FTX’s collapse was a crime, not an accident(coindesk.com) |
FTX’s collapse was a crime, not an accident(coindesk.com) |
There are none so blind as those who will not see.
I'm surprised by 'DeFi' nerds who promoted cryptos to escape government interventions during bull markets, but who invoke state institutions like justice when they have lost everything.
Crypto wasn't dead to me until I saw that post.
I hope governments won't do any investigation into this, as it's what anyone who gave money to FTX invested for.
Even among the hardcore anti-government anarchists I doubt many of them saw it as anything but something they wanted in the distant future, not something that exists today.
They never intended the fraud to be found out, just like any fraudster and Ponzi scheme operator in history.
In an interview the other week, SBF was asked what he might do differently given the chance.
"More careful accounting".
Girlfriend: "Huh. Just a casual phrase. But not "more accurate/better" accounting, but "more careful"."
Like, if I write about how it's a sad a murderer is going to jail because they worked in a charity shop on Thursdays, that seems like distraction to the point of complicity.
It really sniffs of agenda. Crypto folk are too familiar with paying for articles. But this was in Washington Post.
It's probably one of the clear headed things that JC has done in that at times he does shine a light of truth on something rather than the usual PR bluster he is known for.
It's way bigger than the exchanges, there will be some VC firm fallout over this as the SEC will get involved.
They took money from clients because they thought they could pay it back because they think they are smart and they are not smart. Their accounting was good enough to keep track of large loans to insiders though.
How could it be possible for an arbitrageur to not know the difference between entity A and entity B?
P&L up/downs and internal funds transfers are an essential part of running that kind of business. You can't sell something in Asia and simultaneously buy it in the US without thinking carefully about how you finance your trading activity.
TIL that august can be used as an adjective:
au·gust adjective \ȯ-ˈgəst, ˈȯ-(ˌ)gəst\
: marked by majestic dignity or grandeur
her august lineage
an august mansion
I was torn whether the collapse was due to intentional or negligent handling of moneys and this makes it clear that it was intentional AND he was pretty bad at trading. He got in to the whole space by arbitrage trading from an office down the street from my house. He enjoyed risk, had some good ideas, then got plain greedy. Combo greedy with bad trading and you get imminent collapse.
The live coverage (as of 30 Nov 2022 @ 5p Pacific) https://www.nytimes.com/live/2022/11/30/business/sam-bankman...
I’m not suggesting that the OTPP is the best pension fund around. Just that there’s no story here. They invested a penny in a high risk venture and lost it badly.
Let's correct that to say "stole $1B in customer wealth". You can't "take out a loan" from someone who doesn't agree to loan it to you (and, indeed, FTX expressly said they wouldn't borrow customer funds).
Looking back at the last 3 years of media insanity, I wonder what kinds of people are running the show.
Let's face it: this whole massive money pie appeared because (mostly educated) people started gambling thinking there's an easy way up. And they do so at scale because becoming wealthy nowadays is super hard comparing to, say, 50-70 years ago.
I think this article is great. I've commented on this for a while, but I still can't fathom why most of the media isn't highlighting that this was plain old, straightforward theft. There is no gray area here, the lack of crypto regulations are pretty irrelevant, and I'm glad a journalist is saying clearly that this was just fraud and theft.
Or are you just thinking that the PR narrative of well-intentioned-but-made-some-mistakes would be better at protecting people from future scams?
Negative discuss about FTX is seems sensitive... I still don't know why many people still defense for FTX and SBF. Thousands of people lost all their money.
As in: "Fun to watch people losing money they sent to someone who they thought was honest because he was on the cover of many mainstream publications who were presenting him as an altruistic genius"
?
Yes, it's so enjoyable after years of telling them to stop oh god stop telling me to buy their shit MLM token crap.
That should absolutely concern you even if you think all cryptocurrency and bitcoin is fake and doomed to eventual collapse.
They used to be a competitor and are existentially scared that people will believe that crypto is gambling in a crooked house.
Nevermind FTX was an exchange, and my stock brokerage certainly doesn't lend out my stocks to a related party without my consent.
They are simply smarter than the goyim
Is that funny too?
I mean fine the NYT is weird, but it's the millions of cryptards on Youtube that syphon and funnel the money...
A history rife with fraud, deception, thievery, and greed.
I feel sorry for the marks that fooled themselves, avariciously put the blinkers on themselves, but it takes a certain attitude to not see the signs.
Seriously what is wrong with you people.
Maybe some rugged John Galt type will bypass all the legal flim-flam and just go after the FTX executives personally. That would be a lot more cyberpunk than writing seething letters to the SEC about the predictable failure of another get-rich-quick scheme.
Is that not precisely the future the crypto hoodlums have espoused, indeed, the only one they will accept?
I've got no dog in this fight so I can just sit back and make popcorn. If they'd televise the hunt we might be onto something. "Code is law" would be a great tagline for a bounty-hunter show.
Is it because SBF gave a bunch of money to politicians? Is it because FTX got investment dollars from prominent VCs? Is it because journalists do not understand crypto, like, at all? Is it because he bamboozled journalists by talking so much about Effective Altruism?
Nobody, literally nobody, said Bernie Madoff was "suffering from a solvency crisis." They said he lied and stole money. And yet SBF's alleged crimes are quite similar in nature, but he's portrayed as suffering from market conditions beyond his control. So was Madoff. If Madoff got lucky and his portfolio doubled in a year, then he too would have been able to make customers whole. But even if that happened, he still lied and stole, just like SBF.
This is not a bald criticism or renunciation of journalism from big publications - I simply mean to provide some understanding and clarity around how journalism so often misses the mark. Even though it misses the mark, journalistic coverage is incredibly valuable and a far better approach than darkness. (People might think of journalism as turning the lights on - more accurately journalism is like shining a flashlight into a dark place.)
In this case, it is very odd that much of the coverage has not been centered on fraud. I genuinely don’t understand why.
> Vox co-founder Matthew Yglesias, court chronicler of the neoliberal status quo, seemed to whitewash his own entanglements by crediting Bankman-Fried’s money with helping Democrats in the 2020 elections – sidestepping the likelihood that the money was effectively embezzled.
Here are some excerpts from Yglesias' article[1]:
> But the truth appears to be much worse than reckless, even as it’s still not fully clear exactly how much worse (did he and his circle lose the money? did they pocket it?), and for those of us who defended him against some of his critics, a reckoning is due. ** > By betraying his clients — I don’t know whether he “defrauded” or whatever else in a legal sense, but he certainly betrayed them — SBF is leaving many of his causes worse off than they would have been if he’d never invested in them. ** > I did warn that SBF supporting good causes didn’t mean that we should assume his crypto agenda is benign — sincere belief that your wealth benefits humanity can be dangerous...I did not, of course, seriously consider the possibility that he would just steal his clients’ money. And given what we now know, you have to be suspicious about the downstream spending as well. All the official and unofficial EA material emphasizes the importance of integrity and does not encourage people to run scams or break faith with others. But I do think the situation poses some questions that the community as a whole will need to reckon with.
Honestly, the effort to paint this as a failure of the mainstream media seems to cover the lionization of Sam Bankman-Fried by many in the crypto community. For instance, Coindesk itself wrote numerous articles painting Sam Bankman-Fried in a positive light. And these were directed at people trying to invest in crypto, unlike Yglesias' article.
[1] https://www.slowboring.com/p/some-thoughts-on-the-ftx-implos...
I've lost hope of Hanlon's Razor at this point. It's painfully transparent how purposeful this has been at the media level, and I've come to believe that there's a very large group of voices who are perfectly fine with what's going on because the fallout "hurt the right people" in their eyes.
It's even worse that that: they give SBF a free pass on referring to FTX's issues as being a liquidity problem, which implies his venture was solvent, but just needed more time to extract the value of its investments, even though that too is obviously false, and no amount of time would let him convert FTT etc to value he claimed in his books.
Edit: My earlier comment on abuse of the concept of "liquidity": https://news.ycombinator.com/item?id=33539326
> Is it because journalists do not understand crypto, like, at all?
I think this is a part of it, even most cryptocurrency enthusiasts don't understand it (a statement that most enthusiasts would concede, just not about themselves), but I think a more influential component is that people just don't care. There have been so many scams like these over the years that everyone already understands cryptocurrency is mostly scams and people are somewhat resigned to the state of things; it's cryptocurrency outrage fatigue. From the media's perspective, the story is far more provocative if they entertain SBF's meandering chaos rather than file it away as just another cryptocurrency scam.
> Nobody, literally nobody, said Bernie Madoff was "suffering from a solvency crisis." They said he lied and stole money.
I think that's just a product of the era we live in, "suffering a solvency crisis" is the type of euphemism you see all the time in the cryptocurrency world.
Also, probably taking cues from the self-serving VC blow jobs: https://web.archive.org/web/20221027180943/https://www.sequo...
The same thing happened after Elizabeth Holmes' fraud was revealed. There were a lot of articles claiming that she was actually the victim, or that the industry was to blame, or that everyone was doing the same thing with their startups. None of those aged well, but they drove clicks at the time.
If the perp had been a persona non-grata, you'd bet this would have been all over the place --pitchforks and torches in-hand.
On the other hand I haven't seen any media downplaying, here in Germany it's all haughty "Americans being Americans again" ("let's not talk about Wirecard for a few minutes, can we?") and what I read through the hn filter isn't downplaying either. Perhaps what you are perceiving is a subset of media motivated by the crypto angle?
The mainstream definitely doesn't understand crypto. (Hell, SBF himself paid for TV ads telling them they didn't have to!) Madoff had easier precedences to compare to and validate for themselves vs trying to figure out if the various crypto-sphere tweets and blog posts "proving" fraud are actually proof and such.
The FTX story, if half the stuff I've seen linked on HN is too believe, also has a believability hurdle to the uninformed of being UNBELIEVABLY STUPID. "They did almost literally no accounting at all and transparently bought houses with company funds" yet they also raised crazy $$$ from so-called reputable investors? Surely that can't be true!!
https://archives.fbi.gov/archives/newyork/press-releases/200...
My sense is that this cognitive bias is playing out here. "Obviously your money could just disappear, it's crypto, that's what happens. Why look into this?".
Once the brain is trained to know this is how it is, it stops asking why it's happening. That's just what happens.
