No, it says the US is likely to request extradition - but has not yet. SBF was scheduled to appear remotely (Zoom or similar) before congress tomorrow.
It also says the US has filed criminal charges, which is the first I'm hearing of this.
As an aside - anyone else think it makes congress appear weak to still be allowing people to remotely testify? They supposedly are the most powerful and important legislative body in the land, perhaps the world - yet they can't compel people to show up in person and treat the event with the deference it's supposed to deserve?
Specifically they said that they arrested him because the US notified them they were pressing charges and likely to request extradition. I imagine that the 'likely to request extradition' is specific phrasing related to how the extradition treaty with the US is worded as I don't think anyone expects the request to not be made.
Congress is not the current administration. I have no idea where this comment came from...
Congress is in session - meeting in person. Why should people be allowed to remotely testify at this point? It's congress - show up in person, it's important.
> Not really. Not being compelled to testify against yourself is also one of the most important rights this country has enshrined.
Congress isn't a court, and he was not testifying because congress arrested him or anything - it doesn't work that way.
He was going to testify - and a lot of people testify in front of congress all the time. But you used to have to do it in person until the pandemic. Now that congress is back to in-person session - so should the people who are testifying.
SBF was going to testify. He was going to do it remotely.
My issue is remotely was not an option before the pandemic. It was allowed during the pandemic for good reason, but now that reason doesn't exist anymore. Therefore, remote testifying should not be allowed anymore either...
Congress can legally compel you to appear - but they cannot compel you to say things against yourself (ie. incriminate yourself). You still have to show up... but you can just refuse to answer.
Can they simultaneously criminally charge him and force him to testify before Congress without violating his 5th amendment rights? I think getting charged criminally does get him out of having to testify to Congress, or at least it should.
You don't have to have been charged to have 5th ammendment rights or be able to exersize them. He could have pled the 5th and not said anything whether or not they already charged him, it doesn't change that.
(If they grant you immunity , so they can't charge you even in the future, that's the only thing that gets you out of being able to plead the fifth).
> North Takes Fifth Amendment in Testimony to Senate Panel : Claimed Protection at Least 40 Times, One Source Says
> WASHINGTON — Congressional sources said today that fired National Security Council aide Lt. Col. Oliver L. North took the Fifth Amendment during his testimony Monday before the Senate Intelligence Committee.
> One source, who, like the others demanded anonymity, said North took the Fifth Amendment at least 40 times. Another source said he declined to answer a number of questions put to him by senators and committee staff members.
> Asked about an apparent contradiction between Sen. Dave Durenberger’s contention that witnesses had been candid and the report that North refused to answer many questions, committee spokesman Dave Holliday said he would make no attempt to clear it up.
> The Fifth Amendment protects an individual in any proceeding from being required to give testimony that he feels may incriminate him. Invoking it carries no implication of guilt.
> Senator David Durenberger, Republican of Minnesota, who is chairman of the Select Committee on Intelligence, likened the proceedings before the panel to a grand jury investigation. He said witnesses were testifying under oath.
Much sooner than I expected. Figured it'd be a couple of years before the AG was secure enough in their case to bring charges. This is MUCH faster than Madoff or Holmes.
Then again, he's been much more out in the open about everything. He pretty much laid the prosecution's case out to the public for them.
The NYT profiling him as a well-meaning genius who was so focused on fixing climate change and education that he just overlooked a few things at his company, gosh darn it.
The right has been villainized for a very long time and for good reason. Left-leaning people discovering that their side is just as bad and untrustworthy when given enough power is, I believe, the reason people are pointing it out. The left were supposed to be the good guys. You don't begrudge the scorpion for stinging as much as the frog that promised would lead you to a more fair and just land, only to carry you to scorpion island.
The left (or at least the fairly broad swath I'm acquainted with) has been mostly hostile to crypto and skeptical of "effective altruism" for years. I don't know anybody on the left who would have identified SBF as "one of the good guys" before this all came out; "yet another tech bro who thinks he knows how to save the world" is more like it.
I've only ever heard of left-leaning publications that find excuses for him. Maybe individuals you are acquainted with are as you said but that wasn't what me or parent were talking about
You might try reading Fox News sometime. It is fascinating to see what they choose to completely ignore, even big news, because it does not fit their agenda. Be very careful getting your news from a single partisan outlet however, if you care to be well informed.
As a libertarian the last two years has caused to be actively stop reading 'right leaning' papers. I remember when the Right made fun of the Left for being the whiny, constantly claiming they're oppressed, do nothing but complain group. Take all that and ad a ton of hate and anger and you get 'news' from the Right today. I had to drop cable to do it though. I could not stop going back to Fox and getting worked up about BS. Then I had to add all my old Right wing websites to NextDNS because I kept getting drawn back. Just like if I was in a cult. I'm so much happier now.
The NYT profiles I've seen is pretty clear that Alameda and FTX were mingling customer funds, that he refused to answer questions about the handling of funds, and that he was under investigation.
> But he would offer only limited details about the central questions swirling around him: whether FTX improperly used billions of dollars of customer funds to prop up a trading firm that he also founded, Alameda Research. The Justice Department and the S.E.C. are examining that relationship.
> Alameda had accumulated a large “margin position” on FTX, essentially meaning it had borrowed funds from the exchange, Mr. Bankman-Fried said. “It was substantially larger than I had thought it was,” he said. “And in fact the downside risk was very significant.” He said the size of the position was in the billions of dollars but declined to provide further details.
> Around the time the crypto market crashed this spring, Ms. Ellison explained, lenders moved to recall those loans, the person familiar with the meeting said. But the funds that Alameda had spent were no longer easily available, so the company used FTX customer funds to make the payments. Besides her and Mr. Bankman-Fried, she said, two other people knew about the arrangement: Mr. Singh and Mr. Wang.
Perhaps you think you're providing evidence of hard-hitting journalism, but it's the opposite. They are framing premeditated, intentional fraudulent activity as a series of mistakes and oversights.
It was substantially larger than I had thought it was -- whoopsie!
the funds that Alameda had spent were no longer easily available (and why is that, hmmm?) , so the company used FTX customer funds to make the payment -- didnt want to, just rearranging some furniture!
I've seen a few people say that was a puff piece. I thought it made him look bad and covered the accusations of fraud. What are folks looking for? A headline directly calling him a villain?
Ha, After typing this I went to double checked my memory of the article. They literally refer to him as a villain in the first paragraph. Even my hyperbole can't stand up.
"But he would offer only limited details about the central questions swirling around him: whether FTX improperly used billions of dollars of customer funds to prop up a trading firm that he also founded, Alameda Research. The Justice Department and the S.E.C. are examining that relationship."
Covers the first two. They refer to how intermingled they were several times. Its a major point of the article.
"He lived in a five-bedroom penthouse in the Albany resort’s Orchid building, with Ms. Ellison, Mr. Singh, Mr. Wang and six others. Mr. Bankman-Fried and Ms. Ellison were at times romantically involved, two people said."
This covers point 3
It didn't mention the deleted tweets though but that's minor compared to everything else. Are we talking about different articles? This is the one I normally see people complaining about from them: https://www.nytimes.com/2022/11/14/technology/ftx-sam-bankma...
Singer-songwriter, and former free medical clinic employee Charles "Charlie" Manson, who wrote at least one song eventually recorded by the Beach Boys, died earlier today.
Despite not being present at the scene of any of the crimes, Manson, a victim of America's "cradle-to-prison pipeline" starting at age 5 when his parents were both incarcerated, and was allegedly raped at a reform school, was convicted on seven charges of first-degree murder. The prosecutors also conceded that Mr. Manson never directly instructed anybody to commit the murders, yet he was sentenced to death.
Manson, who earned a following preaching a unique, persuasive self-made philosophy based partly on the Bible, Dale Carnegie and the Beatles, has remained as perhaps the most popular and controversial criminal in the United States in the 20th Century.
Always put yourself in 'the other guys' shoes. Imagine you are an editor and, for the sake of argument, you have a singular goal: Make somebody who is decidedly unpopular, almost certainly a criminal, and just stole or otherwise cost millions of people billions of dollars, seem like 'not such a bad guy.' And since you're a smart speaker, your target demographic is not the people who would actively defend him or passively defer to positive messaging, because obviously they already think he's not such a bad guy, but the people who would actively condemn him.
By contrast imagine your motivation is to remain impartial, to say nothing of critical given your long-standing antagonism of billionaires and crypto, and here you have a billionaire player in crypto. Would you do things like press him on the discovered backdoors, where exactly the money went, illegalities of misappropriation, etc? Or would you simply take hand-waving deflectionary non-answers at face value, let alone publish them? Would you invite him to come speak alongside world leaders at an event you are hosting?
I think this might be the confusion between the two parties in this discussion. When people say 'puff piece', they don't just mean that they're engaged in mindless cheer-leading, but rather that they're taking a turd and instead of reporting on a turd, they're reporting on a diamond in the process of being made, while remaining aware of what the reader is going to see when they look at that 'diamond in the making.'
Not true, there were plenty of people on HN that were upset he was being "given a platform".
People think he should be punished by being ignored by the larger publications or something. He was still giving Twitter interviews with lots of popular crypto people all the time so I doubt it would have done anything.
You're right. I was thinking of the 3 months between the arrest and the sentencing, not the collapse and arrest. You'll have to forgive a memory 13 years hence. ;)
If FTX had been allowed to stay profitable and grow with external market makers, it'd be possible to fill the hole, but there wouldn't have been a hole to begin with and that ship has long sailed.
Best bet for an ex-con is to bootstrap a crypto-native company anonymously, or a crypto trading firm. Given how Alameda went, more likely the former, but I suppose that's getting harder too.
Ah, remember those times that crypto was heralded as some sort of wedge against "2008-level government sponsored corruption? , That was a nice thought while it lasted.
Don't get me wrong though, I'd say 2008 was blamed a lot on an industry that largely played fairly outside of some truly revolting players. Letting too many bent actors get away with their misgivings emboldens the next generation, and you could certainly argue a lot of this next generation of bent actors are playing fast and loose in crypto.
> Ah, remember those times that crypto was heralded as some sort of wedge against "2008-level government sponsored corruption? , That was a nice thought while it lasted.
How did any of that change exactly?
That 2008 style Wallstreet corruption is bigger than ever, it's just a matter of time before the world sees that the upcoming/ongoing inflation is not actually "due to the war in Europe and Covid".
It's strange how as soon as criminal money starts going into campaign funds, we all get up in arms about how corrupt and awful pay-to-play politics is.
The same political conflicts of interest exist, regardless of whether the funding comes from a carbon Super-PAC, or a crypto con man... But you wouldn't be able to tell that from any of the blatantly partisan rhetoric around it. It's all very "We're not mad that campaign funding works the way it does, we're mad that the other guys got more of it."
Sure, but what do you do about it? I've never been able to formulate any rules that wouldn't have worse, unintended consequences. Running for a political office is essentially advertising yourself, and that takes gobs of money, existing fame, connections, or all of the above.
Trying to limit 'who' can contribute is fraught with violations of free speech or picking and choosing the definition of what a 'company' vs an 'organization' is.
I would go back to the Constitution that has a census to enumerate the people and expand the federal House of Reps, as intended. It would be so representative and so big they would meet on zoom or regionally. There would be way too many for the lobbyists to control them.
'The Number of Representatives shall not exceed one for every thirty Thousand, but each State shall have at Least one Representative…”
— U.S. Constitution, Article I, section 2, clause 3'
As it is now, they decided to stop.growing the House because ... big bribes to the controlled-by-lobbyists Reps.
Just a note, if it's The Block, he allegedly paid off the CEO, not the journalists who write there. It's a meaningful distinction. The CEO is a business officer, the EIC would be the one directing content.
What was murky about ProPublica? I thought SBF started a fund dedicated to pandemic preparedness, and ProPublica received a $5M investigative journalism grant from that fund (unrelated to crypto or financial regulation).
It doesn't matter. Taking deposits and investments from US citizens and then buying a 10 million dollar home for your parents with money from that company without your customers' permission is going to bring charges from regulators or a law enforcement agency.
He can claim it was just a mistake and an accounting error if he wants, but the judge and jury will have final say if he goes to jail.
He didn't commingle accounts. He stole from customers to keep Alameda afloat. This is why the money never got converted into actual crypto, and why there are no assets: the money got used, by Alameda, in what must have been some truly cataclysmic trading.
It also sounds like alameda's job was to market make the FTX coin, which they presumably did with that money in part. And likely kept doing until they blew up.
He's a fraud. He knows he's a fraud, and his PR campaign is an attempt to prove he's not a fraud but instead just really really dumb and stuff. Because being dumb isn't illegal, but running a fraud is.
My best guess is that a small part of the billions went towards mansions in the Bahamas, another small part went towards political bribes, and a rather large part went to various counterparties that traded against Alameda.
It's pretty easy to lose any amount of money if you're paying $10 for $5 bills.
Well, the fact that he's been waging a PR campaign lately is, in itself, pretty damning proof that he's also really really dumb, in addition to being a fraud. That his lawyers haven't duct taped his ass to a chair, smashed his phone and computers, burned any paper he could use to write a letter to a random reporter, and cut the power lines to his house is honestly surprising at this point. They must have explained why he needs to stop talking and stay quiet multiple times at this point; nobody talks their way out of being charged by the feds. And yet, here we are.
Everything he's done since FTX first crashed has pretty much been straight out of the most fantastical dream any federal prosecutor has woken up from in the middle of the night, certain that no defendant on the planet would actually be that dumb.
You don't need to be spending money on yourself for a fraud conviction.
I was on the jury of a federal fraud case, where the defendants took millions of dollars in customer funds and used it to make bad business decisions and/or placate earlier customers.
It was very clear to us that even though they lived a very simple life (old car, $1,500/month rented house), they wanted to build the biggest company in their industry, and fraudulently used their customer's funds to do it.
The only commonality between those 3 people is that they're Jewish. There are good and bad people from every race and gender. "Russian" in the case you're talking about is not an ethnicity, so it's a false equivalence.
I recommend you pull yourself away from the Anti-Semitic Point Of No Return. That way leads to social ostracism, and for no good reason at all.
[edit] As I said elsewhere, I stand corrected. I thought you were dog-whistling.
They are both Ukranian and have intertwined big media backgrounds. Whether they are practicing a religion I don't know.
And depending on the part of Ukraine, they are either closer to Polish or Russian (some % Mongolian), despite both countries Slavic. Ukranians calling Russians "orcs" during the war is quite interesting given that we would normally call that moniker racist.
FTX is a brokerage not a bank. Furthermore, banks have strict regulations on the kinds of loans they are allowed to give. Also, bank accounts are secured by FDIC.
Insure what, exactly? Insure peoples imaginary crypto coins? Insure deposits into a brokerage account? Did FTX sweep brokerage accounts into a valid, insurable class? You're missing a ton here, buddy
Some brokerages lend out spare cash (and pay a transparent interest rate, and are subject to strict reserve requirements) but the majority of assets controlled by a typical brokerage are securities. FTX assets were all subject to their leverage strategies, with no specific reserve.
>> FTX is a brokerage not a bank. Furthermore, banks have strict regulations on the kinds of loans they are allowed to give. Also, bank accounts are secured by FDIC.
Also, banks have capital leverage ratios they need to abide by. FTX had no concept of leverage ratios or haircutting assets by liquidity.
> Also, banks have capital leverage ratios they need to abide by.
I mean yes, but it's just a band-aid for a shitty system in which they allow banks to lend money they don't have, so they needed some ratio to control the mess they created.
In in ideal system nobody lends money that isn't their own. Period.
"I'm forced to use banks because the government won't protect me from criminals if I shove cash under my mattresses." Oh please.
The irony of your ill-informed statement is that if you want to put your money in places where it can't be loaned out to others without your consent, where you should really put it is a brokerage - at least, one in the US, where there are regulations ensuring your funds can't be loaned without your consent, and your assets are protected by SIPC insurance.
You'd be surprised. Lots of evidence and some writings on banks in the Babylonian times, with similar concepts dating back well over 2500 years. Obviously much has changed. Oddly, SBF seems to have perpetuated an early form of fraud, "confidence men"
They do have your consent - thats how banks work and you agree that when you deposit money in one. It seems that you are unhappy about having to consent? But, what I'm confused about is what you are upset - your money in a bank is FDIC insured, so, unless you have account that exceed the limits of that insurance, you have no risk from you bank going insolvent. So, what's the problem?
Just rent a deposit box at the bank and put your cash there. They won’t touch it. Just like having it under your mattress but probably safer from criminals.
Would a so-called cbdc work? Get a bank account at the Fed that only gives you overnight rates (i.e. low but still higher than banks!), and only risk is sovereign risk.
Akin to the narrow banks proposals of a few years ago
Your deposits in the US banks supposedly insured and guaranteed by the federal government. You have nothing to lose unless the feds are out of funds as well
The requirements to prove white collar crime are very different. You have to prove the person did the criminal action knowingly. It's not like proving a case for literal bank robbery where you just need to play the tape. Because of this prosecutions of white collar crime tend to take longer. In this case though I suspect that things like discussing your criminal activity in a chat channel called wirefraud tended you accelerate things.
I was a victim, FTX the company definitely stole assets from my brokerage (not bank) account which their terms and conditions said they would not. The trickier bit is showing personal responsibility of SBF rather than someone else in the company. That's why no one got locked up for the 2008 crash - the companies obviously did bad stuff but it was hard to pin on an individual. I imagine in this case they have some personal evidence SBF was in on it.
Though I assume that if the suspect is abroad and seemingly unwilling to travel to the US, the DOJ would likely try to secure their return early, vs a person of interest in the US, who would be told to not leave the country during the investigation.
It's clear Caroline Ellison has turned against him. Stephanie Avakian, former SEC enforcement chief, is representing her in NY. I'm guessing they wouldn't have been able to file charges this quickly without Caroline becoming a cooperating witness.
1. Someone took a picture of her in a coffee shop down the street from the Manhattan FBI/US attorney office a few weeks ago (last week?). She is supposed to be in Hong Kong as that is where she was based.
2. BBG news article recently speculated some hot-shot lawyers have begun representing Caroline.
She was spotted in NYC with another Alameda employee too.
Maybe the Alameda execs are trying to say they just made irresponsible gambles (like a shitty Wall St investor) but SBF is the one who secretly covered the massive losses with FTX customer assets without telling the public and was responsible for the "dual accounting" issue where deposits were counted twice. Among all the other things that they did wrong.
Or maybe there was a more direct/overt conspiracy at play they both took part in and she snitched first.
The good news is we'll probably find out sooner than expected if the extradition gets challenged in court. We'll see exactly how altruistic SBF really is soon.
