7 ms·

I wonder if in the history of banking the first banks had this much fraud with normal currency? Or is this just specific to Bitcoin? It feels like the stats now

I wonder if in the history of banking the first banks had this much fraud with normal currency? Or is this just specific to Bitcoin? It feels like the stats now are just where by default everything with Bitcoin is (eventually) fraudulent and honest services are the exception.

prepend 5y ago
I’d like to know this as well. I suspect there’s more because now the entire contents of the vault can fit onto a slip of paper. So just logistically can be moved around more than previous bank eras.
an_opabinia 5y ago
What if the exit scams happening today in China are 10x worse than South Africa’s, because it’s so much bigger, but we aren’t hearing about them? Never mind history.
- moneywoes 5y ago
  Any examples?
dragontamer 5y ago
There's a reason why the middle ages had a huge number of coins. A mint could be trustworthy for a generation as some Noble family takes care of it with high degrees of trust. (Usually proven amounts of silver in each coin, for example) Then the wrong child becomes the leader of the family and and bam, they start reducing the silver weight and replacing the coins with cheaper metals and the entire trust in that coin disappears. And that ignores issues like the Conquistadors coming back from the new world with literally tons of gold / silver and royally messing up the gold / silver coinage economy.
- Dracophoenix 5y ago
  >>Then the wrong child becomes the leader of the family and and bam, they start reducing the silver weight and replacing the coins with cheaper metals and the entire trust in that coin disappears. // That's actually a plot point in an anime called Spice and Wolf[1]. I encourage anybody who has an interest in medieval economics and early capitalism to watch it. [1]https://myanimelist.net/anime/2966/Ookami_to_Koushinryou https://myanimelist.net/anime/2966/Ookami_to_Koushinryou
  - dragontamer 5y ago
    A lot of my historian friends liked that show, especially because it tried to focus more on the mundane issues in the Middle Ages. Mr. Lawrence had a leg up on his rivals because he's the main character with practically a modern economics degree. So his ability to predict market trends and focus on important information is head-and-shoulders above everyone else. Holo the Wise Wolf in contrast, is a minor, fictional pagan deity without much understanding of human culture. But her sharp wits gives her a lot of street smarts that stands above even Mr. Lawrence. It seems that she can control the yields of wheat fields to a certain degree, but since the recent invention of crop rotation and some fertilizers, her followers were no longer praying to her (and probably don't need her anymore). So she heads off with Mr. Lawrence (the first merchant to swing by after she decided to leave). Holo serves as a good stand in for the audience as well: as Mr. Lawrence holds roughly 15+ different coins out and describes their relevant marketplaces, Holo of course gets bored of the discussion (much like the audience probably does). Giving Mr. Lawrence "knowledge", while giving Holo "wisdom" allows the pair to balance each other out in their journeys. Especially since the basic plot of the show is "follow rumors to make money". Holo can accurately sniff out the truth out of rumors, while Lawrence can predict where the markets go once he's given the facts. EDIT: In many ways, Holo serves as Watson while Lawrence serves as Sherlock in most situations. Lawrence explains the plans to make lots of money to Holo (much like Sherlock explains the situation to Watson, since Watson is the audience stand-in). But unlike Watson, Holo quickly catches onto the money-making game and is quite capable to changing the plan for the better. So its actually a very fun dynamic to watch the two. Just enough explanation from Lawrence, and just enough improv from Holo to keep things interesting, even though they're just buying and selling things throughout the show.
- spiralx 5y ago
  > And that ignores issues like the Conquistadors coming back from the new world with literally tons of gold / silver and royally messing up the gold / silver coinage economy. Which was preceded by the exact opposite problem in Europe: https://en.wikipedia.org/wiki/Great_Bullion_Famine https://en.wikipedia.org/wiki/Great_Bullion_Famine
cowvin 5y ago
I mean a currency that protects you from government intervention also protects criminals from law enforcement. They're just two sides of the same coin. The first banks would have dealt mostly with physical money / gold, so it would be a lot harder to pull off this kind of fraud.
- colonwqbang 5y ago
  Why? Just take the gold and run. Bank robbery was a thing, and it's much easier to rob your own bank.
