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Vanguard National Bank lost US$345,000 to a high frequency trader—and it's refusing to pay out
🕑 Added 2025-04-16 14:11:29 +0000 UTCOn the 11th February 2025, the owner of CityRP, LilDigiVert, received an urgent message from Vanguard National Bank CEO Nexalin. It read—
Nexalin: Hi Digi [...]
[A trader called] Nimq_ abused the VMA [Vanguard Market Access] platform and transferred 1 million [DemocracyCraft dollars] to CityRP which is 100k in CityRP dollars. We would like your "blessing" or backing for us to get it back from Nimq_
When LilDigiVert enquired how VMA—Vanguard's brokerage platform—had been allegedly abused, Nexalin responded—
Nexalin: They traded Melania-USD crypto coin and abused it and made a lot[,] so no more trading crypto. [They] ruined it for everybody
On the very next day, Nexalin froze Nimq_'s bank accounts for alleged fraud—an allegation which a CityRP court would later conclude was completely unsubstantiated and backed up by zero evidence.
When Nexalin mentioned in his messages that Nimq_ "made a lot," he cited a figure of CRP$100,000 (US$400) to LilDigiVert—the amount of money stored in Nimq_'s CityRP bank account.
What he didn't mention was the amount of money Nimq_ reportedly had on their VMA account: D$850 million (US$345,000).
"The Credit Suisse of Minecraft"
When I asked the-then CityRP finance minister and former Vanguard executive Jack whether he would bail out Vanguard National Bank in the event of a collapse, he said he wouldn't rule out a UBS-Credit Suisse style deal—i.e. a deal where the government would forcefully "persuade" the private sector to bail each other out.
In response, I asked an intentionally provocative question: "Would it be fair to compare [Vanguard National Bank] to Credit Suisse outright, particularly because of its attitude towards risk management and compliance?"
Jack: Haha, I think it might be a little more nuanced than that.
By the time I interviewed Jack, Vanguard National Bank's chronic issues with risk management had become an open secret among DemocracyCraft and CityRP's financial sector. Over half a dozen sources I interviewed within the sector had expressed some degree of concern about the financial risks that the bank was taking.
These concerns were not new to Nexalin. At least four separate sources had indicated that they shared their concerns directly with the Vanguard CEO. For example, Luke201556, the-then CityRP finance minister, claimed that he and Stoppers urged Nexalin to abandon the fixed 10:1 exchange rate between D$:CRP$. Two sources close to him described him being almost in denial of the situation when he chose to stay put with the 10:1 rate—a decision which ultimately plunged the bank's CityRP branch into insolvency.
The financial risks that the bank was taking when it launched Vanguard Market Access—where it essentially promised to short anything its clients touched with no strings attached—were well known and obvious.
So obvious, in fact, that Nexalin had literally conceded in subsequent messages to LilDigiVert that the VMA could only stand to lose the bank money—
LilDigiVert: Yeah I mean trading [on] irl stocks with in game money only loses you money
Nexalin: Overtime yes
Yet, despite seemingly being aware of the risks, he chose to plough on anyway.
"I found a way to print money"
When Nimq_ deployed their automated trading bot on VMA, they were astounded by how well it worked. In their private messages to a fellow investor, fluffywaafelz (which were awkwardly leaked by Nexalin himself in a CityRP court filing), Nimq_ compared their trading bot to a money printer.
They weren't joking: in the span of just three minutes, their trading bot reportedly made over D$520 million (US$214,000).
So how was Nimq_ able to earn so much money that quickly?
In short, they used arbitrage.
VMA allowed users to buy and sell derivatives known as "echo securities," which mirrored the value of a stock or asset in real-life. For example, if Apple stock ($AAPL) was valued at US$200 in the real-life stock market, a user would be able to buy and sell Apple echo securities ($e.AAPL) for D$200 to Vanguard.
VMA allowed users to buy and sell echo securities in real-time, which meant that if the price of real-life Apple stock went up (e.g., to US$200.25), the price of Apple echo securities would also go up (e.g., to D$200.25).
Nimq_, however, noticed a crucial flaw with how the VMA implemented this—changes in a real-life stock's value didn't immediately change the value of the underlying echo security. If real-life Apple stock went up by US$0.25, it would take VMA a small amount of time for it to update the value of Apple echo securities.
