Wild West Crypto World: The Story of Skycoin’s Lawsuit Against Fraudsters

Since the dawn of blockchain, cryptocurrency companies have often been seen as shady businesses somehow associated with crime. When it first emerged, Bitcoin was widely considered to be a vehicle for laundering money and trafficking illegal substances and weapons.

The notorious dark web black market, Silk Road, which was launched in 2011, was accused of facilitating the sale of $1 billion in illegal drugs, with Bitcoin as the preferred method of payment. A Michigan man was caught purchasing and shipping gun components to buyers overseas in exchange for Bitcoin. Besa Mafia, a scam website claiming to be run by the Albanian Mafia, offers Hit-Man-For-Hire services to disgruntled spouses on a sliding scale: $5,000 worth of Bitcoin for a standard murder, $6,000 to make it look like a car accident, and $12,000 for a sniper hit.

Meanwhile, at the peak of the ICO bubble of 2017-2018, thousands of investors were defrauded by conmen trying to capitalize on the crypto craze. For example, OneCoin (One), whose founder once held a glitzy event in Wembley Stadium, was revealed to be a $4-billion Ponzi scheme. One of CoinMarketCap’s best-performing coins, BitConnect (BCC), turned out to be another pyramid scheme before it collapsed, leaving its token holders with nothing. Like an estimated 90 to 95 per cent of joke tokens, BoringCoin (ZZZ) didn’t even last a year after launching with a promise that there would be no drama, no hype, and no pump and dumps.

Many years have passed since then, and cryptocurrencies have become more acceptable to government regulators, as they now understand that, although cryptocurrencies ostensibly provide anonymity, their use can still be traced. And law enforcement agencies have been using this ability to good effect. To cite a few cases: Silk Road was shut down in 2013, and its founder, Ross Ulbricht, was convicted and sentenced to life in prison; an American named Trendon Shavers pleaded guilty to running a $150-million Ponzi scheme in the first Bitcoin securities fraud case; and a Frenchman named Mark Karpelès was arrested and charged with fraud and embezzlement of $390 million from the now-shuttered Bitcoin currency exchange Mt. Gox.

Although most of the focus with regards to criminal activity in the crypto world remains on its use in illicit trafficking and money laundering, there is another issue that goes largely unnoticed: attacks on legitimate blockchain companies and their founders by nefarious opportunists and extortionists, who see the big and seemingly easy money in the crypto world as low-hanging fruit, ripe for the taking.

The Crypto World: Land of Great Opportunity and Dangers

The list of crimes targeting crypto participants is huge: people who were known to own a large number of tokens have been beaten, tortured, and even killed. In 2018, when cryptocurrency extortion crimes reached an epidemic level, Bitcoin developer jlopp began compiling a table listing all known cases of attacks on digital currency executives and traders involving physical violence. Today, it contains 105 cases in which digital currency holders have suffered or even died.

Among the victims have been well-known bloggers who publicly disclosed their income. For example, 23-year-old Pavel Nyashin, was beaten and robbed of $425,000 in crypto when his home was raided, and computer equipment stolen. The successful blogger and crypto trader was later found dead in his apartment. The investigation found he had likely committed suicide due to his debts, as much of the stolen money had been that of investors whom he could not pay back, but murder was not ruled out.

Owners of cryptocurrency exchanges and large projects become a priori targets for criminals since they have access to passwords from online and offline wallets, which store not only their own tokens, but the coins of their entire project, as well as those of site users. Surprisingly, in most cases, crimes committed against the owners of cryptocurrency businesses go unpunished.

Today, cryptocurrencies have gained a degree of legitimacy in the public eye, and it is becoming more and more accepted as a method of payment. The Central African Republic and El Salvador have even declared Bitcoin to be official legal tender in their countries. However, despite its growing respectability, for fraudsters and conmen, the crypto world is still a kind of Wild West – a place full of opportunities where anything goes, and wily hombres can do as they please as long as they’re faster on the draw than the sheriff.

How Outlaws Attack Legitimate Blockchain Companies

One notable victim of such scammers has been a Singapore-based blockchain company called Skycoin, which develops hardware and software that will contribute to the emergence of the long-anticipated decentralized Web 3.0. It also helps companies to optimize and secure their networks and data storage on blockchain, and aids individuals in taking back control of their personal information.

