10 ms·

Crypto Might Have an Insider Trading Problem

130 points by IdEntities 4y ago

wslh 4y ago
If you can't see the whole article: Archive to the rescue: https://archive.is/njixG https://archive.is/njixG
ur-whale 4y ago
https://archive.ph/Ak2Rz https://archive.ph/Ak2Rz
vegai_ 4y ago
Nooo way, really?
- BonoboIO 4y ago
  I m shocked
  - lb1lf 4y ago
    As it goes in 'Casablanca' - Capt. Renault - "I am shocked, shocked to find that gambling is going on in here!" (Croupier hands him a neat pile of money.) "Your winnings, Sir" Renault - "Oh, thank you very much!"
usui 4y ago
I read the article. What's the financial incentive for a company to actually enforce "insider trading" rules to its employees? In fact, what does "insider trading" even mean in this context? Shouldn't that be defined by a central authority? When I read the title, it was, "No shit? What do you expect in an unregulated market by design?" I realize that "lots of insider trading is obviously happening, naturally" is a big statement and unfalsifiabe, so going in the other direction is more logically sound. On other hand, I can't help but feel it doesn't need to be proven. Unregulated economics is in the design! Maybe we just need more articles like this to prove the trend, but do we still feel the need to prove it? It reminds me of the way scientific consensus fought and eventually converged on "smoking causes lung cancer", even though that wasn't agreed upon at the beginning because monied interests disagreed. But it was like... well, you're burning toxic chemicals inside your lungs, it's in the design isn't it?! Which take makes more sense currently?
- NelsonMinar 4y ago
  That was sort of my reaction to: "why yes, of course this unregulated market has bad actors ripping off other people". But consider the WSJ audience and the way cryptocurrency is increasingly being peddled as a legitimate investment. Insider trading steals money from end retail investors and gives it to powerful insiders. It is actively harmful to ordinary investors. Ultimately markets that tolerate this kind of fraud fail as people get mad about being the sucker who gets ripped off and refuse to participate. Compared to the other kinds of fraud endemic to cryptocurrency, the risk of a corrupt market is a slow burn. Probably the Ponzi scheme will collapse or the rug will be pulled or the contract will be hacked long before the sheep realize they are being fleeced by insiders.
  - ineedasername 4y ago
    That's a good point. Those following from a crypto disaster journalism vantage point will view this story as "yes, and water has been know to be wet on occasion, and the sun to come up on quite possibly every day." But if your exposure is more from following tradition financi news, you may have seen some of the disasters and certainly volatility but otherwise may seem like a gradually emerging but not quite mature new asset class.
  - Handytinge 4y ago
    > But consider the WSJ audience and the way cryptocurrency is increasingly being peddled as a legitimate investment. If this audience doesn't understand what they're investing in and the rules around it, they're not very good investors, are they?
- Tenoke 4y ago
  >What's the financial incentive for a company to actually enforce "insider trading" rules to its employees? E.g. for Coinbase/Binance the financial incentive is that users might invest less in their offerings if they consistently do worse when participating there compared to initial offerings elsewhere or simply due to seeing proof of it. Similar/related rules might disincentivize insider trading for the projects themselves if insider trading is harmful in the first place which I am not sure of. If it is, and the common arguments that it leads to less outside investments are true then that should at least partially incentivize long-term thinking projects against it. Further, Coinbase/Binance have the incentive to dissuade projects from taking advantage of the information and as far as I know indeed try to though I guess their success is mixed.
deleted 4y ago
[deleted]
cryptobonanza 4y ago
“Might”? There is insider trading going on. An anonymous person that is most definitely not me (and wishes to specifically distance themselves from any of this activity) is in a high role in finance and has seen with their own eyes a business partner buying tokens for $0.02 in secret presale rounds which were then listed on all major exchanges starting at $0.30 to $0.50 and then obviously immediately dumped on retail buyers. The anonymous person has told me this is not even a real secret, it’s an open secret in DeFi and that for some reason all the other “investors” do either not care or just accept it and that it happens with every single “project”
- BaseballPhysics 4y ago