- dorgo 5y ago
  > a currency that protects you from government intervention also protects criminals from law enforcement. Not if the government intervention is a smart contract. Why do we fear government intervention? - (individual) errors - (individual) misconceptions - corruption ( individual incentives ) What if we had direct democracy and your case would be reviewed by every citizen? Would you still fear to be spyed upon? Would you fear to be detained without reason? That's what Cryptography promises. A uncorruptable system which serves society with incentives correctly alligned.
doggodaddo78 5y ago
I think hard currencies took care of trust about intrinsic value. It's only the establishment of rule-of-law and regulations allowed fiat currencies to proliferate. Regulations were written in the tears, fears, and anger of common folk. There's essentially no way to trust someone else with a BTC wallet and there's no trust in BTC's value because there's nothing behind it... it shouldn't be used to store value long-term, only for quick, transactional events. Banks and municipalities who issued their own fiat currencies I believe encountered many more problems.
makomk 5y ago
Even in the modern era there's a lot of fraud and scamming going on. This sounds like a classic Ponzi scheme, and Bitcoin-based Ponzis are just one corner of a broader universe of similar scams all across the globe. They've even brought down governments and the odd country...
vmception 5y ago
Probably a great time to introduce you to ACH fraud https://www.afponline.org/publications-data-tools/reports/survey-research-economic-data/Details/payments-fraud/ https://www.afponline.org/publications-data-tools/reports/su... Its just as large and just as consequence free as bitcoin/crypto heists and fraud despite the paper trail Some reinforce their respect of one system by looking at the proportions of the money supply and transactions, I would say that isnt that important as the industry / interest in fraud has a fixed size
- NicoJuicy 5y ago
  No, it isn't. ACH fraud was 1% on 21 billion$. That's 210 million in total, way less than the 4 billion from the article with 1 Bitcoin scam ( of an exchange, again). None of the ACH frauds were the exchange/bank running away with your money fyi. And probably a lot of them, if end users, was even insured. Edit: Sorry. Made a mistake corrected below by a comment and follow-up. 0,08% fraud on 51 T. Is still way less than this sole scam vs. BTC market cap.
  - vmception 5y ago
    The perpetrators are often not prosecuted, which is what I meant by consequence free. ACH Fraud has also been going on for at least 20 years or so in similar amounts Yes big bitcoin heist and no insurance for those victims of that exchange Both true
  - sokoloff 5y ago
    > ACH fraud was 1% on 21 billion$ 21 Billion per year is close to the annual ACH transaction volume measured in count of transactions. The total value of those transactions in dollars is somewhere over $50T (Trillion) dollars. 1% of that is $500B.
    - NicoJuicy 5y ago
      Mmm. Where did you see those numbers? I haven't found that number. + The number i found for fraud in ACH afterwards was actually 0,08 % > ACH fraud is extremely low at 0.08 basis points, or 8 cents for every $10,000 in payments https://silamoney.com/ach/understanding-the-basics-of-ach-fraud/ https://silamoney.com/ach/understanding-the-basics-of-ach-fr...
marc__1 5y ago
you don't need to go that far back in time to find banking issues basically in every major geography, with different kinds of currencies, digital or not. Case in point: https://en.wikipedia.org/wiki/Danske_Bank_money_laundering_scandal https://en.wikipedia.org/wiki/Danske_Bank_money_laundering_s... https://www.cnn.com/2021/01/21/europe/vatican-bank-money-laundering-intl/index.html https://www.cnn.com/2021/01/21/europe/vatican-bank-money-lau... https://www.justice.gov/opa/pr/bank-julius-baer-agrees-pay-more-79-million-laundering-money-fifa-scandal https://www.justice.gov/opa/pr/bank-julius-baer-agrees-pay-m...
- NovemberWhiskey 5y ago
  Money laundering is a different kind of a problem from what we're talking about here, though. Those are mostly KYC or internal controls failures - I'm not saying they're a good thing but they're not impacting other customers of the bank really. Find some recent example of the owners of a bank/exchange absconding with their client funds: that would be closer to the matter at hand.
  - hectormalot 5y ago
    Wirecard :) But you’re right. Mostly the normal banks and exchanges are regulated and incidence of fraud is low. A lot of that regulation is “lessons from past failures”, which crypto hasn’t had yet.
    - NicoJuicy 5y ago
      Wirecard wasn't a bank/exchange either. But a payment processor. It was fraudulent though.
