QuadrigaCX Drama, Kraken CEO on Mt.Gox Sell-Off, Facebook Buys Crypto Startup | Hodler's Digest

Happy Chinese New Year, guys. It is the year of the pig. Hodlers are hoping that the year of the Bear ended already in 2019 for Jack Dorsey. 2019 could be the year of the Bull for Bitcoin, following his appearance on the Joe Rogan Experience where he said.

So back to the Internet. I believe the Internet will have a native currency. Really, It'll have a native currency and I don't know if it's bitcoin. I think it will because just given all the tests it's been through and the principles behind it, how it was created.

The Twitter CEO went full BTC evangelist on his own platform, replying to a tweet apparently asking him what altcoins he was holding. Dorsey responded simply, I only have bitcoin. Which prompted CZ to tweet a one of us, one of us meme. Dorsey went on to say, bitcoin is resilient. Bitcoin is principled. Bitcoin is native to Internet ideals. Most noteworthy, perhaps, was the fact that he's joined a community experiment within the Lightning Network, aiming to prove the functionality of transactions. We spoke to Steven Levira, a bitcoin podcaster who managed to book an interview with Jack by just tweeting at him.

He offers a viewpoint that is in some ways similar to the viewpoint that I have, which is that bitcoin could someday become the native currency of the Internet. And he has a certain focus in the way his products are created as well. So I really respect that and admire the way that with his company Square and the product Cash app that it is bitcoin only.

Also this week, a Crypto Exchange founder dies with apparently millions locked in a cold wallet. A Mt. Gox sell off controversy Venezuela's Crypto Bill and Facebook gets into Blockchain Ladies and gentlemen, I'm Molly Jane and this is your weekly Hodler's Digest. Let's have a look at the latest market updates. Late last year, a philanthropist and crypto entrepreneur died in India while reportedly building an orphanage of complications related to Crohn's disease. He left everything, including properties, a yacht and even his two Chihuahuas to his wife. Everything, that is, except access to an apparent 190 million in crypto locked in cold wallets. The man with Gerald Cotton, CEO of the embattled Quadra CX crypto exchange. About 100,000 users are apparently affected by the potential permanent loss of funds. Some have even grown suspicious that the exchange was a scam from the very start. His wife has stated that she has searched for the encryption keys Everywhere, to no avail. The question is whether Kashin was incredibly irresponsible in keeping the keys to himself or whether something much more nefarious was going on. There is even speculation that his death certificate is a fake due to the fact that there have been a lot of reported cases of fake death certificates in the Indian region where he died. Not to mention that his last name is spelled incorrectly on the certificate, which was released by another crypto publication, Cotan, with an A rather than an E. Further suspicions arose when it was revealed that only 12 days before his death, Khattan filed a will naming his wife, the only beneficiary and executor of his estate. Perhaps the most worrying is analysis of the exchange's cold wallets, which apparently actually can't be found, and evidence that some funds have been moved from Quadriga linked hot wallets after Cotten's death. We spoke to David Gerard, author of attack of the 50 foot blockchain, to find out more.

The analysis was done by crypto medication. He can't find a cold wallet address which he was defining as an address which clearly gets coins from the known hot wallet addresses that they use for daily trading. So maybe they're out there, but he couldn't define them on his first analysis. And I think others have tried to recreate that work and found similar questionable things. So not only did they not have the keys, we aren't quite sure of the addresses, which is disconcerting. And it's possible that they were actually trading while insolvent all through 2018, where withdrawals could only be paid waiting for a deposit to come in, which is very worrying. People are wondering obviously if they were insolvent and if he was trying to trade his way back up to solvency, which might have have been possible on the upslope of the bubble, but 2018, of course, was the downslope. This is the biggest financial news story in Canada this week. Somehow an institution with a couple of hundred million dollars was running out of anyone's sight and now it's collapsed and everyone is going, why didn't we know about this? They're asking the government, why didn't you know about this? I think the obvious upshot is we won't see in Canada at least another big exchange. That's literally one guy, his laptop and some servers on AWS.

