Indeed, whenever I see a snappy headline here, and the domain name is "bloomberg.com", I just go to my inbox and 9 out of 10 times, it's his column sitting there waiting for me.
Eh, to me, he lost credit when he patronizes us about the Texas Two Step bankruptcy process.
I don't even care if he thinks it's a "valid" approach to take.
I do care that he, and the law firm that basically handles every one so far, condescends to tell us that "really, this is in the best interests of the plaintiffs suing these companies", and that it "makes their lives easier, and is fairer to them", and why can't we just understand that and believe them?
1. Why are these defendants so willing to bend over backwards to "assist the plaintiffs and make their lawsuits go more easily", when the potential downside to them is liability judgments in the tens of billions? Oh, because they'll never actually pay that. They'll "pledge" to fund their little spin off to the full value of liabilities, but will generally throw a couple of hundred million in, shut up shop and say "So sad, too bad", as happened in effectively each of the largest Texas Two Step bankruptcies.
Don't treat your readership like they're idiots, Matt. We know that these companies are not "choosing" to make it easier for them to be sued into oblivion for decades of lies and injuries - we're not naive. They're choosing to do it because they've already donned their parachute and slashed the lines on everyone else's.
I mean...the 3rd circuit ruled that J&J did fully fund the spin off's liabilities - or rather, that the spin off had access not to "a couple of hundred million", but to at least $61.5b.
In that specific case, are you suggesting that the 3rd circuit got it wrong, and that the spin off didn't have access to that money?
Thus far, it remains undetermined, as things are still in progress.
> On January 30, 2023 the 3rd Circuit Court of Appeals ruled after an appeal that LTL's bankruptcy should be dismissed on the grounds that LTL was not in financial distress, reversing a previous ruling by the Bankruptcy Court. On April 4, 2023, LTL filed for a second bankruptcy. On July 28, 2023, Chief Judge Michael Kaplan of the U.S. Bankruptcy Court in New Jersey dismissed the second bankruptcy.
This is common to how it has played out before. Promises of funding, pledges, that then evaporate.
The entity that J&J spun off has attempted multiple times to declare bankruptcy, only to be thwarted some. When the Third Circuit made their ruling, they stated that "the time was not right" and questioned the amount of funding.
LTL re-filed for bankruptcy three hours after this ruling. (Why, was the time right, in the afternoon?)
Georgia Pacific did the same with Best Wall. Stood there in court and said they'd "fully fund" the liabilities into Best Wall, and that they'd put an initial $1B into seeding that entity. Court ruled, and things moved forward. At which point GP said "Actually, we meant $175M. And we meant that's all we'll ever fund."
St Gobain did the same thing. Faced with an estimated $50B+ in liabilities, they spun off another company, and promised to fully fund it. They ended up putting less than $100M in.
So audacious was St Gobain that they were laid into by the court:
> Gross testified that Saint-Gobain repeatedly misrepresented its intent in creating the subsidiary that eventually filed for bankruptcy, calling executives’ testimony and other statements “misleading” and “not truthful.” U.S. Bankruptcy Judge Craig Whitley followed Gross’s testimony last August with factual findings that included his own blistering critique of the executives’ statements as “contrary to the evidence,” saying the company’s story “strains credibility.”
When only four firms have tried this, and three of them have had the same outcome (which drastically protected those companies), and the fourth is using the same playbook (because all four used the same law firm), we (and Matt) need to forgive a healthy skepticism over "fully funded, for reals this time" when it comes to the Texas Two Step.
> Thus far, it remains undetermined, as things are still in progress.
My question was, do you think the 3rd circuit got it wrong, and that the spin off didn't have access to that money when it initially tried to file for bankruptcy? That is not in progress, and we have as much information as we ever will have. J&Js finances, the text of the funding agreement, and the text of the 3rd circuit's opinion are in the public record!
> The entity that J&J spun off has attempted multiple times to declare bankruptcy, only to be thwarted [...] they stated that "the time was not right" and questioned the amount of funding.
Right, they were thwarted because they had TOO MUCH money. The time wasn't right because with an $60b+ blank check from J&J, they weren't bankrupt. Which is a pretty plausible argument!
> LTL re-filed for bankruptcy three hours after this ruling. (Why, was the time right, in the afternoon?)
This is hardly a mystery. They refiled with a different (and less generous) funding agreement, which (rather obviously) brought them closer to being technically bankrupt but (as the 3rd circuit ruled) didn't come close enough.
