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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

#291

Post by glerk »

nicoburns wrote: post #277
glerk wrote: post #232

Earlier quoted context omitted.

> If did have an owner, that person is probably violating all sorts of securities laws in countless jurisdictions. That's probably what upsets me most about this story. These developers want to have it both ways: it is decentralized finance and nobody owns the contract as long as we are making money, but we want all the laws and regulations of traditional finance to protect us if things don't go our way. I am saying…

Frankly, I don't think it's up to you to pick a lane. It's the wild-west at the moment because the technology is new. But it won't be long before the law catches up and crypto will be subject to it the same as everything else.

Publishing a piece of code on a public blockchain cannot be made illegal. The Court of Appeal already ruled that code is speech making this a first amendment issue [1].

Decentralized finance is here to stay as an alternative to the traditional system. Some things are just impossible to regulate.

[1] https://www.trustnodes.com/2018/11/09/smart-contract-code-is...

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

#292

Post by motohagiography »

aidenn0 wrote: post #276
motohagiography wrote: post #60

This isn't a hack, it was straight arbitrage. I distinguish them because there was at no time a transfer of administrative power or control over the contract or targets infrastructure to Medjedovic. In a smart contract, I'd make a legal distinction between syntactic parsing and calculation, which has to do with the purity of functions and data. An arbitrage would be fair game if it levered an unanticipated calculatio…

> If he has the money, fleeing before charges were laid was probably even rational, as there is no reason to expect the legal system is equipped to deliver justice in something so new. TFA claims he was originally offered to keep 10% (over a million dollars) from this hack, free and clear. Not agreeing to that deal meant willingly putting himself at the mercy of said legal system. Talking about a single decision as r…

This is like a casino offering to let you leave with 10% of your winnings because their dealer didn't shuffle the deck. Not an reasonable expectation.

I will go back to this idea of an endogenous logic calculation vs. exogenous parsing errors description, where so long as he did not misrepresent the identities or sabotage the functions of any of the sources or destinations of the funds he used in his system, he should be in the clear.

It would be interesting to verify whether his technique had this "functional purity," that I've named and am balancing my argument on tho.

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

#293

Post by FireBeyond »

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…

> 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 of that trade was to mislead token holders to part with tokens on terms they never would have agreed to,” says Stephen Aylward, a lawyer representing Kellar and Day. “We say that's a form of market manipulation.” The same argument applied to Medjedovic's interaction with the CC10 pool.

Shame you can't manipulate an unregulated market. It's not illegal to do irrational things. Hell, even the regulated markets say, "The market can remain irrational longer than you can remain solvent."

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

#294

Post by greycol »

thrwy_918 wrote: post #193
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…

>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 I think some confusion arises because that "smart contracts" only make sense if code really is law, in the sense that any transaction executed by the contract -- even unexpected, surprising transactions -- is considered to be fully consented to by all parties interacting with the contract. I agree t…

The same argument could be made about an escrow account. Just because the account gets payed to one party by the third party doesn't mean that the second party couldn't sue the first for the money back. Assuming the third party made a mistake or (more in line with smart contracts) if the escrow was set up in a way were the pay out was just with relation to the escrow terms but wasn't in line with the contract terms between the 1st and 2nd party they'd be likely to get redress.

There's still a very real use for smart contracts in that you change what bad actors can do to act badly. Before they may have been able to breach a contract by ignoring invoices now they breach a contract by exploiting a smart contract loophole. Basically your shuffling the trust and risk around which can be a useful tool. i.e. it can be quite costly to enforce (and do due diligencece on) a contract with someone in another country so the cost and technical risk of setting up a smart contract may be much more preferable than the posisbility of having to legally enforce redress for breach in a regular contract.

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

#295

Post by moistly »

hartator wrote: post #160
blakesterz wrote: post #2

This was an interesting read. The case is now in limbo until authorities can locate Medjedovic or he decides to appear. “I did not steal anyone's private keys. I interacted with the smart contract according to its very own publicly available rules. The people who lost internet tokens in this trade were other people seeking to use the smart contract to their own advantage and taking on risky trading positions that the…

> I did not steal anyone's private keys. I interacted with the smart contract according to its very own publicly available rules. Yes, it's a little disingenuous to claim "code is law" until it doesn't suit you anymore.

It’s a heck of a catch-22! Reject the judiciary system and shun government interfere… or open the door to continually expanding government oversight. Remain the primary target for big “crime” hacks and lose trust and value… or join the current system and lose value?

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

#297

Post by ummonk »

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…

As the article mentions, there is a difference between the utilitarian and the libertarian view of DeFi / smart contracts. In the utilitarian worldview, the legal system still exists to handle disputes / exploits, but in the absence of such legal disputes, smart contracts allow you to automatically execute contracts without needing human overhead to manually execute them.

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

#298

Post by ummonk »

LeifCarrotson wrote: post #205
webmaven wrote: post #186

Earlier quoted context omitted.

The legal system has failure modes that are just as easily exploitable, but humans can intervene and reverse the failure, make people whole, etc. The problem with smart contracts isn't that there are bugs, but that buggy results are final with little to no recourse, by design, unless you get everyone to agree to hard fork the chain (rolling the "bad" transactions back and eplacing the buggy contract) and/or the imple…

I think a lot of the appeal of crypto/smart contracts is that they are final with little to no recourse, humans can't intervene and exploit failure modes which individuals using the so-called contracts can't defend against. Corporations and wealthy individuals with influence in the writing of this legal system, with massive amounts of financial resources, with negligible moral agency, and with limited criminal liabil…

That's ridiculous. If we're talking power disparities and differences in resources, corporations could just code up standard smart contracts with loopholes in them that allows the corporations to steal from their customers. It's not like customers have the resources to carefully audit the smart contract and make sure there aren't any backdoors that the corporation has written in to exploit.

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

#299

Post by User23 »

daveed wrote: post #72
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…

Respectfully disagree. I think I've seen several times the belief(from crypto supporters) that the code is the code is the code, and these are the rules that we play with. The "laws of physics" analogy doesn't match up. I feel like it would be more appropriate in an anarchist society (physics are the only laws, thus everything that obeys physics is game). This feels more like discovering an exploit in a video game. I…

The crypto community does seem inclined towards a law of the jungle approach. It's amusing but unsurprising that the wannabe Shere Khans go running to the legal system when they learn they're actually prey.

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

#300

Post by User23 »

majormajor wrote: post #237
Ajedi32 wrote: post #90

Earlier quoted context omitted.

That's not how the law works though, at least not in any country I know of. If you exploit flaws in computer code to steal something of real-world value, that's a crime. We're all bound to the laws of physics, just as in the world of smart contracts all are bound to the laws of code. But none of that changes the existence of the laws of men.

If you do a promotion for giving away free food, and your smart contract accidentally allows someone to get a free sandwich every minute instead of once a day, is it so obvious that someone using your promotion more than once a day is "stealing"? Ever use a different email address to sign up for a different free trial, say? Let alone people sharing Netflix accounts... where do you draw the line around "stealing" here…

This reminds me of the Pepsi fighter jet affair[1].

[1] https://en.wikipedia.org/wiki/Leonard_v._Pepsico,_Inc.

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