Those hackers who stole millions of dollars worth of bitcoins, why cant they be traced if it is trivial to figure out who a coin belongs to?
That's what I wondered as well... probably gone through some mixer-up system at some exchange where they mix all coins, legal and illegal... read about that the other day. Ethereum network backtracked when it was hacked a while back and basically erased the coin transfer obtained through the hack. But funnily some people who supported the system didn't want it because they saw that as a violation of the "done-is-done"-framework... I guess they where the ones that didn't lose much. To me it's looking more and more like an extreme leftist community (I'm not right voting, more middle, that's not the point).... where they all want to be free of government and rules, form of monetary anarchy... but when they lose money they want the SEC or another form of regulator to step in and sort it out... can't have it both ways. Lot's of younger people have that "you-owe-me" mindset. They all want to eat smashed avocado and nuts on toast together with two lattes and fresh oj... but hey, we also want to live in the centre of the best cities and we can't afford it because inflation!!! Kick and scream and run to mummy and daddy to ask for money... (rant out) EDIT. Jeez... me having the feeling that I need to explain this "(I'm not right voting, more middle, that's not the point)"... WTF where are we heading...
Deep thought for today: Tracking where something went is different than tracking where it came from. Read the article.
With the blockchain, you can actually do both. And unless the coins are never spent, eventually they will come from somewhere, the place where they went before. You can use a broker as a tumbler, to wash your dirty coins. You can have 2 accounts with different identities at the same broker, you feed in the dirty coins with one account and you take out the clean ones with the other account. Better than having a Chinese restaurant or Vietnamese salon (carwash anyone?) for money laundering.
The mixing route is the only way to prevent tracking, but it has some significant limitations itself especially when you're talking that much. And we know about it but most people here, until reading this, probably assumed bitcoin was untraceable, which was my point. Tracking forward is significantly harder than tracking back because of the way you do it. You need to identify the place the coins went to and make transactions there yourself in order for it to work, again the article does a far better job of explaining this than I ever could. It's not nearly as simple as looking for coin A383B3838D30218. So theoretically yes, you could track forward but it's far more difficult.
The exchanges had it all worked out for themselves to give the impression of security of funds when it is not so - it just looks like it on cursory review. The way it worked was that if an exchange member customer incurred a loss he could not cover the assets of OTHER CUSTOMERS of that clearing member were used to cover the loss - yep you read that right - your funds are used to cover some reckless dicks loss. Here is where it gets really good, the ASSETS OF THE CLEARING MEMBER ARE NOT LIABLE FOR COVERING THE LOSS, ONLY IT'S CUSTOMERS ASSETS. Things may have changed but that is how it was when I looked at this Refco bankruptcy time. Note, the Refco Lawyers contended that any client money put into a Refco managed fund was a Refco asset and thus available to Refco creditors. Chicago stinks but pretends it is clean. If anyone who was an exchange member knows different then by all means correct me if/where I am wrong, but that is what i discovered by looking into this - just the impression of funds security. As an aside, now you know why huge floor traders had retail accounts for their seat - so that the money in their seat account being used for their trading was not their money and in the event of a catastrophic loss they were not liable beyond making good the original account balance of the customer to cover the fact that they were using customer money = option payoff profile heads I win, tails I don't lose - we can all be start traders if the profits are ours and our losses are someone Else's. Note: I imagine not many ET members now are old enough to remember the Refco bankruptcy.
What you said is true but there is a way to protect yourselves and floor traders have been doing this for years. When you hold funds at an FCM, you buy US Treasuries in YOUR name with your cash. FCM's will hold those treasuries for you and allow you to borrow 95% against them. In the event of a Refco or PFG, the clearing member CANNOT take your treasuries to payoff creditors. Retail traders can do this as well.
Hi Maverick, Could you please elaborate further, as "Client money safety " is a subject dear to my heart.I guess in case of broker's like IB they sweep the cash seating in to a combined account under SIPC protection, but when dealing with other pure FCMs, who only deal in Futures market it seems what you suggest is a better way! BUT could you please explain if a FCM goes out of business can the account holders who uses your idea of US treasuries can get his/ her money back BEFORE the liquidation procedures take it's time! or the timing would be same but that account holder will get preference over other creditors!
You aren't in the bankruptcy stack if you follow Maverick's advice. You get any securities held in your name back when you ask for them, although I'd expect some process delays due to just the cluster of an unexpected bankruptcy.
Correct. This is very similar to holding stock securities. Most people who have retail trading accounts sign away this right to have a margin account. This means when you buy shares of AAPL, your broker is probably lending your shares to someone else since you chose not to hold the securities in your name but in "street name". The benefit to you is you get immediate access to margin vs waiting for the clearing process. The same is true in the futures market. Except we are not dealing with securities usually. US Treasuries are a security and like stocks, you can buy them and hold them in your name. In the old days a big reason people did this is because in the 1980's, they paid 15% a year! This was how many FCMs made money back then. They took your cash and bought Treasuries, Pocketed the interest and lent you the money to trade. If you guys recall this is how PFG got in trouble. Except they didn't buy Treasuries, they bought higher risk securities. When those blew up, the customers were shocked. They shouldn't have been as all FCMs put this in their trade agreements which you sign. Which means it's even more important for you to take control of your funds.