Exposing how Bitcoin and Dash users are unwittingly being exposed to HODL worthless Tether Tokens via unregulated centralised exchanges and in wallet Lock(TM) features!

The basic claims made in this article:

Many accuse Bitfinex of manipulating BTC price by using unbacked Tethers to buy BTC. Bitfinex own and control Tether. Tethers (USDT) are not 1to1 backed by USD < 10%. Bitfinex and Tether do not have reliable Fiat banking partners. Tethers are unwittingly / unknowingly held by thousands of people in wallets via Coinapult Lock(TM) feature. Bitfinex et el refer to USD instead of Tether. The bank at the centre of DASH and Bitfinex is Cryptocapital which is not a Bank! Cryptocapital are unlicensed and uninsured, using entities as banking partners who are known criminals and scammers. CryptoCapital offer services to many exchanges and are the same people behind Coinapult. Coinapult claim to Lock BTC or DASH to USD, which is actually unbacked Tether USDT. Coinapult Lock(TM) is incorporated into the Mycelium wallet as well as DASH, Safello and many others. DASH have incorporated the unreliable fiat banking solution provided by the people behind Coinapult / Cryptocapital. Roger Ver is very knowledgable about Tether despite claiming not to be since being an investor of Coinapult, Safello and Kraken all connected to Coinapult. EXTERNAL TETHER AUDIT is planned for 2 Jan 2018! EXTERNAL USD AUDIT is planned for 6 Feb 2018!

Act1 Enter Bitfinex

There have been many accusations made against Bitfinex in the last year alleging Bitfinex are the same entity as Tether and that Tether tokens (USDT) are NOT backed 1 to 1 with USD as claimed, thereby falsely inflating the value of cryptocurrency. These accusations have intensified over the past year as supporting evidence accumulates — for example, Bitfinex losing retail banking partners, while Tether printing increased despite the lack of banking and Bitfinex’s sudden decision to stop new account signups.

Act2 Enter Tether

Nethertheless and despite these accusations Bitfinex has continued to use Tethers which have continued to be issued in the millions and this house of cards has not yet fallen. As time has gone on, many have started to dismiss these allegations as not critical for the ecosystem, some have started shooting the messengers and apparently others have continued to use Bitfinex despite the risks.

Recently there was an important change in the claims by one of the Bitfinex spokespeople, alluded that Tethers were also backed by other crypto currencies instead of USD!

Now in this article I am going to take you further inside this rabbit hole and explain how one aspect of this complicated scam really works, who is involved, what are the risks of it imploding, how it will all unfold and how Bitfinex have continued to issue and sell Tethers to Hodlers of Bitcoin despite very direct allegations of fraud covered in the NYTimes and all mainstream media, making the unbacked USD/Tether saga to become one of the most important concerns in the crypto community in recent months.

Lets start by observing the fact that Bitfinex display their crypto currency prices against the USD which is totally disingenuous since Bitfinex infamously lost their USD banking partners. Bitfinex own and operate Tether.to which issues a Token they claim is ‘backed’ by USD, despite no-one believing this… So the currency pairs listed on Bitfinex should instead of showing BTC/USD be listed as BTC/Tethers or as they might prefer (BTC/USDT). Meanwhile Poloniex another popular exchange does list all of their currency pairs against USDT (Tethers) as an example. Using USD in replacement of ‘USD’T or more accurately just Tethers is blatantly false and shows malfeasance, further using ‘USD’ in the name of a Token issued by some centralised obscure third party issuer is highly misleading and blatant trademark and copyright infringement to the real USD and TETHER should have caught the US attorney attention for counterfeiting USD a long time ago.

