Auscoin cryptocurrency founder arrested for alleged drug trafficking
Celebrity endorsements and national themes are always red flags, and Auscoin is more evidence of both.
Australia's anti-money laundering watchdog has shuttered some cryptocurrency platforms for the first time, closing down two cryptocurrency platforms, Auscoin and SK BTC, for alleged money laundering violations.
The anti-money laundering violations in question are focused on Auscoin founder Sam Karagiozis' alleged trafficking of 30 kilograms of drugs including methamphetamine and others.
"Police will allege in court that the 27-year-old played a key role in directing the operations of the criminal syndicate, which used various dark net sites, bitcoin accounts and legitimate business for the sourcing, payment and distribution of the illicit drugs," the press release reads.
"AUSTRAC's role is to deter and disrupt criminal exploitation of Australia’s financial system and we take swift action where there is a reasonable risk of compromise. Our decision to suspend the registration of the two businesses means they can no longer lawfully operate."
What was Auscoin?
Auscoin presented itself as an Australian national cryptocurrency, but was implied to be a transparent cash grab shortly after the announcement of its ICO. Auscoin's decision to take the cryptocurrency spotlight on national television was controversial at the time, and many people thought it was an extremely poor representation of Australia's cryptocurrency scene.
In hindsight, those concerns were very well founded.
The Auscoin ICO was intended to fund the rollout of Bitcoin ATMs around Australia, with supporters able to access lower ATM fees. The ICO flopped, but the Bitcoin ATMs started rolling out around Australia anyway. As recently as 20 January the company raised eyebrows by announcing that its ATMs were turning over $500,000 per week throughout 2018.
SK BTC, meanwhile never seems to have been anything. Its Facebook page simply says "You will soon have the ability to BUY & SELL Bitcoin through us directly. Formally known as Sam Kazz BTC on localbitcoins.com AUS LARGEST BITCOIN TRADER!!"
It goes without saying that some dude on LocalBitcoins was most definitely not Australia's largest Bitcoin trader.
Red flags: Celebrity endorsements and national themes
If there's one consistent red flag in cryptocurrencies, it's being endorsed by a celebrity from a completely unrelated industry. Auscoin fitted the bill by picking up a public endorsement from Nick Kyrgios (an Australian tennis player).
If there's another red flag, it's when a cryptocurrency describes itself as the official cryptocurrency of a nation or region without deliberately being a joke.
You don't have to look far to find other examples. The first was probably Auroracoin, Iceland's national cryptocurrency, whose prices flopped immediately after release when the founders dumped their pre-mined allocation on unfortunate believers. An even clearer example was Turcoin, Turkey's self-described national cryptocurrency, which disappeared after it was revealed to be a straight up Ponzi scheme.
On a more regional level you also have examples like New York Coin (NYC) which went to zero after people realised it was actually pointless.
Auscoin might be the best example of this trend in action though, with potential links between its creation and money laundering.
The rules of thumb are that celebrity endorsements and national themes mean a cryptocurrency might be a scam. Those rules definitely seem to have held up here.
Disclosure: The author holds ETH and XLM at the time of writing.