I'll be incredibly surprised if all this admission-of-guilt-galore doesn't get him in _real_ trouble, even if he manages to get only a slap on the wrist.
I feel like he is 100% in real trouble. But it’s mostly been admission of being dumb and not of guilt. The full on admission of guilt is why they could easily pick up madoff. They just got to connect the dots before they can tighten the rope.
That this guy is still talking about this stuff in public when any lawyer he has is surely telling him not to... he must think he's invincible? Or he really doens't realize he's done anything wrong? I could believe the second one, because I think it's probably true that this is how everyone does business, and most people get away with it?
I'm not defending him, but I'd reserve judgment until after I see the analysis of what exactly happened.
7 bill sent to Binance and random VC is plausible at least, but it sounds like the money vanished (it doesn't vanish, someone somewhere took out large sums of money).
7 bill sent to crypto is hard to believe, and sounds more like laundering, but the cash reserves should nonetheless have a paper trail.
4 bill will not vanish, or it may have never existed, or he's lying and it was moved to a Cayman acct(s) somewhere.
If it never existed, then FTX was operating more like a bank - dollars only work because they have a paper trail and we can keep printing new ones. Try cashing out your savings, you might be able to. Now try everyone cashing out - there is no money for it.
With a real bank OFC there is a lot of scrutiny and supposedly you have to keep track of assets and liabilities but there is a large degree of fudging it, plus they can always get loans from the unlimited central supply if they have an immediate shortfall...
Which might be what he's looking for i.e. a bailout via printed money, which would allow investors to withdraw funds and OFC send inflation sky high...
> If it never existed, then FTX was operating more like a bank - dollars only work because they have a paper trail and we can keep printing new ones. Try cashing out your savings, you might be able to. Now try everyone cashing out - there is no money for it.
Of course there is money in a bank run on an otherwise solvent bank. The Fed steps in and either lends the money in exchange for its pound of flesh, or takes over and makes depositors whole, up to the FDIC limits.
The fact that the Fed CAN do this, combined with bank regulations such as reserve requirements, is why it doesn’t need to do this very often.
Banks are explicit that they borrow short and lend long. It’s not that the money isn’t there, it’s just a mismatch in liquidity/duration. For FTX, the assets themselves were bad, never mind the liquidity.
Also, if we assume a bank run and you cash out dollar bills then you are technically banking with the Fed which means the Fed can lend that money back to the commercial bank. Deposits aren't needed to run a bank. They are needed to compete with lower interest rates against other banks.
Wire card is a good example how a financial company fails even though there was no reason for it. They could have just collected money and ran their business but for some motivated individuals that isn't enough.
> Which might be what he's looking for i.e. a bailout via printed money, which would allow investors to withdraw funds and OFC send inflation sky high...
They tried to do the equivalent by minting more of their in-house coin "FTT", right? Both after the bankruptcy filing, but I saw one analysis posted on HN suggest they had been doing that on an ongoing basis as part of their operations too, trying to cover shortfalls by simply minting FTT and calling that collateral for loans or what you have.
> But it’s mostly been admission of being dumb and not of guilt.
I think there is a misunderstanding of how his blabbing is hurting his future defences.
It is not about admitting or not admitting to crimes. When you say that he did not admit to being guilty it sounds like you expect him to say “yes I SBF have done wire fraud using interstate communications”. He certainly did not do that. That is not what anyone says when they say he is admitting crimes.
The way criminal law works is that the crimes have elements. To be able to say that you have commited X a prosecutor has to show A and B and (C or D). What he is doing is not admitting X, but providing the As, or Bs or Cs on a silver platter for a prosecutor.
For example maybe for some crime they have to show that when you made a statement you did know that it is false. That is really hard to show. Unless you help them out by going on the record about what did you know and when. (Which many of his statements seems to be doing.) That is one element I have heard about, but there are many different crimes he can be in trouble for and many different elements. Also the interpretation of many of these elements is arcane to say the least. You really need to be an expert on law to be able to tell what the terms means. Which means that it is very easy for him to fall into a trap where he is saying something which to my untrained ears sounds fine, perhaps even exculpatory, but for a lawyer’s ears provides the last element to prove something.
The other way his blabbing is hurting him is that it locks him into a specific story. Years from now, when prosecutors get a case together they will have to share all their evidence with his legal team. Then his legal team would have the option to find the most defensible, legally best narrative for all of it. But they can’t do that if he already locked himself into some narative. Every time he opens his mouth he is removing freedom to maneuver from his future defense team.
The third way he is hurting his case is that if there is anything he says which later turns out to be false, or can be depicted as false, that can be used to paint him as a liar. And that can be used to undermine other things he might say. This might not be a crime in itself, but can be used to convince perhaps a jury to disregard his statements.
His statements can be used against him in a criminal trial, so yes.
Statements by another person generally cannot be used against him unless that person is brought into court, put under oath, and his lawyers get a chance to cross-examine the person.
That is called the hearsay rule. That rule does not apply to statements made by the defendant.
Furthermore, what about everything he said pre-blow-up? If not fraud, surely it must be misleading investors (aka stealing from rich people, which is a big no-no).
What earthly reason would anyone have to stay bought where SBF is concerned? He’s not going to donate again and he’s so radioactive you wouldn’t take the money if he somehow did.
