FTX to file for U.S. bankruptcy, CEO resigns
reuters.com
reuters.com
That gets them out from bankruptcy in the Bahamas, which is much tougher than US law. The Bahamas still has classic tough bankruptcy laws, where there's no debtor-in-possession reorganization. It's straight to liquidation, with a court-appointed receiver in charge.
This should be, and may be, converted to a straight liquidation. Chapter 11 can be useful for restarting companies that actually do something, like General Motors. There, much of the value is in the ongoing business. FTX, going forward, has no ongoing business. Lawyers for creditors will be making that argument.
Note that Bankman-Fried is still employed by FTX, "assisting".
Current banners at FTX.com: "FTX is currently unable to process withdrawals. We strongly advise against depositing. Deposits of TRX, BTT, JST, SUN, and HT are disabled. All onboarding of new clients has been suspended until further notice."
"We have reached an agreement with Tron to establish a special facility to allow holders of TRX, BTT, JST, SUN, and HT to swap assets from FTX 1:1 to external wallets. This functionality will be enabled at 18:30 UTC, November 10, 2022."
These centralized coins are hilarious. How can you negotiate a special facility to swap to those assets when they're presumably gone? Also now that they've filed for Chapter 11 won't all these 'activities' and withdrawals be frozen?
Wait, withdrawls are completely frozen and the company is done for, but they are still accepting deposits?!
There are still people who believe. This is the top comment on FTX on Coinmarketcap, posted yesterday:
$FTT -- Take a screenshot of this post
1. Someone is going to buy out FTX and this exchange is not shutting down. By someone I mean Elon Musk kind of people.
2. No. FTT isn't going to wipeout if we talk about the fall, most of the cryptos have all fallen significantly. So a crypto going down from $24 to $3 doesn't mean the are going out for good.
3. $8 Billion Dollars as some here are fidgeting to understand isn't a large number if you look at the entire market cap of the crypto sitting at $800 Billion and $3 Trillion sometime back.
There are people who truly believe. And there are those who exploit that belief.
IOW, they're saying: "If you give us money, we will (/may) be forced to give it to our creditors rather than back to you, so don't do that.".
0: IE, a message published by Alice to the effect of "[Alice's public key] gives [Bob's public key] X [coin]s. [Alice's signature for this message]", published on the distributed ledger. Note that Alice can create and publish such a message without any input from Bob.
the regulations apply to people that chose to do that and don't apply to people that use cryptocurrency
And then people can keep sending to the same address. The way crypto works there’s no way to stop someone doing that I’m afraid - just how it works.
They could send it back (spending money) but you can’t stop it being sent.
[1] https://www.financierworldwide.com/forum-managing-cross-bord...
If I had a chunk of money there it seems like it would be less risky to buy a plane ticket.
I was looking for a diplomatic way to write "and nothing of value was lost...", but you nailed it.
https://blockworks.co/news/ftx-ceo-bankman-fried-resigns-ban...
https://www.kraken.com/learn/what-is-serum-srm
> Serum is a decentralized exchange software built on Solana where cryptocurrencies can be bought and sold by traders
more rumours are surfacing, including Yuga Labs (biggest name in the NFT space), Jump Crypto, Paradigm... this is basically our Lehman Brothers moment
edit: looks like Yuga might be ok after all. luckily, sometimes rumour is just a rumour.
People are saying that Alameda Research lost a lot of money due to Luna / Terra and were bailed out by FTX user funds, a loan with FTT as collateral.
Alameda's bets went bad in the crypto crash earlier in the year. FTX loaned it up to $10bn in customer deposits against trumped-up collateral (its own token). Somehow, Alameda must have lost most of that money, either by using it to cover its liabilities from the crash, or making more bad bets. When it was leaked to Coin Desk that Alameda's balance sheet was padded with FTX tokens, confidence in the token rapidly collapsed. That obliterated the collateral protecting FTX's loans, ripping open a ~$10bn hole in its finances.
I am not kidding, really, get out now. I care too much for our community to not have said anything to warn you."
Not sure what that all entails.
Those same network effects that propelled web3 into stratosphere are going to bring it down back to earth. Not necessarily vanquish it, but put web3 in its place, so to speak. A scenario I'd imagine where DEXes / DeFi will endure and possibly thrive, but DEXes / DeFis don't have the kind of moats to justify astronomical valuations... which is both a good and a bad thing, depending on which side of the coin you are on.
Tech VCs have already circled back to AI, so doubt private companies in need of more money can stay afloat for longer, if they weren't being careful with volatile crypto assets.
I think they'll be fine.
Also, if Coinbase goes bankrupt and takes everyone’s crypto with them I feel everything will crash to essentially 0.
Well they can't make money because all the other exchanges offer better fees/lower spreads since they're loaning customer money out. They'll never be big enough to actually makea. profit while there are shady exchanges offering a better product(until it collapses).
By their own figures, Tether is now undercapitalized and just had billions withdrawn. They made those payments. But, as Hemmingway said, bankruptcy tends to happen gradually and then all at once. Tether is in a hole. Nobody knows how close they are to not making payments. But when they implode, it will be sudden and the blast radius will be large.
Does Tether weather this squall? Based on history, probably. Based on economic fundamentals, they will sink at some point.
The point of this article was to make the consequences of the following statement clear:
And now you know enough to understand what I'm saying with an otherwise opaque statement like "Tether is 35:1 levered on risky assets during market contagion."
Yes, if everything goes Tether's way, they can weather anything, forever. But eventually it won't, and they won't.
Where has Tether stated this? Last I heard--today--Tether has continued to claim the opposite.
(edit to add, 45 minutes later:) I see patio11 makes the same claim, but I've now read both his recent articles on this and he is making a LOT of extremely stretched assumptions to pull off this reasoning, and even then the best he has is that it must have momentarily become insolvent in the past :/. And so like, maybe they are undercapitalized... but if they are it is because they are lying, not because their own figures somehow demonstrate such.
2. Tether has claimed, prior to that, that USDT is backed by dollars.
3. Since #1, Tether has not been transparent about their backed assets. Oh, sure, they say that they own X billion dollars of <some particular asset type>, but we don't know if those are AAA assets, or utter garbage[1], or whether they are counterbalanced by liabilities.
4. So far, the track record for unaudited crypto funds is not great.
On the scale of 'Untrusted', 'Trusted', and 'Completely Trusted'[2], I would definitely put them int he 'Untrusted' category.
[1] The fact that they were even considering buying FTX leads me to believe that they have no aversion to paying good money for garbage.
[2] Promotion to the third category can only happen posthumously.
Is Coinbase just not cool anymore, or is there some advantage to using exchanges like FTX until they go belly-up?
Larry David + Steph Curry "endorsed" television commercials?
"Gamified" trading apps like Robin Hood have made it all too easy to feel much lower risk that it is in reality though.
For the rest, crypto can be part of a diversified investment strategy. Not all crypto is outright scams... but you do need to be able to handle the volatility.
I was pretty heavily involved in the personal finance community on Twitter and there's two camps.
1) VTSAX and chill (basically dump money into an ETF and forget about it) 2) Moar passive income by side hustles and crypto
The latter became more and more common and ultimately drowned out the former. I believe it's because the market was doing so well that folks' risk meter just wasn't registering.
Probably the same reason why people choose to get into MLMs.
That's because they were probably still in school back in 2008. I remember the days of late October 2008 like it was yesterday, and back then I was a no-name computer programmer working for an independent mortgage broker, not a big finance schmuck from Wall Street.
I bought some (emphasis on the some, sadly) Bitcoin when it was $80. I’ll never get a return like that in my life. Other people are chasing that dragon. Unfortunately it leads them to burgeoning “shitcoins.”
It’s all fine if you view it like the lottery and put “fun money” into it. It’s not fine if it’s your primary investment vehicle. For what it’s worth I still think Bitcoin and Ethereum will be fine and bounce back up, eventually.
Benjamin Graham & David L. Dodd, Security Analysis, 1934
Hash rate is still climbing, the price will follow.
Everything else is noise.
Sounds like a red alarm for me. There's probably a good reason domestic exchanges don't let you extend out that far... particularly on extremely volatile securities.
(This comment is an explanation of a viewpoint, and not an endorsement.)
The problem is, these exchanges do not make you go through the same "vetting" processes traditional securities brokers/exchanges do before you can leverage up to your eye balls and lose everything.
They also go out of their way to make it "fun" to trade crypto - gamification at it's best - which reduces/removes the traditional apprehension of getting in way above your abilities.
We can liken a lot of these exchanges to gambling more than investing.
That is to say, an 18 year old with $500 in total assets shouldn't be eligible to leverage 20x or more. That's just a life-changing problem waiting to happen.
Since governments usually have to enforce the consequences of those decisions, ye.
- multiple sub accounts - 20x leverage with tiered liquidations - you could use your portfolio as collateral - advanced trading tools
This is why it was so shocking to see them collapse for doing such a stupidly bad thing, the guy seemed super smart (albeit vegan+commie).
The rational side told me (and the best investors in the world) these guys were the smart people in the room, the wont do anything stupid.
Then you look at SBF: he is a major democratic donor, he supports UBI, his underlying driver is to make money to give it away, he is a vegan, he hangs around with clintons etc.
