Thursday, March 6, 2014

Bitcoin news March 6-8 , 2014 -- Breaking news for March 8 , 2014 , Whistleblower Threatens to Expose Corruption at Bitcoin Foundation ! ! Alleged bitcoin originator unmasked ? Denial, Outrage and Acceptance: Reactions to Satoshi Nakamoto’s ‘Unmasking’ ....... Bank of Russia indicates bitcoin not banned per se , but that concerns exist regarding money laundering and crimes related to anonymous payment systems and crypto-currencies on the territory of Russia......... Additional security and regulation items !


Bitcoin world  beginning to resemble the  Syrian Rebels ( in - fighting set to  tear apart the bitcoin movement more than the banksters can ? )


Whistleblower Threatens to Expose Corruption at Bitcoin Foundation

Whistleblower Threatens to Expose Corruption at Bitcoin FoundationSEXPAND





If a breathless car chase wasn't cinematic enough to make you care about Bitcoin, how about a whistleblower threatening to publish an expose about corrupt elders and ominously signing off: "You have 72 hours"?
An "entrepreneur and former venture capitalist" who goes by the handle the Two-Bit Idiot declared "war" today in a blog post entitled Coup or Death for the Bitcoin Foundation? The blogger, whose name is Ryan Selkis, previously talked to Fortune's Dan Primack about leaking documents about Mt. Gox. In today's post, he threatened to publish a searing expose on Monday unless two of its board members resign. TBI also claims that the foundation's corporate sponsors "discouraged" him from airing Bitcoin's filthy laundry.
According to TBI, chairman Peter Vessenes and executive director Jon Matonis are not "ethically entitled" to retain their board seats in the Seattle-based non-profit because conflicts of interest and gross negligence. The most damning allegations are related to the disastrous implosion of Mt. Gox. In the early days, Mt. Gox was the largest Bitcoin exchange and a tent pole for the budding economy, hiding questionable practices.





TBI says Vessnes and Matonis got their money out through connections with Mt. Gox CEO Mark Karpeles, while $473 million swirled down the blockchain drain (emphasis mine):
On Monday, I plan to publish a full article which elaborates on these damning facts and much more: 

1) The Foundation never once warned Bitcoin investors about keeping deposits in Mt. Gox, despite clear red flags dating back to at least April 2013. Nor did the Foundation craft or advocate for best practices such as technical transparency, deposit audits, or appropriate consumer protection disclosures. This was a colossal failure of leadership.

2) There is evidence that Bitcoin Foundation board members may have had direct access to Mark Karpeles which allowed them to personally deposit and withdraw funds from Mt. Gox, despite persistent delays for other customers. 

3) There is a troubling and inappropriate overlap between Peter Vessenes' staff at his private company, CoinLab, and the Bitcoin Foundation's staff, which goes far beyond shared office space

4) The current leadership has shown a stunning disregard for proper communications with its members. The importance of immediate resignations (rather than gradual) is highlighted by the Board's secret plans to move the Foundation's headquarters to London without input from members and sponsors.

5) Peter Vessenes has had a nine month conflict of interest regarding Mt. Gox given that his company CoinLab was involved in an active multi-million dollar lawsuit against Mark Karpeles and Mt. Gox, following a failed partnership. Both men remained on the board of directors, and the Foundation failed to draft adequate by-laws that would allow them to address situations such as this where directors had material conflicts, which would compromise their ability to act in the best interests of its members. 

This egregious behavior and negligence may not be the worst of the information to come. I have been unable to reach representatives of the Foundation for comment on a myriad of other accounting issues related to the treatment of member donations.
True believers like to tout the fact that Bitcoin is intentionally decentralized, so an industry group like the foundation is about as close to an authority figure or overseer as you're going to get. The agency's website says:
Bitcoin Foundation standardizes, protects and promotes the use of Bitcoin cryptographic money for the benefit of users worldwide.





