German Exchange and Fidor Bank Partner for Instant Bitcoin Trades

bitcoin alternatives

NEW YORK (InsideBitcoins) — In a move that brings bitcoin to everyday banking, bitcoin exchange Bitcoin.de and German-based Fidor Bank have partnered to bring a “Bitcoin Express” option that allows users to buy and sell bitcoin instantly.

fidor-bank-logoUnlike most other bitcoin exchanges, because Fidor Bank is a regulated bank, the transactions can take place immediately rather than hours — if not days — later. In the past, a user would have to transfer money into their exchange and only then could they then buy bitcoin. With this partnership, a user can log into their “Fidor Smart Giro Account,” select that they want to buy bitcoin, and it will immediately be in their account.

“That is not only good news for all bitcoin fans, but also good news for FinTech companies based in Germany. Together with the right partners more is possible in Germany than one might think,” said Oliver Flaskämper, board member of Bitcoin Deutschland AG.

This also means that clients have their bitcoin secured. Since the funds are held within Fidor Bank, they are insured by up to €100,000, the standard for German banks.  And because the funds are held within Fidor, there are fewer concerns of handing over funds to a third party exchange.

Fidor coming to the USA

Fidor is also planning on expanding its branchless banking platform to the United States, by partnering with an unnamed partner. Because Fidor is so friendly to cryptocurrencies, this could be a significant coup for bitcoin.

With the growing trend among millennials to bank on their phones rather than in branches, Fidor would join a slew of other mobile-only banks such as Ally and Simple. This younger, tech-savvy generation wants features that traditional banks are not offering.

“The reason that a lot of very successful fintech startups are happening in the U.S. is not only because there are so many talented people setting up those businesses. It is also because there is a huge gap in innovative services,” Matthias Kroener, CEO of Fidor Bank, told Payments Source. “Banks are first of all solving their problems and [then] maybe the problems of their customers. Just have a look at the products and their pricing.”

CEO of E-Commerce Giant Rakuten Hints Bitcoin Acceptance

Rakuten bitcoin

NEW YORK (InsideBitcoins) — Bitcoin may be getting one of Japan’s largest e-commerce sites on its side. At the Rakuten Financial Conference in Tokyo, Hiroshi Mikitani, CEO of Rakuten, revealed that the company was considering adding bitcoin as an accepted payment.

mikitani“We are thinking about it, and probably will,” Mikitani said. While he was unwilling to reveal when the company may look to launch this feature—he says it’s a trade secret—the company has formed a department to study cryptocurrencies. It has also invested in some bitcoin related startups in the United States, including Bitnet Technologies.

This has been coming for quite a while. Back in July, Mikitani said that the company was looking to accept bitcoin and that it would happen “sooner or later.”

If this were to occur, Rakuten would be one of the largest e-commerce sites to join the bitcoin ecosystem. According to Wikipedia, the company did $5.3 billion in revenue in 2013.

However, it’s not just an e-commerce site. Rakuten runs its own bank, distributes credit cards, and  operates its own securities brokerage. The conglomerate also owns Kobo, which is an e-book company that competes with Kindle and acquired the messaging app Viber in February 2014. Because of how far reaching Rakuten is, CEO Mikitani has been referred to as Japan’s Jeff Bezos.

With Rakuten acceptance of bitcoin would come a big stamp of approval for the currency. As more ecommerce leaders — such as Dell, Expedia, Overstock and Microsoft — continue to accept bitcoin, it moves to create an environment where more consumers may trust the digital currency.

US Government Schedules Third Silk Road Bitcoin Auction

silk road bitcoin auction

NEW YORK (InsideBitcoins) — The United States Marshals Service announced today that it would hold its third auction of Silk Road bitcoins on March 5th. This is yet another cache of bitcoin seized when Ross Ulbricht, convicted leader of Silk Road, was arrested back in October, 2013.

The government announced that it would be auctioning 50,000 bitcoin broken into two series. Series A is comprised of 20,000 total bitcoin divided into 10 lots. Series B is comprised of 30,000 total bitcoin and is also distributed into 10 blocks.

The registration for bidding was initially planned to start on February 17, 2015, but due to the weather, registration began today. Bidders qualify by completing an auction form, providing a government ID, a six figure deposit determined by whether the bidder is going to participate in Series A or Series B, and a copy of the wire transmittal receipt.

Starting on March 5, bidders will have six hours to get their bid submitted for the coins. Once all the bids have been received, the Marshals Service will take a day to determine the winner(s), notifying them on March 6th. Payment is due by March 9th.