This delay gave users an opportunity—if a user spotted that Apple stock went up in the real-life stock market, they could buy a lot of Apple echo securities during this short delay period on VMA. When VMA updated its prices, the user could then sell it back to VMA for a guaranteed profit.
Realising this potential for arbitrage, Nimq_ created a basic trading bot using Bash. The bot worked by continually comparing the price of a real-life stock using Yahoo Finance's API and the price of an echo security listed on VMA. If it detected a sizeable difference between the prices, it would automatically buy and sell the relevant echo securities on VMA.
(Note: This is not the actual script used, but an illustration provided by Nimq_)
The bot did these trades at lightning speed. Stoppers, Vanguard's IT chief and developer of VMA, claimed that Nimq_'s bot executed 5,000 buy and sell orders in one day, characterising it as "a script to spam buy/sell orders on the platform." According to Nimq_, the bot was deployed in short bursts—being turned on for a maximum of a few minutes at a time.
By the time Vanguard caught wind of what was going on, Nimq_ had reportedly made D$850 million (US$345,000). It immediately froze Nimq_'s accounts and wiped their VMA balance to D$0.
The bank refused to pay out.
Three words away from bankruptcy
When Nimq_ took Vanguard National Bank to court in CityRP, Nexalin alleged in court filings that Nimq_ had obtained the money "through exploitation of a bug within the VMA system"—an allegation which would later be dismissed as being unsubstantiated and without evidence.
Since then, the bank appears to have rolled back some of its claims. According to Stoppers, Vanguard wiped out Nimq_'s VMA balance on the grounds that they violated VMA's Terms of Service.
Specifically, it has alleged that Nimq_'s high frequency trading fell afoul of its "fair trading and exploit prevention" clause which stated (emphasis mine)—
Customers are strictly prohibited from engaging in trades designed to exploit system mechanics, including placing trades outside of real-life market hours to gain an unfair advantage. If any trade is determined to be exploitative, Vanguard Market Access reserves the right to reverse the trade and undo all associated gains or losses. Customers engaging in exploitative trading practices may have their accounts restricted or suspended at Vanguard's sole discretion.
Nimq_ is not the only person the bank has accused of "exploiting system mechanics." In an explosive lawsuit filed on the 2nd April 2025, the bank accused another trader, Naezaratheus, of "fraudulent stock trading" to the tune of D$9 million (US$3,650).
According to Nimq_, VMA did indeed contain several bugs that could have been exploited—intentionally or otherwise—by its users. One of these bugs allowed users to sell more shares than they actually owned by simply clicking the "sell" button twice, essentially doubling a user's money.
"[T]here are dozens of people who have accidentally done it," Nimq_ said in an interview, "I am sharing this because this [is a bug] they have refused to fix."
While neither Vanguard nor Naezaratheus have disclosed which specific exploit was used in the case, the bank has given a hint by claiming that Naezaratheus "sold more shares that he owned."
When asked about their trading bot specifically, Nimq_ maintained their belief that the bot's trades were legitimate. They said that their bot was not intentionally designed to break VMA's Terms of Service.
Indeed, if Nimq_'s trading bot legitimately made D$850 million off of high frequency arbitrage trading, the only thing that could feasibly save Vanguard National Bank from being bankrupted ten times over are the interpretation of just three words—"exploit system mechanics." Is high frequency trading a form of exploitation?
This question would be central to any potential lawsuit. Even if Nimq_'s trading bot had inadverently exploited bugs which meant that its arbitrage trades should've made less than they did, Nimq_ would only need to claim a fraction of the alleged damages to bankrupt Vanguard multiple times over.
If a court holds that high frequency trading, in principle, was a form of unlawful exploitation, Vanguard may—just may—live to see another day. If it holds the opppsite, it could very well mark the end of a chapter in the server's economic history.
"This is business as usual"
When I interviewed Volt Bank CEO and Fed Board member SmokedChief on the 9th April 2025, I asked him whether his bank was at all concerned about potential contagion from a potential collapse of Vanguard National Bank. He replied—
SmokedChief: [A Vanguard collapse is not] something I would be keen to see happening ... [A] collapse would have a domino effect on the market, wiping out millions of dollars from regular depositors and other institutions that depended on [Vanguard] to hold money for them.