> Georgia Pacific did the same with Best Wall
Can you provide any support for this claim? Because I think you've got the sequence of events backwards - specifically I believe they promised $175m in the initial funding agreement, and then later raised it to $1b, which (so far) they haven't walked away from.
Happy to learn more about the details though.
> St Gobain did the same thing
Again, what did the original funding agreement promise, and what did they deliver?
> When only four firms have tried this
I am legitimately curious - have any of those four firms failed to deliver on the funds promised in the funding agreement of the spun off holding company? Because I'm not aware of this occuring, and some quick internet searching didn't come up with any results either.
Switching to 8.8.8.8 and restarting my network doesn't seem to change anything. I'm sure they have their reasons for doing things the way they do, but if a website is requiring me to use my ISP's DNS, I'm honestly just not going to bother going to that site; I already hate my ISP enough and resent that I have no other option where I currently live, and I want to continue resisting against their dumb monopoly any way I can, even if it's mostly symbolic.
The big underreported story here is how involved the Stanford Law School professor parents of SBF were and still are. They had the connections to VCs, they helped set up shell companies, they even picked the perfect FTX compliance officer: the crooked and disgraced lawyer Daniel Friedberg. And the parents were richly rewarded for their involvement.
It really seems like there's something deeply culturally wrong at Stanford.
SBF, Elizabeth Holmes, Do Kwon, Stan Cohen, Marc Tessier-Lavigne, and more.
They seem to produce or attract people for whom truth is an inconvenience and to whom the ends justify the means. Entitled people taught to "fake it til you make it" with some weird hyper-capitalistic/accelerationist philosophy. For whom a moral compass is only for the kids at state schools who don't have the right connections.
Yeah, I think this might just be the case when you have rich and powerful people involved at historically rich and powerful institutions. Nepotism and all.
While other institutions certainly carry their own quantity and form of hubris, Stanford does indeed seem unique in just how warped the hubris is of its members.
If you're talking about FTX: MIT is also not an Ivy League school.
The Ivy League is really just a sport league. Back when I was applying to colleges I read that Colgate was invited to join but when they declined Cornell was recruited instead. (but can't find anything about this on the web).
You should probably read a biography of Leland Stanford. [1, among others]
More generally, this is how the world works. Go look more deeply into how other great American heroes like Jefferson, Andrew Jackson, Lincoln, Vanderbilt, Rockefeller, Carnegie, Ford, Nobel, the Kennedy clan, LBJ, Fred Terman, David Packard, Bill Gates, Elon Musk et al operated. There's usually a pattern of failing upwards (usually at public expense) until they do the one thing that cements their legacy, and then doing their best to whitewash their deeds with philanthropy so everybody remembers them as a benefactor of universities rather than a cold-blooded murderer. People for whom the ends do not justify the means tended to meet untimely ends at the hands of those for which it does.
I feel like this is being too charitable to SBF and Holmes :-P They were always going to fail -- they were always going to get caught -- it was just a matter of when.
They were both stupid and short-sighted in a way that the others weren't. They weren't competent.
There was no outcome where they went down in history as good, but were actually bad.
---
I think most of the "fallen heroes" you list have done things competently -- sometimes amazingly competently -- but their behavior was terrible in some standout cases.
To take Gates as an example, he started a company that arguably made the computing world worse off for a couple decades with anti-competitive tactics. He arguably "stole" a lot of money from his competitors.
Microsoft treats a lot of their enterprise customers like shit (but that's not a crime).
But I don't think Microsoft was at its core a fraudulent company (I personally avoid most of their products -- but then again I avoid a lot of software companies). It may have been bad, but at the end of the day there was and is an actual business there. It's qualitatively different than the frauds.
(Also, Microsoft arguably "invented" the idea of selling software (without hardware), which unlocked a lot of value. They were very early to the game. And, the more we learn, there seems to be less and less light between Google in the last 10 years and Microsft in the 90's. I also don't consider Google fraudulent at its core, though it's been taken over by bad actors.)
---
SBF is a lot closer to say Bernie Madoff. Madoff just took people's money and literally never invested it. He just had a computer program print up reports that showed 25% a year gains. He was running a confidence game.
SBF was maybe a hair better than that, since I guess he did actually perform crypto trades lol. (But if he had Madoff's regulatory access, he probably wouldn't have)
Either way, not much better. He sent the same kind of fabricated reports, and made up safeguards out of thin air, and he didn't produce anything positive to compensate for it. It was a pure loss for everyone!
