13 ms·

FTX’s collapse was a crime, not an accident

1082 points by mcone 4y ago

shp0ngle 4y ago
The way mainstream is covering SBF is downright bizarre and it starts to confirm conspiracy theories to many people.
- seydor 4y ago
  https://techcrunch.com/2022/12/01/was-sam-bankman-frieds-appearance-a-performance/ https://techcrunch.com/2022/12/01/was-sam-bankman-frieds-app...
m0llusk 4y ago
A crime? Like there was only one? Seems more like a great pile of crimes all blended together to form a kind of crime emulsion.
deleted 4y ago
[deleted]
Yuyudo_Comiketo 4y ago
This story reeked of fried bankers from the very start. Alas, olfaction failed too many wannabe investors.
paulpauper 4y ago
It took almost 3 years to indict Enron executives after its bankruptcy. This could be a while.
- LatteLazy 4y ago
  Enron was a much more complex, longer, more wide ranging fraud though. This was just straight up "CEO moves client money to his other company" theft. It's almost staggeringly simple and mundane...
  - SilasX 4y ago
    Yep. I saved this comment, which gives a great explanation why FTX prosecution should be faster and easier than Enron: https://news.ycombinator.com/item?id=33724683 https://news.ycombinator.com/item?id=33724683
  - tenpies 4y ago
    Yes, but Enron forgot to grease the right palms in Washington, and crucially also help deliver a Midterm victory to the Party. The level of regulatory capture and open corruption in the US today vs 2001 is also incomparable. It's functionally two different countries.
    - arrosenberg 4y ago
      > Yes, but Enron forgot to grease the right palms in Washington, and crucially also help deliver a Midterm victory to the Party. 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.
      - dhruval 4y ago
        Hard to take anything he says at face value. He is a lying sociopath. Are there independent records of these donations.
        arrosenberg 4y ago
        > Are there independent records of these donations. 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.
        mikeyouse 4y ago
        The whole point of dark money is that it's anonymous.. in either case one of his staunchest defenders in congress is the #3 guy in the GOP who received millions of dollars of support from FTX on the record. Rep. Emmer also tried to prevent the SEC from investigating FTX so maybe everyone can stop pretending that it's exclusively a Democrat problem? https://prospect.org/power/congressmembers-tried-to-stop-secs-inquiry-into-ftx/ https://prospect.org/power/congressmembers-tried-to-stop-sec... https://www.opensecrets.org/outside-spending/donor_detail/2022?id=U0000004758&type=I&super_only=N&name=Salame%2C+Ryan+D.+%26+Susan https://www.opensecrets.org/outside-spending/donor_detail/20...
crtified 4y ago
No doubt it was both, to some degree. The latter doesn't excuse the former. 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.
- xmodem 4y ago
  If you're building a system that's certain to fail once it comes under any sort of stress, when the inevitable happens, that's hardly an accident.
  - crtified 4y ago
    Sure. But 'complete downfall' isn't a thing that one advances entirely purposefully toward, either. Unintended consequences will have occurred within the detail of proceedings. Whether-or-not to label those unintended aspects as accident is a decision of semantics. The relevant crimes will be pursued regardless.
    - scottiebarnes 4y ago
      Well in this case, you're labeling "gambling and losing money that's not yours" as "unintended consequences". I mean, I guess you're right in that nobody gambles with the intention of losing.
      - crtified 4y ago
        They weren't at a casino. They lost the money in trading markets. The same way they'd previously made a lot of money over several years, that being the very way they originally made their name and fortune. 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.
mdotk 4y ago
Finally, some reporting by media that hasn't been bribed.
- puffoflogic 4y ago
  Uh, they're not called "bribes", they're called "campaign donations".
  - ohiovr 4y ago
    Thats the beauty of screwing and not being screwed in return.
- readthenotes1 4y ago
  I would call CoinDesk "the media". They used to be a competitor and are existentially scared that people will believe that crypto is gambling in a crooked house.
- bandyaboot 4y ago
  Finally, media saying things that I like.
neonate 4y ago
Videoless: http://web.archive.org/web/20221130220547/https://www.coindesk.com/layer2/2022/11/30/ftxs-collapse-was-a-crime-not-an-accident/ http://web.archive.org/web/20221130220547/https://www.coinde...
richbell 4y ago
CoffeeZilla covered this in a recent video. The effort to paint over such blatant fraud and negligence and pretend it was all a mistake from a well-meaning kiddo is disgusting. https://youtu.be/0rL35_WV3lE https://youtu.be/0rL35_WV3lE
- smallmouth 4y ago
  - pfisch 4y ago
    This seems like a fake story. Didn't he give millions to both parties?
    - notyourwork 4y ago
      Can't lose if you are on both teams.
    - therein 4y ago
      No evidence of any donation to republicans.
      - keneda7 4y ago
        Yes there is. Plenty. For PACs where most of the money was spent: Left: 44.8 Right: 23.2 https://www.opensecrets.org/orgs/recipients?id=D000073694&cycle=2022 https://www.opensecrets.org/orgs/recipients?id=D000073694&cy...
        therein 4y ago
        Why did he say in his interview the other day that they are dark donations and due to their nature, they will not be observable?
        keneda7 4y ago
hinata08 4y ago
"a crime" 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.
- baby 4y ago
  FTX isn’t DeFi. I think you’re conflating centralized entities building on top of crypto (which should be regulated the same way banks are due to multiple historical crisis created by shady banking) and DeFi which are much more transparent in how they operate (by design)
- dmix 4y ago
  Not all crypto people are 'crypto-anarchists'. That is a tiny fringe within a fringe (and FTX was hardly pushing that idea either) 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.
- electic 4y ago
  FTX isn't DeFi. It is a centralized exchange, similar to a bank or a brokerage. DeFi, ironically, is the complete opposite of this.
  - alwayseasy 4y ago
    I agree with the fact it's a CEX but he isn't wrong about people trusting a financial institution in the Bahamas and expecting the US Gov to do something now.
gamblor956 4y ago
In today's NYT Dealbook, SBF claimed that "unspecified third parties" were behind the "hack" around the time they went bankrupt, that they spent "thousands of hours" on compliance, that dealing with the CFTC is "too much work", that they had "too many boards" overseeing their work (internally), and that customers might be made "whole" if FTX were recapitalized like Bitfinex was. Also, he claims he took all the money FTX/Alameda loaned him and then used contributed it back to them so he's super duper not sure where all the money is. (This last bit by itself isn't usually illegal; law firm and accounting firm partners do this all the time when they first buy their stakes, but FTX appears to have double- or triple-booked this money: first when received, possibly again when loaned out to SBF, and again when recontributed back to the company.) 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.
- rosnd 4y ago
  > and that customers might be made "whole" if FTX were recapitalized like Bitfinex was The obvious difference being that Bitfinex seems to be run by adults.
  - the_mitsuhiko 4y ago
    Which doesn’t necessarily mean that Bitfinex won’t collapse. It had the benefit of a rising market and lack of regulation which allowed them to give out tradable equity.
    - rosnd 4y ago
      Of course, but given that the lost money has now been recovered and has vastly increased in value since the theft (from $72 million to over two billion, out of which Bitfinex keeps at least 20%) it's not all that likely that Bitfinex will collapse.
  - candiddevmike 4y ago
    I think the majority of Ponzi Schemes are ran by adults, too.
babypuncher 4y ago
Whatever you want to say it was, I thought it was pretty fun to watch.
- baby 4y ago
  At this scale it still isn’t large enough to cause a 2008-type of crisis like banks have done, thankfully
- TacticalCoder 4y ago
  > I thought it was pretty fun to watch 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" ?
  - LiquidSky 4y ago
    Yes, exactly. It was doubly funny because the usual crypto scam nonsense had that extra layer of "effective altruism" bullshit. At this point, if you get into a crypto venture and it, uh, totally accidentally mysteriously falls apart and you lose everything, you have only yourself to blame.
    - TacticalCoder 4y ago
