Last month, I reported that PayBase, the subsidiary of GAW Miners responsible for the administration of PayCoin, would open enrollment for a “buyback program” on the first of February. When that didn't happen, I decided to give them some leeway – the complexity of it all and the end result of so many people getting their promised $20 per coin seemed like it might warrant a reasonable delay.
The company posted a one-paragraph blog on the day they were supposed to open enrollment:
As previously reported, we are reviewing with counsel the features of the Honors Program and what if any aspects of the program may require regulatory approval. We intend to proceed based upon advise of counsel and will provide updates as developments warrant.
The blog links to a forum post from a the day before by Josh Garza, in which he says “the regulatory environment has changed.” It is important to keep in mind that this post was written only about two weeks after my article was published, and it was the morning I wrote the article that the $20 repurchase agreement was publicized.
“To the outside, I know it seems like nothing is happening,” Garza writes. He uses the rest of the short post to do important things: name the company's law firm and blame the government for the delays.
The regulatory landscape has changed night and day the last month. Just about every major company is dealing with it, not just us. […] The issue is that the rules and regulations are not well defined in this industry, it makes it difficult to navigate. […] The good news is we retained Manatt, Phelps & Phillips, LLP about two weeks ago, and they are helping us through the regulatory progress.
CCN reached out to the law firm in question, but after more than 48 business hours we had not heard back from them.
What an altcoin, right! Just roughly 50 of them were equal to a Bitcoin. This price proved unsustainable, however, and about a week later the price dove off a cliff, to .01, and from there, it steadily declined to its current rate of about .003BTC – or about twice the value of its ancestor, Peercoin.
None of this has deterred the unabashed supporters who congregate at HashTalk.org. “Cool beans. Good to see you got heavy hitters working in your corner on the legal aspect,” wrote one user. The general sentiment of the responses was along these lines: oh, Mr. Garza, thank you for your continued hard work!
But too many questions are raised by all this to let them off that easy, at least for a rational person with no emotional or business connection to the company. For instance – what exactly are they talking about with the “regulatory landscape” changing? Is this in reference to the SEC investigation reportedly underway?
Why would the SEC have a problem with the buyback program going through? Why would they want to impede the progress of something that will apparently rectify the alleged wrongdoings of GAW, regarding promising the $20 price floor in the first place?
Or is it something more obvious? Is it that GAW does not, in fact, have enough money to buy back the entirety of the coins (and why would anyone not seek to capitalize by several-fold)? Have their promises outpaced their abilities? Will the website redirect to a domain provider in a few months, GAW never to be heard from again?
All I can say is we've seen crazier things than that before in this space. There aren't many who'd be surprised if that's exactly what happened – PayBase and GAW fold over completely, shut down operations, and disappear, consequences be damned. After all, Garza never did address the issue of investor concern at The North American Bitcoin Conference in Miami, and few representatives of the company have been forthcoming at all. They could do a lot more to alleviate concerns, but why bother when so many of their customer base is still satisfied with the way things are going?