Err.. aren't these guys going to run into regulatory problems? You need a license to sell this in the US. Not to mention selling crypto with credit cards is a great way to go broke unless you own the keys like Coinbase does.
Also, why would you trust the keys they are sending you? Having someone else generate a wallet for you then sending it to you via a USB key sounds very very bad.
I agree. Have these guys done any legal due diligence on any of this? Any lawyers care to chime in? I thought you couldn’t do this in many states without a money transmitter license.
Also, does this constitute financial advise? That’s also a big no no in the USA. The CoinTracker guys (current yc batch who make an app for tracking crypto) mentioned that as a reason for not offering a portfolio management product right out of the gate.
Also doesn’t stripes terms of service basically prohibit this? I bring this up because in the interview they say the following:
“What platform/tools do you use for your business?
Stripe for payments”
This is what Stripes TOS says:
“By registering with us, you are confirming that you will not use the Service to accept payments in connection with the following businesses, business activities or business practices.”
“Virtual currency that can be monetized, resold, or converted to physical or digital products and services or otherwise exit the virtual world (e.g., Bitcoin); sale of stored value or credits maintained, accepted and issued by anyone other than the seller
”
I think this is a cool idea, I’m just not sure if they are going about it in a compliant way. If they are doing the right thing they should stick a FAQ up on their launch page ASAP.
Assuming they are doing this legally I’d also love to know how they are handling taxes when they buy these 100 currencies. I.e when you buy alts using eth/btc that’s a taxable event. How do they factor that into the pricing.
> Err.. aren't these guys going to run into regulatory problems? You need a license to sell this in the US.
We've had some conversations with our legal team at Cooley & some conversations with outside counsel at Goodwin Procter. They have not been able to reach consensus on whether we fall within regulatory oversight. Until then, we're not going to be selling anymore in the United States. It comes down to whether this is art or a collectible or not. We're working on it & have stopped sales for the time being. :)
> Not to mention selling crypto with credit cards is a great way to go broke unless you own the keys like Coinbase does.
This is a fair point, there is actually trust on both sides of the relationship here - we're trusting that our customers will not chargeback & they're trusting us not to steal their keys.
> Also, why would you trust the keys they are sending you? Having someone else generate a wallet for you then sending it to you via a USB key sounds very very bad.
We originally thought so as well. When we sold a bunch we were surprised & started talking to our customers. It turns out, they don't want to go through the hassle of finding a wallet creator, disconnecting their computer from the internet, generating a wallet, writing down private keys or mnemonics & securing them.
You can think of this kind of how car dealerships don't run their own mail servers anymore or pizza places don't run their own instance of a bind DNS server. They want the convenience of not having to worry about it.
We're currently working hard on a v2 that makes it a bit more secure while maintaining usability.
> I don't get this.
We really didn't either, but the people that have trusted us with their money helped us understand this: Everyone who is working on cryptocurrency projects is suffering from the curse of knowledge [1] - most of them don't care about the end user.
So, this startup is headquartered in Miami, FL, and is selling randomly amounts of random cryptocurrencies to people who pay a defined amount of real US currency.
That is, it looks remarkably like a private, for-profit lottery. The operation of which, and even knowing assistance or promotion of which, is a third-degree felony under Florida state law. [0]
I'm not clear from the article that this is "random amounts" or even "of random cryptocurrencies." They just said "random wallets", which could mean a lot of different things.
Even if it is random cryptocurrencies, though, if they're smart, the amounts of each of said currencies should add up—at moment of sale, when converted to USD—to a constant amount. In that case, it'd be random ratios of each currency, to fill in a crypto "instrument." (Actually, I would expect this to be true if they have any business sense at all, since the only way to be able to do their books is if they can track their costs, which is only feasible if they have a fixed per-unit cost.)
Or, to put that another way, rather than a lottery per se, this might be more of a crypto-backed Collateralized Debt Obligation issuance where people don't get to know which tranch they're buying. (Which is legal, AFAIK; if it wasn't, the 2007 mortgage bubble couldn't have happened.)
