He has not stolen anybody's password, has not modified DeFI code - simply executed a set of financial transactions according to the rules (expressed as DeFI smart contracts) and profited from it.
Indexed Finance is an unlicensed investment firm. The promoters knew the risk ( decentralized finance) and now they want to blame someone who outsmarted them at their own game.
If you end up using the legal system to remediate undesired transactions, what's the point of cryptocurrencies in the first place?
So far, to execute illegal transactions and using the lack of regulations to exploit the financially illiterate.
Another one to make you scratch your head/chin: The world's busiest crypto exchange is Binance. The Wiki page literally says: "Headquarters: Unknown". How can anyone trust a company like that? Who regulates it? What enforcement agency will help in the event of fraud?
Your thought experiment reminded me a little of the Kurzgesagt video on how to debunk an internet conspiracy in seconds: https://www.youtube.com/watch?v=Hug0rfFC_L8
The recent moves by the administration have been so incompetent as to tank the bond market as well, thereby leaving few safe harbors. And no harbor is less safe than crypto.
What I like is that every time there's a hack, or someone loses money over crypto either due to some illegal action or just unintended consequence of using it, you have a few more people demanding more regulation and state intervention. If only crypto regulation was scoped exclusively to when they need it after being swindled out of it.
> So far, to execute illegal transactions and using the lack of regulations to exploit the financially illiterate.
P.S. I understand the context in your comment here. Just expanding on it for cynicism's sake.
[0] https://biotech.law.lsu.edu/blaw/olc/sitting_president.htm [1] https://www.justice.gov/file/146241-0/dl?inline [Note it has been updated since 2000.]
You've cited policy which blocks prosecution of sitting Presidents -- but that didn't necessarily enjoin eventual justice from being served after his term(s) end. However the outcome of Trump v. United States, 603 U.S. 593 (2024) appears to not just block prosecution but grant immunity, meaning what would normally be a crime ceases to even be a crime.
That ruling appears to draw a nearly complete shield of immunity around Presidents for any crimes done as 'official acts,' and nearly everything can be claimed to be an 'official act' especially given how vaguely-scoped much Presidential power has become. I consider it pretty unlikely that we'll ever see a former President even be charged with a crime if Congress doesn't explicitly repudiate this ruling with an actual law.
Source: https://en.wikipedia.org/wiki/Trump_v._United_States#:~:text...
You could have stopped the sentence here; most US presidents are responsible for acts that appear to be criminal but for the fact that it is political convention not to charge them. The most egregious case I recall was Anwar Al-Awlaki [0] - where he seems to have been killed on the president's orders without actually having done anything specific to justify it. Searching for "crime" on his Wikipedia page turns up nothing much. If a president isn't publicly investigated by the judicial system for having a US citizen killed it is hard to see when charges would be appropriate.
This was an assaination as part of an armed conflict if i understand correctly.
There are a lot of things you can argue about with the morality of the drone strike program, but its at the very least grey. As a general rule, armed conflict involves killing people who have done nothing wrong other than being on the wrong side of the conflict.
Its possible it still might be a crime, but i think it would be on the standard of if its a war crime, and not an ordinary murder.
P.s. i dont understand what him being an american citizen has to do with it. Its not any more ok to kill non-citizens.
If that is your standard then under what conditions is the US president going to be prosecuted for a crime? He or she will always claim there are mitigating circumstances and/or that they think their actions were legal. Nobody is going to stand up and say "oh gee, I've just done something clearly criminal!".
I suppose I'll put my challenge one more time just to be clear - if you feel the US executive unilaterally assassinating a US citizen without even any particular accusation of a crime is clearly legal, what conditions do you anticipate where the US president would be charged with a crime? While acting in an official capacity? The Trump decision codified it but the standard has been set for decades if not centuries - unless Congress gets involved there isn't going to be a prosecution.
I just mostly think this is a particularly bad example of executive ignoring laws - using military force in armed conflict is not usually considered a crime and certainly not unprecedented. It is in fact very, very precedented throughout the history of the united states. There are circumstances where it can be illegal (war crimes, crimes against hummanity, etc) but generally the justice system around that is quite different than normal domestic laws around murder.
I would contrast that with some of the accusations against trump which are much less wrapped up in armed conflict and very unambigiously crimes (if you want an older example i would say the same thing about watergate)
You're right that that makes it messy. The us wasn't engaged in an armed conflict with the state of yemen, but with a non-state armed actor operating within yemen (and elsewhere). (And its not like that isn't true right now either - america bombed houthi positions in yemen just a few weeks ago. Different group but still a non-state armed group i would consider america to be in an armed conflict with). A lot of the ways we think about wars and what is just and unjust implicitly assume two states fighting each other. Its much more ambigious with non-state armed actors.
The story of Anwar Al-Awlaki and his American US-born son who was killed in the attack authorized by the Obama administration must not be forgotten.
The issue of presidential powers and conduct must be a non-partisan issue. Trump merely walked through the cracks created under Obama.
Being well-intentioned (“protecting Americans against terrorism”) is not sufficient excuse for murdering an American minor due to the sins of his father no matter how much the Obama administration DOJ attempted to make it legally permissible to do so.
Which were dependent on the GWB administration (forced renditions, torture prisons), the Reagan administration (Iran-Contra etc), the Nixon Administration (Watergate etc), FDR's admin (concentration camps), on and on and on.
The expansion of Presidential power is non-partisan. Congress would be the logical counterbalance but other than in fits and starts has generally abdicated this role to the SCOTUS which has now been captured by believers in the unitary Presidency.
