Posted on

Mt. Gox Founder Knew of Security Risks Years Before Collapse, Lawsuit Claims

Two traders are suing Mt. Gox founder Jed McCaleb, and allege he knew of “serious security risks” years before 850,000 BTC was stolen in a devastating hack.

Mt. Gox founder Jed McCaleb is being sued by two traders who used the doomed exchange, court documents filed on May 19 show.

Joseph Jones and Peter Steinmetz have accused the ex-CEO of fraudulently and negligently misrepresenting the exchange.

The pair also allege that McCaleb was aware of “serious security risks” back in late 2010 or early 2011 — more than three years before 850,000 bitcoin (BTC) was stolen in an audacious hack. Their complaint adds:

“Rather than secure the exchange, McCaleb sold a large portion of his interest in the then sole proprietorship, and provided avenues to the purchases to cover-up security concerns at the time without ever informing or disclosing these issues to the public.”

Both of the plaintiffs describe themselves as experienced cryptocurrency traders. They said they were reassured by McCaleb following a “dictionary attack” in 2011, where a fraudster stole coins after targeting accounts with weak passwords.

The court document alleges that 80,000 BTC was already missing at that time, and claims that McCaleb sold a majority of his interest in Mt. Gox to Mark Karpeles instead of staying to repair the security issues.

While Jones said he owned 1,900 BTC at the time of Mt. Gox’s bankruptcy in February 2014 (worth $24 million at press time,) Steinmetz said he owned 43,000 BTC — crypto that would be worth more than $542 million at today’s rates. Both men are still in pursuit of their lost funds, and say they would not have used Mt. Gox had they known about the “significant security concerns” that existed in 2011.

In April, Mt. Gox rehabilitation trustee Nobuaki Kobayashi successfully petitioned a Japanese court to extend the deadline for the submission of rehabilitation plans to October 2019.

Meanwhile, back in March, former CEO Mark Karpeles was given a suspended jail sentence after being found guilty of tampering with financial records.

Mt. Gox was once the world’s biggest crypto exchange, and McCaleb later went on to become the founder of Ripple and the co-founder of Stellar.

Posted on

Ripple, Stellar Co-Founder: Bitcoin Crash Isn’t A Bear Market, Crypto Still “Way Up”

Meet “Crypto Pioneer” Jed McCaleb

Although you may not have heard of him, Jed McCaleb is a legend in the budding crypto industry. He forayed into cryptocurrencies when there was essentially only Bitcoin (BTC), launching the first iteration of Mt. Gox in 2007 (he converted into a BTC platform in late 2010). After leaving Mt. Gox, which collapsed just years later under the leadership of French national Mark Karpeles, Caleb began work on the Ripple protocol. The developer’s venture spawned XRP into existence, leading him to subsequently on-board David Scharwtz and Chris Larsen, who now act as prominent executives at the San Francisco-headquartered Ripple.

Following his stint at the financial technology startup, which has outperformed its peers in 2018, the crypto-centric entrepreneur left to co-found the Stellar Development Foundation (SDF). The SDF evidently is behind the organization Lumens (XLM). Since founding the Stellar protocol parent in 2014, McCaleb has committed a majority of his time developing the Stellar ecosystem, as XLM continues to top the cryptocurrency leaderboards day-in and day-out.

Disregard Bitcoin Crash, Crypto Still “Way Way Up”

2018 hasn’t been kind to the cryptosphere. In the past year, a majority of cryptocurrencies have tumbled, falling victim to the bear market blues. In fact, the aggregate value of all cryptocurrencies has fallen from ~$825 billion to $125 billion. This collapse has led mainstream media to lambast Bitcoin and its altcoin brethren, claiming that the end is nigh for this innovative asset class.

However, McCaleb, speaking to Yahoo Finance in a recent interview, claimed that consumers shouldn’t be worried. In a phone interview, the Ripple and Stellar co-founder claimed that “it’s funny when people say crypto is down,” quipping that in his eyes, it’s still “way way up.”