1. SBF, Caroline, SBF Parents all know all the right people and run in the same circles as the editors/owners of the top publications
2. A lot of other people come down along with SBF, so they dont want to pull the thread. For example, if the FTX money was indeed stolen, then did Dems get stolen-cash-contributions? For example, who else has deeded ownership over the 300M of laundered cash homes in The Bahamas? I think a lot of people want this to go away and they are all friends with the same NYTimes exec circle
3. No one wants to be called anti-semitic, so people are treading very, very carefully around this, even at the expense of justice. No one wants to end up like Kyrie Irving https://www.nytimes.com/article/kyrie-irving-antisemitic.htm... having to donate 1/2M$ for even touching this
Give this scandal some time to percolate. I think the scale of the failure/criminality here is still under appreciated by journalists.
Also helps that SBF is still in his 20s. He’s getting more benefit of the doubt than he would otherwise. Whether that offers any legal protection remains to be seen…
I don't this it's this one because EA has gotten 10x the negative coverage SBF has.
I think a lot of people haven’t decided when SBF became the crook and what his intentions were. As we don’t have all the information and he hasn’t gone to court, isn’t that healthy?
FTX’s Unraveling Is Latest Blow to Softening Ad Market : https://www.wsj.com/articles/ftxs-unraveling-is-latest-blow-... ( https://archive.ph/GogZu )
Maddoff didn’t have any portfolio since the late 80’s. So no trading, all fake records. Redemptions of principal and made up profits were paid with other customer funds.
"It's a big club and you ain't in it"
https://www.opensecrets.org/elections-overview/top-organizat...
No, I think it's because they understand it well enough to know that if they call what FTX was doing a scam (which it was) then the entire house of cards will collapse because all of the other big crypto exchanges/lenders/yield farms/funds are doing the exact same thing. SBF laid it all out to Matt Levine on Odd Lots back in April.
https://www.bloomberg.com/news/articles/2022-04-25/sam-bankm...
Where is this media that is trying to white-wash FTX?
Yet the takeaway from Matt Levine is consistently that they're fucking idiots, not fraudsters. That nobody bothered to count the money. They didn't transfer customer funds to Alameda, but instead used Alameda bank account for customer deposits because FTX didn't have one. Then they didn't bother to do any accounting to notice the money was disappearing.
ML paints them as more likely to be morons than hucksters knowingly perpetrating a fraud? Or, I've misread all of his recent columns.
This is Andrew Ross-Sorkin who is supposed to be a pretty respected journalist or at least I thought. This isn't a mistake, and I don't think they're stupid either. SBF seems to know how to appeal to journalists pretty well. What the motives of the journalists are is more complicated.
Let's not forget that the folks using FTX were only doing so in an attempt to steal money from others. If the key innovation of crypto is that it's supposed to reduce the risk of lending by bringing realtime transparency to the assets and liabilities of borrowers, then why was FTX paying vastly higher interest rates than traditional banks? It's hard to feel sorry for those who lost their money because they thought they were in on the con or whatever.
You can hear the folks who lost money saying this themselves, e.g.: https://www.youtube.com/watch?v=9cATvKsZA0A
And to those who think I'm being uncharitable, I've been saying the same thing on HN since long before the FTX collapse, e.g.: https://news.ycombinator.com/item?id=28457273
What I hear from people who invest in crypto is hoping they will make money on it. Maybe that technology is part of it but I've only known people that want to invest in it for a greater return. It's thought of as a stock, but unlike a regular stock there is no company behind it that produces something of value. It's a made up digital collectible spawned from the mind of boy geniuses that is literally nothing.
My recommendation for investing in collectibles is comic books, trading cards, etc. They are finite, they exist, and they are not propped up by VC money.
Never heard this definition, where did you read this? Any time the word "asset" is linked to a crypto, people should know by now it's eventually going to zero.
But how would you respond to the argument: those that lost money in FTX weren’t consciously in on the con, but instead had (vastly) exaggerated expectations about the future of crypto?
Nailed it!
Honestly I wonder how intentional this Boris Johnson tactic of engendering sympathy through unkempt hair is. It seems to work. Maybe it reminds parents of their helpless teenagers or something.
I agree and this thread is honestly plain disgusting too. Many here are happy and find it funny to see people's crypto being stolen by fraudsters.
From TFA:
"It is now clear that what happened at the FTX crypto exchange and the hedge fund Alameda Research involved a variety of conscious and intentional fraud intended to steal money from both users and investors."
And from the bankruptcy filings:
"On-chain analysis has found the bulk of movements from FTX to Alameda took place in late 2021, and bankruptcy filings have revealed that FTX and Alameda lost $3.7 billion in 2021. This is maybe the most befuddling part of the Bankman-Fried story: His companies lost massive amounts of money before the 2022 crypto bear market even started. They may have been stealing funds long before the blowups of Terra and Three Arrows Capital".
People may hate on Bitcoin, Ethereum, ape monkeys yacht club etc. (or whatever these NFTs are called) as much as they want, it's not reason to rejoice when thieves do scam people (including a canadian teachers pension funds' money).
There's also another angle: the very same who are cheering on people losing all their money to a scam were the first to say: "Pay your taxes on any crypto gain you made" (so that, in the end, they get their share of these winnings too through the state's spendings)...
If the state collects taxes on gain made on crypto, the state go after people stealing other people's crypto.
As simple as that.
P.S: and I hope people are happy that their politicians got greased by stolen funds and aren't giving these bribes (pardon, donations) back.
https://www.coindesk.com/layer2/2022/11/30/a-self-regulatory...
> A Self-Regulatory Organization Is the Best Way to Advance Crypto While Protecting the Public
> The financial industry, collectively, has greater domain expertise than can be expected of regulators. This reality invites transparent, fully accountable, self-regulation.
I'd think anyone could see that it's virtually all scams atop schemes atop scams, and find grounds to shut it all down.
Of course people who would like to run these scams and schemes would like to self-regulate it.
It was an remote interview with Bankman-Fried. The reporter (interviewer?) was David Yaffe-Bellany.[2] He came from Bloomberg.
When, as a reporter for a major paper, do you call a CEO a crook? That's a tough call. Especially when the CEO is in total denial at the time. Especially when such an article will crash what's left of the company. I wonder what discussions took place within the NYT editorial staff.
The interview was on Sunday, Nov. 13. The Binance buyout deal was supposedly happening as of Nov. 8, Binance was making backout noises on Nov 9th, and the deal was dead by Thursday Nov. 10. There was still talk of other deals past that point.
It wasn't clear as of Nov. 14th that there had been out and out theft. The hard info on that came later. Take a close look at who knew what when.
[1] https://www.nytimes.com/2022/11/14/technology/ftx-sam-bankma...
I don't want this to come off as dunking on anyone who has touched by this tragedy. I feel for the people I know involved in this, just as I see these events as part of the inherent risk structure of the space.
Am I wrong here? I really want to know if these cries of foul are substantively different than, say, the required reserves to prevent these types of collapses. Or say, the existence of FDIC insurance in cases of mismanagement or even outright illegal trading by banks?
Getting the lies on the record seems useful?
[1] https://twitter.com/edmundlee/status/1597957472761057282
This is just straight up nonsense correct? Or does he have something to grab hold to here?
This dude, however, is attending speaking engagements with the NYT and sharing the stage with war criminals after his obvious fraud in a shady-ass industry. He's probably still got plenty of friends, and his co-speakers are an example of what impunity and getting off scot-free when everyone knows you're guilty might look like for him.
The myth is that we’re all equal before the law but the reality is that there are obvious inequalities.
It really is remarkable. I would think the hardest part about getting indictments at this point is collecting enough information to actually present to… anyone.
If you don't have physical or digital copies of statements, transactions, and account numbers and the company you are dealing with just comes up with some bogus, "We were hacked, it's all gone, we are now bankrupt, goodbye," and then proceeds to delete their website and disconnect their phone how do you prove that you even have a claim?
They are all feeling the crunch now and want to turn the narrative away from ones that will cause people to stop putting real money in.
He claims he has no hidden funds, he's down to his "last credit card" and last $100k in his bank account.
I expect many of his statements today to be used against him in court. Assuming he hasn't "died" by then.
The obvious difference being that Bitfinex seems to be run by adults.
Who like to repeatedly lie to people too.
Remember how "We're unrelated to Tether" turned into "We gave Tether a loan. See how the three signatories on the Bitfinex side of that contract are our corporate officers, Mr A, B and C, and Tether's corporate officers who signed the contract for them are Mr A, B and C? We're going to need you to ignore that."
And others.
And with this four-letter acronym alone the clandestine literate [1] might be able to draw his/her own conclusions about the how, the why and the kid gloves with which the media handles SBF.
Imagine a three letter state agency looking for ways to secretly pay off shady foreign allies from terrorists to cartels. What kind of infrastructure would you need to do that on a geopolitical scale? Sigh, if there only existed such a technology irony off!
No, that doesn't mean SBF is crypto's James Bond, but it does shed an intriguing light on certain stablecoins as well [2, 3]
[1] https://www.washingtonpost.com/archive/opinions/1991/08/11/t...
[2]: https://asia.nikkei.com/Spotlight/Datawatch/Tether-cryptocur...
Q: Did you co-mingle funds?
A: I did not mean to.
Q: It says in the TOS that you would not do that. How is it ok then?
A: It says elsewhere in the TOS that customers can take margin positions, so in some cases the co-mingling was to be expected.
Q: How did then such a large amount of money get co-mingled then, because it seems that a much larger amount of customer funds were affected than just the accounts trading on margin?
A: In the early days, we did not have a bank account, so when customers wanted to trade on our platform, they deposited money to alameda who then credited the money to us. I don’t know for sure, but it seems that the money that was credited wasn’t always put in the right account (ie safe money, per the TOS)
So as I’ve understood so far, it seems SBF is claiming there was just incompetence and mismanagement. A lot of regulation in finance is to prevent people from being able to do this. Anyways, to those who have said, “stealing money that I traded for magic beans is still stealing”, I think it’s a little more complicated than that.
Well said, though. It's pretty straightforward they shouldn't have used the customer funds, or tied Alameda so closely to the exchange.
It's still a bit slapstick though. I can see some young kids with no organisation falling into "oh let's borrow some from the customers, I bet banks do it all the time". It's still wrong of course but with the whole nerd act you might wonder whether there was any genuine thought about whether it was allowed. Even if you don't know the rules, you have to follow them.
The whole thing beggars belief. How they got that big, while playing video games, having no oversight, with backing from real names. And then blew up seemingly in the space of a few days, but possibly "mortality wounded" for a long while before.
He is still talking. For example,
16 Nov 2022
https://www.youtube.com/watch?v=6DezodR9hNI
(Sounds like he is in the bathtub.)
