Thursday, July 10, 2014

Urocoin: Real or Scam?

The past 24 hours saw Urocoin (URO) go from just another alt-coin into being the heaviest traded alt-coin at several exchanges (Bittrex and Mintpal), totaling thousands of BTC worth of trading during the day. It looks like a classic pump-and-dump, but there are still people defending the coin as being legit. So what exactly is it that URO is supposed to offer?

The big "hurrah" this time is about linking a cryptocurrency directly to a commodity, and in this case it's Urea. Never heard of it? It's basically fertilizer. Why would they need to use a cryptocurrency instead of, say, regular money? (Answer: they wouldn't.) But I digress; the announcement post says 1 URO will be worth 1 metric ton (tonne if you prefer) of Urea, and there will be a total of 1 million URO. Okay, how much is 1 MT of Urea worth then? How does $300 strike you?

So let's get this straight: company (Green Earth Systems in Australia, with offices in Hong Kong, India, Pakistan, and a few other locations) is going to create a new cryptocurrency, have no premine, and they're going to back it with the value of Urea? Yeah, that's the gist of it, which means the earliest miners were finding blocks of 12 URO in a matter of seconds that would "one day" be worth $3600 or more. And to help all this happen, URO has...a completely vanilla wallet that could have been copied from any number of X11 alt-coins. Hmmm....

AltCoinHerald has already posted much of what I would have said, so let me just add a few comments. First, notice that I'm totally not anonymous, and also note that I posted the following in the AltCoinHerald article: "If altcoinherald isn't correct in his assessment -- which matches mine -- I will close shop on HolyNerdvana.com as well. We've seen this same story with a bit less panache several times now. Guarantcoin (GTC) is one example." Yes, that's me putting my web site on the line to say that this is a scam. Why would I do such a thing? Am I just trying to get in on a lower buy price for URO? Nope -- I do it because I'm a blogger and thus traffic benefits me, and by publicly showing I'm right about this (and many others are right as well), maybe I can get a bit more respect/traffic. And if this totally backfires, I guess I'm just not cut out for looking at alt-coins any longer.

Rather than rehash AltCoinHerald, though, I decided to try something more interesting. Archive.org has old copies of the information on GreenEarthSystems.com.au, so I looked for details there. That also brought me to GESCommodity.com, a related site which hasn't been updated lately. Since Urea is a commodity, I checked the Contact Us page, which of course is quite different from the current Local Offices page at the "main" site. Note that all of the email addresses have been changed, so instead of sales@greenearthsystems.com.au they are now [country]@greenearthsystems.com.au, but there are no phone numbers listed. Anyway, I decided to try calling those old phone numbers from the GESCommodity pages; any guess as to what I found?

The two numbers for Australia gave me a disconnected line and a "no one is available" voice mail after 15 seconds of ringing. All of the other numbers I tried were disconnected, except for Germany where I was able to talk with a nice gentleman for a few minutes. He used to work with Green Earth Systems (apparently as a local consultant/point of contact), but he has not done anything with them since February 2014. He does not know what the company is doing now, but I gather that he didn't do too much with them earlier either. More than anything, his attitude was curiosity: "What is Green Earth Systems doing that makes you want to talk with me!?" So, the one phone number that I was able to speak with someone basically confirmed that the information on their web pages is at best woefully outdated.

All of this points to the company having gone kaput, letting their domains sit idle, and along comes a group of ne'er-do-wells who are able to grab the old domain (but perhaps not GESCommodity.com yet, though it appears that domain was just updated July 7 so it's not likely to be far behind if the scam continues) and perpetrate a huge scam. Looking at the main site's domain registration, it was apparently last updated in April 2014 by "IMPACT INVESTIGATIONS AND SECURITY PTY LTD". The Twitter account meanwhile was virtually dead until June of this year, right before URO came into being.

In short, this looks ever more like an elaborate scheme by pump and dumpers (and alt-coin designers) to create a coin with a huge amount of hype and then cash in on it. All we need now is a hidden premine or something to that effect, but at least there's no indication that happened. What I do know is that I called at least six of the countries listed on the GES Commodity contact page, and either had a disconnected line or no answer for Australia, RSA, Hong Kong, Fiji, the UK, and I think Jordan as well; Germany answered and is no longer working for the company.

I've seen less elaborate scams (GTC and AC come to mind), but bottom line is that if this were true, some company would be looking at investing $300 million into a new alt-coin (in order to cover 1 million URO that are each worth $300 of Urea). Why would a company think that making a new coin and funding it with that much money would be better than, say, using Bitcoin? Why would farmers in India and other locations want to buy Urea with URO instead of fiat? Occam's Razor basically points to this being a scam, as the alternative (i.e. that it's real) requires far more assumptions and uncertainty.

Feel free to start calling the phone numbers if you'd like to verify my story, but please be kind to the German gentleman and don't call him again -- let a couple alt-coin sites call him, if they want (and tell him I'm sorry for starting this phone calling business!), but if individuals start calling he's going to have a hundred out of country calls in a day, and that would be horrible. UK and Australia's phone numbers appear dead, so those are easy enough to confirm. And if you can prove that this isn't a scam... well, give me a number listed on the Archive.org web page that actually works. Yeah, that can probably be done as well given enough incentive.

It looks like the bubble is already mostly past so I don't think much more will happen. We'll see small volumes of trade as the price goes up, then big volumes going down as anyone still holding tries to get out. A see-saw pattern downwards is going to be the order of the day for URO is my bet. Good luck if you want to bet against me, and if I'm wrong... well, I'll stop posting about alt-coins on HolyNerdvana and find something else to do with my time.

As a final thought, there are many saying, "But BTC isn't backed by anything and it continues plugging along. Doesn't that mean all cryptocurrencies are a scam!?" The problem with that reasoning is that Bitcoin never promised to be anything more than Bitcoin -- 1 BTC is worth 1 BTC, and if you trade it for something else than the market will determine how much it's worth, be that $1, $32, $260, $1250, or the current $625. URO is claiming to be tied to 1 ton of Urea, but if you can't actually redeem your URO for Urea then it becomes a scam. 1 URO is worth exactly 1 URO, and however much that is worth is up to the markets to determine. Not surprisingly, URO reached a peak price of 0.035 (give or take) and has now dropped to 0.007 -- and it continues to fall. In a few months it won't be that difficult to collect 12500 URO, but good luck redeeming that for $3,750,000 worth of Urea!

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