Sorry that happened to you.

I'd argue the time to get out passed long before delays. The time to get out is when a competitor has delays(if you're so lucky). I remember reading and studying Celsius vs Voyager for about a month before I put low 5 figures into Voyager. Hey, free money right?

Then Celsius hit snags, and people were -still- recommending Voyager. I noped right out and withdrew it all.

What do you know, a couple weeks later Voyager suspends all withdrawals. I believe I have like 9 dollars tied up still with them, because I keep getting weekly updates in their 'plan.'

I do feel for people who lost more than I put in, but at some point you have to expect people to know money isn't free and the gravy train doesn't last forever.

Since all of these systems are negative-sum, in almost all cases, the majority lose more than they put in. That's how these scams work.

I would discourage everyone from developing the apetite for "free money" in these cases, because it isnt free. You were just lucky enough to be early in the pyramid scheme which ends with the vast majority losing everything. It was their cash you withdrew, that's the source of your "free" money.

If people want to know why these scams are so common, its because they work. People early-in, early-out extract money from the rest.

Nevertheless, in almost all cases, by the time you hear about the opportunity, you're too late to scam people. If nothing else, at least presume this.

(which is the anti-dote to FOMO: by the time you feel FOMO it's too late, you'll be the dupe)

Yes, or more bluntly: if you identify something as a Ponzi but are able to get in and out fast enough to profit, that is stolen money and you are as culpable as the original founders.

Ha ha ha! Nice try!

Even if you don't know it's a fraud, you can wind up losing the profit. This famously happened in the Madoff ponzi:

https://news.bloomberglaw.com/bankruptcy-law/madoff-investor...

> Investors who profited in good faith from Bernie Madoff’s Ponzi scheme must return millions they received in excess of their principal, the Second Circuit ruled, affirming judgments allowing the firm’s liquidating trustee to claw back the funds.

> Net winners of Madoff’s infamous Ponzi scheme don’t have property or contract rights to profits earned over and above what they invested, even though they were unaware of Madoff’s fraud, the U.S. Court of Appeals for the Second Circuit ruled Thursday.

Wow, that's pretty bad. Not only you take the risk but you are doomed to loose either way.

> Since all of these systems are negative-sum, in almost all cases, the majority lose more than they put in.

This is a solid argument and I'd have made it once. But given how the situation is shaping up it is difficult to avoid the comparison to gold which is also a net-negative system, has been waddling on for several thousand years now and has proven irrepressible as an asset (despite many credible efforts to stamp it out).

The argument about whether crypto as a system can create value has been settled in the affirmative. We've never seen these sort of reliable transaction guarantees before in a monetary system and some people are willing to pay for that. Value is being created. The only question still open is what cost is appropriate. So far the market has been consistently saying "more" but maybe that is an aberration.

Gold is different to Bitcoin/Cryptocurrency in a few keys ways, not least of which:

  - it's a physical object
  - it has use value in jewelry 
  - it has use value in electronics and other industrial applications

Gold storage in itself doesn't create value, but jewelry, electronics etc do.

I anticipate these being common points so here is my quick rebuttal to each:

> it's a physical object

That isn't an argument for or against crypto. Crypto is a virtual object and that is desirable, makes it easier to get past a border. I can't easily get my gold out of the country - this is one of my considerations when I started buying in to Monero. There'd be a lot less interest from inside China if crypto was a physical object.

> it has use value in jewelry

Yep. Think about that deeply. One of its primary functions is looking good, and it isn't do so well at that job compared to coloured glass. The point of gold jewellery is to show off - politely - that someone can afford to own gold. There is nothing happening there that Bitcoin can't do except Bitcoin is even more public about how much someone owns.

> it has use value in electronics and other industrial applications

And they'd be able to afford a lot more of it if the investors would go away. Gold's value has been a thing for literal centuries and electronics have only existed for decades. This isn't driving the value of gold as an investment, gold's corrosion resistance is. Crypto has arguably better, arguably worse properties over long periods of time. Really we are still to find this out, it hasn't been around long enough to know what a decade in crypto looks like (at equilibrium).

> That isn't an argument for or against crypto. Crypto is a virtual object and that is desirable, makes it easier to get past a border.