He explained that while prices are evidently down from their peak, by and large, this industry is stronger than ever. The Stellar creator added that it hasn’t affected business much either, noting that it “doesn’t matter” too much, echoing sentiment touted by other “BUIDLers.” Yet, he admitted that bull runs bring in more eyes, along with more free-flowing capital to drive innovation.

Considering McCaleb has an evident vested interest in this industry, it’s no surprise that he’s still bullish. Yet, confidence from such a notable industry insider is comforting.

“90% Of Projects Are B.S.”

Although McCaleb painted a positive picture overall, he explained that this industry has become inherently hype-driven, presumably due to the rapid rate that this industry has grown at. On the matter of hype, he added:

The allocation of capital and resources is wild to watch, when these projects that have zero technical merit get millions of dollars. It seems like a big shame. Hopefully that will start to change. One of the nice things that comes with the market calming down—I still say it’s not a bear market—it means there’s less of that.

The industry insider subsequently noted that 90% of all crypto projects are “B.S.,” adding that he’s looking forward to this industry theme to shift. McCaleb specifically called out Tron (TRX), claiming that it’s garbage, but people continue to “dump tons of money into it,” even if the product doesn’t work in full. He added that when you boil things down, in most cases, the utilization of existing cryptocurrencies, like XLM and BTC, is enough.

Title Image Courtesy of Brian Garcia via Unsplash

The post Ripple, Stellar Co-Founder: Bitcoin Crash Isn’t A Bear Market, Crypto Still “Way Up” appeared first on Ethereum World News.

Posted on

Stellar Co-founder Brands 90% of Crypto Projects ‘B.S.’

In a frank interview with mainstream media, Stellar CTO Jed McCaleb appeared skeptical of any cryptocurrency beyond Bitcoin, Ethereum or Stellar.

Most financial institutions will not use Bitcoin (BTC), payment network Stellar’s co-founder and CTO Jed McCaleb stated in an interview with Yahoo Finance Dec. 31.

Speaking to the online news outlet, McCaleb — who is also known as one of the founding fathers of defunct Japanese Bitcoin exchange Mt. Gox, as well as the co-founder of Ripple — made an argument in favor of the use of permissionless, open blockchains in finance. He told reporters bluntly:

“It doesn’t need to be the bitcoin blockchain, but if it’s not a public chain, then you’re missing the point.”

McCaleb also levelled criticism at cryptocurrency projects that were not Bitcoin, Ethereum or his own Stellar.

“Ninety percent of these projects are B.S. I’m looking forward to that changing,” he said when asked about the outlook for the cryptocurrency industry in 2019, continuing:

“Things like Tron, it’s just garbage. But people dump tons of money into it, these things that just do not technically work.”

Billed as an alternative token development platform to Ethereum, TRON (TRX) has upped its publicity efforts this year, with CEO Justin Sun regularly lambasting the Ethereum network over its alleged shortcomings.

Celebrations of TRON accruing its one millionth user account this month were likewise met with skepticism.

For McCaleb, however, no single cryptocurrency network or associated token forms an all-encompassing solution — including Stellar and its in-house coin, Lumens (XLM).

“There are some things bitcoin is good at, some things Ethereum is good at, and some things Stellar is good at,” he said, adding:

“And none of them can do all the things well. That’s just not how software works.”

Going forward, McCaleb was bullish, rejecting the idea that 2018 represented a bear market in crypto and instead describing it as “calming down.”

Stellar partnered with cryptocurrency wallet provider last month to expand the circulation and uptake of XLM with a massive $125 million airdrop to users.

Posted on

Co-Founder Of Ripple, Stellar: Blockchain Needs To Be Decentralized To Be Successful

Jed McCaleb, the co-founder of Ripple (XRP) and Stellar (XLM), as well as the creator of the infamous Mt. Gox cryptocurrency exchange, claimed that cryptocurrency and its underlying technology, Blockchain, should remain decentralized in order to succeed in the future, CNBC reported Friday, March 23.