If they're taking millions of dollars from Chinese NGOs that would be a problem. If they filled out a form wrongly and there is no motive involved that isn't interesting. Might be worth a few political points on a slow news day.
Those laws are a poster child for the high risk of selective enforcement leading to political corruption.
The reason is that what constitutes an official act is up in the air, and let us be honest, the incumbent president is not known for staying inside the Executive branch's lane.
But the sheer unwillingness of the DOJ to prosecute, creates a catch-22: you need indictments to change or clarify Trump v. United States, 603 U.S. 593, and right now there are two options:
Somehow revive the private right to criminal prosecution (and of the president at that)(See Linda R.S. v. Richard D., (1973) 410 U.S. 614 (citations omitted)) or a Federal Court to appoint counsel to investigate a former or incumbent president. (Young v. U.S. ex re. Vuitton et Fils, (1987) 481 U.S. 787.) And I am not sure which one is less likely to happen. (Or for Congress to take that role beyond impeachment, which is even less likely.)
While Trump may go farther than that, it is hard to imagine any other President in our history who would have considered doing anything more deserving of criminal prosecution in a US court.
Given how polarized our country has become and the requirement for a 2/3 majority in the Senate, it is also difficult to see how we could ever again wind up in a situation where the threat of impeachment is a significant concern to a sitting President. Given the current state of the Republican party, I'm not even sure whether an attempted military coup by Trump would get that result.
The economic conditions that push vulnerable people to committing crimes enhanced by technology are not a condemnation of the technology itself.
What you need to argue is that the the smart contracts were valid contracts that the creators intended to and had opportunity to understand and that their creation was their act of negotiation of a position. It isn't really a stretch, but with amounts like this probably more diligence would have been due than that. Calling it theft is ridiculous on the other hand.
He's charged with:
1) wire fraud (the smart contracts/swap exploit)
2) unauthorized damage to a protected computer (running the exploit on the ethereum network)
3) attempted hobbs act extortion (contacting kyberswap to attempt to gain control of kyberswap in exchange for return of some of the crypto)
4) money laundering conspiracy
5) money laundering (knowingly laundering the proceeds of the previous, including paying an undercover agent to help bypass a blacklist to do so)
[1] https://www.justice.gov/usao-edny/media/1388036/dl?inline
You've hit a key point of disagreement amongst philosophers about the idea of the social contract.
Some of them say it's not voluntary because we were all born into a existing society, others say, sure it is, you can just give up all your property and go live in the forest.
Others then reply that disabled people and children can't do that.
But also the idea of living in a forest is not really an option for most people in the modern world. So my personal take is that the social contract is inherently non-voluntary in the modern world.
> Calling it a social contract just sounds too… soft? for what it really is.
Why do you think a social contract implies softness? For most of it's existence the social contract allowed slavery, ritual killing in the form of warfare and duels, and it still allows the death penalty in much of the world.
I think they are saying that the words "social contract" sound more collaborative and voluntary (to them) than what the phrase actually refers to. Your examples would only reinforce that view.
It is a subjective stance on a coined phrase, but given most of our laws were settled by people not living now, and enforced on people not living when the laws were created, and there is no periodic process of ensuring laws reflect the living, the words "social" and "contract" are being stretched quite a bit.
(On the other hand, the meanings of most phrases drift from the nominal meanings of their constituent words.)
I would not survive away from society due to medical needs. In exchange for being able to acquire the items I need to survive, I follow the constraints of living in that society. But it _is_ a choice. I could choose to go live in the woods without said benefit; and I'd die.
That's just the nature of almost any society: they are actively hostile towards such outliers.
Hence why it's a "contract". Both parties benefit. Society gets to exist, the people in it mostly have better lives than they would living alone in a forest. Admittedly, that's a low bar and we could stand to improving things.
This idea is ridiculous because even if you could go live in a forest a large part of the enlightenment was that states grabbed control of the periphery (forests) of their domain. You can no longer run of into the forest. The state will still want you to fit into the existing ownership structures, censuses, taxation regimes, etc. If you commit a crime it will still be decided by the existing courts.
Legally, a contract must be entered into voluntarily by both parties. If either party is coerced into joining, then it is no longer considered to be a contract. I assume that philosophers use the same meaning of the word contract.
In this case it seems more like the former since no one is really actively combing the woods for hermits and forcibly integrating them into society. I guess it’s not unimaginable for something like that to happen, but I don’t think you could say that that’s reason that most of us are part of society. I do guess you could argue that point, but the argument would have to be that society is actively taking away viable alternatives to force people who otherwise would not have to have to join it, not that such alternatives never existed in the first place.
The US has forest rangers, among others, as do most countries. Even in remote Siberia and Alaska, it likely won’t be long before someone defending a mining claim or similar gets you removed or tries to shoot at you, though you might get long enough in some spots to live half a life at least.
Every society I’m currently aware of has something similar going on, and they absolutely are trying to remove opportunities to stay outside of their bounds.
And these people are wrong since the laws will still be applied there. If you don't own the land you are likely trespassing, squating, etc.
If you didn't agree to the law, then the people tasked with enforcing the law can affect you for a different reason: because they can. The natural state of things is basically that people can just hurt each other because they want to, and who's going to stop them? And "anyone" includes the police, and "any reason" includes "because their boss told them to enforce the law on you regardless of some-platonic-version-of-you is some-platonic-version-of-bound by the some-platonic-version-of-law"
Saying "he used the system as it was designed, even if not as intended" is more or less equivalent to saying that any computer hack or zero day is also "using the computer system as designed".
You even plausibly extend that to picking locks in the physical world.
