Looks like the Cyphermine.B1 bonds were purchased on September 10, 2013 so in a few weeks Deprived will be able to redeem them for face value with no penalty. Maybe that is what he is waiting for. If he can redeem the bonds he can pay all back dividends and close down the fund cleanly.
I hope he uses this opportunity.
1. Deprived's disappearance from the community
2. CIPHERMINE is either a fraud, a scam, or just plain not honoring redemption requests:
Hi everyone,
My name is Phillip Monk, and I hold about 1500 CIPHERMINE.B1 bonds. I live in Australia. I hold some legal qualifications, but I am not a lawyer.
In March this year I gave Kate 3 month's notice that I wanted my bonds redeemed. She acknowledged my notice.
In early June, the redemption date came and went. I received nothing, so I asked Kate what the problem was.
She told me that Ciphermine didn't have the funds to pay me back. She cited a number of reasons for not paying up, including exponential difficulty, delayed hardware and an increase in the price of BTC.
She said that she was working out what to do, and asked me to keep the information confidential. I waited for a while, but heard nothing. I noted that during this period Ciphermine paid at least one dividend to its shareholders on June 29, and apparently put new hardware into service. Presumably Ciphermine are still operating that hardware.
In July I engaged a lawyer based in the UK to request payment. Since then, there has been some back and forth between her lawyer and mine, but essentially she has not conceded liability to me, nor has she offered any payment.
My analysis of the situation (which Kate's lawyers have neither confirmed or denied), is that the founders of Ciphermine (Kate, Giles Russel, Ross Martin and Simon Weald) were not operating under a corporate structure at the time the bonds were available on btct.co in September and October last year. Therefore, I believe that the bondholders are in a contractual relationship with the founders, and the founders are personally liable to the bondholders for the value of the bonds.
The latest response from her lawyer to mine was fairly terse and claimed that Kate and the other founders were relying on an exclusion clause which was (I presume) listed on the asset details page for CIPHERMINE.B1 on the btct.co website:
Warning
CipherBond is a virtual security whose shares (bonds) and dividends are to be quoted and distributed in a virtual cryptocoin commodity (Bitcoin) which is not recognised as a legal security in any jurisdiction. It is Ciphermine's intention to uphold this shareholder agreement, but we, Kate Craig-Wood, Wood Technology LLP, Giles Russell, and all other individuals and legal entities associated directly or indirectly with this security, are in no way liable for any losses you may incur in connection with CipherBond or CipherMine.
Further, be aware that the BTC Trading Company is unregulated and legally considered an online game. Should something go wrong you have no recourse in law. CipherMine is a virtual company and the management team, staff and its associated (sic), are not bound by law, corporate or otherwise, nor are we qualified to provide financial advice.
DO NOT INVEST MORE THAN YOU CAN AFFORD TO LOSE!
So, does she get away with it? I don't think so. There's a bit of unqualified legal opinion coming here (i.e., it's mine).
UnfairnessThe clause that Kate is relying on is void for unfairness. It basically permits Ciphermine to take the funds raised and not pay anything back.
Under the
Unfair Contract Terms Act 1977 a party cannot rely on an unfair term to avoid liability (s3). From studying the Act I would appear to meet the definition of a 'consumer' (s12) and the clause would appear to fail the 'reasonableness' test in s11 (basically as it would deprive me of the right to enjoy the benefit of the contract if it was relied upon, and it was not reasonable for Kate and the other founders to expect me to think that they would be unable to pay me back). Indeed, Kate herself said:
There should be no losses associated with the bond. CipherMine will take all necessary measures to ensure that it is repaid, as any company would in such a situation. The ultimate back-stop would be to sell the assets themselves, though by then even in a dire scenario we should have been able to repay most if not all the face value from the mining yields. That they are secured by the assets purchased should only ever come into play if something went disastrously wrong (ie. CipherMine had completely exhausted its funds attempting to honor the loan).
Has she taken all necessary measures to ensure the bonds were repaid? No. She has apparently continued to operate Ciphermine after she refused to redeem my bonds (new hardware was received on 14 June apparently), and has even paid dividends to her shareholders (last one was paid around 29 June).
Onerous clauses and reasonable noticeI also had a quick look at common law. Cases like
Interfoto Picture Library Ltd v. Stiletto Visual Programmes Ltd [1989] 1 QB 433 have held that reasonable notice of onerous clauses must be given for them to be effective.
I based my decision to invest in CIPHERMINE.B1 on the basis of the terms given on bitcointalk (see
https://bitcointalk.org/index.php?topic=286634.msg3071632#msg3071632). This posting
did not mention the liability disclaimer, which I presume was only listed on the CIPHERMINE.B1 asset details page on btct.co (the crypto exchange the asset was listed on).
It
did include a statement at the bottom linking to the home page of btct.co:
For further details please see CIPHERMINE.B1 on
BTC TC.
However this link only takes you to the btct.co home page, not to the asset details page with the full terms. There was no requirement to acknowledge and accept the term in order to purchase the bonds. In my opinion, Kate and the other founders did not do enough to draw this onerous (and unreasonable) clause to the attention of prospective bondholders (though, as I said earlier, I believe the clause is void for unfairness anyway).
So, that's pretty much what I've been up to on this. I do not see any prospect of Kate honouring the contract, and I do not intend to reward her conduct, so it's time to move on to other measures. I have instructed my lawyer to refer this matter to the Financial Conduct Authority (FCA) in the UK, which he informs me can investigate what the Ciphermine founders have been up to, and if necessary enforce the contract. I have also instructed him to report this to other law enforcement authorities in the UK as he sees fit.
Whilst it's a good development that the authorities in the UK are about to become involved, I am also considering filing an action against her and possibly the other founders on my own behalf. The benefits of filing are (as explained to me by my lawyer):
- As the coins are not considered currency, the claim would be for breach of contract, not a money claim. Therefore costs may be awarded (basically I get most of my legal costs back).
- It may be quicker than relying on the FCA, who have to prioritize any investigation with other work that they are doing.
So far I have funded this out of my own pocket, but if it becomes necessary or desirable to file there will be more costs. I am asking people to come forward if they wish to consider a joint action, and potentially save some money.
If you wish to find out more, you can PM me here. It is entirely up to you but it might be helpful if you tell me which country you are in, an idea of how many bonds you own and whether you have tried to redeem them yourself yet. All of the bonds become redeemable on September 10, so we are not that far away from all bondholders being in the same boat I am in (unless for some reason you were able to charm Kate into repaying you).
Cheers.
