Why Winklevoss Twins Fear Investors are Losing Confidence in Crypto

In no way, a centralized entity should be able to gain hold of someone else’s cryptocurrencies. That’s the main logic bitcoin propagated via its original …

The crypto industry is currently going through trust issues, according to Cameron and Tyler Winklevoss.

The Gemini crypto exchange founders, otherwise known as the Winklevoss Twins, said that investors were less confident about investing in cryptocurrencies following the shutdown of QuadrigaCX. The Twins demanded more inputs from the US regulators to make the cryptocurrency market a safer place for investors, stating:

“There are a lot of carcasses on the road of crypto that we’ve seen and learned from. At the end of the day, it’s really a trust problem. You need some kind of regulation to promote positive outcomes.”

QuadrigaCX, once a prominent Canada-based crypto exchange, announced shutdown this December after its chief executive Gerald Cotten died unexpectedly with the keys of $194 million crypto wallets. The company eventually lost clients’ funds in excess which, per the Winklevoss Twins, is what rattled potential crypto investors.

Better oversight, they said, would attract more investors and would further set bitcoin to the path of a long-awaited price recovery.

Twins Miss the Point

While the Twins could be right about strict oversight attracting big investors, as also covered by NewsBTC earlier, there is no evidence that QuadrigaCX fiasco could initiate a new negative trend. With trust, the Twins want to imply that QuadrigaCX would eventually undo crypto adoption as a whole. Instead, their focus should be more on educating crypto users about protecting their assets from potential hacks. Because, indeed, hacks do not discriminate between regulated or unregulated exchanges.

And they got rich within an unregulated crypto environment. Socialism. Hypocrisy.

— AR (@AR99092110) March 11, 2019

The reason why QuadrigaCX users lost funds was that they handled control of their assets to the exchange. In no way, a centralized entity should be able to gain hold of someone else’s cryptocurrencies. That’s the main logic bitcoin propagated via its original whitepaper. Centralized exchanges never did enough to reduce counterparty risk. Since Mt. Gox, the crypto industry suffered plenty of hacks, leading to the loss of billions of dollars worth of crypto assets. The hacked platforms included BitStamp ($1.43 billion), BitFinex ($900 million), BitGrail ($170 million), CoinRail ($40 million), amongst others.

In all the cases, crypto traders trusted exchanges to store their money. Nevertheless, all of them failed to provide careful custodianship. These exchanges continue to control users’ assets, and that is where the core problem lies.

Control is Confidence

The rising number of decentralized exchange projects (DEX) indicate that – in the future – traders would gain 100% control of their crypto assets. Also, these exchanges would practically do the job of a centralized exchange but without designating power to a single party. That includes everything from capital deposits, order books, order matching, and asset exchange.

Nevertheless, DEX would need to catch up when it comes to handling a large number of volumes and supporting features like stop loss and margin trading. And for active traders, centralized exchanges will remain a go-to option. However, the best they can do to ensure utmost protection is to keep only a small part of their holdings on their public wallet.

While a stricter regulatory framework, as the Winklevoss Twins, would still be useful, one cannot risk exposing their funds to lengthy court procedures in the event of a hack.

Not your keys, not your bitcoins.

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Karpeles: Bitcoin baron brought down with a bump

‘Magic’ -. But his life really changed the day a customer asked if he could pay in bitcoin — a new virtual currency that was just taking its own baby steps.
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Tokyo (AFP)

Once described as a geek who stuffed himself with snacks in front of his computer, Mark Karpeles rose to head a firm that once claimed to handle 80 percent of the world’s bitcoin transactions.

But his lavish Tokyo lifestyle came to an abrupt end when prosecutors charged him with creaming off millions of dollars of customer deposits from his cryptocurrency exchange MtGox.

In many ways, the trajectory of the Frenchman, now 33, mirrors the volatile rise and fall of the bitcoin currency itself.

According to his mother, he had few friends at school, as he was “unable to find a buddy who could talk like he could about IT and quantum physics”.

