A Cryptsy Opinion [Poll Added] [Poll reset]

[no-ice-please]

This with reference to the announcement on the blog at http://blog.cryptsy.com/

The two exchanges I've trusted and used the most are Bitfinex and Cryptsy. Cryptsy has done good by me so I'm hoping they get past the current problems.

In 2013 I was hacked and asked them to freeze my account. John or someone sent me an email with the word "FROZEN" and I sent all the coins that hadn't been stolen there. Over the next week or so I tried to get my account unfrozen and they were excessively cautious. I finally started getting pissed and sending them hostile email and they freed up my coins. They were excessively cautious and would not free up my coins until they knew they were dealing with me and not the hacker. It was a little annoying waiting but in retrospect they did save my ass. I'm often times homeless and have few resources besides some coins so it wasn't a small favor to save a few of my coins.

Their blog offers three option

1) Fold > bankruptcy > legal quagmire for coinholders

2) Sell Cryptsy to another entity > risky for coinholders and possible discounted coin balances

3) Recover hacked funds and continue

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In my opinion, most people would probably agree, Cryptsy did not handle the hack in a photogenic way but in a practical sense they may have had little choice. If they had announced the hack immediately they probably would have folded. As things are they are potentially surviveable. In strict business terms they managed a difficult situation in a reasonable way, even if it looks bad.

Important to remember that there was never any misconduct by anyone at Cryptsy and aside from their carelessness with regard to hackers and their overly practical response to the hack (or lack of transparency if you like) they handled things as best they could.

There was never any deliberate fraud on the part of anyone at Cryptsy, as there was at Gox and a few others, only a sort of desperate business attempt to survive.

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So my opinion.

I trust the folks at Cryptsy to run their business honestly, which they have always done. Financial transparency regarding their solvency and other issues related to the hack is the only sticking point.

If they publicly / transparently give information of their assets and liabilities (i.e., customer deposits) and limit withdrawals for current customers to whatever is needed to maintain their viability as an exchange, I would gladly continue to use them.

There are a lot of exchanges out there. Most of them have a fly by night aura to them. Cryptsy is run by ethical folk. They aren't going to outright scam anyone, like a lot of other exchanges have and will. If the exchange is sold to another entity I will bail, even at a discount on my coins. If it is slowly stabilized by the current folks I will continue dealing with them.

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More options added to the Cryptsy blog today

4. Spread the loss to all users in the system and allow trades to continue.

5. Restrict withdrawals on short balanced coins, allowing withdrawals on a first come, first serve basis upon availability.  

6. Place existing user balances of BTC, LTC into a frozen state and release funds as they become available from fees collected.  

7. Find an investor or group who wish to invest into the operations or provide a loan.

(...)

I’m seeking known leaders in the community who want to participate in an advisory board on how we can keep Cryptsy operational for the users.

Advisory board / community management & recovery option added to poll 1/16/2016

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Going to reset the poll and re order the options, mainly to see if the order affects anything, and because the "community managed recovery" option is new and might be an important option.

Before the reset here were the results

Fold, management commit hari kari  14 votes (35.9%)
Sell out to white knight 9 votes (23.1%)
Bankruptcy 7 votes (17.9%)
Try to recover 8 votes (20.5%)
Other (give details in your post) 1 vote (2.6%)
Advisory board / Community managed recovery (added to poll later)  0 votes (0%)
   
Total Voters: 39

[markm]

Going bankrupt will be more than a quagmire, as it will very likely result in many coins having their value destroyed by being dumped to try to pay off the losses.

For many coins they would probably get a better price by treating them as already sold, for the bitcoin people sent in there to buy them, as that would value them at the prices people actually already paid for them.

In other words instead of dumping them treat them as already having been dumped, deliver them to their current owners of record in the exchange.

After all it is things like bitcoin and litecoin they are short of, all the other coins people already paid litecoin and bitcoin for have already done their part in helping recover the bitcoin and litecoin losses by having already been sold off for such coins.

For many of the coins there is now nowhere TO sell them anyway, so they already had their last sale already did their part in helping restore the balances of the stolen coins...