20 Nov 2022
[another to be published phone call with the YouTuber above]
30 Nov 2022
https://www.nytimes.com/live/2022/11/30/business/sam-bankman...
https://slate.com/technology/2022/11/sam-bankman-fried-new-y...
Internet discussion seems to center on criminal charges but there will be numerous civil suits first. Poetic justice would be if he has to ask his parents for money. Every time he opens his mouth, plaintiffs lawyers are listening.
In the 16 Nov interview he reveals that he told his lawyers to "go fuck themselves". He said "I don't think they know what they are talking about" and "They only know what they're talking about in the extremely narrow domain of litigation."
Maybe he should be put on a suicide watch if he isn't already.
If I understand correctly, he will be on The Crypto Roundtable next.
https://podcasts.apple.com/us/podcast/the-crypto-roundtable-...
He is booked to appear on Good Morning America next week.
How many times can someone say "like" in 20 minutes. Listen to an SBF interview and find out.
I only played around with it for a while, buying/selling $250 worth of coins to try it out. I thought it was fairly well-designed, fast, etc. and on par with other tools like Schwab or Robinhood.
To hear that the entire thing was a fraud makes me think that they put a lot of engineering/design effort into making the FTX platform work. It was a fully-functioning product, not some Theranos-like facade!
The level of regulatory capture and open corruption in the US today vs 2001 is also incomparable. It's functionally two different countries.
And the whole matter is only made worse by (or, perhaps, 'highlights') the surrounding incestuous cesspool of other crypto exchanges and funds, and the 'crypto media' arms which they own and run. Several of whom are almost certainly engaging in, at the least, grey-area practices, in order to accrue vast and lightly regulated profits.
The fact that many of crypto's best-known names are basically digital bankers-for-profit, illustrates how the scene went off the rails some time ago. From a tech perspective.
The relevant crimes will be pursued regardless.
It seems quite possible that a couple of years from now we'll find out that most major cryptocurrency companies were doing things similar to FTX. With that possibility, this article could be an attempt to avoid FTX bringing down other companies in the space.
Odd to me that anyone would look at a company that managed to lose billions of customer and investor dollars under extremely suspicious circumstances, and then react dismissively to credible allegations of fraud by framing it as an attempt to "heap scorn".
Basically demonstrating zero personal responsibility for the the money he had control over.
Maybe more will come out to show he's is in fact a modern Bernie Madoff, with a grand hidden scheme at work to directly enrich himself, but that's not 100% obvious yet. I'm looking forward to what comes out in the future.
Alternatively, the random death of crypto billionaires is barely mentioned and talked about
Randomly generated personas on a dedicated mission to ruin some people, or rather to prepare us for something, but what? digital EURODOLLAR, because digital YUAN is soon?
I will also say that many people in crypto did not want to look down and see that they were standing on air. This does not excuse FTX or SBF. They had lawyers that told them to implement corporate controls and they ignored that advise.
My point about bad culture is that bad culture causes crimes. There's no such thing as "just bad culture"
I presume the dozens of people, news organizations, celebrity endorsers, politicians, and investment gurus who hyped FTX won't suffer a bit either. And I think that's wrong.
That “canadian teachers pension fund,” however, is a $180 billion monstrosity that - in the process of losing a rounding error off their fund - legitimized a scam artist because they were too stupid to do a minimum of due diligence. They’ll make the money back in a fortnight off the safe investments they should have been putting money into in the first place while the little people who trusted FTX by proxy got fucked.
Crocodile tears for the speculators. That’s the story of finance.
There’s very little solace in being able to say “I told you so” when disaster strikes. If there’s anything to rejoice about, it’s that the current crypto collapse seems to be more isolated from the rest of the economy than, for example, the 2008 subprime mortgage crisis.
After the damage has been done, we can go in and regulate the way that crypto should have been regulated from the beginning. You can’t escape politics, and large, public collapses like this provide the political willpower to create the oversight that we already knew was necessary, to protect future generations.
> There's also another angle: the very same who are cheering on people losing all their money to a scam were the first to say: "Pay your taxes on any crypto gain you made" (so that, in the end, they get their share of these winnings too through the state's spendings)...
I don’t understand the criticism here. If I think that it is right to pay taxes, and I think that crypto is a scam, are you saying that this is somehow hypocritical? I think there might be some steps here in the argument which I don’t see or understand.
I believe in due process and the prohibition on ex-post-facto laws. If you make money manufacturing widgets, but I think widgets are morally repugnant and pass laws to ban widget manufacturing, then I don’t get to go in and retroactively confiscate your widget profits from the past five years. You pay your taxes on crypto profits, and then if it turns out that you were breaking the law, you have to face the consequences for that too. Crypto tokens have blurred the lines between securities and other types of products and it makes no sense to pass new laws and backdate them to apply to old crypto transactions.
I am strongly against using public resources to bail out folks who willfully sidestepped centuries of learned experience in financial regulation. Most financial fraud is privately pursued. SBF should go to jail. But beyond that, it's on the creditors to recover their assets.
I rejoice in that I would hope it deters future pension funds from investing in crypto. It’s a downright idiotic decision given the current sphere of hype-inflation that can balloon and burst on a whim.
Just look at the effect a single tweet from musk had on Doge.
They are? I haven't noticed that.
> The Financial Industry Regulatory Authority (FINRA) is a private American corporation that acts as a self-regulatory organization (SRO) that regulates member brokerage firms and exchange markets.
SBF's greatest punishment will not be jail. It will be that he can't show his face in public for fear of running into someone who lost money.
Noone will want to do business with him anymore because of reputational risk.
Ftx most likely had deposits from some really cleaver hackers with real anger management issues. Any parcel he opens could be a bomb.
Prediction: The next mega entrepreneur in the crypto space will be extremely transparent.
I don't know about you, but I'd much rather have a garbage reputation than go to jail for a long time.
Vyacheslav Taran, 53: died in helicopter crash
Mircea Popescu, 41: drowned in the ocean
Tiantian Kullander, 30: died in his sleep
Nikolai Mushegian, 29: found dead on a Puerto Rico beach
In some sense, sure they did. He went to jail. And his investors got back 80 cents on the dollar.
No, it’s not. The answer is never — unless that person has been charged with and convicted of a crime.
To do otherwise would expose the reporter to enormous potential civil liability. Defamation is a thing.
Prosecutors charge people with crimes, not reporters.
Libel suits happen frequently. All the major papers are quite versed in dealing with them. They rarely lose these cases.
I did A quick google search and can’t even find a libel case the NYT has lost in the last 30+ years. There was one case in 2003 where media outlets reported incorrectly that the times lost a libel case. In fact, they won the case, even though the jury agreed that the facts reported were false, because the plaintiff failed to prove malice (see https://www.washingtonpost.com/archive/politics/2003/05/24/n...).
"Asked whether he was overly dependent on that small group, Mr. Bankman-Fried said his circle of close colleagues numbered about 15."
What a softball! Perfectly calibrated to his mistakes-not-fraud PR push.
In contrast, this Coindesk article is exactly the kind of in-depth, no-nonsense article focused on the relevant facts that people used to expect from the NY Times
By Nov. 21, Coindesk is reporting that FTX is being looted, and possibly by an insider. But not that Bankman-Fried is responsible.[2]
Then, on Nov. 22, there's the first bankruptcy hearing. With, finally, disclosures in court of what's been going on.[3] At this point, it finally becomes clear that Bankman-Fried has been been using all those FTX companies as his personal piggy bank.
Hindsight is 20-20.
[1] https://www.coindesk.com/markets/2022/11/12/the-epic-collaps...
[2] https://www.coindesk.com/markets/2022/11/21/ftx-exploiter-tr...
[3] https://www.coindesk.com/policy/2022/11/22/lawyers-detail-th...
https://www.cnn.com/2022/11/24/media/coindesk-scoop-ftx-reli...
https://crypto.news/potential-buyers-circle-around-digital-c...
The leaked balance sheet on Nov. 12th was as much clarity as I needed. Plainly, it demonstrated that customer assets were not segregated as promised, but were gambled with.
It can also be hard not to blame the victim after they responded to skepticism with shrill political diatribes, although that's not a new trick when it comes to fraud schemes. The guys trying to sell bogus patents for tapwater-powered cars in decades past used similar rhetoric in order to make pawns out of the gullible. "It's not a scam! That's just what they want you to think!"
Put differently, it sounds like you think people who put money into FTX are dumb. Fine. But the law still protects dumb people, as it should.
One of the main reasons I hesitated on DeFi, and I probably read a dozen white papers, was my concerns over not being in control of my assets when off exchange. The staking rates always seemed insane.
Certainly not as concerned as when I didn’t understand the Luna white paper and my friends who were rich off it couldn’t explain it to me, but still concerned.
> Am I wrong here?
I think so. The overwhelming majority of the lost money comes from some combination of a) criminals b) investors in crime-enablement technology c) speculators who thought they could make money off a) and b). It's not much of a tragedy, and dunking on them is warranted.
> I really want to know if these cries of foul are substantively different than, say, the required reserves to prevent these types of collapses. Or say, the existence of FDIC insurance in cases of mismanagement or even outright illegal trading by banks?
The problem with being outside the law is that you're outside the law. Banks do dumb things and lose money all the time, but the rest of us support them because they're fundamentally a part of society; they submit to society's rules, they pay the fines they get charged without complaint (even when those fines are often blatantly unfair), they generally follow the law as best as they can and go through the proper processes when they want to get the law changed (which is not to say they don't lobby for their own interests - they absolutely do - but they play by the rules).
They're both crimes.
According to some, supposedly cryptocurrencies was the solution to get around financial and banking regulations, and the only truth was written on the blockchain ledger. "Smart" contracts will make traditional contracts based on the legal system obsolete. At least for those cases, it can be argued that those people waived their rights to recovering economic loss via the legal system by using cryptocurrencies.
That said, I don't buy it. But maybe a desperate lawyer could try to argue that...
I share the same perspective, but I'm surprised by everything that is happening around.
Users on Tweeter and some crypto websites are speculating and investigating on how ftx got a banking license (shouldn't they have done it in the first place, before they invested ?)
They're also defiant to the media (as in the intro of the featured article)
And posts on HN about the very nature of the crypto industry are hot.