      OK but what happened, for example, to journalism and these supposedly reputable publications like The New York Times that, instead of actually googling a little bit online (they'd have found in less than 30 minutes that SBF was fraudster and FTX a ponzi) and then exposing Ponzi boy decided instead to be complicit in the scam? Is that funny too?
      - xwolfi 4y ago
        Yeah and the funniest is all these anti system idiots are now whining "but I read the New York Times", when in fact all they read is Coindesk and youtube videos by commercial actors calling them their "community". I mean fine the NYT is weird, but it's the millions of cryptards on Youtube that syphon and funnel the money...
skybrian 4y ago
The New York Times did another interview with Bankman-Fried today, very much against the advice of his lawyers. I didn't watch it, but from a tweet summary [1], it sounds rather amazingly self-destructive. Getting the lies on the record seems useful? [1] https://twitter.com/edmundlee/status/1597957472761057282 https://twitter.com/edmundlee/status/1597957472761057282
- chrchang523 4y ago
  We'll see. From my perspective, this could still go either way: he could be put in prison for a long time partly as a consequence of how much is on the record, or he may still be protected regardless of what is on the record.
- earthscienceman 4y ago
  Why did I just get linked to a tweet of a news article? https://www.nytimes.com/live/2022/11/30/business/sam-bankman-fried-interview https://www.nytimes.com/live/2022/11/30/business/sam-bankman...
  - humanistbot 4y ago
    Ridiculous, I have no idea why people do this.
  - culanuchachamim 4y ago
    Because in the tweet is the summary
  - skybrian 4y ago
    Because I don't have a NYT subscription.
  - neonate 4y ago
    https://archive.ph/AxB6G https://archive.ph/AxB6G
  - JohnFen 4y ago
    Thanks for breaking that out. If it's only on Twitter, it's invisible to me.
m_ke 4y ago
quyleanh 4y ago
A bit off topic, but I hope this thread will not be flagged as mine days ago. 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.
- eldenwrong 4y ago
  He belongs to a very protected group of people who happen to own all the boats and medical outlets
  - keewee7 4y ago
    @dang this comment is anti-semitic dog whistling.
    - eldenwrong 4y ago
      Well he's part of the exclusive money lenders club. Nothing to do with being jewish. Its literally just a coincidence that they are extremely overrepresented in positions of extreme power and wealth. They are simply smarter than the goyim
    - logicchains 4y ago
      It's anti-semitic of you to assume he was referring to that. SBF isn't Jewish, but he is a Democrat, which is presumably what the poster was referring to.
dmix 4y ago
I watched the full NYT interview today and he's either an amazing well-coached liar (very possible) and or he really is a kid in way over his head, who got to take advantage of reputation circles (VCs, media, politicians, etc) to make reckless massive gambles without any adult risk-adverse old-school finance guys in the room. 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.
- p1necone 4y ago
  "I was too ignorant to run a giant investment company/pseudo-bank correctly" shouldn't get you off though. He needs to face the same charges regardless of whether he was malicious or stupid.
  - dsfyu404ed 4y ago
    >He needs to face the same charges regardless of whether he was malicious or stupid. 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)
  - throwawaysleep 4y ago
    Fraud requires intent.
  - mikeyouse 4y ago
    And he absolutely will... People are ridiculously acting like he got away with something because he's not in Federal prison yet. It hasn't even been a month since it all blew up.
  - BobbyJo 4y ago
    The day the "too dumb" defense works is the day we can open all the cell doors and close down the prisons, because that's everyone's defense.
barathr 4y ago
This seems a bit like a "doth protest too much" article -- while the things FTX did are no doubt shady, this article seems to be trying to heap scorn on FTX as if it is unique in the cryptocurrency space. (And there are factions within that world -- is FTX in a different faction than Coindesk? I'm not sure.) 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.
- valar_m 4y ago
  Well, FTX is unique in the crypto space in that there has never been a loss of funds anywhere near the magnitude of this debacle. 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".
  - jasonhansel 4y ago
    The collapse of Mt. Gox was of a reasonably comparable magnitude IIRC (around half a billion). FTX is the biggest, but it's not exactly unprecedented.
  - barathr 4y ago
    Not really what I'm saying -- it seems that there was fraud here. But it's a bit strange to see this from Coindesk, which has undoubtedly reported in glowing terms about plenty of other companies doing fraud in this space.
    - valar_m 4y ago
      That seems even more odd to me. 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?
lordnacho 4y ago
Pretty long article to say some simple things. 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.
- ilaksh 4y ago
  How? Because everything operates around the level of delinquent 12-year olds following the latest trends. 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.
  - newsclues 4y ago
    How is they had help, from family and other powerful connected people
    - ilaksh 4y ago
      That too.
  - bscphil 4y ago
    > "crypto isn't trustworthy" 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.
csours 4y ago
Bad corporate culture is not always a crime in and of itself, but it does encourage crime. If a company has bad corporate culture, you can find crimes associated to that culture. 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.
- jeremyjh 4y ago
  No, this isn't just bad culture. This is FTX saying "trade on our exchange, and your funds will be held only in the coins they are recorded in. We will not make investments with your funds." This is the promise and expectation of every brokerage account. It was a lie, and the investment of their customer's funds into their own investment fund is simply theft.
  - csours 4y ago
    Yes it's a crime. My point about bad culture is that bad culture causes crimes. There's no such thing as "just bad culture"
    - noisy_boy 4y ago
      Yes, diseases happen in unclean environments.
oldgradstudent 4y ago
Of course it was an accident. They never intended the fraud to be found out, just like any fraudster and Ponzi scheme operator in history.
- FireBeyond 4y ago
  My girlfriend is working on her CPA and is fascinated with forensic accounting to the point where she thinks I should do it, because of the little things I notice. 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"."
Kukumber 4y ago
I have the feeling that it was a failed attempt at poisoning Binance, it was indeed a crime, an organized crime with the help of government funded institutions, that's pretty obvious at this point, based on the massive echo from the press 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?
NelsonMinar 4y ago
Note this op/ed is published by CoinDesk, the cryptocurrency journalism outlet that broke the story about FTX's financial situation that precipitated their collapse. Different authors but same publication. https://www.cnn.com/2022/11/24/media/coindesk-scoop-ftx-reliable-sources/index.html https://www.cnn.com/2022/11/24/media/coindesk-scoop-ftx-reli...
- valar_m 4y ago
  What's your point?
  - toomim 4y ago
    A publication that contradicts itself should be taken with a grain of salt.
    - valar_m 4y ago
      Can you explain what the contradiction is?
- inasio 4y ago
  Probably not the angle parent was going for, but CoinDesk is owned by Digital Currency Group, who had significant exposure to this mess (and their Genesis trading arm appears to be currently evaluating bankruptcy), so in some sense CoinDesk precipitating FTX's collapse had severe effects on their own situation.
  - jandrese 4y ago
    IMHO the Coinbase story was a distraction. FTX went down because Binance dumped their entire position all at once and exposed how cooked FTXs books were. They said it was because of the Coinbase story, but really it was a personal beef with SBF and how he was writing crypto market regulation for legislators that was going to hurt Binance.
    - 4y ago
arkis22 4y ago
This isn't just comingling accounts and bad accounting. They borrowed between firms. They absolutely knew where liquidity was, and where liquidity wasn't - liquidity follows profits. Their solvency was based on their own manufactured tokens. 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.
- totalZero 4y ago
  Not to mention that his kimchi spread origin story is based on an arbitrage. 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.
bandyaboot 4y ago
I have to admit, I’m really having a hard time caring about whatever drama is happening in the pretend money world.
- anonporridge 4y ago
