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Sifting Mt. Gox's Logs Reveals Suspicious Trading Patterns 143

Posted by timothy
from the didn't-do-it-and-nobody-saw-me dept.
This analysis of trading logs from the Mt. Gox Bitcoin exchange analyzes a subset of the transactions that took place there prior to the exchange's collapse, and makes the case that two bots (the writer calls them "Willy," and "Markus") were making suspicious transactions which may have been used to intentionally manipulate the trading price, and which can explain the loss of Bitcoin inventory on which the exchange's failure was blamed. The author of the analysis says "[T]here is more than plenty of evidence to suspect that what happened at Mt. Gox may have been an inside job. What I hope to achieve by releasing this analysis into the wild is for the public to learn the truth behind what happened at Mt. Gox, how it affected the Bitcoin price, and hopefully for the individuals responsible for the massive fraud that occurred at Mt. Gox to be put to justice. Although the evidence shown in this report is far from conclusive, it can hopefully spur a more rigorous investigation into Mt. Gox’s accounting data, both by the public (using the leaked data) and the authorities (forensic investigation on the actual data)."
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Sifting Mt. Gox's Logs Reveals Suspicious Trading Patterns

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  • Hahahahhahaha (Score:5, Insightful)

    by Anonymous Coward on Sunday May 25, 2014 @11:41PM (#47090535)

    First we hear how BitCoin rules because it side steps those evil governments and their rules and regulations. Now that people have lost money due to dishonest behavior (which was 100% predictable given the nature of BitCoin) people are howling for the "individuals responsible for the massive fraud that occurred at Mt. Gox to be put to justice".

    HAHAHAHAHAHAHAHA

    What buffoons. First its "The government is evil! We rule because we are outside their jurisdiction". Then when the completely obvious consequence of having an unregulated and anonymous system for monetary transactions happens its "Hey, what the ???? Someone has stolen our money! Quick! Call the police! Government, come save us!".

    HAHAHAHAHAHAHAHAHA

    • Re:Hahahahhahaha (Score:5, Insightful)

      by WhiteZook (3647835) on Monday May 26, 2014 @04:04AM (#47091081)
      You are making a common mistake of claiming that a diverse group of people all have exactly the same opinion and motives. But in reality, the bitcoin supporters are all different people with different opinions. Some may be completely opposed to rules and regulations, while others are not. At any time, you only hear the most vocal and opinionated members of the group express themselves.
      • by Anonymous Coward

        OPs argument can be interpreted as "government regulation of currency is a good thing; the present fiasco explains why." I.e., if you don't think the banking industry, of which Mt. Gox is basically a part, needs to be regulated... well... you're wrong.

    • Re:Hahahahhahaha (Score:4, Insightful)

      by Anonymous Coward on Monday May 26, 2014 @04:14AM (#47091099)

      What buffoons. First its "The government is evil! We rule because we are outside their jurisdiction". Then when the completely obvious consequence of having an unregulated and anonymous system for monetary transactions happens its "Hey, what the ???? Someone has stolen our money! Quick! Call the police! Government, come save us!".

      Don't mistake hypocrites for bufoons. The "small government" people have always been about "small government" for you, "big government for me". Even most of the strictest "libertarians" want a strong police and army. Why? Becuase they believe (mostly against the evidence) that in future they will be rich and have lots of property that they would like someone else to support. Look at the way the Ayn Rand article on Wikipedia [wikipedia.org] says "[..] despite her initial objections, was persuaded to allow Evva Pryor, a consultant from her attorney's office, to sign her up for Social Security and Medicare." as if someone just signed a paper with her name and tries to avoid mentionaing that she actually happily took medical treatment... No; she got pain relief and medical treatment solely because the "big government" made sure she could. She benefitted from the social security payments of many people who died quickly and in accidents in a way that the money she would have saved from not paying social secruity could never have helped her and she still wasn't willing to be greatful.

