Banks operate in a predictable, fairly transparent framework. Inflation devalues your money but the process of inflation is well understood and the occurrence/details are public knowledge.
Cryptocurrencies values can fluctuate rapidly and there's a strong precedent for your money disappearing in an exchange or otherwise.
> his company is broke, he’s broke, and the bot is broke because he spent all the coins, after he himself ran out of money.
(emphasis mine)
How did he think this was remotely acceptable? Jesus Christ! Don't operate custodial accounts if you don't understand the consequences. You can not just spend other people's money, no matter how broke you are...
If that's your only option, give everyone their money back and declare bankruptcy.
Morality is just an attempt to describe the actions our monkey brains view as acceptable and unacceptable. If you remove the monkey far enough from its natural habitat, far enough that the shape and magnitude of consequences are susbtantially altered, people feel more and more free to act in ways that are immoral. Cryptocurrencies CLEARLY are having that effect. People think they are above the law and consequences, largely because they are, and act accordingly.
Wait I'm being serious here: how is that not a feature? People trade humans and hit jobs on the darknet.
Do you really think "get rid of laws and people will do the right thing" is a reasonable assumption? You seem genuinely shocked at this outcome, but how many times has a story like this played out?
Most of what you've said is a complete non-sequitur, but I'll address each point in turn.
> how is that not a feature?
(Vacuously) I think it's bad to do bad things. I assume you think so too.
> People trade humans and hit jobs on the darknet.
This has nothing to do with the matter at hand. And furthermore, just because some people do something doesn't make it right. And even if those people think it's right, it doesn't mean other people think it's right.
> Do you really think "get rid of laws and people will do the right thing" is a reasonable assumption?
No. I can't see where I gave the impression that I am making this assumption.
> You seem genuinely shocked at this outcome
I am shocked. If I was operating a DogeTipBot, there is no fucking way I would just spend the users' money and then act all surprised when I ran out of money. Who the hell does that?
> how many times has a story like this played out?
Does this really happen in darknets? Or is it just Dale Gribble types and law enforcement stings? I've seen the postings in certain places, but never assumed it was real. It seems IRC would be a more likely place for things like this to take place. It's not like a drug market.
Not necessarily "morality" as such, but some cryptocurrency advocates idealise the use of smart contracts and such to create binding agreements without using the threat of state violence.
To put this in perspective, The Merkle estimates that Dogetipbot's creator cashed out between $140,000 and $1.4 million worth of Doge from account holders. Not exactly loose change.
This happens with all sorts of money held in Trust. It's not unusual to see lawyers steal from trust funds, Trustees steal from trust funds, CEOs buy strippers and drugs with investor funds. We like to pretend we live in a world were people are honest and rational, and that's why people are so willing to put money into trust. But we don't live in that world, and trust should be about just that - do you trust this individual to hold that money. We pretend there is some legal regulatory system to prevent people stealing trust money but there isn't, all the legal system can do is punish people after the fact. And as evidenced by the existence and popularity of criminal courts and prisons, future punishment is often not a good deterrent for present bad behavior.
Now if it's someone like my bank I do trust them, because they have been around for a long time and have never stolen from their customers. If it's some guy on reddit with "wow such business" working with dogecoin, I think I would be a little more reluctant to trust.
In general, one also trust's one's bank (in the US at least) because it's an FDIC-insured institution; the government promises that it will use control of fiat currency to make you whole if the bank fails.
That guarantee hasn't always existed, and the Great Depression was partially exacerbated by the problem that in the event of a savings bank failure, there was no institution to make creditors whole. As far as I am aware, the BTC ecosystem has no such guarantee anywhere within it, which makes it not as safe a place for stored wealth as a US bank (assuming you trust the US economy to not implode over your lifetime, of course... Current track record suggests you should trust it more than the BTC economy ;) ).
This is why banking regulation and licensing exists. It's also well understood that a bank will do this with your money, while a regular custodian should not.
If he'd made it clear upfront that the funds would be loaned to a risky business venture, with no reward, and people still chose to trust him with money then arguably that would be fine from a moral standpoint, but he didn't, and I'm sure he didn't because he knew nobody would have agreed to it.
You're acting like a founder never ran off with a VC's money and that there also aren't legit cryptos. This is the real world. Scummy people exist in all facets of life.
They exist everywhere but that hasn't stopped them from being especially prevalent in cryptocurrencies. The financial system is pretty sketchy in general but cryptocurrencies seem to have a large amount of scandals for having such a low volume of people actually using them.
Because its really weird and new to attribute high value to small amounts of data you transact over the internet to a distributed system. The cryptography and game theory needed to stop anti-social nodes(hackers and other entities) isn't developed yet.
What'd he spend it on? Is this really hosting intensive? I'd think it'd fit in free tier usage or something. And even if not, it can't be more than what, a hundred or two a month? I don't follow what "creating a business" actually meant as far as why his costs went up. He was running a bot. So, you get an LLC, no big deal, it changes nothing. That's like what, 50$ in some states?
What am I missing? Unless it comes out that he started hiring people (to do what??) or if he quit his job and started spending people's money for his rent -- why'd he suddenly incur any serious expenses?
Also what's it got to do with crypto currencies per se? If banks offered some super easy API for USD-USD transfers and he had shoved all this money into a WellsFargo account would he somehow not have spent it?
> According to Mohland, in 2015, all Wow Such Business employees were laid off, including himself, and he began pouring his personal funds into the service to keep the bot alive.