I believe ever since the bloody collapse of communism, the modern descendants of that ideology never label them selves as communists. They use different words to achieve the same end: stakeholder capitalism, effective altruism, UBI etc..
Its a huge leap and to clarify I'm not saying they are closeted or anything. I guess what I'm saying is we are living in a very weird world where nothing is as its seems.
Therefore its more important than ever to rely on ones gut instinct about a person. Its more important than ever to not disregard signals like a high iq person who is also a vegan or supports UBI.
I know this is a controversial opinion but its my 2 cents. I think the corruption of the intellect is the most fatal of threats.
The kind of damage avg people can do is often limited and can be seen from a mile away but these high iq people with a god complex can destroy entire civilisations with their good intentions. SBF is a good example, next is vitalik and Proof Of Stake ethereurm (IMO)..
The problem with trying to put EA alongside post communist thinking is that actually identifying socialists and communists have huge issues with EA and can’t see how EA is the same as their ideology.
Being a capitalist is one of the biggest issues. Completely supporting the current structure of society and being able to selfishly take advantage of it by making the most money possible [and donating some of it] is not close to communist ideals. It’s better than being someone who is just selfish, but EA still allows one to selfishly take advantage of capitalism and privilege without issue. In the name of supposed altruism. Just the name is troublesome. Seeing oneself as so good.
Then going as far as celebrating this selfish behavior and making that a core part of the ideology. As well as fawning over overly rich classist and uber wealthy millionaires and billionaires who donate to one of the two major party presidents is not post-communist ideology.
To give some credit to EA, actual socialists and communists are be able to view EA people as allies at times. Not more than that though.
And it's glaringly obvious everyone offering these outsized returns is literally just pulling a ponzi.
FTX was just a tremendously better derivatives exchange than everybody else when it was launched. To this day only Okex of the major exchanges has a competitive margin system imo. Continuous pnl realization and cleaner perpetual models are icing on the cake.
Theft of user funds aside, SBF likely knows more about derivatives and trading them than most exchange operators and it shows in the design of the exchange.
Or, alternatively, the rates were artificially inflated by a ponzi operator interested in getting more and more people joining the pyramid. Just like Coinbase, FTX was, with 99% certainty, not profitable. Of course, the creators of the pyramid WILL profit and take resources for themselves to buy things like, let's say, a 10% stake on Robinhood, or invest in many real state properties around the world, a la Do Kwon. People are just gullible, anyone who believed on those "crypto earn" vehycles, paying 5 to 10 times the market interest rates, is probably the same people that would buy magic beans from a random dude in Times Square.
that's the point of theoretically?
Their spot lending system didn't come out until well after they had cemented their spot as a top exchange, and if you look at the rates anytime in the last year they were well under market rate - like ~1-2% rates for most major products.
It might have been part of the scam, but this looks much more like pretty bog standard "let's go trade our users funds away".
You're definitely right that the retail lending aspects were generally somewhat scammy. I suspect those rates made more sense pre-2021 when it was very expensive and hard for crypto firms to borrow capital, but offering 8% fixed on dollars in any recent time was a loss leader at best.
It's sadly looking more like sbf was buying up these firms to do exactly as you said and grab capital to fill the whole, and hide their own liabilities to said firms.
- FTX had lower fees than Coinbase
- FTX offered a lot more coins to trade than Coinbase
- FTX (like many others, but not so much Coinbase) were giving large sign up bonuses, and advertising like crazy. (Finance YouTubers like Graham Stephan, Meet Kevin, Jeremy Financial Education, Minority Mindset, etc. are taking some heat for their paid promotions they did for FTX.)
- FTX offered options on some cryptos, like Bitcoin. This seems to be kind of rare.
- FTX offered leverage (like most of the other big exchanges, but not Coinbase)
- Since FTX also set up a separate FTX.US entity, it gave the perception that it had all the same US regulation protections as Coinbase. And since FTX was much bigger than Coinbase, it gave the perception that FTX was more likely to be more solvent than Coinbase. A month ago, I suspect if you asked most crypto people which exchange was more likely to go under first, they would have all said Coinbase.
This whole industry looks very unhealthy. The large exchanges that most people use like Binance and FTX have books and operations shrouded in mystery, so nobody really knows how solvent any of these things were. FTX said they were not lending out coins (and by law, as an exchange, they are supposed to have all assets), but only after a leak revealed by Coindesk, did the public find out something was really wrong. Without that leak, FTX would still be doing business as usual.
Meanwhile, Coinbase which is a publicly traded company in the US which is many magnitudes more transparent with their books (because they are required to be), can't seem to make a profit.
The overall implication is that regular exchanges that just make money from fees are in an unsustainable business model. And all the other exchanges that are making a profit, might be doing all the shady things that FTX was caught doing.
Any company that sponsors more than one Formula 1 team is high on my "probably not a good thing for humans" list. The shit that has taken the place of tabacco advertising is just automatically suspicious.
https://twitter.com/westiecapital/status/1591089073468280832...
[1] https://news.ycombinator.com/item?id=31686140
[2] https://www.bloomberg.com/news/articles/2022-03-23/terra-s-p...
[3] https://twitter.com/cz_binance/status/1589374530413215744
It’s less than that even due to electric bills and all that.
Contrast that to a productive asset, like a farm. You start with land and put dollars in and you get food. And you still have the land. There’s more food than there was before.
Or if you’re one of those Elon worshippers, he starts with rocky ore and seawater or whatever and ends up with lithium battery packs.
So with that established, when you see this guy running around spending hundreds of millions of dollars the next question has to be whose dollars were those. Because they don’t have them any more and they ain’t getting them back.
https://mobile.twitter.com/LucasNuzzi/status/159012259020682...
In summary:
1. Alameda essentially needed a bailout in the spring.
2. Alameda, though, also had a large chunk of FTT coming due in the fall that was basically part of the vesting schedule of the original FTT ICO.
3. So, FTX lent Alameda customer funds in the spring.
4. In the fall, when the vested FTT paid out to Alameda, they immediately paid it back to FTX.
5. The thing that looks highly suspicious and fraudulent is that SBF tweeted out that the big FTT move that day was just normal "rotation".
Also, particularly interesting to me, the FTX-US president, Brett Harrison, resigned the day before that transaction at the end of September. He also just liked an interview on LinkedIn where Brian Armstrong (Coinbase CEO) was being interviewed, saying "not all crypto companies are like FTX, where it appears they fraudulently misappropriated customer funds".
The above is speculation, but it's based on on-chain data.
But still, should be fine at that point, right? The loans are nice and overcollateralized, what could go wrong?
Problem is that FTT is itself a bet on FTX. So if the news comes out that FTX and Alameda have these shady linkages, some of your customers will want to withdraw—and at the same time, FTT will fall.
Oops—the value of that collateral just crashed and now you don’t have enough assets to process the withdrawals.
Which makes FTT fall more, and more people want to withdraw.
It’s not like some fluctuation in Bitcoin price, where maybe you could get lucky and wait for it to come back up. FTT is just a bet on you, and you can’t process withdrawals, so why would that ever come back up?
And now you’re insolvent.
Predicted it, but was willing to make money off of suckers anyway, and then also caught himself with his own pants down despite knowing it was BS? Phenomenally stupid, or just plain corrupt and moderately stupid?
Begins at about the 24 min mark
https://open.spotify.com/episode/2SXncXpdjwH6WIxhM2V9zZ?si=D...
"I LOVE THIS FOUNDER," typed one partner.
"I am a 10 out of 10," pinged another.
"YES!!!" exclaimed a third.
> This was about FTX International. FTX US, the US based exchange that accepts Americans, was not financially impacted by this shitshow.
The weirdest part is that all 23 tweets were posted simultaneously at 8:13am. So he had the opportunity to say nothing; he could’ve clicked “save draft” instead of “tweet all”.
Here's another...SBF has stepped down, and his replacement is John J. Ray III, a famous bankruptcy lawyer who helped clean up Enron...yes, that Enron.
I suppose the writers could mine[0] this for inspiration.
[0] Pun intended.
"Here is a bunch of information about the ongoing potentially criminal collapse of my company - oh by the way I'm a bad dev so some of what I said above might be wrong, don't act on this information."
Was he in denial? Lying? Clueless? I have no idea at this point.
He seemed earnest and genuine, but everything he’s saying is the exact opposite of reality.
Maybe he was having an anxiety attack. I had one once, and it completely sucks. It ruins your ability to form logical thoughts.
(It’s rare to see someone so powerful be so confidently mistaken. The confidence is the part I’m struggling to figure out. There doesn’t seem to be much benefit for him to knowingly lie about FTX US not being impacted, so it seemed like something else was going on.)
It seems like there was negative benefit: not only did it accomplish nothing in practice, but it couldn’t have helped even theoretically.
So when someone does something like that, I can’t help but speculate.
I struggle to see how this could be true after 4 years of President Trump and Elon Musk's various undelivered promises. It's not rare, it seems to be extremely commonplace.
It is very common
I don't think Joe Biden has ever said that.
https://www.nationalreview.com/news/fbi-officials-told-agent...
