2018 has seen the production of many ideas for a Bitcoin Exchange Traded Fund (ETF) that could be established to make institutional investment easier for large companies and corporations. The notion of a Bitcoin ETF is that it would make Bitcoin investment more mature and more accessible to big companies, all of whom would no doubt put a lot of money into Bitcoin, should investment be made a little safer for them. This, in essence is exactly what the Bitcoin ETF aims to achieve.
What we have seen through 2018 is a number of applications to open a Bitcoin ETF filed with the United States Securities and Exchange Commission (SEC). These applications have been held for review by the SEC for a number of months, as the SEC cannot decide on the grounds through which they should approve an ETF. This is a heavily unregulated industry and therefore, the SEC don’t have a rule book to refer to, therefore the applications must be reviewed by people, over a long period of time to ensure the SEC don’t mess it up.
The most prominent ETF application currently comes from VanEck, a New York based Investment Management Company who work with institutional investors on a daily basis. Just yesterday, the SEC announced that they would be further delaying the decision for this application, pushing the deadline back to the 27th of February 2019. This is important, given that a final decision was set to be made in August 2018, before being pushed back to the end of Septeember 2018, and then, December 2018.
SEC Slaps Blockchain Author Alex Tapscott, Firm With Fines Over Securities Violations
The U.S. Securities and Exchange Commission (SEC) has fined blockchain author Alex Tapscott and his investment firm NextBlock Global over securities violations.
The SEC says that Canada-based NextBlock had been offering securities that were not registered with the SEC “in any capacity” and that false misrepresentations were made about the firm when soliciting investors. The agency has therefore ordered Tapscott, co-author of the book “Blockchain Revolution,” to pay a $25,000 penalty and also issued a cease-and-desist on further securities violations by him or his firm.
The SEC said it had taken into account the remedial acts “promptly undertaken” by Tapscott and NextBlock when agreeing the terms of the settlement. It also said that, following the firm’s payment of a 700,000 Canadian dollar (roughly US$520,000) administrative penalty, it had not imposed a further civil penalty on the company.
NextBlock was launched in 2017, raising $20 million via convertible debentures – a type of debt instrument – at the time to invest in blockchain and cryptocurrency companies, the commission said.
The SEC further said that, in order to solicit funds from investors in the U.S., Canada and elsewhere, NextBlock and Tapscott falsely claimed that as many as four “prominent” individuals in the blockchain industry were serving as advisors to the firm.
NextBlock and Tapscott also initiated a second funding round and hired two Canadian investment banks as advisors for the effort, as well as to help list the firm on the Toronto Stock Exchange, according to the order. However, due to media reports of misrepresentations to investors, NextBlock canceled the round and its initial public offering plan.
Later, NextBlock voluntarily initiated court proceedings in Ontario to wind up operations and liquidate its existing digital asset holdings, and return the funds to debenture holders with principal investment plus profits (approximately 140 percent as of March 2019).
Tapscott has voluntarily surrendered his right to collect his share from NextBlock’s profits worth over $2 million, an amount that was retained by the firm and formed part of the distributions to debenture holders, the order states.
SEC Again Delays Decision on Bitwise Bitcoin ETF Approval
The U.S. Securities and Exchange Commission (SEC) again delayed a decision on whether to approve or reject a bitcoin exchange-traded fund (ETF) on Tuesday.
In a new document published by the SEC, the regulator said it would hold off on making a decision on the Bitwise ETF proposal filed with NYSE Arca.
The proposal was first filed in January of this year, kicking off a new race to launch a bitcoin ETF in the U.S., which is expected to bring fresh money – and therefore, liquidity – to the crypto space.
The SEC last postponed a decision on both the Bitwise and VanEck/SolidX proposals at the end of March, kicking both to May. The regulator has yet to approve any bitcoin ETFs, though both experts in the space and officials with the agency seem to believe that it’s only a matter of time.
Crypto Crescent Asset Management, a digital asset and fund manager, has also proposed a crypto ETF, which would give customers exposure to both bitcoin and ether. The firm, which is partnering with NYSE Arca, has not yet formally filed its proposal, however.
There will be a public comment period for three weeks after the latest document regarding the Bitwise ETF is published in the Federal Register, plus an additional two weeks for responses.
Top 7 21st-Century Ponzi Schemes
In the financial world, there will always be people with less than honest intentions. That is only to be expected, primarily because a lot of people want to make money at all costs. Ponzi Schemes are often a great way to attract a lot of money, even though they will always be shut down in the end. The following 21st-century examples show how crafty scammers can get.
