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I suspect this is going on today. Cryptocurrency traders place a lot of faith in the exchanges. A bad actor at an exchange could manipulate a price upwards: -

by astund 9y ago

I suspect this is going on today. Cryptocurrency traders place a lot of faith in the exchanges. A bad actor at an exchange could manipulate a price upwards: - Create a ton of volume and potentially and upward trend (two bots trading with one another, increasing the price each time) - Generate hype around a coin - Let FOMO take over If things start to go south, disable withdrawals, deposits, or freeze the market until you can get it under control. I doubt any of this manipulation is even illegal?

module0000 9y ago
>> I doubt any of this manipulation is even illegal? That was my first thought also... in stock/futures trading world, this is 100% normal business as usual. The idea of buying all the available XYZ to run up prices is a valid move for a hedge fund with sufficient capital to do so.
- nrb 9y ago
  In the MtGox case, the exchange was (allegedly) fraudulently buying BTC with cash that didn't exist, which could theoretically continue for as long as they have enough cash on hand to satisfy withdrawal requests. IANAL but in the US that sounds like blatant wire fraud at the very least; I'm not sure about the relevant Japanese law.
  - fjsolwmv 9y ago
    Of course the cash existed. It was their depositors cash and cash from their depositors Bitcoin
    - nrb 9y ago
      Right, I'm saying the exchange isn't actually solvent. The "cash balance" on the fraudulent buyer account wasn't backed by any actual cash deposit or proceeds from BTC sale, it's just a column in a database table. Theoretically, the exchange buys up a bunch of BTC with non-existent cash, raising the price tenfold, until their real cash deposits are too low to meet withdrawal requirements, then they do as the grandparent post says and disable withdrawals, deposits, or freeze the market until they can get it under control.
- pishpash 9y ago
  Pretty sure market manipulation to create false impressions of supply/demand or to prevent price discovery is generally illegal.
- JumpCrisscross 9y ago
  > in stock/futures trading world, this is 100% normal business as usual This is securities fraud. Some variant or combination of wash trading, pump and dump, order spoofing and wire fraud. It is not normal.
FabHK 9y ago
In aviation, the saying goes that "aviation regulations are written in blood", because for many rules, some time in the past people died in an accident, and the rule was established to prevent reoccurrence. Now, in finance, the situation is not quite so dramatic. Nevertheless, many of the banking rules that cryptocurrencies (and sometimes fintech) aim to circumvent or flout are there for a reason. Surprise!
- jstanley 9y ago
  They might be there for a reason, but that reason doesn't necessarily benefit the individual who is being harmed by them. E.g. KYC/AML.
zik 9y ago
There are a lot of accusations that Tether is being used to do this kind of fraudulent price pumping right now. https://www.bloomberg.com/news/articles/2017-12-05/mystery-shrouds-tether-and-its-links-to-biggest-bitcoin-exchange https://www.bloomberg.com/news/articles/2017-12-05/mystery-s...
waytogo 9y ago
Good point and thus, trust only coins traded minimum on two exchanges and have similar curves.

by astund 9y ago

module0000 9y ago

>> I doubt any of this manipulation is even illegal? That was my first thought also... in stock/futures trading world, this is 100% normal business as usual. The idea of buying all the available XYZ to run up prices is a valid move for a hedge fund with sufficient capital to do so.

nrb 9y ago
In the MtGox case, the exchange was (allegedly) fraudulently buying BTC with cash that didn't exist, which could theoretically continue for as long as they have enough cash on hand to satisfy withdrawal requests. IANAL but in the US that sounds like blatant wire fraud at the very least; I'm not sure about the relevant Japanese law.
- fjsolwmv 9y ago
  Of course the cash existed. It was their depositors cash and cash from their depositors Bitcoin
  - nrb 9y ago
    Right, I'm saying the exchange isn't actually solvent. The "cash balance" on the fraudulent buyer account wasn't backed by any actual cash deposit or proceeds from BTC sale, it's just a column in a database table. Theoretically, the exchange buys up a bunch of BTC with non-existent cash, raising the price tenfold, until their real cash deposits are too low to meet withdrawal requirements, then they do as the grandparent post says and disable withdrawals, deposits, or freeze the market until they can get it under control.
pishpash 9y ago
Pretty sure market manipulation to create false impressions of supply/demand or to prevent price discovery is generally illegal.
JumpCrisscross 9y ago
> in stock/futures trading world, this is 100% normal business as usual This is securities fraud. Some variant or combination of wash trading, pump and dump, order spoofing and wire fraud. It is not normal.

FabHK 9y ago

In aviation, the saying goes that "aviation regulations are written in blood", because for many rules, some time in the past people died in an accident, and the rule was established to prevent reoccurrence. Now, in finance, the situation is not quite so dramatic. Nevertheless, many of the banking rules that cryptocurrencies (and sometimes fintech) aim to circumvent or flout are there for a reason. Surprise!

jstanley 9y ago
They might be there for a reason, but that reason doesn't necessarily benefit the individual who is being harmed by them. E.g. KYC/AML.

zik 9y ago

There are a lot of accusations that Tether is being used to do this kind of fraudulent price pumping right now. https://www.bloomberg.com/news/articles/2017-12-05/mystery-shrouds-tether-and-its-links-to-biggest-bitcoin-exchange https://www.bloomberg.com/news/articles/2017-12-05/mystery-s...

waytogo 9y ago

Good point and thus, trust only coins traded minimum on two exchanges and have similar curves.