Intrade discovers a $700k cash shortfall | Hacker News Reader

Intrade discovers a $700k cash shortfall

intrade.com

101 pointsdopamean53 comments

Reminds me of the time I worked for one company and prior to going public, we called in some Sarbanes-Oxley consultants to vet us. After a thorough SOX compliance effort (which was ridiculous - one recommendation was "print out all source code and file it"), I showed up one day and an accountant in the corner had disappeared.

Seems that he had a gambling problem, but was allowed to both cut checks and sign them (fall into the GAAP). He embezzled, IIRC, close to one million dollars and was only found due to the SOX compliance effort.

Are you able to discuss in more detail what exactly helped find him?

Your good old financial audit. Debits must match credits, and all debits must make sense.

It's a little scary that SOX was required to force them to do this... that company was run very poorly, IMO.

They were doing it, they being the embezzling acct.

I honestly haven't the foggiest idea, sorry. The company only told us the bare minimum because they were trying to contain the damage.

> After a thorough SOX compliance effort (which was ridiculous - one recommendation was "print out all source code and file it"),

If they found that rogue accountant it wasn't all that ridiculous after all. That one requirement was (probably, I don't know the context) ridiculous but the compliance effort apparently wasn't.

On another note, I have had a customer a while ago that would have been extremely happy if they had had a printed, filed copy of all their source code.

If your source code is your life, a printed backup in ocr font isn't that insane. $100 in printing costs? Cheaper than most long-term backup.

You would presumably be doing more traditional long-term backup anyway of course; it is not like you would be saving money on that.

Is there something like a paper version of "tar" that will print a directory of files in a format that can be scanned, preserving file structure etc?

http://ollydbg.de/Paperbak/

Why filing? As method for backing up IP?

I think they like filing because it's immutable storage. An engineer can't write code to change the filed-away code as easily as they can the on-disk source code.

I don't know much about SOX, but based on how I've seen it implemented at various places it seems to be a law that says "it is illegal to write computer programs, so don't let anyone do it! have a good day and have fun running a business!"

Filing is great but file an archival DVD and save a lot of effort. Or five of them, really, just in case.

Paper lasts longer than DVDs.

I remember being perplexed looking at the intrade exchange pricing during the last presidential election. I wasn't the only one. Nate Silver and Paul Graham wondered about it too

http://fivethirtyeight.blogs.nytimes.com/2012/10/24/oct-23-t...

https://twitter.com/intent/retweet?tweet_id=2615138971341414...

The bets on Obama not being re-elected seemed way too high. I convinced myself at the time that this must have been due to either personal bias or perhaps a strong republican leaning userbase on Intrade. But now it's starting to seem like it may have been part of some scam.

I assumed this was because a pool of funds had been set up to prop up Romney's odds to make him appear more viable -- or at least to stave off a story that Intrade users were betting heavily against him. Intrade was a small enough market that this could have been done with a comparatively small investment compared to media buys, and without any technological or financial chicanery. It's not illegal to pay too much for something that could have been had for less.

Query version of the Twitter link: https://twitter.com/paulg/status/261513897134141440

It would be elegant and pleasing if we could resolve both mysteries with one stone, but I don't see how it's supposed to work. How does a Romney anomaly lead to $700k embezzled and Intrade suing 2 different parties for $3m+?

Anyone have a copy of the proposed forbearance agreement for large account holders? It seems pretty brazen to ask people to give the company some slack on repaying deposits when they haven't really come clean on what went wrong. "For legal reasons we are not yet at liberty to document them" isn't good enough explanation; an announcement of specific arrests or civil lawsuits might be.

Not tipping someone off that they're about to be arrested constitutes "legal reasons."

Arrest first, ask for your creditors to give you a break second.

That's a nice idea, but what if they go out of business before the arrests are made?

Typo on my part. My comment was in reference to this:

"It seems pretty brazen to ask people to give the company some slack on repaying deposits when they haven't really come clean on what went wrong."

Which is exactly what Cyprus is doing with its banks right now. They've frozen most of the assets of their depositors and are taking a percentage of the existing accounts.

And still no one wants to actually analyze the problem to see what's wrong.. the answer is simply "throw more money at it."

coughCyruscough

Who?

I wondering if they meant "Cyprus" but then my reaction is simply "Huh?" instead of "Who?".

Sounds like the writings been on the wall for a while now. They were fined by the CFTC in late 2012 and had to withdraw from the US market for not being a licensed exchange [1].

Most of their customers were in the US so this was a major blow to their business.

I wonder if there's an opportunity here for a Bitcoin based predictions market?

[1] http://motherboard.vice.com/blog/how-the-us-killed-intrade

Haven't used it, but http://betsofbitco.in/ seems to have some traction.

That is not a prediction market since there are no prices.

It looks like their demise was due to fraud/embezzlement. Not sure how bitcoin would help here.

Also, users of such an exchange would be heavily exposed to the volatility of BTC/$major_currency when making long-term bets. Unless one doesn't care about currency risk, but it's not easy to ignore it unless as long as one's future expenses are still pegged to $major_currency.

Based on past Bitcoin businesses, Bitcoin could help here by making the fraud and embezzlement harder to catch.

The Bitcoin protocol has built into it a sophisticated scripting component which would make it possible to make multiparty contracts (like those on a predictions market) that could not be broken by any means, other than an attack on the underlying Bitcoin protocol. It hasn't yet been fully implemented in any client, but it's there to be used whenever the devs feel comfortable putting it in. This feature has the potential to make Bitcoin fraud/embezzlement much more difficult than it is now.

Golly gee, I wonder where it went!

Did you post the URL in the wrong field?

Nope, looks great.

When I put the URL in the URL field it forwarded me to a post a few months ago about Intrade ceasing trading. The latest announcement and that announcement a few months ago were both put on the Intrade homepage so I guess the forum thought I was reposting something.

Yes; what people usually do in response to this is to add a query string--e.g., http://www.intrade.com/v4/home/?ohno

I'll remember that for the future. Thanks.

Are they not insured?!

Is it possible to get insurance against embezzlement?

It is. It seems weird, but there it is... http://en.wikipedia.org/wiki/Fidelity_bond

It's possible to get insurance against almost everything, the question is how much are you willing to pay?

rorrr, you are hellbanned.

...and for good reason too. Go back and read his comment history before you warn him.

Why do commenters feel the need to point out hellbanning? It seems to defeat the whole purpose.

Sometimes users get hellbanned for no good reason. I was hellbanned for a few days and only noticed because I knew what to look for. I emailed info@ycombinator.com and they said it was an accident, and reinstated me.

I agree with anthonyb though, you should probably make sure they're not actually trolls before pointing it out.

The reason for hellbanning is https://news.ycombinator.com/item?id=5413912

"Adria Richards is an evil cunt.

SendGrid is a shit company that I would never want to work for."

Not exactly stellar material.

No need to inflict it on random passers-by though :P

This is why bans should start with a warning - hellbanning may be efficient from an administration perspective, but among other issues, without the possibility of appeal it's fundamentally unfair and prone to mistakes. (The ability of users to appeal after noticing something you're explicitly trying to hide from them isn't really adequate.)

But yes, this ban is probably deserved.

hellbanning has the fringe benefit that those who have been hellbanned aren't necessarily aware of it, which means they are less likely to register for another account.

yep, I sometime contemplate telling users that they are hellbanned but first I check their comment and submission history.

Is the forbearance agreement the business equivalent of the "Don't Tase Me Bro!!"?

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