It sounds like at some point, for some reason, he had employees. Unless he's just using weird wording and he was the only one.
Him and a cofounder, a dev, community/customer support, and a new hire coming on to "go to the moon".
I would love to know the thought process that came up with this.
Edit: Ya they went to conventions and on and on. Built a v3 system that could do "<bold>40 transactions per second</bold>", supported Twitch and other stuff. And they raised money: "Hell, we even raised $445k in a seed round to keep this train moving well on into 2015."
Well that makes a lot more sense. And I sympathize with wanting to keep your business alive. I've seen that happen and it sucks because it's hard to cut losses and walk away.
> In finance, customer funds are supposed to remain segregated from the business’s funds. They live in a separate legal universe, and this rule is meant to insulate the business and customer from each others’ failures.
It's worth pointing out that this fiasco has nothing to do with cryptocurrencies. In the absence of regulations and legal enforcement, the exact same thing can happen with any bank or brokerage account. "We went bankrupt due to subprime bets, so we're taking all of our customers' savings to bail ourselves out. Fight club, lol".
Given that this was a legally registered business, I hope this scumbag faces criminal prosecution and imprisonment. It's time we started locking up white-collar-thieves the same way we lock up burglars.
> same thing can happen with any bank or brokerage account
Not really, no. There's extensive regulatory systems in place to limit this and it only happens in dire circumstances (accounts over €100k in Cyprus, for example)
Thing is, no bank or brokerage account exists in the absence of regulation or enforcement. So it really is peculiar to cryptocurrencies, even if it is not a logically necessary feature of that system.
The currency is supposed to be secure from snooping which precludes strong oversight. But at the same time, the asset manager is able to just loot all his depositors at will with no repercussions.
Equally, the technical architecture of this bot - they have all the private keys and thus custody of the funds - isn't necessary at all. The author could have used payment channels instead, and never had custody of a non-trivial amount of user funds.
You can't do that with the conventional financial system.
In a conventional financial system, people literally hand over their cash to a bank, with the expectation that they the bank won't take that money and run off into the sunset. The only thing that safeguards this expectation is legal enforcement. The same legal enforcement could also be applied to any cryptocurrency-based "bank" or store.
Ie, When it comes to fraud like this, if you're looking for someone to blame, blame the lack of regulations and legal enforcement. Not the concept or technical architecture of cryptocurrencies.
Well, I think my point there is that cryptocurrencies provide two avenues for imposing regulation: legal and technical regulation.
My payment channel suggestion is an example of the latter. And of course, you can use both: competent fintech "blockchain" use-cases are all examples of adding technical regulation to a field that's already legally regulated.
I grew up in an upper middle class area and a lot of my friends were a sort of radical libertarian. The most interesting thing about cryptocurrencies for me was them slowly realizing why a basic level of financial regulation is important.
It's been interesting to watch currency libertarians rediscover from first principles the reason so many of the financial systems of the world work the way they do.
I find myself sometimes wishing they'd discover it by doing their research instead of orechestrating a sequence of events that lead to a catastrophic value crash, but (a) as long as it's not my money being burned, I don't generally deeply criticize how people spend their time and resources and (b) I bet it's a lot more fun to be in the middle of a scandal than to read dry economics history. ;)
It has everything to do with cryptocurrencies. The whole point of which is to avoid and theoretically not need regulations. Spoilers, that theory is overly optimistic.
The only technically-significant aspect of cryptocurrencies in relation to this story is that by the nature of the Bitcoin and Bitcoin-derivative architectures, a massive fraud on the system can't be softened or ameliorated by a central bank printing money to make victims whole, since cryptos are "gold-standard"-style fixed-quantity currencies.
Practically speaking, that makes something equivalent to FDIC insurance more expensive to implement; in theory, several brokers could join some kind of insurance group where they pay into a common pool of unused BTC to pay out in the event of fraud. I'm unaware of such an experiment being tried.
History has shown that it's possible to wreck a fiat-currency-backed economy so badly that the nation-state's ability to print money can't be used to fix the problem, but in practice it seems in general difficult to do (whereas there have been multiple Bitcoin crashes and frauds where it'd have been nice to have a "Just issue those people BTC to cover their losses" solution, but that's not technically feasible).
Can someone explain how these coins went from zero value to having value? The articles kind of skips over that part, saying that getting listed on exchanges made it worth something.
So simply being able to trade it for real money (+ hype, + limited supply) made it actually worth real money? The only thing that needs to happen for a currency to exist is liquidity and x number of people to think its valuable (who buy/sell it)?
I think you just answered your own question. The only thing that needs to happen for a currency to exist is liquidity and people to think its valuable.
Cryptocurrency acts as a transfer currency. If I want to send someone $1 worth of Dogecoin, I spend a dollar on the exchange, and whomever is willing to give me the most Dogecoin to get my dollar wins and sets the trading price. Of course, this is limited by how much Dogecoin people have that they are willing to sell.
Mainly its psychology; what people expect to happen determines how they trade and thus what does happen. So you end up with a chaotic system and an unstable currency.
So, you stole everyone's money to support your personal business and then claimed bankruptcy once all of everyone's money was gone. Is that correct?
Then you complain when some hacker takes the money from the ponzi type scheme your running and now the result of all of it is, everybody lost their money including you?
Real shame. As an active community member, I can tell you that mohland was pretty much revered by the Doge members, because of how influential and prolific DogeTipbot was across the sub. People were tipping each other on a huge scale of engagement unseen anywhere else (by me, anyway).
