The Week: The SEC takes on Kik, and More News About Facebook’s Globalcoin

This week, Tron CEO Justin Sun paid $4.6 million for a power lunch with one of crypto’s biggest critics, a disk failure brought Binance to an unexpected halt, Poloniex margin lenders paid the price of a collapse in the CLAMS market, a Thai bank isn’t using XRP either and Komodo’s developers showed cool hands by hacking their own wallet to foil an attack.

Top News

SEC takes action against Kik

The Securities and Exchange Commission (SEC) has announced it is suing messaging app Kik for running an illegal securities offering. Kik raised $100 million by issuing its KIN token in November 2017 through an ICO, of which $55 million came from US investors.

Facebook’s ‘Globalcoin’ will be run by an independent foundation

More details of Facebook’s much-anticipated move into crypto are beginning to emerge. A senior executive accidentally let slip that the venture, known as ‘Project Libra’ or ‘GlobalCoin’, will involve the creation of an independent foundation to govern the network. It’s reported that nodes will pay a $10 million licensing fee to participate.

Stolen funds from the 2016 Bitfinex hack resurface

Coins from the infamous 2016 Bitfinex security breach, in which 120,000 BTC were taken from the exchange’s hot wallet, havebegun moving in a series of small transactions. The thieves moved around 170 BTC over five transactions, presumably as a test ahead of an attempt to withdraw the funds. Bitfinex has recently made an offer to the hackers to return the funds, but says it is unconnected with this latest development.

The Long Take

In November 2018, the SEC announced it was taking enforcement action against two ICO projects – Paragon and Airfox – for flagrant disregard of US securities laws. The move prompted speculation that the agency was beginning a sustained campaign against malicious or irresponsible actors from the 2017 fund-raising boom. Six months of near silence on ICO-related matters relieved concerns, suggesting the settlements amounted to mere signalling rather than a coordinated attack. This latest action, against Kik – a well-established company launched in 2010 and with millions of registered app users at the time of its public sale – has reignited fears of further punitive action.

What’s notable about the Kik case is the weight of support it has fighting in its corner. The company has launched a fundraising campaign, ‘Defend Crypto’, to galvanize the crypto community against the SEC’s ‘regulation by enforcement’ strategy. Influential supporters at the outset included Union Square Ventures, Coinbase, Circle and Messari, however two of these backers have since removed their logos from the campaign website. Driven by a PR offensive that has included interviews with Laura Shin, Anthony Pompliano and Ran NeuNer, Defend Crypto has raised around $4.5 million at the time of writing, in addition to funds committed by Kik itself.

As legal experts pick apart the details of the SEC’s claims, the main contention seems to lie not on the legality of public token offerings, but on whether Kik specifically induced investors on the promise they’d “make a ton of money”. The facts of the case will likely determine whether it is indeed a call to arms for the crypto community or a mere instance of a project overstepping the law in its pursuit of funding. This tension was perhaps best expressed by Coin Centre’s Jerry Brito, who said:

If the facts are as alleged in the SEC complaint, then this is not a case of innovators stepping inadvertently on a landmine because of “lack of regulatory clarity.” Rather, it’s a case of potential non-compliance with relatively uncontentious law.

With Kik well capitalised and keen to contest, the chances of the case going to a jury trial are high. Whether this will serve to provide much-needed legal clarity on public raises will only be learned through time and substantial legal costs. For projects that raised in the funding glut of 2017/18 the question is – who’s next?

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Quantitative Bitcoin Analyst PlanB Explains Why His Identity Remains a Secret

Michael LaVere
  • Quantitative crypto analyst PlanB keeps his identity a secret to avoid interfering with his employment at an institutional investor.
  • PlanB gained prominence for being the first analyst to apply the stock-to-flow (S2F) model to bitcoin. 

The anonymous crypto analyst PlanB has revealed why he keeps his identity a mystery. 

PlanB, who gained prominence on Twitter and Medium for being the first analyst to apply the stock-to-flow (S2F) model to bitcoin, said he keeps his true identity a secret in order to avoid interfering with his day job. 

Speaking in an interview with In Gold We Trust, the quantitative analyst said, 

I am both an analyst and investor at an investment office of a large institutional investor in the Netherlands. As a team we invest USD 50+ billion AUM. My main focus is on mortgages, loans, and structured finance. I do not want my employer to have any negative consequences from my Bitcoin ‘hobby’. Also, I consider it good operational security to remain anonymous.

PlanB continued, explaining he has no interest in becoming a public figure and does not intend to reveal his identity any time soon. 

He also refuted several criticisms against the application of stock-to-flow to bitcoin, which evaluates the injection of new BTC into the market relative to the total circulating supply. 

He said, 

People that use the demand argument probably don’t have a statistics or investing background. The argument is theoretically right (price is a function of supply and demand) but there are a lot of famous pricing models that do not use demand – or supply – as input and still give good predictions.

PlanB said strict adherence to the overall demand for bitcoin, which does not apply in S2F, is an argument based on “ignorance.”

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