In 2017, Arbitrade Ltd., a Bermudan company, and Cryptobontix Inc., a Canadian company offered a new type of crypto token which could make gold easy to own. With a few clicks of your smartphone, you could own gold without the hassles of physical custody. This same venture is now subject to the SEC’s investigation.
As per the SEC report, Arbitrade and Cryptobontix Inc. and their 4 principals allegedly pulled a pump-and-dump scheme. They offered the Dignity token or DIG, which promised to have gold as the underlying value. The SEC complaint further reveals that Arbitrade claimed that it has received $10 billion worth of gold bullion to back each DIG token. One Dig is equal to $1 worth of gold. As alleged, it was all a sham and there was no gold. The suspected scam artists were able to use their claims to pump up the demand for DIG and were able to sell at least $36.8 Million worth.
Dignity token is based on the Ethereum blockchain and transactions can be viewed here: https://etherscan.io/token/0x093e5c256ff8b32c7f1377f4c20e331674c77f00. As per the transaction history, there has been no transaction for 1500+ days, which in crypto years often considered as rug pull.
Is gold-backed crypto needed?
The problem with gold and or any other precious metal is the act of transporting and securing it. Just imagine trying to carry $5 million worth of gold, which is approximately 100 kilograms. You’d probably break your back if you try to do it all at once. Making sure nobody steals it is another problem. The scenario above is both a big problem and a golden opportunity. What if a person can carry all of his/her gold stash with just a smartphone? In case you were wondering, we haven’t invented interdimensional storage yet! The idea is to tokenize anything of value like gold or silver. Imagine Paypal, Venmo, or online banking, but instead of money, you have gold as deposit. You can have access to a ton of gold with just your fingertips
What is next?
The case is ongoing and it is up to the courts to decide the outcome. Honestly, it is all allegations until proven true. For investors, this should serve as a lesson to always do your own research (DYOR). If it were me, I would have looked into PAXG or PAXOS Gold as an alternative. It is backed by London Bullion Market Association (LBMA) gold bars. The gold is kept in a secured vault and has been audited by Withum, a reputable accounting firm. The issuing company, PAXOS is a regulated financial company in New York. It is also listed by a reputable trading platform like Binance, which has done its due diligence. But that is just me It is easy to get mesmerized by shiny things and promises of wealth, but it is always healthy to proceed with caution. The crypto space can create wealth, but some will use it to take yours. Not all that glitter is gold.
Here is the link to the SEC report
Irwin,Kate SEC Charges Crypto Firms for Alleged Scam With ‘Gold-Backed’ Ethereum DIG Token, Oct 1, 2022, https://decrypt.co/110996/sec-crypto-firms-alleged-scam-gold-backed-ethereum-dig
