The bankruptcy saga for digital asset lending service Cred is beginning to turn ugly as investors are looking to safeguard their funds despite its problems. However, their latest effort appears to have hit a snag as a bankruptcy court ruled in the company’s favor.
No Clarity Over Funds’ Status
Earlier this week, John Dorsey, a U.S. Bankruptcy Court judge, ruled to deny an emergency motion from Cred’s customers looking to freeze its crypto assets on exchanges. The motion, which 15 company investors filed on Monday, sought to compel over 20 cryptocurrency exchanges to freeze all assets affiliated with the lending service on their platforms.
According to reports, a hearing that took place yesterday saw the bankruptcy judge side with Cred. Judge Dorsey explained that he couldn’t act on the investors’ motion, citing inadequate evidence on the funds’ ownership and status.
He also highlighted that the investors had done insufficient work to track the assets down. It isn’t over for the investors, however. As the judge explained, the court will most likely deliberate on issues concerning Cred’s assets’ freezing on December 9.
The deliberation is related to a November 18 motion filed by two Cred users, who requested that the court converts the case to liquidation proceedings.
Amongst other things, the users accused Cred of operating an unlicensed, fraudulent hedge fund. The suit alleged that Cred’s liquid assets make up for just a tenth of the company’s $136.5 million in liabilities.
Cred Comes Crashing Down
The latest developments show that Cred’s bankruptcy case won’t go without a fight from investors. Many investors had begun raising eyebrows at the company after it shut off cash inflows and outflows last month. In a tweet, the company explained that the action was necessary due to the fraud investigations that it faced.
Cred claimed that while the investigations hadn’t caused any internal issues, it was merely working with law enforcement to crack down on “irregularities in the handling of specific corporate funds by a perpetrator.”
Soon after the investigations came to light, Uphold, an American crypto wallet and trading platform, confirmed that it had terminated its relationship with Cred. Days later, Cred shut off all user communications on social media, online forums, and all channels.
The company ultimately announced that it had filed for bankruptcy with the Northern District of Delaware on Saturday. Cointelegraph noted that the firm had reported between $50 million and $100 million in assets. Its liabilities were estimated to be worth about $150 million.
Users immediately took to social media, urging the company to get in touch with them. Several of them complained about the inability to access their funds, while others cited concerns over funds possibly being lost in the bankruptcy process.
The Bitcoin rally already has investors excited. As things stand now, there is little doubt that BTC will break its all-time high record this year. However, investors and analysts are still trying to figure out how high the asset could go. Dan Tapiero, the founder of Gold Bullion International, believes that we could see a six-figure price peg pretty soon.
Institutions to Push Bitcoin’s Market Cap
Speaking with Morgan Creek Digital co-founder Antony Pompliano, Tapiero explained that Bitcoin is on the fast track to $500,000. While the gold enthusiast believes that investors should split their assets between gold and Bitcoin, he acknowledged that the leading cryptocurrency remains the cream of the crop for alternative assets.
“In the next five years, I can see gold at $4,000, so that’s double. But if gold is at $4,000, Bitcoin is probably somewhere between $300,000 and $500,000, so that’s a 20, 30x,” Tapiero highlighted, adding that no one in the gold trading industry could dispute Bitcoin’s dominance.
Tapiero highlighted that the Bitcoin market already saw a significant influx of institutional investment this year. As the asset’s market capitalization continues growing, more institutions will feel comfortable with it. This could start a cycle of higher investments and a higher valuation for the asset. Once this happens, Bitcoin will take a similar stance as gold.
The gold bug added that Bitcoin also beats gold in terms of functionality. While gold only works as a store of value, Bitcoin functions as an entire network. Due to this greater functionality, Tapiero sees Bitcoin ultimately outperforming gold.
Schiff Remains Unwavering
Tapiero’s acknowledgment was a significant moment, especially considering that many people have begun drawing comparisons between Bitcoin and gold.
