Original author: Pete Rizzo
Coin News
Top 10 trading pairs on the exchange by volume. Source: CryptsyIceland-based Auroracoin was an example of this process. Said Vernon:“Auroracoin was one of the first coins that we chose from the voting list, where people can vote on coins.”The system is a mix of incentivized voting ballots. Every user gets a free vote for a coin. Also, users can spend Cryptsy points, which are accumulated through trading on the exchange.Voting with bitcoin donations is also another method for Cryptsy’s users to voice an opinion on which altcoins should be added. User input is important to this process being open:“We have to listen to the majority; try to get a sense of what people like. I wanted to add some transparency of how we added coins.”Coins with volumeAdding new altcoins for trading can be exciting for Cryptsy’s users, but Vernon says that sometimes doing so can cause problems. 
One week DOGE/BTC trading. Source: CryptsyOne coin that unexpectedly caused issues was dogecoin, where trading volume jumped immediately on the new Cryptsy DOGE/BTC trading pair. Said Vernon:“When I initially added [dogecoin], I had no idea the kind of volume it was going to have. And I’ve actually had to swap out wallets because the wallet got so huge, like 2.5 GB.”At the time, the Cryptsy dogecoin wallet got so large so quickly that withdrawals and deposits were briefly delayed.Vernon has also noticed relatively high trading volume for something called devcoin, which is a foundation that pays developers to create things:“Devcoin gets quite a bit of volume. It’s one that’s been around for quite some time. We get people who have received the coins, and they exchange them for bitcoin.”Pre-mining principlesIn the early days of altcoins, many were pre-mined in order for the developer to reap the financial rewards if a coin should become successful.Charlie Lee’s creation of litecoin changed that. Lee believed there needed to be a silver to bitcoin’s gold, and when he created litecoin, he didn’t pre-mine it.Said Vernon:“Well, originally it was one of those kind of things that turned you off, the word ‘pre-mined’. You’re like, I don’t want anything to do with it.”Cryptsy’s stance is that, if the pre-mining is carried out not to benefit the developer, but to benefit something else, it’s acceptable.Auroracoin is an example of that, with coins being pre-mined for free distribution to Icelandic citizens, although that coin’s distribution allocation has negatively affected its price. 
One week AUR/BTC trading. Source: CryptsySaid Vernon:“Maybe we shouldn’t even call it pre-mine, just because of the word. Maybe we should call it pre-allocation.”Significant proofThe fact that Cryptsy currently has 157 cryptocurrency trading pairs means that Vernon has a lot of experience in comparing different types of cryptocurrencies.Because of this, the idea of a proof-of-work algorithm that actually works to solve a problem is of interest to him:“Primecoin is pretty cool. They’ve actually found quite a few primes that nobody knew about. But what are we going to do with those [prime numbers], I don’t know.”So far, Vernon hasn’t come across a proof-of-work system other than primecoin that does something substantial from a computational standpoint. But he has thought of something that might be useful for humanity:“Protein folding. That would be something that would be really nice to have: a proof of work where the work is really doing something, solving problems,” he said.Vernon pointed out with the hashing power that the Bitcoin network has, it could be considered, “the biggest supercomputer in the world.”Preparing for fiatCryptsy does not deal with fiat money, but it will sometime in the future. Vernon started the exchange without the use of government-backed money as a method of exchange because it was an easier business to get off the ground:“Mainly I didn’t want to get into fiat because of the regulatory issues. And so [cryptocurrency-to-cryptocurrency] seemed like a good entry point.”Crypsty has been working through a lengthy process to be in a position to accept fiat money on its platform, but it is taking a lot of time.Some of the delay is down to working with accountants that have to get used to the concept of cryptocurrencies; some of it is because Vernon wants to set an example of diligence:“It’s a long process, and we want to make sure we do it right. It’s not something I want to do without knowing that the way we do it is the right way.”With this in mind, he has sent four of his employees to become CAMS certified. This is a credential offered by the Association of Certified Anti-Money Laundering Specialists that, the associations says, “denotes proven knowledge in the detection and prevention of money laundering”.Vernon says that he expects Cryptsy to be one of the only exchanges to have that number of people with CAMS certification on its staff.Crypto-to-crypto was a way to get Cryptsy off the ground, but Vernon wants to set an example for how to do things the right way to ensure long-term stability of the exchange. 
