
CEO of porn cryptocurrency disappears with investor money - prostoalex
https://nypost.com/2018/01/08/ceo-of-porn-cryptocurrency-disappears-with-investor-money/
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pbiggar
I consider every ICO to be a scam and that this sort of thing will become par
for the course, with basically every speculator in the space losing money -
except those who manage to trick main street investors to cash them out.

However, this is weird: “Within hours they refunded me ethereum with a dollar
amount equal to what I had contributed in early September, but since the coin
has more than tripled in value since then, they kept the rest of my
contribution, essentially stealing quite a lot of money from me.”

Yeah, that's bullshit. They owe you your money back, they don't owe you the
gains that you would have gotten if you had speculated in Ethereum instead.

~~~
palakchokshi
No sorry if you consider ETH to be a currency and payment was made in that
currency then repayment is expected in that currency. Let's say you borrow
US$1000 from a friend. That $1000 would have bought 1000 candies when you
borrowed that money. One year later 1000 of the same candies costs $800
because the USD became stronger. You cannot repay your friend with 1000
candies and say you are good. You took $1000 and your friend wants $1000, not
something that was equivalent to $1000 at the time you borrowed the money.

~~~
pbiggar
I agree conceptually: if both sides consider the transaction to in ethereum-
denominated currency, then there is a logical argument to what you said.

But legally, ETH is not a currency. If they take this to court, the court will
award the original USD price. They bought an asset worth $x. They are owed $x.

When we get away from this funny money "we're inventing currencies" bullshit,
there is a law of the land. An asset was promised, and they are owed the value
of that asset when purchased, in USD.

~~~
derefr
> If they take this to court, the court will award the original USD price.
> They bought an asset worth $x. They are owed $x.

That's not true at all, outside of very specific asset-classes.

A better analogy: let's say we make a trade where I pay you in _land_ , and
you don't give me what I'm owed in that trade. I would expect my _land_ back,
not its dollar-value.

We do things this way, in the case of land, precisely _because_ my land might
turn out to e.g. have gold under it that might make it worth 100x more. If you
conned me out of the land, and then found the gold, guess what? That's
rightfully _my gold_.

Refunds aren't legally equivalent to suing for damages. If someone doesn't
give you a refund for breaking a contract where you transferred an asset to
them, your legal fallback isn't suing for damages; it's _suing to get a court-
order to execute a seizure_ in order to reclaim your property, or the things
it has in turn been traded for by the contract-breaker. (You know, like repo
companies do when you buy stuff on a credit card and then let it go to
collections!)

~~~
pbiggar
Can you explain how you chose land as the equivalent asset class? That doesn't
even seem close to the ETH situation.

~~~
rargulati
For federal tax purposes, virtual currency is treated as property:
[https://www.irs.gov/pub/irs-drop/n-14-21.pdf](https://www.irs.gov/pub/irs-
drop/n-14-21.pdf)

~~~
mdorazio
You seem to be misinterpreting what the IRS means by "property". It is
equivalent to "asset", not to "land". It can mean land, but can also mean a
stock, bond, capital good, etc. that you own. See [1] for example usage.

[1] [https://www.irs.gov/taxtopics/tc703](https://www.irs.gov/taxtopics/tc703)

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raiyu
If you went to a Seed fund and tried to pitch them your idea (whitepaper) with
no working prototype 99 out of 100 times you wouldn't get any funding. After
you have your MVP then they will start asking you for traction. Again 98 out
of 100 times not getting any funding.

Here you can raise a tremendous amount of capital, given that the majority of
seed rounds are $500k-$3MM, and with an ICO entities are raising tens of
millions of dollars to build something that again has no actual working mvp to
show usage.

Doesn't really seem like a sound investment ;)

Tokens have already been in use for a long time with chat sites, I suppose if
one of them decided to re-create their tokens on the blockchain and offer an
ICO they could make more money during this period than actually operating
their service.

At least that would have some basis in reality in that there is an existing
site that is generating revenue, profit, and visitors.

~~~
Alex3917
> Doesn't really seem like a sound investment.

You're conflating the economics of currencies with the economics of companies.

~~~
paulgb
It seems to me like the whole value proposition of ICOs is getting people to
think of a currency as equity in a company.

~~~
raiyu
Not necessarily. Companies still need to charge you for a service, so instead
of buying something directly you buy tokens from them and then use them.

That has been in use by companies for quite some time, just that the tokens
were primarily used to actually work with the companies service, rather than
trade them as an independent entity.

