Proof of reserves? Insurance fund? Best I can do is a random number generator!

LoyceV

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Thick-Skinned Gang Leader and Golden Feather 2021

Quote from: o_e_l_e_o on October 11, 2023, 07:03:23 AM

The first picture above shows how the value of 5,250,000 FTX Token supposedly in the insurance fund was "calculated". It wasn't. It was just coded in. insuranceFund.size = 5250000 FTT. Cheesy

The second picture above shows how the value of USD in the insurance fund was "calculated". The daily trading volume on FTX was multiplied by a random number, and this was used to adjust the insurance fund to a new size. Cheesy

To me, this looks like a bunch of ~~nerds~~ IT guys who got in over their head after attracting much more money than they can handle. It looks like they're still just kidding around, without realizing there are real-life consequences to what they're doing.

o_e_l_e_o

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Quote from: Synchronice on November 03, 2023, 08:51:58 AM

What programming language is that? I'm learning JS and it doesn't look like that, probably doesn't look like a JS framework too. Is that a python? I'm just curious.

The screenshot on the left is Javascript; the one on the right is Python.

Quote from: nelson4lov on November 03, 2023, 04:22:44 PM

Yes, that's true; as there is no way to actually verify assets that users have deposited to an exchange.

The solution is obvious - put your coins in your own wallet. Then it is trivially easy to verify every single satoshi you own.

goldkingcoiner

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A Bitcoiner chooses. A slave obeys.

Quote from: o_e_l_e_o on October 11, 2023, 07:03:23 AM

If you've not been following the FTX trial, you really should, because the level of fraud on display is enough to even rival that of CSW. Here are two snippets of code (pictures courtesy of https://nitter.cz/molly0xFFF) which have been submitted as evidence in the trial. This code is regarding FTX's insurance fund which was widely publicized:

The first picture above shows how the value of 5,250,000 FTX Token supposedly in the insurance fund was "calculated". It wasn't. It was just coded in. insuranceFund.size = 5250000 FTT. Cheesy

The second picture above shows how the value of USD in the insurance fund was "calculated". The daily trading volume on FTX was multiplied by a random number, and this was used to adjust the insurance fund to a new size. Cheesy

This is the kind of bullshit centralized exchanges are using in their "proof of reserves", "safu funds", "insurance funds", "collateral funds", "1-to-1 matching reports", and all the other trash they peddle to convince you your funds are totally safe. Literal random number generators. They will do and say anything to get you to hand over your coins to them. Don't fall it.

Once again conclusive proof that centralized exchanges cannot and should not be trusted! The weak point always remains the same: "Trust us". A decentralized technology should be completely unreliant on trust. But it does not work if you give someone else custody of your wallet.

I keep telling people:
Do not store your money on centralized exchanges, if possible. If you absolutely have to sate your urge to daytrade or something then at least use decentralized services. (But watch out for DeFI scammers.)

nelson4lov

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Quote from: Synchronice on November 03, 2023, 08:51:58 AM

~Snipped

Quote from: nelson4lov on October 11, 2023, 07:21:45 AM

If FTX went as far as publishing insurance numbers out of thing air with no actual asset to back it up, I'm convinced that some CEX available today still indulge in those practice.

I have a doubt absolutely every company lies about numbers that they show on their website.

Yes, that's true; as there is no way to actually verify assets that users have deposited to an exchange. They can simply display whatever numbers they want and users will have no choice than to believe. For close source systems like that, it's hard to verify. It's not on-chain.

Quote from: o_e_l_e_o on November 03, 2023, 03:26:55 AM

Unsurprisingly, SBF has been found guilty of all seven charges: https://newsletter.mollywhite.net/p/sam-bankman-fried-guilty-on-all-charges

Sentencing is awaited. His team will almost certainly appeal. Maximum possible sentence of 110 years as I understand, although he'll almost certainly get much less.

I'll be looking forward to the judgement. It's one thing to be found guilty, it's another thing to be duly punished.

