Following the bouncing bitcoin ball...... Last week we saw the Coinlab lawsuit against Mt Gox and began to wonder when the hammer on Bitcoin might fall..... From my prior post .....
http://fredw-catharsisours.blogspot.com/2013/05/coinlab-sues-mt-gox-for-75-million.html
http://fredw-catharsisours.blogspot.com/2013/05/coinlab-sues-mt-gox-for-75-million.html
Friday, May 3, 2013
CoinLab sues Mt Gox for 75 million dollars - various acts / non actions , malfeasance / misfeasance claims for breach of contract to transition Mt Gox's US and Canadian customers to Coinlab's systems appears to be the major cause of action (dollars not bitcoins sought by the way ) , 75 million , which is several times the annual revenue of Mt Gox , would not Mt Gox quite backwards if they lost ! ...
http://www.infowars.com/when-is-the-government-going-to-shut-down-bitcoin/
http://coinlab.com/status
Submitted by Tyler Durden on 05/06/2013 18:30 -0400
When Is The Government Going To Shut Down Bitcoin?
Do you actually believe that the central banks of the world are going to sit back and do nothing while their monopoly over money creation is being threatened? Do you actually believe that the governments of the world are going to allow a digital currency that they have no control over to become “the future of money”? If so, then you are incredibly naive. Wars have been started over much less. The global elite are very, very sensitive when it comes to the creation of money, and Bitcoin has definitely gotten their attention. Yes, there have always been alternative currencies created by local communities, but none of those has ever been a real threat to the central banks of the world. The truth is that Bitcoin is different. It has the potential to really be something, and I expect a serious move to be made against Bitcoin before it explodes in popularity. If Bitcoin was solely a domestic currency, the U.S. government would have already shut it down long ago. The fact that it is a decentralized international currency makes things trickier, but without a doubt right now officials are thinking of ways to restrict the use of Bitcoin or shut it down altogether. Bitcoin is already being portrayed as a currency that attracts criminals involved in such things as tax evasion, drug dealing, gambling, terrorism and money laundering. In fact, the Wall Street Journal recently reported that the Treasury Department has ruled that money laundering rules will be applied to Bitcoin. But this is just the beginning.
At some point, the establishment will bring out the big guns. It is only a matter of time. And there are already some major banks that are shutting down the accounts of Bitcoin dealers. Just check out what is happening up in Canada…
Virtex, based in Calgary, is an online market that matches Bitcoin buyers with sellers, with about $13-million of trades under its belt.But earlier this month Royal Bank of Canada quietly informed Mr. David that it would no longer do business with his company.“They shut down our account without any reason,” said Mr. David, an ebullient entrepreneur with a background in technology companies. “They just said we have the right to refuse service to whomever we wish.”For whatever reason, many in Canada’s small but fast growing Bitcoin community are suddenly dealing with the same problem: The banks have decided they don’t like the cryptocurrency and they’re shutting down some of the accounts of businesses that deal in it.
An isolated incident?
Perhaps.
But many of those that are closely associated with Bitcoin know that they are being closely monitored. They know that bankers and government officials are watching them. Just check out what Jeff Berwick of The Dollar Vigilante recently had to say…
If there is one thing that my involvement with BitcoinATM has shown me very plainly in the last month is that bitcoin has the direct attention of the governments, central banks and banks. It took them nearly two decades to figure out the internet would be their downfall. In this case, it has only taken them months to realize that bitcoin could end their monopoly on money and banking.
And they aren’t watching because they like what they see.
Rather, they are watching because they see a threat that needs to be stamped out.
Robert Wenzel of the Economic Policy Journal recently suggested how they will attempt to do this…
I continue to believe that the point of vulnerability for Bitcoin remains the point of exchange between bitcoins and other currencies. I fully expect government to make a massive shutdown of these exchanges at some point.
And I agree with him. I believe that a day will come when those exchanges will be shut down. The powers that be just have to figure out how to sell it to the public.
So what will happen to Bitcoin once those exchanges are shut down? The following is from a recent article by Max Keiser…
Here’s a thought exercise. What if all bitcoin exchanges were shut down by various governments? What would the current value of a bitcoin be? This is an important question because of the implied outcome of the current trend by governments to shut down — or prevent the creation of — bitcoin exchanges.The mining of bitcoin would continue but spending them becomes a problem since there would be no quoted price. The bitcoin protocol is about mining bitcoin not pricing bitcoin. There is nothing in the protocol about establishing a market price for bitcoin; you need a market for that, but what if all the exchange markets are shut down?
