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.
I can't figure out why the media is doing such a terrible job covering this (other than Matt Levine, his coverage has been flawless).
Is it because SBF gave a bunch of money to politicians? Is it because FTX got investment dollars from prominent VCs? Is it because journalists do not understand crypto, like, at all? Is it because he bamboozled journalists by talking so much about Effective Altruism?
Nobody, literally nobody, said Bernie Madoff was "suffering from a solvency crisis." They said he lied and stole money. And yet SBF's alleged crimes are quite similar in nature, but he's portrayed as suffering from market conditions beyond his control. So was Madoff. If Madoff got lucky and his portfolio doubled in a year, then he too would have been able to make customers whole. But even if that happened, he still lied and stole, just like SBF.
Anytime I read a story by big publications about a topic I’m an expert in, I recalibrate my expectations around accuracy and effectiveness in coverage of big publications. It’s astonishing how much nuance is lost in translation - both from the subject matter to the journalist, and again from the journalist’s reporting to the public.
This is not a bald criticism or renunciation of journalism from big publications - I simply mean to provide some understanding and clarity around how journalism so often misses the mark. Even though it misses the mark, journalistic coverage is incredibly valuable and a far better approach than darkness. (People might think of journalism as turning the lights on - more accurately journalism is like shining a flashlight into a dark place.)
In this case, it is very odd that much of the coverage has not been centered on fraud. I genuinely don’t understand why.
Can’t agree more. I generally forgive journalists who simply reporting on a story and get it very wrong because they usually report all kind of stories and it’s unreasonable to expect good grip on all the topics.
On the other hand, when a journalist follows a story, they must have good high level understanding. Shockingly, youtubers have much better grip on the situation.
The traditional media seems to be losing the plot in this FTX and presenting SBF in strangely positive light, almost as if it is a human interest story.
> I generally forgive journalists who simply reporting on a story and get it very wrong because they usually report all kind of stories and it’s unreasonable to expect good grip on all the topics.
I generally don't. A journalists job is to report the news, if they don't feel confident in a given domain then they can sit the story out.
To give you an analog, I work on infrastructure, but I don't work on things like AWS policies every day. It generally takes me longer to craft up the right way to restrict a given resource due to that. If I left an S3 bucket open to the public "on accident" I'd expect ramifications from my employer.
That's to say, the onus is on the doer of the work. Now, if news outlets are just telling journalists to give it the old college try on domains they don't know, that's another subject.
Reporters are low paid people who are expected to pump large amounts of content very quickly. They also need to report it in a way that other people with no domain knowledge will find it interesting and feel like understand the story. If they can’t do that, someone else will do and get all the views.
It’s not an excuse for the low quality, just an expected outcome IMHO.
Nope. A journalist job is to make clicks. That’s how their job is evaluated: how many click did the story bring.
That’s all. That’s f**ing all.
Every news outlet office now has a giant screen with the list of the stories and the number of clicks. "Journalists" are expected to competed on that metric and that metric alone.
It blew my mind every time to realize that, even in tech, people are still naïve enough to not see that. Just change the word "journalist" by "click farmers" and, suddenly, everything makes sense. (Television has "audience" instead of "clicks" but the reasoning is similar)
The problem is that bad, irresponsible, and / or wrong journalism still makes money. Newspapers rarely face consequences for their shoddy publications.
That's not totally true. For instance I blocked USA Today on my Apple News stream because of the low quality of journalism and clickbait titles. The problem is that this has minimal impact but more importantly, USA Today probably doesn't even get a report letting them know that end users are doing this and probably get paid anyway so they are blissfully unaware.
I've found several USAToday fact checks, notably on COVID, by them given an air of authority using citations full of tangential (or worse, wrong) experts..
While such tangential citations were used, at most it basically discredited the article but not necessarily fully refute the topic.
"A journalists job is to report the news, if they don't feel confident in a given domain then they can sit the story out."
That may have been the case in the past, but "journalism" has radically changed within the past decade. Today it's more about telling the story that the media conglomerates want the public to hear, than about honest reporting.
Public distrust of the media is at an all-time high, and growing.
Is it really the case that a decade ago journalism was not telling the story that media conglomerates wanted the public to hear? Or did that just seem to diverge from what you personally wanted to hear about a decade ago?
I mean, I feel this. I watched George Bush get mocked and made fun of on the news for having a stutter almost every day. I also watched them do daily reports on the deaths in Afghanistan and Iraq. When Obama took over they stopped reporting deaths and some organizations cheered him on while others broadcast viscerally racist shit.
So, to answer your question: it's both. It's bullshit I don't want to hear and what a grip of powerful people probably want me to hear.
In theory maybe, in practice, journalists are simply Instagram influencers with fancy degrees. They make content to draw eyeballs for an organization that sells ads.
In many cases, yes. But what baffles me is the terrible coverage of the crypto world, even from serious journalists. Stories like the Mango Markets exploit would get plenty of clicks and wouldn't take that long to write ("9-figure crypto bank theft may not even be illegal"). So why are they ignored? And why are so many publications portraying SBF like a misunderstood philanthropist when you could arguably get more clicks reporting on the many fraud accusations?
This isn't about "getting it wrong". This is about the use of a certain kind of language like "The company fell". No, "SBF and his chums lost and stole a lot of money". It's exactly like the "Crowd hit by a van" type of language instead of "Terrorist kills 10".
It's about libel lawsuits. They stay factual rather than share the interpretation of knowledgeable insiders. That's why it's "alleged terrorist" even if it's obvious to everyone.
BTW be careful with expecting the media to spoon feed the narratives you want rather than laying out facts and editorializing them to let you decide. That's how you avoid some bias.
The point is that, in some cases where the writer or org may or may not have an interest in protecting, we don't even get "alleged terrorist" or "alleged fraud". It's all passive-voice companies that go bust and things that happen.
Now go look at some other examples where the writer or org has an interest in attacking and you will find, not only no shortage of "alleged"s but also a good dose of extra eyebrow-wriggling, winking and nudging there to suggest whatever number of other crimes can possibly be invented.
While I get your frustration not to see media organizations not reporting exactly like you want, it just won't change. Its still journalists who keep breaking all the stories on SBF. When we see all of Twitter & Youtube use NYT revealed facts to get a better understanding of the fraud I'm not convinced its a huge problem the tone isn't perfect.
Same thing happens early in crises, from the Russian massacres of civilians in Ukraine to Trump's Mar-a-Lago files we get some forms of facts but its the readers who have to draw some to all of the conclusion.
I'm shocked at how many articles about the FTX collapse still refer to SBF as some sort of philanthropist. You don't need to call him a scammer, but could you at least stop pretending he's a net positive on the world?
It's not about getting it reported exactly like I want.
Don't you think it is an interesting question to ask yourself, "why they report it like that?".
"Avoiding libel" doesn't cut it, there's other ways of avoiding libel that don't look like a love letter.
Why? Why is it in the reporter's interest to protect this guy? That is the interesting question. I don't need to guess at why reporting on Ukraine or Trump is the way it is, it's pretty clear.
Reporting that “this is the worst mismanaged company I’ve seen” from the enron guy doesn’t seem like a love letter to me.
Are you looking for opinion or journalism? Ethical journalists aren’t going to say “this is a ponzi scheme and this guy stole money” because that’s not what any primary source is saying. It’s clear that’s what’s happened to anyone reading the articles written.
First takes on shady accounting practices, details on co-living of executives, some of the troubles with the parents and more information on his warrant and arrest. But they didn't say "fraud" so many people were happy to never read the articles and criticize while also just reading what their favorite crypto influencers took away from reading the NYT reporting.
> In this case, it is very odd that much of the coverage has not been centred on fraud. I genuinely don’t understand why.
Its because news is for entertainment purpose not knowledge acquisition from the journalists perspective and secondly because powerful players are involved.
This guy donated 40 million dollars to the ruling political party and has parents with connections. Why would you write a truthful article outlining the grand fraud that took place when you only have something to loose by doing so?
SBF, but if "dark money" isn't concrete enough for you then the other co-CEO, Ryan Salame, donated about $22M openly to Republicans, and in the senate race SBF donated $66.7k to Republicans vs $49.2k to Democrats.
Not that it matters to the point that I was making but I wouldn't consider SBF a reliable source of the truth.
Remember this was the guy who said "FTX is fine. Assets are fine" and "We don't invest client assets (even in treasuries)".
I don't doubt that he did donate some money to the non ruling party but to quote what he is saying as truth or try and attribute a donation by an associated party to him is disingenuous.
“Briefly stated, the Gell-Mann Amnesia effect is as follows. You open the newspaper to an article on some subject you know well. In Murray’s case, physics. In mine, show business. You read the article and see the journalist has absolutely no understanding of either the facts or the issues. Often, the article is so wrong it actually presents the story backward—reversing cause and effect. I call these the “wet streets cause rain” stories. Paper’s full of them.
In any case, you read with exasperation or amusement the multiple errors in a story, and then turn the page to national or international affairs, and read as if the rest of the newspaper was somehow more accurate about Palestine than the baloney you just read. You turn the page, and forget what you know.”
– Michael Crichton (1942-2008)
Think about all the places you've ever worked, all the organizations you've been part of, where you know how the sausage is actually made, and how that differs from the way the organization portrays itself.
Now think about all the other organizations in the world, whose internal workings you're not privy to.
While your criticism is valid it's pretty generic and is focused not on this particular issue, but the media as a whole. I don't think that's the correct thing to be talking about right now. It may even distract from the actual conversation about FTX.
If you have a pipe break in your home, I assume you don't hire an everything guy to sort of fix it(I promise he's really good and enthusiastic and he's doing the best he can).
You hire a fcking plumber.
Why can't top publications be held to this standard?
I think we naturally give reporters and publications more credit than they deserve. We like to think they are experts or want to expose the the truth. In reality, they might be idiots who landed a job. Or they are just getting paid to do something like most corporate employees and do the bare minimum and don’t really give a crap about what they are doing. If we don’t hold them to a higher standard, then what they produce makes perfect sense.
There are some amazing journalists out there and I’m sure they are just as disappointed in the mediocre content their peers produce.
I think you misunderstand what journalists do. Journalists are not supposed to be experts in the subjects they cover. They are not telling you the story based on their personal knowledge or beliefs — those are opinion pieces.
Journalists are expected to source information from experts and from people who are in positions to know, and to attribute the information they publish to their sources.
I am not saying that every journalist or publication does a good job of seeking the truth. Only that the job of a reporter does not require being an expert at anything other than - hopefully - information gathering and reporting.
This is how the news gets fooled again and again. They believe an “expert” who came to them with an agenda. It’s often willful as long as the narrative fits their own
That is why the old adagium one source is no source is valid.
Look up how Rian van Rijbroek fooled a popular news show in The Netherlands. If they had invited one more random expert in the field, that person would've grilled her.
To be fair, journalists are meant to also use their own knowledge and judgement to assess the relative validity of sources and frame the story in a way that communicates the truth as they see it (as opposed to just uncritically reflecting whatever their sources told them)
> Anytime I read a story by big publications about a topic I’m an expert in, I recalibrate my expectations around accuracy and effectiveness in coverage of big publications.
I took a look at some of the media coverage and found that people are spinning it as being much more friendly to Sam than it actually is. For instance, the linked to article portrays Matt Yglesias' article like this:
> Vox co-founder Matthew Yglesias, court chronicler of the neoliberal status quo, seemed to whitewash his own entanglements by crediting Bankman-Fried’s money with helping Democrats in the 2020 elections – sidestepping the likelihood that the money was effectively embezzled.
Here are some excerpts from Yglesias' article[1]:
> But the truth appears to be much worse than reckless, even as it’s still not fully clear exactly how much worse (did he and his circle lose the money? did they pocket it?), and for those of us who defended him against some of his critics, a reckoning is due.
**
> By betraying his clients — I don’t know whether he “defrauded” or whatever else in a legal sense, but he certainly betrayed them — SBF is leaving many of his causes worse off than they would have been if he’d never invested in them.
**
> I did warn that SBF supporting good causes didn’t mean that we should assume his crypto agenda is benign — sincere belief that your wealth benefits humanity can be dangerous...I did not, of course, seriously consider the possibility that he would just steal his clients’ money. And given what we now know, you have to be suspicious about the downstream spending as well. All the official and unofficial EA material emphasizes the importance of integrity and does not encourage people to run scams or break faith with others. But I do think the situation poses some questions that the community as a whole will need to reckon with.
Honestly, the effort to paint this as a failure of the mainstream media seems to cover the lionization of Sam Bankman-Fried by many in the crypto community. For instance, Coindesk itself wrote numerous articles painting Sam Bankman-Fried in a positive light. And these were directed at people trying to invest in crypto, unlike Yglesias' article.
