Duy, Author at SynQ • Page 9 of 9

Author: duy

Corruption, Crypto and Cartels, Part III

This is where the pieces come together. Have you noticed how often Bitfinex has been referenced in this story? It doesn’t feel like a coincidence.  

Tether (USDT)

Aside from the multiple incidences of hacks and lost funds, Bitfinex also still have to answer for their sister company’s controversies, Tether. It is no secret that Bitfinex and Tether have received subpoenas from U.S regulators. [1]

Speculations that Bitfinex has been “operating a fractional reserve and is covering over its reserve deficit in complicity with Bitfinex” has existed since early 2017. These allegations are nothing new. [2]

And remember when Bitfinex and CryptoCapital supposedly severed official relations? Not even a few months later, Bitfinex is still associated with CryptoCapital, and the relationship has not improved for the better. 

According to statements in April 26, 2018, Bitfinex sent $850 million of customer and corporate funds to CryptoCapital Corp., and along the way it was “lost”. Representatives of Bitfinex and Tether reported to the NY Attorney General’s office that CryptoCapital claims the funds were seized by Portugese, Polish, and American government officials.

An official confirmation submitted by Bitfinex stated that their respondents did not believe CryptoCapital’s representations that the funds have been seized.

Meanwhile, the $850 million loss severely impaired Bitfinex’s ability to process funds and withdrawal requests as “CryptoCapital, which held all or almost all of Bitfinex’s funds, refused to process customer withdrawal requests and refused or was unable to return any funds to Bitfinex.”

This clearly caused Bitfinex major difficulties and processing delays, despite official denials from the company’s representatives.

Allegedly, funds from Tether’s reserve were then used to make up the shortfall, but neither the loss nor Tether’s fund movements were disclosed to customers and investors. If true, this would very much validate the speculations of 2017. [3]

It is also a testament to the fact that CryptoCapital has never had a good public reputation. CryptoCapital never had the performance track record of being the most reliable financial processor either. Complaints regarding speed and reliability has been a common occurrence and regularly affects related exchanges. It is very questionable how they earned the reputability needed to associate with such a wide network of exchanges. [4]

It would also explain Bitfinex’s history of hostility towards critics, especially ones who would question the secrecy of their banking processes, unsurprisingly. The company is known to respond defensively to negative comments by threatening accusers with legal litigation, instead of transparency. [5]

But not just Bitfinex, remember that CryptoCapital’s very well connected network. Their website names among its customers the now-defunct QuadrigaCX and Coinapult, among others. And according to the Wayback Machine, past customers also included exchanges like Kraken, BTCC and Bitt.

Yet it seems as time progresses, the number of CryptoCapital’s allies dwindle.

Most have met their ends under questionable circumstances. Not just exchanges such as QuadrigaCX and Coinapult (whose office was reportedly across the hall from CryptoCapital), but internal members as well in more recent times.

Next week, we will conclude and discuss the implications of the entire picture.


[1] https://cointelegraph.com/news/bitfinex-tether-get-subpoenas-from-us-regulators

[2] https://cointelegraph.com/news/unconfirmed-polish-prosecutors-seize-400-mln-amid-allegations-bitfinex-is-implicated-in-fraud

[2] https://www.bloomberg.com/news/articles/2017-12-05/mystery-shrouds-tether-and-its-links-to-biggest-bitcoin-exchange

[3] https://www.coindesk.com/bitfinex-ny-prosecutors-tether-850-million-allege

[4] https://github.com/ccxt/ccxt/issues/4826

[4] https://bitcointalk.org/index.php?topic=5118599.0

[4] https://bitcointalk.org/index.php?topic=2822223.0

[4] https://bitcointalk.org/index.php?topic=2810707.0

[5] https://www.coindesk.com/bitfinex-vs-bitfinexed-exchange-hires-law-firm-challenge-critics

[5] https://cointelegraph.com/news/worlds-largest-bitcoin-exchange-bitfinex-threatens-critics-with-legal-action

Corruption, Crypto and Cartels, Part II

Laundering money is one of the hardest things for cartels to do…so we are told.  As Part 2 unfolds,  we dig into the “potential” cartel involvement and start to paint the larger picture of how this is all intertwined together.  

Cartel association

On April 7th of 2018, reports originating from Poland sources informed readers that Polish prosecutors seized €400 mil from two companies, referred to as company M and company C, involving a long link of individuals and eventually leading to Bitfinex; and potential association to cartel involvements.