Con man is short for “confidence” man for a reason. What they’re good at is gaining the unmerited confidence of others. You got played by his charisma. Remember this for next time.
> Announcement 2022-11-10: trading may be halted on FTX US in a few days. Please close down any positions you want to close down. Withdrawals are and will remain open. We will give updates as we have them.
> FTX Trading Ltd. (d.b.a. FTX.com), announced today that it, West Realm Shires Services Inc. (d.b.a. FTX US), Alameda Research Ltd. and approximately 130 additional affiliated companies (together, the "FTX Group"'), have commenced voluntary proceedings under Chapter 11 of the United States Bankruptcy Code in the District of Delaware in order to begin an orderly process to review and monetize assets for the benefit of all global stakeholders.
Excluded are:
> The following subsidiaries are not included in the Chapter 11 proceedings: LedgerX LIC, FTX Digital Markets Ltd., FTX Australia Pty Ltd. and FTX Express Pay Ltd.
In the Sequoia article, SBF gained his initial funding for FTX from executing trades from the US to Japan, where BTC was overpriced because no one bothered to arbitrage it because of the setup difficulty. The way he did this was by contacting a friend to open a bank account in Japan and manage the funding over there while he managed the account US side.
I am sure some of it is normal corporate shell game but I'd imagine at least 50% of this setup was for regulatory purposes. Even small fintechs will have "shell game like" company structure to please regulatory forces that require having certain things be independent from the consumer platform even if the two companies are working towards the same goal.
So SBF having been in finance before (Jane Street), he knew where the footsteps were and how to do it vs a fly-by night crypto investor with no finance background.
When that “arbitrage” turned out to be really lucrative one of the founders of Skype (Talinn something) gave SBF a $50 million loan. SBF and that Talinn guy knew each other also from that Effective Altruism sect-like thing.
All this info was part of a Sequoia congratulatory piece on SBF, they of course had also given him money. The article has since been taken down, it’s still reachable through Web Archive.
I've skimmed through it, and by god, I was surprised Sequoia wasn't crediting the sun rising each morning to SBF.
https://www.bloomberg.com/news/articles/2022-04-25/sam-bankm...
)
> Matt: (27:13)
> I think of myself as like a fairly cynical person. And that was so much more cynical than how I would've described farming. You're just like, well, I'm in the Ponzi business and it's pretty good.
I seriously cannot understand how after this interview Sam still had any kind of support from VCs and so on.
I hope the late 2010s-early 2020s will be remembered as the dot-com era of extremely dumb money...
Because they thought they could make money by finding a bigger fool, or by finding someone who thought they could find an even bigger fool.
$10B "somehow" "gone" is QED that someone did find their marks.
More interesting is how none of these guys are seeing the inside of a jail and doing the jailhouse orgies. I wonder if 'defenestration' will become a meme in crypto world too.
yes you do - because they're at best amoral and know their position and connections means they can make money out of shit like this by ensuring there's a series of bigger fools waiting to buy them out.
:)
I'm just reacting to the idea that you'd need to see the SBF corporations laid out on a diagram to reach the conclusion. When Carrell's character says "they aren't confessing, they're bragging", he's talking about an allusion. The Ponzi schemes here are not allusive. SBF literally bragged about them.
"SBF/Matt Levine said it" does not automatically make it true.
Instead of debating semantics, enlighten us with how/why they are using it incorrectly and what you mean by this being a pump and dump and not a Ponzi. To me it definitely looks like a Ponzi: money from new entrants in the system go to pay off earlier entrants, a pump and dump from what I know would require SBF/FTX pumping up FTT to then dump it all leaving bag holders in the wake of the crash.
Ponzi scheme: Taking later entrants' investments to pay earlier investors on the false pretense that the venture's activity generated the returns.
pump-and-dump: Duping others into thinking an asset has value so that it can be resold above its legit worth.
The original description given clearly fits pump-and-dump better[1], since it's based on making an asset seem valuable:
>>laid the Ponzi scheme straight out: scammers make boxes that pay fake coins when you store your money in them, they put so much money into the boxes that the fake coins seem valuable, then they rug pull everyone and move on to the next one.
For tptacek's part, he could have defended his claim by presenting a substantive understanding of the distinction and justified the label in his own words. Or, somehow indicated this was a point of contention at all. Or done anything whatsoever beyond arguing, in effect, "the perp used the label, therefore it must be accurate". That does not advance the discussion, or indicate a prompt for the kind of contribution in the first half of this comment.
It fits perfectly
Seeing how stupid/greedy SBF was, it makes me wonder if people like him are smart enough to truly understand the need for such structure without having experts in place.
This is how you blow the ballon...
Word on the street is that ikea is technically a charity.
(Does the IKEA org chart have the little figures from the assembly instructions, and an Allen key?)
It’s a situation with many interesting parallels in the crypto industry. Not only does history rhyme, but sometimes it really does repeat.
Anyone working in the CPG space would be 50+.
Binance does the same but even more extreme — they don’t even tell where their HQ is actually located.
Money launderers and tax evaders have long used these tricks. Those people don’t normally get VC capital at $34 billion valuations though. The crypto implosion ought to be a massive lesson to the industry.
What are the liabilities and who are they to?
If you don't send any of those coins out, there are no profits for the exchange operator, either. Look at how Coinbase does everything more-or-less by the book, and barely makes money. Trading fees just don't cut it.
Yet, some fly-by-night exchange incorporated in the Bahamas is offering wild signup bonuses and lower fees and yield that would make Scrooge McDuck blush.
it looks like the usual nonsense of "here's some bank account balances", with no explanation of what liabilities they hold, or how much related party loan crime they have on their books.
Binance’s US subsidiary is just as safe as FTX.US was, despite their claims otherwise. It will fall along with the other dominos.
>> This was about FTX International. FTX US, the US based exchange that accepts Americans, was not financially impacted by this shitshow. >https://twitter.com/SBF_FTX/status/1590709195892195329
So, SBF seems likely to have flat-out lied, right up to the last moment. At this point, why would you choose to trust any crypto company that wasn't perfectly transparent in how it holds assets, backs coins, what it's borrowing on, etc?
Do we blame individuals or the technology that enabled them? I don't know. I do think we need to get back to building useful tools that people need.
Don't do this on HN please.
People get all antsy in their pantsy and can't read nuance.
If the guy is dipping into supposedly segregated client accounts to run his prop trading, and lying about it.. why would he not do the same with FTX US money.
And then there's this from a congressman yesterday, "@GaryGensler runs to the media while reports to my office allege he was helping SBF and FTX work on legal loopholes to obtain a regulatory monopoly. We're looking into this." https://twitter.com/RepTomEmmer/status/1590717374801809409
Because investors had too much cash and became increasingly desperate to earn a return on it. When they have an abundance of cash, they become wreckless and wasteful with their investing as they chase profits.
The best part of these being unqualified children is that they don't even realize that part of the deal they've signed up for is to take the fall when shit finally hits the fan.
There's plenty of people who have made money from SBF behind the scenes, but you'll never hear their names.
[0] - https://techcrunch.com/2022/11/10/daily-crunch-sequoia-capit...
[1] - https://www.otpp.com/en-ca/about-us/news-and-insights/2022/o...
I’m not defending this catastrophe (which seems like it was partly an execution by a rival), but this kind of comment is just bizarre on hacker news in the world of tech companies and startups. Age is not a good proxy for competence.
Several Alameda employees worked at JS, which is by far one of the most successful quant firms out there and they only hire the best. He also exploited a very creative arbitrage to start the firm, which is also not a fluke.
Then again, I would expect no less since the people on here constantly complain about leetcode interviews and "not wanting to interview for big tech for XYZ random reasons" when I know damn well they couldn't pass even if you gave them the answer.
The outliers are great and make this site worth it, but on some topics (of which crypto is one) they’re hard to find.
- Blockchain's main innovation is solving the double spend problem in a decentralized way.
- This means that self-custody is a new capability.
- Self-custody without a centralized authority is a big deal and can empower users (especially those in hostile countries or places with bad currencies).
- There's an extension of this with smart contracts and ethereum that allow for programmatic uses which can extend to completely transparent decentralized finance.
- zk-SNARKs allow for privacy to exist within the above systems.
That people don't self-custody because they don't understand how it works (and terrible UX) is a real problem and why most people should not be using cryptocurrency. They can still get screwed by regular collapses of fiat currency (and they do often), but they won't be helped by increasing their risk with something they don't understand.
The centralized exchange failures are independent of this and arguably a symptom of how centralized finance can cause problems because people don't self-custody funds. Your reasons dismiss the new capabilities they provide (self-custody, protection from government debasement of value, global use) and are an example of the type of HN response I'm talking about.
The only enticing quality of blockchain to finance is just elimination of transaction fees on a more open ledger.
You want recourse? That means oversight, audits and regulation.
In traditional finance, the "exchange", as in "the New York Stock Exchange", only facilitates the calculation of market prices for a range of assets and the matching between sellers and buyers. Exchanges don't even manipulate money - that's left to other, highly regulated, professions, such as brokers.
Brokers hold your assets and sometimes lend you money, but are very restricted with what they can do with it unless they qualify as banks, which requires complying with an array of complex capital requirements.
