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 ;
I had originally skimmed the article and thought they were just selling empty wallets, and I thought, that is cool, an intro to crypto, I'll probably pay for that.
Then I realized they were selling crypto wrapped in wallets wrapped in a USB, and figured they would be out of business fairly quickly, and purchase will never arrive.
> 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
> 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.
Trying to claim it's an 'art collectible' (as you say in another comment), doesn't sound like being 'within the limits of the law' - it sounds squarely like trying to find loopholes in the law.
Quick correction: "where we stand to adapt our offering to be within the limits of the law." should be "where we stand to adapt our offering to be within the limits of the law if it is determined to not already be within said limits."
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.
Kind of a bummer that none of the mainstream payment processors allow crypto related businesses on their platforms. Which banks have no issue dealing with crypto related businesses? Anyone know what banking partners Coinbase, Gemini, Bitpay etc use?
"In more extreme situations, taxpayers could be subject to criminal prosecution for failing to properly report the income tax consequences of virtual currency transactions. Criminal charges could include tax evasion and filing a false tax return. Anyone convicted of tax evasion is subject to a prison term of up to five years and a fine of up to $250,000. Anyone convicted of filing a false return is subject to a prison term of up to three years and a fine of up to $250,000."
I'm not their or your lawyer and this isn't advice it is just one among what I assume are many possible examples of penalties that have been asserted for those who are messing around with coins without really thinking them through. I don't know who is doing their taxes or legal prep, maybe they've got this all covered, who knows.
UPDATE: They reply in another comment that they've been advised to avoid US sales for the time being. Makes sense.
If scamming something like this is possible, the scammers have an incentive to scam as much as possible, so the "scam ratio" will tend to grow to 100% quite fast unless there's a huge amount of legitimate business.
I don't really think this is true in practice. There is a risk to scamming, plus even with zero risk not every customer would choose to scam them (given morals/etc).
The difference may lay in the years that those you named had to adjust and readjust their countermeasures and learn from their mistakes ( up to a point ).
At this stage, as long as you are using a company like Stripe with enabled full transaction review settings, you can tap into this countermeasures (or even better) with few clicks.
Hi, this reply is completely irrelevant to the subject matter, but i couldn't directly send you a message so this is my only option. quite a while back in a topic regarding bitgrail losing 170m you submitted a link to the bitgrail trollbox chat log in here
> 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.
It's the downpayment on the legal fees for running an illegal lottery (random amounts of random currencies?) and an illegal money transmitting business.
Most likely. It's always annoying when startups post good numbers, but fail to mention if they're talking about profits or revenue. For all we know, they may have spent $31,000 on the crypto and $500 on the USB drives.
They are giving random RATIOS of cryptocurrency, that add up to the amount of USD that you pay.
So if you pay 200 dollars, you could get 100$ of litecoin and 100$ of ethereum. OR you could recieve 25$ of doge + 175$ of Bitcoin. (both add up to 200$ USD. Minus their fee obviously)
That's not a lottery. It is a fixed amount of USD value.
By the time you get it in the mail, it might be double. Or half.
I wouldn't want to have to try to explain the volatility of altcoin markets to a grumpy Florida lottery regulator looking to charge you with something.
Have you personally dealt with receiving commodities like gold from CME group or something? My understanding is it is not simple at all. But would love to hear a person's first hand experience.
i will keep saying this and do not care about the downvotes. this kind of shit is stupid and everyone on here who likes it is lame, you should only find get rich quick stories cool if they made something that was actually 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!
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).
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).
They don't need an MTL because they're not transmitting money to another party or holding the money, they're just transmitting the money back to the original party.
However, it does seem like they are running afoul of other parts of regulations, like KYC and money laundering.
Ahh, thank you for clearing that up. I was recently looking into starting a business that required an MTL and knew WE needed one but wasn’t completely sure about what qualified for other companies.
Yes technically it is. It would also be illegal to give someone Euros for USD so there are practical thresholds here that need to be crossed before anyone is going to press charges, but doing it regularly is definitely something that puts you at risk.
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.)
Digging deeper, the TNW article provided more info and you’re right: they are buying $25 less than the price they charge for the package (between $75 and $475) worth of a random mix of a top 300 list of cryptocurrencies from an exchange, so it's probably not a lottery (unless some or all of the underlying cryptocurrencies are lottery tickets, which is probably not legally the case however much it might practically be.)
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.
Have you ever seen a MSB offer Euros, Yen, or Dollars in random amounts as a product? Does not seem like the actions you list are similar at all to this situation.