But DOJ would have needed someone who had the receipts (who could also explain it all) to be able to act this quickly. So, in this case, I think it's a reasonable theory (but not the only viable one).
Maybe part of the urgency was also the planned congressional testimony.
> But DOJ would have needed someone who had the receipts (who could also explain it all) to be able to act this quickly.
Citation needed? I'm not a lawyer, but it seems plausible to me that SBF's public admissions of crimes, plus the full records of his company, are sufficient.
Where would they have gotten the full records? Or been able to know where to look in the records? Forensic accounting takes time (even if the records are as bad as alleged). To me, this suggests someone on the inside helping to build a case. Federal cases can take years to build because they are usually very thorough. Going from collapse of the company to extradition request in the course of weeks seems really fast to me from a historical perspective (but IANAL either).
But this, like most of the thread, is all speculation. We’ll find out more in due course.
It appears that many FTX/Alameda employees were in the dark as well and had huge losses. There's probably no shortage of angry employees interested in sending him to jail (and probably ensuring SBF gets blamed and not them). Add SBF bloviating endlessly on the internet and admitting crimes and you have an easy case?
> Where would they have gotten the full records? Or been able to know where to look in the records?
Bankruptcy procedings. Subpoenas. The standard ways the FBI gets records from regular companies run by people who aren't criminals and don't want to become one (the current CEO is a regular business person).
All of that takes time. Subpoenas can be fought. Bankruptcy cases take time, and I’m not sure that prosecutors would get unfettered access to bankruptcy filings (unless/until the presiding judge thought it was relevant).
But either way, these things take more time than what has passed thus far. I’m not saying that a case couldn’t have been made without an internal informant — just that it happening so quickly makes me suspect that someone (who was high up) flipped.
They can be, but they don’t have to be, and the current management doesn’t seem interested in protecting SBF or the others formerly responsible for running the FTX network of companies.
Besides there's a very extensive history of state procescutors offering deals to co-conspirators early on. Even in obvious sure things they've sided on the safest possible option.
It probably reflects the inherent risk-aversion that comes with a gov lawyer job.
A more balanced tolerance to risk is often missing from much of gov policy making. Probably has a lot to do with people who care more about highly visible and immediate prosecutions to satisfy the public > balanced long-term justice. Politics selects for that. You see the same thing happen on social media where emotions reign king.
> Besides there's a very extensive history of state procescutors offering deals to co-conspirators early on. Even in obvious sure things they've sided on the safest possible option.
I think it's often less about convenience and more about prosecutor's political antennas. Who wants to see the guy dead in jail, and who would be most upset at you if that happened.
> Maybe the Alameda execs are trying to say they just made irresponsible gambles (like a shitty Wall St investor) but SBF is the one who secretly covered the massive losses with FTX customer assets without telling the public and was responsible for the "dual accounting" issue where deposits were counted twice. Among all the other things that they did wrong.
Here’s the crazy thing. Maybe they pierce the veil and say the two companies acted as one, but hedge funds fail all the time. The fraud was SBF using FTX to prop up Alameda…
> Maybe they pierce the veil and say the two companies acted as one, but hedge funds fail all the time.
“Piercing the veil” is a term of art for holding shareholders accountable for corporate liabilities notwithstanding the civil liability shield usually provided by the corporate form.
Holding coconspirators accountable for their role in a criminal conspiracy doesn’t have a special name because it is routine rather than exceptional.
Sigh. Why is HN always like this? (don’t answer, I know)
Piercing the veil broadly refers to removing limited liability protections because the individuals behaved in such a way (criminally) that they have forfeited their protections.
The most common people held to limited liability protections are shareholders in limited liability corporations (LLCs)
A different sort of limited liability is the idea that customers/partners of a fraudulent business are not liable for that fraud, unless they committed gross negligence in allowing the fraud to continue.
To your point, there is not a snappy term for that specific phenomenon, because it is so rare, but piercing the veil 100% applies here because it refers to the “veil of limited liability”.
> Piercing the veil broadly refers to removing limited liability protections because the individuals behaved in such a way (criminally) that they have forfeited their protections.
There is no “limited liability” for criminal sanction to which the term applies. There are criminal immunities, but finding something to be within an exception to one is not called “piercing the veil” in any context.
> A different sort of limited liability is the idea that customers/partners of a fraudulent business are not liable for that fraud
“People other the person committing a wrong are not liable for the wrong” is not generally a “form of limited liability”; it is the basic rule of initial liability. An exception to that is respondeat superior in which a principle is responsible for his agents liability in a broad range of circumstances, and corporate limited liability is an exception to that, since the corporation could otherwise be seen as an agent for its shareholders.
Finding that someone committed a wrong related to a third-party wrong that makes them vicariously liable for that third-party wrong is not generally called “piercing the veil”.
And that’s all in civil liability, which is the only domain where “piercing the veil” applies at all.
> To your point, there is not a snappy term for that specific phenomenon, because it is so rare
No, again, charging co-conspirators in a criminal conspiracy, regardless of their other business relations to each other, isn’t “rare”, has nothing to do with “gross negligence”; it doesn’t have (another) snappy name because its central to the point of the crime of conspiracy.
> There is no “limited liability” for criminal sanction to which the term applies. There are criminal immunities,
Huh? My dude, she didn’t work for FTX.
If you’re saying that she in fact did (and was therefore a co-conspirator), then we agree that FTX was a sham corporation that acted on behalf of Alameda, but then why are we here?
Oh yeah, because you wanted to sound smart without fully understanding a situation; I guess I already knew that.
While it's possible someone just misunderstood colossally in the reporting (happens all the time), one of the allegations is that he had two different sets of documents to hide stuff and get things past auditors, not just double every as is standard.
She was staying completely silent since the moment FTX collapsed while he was spilling the beans everywhere. She obviously cut a deal while he was parading on social media for god knows what reason instead of shutting his mouth. SBF is a complete moron who didn't understand how the party was already over for him, I put it on his upbringing given the kind of ideology his scholar parents preach at university, especially the bits about personal responsibility...
> while he was parading on social media for god knows what reason instead of shutting his mouth
Matt Levine:
> “Sam Bankman-Fried Should Shut Up, Bernie Madoff’s Lawyer Says,” (...) perhaps it is one more case of us watching in real time as crypto re-learns the lessons of traditional finance. Maybe in six months all the busted crypto leaders will be saying “oh wow we should not have given all those interviews.”
Half (probably 3/4) of silicon valley is on the same cocktail... also popular in schools, college campus, law, banking, politics and even recent presidents had the same cocktail of pills ...
As others have mentioned, there is circumstantial evidence in that she was photoographed recently at a Lower Manhattan Starbucks quite close to the Southern District of New York (who would handle any Federal prosectuion like this as it realtes to securities fraud).
But you have to look at the larger picture: The Federal prosectuion conviction rate is 95%. The Federal government is very good at getting prosectuions in cases they choose to prosecute. They tend to plea out cases that are riskier. A key tactic in doing this is they get one or more cooperating witnesses. That witness gets a better deal in exchange for their testimony that pretty much turns the case into a lock.
It's classic Prisoner's Dilemma. The first to take the deal is always the best off. Lawyers know it so if their clients are at risk, they'll tend to push their clients to be the one to take it. Ellison will most likely have direct knowlege of the situation and will be able to produce evidence such as emails and texts.
Importantly, she's not the main guy. It's SBF who opened up custodial assets to be used in that way (or so it seems). That's the primary offence here. It's a bit like how in a murder case the cooperating witness might be a driver or a witness but unlikely to be the actual shooter. They may get embroiled in a felony murder conviction otherwise thanks to the US-specific pecularity (and some, including myself, would call a miscarriage of justice) of felony murder but that's another story.
So Ellison fits the profile of an ideal cooperating witness, there's supporting circumstancial evidence and the fact that Federal prosecutors indicted SBF so quickly further suggests a cooperating witness with firsthand khowledge or they'd otherwise be mired in subpoenas for communications, conducting interviews and otherwise building a case.
A criminal indictment represents the end of the investigation, not the beginning. SDNY has already built their case to their satisfaction. People seem to think an arrest happens and the investigation continues. That's not how Federal prosecutions works.
A necessary conceit of the prisoner's dilemma is that they can't communicate, and therefore can't strategize together so that doesn't exactly apply here. It's just self preservation.
The prisoner's dilemma isn't predicated on the inability to communicate. It's predicated on (the lack of) trust. Put it this way: if you could lock in your decisions in an atomic fashion there would be no dilemma.
Prisoner's dilemma has a Nash equilibrium where defection is the best move regardless of anything else that happens. If you change the game to be a repetitive 'prisoner's dilemma' with the same actors the best strategy would be tit for tat.
'with communication' does a lot of work here. tit for tat is a strategy where you start with the positive-for-both-parties strategy and then just copy whatever the other party did last time.
Yes but the only way repeated cooperation can be maintained is if players can “punish” defectors by also defecting for a certain # of turns (thus making the PV of breaking ranks and defecting < keeping cooperating for every player).
SBF’s situation is different in that the game ends as soon as someone defects.
Yes, and this kind of prisoner's dillema isn't an accurate description of the hypothetical one. When it comes to the DOJ making a case against two people, both of them co-operating will likely get both of them harsher sentencing than what the defector will get.
That's why underlings have strong incentives to defect, and defect quickly. (Defection is also rarely an option for the person at the top of the pyramid.)
Yep. Lack of realistic prospect of cooperation working and the asymmetry are key here. I don't think any option either or both of them can take will save Sam, but Sam could possibly save Caroline from the most serious charges by taking full responsibility for the decision to transfer FTX customer funds to Alameda (except I suspect there are other issues with Alameda's compliance they could still nail her for)
Caroline's option to save Caroline regardless of what Sam does by testifying looks a lot better.
Like others said, it's not about communication, but trust. If you stack the payoff matrix severely enough, there's nothing the prisoners can strategize, and you can literally keep the prisoners in the same room, and it will still work.
Consider the payoff matrix in this example, somewhat analogous to the case we're describing:
- Both defect -> both go to prison for life
- One defects, one cooperates -> the cooperating one goes to prison for life; the defector gets some minor punishment and otherwise goes free.
- Both cooperate -> both go free for a moment, spend some months or maybe even a few years living in fear, then with 95% chance go to prison for life. That's because the whole deal is about saving work for the Feds, but they will put in that work if needed, and come back with bullet-proof case.
There's hardly anything they can do to meaningfully increase their chances of surviving the "both cooperate" option, so the two prisoners will both try to defect.
> Both cooperate -> both go free for a moment, spend some months or maybe even a few years living in fear, then with 95% chance go to prison for life. That's because the whole deal is about saving work for the Feds, but they will put in that work if needed, and come back with bullet-proof case.
This isn't necessarily the case. The Feds convict on 95% of the cases they decide to prosecute. Which means that they decide not to prosecute marginal cases.
It could be the case that there just isn't enough evidence to bury them.
That's a generic case. Parent is describing a specific case in which prisoners determine they have a 95% chance they will be convicted. Given such a case, parent's argument follows logically. How many cases the Fed prosecutes or convicts is irrelevant to the scenario.
Yes, in this scenario the prisoners assume the Feds are going to bring a case in eventually. This, I believe, tracks the real-world situation, because this case is already notable enough that the government is determined to see it through, however long it takes to prepare.
But even if not, then have the prisoners multiply that 95% by whatever they believe is the chance Feds will eventually prosecute. Is it 50/50? That just gives them 52% chance of avoiding spending rest of their lives in prison, which is still not a good bet.
(Note that prisoners won't be unbiased here - the Feds will be trying to make them believe this chance is much higher than it really is.)
There is a third factor here, whether the prisoners can disappear before Feds go after them - I assumed they effectively can't, and/or it comes with sacrifices so big that it's not much different than prison.
> But even if not, then have the prisoners multiply that 95% by whatever they believe is the chance Feds will eventually prosecute. Is it 50/50?
Crucially, these particular prisoners have a very good idea of whether the Feds have enough evidence to go to trial (assuming the Feds get everything, which is probably prudent to assume). Especially with the advice of good council, which they apparently can afford.
> Note that prisoners won't be unbiased here - the Feds will be trying to make them believe this chance is much higher than it really is.
Which is mitigated by the advice of council. Of course, there is a chance that they are influenced too far in the opposite direction - their layers may be banking on raking in fees from going to trial.
This is almost accurate. You can slightly increase your chances if you say "I will defect, but will take care of your family and give you half my income forever. If you also defect, we will both go to prison and you will be worse off", then don't actually defect - which means you both cooperate!
It won't always work, but it did work flawlessly in a show called "Split or Steal", which basically made the prisoner's dilemma a TV show: https://www.youtube.com/watch?v=S0qjK3TWZE8
That's the kicker though, and it's the lever the dilemma orchestrators (here, the Feds) have to force a result: smooth out any real-life considerations by making the payoff matrix more extreme. If the cost of failure is life in prison, "slightly increase" and "won't always work" isn't gonna cut it - they can practically guarantee the prisoners will make a specific choice.
> A criminal indictment represents the end of the investigation, not the beginning.
That's oversimplified, especially when dealing with wide ranging investigations into complex issues, as the many indictments (including successive, either superceding or in different districts or, in some cases, both) indictments of the same party in the course of, for an obvious recent example, the Mueller investigation attest.
Depends how much they needed her cooperation, which will determine how much of a deal she got, if any.
If they wanted her cooperation, but didn't absolutely need it, they may have struck a cooperation deal in which she still sees some prison time, but a lot less than she would have after a full prosecution.
My gut says that because he was so sloppy in implicating himself, that DOJ may not have strictly needed her, and so total immunity for her is unlikely.
There is zero chance she was offered a deal. She is cooperating voluntarily in hopes of leniency. Deals screw her credibility on the stand. She will negotiate a deal when all the cases are over.
This is not correct. Plenty of would-be defendants take deals to testify. Negotiating a deal after you testify is a ridiculous idea and if it has ever happened once, I would love to hear the story.
She is getting the leniency from the sentencing reform act of 1984 which is predicated on cooperation. No way prosecutors have given her a damn thing. Yes, many cases use snitches because that is the only way to win the case, but it is fraught with peril because of the obvious incentive to lie. Prosecutors avoid deals, and sentencing guidelines already provide for leniency for cooperation. When it is all over, they may, at their own discretion, decide not to pursue charges against her.
Out of perhaps an over abundance of curiosity, what would be your take on, say, Massachusetts Rules of Evidence Section 1104? What sorts of things do you think Massachusetts would promise a witness?
They don’t make specific promises except as a last resort because of things like 1104. I know a specific example of the feds losing a case because they granted immunity to get someone to fly to the US to testify. The witness completely blew the prosecution’s case. A federal prosecutor losing is quite the stain on their reputation. Immunity deals are the fastest way to blow a case.
The witness is supposed to say they cooperated because the law provides lighter sentences for those who cooperate voluntarily.
I think a more reasonable interpretation is “they make specific promises so frequently that there had to be a rule enacted to deal with it. I agree that you know about one case where a cooperation witness with immunity caused a problem. As to your initial claims that there is “zero chance she was offered a deal” or that any cooperation must be voluntary, we’ll have to agree to disagree.
IANAL so please correct me but here’s how I understand it: there are three levels of cooperation.
The informal one is basically just telling (some of) the truth during interrogation and agreeing to testify, where her lawyer gets to enter “she cooperated” as evidence during sentencing, but she might still get off scott free, or a judge might ignore the cooperation entirely if she’s found guilty. If SBF pleas guilty anyway, this cooperation is pretty much useless but carries the most credibility.
She can cooperate as part of a guilty plea [1] in which case the prosecutor provides the judge with a sentencing recommendation. The judge can still sentence her within the guidelines at his discretion, though usually the plea deal is on a smaller set of charges than the indictment so its a net win regardless and brings double jeopardy into play since it counts as a conviction.
The last kind is total immunity which sounds nice in theory but is more dangerous for both sides. She’d have to spill all of the beans on everything within the bounds of her immunity which will be broad. If she is ever caught in a lie or a deliberate omission, the immunity deal flies out the window and everything she said as part of the deal can be used against her at trial. Waiving one’s 5th amendment rights is usually a stipulation of immunity agreements - total honesty or guaranteed prison time.
It remains to be seen how much she is cooperating.
He is a much bigger "prize" for the prosecution. She had low profile and not all that well known to the electorate. Plus, prosecuting her may not even look all that good, for identity politics reasons. If she cooperated first, there is a good chance of immunity or very low sentence.
> Plus, prosecuting her may not even look all that good, for identity politics reasons.
Strongly disagree with this. Look at how they threw the book at Elizabeth Holmes (vs, say, Adam Neumann, or any other male founder from the last decade plus). If anything women have been getting it harder.
Adam Neumann did not even commit a crime. The only "crime" he committed was being such a great salesperson to VCs and getting a ridiculous valuation from them. This comparison is ridiculous.
> Strongly disagree with this. Look at how they threw the book at Elizabeth Holmes (vs, say, Adam Neumann, or any other male founder from the last decade plus).
There are plenty of male founders who got popped for fraud. Trevor Milton (of Nikola infamy) is an easy one that comes to mind.
IIRC Adam Neumann’s infraction was owning many of the properties leased to WeWork for above market prices. IANAL but that’s not a crime as long as he was upfront with investors about it, even if they never bothered to read that page of due diligence.
Neumann scammed chump investors out of a bunch of money in ways that were legal, but would have been illegal at a publicly traded company.
For example, selling some of his wework shares, buying office buildings, then leasing the buildings back to wework at above-market rates. Registering the 'We' trademark for himself then selling it to wework. That would be illegal due to being a conflict of interest, were the company publicly traded - but it wasn't.
(There was also drug use and sexual assault claims)
Before filing for bankrupcy, she was the Queen of Crypto - "Is Caroline Single - we would have the best Crypto babies". Turned quickly to "she is ugly" when she wasnt a billionaire CEO of the biggest crypto hedge fund in the world.
Crypto men can add speed running traditional finance gold digging to the list of accomplishments.
I haven’t seen any evidence Alameda itself committed any crime, only that they were terrible traders and lost many billions on margin through FTX, who gave them special treatment for collateral. SBF then tried to bail them out with FTX customer funds since he owned both.
I think Ellison will get off scot free since she only controlled Alameda, and not entirely. Her crimes are probably minor and worth forgiving for her testimony. At least that’s my hot take.
Let's assume there's no documentation or non-conspiring witnesses who can pin someone, but there are five co-conspirators. They will quickly turn on each other and spill the beans. Literally the prisoner's dilemma. All the government needs to do is threaten 20 years in prison. People will do anything including betraying friends and lovers to get that down to 5 or 10 or zero.
I would suggest that a CEO should know where any magic beans are coming from beyond a reasonable doubt. Not knowing where those magic beans are coming from is its own kind of special trouble, from a legal liability perspective.
