I had recently remembered that I used Binance to purchase $100 worth of XRP in 2017 (around the time everyone was jumping on the crypto wagon), so I decided to try to log in to see how my investment was going.
This is when I found out Binance no longer allowed US investors, and I was redirected to a US site (Binance.us). The problem was my account was on Binance.com, and it was not migrated in anyway to this new US site.
I contacted support and they gave me a 7 day period to log in and withdraw my funds (which in itself is weird -- why not just migrate my account to the US site; why the sketchy, arbitrary 7 day period? whatever). I was finally able to log in! And I saw that my $100 investment had (unsurprisingly) turned into $17. I chuckled and tried to get my 17 bucks out anyway, only to find that the site no longer even offers a way to withdraw funds as an American!
This whole experience that spanned maybe an hour was hilarious. I've resigned to the fact that I was scammed out of a hundred bucks. Woulda been nice to use that to buy a few games on Steam, but oh well, here we are. Hope this tale at least amuses or informs someone.
Your % loss in crypto value for that period is almost exactly the same as mine, even though I didn't have any XRP and "spread my investment" over 4 different cryptocurrencies.
Thankfully my "investment" was low enough to walk away from. It was basically an experiment. Glad I did it. Now I know. Of course my wife told me it was a ponzi scheme from the start, and was completely right. The real combined value of all the crypto in the universe is zero. The market just hasn't corrected itself yet.
It's the dumbest technology to try to buy illegal stuff now. Most coins have touched an exchange and everything you do is public. Once deanonymized, it's the opposite of private.
Monero & Zcash are exceptions and the only parts of crypto I'm bullish about (including some new upcoming chains like Ironfish & Aleo). I think private p2p cash has a lot of value. BTC & ETH are the opposite of private.
It's still useful as a means of transferring money for those in jurisdictions that don't care about their illegal activity. Like the countries that tolerate cybercrime as long as it is directed outside of their own borders. Or dictators themselves trying to avoid sanctions.
It's still useful for now, but it will get less and less so. The tornado cash dev is in jail for writing code that made such efforts easier. Since coins can be marked by "good" actors as having been involved in illegal activity, they can't ever be used again.
Let's say a US company gets ransomware attacked by a Russian national and demands payment in bitcoin. US company pays in bitcoin and later reports crime. All accounts get flagged. Anyone helping that address offramp the money will be in trouble. So there has to be a Russian exchange dealing with Russian banks that's creating a track record of provably aiding in crime. It's either going to be such a small amount no one cares or the Russian companies involved will be sanctioned.
Because of the public permanent record, the utility of ETH and BTC are decreasingly useful. Things like instant international settlement, fast payments, and the alike can always be better done with tradfi. Privacy and avoiding regulation was the only real utility ever.
For now it seems the agencies with the technical expertise to prosecute arnt going after the occasional drug buyers, it's pretty safe. Of course, nothing stopping future better police from taking through old records
Monero & Zcash are the best examples right now but like bitcoin, they are volatile and not practical for actual commerce outside of use-cases (like crime) where it's worth the cost.
Stablecoins are a large use case in crypto now but there isn't a private stablecoin yet (I'm ignoring all SGX based technology). A private stablecoin, fully backed by audited bank reserves would enable something like a private Venmo. This private Venmo would know how much you brought in and took out but would have no idea what your transaction history looks like. I think in the next few years we'll see a private Venmo.
Anything other than a privacy coin isn't anonymous, it's pseudonymous. Carrying out illicit transactions on a public ledger is akin to just sending your transaction history to every investigative service on earth: the FBI, NSA, CIA - and abroad of course, the PRC government. They are now, or will in the future, just run it through automated deanonymization tooling.
To borrow an expression from Nicholas Weaver, crimes on public ledgers are just prosecution futures.
"Your % loss in crypto value for that period is almost exactly the same as mine, even though I didn't have any XRP and "spread my investment" over 4 different cruptocurrencies."
The only cryptocurrency that the SEC has said publicly it will not treat as a security is BTC. There are allegedly a few more but the SEC has not disclosed which ones. That leaves every other one open to SEC regulation.
Above every cryptocurrency, save for a few, hangs the sword of Damocles.
With the ongoing FTX story, it is nice to see people on HN are now able to comfortably confess their crypto losses.
> The only cryptocurrency that the SEC has said publicly it will not treat as a security is BTC
ETH has been addressed as well as not being a considered a security (anymore). This was before the switch to PoS. I have not heard or seen anything indicating that the PoS transition would change this.
> That leaves every other one open to SEC regulation.
Only those that fail the Howey Test, I think.
In doing so, the Supreme Court established four criteria to determine whether an investment contract exists. An investment contract is:
An investment of money
In a common enterprise
With the expectation of profit
To be derived from the efforts of others
"Whether or not a particular transaction involves the offer and sale of a security -- regardless of the terminology used -- will depend on the FACTS AND CIRCUMSTANCES, including the economic realities of the transaction."
"I would like to emphasize that the analysis of whether something is a security is not static and DOES NOT STRICTLY INHERE TO THE INSTRUMENT.[10] Even digital assets with utility that function solely as a means of exchange in a decentralized network could be packaged and sold as an investment strategy that can be a security. If a promoter were to place Bitcoin in a fund or trust and sell interests, it would create a new security. Similarly, investment contracts can be made out of virtually any asset (including virtual assets), provided the investor is reasonably expecting profits from the promoter's efforts."
Further...
"[1] The Securities and Exchange Commission disclaims responsibility for any private publication or statement of any SEC employee or Commissioner. This speech expresses the author's views and does not necessarily reflect those of the Commission, the Commissioners or other members of the staff."
"Your letter also asks whether I agree with certain statements concerning digital tokens in Director Hinman's June 2018 speech. I agree that the analysis of whether a digital asset is offered or sold as a security is not static and does not strictly inhere to the instrument."