      "Those Bitcoin people you are talking about are clear; they want the police to protect them; they want you to pay for it whilst they complain about too high taxes. This is not buffoonery, this is theft.

      • by Anonymous Coward

        Nonsense, there is no hypocrisy. Rand shows that the victims of social programs have the right to reclaim whatever was taken from them by force. The principle of non-aggression does not deny you the right of self defense. In fact there's a character dedicated to this principle in Atlas Shrugged, Ragnar Danneskjold.

        "The same moral principles and considerations apply to the issue of accepting social security, unemployment insurance or other payments of that kind. It is obvious, in such cases, that a man recei

        • by ultranova (717540)

          Rand shows that the victims of social programs have the right to reclaim whatever was taken from them by force.

          Atlas Shrugged doesn't "show" anything except its author's personal beliefs any more than Mein Kampft does.

          that a man receives his own money which was taken from him by force

          His own money? By all means, keep any colourful rectangles you might have designed for your home-brewed version of Monopoly.

          Oh, you meant US dollars? Even the gold-backed variant depend on both anti-counterfeiting features an

        • by Darinbob (1142669)

          She stole that medicare money by being a heavy smoker though. Had she cared about her fellow tax payers she'd have become a vegan teetotaller.

    • by drinkypoo (153816)

      What buffoons. First its "The government is evil! We rule because we are outside their jurisdiction". Then when the completely obvious consequence of having an unregulated and anonymous system for monetary transactions happens its "Hey, what the ???? Someone has stolen our money! Quick! Call the police! Government, come save us!".

      You can be sure that there are at least as many bitcoin proponents who would like a government to simply stay out of the whole affair and let them engage in vigilantism as there are those who would like a government to provide a remedy.

      • by goodmanj (234846)

        You can be sure that there are at least as many bitcoin proponents who would like a government to simply stay out of the whole affair and let them engage in vigilantism as there are those who would like a government to provide a remedy.

        To be sure. The value of this social experiment is not so much in pointing out the hypocrisy of the anarcho-libertarians, or convincing them they're wrong, but in showing everyone else what an anarchist "utopia" actually looks like in practice.

        • by drinkypoo (153816)

          The value of this social experiment is not so much in pointing out the hypocrisy of the anarcho-libertarians, or convincing them they're wrong, but in showing everyone else what an anarchist "utopia" actually looks like in practice.

          This does no such thing. Nonetheless, the word "utopia" is apt, because the absence of power structures creates opportunities for those who create power structures. As soon as you abolish the systems abusing people in favor of nothing, you create a void which someone else will fill. The only way out is through.

    • by ultranova (717540)

      First we hear how BitCoin rules because it side steps those evil governments and their rules and regulations.

      No, it rules because it lets me buy things over the Internet without having to give my credit card number to people I don't know, and sell things over the Internet without requiring the approval or cooperation of credit card companies. It solves the "cash over Internet" problem; that it also helps stop any government that oversteps its bounds from cutting funding to Wikileaks or other watchdog organ

    • by Darinbob (1142669)

      I am impressed though. I thought Bitcoin was just a silly toy for people with silly politics. And then it turns around and perfectly replicates the crimes that take place every day in the stock market. Well played, Bitcoin, well played.

  • by Gothmolly (148874) on Sunday May 25, 2014 @11:41PM (#47090539)

    A virtual Internet-based currency is subject to electronic flim-flammery? Color me shocked.

  • Many people have opined about the suspicious behavior of the bot known as "Karpeles" ... More recently, this bot has been very quiet.

  • by Anonymous Coward on Sunday May 25, 2014 @11:52PM (#47090577)

    No matter what the price is, a correctly operated exchange should pair buyers with sellers, and only perform the transactions when the buyers offer more than the sellers demand (exchange gets the difference). That's what it means to be an exchange: you facilitate trades. Some price manipulation shouldn't hurt them: it's just more trades and thus more profit.

