YrGrid blames Bitcoin problems on vendor

 

YrGrid’s Welcome Center region is a recreation of the gambling district in Macau.

YrGrid denies allegations that it is refusing redemptions in order to profit from the recent spike in Bitcoin prices.

Instead, the problem is caused by their Bitcoin wallet service provider, said the grid, which is a Hong Kong-based commercial gambling-oriented grid with a Bitcoin-based virtual currency.

Residents and users have been unable to redeem their uBTC virtual currency with transactions marked simply as “pending.” In addition, Podex, a third-party virtual currency exchange, has shut down operations on the grid.

The problem is that the YrGrid kept some of its Bitcoin funds at  BTC-e.com, a Bitcoin exchange that was fined $110 million and shut down by authorities last July on charges of money laundering. Its alleged mastermind, a Russian hacker accused of using the exchange to launder billions of dollars, has been arrested in Greece and is currently in the process of being extradited to the U.S. to stand trial.

“We have some funds deposited at BTC-e.com,” YrGrid grid owner Zhijie Wang told Hypergrid Business. “Since their website was down, we can’t cover all Bitcoin deposit. We try to recover ourselves before we have solution with them.”

Sharkclub Gaming, acasino on YrGrid.

The grid has been unable to cover residents’ losses out of pocket, Wang said. “The Bitcoin price has been rising too much last year, so it’s more difficult to get enough funds from investors to cover that.”

However, those users who have bought in-world currency recently are unaffected by the problem and will be able to redeem their currency.

In addition, other residents may see some progress in the next couple of months, Wang added. “We expect to get some refunds from the service provider and we will get more funds invested by shareholders.”

The price of a single Bitcoin was just under $800 this time last year. On Sunday, it was worth more than $19,000 and might rise even further as two traditional exchanges — the Chicago Board Options Exchange and the Chicago Mercantile Exchange — are launching Bitcoin-related futures contracts.

Meanwhile, the grid itself might be caught up in the anti-money laundering investigation.

“We received investigation requirements for some special account regarding money laundering,” Wang said. “Since many accounts connect together and it also very difficult to identify uBTC resource, so many accounts’ cash-out keeps pending. However, it won’t effect those accounts which have deposit records.”

The company may implement customer identification procedures in future to solve the issue.

Podex is off the grid

YrGrid residents also complained that Podex machines have been shut down on the grid. Podex is a third-party virtual currency exchange that has been offering currency purchases and sales for more than two dozen grids. It recently celebrated its tenth year in business.

The exchange has suspended repurchases of YrGrid’s uBTC currency and turned off its machines due to the problems.

Jacek Shuftan

“Let me start with the statement that my cooperation with YrGrid owners was always nice and I could not complain about it in the past,” Podex CEO Jacek Shuftan told Hypergrid Business. “But indeed, something strange has happened recently — there is no contact with them and withdrawals from the grid to personal Bitcoin wallets are pending. Because of this fact I decided to suspend withdrawals from YrGrid as well and locked Podex cashouts machines. I simply can not buy coins from users if I can not withdraw them.”

Unhappy grid residents and Podex users have been posting on social media, and have contacted Hypergrid Business directly.

“At first I noticed Podex exchange’s ATM’s were locked, then I asked Podex what was going on and they said that YrGrid’s support was not responding back to them,” one resident told Hypergrid Business. There was no response from the grid’s support team and online ticket service, and no word from the grid on social media or other channels, the resident said.

Why Bitcoin?

Currently, no other major OpenSim grids uses a Bitcoin-based virtual currency.

Even before the latest spike in prices, Bitcoins were too unwieldy for low-value in-world transactions. Plus, the price volatility has always made it difficult for merchants to set prices in Bitcoin. Ongoing problems with fraud, theft, and money laundering have also made the use of Bitcoin as a base currency very problematic.

Some grids to, however, accept Bitcoin as a payment mechanism, as an alternative to, say, PayPal or credit card payments. The way this works is that grids use a third-party payment processor such as Coinbase, BitPay or Stripe to accept the payments. The payments are typically converted to US dollars or Euros at the time of payment. Meanwhile, the grid’s own in-world currency is a traditional virtual currency that is not pegged to Bitcoin prices.

Residents have accused the grid of taking advantage of their deposits in order to profit from the current increase in Bitcoin prices.

“It’s even higher now and you guys are not cashing out anyone’s money anymore,” YrGrid resident KiKi Miranda posted on YrGrid’s Facebook page. “Looks like you’re taking advantage of the high Bitcoin rate and are just stealing all our coins. There are no notices or anything. No responses to tickets. Nothing. Just keeping our money.”

The grid denies the allegation.

“People saying we get advantage of Bitcoin price rising is nonsense,” said Wang. “Actually we work much harder to recover their balance.”

YRGrid, known as a Bitcoin-based gambling grid, brands itself as a Bitcoin economy in OpenSim and uses Bitcoin as their in-world currency meaning users and residents can spend and buy land or services with Bitcoin in the virtual world without having to exchange to Gloebits or Podex or other in-world currencies.

The grid’s weak response to the Bitcoin problems has created a lot of frustration for residents.

For example, on November 19, the grid simply posted a graphic on Twitter that said “YrGrid users be like cash outs gonna be coming any day now!!!” — and nothing since. The grid has responded by saying that the twitter account was taken away by their previous employee and they have been wanting to request the employee to give it back “nicely” without success. The employee has been using the account to attack the grid according to Wang.

