{"code":"26601","sect":"El Salvador","sect_slug":"el-salvador","hits":"3394","link":"https:\/\/elfaro.net\/en\/202212\/el_salvador\/26601","link_edit":"","name":"The Inside Story of How El Salvador\u2019s Official Crypto Wallet Crashed and Failed","slug":"the-inside-story-of-how-el-salvador-rsquo-s-official-crypto-wallet-crashed-and-failed","info":"When Nayib Bukele\u2019s signature Chivo Wallet crashed two days after launch, an American developer was brought in to put out the flames. The story he told to a Texas court is one of amateur coding, millions of dollars of taxpayer money, improvised decision-making, and removal of money laundering firewalls when the bitcoin trading software came to a grinding halt after just 150 downloads.","mtag":"Transparency","noun":{"html":"Nelson Rauda Zablah","data":{"nelson-rauda-zablah":{"sort":"","slug":"nelson-rauda-zablah","path":"nelson_rauda_zablah","name":"Nelson Rauda Zablah"}}},"view":"3394","pict":{"cms-image-000038427-jpg":{"feat":"1","sort":"38427","name":"cms-image-000038427.JPG","link":"https:\/\/elfaro.net\/images\/cms-image-000038427.JPG","path":"https:\/\/elfaro.net\/images\/cms-image-000038427.JPG","back":"","slug":"cms-image-000038427-jpg","text":"<p>El cajero Chivo frente a la plaza Barrios en el Centro capitalino fue reconstruido luego de que en septiembre de 2021 el original fuera incendiado por manifestantes que rechazaban la instalaci\u00f3n de la criptomoneda en el pa\u00eds. Foto de El Faro: V\u00edctor Pe\u00f1a<\/p>","capt":"\u003Cp\u003EEl cajero Chivo frente a la plaza Barrios en el Centro capitalino fue reconstruido luego de que en septiembre de 2021 el original fuera incendiado por manifestantes que rechazaban la instalaci\u00f3n de la criptomoneda en el pa\u00eds. Foto de El Faro: V\u00edctor Pe\u00f1a\u003C\/p\u003E"},"cms-image-000038428-jpg":{"feat":"0","sort":"38428","name":"cms-image-000038428.JPG","link":"https:\/\/elfaro.net\/images\/cms-image-000038428.JPG","path":"https:\/\/elfaro.net\/images\/cms-image-000038428.JPG","back":"","slug":"cms-image-000038428-jpg","text":"<p>Two soldiers and a police officer watch over the Chivo ATM in the lunchroom in the Central Market of Santa Tecla. Photo: V\u00edctor Pe\u00f1a\/El Faro<\/p>","capt":"\u003Cp\u003ETwo soldiers and a police officer watch over the Chivo ATM in the lunchroom in the Central Market of Santa Tecla. Photo: V\u00edctor Pe\u00f1a\/El Faro\u003C\/p\u003E"},"cms-image-000038429-jpg":{"feat":"0","sort":"38429","name":"cms-image-000038429.JPG","link":"https:\/\/elfaro.net\/images\/cms-image-000038429.JPG","path":"https:\/\/elfaro.net\/images\/cms-image-000038429.JPG","back":"","slug":"cms-image-000038429-jpg","text":"<p>This Chivo ATM station in front of Plaza Barrios in San Salvador was built after protestors set fire to the original in September 2021. Photo: V\u00edctor Pe\u00f1a\/El Faro<\/p>","capt":"\u003Cp\u003EThis Chivo ATM station in front of Plaza Barrios in San Salvador was built after protestors set fire to the original in September 2021. Photo: V\u00edctor Pe\u00f1a\/El Faro\u003C\/p\u003E"},"cms-image-000038430-jpg":{"feat":"0","sort":"38430","name":"cms-image-000038430.JPG","link":"https:\/\/elfaro.net\/images\/cms-image-000038430.JPG","path":"https:\/\/elfaro.net\/images\/cms-image-000038430.JPG","back":"","slug":"cms-image-000038430-jpg","text":"<p>This store in San Salvador's Plaza Libertad began accepting bitcoin but has found few customers willing to pay in it. Photo: V\u00edctor Pe\u00f1a\/El Faro<\/p>","capt":"\u003Cp\u003EThis store in San Salvador's Plaza Libertad began accepting bitcoin but has found few customers willing to pay in it. Photo: V\u00edctor Pe\u00f1a\/El Faro\u003C\/p\u003E"},"cms-image-000038431-jpg":{"feat":"0","sort":"38431","name":"cms-image-000038431.JPG","link":"https:\/\/elfaro.net\/images\/cms-image-000038431.JPG","path":"https:\/\/elfaro.net\/images\/cms-image-000038431.JPG","back":"","slug":"cms-image-000038431-jpg","text":"<p>Roxana Valles, de 40 a\u00f1os, es una de las expertas vendedoras que acepta bitcoin y opera una tienda en la playa en El Zonte, cuna de la criptomoneda en el pa\u00eds. En septiembre de 2021, cuando la Ley de Bitcoin entr\u00f3 en vigor, dijo que hab\u00eda ganado dinero cuando el precio de la criptomoneda aument\u00f3, pero se\u00f1al\u00f3 que el sistema que utiliz\u00f3 era incompatible con Chivo, la cartera del gobierno. Foto de El Faro: V\u00edctor Pe\u00f1a<\/p>","capt":"\u003Cp\u003ERoxana Valles, de 40 a\u00f1os, es una de las expertas vendedoras que acepta bitcoin y opera una tienda en la playa en El Zonte, cuna de la criptomoneda en el pa\u00eds. En septiembre de 2021, cuando la Ley de Bitcoin entr\u00f3 en vigor, dijo que hab\u00eda ganado dinero cuando el precio de la criptomoneda aument\u00f3, pero se\u00f1al\u00f3 que el sistema que utiliz\u00f3 era incompatible con Chivo, la cartera del gobierno. Foto de El Faro: V\u00edctor Pe\u00f1a\u003C\/p\u003E"}},"pict_main__sort":38427,"date":{"live":"2022\/12\/15"},"data_post_dateLive_YY":"2022","data_post_dateLive_MM":"12","data_post_dateLive_DD":"15","text":"\u003Cp dir=\"ltr\"\u003E\u003Ca href=\"\/es\/202301\/el_salvador\/26665\/El-fraude-de-Chivo-Wallet-contado-por-uno-de-sus-creadores.htm\"\u003E\u003Cem\u003ELeer en espa\u00f1ol\u003C\/em\u003E\u003C\/a\u003E\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EShaun Overton, a 40-year-old software developer from Texas, was on a layover at Miami International Airport when he received a text message from a friend: \u201cGive me a call. I\u2019ve got the deal of a lifetime for you.\u201d It was Sep. 9, 2021. Intrigued, Overton called back. His friend then told him: \u201cMy customer's project is on fire.\u201d The customer was the government of El Salvador and the project was Chivo Wallet, a state-created bitcoin wallet released two days earlier. The task, he later would discover, was in fact a rescue mission: that of saving an over-confident president\u2019s political pirouette amid a labyrinth of haste, improvisation, and secrecy. Spoiler alert: He failed.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EThe details of the chaos that soon enveloped the developer come directly from Overton himself, who told his story on Aug. 16, 2022 in \u003Ca href=\"https:\/\/ecf.txnd.uscourts.gov\/doc1\/177115479902\"\u003Ea judicial deposition\u003C\/a\u003E. The document is part of a lawsuit his software company Accruvia filed against Athena Bitcoin, Inc., the main developer of the Chivo Wallet. In December 2021, Overton sued Athena for a breach of contract in the \u003Ca href=\"https:\/\/ecf.txnd.uscourts.gov\/cgi-bin\/qrySummary.pl?358561\"\u003ENorthern District Court of Texas\u003C\/a\u003E. In February 2022, Athena \u003Ca href=\"https:\/\/ecf.ilnd.uscourts.gov\/cgi-bin\/qrySummary.pl?413193\"\u003Ecounter-sued him in the Northern District of Illinois\u003C\/a\u003E. Athena\u2019s counter-offensive has been dismissed, but Overton\u2019s case is still pending.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EChivo was the cornerstone of President Nayib Bukele\u2019s crypto project. If bitcoin adoption, the promise of the highly popular millennial leader, were to happen in El Salvador, he argued that this was the way. Bitcoin was supposed to eliminate fees in migrants' remittances, which amount to a fifth of the Salvadoran economy, and give an entryway to financial services for a 6.7-million population where 70 percent have no bank account. Chivo is slang for \u201ccool\u201d in Salvadoran, but when used as a verb (\u201cchivear\u201d), it stands for gambling. It quickly became clear that using Chivo was an uncertain bet.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EAt its birth, Chivo Wallet was shrouded in darkness. After announcing in June 2021 the adoption of bitcoin as a bridge to the future of international finance, the Bukele administration \u003Ca href=\"\/es\/202109\/el_salvador\/25707\/Chivo-es-una-empresa-privada-financiada-con-fondos-p%C3%BAblicos.htm\"\u003Erepurposed an inactive private company formed in 1999 by a public institution, poured a seed capital of $60 million into it and rebranded it as Chivo\u003C\/a\u003E. Its status as a private company, despite the public ownership and taxpayer money sustaining it, insulated Chivo from any accountability or scrutiny from public information law or other auditing procedures. The government gave no details on how it was built or run. So Salvadorans spent months cobbling together bits and pieces of information. In September 2021, El Faro revealed that the whole bitcoin \u003Ca href=\"\/es\/202109\/el_salvador\/25696\/Detr%C3%A1s-del-bitcoin-y-la-Chivo-Wallet-tambi%C3%A9n-hay-venezolanos.htm\"\u003Eproject was managed by Venezuelan advisors to Bukele\u003C\/a\u003E, and in April 2022 \u003Ca href=\"\/es\/202204\/el_salvador\/26148\/Athena-%E2%80%9CLos-salvadore%C3%B1os-reciben-tokens-no-d%C3%B3lares-en-su-Chivo-Wallet%E2%80%9D.htm\"\u003Ethat the wallet project had cost a minimum of $3 million\u003C\/a\u003E. Months later, in November 2022, Revista Factum published that \u003Ca href=\"https:\/\/www.revistafactum.com\/gobierno-millones-por-chivo-wallet\/\"\u003Ethe total paid to Athena was $4.7 million\u003C\/a\u003E.