TBI claims Vessenes and Matonis are at fault, rather than the foundation itself. But it's worth noting that both Krebeles and Charlie Shrem, the indicted founder of BitInstant, were formerly board members:
And for better or for worse, with all of its blue-chip sponsors and leading role to date in events such as the Senate Bitcoin hearings and NYDFS BitLicense hearings, the Foundation is the mouthpiece for the entire industry.
Peter Vessenes and Jon Matonis are not scapegoats. They are not innocent bystanders. And they are not ethically entitled to remain in their board seats through later this year.
Whistleblower Threatens to Expose Corruption at Bitcoin Foundation
TBI also claims that the foundation's corporate sponsors told him to keep his mouth shut, but doesn't name said sponsors. This list of platinum, gold, and silverfoundation members mainly includes Bitcoin startups. Previous donors to the foundation include Wordpress and Fred Wilson from Union Square Ventures. Among investors, the most prominent and full-throated support has come from Andreessen Horowitz, which recently invested $25 million in Coinbase.
At this week's Texas Bitcoin Conference, I was fortified by near-unanimous agreement (and, at times, applause) that the current leadership must resign or be forced out of their positions on the Foundation. Yet I have also been warned that I am playing a dangerous game, with cunning and ruthless power brokers. I have been discouraged by corporate sponsors of the Foundation not to make a public stink which would be "counter-productive" and "irresponsible" for Bitcoin. Most would prefer to let the Mt. Gox scandal blow over, but I would rather wipe the slate clean definitively, blood or no.
TBI describes himself as a "truth-teller," making "the business case for #Bitcoin on its journey from speculative investment to world-changing utility" and clearly sees himself as the Edward Snowden of cryptocurrency.
What if someone spends Bitcoin to take him out before he can send documents to The Wall Street JournalThe New York Times, and others? TBI's got it covered:
If I get hit by a bus this weekend, my lawyers will release it.
If you have any information to share about the Bitcoin Foundation, please email nitasha@gawker.com.
Update: A previous version of this post said TBI was anonymous. His name is Ryan Selkis, as he acknowledged in this interview with Fortune.



















Fed just couldn't resist giving bitcoin a kick today.....just like the banksters gave bitcoin a kick s Mt Gox was hitting the wall.....



Fed's Dudley "US Dollar Wins"; Bitcoin "Not a Good Store Of Value"

Tyler Durden's picture






While the volatility of Bitcoin has been considerable, perhaps merely reflective of the early days of a revolution, the fact that the "value experts" at the Fed have pronounced:
  • *DUDLEY SAYS BITCOIN 'IS NOT VERY GOOD STORE OF VALUE'
  • *DUDLEY SAYS 'U.S. DOLLAR WINS' OVER BITCOIN ACROSS MANY METRICS
..raised an eyebrow or two on our furrowed brows. We thought a look at the following two charts since the inception of Bitcoin and the inception of the Fed would help clarify "value" stability...

Bitcoin since inception...

And the USDollar since the Fed's inception...

You decide?







Digging under the surface of Satoshi Nakomoto 

reveals he did classified work for the US Miltary ! 

Alleged Bitcoin Founder Did Classified Work For U.S. Military

  •  The Alex Jones ChannelAlex Jones Show podcastPrison Planet TVInfowars.com TwitterAlex Jones' FacebookInfowars store
Newsweek writer asks if Satoshi Nakamoto is working on behalf of government
Paul Joseph Watson
Infowars.com
March 7, 2014
Satoshi Nakamoto, the alleged Bitcoin founder who was outed yesterday by Newsweek, did classified work for the U.S. military and major corporations, a fact that will sit uncomfortably with many Bitcoin proponents should it be confirmed that Nakamoto is indeed the father of the cryptocurrency.

