Category Archives: Bitcoins

See all posts talking about Bitcoins, from the Forex Figures – the DailyForex blog

Bitcoin Site and its Owner Faces Legal Trouble

BitcoinBTC-e, one of the oldest digital currency exchanges, remained offline on Thursday, July 27, 2017 after law enforcement officials alleged criminal acts by its owner, Alexander Vinnik.  On Wednesday, the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) announced a $110 million fine against BTC-e for facilitating crimes such as identity theft, ransomware fraud and public corruption, among other crimes, through its digital network.  An additional $12 million fine was imposed against Russian-born Vinnik.  Vinnik was arrested in Greece on Tuesday and the indictment was unsealed in California on Wednesday.

BTC-e was used by criminals who stole or extorted Bitcoin from the victims and converted the into traditional currency using U.S. dollar and Russian ruble-based bank accounts registered to shell companies.  The exchange is accused of laundering more than $4 billion for criminals.  Vinnik’s arrest followed the arrests in Europe and the U.S. of two large drug markets that used Bitcoin as their primary currency.

The indictment also revealed that hundreds of thousands of Bitcoins moved from Tokyo-based Bitcoin exchange Mt. Gox that were controlled by Mr. Vinnik.  MT. Gox declared bankruptcy in 2014 after being hacked and losing more than 800,000 Bitcoins, some of which were laer recovered.  300,000 of the missing Bitcoins were moved from Mt. Gox to a different Bitcoin exchange and converted to traditional currencies that were deposited into Mr. Vinnik’s bank accounts.  According to the New York Times, these Bitcoins would be worth approximately $800 million today.

The agencies also allege that BTC-e ignored he ‘know your customer’ (YC) laws in order to serve a criminal customer base.

The arrest and fines imposed this week should serve as a reminder that even though the digital currency market continues to heat up, sometimes that heat is a hint towards an underlying explosion – as with all trading, make sure to understand your risks before getting started and to use a recommended broker for all Bitcoin trading.

AvaTrade Introduces More Digital Currency Trading

Digital CurrencyAvaTrade, a widely-respected global Forex broker headquartered in Dublin, Ireland, announced this week that it has added trading of three digital currencies to its already wide range of tradeable assets.  The assets are Ethereum, Dash and Ripple.  These currencies have shown a 1,000-4,000% increase in the past year, as has Bitcoin, the most famous digital currency, which AvaTrade also offers.

Digital currency trading is becoming more popular across the globe, though traders are advised to learn about the opportunities and risks before trading.  AvaTrade joins a list of very few Forex brokers which provide these offerings.  eToro is another broker that offers similar opportunities, though the primary difference between the brokers is that AvaTrade is primarily focused on individual trading while eToro’s trading platform is focused on social trading.

Learn more about AvaTrade in our comprehensive AvaTrade review to see if this broker is right for you, and make sure to practice trading digital currencies on a deme before moving to a live account so that you can get a sense for how they fluctuate.

New York State First State to Regulate the Bitcoin

The prize for being the first state in the United States to propose a regulatory framework for the Bitcoin goes to New York State. The New York regulatory proposal will be adopted following a 45 day review period and follows similar regulations already applied to financial firms in New York and those operating under federal laws such as FINRA and NFA.

Back in February of this year, the financial services superintendent for New York, Benjamin Lawsky, announced detailed plans to regulate the use of the digital crypto-currency by the end of this year. At that time, he proposed the issuance of ‘BitLicenses’ to all companies who deal with Bitcoins that would permit them to operate in a similar manner than they had done in the past but had the additional stipulation that all Bitcoin exchanges would be required to warn their customers of the volatility of Bitcoin value and of the irreversibility of Bitcoin transactions.

According to Lawsky, “We’ve found in other areas of the financial world that strong, clear, concise disclosures are critical to earning the long-term trust and confidence of consumers… Virtual currency is no exception.”

Regulations and Requirements

A long list of regulatory provisions accompany the current proposal including a plethora of BitLicense requirements, proper consumer disclosures, a list of anti-money launder procedures and compliance stipulations, capital requirements and a firm’s need for a full-time compliance officer. In addition, independent New York Department of Financial Services examinations and audits would be necessary every two years.

Whether all of these steps will actually be implemented is not certain as the Bitcoin was designed specifically to be unregulated and is decentralized by default, unlike conventional economic systems. Admittedly, the very nature of how Bitcoin transactions operate will make it very hard to regulate this currency.

Growth amid Uncertainty

As proof of the uncertainty of this virtual currency, Bitcoin exchanges, such as Japanese MtGox, have already closed its doors while holding millions of dollars of investor money. On the other hand, California Gov. Jerry Brown has just signed into law a bill legalizing digital currencies, such as the Bitcoin.

