News BITCOIN, Heists, Thefts, Hacks, Scams, and Losses

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The discussion highlights significant security issues surrounding Bitcoin exchanges, particularly focusing on the infamous Mt. Gox, which suffered a major theft leading to its bankruptcy. The exchange's management ignored critical warnings about its software's security flaws, resulting in millions lost and a tarnished reputation for Bitcoin. Other exchanges like Flexcoin and Canadian Bitcoins also reported substantial losses due to hacks and social engineering attacks. The conversation underscores the ongoing risks associated with Bitcoin transactions and the need for improved security measures in the cryptocurrency space. Overall, these incidents illustrate the vulnerabilities within the Bitcoin ecosystem that can lead to significant financial losses for users.
  • #501
Astronuc said:
should have been a red flag
To whom?

There seem to be too groups of people: Group A says this is risky, with no underlying value, a fiat currency made by people without the power to fiat. Group B says Group A is a bunch of old fuddy-duddies, don't understand the New Economy, and will be left behind when the windfall profits come.

Has anything changed?
 
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  • #502
Vanadium 50 said:
To whom?
To those doing 'due diligence'.

Vanadium 50 said:
Has anything changed?
Apparently not? Maybe? Until the next time?
 
  • #503
Interesting blog post from AWS insider on how they could not find any real world use for blockchain

the level 1 crypto skepticism is 'I am wary of cryptocurrencies, but blockchain is a revolutionary technology'

but 10+ years on, nothing has been built with blockchain that anyone would miss, other than the money they gambled on cryptocurrencies, so not only is crypto a bust, blockchain is as well.

https://www.tbray.org/ongoing/When/202x/2022/11/19/AWS-Blockchain
We really only had two questions, both for the big-finance players and for the startups. “What is it you want to do?” and “How does blockchain help?”

The answers, to our disappointment, failed to shatter any preconceptions. The things they wanted to do were perfectly reasonable. Some of them were damn exciting. They all needed databases. They could all make use of ledger-like data structures, also cryptographic hashing and signing. But, um, why did they need blockchain? Severe lack of clarity on that.

The key moment was when we got in a room with the CTO of this one startup, in Tribeca I think. When I heard their VC funding number I thought it was the valuation, not the investment dollars. The customer list was blue ****ing ribbon and don’t you forget it. These guys were razor-sharp.

They presented some of the systems they’d built and yep, we were impressed. Then, with the startup CTO in the room, one of my fellow engineers asked the key question: “All these systems, are there any that wouldn’t work without blockchain?” The guy didn’t even hesitate: “No, not really.”

And that was about that.
 
  • #504
Poor baby.
https://www.msn.com/en-us/money/com...n-to-dollar100000-in-bank-account/ar-AA14JInS
"Am I allowed to say a negative number?" he told the outlet, when asked about his personal finances. "I mean, I have no idea. I don't know. I had $100,000 in my bank account last I checked," he said.

Bankman-Fried said "basically everything" he had was tied up in the now-failed company, making his financial situation "complicated."
 
  • #506
artis said:
I don't believe that, there must be some money put aside in a safe place. This guy doesn't seem like the type of person to forget about himself...

The fact that he lost his robinhood stock makes me think he might have just been paying 0 attention.

That said he is supposed to own like 100 million dollars of real estate in the Bahamas. Who knows if that's being sold for the bankruptcy or if he's just keeping it.
 
  • #507
https://www.cnbc.com/2022/11/30/for...ed-says-i-didnt-ever-try-to-commit-fraud.html
Former FTX CEO Sam Bankman-Fried, in possibly the understatement of 2022, said Wednesday, “I’ve had a bad month.”
...
“I wasn’t running Alameda, I didn’t know exactly what was going on, I didn’t know the size of their position,” Bankman-Fried said. “A lot of these are things I’ve learned over the last month [in the days leading up to bankruptcy.]”

New leadership at FTX said that Bankman-Fried exercised significant control over the entire empire.
I've heard this before.

