Crypto Exchange To 'Socialize' $230 Million Security Breach Loss Among Customers 86
An anonymous reader shares a report: Indian cryptocurrency exchange WazirX announced on Saturday a controversial plan to "socialize" the $230 million loss from its recent security breach among all its customers, a move that has sent shockwaves through the local crypto community.
The Mumbai-based firm, which suspended all trading activities on its platform last week following the cyber attack that compromised nearly half of its reserves in India's largest crypto heist, has outlined a strategy to resume operations within a week or so while implementing a "fair and transparent socialized loss strategy" to distribute the impact "equitably" among its user base.
WazirX will "rebalance" customer portfolios on its platform, returning only 55% of their holdings while locking the remaining 45% in USDT-equivalent tokens. This will also impact customers whose tokens were not directly affected by the breach, with the company stating that "users with 100% of their tokens in the 'not stolen' category will receive 55% of those tokens back."
The Mumbai-based firm, which suspended all trading activities on its platform last week following the cyber attack that compromised nearly half of its reserves in India's largest crypto heist, has outlined a strategy to resume operations within a week or so while implementing a "fair and transparent socialized loss strategy" to distribute the impact "equitably" among its user base.
WazirX will "rebalance" customer portfolios on its platform, returning only 55% of their holdings while locking the remaining 45% in USDT-equivalent tokens. This will also impact customers whose tokens were not directly affected by the breach, with the company stating that "users with 100% of their tokens in the 'not stolen' category will receive 55% of those tokens back."
The grand master plan of crypto (Score:1, Informative)
The plan for all cryptocurrencies isn't what they want to make you think it is. It's more sinister than the egalitarian image the crypto boys portray for it.
After the 2008 financial meltdown, cryptocurrencies were born out of it, declared to be the means by which people could be freed from banks/governments, and promised to avoid any such future meltdowns from happening ever again.
But the crypto boys watched closely the result of that meltdown, and formulated their plan: create a new form of currency, and
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Consumers are not demanding that as they are taking a risky move for the upside of possible huge gains. People who want to grab 4-10% YoY aren't heavy in crypto, you can do that with very traditional and safe investments.
Also would any of those large insurers take that insurance policy? I imagine the risk assesment departments probably would have a lot to say on how they operate their businesses, how they mitigate breach risk. The exchange would have to open themselves up to review to a degree they are l
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The risk in the traditional sense is that the exchange rate of the cryptocurrency will tank. That risk is (hopefully) well understood by investors.
In this case, the crypto exchange asks their customers to take part of the exchange company's loss. I expect lawsuits over this.
Honestly it's mostly just money laundering (Score:3)
What makes this notable is that there's no way that's the case here since the losses are being spread out across the entire user base.
Also there's a phrase in crypto, not my keys not my money. When you use these exchanges you have to give up your keys and if you do that they can pretty much do anything they want with your money like a bank can but without the myriad
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What makes this notable is that there's no way that's the case here since the losses are being spread out across the entire user base.
Well a more conspiratorital view would be that's what they're telling us but it could be the case they are excluding some customers from the cut, is the exchange open enough to verify that type of thing?
I don't know, that could be the case that every address affected by the breach is traceable on the blockchain and therfore the cut here is verifiable as well, or something like that. Like you said, these systems do mitigate the security and transparency advantages crypto does have inherently.
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This comment is copy & pasted under every article about crypto-currencies.
I'm not saying it's necessarily wrong. Just that it's a copy and paste job.
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People in India can vote for Trump? Shocking.
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Re:People in India vote Trump? (Score:1)
Indirectly, yes! Thanks to Citizens United ruling they can help fund pro-candidate ads.
Not this kind of socialism (Score:2)
Re:Not this kind of socialism (Score:4, Insightful)
but its the only kind of socialism you'll ever get. Bottom line is bad things happen and people screw up. Either natural consequences accrue to the people who made the bad choices or so people who are a little more equal get to offload their failures onto everyone else and avoid the consequences.
Fail to produce/procure enough food. Everyone goes hungry, except members of the politburo; they will attend the ballet, and have their wine and caviar state dinner.
Re: Pretty much everything about this post is wron (Score:1)
No true Scotsman fallacy. The first thing that the Cosacs did after Lenin âoeliberatedâ them from the landowners was create an open market which became very profitable. No, not like that said Lenin, so he created a system that would guarantee nobody could make a profit, but was also hugely ineffective (everyone got distributed strips of land, no wider than a single row) leading to mass starvation which he then blamed on the Cosacs.
So you don't get to wave a Scottsman around (Score:3)
Definitionally socialism is the economic system where the means of production are publically owned. So you get to own your own car, but Elon doesn't get to own the factory
But philosophically the difference is capitalism says competition solves our problems and socialism says cooperation solves them.