A Coindesk journalist was the one who first broke the story, that's how the public became aware of it in the first place. Only a few days ago Vox published that bizarre interview, basically giving Bankman-Fried yet another platform to spread more lies. The investors in FTX were mainly not crypto people but venture capital firms, newbies and even the often cited public pension fund.
As someone who's been in the space since the early Bitcoin days, I don't know a single actual crypto person who was a fan of the likes of SBF, CZ etc even before FTX imploded. It's firms such as Sequoia Capital and Softbank (seriously, they're always in when cash can be burned) that lost millions in FTX, not actual crypto natives for the most part.
There is an interview with SBF out there where he quite literally calls the defi tokens he traded a "ponzi". Of course none of the expert investors did due diligence because they were blinded by the bull market hype, with fat dollar signs in their eyes. Now that their "investment" has disappeared the mainstream has made out the culprit as well. Not the scammer, not the gullible tradfi traders, not a system that relied entirely on trust without verification or regulation - no, it's crypto that was the problem of course.
If only there were a way that exchanges could be reliably audited. Maybe some kind of decentralized ledger that can't be controlled and falsified by a single dishonest party.
> Only a few days ago Vox published that bizarre interview, basically giving Bankman-Fried yet another platform to spread more lies.
Here's the first Vox article that pops up when I type "vox sam bankman fried" into Google[1]:
> A week ago, Sam Bankman-Fried was the boy-wonder face of crypto: A 30-year-old who founded one of the biggest cryptocurrency exchanges in the world, a celebrated philanthropist worth an estimated $16 billion, and a major Democratic donor who quickly found favor in Washington. By Friday, he was at the center of an epic flameout that left his empire and his image as an uncannily sharp, altruistic billionaire in ruins.
> In the annals of crypto disasters, the tale of Bankman-Fried may go down as one of the most jaw-dropping. He resigned from his crypto exchange, FTX, as it collapsed from a domino effect of a surge in customers trying to withdraw their funds, and the company filed for bankruptcy. The Wall Street Journal has reported that Bankman-Fried may have illegally taken about $10 billion in FTX customers’ funds for his trading firm, Alameda Research, whose future is also in peril. And Bankman-Fried is now worth close to nothing.
> The downfall of FTX isn’t a typical story of crypto’s volatility or investor risk-taking; it didn’t crumble due to bad luck, but what now appears to be unsustainable layers of deception.
Again, people seem to be trying to purposefully spin the mainstream coverage into something it's not.
Those are the equity investors in FTX, but it has been reported that there are about a million retail customers owed about 8 billion dollars. You might think they’re not “crypto people” because they sent their coins to a centralised exchange but if that disqualifies you then crypto people are a tiny and unimportant part of the cryptocurrency ecosystem.
Make no mistake, real people chose to purchase cryptocurrency and send it to FTX based at least partly on some pretty sophisticated marketing and endorsement from establishment figures. They will almost certainly lose that money. It’s definitely not just VC funds being burned here.
Is this ironic ?
You give the example Yglesias, one of the most famous independent journalists in the US, and litterally the first paragraph of your article is about how he turned down SBF's money:
> Several months ago, I found myself having a few mocktails and splitting vegan snacks with Sam Bankman-Fried at a restaurant near my house.1 We touched on, among other things, his proposal to create a new publication featuring writers he liked, including me.
> I declined, which obviously in retrospect was the right choice. I told him that I like my Substack just fine and make plenty of money, though he was happy to offer more. But I also told him that given the extent to which we agree on a lot of important issues, I thought it was a lot more valuable to these causes for me to maintain credibility by not accepting any of his money.
> spinning it as being much more friendly to Sam than it actually is
That’s because spinning the notion of “they” being more friendly to Sam implies a shadowy conspiracy, which is much more interesting than other explanations.
Cotton’s razor: The most boring explanation is the most likely explanation.
SBF claims to be the Republicans third biggest donor so clearly the paid both sides: https://www.businessinsider.com/sam-bankman-fried-says-hes-t... According to dome other report (Economist?) it was slightly more on the R than D side in any case it was lots on both sides. Crypto lobbying intends to weaken or avoids regulatory oversight. The so called Crypto Four in Congress were two D and tho R.
He claims to have donated to both sides. His democratic donatations were quite public, his claimed republican donations hidden.
The reason he gave for this behaviour was to appeal to the media who dislike republican donations.
The subtext is of course that he was perfectly willing to pay both sides.
She also wrote about "moving past blame" for things that go "terribly wrong".
From "Sam Bankman-Fried's mom once wrote an essay about fixing problems rather than assigning blame when 'something goes terribly wrong'" Nov 20, 2022 [0]
>> She has written pieces for the Boston Review, a quarterly political and literary magazine, arguing that attributing "personal blame" in times of crisis had "ruined criminal justice and economic policy," suggesting it was "time to move past blame."
>> "The fact that we have gotten so little in return for our blame mongering at least opens up the possibility that people would be receptive to a new approach," she wrote in 2013.
>> "The next time something goes terribly wrong, suppose that instead of immediately asking who is to blame, we were to ask: How can we fix this problem?"
Seems a bit of a convenient philosophy for a fraudster . . .
This is literally just blameless incident response/postmorteming as practiced by google (https://sre.google/sre-book/postmortem-culture/) and a bunch of other tech orgs as well as in industries like aviation and healthcare. Its a well established and supported method for approaching problem solving. Like yeah I can see why it seems a bit ironic in this context but shes not expressing anything nefarious here.
It's also the idea in many safety engineering orgs around how to mechanistically prevent something from happening again even though someone still might try to do the same thing again. In other words, blaming people for mistakes or fraud won't fix the problem since people make mistakes and commit fraud so it will simply happen again. Organizations and governments need to block those mistakes and fraudulent actors from being able to have the impact again that they had previously and we're trying to avoid.
That doesn't mean the person at fault can't also be blamed and punished as a warning to others (i.e. one more mechanism to prevent recurrence).
> I can't figure out why the media is doing such a terrible job covering this
I've lost hope of Hanlon's Razor at this point. It's painfully transparent how purposeful this has been at the media level, and I've come to believe that there's a very large group of voices who are perfectly fine with what's going on because the fallout "hurt the right people" in their eyes.
I believe it's imperative to be conscious of the fact that any rule of thumb can become a conventional wisdom trap given the right circumstances. This very much feels like one of them.
>Nobody, literally nobody, said Bernie Madoff was "suffering from a solvency crisis." They said he lied and stole money. And yet SBF's alleged crimes are quite similar in nature,
It's even worse that that: they give SBF a free pass on referring to FTX's issues as being a liquidity problem, which implies his venture was solvent, but just needed more time to extract the value of its investments, even though that too is obviously false, and no amount of time would let him convert FTT etc to value he claimed in his books.
I don't think it's because he donated money, they already have the money so they're now more incentivized to be critical of him in order to distance themselves from his wrongdoing.
> Is it because journalists do not understand crypto, like, at all?
I think this is a part of it, even most cryptocurrency enthusiasts don't understand it (a statement that most enthusiasts would concede, just not about themselves), but I think a more influential component is that people just don't care. There have been so many scams like these over the years that everyone already understands cryptocurrency is mostly scams and people are somewhat resigned to the state of things; it's cryptocurrency outrage fatigue. From the media's perspective, the story is far more provocative if they entertain SBF's meandering chaos rather than file it away as just another cryptocurrency scam.
> Nobody, literally nobody, said Bernie Madoff was "suffering from a solvency crisis." They said he lied and stole money.
I think that's just a product of the era we live in, "suffering a solvency crisis" is the type of euphemism you see all the time in the cryptocurrency world.
> they already have the money so they're now more incentivized to be critical of him in order to distance themselves from his wrongdoing
They're incentivized to not look as if they're willing to backstab donors the moment they fall from grace. Otherwise nobody (or at least no unscrupulously rich person) will donate money to them for political support in the future.
> I think that's just a product of the era we live in, "suffering a solvency crisis" is the type of euphemism you see all the time in the cryptocurrency world.
I have difficulty with your premise, because I’ve read many pieces across many news organizations about how bad the fraud at FTX and Alameda was, and how much of a villain SBF is.
I think the media's contrarian bias has a lot to do with it. Nobody wants to share the 10th version of the same story about SBF being a fraud on their social media. However, if you write a contrarian "Maybe SBF was a good guy" article then it's going to spread like wildfire across social media.
The same thing happened after Elizabeth Holmes' fraud was revealed. There were a lot of articles claiming that she was actually the victim, or that the industry was to blame, or that everyone was doing the same thing with their startups. None of those aged well, but they drove clicks at the time.
Perhaps connected family pulling a lot of strings and asking for one-time favors in a coordinated fashion. It almost reminds me of how mr Weinstein was able to deflect from his sexual crimes through connections to power and his own intimidation. He was able to stave of investigation into his crimes for decades. Regular Joes would have had no such perverted ability.
If the perp had been a persona non-grata, you'd bet this would have been all over the place --pitchforks and torches in-hand.
Picking the wrong goalposts: instead of asking "was it a crime" those downplaying ask "is it possible that he did not understand that it was a crime", as if that made a difference of tipping point scale. Is it possible that he did not understand? Certainly. And given the amount of self-respect depending on him not understanding perhaps even likely. Self-delusion is a powerful force. But it's the wrong question to ask of course.
On the other hand I haven't seen any media downplaying, here in Germany it's all haughty "Americans being Americans again" ("let's not talk about Wirecard for a few minutes, can we?") and what I read through the hn filter isn't downplaying either. Perhaps what you are perceiving is a subset of media motivated by the crypto angle?
It's not, but for people desperately hoping for crypto to recover, "your savings disappeared because of that crypto-bro's you trusted ignorance" is a less bad spin than "your savings disappeared because of that crypto-bro's you trusted malice"
Combination of all of them? After all, you say yourself, one of the most informed journalists on the space is doing an excellent job.
The mainstream definitely doesn't understand crypto. (Hell, SBF himself paid for TV ads telling them they didn't have to!) Madoff had easier precedences to compare to and validate for themselves vs trying to figure out if the various crypto-sphere tweets and blog posts "proving" fraud are actually proof and such.
The FTX story, if half the stuff I've seen linked on HN is too believe, also has a believability hurdle to the uninformed of being UNBELIEVABLY STUPID. "They did almost literally no accounting at all and transparently bought houses with company funds" yet they also raised crazy $$$ from so-called reputable investors? Surely that can't be true!!
There's an interesting implication here, which is that if SBF is enough of a charismatic con to make
otherwise sophisticated investors toss money around blind, wouldn't he also be able to work similar magic on otherwise sophisticated journalists?
Everything will change if there is an indictment, arrest, charges. Remember - Bernie Madoff confessed, and was charged by the Manhattan U.S. Attorney's office.
My impression with crypto is that once money is in token form, there's an expectation that it can just vanish into thin air. Like it can just evaporate. There seems to be a cognitive breakdown that forgets money doesn't get created or destroyed, it is moved from one party to another.
My sense is that this cognitive bias is playing out here. "Obviously your money could just disappear, it's crypto, that's what happens. Why look into this?".
Once the brain is trained to know this is how it is, it stops asking why it's happening. That's just what happens.
>> I can't figure out why the media is doing such a terrible job covering this
1. SBF, Caroline, SBF Parents all know all the right people and run in the same circles as the editors/owners of the top publications
2. A lot of other people come down along with SBF, so they dont want to pull the thread. For example, if the FTX money was indeed stolen, then did Dems get stolen-cash-contributions? For example, who else has deeded ownership over the 300M of laundered cash homes in The Bahamas? I think a lot of people want this to go away and they are all friends with the same NYTimes exec circle
3. No one wants to be called anti-semitic, so people are treading very, very carefully around this, even at the expense of justice. No one wants to end up like Kyrie Irving https://www.nytimes.com/article/kyrie-irving-antisemitic.htm... having to donate 1/2M$ for even touching this
IMO, it’s because crypto still has an aura around it and journalists hesitate to call crypto a fraud. Nothing FTX was doing is any different than what’s going on in tether, yet that still has defenders. Virtually all crypto is a ponzi, but covering crypto like that as a journalist would’ve earned you nothing but scorn for the longest time.
Give this scandal some time to percolate. I think the scale of the failure/criminality here is still under appreciated by journalists.
Also helps that SBF is still in his 20s. He’s getting more benefit of the doubt than he would otherwise. Whether that offers any legal protection remains to be seen…
IIRC, Madoff was literally creating fake statements for customers and not buying securities he claimed he was for his clients. Not saying what SBF did is thus not criminal, but I don't think investigators have that kind of smoking gun yet.