  People sent him "real money" (all money is pretend) which he then funneled to other projects, specifically massive political contributions to influence US elections. That should absolutely concern you even if you think all cryptocurrency and bitcoin is fake and doomed to eventual collapse.
  - bandyaboot 4y ago
    If this was literally a massive and focused political money laundering scheme, yeah that would be a different story. And I realize that many are trying to paint it as such. But, I don’t believe the facts support that.
pessimizer 4y ago
It was a "crime", but we treat the financial industry and anybody with money with such kid gloves that it doesn't really matter that it was a crime. I have no confidence that his prosecution won't end up as difficult as Rob Blagojevich's (notoriously corrupt ex-governor of Illinois), in that Illinois ethics law has been so carefully crafted to allow bribery to and from officials that it was surprisingly difficult to convict him, and irt the details of the process probably unfair. Blagojevich's actual crime was not having being popular with people who had clout, not his open selling of a US Senate seat. 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.
- StanislavPetrov 4y ago
  Reminds me very much of the John Corzine situation. If you are connected with the right set of politically influential and wealthy people, you are above the law.
  - bombcar 4y ago
    Privilege - private law. The myth is that we’re all equal before the law but the reality is that there are obvious inequalities.
- jandrese 4y ago
  Eh, he stole from rich people. He's going to jail. It's not like he only ripped off a bunch of retail investors.
themagician 4y ago
What amazes me about FTX is the speed and severity of the collapse. Never seen anything like it. The website and app simply disappeared overnight. The never sent statements via email or postal mail. If you had any money in the only proof you have some transactional emails and lines in the statements from the banks which you used to fund your FTX account. 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?
- jasonhansel 4y ago
  I suspect that this is surprising in part because we have so little firsthand experience with bank runs. Before the FDIC, a bank could collapse fairly quickly and with relatively little warning.
- muskmusk 4y ago
  I cant hold it in: Yeah it would be really convenient if there was some sort of global database that could hold all this data.
ejlangev 4y ago
This article, while probably true an accurate, seems designed to make SBF the fall guy by portraying him as a uniquely bad actor in the crypto space. In reality, the crypto space is full of fraud that is probably criminal and he is just the latest example. That doesn't excuse his behavior and he should probably go to prison for this but it would be a shame if people get taken in by thinking of him as just a bad apple.
- bhk 4y ago
  I totally missed the part where they say that there have been no other criminals in crypto. Could you point me to that? 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?
- hn_throwaway_99 4y ago
  He is not the "fall guy" considering he, along with Alameda's CEO, make the direct, conscious decision to embezzle customer funds to prop up Alameda. Just because he stole what looks to be a billion dollars doesn't mean there are no other bad actors. 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.
deleted 4y ago
[deleted]
jmull 4y ago
I think the crypto people keep driving the NYT-is-in-bed-with-SBF narrative to distract from the real issue: the great bulk of crypto efforts are essentially scams that want to lure real money in with the promise of riches. 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.
- loeg 4y ago
  I assure you, non-crypto people are baffled as to why big media organizations have been lobbing softballs to SBF, too.
vt85 4y ago
indigodaddy 4y ago
Watching the NYT SBF interview tonight, in which SBF is constantly characterizing billions of customer dollars being funneled illegally to Alameda as, “we didn’t realize that Alameda’s ‘position’ in FTX was so large…” This is just straight up nonsense correct? Or does he have something to grab hold to here?
- m3kw9 4y ago
  Does claiming ignorance help him at all?
- andirk 4y ago
  He gambled. Lost. Gambled more. Lost bad "even when times were good". My guess is he figured if he could borrow from Peter to pay Paul one more time... one more time that he would eventually be back in the black. I think he personally set up those "positions" over and over, but he's not good at gambling so now it's all gone. https://www.nytimes.com/live/2022/11/30/business/sam-bankman-fried-interview https://www.nytimes.com/live/2022/11/30/business/sam-bankman...
  - quickthrower2 4y ago
    You forgot stole. He stole, gambled, lost. Let’s say Amazon bet your $100 order money on WSB stocks and lost, and said “excuse blah insolvent blah accounting blah”.
  - achenet 4y ago
    this sounds like a tragic version of the film Uncut Gems
- chewbaxxa 4y ago
  I spoke to a few Alameda/FTX people over drinks before summer. They were delighted to brag about the lack of separation between the two entities. Really there wasn’t any.
- 55555 4y ago
  The basic idea is this: If he just sent customer funds from FTX to Alameda, that would definitely be fraud/theft as the FTX TOS said they wouldn't do that. But instead he did something else. You know how you can take a margin loan in your brokerage account against the value of your stocks? You can use the money from the loan as you wish, but if your stocks go down X% then they will "margin call" you and liquidate your assets to pay back the loan. SBF's claim is that Alameda took a margin loan as an FTX customer just like any other customer might, and then lost their money gambling. But unlike other customers, Alameda was not subject to any margin requirements (??) and could not be automatically liquidated (??). These facts(?) probably ruin this defense, which otherwise might hold some water, as it's not at all a defensibly arms length transaction. IANAL. 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?)
andirk 4y ago
> recent data implying immense trading losses even when times were good. 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-fried-interview https://www.nytimes.com/live/2022/11/30/business/sam-bankman...
yawnxyz 4y ago
For a fraudulent app, I'm surprised at how well FTX as a platform worked. 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!
- rootusrootus 4y ago
  That makes sense, though, the app wasn't fraudulent, just what they were doing on the back end with customer funds. It's of course in their best interests to hire good enough software talent to build an elegant platform that will inspire confidence and attract more 'investors.'
  - noisy_boy 4y ago
    It is actually an excellent example/warning for people, especially tech people, to not assume soundess of business based on the polish of the website/app.
    - sizeofchar 4y ago
      I, myself, fell for that... :(
lettergram 4y ago
The dude took our $1B in a personal loan with customer wealth. He then used it to donate to random politicians, invest in effectively crazy one off ideas, etc.
- hn_throwaway_99 4y ago
  > The dude took our $1B in a personal loan with customer wealth. 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).
  - kayamon 4y ago
    Most banks only keep a fractional reserve of their money and happily loan the rest out to other people.
    - lettergram 4y ago
      Yeah but don’t often offer personal loans to the tune of $1B of which tens if not hundreds of millions will be used for political donations …
    - hn_throwaway_99 4y ago
      Which is clearly documented by the banks for the benefit of all of their customers. Not to mention there is FDIC insurance, which is specifically why people who are worried about bank stability know they can more their money in multiple banks if they're over the FDIC limit. Nevermind FTX was an exchange, and my stock brokerage certainly doesn't lend out my stocks to a related party without my consent.
Waterluvian 4y ago
A lot of people using the OTPP to push narratives need to read up on it a little. It’s a massively successful pension fund that’s out there crushing it for public school teachers (32 year average return of 10%). The amount they lost here is not even a blip. It’s just part of the process of investing $240B of assets. You can captain hindsight it all you want but they are completely correct to make some higher risk investments along with the lower risk ones too. 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.
- lotsofpulp 4y ago
  How is OTPP’s performance (including expenses) relative to a low cost broad market index fund like VOO or a low cost target date retirement fund?
  - Waterluvian 4y ago
    Over 30 years it appears to be about the same. Just under 10%.
    - lotsofpulp 4y ago
