In response to Coinfire’s article, which piled up a long list of allegations and accusations against Cryptsy, we reached out to Paul Vernon, the CEO of Cryptsy, to try to get his voice out to the public and go through his defenses against Coinfire’s vicious attacks!!
Here is how the interview went on:
Tamer: Who would you narrate to Newsbtc ‘s readers the “Cryptsy” story?
Paul: Cryptsy was created as a hobby, because I was running around 25 different altcoin pools, from litecoin to Mintcoin to Feathercoin and many other coins; I just can’t name them all; I had too many different pools and there wasn’t a place where you can go and exchange all of them; Well, you could go exchange Litecoin at a few places; Mincotin at others, but if you wanted to take all of your coins and exchange them, there was really no place to do that, so I was talking to other people on the forums about that and I came up with the idea “How about I just create an exchange?” and it was mainly for the people who were mining at my pools, so I hacked it out in about 2 weeks and came out with the first version and put it out there and said “Ok guys, try it out and let me know how it works; let me know what you’d like to see, what’s broken….etc” and 2-3 weeks later, I hammered out most of the bugs that I found and started to get more and more sign-ups and these were people who were coming from elsewhere i.e. they weren’t coming from my pools and that was around May 2013, when I officially launched the site. I ran that for a while, just as a hobby for a few months and it started picking up more and more users, approximately 200-300 new users a day, and I wasn’t doing any kind of advertising and I still don’t do any kind of advertising. From there, at around August 2013 is when I started considering that may be I should make Cryptsy my full time job, I opened up a small office here in Florida, hired my first employee, who was my accountant, because of all the trading activity that started going on, I knew I needed somebody to keep track of all these numbers, so that was the first hire and then by October, I had left my job and started working for Cryptsy full time and by the end of that year, I probably had 4-5 employers working and I don’t know if you remember, but by November 2013, there was a huge explosion in trading, across all exchanges, not only on Cryptsy, but all, so that was a crazy month; I think I hired 10 more people during that month alone just to keep on top of things because it got really busy and we moved in to a bigger office, bought more servers and all that stuff and we kept expanding out our coin library and we are still expanding. I don’t know exactly how many coins are listed, but it is well above 200 coins. That’s how we established Cryptsy; no advertising whatsoever; all organic growth which is what any business owner would want.
Tamer: Cryptsy offers the largest number of altcoins one can find on an exchange, am I right?
Paul: I think you are right.
Tamer: Is says on your “About Us” page that “Cryptsy International is an Internet startup managed by Project Investors, Inc.”; I am not an expert in the legal aspect of managing online businesses, but I think that this sentence is rather unclear, so can you please tell us what does it exactly mean?
Paul: Basically, Cryptsy is a Belize corporation as we have multiple corporations; we have a Canadian corporation and I think we have a corporation elsewhere as well, so Cryptsy, the exchange website itself, is by the Belize corporation and we have a licensing agreement between the US corporation, Project Investors Inc., and Cryptsy Inc. the Belize corporation which grants Project Investors Inc. 100% of the profits that Cryptsy Belize Inc. generates, so it is kind of a separation that keeps Cryptsy itself out of the US, while still kind of being in the US, because it is managed by the US corporation.
Tamer: So, can we consider Cryptsy Belize Inc. a subsidiary of Project Investors Inc.?
Paul: It is not a subsidiary but has a licensing agreement that gives Project Investors Inc. full control of the Belize corporation but they are actually two separate corporations.
Tamer: You say that you have over 300,000 users on Cryptsy; how many of those are active traders?
Paul: We have 322,000 users at the moment; of those 50,000-200,000 are active but it depends on how you classify someone is an “active trader”.
Tamer: Let me reformulate the question using Cryptsy’s terms; How many of those traders are active enough to earn a 0.1 Cryptsy point per week?
Paul: Haha; that’s how you consider a trader active? There are a lot of people that mine and they won’t sell their coins for maybe a few weeks, so maybe they go to Cryptsy once a month, so it is hard to say that a user isn’t active just because he/she doesn’t trade every single day. If someone continues coming back again to the site, regardless of the time period between the log ins, then he/she is active, maybe not “highly active”. Even now, we get around 100 new sign-ups a day.
Tamer: Cryptsy executes around 300,000 trades per day; are all those trades executed automatically?
Paul: Yes, it is all user driven so if someone puts in an order, and there is a matching order on the order book, then the trade is executed, so it is all automatic on the backend of the system and there is no human interaction required for a trade to get executed.