"MR. BLISS: So I want to make clear that this is my understanding of the current situation and I don't want to be overly technical but the SEC, itself, my understanding, it has not taken an official position. There is no action that it took to say Bitcoin is not a security, Ether is not a security. Now, there was a speech by a high-ranking person who said that to him that's what it looked like but there has been no action letter, no enforcement action, none of the official ways in which the SEC takes a position on that matter that has occurred. What I understand defendants to be referencing is the speech by Mr. Hinman which is not an official statement of the Securities and Exchange Commission itself."
"11. On June 14, 2018, I delivered a public speech entitled "Digital Asset Transactions: When Howey Met Gary (Plastic)" (the "Speech"). I began the speech with the following disclaimer: "My remarks are mine alone, not necessarily those of the Commission, the Commissioners, or the staff." The text of the Speech, which is publically available on the Commission's website, contains a similar disclaimer: "The Securities and Exchange Commission disclaims responsibility for any private publication or statement of any SEC employee or Commissioner. This speech expresses the author's views and does not necessarily reflect those of the Commission, the Commissioners or other members of the staff.""
"13. The Speech was intended to express my own personal views. During my preparation of the Speech, I discussed my thoughts with other Commission employees, as part of the Commission's ongoing deliberations about whether offers and sales of Ether constituted securities transactions. To the best of my knowledge, the Commission had not taken at that time, and still has not taken, any position or expressed a view as to whether offers and sales of Ether constituted offers and sales of securities."
"We already have robust ways to protect investors trading on platforms. And we have robust ways to protect investors when entrepreneurs want to raise money from the public.
We ought to apply these same protections in the crypto markets. Let's not risk undermining 90 years of securities laws and create some regulatory arbitrage or loopholes."
The quesion no one is willing to ask or answer is: With all their financial and legal resources, why are crypto issuers so reluctant to file registration statements?
You can withdraw your money by moving it to a Binance US wallet or honestly any other wallet (including one on Coinbase) and withdraw from there in USD.
I’m not sure where you missed this in your exploration. I went through this recently as well.
I did consider that, and at first tried to, but then it asked me to verify my identity. Which I had done already years ago. I frankly did not feel like going through all the trouble of uploading my drivers license/supporting documents for $17. Maybe I'll try again before the 7 days is up? IDK it's the week of Christmas.
Lucky you. I deposited a bunch on ethers in 2017/18 and wasn’t being able to withdraw anything since. They claim my passport isn’t enough, so I couldn’t withdraw the same money I deposited to the same address. After several weeks of attempts I gave up and call it a loss.
So, saying it out loud: Binance had scammed me. Happy to jump of public debate about it on Twitter(same nickname).
The small fraction of a BTC and ETH I mined about a decade ago mostly as a GPU benchmark are on coinbase at the moment. Currently worth about $1000 they've oscillated wildly and I am both resigned to them going to zero and slightly tempted to leave them there for the full ride (and to avoid tax liabilities)
This is bizarre. There was a reply to this comment from of person who claimed there’s something wrong with me, and when I reply to it with my contacts. Now I don’t see any of this comments. So if the parent comment is deleted- so all replies to it as well?
The community will collectively mod nuke comments that are blatant violations of the site guidelines. Those without show-dead on will no longer see it. You can view even dead posts by turning on show-dead.
It also gives you aore accurate view of what Dang has to deal with on a regular basis.
As far as I'm aware, you can't delete a replied to post.
Well, this is a problem. As a little man who shared a personal story - there’s no way people on internet can believe me over all mighty Binance.
But this is my story, Binance took my deposit and never gave it back. Although I have no influence whatsoever, there are still a few hundred people from the blockchain industry whom I met over a years on hackathons and conferences. Perhaps we might have friends/contacts in common https://twitter.com/lebed2045? via whom happy share all details.
What’s my motivation to lie? when if this story even get attention (that is unlikely) - binance would always able to disprove it by sending tx proofs that they sent money back or never took in the first place?
I don't even think you can even withdraw XRP anymore from any exchange due to the whole SEC investigation thing. At least that's what I experienced when I tried last year.
The only way I could see was transferring it to some Euro banks or e-cash services I do not possess. In the withdrawal process, I could not even designate my country as "USA". That or transferring to another coin wallet, but that also required me going through the identification process again (which I had already done in 2017). I did not feel like going down the rabbithole of research/contact support/waiting for $17. I'm lucky enough that I make more than $17 an hour, and I also value my time more than that.
Binance and tether have long been the dirtiest players in crypto, and there have been warning signs for years.
Kindleberger likened financial frauds to underwater obstacles. When money is plentiful, the metaphorical tide is high, and the obstacles are hidden by the water so nobody sees them. But they're always there. Then, when the tide recedes (cheap money ends), the obstacles are exposed for all to see.
Binance is just going to be the last domino to fall as a result of cheap money ending.
> Maybe your cryptocurrency is different. But look: you’re in really poor company. When you’re the only honest person in the room, maybe you should be in a different room. It is impossible to trust you. Every comment online about cryptocurrency is tainted by the fact that the commenter has probably invested thousands of dollars into a Ponzi scheme and is depending on your agreement to make their money back.
The irony is that every single crypto enthusiast I know, builder or speculator, has invested in shitcoins and scam coins just to hedge their bets in the off-chance it pumps…
They’re fully aware and will tell me it’s shady, and yet, do it anyways.
Adoption(Actually using crypto as currency) is not in any way a goal anymore.
The goal is now just to HODL till some mythical event where they'll be millionaires/billionaires with a single coin and then just use that as collateral to buy stuff through defi. Very similar to the GME cult.
The top comments did indeed say everything was fine, although to be fair, almost every single reply to those comments said the OP was full of shit, and gave reasons which turned out to be entirely correct. By comment volume, the skeptics were much more represented.
So it seems like the population of HN has both a bunch of boosters who will blindly upvote plausible-sounding “everything is fine” positions but also a bunch of better-informed people who will do the work in tearing those boosters down.
If anything, upvoting controversial comments that have a lot of thoughtful responses is a public service - argument and counter argument gets put right at the top.