Then, it turns out not even our dev-mascot can be trusted... What a pity.
It's also interesting to see some of the discussions around the creation of a decentralised tipbot... But it seems like this would not be possible[0], because the keys to the wallet(s) would always need to be in someone's hands (or a few people's anyway).
I knew Mohland and the DogeTipbot project pretty well. He did have a few employees mostly working in customer support.
He was a stand-up guy and a strong advocate for the Dogecoin community. People are talking about the fact that he liquidated the assets from user wallets as a malicious action, and while I agree it was a terrible choice, I see it more as a bad decision.
Backed into a corner he tried to leverage a businesses asset holdings to keep it a float in time to recover. Depending on your jurisdiction this is something banks do all the time as part of your balance is not liquid and invested elsewhere.
The issue here is his business didn't recover and wasn't ever going to.
Last I heard Josh's plan was to keep the main part of the bot free and charge for websites and streamers to accept tips from the Dogecoin community. He wasn't an idiot like this article tries to portray. There was a reason he was keeping the consumer end of things free. But, the micropayment landscape had more competitive options than a niche currency.
All in all its sad to see the business fail but this was poor business choices, not maliciousness nor stupidity like the article tries to claim.
For what its worth, customers' fund are not "business assets". He had no legal right to spend that money.
Now, he may have thought he could use it to float some funds, and put them back, and no one would be any wiser, but that's definitely illegal.
He may not be a bad person, and he may not be an idiot in the larger scheme of things, but this was an idiotic move, and a terrible (and unethical) decision, that may very well have legal repercussions.
"For what its worth, customers' fund are not "business assets". He had no legal right to spend that money.
Now, he may have thought he could use it to float some funds, and put them back, and no one would be any wiser, but that's definitely illegal."
This is true, and the comparison with banks fractional reserve isn't 1:1
The banks aren't taking your money to pay their bills, they're using your money along a legally defined path of creating and selling investment products with the government in a well-defined position to protect your savings as a guarantor.
I suspect that the Dogecoin business could have leveraged customer deposits in investment products similarly, but would likely require an insane amount of bureaucracy and i-dotting before they could do it.
As for legality, that depends on jurisdiction. Cryptocurrencies are not recognized as a legal tender currency in many areas. In some areas they are, in other areas they are considered an asset like a stock, in others a collectable and in some places have no more legal rights than the gold you earn in World of Warcraft.
I agree he had no moral right to spend that money, but legal becomes highly debatable. It will be interesting to see if there are any small claims cases that rise out of it as it could actually push forward legislation on crypto.
It is not highly legally debatable. Debatable, maybe. Highly? I highly doubt that.
> no more legal rights than the gold you earn in World of Warcraft
Undoubtedly, if a company offered some sort of account to store that gold, they'd be in deep shit if they took gold from those accounts and sold it to pocket the money.
It doesn't matter if it's cryptocurrency, collectible, stock, etc, it still is not a business asset.
If you've got my Jesus shaped collectable potato chips in storage you can't sell them to keep your business afloat.
If you're a brokerage whom I have an account with for my stocks or asset trading, you can't sell my assets to keep your business afloat.
If you're a bank storing my currency, there are very specific rules that govern you, and my money is FDIC insured. This isn't a bank, period.
You can't just change the rules saying "well, banks don't always have your cash on hand, so this guy doesn't have to either". There are rules around how all of that works anyways - and he wasn't operating within them.
This is more akin to paypal, or some type of digital wallet. As it's an "account" where you can "send and receive dogecoins". There is no reasonable expectation that anyone else should have access to the dogecoins in your account.
There's weird grey area around that shit, but suffice to say my assets are NOT your business assets.
No. If a company let you store world of warcraft cold and took some of that gold they'd go out of business, but it wouldn't likely have straight forward legal ramifications unless their terms of service had very clear expectations of what "holding" your gold meant.
Further, in many digital assets like world of warcraft technically the creating company (Blizzard) still owns the asset regardless of what you do with it or where it goes.
If you are storing currency, that is legally defined as currency by your legal jurisdiction (usually the state level) then there are very specific rules for money transmission and money service business licensed businesses. And your accounts are insured upto the legal required amount of $100,000 by the FDIC.
However, many states have NOT classified cryptocurrency as a currency nor required exchanges and services operating solely in cryptocurrency to get a license as a financial service (different if it allows exchanging of crypto and traditional currency). Because of this it is unclear what the legal doctrine is that would apply to it.
Now if I had as you said "a jesus shaped collectable potato chip" in storage that belonged to you, can I sell it? That depends. For example, for a storage facility if your payments are late I certainly can. For plenty of digital assets accounts your funds are taken by the company after X days of inactivity. Then you have services like PayPal which terms of service allows them to freeze your accounts and keep the funds for anything that violates their terms of service (rules designed by them, which you agree to on sign up).
So was Dogetipbot in the legal clear for doing this? Probably not. There is some level of negligence, some level of consumer loss and can probably be a tort case. But was it flat out illegal? No. It was at worst a civil case, but that depends on their terms of service and the legal standing of cryptocurrency in various jurisdictions.
> If you are storing currency, that is legally defined as currency by your legal jurisdiction (usually the state level) then there are very specific rules for money transmission and money service business licensed businesses. And your accounts are insured upto the legal required amount of $100,000 by the FDIC.
Wrong. If you have money stored in a bank that is insured by the FDIC (and pays depositor's insurance), then you are insured.