Timothy Draper, the venture capitalist who has invested heavily in bitcoin and bitcoin companies, won all of the 30,000 bitcoin in the first auction back in June, 2014. He went on to successfully bit for 2,000 bitcoin in the second auction held in December. A syndicate of bidders led by SecondMarket, headed by Barry Silbert, won the remaining 48,000 bitcoin that were auctioned in the second round.

The government currently holds more than 94,000 bitcoin from the original amount seized. If it were all to be sold at today’s rate, the total yield would be about $22 million.

Mt. Gox Parent Company Seeks to Expand Bankruptcy Protection to the US

Mt Gox Bitcoin

NEW YORK (InsideBitcoins) — He may not be Dread Pirate Roberts, but Mark Karpeles’ problems are still far from over. Tibanne Co., Ltd., the holding company that Karpeles launched in 2009, has filed for Chapter 15 bankruptcy protection in the United States.

According to a court filing submitted on February 3, 2015, the company’s lawyers requested that the U.S. courts recognize that the company is currently undergoing bankruptcy in Japan. According to the U.S. Courts, “The purpose of Chapter 15, and the Model Law on which it is based, is to provide effective mechanisms for dealing with insolvency cases involving debtors, assets, claimants, and other parties of interest involving more than one country.”

In this case, Tibanne Co. is currently undergoing bankruptcy in Japan, so the company wants to have current legal action being pursued against it paused. Once the bankruptcy is resolved in Japan, then those proceedings can commence.

[Read More: While Mt. Gox Was Burning, Karpeles Was Heading Home for the Weekend]

“Tibanne was established in October 29, 2009 as a corporation organized under Japanese Law. In its documents, and communications to customers, investors and creditors, Tibanne has consistently represented that it is a Japanese corporation subject to Japanese law,” the filing said. “Tibanne is solely owned by Mark Marie Robert Karpeles who resides in Japan. Tibanne is the parent corporation of Mt.Gox Co., Ltd., a Japanese corporation that always shared office space with Tibanne in Tokyo, Japan. Tibanne holds an 88% equity interest in MtGox, with the other 12% held by Jed McCaleb.”

McCaleb sold Mt.Gox to Karpeles in 2011. “In turn, MtGox is the parent corporation for and holds 100% of the equity interest in Mt. Gox North America Inc., a New York corporation. Moreover, MtGox North America is the parent corporation for and holds 100% of the equity interest in MtGox Inc., a Delaware corporation.

The argument this filing is making is that Tibanne, a Japanese company, owned the Japanese parent company to the American subsidiaries of Mt.Gox; therefore, it should be prosecuted under Japanese law first.

“Tibanne has extremely limited liquid assets at this time. Whatever limited funding it received from MtGox or otherwise was largely used to pay a retainer to its attorneys that is held in a New York account for purposes of filing this request for recognition and provisional relief,” the filing said. “Tibanne therefore cannot retain attorneys or other professionals necessary to defend or pursue actions or claims.”

All of this now requires a judge to determine whether the claim put forth by Tibanne is valid for a Chapter 15 bankruptcy.

Ulbricht Found Guilty of All Charges in Silk Road Trial

Silk Road trial

NEW YORK (InsideBitcoins) — In deliberation that only took 3 ½ hours, the jury has convicted 30-year-old Ross Ulbricht of running Silk Road as Dread Pirate Roberts.

RossUlbricht-2The jury found Ulbricht guilty on all seven felony charges that he faced: drug trafficking, computer hacking, running a criminal enterprise, money laundering, and fraud with identification documents. These seven felonies could carry a sentence of a minimum of 20 years and up to life in prison.

The defense claimed that, while Ulbricht was in fact the creator of Silk Road, he quickly got out of the illegal operation and sold it to someone else who would go on to become the infamous Dread Pirate Roberts.

“There’s so much to question in this case,” Joshua Dratel, Ulbricht’s lawyer, said in his closing remarks. “There are a lot of blinking neon signs in this case that were created to incriminate Mr. Ulbricht, and I submit to you that DPR was doing it.”

Ulbricht Supporter
An Ulbricht supporter outside Manhattan federal court at the start of the trial on Jan. 13.

However, the prosecution argued that this argument was an “incredible fantasy” and was a “desperate attempt to create a smokescreen.” The government further argued that because Ulbricht created the site — what the prosecution referred to as a criminal conspiracy — then he was liable for everything that happened after that time.

