[HN Gopher] The FBI created a coin to investigate crypto pump-an...
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The FBI created a coin to investigate crypto pump-and-dump schemes
Author : croes
Score : 94 points
Date : 2024-10-10 19:52 UTC (3 hours ago)
(HTM) web link (www.theverge.com)
(TXT) w3m dump (www.theverge.com)
| ucarion wrote:
| I _think_ this is the website for the FBI 's sting?
| https://nexfundai.com/
|
| I find it interesting that they made up both "NexFundAI" and
| "NextFundAI" (with a t) with some sort of made-up relationship
| between the two.
| jackcosgrove wrote:
| The stock photos of robots with glowing fingertips pointing at
| charts projected onto a glass screen are :chefs_kiss:
| Lockal wrote:
| Also page-source looks ai-generated. Each tag is annotated,
| as if <title> is not self-explanatory enough.
| petesergeant wrote:
| > With every transaction supply shrinks by burning a percentage
| of reflections to the burn wallet ... Reflections get
| distributed to loyal holders with each transaction.
|
| "Now the first thing to say is that this is definitely not
| Pyramid Selling, ok?"
|
| https://youtu.be/KCQtKOm_pcw?feature=shared
| Fauntleroy wrote:
| I don't know if it was present when you linked this, but
| there's a huge banner on the site confirming this as of now.
| VagabundoP wrote:
| Where can I buy this coin?
| loeg wrote:
| There is a nice Levine column on the same topic today:
| https://www.bloomberg.com/opinion/articles/2024-10-10/crypto...
| wslh wrote:
| https://archive.is/2024.10.10-162504/https://www.bloomberg.c...
| chirau wrote:
| How do you generate these links? Whenever I try, it says the
| URL is currently live or something like that.
| bagels wrote:
| There are two url inputs, use the other one.
| HPsquared wrote:
| I do kind of like the idea of joining AI and cryptocurrencies
| though.
|
| AI workloads could be an actually useful piece of "work" that
| there can be "proof" of.
|
| EDIT: maybe I had assumed too much about the technical
| feasibility...
| ben_w wrote:
| To the extent that you could have an P!=NP type thing going on
| where an AI does a lot of work to reach an easy-to-verify
| solution, you're likely to have some combination of:
|
| 1. The answers have a value uncorrelated with the price: either
| the problems are stupid (just like BTC's are) or they're so
| much more valuable than the mere mining reward that you'd do it
| anyway, with very little "correctly priced".
|
| 2. If the problems are completely arbitrary you get all the
| stupid spin-off coins just like we saw with cryptocurrency; and
| if they're not completely arbitrary then you vary between
| having lots of new problems and hardly any in exactly the same
| way that gold mines were suddenly found and then got mined out
| back when the gold standard was a thing, and IIRC that's one of
| the reasons against the gold standard.
| WJW wrote:
| The main problem is that an AI training workload eventually
| ends, or (if inference is also included) at most generates more
| work proportional to the rate of user queries. If you have 10
| times as many workers, you are done in 1/10th of the time.
|
| Crypto on the other hand generates as more and more work as
| more miners join the network, so that the overall time taken
| remains constant. This is an essential part of the system, to
| prevent improvements in technology devaluing all previously
| mined crypto.
|
| The two have a fundamental incompatibility.
| TrapLord_Rhodo wrote:
| This is such a gray line after reading this and the Levine
| article.
|
| Here, they are blatantly fraudulent. They trade between
| themselves, using fake generated wallets.
|
| But what about Jump Capital? They have a crypto division that
| also does market making. The difference here is there are given a
| large chunk of tokens to market make with, as they please. Doing
| arbitrage through MEV (Which is just a collusion agreement
| between the mevbot and the miners), Buying at low points and
| dumping at high points.
|
| At what point does convulusion and complexity create enough of a
| "Market Maker" vs. Trading with yourself.
|
| trading off the same signals is collusion on "Signal sharing".
|
| Creating MEV bots that take advantage of arb opportunities in the
| pool is insider trading.
|
| Having significant equity in the company, but no financial
| interest or obligation to disclose dumps?
| davidmr wrote:
| > But what about Jump Capital? They have a crypto division that
| also does market making. The difference here is there are given
| a large chunk of tokens to market make with, as they please.
|
| It may be a little early to make that comparison. Jump is still
| being investigated for its crypto shenanigans.
| mattmaroon wrote:
| I realize I'll be in the minority here saying this but: Isn't all
| crypto a pump and dump scheme? It has no intrinsic return, it
| only makes you money if someone buys it from you at a higher
| price than you paid for it. It's still barely used as money.
|
| Any actual utility imagined for cryptocurrency has yet to
| materialize in any significant quantity despite nearly a decade
| of tech bros telling me it's coming any day. I'd bet less than
| 0.1% of good and services are actually bought with it.
