FBI Looking for Hashflare Victims
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In a fraud like this, those who lost money often recover from the people who got out in time. Eg almost 90% of the losses from Bernie Madoff were recovered by suing those who innocently withdrew their 'gains' before the ponzi scheme was discovered.
It would seem to set up a situation where your incentive, if you suspect a Ponzi scheme, is to quietly withdraw your money early then keep your mouth shut. Unfortunate if true.
Were these individuals just sloppy (probably) or is there some kind of forensic analysis that can be performed blockchains to trace the path of tokens/funds/credits through a mixer?
Although I know nothing about crypto, blockchain, defi, I imagine credits/tokens/funds can be split and merged in every imaginable way by a "mixer" and transactions can probably occur across different blockchains via exchanges as well as occur outside in the real world, but I'm curious about any sort of signal that might be extracted from such analysis, other than signals arising from just pure sloppiness.
BTW, I'm not disputing your asserting about being able to track people... more about breadcrumbs in general, even if they're anonymous.
Chainalysis had combined these techniques for de-anonymizing Bitcoin users with methods that allowed it to “cluster” addresses, showing that anywhere from dozens to millions of addresses sometimes belonged to a single person or organization. When coins from two or more addresses were spent in a single transaction, for instance, it revealed that whoever created that “multi-input” transaction must have control of both spender addresses, allowing Chainalysis to lump them into a single identity. In other cases, Chainalysis and its users could follow a “peel chain”—a process analogous to tracking a single wad of cash as a user repeatedly pulled it out, peeled off a few bills, and put it back in a different pocket. In those peel chains, bitcoins would be moved out of one address as a fraction was paid to a recipient and then the remainder returned to the spender at a “change” address. Distinguishing those change addresses could allow an investigator to follow a sum of money as it hopped from one address to the next, charting its path through the noise of Bitcoin’s blockchain.
The whole premise is that you put money in and are given some different money out. But where does your money that you originally put in go? If it went to North Korea, congratulations on your crime.
I merely sold 5000 euros worth of bitcoin to a Chinese OTC exchanger. There wasn't any real legal theory behind the charges. The court and prosecutor just assumed without any evidence that 1) the money must have been from criminal source and 2) I was using the Chinese exchanger specifically to obscure the source of those funds and not because he was someone I'd been working with since before cryptocurrencies existed.
I received a suspended sentence, wasn't worth appealing to recover the 5000 euros. Wasn't gonna get rid of the suspended sentence, there were counts I was totally guilty of.
Ponzi schemes are an extreme example, because the fund is illiquid because it lied about its investments and simply stole the funds, meaning there's absolutely no way to cover.
But there's a lot of ways this can occur. This basically describes a "bank run"; you nominally have an agreement you can withdraw your cash at any time, but if everybody does it at once there's a problem because the bank is using it to do things like fund mortgages, which can not simply be called back in instantly if needed. Even if the bank has the right to do that, and for various things it sometimes does (taking "financial instrument" generally and not just "US mortgage"), it would still be squeezing blood from a stone; they can demand it but it doesn't mean they'll get it.
In recent news, Blackrock suspended withdrawing from a UK real estate fund, because investors have been withdrawing at a rate that would require them to liquidate their holdings at fire sale rates, further depressing the fund's value: https://uk.finance.yahoo.com/news/blackrock-halts-withdrawal... Same sort of thing. No "Ponzi" scheme here; there's some legitimate financial stress, but that stress would only be exacerbated by letting everyone withdraw. (Whether you agree that it is justified to halt withdrawals in this case or not, I'm just using it as an example of the generality of this structure.)
I can't pull it up quickly in a news article because I'm not coming up with the right search terms to pull it out of the noise of constant financial news, but when Janet Yellen was Treasury Secretary, she had floated a trial balloon about trying to fix this incentive problem with bank runs against real banks with the same sort of clawback scheme, the idea being to disincentivize a bank run in the first place by making it so you don't get the pattern where the first few people get all their stuff and everybody else loses everything, which is a huge contributor to the run occurring in the first place. The game theory on this one gets a bit complicated if you think about it. e.g., OK, if everybody else is going to sit tight because this scheme incentivizes them to stay in the bank, then it's safe for me to withdraw everything because the bank run was prevented in the first place. If they then hold things together "long enough", then I can say I did it for my own reasons, not the bank run that was delayed for six months while everyone else sat tight, before an ultimate collapse. But if everybody thinks that way... etc. Not clear to me whether this can actually prevent bank runs, which I mean straight, not as a weak sarcastic "no this obviously wouldn't work". Not clear. Complicated analysis.
This structure is not intrinsically morally wrong or anything. It's a basic tool, and you need some kind of structure to bridge between high liquidity and low liquidity like that, and such a thing will intrinsically have some "impedance mismatch" to it, to use a favorite technical metaphor. But it does have a certain amount of risk intrinsic to it that can be a bit difficult to characterize; the problem is that a given instance of it failing is likely to be highly correlated with a lot of other instances of it failing at the same time. Naive analysis of the risk is utterly inadequate, and being sophisticated and correct about it is easier said than done.