>But I don't think Microsoft was at its core a fraudulent company
Didn't they make their initial money basically rebranding an OS they licensed and then selling it to Intel, whose CEO was buddies with Gates' mom, with ridiculous terms?
Stanford represents the intersection of the personal arrogance of Silicon Valley and the class arrogance of wealth and power.
I'm not sure it's actually more evil than any other upper-class institution, but that evil manifests itself uniquely through extremely punchable human beings rather than through massive faceless investment firms. In the grand scheme of things, SBF almost certainly does less harm than a lot of defense contractors do, but SBF did it in a way that makes him, personally, the asshole (rather than just a blob of people following economic incentives).
I saw a stat that if you look at Forbes' "... Under 30" list, collectively, they have been accused/charged/convicted of stealing/scamming more money than their companies have generated revenue.
And then I saw a tweet a while back, that I admittedly can no longer find, that if you filter for "Stanford" in that list, the ratio blows out to nearly 3:1 (ill-gotten gains:revenue).
That's them being sued, but they aren't being legally prosecuted as of yet, and they both still have their jobs as law professors at Stanford. I believe Barbara Fried is an emeritus professor now, but she should have the title revoked.
I mean, they for sure have employment contracts that provide stipulations. What those are exactly, I don't know. It's currently not clear whether their involvement is illegal or not. It certainly seems that it was illegal.
It just seems outright wrong that law professors, or any professor, can be part of, help orchestrate, benefit from, and support massive fraud and still keep their jobs. Not only is it wrong, it also just seems like a plain bad idea to have your students learning from such corrupt individuals.
> how involved the Stanford Law School professor parents of SBF were and still are.
My favorite SBF Dad anecdote is how his father was being paid $200k a year as a consultant for FTX but he wanted to be making $1million a year, so he CC'd SBF's mom when bringing it up.
> In the emails, per the lawsuit, Bankman told the company's US head of administration he was getting only $16,667 a month from the company when he was "supposed to be getting $1M/yr, starting in December," which "would be a bit more than $80,000 a month, gross."
> He then apparently took his complaints to his son, who cofounded the company and was its CEO, writing in an email: "Gee, Sam I don't know what to say here. This is the first [I] have heard of the 200K a year salary! Putting Barbara on this."
> FTX's lawyers then wrote: "In other words, Bankman lobbied his son to massively increase his own salary."
> "Bankman's influence paid off, not only for him but for Fried too," the lawyers continued.
> "Within two weeks, Bankman-Fried gifted Bankman and Fried together $10 million in funds originating from Alameda Ltd.
> "Within three months, Bankman-Fried caused the couple to be deeded a $16.4 million property in The Bahamas paid for with funds ultimately provided by FTX Trading. Bankman and Fried enjoyed the benefits of more than $90,000 in expenses, paid for by FTX Trading, for their Bahamas residence."
> Ordinarily, when you run a highly leveraged financial institution, and it collapses, and you say “ah well that’s the way things sometimes go at highly leveraged financial institutions,” you were running a regulated financial institution.
> The thing you were running — a bank, a commodities futures exchange — served some social purpose, and the leverage you provided was an essential part of that purpose. So regulators allow it, but uneasily: They keep an eye on you, they monitor your risks, they don’t let you lend all of your depositors’ money to one affiliated hedge fund, etc.
> There are rules to keep the customer money safe, and they also serve to keep you safe: Sometimes banks blow up, but if you ran your bank according to the rules, you don’t generally go to jail for its failure.
> Running a crypto futures exchange in the Bahamas is not like that.
The takeaway? If you're going to be losing a lot of other people's money, follow the rules, and try to do something useful with it. You might not get the book thrown at you.
> People lose money in the stock market all the time, without breaking any rules
Seldom at a “highly leveraged financial institution.” When they do, we consider it a failure and refactor the rules. Levine isn’t saying investing is lossless, he’s talking about financial institutions. Intermediaries.
UPRO[0] is highly leveraged(3x), and regularly loses money. It's down over 14% this month alone. It's a 3rd party taking your money and doing incredibly risky things with it. I don't think you are trying to argue UPRO can't exist, because it has since 2009 and nobody cares.
I think what you mean to say is, You can't take other people's money and promise no risk, and then go risk it. I.e. you can't lie to the investor, you have to tell them the truth as you know it.
SBF clearly didn't do that, he promised his customers, your money is safe like a bank. And then took that money and did ridiculously risky things with it.
If his customers are lucky, since some of those incredibly risky things actually paid off, they may not end up actually losing money when it's all said and done, which is pretty awesome for them.