Is it that different from if I sell you a Euro, a Yen, a Dollar, and a Pound? They are fungible items whose value fluctuates.
How about if I sell you scrap gold jewelry on eBay? It's value will change before you get it and neither of us really knows how much gold is in it when the transaction takes place.
Good news! Florida is a FOR profit prison system. So, I am sure all of this will be looked at with thorough detail before plea deals are rolled out /sarcasm
> I wouldn't recommend using this for non-trivial amounts of money for hopefully obvious reasons
Hey Tom! Guy from the article here. First off, thanks for Metabase. I'm a big fan & recommend it often.
Second, you're absolutely right. We have been capping people at $1500 purchases per month unless they were willing to provide identification & an understanding of the risks associated with our service.
Casascius very simply shut down, some of our counsel thinks we have legal basis to not be a money transmitter while other legal counsel believes we may be. We're currently working through that to understand how and where we stand to adapt our offering to be within the limits of the law.
> Accepting credit cards as payment for cryptocurrency is also a risky proposition, to say the least.
Agreed. Mutual trust has been required, we're working on something better than that now :D
My thoughts exactly, without a MTL (Money transmitting License) it seems like this runs afoul of a number of things including KYC. For the record MTL's for all 50 states will run you 6-12 months and ~300K when insurance, lawyer fees, and application fees are through (That's for the first year, subsequent years are cheaper but still).
I feel like too many "successful startup" stories are just part of their marketing and are optimized for that. Well, that and trying to get some VC funding of course.
First thought that sprang to my mind when I read the headline, which wasn't addressed by reading the article, was "ebay ledger nano scam"[0]. I don't see how you can be sure strangers don't have copies of your keys. Unless the keys are generated and coins transferred automatically somehow when you first plug in the stick, which would be cool.
Once sentence in and the part about pre-generated wallets struck me as a bad idea. Thankfully the other HN comments revealed all the other more subtle ways its a bad idea as well!
Besides that they might be breaking laws in other ways, there is a normal (used by card perso bureaus) procedure for the concern about them generating the private keys. I doubt they use that, but he. It would be a closed system which automatically, using an HSM usually, generates all required secrets and adds them on the stick and then destroys them. To make it be more robust, it would include a procedure which, again automatically and not accessible (by procedural regulation; this is all not technical really) by humans, generates a keypair, somehow provides the private key to the user (email? preferably the user would generate the keypair but if you have to buy these sticks we cannot expect them to?) before destroying it and encrypt the stick content with the pubkey. Some auditor would review the process, software and hardware and put a stamp on it to close off that liability. In this case, the empty usb sticks go into the blackbox (regulatory and possibly also technically) and come out with unreadable content, so who handles them after is no longer relevant for security.
If these guys sit behind their normal work laptops, connected to the interwebs, generating these sticks and sending them off unencrypted, you probably will have a lot of issues if someone comes to look at your operation.
If this website looks blank it might be because Privacy Badger is blocking contentful.com, whatever that is. I'm not sure what to make of that really, any ideas?
# read this story as text-only, no javascript;
t=198f3c4c31d49ced9b00837138196ec7b5c415904e81b59f3ea04e7b3959a1c9 ;
curl -4 https://cdn.contentful.com/spaces/t0pm5m7uku03/entries/4NOhsWpS3m4esgOG6uMYm?access_token=$t \
|exec sed 's/{/\
/g;s/\\n/\
/g;s/\\"/\"/g;s/}//g;s/ *//;s/\"###/\
\
###/;' > 1.htm ;
exec firefox file:///1.htm ;
# another script to get all the stories from starterstory.com, text-only, no javascript;
# sample output:
---------------------
id: ventana-surfboards-and-supplies
title: Ventana Surfboards & Supplies
subtitle: Growing A Business Selling Surfboards As Pieces of Art
description: Collector surfboards and more.
