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Coinbase Hands Nearly $1M to Cryptsy Victims After Settling Class Action Lawsuit

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Coinbase has settled a class action lawsuit brought by users of the former Cryptsy cryptocurrency exchange.

According to a set of court documents dated Nov. 27 and Dec. 10, 2019, Coinbase has agreed to turn $962,500 over to an escrow agent responsible for handling class action claims related to a previous lawsuit against Cryptsy. Lawyers for the plaintiffs, who announced the settlement Monday, have already won 11,325 BTC from this previous case.

The plaintiffs created a webpage for potential Cryptsy victims – any individuals who used the exchange before 2015 – listing upcoming key dates and outlining how they can submit claims.

The settlement concludes a three-year legal action that nearly saw a jury trial.

A hearing will be held on April 17, 2020, to either approve the preliminary settlement agreement or add further modifications as needed, according to the filing.

Brandon Leidel, designated the class representative in the class action lawsuit, will receive $2,500 due to his efforts. He brought the suit in 2016 alleging Cryptsy CEO Paul Vernon used the exchange to launder millions of dollars’ worth of user funds over a multi-year period.

The case

was originally filed by the Silver Miller law firm and Wites Law Firm, both of which were designated class counsel. In a statement, attorney Marc Wites said the case against Coinbase, as well as the previous lawsuit filed against Cryptsy, “were difficult cases” to resolve.

“When companies go out of business, founders flee the country and the amount at issue is relatively small, most plaintiff law firms would decline to pursue the case,” he said. “We were the only lawyers in the country to pursue a case against Cryptsy or Coinbase, individually or as a class action, and we were able to obtain multiple meaningful recoveries for victims who would have otherwise been left without any recourse.”

David Silver of Silver Miller said he commended Coinbase “for stepping up and resolving” the case. The Cryptsy case shows how early exchanges, “especially unregulated exchanges like Cryptsy, shunned regulators, laws and ultimately stole from its own clientele,” he said.

“This case shows that businesses in the cryptosphere bear a large measure of responsibility, from with whom they decide to do business and with whom they choose to associate,” he said.

Coinbase did not immediately return a request for comment.

Read the preliminary settlement below:

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Coinbase’s Bitcoin holdings indicate its dominance in the market

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The importance of exchanges is widely accepted in the community fact but what’s constantly debated about is the difficulty in judging the reliability of exchanges. The estimation with different metrics has its shortcomings and the lack of transparency makes the assessment less reliable.

According to a recent analysis by Longhash, in order to find a transparent metric, the cold wallet storage of different exchanges was analyzed. The study also accounted for the transfers that took place across deposit addresses, hot wallet addresses, and cold wallet addresses across the major exchanges.

The data was collected directly from on-chain assets, which is difficult to alter or fabricate.

Source: Longhash

The study suggested that Coinbase has the largest amount of Bitcoin amid all other crypto institutions and its holding capacity has periodically increased over the past year. Its BTC holdings were unaffected by any price action in 2019 but at the moment, the exchange was very close to exceeding a hold margin of over 1 million BTC coins.

Coinbase’s stronghold over BTC holdings and steady incline over the

past year can be attributed to its share of long-term institutional investors.

Source: Longhash

In comparison, other exchanges’ cold storage holdings remained far less than Coinbase. Binance was able to maintain its 2nd position for most of 2019 but price volatility evidently impacted its holdings.

Bitfinex started the year on the third position but the Tether controversy and the repeated legal bouts with NYAG seemingly depleted BTC holdings.

Surprisingly, Huobi managed to jump from being the 5-largest exchange in terms of cold wallet storage to 2nd in the market toward the end of last year. The reason may be far from ideal as it has been alleged that a bulk of the PlusToken transactions were facilitated on the exchange. PlusToken has been largely deemed a scam by a majority of the community, hence the dramatic jump from 5th to 2nd had an asterisk mark on it.

Although Coinbase registers far lesser transaction volume rather other exchanges, its significant BTC holdings indicate the presence of strong liquidity with its assets.

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Former Coinbase CTO claims Nakamoto.com is a step towards changing culture

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I understand the rationale behind crypto-anarchy, but I believe in crypto-civilization,” said Balaji Srinivasan, founder of Nakamoto.com, when asked about the reason behind the formation of the now-controversial forum.

