[amit9gupta]

He did not steal anything. He beat the fund (Indexed Finance) at their own game.

He has not stolen anybody's password, has not modified DeFI code - simply executed a set of financial transactions according to the rules (expressed as DeFI smart contracts) and profited from it.

Indexed Finance is an unlicensed investment firm. The promoters knew the risk ( decentralized finance) and now they want to blame someone who outsmarted them at their own game.

[InsideOutSanta]

This. If you believe in cryptocurrencies, you can't run to the courts when people use them as designed, even if they didn't use them as intended.

If you end up using the legal system to remediate undesired transactions, what's the point of cryptocurrencies in the first place?

[thinkingtoilet]

> what's the point of cryptocurrencies in the first place?

So far, to execute illegal transactions and using the lack of regulations to exploit the financially illiterate.

[BlackFly]

You'll need a stronger defense than that in court because courts absolutely create and deal in gray areas where technical fine lines exist.

What you need to argue is that the the smart contracts were valid contracts that the creators intended to and had opportunity to understand and that their creation was their act of negotiation of a position. It isn't really a stretch, but with amounts like this probably more diligence would have been due than that. Calling it theft is ridiculous on the other hand.

[Taek]

Just because some subsets of the crypto industry want to operate entirely outside the law doesn't mean the whole industry wants to operate outside the law. As evidenced by anyone who pays taxes on their crypto.

Saying "he used the system as it was designed, even if not as intended" is more or less equivalent to saying that any computer hack or zero day is also "using the computer system as designed".

You even plausibly extend that to picking locks in the physical world.

So yes, it does make sense for the law to get involved.

[__MatrixMan__]

The point of cryptocurrencies is to reward people who make hardware available for in-public multiparty computation. The point of that is to be able to create rulesets and expect that they'll be followed within the confines of the system.

It's bonkers to me that the only rulesets people care to implement on such a platform are just reflections of money as we know it. How unimaginative. I wish we'd make something new rather than translating something old--bugs and all--into a new language.

[CursedSilicon]

The entire idea of crypto is "I wasn't supposed to be the one holding the bag!"

[jstanley]

> If you believe in cryptocurrencies, you can't run to the courts when people use them as designed, even if they didn't use them as intended.

If you believe in cash, does that mean you can't run to the courts if someone steals your cash?

If your security proves insufficient to prevent a theft, that doesn't mean the theft was legal! It just means your security was insufficient.

That security can be enforced by mathematics instead of courts is definitely a benefit of cryptocurrency, but when it goes wrong courts still matter.

[analog31]

Money is a technology. Its purpose is whatever use you want to put it to.

Like any technology, a money system can be designed so that it works well enough for a small set of intended purposes, and poorly for all other purposes. Moreover, its uses can be constrained by laws.

I think an open question is whether existing laws related to money or property apply to cryptocurrencies. For instance, "theft" and "fraud" cover a lot of things, without specifically listing all of them.

If it's ambiguous whether such laws apply to crypto, then sure, someone could use the legal system to settle the matter. In fact, using the legal system to remediate undesired transactions could be as good a use of crypto as any, if "anything goes."

[vonneumannstan]

>you can't run to the courts when people use them as designed, even if they didn't use them as intended.

I doubt that will hold up in court. The exact thing could be said about computer networks and hackers exploiting them.

[pchangr]

The point of bitcoin, in words of their creator is to “allow online payments to be sent directly from one party to another without going through a financial institution.” That’s it.

[Vegenoid]

> If you end up using the legal system to remediate undesired transactions, what's the point of cryptocurrencies in the first place?

Agreed, but there is already a very similar case where "code is law" was tested, and failed: https://www.justice.gov/archives/opa/pr/man-convicted-110m-c...

It turns out that once a financial system becomes big enough, the US will apply its finance laws to it. Finance laws are designed to prevent sudden unexpected transfers of wealth from one (wealthy) unwilling party to another based on unanticipated loopholes.

[wnevets]

> what's the point of cryptocurrencies in the first place?

To funnel cash to regimes like North Korea

[gamblor956]

"Code as law" was attempted as a defense in another token-related "hacking" case.

It didn't work there, and it won't work here either.

If you end up using the legal system to remediate undesired transactions, what's the point of cryptocurrencies in the first place?

That is a philosophical argument completely unrelated to whether or not something is illegal. Cryptocurrencies aren't a replacement for the law, nor do they stand outside of it.

[Braxton1980]

>cryptocurrencies in the first place?

To get 30mg oxy

[lupusreal]

> If you believe in cryptocurrencies, you can't run to the courts when people use them as designed

Shouldn't, but can.

Anyway, you're assuming most of these crypto people are true believers in the technical attributes of crypto currencies, but I think most of them don't understand or care about that and are just trying to get rich.

