Cryptocurrency has become a playground for fraudsters

December 6, 2022 Coin Telegraph

Currency speculation was once the preserve of banking institutions, governments, and investment funds. But with cryptocurrency, it's being sold to the public as casino entertainment.

News involving crypto and fraud is ubiquitous in the white-collar crime sphere and, perhaps more worryingly, these fraudulent activities in the crypto sector are not limited to a single type of crime.

Diverse and distinct yet with one common thread, these crimes involve real money and crypto investors are the victims. Many people have placed their life savings into crypto and, on a larger scale, private equities, pension schemes and even nation-states are principal investors and losers.

There are con artists who will try and entice their targets to invest in a get-rich scheme that turns out to be a Ponzi. On Nov. 21, officials announced that two Estonian citizens were arrested in a $575 million cryptocurrency fraud and money laundering scheme. Additionally, in September, United States authorities announced that the “head trader” of global cryptocurrency Ponzi scheme EmpiresX had pleaded guilty to conspiracy to commit securities fraud in connection with the theft of $100 million from investors. The unraveling of major frauds such as EmpiresX has become frequent in the crypto market, as fraudsters cash in on the bountiful opportunities for digital assets scams.

Then we have the institutional risk — the exchanges and platforms that present as being mainstream and stable but then collapse due to holes in their balance sheets where customer deposits should be. The spectacular recent collapse of FTX has sent shockwaves through the sector, which was already reeling from the effect of the “crypto winter” that saw coin prices plunge across the board. According to a filing in a U.S. bankruptcy court, FTX owes its 50 biggest creditors almost $3.1 billion, though the true cost of FTX’s demise is far higher in terms of the ripple effect tearing through the industry.

The role of regulators in FTX’s ability to fraudulently operate on such a vast scale will face much scrutiny moving forward. In fairness to the United Kingdom’s Financial Conduct Authority (FCA), the agency did issue a September warning stating that it believed FTX may be providing financial services or products in the U.K. without authorization. But the notice was confined to the FCA’s website. It was, apparently, not put on Twitter or disseminated much further. One must question the point of making such a warning without doing much more to try and make sure it reaches its target audience. The collapse of FTX is huge, but it will certainly not be the last of its kind.

In the wake of FTX’s demise, a deputy governor of the Bank of England called for the sector to be brought within the regulatory framework, warning that the continued growth of the crypto market meant action should be taken now, before an even greater shock than the FTX implosion occurs.

While this call to arms is welcome, it is not just about having rules — it is how these rules are policed and enforced that impacts bad behavior and improves market confidence.

Proponents of the sector seek to draw in breathless crowds by playing on the “disruptive” and “Wild West” nature of the crypto space, but it is precisely that feature that makes it so attractive to con artists and thieves. Cryptocurrency remains largely beyond the reach of both domestic and global financial regulation, making it a haven for criminals and leaving investors dangerously exposed, with almost no recourse for redress if they are the victim of crime.

Banks are turning away from, rather than towards, the market. Starling Bank recently announced they were imposing restrictions on customers’ crypto activity, which is likely to push crypto investors towards less safe avenues to complete transactions.

Crypto and blockchains have been labeled as disruptive tech operating in a decentralized space. In these parameters, it seems perhaps unwise to complain about the traditional financial system’s processes, which many criminal perpetrators have sought to evade.

There is a need for external education but also self-control from users. As commentator and founder of IBC Group Mario Nawfal said on Twitter in November: “Everyone keeps asking me HOW we missed the FTX scam. It's simple: Greed. We were all making money, all of us, that we didn't think about proper due diligence. We all followed each other, like sheep, trying not to be the idiot that misses out. We're now paying our dues.”

Everyone keeps asking me HOW we missed the FTX scam

It's simple: Greed

We were all making money, all of us, that we didn't think about proper due diligence

We all followed each other, like sheep, trying not to be the idiot that misses out

We're now paying our dues.
— Mario Nawfal (@MarioNawfal) November 23, 2022

Crypto trading should not be seen as little more than an extension of online gaming, but rather as a serious financial choice with real and risky consequences The gamification of crypto has been made possible by the viral spread of crypto and NFTs across social media, with celebrity endorsements and influencer promotion normalizing the culture with scant regard for the possible downsides of investing. Young investors are bombarded with tall tales of how their peers made eye-watering returns from small-stakes investments, and are easily tricked into throwing money at the next get-rich-quick scheme being dangled in front of them.

Currency speculation, once the preserve of banking institutions, governments and funds, has been repackaged and sold to the masses as casino entertainment, and its rapid growth demonstrates just how successful the revamp has been. The perfect storm has been created, harnessing brash social media broadcasting, the fog of little-understood crypto technology, and the type of wild price volatility that allows investors to dare to dream. The combination of greed, technological advances and lack of regulation remains destructive. Fraud is currently the price of doing business in crypto, and there is a long way to go to prevent history from repeating itself.