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EAthena, in reality, was never the government\u2019s first choice to develop the crypto wallet. \u003Ca href=\"\/es\/202206\/el_salvador\/26217\/Bukele-va-perdiendo-la-apuesta-por-el-bitcoin.htm\"\u003EAt least two other companies declined to take the project in the tight three-month deadline\u003C\/a\u003E set by the government when it announced the Bitcoin Law. The first was Strike, a crypto-wallet company founded by Jack Mallers, the man who announced the law in June 2021 at a Miami conference. Mallers went from \u003Ca href=\"\/en\/202106\/el_salvador\/25541\/How-El-Salvador-Adopted-Bitcoin-in-Five-Hours.htm\"\u003Eposing teary-eyed on stage with a Salvadoran national team soccer jersey, declaring that he would \u201cfucking die on this fucking hill,\u201d\u003C\/a\u003E to months later denying his overall connection to the project \u003Ca href=\"https:\/\/www.bloomberg.com\/news\/features\/2022-11-04\/el-salvador-s-bitcoin-revolution-is-failing-badly?leadSource=uverify%20wall\"\u003Eto Bloomberg\u003C\/a\u003E. Neither he nor the government clarified why the deal collapsed.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EAthena entered the picture later. The small Illinois-based ATM company had to put together \u003Ca href=\"\/es\/202112\/el_salvador\/25906\/Athena-presume-la-Chivo-Wallet-pero-nadie-responde-por-sus-fallas.htm\"\u003Ea web of companies to accomplish the task\u003C\/a\u003E by the September deadline. By December, Athena \u003Ca href=\"\/es\/202112\/el_salvador\/25906\/Athena-presume-la-Chivo-Wallet-pero-nadie-responde-por-sus-fallas.htm\"\u003Ehad already lost the contract to New York-based Alphapoint\u003C\/a\u003E, the company that\u2019s currently running the affair.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003E\u003Cbr\/\u003E \u003Cfigure class=\"pict pict_land pict_move_posc 0 cs_img cs_img--curr rule--ss_c\" data-shot=\"pict\" data-hint=\"pict\"\u003E \u003Cdiv class=\"pict__pobj text-overflow\"\u003E\u003Cimg src=https:\/\/elfaro.net\/get_img?ImageWidth=3000&ImageHeight=2000&ImageId=38428 class=\"pobj\" style=\"max-width: 100%\" rel=\"resizable\" alt=\"Two soldiers and a police officer watch over the Chivo ATM in the lunchroom in the Central Market of Santa Tecla. Photo: V\u00edctor Pe\u00f1a\/El Faro\" \/\u003E\u003C\/div\u003E \u003Cfigcaption class=\"pict__text cs_img_caption folk_content typo_buttons line--ss_s0c line--ss_s0c--auto block full-width text-overflow rule--ss_l relative\"\u003E \u003Cdiv class=\"__content block-inline full-width align-top tint-text--idle relative\"\u003E Two soldiers and a police officer watch over the Chivo ATM in the lunchroom in the Central Market of Santa Tecla. Photo: V\u00edctor Pe\u00f1a\/El Faro \u003Cdiv class=\"photographer text_italic rule--ss_l tint-text--idle\"\u003E \u003C\/div\u003E \u003C\/div\u003E \u003C\/figcaption\u003E \u003C\/figure\u003E\u003Cbr\/\u003E\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EThe September launch was supposed to be a party. Diario El Salvador, the government newspaper, put \u201cBitcoin Day\u201d on its cover. Crypto billionaire and former child star \u003Ca href=\"\/es\/202109\/el_salvador\/25711\/Los-evangelistas-del-bitcoin-bailan-conga-en-El-Salvador.htm\"\u003EBrock Pierce threw an actual beach party\u003C\/a\u003E in La Libertad attended by YouTuber-slash-boxer Logan Paul. Main plazas all over the country had been filled days before with 200 Athena-made bitcoin ATMs, guarded day and night by police and soldiers.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EIt was all marvelous until the Chivo app actually launched. As soon as they downloaded it, users publicly complained about multiple glitches like difficulties in registering or failure to process payments. It didn\u2019t take long for President Bukele to enter panic mode in his Twitter feed. At 7 a.m. on September 7, he tweeted they were \u201c\u003Ca href=\"https:\/\/twitter.com\/nayibbukele\/status\/1435197879795212291\"\u003Edisconnecting Chivo Wallet while we augment the capacity of the servers that capture images\u003C\/a\u003E.