    If you want to add some extra damping there and capture some profits from the changing prices, you can either screw with the profit margin size dynamically, or you can become a user of your own exchange (become an investor in multiple currencies, and shift between them on your own exchange). Investing like that is a separate thing, and if they mixed that up with the operating of the exchange part, then they really screwed up: if you botch separation on concerns, one screw up wrecks everything. Well, we know they really screwed up in lots of ways, and with no proper separation of concerns, they totally wrecked everything in lots of ways. No partial failure support + fail horribly at something = oops, no more company.

    • by Rich0 (548339) on Monday May 26, 2014 @04:48AM (#47091165) Homepage

      Exchanges should not lose inventory!

      Exchanges should not have inventory to lose!

      Those who lost money from Mt. Gox were treating it as a bank, not as an exchange. It is a lot easier to mess up the operation of a bank, or to be burned by a bank failure. That is why the FDIC was created in the US, and I imagine that most countries have similar sorts of arrangements. If somebody was storing any significant amount of money at Mt. Gox then perhaps they've learned something.

      Storing your bitcoins in an unregulated bitcoin-based bank is no different than storing your US dollars in an unregulated dollar-based bank.

      I agree with everything you said though - exchanges shouldn't have money at risk at all if operated properly, concerns should be separated, and even if something was messed up the exchange concern should never have more money on-hand than the momentary trading volume.

      • The problem is that in order for an exchange to work properly, transactions need to be cleared instantly. If the fiat money and/or the bitcoins are not stored in accounts on the exchange, how do you propose to quickly clear the exchange ? For example, MtGox was located in Japan, so if I'm in Europe, and I have 1000 EUR in my own bank account, and I wish to buy bitcoin from a seller in the US, when and how do you want to exchange the money and bitcoin for a price we all agree on, and with no risk of someone
        • by Rich0 (548339)

          Hence my point about the "momentary trading volume." Mt. Gox was holding far more bitcoin (or purporting to, at least) than necessary to fill trades.

          I don't have a problem with them taking money and holding it for a few hours until they match everybody up at a reasonable price. If there were some kind of problem, there shouldn't have been a loss of more than a few hours of trading volume.

          • Still, in order for MtGox to facilitate a trade they must have an account per user, that will hold a certain amount of btc and fiat. So, say I wanted to buy 1000 EUR worth of bitcoin, I arrange a bank transfer from my bank to MtGox. This may take a few days, and then they have my money in their account. Now, maybe during that time, the BTC/EUR exchange rate went up, and I decide to wait for the price to drop. In that case, the 1000 EUR will be sitting in their account until I decide to buy btc (or decide to
            • by Rich0 (548339)

              This is where separation of concerns comes in. They're not just running an exchange in the case you describe - they're holding onto money.

              Fine, they run a bank/brokerage, and an exchange. These should be separate concerns, with the exchange never holding money at all, and the bank being run like a bank.

        • Instant transactions would be ideal but they are not really necessary for the currency to function properly. If it takes, say, a day for a transaction to clear, and the exchange has a good reputation, then the odds are very good that they won't make off with your cryptocoins or dollars while the transaction is being cleared. And if you do use it as an exchange rather than an online wallet, your exposure is likely to be rather limited.
          • Except that the customers will prefer a small delay, so they'd rather use an exchange where they can immediately withdraw their funds. This is especially true for people wanting to trade back and forth, or those seeking to do arbitrage for profit. Given that you have to put trust in the exchange anyway, you might as well extend the trust a little bit in return for immediate transactions.
      • Are you saying that banks should be separated from investment banks? Snort!
  • "Inside job," I said...

    (Actually I said I thought it "probably" was.)
    • by Rich0 (548339)

      It had to be gross mismanagement at best. An exchange doesn't need to hold money. If they ran a bank and an exchange then those operations should have been isolated.

      This is really just a bank failure by another name. Banks love to take risks with other people's money, which is why they tend to fail all the time when left to their own devices, which is why nobody leaves them to their own devices.

