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RE: Pro Bono Legal Opinion for Victims of Steem HF23 & Bittrex

in #hf23last year

Importantly, HF23, did not actually fork the Steem blockchain into two separate chains, it simply changed the operating code of the existing Steem blockchain.

This is a very important distinction, and it is also false.
Every code change is technically a fork.
No one is "forced" to use the new code; the code is open-source.
Just because no one is running the old code doesn't mean a fork didn't happen.

If you try to make the argument to say that this is theft,
you can certainly use the same logic to say the Hive fork is theft.

That being said, what Steem is doing LOOKS a lot more like theft and securities fraud from the outside looking in, so I could certainly see them winning in court while Hive would not be targeted. However, it would set a very dangerous precedent; one that puts Hive (and all forks) in danger once the real world actually realizes how this all works.

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You're mistaken. Hive was forked by nonconsensus witnesses. That's the difference, and it's a very big one. Steem forked with consensus witnesses with the sole purpose to remove funds from users.

Any person can fork the code that is nonconsensus without anyone being affected. With consensus witnesses fork, everyone on that chain is effected.

Since this, all can be proven Justin Sun runs the network, this post from a few hours ago makes it clear as day to a child that Sun does control the network: https://hive.blog/witness-category/@crokkon/steem-witness-ranks-excluding-dev365

Since it is known Justin Sun spins up fake accounts and votes them in from one computer, this is a Sybil attack on Steem, by definition: https://en.wikipedia.org/wiki/Sybil_attack

You're mistaken. Hive was forked by nonconsensus witnesses. That's the difference, and it's a very big one.

If 20 people had made this decision instead of one no one would back down and stop calling this theft.
I don't think the Sybil attack really has anything to do with the logic behind calling this theft.

Would you rather that Sun stopped buying everyone's bags and dumped Steem sub 1 cent?
Would this also be theft?
This is what we all thought was going to happen anyway.
I think it's cool that they are trying to keep the project alive and stem the bleeding.
We all knew that Steem was fucked when this all went down.
I'm actually impressed they've made it this far.
We all got more money out of Steem than we were expecting.

I 100% agree that this is securities fraud, by definition, and Steemit Inc is likely going down for this.

But, since you are now claiming that the consensus witnesses made this choice, doesn't that mean that they have the right to do whatever they want?

They are elected by DPoS and if there is consensus then it has to happen. This also means that the blockchain itself (all the coins) is the property of elected witnesses and not regular users/accounts.

Yes, users can vote to change the elected witnesses, but @dev365 must be considered as a normal stakeholder in court. Even though we know it should be a non-voting stake, in court, promises don't hold.

There is a difference between centralized governance and decentralized consensus. The only reason decentralized consensus is "wild wild west" is that there is no one to sue. You can't sue bitcoin, etc. However, when you buy 30% of the dev fund in an OTC deal from the founding company, it turns steem into a security. Now, there is someone to sue and a legal target here, if someone wanted to sue they could.

For decentralized consensus to steal funds, wherever the funds ended up would be liable, if they sent to null that would be a very weird spot and you'd probably be fucked there. But people steal because they are greedy. The decentralized consensus wouldn't hurt the chain as it would hurt their own investment. Justin Sun does not care what the west thinks of us and he can spin the media in the east as our voices are not heard. He has market makers to pump the price even if he steals from you. This is apples and oranges not only from a consensus standpoint but from an incentive standpoint.

For decentralized consensus to steal funds, wherever the funds ended up would be liable, if they sent to null that would be a very weird spot and you'd probably be fucked there.

Interesting as all hell. I have no idea what the result would be if it all got nulled. Guess it would partly be up to you too if that happened.

There is many choices available to seek legal recourse and/or pecuniary relief but see it flourish in the near future for all matters involving blockchain.

The only reason decentralized consensus is "wild wild west" is that there is no one to sue.

