Connect with us

Investment

Nasdaq Is Now Working With 7 Cryptocurrency Exchanges

Published

on

Cryptocurrency exchanges who want to use Nasdaq’s proprietary surveillance technology need to have more than money.

A team of about 20 people contribute to helping in an elaborate due-diligence process aimed at ensuring that any exchange who wants to use the technology that scans for fraudulent transaction patterns is both technically capable, and morally inclined to use the powerful software wisely.

For exchanges who pass the test (and can foot the bill) they’ll be granted access to the same surveillance technology Nasdaq itself uses to ensure its clients that trading volume is as free from fraud and manipulation as possible.

So far, seven cryptocurrency exchanges have passed Nasdaq’s muster, according to a Nasdaq representative speaking with Forbes, though only two, Gemini and SBI Virtual Currency, have been publicized. As more cryptocurrency exchanges seek to lure new customers, the assurance of Nasdaq’s technology is already being used to attract institutions and traders used to more mainstream venues.

During a briefing with members of media today, Nasdaq’s head of exchange and regulator surveillance team, Tony Sio, who works within the market surveillance division, shared the questions every cryptocurrency exchange must answer as part of a larger presentation on the state of the industry around the world.

“Historically, we don’t do such a large vetting process for our clients because they are much more well-known,” said Sio. “But as we started working with less well-known names, startups, then we realized we needed to do this check process.”

During the briefing at Nasdaq’s offices earlier today, Sio presented a detailed overview of how the company on-boards its crypto exchange clients, broken down in to three categories: Business Model, KYC/AML, and Exchange Governance & Controls.

While the press briefing was for educational purposes, in an interview following, Sio provided Forbes with further context, explaining how his team of legal and technical experts use the criteria to evaluate possible customers for risk. Not everyone makes the cut, he says.

The first section of a document, titled “Key Questions to Ask When Evaluating a Cryptocurrency Exchange,” was called “Business Model.” Of the questions in that section, one jumped out: “How reputable are the products available to trade on the venue?”

What’s interesting about this is that it shows Nasdaq is concerned about who is using crypto assets, and how they are being used. As questions about the importance of how a crypto asset was used in the past (Was it used to buy drugs? Does that matter?) continue to be sorted out, this point will likely only continue to raise in value.

The second section of the document is called “KYC/AML,” which stands for know-your-customer/anti-money laundering. Like the questions about business models, the most interesting question in this section relates to reputation. “What is the organizational structure and what are the founders’ backgrounds (i.e. tech expertise, financial markets expertise, etc.).”

What stands out about this question is the importance that past experience plays. From the early days of cryptocurrency, and now into other crypto-assets, the industry’s biggest value proposition was that it would democratize finance and a wide range of industries by letting retail consumers build and manage their own financial products.

Instead of innovation coming from the top down, crypto would be grassroots. While Nasdaq has shown a willingness to work with some unusual clients in the cryptospace, the ones we know about support what these questions reveal about Nasdaq’s interest in working with proven entities, something other regulated exchanges and technology providers will likely follow.

In the third and final section of the “key questions” document, “Are crypto asset listing standards in place?” is the most insightful. While some of the largest cryptocurrency exchanges, like Circle (which owns the Poloniex exchange) and Coinbase, publicly post their new asset listing process, others are much more opaque, leaving open the door to pay-to-play allegations and other potentially fraudulent activity.

Most recently, in June 2018 SBI Virtual Currencies run by Japanese financial giant SBI Holdings, announced it was using Nasdaq’s matching system. Before that, in April 2018, the heavily licensed Gemini cryptocurrency exchange run by Tyler and Cameron Winklevoss, announced it was using Nasdaq’s SMARTS surveillance system. “Our deployment of Nasdaq’s SMARTS Market Surveillance will help ensure that Gemini is a rules-based marketplace for all market participants,” said Gemini CEO Tyler Winklevoss in a statement at the time.

Beyond providing technical support to these exchanges, Nasdaq’s interest in blockchain has been largely limited to investing in other non-cryptocurrency applications of the technology. In September 2015 Nasdaq joined a $30 million investment round in Chain, a blockchain startup that eventually partnered with Nasdaq to launch Linq, a platform for issuing private equities. Then, last week Nasdaq led a $20 million investment in Symbiont, another blockchain company building services that eliminate middlemen in traditional financial workflows.