| (Optimistic estimates are 0.2%). So it's clearly not primarily
| used as currency. You can't eat it and it doesn't pay a dividend.
|
| It's just people pumping and dumping and other people hoping to
| time their purchases and sales along with the pump and dumpers.
| gwbas1c wrote:
| You're not in the minority. It's just that, until recently, the
| groupthink would downvote / flag comments like yours.
| nyolfen wrote:
| it gives ordinary people the ability to discipline their
| central bank and preserve their own personal holdings. there
| are other uses but this is the one i care about.
|
| > I'd bet less than 0.1% of good and services are actually
| bought with it. (Optimistic estimates are 0.2%).
|
| this also applies to nearly every 'normal' currency
| lottin wrote:
| Sorry, but you're delusional. Central banks are held
| accountable through a system of checks and balances and the
| rule of law.
| mrighele wrote:
| Plenty of countries have neither checks and balances nor
| rule of law.
| nyolfen wrote:
| i'm sure that is deep solace when you lose half of your
| savings to inflation. btw not sure which central banks
| you're thinking of, but this checks and balances stuff does
| not apply to the fed at least; it is explicitly defined as
| independent (ie unaccountable).
| lallysingh wrote:
| You'll end up in a slippery slope there, though. Lots of stocks
| don't pay dividends, and you can't eat them either.
|
| But one use is to get around currency controls / manipulation
| by the government. Not a big deal in EUR/USD countries, but
| some places limit how much money you can take with you outside,
| or occasionally invalidate their old currency for a new one
| altogether.
| lottin wrote:
| Whether a stock pays dividends or not has no relevance to the
| stock returns.
| mschuster91 wrote:
| > You'll end up in a slippery slope there, though. Lots of
| stocks don't pay dividends, and you can't eat them either.
|
| If you get enough shares you can force a dissolution of the
| company and get paid the proceedings.
|
| Of course that only works for stocks that are not overvalued,
| but stocks in that territory are for gamblers only anyway.
| kortilla wrote:
| The stock of every healthy company is overvalued by that
| measure. The dissolution of the company resulting in the
| share value means there were 0 expected earnings.
| popcalc wrote:
| > Lots of stocks don't pay dividends, and you can't eat them
| either.
|
| Yes, you can. If you are an UHNWI your private banker who
| also manages your portfolio will organize cash loans to you
| and your family using the shares as collateral. It just shows
| up in your bank account and you pay your bills, go eat out
| and live off that tax free income. If you don't have major
| equity holdings (say a kleptocrat living in London who,
| coming from the wild-west has an aversion to publicly listed
| equities) your banker will do the same but using your real
| estate holdings, yachts, etc. as the collateral.
| kortilla wrote:
| They will also do the same thing with bitcoin as
| collateral. Ability to be used as collateral doesn't mean
| anything
| popcalc wrote:
| Extremely small business. The reason is there is a real
| risk that past margin call for the lender there will be
| no one to offload the crypto onto. With AAPL and condo
| developments in LA/NYC there is very low cost of insuring
| an annihilation of value for obvious reasons -- because
| it's unthinkable. Not so much for magic internet beans.
| popcalc wrote:
| [delayed]
| wmf wrote:
| Legally it's only a "pump and dump" if the people doing the
| pumping and the people doing the dumping are the same or
| working together. Otherwise it's just speculation.
| seanw444 wrote:
| That's the way most people use it now, yes. I'm also in the
| minority, in that I use Monero to pay for goods/services that
| accept Monero. That's it. Believe it or not, some of us use
| Monero as a matter of principle, not to do anything nefarious.
| popcalc wrote:
| The only reason anyone accepts it from you as payment is
| because they believe one of a million speculating gamblers
| will in turn take it off their hands for liquid cash. Also we
| cannot deny the impact Tether has on propping up all
| cryptocurrencies by way of printing USD value out of thin
| air.
|
| Imagine using BBBY shares as a store of value and you have
| pretty much the same situation.
| samatman wrote:
| I doubt this comment will change your mind. But it should.
|
| https://news.ycombinator.com/item?id=33644090
| declan_roberts wrote:
| lol how do I get a job at the FBI doing this kind of stuff. I
| love it!
| xmprt wrote:
| Start off by getting a job not at the FBI doing this kind of
| stuff.
| benmmurphy wrote:
| How is this not entrapment? Wouldn't it be better for the FBI to
| investigate crypto scammers using their own coin than to create a
| coin for the purpose of scamming?
|
| I feel like law enforcement always uses the option which produces
| easy prosecutions rather than the more difficult option that
| involves complex investigations that has more risk but more
| likely to produce long term good.