Crypto is like a family game of monopoly that gets a little out of control. There is this long-running game, and the family are really invested in trying to 'win'. So much so that they were willing to pay with real money to buy monopoly money from one another just to keep playing. As the game progressed, the banker gave out more money as people passed go, but the agreed amount for the monopoly money remained the same.

Neighbours watching the game see the family playing the game and ask to buy some monopoly money seeing it will be more valuable in just a few throws of the dice. This increased demand for a limited supply of monopoly money, which saw the people already holding monopoly money profit more. This further attracted people to the game. Soon the whole neighbourhood is trading in monopoly money, and everyone who does sees a profit.

Off the back of this successful and profitable game of monopoly, others tried to replicate it in a nearby community. Services started popping up where people offered to hold the monopoly money for people, and would allow it to be exchanged for other monopoly monies. Secretly though, the monopoly exchanges were busy trading those people's monopoly money so that they too could invest it further in the game. They justified it to themselves, promising they would return it as soon as they made it back.

Some of these exchange services played way too dangerously, and lost all of their monopoly money. This startled players of the game, and they decided to withdraw their monopoly money investment for real money they trusted before playing the game. This in turn triggered those exchanges that also gambled monopoly money to have to admit that it was no longer there.

Now to current day. More and more people get startled by losses and start pulling out to recover what they can, as promises of returning to the glory days of high value monopoly money never materialize. Most of the exchanges have their liquidity in other monopoly money exchanges, and as these 'assets' diminish, so do their own. Some hold real world liquid assets, but the people running the exchanges quickly pull this out for themselves.

It's the future, and anybody left holding monopoly money once again has a token money for a game people stopped playing a long time ago. They hold onto it because they either couldn't get out before it all imploded, or they delude themselves into thinking everybody will come back to the table and start playing again.

The monopoly game is over, and the family no longer talk to each other. Some of the family are now mega rich, but this was at the cost of the majority of players that joined the game, mostly those with smaller amounts invested and those who turned up late.

> And they'd be able to afford a lot more of it if the investors would go away.

They wouldn't. Gold is super valuable because it has tonnes of special properties, and there isn't much of it.

It also doesn’t require the continuous input of the power requirements of a European nation to keep gold existing.

Gold has kept its value for thousands of years because it's not net-negative. People happily buy gold and "lose" money on the deal, because they value the gold more than the money.

So everyone involved in the gold market could, theoretically, gain value (each according to their own perception of value).

Crypto=Tulips

>these systems are negative-sum

that kind of assumes the tokens produced have no value which in the case of stuff like bitcoin seems empirically not to be true. Even after all the crashes etc. you can sell them for >$10k each

And if you say the people paying $10k+ for bitcoins are just mugs, it's all 0s and 1s, it is hard to differentiate from regular currency which is also just bits of paper or 0s or 1s. Both have value because in practice you can exchange them for real stuff.

The whataboutism kinda falls flat since both can be true: fiat currency from a govt and crypto can both have zero real value, propped up only by shared delusions.

However, govt currency is propped up some by it's taxing authority (the govts ability to take value from its residents)

Would this affect exodus? Or I guess they don't really compare.

Am I watching a bank run in real time?

you are seeing a chapter in the history books in real time. like Enron stuff

The closest real world analogy is probably https://en.wikipedia.org/wiki/MF_Global : same story of illegally transferred client funds from what should have been a plain custodial brokerage.

Exchanges cannot get bankrun on. What you're watching is fraud being revealed.

So-called crypto "exchanges" often function as a mix of exchange, broker-deal and bank.

100%. People are being fooled by the word Exchange. It makes them think that this is the same category as NYSE or NASDAQ.

Exchange should be a sort of a reserved word, like bank.

It is. But in the real world there is no compiler to prevent misuse. There is only a very lazy and incomplete runtime checker.

Even compiler is kind of a misused word though...

Runtime checker as in the guys who are eager to correct the terminology? Hahahaha

Of course they can if they're running on fractional reserves AKA fake liquidity. I don't think there is any regulation against them doing that.

In its terms of service, FTX was supposed to hold the customer assets at 1:1 ratio.