So yes, it does make sense for the law to get involved.
Smart contracts are supposed to eliminate a huge swath of disputes, so often people don’t need courts at all. People can put business rules in place that aren’t violated - and not just for contracts.
For example bidders at Christie’s and Sotheby’s sometimes don’t have the money but the houses can’t make a big scandal. They try to hold another auction and sell it to someone else as if the guy sold it.
In crypto it would be trivial to endure bidders have put up the money. You can refund the lowest bidder below N winners. You can also ensure payouts happen at agreed-upon rates. You can prove escrow. And stuff like that.
Imagine a bunch of donors or investors seeing how their money is spent because it is on the blockchain. Or imagine a community having roles and knowing that each role was granted properly.
In web2 anyone who can get into the database can modify any records and then you hope court cases and chilling effects will undo the damage retroactively.
That just sounds like near total agreement with me.
Dont get me wrong, I love smart contracts conceptually. But if the parties to a smart contract desired court arbitration, they should include a function for it in the smart contract. Like a swing vote for a trusted third parties keys.
Without that, to me, you are signalling acceptance of the outcome of the code without arbitration. If you seek a court to interfere with the execution of a smart contract that never included a provision for arbitration then you are in my mind, as guilty of ignoring the intent of the smart contract as any hacker might be.
And if you were just going to court to dispute the smart contract, you may as well just have accepted a legacy contract. Escrow, multiple parties, etc etc all solved problems in the traditional legal space.
So I disagree even if you used that feature of the framework, that you “may as well have used a non smart contract”.
And also not in crypto, as has been done for thousands of years
And, a lot of crypto projects do pair their smart contracts with regular contracts, or at the very least with ToS
(Clearly in the real world the American authorities have decided it's a criminal matter. I just find it odd that a "smart contract" dispute falls under criminal rather than commercial law.)
It's bonkers to me that the only rulesets people care to implement on such a platform are just reflections of money as we know it. How unimaginative. I wish we'd make something new rather than translating something old--bugs and all--into a new language.
We are defending our privacy with cryptography, with anonymous mail forwarding systems, with digital signatures, and with electronic money.
Or "The Crypto Anarchist Manifesto"
Computer technology is on the verge of providing the ability for individuals and groups to communicate and interact with each other in a totally anonymous manner. Two persons may exchange messages, conduct business, and negotiate electronic contracts without ever knowing the True Name, or legal identity, of the other.
> the point of crypto is more abstract than any of that
It has to do with operating in spite of somebody who would otherwise tamper with your information. It's about durability in the face of sophisticated adversaries.
I was trying to get at the point of crytocurrency. The accounting system can handle anything at all, so why bother with the coins? We've had coins for thousands of years, they're the most boring app imaginable. Why bother maintaining artificial scarcities when we could be addressing real ones?
But at the end of the day, if nobody provides hardware for it to run on, then, we can't have that accounting system. And those people have to pay their electric bills, and for the hardware they're using, and for that they need something money-shaped. The point of cryptocurrency is to be that money-shaped thing. We need it to interface with the traditional finance system until we can replace that system with something better.
That's the point for them. It's not the point for anybody else.
Also there's a directed graph where the nodes are users. Edges on this graph indicate that this user trusts that user, the edges are colored to indicate which type of trust it is.
Given two users, they can compare graphs to decide if they both trust (transitively) any other users in some set of colors. Also, if cycles appear, then that cycle is a community of experts and they can follow the graph in reverse to find out which other users consider them experts.
It's sort of like how we have representatives in congress, except instead of being one layer deep with millions of people being represented by one, it can be as nested as needed to ensure that the experts are not overloaded (since many of us are somewhere in the middle, we distribute the load by playing both roles--depending on who we're dealing with). It also differs from typical representative democracy because you can express trust in somebody's diplomacy and simultaneously avoid trusting their understanding of economics (or whatever other colors you care to).
Ideally it would be a system in which the most trusted and capable people for any job are easy to find and easy to support, and in which we focus on becoming skilled and trustworthy rather than on the ownership of scarce things.
Human societies already work like this, they have for a million years or so, but it stops working well when the cognitive burden of walking all of these trust graphs becomes too much to bear, then things get authoritarian. We now have the technology to scale it better, but the implicit non-specialized authorities are still in charge.
A couple of applications for this that could work in the near term:
1. If you have a dispute, you can use the data find a mediator who is trusted by you and the other party. And not just trusted, but trusted in the relevant way. This is a step towards a better court system, better because the arbiter is explicitly trusted by the complainants and because the arbiter is an expert in the color of the complaint.
This would solve the well-somebody-needs-to-be-able-to-undo-the-transaction problem without invoking a bank and without leaving it unsolved. The transaction arbitrator would be determined by the trust settings of the parties to the transaction. There's a lot more consent and specificity in that than in what we're doing.
2. If you find a dubious claim, you can see who signed it and check for a trust path between you and that person. 1,000,000 fake amazon reviews mean nothing through that lens, since you don't trust them. But two or three reviews signed by people that you explicitly trust (perhaps transitively) would mean a great deal. This gives us a way to ignore scammers and malicious AI's and creates a space in which being trustworthy is an asset (contrast this to the world we've built which is more about commanding the most attention).
I'm not saying I have it right, but such things are worth trying in general, and "crypto" isa much better medium for them than bureaucracy (although I'm more excited about CRDT's than blockchains, because I think partition tolerance is more important than consistency).
Using "value" as a medium is problematic because we increasingly don't value the same things. It worked ok back when food took so much effort to grow that securing it represented a significant portion of our mindshare. Then money was reliably a proxy for our shared agreement that food was good.