Last week, Rick Reider, the Chief Investment Officer of fixed income at asset management giant BlackRock, told CNBC that Bitcoin is here to stay and eventually take gold’s place. While Reider didn’t acknowledge being a Bitcoin bull, he explained that the asset is currently more functional than gold. Ultimately, it would take gold’s place.
Like Tapiero, Reider highlighted the growth in institutional demand for Bitcoin. He also pointed out the asset’s attraction to millennials, who would eventually become tomorrow’s prominent investors. With more millennials choosing Bitcoin over gold, it is only a matter of time before they switch places.
While Tapiero is okay with acknowledging Bitcoin’s superiority over gold, Peter Schiff, another famous gold bull, remains unconvinced.
Schiff has ramped up his criticism of the leading cryptocurrency this year, even though the asset has proven him wrong several times over. Last month, data from CoinGecko showed Bitcoin hitting the 7-ounce mark against gold for the first time in over a year. Despite the performance, Schiff was unimpressed.
The gold bull lashed out on Twitter, calling Bitcoin the largest bubble he had ever seen.
Bitstamp, one of the largest crypto platforms in Europe, has partnered with Sovos, a startup that focuses on cryptocurrency accounting and auditing, in order to modernize its tax information reporting.
The reporting obligations for cryptocurrency in the US continue to evolve at a breakneck pace, often lacking clear guidance from regulatory authorities. Most notably, the Internal Revenue Service has added a question to the standard 1040 form, America’s primary income tax form. The compliance measure comes in the form of a checkbox and asks taxpayers to disclose if they have ever dealt in cryptocurrencies in 2020.
Bitstamp will use Sovos’ technology to automate its 1099 forms and filings, which helps reduce potential human errors and ensure automatic regulatory updates. The company’s Tax Information Reporting solution, which has experience in handling tax issue in alternative currency markets, allows Bitstamp to protect its users just as investors of other asset classes.
“The Sovos solution automates complex reporting at the federal and state level, which allows our team to focus on other client-centric initiatives,” said Hunter Merghart, Head of U.S. at Bitstamp.
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“As cryptocurrencies grow increasingly popular, they have in turn fallen under heightened IRS scrutiny. Bitstamp understands that to remain compliant, they need a trusted partner like Sovos to automate what can be a truly arduous and confusing process,” added Paul Banker, general manager of Tax and Regulatory Reporting at Sovos.
IRS Gets Serious About Cryptocurrency
This collaboration with Sovos should address the reporting needs of the cryptocurrency customers in the upcoming tax season, which kicks off in January. As such, accounting professionals servicing crypto-transacting clients will have sources required when reconciling cryptocurrency balances and transactions.
Recently, there have been numerous reports emerging of tax authorities clamping down and going after traders underreporting their cryptocurrency profits. The IRS also sent letters to taxpayers who might have failed to report income and pay the resulting tax from cryptocurrency transactions.
At the very core, the IRS still deems crypto assets to be property rather than currency for income tax purposes, the same as its regulatory guidance came out five years ago. That means the authority will continue to tax crypto profits and losses like those for stocks, at capital gains rates.
Major domain name and web hosting site GoDaddy has become the latest tech firm to fall victim to a social engineering attack. Several crypto services hosted on the platform have seen security breaches, per a KrebsOnSecurity report.
Another Problem for GoDaddy
The spate of attacks began with cryptocurrency trading platform Liquid on November 13. In a separate blog post, Liquid’s chief executive Mike Kayamori accused the hosting platform of transferring domain account access to a malicious actor.
The hackers changed the DNS records and gained control of the internet domain account. Hackers were also able to access Liquid’s infrastructure and document storage.
Besides Liquid, crypto mining service NiceHash also suffered an incursion on GoDaddy. The attack happened a few days after Liquid’s account was compromised. NiceHash revealed that its domain registration records had been edited without its permission on the web host. The mining service immediately froze customer funds for 24 hours to prevent unauthorized transactions and rectify the problem.