Unfortunately it seems likely "bankruptcy trustees" would not handle them that way, instead dumping them destroying their value and not incidentally stealing them from who-ever currently holds them on the exchange. Though they would not call it stealing it kind of obviously and clearly would be.

-MarkM-

[BitcoinNational]

Sell out to white knight, new base pair, orderly with draw

1.  12k BTC is the claim, and supposedly now reduced to 10k via running a ponzi exchange for nearly 2 years.
2.  likely still more but 10k btc is easy math  
3.  New owner assumes the debt but needs just 1cent on the $ to get things back up.  
4.  This means only 100 BTC pledged, and creditors are given BTC and LTC 'Cry' tokens that can be trade/sold, the new owner with that 100 BTC stack pledges to be buyer of last resort @ 1 penny.
5.  In the mean time a liquid (likely ripple) acts as the base pair since BTC and LTC markets are very broken
6.  ALT coin holders can trade and exit
7.  In a few months BTC and LTC  markets can be restarted, granted anyone still wants to trade there
8.  Despite the debacle Cryptsy is an established market/business $50-$90k seems a bargain
9.  "Going bankrupt will be more than a quagmire" it would be a nightmare.  And it is to the benefit of BTC, LTC, XRP, Doge, Dash, and NXT whales to fund some kind of take over that makes all but the BTC/LTC creditors whole and avoids crypto getting tossed into deeper regulatory waters.

[edmundduke]

I went with the only real option in that list and that is the first one. In reality most likely the "hacker" will never be found as it is most likely vern himself. I hope he at least looses in court and will have to pay back everything lost + does jail time. Maybe it will then serve as a warning for other exchanges.

[dustint]

At some point they better let us withdraw our altcoins that we have paid for!   Why hold all altcoins hostage?

[no-ice-please]

... most likely the "hacker" will never be found as it is most likely vern himself. I hope he at least looses in court and will have to pay back everything lost + does jail time. Maybe it will then serve as a warning for other exchanges.

I understand being pissed off about losing money, but it's important to place 'blame' in the right place.

Did Vern or anyone else at Cryptsy actually do anything crooked?

Or did they just get hacked and then try to survive the attack?

Did Vern or someone else at Cryptsy do something that you would not have done in a similar situation?

[BrewCrewFan]

... most likely the "hacker" will never be found as it is most likely vern himself. I hope he at least looses in court and will have to pay back everything lost + does jail time. Maybe it will then serve as a warning for other exchanges.

I understand being pissed off about losing money, but it's important to place 'blame' in the right place.

Did Vern or anyone else at Cryptsy actually do anything crooked?

Or did they just get hacked and then try to survive the attack?

Did Vern or someone else at Cryptsy do something that you would not have done in a similar situation?

Of course, not letting the public know way long ago this had happened. Most people put faith and trust the funds were going to be there. We all thought they were whole, not doing a ponzi... and yes, this is a very good example of close to being a ponzi.

You notify your users and then let the cards fall where they may. Your eventually will be exposed one way or another, it might be the next day or 2 years if you do not, but it will be found out.

[vhong]

At some point they better let us withdraw our altcoins that we have paid for!   Why hold all altcoins hostage?

I doubt it at this point they will probably use those coins as compensation for their losses.

[no-ice-please]

Of course, not letting the public know way long ago this had happened. Most people put faith and trust the funds were going to be there. We all thought they were whole, not doing a ponzi... and yes, this is a very good example of close to being a ponzi.

You notify your users and then let the cards fall where they may. Your eventually will be exposed one way or another, it might be the next day or 2 years if you do not, but it will be found out.

Ideally that is the best approach in any situation.

In this case though if they had announced the hack immediately the exchange would have closed immediately, almost all funds would have been lost and there would be nothing gained by anyone except the hacker.