In an interview on CNBC’s Fast Money, McCaleb said that the only other successful decentralized network he has ever seen is the Internet. In a fairly open critique of Ripple – a payment protocol company he co-founded in 2013, but has since left – McCaleb stated that the deployment of a centralized financial payment protocol in crypto would lead to “a system that is no better than SWIFT or PayPal.” He continued his Internet and Blockchain comparison, saying:

“The real vision is that you have a network, much like the internet, that anyone can participate in […] That’s the key thing to make these things successful.”

Earlier this week, McCaleb explained his vision for a Blockchain-powered “universal payments network”, also noting he thinks all equity will be tokenized by the year of 2028.

McCaleb is not the only high profile person making public comments on crypto and Blockchain this week. On March 22, Edward Snowden expressed concerns during an interview that the Bitcoin (BTC) Blockchain is “devastatingly public”, calling BTC’s public ledger its “long-lasting flaw”.

Earlier this week on March 21, Jack Dorsey, the CEO of Twitter and payment service Square, told mainstream media that he sees a single future currency emerging for the world and Internet, adding “I personally believe that it will be Bitcoin.”

Posted on

Stellar’s McCaleb: Blockchain Could Power ‘Universal Payments Network’ By 2028

Stellar CTO and co-founder, as well as Mt. Gox creator, Jed McCaleb told CNBC March 21 about his vision for a singular global payments system – one that will crucially involve Blockchain technology.

Stellar, which like Ripple is a Blockchain-powered international remittance setup with its own cryptocurrency, is currently attempting to create such a network.

“In the future, I think it’s pretty clear to me there will be a universal payments network that will operate,” McCaleb said.

While the solution he sees might not necessarily have Bitcoin or Ethereum at its heart, it would involve a “public ledger that people can see and can’t change arbitrarily.”

A halfway house situation may evolve, facilitating continued use of fiat currencies via Blockchain, letting people “use things they’re used to, like dollars and euros,” he adds.

McCaleb’s comments come as more and more legacy financial institutions reveal they are considering both Stellar and Ripple as a major shake-up of their remittance models. Ripple is currently due to be implemented on a commercial basis by South Korean Woori Bank later this year.

In future, it may not just be payments, but traditional assets such as stocks that go digital using Blockchain tech, McCaleb meanwhile said, the change potentially occurring before 2028:

“In the next 10 years I wouldn’t be surprised if all equity isn’t tokenized on some blockchain somewhere.”

Today, March 21, Twitter and Square CEO Jack Dorsey went further than McCaleb in terms of specificity, making his own prediction for the future of Blockchain and crypto. Dorsey said he sees Bitcoin in particular becoming the world’s “singular” currency within the same timeframe.

Posted on

Blockchain of the Vanities? Sibos, Swell and Stellar Troll in Toronto

So much for collaboration

In the latest sign that the blockchain sector has reached peak hubris, two much-anticipated conferences devolved this week into what can only be described as elaborate trolling.

But for those following the run-up to the events, the result is unlikely to be a surprise. When distributed ledger startup Ripple announced it would host an event called Swell, aimed at uniting financial leaders to discuss trends and strategies, it was hardly coy about its intent.

What might have seemed pretty innocent on the surface showed its true colors when Ripple decided to have the event in the same city, on the same days as Sibos, the flagship annual conference that its incumbent competitor has been putting on since 1978.

As a result, the city of Toronto played host to an all-out grab for attention, one where none of the players involved were willing to let the others have their day. But, the publicity did have its benefits, and it does seem to have favored the startups if attendees are any indication.

“It’s more fun over here,” one Swell attendee said to another, both of whom had passes to attend Sibos.

Even onstage attendees and online commentators were forced to recognize the situation.

When Swift CEO Gottfried Leibbrandt poked at Ripple, describing one of its initiatives as “not a swell, but a tsunami,” Ripple’s chief technology officer Stefan Thomas sent it right back on Twitter, retorting:

“To the future victims of @SWIFT’s ‘tsunami’ – @Ripple will be here to help rebuild.”

But in other ways, Ripple’s PR offensive didn’t work.