~~~
paulgb
I could see how that could work in theory (and I'll be excited if that's
actually happening!), but aren't most of these ICOs for products that don't
exist yet? It seems like the token buyers take on risk as if they are
investors in the company without getting a stake in the upside.

~~~
raiyu
Any ICO from a newly formed company is entirely at risk. An ICO from Kik or
Telegram is different to an extent in that there is already an entity behind
it.

Of course if there were no "blockchain" they would simply issue tokens like
everyone has in the past, where you exchange money to get a token, that you
can use in the app, and that token is locked into that app. So you can't use
it elsewhere, but it still has some value as long as the app and users exist
since you can sell your tokens to other people if you no longer need them,
assuming that transferring of tokens is allowed / acceptable.

But then it wouldn't be block chain, and it wouldn't get any hype =]

Games have been using this for years and years, so there's really no
difference here.

One side likes to point out the internet bubble, the other side likes to say
well look at the internet now. What's missed though is the massive companies
that were built in the middle, that really changed our daily lives. Amazon,
Google, Facebook, Apple, etc, these companies changed how we live our lives
and then Banks and everyone else realized the benefits of offering connected
services directly to a PC or a phone and again there were tremendous benefits
to consumers and end users.

At the moment, there is no benefit, outside of a large remittance and some tax
avoidance that can be accomplished through cryptocurrency, and certainly
there's no functional product company in the crypto space, outside of the
exchanges which make money through people simply trading currencies, but
returning no real value back to the world.

~~~
starlust2
But aren't all these app creating their own coins? Doesn't that mean the
tokens are only usable in that app?

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Hasz
Is this even remotely surprising to anybody?

All these ICOs are pump and dump schemes at best. This guy just seems to have
ditched the formalities and simply stolen the money.

~~~
cheez
I used to get downvoted for sharing that thought :)

~~~
Hasz
If it's any consolation, I did too.

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indescions_2018
The real tragedy here is that an instant, anonymous, feeless, global
cryptocurrency would form the absolute ideal medium of exchange between online
sex workers and their patrons. Sites such as ManyVids, et al. probably see on
order of $100K per week in transactions. Although the cryptocurrency community
may balk at the association. The benefits of decentralization in this
particular milleu are self-evident. Its possible it may even become the driver
of significant transaction volume growth!

~~~
dna_polymerase
It really would make a perfect fit. Then again site owners might face legal
challenges as there would be no age verification built into the payment
system. I guess there is still space for a player in that market.

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the_stc
This is why we are not launching our ICO until after we have a working
service. We are raising some money in a pre-ICO (Series A) but given the
scams, we felt it was best to deliver before going public.

Of course, we are not a typical ICO. We are selling an unregulated security:
equity in our company and we will pay dividends. We are only going this route
because we are an extrajurisdictional company and traditional fundraising is
incredibly difficult for such a setup.

~~~
wpietri
Isn't "extrajurisdictional company" a contradiction in terms? A company is a
legal vehicle, which requires laws, which requires jurisdiction.

Without a legal company, it would seem that under the law you are just some
individuals conducting business. Is that not the case?

~~~
the_stc
A company is a group of people operating together. That is what our company
is. We are not incorporated in any jurisdiction.

~~~
fragsworth
Unless you and the people in your "company" can pay for your food, rent, and
bills directly with Bitcoin or Ethereum, I don't see how this works. You have
to convert it to fiat somewhere, and that's probably going to be through a
bank. Then you're in for a lot of trouble if you get investigated, audited, or
whatever.

~~~
the_stc
>Then you're in for a lot of trouble if you get investigated, audited, or
whatever

Yes that is accurate. This endeavor relies on me getting our opsec right.

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Ralz
Can we put the FMtokens cryptocurrency name in the title? This may scare
people who invested in other adult entertainment coins such as SpankChain
([https://spankchain.com/](https://spankchain.com/))

~~~
jpatokal
If you invest in something called "SpankCoin", I think getting occasionally
spooked by titles is going to be the least of your worries...

~~~
abrkn
You'd be surprised. Bitfinex has added the "SPANK" token of "SpankChain" to
its markets[1]

[1] [https://www.bitfinex.com/t/SPK:USD](https://www.bitfinex.com/t/SPK:USD)

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puranjay
The number of ICOs I see being advertised all around the internet, all with
the familiar marketing gimmicks ("coin for marijuana! celebrity founder!")
makes me doubt pretty much every ICO.

I'm yet to see a single real-world use case for crypto. Pretty much everything
is hinged on the "promise" of crypto.

BTC itself seems to have zero momentum in actually implementing it for
payments. All the stories I see about it are about its price as an asset.

~~~
pscsbs
I think FileCoin is pretty interesting, and actually based on the economics of
scarcity (file storage) thereby providing some concrete value.

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krylon
When I saw the headline, I thought it was satire.

It happens at a disturbing rate these days. Is it just me growing old(er), or
is the world really becoming more and more unreal?

~~~
debacle
Some sliver of it, to be sure, but most people don't know what a bitcoin is.

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zebraflask
Color me shocked (not that shocked).

On its face . . . just the idea . . . how could anyone look at that one, out
of all of the ICOs out there, and not think twice before sending in their
money?