I believe risk can be moved around, but it can't be eliminated. This is probably fairly mainstream Wall Street analysis, too. I also believe that all attempts to move around risk must also increase it on the net, e.g., if you do the extremely popular financial move of taking a modest chance of modest loss and stuffing all the risk into a small chance of total loss and then hoping that just never happens, that the total risk has increased. This is probably less mathematically provable, and depends on a lot of assumptions about how one compares various classes of risks. (I base my thinking on a variant of what you might call the "more or less efficient market hypothesis"; if there was a way to net reduce risk overall, it would probably already have been taken.)
The bank abstraction you refer to is in my opinion in that class of "extremely popular financial moves". Yes, it removes the modest risk of partial loss, but it moves the risk entirely into a small chance of total loss when the entire system comes down instead. I worry about the net effect of millions of little financial transaction that all perform that particular risk management move. It ends up creating a lot of easily-hidden correlations in the system, and no one entity (let alone person) can have a view of the whole situation.
In the end, the risk is moved around, but the bank run is still a possibility and no amount of financial abstraction can truly remove the fact that the liquidity term mismatch is a fundamental aspect of such an operation that can't be erased, only managed.
Furthermore I'd argue that insuring deposit banks through the asset-limited FDIC is yet another setup to socialize catastrophic losses. If bank deposits were guaranteed by the Fed directly, the Fed could print an unlimited number of dollars to make depositors whole, thus completely eliminating the risk that a USD-denominated deposit simply vanished. (The realized damage would instead be expressed as monetary inflation)
The FDIC is backed by the full faith and credit of the United States. It legally cannot run out of money.
Its fees are mostly an accountability mechanism on the bureaucracy. If the FDIC burns through its reserves and has to ask the Treasury for money, it failed at risk management. Some folks may get fired. But the bills will be paid.
The FDIC is legally backed by the full faith and credit of the United States, its liabilities beyond its own resources, to the extent that such may exist, are debts of the United States.
Which has a fundamental power to mint US currency, and thus cannot meaningfully “run out” of it.
On the other hand, in order to do that, you have to pay them a higher interest rate to make it worthwhile. And rates have been driven to the floor.
How so? Law enforcement can claw it back, and the earlier you withdraw, the less your gains.
And harder to claw back funds after you’re already dead and the estate has been settled. Or you’ve already spent it all.
This is only true if you never have income in the future. They can garnish and/or reach in and take other assets
What this does is it creates an incentive to not invest in a ponzi, period. Without this rule, it makes sense for me to invest into something that I think is a Ponzi, as long as I believe that I'll be able to cash out before it collapses.
That’s where a lot of the clawbacks/recalls were from.
Liars gonna lie. My deposit and withdrawal addresses and the blockchain kinda shows no, I wasn’t made whole
It takes awhile to come to grips with this and actually see yourself as victimized- I mean, a really long time. The overall personal lesson is don’t give strangers money, especially if it’s too good to be true.
Feeling depressed thoughts and guilt over the greed of seeking interest takes awhile to move beyond.
The claim that Plex isn’t allowed to be traded for real money seems irrelevant since there is nothing in the bitcoin spec that allows trading for real money either.
Oh now I understand your question. It’s totally in-game legal to run a ponzi scheme in Eve but no one actually gets prosecuted for it.
Also, the name of the company was hilarious.
Online drugs, porn, terrorist funding, and other illicit or anti-social behavior , that’s likely gonna wind up being the only use case for all that nonsense
This seems kinda reasonable as long as it was disclosed... Buying and setting up mining hardware takes a while. Buying bitcoins on the open market from someone else who has mining hardware is functionally identical.
It's a bit like going to a farmer and giving him money to grow a field of corn for you, only to find out he actually gave your money to some other farmer who grew the corn and gave it to you.
> who were requesting withdrawals from their HashFlare account
So it was more like a ton of people pay a farmer to grow a field of corn, and when they ask for corn in return, the farmer buys corn somewhere else and presents it as from his field. Meanwhile the farmer hasn't planted what they should have, and hopes not too many people ask for their cork or they'll crash.
Akin to 'farmer neither has corn growing nor money to buy corn to fulfil promises to customers'
That would be the crime...
The expectation was this farmer would grow new calories (increasing the supply of food for the region).
You may argue there is a fixed number of crypto released and thus not fair, but allocating that money towards the open market instead of toward hardware and energy company has an impact on the crypto's value.
If someone was illegally selling securities that they claimed were regulated or audited, or that depositor's funds were FDIC or SPIC insured, certainly law enforcement should step in for the "victims." But why waste FBI manpower in this case? Why not just let "a fool and his money" go anyway they want? (Is it because the stolen money went to fund nefarious things, like North Korea?)