Charlie Lee (LTC), Paul Vernon and Jackson Palmer (DOGE) answering questions at CoinSummit’s altcoin panel.He discusses this at conferences, and was a on a panel at San Francisco’s recent CoinSummit event talking about alternative cryptocurrencies.Vernon shares the government’s uneasiness about decentralized money being used in nefarious ways. As he sums it up:“Our concern is, and the government’s concern is, money laundering. So we need to kind of be the poster children of how to do [compliance] correctly. So I’m not going to launch [a fiat currency option] until I’m ready to be on the poster.”auroracoincoinsummitcomplianceCryptsydevcoindogecoinlitecoinPaul VernonOriginal author: Daniel Cawrey
A group of Florida residents have been accused of fraudulently selling scrypt mining ASICs as part of an altcoin pump-and-dump scheme.
Perpetrated from March 2013 through August of this year, the scheme centered on a cryptocurrency called cachecoin whose market was allegedly manipulated by the actions of the defendants.
The five individuals, which include a married couple as well as a company called Scrypted Life, are also accused of stealing funds raised for an independent mining operation. Represented by Florida-based law firm Akerman LLP, the plaintiffs are seeking loss-of-profit damages as well as legal costs, and have requested a trial by jury.
Akerman attorney Christopher Hopkins told CoinDesk that those named in the case used a variety of means to collect funds from unsuspecting investors.
By including an alleged pump-and-dump scheme in the plan, he said, the group was able to further boost its fraudulent revenues, explaining:
"They conned investors and buyers to convert their money to cachecoin, claiming a discount for any investment or purchase with Fibonacci in cachecoin. In the end, after taking money from my clients and others, we believe that the Fibonacci defendants also walked off with ‘pump-and-dump profits' from cachecoin."
The defendants have been charged with fraud, unjust enrichment, false advertising, negligence and violation of state investment statutes, according to documents filed 3rd December.
Altcoin pump and dump
Court documents provided to CoinDesk state that the defendants allegedly used social media platforms such as Litecoin Talk to promote and sell mining units that were never developed or delivered through an organization called Fibonacci Scrypt Mining ASICs.
Fibonacci allegedly conducted a broader, multi-layer promotional campaign that resulted in several different money-generating initiatives, including the ASIC presales and the pump-and-dump scheme in the cachecoin market.
The Fibonacci ASIC – a project that followed an previously planned mining unit – was announced in December 2013. The Fibonacci group began accepting pre-orders in March 2014.
Fibonacci purportedly enticed customers to convert bitcoins for cachecoins in exchange for a discount on mining devices that were said to be in development. This led to a rise in volume and the overall price for that altcoin – an event that the documents say was planned by Fibonacci so it could profitably sell its holdings to unsuspecting customers.
Both plaintiffs involved exchanged bitcoins worth thousands of dollars at the time for cachecoins, and sent those coins to the Fibonacci group as payment for the scrypt ASICs. One plaintiff bought about $18,000 dollars in cachecoins while the other purchased roughly $30,000-worth.
The documents explain:
"Unbeknownst to plaintiffs, this was part of defendants’ scam to not only take plaintiffs’ money directly but to profit by having plaintiffs and other “buyers” and “investors” use cachecoin, which increased the value of cachecoin. This was of interest and profit to defendants, who were responsible for launching cachecoin."
Both payments were issued on 17th March. One of the plaintiffs, the court filings state, later received a partial refund worth approximately $3,500 in July.
Fibonacci told customers at the time that both the ASICs would be delivered and the mining operation started in August.
Collapse in August
When the anticipated date arrived, however, the filings argue neither the ASICs nor the planned mining operation had materialized.
According to posts on Litecoin Talk, customers stopped hearing from Fibonacci staff. At the same time, the Fibonacci website, through which payments were being processed, went offline. Compounding the situation was the sudden drop in the price of cachecoins, which according to the plaintiffs has continued to this day.
Plaintiffs argue Fibonacci’s actions resulted in both the loss of profit from mining units that were never delivered, as well as damages through the eventual collapse in the cachecoin market.
The filing states:
"At or around August 2014, Cachecoins were essentially worthless. As of today, Cachecoins are worth less than $0.0003 cents with little interest or activity."
Hopkins said that the defendants named in the case have been served, and that ultimately, cases like this could lead to a more transparent environment for potential investors.
“These suits may just run out of town the scourges who see financial potential in the virtual currency space through ploys and scams rather than diligence and ingenuity,” he said.
A full copy of the court filing can be found below:
Crandall StrutherCrandall Struthers v Hudgins Fibonacci et al.pdfs v Hudgins Fibonacci Et Al
Legal image via Shutterstock
Original author: Stan Higgins