[1] The story began when the Belgian Ministry of Foreign Affairs was in the process of building a new embassy in the Democratic Republic of the Congo. Company M, owned by a Canadian of Panamanian descent, impersonated the building contractor and intercepted the $400mil payment. Through an investigation with Interpol, it was revealed that company M was associated with company C, owned by a Colombian with Panamanian citizenship, who was in turn associated with a large online exchange of cryptocurrencies.

Polish authorities reported that the two companies specialize in money laundering. “The scale of financial operations indicates that these bills were to hide money from smuggling cocaine to Europe. The companies were also used for large scale scams. Criminals have hidden their operations, also exchanging money for cryptocurrencies, obliterating traces.”

The funds from the two companies were deposited at a branch of one of the banks in the accounts of the two companies registered in Poland, which is coincidentally the Banku Spółdzielczym w Skierniewicach – the bank where Bitfinex is registered. Surprise!

A forum user admitted to being a interrogated witness in the case, and that the company has paid them used a Bitfinex account, further strengthening the allegations. [2]

Now why would Bitfinex need to pay a witness? And what does that have to do with CryptoCapital? [4]

Members of CryptoCapital Management

Well, when Bitfinex opened its Polish bank account in Nov 2017 with the reported intention of trading euro pairs, the company name under the account was registered as Crypto SP, and as located in Panama. This company, Crypto SP, is owned by Crypto Capital Corp, the director of which is the very same Ivan Manuel Molina Lee.

But according to them? Nothing! CryptoCapital has since denied affiliations to the scandals and associated materials, contents, and media related to Bitfinex has subsequently been removed. This was not the first incidence of CryptoCapital removing bad publicity either. [3]

So the reality is we have two companies known for money laundering putting their cash into the same bank as Bitfinex.  Furthermore, one of the owners of these companies is affiliated with a large online exchange and also has Panamanian citizenship, where CryptoCapital is based out of.

If you think the picture can’t be clearer, wait for Part 3…






Corruption, Crypto and Cartels, Part I

For the next few weeks we will be releasing the first investigative piece from SynQ I/O. We will be detailing this story with all of what we know in multiple releases with public sources included.  Given the nature of this story, we will be adding our own opinions, conjecture, and potential implications along the way in separate releases so we can keep the facts and opinions clearly separated.

Part I

Nobody would be surprised if cryptocurrencies has been used for nefarious means, the same could be said for any measure of currency that exists. But what if you found out the industry has been systematically exploited to blatantly launder cartel cocaine money right underneath our noses (pun intended)?

After all, the Devil’s greatest trick is convincing the populace he doesn’t exist.

CryptoCapital – A Shady History

Mathias Grønnebæk, an early ETH developer, was one of the earliest people who noticed that a number of crypto companies are connected to a remote company. CryptoCapital, a fiat banking platform, is responsible as the banking/payment processor for a number of platforms, namely Decentralized Capital, Bitfinex, QuadrigaCX, CEX.io, etc.

Yet they are relatively anonymous, with only a few known details of significance; such as the fact that they are a Switzerland-based company and headquartered out of Panama.

Anonymity is not a crime, but for a company with smudgy associations, it’s a huge red flag, especially when a number of associated companies shares similar sketchy traits. Where there is smoke, there is usually fire. [1]

CryptoCapital’s conception can be traced back to Reddit user /u/Bitfan2013, who has divulged a few key details throughout his post history. It is known that the user is from a family of bankers, and were involved with the Panamanian acquisition of Havelock 5 years ago as well.

Havelock Investments, was the investment platform used to IPO Crypto Financial, the original name of CryptoCapital. Once a popular choice for users to invest in crypto projects, it has since gained a reputation for associations to security fraudulent projects. It is rather curious that a company has to circle around and buy out it’s originating platform, perhaps as an attempt to control sensitive information.

[2] The trail goes further, as CryptoCapital is also linked to a Polish company, Crypto Sp. Z.O.O. This company secured and provided a banking account for both Bitfinex and CEX.io with a Polish bank, Bank Spółdzielczy w Skierniewicach, which translates to Cooperative Bank in Skierniewice.

For scale reference, this smaller sized bank only had assets of around $13 million in 2011, making estimated profits of ~$5 million. Coincidentally, it’s also the equivalent of what Bitfinex handles in around one hour.

Crypto Sp. Z.O.O’s ownership can be traced back to CryptoCapital , and the director of both Crypto Sp. Z.O.O and CryptoCapital is one Ivan Manuel Molina Lee, who is thought to be an accountant, or a consultant. This individual is thought to be a “shell” CEO for hire, a scapegoat for those who would want to mask their identity.

