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Author Topic: WHERES THE MONEY?  (Read 1850 times)
beeph
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June 24, 2011, 07:57:39 AM
 #1

Guys this is the #1 question u should be asking right now and this drives at the heart of human motives.  Let me explain to you what's probably going on here

These guys are running an exchange/brokerage, whatever, maybe not legally so but typically the way companies like this are set up is

they have profits/operating expenses, etc (this for mt gox would be their 1.3% fees for profits, expenses would be rent , salary, utilities, etc)
but there's also another account which is typically in a TRUST that holds CLIENT BALANCEs.. to cover withdrawals and deposits.   This trust typically
put ths bank signer as a lawyer or accountant or some impartial third party who's fiduciary duty is to make sure THE SHIT DONT GET STOLEN.

Why... all this red tape and overhead?  Well... we've learned over the last 100 years or so that when u dont have this third party.. THE SHIT ALWAYS GETS STOLEN.

So here's what could very well be happening.  Mercedez or whatever gets fast and loose with the company books.. sure he's making alot of money but he overextends and buys i dont know.. a luxury apartment in tokyo,
or maybe he buys alot of call options on a 'sure thing', figuring he can put the profits back i nthe company account before anyone notices.  

Now think what started happening the week before the hack?  They were having trouble with the 'dwolla API' and people were slow in getting money out.   This means he's using peter to pay paul, banking that
not everyone will ask for withdrawals at once, etc .  But then what happens? a hack.. a panic.. suddenly everyone wants their money out.  They issue reversals thru their banks and credit cards.

Only the money isnt there anymore.. because the owners have been paying it out to themselves as dividends, or salaries (whatever is most tax efficient), or investing it in stocks, or just outright hitting the casino with it, because there was never a fiduciary trust set up to prevent

when a crisis like this .. THE FIRST THING THAT SHOULD HAPPEN IS THEY SHOULD RELEASE A FINANCIAL STATEMENT (CURRENT BALANCE) THRU AN ACCOUNTANT FIRM IN JAPAN THAT HAS THEIR FIDICUIARY ACCOUNT BALANCE AND MAKE SURE ITS NOT ZERO!  Because if they cant produce this balance.. guess what guys.. you can be sure it IS zero.  Right now ALL  REAL information is going through 1 or 2 guys.. period.  This is a CLASSIC sign of fraud.

Them not releasing this information to the public is A MAJOR PROBLEM.  Then they start playing games with stalling and approving low balance accoutns first, cuz if theres a panic its not the price of bitcoins they worry about its their own solvency.

PS THIS IS HYPOTHETHICAL ( I DONT WANNA GET SUED FOR LIBEL )..  But this little scenario plays out  TIME AND TIME AGAIN and is the first place your thoughts should go
WHHAAAAAAAAAAAAAAAAAAAAAAAARS THE MONEY GUYS? Its not 'paranoid' to want to see the trust account balance, its  STANDARD OPERATING PROCEDURE



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realnowhereman
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June 24, 2011, 08:29:20 AM
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While I think we all recognise that the Mt.Gox team has not covered themselves with glory, you have to think about incentives when talking about criminal activity.

Mt.Gox was legitimately pulling in tens of thousands of dollars a day.

Once the exchange is up and running and is secure, it is a license to print money.

How much would they make from stealing balances?  Factor in as well that they would be international criminals as well.

I think on balance, a legitimate three million dollar a year business is worth more than the temporary winnings from any crime they could commit.  Given the growth potential of Bitcoin, it is conceivable that being the first and most established exchange could also end with them earning billions not millions.

Every day that Mt.Gox is switched off is costing them thousands of dollars in lost trading fees; not to mention lost reputation and good will.  I guarantee that they are killing themselves to try and get back online.  I would be.

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June 24, 2011, 08:38:27 AM
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I think on balance, a legitimate three million dollar a year business is worth more than the temporary winnings from any crime they could commit.  Given the growth potential of Bitcoin, it is conceivable that being the first and most established exchange could also end with them earning billions not millions.

that's assuming a successful business forever. one day they might start to cover business expenses with trader's money because they have to or go under.
this has happened before with brokers.

that's the reason the SIPC was created: http://en.wikipedia.org/wiki/Securities_Investor_Protection_Corporation
beeph
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June 24, 2011, 08:39:17 AM
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While I think we all recognise that the Mt.Gox team has not covered themselves with glory, you have to think about incentives when talking about criminal activity.

Mt.Gox was legitimately pulling in tens of thousands of dollars a day.

Once the exchange is up and running and is secure, it is a license to print money.

