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Bitcoin Bonanza: Cryptocurrency profits draw investors in the Ozarks

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Sharply rising prices and a growing variety of cryptocurrencies are motivating people to get on the investment bandwagon – some seeing 1,000 percent returns.

“Last month, I invested into a coin called Iota – it’s one of the many ‘alt’ coins out there. I bought in with $30,000, and it went up to $340,000 in a few days,” said Josh Dunn, cryptocurrency guru and former operator of DigitMint Inc.

With a high promise of profits, Dunn is among a growing number of people pouring loads of time into trading.

There are now more than 1,000 varieties of digital currencies, such as bitcoin and Ethereum, and serious investors scour the internet for news and trends, while joining forums and Facebook groups obsessing over the minutia of the emerging industry.

Last month, 28 people attended the inaugural session of Springfield’s Bitcoin & Cryptocurrency group organized through Meetup.com. The group had 57 members by Springfield Business Journal’s press time, and monthly meetings are planned.

Organizer Daniel Diaz said he was surprised by the number of attendees and the success many of them claimed to have in cryptocurrencies.

“I’ve noticed whenever people hear about bitcoin or anything like that in the news, their ears perk up,” said Diaz, a computer science student at Ozarks Technical Community College. “There’s so much talk going on and so much media hype around it lately.”

Like most cryptocurrency investors, Diaz is self-taught. The uncharted waters of the new market have created a wild west for investors – and with it comes confusion and the opportunity for fraud, he said.

Diaz hopes the group will become a resource where accurate information is shared to help protect against scams. He has been leery of multilevel marketing companies that have promoted currency exchange investing in the area, such as BitConnect and USI-Tech.

Diaz said he began researching cryptocurrencies in 2016 and has gained a nearly 1,000 percent return on an undisclosed investment. Admittedly, the ROI came “after trying to get resources and hours of trial and error – and maybe some mistakes I’ve made on some of these exchanges,” he said. “You can lose money with simple little mistakes by not correctly doing things online.”

Quick to pivot
Several businesses have popped up around town to feed local hunger.

Dunn, who previously worked for two out-of-state cryptocurrency firms, opened his DigitMint office in Springfield in July 2017, with the intent of making money by operating hundreds of computer processors that served as part of the international web of “miners” necessary for bitcoin and other cryptocurrencies to exist.

Through the use of complex blockchain software, Dunn said he could earn up to $130 a month from each of his 600 computers before accounting for overhead such as hardware, electricity and warehouse rent.

It only lasted a few months. When compared with the money he could earn trading, he said the math didn’t add up. He closed the warehouse in December 2017, deciding to focus on trading the currencies.

But his decision was not entirely financial. Within the first few months, most of the DigitMint staff had caught crypto fever.

Chief Operating Officer Sylvester Layne left the short-lived DigitMint mining work in September. No sweat, he said – he replaced his income by trading.

“You could know nothing today, but dedicate yourself to learn and research,” Layne said. “And you could be as successful as somebody who’s been in it for five years.”

Layne continually researches crypto software developers to determine which ones appear to be legitimate, based on the stability and transparency of their business models.

“I had one, it’s called ReddCoin, that I found. It was 0.00085 [dollars] when I bought it the first time, and now it’s like 2 cents,” he said. “They’ve all gone up 20 to 30 percent.”

Layne is investing his profits into Cloudwalkers Marketing LLC, which he founded in December 2017 with Luke Daugherty.

“Crypto gave me the freedom to pursue something I enjoy more. Even though I’ll make less money doing my marketing company, I enjoy it,” he said.

Cash for coins
Another casualty of DigitMint’s closure was the loss of Springfield’s only crypto automated teller machine. Dunn bought the ATM, but never made it available to the public for transactions.

“We were still waiting to hear back from the state of Missouri for our money transmitter license. So until we got that, we weren’t allowed,” said Dunn, who eventually sold the machine to someone in Utah.

According to CoinATMRadar.com, Missouri is home to 16 cryptocurrency ATMs. With familiar bank-like interfaces, the ATMs charge 8-16 percent in conversion fees.

With the absence of the ATM technology locally, some are turning to individuals sellers. LocalBitcoins.com lists two sellers in Springfield.

Answering the phone only by her username, “CandyCane2015” accepts cash for her bitcoins.

Clients contact CandyCane2015 by text message, she said, requesting a specific amount of her bitcoins – or a fraction of a coin. They set up a rendezvous at a public place, often a Subway restaurant.

“People like to come to me for privacy’s sake,” she said, declining to disclose her full identity to SBJ. “I place in my ads that I only want to deal with people who have legally acquired their funds and want to use their bitcoins for legal reasons.”

CandyCane2015 said she has made more than 1,000 bitcoin transactions. With more than 100 customers, her online profile has a 100 percent satisfaction rate.

She charges about 10 percent above the market price set by the exchange BitStamp.net.

LocalBitcoins.com holds the bitcoins CandyCane2015 has agreed to sell in escrow, until she counts the cash and approves the transfer on her smartphone. The website, which charges a 1 percent handling fee, mediates disputes between buyers and sellers.

The other listed seller on LocalBitcoins.com, “Cindy444,” is an apprentice to CandyCane2015. Neither seller was aware of any licenses required to sell the funds for cash.

Another seller previously listed on LocalBitcoins.com was entrepreneur Jason Klein. He was busted in an undercover sting by the IRS Criminal Investigation division and sentenced in September to pay a $10,000 fine, along with five years of  probation, for a bitcoin sales cybercrime. While completing cryptocurrency transactions with Klein, undercover officers claimed to be using the bitcoins site to launder cocaine funds.

CandyCane2015 said she doesn’t ask people why they are purchasing bitcoin from her instead of the multiple exchanges online.

“LocalBitcoins is dangerous, not for the public, but for people selling on it,” said Dunn. “It’s rare to see someone get busted for buying it, but it’s more common to see someone get busted for selling it. So I would just say ‘seller beware.’”

Comments

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user33376

Why isn't the IRS Criminal Investigation division filing charges against CandyCane2015 or Cindy444 for not having a money transmitting license, like they did with Jason Klein? Seems to me like they are doing the exact same thing and are getting by scot-free. Talk about injustice!!!

Thursday, January 18, 2018
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