Act3 Enter CryptoCapital

This investigation however now moves temporarily away from Bitfinex onto CryptoCapital, (archive) a Panamanian based financial services company FALSLY claiming to be a ‘BANK ‘ (NOT TRUE). With scam warnings online EVERYWHERE. The most recent investigation into Cryptocapital and Decentralized Capital uncovered even more history connecting these entities as one. Now while Cryptocapital also claims to be a fully licensed and insured Panamanian money exchange service. All of these claims are false! CryptoCapital started life as Crypto Financial (CFIG) and was launched via a company called HAVELOCKINVESTMENTS (archive) which is a company owned apparently by something called The Panama Fund, S.A. Havelock Investments is a platform where a lot of SCAM crypto ‘investments’ took place and the last announcement on HaveLOCKInvestments website announced a partnership between Coinapult and Cryptocapital. Remember Coinapult and that >> LOCK << part for now. HaveLOCKinvestments were the platfrom that offered shares in Cavirtex a canadian Crypto exchange which was bought out by Coinsetter which was then bought out by Kraken. Note that Roger Ver is an investor in Kraken. There is good speculation that HaveLOCKinvestments, the Panama Fund, CryptoCapital and Coinapult are all run by the same people.

CryptoCapital have been telling people to send their money to Global Transaction Services (HK) Limited who are known scammers as well as working with some tiny polish banks Pekao Bank and Bank Spółdzielczy.

Despite the false claims of Cryptocapital being an insured bank (all over Coinapult), the banking superintendence of Panama has forbidden all Panamanian banks of providing services and accounts to companies within the Crypto space. No banking licenses have been issued to any bank to engage with digital currencies in Panama! There are no named officers listed on the CryptoCapital website, nor any bank license numbers, company numbers or other information to support the claims that they are a regulated or insured banking institution.

CryptoCapital promote their service as a regulated one stop banking partner dedicated to crypto currency exchanges providing access for customers who once verified are then able to open accounts across multiple exchanges although it has been commonly reported that new customers are unable to open accounts with CryptoCapital. ‘tried to open an account with Cryptocapital without success’

CryptoCapital claim to provide banking services to the following exchanges: COINAPULT, BITFINEX, QUADRIGACX, CEX.IO, EXMO, CHIP CHAP.

Act4 Enter Coinapult

Now jumping from CryptoCapital to Coinapult (one of CryptoCapitals listed exchanges) who are of specific interest in this drama. Coinapult have offices next door to CryptoCapital and their internal technology was created by Coinapult according to Ira Miller (former CEO / CTO of Coinapult). Then Diginner (archive).

Ira Miller of Coinapult created CryptoCapital’s backend systems and API (archive) and it appears there are many close ties between CryptoCapital and the other technology projects created by Ira Miller, such as mentioned on a proposal by Ira Miller to the Dash Community which connects the most interesting companies in this plot even further.

Now, to understand how the Tether distribution system works you have to understand one very interesting feature that is offered by Coinapult called Locks(TM) which allows hodlers of Bitcoin on Coinapult to lock down their Bitcoin USD value. So when the USD value of Bitcoin price moves you can lock in the USD value any time to protect against potential price drops.

Locks(TM) started life on Coinapult and was initially launched to a very skeptical reddit userbase but was then quickly shifted over to “Crypto Capital bank account” to manage shortly after Coinapult ‘integrated’ with CryptoCapital according to this support page (archive).

There is no further information provided by CryptoCapital or Coinapult on how these Bitcoin USD values are locked, insured or stored, but we are SURE that Cryptocapital use the accounting mechanism known as Tether Tokens to account for who owns what USD value. The USD values are claimed by Coinapult to be insured by Cryptocapital but that is blatantly FALSE. The 3rd party counterpart risk is over the moon this relationship (given that CryptoCaptial’s banking partners are known criminals). Note that there is NO MENTION anywhere on Coinapult or Cryptocapital about Tether Tokens. Simply this feature is listed and called Lock(TM) on Coinapult.

Now, going back a little in history, Coinapult started life as a convenient method to send bitcoin via email to people who did not yet have a Bitcoin wallet. Sometime in the last few years Coinapult morphed into what they call an ‘exchange’. That said, there are very limited exchange type features on the site, which are crude and simplistic, not the typical features one would expect to see on a real exchange. Coinapult’s exchange method is more like a buy it now button for Bitcoin and the price feed comes directly from Bitfinex. Tracking the Bitfinex price feed day and night.

All the ‘real’ Bitcoin exchanges and marketplaces have widely different prices. Given that Coinapult’s Bitcoin price feed is Bitfinex’s BTC/USD price we can superpose that the relationship is clear and via CryptoCapital and Coinapult are trading BTC/USDT (Tethers) on Bitfinex and using Tether Tokens for their Lock(TM) feature! (remember HaveLOCKInvesments!).