As someone who loosely followed and played in the space, I got scared around when Binance set up their own non-eth chain and everyone just... was OK with it. I may recall wrong, but this stuff was "justified" because people didn't want to pay the fees and delays to trade on something like Uniswap.
Funny, because BNB was one of my best investments at the time, making up for other counterparty risks I didn't avoid.
This looks like a potentially huge revelation. The wallet analysis looks sound, and, if correct, the implications of US customer funds being comingled in this manner could set the stage for an even worse scenario for US customers than that of FTX. Even SBF in all his criminality knew not to play AS fast and loose with US customer funds as he did with international, and John Ray has indicated that US customers will fare much better overall than others.
Total nonsense. FTX made no distinctions, neither by contract nor by country of origin.
They'll pay out people from the US first for sure, but that's just how the bankruptcy process works and there likely won't be anything left by the time the queue moved down to foreign holders. But the reason you've provided is just plain fake news
> TX made no distinctions, neither by contract nor by country of origin.
Apparently there was special rules for Japan. The regulations were a result of Mt Gox failing. Basically you cant comingle funds and the accounts need to be linked to a trusted third party.
Do you have a source for this? I'd really love to read more about it.
My impression from Ray's congressional testimony was "FTX.us might be solvent, but we don't know yet because the forensic accountants are still chipping away". But I was only half focused and am not confident I remember correctly.
I had originally heard it during the congressional testimony, but given that it's over three hours long, I don't know exactly where.
The gist of what was said, is that a lawmaker cited something about FTX.US being "98% solvent" and asked John for confirmation of this. John stated that he couldn't give any figures at the moment, but there was generally truth to the statement that U.S. customers would be hurt less than others.
> no company in the entire crypto space that isn't a wretched hive of scum and villainy
Entire financial space. It's just that traditional financial companies are better regulated (and are better at working within the regulations to hide their crimes). But they are not in any way better humans. For every FTX or Binance there's an Enron or Deutch Bank ten times the size and just as villainous.
The armies of shill-droids that constantly post deflective whataboutism, fallacious predictions, unethical financial advice, strained rationalizations, and false equivalencies to justify the unregulated crypto space aren't better humans, or even human at all.
My bank is constantly and repeatedly recognized as one of the best-run, most ethical, and most customer-centric companies in the United States, if not the entire planet.
Of course it is not publicly-traded, so that eliminates one source of pressure to be a wretched hive of scum and villainy.
Of particular note is that they are the largest bank in the United States to not require or take a bailout during the financial crisis.
I imagine credit unions have the same lack of pressure that my bank does and it is incomprehensible to me that someone would patronize a financial institution that has incentives to screw them over to make their quarterly report look good.
It is entirely possible to interface with the financial system without dealing with scumbags, or putting your faith into digital magic beans that immediately collapse when the Ponzi stops.
JP Morgan didn’t require a bailout but was forced to so people wouldn’t know which banks actually needed bailouts, to stop bank runs. AFAIK Wells Fargo was in the same boat (although the Wachovia acquisition led it to need some help, Wachovia was insolvent)
I might be wrong but my foggy memory recalls that JP Morgan was in good shape because they were the top of the mortgage-backed security pyramid and that years later their penalty for misleading investors prior to the financial crisis was the highest of all time(or of all the banks?).
Enron gave us SOX, for reasons. Deutsche Bank is, like UBS and basically any other international bank, involved in all kinds of shady businesses, from money laundering to tax fraud. Those banks are usually fined, I do agree so that those scandals are very under covered. Deutsche Ban an other have yet to directly defraud customers of their deposits, not even WireCard managed to do that.
Name a financial firm that had a significant negative impact on consumers? Wells Fargo scandal is the only one i can name but the total losses to all customers involved was $2M which they got compensated with $140M payout.
Our banking system nearly collapsed in 2008. Lots of people got hurt. Financialization of the US economy is a larger, delayed version of what happened to General Electric.
> Our banking system nearly collapsed in 2008. Lots of people got hurt.
Yes, plenty of people got hurt because they made shitty investments.
How many people got hurt due to their bank running off with their money to the Bahamas/betting it all on red?
Because that's the degree of 'hurt' that the various crypto exchanges have been inflicting on their customers. Can you find me one American who lost money from their savings account in 2008? Or just had it go poof from their stock brokerage?
I responded to: "Name a financial firm that had a significant negative impact on consumers?" I didn't respond to which financial firms stole money from customers. What SBF did was more like Bernie Madoff.
The only reason we didn't have bank runs and frozen accounts is because the Fed stepped in to provide liquidity to the whole market. The banking system would've collapsed similar to the Great Depression without such action. Lots of people lost their savings in the Great Depression.
Retail investors used FTX, retail was not heavily exposed to Bernie. His marks were mostly institutional and accredited investors, for whom the expectations are far closer to the 'buyer-beware' side of the spectrum.
> because the Fed stepped in to provide liquidity to the whole market.
That's the Fed's job. Everything worked... Pretty much as intended.
And there's a reason it's not stepping in to provide liquidity for the various crypto scams. Liquidity injections can save a situation where value exists, but can't be immediately realized - as in the case of a bank run. In this case, though, there's no value worth saving.
> Lots of people lost their savings in the Great Depression.
Which is precisely why we built systems to prevent that failure mode from happening again. They worked.
I agree that the Fed was right in letting these crypto scams fail. The problem inherent to the system is inflation. As the Fed expands its powers, it can avoid significant recessions/depressions but one day it won't work and the dollar will fail like every other fiat currency in the world has eventually failed. This system "working" isn't eliminating risk, it's polarizing it.
I wrote a longer comment a year ago but here's a piece: "The price of gold was $45/oz in 1970. 52 years later it's $1,800/ounce. That's roughly 7.6% a year or 45x increase. If you use the inflation provided by the government, CPI, (1), they say inflation is only 3.6%/year or roughly 7x since 1970. Obviously we have a discrepancy. Is the dollar worth 45x less than 1970 or 7x times?