\u201d At 9 am, he asked his 4 million followers \u003Ca href=\"https:\/\/twitter.com\/nayibbukele\/status\/1435226912985649158\"\u003Eif they could try and log in\u003C\/a\u003E and comment on his thread about the problems they were having. At 11 p.m., he posted \u003Ca href=\"https:\/\/twitter.com\/search?q=(from%3Anayibbukele)%20until%3A2021-09-13%20since%3A2021-09-01&src=typed_query&f=live\"\u003Ea screenshot of the app\u003C\/a\u003E with instructions to correct a malfunction. At 1:52 a.m., in the middle of the night just 26 hours after Chivo went live, he tweeted they were again \u201cdisconnecting\u201d the app to \u003Ca href=\"https:\/\/twitter.com\/nayibbukele\/status\/1435481125741289472\"\u003Eadjust it and enhance user experience\u003C\/a\u003E.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EOverton said he signed a contract with El Salvador\u2019s government on September 10, 24 hours after that first call at Miami International Airport \u2014 \u201cthe most stressful project of my life\u201d, he calls it. His depositions provide a glimpse behind the scene on the chaotic first days of Chivo and of the fallout of the fiasco. Post-launch glitches meant that transactions made from a bank account to a Chivo address were delayed or failed to register. People\u2019s money was \u201cdisappearing\u201d. The government was losing money, too.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003E\u003Cstrong\u003EThe Promise of Easy Money\u003C\/strong\u003E\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EPresident Bukele had not only promised the public that bitcoin would catapult El Salvador out of financial distress and into a new Asian-Tiger-style future. He also offered a $30 sign-up bonus to every Salvadoran who registered for the Chivo Wallet. But many would soon find out ways to make much more money from a defective app.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003E\u201cPeople very quickly learned that if they could show an El Salvador IP address, they could sign up for Chivo Wallet, get $30 completely for free as a gift for registering, and then withdraw that money immediately\u201d, Overton said.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EThe process for registering included taking a picture of the Salvadoran ID card and hundreds of people denounced that their identification numbers had been used to register accounts in the Chivo Wallet. In December, NGO Cristosal \u003Ca href=\"\/es\/202203\/el_salvador\/26041\/Los-ap%C3%B3stoles-del-bitcoin.htm\"\u003Efiled a complaint representing 131 persons who had their identities stolen\u003C\/a\u003E.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EOverton said he worked nearly every day with Miguel Sabal, \u003Ca href=\"\/es\/202106\/el_salvador\/25520\/El-gabinete-oculto-de-venezolanos-que-gobierna-con-Bukele-y-su-familia.htm\"\u003Eone of the many Venezuelan advisors to Bukele\u003C\/a\u003E and right-hand man of the leader of the Venezuelan shadow cabinet in El Salvador, Sara Hanna. Reportedly more powerful than the cabinet of ministers, this tight ring of advisors close to the Venezuelan opposition has a hand in every major policy, from the pandemic handling to a now-defunct OAS-led Anti-Corruption commission to bitcoin. Sabal, said Overton, \u201cwas coming in(to) my office saying people were taking pictures of the wall, of potted plants when they would take the selfie for their personal identification\u201d.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003E\u201cWe never pinned down the exact amount of fraud, but we estimated that between 10 to 20 percent of all of the registered users were fraudulent,\u201d Overton said before the court.