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The reason I'm inclined to believe this report's implications about Karpeles is because I spent a long time in Mt. Gox's IRC support channel talking with suppor
by sillysaurus3 12y ago
The reason I'm inclined to believe this report's implications about Karpeles is because I spent a long time in Mt. Gox's IRC support channel talking with support reps, and they were paid to lie. They didn't know they were being paid to lie, but they were instructed by management to say "don't worry, all user coins are safe" right up until the day the Mt. Gox crisis report was leaked. They could have said "we are investigating the extent of the problem," but no, Karpeles was paying them to say "nothing is wrong," even while Karpeles was crafting his crisis report to investors about how all the coins were gone.
Karpeles seems to have a history of lying. He was caught in a lie by his employer in 2004: http://newslines.org/mt-gox/joins-linux-cyberjoueurs/ http://newslines.org/mt-gox/joins-linux-cyberjoueurs/
From a game theory point of view, it's interesting that the price at every major exchange depends on every other major exchange. For example, when Mt. Gox was active, if its price went up, BTC-e, Bitstamp, etc would simultaneously go up. It's a natural phenomenon which has rather grim implications: if an exchange is conducting fraudulent activity, then the entire bitcoin trading ecosystem is affected. And since bitcoin is completely unregulated, there's nothing really stopping anyone from manipulating the market. For example, no one knows who's behind BTC-e, but it has a lot of trade volume. What if they're engaging in fraudulent trading as well? There's every incentive to.
The inevitable conclusion seems to be: you can try to come up with a bunch of logical reasons about why the price of bitcoin is going up or down, but you can't ever rule out "the price is due to large-scale fraudulent behavior," i.e. it's a bubble. Bad behavior from one exchange will always affect all the others.
As Karpeles has probably shown, you can become a millionaire by manipulating the market and then escape all consequences by letting your company go bankrupt.
- CamperBob2 12y agoI don't know about "escaping all consequences," unless his idea of "escaping all consequences" is having to watch his back for the rest of his life. Seems like a pretty dumb way to make a few million bucks, IMHO.
- mattm 12y agoEspecially since he could have been a legitimate multi-millionaire just by doing things correctly. The market lead MtGox had is something people dream about.
- phpnode 12y agohe was probably arrogant enough to assume he could do both.
- garthk 12y agoI worked for a clever, clever, stupid bastard like that once. He could have made legitimate millions but chose instead to cook the books, embezzle a few hundred thousand, set up patsy directors to take the blame, flee the state with his wife and kids, and live under an assumed name. Either that or, now that it occurs to me, we might have been a front for drug laundering. That would also have fit the evidence. Huh.
- sillysaurus3 12y agoIt pains me to say this, but "dumb and evil" have been par for bitcoin thus far. The question is, will the situation change? It might. Many modern reliable systems grew out of shaky or illicit foundations. But that's little solace in the meantime.
- krapp 12y ago> Many modern reliable systems grew out of shaky or illicit foundations. Arguably, those systems became reliable because of the adoption of standards of practice, insurance and regulation. Even the mafia has rules (and a means of enforcing them.)
- deleted 12y ago[deleted]
- boyaka 12y agoBecause Mt. Gox is totally the foundation of bitcoin rollseyes
- krapp 12y agoMt Gox is not the foundation of bitcoin. Bear-Stearns and Lehman Brothers are not the foundation of the dollar. Yet some bitcoiners seem quite happy to ignore the former, while insisting upon the inevitability of the latter. If the crime and corruption of regulated systems are a valid argument for cryptocurrencies, then surely Mt Gox is a valid argument against them.
- michaelt 12y agoI don't know about "escaping all consequences," unless his idea of "escaping all consequences" is having to watch his back for the rest of his life. If I had stolen a few hundred million dollars from mtgox users and disappeared, my policy would be simple: Anyone who tracks me down and puts a gun in my mouth can have ten times their losses refunded, if they tell me how they found me. Twice their losses up front, eight times after they let me get safely away. The guy with the gun chooses the address to send the refund to. I doubt more than 5% of mtgox investors have the losses, the stomach and the connections to get me murdered. So I'd still have 50% of the money left over at the end.
- rtpg 12y agoalternatively, the guy with the gun will just want everything and you are left with nothing. I think you might be overestimating the leverage you have with just your BTC
- bthomas 12y ago.001% is enough...
- Aqueous 12y agoIf someone has a gun to your head you're not really in a position to set terms. What do you get at the end? A life.
- sparkzilla 12y agoMore than lying, he has a history of computer fraud: http://newslines.org/mt-gox/convicted-of-computer-fraud/ http://newslines.org/mt-gox/convicted-of-computer-fraud/
- dlsx 12y ago"They trust me -- dumb fucks" - Mark Karpelesberg
- olalonde 12y agoI agree with pretty much everything you said but is it true that regulations would have prevented someone like Karpeles from doing the same with say, gold? What regulations prevent this? I'm asking genuinely because I have no idea what regulations exist in that world and I keep hearing that argument from smart people so I guess it's probably true.
