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The math prodigy whose hack upended DeFi won’t return funds

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Re: The math prodigy whose hack upended DeFi won’t return funds

#131

Post by woojoo666 »

glerk wrote: post #122
SamBam wrote: post #50

> But in our email exchanges, he argued that he'd executed a perfectly legal series of trades. In real finance, there is an understanding that technical loopholes can exist, since not every outcome can be foreseen when writing laws, but the legal system can frequently prosecute against a series of actions which are, individually, legal, but which together are taken in order to achieve something illegal. That is, mode…

They really don't have any leg to stand on. A smart contract is a piece of code running on a public permissionless blockchain. The developers who deployed that code do not own it. Medjedovic had as much the right to take money out of the smart contract using the contract's logic as Kellar and Day. Being blockchain developers, Kellar and Day know these facts very well, but they persist in their hypocrisy because it is…

By that token, wouldn't rugpulls be legal too?

Re: The math prodigy whose hack upended DeFi won’t return funds

#132

Post by glerk »

toomuchtodo wrote: post #103
SkyMarshal wrote: post #91

Earlier quoted context omitted.

> With this worldview, if the attacker simply exploited poorly-written code to find a loophole, how do the owners of Index have a leg to stand on? They don’t. They simply have to accept it as a bug bounty successfully collected and paid out, and treat it as a learning experience and evolutionary process. Do better next time, if there is a next time.

Good luck making that argument in court. Intent is key, and if this is not the intent of the "smart" (lol) contract, "finder's keeper's" is not a legal defense. The legal system doesn't care about your blockchain arguments.

A smart contract deployed on a public permissionless blockchain is not owned by anyone. Only the contract's logic determines how one can interact with it. This is a fact.

It doesn't matter who can make the best argument in court. A good enough lawyer can convince a stupid enough jury of pretty much anything.

Re: The math prodigy whose hack upended DeFi won’t return funds

#133

Post by cbm-vic-20 »

liminal wrote: post #42

The fact that Ethereum code is public seems to weigh in favor of allowing him to get away with his "hack". For any other financial instrument, we rely on verbal descriptions of how it will be conducted and behave. With Ethereum, the code speaks for itself -- for better or worse. This leads to a rather absolutist dog-eat-dog rationality that I don't much like, but also don't see how to avoid.

> For any other financial instrument, we rely on verbal descriptions of how it will be conducted and behave.

My brokerage sends me plenty of prospectuses and other documentation that I don't read that describes exactly that. I depend on the regulators and the lawyers of other clients that have a lot more to lose than I do to make sure they stick to the rules.

Re: The math prodigy whose hack upended DeFi won’t return funds

#134

Post by colinmhayes »

iak8god wrote: post #18
antishatter wrote: post #3

What’d he do that was illegal? Seems like he didn’t cheat and insider trading laws don’t seem to apply. Oops crypto is a unregulated market.

FTA: > In their complaint, lawyers for Kellar and Day argued that two particular steps of the attack violated statutes against market manipulation and computer hacking. One was swapping almost all the UNI tokens out of the DEFI5 pool, the otherwise irrational trade that distorted the pricing such that Medjedovic could buy tokens out from under Indexed users, who were forced by the algorithm to sell. “The only purpose…

> to part with tokens on terms they never would have agreed to

Didn't they agree when they bought the token though?

Re: The math prodigy whose hack upended DeFi won’t return funds

#135

Post by colinmhayes »

bix6 wrote: post #119

Can someone explain how you can take out a ~$150m flash loan? (Did he post $300m collateral?) Did he only need 3 ETH for that or were the ETH only used for the transaction fees?

So flash loans must be repaid before the next block is mined, so you don't need to post any collateral, just the interest. If the loan isn't repaid in time it automatically unwinds and you lose the interest payment.

Re: The math prodigy whose hack upended DeFi won’t return funds

#136

Post by buzzdenver »

gizmo686 wrote: post #100
twox2 wrote: post #57

Earlier quoted context omitted.