"I'm just a poor boy nobody loves me. He's just a poor boy from a poor family"

https://www.businessinsider.com/sam-bankman-fried-ftx-bahamas-house-parents-name-for-staff-2022-12
Reuters reported last week that a $16.4 million house in a gated community with beach access in the Bahamas listed Bankman-Fried's parents, Joseph Bankman and Barbara Fried, as signatories and was described in property records as a "vacation home."

A spokesperson for his parents, both Stanford University law professors, previously told Reuters that they had been trying to return the deeds to the company "since before the bankruptcy proceedings."
 
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  • #508
Coinbase Global Inc. Chief Executive Brian Armstrong expressed skepticism about SBF's explanation about the movement of US$8 billion from his crypto exchange FTX to brokerage arm Alameda Research.
Coinbase Global Inc. Chief Executive Brian Armstrong said Sam Bankman-Fried’s explanation of sloppy accounting as the reason US$8 billion moved from his crypto exchange FTX to brokerage arm Alameda Research doesn’t stand up to scrutiny. Bankman-Fried gave the reasoning in an interview with Bloomberg published on Friday.
https://finance.yahoo.com/news/coinbase-ceo-armstrong-says-bankman-055501313.html

“I don’t care how messy your accounting is (or how rich you are) – you’re definitely going to notice if you find an extra $8B to spend,” Armstrong tweeted on Sunday, in reference to the funds showing up at Alameda. “Even the most gullible person should not believe Sam’s claim that this was an accounting error.”

A “substantial amount of assets” of collapsed cryptocurrency exchange FTX have either been stolen or are missing, an attorney for FTX said on Nov. 22 at its first hearing in the federal bankruptcy court in Delaware, U.S.
 
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  • #509
1670447508378.png
 
  • #510
Did Sam Bankman-Fried Finally Admit the Obvious?

Daniel Kuhn, CoinDesk
Thu, December 8, 2022, 1:30 PM

https://www.coindesk.com/consensus-...-sam-bankman-fried-finally-admit-the-obvious/

Interesting read.
Despite the focus on FTX following its catastrophic collapse, it’s remarkable how little we know about how the crypto exchange and its in-house trading firm Alameda Research actually operated. New CEO John Jay Ray III has called Sam Bankman-Fried’s crypto trading empire the “greatest failure of corporate controls” he’s seen.

Wednesday, Coffeezilla, a YouTuber with a rising star who has made a career of shining a light on sketchy projects in and out of crypto, pressed Bankman-Fried for information related to how different customer accounts were treated at the exchange. It turns out, there wasn’t much differentiation – at the very least during the final days the exchange was in business, Bankman-Fried admitted.

"At the time, we wanted to treat customers equally,” SBF said during a Twitter Spaces event. “That effectively meant that there was, you know, if you want to put it this way, like fungibility created” between the exchange’s spot and derivatives business lines. For Coffeezilla, this looks like a smoking gun that fraud was committed.

At the very least, this is a contradiction of what Bankman-Fried had said just minutes before when first asked about the exchange’s terms of service (ToS). “I do think we're treating them differently,” Bankman-Fried said, referring to customer assets used for “margin versus staking versus spot versus futures collateral.” All of those services come with different levels of risk, different promises made to customers and different responsibilities for the exchange.

According to FTX’s ToS, everyday users just looking to buy or store their cryptocurrencies on the centralized exchange could trust they were doing just that, buying and storing cryptographically unique digital assets. But now, thanks to skillful questioning by Coffeezilla, we know there were instead “omnibus” wallets and that spot and derivatives traders were essentially assuming the same level of risk.

We can also assume this was a longstanding practice at FTX. Bankman-Fried noted that during the “run on the exchange”, when people were attempting to get their assets off before withdrawals were shut down, FTX allowed “generalized withdrawals” from these omnibus wallets. But he also deflected, saying what, you wanted us to code up an entirely new process during a liquidity crisis?

