Icbit.se, the bucket shop

Friday, 16 November, Year 4 d.Tr. | Author: Mircea Popescu

Icbit.se is a website which markets itself as a Bitcoin securities exchangei.

I never considered it anything other than a nominal participant, for the simple reason that I don't recall assbot ever streaming a trade from them in #bitcoin-assets, and that happens to be the criteria I use. Nevertheless, they do figure nominally, for instance in my Security Comparison of Bitcoin-Denominated Instruments Exchanges piece from two months ago (and what busy months they were!).

Recently they've added "future contracts". I examined the ones of interest briefly (oil, mostly) and determined that they're worthless. It's no secret that I have been trying to list future contracts on MPEx - energy mostly, but honestly I'd take pretty much anything. The catch is that I will only consider listing contracts which include physical delivery as an option. As far as I'm concerned futures which don't ever deliver aren't futures at all, they're just side-bets. That's exactly what icbit.se is listing : they pull the trade data from some other market, through who knows how dirty a pipe, and trade on that. Something like this is useless : you're better off trading straight on the market in straight fiat rather than trading in bitcoin with some dubious bucket shopii.

A few days ago Michael Carver, my broker, pointed out to me they also list a BTC future. The arrangement is maybe a little dubious (it would make a lot more sense to sell a dollar future seeing how your currency of account is the BTC rather than their current scheme of using imaginary 10 USD lots which you somehow buy in BTC at an USD price) but then again if you ineptly adapt already existing code predicated on the USD as a currency of account you're stuck with such roundabout nonsense.

Their volume is listed as 320k USD, which makes absolutely zero sense. The monthly turnover of options on MPEx is somewhere in the 50k BTC range, I maintain a vast and far reaching network of correspondents, if indeed icbit was on the map someone'd have mentioned them. But, that aside, I sent some money over and we began trading. Here's an affidavit of the results :

Affidavit of Michael 'smickles' Carver

12NOV12 20:21 Mircea and I began discussing the discrepancy between the future USD/BTC exchange rate implied by the icbit future contract BUZ2 and the future exchange rate implied by MPEx options and the current spot price.

12NOV12 20:44 Mircea decided to send 200 BTC to my icbit account with the intention of capitalizing on the future/spot discrepancy. I placed the order and received the contracts.

13NOV12 21:32 I reported to Mircea that the quoted price on BUZ2 was 10.1 at close (a significantly odd and large downward move considering the concurrent rise in the USD/BTC spot rate).

Mircea was then curious if icbit's operator could determine if my account was traceable to my known identity.

Due the username and email address associated with the account I speculated that it would not be a stretch to assume that they associated my account with me. Further, someone who did not care for strong evidence would assume his involvement too as most of the deposit of BTC into this account came from the public receiving address of MPEx.

I asserted that it was not likely they would try to figure out who I was.

13NOV12 21:40 After determining that BUZ2 quoted price close was nearly 1 USD below spot with only about one month before settlement, Mircea decided to establish a bid-wall.

13NOV12 25:51 After looking into the historical quote movement of BUZ2. I determined that, recently, selloffs had been occurring just before close. With the exception of this most recent one, they typically involved about 50 contracts. This most recent one involved a little fewer than 400, leading me to speculate that this larger amount was due to the triggering of forced liquidations, and another volley of 50 contracts could be expected at todays close.

Further, it became apparent that the order I placed for Mircea yesterday was one of the largest single points of volume (in terms of BTC) in the history of BUZ2 trading.

Mircea now asserted that it would be unlikely for the operator of a site not to look into who one of their largest customers is.

14NOV12 00:11 I informed Mircea of confirmation of placement of his bid. At the same time, unknown to Mircea, I too placed a bid, yet slightly above his own.

14NOV12 20:03 I informed Mircea of BUZ2's closing price of 10.01 and that I had been watching the live order book at close and saw the whole order book of less than 200 contracts sold except his order and then I informed him of my order and the fact that it was as well not sold into.

Mircea pointed out that this meant that everything was sold out except for [the few below our own and] our own orders.