For one, big-budget keynotes, such as those for the inventor of the World Wide Web, Tim Berners-Lee, and former Fed chief Ben Bernanke, didn’t fill the room. Of course, that may be because speakers didn’t exactly choose sides. (Prior to his appearance at Swell, Berners-Lee had been reportedly spotted at Sibos.)

If all that wasn’t enough, the move also sparked another form of boycott, with one of Ripple’s own industry-specific competitors using the event as a platform for attention-seeking.

On Monday, Stellar came out of hiding, announcing a partnership with IBM in which the incumbent tech company revealed it is settling real transactions with Stellar’s native cryptocurrency.

Not to stop there, on Tuesday night, Stellar founder Jeb McCaleb (who has had a longstanding beef with Ripple executives) spoke about his protocol to about 100 people at a local bitcoin enthusiast group Bitcoin Bay’s MeetUp.

A game of trolls?

If you’re looking for winners, though, the sad truth is no one wins in a game of trolling at this scale. Rather attendees were perhaps given more one-sided content in two (or three) different ways.

Protest events notwithstanding, financial incumbent Swift remains a powerhouse, and it used its event to herald its own blockchain solution for moving money in nostro-vostro accounts.

The same could largely be said about Swell – where panels mainly focused on enterprise use cases for Ripple tech. Swell may have been unique, however, in the sheer emphasis it put on the idea that there is a competition to be had between the two camps.

For example, a number of financial institutions used the Swell stage to laud blockchain (and Ripple’s platform specifically) for being an easier way to transact cross-border than Swift.

On day one, Marwan Forzley, CEO and co-founder of business-to-business payments provider Veem, was keen to stress that blockchain allows cross-border transactions to move in real-time (unlike the incumbent’s generally slower payment mechanisms).

“The [blockchain] environment is very useful in markets like the Philippines,” he said, pointing to the currencies outside the G10 (those that are the most liquid and heavily-traded).

Day two of Swell was more of the same, with a handful of Ripple’s clients – including Banco Santander, SBI Remit, Nordic bank SEB and India’s Yes Bank – speaking about the protocol’s benefits.

For instance, Banco Santander’s blockchain innovation lead Richard Bell talked about his company’s pilot Ripple iOS app, which allowed the bank’s employees to pay in British pounds when the merchant wanted to accept euros or U.S. dollars.

“Very quickly our employees were using this application for mission-critical things, like mortgages on homes in other countries and … speeding fines,” Bell said.

The catch

Of course, all of this actually ended up exposing similarities between the providers.

With more than 100 clients, Ripple may be well on its way toward becoming a competitor to the legacy financial payments system, but it also must work with it to get there.

Even Stellar’s McCaleb acknowledged the importance of getting legacy partners to the effort of growing the use of distributed ledger systems, telling his meetup attendees:

“Everytime we get a financial institution to use the network, it’s easier to get more financial institutions to use it too.”

This line of thinking was perhaps best on display during the last panel at Swell, which likely packed the room because ethereum creator Vitalik Buterin was onstage (also speaking were Hyperledger executive director Brian Behlendorf, Chain president Tom Jessop and Ripple’s Thomas).

But, all the panelists conceded that right now, it’s too early to compete to the death.

While Buterin built (and continues to build) what he calls a general purpose blockchain, he also said that there’s no right answer for every use case. Sometimes private blockchains work best, other times a public blockchain is necessary, and in other cases, a hybrid approach is the only route, he said.

“We are building the new financial world and some parts of the new internet,” Buterin said, adding in that way, it’s more about competing over ideas, instead of with people and companies.

Plus, sometimes, it’s hard to tell whether blockchain companies know who their competition really is.

In response to a question about Swift, Behlendorf came to the incumbent’s aid, saying, “Well first, you have to understand what Swift is. They’re a co-op … and they don’t help their shareholders by charging exorbitant rent. It’s pretty cheap.”

He continued:

“For [Swift] it’s about getting payments down from T-2 days to T-5 minutes … so they’re in a perfect position to adopt blockchain.”

Even Thomas, taking inspiration from the blockchain interoperability play Interledger Protocol where he devotes much of his time, was more reserved during the panel when it came to dissing the competition.