I can see a future where a specific decentralized environment and every beneficiary or participant of it is held proportionately liable to pay damages/ penalties for any civil or criminal case won in a court of law.
The defendant named would be that specific decentralized environment, as if the road upon which a car crash occurred was named as a defendant party to the plaintiff's loss!

If it does ever get attempted, then that's when the really spicy times begin. the mind boggles!

You made great points, but I still think this would be debatable in court. I don't know if there is precedent for such a case, or if owning 30% of a decentralized blockchain can make it a security.

It definitely is a reasonable argument, and I am curious to see how this would play out in court. In any case what matters is that you guys get the money back, and hopefully without lawyers.

It is completely wrong legally to suggest that in a DPOS blockchain all coins are the property of the elected witnesses.
If that was the case then the witnesses, rather than the owners of the coins would have to pay all the taxes!
There is already plenty of established law that cryptocurrency is property belonging to the legitimate holder of the keys.

Why is law of ownership being applied to cryptos when the whole point was to own your coins without any state intervening. Your keys your crypto. Not because of the law, because of the code. Your votes your decisions. Including theft. If you are against that then do not vote for witnesses that are ready to steal. If you are 51% attacked and have no choice, fork away. Simple.

You own your gold and silver without any state or bank intervening. Not because of the law but because of chemistry and physics.

That doesn't mean you can't or shouldn't seek legal assistance if it is stolen.

Satoshi created Bitcoin to free us from fiat currencies and banks, not all government and law.
Crypto can achieve the former but never the later.

Even if all fiat currencies disappear and the whole world moves onto crypto and decentralised communities like Hive become the norm on the internet, there will always be a real world of governments, law, police, armies and taxes.

I understand where you're coming from but I think your analogy proves my point, not yours.

If someone steals your gold, you definitely should ask for legal assistance I agree with that. However, the executive order 6102 is the historical moment where the US government decided that you are no longer allowed to hoard gold and should use their notes instead. (https://en.wikipedia.org/wiki/Executive_Order_6102)

This shows that governments have the power to "steal" your money legally! They can give you a note instead of a currency - again, legally! - and then years later sell the gold and leave you with worthless notes. That is stealing, but it is technically agreed by the majority since in a democracy there are elections.

In your analogy, the witnesses are the government, and they are elected by stakeholders (or the people in a democracy). Since the witnesses can pass and execute laws on the blockchain by changing the code, and since they have the approval of the majority (they are elected), why can't they steal your money legally? They can, and did so in the steem case, and with the support of the majority of the voting stake.

In a company, there is a shareholder agreement protected by law and therefore the government that majority shareholders cannot simply decide to vote to steal someone else's shares. However, in a DPoS blockchain, there is no shareholder agreement or contract protected by the state. The only rules are those in the code, and everyone who bought the coin knows this before buying the coin.

If you want to define what the witnesses/Justin did as stealing, I accept that in a conversation, but not in legal terms. I also believe they stole, and went again important principles that they should have respected, BUT they definitely did not break any rules or laws. They simply used the DPoS system, which we all agreed to be a part of.

I would insult Justin Sun gladly, but I wouldn't sue him.

Steem forked with consensus witnesses with the sole purpose to remove funds from users.

Many of the cocksuckers and "accounts" on the list of what you call 'victims', are literally the biggest scammers and thieves on this platform. And you, stand right behind them and watch them carry out this "theft" and abuse on a daily basis.

How about you worry about the amount of money and abuse you and your own circle-jerks suck out of the platform and it's users, instead of crying like a little bitch and blaming someone else, for stealing money that you all stole from others in the first place.

Take a good look on the mirror, circle-jerk deceivers.

This is a very interesting and informative comment and discussion above and below.

I will be preparing detailed legal opinions on both the soft fork that temporarily froze the governance voting rights of the Steemit Inc stake and the fork which created the Hive blockchain.

Justin Sun has claimed that both these forks were stealing from him and these claims need to be addressed with detailed technical legal analysis.

