Reddit Users Lose Real Money After Meme Currency Bot Dies
gizmodo.com
gizmodo.com
(emphasis mine)
How did he think this was remotely acceptable? Jesus Christ! Don't operate custodial accounts if you don't understand the consequences. You can not just spend other people's money, no matter how broke you are...
If that's your only option, give everyone their money back and declare bankruptcy.
Do you really think "get rid of laws and people will do the right thing" is a reasonable assumption? You seem genuinely shocked at this outcome, but how many times has a story like this played out?
Myself, I relish these stories.
> how is that not a feature?
(Vacuously) I think it's bad to do bad things. I assume you think so too.
> People trade humans and hit jobs on the darknet.
This has nothing to do with the matter at hand. And furthermore, just because some people do something doesn't make it right. And even if those people think it's right, it doesn't mean other people think it's right.
> Do you really think "get rid of laws and people will do the right thing" is a reasonable assumption?
No. I can't see where I gave the impression that I am making this assumption.
> You seem genuinely shocked at this outcome
I am shocked. If I was operating a DogeTipBot, there is no fucking way I would just spend the users' money and then act all surprised when I ran out of money. Who the hell does that?
> how many times has a story like this played out?
Too many.
Now if it's someone like my bank I do trust them, because they have been around for a long time and have never stolen from their customers. If it's some guy on reddit with "wow such business" working with dogecoin, I think I would be a little more reluctant to trust.
That guarantee hasn't always existed, and the Great Depression was partially exacerbated by the problem that in the event of a savings bank failure, there was no institution to make creditors whole. As far as I am aware, the BTC ecosystem has no such guarantee anywhere within it, which makes it not as safe a place for stored wealth as a US bank (assuming you trust the US economy to not implode over your lifetime, of course... Current track record suggests you should trust it more than the BTC economy ;) ).
This is exactly how banks operate.
If he'd made it clear upfront that the funds would be loaned to a risky business venture, with no reward, and people still chose to trust him with money then arguably that would be fine from a moral standpoint, but he didn't, and I'm sure he didn't because he knew nobody would have agreed to it.
Sure, within a huge framework of regulations and insurance provided by the government.
Given that this was a legally registered business, I hope this scumbag faces criminal prosecution and imprisonment. It's time we started locking up white-collar-thieves the same way we lock up burglars.
Not really, no. There's extensive regulatory systems in place to limit this and it only happens in dire circumstances (accounts over €100k in Cyprus, for example)
https://en.wikipedia.org/wiki/MF_Global https://www.sec.gov/news/press-release/2017-85 http://www.chicagobusiness.com/realestate/20130718/CRED03/13...
You can't do that with the conventional financial system.
Ie, When it comes to fraud like this, if you're looking for someone to blame, blame the lack of regulations and legal enforcement. Not the concept or technical architecture of cryptocurrencies.
I know a whole bunch of people in Cyprus that beg to disagree
My payment channel suggestion is an example of the latter. And of course, you can use both: competent fintech "blockchain" use-cases are all examples of adding technical regulation to a field that's already legally regulated.
It's a very solid guarantee when it comes to savings in an FDIC-insured bank.
Anarcho-capitalism is all fun and games until you discover you're not really a wolf among the sheep.
I find myself sometimes wishing they'd discover it by doing their research instead of orechestrating a sequence of events that lead to a catastrophic value crash, but (a) as long as it's not my money being burned, I don't generally deeply criticize how people spend their time and resources and (b) I bet it's a lot more fun to be in the middle of a scandal than to read dry economics history. ;)
Practically speaking, that makes something equivalent to FDIC insurance more expensive to implement; in theory, several brokers could join some kind of insurance group where they pay into a common pool of unused BTC to pay out in the event of fraud. I'm unaware of such an experiment being tried.
History has shown that it's possible to wreck a fiat-currency-backed economy so badly that the nation-state's ability to print money can't be used to fix the problem, but in practice it seems in general difficult to do (whereas there have been multiple Bitcoin crashes and frauds where it'd have been nice to have a "Just issue those people BTC to cover their losses" solution, but that's not technically feasible).
What am I missing? Unless it comes out that he started hiring people (to do what??) or if he quit his job and started spending people's money for his rent -- why'd he suddenly incur any serious expenses?
Also what's it got to do with crypto currencies per se? If banks offered some super easy API for USD-USD transfers and he had shoved all this money into a WellsFargo account would he somehow not have spent it?
It sounds like at some point, for some reason, he had employees. Unless he's just using weird wording and he was the only one.
Him and a cofounder, a dev, community/customer support, and a new hire coming on to "go to the moon".
I would love to know the thought process that came up with this.