Image: Satoshi Nakamoto (Photobucket).
After Newsweek’s Leah McGrath Goodman tracked Nakamoto down to a humble home in Los Angeles’s San Gabriel foothills, she was apparently able to verify his role as the founder of Bitcoin when Nakamoto remarked, “I am no longer involved in that and I cannot discuss it. It’s been turned over to other people. They are in charge of it now. I no longer have any connection.”
However, after a scrum of journalists later descended on Nakamoto, he immediately backpedaled, telling the Associated Press, “It sounded like I was involved before with Bitcoin and looked like I’m not involved now. That’s not what I meant. I want to clarify that.”
McGrath’s profile of the 64-year-old Japanese-American man portrays him as a highly secretive individual with a murky past.
“My brother is an asshole. What you don’t know about him is that he’s worked on classified stuff. His life was a complete blank for a while. You’re not going to be able to get to him. He’ll deny everything. He’ll never admit to starting Bitcoin,” said Nakamoto’s younger brother, Arthur Nakamoto.
Nakamoto did “classified work for major corporations and the U.S. military,” according to the report, including Hughes Aircraft, now part of Raytheon, as well as classified electronics and communications work for what is now L-3 Communications. Nakamoto also did secretive work for the FAA immediately after the 9/11 attacks.
“Did he act alone or was he working for the government? Bitcoin has been linked to everything from the National Security Agency to the International Monetary Fund,” asks McGrath.
Nakamoto’s close ties with government and military contradict his libertarian political beliefs, which according to his daughter centered around being, “very wary of the government, taxes and people in charge.”
Whatever the truth behind Nakamoto’s history, his background in working on classified projects for the military-industrial complex will only make those who believe Bitcoin is some kind of trojan horse for a global one world currency even more nervous.


and......

LA Sheriff's Department: Newsweek Writer Accurately Quoted Nakamoto

Satoshi Nakamoto
REUTERS/David McNew
Satoshi Nakamoto
A spokesperson for the Los Angeles County Sheriff's Department issued a statement Friday confirming the accuracy of quotes that appeared in Leah McGrath Goodman's Newsweek article allegedly outing the founder of Bitcoin. 
The Department said two sheriff's deputies were called to Nakamoto's home in Temple City when Goodman came there to interview him Feb. 20 and they both "agreed" that the quotes in the story were correct.
"I spoke to the two Los Angeles County Sheriff’s deputies who handled the call and who were present for the conversation," Los Angeles County Sheriff’s Department Captain Mike Parker said. "Both sheriff’s deputies agreed that the quotes published in the March 6, 2014, Newsweek magazine Bitcoin article that were attributed to the resident and to one of the deputies were accurate."
After Goodman's story was published Thursday, Nakamoto denied having anything to do with the cryptocurrency and said he was misunderstood by Goodman when he told her, "I am no longer involved in that and I cannot discuss it." Nakamoto said he was referring to his engineering career and not confirming he was involved in the creation of the cryptocurrency. He did not claim he was inaccurately quoted, only that his words were misunderstood. Goodman also quoted one of the deputies as having said, "This is the guy who created Bitcoin? It looks like he's living a pretty humble life."
The Los Angeles County Sheriff's Department also provided details about why the pair of deputies responded to Nakamoto's home when Goodman came to interview him.
Read the other details the Department provided about the incident below:
At 2:09PM, on Thursday, Feb. 20, 2014, Temple Sheriff’s Station of the Los Angeles County Sheriff’s Department received a suspicious person call in Temple City.  The caller reported an unknown woman in her 20’s was knocking on the door at his home, and sitting on his porch for the past hour. The caller said he was afraid to open the door.
Two deputies responded and spoke to the male resident caller and the woman.  The woman identified herself as Newsweek reporter Leah Goodman and the resident expressed reluctance to talk to her.  The deputies were present for the brief conversation between the two, and then the resident went back inside his home and the reporter left.
Earlier today, Arthur Nakamoto, Dorian's brother, indicated to BI that Goodman had misquoted or misunderstood his comments.


And more mystery at MT GOX.........


$113m in Gox Money Believed To Be Moving Through Block Chain

 (@dannybradbury) | Published on March 7, 2014 at 23:24 GMT | Blockchain,CompaniesExchangesMt. GoxNewsWallets
Share1