If exchanges are handling customer funds, then they must be regulated and operate like banks to protect consumers, with guarantees in place and deposits properly siloed and protected.

Cryptocurrency should be subject to some form of centralized certification process so that investors can be well informed of the risks involved with investing. There will need to be minimum standards and assurances for a token to be certified. Consumers will then have clear vision and can make informed choices.

The issuing of coins/tokens also needs to be looked at, and for regulation to mean something, minimum standards comparable to those of initial public offerings are a requirement.

Valuation remains a problem. Companies are issuing tokens where the value is based on the prospects/value of the company and therefore are included in the value of its own shares. FTX value was supported by the market value of its token FTT, and the value of FTT was itself based on the valuation of FTX. The circularity here is dangerous.

The crypto sector is now at a crossroads. The counterculture that sets it at odds with centralized regulation will only lead to more scandal, volatility and loss of confidence.

Richard Cannon is a partner at Stokoe Partnership Solicitors, specializing in serious fraud and white-collar crime matters. He has extensive experience in high-value and complex matters across the Proceeds of Crime Act. He studied at the University of Hull and the College of Law.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Bitcoin Family Says They Are Moving $1M in Crypto to Decentralized Exchanges After FTX Collapse

December 1, 2022 Bitcoin.com

5 tips for riding out a downbeat market this holiday season

November 24, 2022 Coin Telegraph

Christmas

The market doesn't look like it's going to spike upward anytime soon. While you wait, grow your network and position your portfolio to take advantage of a future recovery.

These forecasts are driven by deteriorating structural fundamentals. For example, credit card debt has surged past even 2020 levels, with interest rates charged by banks that are just slightly higher than those observed leading up to the post-2000 dot-com crash. And yet, labor force participation rates — or the proportion of the population that is able to work and is working — have still not recovered to pre-pandemic levels. Furthermore, inflation — as measured by the consumer price index — has surged over the past few years.

Economic forecasts suggest that we are in for greater economic turbulence. The United States has been in a recession and that recession is expected to continue, with the Conference Board forecasting a further decline in gross domestic product (GDP) by 0.5% in Q4 of this year. It also anticipates that the recession will continue into at least Q2 of 2023. That was before the collapse of crypto trading platform FTX, which had profound downstream effects on investment portfolios and non-crypto companies. Other more optimistic forecasts, such as those of the Federal Reserve Bank of Philadelphia and S&P Global, are just barely positive for 2023 at 0.7% and 0.2%, respectively.

*Consumer Debt & Interest Rates in the United States, 1995-2020. Source: St. Louis Federal Reserve*

*Labor Force Participation in the United States, 1950-2020. Source: U.S. Bureau of Labor Statistics*

*Consumer Price Index, 2011-2022. Source: St. Louis Federal Reserve*

These macroeconomic indicators are common outside of the U.S. too. Many – even the International Monetary Fund — have pointed out the increase in inflation as a result of higher energy prices in Europe, which is one factor, among others, that contributes to the European Union’s recent forecast of nearly zero GDP growth for all of 2023. That is on top of its already long-run demographic challenge that there are too many people aging out of the labor force and not enough new entrants, which has dire implications for GDP growth.

While these macroeconomic fundamentals are outside your control, there is still a lot within your control. We need to remember that we have substantial agency over our lives and do not need to get dragged into an economic tailspin just because that’s what might be happening to the aggregate economy — we can still individually thrive during a famine.

Here are five tips for doing just that.

Optimize the wait. Make the best use of your time every day, which might mean picking up a new skill or taking up a freelance job that deploys your broader skill set. Especially with the emergence of artificial intelligence and automation, certain tasks are becoming obsolete and other new creative opportunities are emerging — and you can leverage that trend by acquiring the skills to perform these tasks. There are substantial mismatches in the demand and supply in certain parts of the labor market, such as artificial intelligence and cybersecurity jobs, so consider picking up a new skill that you can put to work.

Reflect and take inventory. It is far too easy to look at the circumstances we personally or as a society are in and get worried, but take stock of what is going right and what you’re thankful for. The holidays are an especially good opportunity to do so. By putting your circumstances in perspective, you avoid a lot of mental rabbit holes that could cause you to become more anxious and disappointed, which unfortunately only further amplifies challenging circumstances. Even when circumstances look bleak, remember what you have and what you have been through — it will inspire you to go on.

Grow your network. Building relationships is part of the adventure we are on. Focus on people as actual human beings, rather than potential doors of opportunity. People are indeed doors, but treating people in transactional ways warps your perspective of life and ends up closing those doors, because people do not like being treated as vending machines. (Would you like it if people only talked to you based on what you could give to them?)

