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People actually knowledgable in the crypto community would have told you literally years ago that the Chinese exchanges were shit. ChangPeng Zhao who now runs b

by dreit1 9y ago

People actually knowledgable in the crypto community would have told you literally years ago that the Chinese exchanges were shit. ChangPeng Zhao who now runs binance out of Hong Kong, made a reddit post (now deleted) stating exactly what was going on. The issue of exchanges "investing" client funds was known two years ago, and most people stayed away from these exchanges.

peterlk 9y ago
I think this is exactly the point the author is making. There exist regulatory entities to protect people from exactly the kind of logic you are using. If I don't know anything about cryptocurrency, and want to start trading, it would be nice to have entities that I can go to to find out the status of various players in the industry. If I'm new to the scene, what would make me inclined to believe 1337_haxor on some crypto-forum? Excluding everyone without deep knowledge is bad for the industry; including everyone without regulation leads to theft. Somewhere in the middle is probably better than either
smcl 9y ago
The exchanges investing client money does not surprise me at all. I worked in UK finance for 6 years or so where you have mandatory "CASS" training to warn you what is and is not OK to do with client money. I remember when I first started I was like "well obviously you keep client money and assets separate from the corporate accounts..." and EVERY year in the "refresher course" our Compliance dept gave they had new cases of banks fucking this up and getting insane fines for it [0]. If these supposedly respectable banks managed to repeatedly do this (this is after the financial crisis btw) then it's anyone's guess what goes on in the Wild West that is Bitcoin exchanges. That said, the stupidity and lack of common sense in UK financial industry continues blows my mind. [0] - https://www.moneymarketing.co.uk/why-the-fca-rewrote-the-rules-the-biggest-fines-for-client-money-breaches/ https://www.moneymarketing.co.uk/why-the-fca-rewrote-the-rul...
- blusterXY 9y ago
  Yes, we will see what the situation is in terms of exchange liquidity. With that said, the reports were of exchanges investing customer-deposited RMB funds, not selling customer-deposited crypto for fiat and then investing that fiat for profit.
  - smcl 9y ago
    Well investing the client deposits is pretty much exactly the situation I described. Probably could be seen as less directly scammy or intentional than selling their assets and investing it in <pick-a-product>, but certainly still a pretty standard client money breach
canoebuilder 9y ago
This such an annoying pattern. Something unflattering comes to light(for some greater measure of coming to light) and the predictable response always, "Geez... Everybody already knows this. It's in the wiki!" Not to mention the richness of implying chinese exchanges are somehow uniquely bad! Exchange shenanigans on the english speaking web are a central part of the bitcoin story to this point.
- Animats 9y ago
  "You didn't know that was a scam? Don't you subscribe to Offshore Alert?" There are still people putting money into MMM, which is a long-running scam with its own Wikipedia article.[1] The binary option industry, run out of Ramat Gan in Israel, was a whole industry of bucket shops pretending to be brokers. It got so big it was 40% of Israel's financial sector. About 95% of binary option investors lose their entire investment. Turns out it's legal in Israel to scam non-Israelis. Once that came out, it became a political embarrassment.[2] “Binary options is causing anti-Semitism around the world.” - a member of the Knesset. [1] https://en.wikipedia.org/wiki/MMM_(Ponzi_scheme_company) https://en.wikipedia.org/wiki/MMM_(Ponzi_scheme_company) [2] https://www.timesofisrael.com/unhappy-with-bill-israels-coalition-chief-wont-rush-binary-options-ban-to-knesset/ https://www.timesofisrael.com/unhappy-with-bill-israels-coal...

by dreit1 9y ago

peterlk 9y ago

I think this is exactly the point the author is making. There exist regulatory entities to protect people from exactly the kind of logic you are using. If I don't know anything about cryptocurrency, and want to start trading, it would be nice to have entities that I can go to to find out the status of various players in the industry. If I'm new to the scene, what would make me inclined to believe 1337_haxor on some crypto-forum? Excluding everyone without deep knowledge is bad for the industry; including everyone without regulation leads to theft. Somewhere in the middle is probably better than either

smcl 9y ago

The exchanges investing client money does not surprise me at all. I worked in UK finance for 6 years or so where you have mandatory "CASS" training to warn you what is and is not OK to do with client money. I remember when I first started I was like "well obviously you keep client money and assets separate from the corporate accounts..." and EVERY year in the "refresher course" our Compliance dept gave they had new cases of banks fucking this up and getting insane fines for it [0]. If these supposedly respectable banks managed to repeatedly do this (this is after the financial crisis btw) then it's anyone's guess what goes on in the Wild West that is Bitcoin exchanges. That said, the stupidity and lack of common sense in UK financial industry continues blows my mind. [0] - https://www.moneymarketing.co.uk/why-the-fca-rewrote-the-rules-the-biggest-fines-for-client-money-breaches/ https://www.moneymarketing.co.uk/why-the-fca-rewrote-the-rul...

blusterXY 9y ago
Yes, we will see what the situation is in terms of exchange liquidity. With that said, the reports were of exchanges investing customer-deposited RMB funds, not selling customer-deposited crypto for fiat and then investing that fiat for profit.
- smcl 9y ago
  Well investing the client deposits is pretty much exactly the situation I described. Probably could be seen as less directly scammy or intentional than selling their assets and investing it in <pick-a-product>, but certainly still a pretty standard client money breach

canoebuilder 9y ago

This such an annoying pattern. Something unflattering comes to light(for some greater measure of coming to light) and the predictable response always, "Geez... Everybody already knows this. It's in the wiki!" Not to mention the richness of implying chinese exchanges are somehow uniquely bad! Exchange shenanigans on the english speaking web are a central part of the bitcoin story to this point.

Animats 9y ago
"You didn't know that was a scam? Don't you subscribe to Offshore Alert?" There are still people putting money into MMM, which is a long-running scam with its own Wikipedia article.[1] The binary option industry, run out of Ramat Gan in Israel, was a whole industry of bucket shops pretending to be brokers. It got so big it was 40% of Israel's financial sector. About 95% of binary option investors lose their entire investment. Turns out it's legal in Israel to scam non-Israelis. Once that came out, it became a political embarrassment.[2] “Binary options is causing anti-Semitism around the world.” - a member of the Knesset. [1] https://en.wikipedia.org/wiki/MMM_(Ponzi_scheme_company) https://en.wikipedia.org/wiki/MMM_(Ponzi_scheme_company) [2] https://www.timesofisrael.com/unhappy-with-bill-israels-coalition-chief-wont-rush-binary-options-ban-to-knesset/ https://www.timesofisrael.com/unhappy-with-bill-israels-coal...