But now that it's so much easier to make the necessities that we agree on, we spend more time perusing contradictory outcomes. Which is more valuable, if my endeavor succeeds and yours fails, or visa versa? Whose agenda am I furthering when I decide to value a dollar? It's hard to participate in because I can never figure out whether I'm hurting or helping.
Better would to let people be explicit about what they want so that we can the things that have consensus and work towards those. As it is we're letting the ownership of scarce abstractions determine what gets done, which is just bonkers. It was once the best we could do with only the laws of physics at hand to enforce the rules (re: the scarcity of gold), but now we can do better.
Most of the deadcoins were very low cap, and low cap investments are inherently risky. Most of the rugpulls were schemes around small coins or individuals not actually holding the private keys to the wallet.
If you believe in cash, does that mean you can't run to the courts if someone steals your cash?
If your security proves insufficient to prevent a theft, that doesn't mean the theft was legal! It just means your security was insufficient.
That security can be enforced by mathematics instead of courts is definitely a benefit of cryptocurrency, but when it goes wrong courts still matter.
No, because the point of cash isn't to circumvent government control of the financial system. If you build a whole system just to decentralize financial control and avoid government influence but then appeal to the government as soon as you don't like what happens, you're doing something wrong.
Stealing someone’s private key and then using it to steal their assets is very different from exploiting edge cases of get rich quick schemes.
If you didn't want folks to be able to get the crypto under those conditions, then why did you make the contract grant them the crypto in those conditions? I can't take a stack of $100 bills and leave it on the sidewalk with a post-it note saying "only to be picked up by John" and then sue the person named John who comes by and picks up cash. I also can't get mad when Alice sees the stack and tells her friend John to come pick up the money with his name on it.
So it is with crypto. Why are you using crypto if you don't want to follow the rules? That sounds to me like you're trying to do unregistered securities trades...
It's a very hard battle to say "wow, I didn't intend to have my contract say that, despite writing that and publishing it." You'd have to have a lot of auxiliary material explicitly stating the opposite of what your contract actually said, or you'd have to convince others that what the contact actually says is so difficult to understand that there was no way to anticipate that the contract allows what it does. And even then, I don't know if that'd pass because "I didn't think of that at the time" is commonly not accepted as a way to get out of breach of contract.
> To form a contract, there must be: a) an offer and acceptance of said offer; b) consideration for the offer, or some value exchange; c) an intention to form legal relations; and, d) a certainty of the terms of the contract
https://www.canlii.org/en/commentary/doc/2019CanLIIDocs4082
The people who made the smart contract almost certainly wouldn’t tick all four of those boxes definitively. It’d be an interesting civil case probably!
It's like opening a bank account, and the contract says "You can only access your own money in the vault. Everything you can access is yours to use as you see fit." On your first visit the manager brings you into a vault with hundreds of cash-laden tables. He shows you to an empty table, and says "Here's your table. Enjoy!".
Are you allowed to take money from the other tables? Clearly the contract says you can, but surely that can't be what they intended? Is it theft to "break their security" by walking over to another table, or is it just a hidden perk of the contract you signed?
unlike actual contracts, which are written with the expectation that disputes may occur and be resolved by arbitrators and a legal system (who will probably rule that a poorly drafted clause 2b doesn't in fact grant you the right to take all the other customers' money)
> Are you allowed to take money from the other tables? Clearly the contract says you can, but surely that can't be what they intended?
If their entire business model is based on giving a service that allows you to store your money in safety without any government dependency, while in reality they allow everyone else to take your money, then they deserve whatever happens to them.
Like any technology, a money system can be designed so that it works well enough for a small set of intended purposes, and poorly for all other purposes. Moreover, its uses can be constrained by laws.
I think an open question is whether existing laws related to money or property apply to cryptocurrencies. For instance, "theft" and "fraud" cover a lot of things, without specifically listing all of them.
If it's ambiguous whether such laws apply to crypto, then sure, someone could use the legal system to settle the matter. In fact, using the legal system to remediate undesired transactions could be as good a use of crypto as any, if "anything goes."
I doubt that will hold up in court. The exact thing could be said about computer networks and hackers exploiting them.
Agreed, but there is already a very similar case where "code is law" was tested, and failed: https://www.justice.gov/archives/opa/pr/man-convicted-110m-c...
It turns out that once a financial system becomes big enough, the US will apply its finance laws to it. Finance laws are designed to prevent sudden unexpected transfers of wealth from one (wealthy) unwilling party to another based on unanticipated loopholes.
To funnel cash to regimes like North Korea
It didn't work there, and it won't work here either.
If you end up using the legal system to remediate undesired transactions, what's the point of cryptocurrencies in the first place?
That is a philosophical argument completely unrelated to whether or not something is illegal. Cryptocurrencies aren't a replacement for the law, nor do they stand outside of it.
Because it sure looks like they intended for “code is law” to be the case. Many of the oft cited use cases were to circumvent traditional systems.
Most comments saying that cryptocurrency holders should abide by "code is law", are not actually saying that we should abide by "code is law" and abandon the legal system.
It's a classic argument to show that the purported benefits of cryptocurrency are a farce.
To get 30mg oxy
Shouldn't, but can.
Anyway, you're assuming most of these crypto people are true believers in the technical attributes of crypto currencies, but I think most of them don't understand or care about that and are just trying to get rich.
I think you’re answering your own question here
In this case, to make money. These are not ideological purists, they're capitalists.
Not to be that guy but it seems like the point of cryptocurrencies is to scam vulnerable people...