While competitors like the New York Stock Exchange have partnered with Microsoft and Starbucks to launch its own cryptocurrency exchange, Bakkt, later this year, Nasdaq’s cryptocurrency exchange guidelines are likely to be limited to providing technical support for now.

“The objective that we’re trying to work with crypto, is we see this as a growing asset class,” says Sio. “So we’re working to help provide our technology, it could be around matching, it could be around surveillance, to help our customers as they grow their marketplaces.”

Michael del Castillo Forbes Staff

Continue Reading
Advertisement
Comments

Investment

How Cryptocurrency Scams Work

Published

on

By

Millions of cryptocurrency investors have been scammed out of massive sums of real money. In 2018, losses from cryptocurrency-related crimes amounted to US$1.7 billion. The criminals use both old-fashioned and new-technology tactics to swindle their marks in schemes based on digital currencies exchanged through online databases called blockchains.

From researching blockchain, cryptocurrency and cybercrime, I can see that some cryptocurrency fraudsters rely on tried-and-true Ponzi schemes that use income from new participants to pay out returns to earlier investors.

Others use highly automatized and sophisticated processes, including automated software that interacts with Telegram, an internet-based instant-messaging system popular among people interested in cryptocurrencies. Even when a cryptocurrency plan is legitimate, fraudsters can still manipulate its price in the marketplace.

An even more basic question arises, though: How are unsuspecting investors attracted to cryptocurrency frauds in the first place?

RELATED | Is Forex A Scam Or Money Goals?

Fast-talking swindlers

Some cryptocurrency fraudsters appeal to people’s greed, promising big returns. For example, an unknown group of entrepreneurs runs the scam bot iCenter, which is a Ponzi scheme for Bitcoin and Litecoin. It doesn’t provide information on investment strategies, but somehow promises investors 1.2% daily returns.

The iCenter scheme operates through a group chat on Telegram. It starts with a small group of scammers who are in on the racket. They get a referral code that they share with others, in blogs and on social media, hoping to get them to join the chat. Once there, the newcomers see encouraging and exciting messages from the original scammers. Some newcomers decide to invest, at which point they are assigned an individual bitcoin wallet, into which they can deposit bitcoins. They agree to wait some period of time – 99 or 120 days – to receive a significant return.

During that time, the newcomers often use social media to share their own referral codes with friends and contacts, bringing more people into the group chat and into the investment scheme. There’s no actual investment of the funds in any legitimate business. Instead, when new people join, the person who recruited them gets a percentage of the new funds, and the cycle continues, paying out to earlier participants from each round of newer investors.

Some members work especially hard to bring in new funds, posting tutorial videos and pictures of themselves holding large amounts of money as enticements to join the scam.

Lies and more lies

Some scammers go for straight-up deception. The founders of scam cryptocurrency OneCoin defrauded investors of $3.8 billion by convincing people their nonexistent cryptocurrency was real.

Other scams are based on impressing potential victims with jargon or claims of specialized knowledge. The Global Trading scammers claimed they took advantage of price differences on various cryptocurrency exchanges to profit from what is called arbitrage – simply buying cheaply and selling at higher prices. Really they just took investors’ money.

Global Trading used a bot on Telegram, too – investors could send a balance inquiry message and get a response with false information about how much was in their account, sometimes even seeing balances climb by 1% in an hour. With returns looking like that, who could blame people for sharing the scheme with their friends and family on social media?

Exploiting friends and family

Once a scheme has started, it stays alive – at least for a while – through social media. One person gets taken in by the promise of big returns on cryptocurrency investments and spreads the word to friends and family members.

Sometimes big names get involved. For instance, the kingpin behind GainBitcoin and other alleged scams in India convinced a number of Bollywood celebrities to promote his book, “Cryptocurrency for Beginners.” He even tried to make himself a bit of a celebrity, proclaiming himself a “cryptocurrency guru,” as he led efforts that costinvestors between $769 million and $2 billion.

Not all the celebrities know they’re involved. In one blog post, iCenter featured a video that purported to be an endorsement by Dwayne “The Rock” Johnson, holding a sign featuring iCenter’s logo. Videos of Justin Timberlake and Christopher Walken were deceptively edited so they appeared to praise iCenter, too.