“As a unanimous jury has found, Ross William Ulbricht operated Silk Road – a clandestine global marketplace that offered buyers and sellers of illegal goods and services a promise of anonymity,” said Manhattan U.S. Attorney Preet Bharara in a statement issued after the verdict. “Ulbricht built this black market bazaar to exploit the dark web and the digital currency Bitcoin to allow users to conduct illegal business beyond the reach of law enforcement. Ulbricht’s arrest and conviction – and our seizure of millions of dollars of Silk Road Bitcoins – should send a clear message to anyone else attempting to operate an online criminal enterprise. The supposed anonymity of the dark web is not a protective shield from arrest and prosecution.”

Sentencing is scheduled for May 15. Ulbricht still faces trial in Baltimore for a murder-for-hire charge.

Additional reporting by Hal M. Bundrick

U.S. Government Reveals Dread Pirate Robert’s Murder-For-Hire Plots

Silk Road trial

NEW YORK (InsideBitcoins) — The U.S. Government spent the last day of presenting its Silk Road case against Ross Ulbricht walking jurors through the messages where Dread Pirate Roberts hired someone to kill five different people.

Despite the fact that there is no evidence to show that the murders took place, the prosecutors are using the solicitation messages as a means of demonstrating how far Ulbricht would go to protect Silk Road.

In 2013, FriendlyChemist threatened to release vendor and customer information from Silk Road unless he was paid $500,000. It all started because one of FriendlyChemist’ suppliers, lucydrops, had gone missing after being lent $900,000 worth of his product. According to the server logs, FriendlyChemist said, “I lent him 900k of product and he paid be 200k and then he started avoiding me…what is the deal? Where is my money? Why is lucydrop still selling when I kno for a fact that he has no product because I supplyed him.” [sic]

Then came the threat: “[I] also have identities of 9 top vendors and 15 small vendors and 1000s of customers.” His concern was that he owed people money and they had threatened his family. In other words, FriendlyChemist was just a distributor of someone else’s drugs.

Hells Angels were the supplier

In a twist made for movies, the motorcycle gang Hells Angels played a part in the entire story. According to RealLucyDrop, lucydrop, his partner, had been arrested and now FriendlyChemist was “freaking out because he truly believes his life and his family’s life is in danger.”

The chain of drugs went like this:

The Hells Angels gave the drugs to FriendlyChemist who in turn gave the drugs to lucydrop who got arrested. That meant that the product was missing and the Hells Angels were without compensation.

In his frustration, DPR told RealLucyDrop not to message him unless it included the identity of FriendlyChemist. “Don’t bother messaging me again if the message does not contain his personal info…I won’t be blackmailed.”

After some time, he got the information. FriendlyChemist was 34, married with kids, living in Vancouver.

Enter the Hells Angels

At some point, a user named “redandwhite” showed up and made contact with DPR. The user explained that the group didn’t hold DPR or Silk Road responsible for what happened.

“In my eyes, FriendlyChemist is a liability and I wouldn’t mind if he was executed, but then you would be out your $700k,” DPR said to redandwhite.

“I would like to put a bounty on his head if it’s not too much trouble for you. Hopefully this is something you are open to and this can be another aspect of our business relationship.”

After some time, redandwhite disappeared. This group never targeted FriendlyChemist, but he still felt that they were always going to be on his case. He continued to send messages to DPR requiring the $500k in exchange for keeping the site’s information a secret. “500k is nothing to u but its life and death for me,” he said to DPR.

Finally, DPR reached out to redandwhite and said: “I would like to put a bounty on his head if it’s not too much trouble for you. Hopefully this is something you are open to and this can be another aspect of our business relationship.”

After that, redandwhite explained that it would cost $150k to kill FriendlyChemist. If DPR wanted a clean kill, it would cost quite a bit more. In these chats, DPR got a deep lesson in how murder-for-hire works.

“I have no problem putting my faith in you and I am sure you will do a good job,” DPR said to redandwhite. He sent 1,670 bitcoin—then worth $150k—to redandwhite. DPR went so far as to offer to send more bitcoin in the event the price of a bitcoin dropped.

There are no bodies

All told, DPR asked redandwhite to kill a total of five people. According to redandwhite, while they had been interrogating FriendlyChemist, they learned the name Andrew Lawsry, who went by tony76 and nipplesuckcanuck. According to their investigation, he had been creating accounts, selling for a while, and then scamming people, taking a lot of money in the process.

“This guy has probably ripped off millions of $ at this point from me and the rest of the Silk Road community,” DPR said, asking if redandwhite would go after him.

After getting more information about Lawsry from redandwhite, DPR gave the go ahead to kill him and three of his associates. It would cost $500,000 to remove them all.

Despite the fact that the government showed these conversations, there are no bodies. Officials have been unable to find anyone by these names that have turned up dead. But the government argues that just by having the conversations, it shows that DPR would stop at nothing to protect his site.

