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Fraudulent trading activity at Mt. Gox

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Re: Fraudulent trading activity at Mt. Gox

#21

Post by sillysaurus3 »

c0ldfusi0nz wrote: post #16
antonius wrote: post #4

Further proof that the absurd run-up in November when bitcoin reached $1,200 was illegitimate.

Whether or not the run-up was "legitimate" in your eyes is inconsequential - the exchange rate ran up to the point that the market could no longer bear, then crashed back to reality. Does the run-up's legitimacy somehow make the current exchange rate illegitimate? I think not.

Actually, the rate ran up to the point that Mt. Gox could no longer bear. Unfortunately, it's rather easy to start an exchange and get people using it (or at least, it's no more difficult than any other startup) so there will probably always be companies willing to manipulate the market for personal gain. And since every popular exchange's price affects every other, manipulation from one will manipulate the price at all the rest.

The modern day bitcoin trader should carefully consider whether they want to be a part of a market where the largest actors aren't bound by the rules they set for everyone else.

Re: Fraudulent trading activity at Mt. Gox

#22

Post by [deleted] »

drcode wrote: post #11
antonius wrote: post #4

Further proof that the absurd run-up in November when bitcoin reached $1,200 was illegitimate.

Unfortunately this is plausible: The only reliable way to trigger a run-up in a commodity is to expend a lot of capital to acquire that asset at inflated prices- You'd have to "burn through" a lot of money to get this to happen. ...so, then where was this cache of money that was destroyed to inflate the price? It would have to be a pretty large quantity to have such a drastic impact. Occam's Razor to me suggests the…

[deleted]

Re: Fraudulent trading activity at Mt. Gox

#23

Post by maxerickson »

panarky wrote: post #10

Step 1: create USD out of thin air. Step 2: buy BTC at $1200. Step 3: sell BTC at $200. Step 4: profit!

I wonder if the information even exists to create a ledger of all the real dollar deposits and withdrawals that Mt. Gox carried out. I suppose even if that ledger made sense they could be sending the $200 to an account (or multiple accounts) controlled outside of the business.

Re: Fraudulent trading activity at Mt. Gox

#24

Post by drcode »

c0ldfusi0nz wrote: post #16
antonius wrote: post #4

Further proof that the absurd run-up in November when bitcoin reached $1,200 was illegitimate.

Whether or not the run-up was "legitimate" in your eyes is inconsequential - the exchange rate ran up to the point that the market could no longer bear, then crashed back to reality. Does the run-up's legitimacy somehow make the current exchange rate illegitimate? I think not.

Though I agree somewhat with your argument, a true "legitimate market" requires full transparency by all parties without people trading on insider info.

In this case, however, only some parties knew that MtGox's internal accounting was broken. Therefore, the price run up may have been "illegitimate" for a limited time period based on this asymmetry of information.

You are right though that over the long term a market price is always "legitimate" by definition, because of the maxim "something is worth whatever someone is willing to pay for it."

Re: Fraudulent trading activity at Mt. Gox

#25

Post by deckar01 »

jabagawee wrote: post #19
deckar01 wrote: post #14

Earlier quoted context omitted.

Start : (Markus: $0) (Joe: 1BTC) Step 1: (Markus: $1200 ) (Joe: 1BTC) Step 2: (Markus: 1BTC) (Joe: $1200 ) Step 3: (Markus: $200 ) (Joe: 1BTC, $1000 ) Step 4: Piss off Joe by preventing him from withdrawing his imaginary profits. I don't understand what Markus gains in this situation.

Assuming "Joe" represents the entire userbase of Mt. Gox, which deposited its own money into the system: Start : (Markus: $0) (Joe: 1BTC, $200) Step 1: (Markus: $1200 ) (Joe: 1BTC, $200) Step 2: (Markus: 1BTC) (Joe: $200 + 1200 ) Step 3: (Markus: $200) (Joe: 1BTC, $1200 ) Assuming Markus withdraws fiat before Joe does, Mt. Gox only had $200 in real money and $1200 in fake make-believe numbers, so Joe is left unable t…

But it seems like if they were pumping the price up, then a lot of active traders would be holding fake USD. Mt. Gox can't tell if it is accepting real or fake USD while dumping. I think my first post outling a possible scenario that generate nothing except perceived loss to users once they can't withdraw.