Synchronice

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What programming language is that? I'm learning JS and it doesn't look like that, probably doesn't look like a JS framework too. Is that a python? I'm just curious.

I didn't know if this code was enough to collect millions of dollars

Quote from: nelson4lov on October 11, 2023, 07:21:45 AM

If FTX went as far as publishing insurance numbers out of thing air with no actual asset to back it up, I'm convinced that some CEX available today still indulge in those practice.

I have a doubt absolutely every company lies about numbers that they show on their website.

Quote from: CryptopreneurBrainboss on October 11, 2023, 08:24:35 AM

For newbies that'll come across this thread, if you still have coins on exchanges, get them off right away. Exchanges aren't wallet to store your coins with them and don't believe whatever excuse they'll give to make you believe they'll look after your coins. Take the security of your coins as your personal business and store them offline in a hardware wallet.

Do you know that people with the ability of critical thinking are a minority of our society? A very tiny minority. It doesn't matter how many times you are going to warn someone, they'll still do it if they want to do it. People can't learn, even on their own mistakes. That's not my problem, nor your problem. Bitcoin, a decentralized currency with free, non-custodial wallet is in front of us and people still prefer to store them on Binance. I don't know what is the solution of this problem.

o_e_l_e_o

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Unsurprisingly, SBF has been found guilty of all seven charges: https://newsletter.mollywhite.net/p/sam-bankman-fried-guilty-on-all-charges

Sentencing is awaited. His team will almost certainly appeal. Maximum possible sentence of 110 years as I understand, although he'll almost certainly get much less.

o_e_l_e_o

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https://nitter.cz/molly0xFFF/status/1714837404635353154#m

I'll take "What is fractional reserve?" for negative $9 billion please, Alex. Cheesy

FTX was insolvent for years before their eventual collapse. Your money was being used to buy mansions, holiday homes, private jets, and more. Don't worry though, I'm sure other centralized exchanges are totally different, because reasons. Roll Eyes

I'm also laughing at just how stupid SBF was: https://newsletter.mollywhite.net/p/the-ftx-trial-day-eleven. Admitted a bunch of illegal stuff to a reporter, and then after that was reported came back and said "Uh, can you make that off the record?"

This is the kind of incompetence and sheer maliciousness you trust with your coins if you use centralized exchanges.

famososMuertos

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Quote from: fM to whom it May concern

Wait a moment... the thing is not that you run away from the CEx, but that you take "advantage" of them with full knowledge of the facts and if it is "irremediable" to have to use them, then even more so.

The "bluff" in the code is not a surprise, no one audits them, those who grant permissions only see the "balance and loss books" (let's say it's sarcastic, but something like that), the bureaucracy has standards that it must supervise better.

The issue is that people have been walking through these types of situations from various angles, ok, we are in a crypto niche, but these bad practices have always been in all their variants, traditional e-wallets, casinos and all that "screen- balance" of any centralized service that shows you a "Value". People don't think of that value as a line of code, which in theory represents the equivalence of your money.

The incredible thing is that the ""screen- balance" " is repeated, many in these parts do not speak of Quadriga, but in any case it would be another example +.

That is, the protagonists change but the "lines of code"^scenario remain the same.

DaveF

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Crypto Swap Exchange

To be totally fair Bernie Madoff, Bernard Ebbers (WorldCom), Ken Lay (Enron), Mark Swartz and Mark Belnick (Tyco), all did it too.

It's not new, and people will always believe what they want to believe.

And if you put up something that looks legit, and people are looking for a reason to believe that it is legit, then they will latch onto that as proof.

-Dave

Franctoshi

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Quote from: Z-tight on October 11, 2023, 08:37:37 AM

People who still hold their funds in Binance are either ignorant, not aware of the recent events regarding centralized exchanges & lending and earning platforms or they think Binance is too big to fail. If Binance bites the dust they'll be the ones affected and a million other holders of shitcoins, the BTC network will be just fine with or without Binance.

