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Generating $32,000 in 30 days selling a crypto-filled USB stick

151 points by patwalls 9y ago

gtsteve 9y ago
If this website looks blank it might be because Privacy Badger is blocking contentful.com, whatever that is. I'm not sure what to make of that really, any ideas?
- Karunamon 9y ago
  Looks to be some kind of dev-centric publishing tool that also does CDN duties. https://www.contentful.com/faq/about-contentful/#what-is-contentful https://www.contentful.com/faq/about-contentful/#what-is-con...
- randomsofr 9y ago
  It's a CMS SaaS.
- feelin_googley 9y ago
  # read this story as text-only, no javascript; t=198f3c4c31d49ced9b00837138196ec7b5c415904e81b59f3ea04e7b3959a1c9 ; curl -4 https://cdn.contentful.com/spaces/t0pm5m7uku03/entries/4NOhsWpS3m4esgOG6uMYm?access_token=$t \ |exec sed 's/{/\ /g;s/\\n/\ /g;s/\\"/\"/g;s/}//g;s/ *//;s/\"###/\ \ ###/;' > 1.htm ; exec firefox file:///1.htm ; # another script to get all the stories from starterstory.com, text-only, no javascript; # sample output: --------------------- id: ventana-surfboards-and-supplies title: Ventana Surfboards & Supplies subtitle: Growing A Business Selling Surfboards As Pieces of Art description: Collector surfboards and more. link: /ventana-surfboards-and-supplies name: David Dennis revenue: 8e3 measurement: revenue/mo founders: 2 employees: 0 startDate: 2014/08/01 location: Santa Cruz, CA category: other publishedDate: 2018/03/27 contentId: 5YPTt4uj3a022uOi0uASUc [hyperlink to content] type: story --------------------- id: cblocks title: CBlocks.io subtitle: Earning $32,000 in 30 Days With a Crypto-Filled USB Drive description: Crypto-filled USB drive. link: /cblocks name: Auston Bunsen revenue: 32e3 measurement: revenue/mo founders: 3 employees: 0 startDate: 2018/01/01 location: Miami, FL category: other publishedDate: 2018/03/27 contentId: 4NOhsWpS3m4esgOG6uMYm [hyperlink to content] type: story --------------------- etc. curl -4o 1.js https://www.starterstory.com/static/js/main.6bf2bb3b.js ; t=$(exec sed 's/.*access_token=//;/acess_token/q;s/\".*//;/\//d' 1.js); exec sed 's/{id:\"/\ &/g;s/\"type\":story/&\ /g;/{id:\".*title:/!d;s/.*X=\[//;s/t.a=X.*//;/{id:\".*title:/p;' 1.js \ |exec sed '1s/^/<pre>/;s/,[^ 0]/\ &/g;$s/$/<\/pre>/;/Date:/{s/new Date(\"//g;s/\")//g;};s/{/\ ---------------------\ /;' \ |exec sed '/additional:/d;s/}.*//;/component:/d;/live:/d;/dynamic:/d;/\"jpg/d;/\"jpeg/d;/[iI]mage:Object(/d;s>contentId:\".\{22\}>&\"\ </pre\><a href=https://cdn.contentful.com/spaces/t0pm5m7uku03/entries/&?access_token='"$t"'\>[hyperlink to content]</a\><pre\>>;s>contentId:>>2;s>\">>g;s>,>>;s>:>: >' > 1.htm; exec firefox file:///1.htm ;
Palomides 9y ago
nice, a classic "shovels during a gold rush" business edit: misread it, thought they were just selling empty setups w/ software
- bpicolo 9y ago
  They're selling the currency. The delivery method just happens to be a USB drive.
  - jermaustin1 9y ago
    I had originally skimmed the article and thought they were just selling empty wallets, and I thought, that is cool, an intro to crypto, I'll probably pay for that. Then I realized they were selling crypto wrapped in wallets wrapped in a USB, and figured they would be out of business fairly quickly, and purchase will never arrive.
- gruez 9y ago
  No, this is more "selling tulips during a tulip bubble" business.
  - deleted 9y ago
    [deleted]
tlrobinson 9y ago
I wouldn't recommend using this for non-trivial amounts of money for hopefully obvious reasons Nor would I recommend the founders continue to run it unless they've consulted a lawyer and are aware they're likely running a money transmitter business. See https://en.bitcoin.it/wiki/Casascius_physical_bitcoins#Suspension_of_sale https://en.bitcoin.it/wiki/Casascius_physical_bitcoins#Suspe... Accepting credit cards as payment for cryptocurrency is also a risky proposition, to say the least.
- auston 9y ago
  > I wouldn't recommend using this for non-trivial amounts of money for hopefully obvious reasons Hey Tom! Guy from the article here. First off, thanks for Metabase. I'm a big fan & recommend it often. Second, you're absolutely right. We have been capping people at $1500 purchases per month unless they were willing to provide identification & an understanding of the risks associated with our service. > Nor would I recommend the founders continue to run it unless they've consulted a lawyer and are aware they're likely running a money transmitter business. See https://en.bitcoin.it/wiki/Casascius_physical_bitcoins#Suspe.. https://en.bitcoin.it/wiki/Casascius_physical_bitcoins#Suspe.... Casascius very simply shut down, some of our counsel thinks we have legal basis to not be a money transmitter while other legal counsel believes we may be. We're currently working through that to understand how and where we stand to adapt our offering to be within the limits of the law. > Accepting credit cards as payment for cryptocurrency is also a risky proposition, to say the least. Agreed. Mutual trust has been required, we're working on something better than that now :D
  - GordonS 9y ago
    > We're currently working through that to understand how and where we stand to adapt our offering to be within the limits of the law. Trying to claim it's an 'art collectible' (as you say in another comment), doesn't sound like being 'within the limits of the law' - it sounds squarely like trying to find loopholes in the law.