Some QuadrigaCX users concerned for their assets have retained lawyers to begin legal proceedings in Canada. However, the court has given a 30 day stay to prevent lawsuits during this time. The stay of proceedings will end March 7, at which point lawyers representing QuadrigaCX could sell the exchange to pay off its debts. While a lot of wilder theories have come from redditors, there have been major figures in the crypto world that have expressed incredulity, like Jesse Powell, founder of Kraken, who called on law enforcement to take action in a recent tweet replying to one of his followers. He even went as far as comparing the whole debacle to Mount Gox. It is of course a fact of life that people die and crypto gets lost. 4 million bitcoins are estimated to be lost forever. But with this story, there are just too many red flags to ignore and we're going to be paying close attention as it unfolds. Make sure to check out our website for updates. Thousands of Venezuelans are protesting in the streets calling for the removal of Maduro from office, and many countries around the world, including the U.S. now recognize the opposition leader Juan Guaido as the legitimate president. This prompted accusations of a US backed coup. While Maduro is both deeply corrupt and unpopular, polls indicate that the vast majority of Venezuelans do not want the US to get involved. Unsurprisingly, the self declared interim president is anti crypto, calling it a scam to cover up hyperinflation. He is, however, bullish on bitcoin and somewhat of an early adopter, tweeting about it way back in 2014. In 2019, there has been a spike in the crypto trade in the country. On local bitcoins alone, $7 million was traded. However, the hyperinflation in the country is the likely cause for bitcoin trades shooting up from 500 to 2,000. On the state level, the fortunes of the Maduro regime seem to be worsening by the day. Over a billion dollars in gold reserves have been frozen in the UK by the bank of England, in addition to the halting of the sale of $850 million in gold reserves to the UAE. The latter was intended to be facilitated by Russia, who still supports Maduro. Last year Maduro reportedly sold 40% of his country's gold reserves. 73 tons were shipped to the UAE in a desperate bid to fund his regime and pay for government programs. Despite previous attempts at crackdowns, at this point Maduro might be wishing it was possible for a nation state or a central bank to hold BTC reserves. A cold wallet wouldn't require a chartered Russian plane. Even with the ensuing crisis, there is still time to talk crypto. The national assembly recently introduced a new crypto bill that established a legal framework for the nascent industry in the country. Titled the Constituent Degree on the Integral System of Crypto Assets, it contains 63 articles, including obligatory licenses for mining, ENT and crypto exchanges, as well as the introduction of fines for unlicensed activities. The Degree details the power of sunacrip, the crypto watchdog, including the ability to control the creation, emission, transfer, commercialization and exchange of all cryptos within Venezuela. Given the current political situation, it is unclear if this decree will be upheld in the coming months. One positive thing to come from the Degree, however, is the fact that there is no mention of the Petro the trustee of defunct crypto exchange Mount Gox might have sold millions of dollars worth of bitcoin and Bitcoin cash on the trading platform Bitpoint, possibly causing the fall in crypto prices. According to LeakBank documents that appeared on the website Goxdocs, the exchange's trustee, Nobuki Kobayashi, received a $318 million payment from Bitpoint. The anonymous source infers that the money comes from a large sale of Mt. Gox's crypto holdings aimed at repaying the exchange's creditors, Goxdocs wrote. Unless Bitpoint is being really generous, we'd wager the reason they are depositing billions into the trustee's bank account is because they were hired to sell the Mount Gox estates, Bitcoin and Bitcoin cash. Once the largest crypto exchange in the world, Tokyo based Mt. Gox went bankrupt in early 2014 after losing almost half a billion dollars in bitcoin in a hack. If the allegations prove to be true, that means that Kobayashi went against the advice of Kraken CEO Jesse Powell, who back in 2014 was appointed to support the search for Gox's missing co. Powell had recommended either not to sell the coins or to sell them through auctions or an OTC trading desk in order to avoid affecting the market with large sales. We talked to Powell and asked him to comment on the issue.

I think a lot of people are just looking for reasons why the price went down. Obviously, somebody selling $300 million worth of Bitcoin is going to have a big impact on the market. Whether that alone is the reason why the market crashed, I think it's very, very hard to say, and it's probably not that alone. I think the main issues that people have with the Gox selling really was that it wasn't really transparent for the creditors, and it probably could have been done in a way that would have had less impact on the market through an auction, for example. The auction would have been very transparent. It would have allowed for liquidity to build up. Generally we see the people bidding on auctions being long term holders and investors, not people that are just going to turn around and dump it on the market. And it seems like what happened was they had an arrangement or they sold it to an OTC desk which just turned around and dumped it on the.

Market.

Rather than trying to find buyers that were going to hold it for a long time, which is I think what would have happened if they had done an auction. So, you know, there are all these questions now that you know, who knew that these sales were coming? Did anybody front run the market? Was there any sort of self dealing, you know, like some kind of side deals for this flow? There's just not a great reason why there wasn't an auction done.

