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Comment by oldstrangers | Hacker News Reader

Anyone else oddly skeptical of FTX? They seemingly came out of no where with ungodly amounts of money, and began slapping their name on anything and everything.

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No. I have some mutual acquaintances with the owner through effective altruism and I've heard good things. It's pretty insane that he left Jane Street to try make more money to give to effective charities and now at 29 is worth $22.5 Billion! So they have the money to spend on these things and the fact he's running a future fund makes total sense based on what his original goals were.

Where did that money come from, though? People getting margin called on their life savings?

Update: I assume the majority of SBF's net worth is from FTX not Alameda, so my question is where does FTX's money come from. I assume it's from wrecking retail traders.

Crypto trading with his own money and then his own fund. I believe it was Alameda Research which is still going. Basically a bunch of young Jane Street/MIT/Stanford mathematicians who've made a killing. You can read a little more about it here: https://80000hours.org/stories/sam-bankman-fried/

Is the assumption that just because SBF made money, it must have been through "some evil"? What's the basis for that assumption (versus anything else, like ICOing a new token).

Nah the assumption that they made money in crypto which is just a cesspool of fraud, grift and crime - is what gives some folks the assumption that it could have been through fraud, grift or crime.

You hang out in the muck, folks are going to assume you have some on you.

I'm not saying they do necessarily, just that that's where the assumption more than likely comes from.

exdsq is right in the sibling comment. Alameda also made a lot of money (probably still does) with arbitrage. BTC in Korea costs more than BTC in the US. It's not easy to convert KRW to USD freely but they seemed to have found a way around it.

[Edit: Typo]

Crypto exchanges make a lot of money. Just from trading fees. Margin calls don't typically have their own special fees, although the perpetuals products (that one can get margin called on to begin with) typically have daily fees.

Coinbase did a direct listing of its shares at a $100bn valuation, with extremely low revenue numbers, which are still great numbers.

Anyone that:

A) Has similar volume

B) Has similar growth

C) Offers more ways of accruing value - such as perpetuals

D) Retains greater ownership of their own company

is simply going to have a lot of money. Its not that mysterious. Keeping a few $billion in crypto provides many opportunities for the same price appreciation as everyone else.

Alameda is also known as being quite a shark when it comes to deal making, if you don't get something in writing they are going to do the most profitable thing at you/your community's expense as soon as the opportunity arises.

Their OTC desk also likely has more volume than their lit exchange exchange, and OTC desks enjoy wider spreads in the trades.

And remember, they have nonstop trading sessions, 24/7, so more than 3x as many sessions as a stock or options exchange, and slightly more than futures and currency exchanges.

When I see a crypto exchange with tens of billions of daily volume and almost no marketing, I assume they are dealing with institutions, governments and probably organized crime.

Yes all are on crypto exchanges, alongside retail. They grow fast because they provide an immediate service.

Basically what happens is that they grow soooo fast that they arent able to handle customer support, cant list new assets that customers want fast enough, that even institutions want.

So then the next startup crypto exchange lists the newly desired assets and attracts the whole network and people fearing missing out.

And it keeps going. Thats the primary way they compete. There is a bunch of stuff behind the scenes for market depth and liquidity, but it reduces the need for exchanges to compete with each other on liquidity so its not really a factor just like trading commissions are really how they compete.

Boom town.

> Margin calls don't typically have their own special fees

Liquidations, not margin calls, are where the money is. And they definitely do have their own special fees.

Cool, what’s the current fee schedule, for myself and anyone passing by?

vmception - I get that you have massive crypto bags, because you're active on every crypto thread. But give it a rest sometimes.

Liquidations absolutely have implicit fees, as you don't have control over execution. There's a reason why every major exchange OWNS a market making unit...and it's for liquidations.

Your smug attitude in every thread towards everyone is really tiresome. I feel sorry for someone who has drank so much koolaid.

Good explanation. I wasn't aware of that part of Alameda's reputation though, where can I find more data?

This is one company that went public with their disagreement

https://www.coindesk.com/business/2021/03/16/80m-deal-gone-w...

