Well, your theory does not match the newspaper articles that I have seen.  They specifically say mining contracts (not exchange accounts) of 400'000 HKD each.  So if they really had 3000 customers, at a minimum those people lost 150 million USD in real money.  If the average client had 2.5 such contracts, than it would be ~380 million USD.



Yep, just like MtGOX.  I recall someone boasting on this thread of having deposited 50'000 USD on MtGOX when it had already suspended withdrawals, to buy those cheap BTC (200 USD each IIRC, when the market was ~800).

EDIT: A scam that netted hundreds of millions and resulted in no convictions so far is worth trying again, no?

You mean, ". "?

Well, if each contract was 400'000 HKD minimum ( = 52'000 USD = 230 BTC), and there were 3000 clients, then the scammers stole at least 150 million USD of real money from their victims.  At current prices that would be 680 kBTC.

It may be bigger than MtGOX, because we do not know how much MtGOX clients actually lost.  The 660 k BTC / 500 M USD figure is what they thought they had in their accounts, which (as in Madoff's case) may be a lot more than what they actually put in.

Yes, you have seen this article by now, I suppose:
Why the Chinese can't get enough of Bitcoin - despite bank ban
Peter Ford, Christian Science Monitor, 2013-12-06
http://www.csmonitor.com/World/Asia-Pacific/2013/1206/Why-the-Chinese-can-t-get-enough-of-Bitcoin-despite-bank-ban


No news on the SMBIT thread, and Google does not seem to find anything either.  I suppose that it is still at Stage 4 in the Karpelès Scale.

According to Barry's tweet, they have suspended redemption (withdrawal, liquidation) since 2014-10, while they are waiting for SMBIT shares to be listed at OTCQX -- an exchange for non-standard assets ("pink sheets" some sources have called them).  SMBIT had promised investors that such a market would be available by April 2014, IIRC.

I don't understand why they have to suspend redemption for that reason.  Perhaps they intend to suspend redemption indefinitely, so that the only way for clients to get their money back will be to find even greater fools more optimistic investors?

Anyway, I suppose that their clients were duly warned that such a situation could arise, and SMBIT has told them the reasons for the suspension  Unfortunately, it seems that clients have to sign an NDA of some sort, and cannot reveal the content of the mail they get from the fund.

I would expect that too.  It probably was like MtGOX, the Madoff ponzi, or the silver scam of James Ray Houston, father of BFL's CEO: the clients invested X, their account balance was (say) 5 times X, but the site's coffers were actually empty.

From that distance, wouldn't you miss the toe?

Gourmet popcorn:

The Race to Replace Bitcoin
An epic battle between two bitcoin 2.0 contenders grips the crypto world
By Michael Craig Observer/Innovation, 2015-02-05 8:00am
http://observer.com/2015/02/the-race-to-replace-bitcoin/

EDIT: Although it is about two altcoins, the main characters are the Gods of the Bitcoin Pantheon...

The math does not seem right.  If I understood the translation correctly, 30 victims sought the police and some losses (the largest ones?) were 10 million yuan.  That would be 300 million yuan, not 3 billion.  

Perhaps the reporter goofed?

Perhaps they extrapolated to 300 clients?

Number digits in China and Japan are traditionally grouped by fours rather than by threes, so that "2 million" is written "200 万" where 万 means "ten thousand".  Perhaps that is the source of confusion, either by the reporter or by Google Transalte?

EDIT: forget it, see the post by @jl2012 above

Would you perchance know whether the fruits of the Eastern mistletoe of North America have a sticky pulp, like those of the European mistletoe?

"Mycoin.hk", a bitcoin thing in Hong Kong, apparenly closed without warning and owners disappeared with all clients coins.  Losses seem to be about 3 billion yuan, or 500 million USD -- on the same level as the MtGOX collapse.

The nature of mycoin.hk's business was not clear.  It apparently involved mining, and perhaps some Ponzi-like scheme.  I could not tell whether it also worked as a live exchange.

Article in Chinese:
http://hk.apple.nextmedia.com/news/art/20150208/19034053

Google translation:

EDIT: See also the reddit thread.  One comment in there claims that the report is incorrect.

I seem to recall Tony Gallippi denying that in an interview, I am not sure.

In that wallet snooping site we can see them collecting hundreds of small BTC deposits (many less than 1 BTC) and occasional 500-1000 BTC deposits (some identified as coming from KnC and other miners); and sending lumps of 500-1000 BTC, every day or so, to Bitstamp and other wallets.  I suppose that they are not dumb enough to leave large sums on exchanges, so they must be selling at the same pace, at whatever price.

It is a pity that most bitcoin companies are privately financed, so they don't have to publish quarterly audits or other official financial statements.  Bitstamp published a one-page report covering the year up to Oct/2013, containing the absolute minimum info required by UK laws (Shouldn't they be publishing the 2014 one now?).  Last year, an australian bitcoin exchhange and mining operation published somewhat more complete financial reports.  The current state of MtGOX spoils was published by the bankruptcy trustee.  Have there been any others?

Yeah, how stupid are people for not seeing that.

I was asked this soon after I started posting here, and my answer is still basically the same:

Bitcoin will be a success (as a currency) when a significant number of people spontaneously choose it to pay for legal purchases, because it is better for them than the alternatives. "Better" may include cheaper, safer, simpler, faster, or any other operational advantage.  But I would not count people who use it just out of curiosity, because they are invested in bitcoins, for political/ideological reasons, or because they are interested in the technology.

I don't see that happening yet.

However, since then I have come to realize that bitcoin was never intended for large-scale use, but only to test whether the solution proposed by Satoshi to the "distributed ledger problem" (block reward + proof-of-work + longest-chain-wins) would indeed motivate the miners to maintain the ledger and protect it from malicious attacks.  The experiment has been running for 6 years, which is remarkable; but it exposed one flaw -- the centralization of mining -- which may require another genial idea to solve.