    - auston 9y ago
nicpottier 9y ago
Err.. aren't these guys going to run into regulatory problems? You need a license to sell this in the US. Not to mention selling crypto with credit cards is a great way to go broke unless you own the keys like Coinbase does. Also, why would you trust the keys they are sending you? Having someone else generate a wallet for you then sending it to you via a USB key sounds very very bad. I don't get this.
- htormey 9y ago
  I agree. Have these guys done any legal due diligence on any of this? Any lawyers care to chime in? I thought you couldn’t do this in many states without a money transmitter license. Also, does this constitute financial advise? That’s also a big no no in the USA. The CoinTracker guys (current yc batch who make an app for tracking crypto) mentioned that as a reason for not offering a portfolio management product right out of the gate. Also doesn’t stripes terms of service basically prohibit this? I bring this up because in the interview they say the following: “What platform/tools do you use for your business? Stripe for payments” This is what Stripes TOS says: “By registering with us, you are confirming that you will not use the Service to accept payments in connection with the following businesses, business activities or business practices.” “Virtual currency that can be monetized, resold, or converted to physical or digital products and services or otherwise exit the virtual world (e.g., Bitcoin); sale of stored value or credits maintained, accepted and issued by anyone other than the seller ” https://stripe.com/ca/prohibited-businesses https://stripe.com/ca/prohibited-businesses I think this is a cool idea, I’m just not sure if they are going about it in a compliant way. If they are doing the right thing they should stick a FAQ up on their launch page ASAP. Assuming they are doing this legally I’d also love to know how they are handling taxes when they buy these 100 currencies. I.e when you buy alts using eth/btc that’s a taxable event. How do they factor that into the pricing.
  - throw9991999 9y ago
    Kind of a bummer that none of the mainstream payment processors allow crypto related businesses on their platforms. Which banks have no issue dealing with crypto related businesses? Anyone know what banking partners Coinbase, Gemini, Bitpay etc use?
rileyphone 9y ago
Nice to see a startup in Miami getting some press, but I wish it were a little more...impactful. Props to them though.
- paulie_a 9y ago
  > impactful Or legal
IAmGraydon 9y ago
Is $32,000 your gross or your net?
- ceejayoz 9y ago
  It's the downpayment on the legal fees for running an illegal lottery (random amounts of random currencies?) and an illegal money transmitting business.
  - IAmGraydon 9y ago
    Most likely. It's always annoying when startups post good numbers, but fail to mention if they're talking about profits or revenue. For all we know, they may have spent $31,000 on the crypto and $500 on the USB drives.
  - stale2002 9y ago
    It is not a lottery. They are giving random RATIOS of cryptocurrency, that add up to the amount of USD that you pay. So if you pay 200 dollars, you could get 100$ of litecoin and 100$ of ethereum. OR you could recieve 25$ of doge + 175$ of Bitcoin. (both add up to 200$ USD. Minus their fee obviously) That's not a lottery. It is a fixed amount of USD value.
    - ceejayoz 9y ago
      By the time you get it in the mail, it might be double. Or half. I wouldn't want to have to try to explain the volatility of altcoin markets to a grumpy Florida lottery regulator looking to charge you with something.
      - stale2002 9y ago
        Cryptocurrencies are treated exactly the same as commodities, legally. So it would be the same thing as if you shipped bars of gold and silver to someone. It really isn't complicated.
pkaye 9y ago
What does it mean crypto filled USB sticks? What is the contents?
- dboreham 9y ago
  Money. "Crypto" has now been hijacked to mean "Crypto Currency" by the kids.
- always_good 9y ago
  Next time try clicking in to TFA and skimming the first sentence.
HenryBemis 9y ago
A pop-up advertising window for Quickbooks? Really? No disrespect to QB, they got some fantasstic product.. but.. pop-up window?? Dear Stratechery, you were just added to my adblock list.
- krallja 9y ago
  Wrong post?
- solarkraft 9y ago
  You may enjoy this. https://addons.mozilla.org/en-US/firefox/addon/in-page-pop-up-reporter/ https://addons.mozilla.org/en-US/firefox/addon/in-page-pop-u...
davidsawyer 9y ago
Starter Story looks like a great site! Love the metrics on this post: https://www.starterstory.com/blog/how-i-hustled-my-way-from-0-to-1000-email-subscribers https://www.starterstory.com/blog/how-i-hustled-my-way-from-...
- patwalls 9y ago
  Thank you :)
glorkk 9y ago
Is this just a clever way to dodge regulations?
- dragonwriter 9y ago
  I think it's more of a not-so-clever way to run straight into the mouth of the law than a clever way to dodge anything.
- s73v3r_ 9y ago
  "Clever" and "dodge regulation" implies that they'd actually be able to do that.
the_cat_kittles 9y ago
i will keep saying this and do not care about the downvotes. this kind of shit is stupid and everyone on here who likes it is lame, you should only find get rich quick stories cool if they made something that was actually cool.