Just in case you aren't self-aware: On one hand you are lauding Matt Levine's coverage (he has been very clear not to accuse SBF of fraud yet); on the other hand you seem to be angry that other publications aren't accusing SBF of fraud.
Not everything is black or white. It’s not the case that there are either good guys or crooks. Often fraud is committed by people that start off doing well or have good intentions but screw up or the market goes against them. They then borrow (steal) just for a short while to make things right and make the same mistakes and commit more fraud.
I think a lot of people haven’t decided when SBF became the crook and what his intentions were. As we don’t have all the information and he hasn’t gone to court, isn’t that healthy?
“ If Madoff got lucky and his portfolio doubled in a year, then he too would have been able to make customers whole.”
Maddoff didn’t have any portfolio since the late 80’s. So no trading, all fake records. Redemptions of principal and made up profits were paid with other customer funds.
Myth? If so, what do you consider most of mainstream media to be? It is easy to highlight Fox News as right-wing, but how would you classify MSNBC, CNN, New York Times, etc.? I have a feeling most people would respond that journalists are largely on the left ideologically and sympathetically, if not wholeheartedly progressive.
There's plenty of non-left news/media orgs. WSJ, Washington Examiner, New York Post, National Review, Daily Mail, Newsweek, Washington Times. I don't think most of those would be considered fringe media.
I don’t get how so many smart people here don’t understand this.
It is not the job of the media to accuse people of having committed crimes, and it is dangerous for most people to do so. Defamation is a real thing. Publicly accuse someone of a crime they did not commit, and they have a legitimate civil cause of action against you.
If you can get people to go on the record with their own accusations, great, but those people, too, would be exposing themselves to potential liability.
If SBF is charged, the media will be all over it, and the coverage will be based on official records and statements. That is how news coverage of crime works.
It is precisely because SBF has not been charged that the information needed to substantiate a news story tying him to criminal activity is unavailable.
> It is not the job of the media to accuse people of having committed crimes, and it is dangerous for most people to do so. Defamation is a real thing. Publicly accuse someone of a crime they did not commit, and they have a legitimate civil cause of action against you.
It's indeed dangerous for "most people" to do so. However, in many jurisdictions, the media gets more protection against defamation claims than the average person because of their public duty to report alleged criminal behavior.
The press doesn't get to receive special treatment in defamation law and then claim they're not going to report facts because they fear legal consequences.
Also there's this [1], which just boggles my mind. I can't make sense of this level of centralized message control and dissemination. It's straight out of 1984.
It's hard to believe "the media" (whoever "they" are) has an agenda... it's tinfoil hat stuff.. Usually I write it off as emergent behavior of collective groups of humans trying to make $$$ from clicks, standard selfish behavior + time, leading to a race towards the bottom that looks like this.
But watching those clip segments it's pretty clear there's a story/narrative being pitched by someone with the leverage to do so. Is this propaganda? What is propaganda? How can I recognize it? Is everything propaganda? Has "the media" been captured and become a tool of whatever "system" is controlling things? This is the kind of stuff Jean Baudrillard was writing about.
Sometimes we get journalism other times we get whatever that this stuff is. I don't have a problem with journalists sticking to the facts, SBF hasn't been charged, so lets not lynch him just yet. But hopefully he's being investigated (they usually don't announce when they are investigating someone, as it puts them on notice).
Overall I think this is a direct result the 1996 Telecommunications Act which eliminated the rules on the number of radio stations a company could own (which also was one of the most lobbied bills in history). In hindsight this was a big mistake, and set things up for the kind of centralized messaging we see. There was hope that internet "streams" would help reset things, but with FAANG we're back to a small group of companies controlling what you see and hear.
Distrust of the media is at an all time high because of this kind of stuff. It's hard to put your finger on, but your gut says something is very wrong. No wonder so many people go down the tinfoil hat rabbit hole. They're simply trying to make sense of the world they're now living in.
Not sure why "collusion" is in air quotes. They met with a KGB agent in Trump Tower to discuss the lifting of sanctions in exchange for election interference on his behalf, and his campaign manager admitted giving their voter data to the Russians.
Trump was in the headlines as much as he wanted to but relating to legal troubles, they only report developments in the investigation. They did then repeat Bill Barr when he said there was no collusion.
Yeah I listened to a podcast about it and they were seriously clueless. (Wall Street journal.) They basically said people got cold feet and de invested. They didn’t even get to the part where it was a Ponzi scheme
Of course it's because he is connected, is on "the same team" and gave them all money. What else is there to understand? Isn't that enough of an explanation?
> Is it because journalists do not understand crypto, like, at all?
No, I think it's because they understand it well enough to know that if they call what FTX was doing a scam (which it was) then the entire house of cards will collapse because all of the other big crypto exchanges/lenders/yield farms/funds are doing the exact same thing. SBF laid it all out to Matt Levine on Odd Lots back in April.
Are you high? This is literally the medias job: telling the proles that the reason they lost all their money in the housing collapse, the stock market collapse, the crypto collapse, is all a terrible , terrible accident and let’s laugh at these silly buffoons with their silly hair. No dear prole, this surely wasn’t yet another well orchestrated financial heat pump to move money from poor people to rich people. Everyone knows money trickles down!!! Ha ha ha ha ha!
I don't really understand this narrative, that the media are going soft on FTX or SBF. The NYT did do one soft-ball interview, to their discredit, but that was well before we knew the full extent of the wrongdoing and they've been pretty clear-headed since (https://archive.ph/AxB6G). Bloomberg has been very clear (Matt Levine, as you note, has been pretty scathing, despite being a former fan of SBF).
Where is this media that is trying to white-wash FTX?
> other than Matt Levine, his coverage has been flawless
Yet the takeaway from Matt Levine is consistently that they're fucking idiots, not fraudsters. That nobody bothered to count the money. They didn't transfer customer funds to Alameda, but instead used Alameda bank account for customer deposits because FTX didn't have one. Then they didn't bother to do any accounting to notice the money was disappearing.
ML paints them as more likely to be morons than hucksters knowingly perpetrating a fraud? Or, I've misread all of his recent columns.
I mean sure SBF stole, but what he stole was basically the modern equivalent of Monopoly Money. So unlike with the Madoff scam, it's tough to feel any sympathy for SBF's "victims" here since 100% of them were greedy grifters who were voluntarily participating in an obvious pump-and-dump scam. Hopefully SBF will eventually go to prison for wire fraud or something but the impact of his crimes was pretty minor in the grand scheme of things.
You think Sequoia, Ontario Teachers Pension Fund, and a ton of other legitimate investors were "participating in an obvious pump-and-dump scam"?
I get its criminal what SBF did and this is as bad as negligence gets in business but everyone is treating this like some overt Madoff like scam that was obvious to everyone in-the-know. The details of how SBF himself was engaging in the scam is not even yet set in stone, besides some real estate deals and an obvious lack of corporate controls/conflict of interest, so accusing others of also being a part of it seeems pretty brash and far too early.
Although I get the emotional outrage angle of none of the power players calling it out sooner or asking tough questions. But that's slightly different than participating in a scam.
Big investors like Sequoia should absolutely have asked tougher questions. They deserve to be scrutinized for this. It isn’t emotional outrage, it’s asking people to do basic due diligence.
Accusing people of participating in a pump-and-dump scheme is the same as asking people to do due dilligence? I don't know, that's sounds a lot like emotional internet outrage. That's the only thing I'm critiquing here.
FUD doesn't help us stop this in the future. Actually accusing them of the things they did is how you get them to fix that mistake in the future. Accusing them of being overt scammers, before we have any actual evidence of that, is how you get completely ignored as being hysterical.
Yes, Sequoia, Ontario Teachers Pension Fund, and a ton of other investors were participating in an obvious pump-and-dump scam. Let's not be naive. They knew what they were getting into. They thought they could ride the "pump" up, then "dump" the trash on some other sucker. But the scam blew up faster than they expected, and now they're crying crocodile tears. Boo hoo.
The investors might not have committed any crimes, but they bear some moral culpability for this debacle.
And to be clear I am not defending SBF at all. But on the scale of crimes, what he did is less bad than literally any violent crime.
So [established financial player in old school finance job put on high risk desk] sees crypto as a chance to 10-100x BUT they just have to time it right. So all they have to do is basically play the lottery that their hundred plus million investment will have IPOd or got acquired by a bigger fish... all before a) anyone figures out the company is a fully worthless or b) the whole value was based on other companies falsely pumping up crypto. So they simply bet no one would notice in the next 5-10yrs before the stock gets converted or maybe a loan gets paid back.
And their risk/management team signed off on it?
And how do they estimate how long no one will notice or care? Or do you think they have other bullshit companies lined up to acquire it or the IPO market wouldnt check either?
Why wouldn't they just buy FTX coins or similar tokens for such a blatant pump scheme? Why make a long term bet on the actually company cashing out before anyone checks their books?
Basically yes, that's roughly how the scheme operates. And for an amoral financier concerned only with maximizing returns, that strategy actually succeeds often enough that using it isn't necessarily irrational. The retail market is full of dumb money that will buy almost any trash in an IPO as long as someone can make up a plausible sounding story about growth potential. They literally don't check.
I don't mean to paint with too broad a brush here. The majority of investment managers are ethical and responsible. But there are always some bad actors, which we now see all around FTX.
The more you explain yourself the less this sounds like a pump and dump/FUDy territory this conversation started with.
Maybe I'm confused but even "dumb money" doesn't typically buy billion dollar scams at IPO where their financials are arranged by Goldman Sachs et al. Unless I missed some obvious examples in recent history where a bullshit (let alone crypto tier bullshit) tech company IPOd with hundreds of millions invested by legit Sequia/OTPP style investors and then the whole charade got exposed after the fact.
You could maybe point to a tiny set of VC companies in history, like Groupon where the stock price was overvalued at IPO, but even they are still a real business with 4000 employees 11 years later.
If anything you could say the grand conspiracy was betting on an acquirer buying them before crypto went bust. But I highly doubt that was a key part of some calculated plan.
Why is it so hard to believe some VC (who looked for external validation over their own dilligence) thought there was real longterm value in the business? That it seemed on paper like they were making revenue from legit sources and successfully hid their relationships/high risk bets elsewhere? Or even exploded in risk after they got tons of $$ invested? There's more than enough potential doubt here to wait before pushing this FUDy angle.
Not doing their own due diligence is clearly the main issue here.
It's just ridiculous that the whole fraud seems like it could have been revealed by just sending a (not even specialized in crypto !) accountant to either FTX or Alameda, and the """sophisticated""" investors (and worse : US banking """regulators""") failed to to so !
P.S.: And this is also where the defense of SBF comes in : he's pretty young, focused on "moving fast and breaking things", so of course he would have been emboldened by the above, and might not have realized just how criminal his doings were ??
> I get its criminal what SBF did and this is as bad as negligence gets in business but everyone is treating this like some overt Madoff like scam that was obvious to everyone in-the-know.
It's cryptocurrency. Of course it was obviously a scam to anyone who's bothering to pay attention.
I think you're mainly talking about the large investors here who I generally agree were willing participants in scummy behavior, but there were other people hurt in this that I feel deserve some sympathy, namely a lot of the naive retail investors who lost their shirts. Yes, a portion of those were also greedy people hoping to take advantage of others but a lot of them weren't.
I think a little talked about part of the crypto investment boom among "normies" is that a lot of those people felt completely left behind by capitalism, constantly underwater financially, with no way to catchup or reach financial security. Crypto then got sold to them by the grifters and media as a way out, an amazing, full proof chance to get free. Theres a reason they were paying people Matt Damon and Larry David to do their commercials. Yes, putting your life savings in crypto is obviously a hugely risky and bad idea but most people lack the financial education necessary to recognize that a project promising you 20% APY is unsustainable and even those that do may still go for it because they see it as their one chance to stop drowning.
These aren't ancap millionaires living in the Bahamas, rubbing elbows with politicians and flaunting their $150k NFTs on Twitter, its people like my friend whos a single dad trying to raise two kids with autism while dealing with chronic health issues from his military service who lost most of his (negligible) savings when Celsius blew up. Yes, I'd been telling him for years how he shouldn't be taking risks on stuff like this and how they are all obviously scams and yes he was really stupid for not listening to me and everyone else and he does deserve some blame for his decisions but he wasn't in it for evil or greedy reasons. Dude just wanted to be able to afford counseling services for his kids and got tricked into giving people like SBF his money in hopes of being able to do so and is completely fucked now as a result.
I'm possibly being too empathetic and willing to remove blame from people who made bad choices due to hard circumstances (maybe because I have such a close anecdote). I guess I just feel like theres a large number of the victims that were the suckers the grifters were siphoning money away from and the impact on those people isn't really being discussed.