I think for toys and games and snacks and women's hairpins other non-essentials that's right.
But for an
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Except not everyone cooperates. There is always someone who decides to take advantage of the others.
You can't have fox the guard the hen house, human nature makes us all foxes. Socialism has failed everywhere its been tried, the places it hasnt failed is because good old USA propped it up in the modern era.
Power IS the argument here.
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So government regulation is still required, just like under every other system that has ever been conceived.
Nobody ever said that socialism didn't also require regulation to keep playing fields fair.
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That's explains the failing US public education system.
Strange, that the US's profit-hungry health-care is surrounded by customers with decreasing health while the rest of the world, stays healthy. A lack of health is a combination of factors, sooner or later derived from the priority of getting a job. So, in the USA that fixation on employment, causes damage to society as much as it benefits society.
This detour into American Exceptionalism doesn't fit the facts for US history, or its part in internatio
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Weird, because if you look at the stats, with the exception of wealth diseases (which as the name implies, is due to inordinate wealth) healthcare has the best metrics from emergency all the way to cancer and palliative care. Moreover, most countries in the EU and Canada get cheap drugs because the US invents and then the US tax payer even funds the production (EU and Canada negotiate a "production at cost" and then socializes any losses back onto the "evil drug companies").
Modern US law exceeding the const
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There, I strongly disagree: Reagan undid left-wing reforms but appeasing the new right-wing movement (who saw him as a messiah) caused much collateral damage that punishes the USA even today. Kennedy is a Reagan wanna-be but won't be a messiah. Once, the echo-chamber is large, Trump will do whatever the far-right wants, which is much worse than few the left-wing laws remaining in the USA.
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it's game over for the human race.
It's game over anyway if we don't get off this one little rock. Eventually something will take it out. We are playing the ultimate "eggs all in one basket" game while wringing our hands over the little things claiming to be playing the long game. Face it, the human race is fucked. It's just a matter of when.
Re:Not this kind of socialism (Score:5, Insightful)
That's not socialism. Consider how real banks work, with a deposit protection scheme that they are obliged to be part of, and if that isn't enough the government steps in and uses taxpayer's money.
If it was socialist, depositors would also be sharing in the massive profits that the banks make. They don't though, they get a little bit of interest that is just enough to make the account perform in the marketplace. It's the shareholders that reap the rewards, and the bankers with their bonuses. The one time when the people do actually own the means of production, the money that is invested to make more money, they don't get their fair share of the profits.
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Socialism is public ownership of the means of production. This involves
a) no means of production
b) no public, owning things or otherwise
Some people gave their money to a private company to um, hold for them, it was (alledgedly) robbed, doesn't have enough money to pay them back, so it's giving everyone a fraction of what they're owed. I.e. the same thing every other failed crypto exchange does, and what failed banks used to do.
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Go read the Wikipedia article: https://en.wikipedia.org/wiki/... [wikipedia.org]
Socialist systems divide into non-market and market forms.
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UK Labour Party:
The party is (still) a social democratic party, but "social X" and "socialism" are not necessarily the same thing (unless y
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Public ownership exists in market or non-market socialism and exists in a large different political and economic systems such as capitalist markets or mixed economies.
I would like to add that I am not declaring my own political opinion or promoting one, just trying to explain common political t
Re: Not this kind of socialism (Score:3)
Socializing losses (usually through nationalisation of underperforming companies) and privatising gains is the default mode of capitalism.
I have to say that this is a new version though. I'll have to give the crypto boys that they're innovating this field. But I'm thinking other types of companies will have a hard time doing the same. They're just fortunate that with crypto, the default expectation is that you will lose everything.
Not as bad as it sounds (Score:5, Insightful)
Assuming they don't have the reserve funds to cover the loss (which seems likely), 55% recovery is probably more than those same customers would get if the exchange went bankrupt instead.
Sucks for those customers, but when you put your money in the hands of unregulated, unsupervised companies that have no legal obligation to hold a certain level of security funds (like all regular banks etc. do) this is one of the risks you're accepting.
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So, let me get this straight . . . (if this were real money) a US bank got robbed somewhere, and all US Bank account holders must now surrender some percentage of our current balances to cover the losses at that bank? Substitute the words 'monopoly money' for 'real money' and 'exchange' for 'bank'.
Wow, it sure doesn't work for real money. That crypto is some amazing stuff if it can make this work, can somebody tell me how this even makes sense, 'cuz I sure DGI.
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So, let me get this straight . . . (if this were real money) a US bank got robbed somewhere, and all US Bank account holders must now surrender some percentage of our current balances to cover the losses at that bank?
