The Barry Silbert-led investment firm Grayscale has submitted an official filing for the Zcash Investment Trust with the U.S. Securities and Exchange Commission (SEC).

As first uncovered by WhalePool, a prominent cryptocurrency trading group, Grayscale filed a “Notice of Exempt Offering of Securities” with the SEC earlier this week. The filing states the firm’s intent to sponsor a trust that will invest in Zcash, an anonymity-centric cryptocurrency that just celebrated its first birthday and currently holds the 16th spot in the market cap rankings with a total valuation of about $591 million.

The filing indicates that the trust already has nine investors who have contributed a combined total of more than $11.6 million, although the minimum investment threshold is much lower at $10,000. Initially, the trust will only be available to accredited investors.

Grayscale — a subsidiary of the Digital Currency Group — recently surpassed $1 billion in assets under management (AUM). Most of those assets are concentrated in the Bitcoin Investment Trust (OTC: GBTC), a publicly-listed security that is currently traded over-the-counter (OTC) and can be purchased through any brokerage account. Wall Street analyst and bitcoin bull Tom Lee recently called GBTC an “attractive” investment, predicting that it could triple in value over the course of the next five years.

Although many firms have filed to launch exchange-traded funds (ETFs) that either track the price of bitcoin or hold the asset directly, the SEC has yet to approve one. Consequently, GBTC remains the only U.S. exchange-listed vehicle that gives institutional investors exposure to crypto assets.

Grayscale has also sponsored the Ethereum Classic Trust, although, like the Zcash trust, this product is currently only available to accredited investors. Since launching in April of this year, the underlying assets represented by Ethereum Classic Trust shares have risen in value from $4.30 to $10.14 and the trust’s AUM has tripled to about $36 million.

The firm has not yet confirmed the news of the Zcash Investment Trust, but it did hint that it would announce “additional investment products” in a tweet posted two weeks ago.

The State Bank of Vietnam (SBV) has amended its monetary regulations to make Bitcoin and similar virtual currencies illegal. In an announcement revealed today – it is now illegal to issue, supply or otherwise use Bitcoin because it has been designated as an illegal means of payment. The SBV notice clarified that the only officially accepted means of payment in Vietnam are checks, payment orders, payment orders, collection orders, bank cards as well as any other payment instruments approved by the State Bank. The move against cryptocurrencies follows similar bans on centralized virtual currencies, often used for gaming or gambling, as well.

While no other altcoins like ZCash, Ethereum, Litecoin, Ripple, and others are specifically named, it’s pretty clear that Vietnam is also considering these other cryptocurrencies to be illegal means of payment, as well. What’s the penalty for using illegal means of payment? 150 million to 200 million VN – which translates to roughly $9,000 USD.

Editor’s Note: Dominik Weil from the bitcoin.vn has said that the ruling has been misunderstood:

In short: All status quo. You are not supposed to offer goods/services in other means than VND – same rules apply e.g. for USD/Gold etc.  Reason for the announcement now is the the news from the day before, that FPT university planned to start accepting BTC for tution fees.  Since those news got covered in all major VN media – SBV saw themselves forced to react with a clarification on the matter. Offering goods & services in VN needs to be done for VND. Status of Cryptocurrency Regulation in VN remains unchanged.

Vietnam: $9,000 fine for using cryptocurrency

The Vietnamese site that published the news about he update to Article 206 – nld.com.vn – is a state owned and operated media operation. So the rule has already been decreed – there is no comment period here.

“From 1-1-2018, the act of issuing, supplying and using illegal means of payment (including bitcoin and other similar virtual currency) may be subject to prosecution in accordance with the provisions of clause 1 (h) of Article 206 of the Penal Code 2015 (as amended and supplemented in 2017).”

It concluded:

“As such, Bitcoin and other similar virtual currencies are not legal means of payment in Vietnam. The issuance, supply, use of bitcoin and other similar virtual currency as a means of payment is prohibited in Vietnam.”

It isn’t yet clear if the declaration that virtual currencies are illegal means of payment affect the use of Bitcoin and similar currencies as a form of investment. Does the prohibition of issuing and supplying of Bitcoin also mean that mining is illegal in Vietnam? It’s entirely possible. Until the first user, or company, is fined for breaking this new decree, we won’t know exactly. However, don’t be surprised if other countries also decree that Bitcoin isn’t a legal means of payment as the fiat status quo continues to be disrupted. That means that virtual currencies have successfully ruffled some feathers and that they, the governments, have moved on from ignoring us to fighting us – and the next step is simply that we win.