This was true for other Ripple executives as well. On Wednesday, the last day of Swell, Ripple CEO Brad Garlinghouse reflected on Tuesday’s closing panel, clarifying that what’s good for his company, is generally good for everyone in the ecosystem.

He concluded:

“I want all boats to rise.”

Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Chain and Ripple. 

Panel image via Bailey Reutzel

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Interested in offering your expertise or insights to our reporting? Contact us at

Posted on

Competition Stiff Among Companies Using Blockchain to Disrupt Apps Market

Accusations of “bubble” abound even as Bitcoin price surges back toward its record high of $5,000. There are also suggestions that Bitcoin’s price should be viewed in terms of the S-curve of rapid adoption.

Others say that Bitcoin will reach $50,000, or even $1 mln, in due course. Hardcore skeptics such as Chase CEO Jamie Dimon believe that the government will ultimately shut down Bitcoin and bring this grand experiment to an end.

User “dashfriend” on the Dash Nation Slack comments:

“Isn’t ease of use one of the main catalysts for a bubble? I don’t see ease of buying yet for non-tech people.”

User “foxtrot” agreed:

“In order for a bubble to exist there needs to be saturation of the market…and with the crypto market still [in] its infancy, that seems highly unlikely…Hasn’t Bitcoin supposedly been in a bubble since it was $2?”

A powerful disconnect

Many digital currency investors and traders are focusing on the presence of institutional investors: banks, pension funds, mutual funds and the like. While such mega investors would certainly help push the price up, it seems that retail investors and users are always forgotten in such discussions.

With so many working on creating ETFs, regulated futures markets and so on, who is focusing on the little guy? Who is working to make sure that digital currency gets in the hands of as many ordinary people as possible?

It’s the apps

According to TechCrunch, the apps market is expected to reach $6.3 tln by 2021. By the end of this year, there will have been a total of 268 bln apps downloaded, with revenue exceeding $77 bln.

This is a staggeringly huge market, and with Google and Apple taking over a 30 percent cut of the profits, it’s a market ripe for disruption.

While many startups are trying to find ways to profit from this enormous market, to date they have been hampered by the Blockchains they build upon. Both Bitcoin and Ethereum are capable of about seven transactions per second, which is clearly not enough capacity to support a transformation of the apps market.

Competition is stiff

Among companies that aim at using Blockchain to disrupt the app market are Mobius, ChainLink and IOTA.

Cyrus Khajvandi, co-founder of Mobius, is anticipating the creation of “Smart Markets” where data from connected devices can be traded freely between other devices. According to Khajvandi, Mobius gives the example of connected appliances which contract with decentralized electricity generators to provide machine-to-machine payments. Such a system would use “smart contracts” and “smart auctions” to run appliances, using as little energy as possible at the lowest possible prices.

Mobius boasts Jed McCaleb as an early investor and advisor. McCaleb is the founder of Ripple and Stellar, and, somewhat unfortunately, the founder of doomed Bitcoin exchange Mt. Gox.

Mobius intends to be a leader in the Internet of Things (IOT), but to do so, they will face stiff competition.

IOTA has a significant head start in this area, seeking to “[make] every technological resource a potential service to be traded on an open market.”

Even in terms of their current product for app payments, Mobius has competitors such as ChainLink. In fact, ChainLink’s services sound similar to Mobius’ product. ChainLink’s website says:

“ChainLink is Blockchain middleware that allows smart contracts to access key off-chain resources like data feeds, various web APIs, and traditional bank account payments.”

Nothing is certain

BlockTower Capital cofounder Matthew Goetz probably said it best when he compared the digital currency and Blockchain boom to the Internet boom of the late-1990s. Goetz warns:

“You could be right on the thesis that cryptocurrencies are transformative, and you could make what you think is the right bet at the time, but remember one time you had Yahoo and then this thing called Google came along.”

Mobius, IOTA, ChainLink and others all sound interesting, but the market will ultimately decide on the winners and losers. Even if you can predict the general trend, it’s much more difficult to bet on exactly the right horse.