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003E\u003Cbr\/\u003E \u003Cfigure class=\"pict pict_land pict_move_posc 0 cs_img cs_img--curr rule--ss_c\" data-shot=\"pict\" data-hint=\"pict\"\u003E \u003Cdiv class=\"pict__pobj text-overflow\"\u003E\u003Cimg src=https:\/\/elfaro.net\/get_img?ImageWidth=3000&ImageHeight=2000&ImageId=38431 class=\"pobj\" style=\"max-width: 100%\" rel=\"resizable\" alt=\"Roxana Valles, de 40 a\u00f1os, es una de las expertas vendedoras que acepta bitcoin y opera una tienda en la playa en El Zonte, cuna de la criptomoneda en el pa\u00eds. En septiembre de 2021, cuando la Ley de Bitcoin entr\u00f3 en vigor, dijo que hab\u00eda ganado dinero cuando el precio de la criptomoneda aument\u00f3, pero se\u00f1al\u00f3 que el sistema que utiliz\u00f3 era incompatible con Chivo, la cartera del gobierno. Foto de El Faro: V\u00edctor Pe\u00f1a\" \/\u003E\u003C\/div\u003E \u003Cfigcaption class=\"pict__text cs_img_caption folk_content typo_buttons line--ss_s0c line--ss_s0c--auto block full-width text-overflow rule--ss_l relative\"\u003E \u003Cdiv class=\"__content block-inline full-width align-top tint-text--idle relative\"\u003E Roxana Valles, de 40 a\u00f1os, es una de las expertas vendedoras que acepta bitcoin y opera una tienda en la playa en El Zonte, cuna de la criptomoneda en el pa\u00eds. En septiembre de 2021, cuando la Ley de Bitcoin entr\u00f3 en vigor, dijo que hab\u00eda ganado dinero cuando el precio de la criptomoneda aument\u00f3, pero se\u00f1al\u00f3 que el sistema que utiliz\u00f3 era incompatible con Chivo, la cartera del gobierno. Foto de El Faro: V\u00edctor Pe\u00f1a \u003Cdiv class=\"photographer text_italic rule--ss_l tint-text--idle\"\u003E \u003C\/div\u003E \u003C\/div\u003E \u003C\/figcaption\u003E \u003C\/figure\u003E\u003Cbr\/\u003E\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EAccording to official figures from the Salvadoran government, Chivo reached 4 million users in its first three months; based to the developer\u2019s low-end calculation that 10 percent of the users were fraudulent, at least 400,000 profiles were used to collect a $30 bonus each, totaling $12 million in embezzlement of taxpayer money. \u201cAnd the vast majority of that money had left the Chivo Wallet ecosystem,\u201d said the developer. \u201cSo throughout my time in the project, fighting fraud was overwhelmingly the government's priority and consumed a lot of our time and resources.\u201d\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EAlthough the government has pursued some forms of fraud in Chivo, no charges have been brought against anyone for stealing identities to collect Chivo, nor against any government official involved. There\u2019s no official information about the total tally of wrongdoers or lost funds. In fact, there\u2019s not even an official acknowledgment that any of this even happened.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EHow could it? This is the president who introduced himself to the U. N. General Assembly by \u003Ca href=\"\/es\/201909\/el_salvador\/23676\/Otra-selfie-y-ni-una-palabra-sobre-nuestros-migrantes.htm\"\u003Etaking a selfie and declaring the format of the conference obsolete\u003C\/a\u003E. He launched an Innovation Secretariat \u2014that had no role in the bitcoin project\u2014 and introduced himself to investors with \u003Ca href=\"\/es\/202111\/el_salvador\/25860\/Bukele-explora-financiar-El-Salvador-con-criptomonedas-y-sin-el-Fondo-Monetario-Internacional.htm\"\u003Ean animation of himself descending from a UFO\u003C\/a\u003E. His party also conducted its internal elections over the internet in July 2020, with some of the \u003Ca href=\"https:\/\/gatoencerrado.news\/2020\/07\/20\/nuevas-ideas-elige-candidatos-entre-voces-que-gritan-fraude\/\"\u003Elosing candidates alleging generalized fraud\u003C\/a\u003E after the results were announced.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EAnd still more than one form of fraud happened within Chivo.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EArbitrage, a practice that takes advantage of bitcoin\u2019s highly variable price by buying fractions of bitcoin (nicknamed \u201csats\u201d) and selling them when the price goes up, was one of them. Another of the many technical failures of Chivo was updating the bitcoin reference price just once per minute, so Chivo users could see the price variations in real-time but trade on Chivo when the frozen reference price was lower than the market one \u201cand make half a percent or one percent on their money\u201d, as Overton described.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003E\u201cThe government was hemorrhaging money,\u201d the developer said, and offered the example of a user who started trading with $2,000 and ended up with $400,000. \u201cBecause the Chivo Wallet ecosystem did not offset market risk, that means that all of those guys' profits came from the government of El Salvador,\u201d Overton said.