I find all of that pretty amateurish yet still convinced, after seeing both the wave of tech guys who believed in cryptos for what you said, then of more or less proud 'crypto bros' who just saw a financial opportunity, with hardly any financial, tech, or political knowledge. The former didn't see the latter come in and ruin their usage of the crypto, and the latter ignored the warnings from specialized journalists
What is happening right now is very interesting to watch. I've spent two years to get a better paid job before I could have more money to invest, so I'll watch around to learn.
I've already seen basically the same, on documentaries about Wirecard.
The first lesson I'll take will be about being humble, being able to listen outside of bubbles, and to take criticism without flaming other commenters. The second one will be that collapses can arrive very fast. The poor investors lost everything in a snap. It looks pretty bad
[0] https://hardwaresfera.com/en/noticias/criptomonedas/consumo-...
[1] https://cen.acs.org/environment/sustainability/Bitcoin-poses...
[2] https://www.cnet.com/culture/features/north-koreas-crypto-ha...
Almost everyone in the crypto industry wants the centralized institutions regulated, because they are opaque companies that could do market manipulation or steal funds at any time.
In stark contrast is DeFi, the second group, who are completely transparent and have no way for the owners to run off with user funds. These ones should not be regulated (scammers should be prosecuted if they code secret backdoors, but they don't need normal bank reporting, kyc, etc)
The distinction is very important.
No need for regulation to deal with this.
The part I missed is that the contract contained a hidden part where Blockfi can take out the money from the regulated storage and do whatever they want with it without notifying me.
I was paying regular loan repayments and had no idea that they put it in a casino.
When people don't go for known thiefs and mix them with other people, it just gives me more confidence in the important of decentralization.
Classic.
https://www.nytimes.com/live/2022/11/30/business/sam-bankman...
According to Sam Bankman-Fried. Not the most reliable source.
https://www.nytimes.com/live/2022/11/30/business/sam-bankman...
Let’s say Amazon bet your $100 order money on WSB stocks and lost, and said “excuse blah insolvent blah accounting blah”.
So they took a margin loan using all their FTT as collateral, then lost all the money. Normally you wouldn't be able to lose more than you've left as collateral, but they weren't like other customers (see above). But there's also the fact that the collateral was semi-BS, so FTX can't sell it to get the money back anyway. FTX printed the FTT out of thin air and then sent it to Alameda (surely for some purported reason). Alameda then used this semi-fake collateral to loot all FTX's customer deposits. (It was fake in the sense that you can't sell all of it at the mark-to-market/last-match price). You can see how FTX is involved at every step of the way here, and is at the root of the scheme, not merely a criminally negligent player.
But honestly it just keeps going deeper and deeper, as it sounds a lot like funds were missing prior to any of this happening, and that even if they could pay all this money back, there wouldn't be enough money, and that the margin loan wasn't just used for investing but also frivolous spending. Don't try to make sense of SBF's actions, they don't make much sense (Why go on a shopping spree that worsen's your already-insolvent exchange? Why tie up withdraw-at-anytime depositor's funds into 10-year-time-horizon VC funds? IDK, why talk so much publicly against your lawyer's wishes and your own best interest?)
Is it normal for margin loan funds to come from customer deposits? For example, if I deposit on Charles Schwab, is the cash held in my Schwab account used as capital for margin loans to other Schwab customers? I would think not (unless I'm misunderstanding how finance works). Like of course the money is probably lent out like banks do, but FDIC insured banks have rules about what types of things they can lend money to, right?
I would think that using customer deposits to make margin loans to other customers would be fraud even if Alameda wasn't in the picture. That's what I fundamentally don't understand about SBF's mumbo jumbo; how would Alameda (or any other customer) take a margin loan out of customer funds if customer funds are supposed to be segregated from FTX company funds? Isn't the admission that a margin loan to Alameda led to the loss of customer funds an admission that depositors were defrauded?
Market prices aren't continuous, so you cannot guarantee that you can close the customers position at the point where they are wiped out. So a cryptocurrency casino that offers margin to users cannot guarantee that they won't just suddenly be insolvent.
They also accepted magic beans as collateral no just their own FTT but all manner of other dogshit where there couldn't be a realistic realtime market price.
The key point is that these bucketshops end up as the counterparty to their customers trades the net result was that FTX itself was essentially long all manner of illiquid scamcoins and massively short Bitcoin.
This complicates accounting for the total loss-- if you deposit $1000 but then turn it into $100k worth of "bitcoin" using trades with 100x leverage-- though the bitcoin never existed it was just an entry on FTX's books-- and then FTX implodes what the amount lost? Arguably closer to $1000, but right now the figures about FTX all use the highest number. But the customer didn't actually lose that full amount-- it was just a fantasy.
A lot of the dialog about the fraud at FTX centers on diverting company assets for personal/family use-- which indeed doesn't appear to be good, but so far that doesn't appear to have happened at a scale that they couldn't have operated out of if not for the fact that the entire business itself-- basically selling people paper assets which weren't even backed by meaningful collateral-- was fraudulent.
And this is an important distinction because it changes what risk people should be looking for... The 'crypto' ecosystem is highly volitile at best-- full of garbage that is sure to fail. Business offerings that aren't provably implosion proof will almost all eventually implode.
Compare to your typical US retail brokerage-- margin is available, but 2x leverage at the absolute most, highly controlled, regulated, and risk managed, riskier assets either can't be used as collateral or count far less. The assets and customers are diversified (and when they become less so, leverage is further reduced), and there is industry provided insurance mechanisms to backstop. In the crypto space things are massively more correlated, unregulated, customer are all over the world so there is seldom any recourse against them, no one has every (AFAIK) gotten in trouble for manipulating a cryptocurrency market, and instead of 2x leverage _20x_ is common at these casino services (and 20x isn't even the limit).
You take a (what you think is) calculated risk, nothing bad happens immediately and it worked out - which reinforces the belief that your risk estimate was correct and not just pure luck.
Then you take the same sort of risk all the time and it becomes your new normal - you take another risk (which is now a larger step, since the previous risk-taking is just business as usual) and so on until the probability of failure is 1.
Obviously this can easily happen to people who have no advisor they respect more than their own opinion.
But it's always very dangerous to try to determine someone's honesty based on public appearances. Anyone appearing in public will have decided exactly what they're going to say, will have decided on what sort of image they want to project, etc. They will have practiced. In a situation like his, triply so.
People appearing in public are rarely their authentic selves. They are playing a role of some sort to some degree. Even ordinary, normal people do this. The information quality you get from how they appear is too low to base any sort of judgement on.
A: I did not mean to. I just loaded the gun, closed my eyes, pointed to the crowd and pulled the trigger.
If you are a trading exchange without a bank account, something is seriously wrong and you don't have an exchange. Choosing to take on customer money in any capacity is just straightforward trying to do something shady.
Yeah it is a little more complicated than normal to do illegal bullshit and fleece retail investors, that's the whole point of regulations and is not really an explanation for anything.
You could argue that anyone sending their money to a company of a different name to the one they expected, in an offshore jurisdiction, "deserved" what they got, but I don't agree with that. SBF is clearly trying to claim incompetence rather than criminal intent, but that should not save him from a gazillion wire fraud charges.
> Bankman-Fried has decided to “confuse, evade, distort.”
Even if you believe he's smart enough to build a massive exchange that takes in billions of dollars of customer money but is too incompetent to institute the most basic safeguards that seems fraudulent (and criminally negligent) to me.
Also, all the "incompetence" seemed to benefit him and FTX senior leadership. Funny how things shake out like that sometimes...
- Hiring compliance officer, who was on tape helping his former boss get away with fraud[1] (and that was not recent revelation)
- Using self deleting messages and encouraging others to use them, for important discussions [2].
- Alameda research having backdoor into FTX, just so they could do stuff without rising any red flags [3]
There are other things that point into direction of fraud, but this are the main 3.
[1] https://nypost.com/2022/11/20/ftxs-ex-chief-regulatory-offic...
[2] https://d1e00ek4ebabms.cloudfront.net/production/uploaded-fi...
[3] https://www.wsj.com/articles/alameda-ftx-executives-are-said...
Centralized "crypto" exchanges are antithetical to cryptocurrency. It means NOT using cryptocurrency and giving it to a bank/speculators and then day trading off-chain. The only good reason to keep them around is for the fiat exchange capability. Which could better be served in other ways.
The amazing thing is that most people still don't know what cryptocurrency actually IS, and think this FTX scam and other similar nonsense means that "crypto isn't trustworthy". When in reality it is all a perfect example of why the capabilities of actual cryptocurrency (such as public ledgers and smart contracts) are such important advances.
This tends to be a bit of a motte-and-bailey point. What people mean when they say "crypto isn't trustworthy" is that if your spouse wants to "invest" in crypto, you put a hard stop to it right that second if you don't want to lose your house.
Crypto is trustworthy in the limited sense that the underlying technology (public ledgers etc.) works - it's not fatally flawed from a technological point of view. But this is not a sense of trustworthiness that is clear or even very important to the general public.
But it's relevant in discussions when I've seen him called worse than Madoff who engaged in a very overt crime. Again we don't know exactly how much SBF tried to directly profit off the business yet and how much it was a concerted plot to scam people. ...And since the internet requires you to be extremely obvious, that is not saying he's not a bad guy or absolved of responsibility or whatever.
We may not like it, but that’s how the system is set up.
We're not gonna invalidate a huge amount of legal precedent spanning centuries for one dude. Intent matters.
(That said I think he's lying and knew what was going on the whole time)
It is such basic fraud that it happened even in 2008 and it’ll keep happening. Cherub faced little fucks will evolve to fool you out of your money until the end of all time. Don’t fall for it.
Full agree. But when I see this, I assume his target market is the single juror at his criminal trial who needs to buy it in order to prevent a conviction.
Edit: Unless it's a Bahamas jury trial (for a crime not punishable by death), in which case, he will need to convince four out of nine jurors to prevent a conviction.
The book talked about a security guard who would be responsible for the daily firing, walking the person out of the building with their box of belongings was as normal as lunch.
Dude knew what he was doing and if he didn't it was done out of such criminal negligence that he's still to blame.
They're incentivized to not look as if they're willing to backstab donors the moment they fall from grace. Otherwise nobody (or at least no unscrupulously rich person) will donate money to them for political support in the future.
No usually you see "rugged"
Wow this got me thinking... like all collectibles the value is not intrinsic in the item itself, but subjective to the eye of the beholder.
What exactly is the subjective thing that's being collected here? I wonder if the appeal of crypto is that literally represents (well, as literal as a digital good can be) a piece of "the digital new", whatever that may be. It's a piece of the our perceived digital future, but one you can own and say is yours.