      Then as an employee, I would rather have my own retirement savings in a 401k or similar type account invested in VOO over letting someone else have control of my future benefit.
      - willhslade 4y ago
        Is your pension a gold plated DB?
scoofy 4y ago
"It was a crime" seems to be the cope du jour that for those who invested in an asset intentionally designed to avoid regulation. 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?
- phist_mcgee 4y ago
  Cope de jour. Classic.
- harlequinn77 4y ago
  It looks like a pretty clear cut case of embezzlement and fraud. They're both crimes.
  - HDThoreaun 4y ago
    It really looks a bit less clear cut than you’re saying. First I’m not sure he’s subject to American financial laws at all since ftx was offshore. Second he has some sort of explanation of alameda just taking a margin loan and he had no idea that the collateral was worthless. Would that fly in the us? Probably not. In the Bahamas? Who knows.
    - BLKNSLVR 4y ago
      FTX.us was also dragged down by the last ditch flick of the Balrog's flaming whip
    - JohnFen 4y ago
      >I’m not sure he’s subject to American financial laws at all since ftx was offshore. 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.
alienalp 4y ago
The whole FTX situation is like a joke. Bunch of junkie kids probably manipulated by sophisticated criminals. Most likely we will never learn about where most of lost money ended up.
neilv 4y ago
At the same time, Coindesk.com front page includes this: https://www.coindesk.com/layer2/2022/11/30/a-self-regulatory-organization-is-the-best-way-to-advance-crypto-while-protecting-the-public/ 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.
- jasonhansel 4y ago
  Can you imagine anyone proposing this for the ordinary financial sector? The hardcore libertarians would approve, but nobody else would take such a proposal seriously.
  - eramoose 4y ago
    While I'm pretty skeptical a SRO would work for crypto, as mentioned in the article, SROs like FINRA are one of the main sources of regulation in the ordinary financial sector.
  - sp332 4y ago
    Usually industries try to self-regulate at first. Sometimes they do an acceptable job, and sometimes they get regulated by outside agencies.
    - oblio 4y ago
      Money's been regulated since the beginning of time. And when/where it wasn't, we usually called the place a failed state.
  - AdamN 4y ago
    Actually SIPC is exactly that and is probably what the crypto industry wants to model themselves after.
Animats 4y ago
Here's the NYT article.[1] 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-bankman-fried-crypto-bankruptcy.html https://www.nytimes.com/2022/11/14/technology/ftx-sam-bankma... [2] https://yaffebellany.com/ https://yaffebellany.com/
- bhk 4y ago
  Seriously? "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
  - deleted 4y ago
    [deleted]
  - res0nat0r 4y ago
    Pretty wild that the reporting from CoinDesk that led to the downfall of FTX, is causing such an entire market implosion that it may be putting CoinDesk itself out of business. https://www.cnn.com/2022/11/24/media/coindesk-scoop-ftx-reliable-sources/index.html https://www.cnn.com/2022/11/24/media/coindesk-scoop-ftx-reli... https://crypto.news/potential-buyers-circle-around-digital-currency-group-coindesk/ https://crypto.news/potential-buyers-circle-around-digital-c...
  - Animats 4y ago
konfusinomicon 4y ago
i wasn't invested through ftx but I did use blockfolio for years, which was acquired by ftx and now is now seemly not working which is too bad because whenever I felt like becoming depressed I would just open it and look at the sea of red and remember the days when it was lush green fields of cash I was looking at
woodpanel 4y ago
Great article. It even goes there and mentions BCCI. 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/the-cias-bcci-laundry/6c69ffbf-42d3-46ee-ba86-b8ad03adb685/ https://www.washingtonpost.com/archive/opinions/1991/08/11/t... [2]: https://asia.nikkei.com/Spotlight/Datawatch/Tether-cryptocurrency-emerges-as-money-laundering-fears-rise https://asia.nikkei.com/Spotlight/Datawatch/Tether-cryptocur... [3]: https://www.ledgerinsights.com/tether-shadow-ftx-saga/ https://www.ledgerinsights.com/tether-shadow-ftx-saga/
- jessaustin 4y ago
  Not so much a "crime" as an "op". Like various other distractions to which we're supposed to devote attention, while the actual crimes take place elsewhere.
fredgrott 4y ago
Keep, in mind if you are consumed a certain podcast over this summer, we learned that certain SV VC firms were circulating token issuance schemes that involved being outside of US jurisdiction to avoid oversight to game the systems. 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.
jongjong 4y ago
The fact that many members of the elites keep trying to protect obvious fraudsters makes me doubt the legitimacy of the elites themselves. Looking back at the last 3 years of media insanity, I wonder what kinds of people are running the show.
RustLove 4y ago
None of Theranos enablers seemed to suffer at all after Theranos went down. Why do any of their board members still have careers? Why is Stanford's Channing Robertson still advising companies? 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.
- college_physics 4y ago
  your problem is that you are a minority (in a society where those with the right information and ability to act on it actually think its a-ok). It is also called moral bankruptcy and is closely associated with financial bankruptcy.
DevKoala 4y ago
This comment section is hilarious. Some don’t want to acknowledge the obvious, and instead try to tip toe around the subject with funny excuses such as, “MSM are not crypto experts”, “his 40M in donations to democrats do not hold any value anymore”, “his family ties to Democrat and academic leadership only makes his inner circle judgement more impartial”, etc. There are none so blind as those who will not see.
- seabird 4y ago
  Yeah, it's pretty wild watching people wonder why a top political donator is getting so much peel for somebody who is either a crook or dangerously stupid. There's a lot of people who like to imagine that media and journalism is a lot more impartial than it really is.
neuroma 4y ago
I wrote to a journalist called Dan Diamond who had written an article covering how FTXs 'collapse' would set back health philanthropy. He would not directly answer my reasonable questions except to say "I'm a health journalist ". 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.
1vuio0pswjnm7 4y ago
"In interviews, he talked a stream of nonsense tailored to snowjob outsiders about an industry that's already full of jargon and complicated tech." He is still talking. For example, 16 Nov 2022 https://www.youtube.com/watch?v=6DezodR9hNI 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-fried-interview https://www.nytimes.com/live/2022/11/30/business/sam-bankman... https://slate.com/technology/2022/11/sam-bankman-fried-new-york-times-dealbook-interview-ftx-alameda.html 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-show/id1646229350 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.
- maxbond 4y ago
  > [another to be published phone call with the YouTuber above] https://www.youtube.com/watch?v=xP54LZB3WRw https://www.youtube.com/watch?v=xP54LZB3WRw
  - 1vuio0pswjnm7 4y ago
    Cheers!
patmcc 4y ago
...were we not all assuming this was the case?
drawingthesun 4y ago
When is SBF going to be arrested? I cannot believe he did this and lost US customers money yet he can walk free.
tromp 4y ago
> August institutions including the New York Times and Wall Street Journal 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 http://www.merriam-webster.com/dictionary/august http://www.merriam-webster.com/dictionary/august
additall 4y ago
But many journalists have crypto assets themselves? :) 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.
- nnoitra 4y ago
asimpletune 4y ago
So I’ve been watching the NYT dealbook interview and want to add some clarity that I think is missing here. Let me add a disclaimer that I don’t condone SBF at all. I just want to use his words to provide clarity. Everything below is paraphrasing. 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.
- pjc50 4y ago
  Margin trading is still not supposed to be co-mingled (or allowed if you're running a regulated brokerage). There's supposed to be a separate bank account labelled "client money" which has the client money in. https://www.handbook.fca.org.uk/handbook/CASS/5/5.html https://www.handbook.fca.org.uk/handbook/CASS/5/5.html 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.
- NhanH 4y ago
  Q: Did you kill those people? 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.
mmcnl 4y ago
It's amazing how many people fail to recognize a ponzi scheme exchange right in front of their eyes, and then be surprised when it collapses.
deleted 4y ago
[deleted]

