Subject: RE: We need to do a follow-up on these allegations of fraud.
Date: Wed, 26 Nov 2014 18:06:59 +0000
From: Casey, Michael J <
Michael.Casey@wsj.com>
To: Josh Garza <
josh@btc.com>
CC:
mjlindenberger@gmail.com <
mjlindenberger@gmail.com>, Stuart Fraser
<
SFRASER@cantor.com>, Daniel Kelley <
dan@geniusesatwork.com>
OK folks, so I need responses in general to the allegations that you’re
by now well aware of. And to the extent to which there is more solid
proof, rather than simply a denial, that will be better. It will make it
seem less like you’re being evasive and giving fodder to your critics
who say it’s a scam.
I’m not a position either way on behalf of any of these criticisms. And
it seems to me that part of the problem is that the bitcoin community is
full of some very passionate and inherently mistrusting people. They are
also going to be especially suspicious of any operation that is
perceived to be centralized, run by a for-profit corporation, even
though, as you argue, that may be the only approach that will bring
cryptocurrency into the mainstream. But with the barrage of comments
attached to my article and the emails I received, it is now impossible
for us to not at least write about the claims against you.
Before we met I’d seen such claims on Reddit and thought it as part of
the usual trolling that occurs within bitcoin land and typical of all
the loosely defined “pump and dump” allegations that are leveled at
pretty much every altcoin or the claims of fraud place on all mining
service providers. Also, I did some due diligence on you guys and you
were very helpful and constructive in that regard, including the
interview with Stuart. That was a constructive approach and it gave me
confidence. So, I felt that although I can’t back up your numbers you
clearly have a solid track record and sound business associates, so I
was happy to run with the article.
Sadly, though – rightly or wrongly -- the response to it changes the
calculus, both for me and for you. (The fact that you’d broadcast that
there would be a story in WSJ and then openly discussed how and when it
might run didn’t help, by the way. It puts me in an awkward position.
Word to wise: don’t do that again with us or any other news
organization. It can only make life difficult for you.) I now need to do
a follow-up to acknowledge that these concerns exist. We want to get
this out today.
So, here are the questions, most of which I’m sure you’ve encountered
before.
1.The big one: That this is a Ponzi scheme. What can you provide to show
that there are actual coins being mined and payments being made from
them? Are there mining addresses you can reveal that show significant
bitcoin mining activity to match the claim that you account for 50% of
new online mining capacity? (Or 90% of Litcoin?)
2.What’s the breakdown for that 50% claim? Over what time frame? Is that
for BTC only or BTC , Litcoin etc.
3.Are there other details that you can provide to verify the size of
your Mississippi operation? An address that allows us to search it on
Google Earth and street view, for eg.. (Also any very recent photos of
the inside of the plant and mining rig racks.)?
4.Why Mississippi? How do you maintain a low-cost operation in a state
that averages max temperatures year-round of about 75 degrees?
5.I take it that some of the payments on a hashlet that a customer
receives comes from trading revenues and some from a pool of assets that
Gaw mines, in addition to direct mining revenue. Can you break out those
flows for me? Is there an average across all clients?
6.And if, as various observers say, it’s extremely difficult for someone
to break even on any cloud mining contract given the struggle to keep up
with rising difficulty, low prices, etc., then isn’t it the case that
eventually there will be a pool of misfortunate hashlet traders left
holding the bag? How do explain that there are perpetual gains to be had
from owning and trading hashlets over time? How do you keep the supply
of hashing power up?
7.Related to that prior question: A static cloud mining contract is a
depreciating asset by definition, so long as the BTC price is flat or
falling. How is a hashlet different from that? How can I claim that it
has upside value? Is this because of the capacity to “amp it?” But if
so, isn’t the cost of doing so going to rolled into the price as well?
8.Most importantly, if trading and/or investments in a pool of assets is
part of the business model, is it regulated by the SEC? Do your lawyers
believe it doesn’t need to be? Are you seeking regulation? Where does
that stand?
9.Critics have described the hashpoint program for pre-ordering
hashcoin/paycoin as a scheme to cover for the fact that payouts on
hashlets started to decline early in the fall as difficulty rates rose.
What’s your answer to that?
10. In general, there’s a view that all cloud mining needs to be far
more transparent. That fund flows could and should be provably posted on
a blockchain-based system. What do you say to that?
11.Critics say the Hashtalk forum is aggressively moderated, with
dissenters barred and their comments removed. What’s your response to
that? The same critics also say that you pay supporters. Response?
Thanks for your prompt response.
Best wishes,
Michael
Michael Casey
Senior Columnist, Global Finance
The Wall Street Journal
212-416-2209 (o)
914-409-8733 (m)
michael.casey@wsj.com <mailto:michael.casey@wsj.com>
Twitter: @mikejcasey
