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It talks volumes about the internal controls at CB that it took a tweet to expose this. Given the speed with which they grew last two years I expect their fina
by vishnugupta 4y ago
It talks volumes about the internal controls at CB that it took a tweet to expose this.
Given the speed with which they grew last two years I expect their financial and security processes to be next to nothing.
This is just tip of an iceberg. Insiders would have made tens of millions over last two years of bull run, if not more. This dude just got greedy and unlucky to get caught just as the crypto bubble began bursting.
- woodruffw 4y agoPrecisely. This was one actor; it beggars belief to expect that his is the only (much less largest) instance of insider trading at these firms.
- admn2 4y agoI was surprised to see the CSO replying to the tweet. I do agree with you, but do you think that was more for the PR and they knew about it or no way?
- pjc50 4y agoA lot of people suspect there's ""official"" insider trading at the exchanges; there's no reason for the exchange not to front-run orders or fake the order book if they think they can get away with it. Or trade against heavily leveraged positions to liquidate them. Or prop-trade with the customers' money.
- ChainOfFools 4y agoCrypto people love to talk about incentives when referring to things like crypto adoption by the market, or corrupt actions on the part of incumbent powers like bankers or politicians. They are much less enthusiastic about discussing incentives when it comes to things like exchange operatiors front running their clients, centralizing forces in crypto generally, etc.
- pcthrowaway 4y agoI work for a company that provides financial services to/on centralized exchanges, but none of us really like the centralization there; even if it's our bread and butter (for now) I think most "crypto people" are more excited about decentralized exchanges.
- noobermin 4y agoThis sounds a lot like a no-true scotsman...
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- olalonde 4y agoWhat makes you say that? In my experience, centralized exchanges are perceived as public enemy #1 by a lot of crypto people. They are seen as a necessary (but temporary) evil to bridge the "legacy" fiat world.
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- Forgeties79 4y ago> They are seen as a necessary (but temporary) evil to bridge the "legacy" fiat world. There is no world in which they can put that genie back in the bottle, so I really hope they don’t actually believe it’s “temporary.”
- ETH_start 4y agoThe top decentralized exchange, Uniswap, has overtaken the top centralized exhanges in liquidity depth for several major trading pairs: https://uniswap.org/blog/uniswap-v3-dominance https://uniswap.org/blog/uniswap-v3-dominance So there is a world where centralized exchanges have far less relevance than they do today.
- pvarangot 4y ago"A lot of people suspect"? Are we being overt? Am I the only one that not very subtly got offered insider trading of NFT tokens as a perk for joining a crypto company?
- xur17 4y agoI'd be very curious to hear more about this..
- pjc50 4y agoNot my intention! I hold no crypto stake apart from the free Keybase one and work for a non-crypto company. But the fact that you read that in my message indicates that it has been a clear part of the "offering" of crypto - that it's permissionless. i.e. there are no rules and no law enforcement.
- xsmasher 4y agoDo you mean you were offered tokens? Or do you mean you were explicitly offered access to non-public information that you could trade on?
- adrr 4y agoIt’s legal for the company to do it. Not legal for individuals. Coinbase could have bought assets ahead of time and done the same thing legally. There was a case where a person had access to the credit card transaction data[1] and used that data to figure out sales prior to earning calls. That same data is available to hedgefunds willing to purchase it from Bloomberg. They call legally get a companies sales data prior to earnings and trade off that information. 1. https://www.reuters.com/article/us-sec-capitalone-insidertrading/u-s-jury-finds-ex-capital-one-analyst-liable-in-insider-trading-case-idUSKCN0UR2KR20160114 https://www.reuters.com/article/us-sec-capitalone-insidertra...
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- compsciphd 4y agobloomberg doesn't trade on that information, heck I didn't work on anything financially oriented while at Bloomberg (worked on BLAW) and I was still restricted in the type of investments they allowed me to make. i.e. by definition bloomberg buying the data and making it available to the terminal is making the data public.
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- nullc 4y agoIf you look at the details in this case it appears that the actual charges are for exploiting confidential company information for his own gain and not insider trading.