| cyanydeez wrote:
| By not pumping and dumping?
| JackYoustra wrote:
| law enforcement has limited resources, and must try to catch
| the most criminals and dissuade the most crime given said
| resources. It's especially bad in tax these days, there are
| tens of thousands of people with incomes over a million dollars
| that the US doesn't have the capacity to go after.
| vlovich123 wrote:
| That's the IRS not the FBI.
| benmmurphy wrote:
| It is a complex situation. The worst case scenario from these
| entrapment operations is the FBI incentives people into a
| committing a crime they would otherwise not have committed.
| The end result is more crime, but maybe it kind of nets out
| because FBI has 100% success and victims are made whole but
| then you have the sunk cost of this FBI work. The more
| optimal case is the FBI nabs people who would have otherwise
| committed another crime and this is a more efficient way of
| dealing with these people than investigating real crimes.
|
| My concern is the FBI doesn't actually try and determine
| which is the best allocation of resources but just presses
| the button that makes the FBI look best. Investigating real
| crimes is a lot more difficult than investigating these
| 'sting' crimes so if investigating 'sting' crimes was less
| efficient then it might be incorrectly priotized.
| ceejayoz wrote:
| It's only entrapment if you push someone into doing something
| they wouldn't normally do.
|
| If the FBI threatens your family to get you to commit a crime,
| that's entrapment.
|
| If you pull up to a sex worker and proposition them, but it
| turns out to be a cop, that's not entrapment. Because you were
| looking to commit the crime.
| daniel_iversen wrote:
| Came here to ask the same. I guess it's entrapment when law
| enforcement induces a person to commit a crime they otherwise
| wouldn't have.. so maybe it depends on how hard and well they
| marketed it? :) It's such a fine line - both legally maybe
| (IANAL) but certainly morally I feel.
| jsheard wrote:
| IANAL but my understanding is it's only entrapment if they
| encouraged the other parties to commit crimes they may not have
| otherwise, if those other parties approached FBIcoin with a
| proposal to do crimes entirely of their own accord then it's a
| kosher sting operation.
| potato3732842 wrote:
| >How is this not entrapment?
|
| Look at the majority of the replies to your comment. Now
| imagine twelve of those people on a jury and a defendant who
| isn't mother teresa.
|
| That's how.
| Capricorn2481 wrote:
| Now I'm imagining if you were on the jury because you don't
| know what you're talking about.
|
| It's just not entrapment. If an FBI agent sells you a
| baseball bat and you kill someone with it, that's hardly
| entrapment.
|
| There's lots of actual terrible things the FBI does that
| there's no reason to make something out of nothing.
| potato3732842 wrote:
| It's never that cut and clear. They're usually going out of
| their way to create some situation that temps people who
| don't normally do that type of crime to do it.
|
| The quintessential example is a bait car with the keys in
| it. Every real car theif walks right on by and after a week
| of it sitting there they nab some teenager with a weed
| dealing prior and then throw the book. Yeah, he did steal
| it but he probably wouldn't have if he didn't walk by it
| sitting there with the keys in it for an f-ing week.
| Frequently when it's "real crime" they're going after
| informants are involved and that often muddies the waters a
| lot since the informant is usually trying to get a break on
| some other charge.
| Capricorn2481 wrote:
| > They're usually going out of their way to create some
| situation that temps people who don't normally do that
| type of crime to do it
|
| So you're just making up that they did that here because
| your gut says they usually do that?
|
| > The quintessential example is a bait car with the keys
| in it. Every real car theif walks right on by and after a
| week of it sitting there they nab some teenager and then
| throw the book. Yeah, he did steal it but he probably
| wouldn't have if he didn't walk by it sitting there with
| the keys in it for an f-ing week.
|
| We're looking at multiple individuals collaborating long-
| term saying they can "control the pump and dump" and do
| "inside trading easily." These are just scammers doing
| scam things.
| kortilla wrote:
| > The quintessential example is a bait car with the keys
| in it.
|
| A bait car isn't entrapment either. I don't think you're
| understanding the term.
|
| Making a crime look easy is not entrapment. Putting on a
| short dress is not "rape entrapment".
| Capricorn2481 wrote:
| Entrapment would be if they encouraged people to break the law
| who otherwise wouldn't be pre-disposed to doing that. It's a
| fairly difficult thing to prove, but nothing they talk about
| here rises anywhere close to that. They just made their own
| coin.
| CPLX wrote:
| They were targeting companies that performed market
| manipulation as a service for creators of crypto coins.
|
| So they created a coin to pose as a customer of this service.
|
| It's just not entrapment at all, it's not similar or close to
| entrapment either. It's analogous to posing as a drug dealer to
| bust money laundering services, or posing as a car thief to
| bust a fencing operation.