See the Locks Introduction Video from Coinapult.

Now we are full circle back at BitFinex and Tether where we can superpose with absolute confidence that the Coinapult’s Bitcoin price is Bitfinex price and Via CryptoCapital Tether Tokens are being purchased and distributed through the Coinapult Lock(TM) feature. But we haven’t accounted ‘yet’ for how new Tethers are being sold into the marketplace since Coinapult is clearly not used as a retail marketplace to trade Bitcoin. In fact Coinapult abandoned their retail services to instead concentrate on ‘business to business’ relationships. For example if you try to open an account on Coinapult they instruct you to fund your account via CryptoCapital, yet when people apply at CryptoCaptial for an account they are totally ignored ‘tried to open an account with cryptocapital without success’. Which doesn’t bode well for people expecting to cash out from the Lock(TM)ed USD/BTC or USD/DASH values from CryptoCapital or Coinapult anytime in the near future.

Act5 Enter Mycelium

Now delving a little further into this rabbit hole we find Coinapult then integrated their Lock(TM) feature into the popular Mycelium Bitcoin wallet as well as integrating with the Tender Wallet which offers to transfer Bitcoin and Lock(Tm) BTC/USD across the Telegram app to their millions of users.

Mycelium Coinapult Lock introduction video

Now that Coinapult integrated with Mycelium wallet this partnership opened up and exposed hundreds of thousands of Mycelium Wallet holders to brand new shinny fake Tethers, all of whom are totally unaware how the Lock(TM) feature works in practice, what it is backed by, or what the counter party risks for using the LOCK(TM) feature brought to them by the trusted services of Coinapult / CryptoCapital / Bitfinex / Tether, when holding their BTC/USD values as ‘Lock’(Tether) funds. Nowhere on the Mycelium wallet is it mentioned that Coinapults Lock(TM) is using CryptoCapital ‘bank’ and that Tether Tokens are ‘backing’ these ‘Lock’ed USD(T) Tether values!

Act6 Enter SAFELLO

Coinapult have also integrating with Safello another exchange with hundreds of thousands of users now also accessing the Coinapult LOCK(TM) Tether service. Safello Investors notably include Roger Ver (Coinapult Investor), Eric Voorhees (Coinapult Co Founder).

Act7 Enter DASH

At the same time that Coinapult integrated with the Mycelium and Tender Wallets and Ira Miller started working on Dash integration, around that time we notice that Coinapult stopped communicating to the general public via Reddit and Twitter. It appears the focus at Coinapult shifted from trying become a retail exchange service to instead focus on integrating the Lock(TM) feature into as many crypto ecosystems as possible via business to business partnerships.

Here is a very interesting podcast with Ira Miller being questioned about the third party counterpart risks associated with using Coinapult’s Lock(TM) service and starting at about 10 minutes, the conversation focuses on how the Lock(TM) feature is backed up by Coinapult in a ‘trust them scenario’, specifically of interest is how Ira Miller dodges / answers the questions around pegging BTC to GOLD while justifying ‘you always have to take risk when you trust any third party company’. Starting about 40 minutes Miller talks about efforts to block USA IP address, while more revealing is his ideology, justifications and thought processes throughout this section.

After the successful integration of Coinapult Locks(TM) service into Mycelium, Ira Miller the CEO and CTO of Coinapult publicly announced his ‘stepping down’ from Coinapult CEO to instead concentrate on his new projects at Deginner and Git Guild (archive).

Act8 Leave Coinapult

But then after making all of these integrations with DASH and Mycelium, He ominously disavows Coinapult with this announcement on twitter by Ira Miller (archive):

Accusations made from a former Coinapult employee then call into question the integrity and honesty of the current incarnation of Coinapult.

However, despite Ira Miller disavowing himself from Coinapult on Twitter, at 6:33 PM — 5 Aug 2017, and apparently stepping down as Coinapult CEO and CTO in 2015 (he still likely the beneficial owner!) and he was still championing the amazing business partnerships of Coinapult / CryptoCapital / Mycelium and Bitfinex to the Dash Masternode community on 19th august 2016.