If Alameda executives knew that FTX customer funds were being commingled with Alameda’s then they were well aware their source of capital was from customer money they shouldn’t have been touching. It’s not just that they were given unlimited margin from FTX.
> I haven’t seen any evidence Alameda itself committed any crime
I've seen considerable evidence that the FTX empire, including Alameda, was jointly run by a narrow set of leaders, in which Caroline was #2, not a set of separate, arms length enterprises.
I'd take that bet 7 days a week and twice on Sundays.
No way Ellison is getting off scot free. I'd expect her to get a huge reduction in her sentence, but would still be shocked if she got no jail time.
It has been reported that there was a meeting that included SBF, Ellison and the other high ups at FTX where the decision was deliberately, explicitly made that Alameda would use customer funds to prop itself up. That is most definitely a crime on Ellison's part if true.
I posted a Twitter thread about this in an early story that I can look up that was super informative with a lot of detail, but the short of it is that it was all a house of cards based on FTT. If Alameda died, it would have tanked the value of FTT, which would have in turn killed FTX, because they were assigning huge value to FTT on their balance sheet (which is, in and of itself, insane because FTT worked more like a stock of FTX itself - a company doesn't put its own stock on the asset side of the balance sheet).
> which is, in and of itself, insane because FTT worked more like a stock of FTX itself - a company doesn't put its own stock on the asset side of the balance sheet
Thinking about it, it makes sense. But I never did before. So where does a company’s own stock normally end up at, balance-wise?
> But I never did before. So where does a company’s own stock normally end up at, balance-wise?
The company’s own stock is in the equity section (treasury stock – stock that the company has repurchased after it was issued is a contra equity account, since the act of purchasing reduces stockholder equity.)
On a balance sheet, assets - liabilities = shareholder equity. This calculated shareholder equity amount is known as a stock's book value, but this can of course differ from its market value: https://www.investopedia.com/ask/answers/how-are-book-value-...
I've always been confused about this point. In the stock buyback world apparently they just vaporize the stock when it's acquired, they don't hold it on the books because if they need to issue more they can always dilute and create new shares when they need it.
Though I would disagree that FTT really functioned equivalently to ownership shares.
* FTX's success was helped a lot by the reputation of Sam and Alameda as the best of the best
* Alameda bankruptcy proceedings would have unveiled some skeletons, like the unlimited borrowing of user funds (confirmed by court filing recently)
Ellison joined Alameda Research in March 2018. She became co-CEO along with Sam Trabucco in October 2021. She became the sole CEO of Alameda Research in August 2022 after Trabucco stepped down.
Sam Trabucco - now there is a name you never hear ... yet he was CEO and left 2 months before they went bankrupt ...
Hard to believe they weren't complicit in the fraud given users were wiring money directly to Alameda's bank accounts (for deposits intended for FTX). You (Alameda) receive thousands of wires from random people, so you just decide it's OK to trade with it?
Granted they technically have no fiduciary duty to users since nobody signed a contract with them, I doubt they get off scott free.
She doesn't even need to be aware to be accountable and prosecuted. Most regulated activities have a requirement of _means_ rather than _outcome_. i.e. She is as much in breach for not setting up the means by which she should have known, than actually knowing.
Couldn’t she just claim she believed those funds were coming from the customer margin accounts where the terms allowed that usage? That matches her public statements.
I think you grossly underestimate the amount of regulation Caroline is subject to.
At the very least she will be deemed unfit or proper, which means she will be barred from any financial activity for the years to come.
On top of that, as a MOO & RO she will be professionally and personally liable to millions in fines, and most likely jail time.
Negligence _is_ a crime, a lack of means _is_ a crime, a lack of knowledge or control are crimes as well, for any regulated person, especially at the MOO/RO level, a lack of chinese wall between investment and retail is a crime, accepting money from an unverified source is akin to money laundering for an investment firm.
Edit:
MOO, ROs (responsible officers) and MICs (managers in charge) are regulated activities that should be assigned to individuals performing specific duties in an investment fund. Each regulator will have different names and variations on their duties and structure, but overall it's pretty much aligned.
It is mandatory for a regulated firm to have a specific amount and hierarchy of these regulated activities, and each one of them comes with a set of duties.
These activities are the main vector by which regulators enforce and control individual managers.
MOO is often assigned to the CEO. ROs are often the key investment officers, and MICs are often the key tech & operation officers.
Edit2: Hedge funds are no less regulated than any other investment firm. You are mixing "prop shops"/"family offices" and hedge funds.
Alameda was definitely an asset manager as it received external funds and was selling (debt) securities.
She was in charge a hedge fund. Hedge funds are allowed to trade badly and lose money. It happens all the time. There is a VERY high bar for negligence. Alameda Research was also located in the Bahamas. Did Alameda even have outside investors? It was basically SBF's family office. Caroline isn't likely to be liable for much unless she knowingly conspired to commit crimes.
Hedge funds are not exempt from having to know where their money is coming from. A hedge fund that works knowingly using drug money will have people go to jail. A hedge fund that doesn't do any amount of KYC will have people go to jail.
Hedge funds are not magic places where you can say teehee i just used money I found
My understanding is that she was the CEO of Alameda and received a loan from FTX based on garbage collateral. That’s not a crime? SBF knew the collateral was junk, so it’s not misrepresentation. Was she also an officer of FTX? A good chunk of those customer funds were from margin accounts that could be loaned out, so it may be hard to prove she knew SBF was dipping into the forbidden cookie jar, especially when there were no real FTX financials and it all seemed to be in SBF’s head.
I’m not saying she’s fully innocent, maybe there’s some incriminating text messages or something, but from the public information so far it doesn’t seem cut and dry to convict her of a serious crime.
There are very strict rules for any regulated firm about the provenance of the funds, ultimate beneficiaries, client-assumed risk, KYC, etc.
These are not only for customer protection, but anti money laundering as well.
Small regulators often overlook the client risk part so as to attract foreign money (that's why most of these regulators will be OK with little to no restriction of derivatives). The anti money laundering part though is very important for these small regulators as they could be fined internationally and don't want the bad publicity.
You cannot just "accept money and trust its from a legitimate source".
> I haven’t seen any evidence Alameda itself committed any crime
Well if you look at what the mainstream media are saying, the very same mainstream media who were presenting SBF as the second coming of the Christ on their front cover, you're not looking very much.
For a start it's proven that some people who wanted to send hefty sum of money to FTX had to wire it to Alameda to dodge controls. That's wire fraud.
Then it's clear that Alameda manipulated the market and were the ones behind the pump and dumping of several shitcoins. Including several shitcoins of SBF's creation.
But really... People who actually called SBF for the ponzi boy and FTX and Alameda for the complete ponzis they were, months or even years before they failed, have lots of evidence that Alameda was part of a bigger criminal operation, before FTX even existed.
If you really believe it's a coincidence the top lawyers at FTX and Bitfinex happened to be colleague at a company caught in an online poker cheating scandal I've got a bridge to sell you.
From the very start even just the naming of Alameda as "Alameda Research" was part of the con (SBF says on video he added "research" to dodge banking restrictions more easily).
The goal of Alameda Research was, from day one, to engage in criminal activities.
This entire "leveraged trade gone wrong" is lies, lies and more lies, relayed by certain media (once again: the same who were presenting SBF as an altruistic genius that was going to save the world).
Now maybe that Alameda also fucked up trades but I'm pretty sure that a lot of the missing billions mysteriously ended up at the hands of those behind the iFined/tether/Bitfinex/Deltec cartel.
Funnily enough this may make tether a bit more backed now.
One of the latest development btw is that one of the shareholder of Bitfinex is a now convicted money launderer (China just arrested sixty people in relation with chinese mafia money laundering through stashes of cash that found their way to Hong Kong and then were exchanged for USDT: $1.7 bn at least).
FTX / Alameda are one and the same and it's highly likely they were just a front for tether, with SBF as the useful idiot.
Some are going to say: "there's no evidence" but this entire thing stinks.
And nobody will convince me that Alameda didn't commit any crime.
Alameda, just like Moonstone bank (bought by SBF from Deltec) and the tens if not hundreds of companies SBF had, were part of a criminal operation.
She is highly intelligent but not street smart it seems - one does not win maths prizes for being stupid - just think she was either in over her head and was controlled by SBF and his cult to do rather dodgy stuff.
Did she get any special loans or other gifts from FTX like SBF's parents got a free condo in the Bahamas ???.
Depends on what deal she was offered and what she agreed to. If the feds already had a bunch of evidence against her (or believed they soon would), they may have offered a plea deal (less-serious charges, shorter sentence). If they had nothing, but knew she'd have a lot of dirt, they may have offered her immunity. I'm sure the specifics of the deal (if any) will come to light soon enough.
Everybody can agree that some bargains are appropriate and others are not, so what people are going to discuss is the dividing line and particular deals.
Would need to have more information before coming to such a conclusion, such as the proportion of crimes committed by men vs women, the types of crimes committed by men vs women, etc.
National Crime Victimization Survey (NCVS) does a pretty good job. It compiles the stats through interviewing victims of crime, so they aren't coming from enforcement branches.
Aren't there lots of terrible crimes without a victim? Like smoking or growing plants, or owning an NFA restricted firearm item? So looking at victims may not tell the whole picture.
Justice is what happens when people are held accountable for the wrong things they've done.
Nothing about justice requires that punishment be meted out in strict accordance with the demographic breakdown of a population except insofar as wrong things are done in strict accordance with the same demographic categories.
Maybe you're assuming that to be the case, but I don't think you'll find any evidence to support such a claim.
Exactly. If men are disproportionately in prison, maybe that isn't justice.
Why is it ok for 'spaulding to just shut down the argument as "nothing about justice requires that punishment be meted out in strict accordance with demographic breakdown" but suddenly a fallacy when I insert an actual demographic? I knew it would make people upset because well if we're talking about men then no defense is necessary, no woodruffw to the rescue with "affirming the consequent", but if black people cue up the folks with the torches.
Nobody has torches out. I'm just pointing out that 'spaulding has made a strictly correct observation. You could have responded to it with an equally valid and interesting observation ("we have ample social evidence that criminalization is gendered"), but you chose to be inflammatory instead.
It's not justice, but the same phenomenon. If certain group has a larger tendency to commit crimes, and you have limited time and resource to look for crimes, it's overall more effective (arrest more people and perhaps prevent more crime) to disproportionately target that certain group. Men and blacks do in fact proportionally commit more crime than women and other races, but less so than the rate of incarceration suggests. There are only two ways to prevent this: being super effective and checking everything (police state), or being less effective and arrest less criminals for taking extra steps to arrest in just proportion (there are legit reasons to want this, e.g. it'd be terrible for society if for example white women had the sensation they could commit any crime without punishment. But to what degree is that extra effort worth it?).
Justice should be blind in terms of punishment. Easy show systemic racism by looking at the number of African Americans in jail for drug offenses for drug when comparing across races. Drug use by race is relatively consistent in terms of percentage. I would consider that a big problem with our justice system.
My understanding is those "usage rates" are uniform only if we look at "used in last year", but ignore "used in last week" metrics where they diverge (according to Bureau of Justice Statistics). SSC did a pretty good deep dive on race and the criminal justice system, that covers this and other things such as underreporting, below:
I agree that correlation doesn't equal causation, I pointed it out because it's the exact same argument used to decry racial disparities in the criminal justice system. Either the argument is valid, or it isn't. We can't pick and choose when it fits our beliefs.
You're still oversimplifying things. A large reason people get confused between correlation and causation[0] but rather things that are correlated and connected with a confounder. The problem here is oversimplifying the model. You have to ask a lot more whys. It is fact that men are arrested more than women and fact that black men are arrested more often, as a percentage, than white men. But it is naive to assume that the "man" variable or the "black" variable are causal variables. In fact they are confounders.
The argument isn't either "valid or not" in a general sense. The argument needs more nuance and if that's your concern, ask for it and point out where it is lacking. Demand better comments instead of trying a quick mic drop.
[0] Most people aren't confused with spurious correlations like: US technology funding vs number of hangings. (99.8% correlated) http://tylervigen.com/spurious-correlations
For what it's worth, I agree with you. But if you've ever discussed racial disparities in anything you know that asking for more information that might not fit neatly with the established narrative, is likely to just get you called a Nazi or something.
I think you're exaggerating this. No one is going to call you a Nazi for saying that Black men have a lower ability to climb the socioeconomic ladder through traditional legal means and thus have a propensity to seek out other non-legal means. Many seeking social justice will stand by that actually. But you will get called a Nazi if you suggest that the reason for them doing this is because they are black (note: capitalization is subtle but important). That is eugenics and has been disproved.
See how the causal factors in these arguments are different? The former is a demonstration of an unfair set of opportunities that disproportionately affects a certain subset of humans while the latter says that the arrests are destined because of genetic makeup. We know one is true and the other is false.
If you're making arguments akin to the former and getting called a Nazi, get off Twitter and touch some grass. Talk to some real people. Specifically people of color. But maybe listen first before you open your mouth.
If you use that argument to explain away property crime differences, maybe. But that doesn't hold for violent crime rate disparities, which is typically where these conversations go off the rails.
Maybe if that is happening then the problem is you're talking about apples when others are talking about oranges. They're both round fruits and share a lot of similarities so it is easy to get the two confused. Especially with human language where we have a lot of priors that fill in the tremendous gaps in our compressed language. It is even more problematic with hot topics, which is why I suggested listening first. If there is a failure to communicate then maybe change the means in which you are communicating. This should also prod you to listen better. Remember that in communicating you're trying to express this complex idea with a limited vocabulary and time. The listener then has to decompress and interpret this information based on what you said (not what you are thinking) combined with their prior experiences (including the similarity of your argument to arguments made by others. Possibly others you don't wish to associate who are instead dog whistling or using malinformation). So do your best to communicate well and specifically with your target audience but also ensure that you are doing your best to interpret the intended message of those you are communicating with. Not only will the latter help make a more productive conversation, but demonstrating this helps encourage others to do the same in return. Not to say that we aren't human and won't make quick quips. But if we can re-navigate these situations, they do tend to turn out better. I think this conversation between us is a good demonstration of that.
You assume good intentions with these people, that is not what has been on display for the last few years. A general rule of thumb is that anybody engaged in identity politics is a horrible human being, and discussion with them is generally an exercise in futility.
These are people who literally start every discussion with the idea that people of different races should be treated differently based on the color of their skin. So I suspect they're projecting a bit, since that is precisely Nazi ideology cloaked in a different skin (literally).
Yes, because if we don't, then it does lead to what's been on display (which is also a selection bias). Start with the assumption of good intentions, but you don't have to keep that after they play their hand.
> A general rule of thumb is that anybody engaged in identity politics is a horrible human being, and discussion with them is generally an exercise in futility.
I found the problem. If you treat everyone you meet like an asshole or terrible person then it is no wonder they respond that way. You can't expect anyone to be nice to you if you are being a dick to them. People can tell what you think of them. You probably aren't as good of a bluff as you think you are.
Well there is an easy way to test this theory of yours, by answering a question. Do you think we should treat people differently based on the color of their skin?
I happen to think we should treat everyone the same regardless of skin color. Do you?
I'm not taking the bait. I just want you to know that the reason you're having problems with people is because you're arrogant. Tone it down if you want to have the conversations you want to have because you're never going to get there the way you're going about it. That's the end of this conversation for me. Sorry.
Most crime that we have records for to use for studies is committed by men you mean. Who is to say how much crime by women goes unreported and uninvestigated, and therefore has no presence in our statistics.
Yeah but it's not as if there is this huge epidemic of underreported or uninvestigated crimes committed by women. This doesn't account for the statistical difference.
Madoff's scam was so baffling because his contributions to finance before that were legendary. He practically invented modern market making but his firm and others following in his footstep were wiped out by HFTs.
Is one of many articles on the topic. I had an old textbook (maybe 2003) textbook on markets and trading that had a sidebar that lionized him but almost everything on the web is colored by his scam.
I think they were gradually decimated due to shrinking margins but that was partly due to decimalization, Reg NMS and other market structural reforms / changes. Then HFTs stared to flourish which drove the older market makers out of the picture.
I know her parents would have been colleagues of SEC Chair Gary Gensler when he was still at MIT, that's a large faculty though. Is there evidence that they were more than just colleagues though?
They were known to be friends while they both worked at MIT, and both were economics professors in the same sub-field, which makes it very unlikely that they didn't speak to each other.
I just learned that people have been theorizing on the internet that Caroline Ellison is Gary Gensler's daughter, which is completely nuts and totally false.
just a quote from wikipedia as a whole paragraph, you can verify it, did not think that much, no need to over react, everyone is so sensitive these days.
Whether or not you thought about it much, or whether you think I’m over reacting and calling me sensitive is you disregarding your own actions rather than acknowledging the sexist undertones. Bet your mother is proud.
But what does it have to do with this thread or the comment you replied to? If I wanted to read random wikipedia snippets I'd be at wikipedia.org, not news.ycombinator...
Maybe they don't need a cooprerating witness or special deals. Apparently the companies were really badly run, with lots of clear-cut violations, making it very easy to file charges.
John J. Ray III, who has taken over for Bankman-Fried as CEO of FTX and whose credentials include supervising the corporate cleanup after Enron imploded, has already said, 'Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.'
John J. Ray III is a star. The board did right to hire him for the clean-up. I am sure he is cooperating closely with US and Bahamian authorities for criminal evidence gathering. And, he is being paid ~2.6M USD annualised (1,300 USD per hour, 2,000+ hours per year). Seems cheap to clean-up that mess. It might take 5-10 years for full clean-up and wind-down. As the mess is so extensive, I wonder if some board members will also be under investigation. While board member normally have liability insurance, it won't help if crimes were committed.
FTX US had (at least) nine board members. FTX International (non-US entity) was private, as I understand, and essentially unregulated, so who cares about the board.
FTX US is a subsidary of FTX int. The board of FTX US has no power to do anything to parent co or other subsidaries of parent co. FTX US was/is also a private company.
It is a good question. I assume FTX global and/or US has some cash reserves. At the very minimum they have been running a business that needs to pay cash salaries, rent, utilities, etc. Your question is partly answered by the 200K USD retainer" (no details provided). I assume that was paid upfront. He may refuse to continue work if paychecks do not arrive in a timely manner. This guy is very experienced cleaning up bankrupt companies. I'm sure he will get paid, or not work.
One of the problems of these centralized exchanges is that so much stuff happens off-chain. The DEX don't have these problems (some of them have other problems)
One of the major charges though is that they misdirected funds to Alameda Research or had people deposit directly to them instead which would be happening on chain. The failed arbitrage would have also required a lot of on-chain activity.