- sctb 9y ago
  Your recent comments have mostly been violating the guidelines. Please re-read them and post accordingly. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
VectorLock 9y ago
Once sentence in and the part about pre-generated wallets struck me as a bad idea. Thankfully the other HN comments revealed all the other more subtle ways its a bad idea as well!
spelunker 9y ago
I don't understand. Who wants to pay for a random crypto? Am I missing something?
- brk 9y ago
  Yes. You are missing the viewpoint of a large part of the public who has heard that cryptocurrencies are the hot new investment. These same people have no clue where to start, how to get a wallet, etc. This looks like a turn-key way for them to make a small purchase and suddenly be "in the crypto game". It is probably confusing from a business perspective to many on HN because it makes little sense. But think about it from the perspective of your aunt/grandma/etc. They get a USB drive (something they have a rough understanding of) that comes with "a bunch of cryptocurrencies". Some of these people probably think this is the next Beanie Baby. Buy it, set it on a shelf and wait 15 years, at which point it will certainly be worth enough to pay for their kids' college. (/s).
loourr 9y ago
If you guys are not a registered Money Service Business you should stop ASAP. What your doing sounds like a jailable offense. See the local bitcoin guy who went to prison for selling bitcoin in Florida.
- dragonwriter 9y ago
  Being a registered MSB probably won't stop you for going to prison for running an illegal lottery.
- joshstrange 9y ago
  My thoughts exactly, without a MTL (Money transmitting License) it seems like this runs afoul of a number of things including KYC. For the record MTL's for all 50 states will run you 6-12 months and ~300K when insurance, lawyer fees, and application fees are through (That's for the first year, subsequent years are cheaper but still).
  - pfarnsworth 9y ago
    They don't need an MTL because they're not transmitting money to another party or holding the money, they're just transmitting the money back to the original party. However, it does seem like they are running afoul of other parts of regulations, like KYC and money laundering.
    - joshstrange 9y ago
      Ahh, thank you for clearing that up. I was recently looking into starting a business that required an MTL and knew WE needed one but wasn’t completely sure about what qualified for other companies.
- exhilaration 9y ago
  See the local bitcoin guy who went to prison for selling bitcoin in Florida. Wait, selling bitcoin in one the many bitcoin meetups around the U.S. is illegal?
dragonwriter 9y ago
So, this startup is headquartered in Miami, FL, and is selling randomly amounts of random cryptocurrencies to people who pay a defined amount of real US currency. That is, it looks remarkably like a private, for-profit lottery. The operation of which, and even knowing assistance or promotion of which, is a third-degree felony under Florida state law. [0] [0] http://www.leg.state.fl.us/Statutes/index.cfm?App_mode=Display_Statute&Search_String=&URL=0800-0899/0849/Sections/0849.09.html http://www.leg.state.fl.us/Statutes/index.cfm?App_mode=Displ...
- derefr 9y ago
  I'm not clear from the article that this is "random amounts" or even "of random cryptocurrencies." They just said "random wallets", which could mean a lot of different things. Even if it is random cryptocurrencies, though, if they're smart, the amounts of each of said currencies should add up—at moment of sale, when converted to USD—to a constant amount. In that case, it'd be random ratios of each currency, to fill in a crypto "instrument." (Actually, I would expect this to be true if they have any business sense at all, since the only way to be able to do their books is if they can track their costs, which is only feasible if they have a fixed per-unit cost.) Or, to put that another way, rather than a lottery per se, this might be more of a crypto-backed Collateralized Debt Obligation issuance where people don't get to know which tranch they're buying. (Which is legal, AFAIK; if it wasn't, the 2007 mortgage bubble couldn't have happened.)
  - dragonwriter 9y ago
    Digging deeper, the TNW article provided more info and you’re right: they are buying $25 less than the price they charge for the package (between $75 and $475) worth of a random mix of a top 300 list of cryptocurrencies from an exchange, so it's probably not a lottery (unless some or all of the underlying cryptocurrencies are lottery tickets, which is probably not legally the case however much it might practically be.)
- jws 9y ago
  Is it that different from if I sell you a Euro, a Yen, a Dollar, and a Pound? They are fungible items whose value fluctuates. How about if I sell you scrap gold jewelry on eBay? It's value will change before you get it and neither of us really knows how much gold is in it when the transaction takes place.
burritofanatic 9y ago
I immediately questioned how they got around the fact that they're doing the work of money transmitters.
angryasian 9y ago
I don't get it, how did they get these sales if theres nothing on their website https://www.cblocks.io/ https://www.cblocks.io/ "Want a CBlock One? Enter your email - we'll notify you when we launch!"
- comboy 9y ago