Only fools would see what happened to FTX and still store or keep their cryptos in Binance or any other centralized exchange out there, I'm not against doing business with the platform, but the message here is never to keep your coin there at the end of the day, and relies on them for safe storage; If as an investor/trader, you are not a Safe with storing your funds “self custody” then I assure you no one can, and this reminds me of an argument with someone I know who still believes that Binance is too big to fall, and since then, I see that person as being naughty.

If Binance still claims they are “SAFU” I'm short of words, but only time will tell about their sincerity.

Z-tight

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Quote from: hatshepsut93 on October 17, 2023, 03:41:27 PM

I want to believe that the majority of coins that are held on exchanges are owned by day traders who have little choice but to keep their coins there, because of transaction speed and costs. Because it should be a common wisdom by now that coins held on exchanges are almost as good as gone in the long term.

I also want to believe that but i am not so sure how true it is. It is hard to believe but there are so many people who believe that some centralized exchanges are too big to fail, and so instead of being their own bank and keep their coins safe, they rather just let Binance do it for them, since 'it's too big to fail'. That's the idea many people have and that's why they lose their money whenever an exchange bites the dust.

franky1

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Quote from: philipma1957 on October 17, 2023, 02:22:04 PM

Quote from: franky1 on October 17, 2023, 02:01:17 PM

Quote from: stompix on October 17, 2023, 09:35:19 AM

Us, Japan, EU, south whatever, there is simply not enough workforce to monitor everything, and these companies know it, you can't have a million supervising a million companies, they all have to do with the numbers these provide, and even if on inspection they find a flaw that will be discovered only after a trimester and then real action will take further months.

Besides, the major fuck up was not even over ftx.us but com, which was not US jurisdiction, in September 2021 was based in HK and then in the Bahamas, just like how CZ keeps binance.us clean so did SBF.

your learning finally.. but ontop of not having enugh workforce, regulators are not pro-active investigators/inspectors. they do not actively audit companies to any schedule. instead they wait in their offices to receive grievance reports from customers or internal self reporting from the companies to then act. EG when the company itself does its quarterly reporting. if the regulators see some dodgy math in a companies report to them, then they react

And they offer reward money 💰 for correctly reported tax avoidance scams.

Every year the I.R.S. gives millions to citizens that make correct reporting on a tax scammer.

https://www.irs.gov/compliance/whistleblower-office

legit link above.

and the irs is not the only gov agency with these programs.

only if the IRS can collect proceeds.. which is why many businesses file bankruptcy rather then pay out

hatshepsut93

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Quote from: Z-tight on October 11, 2023, 08:37:37 AM

People who still hold their funds in Binance are either ignorant, not aware of the recent events regarding centralized exchanges & lending and earning platforms or they think Binance is too big to fail. If Binance bites the dust they'll be the ones affected and a million other holders of shitcoins, the BTC network will be just fine with or without Binance.

I want to believe that the majority of coins that are held on exchanges are owned by day traders who have little choice but to keep their coins there, because of transaction speed and costs. Because it should be a common wisdom by now that coins held on exchanges are almost as good as gone in the long term.

philipma1957

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Quote from: franky1 on October 17, 2023, 02:01:17 PM

Quote from: stompix on October 17, 2023, 09:35:19 AM

Us, Japan, EU, south whatever, there is simply not enough workforce to monitor everything, and these companies know it, you can't have a million supervising a million companies, they all have to do with the numbers these provide, and even if on inspection they find a flaw that will be discovered only after a trimester and then real action will take further months.

Besides, the major fuck up was not even over ftx.us but com, which was not US jurisdiction, in September 2021 was based in HK and then in the Bahamas, just like how CZ keeps binance.us clean so did SBF.

your learning finally.. but ontop of not having enugh workforce, regulators are not pro-active investigators/inspectors. they do not actively audit companies to any schedule. instead they wait in their offices to receive grievance reports from customers or internal self reporting from the companies to then act. EG when the company itself does its quarterly reporting. if the regulators see some dodgy math in a companies report to them, then they react

And they offer reward money 💰 for correctly reported tax avoidance scams.