      - NovemberWhiskey 5y ago
        Did any customers actually lose money over the Wirecard thing, or was it just the shareholders and lenders that lost out? I couldn't immediately find anything about customer losses.
tedunangst 5y ago
Reinventing modern finance one disaster at a time.
- agumonkey 5y ago
  seems like wheel shaped things enjoy regular reinventions
  - acdha 5y ago
    I think it's more that the problem can seem deceptively simple because you're using the default system everyone's assumptions are based on and you don't need to understand the history behind it to have the basic banking experience. The average cryptocurrency booster hasn't studied the current system or its history[1] so it's easy to focus on the happy path and say you're making things easier until you hit a reminder of just how hard it is to stymie abusers when the rewards are high. 1. education from their fellow salespeople is typically worse, like getting medical advice from a health-supplement vendor.
    - dorgo 5y ago
      > the problem can seem deceptively simple Simple or not, the current solution is far from perfect and will be reinvented and will fail again and again until a better solution emerges. There is no way that the current banking/government/democracy/economy system will survive this century.
- api 5y ago
  "Speed running the last 200 years of financial history..."
- ska 5y ago
  There is a great word for this "recapitulation".
rchaud 5y ago
Deposit insurance is a relatively new concept, at least in North America. It didn't exist in the US until the Great Depression. Canada did not introduce it until 1967. A lot of what's happening in the crypto space is just self-professed libertarians re-discovering fire. They start off by being skeptical of banks and monetary authorities, but eventually realize that an unregulated free-for-all attracts bad actors that ruin it for everyone else. Hence the wet blanket of AML + KYC + Deposit ratios.
anonyxyz 5y ago
This still happened as recently as 100 years ago. Con men would set up false banks in small towns and make off with a lotnof money. Lookup Yellow Kid Weil.
- saalweachter 5y ago
  I wonder how many bank robberies were scams. Bank owner embezzles for awhile, bank robber shows up, publicly robs the bank, makes off with $1000, bank owner claims $10,000 was stolen. Bank owner now has a reason why he can't give everyone their money back.
- azinman2 5y ago
  So what changed? I'm not concerned with any current bank making off with my money (although I'm more concerned with risky practices leading to them to go under, which is legal and as 2008 proved, the tax payer will absorb).
  - deleted 5y ago
    [deleted]
nerfhammer 5y ago
The US has had periods where banks or even corporations could print their own money. https://en.wikipedia.org/wiki/Wildcat_banking https://en.wikipedia.org/wiki/Wildcat_banking It wasn't fiat money, they were deposit notes representing gold or silver. And while outright fraud wasn't much of an issue since physical banks can't just disappear and leave town overnight, if the bank collapsed the currency would probably not be redeemable anymore.
- manquer 5y ago
  Fraud was high. It was not fraud by the institutions as such, but counterfeits was a big problem with as many as 7000 unique notes it was next to impossible to know which was genuine. Post the civil war as much as half the currency was estimated to be counterfeit. The secret service was given the policing money task as a direct result. There was streamlining of currency issue after that.
- jsrcout 5y ago
  George Byron Merrick's book Old Times on the Upper Mississippi: The Recollections of a Steamboat Pilot from 1854 to 1863 [0] has a fascinating chapter on how people got rich on wildcat banking swindles. [0] https://www.gutenberg.org/ebooks/47262 https://www.gutenberg.org/ebooks/47262
- slowhand09 5y ago
  Nevada, New Hampshire, and Utah have gold notes that are legal tender now. https://www.jmbullion.com/gold/gold-notes/ https://www.jmbullion.com/gold/gold-notes/ https://www.jmbullion.com/1-nevada-goldback-gold-note/ https://www.jmbullion.com/1-nevada-goldback-gold-note/
ffhhj 5y ago
> Nothing is known about Diogenes' early life except that his father, Hicesias, was a banker. > Hicesias and Diogenes became involved in a scandal involving the adulteration or debasement of the currency,[10] and Diogenes was exiled from the city and lost his citizenship and all his material possessions. https://en.wikipedia.org/wiki/Diogenes https://en.wikipedia.org/wiki/Diogenes
thesausageking 5y ago
Much more fraud is committed using US Dollars than Bitcoin. It's just not news so you don't read about.
- deleted 5y ago
  [deleted]
- sam_bristow 5y ago
  A lot more non-fraud is done with USD too though.
- shkkmo 5y ago
  https://xkcd.com/2476/ https://xkcd.com/2476/

