11 days after I lambasted the outfit. Billions went up in smoke already.
This is my biggest blockchain hero, and now the Securities and Exchange Commission is taking all the fun out of it. The SEC has “temporarily suspended” trading in the shares of UBI Blockchain Internet, a Hong Kong-based company whose shares [UBIA] are traded in the US. This came 11 days after I lambasted the shenanigans of UBI and its executives.
The SEC cited two reasons – “accuracy” in UBI’s disclosures and funny trading activity:
- “Questions regarding the accuracy of assertions, since at least September 2017” by UBI in SEC filings “regarding the company’s business operations.”
- “Concerns about recent, unusual and unexplained market activity in the company’s Class A common stock since at least November 2017.”
The suspension of trading is effective through January 22. The SEC added this warning:
The Commission cautions broker-dealers, shareholders, and prospective purchasers that they should carefully consider the foregoing information along with all other currently available information and any information subsequently issued by the company.
The last phrase is good: “…and any information subsequently issued by the company.” So don’t believe whatever the company might say in the future.
By hyping the word “blockchain” in its name, and by hook or crook, this outfit with zero revenues and a disconnected phone number in its SEC filings got its shares to spike by over 1,100% in a few days, from $7.20 on December 11 to $87 by December 18, pushing its market capitalization to $8 billion. On December 26, the company filed with the SEC to sell 72.3 million shares owned by six executives, including CEO Tony Liu, to allow them to bail out.
Shares closed at $22 when last traded on Friday, and now no one can sell them – however dubious they might turn out to be.
Even at $22 a share, if the share sale were to succeed – if the “public” were stupid enough to go for it, which by the looks of it might have been the case in this “blockchain” hype era – the executives would still transfer $1.6 billion from the public into their own pockets.
UBI’s history in the US doesn’t pass the smell test. In October 2016, the Hong Kong company acquired a publicly traded shell corporation registered in Las Vegas, changed the name and ticker symbol, and off it went, as I pointed out in my piece, I’m in Awe of How Far the Scams & Stupidities around “Blockchain Stocks” are Going
There were some glaring red lights in the prospectus for people who bother to read it, who likely wouldn’t be the people who’d buy the shares. It said, for example, that “due to the uncertainty of our ability to meet our financial obligations and to pay our liabilities as they become due,” UBI’s auditors questioned “our ability to continue as a going concern.”
“Without any additional funding, the Company will be unable to operate,” it said, and it “must raise additional capital in order to continue operations.” But all the shares would be sold by its executives and the company “will not receive any proceeds from the sale of the common stock by the selling stockholders.”
So even after the sale of the shares, UBI would still have nothing – no revenues, no business model, no cash. You have to hold your nose while reading the prospectus, wondering who’d be stupid enough to fall for this. But enough people were stupid enough. Hence the multi-billion dollar market cap.
Regulators finally woke up to this game, issuing a series of warnings about the entire crypto and “blockchain” hype. On December 11, the SEC issued a warning that commenced this way:
The world’s social media platforms and financial markets are abuzz about cryptocurrencies and “initial coin offerings” (ICOs). There are tales of fortunes made and dreamed to be made. We are hearing the familiar refrain, “this time is different.”
On January 4, the North American Securities Administrators Association (NASAA) warned:
Investors should go beyond the headlines and hype to understand the risks associated with investments in cryptocurrencies, as well as cryptocurrency futures contracts and other financial products where these virtual currencies are linked in some way to the underlying investment.
The recent wild price fluctuations and speculation in cryptocurrency-related investments can easily tempt unsuspecting investors to rush into an investment they may not fully understand.
Cryptocurrencies and investments tied to them are high-risk products with an unproven track record and high price volatility. Combined with a high risk of fraud, investing in cryptocurrencies is not for the faint of heart.”
The same day, the SEC warned once again about “cryptocurrencies” and “Initial Coin offerings,” commending the NASAA for its “timely and thoughtful reminder to Main Street investors to exercise caution.” It added:
The release recognizes that cryptocurrencies, while touted as replacements for traditional currencies, lack many important characteristics of traditional currencies, including sovereign backing and responsibility, and now are being promoted more as investment opportunities than efficient mediums for exchange.
UBIA, at the $22 a share, still has a market cap of $2.4 billion on paper. From its peak, nearly $6 billion has evaporated. And there’s a good chance that the rest of it will evaporate too.
