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TLDR? Leaked emails about GAWMiners fraudulent practices with Cryptsy, Market Violations and the man who exposed them, Allen Shinners.
<< Subject: FW: FW: [#172763] XPY Market: Violation of Commodity Trading
Regulations (Traders)
From: Jonah Dorman [mailto:[email protected]]
Sent: Wednesday, January 07, 2015 4:50 PM
To: Allen Shinners
Cc: Josh Garza
Subject: Re: FW: [#172763] XPY Market: Violation of Commodity Trading Regulations (Traders)
Allen,
Officially (Legal and PR) the company has no statement regarding this issue.
If you chose to move forward I would appreciate being kept in the loop as the subject intrigues
me.
On Tue, Jan 6, 2015 at 6:19 PM, Allen Shinners
Well, that wasn’t reassuring. Cryptsy is obviously waiting for me to say proceed.
D. Allen Shinners
From: Jonah Dorman [mailto:[email protected]]
Sent: Tuesday, January 06, 2015 6:15 P
To: Allen Shinners
Cc: Josh Garza
Subject: Re: FW: [#172763] XPY Market: Violation of Commodity Trading Regulations
(Traders)
Allen,
Any official answer or statement will have to come from our Legal and PR teams of course. If
Cryptsy is not answering you after their comment about Josh being a target then I would ask for
24 hours for us to investigate internally prior to giving you an official response.
On Tue, Jan 6, 2015 at 6:12 PM, Allen Shinners
Jonah, it is not a one‐time failure. I have days and days of snapshots of the market where this activity is
occurring with extreme frequency. If that is your official answer I am responding back to Cryptsy to tell
them that I am pressing forward with the complaint. Josh only has to pick up the phone and call Big Vern
to verify what his own people are seeing, since they can see what the accounts, and IP addresses
belonging to the accounts, are causing this activity.
If Cryptsy says they cannot pursue this for other than regulatory reasons, I am sending the entire
package off to the CFTC for investigation, and hopefully prosecution.
D. Allen Shinners
From: Jonah Dorman [mailto:[email protected]]
Sent: Tuesday, January 06, 2015 6:02 PM
To: Allen Shinners
Cc: Josh Garza
Subject: Re: FW: [#172763] XPY Market: Violation of Commodity Trading Regulations
(Traders)
Allen,
Our system is programmed to proxy customer orders to the exchange in a timed and controlled
fashion in order to prevent these issues.
Unless this was during a testing phase (for which I have requested logs of all activity) in which a
race condition or failure caused the system to issue repetitive orders and then subsequently
cancel those orders (which would have come out in testing) I do not see a way this could be
possible.
Additionally I am stated as a fact: Our system is designed to enter a maximum of one order based
purely on customer activities to the market on either the buy or the sell side at one time. This
means that we will only ever have a single active order on the order book at any one time. All
data for order placement and cancellation is provided by the cryptsy API.
Once I have logs of trades or more information from cryptsy I can comment further on testing or
failures of the system. At this time I can say that these activities are more than highly suspicious
and are in line with what we have been told by multiple sources regarding market manipulation
by third parties.
Having written several trading bots both HFT and non-HFT in the past I can also say that this
single example could be a simple one time failure of a trading bot which did not have proper
limits or response reading in place.
Please keep the questions coming. I will continue researching.
On Tue, Jan 6, 2015 at 5:54 PM, Allen Shinners
Jonah,
Let me be perfectly clear here. Regardless of simultaneously entering a ceiling and floor, then
withdrawing these as the market approaches them, the real center of attention for prosecution is this:
Do you see all of those 0.009 order entries? The entire buy order book is filled with those,
leading the price of the market lower when every seller tries to discover the real price of a
real “buy.” This is called “painting the screen” with noncompetitive orders in a
commodities exchange. The same goes with the sell order book. Additionally, this is clearly
branded as “market manipulation” of a commodity. It is these types of activities that will
complete destroy a market for any commodity, let alone XPY. All of this is outlined already
in that thread. Are you emphatically stating that your software is not programmed to enter
noncompetitive orders in an exchange to lead traders in an intended market direction?
D. Allen Shinners
From: Jonah Dorman [mailto:[email protected]]
Sent: Tuesday, January 06, 2015 5:40 PM
To: Allen Shinners
Cc: Josh Garza
Subject: Re: FW: [#172763] XPY Market: Violation of Commodity Trading Regulations
(Traders)
Allen,
I have confirmed that our market exchange is incapable of placing a simultaneous buy and sell
order. Therefore any activity which may be happening at cryptsy would not be originating from
our site. As we anticipate nefarious parties attempting to exploit our systems into performing
these exact actions we have built our systems to prevent this.
Even if Cryptsy's platform was returning bad data through the API there would still be a very
limited scope when actions of this type would be possible.