      • It had to be gross mismanagement at best.

        No, it didn't.

        An exchange doesn't need to hold money. If they ran a bank and an exchange then those operations should have been isolated.

        An exchange had little reason to exist at all, except to milk stupid investors. Dealing in Bitcoin did not require exchanges. AND they added exchange fees that were totally unnecessary, and which was actually a form of double-dipping.

        Banks are repositories for MONEY. Bitcoin does not need repositories. There is a very huge damned difference.

        • by Rich0 (548339)

          It had to be gross mismanagement at best.

          No, it didn't.

          How can money held in trust for somebody else be lost other than by mismanagement? Every bank in the world holds money in trust for others and most of them manage to do it without losing track of it (and frankly they should be better-regulated than they are as it is). You just need to hold money for as little time as necessary and avoid treating the money you're holding onto like it is your personal investment account.

          An exchange doesn't need to hold money. If they ran a bank and an exchange then those operations should have been isolated.

          An exchange had little reason to exist at all, except to milk stupid investors. Dealing in Bitcoin did not require exchanges. AND they added exchange fees that were totally unnecessary, and which was actually a form of double-dipping.

          Banks are repositories for MONEY. Bitcoin does not need repositories. There is a very huge damned difference.

          All currencies are traded on exchanges today - they're a convenience. Sure, if I have a

          • How can money held in trust for somebody else be lost other than by mismanagement?

            My apologies. I read "at best" and somehow it got interpreted as "at most". But that is clearly not what you wrote.

            All currencies are traded on exchanges today - they're a convenience.

            Part of the whole purpose of Bitcoin was that it was designed to not need exchanges. The exchanges capitalized on the ignorance of people who were used to using exchanges and thinking in those terms, and didn't realize that they were paying money for something they could have gotten for "free".

            • by Rich0 (548339)

              Part of the whole purpose of Bitcoin was that it was designed to not need exchanges. The exchanges capitalized on the ignorance of people who were used to using exchanges and thinking in those terms, and didn't realize that they were paying money for something they could have gotten for "free".

              Bitcoin doesn't require banks for storage, but it certainly needs exchanges. What is your alternative if you have $100 in USD that you want to convert into Bitcoin? You could look on some random forum and mail a check to some random individual and hope they deposit the bitcoin in your wallet. Exchanges exist for the same reason that escrow services do - they're points of convenience and trust.

              • Bitcoin doesn't require banks for storage, but it certainly needs exchanges. What is your alternative if you have $100 in USD that you want to convert into Bitcoin? You could look on some random forum and mail a check to some random individual and hope they deposit the bitcoin in your wallet. Exchanges exist for the same reason that escrow services do - they're points of convenience and trust.

                Unlike most "currencies", Bitcoin is a commodity, in the genuine economic sense of the term. Further, unlike most commodities even, its "value" determination was built in. Therefore speculating on Bitcoin is pretty irrational, because in a rational market, inevitably its "value" is going to settle around a relatively fixed number.

                So if you were a rational person, it is likely you would seldom have good reason to converting cash to $100 worth of Bitcoin. Unless you wanted to make an anonymous online trans

                • by Rich0 (548339)

                  So if you were a rational person, it is likely you would seldom have good reason to converting cash to $100 worth of Bitcoin. Unless you wanted to make an anonymous online transaction.

                  No argument there, but people exchange currencies all the time for the sole purpose of performing transactions.

                  When I travel to Europe it is helpful to have Euros in my wallet and not US Dollars. So, I go to a local exchange (at my bank or in an airport) to exchange my Dollars for Euros. That's all an exchange is - somebody willing to trade one thing for another. It doesn't have to be as part of an investment, though people will always trade commodities of any kind.

                  Further, unlike most commodities even, its "value" determination was built in.

