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Crypto Tycoon Resigns From Blockchain Fund After Alleged Defamation

Li Xiaolai, a noted cryptocurrency investor and early bitcoin evangelist in China, has resigned from his role as managing partner of the $1 billion Hangzhou Xiong’An Blockchain Fund after alleged defamatory comments were made against him.

The sudden departure comes as the result of an ongoing internet feud between Li and Chen Weixing, a venture capitalist who in recent months has made a series of hostile comments in public against the investor.

Li announced his resignation on his Weibo account on Monday night, saying he made the decision in order to preserve the reputation of the government-backed blockchain investment fund launched in April of this year.

He wrote:

“The series of defamations from Chen Weixing against myself has brought material and negative impacts on the reputation of Xiong’An Blockchain Fund. … To let the Hangzhou government continue its push for blockchain development, I will resign from my role as a managing partner.”

As previously reported by CoinDesk, back in June, Chen openly described Li as a “fraud” and a “tumor” of the cryptocurrency industry. He later alleged that Li owed a group of investors 30,000 bitcoin that he had collected in 2013 for an investment fund, but could not repay since he had gambled away the assets.

Li later responded with detailed explanations to each of Chen’s accusations, but the spat did not end there. Things soon sparked off again as an obscenity-laden recording of a private meeting between Li and several individuals was leaked through social media on July 3, stirring up controversy within the Chinese cryptocurrency community.

In the 50-minute chat, recorded in January, Li took aim at various individuals and companies within the industry, calling Qtum’s co-founder Shuai Chu a “spin doctor,” Binance exchange a “cheating” platform and Softbank a “stupid fool” for investing in Ripple.

Chen went public again following the audio leak, accusing Li of being a “foul-mouthed liar.” He further questioned the legality of the Xiong’An Blockchain Fund, asking whether the local government has indeed allocated the apparently promised 30 percent of the funds.

Then, last Friday, Li announced through his WeChat channel that he had filed a lawsuit with a local court in Hangzhou accusing Chen of defamation. He went on to say that Chen has no knowledge of blockchain and can only make his name by defaming others.

Chen responded on Weibo that he believes the lawsuit will turn out to be his chance to take on Li in court and calling for “victims” to join him.

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Czech Investment Bank Raising $100 Million for Blockchain Fund

Benson Oak, an investment bank based in Prague, Czech Republic, has announced it is raising $100 million to launch an investment fund dedicated to the Israeli market and taking a focus on blockchain startups.

According to a report from Israeli media outlet Calcalistech on Sunday, the new investment arm, called Benson Oak Ventures, has already secured $25 million and aims to reach the goal of $100 million by the end of this year.

The new venture’s capital will come from private investors and family offices, excluding institutional investors, the report said. With a focus on seed-stage blockchain and consumer-facing startups, Benson Oak said in the report it anticipates to release the names of two portfolio companies in the coming days.

According to Benson Oak Ventures’ website, the fund will be interested in blockchain startups which can offer consumer products or create a platform that enables community growth, in an effort to boost blockchain’s use at a consumer level.

While the site of a thriving blockchain startup scene, several of the more major initiatives in Israel are being driven by large financial institutions that focus more on a business-to-business setting.

As previously reported by CoinDesk, Bank Hapoalim, Israel’s largest bank, is working with Microsoft to develop a blockchain-based platform for creating digital bank guarantees.

Meanwhile, the Tel Aviv Stock Exchange (TASE) is also teaming up with Accenture to build a blockchain securities lending platform aimed to allow direct lending of all financial instruments.

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Ether Investment Firm Begins Trading on Canadian Stock Exchange

The stock for cryptocurrency investment firm Ether Capital has begun trading on a Canadian stock exchange.

Formerly known as Ethereum Capital, the investment fund’s shares went live on the NEO Exchange in Toronto Thursday. The company plans to invest the funds it raises both into startups developing projects in the space as well make direct purchases of ether – the cryptocurrency of the ethereum network – as previously reported.

Co-CIO Ben Roberts told CoinDesk that the company raised $45 million Canadian (out of a planned $50 million), which will be mostly be converted into ether over the next four weeks. Ultimately, some 90 percent of the raised funds will be converted into the cryptocurrency, though Roberts declined to say how much the company had already converted

“I think it’s going to take the market some time to really understand the value proposition here,” he said, explaining:

“The utility of that is two-fold, yes it gives people exposure in the marketplace and more importantly creating that pool of assets gives us space in the community and the ethereum platform. As we kind of scale that out we can have an opportunity to become something like ConsenSys, which is a large organized stakeholder in ethereum which can then use its platform to create value.”

