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A software change allowed FTX to use client money

reuters.com

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Re: A software change allowed FTX to use client money

#71

Post by gruez »

gcr wrote: post #44
gruez wrote: post #29

Earlier quoted context omitted.

There's many reasons to hate smart contracts, but this isn't one of them. The article is talking about changes to a codebase that's closed source and deployed with little scrutiny. None of this is applicable to reputable smart contract projects, which are open source and require some sort of consensus and/or vote for code changes. Using this as an argument against smart contracts makes as much sense as using the elec…

Your very post says it -- "reputable." In this field, no matter the technology, reputation and trust are everything amidst fears of rug pulls and scams, and smart contracts don't replace the need for social trust. It's hard to name any crypto organization that was seen as more reputable than FTX before this happened. If we can't even trust someone with SBF's track record, what's left?

I was mostly using "reputable" as a hand wavy way to eliminate the minority of smart contract projects that don't have such protections. As it relates to smart contracts or more broadly crypto, the point is that you can theoretically inspect every aspect of the system, rather than trusting whoever is running it won't do anything bad because they're "reputable". There are still failure modes for this (eg. hidden bugs, intentional or otherwise), but at least you can't pull off what happened at FTX.

Re: A software change allowed FTX to use client money

#72

Post by 8note »

throwaway4837 wrote: post #38
roland35 wrote: post #12

And this is what really ruins crypto to me. With no actual legal protection, no trust, "code is law", am I expected to keep up with every pull request? And of course these exchanges are completely opaque on top of that.

Do you currently keep up with every clause in every contract and law? Doesn't seem like a new problem.

I generally have to accept contract changes before they apply to me? And I'm given an opt out method before they apply

Re: A software change allowed FTX to use client money

#73

Post by steveBK123 »

alar44 wrote: post #31
hn_throwaway_99 wrote: post #23

> Only Singh, Bankman-Fried and a few other top FTX and Alameda executives knew about the exemption in the code, according to three former executives briefed on the matter. A digital dashboard used by staff to track FTX customer assets and liabilities was programmed so it would not take into account that Alameda had withdrawn the client funds, according to two of the people and a screenshot of the portal that Reuters…

Really? I feel like intent would be really hard to prove. "Hey, due to the way our accounting works I need you to subtract X from our dashboard." "Ok boss." Are programmers expected to know finance law? If I build a program for a dairy farmer am I supposed to know the laws of the interstate dairy trade? I can't believe that would be the case.

If Jamie Dimon asked a developer at the bank "hey can you have Chase ATMs allow these 10 accounts that are in my name to withdraw unlimited funds?" everyone involved would be in jail.

This is not dissimilar.

Re: A software change allowed FTX to use client money

#75

Post by andrewstuart »

The real problem behind all these crypto companies is the people who make the money have no concept of what "integrity" is.

They aren't coming from a baseline assumption that their job is to protect and interests and the money of their clients.

Traditional banks, for the most part, have DNA built around protecting customer interests and customer money. Crypto companies have none of that attitude - behind every one of them is a sleazy tale of self interest and corruption.

My first introduction to this way of thinking was many years ago when I worked on a software development project and the project manager was extremely concerned about a single cent being wrong in the calculations - he taught me that with customer money you cannot get even a single cent wrong.

These crypto idiots are just young cowboys who see a giant pile of loot and don't have any concept of how to manage it in an ethical manner. They just wanted to work out how to gamble it all in the hope of more crypto gold. If there are crypto companies that have not yet had their rotten hearts exposed and gone bust, it's simply a matter of time.

Every single one of these companies will - and should - go bust - good riddance. It's a pity Robinhood won't go with them - the filthiest scumbags of all.

Re: A software change allowed FTX to use client money

#76

Post by 0xcde4c3db »

tedk-42 wrote: post #37
anon291 wrote: post #27

Earlier quoted context omitted.

People need to understand that money is debt. That is the source of all currency (yes, even gold and other 'hard' currency). If people cannot freely create it, then it's useless. The key is that you ought to be able to gauge the money creator on their trustworthiness, which hopefully you know as a member of a small community. Or, if you are creating money on the open market to large numbers of people, often it's usef…

Money is money. Debt is money from the future. Seems you don't understand.

> Debt is money from the future.

By the same token, money is debt from the past.

The origins of debt are ultimately material. Alice has a bushel of apples today, but Bob won't have a bushel of oranges until next month. The function of money is to decouple the general function of debt from its material details. In other words, you can have debt without money, but you cannot have money without an underlying debt.

Re: A software change allowed FTX to use client money

#77

Post by CuriousCosmic »

gcr wrote: post #45
rafale wrote: post #18

Earlier quoted context omitted.