  It's because the assumption is that regular markets work the same way and we just don't talk about it. Your can mention regulation until you're blue in the face but it won't matter because for many crypto is the antedote to a conspiracy theory they've been literally sold. And the worst part is: as with all conspiracy theories, there's a grain of truth in there--fraud and insider trading absolutely does happen in tradfi!--which makes it that much harder to convince these folks they're wrong.
  - ineedasername 4y ago
    Yes, I think for some folks the appeal of crypto is that it seems possible to get in on the con and themselves. Try to find some shitcoin or get tight with a group that's going to launch something to buy it an pre-public rates. It's not "crypto is more open so it can't happen" it's "they're all scams and here's my chance to fleece some other sucker." I wouldn't paint all of crypto with that brush, but certainly a large proportion.
    - danaris 4y ago
      Frankly, from what I've seen, I suspect that more than 50% of the valuation of most cryptocurrencies comes from people with that mindset.
      - deleted 4y ago
deleted 4y ago
[deleted]
curiousgal 4y ago
I mean the list of common types of market misconduct that have been outlawed by regulators are a play book for crypto markets (spoofing, frontrunning, insider trading, etc) why wouldn't they be?
- notacoward 4y ago
  You forgot "pump and dump" which is practically the essence of how crypto works in the real world. Also money laundering.
  - martin8412 4y ago
    Buying/selling artificially inflated art to conceal where the money came from indeed
  - tyrfing 4y ago
    Chamath did it better. Even in the stock market it's not a crime to make billions peddling nonsense to retail.
logicalmonster 4y ago
I think pretty much every market has insider trading going on. The difference with Crypto is that because there's an actual record of transactions, there's at least a chance for the public to catch onto shady looking behavior that manipulates the price of an asset. A lot of people falsely think the stock market is heavily regulated and pure. It's not. You can't even find out a definitive answer as to how many shares of a stock currently exist. Crypto is infinitely superior in many respects.
- balaji1 4y ago
  > there's at least a chance for the public to catch onto shady looking behavior that manipulates the price of an asset but can we do anything about it even if you catch the behavior? other than old-school regulation and litigation? and eventually add checks and balances > You can't even find out a definitive answer as to how many shares of a stock currently exist maybe there are better models of stock exchanges? (hopefully looking at Europe, or at least in the past)
- NovemberWhiskey 4y ago
  How do you think the SEC identifies insider trading? Do you think there's no "actual record of transactions" in non-crypto markets?
  - logicalmonster 4y ago
    To give one small point within a very complex and nuanced topic that people could write a hundred books about... Financial disclosures in stocks are typically required to be filed within 30 days. As we know in investing, timing is everything. The financial disclosures that exist IMO mainly serve to placate the masses that there's regulation and are worthless for knowing about actual problems or impending price movement. With crypto, big movement of assets happens on a blockchain and can be observed in real-time. There's at least a chance of catching issues in a way that can't be replicated with stocks.
    - salawat 4y ago
ftyers 4y ago
https://archive.ph/njixG https://archive.ph/njixG
martin8412 4y ago
Gasp! An industry where lots of people get to learn why 100+ years of financial regulations exist.. They're speedrunning centuries worth of financial scams.
- alangibson 4y ago
  You left out how they're also speedrunning 100 years of financial crises due to forgetting everything learned about money in the 20th century.
  - IdEntities 4y ago
    I wouldn't say a whole lot was learned about money in the 20th Century given that the Secretary of the Treasury wound up on his knees begging the Speaker of the House to pass a bailout bill in 2008 to forestall an apocalyptic financial collapse. The jury is still out on this but it's possible all that was discovered was new ways to kick the can to an even bigger crisis down the road.
    - arcticbull 4y ago
      > I wouldn't say a whole lot was learned about money in the 20th Century given that the Secretary of the Treasury wound up on his knees begging the Speaker of the House to pass a bailout bill in 2008 to forestall an apocalyptic financial collapse. (a) what does this have to do with monetary policy? the bailouts were run by Treasury and were strictly fiscal policy. this isn't really something we learned about money. (b) bailouts were loans not grants, and not only has the entire balance of the loans been repaid, the government netted a tidy profit ($109B) - and there's more left. [1] [1] https://projects.propublica.org/bailout/ https://projects.propublica.org/bailout/
