HN Explorer

Ask HN: Did anyone allege FTX/Alameda was fraudulent before the meltdown?

18 points by DevX101 ↗ HN
There seem to be a lot of content with hindsight bias asserting that it was obviously fraud. But I can't find any content making a strong case that they were using customer funds to trade prior to the public meltdown in the last few weeks.

Looking for dated tweets, blog posts, articles. Interested in well-reasoned, but non-obvious arguments before it was clear consensus.

12 comments

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mudrockbestgirl
There was this article [0] from a week ago. It was based on this [1] information which apparently was a leak of a private balance sheet.

I don't think any of this was related to using customer funds though, that's a separate issue. Nobody other than insiders could've known that, and they are probably highly incentivized to keep it that way.

[0] https://dirtybubblemedia.substack.com/p/is-alameda-research-...

[1] https://www.coindesk.com/business/2022/11/02/divisions-in-sa...

mamonster
Well, a very famous shortseller, Marc Cohodes, has been railing on about Bankman Fried for quite some time now, convinced he was fraud.

One thing though is that Cohodes never alleged the customer funds were being misused like that, but his line of questioning IIRC was basically the following:

1. SBF had no rep(i.e Cohodes could not find anybody from TradFi who could vouch for this guy being smart, viewed JaneStreet stint as very questionable per his research, etc).

2.Garry Wang is basically a ghost with very little info despite being CTO.

3. Dan Friedberg, who was basically in charge of regulation at FTX IIRC, was one of the lawyers involved in the Ultimate Bet poker scandal.

4. SBF was super late to the crypto game and their whole "geographical arbitrage" trade that propelled Alameda to fame was never fully explained. In Marc's opinion every single person who has ever put on a massive trade and won can describe the trade with granular detail, SBF never went into specifics of his.

If you try googling around SBF and Marc Cohodes you should probably be able to find more detailed arguments. Cohodes is the only one I know who was super public about calling him a fraud before the balance sheet leaks.

PaulHoule
There's the generic analysis that anything in crypto is a scam which is justified by a few hundred years of experience with securities markets, some good books to read are

https://en.wikipedia.org/wiki/Extraordinary_Popular_Delusion...

https://www.amazon.com/Where-Are-Customers-Yachts-Street/dp/...

https://www.goodreads.com/book/show/29803765-supermoney

https://www.goodreads.com/book/show/39358391-the-money-game

(many of those books are about the psychology of stock market bubbles, which ar a bit less scammy because stocks do have some intrinsic value because the firms involve own assets and produce income)

I can't give you names or dates but I can tell you that "No" and "Nothing more to see here, move on folks" are the best advice I can give you about crypto because it all ends in tears. You will forgo the possibility of selling to a greater fool but eliminate the possibility of being that greater fool which statistically you're more likely to be.

What is great about timeless principles is that they give consistently right answers with the greatest of ease. This goes against the "ahistoric turn" and the general "this time is different" which is said about every bubble but you can be confident that your "predictions" are right.

It's not impossible technically that cryptocurrencies could be regulated like other securities and possibly earn trust except for the fact that blockchains are at best a TRS-80 with a coinslot attached: they just can't compete economically with the likes of the LSE, DTCC/Swift, etc.

ethanbond
There was the time where SBF openly described a Ponzi scheme to Matt Levine and the Odd Lots podcast hosts and suggested that that's what FTX is powered by. He wasn't really saying FTX is a Ponzi, but it was an open admission that they're providing the infrastructure for Ponzis and taking fees. If you're someone who believes in the concept of personal principles, this was pretty decent signal SBF was sorely lacking on at least the dimension of financial responsibility.

Levine paraphrased as, "we're in the Ponzi business, and business is pretty good."

rasz
_all_ crypto is scam.
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TheAlchemist
Well the specific usage of customer funds - probably not.

But FTX being a fraud ? ALL crypto trading space is a fraud - Binance probably the biggest (well maybe Tether) - it’s all smokes and mirror. Anybody with a brain should know that.