Tamer: Can you tell us a bit about how you secure Cryptsy’s servers?
Paul: I am not going to tell you all details because this is classified info, but we have a lot of different layers. We use Incapsula, our DDoS protection provider, which is our first security layer and then, we have frontend web servers, which is our second security layer, and all of those have firewalls and all of our online databases are backened, so the rest of the services , servers and other stuff aren’t accessible from the public internet, which is a key strategy when trying to boost security as the best way to be secure is not to plug in to the internet. Our wallets have several security layers and they are really hard to get into even for me, so wallets’ security is a priority especially when you have a couple of hundred altcoins on the platform.
Tamer: Can you tell us how would you react to a DDoS attack? Do you use blackholing for instance?
Paul: Generally, it goes through Incapsula, so we let them try to deter the attack as much as possible and if it’s something that overwhelms them, we will shut down our servers. We had a DDoS attack a while ago and it was overwhelming, so we had to shut down our web servers for some time as DDoS attacks don’t tend to last very long.
Tamer: Let’s go through the allegations and accusations that Coinfire have had on their article as they claimed that you are not a licensed or a registered company. I know that Crypsty has a FinCen license, so tell us a bit about this.
Paul: FinCen is not really a license, it is a registration, so as a Federal money transmitter, you require to register with FinCen and file them reports of currency transactions, suspicious activity reports and stuff like that. It is super-easy to register with FinCen, the hardest part is to keep up with the reporting which we do regularly and I will share with you a copy of our filing records. I registered with FinCen when I launched the website back in 2013 and we were continuously working to be compliant with FinCen and technically, we were always exceeding their requirements. We had calls from FinCen personnel telling us “This is not something you have to tell us about”, so we were always exceeding the reporting requirements for them just to make sure that we were compliant with their regulations, but we have no “state level” licenses and the reality is there are very few exchanges that have ones.
Cryptsy’s FinCen E-Filing Reports Record
Tamer: I don’t think you have to have a State license to run a Bitcoin exchange; correct me if I am wrong please.
Paul: It varies from a state to the other as they all have their own requirements so if you are just doing crypto-to-crypto trades, most States don’t require that you donate a file.
Tamer: I tried to get my USD out of Cryptsy but I didn’t succeed because you don’t offer wired transfers, so how do you send Fiat (USD) to your users?
Paul: Well, we used a service called e-wallet that was doing the USD withdrawals for us. We try to stay away from wired transfers as we don’t want to be wiring money all over the world. We have a very good banking reputation and we don’t want to do anything that can affect it as this is what most people in the cryptocurrency community have issues with. We have excellent banking relationships and we don’t want to undermine this by sending wires all over the world, particularly to someone who is not supposed to be receiving wires. So, for USD withdrawals we had e-wallet and now we use Tether.
Tamer: What about GAW miners? Coinfire claimed that you had relationships to GAW miners and you have helped them launder the money, how can you respond to that?
Paul: I don’t know what they are basing that off of. Maybe, Coinfire have money on Cryptsy and want the markets to move to their good. I have talked with a guy from GAW a while ago, but I never had any business collaboration with him or any other from GAW Miners, The only thing I had to do with them is list Paycoin; it was a very natural thing as it was a very popular coin and it had a lot of users, so of course I was going to list it on Cryptsy, why wouldn’t I list it? Well, there was a problem with the model, but it is just a cryptocurrency, so why it shouldn’t be listed on Cryptsy? However, as far as laundering money, I have never helped anyone do such thing.
Tamer: Coinfire accused you of using bots and auto-trading software to manipulate the market and use that to make personal profits; how would you react to that?
Paul: That’s not true. Every now and then, I get various altcoins but I trade them just like everyone else. Actually, in my opinion, bots are never as clever as a human trader would be.
Tamer: Some cryptocurrency exchanges make deals with third party software developers to develop bots or auto-trading Python/DJANGO scripts that would help their users make profit on auto-pilot. Are there any similar scripts on the market from Cryptsy?
Paul: There are scripts everywhere that use the Cryptsy API to perform trades and there is a Cryptsy bot somewhere online that has been developed a year or so ago, but that bot still works through the API, so there is no secret “backdoor” or anything like that, so users have to have API credentials to be able to perform trades on the system.
Tamer: How will you react to Coinfire’s accusations?
Paul: I will be probably suing them. I just need to find out exactly who they are