So really, I don't understand: how are those entities not offering "investment services" and so not under SEC supervision?
Yesterday SBF said FTX US was not impacted by the shitshow:
You can sign up to get the newsletter for free, but it’s sometimes paywalled on the site (it’s a great newsletter for finance anyway).
The most recent: https://www.bloomberg.com/opinion/articles/2022-11-10/ftx-is...
Edit: here's [0][1] some sources that says FTX ponied up $135M for the name to remain through 2040. Your question still stands, will that name stay even if the organization that has the name doesn't exist or is circling the drain? All depends on the terms of the contract, I guess.
[0] https://www.local10.com/news/local/2021/03/27/nba-still-need...
[1] https://www.cbsnews.com/miami/news/its-official-miami-heat-h...
In a way it would be another asset for the bankruptcy liquidator to disperse.
I just looked up a similar situation from 20 years ago[0,1].
[0] https://www.nytimes.com/2002/02/28/sports/baseball-astros-ba...
The Heat will find another partner, and they may or may not try to get money out of the FTX bankruptcy proceedings, but I'm guessing the odds of that aren't super high. Probably more efficient to cut bait and move on.
As a lawyer, not a transactional lawyer so this is pretty far outside my expertise, I'd imagine they'd include some provisions for this type of scenario in the agreement. Even if it didn't, the stadiums owners would probably offer FTX some sort of partial refund to give up the naming rights, which they would have to to pay back their creditors. They could even just breach the agreement and offer a settlement.
Eron field got renamed pretty fast. So will this stadium.
All of this is handled much differently if a party is in bankruptcy (which is the point of bankruptcy).
This happened to Adelphia with the Tennessee Titan's arena in 2002. In that situation the stadium was renamed to a generic "The Colosseum" for a few years because they had trouble finding a new naming partner. I suspect they'll have an easier time finding a replacement in this case, but who knows.
At least Larry David got paid.
I assumed he got paid based on my limited understanding on how actors in TV commercials are compensated. It would be weird for Larry David to be in an ad that aired during the Superbowl and not get paid.
- They miss their next payment and the contract is terminated. The arena owners find a new sponsor.
- The naming rights are considered an asset of FTX and are sold off during bankruptcy proceedings to recover cash. The buyer puts their own name on the arena for the rest of the contract term.
Considering naming rights are sold for such lengthy terms (20 years in FTX's case) it is incredibly common for companies to go under or get bought out in the middle of it.
Except in this case both parties involved will want the contract to be terminated.
https://www.espn.com/nba/story/_/id/35004915/miami-heat-cut-...
https://finance.yahoo.com/news/blockfi-halts-withdrawals-cit...
Regulation also doesn't fully solve this, we still have fully regulated bank failures today: https://en.wikipedia.org/wiki/List_of_bank_failures_in_the_U...
What solves it is the Fed stepping in and agreeing to print money no matter what to cover customer deposits if need be (FDIC insurance). That's hard to replicate in the crypto world but likely possible.
The FDIC is not related to the Fed, and certainly does not entail a commitment of mobetary policy (it involves a fiscal commitment by the USG, but the whole point of the Fed is to separate monetary policy from fiscal actions.)
https://blockworks.co/news/blockfi-stops-withdrawals-hinting...
I happened to be at a hotel earlier this year that was hosting a crypto conference and the attendees looked like the kinds of people a multi-level marketing scheme attracts. Very different from a few years ago.
And you want them to go under. When the scams stop going under is when you have a real problem, because that means the entire industry is in fact a scam.
I am not really convinced of Tether having trouble anymore. I've been hearing it for years. They seem to have gotten lucky and cleaned up their act before collapsing, every time they do an audit or anything the last few years they show full collateral backing their assets in circulation. With regard to binance, I couldn't tell you one way or another, but they've survived more than one cycle so they probably know what they're doing.
All it decimated were hype merchants and their lemmings. Hopefully the same is true here. I think it will be.
This seems like a bigger deal to me because FTX is part of then new wave of crypto companies that were supposed to be legitimising crypto. And even they can't stay afloat. It's just a matter of time before the next crypto giant falls.
So people who are barely holding on to the bottom rungs of the (American) middle class, and who are the traditional targets of multi level marketing (and also religious) hucksters?
That doesn't bode well for the argument that the crypto ecosystem isn't a set of scams, regardless of whatever the merits of the underlying technology has.
All of this is necessary to stop situations like FTX/Alameda. A bank can't take your money and bet it on blackjack but there seems to be no such protection for these crypto exchanges. All of this is necessary to maintain confidence in the financial system (yet another reason to roll one's eyes at libertarians).
I mention this because it's just another case of crypto lacking protections the non-crypto financial system has and ignoring lessons learned over the last 5000 years of finance.
I saw a comment on HN yesterday where someone in the Navy said that when they get a new CO it'll be one of two types: the first will work out how things work and then incrementally improve things. The second will immediately reshape everything in their image without figuring out why things are the way they are.
I see that trend in management too. But it seems to be a problem with the entire crypto space. Otherwise smart people completely ignorance of the financial systeem just reshaping crypto with no regard for history.
As for SBF, this is a fraud on a massive scale, like Madoff scale. I really wonder what will happen here because what should probably happen is he'd spend the rest of his life in prison.
I would like to clarify that the regulations on "the financial system" have probably enabled just as much fraud as they have prevented over the long run. The financial system you speak of is a huge collection of bets and leverage and interesting interpretations of the truth ("why yes, your money is 'safe' with us!"). The regulations make it work just barely well enough that it only comes crashing down, what, every 10 or 20 years now? If instead of adding regulations and saying, "there, now it's totally going to work, put your money back in," I wonder what things would look like if we had instead said, "yup, loaning your money to banks/corporations/governments/individuals is super risky, learn from past mistakes!" ? Maybe people would only risk what they can actually afford to lose and we wouldn't get into these cycles where people get over leveraged, things crash, bankruptcy gets declared, and the poor and middle class foot all the bills. Over and over and over. A libertarian can dream...
This is called a "low trust society". The flip side is of course that nobody will lend you money. Mortgages and consumer credit are scarce. Business credit is difficult. Large amounts of capital need to be tied up in buffers. The overhead of keeping an eye on everyone is considerable. You don't get "First World" levels of development with a low trust society.
Many of the crypto scams that are out there are claiming their coin has these same properties when it doesn't and that's where people at getting burned by "crypto." Yes, regulations could reduce the risk of these frauds happening, but they won't eliminate it. Bitcoin eliminates the risk.
> Needing to rely on trust is a big problem that Bitcoin solves.
No, it doesn't. As soon as anything is external to the Bitcoin network, you now require trust. This is so well-known it has a name: the oracle problem [1]. Crypto Andys, of course, just double-down and say we need more crypto. Just like libertarians who when confronted with the problems of lack of regulation they will argue the solution is even less regulation.
> There's no single Bitcoin Chair than can tweak the policy or supply of Bitcoin that you have to trust.
Instead there's unaccountable miners who with 51% of the hash power can completely rewrite the rules with no recourse. Bitcoin has already forked multiple times [2].
> There are no charge backs
Chargebacks are a feature not a bug.
> no middle men that you you have to trust to not steal your money in transit
FTX customers may disagree.
[1]: https://blog.chain.link/what-is-the-blockchain-oracle-proble...
[2]: https://www.cnbctv18.com/cryptocurrency/a-list-of-bitcoin-fo...
What people are doing with FTX is taking their money off of public blockchains and giving them to something like a bank or stock exchange where ultimately customer funds are accessed in secret. This is again, antithetical to cryptocurrency which has the main features of avoiding the necessity of banks for operating with digital money and having a public, mathematically verifiable ledger.
All of this nonsense is people using the interest around cryptocurrency to promote what is essentially gambling.
Some people have even theorized that they were intentionally trying to sully the reputation of the technology since it makes old fashioned financial institutions obsolete, and the family has strong ties to the establishment (with massive investments in old-fashioned financial schemes).
Cryptocurrency speculation on centralized exchanges literally does not use cryptocurrency and it's a shame that people think that's what it is.
What cryptocurrency actually is is a secure and auditable way to do transactions and record keeping in a very large group of people. That's what I and many other people use it for. Completely unrelated to day trading, and using the actual chains.
This isn't the way cryptocurrency was meant to be used. We were meant to hold our money in our own wallets, not leave it in some centralized exchange so it can "efficiently" allocate the funds. People keep using exchanges as if they were banks and they keep getting burned in ways only banks are capable of.
If this keeps happening it speaks to the fact that the current system isn't well designed.
Most of the newbies getting into crypto don’t know what it means to hold your keys
https://twitter.com/JasonYanowitz/status/1590800210200256513
https://twitter.com/StackerSatoshi/status/159097223797656780...
https://twitter.com/statelayer/status/1590939767205920769
And then there are these NFT shenanigans:
https://i.redd.it/078p4g7m6cz91.jpg
The Chapter 11 filing is for the ones in the US, working out what this means for the rest is going to keep a whole lot of lawyers very busy for years.