| samatman wrote:
| Fundamentally, it's not entrapment because entrapment doesn't
| mean what many of us, myself included, feel that it should
| mean.
|
| The crime was committed. So the burden of proof falls on the
| defendant to demonstrate entrapment, which only happens if they
| can make a convincing case that they were not otherwise
| inclined or likely to commit the crime.
|
| That's quite difficult to do when, in fact, they did commit the
| crime.
|
| I think the standard should be stiffer: it should need a
| preponderance of evidence (not proof beyond reasonable doubt)
| that the defendant either also committed similar crimes, or was
| demonstrably predisposed to committing the crime in question.
|
| I rather suspect that the defendants in this case would not be
| able to mount that defense either. But I've grown quite tired
| of reading about the FBI hitting up some random resentful
| teenager and talking him into buying a fake bomb.
| phil21 wrote:
| For all intents and purposes entrapment basically doesn't exist
| according to modern court interpretation. If you as a layman
| think it's entrapment it's probably not.
| nostrademons wrote:
| It'd depend heavily on what the specific circumstances of the
| FBI's actions were.
|
| Creating a coin to investigate pump & dumps is not entrapment.
| That's a legal action, and one that many legit people and
| businesses do. It's akin to standing up a server on the
| Internet to see who hacks it.
|
| If they approached a market maker who was not otherwise
| marketing pump & dumps and said "Hey, I have this coin, can you
| pump it up so I can exit with a profit?" and the market maker
| replies "This is not normally something we do, we're not
| interested" and then the FBI keeps approaching them with
| progressively higher prices until they give in, they'd have a
| good case for entrapment. But note that even if it's the FBI
| doing the approaching, but the market maker just says "Sure,
| here's the price", it's still not entrapment. In that situation
| they're still clearly willing to commit crimes.
| guywithahat wrote:
| The FBI really shouldn't be creating fake securities for people
| to buy. I don't think any of the fake companies they make
| (including the secure phone one) should be allowed. It's a bad
| use of taxpayer funds and it's not how government should be
| arresting people
| the_gorilla wrote:
| This is apparently a controversial opinion but I don't think
| the government should be allowed to break the law. And no
| cheating by writing a law that laws don't apply to you.
| ceejayoz wrote:
| So, emergency vehicles should do the speed limit and wait for
| red lights?
| jjulius wrote:
| The post you're responding to says that they shouldn't
| break the law. Emergency vehicles are allowed, _by written
| law_ , to exceed the speed limit and move through red
| lights. Here's one, for instance...
|
| https://oregon.public.law/statutes/ors_820.300
| creato wrote:
| It also says:
|
| > And no cheating by writing a law that laws don't apply
| to you.
| jjulius wrote:
| I mean, there's a difference between writing an exemption
| just so _you_ can do a thing without getting in trouble,
| and writing an exemption that is so obviously for the
| benefit and health of society /community writ large. I
| can't think of a crappier example to have used to have
| tried to make the point they're making.
| janalsncm wrote:
| The FBI didn't write the law. And it's not for the
| benefit of the FBI, it's for the purpose of getting
| scammers off the street. Billions of dollars have been
| lost of crypto scams.
| wizzwizz4 wrote:
| Not all emergency vehicles are the government.
| axlee wrote:
| Wash traders are the ones breaking the law.
| Capricorn2481 wrote:
| And where did they break the law?
| Geeek wrote:
| Why not?
| mschuster91 wrote:
| A reasonable argument can be made that the government enticed
| people to break the law. In some jurisdictions (like Germany)
| this kind of behavior is illegal for the police to use, only
| the secret services can do so (but only very limited in
| scope, and their discoveries are all but impossible to share
| with police).
| janalsncm wrote:
| I don't mind it. They're taking down seasoned scammers. We all
| agree they should be punished, now we're just arguing about how
| to catch them.
|
| If you want to be upset about government overreach, look into
| Richard Glossip's case. He's been on death row in Oklahoma for
| decades for a murder even Oklahoma agrees he didn't commit,
| based on the false testimony of the actual murderer.
| staplung wrote:
| Please tell me they called it HooverCoin.
|
| Such entrapment.
|
| Very problem.
|
| Wow.
| FactKnower69 wrote:
| >Liu Zhou, a "market maker" working with MyTrade MM, allegedly
| told promoters of NexFundAI that MyTrade MM was better than its
| competitors because they "control the pump and dump" allowing
| them to "do inside trading easily."
|
| hilarious, but running an operation of this scale to only charge
| _18_ people? this is like squishing a few individual ants, then
| going on a victory lap bragging to national media about what a
| canny and clever exterminator you are. great job cleaning up
| 0.0001% of the market 10 years late!
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