BITCOIN, Heists, Thefts, Hacks, Scams, and Losses

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In summary: I don't know if this actually happened, but...?In summary, the website of major bitcoin exchange MtGox was offline Tuesday amid reports it suffered a debilitating theft. Around midmorning in the U.S., the company released a statement saying it had closed off transactions "to protect the site and our users." It offered no further details.
  • #841
Was it that creative? Really?

When you sweep away the ribbons, streamers, bells, whistles, dancing baloney and interlocking companies, what do you have? A bank. And what did this bank do?

It took customer deposits, and spent them.
 
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  • #843
BWV said:
Along side the new Michael Lewis School of Journalism

the only thing sinking faster than SBF's chances of freedom is that writer's reputation
SBF could be free now in Cuba. Baffled why with the motive,means and opportunity in the Bahamas he did not arrange a fast boat to Cuba. And join the US fugitive community there.Maybe his lawyers can use that for the dumb puppy defense.
 
  • #844
Obviously, he did not follow Rule 1 of white collar crime - have your escape plan in place before you need it.
 
  • #845
Rule 2 of of white collar crime - don't be the white collar Crime Boss.
1698003789909.png

https://www.npr.org/2023/10/21/1207143248/sam-bankman-fried-trial-ftx-crypto-fraud-alameda

They were Sam Bankman-Fried's friends. Now they could send him to prison for life​

 
  • #846
Well, in Plain Old Crime, the crime boss usually has ways to ensure his..um..staff keeps their mouths shut.

That's not a flattering picture of Caroline Ellison. She has the same expression as Dobby from Harry Potter. I want to give her one of my old socks or something.
 
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  • #847
Seems like life is just draining from her.
1698013201372.png
1698012969735.png
 
  • #848
Looking at those pictures, all I can think of is "somebody needs a hug."

The prospect of 110 years in prison will wipe the smile off one's face. That's one-tenth what Elizabeth Holmes got - Holmes also scammer her way to billionairehood.

For giggles, I tried to find Bankman-Fried's thesis in the MIT Libraries. No luck. Graduate theses are more complete. He did study physics after all.
 
  • #849
I think I've asked this before, but what was their end-game?

What are all criminal's end-games? Do they think they'll just never get caught?

A poor desperate criminal may not care that much about the consequences of going to prison, b/c their life outside may be very miserable and the risk may be worth the reward to them. These wealthy criminals boggle my mind. The risk-reward equation doesn't make sense.

SBF's parents are presumably very well-off. He worked on Wall Street doing currency arbitrage himself. He likely had a good living/lifestyle. And, he's likely inherit a good sum of money. Why, SBF, why??
 
  • #850
Vanadium 50 said:
As others have said "The markets can stay irrational longer than you can stay solvent".
+10% at this point, with all that stuff above still on the table.
Looks like a decent example of 'short squeeze' for me.

kyphysics said:
I think I've asked this before, but what was their end-game?
I don't think they had any.
Getting off the tiger is difficult enough to explain the going-on.
 
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  • #851

 
  • #852
So, what have I learned from that video? Apart from when Tiffany Fong pees (and I could have gone my whole life without that bit of oversharing)? The Big Dumb Puppy defense isn't even fooling Bankman-Fried's friends.

However, the lovely and possibly pollakiurian Ms. Fong has missed a critical problem with this plan. If Bankman-Fried argues "My lawyers told me it was OK and I always listen to my lawyers" that's contradicted by appearing on the stand against his lawyers' advice.

Then there is the absurdity of it all "I could afford to hire the best lawyers in the world, and they told me it was perfectly OK to take my clients' deposits and spend them myself - and no, you can't talk to them that conversation is privileged."
 
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  • #854
Astronuc said:
oof!
<cringe>
 
  • #856

Bankman-Fried says he knew little about cryptocurrencies before starting FTX​

https://www.msn.com/en-us/money/mar...ptocurrencies-before-starting-ftx/ar-AA1iXOWJ

"I had absolutely no idea how they worked," Bankman-Fried said in court on Friday. "I just knew they were things you could trade."