link: /ventana-surfboards-and-supplies
name: David Dennis
revenue: 8e3
measurement: revenue/mo
founders: 2
employees: 0
startDate: 2014/08/01
location: Santa Cruz, CA
category: other
publishedDate: 2018/03/27
contentId: 5YPTt4uj3a022uOi0uASUc
[hyperlink to content]
type: story
---------------------
id: cblocks
title: CBlocks.io
subtitle: Earning $32,000 in 30 Days With a Crypto-Filled USB Drive
description: Crypto-filled USB drive.
link: /cblocks
name: Auston Bunsen
revenue: 32e3
measurement: revenue/mo
founders: 3
employees: 0
startDate: 2018/01/01
location: Miami, FL
category: other
publishedDate: 2018/03/27
contentId: 4NOhsWpS3m4esgOG6uMYm
[hyperlink to content]
type: story
---------------------
etc.
curl -4o 1.js https://www.starterstory.com/static/js/main.6bf2bb3b.js ;
t=$(exec sed 's/.*access_token=//;/acess_token/q;s/\".*//;/\//d' 1.js);
exec sed 's/{id:\"/\
&/g;s/\"type\":story/&\
/g;/{id:\".*title:/!d;s/.*X=\[//;s/t.a=X.*//;/{id:\".*title:/p;' 1.js \
|exec sed '1s/^/<pre>/;s/,[^ 0]/\
&/g;$s/$/<\/pre>/;/Date:/{s/new Date(\"//g;s/\")//g;};s/{/\
---------------------\
/;' \
|exec sed '/additional:/d;s/}.*//;/component:/d;/live:/d;/dynamic:/d;/\"jpg/d;/\"jpeg/d;/[iI]mage:Object(/d;s>contentId:\".\{22\}>&\"\
</pre\><a href=https://cdn.contentful.com/spaces/t0pm5m7uku03/entries/&?access_token='"$t"'\>[hyperlink to content]</a\><pre\>>;s>contentId:>>2;s>\">>g;s>,>>;s>:>: >' > 1.htm;
exec firefox file:///1.htm ;
Really awful idea. N00b users who buy this will fail to transfer the funds to their own wallets. The startup could retain the sold keys and steal the funds back -- Oh sorry n00b you got robbed, better luck next time.
Fundamental rule of cryptocurrency that they do not teach is:
"Generate your own private keys"
And they are probably acting as unlicensed money transmitters too, which will incur regulatory actions.
Yes. You are missing the viewpoint of a large part of the public who has heard that cryptocurrencies are the hot new investment. These same people have no clue where to start, how to get a wallet, etc. This looks like a turn-key way for them to make a small purchase and suddenly be "in the crypto game".
It is probably confusing from a business perspective to many on HN because it makes little sense. But think about it from the perspective of your aunt/grandma/etc. They get a USB drive (something they have a rough understanding of) that comes with "a bunch of cryptocurrencies". Some of these people probably think this is the next Beanie Baby. Buy it, set it on a shelf and wait 15 years, at which point it will certainly be worth enough to pay for their kids' college. (/s).
I wonder if instead the usb sticks had empty wallets, would this business be legal? Going a step further, in addition to the empty wallet, if the seller offered a credit/iou of any crypto of the buyers choice (a bit like a visa gift card), where the seller could choose to excersise or claim the credit at any time (or never), I wonder if structuring it like that would still require a msb license etc..
[+] [-] nicpottier|8 years ago|reply
Also, why would you trust the keys they are sending you? Having someone else generate a wallet for you then sending it to you via a USB key sounds very very bad.
I don't get this.
[+] [-] htormey|8 years ago|reply
Also, does this constitute financial advise? That’s also a big no no in the USA. The CoinTracker guys (current yc batch who make an app for tracking crypto) mentioned that as a reason for not offering a portfolio management product right out of the gate.
Also doesn’t stripes terms of service basically prohibit this? I bring this up because in the interview they say the following:
“What platform/tools do you use for your business?
Stripe for payments”
This is what Stripes TOS says:
“By registering with us, you are confirming that you will not use the Service to accept payments in connection with the following businesses, business activities or business practices.”