Indeed. It's emerged that there are screenshots of a signal chat group called (in what must have seemed at the time to be an amusing joke) "Wirefraud" with SBF, the CEO of Alameda (Caroline Ellison) and two of the other top folks from FTX/Alameda.[1] So one of them (probably Ellison as everyone is speculating) almost certainly turned to provide that. That's the sort of off-chain evidence that is somewhat awkward when you're trying to defend (amoung other things) a charge of wire fraud.
Yeah I think they're absolutely hosed here. Beyond anything they did or said before the collapse SBF kept talking and to all appearance lying while trying to get people to reinvest which is a whole new set of possible crimes about misleading investors as well as basically admitting to several crimes.
A great deal of internal communication apparently occurred within ephemeral Signal Chats. While JJRIII is witness to failure, Ellison was witness to intent.
I remember there was a picture of her in a NYC Starbucks in the past week. Someone predicted she had made a deal with DA and SBF would be indicted soon. Now it appears the prediction was spot on.
If the charges include manipulating the prices of TerraUSD and Luna earlier in the year - that ironically probably caused the FTX implosion, it's hard how to see Caroline Ellison as head of Alameda wasn't heavily involved in major criminal activities.
It's possible - but politicians don't stick their neck out very far for past donations, it's the prospect of future donations which is important.
If you've just got wiped out financially? Unless they can expect donations from your allies, or from your peers in industry who are eager to see you released, they can just stop returning your calls.
Seems the investors of FTX never asked for a detailed balance sheet. Companies that FTX bought out were often compensated with significant strings attached.
Holmes at Theranos was giving investors tours of it all working while doing it manually and with more blood behind a curtain.
> A spokeswoman for Mr. Bankman and Ms. Fried wouldn’t comment on whether they are giving their son legal advice. Their friends, some of them legal scholars themselves, have said Mr. Bankman-Fried’s frequent media appearances are a mistake that could put him deeper in legal jeopardy.
“They want him to protect himself, and he won’t,” said Larry Kramer, a former dean at Stanford Law and longtime family friend. “They’ve decided, ‘We’re not going to fight with our son.’”
After adjusting my tinfoil hat, I can only conclude this is to preclude any direct testimony tomorrow. If he’s going to talk to the US authorities, the Bahamians are going to be the mediator.
Regardless of what it the actual reason for the strangely timed arrest in Bahamas, he can now take the 5th for any future committee hearing and it would be perfectly normal for someone who is under indictment.
This guy had a big mouth and poor motor control over his tongue. Who knew what he would spew? Maxine is relieved, is my opinion.
Has he confessed? I though his line was still "I'm not a fraudster, I've just been colossally incompetent"[1]. Although if he really believes that, he's going to be disappointed when its pointed out to him that some of his incompetence led to him defrauding people...
[1] Then following that admission with "and if people just give me another 8 billion dollars, I can fix everything" does perhaps point to him being a bit out of it. Or looking for the dumbest of marks.
But his admissions and the public and transparent nature of the fraud are effectively equivalent. Anyway, now that action is being taken I’m placated :)
The Zoom calls he did where he pretty much confesses to defrauding customers didn’t help.
I hope this is a lesson to those who think they can just talk their way out of things. The moral arc of the universe is long, but it bends toward justice.
I kind of had hopes the Bahamas are moving fast. As a tax haven, and arguably black money haven, you cannot have people abusing your lax financial regulations by stealing other peoples money, can you? After all, all the money people are parking at your banks teust you that it will still be there later. Also, in order to keep your freedom you have to keep the US authorities, and the EU, of your back.
Still surprised they moved that fast, I thought they'll wait for a demand from the DoJ.
Edit: According to vice.com, the US asked for his arrest.
> Maybe this was the only way to ensure he testified
Nope, it doesn't make any sense to arrest him if the goal was to force him to testify in front of congress. Once he is placed under arrest then I'm pretty sure the house cannot make him testify if he is in custody, he becomes at the mercy of a judge and I imagine bail conditions will not allow him to talk in public about the case either.
He wasn't arrested by the US government (or US state government), the Bahamas arrested him after the DOJ said they were pressing charges and likely to request extradition.
As for flight risk the Bahamas had previously confiscated his passport and he wasn't able to get himself smuggled out in the last 2 weeks so he doesn't appear hugely flighty, but then again knowing that he's being formally charged may change that.
Bail is a US thing for: when you're arrested and charged with a crime, you're not necessarily going to sit in jail until trial. You are either let go or you pay money (bail) to decrease the chance you'll flee. If you can't pay bail or bail is refused by the judge, you sit in jail.
SBF hasn't been charged yet. Bahamas arrested him for the sole purpose of preventing him from fleeing because U.S. indicated that they'll charge him and will want to extradite him to U.S.
I don't know if Bahamas even has a concept of bail but it doesn't apply here and wouldn't make sense to let him out.
Bail is definitely not just a US thing, in fact a quick search brings up details of how bail works in the Bahamas.
That said, bail does seem unlikely in this case.
People in jail and prison testify in court all the time. They are transported to and from the court by guards, have a guard assigned to them in the courtroom, and sometimes testify in prison uniforms etc.
I don't know why a house subpoena would be any different.
If you are out on bail, I have never heard of bail conditions restricting what someone can say, that's not what bail is, I don't think that's even a thing. Judges in the case do sometimes put "gag orders" on the parties involved, but that's not related to bail.
Where are you getting this information?
He's perhaps unlikely to be testifying to the house tomorrow though, when he's been arrested in the bahamas. Probably just as a practical matter he needs to be extradicted to US custody and processed first.
> People in jail and prison testify in court all the time.
I think the point the GP is trying to make is that his arrest does not obligate him to testify in front of anyone: his "right to remain silent" and all that. Prior to being arrested, voluntarily testifying (or complying with a subpoena to do so) before Congress could have been useful to him if he could manipulate things well enough to get the heat turned down. (I don't think he'd actually be successful at that, but that's another story.)
Now that he's in jail, he may actually listen to the advice I'm sure his lawyer has been giving him all along: shut the hell up. And he's perfectly within his rights to do that. Even if he is hauled before Congress, he can simply assert his 5th Amendment rights after every question, and that might actually be the best move for him now.
Edit: re-reading the GP, I realize what you were objecting to, the "I'm pretty sure the house cannot make him testify if he is in custody" bit; I agree with you in that I don't think that's the case. Still, though, even if Congress can force him to testify, they can't actually force him to answer questions. They technically couldn't do that before, but now that he's been arrested it's likely even less in his best interests to talk.
Also, what does he offer any of those places. I guess he might be able to help NK with their crypto scams, but I'd prefer a US prison to even the better off in NK. Places don't just accept people running from the USG for shits and giggles, Russia accepted snowden to rub it in the US's face, not out of any belief he was a wronged hero.
I can't imagine why he wouldn't flee.
If i was committing ~9 figures worth of fraud, I would have huge stashes of 1oz gold bars buried in countries without extradition like Vietnam and venezuela.
He seems like he had no exit plan thought up.
Madoff got 150 years in prison, and i dont see any reason why SBF would get any less.
> Madoff got 150 years in prison, and i dont see any reason why SBF would get any less.
I actually see one: SBF mostly mishandled unregulated magic beans on an unregulated exchange (FTX.com).
The unregulated magic beans on the regulated exchange FTX.US are still there, waiting for withdrawal, according to his tweets.
US customers weren’t even allowed to register on FTX.com, which was outside the US.
Anyway, he still kinda defrauded Sequoia and friends, who didn’t buy magic beans but actual shares of the FTX exchanges (not sure about whether .com, .us or both)! But maybe he still gets less than 150 years..
That might be the inexperience. He used pretty much every outlet out there to talk about his story and what really surprised me was the naïveté of SBF and Caroline.
Just because a country doesn't have an extradition treaty doesn't mean it won't extradite on a case by case basis. The vast majority of countries are signed on to at least one international treaty that covers extradition like the United Nations Convention against Corruption.
People like Ghosan are safe because they flee to countries that won't extradite their own nationals as a matter of long standing policy. They have no problem extraditing troublemakers from other nations, especially under international pressure.
See Vietnam's latest extradition for example [1], which doesn't have an extradition treaty with the US and they aren't even on the best of terms. The only way they could get away in Madagascar is if the authorities there didn't have the resources to capture them - a small promise of USAID from the State department would be enough to put extradition on the table.
I think this is the best argument that SBF didn't intend to commit fraud, so much as fraudulent activity with the expectation that it'd all work out somehow. If the exchange contagion was quelled (partially by his actions backstopping other liquidity crises), and cryptocurrencies went generally up, and FTT was strengthened by FTX's appearance of strength, then all of these problems would have gone away.
If he had simple fraudulent intent (i.e. personal enrichment at the expense of customers), he would have had a plan. One that included adequate cash socked away in appropriate locations. Something much more well-thought out than "a US-friendly island 2 hrs by plane from SDNY".
Nan, you probably would not.
Do you have somebody in Vietnam or Venezuela, with a small army of mercenaries, and that you trust enough to hide those stashes of gold ?
How much does one of those soldiers get for ratting him out to whichever country/cartel is willing to pay 0.0001% of that as a finder’s fee or agree not to notice that all of his stuff went missing shortly before capture? If you’re hiring mercenaries willing to stand off law enforcement, what keeps some of them from realizing that they can kill you and get their money all at once?
This is the prepper fallacy: stockpiling riches but not allies makes you a target, not safe. Maybe you can get away with it if you’re an incredibly charismatic cult leader but most people are going to be much better off with friends and family than a pile of Krugerrands and guns.
Oh yeah, and how exactly do you imagine this going ?
You're going to ask to see a cartel boss and tell him you have $10B in untraceable money, and you need a small army - you're willing to pay 1,000 men - $100,000 for the next 10 years ? They will most probably start to torture you to know where the money is, before you finish these words.
That's a fun mental exercise btw - imagine you have $1B now - let's say illegal money you need to keep. How do you proceed ?
Pay cash for a field of shit land in the sticks, start purchasing hundreds of totaled cars (also with cash), remove or ruin engine/tires/seats/things of value, place the cars in the field, place the money inside the cars, and throw up a fence with no trespassing signs on it.
If you committed a billion in fraud, you probably wouldn't be shitposting on Twitter or giving interviews that made a prosecuter's case easier, either.
This is the guy that's bragging about committing fraud on live interviews... even after the screwup he didn't have the wherewithal to have an escape plan.
Then again, realistically a disappearing act of this magnitude would likely require access to a lot of trusted people to pull it off. Plastic surgery, boat captains, someone to plant false leads, security, etc.
You'd have to be able to get to Vietman or Venezuela. I'm guessing he was being watched like a hawk. They could have arrested him at anytime, but having more evidence before an arrest is always a better position.
It's an island. Tough to get off even if not arrested. I'm sure if he tried to get on a plane all kinds of "problems" would have appeared (computer not working, ...) If he tried a boat, "oh look, it's leaking oil, we can't let it leave and pollute the waters".
Bahamas will have absolutely not let him get out of their sight. They have so much egg on their face.
I can even see the titles if he left "Did he bribed Bahamas officials to look the other way?" ...
How many of those other countries have people who lost money? What are the odds that some of the people he ripped off have very muscular friends who want to have a private chat about repayment timeframes? What are the odds that they know the kind of people you’d need to get fake ID or live undercover?
He was being followed. The minute he boarded a boat the USCG would be enroute with a cutter to intradict and perform a thorough safety inspection in international waters, perfectly in line with their law enforement and maritime safety duties.
It is an island, and it's not that hard to get on a boat and sail away. Carlos Ghosn was able to be smuggled out of Japan on an airplane while under house-arrest. I imagine Japan is much, MUCH, harder to be smuggled out of than the Bahamas :)
Seems a bit ignorant of politics. For instance he planned to travel to Dubai which would obviously extradite him. Silver spoon son of Stanford profs probably thought his donations made him invulnerable. Thankfully it’s embarrassing enough to the right people that he is wrong.
FWIW, most of the presige media (NYTimes, WaPo, WSJ) have been running puff pieces which parrot SBF's claims of ignorance without much if any fact checking or investigation.
I'm not sure reporting that Alameda + FTX had little to no financial controls, terrible accounting, and unaccounted for deposits is really puffery, unless you stretch the definition. And I've seen stories about SBF spending FTX money on personal loans and Bahamas real estate all over the legacy media. Even the restructuring CEO couldn't account for all the lost funds until recently
Coindesk said this about The New York Times' interview with SBF after the collapse:
"Yaffe-Bellany says Bankman-Fried stayed on the line for over an hour – and yet there are no direct quotes concerning the conflict of interest between FTX and Alameda, neither a confirmation or denial that SBF illegally commingled funds between the two or further admissions of guilt. There's little sense SBF, who stepped down from the exchange, is taking responsibility for the situation.
But, what, you want SBF to perjure himself? It’s a shame that Yaffe-Bellany wrote about Bankman-Fried’s cryptic Twitter thread, rather than the tweets he has been deleting. It sucks we know nothing more about the Bahamian withdrawals FTX opened, claiming it was at the behest of the island nation’s securities regulator – which the agency debunked."
> The NYT profiles I've seen is pretty clear that Alameda and FTX were mingling customer funds, that he refused to answer questions about the handling of funds, and that he was under investigation.
>> But he would offer only limited details about the central questions swirling around him: whether FTX improperly used billions of dollars of customer funds to prop up a trading firm that he also founded, Alameda Research. The Justice Department and the S.E.C. are examining that relationship.
OK no quote, but if there's no information why should they quote three repeated "no comments"? If he did not answer the question there's nothing quotable there, that doesn't make it a puff piece.
Maybe coinbase has political motivation to call reporting from certain media puff pieces?
It uses the same tone that SBF uses when characterizing the situation as a complicate mixup instead of what it really is, deliberate fraud using customer funds to increase leverage.
> It uses the same tone that SBF uses when characterizing the situation as a complicate mixup instead of what it really is, deliberate fraud using customer funds to increase leverage.
That's because describing it as "deliberate fraud" would require evidence of intent that they don't have. I agree that it's likely the case, but I wouldn't expect a journalist to state it as fact at this point.
FTX firm headed by SBF collapses after failing to process user withdrawals. Mismanaged funds and risky trades are to blame. Victims and prominent figures within the crytposphere allege fraud.
Funny how when it comes to most stories, "Business is killing babies... says person (random person on twitter)" is good enough.
Listen, people want their opinions validated. Mix that with a weak understanding of libel laws and certain people with potentially libelous opinions will feel like their voice isn’t heard in mainstream media.
It’s kind of how we got one of our recent presidents…
So you don't think you can present the same 2 sets of facts with different tone/connotation and achieve drastically different outcomes in public opinion?
They ask about the real estate purchases, they ask about the transfers, they ask about conflicts of interest and criminal liability. How can a live unedited interview with those questions be a puff piece?
People are angry and they aren't seeing the immediate consequences they want. It's not just an SBF thing though, I suspect that various police dramas have given people a very skewed view.
You’re right, but the political angle reinforces this. Note the posting history of the people who’ve been most consistently performing outrage about this — they’re pretty reliably cued by whatever the right-wing media is currently pushing, and right now that’s emphasizing his donations to Democrats and the idea that he bought leniency. I’m sure the emotion is genuine but it’s being stoked by a party eager to go back on the attack after the scandal-plagued Trump years.
There's a lot of outrage performers invested in crypto who want to make this about _anything besides crypto_.
So instead of people taking a close look at the crypto space and saying "wait, maybe a lot of these other projects are flawed", their anger gets focused on the press and the regulators. It's pretty ridiculous when you think about it -- is the NYTimes really responsible for FTX because the tone of their pieces wasn't sufficiently harsh? I'm skeptical.
Yes — I'd especially want people to point to their own past warnings about projects before they failed. The kind of stuff coming out about FTX means basically anyone who worked there could have blown the whistle but did not, and I'd be shocked if other people in the field didn't have some idea that things were not as solid as advertised.
And of course there can't be a mind virus around the mind virus that he heavily donated to democrats on the part of idiot republicans and that only a free-minded savant on HN would know that he also donated to republicans.
Except that only a moron would ask those questions in a vacuum like Sorkin did without a single follow up. He didn't challenge a single one of his answers when there is so much evidence against the lies he spewed. It's really not that hard to understand, but sure go ahead deny this was anything but grade-A journalism, if you're a NYT fanboy you'll find a way.
It's as if SBF lawyers handed NYT a list of questions to ask and nothing more.
I don't think this is a correct representation of the interview. Sorkin starts by reading a letter from an FTX customer that directly accuses SBF of stealing. The next 30 or so minutes are repeated follow ups on commingling of assets between Alameda + FTX, and Sorkin highlights past statements SBF made that seem to contradict with current reality. Sorkin even has this:
SORKIN: I think the question is whether you supposed to have access to these accounts to begin with. If I worked at a bank and was a bank teller and I decided to leave the bank at the end of the evening and take the cash that I ostensibly had access to, even if I intended to bring it back to the bank later or with even more money to give them back — I still stole that money.
The Times and Washington Post perhaps but I haven't seen any puff pieces from WSJ about SBF. In fact quite the opposite. The WSJ seems to be decidedly anti-crypto. The most recent piece concerning him before this announcement was titled:
I skimmed the entire document and didn’t see any new information and in particular i didn’t see any evidence of a particular crime that could be pinned on SBF, other than negligence. (I’m sure he’s guilty of many crimes, i just didn’t see new evidence in this document)
This is his intro statement to the Congressional Committee. One wouldn't expect that it has much new, and given his role as "repo man", it wouldn't be focused on SBF's specific crimes, but on what he can do now to clean it up. But the tone is absolutely damning and it's clear that he is saying that illegal shit went on.
It's the testimony they are going to read tomorrow. It's a good idea to have something prepared so you don't stumble over yourself like SBF is everytime he speaks.
There are a lot of people responsible because of things they did but also a lot of people responsible by being quite negligent.
Actually more than the people who perpetrated the fraud, I hope the people who casually let it happen while doing none of their job to prevent it… I hope those people see real consequences.
There are always going to be cheats and bullshitters, our first line of defense against them are the people who are supposed to be reasonable just saying “no” to the dude sucking at League during a pitch.
Just one day before the hearing at the US house? very interesting. Why not let him talk if he was going to incriminate himself more? Somebody sure didn't want him to talk tomorrow...
Your honor, my client confessed to the murder while in police custody, in fact -- we have it on tape. But we're not allowed to use it since it was not under oath. Shucks.
That article says he was scheduled to testify before the House ("Bankman-Fried is scheduled to appear at a House Financial Services Committee hearing on Tuesday that will focus on his company's collapse") while refusing to testify before the Senate.