  I feel like too many "successful startup" stories are just part of their marketing and are optimized for that. Well, that and trying to get some VC funding of course.
- auston 9y ago
  We stopped selling after our last run of USBs & for the reasons outlined above.
iggg 9y ago
Why is everyone assuming he is running a lottery? Where did he say he put funds in the wallets? All he said was he generated wallets, encrypted them, and put them on a usb.
- mwnivek 9y ago
  > PK (my other co-founder) had recently sold his friend a preloaded ledger of cryptocurrencies and walked over to us and told us we should “sell people wallets preloaded with random cryptos”. > We thought that there was no way people would pay us for this kind of service, but we spiked out a site over the weekend and launched that following Monday.
- IncRnd 9y ago
  A lottery requires a prize, chance, and consideration to win. I don't see all three elements here, though it is a little difficult to actually understand what the business is - so maybe.
raresp 9y ago
The article's title sounds like a scam, but the story is quite awesome. Good work!
shiado 9y ago
If you didn't generate the keys you don't own the crypto. It is that simple.
mwnivek 9y ago
https://www.fincen.gov/enforcement-actions-failure-register-money-services-business https://www.fincen.gov/enforcement-actions-failure-register-...
alacombe 9y ago
Obligatory question nobody's ask: who is generating the wallets, and what realistically, prevent them from keeping a copy of the said wallets ?
- desertrider12 9y ago
  They are, and nothing. Nothing is preventing them from keeping every single private key and then emptying all the wallets after a month.
  - pxmpxm 9y ago
    The headline next week: "Generating $64,000 in 30 days selling ..."
45h34jh53k4j 9y ago
Really awful idea. N00b users who buy this will fail to transfer the funds to their own wallets. The startup could retain the sold keys and steal the funds back -- Oh sorry n00b you got robbed, better luck next time. Fundamental rule of cryptocurrency that they do not teach is: "Generate your own private keys" And they are probably acting as unlicensed money transmitters too, which will incur regulatory actions.
UncleEntity 9y ago
> It wasn’t until we actually had strangers paying us money that we designed the CBlock. Weird world we live in. No prototype, no feasibility study, just some "marketing guru" writing up copy and seeing how many fools easily part with their money.
latenightcoding 9y ago
> We are big fans of the Lean Startup of course they are. I hope they change their ways before they end up in Jail.
m-i-l 9y ago
First thought that sprang to my mind when I read the headline, which wasn't addressed by reading the article, was "ebay ledger nano scam"[0]. I don't see how you can be sure strangers don't have copies of your keys. Unless the keys are generated and coins transferred automatically somehow when you first plug in the stick, which would be cool. [0] https://cointelegraph.com/news/life-savings-stolen-from-second-hand-ledger-hardware-wallet https://cointelegraph.com/news/life-savings-stolen-from-seco...
therein 9y ago
I have a feeling 4-5 months from now we will be hearing about their post-mortem and the mistakes that were made from a legal perspective.
jason_slack 9y ago
For those that don't know about a money transmitter license: https://en.wikipedia.org/wiki/Money_transmitter https://en.wikipedia.org/wiki/Money_transmitter I had to do look myself to understand why selling a crypto filled USB stick would fit into the definition.
tluyben2 9y ago
Besides that they might be breaking laws in other ways, there is a normal (used by card perso bureaus) procedure for the concern about them generating the private keys. I doubt they use that, but he. It would be a closed system which automatically, using an HSM usually, generates all required secrets and adds them on the stick and then destroys them. To make it be more robust, it would include a procedure which, again automatically and not accessible (by procedural regulation; this is all not technical really) by humans, generates a keypair, somehow provides the private key to the user (email? preferably the user would generate the keypair but if you have to buy these sticks we cannot expect them to?) before destroying it and encrypt the stick content with the pubkey. Some auditor would review the process, software and hardware and put a stamp on it to close off that liability. In this case, the empty usb sticks go into the blackbox (regulatory and possibly also technically) and come out with unreadable content, so who handles them after is no longer relevant for security. If these guys sit behind their normal work laptops, connected to the interwebs, generating these sticks and sending them off unencrypted, you probably will have a lot of issues if someone comes to look at your operation.
letitgrowx 9y ago
I wonder if instead the usb sticks had empty wallets, would this business be legal? Going a step further, in addition to the empty wallet, if the seller offered a credit/iou of any crypto of the buyers choice (a bit like a visa gift card), where the seller could choose to excersise or claim the credit at any time (or never), I wonder if structuring it like that would still require a msb license etc..
icedchai 9y ago
What happens if someone orders these sticks, copies off all the data, and returns them for a refund?