The ZCash Foundation has been granted 501(c)3 status as a public charity by the United States government. The ZCash Foundation went through a long and arduous application process with the IRS to make sure that they received tax exempt status for public infrastructure – not public education (which is much much more common and usually referred to as the easy route). Furthermore – they are the first to do so in the name of privacy. Peter Van Valkenburgh explained the significance of the new tax designation on the ZCash Foundation blog:

You may not be particularly interested in non-profit tax law, but if you are passionate about the Internet, privacy, and the future of public infrastructure, then this is important news. So far as I know, the Zcash Foundation is now the first public charity dedicated to building internet payments and privacy infrastructure for the public good.

ZCash Foundation will still promote cryptocurrency education

Valkenburgh clarified that the ZCash Foundation’s previous work will continue, just be expanded to cover more:

The foundation will—still—engage in public education about cryptocurrencies, online privacy technology, and the computing networks that power these new tools. But the foundation will also support open, peer-reviewed scientific research into zero-knowledge proofs and associated cryptographic technologies, and, perhaps most importantly, it will help to build the Zcash decentralized network as open, public infrastructure.

ZCash was able to successfully justify the importance of privacy in public spaces – including those that are online – to the IRS. This is a big win for cryptocurrencies, privacy, and free and open source software in the United States and abroad.

Today, the LabCFTC, a fintech initiative within the Commodities Futures Trading Commission (CFTC), released a paper titled  “A CFTC Primer on Virtual Currencies.” The doc reveals the CFTC’s current stance on Initial CoinSale (ICO) tokens in relation with other agencies – though there is this disclaimer:

“This primer format is intended to be an educational tool regarding emerging FinTech innovations. It is not intended to describe the official policy orposition of the CFTC, or to limit the CFTC’s current or future positions oractions. The CFTC does not endorse the use or effectiveness of any of the financial products in this presentation.”

The CFTC is essentially saying that it has determined that virtual currencies and tokens are still commodities, but could also be securities – as the Securities Exchange Commission (SEC) has previously said this year. The CFTC’s newest thoughts on virtual currency add this SEC consideration without going back on previous designations. Back in 2015, the agency did declare that it would treat Bitcoin and other cryptographic assets as commodities. The CFTC clarified how their definition of cryptocurrency and tokens is consistent with the SEC’s:

“There is no inconsistency between the SEC’s analysis and the CFTC’s determination that virtual currencies are commodities and that virtual tokens may be commodities or derivatives contracts depending on the particular facts and circumstances.”

ICO tokens, like their underlying cryptocurrencies, are also commodities to the CFTC

Whether or not you agree with the designation of tokens or cryptocurrencies as a security and a commodity (and a property for tax purposes), the additional clarifications do somewhat clear the haze and allow bitcoin and blockchain based companies to charge forward.

Not all ICOs are dandy – and many ICOs are just straight up scams that do deserve multi-agency government crackdown. Take LangPie for example. The decision does give ICOs some additional validation and will undoubtedly be used to guide US-based ICOs, at least.

Full doc here.

What do you think about the CFTC’s suggestion that ICO tokens are both commodities and securities? Let us know in the comments below.

ico scam example

This is a story of a poorly executed ICO scam called Langpie. The Langpie pre-sale is planned for later today and the ICO is set for November 2017. As an editor in chief, I have a strong nose for BS. As anybody who has been in the Bitcoin space for awhile can tell you, this industry attracts the absolute worst BSers in the world. After being made aware of certain scammy aspects of this particular ICO, I had to take a deeper dive. I’ve read the Langpie “whitepaper” so you don’t have to, but I still recommend that you do just for a few laughs.

The Langpie ICO scam investigation

A few days ago, I stumbled upon a Hacker News post by a thoroughly flabbergasted developer – we’ll call him K at his request. He had noticed that his GitHub and other social media accounts, including his profile picture, were being used to promote an ICO. His HN post read:

“I just found out that somebody is using my picture, name and links to social networks in what seems to be an ICO scam website. They pretend to be a translation app on top of blockchain technology and listed me as part of the team working on the app which I am not. I am not sure what to do! Any ideas?”

I contacted him for more information – K emailed me quickly, and explained fully:

I was contacted by Nastya Moroz, also in the same team, on Facebook messenger at first she said that she have some questions about the blockchain. I thought it was strange that a random person is just reaching out to ask me about something I have very little knowledge about. So I was looking into her profile and that’s how I found the website.