Most others do not because voicing anything means no exchange listing, no potential of support from Alameda/FTX and their partners

Many token founders are fine with it for the payday (like in Ren/Republic protocol) while all the tokens get dumped on their community

It is very common in the crypto exchange/advisor space for contractual arrangements to go “I’ll buy your illiquid treasury and wont immediately sell, trust me bro” and then they sell once the partnership announcement creates a bunch of fomo and liquidity to sell into, Alameda has the reputation of being that way. And then when confronted they say “it wasnt in the contract and there was no vesting smart contract to prevent selling either, we’re not in the wrong”

Not the most community collaborative to say the least, its very lucrative for them

Dang, I wonder how easy it is for the Alameda EA folks to rationalize this as being for the greater good.

"We're reallocating surplus speculator dollars towards AI safety?"

Probably helps that many token founders don't seem too virtuous when many are just looking to make a quick buck through copycat apps. But sounds like some earnest people are getting burned, too.

I personally don't see the issue with this assuming you're not running scams or building projects but purely trading.

> Probably helps that many token founders don't seem too virtuous

This perception is exacerbated because this kind of stuff has been happening behind the scenes for half a decade

Many founders do want to collaborate with their community, a community that expects and begs for exchange listings, which the founders cant talk about in advance and the exchanges know that and basically extort them and dump on the community, making the founder look bad and radioactive from then on.

Many/most want their project to organically grow and get help from large whales along the way, but it's more likely that tokens which have high value and many coveted exchange listings have nothing organic about them at all and cannot be emulated. Any founder trying to emulate it get into these token crashing toxic arrangements leaving many community bagholders.

It is nearly impossible to tell the difference between founders, the best thing that has occurred is that nobody needs these exchanges anymore. liquidity went onchain.

Liquidation fees are an very small portion of FTX's revenue.

They did name it "Alameda Research" because they wanted to trick banks into servicing them.

"good things" is someone who claims to want to give his money away yet keeps getting richer, and is also getting a lot of his wealth by running an ethically dubious crypto exchange that is plastering its name on anything that will take their money?

He keeps getting richer because he owns a large stake in a company that's grown massively in a few years. He's given away millions of dollars by age 29.

Your criticism is he isn't giving away his money fast enough? Get a grip.

He does give money away but it's hard to give quickly unless you just spray and pray which is against his ideals. And I don't agree that FTX is dubious, I think they're a genuine legit exchange. I take from your comment that your issue is with crypto, which is fine, but people are making money in that space and if someone wants to use that to their advantage to make a load of money for charitable causes I'm all for it.

So essentially, as long as he says he is only making all of this money so he can donate it, he gets the prestige of having already donated it without having done so yet, as well as a free pass to make the money however he sees fit?

There’s incredible amounts of capital going into the crypto industry and FTX is one of the biggest players. There may be some froth but they seem like one of the least shady players in the space to me.

The question is how and why FTX became big given that BitMEX already existed.

Bitmex is very much a niche exchange, it only offers a handful of perps. FTX will let you trade pretty much any thing you can think of (crypto perps/spot, stocks, political elections, etc.)

Bitmex and its liquidation engine is why.

BitMEX was engulfed in controversy (lawsuits and investigation) around the time FTX launched.

Well that is a low bar. I am curious why their US destination wires arrive from "West Realm Shires Services Inc" instead of, like FTX.

The story is that their founder made billions of a crypto trade a couple years ago so I think they might have the funding to do stuff like this.

To extend on that, he’s done a couple ho hour interview with Sam Harris on ‘earning to do good’

I first heard about them when they began to sponsor a Magic: the Gathering related podcast and about a month(?) later, they're everywhere.

But I'm wary of the crypto space in general. A lot of bad faith actors.

Their growth was reasonably organic if you were following the popularity of exchanges

I've "followed exchanges" since Mt Gox, got screwed by Mintpal, saw the fall of cryptsy, the rise and eventual irrelevance of Bittrex, the rise and eventual irrelevance of Poloniex... Even with all of that, I still don't immediately know where FTX came from.

Tether

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