Skycoin is an absolutely unique project that can trace its history back to the very beginning of the crypto industry. It was originally launched to solve problems with Bitcoin’s and Ethereum’s algorithms that compromise their degree of decentralization by Brandon Smietana, a blockchain pioneer who even wrote some of the original code for the world’s first cryptocurrency along with Satoshi Nakamoto

The company’s token, SKY, serves as currency in the project’s ecosystem. When it launched in 2012, it was worth less than a penny. However, with the crypto craze of 2017, its price shot up to a peak of $53.83 – 5,000 times higher than its original value – bringing the project’s capitalization to a mindboggling $5 billion. Unfortunately, this monumental success attracted a number of low-life grifters and outlaws posing as a marketing company, who would have felt right at home in Tombstone’s infamous Clanton gang.

In January of 2018, Skycoin hired Smolder LLC to revamp its website, perform SEO, and generate positive publicity. According to the crypto project, this unfortunate decision led to a seemingly endless series of criminal attacks, including fraud, blackmail, defamation, and even kidnapping.

In fact, the alleged attempts to sink the company and slander its founder created quite a scandal. An ‘expose’ of the company even appeared in New Yorker magazine.

I decided to get to the bottom of the Skycoin story to find out what had really transpired. To do this, I combed the internet for any open sources I could find and tried to reach Smietana and the alleged attackers to get their respective sides of the story. While I managed to reach Smietana and spoke to him at length, the attackers failed to respond. Here’s what I’ve managed to learn.

The Skycoin Story

Shortly after being hired, the marketing team led by the Smolder’s co-founder, Bradford Stephens, announced that they had uncovered a scheme by an unknown third party to damage Skycoin’s reputation by linking pornographic blogs, which included kiddie porn, and other harmful spam content to its website. Stephen’s requested additional money to ward of the attacks, and Skycoin provided the funds.

Stephen’s first task in promoting the company was to go to a CoinAgenda conference in Las Vegas to rub shoulders with some blockchain bigwigs. While there, he threw a promo party at his own initiative, which included expensive steak dinners, top-shelf alcohol, and high-priced prostitutes. On his return, he presented Skycoin with a staggering bill for expenses amounting to $225,000.

Among the more outrageous claims were a $3,550 tip for a $3,550 restaurant dinner, “cash tips for hostesses,” and $10,000 for “cupcake girls.”

An un-itemized invoice for $873 in cash also caught the eye of Skycoin’s accountant, as it looked like it may have been used to buy drugs. In short, nearly none of the ‘expenses’ could be substantiated or actually matched the submitted invoices. To add injury to insult, as it turned out, none of the key people from the conference had actually attended this ‘VIP party’. In fact, no one but Stephens and some of his friends had apparently been there. Naturally, Skycoin refused to reimburse these expenses, as Stephens hadn’t even informed the company that he intended to organize the event.

“Of course, we refused. This is not a business expense. We didn’t approve this, and we won’t pay it. I don’t think there’s any professionally run company that would pay for something like this,” Smietana noted.

A month after the conference, Smietana says Stephens and his business partner, Harrison Gevirtz, met him in Shanghai. The pair allegedly took Brandon to a hotel room, where they introduced him to a ‘power marketer’ in a video call. There, the three said they wanted to invest $50 million in cash in Skycoin, which they claimed would increase the company’s value by several hundred times. But there was a catch: first Skycoin needed to pay Smolder LLC $30 million in BTC to prove that the company was serious about working with their marketing team.

Brandon says he declined this questionable offer, noting that it would be nuts to send $30 million to someone he’d never even met after a Zoom call. The meeting ended in acrimony, with the ‘influential person’ promising to do everything in his power to destroy the Skycoin project.

When Skycoin’s advisory board found out about this bizarre meeting, half its members threatened to quit unless Stephens left the company, as they were afraid their names would be connected with Gevirtz, aka “Harro”, who is widely considered to be the king of the blackhat marketing criminal underworld. There were also suspicions that the mysterious person in the Zoom call was Ryan Eagle, another Smolder partner, who had been named in a US Government FTC action related to illegal marketing practices in 2014 and 2016.

Consequently, Stephens resigned less than two months after being contracted, on February 24, 2018, under pressure from Skycoin’s advisory board.

It later emerged that the people behind the spam attacks on Skycoin’s website were none other than the contractors themselves. At that point, they demanded that Skycoin pay them $100,000 per month to cease their attacks on Skycoin’s site, later increasing their demand to $300,000 per month.

