It's also quite possible they caused it. Fractional reserve banking by definition means keeping only a percentage of customer deposits readily available.
What solves it is the Fed stepping in and agreeing to print money no matter what to cover customer deposits if need be (FDIC insurance). That's hard to replicate in the crypto world but likely possible.
> What solves it is the Fed stepping in and agreeing to print money no matter what to cover customer deposits if need be (FDIC insurance).
The FDIC is not related to the Fed, and certainly does not entail a commitment of mobetary policy (it involves a fiscal commitment by the USG, but the whole point of the Fed is to separate monetary policy from fiscal actions.)
It looks like it? At least from a cursory reading of the press release...which goes against everything that has been said up to this point. The hilarity continues.
It absolutely blows my mind; if this[1] failure of an attempt at a "get out of jail free" disclaimer is something you feel the need to write out so poorly, and in all caps, after your diatribe, maybe - MAYBE - you shouldn't have said a goddamn word.
Yeah! That was the tweet that made me suspect an anxiety attack / some other health condition.
The weirdest part is that all 23 tweets were posted simultaneously at 8:13am. So he had the opportunity to say nothing; he could’ve clicked “save draft” instead of “tweet all”.
This guy is just taking a play from the same book Trump, Musk, Kanye, etc use. Only, he's turned it up to an 11. It'd be a funny skit to see a Trump character reading this guy's tweets/interviews and saying "whoa"
Especially on twitter, where by default you only see the first few tweets of a chain.
"Here is a bunch of information about the ongoing potentially criminal collapse of my company - oh by the way I'm a bad dev so some of what I said above might be wrong, don't act on this information."
Was he in denial? Lying? Clueless? I have no idea at this point.
He seemed earnest and genuine, but everything he’s saying is the exact opposite of reality.
Maybe he was having an anxiety attack. I had one once, and it completely sucks. It ruins your ability to form logical thoughts.
(It’s rare to see someone so powerful be so confidently mistaken. The confidence is the part I’m struggling to figure out. There doesn’t seem to be much benefit for him to knowingly lie about FTX US not being impacted, so it seemed like something else was going on.)
If he comes out the other side massively wealthy, then what was there to be "mistaken" about? You're extending an incredibly generous quantity of sympathy to someone that has absolutely not earned even a little of it. Speculating that he had an anxiety attack! I mean, really.
It kept some number of people from withdrawing their funds from FTX US yesterday, leaving more money in the pot to return to other stakeholders. This has nothing to do with game theory, what would that even mean!?
Ah yes, yet another “game theory” perspective. Seriously, what is it with crypto enthusiasts and making everything about game theory? What does it even mean in reality?
It's a way of ignoring basic fundamentals and construing any move by anyone the way you want it because of 'rationality' as opposed to actual evidence or the most obvious reason.
> It’s rare to see someone so powerful be so confidently mistaken.
I struggle to see how this could be true after 4 years of President Trump and Elon Musk's various undelivered promises. It's not rare, it seems to be extremely commonplace.
Rumors were that he was still trying to raise some kind of last minute savior financing after Binance backed out. If so, his best cards are to show that not everything he has is a shitshow and there may still be some real value financiers might be able to buy for pennies on the dollar if they save him from complete collapse.
> He seemed earnest and genuine, but everything he’s saying is the exact opposite of reality.
Con man is short for “confidence” man for a reason. What they’re good at is gaining the unmerited confidence of others. You got played by his charisma. Remember this for next time.
Wrong. FTX US is the US based exchange that accepts Americans. You gotta always read the latest SBF tweets because he consistently says 1 thing then the next day does the opposite.
> Announcement 2022-11-10: trading may be halted on FTX US in a few days. Please close down any positions you want to close down. Withdrawals are and will remain open. We will give updates as we have them.
Yes, it explicitly mentions that FTX US is included:
> FTX Trading Ltd. (d.b.a. FTX.com), announced today that it, West Realm Shires Services Inc. (d.b.a. FTX US), Alameda Research Ltd. and approximately 130 additional affiliated companies (together, the "FTX Group"'), have commenced voluntary proceedings under Chapter 11 of the United States Bankruptcy Code in the District of Delaware in order to begin an orderly process to review and monetize assets for the benefit of all global stakeholders.
Excluded are:
> The following subsidiaries are not included in the Chapter 11 proceedings: LedgerX LIC, FTX Digital Markets Ltd., FTX Australia Pty Ltd. and FTX Express Pay Ltd.
From the Sequoia article on SBF / FTX, it's very likely to be able to trade internationally because each country requires you to have a bank account in that country to be able to access their markets.
In the Sequoia article, SBF gained his initial funding for FTX from executing trades from the US to Japan, where BTC was overpriced because no one bothered to arbitrage it because of the setup difficulty. The way he did this was by contacting a friend to open a bank account in Japan and manage the funding over there while he managed the account US side.
I am sure some of it is normal corporate shell game but I'd imagine at least 50% of this setup was for regulatory purposes. Even small fintechs will have "shell game like" company structure to please regulatory forces that require having certain things be independent from the consumer platform even if the two companies are working towards the same goal.
No one did it for Japan first probably because they have pretty strong criminal liability stuff for securities violations and other financial crimes and don't play the "no fault settlement" game.
It's not illegal to arbitrage but yeah I think what you are pointing at is you have to be regulatory-ily buttoned up for Japan markets vs a more loose market where you don't have to be super careful & can learn as you go.
So SBF having been in finance before (Jane Street), he knew where the footsteps were and how to do it vs a fly-by night crypto investor with no finance background.
Supposedly the Japan “subsidiary” (if you can call it that) was set up by a Japanese person and a resident of Japan, who was a contact of SBF through the Effective Altruism thing. I think they knew something was shady, because the account they had opened in Japan was with a small rural Japanese bank.
When that “arbitrage” turned out to be really lucrative one of the founders of Skype (Talinn something) gave SBF a $50 million loan. SBF and that Talinn guy knew each other also from that Effective Altruism sect-like thing.
All this info was part of a Sequoia congratulatory piece on SBF, they of course had also given him money. The article has since been taken down, it’s still reachable through Web Archive.
This guy has major Epstein vibes (minus the girls). comes out of nowhere super politically connected, investing in research, with a pretty dubious origin story of how he got rich.
That sounds to me a lot like a cover story to try and convince people there was actually a value-add. I'm skeptical that the barriers were so high they discouraged anyone from seizing essentially free money, but he solved this with a Japanese friend's bank account.
What do you even need a blueprint for? The guy did an interview with Matt Levine and laid the Ponzi scheme straight out: scammers make boxes that pay fake coins when you store your money in them, they put so much money into the boxes that the fake coins seem valuable, then they rug pull everyone and move on to the next one. That's how he described his own business.
I remember listening to that interview and this part always got me:
> Matt: (27:13)
> I think of myself as like a fairly cynical person. And that was so much more cynical than how I would've described farming. You're just like, well, I'm in the Ponzi business and it's pretty good.
I seriously cannot understand how after this interview Sam still had any kind of support from VCs and so on.
I hope the late 2010s-early 2020s will be remembered as the dot-com era of extremely dumb money...
> Because they thought they could make money by finding a bigger fool
$10B "somehow" "gone" is QED that someone did find their marks.
More interesting is how none of these guys are seeing the inside of a jail and doing the jailhouse orgies. I wonder if 'defenestration' will become a meme in crypto world too.
Forget VCs. This interview snippet went semi-viral, I don't understand how FTX's customers didn't try to pull all their money out right then and there.
> I seriously cannot understand how after this interview Sam still had any kind of support from VCs and so on.
yes you do - because they're at best amoral and know their position and connections means they can make money out of shit like this by ensuring there's a series of bigger fools waiting to buy them out.
I hate to be the That Guy this time, but pump-and-dump is a different kind of fraud from a Ponzi. Not that anyone cares to make the distinction anymore.
Hey, that guy, tell it to Matt Levine and SBF, who literally used the term in the interview.
:)
I'm just reacting to the idea that you'd need to see the SBF corporations laid out on a diagram to reach the conclusion. When Carrell's character says "they aren't confessing, they're bragging", he's talking about an allusion. The Ponzi schemes here are not allusive. SBF literally bragged about them.
That still doesn't mean they're using the term properly, at least in regards to kind of scam you were describing in your comment, or what that comment's parent was referring to.
"SBF/Matt Levine said it" does not automatically make it true.
To be honest, you don't explain how they are wrong and then tell us that "SBF/Matt Levine" saying it doesn't make it true but both have a public recognisable background in finance, we have absolutely no idea who you are to even judge if you could be right or not.
Instead of debating semantics, enlighten us with how/why they are using it incorrectly and what you mean by this being a pump and dump and not a Ponzi. To me it definitely looks like a Ponzi: money from new entrants in the system go to pay off earlier entrants, a pump and dump from what I know would require SBF/FTX pumping up FTT to then dump it all leaving bag holders in the wake of the crash.
That's fair -- I thought that by highlighting the correct term, against the parent's description with its mislabeling, that would be enough to make the point, especially since a) the issue of "Ponzi" misuse comes up so much, and b) one could just look up the terms and compare. But, to make it explicit:
Ponzi scheme: Taking later entrants' investments to pay earlier investors on the false pretense that the venture's activity generated the returns.
pump-and-dump: Duping others into thinking an asset has value so that it can be resold above its legit worth.
The original description given clearly fits pump-and-dump better[1], since it's based on making an asset seem valuable:
>>laid the Ponzi scheme straight out: scammers make boxes that pay fake coins when you store your money in them, they put so much money into the boxes that the fake coins seem valuable, then they rug pull everyone and move on to the next one.
For tptacek's part, he could have defended his claim by presenting a substantive understanding of the distinction and justified the label in his own words. Or, somehow indicated this was a point of contention at all. Or done anything whatsoever beyond arguing, in effect, "the perp used the label, therefore it must be accurate". That does not advance the discussion, or indicate a prompt for the kind of contribution in the first half of this comment.