> If you follow the rules they shouldn’t be losing it.
This is not necessarily true otherwise we wouldn't have the FDIC. You wouldn't have to sign statements about the kinds of returns expected or statements about the volatility of markets.
> not necessarily true otherwise we wouldn't have the FDIC
They, i.e. depositors, don’t lose money with FDIC insurance.
> wouldn't have to sign statements about the kinds of returns expected or statements about the volatility of markets
Levine is discussing “highly leveraged financial institutions” like “a bank” or “a commodities futures exchange.” (Or FTX.)
SBF isn’t going to jail because his customers lost money on Bitcoin and apes. (They did.) He’s going to jail because they lost the money “deposited” with him. The analogy is bank embezzlement. Not investment losses.
When it came to crypto, in the good times of 2022 a lot of people just wanted to own it and exchange it now and then. Just at that basic level I'm sure a lot of businesses could be profitable without risking other people's money.
But once you get into the game of making the line go up faster, you start taking risks with money you don't own, then all this devolves into BS.
55 comments
[ 0.24 ms ] story [ 120 ms ] threadI don't even care if he thinks it's a "valid" approach to take.
I do care that he, and the law firm that basically handles every one so far, condescends to tell us that "really, this is in the best interests of the plaintiffs suing these companies", and that it "makes their lives easier, and is fairer to them", and why can't we just understand that and believe them?
1. Why are these defendants so willing to bend over backwards to "assist the plaintiffs and make their lawsuits go more easily", when the potential downside to them is liability judgments in the tens of billions? Oh, because they'll never actually pay that. They'll "pledge" to fund their little spin off to the full value of liabilities, but will generally throw a couple of hundred million in, shut up shop and say "So sad, too bad", as happened in effectively each of the largest Texas Two Step bankruptcies.
Don't treat your readership like they're idiots, Matt. We know that these companies are not "choosing" to make it easier for them to be sued into oblivion for decades of lies and injuries - we're not naive. They're choosing to do it because they've already donned their parachute and slashed the lines on everyone else's.
In that specific case, are you suggesting that the 3rd circuit got it wrong, and that the spin off didn't have access to that money?
> On January 30, 2023 the 3rd Circuit Court of Appeals ruled after an appeal that LTL's bankruptcy should be dismissed on the grounds that LTL was not in financial distress, reversing a previous ruling by the Bankruptcy Court. On April 4, 2023, LTL filed for a second bankruptcy. On July 28, 2023, Chief Judge Michael Kaplan of the U.S. Bankruptcy Court in New Jersey dismissed the second bankruptcy.
This is common to how it has played out before. Promises of funding, pledges, that then evaporate.
The entity that J&J spun off has attempted multiple times to declare bankruptcy, only to be thwarted some. When the Third Circuit made their ruling, they stated that "the time was not right" and questioned the amount of funding.
LTL re-filed for bankruptcy three hours after this ruling. (Why, was the time right, in the afternoon?)
Georgia Pacific did the same with Best Wall. Stood there in court and said they'd "fully fund" the liabilities into Best Wall, and that they'd put an initial $1B into seeding that entity. Court ruled, and things moved forward. At which point GP said "Actually, we meant $175M. And we meant that's all we'll ever fund."
St Gobain did the same thing. Faced with an estimated $50B+ in liabilities, they spun off another company, and promised to fully fund it. They ended up putting less than $100M in.
So audacious was St Gobain that they were laid into by the court:
> Gross testified that Saint-Gobain repeatedly misrepresented its intent in creating the subsidiary that eventually filed for bankruptcy, calling executives’ testimony and other statements “misleading” and “not truthful.” U.S. Bankruptcy Judge Craig Whitley followed Gross’s testimony last August with factual findings that included his own blistering critique of the executives’ statements as “contrary to the evidence,” saying the company’s story “strains credibility.”
When only four firms have tried this, and three of them have had the same outcome (which drastically protected those companies), and the fourth is using the same playbook (because all four used the same law firm), we (and Matt) need to forgive a healthy skepticism over "fully funded, for reals this time" when it comes to the Texas Two Step.
My question was, do you think the 3rd circuit got it wrong, and that the spin off didn't have access to that money when it initially tried to file for bankruptcy? That is not in progress, and we have as much information as we ever will have. J&Js finances, the text of the funding agreement, and the text of the 3rd circuit's opinion are in the public record!
> The entity that J&J spun off has attempted multiple times to declare bankruptcy, only to be thwarted [...] they stated that "the time was not right" and questioned the amount of funding.
