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Author Topic: Poloniex's taking money from its customers to cover its loss  (Read 1836 times)
stormos
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June 28, 2019, 08:55:56 AM
 #61

I blame following polo's mistakes in our loses
Intransparency. Poloniex lending market is intransparent compare to bitfinex where you know total and your personal exposure to a collateral asset. Obviously polo have changed their loss management policy after the incident
Lack of risk management procedures on the exchange side. Our funds was the main (and only) driver for the whole pump. Probably pumper(s) had intention to rob us at the very beginning. In this case, polo should seize pumper’s assets and give it to us.
If polo will fail to obtain funds from borrowers/pumper, we should get portion of 15% lending fee until full repayment
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countryfree
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June 28, 2019, 09:35:03 AM
 #62

I've found a willing lawyer if there are people interested, but the status of the case will depend of the number of victims...

have you managed to track down other victims? at 1800 BTC generalized loss (1620 BTC if 10% was refunded) there must be some big lenders affected. i'm surprised at how quiet this story has been.

i'm assuming polo hasn't said a word since they refunded the 10%? they should at least establish some sort of payment plan out of their profits like bitfinex did after they were hacked.

I've found only 3 other people so far! Don't know where to find the other victims... And no news from Poloniex since they gave 10% back. I've asked support about waht's next, but no answer so far...

Now getting legal advice, I've been told that proving there was a fraud would be very difficult, unless having access to Poloniex's whole data, but there was definitely a mistake. Things like this, that CLAM crash because of crazy margin trading, should never happen.

If you're looking for a trading/lending place, better avoid Poloniex, as it socializes losses. Learn more about it on this topic.
stormos
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June 28, 2019, 10:02:30 AM
 #63

Polo victims telegram group https://t.me/joinchat/Dn0zBRZOyaYnp6O8oDsLAw
countryfree
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June 28, 2019, 07:26:39 PM
 #64

Yeah, sure! It's the group from the lending bot Coinlend; it's an open group and the link is the following: https://t.me/CoinlendOfficial

Thanks for info, but actually, I won't join that group. It's quite possible it was a bot which made the CLAM sh*tcoin crash. I don't trust bots, Poloniex should not allow them...


Thanks a lot, I've just joined that group. We shall be all individual private investors there.


If you're looking for a trading/lending place, better avoid Poloniex, as it socializes losses. Learn more about it on this topic.
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June 28, 2019, 11:05:14 PM
 #65

Now getting legal advice, I've been told that proving there was a fraud would be very difficult, unless having access to Poloniex's whole data, but there was definitely a mistake. Things like this, that CLAM crash because of crazy margin trading, should never happen.

I wouldn't think fraud would be the angle here. Something like negligence with regard to capital and margin requirements, maybe.

Does anyone know what jurisdiction this case would fall under? Did the lawyer you spoke to say? As a US company, capital and margin requirements would normally be covered by CFTC regulations. Since US persons aren't allowed to lend or margin trade on Poloniex, I'm not sure they apply here.

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June 29, 2019, 12:38:36 AM
 #66

I see rates are down to 2% apr again. I guess lenders there are just gluttons for punishment? Lips sealed
countryfree
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June 29, 2019, 10:48:14 AM
 #67

Now getting legal advice, I've been told that proving there was a fraud would be very difficult, unless having access to Poloniex's whole data, but there was definitely a mistake. Things like this, that CLAM crash because of crazy margin trading, should never happen.

I wouldn't think fraud would be the angle here. Something like negligence with regard to capital and margin requirements, maybe.

Does anyone know what jurisdiction this case would fall under? Did the lawyer you spoke to say? As a US company, capital and margin requirements would normally be covered by CFTC regulations. Since US persons aren't allowed to lend or margin trade on Poloniex, I'm not sure they apply here.

Yes, negligence, but there's also the fact that socializing losses is illegal in the US. Poloniex says it's OK because it wasn't offering its services to US customers... Easy answer!

I see rates are down to 2% apr again. I guess lenders there are just gluttons for punishment? Lips sealed

Yes, very stupid. Now that we know that lending is unsafe at Poloniex, doing it to earn a measly 2% is plain stupid.

If you're looking for a trading/lending place, better avoid Poloniex, as it socializes losses. Learn more about it on this topic.
PrimeNumber7
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June 29, 2019, 10:04:04 PM
 #68

they should at least establish some sort of payment plan out of their profits like bitfinex did after they were hacked.
I don't think poloniex plans on using money from their profits to repay lenders. I believe their intention to solely use coins recovered from defaulted borrowers. At least this is my understanding

That is my understanding as well, and that's what's stated on their announcement since the beginning. They've shown no intentions to make amends.

