Topic: [2015-10-31] NewsBTC CA: CAVirtex: Scam in the Making? (Read 447 times)

I remember when they were on havelock and people were starting to voice some concerns. I'd already been burned on enough btc securities to stay well away. I use cavirtex to buy and sell though. Haven't had any issues with that.

On October 30th we published an article that was deemed controversial, which covered rumors around CAVirtex. Although numerous shareholders were disgruntled, and some were considering legal action, other community members thought it unfair to only cover one side of the story. The responsible thing to do would have been to reach out to CAVirtex for comments.

Joseph David Toth was kind enough to reach out to us, speaking on the record with the original author for a formal interview. He had strong words about the motivation behind these accusations, and was able to clear up some of the confusion around the Havelock shareholder incident.


Andrew Wagner: “OK, well first of all I’d like to apologize for the provocative headline. There’s a lot of gossip right now, but we’ve not really chatted directly. What’s your current role at CAVirtex–are you focusing on any other projects?”

Joseph David Toth: “Firstly Andrew, I’d like to thank you for reaching out to me. You are the first journalist that has done so since the Coinsetter acquisition on April 8, 2015.  My current role is an advisor; I advise the CEO (Jaron), but he has full control over operations and business planning. I am exploring some new projects in the Bitcoin space but nothing has been firmed up yet; when it does I will be going public with announcements.”

Andrew: “Why did you decide to step down as CEO? Weren’t you the founder?”

Joseph: “Yes, I stepped down to sell the company; the Bitcoin exchange business became unprofitable, especially with the added bank fees and regulatory uncertainty. We were looking for a larger acquirer that had the backing and capital to stay in operations until the next big pickup in volume.”

Joseph: “I’d also like to clarify the Havelock situation: shareholders were offered $40 per share ($10 higher than they purchased  it at the IPO). The de-listing off Havelock was in order to pro-actively comply with Canadian securities regulations by making all BTC purchasing shareholders real shareholders of the Alberta Corporation with share certificates.

A large majority of Havelock shareholders have been registered with the CAVirtex Alberta Corporation, but there does remain a small minority that failed to respond to repeated requests to register by providing their name and address; these are mostly very small shareholders that purchased 5 or fewer shares off Havelock.

Andrew: “Why were some shareholders posting otherwise? Several claim they’re unaware of any change in status. You’re saying the process is complete?”

Joseph: “The process of trying to get all Havelock shareholders registered in the Alberta Corporation and an offer of a share buyback was performed in 2014 by our law firm at the time, Norton Rose Fulbright; in April, 2015, the status of all Havelock shareholders was transferred to Coinsetter’s Legal Team. Any questions or inquiries about Havelock Shareholder status should be directed at [email protected].

Despite mention of a ‘class action lawsuit,’ there was never any claim made or charge filed. Some of these posts were by our competition (if you dig hard enough to look at screen names and cross reference userids) in an effort to discredit our name. Performing a whois on cavirtexlawsuit.com yields an anonymous registrant from Panama.”

Andrew: “So this is all part of an elaborate smear campaign by your competition? What about the claim that you used to go by another name?”

Joseph: “My full legal name that anyone can search for under the corporation is: Joseph David Toth. The Alberta corporate registry only shows Joseph Toth; my legal middle name is David. It is legal to use a middle name in public and I did so in an effort to ward off social engineering.

In the early days, I was under constant attack, with many people trying to impersonate me and discredit what I was trying to accomplish. I now go by my full legal name. As of now, I have ten people that I know of trying to impersonate me on the Internet, ranging from Facebook to BitcoinTalk.

I was the front and center pioneer in the early days, and was under constant attack both personally and from a business perspective. I live this dichotomy as an entrepreneur: on one hand I’m excited about Bitcoin, “the future of money,” and the industry I’m in, and I want to promote it and speak in public. On the other hand I’m under constant attack for doing so.”

Andrew: “Were you ever involved in something called Hedge for Profit?”

Joseph: “It was a business I started at the time when FOREX brokers gave interest-free accounts. The secret was simple: you go long GBP/JPY with one broker that pays you interest, and you go short GBP/JPY with another broker that does not charge you interest to be short.

You initiate both positions at the same price, so they balance each out from a P/L perspective. You then simply collect your interest and re-balance the accounts when the position moves far away from your starting point.

I did two seminars with a business partner in Texas that I later found out to be unscrupulous; it was he who posted the false statements on Ripoff Report when I terminated our business partnership. I stopped offering this product when the non-interest charging brokers all changed their policies and started to charge interest. I have always observed ethical business practices and do not promote any business that misleads consumers or investors.”

Andrew: “Were shareholders warned about the de-listing? Wasn’t the price over $100 at the time?”

Joseph: “Yes, they were warned and given plenty of notice, and the $100 was a brief spike. Havelock allowed trading of the shares after the IPO was fully funded; this $100 price spike was driven by user demand, nor did I or any other CAVirtex shareholder trade any shares on Havelock.