While the working the history of the company goes further, details are surfacing as evidence of money laundering and nefarious activities have been coordinated by the individuals behind CryptoCapital.

Some of our questions

  • Why would a Swiss based company be headquarter in Panama?,
  • Why the need for multiple ‘shell’ corporations
  • Why so anonymous?

Over the next couple of weeks, we’ll be publishing our findings when looking into the answers of these questions, and what we’ve found.


Why Alt Season Ain’t Happening

There has been a considerable amount of chatter in the cryptosphere in regards to the return of “Alt Season”. Undeniably, there has been a noticeable increase of consumer interest and sentiment for cryptocurrencies. However, we are of the opinion that this Alt Season isn’t going to happen the way everyone thinks it is.

There are two main reasons for our negative outlook on Alt Season:

  1. Technological Development and Adoption
  2. Macro Economic Influences

In this report, we will explain what Alt Season is, why people think Alt Season happens, and why it likely will not happen the way people expect in 2019 and beyond.

What is Alt Season?

It is generally agreed upon that “Alt Season” is defined as the period in which the majority of alt coins rise in BTC and USD value quickly, and outperform BTC in terms of price action. We have seen this phenomenon many times throughout the history of cryptocurrency trading, but very few understand the driving force behind it.

There has been one main Alt Season before happening in 2017. To put it simply, BTC’s price was rising rather rapidly, but its market dominance began to falter in relation to other alts. Meaning, more volume was flowing into alt coins instead of Bitcoin. Bitcoin market dominance went from above 90% to around 30% in a matter of less than 12 months. This allowed alt coins to increase in BTC and USD value. This is not the main factor, but it was one of the largest contributing factors that most industry veterans look to, today. The picture below outlines the time period in which this happened.

It is important to note that during this time there was an increased interest in alt coins because of the 2017 ICO boom, as well as the fact that margin trading had not been released yet. The large amount of money flowing freely in the market to buy alt coins, coupled with the inability to bet on the future of Bitcoin contributed to a heightened interest in alt coins to increase gains outside of BTC.

Once futures trading was introduced, attention switched back to Bitcoin and has been growing steadily since then. 

The picture below outlines when the ICO Boom happened, as well as when Futures Trading began.

Why Do People Think Alt Season is going to happen

People generally think that Alt Season is imminent because of one main factor: shared bullish sentiment – it’s the general consensus that we are in a bull market. But does that mean because we’re in a bull market, everything should be going up, right? Not exactly.

Remember that Alt Season is when alt coins generally perform well in BTC value and USD value. Another reason people think Alt Season is coming is because a few top alts are actually performing well in terms of USD value. ETH, LTC, and BNB can be included in this list. But, one main point that is missing is the fact that alts are not gaining much in BTC value during this run up. Most alt coin traders tend to track their gains in BTC. So, the USD increases are not really in the same category here.

Most people expect Bitcoin dominance to cool off and gives alts room to “moon”, as the hip kids like to say. But, as we explain further, there are many reasons for Bitcoin dominance to stay at its current levels of 60%+ or go higher.

Why Alt Season Won’t Happen

As we explained above, there are two major reasons why we think Alt Season won’t happen:

  1. Technological Development and Adoption
  2. Macro Economic Influences

Technological Development and Adoption

All alt coins created pre-2018 and beyond are mostly all projects founded by teams with a vision to use blockchain technology and cryptocurrencies to solve needs and problems in the 21st century. But, the promise of delivery has not been reached by many of these projects and their teams.

Many coins have fallen short of their goals, burned funding too quickly, or witnessed the majority of their funds that they raised reduced to a fraction of the value of when it was raised due to the crypto collapse in early 2018. These issues have plagued most teams, many of which are run by unproven founders who held millions in their wallets waiting to be spent. The market was dominated by pure speculation when alts were booming, but now things are beginning to get a bit different.

The times are now changing, and people are focusing less on promise, and more on delivery. The coins that deliver will eventually see a rise in value, as those who invest will invest in the outcomes of the team’s achievements. Things like product delivery, partnerships, clients, and putting their finished products in the hands of those it was built to serve are now major factors. These factors are what investors will now look for.

What this does is put alt coins in buckets of “Haves” and “Have-Nots”. This theme is not new in the cryptosphere, but it is one that is becoming more important.

The Haves will be coins like the ones I described above. LTC, ETH, BNB, and EOS would be examples of Haves. These coins have seen product delivery, investment, adoption, and verified use cases.  The Have-Nots will be coins that have done the opposite. Alt coins like XLM, ETC, DGB, and BSV are examples of Have-Nots. These coins have not seen significant development, adoption, or wise spending of capital. Don’t even get us started on Craig Wright.