Right, they were thwarted because they had TOO MUCH money. The time wasn't right because with an $60b+ blank check from J&J, they weren't bankrupt. Which is a pretty plausible argument!
> LTL re-filed for bankruptcy three hours after this ruling. (Why, was the time right, in the afternoon?)
This is hardly a mystery. They refiled with a different (and less generous) funding agreement, which (rather obviously) brought them closer to being technically bankrupt but (as the 3rd circuit ruled) didn't come close enough.
> Georgia Pacific did the same with Best Wall
Can you provide any support for this claim? Because I think you've got the sequence of events backwards - specifically I believe they promised $175m in the initial funding agreement, and then later raised it to $1b, which (so far) they haven't walked away from.
Happy to learn more about the details though.
> St Gobain did the same thing
Again, what did the original funding agreement promise, and what did they deliver?
> When only four firms have tried this
I am legitimately curious - have any of those four firms failed to deliver on the funds promised in the funding agreement of the spun off holding company? Because I'm not aware of this occuring, and some quick internet searching didn't come up with any results either.
If you do hate your ISP I can recommend running through Mullvad full time.
SBF, Elizabeth Holmes, Do Kwon, Stan Cohen, Marc Tessier-Lavigne, and more.
They seem to produce or attract people for whom truth is an inconvenience and to whom the ends justify the means. Entitled people taught to "fake it til you make it" with some weird hyper-capitalistic/accelerationist philosophy. For whom a moral compass is only for the kids at state schools who don't have the right connections.
If you're talking about FTX: MIT is also not an Ivy League school.
The Ivy League is really just a sport league. Back when I was applying to colleges I read that Colgate was invited to join but when they declined Cornell was recruited instead. (but can't find anything about this on the web).
More generally, this is how the world works. Go look more deeply into how other great American heroes like Jefferson, Andrew Jackson, Lincoln, Vanderbilt, Rockefeller, Carnegie, Ford, Nobel, the Kennedy clan, LBJ, Fred Terman, David Packard, Bill Gates, Elon Musk et al operated. There's usually a pattern of failing upwards (usually at public expense) until they do the one thing that cements their legacy, and then doing their best to whitewash their deeds with philanthropy so everybody remembers them as a benefactor of universities rather than a cold-blooded murderer. People for whom the ends do not justify the means tended to meet untimely ends at the hands of those for which it does.
[1] https://www.whatitmeanstobeamerican.org/journeys/was-leland-...
They were both stupid and short-sighted in a way that the others weren't. They weren't competent.
There was no outcome where they went down in history as good, but were actually bad.
---
I think most of the "fallen heroes" you list have done things competently -- sometimes amazingly competently -- but their behavior was terrible in some standout cases.
To take Gates as an example, he started a company that arguably made the computing world worse off for a couple decades with anti-competitive tactics. He arguably "stole" a lot of money from his competitors.
Microsoft treats a lot of their enterprise customers like shit (but that's not a crime).
But I don't think Microsoft was at its core a fraudulent company (I personally avoid most of their products -- but then again I avoid a lot of software companies). It may have been bad, but at the end of the day there was and is an actual business there. It's qualitatively different than the frauds.
(Also, Microsoft arguably "invented" the idea of selling software (without hardware), which unlocked a lot of value. They were very early to the game. And, the more we learn, there seems to be less and less light between Google in the last 10 years and Microsft in the 90's. I also don't consider Google fraudulent at its core, though it's been taken over by bad actors.)
---
SBF is a lot closer to say Bernie Madoff. Madoff just took people's money and literally never invested it. He just had a computer program print up reports that showed 25% a year gains. He was running a confidence game.
SBF was maybe a hair better than that, since I guess he did actually perform crypto trades lol. (But if he had Madoff's regulatory access, he probably wouldn't have)
Either way, not much better. He sent the same kind of fabricated reports, and made up safeguards out of thin air, and he didn't produce anything positive to compensate for it. It was a pure loss for everyone!
Didn't they make their initial money basically rebranding an OS they licensed and then selling it to Intel, whose CEO was buddies with Gates' mom, with ridiculous terms?
I'm not sure it's actually more evil than any other upper-class institution, but that evil manifests itself uniquely through extremely punchable human beings rather than through massive faceless investment firms. In the grand scheme of things, SBF almost certainly does less harm than a lot of defense contractors do, but SBF did it in a way that makes him, personally, the asshole (rather than just a blob of people following economic incentives).