1082 points by mcone 4y ago

shp0ngle 4y ago

The way mainstream is covering SBF is downright bizarre and it starts to confirm conspiracy theories to many people.

seydor 4y ago
https://techcrunch.com/2022/12/01/was-sam-bankman-frieds-appearance-a-performance/ https://techcrunch.com/2022/12/01/was-sam-bankman-frieds-app...

m0llusk 4y ago

A crime? Like there was only one? Seems more like a great pile of crimes all blended together to form a kind of crime emulsion.

deleted 4y ago

[deleted]

Yuyudo_Comiketo 4y ago

This story reeked of fried bankers from the very start. Alas, olfaction failed too many wannabe investors.

paulpauper 4y ago

It took almost 3 years to indict Enron executives after its bankruptcy. This could be a while.

LatteLazy 4y ago
Enron was a much more complex, longer, more wide ranging fraud though. This was just straight up "CEO moves client money to his other company" theft. It's almost staggeringly simple and mundane...
- SilasX 4y ago
  Yep. I saved this comment, which gives a great explanation why FTX prosecution should be faster and easier than Enron: https://news.ycombinator.com/item?id=33724683 https://news.ycombinator.com/item?id=33724683
- tenpies 4y ago
  Yes, but Enron forgot to grease the right palms in Washington, and crucially also help deliver a Midterm victory to the Party. The level of regulatory capture and open corruption in the US today vs 2001 is also incomparable. It's functionally two different countries.
  - arrosenberg 4y ago
    > Yes, but Enron forgot to grease the right palms in Washington, and crucially also help deliver a Midterm victory to the Party. 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.
    - dhruval 4y ago
      Hard to take anything he says at face value. He is a lying sociopath. Are there independent records of these donations.
      - arrosenberg 4y ago
        > Are there independent records of these donations. 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.
      - mikeyouse 4y ago
        The whole point of dark money is that it's anonymous.. in either case one of his staunchest defenders in congress is the #3 guy in the GOP who received millions of dollars of support from FTX on the record. Rep. Emmer also tried to prevent the SEC from investigating FTX so maybe everyone can stop pretending that it's exclusively a Democrat problem? https://prospect.org/power/congressmembers-tried-to-stop-secs-inquiry-into-ftx/ https://prospect.org/power/congressmembers-tried-to-stop-sec... https://www.opensecrets.org/outside-spending/donor_detail/2022?id=U0000004758&type=I&super_only=N&name=Salame%2C+Ryan+D.+%26+Susan https://www.opensecrets.org/outside-spending/donor_detail/20...

crtified 4y ago

No doubt it was both, to some degree. The latter doesn't excuse the former. 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.

xmodem 4y ago
If you're building a system that's certain to fail once it comes under any sort of stress, when the inevitable happens, that's hardly an accident.
- crtified 4y ago
  Sure. But 'complete downfall' isn't a thing that one advances entirely purposefully toward, either. Unintended consequences will have occurred within the detail of proceedings. Whether-or-not to label those unintended aspects as accident is a decision of semantics. The relevant crimes will be pursued regardless.
  - scottiebarnes 4y ago
    Well in this case, you're labeling "gambling and losing money that's not yours" as "unintended consequences". I mean, I guess you're right in that nobody gambles with the intention of losing.
    - crtified 4y ago
      They weren't at a casino. They lost the money in trading markets. The same way they'd previously made a lot of money over several years, that being the very way they originally made their name and fortune. 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.

mdotk 4y ago

Finally, some reporting by media that hasn't been bribed.

puffoflogic 4y ago
Uh, they're not called "bribes", they're called "campaign donations".
- ohiovr 4y ago
  Thats the beauty of screwing and not being screwed in return.
readthenotes1 4y ago
I would call CoinDesk "the media". They used to be a competitor and are existentially scared that people will believe that crypto is gambling in a crooked house.
bandyaboot 4y ago
Finally, media saying things that I like.

neonate 4y ago

Videoless: http://web.archive.org/web/20221130220547/https://www.coindesk.com/layer2/2022/11/30/ftxs-collapse-was-a-crime-not-an-accident/ http://web.archive.org/web/20221130220547/https://www.coinde...

richbell 4y ago

CoffeeZilla covered this in a recent video. The effort to paint over such blatant fraud and negligence and pretend it was all a mistake from a well-meaning kiddo is disgusting. https://youtu.be/0rL35_WV3lE https://youtu.be/0rL35_WV3lE

smallmouth 4y ago
- pfisch 4y ago
  This seems like a fake story. Didn't he give millions to both parties?
  - notyourwork 4y ago
    Can't lose if you are on both teams.
  - therein 4y ago
    No evidence of any donation to republicans.
    - keneda7 4y ago
      Yes there is. Plenty. For PACs where most of the money was spent: Left: 44.8 Right: 23.2 https://www.opensecrets.org/orgs/recipients?id=D000073694&cycle=2022 https://www.opensecrets.org/orgs/recipients?id=D000073694&cy...
      - therein 4y ago
        Why did he say in his interview the other day that they are dark donations and due to their nature, they will not be observable?
        keneda7 4y ago

hinata08 4y ago

"a crime" 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.

baby 4y ago
FTX isn’t DeFi. I think you’re conflating centralized entities building on top of crypto (which should be regulated the same way banks are due to multiple historical crisis created by shady banking) and DeFi which are much more transparent in how they operate (by design)
dmix 4y ago
Not all crypto people are 'crypto-anarchists'. That is a tiny fringe within a fringe (and FTX was hardly pushing that idea either) 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.
electic 4y ago
FTX isn't DeFi. It is a centralized exchange, similar to a bank or a brokerage. DeFi, ironically, is the complete opposite of this.
- alwayseasy 4y ago
  I agree with the fact it's a CEX but he isn't wrong about people trusting a financial institution in the Bahamas and expecting the US Gov to do something now.

gamblor956 4y ago

In today's NYT Dealbook, SBF claimed that "unspecified third parties" were behind the "hack" around the time they went bankrupt, that they spent "thousands of hours" on compliance, that dealing with the CFTC is "too much work", that they had "too many boards" overseeing their work (internally), and that customers might be made "whole" if FTX were recapitalized like Bitfinex was. Also, he claims he took all the money FTX/Alameda loaned him and then used contributed it back to them so he's super duper not sure where all the money is. (This last bit by itself isn't usually illegal; law firm and accounting firm partners do this all the time when they first buy their stakes, but FTX appears to have double- or triple-booked this money: first when received, possibly again when loaned out to SBF, and again when recontributed back to the company.) 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.

rosnd 4y ago
> and that customers might be made "whole" if FTX were recapitalized like Bitfinex was The obvious difference being that Bitfinex seems to be run by adults.
- the_mitsuhiko 4y ago
  Which doesn’t necessarily mean that Bitfinex won’t collapse. It had the benefit of a rising market and lack of regulation which allowed them to give out tradable equity.
  - rosnd 4y ago
    Of course, but given that the lost money has now been recovered and has vastly increased in value since the theft (from $72 million to over two billion, out of which Bitfinex keeps at least 20%) it's not all that likely that Bitfinex will collapse.
- candiddevmike 4y ago
  I think the majority of Ponzi Schemes are ran by adults, too.

babypuncher 4y ago

Whatever you want to say it was, I thought it was pretty fun to watch.