Some merchants may do that (just as some merchants actuall accept bitcoin directly, without BitPay's intermediation).  But I am pretty sure that Dell, Microsoft, Wikipedia, etc. do not.  Handling bitcoins requires extra work from accoutants, which is not worth the amount of payment received.  Losses from bitcoin price variations (as Overstock and Fortress suffered) would have to be reported in the quarterly reports, and would be hard to justify to stockholders.


SIgh.  No, it is not the same thing.  Dell USA does accept USD, because you can wire USD to their bank account directly. They do not accept CAD,YEN,CHY,GBP nor BTC, and you cannot send them any of those currencies directly; you must send them to some other company, that converts them to USD and sends the USD to Dell.

See this post

https://bitcointalk.org/index.php?topic=150803.msg9916541#msg9916541

SLoK is the hated admin of the BFL forum, believed to live in the Netherlands.  BFL victims identified his blockchain address and noted 11 payments from that address to the SilkRoad address.

SLoK claims that he just sold the biotcoins that he mined to a buyer that he found through LocalBitcoins.  SLoK claims that he was not aware that the address the buyer gave him was not the buyer's own, but was SilkRoads.

Whether that story is true or not, it is an example of the risks of the "anonymous" ledger.  Namely, it is "anonymous" when it shouldn't (when you need to know where you are sending the bitcoins to) and is not anonymous when it should (when others want to know what you have been buying).

It is not just a matter of definitions.  

Dell USA has bank accounts.  In those bank accounts there are only dollars, not JPYs or BRLs, and one can only deposit dollars in them.  dell does not have a receiving blockchain address, or a bitcoin-denominated account in some bitcoin service.  They have an account at BitPay, but they do not keep bitcoins there.  Like most merchants that "accept bitcoin", when a customer chooses to "pay with bitcoin":

* the customer is redirected to a BitPay page, and the merchant tells BitPay the price in USD;
* BitPay computes the amount of bitcoin needed and displays that to the customer;
* the customer issues a blockchain transaction request that sends the bitcoins to BitPay;
* BitPay checks whether that transaction request is valid and has propagated to enough nodes;
* Bitpay tells the merchant that the customer paid the specified USD amount;
* the merchant trusts Bitpay and tells the customer "payment received, purchase successful";
* at the end of that day, Bitpay wires the USD amount to the merchant's bank account;
* eventually the bitcoin deposit into BitPay's wallet is confirmed by the network;
* sometime later, Bitpay sells those bitcoins to replenish their USD reserves.

Note that at no time the merchant had possession of the bitcoins. 

Indeed, it is not known whether there are other Bitpay incoming addresses that are not included in that "wallet".

The site that tracks the "BitPay input wallet" scans the blockchain for transactions that have two or more inputs, and assumes that all the input addresses of each transaction must all belong to the same person or company.  That criterion defines clusters of addresses with same owner, that the site calls "wallets".

Periodically, Bitpay merges all the amounts that it received from customers and sends them to Bitstamp or other buyers.  The site sees those transactiions, and then identifies all the input addresses as belonging to the same owner.  Then it  is easy to tell that the owner is BitPay.  

That criterion may indeed miss some input address that is owned by Bitpay but is never combined with other known Bitpay addresses in any transaction.  However, just by looking at the addresses that were identified as Bitpays, we get 1000 to 2000 BTC per day, which matches the "1 million USD per day" that BitPay claimed to process in May 2014.   One can also find in that wallet some famous payments, such as the 0.5 M$ house bought by Josh Zerlan of BFL  and the 1 M$ downpayment by HashTrade(?) to BFL.  So, that "wallet" does seem to include most of what BitPay processes.

EDIT: The CoinJoin anonymizing service combines input addresses from different people in the same transaction, and therefore breaks that clustering criterion.  There is a huge "wallet" called "MtGOX and others"  that seems to comprise all addresses that were once used in a CoinJoin transaction.

Dell USA, AFAIK, accepts only dollars.  Dell Brazil accepts only reals.  If you want to pay them with some other currency, you must find a way to convert them to USD or BRL, respectively, and send those to the companies.

I have used my Brazilian credit card, whose bills I pay with BRL, to pay for hotels and other stuff in the US, Europe, Japan, etc; but it was always the credict card company that exchanged my BRL for USD, EUR, JPY and deposited these to the merchants' bank accounts.  Those merchants definitely did not "accept BRL", anymore than Dell "accepts bitcoin".

I don't know whether BitPay is profiting.  

IIRC, when they started, they offered merchants a free entry-level plan, that allowed only some small volume.  Merchants who exceeded that volume would have to upgrade to a plan with a monthly fee.  But at some time they dropped all fees.

Even if they are processing 200 million USD/year of e-payments, and taking a percentage of that somehow, their revenue must be only 3-4 million USD/year.  Their payroll alone must be more than that.  

Didn't they lay off some staff recently? Anyone remembers how much they paid for the Bitcoin Bowl?

So perhaps they are still operating at a loss, burning their venture capital, hoping for a substantial traffic increase.  Which, again, would explain why they are not releasing any meaningful numbers.

Of course.  The currency that they accept is one thing, the means through which they receive the currency is another thing.  Last time I checked, Dell USA accepted only dollars, but you could send the dollars in one of several ways: PayPal, credit card, bank wire, old-fashioned checks, -- or BitPay.  Likewise, Dell would pay refunds only in dollars, even if you paid with BitPay.


Either PayPal will do the conversion to dollars and send dollars to the merchant, like BitPay does; or most merchants that accept payment via BitPay will not accept bitcoins through Paypal.