      - IdEntities 4y ago
        Right, so, what everyone "learned" is that you can leverage yourself to the gills, enjoy the fruits of debt-fueled asset appreciation on the way up, and when it all goes pear shaped the government will be able to step in and clean up the mess and get the whole cycle started again. The fiscal bailouts became necessary because the Fed had fired all of its monetary policy bullets and it had failed to arrest the collapse in confidence which was freezing credit markets. Like I said, the jury is still out. Maybe the next time will go just like 2008. Maybe there really will never be any price to pay for all this moral hazard that's being stuffed into the system.
jollybean 4y ago
Large swaths, possibly even the majority of crypto/NFT trading is wash trading i.e. people selling stuff to themselves to prop up the market.
- ChainOfFools 4y ago
  Turns out that anonymity of market actors and decentralization of market behavior are completely orthogonal objectives. Who knew?
djbebs 4y ago
Insider trading is arguably a good thing. It makes markets more efficient, and puts everyone on an even footing.
- ohyoutravel 4y ago
  Whatever the news story is, it’s somehow good for crypto!
joshmarinacci 4y ago
I think the significance here isn’t the title or the content of the article, but that it’s on the WSJ website. This will reach more people who know little about crypto ins and outs.
api 4y ago
Water may be wet...
jrm4 4y ago
Of course it does. But if you're thinking that e.g. the stock market is any better, you're wildly naive. In the stock market, the griminess has been developed and institutionalized, and still gets away with silliness like "dark pools." Crypto is also very much a mess in this regard, but you have a much greater shot at fairness, given that to some extent, blockchains must be visible and open.
mattfrommars 4y ago
Basically, something that happens in traditional finance/IPOs but considered OK. Insider knowledge of knowing when a company will do IPO to get maximum return on their investment and cashing out when company goes public after great public showing. Only difference between the traditional run of the mill companies that go on IPO with massive valuation and what crypto coins do when they go 'public', is that with IPO case, it is socially acceptable for people to game the system. There are numerous example from IPO bonanza that took place last year where investor did exactly the same and now their stock have reached rock bottom. Whatever value those companies had, the 'insider investor' had their pay day, now its left to rot in public domain. Fantastic.
rdtwo 4y ago
Might? It totally does
Spooky23 4y ago
Lol. That’s like saying Jeffery Dahmer may have had a dietary selection problem.
exdsq 4y ago
When I worked in crypto I knew news before release and, if I wanted, could trade on it. If there was a delay it’d almost always cause a minor crash, so I could short. On the other hand big investors or collaborations would give the price a hike. All perfectly legal, but I didn’t for ethical reasons.
pengaru 4y ago
When I briefly paid attention to Monero/XMR and ran a mining rig it was glaringly obvious that every time they changed the algorithm, something Monero deliberately did(does?) regularly for anti-ASIC reasons, those participating in the development would have their miners active effectively across the changeover with zero down time. It seemed pretty close to insider trading to me. While the network was getting back to its previous aggregate hash rate the difficulty would be exceptionally low, so everyone closely involved had a window of easy mining every time the algo changed. It would take days for the aggregate hash rate to recover 100%...
- gruez 4y ago
  I don't buy it. I'm not intimately familiar with how the monero project is run, but shouldn't you able to pick this up by looking at the PRs? Or are the repository owners just keeping their PRs under wraps and merging them immediately after they're created? Even then, the bigger question is how these changes get deployed. If you're going to change the hashing algorithm, you'll probably have to get most clients on the network to update in advance, otherwise all the people running outdated clients would be on a forked chain. Therefore it seems unlikely that monero insiders would have much of an advantage compared to an observant outsider.
  - xur17 4y ago
    Agreed. The network would grind to a hault if the mining algorithm was changed without notifying everyone first. I have to imagine a new version of the node software is released (fork) that changes the hashing algorithm starting at X block. Anything else would be.. stupid.
    - pengaru 4y ago