This must strongly resonate at a subconscious level to those weaned on social media who now live in a state of constant anxiety due to FOMO. The digital world is ephemeral, but bitcoin is something you can hold on to.
The average person doesn't understand the digital revolution and the world it's built and are discontent as they feel left out it's promise; namely a techno utopia that brings great wealth and power to those in the know (Gates/Jobs/Zuckerbergs/etc.).
Crypto therefore allows these people to believe they own a piece of the action. That may be it's only appeal. They can point to it and say it's theirs. "I don't understand it, but I'm not going to be left out of it."
It is the ultimate nexus of everything wrong with social media and the modern digital world. The future is coming, everyone else on my feed is having fun and smiling, and vast riches await you too if you only have Diamond Hands and HODL, which ensures you will never experience FOMO. A collectible that acts as a balm against all the anxieties of the modern world. Snake oil as a collectible.
I must think on this further.
As someone who's been in the space since the early Bitcoin days, I don't know a single actual crypto person who was a fan of the likes of SBF, CZ etc even before FTX imploded. It's firms such as Sequoia Capital and Softbank (seriously, they're always in when cash can be burned) that lost millions in FTX, not actual crypto natives for the most part.
There is an interview with SBF out there where he quite literally calls the defi tokens he traded a "ponzi". Of course none of the expert investors did due diligence because they were blinded by the bull market hype, with fat dollar signs in their eyes. Now that their "investment" has disappeared the mainstream has made out the culprit as well. Not the scammer, not the gullible tradfi traders, not a system that relied entirely on trust without verification or regulation - no, it's crypto that was the problem of course.
If only there were a way that exchanges could be reliably audited. Maybe some kind of decentralized ledger that can't be controlled and falsified by a single dishonest party.
Here's the first Vox article that pops up when I type "vox sam bankman fried" into Google[1]:
> A week ago, Sam Bankman-Fried was the boy-wonder face of crypto: A 30-year-old who founded one of the biggest cryptocurrency exchanges in the world, a celebrated philanthropist worth an estimated $16 billion, and a major Democratic donor who quickly found favor in Washington. By Friday, he was at the center of an epic flameout that left his empire and his image as an uncannily sharp, altruistic billionaire in ruins.
> In the annals of crypto disasters, the tale of Bankman-Fried may go down as one of the most jaw-dropping. He resigned from his crypto exchange, FTX, as it collapsed from a domino effect of a surge in customers trying to withdraw their funds, and the company filed for bankruptcy. The Wall Street Journal has reported that Bankman-Fried may have illegally taken about $10 billion in FTX customers’ funds for his trading firm, Alameda Research, whose future is also in peril. And Bankman-Fried is now worth close to nothing.
> The downfall of FTX isn’t a typical story of crypto’s volatility or investor risk-taking; it didn’t crumble due to bad luck, but what now appears to be unsustainable layers of deception.
Again, people seem to be trying to purposefully spin the mainstream coverage into something it's not.
[1] https://www.vox.com/the-goods/23458837/sam-bankman-fried-ftx...
Make no mistake, real people chose to purchase cryptocurrency and send it to FTX based at least partly on some pretty sophisticated marketing and endorsement from establishment figures. They will almost certainly lose that money. It’s definitely not just VC funds being burned here.
> Several months ago, I found myself having a few mocktails and splitting vegan snacks with Sam Bankman-Fried at a restaurant near my house.1 We touched on, among other things, his proposal to create a new publication featuring writers he liked, including me.
> I declined, which obviously in retrospect was the right choice. I told him that I like my Substack just fine and make plenty of money, though he was happy to offer more. But I also told him that given the extent to which we agree on a lot of important issues, I thought it was a lot more valuable to these causes for me to maintain credibility by not accepting any of his money.
That’s because spinning the notion of “they” being more friendly to Sam implies a shadowy conspiracy, which is much more interesting than other explanations.
Cotton’s razor: The most boring explanation is the most likely explanation.
And when/where it wasn't, we usually called the place a failed state.
It was the exact same way on The Motley Fool boards after the dotcom crash. The crowd that was all "Well you may have your facts and figures, but my CMGI keeps going up and up and up, so PPPPPTTTTHHHHH!!!", instantly pivoted to "How can you kick me when I'm down like this? Do you enjoy suffering?"
The article has some large numbers. "Bankman-Fried received an incredible $1 billion in personal loans, as well as a $2.3 billion loan to an entity called Paper Bird in which he had 75% control."
(I mean, except for the "Vision Fund" or other BS like that).
But Sequoia's reputation probably took a dump from the latest episode
Because code is immutable you can simply wait until a protocol is a few months / years old and if it hasn't been hacked you know it's going to be safe.
This is why regulation isn't as needed, because the code can't secretly change like humans at opaque financial institutions can. Immutability + Transparency + Time is the regulation.
The Ontario teacher’s pension fund had something like a $95M investment in FTX. It manages $241.6BN CDN in assets, making the FTX investment about 0.04% of the total assets. Pension funds normally put some percentage of their assets in risky investments, this is normal and good—and they will, therefore, invest in whatever new scam people come up with ten or twenty years from now. If not crypto, it will be something else.
Yes, they probably didn’t do the due diligence that they should have done. But that is a different kind of mistake than the mistake of investing in something risky when they thought they were investing in something safe. The pension fund likely knew it was risky, they just didn’t figure out that the inmates were running the asylum, so to speak.
Or in short, yes, this was a mistake, but pension funds invest, on purpose, in things that can balloon and burst on a whim anyway.
(I'm not implying any moral judgment here. Personally, I think it's actually a net positive given the amount of harmful regulation, both in national laws and in international sanctions. But that's precisely why it would be silly to expect it to not be driven underground by the governments in the long term.)
The argument "I'm sorry, I didn't know rape/murder was illegal" does not have _any_ value in a court of law.
It seems to be working, at least on some margins. Even here he has his defenders.
An adult - in general - will recognize when the jig is up and take it on the chin. Or just lawyer up if they think they can get away with it despite being culpable. This is a 30 year old who thinks he knows better than his lawyers (assuming his lawyer didn’t actually advise him to go to interviews and claim he did it against their advice for some reason). I’ve yet to meet a 30 year old that stupid. It’s the gradient between 25 and 30. You understand the world so fast that a 25 year old seems like a child if they insist they’ll go at it without lawyers.
Enron collapsed right after the 2000 election and before the 2002 primaries. Their outgoing CEO and chairman of the board was co-chairman of Bush's campaign and a personal friend of Bush Sr. and Dick Cheney. One major reason he was retiring was moving into politics, being mentioned as being on the short list for cabinet appointments (Treasury or Energy).
The chief US economics advisor and the chief US trade representative under W. were Enron advisory board members (well, they had to resign from the board when appointed by W.).
My point is, Enron was well connected.
Enron was arguably better at influencing politics than SBF and FTX which allowed them to run unchecked for far longer.
0. https://en.wikipedia.org/wiki/Enron#Enron's_influence_on_pol...
"Tell me you weren't alive in 2001 without telling me that you weren't alive in 2001." Such a rosy depiction of the Bush II years is entirely detached from history.
SBF and the gang aren’t going to be able to con more people, the companies are in bankruptcy now so their books are being poured over, and there’s multiple state and federal investigations ongoing. Presumably the Bahamas has some sort of law enforcement system as well. Just because the US hasn’t descended on the Bahamas with apache helicopters in a month or two doesn’t mean “they got away with it”, people need to stop being so hysterical.
What does this mean? Enron donated a ton of soft money and lobbied heavily. They had no shortage of friends in Washington.
Sam recently said on an interview that he donated just as much to the Republican party using dark money channels. I doubt that's going to save him at this point.
Are there independent records of these donations.
https://prospect.org/power/congressmembers-tried-to-stop-sec...
https://www.opensecrets.org/outside-spending/donor_detail/20...
Wouldn't be called dark money if there were. Sure he's a lying sociopath, which is why it would make sense that he did donate to both sides.
No. What happened at the company FTX has nothing to do with blockchain and smart contracts. It could have been an online exchange for euros or dollars or Pokemon cards. Violating the ToS and stealing users' funds is a crime.
Insanity.
Obviously you're not going to come out and say you're doing this as a PR strategy developed with your legal team, you're going to act like it's a personal risk to yourself to tell your story, which I suppose lends it some credibility in the eyes of some people. Like some of the people in this thread.
The man's a con artist. I'm astounded that people still believe anything he says. I suppose I shouldn't be, he must be a very good con man because he managed to steal billions of dollars.
https://cointelegraph.com/news/sbf-s-lawyers-terminate-ftx-r...
Major papers rarely lose libel cases because they do the obvious thing and avoid publishing libel.
If it's true, there is no defamation. If it was stated as opinion, there is no defamation.
Compared to the alternatives, Jane Street doesn't exactly select for street smarts. (Nor does MIT, to be frank.)
Sam Bankman-Fried's statement to Tyler Cowen that he will take any positive-EV bet regardless of the standard deviation of returns, sounds more like a learned-by-rote answer to an on-campus trading interview question rather than a core tenet of a trading philosophy. Professional traders at major institutions (including Jane Street) care about things like Sharpe ratio, value at risk, and position sizing. Not to mention that Jane Street asks Fermi questions in their interviews. I wouldn't be surprised if the average MIT senior with three or more trading offers could proffer the same kind of demonstrations/responses as what you describe.
He must be on some weird drugs that just has him spewing his points left and right. What people are misinterpreting is his claim that he was careless and that the accounts where poorly labeled. Those aren’t him trying to say he wasn’t a fraud,m, that’s him saying that he could have kept the fraud going if only they hadn’t been too highly leveraged.
Brokers and exchanges are obligated to park customers' money in an escrow, and may even be required to insure them [1] for a good measure. Under no circumstance are customers' funds lent out. So where do they get money from to lend? Brokers lend either their own money or get into arrangements with liquidity providers. These are big institutions/hedge-funds etc., who offer to lend money in exchange for attractive returns. They get into a different agreements and are fully aware of risks they are taking on.
Traditionally, lending deposits out as loans (especially mortgages) was seen as the most important thing that banks did, their core function. Nowadays things are more abstract and regulations are different, but it wouldn't surprise me if margin loans could still be at least partly funded (at least in an abstract capital-ratio sense) from deposits.
[0] https://www.finra.org/rules-guidance/rulebooks/finra-rules/3...
This all was a big problem I. The us up through Great Depression, and then the securities exchange act of 1934 was implement to regulate these practices quite successfully over the years.