It is important to note that the analysis of whether certain conduct is theft is completely separate and unrelated to whether a cryptocurrency is a security.
Something only needs to be "property" to be the subject of theft.

The definition of theft is pretty universal whereas the definition and regulation of a security varies widely from one jurisdiction to another.

It is best not to confuse these issues.

Make sure to take a look at this post by @blocktrades explaining why forking is not theft:
https://peakd.com/cryptocurrency/@blocktrades/the-legal-basis-of-cryptocurrency-forks

Also I'm about to put you on blast in my next post for referencing Justin Sun so much when he can clearly hide behind the shell corporation Steemit Inc.

We can't beat Justin in court. He will dump Steem to zero, claim Steemit Inc got hacked, and declare bankruptcy without losing any money.

I've looked at @blocktrades post and while it is good overall, it is completely wrong when it says:

So in the end, while there are no technical or legal limits on what changes can be made in a fork

It is quite ironic given @blocktrades are the biggest victim of this HF23 crime.

The criminal law limits all human behaviour in a country and when that criminal law is pretty universal (like theft) it limits it everywhere.
There is no blockchain exemption to the criminal law.
Blockchains and cryptocurrencies are not complete law free zones, and nor should they be.

Even in a completely decentralised blockchain, its is possible to apply criminal law to witnesses that implement code that commits a serious felony. Complete anonymity from determined a law enforcement operation is very hard to achieve as Ross Ulbricht and many others have found.

If the law breached is universal then extradition can and will happen.

In this case though it is easy for law enforcement, because Steem is completely controlled by Justin Sun.

Justin Sun cannot hide behind Steemit Inc in a criminal conspiracy charge and indeed all entities between Justin Sun and @dev365 (including potentially the Tron Foundation) will also be caught.

We absolutely CAN beat Justin Sun in Court and either put him behind bars for a long time (if China doesn't protect him) or prevent him ever leaving China again.

What would you say if I told you Hive was the original chain and Steem was the airdrop? Considering all the value lies in the layer zero community, this is pretty much the case. You might find you're actually doing legwork for the opposing team.

Justin Sun cannot hide behind Steemit Inc

Do you think Justin Sun has zero lawyers?
We are playing his game now.
We are out of our element.

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If you try to make the argument to say that this is theft,
you can certainly use the same logic to say the Hive fork is theft.

Comparing the fork that created Hive and HF23 that took Steem & SBD from the above steem blockchain accounts is like comparing apples and oranges. All the steem & SBD owned by the accounts of Justin Sun, Steemit Inc. & the people who supported Justin Sun are left in their respective accounts in the steem blockchain. They, just, did not get the equivalent of Hive & HBD in the newly created Hive blockchain like all the other steem accounts did.

You have no idea what you're talking about and if you want to know why you can check out my blog.

If you think Steem HF23 is somehow an "old asset" and Hive HF23 is a "new asset" you are lying to yourself.

If anything, Hive is the original chain and Steem is the fork. Hive retained 90%+ of the layer 0 community.

That is an interesting take but I don't think it holds any water. The original chain is NOT identified by "the layer 0 community" whatever that means. Not to mention all steemians are still active on steem commenting or powering down, etc. I believe the original chain is identified by the brand which is STEEM in this case and we all know which fork has retained the original brand and is therefore the original chain.

The HF23 didn't make a copy of the blockchain to create a new one, only made a change of the code to allow the thief of the funds. The technical analysis in blockchain terms is mostly irrelevant on the case and should be avoided to not confuse to the judge. The HIVE case and STEEM case are completely different in law terms, because in one you are retiring their funds from some accounts while in the other case HIVE didn't retired any funds of Justin's account but made a copy of the blockchain where those funds went to the DAO.

While for a programmer could be argumented that part of the DAO are stolen funds (which i don't think) for a court that should be simply ridiculous (as for the most people who understand the blockchain).

You can say HF23 is a hardfork and therefore a new blockchain but the fact is that is only an update of the blockchain.