- sillysaurus3 12y agoGood question. I'd like to know too. It seems like the stock market would be the most relevant arena to seek examples from. Anyone know what kind of regulations prevent sneaky behavior in the stock market? How do they work?
- pmorici 12y agoThe important thing to remember is that while there maybe more specific laws against what happened on Gox in other markets that doesn't mean that what Gox did was some how ok in the eyes of the law. A fraud is a fraud customer money _is_ missing. On the topic of price manipulation in other markets if you follow financial news at all there have been a rash of cases of banks paying large fines and even pleading guilty to manipulation of at least the libor rate and gold prices and there are supposedly more on going investigations into price manipulation. http://www.bloomberg.com/news/2014-01-06/royal-bank-of-scotland-japan-unit-sentenced-in-libor-probe-1-.html http://www.bloomberg.com/news/2014-01-06/royal-bank-of-scotl... http://www.ft.com/intl/cms/s/0/08cafa70-e24f-11e3-a829-00144feabdc0.html#axzz32lORv1SX http://www.ft.com/intl/cms/s/0/08cafa70-e24f-11e3-a829-00144...
- harmegido 12y agoI'm not an expert, but I suspect the clearing mechanism is what would prevent these sorts of manipulations outlined in the post. I'd start your search there.
- mike_hearn 12y agoRegulations on financial institutions break down into several categories: 1) Identifying operators and users, so if fraud happens, the right people can be found and held accountable 2) Requiring paperwork documenting what is happening, again, so if there is a fraud of some kind it can be detected and the responsible parties found 3) Actually trying to prevent fraud, usually this means mandatory audits of some kind I can't point you to what rules govern a currency exchange in Japan exactly, but the above is how it usually seems to break down. Gox was AFAIK never audited. How much of a paper trail exists is unclear. The relevant people's identities are known, however. One other thing I think we should clear up: these rules are usually pretty vague and general. It's not like regulation is something that people opt into or out of depending on their personal preferences. Whatever regulations applied to exchanges and markets in Japan would likely have also applied to Mt Gox. The problem with trying to argue that the fix is "regulation" in the abstract is "regulation" isn't some singular silver bullet. It's a big pile of rules and people who try to enforce those rules, but often those rules aren't doing what you think they're doing, or they exist to allow punishment rather than prevention, or they're somewhat theoretical because they aren't reliably enforced. This is why lots of people would dearly love to find a way to build a decentralised exchange: in theory it could be more reliable than a regulated institution.
- argumentum 12y agoI agree with most of what you said but: > Karpeles seems to have a history of lying. He was caught in a lie by his employer in 2004 Everybody "has a history of lying", because everybody lies. One incident of lying to an employer about IM'ing (or using Facebook or HN while at work, which almost every HN user has likely done) does not a future fraud make. Lying is universal - we all do it. Therefore, the wise thing is for us diligently to train ourselves to lie thoughtfully, judiciously; to lie with a good object, and not an evil one; to lie for others' advantage, and not our own; to lie healingly, charitably, humanely, not cruelly, hurtfully, maliciously; to lie gracefully and graciously, not awkwardly and clumsily; to lie firmly, frankly, squarely, with head erect, not haltingly, tortuously, with pusillanimous mien, as being ashamed of our high calling. - Mark Twain
- pdkl95 12y agoThis is what we call "projection". You may lie sometimes, and so you assume other people do as well. Some of us don't. Personally, I don't have the room in my head for it; there far more important thing to try and remember, and trying to keep track of lies would eat up way to much wetware. I make no claims as to frequency of non-lying - it be a rare trait. I have met a couple others, though, so "everybody" is incorrect.
- lsc 12y ago>Some of us don't. Personally, I don't have the room in my head for it; there far more important thing to try and remember, and trying to keep track of lies would eat up way to much wetware. You must have a, ah, very narrow conception of what a lie is. I mean, sure, most of us don't build a complex and self-consistent web of deception where we maintain several different self-consistent models of reality at once. But that's not the only sort of lie. The most common substantive lie, I think, is the "tell them what they want to hear" lie. E.g. "are you working?" alt-tab "Yeah, I'm working" Or even more commonly, checking personal email, facebook, or a webcomic on work time, and still putting that '8' on your timesheet. For me? I don't do this on things that matter, and for me, work matters. e.g. if you ask if I'm working, but I'm on HN? I say, "No, I'm screwing off" If I'm having a hard time focusing, say, and I spend time on HN, my timesheet will have very few hours on it. But, if you ask "how are you?" Quite often, I will say "fine" even if it is a lie. I excuse this lie by explaining it away as a greeting, but really? I don't want to spend time with a non-standard but more truthful answer, most of the time. But a lot of people give the expected answer, even when the answer is a little bit important. This is the sort of lie that most people tell.