SmokedChief was not the only one to express concern about the impacts a Vanguard collapse would have on ordinary players. Nimq_ themselves expressed concerns that winning a potential D$850 million lawsuit "wouldn't be taking from Vanguard but from [its] depositors." From my interviews with them, I gained the impression that it was this broader implication that made Nimq_ pause for thought.
A collapse of Vanguard National Bank may end up happening anyway, regardless of Nimq_'s decision.
Over the past two months—both shortly before and after the publication of The DC Short—investors had begun rapidly pulling their money and investments out of the bank, leading to significant capital outflow. Both Volt and Voyager Bank suspended inter-bank deposits from Vanguard National Bank.
In an interview given on the 9th April 2025, Voyager Bank CEO Louder_Leo claimed that the bank liquidated all of its stocks on VMA, totalling D$2.5 million (US$1,000). He also claimed that the bank was still waiting for Vanguard to process a withdrawal of D$12 million (US$4,900)—which he claimed was money held by Voyager's depositors—and that he had been waiting for over a month.
The bank's increasingly slow withdrawals have sparked fears that it may be suffering from a bank run. These fears were exacerbated when on the 7th April 2025, users began receiving error messages when they attempted to withdraw their money from VMA, suggesting the bank only had around D$1,100 left.
In an interview given on the 8th April 2025, Stoppers confirmed that VMA had indeed run out of money, stating—
Stoppers: ... [T]he VMA VNB bank account does not have enough cash to payout withdrawals. And I'm not sure why Nexalin isn't topping up the account with additional cash.
MrFluffy2U94, an investor of Volt Bank, said in an interview four days later that he was able to get all of his money out of Vanguard and VMA. In total, he claimed to have transferred D$12.7 million (US$5,160) from Vanguard to Volt. When I asked him why he pulled everything out, he answered—
MrFluffy2U94: Well, to be truthful, there were some concerns with the constant issues with their VMA platform ... Vanguard has tens of millions tied up in lawsuits over it currently ... [T]he insecurity of not being able to have access to my funds when needed was a driving factor as well. Another [reason was that] I am one of the largest shareholders in Volt Bank ... [and I might] as well have my money being utilized to benefit the bank that I partially own rather than [its] competitors.
As you alluded to, there were week long portions where Vanguard was unable to process any transactions due to not [having] funds in VMA, bugs or similar issues. Back in the day transactions would be processed in hours, and now its days.
Speculation over Vanguard's health reached a fever pitch when it announced on the 14th April 2025 that it had sold Vanguard Market Access to the Stoppers-owned Cope Holdings—a holding company that also owned DemocracyCraft's stock exchange. In its announcement, Nexalin stressed that the sale didn't require the bank's customers to "sell or withdraw [their] cash"—
Both Nexalin and Stoppers have been tight-lipped about the amount of money involved in the sale of VMA. Stoppers, however, denied in an interview that the sale was related to Vanguard National Bank's liquidity issues, instead stating that the sale formed part of his personal ambition to build a business empire on the server.
Not everyone is convinced that Vanguard National Bank's collapse is one of inevitability, however.
For Stoppers, who also serves as the server's Fed Governor, the mere prospect of a Vanguard collapse can't be entertained—
Stoppers: I would buy out Vanguard before it is allowed to collapse
One of our oldest and largest banks on the server does not have the option of failing
Jack, a former Vanguard executive, sees things in a different light.
When I asked him how Vanguard could be expected to "limp and survive" at its current state, he rebutted—
Jack: [You're] making an assumption that it's limping. [A]t least historically[,] nothing operationally has changed for [V]anguard and [N]ex ... nothing [I]'ve observed for nearly 3 years before it was even called [V]anguard[.]
[T]his is business as usual[.] [Y]ou've stumbled upon us during a time of usual business, usual—insane, batshit crazy, off the wall, nonsensical—business.
[V]anguard will likely get sued for the tax stuff, it'll draw out for months, [N]ex will pay a small fine and nothing will change.
For him, Vanguard will survive, not because someone will come and save it, but because this is normal. It's business as usual.
Comments
Daniel
I'm currently working on an entirely different video, and I had been passively collecting updates about the latest developments in DemocracyCraft, CityRP, BusinessCraft, and Harlon after the publication of the DC Short. I didn't intend to do another write-up about it so soon, but this is a scoop that's way too insane to just sit on. So here we are and I hope you all enjoy! This'll probably be recycled for a Part 3 (if I do end up producing one, that is).