      When your currency intends to keep changing the algorithm, the protocol itself should describe the algorithm to use and automate the changeover process. It's not the manual aspect that is defending against ASIC miners, it's the non-determinism of what the algorithm is going to be. If you keep it that way for years, it starts looking very deliberate. In this scenario I'd describe the "insiders" as those participating in and following monero's development closely enough to be continuously aware of these changes at the source level. We're not talking about SEC regulated crap where insider trading is well defined, this is all unregulated wild west software land. Insiders are the nerds cloning git repos and building from source, lurking in monero chat rooms all day, etc.
cde-v 4y ago
I thought this was a feature of crypto, not a bug?
gruez 4y ago
Obligatory reminder that insider trading laws (at least in the US) are about theft of information, not fairness. >KESTENBAUM: And she says while everybody gets upset at insider trading because it gives someone an unfair advantage, that is not the legal reason why it gets you into trouble. The argument used these days in court for why it's illegal is that insider trading amounts to stealing information from a company. It's like theft. >GOLDSTEIN: And so for that reason, proving that someone traded on insider information - that is not enough to convict them. If, say, a financial document from some company blows out the window and you happen to find it sitting there on the sidewalk, Sarah says it's not insider trading for you to use that to make money in the stock market because you didn't steal it. https://www.npr.org/transcripts/596532106 https://www.npr.org/transcripts/596532106 In the case of public corporations, insider information (eg. this quarter's earnings) belongs to the company and the company has a duty to act in the interests of its shareholders. If you work at that company and trade on that information, that's illegal because the information doesn't belong to you. However, in other markets (eg. commodities or forex), no such "owner" of information exists so "insider trading" is effectively legal[1]. Applying this to the example, it's unclear whether it would count as insider trading. I suppose you could argue that people working on the project has a duty to protect tokenholders, and therefore they should be barred from trading ahead of some announcement, but in this case the insiders seem to be insiders on exchanges, which hold no such obligations. [1] "Insider trading" in energy markets is not really a thing, because energy markets are largely for producers and users of energy to hedge their production and needs, and that production and those needs are the sort of "inside information" that would move markets. So everyone just kind of gets a free pass to trade on inside information. https://www.bloomberg.com/opinion/articles/2013-12-19/helicopter-edge-is-better-than-black-edge https://www.bloomberg.com/opinion/articles/2013-12-19/helico...
Animats 4y ago
This becomes much more of an issue as "line goes down". The normal progression in NFTs now is that the minters make money, and the suckers who bought with intent to resell lose money.
deleted 4y ago
[deleted]
SilverBirch 4y ago
Crypto currencies are generally not regulated securities. So there's basically no reason that an exchange can't run an exchange and then also run a trading team that knows every single individual's position, limit orders, stop losses, everything. Oh, and they work for the exchange so they also have a latency advantage. I've had conversations with engineers working in HFT. Their eyes light up when you talk about crypto because you can do every single trick that would get you in trouble in real markets. The fact that the WSJ thinks a trivial amount of insider trading is note worthy indicates that they don't have the first clue how crypto works. Go and read up on the regulations around trading regulated securities, and then realise that that's an instruction manual for how to make money trading bitcoin.
- qeternity 4y ago
  Seriously, this sort of insider trading is the least of concern. Arthur Hayes was just sentenced. This is old news. Exchanges trade against their customers as a matter of business. It is core to their revenue.
  - influxmoment 4y ago
    That was Ripple that was caught trading against their customers not Hayes. Ripple paid off regulator so are all good now
  - atc 4y ago
throwawayfora 4y ago
Go to a place where product managers and engineers from Coinbase and Robinhood go for breakfast, lunch, dinner, alcohol, or coffee They are very open about insider trading
- jiveturkey 4y ago
  Are COIN and HOOD WFO companies?
karmakaze 4y ago
What does 'crypto' even mean anymore? I thought it was the "store of value' using a decentralized blockchain (ignoring cryptography for the moment). At this point we can make up any news story and praise or blame crypto. I'm still trying to decide if the narrow & broad crypto term is rather than has the problem.
throwawaymanbot 4y ago