So here we go (I’m just kidding, but others are not, and people are falling for it). Read… Wolf Street Changes Name to Wolf Blockchain, Shares Soar 2,000%, Company & Founder Sell 10 Million Shares
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I am quite happy that I in no way understand, nor wish to garner any knowledge about, “blockchains”!! I shall remain a ‘blockhead’ I guess.
The irregularities of the Hong Kong stock exchange are astounding. See the “Enigma Network.” Looks like shell companies rule the exchange.
Thank goodness the risk indicators have flattened out.
Wow! The SEC actually doing its job! They must be protecting somebody important.
The ‘Stable Genius’ perhaps?
you forgot the “very”
Take heart – the MSM is on the bandwagon pumping Oprah as the next Pres … and Rosanne is the dark horse claiming she would be better.
Good times coming, or maybe it really is the end.
C’mon folks, how can you not like the “stable genius”, I mean , would you rather see the “Terminator” in there?
We had the Terminator in Cali :-]
How about ‘Two Lip Coin’?
‘Two Lip Coin’
A GOOD one.. LOL
‘my Biggest “Blockchain Stock” Hero’
My blockchain stock hero is bigger than your blockchain stock hero.
A Crypto Website Changes Its Data, and $100 Billion in Market Value Vanishes
A hundred billion is rather a lot of smoke and mirrors.
I know, I know, we don’t need no stinkin’ regulations, but it’s really something that ought at least to be discussed.
Walter, what are you, some kind of stinking anti-Libertarian? It’s plain as day that the problem is Too Much regulation.
In case you kiddies think that creating value out of nothing with smoke and mirrors is a product of the digital age, let me recount how the business operated that I flogged penny stocks for for a week in 1980. They had some basic mining equipment, paint brushes, and a sufficient variety of paint. They’d buy mining claims that had gone bust, rename it Goldstrike Unlimited or God’s Treasure, move the equipment there and start pushing dirt around. Grease the palms of mining newsletter “journalists” with a few Loonies. Create buzz and momentum, then convert it into Maple Leafs. Repaint the equipment and repeat. Probably 1/2 of the Vancouver penny exchange operated with a variation of this MO. None of the investors on the Exchange gave a damn because they only were interested in timing Momentum and fleecing the suckers that junior salesmen like me were able to bring through the door.
I’d bet that a variation of the same scam was going full scale on the day Jesus was born.
Oh Canada, home of the scam (and the Attitude!). And if you score big enough you get the Order of Canada medal …
This enforcement action is all fine and good, but the FRB and it’s central banking brethren are the all-time long con.
I’m having a hard time typing because I keep breaking out laughing. Wolf, your original article made it abundantly clear that the whole thing was questionable.
And the amazing thing is that there doesn’t appear, from reading your article, to be any fraud involved, the company was upfront about their worthlessness, lack of future, and the disposition of the money from the stock sale.
And as to the SEC doing their job, I’d say they were a few days late and a few billions short! I guess they didn’t read the prospectus either.
Good point, if your company is a obvious fraud and there is no deception on the part of management, where’s the crime?
These things don’t have to be a “crime” – which would mean that the FBI shows up at the door. Stock manipulation or “unexplained market activity,” as the SEC calls it, and not disclosing what needs to be disclosed would be enough.
We’re sort of in a behind-the looking-glass world here. Because if senior management is honest about engaging in fraud, they could never sell their stock because every sale would precede disclosure of damaging financial information violating insider trading rules.
They need to give the Agents of the SEC guns and black helicopters.
“And as to the SEC doing their job, I’d say they were a few days late and a few billions short!”
Regulatory capture works. Even if nothing else in government does.
Financial regulation, for example, is so far behind the curve they can never catch up, and any more they take only the vaguest interest in trying to make it look good.
Hackers: “All your data are belong to us.”
Always good to have walter map explain (daily) that EVERYBODY is crooked or incompetent, NOTHING works as it should (or Walter thinks it should), and we’re all DOOMED!
You don’t follow trends or read the news, do you?
Yup, I do.
I just don’t accept EVERYTHING is ALWAYS ABSOLUTELY wrong/corrupt like you do.
Glass half-full; glass half-empty.
“I just don’t accept EVERYTHING is ALWAYS ABSOLUTELY wrong/corrupt like you do.”