Re: Fraudulent trading activity at Mt. Gox

#26

Post by sillysaurus3 »

CamperBob2 wrote: post #12
sillysaurus3 wrote: post #9

The reason I'm inclined to believe this report's implications about Karpeles is because I spent a long time in Mt. Gox's IRC support channel talking with support reps, and they were paid to lie. They didn't know they were being paid to lie, but they were instructed by management to say "don't worry, all user coins are safe" right up until the day the Mt. Gox crisis report was leaked. They could have said "we are inve…

I don't know about "escaping all consequences," unless his idea of "escaping all consequences" is having to watch his back for the rest of his life. Seems like a pretty dumb way to make a few million bucks, IMHO.

It pains me to say this, but "dumb and evil" have been par for bitcoin thus far.

The question is, will the situation change? It might. Many modern reliable systems grew out of shaky or illicit foundations.

But that's little solace in the meantime.

Re: Fraudulent trading activity at Mt. Gox

#27

Post by phpnode »

mattm wrote: post #18
CamperBob2 wrote: post #12

Earlier quoted context omitted.

I don't know about "escaping all consequences," unless his idea of "escaping all consequences" is having to watch his back for the rest of his life. Seems like a pretty dumb way to make a few million bucks, IMHO.

Especially since he could have been a legitimate multi-millionaire just by doing things correctly. The market lead MtGox had is something people dream about.

he was probably arrogant enough to assume he could do both.

Re: Fraudulent trading activity at Mt. Gox

#28

Post by kolev »

panarky wrote: post #20
kolev wrote: post #2

The fraud continues today in China. Those exchanges were caught several times faking volume and placing phantom orders. I think the game now is: fake price hike in China, sell coins for real money on Bitstamp, buy cheaper, repeat. Just look at the recent hike - no news, no reason for 30% jump from $440 to $580 in a week.

Right now the exchange rate on Bitstamp is USD 576 and the rate on Huobi is RMB 3578. Converted, those prices are within one-half of one percent of each other. If there are fake price hikes in China, wouldn't Huobi prices be higher? And how would buying coins for real money on Bitstamp allow you to buy for cheaper anywhere else?

Maybe I wasn't clear, but I wasn't talking about arbitraging. I'm talking about faking demand to hike prices and extend profit margin 10-fold. You can do this two ways - you can sell and buy cheaper, but then there's a risk that the price will stay low, so, you have more bitcoins, but less fiat. With this trick, you don't risk anything, and you make both more coins and more fiat.

Having Bitstamp and BTC-e copy the direction that Huobi takes without questioning makes them puppets in the hands of those who control Huobi and the likes. I think it's clear that Bitcoin market is predominantly amateur investors from the trigger-happy kind and the smart crooks can do with the market whatever they want with just a few hundred coins.

As recently the crypto wasn't profitable (the stock market performed way better) and people started to lose patience, some of those crooks had to do something to revive the market and keep doing what they've been doing so far. It's much easier to manipulate Bitcoin than the stock market, Forex, Gold, etc., so, those crooks didn't want to use their unique opportunity.

When you see "to the moon" everywhere, you know the game is back on, and many are gonna get taken advantage of pretty soon.

Re: Fraudulent trading activity at Mt. Gox

#29

Post by panarky »

drcode wrote: post #13
panarky wrote: post #10

Step 1: create USD out of thin air. Step 2: buy BTC at $1200. Step 3: sell BTC at $200. Step 4: profit!

Yes, this is exactly right, but you should clarify: Step 1: create USD_FAKE out of thin air. Step 2: buy BTC at 1200 USD_FAKE on MtGox. Step 3: sell BTC at 1100 USD_REAL on Bitstamp. Step 4: profit!

Whoever sold you BTC in Step 2 isn't going to accept USD_FAKE for their coins. Doesn't this scam fall apart right there?

There's something like $600M missing. Were people really leaving that much fiat on account at Gox?

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