4 ms·

An extra point to add to this: Bitmex isn't an exchange and never touched USD or any other fiat currency, you couldn't obviously use it to launder money (at le

by nullc 6y ago

An extra point to add to this: Bitmex isn't an exchange and never touched USD or any other fiat currency, you couldn't obviously use it to launder money (at least not in any way that you couldn't use any other custodial wallet to do so). Essentially it is just a platform that lets non-US bitcoin users deposit bitcoin and place side bets on price of Bitcoin (and several altcoins, note that you couldn't deposit and withdraw those altcoins AFAIK, just place sidebets on their exchange rates). It is easily (ab?)used as a gambling platform. From a consumer protection perspective it's probably a disaster-- the vast majority of users lose their shirts. But I'm not aware of any accusation that there was widespread use by US persons. And CFD gambling houses are common in many places outside of the US.

ve55 6y ago
These are both good points, I added to my comment that Bitmex didn't touch USD since it's relevant. The gambling problem is absolutely true, but it's difficult to know how to approach it properly, since it's obvious that there's people gambling just as badly on brokerages in the US right now, primarily with options (especially Robinhood).
- nullc 6y ago
  I think the risk surface with options can be significantly better-- e.g. if no margin is used for longs and if short calls are covered and short puts are cash secured, then the exposure is fixed and established upfront. But I don't disagree that the there are much larger and more relevant gambling-in-the-guise-of-investing targets. Also to be clear: I think there are legitimate investment uses of that product-- e.g. if you have a credible reason to believe the Bitcoin price will drop soon you could short a small amount with leverage while keeping the bulk of your holdings safe in cold storage. The extra fees and specific risks of the CFD may be offset by avoiding a need to touch cold coins. But I do also doubt that most users are using it that way.
  - ve55 6y ago
    It can be much better, but a quick glance at what a lot of retail investors are actually doing with options (basically just buying calls) shows a lot of high-risk and reckless gambling. While I'm fine with people choosing whichever risk level they desire, some of the images I've seen of e.g Robinhood UI's are pushing it far beyond what I'd say is reasonable (and perhaps even to the point of illegality), for example https://pbs.twimg.com/media/EtfOof8XIAMhaX6?format=jpg&name=medium https://pbs.twimg.com/media/EtfOof8XIAMhaX6?format=jpg&name=...
    - nullc 6y ago
      oy. That UI is ... not great. Buying a three (?) month call which is out of the money by 4.8% is "medium risk" ?!?. Too bad there isn't a date on that image so I can figure out what the black scholes probability of expiring worthless they consider 'medium risk' is exactly. -- Assuming it's 90 days, they consider a 63% probability of total loss "medium risk".
      - inter_netuser 6y ago
        would you consider it a high risk?
        nullc 6y ago
        For a lottery ticket? No. For an investment? Yes. I'm not really sure where I'd draw the line but anything where my best model said total loss was more likely than not is certainly past the high risk line. And high risk investments can be totally fine, treated as such. Presumably most users won't go broke losing one contract worth though it might hurt some (I'm assuming that isn't a mini option or some kind of split contract-- so we're talking about a $788 loss for one contract if it expires worthless). But if they call it "medium risk" I'm guessing people are going to buy more than one.
  - keypusher 6y ago
    BitMex offers 100x leverage, which is quite dangerous in any market, but in one as volatile as cryptocurrency is almost certain to wipe out your account very quickly.
tim333 6y ago
>you couldn't obviously use it to launder money Actually I think it might be rather good for laundering money. Say you sell your shipment of cocaine for bitcoins - you put that in a tainted bitcoin wallet and send that to Bitmex and claim they are nothing to do with you. But actually you withdraw from Bitmex to a clean wallet where you claim the money came from your brilliant trading on that one. It falls apart if bitmex share all their records with the revenue services but I don't think they do. In a very non KYC way they don't ask for any proof of who you are. You can open an account for Mickey Mouse and if you send in bitcoin you are good to go. That said there are probably less regulated exchanges out there for that kind of stuff. If you really wanted to launder large sums you might be better off setting up your own one.
- nullc 6y ago
  That is the same deal for any custodial wallet. Deposit coins, withdraw different coins, everything is opaque unless they share records. > That said there are probably less regulated exchanges out there for that kind of stuff. That is believed to be a big part of the illiquid altcoin market. Premine some altcoin, sell it at high prices to your dirty money account. Even where the exchange has "kyc" the launderer just needs a disposable identity for the dirty account that is good enough to pass it for a few days.

