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.
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.
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.
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. If they threaten the market maker's family, it'd be a very good case. 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.
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.
So, for clarification:
Police are allowed to set up stings . if you walk in to a crack house and willingly buy crack, thats on you. You broke the law and there was intention to do so.
If the government say, gave you money and told you to invest it with their friend at glowcoin to dump it, that would be entrapment.
Local us government agencies at the state level routinely get slapped down for entrapment. The FBI, not so much...
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.
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.
That’s the IRS not the FBI.
By not pumping and dumping?
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.
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.
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.
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.
>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.
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.
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.
> 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.
The fact that you fall right back to "these are bad guys doing bad things and in this particular case it wasn't entrapment" brings us right back to the first point about juries. Say nothing of all the case law that's built up over the years.
> 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”.
There is a nice Levine column on the same topic today: https://www.bloomberg.com/opinion/articles/2024-10-10/crypto...
How do you generate these links? Whenever I try, it says the URL is currently live or something like that.
There are two url inputs, use the other one.
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.
The stock photos of robots with glowing fingertips pointing at charts projected onto a glass screen are :chefs_kiss:
Also page-source looks ai-generated. Each tag is annotated, as if <title> is not self-explanatory enough.
Where can I buy this coin?
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.
> 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?”
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
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.
Why not?
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).
How did they entice anyone to commit a crime? They created a vessel for crime to occur, and it occurred because the criminals wanted to commit the crime.
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.
So, emergency vehicles should do the speed limit and wait for red lights?
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...
It also says:
> And no cheating by writing a law that laws don't apply to you.
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.
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.
Not all emergency vehicles are the government.
Wash traders are the ones breaking the law.
And where did they break the law?
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.
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.
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.
The only reason anyone accepts it from you as payment is because they believe one of a million speculating gamblers (who prefer to be called day-traders) 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.
We haven't hit a tipping point where cryptocurrencies are actually needed for their intended purpose en masse. We live in peace and comfort, and not enough people in the first world are concerned about their digital transactions being used against them. When that changes, we will likely see shift from using bad CCs like Bitcoin for dumb pump and dumps, towards actually-useful CCs like Monero for daily transactions.
However, if things change too drastically (the power grid goes down), then CCs are completely useless anyways and we'll be back to bartering. So I'll keep a good stock of Monero, and an even larger stock of things people value in a crisis. Guns, ammo, tools, food, water, medicine.
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.
>limit how much money you can take with you outside
Bearer shares were once a choice tool for cross-border money laundering. Once commonplace, now outlawed or neutered virtually everywhere on earth. What you are describing is money laundering. It is a crime. We are not debating whether it should be considered so, or that all engaging in it are the bad guys (some are ordinary wealthy/middle class fleeing warzones/regime-change/political persecution), but it is ridiculous to use this as a line of defense for the existence of something.
> 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.
They will also do the same thing with bitcoin as collateral. Ability to be used as collateral doesn’t mean anything
Extremely small market. 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, even at fire-sale prices. 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.
Whether a stock pays dividends or not has no relevance to the stock returns.
> 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.
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.
I doubt this comment will change your mind. But it should.
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
Sorry, but you're delusional. Central banks are held accountable through a system of checks and balances and the rule of law.
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).
Plenty of countries have neither checks and balances nor rule of law.
> I realize I’ll be in the minority here saying this but: Isn’t all crypto a pump and dump scheme?
Bitcoin was created as a gigantic middle finger to the various governments, worldwide, ever printing more money out of thin air. This has been made very clear in the message encoded by Satoshi in Bitcoin's genesis block:
"Chancellor on the brink of second bailout for banks"
From there everybody was free to side with cypherpunk anarchists and to mine Bitcoins or to buy Bitcoins.
Now I'm not disputing there have been lots of pump and dump.
I'll list two examples...
Without squinting too much the following for example is one kind of fraud: although SBF and FTX had already been exposed (by a famous short-seller) for the complete and utter scammy fraud they were, "journalists" at the NYT kept writing articles about SBF as if he was the second coming of Christ. Not surprisingly SBF had parents very well connected in NY and raising tens of millions for the dems. This, too me, is not far from a criminal organization (SBF/FTX/his parents and their accomplices at the NYT) actively defrauding people. One may dispute what's "pump and dump" (FTX was known to pump and dump a lot) but the NYT's articles certainly lured many into FTX, which pumped a great many shitcoins, and then, poof, all the money disappeared.
Following that even, the very Chamath Palihapitiya said that VC from SV had to look very deep into the way they were functioning because they actively took part in a great many pump and dump of shitcoins (he criticized for example lessons being given as to how to create coins).
It's nearly as if the biggest of the biggest of the pump and dumps were organized by well-known and well-respected entities and not by the cypherpunks who originally created Bitcoin no!?
As for an actual usecase, I'll leave this here:
- Turkey inflation rate in 2022: 72%
- Venezuela inflation rate in 2022: 234% ("slowing" down from previous year)
- US government public debt: soon to reach 36 *trillion*
Now physical gold is something lots of HNer used to make lots of fun of in the past. They're probably not laughing that much now that central banks are stockpiling physical gold and that gold reached new all-time highs.
So I'd suggest this: first wonder if you were one of these making fun of physical gold, thinking it was stupid. Then wonder if you were maybe wrong or not. Then wonder if "digital gold" is really that crazy of an idea?
You're not in the minority. It's just that, until recently, the groupthink would downvote / flag comments like yours.
lol how do I get a job at the FBI doing this kind of stuff. I love it!
Start off by getting a job not at the FBI doing this kind of stuff.
>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!
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?
> 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.
Please tell me they called it HooverCoin.
Such entrapment.
Very problem.
Wow.
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...
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.
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.