If you have a cash deposit with a brokerage that is not FDIC insured, and their CEO spends customer's money (that they are not allowed to), and go bankrupt, you are absolutely not insured by the FDIC, and will have to go to court to try to reclaim assets. This happened, see MF Global. In that case, the CEO (Jon Corzine) was very well connected and was able to sidestep prosecution and jail time.
I'm going to bet that this clown is not well connected. Fortunately for him, all he embezzled was this bullshit toy currency, so hopefully, for him, its so irrelevant that he gets away unscathed.
> If you've got my Jesus shaped collectable potato chips in storage you can't sell them to keep your business afloat.
With examples that small-fry, you're getting into 'small claims' territory, which basically amounts to you having your little slapfight in front of a judge until he tells one of you or the other to knock it off.
> This is more akin to paypal, or some type of digital wallet
Minus any of the user agreements, established business licenses, regulations, and other financial grunt work that it took to get PP up and running (and even then, they have free reign to freeze your account with little to no recourse if they think you're out of line - plenty of stories of people being burned by this)
This is "more akin to" handing off your trading cards to the guy at work running the betting pool and trusting him not to fuck you over, except (A) trading cards are much easier to explain and (B) in this case you don't even know the guy.
Exactly. Which is why I think comparing it to anything financial (banks, PP, etc) is silly in the first place.
Replace collectable potato chips with baseball cards and you're back to the example I was trying to portray.
If someone was holding your property (baseball cards) and sold them out from under you, then it seems like there would be good ground for a civil case.
"But your honor, ISK is part of the EVE Online game, and it's in the nature of the game to build up a bunch of in-game assets and then get screwed out of them by other players. Players find this fun and continue to come back to it.
"Exhibit A is the relevant value-lost-per-day in dumb territory disputes and ultimately meaningless fun-fights. As our expert witness, we're calling a psychologist who can explain the sort of masochism that factors into a person's enjoyment of this experience..." ;)
> Undoubtedly, if a company offered some sort of account to store that gold, they'd be in deep shit if they took gold from those accounts and sold it to pocket the money.
We've actually had situations similar to this play out.
Star Wars Galaxies had a counterfeiting bug, and Sony responded to people exploiting the bug by zeroing out the money---regardless of whether the holder was a counterfeiter or a victim of a counterfeit---and banning a subset of players who were holding the money.
While the path from "take player money" to "sell the money and pocket the value" isn't direct, deleting money from accounts has the side-effect of making all the remaining money more valuable; in essence, Sony boosted the per-player value of the remaining accounts and future created accounts (though that likely wasn't the intent of their actions; they were just punishing cheaters).
Check the legal history to see what the ramifications were. To my memory: there were none. Game space money bought with real money isn't real money (should it be? Excellent question; I don't believe the law has caught up with that question yet).
But that's not real money. All the protections and rights of legal money do not necessarily apply to cryptocurrencies, bitcoin being the sole cryptocurrency with a degree of legal respectability.
This bot was more like a club where people tipped in to play a game together. It can be argued that it's like you chipped in to buy donuts for your local club to play "pass the donut", and the club later sold the donuts to stay open. The service was free so it's hard to find a breach of contract anywhere, especially if the company went bankrupt.
Regardless of whether or not it is money, one thing is for sure, and that is, it is property.
The donut analogy doesn't work, because in your case, you are donating donuts to the club.
This is more like you lend a TV to the club, with the caveat that you still own it, and can take it back at any time.
The club decides to pawn in, thinking it will just buy it back when it has money again, and you won't have any idea. But then it can't, and it sold property that wasn't its to sell in the first place.
Made up gibberish worth an estimated 140-400k USD based on the wallets ranking (top 100). Somehow that gibberish was transformed into "real" money to pay the bills.
Legally (depending on jurisdiction), it's barely "money."
The notion that he had any legal rights is a bit vacant. Morally, I think "spreading the risk you've brought upon yourself to your creditors without their knowledge or consent" is generally considered a financial dick move though. ;)
I think the facts of the case would imply he really isn't. Sounds like he had good intentions and no deliberate malice, but he did something bad anyway.
Another interpretation is: Someone can be "a stand-up guy" and still fuck up this badly.
More generally, at some point you might find yourself thinking: that would be an obviously unethical and stupid thing to do, and this person is a stand-up guy, so he won't do it. What this case suggests is that that's not enough.
(AdamSC1, I'm curious. Suppose it was a couple months ago, or before you heard that this was happening. If you'd been asked then, whether Mohland would ever do the thing that he has since done, what do you think you would have said?)
I dealt with him a great deal in a previous business, he is an individual who is absolutely reputable. The kind of person where had he asked to borrow a decent sum of money, I'd have probably wired it to him without much of a second thought.
Further more, I know how much he loved this business and the Dogecoin community. From what I had heard, of his talks with investors and even the bank he used for the business, his top priority was always his users.
That's why, while it is shocking that he did this, I know it wasn't from malice.
I was a part of the Dogecoin community early on, and was a moderator of their sub-Reddit. I've helped organize with the fundraisers for sending the Jamaican Bobsled team to Sochi, and sponsoring a NASCAR driver, I even hosted a ridiculous art contest for the community. Unlike other cryptocurrencies, Dogecoin wasn't about being a financial investment, it was a community. It was about being part of something bigger than yourself, and doing something positive in a world that is sometimes pretty shitty.
When you consider that Mohland dedicated his life to that community and his work on the DogeTipBot, I have no doubt that it became a part of his identity. He didn't want to let people down, and that's not surprising. People make these mistakes all the time. Ask any father who tries to buy nice things for his kids while he is barely making ends meat. He'll stack on credit card debt, while forcing a smile to his wife and kids at dinner time because he doesn't want to let anyone down.