AND YES Ira Miller successfully convinced and partnered up with Dash giving them too the opportunity of fiat ‘banking’, though CryptoCaptial exposing the Dash Community to his ‘banking’ solutions and the now infamous Coinapult Lock(TM) Tether feature.

Here is an overview of the Ira Miller GITGUILD Integrations designed for the DASH (archive) community to which features all of the main players of this play, Cryptocapital, Coinapult, Bitfinex as you can imagine after this successful integration with Dash the spot price has risen from 88$USD on the 17th/may/2017 when the integration was announced to todays giddying price of 1565$ on the 20th Dec 17. An epic 18 fold increase or 1678%.

Act9 Leave Roger Ver

Interestingly one of the most influential Bitcoin early investors, ‘Roger Ver’ did a AskMeAnything Youtube livestream on 18th/12/17 and the most important and most commonly asked question from the reddit community was for his thoughts on the Tether / Bitfinex saga, did he think it hold Tether would hold a 1–1 USD value in a crash? His nervous reply (starting at about 3 minutes) was that he didn’t know anything about Tether but had heard many allegations, but suggested people do their own ‘due-diligence’ research and that he was very often the victim of slander and could understand how others are often accused wrongly of scams when they are not.

What he failed to mention was that he himself is an investor in Coinapult and also an investor of Safello which now is also using Coinapult LOCK(TM) Tethers). Roger Ver would have been fully informed about the financial profits that arose from the Coinapult Lock(TM) integration into the Myciliem Wallet and the LOCK(Tether) into Safello.com. However with Roger Ver’s recent and public Launch/backing of Bitcoin_Cash and his own recent transfers of 40K BTC to BCH via Bitfinex, into Bitcoin’s new rival, maybe Roger knows more than was publicly admitted?

Act10 Connecting The Actors Together

An interesting method of connecting these projects together is the using technical repositories listed on Github built by and maintained by Ira Millers teams. Of interest is a dead exchange project called 1btcex which has CryptoCapital branding all over it, is built on an open source project called WLOX, WLOX was developed by Ira Miller for CryptoCapital, as can be seen on the CryptoCap GitHub page (archive). 1btcxe.com (archive) is hosted on the IP 104.25.146.101 which is the SAME IP hosting address for CryptoCapital (at time of writing).

On the same IP 104.25.146.101 we notice the following projects:

trustless.exchange (archive) which links to the Cryptocap GitHub page

On the same IP as CryptoCapital, as trustless.exchange and 1btcex.com is small number of xxxPORN and Lets Get Rich Online tutorial sites.

So those people relying on the banking capacities of the exchanges using Tethers should also be aware of the company they are in. These exchanges not only deal strictly in Tethers and pass them off as USD(T) but share the same ‘banking’ partner Cryptocapital (scam bank) and many wallets and exchanges have surreptitiously integrated Coinapult LOCK(TM) USDTethers to their users.

These are the bitcoin exchanges (archive) that Ira Miller has produced clients for which should be an indication of focus of his reach.

This is unfolding badly for the hundreds of thousands of people unwittingly hodling unbacked Tethers Via the Coinapult Lock(TM) Tether feature included in the popular Mycelium wallet and Safallo exchange. The young and innocent Dash evangelists and all the other wallets who are intergrating this popular feature. The New Dash Evolution (incarnation Version 2 of Dash) is already totally exposed by integrating with this toxic banking network and reliance on these unregulated exchanges and Tethers. I cannot be sure how many other exchanges and wallets are using this Lock(TM) and the fake Tether USDT / USD but these alone could easily account for the 1 Billion infake Tether Holdings.

Act11 Leave Tether

Many people have been calling for Bitfinex/Tether to conduct an external audit confirming real USD holdings and BTC holdings to verify that the over one billion Tethers currently being circulated and being held by brave crypto paper millionaires are indeed backed by real USD. While this has not yet and will never happen, one method the crypto community has available to them is to organise a crowd regulated open EXTERNAL TETHER AUDIT to prove and confirm the liquidity of Bitfinex/Tether against ‘their’ BTC and DASH hodlings.