151 points by patwalls 9y ago

If this website looks blank it might be because Privacy Badger is blocking contentful.com, whatever that is. I'm not sure what to make of that really, any ideas?

Karunamon 9y ago
Looks to be some kind of dev-centric publishing tool that also does CDN duties. https://www.contentful.com/faq/about-contentful/#what-is-contentful https://www.contentful.com/faq/about-contentful/#what-is-con...
randomsofr 9y ago
It's a CMS SaaS.
feelin_googley 9y ago
# read this story as text-only, no javascript; t=198f3c4c31d49ced9b00837138196ec7b5c415904e81b59f3ea04e7b3959a1c9 ; curl -4 https://cdn.contentful.com/spaces/t0pm5m7uku03/entries/4NOhsWpS3m4esgOG6uMYm?access_token=$t \ |exec sed 's/{/\ /g;s/\\n/\ /g;s/\\"/\"/g;s/}//g;s/ *//;s/\"###/\ \ ###/;' > 1.htm ; exec firefox file:///1.htm ; # another script to get all the stories from starterstory.com, text-only, no javascript; # sample output: --------------------- id: ventana-surfboards-and-supplies title: Ventana Surfboards & Supplies subtitle: Growing A Business Selling Surfboards As Pieces of Art description: Collector surfboards and more. link: /ventana-surfboards-and-supplies name: David Dennis revenue: 8e3 measurement: revenue/mo founders: 2 employees: 0 startDate: 2014/08/01 location: Santa Cruz, CA category: other publishedDate: 2018/03/27 contentId: 5YPTt4uj3a022uOi0uASUc [hyperlink to content] type: story --------------------- id: cblocks title: CBlocks.io subtitle: Earning $32,000 in 30 Days With a Crypto-Filled USB Drive description: Crypto-filled USB drive. link: /cblocks name: Auston Bunsen revenue: 32e3 measurement: revenue/mo founders: 3 employees: 0 startDate: 2018/01/01 location: Miami, FL category: other publishedDate: 2018/03/27 contentId: 4NOhsWpS3m4esgOG6uMYm [hyperlink to content] type: story --------------------- etc. curl -4o 1.js https://www.starterstory.com/static/js/main.6bf2bb3b.js ; t=$(exec sed 's/.*access_token=//;/acess_token/q;s/\".*//;/\//d' 1.js); exec sed 's/{id:\"/\ &/g;s/\"type\":story/&\ /g;/{id:\".*title:/!d;s/.*X=\[//;s/t.a=X.*//;/{id:\".*title:/p;' 1.js \ |exec sed '1s/^/<pre>/;s/,[^ 0]/\ &/g;$s/$/<\/pre>/;/Date:/{s/new Date(\"//g;s/\")//g;};s/{/\ ---------------------\ /;' \ |exec sed '/additional:/d;s/}.*//;/component:/d;/live:/d;/dynamic:/d;/\"jpg/d;/\"jpeg/d;/[iI]mage:Object(/d;s>contentId:\".\{22\}>&\"\ </pre\><a href=https://cdn.contentful.com/spaces/t0pm5m7uku03/entries/&?access_token='"$t"'\>[hyperlink to content]</a\><pre\>>;s>contentId:>>2;s>\">>g;s>,>>;s>:>: >' > 1.htm; exec firefox file:///1.htm ;

Palomides 9y ago

nice, a classic "shovels during a gold rush" business edit: misread it, thought they were just selling empty setups w/ software

bpicolo 9y ago
They're selling the currency. The delivery method just happens to be a USB drive.
- jermaustin1 9y ago
  I had originally skimmed the article and thought they were just selling empty wallets, and I thought, that is cool, an intro to crypto, I'll probably pay for that. Then I realized they were selling crypto wrapped in wallets wrapped in a USB, and figured they would be out of business fairly quickly, and purchase will never arrive.
gruez 9y ago
No, this is more "selling tulips during a tulip bubble" business.
- deleted 9y ago
  [deleted]

tlrobinson 9y ago

I wouldn't recommend using this for non-trivial amounts of money for hopefully obvious reasons Nor would I recommend the founders continue to run it unless they've consulted a lawyer and are aware they're likely running a money transmitter business. See https://en.bitcoin.it/wiki/Casascius_physical_bitcoins#Suspension_of_sale https://en.bitcoin.it/wiki/Casascius_physical_bitcoins#Suspe... Accepting credit cards as payment for cryptocurrency is also a risky proposition, to say the least.