130 points by IdEntities 4y ago

wslh 4y ago

If you can't see the whole article: Archive to the rescue: https://archive.is/njixG https://archive.is/njixG

ur-whale 4y ago

https://archive.ph/Ak2Rz https://archive.ph/Ak2Rz

vegai_ 4y ago

Nooo way, really?

BonoboIO 4y ago
I m shocked
- lb1lf 4y ago
  As it goes in 'Casablanca' - Capt. Renault - "I am shocked, shocked to find that gambling is going on in here!" (Croupier hands him a neat pile of money.) "Your winnings, Sir" Renault - "Oh, thank you very much!"

usui 4y ago

I read the article. What's the financial incentive for a company to actually enforce "insider trading" rules to its employees? In fact, what does "insider trading" even mean in this context? Shouldn't that be defined by a central authority? When I read the title, it was, "No shit? What do you expect in an unregulated market by design?" I realize that "lots of insider trading is obviously happening, naturally" is a big statement and unfalsifiabe, so going in the other direction is more logically sound. On other hand, I can't help but feel it doesn't need to be proven. Unregulated economics is in the design! Maybe we just need more articles like this to prove the trend, but do we still feel the need to prove it? It reminds me of the way scientific consensus fought and eventually converged on "smoking causes lung cancer", even though that wasn't agreed upon at the beginning because monied interests disagreed. But it was like... well, you're burning toxic chemicals inside your lungs, it's in the design isn't it?! Which take makes more sense currently?

NelsonMinar 4y ago
That was sort of my reaction to: "why yes, of course this unregulated market has bad actors ripping off other people". But consider the WSJ audience and the way cryptocurrency is increasingly being peddled as a legitimate investment. Insider trading steals money from end retail investors and gives it to powerful insiders. It is actively harmful to ordinary investors. Ultimately markets that tolerate this kind of fraud fail as people get mad about being the sucker who gets ripped off and refuse to participate. Compared to the other kinds of fraud endemic to cryptocurrency, the risk of a corrupt market is a slow burn. Probably the Ponzi scheme will collapse or the rug will be pulled or the contract will be hacked long before the sheep realize they are being fleeced by insiders.
- ineedasername 4y ago
  That's a good point. Those following from a crypto disaster journalism vantage point will view this story as "yes, and water has been know to be wet on occasion, and the sun to come up on quite possibly every day." But if your exposure is more from following tradition financi news, you may have seen some of the disasters and certainly volatility but otherwise may seem like a gradually emerging but not quite mature new asset class.
- Handytinge 4y ago
  > But consider the WSJ audience and the way cryptocurrency is increasingly being peddled as a legitimate investment. If this audience doesn't understand what they're investing in and the rules around it, they're not very good investors, are they?
Tenoke 4y ago
>What's the financial incentive for a company to actually enforce "insider trading" rules to its employees? E.g. for Coinbase/Binance the financial incentive is that users might invest less in their offerings if they consistently do worse when participating there compared to initial offerings elsewhere or simply due to seeing proof of it. Similar/related rules might disincentivize insider trading for the projects themselves if insider trading is harmful in the first place which I am not sure of. If it is, and the common arguments that it leads to less outside investments are true then that should at least partially incentivize long-term thinking projects against it. Further, Coinbase/Binance have the incentive to dissuade projects from taking advantage of the information and as far as I know indeed try to though I guess their success is mixed.

deleted 4y ago

[deleted]

cryptobonanza 4y ago

“Might”? There is insider trading going on. An anonymous person that is most definitely not me (and wishes to specifically distance themselves from any of this activity) is in a high role in finance and has seen with their own eyes a business partner buying tokens for $0.02 in secret presale rounds which were then listed on all major exchanges starting at $0.30 to $0.50 and then obviously immediately dumped on retail buyers. The anonymous person has told me this is not even a real secret, it’s an open secret in DeFi and that for some reason all the other “investors” do either not care or just accept it and that it happens with every single “project”