Now, now, Javert, I’ve already pointed out that regulatory capture works and functions very well and as intended. So does Social Security, for that matter, despite the predations of vultures. And fyi, a glass is neither half-full nor half-empty. It simply has space for more brandy.
Not everybody is corrupt and/or incompetent.
You assume that conscious mind/s are out to control/capture the system. A lot of it is probably simple incompetence and the limitations of the enforcers.
SEC folks must be bored of xxx. They were ‘busy’ for eight years and now they are clearing the inbox.
What we don’t know is what they did to get their shares to spike 1,100% in three days. This takes some doing. And I’d love to get the details on this.
If yahoo finance is correct and their 3 month avg daily trading volume is really under 18,000 shares per day, then it really doesn’t seem that difficult for unscrupulous mgmt or its confederates to put the “pump” in pump and dump.
Excellent question … why do some of these comapanies jump so radically with the Blockchain stuff …one of my penny stocks issued a news release about ‘embracing Blockchain technogy’ In their dispensaries and their stock went up a mere 300%! Lol
Some article somewhere proposed the stock trading algos see it and just push the stock up … of course algos don’t actually think so common sense is difficult to capture in a computer script lol
Maybe someone in the SEC got wind of your article and actually decided to do something about it.
I’d love to be a fly on the wall in the office of Harry Markopolis, the analyst who tried in vain multiple times to get the SEC to act against Bernard Madoff.
Does the name have to contain blockchain or is chain enough? If the latter, then Goldchain Pyramid would be my name of choice.
Or just “block” as in H.R. Block? Looking at the stock price, I think the algos haven’t picked up on it just yet. Maybe it’s an opportunity to get in on the ground floor?
Hahaha … H.R, Block should change their name to HR. Blockchain and the company valuation increases will exceed its entire history! Lol … just cracked me up when you referenced them
With all their local offices, wouldn’t they be the H&R Block chain of tax preparers? Now that I’ve put that onto the webs you have maybe 3 seconds to make your move.
The rolling blockchain with ledgers rendered obsolete may actually make the business model viable – or at least plausible!
Good day oldsters!
Unbeknownst to you, there is a massive amount of millenials who follow several tipsters who tout certain stocks on a daily basis. They predict what tomorrows action will be and then wait for these fools to pile on.
Mostly tech and biotechnology stocks, some dubious, some not.
I’ve seen some go from $5.00 in the morning to $30.00 in the afternoon.
Check out ‘Stocktwits’ website as an example. Here’s the takeaway, none of them can’t won’t read more than 140 characters at a time.
If someone they follow says its a buy, it’s a buy.
Huge money gained and lost on a daily basis.
Several known hucksters release fake news, short the stock, then play it back up.
Who said white collar crime doesn’t pay?
“Who said white collar crime doesn’t pay?”
You might like to talk to Javert Chip about that. Judging from his post above, it seems unlikely he’ll be joining my fan club any time soon, but on the plus side, that also means he won’t be mounting a hostile takeover.
As for me, I am frequently concerned that my comments may not convey the proper sense of alarm.
Actually, Walter & I are pretty close on this. As a retired CFO, I see no reason for UBI Blockchain Internet to be allowed access to the US markets, and frankly do not understand why the SEC allows this (but then I also thought BofA and Citi should have been shut down in about 2009). I am also disgusted at Wells Fargo, and very disappointed that Buffett has not spoken out strongly, and a bunch of WFB Sr Mgrs should alrednybe in jail.
Ref: …(but then I also thought BofA and Citi should have been shut down in about 2009). I am also disgusted at Wells Fargo, and very disappointed that Buffett has not spoken out strongly, and a bunch of WFB Sr Mgrs should already be in jail.
As Grandma warned “be careful what you wish for as you just may get it.”
This [inaction] appears to be the result of a synergistic (and in MNSHO, highly toxic) combination of “judicial consequentialism” and “prosecutorial discretion.” While it would be highly satisfying on the primitive personal level, such public (show trial) actions would have been *HIGHLY* counter productive, given the 2008-2009 socioeconomic/political environment, resulting in even more civil unrest, e. g. “Occupy Wall Street.”
