Collecting Coins

Debt Collection, TITAN, Africrypt, and Tomb Raiders

Debt Collection

We talk a fair amount around here about debt collection. It’s a murky industry, filled with unscrupulous characters. Many Americans have delinquent debts, and are one emergency away from financial ruin. It’s surprisingly easy to get into the debt collection business. For some places in America, it’s a cottage industry:

The National Consumer Law Center calls Buffalo “an epicenter” of fraudulent debt collection activity. Authorities say thousands of people from all over America are scammed each year by collectors working in Erie or Niagara counties.

There are 156 debt collection companies – some of them legitimate, some not – in those two counties, employing more than 3,400 people, according to the state Labor Department.

Buffalo, New York has become a hub for illegal debt collectors, at large scale:

In recent years, authorities have either fined, seized or issued judgments totaling  $120.4 million against debt collectors in Western New York. They have prosecuted at least 39 local debt collectors since 2010.

But that hasn’t stopped the abuses.

Unlawful debt collectors take advantage of struggling, unsophisticated victims who are terrified by fake threats of police arrests, lawsuits and other drastic actions, authorities say. Some of the victims are harassed again and again for debts they never owed or paid off years ago.

Illegal debt collectors get consumer data from the same sorts of vendors the magazine scammers and payday lenders use. Files full of people who, at some time, had legitimate debts in collections. Collectors call and harass their victims, using threats and intimidation to get them to pay money they don’t owe:

“People found out that you can buy ‘old debt’ for a few pennies on the dollar,” [James] Morrissey said.

He said “old debt,” also known in the industry as “bad paper,” is a list of people who are believed to owe money. Some of these debts are legitimate, but are many years old.

Some of these debts are fictitious, and never were owed. Some of the debts have been discharged in bankruptcy cases. Others were paid off years ago.

“Some companies buy old debt, collect what they can on it, and then – instead of canceling the debt, which they are supposed to do – they just sell the list of debtors to another company,” Morrissey said. “Some of this old debt gets sold and collected on two or three times.” 

Disgusting. It is bad enough to have to deal with debt collectors for money you owe, much less have it haunt you for years because a company sold your information for pennies to the lowest bidder. So how does Buffalo fit into this world of unscrupulous criminals?

Debt collection provided thousands of job opportunities in a region where unemployment is traditionally high.

“Debt collectors continue to open in Buffalo because of the cheap office space and no statewide licensing requirement for debt collectors in New York,” according to the staffer in the Attorney General’s Office, who spoke on the condition of anonymity.

Lovely! Perhaps we should require some sort of licensing for companies who have the power to ruin someone’s credit? Even the penalties for illegal debt collectors are tame:

Local debt collectors who cross the line by threatening and harassing consumers rarely find themselves facing the possibility of time behind bars. In most cases, experts say, they face civil lawsuits or forfeiture actions. 

The civil penalties imposed appear substantial. But like many debtors, debt collection kingpins have been elusive when it comes to paying what they owe. 

According to court records, there have been at least $120.4 million in fines, penalties, cash seizures and judgments against local debt collectors over the past several years, but only a fraction of that amount has been paid.

It shouldn’t come as much of a surprise that the debt guys know how to get out of paying money they owe. Sadly, our civil justice system doesn’t have many tools at its disposal to deal with sophisticated financial criminals. Some of the more egregious offenders in Buffalo have been criminally charged and jailed, but until the country’s debt collection laws and reformed, bad actors will continue to take advantage of broke and scared citizens who don’t know their rights.

TITAN

These days, people spend a lot of time creating new financial instruments for cryptocurrency. Some of them go nowhere, but some can be incredibly lucrative. Today let’s talk about stablecoins which are called “stable” because their value is pegged to another thing:

Stablecoins are cryptocurrencies whose value is attached to financial assets such as commodities or government-issued currency in a bid to keep them “stable.”

Still with me? So you create, I don’t know, ScamCoin, and you say okay for every one ScamCoin we will have $1 US dollar in a bank account somewhere. You may remember this is what Tether claims to do, though there’s evidence they don’t quite do it.

If you were curious enough about stablecoins to have clicked the link I cited above, you will have noticed that right before the quoted section, it says this:

The project was attempting to boot a partially collateralized stablecoin known as IRON. The stablecoin, in turn, consists of Circle and Coinbase’s stablecoin, USDC, as well as TITAN, and was pegged to $1.

Why the past tense? Well, in ways I only vaguely understand, the TITAN project experienced “a crypto vortex of money” according to CoinDesk. Basically, TITAN was linked to IRON, and a bunch of people sold TITAN which caused the crypto equivalent of a bank run, which is when everyone tries to withdraw their money at the same time. TITAN’s price fell from $65 to $0.000000035 in a day, which is obviously bad for all the people who are left holding the coin(s).

Then it turned out Mark Cuban was involved:

Cuban, like a bunch of other people these days, has been going down the DeFi [decentralized finance] rabbit hole and he even wrote a blog post about his enthusiasm this Sunday, which included this paragraph where he highlights the TITAN token:

Cuban was part of the “pump”, or the enthusiasm that sent TITAN’s price up. He didn’t dump in time, though, and got caught up in the vortex of money:

I took a flyer and lost. But if you are looking for a lesson learned , the real question is the regulatory one. There will be a lot of players trying to establish stable coins on every new l1 and L2. It can be a very lucrative fee and arb business for the winners.

There should be regulation to define what a stable coin is and what collateralization is acceptable. Should we require $1 in us currency for every dollar or define acceptable collateralization options, like us treasuries or?