“Virtual currency that can be monetized, resold, or converted to physical or digital products and services or otherwise exit the virtual world (e.g., Bitcoin); sale of stored value or credits maintained, accepted and issued by anyone other than the seller ”
https://stripe.com/ca/prohibited-businesses
I think this is a cool idea, I’m just not sure if they are going about it in a compliant way. If they are doing the right thing they should stick a FAQ up on their launch page ASAP.
Assuming they are doing this legally I’d also love to know how they are handling taxes when they buy these 100 currencies. I.e when you buy alts using eth/btc that’s a taxable event. How do they factor that into the pricing.
[+] [-] mieseratte|8 years ago|reply
I look forward to the "How I lost $32,000 selling crypto-USBs" after the fraud claims and chargebacks are filed.
[+] [-] auston|8 years ago|reply
We've had some conversations with our legal team at Cooley & some conversations with outside counsel at Goodwin Procter. They have not been able to reach consensus on whether we fall within regulatory oversight. Until then, we're not going to be selling anymore in the United States. It comes down to whether this is art or a collectible or not. We're working on it & have stopped sales for the time being. :)
> Not to mention selling crypto with credit cards is a great way to go broke unless you own the keys like Coinbase does.
This is a fair point, there is actually trust on both sides of the relationship here - we're trusting that our customers will not chargeback & they're trusting us not to steal their keys.
> Also, why would you trust the keys they are sending you? Having someone else generate a wallet for you then sending it to you via a USB key sounds very very bad.
We originally thought so as well. When we sold a bunch we were surprised & started talking to our customers. It turns out, they don't want to go through the hassle of finding a wallet creator, disconnecting their computer from the internet, generating a wallet, writing down private keys or mnemonics & securing them.
You can think of this kind of how car dealerships don't run their own mail servers anymore or pizza places don't run their own instance of a bind DNS server. They want the convenience of not having to worry about it.
We're currently working hard on a v2 that makes it a bit more secure while maintaining usability.
> I don't get this.
We really didn't either, but the people that have trusted us with their money helped us understand this: Everyone who is working on cryptocurrency projects is suffering from the curse of knowledge [1] - most of them don't care about the end user.
1. https://en.wikipedia.org/wiki/Curse_of_knowledge
[+] [-] dragonwriter|8 years ago|reply
I think Dr. McCoy said it best: “There aren't going to be any damn permits. How can you get a permit to do a damn illegal thing!”
[+] [-] parliament32|8 years ago|reply
I'm not sure if you do. How is this any different than "buy X product for $50 and get a $5 mail-in-rebate via AMEX gift card"?
[+] [-] unknown|8 years ago|reply
[deleted]
[+] [-] yorby|8 years ago|reply
[+] [-] wheelerwj|8 years ago|reply
[+] [-] paulie_a|8 years ago|reply
They should be more concerned about federal prosecution for fraud
> I don't get this
Because it is a scam
[+] [-] dragonwriter|8 years ago|reply
That is, it looks remarkably like a private, for-profit lottery. The operation of which, and even knowing assistance or promotion of which, is a third-degree felony under Florida state law. [0]
[0] http://www.leg.state.fl.us/Statutes/index.cfm?App_mode=Displ...
[+] [-] derefr|8 years ago|reply
Even if it is random cryptocurrencies, though, if they're smart, the amounts of each of said currencies should add up—at moment of sale, when converted to USD—to a constant amount. In that case, it'd be random ratios of each currency, to fill in a crypto "instrument." (Actually, I would expect this to be true if they have any business sense at all, since the only way to be able to do their books is if they can track their costs, which is only feasible if they have a fixed per-unit cost.)
Or, to put that another way, rather than a lottery per se, this might be more of a crypto-backed Collateralized Debt Obligation issuance where people don't get to know which tranch they're buying. (Which is legal, AFAIK; if it wasn't, the 2007 mortgage bubble couldn't have happened.)
[+] [-] jws|8 years ago|reply
How about if I sell you scrap gold jewelry on eBay? It's value will change before you get it and neither of us really knows how much gold is in it when the transaction takes place.
[+] [-] ransom1538|8 years ago|reply
http://www.orlandosentinel.com/opinion/os-ed-kiss-off-privat...