1) Hi all:
Today, I filed FTX, FTX US, and Alameda for voluntary Chapter 11 proceedings in the US.
https://twitter.com/SBF_FTX/status/1591089317300293636?s=20&...
This doesn't feel normal in any sense.
Do you guys know, what will happen with the funds? Will I as a customer get any of my money back? (do you know if I'm a secured creditor?)
And does/would it bring any value into the world, or is it just an effort to keep the plates spinning in the multi dimensional scam crypto has become?
Genuine question btw, if there is a real business there, does it serve the interests of broader society in any way?
I'm a bit of a Luddite when it comes to crypto, can you please help me undersatnd what did SBF actually do that has caused all this trouble?
Aside from running an exchange I mean.
I'm just trying to understand the context of all these headlines.
That's why these companies have to mint their own shitcoins and come up with derivative Ponzi products to make money.
If so, wow'zer.
(Did the mtgox payout happen yet?)
Everybody said this can happen. Coinbase was forced to include a warning to this effect in their filings as a public company. But nobody cares when the going is good and FOMO is strong.
While I don't touch crypto for the same reason I don't touch Beanie Babies, it's made me think more about what is money, what's intrinsic value, and what protections are in place in case something goes wrong.
If you don't have access to your keys then you never owned your digital assets
and if you don't know how to run that test then blaming the victim is completely appropriate here
Not your keys, not your coins.
https://www.cnbc.com/2022/08/19/crypto-firm-ftx-receives-cea...
Was this a fraud that got out of control, or premeditated? If it was premeditated, what was the exit plan?
Did he expect to be able to gamble with customer funds indefinitely?
Were the Effective Altruism intimations genuine?
Why, if Alameda was a market maker, and they therefore presumably have some form of insight into the markets, did they then decide to take a huge directional bet on Crypto [source?]? This is contrary to market making principles.
What was the purpose of encouraging employees to invest? Was it to buy their silence/cooperation ('you have to stay employed and invested if you ever want your money back') if they found out about the fraud, or did Bankman-Fried genuinely believe it was to their benefit?
Why were there so many puff pieces in the media, without any journalist questioning the narrative?
you are surrounded by people celebrating your genius, everything you touch turns to billions and billions
it is easy to see how someone gets disconnected from reality and ends up living in the metaverse of their own genius
See? The metaverse isn't useless after all.
Also why are there no lawsuits yet? Since FTX clearly broke its own T&S?
Using customer funds held in custody is theft. Period. People go to jail for this.
This may be the biggest embezzlement of customer funds held in custody in history. Most scams involve misuse of funds invested, not just held in custody. The biggest outright theft of this type seems to have been Peregrine Financial.[2] That was $200 million, far smaller than this one.
What happened to the CEO of Peregrine? Here he is, 10 years after conviction:
Bureau of Prisons Inmate Locator
RUSSELL R WASENDORF
Register Number: 12191-029
Age: 74
Race: White
Sex: Male
Located at: Jesup FCI
Release Date: 02/19/2054
[2] https://archives.fbi.gov/archives/omaha/press-releases/2013/...
It feels like having an investigative journalist on payroll. The delay between an Animats comment and this showing up in the news is significant. Thank you!
(I remember your comments about the CEO that forged pay stubs being similarly excellent. Someday it might be worth collating them. In the meantime, whenever Animats says CEO Foobar is going to prison, Foobar had better start mentally preparing themselves for the journey.)
We still have both mass-market and one-on-one scams, but now they can both be done remotely. There's not much originality. It's mostly the same old scams of a few standard types, sometimes in new packaging.
Stories like that are really interesting to dig into. They all seem to get caught because the world changes (audits happening via internet in Wasendorf’s case, the economy imploding and sinking Alameda’s risky investments, etc) rather than from any particular mistake. The mistake always seems to be that they started cheating in the first place, and then it was just a matter of time.
Of course, we only hear about the ones who were caught. It makes you wonder how many stories like this were swept under the rug — if Alameda had made money instead of losing it, FTX would probably still be online, even though they’d still be committing the same large scale fraud.
Anyway, thanks again for all this, and especially for all the detail you put in. (Your comment pointing out that SBF is firmly under the SEC’s jurisdiction was wonderful.)
I wouldn't be surprised to learn that the amount of actual customer funds that went in were much smaller than claimed.
Keep in mind FTX was mostly 'perpetuals' -- fake assets. It might be that a lot of the customer funds were just fictional gains, also may be that a lot of them were paper value owned by SBF entities.
I've been trying to find anyone I personally know that had FTX exposure and so far I'm coming up dry.
At least they're at the head of the line in bankruptcy. Custodial funds come ahead of debts.
[1] https://www.reddit.com/r/wallstreetbets/comments/yq6y5d/all_...
That's true for the numbers used when reporting on Bernie Madoff's Ponzi scheme. Much of the $50B was fictional gains.
There were even clawbacks on the gains of those who withdrew before the collapse.
Ultimately the US government is the party that gained the most financially from Madoff's scheme!
He will either go to prison or kill himself I would bet.
EDIT: Suicide is something that's hit personally lately - my response was likely something based on that. To the person who responded - I didn't think you considered suicide a joke - and plenty do consider it. It's never a solution though. You even got an upvote.
“I’d bet” is a figure of speech. Not the stated desire to gamble.
It's survivorship bias.
I also don’t understand why there are competing cryptocurrencies? Without governments and borders, shouldn’t one standard currency be enough? (Technical challenges aside)
A lot of these "competing cryptocurrencies" are just financial instruments, kind of like you could have stock in a company, but you can also trade options and futures of the same underlying stock.
No they weren't. This comparison has no relation to reality.
For most people, the only important part of what you call "ownership" are the cash benefits (buybacks, dividends, and acquisitions). You can see this from the small price difference between GOOG and GOOGL.
Those people look particularly silly on days like this.
What kind of bets was Alameda making? Why would it need so much leverage?
I understand why loaning money to Alameda could be rationalized a risky, but not sketchy move (if Alameda posted collateral, paid reasonable terms like anyone else would, etc.).
Actions and results matter. Intentions can easily be bullshit and delusion.
If someone is committing multi-billion dollar fraud, there is a line that was crossed a LONG time ago.
It’s only plausible to a certain point that they were unknowingly bad actors. They’d have to willingly be deluding themselves.
No one commits multi-billion dollar fraud accidentally.
They’d have to turn a blind eye to something any reasonable person would consider a ‘are we the baddies’ moment. Or two. Or dozens.
As to if it’s documented? One can hope, but I’m not holding my breath. I’m sure there have been many shredder parties (or digital equivalents) happening in many places since the news broke.
Most people cross that threshold well before a million bucks.
You can tell by the shape of the lies that are inevitably told. Someone who actually thinks they’re doing something ok won’t go to such lengths to hide important details, or omit specific things that are inevitably omitted.
And in this case, why not just update the TOS to be clear what they’re doing?
Because they know it’s wrong.
What you’re talking about is willful delusion.
Denial ain’t just a river in Egypt, etc.
They were either criminally stupid or did this on purpose. It really wasn’t that complex. This isn’t even close to 2008 complexity since this was all happening within one organization With the same owner SBF.
As a caveat, however, SBF did work at Jane Street and graduated Summa Cum Laude from MIT with a Physics degree, so maybe this quote does not apply.
I won't assume any malice on your part.
https://getyarn.io/yarn-clip/87387a75-dde7-44ec-bc87-66f4e20...
Or this guy from Why Him:
https://getyarn.io/yarn-clip/bbc047f6-7417-4eb3-b4fe-064f75d...
2: “Never assume malice by that which could be explained by incompetence.”
1+2 = 3: “Never attribute malice to that which can be adequately by greed”
But again and again, supposedly smart finance folks end up blindsided by retrospectively obvious stuff. There's just too many complicated fabrications on top of one another.
I'm not particularly sanctimonious, I think the average vilain of the day is most of the time just an average person making dumb mistake.
I think that reality hasn’t set in for most people yet. Especially SBF.
They’re the type of people that are too smart for their own good where they can’t even see how idiotic they’re being. Or maybe they’re just spoiled. Or maybe they just think they’re smart. It’s interesting to me that Jane Street prides themselves on their hiring process, but they apparently hire folks like this.
Other than people losing money, I am super glad these reality checks are happening. But I wish they’d happen to more as well, e.g., Musk and Trump.
They like to give the impression they hire Ultra Mega Geniuses who have done the IMO (who cares if you did the IMO at age 17...?)
If your thesis is "they were inexperienced and operating without sufficient supervision" then that's a big part of what the structure of a place like Jane Street gets you.
Anecdata,
I've studied along guys/gals who've done IMO, also had them as co-workers at other times, they have never performed well.
I really like Linus' saying "talk is cheap, show me the code". These people can make a thousand arguments about why something should/shouldn't work (but never write code), then you show up with working code and they don't have much else to say.
Some young kid thought he knew better than his elders, and was doing arbitrage, which is moving around vast amounts of money, for very small gains (but safe ones).
They had all this money at their disposal, and just knew that these stuffy old farts were "missing the boat," so they figured that they'd just use a bit, to make a small bet, and put it back...
They accept FTT as collateral, give out a leveraged loan to the other company. The company spends that money on things like stadium rights and bailing out other failed crypto companies. Collateral falls to a value of 0, and the money is spent.