Many Forex brokers have already added the Bitcoin to its list of assets for trading and several independent websites are geared exclusively to the virtual currency.

Boon to Virtual Currencies

Depending on its net capital requirements, this new regulation for Bitcoins should prove to be a boon for the virtual currency industry. The laws address customer protection and a framework that is not dissimilar to US Securities regulation and once they are finalized, these rules will allow firms to operate in a clear legal manner and in a more definitive environment. All financial institutions handling the Bitcoin in any manner whatsoever will be required to abide by this proposed regulation.

One thing is certain. The Bitcoin is beginning to become formally accepted by economists as a real currency, even if it is not necessarily regarded as a legitimate one, and is no longer the designated currency for pyramid schemes and for people involved in illegal money laundering. With New York State leading the way towards formal regulation, other states will not be far behind.

The Bitcoin: 2 Sides of the Coin

From the moment the bitcoin was introduced it was controversial. Never before has an electronically transmitted currency become available for personal use. And even before it was fully understood, it took off like lightening by investors seeking anything new that could be a potential source of income.

The bitcoin is the first decentralized currency and a bitcoin account can be set up easily with a free application called a ‘bitcoin miner.’ Bitcoins are stored in ‘digital wallets’ and can be transmitted to cover a transaction with an electronic signature.

The difference between bitcoins and other international currencies is that only a specific number of bitcoins were minted—21 million—and they were predicted to last until 2140.

Bitcoins can be accessed via the Internet and through automated bitcoin machines where transactions to buy or sell can be done right on the spot. There have, however, already been several cases of machines not functioning properly resulting in trades not being executed on time or not at all. In addition there has been at least one bitcoin company, Mt Gox, a Japanese entity, that has closed its doors citing bankruptcy, leaving traders with a loss of millions of dollars and investors questioning the legality and accountability of bitcoin handlers. is a mining pool which until now has maintained a 50% stake in the bitcoin. And despite its guarantee made last January that it would not cross the 51% threshold, in a recent announcement, announced its intention to do just that -adding shares that would bring its total holdings to 51%.

As expected, the bitcoin community is up in arms over the move, sparking a fierce debate over mining centralization in general and’s independent move in particular.

Should go through with its intentions of maintaining 51% of the bitcoin network, it will essentially be in control of certain uncontested acts such as double spending individual bitcoins, preventing other miners and mining pools from profiting from sound currency blocks and be able to block transaction confirmations.

According to one expert hacker with years of experience in distributed systems, by moving over to 51%, will in fact

acquire complete control over which transactions appear on the blockchain and which miners reap mining rewards.”

And with bitcoin holders concerned that once a 50% stake is reached by any one firm, the value of the bitcoin will decrease, bitcoin experts have been joining the outcry. Gaven Anderson, the Chief Scientist at the Bitcoin Foundation posted a blog in the foundation’s newsletter voicing concern and condemnation of the move while at the same time backtracking somewhat by stating that the

bitcoin is still a work in progress and you should only risk time or money on it that you can afford to lose.”

Since making the announcement, has been keeping out of the news. In fact, the company has become unavailable for unknown reasons. The website is still accessible due to their CloudFlare protection, but miners are unable to access their statistics and the mining itself may have been affected. Users visiting receive a brief 502 error which then redirects them to an old, non-live version of the site. In addition, has not responded to any comments made through the site.

Citing fair competition as a response to the 51% argument, one mining pool member had this to say:

In any market, competition and innovation drives growth and that is particularly true in an emerging and disruptive environment such as bitcoin. Successful and innovative companies cannot be expected to limit their growth or competitiveness as a direct result of their success.”

It is important to keep in mind that unlike traditional currencies such as euros, bitcoins are not managed by any central authority, government, company or bank. It is therefore, more open to corruption and fraud. At the CoinSummit Conference which will take place in London, U.K. on July 10th-11th, bitcoin industry leaders will be meeting to discuss the current situation of the electronic currency and can be expected to argue both sides of the cryptocoin.

Sacramento Kings Becomes First Pro Team to Accept Bitcoins

2014 certainly looks like becoming the year of the Bitcoin. In a move likely to set a precedent for future such collaborations, the Sacramento Kings has become the first major sports team to accept the Bitcoin, an online currency that has gained tremendous popularity of late.

The Bitcoin has had a rather controversial history since its introduction several years ago and continues to evoke mixed emotions by consumers and financial institutions alike. No one is certain which individual or group introduced this virtual currency but credit seems to go to one Satoshi Nakamoto, a ghost name with no additional information attached to it.

