadriga customers.

Quadriga users leaving funds on the exchange stand to lose out.

This has caused various theories to abound about the whereabouts of the money, particularly given some of the circumstances surrounding Cotten’s death. Firstly, the Quadriga CEO died in a part of India known for having “fake death mafias” – organised gangs who will take care of all the paper work needed to make someone vanish administratively. Many have therefore accused the late Cotten of exit scamming his way out of Quadriga.

More recently, allegations have been made that the funds are in fact sitting on several large exchanges, including: Poloniex, Kraken, and Bitfinex. Research leading to this conclusion was published on the Zerononcense Blog.

However, Kraken CEO Jesse Powell refuted this narrative, whilst also reminding those who have lost funds thanks to the Quadriga missing keys debacle that the best chance of them getting their money back was if the money was indeed resting in a couple of exchange accounts.

Powell has himself been particularly active in the hunt for the Quadriga millions. The CEO even pledged to gift $100,000 in either cryptocurrency or fiat to whoever could give meaningful information leading to the recovery of the missing money.

Related Reading: QuadrigaCX Imbroglio Continues: Cotten Mentioned Bitcoin Key Loss In 2014

Featured Images from Shutterstock.

Posted on

Court Gives QuadrigaCX 45-Day Extension in Search for Crypto Millions

A Canadian judge has granted troubled exchange QuadrigaCX a bit more breathing room as it searches for nearly $140 million in missing cryptocurrencies.

Judge Michael Wood, of the Nova Scotia Supreme Court, said he was satisfied that a stay of proceedings first granted a month ago should be extended by just under 45 days, with the next hearing scheduled for April 18. Creditors cannot sue the exchange until the stay expires or is lifted.

Appearing in court Tuesday, attorneys for Quadriga explained that the company was making progress.

“We owe it to everyone in the process to go on as long as is reasonable,” said Maurice Chiasson of Canadian law firm Stewart McKelvey. Chiasson has been representing Quadriga since the company filed for creditor protection at the end of January.

Elizabeth Pillon of Stikeman Elliott, representing Quadriga’s court-appointed monitor Ernst & Young (EY), added that the companies are currently in the “data recovery, asset recovery” phase, and needed some “breathing room” to continue their efforts.

Wood also approved the appointment of a chief restructuring officer (CRO), an individual who would manage the exchange and related companies while working with EY in recovering the funds that Quadriga owes customers.

Chiasson explained that Jennifer Robertson, the widow of Quadriga founder and CEO Gerald Cotten, did not have much experience running a cryptocurrency-focused company, did not want the notoriety that her position has brought her and may also have a conflict of interest as the executor of Cotten’s estate.

Chiasson told the court:

“There needs to be a bit of separation here.”

Wood expressed some concerns about the potential cost to creditors, particularly if the CRO duplicated work that EY already conducted.

However, EY, Quadriga and the judge came to a compromise, where the CRO would only conduct work at the direction of EY, preventing any such duplication and keeping costs low.

Further, the CRO to be appointed – Peter Wedlake, a senior vice president at Grant Thornton – will bill at an hourly rate, rather than charge a much higher monthly fee.

Other orders

Wood granted an order compelling Amazon Web Services, which reportedly has Quadriga platform data in an account created by Cotten, to turn over any such data.

During the hearing, an attorney for EY explained that Amazon was not opposed to doing so, but could not do so without the court order as Cotten did create a personal account, rather than a business one.

The judge also hopes to speak with payment processors which have yet to turn over any funds belonging to Quadriga to either the exchange or EY. While he said some firms may have to appear in court in-person, for the moment he said speaking to representatives of each processor via telephone would be acceptable.

He deferred any order on repaying Robertson the $300,000 CAD ($225,000 USD) that she initially paid into the CCAA process.

Separately, attorneys with Miller Thomson and Cox & Palmer, the court-appointed representative counsel, updated Wood on their efforts to organize the exchange’s creditors.

To date, 800 individuals have reached out directly to the law firms, said Gavin MacDonald, of Cox & Palmer. Of these, 58 have expressed interest in becoming part of the steering committee, a group of creditors who would effectively direct the representative counsel.