The money that you spent to pay for the bitcoins exit the system during the purchase. Most likely paying the Ferrari of the seller.
My particular views are: https://forum.effectivealtruism.org/posts/EKN9Nn89ixriwSXpP/...
This explanation seems pretty plausible from a game theory angle. The selfish cost of losing 1 billion dollars and losing 10 billion dollars for fraud is the same. Either way he is ruined and probably goes to prison, so he keeps gambling even if the odds aren't in his favor, and problem grows exponentially.
Altruism is a lot easier when it's not your neck on the line.
The CEO described how a feasible 'pyramid' could work with Levine on Bloomberg and it looks like he was doing just that.
This is basically a smart kid breaking all the rules, doing mostly what he was allowed to do legally with all of the misrepresentation and hyper - plus a little bit of illegal stuff which is all you need along with the massive leverage that comes along with it.
But I would say aside from his shenanigans - this is a crypto problem. At the base of the pyramid was an 'asset worth nothing' well ... of of crypto is essentially that.
SBF was just following the EA maxim: "take advantage of strategies other people are biased against using"
At this point, mid-2019, SBF decided to double down again—and scratch his own itch. He would bet Alameda’s multimillion-dollar trading profits on a new venture: a trading exchange called FTX. It would combine Coinbase’s stolid, regulation-loving approach with the kinds of derivatives being offered by Binance and others. He only gave himself a 20 percent chance of success, but, in his mind, SBF needed extreme risk to maximize the expected value of his lifetime earnings—and, therefore, the good his earn-to-give strategy could do. The fact that he was, by his own lights, overwhelmingly likely to fail was beside the point.
The point was this: When SBF multiplied out the billions of dollars a year a successful crypto-trading exchange could throw off by his self-assessed 20 percent chance of successfully building one, the number was still huge. That’s the expected value. And if you live your life according to the same principles by which you’d trade an asset, there’s only one way forward: You calculate the expected values, then aim for the largest one—because, in one (but just one) alternate future universe, everything works out fabulously. To maximize your expected value, you must aim for it and then march blindly forth, acting as if the fabulously lucky SBF of the future can reach into the other, parallel, universes and compensate the failson SBFs for their losses. It sounds crazy, or perhaps even selfish—but it’s not. It’s math. It follows from the principle of risk-neutrality.
If you have $1B to your name, it's stupid to put it all on red, even if your expected return is positive.
I don't think people are comprehending how tragic this whole situation is (acknowledging that it's SBF's fault). This collapse put the brakes on a powerful force for good, and lives that would have been saved won't anymore.
Perhaps if he had spent more time donating money (his stated aim) rather than inventing convoluted financial structures (FTX has over 100 related companies!), he would have achieved more, and cost people a lot less.
(Sorry for saying "financial" earlier when the reference class is really something more specific like "international retail finance")
Let's be honest: we don't know what his life goals are. He said that his goal is to fund charities, but that's a pretty common thing for wealthy people in the U.S. to say because saying so gives you a lot of social status at no cost. Very few people actually proceed with any plans of significant charitable donations.
from: https://www.vox.com/future-perfect/23462333/sam-bankman-frie...
Maybe there's a reason it takes 4 years of extremely tough classes to understand the basics of "hard" math.
Most books, yt videos, jobs and academic press releases tell me all it takes is `import tensorflow` or `git clone github://lolcoin.git`
On top of that, any decent tech school also has an "ethics of engineering" course somewhere along the way, or at least I did about 20 years ago when I was a student (we had quite a stupid professor, but the intention was there).
What calculation? What's the formula that gives you the odds that your Ponzi scheme will be discovered? What can possibly "model" that, aside from a scifi-level reality simulation? It's not even math, it's math LARPing.
E.g. if you had a weighted coin that was 50-50 odds with 3-to-1 payout, you wouldn't bet your whole bankroll on just one flip.
But outcomes aren't certain and high EV plays can still carry a substantial amount of risk, which is exactly why we have finance regulations.
I can speculate based on recently revealed facts.
SBF did grease politicians to the tune of 40 million USD in political donations. Several have described these donations as: "bribes" (I'll let you judge). (as a sidenote I wonder if these politicians are going to give these donations back to the people SBF scammed).
A US congressman, as reported here several times, wrote: "GaryGensler runs to the media while reports to my office allege he was helping SBF and FTX work on legal loopholes to obtain a regulatory monopoly. We're looking into this".
It's "allegedly" but it's a fact that a US congressman posted that.
It's also established that a colleague of the SEC's Garry Gensler happens to be the father of... Drumroll... The 28 years old woman CEO of Alameda.
So I'll speculate a TL;DR:
SBF was working hand in hand with corrupt politicians and corrupt officials to kick Binance out of the US through regulatory capture in order to grab Binance's insane market share (easily 10x the size of FTX).
SBF would then have continued the established FTX/Alameda scam through FTT. So he'd have then used FTX to pump the price of FTT (and, because why not, other manipulated shitcoins too) in order to keep pretending traders at Alameda were geniuses.
Alameda would have been fully legit and would have take shitloads of money from various pension funds and investment funds (knowing he already got some: why not think he would have gone for more?).
That's my speculation: why stop at 1/10th the size of Binance when you can donate tens of millions to politicians (which is pocket change when you're making billions) and work with the SEC to get a monopoly on crypto exchanges in the US, all the while pumping the value of your Alameda fund and all the while having covers of magazines and people everywhere (Bloomberg, Sequoia, JP Morgan, etc.) saying how big of a genius you are and how geniuses all people around you are.
The guy is a megalomaniac: no longer than a few weeks ago he was saying that companies worth tens of billions were "potential acquisition targets".
And I think that, had the overall markets not have been crashing hard, he may have succeeded at all that, creating a scam 10x or 100x bigger than the one he actually ran.
But the market crashed and CZ took the opportunity to reveal the FTT scam to get rid of a very dangerous competitor. No matter if Binance is legit or not: SBF was after Binance but Binance was too big for SBF too chew. Binance may be going down too (no clue about that) but Binance was never going to go down alone while letting SBF free to run his SEC-endorsed scam.
Basically - is Binance solvent? I don’t know.
CZ knew about FTX's finances because he was the original investor in FTX. The reason he had FTT to dump in the first place is because of that initial investment in FTX.
Two important points: 1. Generally Proof of Reserves is a term where all holders can validate cryptographically that their funds are accounted for. This is harder because it's natural and efficient for an exchange to co-mingle multiple customers. 2. Doesn't mean they're solvent! They might owe customers $100bn for all anyone knows.
It's still far better than nothing, but FWIW their history of lying about their home jurisdiction, and massive "out of nowhere" growth is a huge red flag that you should be aware of (FTX did the latter even faster, of course, being founded in 2019!).
I'm actually confident that he's running a real business there, because that's the smart thing to do.
1: CZ literally destroyed FTX with a tweet.
SBF contributed millions to democrat candidates in the recent elections. Perhaps his exit plan was legislation to bail him out.
Like every gambler, he was wrong of course, and eventually lost it all because gambling is stupid.
Presumably, SBF was hoping that the crypto winter would end soon, which would bring everything else massively profitable for them again, and then plug the holes he had.
Sam is only 30 so obviously doesn't appreciate just how retro this is... Enron & Crypto...as I live and breathe.
If he was high functioning and reading a daily newspaper, he’d have heard a lot about it.
Or just disappear in Europe?
I’d love to get ahead of the ball on this one so if anyone here has any, and I mean any, FTX swag you somehow have picked up over the years, I’m a very motivated buyer. I’d also do unspeakable things for swag from any one of the subsidiaries on that absolutely ludicrous flow chart I’ve seen floating around.
I’m serious.
And whatever you do, don’t sell it to /u/filmgirlcw, she is also a collector of deadco swag, and thus my competition here.
You are not in competition - you are both tiny versus the size of the market, and can work together to grow the amount of offers, thus lowering the overall price.
(Sounds like you have a very cool collection, by the way!)
I want to buy a Theranos Edison machine and am willing to pay. If you know anyone that has one, parts of one, or anything like that, my email is in my bio and I am very happy to talk to you.
I intend to take a small portion of it, melt it into steel ingots, and include it in 'Order of the Engineer' rings for myself and my colleagues who are also engineers.
We are looking for physical equipment in which engineers screwed up and the general public paid a high price for it, as a reminder to ourselves that our work is meaningful and is one of service to the people we serve with our efforts. If you know of any equipment that may fit that bill, I am looking to pay for that too.
I'm curious, have you already made any rings or are you still looking for the right equipment?
We've not been able to source any 'failures' outside of some fragments of the space shuttles that fell on people's land.
We're looking to get as many failures as we can before melting down out rings, casting in the debris in appropriate masses and compositions (they still needs to be steel rings at the end), and then reforging/casting the rings for all of us, with enough of an ingot left over to continue the process as 'failures' continue onward.
It's entirely symbolic, but does take effort and time.
Perhaps they’d be a good first step.
Good luck, that’d be a hell of a find.
https://web.archive.org/web/20221027180943/https://www.sequo...