Not doing so is fraud, and there's already regulation against fraud.

It's totally illegal and the SEC is chatging everyone they can reach. But most are out of reach, because they are outsdt US and the Presidents refuse to use the military to defend USAns against finacial warfare.

They absolutely can if they operate like banks with a fractional reserve. All of them do, they cannot resist the temptation to "efficiently allocate" the huge amount of money they are sitting on.

That's what the fraud is.

Will this contagion spread further? Without regulation, any crypto company could be doing this.

Is Coinbase at risk?

This is remarkable to watch unfold.

I don't really see a reason to be any more trusting in Coinbase than in FTX, since as far as most people were concerned, FTX was a completely reputable company just a month ago. Well, as reputable as crypto companies go anyways.

And now we have reports that FTX had a backdoor to "alter the company's financial records without alerting other people, including external auditors".

https://www.reuters.com/markets/currencies/exclusive-least-1...

Well, for one thing, Coinbase has a board, and FTX did not. They also had no CFO. They were not “completely reputable” by any reasonable standard; it’s just that no one cared at the time.

> Well, for one thing, Coinbase has a board, and FTX did not.

So did Enron.

Just listening to the bossman of FTX in interviews and reading about him was enough to make me swerve anything he touched. Seemed like a shop of cowboys.

Fried?

Yeah, everything about him screamed "don't trust this man with your funds", and the stuff that has come out since has just reinforced that.

In many ways he reminded me of the MtGox dude.

This Mt Gox dude?

https://qz.com/a-crypto-billionaire-is-joining-the-race-for-...

If he is shady, are you implying Gox was an inside job like FTX?

He has gotten a lot shadier since his MtGox days in thebesly days of crypto, when arguably he could have been merely ignorant.

I’ve been seeing him called “Fried Bank Man”.

Brian Armstrong from Coinbase was on the latest All-In podcast and talked about this. It sounds like they're not at much risk as they are US based and are regulated to have much higher standards of keeping reserves

https://twitter.com/theallinpod/status/1591388975385612288

Brian Armstrong has to say Coinbase is risk-free... I mean, what else is he going to say?

If what he's saying is true, there isn't really anything to worry about, and coinbase will likely be the winner here with a proven track record.

If they are truly holding customer funds and crypto 1:1, then you cannot do a bank run on them. They will just pay out. Which is what Armstrong says.

Frankly, after all this shit if an exchange can prove they are reliable and reputable, which Coinbase has so far, they are likely to emerge quite well out of all this (unless the entire crypto market loses all credibility or gets regulated into nothing).

> If what he's saying is true, there isn't really anything to worry about

I don't believe that is entirely accurate. Coinbase used to have a pro account with margin trading. Unless they managed to clearly unwind that business there is a risk that something went wrong at one point.

If the allow margin gambles they probably are not selling the cryptos for cash to save transaction cost and just calculate the balance virtually. With all the cryptocoin volatility I don't see how process margin calls without keeping the actual cryptocoins either, so you can give them back to the lender.

Margin trading is safe for the exchange if it works as usually described in the terms: they just act as a bookmaker reallocating customer funds according to which side wins each peer to peer bet. There's usually rules that describe what happens in gaps, closing the winning side with a win that never exceeds what the losing side put down when opening the bet.

If they steal customer funds, then all is off, but same when there is no margin trading involved.

> if an exchange can prove they are reliable and reputable, which Coinbase has so far

I hove no idea how Coinbase operates, so please forgive my ignorance: How do they prove that they are trustworthy?

They are a public company, they have an actual board, they are also audited by a big 4 accounting firm.

This is MUCH more transparency than some corp in the bahamas.

Obviously it's not complete security, Enron was a public company and audited, but it's still considerably better than FTX or Binance.

"Well he would, wouldn't he?"

https://en.wikipedia.org/wiki/Mandy_Rice-Davies#%22Well_he_w...

Would the CEO ever say "Yes we are a ponzi scheme as well"?

FTX pretty much did, 7 months ago :

https://www.bloomberg.com/news/articles/2022-04-25/sam-bankm...

Though it then, by definition, makes it not a Ponzi (at that specific point), since Ponzi implies deception : banks are also unable to pay everyone at once, yet they typically aren't called "Ponzi".