Cherish small wins. We often focus on the big and flashy goals or aspirations, but overlook what is immediately in front of us. We have a lot more agency than we give ourselves credit for! Whether you are taking care of your property or writing an excellent report at work, demonstrating excellence in everything that you do creates a lot more optionality in the long run that yields truly fulfilling and fruitful employment opportunities.

Always carve out some proportion of your earnings for savings. Consider investing it in structurally sound digital assets. There is no substitute for setting aside resources every month, whether crypto or fiat, that you can draw on when you’re most in need. There will always be an element of unpredictability in the world, so view these savings as your insurance policy on market downturns. Even though crypto has been in a winter, all assets have been struggling because the entire market is in a downturn. But the future of the major tokens, such as Bitcoin (BTC) and Ether (ETH), remains hopeful, and it’s just a matter of time before they rebound. Moreover, as governments become more volatile and inflation continues to grow, crypto can be a useful hedge and diversification strategy.

Don’t despair even when the economy is faltering. You and your household can still thrive!

Christos A. Makridis is a research affiliate at Stanford University and Columbia Business School and the chief technology officer and co-founder of Living Opera, a multimedia art-tech Web3 startup. He holds doctoral degrees in economics and management science and engineering from Stanford University.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

$56,000,000,000 Asset Manager Issues Apocalyptic Economic Warning – Here’s the Forecast

November 6, 2022 The Daily Hodl

Fidelity Digital Assets Report Finds Nearly 60% of Surveyed Institutional Investors Have Invested in Crypto

October 28, 2022 The Daily Hodl

After Accurately Forecasting 2022 Collapse, Billionaire Chamath Palihapitiya Says Smart Money Is Buying As Psychological Turning Point Arrives

October 17, 2022 The Daily Hodl

Societe Generale launches custodial services for crypto fund managers

September 21, 2022 Coin Telegraph

Coin Telegraph

The firm is also in the process of testing a digital euro together with the European Central Bank.

According to a new press release on Wednesday, Société Générale, one of the largest investment banks in Europe, said that it would be expanding its cryptocurrency asset management services through its Security Services subsidiary. Clients who are digital asset fund managers can now elect to have Société Générale as their fund custodian, valuator and liability manager. The tools are designed to facilitate the addition of cryptocurrencies into institutional investors' portfolios.

The firm's most recent client is Arquant Capital SAS, a licensed asset management company in France with two euro-denominated digital asset products consisting of Bitcoin (BTC), Ether (ETH) and other derivatives. David Abitbol, director of Societe Generale Securities Services, commented:

"By combining Societe Generale's innovation expertise with Arquant Capital's technical skills, we are expanding SGSS' ability to meet the diversification needs of asset managers."

Meanwhile, Eron Angjele, CEO of Arquant Capital, wrote:

"This solution provides Arquant Capital with an innovative structuring that allows us to scale our offering and focus on creating value for our clients."

Société Générale Security Services is ranked among the three largest European custodians and the top 10 worldwide. It has over $4.277 trillion worth of assets under custody, providing trustee services for 3,312 funds and valuation services for 4,426 funds. It also has 22 locations worldwide with over 4,000 staff.

In the past, Société Générale has issued euro bonds on the Ethereum blockchain as well as proposed DAI stablecoin loans in exchange for bond tokens. The firm also has a security token on the Tezos blockchain. It is one of the financial behemoths that is currently partnering with the European Central Bank to develop a digital euro.

The market isn’t surging anytime soon — so get used to dark times

September 20, 2022 Coin Telegraph

Bitcoin

Global economic conditions suggest that markets — including the cryptocurrency market — have further downside ahead. Don’t bank on a surge to new all-time highs in the months ahead.

Global markets are going through a tough period — including the cryptocurrency market. But judging by talk from the peanut gallery, it seems like some observers haven’t received the memo.

“Feel like we're relatively safe through mid-terms,” Twitter's “CryptoKaleo” — also known simply as “Kaleo” — wrote in a Sept. 12 tweet to his 535,000 followers, referring to the United State’s November mid-term elections. The prediction was accompanied by a chart indicating his belief that Bitcoin's (BTC) price would surge to $34,000 — a 50% gain from its roughly $20,000 level as of last week — before the end of the year.

“Of course we can bleed lower,” fellow pseudonymous Twitter mega-influencer Pentoshi wrote in a Sept. 9 missive to his 611,000 followers. “But the market at this value is far more attractive than it's been in over a year. […] I grabbed a little $BTC yesterday / no alts but will be nibbling.”

Those assessments come from the “respectable” observers — those who have periodically been correct in the past. One gentleman in my inbox today — a Charlie Shrem looking to sell his "investing calendar" — assured readers that a “major crypto ‘run-up’ could begin tomorrow.” Look further and it isn’t hard to find even more bullish prognostications, like the prediction that Bitcoin is on the cusp of a 400% surge that will bring it to an all-time high price of $80,000 and market capitalization of $1.5 trillion — $500 billion more than the value of all the silver on Earth.