Setting up the investment fund took more than a year from concept to launch, but the process itself was straightforward, he said, explaining that “the first step was talking to the Ontario Securities Commission and getting their blessing, then talking to banks and getting them comfortable and setting up a custody solution to house the asset safely.”

Over the next year or two, the company plans to look at different projects it can support while “simultaneously creating enterprise value,” he said.

“Ethereum is a project that began in Canada, [but] it’s really being developed in most major cities in the world and this is a way to bring it back to Toronto and really bridge the gap between the technical community and the finance community,” Roberts added.

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Gibraltar Will Take Market-Driven Approach to ICO Rules

Gibraltar may be moving to regulate initial coin offerings (ICOs), but officials say it will be up to the market to determine what a “good” token sale looks like.

The U.K. overseas territory announced that it was drafting ICO regulation earlier this month, which will include the implementation of a system for “authorized sponsors” that will be tasked with managing compliance. Gibraltar’s government outlined a tripartite approach that would address “the promotion, sale and distribution of tokens,” create a well-regulated secondary market related to tokens and establish standards for the provision of advice relating to token investment within its jurisdiction.

“We don’t see a place for us as a regulator, or indeed Gibraltar as a jurisdiction that makes its own laws, for saying what ‘good’ looks like in token sales,” Sian Jones, a senior advisor to the Gibraltar Financial Services Commission (GFSC), told CoinDesk in an interview Tuesday.

Instead, regulators would “rather let the marketplace of authorized sponsors come up with possibly a number of different options of what good looks like,” Jones said.

Jones explained that a one-size-fits-all regulatory approach would be inappropriate for the blockchain funding model, and that Gibraltar is instead developing a set of principles for best practice. With these principles, each authorized sponsor will be able to “come up with its own methodology” to apply to the ICOs or tokens that they sponsor.

Asked if these measures implied a kind of self-regulation on the part of sponsors, Jones replied:

“I don’t know that I would reach as far as saying it’s self-regulatory, but it certainly resonates – the idea that the marketplace will determine what a good ICO looks like.”

Paul Astengo, senior finance executive at the Gibraltar Finance Centre, told CoinDesk that the timing of the territory’s ICO regulation is a product of its efforts to “keep abreast of developments” in the blockchain and cryptocurrency industry.

He explained that the legislation is the logical next step after Gibraltar’s Jan. introduction of a license for companies working with distributed ledger technology, which has made it an appealing destination for blockchain startups.

Likewise, Astengo said, “We want to welcome good quality companies, we want to welcome people that wish to operate that are as concerned for their reputation as we are for ours. And we want to make sure that all of the different elements for this regulatory framework will be enough to support what they’re trying to achieve for their firms.”

Roadmap for crypto fund rules

Astengo and Jones also confirmed reports that Gibraltar is considering regulation related to investment funds associated with cryptocurrencies and tokens.

“We are reviewing the inclusion of crypto-related assets in funds in our investment funds,” Jones said.”I think it’s fair to say that our thinking is not yet as developed as it is around token sales. So it’s a matter that’s under review right now.” Officials expect to iron out additional details on the matter later this year.

Both officials view Gibraltar’s forthcoming ICO legislation as one element in a regulatory framework that will continue to evolve parallel to the progression of the blockchain and cryptocurrency industry.

“We see blockchain and distributed ledger technology as a long game,” Jones said. “We see this as something that will have an important and profound effect on trust relationships with both customers and enterprises, citizens and government, and therefore something which is highly sustainable.”

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Investment Fund Moves to Capitalize on Ethereum Ecosystem

One of Canada’s largest investment funds is hoping to leverage the ethereum ecosystem through a new venture.

Ethereum Capital, a recently incorporated entity formed primarily by Canadian investment group OMERS, is raising $50 million and preparing for a reverse-takeover procedure. When the funding round is completed on Feb. 16, the company will invest the funds in both the ether token and in blockchain startups, according to a press release.

The ultimate goal, the firm said, is to become “the central business and investment hub for the ethereum ecosystem.” To that end, the company will also purchase controlling stakes in companies using ethereum-based tokens.

The company explained it would sell 2 million subscription receipts, valued at $2.50 each, in order to achieve its funding goal.

Once this goal is accomplished, each share of the company, called Ethereum Shares, will be later replaced with a share in Movit Media Corp., which will subsequently take over Ethereum Capital. The company will keep the Ethereum Capital name.