Edit: Ya they went to conventions and on and on. Built a v3 system that could do "<bold>40 transactions per second</bold>", supported Twitch and other stuff. And they raised money: "Hell, we even raised $445k in a seed round to keep this train moving well on into 2015."
Well that makes a lot more sense. And I sympathize with wanting to keep your business alive. I've seen that happen and it sucks because it's hard to cut losses and walk away.
I think this story could have gone "we raised $x million in series A" and have some sort of exit in some hype-bubble and he'd be lauded as a genius.
Edit: It seems that they built this: https://honeyledger.com/ - chargeback free way for streamers to get money from fans. Not a bad idea.
He was a stand-up guy and a strong advocate for the Dogecoin community. People are talking about the fact that he liquidated the assets from user wallets as a malicious action, and while I agree it was a terrible choice, I see it more as a bad decision.
Backed into a corner he tried to leverage a businesses asset holdings to keep it a float in time to recover. Depending on your jurisdiction this is something banks do all the time as part of your balance is not liquid and invested elsewhere.
The issue here is his business didn't recover and wasn't ever going to.
Last I heard Josh's plan was to keep the main part of the bot free and charge for websites and streamers to accept tips from the Dogecoin community. He wasn't an idiot like this article tries to portray. There was a reason he was keeping the consumer end of things free. But, the micropayment landscape had more competitive options than a niche currency.
All in all its sad to see the business fail but this was poor business choices, not maliciousness nor stupidity like the article tries to claim.
Now, he may have thought he could use it to float some funds, and put them back, and no one would be any wiser, but that's definitely illegal.
He may not be a bad person, and he may not be an idiot in the larger scheme of things, but this was an idiotic move, and a terrible (and unethical) decision, that may very well have legal repercussions.
This is true, and the comparison with banks fractional reserve isn't 1:1
The banks aren't taking your money to pay their bills, they're using your money along a legally defined path of creating and selling investment products with the government in a well-defined position to protect your savings as a guarantor.
I suspect that the Dogecoin business could have leveraged customer deposits in investment products similarly, but would likely require an insane amount of bureaucracy and i-dotting before they could do it.
As for legality, that depends on jurisdiction. Cryptocurrencies are not recognized as a legal tender currency in many areas. In some areas they are, in other areas they are considered an asset like a stock, in others a collectable and in some places have no more legal rights than the gold you earn in World of Warcraft.
I agree he had no moral right to spend that money, but legal becomes highly debatable. It will be interesting to see if there are any small claims cases that rise out of it as it could actually push forward legislation on crypto.
> no more legal rights than the gold you earn in World of Warcraft
Undoubtedly, if a company offered some sort of account to store that gold, they'd be in deep shit if they took gold from those accounts and sold it to pocket the money.
It doesn't matter if it's cryptocurrency, collectible, stock, etc, it still is not a business asset.
If you've got my Jesus shaped collectable potato chips in storage you can't sell them to keep your business afloat.
If you're a brokerage whom I have an account with for my stocks or asset trading, you can't sell my assets to keep your business afloat.
If you're a bank storing my currency, there are very specific rules that govern you, and my money is FDIC insured. This isn't a bank, period. You can't just change the rules saying "well, banks don't always have your cash on hand, so this guy doesn't have to either". There are rules around how all of that works anyways - and he wasn't operating within them.
This is more akin to paypal, or some type of digital wallet. As it's an "account" where you can "send and receive dogecoins". There is no reasonable expectation that anyone else should have access to the dogecoins in your account. There's weird grey area around that shit, but suffice to say my assets are NOT your business assets.
Further, in many digital assets like world of warcraft technically the creating company (Blizzard) still owns the asset regardless of what you do with it or where it goes.
If you are storing currency, that is legally defined as currency by your legal jurisdiction (usually the state level) then there are very specific rules for money transmission and money service business licensed businesses. And your accounts are insured upto the legal required amount of $100,000 by the FDIC.
However, many states have NOT classified cryptocurrency as a currency nor required exchanges and services operating solely in cryptocurrency to get a license as a financial service (different if it allows exchanging of crypto and traditional currency). Because of this it is unclear what the legal doctrine is that would apply to it.
Now if I had as you said "a jesus shaped collectable potato chip" in storage that belonged to you, can I sell it? That depends. For example, for a storage facility if your payments are late I certainly can. For plenty of digital assets accounts your funds are taken by the company after X days of inactivity. Then you have services like PayPal which terms of service allows them to freeze your accounts and keep the funds for anything that violates their terms of service (rules designed by them, which you agree to on sign up).
So was Dogetipbot in the legal clear for doing this? Probably not. There is some level of negligence, some level of consumer loss and can probably be a tort case. But was it flat out illegal? No. It was at worst a civil case, but that depends on their terms of service and the legal standing of cryptocurrency in various jurisdictions.