Fraudulent initial coin offerings

Another popular scam technique is called an “initial coin offering.” A potentially legitimate investment opportunity, an initial coin offering essentially is a way for a startup cryptocurrency company to raise money from its future users: In exchange for sending active cryptocurrencies like bitcoin and ethereum, customers are promised a discount on the new cryptocoins.

Many initial coin offerings have turned out to be scams, with organizers engaging in cunning plots, even renting fake offices and creating fancy-looking marketing materials. In 2017, a lot of hype and media coverage about cryptocurrencies fed a huge wave of initial coin offering fraud. In 2018, about 1,000 initial coin offering efforts collapsed, costing backers at least $100 million. Many of these projects had no original ideas – more than 15% of them had copied ideas from other cryptocurrency efforts, or even plagiarized supporting documentation.

Investors looking for returns in a new technology sector are still interested in blockchains and cryptocurrencies – but should beware that they are complex systems that are new even to those who are selling them. Newcomers and relative experts alike have fallen prey to scams.

In an environment like the current cryptocurrency market, potential investors should be very careful to research what they’re putting their money into and be sure to find out who is involved as well as what the actual plan is for making real money – without defrauding others.

Nir Kshetri; Professor of Management, University of North Carolina – Greensboro

The Conversation

The Conversation

Continue Reading

Investment

Hulu Offers Glimpse Of An Edgier Future Under Disney’s Control As Subscriber Count Passes 28 Million

mm

Published

on

By

Hulu is poised to enter a new chapter in its history as the decade-old streaming service once dismissed as “Clown Co.” moves to refine its identity among a trio of direct-to-consumer services under the control of the Walt Disney Co.

The streaming service offered a glimpse of what’s to come Wednesday as it announced its programming lineup in a presentation at Madison Square Garden in New York City. Hulu is looking for more adult—and, in some cases, edgier and boundary-pushing—programming, as well as comedies that have something to say, in the mold of its new series Shrill.

The company said its viewer proposition—the ability to watch the stories they love, whenever and wherever they want—is catching on with consumers. Hulu said it increased its total customer base to more than 28 million—26.8 million monthly subscribers and 1.3 million promotional accounts. That’s up from 25 million paid and promotional accounts reported in January.

Hulu’s viewers are 20 years younger than those who pay for cable or satellite TV subscriptions — the median age is 31; and some 21 million have either canceled their pay TV subscriptions or never signed up in the first place.

“Hulu’s continued growth, as well as the shows and initiatives announced today, reflect our deep investment in product, programming, brand, customer experience,” CEO Randy Freer said in a statement.

The venerable Hulu will need to differentiate itself as more than a mere cable substitute, as media giants like AT&T’s WarnerMedia and cable giant Comcast prepare to launch their own streaming services. It’ll also need a distinct identity within Disney, which gained a controlling interest in the streaming service with its March acquisition of 21st Century Fox and plans to launch a family-focused Disney+ in November.

Hulu called in some serious star-power to highlight its original series, including Margot Robbie, producer of the forthcoming series Dollfacestarring Kat Dennings, Mindy Kaling, who’s producing an adaptation of Four Weddings and a Funeral, and George Clooney, who stars in a dark, satirical comedy based on Joseph Heller’s novel, Catch-22.

The streaming service greenlighted Nine Perfect Strangers, starring Nicole Kidman, an adaptation of the New York Times bestseller from Big Little Lies author Liane Moriarty. The series, from acclaimed television writer and producer David E. Kelley and John Henry Butterworth, takes place at a boutique health-and-wellness resort that promises healing and transformation to nine stressed city dwellers.

Hulu is also benefiting from Disney’s decision to end its relationship with Netflix, which had created four well-received series based on Marvel characters.

Hulu will add two new live-action series drawn from the Marvel universe, Marvel’s Ghost Rider and Marvel’s Helstrom, whichare slated to debut in 2020. For those not versed in the canon: Ghost Rider (aka Robbie Reyes) is an antihero, consumed by hellfire and supernaturally bound to a demon. Meanwhile, Daimon and Ana Helstrom are the son and daughter of a mysterious and powerful serial killer. Together, the siblings track down the worst of humanity.