How do you figure, he has has stolen as much as $9 billion there's plenty more to go around. His official on the books donations in just 2022 were $69 million. There's still a path to give money to Ukraine and funnel it back to the US, the missing crypto can be an asset with regard to that.
If it's years before a conviction [1], who knows who will be president. But all presidents have given controversial pardons... some with a very strong quid-pro-quo smell (Clinton and Mark Rich).
The guy is either a conman, or a fool. Either way, he lost a lot of money. He's going to have to face the consequences of his actions, and he's not going to like it.
I'm all for the justice system, but if he's given a slap on the wrist he lost enough of his customer's money I don't think he'd last long... Lesser crypto entrepreneurs who didn't commit fraud have been targeted by PMC groups in westernized nations...
He admitted in an interview that Bahaman entities were allowed to withdraw after the other customer's withdrawals were frozen because of something to effect of him being afraid of being in a country where very angry powerful people are out to get you.
Like Wagner, I spent some time traveling in South Africa and Chile. It's not uncommon for these groups to be hired to "rubber band" funds from individuals who have defrauded members of the royal family in the UAE etc.
Committing fraud at this scale carries significant risk - founders who have embezzled far less have been targeted by less wealthy adversaries whom they've defrauded.
Commenting because genuinely curious - i thought FTX international was the org where people were defrauded but FTX.us was a “separate entity” where customers could be made whole tomorrow.
In my opinion it sounds like it is too difficult to start a proper exchange. After all if countries and their financial regulatory were cooperative only a fraction of funds would have been lost because the Bahamas company would be just a holding company.
It's a negative because no lawyer would agree to such a dumb strategy.
I'm doubtful it's a coherent pre-planned legal strategy though. Playing dumb isn't a legal defense. Considering his obsession with "altruistic" charity, it makes sense he'd take an altruistic approach to the media backlash... Something detached from a purely rational/economic approach that places communicating his own good intentions as the most important metric.
He hasn’t said anything egregious but considering he is fully aware he lost $5B and knows he had a positive public image he would like to maintain, I’d bet he cares as much about how he appears in public as much or more than he cares about not going to jail.
Ego is occams razor
There is no a good legal strategy here by talking like this no matter how you spin it. He just desperately wants to come off as a hapless good guy who got in over his head, even if it makes prosecution easier.
I’m not buying the brilliant conman narrative until I see more evidence he actually profited from this more than some $16M house for his already upper-middle class family.
I think he got high on his own supply (both literally and figuratively). He was being praised and lauded by all of the most powerful people in the world for years. People were throwing billions of dollars at him and telling him he was a genius who could do no wrong. Add in the fact that he is clearly a narcissist and sociopath of the highest order and you get SBF.
ya know, if the FTX group really had no internal controls or documentation that binds the directors to specific behaviors, then an embezzlement charge could really be ruled out, same with other forms of theft, or securities fraud even. in this case, even the assets being traded precluded them from needing compliance officers which is one of those areas where "need regulation" would fit well.
It's really more like a phishing attack to get people to voluntarily wire money to the Alameda bank account presented on the website's interface, and they did.
not high KYC/AML requirements, just odd interpretations of what they need to do, but this is also unrelated to what requirements are levied after accepting the money
Under US banking laws, since, unlike for ICOs, US regulators allowed FTX to both do business with US customers, and also to lend money ? (Also to buy a small US bank.)
Many people have been confused about why he's talking so much publicly, which is clearly self-destructive if he plans to mount a legal defense.
One logical explanation is that this is a prelude to him committing suicide. His public interviews and statements may be his way of leaving behind some sort of explanation and justification.
I would point to a general lowering of moral standards and the bad example set by Elon Musk's communications about Twitter. It's not really a fair comparison (Musk seems unlikely to face criminal charges) but I think the psychology may be similar.
SBF may be kidding himself about how gullible crypto investors are. Maybe he thinks if he could get people to believe in FTX tokens, FTX could be solvent again.
He seems to have pathologically high risk tolerance perhaps enhanced by some of the medication he uses. So he might think he is smart enough to get away before any law enforcement agency takes action against him, by relocating out of their reach.
"Use" in this case means theft. It can't be repeated enough, they stole customer funds, and did something with them their self not as an agent for the customer (hesitate to say invested). At best this is like your stock broker cleaning out your account and going to Vegas (and claiming they new how to double "their" stake, and were going to give you 10% returns back).
The whole SBF "effective altruism" is just a variation on solipsism, the belief not being the only one to exist but the only moral actor to exist. That being itself an incredibly selfish or non-altruistic position.
"Stole" from people who wanted in on an obvious "get rich quick" scheme. I've got zero sympathy for anybody who lost their life savings on crypto. Everybody got what they deserved in this story.
When the victims are greedily persuing impossible gains, it’s hard to consider them truly innocent in the endeavor.
It’s like a con artist taking advantage of folks by convincing them to do a get-rich-quick scheme. It’s hard to not consider everyone as shitty in the scenario.
For years the news (and charlatans) have been bleating about how crypto has gone up and up. Crypto billionaires are a thing. It is not hard to imagine unsophisticated investors throwing money at any vehicle they can to try and not miss out on the opportunity.
That just reinforces my point, since everything you’re describing is just ‘get-rich-quick’.
Very few people thought they were legitimately doing something that created actual value, just getting on the train to getting rich without having to do anything.
