Creators Accused of Ripping Off Investors by Covertly “Premining” Bitcoin Private Coins

An accused “scammer,” “serial forker” of cryptocurrencies, the San Francisco Bay Area software engineer Rhett Creighton is in hot water this week on Twitter following the publication of an article by Coin Metrics alleging Creighton and fellow creators of “Bitcoin Private” of secretly pre-mining and vesting themselves with BTCP coins they failed to disclose in the project’s white paper.

According to the article:

“Bitcoin Private (BTCP) is a fork-merge of Bitcoin and ZClassic (a ‘privacy coin’)…BTCP defined its initial supply according to the sum of the outstanding supply of Bitcoin at the time (16.8m), ZClassic (3.4m) and a small 62,500-unit miner program. This was intended to give it an initial supply of ~20.4m BTCP, with a decaying miner reward, capping the total supply at 21m units as with Bitcoin.

“However, 2.04m additional units were covertly minted during the import of the Bitcoin UTXOs and sent to the BTCP shielded pool, bringing the initial supply to 22.6 million, contradicting the whitepaper and all of the materials published by the team.”

Not only did the team behind Bitcoin Private create and fail to disclose the extra coins, Coin Metrics believes, someone even moved them quickly to exchanges, meaning the coins may have diluted the value of early publicly-traded coins while enriching the selling coins’ creators.

While marketing a crypto coin can be expensive creating them is cheap:

“Three hundred thousand units of the covert premine were moved out of the shielded pool towards what appear to be exchanges.”

If successfully sold, the coins could have yielded between up to $3 million for purveyors of the scheme:

“If those coins were sold on the open market, they could have netted a profit on the order of $1M to $3M.”

Coin Metrics said there are five possible ways to explain the appearance of additional coins:

  • Our node is not on the correct chain – someone is somehow feeding our node garbage
  • There’s a bug in the gettxoutsetinfo code
  • The mining reward changed since the publication of the whitepaper making our original estimate wrong
  • Zk-snarks have been broken and someone is minting BTCP in the shielded pool
  • There was a hidden premine

The analysts then proceed to provide technical evidence of why they think there was indeed a premise.

For his part, Creighton tweeted that he considers the “covert inflation” of the BTCP coin supply to have been a “hack”:

He also tweeted that he never wrote any of the software for Bitcoin Private, but someone attached a comment to that claim showing Creighton commenting somewhere on a Bitcoin Private software commit:

Creighton has already attracted ire in the crypto sphere for creating, or helping create, a series of coins:

In April, Crypto Core Media reported on Creighton’s “sudden” departure from the Bitcoin Private project, which he moved on from to create another fork of Bitcoin called “Bitcoin Prime.”

The split was reportedly disappointing for Bitcoin Private investors who liked the prospects of a privacy-enhanced version of Bitcoin, and who, like most investors, would prefer less competition for investors.

Following the Bitcoin Private’s release in May 2018, it traded as high as $50 USD, but now trades for $2.

Sometime yesterday, Creighton announced he was blocking detractors on Twitter:

https://twitter.com/HeyRhett/status/1076987653738897408
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