Block One’s EOS Wash Trading ICO Audit Report Doesn’t Exist as Investor Concerns Begin to Set In


In Search of Truth: Block One Yet to Fulfill a Promise to Release the Audit Report

When one discusses the meaning of truth and trust, the nature of philosophy allows room for debate. In business, thankfully, things are much more cut and dry. One is either guilty or not guilty. There is the law and there is the interpretation of the said law. Present supporting evidence and a verdict is passed based upon it. This seems fairly straightforward. Thus when last year, during their ICO, Block One was accused of Wash Trading EOS to lure Investment, they offered to clear their name by way of an audit. Today, the community is still searching for the truth as that audit report is yet to find its way to the public.

BitFinex is one of the largest cryptocurrency exchanges in the world. Thus, accusations of mishandling and shady deals are part and parcel of that world. However, when the rumblings became loud, almost 11 months ago, they announced that an external audit firm was being hired to look into this and clear them of any misappropriation. Since then the community members have continuously crawled though  Block One, the official publishers of the EOSIO platform. They are yet to come across any meaningful release or update about this.

This lack of communication has slowly snowballed from idle gossip into a genuine concern that Block One might have engaged in EOS wash trading during their ICO, after all. What is more alarming is the accusation that BitFinex, with a close relationship with USDT, knew about this but decided to look the other way.

What Had Happened

Wash trading, for the uninitiated, is an unethical practice which usually results in an investor getting conned off his investment. This is an old trick,  a form of market manipulation in which an investor simultaneously sells and buys the same financial instruments. To the larger market, this creates a misleading impression of activity, and thus gives the impression of market interest. The crypto trading exchanges today might try to do the same thing by allowing certain entities to buy and sell their orders. Unsurprisingly this is illegal in any regulated exchanges.

There is strong corroborative evidence that Block One engaged in this as ETH was periodically sent from EOS Crowdsale address to BitFinex. On its own, this means nothing, however, it has been noted that many of the addresses sending ETH to EOS Crowdsale received ETH from BitFinex who then sent them to EOS Crowdsale receiving EOS in return. This indicates the loop that is suspiciously reminiscent of wash trading. While  Block One vehemently denied any wrong doing and assured proper audits to prove it, there has been little evidence part from those words.

Evidence to the contrary though seems to be mounting. One keen observer commented, “if they had just left ETH in a couple addresses, it would be easy to verify that there was no recycling, but they send it all to BitFinex“. Furthermore, if indeed Block One was innocent then this would have been quick and easy to prove due to the publicly verifiable nature of blockchain itself. Finally, the fact that this is not the first time BitFinex has been accused of this shady practice. To compound the matter their trade engine seems to allow wash trading.

A More Systemic Problem

EOS gives developers the necessary infrastructure to run their decentralized applications from. The platform makes use of a delegated proof of stake mechanism, incorporating 21 block producers. These 21 block producers continuously circle around and are voted for by EOS coin holders. Candidates are rewarded for their performance and based on their intentions towards their EOS rewards. This is a major reason why they draw a lot of flak from observers. Further, allegations that the block producers host their servers at Google or Amazon affects the network security.

Apart from these issues, it has been found that there was a controversial dossier recently leaked. It details widespread corruption that allows for exchanges holding a majority of EOS to simply auction off their votes to the highest bidder.

It would be unwise to jump to conclusions without first having all the required evidence and facts. However, Block One would be well served to not test the virtue of patience too much. Irregardless of the findings, presenting the facts will at least show that they are either innocent or at the very least ready to move forward with the right intentions.

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