Feds: Brothers stole $25M in crypto in 12 seconds. Defense: outsmarted bots
(businessinsider.com)36 points by pseudolus 11 hours ago
36 points by pseudolus 11 hours ago
you can read what happened here: https://hackmd.io/@dmarz/total-eclipse-of-the-relay
This is going to be fun to explain to a presumably non-technical jury.
Something we can easily infer is that the counterparty must be a connected Trump donor.
I have to wonder if there is some deeper connection whereby the introduction of this large not-yet-regulated economic sector actually creates pressure to move our whole society towards an oligarchic mobster/patronage style government. In a steady state where laws are widely known, it's harder to eek out an edge by breaking laws and then buying your way out of trouble - with the law being clear, the Schelling point is to be opposed to you. And an aggrieved counterparty can spend some resources to make sure it stays that way, even if they're not necessarily in favor with the ruling party.
Whereas with this case, nobody actually knows what the law "is" or really even what it "should be". Cryptocurrency was designed on a strong assertion of "code is law". But this doesn't keep governments from inserting their own semantics after the fact. Since there is no clear diving line, most people are not predisposed to thinking it should go one way or the other. This makes having a connection to the big boss man who can put his finger on the scale become much more relevant, and therefore much more valuable.
> Something we can easily infer is that the counterparty must be a connected Trump donor.
How so?
The DOJ has been put directly under the command of the presidency ("Unitary Executive Theory"). Micromanagement makes for reduced regulatory bandwidth makes for little reason to go after crime for the sake of it, especially cryptocurrency related... unless it directly affects someone who can get the ear of the president or if it can be used for a political spectacle. I don't really see the spectacle angle here, so therefore it must be an instance of someone getting burnt in the "code is law" environment and then seeking out-of-band retribution.
Why are the authors so aggressive in using scam/fraud/etc terms when discussing the crime, but then spend so little time explaining the defense? This article seems wildly one sided and I’m not a fan of how it’s written.
It looks like both of the author just do clickbait articles - their last ~10 articles are solely about “diddy”.
Am I wrong if this feels like high frequency trading bots here, doing their own dubious things (within the bounds of the law, but not the spirit), got baited into doing something stupid and someone smarter took advantage of that stupidity. It's a fun game to watch.
Reminds me of this recent court case in Germany.
https://www.heise.de/en/news/Higher-Regional-Court-Virtual-t...
The physical world is within regulated frameworks though. There is no regulatory body in charge of the Ethereum blockchain.
The prosecution is alleging that there was a "promise" to the victim, which would let the transaction breach the boundaries of the crypto universe and be classified as real world fraud between two individual parties, but I just don't see how there was any sort of "promise" made here. First of all, they traded against an automated trading bot. Second, a bid or ask and market liquidity is not a "promise". I trade for a living and market makers suddenly pull liquidity all the time when it suits them, on millisecond time-frames. Granted, what the brothers did is essentially "spoofing" or posting bids and asks with the intent to move markets, so the question here to me boils down to is crypto spoofing illegal or not. Perhaps that depends on the jurisdiction/and or decentralized nature of the exchange that they were posting the offers on. I would think that if they can get charged for this then the majority of trading on thousands of "shitcoins" is outright illegal activity by extension though.
On a much more simplistic level, if you're coding up in ethereum arbitrage bot, and it makes a bad high frequency arb trade... tough luck? I was under the impression that this was sort of the point of crypto markets, to escape regulations and be a freeform, decentralized trading venue.
An automated trading bot is just some person/company's agent. It can still be a victim of a fraud.
I think spoofing should quite obviously be illegal. It's basically contract fraud.
> I was under the impression that this was sort of the point of crypto markets, to escape regulations and be a freeform, decentralized trading venue.
"Escaping regulations" is some libertarian fever dream. There is no such thing as "the law doesn't apply to you" if you make the right people angry enough.
THIS, Exactly!
>>"Escaping regulations" is some libertarian fever dream
The same for "Free Markets".
People scream about "Free Markets" and use that standard as a cudgel to complain about any regulation they do not like.
The fact of the matter is that free markets do not exist, or if they do, they are a very transitory anomaly, the exception that proves the rule. Every market has (varying) expectations of trust and honesty on each side, and sets of constraints on what is and is not a legitimate transaction or even objects (real or virtual) for transaction.
The only question is who is regulating the markets, and to what degree and with what intent they are regulating them.
Obviously, regulations can be too heavy or too light to sustain the market, and will need adjustment. In practice, regulations are almost always too heavy or light (especially from the POV of particular parties) and in need of frequent adjustment.
But the idea of "escaping regulations" and having an absolutely "Free Market" is a false idol and actively damaging in the real world, where the debate should be how much and what regulations are appropriate, not a stupid "all regulation is bad" cudgel.
To me it sounds like they acted on the sale before it was finished.
Imagine you see Taylor Swift tickets for sale, so you start buying them. Meanwhile, you also start booking a hotel room. The Taylor Swift purchase fails because they are sold out by the time you try to finish your purchase - but at that point the hotel room booking has already succeeded! Should you be able to blame either Ms. Swift or the hotel for having to pay a cancellation fee on the now-worthless room?
From an automated trading perspective it makes sense to execute both orders at once as it minimizes the amount of time you have to hold onto it (during which your potential gain can evaporate or even turn into a loss), but it does expose you to the risk of cancellation. To me that sounds like the cost of doing business?
And the defence of "there was no communication between the two brothers and the traders" feels really weak as well. Of course there was a communication, they put a trade offer online, and it was accepted by a trader, albeit automatically.
The search terms for how to evade fraud is also not going to help them.
I wonder if their lawyer advised them not to take the plea deal, it doesn't sound like they have a high chance of getting away with it.
First it falls to the prosecution to prove without a doubt that those searches were conducted by one of the individuals. The article posted here takes the prosecution's word at face value.
I feel like our discussions of whether this was fraud or not - in the practical and ethical sense, if not the legal one - hinges entirely on the details of what these guys did, details that are not present in the article.
So not only are we not lawyers, we're barely even readers.