Yes, indeed. And when people leave their home unlocked the thieves should get to keep their stuff. What kind of savagery is this?
> If you end up using the legal system to remediate undesired transactions, what's the point of cryptocurrencies in the first place?
Great question, we have been waiting for answers for nearly a decade now...
That's not what happened here. What happened is that the crypto company said, "Follow this contract," and their customer followed the contract and took their money, and then the crypto company was like, "But not like that!"
Ostensibly, the whole point of cryptocurrencies is to decentralize financial control and not depend on governments for that service. If you then depend on governments the second you don't like what happens, there's no point to cryptocurrencies.
I have to admit, that's pretty funny. But I will point out that you did not make an argument in support of your position; you merely insulted me.
If you see a case where someone exploits a badly-coded computer program to take a hundred million dollars from someone, refuses to return any of it (even when offered several million dollars for their trouble), refuses to co-operate with the judges and the rest of civilised society, and just see "waa waa baby doesn't like his medicine" then I don't see how to actually reason with you. That's just a value difference, not really an insult.
I think you overestimate how easy it is to distinguish between these two. A reasonable common example is people like Bernard Marantelli exploiting lotteries. The lottery does not intend for people to play as Marantelli does. You can (and people do) argue that he's stealing money, but should he go to jail for playing the lottery in a way "not intended by anyone"? I don't think so.
It's the same with card counters at a casino. The casino can throw card counters out because they can decide who plays at their establishment, but it would be unreasonable to jail card counters for playing blackjack in a way casinos don't intend.
>If you see a case where someone exploits a badly-coded computer program to take a hundred million dollars from someone
This phrasing removes relevant context to the point where it no longer represents what actually happened.
>refuses to return any of it (...)
I did not comment on any of this at all.
>I don't see how to actually reason with you
This is dismissive and denies my ability to be convinced by reasonable arguments. It is insulting, even if it's not intended that way.
> This phrasing removes relevant context to the point where it no longer represents what actually happened.
I don't think it does, but you don't explain why, so there is not much to argue. It is hard to get an objective description of what happened, but as far as I can tell, the liquidity pools operated by Indexed Finance are governed by a smart contract, the smart contract contained a mistake, and by exploiting that mistake, Medjedovic was able to drain them completely.
Can you explain to me in simple english how that is using the contract as intended? Note that "it's what the smart contract said" is not sufficient, for the same reason that "the web server allowed me to make that request" is not a defence against a charge of computer hacking. What the smart contract says is actually almost irrelevant. What is relevant is what it was intended to do.
Incidentally, why should I be rooting for this guy? It seems like literally the only argument in favour of what he did here is "everything that is possible is fair". His extraction of money is purely parasitic, and aside from merely identifying the bug, he hasn't done any useful work at all. I would grant that this applies to the lottery and card counting examples too. But why should I care that he's having his money taken away?
Many people disagree with you and describe what these people do as theft, so it's not as easy as you think.
>which Medjedovic rejected
I made no points at all about what he did afterward. This is all irrelevant to my point.
>I don't think it does, but you don't explain why
I did explain why further up in the thread. It's not just a badly coded computer program; it's a badly coded computer program that acts as a contract intended to circumvent government control of money. That's the context.
People agree to adhere to the smart contract instead of putting their money into a financial institution that uses contracts backed by laws enforced by governments. This guy adhered to the smart contract, and when the crypto company didn't like the outcome, they decided that none of the crypto stuff mattered and that the laws enforced by governments mattered after all.
But this makes cryptocurrencies entirely pointless. If you can use legal means to circumvent undesired smart contract outcomes, then you can just do that in the first place and not have the smart contract.
>Can you explain to me in simple english how that is using the contract as intended?
Yes, of course. Smart contracts are self-executing contracts. The agreement you make is written in the code of the contract. That is the intention behind a smart contract. It makes no sense to say that you did not adhere to the contract if it allowed you to do something. So by definition, anything you do that the contract enables you to do is using the contract as intended.
>Note that "it's what the smart contract said" is not sufficient, for the same reason that "the web server allowed me to make that request" is not a defence against a charge of computer hacking
Again, this argument ignores the context of smart contracts. Web servers don't claim that their code is a contract.
>why should I be rooting for this guy
It doesn't matter. I'm not rooting for this guy. I'm not arguing emotionally in favor of some guy who did something. In fact, I think he's a shithead.
I think this is the point where I really disagree with you. I don't see how this is different for smart contracts, as opposed to, say legal contracts written in english. It is not true in general that just because a contract says something, that those exact terms are enforced. There is a whole body of law around what terms are enforceable, what to do in cases of mistakes, and so on.
I am now really unclear on what your position is. I thought originally that you were in favour of smart contracts, and that it was somehow unfair or unethical for e.g. a court to rule whether a smart contract was intended to do something different than what it did. So I am trying to understand why you think it is unethical. In this case I think it is unethical to obey the smart contract, and that what this kid did is unethical and should be illegal. Are you saying what he did is wrong, but he should be allowed to do it anyway? If so, why?
It's different because the whole purpose of smart contracts is to circumvent governmental power structures. Otherwise, people would use regular contracts.
Technologically, it's much easier to set up a payment system using a centralized database in a specific jurisdiction and have people sign normal contracts to use the system. People create cryptocurrency systems to avoid that. They put much effort into creating payment systems independent of existing power structures. If this system does not work without backup from the legal system and governmental power, then all that effort is pointless.
>I thought originally that you were in favour of smart contracts
I think they're interesting.
>Are you saying what he did is wrong, but he should be allowed to do it anyway?