Disclaimer: Not a lawyer, not legal advice.
Wrong. If you have money stored in a bank that is insured by the FDIC (and pays depositor's insurance), then you are insured.
If you have a cash deposit with a brokerage that is not FDIC insured, and their CEO spends customer's money (that they are not allowed to), and go bankrupt, you are absolutely not insured by the FDIC, and will have to go to court to try to reclaim assets. This happened, see MF Global. In that case, the CEO (Jon Corzine) was very well connected and was able to sidestep prosecution and jail time.
I'm going to bet that this clown is not well connected. Fortunately for him, all he embezzled was this bullshit toy currency, so hopefully, for him, its so irrelevant that he gets away unscathed.
http://webcache.googleusercontent.com/search?q=cache:ORsA-jt...
With examples that small-fry, you're getting into 'small claims' territory, which basically amounts to you having your little slapfight in front of a judge until he tells one of you or the other to knock it off.
> This is more akin to paypal, or some type of digital wallet
Minus any of the user agreements, established business licenses, regulations, and other financial grunt work that it took to get PP up and running (and even then, they have free reign to freeze your account with little to no recourse if they think you're out of line - plenty of stories of people being burned by this)
This is "more akin to" handing off your trading cards to the guy at work running the betting pool and trusting him not to fuck you over, except (A) trading cards are much easier to explain and (B) in this case you don't even know the guy.
> Minus any of the user agreements...
Exactly. Which is why I think comparing it to anything financial (banks, PP, etc) is silly in the first place.
Replace collectable potato chips with baseball cards and you're back to the example I was trying to portray.
If someone was holding your property (baseball cards) and sold them out from under you, then it seems like there would be good ground for a civil case.
Held legally accountable? Lmao. Guile is part of the game and all your credits belong to Eve.
"But your honor, ISK is part of the EVE Online game, and it's in the nature of the game to build up a bunch of in-game assets and then get screwed out of them by other players. Players find this fun and continue to come back to it.
"Exhibit A is the relevant value-lost-per-day in dumb territory disputes and ultimately meaningless fun-fights. As our expert witness, we're calling a psychologist who can explain the sort of masochism that factors into a person's enjoyment of this experience..." ;)
We've actually had situations similar to this play out.
Star Wars Galaxies had a counterfeiting bug, and Sony responded to people exploiting the bug by zeroing out the money---regardless of whether the holder was a counterfeiter or a victim of a counterfeit---and banning a subset of players who were holding the money.
While the path from "take player money" to "sell the money and pocket the value" isn't direct, deleting money from accounts has the side-effect of making all the remaining money more valuable; in essence, Sony boosted the per-player value of the remaining accounts and future created accounts (though that likely wasn't the intent of their actions; they were just punishing cheaters).
Check the legal history to see what the ramifications were. To my memory: there were none. Game space money bought with real money isn't real money (should it be? Excellent question; I don't believe the law has caught up with that question yet).
Meaning, it's theirs to issue/manipulate it as they please. If a third party did that, it seems as though it would be much different.
But that's not real money. All the protections and rights of legal money do not necessarily apply to cryptocurrencies, bitcoin being the sole cryptocurrency with a degree of legal respectability.
This bot was more like a club where people tipped in to play a game together. It can be argued that it's like you chipped in to buy donuts for your local club to play "pass the donut", and the club later sold the donuts to stay open. The service was free so it's hard to find a breach of contract anywhere, especially if the company went bankrupt.
Such is the joy of "privatized money".
The donut analogy doesn't work, because in your case, you are donating donuts to the club.
This is more like you lend a TV to the club, with the caveat that you still own it, and can take it back at any time.
The club decides to pawn in, thinking it will just buy it back when it has money again, and you won't have any idea. But then it can't, and it sold property that wasn't its to sell in the first place.
(Still don't think he should have)
The notion that he had any legal rights is a bit vacant. Morally, I think "spreading the risk you've brought upon yourself to your creditors without their knowledge or consent" is generally considered a financial dick move though. ;)
I think the facts of the case would imply he really isn't. Sounds like he had good intentions and no deliberate malice, but he did something bad anyway.
More generally, at some point you might find yourself thinking: that would be an obviously unethical and stupid thing to do, and this person is a stand-up guy, so he won't do it. What this case suggests is that that's not enough.
(AdamSC1, I'm curious. Suppose it was a couple months ago, or before you heard that this was happening. If you'd been asked then, whether Mohland would ever do the thing that he has since done, what do you think you would have said?)
I dealt with him a great deal in a previous business, he is an individual who is absolutely reputable. The kind of person where had he asked to borrow a decent sum of money, I'd have probably wired it to him without much of a second thought.