The law firms are in the process of interviewing the applicants and plan to have a committee selected by the end of next week. Should EY agree to the members, Wood said he would approve the committee.

End of the line?

While Wood did approve the appointment of a CRO, he noted that the title is at best symbolic, and the officer’s mandate puts him into more of a manager-type role rather than a turnaround artist.

Other aspects of Quadriga’s case are also different from a typical company restructuring, he noted.

Chiasson mentioned the possibility that Quadriga would sell its trading platform a number of times, though this possibility is still in the distant future.

It may become necessary to change from a creditor protection proceeding under the CCAA, which Quadriga originally filed for, to something more akin to bankruptcy, Wood added, concluding:

“This isn’t so much a restructuring as it is a claims process and liquidation … it does look like an end process.”

Judge Michael Wood image via Nova Scotia Supreme Court

Posted on

Judge Delays Decision On Legal Representation for Quadriga Creditors

A Canadian judge declined to name any law firms to represent as many as 115,000 users of QuadrigaCX, deferring that significant decision by a week.

Nova Scotia Supreme Court Judge Michael Wood said during a hearing Thursday that he would not appoint any firms as representative counsel or make any other decisions regarding creditor representation immediately, though he plans to have a final decision within the week.

Wood did, however, shoot down a proposal which would have delayed the process even further.

As CoinDesk previously reported, three legal teams have formally applied for the position of representative counsel: Bennett Jones with McInnes Cooper, Miller Thomson with Cox and Palmer and Osler, Hoskin and Harcourt with Patterson Law. Another law firm, Goodmans LLP, wrote a letter calling for an extended appointment process, saying a committee of creditors who can coordinate should be created beforehand.

Whichever law firm team is appointed would be tasked with coordinating between Quadriga as it seeks to recoup roughly $196 million it owes its creditors and those whose balances are stuck on the exchange specifically.

The representative counsel may also begin preparatory work for a class action lawsuit, though such a suit cannot be filed during a court-imposed stay of proceedings. That stay is set to expire March 7 barring any further action on that front.

Money troubles

The question of who will represent Quadriga’s customers aside, Thursday’s hearing also touched on the funding issues surrounding the recovery efforts.

Professional services firm EY, a court-appointed monitor for Quadriga, explained in court Thursday that its oversight (along with lawyers’ fees) was being funded through a $300,000 lump sum dedicated to the process. Of this, $250,000 has already been spent, and the firm estimated that its runway would last for no more than two weeks.

EY has not yet received any funds from the payment processors holding Quadriga’s fiat balances, it said in a report published earlier this week. The companies are working with some of these processors to have the exchange’s funds released, though at least one is claiming it “has the right to continue to hold funds.”

The firm was not named, though in previous court filings, Quadriga identified WB21 as a payment processor which refused to release funds to the exchange. WB21 did not immediately respond to a request for comment.

The report also touched on the issues involved with pulling funds out of processors thta are cooperating with the monitor, noting that one unnamed firm was holding roughly $25.2 million CAD ($19 million USD) for the exchange.

Billerfy, a payment processor for Quadriga, previously told CoinDesk it was holding that amount in the form of bank drafts while it sought a banking partner who would endorse – and therefore, cash out – the funds.

José Reyes, Billerfy’s managing director, said at the time that the company was having difficulty finding a bank willing to work with crypto-related funds, causing delays.

Tuesday’s report added:

“Counsel for the Applicants and the Monitor have been in contact with legal counsel for this payment processor. There are various issues to address, however, discussions between the parties have been positive to date.”

A separate group of bank drafts held by another unnamed third-party processor has been transferred to Stewart McKelvey, the law firm representing Quadriga, according to EY’s report. These drafts are currently being cataloged.

The report did not specify what the total value of these drafts was, though in its initial filing, Quadriga identified some $565,000 being held by a total of three processors.

A hearing will be held on Feb. 22 to help facilitate the transfer of these funds to EY.

Attorneys for EY and Quadriga apparently did not discuss how efforts to recover $136 million in cryptocurrencies currently locked in cold wallets are proceeding.

Hat tips to Jack Julian of the Canadian Broadcasting Corporation and Matt Stickland of The Signal.