> banks are also unable to pay everyone at once, yet they typically aren't called "Ponzi".

There's a distinction between liquidity and solvency. Banks can run into liquidity issues, but in theory if they do their job right they should stay solvent, and will be backed by insurance / reinsurance and such. Basically a very different world from these yolo crypto outfits running out of offshore tax havens.

I am not sure there is a clear distinction between the two for fractional reserve banking ?

The bank can have done nothing "wrong", yet if the situation is bad enough : bank run + entities it has been lending to going bankrupt + entities that could bail it out going bankrupt too ; then the bank IS going bankrupt, and taking most of the opposite fraction of the money it claimed to "hold" with it...

This is where the "lender of last resort", i.e. the government, comes in. Depositor losses are sufficiently bad for the economy as a whole that it makes sense to prevent them at almost any cost.

The UK ended up owning RBS: https://commonslibrary.parliament.uk/royal-bank-of-scotland-...

Ireland got hit pretty hard: https://www.irishtimes.com/business/financial-services/2022/... but did at least manage to send Sean Quinn to actual jail.

Cyprus had too large and too dodgy a banking sector for its government to cover, so there depositors did incur real losses ("haircut").

It's statistical, like everything, and the difference is whether you have a guaranteed valuation for your illiquid assets. If you are backed by the full faith and credit if the US (taxation, IRS, and military), you are 99% solvent. In Brazil, maybe 80%

>I am not sure there is a clear distinction between the two for fractional reserve banking ?

If your assets are real and not shitcoins, there is a difference. If I have $200 in my bank, the bank takes $100 from me and buys AAPL stock (and adds their own cash); and then I go to withdraw my $200 on Saturday:

1. The bank is illiquid. I want $200 cash, but the bank only has $100 and 1 AAPL stock.

2. The bank is (likely) solvent. Unless AAPL crashes below $100 on Monday morning they are likely good for the money (AAPL, a blue chip stock, is unlikely to crash below $100) on monday morning. In this case a lender of last resort will step in (like the Fed) and bank may pay some premium for an emergency loan.

Still fraud though. Basically the banks convinced the coin makers to issue new money if they become insolvent. It would be the same as FTX being able to call the money printers of each currency to get the needed funds to stay afloat. Amazing this is not considered a criminal enterprise.

The banks are just on a different level of grift when compared to crypto exchanges

No, you're completely missing the distinction between insolvent and liquidity problems, even though it was explained to you in the post you replied to.

A bank with liquidity problems borrows newly printed money from the central bank and repays them with the profit generated from its loans. An insolvent bank that made too many loans that won't be repaid can't repay loans the money printers might offer it and so still gets wiped out. (Its customers get bailed out, but its shareholders don't).

Sure, I can understand there's a difference. But what's not equivalent with what happened in FTX? It's essentially a bank run without the ability to get a lender of last resort. Banks are just more protected in this situations, but in the end they are still playing the same game as the crypto exchanges.

> what's not equivalent with what happened in FTX?

Banks openly lend money to a people who are not the bank's CEO and companies which are not run by the bank's CEO and make a profit on the vast majority of them repaying the money, though typically over a time frame of years, not days. This means the lender of last resort providing funds for those days also expects to get repaid

FTX secretly lent customer funds to a single company run by its CEO to bail it out, and there was no realistic prospect of that money ever being repaid.

If you honestly think that's "equivalent", I'll happily share Paypal details so I can look after some of the money in your bank account in what you consider to be the same way the bank does...

You are completely wrong.

Banks have a liquidity and term mismatch, but are required to be solvent. Ponzi schemes offer fake balances and are insolvent.

It's not clear at what exact point FTX became insolvent, but I think the CEO writing an $8bn disguised accounting entry for tokens he'd lent to his girlfriend may have been it.

When you are big enough liquidity and solvency are the same thing.

There's also maybe the option of being insolvent but nobody caring because the money is too good..?

Not sure what to call this since I assume this has been regulated to death in normal finance ?

But it wouldn't surprise me if it had happened at some point at FTX, considering all the greed and hype around crypto...