"Code is law" is a dream that is not actualized. It's not actually law, it's just code. I'm pretty sure law enforcement will gladly prosecute for a lot of these "hacks".

What specific law was broken? In the US, generic "hacks" generally fall under the computer fraud and abuse act, which is notoriously vague about what qualifues as "authorized". Perhaps some other lawvis applicable. But I cannot think of any that are obviously on point. Nor can I think of a clear precedent that clarifies the issue.

> What specific law was broken?

Market manipulation, fraud.

Re: The math prodigy whose hack upended DeFi won’t return funds

#137

Post by criddell »

bombcar wrote: post #80
criddell wrote: post #26

Earlier quoted context omitted.

There are lots of stories lately about stolen NFTs. The podcast ReplyAll did an episode where they tracked down the current owner of a stolen NFT. He had sympathy for the original owner but he had no intention of turning it over. I don’t get why purchasing a stolen NFT is different than purchasing a stolen guitar from a pawn shop. Shouldn’t the previous owner be able to use the courts to demand the return of the item…

The whole point of an NFT is that the ownership is on the blockchain and guaranteed by said blockchain - if the courts can "force" return of the NFT than the NFT isn't actually synonymous with the ownership, and so then is kinda pointless.

Is there really any question about whether or not courts can force the transfer of an NFT or impose penalties?

Say you hold most of your wealth in some cryptocurrency and are going to file for bankruptcy. Do you think the courts will tell your creditors that the Bitcoin is beyond reach? I suspect they wouldn’t treat it differently from any other asset.

That the blockchain is interpreted as a record of ownership is irrelevant. It merely records what has happened and says nothing about the nature of those transfers.

Re: The math prodigy whose hack upended DeFi won’t return funds

#138

Post by shadowgovt »

turtledove wrote: post #9

The people who genuinely believe "code is law" are stunned to learn that: a) humans won't act "rationally", b) regulations exist for a reason, and c) no, the law is law, code is brittle.

"Code is law" really seems to me to be a philosophical position that can only be held by people who haven't fully internalized Gödel's incompleteness theorems.

Re: The math prodigy whose hack upended DeFi won’t return funds

#139

Post by yobananaboy »

bix6 wrote: post #119

Can someone explain how you can take out a ~$150m flash loan? (Did he post $300m collateral?) Did he only need 3 ETH for that or were the ETH only used for the transaction fees?

The 3 ETH was the gas fees for the transactions. (Some went to deploying the attacking contract, some went to contract interactions afterwards.)

With a flash loan, the funds must be returned by the end of the transaction, or the transaction fails. This makes the completion of the transaction the collateral, as if it fails at any point, all transactions (including the loan) get reverted.

Re: The math prodigy whose hack upended DeFi won’t return funds

#140

Post by notahacker »

DannyBee wrote: post #82
Ajedi32 wrote: post #65

Earlier quoted context omitted.

I've seen this argument regarding smart contracts several times now, and I don't think it makes any sense. It's like robbing someone in real life, then claiming you did nothing wrong because you didn't violate the "laws" of physics. Those are two entirely separate things. In the world of smart contracts code is indeed law, but that doesn't change the fact that in the real world law is law, and the fact that you used…

This claim makes no sense. In the real world, crimes have very specific definitions. Most are physical, in fact. For example, robbery is when, with intent to commit theft, you take property by force. Anything else is not robbery. Theft by taking is: when a person unlawfully takes or, being in lawful possession thereof, unlawfully appropriates any property of another with the intention of depriving him of the property…

In addition to sounding like textbook embezzlement, I don't think there's any reason to believe that "theft" as define by that very broad Georgia definition couldn't apply here (the "unlawfully" is to exclude certain property appropriations explicitly permitted by law like bailiff seizures or deposit retentions from the definition, not to mean it's not theft if you keep someone's property against their will without breaking any other laws. I don't think it ceases to be "appropriation" of funds simply because you provide something worthless as an exchange either, particularly not with that last clause)
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