Accusations that Bitfinex CEO ponzi scheme as 70million disappears

After $70 million disappears from Bitfinex, sources accuse CEO and founder of attempting ponzi scheme

Silence still reigns as far as Bitfinex directors and CEO are concerned following a ‘hack’ in which investors lost a collective $70 million last week. Now allegations are abound that CEO Raphael Nicolle once attempted to start a ponzi scheme and is a vocal proponent of Trendon Shavers.

Yesterday, FinanceFeeds reported that Bitcoin exchange Bitfinex has issued a notice to its customers stating that as a result of the $72 million that was lost from its platform as a result of ‘hackers’ last week, 36% will be removed from each customer’s balance as investors are expected to share the losses.

Whilst the technological aspects of Bitcoin have successfully raised the intrests of vast global banking institutions, management consultancies and venture capital investors which have poured record-breaking amounts of funding into blockchain development projects in order to automate various banking procedures, thus elevating the entire Bitcoin business into an institutional arena, the actual currency itself which is inexorably linked to the blockchain that is the darling of the large investors, remains a very risky fringe currency that has absolutely no backing from anyone anywhere should something go wrong.

It also remains the preserve of those with less than honorable business ethics, lessons having not been learned in some cases from the demise of MtGox and the legal wrangling that surrounded it, plus the US government’s seizure of Silk Road and arrest of its owners.

Clearly these incidents did not dissuade investors and Bitfinex, one of the remaining exchanges for Bitcoin, maintained favor and has now become the subject of a ‘hack’ that lost $70 million of customer monies.

It does appear, however that there is more to this than meets the eye, as certain sources say that Raphael Nicolle, founder of Bitfinex and encumbent CEO, had engaged in attempts to start a ponzi scheme, as well as having participated in various ponzi schemes in 2012.

According to various sources, Mr. Nicolle had been a vocal proponent of Trendon Shavers, the incarcerated felon who operated a virtual currency ponzi scheme and gained high profile attention for doing so.

“When I need more coins than I have to fill an order, I will ask everyone that previously “registered” with me to lend me some BTC” is a diatribe that has been attributed to Mr. Nicolle.

He purportedly continued “After 7 days, I will return all of it, principal + 2% interests per week. Now the questions you might have: What could you do to make so much profit? Let just say that I do “arbitrage”: I buy low and sell high.”

Mr. Nicolle, along with other directors of Bitfinex have been notable by their complete absence and silence since the biggest exchange in USD volume suddenly announced the theft of $70 million worth of bitcoins last week.

Additionally, it appears that some professional profiles are fully being deleted, with some other profiles, such as that of Giancarlo Devasini, Risk Manager at Bitfinex, now appearing to lack much if any information.

Just days before BST closed doors, Mr Nicolle was responding to critics who were accusing the scheme of being a Ponzi by stating:

“Pirate’s (pseudonym for Trendon Shavers) turns growth in demand for bitcoins (ie USD flows to bitcoins) into bitcoins profit. That’s why he needs massive (at bitcoin scale) capital.”

When things went awry, Mr. Nicolle turned against the ponzi’s victims, blaming them for Shaver’s deception:

“3 hours of waiting and you scream ponzi. What a joke. So you’re p****d because Pirate ignored you, and you want to hurt him by starting a panic withdrawal. That’s so ridiculous and childish. How old are you again?”

Back in February this year, Phillip G Potter, CSO at Bitfinex, admitted on a live talk internet show that he had traded Bitcoin using the company’s infrastructure, before backtracking just a few minutes later when he was grilled by an interviewer on the issue.

“I’m a long term holder and if anything there’s a very minor amount of trading that I do, like, I you know, out of the market, either bids and offers, small amounts,” Potter replied when asked about whether his role as an officer of Bitcoin’s largest exchange, tasked with the care taking of customer orders, put him at odds personally with his role as a trader” said Mr. Potter.

Mr. Potter stumbled through the next question, admitting that he had been “a trader all his life” and then subsequently claiming that “there is of course a conflict of interest if I traded actively and I don’t.”

The entire show can be listened to here.

Indeed it appears that whilst Blockchain has won the hearts of international regulators, investors and institutions for its technological prowess that can shape the future of the financial sector’s technological infrastructure, Bitcoin itself has a long way to go before it elevates itself out of the financial services equivalent of a bunting-clad portacabin in a backstreet that sells used cars with no service history or warranty.


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