The “only thing that interested” her “talented” son was computer science, according to his mother, speaking in a 2017 documentary.

Karpeles, whose real first name is Robert, himself admitted to French television that he would spend entire days in front of the computer screen without the slightest bit of physical activity.

Entering the professional world, he quickly found himself at odds with his French company Linux Cyberjoueurs, which found irregularities in its data and pointed the finger at Karpeles.

The firm brought the case to the authorities and in 2010, he received a year’s suspended sentence in absentia in France for “fraudulent access of an automated data processing system” and “fraudulent altering of data”.

But by this time, Karpeles was in Japan, which he had visited several years previously and found the people and culture to his liking.

Once in Japan, he founded his own company, called Tibane — after his cat.

– ‘Magic’ –

But his life really changed the day a customer asked if he could pay in bitcoin — a new virtual currency that was just taking its own baby steps.

The virtual currency appealed to the computer whiz and he began to delve into the technical and IT aspects of the new trend.

By 2011, he had bought his own cryptocurrency exchange MtGox, which stands for “Magic: The Gathering Online eXchange” — referring to a “magic” card-swapping platform beloved by Japanese “otaku” or “geeks”.

This grew rapidly until, at the height of its powers, it claimed to control 80 percent of all global bitcoin transactions.

“He was excited by the money that could be generated on this exchange market,” one of his associates told a television documentary under the cover of anonymity.

And Karpeles enjoyed the trappings — reportedly lodging in an $11,000-per-month luxury pad with a king-sized bed worth tens of thousands of dollars.

He married a Japanese woman and became a father but everything came crashing down in 2014, when MtGox suffered what Karpeles said was a “massive” hack attack and lost around 850,000 bitcoins, worth just under half a billion dollars at that time.

MtGox collapsed and filed for bankruptcy protection. Prosecutors are not pursuing Karpeles for that but for allegedly falsifying data and pilfering around $3 million from customers’ accounts.

He had tried to take the traditional path of bowing deeply and apologising profusely — in Japanese — for the losses.

But this earned him only mockery online and did not deter the authorities.

He was arrested in August 2015 and spent a year in Japanese detention after being re-arrested several times, as is possible under the legal system in Japan.

When he was finally released on bail, he had lost a huge amount of weight and at his first high-profile hearing offered up a clean-cut image.

Since then, Karpeles has been active on social media but has largely avoided commenting on his case in detail as he awaits the court’s verdict, which is expected on Friday.

? 2019 AFP

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Verdict due in MtGox bitcoin embezzlement case

The disappearance left a trail of angry investors, rocked the virtual currency community, and dented confidence in the security of bitcoin. At one point …

TOKYO – The former high-flying head of collapsed bitcoin exchange MtGox will learn his fate Friday as a Tokyo court hands down its verdict on charges of faking digital data and embezzling millions of dollars.

Mark Karpeles, former head of the collapsed bitcoin exchange MtGox, is accused of faking digital data and embezzling millions of dollars

Prosecutors have called for a 10-year jail sentence for French-born Mark Karpeles, 33, who denies the charges.

Karpeles is alleged to have repeatedly manipulated computer data over several years while embezzling a total of 341 million yen ($3 million) of clients’ money deposited at the company.

Prosecutors claim he splashed the embezzled money on a 3D-printing software business unnecessary for MtGox, as well as on personal expenses, including some six million yen ($54,000) for a canopy bed.

He also spent millions of yen on arranging overseas trips for his estranged wife, as well as utility bills and cleaning services at his luxury apartment that he reportedly rented for $11,000 per month, prosecutors allege.

MtGox was shut down in 2014 after 850,000 bitcoins (worth half a billion dollars at that time) disappeared from its virtual vaults, a mystery that remains unsolved.

The disappearance left a trail of angry investors, rocked the virtual currency community, and dented confidence in the security of bitcoin.

At one point, MtGox claimed to be handling around 80 percent of all global bitcoin transactions.

The spectacular failure of the exchange caused a dramatic slump in the value of bitcoin but the cryptocurrency rallied to an all-time high of near $20,000 in December 2017 before dropping off sharply.