If we suppose (take it for granted) that in all likelihood there are no real USD $$$ backing Tethers but instead hope and pray that the BTC and DASH that Bitfinex have purchased with these (fake USD) Tethers is still being held within Bitfinex ‘vaults’ and has not found yet their way into some ‘hackers’ or ‘insiders’ account or instead been sold off on other exchanges and squandered. Then if one prays even harder that Bitfinex will redistribute and exchange (give back) this safely guarded BTC and DASH to the rightful owners at some fair value according to what they are expecting upon request, only then can the crypto hodlers show some sigh of relief, even if they are unable to redeem the full USD paper value they were expecting according to what their exchange and wallet balances currently state.

If however the USD price of BTC/USDT (TEHHER) goes down quickly it will leave all of these paper millionaires with Locked USD funds to discover they have actually got Tethers instead of USD and they will have absolutely no hope of redeeming them on any regulated exchange which works with real USD. The best they will be able to hope for is to regain control of the BTC and Dash that they relinquished. Though the real question remaining about Bitfinex and their BTC/Dash liquidity will be at what real USD value. Have they the intention of keeping the BTC/Dash they have bought with fake Tethers or are they running to the hills already hiding behind their fractional reserves while trying to exchange as many BTC/Dash for real fiat currencies before everyone else realises the game is up.

An EXTERNAL TETHER AUDIT of Bitfinex can be simply achieved by organising ‘everyone’ in the crypto community who is unwittingly hodling Lock(TM)ed USDT (Tethers) in their various DASH and Mycelium wallets by getting them to convert these worthless Tethers back to real BTC & Dash. Then removing those BTC and Dash from the unregulated exchanges and wallets and move them to other safely controlled wallets that don’t offer those LOCK(TM) / HODL ‘features’ and Tether USDT ‘Hodlings’.

This will be possible to organise fairly quickly with the massive interest and addiction speculators have in this space. It will not be too difficult to organise everyone to convert out of such Hodlings (when they know what they are hodling) back into the real BTC/Dash crypto currency of choice which will quickly validate the intentions of Bitfinex and Tether. In as much as proving if they will act in good faith when tested or fold under pressure because they don’t have the value or intention to cover the debts on their glossy accounting balance sheets.

I am scheduling a community driven EXTERNAL TETHER AUDIT to take place at 2pm GMT on the 02/Jan / 2018. Giving everyone reasonable time to allow the media outreach of this community driven audit upon hearing about these revelations to alert all unwitting Hodlers about the risks they are taking and allowing them to participate in this recovery project while BTC and DASH prices are still astronomically high!

Act12 Leave Bitfinex and ALL Exchanges

Because of the questions raised during this investigation into Tether and the reliability of crypto exchanges in general I am also calling for an EXTERNAL USD AUDIT of all exchanges!

We are bombarded daily with euphoric price propaganda pumped to us from every smug (and rightly so) early investor of BTC and the exchanges along with the large whales, screaming to us ‘all time high’ ‘spot price’ and announcing the Bitcoin MarketCap which today (20/12/2017) has reached a dizzying 320 Billion USD, while the crypto MarketCap is at over 600 billion USD. Given these all time high’s one would be safe to assume there would be huge liquidity and enough volume to absorb a fair ‘medium/high’ price for everyone who has been hodling cryptos for at least 6 months to allow them to cash out at least half of their holdings. With the record numbers of new speculators flooding into these markets all wanting a share of these astronomical gains, in the process crashing the Coinbase servers and crippling their KYC department, it should be possible to get some real USD$ out of these exchanges without crashing the current BTC/Dash prices.

Lets see what this would achieve:

First it would prove this isn’t just some massive decentralised Ponzi scam as it is being accused of being by every central bank and government official every time they open one of their mouths. Where Satoshi and early entrants aren’t just sucking out any value as soon as new ‘suckers’ put it in.

Second this will provide a community driven EXTERNAL USD AUDIT of funds which are being held on behalf of the community by a small group of the centralised exchanges. It’s one thing to be paper rich and anyone who’s played Monopoly has felt what that’s like! This would prove if there is real USD liquidity and equity in the various crypto exchanges to cover what was shown in everyones wallets and in their exchange accounts, validating this MarketCap and spot price value to all naysayers and proving to the skeptical world that this was the real deal (thus once proven this validation experiment will without any doubt encourage MASS adoption of cryptos even quicker!).