[+] [-] paulie_a|8 years ago|reply
[+] [-] tlrobinson|8 years ago|reply
Nor would I recommend the founders continue to run it unless they've consulted a lawyer and are aware they're likely running a money transmitter business. See https://en.bitcoin.it/wiki/Casascius_physical_bitcoins#Suspe...
Accepting credit cards as payment for cryptocurrency is also a risky proposition, to say the least.
[+] [-] auston|8 years ago|reply
Hey Tom! Guy from the article here. First off, thanks for Metabase. I'm a big fan & recommend it often.
Second, you're absolutely right. We have been capping people at $1500 purchases per month unless they were willing to provide identification & an understanding of the risks associated with our service.
> Nor would I recommend the founders continue to run it unless they've consulted a lawyer and are aware they're likely running a money transmitter business. See https://en.bitcoin.it/wiki/Casascius_physical_bitcoins#Suspe....
Casascius very simply shut down, some of our counsel thinks we have legal basis to not be a money transmitter while other legal counsel believes we may be. We're currently working through that to understand how and where we stand to adapt our offering to be within the limits of the law.
> Accepting credit cards as payment for cryptocurrency is also a risky proposition, to say the least.
Agreed. Mutual trust has been required, we're working on something better than that now :D
[+] [-] loourr|8 years ago|reply
What your doing sounds like a jailable offense.
See the local bitcoin guy who went to prison for selling bitcoin in Florida.
[+] [-] exhilaration|8 years ago|reply
Wait, selling bitcoin in one the many bitcoin meetups around the U.S. is illegal?
[+] [-] joshstrange|8 years ago|reply
[+] [-] dragonwriter|8 years ago|reply
[+] [-] angryasian|8 years ago|reply
https://www.cblocks.io/
"Want a CBlock One? Enter your email - we'll notify you when we launch!"
[+] [-] comboy|8 years ago|reply
[+] [-] auston|8 years ago|reply
[+] [-] m-i-l|8 years ago|reply
[0] https://cointelegraph.com/news/life-savings-stolen-from-seco...
[+] [-] davidsawyer|8 years ago|reply
[+] [-] patwalls|8 years ago|reply
[+] [-] VectorLock|8 years ago|reply
[+] [-] tluyben2|8 years ago|reply
If these guys sit behind their normal work laptops, connected to the interwebs, generating these sticks and sending them off unencrypted, you probably will have a lot of issues if someone comes to look at your operation.
[+] [-] gtsteve|8 years ago|reply
[+] [-] Karunamon|8 years ago|reply
https://www.contentful.com/faq/about-contentful/#what-is-con...
[+] [-] randomsofr|8 years ago|reply
[+] [-] feelin_googley|8 years ago|reply
[+] [-] rileyphone|8 years ago|reply
[+] [-] paulie_a|8 years ago|reply
Or legal
[+] [-] 45h34jh53k4j|8 years ago|reply
And they are probably acting as unlicensed money transmitters too, which will incur regulatory actions.
[+] [-] jason_slack|8 years ago|reply
I had to do look myself to understand why selling a crypto filled USB stick would fit into the definition.
[+] [-] burritofanatic|8 years ago|reply
[+] [-] spelunker|8 years ago|reply
[+] [-] brk|8 years ago|reply
It is probably confusing from a business perspective to many on HN because it makes little sense. But think about it from the perspective of your aunt/grandma/etc. They get a USB drive (something they have a rough understanding of) that comes with "a bunch of cryptocurrencies". Some of these people probably think this is the next Beanie Baby. Buy it, set it on a shelf and wait 15 years, at which point it will certainly be worth enough to pay for their kids' college. (/s).
[+] [-] mwnivek|8 years ago|reply
[+] [-] letitgrowx|8 years ago|reply
[+] [-] therein|8 years ago|reply
[+] [-] raresp|8 years ago|reply
[+] [-] UncleEntity|8 years ago|reply
Weird world we live in.
No prototype, no feasibility study, just some "marketing guru" writing up copy and seeing how many fools easily part with their money.