2019 and 2020 will be an interesting period of time for the theme of “technological development and adoption”. We will see the market begin to look beyond speculation and promise, and begin to look to actual delivery. Core themes include:

  • Token valuation: Are the tokenomics clear? Does the network truly need the token? How does the token scale for mass adoption?
  • Market Leaders: Does one or a few coins lead their market vertical?
  • Product Delivery: Is the team delivering on their road map? Are customers or clients using their product?
  • Community: Is the community active? Is it growing? Is it toxic or helpful?

We will wait for the data to come in, but you can already see who the Haves and Have-Nots are. Haves are already winning the battle in terms of fighting for the attention economy’s focus, with Bitcoin being the clear current winner.

Macro Economic Influences

There are many major macro economic influences at play right now that are contributing to the current Bitcoin run up and subsequent calls for a bull market. Other than the fact that Libra put cryptocurrency on national news headlines, we have been seeing a global push from a plethora of regions outside of the US and Asia clambering to buy Bitcoin at scales never seen before.

One does not have to look far to see that a global trade war, threat of economic collapse in South America, poverty and corruption in Africa, and a dollar/oil war with Iran and the Middle East is on the rise. These factors push people into commodities, which BTC happens to be classified as, under a recent CFTC ruling (https://www.cftc.gov/Bitcoin/index.htm). This global attention and demand has been contributing to Bitcoin’s increase in price, as more volume comes in from around the world.

As global distrust for fiat currency and for the dollar continues, Bitcoin and other cryptocurrencies have become viable options for the impoverished who are suffering from the poor decisions of the government who controls their country. Venezuela is the easiest example to call from, but Brazil is gaining a close second. Iran had a massive increase in Bitcoin interest, which their country quickly realized and tried to put a stop to, but you can’t put a stop to Bitcoin or the Internet, so there will always be another way. Also, we have seen a large amount of interest continuing to grow from Africa.  These factors are important as we look to global mass adoption.

As you can see below, LocalBitcoins has been growing in volume and interest from impoverished countries from around the globe. Their volume is now near $50 million per week, putting them in the ranks of exchanges like Bitfinex.

There are four major types of consumers we will define to summarize this point.

  1. Crypto buyers/retail investors who have been here pre-2019
  2. New crypto buyers/retail investors showing up during 2019
  3. Institutional and Family Office buyers
  4. Impoverished Nations and/or Nations suffering political/economic turmoil

For this point we assume that consumer group #1 will be alt coin buyers if Bitcoin market dominance begins to falter. This consumer group will likely take a gamble to throw more fiat and/or bitcoin at alt coins in hopes of gaining more BTC value.

Consumer group #2 will likely buy alt coins if the bitcoin dominance begins to falter, as well, though not with extreme hast. They are still nascent and uneducated, so they may take less risk as a full group.

Consumer group #3 will likely not buy alt coins for a few reasons. Institutional and family office buyers require a risk averse strategy that comes with market liquidity and custodianship services. This consumer group will likely focus solely on Bitcoiin with potential diversification into other Top 5 alt coins that come with custodianship services and lots of liquidity for entering and leaving the market. They are more bound by the traditional rules of investment and the laws that come with it, as well.

Consumer Group #4 will likely only focus on Bitcoin, and maybe Litecoin, as we have seen in countries like Venezuela. Nations under suffering are not in this for pure investment or trading strategy. They are buying crypto to stash money away, pay for goods and services, and survival. Their money’s no good, so they need a verified alternative. They require trust and use case. Something that only Bitcoin can offer them today.

So, if 2 out of 4 consumer groups will never turn to face alts, and a portion of the other 2 consumer groups are unlikely to just jump into alt coins in their full capacity due to the risks they pose, you are left with a small consumer base to actually invest in these alt coins. Sure the market caps are low, but you need investment at scale to repeat the Alt Season of 2017. That is unlikely to happen with the macro economic factors at play


To summarize the above, we believe Alt Season will not happen in the caliber that it has happened before due to two main reasons: Technological Development and Adoption, and Macro Economic Influences. These two reasons combined create a negative market sentiment and outlook in regards to alts.

The alt coins that will perform well will be the ones that see promise in terms of product delivery, market adoption, becoming a leader, proving token valuation, and growth in community. Without these factors, alt coins will surely suffer long term.