auston 9y ago
> I wouldn't recommend using this for non-trivial amounts of money for hopefully obvious reasons Hey Tom! Guy from the article here. First off, thanks for Metabase. I'm a big fan & recommend it often. Second, you're absolutely right. We have been capping people at $1500 purchases per month unless they were willing to provide identification & an understanding of the risks associated with our service. > Nor would I recommend the founders continue to run it unless they've consulted a lawyer and are aware they're likely running a money transmitter business. See https://en.bitcoin.it/wiki/Casascius_physical_bitcoins#Suspe.. https://en.bitcoin.it/wiki/Casascius_physical_bitcoins#Suspe.... Casascius very simply shut down, some of our counsel thinks we have legal basis to not be a money transmitter while other legal counsel believes we may be. We're currently working through that to understand how and where we stand to adapt our offering to be within the limits of the law. > Accepting credit cards as payment for cryptocurrency is also a risky proposition, to say the least. Agreed. Mutual trust has been required, we're working on something better than that now :D
- GordonS 9y ago
  > We're currently working through that to understand how and where we stand to adapt our offering to be within the limits of the law. Trying to claim it's an 'art collectible' (as you say in another comment), doesn't sound like being 'within the limits of the law' - it sounds squarely like trying to find loopholes in the law.
  - auston 9y ago

nicpottier 9y ago

Err.. aren't these guys going to run into regulatory problems? You need a license to sell this in the US. Not to mention selling crypto with credit cards is a great way to go broke unless you own the keys like Coinbase does. Also, why would you trust the keys they are sending you? Having someone else generate a wallet for you then sending it to you via a USB key sounds very very bad. I don't get this.

htormey 9y ago
I agree. Have these guys done any legal due diligence on any of this? Any lawyers care to chime in? I thought you couldn’t do this in many states without a money transmitter license. Also, does this constitute financial advise? That’s also a big no no in the USA. The CoinTracker guys (current yc batch who make an app for tracking crypto) mentioned that as a reason for not offering a portfolio management product right out of the gate. Also doesn’t stripes terms of service basically prohibit this? I bring this up because in the interview they say the following: “What platform/tools do you use for your business? Stripe for payments” This is what Stripes TOS says: “By registering with us, you are confirming that you will not use the Service to accept payments in connection with the following businesses, business activities or business practices.” “Virtual currency that can be monetized, resold, or converted to physical or digital products and services or otherwise exit the virtual world (e.g., Bitcoin); sale of stored value or credits maintained, accepted and issued by anyone other than the seller ” https://stripe.com/ca/prohibited-businesses https://stripe.com/ca/prohibited-businesses I think this is a cool idea, I’m just not sure if they are going about it in a compliant way. If they are doing the right thing they should stick a FAQ up on their launch page ASAP. Assuming they are doing this legally I’d also love to know how they are handling taxes when they buy these 100 currencies. I.e when you buy alts using eth/btc that’s a taxable event. How do they factor that into the pricing.
- throw9991999 9y ago
  Kind of a bummer that none of the mainstream payment processors allow crypto related businesses on their platforms. Which banks have no issue dealing with crypto related businesses? Anyone know what banking partners Coinbase, Gemini, Bitpay etc use?

rileyphone 9y ago

Nice to see a startup in Miami getting some press, but I wish it were a little more...impactful. Props to them though.

paulie_a 9y ago
> impactful Or legal

IAmGraydon 9y ago

Is $32,000 your gross or your net?

ceejayoz 9y ago
It's the downpayment on the legal fees for running an illegal lottery (random amounts of random currencies?) and an illegal money transmitting business.
- IAmGraydon 9y ago
  Most likely. It's always annoying when startups post good numbers, but fail to mention if they're talking about profits or revenue. For all we know, they may have spent $31,000 on the crypto and $500 on the USB drives.
- stale2002 9y ago
  It is not a lottery. They are giving random RATIOS of cryptocurrency, that add up to the amount of USD that you pay. So if you pay 200 dollars, you could get 100$ of litecoin and 100$ of ethereum. OR you could recieve 25$ of doge + 175$ of Bitcoin. (both add up to 200$ USD. Minus their fee obviously) That's not a lottery. It is a fixed amount of USD value.
  - ceejayoz 9y ago
    By the time you get it in the mail, it might be double. Or half. I wouldn't want to have to try to explain the volatility of altcoin markets to a grumpy Florida lottery regulator looking to charge you with something.
    - stale2002 9y ago
      Cryptocurrencies are treated exactly the same as commodities, legally. So it would be the same thing as if you shipped bars of gold and silver to someone. It really isn't complicated.

pkaye 9y ago

What does it mean crypto filled USB sticks? What is the contents?

dboreham 9y ago
Money. "Crypto" has now been hijacked to mean "Crypto Currency" by the kids.
always_good 9y ago
Next time try clicking in to TFA and skimming the first sentence.