It is currently trading at around $3,900.

Japan issued new regulations after the MtGox case, but the exchange Coincheck was forced last year to refund customers more than $440 million in virtual currency that disappeared from its holdings.

During the trial, Karpeles apologised to customers for the company’s bankruptcy but denied both data falsification and embezzlement.

“I swear to God that I am innocent,” Karpeles, speaking in Japanese, told the three-judge panel hearing when his trial opened.

Karpeles has said the bitcoins were lost due to an external “hacking attack” and later claimed he had found some 200,000 coins in a “cold wallet” — a storage device not connected to other computers.

“Most people will not believe what I say. The only solution I have is to actually find the real culprits,” he told reporters after the hearing.

The charges against the former CEO are not directly related to how the MtGox losses came about.

– ‘Significant money losses’ –

Satoshi Mihira, chief attorney at Mizuho Chuo law firm, said: “If it was an outside hacker who stole the currency, it’s a problem. But if he stole even part of the money, it would be embezzlement.”

“His defence counsel needs a high level of evidence to win an innocent verdict,” he told AFP.

“If he’s found guilty, it is possible he will get a jail term considering the significant money losses (suffered by customers),” said the lawyer, an expert on cryptocurrency issues.

The odds are stacked against Karpeles as the vast majority of cases that come to trial in Japan end in a conviction.

The Frenchman was first arrested in August 2015 and, in an echo of another high-profile case against former Nissan chief and compatriot Carlos Ghosn, was re-arrested several times on different charges.

Karpeles eventually won bail in July 2016 — nearly a year after his arrest — reportedly paying 10 million yen to secure his freedom pending a trial, which began in July 2017.

During his time on bail, Karpeles has been active on social media — notably voicing doubts about bitcoin and replying to some media questions about conditions in Japanese detention centres.

However, he has largely avoided commenting on his case in detail.

The court is expected to issue a verdict Friday and, if it finds Karpeles guilty, will likely hand down a sentence at the same time.

However, even if he were to lose the case, he has the right to appeal, which would keep him on bail.

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Winklevoss Twins Are Pro-Regulation, Asserts That “Gemini’s Product Is Really Trust”

The Winklevoss twins, Cameron and Tyler, recently spoke at the SXSW Conference where they shared their thoughts about all things Bitcoin (BTC) …

The Winklevoss twins, Cameron and Tyler, recently spoke at the SXSW Conference where they shared their thoughts about all things Bitcoin (BTC) and the importance of regulation in the crypto industry.

Elaborating on why crypto regulation is so important for the space, the billionaire brothers brought up 2 separate incidents in which substantial amounts of crypto were lost.

The first example was the infamous Mt. Gox exchange hack of 2014, in which about 740,000 bitcoins were lost, with only around 200,000 recovered since. The second incident was the QuadrigaCX debacle, in which a Canadian crypto exchange lost roughly $140 million worth of crypto after the death of its CEO, who had sole possession of the exchange’s private keys.

Regulatory Oversight Is Needed

According to Tyler Winklevoss, co-founder of leading cryptocurrency trading platform Gemini, a giant problem surrounding Bitcoin and the crypto industry is the lack of regulatory oversight and internal control of the businesses dealing with crypto.

Citing the Mt. Gox hack, Tyler blames this disastrous event on a lack of regulatory oversight and internal control. Adding to this, he stated that he and his brother want to introduce rules for companies who deal with people’s cryptocurrency, so that the losses experienced during the Mt. Gox hack and QuadrigaCX incident never occur again.

The Winklevoss twin then proclaimed that traditional financial markets succeed at building trust because regulatory oversight from governing bodies ensures that those enterprises play the roles they promised.

Adding to this, he said that regulatory oversight ensures enterprises have measures in place that safeguard consumer funds or assets from unjust or unlawful practices.

Furthermore, the billionaire twin boasted that the Gemini exchange is one of the most regulatory-compliant crypto exchanges, as it undergoes examination by the New York Department of Financial Services at least once a year.