What did Binance do wrong again? I don’t consider having faulty blockchain analysis software at a time (2018) when most blockchain analysis software wasn’t very good a crime. And the Iranians they supposedly aided all used VPNs and hid the fact that they were Iranian. I think the best the government will get out of Binance is a DPA but that’s just me.
They haven't been caught red-handed, but their reserve claims are highly suspect[1]. Predictions that Binance is next are pretty credible in my mind, and the DOJ is already looking[2] in that direction.
Also given that the big banks haven't been hit hard from this scandal DOJ might go harder at Binance since they probably didnt want to destabilize the economy unnecessarily with pursuing both at the same time (uncertainty around exposure to crypto in the wider market).
They'll be caught shuttling around money from account to account to inflate the apparent amount of reserves on the books by my reading of that Mazar's doc.
(to elaborate: Look here, we have 2 billion in this account on Monday, 2 billion on that account on Tuesday and 2 billion over there on Wednesday, so that makes 6 billion total, right?).
Don't know details of Binance, Tether or others. But at this point, it would be prudent to pull all except your in-play trading chips off the table into self-custody no matter what exchange you are using, until this whole kerfluffle is sorted out.
I wonder how crypto exchanges can guarantee non-hypothecation of customer funds in a DeFi trustless manner. The methods I've heard about still are tradfi-style centralized mechanisms that can still be subverted, and do not leverage crypto currency's strengths, though I'd sure like to be pointed to any exchange that has really figured this aspect out.
Don't we all love some bank runs and stupid bagholders losing all their money? Specially if they had some magic beans we dislike. It's good for fiat. /s
Yeah but that was a very shitty prediction. It appears the charges filed were by SDNY which if anything is known for being anti-Trump. Essentially a bunch of democrat appointed attorneys arrested him.
Not only shitty, but opposite of how you'd expect. When a high-profile donor does a high-profile crime—and when they're certainly not going to be a fundraiser in the future—the recipient of those donations has a lot of motivation to distance themselves from the fraudster, to be harsher in their actions, to respond to pressure and sever any perceived ties.
This is a cogent point. Sometimes people see political donations as a suicide pact and they most definitely are not. A politician's deference to a donor is a function of the probability of future donations from them. If that probably drops to zero their deference drops to zero. A donor is only as good as their next donation.
This is true on all sides of the aisle. If SBF hadn't tried to speed run every crypto-scam he might have some political connections left. But he's not just persona non-grata, he's broke. He doesn't have much to offer politicians at this point except testifying against co-conspirators (should there be any).
Not surprising, I’m sure they want to run the investigation to ensure they can run damage control and keep the most implicating evidence out of the public eye.
Is there any evidence that would convince you that you are wrong? Was your prediction last week that this would happen - or did you predict he wouldnt be charged?
I personally do not think the Dems care about a broke crypto dude who can contribute nothing to them and didnt exist 3 years ago.
What? Wherever you put your goalpost, my goalpost was always wanting to see this guy convicted and imprisoned. That's the goalpost that actually matters when you're talking about the prosecution of criminals.
Speedy trial requirements at the federal level are strict, they would not file charges if they weren't pretty much ready to take it to court. I think you'll get your wish sooner than later. Recall that the feds have a nearly perfect conviction rate.
What I found funny about that kind of attitude is less the conspiratorial mindset but more the weirdly gullible perception of the world of crime.
People who are willing to be bribed generally tend to lack integrity and loyalty, so if you ever think that handing a corrupt person money is going to protect you once you turn from an asset into a liability with no leverage, stay out of that world. Which is probably what SBF thought too, which is why he was a really shoddy political operator and white collar fraudster with a very short lifespan.
I remember a lot of people strongly believed that SBF would never get in trouble because he was a Democratic donor, and that this was all part of some vast corruption scandal.
The HN commenters in question were universally saying that he made up the donations to Republicans to cover up his more extensive connections to Democrats.
SBF's claim is that the Republican donations were "dark", meaning is funneled through super PACs. These are famously not public record. He states he did this to hide them from the media.
Public record showed that he is #2 individual donor to Democrats. He claimed that he also donated a similar amount to Repulicans via "dark channel" or something like that, so no record, let alone public.
It’s not that everything’s a conspiracy, it’s that everything is corrupt. Our whole system is from top to bottom. The PR and public statements are almost never the private statements or full story.
Even with all the corruption, sometimes the optics are a bridge too far, even for the connected.
Strongly disagree. I think you can fairly say that about developing countries. I live in one now and it’s almost assumed politicians are on the take. But in the US many people are very principled.
I also don’t see why complete transparency would be the goal of the justice department. Sam might think of moving to Dubai if he knows all their moves.
Lots of folks in the third world and in the US are very principled. They just aren’t holding the levers of power in government.
The evidence of widespread corruption in the US government is everywhere if you open your eyes: legislators become vastly more wealthy after getting elected via insider trading, regulators invest in the very companies they oversee, prosecutors selectively prosecute crimes, sweetheart book deals and speaking gigs, positions on boards of think tanks and companies after their “public service” has ended, I could go on.
It’s not about transparency, it’s about integrity. All the things I mentioned above are open secrets. The US is a third world country with cell phones.
By definition, the US is a First World country. It basically refers to NATO. The Second World was USSR and Communist states. The Third World was everyone else.
> The US is a third world country with cell phones.
> It’s not that everything’s a conspiracy, it’s that everything is corrupt.
No, it's not, and this sentiment is what frustrates a lot of us. I'm in no way saying "the world is fair" or that money and power can't be influential, but, at least in the US, and at least for the time being, there are a lot of career law enforcement people who really just want to do a good job.
Yes, these folks that do just want to do a good job have been under a heavy attack in the past 10-20 years as "the deep state", but most of them are just normal Joes and Janes that are good at their job and believe in following the law, and there are just not enough avenues at the time being to bypass that, particularly in high profile cases like this.
In the US our corruption is out in the open, we enshrine our corruption into laws. Corporations have lobby groups that literally write the legislation Congress passes. If you think our system has integrity you’re just naive I’m sorry.
Yes, corruption exists. Yes, there are bad actors. But this idea that "everything is corrupt, all the laws are corrupt, the whole system is corrupt" is just lazy bullshit.
No it’s not lazy bullshit it’s the sad reality. It’s systemic, it perpetuates itself. Go read the Princeton study on the effect of our votes for starters.
You are right, most certainly not everything is corrupt and not everything in the “system” is wrong.
And yet, OP’s point of view is a very common one among people. So why is that? I think dismissing this as “nihilism” it’s not a clever continuation of this conversation.
Is it because the system is very inefficient at healing itself (or so seems to be) from bad actors, that the public thinks it will never be healed? Is it because politics is a zero sum game, therefore since many are corrupt and cheating, all the others seem compelled to do the same in order to hang onto power? (Very similar dynamics happens with pro cyclist).
Is it because it attracts a certain profile of people that are more likely to be corrupted?
Given the power nature of politics and the relatively few players involved, is it because we are holding everybody at a high standard therefore even one episode of corruption is enough to taint the whole category, even when corruption is limited in scope?
Lots of places to go before slapping the “nihilist” label on the car.
And if indeed the system doesn’t get better, what’s a good way to address the “nihilist” point of view across the population?
Is the problem too big and too complex to be solved because we can’t change human nature? Then maybe it is nihilism after all.
> the problem too big and too complex to be solved because we can’t change human nature
Yes. Basically, all humans can be corrupted at an individual level with the right incentives, and all people are somewhat corrupt, let's say except Jesus. So the system we compose inherits the characteristics of its constituent parts and there is no way to design around that.
This seemingly cynical view is so common IMHO because it's true. As far as I can tell, those that don't see it are just young and haven't figured it out yet or haven't seen enough to realize it. We start out being taught Mr. Smith Goes to Washington for a couple decades of our lives and it takes some time to peel that back.
well he has no more money to give, so of course they are happy to arrest him now. they just didnt bother investigating the fraud until after it collapsed for some reason..
yeah i’m sure, they just happened to wait till after the election and after he was out of money, and after it was early enough to prevent people from losing their life savings
Since Trump refuses to come back to Twitter Musk has decided to impersonate him. And since SpaceX depends very heavily on the government it seems very foolish for Musk to be getting to political.
A few days before that tweet: A person familiar with the matter said that the Department of Justice and the Securities and Exchange Commission (SEC) were examining FTX to determine whether any criminal activity or securities offenses were committed.
He's only a useful donor if he's super-rich. He might have walked away with a couple million assuming no prosecution, but regardless of what the media/politicians might think, his name is mud on Wall Street. That means he can't bankroll campaigns anymore.
Reminds me of the times other HN threads were full of people saying tick tock is perfectly safe and does not send all your data to their servers, hahaha.
I wasn't one of those people, but they definitely had history on their side. Nothing seems to escape prosecution in the eyes of the public like financial crimes.
Because convicting somebody of financial crimes requires proving intent, which is time-consuming and really hard to do. It’s not that people who commit financial crimes are able to bribe their way out of conviction, it’s that proving what is in somebody’s head is a difficult challenge.
Hopefully we will see this as a powerful turning point, heralding an end to cryptocurrency, with all its false promises of financial utopia.
Turns out it was nothing more than a series of scams, and the ensuing court cases will prove this beyond a shadow of a doubt. This entire edifice will come crumbling down, and take this entire sordid industry with it. One can hope.
I hear your anger, but consider that this is the one financial system where self-custody is an an actual workable option. You can't store 100M USD under a mattress. You can't deploy large amounts of cash without permission from governments. In the US, banks have to report transactions over $600 to the IRS.
That said, use Monero. It's the only one of these things that protects privacy.
Now we'll see if having both parents who are Stanford Law Professors, and possibly many other legal minded connections, will save him from going to jail.
His father was a paid employe. Quoting the WSJ article about his parents:
"Joseph Bankman and Barbara Fried remained by Mr. Bankman-Fried’s side—as legal advisers, one person familiar with the matter said, but mainly as parents to a son who is in deep trouble.
Before FTX’s collapse, Mr. Bankman was a paid employee of the company for almost a year. He joined his son in meetings with Washington policy makers, expanded its philanthropic endeavors and helped connect his son to at least one major investor. And when Mr. Bankman and Ms. Fried visited their son in the Bahamas, where FTX is based, the company provided a place for them to stay."
For those saying "what took so long?", this is incredibly quick. It's still quicker than I thought it would be. But it is an open-and-shut case. As soon as you steal custodial assets (meaning customer assets that you'r eholding in trust), it's game over.
Additionally, the US claims jurisdiction on pretty much anything that touches the US financial system. It's how the US can exert pressure on, say, European banks (eg the Swiss settlements for withholding taxes for US citizens).
Given the scale of the fraud (ie $billions), I honestly expect him to spend the rest of his life in prison. It's that large and that egregious. Was it worth it?
I'm curious to find out if Caroline Ellison was (or will be) a cooperating witness in this case as some speculated when she was spotted in a Starbucks recently in Lower Manhattan close to the SDNY office.
> I honestly expect him to spend the rest of his life in prison
Yeah a lot of people are saying this and citing Madoff for comparison. I guess we'll all wait 2 years and see, but I doubt he's getting this kind of time.
How similar can he make his story look to Nick Leeson's? He'll say he just got in over his head, tried to trade his way out of it, used funds he shouldn't have and lost in his gambles. Leeson got 6 1/2 and served 4. My prediction is SBF gets 11 and serves 7 or so.
Nick Leeson was prosecuted in Singapore though, very difficult to compare to that to the US. There's a good chance Nick Leeson would've gotten a harsher sentence was he charged by the Southern District of NY..
For all the struggles facing the democratic world, it's nice to know there is a stream of justice that prevails.
In certain other large counties, this man would either be protected or jailed depending on what party he aligns to. Sure, you can say the same for USA, but with far less immediacy. Over time things tend to sort themselves out.
A lot of the money that was lost came from institutions and some public funds as well. Ontario Teachers’ Pension Plan, BlackRock, Circle, Sequoia Capital, Binance, SoftBank,...
SBF is a crazy character, he somehow must have thought he was above it all. If he'd done what all these finance companies do, scamming the little man, he'd probably still be free. Alex Mashinsky yet has to be arrested for example. And people like Vladimir Tenev aren't even prosecuted, many of them get off with a slap on the wrist.
Don't feel bad for Blackrock/Sequoia/Softbank etc. These are professional investors, yet they invested in a finance company that didn't even have proper financial sheets. To let that slide is pure negligence, and, frankly, should put them on the hook for the monetary loss from the FTX customers.
Time to put all these frauds in jail and wrap up the crypto saga. Good practical demonstration why regulation and traditional finance work the way they do.
How do decentralized exchanges convert USD to crypto and back again? Especially given all the legal compliance requirements. This seems impossible without a central service / legal entity.
This is a very good question. They cannot and do not.
On/off-ramps are a huge topic and we have a lot of work to do to make these ramps as permissionless as possible, should we want to allow humans to decide for themselves whether or not to comply with (potentially) tyrannical governments.
If it wasn't for the goldrush enabled to large part by the exchanges cryptocurrencies would still be some technology used by some nerds in their basements to pay each other for pizza. Let's be real, almost nobody uses crypto as an actual payment method. It's all just get rich schemes too good to be true.
So why you're correct in principle, it would be of no relevance if everyone self-custodied (also let's not ignore the bugs crypto contracts)
No but with these exchanges collapsing I keep seeing the argument that it people kept everything in a soft or hard wallet then everything would be OK. I disagree with that premise for the reasons prior. Also in the case of Luna and many others their coins are effectively worthless.
Totally valid criticism about the coins potentially being worthless.
I just want to stop the ignorant, misinformed takes.
It's so paradoxical that HN is paranoid about the government changing settings on your phone without your permission, and yet HN does not think we should prevent the government or an opaque set of third parties from arbitrarily seizing and freezing your money.
I assume you’re saying the way they prevent misuse is because the ledger is public and it’s trackable by anyone who wants to look at the ledger.
If I’ve mistaken your argument then please correct me. I’m familiar with blockchain and have contributed to multiple projects in the open source community back when I saw potential and promise in blockchain tech.
If you’re depositing into a bank or exchange it’s not like 1 person is controlling that entire entities wallet(s). Deposits have the same risk of being misused in crypto as in fiat.
An argument against the worth of an arbitrary token created on a permissionless blockchain is not an argument against the good, useful, valuable properties of blockchains, such as the fact that you mathematically cannot be stolen from without physical coercion or profound negligence.
So am I to assume you have read the entire source code of any cryptocurrency you put money in to prove to yourself there is no "backdoor"? And you argue every user of cryptocurrency should do the same? i.e. "don't put money in X if you have not read and verified the source code of X and committed to reading every code for every future update of X, and also verified that the nodes you are talking to are running the same code X, and in the future will keep verifying that the network is not pulling a sneaky on ya?" In which case, I strongly agree with you. Moreover, with such a great user interface cryptocurrency will surely replace traditional finance any day :)
Never argued blockchains should fully replace traditional finance.
Banks are extremely valuable to me and probably always will be.
Blockchains have certain properties which make them extremely desirable in a specific set of use-cases. That set was greatly exaggerated by ignorance and insanity in the bull market. Still, the true set is nonzero.
You did not answer my earlier question, only latched on to a throwaway line at the end. Do you verify code of everything on a Blockchain you interact with, and maintain that everyone who interacts with the Blockchain should verify these "mathematical properties" themselves?
Yes, I do not hold assets in contracts which I have not personally verified.
Yes, I strongly recommend everyone do the same.
If it's a "yield vault" or an "LP pool" then you really truly should read every line of code and understand all the risks, because it is extremely likely that there is some catastrophic exploit, given the current near non-existent scaffolding regarding formal verification of smart contracts.
Great! At least we agree on one count. Now, from what you say, I see only two possible logical conclusions:
1. People only deposit their crypto on LP pools they can read and verify, on chains whose code they can read and verify. Since people with such technical know-how is very limited, there is not much liquidity in the "liquidity pools" and thus the DEXes are virtually unusable.
2. People deposit their money to DEXes without reading and verifying every single smart contracts and Blockchain code. DEXes have sufficient liquidity but the depositors sometimes wake up with all their money gone in the air.
If you are arriving at a third possibility, naturally you are making a different assumption than I made in the above two points. What are the assumptions that leads you there? I would really like to understand.
You make a good point. We need to figure out how to make it easier to use blockchains correctly.
It could be that there is no good answer and blockchains are simply hard to use and we should advise the general public to exercise extreme caution when using them, if at all.
SBF's public conduct over the past weeks, and alleged conduct over the past years, reinforces an image of unintelligence. Be it genuine stupidity, stimulants or both, he isn't top-of-the-doghouse material. (Granted, easy to say ex post facto.)
The elephants in the room are Binance and Tether, together with certain high-profile investors. Taking some of these out could likely be worth a plea bargain. (For optics, he has to go to jail. But sending him to jail for a long time while letting the others go free for lack of evidence is a bad trade.)
It’s a little bit innocent to think that SBF isn’t intelligent; he’s extremely adept at lying and manipulating. And on top of that, intelligent enough to create a large crypto exchange. It’s his morals and impulses that got him into trouble.
He’s the latest example of why many RPGs have separate stats for intelligence and wisdom. He’s clearly not stupid but his lawyers must be sitting at their desks sobbing “stop giving interviews!”
> He’s clearly not stupid but his lawyers must be sitting at their desks sobbing “stop giving interviews!”
TBH I don't think the interviews hurt him much, and I think more than likely they are a strategy trying to reduce his culpability. The common thread among all his interviews is "I'm really sorry for being such an idiot", basically trying to play stupid to make it difficult to prove intent.
I’d look at it from the other direction: how does an interview help him? Nothing he says is going to keep him out of a courtroom and he’ll have time to present his version there, so I’m not seeing any upside to potentially saying something which the prosecution can use, find a lead from, or simply point to as evidence of duplicity — immediately pivoting from “I’m a genius who’ll stabilize this out of control field” to “I had no idea what was going on and ignored my staff” just days after being caught is going to be a hard sell.
Being intelligent at math is quite different than handling a crisis well. IMO he's spent the last few years with everyone sucking his nuts and going on about how smart he is and it's gotten to his head.
My opinion is that it's all faux stupidity. I think his whole "I really didn't know what was going on" spiel is going to fall apart quickly in court. Anyone with a couple brain cells to rub together would know to shut the hell up. He seems desperate enough to try lying and manipulating his way out of hot water. That's what his whole media tour has been about. He's not giving interviews to people that will give him tough questions and follow up on his responses. He's giving interviews to people that are going to ask "so, what happened?" And follow up his half-baked response with "Wow, you didn't know what was happening, that's wild!"
He could be intelligent but distressed (who wouldn't?) or he could be just a front for more sinister people.