Is this just the natural outcome of running a multi billion dollar crypto business? Do you hire so many experts and lawyers that they set this up for you as an ideal structure?
Seeing how stupid/greedy SBF was, it makes me wonder if people like him are smart enough to truly understand the need for such structure without having experts in place.
You need that many companies trading with each other to create value and muddle the waters... Intangible assests and future flows passed from one entity to the other and priced at some unrealistic assumptions create/raise paper value.
SBF would be a nobody without Sequoia and others throwing money at him. I'm more concerned about the judgment of monied people who are so desperate to find their own Adam Neumann, that they forgo common sense and invest based on 'feel'.
It's almost like they asked GPT3 or Dall-e to create "a corporate structure that is so confusing it will be a liability shield to keep my ass out of jail", and then used whatever came out
This is a huge oversimplification but my recollection is, there is a design arm of the IKEA structure which is a non-profit. They create and own all of the designs and IP related to products, which a different IKEA subsidiary then licenses and pays royalties on, essentially negating much/all of the margin of the finished good.
It's quite common to spin off daughter companies per project, it isn't unusual or illegal in any way. Without at least type and ownership information it's hard to tell if it's iffy.
That’s actually just a tiny, tiny subset of the overall Enron corporate structure. The chart you linked just shows the capitalization and ownership of one of the off-balance sheet structures that Enron used to conceal debt. This structure was capitalized with Enron stock, which worked great as long as the price kept going up, but once the value of that stock fell beneath a certain value, the single-purpose entity used here became insolvent and accounting rules (finally) required that that debt be consolidated back onto Enron parent’s balance sheet.
It’s a situation with many interesting parallels in the crypto industry. Not only does history rhyme, but sometimes it really does repeat.
To be fair, any billion-dollar multinational will have an organizational chart that looks very similar to this. Companies like EY exist, almost purely, to create 'tax effective' structures with hybrid debt instruments and service agreements.
Being US only limits your structure options. Start generating some international revenue and you’ll see how your entity/structure requirements increase.
if you're a creditor, good luck getting any part of what's left over after they pay the accounting firms to unwind this. On second thought, if you're an accounting firm, good luck getting paid if you do any work for them.
These days owning a crypto exchange is a shell game where you try to hide the funds and liabilities into a chain of companies located in offshore jurisdictions.
Binance does the same but even more extreme — they don’t even tell where their HQ is actually located.
Money launderers and tax evaders have long used these tricks. Those people don’t normally get VC capital at $34 billion valuations though. The crypto implosion ought to be a massive lesson to the industry.
I'm really skeptical of Binance, whilst I would never accuse them of anything specific, I have no proof. Their structure, governance and business model combined with their refusal to meet basic regulatory requirements makes me feel uneasy.
Even the assets are questionable — as Tether’s attestation language change shows. They value their assets at what they’re worth “in normal market conditions” which is a flashing red light for bank run vulnerability.
Exchange is pretty simple business. Customers deposit coins and fiat, trade between them and pay you commissions. If you don't send any of those coins out, there is no risk, no liquidity crunches, no liabilities whatsoever. This guy took customer coins to gamble, and lost. Story as old as Romeo and Julia.
> If you don't send any of those coins out, there is no risk, no liquidity crunches, no liabilities whatsoever.
If you don't send any of those coins out, there are no profits for the exchange operator, either. Look at how Coinbase does everything more-or-less by the book, and barely makes money. Trading fees just don't cut it.
Yet, some fly-by-night exchange incorporated in the Bahamas is offering wild signup bonuses and lower fees and yield that would make Scrooge McDuck blush.
it looks like the usual nonsense of "here's some bank account balances", with no explanation of what liabilities they hold, or how much related party loan crime they have on their books.
Binance is effectively saying “I’m not going to tell you where I am but you should let me manage your money.” It takes a special kind of gullibility to accept that, but in the crypto world left has been right and black white for a very long time.
Binance’s US subsidiary is just as safe as FTX.US was, despite their claims otherwise. It will fall along with the other dominos.
If a hedge fund trades on an exchange in Singapore they will probably want a corporate structure there for trading and tax purposes. Larger trading operations aren’t just clicking sign up on random exchange websites and allowed to start trading billions of dollars. Legal agreements need to be inked, collateral deposited, etc.
So, SBF seems likely to have flat-out lied, right up to the last moment. At this point, why would you choose to trust any crypto company that wasn't perfectly transparent in how it holds assets, backs coins, what it's borrowing on, etc?
Do we blame individuals or the technology that enabled them? I don't know. I do think we need to get back to building useful tools that people need.
If withdrawals are open, then it seems FTX.us still has all its customers assets and can return them, but will not be able to pay its own bills for hosting, staffing, etc. in the very near term. So yesterdays statement that it wasn't affected by the loss of funds implosion would be accurate, but if the business was reliant on funding from other operations to survive, it can still go bankrupt.
People get all antsy in their pantsy and can't read nuance.
I think people are jumping to conclusions by saying that because FTX.us is included in the filing, all user funds are completely gone. Not to say I blame them for thinking the worst, but we'll probably know more once the dust settles.
If the guy is dipping into supposedly segregated client accounts to run his prop trading, and lying about it.. why would he not do the same with FTX US money.
The CEO of Alameda said "we tend not to have stop losses... I'm trying to think of a good example of a trade where I've lost a ton of money... I probably don't want to go into specifics with that"
Now how did this place end up managing billions of dollars and SBF the darling of politicians?
The picture is starting to come into focus. SBF used customer funds to become one of the top political donors. He donated $40M and was planning up to $1B. His parents are Stanford Professors who are well connected in the political world.
Caroline, Alameda's CEO, also said "My advice for college is that classes don't matter that much and friends and networking are really important. Probably the most valuable thing you can do in college is find the coolest people you can and spend lots of time hanging out with them". Apparently so.
Her dad is the Department Head of Economics at MIT. Prior to getting appointed to the SEC, Gary Gensler was a Professor for the Practice of Global Economics & Management at MIT.
The CEO of GoldmanSachs met with SBF to help FTX get regulatory approval.
From a congressman yesterday, "Gary Gensler runs to the media while reports to my office allege he was helping SBF and FTX work on legal loopholes to obtain a regulatory monopoly. We're looking into this." https://twitter.com/RepTomEmmer/status/1590717374801809409
It looks like Enron or Theranos 2.0. The kids of the elite were being elevated into positions way outside their ability and supported at high levels with no scrutiny. The fallout from this is going to be astronomical.
I guess the way it works is before they blow up people go "clearly they're doing great, they know something we don't. You think they need stop losses, but that's because you just don't get it. Stop asking questions".
The same way fiat finance builds up and then collapses: most people have no idea what's going on or what any of it means. There's a lot of accounting smoke & mirrors to make everything look successful, until it's put to the test. At least with traditional finance there is occasional some effort to reign things in, or at least cover consumer checking accounts. But even there the finance companies employ more lawyers, accountants and experts than the regulators can and so the regulators are usually playing catch up after the collapse. In crypto there's no regulators, just other companies hoping they don't get found out.
To be fair I heard from a few places that you really don't want to do stop losses on crypto exactly because of companies like FTX - since the traders and the exchange are really the same people, it's possible that there isn't a good enough chinese wall between them - when that happens the traders can see your stop losses which is like holding a massive sign saying "Here, take my crypto for cheap".
I hope people read this and really understand what it says. It Crypto had any intrinsic value this paragraph would be ridiculous ... but it's not. At least tulips were pretty to look at.
The only reason big banks doesn't do this openly is because they actually have regulators breathing down their neck so they have to either hide it well or find ways around.
The problem isn't crypto, it's the lack of accountability.
> The only reason big banks doesn't do this openly is because they actually have regulators breathing down their neck so they have to either hide it well or find ways around.
I thought that's what the whole PFOF debate in the US was about? That e.g. Citadel is allegedly using SL and order book information to hunt stops on thin volumes.
Not from the US and I didn't follow it too closely, maybe I got it wrong.
This is actually generally how finance works though. The whole industry is built on the illusion of superior competence.
"Prestige" is a determining factor in someones ability get a job running a hedge fund/financial asset management. Generally they need to have gone to the right school, worked at the right bank, then at the right hedge fund. Each should show a good amount of tenure ( > 3-5 years ).
A major asset manager that I won't mention hires PhDs from Harvard as a way to get people to invest in their fund. Behind the scenes, away from all the quant marketing nonsense, is some guy you've never heard of making gut based trades on the market.
"This is actually generally how finance works though. The whole industry is built on the illusion of superior competence. "Prestige" is a determining factor in someones ability get a job running a hedge fund/financial asset management"
It's not just finance, people everywhere are impressed by a prestigious background, and assume if you can drop certain names on your resume you must be great.
Such names will open all sorts of doors for you that are firmly shut against the riffraff.
Of course, conmen have used such patinas of prestige to their advantage since the dawn of time.
There's also the irony of the fancy office. If you're a customer of a professional and walk into a very luxurious office, you know ultimately you're the one paying for that. If it were a separate surcharge to meet in the fancy office vs something basic would you chose to pay it? Yet psychologically we all feel more confident in the fancy office.
I saw this at Bridgewater. Hired only ivy league, smart people actually. But their total discretionary control was a tiny % of fund. Hedge funds are mostly marketing. When 2008 financial crisis happened, Dalio was making the big trades in the control room himself on gut feel.
This. Someone from Bridgewater mentioned that Dalio's "radical transparency" and all that we-record-everything nonsense is just a marketing bluff. Actual decisions are made behind closed doors by a few people.
To see this all you have to do is interview at a few "prestigious" financial companies.
A while back I interviewed with one of the top trading firms. It was for a lower level position that I normally wouldn't take but I was excited about the prospect of working with some truly brilliant quants.
Wow was I disappointed. The discussion with the quants quickly relieved that they had absolutely zero interest in their field, and not a particularly deep understanding of the fundamentals of the mathematics they were using. It became clear that their entire course of study was focused on getting in to high paying financial company, and all the things they had to learn on the way there were just boring prereqs.