The first bank book may contain a lot more details about how he was selling. But to sue the trustee, in order to get it, you'd have to sue for negligence. You have to sue him for negligence. And in Japan it's very difficult to sue the trustee for negligence because if he had the approval of the court, as far as my lawyers explain it to me, it's like by default, not negligent. So despite Kraken telling him, his higher advisor, Kraken saying don't sell, if you do sell, sell through an auction, him not listening, it's going to be very hard to sue him for negligence and also to sue and get the other bank book because from what I've been told, again, under Japan law, the discovery process is very different than in other places. You would have to essentially sue for the production of that document and he wouldn't have to give it. So I'm going to keep talking to lawyers about this, but certainly no one wants the trustee to sell and hopefully now that we have some information about what happened, we can prevent him from selling more.

Facebook made a significant step closer to crypto this week. Mark Zuckerberg's tech giant recently hired the team behind the UK based crypto startup Chainspace and what is called in Silicon Valley jargon, an aquahire. While Facebook did not buy any of the technology developed by Chainspace, it hired four of the company's researchers. Chainspace was working on a distributed ledger platform allowing fast transactions on blockchain. Recently, Facebook had set up a team of blockchain experts headed by former PayPal president David Marcus, with the task of exploring possible applications to leverage the power of blockchain. As previously reported by Bloomberg. Facebook is reportedly developing its own stablecoin, which will be used to transfer money on the messaging platform WhatsApp. But Facebook is far from being the only big tech company interested in exploring the potential of blockchain messaging giant Telegram is planning to launch its new token gram by March 2019. The token will power the Telegram Open network, which is intended to be a competitor of Ethereum, with its use of decentralized applications and smart contracts. According to analysts from Hash crypto investment bank, Gram's total market cap is likely to reach nearly $30 billion by the end of the year. Even Google has shown interest in crypto recently deploying its big data processing tool BigQuery, to analyze a list of blockchain networks including Bitcoin, Ethereum and xrp. By developing this technology, Google aims at making the blockchain searchable as it made the Internet searchable 20 years ago. The BitTorrent token, or BTT, is showing outstanding performances since its ICO was conducted in late January, arguably the most successful out of 2019. The sale, conducted on Binance's platform Launchpad, took only 15 minutes to complete with nearly 60 million tokens sold out of a total for over $7 million. A week later, the BTT's value was already six times higher than its ICO price. This is an impressive rally on the background of a seemingly never ending bear market, reminding many of the glory days of the crypto bull run. The token is now listed on a number of major exchanges such as binance, Upbit and OKEx. The major peer to peer file sharing service was acquired by Tron last summer, reportedly for $140 million. Running on the Tron blockchain, the new BTT token will be powering the soon to be launched BitTorrent speed platform where users will be rewarded with BTT for seeding files, thus making the file sharing experience faster and more efficient.

BitTorrent is actually one of the first implementations or the longest standing implementation of a decentralized network that we have today. This predates Bitcoin by far, right? When the US Government closed down Napster around the turn of the century, they basically people who wanted to share files had to do it in a more decentralized way, right? And BitTorrent basically was it took a few years to develop the techniques, but at the moment BitTorrent has about 170 million active users. So this is an incredible decentralized network that's already acting independently of any type of cryptocurrency and they've only recently decided to kind of use a crypto asset in order to streamline the downloading process. Whenever you're thinking about, you know, kind of implementation of a crypto to build a network is very difficult, but if you have an existing network already of active users, or an active user base is going to be much easier to implement your solution and integrate your token into that network. So this is kind of what BitTorrent is doing, and that obviously gets alternative investors extremely excited, as we've seen with the Kin, ICO and Telegram, which both of them were hugely successful because they already have an active, loyal user base. And then it's just an issue of implementing a software solution that will easily grant them access to that token.

While many in the space can hardly rein in the FOMO, others keep a more skeptical stance, suspecting the BTTs a snow astonishing performance could hide mere speculative hype. For instance, former CSO at BitTorrent, Simon Morris has already claimed that there is no way the Tron blockchain can handle the transaction volume necessary to tokenize BitTorrent. Will the BitTorrent token justify the hype? Only time will tell. What do you think really happened at QuadrigaCX? Were any of you personally affected? Let us know in the comments. And as always, remember to like subscribe and hodl Cointelegraph like subscribe and Hodl.