And then I saw a tweet a while back, that I admittedly can no longer find, that if you filter for "Stanford" in that list, the ratio blows out to nearly 3:1 (ill-gotten gains:revenue).
https://www.nbcnews.com/tech/crypto/ftx-sues-founder-sam-ban...
It just seems outright wrong that law professors, or any professor, can be part of, help orchestrate, benefit from, and support massive fraud and still keep their jobs. Not only is it wrong, it also just seems like a plain bad idea to have your students learning from such corrupt individuals.
My favorite SBF Dad anecdote is how his father was being paid $200k a year as a consultant for FTX but he wanted to be making $1million a year, so he CC'd SBF's mom when bringing it up.
https://www.businessinsider.com/sam-bankman-frieds-ftx-1-mil...
> In the emails, per the lawsuit, Bankman told the company's US head of administration he was getting only $16,667 a month from the company when he was "supposed to be getting $1M/yr, starting in December," which "would be a bit more than $80,000 a month, gross."
> He then apparently took his complaints to his son, who cofounded the company and was its CEO, writing in an email: "Gee, Sam I don't know what to say here. This is the first [I] have heard of the 200K a year salary! Putting Barbara on this."
> FTX's lawyers then wrote: "In other words, Bankman lobbied his son to massively increase his own salary."
> "Bankman's influence paid off, not only for him but for Fried too," the lawyers continued.
> "Within two weeks, Bankman-Fried gifted Bankman and Fried together $10 million in funds originating from Alameda Ltd.
> "Within three months, Bankman-Fried caused the couple to be deeded a $16.4 million property in The Bahamas paid for with funds ultimately provided by FTX Trading. Bankman and Fried enjoyed the benefits of more than $90,000 in expenses, paid for by FTX Trading, for their Bahamas residence."
Give me a raise or I'll tell Mommy!
1. Customers deposited billions of dollars at FTX.
2. Bankman-Fried spent a whole lot of it on baubles like Bahamas beachfront real estate, political donations, Tom Brady, etc.
3. The customers asked for their money back and it wasn’t there."
Yes. That's pretty much what the prosecutor said in summation.
> Ordinarily, when you run a highly leveraged financial institution, and it collapses, and you say “ah well that’s the way things sometimes go at highly leveraged financial institutions,” you were running a regulated financial institution.
> The thing you were running — a bank, a commodities futures exchange — served some social purpose, and the leverage you provided was an essential part of that purpose. So regulators allow it, but uneasily: They keep an eye on you, they monitor your risks, they don’t let you lend all of your depositors’ money to one affiliated hedge fund, etc.
> There are rules to keep the customer money safe, and they also serve to keep you safe: Sometimes banks blow up, but if you ran your bank according to the rules, you don’t generally go to jail for its failure.
> Running a crypto futures exchange in the Bahamas is not like that.
The takeaway? If you're going to be losing a lot of other people's money, follow the rules, and try to do something useful with it. You might not get the book thrown at you.
If you’re going to be risking other peoples’ money. If you follow the rules they shouldn’t be losing it.
Seldom at a “highly leveraged financial institution.” When they do, we consider it a failure and refactor the rules. Levine isn’t saying investing is lossless, he’s talking about financial institutions. Intermediaries.
I think what you mean to say is, You can't take other people's money and promise no risk, and then go risk it. I.e. you can't lie to the investor, you have to tell them the truth as you know it.
SBF clearly didn't do that, he promised his customers, your money is safe like a bank. And then took that money and did ridiculously risky things with it.
If his customers are lucky, since some of those incredibly risky things actually paid off, they may not end up actually losing money when it's all said and done, which is pretty awesome for them.
0: https://www.proshares.com/our-etfs/leveraged-and-inverse/upr...
When you say I'll keep your money safe and not invest it somewhere and then turn around and gamble with it, then you get into the breaking of rules.
This is not necessarily true otherwise we wouldn't have the FDIC. You wouldn't have to sign statements about the kinds of returns expected or statements about the volatility of markets.
They, i.e. depositors, don’t lose money with FDIC insurance.
> wouldn't have to sign statements about the kinds of returns expected or statements about the volatility of markets
Levine is discussing “highly leveraged financial institutions” like “a bank” or “a commodities futures exchange.” (Or FTX.)
SBF isn’t going to jail because his customers lost money on Bitcoin and apes. (They did.) He’s going to jail because they lost the money “deposited” with him. The analogy is bank embezzlement. Not investment losses.
But once you get into the game of making the line go up faster, you start taking risks with money you don't own, then all this devolves into BS.