Feds: Brothers stole $25M in crypto in 12 seconds. Defense: outsmarted bots

3 hours ago (businessinsider.com)

I'm not a lawyer but it seems like if they booked a transaction based on a basket of goods, and then seconds later changed that basket of goods, seems like in the physical world that would be fraud

  • The physical world is within regulated frameworks though. There is no regulatory body in charge of the Ethereum blockchain.

    The prosecution is alleging that there was a "promise" to the victim, which would let the transaction breach the boundaries of the crypto universe and be classified as real world fraud between two individual parties, but I just don't see how there was any sort of "promise" made here. First of all, they traded against an automated trading bot. Second, a bid or ask and market liquidity is not a "promise". I trade for a living and market makers suddenly pull liquidity all the time when it suits them, on millisecond time-frames. Granted, what the brothers did is essentially "spoofing" or posting bids and asks with the intent to move markets, so the question here to me boils down to is crypto spoofing illegal or not. Perhaps that depends on the jurisdiction/and or decentralized nature of the exchange that they were posting the offers on. I would think that if they can get charged for this then the majority of trading on thousands of "shitcoins" is outright illegal activity by extension though.

    On a much more simplistic level, if you're coding up in ethereum arbitrage bot, and it makes a bad high frequency arb trade... tough luck? I was under the impression that this was sort of the point of crypto markets, to escape regulations and be a freeform, decentralized trading venue.

    • An automated trading bot is just some person/company's agent. It can still be a victim of a fraud.

      I think spoofing should quite obviously be illegal. It's basically contract fraud.

      > I was under the impression that this was sort of the point of crypto markets, to escape regulations and be a freeform, decentralized trading venue.

      "Escaping regulations" is some libertarian fever dream. There is no such thing as "the law doesn't apply to you" if you make the right people angry enough.

  • And the defence of "there was no communication between the two brothers and the traders" feels really weak as well. Of course there was a communication, they put a trade offer online, and it was accepted by a trader, albeit automatically.

    The search terms for how to evade fraud is also not going to help them.

    I wonder if their lawyer advised them not to take the plea deal, it doesn't sound like they have a high chance of getting away with it.

  • Cryptocurrency markets keep reinventing fraud and fraud mitigation one century at a time.