> Binance and Tether
Binance is the elephant in the room. They might have their finances in order, however. The fact that they were enabling shady deals doesn't mean they were cooking their own books. For Tether, I think it's more solid than you think. These guys have been cooperating with NYAG from day one.
It is a feature of social media society that there is such a large body of actual evidence ex post facto that is so damning. I am thinking of SBF tripping on stimulants on meet the press, the CEO of a multi billion $ hedge fund talking about how many of their investments were scammy.
Yet these raised no red flags, and were even cited as proof of their genius, how this time it is different - you can pitch at a 30bn valuation while tripping on drugs and playing a game at the same time. Genius (or Idiot?)
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[ 2.8 ms ] story [ 751 ms ] threadIt also says the US has filed criminal charges, which is the first I'm hearing of this.
As an aside - anyone else think it makes congress appear weak to still be allowing people to remotely testify? They supposedly are the most powerful and important legislative body in the land, perhaps the world - yet they can't compel people to show up in person and treat the event with the deference it's supposed to deserve?
Congress is in session - meeting in person. Why should people be allowed to remotely testify at this point? It's congress - show up in person, it's important.
https://news.ycombinator.com/newsguidelines.html
Not really. Not being compelled to testify against yourself is also one of the most important rights this country has enshrined.
Congress isn't a court, and he was not testifying because congress arrested him or anything - it doesn't work that way.
He was going to testify - and a lot of people testify in front of congress all the time. But you used to have to do it in person until the pandemic. Now that congress is back to in-person session - so should the people who are testifying.
SBF was going to testify. He was going to do it remotely.
My issue is remotely was not an option before the pandemic. It was allowed during the pandemic for good reason, but now that reason doesn't exist anymore. Therefore, remote testifying should not be allowed anymore either...
(If they grant you immunity , so they can't charge you even in the future, that's the only thing that gets you out of being able to plead the fifth).
> North Takes Fifth Amendment in Testimony to Senate Panel : Claimed Protection at Least 40 Times, One Source Says
> WASHINGTON — Congressional sources said today that fired National Security Council aide Lt. Col. Oliver L. North took the Fifth Amendment during his testimony Monday before the Senate Intelligence Committee.
> One source, who, like the others demanded anonymity, said North took the Fifth Amendment at least 40 times. Another source said he declined to answer a number of questions put to him by senators and committee staff members.
> Asked about an apparent contradiction between Sen. Dave Durenberger’s contention that witnesses had been candid and the report that North refused to answer many questions, committee spokesman Dave Holliday said he would make no attempt to clear it up.
---
NORTH SAID TO USE FIFTH AMENDMENT - https://www.nytimes.com/1986/12/02/world/north-said-to-use-f...
> ...
> The Fifth Amendment protects an individual in any proceeding from being required to give testimony that he feels may incriminate him. Invoking it carries no implication of guilt.
> Senator David Durenberger, Republican of Minnesota, who is chairman of the Select Committee on Intelligence, likened the proceedings before the panel to a grand jury investigation. He said witnesses were testifying under oath.
thats dark.
Magnate of coins
Hooverer of phet
Legend of League
Pinner of weasels
Then again, he's been much more out in the open about everything. He pretty much laid the prosecution's case out to the public for them.
> But he would offer only limited details about the central questions swirling around him: whether FTX improperly used billions of dollars of customer funds to prop up a trading firm that he also founded, Alameda Research. The Justice Department and the S.E.C. are examining that relationship.
> Alameda had accumulated a large “margin position” on FTX, essentially meaning it had borrowed funds from the exchange, Mr. Bankman-Fried said. “It was substantially larger than I had thought it was,” he said. “And in fact the downside risk was very significant.” He said the size of the position was in the billions of dollars but declined to provide further details.
> Around the time the crypto market crashed this spring, Ms. Ellison explained, lenders moved to recall those loans, the person familiar with the meeting said. But the funds that Alameda had spent were no longer easily available, so the company used FTX customer funds to make the payments. Besides her and Mr. Bankman-Fried, she said, two other people knew about the arrangement: Mr. Singh and Mr. Wang.
https://www.nytimes.com/2022/11/14/technology/ftx-sam-bankma...
It was substantially larger than I had thought it was -- whoopsie!
the funds that Alameda had spent were no longer easily available (and why is that, hmmm?) , so the company used FTX customer funds to make the payment -- didnt want to, just rearranging some furniture!
Ha, After typing this I went to double checked my memory of the article. They literally refer to him as a villain in the first paragraph. Even my hyperbole can't stand up.
- No question about commingling funds between FTX and Alameda
- No question about his relationship with Alameda's CEO
- No mention of the tweets he deleted
Covers the first two. They refer to how intermingled they were several times. Its a major point of the article.
"He lived in a five-bedroom penthouse in the Albany resort’s Orchid building, with Ms. Ellison, Mr. Singh, Mr. Wang and six others. Mr. Bankman-Fried and Ms. Ellison were at times romantically involved, two people said." This covers point 3
It didn't mention the deleted tweets though but that's minor compared to everything else. Are we talking about different articles? This is the one I normally see people complaining about from them: https://www.nytimes.com/2022/11/14/technology/ftx-sam-bankma...
Despite not being present at the scene of any of the crimes, Manson, a victim of America's "cradle-to-prison pipeline" starting at age 5 when his parents were both incarcerated, and was allegedly raped at a reform school, was convicted on seven charges of first-degree murder. The prosecutors also conceded that Mr. Manson never directly instructed anybody to commit the murders, yet he was sentenced to death.
Manson, who earned a following preaching a unique, persuasive self-made philosophy based partly on the Bible, Dale Carnegie and the Beatles, has remained as perhaps the most popular and controversial criminal in the United States in the 20th Century.
By contrast imagine your motivation is to remain impartial, to say nothing of critical given your long-standing antagonism of billionaires and crypto, and here you have a billionaire player in crypto. Would you do things like press him on the discovered backdoors, where exactly the money went, illegalities of misappropriation, etc? Or would you simply take hand-waving deflectionary non-answers at face value, let alone publish them? Would you invite him to come speak alongside world leaders at an event you are hosting?
I think this might be the confusion between the two parties in this discussion. When people say 'puff piece', they don't just mean that they're engaged in mindless cheer-leading, but rather that they're taking a turd and instead of reporting on a turd, they're reporting on a diamond in the process of being made, while remaining aware of what the reader is going to see when they look at that 'diamond in the making.'
People think he should be punished by being ignored by the larger publications or something. He was still giving Twitter interviews with lots of popular crypto people all the time so I doubt it would have done anything.
Best bet for an ex-con is to bootstrap a crypto-native company anonymously, or a crypto trading firm. Given how Alameda went, more likely the former, but I suppose that's getting harder too.
Beachfront properties, random companies, journalists... but no Lamborghinis.
Got it.
Don't get me wrong though, I'd say 2008 was blamed a lot on an industry that largely played fairly outside of some truly revolting players. Letting too many bent actors get away with their misgivings emboldens the next generation, and you could certainly argue a lot of this next generation of bent actors are playing fast and loose in crypto.
How did any of that change exactly?
That 2008 style Wallstreet corruption is bigger than ever, it's just a matter of time before the world sees that the upcoming/ongoing inflation is not actually "due to the war in Europe and Covid".
The same political conflicts of interest exist, regardless of whether the funding comes from a carbon Super-PAC, or a crypto con man... But you wouldn't be able to tell that from any of the blatantly partisan rhetoric around it. It's all very "We're not mad that campaign funding works the way it does, we're mad that the other guys got more of it."
Trying to limit 'who' can contribute is fraught with violations of free speech or picking and choosing the definition of what a 'company' vs an 'organization' is.
'The Number of Representatives shall not exceed one for every thirty Thousand, but each State shall have at Least one Representative…” — U.S. Constitution, Article I, section 2, clause 3'
As it is now, they decided to stop.growing the House because ... big bribes to the controlled-by-lobbyists Reps.
That case is even murkier, but the intent seems clear.
Did I miss something?
He can claim it was just a mistake and an accounting error if he wants, but the judge and jury will have final say if he goes to jail.
It also sounds like alameda's job was to market make the FTX coin, which they presumably did with that money in part. And likely kept doing until they blew up.
He's a fraud. He knows he's a fraud, and his PR campaign is an attempt to prove he's not a fraud but instead just really really dumb and stuff. Because being dumb isn't illegal, but running a fraud is.
It's pretty easy to lose any amount of money if you're paying $10 for $5 bills.
Everything he's done since FTX first crashed has pretty much been straight out of the most fantastical dream any federal prosecutor has woken up from in the middle of the night, certain that no defendant on the planet would actually be that dumb.
Nit-pick: it very much can be. Being dumb can lead to gross negligence, which can be criminal.
[1] - https://www.forbes.com/sites/mattdurot/2022/11/17/sam-bankma...
He cashed out $300M at Series B and took a $1B loan from FTX. So yeah, ~10% went to Lambos and the rest of the $10B to his gambling habit.
I was on the jury of a federal fraud case, where the defendants took millions of dollars in customer funds and used it to make bad business decisions and/or placate earlier customers.
It was very clear to us that even though they lived a very simple life (old car, $1,500/month rented house), they wanted to build the biggest company in their industry, and fraudulently used their customer's funds to do it.
I recommend you pull yourself away from the Anti-Semitic Point Of No Return. That way leads to social ostracism, and for no good reason at all.
[edit] As I said elsewhere, I stand corrected. I thought you were dog-whistling.
And depending on the part of Ukraine, they are either closer to Polish or Russian (some % Mongolian), despite both countries Slavic. Ukranians calling Russians "orcs" during the war is quite interesting given that we would normally call that moniker racist.
Other brokerages lend out their spare cash without your consent, too.
It's not really any different other than that law has (rather arbitrarily) decided to protect one and not the other.
- https://www.interactivebrokers.com/en/pricing/stock-yield-en...
- https://www.fidelity.com/trading/fully-paid-lending
Some brokerages lend out spare cash (and pay a transparent interest rate, and are subject to strict reserve requirements) but the majority of assets controlled by a typical brokerage are securities. FTX assets were all subject to their leverage strategies, with no specific reserve.
Also, banks have capital leverage ratios they need to abide by. FTX had no concept of leverage ratios or haircutting assets by liquidity.
I mean yes, but it's just a band-aid for a shitty system in which they allow banks to lend money they don't have, so they needed some ratio to control the mess they created.
In in ideal system nobody lends money that isn't their own. Period.
I'm forced to use banks because the government won't protect me from criminals if I shove cash under my mattresses.
The banks don't offer an "opt-out" option when you register. Real consent means you offer "yes" and "no" and the other party says yes.
It's effectively forced upon me.
The irony of your ill-informed statement is that if you want to put your money in places where it can't be loaned out to others without your consent, where you should really put it is a brokerage - at least, one in the US, where there are regulations ensuring your funds can't be loaned without your consent, and your assets are protected by SIPC insurance.
B) I don’t know about all of them, but the ones I’ve used have explicit rules against storing cash.
Akin to the narrow banks proposals of a few years ago
2. BBG news article recently speculated some hot-shot lawyers have begun representing Caroline.
Maybe the Alameda execs are trying to say they just made irresponsible gambles (like a shitty Wall St investor) but SBF is the one who secretly covered the massive losses with FTX customer assets without telling the public and was responsible for the "dual accounting" issue where deposits were counted twice. Among all the other things that they did wrong.
Or maybe there was a more direct/overt conspiracy at play they both took part in and she snitched first.
The good news is we'll probably find out sooner than expected if the extradition gets challenged in court. We'll see exactly how altruistic SBF really is soon.
Maybe part of the urgency was also the planned congressional testimony.
Citation needed? I'm not a lawyer, but it seems plausible to me that SBF's public admissions of crimes, plus the full records of his company, are sufficient.
But this, like most of the thread, is all speculation. We’ll find out more in due course.
Bankruptcy procedings. Subpoenas. The standard ways the FBI gets records from regular companies run by people who aren't criminals and don't want to become one (the current CEO is a regular business person).
But either way, these things take more time than what has passed thus far. I’m not saying that a case couldn’t have been made without an internal informant — just that it happening so quickly makes me suspect that someone (who was high up) flipped.
They can be, but they don’t have to be, and the current management doesn’t seem interested in protecting SBF or the others formerly responsible for running the FTX network of companies.
I’m sure he was more truthful in private signal or telegram chats amongst executives
It probably reflects the inherent risk-aversion that comes with a gov lawyer job.
A more balanced tolerance to risk is often missing from much of gov policy making. Probably has a lot to do with people who care more about highly visible and immediate prosecutions to satisfy the public > balanced long-term justice. Politics selects for that. You see the same thing happen on social media where emotions reign king.
there are long term benefits to encouraging conspirators to defect early and often, even if you don't strictly require them in a given case.
I think it's often less about convenience and more about prosecutor's political antennas. Who wants to see the guy dead in jail, and who would be most upset at you if that happened.
https://youtu.be/4o_jPzBZSIo
Here’s the crazy thing. Maybe they pierce the veil and say the two companies acted as one, but hedge funds fail all the time. The fraud was SBF using FTX to prop up Alameda…
https://youtu.be/4o_jPzBZSIo
“Piercing the veil” is a term of art for holding shareholders accountable for corporate liabilities notwithstanding the civil liability shield usually provided by the corporate form.
Holding coconspirators accountable for their role in a criminal conspiracy doesn’t have a special name because it is routine rather than exceptional.
Piercing the veil broadly refers to removing limited liability protections because the individuals behaved in such a way (criminally) that they have forfeited their protections.
The most common people held to limited liability protections are shareholders in limited liability corporations (LLCs)
A different sort of limited liability is the idea that customers/partners of a fraudulent business are not liable for that fraud, unless they committed gross negligence in allowing the fraud to continue.
To your point, there is not a snappy term for that specific phenomenon, because it is so rare, but piercing the veil 100% applies here because it refers to the “veil of limited liability”.
There is no “limited liability” for criminal sanction to which the term applies. There are criminal immunities, but finding something to be within an exception to one is not called “piercing the veil” in any context.
> A different sort of limited liability is the idea that customers/partners of a fraudulent business are not liable for that fraud
“People other the person committing a wrong are not liable for the wrong” is not generally a “form of limited liability”; it is the basic rule of initial liability. An exception to that is respondeat superior in which a principle is responsible for his agents liability in a broad range of circumstances, and corporate limited liability is an exception to that, since the corporation could otherwise be seen as an agent for its shareholders.
Finding that someone committed a wrong related to a third-party wrong that makes them vicariously liable for that third-party wrong is not generally called “piercing the veil”.
And that’s all in civil liability, which is the only domain where “piercing the veil” applies at all.
> To your point, there is not a snappy term for that specific phenomenon, because it is so rare
No, again, charging co-conspirators in a criminal conspiracy, regardless of their other business relations to each other, isn’t “rare”, has nothing to do with “gross negligence”; it doesn’t have (another) snappy name because its central to the point of the crime of conspiracy.
Huh? My dude, she didn’t work for FTX.
If you’re saying that she in fact did (and was therefore a co-conspirator), then we agree that FTX was a sham corporation that acted on behalf of Alameda, but then why are we here?
Oh yeah, because you wanted to sound smart without fully understanding a situation; I guess I already knew that.
You're supposed to count everything twice in corresponding accounts. That's double-entry accounting.
The badly labeled @fiat account ... ? I am still in awe over that 11yo's soda stand spreadsheet.
She was staying completely silent since the moment FTX collapsed while he was spilling the beans everywhere. She obviously cut a deal while he was parading on social media for god knows what reason instead of shutting his mouth. SBF is a complete moron who didn't understand how the party was already over for him, I put it on his upbringing given the kind of ideology his scholar parents preach at university, especially the bits about personal responsibility...
Matt Levine:
> “Sam Bankman-Fried Should Shut Up, Bernie Madoff’s Lawyer Says,” (...) perhaps it is one more case of us watching in real time as crypto re-learns the lessons of traditional finance. Maybe in six months all the busted crypto leaders will be saying “oh wow we should not have given all those interviews.”
But you have to look at the larger picture: The Federal prosectuion conviction rate is 95%. The Federal government is very good at getting prosectuions in cases they choose to prosecute. They tend to plea out cases that are riskier. A key tactic in doing this is they get one or more cooperating witnesses. That witness gets a better deal in exchange for their testimony that pretty much turns the case into a lock.
It's classic Prisoner's Dilemma. The first to take the deal is always the best off. Lawyers know it so if their clients are at risk, they'll tend to push their clients to be the one to take it. Ellison will most likely have direct knowlege of the situation and will be able to produce evidence such as emails and texts.
Importantly, she's not the main guy. It's SBF who opened up custodial assets to be used in that way (or so it seems). That's the primary offence here. It's a bit like how in a murder case the cooperating witness might be a driver or a witness but unlikely to be the actual shooter. They may get embroiled in a felony murder conviction otherwise thanks to the US-specific pecularity (and some, including myself, would call a miscarriage of justice) of felony murder but that's another story.
So Ellison fits the profile of an ideal cooperating witness, there's supporting circumstancial evidence and the fact that Federal prosecutors indicted SBF so quickly further suggests a cooperating witness with firsthand khowledge or they'd otherwise be mired in subpoenas for communications, conducting interviews and otherwise building a case.
A criminal indictment represents the end of the investigation, not the beginning. SDNY has already built their case to their satisfaction. People seem to think an arrest happens and the investigation continues. That's not how Federal prosecutions works.
SBF’s situation is different in that the game ends as soon as someone defects.
That's why underlings have strong incentives to defect, and defect quickly. (Defection is also rarely an option for the person at the top of the pyramid.)
Caroline's option to save Caroline regardless of what Sam does by testifying looks a lot better.
Consider the payoff matrix in this example, somewhat analogous to the case we're describing:
- Both defect -> both go to prison for life
- One defects, one cooperates -> the cooperating one goes to prison for life; the defector gets some minor punishment and otherwise goes free.
- Both cooperate -> both go free for a moment, spend some months or maybe even a few years living in fear, then with 95% chance go to prison for life. That's because the whole deal is about saving work for the Feds, but they will put in that work if needed, and come back with bullet-proof case.
There's hardly anything they can do to meaningfully increase their chances of surviving the "both cooperate" option, so the two prisoners will both try to defect.
This isn't necessarily the case. The Feds convict on 95% of the cases they decide to prosecute. Which means that they decide not to prosecute marginal cases.
It could be the case that there just isn't enough evidence to bury them.
But even if not, then have the prisoners multiply that 95% by whatever they believe is the chance Feds will eventually prosecute. Is it 50/50? That just gives them 52% chance of avoiding spending rest of their lives in prison, which is still not a good bet.
(Note that prisoners won't be unbiased here - the Feds will be trying to make them believe this chance is much higher than it really is.)