Further more, I know how much he loved this business and the Dogecoin community. From what I had heard, of his talks with investors and even the bank he used for the business, his top priority was always his users.
That's why, while it is shocking that he did this, I know it wasn't from malice.
I was a part of the Dogecoin community early on, and was a moderator of their sub-Reddit. I've helped organize with the fundraisers for sending the Jamaican Bobsled team to Sochi, and sponsoring a NASCAR driver, I even hosted a ridiculous art contest for the community. Unlike other cryptocurrencies, Dogecoin wasn't about being a financial investment, it was a community. It was about being part of something bigger than yourself, and doing something positive in a world that is sometimes pretty shitty.
When you consider that Mohland dedicated his life to that community and his work on the DogeTipBot, I have no doubt that it became a part of his identity. He didn't want to let people down, and that's not surprising. People make these mistakes all the time. Ask any father who tries to buy nice things for his kids while he is barely making ends meat. He'll stack on credit card debt, while forcing a smile to his wife and kids at dinner time because he doesn't want to let anyone down.
It sounds like Mohland was in the same boat. He thought he could pull through with something risky, but it didn't work, and when you are deep in on a gamble like there is this part of you that snaps and just keeps doubling-up because you are so afraid of what happens if it all comes crashing down.
It's probably been 2-3 years since I was last in touch with Mohland, but even after this I'd stand by the statement he IS a reputable man, he just made a mistake trying to save something he loved. I think this sentiment is echo'd most clearly in the messages of support, and not anger, that he received from the Dogecoin community. The same people who lost their money were posting requests to try and help keep DogeTipBot financially a float, and Mohland has outlined a payment plan to pay off everyone's debts over time and is allowing that process to be mediated by Dogecoin's creator.
In life we make mistakes, but that doesn't define the character of a man; their character is what is defined in the moments after.
It's not a business, it was a hobby/bot/side project whatever you want to call it (I'm still not quite sure what it does and don't really want to delve so far into the depths of stupidity to understand it) and it never made any money.
> He wasn't an idiot like this article tries to portray.
He wasn't an idiot for making poor decisions. Everyone makes poor decisions. But he was an idiot for thinking this could ever be a business (and staking apparently his personal savings and credit cards on it). Let's not tip-toe around the issue. Calling someone an idiot isn't as big a deal as you think it is.
We all had some wishful thoughts at one point or another.
This is just a cautionary tale of a guy who spent too much money on a hobby.
Except banks are insured in case shit goes south and the depositors get their money back.
This is why I don't touch the "coins" with a ten foot pole. Yes fiat currency is also made up nonsense, but it's made up nonsense backed by nations, not some guy in a trailer in Nevada.
He gambled away money that wasn't his (betting on his own company), and concealed it from the people the money belonged to, then told them they were SOL. He's basically a micro-Madoff.
It's not nobler because he used the funds to "keep the business afloat"-- that was for his own benefit. Presumably, a good chunk of that money was spent on his personal living expenses.
A stand-up guy wouldn't do this.
The central bank just prints money and thus steals 'value' from you (devaluation)
It's a matter of trust into an entity
All trust is not equal.
Cryptocurrency people tend to believe that the stuff they're into makes laws and regulations obsolete, so who would bother writing up any of those?
Cryptocurrencies values can fluctuate rapidly and there's a strong precedent for your money disappearing in an exchange or otherwise.
https://www.reddit.com/r/dogecoin/comments/69vycc/important_...
So, you stole everyone's money to support your personal business and then claimed bankruptcy once all of everyone's money was gone. Is that correct?
Then you complain when some hacker takes the money from the ponzi type scheme your running and now the result of all of it is, everybody lost their money including you?
Bravo Mo
How do people like this exist?
Then, it turns out not even our dev-mascot can be trusted... What a pity.
It's also interesting to see some of the discussions around the creation of a decentralised tipbot... But it seems like this would not be possible[0], because the keys to the wallet(s) would always need to be in someone's hands (or a few people's anyway).
[0] - https://www.reddit.com/r/dogecoin/comments/6acho0/a_decentra...
This is HackerNews, born from the tech startup/VC culture, right?
So simply being able to trade it for real money (+ hype, + limited supply) made it actually worth real money? The only thing that needs to happen for a currency to exist is liquidity and x number of people to think its valuable (who buy/sell it)?
Yes? Of course, trading can vanish just as quickly as it came.
Mainly its psychology; what people expect to happen determines how they trade and thus what does happen. So you end up with a chaotic system and an unstable currency.
Can we get a source other than Gizmodo?
Admittedly that's for serious investment rather than daft things like tipbots.