- dcolkitt 4y agoMisappropriating fiduciary information is literally the legal basis for insider trading. There's a common fallacy that insider trading is illegal because the government wants to enforce a "level playing field". Nothing could be further from the truth. Insider trading is illegal because as an employee of the company, you're profiting off your job in a way that doesn't share any of the profits with your employer. In other words the "victim" of insider trading is actually the company itself, not the poor schmuck who you dumped a losing trade on. Many things that are colloquially thought of as insider trading, are not against the law. For example it's perfectly legal for a hedge fund to hire a helicopter to circle an oil refinery day and night with an infrared camera, so they can get a precise estimate of how much revenue an energy company will announce in its quarterly earnings. This is perfectly legal because at no point was any of this information "misappropriated" in violation of a fiduciary duty. Very clearly the little guy in this case has no chance of competing, and this isn't a level playing field in any sense. But the law simply does not care.
- nullc 4y agoI appreciate the clarification! But maybe you took it too far? Publicly traded companies themselves are subject to regulations that impede varrious kinds of unfair and prejudicial behavior. Isn't the colloquially interpretation less far from reality than someone might extract from your comment? Since if regulations keep the company from doing it, and 'insider trading' keeps the insiders from doing it-- you're left with those that have superhuman insight from satellite photos or whatever (technically public, but maybe only practically available to billion dollar corporations) -- and at least the hedge funds are vulnerable to noise and misinterpretation. You might get thoroughly out traded, but hopefully not through actually privileged information. The reason I bring it up is was really the reason behind my original comment: I think that nothing about this prosecution should make people investing in crypto-commodities, ICOs, etc. particularly obscure and thinly traded ones feel any safer from exchange insiders trading against them to their detriment. All you we can extract from this is that if exchange staff do it for their personal benefit they might get prosecuted. But the staff doing it personally in their own accounts is probably a minor problem compared to the exchange engaging in it for its own profits.
- Cthulhu_ 4y agoI mean this is probably true for all exchanges, also for the traditional stock market; it's the financial incentive they have on top of the regular commissions they charge. The person in question was sloppy, and as others said, this is probably just the tip of the iceberg.
- rmbyrro 4y ago> Ethereum blockchain wallet “that bought hundreds of thousands of dollars of tokens exclusively featured in the Coinbase Asset Listing post about 24 hours before it was published.” It talks volumes that had they done this in a privately held network, it might have been harder to catch them. All the "blockchain is anonymous, hence it's made by and for fraudsters" is a total nonsense.
- duxup 4y agoAnd yet the story is about a fraudster?
- rmbyrro 4y agoAbout a fraudster that was caught by a random person who could look at his fraud publicly, under the light of the sun. The part after "fraudster..." is what sets apart the blockchain and traditional financial networks, when it comes to fraud. If you commit fraud in the traditional financial system, only the financial institution has a chance to find it suspicious and tip the government agency responsible to investigate. In the blockchain, literally ANYONE ON THE PLANET can keep an eye on the fraudster.
- duxup 4y ago>is what sets apart the blockchain and traditional financial networks, when it comes to fraud Are you telling me that fraudsters get caught on the blockchain more than other places?
- incone123 4y agoThis might be the same problem as libre open source software: Anyone can search for evidence of fraud (or software bugs) but not many are doing so.
- georgeecollins 4y agoThis! It's so obvious from the buy / sell ratios of coinbase that they are fueled by millions (or 100ks) of small investors investing $10k or less. Joe consumer isn't going to sue over a bad investment. I am guessing that polygon, gamestop is similar. Also the counter parties aren't major US companies, they are often small to mid cap LLCs. So when the thing they push collapses they sort of fade away. If this were a major US company ripping off say a US bank, there would be investigation. But a small start up (I'm thinking of the issuers, not coinbase) ripping off people all over the world for $100- $20k with false promises-- it's practically a victimless crime. Coinbase and the exchanges aren't necessarily guilty of this but they are complicit.
- giarc 4y agoWhat could they do though? Ask all employees to provide their personal wallet addresses then monitor that? Seems unlikely to happen.
- chollida1 4y agoI mean, this is exactly what happens when you work for a hedge fund. You have to provide statements for all trading accounts you and your immediate family own. So, yeah, this is exactly what coin base should be doing. They should require all employees to list all account addresses they have access to. It's a trivial ask for the employee and its trivial to scan
- etothepii 4y agoI worked for an investment bank for many years. We had to sign a declaration that we would not make trades of any kind without permission from compliance (the withholding of this permission in 2012 is why I am not a BitCoin millionaire). However, there was no requirement to hand over login details to brokerage accounts etc. I would be surprised if there was elsewhere.
