30 Oct 2021 · 15 min read

Graft, Greed, and Guile in the Highly Lucrative Crypto Industry

Disclaimer: The text below is an advertorial article that was not written by Cryptonews.com journalists.

Back in the 2018 ICO craze, multi-millionaires and even billionaires were made in less time than it takes to mine a bitcoin. During those heady times for the crypto world, any novel idea, no matter how crazy, could be thrown into the market to see if it would stick. Prices skyrocketed, champagne flowed, and huge fortunes appeared like magic overnight as initial coin offerings funneled enormous sums of cash to their project’s creators. 

The wave of enthusiasm carried dodgy tokens up to dizzying heights along with legitimate ones. Many of these crypto projects had been put together in a fraudulent or seat-of-your-pants fashion. Without any technological substance behind them, their values were based solely on clever PR and marketing. Then the crypto bubble suddenly burst, and much of the riches evaporated, along with the hype. 

Hundreds of cryptocurrencies were wiped off the map. Some of their progenitors cashed out early and ended up no worse for wear, though supporters of their projects were left holding the bag. Some went down with their ships, and others just outright took the money from their ICOs and ran off.

To name a few instances, millions of investors ended up defrauded when OneCoin (ONE), whose founder once held a glitzy event in Wembley Stadium, was revealed to be a $4 billion Ponzi scheme. Another pyramid scheme, BitConnect (BCC), was one of CoinMarketCap's best performing coins before it collapsed, leaving its token holders with nothing. BoringCoin (ZZZ) promised no drama, no hype, and no pump and dumps but failed to last a year, like an estimated 90 to 95 percent of joke coins. GetGems (GEMZ), a social messaging app that allowed people to send and receive Bitcoin, raised roughly $1 million through crowdfunding before ceasing to trade completely.

Overall, from their peak in January of 2018, cryptocurrencies collapsed by a total of 80 percent, making the crash worse than the Dot-com bubble burst of 78 percent.

When the smoke cleared, only serious projects that had some real innovative technological clout remained. One of those survivors was a China-based crypto company called Skycoin.

“Skycoin was created as an answer to the shortcomings of both Bitcoin and Ethereum,” according to the company’s website. Its vision from the beginning was to clean up Bitcoin’s problems, like its centralization of mining and lack of descripting language, and also to make it a cleaner and more readable blockchain platform for developers. In its ten years in business, Skycoin has been creating a whole ecosystem of solutions to problems that the blockchain aims to solve.

“The goal of our software is to build infrastructure. Infrastructure is like plumbing – that is all blockchain is. Some cities are running their water systems on hundred-year-old pipes. If what we build works then, a hundred years from now, people will probably still be using it,” notes Skycoin’s founder, Brandon Smeitana.

The company’s flagship product is Skywire – a decentralized community-driven mesh network that runs on user-owned nodes, dubbed Skyminers. These mini servers provide the infrastructure for an internet network which bypasses traditional internet service providers (ISPs), while providing lightning fast, completely encrypted web access. Skyminer owners are reimbursed for operating their nodes with Skycoin tokens.

Skycoin tokens are not mined like Bitcoin, as they don’t rely on Proof-of-work (PoW) consensus where people are rewarded in coins for their computers’ energy and processing use. It is also not a Proof-of-Stake (PoS) currency where users are rewarded for simply holding Skycoin in their wallets. 

Instead, Skycoin has its own, custom consensus method called Obelisk, which addresses many of the weaknesses of Proof-of-Work (PoW) and Proof-of-Stake (PoS) algorithms. Obelisk is based on a Web-of-Trust consensus, where influence is distributed over the network, creating a Web-of-trust architecture that provides a perfect system of checks and balances. The result is quick, highly secure, and free transactions on the blockchain.

The structural layer behind Skycoin’s blockchain platform, dubbed Fiber, is described by the company as “a transformational, better-than-blockchain solution which solves existing problems using distributed ledger technology. Fiber is the foundation of blockchain 3.0 and can be best described as an infinitely scalable network of blockchains laid side by side, like strands. This is a technological feat that cryptocurrencies such as Bitcoin or Ethereum will never be able to achieve, as they were never engineered to scale infinitely.”

Skycoin has even created its own feature-rich programming language called CX, which it is currently using to address the growing needs of Skycoin’s ambitious and growing ecosystem of projects that can’t be satisfied with any other available languages.

Despite its long-life and technological prowess, the crazy scheming milieu of 2018 has recently come back to haunt Skycoin, as the company has recently found itself the subject of a hit piece published in The New Yorker entitled Pumpers, Dumpers, and Shills: The Skycoin Saga. The attack, which seemingly came out of the blue, was based nearly solely on the testimony of a former contractor of Skycoin’s, Bradford Stephens, who was pressured to part with the company over three years ago due to the ethical concerns of its advisory board.

Indeed, Stephens created huge problems for Skycoin after his company, Smolder LLC, was contracted to do marketing and business development back in 2018, when the ICO craze was in full swing. 