prepend 5y ago

I’d like to know this as well. I suspect there’s more because now the entire contents of the vault can fit onto a slip of paper. So just logistically can be moved around more than previous bank eras.

an_opabinia 5y ago

What if the exit scams happening today in China are 10x worse than South Africa’s, because it’s so much bigger, but we aren’t hearing about them? Never mind history.

moneywoes 5y ago
Any examples?

dragontamer 5y ago

There's a reason why the middle ages had a huge number of coins. A mint could be trustworthy for a generation as some Noble family takes care of it with high degrees of trust. (Usually proven amounts of silver in each coin, for example) Then the wrong child becomes the leader of the family and and bam, they start reducing the silver weight and replacing the coins with cheaper metals and the entire trust in that coin disappears. And that ignores issues like the Conquistadors coming back from the new world with literally tons of gold / silver and royally messing up the gold / silver coinage economy.

Dracophoenix 5y ago
>>Then the wrong child becomes the leader of the family and and bam, they start reducing the silver weight and replacing the coins with cheaper metals and the entire trust in that coin disappears. // That's actually a plot point in an anime called Spice and Wolf[1]. I encourage anybody who has an interest in medieval economics and early capitalism to watch it. [1]https://myanimelist.net/anime/2966/Ookami_to_Koushinryou https://myanimelist.net/anime/2966/Ookami_to_Koushinryou
- dragontamer 5y ago
  A lot of my historian friends liked that show, especially because it tried to focus more on the mundane issues in the Middle Ages. Mr. Lawrence had a leg up on his rivals because he's the main character with practically a modern economics degree. So his ability to predict market trends and focus on important information is head-and-shoulders above everyone else. Holo the Wise Wolf in contrast, is a minor, fictional pagan deity without much understanding of human culture. But her sharp wits gives her a lot of street smarts that stands above even Mr. Lawrence. It seems that she can control the yields of wheat fields to a certain degree, but since the recent invention of crop rotation and some fertilizers, her followers were no longer praying to her (and probably don't need her anymore). So she heads off with Mr. Lawrence (the first merchant to swing by after she decided to leave). Holo serves as a good stand in for the audience as well: as Mr. Lawrence holds roughly 15+ different coins out and describes their relevant marketplaces, Holo of course gets bored of the discussion (much like the audience probably does). Giving Mr. Lawrence "knowledge", while giving Holo "wisdom" allows the pair to balance each other out in their journeys. Especially since the basic plot of the show is "follow rumors to make money". Holo can accurately sniff out the truth out of rumors, while Lawrence can predict where the markets go once he's given the facts. EDIT: In many ways, Holo serves as Watson while Lawrence serves as Sherlock in most situations. Lawrence explains the plans to make lots of money to Holo (much like Sherlock explains the situation to Watson, since Watson is the audience stand-in). But unlike Watson, Holo quickly catches onto the money-making game and is quite capable to changing the plan for the better. So its actually a very fun dynamic to watch the two. Just enough explanation from Lawrence, and just enough improv from Holo to keep things interesting, even though they're just buying and selling things throughout the show.
spiralx 5y ago
> And that ignores issues like the Conquistadors coming back from the new world with literally tons of gold / silver and royally messing up the gold / silver coinage economy. Which was preceded by the exact opposite problem in Europe: https://en.wikipedia.org/wiki/Great_Bullion_Famine https://en.wikipedia.org/wiki/Great_Bullion_Famine

cowvin 5y ago

I mean a currency that protects you from government intervention also protects criminals from law enforcement. They're just two sides of the same coin. The first banks would have dealt mostly with physical money / gold, so it would be a lot harder to pull off this kind of fraud.

colonwqbang 5y ago
Why? Just take the gold and run. Bank robbery was a thing, and it's much easier to rob your own bank.
dorgo 5y ago
> a currency that protects you from government intervention also protects criminals from law enforcement. Not if the government intervention is a smart contract. Why do we fear government intervention? - (individual) errors - (individual) misconceptions - corruption ( individual incentives ) What if we had direct democracy and your case would be reviewed by every citizen? Would you still fear to be spyed upon? Would you fear to be detained without reason? That's what Cryptography promises. A uncorruptable system which serves society with incentives correctly alligned.