I've met a lot of really talented and smart applied math people over my career, and this quant team was not in that groups of people.
That said all the engineers I chatted with were great. My takeaway was that these companies do need talented engineers to run these systems but the "brilliant quants" is more or less just, as you say, the illusion of superior competence.
I think it really depends to be honest. I don't think what you are saying is generally true of people at prop trading firms, the ones that I know were generally very into math/physics and got lured by the high pay.
With prop firms, there is little need to schmooze the rich with fancy degrees
I do feel like SBF path was obviously distinct from this hedge fund/IB pathway you are describing.
For one, he got hired for a prop trading firms - in which these effects are not very large because they have little-to-no interest in clients and managing assets.
> Now how did this place end up managing billions of dollars and SBF the darling of politicians?
It's not that hard to be the darling of politicians in this day of extreme polarization - you just tell them what they want to hear.
SBF made a good safe bet that coming off as "pro-regulation" would be a winning strategy in the current climate. Heck, it was probably a good bet regardless of whether Democrats or Republicans are in power, because even though Republicans are nominally anti-regulation, being against "Silicon Valley billionaires" is basically the one thing that gets bipartisan support these days, so flattering politicians with "we need you to regulate us" was probably a good strategy.
How many times are we going to allow someone to slice us with weaponized stupidity before we realize that willful ignorance is actually a powerful tool in the malicious actor's/white collar toolkit?
On the street, the cops/court'll beat you with "ignorance of the law is not an excuse".
In the board room, the corporation can do no wrong, here's your settlement, chapter 11 plox.
My point is this doesn't feel like stupidity or some confluence of mistakes. It feels more like someone realizing they can get people to invest in their house of cards while knowing it's a house of cards.
Yeah, it's funny to see Alameda called out for this, when most hedge funds don't use stop losses. It's pretty reasonable not to want their assets liquidated at a bad price in their sleep, in response to a price movement which might have been an artificial blip.
Is this how it always is and has been in Silicon Valley or Tech in the US. Startups started by well connected or well off kids, with backgrounds at elite Universities. Background and connections count for so much in that industry, it makes you wonder how much has been lost or how much potential was lost because people didnt go to the right schools.
no, this is not true. The reality of Silicon Valley since the mid-1970s is an explosive and unpredictable mix of institutional money, their cohorts and practices; defense industry, their cohorts and money (these fit your hypothesis somewhat); dramatic and overlapping physical inventions using silicon parts, the people that build and promote those, their investor and insiders; marketing success more like Hollywood of old, their cohorts and practices; non-USA money and investment systems, their cohorts and practices; international Fortune 500, their cohorts and practices.. and more I am leaving out..
> Caroline, Alameda's CEO, also said "My advice for college is that class don't matter that much and friends and networking are really important. Probably the most valuable thing you can do in college is find the coolest people you can and spend lots of time hanging out with them".
This is mainstream advice if you're at an Ivy, Stanford, etc. You're learning the same material as the people who go to a state university. The advantage is the proximity to power, the people you rub elbows with who can help your career down the line.
This is the entire premise of elite business schools – nobody is dropping $100k/year for the content that you can get on YouTube for free.
> You're learning the same material as the people who go to a state university. The advantage is the proximity to power, the people you rub elbows with who can help your career down the line.
I got my MS CS from Stanford and this is completely false. I did my BS CS at Georgetown, and even between the two there was a huge difference being at Stanford. The course material pushed me way harder, there were more resources (e.g. robots), a much wider selection of electives, and more consistently brilliant peers. I never felt behind at Georgetown; I certainly had those moments at Stanford, even though I did very well there in the end.
The original comment applies more to humanities and business school than to hard sciences. But it's still relevant in STEM.
> I got my MS CS from Stanford and this is completely false. I did my BS CS at Georgetown, and even between the two there was a huge difference being at Stanford.
Stanford is probably the best-known school in the world for Computer Science. Georgetown (while a great school) is known for its international relations. So I'm not surprised that Stanford had more CS electives, resources, etc.
But the fair comparison here is a school like UC Berkeley, University of Illinois, or [insert flagship state university here]. Is the quality of education really that different vs. Stanford? Or is the Stanford name brand on the resume the differentiator?
Also, a masters program should be harder and more competitive than an undergrad program!
> and more consistently brilliant peers
Exactly. At Stanford, your "consistently more brilliant peers" will be in positions of power down the road. They'll be hiring managers at Google and Apple in <5 years.
This stuff just worries me so much. These people are looked up to as some gods of business, insight, or whatever. Even I have been guilty of getting caught up and being jealous of these younger people with so much apparent success. But then you find out, in gory detail, about just how much bullshit it all is, and that these people are just from elite circles who got handed keys to the Lamborghini after just playing with a Tonka truck. I mean, just hearing these people speak is cringe. They don’t understand how anything actual works. I can’t believe that something that literally stops your losses is not an effective risk management tool.
This is what you find with kids from the elite class. They can take on mind blowing risk because they can fall back on their parents when it fails. People from lower socioeconomic levels cannot do that. Our government sets back and let criminal actions go unpunished, letting people truly treat life as a Monopoly game.
SBF should delete twitter mostly to stop publishing increasingly ridiculous "I’m really sorry, again" messages: "Hopefully things can find a way to recover. Hopefully this can bring some amount of transparency, trust, and governance to them. Ultimately hopefully it can be better for customers."
Not good for anyone, obv, but where is the money?? If dude sent it to his other company, shouldn't it be sitting there? Did they already spend it?
Although crypto is marred with scams and is by nature often shady, this isn't about crypto but about 1 single person, the ex-CEO, stealing people's money.
The FTT on its balance sheets as if it was real money is very crypto-stupid though.
Just noting that the FT article has a statement from its interim CEO:
“The immediate relief of Chapter 11 is appropriate to provide the FTX Group the opportunity to assess its situation and develop a process to maximize recoveries for stakeholders,” [John J] Ray [III] said.
Well, secured creditors really. They may or may not be insiders.
The people who are really hosed are the non secured creditors. Who, again, may or may not be insiders.
That said, in either case, they are very likely to be extremely disappointed in what is recovered. I just have a sneaky suspicion that even the USD6 Billion that everyone hopes remains available, is not actually there.
Two years ago, when Twitter was banning right wing politicians (and left wing ones too), it was a private company that can do whatever it wants.
Suddenly in the past two years, it has magically transformed into a national security risk with global consequences.
Which is it? if the former, then they should be able to do what they want, including ban whom they want. If the latter, it needs to be regulated and certain rights ought to be enumerated for its users.
I don't know that anyone likes how moderation is ever done. If you try I bet you struggle to find folks who have ever liked twitter / the ecosystem for very long ... ever.
If twitter is a national security risk, it needs to regulated and not be a private company. If twitter is not a national security risk, then whoever owns it makes the rules.
He already lost his whole net worth overnight ($16B) and will live in hiding with serious death threats for the rest of his life. This is no ordinary CEO switcheroo where the he walks away with a slap on the wrist and a golden handshake.
I'm not. Just saying that he won't get away with it like other CEOs have done in the past while "taking responsibility". His punishment has already begun.
Yes, losing his money, reputation and freedom (whether that's in hiding or in jail). He's obviously royally screwed, regardless if he goes to jail or not, and yet people are saying he walks away from this unscathed.
> To be fair to the guy, he wasn’t afraid to admit it in some very public interviews.
I don't think brazen criminals should get a different perspective than sneaky ones; perhaps a worse characterization because they either don't recognize what they're doing is wrong, or they simply hold society in contempt.
It wasn’t a Ponzi scheme, at least based on what’s publicly known.
This is just investing with client funds, which the US learned the hard way must be carefully restricted. The US has the Glass-Steagall Act, and deposit insurance to try to prevent bank runs like this.
Me, as a kid: “the emperor’s new clothes is nonsense, nobody would go along with something that obviously wrong”
Me, after watching people sell no-hope dotcoms, dubious real estate, and cryptocurrency: “… unless they thought they could cash out before the other fools wised up”
They were talking about stuff like Celsius. I don't think FTX was itself offering yield-farming products, just letting people trade those tokens. "Yeah, the stuff people trade on my platform are probably Ponzis" is definitely not great publicity, but it's not obviously admitting to your own crimes.
I am still not convinced that he did not steal the missing FTX client funds. So at this point it is not clear to me how much he lost or gained from this. I do hope the DOJ conduct a full investigation and trace where all the money went.
He will have worked with some accountants and lawyers to move money into untouchable places. There will be someone employed to hold it for him, and dole it out in the future. Sure he will have to keep a low profile, but there will be resources.
He will probably have dispersed quite some sums to friends and family, some of that will come back to him in one way or another.
Finally, he will be able to go on the celebrity speaking circuit for quite a while...
I stand corrected on this point. Bloomberg is reporting that SBF's Robinhood stake was apparently held through Alameda and may have been used as collateral for loans.
No death threats because he had money? Have you perhaps seen the extensive list of Russian billionaires who "committed suicide" during like the past five years?
Russia is a terrorist state oligarchy with a murderous dictator. No one is actually going to kill this guy in the US. He will obviously get threats, and then reboot with a new $500mm seed round for some new scam from Marc Andreessen in a few years. Nevermind that's Adam Neumann.
> “People on Twitter now are like “he admitted that FTX is a Ponzi!” but of course that’s not true. He conceded a certain validity to my claim that some crypto businesses — not his — are Ponzis. He is just in the business of trading their tokens.
“In fact, I came away from that conversation bullish on FTX and Bankman-Fried. My view was, and is, that if you talk to a crypto exchange operator and he is like “crypto is changing the world, your old-fashioned economics are just FUD, HODL,” then that’s bad. A wild-eyed crypto true believer is not the person to operate an exchange. The person you want operating an exchange is a clear-eyed trader. You want someone whose basic attitude to financial assets is, like, “if someone wants to buy and someone wants to sell, I will put them together and collect a fee.” You want someone whose perspective is driven by markets, not ideology, who cares about risk, not futurism. A certain cynicism about the products he is trading is probably healthy.”