Yes.
>If so, why?
Using existing governmental power structures to punish people who adhere to smart contracts in ways some system members don't like invalidates the whole system. If cryptosystems don't work purely technologically without judicial support, they don't work, period.
What you're hoping for is, taken literally, impossible. Smart contracts can't protect people from fraud, or coercion. Since the law does protect them from these things, smart contracts cannot be totally isolated from the legal system (even if everyone wanted this, which they don't).
> Using existing governmental power structures to punish people who adhere to smart contracts in ways some system members don't like
Fine, but what about in ways that the rest of society don't like?
That's what traditional systems already do.
>Fine, but what about in ways that the rest of society don't like?
They don't participate in crypto.
I absolutely get your position, and possibly hypocritically supported the main branch when ethereum had a big fork over exactly this issue. But its also not hard to see where the "code is law" guys are coming from.
With a smart contract, you have the option to bake in a third parties keys to sort dispute resolution. If you choose not to, I dont see why it should be litigated instead.
To my mind, the choice not to have a mediation or dispute resolution option is just as much the "Intent" as not being hacked and drained of funds.
Actually, in many parts of the US, you do not have to have any law education to become a judge in district courts.
As popular as this idea is online, it doesn’t work that way in the courts.
Intent matters in issues of the law. The “finders keepers” rules don’t apply in legal matters in the real world.
If someone logs into their bank and notices that changing the account number in the URL lets them withdraw from other people’s accounts, no court is going to shrug it off and say that it’s the bank’s fault for not being more secure. Likewise, finding a vulnerability in a smart contract doesn’t automatically give someone the right to any funds they collect from exploiting it.
We all know the “code is law” arguments about smart contracts are just marketing bluster. The lawyers do, too.
Everybody involved knows all of that, and claims it as a positive feature of the system. At least until they find out that it's actually hard to write bug-free code.
There may indeed not be a legal "meeting of minds" (although there very well also may)... but from an ethical point of view, everybody involved knowingly signed up for exactly that kind of risk. And honestly it would be good public policy if the law held them to it. Otherwise you get people trying to opt out of the regular legal system up until it's inconvenient.
There'd be more of a case if he'd exploited the underlying EVM implementation. But he didn't. He just relied on the "letter" of a contract, in an environment that everybody had sought out because of unambiguous to-the-letter enforcement.
Am I an idiot or is it unclear why this is the intention?
When you open a bank account, there is an actual contract and regulatory framework that governs how you use the account. A URL parameter is an implementation detail that no more alters the contract than a broken lock on a vault would alter the contract.
But when you interact with a smart contract, the smart contract is the contract. What you are allowed to do is defined by what the smart contract lets you do. You don't need to open an account, agree to T&Cs or sign any other sort of contract to interact with the smart contract.
If the smart contract is not the contract, how would you propose we can determine what the real contract is?
This is one viewpoint but certainly not the only viewpoint and definitely not the viewpoint of the authors of the contracts in question.
Smart contracts are a novel method of executing contracts, but like all contracts the parties involved and the contract itself is subject to legal oversight in the relevant jurisdictions.
With DeFi it's different; the code is public and decentralized. There was no unauthorized access to anything here. From my reading of what was done, it was essentially taking advantage of the poor trading strategy of Indexed Finance.
I'm not going to pretend to be a lawyer, but I don't see a lot of parallels between this and e.g. using SQL injection to obtain unauthorized access to a system.
To give an analogy, it's like writing code in a high level language and saying that it will prevent side channels such as spectre. But such side channels are a function of the hardware, not the high level language. The hardware in defi is ultimately the law, not the servers.
Correct. The courts care about intent, structure is secondary.
This is the classic “you don’t get to walk into my house just because you found an unlocked door” that HN users struggle to understand when the digital equivalent is under discussion e.g. an unsecured API.
Except this is not how DeFi and dApps work. The network is decentralized. At no point was any unauthorized access to a system performed. This is not the same as entering private property through an unlocked door, or using SQL injection to gain unauthorized access to a system.
This is not to say Medjedovic is innocent; he made extortionist threats, and gleefully admitted he stole money from people, so wire fraud charges seem obvious. As you say, the courts care about intent, and his intent was clear. But you can't apply the normal charges of accessing a computer without authorization here.
In this particular case, however, we’re talking about fraud not unauthorised access, see a very similar case here which resulted in a conviction: https://www.justice.gov/archives/opa/pr/man-convicted-110m-c...
Would it be fair to say his intent was to enrich himself by using this platform's features ? And bonus points: "is that a crime" ?
Among other bits:
> MEDJEDOVIC understood that his conduct circumvented the intended functioning [...] MEDJEDOVIC discussed a plan to "steal crypto," referred to the exploit as involving "glitch" and "fake" liquidity, and described the code for the exploit as a "rape."
> MEDJEDOVIC also prepared a "POST-EXPLOITATION" plan for himself, which included, among other things, "KEEP the configs Burn the evidence, including the histfile" and "Book flight to: Pack Bags," as well as another file labeled "Decisions and Mistakes," in which he wrote, "Going On the run / Yes / Chance of getting caught<Payoff for not getting caught"
> Immediately after obtaining the flash loan, MEDJEDOVIC wrote "Raping Now" in the public event long for the transaction.
There's extremely strong evidence that he believes he's committing a crime, and specifically "steal[ing] crypto" in his own words, so yes. And when you have records effectively saying "I believe I am committing a crime", it becomes a lot easier to convince a jury you committed a crime.
