There is a mind-boggling amount of notional value in derivatives.  It would not surprise me if something much less than a downgrade or limited default triggered some issues here, and I would be surprised if either of these two events did not.

There is an argument that the _net_ value is not high, but it can also be pointed out that as counter-parties go poof, net value approaches notional value.  (Explains 'to big to fail' in my mind.)

Now, in the event of a derivatives related crisis there might be some short term relief by changing accounting rules (again) and redefining or re-interpreting various things, but I would not bet on these to have any lasting effectiveness...if much effectiveness at all.

Like the Lehman deal, there are probably a lot of not generally considered issues which could pop to the surface if the near-boiling pot is disturbed.  Here's an interesting vid for those who may not have seen it.

  http://www.deepcapture.com/naked-short-selling-redefining-systemic-risk/

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But to your question, I have a friend who does the following:

 - gold bullion
 - property
 - junk silver
 - USD in several bank accounts and some in safe deposit boxes.
 - bitcoin

He does not have any other financial instruments as he feels it unlikely that a functional legal system will be around to assist him in collecting his assets in a scenario where he would actually need them.  A functional legal system is likely to exist...it's just that it will not be his interests which are high on it's priorities.

I heard mention on Bruce's show about this comment and it stirred my interest.  Looking back at 'Lanie Grace's blog, I see that he has not yet lived up to his promise to provide updates or defend his plainly wrong assertion that Tradehill was not responsive.  It's right there in the comments for God's sake!

If I had to guess, I would suppose that after facilitating apparent libel on the part of Dwolla, he must have decided to shut up...or been told to do so.  Probably a wise move.

Cool!  Keep the users calm while Dwolla loads the lifeboats with their money.  In trade, Dwolla can kick back enough to keep you solvent.  Mutually promise not to sue one another.  Keep it silent and noone will be the wiser.  Everyone wins.  Modern business 101.

Just kidding...I of course don't know that Mt. Gox is doing that and I highly doubt it.  I'm sure our VC brain trust here would highly approve of the strategy though.

Nicely put Panda, but I'll abbreviate and add an option...


Or alternately, please stick around and keep reminding us why it could be a better world if the Bitcoin project evolves in a particular way and to keep an eye out for the armies of slimy degenerates who will be trying to creep in.

My confidence in the US justice system is very very low and has been since Bush-II was installed.  So ya, it would not surprise me at all if Tradehill did not get a fair shake.

On the other hand, as long as the selection process is not managed carefully by TPTB, it is possible to end up in yet-to-rot parts of our system and have a fair result in spite of the corruption.  More-so than in most countries I would guess.  There would have to be something a lot bigger than a piddly little $37k at stake to warrant a reliably managed miscarriage of justice (and there well could be.)

One invention of my conspiratorial mind is the hypothesis that this is mostly a bait to lure Tradehill into a trap.  Happily, due in large part to their apparently being quite on top of things, justice is more of a nice-to-have than a must-have (if Jered is to be taken at his word.)  A lot of Tradehill's competition seems to have gone through an interesting 'no problem here...er...maybe a little problem...er...<silence>' series of phases.

I won't bother to respond to the more absurd parts of your synthesis of events...95% of the people who look at this situation find your (ilk's) construction laughable, and a fair fraction of the rest display extreme shill-like characteristics (imo.)

My guess is that BitcoingEXpress/OrangeSun is an escapee from the Republic of Sockistan.  Happily forum.bitcoing.org has the good sense to offer refugee status for general amusement.  It must be dawning on him by now that this isn't the typical day-trader/silver-bug forum.  Maybe not though...he does not seem all that quick on the uptake.

Another hypothesis is that he is actually trying to bring Dwolla down and elevate Tradehill.  Seems like every time he shows up he gets his balls pounded flat and Dwolla gets another shiner.

Oh ya...I would be remiss to not mention that I am blown away by and in love the bitcoinity charts.  They are simply awesome and very impressive.

A slight complaint about the wording in the (very usably implemented) help section is nothing.

I'll shut up and quit talking to myself on this thread now.

Probably some of them became aware of Bitcoin as an alternate to their Cayman Islands accounts.


Did any of them seem to not take it as a matter of principle that two businesses should silently collude to screw their mutual customers?

Hopefully Bitcoin will not devolve toward a business-as-usual cesspool of corruption.  I'm not holding my breath, but I do have some hope because there it seems to me that us peons have a much greater potential to vote with our feet using this monetary system.

I got fed up with not understanding this and decided to do some experiments.  Wanted to make some purchases anyway.

I added several bids orders on Tradehill for below the market price.  I saw them show up on bitcoinity within seconds as upward direction green bars on the left side.

Next I added a bids for well over the market price.  Unless there was really bad luck, I spotted this as a green downward direction bar on the _right_ side.

Obviously my order was filled.  It was filled in a couple of transactions for within 10 cents of the current market rate (well below my bid) as I expected.

So, I would say that the WTF text is basically misleading by saying that left side means bid offer changes.

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Realizing that Tradehill is not the largest exchange, I still had something of a sense of empowerment to be able to 'move the market' a noticeable amount with some ease.  Hopefully this means that someday I'll look back and consider myself an 'early adopter' (and hopefully be happy about it.)  I really would most likely have got into it in early 2011 if I had not been busy with other things.  Oh well...win some lose some.

Null posts still counts as a post.  Were you lying when you said you would vamoose, or did you just forget to change your socks?

BTW, it must suck for someone who knows so much about VC to have dumped the steaming pile of shit that is Dwolla into your clients brief cases.  Good luck in your recovery.

And as for your prediction the Tradehill is going to do something that they have offered to do at every opportunity, forgive me if I am unimpressed by your prescience.