And already we are starting to see Bitcoin being demonized in the mainstream media. For example, the following is a brief excerpt from a recent CNN article about Bitcoin…
No one really knows who is really behind Bitcoins, as the creator is just a pseudonym Satoshi Nakamoto. That in itself should be a huge red flag. I would certainly not trust my life savings to some mysterious computer algorithm created by shadowy anonymous characters in a system that attracts underworld types.One of the self-proclaimed largest Bitcoin exchanges is Mt. Gox. The name originally stood for Magic: The Gathering Exchange, an online site designed to trade cards used in playing the card game popular with the younger set. An exchange based on trading kiddy cards does not seem like a sound foundation for a monetary system.There is no government regulating participants in the system to prevent fraud and abuse. I would not be surprised if the Bitcoin mining software becomes a magnet for computer viruses. After all, the tax evaders, drug dealers and terrorists attracted to Bitcoin would not be likely to cooperate with authorities when they have been hacked and robbed.It would be close to the perfect crime to create a pseudomonetary system that rips off other evildoers. Just be careful when the bad guys find out where you live.
And without a doubt, Bitcoin is a very, very unstable currency. Just a few days ago a Bitcoin was going for around $150. Now it has dropped below $100.
But I applaud the creators of Bitcoin for trying to come up with an alternative digital currency that actually works. As I have written about over and over, the Federal Reserve and the other central banks around the globe need to be abolished. They have trapped humanity in a debt-based monetary system that systematically drains our wealth.
We desperately need an alternative.
Unfortunately, I don’t believe that Bitcoin is going to be the solution. At some point, the establishment is going to step in and try to shut down Bitcoin. When that occurs, what is going to happen to all of the time, money and effort that people have put into the Bitcoin system?
and...
http://coinlab.com/status
Status UpdateMay 2, 2013
I have more news on the Mt. Gox transition. Today, CoinLab regretfully filed a formal complaint in Federal Court against Mt. Gox.
In the last month, many of you have contacted me directly and asked for more details on our transition, and I would say (charitably) that I've been frustratingly vague -- I just haven't been able to talk about it.
I'm going to take this chance to talk about it. I'm not here to complain, our filing contains an accurate summary of events, but I want to talk about what I see as most important for Bitcoin right now.
Bitcoiners have, on average, lost more money due to technology difficulties, frozen / lost banking relationships and shady characters like pirateat40 than due to any part of Bitcoin's fundamental economics. I hate this fact, passionately. I have a vision in which high quality service and technology and ethics can be delivered to you, me, my kids, everyone who has a stake in Bitcoin.
It is my goal for CoinLab that we provide fundamental infrastructure to minimize these risks for everyone in our space, and I do mean everyone; from those on the Bitcoin Forums who dislike and distrust me personally, to the mom and pop cupcake makers in San Francisco, to my daughter who recently sold some knit products for .01BTC.
While I was willing to take a two year restriction on our venue (US and Canada only for two years was part of our contract), I have for a number of years now wanted to make sure that Bitcoin is properly situated for everyone's good.
When we spun up our initial alpha customers, they included companies that from one perspective could reasonably be deemed to be our competitors, some of the best companies in our space. We worked extremely hard to provide them great service, because I want to build our ecosystem; I want a robust economy and a broad base of service and product for everyone.
What tipped us into filing was our complete inability to get Mt. Gox to deliver on the few simple things left that were needed for customers to move over en-masse; we were often left just apologizing to our alpha customers while their own businesses suffered. I'm just not willing to put any of our customers in that position -- if we can't do a good job for you, I won't promise that we can.
What I hope is that Mt. Gox has this same interest in the good of Bitcoin, and Bitcoiners, and finds a way to work this out.
So, what's next? I hope that we'll be able to provide some good news on that front soon, from a financing and technology perspective at the very least, and ideally with news that we've settled this dispute. In the interim, my biggest hope is that Mt. Gox does an excellent job keeping Bitcoiners safe and liquid and trading on the exchange.
http://qz.com/81167/bitcoin-75-million-coinlab-lawsuit-against-mt-gox-could-destroy-currency-exchange/
$75 million lawsuit could destroy bitcoin’s largest exchange—but might help the currency go mainstream
Telling: the damages are to be awarded in dollars, not bitcoins. AP/Rick Bowmer
Coinlab, one of the best-funded bitcoin startups in the US, is suing Mt.Gox, the world’s largest exchange for bitcoin, for $75 million. According to estimates, that’s several times more than Mt. Gox’s entire annual revenue, which The Verge pegs at about $22 million a year. (My own calculations, based on periodic reports issued by Mt.Gox itself, suggest this is a reasonable estimate.)