When we look at prices of things like education, housing, and healthcare, the 45x number makes a lot more sense. Education has 30x in price over the same time period (2). If you're comparing prices in dollars, it feels like education got really expensive compared to the basket of goods the BEA tracks but in reality, education requires less gold than it did in 1970. Our incredible supply chains and manufacturing automation have lowered most consumer prices such that we don't really notice inflation but when you look at things that can't get much cheaper like housing, healthcare, education, asset prices of all sorts, you can't miss the fact that they correlate more closely with gold than the USD."
>
I wrote a longer comment a year ago but here's a piece: "The price of gold was $45/oz in 1970. 52 years later it's $1,800/ounce. That's roughly 7.6% a year or 45x increase. If you use the inflation provided by the government, CPI, (1), they say inflation is only 3.6%/year or roughly 7x since 1970. Obviously we have a discrepancy. Is the dollar worth 45x less than 1970 or 7x times?
The main[1] answer to your riddle is that the economy grew about ~6x faster than we have been mining gold. The dollar is closer to being worth 7x less than 45x less.
> When we look at prices of things like education, housing, and healthcare, the 45x number makes a lot more sense. Education has 30x in price over the same time period (2).
The same amount of education isn't actually 30x more expensive.
Because you're not getting the same services in exchange for your money today, as you were 50 years ago.
If you drop the money-pit sports programs, the entirety of the administrative sector, the nice new dorm buildings, and account for reduction in public funding, you'll find that the growth in the cost of education is much closer to the cost of inflation.
It's not all that expensive, even in 2022, to stuff a group of young adults into a lecture hall and have an underpaid adjunct who doesn't even get health insurance read off Powerpoint slides to them for 15 hours a week. It's the everything else, most of which has nothing to do with education that costs money.
[1] The secondary answer to your riddle is that late-night-infomercial-manufactured demand from goldbugs and other morons can easily raise the price of gold significantly above where it 'ought' to be. Beanie babies, baseball cards, NFTs, shitcoins, etc.
College education is ~30x more expensive (1). Home prices (2) & Health care (3) are ~22x more expensive. Farm land is up 20x (4)
> The main[1] answer to your riddle is that the economy grew about ~6x faster than we have been mining gold. The dollar is closer to being worth 7x less than 45x less.
How are you measuring it? It's a circular argument if you measure it in dollars. If it measure it in anything that can't be made more efficient due to automation & offshoring, it's no where near a 7x decrease.
> [1] The secondary answer to your riddle is that late-night-infomercial-manufactured demand from goldbugs and other morons can easily raise the price of gold significantly above where it 'ought' to be. Beanie babies, baseball cards, etc.
Gold is simply a good that's impossible to mass produce with technology. Use land, housing, healthcare, education or whatever you feel is most representative. Using toothpaste and tv's for CPI is a bad measurement in the last 50 years, our technology for mass producing them has lowered the true cost.
> How are you measuring it? It's a circular argument if you measure it in dollars.
Measure it in houses built, cars sold, concrete poured, steel refined, restaurant visits, number of people working in service industries. Measure it in color televisions and washing machines and computers sold and movies made, and the mountains of disposable crap that everyone fills their homes with. Or by looking at the skyline in Beijing in 1970, and today. The dollar is the currency of global trade, you have to print more of it to keep track with the global economy, just to prevent it from becoming a deflationary currency.
It may not less obvious if you live in the United States, but we make and consume more useful goods and services, much faster than we mine gold. That's why the cost of an ounce of gold can grow 50 times, while the cost of a loaf of bread can grow 5 times in the past 50 years.
> If it measure it in anything that can't be made more efficient due to automation & offshoring, it's no where near a 7x decrease.
Why not? The world's economy has grown by around that much in real value (Denominated in goods[1], not dollars) added in 50 years. [2]
> Use land, housing, healthcare, education or whatever you feel is most representative.
Land is speculative, you don't make more of it when the economy grows, and its price trends towards 1 divided by the interest rate. In a world of zero-interest, it trends towards infinity. A modern house requires a lot more economic inputs to go into it than a 1970s house. Likewise, the amount of waste and work that goes into healthcare, education, etc, has significantly increased over that same time period.
A better metric would be median wages[3], compared to productivity growth. Median family income in the US in 1970 was $9,870/year. Median family income today is ~$78,000. If there was zero productivity gain, and zero quality-of-life increases/decreases, this will tell us that a dollar today is worth ~8x less than a dollar back then.
But we have had productivity and quality of life increases. And you have to divide that 8x by whatever those multipliers were.
Gold is the weird outlier when it comes to the value of things, not the gold standard.
[1] 50 years ago, there were 200 million cars in the world. Today, there are ~1.4 billion. You can't tell me that the real product of the economy hasn't grown by something resembling that factor. Or that billions of people haven't been born, without economic growth. Or that billions of people haven't been lifted out of complete poverty, without real, per-capita economic growth.
[2] It's grown about 35x, when denominated in dollars. If we actually used gold for money, it would have been deflationary, to the tune of... Whatever real economic growth the world would have had. That amount of deflation would have been utterly horrifying.
[3] At the end of the day, the costs of all things are largely determined by wages. Plus a bit of profit margin for speculators, rentiers, and capitalists, but they take a much smaller slice of the pie.
The problem is there are people who hold strongly to an ideological position that greed is, in fact, a good thing. So if you can still edit, you might want to clarify that you weren't stating that in your comment :-)
Fair warning. And those same greedy libertarian crypto shills are a dime a dozen in these discussions, but nobody's buying what they have to say and more.
Edit: I've recently seen a significant reduction of blatant crypto shilling posts from people like that on this forum (thanks to good moderation, and people calling them out on their lies, and linking to proof of their scams and well documented history of crimes).
For example, it's been ages since I've seen any posts here from the notorious scammer and spammer Richard "Dodge Dodge" Heart (whose real name is Richard J "Spam King" Schueler, winner of the "Golden Pump Award" for "Best New Scam" for his POS get-rich-quick pyramid scheme called "HEX"). He was trying to recruit and exploit unsuspecting developers here on HN to implement and operate his scams in exchange for promises of shitcoin equity.
