Poloniex May Have Known Trouble Was on the Horizon

May 2017 Posting on Poloniex Hints Towards Difficulties

In the wake of the recent issues at Poloniex, it begs to question if Poloniex knew that trouble was brewing. Did Poloniex staff, in fact, take steps to prepare for these imminent issues over a month ago, all the while, keeping it quiet instead of informing users? It is possible that they did in fact, did foresee the possibility of major platform issues. This may be evident based upon a written piece that Poloniex themselves posted to their website on May 16th, slightly over a month before the trouble began for the exchange’s users.

Reading the Article, titled, “INDUSTRY GROWTH AND ITS EFFECT ON POLONIEX”¹, when it was published left the impression that Poloniex was providing its users with a status update on their inner-workings and the changes being implemented. Status Quo, or at least anyone would have thought this was just normal, everyday operations.

Below is a Screenshot of the Entire post from May 16th

The original post can be seen at
https://poloniex.com/press-releases/2017.05.16-Industry-growth-and-its-effect-on-Poloniex/

In America, there is an old saying that says, “Hindsight is always 20/20”. For those not familiar with the phrase, it simply means that things are always easier to understand when you look back at an event. Reading the article from May 16th today makes for very compelling evidence that Poloniex was putting forth the excuses and reasoning behind the issues that have been occurring over the past week or so. In addition to the many, very legitimate, reasons that Poloniex faces challenges in providing smooth operations, the article also quite blatantly and directly points users to review the full terms and conditions of using the Poloniex platform, as seen in this statement directly from the article itself:

“…. trading risk may be compounded by operational stress whenever volume increases at massive scale over short periods of time. In addition, understanding these risks is important because to offer our services, Poloniex requires users to agree to our terms and accept these trading and operational risks. This means users accept the risk of transaction failure resulting from unanticipated or heightened technical difficulties, such as those resulting from operational challenges or sophisticated attacks. Review our full terms.”

In other words, they are just reminding you that in times of trouble, such as the ones being faced now by many Poloniex users: you have to just deal with it. They do have a valid point: the terms and conditions do quite clearly state that during times of crisis, Poloniex will not be held liable for any misfortunes arising from those issues and the user assumes all risk associated with just about anything short of negligence or malintent. That leaves the question, Is there some culpable negligence, or even worse, premeditated malintent involved in these recent issues? That has yet to be determined.

Poloniex Site Notices Might Have Been First Steps In Crisis Management

To further muddy the waters, the “NOTICES” section on the main exchange page at Poloniex shows that, again, it would appear that Poloniex was taking steps to deal with issues of some sort. On June 7th, they announced that they were improving their support capacity. That was followed up by notice on the same day that they were discontinuing their Trollbox to meet ever-increasing support demands. While that sounded totally plausible at the time it was posted, it does now seem a bit convenient that Poloniex users no longer have a public venue in which to complain, inform other Poloniex users of the situation, etc.… While there is always Bitcointalk.org and Reddit, it would not have been as convenient as being able to speak directly to other users on Poloniex about these current issues. Again, this could be coincidental. Coincidences can and do occur in eerily uncomfortable situations, but for them to occur multiple times, regarding the same situation? This is difficult to believe.

Of course, most of the negative speculation, exit scam talk and other doubts might not be so critical if Poloniex would at least address the issues. If they would even just release a generic, “Yea, we know its messed up right now and we are working on it”, statement; things would be a bit better. . The continued silence and unanswered questions added to the 30+ day old article that pretty much predicted these events would make anyone feel uncomfortable, at best.

Corporate Safe Haven, Anonymous Business Info & More Doubt

Poloniex is a U.S. Corporation. However, they are incorporated in the state of Delaware, which is the Mecca of corporate havens. To try and put it into perspective: according to several sources² , more than 50% of ALL publicly traded companies in the United States are incorporated in Delaware. Also, 60% of ALL fortune 500 companies are incorporated in the state of Delaware, as well. There are over 1 million corporations in Delaware. The state has a total population of 952,065 people, meaning there are more business entities than people in the state.

With this being said, under normal circumstances, it would appear a very normal thing to find Poloniex was incorporated in the state of Delaware. These are not normal circumstances, however. Besides the very lenient tax laws and corporate goveranance guideline, Delaware also has a few other rules that make it interesting to find Poloniex within their corporate database.

The most interesting, and one that needs to be noted here is this:

“While most states require a for-profit corporation to have at least one director and two officers, Delaware laws do not have this restriction. All offices may be held by a single person who also can be the sole shareholder. The person, who does not need to be a U.S. citizen or resident, may also operate anonymously with only the Listing Agent with whom the company is registered with Delaware named.”

Corporate Law in Delaware, The First State

In doing some research into some of the basic corporate laws in a handful of other states, and then confirming this with some general information found from several resources, such as the IRS, Small Business Administration, Wikipedia and LinkedIn, the majority of the remaining 49 states within the United States of America require a corporation to have at least one director and two officers. Not Delaware. In Delaware (and Florida too, FYI), a corporation can be formed by a single person, who can act as the director and hold every officer title/position required. That one person can also serve as the company’s registered agent, as well. This means that a single person can legally become an entire corporate entity for the modest corporate formation fees of approximately $50.00 USD.