Altruism being effective seems like a good thing in the abstract, much like being anti-fascist.
If you have a bone to pick with the "effective altruism" movement, it would be better to critique what they actually have done than make philosophical or mind-reading declarations. Many people on HN don't know any more about it than antifa.
I have a bone to pick with the idea that we should break things and then fix the damage we caused in the process by doing altruism.
Even if SBF could have gotten away with it, now I am skeptical that his altruism would have done more positive things than if he had never earned the money to begin with.
> If you have a bone to pick with the "effective altruism" movement, it would be better to critique what they actually have done
It's in the comment above:
> they stole customer funds
SBF isn't some random crook who happens to be vaguely associated with Effective Altruism; he's a relatively central figure to the movement. Currently, one of the most significant fruits of EA is massive fraud.
"SBF isn't some random crook who happens to be vaguely associated with Effective Altruism; he's a relatively central figure to the movement."
If you say so, why should I doubt it? Perhaps everyone associated with the movement is a monster. Let's assume that is the case.
That doesn't defend the pseudo-philosophical/psychological pronouncements on what the essence of the idea is.
With or without your addition it looks to me like an equivocal attack on being effective in doing good, rather than on "Effective Altruism" as a movement.
Psychobabble is not aimed at people who are deeply familiar with the history and the nature of the movement, but at people like me who know nothing much about it.
It's schematically the same as a lot of rhetoric that see-saws on a foundation of equivocation but careless people fall off.
If someone is going to traffic in this nasty, illogical rhetoric, I object to them sliding by doing it in a completely careless and sloppy way.
He is being stage-managed by his father, but there is no amount of legal coaching that can get him out of the mess that he's in. I'm still trying to figure out the best case scenario they're trying to get to by the play young and dumb strategy.
You mean Caroline Ellison? She was just recently spotted in NYC, and it's only speculation what she's been up to. But yes, she hasn't been speaking to the press, though I'm not sure what the point is of using her as an example if that's all you're bringing her up for.
Uh, the only thing he should be doing is keeping his mouth shut, period. This isn't 4D chess - the fact that he's out here doing interviews to me says, "wow, this person is totally fucking incompetent and incapable of soliciting, or accepting, the most basic legal advice".
He's repeatedly said things that are plainly not true. I'm not sure if they're deliberate lies, or if there is an element of self delusion.
For example, he keeps repeating that customers could be made whole if the $4B of new investment comes through.
Newsflash buddy: that ain't happening, ever. Nobody in their right mind or... any... mind would invest in FTX, ever. It's a worthless wreck being picked apart for scrap.
But he keeps repeating it like there's a 50:50 chance of it happening and he just needs to "tip things" towards it being more likely.
The other big lie he keeps repeating is that mark-to-market value of the shitcoins FTX had on their books. They're worse than junk bonds, with some worth maybe one cent on the dollar, if that. But he keeps repeating that if it wasn't for the freeze on FTX's trading, customers could be refunded their crypto if those "assets" could be just sold off.
> Too late I think. If you had joined FTX as an employee you would have received direct advice on what to smoke. :)
If I'm not mistaken, their drug of choice was trans-dermal patches of Rx amphetamines.
Just keep this in mind when we keep hearing about how ideal trajetory is to go to an Ivy League in order to be qualified for Vc money from the majors: Sequoia, Blakrock et al.
I still cannot believe how easily they are getting off on such a blatant lack of due diligence in all of this; but I guess when he played the game and he knew who to pay off this is just the name of the game.
I think they mean from social reprisal rather than a legal one. If they invest in risky projects that turn out to be frauds (and sometimes it feels like everything Softbank is involved with is a fraud - WireCard, Greensill, WeWork, and now this), they probably aren't breaking the law (at least, we'd need a lot more evidence to conclude this is deliberate rather than reckless), but they enable a higher rate of fraud in society. Which sucks for those of us living in it, which is to say, everyone.
I could see the argument for people saying, hey, gigantic VC firms, get your shit together, or we'll create a protest movement to shame you into it. Not because they're breaking the law, but because they're making messes which other people have to clean up.
That is typically called ‘reputational damage’, with the consequences being investors not giving them money to invest because they think they would lose it in another scam later.
Which they are going to be suffering from (somewhat).
Unless someone is picketing the line of investors lining up to give them money (how?), who/what is even going to be protesting?
Not to sound crass, but each other... and I mean that in every sense of the word, they felt they were the smartest people on Earth and spouting the EA narrative of solving the World's problems while simultaneously using their Ivy League connections and paying off who they had to keep paying themselves and living in some hedonistic debauchery in he Bahamas as they lived in some poly-amorous situation.
> They are losing their money. Is investing in a barely veiled scam a crime?
Their is about a billion of what were likely customer deposits missing, and no one knows who took it; the Bahama government stepped in and took what was left after the fact and started the bankruptcy. As for investing in a scam, well, they were funneling customer funds into Alameda so that alone is a breach of basic fiduciary trust in finance, so yes... it is a crime.
The question is what will come from this, because the argument is that regulation is required when FTX and Alameda are both regulated and licensed proving the reality of a multi-tiered legal system that includes access to VC money, which as entrepreneurs we've been told is a meritocracy based allocation that is accessible to anyone with 'a better mouse trap' when it's clear that it isn't and never has been.