It’s unclear how much Liquid lost to the hackers, but NiceHash confirmed that no funds went missing. However, the fact that these attacks happened is cause for concern on its own.
As KrebsOnSecurity noted, this isn’t the first time that GoDaddy has had security problems this year. In May, the news source reported that the hosting platform had suffered a security breach that left the accounts of 28,000 of its employees compromised.
The issue stemmed from a security breach that occurred in October 2019. However, GoDaddy didn’t notice it until April 2020. In a filing with California’s Attorney General’s Office, the hosting platform noted that the breach was limited to hosting accounts.
Personal information and customer accounts weren’t affected, although the company reset usernames and passwords for some of its customers.
Unlike this hack, it’s unclear how the attackers breached the company’s security systems. GoDaddy gave no additional details, leaving experts to keep guessing. KrebsOnSecurity noted that it appeared to have been a brute force attack on the company’s security infrastructure.
“On behalf of the entire GoDaddy team, we want to say how much we appreciate your business and that we sincerely regret this incident occurred. We are providing you one year of Website Security Deluxe and Express Malware Removal at no cost. These services run scans on your website to identify and alert you of any potential security vulnerabilities.”
Twitter’s Social Engineering Snafu
The difference between the previous incident and this one appears to be the method of gaining access. Brute force attacks are usually easy to spot, but social engineering operations are much more subtle.
A similar case gripped top social media network Twitter this July. In a massive scandal, the Twitter accounts of several notable names – including Barack Obama and Elon Musk – were infiltrated.
Hackers promoted fake giveaways, asking unsuspecting victims to send BTC tokens to their addresses in exchange for possible winnings.
The hackers eventually only walked away with about $100,000 in gains, since Twitter found out soon enough and rectified the problem. A few days later, the social media platform confirmed that the attackers had conducted a coordinated social engineering attack on employees and gained access to internal systems and tools. The firm promised improved staff training and security measures going forward.
While Bitcoin has seen a significant resurgence, it was also the year where scams and fraudulent operations proliferated. However, authorities have also grown in their ability to crack these operations and crackdown against them.
Crypto, Forex, Binary
In the latest sweeping action, the Texas State Securities Board (TSSB) has announced charges against 15 fraudulent schemes advertising false investments, according to an official press release.
The agency confirmed that it had sent out at least three cease-and-desist orders targeting companies that sell fake crypto, forex, and binary options investments.
In the TSSB’s first order, it identified ten investment platforms linked to one James Blundell. The fraudster allegedly used the companies to attract investors with the promise of returns in just a matter of hours.
The Texas resident also reportedly promoted his scams on social media accounts, positioning himself as a thought leader in the investment world. He additionally advertised an official trading license from Texas State, although TSSB confirmed that he had no such thing.
The second order accuses three firms – FX Trades, IQTrade, and Binary Trade Forex – which operate from Valentine, Texas.
Like Blundell’s firms, the companies solicited funds from investors in exchange for lucrative returns on forex, cryptocurrencies, and binary options investments. They got fake testimonials to add to their credibility, luring investors with attractive rates.
Also, like Blundell, the firms used fake registration claims. They touted themselves as “e-gaming” firms registered by the Isle of Man Gambling Supervision Company. However, the TSSB disclosed that they had not registered to sell securities in the state.
As for the third order, the TSSB nailed GeniusPlanFxPro, a crypto and forex trading company that claimed to be from Austin. Along with claiming regulation with the TSSB, the firm also added that it had registered with the Cyprus Securities and Exchange Commission and the Financial Conduct Authority.
Dealing With Fraudsters All Year
The TSSB has been one of the United States’ most active regulators this year concerning cracking down against fraudsters. Along with these new firms, the agency already has its plate filled with Angus Jerrard, a South African resident who started three “double your money” businesses.