I was surprised Andrew Ross-Sorkin let him speak for the dealbook interview today[1] (You can see a lot of the interview clips on yt now). He did ask some tough questions but SBF was allowed to say whatever he wanted in response and was given space to speak without pushback. Maybe Sorkin wasn't prepared for what SBF answered but then why have him on? I don't think the interview should have happened at all for that reason. I guess we shouldn't assume guilt but we should avoid allowing someone to run PR for themselves also. The audience even laughed along with Sorkin and in reply to some comments SBF made. It was strange given what happened and even Sorkin read out a letter of someone who lost a lot of money but they're joking.
This is Andrew Ross-Sorkin who is supposed to be a pretty respected journalist or at least I thought. This isn't a mistake, and I don't think they're stupid either. SBF seems to know how to appeal to journalists pretty well. What the motives of the journalists are is more complicated.
> The effort to paint over such blatant fraud and negligence and pretend it was all a mistake from a well-meaning kiddo is disgusting
Let's not forget that the folks using FTX were only doing so in an attempt to steal money from others. If the key innovation of crypto is that it's supposed to reduce the risk of lending by bringing realtime transparency to the assets and liabilities of borrowers, then why was FTX paying vastly higher interest rates than traditional banks? It's hard to feel sorry for those who lost their money because they thought they were in on the con or whatever.
> If the key innovation of crypto is that it's supposed to reduce the risk of lending by bringing realtime transparency to the assets and liabilities of borrowers, then why was FTX paying vastly higher interest rates than traditional banks?
What I hear from people who invest in crypto is hoping they will make money on it. Maybe that technology is part of it but I've only known people that want to invest in it for a greater return. It's thought of as a stock, but unlike a regular stock there is no company behind it that produces something of value. It's a made up digital collectible spawned from the mind of boy geniuses that is literally nothing.
My recommendation for investing in collectibles is comic books, trading cards, etc. They are finite, they exist, and they are not propped up by VC money.
> It's a made up digital collectible spawned from the mind of boy geniuses that is literally nothing.
Wow this got me thinking... like all collectibles the value is not intrinsic in the item itself, but subjective to the eye of the beholder.
What exactly is the subjective thing that's being collected here? I wonder if the appeal of crypto is that literally represents (well, as literal as a digital good can be) a piece of "the digital new", whatever that may be. It's a piece of the our perceived digital future, but one you can own and say is yours.
This must strongly resonate at a subconscious level to those weaned on social media who now live in a state of constant anxiety due to FOMO. The digital world is ephemeral, but bitcoin is something you can hold on to.
The average person doesn't understand the digital revolution and the world it's built and are discontent as they feel left out it's promise; namely a techno utopia that brings great wealth and power to those in the know (Gates/Jobs/Zuckerbergs/etc.).
Crypto therefore allows these people to believe they own a piece of the action. That may be it's only appeal. They can point to it and say it's theirs. "I don't understand it, but I'm not going to be left out of it."
It is the ultimate nexus of everything wrong with social media and the modern digital world. The future is coming, everyone else on my feed is having fun and smiling, and vast riches await you too if you only have Diamond Hands and HODL, which ensures you will never experience FOMO. A collectible that acts as a balm against all the anxieties of the modern world. Snake oil as a collectible.
> the key innovation of crypto is that it's supposed to reduce the risk of lending by bringing realtime transparency to the assets and liabilities of borrowers
Never heard this definition, where did you read this? Any time the word "asset" is linked to a crypto, people should know by now it's eventually going to zero.
> Never heard this definition, where did you read this?
I mean literally the reason why everyone refers to crypto as "triple entry accounting" is because entries on the ledger are cryptographically signed, which makes ledgers less expensive to audit and also prevents certain categories of fraud. So that alone should always make the costs of lending on the blockchain lower, and therefore also reduce interest rates.
But if you want a much more detailed explanation of why crypto should reduce the cost of borrowing money, especially in the developing world, here is an extremely detailed explanation on this topic:
I can see it clearly now - the next crypto crash rolling around like clockwork. Except this time it’ll be a speed run through four centuries of debtors law in which the cryptobros realize that the reason for interest rates isn’t the transaction cost or the paperwork but the enforcement arm to get people to complete the whole transaction through to the end.
I think it’ll come in two phases: first they’ll come around to the idea of debtor’s prisons and demand the governments of the world bring them back. Then when they’re all in the prisons, they’ll lead a movement to abolish them (again) completing the circle of “why bother?”
In the end we’ll be left with a saturated market of repo companies picking up the pieces for pennies on the dollar.
> the cryptobros realize that the reason for interest rates isn’t the transaction cost or the paperwork but the enforcement arm to get people to complete the whole transaction through to the end.
It's interesting you brought that up because crypto has a similar mechanism to get people to complete the whole transaction and resolve disputes without involving interest rates.
For example, imagine person B was buying a product from A. Should A send the product first or should B pay first.
When both sides don't want to take the initiative, they use an escrow contract on the blockchain where both sides have to lock up 150% to 200% of the value of the product in crypto inside the contract.
A then sends the product.
B receives the product.
If B accepts the state of the product, he can press a button to release the relevant amount of crypto in the contract to A and refund the extra 50% to 100% he had to put up.
If B sees the product is fraud, he presses another button and both sides lose all their crypto. This disincentives both A and B from committing fraud.
There are more nuanced conditions involved so I won't bore you with the details, but the main concept is there and it doesn't involve interest rates.
> If B sees the product is fraud, he presses another button and both sides lose all their crypto. This disincentives both A and B from committing fraud.
That can't possibly be right. It would mean that if person A defrauds person B, person B would lose 150-200% of the asking price, rather than just 100% if no "crypto escrow" were used at all.
If that's not a scathing indictment of the kinds of simplistic thinking that cryptobros think can solve real world problems, I don't know what is.
Of course, the fact that it makes it impractical to buy any kind of expensive product is merely a detail. As is the extreme cost of non-fraudulent delivery failures in this scheme.
Interest rates exist to incentivize loans in a universe where there’s a risk borrowers might not pay them back. The Roman Catholic Church decisively proved during the middle ages that no interest = no loans
You just described escrow with extra ~steps~ risk which has nothing to do with loans unless you’re suggesting borrowers put up 150-200% of the capital they want to borrow? (!?!?)
> entries on the ledger are cryptographically signed, which makes ledgers less expensive to audit and also prevents certain categories of fraud. So that alone should always make the costs of lending on the blockchain lower, and therefore also reduce interest rates.
.. but this is obviously garbage. The question in lending is always about default risk, which crypto does nothing to address. Most crypto lending seems to be so-called "overcollateralised" loans, which are secured on other crypto "assets", which also tend to turn out to be garbage.
And we can see that everyone in the crypto space is offering higher interest rates for depositors. Even more than Madoff's 8%. 10%? Why not! How about 10% per month! Who's taking the other side of that trade? Well, it turns out to be bankrupt exchanges and fraudsters.
The cost of ledgers and their auditing is not a meaningful proportion of retail interest rates in the current environment, which is dominated by the cost of funds, default risk, marketing/customer acquisition costs and profit.
Reducing or eliminating that cost should not make the costs of lending change in any noticeable way, because you're reducing something that is insignificantly small anyway.
I think you are confusing crypto with the layers on top of it. Lending via crypto is a dubious practice as it needs to tie into the physical world. Interest being paid on loans is an aspect of finance that some areas of crypto are recreating and failing at miserably, as they should, for obvious reasons.
Okay, eventually it must...depending on the form. In it's current implementation being sold, it won't work. Lending to generate income relies on a mature legal system to back up contractual demands. Crypto itself (an algorithm) cannot guarantee repayment of loans.
"Exchanges" try to bridge this gap and counterparty risk isn't properly priced in. If anything, the high interest payments aren't high enough to represent risk.
> Sweetbridge converts any Commercial relationship, Supply chain, or Value chain into an Ecosystem that increases the Net Worth of its Members.
Just the casing of that phrase makes me suspect them of some fraud :-)))
Ah, confirmed:
> By running all of the sales and purchases from an organization through an Ecosystem over a 5 year period, members will typically increase their net worth by:
Specifically with Ethereum, you can automate margin-calls and auto liquidation.
This is the basis for a lot of DeFi, which recently was the blockchain topic du joure. The idea is that you can trade in options, or margin loans, with the smart contract ensuring the seller of the option is sufficiently collateralized. This removes brokers and exchanges from the equation, which should make things easier.
Notably, FTX also offered the option of margin loans and options, though they were centralized. This turned out to be bad, not because it made things more difficult, but because they stole all the collateral.
Also note that the DeFi approach would likely have failed here, because the smart-contracts that determine the value of the collateral do a simple "units owned * current market price" computation. That doesn't account for price slippage. In practice the markets are quite illiquid, so selling some collateral will drop the price of that collateral quite quickly. DeFi currently has very little holistic risk management. When you have a lot of, say FTT, as collateral from counter-parties, that leaves you quite vulnerable. If FTT drops quickly, many people will get margin-calls. If they all default, then you get left with their FTT. If you try to sell that, it will crash the price even more.
Thanks for the response, I didn't realize Eth had this ability. I was taking issue with the statement of the "key innovation of crypto is that it's supposed to reduce the risk of lending" which I don't think you are agreeing with.
It's not clear to me that increased liquidity would solve their problem. I'm not against DeFi, but the spectacular failures are proving that it's not nearly ready for prime time.
I’m not in total disagreement with your point, and, frankly, I’m glad that you made it.
But how would you respond to the argument: those that lost money in FTX weren’t consciously in on the con, but instead had (vastly) exaggerated expectations about the future of crypto?
But the reason it's exciting is, among other things, because it should radically drive down the cost of borrowing money. So yeah, I'm probably literally on the most bullish person on crypto on HN, but that's why it's so easy for me to see how the folks chasing those double digit interest rates on FTX aren't exactly the innocent victims they're being portrayed as.
I'm hardly an economist, but even the most financially illiterate people know that interest rates should be vaguely proportional to risk.
A lot of people still haven't figured out that crypto is a psychological hack, not a technological or a financial one.
It's just virtual tulip bulbs and South Sea Company shares. And that's all it's ever been.
The fraud is the point. It's not an unfortunate, isolated, and regrettable accident. Crypto literally raises the cost of borrowing by making it trivially easy for fraudsters to steal it, under the cover of running a "secure exchange" or a global high profile pump and dump, or worthless NFTs, or whatever the next scam du jour is.
Well, sort of. Crypto-- done well-- is supposed to represent banking as a SaaS. The existence of these electronic exchanges demonstrated the failure of that function. It just wasn't practical or even possible to transfer value without the involvement of these shady characters.
After removing "banking as SaaS" from the value proposition, what was left was a bunch of hustlers running cleverly incentivized Ponzi schema. It's not even tulip bulbs. We're finding its black boxes, creative financing and yield farming as far as the eye can see.
Ultimately none of these things produce anything of value and all they do is trade money in circle. Ultimately the money has to leave system. Right now there is less money in the system than it did before. I guess soon enough we will find many people cannot leave the system. This is the reason why Binance CZ announced the 1 billion crypto recovery fund to stop spreading contagion.
The 500 years thing is pretty tough for me. No love for the steam engine? mass production? Computers? The internet? Surely the internet has revolutionized the world more than blockchain will.
None of these would have been possible without the invention of double entry accounting, because before double entry accounting you couldn't even really run anything larger than a family business because there was no way to know whether or not you were making or losing money. So it stands to reason that because blockchain is a breakthrough in accounting of a similar magnitude, in the sense that it will enable all sorts of new economic relationships that aren't possible today by radically driving down the transaction costs of doing business, that these new relationships will similarly enable all sorts of new technologies that we can't even imagine today.
To understand blockchain, you need to go back and read all the books on the history of double entry accounting in order to understand the changes that it enabled within society. But these changes aren't going to happen over night, they'll take a couple hundred years to play out, in the same way that it was a couple hundred years between the invention of double entry accounting and the height of the Dutch East India company or whatever.
>None of these would have been possible without the invention of double entry accounting, because before double entry accounting you couldn't even really run anything larger than a family business because there was no way to know whether or not you were making or losing money.
What? I thought the benefit of double-entry was that it makes fraud and inconsistencies easier to catch, not detection of profit per se (which single-entry can surface).
> I thought the benefit of double-entry was that it make fraud and inconsistencies easier to catch, not detection of profit per se
One of the key principles of double entry accounting is denominating profit and loss in a fungible currency, rather than just recording the number of goats you own or whatever. Double entry is actually the codification of several different best practices, it’s more than just having two sides of the ledger. But even with just the fraud part, you are very limited on the number of employees you can have if you don’t have any way to know if they’re stealing from you. That’s why even though e.g. Ancient Rome had thousands of fast food restaurants, they didn’t have franchises like McDonalds.