I'm not sure we can get clear collusion charges for these VCs as of yet, but it begs the question of how blatant these connections and funding gets made made for the 'right' candidate with almost no scrutiny for those with political connections which in turn could curry favor at a later time.
You seem to be conflating investors with owner/operators?
We’ll see what they knew and when, and if the VC firms knew of the specifics of the mismanagement of customer funds, then they’ll have some culpability.
Otherwise, aren’t they another victim (albeit one that it’s particularly embarrassing that fell for it!) not a co-conspirator?
The operators of FYX took billions in deposits and sent them secretly and illegally to a trading firm run by SBF’s ex-girlfriend or however they count their polyamorous lovers. Oh I seem to recall it’s something like paramour. And then sort of lost track of it all. Lol whoops. I’m pretty sure that should land the lot of them in jail. They’re not in jail yet so maybe they’re getting away with it so far.
Newsflash buddy: that ain't happening, ever. Nobody in their right mind or... any... mind would invest in FTX, ever. It's a worthless wreck being picked apart for scrap.
I would not be so sure. You'd be surprised how people will given bad or fallen companies or individuals second chances, especially if enticed with discounts or rebates. FTX's brand could be bought out, retaining its users and then offer a generous incentive to sign up, like $100 in free crypto or so. Some may stay, and new people join.
You're talking about retail customers (dumb money) being lured back in. But the comment above is about getting billionaires (smart money) to sign up and recapitalise FTX. I don't see the latter happening...
It's such a dumb take. The US is already funneling billions into Ukraine, why would they need a convoluted way to secretly send a few hundred million more?
yeah, this is the part i keep thinking but haven’t seen anybody else saying.
the problem isn’t really that “he just needs to raise more money” to make the existing customers whole. it’s that he thinks he can raise more money from investors, and then give it to defrauded customers. what exactly would the “investors” get in this scenario?! A Ponzi ticket? ownership in FTX?
he still owes the money after that! it’s like he can’t think more than one step at a time or something. could be the root cause of his issues, i guess
Is this the reductio ad absurdum of VC culture, whereby founders stop even considering that overall profit is (eventually) an end goal, and that VCs don’t pick from an endless money tree? In the case of FTX, some reports seem to suggest that VCs themselves have lost sight of this
I'm not sure if customers of FTX should count as investors. They are creditors and should have a senior claim on whatever remains. FTX is just your garden variety scam, not a Ponzi.
This is how people addicted to gambling think. Their strategy would have worked if they just got one more round of blackjack etc. This is not the type of person I would want running a financial org with custodial/FBO funds.
On the other hand what exactly makes the "shitcoins" less real than bitcoin?
How could someone who built FTX make a principled distinction?
>with some worth maybe one cent on the dollar, if that
But if they aren't worth zero, then why can't they be worth any other number?
I mean, I can see the magic is gone, but I am not quite on board with calling someone an idiot for refusing to accept that the magic is gone. It's not like we have an objective theory for how it develops and vanishes.
I read a funny thing about how someone else who was basically speculating on any available "shitcoins" convinced themselves they were doing an arbitrage because they got coins at a discount (but locked up for a while).
That is kind of the thing about these liquid "volcoins" (vitalik buterin terminology). If you think cryptocurrency stores value, then who is to say that you will be the first to sell them and "unstore" that value? Couldn't someone just front run you? Exactly. The moment FTX's crypto holdings were known people did exactly that, leaving FTX with worthless cryptocurrencies.
I'm as surprised as many of you that SBF continues to talk to everyone and "admit" all sorts of things. But I think he's just doubling down on the strategy that got him this far! Charm and weaponized stupidity got him his billions, why can't charm and weaponized stupidity help get him out of this mess?
If that were the case, the powerful people wouldn't appreciate him constantly talking about it and effectively throwing fuel on the fire? I think it's something else.
It makes the powerful people he colluded with, his parents and their network, and powerful politicos like Waters, appear less culpable.
He is making sure that he doesn’t appear smart enough to have the capacity to collude though clearly if you follow the money trail that’s exactly what happened. He is making himself to be the scapegoat by playing the fool.
Just like Bernie Made-off, he isn’t an island of culpability as is being conveniently portrayed. He was surrounded by various people who can be documented to have benefitted in the millions of dollars and will magically, by slight of hand, walk away from the whole thing scot free.
He is the opposite of stupid. He’s playing the fool to help the politically powerful patrons he served. That’s effective “altruism” for sure.
Interesting story: turns out there was once a reality TV star who was such an obvious idiot nobody took it seriously when he decided to run for president...
If people only understood how much of a mirror this is to the way normal banks work it would blow their minds. The main difference being that shifts in dollar value while the bank is giving others your money are miniscule so even super large investors pulling out doesn't tank the bank, and if it does, they quietly go with hat in hand to the regional fed.
I think FTX was a known issue and was "setup" for lack of better terminology as the Lehman Brothers scapegoat that will be used to justify regulation against crypto, and if they can, towards CBDCs.
“History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and its issuance.” -James Madison
"The real truth of the matter is,as you and I know, that a financial
element in the large centers has owned the government ever since
the days of Andrew Jackson…" -Franklin D. Roosevelt
(in a letter to Colonel House, dated November 21, 1933)
Banks borrow short and lend long, and that’s both extremely useful and prone to catastrophic failure. So we have insurance for when things go wrong and regulation to ensure that unscrupulous banks don’t abuse the insurance by taking on too much risk.