There is a third factor here, whether the prisoners can disappear before Feds go after them - I assumed they effectively can't, and/or it comes with sacrifices so big that it's not much different than prison.
Crucially, these particular prisoners have a very good idea of whether the Feds have enough evidence to go to trial (assuming the Feds get everything, which is probably prudent to assume). Especially with the advice of good council, which they apparently can afford.
> Note that prisoners won't be unbiased here - the Feds will be trying to make them believe this chance is much higher than it really is.
Which is mitigated by the advice of council. Of course, there is a chance that they are influenced too far in the opposite direction - their layers may be banking on raking in fees from going to trial.
That's the kicker though, and it's the lever the dilemma orchestrators (here, the Feds) have to force a result: smooth out any real-life considerations by making the payoff matrix more extreme. If the cost of failure is life in prison, "slightly increase" and "won't always work" isn't gonna cut it - they can practically guarantee the prisoners will make a specific choice.
https://www.amazon.com/Chickenshit-Club-Department-Prosecute...
That's oversimplified, especially when dealing with wide ranging investigations into complex issues, as the many indictments (including successive, either superceding or in different districts or, in some cases, both) indictments of the same party in the course of, for an obvious recent example, the Mueller investigation attest.
If they wanted her cooperation, but didn't absolutely need it, they may have struck a cooperation deal in which she still sees some prison time, but a lot less than she would have after a full prosecution.
My gut says that because he was so sloppy in implicating himself, that DOJ may not have strictly needed her, and so total immunity for her is unlikely.
The witness is supposed to say they cooperated because the law provides lighter sentences for those who cooperate voluntarily.
The informal one is basically just telling (some of) the truth during interrogation and agreeing to testify, where her lawyer gets to enter “she cooperated” as evidence during sentencing, but she might still get off scott free, or a judge might ignore the cooperation entirely if she’s found guilty. If SBF pleas guilty anyway, this cooperation is pretty much useless but carries the most credibility.
She can cooperate as part of a guilty plea [1] in which case the prosecutor provides the judge with a sentencing recommendation. The judge can still sentence her within the guidelines at his discretion, though usually the plea deal is on a smaller set of charges than the indictment so its a net win regardless and brings double jeopardy into play since it counts as a conviction.
The last kind is total immunity which sounds nice in theory but is more dangerous for both sides. She’d have to spill all of the beans on everything within the bounds of her immunity which will be broad. If she is ever caught in a lie or a deliberate omission, the immunity deal flies out the window and everything she said as part of the deal can be used against her at trial. Waiving one’s 5th amendment rights is usually a stipulation of immunity agreements - total honesty or guaranteed prison time.
It remains to be seen how much she is cooperating.
Edit: [1] turns out the DoJ has several different types of plea agreements and even a handy guide: https://www.ojp.gov/ncjrs/virtual-library/abstracts/basic-gu...
Strongly disagree with this. Look at how they threw the book at Elizabeth Holmes (vs, say, Adam Neumann, or any other male founder from the last decade plus). If anything women have been getting it harder.
There are plenty of male founders who got popped for fraud. Trevor Milton (of Nikola infamy) is an easy one that comes to mind.
Jeff Skilling (Enron) served 12 years.
Ken Lay (Enron) died before sentencing, but was facing up to 45 years.
Bernard Ebbers (Worldcom) served 13 years.
I can't think of a reason offhand to compare her to Neumann and not Sunny Balwani.
Can you explain further?
For example, selling some of his wework shares, buying office buildings, then leasing the buildings back to wework at above-market rates. Registering the 'We' trademark for himself then selling it to wework. That would be illegal due to being a conflict of interest, were the company publicly traded - but it wasn't.
(There was also drug use and sexual assault claims)
https://www.reddit.com/r/OutOfTheLoop/comments/z00scd/whats_...
Crypto men can add speed running traditional finance gold digging to the list of accomplishments.
https://news.ycombinator.com/newsguidelines.html
from: https://news.bitcoin.com/document-claims-alameda-ceo-carolin...
"...Alameda Research CEO Caroline Ellison’s personal account was in the hole by $1.31 billion in May 2022."
I don’t think this is being reported correctly - it’s not her personal account most likely Alameda.
I think Ellison will get off scot free since she only controlled Alameda, and not entirely. Her crimes are probably minor and worth forgiving for her testimony. At least that’s my hot take.
But it's quite possible that after the DOJ finishes twisting enough thumbs, they will have a stronger case against her than you or I do.
If Alameda executives knew that FTX customer funds were being commingled with Alameda’s then they were well aware their source of capital was from customer money they shouldn’t have been touching. It’s not just that they were given unlimited margin from FTX.
I've seen considerable evidence that the FTX empire, including Alameda, was jointly run by a narrow set of leaders, in which Caroline was #2, not a set of separate, arms length enterprises.
No way Ellison is getting off scot free. I'd expect her to get a huge reduction in her sentence, but would still be shocked if she got no jail time.
It has been reported that there was a meeting that included SBF, Ellison and the other high ups at FTX where the decision was deliberately, explicitly made that Alameda would use customer funds to prop itself up. That is most definitely a crime on Ellison's part if true.
> which is, in and of itself, insane because FTT worked more like a stock of FTX itself - a company doesn't put its own stock on the asset side of the balance sheet
Thinking about it, it makes sense. But I never did before. So where does a company’s own stock normally end up at, balance-wise?
The company’s own stock is in the equity section (treasury stock – stock that the company has repurchased after it was issued is a contra equity account, since the act of purchasing reduces stockholder equity.)
Though I would disagree that FTT really functioned equivalently to ownership shares.
* FTX's success was helped a lot by the reputation of Sam and Alameda as the best of the best * Alameda bankruptcy proceedings would have unveiled some skeletons, like the unlimited borrowing of user funds (confirmed by court filing recently)
This is most definitely a hot take.
Sam Trabucco - now there is a name you never hear ... yet he was CEO and left 2 months before they went bankrupt ...
Granted they technically have no fiduciary duty to users since nobody signed a contract with them, I doubt they get off scott free.
Many news outlets reported this. She participated on the crime
At the very least she will be deemed unfit or proper, which means she will be barred from any financial activity for the years to come.
On top of that, as a MOO & RO she will be professionally and personally liable to millions in fines, and most likely jail time.
Negligence _is_ a crime, a lack of means _is_ a crime, a lack of knowledge or control are crimes as well, for any regulated person, especially at the MOO/RO level, a lack of chinese wall between investment and retail is a crime, accepting money from an unverified source is akin to money laundering for an investment firm.
Edit: MOO, ROs (responsible officers) and MICs (managers in charge) are regulated activities that should be assigned to individuals performing specific duties in an investment fund. Each regulator will have different names and variations on their duties and structure, but overall it's pretty much aligned.
It is mandatory for a regulated firm to have a specific amount and hierarchy of these regulated activities, and each one of them comes with a set of duties.
These activities are the main vector by which regulators enforce and control individual managers.
MOO is often assigned to the CEO. ROs are often the key investment officers, and MICs are often the key tech & operation officers.
Edit2: Hedge funds are no less regulated than any other investment firm. You are mixing "prop shops"/"family offices" and hedge funds.
Alameda was definitely an asset manager as it received external funds and was selling (debt) securities.
Hedge funds are not magic places where you can say teehee i just used money I found
I’m not saying she’s fully innocent, maybe there’s some incriminating text messages or something, but from the public information so far it doesn’t seem cut and dry to convict her of a serious crime.
These are not only for customer protection, but anti money laundering as well.
Small regulators often overlook the client risk part so as to attract foreign money (that's why most of these regulators will be OK with little to no restriction of derivatives). The anti money laundering part though is very important for these small regulators as they could be fined internationally and don't want the bad publicity.
You cannot just "accept money and trust its from a legitimate source".
Well if you look at what the mainstream media are saying, the very same mainstream media who were presenting SBF as the second coming of the Christ on their front cover, you're not looking very much.
For a start it's proven that some people who wanted to send hefty sum of money to FTX had to wire it to Alameda to dodge controls. That's wire fraud.
Then it's clear that Alameda manipulated the market and were the ones behind the pump and dumping of several shitcoins. Including several shitcoins of SBF's creation.
But really... People who actually called SBF for the ponzi boy and FTX and Alameda for the complete ponzis they were, months or even years before they failed, have lots of evidence that Alameda was part of a bigger criminal operation, before FTX even existed.
If you really believe it's a coincidence the top lawyers at FTX and Bitfinex happened to be colleague at a company caught in an online poker cheating scandal I've got a bridge to sell you.
From the very start even just the naming of Alameda as "Alameda Research" was part of the con (SBF says on video he added "research" to dodge banking restrictions more easily).
The goal of Alameda Research was, from day one, to engage in criminal activities.
This entire "leveraged trade gone wrong" is lies, lies and more lies, relayed by certain media (once again: the same who were presenting SBF as an altruistic genius that was going to save the world).
Now maybe that Alameda also fucked up trades but I'm pretty sure that a lot of the missing billions mysteriously ended up at the hands of those behind the iFined/tether/Bitfinex/Deltec cartel.
Funnily enough this may make tether a bit more backed now.
One of the latest development btw is that one of the shareholder of Bitfinex is a now convicted money launderer (China just arrested sixty people in relation with chinese mafia money laundering through stashes of cash that found their way to Hong Kong and then were exchanged for USDT: $1.7 bn at least).
FTX / Alameda are one and the same and it's highly likely they were just a front for tether, with SBF as the useful idiot.
Some are going to say: "there's no evidence" but this entire thing stinks.
And nobody will convince me that Alameda didn't commit any crime.
Alameda, just like Moonstone bank (bought by SBF from Deltec) and the tens if not hundreds of companies SBF had, were part of a criminal operation.
Did she get any special loans or other gifts from FTX like SBF's parents got a free condo in the Bahamas ???.
[1] https://www.bop.gov/about/statistics/statistics_inmate_gende...
Nothing about justice requires that punishment be meted out in strict accordance with the demographic breakdown of a population except insofar as wrong things are done in strict accordance with the same demographic categories.
Maybe you're assuming that to be the case, but I don't think you'll find any evidence to support such a claim.
Why is it ok for 'spaulding to just shut down the argument as "nothing about justice requires that punishment be meted out in strict accordance with demographic breakdown" but suddenly a fallacy when I insert an actual demographic? I knew it would make people upset because well if we're talking about men then no defense is necessary, no woodruffw to the rescue with "affirming the consequent", but if black people cue up the folks with the torches.
https://slatestarcodex.com/2014/11/25/race-and-justice-much-...
2) That's not how logic works. Correlation does not equate to causation.
The argument isn't either "valid or not" in a general sense. The argument needs more nuance and if that's your concern, ask for it and point out where it is lacking. Demand better comments instead of trying a quick mic drop.
[0] Most people aren't confused with spurious correlations like: US technology funding vs number of hangings. (99.8% correlated) http://tylervigen.com/spurious-correlations
See how the causal factors in these arguments are different? The former is a demonstration of an unfair set of opportunities that disproportionately affects a certain subset of humans while the latter says that the arrests are destined because of genetic makeup. We know one is true and the other is false.
If you're making arguments akin to the former and getting called a Nazi, get off Twitter and touch some grass. Talk to some real people. Specifically people of color. But maybe listen first before you open your mouth.
These are people who literally start every discussion with the idea that people of different races should be treated differently based on the color of their skin. So I suspect they're projecting a bit, since that is precisely Nazi ideology cloaked in a different skin (literally).
Yes, because if we don't, then it does lead to what's been on display (which is also a selection bias). Start with the assumption of good intentions, but you don't have to keep that after they play their hand.
> A general rule of thumb is that anybody engaged in identity politics is a horrible human being, and discussion with them is generally an exercise in futility.
I found the problem. If you treat everyone you meet like an asshole or terrible person then it is no wonder they respond that way. You can't expect anyone to be nice to you if you are being a dick to them. People can tell what you think of them. You probably aren't as good of a bluff as you think you are.
I happen to think we should treat everyone the same regardless of skin color. Do you?
Is the explanation right in this case but wrong in that. Right in both? Wrong in both?
Is one of many articles on the topic. I had an old textbook (maybe 2003) textbook on markets and trading that had a sidebar that lionized him but almost everything on the web is colored by his scam.
That may have been revised down to 3 from 6...
I just learned that people have been theorizing on the internet that Caroline Ellison is Gary Gensler's daughter, which is completely nuts and totally false.
From The Verge article about the arrest of Bankman-Fried ( https://www.theverge.com/2022/12/12/23506483/sam-bankman-fri... ) :
John J. Ray III, who has taken over for Bankman-Fried as CEO of FTX and whose credentials include supervising the corporate cleanup after Enron imploded, has already said, 'Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.'
Source on pay: FT.com -> https://www.ft.com/content/5d826ca9-389e-41ec-a38b-da43211da...
FTX US had (at least) nine board members. FTX International (non-US entity) was private, as I understand, and essentially unregulated, so who cares about the board.
[1] https://futurism.com/the-byte/sbf-caroline-ellison-allegedly... and elsewhere
https://www.nytimes.com/2022/12/07/business/ftx-sbf-crypto-m...
Getting one of two culpable people to testify against the other and let them off the hook seems a dreadfully lazy approach to prosecution.
If you've just got wiped out financially? Unless they can expect donations from your allies, or from your peers in industry who are eager to see you released, they can just stop returning your calls.
https://www.youtube.com/watch?v=2ivqzyjfHG0
he walks through a lot of how the points are calculated.
You think there are only took culpable parties here?
With Holmes the prosecution probably had to do a hell of a lot of legwork to prove crap like intent, damage, etc.
I dunno. Wonder what other people think.
Seems the investors of FTX never asked for a detailed balance sheet. Companies that FTX bought out were often compensated with significant strings attached.
Holmes at Theranos was giving investors tours of it all working while doing it manually and with more blood behind a curtain.
From the WSJ:
https://archive.ph/2022.12.12-111902/https://www.wsj.com/amp...
This guy had a big mouth and poor motor control over his tongue. Who knew what he would spew? Maxine is relieved, is my opinion.
https://www.pointoforder.com/2013/05/22/taking-the-fifth-bef...
I no nothing about law, but I can imagine the pressure on Southern District to act after the cast was outlayed so well in social media.
Madoff was less than 11 days after discovery of his fraud:
https://www.theguardian.com/business/2009/mar/12/bernard-mad...
[1] Then following that admission with "and if people just give me another 8 billion dollars, I can fix everything" does perhaps point to him being a bit out of it. Or looking for the dumbest of marks.
But his admissions and the public and transparent nature of the fraud are effectively equivalent. Anyway, now that action is being taken I’m placated :)
Madoff was arrested before the news broke.
And Madoff was more out in the open. He confessed everything to his sons, and the very next day he was arrested.
I hope this is a lesson to those who think they can just talk their way out of things. The moral arc of the universe is long, but it bends toward justice.
Still surprised they moved that fast, I thought they'll wait for a demand from the DoJ.
Edit: According to vice.com, the US asked for his arrest.
https://techcrunch.com/2022/12/12/sbf-scheduled-to-testify-t...
Nope, it doesn't make any sense to arrest him if the goal was to force him to testify in front of congress. Once he is placed under arrest then I'm pretty sure the house cannot make him testify if he is in custody, he becomes at the mercy of a judge and I imagine bail conditions will not allow him to talk in public about the case either.
Also, it what universe would bail make sense for such an obvious flight risk?
As for flight risk the Bahamas had previously confiscated his passport and he wasn't able to get himself smuggled out in the last 2 weeks so he doesn't appear hugely flighty, but then again knowing that he's being formally charged may change that.
Bail is a US thing for: when you're arrested and charged with a crime, you're not necessarily going to sit in jail until trial. You are either let go or you pay money (bail) to decrease the chance you'll flee. If you can't pay bail or bail is refused by the judge, you sit in jail.
SBF hasn't been charged yet. Bahamas arrested him for the sole purpose of preventing him from fleeing because U.S. indicated that they'll charge him and will want to extradite him to U.S.
I don't know if Bahamas even has a concept of bail but it doesn't apply here and wouldn't make sense to let him out.
I think they can since they have vast subpoena power. SBF, however, can plead the 5th -- which would make it nothing more than a TV spectacle.
I don't know why a house subpoena would be any different.
If you are out on bail, I have never heard of bail conditions restricting what someone can say, that's not what bail is, I don't think that's even a thing. Judges in the case do sometimes put "gag orders" on the parties involved, but that's not related to bail.
Where are you getting this information?
He's perhaps unlikely to be testifying to the house tomorrow though, when he's been arrested in the bahamas. Probably just as a practical matter he needs to be extradicted to US custody and processed first.
I think the point the GP is trying to make is that his arrest does not obligate him to testify in front of anyone: his "right to remain silent" and all that. Prior to being arrested, voluntarily testifying (or complying with a subpoena to do so) before Congress could have been useful to him if he could manipulate things well enough to get the heat turned down. (I don't think he'd actually be successful at that, but that's another story.)
Now that he's in jail, he may actually listen to the advice I'm sure his lawyer has been giving him all along: shut the hell up. And he's perfectly within his rights to do that. Even if he is hauled before Congress, he can simply assert his 5th Amendment rights after every question, and that might actually be the best move for him now.
Edit: re-reading the GP, I realize what you were objecting to, the "I'm pretty sure the house cannot make him testify if he is in custody" bit; I agree with you in that I don't think that's the case. Still, though, even if Congress can force him to testify, they can't actually force him to answer questions. They technically couldn't do that before, but now that he's been arrested it's likely even less in his best interests to talk.
Is there anyway the arrest is in response to the refusal to testify? Or just coincidental timing?
FTX had a lot of customers in Hong Kong. So where do you go?
Madoff got 150 years in prison, and i dont see any reason why SBF would get any less.
He lost the locals' money too [1]. They weren't letting him go anywhere.
[1] https://www.bloomberg.com/news/articles/2022-12-12/bahamas-p...
I actually see one: SBF mostly mishandled unregulated magic beans on an unregulated exchange (FTX.com).
The unregulated magic beans on the regulated exchange FTX.US are still there, waiting for withdrawal, according to his tweets.
US customers weren’t even allowed to register on FTX.com, which was outside the US.
Anyway, he still kinda defrauded Sequoia and friends, who didn’t buy magic beans but actual shares of the FTX exchanges (not sure about whether .com, .us or both)! But maybe he still gets less than 150 years..
Even if they only sent magic beans, wire fraud covers any form of property - not just money.
All North and South American countries do. All Caribbean countries too. Even Cuba.
Parts of Africa and Asia look pretty safe. Madagascar is nice this time of year.
0. https://2009-2017.state.gov/documents/organization/71600.pdf
People like Ghosan are safe because they flee to countries that won't extradite their own nationals as a matter of long standing policy. They have no problem extraditing troublemakers from other nations, especially under international pressure.
