A.G. Schneiderman Launches Inquiry into Cryptocurrency “Exchanges”
ag.ny.govI suspect they would find some efficiently fraudulent manipulation in the complete absence of regulation, if only those exchanges were regulated enough to retain data sufficient for such inquiries.
Fortunately all the cryptocurrency in and out transactions are irrevocably documented on a public legder.
> all the cryptocurrency in and out transactions are irrevocably documented on a public legder
The blockchain doesn't (consistently) tell you who owns which wallets, nor if they're a terrorist financier or money launderer. This is besides the point that "exchange" has a specific legal meaning under the Securities Exchange Act of 1934, as amended.
One exchange user selling to another user on the same exchange (or to themselves, i.e. a wash trade) needn't hit the public ledger.
Indeed. Only when crypto funds leave the exchange does it hit the ledger. When it’s in the exchange, it’s all in their private database.
That doesn't even scratch the surface of illegal trading activities that are probably taking place.
>if only those exchanges were regulated enough to retain data sufficient for such inquiries.
It wouldn't surprise if they do indeed keep all the data. After all, almost all these companies are data driven, and they have data analysis departments [0].
Interesting to see it's in new york - I wonder what role the big players in finance have had in lobbying for this. Nonetheless, this is great. I would bet every single crypto exchange has their hand deep in the honey pot so they deserve whatever an investigation turns up.
While lobbying may have a role to play, it's likely that NY also has more prosecutorial expertise on financial shenanigans than any other place in the US (Due to past and current misdeeds of said big players in finance).
I wouldn't be surprised if they did.
In Toronto, TMX Inc (holders of the Toronto Stock Exchange) along with Paycase and Bank of Montreal have recently organized to establish their own trading desk/brokerage at the TSX for cryptocurrencies. The news of that came about a week or two after Bank of Montreal banned all purchases of cryptocurrency both on their debit and credit cards.
While I'm suspicious of the banks' intentions in some of these cases— I'm with you. There's just been too many outright scams, ponzi schemes, and theft.
I am all for reasonable suspicion regarding banks, but I feel like banks banning speculating on cryprocurrencies with borrowed money is just good risk management.
Absolutely! I would have been less suspicious in this case were it not for their banning of debit card/Interac use as well.
Many other Canadian banks banned the purchases on credit cards alone—not preventing anyone from using Interac Online or Visa Debit, etc.
Ah, I didn't realize that was the case.
I'm pretty sure a bunch of big finance players were involved, but at least some of them I bet were not in the way you implied.
If I were a big fund or HFT shop I for sure want as much insurance as possible that my bitcoin trading funds are kept safe. Futures have too low liquidity, and don't trade on weekend when many moves happen.
I'm not suggesting anything in particular and maybe shouldn't have used the word lobbyist and certainly don't want to sound like a conspiracy nut - but it's a good thing to keep in mind that if/when existing banks and existing exchanges become involved in trading cryptos, they'll want less competition from the vulnerable incumbents.
I completely agree though. I can't even begin to imagine what the crypto exchanges are getting away with. I haven't read about about any dark pool scandals in years so I think the banks have been behaving better.
I can tell you one thing going on: legendary stop hunts.
But I don't think it's the exchanges who are behind them, but other big players.
At the same time, who knows? Bribe a dev 1mm and ask him to send you a snapshot of the order book periodically at a crypto exchange. Just imagine what you can get away with with that wouldn't fly in an actual exchange with silos, compliance, heavy auditing, etc. If I owned a crypto exchange right about now, I'd make sure I have a second passport ready.
New York takes on a lot of cases with national implications, usually out of the Southern District. Having the AG on this is an even bigger deal than that, and a strong indication of a potential crackdown nationally.
> I would bet every single crypto exchange has their hand deep in the honey pot
I really doubt it. These exchanges are making unbelievable amounts of money in fees. There's no reason for them to risk that just to make a little more.
These exchanges are all operating completely outside of any regulation or oversight. I wouldn't be surprised to find if most of them were completely insolvent and didn't hold a good majority of the crypto currency they claim to. I also wouldn't be surprised if a good fraction of their exchange volume was completely fabricated.
If you use these exchanges, you are basically playing in a wild-west casino where the house has every single advantage and every incentive to siphon off every dime of your money.
> There's no reason for them to risk that just to make a little more.