Wait. There is more. The majority of other states also require the names and addresses of the director and officers, as well as the registered agent to be listed and publicly available to anyone who wishes to look it up online. Not Delaware. In Delaware, the corporation can simply hire a registered agent service, as a corporation in any state can do, but in Delaware, the corporate officers and director, be it 5 people or one, can choose to remain anonymous.

Oh yes, I almost forgot, Delaware also does not require the corporation, person forming it or anyone else involved in the creation of the corporate entity to be an American citizen, reside in America or even speak English, for that matter. All that is required is that the registered agent is physically located within Delaware and that their address is listed as contact information. Being the way things are in Delaware, would anyone like to guess at the number of these services that are available? Too many to count in a time efficient manner.

Poloniex Recent Issues + Delaware’s Lax Corportae Laws = Shady

Would you, the reader of this article like to take a guess as to what is found when searching the Delaware Corporation database, when Poloniex, Inc is the targeted corporation being searched?

Poloniex lists only a registered agent service as the contact information, with no other info given on any of the possible owners, director, officers employees or other related individuals. There is no physical address listed for Poloniex, and the registered agent address comes back as an extremely large office complex.

Below is a Screenshot of the Poloniex Official Corporate entry with the State of Delaware.

In looking at the listed registered agent, Vcorp Services, the website itself is a red flag, as it is outdated. Severely outdated. There have also been no new news updates since October of 2016. Calling the number listed on Vcorp’s website did indeed confirm that they are still in business and not willing to talk about their clients at all.

While, by itself, it is not necessarily a bad sign… Wait. Scratch that. By itself, it is a terrible sign. Why would a legitimate business hide their identity, location and other pertinent information from their users? Maybe there is a good reason for it. Especially since it is an option that has laws written to make it possible, but why in this industry would a company, an exchange none-the-less, ever not be fully transparent? Coinbase³, Bittrex⁴, BitStamp⁵ and most other large Bitcoin exchanges list their addresses and phone numbers right on their website. With events from the past, the nature of bitcoin itself and all of the attention on verifying users, as of late, it seems odd that one of the largest exchanges in the world would not have any contact information or transparency in regard to the physical location of the exchange which holds well over 120,000 BTC⁶ worth of currency.

Seemingly Innocent Things + No Communication = Suspicion

Maybe it is a case of poor decisions or bad advice, but in any event, it is the lack of communication that even causes an eyebrow to be raised about any of the matters that have been mentioned here. By themselves, none of these things point to any type of misconduct, negligence or other malicious intentions on the part of Poloniex, but the lack of communication speaks volumes.

Failing to provide a simple note, message, Tweet or anything at all to users who have faithfully entrusted the exchange with their money is the negligence in this situation. It is the catalyst that causes the other speculation to arise and it is the reason so many people are now questioning the legitimacy of what was once a leading innovator and model to be followed. There are questions that need to be answered, accountability for things that do not really make much sense and culpability for the failure to properly address the concerns of the Poloniex exchange users.

1. Is there any news on why the withdrawals of many user have been delayed, suspended or outright forgotten about?

3. With several mentions recently, on the exchange website, of “improving support capacity”, why is it that Poloniex support has become worse then it has ever been before? With the moderators no longer having to moderate the “Trollbox”, isn’t there more available staff that could at least post a quick message that lets users know that the issues are being worked on?

Poloniex User Surety, Safety & Hope

Withdrawing bitcoin or other currencies may be the only option that people can take to help save them from any potential losses that might be incurred due to whatever the situation actually is. Unfortunately for some, that option is already closed off. It seems very suspicious when you take into account the may posting, the Trollbox closure and the entire corporate “hiding” methods that are being used. Hopefully, it turns out to be all coincidental. Currently, there is a ton of circumstantial evidence that points to bad things.

When hope is all we have, then hope is all we can do. The hope here is that Poloniex answers these questions, replies to their user support tickets and this resolves itself with no loss of money for any users of the exchange. If you look to the past, it is a bleak outlook and nothing good can happen, but this is Bitcoin and the future is where all eyes should be focused. Maybe. Just maybe; for once, the Bitcoin users of the world will not be let down by another greedy criminal.

This is a challenge to Poloniex. Communicate with your users and the bitcoin community at large. Answer the questions that have been put forth. Show us a bit of transparency. let us know that our funds are secure and not in jeopardy. help us to help you and in doing so, help to end the all-to-often-implemented practice of ignoring cryptocurrency users since there is nothing they can do.

Reopen the Trollbox so that users can discuss the situation on the platform. Inform the general public of what the issues are and why, with roughly 1/4 million USD capital per day flowing through your exchange, they cannot be solved? Poloniex has made millions in profits. There is no reason for greed or scamming users, so why the secrecy, the poor communication and totally unacceptable customer service?

maybe this will get through to you. maybe you will answer these questions and give us some info. Only time will tell.

Cited Sources:

1. https://poloniex.com/press-releases/2017.05.16-Industry-growth-and-its-effect-on-Poloniex/
2. https://en.wikipedia.org/wiki/Delaware_General_Corporation_Law, http://corplaw.delaware.gov/delaware_law.shtml, http://delcode.delaware.gov/title8/c001/index.shtml
3. https://www.coinbase.com/about
4. https://bittrex.com/Home/Contact
5. https://www.bitstamp.net/
6. https://poloniex.com/exchange#btc_eth