Poppycock. Ancient Rome and Ancient Greece both had plenty of sophisticated bookkeeping and accounting methods — I don’t think you can even point to a single moment in time when double entry was “invented” (just standardized or popularized).
There are many reasons that they didn’t have McDonalds-like franchises, and none of them have to do with accounting. Those kinds of franchises didn’t exist in the modern world until the 20th century; they are product of many elements of modern culture (and modern approaches to business). What the heck would a franchise even do for someone in Ancient Rome? It’s not like there are massive chicken suppliers or industrial-scale bakeries that produce standardized food products to sell. Every restaurant needs to source local suppliers directly anyways. Fast food chains make no sense without industrialization, among many other things (bookkeeping being the least of them).
I think you have a fundamental misunderstanding of what blockchain is. You mention its the most important invention economically of the past 500 years and in your other post you said thats because its a replacement for double entry accounting and thats why its so important.
Its not. Blockchain is an immutable ledger only, there's nothing in the original blockchain spec (not Satoshi's spec, Satoshi didn't make blockchain. he kinda stole it, like he didn't cite his sources very well) that mathematically enforces any sort of double entry accounting feature like ledger immutability is mathematically enforced. But blockchain is useful and interesting for other reasons. Lets set that aside since you're clearly talking about crypto, which is also not a replacement for double entry accounting for its own myriad of reasons including but not limited to excessive power consumption, reliance on a consensus of random computers (of which anyone could own 51%+ and effectively have full control over the chain), zero recourse for lost/stolen funds, unpredictable value, poor security features (true), no way to correct errors (without compromising the data structure), and the list does go on.
Even if it was a panacea for the burden of having to have an accounting department (the horror), it can't have the same economic impact as double entry accounting like you claim since double entry accounting literally didn't exist before double entry accounting. Crypto is just automated (until there's problems, and there's always problems) double entry accounting, its literally still double entry accounting and will still even need to be audited by real accountants (ugh, stupid laws, right?) LOL.
> interest rates should be vaguely proportional to risk.
Not really. If we take nominal interest rate = real rates + inflation expectation + credit spread, then only the (counter party dependent) credit spread reflects riskiness. Real rates reflect an equilibrium of time preferences.
Yup, 100% this. My own feelings on crypto notwithstanding (the whole thing is a fraud/built on hype); the crypto community seems to have pretty much agreed on this being a case of straight fraud. It’s only the tangential and traditional financial community (and some journalists) who are painting this as a “well-meaning company/crypto genius who made a mistake”.
I think you misspelled "the media" there. Everyone I know in the actual traditional financial community thinks the guy is a fraud who scammed his customers.
Aw, but his hair is so messy, he can't be that bad!
Honestly I wonder how intentional this Boris Johnson tactic of engendering sympathy through unkempt hair is. It seems to work. Maybe it reminds parents of their helpless teenagers or something.
I don't get this obsession with mainstream 'the man' controlling the narrative. For example the FT slams him so much it's boring. They even have a (great) data driven article about how he sucked at LoL.
> The effort to paint over such blatant fraud and negligence and pretend it was all a mistake from a well-meaning kiddo is disgusting.
I agree and this thread is honestly plain disgusting too. Many here are happy and find it funny to see people's crypto being stolen by fraudsters.
From TFA:
"It is now clear that what happened at the FTX crypto exchange and the hedge fund Alameda Research involved a variety of conscious and intentional fraud intended to steal money from both users and investors."
And from the bankruptcy filings:
"On-chain analysis has found the bulk of movements from FTX to Alameda took place in late 2021, and bankruptcy filings have revealed that FTX and Alameda lost $3.7 billion in 2021.
This is maybe the most befuddling part of the Bankman-Fried story: His companies lost massive amounts of money before the 2022 crypto bear market even started. They may have been stealing funds long before the blowups of Terra and Three Arrows Capital".
People may hate on Bitcoin, Ethereum, ape monkeys yacht club etc. (or whatever these NFTs are called) as much as they want, it's not reason to rejoice when thieves do scam people (including a canadian teachers pension funds' money).
There's also another angle: the very same who are cheering on people losing all their money to a scam were the first to say: "Pay your taxes on any crypto gain you made" (so that, in the end, they get their share of these winnings too through the state's spendings)...
If the state collects taxes on gain made on crypto, the state go after people stealing other people's crypto.
As simple as that.
P.S: and I hope people are happy that their politicians got greased by stolen funds and aren't giving these bribes (pardon, donations) back.
No one is rejoicing that normal people in Latin America or Africa lost their savings because they were trying to hedge against inflation. At least no one I have noticed posting on HN.
That “canadian teachers pension fund,” however, is a $180 billion monstrosity that - in the process of losing a rounding error off their fund - legitimized a scam artist because they were too stupid to do a minimum of due diligence. They’ll make the money back in a fortnight off the safe investments they should have been putting money into in the first place while the little people who trusted FTX by proxy got fucked.
Crocodile tears for the speculators. That’s the story of finance.
In October 2021, Ontario Teachers’ invested US$75 million in FTX International and its US entity (FTX.US). In January 2022, we made a follow-on investment of US$20 million in FTX.US. ... Our investment represented less than 0.05% of our total net assets...
I don’t know why but that extra factor of two somehow makes it even worse. 0.05% of assets isn’t even enough for petty cash for most businesses and they couldn’t do some due diligence when it was $75 million?!
You raise a good point about due diligence. They probably did as much as possible, but remember that they were investing in a private company that was committing massive fraud. It is hard to know if a company is lying to you when you are doing due diligence without direct access to internal materials. Also, for FTX, 75m USD was a tiny investment, so the amount of access granted for due diligence was probably very limited. I guess the sale was done with a 50ish page powerpoint presentation, and a few meetings with the C-suite. Some part of investing in private companies is always a gamble.
If we consider publicly listed companies that require annual audits by external professionals: Look how many people were taken surprise by Germany's largest start-up: Wirecard. It took years for highly skilled investigative journalists to expose the extent of fraud. Yes, you can be cynical about professional auditers, but they were also subject to an impressive level of deceit. When Dan Mccrum from FT was getting very close, I still thought it might be their Asian ops were a fraud, but EU ops OK. I was dead wrong -- the whole thing was a fraud.
Any time you see returns substantially higher than a savings account you have to assume you can lose your principal at any point. Risky investment is risky investment, trust by proxy is bullshit. How many fund managers have committed suicide after losing it all?
I interpret it less as "celebration" and more as "I told you so". That's never a pretty thing, and polite people don't do it... but when you have nothing nice to say, the polite people say nothing, and the impolite people say the impolite thing.
There's certainly a portion of the people who were annoyed at Crypto bros constantly posting about how they just made their third billion (on paper) and you're so dumb for not putting everything in crypto and hodl forever. It's hard to feel bad when those guys get wiped out. Everybody is a genius in a bull market. So many people who think they are God's gift to money management who were basically just leveraged to the max and the only real strategy was "line goes up".
I didn't realize it would be interpreted as an ontological statement about humanity.
I'm referring to an old dictum of politeness: "If you don't have anything nice to say, don't say anything at all." People breaking that rule are being impolite.
I apologize that I wrote that in a confusing way by referring to them as "impolite people". It was intended as a more instrumental observation: in that instance, they are being impolite (at least by that particular rule, which is of course itself not universally accepted). It was not intended to make a categorical statement about them, but it clearly read that way.
I’m genuinely confused by the downvotes here since nobody has responded.
Am I to believe that lumping people into groups of polite and impolite as human beings is a polite thing to do, or am I meant to believe that lumping people into binary groups of polite and impolite is an impolite thing to do?
Am I being downvoted by polite people or impolite people??
Is reductively judging people and putting them into antithetical groups based on offhand comments polite, or is it impolite? It’s a legitimate question.
> when you have nothing nice to say, the polite people say nothing, and the impolite people say the impolite thing.
I’m genuinely confused by this sentiment. Does this poster think they’re saying something nice? Or are they intentionally outing themselves as impolite by opting not to say nothing?
It seems genuinely funny to assume the role of the judge of who is or isn’t “polite” while violating their own rules about who is “polite”
To further rephrase that: That appears to be (without clarification) a very amusing moralizing statement that provides no value whatsoever other than to directly contradict its own premise.
Usually I classify comments as polite or rude, not people. I guess GP is the arbiter of personality though?
> […] it's not reason to rejoice when thieves do scam people […]
There’s very little solace in being able to say “I told you so” when disaster strikes. If there’s anything to rejoice about, it’s that the current crypto collapse seems to be more isolated from the rest of the economy than, for example, the 2008 subprime mortgage crisis.
After the damage has been done, we can go in and regulate the way that crypto should have been regulated from the beginning. You can’t escape politics, and large, public collapses like this provide the political willpower to create the oversight that we already knew was necessary, to protect future generations.
> There's also another angle: the very same who are cheering on people losing all their money to a scam were the first to say: "Pay your taxes on any crypto gain you made" (so that, in the end, they get their share of these winnings too through the state's spendings)...
I don’t understand the criticism here. If I think that it is right to pay taxes, and I think that crypto is a scam, are you saying that this is somehow hypocritical? I think there might be some steps here in the argument which I don’t see or understand.
I believe in due process and the prohibition on ex-post-facto laws. If you make money manufacturing widgets, but I think widgets are morally repugnant and pass laws to ban widget manufacturing, then I don’t get to go in and retroactively confiscate your widget profits from the past five years. You pay your taxes on crypto profits, and then if it turns out that you were breaking the law, you have to face the consequences for that too. Crypto tokens have blurred the lines between securities and other types of products and it makes no sense to pass new laws and backdate them to apply to old crypto transactions.
> not reason to rejoice when thieves do scam people (including a canadian teachers pension funds' money)
I am strongly against using public resources to bail out folks who willfully sidestepped centuries of learned experience in financial regulation. Most financial fraud is privately pursued. SBF should go to jail. But beyond that, it's on the creditors to recover their assets.
> it's not reason to rejoice when thieves do scam people (including a canadian teachers pension funds' money).
I rejoice in that I would hope it deters future pension funds from investing in crypto. It’s a downright idiotic decision given the current sphere of hype-inflation that can balloon and burst on a whim.
Just look at the effect a single tweet from musk had on Doge.
In theory, this would deter pension funds from investing in crypto. In practice, I don’t think this collapse will have the desired impact on pension fund behavior.
The Ontario teacher’s pension fund had something like a $95M investment in FTX. It manages $241.6BN CDN in assets, making the FTX investment about 0.04% of the total assets. Pension funds normally put some percentage of their assets in risky investments, this is normal and good—and they will, therefore, invest in whatever new scam people come up with ten or twenty years from now. If not crypto, it will be something else.
Yes, they probably didn’t do the due diligence that they should have done. But that is a different kind of mistake than the mistake of investing in something risky when they thought they were investing in something safe. The pension fund likely knew it was risky, they just didn’t figure out that the inmates were running the asylum, so to speak.
Or in short, yes, this was a mistake, but pension funds invest, on purpose, in things that can balloon and burst on a whim anyway.
The only proven practical purpose of crypto is evading regulation. So when regulation happens, it will effectively amount to making it illegal. Which won't kill it off, just move it into the black markets where it has actual use.
(I'm not implying any moral judgment here. Personally, I think it's actually a net positive given the amount of harmful regulation, both in national laws and in international sanctions. But that's precisely why it would be silly to expect it to not be driven underground by the governments in the long term.)
Imagine that every day for two years some folks showed up at your door trying to get you to join their UFO cult and every time you say 'actually, I'm pretty sure To Serve Man is a cookbook' then finally the mother ship arrives and they start eating up the cultists. Sure being eaten is rough but they A) didn't heed my advice and B) at least now they won't knock on my door anymore.
The people who were completely obnoxious when anyone tried to warn them that monkey JPEGs going for $500k was nutso, have now flipped to obnoxiously playing the victim.
It was the exact same way on The Motley Fool boards after the dotcom crash. The crowd that was all "Well you may have your facts and figures, but my CMGI keeps going up and up and up, so PPPPPTTTTHHHHH!!!", instantly pivoted to "How can you kick me when I'm down like this? Do you enjoy suffering?"
SBF himself said he donated the same to Republicans but did it secretly through dark money thanks to Citizens United because he thought Reporters would like him better
in other words thanks to Citizens United we have no idea who is funding US political campaigns, and that is by design. So people looking at the open records are only seeing the tip of the iceberg
He thought right. If there’s one takeaway from this whole debacle, I hope people realize that the mainstream media is inherently dishonest and there’s no reason to trust them by default.