I'm not arguing on the basis of what Levine thought of the conversation.
At the very least, it's apparent that SBF sees crypto as being heavily based on speculation that's disconnected from any actual value proposition, but he's choosing to exploit and profit from those systems. And it's now apparent that he also was engaging in speculation with user funds himself via Alameda.
A wild-eyed crypto believer might lose anywhere from a few thousand to a few million of their own money in poorly placed speculation.
A sophisticated market-maker will facilitate the loss of billions (about $10 billion in this case) from numerous people.
Which is more dangerous? A HODL who loses their savings on some speculative crypto purchase, or the next Bernie Madoff?
A wild eyed Luna type can lose a lot of people’s money and is probably more likely to do so than a skeptical trader making deals. The issue with this wasn’t that general heuristic which is still true (imo), it was SBF’s decisions despite that (which were bad and extremely high risk, but different than it being a ponzi).
Pair that with an intelligent enemy looking for ways to destroy you and this is where it ends up.
That is not the comparison at all, and while I have to assume you are commenting in good faith, it is really hard to do so here.
The difference Levine is pointing out is between the type of person operating the exchange. It is not the comparison between janitor and CEO at a fortune 500 company.
A "true believer" will cause just as much (or per Levine's assertion: more) damage as a "sophesticated crypto cynicist", but one will at least understand financial fundamentals while the other brings none of the learnings from running any kind of investment or banking firm.
A "true believer" isn't able to carry out their work without a marketplace. Nobody lost money in crypto on the scale we're seeing 5 years ago.
The largely unregulated, uninsured, and opaque marketplace of crypto, facilitated by people like SBF, has been the conduit for the true believers.
If somebody says "I know you're a sucker and I'm going to take your money", (as SBF did in Levine interview) they just told you everything you need to know. You can rest assured that their other dealings are dirty, as is now coming to light for SBF.
I'm not sure why "good faith" is being brought into question, and I certainly haven't challenged the good faith of those who disagree with me. So I'm not going to address that aspect of the conversation.
>I'm not sure why "good faith" is being brought into question, and I certainly haven't challenged the good faith of those who disagree with me. So I'm not going to address that aspect of the conversation.
Per the commenting guidelines, we are expected to believe people are commenting in good faith even when they say:
>A wild-eyed crypto believer might lose anywhere from a few thousand to a few million of their own money in poorly placed speculation.
>A sophisticated market-maker will facilitate the loss of billions (about $10 billion in this case) from numerous people.
Which is either a deliberately bad comparison (akin to janitor vs CEO), or completely irrelevant in the context of what SBF was saying / what Levine thought.
A wild-eyed crypto believer would make all the same mistakes as the sophisticated trader and run the exchange into the ground while breaking laws. The sophisticated trader will typically run their business within the legal framework, while taking as much profit as possible.
But the exchange it seems was but only one constituent of a wider more complex (necessarily complicated?) web of cross funding that in no way represents the expected business practice of an exchange. Matt it seems failed to account for the bare faced lying of a deluded ideologue. Or at least someone who hid behind an ideology to excuse absurd business practices
In some circles resigning from a failed tech venture is not seen as a failure. WeWork CEO resigned and is now promoting a new fully funded company in the same space.
FTX CEO has been openly lying about the impact for a long time now, and has mismanaged billions of dollars (of other people's money). Resigning doesn't seem like a reasonable punishment.
Not to get too far off-topic, but WeWork was commercial real estate, Flow is residential:
Andreessen [of Andreessen Horowitz, investors of 350M in a company that's single asset is currently a landing page] positioned the new company as a long-awaited solution to the nation’s “housing crisis.” ...
“community-driven, experience-centric service” — to explain how the new startup would “create a system where renters receive the benefits of owners.”
This sounds completely different than WeWork, which had the simple goal of changing the world, one beer-Friday at a time.
The sad part is the AZ money isn't the dumb money in this deal; that will flow in latter.
I'm not trolling. So far this is just a business failure, not a crime.
I don't know much about this whole thing. It sounds likely there will be investigations, and they may prove "large scale theft" at that time. But right now resigning is the only way for him to "take responsibility".
When everything was going down he tweeted something on the line that everything was fine, he later deleted that but for sure there's an archive somewhere (and I'm sure Elon would be GLAD to provide that data). That's fraud, and I'm sure there's a lot more like that once the DOJ/SEC start looking around.
I like SBF, honestly, I like his personality, I don't believe he's a bad person, I could even believe (with a truckload of salt) that all of this happened without him being fully aware of what was going on. But, real is real, and I'm quite sure he will do jail time.
I take full responsibility for stealing $10 billion and am stepping down as CEO, it has been a long journey from me having nothing to this point. I am sorry to those that lost some or all of your money.
I will no longer take part in the company and will quietly fly away on my private jet to my $50 million home where I will contemplate my next venture.
The context here is other CEOs stepping down after a fiasco, getting a massive severance check, saying they take "full responsibility". Compared to that SBF is massively screwed.
he's bankrupt and deeply in debt. Why would his "connections" stick their necks out for him? I don't know if having a dad teaching at Stanford gives you a free pass everywhere.
is he? sounds like his various corporate frauds have destroyed a lot of companies and led to corporate bankruptcies, but what information is there about how much he scooped out before?
The allegation is he moved money between companies to support his terrible “hedge” fund. Where have you seen anything at all about him not having a lot of personal money?
Bloomberg Billionaires Index estimates that SBF has lost 100% of his net worth, all of which was in one way or another tied into Alameda/FTX-related firms (there was some invested in Robinhood, but it was used as collateral for Alameda-related loans.)
I'm not sure how much trouble having parents at stanford gets you out of. Maybe he can get a good lawyer but losing 10B of client funds is going to have a lot of wealthy people quite upset with him. I'd imagine anyway.
Oh I completely agree. I don't think having two parents on the faculty at Stanford helps any more than having one parent on the faculty, which is to say probably not at all here. My comment was really just meant to be parenthetical to the OPs statement.
I will bet you cash money that this is one CEO you’ll see in prison. This is like 10x as bad as anything Elizabeth Holmes did, and as far as I know, she wasn’t tweeting real time as the walls were closing in on her.
Is it as bad as Holmes? Theranos had patients with incorrect medical test results, which seems different in kind that a bunch of crypto investors losing a massive amount of money.
You can't really pick and choose where to have your bankruptcy. This filing is for FTX's US entities, those in Antigua will be wound up with Antigua's rules.
FTX Trading Ltd is "is incorporated in Antigua and Barbuda, and headquartered in The Bahamas", yet the linked statement clearly says FTX Trading Ltd (plus the FTX US entity, and Alameda, and others) are filing for Chapter 11 under US law in Delaware.
Is there a parent company of FTX Trading Ltd that's based in the US?
Edit: Apparently "Paper Bird Inc" is registered in Delaware, is 100% owned by SBF, and has ~89% ownership of FTX Trading Ltd.
Group holdings yes, but the US exchange and some of their other acquisitions are in US. It seems to be quite an elaborate cluster of firms that have filed for bankruptcy, which makes me think maybe someone was doing funny stuff with money.
I made the argument a couple days ago that CZ thought he was playing "4D chess" as the kids like to say these days by publicly and loudly dumping FTT, and he ended up burning the whole thing down.
intentional or unintentional, he didn’t really have a choice: if he had dumped FTT quietly, people would have noticed and it would have had the same outcome. If he didn’t dump it, he’d have been left with a worthless token. As soon as the Alameda balance sheet was leaked, the fate of SBFs empire was sealed, because it was the SBF mythology that supported FTX — hence the “credible” industry players using and recommending FTX. For cz to have been responsible for this, you have to argue that Alameda could have remained credible within the industry after it was revealed to be leveraged to the gills — doesn’t really seem plausible, it was only a matter of time before it was discovered that he was stealing customer deposits. The only variable in the collapse of FTX was the amount of time it took people to realise that SBF had been stealing deposits, whether it happened because of a bank run or something else, it would have happened.
You really think it was necessary to set up a totally fraudulent multi billion dollar crypto company in order to raise money for Biden? You realize they could have just gone to any of a few dozen left leaning billionaires and gotten the money far easier?
Occam's Razor.
We know what happened. Smart rich kid uses his connections to get loaned $50M and gets wildly rich from arbitrage. I'm not sure why more and more people decided he was worth trusting with even more insane amounts of money, especially when it's just a gang of kids running the company.
That thread is completely deranged and uses a lot of tweets to say nothing of substance. Barely above Qanon level here. Well connected kids with successful well connect parents make lots of money, news at 11...
It's currently getting downvoted to the bottom of the comments, and follow up responses to it with more "corroborating information" are already getting downvoted to hell.
Edit: Most comments in this chain, including the genesis, "Add some political contribution money laundering into the equation", are now grey.
Edit 2: Aaaaand the genesis comment, as well as the follow up with "corroborating information", are now flagged.
Had it been going on behind the doors, the VCs would have pumped more money in to the scam. Since it became too public to hurt their brand they will no more fund it.
It happens all the time. The VCs know how their portfolio companies operate and still keep supporting them.
Quick reminder that we're on a VC board that has participated in this shell game; this fraud that has stolen money from naive people.
And before I get downvoted to oblivion or moderated by @dang I hope a few people read this comment and realize how much was stolen from you so the sand hill gang can play monopoly ... it was a lot.
yes its been my opinion for years that they are all crooks, the whole thing was made possible basically by quantitative easing. but I still find a lot of ridiculous foolishness posted here so I keep getting lured back.
SBF has Tweeted a lot of things in the last few weeks that were provably false, sometimes just hours after he sent them. I was surprised that everyone here just took him at his word about FTX US.
These donations were pretty clearly part of a forward-play on having a prominent seat at the table for writing regulations, it’s not really a secret that they were planning to try to starve out Binance through crypto regulation.