                  Its supply is built-in. The value of a

  • As time goes on... (Score:4, Insightful)

    by Rick in China (2934527) on Monday May 26, 2014 @12:05AM (#47090619)
    The less people will care. The less people will remember their lost money, and the less people will be able to do about it. I think we're close to that point where those who lost have accepted it and those who followed the story stopped, no lessons learned, look at all the thriving bitcoin exchanges & online wallets. Like school shootings, we're about over it til the next big one hits.
    • The less people will care. The less people will remember their lost money, and the less people will be able to do about it. I think we're close to that point where those who lost have accepted it and those who followed the story stopped, no lessons learned, look at all the thriving bitcoin exchanges & online wallets. Like school shootings, we're about over it til the next big one hits.

      Hmmmm. Take that paragraph, and "s/bitcoin exchanges/stock exchanges/" and "s/online wallets/portfolios/", and it would still be entirely true. Looks like the bitcoin markets aren't all that different from the securities markets.

      • Except there is a huge difference. I don't have time to educate you on the differences between fully-digital decentralized bitcoins and companies that have gone public.
      • Except that stocks are more of a commodity. I don't pay for things with 3M stock; if I want to do that, I have to sell my 3M stock, get dollars, and pay for whatever with the dollars. Bitcoin is more of a currency. You can pay for things with it.

        Moreover, I'm pretty confident that the stocks at my brokerage aren't going to be embezzled or converted or whatever the legal term is. If that did happen, I'd be pissed. Having the value go down is something I have to expect, and it doesn't make me angry or

  • by pitchpipe (708843) on Monday May 26, 2014 @12:11AM (#47090635)
    I think the US government is genuinely confused. They aren't sure if these guys are more like Wall-Streeters that committed fraud on a massive scale thereby enriching themselves with billions, or common thugs who rob banks with guns. If it's the former, they're safe: too big to jail and one of the boys. If it's the latter, well, here comes pound-me-in-the-ass prison for life.

    If only they would have made it simpler by either stealing a lot more, or a lot less.

    • I think the US government is genuinely confused.

      I think the US government doesn't care. Its the Japanese government that cares, Mt Gox is in Japan. :-)

    • by NicBenjamin (2124018) on Monday May 26, 2014 @05:39AM (#47091263)

      I think the US government is genuinely confused. They aren't sure if these guys are more like Wall-Streeters that committed fraud on a massive scale thereby enriching themselves with billions, or common thugs who rob banks with guns. If it's the former, they're safe: too big to jail and one of the boys. If it's the latter, well, here comes pound-me-in-the-ass prison for life.

      If only they would have made it simpler by either stealing a lot more, or a lot less.

      The problem with this argument is there's no evidence that Mt. Gox actually stole the money itself.

      There's evidence a bunch of BTC advocates with excessively high IQs (and the corresponding total lack of common sense) are extremely convinced Karpeles stole the money, and have figured out how he could do it. But anyone who pisses off a bunch of high IQ people is gonna quickly be informed that they clearly are the reincarnation of Hitler and Stalin, as proven in this extremely convincing 47-page manifesto, which can only be understood by people eligible for Mensa membership. So the fact that BTC guys think they have evidence he stole the money is not terribly convincing.

      What is convincing is the fact we know where Karpeles is, and he's in bankruptcy. The bankruptcy Judge will have a good idea of Karpeles financial situation, which means that if he's spending like a millionaire and claiming his company has no money he's going to jail in Japan. Which in turn means if he stole hundreds of millions he'd have fled someplace under an assumed name.

      What's more convincing is his story. "programmers with no experience in security, totally fucked up the security," is a significantly more believable scenario then "programmers with no experience in security, and no history of fraud, purposefully designed a security flaw into our system specifically so they could exploit it." The fact he found a hundred million or so in BTC under his couch further increases the first story's credibility, because if you're good at security you don't do that shit.