Shaky Start

Because of its effortless use as a currency easily trafficked by drug dealers, the Bitcoin got off to a shaky beginning but has since assumed a more tolerable stance and is accepted as a means of payment by more and more vendors, both on and off line.

Since Bitcoins are virtual, all transactions must be made through a processing company which converts the Bitcoin to whatever currency is desired and then transfers the funds to the receiving party. Should there be a need for additional Bitcoins, they can be ‘mined’ using complex mathematical software. However, the originators of the Bitcoin have indicated that once that currency has run out, there will be no further production of the ‘coins.’ This may create a situation where speculators will hoard the Bitcoins, adding to the increase in its already inflated price.

Be that as it may, the Bitcoins are here to stay for a while and with more and more popular companies announcing their acceptance of the currency, the fluctuations in the Bitcoin marketplace don’t seem to be dampening the use of the Bitcoin for a variety of consumers’ needs.


The recent collaboration with the Sacramento Kings is only one of several recent deals contracted between major sports teams and financial products. Kings’ owner, Vivek Ranadivé, has always exhibited an interest in advancing technology for his team and recently introduced a business philosophy called “NBA 3.0″ which emphasizes community affiliations and globalization. According to Kings President Chris Granger, “we think Bitcoins are yet another way to make the experience for (our) fans more seamless and hassle free.”

As such, the Kings are partnering with BitPay Inc., an Atlanta company which will process all of the Kings’ Bitcoin transactions, converting most of the Bitcoins to dollars while retaining some as Bitcoins for future use.

The Kings have already begun to accept Bitcoins at the Kings Sleep Train Arena and will be offering its fans the ability to pay online with Bitcoins for team merchandise and tickets by March 1.

Despite the instability of the Bitcoin as a currency, the use of the Bitcoin by one of NBA’s major teams is viewed as a progressive move by Sacramento businesses which see the use of the currency as a smooth approach to increased sales.

The Sacramento-Bitcoin cooperation is a win-win deal for both parties, offering much needed acceptability to the little understood Bitcoin while boosting the team’s reputation as an advanced high tech conglomerate.


Plus500 Changes Terms of Bitcoin Trading

Dramatic price fluctuations in the bitcoin market have the trading world abuzz, especially following the spikes earlier this week, and the subsequent crash to nearly half that much. This volatility allows bitcoin trading to be continually popular, as evidenced by the slew of Forex brokers and binary options providers that have recently started offering bitcoin trading, including AvaTrade, Trade Rush and Plus500.

In April 2013, Plus500 entered into contract with MTGox to track bitcoin prices and offered its Forex traders the ability to trade bitcoin using 1:4 leverage and to enter short trades. When Bitcoin first emerged in 2009, it sold for less than a dollar; it sold for over $900 earlier this week before it plummeted again. This steep fluctuation, however, has caused bitcoin brokers to reconsider the way they handle these trades, and, as reported yesterday by Forex Magnates, Plus500 is now the first broker to prohibit overnight holding of bitcoin trades.

This risk reducing measure put Plus500 in a more secure position. However, it means that traders have to reopen their positions every morning, limiting their ability to speculate on the appreciation of bitcoin prices for the long term.

CFDs and Bitcoins

Bitcoin can be purchased and exchanged for standard currency, such as dollars, euros and yen at Bitcoin exchanges. Trading bitcoins through CFDs differs from real bitcoin trading however, since the CFD broker must always trade in the opposite direction of his traders. So when his traders long a bitcoin, the CFD broker shorts it. This is what Plus500 was doing in the same manner it did with its other CFD products. Brokers can generally hedge the underlying products of CFDs but during periods of long trending markets, investors tend to lean heavily, sometimes over 80% of the time, in one direction or another-either longing or shorting it.

This is when the risk comes in. When bitcoins reached a high of $900 within a month, brokers found themselves facing a difficult predicament. The drastic rise in price in conjunction with wide spreads can leave brokers vulnerable to steep losses. It is for this reason that Plus500 restricted its bitcoin trading policies by removing the leverage it had previously offered and introducing a daily close for all market positions of 10PM GMT. We’ll be watching the other brokers carefully to see if they will follow suit.

SEC Makes a Ponzi Mountain out of a Bitcoin Hill

bitcoin pirate

In 2011, a Mr T Shavers of Texas (Lance Armstrong country) started asking for lenders (alont with ‘Bitcoin Savings and Trust’), under an alias known as ‘the Pirate’, to fund his trading strategy. To encourage investors, the SEC claim the Pirate posted that he wanted to borrow money to finance a trading strategy that had risk free returns of 350% per annum.