Though I guess it might be a moot point : information doesn't travel instantly, and a judge might still deem you "guilty of Ponzi" (or whatever term is appropriate) if you haven't literally been shouting "We are insolvent !" from the rooftops ? See again : regulation.

"Trading while insolvent" we call it in the UK; the legal obligation is to call in the administrators when you realize you're insolvent. Which they have now done. And insolvent companies generally do themselves, because it's less painful than the alternative.

There will probably be a lengthy argument in court (but which court - Bahamas?) as to whether they should have realized this earlier and whether their accounting was deceptive or incompetent.

(those interested should read "Lying for Money" by Dan Davies, it's an entertaining and escalating history of fraud)

"Trading while insolvent" is called "equity" or "unsecured loan", and it's legal and regulated.

Ah ok, because CEOs never make a public statement and then the next day literally the opposite of what they just said happens. Not saying that this will happen with Coinbase, but I would not believe that Coinbase is not at risk just because their CEO said it isn't.

FTX.us was also US based.

At the very least, coins get devalued more.

I think it depends a lot where an exchange is located, if the place has rule of law and proper supervision for financial service providers. Also, if an exchange has properly regulated external audits.

Coinbase would find it much harder to get away with such stuff as a US resident and publicly listed company.

Isn't Mt Gox in the process of paying based on later found coins?

A fraction of that total is is worth several times more than the USD value of BTC at the time.

If you’re looking for an opportunity that might 2x your investment over a decade, I imagine the good old stock market would be better than gambling your funds on a dying exchange. But what do I know.

I put in $11k at $1,100/coin. I’ll be lucky to walk with 1 BTC after more than a decade. So, not really. And I’ll believe that when the coin is in my wallet. Till then, it’s a mental write-off.

>>I’ll be lucky to walk with 1 BTC after more than a decade.

The payout is clearly stipulated on the MtGox website, assuming you've done the work of registering as a creditor. The minimum you'll be walking away with is roughly ~1.5BTC.

> And I’ll believe that when the coin is in my wallet

In your wallet? 10years of your money trapped and you'd voluntarily choose to leave it dangling it in front of theives as soon as you get it back?

They will after January 2023.

And yes... bitcoin has gone up a lot in that time. That doesn't mean the creditors are happy about their crypto being stuck on a bankrupt exchange for almost a decade.

I have a small fortune in the civil rehabilitation proceedings. Since mtgox went down, I've since met my wife, got married, had children, started a Masters, finished a Masters, and bought a house. Having access to my crypto at any point during that period would have been really nice.

Do you happen to know if there is any way to apply for this process later?

I had tens of bitcoins when MtGox went down. But I have no proof of the transaction or even a proper memory of my account name, and I missed their stupid deadline for applying for the payback program.

You can try by contacting the official support email ([email protected]), but I believe you have missed all deadlines to register as a creditor.

Thanks, yeah I think so too..

The entire mtgox database was leaked and was googleable, with real names. You should be able to find yourself in it.

I'm not sure you can still get approved as a creditor but have a go.

Thank you, I will check it out. Yeah I think the deadlines are already over, the whole process was quite shady and I did not even realize you can apply, until the deadlines were over.

Maybe losing that crypto taught you a lesson and made you a better person and presented you from losing far more in the intervening years. If you got your crypto back you might have been misled into believing that when you give your keys to a strangers, it's still your crypto.

Come for the free money. Stay for the life lessons!

It is unfortunate and no creditor should be exactly "happy" about the situation or completely satisfied with the outcome.

But everyone early on crypto knew there were some risks involved. And there is a chance you, or other creditors would have, for whatever reason, withdrawn and converted earlier to less USD (or even lost everything). Getting a fraction now can be a win for many. Call it "enforced diamond hands" if you like the meme...

I guess in the average case it is a fair outcome.

I tried to send my tiny balance to a MetaMask wallet but my 2FA passcodes were not accepted. Resetting 2FA was also not possible... Hmm, I wonder if I ever get anything out.

But Matt Damon told me fortune favors the brave

Thanks for sharing this. I remember back on IRC when folks were buying and selling mtgox debt accounts.

I never even logged in or filed a claim or took a screenshot or anything- just wrote it off