The series join a growing superhero roster on Hulu that includes Marvel’s Runaways, which is entering its third season, and previously announcedadult animated series based on the popular Marvel Television characters Hit-Monkey, Tigra and Dazzler, Howard the Duck and Mental Organism Designed Only for Killing (or MODOK).

Following the success of Hulu’s 2019 comedy slate, it ordered second seasons of Pen15, in whichMaya Erskine and Anna Konkle play versions of themselves as 13-year-old outcasts in the year 2000, and Ramy, a series that follows first-generation Egyptian-American Ramy Hassan on a spiritual journey in his politically divided New Jersey neighborhood.

Hulu confirmed its order for The Dropout, a limited series starring Kate McKinnon, who comically bow-leg walked on stage in heels to talk about her portrayal of Elizabeth Holmes, the founder of the blood-testing company Theranos who is now awaiting trial for fraud.

“Hello advertisers,” McKinnon deadpanned. “I have never been to an Upfront before. If you need the blood of an upfront virgin, I am your gal.”

The service also said it will partner with Vox Media Studios, David Chang’s Majordomo Media and Chrissy Teigen’s Suit & Thai Productions to develop and produce a slate of premium food-centric programming for Hulu.

Dawn Chmielewski; Forbes Staff

Continue Reading

Investment

Airbnb Leads $160 Million Investment Into Hospitality Startup Lyric

mm

Published

on

By

Airbnb is the lead investor in a new $160 million funding round for hospitality startup Lyric. The $30 billion home-sharing platform was joined by a host of major players in real estate including new investors Tishman Speyer and RXR Realty, as well as existing investors FifthWall Ventures and Starwood CEO Barry Sternlicht.

The Series B financing is about 50% debt and brings Lyric’s total funds raised to $185 million. The San Francisco-based startup declined to discuss its valuation.

Lyric’s model is similar to the one WeWork popularized for shared offices. Lyric leases a full floor of an apartment building from the landlord, fills each unit with Instagram-friendly furnishings, and then rents them out like hotel rooms. The company makes money off the spread between what it pays in rent and what it charges travelers.

READ MORE | Meet The Top Women Investors Of The Midas List In 2019

“The supply and demand of real estate used to move in a rigid cadence. It was like the old Henry Ford quote ‘you can have a car in any color you want as long as it is black,’” says Rob Speyer, CEO of developer Tishman Speyer. “To be competitive in 2019, real estate must offer flexibility to the customer, just like any other business.”

Lyrics average nightly rate is $220. Travelers can book one of 500 “suites” through the company’s site or on rental marketplaces like Airbnb. They can stay for as few as two nights or try to beat the record of 304. Every Lyric apartment includes a Casper mattress, Frette linens and toiletries from Malin + Goetz. Units feature local touches like Delta blues records in Chicago, Ed Panar photos in Pittsburgh and Cultivar Coffee in Dallas.

“We have seen how hospitality entrepreneurs like the team at Lyric can help deliver amazing experiences and help guests feel like they can belong anywhere in the world,” Greg Greeley, Airbnb’s president of homes, said in a release announcing the investment. Lyric plans to use the new funds to grow to 2,500 units in 12 months.

READ MORE | Airbnb Hires Airline Executive In Move To Offer Transportation Services

For real estate owners, having Lyric absorb units can help get a new rental building to full occupancy faster. Lyric says it pays market rate for the apartments it uses. CEO Andrew Kitchell argues access to guest suites can also be marketed as an amenity for traditional, long-term tenants. His company’s presence, Kitchell reasons, eliminates the need for a spare bedroom or keeps a sibling from sleeping on your couch.

“We believe having some percentage of our buildings as shared hospitality, if done right, would be a very valuable addition,” says Scott Rechler, CEO of RXR, which is developing 6,000 residential units. “Merchandising them with multiple products that can meet different customers’ needs will make the communities more vibrant.”

Of course, not everyone likes the idea of random travelers coming and going as they please. Niido, another Airbnb-backed startup, experienced pushback when it took over management of a Florida apartment building and promised to help residents rent our their spaces short term.

Kitchell, who has worked in real estate technology since 2009, cofounded Lyric in 2014 with president Joe Fraiman. In 2011, Fraiman founded Tastemaker, a interior design startup.

-Samantha Sharf; Forbes Staff

Continue Reading

Trending