See Vietnam's latest extradition for example [1], which doesn't have an extradition treaty with the US and they aren't even on the best of terms. The only way they could get away in Madagascar is if the authorities there didn't have the resources to capture them - a small promise of USAID from the State department would be enough to put extradition on the table.
[1] https://hanoitimes.vn/vietnam-us-cooperate-to-extradite-amer...
If he had simple fraudulent intent (i.e. personal enrichment at the expense of customers), he would have had a plan. One that included adequate cash socked away in appropriate locations. Something much more well-thought out than "a US-friendly island 2 hrs by plane from SDNY".
People aren’t cartoon villains, and the speculation about “what I’d do if I were Al Capone” or whatever are just silly fantasy.
This is bank fraud, not a heist, also much different than Madoff.
This is the prepper fallacy: stockpiling riches but not allies makes you a target, not safe. Maybe you can get away with it if you’re an incredibly charismatic cult leader but most people are going to be much better off with friends and family than a pile of Krugerrands and guns.
You're going to ask to see a cartel boss and tell him you have $10B in untraceable money, and you need a small army - you're willing to pay 1,000 men - $100,000 for the next 10 years ? They will most probably start to torture you to know where the money is, before you finish these words.
That's a fun mental exercise btw - imagine you have $1B now - let's say illegal money you need to keep. How do you proceed ?
If you committed a billion in fraud, you probably wouldn't be shitposting on Twitter or giving interviews that made a prosecuter's case easier, either.
Guess what, you're smarter than this dude.
Then again, realistically a disappearing act of this magnitude would likely require access to a lot of trusted people to pull it off. Plastic surgery, boat captains, someone to plant false leads, security, etc.
Bahamas will have absolutely not let him get out of their sight. They have so much egg on their face.
I can even see the titles if he left "Did he bribed Bahamas officials to look the other way?" ...
There was talk that he was followed around everywhere in Bahamas by the police.
Like I said, there are ways to keep someone on an island without arresting them. Especially in this case, what was he going to do, sue?
On a boat? Usually not. Most people island hopping in the Caribbean definitely aren't going through any kind of passport controls.
Unless the cops were following him everywhere he went, Bahamas would be one of the easier places to escape.
He answered this question at the beginning of this interview:
https://www.youtube.com/watch?v=zGNiYt1GN_4
"from my perspective, it's not about looking to go home.... this is were I've been running FTX from.... there are still things that need to get done."
Feds were probably gathering evidence from Day 1, and the restructuring CEO seems to have found it: https://docs.house.gov/meetings/BA/BA00/20221213/115246/HHRG...
"Yaffe-Bellany says Bankman-Fried stayed on the line for over an hour – and yet there are no direct quotes concerning the conflict of interest between FTX and Alameda, neither a confirmation or denial that SBF illegally commingled funds between the two or further admissions of guilt. There's little sense SBF, who stepped down from the exchange, is taking responsibility for the situation.
But, what, you want SBF to perjure himself? It’s a shame that Yaffe-Bellany wrote about Bankman-Fried’s cryptic Twitter thread, rather than the tweets he has been deleting. It sucks we know nothing more about the Bahamian withdrawals FTX opened, claiming it was at the behest of the island nation’s securities regulator – which the agency debunked."
> The NYT profiles I've seen is pretty clear that Alameda and FTX were mingling customer funds, that he refused to answer questions about the handling of funds, and that he was under investigation.
>> But he would offer only limited details about the central questions swirling around him: whether FTX improperly used billions of dollars of customer funds to prop up a trading firm that he also founded, Alameda Research. The Justice Department and the S.E.C. are examining that relationship.
OK no quote, but if there's no information why should they quote three repeated "no comments"? If he did not answer the question there's nothing quotable there, that doesn't make it a puff piece.
Maybe coinbase has political motivation to call reporting from certain media puff pieces?
- commingling of funds between Alameda and FTX
- conflicts of interest between the two, including SBF's relationship with the CEO
- use of customer deposits to pay off loans for Alameda
- that FTX and SBF are under investigation
If you want to compare tone, you can look up any NYT article on FB https://www.nytimes.com/topic/company/facebook-inc.
If you want something specific to compare, just take a look at the headline/subtitle which about as far as most people get in any article.
That's because describing it as "deliberate fraud" would require evidence of intent that they don't have. I agree that it's likely the case, but I wouldn't expect a journalist to state it as fact at this point.
FTX firm headed by SBF collapses after failing to process user withdrawals. Mismanaged funds and risky trades are to blame. Victims and prominent figures within the crytposphere allege fraud.
Funny how when it comes to most stories, "Business is killing babies... says person (random person on twitter)" is good enough.
It’s kind of how we got one of our recent presidents…
Ignoring that he also donated to Republicans. This is all part of that narrative - substantiated or otherwise.
So instead of people taking a close look at the crypto space and saying "wait, maybe a lot of these other projects are flawed", their anger gets focused on the press and the regulators. It's pretty ridiculous when you think about it -- is the NYTimes really responsible for FTX because the tone of their pieces wasn't sufficiently harsh? I'm skeptical.
It's as if SBF lawyers handed NYT a list of questions to ask and nothing more.
SORKIN: I think the question is whether you supposed to have access to these accounts to begin with. If I worked at a bank and was a bank teller and I decided to leave the bank at the end of the evening and take the cash that I ostensibly had access to, even if I intended to bring it back to the bank later or with even more money to give them back — I still stole that money.
The full transcript is here: https://www.nytimes.com/2022/12/01/business/dealbook/sam-ban...
"The Rise and Fall of Respectability":
https://archive.vn/AiEEO#selection-109.5-109.40
Seems SBF won’t be attending after all…
Actually more than the people who perpetrated the fraud, I hope the people who casually let it happen while doing none of their job to prevent it… I hope those people see real consequences.
There are always going to be cheats and bullshitters, our first line of defense against them are the people who are supposed to be reasonable just saying “no” to the dude sucking at League during a pitch.
None of that was under auth.
"the prosecutor: but you said this on Twitter?"
"SBF: I was no longer the CEO of FTX and I was just kidding".
> "SBF: I was no longer the CEO of FTX and I was just kidding".
Jury: "We don't buy it. Guilty"
Though I do wish he had testified and further incremented himself.
I knew this was Unixware’s fault.
https://www.cnbc.com/2022/12/12/former-ftx-ceo-sam-bankman-f...
https://www.cnbc.com/2022/12/12/us-doj-is-split-over-chargin...
But as a counterpoint, if they couldn't create AML controls for their exchange, they shouldn't have existed -- at least not until they built it.
[1] https://mishtalk.com/economics/binances-alleged-crypto-audit...
[2] https://arstechnica.com/tech-policy/2022/12/doj-divided-over...
(to elaborate: Look here, we have 2 billion in this account on Monday, 2 billion on that account on Tuesday and 2 billion over there on Wednesday, so that makes 6 billion total, right?).
I wonder how crypto exchanges can guarantee non-hypothecation of customer funds in a DeFi trustless manner. The methods I've heard about still are tradfi-style centralized mechanisms that can still be subverted, and do not leverage crypto currency's strengths, though I'd sure like to be pointed to any exchange that has really figured this aspect out.
This is true on all sides of the aisle. If SBF hadn't tried to speed run every crypto-scam he might have some political connections left. But he's not just persona non-grata, he's broke. He doesn't have much to offer politicians at this point except testifying against co-conspirators (should there be any).
I personally do not think the Dems care about a broke crypto dude who can contribute nothing to them and didnt exist 3 years ago.
https://en.wikipedia.org/wiki/Preparedness_paradox
People who are willing to be bribed generally tend to lack integrity and loyalty, so if you ever think that handing a corrupt person money is going to protect you once you turn from an asset into a liability with no leverage, stay out of that world. Which is probably what SBF thought too, which is why he was a really shoddy political operator and white collar fraudster with a very short lifespan.
It turns out not everything is a conspiracy.
"Prosecutors" also begins with the letter "P, but...
https://fortune.com/crypto/2022/11/29/sam-bankman-fried-poli...
https://www.washingtonpost.com/politics/2022/09/22/senate-re...
Even with all the corruption, sometimes the optics are a bridge too far, even for the connected.
I also don’t see why complete transparency would be the goal of the justice department. Sam might think of moving to Dubai if he knows all their moves.
The evidence of widespread corruption in the US government is everywhere if you open your eyes: legislators become vastly more wealthy after getting elected via insider trading, regulators invest in the very companies they oversee, prosecutors selectively prosecute crimes, sweetheart book deals and speaking gigs, positions on boards of think tanks and companies after their “public service” has ended, I could go on.
It’s not about transparency, it’s about integrity. All the things I mentioned above are open secrets. The US is a third world country with cell phones.
> The US is a third world country with cell phones.
This makes no sense.
No, it's not, and this sentiment is what frustrates a lot of us. I'm in no way saying "the world is fair" or that money and power can't be influential, but, at least in the US, and at least for the time being, there are a lot of career law enforcement people who really just want to do a good job.
Yes, these folks that do just want to do a good job have been under a heavy attack in the past 10-20 years as "the deep state", but most of them are just normal Joes and Janes that are good at their job and believe in following the law, and there are just not enough avenues at the time being to bypass that, particularly in high profile cases like this.
In the US our corruption is out in the open, we enshrine our corruption into laws. Corporations have lobby groups that literally write the legislation Congress passes. If you think our system has integrity you’re just naive I’m sorry.
Yes, corruption exists. Yes, there are bad actors. But this idea that "everything is corrupt, all the laws are corrupt, the whole system is corrupt" is just lazy bullshit.
And yet, OP’s point of view is a very common one among people. So why is that? I think dismissing this as “nihilism” it’s not a clever continuation of this conversation.
Is it because the system is very inefficient at healing itself (or so seems to be) from bad actors, that the public thinks it will never be healed? Is it because politics is a zero sum game, therefore since many are corrupt and cheating, all the others seem compelled to do the same in order to hang onto power? (Very similar dynamics happens with pro cyclist).
Is it because it attracts a certain profile of people that are more likely to be corrupted?
Given the power nature of politics and the relatively few players involved, is it because we are holding everybody at a high standard therefore even one episode of corruption is enough to taint the whole category, even when corruption is limited in scope?
Lots of places to go before slapping the “nihilist” label on the car.
And if indeed the system doesn’t get better, what’s a good way to address the “nihilist” point of view across the population?
Is the problem too big and too complex to be solved because we can’t change human nature? Then maybe it is nihilism after all.
Yes. Basically, all humans can be corrupted at an individual level with the right incentives, and all people are somewhat corrupt, let's say except Jesus. So the system we compose inherits the characteristics of its constituent parts and there is no way to design around that.
This seemingly cynical view is so common IMHO because it's true. As far as I can tell, those that don't see it are just young and haven't figured it out yet or haven't seen enough to realize it. We start out being taught Mr. Smith Goes to Washington for a couple decades of our lives and it takes some time to peel that back.
It doesn't make any sense, but the conspiracy people are experts at mental gymnastics.
It’s a conspiracy to think influence doesn’t peddle.
Nope. The investigation was opened months before FTX collapsed. It’s not like they’re going to announce it in advance!
https://www.bloomberg.com/news/articles/2022-11-21/us-prosec...
https://twitter.com/elonmusk/status/1591822387267665921
https://www.theguardian.com/technology/2022/nov/10/ftx-crypt...
Figure out a way to make be accountable for the stuff they type online.
Turns out it was nothing more than a series of scams, and the ensuing court cases will prove this beyond a shadow of a doubt. This entire edifice will come crumbling down, and take this entire sordid industry with it. One can hope.
I hear your anger, but consider that this is the one financial system where self-custody is an an actual workable option. You can't store 100M USD under a mattress. You can't deploy large amounts of cash without permission from governments. In the US, banks have to report transactions over $600 to the IRS.
That said, use Monero. It's the only one of these things that protects privacy.
Depositors were stolen from because they did not self-custody.
You can't take someone else' funds on a blockchain, except by physical threat or profound custodial negligence.
https://www.wsj.com/articles/sam-bankman-frieds-parents-were...
"Joseph Bankman and Barbara Fried remained by Mr. Bankman-Fried’s side—as legal advisers, one person familiar with the matter said, but mainly as parents to a son who is in deep trouble.
Before FTX’s collapse, Mr. Bankman was a paid employee of the company for almost a year. He joined his son in meetings with Washington policy makers, expanded its philanthropic endeavors and helped connect his son to at least one major investor. And when Mr. Bankman and Ms. Fried visited their son in the Bahamas, where FTX is based, the company provided a place for them to stay."
Additionally, the US claims jurisdiction on pretty much anything that touches the US financial system. It's how the US can exert pressure on, say, European banks (eg the Swiss settlements for withholding taxes for US citizens).
Given the scale of the fraud (ie $billions), I honestly expect him to spend the rest of his life in prison. It's that large and that egregious. Was it worth it?
I'm curious to find out if Caroline Ellison was (or will be) a cooperating witness in this case as some speculated when she was spotted in a Starbucks recently in Lower Manhattan close to the SDNY office.
Yeah a lot of people are saying this and citing Madoff for comparison. I guess we'll all wait 2 years and see, but I doubt he's getting this kind of time.
How similar can he make his story look to Nick Leeson's? He'll say he just got in over his head, tried to trade his way out of it, used funds he shouldn't have and lost in his gambles. Leeson got 6 1/2 and served 4. My prediction is SBF gets 11 and serves 7 or so.
In certain other large counties, this man would either be protected or jailed depending on what party he aligns to. Sure, you can say the same for USA, but with far less immediacy. Over time things tend to sort themselves out.
Compare that to being vanished, and/or having your family roped in.
SBF is a crazy character, he somehow must have thought he was above it all. If he'd done what all these finance companies do, scamming the little man, he'd probably still be free. Alex Mashinsky yet has to be arrested for example. And people like Vladimir Tenev aren't even prosecuted, many of them get off with a slap on the wrist.
Looking forward to the perp walk and orange jumper.
Yes, DEXs exist.
On/off-ramps are a huge topic and we have a lot of work to do to make these ramps as permissionless as possible, should we want to allow humans to decide for themselves whether or not to comply with (potentially) tyrannical governments.
So why you're correct in principle, it would be of no relevance if everyone self-custodied (also let's not ignore the bugs crypto contracts)
People have successfully avoided fraud, theft, and the tyrannical seizure of their assets by arbitrary decisions of arbitrary government officials.
Billions of dollars worth of assets are stored on blockchains.
Unless you have a mathematical argument against the properties of a blockchain, I will continue to believe the properties are true."
Yes, DEXs exist. Yes, you can self-custody on DEXs.
For crypto yes you can have a hard wallet, but it can still be stolen from you without anyone physically touching your hard wallet.
I don’t and won’t see the appeal for crypto until it has a killer app that people NEED to use for another reason than “I can get rich quick”
How?
I just want to stop the ignorant, misinformed takes.
It's so paradoxical that HN is paranoid about the government changing settings on your phone without your permission, and yet HN does not think we should prevent the government or an opaque set of third parties from arbitrarily seizing and freezing your money.
All the depositors have the extremely pressing NEED of not having all their deposits stolen from them.
Blockchains mathematically prevent fraudulent misuse of deposits.
People aren't mad about SBF taking a wrench to their head. They're mad about SBF defrauding them.
Could not have happened on a blockchain.
Depending on the argument I hear that the ledger is anonymous or not anonymous.
Anonymity has nothing to do with the property that you cannot steal on the blockchain.
How do you think blockchains even work? Read primary sources before vaguely disagreeing.
If I’ve mistaken your argument then please correct me. I’m familiar with blockchain and have contributed to multiple projects in the open source community back when I saw potential and promise in blockchain tech.
If you're the only person with the private key, you're the only person who can move the funds.
It's math. Unless you have a mathematical argument as to how to move funds without the private key, you're ignorant and uninformed.
Again, read primary sources and learn fundamental concepts before vaguely disagreeing.
It's also correct that FTT tokens are worthless.
An argument against the worth of an arbitrary token created on a permissionless blockchain is not an argument against the good, useful, valuable properties of blockchains, such as the fact that you mathematically cannot be stolen from without physical coercion or profound negligence.
Exhibit A: https://rekt.news/madmeerkat-finance-rekt/
Exhibit B: https://rekt.news/monox-rekt/
Exhibit C: https://www.coindesk.com/tech/2022/11/02/cross-chain-dex-rub...
Or do you want me to find a few more examples before you stop spreading misinformation?
Why prevent people from using math to prove their assets cannot he stolen?
Banks are extremely valuable to me and probably always will be.
Blockchains have certain properties which make them extremely desirable in a specific set of use-cases. That set was greatly exaggerated by ignorance and insanity in the bull market. Still, the true set is nonzero.
Stop being an ideologue. It spreads ignorance.
Yes, I strongly recommend everyone do the same.
If it's a "yield vault" or an "LP pool" then you really truly should read every line of code and understand all the risks, because it is extremely likely that there is some catastrophic exploit, given the current near non-existent scaffolding regarding formal verification of smart contracts.
1. People only deposit their crypto on LP pools they can read and verify, on chains whose code they can read and verify. Since people with such technical know-how is very limited, there is not much liquidity in the "liquidity pools" and thus the DEXes are virtually unusable.
2. People deposit their money to DEXes without reading and verifying every single smart contracts and Blockchain code. DEXes have sufficient liquidity but the depositors sometimes wake up with all their money gone in the air.
If you are arriving at a third possibility, naturally you are making a different assumption than I made in the above two points. What are the assumptions that leads you there? I would really like to understand.
It could be that there is no good answer and blockchains are simply hard to use and we should advise the general public to exercise extreme caution when using them, if at all.
The elephants in the room are Binance and Tether, together with certain high-profile investors. Taking some of these out could likely be worth a plea bargain. (For optics, he has to go to jail. But sending him to jail for a long time while letting the others go free for lack of evidence is a bad trade.)
TBH I don't think the interviews hurt him much, and I think more than likely they are a strategy trying to reduce his culpability. The common thread among all his interviews is "I'm really sorry for being such an idiot", basically trying to play stupid to make it difficult to prove intent.
The fact that he’s done this would give his stupid guy story credence... if there wasn’t already a boatload of other evidence that he’s a conman.
> Binance and Tether
Binance is the elephant in the room. They might have their finances in order, however. The fact that they were enabling shady deals doesn't mean they were cooking their own books. For Tether, I think it's more solid than you think. These guys have been cooperating with NYAG from day one.
Yet these raised no red flags, and were even cited as proof of their genius, how this time it is different - you can pitch at a 30bn valuation while tripping on drugs and playing a game at the same time. Genius (or Idiot?)