Coffeezilla also points out that SBF is consistently lying about almost everything, and there is no evidence to support this claim beyond "this is what he says".
I'm not saying he did or didn't, just that the source is ehhhhh.
Yeah I’d want to see some receipts before believing anything SBF says, especially if he thinks it is something that by saying may remove some heat from him or his friends.
> He said he donated about the same to both parties, with the Republican donations hidden as dark money.
And he allegedly did so that he could get credit for supporting Democrats, which is incredibly cynical and undermines his "innocent kid in over his head" story.
Who says the two parties aren't on the same team? Maybe the winning team is corrupt politicians and the facade of ideology is a marketing gimmick that sells tickets but at the end of the day, the NFL doesn't care whether you buy a the 49ers jersey or the Raiders jersey.
Imo the real teams aren't you versus me, it's us versus them.
This sounds like wishful thinking, didnt he pay millions to BOTH parties ? He did play for the winning team, even if he also gave money to some losers.
The problem is not how many republicans he paid, it's how many democrats accepted.
Unfortunately in my opinion he is not a trustworthy source at all. He lies in that same interview. His own PAC is left. His mom helped found and run another left super PAC.
Seems like the family heavily supports one side. I think he has plenty of reason to lie to help out that side.
He should have receipts for those donations or at least evidence of them happening. That would at least give some credence to his claim.
Yeah, he lies all the time and I agree the support from him and his family seem to heavily support one side over the other.
During his interview with Tiffany Fong, he said all his donations to the republican party has been dark but equivalent to what he gave to the democrats. He said they did this because journalists are deep down hardcore liberals and they get spooked when they see you donated to republicans.
> 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.
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.
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.
> The Financial Industry Regulatory Authority (FINRA) is a private American corporation that acts as a self-regulatory organization (SRO) that regulates member brokerage firms and exchange markets.
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.
The bar for defamation in the United States is very high. You have to prove not only that the statement was a lie, but also that the writer either knew that it was false or had reckless disregard for obtaining the truth.
Libel suits happen frequently. All the major papers are quite versed in dealing with them. They rarely lose these cases.
I did A quick google search and can’t even find a libel case the NYT has lost in the last 30+ years. There was one case in 2003 where media outlets reported incorrectly that the times lost a libel case. In fact, they won the case, even though the jury agreed that the facts reported were false, because the plaintiff failed to prove malice (see https://www.washingtonpost.com/archive/politics/2003/05/24/n...).
The reason the NYT wins libel suits is because they have rules about what their journalists are allowed to say, and one of those rules is to make it very clear people only accused/charged with a crime haven't yet been convicted.
The journalist does clearly know that he isn't charged and convicted, and if they did not know that while writing an article about someone's crimes and still printed that assertion, it would qualify as reckless disregard for obtaining truth.
Major papers rarely lose libel cases because they do the obvious thing and avoid publishing libel.
Would calling someone a "crook" even qualify as defamation? That's an opinion I can have about my local grocer because he charges slightly more for a half gallon of milk than Trader Joes does for a gallon. It's still an opinion regardless whether I'm wrong about the price of milk (I haven't checked but according to my buddy who worked at TJs it's a loss leader, so I'm going to recklessly assume the grocer is a crook).
In the US, it would only count as defamation if it were stated as a fact and was untrue, and any reasonable person given the same information would have suspected that it might not be true.
If it's true, there is no defamation. If it was stated as opinion, there is no defamation.
Everyone vaguely informed about this story knows it was a scam. Reporting anything else is untruthful. Why do you defend reporting you know to be untruthful?
"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
Look at the dates of the articles. And look at what Coindesk published on Nov. 12, a day before the NYT interview.[1] Zero indication of fraud in that article.
By Nov. 21, Coindesk is reporting that FTX is being looted, and possibly by an insider. But not that Bankman-Fried is responsible.[2]
Then, on Nov. 22, there's the first bankruptcy hearing. With, finally, disclosures in court of what's been going on.[3] At this point, it finally becomes clear that Bankman-Fried has been been using all those FTX companies as his personal piggy bank.
And today is December 1st and the NYTimes continue to run deflection come puff pieces [1] on SBF. And that is after inviting him as a speaker at their DealBook conference, no less. They continue to unquestioningly repeat his ever-shifting dart throws to try to influence public opinion.
"Mr. Bankman-Fried, who became a billionaire as FTX soared and was viewed as a wunderkind, faces significant legal trouble. The Justice Department and the Securities and Exchange Commission are investigating FTX’s transfer of funds to Alameda. The chief executive of Alameda, Caroline Ellison, told staff this month that the trading firm had dipped into FTX customer funds to finance its own trading activity, The Times and others have reported.
Mr. Bankman-Fried has since come under heavy criticism. In court filings, FTX’s new chief executive, who is managing the company’s bankruptcy, said he had never seen “such a complete failure of corporate control” and listed a series of “unacceptable management practices.”
On Wednesday, Treasury Secretary Janet L. Yellen called FTX’s collapse a “Lehman moment” for the cryptocurrency industry, referring to the bankruptcy of the Wall Street bank Lehman Brothers at the start of the 2008 financial crisis. She indicated that she viewed cryptocurrencies with skepticism..."
The narrative you have does not equate with what is actually in the articles.
Conspiracy sees what conspiracy sees. Girlfriend bit and weird behavior was already covered extensively by NYT. He's the CEO with no management practices. Lehman an unmitigated disaster of ethics as you say. I would read this as laying at all at the feet of SBF - which the NYT has done consistently.
Mostly I believe people don't know how to read news vs opinion. Matt Levine can speculate and call him a thief, as he's an opinion journalist. Straight news can have an edge but has to mostly report facts. (edited here to add:) You will notice that each of those paragraphs has quotes, sourced to people. That's called reporting, not deflecting.
Deflecting is a type of reporting. It's one where you focus on anything and everything except the core of the problem in order to try to deflect attention from it. This issue isn't a matter of management practices or ethics, it's a matter of the head of a company engaging in widespread criminal behavior. To frame it as the former is like arguing that Madoff was just a case of "poor accounting practices."
I don't think there is winning this with you, but you are comparing apples to oranges. The TFA mentioned above is "news" because it was reporting on the interview SBF just did, not a recap of the whole thing.
The CNBC article is "news" because it was breaking the news on the back door, transfer of funds, etc. It was new news at the time. Here is CNBCs coverage of the interview where you can compare to NYT apples to apples: https://www.cnbc.com/2022/11/30/former-ftx-ceo-sam-bankman-f...
There is a cadence to the news cycle. Not every articles is summative. Some are reporting on latest developments, hot takes, etc.
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.
> It wasn't clear as of Nov. 14th that there had been out and out theft.
The leaked balance sheet on Nov. 12th was as much clarity as I needed. Plainly, it demonstrated that customer assets were not segregated as promised, but were gambled with.
Why do you think a reporter should be deciding who is and who is not a crook? If they adequately report the facts then the reader can be sufficiently informed to make up their own mind.
It doesn’t assume that at all. Explaining the known facts relating to legal controversies sounds like reasonable journalism to me. Labelling somebody a crook is a conclusion that the reader may choose to draw from those facts, not one that should be prescribed to them. Have you ever broken the law? You almost certainly have. Does that make you a crook?
"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?
Crypto is pretty much just people tearing down Chesterton's Fence and then going "surprised Pikachu" when most of the protections they bypassed turned out to be necessary.
It can also be hard not to blame the victim after they responded to skepticism with shrill political diatribes, although that's not a new trick when it comes to fraud schemes. The guys trying to sell bogus patents for tapwater-powered cars in decades past used similar rhetoric in order to make pawns out of the gullible. "It's not a scam! That's just what they want you to think!"
The protections they bypassed aren't "necessary" but they are certainly there to protect the investors so I have little sympathy for the libertarian crypto people (or libertarians in general) when they have nothing to fall back on after bypassing all the regulations that were there to mitigate these issues.
I don't believe libertarians have a problem with punishing transgressions against sensible anti-fraud laws post-fact, which seems to be what the article is calling for.
Let's say I start an exchange to trade magic beans. The beans are worthless, but lots of people like trading them. In my terms of service, I say I won't use user funds for anything else and won't rehypothecate user beans if posted as collateral. I claim to make money off fees. Then I do both, lose all the money, and people lose billions of dollars---which they realize when they ask for their money back. You may think magic bean trading is dumb. You may think the people trading them are dumb. But what I did would still be a crime, and calling it a crime doesn't necessarily mean you're delusion about beans.
Put differently, it sounds like you think people who put money into FTX are dumb. Fine. But the law still protects dumb people, as it should.
Not dumb. I just think this result should have been part of the risk-adjusted value calculation.
One of the main reasons I hesitated on DeFi, and I probably read a dozen white papers, was my concerns over not being in control of my assets when off exchange. The staking rates always seemed insane.
Certainly not as concerned as when I didn’t understand the Luna white paper and my friends who were rich off it couldn’t explain it to me, but still concerned.
As someone that loves DeFi I think that take is reasonable. If you don't understand it don't put your money in it, and only invest an amount that is equal to the risk of that protocol failing.
Because code is immutable you can simply wait until a protocol is a few months / years old and if it hasn't been hacked you know it's going to be safe.
This is why regulation isn't as needed, because the code can't secretly change like humans at opaque financial institutions can. Immutability + Transparency + Time is the regulation.
> 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 think so. The overwhelming majority of the lost money comes from some combination of a) criminals b) investors in crime-enablement technology c) speculators who thought they could make money off a) and b). It's not much of a tragedy, and dunking on them is warranted.
> I really want to know if these cries of foul are substantively different than, say, the required reserves to prevent these types of collapses. Or say, the existence of FDIC insurance in cases of mismanagement or even outright illegal trading by banks?
The problem with being outside the law is that you're outside the law. Banks do dumb things and lose money all the time, but the rest of us support them because they're fundamentally a part of society; they submit to society's rules, they pay the fines they get charged without complaint (even when those fines are often blatantly unfair), they generally follow the law as best as they can and go through the proper processes when they want to get the law changed (which is not to say they don't lobby for their own interests - they absolutely do - but they play by the rules).
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.
Let's not be silly. The criminal himself admitted he stole the money. It's not rocket science. If your banker tells you he used your savings for his holiday it's not ambiguous
The problem is both his parents are Stanford professes and lawyer. He business partner father is a MIT professor. NYT and WSJ are trying to coving up the stolen money. This is what makes it complicated and why he might not be charged
It's not rocket science, but it involves banking and property law. I'm not sure which one is more complicated.
> If your banker tells you he used your savings for his holiday it's not ambiguous
In fact, your banker does routinely use your savings for his holiday. This is called "fractional-reserve banking", where the bank doesn't put your money in a metaphorical "safe", but rather they use it for whatever. Most of the money is loaned to other parties, but the money can also be used to pay employees' salaries (which can get used on a holiday).
I'm not saying FTX didn't do anything criminal. Most likely they did. It's just that laws are sometimes more complex than they seem. (And that you probably have the wrong impression of what your bank can do with your money?)
Even during a bank run, employees are supposed to get paid. When the banker takes your money and uses it to pay salary, it's not banking theft. Theft happens when the exchange (not banker) promises you to hold your assets in escrow and then uses it to pay themselves. There's a legal difference between bankers and exchanges in which one borrows your money, and the other holds your assets on your behalf.
The fact that you don't (want to) understand the point doesn't make it non-existent.
>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.
I have no idea what the deal with FTX.us is, but the main exchange can plausibly say they had no customers in the US and did no business there. American IPs couldn't enter the site.
According to some, supposedly cryptocurrencies was the solution to get around financial and banking regulations, and the only truth was written on the blockchain ledger. "Smart" contracts will make traditional contracts based on the legal system obsolete. At least for those cases, it can be argued that those people waived their rights to recovering economic loss via the legal system by using cryptocurrencies.
That said, I don't buy it. But maybe a desperate lawyer could try to argue that...
No. What happened at the company FTX has nothing to do with blockchain and smart contracts. It could have been an online exchange for euros or dollars or Pokemon cards. Violating the ToS and stealing users' funds is a crime.
There's plenty of people in here who think that the investors "deserved it" because they traded cryptocurrency. They have such a hatred for it that they would be glad to let these criminals get off scot-free, just to spite those who invested in crypto and lost it in a scam. There's no discussion to be had there. It should be obvious that FTX operated as a traditional centralized financial institution that happened to trade primarily crypto and therefore should have been subject to regulations, but no. Crypto bad, therefore props to the scammers.
that's exactly what I commented, and the comment was downvoted, contradicted, flagged, and has vanished (really, deleting comments ? is that what this site is about ? I thought is was a site for the open minded ) (edit : it was folded, not deleted. but still)
I share the same perspective, but I'm surprised by everything that is happening around.