It sounds like Mohland was in the same boat. He thought he could pull through with something risky, but it didn't work, and when you are deep in on a gamble like there is this part of you that snaps and just keeps doubling-up because you are so afraid of what happens if it all comes crashing down.
It's probably been 2-3 years since I was last in touch with Mohland, but even after this I'd stand by the statement he IS a reputable man, he just made a mistake trying to save something he loved. I think this sentiment is echo'd most clearly in the messages of support, and not anger, that he received from the Dogecoin community. The same people who lost their money were posting requests to try and help keep DogeTipBot financially a float, and Mohland has outlined a payment plan to pay off everyone's debts over time and is allowing that process to be mediated by Dogecoin's creator.
In life we make mistakes, but that doesn't define the character of a man; their character is what is defined in the moments after.
I think the bigger issue is that you're calling it a business.
It's not a business, it was a hobby/bot/side project whatever you want to call it (I'm still not quite sure what it does and don't really want to delve so far into the depths of stupidity to understand it) and it never made any money.
> He wasn't an idiot like this article tries to portray.
He wasn't an idiot for making poor decisions. Everyone makes poor decisions. But he was an idiot for thinking this could ever be a business (and staking apparently his personal savings and credit cards on it). Let's not tip-toe around the issue. Calling someone an idiot isn't as big a deal as you think it is.
We all had some wishful thoughts at one point or another.
This is just a cautionary tale of a guy who spent too much money on a hobby.
> Backed into a corner he tried to leverage a businesses asset holdings to keep it a float in time to recover. Depending on your jurisdiction this is something banks do all the time as part of your balance is not liquid and invested elsewhere.
Except banks are insured in case shit goes south and the depositors get their money back.
This is why I don't touch the "coins" with a ten foot pole. Yes fiat currency is also made up nonsense, but it's made up nonsense backed by nations, not some guy in a trailer in Nevada.
Over 8 years, with billions of dollars at stake, it has been proven that proof of work cryptocurrencies can only be compromised under a few very well defined scenarios (51% attack). What happened here was simple theft. People sent Mohland money, he said he would hold onto it for them, and then he stole it. I assume you also don't trust any other form of money, because it can also be embezzled in that way.
And how many fiat currencies have had large scale markets like Mt. Gox just practically vanish overnight? How many bankers liquidated the entire assets of a bank's deposits to attempt to save the business? That straight up does not happen in the Real World.
I don't see how this is defensible at all. It's both malicious and stupid, along with being a poor business choice.
He gambled away money that wasn't his (betting on his own company), and concealed it from the people the money belonged to, then told them they were SOL. He's basically a micro-Madoff.
It's not nobler because he used the funds to "keep the business afloat"-- that was for his own benefit. Presumably, a good chunk of that money was spent on his personal living expenses.
I knew about exit scams (https://en.wikipedia.org/wiki/Exit_scam) when it came to illicit sellers/marketplaces for drugs but I'd never thought that I'd ever see an exit scam for a tip bot for a meme cryptocurrency.
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[ 4.2 ms ] story [ 142 ms ] threadThe central bank just prints money and thus steals 'value' from you (devaluation)
It's a matter of trust into an entity
All trust is not equal.
Cryptocurrency people tend to believe that the stuff they're into makes laws and regulations obsolete, so who would bother writing up any of those?
Cryptocurrencies values can fluctuate rapidly and there's a strong precedent for your money disappearing in an exchange or otherwise.
(emphasis mine)
How did he think this was remotely acceptable? Jesus Christ! Don't operate custodial accounts if you don't understand the consequences. You can not just spend other people's money, no matter how broke you are...
If that's your only option, give everyone their money back and declare bankruptcy.
Do you really think "get rid of laws and people will do the right thing" is a reasonable assumption? You seem genuinely shocked at this outcome, but how many times has a story like this played out?
Myself, I relish these stories.
> how is that not a feature?
(Vacuously) I think it's bad to do bad things. I assume you think so too.
> People trade humans and hit jobs on the darknet.
This has nothing to do with the matter at hand. And furthermore, just because some people do something doesn't make it right. And even if those people think it's right, it doesn't mean other people think it's right.
> Do you really think "get rid of laws and people will do the right thing" is a reasonable assumption?
No. I can't see where I gave the impression that I am making this assumption.
> You seem genuinely shocked at this outcome
I am shocked. If I was operating a DogeTipBot, there is no fucking way I would just spend the users' money and then act all surprised when I ran out of money. Who the hell does that?
> how many times has a story like this played out?
Too many.
[1] https://themerkle.com/whats-going-on-with-dogetipbot/
Now if it's someone like my bank I do trust them, because they have been around for a long time and have never stolen from their customers. If it's some guy on reddit with "wow such business" working with dogecoin, I think I would be a little more reluctant to trust.
That guarantee hasn't always existed, and the Great Depression was partially exacerbated by the problem that in the event of a savings bank failure, there was no institution to make creditors whole. As far as I am aware, the BTC ecosystem has no such guarantee anywhere within it, which makes it not as safe a place for stored wealth as a US bank (assuming you trust the US economy to not implode over your lifetime, of course... Current track record suggests you should trust it more than the BTC economy ;) ).
This is exactly how banks operate.