Also while it’s kind of a thing to buy influence to the legislative process, buying your way out of justice isn’t really. There’s way too much apparatus outside of electoral politics. FTX wasn’t investigated because what were they going to be investigated for, it’s an unregulated offshore financial outfit with no signs of distress until it went boom, like most “Ponzi schemes”.
I didn't try to suggest it because HN would probably downvote me to oblivion if I did. I personally, however, think that a quid pro quo is pretty likely - and Republicans would shout this from the rooftops if they had a little more sense in my opinion. Stealing a ton of money, giving a ton to Democrats, potentially helping win an election, and then not investigating or properly punishing the thief is a perfect crime... so, if I am the Dems, I would throw or at least try to get 150+ years in prison Madoff-style at a minimum.
> Republicans would shout this from the rooftops if they had a little more sense in my opinion.
The Republican party has been defunct since 2008. I say this as a republican. Yes, they have local machines in isolated areas, but the party itself is non-existent on a national level, except when they scrape by due people being disaffected by the democrats. The Republicans have not been a true majority party for decades.
You will certainly see certain republicans shouting this, myself included. You will see smaller local groups shout this. But the national party does not really exist
I think it's really amazing that she started a PAC and 13 days later her son became one of the largest political donors to the Democrats. What great timing for her.
Why would an organization donate to BOTH competitors sizeable amounts like this? Okay, it's more to the dems, but quite a sum for the gop as well. Do they just want a soft landing regardless who wins? Wouldn't that be the same if not funding at all? Or maybe not, they can tell later any winner "look I paid ya"...
From a "trader" perspective, the best policy if you are bribing is bribing any current AND future candidates, discounted by some factor for probability of being in power at some point in the future, and discounted by the time value of money (so people currently in power gets more.) That's probably the type of amoral, risk reward based thinking that goes through someone like SBF's head.
Source: was a quant at some hedge fund in a past life.
Donations from employees, not the company itself. The company can't force the employees to donate in a specific way (or maybe they can. I don't the know US laws, but that would sound unethical)
What of the rumour that Bahamians are allowed to access their funds for legal reasons while everyone else can not? Most of the FTX employees including SBF are based in Bahama? Isn't this just insiders cashing out before creditors/users?
The sheer number of affiliated companies is not unusual in regulated industries as each tends to be a special purpose vehicle to segregate the associated assets and liabilities.
r/bitcoin did that in one of the early downturns, and with good reason: at least one person on r/bitcoinmarkets did take their own life, and several more in the cryoto subreddits talked about it.
It's funny. Banks are widely perceived as corrupt; and lo and behold, the alternative systems to replace banking have been dragged by their heels through Banking 101.
Edit: Also funny, was the unrelated Matt Damon TV ads about how "Fortune Favors the Brave." Obviously it comes from Caesar, but it was also used in Charles Dickens's Little Dorrit by a character encouraging what later turned out a Ponzi scheme...
Too often banks are perceived as corrupt due to risk management practices, like not giving mortgages to poor people who go on about how their rent is more than their mortgage.
FTX being corrupt doesn't automatically mean banks are not corrupt. Just 14 years ago, the actions of banks brought most of the world to the precipice of financial collapse. FTX and Alameda depositors will lose their money. During the GFC, almost everyone lost their money.
>FTX being corrupt doesn't automatically mean banks are not corrupt.
That's not what OP said. OP highlighted the fact that a lot of the crypto space lambasts the traditional banking system as being wholly corrupt, despite a lot of the crypto space itself being equally corrupted in the same ways.
Edit: "People who live in glass houses shouldn't throw stones", basically.
FTX WAS a corrupt bank/betting parlor. Cryptocurrency is about self custody and full transparency. This is what blockchains allow. FTX was people depositing money in SBF's personal piggy bank. FTX has nothing to do with crypto, other than the fact that it allowed people to bet on crypto prices.
Wow... I thought this was satire. (when talking about trading) 'We don't tend to have stop losses, we don't see those as very good risk management tools' No wonder they're bankrupt...
SBF loaned her company 10 billion to trade without basic risk management for trading.
She’s not wrong, stop losses are pretty pointless if you’re running a high volume market maker that is in theory constantly doing tons of volume and reacting to updates.
They’re also super dangerous if you have gigantic positions
Anyways they wouldn’t save you from collateralizing your loans with shitcoins, taking leveraged bets with money that isn’t yours, having super high exposure to UST and/or Luna, exposed to hackable defi products. Harder things that “having a good sense for risk” usually entails thinking about.
The real red flags are claiming she doesn’t use math and that she’s never lost a lot of money on a trade despite doing largely human informed trading for size…
Fair enough. I'm not familiar with that kind of trading I'm only familiar with basic day trading such as momentum and swing trading which stops have been very helpful for me personally. I imagine when you're making a market and are moving massive volume the rules are different and as you mentioned would require a lot of math like maybe trying to be delta neutral.
For a bit more color, as stop makes sense for you since you’re not there 24/7 making decisions.
But if you are, there’s no reason to just auto trade a position away. The decision of “what to do when price hits X” is a function of many things instead of price, and you’re better off dynamically deciding.
Consider that you could already implement a stop as a 24/7 trading firm anyways
>The real red flags are claiming she doesn’t use math and that she’s never lost a lot of money on a trade despite doing largely human informed trading for size…
For the peak crypto years it was almost impossible to lose money AS AN EXCHANGE. These clowns really thought they were on fire, and not just in position that random moves could be winning strategies.
> For the peak crypto years it was almost impossible to lose money AS AN EXCHANGE.
She wasn't running an exchange. You're confusing Alameda, the trading outfit, with FTX, the exchange. She was the CEO of Alameda. She was not the CEO of FTX.
Prices are not continuous. Stop loss orders are suicide pacts, especially in illiquid markets. They have little to no role in a coherent risk management strategy.
They're primarily marketed to unsophisticated retail traders as providing protection that they can't provide-- something equivalent to a free put.
In fact, some time back their firm was sued for IIRC essentially manipulating markets to trigger traders stop loss orders in order to swallow up trades at unreasonable prices.
Tiny traders in the largest of markets can potentially get away with using stop losses and not get burned too badly too often, but none of the cryptocurrency markets really qualify as that.
She was referring to the type of math that she did to earn a math degree, which I suppose could be true. My math degree did not require any of the kind of math I assume they do at these kinds of exchanges, although I also assume that the whole branch of math that starts getting into modeling and analysis would be very useful in these sorts of companies.
This whole thing is just the .com crash all over again. Super Bowl ad’s the same year of the crash even.
I happened to be at a hotel earlier this year that was hosting a crypto conference and the attendees looked like the kinds of people a multi-level marketing scheme attracts. Very different from a few years ago.
You must not have been following cryptocurrency for that long. This sort of thing happens every 2-3 years. This isn't a wild, unforseen crazy market calamity, this is your run of the mill downturn, this ones mild so far actually. You're only hearing more "bloodbath" talk because the news covers it nowadays, and the news loves to exaggerate bad things and make them sound worse because that's how they keep the lights on.
The previous dips though haven't been this leveraged though. Over the past couple years the amount of opaque and highly leveraged instruments against crypto has ballooned. There's a lot more on the line this time around imo.
I’ve held BTC since 2011 so I think I get it. My point is the industry around it collapsing. It’s not just crypto crashing but the industry built around it collapsing at scale. This isn’t Mt.Geox level - this is .com level.
But it's not collapsing at scale... not yet anyway. It's just one exchange, a big one but just one going under. It's scams and rug pulls predictably going under, same story as the last cycle. The only difference is that the news is covering it, it makes it seem like a bigger deal than it is.
And you want them to go under. When the scams stop going under is when you have a real problem, because that means the entire industry is in fact a scam.
Why would it collapse the whole system? These blockchains run themselves, the ones worth a shit anyway. They were here before these companies, there's nothing fundamental that prevents them from being around after.
I am not really convinced of Tether having trouble anymore. I've been hearing it for years. They seem to have gotten lucky and cleaned up their act before collapsing, every time they do an audit or anything the last few years they show full collateral backing their assets in circulation. With regard to binance, I couldn't tell you one way or another, but they've survived more than one cycle so they probably know what they're doing.
Did it? Or did the cruft just fall to the wayside where it belongs. From my recollection the panic lasted a year and within 5 years the companies that were part of it actually doing interesting things were valued much higher than at the peak of the bubble.
All it decimated were hype merchants and their lemmings. Hopefully the same is true here. I think it will be.
It seems like a fundamental flaw in their business model rather than a market downturn.
This seems like a bigger deal to me because FTX is part of then new wave of crypto companies that were supposed to be legitimising crypto. And even they can't stay afloat. It's just a matter of time before the next crypto giant falls.
Every time there's a bull market a hundred new operations spring up. And some of them always present themselves legitimately, and most of them always fail when the downturn comes. This is a run of the mill downturn, it happens every single time. A ton of "crypto giants" don't survive the downturn, every single time.
> I happened to be at a hotel earlier this year that was hosting a crypto conference and the attendees looked like the kinds of people a multi-level marketing scheme attracts.
So people who are barely holding on to the bottom rungs of the (American) middle class, and who are the traditional targets of multi level marketing (and also religious) hucksters?
That doesn't bode well for the argument that the crypto ecosystem isn't a set of scams, regardless of whatever the merits of the underlying technology has.
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[ 3.0 ms ] story [ 422 ms ] threadhttps://finance.yahoo.com/news/blockfi-halts-withdrawals-cit...
Regulation also doesn't fully solve this, we still have fully regulated bank failures today: https://en.wikipedia.org/wiki/List_of_bank_failures_in_the_U...
What solves it is the Fed stepping in and agreeing to print money no matter what to cover customer deposits if need be (FDIC insurance). That's hard to replicate in the crypto world but likely possible.
The FDIC is not related to the Fed, and certainly does not entail a commitment of mobetary policy (it involves a fiscal commitment by the USG, but the whole point of the Fed is to separate monetary policy from fiscal actions.)
https://blockworks.co/news/blockfi-stops-withdrawals-hinting...