Perhaps he is referring to the idea that people believe GAW controls paycoin? While this
assumption is highly inaccurate it has been spread amongst the heard of those who do not wish to
see paycoin succeed.
On Tue, Jan 6, 2015 at 5:24 PM, Allen Shinners
It sure seems that way, unless the responder is a complete idiot and cannot properly convey his point,
which I doubt. They are stating that GAW is directly in the “line of fire” should I pursue this with the
CFTC. I take that to mean that either an individual or “bot” at GAW is generating these trades. Is it
illegal? Yes, you better believe it is illegal to “paint” order books with noncompetitive bids, where other
traders cannot see anything else but orders worth fractional cents. When traders have to spend money
to clear those out, without knowing what is on the other end, it is a direct violation of commodity
trading regulations, punishable by a fine and possibly jail time. Read the thread in HT for goodness sake.
https://hashtalk.org/topic/28101/formal‐complaint‐filed‐to‐cryptsy
When I responded to the person in the email, asking whether they were inferring that GAW was
generating these trades, they did not respond. Since they were given clear snapshots in time (pics of
Cryptsy), they had the ability to look at the trading activities and the accounts generating the trades… all
of them.
D. Allen Shinners
From: Jonah Dorman [mailto:[email protected]]
Sent: Tuesday, January 06, 2015 5:11 PM
To: Allen Shinners
Cc: Josh Garza
Subject: Re: FW: [#172763] XPY Market: Violation of Commodity Trading Regulations
(Traders)
Hey Allen,
Is cryptsy stating that these buys and sells are coming from our account and may be in violation?
On Tue, Jan 6, 2015 at 4:56 PM, Allen Shinners
Any other type of financial actions such as “painting the screen” are not legal otherwise. I am sure every
GAW employee (or most anyway) have read the thread in HT on this subject. It appears to have rather
broad support from the community.
D. Allen Shinners
From: [email protected] [mailto:[email protected]] On Behalf Of Josh Garza
Sent: Tuesday, January 06, 2015 4:48 PM
To: Allen Shinners; Jonah Dorman
Subject: Re: FW: [#172763] XPY Market: Violation of Commodity Trading Regulations (Traders)
I do not understand this. Jonah, can you help?
What I have told Alen is that we place a buy or sell order every time customer does with us. Is
that correct?
Josh Garza
CEO- GAW Corp
On Tue, Jan 6, 2015 at 4:45 PM, Allen Shinners
So they inference here is that this affects you directly? Can you elaborate?
D. Allen Shinners
From: Cryptsy.com [mailto:[email protected]]
Sent: Tuesday, January 06, 2015 4:36 PM
To: Allen Shinners
Subject: Re: [#172763] XPY Market: Violation of Commodity Trading Regulations (Traders)
Hello Allen,
After some research, I think before you decide to pursue this any further you should talk to your boss
Josh.
He will be in direct line of your fire and what you are pushing will affect him personally.
Sincerely,
Jim aka: JShock
Customer Service Manager
Cryptsy.com
Add 2 Factor Authentication
Official Cryptsy Facebook
Cryptsy Blog
Cryptsy Wiki
On Tue, 6 Jan at 11:29 am , Allen Shinners
Hello Jim,
Ref: "The trader(s) in question entered simultaneous buy/sell orders, valued in 27 Bitcoins, for
1584.3226 XPY (at 0.017 BTC) and 1485.15706 XPY (at 0.0185 BTC). "
The first activity was viewed Sunday afternoon at 3:08 PM, it continued for hours. The
trader then applied “painting the screen” activity, throughout the afternoon, to cover
the order book views, with noncompetitive orders, making the upper and lower trade
orders hidden from other market traders. This activity has been repetitive since shortly
after commencement of the XPY market trading, and continued to as recent as
yesterday, Jan 05, 2015 8:48 PM, 10:15 PM and 11:28 PM, in both an up and down
markets, with the second, third and fourth snapshots showing both “painting” and
recent market trades at noncompetitive prices.
Jan 4 3:08 PM (painting the screen, first activity)
Jan 5 8:48 PM (painting the screen, up market)
Jan 5 10:15 PM (painting the screen)
Jan 5 11:28 PM (painting the screen, down market)
D. Allen Shinners
From: Cryptsy.com [mailto:[email protected]]
Sent: Tuesday, January 06, 2015 7:39 AM
To: Allen Shinners
Subject: Re: [#172763] XPY Market: Violation of Commodity Trading
Regulations (Traders)
Hello Allen,
Can you give me the date and time that you saw this occur and I will be
happy to look into this for you.
"The trader(s) in question entered simultaneous buy/sell orders, valued in 27
Bitcoins, for 1584.3226 XPY (at 0.017 BTC) and 1485.15706 XPY (at 0.0185 BTC).