It’s good to see the optimism running rampant, even if it is mostly among influencers looking for engagement and paying customers. Unfortunately, macroeconomic headwinds indicate the reality is a little darker — perhaps a lot darker.

FedEx last week underscored the possibility that economic conditions might worsen with its announcement that it had fallen $500 million short of its first-quarter revenue target. “These numbers — they don't portend very well,” CEO Raj Subramaniam wryly noted in an interview with CNBC. His comments, which included a prediction that the numbers represented the beginning of a global recession, prompted a 21% end-of-week crash in his company's stock price that took the wider market along for the ride.

In response to the economic doldrums, FedEx said it was planning to take measures including the closure of 90 locations by the end of the year. The good news: Americans are so saddled with debt that it’s unlikely they were planning to visit any of those locations anyway. Consumer debt hit $16.15 trillion during the second quarter of 2022 — a new record — the Federal Reserve Bank of New York noted in an August report. The number amounts to a little more than $48,000 for every man, woman and child in the United States — 330 million in all.

*Total consumer debt held by Americans. Source: FRBNY Consumer Credit Panel/Equifax*

With a national median income of $31,000, that equates to an average debt-to-income ratio of 154%. If you want to factor in a little more than $30 trillion in debt held by the federal government, you can add another $93,000 per person — for a total of $141,000 and a debt-to-income ratio of 454%. (The numbers obviously become worse if you account for the fact that just 133 million Americans enjoyed full-time employment as of August.)

While policymakers might be lackadaisical about government debt, they are more concerned about consumer debt. “I'm telling the American people that we're going to get control of inflation,” President Joe Biden said in a CBS interview on Sunday, prompting observers to wonder whether he was attempting to preempt this week’s Federal Reserve announcement of a potentially enormous, 100 basis point rate hike in the federal interest rate. Such a move would likely send markets into a tailspin from which they would not recover for some time.

Ironically, even that move might not be enough to tame inflation in the near term. Considering the rapid rise in debt, perhaps it’s no surprise that inflation — up a little more than 8% in August year-over-year — has shown few signs of abating. Americans may not have much money left, but — by and large — that reality hasn’t tamped down demand. If the New York Fed’s report was any indicator, the cash backing that demand is coming from credit. The bank noted that credit card debt in the second quarter experienced the largest year-over-year percentage increase in more than 20 years.

Therein lies the rub. No matter how quickly the feds move to disincentivize debt, it isn’t clear when asset prices will rise. High debt levels — which already exist — mean less money for buying things. Increasing the cost of debt service, as the Federal Reserve is attempting to do, means less money for buying things. Forcing Americans into a state of economic ruination in order to bring costs down means less money for buying things. Failing to control inflation and allowing the cost of basic goods and services to continue rising — exacerbated, of course, by an energy crisis in Europe over which financial managers have little control — means less money for buying anything else.

Maybe this outlook is the same as the one Elon Musk arrived at when he said in June that he had a “super bad feeling” about the economy. Other observers have issued even darker takes, including the famously debt-averse Rich Dad, Poor Dad author Robert Kiyosaki. “Biggest Bubble Bust coming,” Kiyosaki wrote on Twitter in April. “Baby Boomer’s retirements to be stolen. $10 trillion in fake money spending ending. Government, Wall Street & Fed are thieves. Hyper-inflation Depression here. Buy gold, silver, Bitcoin before the coyote wakes up.”

WIley COYOTE moment coming. Biggest Bubble Bust coming. Baby Boomer’s retirements to be stolen. $10 trillion in fake money spending ending. Government, Wall Street & Fed are thieves. Hyper-inflation Depression here. Buy gold, silver, Bitcoin before the coyote wakes up. Take care
— therealkiyosaki (@theRealKiyosaki) April 16, 2022

Admittedly, Kiyosaki’s assessment is partially at odds with the outcomes that pessimists might expect. Economic calamity should result in declining asset prices across the board — including prices for gold, silver and Bitcoin. A more optimistic forecaster might hope that Americans will learn from their mistakes, take the next year to pay their debts, and resume spending big in 2024 — while avoiding a hyper-inflationary depression.

In either scenario, one thing seems relatively certain: Neither crypto nor any other asset class is on the brink of a record-breaking surge. If you want to prosper through investing in the year ahead, you’d better start learning how to buy short options from less market-savvy optimists.

Rudy Takala is the opinion editor at Cointelegraph. He formerly worked as an editor or reporter in newsrooms that include Fox News, The Hill and the Washington Examiner. He holds a master’s degree in political communication from American University in Washington, DC.