HenryBemis 9y ago

A pop-up advertising window for Quickbooks? Really? No disrespect to QB, they got some fantasstic product.. but.. pop-up window?? Dear Stratechery, you were just added to my adblock list.

krallja 9y ago
Wrong post?
solarkraft 9y ago
You may enjoy this. https://addons.mozilla.org/en-US/firefox/addon/in-page-pop-up-reporter/ https://addons.mozilla.org/en-US/firefox/addon/in-page-pop-u...

davidsawyer 9y ago

Starter Story looks like a great site! Love the metrics on this post: https://www.starterstory.com/blog/how-i-hustled-my-way-from-0-to-1000-email-subscribers https://www.starterstory.com/blog/how-i-hustled-my-way-from-...

patwalls 9y ago
Thank you :)

glorkk 9y ago

Is this just a clever way to dodge regulations?

dragonwriter 9y ago
I think it's more of a not-so-clever way to run straight into the mouth of the law than a clever way to dodge anything.
s73v3r_ 9y ago
"Clever" and "dodge regulation" implies that they'd actually be able to do that.

the_cat_kittles 9y ago

i will keep saying this and do not care about the downvotes. this kind of shit is stupid and everyone on here who likes it is lame, you should only find get rich quick stories cool if they made something that was actually cool.

sctb 9y ago
Your recent comments have mostly been violating the guidelines. Please re-read them and post accordingly. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html

VectorLock 9y ago

Once sentence in and the part about pre-generated wallets struck me as a bad idea. Thankfully the other HN comments revealed all the other more subtle ways its a bad idea as well!

spelunker 9y ago

I don't understand. Who wants to pay for a random crypto? Am I missing something?

brk 9y ago
Yes. You are missing the viewpoint of a large part of the public who has heard that cryptocurrencies are the hot new investment. These same people have no clue where to start, how to get a wallet, etc. This looks like a turn-key way for them to make a small purchase and suddenly be "in the crypto game". It is probably confusing from a business perspective to many on HN because it makes little sense. But think about it from the perspective of your aunt/grandma/etc. They get a USB drive (something they have a rough understanding of) that comes with "a bunch of cryptocurrencies". Some of these people probably think this is the next Beanie Baby. Buy it, set it on a shelf and wait 15 years, at which point it will certainly be worth enough to pay for their kids' college. (/s).

loourr 9y ago

If you guys are not a registered Money Service Business you should stop ASAP. What your doing sounds like a jailable offense. See the local bitcoin guy who went to prison for selling bitcoin in Florida.

dragonwriter 9y ago
Being a registered MSB probably won't stop you for going to prison for running an illegal lottery.
joshstrange 9y ago
My thoughts exactly, without a MTL (Money transmitting License) it seems like this runs afoul of a number of things including KYC. For the record MTL's for all 50 states will run you 6-12 months and ~300K when insurance, lawyer fees, and application fees are through (That's for the first year, subsequent years are cheaper but still).
- pfarnsworth 9y ago
  They don't need an MTL because they're not transmitting money to another party or holding the money, they're just transmitting the money back to the original party. However, it does seem like they are running afoul of other parts of regulations, like KYC and money laundering.
  - joshstrange 9y ago
    Ahh, thank you for clearing that up. I was recently looking into starting a business that required an MTL and knew WE needed one but wasn’t completely sure about what qualified for other companies.
exhilaration 9y ago
See the local bitcoin guy who went to prison for selling bitcoin in Florida. Wait, selling bitcoin in one the many bitcoin meetups around the U.S. is illegal?

dragonwriter 9y ago

So, this startup is headquartered in Miami, FL, and is selling randomly amounts of random cryptocurrencies to people who pay a defined amount of real US currency. That is, it looks remarkably like a private, for-profit lottery. The operation of which, and even knowing assistance or promotion of which, is a third-degree felony under Florida state law. [0] [0] http://www.leg.state.fl.us/Statutes/index.cfm?App_mode=Display_Statute&Search_String=&URL=0800-0899/0849/Sections/0849.09.html http://www.leg.state.fl.us/Statutes/index.cfm?App_mode=Displ...

derefr 9y ago
I'm not clear from the article that this is "random amounts" or even "of random cryptocurrencies." They just said "random wallets", which could mean a lot of different things. Even if it is random cryptocurrencies, though, if they're smart, the amounts of each of said currencies should add up—at moment of sale, when converted to USD—to a constant amount. In that case, it'd be random ratios of each currency, to fill in a crypto "instrument." (Actually, I would expect this to be true if they have any business sense at all, since the only way to be able to do their books is if they can track their costs, which is only feasible if they have a fixed per-unit cost.) Or, to put that another way, rather than a lottery per se, this might be more of a crypto-backed Collateralized Debt Obligation issuance where people don't get to know which tranch they're buying. (Which is legal, AFAIK; if it wasn't, the 2007 mortgage bubble couldn't have happened.)
- dragonwriter 9y ago
  Digging deeper, the TNW article provided more info and you’re right: they are buying $25 less than the price they charge for the package (between $75 and $475) worth of a random mix of a top 300 list of cryptocurrencies from an exchange, so it's probably not a lottery (unless some or all of the underlying cryptocurrencies are lottery tickets, which is probably not legally the case however much it might practically be.)
jws 9y ago
Is it that different from if I sell you a Euro, a Yen, a Dollar, and a Pound? They are fungible items whose value fluctuates. How about if I sell you scrap gold jewelry on eBay? It's value will change before you get it and neither of us really knows how much gold is in it when the transaction takes place.