This is not to say that the accountable directors, officers and cadre managers should have gotten off scot-free, but that they should have been gradually eased out of the financial sector by civil regulatory action by the SEC, FDIC, CoC, CFTC, etc. with as little publicity as possible, by placing them on a unified/joint list prohibiting employment in a regulated company for 5 or 10 years (possibly longer in especially egregious cases). The BoA and Citi banks (among others) including their brokerage divisions, should have been gradually pruned back to a manageable human scale size, possibly requiring de-mergers and spin-offs.
Perhaps after the next “credit event”…
“…I see no reason for UBI Blockchain Internet to be allowed access to the US markets, and frankly do not understand why the SEC allows this…”
They SAID in their offering memo that they were a sham company, with no real business. If you TELL the public “we’re going to rip you off” and exactly how you’re going to do it, and then do it, is that a crime???
George, the proper treatment for snakes like Dimon, Bezos, Buffet, Stumpf, Carlos Slim, Roman Abramovitch etc. is not to gradually ease them out of their companies to live the rest of their lives jetting between the Hamptons and St. Barts. Far better to put them in a large pot full of champagne and build a fire under it that gradually brings it to a bubbling boil. Now that’s Practical Gradualism!
Bumper sticker recently seen while driving around town: “Eat The Rich”. Now there is a theory of Economics devoid of all macroeconomic fallacies.
Amen to that and two blockchain hale mary’s.
I understand your counsel for moderation, but given the severity of 2008’s financial crash and the magnitude of the massive violation of the public trust demonstrated by both Citi & BofA, my considered opinion was & is both institutions should have been “resolved”. This would entail essentially selling off the retail and most “traditional” commercial businesses (smaller banks would have wanted the vast majority of these properties). All the fancy & highly offensive investment banking, financial engineering & derivatives should have been wound down (a process which may have taken 10 years).
Both institutions had staff in the neighborhood of 400-500,000 employes. Each bank’s top 30-40,000 senior managers and morally corrupt “investment bankers” should have been out of jobs; tellers and other operations staff jobs would have been preserved.
However, when the two banks were rescued, top management jobs were (for the most part) saved, but 100-200,000 lower-level staff were terminated to “reduce costs”.
This episode was not exactly a shining moment for big government’s & regulators (NOTE: ig banks are huge campaign contributors).
I am an unapologetic capitalist, but capitalism must have consequences. What happened here was Citi & BofA got saved & the (innocent) “little people” got laid off. That’s not capitalism – that’s political corruption.
(I’m guessing Walter will be proud of my rant).
George i would of though public trials of excess would have reduced civil unrest. When the public belives the law,gov system is holding people to account, they cab eagerly await trial. There are no protests when everything goes well. No civil unrest over the arrest of car thiefs.
Conversely if they feel regulators, politicians are letting them off unfairly then civil unrest makes more sense.
So tipsters are peddling the same stocks and the price goes up? How surprising!?
21st century shoe-shine boys.
Wile UBI is the most flagrant, much of what Wolff reports applies to many of the other SEC regulated corporations, for example Enron, Global Crossing, WorldCom, etc. Only time will tell which blue chip company(ies) will “cash in its chips” when interest rates return to normal.
Yeah I know, who do these guys think they are? Only the hypocritical FED and other sanctioned central banks are legally allowed to conduct “funny or unexplained trading activity” when the urge strikes.
Well, I see that what is left of Kodak is getting in on the craze. They have announced “Kodakcoin”. Their shares were up as much as 77% this afternoon. Why bother with a product when you have an imaginary “coin”.
And, for what it is worth, in my experience many of the problems we attribute to criminal action are actually the result of ignorance, stupidity, and greed.
Time for a new macro metric: Gross Imaginary Product.
Following this measure, at some point in the future everybody on the planet will inevitably become a wealthy billionare just before the entire global economy undergoes a sudden and gratuitous total existence failure.
As we know, nothing ever goes kaput in a straight line, but that in no way excludes the likelihood that everything will go kaput in a Lifschitz fixed point.
Whoa, Walter. That’s cool. Maybe the whole world economy is a contraction mapping!?!
Nice job on the original article, Wolf, which included the previous call/warning.
These bubbles of buying exuberance are absolutely amazing. When we are old codgers we will be able to share some of these examples with friends and family. Hopefully, no one will believe us and will actually confirm present events with some research. It is, unbelieveable.
A foole & his money,
be soone at debate:
which after with sorow,
repents him to late.
and even older!!
Ecclesiastes 1:9New International Version (NIV)
What has been will be again,
what has been done will be done again;
there is nothing new under the sun.