Bankman-Fried said he gave the exchange about a 20% chance of being successful when he partnered with Gary Wang, who has testified against Bankman-Fried in the trial.

Bankman-Fried said that he was not aware of the so-called digital back door that Alameda Research, his other company, used to withdraw FTX customer funds. That access is part of the key charges by prosecutors.

That's kind of a bewildering statement. Why would people invest $millions with a guy who knew little about the investment vehicle? So what happened with 'due diligence'?
 
  • #857
Vanadium 50 said:
<cringe>
It reminded me of Sgt Oddball (Donald Sutherland) in Kelly's Heroes.
 
  • #858
So I checked out the delightful yet overhydrated Ms. Fong. She claims to have lost $200K in Celsius, but couldn't pass up the interest rate,

At a time when short-term Treasuries were paying 1.5%, Celsius was paying up to 17%. In "regular" economics, increased interest compensates for increased risk. (In "crypto economics", "what do those old fuddy-duddies in their tweed blazers know? That's so 20th century! This time it's different. Boomer.")

To put that in perspective, that's about 2/3 the rate banks to charge for credit cards to people who are already bankrupt.

Those of us who remember the S&L crisis of the 1980's (i.e. "Boomers") also remember that there is a flip side to skyrocketing yields.
 
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  • #859
Amusing fact of the day - FTX apparently had seven balance sheets. "How much did we make?" "Take your pick - how much would you like to have made?"
 
  • #860
Vanadium 50 said:
So I checked out the delightful yet overhydrated Ms. Fong. She claims to have lost $200K in Celsius, but couldn't pass up the interest rate,

At a time when short-term Treasuries were paying 1.5%, Celsius was paying up to 17%. In "regular" economics, increased interest compensates for increased risk. (In "crypto economics", "what do those old fuddy-duddies in their tweed blazers know? That's so 20th century! This time it's different. Boomer.")
Somewhere in my house I have a 25 year old copy of "The Only Investment Guide You'll Ever Need" that talks about a similar deal people went after in Mexican savings accounts in I think the '80s. But that one had less reward and less risk. They didn't lose all their money just most of it. But what does he (the author) know, he's a boomer.
Amusing fact of the day - FTX apparently had seven balance sheets. "How much did we make?" "Take your pick - how much would you like to have made?"
If Bernie Madoff had written a book, that would have been Chapter 2.
 
  • #861
Vanadium 50 said:
She claims to have lost $200K in Celsius
My brain just short-circuited...
 
  • #862
I've been accused of being an irrational hater of crypto, as well as a boomer, which I guess is much the same thing. That's not true. I think there is a utility to crypto, apart from (*as previously discussed) paying Tony Soprano to have one's girlfriend whacked.

A currency has two functions (some would say three, but I think the thirtd is subsumed into the 2nd)
  1. A medium of exchange
  2. A stable store of value
At its core, it allows goods and services to be traded across space and actoss time. ("I'll give you this pen now if you give me a cupcake on Tuesday/")

Note that "like stonks, crypto can only go up" not only not a necessary function of currencies, but it conflicts with requirement #2.

So, where might it be used? Where national currencies are failing. The Argentine peso, for example, arguably the Venezuelan Bolivar and Turkish lira, and previously the Zimbabwe dollar. One might even imagine that all the countries with distressed currencies use the same one, as a means of spreading risk.

However, this is unlikely to happen:

(1) Currencies don't collapse in a vacuum. Policies of the government issuing them drive them to collapse. Argentina used to be prosperous. Adopting another currency has political implications, and effectively reduce the power of the governments: they can no longer print money to fund whatever they want.

This is a criticism of the Central African Franc. it has curbed inflation, but it has prevented governments from addressing "urgent needs of society" by printing more money.

(2) There isn't enough crypto out there. The three countries I mentioned together need about 4x the total value of Bitcoin.

(3) While in theory diversification reduces risk, there's also a risk of
contagion. If one currency tanks, it might take the others with it.