The new firm’s advisors include both traditional investors and representatives from blockchain startups. Notably, Liam Horne, a member of ethereum creator Vitalik Buterin’s L4 Ventures, will serve as an officer of Ethereum Capital’s board.

Joey Krug, a director of Ethereum Capital and co-founder of decentralized oracle startup Augur, said ethereum’s potential is largely untapped, according to a statement.

Krug said:

“The Ethereum network is just beginning to demonstrate its potential, with a greater number of transactions and applications being created almost daily. I believe it has the potential to disrupt many existing industries and am excited to advise Ethereum Capital due to its position to capitalize on the most promising of these resulting companies through strategic acquisitions.”

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Malta Proposes Rules for Cryptocurrency Investment Funds

The government of Malta is seeking public feedback on proposed rules for investment funds that focus on cryptocurrencies.

The Malta Financial Services Authority (MFSA) has published a proposed rulebook, dated Oct. 23, that would govern how professional investment efforts solicit stakeholders, manage risks and govern themselves. The release, subject to further alteration after the consultation period ends next month, represents the latest step by the Maltese government to implement public policy changes in light of the technology.

In statements, the MSFA said that its work could grow to encompass a range of investment fund types, explaining:

“The MFSA is developing a rulebook to regulate Professional Investor Funds (“PIFs”) which have the investment in virtual currencies as their investment objective. The MFSA is presently considering whether Alternative Investment Funds and Notified Alternative Investment Funds should also be allowed to invest in virtual currencies.”

The government said that it would accept input from potential stakeholders through Nov. 10, after it which is expected to audit the results and adjust the proposed rules accordingly.

Ultimately, the regulator said that it was approaching the new ruleset from the perspective of investor protection.

“The main proposals introduced within this new rulebook aim at safeguarding the interest of investors and the integrity of the financial market in the context of virtual currencies,” the MFSA said in a statement.

The full proposed rulebook can be found below:

20171023 VCFunds PIFs ConsDoc by CoinDesk on Scribd

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Billionaire Mike Novogratz: Bitcoin's Price Will Reach $10k in Less Than a Year

Ex-fund manager Michael Novogratz has said in an interview that he believes the value of a bitcoin will reach $10,000 in six to 10 months.

Putting his belief into practise, Novogratz, a former principal at investment firm Fortress and an ex-partner at Goldman Sachs, said he is leaving retirement to start a $500 million fund for cryptocurrencies, token sales and related startups.

Named the Galaxy Digital Asset fund, Novogratz indicated he has committed $150 million of his own money to the venture, and aims to raise the rest by January, CNBC reports. The remaining funds will be raised by wealthy individuals and other hedge fund managers.

Rather than focus on a narrow range of cryptocurrencies, the billionaire intends to invest indiscriminately across the industry, or “play the whole ecosystem,” he explained.

In an interview with CNBC’s Fast Money, Novogratz called the emerging landscape a “revolution,” stating:

“I never thought I’d come out of retirement but the space is so exciting right now I decided to build a business, hire a whole bunch of smart guys, and we’re gonna to raise a fund … and hopefully take advantage of what I see as a revolution, actually. A decentralised revolution.”

As a store of value, Novogratz likened bitcoin to digital gold, and said the technology is beginning to make “more and more sense” as we move increasingly into the digital.

Novogratz continued to say that, while bitcoin is a bubble, the mania is justified, because it is a technological advancement that promises to fundamentally alter our lives. Bitcoin is set to become “the biggest bubble of our time,” he added, and could reach $10,000 very soon due to fast-building interest.

“I can hear the herd coming” Novogratz said.

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Coinbase Vets Talk New Fund: Want Returns? Think Beyond Bitcoin

“People have this perception that bitcoin and ethereum are completely anonymous when that is not the case.”

That’s one of the insights Linda Xie gleaned over three years working at Coinbase – understandings that are now guiding strategy at the as-yet-unnamed cryptocurrency hedge fund she’s leaving to start.

One of a growing number of vehicles seeking to help investors capture the market’s meteoric growth, Xie’s is perhaps distinguished by her resume.

Most recently a product manager at Coinbase, Xie left her position last week to join up with another company veteran, software developer Jordan Clifford, on the venture. Their move is notable following the departures of Nick Tomaino and Olaf Carlson-Wee, both of whom also left Coinbase to found investment vehicles.

But Xie wants her fund to be known by the strength of its bets, and she says she’s gambling on the idea that gains will be found in the growing market of cryptocurrencies beyond bitcoin. In particular, she described privacy-focused cryptocurrencies as “extremely undervalued” given their potential to help solve what she perceives as limitations of the bitcoin protocol.