If he'd made it clear upfront that the funds would be loaned to a risky business venture, with no reward, and people still chose to trust him with money then arguably that would be fine from a moral standpoint, but he didn't, and I'm sure he didn't because he knew nobody would have agreed to it.
Sure, within a huge framework of regulations and insurance provided by the government.
This is HackerNews, born from the tech startup/VC culture, right?
What am I missing? Unless it comes out that he started hiring people (to do what??) or if he quit his job and started spending people's money for his rent -- why'd he suddenly incur any serious expenses?
Also what's it got to do with crypto currencies per se? If banks offered some super easy API for USD-USD transfers and he had shoved all this money into a WellsFargo account would he somehow not have spent it?
It sounds like at some point, for some reason, he had employees. Unless he's just using weird wording and he was the only one.
Him and a cofounder, a dev, community/customer support, and a new hire coming on to "go to the moon".
I would love to know the thought process that came up with this.
Edit: Ya they went to conventions and on and on. Built a v3 system that could do "<bold>40 transactions per second</bold>", supported Twitch and other stuff. And they raised money: "Hell, we even raised $445k in a seed round to keep this train moving well on into 2015."
Well that makes a lot more sense. And I sympathize with wanting to keep your business alive. I've seen that happen and it sucks because it's hard to cut losses and walk away.
I think this story could have gone "we raised $x million in series A" and have some sort of exit in some hype-bubble and he'd be lauded as a genius.
Edit: It seems that they built this: https://honeyledger.com/ - chargeback free way for streamers to get money from fans. Not a bad idea.
Can we get a source other than Gizmodo?
Admittedly that's for serious investment rather than daft things like tipbots.
Given that this was a legally registered business, I hope this scumbag faces criminal prosecution and imprisonment. It's time we started locking up white-collar-thieves the same way we lock up burglars.
Not really, no. There's extensive regulatory systems in place to limit this and it only happens in dire circumstances (accounts over €100k in Cyprus, for example)
https://en.wikipedia.org/wiki/MF_Global https://www.sec.gov/news/press-release/2017-85 http://www.chicagobusiness.com/realestate/20130718/CRED03/13...
You can't do that with the conventional financial system.
Ie, When it comes to fraud like this, if you're looking for someone to blame, blame the lack of regulations and legal enforcement. Not the concept or technical architecture of cryptocurrencies.
I know a whole bunch of people in Cyprus that beg to disagree
My payment channel suggestion is an example of the latter. And of course, you can use both: competent fintech "blockchain" use-cases are all examples of adding technical regulation to a field that's already legally regulated.
It's a very solid guarantee when it comes to savings in an FDIC-insured bank.
Anarcho-capitalism is all fun and games until you discover you're not really a wolf among the sheep.
I find myself sometimes wishing they'd discover it by doing their research instead of orechestrating a sequence of events that lead to a catastrophic value crash, but (a) as long as it's not my money being burned, I don't generally deeply criticize how people spend their time and resources and (b) I bet it's a lot more fun to be in the middle of a scandal than to read dry economics history. ;)
Practically speaking, that makes something equivalent to FDIC insurance more expensive to implement; in theory, several brokers could join some kind of insurance group where they pay into a common pool of unused BTC to pay out in the event of fraud. I'm unaware of such an experiment being tried.
History has shown that it's possible to wreck a fiat-currency-backed economy so badly that the nation-state's ability to print money can't be used to fix the problem, but in practice it seems in general difficult to do (whereas there have been multiple Bitcoin crashes and frauds where it'd have been nice to have a "Just issue those people BTC to cover their losses" solution, but that's not technically feasible).
So simply being able to trade it for real money (+ hype, + limited supply) made it actually worth real money? The only thing that needs to happen for a currency to exist is liquidity and x number of people to think its valuable (who buy/sell it)?
Yes? Of course, trading can vanish just as quickly as it came.
Mainly its psychology; what people expect to happen determines how they trade and thus what does happen. So you end up with a chaotic system and an unstable currency.
https://www.reddit.com/r/dogecoin/comments/69vycc/important_...
https://www.reddit.com/r/dogecoin/comments/6a1eh0/options/
So, you stole everyone's money to support your personal business and then claimed bankruptcy once all of everyone's money was gone. Is that correct?
Then you complain when some hacker takes the money from the ponzi type scheme your running and now the result of all of it is, everybody lost their money including you?
Bravo Mo
How do people like this exist?
Then, it turns out not even our dev-mascot can be trusted... What a pity.
It's also interesting to see some of the discussions around the creation of a decentralised tipbot... But it seems like this would not be possible[0], because the keys to the wallet(s) would always need to be in someone's hands (or a few people's anyway).
[0] - https://www.reddit.com/r/dogecoin/comments/6acho0/a_decentra...
He was a stand-up guy and a strong advocate for the Dogecoin community. People are talking about the fact that he liquidated the assets from user wallets as a malicious action, and while I agree it was a terrible choice, I see it more as a bad decision.
Backed into a corner he tried to leverage a businesses asset holdings to keep it a float in time to recover. Depending on your jurisdiction this is something banks do all the time as part of your balance is not liquid and invested elsewhere.
The issue here is his business didn't recover and wasn't ever going to.
Last I heard Josh's plan was to keep the main part of the bot free and charge for websites and streamers to accept tips from the Dogecoin community. He wasn't an idiot like this article tries to portray. There was a reason he was keeping the consumer end of things free. But, the micropayment landscape had more competitive options than a niche currency.
All in all its sad to see the business fail but this was poor business choices, not maliciousness nor stupidity like the article tries to claim.