According to Tyler, the process is similar to that of an audit, as it ensures there are layers of both checks and balances. Adding to this, he said:

“That’s what regulation brings and that’s worked really well in financial markets. And, the healthiest markets in the world today outside of crypto are the ones that are the most thoughtfully regulated like the US equities market.”

“Successful Markets Without Regulatory Oversight Don’t Exist”

Adding to what his brother said, Cameron stated that no markets can thrive without regulatory oversight. Expanding on this, he said that markets need rules, as successful unregulated markets simply do not exist.

Cameron then spoke about his and his brother’s first experience buying Bitcoin on the wild west crypto exchange Mt. Gox, and how they had to figure out a secure way to store it themselves. He said:

“We ended up buying a lot of Bitcoin on Mt. Gox. So we kind of grew up in the wild west of crypto, experienced it first hand, and we also have a store of crypto. and we basically took our private keys, cut them into pieces, and stored them in secure locations all over the country… but we’re like, most people aren’t gonna do that if they get into crypto.”

After their experience of buying and figuring out how to store crypto, Cameron proclaimed that this experience was what led them to create a product people can trust. He said:

“It was a scary time, and it kind of informed us like in order for this thing to grow, we’ve got to basically build trust. Gemini’s product is really trust, like trust is our product.”

Watch the Winklevoss twins’ full interview with at SXSW below.

Do you agree with the Winklevoss twins that the crypto markets must be regulated in order to thrive and succeed? Let us know what you think in the comment section below.

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Bitcoin [BTC] billionaire: Healthiest markets outside of crypto are most thoughtfully regulated

The Winklevoss brothers aka Bitcoin billionaire brothers, Cameron and Tyler, spoke about the reason why regulation is important for the space, taking …

The Winklevoss brothers aka Bitcoin billionaire brothers, Cameron and Tyler, spoke about the reason why regulation is important for the space, taking into account the infamous Mt. Gox hack and the recent QuadrigaCX incident over lost keys. These topics were discussed during a panel discussion at the SXSW Conference.

Tyler Winklevoss, the co-founder of Gemini, a leading cryptocurrency exchange platform, remarked that there have been problems relating to Bitcoin, such as Mt. Gox, because of the lack of internal control and regulatory oversight. He also stated that they wanted to introduce rules for companies that are engaged in dealing with people’s cryptocurrency.

This was followed by the Bitcoin billionaire stating that the financial market built trust with the help of regulatory oversight as there was a body ensuring that enterprises play the role that they promised. Furthermore, he claimed that Gemini was examined by the New York Department of Financial Services at least once a year, with the latest examination dating back to six weeks. He asserted that this process was similar to that of an audit, which ensures that there are “both layers of checks and balances”. He said:

“[…] and that’s what regulation brings and that’s worked really well in financial markets. And, the healthiest markets in the world today outside of crypto are the ones that are the most thoughtfully regulated like the U.S equities market.”

This was further discussed by Cameron Winklevoss, who stated that the US equities market was “probably the most regulated market” in the world. He added that there is not a market that is thriving without rules and that a successful market without regulatory oversight “just does not exist”.

Furthermore, Cameron spoke about his perspective on the Mt. Gox and QuadrigaCX incident. He stated:

“We ended up buying a lot of Bitcoin on Mt. Gox. So, we kind of grew up in the wild west of crypto, experienced it first hand, and we also have a store of crypto and we basically took our private keys cut them into pieces and store them in secure locations all over the country […] but we’re like most people aren’t gonna do that if they get into cryto.”

He went on to say that buying Bitcoin from Mt. Gox was a “scary” experience as they had to then figure out where and how to store it. He said:

“It’s like once you have the gold bars, you have to then secure it, and if you store it in your house that’s kind of scary because you got to buy a safe and people trying to rob your house.It was a scary time and it kind of informed us like in order for this thing to grow, we’ve got to basically build trust. Gemini’s product is really trust, like trust is our product.”


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