The Cointed Payment Channel for Optioment
The Optioment case is hot, very hot. Don’t be misled by the fact that media and blogger do not report on it currently. We had extensive discussions with lawyers, insiders, and blockchain experts about the case. Actually, Optioment is a difficult puzzle with many pieces but bit by bit we assemble the whole picture.
There is sufficient evidence to state that Cointed and its founder Christopher RIEDER were involved in the Optioment scheme. Several Witnesses (Optioment investors) explained that they have been referred by the respective MLM salespeople to Cointed’s ATMs and/or exchange services to purchase Bitcoins with their FIAT money (Euros). Unfortunately, a significant part of the money invested was “black” money, i.e. income that was not declared to the tax authorities. Hence, it is a bit tricky to file complaints with the authorities for money which officially doesnot exist at all.
From what we learned over the last couple of weeks it’s more than fair to work on the hypothesis that significant parts of Optioment funds were channeled into the Cointed group and its environment and never arrived in the “Optioment system”. According to the “3 Optioment Musketeers” (read here), the involved lawyers and authorities, the Cointed founder Christoph RIEDER was sort of a mastermind behind the Optioment investment scheme which makes this hypothesis the more plausible. In a next step we checked and validitated the Cointed numbers to find out if there is more evidence that Optioment funds were channeled into the company.
The Cointed Numbers in a Nutshell
Following this hypothesis, it’s only consequent to ask where Cointed’s money for the extremely fast expansion in the last 18 months might have come from and if they possibly could have financed the exciting growth with their profits:
- Sales, Profit and Margin: According to the Transparency Report Cointed GmbH, the operating entity for Crypto-ATMs and crypto-exchange, generated a preliminary operating result (profit) of EUR 854,529,46 with preliminary sales of EUR 41,055,211.73 resulting in an operating margin of (return on sales) of 2.08%. These results were achieved between March 2017 (launch of Cointed platform) and October 2017 according to the Transparency Report. It is said in the report that the numbers were prepared by DELOITTE Austria, Cointed’s tax representative.
- ATM Expansion: the Transparency Report states that Cointed GmbH owned 116 Crypto-ATMs as of October 2017. Cointed Ltd, Hongkong, and Cointed Turkey operated another 34 Crypto-ATMs. In total, so the company, 150 Crypto ATMs were owned and operated by the Cointed group. Furthermore, Cointed developed its own ATM devices.
- Product Development: According to the Transparency Report Cointed invested material amounts into the development of payment products around the announced but never delivered “PayCO. It was (is) planned to launch a crypto-debit card in Q2 2018, for example.
- Corporate Development: the Transparency Report states that Cointed expanded internationally with subsidiaries in Switzerland (Swiss Crypto Group AG), Sweden (Cointed AB), Turkey (Cryptoted Turkey Ltd), Hongkong (Cointed Ltd), and representations in other countries.
The Transparency Report does not state that the company received funds from investors or founders. Unfortunately, no attachments were provided with the published report and the most important parts of the report are blackened.
The Cointed ICO
Cointed did an ICO to finance its global expansion. The goal was to raise some EUR 100 Million (or so). Actually, they raised only a fraction of its target. According to Etherscan, the Cointed ICO wallet (link here) received some 4,000 ETH of which around 70% came frim an Ether-mining pool associated with Cointed. Hence, we can assume that Cointed raised only some EUR 1 Million with the issuance of its Cointed Token. As most of the ETH have not been withdrawn until recently, Cointed, addidionally, had to record a huge decline of the worth of ETH raised. As of March 27, 2018, more than 2,700 ETH are still in the ICO wallet and have not been used to finance operation or investments.
Let’s do the Cointed Math Now (excluding Mining)
We have not included the mining business in our calculations and considerations. Crypto-Mining is a fixed-cost business that demands quite a significant capital upfront. As far as we understood, it’s not even clear whether Crypto-Mining was a Cointed business at all. We are still investigating this business and will publish our findings soon.
The ATM Math
Let’s start with the ATM business. Running an ATM needs a lot of working capital (cash and cryptocurrencies). Besides the initial investment, it needs significant working capital to finance the “Cash-to-Crypto-to-Cash-to-Crypto” cycle. As laid out in the graphics it usually takes two days to have the ATM cash deposits converted into cryptocurrencies again. Cash logistics is an important (and expensive) part of any ATM-business. Based on the industry experience we can do the ATM math for Cointed:
Number of ATMs installed: 150
- Average cost per ATM including installation (CAPEX plus services): EUR 10,000
- Total costs for 150 installed ATMs: EUR 1,500,000
- Development costs for new ATM: EUR 150,000
- Average working capital requirement per ATM including cash logistics: EUR 30,000
- Total working capital requirement for 150 installed ATMs: EUR 3,000,000
- Total capital requirement as of Oct 2017: EUR 4,650,000
Cointed, of course, could have opted to lease the ATMs which would have reduced the capital required to run the ATM system. According to the Transparency Report, no leasing agreements have been made and thus we can assume that those ATMs have been purchased.
The Product Development Math (Assumptions)
Let’s assume that Cointed invested EUR 500,000 into the development of its payment products. This is actually next to nothing given the complexity of financial products with all their legal requirements (KYC, AML, APIs, etc.).
The Corporate Development Math (Assumptions)
Let’s assume that the average costs per subsidiary or representation were USD 50,000 and we arrive at EUR 450,000 with the 9 subsidiaries/representations given in the Transparency Report
The Conclusions in a Nutshell
Cointed reported a profit of EUR 854,529,46 since the launch of its platform. The calculated capital requirement for the business described in the Transparency Report would at have been somewhere between EUR 4.5 Million and EUR 5.5 Million (excluding the Mining business).
Even if we include the EUR 1 Million from the ICO, Cointed would not have enough funds to finance its business as laid out in the Transparency Report. Let alone the mining business. In our provisional calculation Cointed is short of several million Euros.
Bottom line: Cointed must have access to an additional source of funds.
Additional remarks: the above calculation is done on a best estimate basis, please give us feedback in case we missed something.