A bankman fried after all
Oh and it is all the fault of the Devs
https://twitter.com/SBF_FTX/status/1590774827467812865
If you stick your company name in your twitter handle - does that mean the company owns the twitter account too???
At this point I think there are a lot of people who operate as if they and the company are fundamentally joined / the same thing.
The loans had very poor collateral behind them, meaning that FTX were exposed.
It is not currently clear if or how Alameda lost the $billions of client assets, or if they are just illiquid.
There is noise that the client assets were spent on things like the summer bailouts of defunct crypto firms, but I think we are just speculating at that point.
Excellent explanation.
Appears to be confirmed by the WSG "FTX Tapped Into Customer Accounts to Fund Risky Bets, Setting Up Its Downfall"
Original: https://www.wsj.com/amp/articles/ftx-tapped-into-customer-ac...
Compare this to traditional finance with events like the collapse of Lehman, then Bear Stearns, with Morgan Stanley next in line to fall. Their competitors stepped in, with a major push from the Fed, to prevent the collapse because they knew it would trigger a domino effect that would crash prices and bring them all down. Binance seems to be doing the exact opposite.
Of course, there's a risk that the hedge fund could lose some or all of the customers' funds. And the exchange promises that customers can have their assets back on demand, which could be a trifle problematic if they are locked up in leveraged positions held by the hedge fund. But this is crypto. There's an easy solution. The exchange can issue its own token to replace the customer assets transferred to the hedge fund. The exchange will report customer balances in terms of the assets they have deposited, but what it will actually hold will be its own token. If customers request to withdraw their balances, the exchange will sell its own tokens to obtain the necessary assets - after all, crypto assets, like dollars, are fungible. ["The FTX-Alameda nexus" - emphasis mine]
-SBF's other pet project Alameda Research suffered huge loses after Luna blew up.
-Alameda Research, a 'backer' of FTX was given billions of FTT tokens that they 'owned' by FTX because they participated in its 'ICO', transferred it FTX, and then used it as collateral to 'borrow' FTX user assets, hoping they could gamble with it and make back their money.
CZ, of Binance, got wind of this somehow, and holding billions of FTT on Binance, decided to tank the price by saying it will all be sold immediately
-SBF gets caught with his pants down
“The immediate relief of Chapter 11 is appropriate to provide the FTX Group the opportunity to assess its situation and develop a process to maximize recoveries for stakeholders,” [John J] Ray [III] said.
The people who are really hosed are the non secured creditors. Who, again, may or may not be insiders.
That said, in either case, they are very likely to be extremely disappointed in what is recovered. I just have a sneaky suspicion that even the USD6 Billion that everyone hopes remains available, is not actually there.
But time will tell.
The US has Chapter 11 bankruptcy, while Antigua and Barbuda might only have something more closer to the US's Chapter 7.
FTX Trading Ltd is "is incorporated in Antigua and Barbuda, and headquartered in The Bahamas", yet the linked statement clearly says FTX Trading Ltd (plus the FTX US entity, and Alameda, and others) are filing for Chapter 11 under US law in Delaware.
Is there a parent company of FTX Trading Ltd that's based in the US?
Edit: Apparently "Paper Bird Inc" is registered in Delaware, is 100% owned by SBF, and has ~89% ownership of FTX Trading Ltd.
The holding company of the foreign entity is in the US and can thus file for ch11. See who owns FTX Trading Ltd (Antigua) for example: https://d1e00ek4ebabms.cloudfront.net/production/8566b562-d5...
Withdrawals were requested at the same time two days ago, glad I remembered I had some coins sitting around in those accts.
Anyone have an idea which firms produce these chips for Amazon, Apple, Google, Microsoft, etc. ?
But man…what a clownshow.
Bitcoin's difficulty adjusts on-demand. Regardless of how many or few people use it, as long as some people do then it'll keep existing and sitting there clearing transactions all day long, spitting out new blocks every ten minutes like clockwork. That's the beauty of Bitcoin -- it's a program that once started never stops running, like a watch that keeps ticking.
The work in place to build L2 systems (Lightning, Web5, etc) that can derive a secure economic system from that base consensus clock will continue on just fine.
Paying for digital products (software, digital items) is hands down far better wtih a web wallet than a credit card.
Ethereum is probably the only crypto I can imagine holding for the medium to long-term
https://twitter.com/ApeDurden/status/1590912098871435265
Now how did this place end up managing billions of dollars and SBF the darling of politicians?
The picture is starting to come into focus. SBF used customer funds to become one of the top political donors. He donated $40M and was planning up to $1B. His parents are Stanford Professors who are well connected in the political world.
Caroline, Alameda's CEO, also said "My advice for college is that classes don't matter that much and friends and networking are really important. Probably the most valuable thing you can do in college is find the coolest people you can and spend lots of time hanging out with them". Apparently so.
Her dad is the Department Head of Economics at MIT. Prior to getting appointed to the SEC, Gary Gensler was a Professor for the Practice of Global Economics & Management at MIT.
The CEO of GoldmanSachs met with SBF to help FTX get regulatory approval.
From a congressman yesterday, "Gary Gensler runs to the media while reports to my office allege he was helping SBF and FTX work on legal loopholes to obtain a regulatory monopoly. We're looking into this." https://twitter.com/RepTomEmmer/status/1590717374801809409
Senators are still going forward with an SBF-backed bill https://www.theblock.co/post/185746/senators-moving-forward-...
It looks like Enron or Theranos 2.0. The kids of the elite were being elevated into positions way outside their ability and supported at high levels with no scrutiny. The fallout from this is going to be astronomical.
That's how.
The problem isn't crypto, it's the lack of accountability.
I thought that's what the whole PFOF debate in the US was about? That e.g. Citadel is allegedly using SL and order book information to hunt stops on thin volumes.
Not from the US and I didn't follow it too closely, maybe I got it wrong.
"Prestige" is a determining factor in someones ability get a job running a hedge fund/financial asset management. Generally they need to have gone to the right school, worked at the right bank, then at the right hedge fund. Each should show a good amount of tenure ( > 3-5 years ).
A major asset manager that I won't mention hires PhDs from Harvard as a way to get people to invest in their fund. Behind the scenes, away from all the quant marketing nonsense, is some guy you've never heard of making gut based trades on the market.
It's not just finance, people everywhere are impressed by a prestigious background, and assume if you can drop certain names on your resume you must be great.
Such names will open all sorts of doors for you that are firmly shut against the riffraff.
Of course, conmen have used such patinas of prestige to their advantage since the dawn of time.
Fields like tech are nominally more meritocratic.
This. Someone from Bridgewater mentioned that Dalio's "radical transparency" and all that we-record-everything nonsense is just a marketing bluff. Actual decisions are made behind closed doors by a few people.
A while back I interviewed with one of the top trading firms. It was for a lower level position that I normally wouldn't take but I was excited about the prospect of working with some truly brilliant quants.
Wow was I disappointed. The discussion with the quants quickly relieved that they had absolutely zero interest in their field, and not a particularly deep understanding of the fundamentals of the mathematics they were using. It became clear that their entire course of study was focused on getting in to high paying financial company, and all the things they had to learn on the way there were just boring prereqs.
I've met a lot of really talented and smart applied math people over my career, and this quant team was not in that groups of people.
That said all the engineers I chatted with were great. My takeaway was that these companies do need talented engineers to run these systems but the "brilliant quants" is more or less just, as you say, the illusion of superior competence.
With prop firms, there is little need to schmooze the rich with fancy degrees
The presence of people with fancy degrees might be expected for the more mundane reason that those people do tend to be more competent on average.
For one, he got hired for a prop trading firms - in which these effects are not very large because they have little-to-no interest in clients and managing assets.
It's not that hard to be the darling of politicians in this day of extreme polarization - you just tell them what they want to hear.
SBF made a good safe bet that coming off as "pro-regulation" would be a winning strategy in the current climate. Heck, it was probably a good bet regardless of whether Democrats or Republicans are in power, because even though Republicans are nominally anti-regulation, being against "Silicon Valley billionaires" is basically the one thing that gets bipartisan support these days, so flattering politicians with "we need you to regulate us" was probably a good strategy.
On the street, the cops/court'll beat you with "ignorance of the law is not an excuse".
In the board room, the corporation can do no wrong, here's your settlement, chapter 11 plox.
This is mainstream advice if you're at an Ivy, Stanford, etc. You're learning the same material as the people who go to a state university. The advantage is the proximity to power, the people you rub elbows with who can help your career down the line.
This is the entire premise of elite business schools – nobody is dropping $100k/year for the content that you can get on YouTube for free.
I got my MS CS from Stanford and this is completely false. I did my BS CS at Georgetown, and even between the two there was a huge difference being at Stanford. The course material pushed me way harder, there were more resources (e.g. robots), a much wider selection of electives, and more consistently brilliant peers. I never felt behind at Georgetown; I certainly had those moments at Stanford, even though I did very well there in the end.
> I got my MS CS from Stanford and this is completely false. I did my BS CS at Georgetown, and even between the two there was a huge difference being at Stanford.
Stanford is probably the best-known school in the world for Computer Science. Georgetown (while a great school) is known for its international relations. So I'm not surprised that Stanford had more CS electives, resources, etc.