Nastya Moroz, the supposed Project Manager for Langpie, reached out to their supposed blockchain developer, after already listing him on the site. The story gets more bizarre still:

“This person kept contacting me on messenger this time saying she have something important to talk about regarding her company, and when I faced her with the fact that they’re using my name and picture without my permission, she said it was a mistake and asked that I tell no body, probably to not mess with their ICO that starts in 2 days.”

The Langpie website no longer has K’s profile picture and social media links – they have been replaced with another person’s profile picture, Facebook and GitHub link. This new blockchain developer profile, along with Nastya Moroz’s profile, both claim to be a former employees of Open Solutions – a Russian tech consulting company. I think it’s safe to say that Langpie doesn’t have a blockchain developer, or any developer whatsoever.

Both Open Solutions and Langpie did not respond to requests for comments by the time of publication.

Signs you might be running an ICO scam

1. Your blockchain developer isn’t actually a blockchain developer
2. Your blockchain developer has no idea who the hell you are
3. You willfully confuse profit and revenue in your whitepaper
4. You don’t know what burning cryptocurrency means
5. ???
6. Don’t Profit

Langpie is generating buzz on the promise of transforming the online translation industry. The same way that experts have pinned Bitcoin as a digital competitor to gold, and estimated that Bitcoin’s price would be $X if it could only hit Y% of the gold market cap, or the credit card fraud volume, or international trade flows, etc. The stated target industry for Langpie is the $1.713 billion over-the-phone interpreting market. Langpie promises that, with a heavy marketing campaign paid for by your funding, they’ll be able to capture 20% of that market by 2020. Starting off though, the Langpie whitepaper author claims:

“Our company expects to conquer and occupy about 10% of the market share by the end of 2019, the estimated profit will be 171 million US dollars of profit per year.”

Wait a minute, I thought your profits came from 5% commissions? And aren’t those commissions burned (technically having their value evenly distributed among the remaining coin holders, even those that didn’t participate in the transaction)? Wouldn’t Langpie’s profit, if they did even keep 5% of every successful Langpie smart contract transaction, be a lot smaller than $171 million? And jeez that sure sounds deflationary if 5% of every transaction gets burned – in the event that people actually use this scam coin, what happens to the supply?

In the infamous words of Billy Mayes: “But wait, there’s more!”

The whitepaper goes on to address this economic point…

“After several years, in case of insufficiency of tokens the system will generate new tokens which will be sold through the exchange market, 80% of the profit from that crowdsale would be distributed proportionally between the users, the rest of 20% would be spent on improvement of the system, equipment and for employment of additional staff.”

That’s right, they’re promising current pre-sale and ICO participants a chunk of their future crowdsale which will happen in several years. The money generated from the planned pre-sale and ICO are earmarked as such: 46% for marketing, 7% for tech infrastructure, and 15% for R&D – they clearly have their priorities straight, just check out their Bitcointalk thread and see the type of marketing they’re currently promoting. One big ICO scam sin is having bounty programs for publications to write about your ICO – and Langpie is no different. Langpie paid for press releases on several cryptocurrency news publications and claims on their website that they have received “coverage” by these sites. Langpie proudly displays them on their homepage with a simple message: “Press love us!” Let’s not get into the current sorry state of the digital currency media space, that such a project was able to gain any steam at all. Very technically, I could try and claim a chunk of the Langpie Blogs/Media promotion bounty with this article – not that I’m likely to ever get a response from this fake project.

The current effort, and planned future effort, is all for marketing and nothing for tech/dev. If the dev work on the translation app is completed, and that’s the reason why there aren’t any real blockchain developers on this supposed blockchain project, then why not demo it? I could sit here and ask questions all day, but we already know the answer.

If you didn’t notice any of these red flags, you just might be wearing rose colored glasses – and you definitely shouldn’t be involved in ICO speculation. They’re hoping to raise a minimum of $150,000 and a cap of $400,000 in their pre-sale tomorrow – let’s make sure that doesn’t happen. They’re planning their full ICO in November – for the sanity of this industry, that can’t happen either. If you see someone tweeting or talking about Langpie or any other sketchy ICO – please, please, please link them to this article.

Thanks again to K for bringing this to my attention, I truly hope that revealing the Langpie ICO scam for what it is helps to make up for any potential damage that Langpie has caused for K’s and the blockchain industry’s reputation.