A list of economic crashes and Depressions from the first century, here: https://en.wikipedia.org/wiki/List_of_economic_crises
:-) Oh yeah, this time is different. DOW 30,000 (Ha)
How long can the Fed tolerate the existence of rival counterfeiters?
The fed will torelate the existence until somebody publishes a paper that uses derivatives on correlation matrices built out of sampling elements in some manifold or some such gibberish. If you are techie, it isn’t raining until your iPhone says so, even if you are soaking wet. For an economist in the same rain, the rain is not real until somebody can show it to her using equations.
SEC says “thow shalt disclose”. Doesn’t mean that anybody reads it. These guys were an obvious fraud from the day they bought the LV shell. Thanks for shedding some light into the dark corners of human nature! Can’t believe people fall for this stuff.
There is a material difference between “you shall disclose” normal business risks and conducting a fraud (definition: false statement of fact made by one party to another party, which has the effect of inducing that party into contract).
Inappropriate use of the name “blockchain” or “doctor” is plainly intended to deceive the unaware.
I don’t think regulators should be in the business of protecting snowflakes (of any age) from their own ignorance, but intentionally & blatant misrepresentation is (or should be) clearly wrong (aka: actionable).
C, I think we do need to be in the “business of protecting snowflakes”. By allowing pied-pipers to waltz these dumbbells away from their personal assets, it’ll eventually just add to the hoards that will be begging (or worse) for alms.
Don’t disagree. I was just stating the argument for as little functional regulation as possible. As you said above: “…capitalism must have consequences…” It is far better if those consequences are a function of the market than coercive regulation.
“The ultimate result of shielding men from the effects of folly, is to fill the world with fools.” Hertbert Spencer
RDE: “Walter, what are you, some kind of stinking anti-Libertarian?”
I am an art critic.
From Coindesk.com, Kodak’s announcement:
“Kodak CEO Jeff Clarke said in a statement:
“For many in the tech industry, ‘blockchain’ and ‘cryptocurrency’ are hot buzzwords, but for photographers who’ve long struggled to assert control over their work and how it’s used, these buzzwords are the keys to solving what felt like an unsolvable problem. Kodak has always sought to democratize photography and make licensing fair to artists. These technologies give the photography community an innovative and easy way to do just that.”
As of press time, shares for Kodak are up roughly 37 percent for the day, having risen from an opening of $3.10 to as high as $5.50 before settling down around $4.30, according to Google data.”
But: I thought the royalty thing was handled by watermarks on photos, licencing, and normal payment systems to use photos. It’s a whole business.
Thanks for doing my homework:).. but now im curious, like you, what this means.
I guess it really means nothing, because it’s something anyone could do anyway, with a website than can be set up in minutes for free, watermarks, and PayPal or some other payment mechanism like credit cards or the umpteen money transfer systems.
Bonus: such transactions take seconds instead of the minutes or sometimes hours of blockchains, though mileage varies amongst the different blockchains/coins.
The whole blockchain thing is just about decentralized database records, what the 1500 ‘coins’ and tokens are all about. Sometimes it’s about ‘contracts’, though I wonder what the legal strength of a computer-generated contract in cyberspace would be with no traditional signature and witness, and that could vanish at any moment.
> But: I thought the royalty thing was handled by watermarks on photos, licencing, and normal payment systems to use photos. It’s a whole business. <
Like "Shutterstock". They could legally change their name to "Shutterblock" and cash in on the block word. Maybe their shares would go skyward.
We live in a gamblers world.
Wolf, just to be clear, the SEC halted the shareholders from selling, untill Jan 22nd, correct?
“…if the “public” were stupid enough to go for it, which by the looks of it might have been the case in this “blockchain” hype era – the executives would still transfer $1.6 billion from the public into their own pockets…”
Great reporting and comments as always.
No trading through Jan 22. So no buying and no selling.
SEC over sees Block chain stocks…and reacts..they over see Gold and Silver Futures and sit idly by…for YEARS…..now they are ..HERO’s….wtf
Just found this from Bloomberg: “Shouting Crypto in a Crowded Theater”: https://www.bloomberg.com/gadfly/articles/2018-01-10/your-best-response-when-a-company-shouts-crypto-run
Buffett on cyrptocurrencies:
‘I can say almost with certainty that they will come to a bad ending.’
I think he could have left out “almost”