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EThe result echoes what happened one year earlier, as the pandemic hit El Salvador, with another of Bukele\u2019s subsidies: a $300 pandemic-relief check. The Salvadoran \u003Ca href=\"\/es\/202005\/el_salvador\/24423\/Corte-de-Cuentas-Gobierno-reparti%C3%B3-$30-millones-a-100-mil-personas-con-criterios-desconocidos.htm\"\u003ECourt of Audits said that $30 million had been handed with unknown criteria\u003C\/a\u003E.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EOverton then described an \u201call-night marathon session writing code,\u201d during which a developer made a mistake that allowed the exchange of one dollar to one bitcoin, while bitcoin\u2019s price was around $60,000. \u201cMiguel Sabal came into my office and directed me and said: I need this fixed today,\u201d Overton recalls. He says Sabal \u201cfrantically\u201d texted another member of the team to ask him what was happening because the amount of bitcoin going through the system was in excess of $10 billion.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EOn October 18, 2021, Chivo users reported \u003Ca href=\"https:\/\/diario.elmundo.sv\/Econom%C3%ADa\/usuarios-de-chivo-wallet-se-vuelven-millonarios-por-una-noche-por-fallas-en-sistema\"\u003Ea glitch that momentarily made them \u201cmillionaires\u201d, according to their balances in the app\u003C\/a\u003E. Chivo went offline that day, as Overton described in court: \u201cWe had to take the server completely off-line \u2014 we killed the entire system, just turned it off, and didn\u2019t get it back on until about 7:30 in the morning\u201d, he said.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003E\u003Cstrong\u003EOpen Door for Money Laundering\u00a0\u003C\/strong\u003E\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EChivo\u2019s problems didn\u2019t end with Athena\u2019s exit. On April 8, 2022, four users started moving funds from their Chivo Wallet to their bank accounts through a glitch that allowed them to send money without the app registering it, according to \u003Ca href=\"https:\/\/www.revistafactum.com\/falla-de-chivo-provoco-hurto\/\"\u003ERevista Factum\u003C\/a\u003E. This led the Salvadoran Attorney General to charge five people with computer theft and money laundering for the illicit transfer of $840,000.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EBut the accusations were handled in complete silence by Bukele\u2019s hand-picked attorney general, rare secrecy for a government that heavily publicizes arrests for prosecutions ranging from organized crime to animal cruelty. In the case of Chivo Wallet, it was the government\u2019s own decisions that made it vulnerable, according to Overton. \u201cIt was rife with fraud,\u201d he said.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EBrian Berknopf, the friend who had called Overton at the Miami Airport, is the \u003Ca href=\"https:\/\/qaconsultants.com\/about-us\/leadership-team\/brian-bernknopf\/\"\u003Emanaging director of U.S. operations\u003C\/a\u003E for QA Consultants. The details of the firm\u2019s contract with the Bukele administration, as those for every other company involved in the Chivo project, are not public. Bernknopf told his friend that Chivo code was written in a programming environment called Django and that \u201cthe government needs as many talented Django developers as it can possibly get ahold of right now.\u201d The government, says Overton, was \u201cextremely concerned about capability with a country of 6 million people, so they hired QA Consultants with the intent to use them for load testing,\u201d a simulation of the real-life operation of the app.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EChivo Wallet, however, was never tested before release. \u201cBecause of stalling from Athena, they were never actually able to run those load tests,\u201d Overton said.