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0 pointszaroth5y ago0 comments

If you want other examples of how this goes wrong outside of Cryptocurrency, there are some amazing stories on WallStreetBets of traders exploiting bugs in Robinhood’s margin limits to over-leverage and ending up millions of dollars in the red.

It’s not a matter of withdrawals, it’s a matter of losing more money than you have and being unable to cover the loss.

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6 comments · 3 top-level

gruez5y ago· 3 in thread

Okay, but why cryptocurrencies specifically? If you find some infinite leverage exploit on coinbase, how are the effects different compared to one on robinhood? The gp commenter mentioned something involving "separation of ownership in a case of bankruptcy", but even then, I don't see how that's any different than finding a infinite leverage exploit on robinhood, finding a withdraw exploit, withdrawing to your bank account, then buying cryptocurrencies with it. At the end of the day as long you can find a infinite margin exploit + withdraw exploit on any margin platform, you can make wealth dissapear into the aether of cryptocurrencies.

jimmydorry5y ago

Correct me if I'm wrong as I can't use their platform, but Robinhood doesn't act as a bank and mercantile payment processor do they? They only do trading. Coinbase does all the things I mentioned and more.

GP was probably expressing concern that it may be possible for Coinbase to be wiped out in bad leverages which would affect people that don't trade at all.

judge20205y ago

RH created 'cash management' that came with a debit card, but the exploit was exposed (and patched) before that was available to everyone, but even then you'd have to find an exploit where spending money via the debit card doesn't do the same sanity checks as withdrawing.

0: https://news.ycombinator.com/item?id=18672951

gruez5y ago

Is that any different than bank of america operating a retail bank and a brokerage platform (Merrill Edge[1])?

[1] https://www.merrilledge.com/investing/margin-trading

vmception5y ago

That’s not a matter for the CFTC in the spot market or care that an idiot has to pay debt collectors all because they wanted to earn a few pips intraday.

CFTC doesnt regulate spot assets. So it really depends on how Coinbase classifies what people are actually trading.

crowbahr5y ago

I always wondered how much of a problem 2M+ in the red is on Robinhood.

I mean can they actually expect you to pay back what they legally shouldn't have let you have? Are you 2m in debt or in trouble for hacking or what?

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