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 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.