This seems ambitious. The implications seem quite dire; if I'm running a full Ethereum node do I have the ability to say which smart contracts are "authorized" to execute on my implementation of the EVM? If I see a smart contract do a trade I don't like, is someone committing a crime against me? I don't think this will stick if Medjedovic ever goes to court.
so all american youtube sagas about doing card counting in PRESENT time are fraud to dupe people into thinking that it is possible to card count. NOW TODAY.
These days that’s probably true but it has been done: https://www.roulettestar.com/people/joseph-jagger/
> After the second day, Jagger kept a clear head and decided that enough was enough, and left Monte Carlo to head home to Yorkshire with his winnings.
> When he got home, he retired from the Mill and invested some of his winnings into property.
Avi Einsenberg did the same with Mango Markets,
got away with 110M and is now looking at 20 year sentence
And Mango was being sued by the SEC too https://www.sec.gov/newsroom/press-releases/2024-154
> SEC Charges Entities Operating Crypto Asset Trading Platform Mango Markets for Unregistered Offers and Sales of the Platform’s “MNGO” Governance Tokens
> Pair of affiliated entities separately charged for acting as unregistered brokers
That’s not how the law works.
If someone breaks the law or doesn’t comply with regulations, that’s a separate issue. It doesn’t entitle a third party to steal their funds.
If you were to rob a drug dealer, you couldn’t argue that they weren’t complying with the law and therefore you were free to take it. You would both have broken laws.
If you write a contract and give it to a lawyer with the instruction, "Anyone who satisfies this contract gets this money." And someone satisfies the contract to the lawyer's -but not your- satisfaction, and the lawyer sends the money, did the third party steal from you?
1. You deploy a smart contract to the ethereum blockchain
2. I interact with your smart contract in some manner
how do we define whether the manner of interaction in step 2 is fradulent or not?
"Code is law" is one interpretation by crypto enthusiasts to define under what conditions interacting with the blockchain is fraud; in their definition, it's never fradulent.
Let's assume "code is law" is nonsense, as many comments here say. Then, under what conditions do we define interacting with the blockchain as fradulent? What is fraud and what is not fraud?
Edit: In the blockchain we can even formalize this. The ethereum blockchain at block K has a certain state S_K. I submit a certain transaction/set of instructions T to the blockchain which is mined as block K+1. How do we define a function isIllegal(S_K, T)? (Assuming block K+1 contains EVM instructions from my transaction T only)
The thing is, laws can have issues and bugs as well, just like code! And we have courts to judge not just when someone outright breaks a law but also when someone is skirting on the edges of the law.
Take Germany's "cum ex" scandal for example. Billions of euros were effectively defrauded from the state and on paper the scheme appeared legally sound, but in the end it was all shot down many years later because the actions of the "cum ex" thieves obviously violated the spirit of the law.
The only difference is that blockchains are distributed worldwide and there is no single entity that can be held accountable and forced to execute or reverse any given transaction.
... but the whole point of cryptocurrency, or at least of smart contracts and "DeFi", is to reject that and try to build a parallel system. That's presumably based on a belief that you can write code that behaves the way you intend, regardless of whether you really can do that or not.
So perhaps the judge should decide "Well, you signed up for that when you tried to opt out of having human judgement govern your deals. Have a nice day.".
And in fact perhaps there should be formal statutory law that makes it clear that's what the judge is supposed to decide in any case that isn't itself "borderline" somehow. Which the case at hand shouldn't be.
No, it isn't. It might be some peoples desire around it, but by no means all (or even most).
> Abstract. A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution. Digital signatures provide part of the solution, but the main benefits are lost if a trusted third party is still required to prevent double-spending.
Why do you think you can dismiss the obvious claim that cryptocurrencies are a form of decentralized finance with a "no, it isn't"?
They are or can be a form of decentralised finance. That doesn't mean a system that is totally parallel to the legal system. And, again, different people intend different things with it. It's definitely not all "code is law" people.
I would imagine any other legitimate use would be served better by traditional database/finance systems.
There are other cases where interacting the blockchain is illegal in a very clear manner. Example: if I know an Iranian or North Korean entity has the keys to an Ethereum wallet, and if I send USDT to that wallet as a Western citizen, that is very illegal due to sanctions.
https://www.justice.gov/usao-edny/pr/canadian-national-charg...
It doesn't really make sense for people to build smart contracts that are intended to be an extra-judical agreement where the code enforces the rules and then run to government whenever something they don't like happens. What is the purpose of smart contracts at all if you still need the entire legal apparatus around them?
What does agreeing to a contract that inherently implies trying to work around the need for government in contracts means? What does it say about intent?
If for example, the firm that lost money had been saying "Code is Law" in their previous pro-crypto statements and had explicitly talked about smart contracts being extra-judical it seeems there intent would be to avoid legal intervention entirely and it would require a fairly high bar to argue that any bug could result in a lawsuit.
I do this of my own free will, at my own hazard. I know I'm playing this game. I have intentionally elected to use a system that will execute without any further intervention or oversight on my part. Verbally, I state that I am confident enough in the writing of my instruction that I feel secure in whatever outcome it may bring.
The system automatically executes and someone has sold me a very nice remote control car.
I sue that person.
Why should I have standing?
If I run an unmanned lemonade stand out front and leave a pile of money on the table, and say take your change, if you take more than what you're owed that's theft regardless of how easy it was.
What matters is if Medjedovic engaged in activities that would be illegal in the process of acquiring the funds from Indexed Finance. A theft is theft whether it is physical or digital; victims aren't required to have perfect security and criminals are not allowed to exploit weaknesses to just take something that belongs to someone else.