baby 4y ago
At this scale it still isn’t large enough to cause a 2008-type of crisis like banks have done, thankfully
TacticalCoder 4y ago
> I thought it was pretty fun to watch 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" ?
- LiquidSky 4y ago
  Yes, exactly. It was doubly funny because the usual crypto scam nonsense had that extra layer of "effective altruism" bullshit. At this point, if you get into a crypto venture and it, uh, totally accidentally mysteriously falls apart and you lose everything, you have only yourself to blame.
  - TacticalCoder 4y ago
    OK but what happened, for example, to journalism and these supposedly reputable publications like The New York Times that, instead of actually googling a little bit online (they'd have found in less than 30 minutes that SBF was fraudster and FTX a ponzi) and then exposing Ponzi boy decided instead to be complicit in the scam? Is that funny too?
    - xwolfi 4y ago
      Yeah and the funniest is all these anti system idiots are now whining "but I read the New York Times", when in fact all they read is Coindesk and youtube videos by commercial actors calling them their "community". I mean fine the NYT is weird, but it's the millions of cryptards on Youtube that syphon and funnel the money...

skybrian 4y ago

The New York Times did another interview with Bankman-Fried today, very much against the advice of his lawyers. I didn't watch it, but from a tweet summary [1], it sounds rather amazingly self-destructive. Getting the lies on the record seems useful? [1] https://twitter.com/edmundlee/status/1597957472761057282 https://twitter.com/edmundlee/status/1597957472761057282

chrchang523 4y ago
We'll see. From my perspective, this could still go either way: he could be put in prison for a long time partly as a consequence of how much is on the record, or he may still be protected regardless of what is on the record.
earthscienceman 4y ago
Why did I just get linked to a tweet of a news article? https://www.nytimes.com/live/2022/11/30/business/sam-bankman-fried-interview https://www.nytimes.com/live/2022/11/30/business/sam-bankman...
- humanistbot 4y ago
  Ridiculous, I have no idea why people do this.
- culanuchachamim 4y ago
  Because in the tweet is the summary
- skybrian 4y ago
  Because I don't have a NYT subscription.
- neonate 4y ago
  https://archive.ph/AxB6G https://archive.ph/AxB6G
- JohnFen 4y ago
  Thanks for breaking that out. If it's only on Twitter, it's invisible to me.

m_ke 4y ago

quyleanh 4y ago

A bit off topic, but I hope this thread will not be flagged as mine days ago. 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.

eldenwrong 4y ago
He belongs to a very protected group of people who happen to own all the boats and medical outlets
- keewee7 4y ago
  @dang this comment is anti-semitic dog whistling.
  - eldenwrong 4y ago
    Well he's part of the exclusive money lenders club. Nothing to do with being jewish. Its literally just a coincidence that they are extremely overrepresented in positions of extreme power and wealth. They are simply smarter than the goyim
  - logicchains 4y ago
    It's anti-semitic of you to assume he was referring to that. SBF isn't Jewish, but he is a Democrat, which is presumably what the poster was referring to.

dmix 4y ago

I watched the full NYT interview today and he's either an amazing well-coached liar (very possible) and or he really is a kid in way over his head, who got to take advantage of reputation circles (VCs, media, politicians, etc) to make reckless massive gambles without any adult risk-adverse old-school finance guys in the room. 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.

p1necone 4y ago
"I was too ignorant to run a giant investment company/pseudo-bank correctly" shouldn't get you off though. He needs to face the same charges regardless of whether he was malicious or stupid.
- dsfyu404ed 4y ago
  >He needs to face the same charges regardless of whether he was malicious or stupid. 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)
- throwawaysleep 4y ago
  Fraud requires intent.
- mikeyouse 4y ago
  And he absolutely will... People are ridiculously acting like he got away with something because he's not in Federal prison yet. It hasn't even been a month since it all blew up.
- BobbyJo 4y ago
  The day the "too dumb" defense works is the day we can open all the cell doors and close down the prisons, because that's everyone's defense.

barathr 4y ago

This seems a bit like a "doth protest too much" article -- while the things FTX did are no doubt shady, this article seems to be trying to heap scorn on FTX as if it is unique in the cryptocurrency space. (And there are factions within that world -- is FTX in a different faction than Coindesk? I'm not sure.) 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.

valar_m 4y ago
Well, FTX is unique in the crypto space in that there has never been a loss of funds anywhere near the magnitude of this debacle. 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".
- jasonhansel 4y ago
  The collapse of Mt. Gox was of a reasonably comparable magnitude IIRC (around half a billion). FTX is the biggest, but it's not exactly unprecedented.
- barathr 4y ago
  Not really what I'm saying -- it seems that there was fraud here. But it's a bit strange to see this from Coindesk, which has undoubtedly reported in glowing terms about plenty of other companies doing fraud in this space.
  - valar_m 4y ago
    That seems even more odd to me. 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?

lordnacho 4y ago

Pretty long article to say some simple things. 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.

ilaksh 4y ago
How? Because everything operates around the level of delinquent 12-year olds following the latest trends. 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.
- newsclues 4y ago
  How is they had help, from family and other powerful connected people
  - ilaksh 4y ago
    That too.
- bscphil 4y ago
  > "crypto isn't trustworthy" 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.

csours 4y ago

Bad corporate culture is not always a crime in and of itself, but it does encourage crime. If a company has bad corporate culture, you can find crimes associated to that culture. 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.

jeremyjh 4y ago
No, this isn't just bad culture. This is FTX saying "trade on our exchange, and your funds will be held only in the coins they are recorded in. We will not make investments with your funds." This is the promise and expectation of every brokerage account. It was a lie, and the investment of their customer's funds into their own investment fund is simply theft.
- csours 4y ago
  Yes it's a crime. My point about bad culture is that bad culture causes crimes. There's no such thing as "just bad culture"
  - noisy_boy 4y ago
    Yes, diseases happen in unclean environments.

oldgradstudent 4y ago

Of course it was an accident. They never intended the fraud to be found out, just like any fraudster and Ponzi scheme operator in history.

FireBeyond 4y ago
My girlfriend is working on her CPA and is fascinated with forensic accounting to the point where she thinks I should do it, because of the little things I notice. 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"."

Kukumber 4y ago

I have the feeling that it was a failed attempt at poisoning Binance, it was indeed a crime, an organized crime with the help of government funded institutions, that's pretty obvious at this point, based on the massive echo from the press 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?

NelsonMinar 4y ago

Note this op/ed is published by CoinDesk, the cryptocurrency journalism outlet that broke the story about FTX's financial situation that precipitated their collapse. Different authors but same publication. https://www.cnn.com/2022/11/24/media/coindesk-scoop-ftx-reliable-sources/index.html https://www.cnn.com/2022/11/24/media/coindesk-scoop-ftx-reli...

valar_m 4y ago
What's your point?
- toomim 4y ago
  A publication that contradicts itself should be taken with a grain of salt.
  - valar_m 4y ago
    Can you explain what the contradiction is?
inasio 4y ago
Probably not the angle parent was going for, but CoinDesk is owned by Digital Currency Group, who had significant exposure to this mess (and their Genesis trading arm appears to be currently evaluating bankruptcy), so in some sense CoinDesk precipitating FTX's collapse had severe effects on their own situation.
- jandrese 4y ago
  IMHO the Coinbase story was a distraction. FTX went down because Binance dumped their entire position all at once and exposed how cooked FTXs books were. They said it was because of the Coinbase story, but really it was a personal beef with SBF and how he was writing crypto market regulation for legislators that was going to hurt Binance.
  - 4y ago

arkis22 4y ago

This isn't just comingling accounts and bad accounting. They borrowed between firms. They absolutely knew where liquidity was, and where liquidity wasn't - liquidity follows profits. Their solvency was based on their own manufactured tokens. 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.