doggodaddo78 5y ago

I think hard currencies took care of trust about intrinsic value. It's only the establishment of rule-of-law and regulations allowed fiat currencies to proliferate. Regulations were written in the tears, fears, and anger of common folk. There's essentially no way to trust someone else with a BTC wallet and there's no trust in BTC's value because there's nothing behind it... it shouldn't be used to store value long-term, only for quick, transactional events. Banks and municipalities who issued their own fiat currencies I believe encountered many more problems.

makomk 5y ago

Even in the modern era there's a lot of fraud and scamming going on. This sounds like a classic Ponzi scheme, and Bitcoin-based Ponzis are just one corner of a broader universe of similar scams all across the globe. They've even brought down governments and the odd country...

vmception 5y ago

Probably a great time to introduce you to ACH fraud https://www.afponline.org/publications-data-tools/reports/survey-research-economic-data/Details/payments-fraud/ https://www.afponline.org/publications-data-tools/reports/su... Its just as large and just as consequence free as bitcoin/crypto heists and fraud despite the paper trail Some reinforce their respect of one system by looking at the proportions of the money supply and transactions, I would say that isnt that important as the industry / interest in fraud has a fixed size

NicoJuicy 5y ago
No, it isn't. ACH fraud was 1% on 21 billion$. That's 210 million in total, way less than the 4 billion from the article with 1 Bitcoin scam ( of an exchange, again). None of the ACH frauds were the exchange/bank running away with your money fyi. And probably a lot of them, if end users, was even insured. Edit: Sorry. Made a mistake corrected below by a comment and follow-up. 0,08% fraud on 51 T. Is still way less than this sole scam vs. BTC market cap.
- vmception 5y ago
  The perpetrators are often not prosecuted, which is what I meant by consequence free. ACH Fraud has also been going on for at least 20 years or so in similar amounts Yes big bitcoin heist and no insurance for those victims of that exchange Both true
- sokoloff 5y ago
  > ACH fraud was 1% on 21 billion$ 21 Billion per year is close to the annual ACH transaction volume measured in count of transactions. The total value of those transactions in dollars is somewhere over $50T (Trillion) dollars. 1% of that is $500B.
  - NicoJuicy 5y ago
    Mmm. Where did you see those numbers? I haven't found that number. + The number i found for fraud in ACH afterwards was actually 0,08 % > ACH fraud is extremely low at 0.08 basis points, or 8 cents for every $10,000 in payments https://silamoney.com/ach/understanding-the-basics-of-ach-fraud/ https://silamoney.com/ach/understanding-the-basics-of-ach-fr...

marc__1 5y ago

you don't need to go that far back in time to find banking issues basically in every major geography, with different kinds of currencies, digital or not. Case in point: https://en.wikipedia.org/wiki/Danske_Bank_money_laundering_scandal https://en.wikipedia.org/wiki/Danske_Bank_money_laundering_s... https://www.cnn.com/2021/01/21/europe/vatican-bank-money-laundering-intl/index.html https://www.cnn.com/2021/01/21/europe/vatican-bank-money-lau... https://www.justice.gov/opa/pr/bank-julius-baer-agrees-pay-more-79-million-laundering-money-fifa-scandal https://www.justice.gov/opa/pr/bank-julius-baer-agrees-pay-m...

NovemberWhiskey 5y ago
Money laundering is a different kind of a problem from what we're talking about here, though. Those are mostly KYC or internal controls failures - I'm not saying they're a good thing but they're not impacting other customers of the bank really. Find some recent example of the owners of a bank/exchange absconding with their client funds: that would be closer to the matter at hand.
- hectormalot 5y ago
  Wirecard :) But you’re right. Mostly the normal banks and exchanges are regulated and incidence of fraud is low. A lot of that regulation is “lessons from past failures”, which crypto hasn’t had yet.
  - NicoJuicy 5y ago
    Wirecard wasn't a bank/exchange either. But a payment processor. It was fraudulent though.
    - NovemberWhiskey 5y ago
      Did any customers actually lose money over the Wirecard thing, or was it just the shareholders and lenders that lost out? I couldn't immediately find anything about customer losses.

