Bitcoin - The economy of WoW, writ large.
http://en.wikipedia.org/wiki/Bernie_madoff
The world (of warcraft?) economy.
Fraudulent trading activity at Mt. Gox
41–50 of 137 posts
Re: Fraudulent trading activity at Mt. Gox
#42Earlier quoted context omitted.
I agree with pretty much everything you said but is it true that regulations would have prevented someone like Karpeles from doing the same with say, gold? What regulations prevent this? I'm asking genuinely because I have no idea what regulations exist in that world and I keep hearing that argument from smart people so I guess it's probably true.
Good question. I'd like to know too. It seems like the stock market would be the most relevant arena to seek examples from. Anyone know what kind of regulations prevent sneaky behavior in the stock market? How do they work?
The important thing to remember is that while there maybe more specific laws against what happened on Gox in other markets that doesn't mean that what Gox did was some how ok in the eyes of the law. A fraud is a fraud customer money _is_ missing.
On the topic of price manipulation in other markets if you follow financial news at all there have been a rash of cases of banks paying large fines and even pleading guilty to manipulation of at least the libor rate and gold prices and there are supposedly more on going investigations into price manipulation.
http://www.bloomberg.com/news/2014-01-06/royal-bank-of-scotl...
http://www.ft.com/intl/cms/s/0/08cafa70-e24f-11e3-a829-00144...
Re: Fraudulent trading activity at Mt. Gox
#43Step 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!
I think that is called quantitative easing.
Re: Fraudulent trading activity at Mt. Gox
#44The 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?
There are enough arbitrage bots out there now that major differences between the exchanges flatten out rather quickly.
Re: Fraudulent trading activity at Mt. Gox
#45As one of the many people who lost money in the Gox implosion, this is nauseating to read.
On a less related note, I heard they recovered 1/5 of the missing bitcoins awhile ago. Anyone know what will happen to that 1/5?
Re: Fraudulent trading activity at Mt. Gox
#46The 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.
My theory is that Bitcoin is used by the elite in China as just another way of transferring money out of the country. Buying Bitcoin from a Chinese exchange, and selling it on an American exchange, allows you to transfer money between countries, avoiding foreign exchange regulations.
Re: Fraudulent trading activity at Mt. Gox
#47Earlier quoted context omitted.
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.
When a user does not yet have sufficient USD on deposit with Gox to buy the bitcoins they want, they deposit more, and MtGox now has more real USD under their control. It's not a matter of selling the coins for real vs fake USD.
The question is how much new cash was really put into Mt. Gox to buy while they were dumping and the price was crashing?
Re: Fraudulent trading activity at Mt. Gox
#48As one of the many people who lost money in the Gox implosion, this is nauseating to read. On a less related note, I heard they recovered 1/5 of the missing bitcoins awhile ago. Anyone know what will happen to that 1/5?
According to they official announcements, these are going to be liquidated to pay some part of the debt to creditors.
Re: Fraudulent trading activity at Mt. Gox
#49The 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 agree with pretty much everything you said but is it true that regulations would have prevented someone like Karpeles from doing the same with say, gold? What regulations prevent this? I'm asking genuinely because I have no idea what regulations exist in that world and I keep hearing that argument from smart people so I guess it's probably true.
I'm not an expert, but I suspect the clearing mechanism is what would prevent these sorts of manipulations outlined in the post. I'd start your search there.
Re: Fraudulent trading activity at Mt. Gox
#50As one of the many people who lost money in the Gox implosion, this is nauseating to read. On a less related note, I heard they recovered 1/5 of the missing bitcoins awhile ago. Anyone know what will happen to that 1/5?
I've got your back: https://news.ycombinator.com/item?id=7777831
Our money was lost the moment we decided to transfer it to a third party. That 1/5 probably won't recover very much of it, if any of it, for reasons explored in that thread.
Whether it's Mt. Gox or Coinbase, money we put into a webwallet is no longer ours. It's the legal entity's. If they go bankrupt, which can happen for a variety of reasons, sometimes unfair ones, then that money is gone. Best magic trick ever.
Try to be at peace with the loss. Easier said than done; it was difficult for me. If you need someone to talk to, please feel free to shoot me an email.