- incone123 4y agoThe person you replied to said 'statements' not 'login details'. Are you treating these things as synonymous? I suppose if I was only required to hand over statements I could edit them.
- sudosysgen 4y agoNot login details, addresses are read only. And editing statements is fraud.
- incone123 4y agoYes, that's why I wondered if the direct access via login details was intended to prevent that fraud.
- spaceman_2020 4y agoAnyone who has used any leverage trading on any exchange knows that the exchange has visibility into your positions and will run your stops. Open secret in the industry. Unregulated markets promote all sorts of bad actors. And since the returns are wild anyway, everyone just accepts it.
- scrlk 4y agoOne incident that really stands out for me was BitMEX conveniently having "server issues" at one point during the March 2020 crash. Their liquidation engine was hammering the price down - then they took an outage - when they were back up BTC recovered.
- Spooky23 4y agoCoinbase is an awful company. I signed up for a debit card for some reason, and it immediately became a fraud target. Someone tried to use it at a restaurant in South Africa, a store in Singapore and a mobile provider in Moldova. The card was obviously compromised, and the only reason I didn’t lose money is that I didn’t make any available. So called, emailed, texted Coinbase on 5 different occasions and they never deactivated the card and didn’t appear to have a procedure to do so. Not a place I would trust with money.
- jandrese 4y agoFirst rule of crypto is assume the exchange is compromised. Money on the exchange is always in danger, as is anything connected to it. They are not banks. The people running them are usually yahoos. They are not a save place to put money for any extended length of time.
- Solvitieg 4y agoSounds like one of your accounts has compromised. Perhaps your email address?
- Twirrim 4y agoHow would email being compromised leak a debit card number? Can't think of any service I've used online in the last decade+ that would send me the full debit card number that way, or even make it visible when I sign in to their website.
- Spooky23 4y agoThe particular compromise attempt in South Africa was reported on lots of Internet forums. My assumption is that Coinbase or their card provider was breached. That happens and I get it, but the lack of action (the card is still active!) in response to repeated customer inquiry is evidence of a broken process.
- quadcore 4y agoGiven the speed with which they grew last two years I expect their financial and security processes to be next to nothing. This is just tip of an iceberg. Sounds like wild accusations to me. Id like to think the company executives have high integrity and maybe they caught others we havent heard of.
- vkou 4y agoUndeveloped financial and security processes aren't a question of solely integrity. You need integrity to implement them, but just having integrity doesn't mean you're going to implement them, or to implement them correctly. You need expertise, experience, and to get burned a couple dozen times before your institution figures out how to do these things right. And even then, it's a constantly moving target.
- SamReidHughes 4y agoThe information was on a secret chat limited to a short list of employees, that this one was on. There isn't any internal control, short of bionic implants, that can prevent this.
- anyfactor 4y agoI studied accounting. We were told that Internal Control, audits, reviews etc. are the silver bullets to curbing corporate corruption and accounting scandals. When we reached master's level all that was thrown out of the window and the truth was that, those techniques are only there to serve nothing but regulatory and statutory requirements. Corporate ethics is practically non-existential. The way scandals are exposed are almost always through whistleblowers. That is a fact. If you want transparency and honesty in a system, establish a bounty system and protect the whistleblowers.
- ip26 4y agoI’d be inclined to think controls, audits, and reviews prevent most of the casual fraud, even if some fraud still happens. Sort of like door locks. They don’t eliminate all theft. But they greatly reduce casual theft.
- Breza 4y agoI thought about this the other week when someone casually tried to walk into my house when I was sitting ten feet from the door. She was stopped by my deadbolt. No way my home security will keep out a skilled criminal, but door locks, audits, and other every level security at least raise the bar for someone seeking to do crime.
- POPOSYS 4y agoWait until you reach the exec level to better understand how internal control, audits, reviews etc. do exist to create a perfect facade and magically make everything legal that you want to be legal. Also it is a good protection from small fishes or other gangs trying to take over your game.