I contacted the Havelock admin team and was told that any former Havelock shareholder can still login to their account to view all price history, and the last trade date of a Havelock share was on 12/31/2013 for 0.11214763 BTC. Using CAVirtex’s average price of that day of $500.82 CAD per BTC, this places the de-list price of the Havelock shares at $56.17 CAD per share.

I am aware of the CryptoCoinsNews forum posts that report two erroneous facts: one is the de-list price, which they report as $120 when it fact it was $56.17, and two is the buyback price which they report as $30 when it fact it was $40.  I would like to point out that if there was any mal-intent to Havelock shareholders, why would CAVirtex agree to register them and buy back shares at 33% above the IPO price? A buyback such as this is unheard of in any startup company.”

Andrew: “I know you said that Havelock shareholders are legal corporate shareholders, but weren’t they supposed to become Coinsetter shares with their acquisition? When does that occur?”

Joseph: “Havelock shareholders initially purchased 10% of the equity of CAVirtex; this number then dropped due to some buybacks. Coinsetter purchased CAVirtex, and Havelock shareholders should contact [email protected] for any questions as to their status.

Andrew: “[Shareholders are] saying stuff like ‘I have an email from him that they were working on a plan, but that is like a year old and NOTHING has been done.’”

Joseph: “I’m not sure what plan you are referring to here, if it is the plan to register their shares this was done throughout 2014.  I made a top priority to have all Havelock shareholders registered and offered the buyback at higher than the IPO price. I instructed my admin staff to keep trying to contact these shareholders and increment the contact attempts by 1 in the subject line after every two business days until we reached attempt #29, spanning 3 months of contact attempts. 

Andrew: “Well, I saw two certificates with over 1000 shares.”

Joseph: “When we converted the Havelock shareholders to registered CAVirtex shareholders, we issued 100 CAV shares for each Havelock share. So, this means that 1000 CAV shares would have only equalled 10 Havelock shares, so that person would have spent $300 if he bought at the IPO price.

To conclude, I would like to thank you for contacting me. I do intend on making statements on the Internet on my own private channel (yet to be created) and identified by a video introduction of me, the same Joseph David that appeared before the Senate who was the co-founder and CEO of CAVirtex. I will link to this interview in that statement to confirm that this interview was actually performed by me.”

CAVirtex is Canada’s oldest and most well-known Bitcoin exchange, founded in 2011. For a while, they were the only exchange option available to Canadians, until QuadrigaCX rose to challenge them. Other newcomers such as the Taurus Bitcoin Exchange now offer significantly lower fees, but CAVirtex maintains the largest volume by far.

As a result, CAVirtex remains the exchange of choice for those buying or selling in large amounts. They’re also on good terms with Canadian regulators, and are one of the primary lobbyists for Bitcoin in the country. Their former CEO even presented at a Canadian Senate hearing, which culminated in them being the first government body to publish a report on the blockchain.

All has not always been well at CAVirtex, however. The former CEO goes by Joseph David in the Bitcoin community, but his legal name is Joseph Toth according to official documents. Various Internet sleuths have discovered that his listed addresses are a UPS store and a mall, and that he is an accused scam artist. Until at least 2008, for example, he operated Hedge for Profit, which claimed to make you 87% of your investment but obviously did not.

It was around the time of these allegations that Canadians began to question CAVirtex. Near the end of 2014, CAVirtex was delisted from Havelock Investments at its highest recorded share value. Since Havelock was the only effective means of buying and selling the virtual shares, this basically forced investors to become permanent shareholders. CAVirtex offered to buy the shares back at $30 apiece–a roughly 80% loss–resulting in an attempted class action lawsuit.

Eventually, Joseph stepped down as CEO, but the problems just continued. CAVirtex ran into conflict with its banking partner; at the same time, their security system was compromised by hackers, who managed to get many users’ password hashes and other authentication factors. As a result, the exchange had no choice but to shut down.

No notice was given to shareholders as to what the closure meant for them. This caused an outcry on Coin Forum, Canada’s largest online forum for cryptocurrency enthusiasts. One investor started a thread about the issue, which has gathered over 700 views and counting–quite substantial for a Canadian-only message board.

The company was thereafter purchased by CoinSetter, who provided the quick influx of capital necessary to resume operations. This did nothing to appease shareholders, however, who were left wondering what stake they have in this new corporate entity. A representative posted briefly in an effort to alleviate their concerns, and an email was sent out, but over 7 months have passed without a resolution.

The exchange is currently operating as normal for traders, but the drama rages on at Coin Forum. Numerous investors have registered accounts in an attempt to make their voices heard, and while it’s likely some form of resolution will be reached, we recommend that all CAVirtex shareholders do the same in order to help guarantee a fair return on their investment.