Now, he may have thought he could use it to float some funds, and put them back, and no one would be any wiser, but that's definitely illegal.
He may not be a bad person, and he may not be an idiot in the larger scheme of things, but this was an idiotic move, and a terrible (and unethical) decision, that may very well have legal repercussions.
This is true, and the comparison with banks fractional reserve isn't 1:1
The banks aren't taking your money to pay their bills, they're using your money along a legally defined path of creating and selling investment products with the government in a well-defined position to protect your savings as a guarantor.
I suspect that the Dogecoin business could have leveraged customer deposits in investment products similarly, but would likely require an insane amount of bureaucracy and i-dotting before they could do it.
As for legality, that depends on jurisdiction. Cryptocurrencies are not recognized as a legal tender currency in many areas. In some areas they are, in other areas they are considered an asset like a stock, in others a collectable and in some places have no more legal rights than the gold you earn in World of Warcraft.
I agree he had no moral right to spend that money, but legal becomes highly debatable. It will be interesting to see if there are any small claims cases that rise out of it as it could actually push forward legislation on crypto.
> no more legal rights than the gold you earn in World of Warcraft
Undoubtedly, if a company offered some sort of account to store that gold, they'd be in deep shit if they took gold from those accounts and sold it to pocket the money.
It doesn't matter if it's cryptocurrency, collectible, stock, etc, it still is not a business asset.
If you've got my Jesus shaped collectable potato chips in storage you can't sell them to keep your business afloat.
If you're a brokerage whom I have an account with for my stocks or asset trading, you can't sell my assets to keep your business afloat.
If you're a bank storing my currency, there are very specific rules that govern you, and my money is FDIC insured. This isn't a bank, period. You can't just change the rules saying "well, banks don't always have your cash on hand, so this guy doesn't have to either". There are rules around how all of that works anyways - and he wasn't operating within them.
This is more akin to paypal, or some type of digital wallet. As it's an "account" where you can "send and receive dogecoins". There is no reasonable expectation that anyone else should have access to the dogecoins in your account. There's weird grey area around that shit, but suffice to say my assets are NOT your business assets.
Further, in many digital assets like world of warcraft technically the creating company (Blizzard) still owns the asset regardless of what you do with it or where it goes.
If you are storing currency, that is legally defined as currency by your legal jurisdiction (usually the state level) then there are very specific rules for money transmission and money service business licensed businesses. And your accounts are insured upto the legal required amount of $100,000 by the FDIC.
However, many states have NOT classified cryptocurrency as a currency nor required exchanges and services operating solely in cryptocurrency to get a license as a financial service (different if it allows exchanging of crypto and traditional currency). Because of this it is unclear what the legal doctrine is that would apply to it.
Now if I had as you said "a jesus shaped collectable potato chip" in storage that belonged to you, can I sell it? That depends. For example, for a storage facility if your payments are late I certainly can. For plenty of digital assets accounts your funds are taken by the company after X days of inactivity. Then you have services like PayPal which terms of service allows them to freeze your accounts and keep the funds for anything that violates their terms of service (rules designed by them, which you agree to on sign up).
So was Dogetipbot in the legal clear for doing this? Probably not. There is some level of negligence, some level of consumer loss and can probably be a tort case. But was it flat out illegal? No. It was at worst a civil case, but that depends on their terms of service and the legal standing of cryptocurrency in various jurisdictions.
Disclaimer: Not a lawyer, not legal advice.
Wrong. If you have money stored in a bank that is insured by the FDIC (and pays depositor's insurance), then you are insured.
If you have a cash deposit with a brokerage that is not FDIC insured, and their CEO spends customer's money (that they are not allowed to), and go bankrupt, you are absolutely not insured by the FDIC, and will have to go to court to try to reclaim assets. This happened, see MF Global. In that case, the CEO (Jon Corzine) was very well connected and was able to sidestep prosecution and jail time.
I'm going to bet that this clown is not well connected. Fortunately for him, all he embezzled was this bullshit toy currency, so hopefully, for him, its so irrelevant that he gets away unscathed.
http://webcache.googleusercontent.com/search?q=cache:ORsA-jt...
With examples that small-fry, you're getting into 'small claims' territory, which basically amounts to you having your little slapfight in front of a judge until he tells one of you or the other to knock it off.
> This is more akin to paypal, or some type of digital wallet
Minus any of the user agreements, established business licenses, regulations, and other financial grunt work that it took to get PP up and running (and even then, they have free reign to freeze your account with little to no recourse if they think you're out of line - plenty of stories of people being burned by this)
This is "more akin to" handing off your trading cards to the guy at work running the betting pool and trusting him not to fuck you over, except (A) trading cards are much easier to explain and (B) in this case you don't even know the guy.
> Minus any of the user agreements...
Exactly. Which is why I think comparing it to anything financial (banks, PP, etc) is silly in the first place.
Replace collectable potato chips with baseball cards and you're back to the example I was trying to portray.
If someone was holding your property (baseball cards) and sold them out from under you, then it seems like there would be good ground for a civil case.
Held legally accountable? Lmao. Guile is part of the game and all your credits belong to Eve.
"But your honor, ISK is part of the EVE Online game, and it's in the nature of the game to build up a bunch of in-game assets and then get screwed out of them by other players. Players find this fun and continue to come back to it.
"Exhibit A is the relevant value-lost-per-day in dumb territory disputes and ultimately meaningless fun-fights. As our expert witness, we're calling a psychologist who can explain the sort of masochism that factors into a person's enjoyment of this experience..." ;)
We've actually had situations similar to this play out.
