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Blockfi agrees to pay $100M in penalties and pursue registration

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Re: Blockfi agrees to pay $100M in penalties and pursue registration

#221

Post by abritrum »

snapcaster wrote: post #154
abritrum wrote: post #53

I (along with other) have been filing whistleblower reports on blatant price manipulation on an OTC stock for the entirety of last year (about 30 reports of naked short selling, wash trading). Not one peep from the SEC. It's been eye-opening to see the amount of fraud in the financial markets that goes unchecked. Sometimes I question my sanity that I persist in this stock and whether what I see is illegal. Good to se…

Gamestop bagholder I presume? How do you detect or prove naked shorting or wash trading?

Not gamestop, I said OTC. There is no way to prove naked shorting or wash trading without access to sell tickets. But the signs are there. I added some more of these details in my post of chollida1.

Re: Blockfi agrees to pay $100M in penalties and pursue registration

#222

Post by [deleted] »

abritrum wrote: post #219
chollida1 wrote: post #71

Earlier quoted context omitted.

I"ll bite on this. I work in the financial markets and have alot of experience in market structure. What evidence do you have of wash trading? How would you tell if something is a wash trade? How would you determine if someone is naked shorting? What evidence would you provide for something like this?

You have every reason to be skeptical of my claims. I will not share the ticker since that would mean I am trying to get publicity. Another poster said that you don't know for sure whether it is naked shorting or wash trading. He is correct and I don't have mathematical proof. But there are enough signs: 1) Company had debenture that was paid off early to toxic lender 2) Toxic lender has been caught and fined by the…

[deleted]

Re: Blockfi agrees to pay $100M in penalties and pursue registration

#223

Post by abritrum »

abritrum wrote: post #219
chollida1 wrote: post #71

Earlier quoted context omitted.

I"ll bite on this. I work in the financial markets and have alot of experience in market structure. What evidence do you have of wash trading? How would you tell if something is a wash trade? How would you determine if someone is naked shorting? What evidence would you provide for something like this?

You have every reason to be skeptical of my claims. I will not share the ticker since that would mean I am trying to get publicity. Another poster said that you don't know for sure whether it is naked shorting or wash trading. He is correct and I don't have mathematical proof. But there are enough signs: 1) Company had debenture that was paid off early to toxic lender 2) Toxic lender has been caught and fined by the…

Another huge red flag: a warrant for share dividend was distributed with a strike price that would make 1/10 the number of short sales held by the short added to his burden. When the warrant price hit, the short sold 600k shares in a few minutes to get the price down.

Re: Blockfi agrees to pay $100M in penalties and pursue registration

#224

Post by SilasX »

5350-uiop-1130 wrote: post #84

I've had trouble finding clear jargon-free sources to explain how these lending platforms and various defi lending platforms generate yield. As far as I can tell it mostly works by token inflation. Celsius, Nexo tokens, Compound and Aave tokens for example. But these tokens are given as a reward to yield farmers so there is a huge sell pressure and yet I don't understand who is on the buy side. Why would you buy thes…

I can answer that, since I'm using Compound (and Uniswap).

To start with, they lend out at interest, which is paid by users, for the same reason anyone would take a collateral-backed loan, knowing they'll have to pay interest. It could be speculation on sh-tcoins, investment in stocks, whatever. The Compound contract doesn't care because they're more-than-fully backed and have a mechanism for liquidation at a profit if the loan/collateral value ratio gets too high.

A fraction of that is then paid to depositors (whether or not they're borrowing against said deposits).

In some cases there are tax advantages in that you can avoid selling crypto while converting it into a different asset you'd prefer to invest in.[1]

They also allocate Compound tokens (COMP) to depositors and borrowers (that's the distribution yield figure you see). While COMP's value is highly speculative, its grounding (for whatever that's worth) comes from the fact that the tokens entitle you to vote on changes to the Compound contract[2], which some people apparently value and are willing to pay for. You also need a minimum number of tokens (100,000 IIRC) to submit proposals.

I don't know their process for deciding the distribution yield, but it sometimes leads to weird situations where it's higher than the interest rates for borrowing, meaning that (modulo fluctuations in the rates and value of COMP) you're being paid to borrow it. See, for example, the yields on Basic Attention Token (BAT) [3] -- 10.23% dist yield vs 3.84% borrow rate.

As things stand now the interest on borrowing ETH is about the same as its borrowing distribution yield, meaning you can effectively borrow for free (again, modulo those fluctuations). I starting doing that to convert BTC to ETH that I use in Uniswap liquidity pools, which make money as automated market makers, taking a cut of conversions between cryptocurrencies.

[1] Though, until the IRS clarifies, it's an open question whether putting up your crypto on Compound etc for these loans is a taxable event, as it's booked on the blockchain as conversion of e.g. Ethereum (ETH) to Compound Ethereum (cETH). I think that it should (obviously) have the same tax consequences as taking a loan at a pawn shop with your gold chains as collateral (i.e. there's no sale unless/until you default on the loan, in which case you have sold it for whatever amount they lent you that hasn't been paid back).

[2] https://app.compound.finance/#vote

[3] https://compound.finance/markets/BAT

Re: Blockfi agrees to pay $100M in penalties and pursue registration

#225

Post by NelsonMinar »

omeze wrote: post #184
NelsonMinar wrote: post #168

Earlier quoted context omitted.

Yes, yes they often are. But I think you'll be hard-pressed to find many examples of legitimate banks having their primary customer offering being declared illegal and forced to stop operation immediately.