I cannot help but add my suggestion to that list: currencies/monetary systems.

Thanks for the reply Jered, but...

On a recent Wagner interview, CampBX (Keyur?) seemed to indicate that he is having detailed discussions with Dwolla about how to mitigate the fraud that you guys have uncovered.  And that the announcement of a solution was to be forthcoming.  The question of why the disproportionate level of attention and communications between Dwolla's customers is what I am interested in in this particular post.

In other news, I just added to my TH funds so I could be positioned more flexibly should any unpleasant and unexpected fallout come out of 8/2/2011.  That is to say, while all of my eggs are by no means in one basket, Tradehill's word to do right by their customers has some level of equivalence to my faith in Wells Fargo's ability to look after my assets.  You guys alone seem to have detected, quantified and communicated the damages and told us how you expect to handle situation.  That means a lot to me.

That seemed very odd to me as well.

As I hypothesized on another thread, perhaps there are NSL's involved.

http://en.wikipedia.org/wiki/National_Security_Letter

Hypothesis alert!  (These kinds of ideas hit me when I am in the shower somehow and I just got out.)

Two things seem particularly mysterious about this issue:

1) Dwolla's silence and unwillingness to communicate with Tradehill for no understandable reason.

2) The seemingly disproportionate effect on TH vs. all other exchanges.

The idea which hit me is that for the last decade or so 'national security letters' have been being used like confetti (in the US.)  An interesting feature of these is that complete silence on the part of the involved parties is demanded and usually obtained.  So, for example, the NSA can not only walk into a library and demand their checkout list, but also compel the Librarians to not utter a word about it.  (A few years ago Librarians 'struck' and destroyed all of their records in disgust as I recall.)

So, I wonder if Tradehill is the target of a national security investigation?  It was not to long ago that certain congressmen were making noise along these lines about Bitcoin generally, and Tradehill seems to me like it could be a high-value target.

Part II of my hypothesis is that TH may have been being specifically set up and hence the disproportionate malfeasance that they seem to have encountered.

I dunno...sounded right to me at first glance to say the truth.


Tradehilll didn't lose me as a customer.  In fact, I have found their actions thus far to have been about the best that could be done under a very trying set of circumstances.  (Of course we've only heard there side of the story...nothing yet from Milne...)

Had Tradehill dropped Dwolla with no explanation and refused to provide one (and if I as a non-Dwolla user had noticed) I would have been pretty suspicious.  I'm suspicious of everyone, including Tradehill, but less so now.  I still keep as little $$$/BTC as practical with them however out of general principle.

I was not inclined to get a Dwolla account, but if I had been I would be extra thankful to Tradehill for the useful information about their practices and methodologies.  If Tradehill is 50% accurate in their reports, it is hard to see how Dwolla survives.  The main question is who eats the losses...the users or the angel investors.

I've followed the details with interest.  Tradehill's statements leaves the impression that an explanation of the problem, much less and acceptable solution, was not forthcoming.  Yet some random blogger can get the details about a third-party's issues out of tech support with no problem?

If the info given to a blogger by Dwolla was factually incorrect, did harm to Tradehill, and was published, that strikes me as 'pretty wrong' on the part of Dwolla.  How wrong?  Time will tell.

I thought that it was interesting that a blogger was, apparently, able to get right through to Dwolla and obtain fairly detailed information about what the problem is:

  "I contacted Dwolla Customer Service who explained to me it was TradeHill improperly crediting the accounts of users prior to confirmation that the transactions had cleared. "

  From: http://fmqinc.com/tradehill-bitcoin-exchange-fraudulent-scandal/

Hopefully if/when Milne responds, he'll be able to explain the apparent discrepancies between the above statement and the CSVs and/or a little bit more on how the CSVs, balances, etc were supposed to have been interpreted and why.

Failing that, I would add to the list of complaints against Dwolla, defamation and libel.

You sound pretty confident of that.  I'm not so certain.  You probably don't live in Afghanistan or Iraq.

I, for one, have some fraction of my net worth hedged on this possibility.

I expect that PM's would serve a similar function and be more reliable, but the proliferation of body scanners, divisibility issues and such render PMs a less flexible form in some scenarios.

I figure I have another 40-ish years left and suspect that it is more likely than not that we will experience a global financial disaster sometime within that time frame.  Or at least one in my country.  I guess I would reserve the term 'disaster' for something which would be unexpected.  In my mind, what I am expecting is more of an 'expected reset event' which is baked into the cake for all debt based monetary systems.

Heh...'clawing back'?  I'm not sure I would be quite so charitable in my choice of words.  Defrauding someone else to make up for your losses could, I suppose, be characterized as 'clawing back', but I would not label it as 'successful' just yet.  I'll wait to see what comes out of the justice system first.(*)

Seems to me that Dwolla has chosen to be in the business of dealing with private individuals via banking institutions to get a chunk of their money.  Why, and how, would an entity like Tradehill be expected to be involved in the transaction between Dwolla and the end user?  Dwolla needs to figure out how to adjust their business model(**), advertising, and competence to a point where they can do their job or exit the industry, or at least not mis-lead and ignore their customers (imho.)

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(**)  I've hypothesized that a part of Dwolla's business model may be to collect usage pattern data which is a common one these days.  This incident counts (in my mind) as negative evidence in this hypothesis because I would not expect them to jeopardize their business for a few bucks in this case.

(*) Does Tradehill, having some parts of their operations in Chile, have full access to the US justice system?  I don't know whether I hope so or not.  I choose Tradehill with some hope that the US justice system and it's other organs did not necessarily have full access to Tradehill.  ('Full access' in these days of 'war on terror' being a more encompassing term than it used to be.)