How much would they make from stealing balances?  Factor in as well that they would be international criminals as well.

I think on balance, a legitimate three million dollar a year business is worth more than the temporary winnings from any crime they could commit.  Given the growth potential of Bitcoin, it is conceivable that being the first and most established exchange could also end with them earning billions not millions.

Every day that Mt.Gox is switched off is costing them thousands of dollars in lost trading fees; not to mention lost reputation and good will.  I guarantee that they are killing themselves to try and get back online.  I would be.


Typically in these scenarios the owners dont set out to be crooks.. they dip into the funds with the intention of 'putting the money right back'.. then something goes wrong, like i dont know, like this major hack, or a law suit, cease and desist letter from the japanese money laundering authority, whatever.. some unforseen circumstance. Also, the writing is on the wall here... the days of easy money are over.. BEST CASE scenario if mt gox even recovers at all will be a fee war with trade hill, severely diminishing margins.   Their best days could very well be behind them.  And that 0.65% (lower now) and diminishing volumes as they share their pie with tradehill... fee compared to 100% theft is a 300:1 ratio or so.

Logically presented with this opportunity I personally could see the temptation with 2 alternatives, one a bankrupt mt gox with a difficult legal future, with stiff competition from tradehill, and potential legal threats from authorites.. and a one time score.  


you dont get it.. the very access to the money is a corrupting feature that history has PROVEN very few people are above, this is why these regulations have ssprung up over the years..  I bet you even bernie madoff started out totally legit.

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June 24, 2011, 01:05:36 PM
 #5

Yeah, but it is a lot less likely to get stolen if there is at least *some* oversight. In every industrialized country in the world that does any amount of equities trading, there are oversight organizations that try to prevent shit from getting stolen. This entire incident simply proves exactly why a free, unregulated market will always fail. Organizations like the SEC did not spring up overnight simply because someone thought it would be a good idea to expand the government. There was (and is) a need for some kind of regulation. Whether or not those organizations still perform the job for which they were originally designed is another matter entirely.

Very few serious speculators will put millions of $ into bitcoin unless there are at least some very basic and minimal safeguards in place to help ensure that they don't get swindled out of their money by the very places they are entrusting their money to. It only takes a couple of incidents in different exchanges for all of bitcoin to become irreparably tarnished. It may already be, depending on how this latest thing turns out.

At least the people Madoff swindled have the cold comfort of knowing he will die in prison. I doubt anyone who gets ripped off in the bitcoin 'free market' will get anything of the sort, since the perpetrators will never be charged.
hugolp
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June 24, 2011, 01:14:47 PM
 #6

Well... we've learned over the last 100 years or so that when u dont have this third party.. THE SHIT ALWAYS GETS STOLEN.

We've learned over the last 100 years or so that even if there is a third party.. THE SHIT STILL GETS STOLEN. Enron, Maddoff, UBS are just a few examples.


This is true, and this shit can happen anywhere. But those three cases happened in a regulated market, not in a free market. Because of regulations those people could leverage to some levels that the free market would have not allowed.
w1R903
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June 24, 2011, 01:18:01 PM
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Mt.Gox was legitimately pulling in tens of thousands of dollars a day.
[...]
Every day that Mt.Gox is switched off is costing them thousands of dollars in lost trading fees; not to mention lost reputation and good will.  I guarantee that they are killing themselves to try and get back online.  I would be.

My question is: if they were pulling in so much money, why haven't they hired competent technical expertise and more customer support?  All he does is hire a part-time ESL teacher (no offense to ESL teachers, I did it once myself)?  I totally agree that each day is costing them massive money, so why not hire more, and higher quality, help.  It's the Intertubes -- they don't have to hire people physically in Japan.

I guess we shouldn't attribute to malice that which can be explained by incompetence, but still, I don't get it.

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June 24, 2011, 01:29:01 PM
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Also, they claim that the reason they are delaying opening the site back up is that they need to process more claims.  While this is a valid reason for delaying opening trading, there is no good reason for not allowing approved users to log-in to their accounts, confirm their balance, and add or withdraw money.

Really, I want to believe them but I can't help but think that it's very possible that Mt. Gox is scrambling behind the scenes to borrow money to make up for some deficit of which we are not aware.

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magik
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June 24, 2011, 02:35:39 PM
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and they think they can process the rest of the accounts in another 24 hours?  I hope they are extrapolating correctly, because the other update said 10% were done, lets say 20% were done by the update 6ish hours ago... are they really gonna process the other 80% by 24 hours?

I agree my gut tells me this isn't malice, but all these delays and the lack of information and transparency coming from them is just down right frustrating
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