1) A Ponzi scheme is a kind of scam where later deposits are used to pay off early investors, and which is run as a deliberate fraud with no intent to profit anyone except the operator.
a) The first (later deposits used to pay off early investors) is sort of close, they used later deposits to keep the exchange alive as they looked for a solution.
b) But the essential part of any scam, the intent to profit by deliberate fraud, just doesn't apply. The Cryptsy people could have announced the hack, bailed early and they would have lost nothing. Only those of us who used their exchange would have lost. Instead they took an extreme chance with their reputations, with nothing to gain for them personally, honestly, and tried to solve things.

2) Using the word "exposed" also is misleading. What exactly were they "exposed" of? It was exposed that they tried to survive a major hack and salvage their business and fulfill their obligations to clients. As far as I know not any person at Cryptsy profited, nor tried to profit, from the attack. Rather, instead of taking the easy step of bailing, they put themselves in a deeper, riskier spot. Obviously they knew that if they failed they would pay the price they are paying now, public excoriation (if that's a real word  ).

3) I don't know if I, or most people, would have done what they did. Most folks, including me, try to cover our asses by following rules strictly, so we can say "Hey look, I did everything by the book", even if everything ends in the shitter. But I respect that they knew that they stood to lose a lot, and gain nothing, and yet they still went forward with an obviously risky approach.

That said, I totally understand your sentiment, and that of others who say that the Cryptsy folk are scammers or whatever. I understand the sentiment and appreciate the way you summed up what most people believe, but I disagree.

[kelsey]

i put other, as in Big V goto jail, do not pass go do not collect 13 000 bitcoin type scenario   

[qwizzie]

Lets not forget Cryptsy also banned people (some got banned for life) for raising the withdrawel issues on their forum and
engaged in a total feedback freeze towards complaint tickets that people were sending them. I'm pretty sure they broke
some rules of conduct there and were acting in violation of their own terms of agreement (TOA).


   

[Snail2]

It would be nice to see Cryptsy operating again, but under new management, or under the supervision of a third party independent organization. Maybe converting the lost coins to some sort of shares can be another survival option.

BTW, what about the other exchanges? Back in that time LK7 was traded elsewhere as well.

[no-ice-please]

Lets not forget Cryptsy also banned people (some got banned for life) for raising the withdrawel issues on their forum (...)

If accurate, that is Stalinesque, wasn't active enough to be aware of that.

'Oh what a tangled web we weave when first we practice to deceive'.

BTW, what about the other exchanges? Back in that time LK7 was traded elsewhere as well.

Hmmm

[Zer0Sum]

i put other, as in Big V goto jail, do not pass go do not collect 13 000 bitcoin type scenario   

Cryptsy became a systematic, premeditated Ponzi the day they allegedly were "hacked"...
Announcing various expansion plans and services and selling shares in Cryptsy, opening Cryptsy Canada...
In other words, comingling funds from new Customers to keep paying off older Customers (sporadically).

This worked for about 15 months...
But these are multiple felonies that will get you 10+ years in prison in Florida... seriously, the principals need to do hard time.

[barwizi]

I don't buy the hacking story. Cryptsy has a long record of bad behavior, the number of fiascos that happened before culminated in this latest gig.

I'd also advise strong caution when dealing with the next three or ten exchnages that are going to pop up trying to take advantage of the situation. 

[Bobsurplus]

Why dont you guys get it. Vern is going to jail for what he did.
He was running a fractional reserve exchange for over 12 months, tried to cover up a "massive hack" and then still allowed people to deposit funds for months while denying withdrawals.
All of the above is illegal.

His site, databases and any remaining coins will soon be seized by the FBI and a criminal investigation will begin.

I doubt anyone who lost btc or ltc there will ever see any of their money.

Just gotta deal with the facts yall.

[Meech]

Haven't these exchanges learned anything?  CoinEx did the same thing by blaming someone else but this is worse by not mentioning it to anyone before now.
I understand not leaving coins in an exchange but for those who trade repeatedly it's hard to remove them each time. 
What can an exchange use as a guarantee that your funds are safe?
Gox, CoinEx and Cryptsy need to be fined on top of everything else.

[FinanceUS]

Cryptsy shall allow withdrawals of all alts not getting hacked. Those alts are innocence.

[no-ice-please]

A few hours ago Cryptsy opened up 50 wallets for withdrawals.