The reality is worse then that. What happens is essentially every single person to have dollars is forced to surrender a small percentage of the value of their money. Yes, I know FDIC is not funded by money of the public. It's funded by bank insurance dues. Doesn't change the basic premise. What do banks do when their insurance costs go up?
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The reality is worse then that. What happens is essentially every single person to have dollars is forced to surrender a small percentage of the value of their money.
The thing is, classic banking has safeguards that make large thefts impossible. The largest _ever_ classic bank heist was a mere $81 million. The thieves initially managed to transfer more than $1 billion out of Malaysia, but almost all of the transfers were reversed. Nothing like this exists in the crypto world.
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The reality is worse then that. What happens is essentially every single person to have dollars is forced to surrender a small percentage of the value of their money.
The thing is, classic banking has safeguards that make large thefts impossible. The largest _ever_ classic bank heist was a mere $81 million. The thieves initially managed to transfer more than $1 billion out of Malaysia, but almost all of the transfers were reversed. Nothing like this exists in the crypto world.
This. The whole reason this happened is because cryptocurrency exchanges aren't being governed by banking laws as they should be. If they're holding your money for any significant period of time, it's either a bank or a brokerage. Doesn't matter which one; this wouldn't have happened at either.
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In ye olden days if you put your money in a bank and it got robbed, yeah, every depositor would share the loss. That still happens except now it's shared more widely, and indirectly from your perspective, using insurance.
Re: Not as bad as it sounds (Score:1)
Yes. How do you think real life bank robberies work? FDIC insurance is covered by your taxes which devalues the dollar when used. Larger scale but same result.
You donâ(TM)t have to park your money in an exchange, just like you donâ(TM)t have to keep your money in a bank.
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FDIC insurance has a strict limit and max payout.
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You may not have a brain old enough to remember the SVB and related bank failures a few years ago. Or the bank failures under the Obama administration before that, or the (dotcom bubble) failures under the Clinton administration.
Yeah, FDIC doesn't cover shit, it has a few billion dollars in funds, not even sufficient to prop up a single small bank like SVB, let alone multiple. Where do you think the bail-out funds came from in all the above failures? You think the government has a pot of gold at the end of
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So, let me get this straight . . . (if this were real money) a US bank got robbed somewhere, and all US Bank account holders must now surrender some percentage of our current balances to cover the losses at that bank?
No, because US banks are regulated and insured in a way to ensure this doesn't happen. You can't just substitue the words monopoly money and real money, and the words exchange and bank without also substituting the words "unregulated", "unsupervised", and "legal obligation".
The latter three are the most relevant words in the OP's post.
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Assuming they don't have the reserve funds to cover the loss (which seems likely), 55% recovery is probably more than those same customers would get if the exchange went bankrupt instead.
Ah, so they’ve established what the customer is then.
Ask a woman if she’ll sleep with you for ten dollars. When she refuses, offer her ten million. When she accepts, counter-offer with $20. After all, you’ve already established what she is. Now you’re just haggling on price.
Expect many an exchange executive bonus to be paid with a 45% tax on “thefts”.
Worse than it Sounds (Score:2)
55% recovery is probably more than those same customers would get if the exchange went bankrupt instead.
Perhaps, but unless the Indian legal system is very different from the west's there will be nothing from stopping any customer from suing the exchange for their full funds at which point their only option will be bankruptcy. Thus, instead of socializing it across all accounts what may happen is that is gets dumped on the accounts of those who cannot afford to take legal action which, I would argue, is much less fair than bankruptcy.
yeah (Score:3, Insightful)
I'll bet they were planning on socializing profits too.
"Not Your Keys ... (Score:5, Insightful)
Not Your Crypto"
It's amazing what people will tolerate to avoid writing down twelve words and keeping them safe.
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Some of those people are (or were) active traders. That's where CEXs are potentially useful. But yes people shouldn't be storing crypto on exchanges long term.
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It's amazing what people will tolerate to avoid writing down twelve words and keeping them safe.
Crypto is pretty useless if you hold onto it yourself. You can't convert it to another currency nor can you transfer it with any speed without incurring large transaction costs. Why not invest in gold bars instead if you want something difficult to use for any practical purpose?
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Well if you are using it for a long term investment, why not? There is no need to put it into an exchange.
Losses are always socialized (Score:4, Insightful)
This particular CEX is being rather blunt about their intention to pass on losses to all their customers. Most exchanges would raise fees or resort to skullduggery to make the money back later.
They thought they were csutomers (Score:5, Interesting)
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Exactly this.
By keeping your crypto in an exchange you've given up the whole point of crypto, and also don't have any of the safeguards of a traditional financial institution. You have the worst aspects of both.