SBF has apparently deflected questions on FTX's ToS, since he would have to admit that FTX agreed not to use customer cryptocurrency without expressed consent, but then he proceeded to use customer funds without their expressed consent. More details in the article.

There would be a “chargeable fraud case” if spot assets weren’t backed 1:1 as promised, or were used as collateral for loans or other purposes, Renato Mariotti, a former federal prosecutor, told CNBC. Bankman-Fried has said previously that “dollars” on the exchange and hedge fund were “generally fungible,” being used to reportedly fund personal loans to emloyees and make venture deals. Now, too, did he admit client funds were "effectively" interchange – at least in the final hours.
 
  • #511
There's a dude who reported to have won like 34k usd by shorting luna back in May. FTX didn't want to pay him, so he exposed his case on twitter and what no. Then FTX finally paid him (thanks to his rants on social network), but they didn't do it in a normal, usual way. They just updated his wallet balance in the website, without any trace of what had happened. They manually updated the database to resolve his case. This was a huge red flag, so he got out of FTX after this incident....
 
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  • #512

US Probes FTX Founder for Fraud, Examines Cash Flows to Bahamas​

https://www.yahoo.com/finance/news/us-probes-ftx-founder-fraud-005514809.html

(Bloomberg) -- US prosecutors, laying the groundwork for a potential fraud case against Sam Bankman-Fried and others involved in the collapse of cryptocurrency giant FTX, are scrutinizing how funds held by the exchange operator moved outside the US as it was hurtling toward bankruptcy, according to a person familiar with the matter.
 
  • #513
Hmmm...I wonder what US law he broke. Bahamian law, sure, that's a rael possibility. But US? Wasn't this a Bahamian business? One might even ask if it was set up there so as not to have to deal with all those old-fashioend rules and regulations?
 
  • #514
Vanadium 50 said:
Hmmm...I wonder what US law he broke. Bahamian law, sure, that's a rael possibility. But US? Wasn't this a Bahamian business? One might even ask if it was set up there so as not to have to deal with all those old-fashioend rules and regulations?
I believe it applies to FTX-US transfer of funds. FTX-US is based, or operates, in US, so subject to some laws, or so it would appear.
 
  • #515
https://www.reuters.com/article/idUSL8N3321X6
U.S. Justice Dept is split over charging Binance as crypto world falters - sources
The investigation began in 2018 and is focused on Binance’s compliance with U.S. anti-money laundering laws and sanctions, these people said. Some of the at least half dozen federal prosecutors involved in the case believe the evidence already gathered justifies moving aggressively against the exchange and filing criminal charges against individual executives including founder Changpeng Zhao, said two of the sources. Others have argued taking time to review more evidence, the sources said.
 
  • #517
nsaspook said:
https://www.reuters.com/article/idUSL8N3321X6
U.S. Justice Dept is split over charging Binance as crypto world falters - sources
From the article:

"Among Binance’s arguments: A criminal prosecution would wreak havoc on a crypto market already in a prolonged downturn."

Hmm...
 
  • #518
Is that a bad thing or a good thing?
 
  • #519
russ_watters said:
From the article:

"Among Binance’s arguments: A criminal prosecution would wreak havoc on a crypto market already in a prolonged downturn."

Hmm...
Well they say "don't beat a dead horse" but this horse hasn't died yet. If you ask me - "beat it" !

Of course they should prosecute, otherwise this is similar to a thief running away asking the police to pause the chase because he has run out of breath for the moment...
 
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  • #522
nsaspook said:
I suspect the former girlfriend/former Alameda Research CEO Caroline Ellison is cooperating with the feds....
I hope that doesn't keep her out of jail.
 
  • #523
russ_watters said:
I hope that doesn't keep her out of jail.
When you think about it, she was just ceo of a hedge fund that was doing deals. She had no obligation to ftx's customers, since she was nominally unaffiliated with the exchange. The legal responsibility might entirely lie on people who were in charge of the exchange.
 