Bitcoin, in case you haven’t been following, is a type of secure digital currency, known as a “crypto currency,” which some believe will become the world’s first stateless, fixed-supply, untraceable means of exchange. Considering that Mt.Gox, which is based in Tokyo, Japan, currently handles 66% of all exchanges of bitcoin for more conventional currencies, a court finding in favor of Coinlab would probably shut down the primary venue for turning bitcoin into hard currency.
That’s not necessarily a bad thing. Coinlab’s CEO and founder, Peter Vessenes, issued an impassioned personal letter to accompany the lawsuit, in which he wrote:
“Bitcoiners have, on average, lost more money due to technology difficulties, frozen / lost banking relationships and shady characters…than due to any part of Bitcoin’s fundamental economics. I hate this fact, passionately.”
Those “technological difficulties” probably include the multiple shutdowns of Mt.Gox that have occurred over the past year, whether due to overwhelming demand or attacks by hackers. One of the original motivations for the partnership between Coinlab and Mt.Gox was to add two things to the Mt.Gox system. The first was to give people in North America, where Coinlab was to be the exclusive partner of Mt.Gox, the ability to easily transfer hard currency into and out of the exchange. The second reason for the partnership was that Coinlab hoped to leverage its considerable technical expertise and computing platform to handle some aspects of bitcoin exchange in North America in a way that would make the Mt.Gox trading system more stable overall.
What went wrong?
The complaint filed by Coinlab against Mt.Gox is illuminating. First, there’s the apparent speed with which Coinlab opted for a legal remedy. The two companies announced their partnership fewer than three months ago, on February 28, but the complaint reveals that the agreement between them was actually signed on November 22, 2012. Mt.Gox then had four months, until March 22, to transition all US and Canadian customers of Mt.Gox onto Coinlab’s systems.
Coinlab claims that Mt.Gox breached their agreement in a number of ways, which ultimately led to a loss of customers, who were part of an “alpha” test and were relying on Coinlab to get up and running a US-based outlet for accessing the Mt.Gox system. Transferring money to and from Japanese banks (a current requirement of Mt.Gox) is expensive and time-consuming, and this was the primary issue Coinlab was supposed to solve, initially.
Briefly, here are the ways Coinlab says Mt.Gox breached their agreement:
- “Mt. Gox has failed to cooperate in facilitating the timely and seamless transfer of CoinLab Customers to Coinlab since the Agreement took effect.”
- “Despite repeated requests to do so, Mt. Gox has failed to deliver all passwords, Yubikeys, administrative logins and any other security information required so that CoinLab may assume operation of the Bitcoin exchange services for customers in the United States and Canada in case of a service interruption.”
- “Mt. Gox has failed to timely deposit Liquidity Funds in the manner instructed by CoinLab.”
- “Despite repeated requests to do so, Mt. Gox has failed to make available to CoinLab on-demand and read-only access to Mt. Gox’s databases and other related records and data pertaining to any and all accounts for customers in the United States and Canada.”
- “Defendants have breached their promises to provide necessary technology, software, and know-how to CoinLab and have refused or failed to establish promised connections from CoinLab’s computer network to Mt. Gox’s computer network.”
If true, these accusations suggest a pattern of delay on the part of Mt.Gox. And while neither company has issued any comment beyond brief public statements (one from Coinlab, one from Mt.Gox), by coincidence I visited the offices of Coinlab in Mid-April. At the time, I was supposed to meet with Coinlab head Peter Vessenes, but at the last minute he had to cancel on account of a trip to Japan to meet with the people behind Mt. Gox. This is pure speculation, but it would make sense, given the timing of this announcement, that Vessenes’ mid-April trip to Japan was an attempt to make the deal with Mt.Gox work, before it fell apart completely.
Why would Mt.Gox allegedly violate its deal with Coinlab?
The original contract between Coinlab and Mt.Gox provides for a minimum $50 million penalty if it is breached. In addition, even after the contract between the two companies is terminated, for five years Coinlab is apparently entitled to a portion of Mt.Gox’s revenues earned from people in North America. Given these penalties, the question is, if Mt.Gox was in violation, why would the heads of the company take such a risk?
