4 ms·

Step 1: create USD out of thin air. Step 2: buy BTC at $1200. Step 3: sell BTC at $200. Step 4: profit!

by panarky 12y ago

drcode 12y ago
Yes, this is exactly right, but you should clarify: Step 1: create USD_FAKE out of thin air. Step 2: buy BTC at 1200 USD_FAKE on MtGox. Step 3: sell BTC at 1100 USD_REAL on Bitstamp. Step 4: profit!
- panarky 12y ago
  Whoever sold you BTC in Step 2 isn't going to accept USD_FAKE for their coins. Doesn't this scam fall apart right there? There's something like $600M missing. Were people really leaving that much fiat on account at Gox?
  - thefreeman 12y ago
    I don't follow your argument. The person selling the bit coin in 2 assumes that when the number in their account balance goes up by USD_FAKE that there was really money to back it up. They have no way of knowing that Mt Gox didn't ever have that money. I think that is the point they are trying to make.
  - patio11 12y ago
    Mt. Gox didn't let you withdraw real currencies other than JPY, most interestingly the dollar, from approximately last August. This meant that when you were selling BTC for USD, you were actually accepting a USD liability of Gox -- Bitcoiners sometimes called them GoxBux or GoxUSD. It's a number in a database and now, apparently, something which you'll eventually be allowed to assert as a claim in their liquidation, but it is not actually a dollar. The failure to allow withdraws in currencies they supported is why many people were speculating that Mt. Gox was insolvent, for much of the year prior to them admitting insolvency. As it turns out, we were probably right.
- pmorici 12y ago
  I think that is called quantitative easing.
- baddox 12y ago
  The Bitcoin community has had a term for your USD_FAKE concept for a long time: GoxBux.
- brianpgordon 12y ago
  Also: Step 1: Spend users' deposited BTC until you can no longer cover withdrawals. Step 2: Freeze Bitcoin withdrawals. Step 3: Wait while the internal Gox BTC price plummets as people try to get their money out. Step 4: Buy up the "bad" BTC at the deflated prices until it's all gone. Nobody will ever know the difference.
deckar01 12y ago
Start : (Markus: $0) (Joe: 1BTC) Step 1: (Markus: $1200) (Joe: 1BTC) Step 2: (Markus: 1BTC) (Joe: $1200) Step 3: (Markus: $200) (Joe: 1BTC, $1000) Step 4: Piss off Joe by preventing him from withdrawing his imaginary profits. I don't understand what Markus gains in this situation.
- SoftwareMaven 12y ago
  Markus' $1200 isn't his (in fact, it never existed), whereas Joe's $200 is very real. Markus gains $200.
- jabagawee 12y ago
  Assuming "Joe" represents the entire userbase of Mt. Gox, which deposited its own money into the system: Start : (Markus: $0) (Joe: 1BTC, $200) Step 1: (Markus: $1200) (Joe: 1BTC, $200) Step 2: (Markus: 1BTC) (Joe: $200 + 1200) Step 3: (Markus: $200) (Joe: 1BTC, $1200) Assuming Markus withdraws fiat before Joe does, Mt. Gox only had $200 in real money and $1200 in fake make-believe numbers, so Joe is left unable to withdraw.
  - deckar01 12y ago
    But it seems like if they were pumping the price up, then a lot of active traders would be holding fake USD. Mt. Gox can't tell if it is accepting real or fake USD while dumping. I think my first post outling a possible scenario that generate nothing except perceived loss to users once they can't withdraw.
    - tempestn 12y ago
      When a user does not yet have sufficient USD on deposit with Gox to buy the bitcoins they want, they deposit more, and MtGox now has more real USD under their control. It's not a matter of selling the coins for real vs fake USD.
      - deckar01 12y ago
        The question is how much new cash was really put into Mt. Gox to buy while they were dumping and the price was crashing?
maxerickson 12y ago
I wonder if the information even exists to create a ledger of all the real dollar deposits and withdrawals that Mt. Gox carried out. I suppose even if that ledger made sense they could be sending the $200 to an account (or multiple accounts) controlled outside of the business.