This was the last point the government made before resting its case. The defense will be concluding on Tuesday with its last character witnesses, prior to closing statements.

Jury deliberation is likely to commence on Wednesday.

Winklevoss: Bitcoin ETF Still On Track, in Addition to Gemini Exchange

Gemini bitcoin exchange

NEW YORK (InsideBitcoins) — When the Winklevoss Twins announced that they were launching the bitcoin exchange Gemini, it had many questioning whether the twins had run into too many regulatory hurdles launching an ETF and were moving on to new bitcoin projects.

Tyler Winklevoss told Inside Bitcoins that Gemini is “in addition to our ETF plans.”

WinklevossTwinsWith the expected goal of launching the exchange-traded fund in the first quarter, the twins have been talking with many investors trying to drum up support for the ETF. However, one question that comes up when discussing the bitcoin ETF — which will trade under the symbol COIN — is why buy an ETF when you can buy actual bitcoin instead?

“There are large security measures one needs to undertake in order to safely and securely store bitcoin. For those who are up for that and want to actually buy and sell bitcoin the asset, they can do so at Gemini.com,” Winklevoss explained in an email to Inside Bitcoins. “For those that just want bitcoin asset exposure or those, like institutions, pension plans, 401(k)s, etc., that cannot invest in bitcoins themselves, their only avenue to gain bitcoin exposure will be through a structure like an ETF where they are purchasing a security and not the underlying asset itself.”

COIN will not be the first avenue in which investors can buy bitcoin without actually holding the digital asset. Barry Silbert’s Bitcoin Investment Trust (BIT), a type of hedge fund, allows accredited investors to invest in the fund. Further, through some self-directed account providers, accredited investors can also acquire a position in the Bitcoin Investment Trust for their retirement accounts.

However, COIN would be a publicly traded ETF that would trade on the NASDAQ, so it would not require accredited investors or specific providers. There is significant regulatory approval still required though, for COIN to begin trading.

“…anyone who believes that gold is an important asset to hold in their portfolio should seriously consider adding bitcoin to their portfolio.”

Gold bugs appear to be a target investor for the Winklevoss ETF. On Monday, the twins headlined a session at the Inside ETFs conference in Florida where they pitched bitcoin and said that the cryptocurrency was an improvement to gold.

“We believe that anyone who believes that gold is an important asset to hold in their portfolio should seriously consider adding bitcoin to their portfolio. When we consider all of the qualities that make money money, Bitcoin when compared to gold matches or surpasses gold in every measure of money. This is why we and others call bitcoin “gold 2.0” or “digital gold,” Winklevoss explained in his email.

If investors buy into that thesis, COIN could see some substantial adoption when it launches.

Silk Road Trial: IRS Special Agent Found Ulbricht by Googling

Silk Road trial

NEW YORK (InsideBitcoins) — If it had not been for a simple Google search, Department of Homeland Security Special Agent Jared Der-Yeghiayan might have continued his investigation into Mark Karpeles leading Silk Road. Instead, he got a tip from IRS Special Agent Gary Alford, which would lead Der-Yeghiayan right to Ross Ulbricht.

“I figured it [Silk Road marketing] had to be on the regular Internet so someone could tell you where to go,” Aflord said on the stand during the Silk Road trial.

So Alford did what anyone would do when they want to find information about something. He Googled it. In June 2013, he did a search for “Silk Road” and “Onion.” Unlike mainstream sites that use the .com extension, sites on Tor use .onion. Therefore, by searching for those two keywords together, he was trying to find mention of the Tor site. He limited the posts to those that occurred before January 31, 2011 because that was when Silk Road started.

“Has anyone seen Silk Road yet? It’s kind of like an anonymous Amazon.com.”

That search led him to a thread on bitcointalk.org called “A Heroin Store.” One of the posts there was from a user named “altoid” who gave instructions on how to access Silk Road.

“You guys have a ton of great ideas. Has anyone seen Silk Road yet?” altoid wrote. “It’s kind of like an anonymous Amazon.com. I don’t think they have heroin on there, but they are selling other stuff. They basically use bitcoin and tor to broker anonymous transactions.”

Once Alford had the username, the rest was as simple as clicking around. In a separate thread, altoid posted that he was looking for an IT pro. “If interested, please send your answers to the following questions to rossulbricht at gmail dot com.”

That’s all Alford needed to get a warrant to gain access to that email. By comparing the data found in the email to the data found on Ulbricht’s laptop, the government has created an even more convincing argument that Ross Ulbricht is, in fact, Silk Road’s Dread Pirate Roberts.

In one email, Ulbricht asked a man in Bastrop, Texas to rent out his house. Bastrop is where Ulbricht grew mushrooms.