Every year the I.R.S. gives millions to citizens that make correct reporting on a tax scammer.

https://www.irs.gov/compliance/whistleblower-office

legit link above.

and the irs is not the only gov agency with these programs.

franky1

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Quote from: stompix on October 17, 2023, 09:35:19 AM

Us, Japan, EU, south whatever, there is simply not enough workforce to monitor everything, and these companies know it, you can't have a million supervising a million companies, they all have to do with the numbers these provide, and even if on inspection they find a flaw that will be discovered only after a trimester and then real action will take further months.

Besides, the major fuck up was not even over ftx.us but com, which was not US jurisdiction, in September 2021 was based in HK and then in the Bahamas, just like how CZ keeps binance.us clean so did SBF.

your learning finally.. but ontop of not having enugh workforce, regulators are not pro-active investigators/inspectors. they do not actively audit companies to any schedule. instead they wait in their offices to receive grievance reports from customers or internal self reporting from the companies to then act. EG when the company itself does its quarterly reporting. if the regulators see some dodgy math in a companies report to them, then they react

raumonds

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Ugh, the whole FTX trial mess is giving me a headache. It's crazy how they're basically treating their insurance fund like Monopoly money. Makes you wonder how many other exchanges are pulling the same stunt, huh? Thanks for sharing those code snippets. Eye-opening stuff.

Doan9269

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Quote from: Z-tight on October 17, 2023, 08:15:32 AM

Quote from: Isuru_ on October 15, 2023, 02:04:45 AM

I agree with you. Proof of reserves is a good step, but it's not enough to guarantee that a centralized exchange is safe. There are other things to consider, like the people who run the exchange, how they do business, and how much money they have.

People like CZ, who believe that 99% of funds in self custody would be lost, and that funds are only #SaFu when you store them with Binance. Take note that nothing should serve as a guarantee that any centralized exchange is safe, nothing at all. Centralized exchanges do business through fractional reserve scam, they take your money and try to use it to make more money for themselves, and how can you know how much they have, and if it is enough to cover liabilities, either way you have to trust what they say, and you shouldn't. Store your funds only in a self custodial wallet.

Quote from: Isuru_ on October 15, 2023, 02:04:45 AM

I'm also worried that many centralized exchanges keep their insurance funds in their own tokens. This is a conflict of interest, because it gives the exchange an incentive to manipulate the price of its token.

They can print their tokens just out of thin air, so they rather use your money to either trade or gamble in other investments and see how much profit they can make from it, and if they fail and become insolvent, they print out millions of their tokens out of thin air and try to use it to stay afloat. By the way, why should you be worried about what centralized exchanges do, when you can store your funds the right way.

No wonder exchanges will always accept any shitcoins to be enlisted on their platform once they were able to reach a greed business terms and fund the project for a while, this also call for more caution for potential investors seeking for highly fast growing currencies, most of them were nothing but a hype to attract for more investors, thanks that we have the use of altcoins to differentiate bitcoin from other currencies in cryptocurrency, so CZ is as good as any average businessman and understand the way to persuade people for a business patronage using his exchange even though he knows himself that non custodial wallet is the best means of having crypto assets.

franky1

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Quote from: o_e_l_e_o on October 15, 2023, 01:51:15 AM

So the entirety of BlockFi's "research" and "evaluation" as to whether they should lend over a billion dollars to another company consisted of "Hey, we can totally trust you, right?", without any independent audits, examination, or verification of any sort whatsoever. So essentially FTX said "You can totally trust us, bro", and BlockFi said "OK, here's a billion dollars of our customers' money!"

many large investors failed that verification check. simply because they knew another institution/influencer was promoting FTX, they think the first,second and third one vetted and verified FTX so the fourth didnt have to. yet first second and third didnt either..
EG FTX promoted shark tank presenter, football millionaire and others as promoters.. so real investors thought it must be legit.