14NOV12 20:29 I reported a discrepancy between my observed volume at close and the official number of 471.

15NOV12 18:12 Mircea informed me that he wanted to have a large buy order placed after todays expected pre-close sell order took place.

I noted that I had observed the previous sell orders occurring at 30 seconds before close and informed him that I could try.

I then placed a few orders to figure out the amount of time between when I placed an order and when the order showed in the book.

As the time it took an order to show in the book was less than a second, I reported my confidence in fulfilling Mircea's order to him.

15NOV12 19:59 At 30 seconds until close, I saw the expected sell order. It was larger than I had expected, leaving about 450 contracts on the book at 10.025. Notwithstanding the fact that his order would not overcome this, I dutifully placed the order Mircea had asked me too.

I expected to see the results of Mircea's order within the next few seconds as server load could be expected to be higher than earlier in the day.

At 10 seconds until close I had not seen any evidence of the order taking effect.

Hurriedly, I began repeating the order as many times as I could before close, knowing that, should each of these orders go through, some of my own funds would be used and entered into a position which I did not really want to take. However, I felt it better to potentially sacrifice some of my own funds to fulfill my word. I was able to repeat the order at least three times before close.

15NOV12 20:00 At 10 seconds after close, I saw the large sell order removed on the live order book, and, to my surprise, no evidence of any of my orders having occurred.

I swear to the preceding statements.

And here's the signed version.

The way this scam works is as follows : they list, on their own, a number of orders significantly below market. Random user notices that buying BTC for 10.5 at a time it trades for 11+ on the open market is a good deal. Random user doesn't know how futures work, so he puts in a few BTC, buys the maximum number of contracts and waits. At 22:00 20:00 UTC the site arbitrarily enforces an even lower price, wipes his margin, closes his contract and that's that, random user was scammed out of his few BTC.

The fact that the site refuses customer orders during this period is quite telling. The fact that the site carefully sells into orders on the book except those which in fact belong to third parties is also quite telling. The fact that the site advertises fake volume (both as an aggregate and daily) goes with the need to create the illusion of popularity. It is my estimate that anywhere between nothing and a few hundred bitcoin are syphoned from ignorant users each month through this scheme.

That's all, folks.

  1. Whether a website can ever be an Bitcoin-anything exchange is a matter left to the reader. []
  2. This term is important. A bucket shop is, according to the SCOTUS,

    an establishment, nominally for the transaction of a stock exchange business, or business of similar character, but really for the registration of bets, or wagers, usually for small amounts, on the rise or fall of the prices of stocks, grain, oil, etc., there being no transfer or delivery of the stock or commodities nominally dealt in.

    They became illegal in the US after the Panic of 1920, and they stayed illegal since then - all this for very good cause.

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7 Responses

  1. Actually the 22:00 closing time would be in your local Romanian time, not UTC. The closing time in UTC is 20:00

  2. Mircea Popescu`s avatar
    Mircea Popescu 
    Friday, 16 November 2012

    A you're correct, I was thinking local times for some reason. Fixed, thanks.

  3. sound like a very bad idea to scalping bitcoin with this shop. thanks.

  1. [...] The other is to enter offsetting trades, such as for instance buying options (CALLs insure against BTC going up, PUTs insure against BTC going down), directly trading the currency (if you buy BTC and buy futures to the same value or if you sell BTC and sell futures to the same value you're also zeroed out) and so forth. Icbit.se offers a BTC/USD future which I wouldn't however recomend. [...]

  2. [...] of the usual bucketshop nonsense. Consider the older discussion of icbit.se or this more recent quote : MJR_III bitfinex sucks, they don't actually send orders out, but [...]

  3. [...] children aged nine and saddled with Down syndrome. I'm outright saying it. [↩]See bitfinex, icbit, btcjam and whatever other bs I'm too lazy to list. [↩]I recently tried to buy iodine in [...]

  4. [...] Icbit.se based on direct experiment with concrete data and explanations as to why and how the scam is meant [...]

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