Medjedovic is accused of exploiting "glitches." From a legal perspective, that would be no different from a thief exploiting a "low" wall or an unsecured window. Glitches aren't invitations any more than an open window. In other words...not a defense. (And in the U.S., specifically see the Avraham Eisenberg case, which is basically the same fact pattern. Eisenberg lost. His sentencing was postponed to last week but appears to have been postponed again.)
Then he skipped town after he was ordered by a court to put his tokens into escrow. If he truly believed that "code is law" and that the tokens were rightfully his, he wouldn't have skipped town. At that point...his own actions demonstrated that he didn't believe that what he did to acquire the tokens were legit. (The Fugitive notwithstanding, innocent people don't run.)
Then he "exploited glitches" for another DeFi. See above.
Then he attempted to launder the tokens...with some guy he found on the internet. Someone who legitimately believed that they legally owned the tokens would have hired lawyers, not money launderers, to gain access to their property. (Aside: any money launderer willing to launder money for a stranger is almost certainly undercover law enforcement...)
Then he moved to a country without an extradition treaty, and in the past few months has been spouting racist far-right nonsense in the hopes of getting pardoned.
Is he guilty? His own actions say that even he thinks he is.
I like the analogy of an unsecured window. It doesn't seem to apply to a hypothetical (idk specifics of this company) purely private company in some crypto-friendly country that doesn't have any ties to the rule of law.
> There must be in-groups whom the law protects but does not bind, alongside out-groups whom the law binds but does not protect.
They are outside of regulatory scrutiny but god-forbid someone uses the same excuses to take their funny money.
From that link:
"U.S. Attorney Damian Williams said: “Today, Shakeeb Ahmed was sentenced to prison in the first ever conviction for the hack of a smart contract and ordered to forfeit all of the stolen crypto. No matter how novel or sophisticated the hack, this Office and our law enforcement partners are committed to following the money and bringing hackers to justice. And as today’s sentence shows, time in prison — and forfeiture of all the stolen crypto — is the inevitable consequence of such destructive hacks.”
The undisputable matter of fact is this: there have already been several cases of people who thought they could invoke the "(smart contract) code is law" argument to outsmart judges and the legal system.
But that's fantasy. In practice these people, when caught, go to prison.
> Indexed Finance is an unlicensed investment firm. The promoters knew the risk ( decentralized finance) and now they want to blame someone who outsmarted them at their own game.
And DeFi exchanges are "unlicensed brokers". And yet I posted a case where the hacker who "outsmarted" them is now in prison: how smart one has to be to end up in prison right?
Post me a case where an "unlicensed investement firm" sued a thief who "outsmarted them" and where the judge decided to let the thief walk free.
For I posted a case from justice.gov to prove my point.
A masked man creeps through the shadows of a sleeping town.
He looks both ways, then uses a knife to unlatch a door from the outside. He slips into near pitch blackness. He moves confidently in the darkness - he's worked for this bank before, checking on their security from theft.
Out comes his lock picking tools - the bank president's office door opens with a quick rake. Cheap lock.
Inside, with no windows to betray him, he lights a candle. There in the corner stands the safe. He knows it inside and out, and has been practicing. Five minutes later, the lock is picked, and he loads up the gold, cash, and bonds inside.
He puts the candle out, slips back outside, and returns to his room at the lodging house, climbing in through the window.
The next morning, with the discovery of missing gold, the town looks like someone kicked over a fire ants nest. It only takes 30 minutes before people start wondering about "bank security expert" who had just been in the bank every day.
A crowd heads over the boarding house, growing in size as it goes.
"Did you steal our money?", they ask?
"ABSOLUTELY NOT," he replies, "I merely used my immense mental powers to out hink several flawed physical security measures, breaking no laws of physics, in such a way that the gold, cash, and bonds previously belong to you are now in my possession, and now belong to me. No theft has taken place, only the movement of certain levers, of which anyone who knew how could move, and the movement of afterwords of certain goods."
"So you stole our money!!", the town shouted.
"No, no, I just interacted with the universe according to its very own publicly available rules. No theft has occurred!"
An old cowhand, covering him with double barrel, spoke up, "Walll, guess he's right. We deserved to lose all that money. He did nothing wrong at all."
Everyone left, impressed with his genius.
"code is law" is a meme that primarily lives on hacker news. Only a tiny fraction of crypto people believe it or say it.
https://www.bitget.com/news/detail/12560604358718
> In April 2016, in Switzerland, the Slock.it team was introducing their ambitious plan: The DAO, a decentralized investment fund governed entirely by code. "Imagine a fund with no board, no CEO," founder Christoph Jentzsch explained, "all decisions are made by token holders through smart contract-based voting. This is the ultimate realization of 'Code is Law'."
I find it difficult to believe they're a large majority.
Per Wiki:
> As of May 2016, The DAO had attracted nearly 14% of all Ether tokens issued to date.
Vitalik Buterin is, uh, pretty notable, too.
> A masked man creeps through the shadows of a sleeping town.
> He looks both ways, then
... walks into a casino, realizes there's a flaw in how they shuffle and deal cards, and then makes a shit ton of money exploiting this weakness.
After losing a shit ton of money because they didn't plan for someone to play the game in an unexpected way, the owners of the casino demanded the money back.
"Did you steal our money?", they ask?
"ABSOLUTELY NOT," he replies, "I didn't get any non-public information, I didn't manipulate the deck, and you have yet to point to a single hand that was not played entirely within the stated rules of the game. You're just mad because I noticed that you fucked up and bet accordingly."
"There's always another moron tries that one", they laughed as they walked away.