This, too, is speculation but there may be a hint in the rate at which Mt.Gox has lately been signing up new customers all over the world, including North America. According to a statement from Mt.Gox, the company is now signing up 20,000 new users a day—after adding a total of only 60,000 in March. And the complaint from Coinlab further alleges that Mt.Gox has continued to sign up new users in North America after the March 22 deadline for handover of all such customers to Coinlab.
How a takedown of Mt.Gox could ultimately be a boon to bitcoin
Immediately after the partnership between Coinlab and Mt.Gox was announced in February, the price of a bitcoin recovered from a months-long slump, and subsequently shot up to record levels. Everyone I’ve interviewed about bitcoin, and countless sources in news stories on the currency (like this comprehensive take from Quartz’s own Simone Foxman) have noted that bitcoin, like any other currency, needs to have robust, liquid exchanges in order to become more widespread.
Despite being one of the most secure bitcoin exchanges ever (thefts by hackers have plagued others), Mt.Gox has had ongoing issues with handling the sheer volume of requests it receives from both users and hackers. And yet it continues to carry out the majority of bitcoin exchanges. Many startups, Coinlab included, are angling to make the exchange of bitcoins a more reliable experience, and there’s no reason to believe that their ability to throw more bandwidth and computing hardware at the problem won’t solve it.
So what happens if Mt.Gox is crippled by this lawsuit? Maybe, as other, more stable exchanges rise to take its place, bitcoin gains more of the credibility that is essential for any means of exchange to become widely accepted.
May 6th , May 7th updates.....
China keen to exploit Bitcoin ?
May 6th , May 7th updates.....
China keen to exploit Bitcoin ?
China Brings Bitcoin to Its Populace (They Never Heard of Bart Chilton)
12 Replies
If China successfully aids the proliferation of bitcoin, the implications on the global currency system could be monumental. Rather than having to use USD as an intermediary currency or establish swap lines to support international trade, a world conducting trade with bitcoin would mean the USD currently used for this purpose would be leaked as additional supply in the Forex markets, driving down the value of USD and driving up borrowing rates for the US. This change, on a large scale, would drastically accelerate the effects of the inflationary policies already taken up by the Federal Reserve. A significant inflationary trend in USD could potentially create a devastating cycle as global banks looking to preserve their wealth seek alternative reserve currencies, even further reducing the dollar’s value.
Well , today we see that the long regulatory arm of the Government is looming for Bitcoin.....
http://www.zerohedge.com/news/2013-05-06/us-regulatory-vice-closes-bitcoin
The US Regulatory Vice Closes On Bitcoin
Just six weeks after the US Treasury decided enough-was-enough with this upstart non-fiat, non-controlled-by-TPTB currency (and applied money-laundering regulations), US financial regulators are now looking for supervisory control over Bitcoin. As The FT reports, CFTC's Bart Chilton notes "it's not monopoly money - real people have real risk in these instruments," and that regulating the controversial cyber-currency "is sure something [CFTC] needs to explore." Chilton's remit to regulate this "shadow currency" is predicated on it becoming a basis for derivative contracts as opposed to purely transactional (akin to the monitoring of physical oil transactions that can influence crude futures.) Since the Treasury's March decision, at least three North American companies have had their accounts seized by the banks but while this attempt to control the virtual currency follows the ECB's 'ponzi attack' last year, the 'regulators' may note that, "even if US regulations make it hard for Bitcoin businesses to operate in the US, that doesn’t mean it will make it difficult for people to use Bitcoin as a currency in the US. Bitcoin is a world currency."
Via The FT,
Senior officials at a top US financial regulator are discussing whether Bitcoin, the controversial cyber-currency, might fall under their regulatory remit.Bitcoin “is for sure something we need to explore”, Bart Chilton, one of the five commissioners at the Commodity Futures Trading Commission (CFTC) told the Financial Times. A person familiar with the CFTC’s thinking said that the regulator is “seriously” examining the issue....Since the ruling, at least three companies in North America have reported having their business accounts closed by their banks. Bitfloor, a New York-based Bitcoin exchange, said it was shutting down entirely, and it has not yet been able to return funds to customers.“Even if US regulations make it hard for Bitcoin businesses to operate in the US, that doesn’t mean it will make it difficult for people to use Bitcoin as a currency in the US. Bitcoin is a world currency,”...CFTC jurisdiction generally does not extend to cash markets unless exchanges list derivatives contracts based on them. For example, the agency monitors physical oil transactions insofar as they influence crude futures traded on the New York Mercantile Exchange....“In essence, we’re talking about a type of shadow currency, and there is more than a colourable argument to be made that derivative products relating to Bitcoin falls squarely in our jurisdiction.”