Martha Stewart's insider trading saved her a grand total of $45,673.
Until now, that 'risk' has closely approached 0. In the case of Mtgox, it may have actually turned out to be negative.
Boy, if only there were some big New York banks that would love to help these exchanges smooth things over with Mr. Schneiderman in exchange for some controlling equity...
> big New York banks that would love to help these exchanges smooth things over with Mr. Schneiderman
The New York Department of Financial Services and Attorney General's offices are some of the few state offices that relish going after banks. If you're a New Yorker, getting a dispute resolved with a large bank typically only involves Cc'ing one or both (if the facts are on your side).
Coinbase's exchange, gdax, is already partially owned by NYSE.
Just reading the questionnaire... This is going to be huge as in this is going to be the foundation on which the government will go after the exchanges and enforce consumer protection...
Apologies if I don't feel particularly "protected".
I am fully protected against all bitcoin/token/blockchain scams, I wont touch this stuff with 10 foot pole...
You're also extremely protected from ever making any profits, I'm glad people like you stay out of crypto out of fear.
Don't you worry, I make plenty of profits in the markets, using AI trading robots, but I would never transfer 6 or 7 digits account to one of those shady exchanges, just to watch my money being stolen by crooks...
Just wait few more months and the sign "This domains has been seized by the FBI" will start to pop around...
Why would you move such a large amount to an exchange all at once? It's much safer to move smaller amounts and move the funds to your own crypto wallet with your own private keys, that way you don't have to trust them with large sums.
You need money to make money in trading...
For investing, not surprising, the whole thing is going the way of the tulip bubble... it's just not worth discussing a 25 year old technology still looking for a problem to solve...
I'm glad you admit that your only interest in cryptocurrency is as a speculative vehicle. I hope your investment in digital tulip bulbs works out for you in the end.
The prices of BTC, Ether and XRP have hardly budged today. I find this surprising. Worth watching market prices, especially futures activity around BTC as the story develops. It will take time for the screws to be tightened by AG Schneiderman's team. Note that the questionnaire also focuses on who the major investors / board members are of the exchanges that are the target of this inquiry. As Warren Buffet famously quipped in 2008: "You only find out who is swimming naked when the tide goes out."
I'll point out the obvious, just to get the discussion going: it's reasonable to suspect that the motivation is not consumer protection but subversion of technology which presents a challenge to the FIRE economy, which has a tragic stranglehold on NY (my home state).
How will we know the difference? What will we do if indeed it's the latter?
> it's reasonable to suspect that the motivation is not consumer protection but subversion of technology which presents a challenge to the FIRE economy
No, it isn't. It's only reasonable within the tiny fantasy world of True Believers where the whole world is conspiring to keep the glory of cryptocurrency down. This is the exact same action that would be taken against any other unauthorized, unregistered securities trading. Not to mention an area which has become infamously rife with scams and fraud.
Schneiderman especially has a sterling reputation with regard to pushing against the great financial powers and investigating crimes in that area.
> No, it isn't. It's only reasonable within the tiny fantasy world of True Believers where the whole world is conspiring to keep the glory of cryptocurrency down.
Come on now - that's not fair.
I have lived most of my life in NY. I have spent a lot of time interacting with Albany, including briefly having access clearance to SUNY Plaza. I have met with people in the NY government who seemed like they had good intentions, and those who didn't - in the executive branch, the Senate, and the Assembly.
And I think it's very reasonable to always suspect that the motivation is not consumer protection, but defense of entrenched interests. Saying so doesn't put someone in a "tiny fantasy world."
This Museum of Political Corruption[0] (not accidentally put in Albany) opens next year - I suggest you visit and learn about the struggles we've had with our government over the years.
>the tiny fantasy world of True Believers
Let's not give them the benefit of the doubt here. They're shills. They have a vested financial interest in twisting logic and reason to convince the world that a secret cabal of bureaucrats and bankers are conspiring against this particular technology.
This is the primary problem with discussing anything crypto-related online. In a technical discussion about the merits of Linux and free software, you can be reasonably sure that whomever you are engaging with does not have a financial interest in pushing their particular stance. It seems like in any crypto-related discussion, it is impossible to find honest, impartial debate.
> Let's not give them the benefit of the doubt here. They're shills.
Excuse me - are you addressing me with this comment? My identity is not secret. My contributions to open source software (and to higher education in New York State) are reasonably well known.