Stephen’s first assignment was to attend a CoinAgenda conference in Las Vegas in order to check out the altcoin scene, meet some of Skycoin’s key people, and see what the crypto scene was doing at the time. However, unbeknownst to anyone in the company, while there, he decided to throw a ‘VIP Party’ in a hotel suite that included steak dinners, expensive alcohol, and prostitutes. He later presented Skycoin with a bill for over $225,000 in alleged ‘entertainment expenses’, claiming he had thrown the party to promote the company and had gone over his budget. On doing some further investigation, Skycoin found that his invoices either didn’t match up or couldn’t be substantiated. They also learned that no one from the conference had even attended the party. Needless to say, the company refused to pay, and Stephens was none too pleased by this.

According to The New Yorker article, afterwards, Stephens “asked to see Skycoin’s accounting books” and “in early February 2018, a month after the CoinAgenda conference, booked a trip to Shanghai to see Skycoin’s founder, Brandon Smietana, determined to bring some order to Skycoin.” Just why a marketing contractor who had worked for the company less than six weeks felt like he had the authority to check out the company’s books or “bring some order to Skycoin” is never addressed.

During this visit, Stephens, along with his business partner Harrison Gevirtz, took Smietana to a Shanghai hotel room to introduce him to an “influential marketing specialist” in a Zoom call. Stephens, Gevirtz, and the mysterious person on the call, whose identity could not be revealed for some reason, claimed that they had $50 million in cash ready to invest in Skycoin, which would send its price up hundreds of times. But, first, they claimed that “Skycoin has to show they are serious” by immediately sending them $30 million in Bitcoin in exchange for their company’s marketing services. “If you hire us, Skycoin will go to billions of dollars, if not, it will go to zero,” they said. When Smietana asked for referrals from former customers, the reply was that all their business was very private and confidential so no referrals could be provided. Smietana then asked if the team could be paid monthly, so the company could see how well they perform. The answer was, “No, because our people’s time is too valuable.”

Smietana informed them that there was no way he could just send someone $30 million in Bitcoin after a 10-minute Zoom call without even knowing the name of their company or what they intended to do, and that he would need a proposal in writing, which would have to go through committee approval.

The person on the Zoom call then switched tactics and said he was ready to buy $30 million in Skycoin tokens, which the company should send him immediately, but that instead of paying for them, he would keep the money he would have sent to purchase them and use it for marketing purposes.

When Smietana pointed out that $30 million was a huge amount of money, this “high net-worth individual” became progressively angrier and started screaming threats. The conversation ended soon thereafter.

When Skycoin’s advisory board learned about Bradford’s business partners, half of its members threatened to resign on the spot unless all business relationships with Stephens and his company were immediately severed, as they were afraid that their names would be associated with Gevirtz, aka HaRRo, who is widely considered to be the king of the blackhat marketing criminal underworld. It was also suspected that the person behind the Zoom call was Ryan Eagle, another Smolder partner, who had been named in a US Government FTC action against his company, Eagle Web Associates, concerning illegal marketing practices in 2014 and 2016.

An article on the US Federal Trade Commission Website, explained how Eagle’s scam worked:
At first, consumers thought it was their lucky day. They had received text messages announcing they had won a $1,000 gift card from a major retailer… CPATank and Eagle Web Assets agreed to promote the merchants’ sites through their network of affiliate marketers… The affiliates, in turn, promoted products – including the offers for the ‘free’ merchandise – through unsolicited texts that falsely told consumers they’d been specially selected for a gift or prize – for example, ‘Dear Walmart shopper, your purchase last month won a $1000 gift card, go to [website] within 24 hours to claim.’ The defendants got a commission from the merchants for every person who clicks the link, visits the site, provides information, or buys something. The defendants, in turn, pay a portion of that cash to their affiliates… Consumers ultimately found out that to qualify for the ‘free’ merchandise, they had to climb a Mount Everest of other offers, including applying for credit cards, enrolling in negative option plans, and turning over a raft of personal information. In most cases, it was impossible for people to get the ‘free’ prize without opening their wallets.”

Stephens returned from Shanghai empty handed. Shortly thereafter, a scathing article about Skycoin was published on Next Web, a technology-news website, by a reporter named Tristan Greene. The New Yorker Article states: “Stephens granted Greene an interview but couldn’t persuade him of the project’s legitimacy.” However, Smietana maintains “Stephens blackmailed the company and said that if he wasn’t promoted to COO and given the ability to run the company’s operations and approve his own budgets that he would basically blackmail us with this hit piece in The Next Web.” Obviously, this tactic didn’t work.

According to The New Yorker article, after his return from China, “Stephens came up with a plan to strip Smietana of power and transfer management of the company to a foundation; he still believed that Skycoin could become a reality if reasonable people were in charge.” Although, again, just why someone who wasn’t even an employee that had worked for the company as a contractor a little over a month thought he had the right to take down the company’s founder is never explained.

The journalist who wrote the New Yorker article, Morgen Peck, then goes on to explain: “by late February 2018, six weeks after he [Stephens] joined the project, he found that he was locked out of both the Skycoin Telegram and his work e-mail. Members of his team were locked out, too.” However, oddly, later in the article, she notes: “After being cut off, he took Skycoin’s social-media accounts hostage, and unsuccessfully demanded a severance payment.” Just how Stephens could have taken Skycoin’s social-media accounts hostage if he had already been locked out of them is a question that doesn’t seem to have occurred to Peck. 