[don_neufeld]

> what's the point of cryptocurrencies in the first place?

I think you’re answering your own question here

[-__---____-ZXyw]

This!? Which? What..? Why!?

[FireBeyond]

Yup. Exactly. "The code is law". Well, sometimes you learn you're not as good at code as you thought you were.

[nkrisc]

> If you end up using the legal system to remediate undesired transactions, what's the point of cryptocurrencies in the first place?

In this case, to make money. These are not ideological purists, they're capitalists.

[CPLX]

I mean you can believe in cryptocurrency. But why do courts have to believe in it?

[timcobb]

> what's the point of cryptocurrencies in the first place?

Not to be that guy but it seems like the point of cryptocurrencies is to scam vulnerable people...

[xattt]

A wanting of having cake, but a desire to eat it too.

[tempfile]

> If you believe in cryptocurrencies, you can't run to the courts when people use them as designed, even if they didn't use them as intended.

Yes, indeed. And when people leave their home unlocked the thieves should get to keep their stuff. What kind of savagery is this?

> If you end up using the legal system to remediate undesired transactions, what's the point of cryptocurrencies in the first place?

Great question, we have been waiting for answers for nearly a decade now...

[Aurornis]

> He did not steal anything. He beat the fund (Indexed Finance) at their own game.

As popular as this idea is online, it doesn’t work that way in the courts.

Intent matters in issues of the law. The “finders keepers” rules don’t apply in legal matters in the real world.

If someone logs into their bank and notices that changing the account number in the URL lets them withdraw from other people’s accounts, no court is going to shrug it off and say that it’s the bank’s fault for not being more secure. Likewise, finding a vulnerability in a smart contract doesn’t automatically give someone the right to any funds they collect from exploiting it.

We all know the “code is law” arguments about smart contracts are just marketing bluster. The lawyers do, too.

[Hizonner]

The intent of the whole underlying system is that the intent of all the parties be described by code of the smart contracts. Which are intended to be composable, intended to be used in unanticipated ways, and intended to operate independent of any human oversight. The system is also intended to avoid all ambiguity by enforcing the contracts exactly as described by the code... and to provide certainty of transactions and prevent them from being undone after the fact.

Everybody involved knows all of that, and claims it as a positive feature of the system. At least until they find out that it's actually hard to write bug-free code.

There may indeed not be a legal "meeting of minds" (although there very well also may)... but from an ethical point of view, everybody involved knowingly signed up for exactly that kind of risk. And honestly it would be good public policy if the law held them to it. Otherwise you get people trying to opt out of the regular legal system up until it's inconvenient.

There'd be more of a case if he'd exploited the underlying EVM implementation. But he didn't. He just relied on the "letter" of a contract, in an environment that everybody had sought out because of unambiguous to-the-letter enforcement.

[ipsento606]

> If someone logs into their bank and notices that changing the account number in the URL lets them withdraw from other people’s accounts, no court is going to shrug it off and say that it’s the bank’s fault for not being more secure

When you open a bank account, there is an actual contract and regulatory framework that governs how you use the account. A URL parameter is an implementation detail that no more alters the contract than a broken lock on a vault would alter the contract.

But when you interact with a smart contract, the smart contract is the contract. What you are allowed to do is defined by what the smart contract lets you do. You don't need to open an account, agree to T&Cs or sign any other sort of contract to interact with the smart contract.

If the smart contract is not the contract, how would you propose we can determine what the real contract is?

[mjr00]

The big difference is that those are centralized systems owned by corporations, and accessing them in a way which you're not supposed to, such as by changing a bank account number or exploiting a zero day, is a crime.

With DeFi it's different; the code is public and decentralized. There was no unauthorized access to anything here. From my reading of what was done, it was essentially taking advantage of the poor trading strategy of Indexed Finance.

I'm not going to pretend to be a lawyer, but I don't see a lot of parallels between this and e.g. using SQL injection to obtain unauthorized access to a system.

[stouset]

The entire point of cryptocurrency contracts is supposedly that “code is law”. Running to the courts as soon as someone does something you didn’t intend only highlights that people don’t actually believe this.

[darepublic]

The code is law thing is a grey area. But I am open to the idea that this young man did not break any rules, just found flaws in the system. In the same way that card counting should not be against the law just because it resulted in the house being disadvantaged. These things should be addressed with patches to the rules, not legal action.

[Calwestjobs]

be careful with card counting, most casinos do "business" in such way that there is NO advantage for player. no matter what player does.

so all american youtube sagas about doing card counting in PRESENT time are fraud to dupe people into thinking that it is possible to card count. NOW TODAY.

[KoolKat23]

It's not really a grey area, there is a tacit contract with a mutually understanding that they will use the code to fulfil certain items in the contract, it doesn't take away the need to fulfil the rest of the parties obligations.