So saying FTX is like a bank is sort of true, but only implies that it needed the same regulation banks need.
Oh and also there’s the part where they were lying about treating customers’ money the way honest pre-FDIC banks did, and instead appear to have stolen it.
That's true, and as one of the others said they did claim a 1-1 asset backing which was obviously fraudulent, I was just pointing how similar the legacy system is.
I get a feeling that the twitter mob/vigilante journalism unleashed upon the FTX meltdown story may not entirely be accurate. Obviously something bad has happened financially, and people and emotional and angry. But we have to give our courts and the law system a chance. I don't want vigilante mobs condemning people to jail and death. We are literally hearing only one side of the story - maybe there is a 1% chance that the books were not cooked, that the rapid crypto crash combined with bad accounting practices (not fraud) did actually lead to losing billions of dollars. The very fact that SBF/caroline haven't been arrested leads me to think that the legal authorities see facts which we cannot see. There is an echo chamber forming that is
- republican (people linking this meltdown to deep state conspiracy theories)
- sexist (comments about caroline)
- anti-semitic (comments about religion)
and in the past, these mobs have been wrong in many cases. People are repeating theories as if they are facts, and that makes me uneasy.
maybe there is a 1% chance that the books were not cooked, that the rapid crypto crash combined with bad accounting practices (not fraud) did actually lead to losing billions of dollars
Even that scenario is probably criminal negligence.
> The very fact that SBF/caroline haven't been arrested leads me to think that the legal authorities see facts which we cannot see.
> I don't want vigilante mobs condemning people to jail...
you're making the mistake that the mobs are making when they scream and howl about how he hasn't already been arrested.
maybe the feds aren't going to do a damn thing, but the fact that they haven't done anything within a few weeks means _nothing_.
their standard procedure, if they wanted this guy (and his co-conspirators), would be to keep watching and waiting while they keep digging themselves a deeper hole. the folks brought in to run the bankruptcy are digging stuff up, and SBF and his co-conspirators are probably chatting away with each other over lines that could be tapped.
they've got a big complicated mess to untangle, and they don't want to bring somebody in just to have the defendant invoke speedy when they know they've got months of work ahead of them to build their case.
> We are literally hearing only one side of the story
Which side of the story do you think is missing? SBF has been on a huge media tour.
> maybe there is a 1% chance that the books were not cooked, that the rapid crypto crash combined with bad accounting practices (not fraud) did actually lead to losing billions of dollars.
How do you factor in the alleged backdoor coded into FTX or the fact they hired someone who had previously helped cover up criminal activity as a regulatory/compliance officer?
The guy ~destroyed~ stole billions of dollars worth of other people's money. Yet, he is freely hanging out on twitter and podcasts. When people interview him they ask questions about him politely and give him complete benefit of the doubt.
He has his complete freedom and everyone is just speculating that he'll be arrested and judged.
What else do you want? People not to even be angry?
>I get a feeling that the twitter mob/vigilante journalism unleashed upon the FTX meltdown story may not entirely be accurate.
SBF himself has openly admitted to multiple crimes, including fraud. Everyone should be against lynch mobs and jumping to conclusions but that is not the case here. SBF has done multiple public interviews and admitted to many of these crimes openly, even if he hasn't characterized them as crimes.
> Crazy theory - Big Bank is behind it. Maybe they employed SBF, maybe they actually infiltrated and exploited a badly run company.
It's a sure way to force regulation onto an Industry that so far has been in an ambiguous and nebulous realm, if the goal was to do it with a major yield farming operation that ran a ponzi then we might as well dismantle Social Security and the FDIC because both are insolvent and run on equally shaky model. Not to mention rational reserve banks that have violated all of the Basel requirements since 2008.
Personally speaking I have no sympathy for FTX users at all: this was a regulated and licensed operation and any argument that suggests more regulations are required defy the logic behind why these were in place to begin with.
Most people would be advised to say nothing in this situation.
Instead, he’s launching an aggressive PR tour to rebrand himself from a genius wunderkind to a hapless fool who made some innocent mistakes. It’s a risky strategy, but he has two lawyer parents who are almost definitely helping him thread this needle, legally speaking, plus who knows who else through their connections.
Just go interview a treasury manager at FTX. They definitely knew who were the signers on bank accounts and who had control of funds. There is zero possibility that these "backdoors" were installed without executive sign off at FTX and corporate legal providing some kind of certification or board resolution (which SBF would be involved in). SBF is a compulsive liar.
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[ 2.9 ms ] story [ 198 ms ] threadTo bypass the Paywall: https://12ft.io/https://www.ft.com/content/a1df1d73-9932-4d1...
7 bill sent to Binance and random VC is plausible at least, but it sounds like the money vanished (it doesn't vanish, someone somewhere took out large sums of money).
7 bill sent to crypto is hard to believe, and sounds more like laundering, but the cash reserves should nonetheless have a paper trail.
4 bill will not vanish, or it may have never existed, or he's lying and it was moved to a Cayman acct(s) somewhere.
If it never existed, then FTX was operating more like a bank - dollars only work because they have a paper trail and we can keep printing new ones. Try cashing out your savings, you might be able to. Now try everyone cashing out - there is no money for it.
With a real bank OFC there is a lot of scrutiny and supposedly you have to keep track of assets and liabilities but there is a large degree of fudging it, plus they can always get loans from the unlimited central supply if they have an immediate shortfall...
