A 'paradise' where those fraudsters end up getting caught for everyone to see on a public blockchain?
Sounds like a fraudsters nightmare since the whole thing is traceable.
That is close to nothing compared to the trillions of fraud and illicit transactions by criminals and terrorists all aided by the banks in the current system in the FinCEN files. [0]
It almost doesn't matter, for example the safemoon team's scams are documented on the Blockchain but the investors don't care. We can't underestimate the financial cultism of crypto people
It doesn't make judgments about those using it. It works just as well for fraudsters and cyber criminals as anyone else. There are reasons ransomware extortionists always request payment in some sort of blockchain based crypto --- usually bitcoin.
In other words, blockchain *facilitates* fraud and crime as easily as it *prevents* it.
My point is, fraud happens everywhere, but in crypto it is much harder to get away with it and leave with illicit funds in your pocket without getting caught.
As soon as it hits the exchange, it is frozen, traced and whoever sent the transaction will be traced down and caught.
Unlike in the FinCEN files which the banks and criminals were all making money by processing trillions worth of transactions and a former US Treasury official who blew the whistle on this mass fraud was sent to prison [0] over the regulators not doing their job and instead was supporting criminal financing.
> crypto it is much harder to get away with it and leave with illicit funds in your pocket without getting caught
Ah of course, that’s why crypto neither attracts nor results in fraud or scams. Obviously, everyone who has tried has also been arrested and funds returned to the victims.
There you have it. Unable to answer a basic question and instead tries to use sarcastic nonsense to put words in ones mouth.
Absolutely no-one said that the 'funds would be returned to the victims'. Only that the criminals will be caught once the illicit funds hit the exchange and gets frozen and traced down.
Let's try again since you want to answer for the other user about the corruption evidently exposed in the FinCEN files:
My (& others) core point is that it has nothing to do with technology.
Corruption will always find a way, it’s a result of misuse of power and governmental opaqueness - not the lack of a blockchain.
That’s why I’m making the point around actual justice not being delivered to victims of crypto fraud, despite the traceable ledger. We still need the meatspace to actually catch criminals and reverse (though not exactly possible on the blockchain) the harm inflicted.
No, it became a Ponzi scheme in May/June 2022 when Alameda Research lost all their money and instead of letting Alameda die SBF (mis)used FTX's client's money to bail our Alameda. Who then lost even more money leaving nothing.
There is no evidence of fraud etc before then. There is no evidence of significant, unexplained transfers out of FTX before then either.
>One of the most popular ways to run a Ponzi scheme is to run a cryptocurrency exchange.
This is simply untrue. Even if all crypto exchanges were always Ponzi schemes, that would be a few dozen making it one of the LEAST popular covers for Ponzi schemes...
And:
>It is not far-fetched to assume that many of the deposits on FTX were transferred directly to Alameda, and used to pay off Alameda's debt. With $50M in customer deposits, and $8M in seed money, it would have been possible for Alameda to pay back the remainder of its high interest loan - and settle all of the outstanding interest.
It IS far fetched actually. Per the Authors own numbers, they borrowed 117m at 43% interest. Even if 50M a day in trading volume means 50mil in deposits (Hugely questionable), how can you pay off 117m, plus interest plus buying back shares, with only 50mil?! And the simple act of paying back anything sort of indicates it was NOT a ponzi scheme at that point right? A Ponzi scheme never pays anyone back, it just borrows more. Let alone buying back shares.
IMHO, FTX (and most other crypto exchanges) are created for a simple reason: the fees are huge right now. Stock trading fees are usually less than 1bps (1 bps = 0.01% of the value of the trade). Coinbase charges 40bps for retail users.
SBF ran the Kimchi arbitrage when it was profitable, he ran FTX for the same reason. The crazy thing here is how much money he LOST by not stopping things that were loss making or where risk>>reward... He killed a golden goose to save a mangy terminally ill budgerigar.
They were a few middle-class techy hubristic kids who figured out how to game the crypto system years ago, via leverage and arbitrage opportunities, to make millions during crypto tradings early "easy pickings" years, on crypto platforms which would later be their direct industry competition.
They then transitioned to become part of the system themselves, as an Exchange ... while continuing to expose funds (their own, and their customers) to high risk-reward scenarios, again/still, on their competitors platforms. What else is there?? in the small pond that is the crypto-verse.
That degree, and unwise configuration, of exposure is what caused the collapse.
I don't believe that Ponzis central tenet - to sustain only via new entrants - was ever their long term business tactic. The fact that Alameda/FTX ended in the final flailing desperation of an extremely poorly piloted sinking ship was its own indictment, but that doesn't make them 'a Ponzi from the beginning'.
I think it's a bit of a fools errand to try and piece this together with public information. Because the details matter massively, and we simply don't know the details. For example, in this summary the initial claim is that Alameda took a loan. But let's look at the details. Actually that loan was in ETH. The value of ETH in Jan 2018 peaked at $1400 and troughed at $700. The value of that ETH over the next 6 months proceeded to drop and stay below $700. So actually, Alameda probably paid (in dollar terms) way less than they had borrowed. If they had just taken the ETH, liquidated, and bought back in to repay it? They'd have made a killing. These details matter.