burritofanatic 9y ago

I immediately questioned how they got around the fact that they're doing the work of money transmitters.

angryasian 9y ago

I don't get it, how did they get these sales if theres nothing on their website https://www.cblocks.io/ https://www.cblocks.io/ "Want a CBlock One? Enter your email - we'll notify you when we launch!"

comboy 9y ago
I feel like too many "successful startup" stories are just part of their marketing and are optimized for that. Well, that and trying to get some VC funding of course.
auston 9y ago
We stopped selling after our last run of USBs & for the reasons outlined above.

iggg 9y ago

Why is everyone assuming he is running a lottery? Where did he say he put funds in the wallets? All he said was he generated wallets, encrypted them, and put them on a usb.

mwnivek 9y ago
> PK (my other co-founder) had recently sold his friend a preloaded ledger of cryptocurrencies and walked over to us and told us we should “sell people wallets preloaded with random cryptos”. > We thought that there was no way people would pay us for this kind of service, but we spiked out a site over the weekend and launched that following Monday.
IncRnd 9y ago
A lottery requires a prize, chance, and consideration to win. I don't see all three elements here, though it is a little difficult to actually understand what the business is - so maybe.

raresp 9y ago

The article's title sounds like a scam, but the story is quite awesome. Good work!

shiado 9y ago

If you didn't generate the keys you don't own the crypto. It is that simple.

mwnivek 9y ago

https://www.fincen.gov/enforcement-actions-failure-register-money-services-business https://www.fincen.gov/enforcement-actions-failure-register-...

alacombe 9y ago

Obligatory question nobody's ask: who is generating the wallets, and what realistically, prevent them from keeping a copy of the said wallets ?

desertrider12 9y ago
They are, and nothing. Nothing is preventing them from keeping every single private key and then emptying all the wallets after a month.
- pxmpxm 9y ago
  The headline next week: "Generating $64,000 in 30 days selling ..."

45h34jh53k4j 9y ago

Really awful idea. N00b users who buy this will fail to transfer the funds to their own wallets. The startup could retain the sold keys and steal the funds back -- Oh sorry n00b you got robbed, better luck next time. Fundamental rule of cryptocurrency that they do not teach is: "Generate your own private keys" And they are probably acting as unlicensed money transmitters too, which will incur regulatory actions.

UncleEntity 9y ago

> It wasn’t until we actually had strangers paying us money that we designed the CBlock. Weird world we live in. No prototype, no feasibility study, just some "marketing guru" writing up copy and seeing how many fools easily part with their money.

latenightcoding 9y ago

> We are big fans of the Lean Startup of course they are. I hope they change their ways before they end up in Jail.

m-i-l 9y ago

First thought that sprang to my mind when I read the headline, which wasn't addressed by reading the article, was "ebay ledger nano scam"[0]. I don't see how you can be sure strangers don't have copies of your keys. Unless the keys are generated and coins transferred automatically somehow when you first plug in the stick, which would be cool. [0] https://cointelegraph.com/news/life-savings-stolen-from-second-hand-ledger-hardware-wallet https://cointelegraph.com/news/life-savings-stolen-from-seco...

therein 9y ago

I have a feeling 4-5 months from now we will be hearing about their post-mortem and the mistakes that were made from a legal perspective.

jason_slack 9y ago

For those that don't know about a money transmitter license: https://en.wikipedia.org/wiki/Money_transmitter https://en.wikipedia.org/wiki/Money_transmitter I had to do look myself to understand why selling a crypto filled USB stick would fit into the definition.

tluyben2 9y ago

Besides that they might be breaking laws in other ways, there is a normal (used by card perso bureaus) procedure for the concern about them generating the private keys. I doubt they use that, but he. It would be a closed system which automatically, using an HSM usually, generates all required secrets and adds them on the stick and then destroys them. To make it be more robust, it would include a procedure which, again automatically and not accessible (by procedural regulation; this is all not technical really) by humans, generates a keypair, somehow provides the private key to the user (email? preferably the user would generate the keypair but if you have to buy these sticks we cannot expect them to?) before destroying it and encrypt the stick content with the pubkey. Some auditor would review the process, software and hardware and put a stamp on it to close off that liability. In this case, the empty usb sticks go into the blackbox (regulatory and possibly also technically) and come out with unreadable content, so who handles them after is no longer relevant for security. If these guys sit behind their normal work laptops, connected to the interwebs, generating these sticks and sending them off unencrypted, you probably will have a lot of issues if someone comes to look at your operation.

letitgrowx 9y ago

I wonder if instead the usb sticks had empty wallets, would this business be legal? Going a step further, in addition to the empty wallet, if the seller offered a credit/iou of any crypto of the buyers choice (a bit like a visa gift card), where the seller could choose to excersise or claim the credit at any time (or never), I wonder if structuring it like that would still require a msb license etc..

icedchai 9y ago

What happens if someone orders these sticks, copies off all the data, and returns them for a refund?