[PaywallBuster]

https://www.coindesk.com/policy/2024/04/18/mango-markets-exp...

Avi Einsenberg did the same with Mango Markets,

got away with 110M and is now looking at 20 year sentence

And Mango was being sued by the SEC too https://www.sec.gov/newsroom/press-releases/2024-154

> SEC Charges Entities Operating Crypto Asset Trading Platform Mango Markets for Unregistered Offers and Sales of the Platform’s “MNGO” Governance Tokens

> Pair of affiliated entities separately charged for acting as unregistered brokers

[Cthulhu_]

The company and its customers knew what they were getting into; to get protections from the law and guarantees, financial institutions need to get licensed and comply with all the rules, regulations and law. Of course, this includes providing transaction data to the relevant parties to help them detect tax evasion and money laundering.

[Aurornis]

> to get protections from the law and guarantees, financial institutions need to get licensed and comply with all the rules, regulations and law.

That’s not how the law works.

If someone breaks the law or doesn’t comply with regulations, that’s a separate issue. It doesn’t entitle a third party to steal their funds.

If you were to rob a drug dealer, you couldn’t argue that they weren’t complying with the law and therefore you were free to take it. You would both have broken laws.

[echoangle]

Is that how it works legally? If you hack into computers using a zero day, did you also just access the computer according to the way it was programmed? Just because you can do it technically doesn’t mean it’s not fraud/something else.

[cherryteastain]

If that's not how it works, where's the line for what is fraud and what is not? Once you move away from the "code is law" principle, companies have the perverse incentive to define fraud as "any transaction that results in negative PnL for me", which is exactly what happened here.

[moralestapia]

Indexed Finance's mistake was not being Vitalik Buterin and then putting on a sad face and ask for the shitcoin to fork to a version where they didn't screw up.

[sksxihve]

Code is law went out the door with the ethereum hardfork after the dao hack.

[aqme28]

This makes no sense. I agree with you that code is not law, but the incident you're talking about wasn't law but community-driven consensus.

[Calwestjobs]

(realizing that im so old. if this is what i totally forgot, what else of this magnitude of signifince i do not remember anymore. that i was part of/ was involved/ it affected me.)

[stefan_]

Funny, because it would never have happened if it was court ordered.

[KoolKat23]

It depends if acted in accordance with the terms of the contract then it's fine but if he did something not covered by the contract it's theft.

If I run an unmanned lemonade stand out front and leave a pile of money on the table, and say take your change, if you take more than what you're owed that's theft regardless of how easy it was.

[crispyambulance]

He should have taken the significant and generous 10% bounty the first time around. He now has to face law suits by well-funded finance firms.

[DangitBobby]

It seems like he simply faces a very wealthy existence in countries that don't give a shit about US laws.

[programjames]

Next we're going to learn that winning Poker Bots with an "all in" strategy is defrauding the competition.

[cvoss]

This is a tiresome argument. Stealing is a moral concept first, and a legal concept second. You can steal without breaking any laws, the same way you can be a bad person without breaking any laws.

[gamblor956]

In the real world, code is not law. Computers are not a magical gateway to another reality where existing laws and rules no longer apply.

What matters is if Medjedovic engaged in activities that would be illegal in the process of acquiring the funds from Indexed Finance. A theft is theft whether it is physical or digital; victims aren't required to have perfect security and criminals are not allowed to exploit weaknesses to just take something that belongs to someone else.

Medjedovic is accused of exploiting "glitches." From a legal perspective, that would be no different from a thief exploiting a "low" wall or an unsecured window. Glitches aren't invitations any more than an open window. In other words...not a defense. (And in the U.S., specifically see the Avraham Eisenberg case, which is basically the same fact pattern. Eisenberg lost. His sentencing was postponed to last week but appears to have been postponed again.)

Then he skipped town after he was ordered by a court to put his tokens into escrow. If he truly believed that "code is law" and that the tokens were rightfully his, he wouldn't have skipped town. At that point...his own actions demonstrated that he didn't believe that what he did to acquire the tokens were legit. (The Fugitive notwithstanding, innocent people don't run.)

Then he "exploited glitches" for another DeFi. See above.

Then he attempted to launder the tokens...with some guy he found on the internet. Someone who legitimately believed that they legally owned the tokens would have hired lawyers, not money launderers, to gain access to their property. (Aside: any money launderer willing to launder money for a stranger is almost certainly undercover law enforcement...)

Then he moved to a country without an extradition treaty, and in the past few months has been spouting racist far-right nonsense in the hopes of getting pardoned.

Is he guilty? His own actions say that even he thinks he is.