Coinbase is a US publicly traded company regulated by the SEC. Their business model is garbage but they have orders of magnitude more data that shows that as a company, they’re legit.
In December 1996, Emanuel Pinez, the CEO of Centennial Technologies, and his management recorded that the company made $2 million in revenue from PC memory cards. However, the company was really shipping fruit baskets to customers. The employees then created fake documents as evidence that they were recording sales.
Coinbase goes as far as publishing the exact identification numbers of all the short term US treasuries they hold that back the USDC they emitted. They say they're held in custody at BNY Mellon (IIRC). It would be quite the lie if that wasn't true and I'm pretty sure many people are now carefully looking into these affirmation / proof of reserves / etc.
Coinbase also always had exorbitant fees compared to other exchanges (but who's looking "smart" now, those who paid the huge fees at Coinbase or those who were paying 0.000001% / operation at FTX and are now fucked?), which at least make it sound like making money on actual fees was their business model.
Now: Coinbase is leaking money by having revenues which fell and running costs through the roof.
But, in the short term, if FTX is gone and if Binance goes, Coinbase becomes number one. They're already number two and it's very likely that Coinbase's volume is real (contrarily to Binance).
Coinbase is a HN unicorn, US incorporated. The people behind it are known.
They may be behind a huge scam but somehow I don't think so.
Also I do really wonder: now that rates have gone up, they've got $53 bn actual USD bringing it a significant amount of money. Where's that money going? For a start they're not giving the yeld to people storing USDC in their own private wallet in a "your key / your coins" style. What about the USDC held at Coinbase for customers? Do they give yeld on that?
$53 bn or so is a lot of money with 4 to 5% yeld or something...
Doesn't the other poster's claim that the "Entire financial space" is corrupt and that "For every FTX or Binance there's an Enron or Deutch Bank ten times the size and just as villainous" undermine the claim that BNY Mellon is trustworthy?
I agree that USAA is a rare exception, but do you really trust BNY Mellon if the "Entire financial space" is corrupt, or is that just whataboutism that ignores the outrageously unprecedented and shill-droid-automated degree of unregulated untraceable corruption in the crypto space?
If you believe Coinbase is as rare and trustworthy an exception as USAA, then I've got some Trump NFT's to sell you!
Disagree. Coinbase has been around forever and was born out of the collapse of MtGox and people wanting some adults to run an exchange. I would not be surprised at all if Binance is a house of cards, I would be very surprised if Coinbase was.
Madoff Securities was founded in the 60s and didn't collapse until 2008.
And you may say that Madoff Securities didn't start out as a Ponzi scheme, federal investigators believe that it took until the 70s for it to start. Madoff claims the scams didn't start until the 90s.
So, "being around forever" isn't evidence of lack of fraud.
What gives confidence in Coinbase is that it’s an American company with no offshore subsidiary to perform these kinds of shady transfer shenanigans that have led to the demise of FTX and possibly Binance. No financial company is bulletproof but perhaps it can be said Coinbase only has as much risk as any American financial company. To be fair if this risk is less than your typical crypto darling it’s definitely non-zero.
Even moreso than Coinbase being an American company, it's a PUBLIC american company that is scrutinized by the rules of american exchanges. This makes it more transparent financially than any other exchange that you can hold your crypto at.
Madoff Securities was an American company whose shady shenanigans were all contained within the US.
So the fact that Coinbase is entirely US based is also not a guarantee that it's not doing shady things.
And the implication DonHopkins was making is that every major actor in the crypto space is run by scam artists trying to defraud people of their money. There are no good actors.
It's not about the level of risk with regards to the structure of the company. It's about the people running it. And no manner of corporate structure is going to prevent people from simply lying. Which is what every fraud has to do at some point. By their very nature.
DonHopkins is saying since we can't trust the people running these companies, we can't trust these companies.
And the fact that they've been around for a while or are based solely in the US mean nothing when one of the largest financial scams ticked both of those boxes.
If I had to make a guess on what is going on, Binance US is using Binance cloud, which allows for other platforms to tap into Binance’s orderbook liquidity and infra. Mandala(an exchange) uses it, and their token mdxt doesn’t trade on Binance but still uses their infra and wallets for instance.
There could be a similar arrangement where US pairs don’t appear on the intentional exchange and vice versa, even if they use the same infra
The whole thing about being “a wholly separate entity” in the context of binance and ftx us/intl. is such legal line to distract people.
SBF in an interview mentioned ftx us and intl. have different “principal addresses and everything” for the two companies.
I started a business a few months ago (details not important here) and hire a registered agent service to also serve as my principal address (details not important really but I rent and cannot use my residential address for these business purposes).
So yes legally they’re separate entities but that really doesn’t mean much in a functional sense.
I'm very skeptical of crypto, but what this is telling me is that at least one pro-crypto argument has _some_ merit: _some_ degree of additional transparency. Anyone could look at these addresses. This isn't the case with accounts in traditional banks.
Not to try and create excuses for them, but if I trade on Binance.US, can I trade against someone placing orders on Binance.com? Because if yes, then the commingling of assets is expected and necessary.
Say I register at Binance.US, deposit some USD[T] and buy some BTC instead. Now someone on Binance.com does the opposite - sells me BTC, receives USDT. Now we both withdraw - except my BTC was deposited at Binance.com and the counterparty's USDT was deposited... elsewhere (who knows were).
This doesn't apply, however, if people trading at Binance.US believe they are only trading with each other...
Binance.US was supposed to be a separate entity, operating under US regulations and thus allowing people in the US to use it directly.
Quoting the article:
>Our data suggest that Binance.US’s “market maker” is a single pair of addresses that exclusively transfer funds between Binance and Binance.US. These addresses move customer assets from the U.S.-based exchange to the much larger offshore entity to perform trades. This means that for all practical purposes, there is no real difference between having your money with Binance.US or directly with Binance. Given that Binance was barred from doing business in the United States, it certainly appears that Binance.US is little more than a convenient fiction to evade regulators.