> This was about FTX International. FTX US, the US based exchange that accepts Americans, was not financially impacted by this shitshow.
https://twitter.com/SBF_FTX/status/1590709195892195329
[1]https://twitter.com/SBF_FTX/status/1590709199067295749
The weirdest part is that all 23 tweets were posted simultaneously at 8:13am. So he had the opportunity to say nothing; he could’ve clicked “save draft” instead of “tweet all”.
Here's another...SBF has stepped down, and his replacement is John J. Ray III, a famous bankruptcy lawyer who helped clean up Enron...yes, that Enron.
I suppose the writers could mine[0] this for inspiration.
[0] Pun intended.
"Here is a bunch of information about the ongoing potentially criminal collapse of my company - oh by the way I'm a bad dev so some of what I said above might be wrong, don't act on this information."
Was he in denial? Lying? Clueless? I have no idea at this point.
He seemed earnest and genuine, but everything he’s saying is the exact opposite of reality.
Maybe he was having an anxiety attack. I had one once, and it completely sucks. It ruins your ability to form logical thoughts.
(It’s rare to see someone so powerful be so confidently mistaken. The confidence is the part I’m struggling to figure out. There doesn’t seem to be much benefit for him to knowingly lie about FTX US not being impacted, so it seemed like something else was going on.)
It seems like there was negative benefit: not only did it accomplish nothing in practice, but it couldn’t have helped even theoretically.
So when someone does something like that, I can’t help but speculate.
I struggle to see how this could be true after 4 years of President Trump and Elon Musk's various undelivered promises. It's not rare, it seems to be extremely commonplace.
It is very common
I don't think Joe Biden has ever said that.
https://www.nationalreview.com/news/fbi-officials-told-agent...
Con man is short for “confidence” man for a reason. What they’re good at is gaining the unmerited confidence of others. You got played by his charisma. Remember this for next time.
> Announcement 2022-11-10: trading may be halted on FTX US in a few days. Please close down any positions you want to close down. Withdrawals are and will remain open. We will give updates as we have them.
> FTX Trading Ltd. (d.b.a. FTX.com), announced today that it, West Realm Shires Services Inc. (d.b.a. FTX US), Alameda Research Ltd. and approximately 130 additional affiliated companies (together, the "FTX Group"'), have commenced voluntary proceedings under Chapter 11 of the United States Bankruptcy Code in the District of Delaware in order to begin an orderly process to review and monetize assets for the benefit of all global stakeholders.
Excluded are:
> The following subsidiaries are not included in the Chapter 11 proceedings: LedgerX LIC, FTX Digital Markets Ltd., FTX Australia Pty Ltd. and FTX Express Pay Ltd.
https://i.redd.it/078p4g7m6cz91.jpg
In the Sequoia article, SBF gained his initial funding for FTX from executing trades from the US to Japan, where BTC was overpriced because no one bothered to arbitrage it because of the setup difficulty. The way he did this was by contacting a friend to open a bank account in Japan and manage the funding over there while he managed the account US side.
I am sure some of it is normal corporate shell game but I'd imagine at least 50% of this setup was for regulatory purposes. Even small fintechs will have "shell game like" company structure to please regulatory forces that require having certain things be independent from the consumer platform even if the two companies are working towards the same goal.
So SBF having been in finance before (Jane Street), he knew where the footsteps were and how to do it vs a fly-by night crypto investor with no finance background.
When that “arbitrage” turned out to be really lucrative one of the founders of Skype (Talinn something) gave SBF a $50 million loan. SBF and that Talinn guy knew each other also from that Effective Altruism sect-like thing.
All this info was part of a Sequoia congratulatory piece on SBF, they of course had also given him money. The article has since been taken down, it’s still reachable through Web Archive.
I've skimmed through it, and by god, I was surprised Sequoia wasn't crediting the sun rising each morning to SBF.
https://www.bloomberg.com/news/articles/2022-04-25/sam-bankm...
)
> Matt: (27:13)
> I think of myself as like a fairly cynical person. And that was so much more cynical than how I would've described farming. You're just like, well, I'm in the Ponzi business and it's pretty good.
I seriously cannot understand how after this interview Sam still had any kind of support from VCs and so on.
I hope the late 2010s-early 2020s will be remembered as the dot-com era of extremely dumb money...
Because they thought they could make money by finding a bigger fool, or by finding someone who thought they could find an even bigger fool.
$10B "somehow" "gone" is QED that someone did find their marks.
More interesting is how none of these guys are seeing the inside of a jail and doing the jailhouse orgies. I wonder if 'defenestration' will become a meme in crypto world too.
yes you do - because they're at best amoral and know their position and connections means they can make money out of shit like this by ensuring there's a series of bigger fools waiting to buy them out.
:)
I'm just reacting to the idea that you'd need to see the SBF corporations laid out on a diagram to reach the conclusion. When Carrell's character says "they aren't confessing, they're bragging", he's talking about an allusion. The Ponzi schemes here are not allusive. SBF literally bragged about them.
"SBF/Matt Levine said it" does not automatically make it true.
Instead of debating semantics, enlighten us with how/why they are using it incorrectly and what you mean by this being a pump and dump and not a Ponzi. To me it definitely looks like a Ponzi: money from new entrants in the system go to pay off earlier entrants, a pump and dump from what I know would require SBF/FTX pumping up FTT to then dump it all leaving bag holders in the wake of the crash.
Ponzi scheme: Taking later entrants' investments to pay earlier investors on the false pretense that the venture's activity generated the returns.
pump-and-dump: Duping others into thinking an asset has value so that it can be resold above its legit worth.
The original description given clearly fits pump-and-dump better[1], since it's based on making an asset seem valuable:
>>laid the Ponzi scheme straight out: scammers make boxes that pay fake coins when you store your money in them, they put so much money into the boxes that the fake coins seem valuable, then they rug pull everyone and move on to the next one.
For tptacek's part, he could have defended his claim by presenting a substantive understanding of the distinction and justified the label in his own words. Or, somehow indicated this was a point of contention at all. Or done anything whatsoever beyond arguing, in effect, "the perp used the label, therefore it must be accurate". That does not advance the discussion, or indicate a prompt for the kind of contribution in the first half of this comment.
[1] https://news.ycombinator.com/item?id=33562224
https://youtu.be/lC5lsemxaJo
It fits perfectly
https://en.wikipedia.org/wiki/IKEA#Corporate_structure
Seeing how stupid/greedy SBF was, it makes me wonder if people like him are smart enough to truly understand the need for such structure without having experts in place.
This is how you blow the ballon...
Word on the street is that ikea is technically a charity.
(Does the IKEA org chart have the little figures from the assembly instructions, and an Allen key?)
It’s a situation with many interesting parallels in the crypto industry. Not only does history rhyme, but sometimes it really does repeat.
Anyone working in the CPG space would be 50+.
Binance does the same but even more extreme — they don’t even tell where their HQ is actually located.
Money launderers and tax evaders have long used these tricks. Those people don’t normally get VC capital at $34 billion valuations though. The crypto implosion ought to be a massive lesson to the industry.
What are the liabilities and who are they to?
If you don't send any of those coins out, there are no profits for the exchange operator, either. Look at how Coinbase does everything more-or-less by the book, and barely makes money. Trading fees just don't cut it.
Yet, some fly-by-night exchange incorporated in the Bahamas is offering wild signup bonuses and lower fees and yield that would make Scrooge McDuck blush.
it looks like the usual nonsense of "here's some bank account balances", with no explanation of what liabilities they hold, or how much related party loan crime they have on their books.
Binance’s US subsidiary is just as safe as FTX.US was, despite their claims otherwise. It will fall along with the other dominos.
>> This was about FTX International. FTX US, the US based exchange that accepts Americans, was not financially impacted by this shitshow. >https://twitter.com/SBF_FTX/status/1590709195892195329
So, SBF seems likely to have flat-out lied, right up to the last moment. At this point, why would you choose to trust any crypto company that wasn't perfectly transparent in how it holds assets, backs coins, what it's borrowing on, etc?
Do we blame individuals or the technology that enabled them? I don't know. I do think we need to get back to building useful tools that people need.
Don't do this on HN please.
People get all antsy in their pantsy and can't read nuance.
If the guy is dipping into supposedly segregated client accounts to run his prop trading, and lying about it.. why would he not do the same with FTX US money.
https://twitter.com/ApeDurden/status/1590912098871435265
Now how did this place end up managing billions of dollars and SBF the darling of politicians?
The picture is starting to come into focus. SBF used customer funds to become one of the top political donors. He donated $40M and was planning up to $1B. His parents are Stanford Professors who are well connected in the political world.
Caroline, Alameda's CEO, also said "My advice for college is that classes don't matter that much and friends and networking are really important. Probably the most valuable thing you can do in college is find the coolest people you can and spend lots of time hanging out with them". Apparently so.
Her dad is the Department Head of Economics at MIT. Prior to getting appointed to the SEC, Gary Gensler was a Professor for the Practice of Global Economics & Management at MIT.
The CEO of GoldmanSachs met with SBF to help FTX get regulatory approval.
From a congressman yesterday, "Gary Gensler runs to the media while reports to my office allege he was helping SBF and FTX work on legal loopholes to obtain a regulatory monopoly. We're looking into this." https://twitter.com/RepTomEmmer/status/1590717374801809409
Senators are still going forward with an SBF-backed bill https://www.theblock.co/post/185746/senators-moving-forward-...
It looks like Enron or Theranos 2.0. The kids of the elite were being elevated into positions way outside their ability and supported at high levels with no scrutiny. The fallout from this is going to be astronomical.
That's how.
The problem isn't crypto, it's the lack of accountability.
I thought that's what the whole PFOF debate in the US was about? That e.g. Citadel is allegedly using SL and order book information to hunt stops on thin volumes.
Not from the US and I didn't follow it too closely, maybe I got it wrong.
"Prestige" is a determining factor in someones ability get a job running a hedge fund/financial asset management. Generally they need to have gone to the right school, worked at the right bank, then at the right hedge fund. Each should show a good amount of tenure ( > 3-5 years ).