Srinivasan recently appeared on a podcast with Messari’s Ryan Selkis and spoke about Nakamoto.com, a project which after its release, has caused quite a stir. Srinivasan’s motivations behind the same stemmed from his interest in educating himself and others about the various gaps known within the community. Nakamoto.com has a list of contributors – right from the many big-shot names in the industry to technical gear heads and according to the website,

“We want to create a venue for quality technical, philosophical, and cultural writing that is of general interest to the crypto community as a whole, for beginner and expert alike.”

Even though the idea of the website is novel to Srinivasan, Selkis expressed his concern about the future, claiming that if/when it explodes, it might bring in similar chaos as Reddit did in the early stages of Bitcoin. However, the former CTO of Coinbase argued that it might act

more like a forum where the community can discuss various assets, with moderators helping keep the conversation going.

According to Srinivasan, social media may get more radicalized as it incentivizes people for their actions in terms of attention or money. He highlighted the culture offered by these platforms and claimed that “there is no guiding culture for Reddit.”

He added,

“Getting the culture right seems like a very good step with the launch of Nakamoto.”

Recently, a prominent Bitcoin Telegram channel changed its settings to read-only mode, with the moderators citing trolls and spambots. In order to put an end to the unhealthy culture, Nakamoto.com was created, as per the founder. However, he was highly criticized for the name, with many claiming that Srinivasan used Bitcoin’s creator’s name to just publicize his new venture.

Peter McCormack, a proponent of Bitcoin, had said,

“Any use of the Satoshi Nakamoto name to promote anything outside of Bitcoin is disingenuous AF!”

However, Srinivasan has received support from a few others like Ran NeuNer who asked the community to celebrate “another credible source that can drive adoption.”

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Coinbase-Led Crypto Ratings Council Plans Transparency Boost as New Members Join

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The Crypto Ratings Council (CRC), the Coinbase-led organization hoping to create a standard for assessing whether different cryptocurrencies are securities under U.S. law, is adding new members.

The group announced Thursday that eToro, Radar and OKCoin US have joined the aspiring industry group looking to streamline how exchanges assess whether a cryptocurrency is a security. The new members bolster the level of technical and legal information that the group can utilize, said Juan Suarez, a VP and general counsel at Coinbase working with the CRC.

Suarez told CoinDesk in a phone call that every CRC member reviews the ratings before they are made public, and each asset is listed by at least one of the group.

The CRC rates assets on a scale of 1 to 5, with 1 denoting cryptocurrencies that do not appear to have the characteristics of a security under U.S. law. Five new assets were rated Thursday: cosmos (ATOM) and livepeer (LPT) have both received a 3.75 score, while dash (DASH) and horizen (ZEN) received 1s and ethereum classic (ETC) received a 2.

In addition, the CRC will refine the explanations on its current list, Suarez said. The ratings themselves won’t change but the reasoning behind whether each asset resembles a security will be condensed.

“It just is a part of routine operations of the company that we’ll be changing,” he said. “We’re refining the bullet points to make them more factual and explicit.”

While its ratings indicate the CRC’s confidence that a particular asset resembles – or doesn’t resemble – a security, the group is not affiliated with the U.S. Securities and Exchange Commission, which to date has only stated that bitcoin and

ethereum are not securities.

As a press release puts it: “The CRC’s analysis is its own and is not endorsed by developer teams, regulators or any other third party.”

Public reveal

As part of its 2020 roadmap, the CRC plans to share details of the actual framework it uses to arrive at its evaluations. Suarez said the group plans to continue providing its analysis for any given asset, but releasing the broader framework may help the industry.

The current lack of transparency around how assets are evaluated was one major criticism of the CRC when the group was first unveiled. Industry lawyers told CoinDesk the initiative seemed a beneficial one overall for the space, but revealing the framework in particular would help non-member companies.

“We’re going to release the framework in the hopes that it creates a useful discussion for the industry and we’re going to recruit more members,” Suarez said. 

There’s also work afoot to address questions raised by current CRC members about the framework. Once those are finalized, the analytical framework will be released.

As part of this effort, several meetings are planned in the coming weeks, according to Suarez. 

“We just want to make sure we release the best and final work product possible,” he said. The plan is to make sure it’s “scalable and easy to use” by legal teams at exchanges.

By releasing the framework, the CRC may be able to create guidelines and best practices for companies and developers to look at. The end goal, according to Suarez, is to help crypto startups more easily comply with existing securities law.

“That’s kind of the North Star that we’re driving to,” he said.

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