totalZero 4y ago
Not to mention that his kimchi spread origin story is based on an arbitrage. 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.

bandyaboot 4y ago

I have to admit, I’m really having a hard time caring about whatever drama is happening in the pretend money world.

anonporridge 4y ago
People sent him "real money" (all money is pretend) which he then funneled to other projects, specifically massive political contributions to influence US elections. That should absolutely concern you even if you think all cryptocurrency and bitcoin is fake and doomed to eventual collapse.
- bandyaboot 4y ago
  If this was literally a massive and focused political money laundering scheme, yeah that would be a different story. And I realize that many are trying to paint it as such. But, I don’t believe the facts support that.

pessimizer 4y ago

It was a "crime", but we treat the financial industry and anybody with money with such kid gloves that it doesn't really matter that it was a crime. I have no confidence that his prosecution won't end up as difficult as Rob Blagojevich's (notoriously corrupt ex-governor of Illinois), in that Illinois ethics law has been so carefully crafted to allow bribery to and from officials that it was surprisingly difficult to convict him, and irt the details of the process probably unfair. Blagojevich's actual crime was not having being popular with people who had clout, not his open selling of a US Senate seat. 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.

StanislavPetrov 4y ago
Reminds me very much of the John Corzine situation. If you are connected with the right set of politically influential and wealthy people, you are above the law.
- bombcar 4y ago
  Privilege - private law. The myth is that we’re all equal before the law but the reality is that there are obvious inequalities.
jandrese 4y ago
Eh, he stole from rich people. He's going to jail. It's not like he only ripped off a bunch of retail investors.

themagician 4y ago

What amazes me about FTX is the speed and severity of the collapse. Never seen anything like it. The website and app simply disappeared overnight. The never sent statements via email or postal mail. If you had any money in the only proof you have some transactional emails and lines in the statements from the banks which you used to fund your FTX account. 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?

jasonhansel 4y ago
I suspect that this is surprising in part because we have so little firsthand experience with bank runs. Before the FDIC, a bank could collapse fairly quickly and with relatively little warning.
muskmusk 4y ago
I cant hold it in: Yeah it would be really convenient if there was some sort of global database that could hold all this data.

ejlangev 4y ago

This article, while probably true an accurate, seems designed to make SBF the fall guy by portraying him as a uniquely bad actor in the crypto space. In reality, the crypto space is full of fraud that is probably criminal and he is just the latest example. That doesn't excuse his behavior and he should probably go to prison for this but it would be a shame if people get taken in by thinking of him as just a bad apple.

bhk 4y ago
I totally missed the part where they say that there have been no other criminals in crypto. Could you point me to that? 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?
hn_throwaway_99 4y ago
He is not the "fall guy" considering he, along with Alameda's CEO, make the direct, conscious decision to embezzle customer funds to prop up Alameda. Just because he stole what looks to be a billion dollars doesn't mean there are no other bad actors. 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.

deleted 4y ago

[deleted]

jmull 4y ago

I think the crypto people keep driving the NYT-is-in-bed-with-SBF narrative to distract from the real issue: the great bulk of crypto efforts are essentially scams that want to lure real money in with the promise of riches. 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.

loeg 4y ago
I assure you, non-crypto people are baffled as to why big media organizations have been lobbing softballs to SBF, too.

vt85 4y ago

indigodaddy 4y ago

Watching the NYT SBF interview tonight, in which SBF is constantly characterizing billions of customer dollars being funneled illegally to Alameda as, “we didn’t realize that Alameda’s ‘position’ in FTX was so large…” This is just straight up nonsense correct? Or does he have something to grab hold to here?

m3kw9 4y ago
Does claiming ignorance help him at all?
andirk 4y ago
He gambled. Lost. Gambled more. Lost bad "even when times were good". My guess is he figured if he could borrow from Peter to pay Paul one more time... one more time that he would eventually be back in the black. I think he personally set up those "positions" over and over, but he's not good at gambling so now it's all gone. https://www.nytimes.com/live/2022/11/30/business/sam-bankman-fried-interview https://www.nytimes.com/live/2022/11/30/business/sam-bankman...
- quickthrower2 4y ago
  You forgot stole. He stole, gambled, lost. Let’s say Amazon bet your $100 order money on WSB stocks and lost, and said “excuse blah insolvent blah accounting blah”.
- achenet 4y ago
  this sounds like a tragic version of the film Uncut Gems
chewbaxxa 4y ago
I spoke to a few Alameda/FTX people over drinks before summer. They were delighted to brag about the lack of separation between the two entities. Really there wasn’t any.
55555 4y ago
The basic idea is this: If he just sent customer funds from FTX to Alameda, that would definitely be fraud/theft as the FTX TOS said they wouldn't do that. But instead he did something else. You know how you can take a margin loan in your brokerage account against the value of your stocks? You can use the money from the loan as you wish, but if your stocks go down X% then they will "margin call" you and liquidate your assets to pay back the loan. SBF's claim is that Alameda took a margin loan as an FTX customer just like any other customer might, and then lost their money gambling. But unlike other customers, Alameda was not subject to any margin requirements (??) and could not be automatically liquidated (??). These facts(?) probably ruin this defense, which otherwise might hold some water, as it's not at all a defensibly arms length transaction. IANAL. 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?)

andirk 4y ago

> recent data implying immense trading losses even when times were good. 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-fried-interview https://www.nytimes.com/live/2022/11/30/business/sam-bankman...

yawnxyz 4y ago

For a fraudulent app, I'm surprised at how well FTX as a platform worked. 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!

rootusrootus 4y ago
That makes sense, though, the app wasn't fraudulent, just what they were doing on the back end with customer funds. It's of course in their best interests to hire good enough software talent to build an elegant platform that will inspire confidence and attract more 'investors.'
- noisy_boy 4y ago
  It is actually an excellent example/warning for people, especially tech people, to not assume soundess of business based on the polish of the website/app.
  - sizeofchar 4y ago
    I, myself, fell for that... :(

lettergram 4y ago

The dude took our $1B in a personal loan with customer wealth. He then used it to donate to random politicians, invest in effectively crazy one off ideas, etc.

hn_throwaway_99 4y ago
> The dude took our $1B in a personal loan with customer wealth. 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).
- kayamon 4y ago
  Most banks only keep a fractional reserve of their money and happily loan the rest out to other people.
  - lettergram 4y ago
    Yeah but don’t often offer personal loans to the tune of $1B of which tens if not hundreds of millions will be used for political donations …
  - hn_throwaway_99 4y ago
    Which is clearly documented by the banks for the benefit of all of their customers. Not to mention there is FDIC insurance, which is specifically why people who are worried about bank stability know they can more their money in multiple banks if they're over the FDIC limit. Nevermind FTX was an exchange, and my stock brokerage certainly doesn't lend out my stocks to a related party without my consent.