In her first public interview about her fund’s strategy, she told CoinDesk:

“You can actually reveal information on the blockchain. … This isn’t well known right now. Even people that I talk to inside the space are kind of surprised that it’s so easy to actually trace.”

Not simply an academic observation, Xie learned this firsthand at Coinbase, working in the San Francisco startup’s compliance investigations department.

While helping law enforcement catch cybercriminals by tracing transactions through the public ledger, she realized that same transparency could eventually aid phishing attackers and scammers, who may use the blockchain to identify potential victims with large holdings.

Buy and hold

It’s this real-life experience that is leading Xie’s fund to focus on privacy-focused cryptos such as zcash, dash and monero.

Broadly, however, the fund will follow a long-term, buy-and-hold strategy, reflecting another insight she said was gained at Coinbase: “Don’t try to trade on the news.”

In this way, investments will be primarily in large-cap cryptocurrencies, coins with smaller market capitalizations and token pre-sales, she said.

Bitcoin and ether will be the base of the new fund’s large-cap investments. Bitcoin is regarded in the crypto market as a store of value, according to Xie, so the fund wants to maintain continued exposure, while ethereum, she reasons, is likely to maintain value as a key platform for the development of decentralized applications.

Despite her enthusiasm for bitcoin and ether, though, Xie sees big potential in certain smaller market cap coins.

“It’s important to diversify your portfolio in this space because I don’t think there’s ultimately going to be only one winner,” she said, pointing to the iterative nature of technical development.

Governance and scaling

In addition to privacy holes, Xie sees governance issues and scaling problems as risks that some investors aren’t fully thinking through before buying.

If you’re going to buy something and hold it for the long term, she said, you’re going to need to ask yourself: Will this really scale? Novice investors, she said, often don’t realize that a coin that may be “fine for now” could become a victim of its own success as more people join the network.

As Xie put it:

“If there is one killer app built on top of this, will anyone actually be able to use it?”

A closely related issue is governance. Xie contended that one major red flag from a governance perspective is the concentration of coins among a few holders.

“If they’re going to be doing a decentralized governance system, the project founders or the coin creators themselves shouldn’t have a majority of these coins,” she said.

The flip side of risk is opportunity, and Xie is especially excited about coins where she considers the creators make shrewd decisions about governance.

Some recent examples of coins that did governance correctly from the start, in her view, are Tezos and 0x. These coins, she explained, are widely held, and allow their users to vote on protocol upgrades to mitigate scaling problems.

Token pre-sales

Only about 20 percent of the new fund’s portfolio will be dedicated to token pre-sales, the earliest stage of investment in initial coin offerings, the process by which entrepreneurs mint new cryptocurrencies to fund startup development.

That’s not to say Xie doesn’t want to invest in more pre-sales, but she also has concerns.

“This is the stuff that actually really excites me. This is more of the VC-type investing – but I just don’t think there are enough projects,” she said.

In fact, there are only a “handful of projects” that have conducted ICOs where she sees a real need to issue a token. The key question, according to Xie, is: “If I were to take this project and replace the token with ether, would it still operate the same way?”

If the answer is no, the token may not be a good, long-term buy-and-hold opportunity.

Further, the current popularity of token sales is distorting markets. “People are seeing that there’s a lot of easy fundraising in the space and they are taking advantage of it,” Xie said.

New investors, especially, should be concerned about this risk.

Pitfalls and best practices

One more potential pitfall for investors is technological risk.

To address that risk, Xie said, the ability to conduct code analysis prior to investing is critical for institutional funds. While her background is mostly financial – ­­she worked in portfolio risk management before joining Coinbase – Xie knows how to code.

Still, that wasn’t enough. “I wouldn’t have started this fund without a technical co-founder. That’s the hard requirement for me,” she said.

And that’s where co-founder Jordan Clifford, who worked as a software engineer at Coinbase for nearly two years, comes in.

The importance of technical skills, according to Xie, became obvious last week when a critical security flaw was discovered in IOTA — and several hundred million dollars evaporated from its market cap.

As a final word of advice, she suggested that, if you’re a newcomer to crypto and you’re fortunate enough to realize gains, you should sell off the amount of your initial investment.

If you’re lucky enough to be able to do that, she said:

“Everything you’re holding onto is gains … and that helps people have more peace of mind.”

Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Zerocoin Electric Coin Company, developer of zcash.

Portrait provided by Linda Xie

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Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.