Because half of the purpose of punishment for crime is deterrence?
If “they should have known better” was a valid legal defense for fraud…
Though Lazarus doesn't seem to have been indicted for anything yet.
Just think for a second. If someone has been scammed out of millions, you think they’re not going to talk to law enforcement about it? They wouldn’t only if they were perpetrating their own scam.
At some point privacy nuts on HN have to really stop and think before typing.
Unless we live in Scooby Doo-verse and the FBI agent removes his mask to reveal that he was the IRS all along and this was all a ploy to get people to pay their taxes.
For that matter, what are the tax implications of getting mugged?
But the general rule is to never ever talk with them unless you have a lawyer present. You have no clue whether you're the target of an investigation. You have no clue whether the FBI knows some percentage of their targets were victims of this scam, and are using it to get an in with them (you). You just don't know anything going on behind the scenes.
Basically they're evil, not corrupt.
What proof do you that the FBI is more corrupt than other government agencies?
I asked you to show evidence for this statement ""Historically, the agency has been one of the most corrupt from the beginning". Not if it's easier for them to violate human rights.
"Most USG agencies did not have programs similar to COINTELPRO."
COINTELPRO is a secret surveillance program. There's been similar secret surveillance programs from the CIA and NSA, many discussed here regarding internet surveillance. [1][2]
You also claim the FBI is the US secret police, similar to other countries secret police. What makes them like other countries secret police? What makes them more secret than the NSA or CIA?
"since secret police suppress internal dissent with tactics veiled in secrecy,"
How is the FBI suppressing internal dissent?
[1] https://www.brennancenter.org/our-work/analysis-opinion/how-... [2]https://www.eff.org/nsa-spying
https://www.nytimes.com/2021/09/01/magazine/fbi-terrorism-te...
[1] https://twitter.com/LukeDashjr/status/1609630432546406404#m
What happened here was likely a failed attempt to slip a backdoor into bitcoin core, attackers pulled out and took his bitcoins as a consolation prize after he realised his server had been compromised.
The FBI should absolutely be jumping on this, not because of bitcoin, but because of the likely perpetrators.
How do you know this? Luke has denied this over and over again. It seems like you've invented this in order to defame him.
https://twitter.com/LukeDashjr/status/1593227756841578496
He then only "purged the backdoors" which suggests very poor approach to security. If anything, he publicly discredited himself.
Are you being deliberately dishonest or did you just misread something?
Luke discovered that a server belonging to him was compromised in November, yes. Much later, he found out that his personal devices were also compromised.
He has repeatedly stated that he did not keep any bitcoins on that server, and also repeatedly stated that his coins were stolen from cold storage.
It's possible these attackers had Lukes home computer compromised for years, his bitcoin holdings are not what makes him an interesting target. His ability to backdoor bitcoin core or other similar software just might.
A threat that outweighs the benefits of: possibly increasing the likelihood/degree of takedown of an alleged scammer, and also possibly being more likely to be compensated for losses?
I will admit that they do target US citizens less than others, but most hashflare victims are not US citizens and do not get those protections.
Calling Estonians Russians is not taken well at all. The relationship between the Russian minority, and the Estonian majority is... tense.
Looking up other Turõgins in Estonia, they all have very obviously Russian first names and zero obviously Estonian names.
There's no doubt that Ivan Turõgins parents fully intended to give him a Russian name, even if Estonia requires Estonian script on Estonian identity documents.
Even Estonians call these names "Russian names", that's what they are. If someone in Estonia decides to name their kid Muhamed, that doesn't magically become an Estonian name.
> Calling Estonians Russians is not taken well at all
I suspect that your comment wouldn't be taken very well by Estonian Turõgins
Correct, but it does not suddenly make them another nationality. Also, it's not spelled as you spelled it for a reason -- it's Estonian you're looking at. Not Russian. The reason it looks different, is because they're Estonian, so the name will be different.
My second point, which is pretty clear in the first place, is that a nation of people illegally occupied by Russia for decades, isn't keen on being labelled as Russian.
Most of the Estonians with Russian names do identify as Russian, even if they aren't necessarily Russian nationals. It's an ethnic group, these are ethnic Russians.
> The reason it looks different, is because they're Estonian, so the name will be different
This is false. It's spelled the way it is spelled because that's how Estonian government wants names spelled. Also, because it would be awkward to interact with a society where most people do not know the Cyrillic alphabet.
He's quite literally an Estonian national, go check the FBI report that was released.
https://en.wikipedia.org/wiki/Russians
In Estonia these people are referred to as Russians too, because that is what they are and what they identify as.
And, to your point about them being called Russian in Estonia, I've heard them called "Russian speaking" more than Russian. Then, again, the Estonians I know take a pro-integration position on the matter. The "ethnic Russian" terminology is often used in pro-separatist circles to justify non-integration, or by anti-Russian Estonians.
Writing Russian names in Estonian script does not make them Estonian names.