~~~
jessaustin
Some people, uhhh, _really_ like porn.

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krisives
I'm not surprised. Two out of five of the top coins by market capitalization
right now are fake crypto-currencies. Cardano literally doesn't exist at all
yet and is a white paper and Ripple to be considered a crypto-currency
requires a serious stretch of the imagination. Neither are mineable. Also we
are approaching $2 trillion USDT floating around.

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b0rsuk
I see an analogy with prostitution: prostitutes get away with a lot of
cheating, because their customers are embarrassed to report anything (except
perhaps in countries where it's fully legal).

Therefore, a good rule of thumb is: the more embarrassing a service is, the
more cheaters it will support.

~~~
dmix
Quite the opposite plenty of escorts get fucked around. That’s why they
developed market solutions such as screening clients and widely used black
lists .

~~~
b0rsuk
I don't think this is mutually exclusive. Both parties cheat, because the
topic is awkward and not treated seriously, especially in more conservative
states.

~~~
dmix
True, I can't edit my comment, but yes it happens both sides. The nature of
markets forced to be black. It's not mutually exclusive in any black market,
both sides have to have self defensive tactics outside of the state.

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tudorw
While economics teaches us that past performance is not an indicator of future
performance it concurrently teaches us that history is the only clue we have
as to the future so, what follows is a fictional rewrite of a not so distant
history; Maybe it's canals, not tulips...

"For each cryptocoin, a unique software protocol and accompanying network was
necessary to enable its implementation, and as people saw the high incomes
achieved from sales to fiat currency, mining and transaction fees, coin
proposals came to be put forward by investors interested in profiting from
coins, at least as much as by developers seeking to facilitate egalitarian
movement of financial value and flexible independent storage of wealth.

In a further development, there was often out-and-out speculation, in which
people would try to buy coins in a newly created coin simply to sell them on
for an immediate profit, regardless of whether the network was ever
profitable, or even built. During this period of "coin mania", huge sums were
invested in coin infrastructure, and although many schemes came to nothing,
the coin system rapidly expanded to nearly 4,000 coins in everyday
circulation."

Inspired by the original;

[https://en.wikipedia.org/wiki/History_of_the_British_canal_s...](https://en.wikipedia.org/wiki/History_of_the_British_canal_system#18th_century)

For each canal, an Act of Parliament was necessary to authorise construction,
and as people saw the high incomes achieved from canal tolls, canal proposals
came to be put forward by investors interested in profiting from dividends, at
least as much as by people whose businesses would profit from cheaper
transport of raw materials and finished goods.

In a further development, there was often out-and-out speculation, in which
people would try to buy shares in a newly floated company simply to sell them
on for an immediate profit, regardless of whether the canal was ever
profitable, or even built. During this period of "canal mania", huge sums were
invested in canal building, and although many schemes came to nothing, the
canal system rapidly expanded to nearly 4,000 miles (over 6,400 kilometres) in
length.[1]

~~~
FabHK
A difference being that one can easily make a use case for multiple canals,
but I find it harder to see a case for multiple digital currencies.

~~~
jstanley
There was a time when it was hard to see a use for more than 5 computers.

~~~
tudorw
quite, I recall quite vividly 1994, arguing with my father who was a chemical
engineer working for a blue chip in the city that the Internet had anything to
offer the business world, 'the fax is fine, no one will ever trust anything
that's not on paper', I feel the same about 'blockchain' technology, I've been
following cryptographic currencies since it was science fiction, I've survived
E-gold and Beenz, Mt-Gox and Butterfly labs and emerged into a new wild west.
Winding back the clock not so far, emerging websites were all well and good,
yet it was combining them with the power of databases that really drove the
expansion of possibilities, I feel the same about distributed ledger
technologies, while I would certainly not bet the house on any current
implementation, the novel uses that the technology enables are only just being
explored.

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notadoc
The rampant scam ICOs, nonsensical coins, and other funny business surrounding
the cryptocurrency scene is practically begging for regulators to barge in.

~~~
jhwang5
Yet they haven't, despite the fact that this phenomenon has persisted for over
a year. Either 1) regulators see some practical difficulties in enforcing
regulation, or 2) there is some counter-incentive / counter-pressures /
lobbyists forces out there deterring regulatory action. I wouldn't be
surprised if these scams are allowed to go on for another year.

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EGreg
Can't there be an ethereum contract that refunds everyone their money after 12
months if they don't receive the token?

~~~
quickthrower2
There could be. How does this help though? He'd send you a worthless token.

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arisAlexis
that's what risk/reward ratio means. no scams = 2%. high scam potential means
20000%. every investor (should) knows that

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kensai
Nobody saw that cumming! >_<

