RE: Legal responsibility for the Bitfinex theft (aka "Bitfinexit")
As I explained four days before, your logic that bankruptcy is required is incorrect because presumably the BTC funds held at Bitgo were not partitioned according to segregated accounts, thus the BTC is part of a BTC and non-BTC pool of assets which backs all segregrated accounts BTC and non-BTC. Your logic would only apply to physical non-fungible assets. Thus even if Bitfinex were not bankrupt, it would still need to spread the loss proportionally to all "segregated" accounts BTC and possibly also non-BTC. The concept of segregated account is not to be used for what you are thinking, rather it is to protect the account holder from a lawsuit against Bitfinex which would attempt to grab those assets marked as owned by the segregated account owners. But since these assets are not partitioned by account number, then all of the BTC and possibly also non-BTC accounts are of equal standing w.r.t. to the asset pool. So although Bitfinex would be bankrupt if they could not pay the BTC account holders out of proportional losses for other account holders (BTC and/or non-BTC), they do not have to declare bankruptcy in order to spread the losses proportionally, unless the assets were partitioned by segregated account number. But with a fungible, electronic asset, it seems entirely arbitrary to mark some fungible units for some accounts if all were accessible by the same password set vulnerability. The vulnerability indicates the assets were not partitioned, at least not for all BTC account holders although perhaps one could make an argument that the non-BTC assets were partitioned since they were apparently not subject to the same vulnerability as partitioned. QED.
In other words, the pertinent qualifier is, “segregated from what?”. The crypto assets were segregated at least from the other business liabilities of Bitfinex, but not from each other (or at least not BTC accounts segregated from each other).
LOL, so youre saying that the deposits were like buying stock.... The SEC might have something to say about that.
but no, it doesnt work that way... see peoples westchester vs. FDIC.
The same SEC that was impotent in the failure of segregated assets in the MF global case.
What I am saying is that you the customer have to understand that if the partitioned segregation isn't defined, then you are not protected.
43 B.R. 623
34 B.R. 333
356 F.2d 749
It doesnt matter if the segregation is defined, merely if the funds are traceable. In this case, they are. We clearly know which funds got stolen and which didn't -- they were in specific wallets.
The fact that the segregation wasn't explicitly explained in the TOS isnt sufficient to invalidate the bailment,
MF global there was never any controversy, that i know of, about secured debt and commingling of funds... everyone just lost their money because it was all gone. but the account holders still got paid ahead of the unsecured creditors.
NO they would not... its obvious youre just making stuff up now. As the cites clearly showed you, "meaningful segregation" isnt neccessary. The standard of law is identifiability. Simply saying something is true, and that the courts "routinely" do it, without citation, is nonsense.
Also im pretty sure you think the word fungible means something it doesn't.
You don't like the way the law works, and thats fine. but that doesnt mean it doesnt work that way.
OTOH say if all the btc was in one huge wallett, then a portion of the wallet was stolen, then it would be different...
The tracing of thefts is certainly irrelevant if the BTC account holders are not associated with specific wallet partitions. And even if the BTC account holders are so associated, I am arguing such association is arbitrary, because the security methodology is fungible across all such wallet partitions, thus no such segregated account holders can be at a lower legal standing than the others of the same fungible asset. You are inventing an arbitrary mirage of partitioning. To be segregated, the assets must be meaningfully separate from each other, otherwise the segregation is not legally defined. Courts routinely look past obfuscation and directly to the salient attributes. Imagine if a bank had segregated fiat electronic balance accounts, and a hacker broke not the user's online access password, but some master password of the bank and stole balances from those accounts. Even if they were segregated, the losses would be charged to the bank and then to the accounts proportionally if the bank's assets were insufficient. You can't hold some users responsible for an arbitrary, luck-of-the-draw, meaningless partitioning which they have no control over. Segregation implies the user has control. The partitioning you are claiming can be traced, has no correspondence to the user's control over their account. The user doesn't even select which of the internal Bitfinex wallets they want their account to be associated with. Thus all segregated account are fungible w.r.t. to those arbitrary wallet partitions.