A major asset manager that I won't mention hires PhDs from Harvard as a way to get people to invest in their fund. Behind the scenes, away from all the quant marketing nonsense, is some guy you've never heard of making gut based trades on the market.
It's not just finance, people everywhere are impressed by a prestigious background, and assume if you can drop certain names on your resume you must be great.
Such names will open all sorts of doors for you that are firmly shut against the riffraff.
Of course, conmen have used such patinas of prestige to their advantage since the dawn of time.
Fields like tech are nominally more meritocratic.
This. Someone from Bridgewater mentioned that Dalio's "radical transparency" and all that we-record-everything nonsense is just a marketing bluff. Actual decisions are made behind closed doors by a few people.
A while back I interviewed with one of the top trading firms. It was for a lower level position that I normally wouldn't take but I was excited about the prospect of working with some truly brilliant quants.
Wow was I disappointed. The discussion with the quants quickly relieved that they had absolutely zero interest in their field, and not a particularly deep understanding of the fundamentals of the mathematics they were using. It became clear that their entire course of study was focused on getting in to high paying financial company, and all the things they had to learn on the way there were just boring prereqs.
I've met a lot of really talented and smart applied math people over my career, and this quant team was not in that groups of people.
That said all the engineers I chatted with were great. My takeaway was that these companies do need talented engineers to run these systems but the "brilliant quants" is more or less just, as you say, the illusion of superior competence.
With prop firms, there is little need to schmooze the rich with fancy degrees
The presence of people with fancy degrees might be expected for the more mundane reason that those people do tend to be more competent on average.
For one, he got hired for a prop trading firms - in which these effects are not very large because they have little-to-no interest in clients and managing assets.
It's not that hard to be the darling of politicians in this day of extreme polarization - you just tell them what they want to hear.
SBF made a good safe bet that coming off as "pro-regulation" would be a winning strategy in the current climate. Heck, it was probably a good bet regardless of whether Democrats or Republicans are in power, because even though Republicans are nominally anti-regulation, being against "Silicon Valley billionaires" is basically the one thing that gets bipartisan support these days, so flattering politicians with "we need you to regulate us" was probably a good strategy.
On the street, the cops/court'll beat you with "ignorance of the law is not an excuse".
In the board room, the corporation can do no wrong, here's your settlement, chapter 11 plox.
This is mainstream advice if you're at an Ivy, Stanford, etc. You're learning the same material as the people who go to a state university. The advantage is the proximity to power, the people you rub elbows with who can help your career down the line.
This is the entire premise of elite business schools – nobody is dropping $100k/year for the content that you can get on YouTube for free.
I got my MS CS from Stanford and this is completely false. I did my BS CS at Georgetown, and even between the two there was a huge difference being at Stanford. The course material pushed me way harder, there were more resources (e.g. robots), a much wider selection of electives, and more consistently brilliant peers. I never felt behind at Georgetown; I certainly had those moments at Stanford, even though I did very well there in the end.
> I got my MS CS from Stanford and this is completely false. I did my BS CS at Georgetown, and even between the two there was a huge difference being at Stanford.
Stanford is probably the best-known school in the world for Computer Science. Georgetown (while a great school) is known for its international relations. So I'm not surprised that Stanford had more CS electives, resources, etc.
But the fair comparison here is a school like UC Berkeley, University of Illinois, or [insert flagship state university here]. Is the quality of education really that different vs. Stanford? Or is the Stanford name brand on the resume the differentiator?
Also, a masters program should be harder and more competitive than an undergrad program!
> and more consistently brilliant peers
Exactly. At Stanford, your "consistently more brilliant peers" will be in positions of power down the road. They'll be hiring managers at Google and Apple in <5 years.
You're saying: SBF's coworker's dad's former coworker is now the SEC head and that is the trick?
Getting hired by a firm like Jane St is a pretty strong signal that you are likely capable.
This is what you find with kids from the elite class. They can take on mind blowing risk because they can fall back on their parents when it fails. People from lower socioeconomic levels cannot do that. Our government sets back and let criminal actions go unpunished, letting people truly treat life as a Monopoly game.
"nothing like regular amphetamine use to make you appreciate how dumb a lot of normal, non-medicated human experience is" https://twitter.com/carolinecapital/status/13790363463003054...
SBF should delete twitter mostly to stop publishing increasingly ridiculous "I’m really sorry, again" messages: "Hopefully things can find a way to recover. Hopefully this can bring some amount of transparency, trust, and governance to them. Ultimately hopefully it can be better for customers."
When something bad happens, bitcoiners say "this is good for bitcoin".
Although crypto is marred with scams and is by nature often shady, this isn't about crypto but about 1 single person, the ex-CEO, stealing people's money.
The FTT on its balance sheets as if it was real money is very crypto-stupid though.
https://finance.yahoo.com/news/sam-bankman-fried-secretly-tr...
“The immediate relief of Chapter 11 is appropriate to provide the FTX Group the opportunity to assess its situation and develop a process to maximize recoveries for stakeholders,” [John J] Ray [III] said.
The people who are really hosed are the non secured creditors. Who, again, may or may not be insiders.
That said, in either case, they are very likely to be extremely disappointed in what is recovered. I just have a sneaky suspicion that even the USD6 Billion that everyone hopes remains available, is not actually there.
But time will tell.
Oh and it is all the fault of the Devs
https://twitter.com/SBF_FTX/status/1590774827467812865
If you stick your company name in your twitter handle - does that mean the company owns the twitter account too???
At this point I think there are a lot of people who operate as if they and the company are fundamentally joined / the same thing.
Suddenly in the past two years, it has magically transformed into a national security risk with global consequences.
Which is it? if the former, then they should be able to do what they want, including ban whom they want. If the latter, it needs to be regulated and certain rights ought to be enumerated for its users.
But the law here hasn't changed in any way...
Sam is only 30 so obviously doesn't appreciate just how retro this is... Enron & Crypto...as I live and breathe.
If he was high functioning and reading a daily newspaper, he’d have heard a lot about it.
I don't think brazen criminals should get a different perspective than sneaky ones; perhaps a worse characterization because they either don't recognize what they're doing is wrong, or they simply hold society in contempt.
This is just investing with client funds, which the US learned the hard way must be carefully restricted. The US has the Glass-Steagall Act, and deposit insurance to try to prevent bank runs like this.
https://www.bloomberg.com/news/articles/2022-04-25/sam-bankm...
Me, after watching people sell no-hope dotcoms, dubious real estate, and cryptocurrency: “… unless they thought they could cash out before the other fools wised up”
>This is just investing with client funds...
This is just plain not true.
If he siphoned off even 1% ($160M+)- you can bet he's going to lose it in bankruptcy proceedings.
He will probably have dispersed quite some sums to friends and family, some of that will come back to him in one way or another.
Finally, he will be able to go on the celebrity speaking circuit for quite a while...
Yeah, talking about the power of failure what he learned from it.
Hopefully the US Gov goes after him and forces him to pay it back to creditors/customers, similar to Trevor Milton/Nikola
He openly talked about how the whole thing was a Ponzi scheme.
https://youtu.be/KZYqL79GDXU?t=1277
From Levine’s column yesterday:
> “People on Twitter now are like “he admitted that FTX is a Ponzi!” but of course that’s not true. He conceded a certain validity to my claim that some crypto businesses — not his — are Ponzis. He is just in the business of trading their tokens.
“In fact, I came away from that conversation bullish on FTX and Bankman-Fried. My view was, and is, that if you talk to a crypto exchange operator and he is like “crypto is changing the world, your old-fashioned economics are just FUD, HODL,” then that’s bad. A wild-eyed crypto true believer is not the person to operate an exchange. The person you want operating an exchange is a clear-eyed trader. You want someone whose basic attitude to financial assets is, like, “if someone wants to buy and someone wants to sell, I will put them together and collect a fee.” You want someone whose perspective is driven by markets, not ideology, who cares about risk, not futurism. A certain cynicism about the products he is trading is probably healthy.”
At the very least, it's apparent that SBF sees crypto as being heavily based on speculation that's disconnected from any actual value proposition, but he's choosing to exploit and profit from those systems. And it's now apparent that he also was engaging in speculation with user funds himself via Alameda.
A wild-eyed crypto believer might lose anywhere from a few thousand to a few million of their own money in poorly placed speculation.
A sophisticated market-maker will facilitate the loss of billions (about $10 billion in this case) from numerous people.
Which is more dangerous? A HODL who loses their savings on some speculative crypto purchase, or the next Bernie Madoff?
A wild eyed Luna type can lose a lot of people’s money and is probably more likely to do so than a skeptical trader making deals. The issue with this wasn’t that general heuristic which is still true (imo), it was SBF’s decisions despite that (which were bad and extremely high risk, but different than it being a ponzi).
Pair that with an intelligent enemy looking for ways to destroy you and this is where it ends up.
The difference Levine is pointing out is between the type of person operating the exchange. It is not the comparison between janitor and CEO at a fortune 500 company.
A "true believer" will cause just as much (or per Levine's assertion: more) damage as a "sophesticated crypto cynicist", but one will at least understand financial fundamentals while the other brings none of the learnings from running any kind of investment or banking firm.
The largely unregulated, uninsured, and opaque marketplace of crypto, facilitated by people like SBF, has been the conduit for the true believers.
If somebody says "I know you're a sucker and I'm going to take your money", (as SBF did in Levine interview) they just told you everything you need to know. You can rest assured that their other dealings are dirty, as is now coming to light for SBF.
I'm not sure why "good faith" is being brought into question, and I certainly haven't challenged the good faith of those who disagree with me. So I'm not going to address that aspect of the conversation.
Per the commenting guidelines, we are expected to believe people are commenting in good faith even when they say:
>A wild-eyed crypto believer might lose anywhere from a few thousand to a few million of their own money in poorly placed speculation.
>A sophisticated market-maker will facilitate the loss of billions (about $10 billion in this case) from numerous people.