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003E\u003Cbr\/\u003E \u003Cfigure class=\"pict pict_land pict_move_posc 0 cs_img cs_img--curr rule--ss_c\" data-shot=\"pict\" data-hint=\"pict\"\u003E \u003Cdiv class=\"pict__pobj text-overflow\"\u003E\u003Cimg src=https:\/\/elfaro.net\/get_img?ImageWidth=3000&ImageHeight=2000&ImageId=38429 class=\"pobj\" style=\"max-width: 100%\" rel=\"resizable\" alt=\"This Chivo ATM station in front of Plaza Barrios in San Salvador was built after protestors set fire to the original in September 2021. Photo: V\u00edctor Pe\u00f1a\/El Faro\" \/\u003E\u003C\/div\u003E \u003Cfigcaption class=\"pict__text cs_img_caption folk_content typo_buttons line--ss_s0c line--ss_s0c--auto block full-width text-overflow rule--ss_l relative\"\u003E \u003Cdiv class=\"__content block-inline full-width align-top tint-text--idle relative\"\u003E This Chivo ATM station in front of Plaza Barrios in San Salvador was built after protestors set fire to the original in September 2021. Photo: V\u00edctor Pe\u00f1a\/El Faro \u003Cdiv class=\"photographer text_italic rule--ss_l tint-text--idle\"\u003E \u003C\/div\u003E \u003C\/div\u003E \u003C\/figcaption\u003E \u003C\/figure\u003E\u003Cbr\/\u003E\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EAt 9 pm on launch day, Bukele boasted on Twitter that Chivo was the \u201c\u003Ca href=\"https:\/\/twitter.com\/nayibbukele\/status\/1435415430215127047\"\u003Enumber 1 finance app\u003C\/a\u003E\u201d in the Apple App Store in El Salvador. But all the while, his untested app was falling apart.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003E\u201cWithin the first 150 sign-ups on the platform, the vendor for KYC compliance crashed. So the government of El Salvador made [decided] to eliminate the KYC vendor from the process so that the Chivo Wallet registrations could continue,\u201d Overton testified. KYC means \u201cknow your client,\u201d describing a series of standards designed to prevent money laundering, fraud, and other forms of crime. In the \u003Ca href=\"\/es\/202112\/el_salvador\/25906\/Athena-presume-la-Chivo-Wallet-pero-nadie-responde-por-sus-fallas.htm\"\u003Efirst chart of Chivo\u2019s operations\u003C\/a\u003E, the KYC provider was the Uruguayan company \u201cVu Security.\u201d It was apparently their program that failed.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EBut Overton said the government \u201cwanted to hit their 50,000-user initial launch point\u201d at any cost. To achieve it, Overton said that they didn\u2019t fix the KYC issue; they just turned it off.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003ELess than 48 hours after launching Chivo, they turned the know-your-client filter off.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EThis cannot be understated. Wilson Sandoval, the coordinator of the Salvadoran NGO Anti-Corruption Counseling Center (ALAC) and one of the lawyers who has led the charge in requesting public information about bitcoin implementation, said that the Chivo operators acted against every recommendation in the field.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003E\u201cKYC allows client identification. By not doing it, money laundering or terrorism financing operations could be conducted in that time span, and we don\u2019t know how long it lasted,\u201d Sandoval said.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EAccording to Sandoval, getting rid of these standards violates Salvadoran and international law. Specifically, he said that it goes against the \u003Ca href=\"https:\/\/www.fatf-gafi.org\/publications\/fatfrecommendations\/documents\/fatf-recommendations.html\"\u003ENew Technologies Recommendation of the Financial Action Task Force\u003C\/a\u003E (FATF), the global anti-money laundering (AML) and counter-terrorist financing (CTF) standard, which states that \u201ccountries should ensure that virtual asset service providers are regulated for AML\/CFT purposes, and licensed or registered and subject to effective systems for monitoring and ensuring compliance with the relevant measures called for in the FATF Recommendations\u201d.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EThis is codified in Salvadoran Law. Article 13 of the anti-money laundering bill details eight fields of information about the client and the transaction that companies have to collect and send to the Attorney General for operations larger than $10,000.\u00a0\u00a0\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EMoreover, there are 55 Chivo ATMs in Salvadoran consulates in the United States. Since the registry was unsupervised, Chivo carved out a way to send money from the United States to any wallet user in the world without KYC regulations, for an unspecified amount of time.