Waterluvian 4y ago

A lot of people using the OTPP to push narratives need to read up on it a little. It’s a massively successful pension fund that’s out there crushing it for public school teachers (32 year average return of 10%). The amount they lost here is not even a blip. It’s just part of the process of investing $240B of assets. You can captain hindsight it all you want but they are completely correct to make some higher risk investments along with the lower risk ones too. 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.

lotsofpulp 4y ago
How is OTPP’s performance (including expenses) relative to a low cost broad market index fund like VOO or a low cost target date retirement fund?
- Waterluvian 4y ago
  Over 30 years it appears to be about the same. Just under 10%.
  - lotsofpulp 4y ago
    Then as an employee, I would rather have my own retirement savings in a 401k or similar type account invested in VOO over letting someone else have control of my future benefit.
    - willhslade 4y ago
      Is your pension a gold plated DB?

scoofy 4y ago

"It was a crime" seems to be the cope du jour that for those who invested in an asset intentionally designed to avoid regulation. 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?

phist_mcgee 4y ago
Cope de jour. Classic.
harlequinn77 4y ago
It looks like a pretty clear cut case of embezzlement and fraud. They're both crimes.
- HDThoreaun 4y ago
  It really looks a bit less clear cut than you’re saying. First I’m not sure he’s subject to American financial laws at all since ftx was offshore. Second he has some sort of explanation of alameda just taking a margin loan and he had no idea that the collateral was worthless. Would that fly in the us? Probably not. In the Bahamas? Who knows.
  - BLKNSLVR 4y ago
    FTX.us was also dragged down by the last ditch flick of the Balrog's flaming whip
  - JohnFen 4y ago
    >I’m not sure he’s subject to American financial laws at all since ftx was offshore. 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.

alienalp 4y ago

The whole FTX situation is like a joke. Bunch of junkie kids probably manipulated by sophisticated criminals. Most likely we will never learn about where most of lost money ended up.

neilv 4y ago

At the same time, Coindesk.com front page includes this: https://www.coindesk.com/layer2/2022/11/30/a-self-regulatory-organization-is-the-best-way-to-advance-crypto-while-protecting-the-public/ 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.

jasonhansel 4y ago
Can you imagine anyone proposing this for the ordinary financial sector? The hardcore libertarians would approve, but nobody else would take such a proposal seriously.
- eramoose 4y ago
  While I'm pretty skeptical a SRO would work for crypto, as mentioned in the article, SROs like FINRA are one of the main sources of regulation in the ordinary financial sector.
- sp332 4y ago
  Usually industries try to self-regulate at first. Sometimes they do an acceptable job, and sometimes they get regulated by outside agencies.
  - oblio 4y ago
    Money's been regulated since the beginning of time. And when/where it wasn't, we usually called the place a failed state.
- AdamN 4y ago
  Actually SIPC is exactly that and is probably what the crypto industry wants to model themselves after.

Animats 4y ago

Here's the NYT article.[1] 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-bankman-fried-crypto-bankruptcy.html https://www.nytimes.com/2022/11/14/technology/ftx-sam-bankma... [2] https://yaffebellany.com/ https://yaffebellany.com/

bhk 4y ago
Seriously? "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
- deleted 4y ago
  [deleted]
- res0nat0r 4y ago
  Pretty wild that the reporting from CoinDesk that led to the downfall of FTX, is causing such an entire market implosion that it may be putting CoinDesk itself out of business. https://www.cnn.com/2022/11/24/media/coindesk-scoop-ftx-reliable-sources/index.html https://www.cnn.com/2022/11/24/media/coindesk-scoop-ftx-reli... https://crypto.news/potential-buyers-circle-around-digital-currency-group-coindesk/ https://crypto.news/potential-buyers-circle-around-digital-c...
- Animats 4y ago

konfusinomicon 4y ago

i wasn't invested through ftx but I did use blockfolio for years, which was acquired by ftx and now is now seemly not working which is too bad because whenever I felt like becoming depressed I would just open it and look at the sea of red and remember the days when it was lush green fields of cash I was looking at

woodpanel 4y ago

Great article. It even goes there and mentions BCCI. 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/the-cias-bcci-laundry/6c69ffbf-42d3-46ee-ba86-b8ad03adb685/ https://www.washingtonpost.com/archive/opinions/1991/08/11/t... [2]: https://asia.nikkei.com/Spotlight/Datawatch/Tether-cryptocurrency-emerges-as-money-laundering-fears-rise https://asia.nikkei.com/Spotlight/Datawatch/Tether-cryptocur... [3]: https://www.ledgerinsights.com/tether-shadow-ftx-saga/ https://www.ledgerinsights.com/tether-shadow-ftx-saga/

jessaustin 4y ago
Not so much a "crime" as an "op". Like various other distractions to which we're supposed to devote attention, while the actual crimes take place elsewhere.

fredgrott 4y ago

Keep, in mind if you are consumed a certain podcast over this summer, we learned that certain SV VC firms were circulating token issuance schemes that involved being outside of US jurisdiction to avoid oversight to game the systems. 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.

jongjong 4y ago

The fact that many members of the elites keep trying to protect obvious fraudsters makes me doubt the legitimacy of the elites themselves. Looking back at the last 3 years of media insanity, I wonder what kinds of people are running the show.

RustLove 4y ago

None of Theranos enablers seemed to suffer at all after Theranos went down. Why do any of their board members still have careers? Why is Stanford's Channing Robertson still advising companies? 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.

college_physics 4y ago
your problem is that you are a minority (in a society where those with the right information and ability to act on it actually think its a-ok). It is also called moral bankruptcy and is closely associated with financial bankruptcy.

DevKoala 4y ago

This comment section is hilarious. Some don’t want to acknowledge the obvious, and instead try to tip toe around the subject with funny excuses such as, “MSM are not crypto experts”, “his 40M in donations to democrats do not hold any value anymore”, “his family ties to Democrat and academic leadership only makes his inner circle judgement more impartial”, etc. There are none so blind as those who will not see.

seabird 4y ago
Yeah, it's pretty wild watching people wonder why a top political donator is getting so much peel for somebody who is either a crook or dangerously stupid. There's a lot of people who like to imagine that media and journalism is a lot more impartial than it really is.

neuroma 4y ago

I wrote to a journalist called Dan Diamond who had written an article covering how FTXs 'collapse' would set back health philanthropy. He would not directly answer my reasonable questions except to say "I'm a health journalist ". 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.

1vuio0pswjnm7 4y ago

"In interviews, he talked a stream of nonsense tailored to snowjob outsiders about an industry that's already full of jargon and complicated tech." He is still talking. For example, 16 Nov 2022 https://www.youtube.com/watch?v=6DezodR9hNI 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-fried-interview https://www.nytimes.com/live/2022/11/30/business/sam-bankman... https://slate.com/technology/2022/11/sam-bankman-fried-new-york-times-dealbook-interview-ftx-alameda.html 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-show/id1646229350 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.

maxbond 4y ago
> [another to be published phone call with the YouTuber above] https://www.youtube.com/watch?v=xP54LZB3WRw https://www.youtube.com/watch?v=xP54LZB3WRw
- 1vuio0pswjnm7 4y ago
  Cheers!

patmcc 4y ago

...were we not all assuming this was the case?

drawingthesun 4y ago

When is SBF going to be arrested? I cannot believe he did this and lost US customers money yet he can walk free.

tromp 4y ago

> August institutions including the New York Times and Wall Street Journal 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 http://www.merriam-webster.com/dictionary/august http://www.merriam-webster.com/dictionary/august

additall 4y ago

But many journalists have crypto assets themselves? :) 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.

nnoitra 4y ago

asimpletune 4y ago

So I’ve been watching the NYT dealbook interview and want to add some clarity that I think is missing here. Let me add a disclaimer that I don’t condone SBF at all. I just want to use his words to provide clarity. Everything below is paraphrasing. 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.

pjc50 4y ago
Margin trading is still not supposed to be co-mingled (or allowed if you're running a regulated brokerage). There's supposed to be a separate bank account labelled "client money" which has the client money in. https://www.handbook.fca.org.uk/handbook/CASS/5/5.html https://www.handbook.fca.org.uk/handbook/CASS/5/5.html 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.
NhanH 4y ago
Q: Did you kill those people? 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.

mmcnl 4y ago

It's amazing how many people fail to recognize a ponzi scheme exchange right in front of their eyes, and then be surprised when it collapses.

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