Which is either a deliberately bad comparison (akin to janitor vs CEO), or completely irrelevant in the context of what SBF was saying / what Levine thought.
A wild-eyed crypto believer would make all the same mistakes as the sophisticated trader and run the exchange into the ground while breaking laws. The sophisticated trader will typically run their business within the legal framework, while taking as much profit as possible.
https://i.redd.it/078p4g7m6cz91.jpg
That's a pretty funny statement. Markets are ideology.
It's the government's job to prove crimes.
FTX CEO has been openly lying about the impact for a long time now, and has mismanaged billions of dollars (of other people's money). Resigning doesn't seem like a reasonable punishment.
Andreessen [of Andreessen Horowitz, investors of 350M in a company that's single asset is currently a landing page] positioned the new company as a long-awaited solution to the nation’s “housing crisis.” ... “community-driven, experience-centric service” — to explain how the new startup would “create a system where renters receive the benefits of owners.”
This sounds completely different than WeWork, which had the simple goal of changing the world, one beer-Friday at a time.
The sad part is the AZ money isn't the dumb money in this deal; that will flow in latter.
I don't know much about this whole thing. It sounds likely there will be investigations, and they may prove "large scale theft" at that time. But right now resigning is the only way for him to "take responsibility".
When everything was going down he tweeted something on the line that everything was fine, he later deleted that but for sure there's an archive somewhere (and I'm sure Elon would be GLAD to provide that data). That's fraud, and I'm sure there's a lot more like that once the DOJ/SEC start looking around.
I like SBF, honestly, I like his personality, I don't believe he's a bad person, I could even believe (with a truckload of salt) that all of this happened without him being fully aware of what was going on. But, real is real, and I'm quite sure he will do jail time.
Only a court can decide that.
I will no longer take part in the company and will quietly fly away on my private jet to my $50 million home where I will contemplate my next venture.
https://ustoday.news/both-the-doj-and-sec-are-investigating-...
is he? sounds like his various corporate frauds have destroyed a lot of companies and led to corporate bankruptcies, but what information is there about how much he scooped out before?
He stood to make a lot more from this working out than what the current situation permits.
The allegation is he moved money between companies to support his terrible “hedge” fund. Where have you seen anything at all about him not having a lot of personal money?
Or put another way, where have you seen anything at all about him having a lot of assets outside of the Alameda and FTX groups?
https://www.thestreet.com/investing/cryptocurrency/crypto-bi... (this covers the details, but isn’t paywalled.)
https://en.wikipedia.org/wiki/Barbara_Fried
https://news.ycombinator.com/item?id=33561610
Oh and it is all the fault of the Devs
https://twitter.com/SBF_FTX/status/1590774827467812865
If you stick your company name in your twitter handle - does that mean the company owns the twitter account too???
The US has Chapter 11 bankruptcy, while Antigua and Barbuda might only have something more closer to the US's Chapter 7.
FTX Trading Ltd is "is incorporated in Antigua and Barbuda, and headquartered in The Bahamas", yet the linked statement clearly says FTX Trading Ltd (plus the FTX US entity, and Alameda, and others) are filing for Chapter 11 under US law in Delaware.
Is there a parent company of FTX Trading Ltd that's based in the US?
Edit: Apparently "Paper Bird Inc" is registered in Delaware, is 100% owned by SBF, and has ~89% ownership of FTX Trading Ltd.
https://qz.com/full-text-ftx-bankruptcy-filing-1849772656
The holding company of the foreign entity is in the US and can thus file for ch11. See who owns FTX Trading Ltd (Antigua) for example: https://d1e00ek4ebabms.cloudfront.net/production/8566b562-d5...
I made the argument a couple days ago that CZ thought he was playing "4D chess" as the kids like to say these days by publicly and loudly dumping FTT, and he ended up burning the whole thing down.
We know what happened. Smart rich kid uses his connections to get loaned $50M and gets wildly rich from arbitrage. I'm not sure why more and more people decided he was worth trusting with even more insane amounts of money, especially when it's just a gang of kids running the company.
Ah yes, the pedophile cannibals are to blame. Look into it.
Edit: Most comments in this chain, including the genesis, "Add some political contribution money laundering into the equation", are now grey.
Edit 2: Aaaaand the genesis comment, as well as the follow up with "corroborating information", are now flagged.
It happens all the time. The VCs know how their portfolio companies operate and still keep supporting them.
Quick reminder that we're on a VC board that has participated in this shell game; this fraud that has stolen money from naive people.
And before I get downvoted to oblivion or moderated by @dang I hope a few people read this comment and realize how much was stolen from you so the sand hill gang can play monopoly ... it was a lot.
Yesterday SBF said FTX US was not impacted by the shitshow:
https://twitter.com/SBF_FTX/status/1590709195892195329
https://twitter.com/SBF_FTX/status/1591089317300293636
2/3 (D) 1/3 (R)
https://www.opensecrets.org/elections-overview/top-organizat...
70 million in one year. Yikes. Seems like the company was full of bad decisions.
Also while it’s kind of a thing to buy influence to the legislative process, buying your way out of justice isn’t really. There’s way too much apparatus outside of electoral politics. FTX wasn’t investigated because what were they going to be investigated for, it’s an unregulated offshore financial outfit with no signs of distress until it went boom, like most “Ponzi schemes”.
According to MarketWatch, he was the second largest donor to the Democrat Party.
Good for him I guess that Dems did well in the election. Though, I would love an independent probe to ensure there's no quid pro quo.
The Republican party has been defunct since 2008. I say this as a republican. Yes, they have local machines in isolated areas, but the party itself is non-existent on a national level, except when they scrape by due people being disaffected by the democrats. The Republicans have not been a true majority party for decades.
You will certainly see certain republicans shouting this, myself included. You will see smaller local groups shout this. But the national party does not really exist
Source: was a quant at some hedge fund in a past life.
https://twitter.com/JasonYanowitz/status/1590800210200256513
https://twitter.com/StackerSatoshi/status/159097223797656780...
https://twitter.com/statelayer/status/1590939767205920769
And then there are these NFT shenanigans:
https://twitter.com/cobie/status/1590974648552148992
https://i.redd.it/078p4g7m6cz91.jpg
The Chapter 11 filing is for the ones in the US, working out what this means for the rest is going to keep a whole lot of lawyers very busy for years.
1) Hi all:
Today, I filed FTX, FTX US, and Alameda for voluntary Chapter 11 proceedings in the US.
https://twitter.com/SBF_FTX/status/1591089317300293636?s=20&...
This doesn't feel normal in any sense.
That's when you know shits getting real.
https://www.reddit.com/r/wallstreetbets/comments/ys4lmo/she_...
gold
Edit: Also funny, was the unrelated Matt Damon TV ads about how "Fortune Favors the Brave." Obviously it comes from Caesar, but it was also used in Charles Dickens's Little Dorrit by a character encouraging what later turned out a Ponzi scheme...
That's not what OP said. OP highlighted the fact that a lot of the crypto space lambasts the traditional banking system as being wholly corrupt, despite a lot of the crypto space itself being equally corrupted in the same ways.
Edit: "People who live in glass houses shouldn't throw stones", basically.
i still can't get over the fact that FTX CEO is taking his customers money to fund his gambling firm.
SBF loaned her company 10 billion to trade without basic risk management for trading.
They’re also super dangerous if you have gigantic positions
Anyways they wouldn’t save you from collateralizing your loans with shitcoins, taking leveraged bets with money that isn’t yours, having super high exposure to UST and/or Luna, exposed to hackable defi products. Harder things that “having a good sense for risk” usually entails thinking about.
The real red flags are claiming she doesn’t use math and that she’s never lost a lot of money on a trade despite doing largely human informed trading for size…
But if you are, there’s no reason to just auto trade a position away. The decision of “what to do when price hits X” is a function of many things instead of price, and you’re better off dynamically deciding.
Consider that you could already implement a stop as a 24/7 trading firm anyways
For the peak crypto years it was almost impossible to lose money AS AN EXCHANGE. These clowns really thought they were on fire, and not just in position that random moves could be winning strategies.
She wasn't running an exchange. You're confusing Alameda, the trading outfit, with FTX, the exchange. She was the CEO of Alameda. She was not the CEO of FTX.
It was really tough to lose money, which we all knew was unsustainable.
They're primarily marketed to unsophisticated retail traders as providing protection that they can't provide-- something equivalent to a free put.
In fact, some time back their firm was sued for IIRC essentially manipulating markets to trigger traders stop loss orders in order to swallow up trades at unreasonable prices.
Tiny traders in the largest of markets can potentially get away with using stop losses and not get burned too badly too often, but none of the cryptocurrency markets really qualify as that.
Guess their entire trading strategy was hurr durr the coins go up. Completely unsurprising they lost their asses when gasp the coins stopped going up.
The comfort with risk part seems worse in hindsight. Obviously somewhat less comfort with risk would have been better.
I happened to be at a hotel earlier this year that was hosting a crypto conference and the attendees looked like the kinds of people a multi-level marketing scheme attracts. Very different from a few years ago.
And you want them to go under. When the scams stop going under is when you have a real problem, because that means the entire industry is in fact a scam.
I am not really convinced of Tether having trouble anymore. I've been hearing it for years. They seem to have gotten lucky and cleaned up their act before collapsing, every time they do an audit or anything the last few years they show full collateral backing their assets in circulation. With regard to binance, I couldn't tell you one way or another, but they've survived more than one cycle so they probably know what they're doing.
All it decimated were hype merchants and their lemmings. Hopefully the same is true here. I think it will be.
This seems like a bigger deal to me because FTX is part of then new wave of crypto companies that were supposed to be legitimising crypto. And even they can't stay afloat. It's just a matter of time before the next crypto giant falls.
So people who are barely holding on to the bottom rungs of the (American) middle class, and who are the traditional targets of multi level marketing (and also religious) hucksters?
That doesn't bode well for the argument that the crypto ecosystem isn't a set of scams, regardless of whatever the merits of the underlying technology has.