(4) There are simpler alternatives. Ecuador just uses the US Dollar. Liechtenstein the Swiss Franc. San Marino uses the Euro, and so on.

So while in theory one can shore up troubled national currencies this way, it's not very practical, and most people in these countries worried about it just buy more stable currencies (when they can) to protect themselves.
 
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  • #863
berkeman said:
My brain just short-circuited...
I think her statement needs some clarification. If she bought 30,00 at a quarter (total $7500), watched it rise to $7, and then watched it fall down to a difficult-to-redeem quarter, has she lost $200,000? Or $7500? Or nothing it all?
 
  • #864
Vanadium 50 said:
I think her statement needs some clarification. If she bought 30,00 at a quarter (total $7500), watched it rise to $7, and then watched it fall down to a difficult-to-redeem quarter, has she lost $200,000? Or $7500? Or nothing it all?
As you well know, as far as the IRS is concerned, she hasn't lost anything. Yet. She has to redeem them before such a call can be made.
 
  • #865
Reports of the last day of testimony described Bankman-Fried as "evasive", "arrogant", "dishonest" and "unlikable". While "unlikable" shouldn't matter, if the facts are against you, your only hope is for one of the jurors to thiink "let's give thge Big Dumb Puppy a break." You don't want them getting the message "Who the heck are you to pass judgment on me? Heck, I am so smart I stole 8 billion dollars! What have you twelve ever done?"

I have been debating mentioning this, but at MIT Bankman-Friend and Wang both lived at Epsilon Theta. MIT's living groups all have their own culture, even within the dorms, where people associate with a floor, side of the building and/or entryway. Your extra-academic life revolves around the 30-100 people in your living group. Each living group has its own unique culture.

EΘ is, even by MIT standards, a nerd house. As a rule, they are nice people, but they know The One True Best Way To Do Things. While most people would say "Yeah, we do such and such differently, but it works well for us", the EΘ philosophy is more "Our way is simply the best" (well, they would probably say something more like "inherently superior", but you get my drift.)

The various living groups don't make a student's personality, but they each attract a certain personality. When I learned where Bankman-Friend and Wang lived, my reaction wqas "Yeah, I can see that." And whan I read about how today's testimony went, it was "Yeah, I can see that too."
 
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  • #867
While it does look like his goose was cooked, it was pretty well cooked before he testified. It's not clear he had anything to lose.

I think his biggest setback today was actually the discussion of the jury instructions. The jury will be told that even if he did not know something, he is still guilty if he should have known and avoided knowing. That pretty much renders the "I don't recalls" ineffective.

Also, since he's been on the stand, BTC and ETH have been rising. I'm not sure what message the market is sending. It sure sounds like "Yeah, they're crooks, but not as crooked as we thought they were last week."
 
  • #868
Vanadium 50 said:
I've been accused of being an irrational hater of crypto, as well as a boomer, which I guess is much the same thing. That's not true. I think there is a utility to crypto, apart from (*as previously discussed) paying Tony Soprano to have one's girlfriend whacked.

A currency has two functions (some would say three, but I think the thirtd is subsumed into the 2nd)
  1. A medium of exchange
  2. A stable store of value
At its core, it allows goods and services to be traded across space and actoss time. ("I'll give you this pen now if you give me a cupcake on Tuesday/")

Note that "like stonks, crypto can only go up" not only not a necessary function of currencies, but it conflicts with requirement #2.

So, where might it be used? Where national currencies are failing. The Argentine peso, for example, arguably the Venezuelan Bolivar and Turkish lira, and previously the Zimbabwe dollar. One might even imagine that all the countries with distressed currencies use the same one, as a means of spreading risk.

However, this is unlikely to happen:

(1) Currencies don't collapse in a vacuum. Policies of the government issuing them drive them to collapse. Argentina used to be prosperous. Adopting another currency has political implications, and effectively reduce the power of the governments: they can no longer print money to fund whatever they want.

This is a criticism of the Central African Franc. it has curbed inflation, but it has prevented governments from addressing "urgent needs of society" by printing more money.

(2) There isn't enough crypto out there. The three countries I mentioned together need about 4x the total value of Bitcoin.