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Except that, IIUC, unless you have your funds in an exchange, you can't spend it (except to, perhaps, pay off a blackmailer).
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There is nothing preventing you from transferring it to an exchange when you want to cash it out. Yes, you'll pay a transaction fee, but if you're not in a hurry then you can minimize that. And any rational person would view the tiny transfer fees as a tiny insurance premium that covers the risk of trusting an opaque organization run by assholes you've never heard of in an unregulated greed-fueled shitshow financial market to not fuck you over massively at any moment between now and when you (or someone e
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So. Well, that sounds like a lousy way to buy pizza, but it might work for a purchase the size of a car.
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Would you buy pizza with MSFT shares?
If stock brokers had a history of just having your accounts emptied with zero recourse for getting your stolen assets back, would you just leave your shit in an eTrade account and cross your fingers?
Then why would you buy a pizza with other speculative instruments? Why would you store your assets somewhere that they can be stolen at any moment, with no recourse to getting it back?
Crypto isn't a currency any more than stock shares are a currency. At least, not until it'
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Banking isn't safe either, banks get robbed, go insolvent etc. The only difference is that governments in most western countries offer insurance against such events. In countries that don't have such safeguards, people generally aren't willing to keep large amounts in bank accounts.
Compared to the alternatives, keeping a local bitcoin wallet is pretty safe. If you keep it encrypted it's difficult for someone to steal, and if you keep backups in several places it's difficult to lose or be destroyed.
A pile of
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If you're only making small transactions like buying pizzas then the risk is minimal and the convenience likely outweighs the risk. There's nothing stopping you from transferring a week or a month's worth of pizza purchases into an exchange or some kind of digital wallet, while keeping your larger amount of coins safe.
More like "Share your keys, share your crypto" (Score:2)
not your keys. not your bitcoin.
In this case, it's more like "Share your keys, share your crypto".
What happened to "code is law"? (Score:2)
Clearly this theft happened because of bad programming/configuration (which is just another form of programming), which means you're SOL if something happened that didn't favor you because of this - ie. "Code is law".
So, what happened to that ethos?
exit scam 2.0 (Score:1)
Centralized Crypto (Score:3)
Never use a crypto wallet you don't personally, and totally, control. Don't leave money sitting on an exchange. They're not banks and aren't regulated like banks.
Cryptocurrencies were created by programmers who fundamentally don't understand money. You can't decentralize finance as commerce requires central exchanges in order to function. This has been true since the days of the market square and will continue to be true into the future. All the attempts to "decentralize" finance merely result in deregulated finance. It's just commerce without all the safety rails that have been built into the regular economy due to centuries of experience and lessons learned.
Haaaa ha ! (Score:2)
People lost money in crypto? Say it isn't so! (Score:2)
with the company stating that "users with 100% of their tokens in the 'not stolen' category will receive 55% of those tokens back."
So if you didn't have your tokens stolen by the breach, WazirX will helpfully steal 45% of them from you. Now that's customer service!
God I love crypto, because all I have to do is stay the fuck away from it and I won't end up a sucker or a victim, with my money dependent on the whims of some sleazy dude on another continent.
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God I love crypto, because all I have to do is stay the fuck away from it and I won't end up a sucker or a victim, with my money dependent on the whims of some sleazy dude on another continent.
Or keep your crypto in a crypto wallet and don't put it on an exchange until you are trying to send it somewhere. As soon as you entrust it to someone else, unless that someone else is covered under strict banking laws, you're basically indicating that you can afford to lose that money.
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Or keep your crypto in a crypto wallet and don't put it on an exchange until you are trying to send it somewhere.
But what if when I go to bed it's worth $90 million and when I wake up it's become devalued and dropped to $14.73?
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Or keep your crypto in a crypto wallet and don't put it on an exchange until you are trying to send it somewhere.
But what if when I go to bed it's worth $90 million and when I wake up it's become devalued and dropped to $14.73?
That's a good reason to not get into crypto at all, but that concern is largely orthogonal to being dependent on the whims of people in a foreign country. :-)
Does this extend to executive pay? (Score:2)
I mean, if the users are basically getting 45% of their hard-earned assets taken away, then shouldn't the same extend to salaries collected by the executive staff who didn't require enough safeguards in place?
Profits? (Score:2)
Is this company going to "socialize" their profits too? Somehow I think not...
Black money...easy comes easy go. (Score:1)
Use crapto -- get fucked. (Score:2)
Business as usual.
Just imagine if this happened to paper currency (Score:2)
Imagine if the dollars in your wallet got devalued because someone forged more dollars. Oh, wait, that happens all the time. Never mind.