How does this fake_usd demand driving up the price of Bitcoin tenfold compare with the New York Fed's ex nihilo asset purchase program?
Fraudulent trading activity at Mt. Gox
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Re: Fraudulent trading activity at Mt. Gox
#52I'm a fan of RationalWiki's Bitcoin article: http://rationalwiki.org/wiki/Bitcoin > This is the sort of thing that gets bitcoins called "Dunning-Krugerrands."
A shockingly one-sided article. Probably colored by their aversion to Libertarianism.
Re: Fraudulent trading activity at Mt. Gox
#53Earlier 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.
I worked for a clever, clever, stupid bastard like that once. He could have made legitimate millions but chose instead to cook the books, embezzle a few hundred thousand, set up patsy directors to take the blame, flee the state with his wife and kids, and live under an assumed name.
Either that or, now that it occurs to me, we might have been a front for drug laundering. That would also have fit the evidence. Huh.
Re: Fraudulent trading activity at Mt. Gox
#54Discussion on r/Bitcoin: http://www.reddit.com/r/Bitcoin/comments/26g46e/the_willy_re...
Re: Fraudulent trading activity at Mt. Gox
#55Further proof that the absurd run-up in November when bitcoin reached $1,200 was illegitimate.
So why did it crash? Why didn't the fraudster just prop up the price?
Re: Fraudulent trading activity at Mt. Gox
#56Step 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!
The Bitcoin community has had a term for your USD_FAKE concept for a long time: GoxBux.
Re: Fraudulent trading activity at Mt. Gox
#57The 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.
Regulations on financial institutions break down into several categories:
1) Identifying operators and users, so if fraud happens, the right people can be found and held accountable
2) Requiring paperwork documenting what is happening, again, so if there is a fraud of some kind it can be detected and the responsible parties found
3) Actually trying to prevent fraud, usually this means mandatory audits of some kind
I can't point you to what rules govern a currency exchange in Japan exactly, but the above is how it usually seems to break down.
Gox was AFAIK never audited. How much of a paper trail exists is unclear. The relevant people's identities are known, however.
One other thing I think we should clear up: these rules are usually pretty vague and general. It's not like regulation is something that people opt into or out of depending on their personal preferences. Whatever regulations applied to exchanges and markets in Japan would likely have also applied to Mt Gox.
The problem with trying to argue that the fix is "regulation" in the abstract is "regulation" isn't some singular silver bullet. It's a big pile of rules and people who try to enforce those rules, but often those rules aren't doing what you think they're doing, or they exist to allow punishment rather than prevention, or they're somewhat theoretical because they aren't reliably enforced. This is why lots of people would dearly love to find a way to build a decentralised exchange: in theory it could be more reliable than a regulated institution.
Re: Fraudulent trading activity at Mt. Gox
#58How does this fake_usd demand driving up the price of Bitcoin tenfold compare with the New York Fed's ex nihilo asset purchase program?
(I assume you're referring to QE1, QE2 and QE3)
It's say a supermarket advertises bread for $1. Anyone who reads the ad, will consciously or unconsciously believe that the dollar has value. Now multiply this effect by all the similar advertising over many years and you'll see that the dollar is the strongest brand ever.
When the financial crisis hit in 2008, the public starting saving and they choose the most stable brand they could find (the dollar) and the brand was well on it's way to get even stronger.
The way to counter act it was by flooding the market with money (lowering interest rates and later printing money).
Bitcount does not derive it's value in the same way and printing bitcoins is fixed by the block chain rules.
Re: Fraudulent trading activity at Mt. Gox
#59I'm a fan of RationalWiki's Bitcoin article: http://rationalwiki.org/wiki/Bitcoin > This is the sort of thing that gets bitcoins called "Dunning-Krugerrands."
A shockingly one-sided article. Probably colored by their aversion to Libertarianism.
Which sentences from the article do you disagree with?
Re: Fraudulent trading activity at Mt. Gox
#60The ironic thing about this is that the nature of Bitcoin (specifically, the fact that all transactions are recorded in the blockchain) means that auditing a Bitcoin exchange is an eminently solvable problem. To my mind, given the ease with which Bitcoin wallets can be created, any exchange that commingles its clients' Bitcoins should be viewed with suspicion.
Yes, it's easier to dump everything into a few wallets, instead of maintaining individual wallets for every client. However, if the team behind an exchange isn't capable of dealing with the complexity of individual, segregated wallets, you have to wonder whether they're competent enough to run an exchange in the first place.