Step 1: create USD out of thin air. Step 2: buy BTC at $1200. Step 3: sell BTC at $200. Step 4: profit!

by panarky 12y ago

Step 1: create USD out of thin air. Step 2: buy BTC at $1200. Step 3: sell BTC at $200. Step 4: profit!

Yes, this is exactly right, but you should clarify: Step 1: create USD_FAKE out of thin air. Step 2: buy BTC at 1200 USD_FAKE on MtGox. Step 3: sell BTC at 1100 USD_REAL on Bitstamp. Step 4: profit!

panarky 12y ago
Whoever sold you BTC in Step 2 isn't going to accept USD_FAKE for their coins. Doesn't this scam fall apart right there? There's something like $600M missing. Were people really leaving that much fiat on account at Gox?
- thefreeman 12y ago
  I don't follow your argument. The person selling the bit coin in 2 assumes that when the number in their account balance goes up by USD_FAKE that there was really money to back it up. They have no way of knowing that Mt Gox didn't ever have that money. I think that is the point they are trying to make.
- patio11 12y ago
  Mt. Gox didn't let you withdraw real currencies other than JPY, most interestingly the dollar, from approximately last August. This meant that when you were selling BTC for USD, you were actually accepting a USD liability of Gox -- Bitcoiners sometimes called them GoxBux or GoxUSD. It's a number in a database and now, apparently, something which you'll eventually be allowed to assert as a claim in their liquidation, but it is not actually a dollar. The failure to allow withdraws in currencies they supported is why many people were speculating that Mt. Gox was insolvent, for much of the year prior to them admitting insolvency. As it turns out, we were probably right.
pmorici 12y ago
I think that is called quantitative easing.
baddox 12y ago
The Bitcoin community has had a term for your USD_FAKE concept for a long time: GoxBux.
brianpgordon 12y ago
Also: Step 1: Spend users' deposited BTC until you can no longer cover withdrawals. Step 2: Freeze Bitcoin withdrawals. Step 3: Wait while the internal Gox BTC price plummets as people try to get their money out. Step 4: Buy up the "bad" BTC at the deflated prices until it's all gone. Nobody will ever know the difference.

deckar01 12y ago

Start : (Markus: $0) (Joe: 1BTC) Step 1: (Markus: $1200) (Joe: 1BTC) Step 2: (Markus: 1BTC) (Joe: $1200) Step 3: (Markus: $200) (Joe: 1BTC, $1000) Step 4: Piss off Joe by preventing him from withdrawing his imaginary profits. I don't understand what Markus gains in this situation.

SoftwareMaven 12y ago
Markus' $1200 isn't his (in fact, it never existed), whereas Joe's $200 is very real. Markus gains $200.
jabagawee 12y ago
Assuming "Joe" represents the entire userbase of Mt. Gox, which deposited its own money into the system: Start : (Markus: $0) (Joe: 1BTC, $200) Step 1: (Markus: $1200) (Joe: 1BTC, $200) Step 2: (Markus: 1BTC) (Joe: $200 + 1200) Step 3: (Markus: $200) (Joe: 1BTC, $1200) Assuming Markus withdraws fiat before Joe does, Mt. Gox only had $200 in real money and $1200 in fake make-believe numbers, so Joe is left unable to withdraw.
- deckar01 12y ago
  But it seems like if they were pumping the price up, then a lot of active traders would be holding fake USD. Mt. Gox can't tell if it is accepting real or fake USD while dumping. I think my first post outling a possible scenario that generate nothing except perceived loss to users once they can't withdraw.
  - tempestn 12y ago
    When a user does not yet have sufficient USD on deposit with Gox to buy the bitcoins they want, they deposit more, and MtGox now has more real USD under their control. It's not a matter of selling the coins for real vs fake USD.
    - deckar01 12y ago
      The question is how much new cash was really put into Mt. Gox to buy while they were dumping and the price was crashing?

maxerickson 12y ago

I wonder if the information even exists to create a ledger of all the real dollar deposits and withdrawals that Mt. Gox carried out. I suppose even if that ledger made sense they could be sending the $200 to an account (or multiple accounts) controlled outside of the business.