Smietana explained that, in fact, Stephens’ correspondence with the company shows that he resigned on February 24, 2018, less than two months after being contracted, under pressure from Skycoin’s advisory board. However, he still owed the company a refund of $80,000 for money he had received during the previous billing period but not spent. Skycoin asked for those funds to be returned. Smietana asserts, “Bradford seized social media accounts after we demanded the unspent money from his budget to be returned to the company. He held the accounts hostage and demanded an additional $150,000.”

Smietana admitted that Skycoin had made a big mistake in hiring Stephens in the first place but explained that such characters were commonplace during the 2018 ICO craze, when every scammer worth his salt was trying to leach money from companies riding the crest of the technological tsunami.  “Even if it was only six weeks, it’s crazy how much damage one person can do. We were not the only victims. It happened to almost everyone in the industry. When you are growing rapidly in the middle of a bubble like we had in 2018, among every hundred new people, someone like this will turn up.”

And, indeed, it wasn’t only Bradford Stephens that severely injured Skycoin. Scott Freeman, who was CEO of the now defunct C2CX cryptocurrency exchange, where Skycoin was listed, also did his part. Based on an interview with Freeman, The New Yorker article erroneously states that “Skycoin’s payments were fast, but only because transactions were processed on a single server, rather than on a decentralized network of computers. The server sat in the Shanghai office of Scott Freeman, the C.E.O. of the C2CX cryptocurrency exchange.” Referring to the alleged setup, Freeman told The New Yorker, “The big thing about a blockchain is it’s supposed to be decentralized, and no single entity is supposed to be able to change it… In a way, it makes you into a fraud.”

However, according to Smietana, this description of Skycoin’s system is an outright lie, as there are some 9,000 nodes online just for Skywire. “Every server in the network passes every transaction peer to peer. Every server in the network passes every block peer to peer. Every server in the network independently validates the transactions.” 

The New Yorker goes on to say, “In the spring of 2018, Skycoin climbed into the list of the top hundred coins, and appeared on a Nasdaq Web cast. That May, Binance announced that it would list Skycoin on its trading platform. Around the time of the listing, the price jumped thirty-eight per cent... But, as soon as Binance listed Skycoin, the market flooded with sell orders. Freeman, from the C2CX exchange, had been acting as the project’s primary ‘market maker,’ using a pool of reserves to provide market liquidity and stabilize prices.” Peck then claims that C2CX was eventually forced to abandon Skycoin amid the crypto crash of 2018-2019, noting, “In 2019, Freeman’s exchange announced that it was delisting Skycoin.” 

However, there is a lot more to this story. Smietana explains, “Scott exit scammed by stealing all the Skycoin from the users on C2CX. He sent it to Binance, sold it for Bitcoin, and then lied, claiming that Skycoin had frozen their wallets and therefore he could not allow the users to withdraw their Skycoin from C2CX. Tens of thousands of users had their Bitcoin or Skycoin stolen by C2CX and complained on the internet.” He went on to say that Skycoin had not been Freeman’s only victim. “Most projects chose not to go public because it would have caused severe damage to their reputations, destroyed their price, increased volatility, and brought about a loss of confidence in their projects.”, “When this kind of fraud happens to you, what you do? Its an open secret secret that it happened to almost industry in 2019. When the market crashed many ‘market makers’ and exchanges just stole the projects money” he said.

Despite the ups, downs, and drama of 2018’s mad ride, Skycoin continues to develop new and innovative blockchain products in order to realize the original vision of Bitcoin’s mysterious inventor, Satoshi Nakamoto, of a truly decentralized cryptocurrency. This is why it is especially curious that an article seemingly written solely to slander the project would appear now. After all, the events described in The New Yorker occurred more than three years before the article appeared. Stranger still is that a prominent mainstream publication like The New Yorker would subscribe to a story like this, seeing that its main protagonist, Bradford Stephens, only worked for the company a mere six weeks, and contributor Scott Freeman is a known scammer. Perhaps it’s just a manifestation of a recent trend witnessed around the globe, where the liberal-leaning media has been cheering on their masters in centralized politics and finance as they attempt to constrain and shut down the crypto world, over which they have no real control.

Regardless of the motivations behind the attack, Skycoin has already weathered several crypto winters and its fair share of hit pieces in its ten years of operation, and will, no doubt, go on serving its 10K+ community members who truly believe its products will eventually create a better third-generation cryptocurrency and a truly decentralized, anonymous, and secure internet accessible to everyone.

Skycoin’s founder, Brandon Smietana, observed: “It’s going to take another thirty years to see blockchain replace legacy applications. We are at the start of the technology adoption cycle, not the end. I think about where we are going with blockchain over the next ten, twenty, thirty years. I don’t really care what happens this month or what coin is being pumped this week. We are looking at how this technology is going to transform human society. Skycoin is almost ten years old. In another ten years, we will still be here. We’ve survived through all the booms and busts. We are not going anywhere.”