FTX went down because of how cooked their books were.
Whatever other stuff that was going on around the edges, they wouldn't have gone down if they hadn't cooked their books.
You're saying that, because it is possible that some undefined company that Coindesk previously spoke positively about may be committing fraud, their coverage of an entirely different, unrelated company that lost billions under highly suspicious circumstances should be questioned? That can't be what you're saying, right?
Work hard to keep trust in crypto high basically and act as if those caught were outliers
Are there any news outlets outside of the US that wouldn’t be affected by these insidious US leftist institutions that should be reporting on it?
But if you notice, keep quiet, or you’ll get labeled a lunatic.
It is not the job of the media to accuse people of having committed crimes, and it is dangerous for most people to do so. Defamation is a real thing. Publicly accuse someone of a crime they did not commit, and they have a legitimate civil cause of action against you.
If you can get people to go on the record with their own accusations, great, but those people, too, would be exposing themselves to potential liability.
If SBF is charged, the media will be all over it, and the coverage will be based on official records and statements. That is how news coverage of crime works.
It is precisely because SBF has not been charged that the information needed to substantiate a news story tying him to criminal activity is unavailable.
It's indeed dangerous for "most people" to do so. However, in many jurisdictions, the media gets more protection against defamation claims than the average person because of their public duty to report alleged criminal behavior.
The press doesn't get to receive special treatment in defamation law and then claim they're not going to report facts because they fear legal consequences.
I'm referring to an old dictum of politeness: "If you don't have anything nice to say, don't say anything at all." People breaking that rule are being impolite.
I apologize that I wrote that in a confusing way by referring to them as "impolite people". It was intended as a more instrumental observation: in that instance, they are being impolite (at least by that particular rule, which is of course itself not universally accepted). It was not intended to make a categorical statement about them, but it clearly read that way.
Am I to believe that lumping people into groups of polite and impolite as human beings is a polite thing to do, or am I meant to believe that lumping people into binary groups of polite and impolite is an impolite thing to do?
Am I being downvoted by polite people or impolite people??
Is reductively judging people and putting them into antithetical groups based on offhand comments polite, or is it impolite? It’s a legitimate question.
I mean, I guess you're right in that nobody gambles with the intention of losing.
That does not lessen the culpability of sneakily using other people's money for extracurricular purposes without their consent.
But if we're going to make "gambling" the focus, then let's call a spade a spade - trading-wise, Alameda did what Alameda has always done, since day 1. And a moment of due diligence would have so informed anyone considering investment in anything even remotely related to these people.
Yes. They've gambled away the money that didn't even belong to them in a game of chance.
It's a casino, but with other people's money.
> And a moment of due diligence would have so informed anyone considering investment in anything
Ah yes. It's not the criminal who's at fault. It's all the people who didn't think this was a criminal.
> Delinquents and criminals average IQ scores 8 to 10 points lower than noncriminals, which is about one-half a standard deviation. IQ and criminal behavior are negatively correlated at about r = -. 20 (Hirschi and Hindelang; Wilson and Herrnstein).
There's no way he can plead stupidity.
That’s a small price to pay when interest rates are 3% to find out your fund managers need to be fired.
In October 2021, Ontario Teachers’ invested US$75 million in FTX International and its US entity (FTX.US). In January 2022, we made a follow-on investment of US$20 million in FTX.US. ... Our investment represented less than 0.05% of our total net assets...The subtext is of course that he was perfectly willing to pay both sides.
From "Sam Bankman-Fried's mom once wrote an essay about fixing problems rather than assigning blame when 'something goes terribly wrong'" Nov 20, 2022 [0]
>> She has written pieces for the Boston Review, a quarterly political and literary magazine, arguing that attributing "personal blame" in times of crisis had "ruined criminal justice and economic policy," suggesting it was "time to move past blame."
>> "The fact that we have gotten so little in return for our blame mongering at least opens up the possibility that people would be receptive to a new approach," she wrote in 2013.
>> "The next time something goes terribly wrong, suppose that instead of immediately asking who is to blame, we were to ask: How can we fix this problem?"
Seems a bit of a convenient philosophy for a fraudster . . .
[0] https://www.businessinsider.com/sam-bankman-frieds-mom-wrote...
That doesn't mean the person at fault can't also be blamed and punished as a warning to others (i.e. one more mechanism to prevent recurrence).
It might help if you’re too hard on yourself.
But if you’re egotist (like many founders), it can be used to justify all sorts of wrongdoing.
“I’m getting away with it - that’s a problem with the system not me.”
There's trustworthy crypto banks, they just don't offer interest. If you think you need interest on your crypto you've already lost the plot somewhere. Maybe it was when you took financial advice from a super model and a football player.
The thing that's not trustworthy is the financial industry. Crypto is just their latest tool. Before it was mortgage backed securities, and before that penny stocks.
That's sort of the whole point encapsulated, isn't it? Most of the popular interest is in crypto as a supposed investment! There are trustworthy investments that offer interest - they're just not crypto investments, as you say. That's a pretty big difference between the traditional finance industry and crypto, without even getting into the question of regulatory oversight. The idea that "everyone is just getting crypto wrong" is what I meant by a motte-and-bailey view; you can hold it just so long as you view the vast majority of what goes on in crypto spaces as basically illegitimate.
I don't know how succesful FTX's marketing was, did they really convince the average American to buy their crypto there? I hadn't even heard of FTX until they named a stadium.
Not everyone gets crypto wrong, just the people who got duped. Maybe I'm underestimating how many those are, I'm not an American and never met anyone who had assets at FTX.
All involved knew what they were doing, or took extraordinary measures to blind themselves to knowing.
I don’t think there’s an unintentional relationships which facilitates and under-punishes fraud, but I don’t think there’s a conspiracy afoot.
I've said multiple times on HN that I consider blockchain to be the most economically important invention of the last 500 years, e.g.:
https://news.ycombinator.com/item?id=14633148
https://news.ycombinator.com/item?id=18574399
But the reason it's exciting is, among other things, because it should radically drive down the cost of borrowing money. So yeah, I'm probably literally on the most bullish person on crypto on HN, but that's why it's so easy for me to see how the folks chasing those double digit interest rates on FTX aren't exactly the innocent victims they're being portrayed as.
I'm hardly an economist, but even the most financially illiterate people know that interest rates should be vaguely proportional to risk.
It's just virtual tulip bulbs and South Sea Company shares. And that's all it's ever been.
The fraud is the point. It's not an unfortunate, isolated, and regrettable accident. Crypto literally raises the cost of borrowing by making it trivially easy for fraudsters to steal it, under the cover of running a "secure exchange" or a global high profile pump and dump, or worthless NFTs, or whatever the next scam du jour is.
After removing "banking as SaaS" from the value proposition, what was left was a bunch of hustlers running cleverly incentivized Ponzi schema. It's not even tulip bulbs. We're finding its black boxes, creative financing and yield farming as far as the eye can see.
None of these would have been possible without the invention of double entry accounting, because before double entry accounting you couldn't even really run anything larger than a family business because there was no way to know whether or not you were making or losing money. So it stands to reason that because blockchain is a breakthrough in accounting of a similar magnitude, in the sense that it will enable all sorts of new economic relationships that aren't possible today by radically driving down the transaction costs of doing business, that these new relationships will similarly enable all sorts of new technologies that we can't even imagine today.
To understand blockchain, you need to go back and read all the books on the history of double entry accounting in order to understand the changes that it enabled within society. But these changes aren't going to happen over night, they'll take a couple hundred years to play out, in the same way that it was a couple hundred years between the invention of double entry accounting and the height of the Dutch East India company or whatever.
I estimate that approximately 80% of people would not even understand the claim you're making, let alone be able to evaluate how true it is.
Its not. Blockchain is an immutable ledger only, there's nothing in the original blockchain spec (not Satoshi's spec, Satoshi didn't make blockchain. he kinda stole it, like he didn't cite his sources very well) that mathematically enforces any sort of double entry accounting feature like ledger immutability is mathematically enforced. But blockchain is useful and interesting for other reasons. Lets set that aside since you're clearly talking about crypto, which is also not a replacement for double entry accounting for its own myriad of reasons including but not limited to excessive power consumption, reliance on a consensus of random computers (of which anyone could own 51%+ and effectively have full control over the chain), zero recourse for lost/stolen funds, unpredictable value, poor security features (true), no way to correct errors (without compromising the data structure), and the list does go on.
Even if it was a panacea for the burden of having to have an accounting department (the horror), it can't have the same economic impact as double entry accounting like you claim since double entry accounting literally didn't exist before double entry accounting. Crypto is just automated (until there's problems, and there's always problems) double entry accounting, its literally still double entry accounting and will still even need to be audited by real accountants (ugh, stupid laws, right?) LOL.
Not really. If we take nominal interest rate = real rates + inflation expectation + credit spread, then only the (counter party dependent) credit spread reflects riskiness. Real rates reflect an equilibrium of time preferences.
I got my mortgage for less than 2%. I can't see how crypto is going to enable negative rates.
(Historical factoid: the world's oldest bank in the modern form is up to 550 years old https://en.wikipedia.org/wiki/Banca_Monte_dei_Paschi_di_Sien... )
Now it's Nov. 30. Has NYT published anything nearly as comprehensive as this article? They have significant resources at their disposal
[1] - https://www.nytimes.com/2022/11/30/business/sam-bankman-frie...
"Mr. Bankman-Fried, who became a billionaire as FTX soared and was viewed as a wunderkind, faces significant legal trouble. The Justice Department and the Securities and Exchange Commission are investigating FTX’s transfer of funds to Alameda. The chief executive of Alameda, Caroline Ellison, told staff this month that the trading firm had dipped into FTX customer funds to finance its own trading activity, The Times and others have reported.
Mr. Bankman-Fried has since come under heavy criticism. In court filings, FTX’s new chief executive, who is managing the company’s bankruptcy, said he had never seen “such a complete failure of corporate control” and listed a series of “unacceptable management practices.”
On Wednesday, Treasury Secretary Janet L. Yellen called FTX’s collapse a “Lehman moment” for the cryptocurrency industry, referring to the bankruptcy of the Wall Street bank Lehman Brothers at the start of the 2008 financial crisis. She indicated that she viewed cryptocurrencies with skepticism..."
The narrative you have does not equate with what is actually in the articles.
- The problem isn't SBF - it's his girlfriend. Sorry, "Caroline Ellison." The article omits their relationship.
- The problem isn't SBF - it was some poor management practices.