Star Wars Galaxies had a counterfeiting bug, and Sony responded to people exploiting the bug by zeroing out the money---regardless of whether the holder was a counterfeiter or a victim of a counterfeit---and banning a subset of players who were holding the money.
While the path from "take player money" to "sell the money and pocket the value" isn't direct, deleting money from accounts has the side-effect of making all the remaining money more valuable; in essence, Sony boosted the per-player value of the remaining accounts and future created accounts (though that likely wasn't the intent of their actions; they were just punishing cheaters).
Check the legal history to see what the ramifications were. To my memory: there were none. Game space money bought with real money isn't real money (should it be? Excellent question; I don't believe the law has caught up with that question yet).
Meaning, it's theirs to issue/manipulate it as they please. If a third party did that, it seems as though it would be much different.
But that's not real money. All the protections and rights of legal money do not necessarily apply to cryptocurrencies, bitcoin being the sole cryptocurrency with a degree of legal respectability.
This bot was more like a club where people tipped in to play a game together. It can be argued that it's like you chipped in to buy donuts for your local club to play "pass the donut", and the club later sold the donuts to stay open. The service was free so it's hard to find a breach of contract anywhere, especially if the company went bankrupt.
Such is the joy of "privatized money".
The donut analogy doesn't work, because in your case, you are donating donuts to the club.
This is more like you lend a TV to the club, with the caveat that you still own it, and can take it back at any time.
The club decides to pawn in, thinking it will just buy it back when it has money again, and you won't have any idea. But then it can't, and it sold property that wasn't its to sell in the first place.
(Still don't think he should have)
The notion that he had any legal rights is a bit vacant. Morally, I think "spreading the risk you've brought upon yourself to your creditors without their knowledge or consent" is generally considered a financial dick move though. ;)
I think the facts of the case would imply he really isn't. Sounds like he had good intentions and no deliberate malice, but he did something bad anyway.
More generally, at some point you might find yourself thinking: that would be an obviously unethical and stupid thing to do, and this person is a stand-up guy, so he won't do it. What this case suggests is that that's not enough.
(AdamSC1, I'm curious. Suppose it was a couple months ago, or before you heard that this was happening. If you'd been asked then, whether Mohland would ever do the thing that he has since done, what do you think you would have said?)
I dealt with him a great deal in a previous business, he is an individual who is absolutely reputable. The kind of person where had he asked to borrow a decent sum of money, I'd have probably wired it to him without much of a second thought.
Further more, I know how much he loved this business and the Dogecoin community. From what I had heard, of his talks with investors and even the bank he used for the business, his top priority was always his users.
That's why, while it is shocking that he did this, I know it wasn't from malice.
I was a part of the Dogecoin community early on, and was a moderator of their sub-Reddit. I've helped organize with the fundraisers for sending the Jamaican Bobsled team to Sochi, and sponsoring a NASCAR driver, I even hosted a ridiculous art contest for the community. Unlike other cryptocurrencies, Dogecoin wasn't about being a financial investment, it was a community. It was about being part of something bigger than yourself, and doing something positive in a world that is sometimes pretty shitty.
When you consider that Mohland dedicated his life to that community and his work on the DogeTipBot, I have no doubt that it became a part of his identity. He didn't want to let people down, and that's not surprising. People make these mistakes all the time. Ask any father who tries to buy nice things for his kids while he is barely making ends meat. He'll stack on credit card debt, while forcing a smile to his wife and kids at dinner time because he doesn't want to let anyone down.
It sounds like Mohland was in the same boat. He thought he could pull through with something risky, but it didn't work, and when you are deep in on a gamble like there is this part of you that snaps and just keeps doubling-up because you are so afraid of what happens if it all comes crashing down.
It's probably been 2-3 years since I was last in touch with Mohland, but even after this I'd stand by the statement he IS a reputable man, he just made a mistake trying to save something he loved. I think this sentiment is echo'd most clearly in the messages of support, and not anger, that he received from the Dogecoin community. The same people who lost their money were posting requests to try and help keep DogeTipBot financially a float, and Mohland has outlined a payment plan to pay off everyone's debts over time and is allowing that process to be mediated by Dogecoin's creator.
In life we make mistakes, but that doesn't define the character of a man; their character is what is defined in the moments after.
It's not a business, it was a hobby/bot/side project whatever you want to call it (I'm still not quite sure what it does and don't really want to delve so far into the depths of stupidity to understand it) and it never made any money.
> He wasn't an idiot like this article tries to portray.
He wasn't an idiot for making poor decisions. Everyone makes poor decisions. But he was an idiot for thinking this could ever be a business (and staking apparently his personal savings and credit cards on it). Let's not tip-toe around the issue. Calling someone an idiot isn't as big a deal as you think it is.
We all had some wishful thoughts at one point or another.
This is just a cautionary tale of a guy who spent too much money on a hobby.
Except banks are insured in case shit goes south and the depositors get their money back.
This is why I don't touch the "coins" with a ten foot pole. Yes fiat currency is also made up nonsense, but it's made up nonsense backed by nations, not some guy in a trailer in Nevada.
He gambled away money that wasn't his (betting on his own company), and concealed it from the people the money belonged to, then told them they were SOL. He's basically a micro-Madoff.
It's not nobler because he used the funds to "keep the business afloat"-- that was for his own benefit. Presumably, a good chunk of that money was spent on his personal living expenses.
A stand-up guy wouldn't do this.