This is not crypto, this is Enron, Theranos and Madoff. In DeFi, you check the code once, and that's what gonna run (exception being proxy contracts, but those are a red flag in itself).

Remember what happened with the 2016 Ethereum DAO? Even expert programmers aren't able to check smart contracts for all possible issues.

That's what happens when you decide to write your smart contract language in what is basically javascript and your smart contracts are interpreted in a stack based VM. Doubly so when your contract execution is entirely determined by the order in which Tx happen to get accepted.

It's actually sane when your contract is written in a non-turing-complete language with strong typing and the smart contract system has deterministic execution (i.e. you know the result when you submit the Tx and if the result would be different, the tx fails, preferably without charging you).

I'm convinced that one of the main issues with most smart contracts is that they have such weak guarantees and the guarantees they do have are brittle and hidden behind complex, opaque proofs & constraint systems.

Re: A software change allowed FTX to use client money

#78

Post by 8note »

anon291 wrote: post #27
rafale wrote: post #18

Earlier quoted context omitted.

This is not crypto, this is Enron, Theranos and Madoff. In DeFi, you check the code once, and that's what gonna run (exception being proxy contracts, but those are a red flag in itself).

People need to understand that money is debt. That is the source of all currency (yes, even gold and other 'hard' currency). If people cannot freely create it, then it's useless. The key is that you ought to be able to gauge the money creator on their trustworthiness, which hopefully you know as a member of a small community. Or, if you are creating money on the open market to large numbers of people, often it's usef…

> a movement that decried centralized trust

I don't think the movement cares about centralized trust? Instead it's a movement of get rich quick schemes

There's some separate movement that cares about decentralization, but they're only tangentially affected because they didn't use FTX, and they don't value their crypto in terms of stuff it can buy, but how it makes them feel

Re: A software change allowed FTX to use client money

#79

Post by deathanatos »

tekla wrote: post #62
alar44 wrote: post #31

Earlier quoted context omitted.

Really? I feel like intent would be really hard to prove. "Hey, due to the way our accounting works I need you to subtract X from our dashboard." "Ok boss." Are programmers expected to know finance law? If I build a program for a dairy farmer am I supposed to know the laws of the interstate dairy trade? I can't believe that would be the case.

Developers should know to ask questions when a weird request is made. Developers presumably know how to think and have a vague idea of what the business does to know that a ask to futz with internal financials programmatically is fucking wierd.

IME, it depends on your chain of command. I've literally been reprimanded in my career for asking questions. My boss at that time was crap. I didn't choose him. Asking questions can very likely get you fired.

Also got reprimanded for disobeying an order at once; my boss — same one as above — would not take "no, we are in a regulated industry, and I cannot do that" for an answer. I ended up going behind his back, getting the approvals he should have gotten himself, and once I'd secured those, granted him the access he wanted. I also tried to escalate to his boss (my grand-boss) … but he didn't respond until it was all moot.

But there is a lot of stress when you're fearing for your job, even though you're just trying to do things by the book. I'm inclined to side with engineers, to a degree: the chain of command's responsibility is to never put eng in that position. (Although here, the eng in question seems far higher up than I am. I'm just a bottom rung eng…)

> Developers presumably know how to think and have a vague idea of what the business does to know that a ask to futz with internal financials programmatically is fucking wierd.

They should but IME they often don't, and even if they do, people are lazy. It's a struggle to get people to do the things they should do some days.

Re: A software change allowed FTX to use client money

#80

Post by totalZero »

andrewstuart wrote: post #75

The real problem behind all these crypto companies is the people who make the money have no concept of what "integrity" is. They aren't coming from a baseline assumption that their job is to protect and interests and the money of their clients. Traditional banks, for the most part, have DNA built around protecting customer interests and customer money. Crypto companies have none of that attitude - behind every one of…

It's not just crypto. The entire fintech space has an ideology that lines up far better with Silicon Valley than with Wall Street. The Wall Street mentality would dictate a very different course of action than the Silicon Valley mentality in many of the situations described in the cases brought by the DoJ and the SEC, and yet the Silicon Valley mentality seems to have been the guideline used by SBF/FTX -- perhaps because of a lack of experience dealing with customer funds, or perhaps due to ignorance of the seriousness of consequences.

Edge cases matter a lot more to Wall Street than to Silicon Valley. Wall Street is a world where the new hire on the desk gets a talking-to by the managing director for making an error that could have led to a big loss, and where people are regularly reminded not to put anything in writing that they wouldn't want to see on the cover of the New York Times. Silicon Valley is a world where "move fast and break things" is a central mantra, and sometimes those things that get broken are the rules.

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