Smietana described the scheme the conmen employed as follows:

“So, they were running this extortion racket. What happened was they basically started attacking Siacoin and Substratum. And they went to Substratum and said: ‘Hey! Skycoin’s attacking you! You want to get revenge?’ And they got $100,000 per month from Substratum and Siacoin to attack us, but we had nothing to do with it. Then they came to us and said: ‘Hey, pay us $300,000 per month for protection money and we’ll leave you alone.’”

Fearing for his company’s financial future, Smietana says he eventually gave in to the extortionists’ demands and made the first of three protection payments. A contributing factor to this decision was allusions that Stephen’s associate, Gevirtz, made to Eastern European crime gangs and “unconventional debt collection” methods used by the Albanian mafia.

Ultimately, however, Smietana decided that enough was enough and refused to make any further payments.

At that point, knowing that Skycoin was to be added to Bittrex in late February, Stephens allegedly told Smietana he would go to the exchange and provide them with damaging information that would prevent the listing unless his team was paid $30,000,000 in Bitcoin and 1,000,000 USD. He warned Brandon that if their demands were rejected, SKY’s price would crash to zero.

Smietana says he held firm, refusing to submit to the blackmail. Consequently, Stephens did, in fact, provide Bittrex with slanderous and false information which ultimately kept Skycoin from being listed on the exchange.

But this wasn’t the end.

According to Smietana, in June of 2020, this group hatched yet another scheme to extort more money from Skycoin. The conspirators threatened to get the company’s token delisted from Binance and trash its reputation if it refused to pay them 50 BTC.

The company refused again. Smietana recalls:

“What happened with Binance is we had these people come and say, ‘Give us 50 Bitcoin or we’re going to get you delisted,’ and I told them ‘To hell with you! We’re not paying you $2 million!’ And this is a group of people that has been attacking us for 4 years now.”

Subsequently, the group allegedly paid other individuals to make false complaints against Skycoin, including allegations that Smietana had engaged in drug use and criminal activities. They even publicly discussed what kind of smears could get Skycoin delisted from Binance.

The extortionists were ultimately successful, and Skycoin was delisted from Binance on November 5, 2021.

Afterwards, public messages appeared written by one of the co-conspirators, congratulating all those involved. “Nice work team” and “PARTY TIME”, they read.  A photo was even posted depicting Skycoin as New York’s World Trade Center just before its demolition.

But it didn’t stop at just blackmail. At one point, the criminals’ efforts took a more violent turn. According to Smietana, Stephens and Gevirtz goaded Skycoin’s Chinese marketing team into kidnapping and robbing him by telling its members that they weren’t being paid enough and that everyone who worked in blockchain made $30 million a year in coins. Consequently, Smietana and his girlfriend were forcibly held in their Shanghai flat by kidnappers who tortured and beat Skycoin’s co-founder for six hours to get him to give up the passwords to his computer, which contained source code and other valuable information. Smietana finally capitulated, and the attackers managed to steal about $139,000 in Bitcoin and $220,000 in Skycoin as a result.

Though the assailants were eventually identified, arrested, convicted, and sentenced to prison, the orchestrators were never punished. And they have yet to relent in their persecution of Skycoin and its co-founder, who remains the object of attacks and slander on social media to this day. Smietana has even been subject to antisemitic abuse, being called “a Jew who deserves to die.”

Skycoin’s Lawsuit

On February 8, 2022, Skycoin Global Foundation Singapore filed a federal RICO lawsuit (Skycoin v. Stephens, 22-cv-00708, US District Court, Northern District of Illinois, Chicago) against the former contractors, as well as a number of other parties, for actions that occurred between 2018 and 2022. The defendants include Bradford Stephens, Harrison Gevirtz f/k/a ‘HaRRo’, Ryan Eagle, Andrew Young, former Eagle Web Assets (EWA) associates Aaron Kunstman and Joel Wayne Cuthriell AKA ‘Caribou’, as well as Morgen Peck, Tristan Greene, Bryan Clark, Catherine Byerly, Steven Leonard, and Josh Ogle of Far Ahead Marketing.

Among the list are two journalists, who are being sued for receiving money to publish false and defamatory statements against the company as part of an extortion racket. These include Morgen Peck, a freelance journalist writing for The New Yorker that the lawsuit alleges received bribes from the defendants, including Bradford Stephens, who she knew had been flagged by the FTC for violations connected with one of his previous companies.

Skycoin hopes that this legal action will serve as a kind of OK Corral, that will rid it of these outlaws once and for all and allow it to finally continue with its important work of building blockchain for the future without being harassed.