Tokens sold by Centra Tech are recognized as Securities

The blockchain firm Centra Tech, well-known by some celebrity approvals, has had its tokens ranked as securities by the US Securities and Exchange Commission
28 June 2018   1724

In April two founders of Centra Tech were arrested by US authorities. It raised $32 million by falsely claiming to be developing a cryptocurrency debit card in partnership with Visa and Mastercard. Actually, the executive team on the website was fictitious and no such products were being developed. 

We allege that the Centra co-founders went to great lengths to create the false impression that they had developed a viable, cutting-edge technology.
Robert A. Cohen
SEC Cyber Unit Head 

The ICO was promoted by retired boxer Floyd Mayweather and rap musician DJ Khaled. They are not supposed to be involved in the conflict. Lately, Judge Andrea Simonton of the Southern District of Florida court has considered that the tokens sold in the ICO are securities. It has to be marked that the defendents do not contest this point.

According to US law, the determination of a security is: “An offering is an investment contract if there is: (1) an investment of money (2) in a common enterprise, (3) with the expectation of profits to come solely from the efforts of others.”

This investment shouldn`t be cash, but can take the form of assets, as long as the investor commits them “to an enterprise or venture in such a manner as to subject himself to financial losses.” The existence of a common enterprise must then be set up - “a common enterprise exists where the fortunes of the investor are interwoven with and dependent upon the efforts and success of those seeking the investment of third parties.”

Simonton viewed this satisfied as “the fortunes of individual investors in the Centra Tech ICO were directly tied to the failure or success of the products the Defendants purported to develop. An individual investor could exert no control over the success or failure of his or her investment.”

The definition of a security is set and the punishments can start flowing. The defendants did not register their security, they sold their tokens in various states, the plaintiffs have suffered from financial losses.

Potentional Vulnerabilities Found in ETH 2.0

Least Authority have found potentional security issues in the network P2P interaction and block proposal system
26 March 2020   965

Technology security firm Least Authority, at the request of the Ethereum Foundation, conducted an audit of the Ethereum 2.0 specifications and identified several potential vulnerabilities at once.

Least Authority said that developers need to solve problems with vulnerabilities in the network layer of peer-to-peer (P2P) interaction, as well as in the block proposal system. At the same time, the auditor noted that the specifications are "very well thought out and competent."

However, at the moment there is no large ecosystem based on PoS and using sharding in the world, so it is impossible to accurately assess the prospects for system stability.
Also, information security experts emphasized that the specifications did not pay enough attention to the description of the P2P network level and the system of records about Ethereum nodes. Vulnerability risks are also observed in the block proposal system and the messaging system between nodes.

Experts said that in the blockchains running on PoS, the choice of a new block is simple and no one can predict who will get the new block. In PoS systems, it is the block proposal system that decides whose block will fall into the blockchain, and this leads to the risk of data leakage. To solve the problem, auditors suggested using the mechanism of "Single Secret Leader Election" (SSLE).

As for the peer-to-peer exchange system, there is a danger of spam. There is no centralized node in the system that would evaluate the actions of other nodes, so a “malicious" node can spam the entire network with various messages without any special punishment. The solution to this problem may be to use special protocols for exchanging messages between nodes.