      • I wouldn't assume he would have fled someplace under a new name. There are a number of recent cases where people who should have fled did not. Bernie Madoff surprised me that he didn't run, the Silk Road founder still living in the states was also surprising. I guess it's part of the mentality of 'they'll never catch me'
        • Madoff had some very good reasons to stay in the states. Notably he had family who would suffer quite a bit if he fled. Moreover he didn't actually have the money he was alleged to have stolen (the whole point of a Ponzi scheme is you don't actually have the money, you just have a bunch of fools you've convinced to send you more money to pay the last round of fools off). If he'd left he would simply have sent his sons to jail, and starved himself to death.

          The Silk Road guy didn't know he'd been made. If he'

      • What's more convincing is his story. "programmers with no experience in security, totally fucked up the security," is a significantly more believable scenario then "programmers with no experience in security, and no history of fraud, purposefully designed a security flaw into our system specifically so they could exploit it." The fact he found a hundred million or so in BTC under his couch further increases the first story's credibility, because if you're good at security you don't do that shit.

        The bit of "and no history of fraud" got me and reminded me something I read else-web. In an interview tin Mark Karpeles [lejsl.com] (google tanslate [google.com]):

        Il quittera la capitale un peu vite, accusé, selon nos informations, de fraude informatique.

        He left the capital quickly after being accused of computer fraud.

        I would certainly encourage people not to take my word for it and do some searches ("Karpeles fraud France" is a good one). You might wish to reconsider your conditions on the second option.

        • The interesting thing in that quote? It's in French. Legal concepts like "fraud" can vary significantly between jurisdictions even when there isn't a language barrier, so I'm fairly skeptical of any translation that hasn't been vetted by a fully bilingual lawyer.

          From what I can see he was convicted of something vaguely fraud-like in France prior to 2005 (his blog post describing the experience was made in '06, says it happened in his "youth," and he says the investigation took more then a year), but he got

  • Nice piece of work (Score:4, Informative)

    by vikingpower (768921) <exercitussolus@g ... m minus caffeine> on Monday May 26, 2014 @01:38AM (#47090825) Homepage Journal
    Well-done article. Read it top to bottom. Congrats.
    • Well-done article. Read it top to bottom. Congrats.

      I tried to follow it all the way through, bounce around reddit and even downloaded the torrent "2014 Mt. Gox Leak" http://thepiratebay.se/torrent... [thepiratebay.se]

      But wasn't able to view it as there's concern over the file TibanneBackOffice.zip; It appears to be a MAC.OSX.Coinstealer, go figure.
      https://www.virustotal.com/en/... [virustotal.com]

      • Well-done article. Read it top to bottom. Congrats.

        I tried to follow it all the way through, bounce around reddit and even downloaded the torrent "2014 Mt. Gox Leak"

        I made the basic mistake of following links and forgetting to read the rest of the article. I went back and finished, it was well written and a lot of work went into it.

        To give the ending away, this is what it comes down to (best guess speculation by author):

        Peter R, another trader, came to the same conclusion independently from me
        -The author

        "a group of hackers gained access to MtGox servers and executed fake trades that the world could see, driving the nominal price of bitcoin near $0. Mark was frantic. He

  • "[T]here is more than plenty of evidence to suspect that what happened at Mt. Gox may have been an inside job."

    Or, in other words, evidence to suspect what pretty much everyone has suspected all along.

  • "hopefully for the individuals responsible for the massive fraud that occurred at Mt. Gox to be put to justice"
    Since bitcoin's only value is what some people put on it, and only hand full of governments even recognize it as legit currency, Stealing bitcoins amounts to nothing more then stealing someone gold in WoW, guildewars2, diablo3, etc.
  • by qwe123 (2443130)

    transactions which may have been used to intentionally manipulate the trading price

    Isn't that exactly what trading is all about?

  • by Anonymous Coward

    Should we be surprised this fucked up with potheads at the wheel?

"Whoever undertakes to set himself up as a judge of Truth and Knowledge is shipwrecked by the laughter of the gods." -- Albert Einstein

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