by nullc 6y ago

ve55 6y ago

These are both good points, I added to my comment that Bitmex didn't touch USD since it's relevant. The gambling problem is absolutely true, but it's difficult to know how to approach it properly, since it's obvious that there's people gambling just as badly on brokerages in the US right now, primarily with options (especially Robinhood).

nullc 6y ago
I think the risk surface with options can be significantly better-- e.g. if no margin is used for longs and if short calls are covered and short puts are cash secured, then the exposure is fixed and established upfront. But I don't disagree that the there are much larger and more relevant gambling-in-the-guise-of-investing targets. Also to be clear: I think there are legitimate investment uses of that product-- e.g. if you have a credible reason to believe the Bitcoin price will drop soon you could short a small amount with leverage while keeping the bulk of your holdings safe in cold storage. The extra fees and specific risks of the CFD may be offset by avoiding a need to touch cold coins. But I do also doubt that most users are using it that way.
- ve55 6y ago
  It can be much better, but a quick glance at what a lot of retail investors are actually doing with options (basically just buying calls) shows a lot of high-risk and reckless gambling. While I'm fine with people choosing whichever risk level they desire, some of the images I've seen of e.g Robinhood UI's are pushing it far beyond what I'd say is reasonable (and perhaps even to the point of illegality), for example https://pbs.twimg.com/media/EtfOof8XIAMhaX6?format=jpg&name=medium https://pbs.twimg.com/media/EtfOof8XIAMhaX6?format=jpg&name=...
  - nullc 6y ago
    oy. That UI is ... not great. Buying a three (?) month call which is out of the money by 4.8% is "medium risk" ?!?. Too bad there isn't a date on that image so I can figure out what the black scholes probability of expiring worthless they consider 'medium risk' is exactly. -- Assuming it's 90 days, they consider a 63% probability of total loss "medium risk".
    - inter_netuser 6y ago
      would you consider it a high risk?
      - nullc 6y ago
        For a lottery ticket? No. For an investment? Yes. I'm not really sure where I'd draw the line but anything where my best model said total loss was more likely than not is certainly past the high risk line. And high risk investments can be totally fine, treated as such. Presumably most users won't go broke losing one contract worth though it might hurt some (I'm assuming that isn't a mini option or some kind of split contract-- so we're talking about a $788 loss for one contract if it expires worthless). But if they call it "medium risk" I'm guessing people are going to buy more than one.
- keypusher 6y ago
  BitMex offers 100x leverage, which is quite dangerous in any market, but in one as volatile as cryptocurrency is almost certain to wipe out your account very quickly.

tim333 6y ago

>you couldn't obviously use it to launder money Actually I think it might be rather good for laundering money. Say you sell your shipment of cocaine for bitcoins - you put that in a tainted bitcoin wallet and send that to Bitmex and claim they are nothing to do with you. But actually you withdraw from Bitmex to a clean wallet where you claim the money came from your brilliant trading on that one. It falls apart if bitmex share all their records with the revenue services but I don't think they do. In a very non KYC way they don't ask for any proof of who you are. You can open an account for Mickey Mouse and if you send in bitcoin you are good to go. That said there are probably less regulated exchanges out there for that kind of stuff. If you really wanted to launder large sums you might be better off setting up your own one.

nullc 6y ago
That is the same deal for any custodial wallet. Deposit coins, withdraw different coins, everything is opaque unless they share records. > That said there are probably less regulated exchanges out there for that kind of stuff. That is believed to be a big part of the illiquid altcoin market. Premine some altcoin, sell it at high prices to your dirty money account. Even where the exchange has "kyc" the launderer just needs a disposable identity for the dirty account that is good enough to pass it for a few days.