Users on Tweeter and some crypto websites are speculating and investigating on how ftx got a banking license (shouldn't they have done it in the first place, before they invested ?)
They're also defiant to the media (as in the intro of the featured article)
And posts on HN about the very nature of the crypto industry are hot.
I find all of that pretty amateurish yet still convinced, after seeing both the wave of tech guys who believed in cryptos for what you said, then of more or less proud 'crypto bros' who just saw a financial opportunity, with hardly any financial, tech, or political knowledge. The former didn't see the latter come in and ruin their usage of the crypto, and the latter ignored the warnings from specialized journalists
What is happening right now is very interesting to watch.
I've spent two years to get a better paid job before I could have more money to invest, so I'll watch around to learn.
I've already seen basically the same, on documentaries about Wirecard.
The first lesson I'll take will be about being humble, being able to listen outside of bubbles, and to take criticism without flaming other commenters.
The second one will be that collapses can arrive very fast. The poor investors lost everything in a snap. It looks pretty bad
Just based on the usage patterns of crypto as a whole, it's likely that a fair number of FTX's users were involved in human trafficking, opioid dealing, and/or money laundering. I'm not sure how big of a percentage that was of FTX's user base—maybe it was too trivial to matter—but it does make me less sympathetic.
Don't forget the massive energy/CO2 emissions cost[0], producing over 100 grams of e-waste per transaction[1], and being used to fund the nuclear programs of rogue states[2].
I have always wondered if Satoshi (the anonymous creator of Bitcoin) might have been working for one of the rogue states in question. Pure speculation, but it would explain why Satoshi has never gone public to take credit for it.
Or it's because Hal Finney was Satoshi, and he never took credit for it because he was scared people would harass him even more than they already did, and he died in 2014, so he won't be able to take credit for it any more.
The problem is most outside crypto don't understand the difference between centralized crypto (FTX, Celsius, Binance etc) and decentralized crypto (Uniswap, Aave, GMX)
Almost everyone in the crypto industry wants the centralized institutions regulated, because they are opaque companies that could do market manipulation or steal funds at any time.
In stark contrast is DeFi, the second group, who are completely transparent and have no way for the owners to run off with user funds. These ones should not be regulated (scammers should be prosecuted if they code secret backdoors, but they don't need normal bank reporting, kyc, etc)
Umm, what? We have regulations all over the place to make fraud more difficult. Literally independent auditing is the biggest example. “Trust me” is generally considered insufficient when the cost of the theft is billions of dollars.
I got a loan against my BTC as collateral in the regulated Blockfi company and put it into highly regulated storage at Gemini.
The part I missed is that the contract contained a hidden part where Blockfi can take out the money from the regulated storage and do whatever they want with it without notifying me.
I was paying regular loan repayments and had no idea that they put it in a casino.
When people don't go for known thiefs and mix them with other people, it just gives me more confidence in the important of decentralization.
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.
He's already fuxx0red so getting in front of the media and trying to humanize himself while controlling the public interpretation of what happened is perhaps the only way to avoid getting continually pilloried. I think this is a thought-out move...his parents are law professors. It's not a Shia LaBeouf type of self-flagellation, I don't think.
One thing I learned from the Martin Shkreli saga is that, if the people hate you enough for something atrocious that is technically lawful, the government will poke holes in you until they find something not-atrocious that is clearly unlawful. There's probably value in winning the public over, even if they don't technically have a say in the legal proceedings.
For years I’ve wondered how much SBF’s parents knew about FTX’s operations but I think it’s fair to say they’re either (a) completely uninvolved/ignorant of the details of his situation or (b) giving him some really shit legal advice. I suppose it’s possible they’re so high up in their ivory tower they’ve forgotten there are actual consequences behind the hypotheticals they dream up for their students. Judging by his excel workbook “balance sheet” situation though I’m more inclined to believe everyone even tangentially involved has been misled. I doubt anyone knew the full extent of the fuckery aside from SBF.
The upside is establishing a counter-narrative in the media. The hope is to inoculate the general public with the story of your defense, so that people who have been exposed to your defense theory are more likely to be on your jury. I'm not vouching for the strategy, but it's far from (legal) suicide.
If a potential jury member knows about him they'll be excused from the jury. It's part of the selection process, and one reason jury selection is hard when you have high profile cases like this.
What self respecting lawyer would ever advise their client, whom is probably being investigated for criminal charges, to tell their story to the media?
Can't PR play a big part in high profile and political trials? I feel it can definitely be a strategy to try to put your story out before someone else does.
Obviously you're not going to come out and say you're doing this as a PR strategy developed with your legal team, you're going to act like it's a personal risk to yourself to tell your story, which I suppose lends it some credibility in the eyes of some people. Like some of the people in this thread.
The man's a con artist. I'm astounded that people still believe anything he says. I suppose I shouldn't be, he must be a very good con man because he managed to steal billions of dollars.
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.
He doesn't sound like the genius kid that the media had made him out to be. He sounds more like a pawn in some scheme where he was chosen to take the fall.
None of what he says makes sense, but it's not because he's dumb. He's clearly trying to go for an ignorance and negligence defense to avoid being accountable for fraud and theft. There's no way he's as dumb as he's pretending though. I don't have half the credentials he does, but it's easy for me to understand (1) how not to take client funds (2) how not to overleverage funds such that a tweet can make $8 billion disappear.
There's also the fact that you don't develop a corporate hierarchy as complicated as the FTX and Alameda clusters of companies (something like 130 companies), due to ignorance and naivety.
I saw one story where Chamath Palihapitiya said his due diligence team made very simple governance recommendations like “have a board” and “formalize your related-party transactions” and the response from FTX was literally “go fuck yourself”. Given the recent reporting around just how absolutely fucked their records were I can’t help but wonder what on earth they were handing over in response to DDQs? Was it garbage and people invested anyway? Or were they just making shit up whole cloth? Social Capital must have seen something to get their spidey senses tingling about the related-party situation.
"Made him out to be"? SBF is actually pretty smart. He's repeatedly demonstrated a high level of mental quickness and numeracy that is common to traders, e.g. doing Fermi approximations during live interviews. And plenty of professors' kids don't get into MIT and then Jane Street. He was privileged, sure, but he's got the raw goods, too. Which is one of many why reasons I don't buy his claims that the root problem was just "risk management". No, he just committed fraud.
Smart or not, he clearly made some unethical choices.
Compared to the alternatives, Jane Street doesn't exactly select for street smarts. (Nor does MIT, to be frank.)
Sam Bankman-Fried's statement to Tyler Cowen that he will take any positive-EV bet regardless of the standard deviation of returns, sounds more like a learned-by-rote answer to an on-campus trading interview question rather than a core tenet of a trading philosophy. Professional traders at major institutions (including Jane Street) care about things like Sharpe ratio, value at risk, and position sizing. Not to mention that Jane Street asks Fermi questions in their interviews. I wouldn't be surprised if the average MIT senior with three or more trading offers could proffer the same kind of demonstrations/responses as what you describe.
> I don't buy his claims that the root problem was just "risk management". No, he just committed fraud.
He must be on some weird drugs that just has him spewing his points left and right. What people are misinterpreting is his claim that he was careless and that the accounts where poorly labeled. Those aren’t him trying to say he wasn’t a fraud,m, that’s him saying that he could have kept the fraud going if only they hadn’t been too highly leveraged.
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?
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.
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?)
> 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.
Is it normal for margin loan funds to come from customer deposits? For example, if I deposit on Charles Schwab, is the cash held in my Schwab account used as capital for margin loans to other Schwab customers? I would think not (unless I'm misunderstanding how finance works). Like of course the money is probably lent out like banks do, but FDIC insured banks have rules about what types of things they can lend money to, right?
I would think that using customer deposits to make margin loans to other customers would be fraud even if Alameda wasn't in the picture. That's what I fundamentally don't understand about SBF's mumbo jumbo; how would Alameda (or any other customer) take a margin loan out of customer funds if customer funds are supposed to be segregated from FTX company funds? Isn't the admission that a margin loan to Alameda led to the loss of customer funds an admission that depositors were defrauded?
Brokers and exchanges are obligated to park customers' money in an escrow, and may even be required to insure them [1] for a good measure. Under no circumstance are customers' funds lent out. So where do they get money from to lend? Brokers lend either their own money or get into arrangements with liquidity providers. These are big institutions/hedge-funds etc., who offer to lend money in exchange for attractive returns. They get into a different agreements and are fully aware of risks they are taking on.
> For example, if I deposit on Charles Schwab, is the cash held in my Schwab account used as capital for margin loans to other Schwab customers? I would think not (unless I'm misunderstanding how finance works). Like of course the money is probably lent out like banks do, but FDIC insured banks have rules about what types of things they can lend money to, right?
Traditionally, lending deposits out as loans (especially mortgages) was seen as the most important thing that banks did, their core function. Nowadays things are more abstract and regulations are different, but it wouldn't surprise me if margin loans could still be at least partly funded (at least in an abstract capital-ratio sense) from deposits.
FTX was a brokerage though, not a bank. While banks may be inherently allowed to accept and lend out customer funds, brokerages seem to be largely forbidden from doing so.[0] SBF appeared to act as if the typical rules of operating a security brokerage didn't apply to FTX 'because crypto.'
This is a core business line of broker dealers. However I believe in the US your risk is limited to 140% of the value of your margin loan. If you have no margin loan then your securities need to kept in a separate/segregated client account.
This all was a big problem I. The us up through Great Depression, and then the securities exchange act of 1934 was implement to regulate these practices quite successfully over the years.
> Normally you wouldn't be able to lose more than you've left as collateral, but they weren't like other customers
Market prices aren't continuous, so you cannot guarantee that you can close the customers position at the point where they are wiped out. So a cryptocurrency casino that offers margin to users cannot guarantee that they won't just suddenly be insolvent.
They also accepted magic beans as collateral no just their own FTT but all manner of other dogshit where there couldn't be a realistic realtime market price.
The key point is that these bucketshops end up as the counterparty to their customers trades the net result was that FTX itself was essentially long all manner of illiquid scamcoins and massively short Bitcoin.
This complicates accounting for the total loss-- if you deposit $1000 but then turn it into $100k worth of "bitcoin" using trades with 100x leverage-- though the bitcoin never existed it was just an entry on FTX's books-- and then FTX implodes what the amount lost? Arguably closer to $1000, but right now the figures about FTX all use the highest number. But the customer didn't actually lose that full amount-- it was just a fantasy.
A lot of the dialog about the fraud at FTX centers on diverting company assets for personal/family use-- which indeed doesn't appear to be good, but so far that doesn't appear to have happened at a scale that they couldn't have operated out of if not for the fact that the entire business itself-- basically selling people paper assets which weren't even backed by meaningful collateral-- was fraudulent.
And this is an important distinction because it changes what risk people should be looking for... The 'crypto' ecosystem is highly volitile at best-- full of garbage that is sure to fail. Business offerings that aren't provably implosion proof will almost all eventually implode.
Compare to your typical US retail brokerage-- margin is available, but 2x leverage at the absolute most, highly controlled, regulated, and risk managed, riskier assets either can't be used as collateral or count far less. The assets and customers are diversified (and when they become less so, leverage is further reduced), and there is industry provided insurance mechanisms to backstop. In the crypto space things are massively more correlated, unregulated, customer are all over the world so there is seldom any recourse against them, no one has every (AFAIK) gotten in trouble for manipulating a cryptocurrency market, and instead of 2x leverage _20x_ is common at these casino services (and 20x isn't even the limit).
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.
It's a common human experience: Normalization of deviance. [0]
You take a (what you think is) calculated risk, nothing bad happens immediately and it worked out - which reinforces the belief that your risk estimate was correct and not just pure luck.
Then you take the same sort of risk all the time and it becomes your new normal - you take another risk (which is now a larger step, since the previous risk-taking is just business as usual) and so on until the probability of failure is 1.
Obviously this can easily happen to people who have no advisor they respect more than their own opinion.
Is the outward exterior of earnestness and sincerity (I have to admit I’m almost falling for it) a facade? It seems like he actually believes everything he is saying and there is an absence of malice in how he projects in the interview. He’s either a psychopath who is faking (very well) this earnest persona, or he actually is fully deluded by his own fantasy creation/dollhouse that is FTX.
He could also just be a good actor. Or actually earnest. Any of these things are possible.
But it's always very dangerous to try to determine someone's honesty based on public appearances. Anyone appearing in public will have decided exactly what they're going to say, will have decided on what sort of image they want to project, etc. They will have practiced. In a situation like his, triply so.
People appearing in public are rarely their authentic selves. They are playing a role of some sort to some degree. Even ordinary, normal people do this. The information quality you get from how they appear is too low to base any sort of judgement on.