I personally think that they should at least take some responsibility over this ordeal. They were stupid enough to let the CLAM/BTC pair to be traded on margin despite knowing full well that the liquidity of clams were extremely low, as I've stated before. They even acknowledged this themselves. If you acknowledge that, then why aren't you taking responsibility?

There is language in their TOS that I believe relives Poloniex from legal responsibility from covering the losses. This means that only mechanism to force Poloniex from taking responsibility is the market. In other words, you need to be willing to vote with your coin, and let it be known this situation is why you are no longer using their platform -- if enough other people do the same, they may decide to use their own money to repay some of the losses; I don't think this will happen unless lending rates on Poloniex become much higher than on competing platforms. If borrowing rates on Poloniex are higher than on other margin platforms, traders will not want to use Poloniex because they can trade on margin elsewhere with less costs.

I was not personally affected, and I cannot lend on Poloniex, but this situation makes me to want to not use Poloniex in the future.

I see rates are down to 2% apr again. I guess lenders there are just gluttons for punishment? Lips sealed
I checked coinlend.org and I see around 3.1% p.a. compared to 2.1% on bitfinex and 1.1% on quoine. Maybe there are enough people not paying close attention to bid down the interest rates this low.

I think at a minimum, lenders would need an 8% pa premium over competitors to make the risk worth it.

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figmentofmyass
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June 29, 2019, 10:58:19 PM
 #69

There is language in their TOS that I believe relives Poloniex from legal responsibility from covering the losses.

terms are not enforceable in court where they contradict the law. so the question of jurisdiction is crucial here. like countryfree said, haircutting balances with a generalized loss is 100% illegal in the USA, where poloniex is organized. but IANAL and i dunno if they've dodged a bullet by restricting USA customers from this market. if so, what laws apply here? EU? various local laws where lenders reside?

i wouldn't be surprised if the EU offered similar protections to the USA but i have no idea where to start researching the law.

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June 30, 2019, 06:27:31 PM
 #70

There is language in their TOS that I believe relives Poloniex from legal responsibility from covering the losses.

terms are not enforceable in court where they contradict the law. so the question of jurisdiction is crucial here. like countryfree said, haircutting balances with a generalized loss is 100% illegal in the USA, where poloniex is organized. but IANAL and i dunno if they've dodged a bullet by restricting USA customers from this market. if so, what laws apply here? EU? various local laws where lenders reside?

i wouldn't be surprised if the EU offered similar protections to the USA but i have no idea where to start researching the law.

Yes, the case is difficult. What Poloniex has done is illegal in the US, but the exchange says we can do it because we're not offering this service to US citizens. It's a bit like saying drugs are illegal, but there would be nothing wrong selling drugs to a Chinese tourist...

There's also lots of regulation for consumer and investor protection in the EU, but they would not apply to investments outside the EU.

Poloniex is based in Boston, so justice has to be there.

If you're looking for a trading/lending place, better avoid Poloniex, as it socializes losses. Learn more about it on this topic.
PrimeNumber7
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July 01, 2019, 05:20:15 AM
 #71

There is language in their TOS that I believe relives Poloniex from legal responsibility from covering the losses.

terms are not enforceable in court where they contradict the law. so the question of jurisdiction is crucial here. like countryfree said, haircutting balances with a generalized loss is 100% illegal in the USA, where poloniex is organized. but IANAL and i dunno if they've dodged a bullet by restricting USA customers from this market. if so, what laws apply here? EU? various local laws where lenders reside?

i wouldn't be surprised if the EU offered similar protections to the USA but i have no idea where to start researching the law.
I am curious to know why you believe "haircutting balances with a generalized loss" is illegal in the US. I think this is exactly what happens to depositholders at banks whose deposits exceed FDIC insurance limits when they fail.

I would also point out that I do not know if Poloniex has shareholder equity equal to or greater than the amount of the loan losses. If equity is less than the amount of the loan losses, suing Poloniex may only result in you paying a lot of money in attorney fees, and Poloniex declaring bankruptcy.

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countryfree
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July 01, 2019, 08:10:53 PM
 #72

Poloniex declaring bankruptcy.

What's wrong with that? It would still be better than keeping the business running as usual as it is. At last, the world would be sure this won't happen again.

If you're looking for a trading/lending place, better avoid Poloniex, as it socializes losses. Learn more about it on this topic.
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July 02, 2019, 07:13:58 PM
 #73

Does anyone here is a regular poster on Wikipedia, or knows a journalists?
Thanks.