  • #524
Office_Shredder said:
When you think about it, she was just ceo of a hedge fund that was doing deals. She had no obligation to ftx's customers, since she was nominally unaffiliated with the exchange. The legal responsibility might entirely lie on people who were in charge of the exchange.
I find it really strange that you would assign her less culpability than Tom Brady despite the facts that she's the one who got the stolen money and she ran her operation out of the same office/condo as SBF. It seems pretty clear they were collaborating on the fraud.

And not for nothing, but if she was unaware of it she wouldn't have had anything interesting to tell the FBI.
 
  • #525
russ_watters said:
I find it really strange that you would assign her less culpability than Tom Brady despite the facts that she's the one who got the stolen money and she ran her operation out of the same office/condo as SBF. It seems pretty clear they were collaborating on the fraud.

And not for nothing, but if she was unaware of it she wouldn't have had anything interesting to tell the FBI.

I only said it's reasonably that a lawsuit against Tom brady be permitted, not that he should be found guilty of anything (I think he is not guilty of anything, but the courts should be allowed to decide that).

I didn't say she was unaware of anything, I simply said as CEO of Alameda, perhaps she didn't have a legal obligation to uphold the terms of service of FTX, a totally different company. She could know exactly what SBF was doing, and not have any legal liability perhaps, depending on what SBF was doing.
 
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  • #526
Office_Shredder said:
I didn't say she was unaware of anything, I simply said as CEO of Alameda, perhaps she didn't have a legal obligation to uphold the terms of service of FTX, a totally different company. She could know exactly what SBF was doing, and not have any legal liability perhaps, depending on what SBF was doing.
Knowingly accepting stolen money? Her accepting it was what made it stolen!
 
  • #527
I have a hard time charging Tom Brady. Where does it stop? Actors? Cartoon characters? Will we really be suing Coiunt Chocula and Captain Crunch because their products are sugar bombs? (And would we collect in cartoon dollars?)

It's not clear what we would charge the CEO of a hedge fund for. Bad investments? Not illegal. High fees? Welcome to the club. I don't think it's even illegal for a fund manager to buy an overvalued asset hoping it goes even higher (the "greater fool theory"). Unwise, but people have becomes zillionaires doing it, so what do I know? These funds have pretty tough contracts.
 
  • #528
russ_watters said:
I hope that doesn't keep her out of jail.
I'm pretty sure that little coffee break was orchestrated by the SDNY as a public show of, she's on 'our' side. People have done a lot worse (Sammy ‘The Bull’ Gravano turned on John Gotti) and received a tap on the wrist when the 'Boss' is the target.
Sam Bankman-Fried's ex-girlfriend Caroline Ellison recruits legal team of former SEC official and a lawyer who probed Bernie Madoff Ponzi scheme - as FTX founder's parents fear legal bills will 'wipe them out'
https://www.dailymail.co.uk/news/ar...-Alameda-CEO-Caroline-Ellison-lawyers-up.html
 
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  • #529
Vanadium 50 said:
It's not clear what we would charge the CEO of a hedge fund for.
I may be wrong but in this case of stolen/redirected (ahem...) money (valuables) only the 'knowingly' part might offer any potential/leverage.
 
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  • #530
Is she the one accused of doing the stealing?
 
  • #531
Vanadium 50 said:
Is she the one accused of doing the stealing?

Pure Speculation.
IMO she was likely being set up as the 'fall' person for the fraud. The interviews he did recently, all directed blame mainly to Alameda where she was CEO.
 
  • #532
Vanadium 50 said:
It's not clear what we would charge the CEO of a hedge fund for.
Conspiracy to commit fraud. That's assuming everything about the hedge fund itself was above-board and there's no internal crimes.
 
  • #533
nsaspook said:
Pure Speculation.
IMO she was likely being set up as the 'fall' person for the fraud. The interviews he did recently, all directed blame mainly to Alameda where she was CEO.
Didn't watch the video yet, but from what I've seen he's not accusing her of fraud (that would be higly elastic mud and a risky sling), he's accusing her of running a failed hedge fund. That's not a crime. The crime is in illegally transferring his clients' money to prop it up.
 