Which might be what he's looking for i.e. a bailout via printed money, which would allow investors to withdraw funds and OFC send inflation sky high...
Of course there is money in a bank run on an otherwise solvent bank. The Fed steps in and either lends the money in exchange for its pound of flesh, or takes over and makes depositors whole, up to the FDIC limits.
The fact that the Fed CAN do this, combined with bank regulations such as reserve requirements, is why it doesn’t need to do this very often.
Banks are explicit that they borrow short and lend long. It’s not that the money isn’t there, it’s just a mismatch in liquidity/duration. For FTX, the assets themselves were bad, never mind the liquidity.
They tried to do the equivalent by minting more of their in-house coin "FTT", right? Both after the bankruptcy filing, but I saw one analysis posted on HN suggest they had been doing that on an ongoing basis as part of their operations too, trying to cover shortfalls by simply minting FTT and calling that collateral for loans or what you have.
It just... didn't work.
I think there is a misunderstanding of how his blabbing is hurting his future defences.
It is not about admitting or not admitting to crimes. When you say that he did not admit to being guilty it sounds like you expect him to say “yes I SBF have done wire fraud using interstate communications”. He certainly did not do that. That is not what anyone says when they say he is admitting crimes.
The way criminal law works is that the crimes have elements. To be able to say that you have commited X a prosecutor has to show A and B and (C or D). What he is doing is not admitting X, but providing the As, or Bs or Cs on a silver platter for a prosecutor.
For example maybe for some crime they have to show that when you made a statement you did know that it is false. That is really hard to show. Unless you help them out by going on the record about what did you know and when. (Which many of his statements seems to be doing.) That is one element I have heard about, but there are many different crimes he can be in trouble for and many different elements. Also the interpretation of many of these elements is arcane to say the least. You really need to be an expert on law to be able to tell what the terms means. Which means that it is very easy for him to fall into a trap where he is saying something which to my untrained ears sounds fine, perhaps even exculpatory, but for a lawyer’s ears provides the last element to prove something.
The other way his blabbing is hurting him is that it locks him into a specific story. Years from now, when prosecutors get a case together they will have to share all their evidence with his legal team. Then his legal team would have the option to find the most defensible, legally best narrative for all of it. But they can’t do that if he already locked himself into some narative. Every time he opens his mouth he is removing freedom to maneuver from his future defense team.
The third way he is hurting his case is that if there is anything he says which later turns out to be false, or can be depicted as false, that can be used to paint him as a liar. And that can be used to undermine other things he might say. This might not be a crime in itself, but can be used to convince perhaps a jury to disregard his statements.
IANAL but since it's not under oath does it really matter what he's saying?
Statements by another person generally cannot be used against him unless that person is brought into court, put under oath, and his lawyers get a chance to cross-examine the person.
That is called the hearsay rule. That rule does not apply to statements made by the defendant.
[1] https://nymag.com/intelligencer/2022/12/why-hasnt-sam-bankma...
Committing fraud at this scale carries significant risk - founders who have embezzled far less have been targeted by less wealthy adversaries whom they've defrauded.
They also received a 16 million dollar home from FTX.
The banks will shortly have a 16M home*
If he acquired representation it would make him appear to:
1) be aware that he did something wrong
2) make his idiotic statements unreliable going forward as a lawyer would filter his statements
3) give the prosecution enough to work with to break his idiot defense.
This is all part of his plan to evade accountability and prison time.
[1] https://en.m.wikipedia.org/wiki/Idiot_defense
I'm doubtful it's a coherent pre-planned legal strategy though. Playing dumb isn't a legal defense. Considering his obsession with "altruistic" charity, it makes sense he'd take an altruistic approach to the media backlash... Something detached from a purely rational/economic approach that places communicating his own good intentions as the most important metric.
Ego is occams razor
There is no a good legal strategy here by talking like this no matter how you spin it. He just desperately wants to come off as a hapless good guy who got in over his head, even if it makes prosecution easier.
I’m not buying the brilliant conman narrative until I see more evidence he actually profited from this more than some $16M house for his already upper-middle class family.
I do like the idea he just thinks he can good-guy himself out of it.
Maybe that's what got him money in the first place? A disarming pseduo-honesty.
It's really more like a phishing attack to get people to voluntarily wire money to the Alameda bank account presented on the website's interface, and they did.
Why on earth would such an exchange be precluded from having Compliance Officers?
That does not pass even a basic sniff test. It does not make any sense.
I don't think they get regular audits like normal banks...correct me if you know different.
Under Bahamian law?
One logical explanation is that this is a prelude to him committing suicide. His public interviews and statements may be his way of leaving behind some sort of explanation and justification.
SBF may be kidding himself about how gullible crypto investors are. Maybe he thinks if he could get people to believe in FTX tokens, FTX could be solvent again.
The whole SBF "effective altruism" is just a variation on solipsism, the belief not being the only one to exist but the only moral actor to exist. That being itself an incredibly selfish or non-altruistic position.
It’s like a con artist taking advantage of folks by convincing them to do a get-rich-quick scheme. It’s hard to not consider everyone as shitty in the scenario.
Very few people thought they were legitimately doing something that created actual value, just getting on the train to getting rich without having to do anything.
