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Ladies and gentlemen of the jury, and distinguished judge, I stand before you, and this most-hallowed District Court of the Southern District of New York, representing myself, without a legal degree. I am both humbled and honored to have garnered your attention, and of course, it was no trouble at all to take the time out of my busy schedule to answer your summons.
You undoubtedly called me here because you are curious as to the source of my new-found wealth — perhaps my recent splash in the Grey Lady’s society pages sparked your curiosity! Surely that’s what must have done it.
Well, I am pleased to inform you that most recently, I was blessed with the good fortune of engaging in a highly profitable trading strategy. Out on the wilds of the internet, where the Law’s Light does not shine, there exists a protocol. This protocol was constructed in such a way that the designers allowed a very thinly traded asset (of sorts, if it can truly be considered an asset) to be earmarked as collateral for highly leveraged loans, and by my own cleverness, I used it to take out loans far in excess of the prior agreed-upon value of my collateral. But the oracles, true as they are, said otherwise, and thus was I able to pocket a princely sum.
…oh? You claim this isn’t legal? I don’t think you understand, Your Honor, the code allowed this.
There are myriad examples in the case law — for example, did you know the Mt. Gox Bitcoin Exchange allowed you to access hundreds of thousands of bitcoin if you simply knew that their database was misconfigured? That’s what we in the trade call “market alpha.”
…the person who did that was arrested? But not in the United States I see. Curious. Must have been some regime where Rule of Law is not prevalent.
Let us consider another example: in 2016, a brilliant person discovered that the designers of The DAO — an on-chain art installation dedicated to the pursuit of comical hubris — allowed a lucky individual the ability to grant themselves its treasury. Unfortunately, their legitimately acquired gains were stolen from them by a cartel of thieves calling themselves “the Ethereum community” — a group that remains at large and unpunished. I hope the long arm of Justice finds them one day.
Your honor, please excuse me, but the way you’re staring at me is making me uneasy. You’re looking at me the way I look at legally binding smart contract code. There’s a place for that, but surely not the courtroom.
Anyway, I don’t fault you or the jury for the confusion here. You cannot be expected to understand the nuance of the laws that govern healthy operation of markets; that’s the purview of motivated and experienced practitioners like myself. Why, just this past month, I happened upon another protocol where someone was clearly engaging in illicit market manipulation! The gall! Naturally, I informed my team of lawyers that it was time to act — and we have lawsuits pending.
While I might stand to benefit from successful legal action, my true motivation is a deep and abiding respect for the healthy and uninterrupted functioning of markets. Imagine if anyone could arbitrarily decide the scale and manner of bounty for exploiting a clearly unintentional design flaw! Is that the kind of chaos we want as precedent in this brave new world of DeFi? Absolutely not. Just be thankful that I’m here to help us all thread this absurdly complex needle.
Have I piqued your interest? Excellent. Because I’m moving forward with yet another top-tier investment fund, and I’d be thrilled to have your participation, Your Honor. Given my stellar, legal performance to date, we’re going to eschew the typical 2 and 20 structure for something a bit more–
I’m sorry where are you taking me? Are these handcuffs really necessary? Can I at least get a phone call? The last time they gave me a phone call.