Erm, from recent memory: Wells Fargo (3rd largest US bank) had a nice 185 million fine for checking account fraud… https://en.m.wikipedia.org/wiki/Wells_Fargo_account_fraud_sc... Not saying this justifies BlockFi’s behavior but the incentives for any bank is there!

Yes, that was a fraud. I was personally a victim of it. I will never do business with Wells Fargo again in my lifetime. That doesn't mean I think all banks are fraudulent. In particular I appreciate that there was a regulatory mechanism in place to protect consumers from that fraud.

Re: Blockfi agrees to pay $100M in penalties and pursue registration

#226

Post by ProjectArcturis »

abritrum wrote: post #219
chollida1 wrote: post #71

Earlier quoted context omitted.

I"ll bite on this. I work in the financial markets and have alot of experience in market structure. What evidence do you have of wash trading? How would you tell if something is a wash trade? How would you determine if someone is naked shorting? What evidence would you provide for something like this?

You have every reason to be skeptical of my claims. I will not share the ticker since that would mean I am trying to get publicity. Another poster said that you don't know for sure whether it is naked shorting or wash trading. He is correct and I don't have mathematical proof. But there are enough signs: 1) Company had debenture that was paid off early to toxic lender 2) Toxic lender has been caught and fined by the…

I work in finance and trade stocks every day. Honestly, this seems like extremely weak evidence for any kind of market manipulation. The price movements you've seen are quite consistent with a sucky company that's going down because it's overvalued.

It's generally pretty hard to short OTC stocks, so the idea that someone is out there short 10s of millions of shares is pretty far-fetched. And to what end? If the stock has gone down they're probably covering, not adding.

Roughly half of OTC stocks are themselves scams, run by crooks. Is the company funding itself by continuously selling shares? Check their SEC filings for ATM offerings.

If you genuinely think the fundamental value (not the share price!) of the company will be substantially higher than its current trading value, then go ahead and take advantage of the artificially low price, buy some, and be very patient and ignore the day-to-day stock price movements.

If you're in this stock because you've convinced yourself some short seller has overextended themselves and will get squeezed, well... Prepare to be disappointed.

Re: Blockfi agrees to pay $100M in penalties and pursue registration

#227

Post by Animats »

CPLX wrote: post #195
thebean11 wrote: post #193

Earlier quoted context omitted.

It's unlikely that every single borrower would default just like it's unlikely every stock in an index fund would go to zero. I wouldn't really compare it to options trading, junk bonds are a much better comparison. Lower potential return but also much less likely you would lose money than with options. Obviously the devil is in the details, it's not clear if/how these loans are secured.

There’s no reason at all to think that a complete and total default is unlikely. It’s far from certain but it’s certainly plausible that the value of nearly all cryptocurrency’s will collapse to nothing at all.

The more likely failure mode is that you've lent to something that's leveraged. That can go to zero on a partial drop of the underlying asset. Which is what happened in 2008.

Re: Blockfi agrees to pay $100M in penalties and pursue registration

#228

Post by bduerst »

mbesto wrote: post #188
bduerst wrote: post #174

Earlier quoted context omitted.

IIRC Newegg is using Bitpay, which costs ~1% and settles to USD daily. It also means no refunds allowed (even in USD) to the customer using it, only store credit.

Which is an entirely pointless way to transact commerce for 99% of the population. I get my paycheck in USD and then buy goods and services with it. If it converts to BTC and then BTC back to USD then whats the point? It's just paying with a credit card with extra steps. What's the use case here?

Oh I'm not defending it. It's a garbage way to pay considering the competitive alternatives they allow.

It's marketing to a specific niche of tech bro, which is probably a large enough segment of Newegg's customers to justify it.

Re: Blockfi agrees to pay $100M in penalties and pursue registration

#229

Post by abritrum »

ProjectArcturis wrote: post #226
abritrum wrote: post #219

Earlier quoted context omitted.

You have every reason to be skeptical of my claims. I will not share the ticker since that would mean I am trying to get publicity. Another poster said that you don't know for sure whether it is naked shorting or wash trading. He is correct and I don't have mathematical proof. But there are enough signs: 1) Company had debenture that was paid off early to toxic lender 2) Toxic lender has been caught and fined by the…

I work in finance and trade stocks every day. Honestly, this seems like extremely weak evidence for any kind of market manipulation. The price movements you've seen are quite consistent with a sucky company that's going down because it's overvalued. It's generally pretty hard to short OTC stocks, so the idea that someone is out there short 10s of millions of shares is pretty far-fetched. And to what end? If the stock…

Thank you for the advice. This is a little special because the owners of the loan company have been fined by the SEC for precisely the naked short selling I am accusing them of (without revealing them, an unrelated case is https://www.thestreet.com/investing/stocks/sec-charges-filed...). Naked shorting a stock to 0 and claiming tax benefits is what some of these toxic lenders do. I am invested only in the amount I can afford to lose. But I would like to not lose even that :-) so will heed your advice.

Re: Blockfi agrees to pay $100M in penalties and pursue registration

#230

Post by bduerst »

landemva wrote: post #192
bduerst wrote: post #170

Earlier quoted context omitted.

That article you link is out of date. Global BTC energy consumption is now double[1] what it was in July, meaning the claim that it's somehow getting better spurious. The article also acknowledges that the energy consumption criticism is a valid issue (even despite the stats being out of date). [1] https://ccaf.io/cbeci/index

I think it is worth it to separate money from State. Now we just need the militaries to cut their defense-of-fiat-money forces in half.

I disagree on the former. Destroying the environment just to get a shitty, inefficient, non-competitive payment system because you don't like the U.S. Federal Reserve isn't a good trade.
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