Large amounts of bitcoins previously handled by Mt Gox, which have lain dormant for years, have started moving on the block chain.
Since the exchange blew up at the end of last month, people have been wondering where the stolen coins went, and have tried to trace some movements between Gox addresses. One participant on the bitcoin talk forum recalled an IRC conversation between Gox CEO Mark Karpeles and various users, which allegedly took place on June 23, 2011.
During their conversation, Karpeles (a.k.a. MagicalTux) offered to demonstrate that the exchange owned large numbers of coins, by sending a uniquely identifiable amount to a given address. He sent 424242.42424242 bitcoins to a specific address beginning with 1eHhgW6vquBY. Sure enough, they showed up.
A few weeks later, that large amount of bitcoins was broken into two smaller amounts. Then, more transactions occurred, peeling off 50,000 bitcoins at a time into separate wallets, possibly as a means of moving them into cold storage.
Most of these 50,000 bitcoin wallets were recombined on 16 November, 2011, intotwo separate wallets. One of these contained 500,000 bitcoins, while the other contained 50,000.
The 50,000 bitcoin address was created on that date, and was then dormant until July, 2012, when it began receiving small transactions along with several other outputs. However, no coins left that wallet, until today, when its 50,000 bitcoins were sent to another address, as part of outputs from various bitcoin addresses totalling 180,000 bitcoins ($113 million).
Since then, these coins have been rapidly splitting, with coins being subdivided repeatedly. One branch was found to have been splitting every 30 minutes in what appeared to be an automated fashion. This suggests that there may be some code splitting the coins.
We don’t know for certain that the 50,000-bitcoin address is indeed owned by Mt Gox, but it seems likely. The other, larger, wallet went through several transactions, with the bulk of the coins being sent to an address that was verified as Mt Gox-owned on the block chain.
The leaked Mt Gox crisis strategy document claims assets of 2,000 bitcoins, contained in a hot wallet, adding that the cold storage had been wiped out.

Why now?

So, why is this happening now? One explanation is that it makes the coins easier to use for a high volume of transactions. When bitcoins are sent, all the funds held in a particular address are sent, and the ‘change’ – the part that is surplus to requirements – is sent to a change address, usable by the sender. However, the block chain has to confirm that the change has been returned before it can be reused.
If you were to try and send bitcoins to lots of users very frequently from one address containing a lot of bitcoins, then you would have to wait 10 minutes or more for the block chain to confirm your returned change, before conducting your next transaction.
Core bitcoin developer Gregory Maxwell also suggested that this was a Mt Gox transaction, based on interactions that he had with the Mt Gox API.
Maxwell also argued that the splitting behaviour is consistent with a function in the leaked source code from Mt Gox. This suggests that some of the coins have been dropped into the Mt Gox online wallet, and that the system is now automatically breaking them up, he said.


More delays at Butterfly......



Butterfly Labs Delays Continue, 28nm Monarch Delivery Pushed Back to April

 (@pete_rizzo_) | Published on March 7, 2014 at 18:27 GMT | Butterfly LabsCompanies,MiningNewsTechnology
Share1


Kansas-based bitcoin mining supply firm Butterfly Labs has announced that deployment of its 28nm Monarch mining ASIC will be delayed roughly four weeks.
The most recent setback means those who ordered units, some more than six months ago, will need to wait until April to receive their products.
Butterfly Labs informed the community of the news in a statement on 4th March, which explained that the delay is the result of an issue with the top metal layer of its chips.
Jeff Ownby, the company’s VP of marketing and corporate communications, elaborated on the problem in an interview, suggesting that this will be the last roadblock to delivery.
Said Ownby:
“The metal [layer] as designed for [our] 65nm [unit] doesn’t necessarily copyover to [the] 28nm [unit]. [...] Everything else that’s depending on us putting together a final product is in stock and ready to go, it’s just a matter of getting the chips back and putting them on the boards.”
Josh Zerlan, the company’s VP of product development, also moved to calm frustrated buyers, revealing they would ultimately receive a unit that boasts power consumption numbers that are “better than anticipated”, and that some customers would be eligible for full refunds and delay compensation.
Announced in August, the 28nm Monarch unit has been delayed since September when optimism was high that production issues would soon be ironed out. At the time, the company was already developing a reputation for delays and delivery issues, but said it expected the first run of shipments to begin in January or February.
The latest announcement will likely do little to quell concerns about further setbacks.

Performance upgrades

Though he acknowledged some consumers will be disappointed about the delay, Ownby moved to put the focus on the improved product Butterfly Labs’ buyers will receive.
Ownby said Butterfly Labs expects the Monarch unit to consume 0.45W/GH, down from the 0.6W/GH originally announced. According to Ownby, this means the end result will be a chip that is less power hungry and more economical than those offered by competitors.
Explaining the significance of the change, Zerlan said:
“To put this in perspective, this makes the Monarch chip nearly twice as power efficient as compared to our 28nm competition whose products operate between 0.9W/GH and 1.0W/GH at the wall.”