Third it would validate the wealth that many people think they currently have on paper, but don’t really know, while having concerns that this might all pop anytime. Since they have constantly heard the quotes ‘don’t put in more than you can comfortably afford to loose’, ‘you may loose 1oo% of your stake’ etc.

Fourth, some may worry this will crash the current price, but if the price does drop a little why should you care? 1) You would have peace of mind that the paper value is real and achievable 2) this crypto revolution is a big experiment still in its infancy and as such it should be tested for such eventualities and circumstances 3) If the price does crash, the better for everyone, lots of people are stuck outside waiting to get back into BTC and other cryptos and once the paper value has been validated, millions more people will come flooding in because they will trust the systems and exchanges that performed honestly during the community driven EXTERNAL USD AUDIT, once having been tested and proven they will want to get back in at better prices. This will only serve to push prices even higher very quickly but in a safe tested exchange environment.

I am scheduling this EXTERNAL USD AUDIT of ALL major exchanges to take place before the 6th February 2018. It will take time to organise withdrawals from Coinbase and other regulated exchanges who have relatively tight withdrawal limits which block larger account holders and since this will be a manual process, plenty of time will be needed to manage and organise this LIQUIDITY AUDIT. Obviously one might suggest everyone puts their money straight back into their favourite exchange upon receiving it without any undue stress, delay or phoney surprise requests for further due-diligence burdens placed upon you to stop you from getting your money back. Lets see how this experiment unfolds and let this community self audit method be used to test fiat providing crypto exchanges in the absence of them providing real trusted third party and validated health audits to us voluntarily.

Act13 The Next Chapters

Whats Ira Miller Doing Now?

Ira Miller has just announced a new fund that you might be interested in participating in of a decentralised exchange. Given the history of HaveLOCKinvestments and the success of the Coinapult Lock(TM) Tether Integration via many of the major exchanges and ecosystems it will surely be a great success. Invest now using any of the profits from your Tether Hodlings.

What is Tether Doing Now?

Tether have just announced that they are phasing out the Tether platform (Tethers) and replacing it with a shinny new one following the recent ‘hacking’ event that many suspected was an inside job. Tether have also announced that they will not be redeeming any USD for Tethers themselves since they are hodling on to the real USD. Instead they inform that hodlers should go to any one of the unregulated exchanges and try and trade them there with anyone else who will take them off you! Good luck with that I say. Tether confirm that they are hodling over 1 billion USD(T). Wait. They say USD on one page and then USDT on the actual page, which is it? Well they also say their fake audit is not happening yet and please wait a bit longer for that, that’s a flat out lie too!

My Speculations

Tethers were probably conceived with the intentions to solve the particular problem of not being able to easily send fiat currency between exchanges, but along the way justifications were made and unforeseen problems and opportunities arose, coupled with greed, naivety and grandiose delusions that one day Tether may be more ‘powerful than the USD itself’ you have to laugh at that one. This combination of fallaces and fraud has left hundreds of thousands of people hoodwinked into Hodling worthless Tethers while given up their BTC/Dash on their journeys to the moon which is now officially in tatters.

With a community driven EXTERNAL USD AUDIT, many of the current exchanges especially the unregulated ones will not deliver well and Tether (USDT) will drop to ZERO while they try and hold on the the BTC and Dash. If the Tether based exchanges are able to give back the value of BTC and DASH to the rightful owners I think that would be as genuine attempt as one could realistically hope for. Anyone hoping to regain the current USD value that they see marked in their accounts are delusional. It’s just not going to be possible to give everyone back the USD value they think they have. That USD value is just not there!

It is the exchanges that are holding large quantities of BTC and Dash now. If they exchange ‘their’ BTC and DASH for the fake USD Tethers at the currently high USD valuations, then they will end up given back only a few BTC and Dash compared to the price they originally paid (since they paid a lot less for the BTC at the time when they sold the Tethers) given them a massive BTC and DASH profit, while taking the worthless Tethers back and given up some of their crypto holdings. This will leave them holding the fake USD Tethers and the difference between the price they first bought the BTC and Dash and the price they sold them back for will determine their BTC profits! However if the USDT price drops they will end up making a loss, hence the pressure they are under to ‘fake it until they make it’.

Interested in the next instalment? Follow me on T @untetherbtc