So yes, Binance.US was created to give the impression of a separate business entity to appease US regulators and entice US investors. But it appears to all be a shell game. Deposited funds may as well have been deposited directly into Binance, which is against the public perception they created.
My point is, it depends what "separate" means. It's not uncommon for regulated exchanges to have multiple shell exchanges, just as this article alludes Binance does, where orders are just routed somewhere else. If that's the case then it's unavoidable that client money moves.
What is unclear to me is what independence is promised. Did they promise a fully segregated business with no links? If TFA is right then this is violated.
But maybe they just promised a US entity for dealing with international Binance. If so, the only benefits you reap is there is a US business you can sue and some kind of financial supervision - quite light by the sound of it. And not, by itself, unheard of in regulated finance.
Just saying "look money flowing to and fro" contradicts some but not all sane definitions of "independent".
>In public, Zhao said the new U.S. exchange – called Binance.US – was a “fully independent entity.”
While definitions can have nuance, the "fully" prefix is worthy of consideration here. That doesn't seem to lend itself to being an accurate description of a shell exchange.
If you're concerned the "fully" part didn't come from CZ:
>For instance, Binance.com is not available to US users, while there is a brand partnership with Binance.US, which is a fully independent entity that is a compliant and regulated exchange in the US, to provide US users with a safe, secure, and compliant trading platform. [1]
This is pretty clearly saying one thing then doing another.
I'm not saying Binance did nothing wrong, only the article does not elaborate what promise of independence is made.
These statements, while certainly very strongly hinting at total separation, are vague enough that they could mean anything.
Clearly, the powerhouse of transparency that is Binance could just cut all such speculation by providing a proper audit. We're all arguing around the margins of a slightly dog-chewed napkin containing scribbles pinky promising Binance is good for the money...
The "correct" way to do that would be to maintain two sets of accounts, two bank accounts, and two wallets. Do settlement between the two of them as necessary.
Additionally, the "broker/dealer" function wallets and bank accounts should be separate, preferably in separate corporate identities, from the "free lunch and buy a castle" corporate accounts.
Banking/finance regulations are very strict. Just because you might want that kind of functionality doesn't mean you get to implement it even if it breaks regulations.
Except regulations prohibit that. You as a user need two separate accounts, one for each entity, and an audit trail demonstrating compliance with laws for transfers between those two entities.
It is possible that the one "international" exchange is the marketplace where buyers and sellers are matched, while the .us is the custodian of us clients. Thus you would constantly have settlements (net) between the .us custodian and the .int custodian for matched trades on "the exchange".
This is how I would set it up, but wtf would I know.
My unfounded guess is that this more about tax dodging / regulation skirting than a sign of an imminent collapse. They may have to pay a fine or something but will survive.
This is like the "trick" I use to avoid US speeding fines: I don't speed in the US.
Then same level of fake "outrage" and (at best) ignorance applies to the rest of the article.
There really SHOULD be a requirement for centralised exchanges to hold coins (in wallets they alone control etc) equal to customer deposits (with a reasonable get out for USD/USDT/USDC/BUSD etc fungibility). But there isn't. So Binance.US is free to hold them or transfer them to Binance. And given the terrible service offered by US banks, it is not surprising that they have to use Binance(main)'s rail to access payments. In fact it's totally standard.
Why does it keep referring to Binance.us as a trick or ploy? It is the only way to use Binance for investors in the USA. Like most exchanges long ago they kicked all the USA based people off. Then exchanges were created that fulfilled USA regulations and rules. Typically coins that could be securities aren’t included. Exchanges like Binance.us, FTX.us were created. Americans without a VPN haven’t been able to use exchanges Bitmex, Binance.com, FTX.com etc. for a long time. This isn’t a ploy or trick any more than a separate website for GDPR countries is a trick.
Because they are not keeping your money/stocks/tokens/whatever like they promised and should. Like all real brokers do. A bank run can not happen for a broker.
It is like Vanguard sending your money to their hypothetical Chinese subsidiary because that is where they think the market is most efficient. Then when the Chinese government seizes that company's accounts, you are shit out of luck because your money is not where it is supposed to be, and the US entity is bankrupt.
Crypto is unregulated so there's nothing stopping you from doing more than just profiting off of transaction costs. Why get rich slowly when you can get rich quickly? During the height of the cryptocurrency craze, everyone was making huge profits using this business model. I assume the profits stopped when the market shrunk, putting shady companies (slightly) below solvency.
It's hard to compete in a market where big, scummy brokers will ask no transaction fees because they use their customers' assets to speculate and profit. Had they switched tactics to a transaction fee based approach, they'd risk large customers taking their assets to another broker, which can cause insolvency problems to become visible. Switching business models after having your shady business model collapse may not be an option!
I think you can make a decent amount of profit in the cryptocurrency market by just doing the thing that's normal for real brokers, but you'll need quite soms scale to become seriously profitable. You'll also need to prove somehow that your nee company is the real deal unlike all of your shady competitors.
There are probably real exchanges out there, completely solvent and doing honest trades, but without large volumes you'll probably never hear of them. The most risky businesses will make the most money, provide the cheapest service, and get most of the attention, at the risk of collapsing and taking the price of their speculative assets down with them.
"exchange" is mentioned exactly zero times in the article. However, I'll let that slide as presumably you meant to imply that exchanges make money through yield farming, which also doesn't make sense because yield farming doesn't involve the participation of exchanges at all. As mentioned in the article, the concept is that a smart contract accepts deposits and hands out tokens, which constitute the yield. No part of that requires exchanges.
You seem to be under the impression that a crypto exchange is like a modern day stock or commodities exchange. It is not. It's much more akin to a hybrid of an 1860's era wildcat bank and a 1900's era bucket shop. Their main business is NOT executing crypto trades on behalf of customers no matter what they might say.
You really need to provide some citations. The fees are actually extremely lucrative, check the Coinbase filings during the bull run. The FTX trading fees were massive as well and is one of the reasons SBF is a profound idiot. He could have banked those fees forever but he wanted more and more gains so went to the dark side trading and using user funds and of course losing them.