If you're looking for a trading/lending place, better avoid Poloniex, as it socializes losses. Learn more about it on this topic.
stormos
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July 03, 2019, 09:50:50 AM
 #74

maybe we should push poloniex to increase minimum rates to 20% apr? It's pretty still low for traders. Exchange fee goes up 10 times and some of this increase can be directed to covering our losses.
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July 03, 2019, 03:59:26 PM
 #75

Roughly $13.5 million USD is lost and we have to count cost for that.
I think now it's time to give a concern at margin trading, need to remove margin trading which have poor liquidity like BTC, CLAM.
Not only poloniex, I want to say it is a lesson for all, All exchange should be concern about margin market otherwise user faith will certainly be lost.
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July 03, 2019, 06:32:34 PM
 #76

maybe we should push poloniex to increase minimum rates to 20% apr? It's pretty still low for traders. Exchange fee goes up 10 times and some of this increase can be directed to covering our losses.


hmm, lending rates are directly linked to demand from margin trading. I don't want another sh*tcoin collapse...

Besides, I've removed most of my coins. I only have about 0.1 BTC left at Poloniex. I just don't trust it anymore, and who can?

If you're looking for a trading/lending place, better avoid Poloniex, as it socializes losses. Learn more about it on this topic.
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July 03, 2019, 06:38:39 PM
 #77

hmm, lending rates are directly linked to demand from margin trading. I don't want another sh*tcoin collapse...

Besides, I've removed most of my coins. I only have about 0.1 BTC left at Poloniex. I just don't trust it anymore, and who can?

Has this scandal had a material effect on P2P lending liquidity, or are lenders generally just eating the loss and continuing on as normal? Where can we view statistics about outstanding P2P loans and interest rates? I'd have thought lenders would withdraw funds en masse and this would naturally drive interest rates up.

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July 04, 2019, 06:18:08 AM
Last edit: July 06, 2019, 07:38:37 PM by PrimeNumber7
 #78

Poloniex declaring bankruptcy.

What's wrong with that? It would still be better than keeping the business running as usual as it is. At last, the world would be sure this won't happen again.
There is nothing wrong with this per se, but I would repeat that I do not believe this is a winning case. I would also repeat that I believe the right thing to do is Poloniex to cover the losses, I do not believe they are legally required to do so.

If you did bankrupt Poloniex, I believe you would spend a lot of money out of your own pocket doing so, and any money you do recover would probably not cover any legal expenses you incur.

Does anyone here is a regular poster on Wikipedia, or knows a journalists?
Thanks.
Both Paul Vigna and Steven Russolillo have covered bitcoin recently:

ETA/removed email addresses

There are some writers at Forbes also, but IMO they lack credibility. I don't know any of these people personally.  

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July 04, 2019, 02:20:08 PM
 #79

Poloniex declaring bankruptcy.

What's wrong with that? It would still be better than keeping the business running as usual as it is. At last, the world would be sure this won't happen again.
There is nothing wrong with this per se, but I would repeat that I do not believe this is a winning case. I would also repeat that I believe the right thing to do is Poloniex to cover the losses, I do not believe they are legally required to do so.

If you did bankrupt Poloniex, I believe you would spend a lot of money out of your own pocket doing so, and any money you do recover would probably not cover any legal expenses you incur.
That depends on how Poloniex is set up. If the money of customers' is in custodial accounts, (which i think might be required by law?) then in the case of a bankruptcy, those funds won't/can't be collected, and will be returned to the account holders.

I am curious to know why you believe "haircutting balances with a generalized loss" is illegal in the US. I think this is exactly what happens to depositholders at banks whose deposits exceed FDIC insurance limits when they fail.
Hmm. It was only socialized between other margin traders right?
Still, scum behaviour.

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July 05, 2019, 01:42:50 PM
 #80

hmm, lending rates are directly linked to demand from margin trading. I don't want another sh*tcoin collapse...

Besides, I've removed most of my coins. I only have about 0.1 BTC left at Poloniex. I just don't trust it anymore, and who can?

Has this scandal had a material effect on P2P lending liquidity, or are lenders generally just eating the loss and continuing on as normal? Where can we view statistics about outstanding P2P loans and interest rates? I'd have thought lenders would withdraw funds en masse and this would naturally drive interest rates up.

A 1,800 BTC loss, I've lost myself more than 1 BTC, and I just can't eat it. This is no business as usual. I don't think there are stats available. I guess Poloniex have some, but they're hiding it. We still don't know how many people were affected...

If you did bankrupt Poloniex, I believe you would spend a lot of money out of your own pocket doing so, and any money you do recover would probably not cover any legal expenses you incur.

No, I would not have to pay any legal fee. I've found a lawyer who doesn't ask for any money up front. He just want a share of whatever he may get from Poloniex, but it's a huge share, with a substantial fixed minimum.

If you're looking for a trading/lending place, better avoid Poloniex, as it socializes losses. Learn more about it on this topic.
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