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Fraudulent trading activity at Mt. Gox

willyreport.wordpress.com

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Re: Fraudulent trading activity at Mt. Gox

#2

Post by kolev »

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.

Re: Fraudulent trading activity at Mt. Gox

#3

Post by kylebrown »

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.

> Just look at the recent hike - no news

There was a Federal Election Commission (FEC) decision to allow BTC donations to Political Action Committees (PAC's). Also circle.com showed started taking e-mails and showed a demo video.

Re: Fraudulent trading activity at Mt. Gox

#5

Post by kolev »

kylebrown wrote: post #3
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.

> Just look at the recent hike - no news There was a Federal Election Commission (FEC) decision to allow BTC donations to Political Action Committees (PAC's). Also circle.com showed started taking e-mails and showed a demo video.

Circle.com didn't release much more than we knew already. Regarding donations - you really think the Chinese "investors" care about this?

Re: Fraudulent trading activity at Mt. Gox

#6

Post by EGreg »

This is another example of centralization runing things. Once you have a "trusted" exchange, accounts can do shenanigans like buy bitcoins internally for no fiat money, whether through hacking or collusion.

An actual bitcoin exchange should just set up parties to do a 2-of-3 trade. It would be slower, but better for the stability of the currency!

Re: Fraudulent trading activity at Mt. Gox

#9

Post by sillysaurus3 »

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 investigating the extent of the problem," but no, Karpeles was paying them to say "nothing is wrong," even while Karpeles was crafting his crisis report to investors about how all the coins were gone.

Karpeles seems to have a history of lying. He was caught in a lie by his employer in 2004: http://newslines.org/mt-gox/joins-linux-cyberjoueurs/

From a game theory point of view, it's interesting that the price at every major exchange depends on every other major exchange. For example, when Mt. Gox was active, if its price went up, BTC-e, Bitstamp, etc would simultaneously go up. It's a natural phenomenon which has rather grim implications: if an exchange is conducting fraudulent activity, then the entire bitcoin trading ecosystem is affected. And since bitcoin is completely unregulated, there's nothing really stopping anyone from manipulating the market. For example, no one knows who's behind BTC-e, but it has a lot of trade volume. What if they're engaging in fraudulent trading as well? There's every incentive to.

The inevitable conclusion seems to be: you can try to come up with a bunch of logical reasons about why the price of bitcoin is going up or down, but you can't ever rule out "the price is due to large-scale fraudulent behavior," i.e. it's a bubble. Bad behavior from one exchange will always affect all the others.

As Karpeles has probably shown, you can become a millionaire by manipulating the market and then escape all consequences by letting your company go bankrupt.

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