BaseballPhysics 4y ago
It's because the assumption is that regular markets work the same way and we just don't talk about it. Your can mention regulation until you're blue in the face but it won't matter because for many crypto is the antedote to a conspiracy theory they've been literally sold. And the worst part is: as with all conspiracy theories, there's a grain of truth in there--fraud and insider trading absolutely does happen in tradfi!--which makes it that much harder to convince these folks they're wrong.
- ineedasername 4y ago
  Yes, I think for some folks the appeal of crypto is that it seems possible to get in on the con and themselves. Try to find some shitcoin or get tight with a group that's going to launch something to buy it an pre-public rates. It's not "crypto is more open so it can't happen" it's "they're all scams and here's my chance to fleece some other sucker." I wouldn't paint all of crypto with that brush, but certainly a large proportion.
  - danaris 4y ago
    Frankly, from what I've seen, I suspect that more than 50% of the valuation of most cryptocurrencies comes from people with that mindset.
    - deleted 4y ago

deleted 4y ago

[deleted]

curiousgal 4y ago

I mean the list of common types of market misconduct that have been outlawed by regulators are a play book for crypto markets (spoofing, frontrunning, insider trading, etc) why wouldn't they be?

notacoward 4y ago
You forgot "pump and dump" which is practically the essence of how crypto works in the real world. Also money laundering.
- martin8412 4y ago
  Buying/selling artificially inflated art to conceal where the money came from indeed
- tyrfing 4y ago
  Chamath did it better. Even in the stock market it's not a crime to make billions peddling nonsense to retail.

logicalmonster 4y ago

I think pretty much every market has insider trading going on. The difference with Crypto is that because there's an actual record of transactions, there's at least a chance for the public to catch onto shady looking behavior that manipulates the price of an asset. A lot of people falsely think the stock market is heavily regulated and pure. It's not. You can't even find out a definitive answer as to how many shares of a stock currently exist. Crypto is infinitely superior in many respects.

balaji1 4y ago
> there's at least a chance for the public to catch onto shady looking behavior that manipulates the price of an asset but can we do anything about it even if you catch the behavior? other than old-school regulation and litigation? and eventually add checks and balances > You can't even find out a definitive answer as to how many shares of a stock currently exist maybe there are better models of stock exchanges? (hopefully looking at Europe, or at least in the past)
NovemberWhiskey 4y ago
How do you think the SEC identifies insider trading? Do you think there's no "actual record of transactions" in non-crypto markets?
- logicalmonster 4y ago
  To give one small point within a very complex and nuanced topic that people could write a hundred books about... Financial disclosures in stocks are typically required to be filed within 30 days. As we know in investing, timing is everything. The financial disclosures that exist IMO mainly serve to placate the masses that there's regulation and are worthless for knowing about actual problems or impending price movement. With crypto, big movement of assets happens on a blockchain and can be observed in real-time. There's at least a chance of catching issues in a way that can't be replicated with stocks.
  - salawat 4y ago

ftyers 4y ago

https://archive.ph/njixG https://archive.ph/njixG

martin8412 4y ago

Gasp! An industry where lots of people get to learn why 100+ years of financial regulations exist.. They're speedrunning centuries worth of financial scams.

alangibson 4y ago
You left out how they're also speedrunning 100 years of financial crises due to forgetting everything learned about money in the 20th century.
- IdEntities 4y ago
  I wouldn't say a whole lot was learned about money in the 20th Century given that the Secretary of the Treasury wound up on his knees begging the Speaker of the House to pass a bailout bill in 2008 to forestall an apocalyptic financial collapse. The jury is still out on this but it's possible all that was discovered was new ways to kick the can to an even bigger crisis down the road.
  - arcticbull 4y ago
    > I wouldn't say a whole lot was learned about money in the 20th Century given that the Secretary of the Treasury wound up on his knees begging the Speaker of the House to pass a bailout bill in 2008 to forestall an apocalyptic financial collapse. (a) what does this have to do with monetary policy? the bailouts were run by Treasury and were strictly fiscal policy. this isn't really something we learned about money. (b) bailouts were loans not grants, and not only has the entire balance of the loans been repaid, the government netted a tidy profit ($109B) - and there's more left. [1] [1] https://projects.propublica.org/bailout/ https://projects.propublica.org/bailout/
    - IdEntities 4y ago
      Right, so, what everyone "learned" is that you can leverage yourself to the gills, enjoy the fruits of debt-fueled asset appreciation on the way up, and when it all goes pear shaped the government will be able to step in and clean up the mess and get the whole cycle started again. The fiscal bailouts became necessary because the Fed had fired all of its monetary policy bullets and it had failed to arrest the collapse in confidence which was freezing credit markets. Like I said, the jury is still out. Maybe the next time will go just like 2008. Maybe there really will never be any price to pay for all this moral hazard that's being stuffed into the system.

