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: #NEWS 20 June 2018 Stellar in Talks to Acquire Blockchain Startup Chain . The $500 million acquisition is now public knowledge. So it is confirmed that Ari David Paul tipped non-public ('Insider’) info. to Kazonomics on 5 May 2018. How and when did you learn about the acquisition of Chain by Stellar? You tipped Kazonomics with insider information about the acquisition on 5 May 2018. Who else did you tip? Has BlockTower Capital traded XLM in 2018? How much? Please supply all trade details. Have you personally traded XLM in 2018? How much? Please supply all trade details. Resources for Insider Trading Whistleblowers Blow the Whistle on Pump and Dump Schemers (CFTC) Submit a Tip (CFTC) Whistleblower Program (CFTC) Background: DM Conversation Between Ari David Paul and Kazonomics On the pseudonymous Twitter account posted this enigmatic tweet. It raised little attention. Then he went quiet. 2 June 2018 @Kazonomics Open the link in Twitter and read full thread On Kaz published this redacted version of a DM exchange between and himself from . (The date format is US: M/D/Y). 10 June Ari David Paul 5 May and 6 May Ari David Paul is CIO of , a crypto fund with $150 million under management. Paul co-founded the firm with Matthew Goetz. BlockTower Capital Note that this DM conversation took place before Kaz’s mysterious Tweet of 2 June. Redacted version of DM conversation. It is hard to make sense of that exchange without a little background. What is ‘ ’ and all this talk of racism? On 5 May Paul had Tweeted recommending Technical Analysts. ugh that old TA thread At this stage someone called Zissou weighed. He and Kaz obviously have an old beef. However, all of that is irrelevant. The only statement of significance in the entire redacted exchange is this. But it was impossible to make sense of it at first because it referred to the previous redacted paragraphs. There has been no Chain announcement at 5 May 2018. The news of the acquisition became public on 20 June 2018. Paul means XLM is a great buy (for insiders) before imminent announcement. On 12 June Kaz published the full, unredacted conversation: 1.2 is the smoking gun Paul states “ ” Stellar will announce an acquisition of Adam Ludwin’s Chain sometime in the next 2 weeks. This is not widely known, but at least some funds know. Who are these entities? : Stellar is a platform that connects banks, payments systems, and people. It claims to ‘Integrate to move money quickly, reliably, and at almost no cost.’ The Stellar token is XLM. (Paul: “ .”) XLM is a cryptoasset, but is it a security? This has great significance in the eventual judgement of Ari David Paul. Stellar For example, if I thought XLM was a great buy because of the Chain announcement, I would first buy it then tell you Details of the , Developers, Board Members, and Advisors. Stellar Team : Adam Ludwin CEO at Chain. on Twitter. **@**adamludwin : Chain is a San Francisco based technology company on a mission to enable a smarter and more connected economy.They build cryptographic ledgers that underpin breakthrough financial products and services. Chain Insider Trading What is ? Insider Trading From Investopedia: . Insider trading is the buying or selling of a security by someone who has access to material nonpublic information about the security Insider trading can be illegal or legal depending on when the makes the trade. It is illegal when the material information is still nonpublic. insider Legal insider trading happens when directors of the company purchase or sell shares, but they disclose their transactions legally. Illegal insider trading includes tipping others when you have any sort of nonpublic information. The Martha Stewart Case Directors of companies are not the only people who have the potential to be convicted of insider trading. In 2003, Martha Stewart was by the SEC with obstruction of justice and securities fraud — including insider trading — for her part in the 2001 ImClone case. charged Stewart sold 4,000 shares of biopharmaceutical company ImClone Systems based on information received from Peter Bacanovic, a broker at Merrill Lynch. Bacanovic’s tip came after ImClone Systems’ chief executive officer (CEO), Samuel Waksal, sold all his shares of the company. This came around the time ImClone was waiting on the Food and Drug Administration (FDA) for a decision on its cancer treatment, Erbitux. Shortly after these sales, the FDA rejected ImClone’s drug, causing shares to fall 16% in one day. The early sale by Stewart saved her a loss of $45,673. However, the sale was done based on a tip she received about Waksal selling his shares, which was not public information. After a 2004 case, Stewart was charged with lesser crimes of obstruction of a proceeding, conspiracy, and making false statements to federal investigators. Stewart served five months in a federal corrections facility. To summarise the chain of events in the Martha Stewart case: ImClone Systems’ chief executive officer (CEO), Samuel Waksal, sold all his shares of the company when he learned the FDA’s decision. Peter Bacanovic, a broker at Merrill Lynch, tipped this info. to Martha Stewart. She sold. Food and Drug Administration (FDA) announces its negative decision on ImClone cancer treatment. Shares crash. Martha prosecuted and imprisoned. Bacanovic imprisoned. Waksal imprisoned. The question about Paul is whether these events transpired. Stellar and Chain privately agree terms to an acquisition. This can be expected to be positive news for the XLM price when it is announced. Someone passes this information to Paul. Did Paul buy XLM? Did Blocktower buy XLM? On 5 May 2018 Paul DMs Kazonomics and, totally unsolicited, tips the inside information, to Kazonomics. Kazonomics understands that he has been placed in a dangerous position and blows the whistle. On 20 June 2018 of the acquisition of Chain by Stellar. Fortune breaks the news Was Ari David Paul Insider Trading? If Paul had access to insider information about an imminent acquisition of Chain by Stellar and divulged that information to third parties with a view to them buying Stellar XLM, would that be insider trading? The answer surely depends on two things. Did Paul have insider information? Yes. I have searched Google, the websites of Stellar and Chain, Twitter, the Twitter accounts of Stellar, Chain, Adam Ludwin, and Ari Paul, and there is no information about an imminent acquisition of Chain by Stellar until the Fortune story on 20 June 2018. 2**. Is Stellar a security?** The whole matter of whether certain cryptoassets are securities or not is the subject of public debate. The SEC seems to have ruled that . Bitcoin and Ethereum are not securities The jury is still out on Stellar XLM and Ripple XRP, which are tokens of a very similar nature. However the consensus is forming that XRP (and most likely XLM) will be defined as securities. That is bad news for Ari David Paul. But until that matter is settled, whether XLM is a security, it seems that Ari Paul has a ‘get out of jail’ card. There was no increase in the price of XLM when Fortune broke the Stellar/Chain story. Is this a possible defence for Paul? It seems not: Ten [Original] Questions for Ari David Paul of BlockTower Capital [ .] These questions were written before the news of the Stellar/Chain deal became public on 20 June 2018 Are the screenshots by Kazonomics a true impression of the DM conversation you had with him on 5 and 6 May 2018? [ .] Paul has acknowledged on Twitter they are genuine Is there an imminent acquisition of Chain by Stellar? [ .] The acquisition became public news on 20 June If there is an imminent acquisition, how and when did you learn about it? Is this public information or insider information? [ .] It became public on 20 June If it is public information, please give a link to an internet site showing that information. If there is no imminent acquisition of Chain by Stellar, why did you inform Kazonomics that there is an imminent acquisition? Who else have you informed privately of an imminent acquisition of Chain by Stellar? Does BlockTower Capital hold XLM? How much? When did it buy it? Do you personally hold XLM? How much? When did you buy it? You stated on 5 May 2018 that “ Six weeks have now passed at time of writing (15 June 2018) and this has not happened. Has the acquisition been cancelled? [ .] Stellar will announce an acquisition of Adam Ludwin’s Chain sometime in the next 2 weeks.” No

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