- The problem isn't SBF - this is "just" a 'Lehman moment' - legal and authentic, if unethical, actions gone bad.
I get its criminal what SBF did and this is as bad as negligence gets in business but everyone is treating this like some overt Madoff like scam that was obvious to everyone in-the-know. The details of how SBF himself was engaging in the scam is not even yet set in stone, besides some real estate deals and an obvious lack of corporate controls/conflict of interest, so accusing others of also being a part of it seeems pretty brash and far too early.
Although I get the emotional outrage angle of none of the power players calling it out sooner or asking tough questions. But that's slightly different than participating in a scam.
FUD doesn't help us stop this in the future. Actually accusing them of the things they did is how you get them to fix that mistake in the future. Accusing them of being overt scammers, before we have any actual evidence of that, is how you get completely ignored as being hysterical.
The investors might not have committed any crimes, but they bear some moral culpability for this debacle.
And to be clear I am not defending SBF at all. But on the scale of crimes, what he did is less bad than literally any violent crime.
And their risk/management team signed off on it?
And how do they estimate how long no one will notice or care? Or do you think they have other bullshit companies lined up to acquire it or the IPO market wouldnt check either?
Why wouldn't they just buy FTX coins or similar tokens for such a blatant pump scheme? Why make a long term bet on the actually company cashing out before anyone checks their books?
Stealing and wasting billions is definitely worse than many violent crimes.
Yes.
It's cryptocurrency. Of course it was obviously a scam to anyone who's bothering to pay attention.
I think a little talked about part of the crypto investment boom among "normies" is that a lot of those people felt completely left behind by capitalism, constantly underwater financially, with no way to catchup or reach financial security. Crypto then got sold to them by the grifters and media as a way out, an amazing, full proof chance to get free. Theres a reason they were paying people Matt Damon and Larry David to do their commercials. Yes, putting your life savings in crypto is obviously a hugely risky and bad idea but most people lack the financial education necessary to recognize that a project promising you 20% APY is unsustainable and even those that do may still go for it because they see it as their one chance to stop drowning.
These aren't ancap millionaires living in the Bahamas, rubbing elbows with politicians and flaunting their $150k NFTs on Twitter, its people like my friend whos a single dad trying to raise two kids with autism while dealing with chronic health issues from his military service who lost most of his (negligible) savings when Celsius blew up. Yes, I'd been telling him for years how he shouldn't be taking risks on stuff like this and how they are all obviously scams and yes he was really stupid for not listening to me and everyone else and he does deserve some blame for his decisions but he wasn't in it for evil or greedy reasons. Dude just wanted to be able to afford counseling services for his kids and got tricked into giving people like SBF his money in hopes of being able to do so and is completely fucked now as a result.
I'm possibly being too empathetic and willing to remove blame from people who made bad choices due to hard circumstances (maybe because I have such a close anecdote). I guess I just feel like theres a large number of the victims that were the suckers the grifters were siphoning money away from and the impact on those people isn't really being discussed.
> when you have nothing nice to say, the polite people say nothing, and the impolite people say the impolite thing.
I’m genuinely confused by this sentiment. Does this poster think they’re saying something nice? Or are they intentionally outing themselves as impolite by opting not to say nothing?
It seems genuinely funny to assume the role of the judge of who is or isn’t “polite” while violating their own rules about who is “polite”
To further rephrase that: That appears to be (without clarification) a very amusing moralizing statement that provides no value whatsoever other than to directly contradict its own premise.
Usually I classify comments as polite or rude, not people. I guess GP is the arbiter of personality though?
To be fair so is Venture Capital and Private Equity. The difference lies in the degree of diversification
"The criminal is at fault" and "the investors weren't very wise to give him their money" are both true.
The problem is both his parents are Stanford professes and lawyer. He business partner father is a MIT professor. NYT and WSJ are trying to coving up the stolen money. This is what makes it complicated and why he might not be charged
It's not rocket science, but it involves banking and property law. I'm not sure which one is more complicated.
> If your banker tells you he used your savings for his holiday it's not ambiguous
In fact, your banker does routinely use your savings for his holiday. This is called "fractional-reserve banking", where the bank doesn't put your money in a metaphorical "safe", but rather they use it for whatever. Most of the money is loaned to other parties, but the money can also be used to pay employees' salaries (which can get used on a holiday).
I'm not saying FTX didn't do anything criminal. Most likely they did. It's just that laws are sometimes more complex than they seem. (And that you probably have the wrong impression of what your bank can do with your money?)
You intensionally misconstrued the banking theft example as legitimate lending to make a nonexistent point
He almost certainly is. Under US law, it doesn't actually matter where you're based. If you are engaging in substantial activity in the US, and have a presence in the US, then you are within the jurisdiction of the US, at least for that portion.
We call this “financialization”.
That doesn't help with estimating levels of non-detected crimes of course.
I mean literally the reason why everyone refers to crypto as "triple entry accounting" is because entries on the ledger are cryptographically signed, which makes ledgers less expensive to audit and also prevents certain categories of fraud. So that alone should always make the costs of lending on the blockchain lower, and therefore also reduce interest rates.
But if you want a much more detailed explanation of why crypto should reduce the cost of borrowing money, especially in the developing world, here is an extremely detailed explanation on this topic:
I think it’ll come in two phases: first they’ll come around to the idea of debtor’s prisons and demand the governments of the world bring them back. Then when they’re all in the prisons, they’ll lead a movement to abolish them (again) completing the circle of “why bother?”
In the end we’ll be left with a saturated market of repo companies picking up the pieces for pennies on the dollar.
It's interesting you brought that up because crypto has a similar mechanism to get people to complete the whole transaction and resolve disputes without involving interest rates.
For example, imagine person B was buying a product from A. Should A send the product first or should B pay first.
When both sides don't want to take the initiative, they use an escrow contract on the blockchain where both sides have to lock up 150% to 200% of the value of the product in crypto inside the contract.
A then sends the product.
B receives the product.
If B accepts the state of the product, he can press a button to release the relevant amount of crypto in the contract to A and refund the extra 50% to 100% he had to put up.
If B sees the product is fraud, he presses another button and both sides lose all their crypto. This disincentives both A and B from committing fraud.
There are more nuanced conditions involved so I won't bore you with the details, but the main concept is there and it doesn't involve interest rates.
.. but this is obviously garbage. The question in lending is always about default risk, which crypto does nothing to address. Most crypto lending seems to be so-called "overcollateralised" loans, which are secured on other crypto "assets", which also tend to turn out to be garbage.
And we can see that everyone in the crypto space is offering higher interest rates for depositors. Even more than Madoff's 8%. 10%? Why not! How about 10% per month! Who's taking the other side of that trade? Well, it turns out to be bankrupt exchanges and fraudsters.
Reducing or eliminating that cost should not make the costs of lending change in any noticeable way, because you're reducing something that is insignificantly small anyway.
But if cryptocurrency is to be anything of actual value, it must tie into the physical world at some point, even if loans don't exist.
> Sweetbridge converts any Commercial relationship, Supply chain, or Value chain into an Ecosystem that increases the Net Worth of its Members.
Just the casing of that phrase makes me suspect them of some fraud :-)))
Ah, confirmed:
> By running all of the sales and purchases from an organization through an Ecosystem over a 5 year period, members will typically increase their net worth by:
https://sweetbridge.com/wp-content/uploads/2021/06/bottom-li...
For people that can't see the image, it basically promises that companies can increase their net worth by 25-200% and individuals by 50-200%.
Get outta here with that garbage, pardon my French.
Notably, FTX also offered the option of margin loans and options, though they were centralized. This turned out to be bad, not because it made things more difficult, but because they stole all the collateral.
Also note that the DeFi approach would likely have failed here, because the smart-contracts that determine the value of the collateral do a simple "units owned * current market price" computation. That doesn't account for price slippage. In practice the markets are quite illiquid, so selling some collateral will drop the price of that collateral quite quickly. DeFi currently has very little holistic risk management. When you have a lot of, say FTT, as collateral from counter-parties, that leaves you quite vulnerable. If FTT drops quickly, many people will get margin-calls. If they all default, then you get left with their FTT. If you try to sell that, it will crash the price even more.
It's not clear to me that increased liquidity would solve their problem. I'm not against DeFi, but the spectacular failures are proving that it's not nearly ready for prime time.
One thing I learned from the Martin Shkreli saga is that, if the people hate you enough for something atrocious that is technically lawful, the government will poke holes in you until they find something not-atrocious that is clearly unlawful. There's probably value in winning the public over, even if they don't technically have a say in the legal proceedings.
I don’t know why but that extra factor of two somehow makes it even worse. 0.05% of assets isn’t even enough for petty cash for most businesses and they couldn’t do some due diligence when it was $75 million?!
If we consider publicly listed companies that require annual audits by external professionals: Look how many people were taken surprise by Germany's largest start-up: Wirecard. It took years for highly skilled investigative journalists to expose the extent of fraud. Yes, you can be cynical about professional auditers, but they were also subject to an impressive level of deceit. When Dan Mccrum from FT was getting very close, I still thought it might be their Asian ops were a fraud, but EU ops OK. I was dead wrong -- the whole thing was a fraud.
Which statement?
> It's more complicated.
Says the person who claimed "It's not rocket science."
> You intensionally misconstrued
Assume good faith. https://news.ycombinator.com/newsguidelines.html
> the banking theft example
Even during a bank run, employees are supposed to get paid. When the banker takes your money and uses it to pay salary, it's not banking theft. Theft happens when the exchange (not banker) promises you to hold your assets in escrow and then uses it to pay themselves. There's a legal difference between bankers and exchanges in which one borrows your money, and the other holds your assets on your behalf.
The fact that you don't (want to) understand the point doesn't make it non-existent.
The walls are closing in
Also there's this [1], which just boggles my mind. I can't make sense of this level of centralized message control and dissemination. It's straight out of 1984.
It's hard to believe "the media" (whoever "they" are) has an agenda... it's tinfoil hat stuff.. Usually I write it off as emergent behavior of collective groups of humans trying to make $$$ from clicks, standard selfish behavior + time, leading to a race towards the bottom that looks like this.
But watching those clip segments it's pretty clear there's a story/narrative being pitched by someone with the leverage to do so. Is this propaganda? What is propaganda? How can I recognize it? Is everything propaganda? Has "the media" been captured and become a tool of whatever "system" is controlling things? This is the kind of stuff Jean Baudrillard was writing about.