jollybean 4y ago

Large swaths, possibly even the majority of crypto/NFT trading is wash trading i.e. people selling stuff to themselves to prop up the market.

ChainOfFools 4y ago
Turns out that anonymity of market actors and decentralization of market behavior are completely orthogonal objectives. Who knew?

djbebs 4y ago

Insider trading is arguably a good thing. It makes markets more efficient, and puts everyone on an even footing.

ohyoutravel 4y ago
Whatever the news story is, it’s somehow good for crypto!

joshmarinacci 4y ago

I think the significance here isn’t the title or the content of the article, but that it’s on the WSJ website. This will reach more people who know little about crypto ins and outs.

api 4y ago

Water may be wet...

jrm4 4y ago

Of course it does. But if you're thinking that e.g. the stock market is any better, you're wildly naive. In the stock market, the griminess has been developed and institutionalized, and still gets away with silliness like "dark pools." Crypto is also very much a mess in this regard, but you have a much greater shot at fairness, given that to some extent, blockchains must be visible and open.

mattfrommars 4y ago

Basically, something that happens in traditional finance/IPOs but considered OK. Insider knowledge of knowing when a company will do IPO to get maximum return on their investment and cashing out when company goes public after great public showing. Only difference between the traditional run of the mill companies that go on IPO with massive valuation and what crypto coins do when they go 'public', is that with IPO case, it is socially acceptable for people to game the system. There are numerous example from IPO bonanza that took place last year where investor did exactly the same and now their stock have reached rock bottom. Whatever value those companies had, the 'insider investor' had their pay day, now its left to rot in public domain. Fantastic.

rdtwo 4y ago

Might? It totally does

Spooky23 4y ago

Lol. That’s like saying Jeffery Dahmer may have had a dietary selection problem.

exdsq 4y ago

When I worked in crypto I knew news before release and, if I wanted, could trade on it. If there was a delay it’d almost always cause a minor crash, so I could short. On the other hand big investors or collaborations would give the price a hike. All perfectly legal, but I didn’t for ethical reasons.

pengaru 4y ago

When I briefly paid attention to Monero/XMR and ran a mining rig it was glaringly obvious that every time they changed the algorithm, something Monero deliberately did(does?) regularly for anti-ASIC reasons, those participating in the development would have their miners active effectively across the changeover with zero down time. It seemed pretty close to insider trading to me. While the network was getting back to its previous aggregate hash rate the difficulty would be exceptionally low, so everyone closely involved had a window of easy mining every time the algo changed. It would take days for the aggregate hash rate to recover 100%...

gruez 4y ago
I don't buy it. I'm not intimately familiar with how the monero project is run, but shouldn't you able to pick this up by looking at the PRs? Or are the repository owners just keeping their PRs under wraps and merging them immediately after they're created? Even then, the bigger question is how these changes get deployed. If you're going to change the hashing algorithm, you'll probably have to get most clients on the network to update in advance, otherwise all the people running outdated clients would be on a forked chain. Therefore it seems unlikely that monero insiders would have much of an advantage compared to an observant outsider.
- xur17 4y ago
  Agreed. The network would grind to a hault if the mining algorithm was changed without notifying everyone first. I have to imagine a new version of the node software is released (fork) that changes the hashing algorithm starting at X block. Anything else would be.. stupid.
  - pengaru 4y ago
    When your currency intends to keep changing the algorithm, the protocol itself should describe the algorithm to use and automate the changeover process. It's not the manual aspect that is defending against ASIC miners, it's the non-determinism of what the algorithm is going to be. If you keep it that way for years, it starts looking very deliberate. In this scenario I'd describe the "insiders" as those participating in and following monero's development closely enough to be continuously aware of these changes at the source level. We're not talking about SEC regulated crap where insider trading is well defined, this is all unregulated wild west software land. Insiders are the nerds cloning git repos and building from source, lurking in monero chat rooms all day, etc.

