The case of Banx & C-CEX

Steem Cash is a new project that caught my attention because one of the individuals behind it is Mark Lyford ( @marklyford). His earlier project was Banx, which many have claimed to be a scam and I tend to agree with them.

Some of the stuff is documented quite well in these articles:

Lyford and his business partner Michael Taggart ( @michaelx, @murderistic) have claimed several times (quite aggressively) that those articles are full of lies. But as far as I have dug into this case, I haven't really found any evidence that proves that Ian DeMartino, the writer of the articles, has lied. Lyford and Taggart have implied that the evidence is somewhere in the internet but they haven't provided me any links.

When I was looking for more information about Lyford, I found his chat logs with cryptoexchange C-CEX. Of course I had to read it all because chat logs are many times very good way of seeing how people really act and think. Chatting is usually quite spontaneous so people don't think much what they write and don't use much time to tune their message.

Chat logs: with Pride, "the coin hunter" and with rest of the team.

Things started out when Pride from C-CEX contacted Lyford and wanted to list Banx Shares in their exchange. C-CEX agreed to do a customized ICO (initial coin offering). The customization in this case was that Banx Shares were put on the exchange, but Lyford was the only seller (if I've understood correctly, in normal ICOs coins aren't moving in the exchange until the ICO is over). This way he could make sure that the price was what he wanted it to be.

But eventually problems arose because Lyford didn't do any actual contract with C-CEX, which caused some misunderstandings. But instead of finding a good way (for everybody) to exit the situation, he behaved quite childishly and was very intimidating. On the other hand, C-CEX guys kept it cool almost all the time.

Lyford's goal was to make successful ICO, but he made a mistake and released the wallet during it. Because of that, C-CEX wanted to end the ICO phase in their exchange and let customers trade freely. After all, why not? If the wallet is publicly available and everybody was already using it, any exchange could start to use it too and let their users freely trade Banx Shares. It would not make any sense to not let trading happen also in C-CEX. Lyford should have released the wallet only after when the ICO had ended. So C-CEX decided to end the ICO phase in their exchange and let users trade freely.

Lyford was clearly only interested in how much money he can make. He wasn't happy that other people could sell Banx Shares cheaper than he was selling. He didn't show any interest for C-CEX's side of the story: it would be very bad move for them to delist a coin that is actively traded. Customers wouldn't be happy about that. C-CEX asked several times for a reason so that they could explain removal of the coin for their customers, but Mark didn't give any. This was because his goal was to manipulate the price to stay high. He didn't show any signs of caring about the customers, which were, of course, also owners of Banx Shares.

Reading through all that made my impression of Lyford stronger: he is a really bad business partner. I recommend everybody to stay away from him. Apparently he got criticized on the trollbox and didn't like it (surprise, surprise!). Demand for the BanxShares was also quite low, he managed to sell only very little which jeopardized the ICO.

Lyford was also very clear that he wanted C-CEX to manipulate the Banx Shares price by setting minimum prices for sell orders so that the price would stay up on Coinmarketcap.com. Reason for that was that he was trying to raise money outside of cryptoscene. He needed high rank in CMC to show other investors that Banx was already very successful. And that is the thing that makes Lyford a scammer in this case. His intention was to artificially manipulate the price and use that to deceive investors to give him more money. In my opinion that is highly unethical. When a new company is raising money, they should be very open about their real situation and not intentionally lie to potential investors that they are already succeeding. If investors don't know all relevant information, they can't do rational decisions.

The end was even more absurd (although all events are not clear to me, Lyford had of course heavily edited the Bitcointalk thread about Banx). Apparently some old wallet allowed mining and of course users did mine. Then they sold those coins in C-CEX. Lyford claimed that this was some kind of exploit and changed the blockchain and wallet so that it didn't work anymore with old wallets, including the one that C-CEX was using. So customers in C-CEX who had coins in there lost them because they couldn't make any transfers anymore. Lyford really didn't give a shit about investors, he just wanted to make sure that he'll get as much money as possible.

It also showed very clearly that Lyford had no idea how blockchains and wallets work. How the hell that kind of person could have been successful with all the megalomaniac plans that Banx had (exchange, ATMs, mining operations, physical coin issuing, casino, trading bot, etc)?

[20/11/2014, 12:37:36] Mark Lyford: this is happening in 8 days: http://banxcapital.s3.amazonaws.com/BANX_CAPITAL_wallet_update_announcement.pdf
[20/11/2014, 12:37:43] Mark Lyford: ill leave it to you to tell your customers,
[20/11/2014, 12:37:56] Mark Lyford: if any of your legitimate customers have an issue they are only too welcome to contact me
[20/11/2014, 12:39:18] C-CEX.com: Very good. I just don't recommend to call the fact old wallet supports mining as "exploit" - it is really funny and unprofessional
[20/11/2014, 12:39:59] Mark Lyford: whatever mate, don't talk to me about unprofessional ehh
[20/11/2014, 12:40:35] C-CEX.com: Are You professional in cryptocoin technology? You know all the things how it works?
[20/11/2014, 12:41:03] C-CEX.com: It's like when auto delaer may call "exploit" that his customer still driving old car :)
[20/11/2014, 12:41:14] Mark Lyford: my guys are, I don't need to know everything Im the marketing entrepreneur , I know how to deal with people. thats all I need . I don't change deals half way through a deal...

[20/11/2014, 12:45:01] Mark Lyford: i think you knew people were doing this and dumping illegal shares on your exchange.
[20/11/2014, 12:46:22] C-CEX.com: First You need to state what is "illegal shares"
[20/11/2014, 12:46:42] Mark Lyford: shares that should have been mined over our 6 mill shares.
[20/11/2014, 12:46:45] C-CEX.com: Post it somewhere and then maybe we will have a chance to investigate further
[20/11/2014, 12:47:07] C-CEX.com: Why are they illegal if they could be mined using Your wallet?
[20/11/2014, 12:47:12] Mark Lyford: listen. I'm done with this, I'm too busy to be dealing with this shit any more.

After that incident it should have been clear that Banx had failed. There weren't enough demand for Banx Shares so the funding would be insufficient to carry out all the plans that Banx had promised to it's investors. Only reasonable thing to do would've been to stop the project and return the money. But instead of stopping it, Lyford continued to push it forward. We now know the result: more new investors were deceived to buy shares which are worthless today (Banx was finally closed in April 21 2016).

Lyford didn't care about his investors (he didn't want old investors to be able to trade freely and he wanted to deceive new investors to pay more than market price) and he didn't care his business partners (his behavior was very intimidating and manipulative against C-CEX, he clearly wasn't interested in finding a win-win solutions). Of course different people have different views on what is ethical business and what is not, but in my view price manipulation with intention to deceive investors is very much in the category of unethical business.

Also it's very bad personality trait for a businessman to never admit that he has made mistakes and accuse everybody else for them even it's obvious that he made them himself. Later Lyford has stated that mistakes were made in Banx project, but in this particular case with C-CEX he was shamelessly and aggressively claiming that he hadn't done anything wrong.