Are you seriously directly calling me a shill right now?
Is this the level of discussion that we've reached on HN now?
FWIW, I think my comments have been pretty moderate. I don't see anything that is even vaguely construable as shilling. Nor am I positioned with anywhere near the resources to make shilling worthwhile.
Rather than a shill, I am a long-time NY activist who has deep problems with the way my government has interacted with nearly every facet of the (largely toxic) financial industry in my state. I don't think that concerns regarding the underlying motivation of the AG's office are ever unreasonable to raise, and certainly not here.
Sorry, I was not referring to you here, although I realize that it's confusing given the threading. I was more referring to some of the other posters here (the "True Believers" referred above).
The NY AG has actually been fairly aggressive in the past few months in investigating and reaching record settlements with financial institutions.
And finance firms look at the crypto markets as both potential opportunities for themselves and ways to make the stock market look safe in comparison for their own customers
What is FIRE?
Finance, Insurance, and Real Estate
Not to be confused with the FIRE related to firecalc :)
How is that reasonable to suspect in the slightest?
Too bad they didn't question the big banks as assiduously 10-12 years ago.
Were you Don Quixote in another life? It's almost like the banks don't have thousands of different products and services ran by hundreds of thousands of people all working on different things. "Let's investigate the banks and see what comes up!" Good luck with that...
Please leave the personal comments out. Thanks.
That’s nice. But what does that have to do with investigating cryptocurrency fraud?
Because AGs are rather selective in who they'll prosecute for fraud.
And that is an entirely separate issue that has nothing to do with the fraud ongoing in cryptocurrencies.
No it's not. I think you are perhaps intentionally being a bit obtuse to make a point, but you are better off just coming out and stating your beliefs.
In this case: major finance players are top dogs in Albany politics (along with other FIRE economy and pharma). Their input most certainly has influenced and is influencing both investigations (or lack thereof) into criminal activity in big banks and other financial institutions, as well as into crypto-blockchain tech.
Some big players probably want more robust assurance that their crypto assets are protected. Others probably want to create pain in the space either because they hold a short position or because they have fear of losing their regulatory capture.
But acting like there is no relationship between the (absence of meaningful) investigations into NY finance and this news is unhelpful.
What's unhelpful is baseless speculation about conspiracies and corruption. You're the one making the accusations, you don't get to criticize others asking about them.
JP Morgan was recently sued for defrauding cryptocurrency buyers. We can be assured the corruption is intertwined.
Clearly the AG of NY has motivations and interest to protect fiat / legacy banking systems, let's not pretend otherwise.
> Clearly the AG of NY has motivations and interest to protect fiat / legacy banking systems
Attorney General Schneiderman fined Goldman Sachs and other banks over $5 billion [1]. "Clearly" indeed...
[1] https://ag.ny.gov/press-release/ag-schneiderman-led-state-fe...
> Clearly
The burden of proof is on you to demonstrate that Schneiderman is acting here to protect the banking system and not acting to protect his constituents from being defrauded.
Proof is obviously just another trick by the statist stooges conspiring to hold back cryptocurrencies.
Don't need proof if you've got proof of work...
He has motivation to protect the legacy banking system and all unenumerated motivations as well.
Then it should be trivial for you to provide proof of this accusation.
What part of "burden of proof" do you not understand?
Believe whatever you want
> Too bad they didn't question the big banks as assiduously 10-12 years ago
Is it really easier for you to spin this into a conspiracy theory than consider the facts on the ground?
Who is they? The current AG wasn't in office then. And the fact that some entities weren't investigated does not excuse the actions of other, unrelated entities.
Or now. Do we really think that HSBC-scale drug war corruption is not still happening?
Since no players of note went to jail in the Bailout 10 years ago, we can be reasonably sure the corruption is still entrenched. AGs know what side of their bread is buttered.
since when one guy can crack down on global exchanges. this is why we need decentralised exchanges
He’s not ‘one guy’. He’s the chief prosecutor of the state that happens to be the home of one of the world’s financial capitals.
If you want New York money, you need to deal with the New York legal system.
Decentralized exchanges won’t help you either. Any time you interface with a nation’s currency, you’re going to deal with that nation’s government.
sure but he cannot do anything to an exchange that operates from Malta or Honk Kong.