(3) While in theory diversification reduces risk, there's also a risk of
contagion. If one currency tanks, it might take the others with it.

(4) There are simpler alternatives. Ecuador just uses the US Dollar. Liechtenstein the Swiss Franc. San Marino uses the Euro, and so on.

So while in theory one can shore up troubled national currencies this way, it's not very practical, and most people in these countries worried about it just buy more stable currencies (when they can) to protect themselves.
I really like your informative post, honesty and so on. There's one thing that's "lacking" in your critics, in my opinion. It is looking for flaws in dissecting cryptocurrencies. I.e. how they work. Can they be "hacked", and under which circumstances. What would happen if they get hacked in a certain way. An analysis about the balance between scalability, security and decentralization (the famous trilemma). A discussion about privacy, and things like that.
What to think about their development? I.e. their updating codes on Github done by a handful of devs. For some cryptos like Bitcoin, the users (miners in that case) aren't required to update, they only do if they agree, but then it creates forks I believe, I'm not even sure. What about those things?
If someone gives strong arguments that X, Y, and Z cryptos have huge flaws in their inner-workings, then that would be worth much more than their popularity, at least to me.
 
  • #869
I don't see hacking as inherently different from counterfeiting. It's true that the US government spends more effort on preventing this than RandomCrypto, but they also have much more exposure than RandomCrypto.

I consider privacy a separate issue, but it's probably worth mentioning that not everyone thinks this is a good idea. Some governments want to check on what their citizenry is up to. Some corporations want to collect and sell your information. This is true for crypto and for national currencies. It may be an issue, but it's a separate issue.

It's also not entirely a new issue. There is the stone money of the island of Yap. These stones are too big to put in your pocket (or lift, for that matter) and the way they are exchanged is that the recipient adds his name to a memorized list of transactions. (Bon gave this to Joe in exchange for four pigs, and then Joe gave it to Warren in exchange...." Sound familiar?
 
  • #870
Not only have the Yapese been doing crypto since before it was cool, they even use their blockchain profits to live on a tropical island. What a bunch of promethean trailblazing legends.
 
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  • #871
It gets better. Where is Yap? The Caroline Islands.
Coincidence? I think not.
 
  • #872
As the trial of Sam Bankman-Fried nears its conclusion, the disgraced crypto founder took the stand one final time on Tuesday to face cross-examination under Assistant U.S. Attorney Danielle Sassoon.

The first few hours of Sassoon's scrutiny came on Monday, with Bankman-Fried claiming ignorance as she confronted him with past statements he'd made to reporters and coworkers, all revealing that he'd allowed Alameda, the trading firm for his exchange FTX, to have special privileges, eventually leading to the collapse of his crypto empire in November 2022.
https://www.yahoo.com/finance/news/bankman-fried-lieutenants-directed-them-164332140.html

Crypto-currency or klepto-currency?
 
  • #873
The most ominous statement was "Bankman-Fried's first criminal trial is expected to conclude in early November, with a second set of charges set to be presented in 2024."

That is not good for him.

Normally, however, (disregarding the 'dual sovreignty' argument) one cannot be tried twice on the same set of facts, though. I wonder what the plan is.
 
  • #874
Vanadium 50 said:
Normally, however, (disregarding the 'dual sovreignty' argument) one cannot be tried twice on the same set of facts, though. I wonder what the plan is.
One cannot be tried for the same CRIME. If the facts were to indicate a crime for which he has never been tried or even indicted then using the same facts is not a problem.
 
  • #875
One cannot be tried twice for the same "elements" of a crime. If I shoot and kill you, and am convicted of (or plead guilty to) manslaughter, I cannot be retried for your murder. Double jeopardy relates to the guilty as well as the innocent. (Probably even more so)

Assuming Bankman-Fried is found guilty, the government can say "OK, you committed crimes in October that you've been convicted of. We're now going to try you for different actions committed in December." What they cannot do is say "Your actions defrauded New Yorkers; now we're going to try you again because those same actions also defrauded Vermonters."
 

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