  • #534
russ_watters said:
Conspiracy to commit fraud.
That's tough to show. Usually the contract says "You give me $100. I'll keep $10 and invest the other $90. We hope it goes up, but it might go down." This is intended to insulate the fund against angry clients who are unhappy that the fund invested in diseased cattle.

Now, if the reported financials are not what actually happened, that's a whole 'nother kettle of fish.
 
  • #536
Vanadium 50 said:
Is she the one accused of doing the stealing?
Usually just knowingly handling dirty money is already a difficult legal position: no need to do the tricky part personally.

If the basic stuff around the hedge fund were done, then I see no other accusation what could be 'sticky' enough...

Of course: this is just speculation.
 
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  • #537
Vanadium 50 said:
This is intended to insulate the fund...
Insulation is difficult to achieve when the conductors are physically touching. We'll see.
 
  • #538
I believe Ellison was to SBF what Sunny Balwani was to Elizabeth Holmes, just switched genders.
I mean they were in their 20s and ran business together as well as were in a relationship, there is no way she doesn't know what he knows.
Not sure whether it can be proved legally but she is an accomplice to all the charges of SBF.
 
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  • #539
artis said:
there is no way she doesn't know what he knows.
She may even strike a good deal based on that.
 
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  • #540
Vanadium 50 said:
I have a hard time charging Tom Brady. Where does it stop?
Nobody ever said Brady should be charged with a crime, but I guess this is good to know.
 
  • #541
Rive said:
knowingly handling dirty money
Right.,..but who is to say the money is dirty? That's a whole 'nother prosecution. "You can't argue that I should have known if you, with the full power and authroity of the federal government, can't prove it yourself." is an argument that juries can sympathize with.

This is even one step removed when the activity was all in the Bahamas.
 
  • #542
Vanadium 50 said:
Right.,..but who is to say the money is dirty?
Might be one really difficult and long case, sure. Yet, this one alone may stick - stick enough so a deal could be a tempting offer.
We'll see.
 
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  • #543
https://www.cnbc.com/2022/12/13/us-...ud-securities-fraud-and-money-laundering.html

Sam Bankman-Fried criminal charges unsealed: Conspiracy to defraud the U.S., wire fraud, securities fraud, and money laundering​

Civil charges
https://www.sec.gov/litigation/complaints/2022/comp-pr2022-219.pdf
COMPLAINT
Plaintiff Securities and Exchange Commission (the “Commission”), for its complaint
against Defendant, Samuel Bankman-Fried (“Bankman-Fried”), alleges as follows:
SUMMARY
1. From at least May 2019 through November 2022, Bankman-Fried engaged in a
scheme to defraud equity investors in FTX Trading Ltd. (“FTX”), the crypto asset trading
platform of which he was CEO and co-founder, at the same time that he was also defrauding the
platform’s customers. Bankman-Fried raised more than $1.8 billion from investors, including
U.S. investors, who bought an equity stake in FTX believing that FTX had appropriate controls
and risk management measures. Unbeknownst to those investors (and to FTX’s trading
customers), Bankman-Fried was orchestrating a massive, years-long fraud, diverting billions of
dollars of the trading platform’s customer funds for his own personal benefit and to help grow
his crypto empire.
...
5. But Bankman-Fried did not stop there. Even as it was increasingly clear that
Alameda and FTX could not make customers whole, Bankman-Fried continued to
misappropriate FTX customer funds. Through the summer of 2022, he directed hundreds of
millions more in FTX customer funds to Alameda, which he then used for additional venture
investments and for “loans” to himself and other FTX executives. All the while, he continued to
make misleading statements to investors about FTX’s financial condition and risk management.
Even in November 2022, faced with billions of dollars in customer withdrawal demands that
FTX could not fulfill, Bankman-Fried misled investors from whom he needed money to plug a
multi-billion-dollar hole. His brazen, multi-year scheme finally came to an end when FTX,
Alameda, and their tangled web of affiliated entities filed for bankruptcy on November 11, 2022.
32. Bankman-Fried diverted FTX customer funds to Alameda in essentially two
ways: (1) by directing FTX customers to deposit fiat currency (e.g., U.S. Dollars) into bank
accounts controlled by Alameda; and (2) by enabling Alameda to draw down from a virtually
limitless “line of credit” at FTX, which was funded by FTX customer assets.
33. As a result, there was no meaningful distinction between FTX customer funds and
Alameda’s own funds. Bankman-Fried thus gave Alameda carte blanche to use FTX customer
assets for its own trading operations and for whatever other purposes Bankman-Fried saw fit. In essence, Bankman-Fried placed billions of dollars of FTX customer funds into Alameda. He
then used Alameda as his personal piggy bank to buy luxury condominiums, support political
campaigns, and make private investments, among other uses. None of this was disclosed to FTX equity investors or to the platform’s trading customers.
 