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.
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.
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?
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.
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.
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-reli...
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.
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.
Their books could have stayed cooked for a long time. Just look at Tether, or Bernie Madoff. As long as nobody calls your bluff you can just keep on raising.
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.
> The obvious difference being that Bitfinex seems to be run by adults.
Who like to repeatedly lie to people too.
Remember how "We're unrelated to Tether" turned into "We gave Tether a loan. See how the three signatories on the Bitfinex side of that contract are our corporate officers, Mr A, B and C, and Tether's corporate officers who signed the contract for them are Mr A, B and C? We're going to need you to ignore that."
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.
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.
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]
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.
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.
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.
Playing dumb and framing himself as just a kid who was out of his element appears to be his team's strategy to try and minimize his personal consequences in all of this. He is a highly educated individual that was literally born on Stanford's campus to professors. I'm not sure many will buy his Steve Urkel "Did I do that??" defence.
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
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.
How does incompetence and mismanagement explain SBF, his parents and senior executives buying properties worth nearly $300M in the Bahamas with FTX funds as has been reported by multiple news outlets?
> Bankman-Fried has decided to “confuse, evade, distort.”
Even if you believe he's smart enough to build a massive exchange that takes in billions of dollars of customer money but is too incompetent to institute the most basic safeguards that seems fraudulent (and criminally negligent) to me.
Also, all the "incompetence" seemed to benefit him and FTX senior leadership. Funny how things shake out like that sometimes...
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.
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.
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.
You could also have your spouse do 5 minutes of research and not have them put your money at a bank that was always clearly a scam.
There's trustworthy crypto banks, they just don't offer interest. If you think you need interest on your crypto you've already lost the plot somewhere. Maybe it was when you took financial advice from a super model and a football player.
The thing that's not trustworthy is the financial industry. Crypto is just their latest tool. Before it was mortgage backed securities, and before that penny stocks.
> There's trustworthy crypto banks, they just don't offer interest. If you think you need interest on your crypto you've already lost the plot somewhere.
That's sort of the whole point encapsulated, isn't it? Most of the popular interest is in crypto as a supposed investment! There are trustworthy investments that offer interest - they're just not crypto investments, as you say. That's a pretty big difference between the traditional finance industry and crypto, without even getting into the question of regulatory oversight. The idea that "everyone is just getting crypto wrong" is what I meant by a motte-and-bailey view; you can hold it just so long as you view the vast majority of what goes on in crypto spaces as basically illegitimate.
But it isn't the vast majority as far as I know. Most people I know have their crypto on Coinbase or Kraken or Bitstamp, or they've invested in a hardware wallet.
I don't know how succesful FTX's marketing was, did they really convince the average American to buy their crypto there? I hadn't even heard of FTX until they named a stadium.
Not everyone gets crypto wrong, just the people who got duped. Maybe I'm underestimating how many those are, I'm not an American and never met anyone who had assets at FTX.
The True Crypto fans apparently didn't do a good enough job making the Fake Crypto fans (exchanges and exchange users) Pariahs. Probably because they depended on the latter to increase the value of crypto. So calling them rubes now seems pretty disingenuous. I didn't hear a lot of 'I love Crypto, never use an exchange.' Maybe a bit when MtGox collapsed, but then it fell silent.
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.
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!
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.'
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.
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...
> Enron forgot to grease the right palms in Washington, and crucially also help deliver a Midterm victory to the Party.
Enron collapsed right after the 2000 election and before the 2002 primaries. Their outgoing CEO and chairman of the board was co-chairman of Bush's campaign and a personal friend of Bush Sr. and Dick Cheney. One major reason he was retiring was moving into politics, being mentioned as being on the short list for cabinet appointments (Treasury or Energy).
The chief US economics advisor and the chief US trade representative under W. were Enron advisory board members (well, they had to resign from the board when appointed by W.).
That is absolutely not true. Enron leadership had very close ties with the Bush family and the Bush administration in general [0]. They arguably are one of the major reason why the California recall election of 2003 happened, and why Schwarzenegger replaced Davis.
Enron was arguably better at influencing politics than SBF and FTX which allowed them to run unchecked for far longer.
> The level of regulatory capture and open corruption in the US today vs 2001 is also incomparable. It's functionally two different countries.
"Tell me you weren't alive in 2001 without telling me that you weren't alive in 2001." Such a rosy depiction of the Bush II years is entirely detached from history.
I would love to know the mystical mechanism by which a legislative representative spreads money to federal and state AGs, and then how those AGs spread money around their respective offices, without any of this ever leaking out. And then you have a partisan angle so yeah, whither the Republican state AGs?
SBF and the gang aren’t going to be able to con more people, the companies are in bankruptcy now so their books are being poured over, and there’s multiple state and federal investigations ongoing. Presumably the Bahamas has some sort of law enforcement system as well. Just because the US hasn’t descended on the Bahamas with apache helicopters in a month or two doesn’t mean “they got away with it”, people need to stop being so hysterical.
> 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.
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?
Enron was basically a pyramid scheme at the end. It collapsed because eventually you cannot expand anymore but also cannot justify your lack of cash flow without expanding. Greasing of palms MIGHT have let some people avoid prison or even prosecution. But the game was over because it was just too big to NOT fail...
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.
If FTX Terms of Service state that customer assets belong to the customer--not to FTX and those assets are used by FTX for any purpose that is a crime. Full stop.
Yeah. Just because no charges have been filed yet, and no grand jury announced yet, does not mean there wasn't a crime committed or that it won't be prosecuted. This wasn't some kind of "shady dealing". This was straight up stealing money from people.
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.
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.
It heavily depends on the crime. Many crimes in fact have some sort of mens rea requirement that the offender intend for the action; this is classically the difference between murder and manslaughter. Crimes like fraud generally have a specific intent requirement, so if you didn't mean to commit fraud, you can probably get a not-guilty verdict.
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.
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".
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.
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?
Instead, I'm saying that Coindesk is a stopped clock here (maybe not the clearest metaphor, I know) and knows it -- it's right about FTX but it's strange that they (and plenty of others) have been pumping lots of other highly suspect gambits and companies over the years without much reflection about it. We won't know without the benefit of hindsight which specific others are outright scams, but it seems like there may be quite a few.
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.
"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.
> Delinquents and criminals average IQ scores 8 to 10 points lower than noncriminals, which is about one-half a standard deviation. IQ and criminal behavior are negatively correlated at about r = -. 20 (Hirschi and Hindelang; Wilson and Herrnstein).
Chronic unsolved crimes gets some of it at least. If say, thirty percent of murders are cold cases then you know they aren't all getting caught. Other constraints would hint at the possible count potential murderers. If two people are killed on the same day two days of travel apart then you have at least two murderers.
That doesn't help with estimating levels of non-detected crimes of course.
> Bankman-Fried attended Canada/USA Mathcamp, a summer program for mathematically talented high-school students. He attended high school at Crystal Springs Uplands School in Hillsborough, California. From 2010 to 2014, Bankman-Fried attended the Massachusetts Institute of Technology. There, he lived in a coeducational group house called Epsilon Theta. In 2014, he graduated with a bachelor's degree in physics and a minor in mathematics.
Being dumb never got anyone off of a crime. I'm pretty sure he will face serious consequences regardless. The "bumbling kid" narrative won't help him there.
But it's relevant in discussions when I've seen him called worse than Madoff who engaged in a very overt crime. Again we don't know exactly how much SBF tried to directly profit off the business yet and how much it was a concerted plot to scam people. ...And since the internet requires you to be extremely obvious, that is not saying he's not a bad guy or absolved of responsibility or whatever.
> Again we don't know exactly how much SBF tried to directly profit off the business
The article has some large numbers. "Bankman-Fried received an incredible $1 billion in personal loans, as well as a $2.3 billion loan to an entity called Paper Bird in which he had 75% control."
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.
I’m a year older than him and in finance without an Ivy League education or any pedigree and I can swear to you that innocence act fools no one except people outside the field. This is like a programmer saying he drowned the company because he didn’t realize how much he was spending on cloud costs as he left the auto scaler on. It is the stupidest excuse, except the autoscaler was running on infra the programmer created and owned so he just took all the money. Which is just basic fraud.
It is such basic fraud that it happened even in 2008 and it’ll keep happening. Cherub faced little fucks will evolve to fool you out of your money until the end of all time. Don’t fall for it.
I think the thing that confuses a lot of people is that if he's actually savvy, why on earth has he agreed to do so many damaging interviews? He's either (a) naive in at least some respects, (b) actually doesn't care about his legal liability - what he told the NYT today, or (c) is playing some sort of long game where he parlays his apparent innocence into a shorter prison sentence. But I think a lot of savvy people don't see (c) working out for him.
I think the interviews are a misstep. He’s taking too much meth to think clearly even though he was once obviously a very smart person. The insistence on innocence reminds me of a small child shouting indignantly that they didn’t do anything even if you catch them absolutely red handed. They also totally believe it in the moment and refashion their world view and their truths around that statement.
An adult - in general - will recognize when the jig is up and take it on the chin. Or just lawyer up if they think they can get away with it despite being culpable. This is a 30 year old who thinks he knows better than his lawyers (assuming his lawyer didn’t actually advise him to go to interviews and claim he did it against their advice for some reason). I’ve yet to meet a 30 year old that stupid. It’s the gradient between 25 and 30. You understand the world so fast that a 25 year old seems like a child if they insist they’ll go at it without lawyers.
> I can swear to you that innocence act fools no one except people outside the field.
Full agree. But when I see this, I assume his target market is the single juror at his criminal trial who needs to buy it in order to prevent a conviction.
Edit: Unless it's a Bahamas jury trial (for a crime not punishable by death), in which case, he will need to convince four out of nine jurors to prevent a conviction.
Agreed. That was a huge part of the Theranos story. Balwani fired anyone who was critical of him or the idea (he was even worse than than Holmes and IMO deserves a longer sentence).
The book talked about a security guard who would be responsible for the daily firing, walking the person out of the building with their box of belongings was as normal as lunch.
To be fair, he has said some things about risk and finance that are completely idiotic - like always valuing EV over utility regardless of stakes. It's the kind of detached-from-reality crap that a teenager whose brain hasn't developed yet would say. So he might be a scammer and a complete idiot regardless of where he went to school and where he worked.
I wonder if he started taking emsam after he knew his goose was cooked several months ago. Might be the only way to keep going with a straight face while you bet the farm on red hoping to get the deposits back.
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?
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.
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.
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.
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.
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"."
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.
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.
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.
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.
> 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.
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.
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.
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.
> 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).
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.
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
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.
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.
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.
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.
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.
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.
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"
+ while telling all their friends to have fun staying poor when these pioneers entered the future of money to become millionaires with a starting capital of $10.
Yes, it's so enjoyable after years of telling them to stop oh god stop telling me to buy their shit MLM token crap.
It should be pretty simple. If it relates to cyrptocurrencies, its a scam. The public keeps learning this lesson over and over again but their greed gets to them and they get stuck in the next scam.
The truth is if it involves any form of money there are scams abound. Crypto is no difference. Our entire economy almost collapsed in 2008 because of scams.
True, but many regulations have since been added to prevent all of these previous issues. While crypto is the same thing without the regulations, seemingly with the only purpose being to enable scams again.
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.
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?
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...
From what I read, one NYT reporter covered SBF and did a human-interest gloss on him that many found offensive in retrospect. But even that article had statements from detractors and critics. Who is the mythical person that was taken in by the NYT on this one?
OK so because, say, degens from r/wallstreetbet going all-in on GME make fortunes and kept repeating "have fun staying poor" to those not going all-in on GME, Madoff should be allowed to pull his Enron on those people?
Your conclusion doesn't follow from your premise - I am not that sympathetic to the losses of the crypteau-riche but that doesn't mean I endorse fraudsters. Some of my amusement stems from the fact that a certain kind of crypto evangelist is into it because they hate government, taxes, and central banking, but suddenly wants state authorities to enforce their property rights.
Maybe some rugged John Galt type will bypass all the legal flim-flam and just go after the FTX executives personally. That would be a lot more cyberpunk than writing seething letters to the SEC about the predictable failure of another get-rich-quick scheme.
> Maybe some rugged John Galt type will bypass all the legal flim-flam and just go after the FTX executives personally. That would be a lot more cyberpunk...
Is that not precisely the future the crypto hoodlums have espoused, indeed, the only one they will accept?
I've got no dog in this fight so I can just sit back and make popcorn. If they'd televise the hunt we might be onto something. "Code is law" would be a great tagline for a bounty-hunter show.
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.
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.
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.
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.
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.
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.
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.
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.
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)
https://youtu.be/0rL35_WV3lE