I am writing this post in reference to this notice from Binance stating that they intend to run HF23, despite their statement that:
Binance would like to confirm that we do not condone this type of behavior and believe that blockchains should not be used as a tool for censorship or editing user balances.
I understand Binance and other exchanges are in a difficult position, because not running HF23 currently means users cannot deposit or withdraw Steem.
However, user inconvenience is insignificant compared to the potential for becoming implicated in a criminal (felony theft) conspiracy and Binance and the other exchanges have other legally appropriate options.
Running HF23 prior to rectification of theft may implicate exchanges in a criminal conspiracy
As I have stated in my Pro Bono Legal Opinion on HF23, in my legal opinion HF23 is an implementation of criminal theft and the Steem witnesses, and persons who controlled them, have committed the criminal offences of theft and criminal conspiracy to theft in multiple jurisdictions. Defined terms used in that opinion are used here.
In this open letter to exchanges I warned exchanges not to run HF23. This warning stands until the theft is rectified.
Because of the actions of @community321, Bittrex now has the opportunity to rectify the theft by returning the stolen Steem & SBD to the owners of the Targeted Accounts on Bittrex's own platform.
All exchanges risk becoming part of the criminal conspiracy or accomplices or accessories to it by running HF23 before this rectification occurs. Updating exchange Steem nodes to HF23 constitutes agreement to HF23 which may make the exchanges part of the conspiracy.
Only after the theft is rectified and the criminal conspiracy is thwarted can exchanges and others run this legally tainted code.
As exchanges are the only way Steem can be converted to other cryptocurrencies and fiat currency, running HF23 before rectification facilitates the theft and may lead to exchanges being considered accessories after the fact.
It is likely that law enforcement authorities will become involved in this matter and they will make their own decisions as to who to prosecute. While we in the crypto space understand the difficult position exchanges are in, law enforcement may not see it that way.
The exchanges should all get their own independent legal advice before taking any action this matter.
Exchanges have other legally appropriate options to protect users
In the event that Bittrex is unwilling or unable to rectify the theft, the exchanges have the power, both directly and indirectly, to reverse HF23 and force the Steem blockchain back to its pre-theft state.
Firstly, the exchanges can demand the Steem witnesses reverse HF23 under threat of de-listing.
Secondly, the exchanges can power up their Steem and elect new witnesses to reverse HF23.
Unlike Justin Sun's false claims of malicious actors stealing which led to Binance, Huobi and Poloniex assisting the ouster of the community elected witnesses on 2 Mar 2020, this is a genuine case of malicious actors using the Steem blockchain code to steal user funds, as outlined in a detailed legal opinion.
In my legal opinion, this is the most legally appropriate course of action for the exchanges if Bittrex is unwilling or unable to rectify the theft.
They may need to seek approval from relevant competition law authorities if there is any coordination between them regarding this, but if each acts directly on their own legal advice without coordination then competition law should not be triggered.
The exchanges should seek their own detailed legal advice about this matter, including potential competition law issues, before taking any action to implement HF23.
If they have already started running HF23 they should immediately stop and await rectification of the theft.