I have no professional experience of US contract and criminal law but have enough UK exposure to make some observations.  Let’s break this down so we can understand it. The parties are:

(1) Mr T Shavers;

(2) Bitcoin Savings and Trust (formerly ‘First Pirate Savings and Trust’, I kid you not );

(3) A forum member called ‘the Pirate’ (seriously);

(4) Lenders who appear to be predominantly forum members of the forum that the (3) was a member;

(5) A forum that the (3) and (4) communicated on.

The top hedges funds provide returns of 20% annually to their high net wealth customers using complex computer models and quants (but no pirates), (3) was advertising returns 10 times greater that even the most basic due diligence by members of (5) would have been able to confirm were implausible. There was no contract referred to in the SEC indictment, (3) who may or may not be person who had full control of the online profile of (1), advertised for members of (5) a series of posts on to lend him money to support a  an implausible investment model. There is nothing in the indictment confirming (1) and the (3) are one and the same, but it appears (4) transferred money to (2) on the basis of information that was provided by (3) through forum posts on (5).  About 15% of the money is transferred from (2) to (1) to cover his living expenses and failed trading activities and the rest is eventually returned to (4) following further posts by (3). No detail of how losses were distributed across (4) over the period of the alleged crime other than to state when the business collapsed he prioritised friends and earlier investors.

The only thing that is clear to me is that this is not a Ponzi Scheme and it is likely (1) and/or (2) may not have even committed a crime. There was no contract between (2) and (4), a forum post does not facilitate the confirmation of a legal agreement nor is it recognised anywhere as such in any country I have ever heard off (nor want to live in since most of the people who lived there would be involved in litigation) . Notwithstanding there was no contract, there is no evidence presented or referred to that (1) and (3) are the same, another reason why forum posts are not used to authenticate financial arrangements. As a result, money was transferred from (4) to (2) on the basis of no contract and from (2) to (1) as a shareholder/employee of the company.

How is this a Ponzi Scheme? The facts are that this Pirate had no contract with the forum members who sent him money and it will be a non-trivial exercise for the SEC to prove that the (1) and (3) are one and the same person for each forum post. The lack of contract essentially means there was no security granted to (4) by either (1), (2) or (3) which gives considerable weight to the argument that the lenders had put money into a get rich scheme without taking reasonable steps to protect themselves or their money. Reading between the lines it appears that an altruistic Bitcoin community engaged in high risk lending without undertaking or had means to do so undertake meaningful due diligence who transpires has serious problems with reality (in particular financial markets reality). If someone can confirm to me he had a parrot for an avatar on the forum then I might even go as far to say he was so unhinged he probably thought he was a pirate.

There was essentially no legal basis to bring the indictment since there was no contract for the terms of business and there is even less basis for the SEC to define the arrangement as a Ponzi scheme. In particular the failure to adequately define how the activities of (1) and (2) and the cashflows could be interpreted as being part of a Ponzi strategy. The only basis for the prosecution to refer to the activities of (1) and (2) as a Ponzi enterprise is that he ‘prioritised long terms investors and friends’ when he paid people members of (4) back when the reality of his trading ability became very real. If this has been a true Ponzi it would have been organised as such from the very start and not just when he tried to unwind the mess the mess his inner Pirate created.

What’s Really Going On

The US Government is waging a public relations war on Bitcoin which I have discussed at length in previous blogs for Daily Forex. This Pirate and his business dealings were escalated to Ponzidom because it suited the agenda of the highly politicised SEC to have Bitcoin associated with the negative public perception of a Ponzis scheme to reinforce the message ‘Bitcoin is Dangerous’. The SEC knew they could rely on an unquestioning mainstream media to not actually read the indictment and question the Ponzi association and therefore were guaranteed publicity to discredit Bitcoin worldwide on the filmiest of associations. The fact that the SEC have built a case relying on contracts derived from a series of forum posts against someone who had delusions of grandeur of being a financial trader and/or a pirate supports this. This is a far cry from the complex schemes of the FIAT world where the like’s Madoff created complex financial contracts and accounting methods to legitimise his deception of investors under the very noses of the SEC for many years.  There is are a few important lessons to be learnt from this pseudo nautical experience that is Bitcoin and FIAT agnostic:-

(1) Understanding the reputation of parties prior to a financial transaction is imperative to reduce the risk of fraud, deception or mistakes.

(2) Relying on a legal system that takes years to understand even at the most basic elements of an alleged fraud (and badly) is further evidence that the current system is deeply flawed

(3) Never invest in businesses where the owner of said business refers to himself and/or his business as a Pirate (in particular if he also has a parrot avatar).

This fiasco adds further weight to the argument that for Bitcoin to succeed it needs to supported by a system of reputation to protect parties in the anonymous peer to peer transactions from having to rely on the deeply flawed financial regulation and legal system of the FIAT world.