cde-v 4y ago

I thought this was a feature of crypto, not a bug?

gruez 4y ago

Obligatory reminder that insider trading laws (at least in the US) are about theft of information, not fairness. >KESTENBAUM: And she says while everybody gets upset at insider trading because it gives someone an unfair advantage, that is not the legal reason why it gets you into trouble. The argument used these days in court for why it's illegal is that insider trading amounts to stealing information from a company. It's like theft. >GOLDSTEIN: And so for that reason, proving that someone traded on insider information - that is not enough to convict them. If, say, a financial document from some company blows out the window and you happen to find it sitting there on the sidewalk, Sarah says it's not insider trading for you to use that to make money in the stock market because you didn't steal it. https://www.npr.org/transcripts/596532106 https://www.npr.org/transcripts/596532106 In the case of public corporations, insider information (eg. this quarter's earnings) belongs to the company and the company has a duty to act in the interests of its shareholders. If you work at that company and trade on that information, that's illegal because the information doesn't belong to you. However, in other markets (eg. commodities or forex), no such "owner" of information exists so "insider trading" is effectively legal[1]. Applying this to the example, it's unclear whether it would count as insider trading. I suppose you could argue that people working on the project has a duty to protect tokenholders, and therefore they should be barred from trading ahead of some announcement, but in this case the insiders seem to be insiders on exchanges, which hold no such obligations. [1] "Insider trading" in energy markets is not really a thing, because energy markets are largely for producers and users of energy to hedge their production and needs, and that production and those needs are the sort of "inside information" that would move markets. So everyone just kind of gets a free pass to trade on inside information. https://www.bloomberg.com/opinion/articles/2013-12-19/helicopter-edge-is-better-than-black-edge https://www.bloomberg.com/opinion/articles/2013-12-19/helico...

Animats 4y ago

This becomes much more of an issue as "line goes down". The normal progression in NFTs now is that the minters make money, and the suckers who bought with intent to resell lose money.

deleted 4y ago

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SilverBirch 4y ago

Crypto currencies are generally not regulated securities. So there's basically no reason that an exchange can't run an exchange and then also run a trading team that knows every single individual's position, limit orders, stop losses, everything. Oh, and they work for the exchange so they also have a latency advantage. I've had conversations with engineers working in HFT. Their eyes light up when you talk about crypto because you can do every single trick that would get you in trouble in real markets. The fact that the WSJ thinks a trivial amount of insider trading is note worthy indicates that they don't have the first clue how crypto works. Go and read up on the regulations around trading regulated securities, and then realise that that's an instruction manual for how to make money trading bitcoin.

qeternity 4y ago
Seriously, this sort of insider trading is the least of concern. Arthur Hayes was just sentenced. This is old news. Exchanges trade against their customers as a matter of business. It is core to their revenue.
- influxmoment 4y ago
  That was Ripple that was caught trading against their customers not Hayes. Ripple paid off regulator so are all good now
- atc 4y ago

throwawayfora 4y ago

Go to a place where product managers and engineers from Coinbase and Robinhood go for breakfast, lunch, dinner, alcohol, or coffee They are very open about insider trading

jiveturkey 4y ago
Are COIN and HOOD WFO companies?

karmakaze 4y ago

What does 'crypto' even mean anymore? I thought it was the "store of value' using a decentralized blockchain (ignoring cryptography for the moment). At this point we can make up any news story and praise or blame crypto. I'm still trying to decide if the narrow & broad crypto term is rather than has the problem.

throwawaymanbot 4y ago