- 1 Mutual Benefits Company (2003)
- 2 Moshe and Zvi Leichner (2005)
- 3 SwissCash HYIP (2006)
- 4 Practical Property Portfolio (2009)
- 5 Zeek Rewards (2012)
- 6 The Utah Property Investment Scam (2018)
- 7 Rust Rare Coin (1995 – 2019)
Mutual Benefits Company (2003)
Little over 15 years ago, the SEC decided to crack down on a company known as Mutual Benefits Company. Although their business model seemed legit at the time, it turned out a lot of nefarious activity was taking place behind the scenes. On the surface, Peter Lombardi – who ran this Ponzi Scheme – claimed he would use investor money to pay viatical settlements to HIV patients. This worthy cause attracted well over 25,000 investors, all of whom lost their money in the end. Lombardi currently serves a prison sentence for a few more years.
Moshe and Zvi Leichner (2005)
Even though most people always revert to financial instruments they know, foreign exchange money-making options will attract attention. This is exactly what Zvi and Moshe Leichner engaged in, as they promised investors a monthly return between 2% and 4%. This money was supposed to be earned through their various companies, with Midland Euro Exchange leading the charge. In total, this father-and-son team collected $130m in investments, although they hardly ever paid out any of it to investors.
Interestingly enough, this is also one of the more recent Ponzi Schemes involving a well-known bank. Lloyds TSB, the British bank, paid $12.5m in damaged to victims falling victim to this Ponzi Scheme. While the bank never admitted liability, they decided to compensate fraud victims. This news came at a time when the bank was named in a class action lawsuit condemning them of abetting a breach of fraud. Since their arrest in 2003, Zvi Leichner has served 11 years in prison, whereas his father has four years left on his sentence.
SwissCash HYIP (2006)
Ponzi Schemes often seem to thrive in Asian countries, for some unknown reason. SwissCash is a great example, as this High-yield Investment program – or HYIP – offering returns of up to 300% after 15 months. This business model attracted a lot of investors looking to improve upon their financial situation at that time. Especially citizens of Malaysia, Singapore, and Indonesia were targeted. This ultimately resulted in the arrest of various Malaysian individuals in October of 2006.
Practical Property Portfolio (2009)
Real estate has always been one of the more popular financial commodities around the globe. Unfortunately, it also attracts a lot of con artists. In the United Kingdom, the firm Practical property Portfolio made a lot of headlines around a decade ago. It offered a promise of a house in the North East of England in exchange for a 25,000 GBP upfront investment. With over 1,750 investors being defrauded in the end, the scheme was eventually shut down by the United Kingdom Serious Fraud Office.
Zeek Rewards (2012)
In the United States, penny auctions are often subjected to a terrible reputation. This is primarily due to numerous Ponzi Schemes affecting these offerings, including the notorious Zeek Rewards venture. It promised users returns of up to 1.5% a day, which is simply impossible to achieve in the financial sector. This money was to be earned through Zeek Rewards’ own penny auction, known as Zeekler. Investors also had to recruit new members to increase their returns, and pay a monthly fee on top of their initial investment.
At its peak, officials estimate Zeek Rewards was a $600m Ponzi Scheme, and over 1 million investors were defrauded by this company. Founder Paul Burks eventually agreed to pay $4m to the SEC and has been actively cooperating with the agency ever since. To date, the total financial losses sustained by investors remain uncertain. However, it seems likely to assume most of the funds has never been returned to its rightful owners.
The Utah Property Investment Scam (2018)
Not all of the Ponzi Schemes in history have a fancy name to go by. In 2018, the Ponzi Scheme known as the “Utah property investment business” was shut down. This Ponzi Scheme was operated by Claud R. Koerber, who successfully pocketed close to $100m from investors. This is another great example of how real estate and Ponzi Schemes can go hand-in-hand, no matter how legitimate the offering in question may appear.
Rust Rare Coin (1995 – 2019)
On the surface, Rust Rare Coin has been a legitimate business active in Utah for some time now. Their Ponzi Scheme dates back to as early as 1995, when the company started collecting investments to pool together and buy silver. These silver amounts would then be sold as the price rose, which would allow everyone to profit from this business venture.
As one would come to expect from such a “normal” business model, Rust Rare Coin attracted up to $200m from investors. Rather than buying the silver in question, all of the money was sued to pay new investors, finance his own personal expenses, and sluice funds to his other companies. Gaylen Dean Rust, who runs the company, has been indicted earlier this week. His potential prison sentence remains unclear, as that verdict has yet to be rendered