How about a fruit basket? I buy that without knowledge of what I am getting. But I think the sellers have badly communicated what they are selling. I don't think random applies to the amount. I think they might mean to say a collection of a bunch of currencies, funded with whatever amount it takes to get you in to that currency. There isn't really a way to know until they get a product page up.
Based off that list are you saying companies like T. Rowe Price and Citigroup are offering ETNs and ETFs that have fund compositions that are random for each customer?
Obviously the value proposition is a little bit different but it seems close enough to rhyme. T. Rowe Price and Citigroup aren't saying "the best part about these funds is that you have no idea whats in them!" but in practice these funds behave similarly to the crypto flash drives.
I don't think that the etfs disclose which assets are held on any given day. From the consumers perspective they are buying some mix of currencies, although they don't know exactly which ones. It seems pretty random to me, just not different from the other note holders.
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 don't really think there is much of a jurisdictional reason but it just tends to be a popular location for scammers. It could just be due to the location in regards to retired people.
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.
Why is everyone assuming he is running a lottery? Where did he say he put funds in the wallets? All he said was he generated wallets, encrypted them, and put them on a usb.
> PK (my other co-founder) had recently sold his friend a preloaded ledger of cryptocurrencies and walked over to us and told us we should “sell people wallets preloaded with random cryptos”.
> We thought that there was no way people would pay us for this kind of service, but we spiked out a site over the weekend and launched that following Monday.
A lottery requires a prize, chance, and consideration to win. I don't see all three elements here, though it is a little difficult to actually understand what the business is - so maybe.
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.
109 comments
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edit: misread it, thought they were just selling empty setups w/ software
Then I realized they were selling crypto wrapped in wallets wrapped in a USB, and figured they would be out of business fairly quickly, and purchase will never arrive.
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.
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
Trying to claim it's an 'art collectible' (as you say in another comment), doesn't sound like being 'within the limits of the law' - it sounds squarely like trying to find loopholes in the law.
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.
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.
Surely you're not surprised? Credit card chargebacks make it virtually guaranteed that widespread fraud would occur.
Something, something, move fast and ask for permission later.
https://www.irs.gov/newsroom/irs-reminds-taxpayers-to-report...
I'm not their or your lawyer and this isn't advice it is just one among what I assume are many possible examples of penalties that have been asserted for those who are messing around with coins without really thinking them through. I don't know who is doing their taxes or legal prep, maybe they've got this all covered, who knows.
UPDATE: They reply in another comment that they've been advised to avoid US sales for the time being. Makes sense.
I look forward to the "How I lost $32,000 selling crypto-USBs" after the fraud claims and chargebacks are filed.
https://news.ycombinator.com/item?id=16355342
but unfortunately the link no longer has file, is there any chance you still have the chat log? i would be incredibly helpful.
Thanks
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!”
They should be more concerned about federal prosecution for fraud
> I don't get this
Because it is a scam
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"?
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
I remember when I was young once, too.
Or legal
They are giving random RATIOS of cryptocurrency, that add up to the amount of USD that you pay.
So if you pay 200 dollars, you could get 100$ of litecoin and 100$ of ethereum. OR you could recieve 25$ of doge + 175$ of Bitcoin. (both add up to 200$ USD. Minus their fee obviously)
That's not a lottery. It is a fixed amount of USD value.
I wouldn't want to have to try to explain the volatility of altcoin markets to a grumpy Florida lottery regulator looking to charge you with something.
So it would be the same thing as if you shipped bars of gold and silver to someone.
It really isn't complicated.
Dear Stratechery, you were just added to my adblock list.
https://news.ycombinator.com/newsguidelines.html
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).
What your doing sounds like a jailable offense.
See the local bitcoin guy who went to prison for selling bitcoin in Florida.
However, it does seem like they are running afoul of other parts of regulations, like KYC and money laundering.
Wait, selling bitcoin in one the many bitcoin meetups around the U.S. is illegal?
What if I wire your bank account money in exchange for said suitcase of cash?
What if I'm a bank that credits your account, in exchange for said suitcase of cash, no questions asked?
(This is precisely what KYC laws exist to prevent.)
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...
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.)
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.
I don't think that the etfs disclose which assets are held on any given day. From the consumers perspective they are buying some mix of currencies, although they don't know exactly which ones. It seems pretty random to me, just not different from the other note holders.
http://www.orlandosentinel.com/opinion/os-ed-kiss-off-privat...
https://www.cblocks.io/
"Want a CBlock One? Enter your email - we'll notify you when we launch!"
> We thought that there was no way people would pay us for this kind of service, but we spiked out a site over the weekend and launched that following Monday.
And they are probably acting as unlicensed money transmitters too, which will incur regulatory actions.
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.
of course they are.
I hope they change their ways before they end up in Jail.