The Willy Report - Mt Gox Bitcoin Bot Fraud

droplister

droplister

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The Willy Report: proof of massive fraudulent trading activity at Mt. Gox, and how it has affected the price of Bitcoin | The Willy Report

This blog post suggests, using leaked Mt Gox logs, that two bots were buying and selling hundreds of thousands of bitcoins in November 2013. The author claims these bots are the main catalyst behind the big price spike, not real demand.

And because the bots traded while the API was down, it looks like it was locally hosted. And because of the amount of USD involved, they were probably using money that didn't exist...

Interesting comment suggests arbitrage:
Another possible explanation for [Bot1]/[Bot2] is that it was doing arbitrage with China. Namely, buying cheap coins at MtGOX and sending them to a partner in China, who sold them there (presumably at BTC-China) for a higher price.

Indeed, the report argues that [Bot1] must have been the cause of the August rally because the price at MtGOX jumped up whenever [Bot1] bought, and remained flat between his buys. But the price at BTC-China increased steadily through August. This suggestst that BTC-China was leading, and MtGOX was following, by discrete jumps, through [Bot1]'s arbitrage.

I have not looked carefully at Sep-Nov, but it seems that in that interval, too, the leader was China (ultimately including Huobi and OKCoin, besides BTC-China), and [Bot1]/[Bot2] were following.

All that one-sided arbitrage would have required an awful amount (hundreds of millions?) of USD in the arbitrager’s MtGOX account. Since [Bot1]/[Bot2] paid no fees, it may have been an insider, and it may have paid with non-existent money, as the report argues. In that case, perhaps [Bot1]/[Bot2]expected to get the money later from the Chinese partner; but the latter defaulted, or could not transfer the money due to the PBoC restrictions.
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Which is also interesting and possible, but fraud seems most likely. The author includes a chat log (that I didnt quite understand the significance of) but someone he chats with says all bitcoin exchanges are doing shady insider trading things because the money is big.

The guy who wrote the report says he waited 2 months for bitcoin to bottom and return to a "fair price" before posting this information. So, it's also bitcoin hype.

More details here:
A Bot Named Willy: Did Mt. Gox's Automated Trading Pump Bitcoin's Price?
 



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Edit: Damn, that brought back some memories...
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Karpeles looks pretty guilty again, and he's certainly shown himself to be a evil little shit before, so I can't say I'm too surprised that he'd want to steal more while the price is shooting up... Manias don't just affect the common man.

I will no doubt be posting on this thread a formal evaluation by some academics I read on these subjects; I bet there are ten different nerds pouring over the history charts wondering how we couldn't have noticed before...

But in the meantime, two possible issues come to mind;

1. If the majority of money pushing the rise was just Mark, where in the heck did all of the other exchanges like BTC-E get their matching volume? Other people catching the mania would be spread out among all exchanges equally, (actually Gox was far more popular and 'trustworthy' at the time so a majority of others would have gone to gox and nowhere else) so that means that gox should have had the vast majority of all buying volume during that time... Gox's price should have broken away, far away from the other exchanges because arbitrage was not possible in a timely manner. It did not.

2. Giving up THAT much in fees would have been a huge red flag to tax auditors/collectors. Who gives that much product away at cost?


Who knows though, in the end, no matter how bad it is, it's once again the action of one man and cannot slow bitcoin from its' destiny much.
 
Luke, i remember MtGox consistently being $100 more than the other exchanges for BTC. That's a big difference considering at a certain point people are going to arbitrage no matter how irritating it might be. That would push up the price at other exchanges... not to mention people looked to MtGox anyway for a basic idea on what their BTC was worth anyway because it was the most popular and highest volume exchange out there.
 
WickedJoe said:
Luke, i remember MtGox consistently being $100 more than the other exchanges for BTC.
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Of course, that came after the top though. The whole time between peak and the fall of gox it was horribly inflated on gox because you couldn't get your money out of it... This Willy issue is all about the time from mid October to the peak, and to a lesser extent the same part of the graph during the April (Cyprus) puff too.

r/bitcoin's got several threads with different theories on this right now, and this chart some researchers have put together there would seem to indicate that the Chinese were still the volume kings during the time period in question:

rOKmKQX.png


In China there is no way to get any cash outside of the borders so if this is accurate the rigging Karpeles did still takes back seat to actual demand.


icestationzebra said:
Is this what happens without government regulation?
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I don't have time to tell if you're trolling or not n00b, so just in case you're not; Yes. All kinds of bad people do bad things without government regulation. Thankfully though, without government regulation, megabanks and corps and the government itself can't rob us all of amounts 10,000 times larger than these smalltimers ever could dream of. :batman:
 
Karpeles "appropriated" $10-$20MM in BTC when it was in the $20-$30 area. There is no logic behind the algo being in any way related to him, to the contrary. The scam was no different than FTP. Steal from clients bc you like fancy shit, Use cspline or some linear predictor functions to forecast your rake and you can justify anything. He saw a geometric progression in his rake and assumed he could make everyone whole inside a year with nobody the wiser.

The problem is the shit MUST go down, or at least not go up. So your "loan" of $20MM becomes $400MM at $500 BTCUSD.

Analogous to the corn farmer who sells his crop out to October for $4/bushel in futures only to see a massive drought during the Spring. Corn rallies to $8/bushel and your crop is wiped out. You have nothing to deliver come November and you went debit on futures.

Karpeles justified the theft because the rake was so massive. He could have paid it off in 18 months, worst-case, provided price was relatively stable and lowwwww. The shit simply did a dot-shot to $1000 leaving him with debt of $800MM... well, you know the rest.
 
Seriously, you need to jump in front of a bus right now if you believe for a second it was Karp's algo. You're in the same class as the microcephalic-assholes who believe in neutralizing "acidic blood." Nothing good will result in your continuing to exist.
 
poopie said:
Seriously, you need to jump in front of a bus right now if you believe for a second it was Karp's algo. You're in the same class as the microcephalic-assholes who believe in neutralizing "acidic blood." Nothing good will result in your continuing to exist.
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I love when you talk dirty.
 
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