I would wager not even the insiders really know if Alameda ever made money, the conditions that allowed massive fraud to go undiscovered are basically the messy circumstances that mean it's pretty likely no one really knew the net position of the company. The only thing I would say is that if they really were running a ponzi at that point I'm impressed how long they kept it going.
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[ 2.7 ms ] story [ 57.2 ms ] threadSounds like a fraudsters nightmare since the whole thing is traceable.
That is close to nothing compared to the trillions of fraud and illicit transactions by criminals and terrorists all aided by the banks in the current system in the FinCEN files. [0]
[0] https://www.buzzfeednews.com/fincen-files
Most fraud doesn't revolve around fudging the accounting.
SBF made billions of other people's money disappear into the crypto void without breaking the blockchain.
The idea that blockchain will prevent fraud is naive, absurd and laughable.
It doesn't make judgments about those using it. It works just as well for fraudsters and cyber criminals as anyone else. There are reasons ransomware extortionists always request payment in some sort of blockchain based crypto --- usually bitcoin.
In other words, blockchain *facilitates* fraud and crime as easily as it *prevents* it.
As soon as it hits the exchange, it is frozen, traced and whoever sent the transaction will be traced down and caught.
Unlike in the FinCEN files which the banks and criminals were all making money by processing trillions worth of transactions and a former US Treasury official who blew the whistle on this mass fraud was sent to prison [0] over the regulators not doing their job and instead was supporting criminal financing.
So why wasn't this corruption stopped earlier?
[0] https://www.icij.org/investigations/fincen-files/fincen-file...
Ah of course, that’s why crypto neither attracts nor results in fraud or scams. Obviously, everyone who has tried has also been arrested and funds returned to the victims.
/s
Absolutely no-one said that the 'funds would be returned to the victims'. Only that the criminals will be caught once the illicit funds hit the exchange and gets frozen and traced down.
Let's try again since you want to answer for the other user about the corruption evidently exposed in the FinCEN files:
Why wasn't this corruption stopped earlier?
Corruption will always find a way, it’s a result of misuse of power and governmental opaqueness - not the lack of a blockchain.
That’s why I’m making the point around actual justice not being delivered to victims of crypto fraud, despite the traceable ledger. We still need the meatspace to actually catch criminals and reverse (though not exactly possible on the blockchain) the harm inflicted.
There is no evidence of fraud etc before then. There is no evidence of significant, unexplained transfers out of FTX before then either.
https://en.wikipedia.org/wiki/Alameda_Research
We've known this for a while. Try to keep up!
Also:
>One of the most popular ways to run a Ponzi scheme is to run a cryptocurrency exchange.
This is simply untrue. Even if all crypto exchanges were always Ponzi schemes, that would be a few dozen making it one of the LEAST popular covers for Ponzi schemes...
And:
>It is not far-fetched to assume that many of the deposits on FTX were transferred directly to Alameda, and used to pay off Alameda's debt. With $50M in customer deposits, and $8M in seed money, it would have been possible for Alameda to pay back the remainder of its high interest loan - and settle all of the outstanding interest.
It IS far fetched actually. Per the Authors own numbers, they borrowed 117m at 43% interest. Even if 50M a day in trading volume means 50mil in deposits (Hugely questionable), how can you pay off 117m, plus interest plus buying back shares, with only 50mil?! And the simple act of paying back anything sort of indicates it was NOT a ponzi scheme at that point right? A Ponzi scheme never pays anyone back, it just borrows more. Let alone buying back shares.
IMHO, FTX (and most other crypto exchanges) are created for a simple reason: the fees are huge right now. Stock trading fees are usually less than 1bps (1 bps = 0.01% of the value of the trade). Coinbase charges 40bps for retail users.
SBF ran the Kimchi arbitrage when it was profitable, he ran FTX for the same reason. The crazy thing here is how much money he LOST by not stopping things that were loss making or where risk>>reward... He killed a golden goose to save a mangy terminally ill budgerigar.
They then transitioned to become part of the system themselves, as an Exchange ... while continuing to expose funds (their own, and their customers) to high risk-reward scenarios, again/still, on their competitors platforms. What else is there?? in the small pond that is the crypto-verse.
That degree, and unwise configuration, of exposure is what caused the collapse.
I don't believe that Ponzis central tenet - to sustain only via new entrants - was ever their long term business tactic. The fact that Alameda/FTX ended in the final flailing desperation of an extremely poorly piloted sinking ship was its own indictment, but that doesn't make them 'a Ponzi from the beginning'.
I would wager not even the insiders really know if Alameda ever made money, the conditions that allowed massive fraud to go undiscovered are basically the messy circumstances that mean it's pretty likely no one really knew the net position of the company. The only thing I would say is that if they really were running a ponzi at that point I'm impressed how long they kept it going.