If you have a bone to pick with the "effective altruism" movement, it would be better to critique what they actually have done than make philosophical or mind-reading declarations. Many people on HN don't know any more about it than antifa.
Even if SBF could have gotten away with it, now I am skeptical that his altruism would have done more positive things than if he had never earned the money to begin with.
I first heard of https://en.wikipedia.org/wiki/Motte-and-bailey_fallacy on HN, by the way.
It's in the comment above:
> they stole customer funds
SBF isn't some random crook who happens to be vaguely associated with Effective Altruism; he's a relatively central figure to the movement. Currently, one of the most significant fruits of EA is massive fraud.
Your comments here, as well thought out as they may be, are not part of "the comment above".
"they stole customer funds" = FTX stole customer funds.
"SBF isn't some random crook who happens to be vaguely associated with Effective Altruism; he's a relatively central figure to the movement."
If you say so, why should I doubt it? Perhaps everyone associated with the movement is a monster. Let's assume that is the case.
That doesn't defend the pseudo-philosophical/psychological pronouncements on what the essence of the idea is.
With or without your addition it looks to me like an equivocal attack on being effective in doing good, rather than on "Effective Altruism" as a movement.
Psychobabble is not aimed at people who are deeply familiar with the history and the nature of the movement, but at people like me who know nothing much about it.
It's schematically the same as a lot of rhetoric that see-saws on a foundation of equivocation but careless people fall off.
If someone is going to traffic in this nasty, illogical rhetoric, I object to them sliding by doing it in a completely careless and sloppy way.
I'm surprised anyone is fooled by the fact he just happens to remember only the facts that point to the least criminal explanation.
What's the chance of that?
He's either coming clean about how he's not a smart as they said he was, or he's still playing the game. It's another double down.
Look at how the CEO of Alameda is handling this whole thing, for example.
For example, he keeps repeating that customers could be made whole if the $4B of new investment comes through.
Newsflash buddy: that ain't happening, ever. Nobody in their right mind or... any... mind would invest in FTX, ever. It's a worthless wreck being picked apart for scrap.
But he keeps repeating it like there's a 50:50 chance of it happening and he just needs to "tip things" towards it being more likely.
The other big lie he keeps repeating is that mark-to-market value of the shitcoins FTX had on their books. They're worse than junk bonds, with some worth maybe one cent on the dollar, if that. But he keeps repeating that if it wasn't for the freeze on FTX's trading, customers could be refunded their crypto if those "assets" could be just sold off.
I want to know what this kid is smoking.
Too late I think. If you had joined FTX as an employee you would have received direct advice on what to smoke. :)
If I'm not mistaken, their drug of choice was trans-dermal patches of Rx amphetamines.
Just keep this in mind when we keep hearing about how ideal trajetory is to go to an Ivy League in order to be qualified for Vc money from the majors: Sequoia, Blakrock et al.
I still cannot believe how easily they are getting off on such a blatant lack of due diligence in all of this; but I guess when he played the game and he knew who to pay off this is just the name of the game.
I could see the argument for people saying, hey, gigantic VC firms, get your shit together, or we'll create a protest movement to shame you into it. Not because they're breaking the law, but because they're making messes which other people have to clean up.
Which they are going to be suffering from (somewhat).
Unless someone is picketing the line of investors lining up to give them money (how?), who/what is even going to be protesting?
Not to sound crass, but each other... and I mean that in every sense of the word, they felt they were the smartest people on Earth and spouting the EA narrative of solving the World's problems while simultaneously using their Ivy League connections and paying off who they had to keep paying themselves and living in some hedonistic debauchery in he Bahamas as they lived in some poly-amorous situation.
> They are losing their money. Is investing in a barely veiled scam a crime?
Their is about a billion of what were likely customer deposits missing, and no one knows who took it; the Bahama government stepped in and took what was left after the fact and started the bankruptcy. As for investing in a scam, well, they were funneling customer funds into Alameda so that alone is a breach of basic fiduciary trust in finance, so yes... it is a crime.
The question is what will come from this, because the argument is that regulation is required when FTX and Alameda are both regulated and licensed proving the reality of a multi-tiered legal system that includes access to VC money, which as entrepreneurs we've been told is a meritocracy based allocation that is accessible to anyone with 'a better mouse trap' when it's clear that it isn't and never has been.
I'm not sure we can get clear collusion charges for these VCs as of yet, but it begs the question of how blatant these connections and funding gets made made for the 'right' candidate with almost no scrutiny for those with political connections which in turn could curry favor at a later time.
We’ll see what they knew and when, and if the VC firms knew of the specifics of the mismanagement of customer funds, then they’ll have some culpability.
Otherwise, aren’t they another victim (albeit one that it’s particularly embarrassing that fell for it!) not a co-conspirator?
I would not be so sure. You'd be surprised how people will given bad or fallen companies or individuals second chances, especially if enticed with discounts or rebates. FTX's brand could be bought out, retaining its users and then offer a generous incentive to sign up, like $100 in free crypto or so. Some may stay, and new people join.
It's not hidden. Everything is verifiable except the actual money trail, but the components are there.
US gives billions to Ukraine.
Ukraine uses FTX to hold all their "cryptocurrency donations"
Crypto stored at FTX disappears, seemingly to SBF personal accounts.