RossUlbricht-2Ulbricht wasn’t entirely reckless, though. There were no mentions of Silk Road in Gmail or on Facebook. But what the emails did provide were points in Ulbricht’s life that the government could cross reference with chat logs on Silk Road. For example, Ulbricht traveled from Austin to the Dominica on November 14-15. On one of the Tor chats, “myself” told a Silk Road admin that “I am done traveling, for a little while anyway.” Since it was found on his laptop, “myself” had to be Ulbricht. That conversation occurred on November 15th.

There were plenty of other such examples presented, including Ulbricht’s dating life. In a log describing Silk Road activity dated September 11 –September 18, 2013, Ulbricht said he was suffering from poison oak. Compare that to an email he sent to a “Julia” on September 19: “I have poison oak rash from head to toe. I wish you were here to comfort me. :(“

The government made a case that there were too many identical events that occurred to both Dread Pirate Roberts and Ross Ulbricht for them to be separate people.

And it all started with a simple Google search.

Another Miner Meltdown: CoinTerra Files for Bankruptcy

NEW YORK (InsideBitcoins) — Life is not good for CoinTerra,  its investors or creditors. First it was sued by C7 Data Centers just a couple weeks ago — and now it has officially begun the process of filing for Chapter 7 bankruptcy.

CoinTerra CEO Ravi Iyengar
CoinTerra CEO Ravi Iyengar

Another miner bites the dust.

In its January 24th bankruptcy filing, the company revealed that it had liabilities of between $10 million and $50 million owed to anywhere from 200 to 999 creditors.

Under Chapter 7, all assets are liquidated in an attempt to pay back creditors. If there are assets leftover after those creditors are paid, investors are reimbursed. In its filing, CoinTerra revealed that there would be no funds available after all secured creditors were paid.

Among the list of creditors are C7 Data Centers, Wells Fargo Bank, and CenturyLink, which signed a new hosting contract with CoinTerra last July.

C7 sued CoinTerra a couple of weeks ago for $1.4 million in unpaid services, plus an additional $4 million in damages.

Austin-based CoinTerra launched in August 2013 with $2 million from dozens of investors. It developed chips specifically built for solving the increasingly difficult mathematical formulas tied to mining bitcoin. However, the company experienced complaints from consumers who claimed that what they purchased did not match up with the specs promised.

The company’s website is shut down and displays only an image saying CoinTerra has filed for bankruptcy in Texas.

What Do Americans Really Think About Bitcoin? New Survey Tells All

NEW YORK (InsideBitcoins) — Things take time to catch on for people. Bitcoin is no different. The vast majority of Americans have no idea what bitcoin is, what it can do, or the potential of it. And for the first time, there’s quantifiable data to support that statement.

Coin Center, a non-profit research and advocacy group, has released data from a five-month survey revealing just how well the American people know and understand bitcoin. And the results are not all that surprising.

Fully 65% of people polled were not at all familiar with bitcoin. Of those that were even a slightly bit familiar, 80% had never used it before.

Most surveys are difficult to conduct because there’s always bias or poor scientific reporting. Coin Center used Google Consumer Surveys, which many have seen when they are prompted to answer a question in exchange for reading an article. In a New York Times article, this method of polling was the second most accurate in predicting the outcome of the 2012 U.S. presidential election.

“There has never been a definitive benchmark for public understanding of Bitcoin,” said Jerry Brito, executive director of Coin Center, in a statement released with the study. “This survey demonstrates that there’s much to be done to build an understanding of Bitcoin.”

When polled about whether bitcoin is used for nefarious reasons: crime, fraud, etc. — or good reasons: investing, legitimate payments, and the like — the general population leaned toward the illicit side. While some did believe that it was for good, more people were inclined to believe it was for negative reasons. Even then, the bulk of people were right in the middle, likely undecided.

“Public policy reflects public attitudes on a subject,” said Peter Van Valkenburgh, Coin Center’s director of research. “What we see is a large gap in public understanding.”

While there was a bias towards the belief that bitcoin was primary used for illicit purposes, more people thought that government should leave bitcoin alone rather than ban it. And, like the previous question, the bulk of people were right in the middle on this question.

It’s clear that bitcoin has a long way to go to build its brand and to demonstrate utility. But that does beg the question: does a lack of understanding mean that it won’t gain usage? Or, asked in another way: even if 80% of people say they never use bitcoin, will there come a point where they use it without realizing it?

Very few people can tell you what TCP/IP or even what HTTP is, but tell someone to go to the Internet, find a cute kitty gif and email it to a friend — they’ll do it in a heartbeat.

Photo credit: B Tal