Bitcoin breakups: A tale of two soured relationships

Within 24 hours, stories of two high-profile Bitcoin business relationships gone awry have hit the interwebs, and with two very different outcomes.

1) Jeff Berwick leaves BitcoinATM.

2) CoinLab sues Mt. Gox.

In the first example, Jeff Berwick publicly announced that he had been unceremoniously ousted by his young business partners. Jeff is an interesting fellow, and was recently interviewed by Real Virtual Currency to discuss a range of topics, including the BitcoinATM project. In his words, the project evolved organically – which now we have come to understand means that he was approached by two young entrepreneurs who asked for his help in marketing their invention, which he agreed to render.

Jeff strikes me as somebody who would never trust any government in any country at any point in history, but is paradoxically quick to trust individuals. From my assessment, the BitcoinATM relationship was built from implicit trust from the beginning.

His public description of events served to display two of his idiosyncratic characteristics: First, he is human, and subject to the same emotions as everybody else. At its essence, through so many words, his writing managed to convey the simple feeling: “I’m hurt.” Second, he is unusually open, and while clearly harboring negative feelings about the deal gone bad, expressed two things that struck me: an inherent sympathy for the youthful incautiousness of his ex-partners, and an element of personal responsibility and self-reflection, to be applied to his future ventures.

Simultaneously, we can observe another Bitcoin business relationship devolving in a much more spiteful way. The once heralded CoinLab/Mt. Gox partnership which promised to improve access and legitimacy to Bitcoin exchange markets in the US has suddenly turned into a nasty lawsuit for $75 million in damages. This breakup seems more reminiscent of a divorce proceeding, where the scorned party wants the house, the Lamborghini, and the kids.

I don’t know the CEO of CoinLab, Peter Vessenes, personally. But I’m going to pick a fight with him. In his press release, he mentions a few things that I found curious, and they are all found in the 3rd to last paragraph:

“My continued hope is that Mt. Gox will do what’s best for U.S. and Canadian customers and settle this matter quickly, allowing our customers to transact in the U.S. with a fully licensed and registered company that meets American standards for service quality. It’s most important to me that customers are able to maintain uninterrupted flow of services, and I hope that Mt. Gox shares that goal and works to resolve this dispute.”

First, it is noteworthy that Peter identifies the common good of US and Canadian customers as his primary goal. When the surprisingly likeable and emotional Silk Road founder Dread Pirate Roberts tells his customers that “he loves them,” I’m inclined to believe him. But when CoinLab claims that they are looking out for parties other than themselves in the context of a lawsuit, then I’m much more skeptical.

Second, he mentions “American standards of service quality.” However, I’m not sure what he is referring to, since as far as I can tell, the Americans have delivered a negligible contribution on the Bitcoin exchange front. If I had a bitcent for every post I have read about Coinbase running out of coins or bitinstant not replying to emails for 2 weeks, then I would be able to quit my day job. Mt. Gox, run by an eccentric French hacker based in Japan, is the only exchange with any reputation worth soiling.

Third, he twice alludes to the notion that he wants to reconcile the lawsuit out of court: “…settle this matter quickly…resolve the dispute.” From this tone, it appears to me that CoinLab is not prepared to take this lawsuit beyond its initial threat. After all, it would be painfully expensive, and the CoinLab coffers are filled by investors, whereas Mt. Gox could probably weather a prolonged legal battle by virtue of its business income.

In conclusion, it saddens me that a digital currency based upon trust and voluntary exchange is now in the middle of a disagreement which may have to be sorted out via the clunky and outdated processes of US litigation.

In this article, with the limited information available to the public at the moment, I have arguably displayed Peter Vessenes in a negative light. And if he wishes to rebut my points, he has an open invitation to tell his side of the story on Real Virtual Currency. The same goes for the BitcoinATM founders.

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4 comments on “Bitcoin breakups: A tale of two soured relationships

  1. Frozenlock says:

    I would really like a communiqué from the Bitcoin ATM founders. One of them, at the launch this afternoon, briefly mentioned that M. Berwick and them had a different vision for the project.

    While I have a huge respect for M. Berwick, blaming a failed relationship on the naivete of the young entrepreneurs is a little harsh. It might be true, but without the two sides of the story, I would refrain myself from pointing fingers.

    The timing was also quite special: The evening before the launch.

  2. gregsarmas says:

    Despite Bitcoin ATM falling apart there is still a need for greater accessibility if this currency is ever going to be anything more than mainstream media coverage. I wish these guys would’ve just worked it out. Berwick was a great spokesperson, I doubt we’ve heard the last of him being involved with Bitcoin ventures.

  3. Mark says:

    Peter spoke of “American standards of service quality” and like you I’m not sure what he is referring to, but it seem to me, those “American standards” (or government regulations) can do more to harm to the entire bitcoin economy than any other government in the world. As far as I’m concerned, we don’t need any “American standards” –thank you very much.

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