> The (FTX) crypto exchange's revenue soared more than 1,000% from $89 million to $1.02 billion in 2021.
People really still take any financials that FTX released at face value? Do you also believe SBF when he says he was 8 minutes away from receiving billions of dollars of funding that would have made everyone whole when he mistakenly filed bankruptcy?
This article has nothing to do with how crypto exchanges make money. They make money from trading fees. Let's say your claim about wash trades is true, why wouldn't the exchange make money from those fake trades?
To answer GPs question, legit exchanges do spend a lot of money and effort on keeping user's assets secure so it's maybe not as easy as it seems. But in the case of FTX, I totally agree. FTX was like 2nd or 3rd highest volume exchange and could have been a highly profitable business on it's own. Only SBF knows the answer to why that wasn't enough.
Well while you are deciding if you are going to buy something with your 5k or not, I, a gigabrain genius, can take your 5k and buy the latest mooning stable dog coin and turn it into 50k gaurantteeed and when you want to buy your shares sell it for massive gainz and keep the 45k I made for myself.
Coinbase lost its shirt last quarter doing that. Even in the traditional finance worlds the exchanges have to be extremely consolidated and offer myriads of products to make it.
The crypto market imploded last quarter, that is to be expected. Brian Armstrong and Coinbase have been in this through multiple cycles and know how it goes. Coinbase still has 5.4 billion in cash to make it through the tough times and make lots of money on the next crypto manic cycle. Based on previous cycles, the bottom is already in for crypto. Think of crypto bull runs like the holiday season for retail businesses. It’s where they make their money.
> Based on previous cycles, the bottom is already in for crypto.
Why would you base any crypto predictions on previous cycles? Has the crypto market ever experienced a cycle with high inflation and rising interest rates?
That’s not difficult, it’s what Coinbase and Kraken do. But what if you want to offer derivative products that are leveraged by default where someone can deposit 5k and wants to buy 30k worth of a shitcoin that can drop 90% in a day?
Not exactly, you should dig deeper, many brokers do use your shares. If you agree to it… and you very well could have not reading fine print.
“To be clear, your brokerage firm cannot lend out your stocks without your permission. However, you may have signed a customer agreement that explicitly allows your broker to lend out your securities. This clause is often tucked deep within the customer agreement, and few investors pay much attention to it.”
Those shares would still list you as the beneficial owner at Cede though so if the broker becomes insolvent (perhaps due to counterparty risk from short sellers) your shares are not available to other creditors and continue to be yours.
The trick is that they pretended they were compliant with us regulations when they weren’t. Some users probably don’t mind this, but if there are issues they might change their mind.
> Binance.US was described as a separate entity from Binance that was merely licensing the name and certain features from the main company.
> In public, Zhao said the new U.S. exchange – called Binance.US – was a “fully independent entity.” In reality, Zhao controlled Binance.US, directing its management from abroad, according to regulatory filings from 2020, company messages and interviews with former team members. An adviser, in a message to Binance executives, described the U.S. exchange as a “de facto subsidiary.”
> These public issues have led many to wonder whether Binance and Binance.US are truly separate entities. We can now report that based on blockchain transfers, market data, and company disclosures, it appears that there is no meaningful separation between the two firms. In fact, we show that Binance.US both transfers customer deposits to Binance and pays customer withdrawals using transfers back from the offshore exchange’s wallets. Further, we demonstrate that trades allegedly happening on Binance.US’s exchange are likely being conducted directly on the main Binance exchange.
> It turned out that Binance US apparently didn’t have enough USDT in its wallets to pay back customers for several hours.
> However, Binance.US apparently had to pull money from the main Binance exchange to pay back customer withdrawals. In other words, Binance.US customers were paid back using funds transferred from the offshore Binance exchange! We must ask, why were U.S. customer assets held in Binance addresses?
> We conclude that a significant portion of Binance.US customer deposits are commingled with other deposits on Binance’s main exchange.
> Our data suggest that Binance.US’s “market maker” is a single pair of addresses that exclusively transfer funds between Binance and Binance.US. These addresses move customer assets from the U.S.-based exchange to the much larger offshore entity to perform trades. This means that for all practical purposes, there is no real difference between having your money with Binance.US or directly with Binance. Given that Binance was barred from doing business in the United States, it certainly appears that Binance.US is little more than a convenient fiction to evade regulators.
> In reality, Binance.US appears to be little more than a facade to obfuscate the fact that an unregulated offshore crypto business currently under investigation for money laundering and sanctions violations is doing business in the United States despite being banned from the country.
The post explains quite clearly why they call it a trick.
If I use Vanguard in the US, it is a completely separate entity from Vanguard in Europe. This is to ensure they meet the regulations of where they're operating. This is standard operating procedure. What Binance is doing is not.
Imagine you set up a seperate GDPR compliant site to keep the regulators happy, then behind the scenes transferred the customer info to the standard site and just continued to do all the stuff the GDPR tells you not to.
Thats what they are alleging here, and why the supposedly seperate company is just a trick.
Any examples of those separate websites for GDPR countries?
The thing I most frequently come across is companies that more or less outright admit that without tracking their users they can not make the numbers work or that they refuse to abide by the law and so they block EU citizens outright.
I don't see the point of trying to take down Binance by spreading fud. If Coinbase is all that s left, then what is the point of having bitcoin at all, if it is going to be as regulated as the dollar. This would render coinbase redundant too
To be frank, the evidence here is quite slim. It would be expected that market making funds would operate on both binance and binance.us and transfer funds between them either to provide liquidity or conduct arbitration. That’s not to say you should trust Binance, all centralized exchanges are suspect and CZ himself has said that eventually dex will supersede cex.
We should definitely not trust CZ because he said Binance.US is an independent entity then he ran it as a subsidiary. That's a pretty solid lie and also solidly explained in the article.
An independent entity operating as an exchange might do market making activities with many other exchanges. It seems Binance.US only does that with Binance.