"
Sincerely,
Jim aka: JShock
Customer Service Manager
Cryptsy.com
Add 2 Factor Authentication
Official Cryptsy Facebook
Cryptsy Blog
Cryptsy Wiki
On Tue, 6 Jan at 12:51 am , Allen Shinners
<[email protected]> wrote:
On November 17th, 2014, the CFTC announced that “Bitcoin,”
a cryptocurrency, was classified as a commodity, regulated
and enforced by the U.S. CFTC. By default, this declaration
included all cryptocurrencies traded on U.S. exchanges in the
United States. http://www.wsj.com/articles/cftc-commissionersays-
agency-has-authority-over-bitcoin-price-manipulation-
1416265016
In the past 7 days, I have monitored and archived evidence
that traders have been allowed to manipulate the XPY market
by your exchange. These traders have violated, at minimum,
three laws that require an exchange to report such violations
to the CFTC for investigation and possible prosecution.
Moreover, your exchange is responsible for the policing of all
Cryptsy cryptocurrency markets, including XPY, precluding
violations of current CFTC regulations by registered Cryptsy
traders, regardless of the market in which such activities
occur. I submit the following:
Traders, and vicariously the exchange, are precluding
acceptable price discovery in the XPY market, in violation of
the Commodities Exchange Act 7 USC § 9, including Section
6.a.5.c. where traders are entering large orders, on both buy
and sell books, influencing market participants to believe that
an open sell or buy contract will be executable for the price at
which it is listed, in public order books. Breach of this
regulation occurs when market participants list such orders
and remove them when the market pricing has reached the
listed contract order price. Inclusively, traders are committing
further violations by engaging in the technique “Painting the
screen” (Painting the tape). “Painting the screen” occurs
when a trader, or traders, cover the visual order books to
preclude price discovery, or to confuse a commodity market,
through the entry of minute, noncompetitive trades
“laddering” to an unseen end contract price (sell/buy), other
traders cannot visually identify. Furthermore, in violation of 7
USC § 1 et seq., traders have been identified selling against
market price movements (“dumping”) through the
aforementioned practice “Painting the screen.” These trades
have been registered in successive order in increments of
0.0003 XPY, 0.0001 XPY, 0.001 XPY and currently, at the time
of this notice, 0.05 XPY. All of these values used to conceal
large sell or buy positions. The practice may also be known
as, or termed, “price leading” and “seeding.”
On Sunday, January 5th, 2015, A trader (or two traders) was
recorded, during extremely thin volume market activity,
“sandwiching” a price range, preventing traders from trading
above or below forced ceiling/floor prices. Similar to the
previous description, traders where “led” to both ceiling/floor
levels only to be blocked from passing either price points in
the order books.
Under Dodd-Frank’s New Manipulation Authority (Section 753,
amending Section 6(c) of the Commodities Exchange Act), the
above scenario constitutes the influence of market “power”
over other market participants by artificially influencing the
pricing of a regulated commodity on a U.S. exchange. The
absence of market trading volume accentuated the trader’s, or
traders’, influence over other market participants, artificially
constraining free market pricing. Additionally, CFTC Rules
108.1 deems such activity unlawful, whether intended or
unintended. CFTC Rule 108.2 stipulates the conditions in
which Rule 108.1 is breached, as follows:
1. that the accused had the ability to influence market prices;
2. that the accused specifically intended to create or effect a
price or price trend that does not reflect legitimate forces of
supply and demand;
3. that artificial prices existed; and
4. that the accused caused the artificial prices. Recklessness
will not suffice under final Rule 180.2 as it will under final Rule
180.1.
The trader(s) in question entered simultaneous buy/sell
orders, valued in 27 Bitcoins, for 1584.3226 XPY (at 0.017
BTC) and 1485.15706 XPY (at 0.0185 BTC). Since the activity
also included “painting the screen” market actions, the
activity fulfills all four tests under CFTC Rule 108.2. Moreover,
the traders breached conditions set under CEA Section 6, the
following:
Section 6(c)(1) prohibits the direct or indirect use of any
“manipulative or deceptive device
or contrivance” in connection with any swap, commodity, or
futures transaction.
Section 6(c)(3) prohibits direct or indirect swap or commodity
price manipulation and attempted manipulation.
In conclusion, the CFTC allows registered commodity
exchanges to self-police trading activities on their exchanges.
However, when exchanges have been notified, by market
participants, that such violations are occurring, and
exchanges continue to not enforce CFTC regulations, such
exchanges may be equally subject to investigation leading to
fines or prosecution as determined by the CFTC, and/or the
Department of Justice, should such violations be submitted
for criminal prosecution. Moreover, the aforementioned
breaches, of U.S. commodity trading regulations, is not
currently limited or exclusive to the XPY marketplace. Similar
activities have been noted in other marketplaces on Cryptsy,
where thin volume trading frequently occurs.
I look forward to your response in how you will immediately
and effectively address these violations.
Best regards;
D. Allen Shinners >>