SBF donates $69 million on the record to Dems for 2022 midterms, plus loads more to foundations and initiatives.
the problem isn’t really that “he just needs to raise more money” to make the existing customers whole. it’s that he thinks he can raise more money from investors, and then give it to defrauded customers. what exactly would the “investors” get in this scenario?! A Ponzi ticket? ownership in FTX?
he still owes the money after that! it’s like he can’t think more than one step at a time or something. could be the root cause of his issues, i guess
"Just wait, I just need another few good months and you'll all have your money back; honest, it's not a Ponzi scheme, I double pinky-swear!"
How could someone who built FTX make a principled distinction?
>with some worth maybe one cent on the dollar, if that
But if they aren't worth zero, then why can't they be worth any other number?
I mean, I can see the magic is gone, but I am not quite on board with calling someone an idiot for refusing to accept that the magic is gone. It's not like we have an objective theory for how it develops and vanishes.
I read a funny thing about how someone else who was basically speculating on any available "shitcoins" convinced themselves they were doing an arbitrage because they got coins at a discount (but locked up for a while).
https://astralcodexten.substack.com/p/the-psychopharmacology...
Unless of course you know in advance that important and powerful people have your back and will ensure that nothing bad will ever happen to you.
It's not impossible, it's literally Rupert Murdoch's business model.
The jury will need to decide if was incompetent or evil, and in that case, you definitely want them thinking you’re incompetent.
He is making sure that he doesn’t appear smart enough to have the capacity to collude though clearly if you follow the money trail that’s exactly what happened. He is making himself to be the scapegoat by playing the fool.
Just like Bernie Made-off, he isn’t an island of culpability as is being conveniently portrayed. He was surrounded by various people who can be documented to have benefitted in the millions of dollars and will magically, by slight of hand, walk away from the whole thing scot free.
He is the opposite of stupid. He’s playing the fool to help the politically powerful patrons he served. That’s effective “altruism” for sure.
I think FTX was a known issue and was "setup" for lack of better terminology as the Lehman Brothers scapegoat that will be used to justify regulation against crypto, and if they can, towards CBDCs.
“History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and its issuance.” -James Madison
"The real truth of the matter is,as you and I know, that a financial element in the large centers has owned the government ever since the days of Andrew Jackson…" -Franklin D. Roosevelt (in a letter to Colonel House, dated November 21, 1933)
So saying FTX is like a bank is sort of true, but only implies that it needed the same regulation banks need.
Oh and also there’s the part where they were lying about treating customers’ money the way honest pre-FDIC banks did, and instead appear to have stolen it.
- republican (people linking this meltdown to deep state conspiracy theories)
- sexist (comments about caroline)
- anti-semitic (comments about religion)
and in the past, these mobs have been wrong in many cases. People are repeating theories as if they are facts, and that makes me uneasy.
Even that scenario is probably criminal negligence.
> I don't want vigilante mobs condemning people to jail...
you're making the mistake that the mobs are making when they scream and howl about how he hasn't already been arrested.
maybe the feds aren't going to do a damn thing, but the fact that they haven't done anything within a few weeks means _nothing_.
their standard procedure, if they wanted this guy (and his co-conspirators), would be to keep watching and waiting while they keep digging themselves a deeper hole. the folks brought in to run the bankruptcy are digging stuff up, and SBF and his co-conspirators are probably chatting away with each other over lines that could be tapped.
they've got a big complicated mess to untangle, and they don't want to bring somebody in just to have the defendant invoke speedy when they know they've got months of work ahead of them to build their case.
Which side of the story do you think is missing? SBF has been on a huge media tour.
> maybe there is a 1% chance that the books were not cooked, that the rapid crypto crash combined with bad accounting practices (not fraud) did actually lead to losing billions of dollars.
How do you factor in the alleged backdoor coded into FTX or the fact they hired someone who had previously helped cover up criminal activity as a regulatory/compliance officer?
https://www.nbcnews.com/news/ftxs-regulatory-chief-4-job-tit...
https://www.pokernews.com/news/2013/05/audio-tapes-expose-ul...
The guy ~destroyed~ stole billions of dollars worth of other people's money. Yet, he is freely hanging out on twitter and podcasts. When people interview him they ask questions about him politely and give him complete benefit of the doubt.
He has his complete freedom and everyone is just speculating that he'll be arrested and judged.
What else do you want? People not to even be angry?
SBF himself has openly admitted to multiple crimes, including fraud. Everyone should be against lynch mobs and jumping to conclusions but that is not the case here. SBF has done multiple public interviews and admitted to many of these crimes openly, even if he hasn't characterized them as crimes.
No proof, just an idea.
It's a sure way to force regulation onto an Industry that so far has been in an ambiguous and nebulous realm, if the goal was to do it with a major yield farming operation that ran a ponzi then we might as well dismantle Social Security and the FDIC because both are insolvent and run on equally shaky model. Not to mention rational reserve banks that have violated all of the Basel requirements since 2008.
Personally speaking I have no sympathy for FTX users at all: this was a regulated and licensed operation and any argument that suggests more regulations are required defy the logic behind why these were in place to begin with.
https://twitter.com/compound248/status/1598446659188707328
Instead, he’s launching an aggressive PR tour to rebrand himself from a genius wunderkind to a hapless fool who made some innocent mistakes. It’s a risky strategy, but he has two lawyer parents who are almost definitely helping him thread this needle, legally speaking, plus who knows who else through their connections.