An independent entity operating as an exchange should be directly responsible for and in possession of customer funds that have been deposited with them. Binance.US couldn't fulfill withdrawals without Binance's help. That should not ever be necessary if these are separate entities.
I love some good exchange fud but this article is hot garbage. None of the claims remotely follow from the evidence.
* all exchanges transfer a lot back and forth on behalf of their clients. Arb desks, market makers, etc. To conclude commingling is laughable.
* binance international has many different products and clientele (much more retail and people with positions) than binance us (mostly just hfts, little real world traction). No surprise that the turnover to assets is different. It doesn’t mean that trades awe executing in binance international instead of US.
* binance saying some market makers have headquarters outside the US does not mean binance us trades actually happen on binance. This is so horribly, terribly wrong it makes me doubt the article is good faith.
* A market maker isn’t a pair of address that move funds back and forth, unlike the article claims.
The claim doesn’t even make sense. Binance US trades hundreds of millions a day, and the lifetime back but forth transfer is under 2 billion??? That doesn’t add up to “binance us does it’s trades in binance international”.
The claim doesn’t even make sense. There’s no reason to send funds over to binance international, do the trade for each party there, and send funds back. If the claim is that a market making firm does so then, yeah sure, many do, so what? That’s literally how cross exchange arb works, “but in the low one and sell on the high one”.
Let’s keep the content of a respectable quality. This is someone putting out some garbage so if binance does collapse, they can claim they called it ahead of time.
I have no dog in the fight, but I did find it interesting that the top comment on HN for the Alameda article written by this very exact author was very similar in tone completely dismissing the article and saying it's total nonsense, and that the author knows nothing. As we all found out a few days later, the article was 100% on the nose. So reasonably, it seems we HN readers would have to take the total outright dismissal of this article with a grain of salt...
“
nobody knows what the liabilities are. At one extreme, if the liabilities are all cash, alameda is in a dire place. At the other, if the liabilities are just the tokens on their balance sheet, there's nothing particularly interesting.
“
Is obviously not a total dismissal - I’m on mobile so can’t scroll around to find my other one but it largely says the same thing.
Also, if you can’t really imply anything other than “I’m a shill because I said the balance sheet wasn’t certain evidence of insolvency”, what’s the point? Shill accusations are explicitly called out by dang and the rules for this reason
Never implied that you are a shill at all. Just that I have noticed a common theme on HackerNews where people tend to comment as if they "know it all" (and maybe you do, how do I know). I just want to make aware that this article writer has earned credibility, and as a layman I am much more willing to put a higher weight on the article than a rando taking it down and calling it garbage based on what doesn't seem to be any special insight into the situation.
This is the same reporter who warned investors about Alameda/FTX right before they collapsed. [0] [1]
They also brought attention to Celsius two months ahead of their collapse. [2]
A lot of crypto ponzi schemes have been covered up with "Oh, that was just us doing arbitrage."
Celsius founder in 2020:
"We lend financial assets to players that can transact and generate income for themselves through arbitrage, market making or shorting certain stocks or digital assets."
Almost every brilliant arbitrage has blown up in the faces of high-risk entities or never happened to begin with (SBF's Japanese arbitrage trade looking pretty suspicious right now, with a $9B hole in his balance sheet).
The confidence of your remarks also strikes me as strange, seeing as we've now experienced one domino after another of "we're perfectly solvent and not doing anything bad" to "we're closing withdrawals and all the money's gone" (LUNA/UST, Celsius, 3AC, Voyager Digital, BlockFi, Genesis, FTX... all just in the last year.)
How can you have so much confidence these trades aren't suspicious?
1. Securities exchanges have a well-defined process for clearing transactions, and don't receive off-schedule payouts from ostensibly independent entities in order to make those transactions work out.
2. If Binance goes under, what happens to the holdings of Binance.US customers if they are depending on transactions debited from Binance? It's not about clientele, it's about where the assets are parked.
3. You have the article's causality chain backwards. They establish the hypothesis first and then note that offshore market-making (noted in the Binance.US TOS) supports the hypothesis.
4. The article puts "market maker" in quotation marks, implying that it's not a real market maker but rather a vehicle to move funds to the other entity for the purpose of effecting trades. I interpret this as a no-arbitrage condition between the Binance and Binance.US.
5. The amount of money is irrelevant. If your assets are deposited in a regulated entity and then they get transferred to an unregulated entity for any reason aside from clearing your own transactions, something strange is going on.
6. Cross-exchange arb shouldn't result in USDT deposits on Binance.US dropping to six figures and then needing a $10M lifeline from Binance.
7. This "someone" as you put it was fairly prescient with regard to Alameda and FTX, using similar methodology, and faced similar criticism for the four or five days between their publication and the collapse of the FTX empire.
I think the article was suggesting that the volume of trading exceeded the store of assets on Binance.US and as such required funds be transferred from Binance proper because it had a much better volume:exchange ratio.
Right - and the Binance.US TOS tries to maintain that they are not related parties with Binance even though they share common owners:
As part of an effort to offer digital asset trading technology to its customers through the Binance.US platform, BAM Trading entered into licensing agreements with Binance Holdings Limited ("Binance"), which operates the world’s largest digital asset exchange. BAM Trading and Binance share common majority ownership, but are not within the same corporate structure.
This is when I found out Binance no longer allowed US investors, and I was redirected to a US site (Binance.us). The problem was my account was on Binance.com, and it was not migrated in anyway to this new US site.
I contacted support and they gave me a 7 day period to log in and withdraw my funds (which in itself is weird -- why not just migrate my account to the US site; why the sketchy, arbitrary 7 day period? whatever). I was finally able to log in! And I saw that my $100 investment had (unsurprisingly) turned into $17. I chuckled and tried to get my 17 bucks out anyway, only to find that the site no longer even offers a way to withdraw funds as an American!
This whole experience that spanned maybe an hour was hilarious. I've resigned to the fact that I was scammed out of a hundred bucks. Woulda been nice to use that to buy a few games on Steam, but oh well, here we are. Hope this tale at least amuses or informs someone.