Delay compensation

In an attempt to assuage customers, buyers who ordered 600 GH Monarchs prior to a reduction in price on 28th November will be given the Imperial Monarch, a high-performance version of the card. The original asking price for the 600 GH Monarch was $4,680, but this retail cost has since been reduced to $2,196.
Individuals who have been waiting for less than six months for their order, but paid the full original amount will receive an Imperial Monarch, as well as a 50% off voucher for an additional standard Monarch unit to be delivered at the end of the current queue.
Those who have been waiting for their order for more than six months can elect to receive a full refund in US dollars or double the amount of hardware they ordered.
The post details:
“This latter option will come in the form of (a) first shipping you the new Imperial Monarch, giving you an expected 160-175% of your ordered hashrate, and then (b) an additional Standard 600 GH Monarch at the end of the queue, giving you another 100% hashrate boost, totaling an expected 250+% of your ordered hashrate once all products have shipped.”
Customers who ordered the 300 GH Monarch at full price are now eligible for additional offers, though the full details of available compensation plans are not yet available.

Changing industry to blame

The news of yet another delay angered some customers, though others were less surprised by the announcement given the company’s history of shipment setbacks.
However, Ownby suggested that these buyers should have patience with the company as it works through new issues. In his statements, Ownby evoked comparisons to Butterfly Labs’ performance, which he suggested is on par with its competitors.
“The only thing that you can do when you’re talking about chip development in an industry that’s unknown, is you give it the best case that you possibly can from experience. [...] I don’t think it works out for anybody. Everybody who’s tried to develop a chip has missed their target by some degree. You know it’s just the nature of the way things are.”
Ownby said that his company has been under the microscope, but that this is due in part to the “exaggerated timelines” it works under.
When asked whether delays will become less regular soon, Ownby once again indicated that this would need to be the result of an industry-wide change.
“The one thing that could come out of this at some point is if someone developed a chip and sold it off the shelf, but I don’t see it happening.”










Japanese Government Says Bitcoin ‘Not a Currency’, Forms Investigation Committee

 (@southtopia) | Published on March 7, 2014 at 10:35 GMT | AsiaNewsRegulation
Share2


Japan’s ruling party, the Liberal Democratic Party (LDP) has launched an investigative committeeinto bitcoin, and issued a statementsaying it is “not a currency, but taxable”.
In what has become a familiar refrain from authorities around the world in recent months, the government has also blocked related banks from “brokering bitcoin transactions or opening accounts holding the virtual unit”. Exactly what constitutes a ‘bitcoin account’ remains unknown, but it presumably refers to one with a known bitcoin service like Blockchain.info or Coinbase.
This is likely a reaction to the international attention Japan has received after the collapse of Mt. Gox, which had its headquarters in Tokyo.
Bitcoin “does not fall under the category of a currency” as defined by Japanese law, the government statement said.
“Generally speaking it is subject to taxation if it meets conditions laid out in income tax law, corporate tax law and sales tax law, among others.”
Adding that there were no Japanese laws defining bitcoin, the statement concluded that if bitcoin was used for money laundering, ”that would constitute a crime”.
“As a matter of common sense, if there are transactions and subsequent gains, it is natural… for the finance ministry to consider how it can impose taxes,” Chief Cabinet Secretary Yoshihide Suga said.

Staying out of it

Prior to this, Japanese authorities and the nation’s central bank had been silent on bitcoin, steering clear of the kind of warnings heard from other countries.
The LDP promised it would make a further statement on bitcoin and how the government intended to tax it in the coming week.
Representatives of the recently-formed Japan Digital Money Association, an advocacy group founded by Japanese bitcoin users and cryptocurrency miners, also consulted with LDP members on Friday to present their case.
Bitcoin exchange Kraken also sent a message to the LDP’s Chairman of Special Mission Committee on IT Strategy, offering to share the company’s knowledge of bitcoin and the exchange business.
 Japanese bitcoin users will have to sit patiently and wait to see what happens next. The government has not specified a timeframe for release of conclusions but will probably mull over the details for some time.


















