[steve_taylor]

> Unwinding this becomes tricky - if you sell too fast, you cause the price decrease. And if anybody gets wind of it, they'll abandon ship.

My thoughts exactly. There are far less risky ways for an exchange to rip off its customers with out their knowledge, such as front running. That is, the insider can use lag to effectively trade with advance knowledge of the market. (Remember those long bouts of massive lag?) This doesn't require market manipulation and every single pair of trades is profitable.

[orclev]

Another piece of this puzzle might be shenanigans early on in the history of MtGox. There's been some speculation that something happened early on and MtGox lost a lot of BTC (either a hack, a glitch, or possibly a HD failed with a wallet that didn't have a backup). From that point on they basically scrambled to make up the deficit in BTC through various shady means, one of which might be this bot. There's an oblique reference to that theory early on in the report when they mention trading a BTC deficit for a fiat deficit. Basically they traded cash they didn't have for BTC they didn't have but needed in order to prop up the orders they had outstanding.