FBI Looking for Hashflare Victims (opens in new tab)

>It would seem to set up a situation where your incentive, if you suspect a Ponzi scheme, is to quietly withdraw your money early then keep your mouth shut.

How so? Law enforcement can claw it back, and the earlier you withdraw, the less your gains.

This is an important aspect of the financial world to understand, because a lot of things work this way. It doesn't have to be a "Ponzi scheme", this happens anywhere where a lot of people pool money together, nominally have an agreement that they can withdraw whenever they like, and that money is used for something illiquid, regardless of the reason for the illiquitity, resulting in a situation where if too many people withdraw at once, the fund can't cover it.

Ponzi schemes are an extreme example, because the fund is illiquid because it lied about its investments and simply stole the funds, meaning there's absolutely no way to cover.

But there's a lot of ways this can occur. This basically describes a "bank run"; you nominally have an agreement you can withdraw your cash at any time, but if everybody does it at once there's a problem because the bank is using it to do things like fund mortgages, which can not simply be called back in instantly if needed. Even if the bank has the right to do that, and for various things it sometimes does (taking "financial instrument" generally and not just "US mortgage"), it would still be squeezing blood from a stone; they can demand it but it doesn't mean they'll get it.

In recent news, Blackrock suspended withdrawing from a UK real estate fund, because investors have been withdrawing at a rate that would require them to liquidate their holdings at fire sale rates, further depressing the fund's value: https://uk.finance.yahoo.com/news/blackrock-halts-withdrawal... Same sort of thing. No "Ponzi" scheme here; there's some legitimate financial stress, but that stress would only be exacerbated by letting everyone withdraw. (Whether you agree that it is justified to halt withdrawals in this case or not, I'm just using it as an example of the generality of this structure.)

I can't pull it up quickly in a news article because I'm not coming up with the right search terms to pull it out of the noise of constant financial news, but when Janet Yellen was Treasury Secretary, she had floated a trial balloon about trying to fix this incentive problem with bank runs against real banks with the same sort of clawback scheme, the idea being to disincentivize a bank run in the first place by making it so you don't get the pattern where the first few people get all their stuff and everybody else loses everything, which is a huge contributor to the run occurring in the first place. The game theory on this one gets a bit complicated if you think about it. e.g., OK, if everybody else is going to sit tight because this scheme incentivizes them to stay in the bank, then it's safe for me to withdraw everything because the bank run was prevented in the first place. If they then hold things together "long enough", then I can say I did it for my own reasons, not the bank run that was delayed for six months while everyone else sat tight, before an ultimate collapse. But if everybody thinks that way... etc. Not clear to me whether this can actually prevent bank runs, which I mean straight, not as a weak sarcastic "no this obviously wouldn't work". Not clear. Complicated analysis.

This structure is not intrinsically morally wrong or anything. It's a basic tool, and you need some kind of structure to bridge between high liquidity and low liquidity like that, and such a thing will intrinsically have some "impedance mismatch" to it, to use a favorite technical metaphor. But it does have a certain amount of risk intrinsic to it that can be a bit difficult to characterize; the problem is that a given instance of it failing is likely to be highly correlated with a lot of other instances of it failing at the same time. Naive analysis of the risk is utterly inadequate, and being sophisticated and correct about it is easier said than done.

No, it doesn't, because all Ponzi schemes will always unravel. Keeping quiet isn't going to help you.

What this does is it creates an incentive to not invest in a ponzi, period. Without this rule, it makes sense for me to invest into something that I think is a Ponzi, as long as I believe that I'll be able to cash out before it collapses.

I would imagine the FBI to be able to trace the holders of all the big withdrawals through the blockchain.

Or move to another country without extradition, something I'm surprised more people don't do.

I do wonder what the difference between running a bitcoin ponzi scheme and a ponzi scheme in Eve Online for Plex is.

The claim that Plex isn’t allowed to be traded for real money seems irrelevant since there is nothing in the bitcoin spec that allows trading for real money either.

A lot of his clients were “feeder funds”, and the trustee settled with a lot of them that they should have known better.

That’s where a lot of the clawbacks/recalls were from.

Buying drugs online is a big market and won't go anywhere. That, and transferring money to all kinds of people and regions where traditional banking tools aren't properly functional.

So the real issue is 'Hashflare did not have sufficient assets to cover balances in all customer accounts'.

Akin to 'farmer neither has corn growing nor money to buy corn to fulfil promises to customers'

That would be the crime...

As long as you were going to pay taxes and weren’t actually defrauding people, might as well file a report in case anything comes of it.

The FBI maintains databases of individuals that they consider potential terrorism with such weak definitions that anyone who uses a blockchain application would qualify[1]. When you are put on the list, they will never confirm or deny whether you are on the list. However you will find yourself losing rights to internationally travel freely without harassment, may have computing devices compromised by agents, may have wiretaps or microphones placed in your residence, and more.

I will admit that they do target US citizens less than others, but most hashflare victims are not US citizens and do not get those protections.

[1] https://www.fbi.gov/investigate/terrorism/tsc

I'm not exactly sure what the FBI would gain here, and it may be nothing, but distrusting them by default seems rational given their long history of corruption.

When considering which corporate bodies to trust, I consider their public statements and policies, their historical behaviors, and reports from other users of their services. The FBI’s official policy is to harasses individuals they place on secret watchlists. Historically, the agency has been one of the most corrupt from the beginning, especially the Hoover era, and has never gone through a period of substantive reform to resolve these issues. Additionally, multiple victims of crimes who have reported their situation to the FBI have either seen no positive actions or have even been harassed themselves by FBI employees. Currently there’s a severe shortage of reputable cybercrime security providers that also have enough capabilities to enforce the result of investigations, but the FBI is such a poor organization that it would be foolish to even consider requesting their services.

Give the Minneapolis FBI whistleblower account a read and then think for a second

https://www.nytimes.com/2021/09/01/magazine/fbi-terrorism-te...

Of course Турыгин is a Russian name. Spelling it using Estonian script doesn't change anything.

Looking up other Turõgins in Estonia, they all have very obviously Russian first names and zero obviously Estonian names.

There's no doubt that Ivan Turõgins parents fully intended to give him a Russian name, even if Estonia requires Estonian script on Estonian identity documents.

Even Estonians call these names "Russian names", that's what they are. If someone in Estonia decides to name their kid Muhamed, that doesn't magically become an Estonian name.

> Calling Estonians Russians is not taken well at all

I suspect that your comment wouldn't be taken very well by Estonian Turõgins