Vault of Satoshi Halts US Bitcoin Exchange Service, Cites Worsening US Regulatory Conditions

 (@pete_rizzo_) | Published on March 6, 2014 at 23:19 GMT | CompaniesExchangesNews,RegulationUS & Canada
Share1


Toronto-based bitcoin exchange Vault of Satoshi, announced via its Facebook account on 6th March that it will cease its US operations effective immediately.
Most notable, however, was the reasoning the company gave for the abrupt move. It suggested that the changing attitudes of US regulators were to blame for the service shutoff.
Citing a recent “Let’s Talk Bitcoin” Interview with Charlie Shrem, the company elaborated on its reasoning, saying:
“We feel the regulatory environment in the US is becoming increasingly hostile toward Bitcoin, and more specifically toward exchanges trading in digital currencies.”
In the post, Vault of Satoshi spoke out harshly against the Financial Crimes Enforcement Network (FinCEN), which it said has made it “impossible” to run its business in a way that is compliant with regulations.
“We’ve made repeated attempts to comply with FinCEN regulations, but their online form submission process will not allow us to post reports from our headquarters in Ontario, Canada.
They refuse to accept printed paper reports, and their drop-downs don’t include Canadian options, making it impossible to the file the required documentation properly in order to comply.”
Despite repeated attempts to gain clarity from FinCEN on how it could best move ahead with its regulatory compliance in light of these issues, the company said its questions have gone unanswered.
The statements are notable given that fellow exchange CoinTrader recently had its accounts closed by a partner bank in Canada. At the time, CoinTrader cited the worsening regulatory environment in Canada as the impetus for its partner bank’s decision to cut its services.

The high cost of compliance

In addition to the lack of clarity from major regulatory bodies, Vault of Satoshi suggested that the state-by-state requirements for operating an exchange in the US were the biggest roadblocks. The company described setup and compliance costs for this process as “astronomical”.
Yet, Vault of Satoshi didn’t close the door to its US business permanently, saying it will “be exploring re-launching on a state-by-state basis”.
Still, it noted that no timeline for such an action is yet in place.

What’s next for customers

Vault of Satoshi also detailed how service would change for current US-based customers in the post, suggesting they would only be able to conduct coin-to-coin trading, a service that is not yet launched on the site but that will debut in the coming weeks.
US customers that were in the process of being verified will not be able to complete this process. The company did issue a timeline for when customers could expect refunds to be given.
“Any dollars currently in your account will be refunded to you via check, which you should receive within [two to three] weeks’ time.”
Vault of Satoshi was also apologetic to its users for the service setback, suggesting that the decision, while in the best interest of its business, was not made lightly.
“We deeply regret that we can no longer service your cryptocurrency exchange needs, and we’ll do everything we can to re-gain your business and re-launch in your country in the near future, stronger than ever before.”







Denial, Outrage and Acceptance: Reactions to Satoshi Nakamoto’s ‘Unmasking’

 (@pete_rizzo_) | Published on March 6, 2014 at 16:36 GMT | News
Share


Update 8:51 GMT: Bitcoin Foundation board member Gavin Andresen has posted an open letterto the report author on reddit.
Update 7:30 GMT: Bitcoin Financial Association member Bruce Fenton has offered to charter a plane for Satoshi Nakamoto, as part of comments meant to encourage the community to protect the alleged bitcoin founder.
Newsweek returned to print edition this week with an article that was sure to grab attention and stir controversy: the announcement that its two-month investigation had revealed the creator bitcoin – a 64-year-old Japanese American with a love for privacy and model trains named Dorian Prentice Satoshi Nakamoto.
Unsurprisingly, the declaration sent tremors through the bitcoin community and drew a range of reactions, though the most vocal were those who protested the report and the methods of its author Leah McGrath Goodman.
Chief among the author’s critics was Bitcoin lead developer and Bitcoin Foundation board member Gavin Andresen, who indicated that he now regrets talking to the journalist. The report revealed an email message that suggested that Andresen had an early role in promoting the notion that Nakamoto was a “shadowy figure”, and that Andresen’s relationship with Nakamoto ended abruptly.

I'm disappointed Newsweek decided to dox the Nakamoto family, and regret talking to Leah.