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Bitcoin exchanges and custodians are too big to bail; can fail like pre-1914 gold banks, says Tuur Demeester




Bitcoin exchanges and custodians are too big to bail, can fail like pre 1914 gold banks, says Tuur Demeester
Source: Unsplash

Tuur Demeester, Founder of Adamant Capital, recently remarked that, “Bitcoin exchanges and custodians are too big to bail,” on his official Twitter handle. Further, Tuur Demeester also stated that there was a possibility that platforms may fail the same way as “pre-1914 gold banks could.”
He further explained that this meant,

“[…] – No lender of last resort – Private insurance only option – Ultimately good for HODLers: no socialization of risk – But: due diligence matters, buyer beware.”

The Founder stated that the “lack of centralization” in Bitcoin would be “further improved” with the use of multi-signature solutions, smart custody, and collaborative custody. He also added that this was the reason Bitcoin was “so desirable as a hedging instrument.”
He said,

“This is why bitcoin is so desirable as a hedging instrument: it can insure traditional portfolios against trust based, systemic risks. Here’s a possible scenario:”

This was followed by Demeester explaining the reason why the Federal Bank thinks of Bitcoin as “undesirable”. The first reason was systemic risk, where the “Bitcoin Fed” could get compromised to a security breach or even “face a bank run.” The second reason was bureaucratization, a result of private profits and socialized risk. The third reason was that the cryptocurrency’s banknotes would “only be fractionally backed,” which would be at the “expense of savers.”

He went on to state,

“Most of the people currently still claiming that “Bitcoin can’t work” operate on the premise that centralization is important and desirable. Once Bitcoin is mature, these people will inevitably clamor for a central bank of bitcoin. Imo this will become a huge public debate.”

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Priya is a full-time member of the reporting team at AMBCrypto. She is a finance major with one year of writing experience. She has not held any value in Bitcoin or other currencies.


Huobi, Bitfinex, and other exchanges allegedly linked to laundering/mixing of Bitcoins




Huobi, Bitfinex, and other exchanges are allegedly linked in laundering/mixing of Bitcoins
Source: Unsplash

On 19 May, 2019, @Whale_Alert tweeted a transaction of 2000 BTCs between Bitfinex and an unknown wallet, which after in-depth research by a Twitter user, confirmed that it was linked with wash-trading, mixing and laundering of funds. The funds circulated over various exchanges like Bitfinex, Binance, Huobi, Coinbase, and others, raise serious questions regarding AML laws and more.

The flagged transaction was sent from 1HL5rZWw5rGzFAB1mThEMxwazEBtWigs7B to two distinct addresses.

The Twitter user, @Proofofresearch, flagged this transaction and revealed the exchanges involved [directly or indirectly]. The user tweeted,

The user flagged a few addresses in the clusters which sent a significant amount of funds, shown in the image attached below.

Source: Twitter | CryptoMedication

The entity 145631092, as seen in the above chart, the funds sent by Huobi from this cluster ended on July 21, 2017. Another wallet “17hf5H8D6Yc4B7zHEg3orAtKn7Jhme7Adx”, linked to having transactions with Huobi has one particular transaction that stands out as it has an op_code named “People! help!”, which was transferred on March 30, 2019.

Source: Smartbit

The wallet address “19V5joogtZCCj3YWcP9pNT8eKLSZybc1Kq” has only four transactions in total. Upon checking the previous transaction for this address, the transaction with hash “bee4795db198230d6baad2e9dbba42b597c635b2471101641cce99e1ff0e91e4” stands out, since it is linked to darknet market places, the user tweeted.

Source: Twitter | CryptoMedication

Further, the address “3M1QVCjXn38AUdUxbLCH4WUZc1ai72ZKgr” that sent funds to the above-mentioned wallet, has a strong connection to darknet market places like the Hydra Market place.

Source: Twitter | Cryptomedication

The source of these funds was directly linked again with Hydra Market place, with the user tweeting,

The Twitter user further alleged that the addresses linked to these clusters were attached to fraud and some user[s] was “selling accounts at Coinbase/Huobi/Bittrex/Binance.” The Twitter user also urged the compliance team of the respective exchanges to close these flagged accounts ASAP.

The user added that all the funds linked to darknet market places were later deposited in Huobi exchange, which according to the user, gets mixed by Huobi.

Additionally, the user added,

“There are zero customers involved in any of these transactions at this point. That much is obvious. These addresses are not functioning as customer deposit addresses. That’s a guarantee. Funds go to Binance/OKex/Poloniex/… By FAR, Okex is the most frequent recipient of funds from these Huobi-controlled addresses. Please keep in mind that these are not deposit addresses. These are addresses where Huobi is literally mixing the funds and sending them to other exchanges for some reason.”

One particular address connected to Bitfinex in this fiasco, “1LSgEKji3ZoGdvzBgkcJMej74iBd38fySb,” has received 1 million Bitcoins, according to the user. The user added,

“As stated before, Binance/Coinbase/Bitfinex/Huobi/Bittrex/Coinbase/”Bitbank”/Bithumb/OKex are all pals in this laundering scheme together. They mix and mash funds and operate in a symbiotic fashion – replenishing stores when necessary… In this case, Huobi’s hands are dripping if there’s such a thing as catching someone ‘red-handed’.”

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