if companies CFO's do less research and value surveys compared to lets say the surveys needed for just a $100k mortgage.. when investing millions then those companies CFO's need to be challenged and maybe even taken to court themselves as they put their own business in jeopardy

its become a very well known practice that investors dont pay money to do actual due diligence because they have the mindset of, if the invested company lies about contracted details, the investors can sue the invested company for malpractice.

stompix

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Blackjack.fun

Quote from: Lucius on October 11, 2023, 08:45:25 AM

It really amazes me that such a company could even do business in the US, because what we are seeing now, someone should have noticed and reacted earlier and prevented everything from going to hell. How realistic is it that no one knew about all these illogicalities within FTX until it was too late, isn't there someone who oversees such things?

A bit late to reply but there is one thing I must mention!
Us, Japan, EU, south whatever, there is simply not enough workforce to monitor everything, and these companies know it, you can't have a million supervising a million companies, they all have to do with the numbers these provide, and even if on inspection they find a flaw that will be discovered only after a trimester and then real action will take further months.

Besides, the major fuck up was not even over ftx.us but com, which was not US jurisdiction, in September 2021 was based in HK and then in the Bahamas, just like how CZ keeps binance.us clean so did SBF.

Quote from: o_e_l_e_o on October 15, 2023, 01:51:15 AM

It's worse than that - we know for a fact that Tether doesn't have the assets it claims to have. They revealed in court that at one point only 14% of USDT was actually collateralized: https://bitcointalksearch.org/topic/m.56656992. They also admitted that their collateral includes loan repayments they are making to themselves after printing almost $1 billion USDT out of nothing and loaning it to themselves to stop themselves going bankrupt. So print USDT out of thin air, loan it to yourself, claim USDT is backed up by future loan repayments. Roll Eyes

The situation is better now, probably because of the last bull run, not that they have proved beyond a doubt they have a 1:1 backing but even if we ignore the parts of the audit that can't be trusted they do have at least 40% of those sums in treasury bills, that is the only sure thing they can't fake and can and has been checked, the rest, god knows and with their business practice I'm a bit unsure even he will be able to come with the right numbers.

Quote from: o_e_l_e_o on October 12, 2023, 01:03:55 AM

My most recent favorite snippet from the trial below. Gary Wang was a the CTO of FTX and co-founder alongside SBF:

Quote

Lawyer: Are you aware of the difference between solvency and liquidity?
Gary Wang: Now I am.

What an absolute clown show.

If he tried to be a smart ass, then he's an asshole, if he was sincere then probably this is just the tip of shitshow we're about to discover.

o_e_l_e_o

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Quote from: Fiatless on October 17, 2023, 07:44:48 AM

Nobody knew that the company was a walking corpse until it collapsed. The operations of most of these exchanges are secret and their audit statements are fake and fabricated. You cannot dictate how much they own because they can always randomly generate figures without any verifiable proof. The best option will always be to "stay away from centralization"

I wouldn't say "nobody knew". There have been some of us who have been pointing out for years how shady these centralized exchanges are. 18 months before BlockFi collapse I was making posts warning about how dangerous it is leaving your coins with them. Even their Terms of Service clearly stated that they were taking your money and handing it out to literally anyone who wanted it with absolutely zero collateral or guarantees. Then when these platforms and collapse and people are shocked that the platforms were doing exactly what they said they were doing in their Terms of Service.

It's was very obvious to anyone paying attention that the likes of BlockFi, Celsius, Voyager, FTX, and so on, were massive scams. But lots people were blinded by promises of obviously unsustainable rewards and ignored all the warnings. And now it's obvious to anyone paying attention that the likes of Binance and Tether are running fractional reserve scams, but lots of people ignore these warnings out of greed or convenience.

Topic: Proof of reserves? Insurance fund? Best I can do is a random number generator! (Read 804 times)