A Manifold market notice: Binance

post by Scrooge Mcduck · 2023-05-22T22:24:07.076Z · LW · GW · 13 comments


  Update 2023-Jun-11:

Probably someone on LessWrong has money on Binance, being the largest cryptocurrency exchange.  I'd like to draw their attention to the crime risk, and suggest they move the money elsewhere.

The CFTC has a lawsuit against both Binance and its CEO, Changpeng Zhao ("CZ").  Whatever your general views on regulating crypto, this specific situation has a practical risk to investors.  Because further than just a CFTC lawsuit, my market gives high odds of criminal charges against CZ.  Not just higher than the U.S. population, but actually higher than other crypto project managers.

I didn't want to prematurely declare CZ a danger to investors.  So I waited until the market efficiency grew with more traders.  At this time, the market gives a persistent ~70% chance he'll get criminal charges.  I know it's "only" a playmoney prediction market.  But at 42 traders and fairly unambiguous criteria, unless you have some special insight into his legal situation, it's rational to defer to the market.

This doesn't necessarily mean we'll see FTX-scale losses for investors.  Suppose if he gets criminal charges but the exchange continues to operate, changes leadership, and gets regulated.  In that scenario, investors wouldn't necessarily lose money.  But the money could easily become frozen, stolen, or depreciate by large amounts.  Since this ~70% is a broad aggregation of legal risks that could possibly include things like fraud, this should make you reluctant to do business with him.

Please disregard my small "NO" position on the market.  I habitually place those on newly-made crime markets.  Partly because most people in my markets will never be charged of anything, so that helps push it toward the base rate.  And partly as a gesture of goodwill toward the people mentioned in the markets.

Consider dropping Binance as an exchange you would do business with.


Update 2023-Jun-11:

Per feedback from simon and Dagon, I've made a new series.  The criteria is more relevant.  Though I prefer seeing 5+ traders for reliability, this post's main subject (Binance) has 10+ now, so I feel comfortable including it.  For comparison, I will include the other largest exchanges.

I'm sure there are some who won't find this convincing, and keep their funds on Binance.  If that's you, then please explain what criteria would influence your decision.


Comments sorted by top scores.

comment by Scrooge Mcduck · 2023-05-22T23:49:06.212Z · LW(p) · GW(p)

I see the first 2 votes were downvotes.  Consider me interested in understanding.

Replies from: Gunnar_Zarncke
comment by Gunnar_Zarncke · 2023-05-23T02:03:16.733Z · LW(p) · GW(p)

I haven't downvoted (yet) but would have downvoted if it were higher voted. Why? Specific financial advice is not content suitable for LW (though I didn't consult the guidelines to check). Just adding a Manifold market is not scholarly enough to make it suitable. There is also a risk that this is market manipulation (still only 42 traders and Binance is big; those could easily be paid traders). 

I'm not saying it is necessarily bad advice - I'm not a trader - but that this would better go to some Crypto news site. Or change it to be much more scholarly. 

Replies from: Scrooge Mcduck, benjaminikuta
comment by Scrooge Mcduck · 2023-05-23T02:48:02.977Z · LW(p) · GW(p)

Thank you for describing this.  My reaction in point form:

-I can understand that general prior against financial advice.  After FTX, I had assumed many people here would want to know about such a high risk with the largest crypto exchange.  I can certainly skip posting about such risk outliers here in the future.

-I'm not sure "not scholarly enough" is generally that predictive.  I've seen many posts with many upvotes that didn't seem very scholarly.  I understand the site is trying to maintain more scholarly habits though.  If a Manifold market doesn't tick the right boxes, then thank you for letting me know.

-On manipulation: such a market is probably harder to manipulate than alternative methods I could be using to examine this.  What I like about my post is it's not me saying "I've talked to a few people, and here's my impression of the risks".  It's using a novel new epistemic tool, one that I have reason to expect is better than whatever my judgment is.  I suspect after FTX, everyone in EA is basically still using their own personal judgment about fraud risks, and I expect that will underperform prediction markets in the long-term.  I can imagine people disagreeing with me about that, but I think it's very unfortunate.  I still appreciate you letting me know.