In a press release from August, the TSSB alleged that Jerrard ran three firms — Liquidity Gold Trust, Liquidity Gold Solution LLC, and Liquidity Global Card Solution (PTY) LTD. The firms had run illegal ads on a radio station in Austin, promoting the Liquidity Card – a self-proclaimed crypto MasterCard that works with stablecoins.
The fraudster and his company also claimed that they worked with several top stablecoins, including PAX and TrueUSD. Touting the credit card, the companies claimed that holders would get profits and spend them. They added that the card would help investors avoid the taxes they would otherwise pay when converting their cryptocurrencies to fiat.
Along with the card, the Liquidity Group also sold a multilevel marketing scheme to investors.
As the TSSB claimed, the firm hired marketed to promote their products. One of their most recent ads even claimed that investors could get a “portion” of the crypto project for $1,150. Buyers would get residual income from fees paid by Liquidity Card holders, and they could get up to $1,152 in returns after 18 months.
Bitcoin currently on a trajectory that could see it surpass the highs of the 2017 bull market. With just about every metric ticking up, it appears that more people are keeping tabs on it online. Earlier this week, Brad Michelson, a senior marketing manager at investment platform eToro, confirmed that Bitcoin’s search volumes have been on the rise.
SEMRush vs. Google Trends
Citing data from the Search Engine Optimization (SEO) platform SEMRush, Michelson explained that global monthly searches for Bitcoin on Google amounted to 8.9 million. The marketing expert compared these numbers to those of November 2017, confirming that they were 356 percent higher.
Comparing the results to those of Google Trends, Michelson noted a significant discrepancy.
“An interesting thing that Google Trends data hasn’t shown is that the monthly global volume for Bitcoin in Dec. 2017 was actually lower than what we’re seeing in Nov 2020.”
It’s worth noting that Google Trends counts metrics differently from platforms like SEMRush. The tracker plots interest against time, assigning every search term an interest score between 0 and 100. Every term gets a value depicting assumed popularity.
Following Google Trends data, Bitcoin’s popularity as November 2017 peaked at 100 between December 17 and 23 – the exact time the asset hit its all-time high. The term currently logs a score of 18, suggesting fewer people are actually keeping tabs on the asset. However, the service also comments that data for the popularity value is currently incomplete.
Google Trends data also shows that Nigerians are the ones searching the most for Bitcoin. In fact, the African country is the only nation with a popularity score of 100 on the trends list. Ghana and South Africa round out the top three with scores of 70 and 59, respectively. This goes to show, once again, that interest in cryptocurrencies on the African continent remains strongest.
A Matured Market Separates This Bull Run from the Last
Giving reasons for the discrepancy, Michelson noted that Google Trends only shows data based on one keyword. So, anyone searching for “Bitcoin” only gets results for the popularity of the word. Google Trends has exclusive scored searches like “Bitcoin price” and “Bitcoin to dollar.” Both terms have popularity scores of 18 and 33, respectively, on the tracker.
Interestingly, South Africa and Nigeria are the countries with the highest search counts for the two terms.
Going by SEMRush data, it’s understandable that “Bitcoin” searches would have risen. The market has matured significantly since it fell off that $19,700 pedestal in December 2017. It appears to have weeded out some of the weak investors who only saw it as a get-rich-quick scheme.
This isn’t to say that the market hasn’t added more participants as well. Last week, crypto analytics provider Glassnode reported that the number of new BTC addresses hit 25,000 for the first time since January 2018. Some of these will be people looking to capitalize on the market rally, but a vast majority should be serious investors.
To sum up the difference between this bull market and the last, Nic Carter, the co-founder of crypto data platform CoinMetrics, said in a blog post:
“To sum up, today’s market is far more mature, more financialized, more surveilled, more orderly, more restrained, less reflexive, more capital-efficient, and more liquid than the market that powered the prior bull run in 2017.”