To be able to call itself a stable coin? Where collateralization is not 1 to 1, should the math of the risks have to be clearly defined for all users and approved before release?

There are many jokes about cryptocurrency helping libertarians discover the need for financial regulation, but there is something a little amusing about a guy whose entire schtick is shitposting about how he’s good at finance saying that maybe the wildly speculative crypto assets he thinks are cool should actually just be regulated like normal securities, because he lost money on a dumb bet on a coin with a flimsy financial model.

Africrypt

Elsewhere in crypto:

Following a surge in Bitcoin’s value in the past year, the disappearance of about 69,000 coins -- worth more than $4 billion at their April peak -- would represent the biggest-ever dollar loss in a cryptocurrency scam. The incident could spur regulators’ efforts to impose order on the market amid rising cases of fraud.

The first signs of trouble came in April, as Bitcoin was rocketing to a record. Africrypt Chief Operating Officer Ameer Cajee, the elder brother, informed clients that the company was the victim of a hack. He asked them not to report the incident to lawyers and authorities, as it would slow down the recovery process of the missing funds.

I will say, as something of an expert in these matters, that when you are attempting to make off with $4 billion dollars’ worth of Bitcoin, you may want to craft a somewhat more…sophisticated explanation. As an overnight billionaire, you could afford to hire a PR firm or crisis management company to make things seem a bit more legit. The “we were hacked, please don’t tell the police, and also don’t talk to any lawyers” excuse is so 2014!

Also, it’s probably not a good idea to immediately launder all the Bitcoin:

The firm’s investigation found Africrypt’s pooled funds were transferred from its South African accounts and client wallets, and the coins went through tumblers and mixers -- or to other large pools of bitcoin -- to make them essentially untraceable.

I do not follow crypto markets, but apparently this happened to another South African exchange just last year:

The saga is unfolding after last year’s collapse of another South African Bitcoin trader, Mirror Trading International. The losses there, involving about 23,000 digital coins, totaled about $1.2 billion in what was called the biggest crypto scam of 2020, according to a report by Chainalysis.

Ouch. So, presumably, the authorities are going to come in and investigate the thieves?

While South Africa’s Finance Sector Conduct Authority is also looking into Africrypt, it is currently prohibited from launching a formal investigation because crypto assets are not legally considered financial products, according to the regulator’s head of enforcement, Brandon Topham. The police have not yet responded to a request for comment.

Oh man. If only they had some regulation!

Tomb Raiders

Kudos to CNN for this absolute banger of a lede:

The looting of ancient art in Italy is not a new phenomenon. It is at least as old as the Roman empire, which not only contended with its own tomb raiders -- or "tombaroli," as they are known in Italy -- but also pilfered riches from other nations.

First of all, tombaroli is way too cool of a name for thieves stealing priceless relics. Second, calling out the Roman Empire for its crimes is the kind of petty I live for. Anyhow, the rest of the article is depressing in exactly the ways you’d expect:

During 2020, there was a notable increase in the trading of looted artifacts on Facebook groups globally, according to Katie Paul, co-director of the Antiquities Trafficking and Heritage Anthropology Research Project. In April and May, one of the largest groups monitored by the project almost doubled in size to 300,000 members.

Ah yes. I’ve written about how Facebook has allowed stolen artifacts to be trafficked on its platform for years, and it’s good to see they haven’t done much about it.

Many sites are unprotected because municipal funding issues force cities to ignore historically significant spots:

But 3 meters (10 feet) below street level, columns are scattered like children's toys around the place where Julius Caesar was betrayed by his allies and brutally murdered in 44 B.C. The site of what was perhaps the most infamous assassination in the history of the Roman Empire -- including the ruins of four temples dating back to the 3rd century B.C. -- is now reduced to a traffic obstacle.

It is easy to see how cunning thieves could have access to Italy's treasures. The ruins witness frequent arrests, as tourists and others can easily jump down without detection. It is believed to be one of Rome's most pilfered sites, even though many of most of the important objects, including vases and statues, were taken years ago.

Et tu, Italian government? This sucks, man. Constant budget cuts have ensured Italian cities don’t have the funds to properly excavate or preserve their historic ruins. Most of the existing monuments and sites are propped up by private dollars, because countries like Italy refuse to allocate the funds.

While governments ignore history, tombaroli make their money picking over the ruins. Many of these items make it into collections - even the Met has had to return objects of “questionable” provenance to Italy and other countries. The numbers are staggering:

In 2020 alone, more than 500,000 stolen treasures were returned to Italy from museums and private collections around the world, according to Alessandrini.

The pandemic - which hit Italy especially hard - emboldened the raiders:

In Anzio, south of Rome, the expansive ruins of Nero's imperial palace on the sea have been targeted by many tombaroli over the years. The site is protected by a rusting fence on which beachgoers hang towels to dry. On a sunny day in May, CNN even witnessed a man, who had breached the perimeter with a shovel, digging unhindered in broad daylight.

There’s something a little poetic about Nero’s palace being picked over by thieves while the world burns around it.

Short Cons

FT - ““Nikola was his breakthrough in size and in notoriety,” says Markopolos. “He’s on a roll and companies fear him.””

Bloomberg - “Some wonder what’s taking the SEC so long to tighten up on SPACs in general. The commission has tweaked certain accounting rules and is considering doing more.”

WSJ - ““A sentence with no prison term would, in the court’s view, substantially undermine the message that if you attempt to manipulate the market, the price you will pay includes prison,” Judge Tharp said.”

Tips, thoughts, or tombaroli to scammerdarkly@gmail.com.