Replies from: Dagon, Gunnar_Zarncke
comment by Dagon · 2023-05-23T14:11:42.026Z · LW(p) · GW(p)

To clarify - the scholarly requirement isn't an actual requirement, but part of a cluster of values that a post should provide, aiming to make better models of the world.  Sometimes that's scholarly references to relevant papers (and prediction markets, preferably multiple or fairly heavily-traded).  Sometimes that's multiple examples and a framework for thinking about them.  Sometimes it's just a counterintuitive idea or recommendation, with a reasoning for why it's part of https://www.lesswrong.com/posts/9KvefburLia7ptEE3/the-correct-contrarian-cluster. [LW · GW

Even the advice prohibition is more of a nuanced recommendation than a firm rule.  But the exceptions are in the form of above - where there's non-obvious evidence and interesting/novel approaches to the decision that lead to a contrarian take.  This was neither.  Anyone paying attention (and anyone reading this) already knows that Binance is owned by a nutjob and there is significant risk of fraud or future shenanigans.  

And finally, this points out a risk, without considering alternatives or actions.  Are ANY exchanges much better than Binance (my current belief: no)?  Is this a recommendation to get out of crypto, or to stick with directly held Ethereum and Bitcoin, or something else?

I fully agree with the risks of using a thinly-traded, long-dated prediction market - that's going to mostly be people emotionally invested in the topic (especially because it's about charges, not conviction, and it's about a celebrity founder, not the business itself).  Manipulation is possible, but it's not the only reason to downweight that evidence.

Oh, and the title was clickbait - there is no whistleblower information (insider reporting of crime or suspicious practices).  

Replies from: Scrooge Mcduck
comment by Scrooge Mcduck · 2023-05-23T15:18:33.244Z · LW(p) · GW(p)

Ah, I didn't even notice that clickbait aspect of the title, I'm so used to thinking of "whistleblower markets" as a thing.  I've edited the title to just say Manifold market.

Thank you for the response.  I actually do have a whole series where some comparisons could be made between crypto enterprises.  You're right that a single is less informative.  In the future, I'll assume I probably won't have the energy to write up a detailed comparison, and just won't bother trying to communicate my markets on LessWrong.  Not meant to sound bitter -- this is useful and will avoid wasting time.  (EDIT: Unless there's some way to format low-quality attempts as prototypes for feedback, perhaps that could be desirable.)

Replies from: Dagon
comment by Dagon · 2023-05-23T16:47:50.908Z · LW(p) · GW(p)

Agreed that the tradeoff of early feedback on partial ideas vs spending a LOT of time on a series only to find it's not received well is difficult.  Labeling something as tentative and partial helps a lot.  Giving some outline of how it fits into an overall framework may or may not help.

Probably the biggest tactic I recommend is to use shortform for simple or untested ideas, then expand to a post if it gets good traction.

Replies from: Scrooge Mcduck
comment by Scrooge Mcduck · 2023-05-23T18:07:09.168Z · LW(p) · GW(p)

Short forms it is! Thank you.

Also, I probably assume more readers accept the framework than they do.  That prediction markets are worth using, that a market's accuracy rises in a vaguely lognormal way with trading activity, and a random reader usually can't beat it unless the market has few traders.  I could try including a link to Scott Alexander making similar points for me.

comment by Gunnar_Zarncke · 2023-05-23T11:24:33.394Z · LW(p) · GW(p)

All understandable points.

The "scholarly" requirement is relaxed for more experienced posters.

Maybe you can find some more guidance in the recent moderation posts [? · GW]: 

comment by benjaminikuta · 2023-06-23T17:17:11.780Z · LW(p) · GW(p)

I also oppose the prior against financial advice, especially crypto, considering Bitcoin is one of the ways "rationalists should win". 


comment by simon · 2023-05-23T14:58:58.864Z · LW(p) · GW(p)

In general, one has to be careful as to whether a possible prediction market resolution would have the implications that you think.

My immediate concern here is whether blatantly violating what US regulators consider to be the law regarding crypto would lead to felony charges even in the absence of directly causing losses to investors. 

See Matt Levine's Mar 27 column (which discusses the CFTC lawsuit) as an example of at least the general theme (I don't know what sort of things would lead to felony charges, though).

Replies from: Scrooge Mcduck
comment by Scrooge Mcduck · 2023-05-23T15:35:08.853Z · LW(p) · GW(p)

You're probably right that a more directly relevant criterion could be tried.  So here is a prototype series, starting with the 3 biggest exchanges.

comment by Scrooge Mcduck · 2023-12-31T18:35:50.127Z · LW(p) · GW(p)

Wanted: has anyone on LessWrong said they moved money off an exchange, after seeing my markets? I made a meta-market asking if literally anyone would be influenced to move money off any exchange mentioned in any of my crypto-related markets.

If you've been influenced by any of my markets on the relative exchange risks, please let me know so I can reward predictors.

comment by Amelia Bedelia · 2023-06-06T00:27:57.017Z · LW(p) · GW(p)

throws a Bayes point at you