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  • #545
Just a summary
Bankman-Fried was charged with eight criminal counts, including conspiracy and wire fraud, earlier in the day, for allegedly misusing billions of dollars in customer funds to prop up his Alameda Research crypto fund. Bankman-Fried was arrested Monday in the Bahamas, where he was living.
https://finance.yahoo.com/news/bankman-fried-ftx-fraud-probe-193135904.html
Up to 20 years per count.

(Reuters) - In mid-2020, FTX's chief engineer made a secret change to the cryptocurrency exchange’s software.

He tweaked the code to exempt Alameda Research, a hedge fund owned by FTX founder Sam Bankman-Fried, from a feature on the trading platform that would have automatically sold off Alameda's assets if it was losing too much borrowed money.

In a note explaining the change, the engineer, Nishad Singh, . . . .
https://finance.yahoo.com/news/exclusive-secret-software-change-allowed-205742135.html
The exemption allowed Alameda to keep borrowing funds from FTX irrespective of the value of the collateral securing those loans. That tweak in the code got the attention of the U.S. Securities and Exchange Commission, . . .
I presume the tweak in the code will be used to show 'intent', in conjunction with the transfer of customer funds.
 
  • #546
Sounds like somebody has been a very bad boy.
 
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  • #547
He had the means motive and opportunity to flee to Cuba. Like Ghislaine Maxwell could be living the high life in Paris. (French citizens cannot be extradited). Surely
he was aware of the crimes, as outlined above. Therefore he has to be delusional to carry on as if he is untouchable.
 
  • #548

New FTX CEO: ‘This is old-fashioned embezzlement’​

 
  • #549
morrobay said:
He had the means motive and opportunity to flee to Cuba. Like Ghislaine Maxwell could be living the high life in Paris. (French citizens cannot be extradited). Surely
he was aware of the crimes, as outlined above. Therefore he has to be delusional to carry on as if he is untouchable.
But Ghislaine Maxwell as far as I know isn't living the "high life" in Paris, she is instead sentenced to 20 years in prison. Given she is 60 that is pretty much for life.
She is in prison now.
https://www.justice.gov/usao-sdny/p...son-conspiring-jeffrey-epstein-sexually-abuse
 
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  • #550
So basically the picture I now have of SBF is this.

Guy uses tricks and the crypto boom to make investors and clients deposit their actual worth something fiat currency in his exchange , in exchange he gives them the pretty much worthless experiment of a currency crypto and uses their real fiat currency to back up his pockets and plans through his backdoor company.
As long as crypto's booming no one notices but then when crypto faces the problems it should have long before faced , all of a sudden turns out his just another guy who lived on debt and now can't repay...

So his life achievement is that he was smarter than others who live on debt so he managed to live better while acquiring bigger debt.So the morale of the story is this, if you simply wish to have what you can't buy - take a loan if they give you one, but if you wish to have all of the things in the world that you can't buy - create a crypto exchange and defraud your investors....
Definitely not original.
 
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