Sometimes we get journalism other times we get whatever that this stuff is. I don't have a problem with journalists sticking to the facts, SBF hasn't been charged, so lets not lynch him just yet. But hopefully he's being investigated (they usually don't announce when they are investigating someone, as it puts them on notice).
Overall I think this is a direct result the 1996 Telecommunications Act which eliminated the rules on the number of radio stations a company could own (which also was one of the most lobbied bills in history). In hindsight this was a big mistake, and set things up for the kind of centralized messaging we see. There was hope that internet "streams" would help reset things, but with FAANG we're back to a small group of companies controlling what you see and hear.
Distrust of the media is at an all time high because of this kind of stuff. It's hard to put your finger on, but your gut says something is very wrong. No wonder so many people go down the tinfoil hat rabbit hole. They're simply trying to make sense of the world they're now living in.
“Why is it so hard to believe the media has an agenda?”
Why wouldn’t it? See Agenda Setting Theory.
All mass media can be propaganda. It’s always a political tool.
Yeah, they were farming for clicks, but to get you to read, not to make money.
You’re not supposed to notice that it’s propaganda tho. Otherwise it loses its power. That’s why you’re getting that gut feeling.
So there is something to be said about a decline in the quality of American propaganda
I think the trick is that when ppl think “propaganda” they think external, to/from another country. But internal propaganda is taboo
The word has a bad connotation for historical reasons but it’s actually a neutral term.
Mostly I believe people don't know how to read news vs opinion. Matt Levine can speculate and call him a thief, as he's an opinion journalist. Straight news can have an edge but has to mostly report facts. (edited here to add:) You will notice that each of those paragraphs has quotes, sourced to people. That's called reporting, not deflecting.
If you'd like to see normal reporting feel free to compare with: https://www.cnbc.com/2022/11/12/1-billion-to-2-billion-of-ft...
The CNBC article is "news" because it was breaking the news on the back door, transfer of funds, etc. It was new news at the time. Here is CNBCs coverage of the interview where you can compare to NYT apples to apples: https://www.cnbc.com/2022/11/30/former-ftx-ceo-sam-bankman-f...
There is a cadence to the news cycle. Not every articles is summative. Some are reporting on latest developments, hot takes, etc.
"Exchanges" try to bridge this gap and counterparty risk isn't properly priced in. If anything, the high interest payments aren't high enough to represent risk.
That can't possibly be right. It would mean that if person A defrauds person B, person B would lose 150-200% of the asking price, rather than just 100% if no "crypto escrow" were used at all.
Of course, the fact that it makes it impractical to buy any kind of expensive product is merely a detail. As is the extreme cost of non-fraudulent delivery failures in this scheme.
Cryptocurrency is finance as imagined by people who have never bought anything more expensive than a car or house.
You just described escrow with extra ~steps~ risk which has nothing to do with loans unless you’re suggesting borrowers put up 150-200% of the capital they want to borrow? (!?!?)
I don't mean to paint with too broad a brush here. The majority of investment managers are ethical and responsible. But there are always some bad actors, which we now see all around FTX.
Maybe I'm confused but even "dumb money" doesn't typically buy billion dollar scams at IPO where their financials are arranged by Goldman Sachs et al. Unless I missed some obvious examples in recent history where a bullshit (let alone crypto tier bullshit) tech company IPOd with hundreds of millions invested by legit Sequia/OTPP style investors and then the whole charade got exposed after the fact.
You could maybe point to a tiny set of VC companies in history, like Groupon where the stock price was overvalued at IPO, but even they are still a real business with 4000 employees 11 years later.
If anything you could say the grand conspiracy was betting on an acquirer buying them before crypto went bust. But I highly doubt that was a key part of some calculated plan.
Why is it so hard to believe some VC (who looked for external validation over their own dilligence) thought there was real longterm value in the business? That it seemed on paper like they were making revenue from legit sources and successfully hid their relationships/high risk bets elsewhere? Or even exploded in risk after they got tons of $$ invested? There's more than enough potential doubt here to wait before pushing this FUDy angle.
It's just ridiculous that the whole fraud seems like it could have been revealed by just sending a (not even specialized in crypto !) accountant to either FTX or Alameda, and the """sophisticated""" investors (and worse : US banking """regulators""") failed to to so !
P.S.: And this is also where the defense of SBF comes in : he's pretty young, focused on "moving fast and breaking things", so of course he would have been emboldened by the above, and might not have realized just how criminal his doings were ??
What? I thought the benefit of double-entry was that it makes fraud and inconsistencies easier to catch, not detection of profit per se (which single-entry can surface).
One of the key principles of double entry accounting is denominating profit and loss in a fungible currency, rather than just recording the number of goats you own or whatever. Double entry is actually the codification of several different best practices, it’s more than just having two sides of the ledger. But even with just the fraud part, you are very limited on the number of employees you can have if you don’t have any way to know if they’re stealing from you. That’s why even though e.g. Ancient Rome had thousands of fast food restaurants, they didn’t have franchises like McDonalds.
There are many reasons that they didn’t have McDonalds-like franchises, and none of them have to do with accounting. Those kinds of franchises didn’t exist in the modern world until the 20th century; they are product of many elements of modern culture (and modern approaches to business). What the heck would a franchise even do for someone in Ancient Rome? It’s not like there are massive chicken suppliers or industrial-scale bakeries that produce standardized food products to sell. Every restaurant needs to source local suppliers directly anyways. Fast food chains make no sense without industrialization, among many other things (bookkeeping being the least of them).
On the other hand, when a journalist follows a story, they must have good high level understanding. Shockingly, youtubers have much better grip on the situation.
The traditional media seems to be losing the plot in this FTX and presenting SBF in strangely positive light, almost as if it is a human interest story.
The talk with him today was very strange.
I generally don't. A journalists job is to report the news, if they don't feel confident in a given domain then they can sit the story out.
To give you an analog, I work on infrastructure, but I don't work on things like AWS policies every day. It generally takes me longer to craft up the right way to restrict a given resource due to that. If I left an S3 bucket open to the public "on accident" I'd expect ramifications from my employer.
That's to say, the onus is on the doer of the work. Now, if news outlets are just telling journalists to give it the old college try on domains they don't know, that's another subject.
It’s not an excuse for the low quality, just an expected outcome IMHO.
That may have been the case in the past, but "journalism" has radically changed within the past decade. Today it's more about telling the story that the media conglomerates want the public to hear, than about honest reporting.
Public distrust of the media is at an all-time high, and growing.
In theory maybe, in practice, journalists are simply Instagram influencers with fancy degrees. They make content to draw eyeballs for an organization that sells ads.
BTW be careful with expecting the media to spoon feed the narratives you want rather than laying out facts and editorializing them to let you decide. That's how you avoid some bias.
Now go look at some other examples where the writer or org has an interest in attacking and you will find, not only no shortage of "alleged"s but also a good dose of extra eyebrow-wriggling, winking and nudging there to suggest whatever number of other crimes can possibly be invented.
Like with Nick Sandman or Rittenhouse. runs off cackling
Its because news is for entertainment purpose not knowledge acquisition from the journalists perspective and secondly because powerful players are involved.
This guy donated 40 million dollars to the ruling political party and has parents with connections. Why would you write a truthful article outlining the grand fraud that took place when you only have something to loose by doing so?
https://www.epsilontheory.com/gell-mann-amnesia/
“Briefly stated, the Gell-Mann Amnesia effect is as follows. You open the newspaper to an article on some subject you know well. In Murray’s case, physics. In mine, show business. You read the article and see the journalist has absolutely no understanding of either the facts or the issues. Often, the article is so wrong it actually presents the story backward—reversing cause and effect. I call these the “wet streets cause rain” stories. Paper’s full of them.
In any case, you read with exasperation or amusement the multiple errors in a story, and then turn the page to national or international affairs, and read as if the rest of the newspaper was somehow more accurate about Palestine than the baloney you just read. You turn the page, and forget what you know.” – Michael Crichton (1942-2008)
Think about all the places you've ever worked, all the organizations you've been part of, where you know how the sausage is actually made, and how that differs from the way the organization portrays itself.
Now think about all the other organizations in the world, whose internal workings you're not privy to.
The media coverage about FTX is extremely odd.
You hire a fcking plumber.
Why can't top publications be held to this standard?
There are some amazing journalists out there and I’m sure they are just as disappointed in the mediocre content their peers produce.
Journalists are expected to source information from experts and from people who are in positions to know, and to attribute the information they publish to their sources.
I am not saying that every journalist or publication does a good job of seeking the truth. Only that the job of a reporter does not require being an expert at anything other than - hopefully - information gathering and reporting.
Reminds me of Gell-Mann Amnesia.
Nope. A journalist job is to make clicks. That’s how their job is evaluated: how many click did the story bring.
That’s all. That’s f**ing all.
Every news outlet office now has a giant screen with the list of the stories and the number of clicks. "Journalists" are expected to competed on that metric and that metric alone.
It blew my mind every time to realize that, even in tech, people are still naïve enough to not see that. Just change the word "journalist" by "click farmers" and, suddenly, everything makes sense. (Television has "audience" instead of "clicks" but the reasoning is similar)
Look up how Rian van Rijbroek fooled a popular news show in The Netherlands. If they had invited one more random expert in the field, that person would've grilled her.
While such tangential citations were used, at most it basically discredited the article but not necessarily fully refute the topic.
A case of strong yellow journalism?
Concur.
So, to answer your question: it's both. It's bullshit I don't want to hear and what a grip of powerful people probably want me to hear.
https://www.wsj.com/articles/sam-bankman-fried-ftx-team-amon...
Remember this was the guy who said "FTX is fine. Assets are fine" and "We don't invest client assets (even in treasuries)".
I don't doubt that he did donate some money to the non ruling party but to quote what he is saying as truth or try and attribute a donation by an associated party to him is disingenuous.
Same thing happens early in crises, from the Russian massacres of civilians in Ukraine to Trump's Mar-a-Lago files we get some forms of facts but its the readers who have to draw some to all of the conclusion.
Don't you think it is an interesting question to ask yourself, "why they report it like that?".
"Avoiding libel" doesn't cut it, there's other ways of avoiding libel that don't look like a love letter.
Why? Why is it in the reporter's interest to protect this guy? That is the interesting question. I don't need to guess at why reporting on Ukraine or Trump is the way it is, it's pretty clear.
But with this guy? Why?
Are you looking for opinion or journalism? Ethical journalists aren’t going to say “this is a ponzi scheme and this guy stole money” because that’s not what any primary source is saying. It’s clear that’s what’s happened to anyone reading the articles written.