[poochkoishi728]

He can believe the tokens are rightfully his, and still believe that authorities don't see it his way. Like if you're in Salem and know you're not a witch, you'd want to take off too and chill in no-extradition treaty countries, so you don't get boiled alive by people with different outlooks.

I like the analogy of an unsecured window. It doesn't seem to apply to a hypothetical (idk specifics of this company) purely private company in some crypto-friendly country that doesn't have any ties to the rule of law.

[garfield_light]

Irrelevant, his thoughts in the matter or him being a shithead don't make the unintended use of a smart contract illegal or not. This is just usual case of Wilhoit’s Law by shitcoin peddlers.

> There must be in-groups whom the law protects but does not bind, alongside out-groups whom the law binds but does not protect.

They are outside of regulatory scrutiny but god-forbid someone uses the same excuses to take their funny money.

[InDubioProRubio]

But wont somebody think of the Incompetence Finance Inc. - we cant have fraudsters defrauded, with legal means. The upper caste taketh the lower giveth that is tardition since the dawn of time.

[Yizahi]

Code is lol. Oh, sorry, meant to say Code is Law. :)

[TacticalCoder]

https://www.justice.gov/usao-sdny/pr/former-security-enginee...

From that link:

"U.S. Attorney Damian Williams said: “Today, Shakeeb Ahmed was sentenced to prison in the first ever conviction for the hack of a smart contract and ordered to forfeit all of the stolen crypto. No matter how novel or sophisticated the hack, this Office and our law enforcement partners are committed to following the money and bringing hackers to justice. And as today’s sentence shows, time in prison — and forfeiture of all the stolen crypto — is the inevitable consequence of such destructive hacks.”

The undisputable matter of fact is this: there have already been several cases of people who thought they could invoke the "(smart contract) code is law" argument to outsmart judges and the legal system.

But that's fantasy. In practice these people, when caught, go to prison.

> Indexed Finance is an unlicensed investment firm. The promoters knew the risk ( decentralized finance) and now they want to blame someone who outsmarted them at their own game.

And DeFi exchanges are "unlicensed brokers". And yet I posted a case where the hacker who "outsmarted" them is now in prison: how smart one has to be to end up in prison right?

Post me a case where an "unlicensed investement firm" sued a thief who "outsmarted them" and where the judge decided to let the thief walk free.

For I posted a case from justice.gov to prove my point.

[danielvf]

The camera shows night in the Wild West.

A masked man creeps through the shadows of a sleeping town.

He looks both ways, then uses a knife to unlatch a door from the outside. He slips into near pitch blackness. He moves confidently in the darkness - he's worked for this bank before, checking on their security from theft.

Out comes his lock picking tools - the bank president's office door opens with a quick rake. Cheap lock.

Inside, with no windows to betray him, he lights a candle. There in the corner stands the safe. He knows it inside and out, and has been practicing. Five minutes later, the lock is picked, and he loads up the gold, cash, and bonds inside.

He puts the candle out, slips back outside, and returns to his room at the lodging house, climbing in through the window.

The next morning, with the discovery of missing gold, the town looks like someone kicked over a fire ants nest. It only takes 30 minutes before people start wondering about "bank security expert" who had just been in the bank every day.

A crowd heads over the boarding house, growing in size as it goes.

"Did you steal our money?", they ask?

"ABSOLUTELY NOT," he replies, "I merely used my immense mental powers to out hink several flawed physical security measures, breaking no laws of physics, in such a way that the gold, cash, and bonds previously belong to you are now in my possession, and now belong to me. No theft has taken place, only the movement of certain levers, of which anyone who knew how could move, and the movement of afterwords of certain goods."

"So you stole our money!!", the town shouted.

"No, no, I just interacted with the universe according to its very own publicly available rules. No theft has occurred!"

An old cowhand, covering him with double barrel, spoke up, "Walll, guess he's right. We deserved to lose all that money. He did nothing wrong at all."

Everyone left, impressed with his genius.

[DangitBobby]

Yes, running transactions for asymmetric benefit allowed by code on a platform underpinned by a technology whose proponents espouse "code is law" is at all comparable to a man picking a lock on a bank safe. Very astute.

[meepmorp]

> The camera shows night in the Wild West.

> A masked man creeps through the shadows of a sleeping town.

> He looks both ways, then

... walks into a casino, realizes there's a flaw in how they shuffle and deal cards, and then makes a shit ton of money exploiting this weakness.

After losing a shit ton of money because they didn't plan for someone to play the game in an unexpected way, the owners of the casino demanded the money back.

"Did you steal our money?", they ask?

"ABSOLUTELY NOT," he replies, "I didn't get any non-public information, I didn't manipulate the deck, and you have yet to point to a single hand that was not played entirely within the stated rules of the game. You're just mad because I noticed that you fucked up and bet accordingly."