“We didn’t announce that officially because we still want to ask the employee nicely to get back the account,” he said. “However it seems not work, we will announce that in facebook account for that. So can you certify this point?”

Users have also been experiencing frustration as the grid fails to respond or responds rudely to their posts and comments on social media. The grid has also not been getting responses via email and website support tickets.

One resident told Hypergrid Business they tried reaching the grid by responding to the Tweet several times, and then was told by the grid that they should try again in three months and “not to worry about it.”

YrGrid posted other unpleasant messages on social media, then deleted them.

“He [the YrGrid owner] said things like the money is his now, and to maybe to try back in three months plus said ‘but keep depositing money’ then laughed, and that Bitcoin wasn’t really money and not to worry about it, and that I gave the money to him, etcetera,” the resident told Hypergrid Business

In a Twitter response on December 14, YrGrid said, “bitcoins isn’t money you lost nothing.”

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David Kariuki

David Kariuki is a technology journalist who has a wide range of experience reporting about modern technology solutions. A graduate of Kenya's Moi University, he also writes for Cleanleap, and has previously worked for Resources Quarterly and Construction Review. Email him at [email protected].

11 Responses

  1. Awesome! and thank you for covering the story 🙂

  2. skylifegrid@yahoo.com' SkyLifeGrid says:

    Sounds like a grab and go to me

  3. dirtrider1992@outlook.com' DirtRider says:

    “The grid has been unable to cover residents’ losses out of pocket, Wang said. “The Bitcoin price has been rising too much last year, so it’s more difficult to get enough funds from investors to cover that.”

    However, those users who have bought in-world currency recently are unaffected by the problem and will be able to redeem their currency.”

    Why didn’t they keep 100% of user deposits? Why the heck would they keep the bulk of user balances in a HOT WALLET! Smells like BS.

    Is it any wonder since Melanie Milland works there that they are pulling another currency refresh a la Melanie’s last failed grid, Avination? How long until servers “crash” and it goes offline indefinitely?

  4. cirifrosle@hs130.com' Tori Sunbutton says:

    From what I see the grid isn’t a REAL bitcoin grid because if it was users would have their own keys to access these wallets and see for themselves where their money is. It looks almost as if maybe it is running modified currency module that just updates the balance with whatever they have in the bitcoin wallets that are being held by YrGrid. I have yet to see a grid run bitcoin the way it is supposed to be run. If it was being run correctly then this would never have happened. Especially if the system was creating individual wallets and granting the users to their own keys. That’s how bitcoin is supposed to work after all.

    • yrarea51@gmail.com' Area Fiftyone says:

      This is so true. It’s just a little impractical to run micro-transactions on the bitcoin blockchain at the moment. That being said, there are projects developing (sidechains, ie: LN) to solve the issue of micro-transactions. As soon as that’s out there, it’s going to be the preferred way, any business that doesn’t adapt to this is going to lose all of their customers. The reason for that is:

      Bitcoin was invented because we can’t trust eachother, we can’t even trust banks.

      There are some grossly inaccurate claims in this article: “Ongoing problems with fraud, theft, and money laundering have also made the use of Bitcoin as a base currency very problematic.”

      1. Bitcoin, when stored correctly is totally immune to fraud/theft. The only times bitcoins got lost/stolen were when they were left on an exchange (that exchange got hacked or stole their users coins), or stored them on some other website or kept their bitcoin private keys somewhere unsecure such as in a textfile on their daily used computer.
      2. Most bitcoin exchanges comply with KYC/AML, you have to send a copy of id, proof of address etc. Their requirements are FAR greater than those paypal requires.
      Also because the bitcoin blockchain is public it is further assisting law-enforcement agencies to track peoples coins. All bitcoin based online drug-marketplaces got busted, thanks to this. So the money-laundering claim is just false.

    • serlgr@yahoo.gr' gagas says:

      they print in world currency to be able to run their casino, the grid owner have his own casino.Take this as a fact, then you can understand whats going on in that grid.

  5. wheezycheezy@aol.com' Wheezy says:

    I lost my life savings by investing in YrGrid
    what do I do now?

  6. netinterprizes@yahoo.com' Alex Ferraris says:

    Using Bitcoin as a grid currency is a huge mistake….Actually using any third party currency in a grid is a mistake. I always said a grid should have its own currency and autonomy. Bitcoin’s volatility specially bad for a grid. People think that because Bitcoin is a virtual currency; it can be used in a grid environment …Not really…

    • yrarea51@gmail.com' Area Fiftyone says:

      Yes, because no grid has ever gotten “hacked” or lost their users money!

      Sarcasm off….

      To date the amount of money lost to open-sim grids that got “hacked” or “scammed” is so large now, that you have to be a complete moron to deposit money to a grid, or a centralized grid-currency. Like i said in the comment above, Bitcoin is going to kill all grids that fail to adapt.

      • dirtrider1992@outlook.com' DirtRider says:

        Alex just wants to use his own fake money so he can take the deposit and run when the wind changes, he has a bowel movement, or whatever and he decides to close his grid again.

  7. serlgr@yahoo.gr' gagas says:

    Please be advised

    They keep print in game currency to be able to run their own in game casino.