Due to increased tensions globally, economic collapse in certain regions, and a decrease in risk appetite, we expect high cap coins, with Bitcoin being the leader, to beat most other coins in the market. There is no interest in low cap alt coins that have no adoption or cannot be used by the consumers who desperately need an economic alternative to their fiat currency, or by the wealthy investors now diversifying their portfolios with cryptocurrencies.

Pirate Chain (ARRR)

Komodo was undoubtedly one of the most underrated cryptocurrencies of 2018, even though fundamentally it was one of the soundest projects. The security, privacy advantages and impressive 10k tx/s offered by the KMD platform went largely unnoticed by the market. However, Komodo wasn’t entirely ignored. Within the community and discussions present on the KMD platform were a handful of capable individuals that eventually conceptualized a new and better cryptocurrency, ARRR.


ARRR, or also known as Pirate, is an independent blockchain built as an asset chain to the KMD platform. Designed as a combination of ZEC and XMR, Pirate looks to improve the privacy and security features of XMR whilst fixing the fungibility problem of ZEC through the enforcement of forced shield-transactions.

The issue is that transactions from shielded balances to transparent balances are often the cause of decreased fungibility, as it is possible to identify coin mixing patterns. Concerns are also had about coins being “tainted” by affiliations to past transactions. The solution is to completely prevent this from happening.

This means that Pirate is a forced shield-transactions (z-transactions) only blockchain, making transparent transactions impossible on the Pirate blockchain. The ultimate objective of the project is to be the next-gen privacy cryptocurrency with completely anonymous transactions, except for mining rewards and notary node logs.

As an asset chain of the KMD ecosystem, Pirate also inherits much of Komodo’s features such as Zero Knowledge Privacy and delayed Proof-of-Work (dPoW). Also included, is the ability to backup asset chain records into the Komodo main chain and record them on as a hash on Bitcoin. This effectively enables the asset chain’s records to be then included in the backup that is pushed into the protective hash rate of the main Proof-of-Work (PoW) blockchain, Bitcoin.

This is made possible due to KMD being a fork of ZEC, which was a fork of BTC. In this way, the asset chain records can be protected by the largest hash-rate available on one blockchain. To compromise an asset chain that is employing Komodo’s dPoW protocol, the attacker would have to destroy all existing copies of the asset chain, all copies of the KMD main chain, and the accompanying PoW network (Bitcoin) into which the dPoW backups are inserted.

A visualized schematic of dPoW protocol.

Komodo’s security service is performed by notary nodes, chosen through a stake-weighted vote. These notary nodes have the option to switch notarization to another PoW network besides BTC if needed. For an example, in the event where worldwide miners’ hashing power changes to that of another PoW network, or the cost of notarization becomes unsustainable.
In addition, since KMD derive from ZEC and BTC, all features included in the Bitcoin protocol and Zcash parameters are also available on ARRR. This includes Zk-SNARKS, the top-tier standard for blockchain privacy at this time.

Even for individuals with the utmost priority for privacy will require the need for receipts to verify transactions, therefore Pirate will utilize view keys for this purpose. With view keys, one can prove they paid a certain amount of coins to a certain address. A node processing an incoming viewing key for a z-address can view all past transactions received by that address, as well as all future transactions sent to it. The viewing party cannot spend any funds from the address.


According to information included in the Pirate whitepaper, current block-time is 60 seconds, using the Equihash Proof-of-Work mining algorithm. The maximum supply is approximately 200 million ARRR, with a speed of 6-26 TPS and a transaction fee of 0.0001 ARRR. 

The emission schedule for ARRR coin.

Included is also an emission schedule of the Pirate cryptocurrency, halving in block rewards every 388885 blocks, equating to an estimated 270 days per reward period.


Though early in its infancy, the Pirate team has been able to facilitate the use of z-address deposits and withdrawals with the exchange DigitalPrice and successfully launched coin trading at the end of October 2018. And because it is an KMD integration, Sapling is planned for mid-December 2018, enabling future development of Point-of-Sale (PoS) integration, hardware wallet, Web Shop Plugins, and mobile wallets through Simple Payment Verification (zSPV). The development of a Pirate Foundation is also planned for Q1 2019, with hardware wallet integrations being estimated for Q3 2019.

The Pirate team has already set themselves apart from the existing competitors due to it’s open-sourced, community approach and the progress they’ve achieved thus far. For a market with a waning trust in the current cryptocurrency teams, Pirate may be the fresh breath of air private-centric consumers are looking for. The pioneers of ARRR are enthusiastic and looking to continue to contribute and/or improve the project at a pace not seen by very many other altcoin projects.