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003E\u003Cstrong\u003EMinimal Footprint in Remittances\u003C\/strong\u003E\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EWhile the Chivo Wallet has proved its capability for fraud and as a way to conduct unsupervised transactions, it has yet to live up to its main purported use-case: remittances.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EOverton said two people gave him the \u201crationale behind the project\u201d: Eric Gravengaard, Athena CEO and public-facing \u201cfather\u201d of Chivo, and Lorenzo Rey, another Venezuelan advisor \u201cfunctionally the government\u2019s Chief Technology Officer,\u201d though he holds no official post.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EThe plan, Overton said, is \u201c100 percent focused on remittances and avoiding commissions from Western Union and similar services\u201d. This was \u003Ca href=\"\/es\/202206\/el_salvador\/26217\/Bukele-va-perdiendo-la-apuesta-por-el-bitcoin.htm\"\u003Eone of the Bitcoin Law's main objectives\u003C\/a\u003E, according to the president and lawmakers. It hasn\u2019t worked.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003ECrypto wallets received almost $30 million in remittances in September 2021, 4.5 percent of the market share, but it gradually declined and the figure has not exceeded two percent since. In October 2022, it was $10 million, or 1.5 percent.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003E\u003Cbr\/\u003E \u003Cfigure class=\"pict pict_land pict_move_posc 0 cs_img cs_img--curr rule--ss_c\" data-shot=\"pict\" data-hint=\"pict\"\u003E \u003Cdiv class=\"pict__pobj text-overflow\"\u003E\u003Cimg src=https:\/\/elfaro.net\/get_img?ImageWidth=3000&ImageHeight=2000&ImageId=38430 class=\"pobj\" style=\"max-width: 100%\" rel=\"resizable\" alt=\"This store in San Salvador's Plaza Libertad began accepting bitcoin but has found few customers willing to pay in it. Photo: V\u00edctor Pe\u00f1a\/El Faro\" \/\u003E\u003C\/div\u003E \u003Cfigcaption class=\"pict__text cs_img_caption folk_content typo_buttons line--ss_s0c line--ss_s0c--auto block full-width text-overflow rule--ss_l relative\"\u003E \u003Cdiv class=\"__content block-inline full-width align-top tint-text--idle relative\"\u003E This store in San Salvador's Plaza Libertad began accepting bitcoin but has found few customers willing to pay in it. Photo: V\u00edctor Pe\u00f1a\/El Faro \u003Cdiv class=\"photographer text_italic rule--ss_l tint-text--idle\"\u003E \u003C\/div\u003E \u003C\/div\u003E \u003C\/figcaption\u003E \u003C\/figure\u003E\u003Cbr\/\u003E\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp\u003EDespite the meager results, the government was using Chivo as leverage to negotiate the fees of remittance commissions with the money-transfer company Western Union. \u201cEric told me about a conversation between Sara Hanna and Western Union where Western Union started negotiating on the remittance rates to El Salvador because they were feeling the financial pressure of people using the Chivo Wallet system,\u201d Overton said.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cdiv style=\"margin-top: 4px !important; text-align: left;\"\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EIn fact, according to \u003Ca href=\"https:\/\/ecf.txnd.uscourts.gov\/doc1\/177115479902\"\u003EEric Gravengaard\u2019s deposition in the same case\u003C\/a\u003E, it was Hanna who told him, in the first week of November 2021, that he was being ousted from the Chivo project and that Overton had offered to take over and fix all the problems. In light of Overton\u2019s allegations, problems might be just starting.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003Cp dir=\"ltr\"\u003EThe trajectory of Chivo is not promising for a government that has its mind set on its next technological feat, one that has more implications than millionaire financial transactions. In October 2022, legislators passed a bill aimed to allow three million Salvadorans largely residing in the United States to vote via the internet in the 2024 general elections, just in time for another novelty: Bukele has announced, \u003Ca href=\"\/en\/202209\/el_salvador\/26381\/Bukele-Announces-He-Will-Seek-Reelection-in-2024-despite-Constitutional-Ban.htm\"\u003Edespite an explicit constitutional ban\u003C\/a\u003E, that he will run for reelection.\u003C\/p\u003E\u003Cbr\/\u003E\u003Cbr\/\u003E\u003C\/div\u003E"}