tedunangst 5y ago

Reinventing modern finance one disaster at a time.

agumonkey 5y ago
seems like wheel shaped things enjoy regular reinventions
- acdha 5y ago
  I think it's more that the problem can seem deceptively simple because you're using the default system everyone's assumptions are based on and you don't need to understand the history behind it to have the basic banking experience. The average cryptocurrency booster hasn't studied the current system or its history[1] so it's easy to focus on the happy path and say you're making things easier until you hit a reminder of just how hard it is to stymie abusers when the rewards are high. 1. education from their fellow salespeople is typically worse, like getting medical advice from a health-supplement vendor.
  - dorgo 5y ago
    > the problem can seem deceptively simple Simple or not, the current solution is far from perfect and will be reinvented and will fail again and again until a better solution emerges. There is no way that the current banking/government/democracy/economy system will survive this century.
api 5y ago
"Speed running the last 200 years of financial history..."
ska 5y ago
There is a great word for this "recapitulation".

rchaud 5y ago

Deposit insurance is a relatively new concept, at least in North America. It didn't exist in the US until the Great Depression. Canada did not introduce it until 1967. A lot of what's happening in the crypto space is just self-professed libertarians re-discovering fire. They start off by being skeptical of banks and monetary authorities, but eventually realize that an unregulated free-for-all attracts bad actors that ruin it for everyone else. Hence the wet blanket of AML + KYC + Deposit ratios.

anonyxyz 5y ago

This still happened as recently as 100 years ago. Con men would set up false banks in small towns and make off with a lotnof money. Lookup Yellow Kid Weil.

saalweachter 5y ago
I wonder how many bank robberies were scams. Bank owner embezzles for awhile, bank robber shows up, publicly robs the bank, makes off with $1000, bank owner claims $10,000 was stolen. Bank owner now has a reason why he can't give everyone their money back.
azinman2 5y ago
So what changed? I'm not concerned with any current bank making off with my money (although I'm more concerned with risky practices leading to them to go under, which is legal and as 2008 proved, the tax payer will absorb).
- deleted 5y ago
  [deleted]

nerfhammer 5y ago

The US has had periods where banks or even corporations could print their own money. https://en.wikipedia.org/wiki/Wildcat_banking https://en.wikipedia.org/wiki/Wildcat_banking It wasn't fiat money, they were deposit notes representing gold or silver. And while outright fraud wasn't much of an issue since physical banks can't just disappear and leave town overnight, if the bank collapsed the currency would probably not be redeemable anymore.

manquer 5y ago
Fraud was high. It was not fraud by the institutions as such, but counterfeits was a big problem with as many as 7000 unique notes it was next to impossible to know which was genuine. Post the civil war as much as half the currency was estimated to be counterfeit. The secret service was given the policing money task as a direct result. There was streamlining of currency issue after that.
jsrcout 5y ago
George Byron Merrick's book Old Times on the Upper Mississippi: The Recollections of a Steamboat Pilot from 1854 to 1863 [0] has a fascinating chapter on how people got rich on wildcat banking swindles. [0] https://www.gutenberg.org/ebooks/47262 https://www.gutenberg.org/ebooks/47262
slowhand09 5y ago
Nevada, New Hampshire, and Utah have gold notes that are legal tender now. https://www.jmbullion.com/gold/gold-notes/ https://www.jmbullion.com/gold/gold-notes/ https://www.jmbullion.com/1-nevada-goldback-gold-note/ https://www.jmbullion.com/1-nevada-goldback-gold-note/

ffhhj 5y ago

> Nothing is known about Diogenes' early life except that his father, Hicesias, was a banker. > Hicesias and Diogenes became involved in a scandal involving the adulteration or debasement of the currency,[10] and Diogenes was exiled from the city and lost his citizenship and all his material possessions. https://en.wikipedia.org/wiki/Diogenes https://en.wikipedia.org/wiki/Diogenes

thesausageking 5y ago

Much more fraud is committed using US Dollars than Bitcoin. It's just not news so you don't read about.

deleted 5y ago
[deleted]
sam_bristow 5y ago
A lot more non-fraud is done with USD too though.
shkkmo 5y ago
https://xkcd.com/2476/ https://xkcd.com/2476/