But the fair comparison here is a school like UC Berkeley, University of Illinois, or [insert flagship state university here]. Is the quality of education really that different vs. Stanford? Or is the Stanford name brand on the resume the differentiator?
Also, a masters program should be harder and more competitive than an undergrad program!
> and more consistently brilliant peers
Exactly. At Stanford, your "consistently more brilliant peers" will be in positions of power down the road. They'll be hiring managers at Google and Apple in <5 years.
You're saying: SBF's coworker's dad's former coworker is now the SEC head and that is the trick?
Getting hired by a firm like Jane St is a pretty strong signal that you are likely capable.
This is what you find with kids from the elite class. They can take on mind blowing risk because they can fall back on their parents when it fails. People from lower socioeconomic levels cannot do that. Our government sets back and let criminal actions go unpunished, letting people truly treat life as a Monopoly game.
"nothing like regular amphetamine use to make you appreciate how dumb a lot of normal, non-medicated human experience is" https://twitter.com/carolinecapital/status/13790363463003054...
SBF should delete twitter mostly to stop publishing increasingly ridiculous "I’m really sorry, again" messages: "Hopefully things can find a way to recover. Hopefully this can bring some amount of transparency, trust, and governance to them. Ultimately hopefully it can be better for customers."
Maybe something could have been different this time? In the end it wasn’t, and it proves the necessity of regulation and institutions.
There aren’t very many other aspects of our society where we get to have that kind of experiment and find out whether our approaches to past problems were really correct. Letting us do that may turn out to be the true value of crypto, after the coins go to zero and we start mentioning it in our history books alongside tulip mania and the South Sea bubble.
For those who can read long books, see Anthony Trollope's The Way We Live Now. https://en.wikipedia.org/wiki/The_Way_We_Live_Now
The 2001 television version was also excellent: https://en.wikipedia.org/wiki/The_Way_We_Live_Now_(2001_TV_s... , and only four episodes, instead of 100 chapters.
I would rather see people be more scrutinizing when giving their money to others. It doesn’t matter if there are rules and regulations, people are always going to be duped. When I read about FTX I just think that people need to be better educated.
Maybe one could argue that the rules and regulations are specific to providing consumers with tools to make educated decisions about financial investments.
"I just wish everyone is better" is never a solution for anything that has mass appeal/is used by the general public. You can't ever depend that individual actions will solve a systemic issue, it's not realistic.
I don’t buy it, there are a ton of examples where not only does the gov get it wrong but also have the opposite effect of what they were trying to achieve. Good intentions is not realistic.
The systemic issue is education.
It may have, in a way.
It's too early to tell, but it's possible that FTX's USA-based corporation ("FTX US") is still solvent. I believe it's the Bahamas-based entity that's in bankruptcy - the one that's in an offshore haven not subject to US regulations.
Edit: Looks like FTX US is bankrupt too, but still it may or may not be solvent.
The only difference is that the bank-analogs do not get to face era-appropriate "frontier justice", but instead get to hide under the skirts of 20th century bankruptcy laws.
Just want to remind ppl to not put them in the same bucket.
Decentralized on/off ramps have existed for a LONG time and the fist was a key reason Bitcoin Core (BTC) broke away from the Bitcoin roadmap and became more of an "alt-coin" than the Bitcon we started with. Many think "SegWit" was a hack desigend to inject malicious code into Bitcoin Core to make these types of decentralized exchanges more difficult but then Vitalik just said fuck the US Government and came out with Ethereum.
Unfortunately, people leave tons of money on exchanges, for long periods of time. That's the problem. That's what the majority of exchange users are doing.
All of these problems are solvable with ludicrous levels of complication and confusion, and the average person doesn't even realize they need to take these sorts of measures until they've irrecoverably lost everything.
Don't you think that maybe people should start becoming more educated about how our economy runs? Or what protects their assets?
Don't you think someone with millions of dollars to lose should take some responsibility and become informed about how to protect them?
I really just think that if someone thinks an institution might disappear with their money they won't use the institution. If the alternative is too much of a hassle, or also seems like it could lead to loses then people will just not use crypto.
The information is available to those who are interested or want to further that area of human expertise, but the collective knowledge of humanity is too great for all of us to know everything. That's why we pay (mostly) regulated experts to handle these things for us.
(2) Having a general idea of many areas in life is important for a functioning society and becoming a healthy human being.
I really dislike this narrative that we must not think for ourselves. Always delegate. Always leave it to the experts. I see the same anti-intellectual sentiment in programming communities.
- Don't write assembly, compilers are smarter than you.
- Don't think about building your own networking stack. It's too complicated.
- Don't write your own OS. Do you think you can outperform Linux? Lol
In medieval times, if you "declare bankruptcy" your family and dependents get sold into slavery and your wife is sold off to the highest bidder who will buy your debt.
In many previous times, if you couldn't pay debts you'd just be killed.
What I found was actually weirder:
> In medieval Italy and southern France, it was common for the cedens to stand nude but for his shirt and strike a stone with his posterior ('vituperii lapis') while declaring 'cedo bonis'." The patent purpose of this ceremony was as much to satisfy the anger and frustration of creditors as to publicize the debtor's bankruptcy.
The promise of DeFi has a higher barrier of entry for those unfamiliar with the technicalities of interacting with decentralized systems, but they generally have more transparency in management of funds than crypto-centric businesses. All code running on the blockchain can be audited and so can the funds held within smart contracts. There are plenty of valid criticisms that can be made of various cryptocurrencies with those models of on-chain finance (and even with the value of cryptocurrencies themselves), but criticism of cryptocurrencies deriving from bad businesses that manage them shouldn't be one of them in my opinion.
Like dollars under my mattress? Sure, self-custody can be useful sometimes. But (almost) anyone with substantial quantities of "tokens of value" generally appreciates that delegating custody of them to a (regulated and insured) institution provides a lot of both convenience and protection that's difficult to replicate with "self-custody".
Crypto crises like these are in general due to regulation not having caught up yet, not because companies that involve crypto are inherently un-regulatable. Crypto is speed-running banking regulation over again. It's an ugly process, but the end result will be crypto institutions that are strictly regulated like banks (and/or existing banks will start to handle crypto just like they do any other foreign currency balance).
As for the current state of things, FTX is (was) a Bahamas company not subject to the financial oversight of the general western world. The public would generally hesitate to wire large amounts of money off to some company in the Bahamas, but when it's crypto, people don't think twice about it for some reason. After the FTX blow-up, perhaps more people will. It's hard to prevent people from wiring money off to a company in some other country that has much looser financial regulations, but that's not a crypto problem, it's a financial education problem.
However, crypto is useful because it standardizes behavior across regulatory boundaries, and because it creates a stateless unit of account.
Standardizing behavior across regulatory boundaries means that crypto "just works" to send value from one country to another, without needing cross-border intermediary companies that support your specific country pair to convert things between currencies/systems.
The stateless unit of account part is perhaps more interesting to me, though. Before crypto, there were no digital representations of value independent from state. No country has the power to hyperinflate crypto, and there doesn't seem to be a clear path to be able to accomplish a unit of account like that through traditional political means. The closest thing we have to that is the Euro, but it doesn't tick all the boxes.
Is a stateless unit of account good, or better than traditional government currencies? I'm honestly not sure. It does have some drawbacks in terms of the ability to use monetary policy to loosen and tighten markets. But it's an interesting enough concept that I would say it's worth it to "bother" with blockchain consensus technology.
The most influential statement of your proposal is Hayek's article "Choice in Currency: A Way To Stop Inflation"[1] which he later expanded on in "Denationalisation of Money".
Hayek's views have an admirable internal consistency, but his political premises are contrary to the core values of almost every pre-industrial society, and of the social democratic tradition in Europe which has been internationally influential.
Very few people understand the full scope of Hayek's political vision, which is premised on a thoroughgoing skepticism toward the very possibility of rational democratic deliberation. If they fully understood his proposal's implications, I doubt they'd support them; but certainly there are some who are willing to fully own their anti-democratic implications.
1: https://iea.org.uk/publications/research/choice-in-currency-...
Literally, the first sentence in the Bitcoin whitepaper (which arguably kicked off 'crypto' as a thing) is "A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution".
[https://bitcoin.org/bitcoin.pdf]
I mean, seriously?
And since it’s global, that third party could even be some foreign gov’t or entrepreneurial individual.
So there is always a middleman, unless you’re on your own chain. But it’s distributed, no one can reliably pick who is going to be the miner (or always be the miner) because of the POW algorithm, and everyone can trust the outcome because of the way everything is structured. There are very strong incentives for everyone to try to mine, for instance, and the more mining power there is, the more difficult it is for anyone to have a controlling interest or monopoly on mining, barring special economies of scale in mining hardware, anyway. (Which do exist, but not enough to make it doable to get a monopoly right now)
Worst case, the miners can ignore your particular transaction indefinitely, but the counterparty can see that too, and it would require active collusion from a very large percentage of miners to even attempt that.
So it’s not a middleman like a bank or a payment processor. Rather a bulk processor who moves a bunch of opaque chunks somewhere for money without any particular regard for who or what as long as they get paid for it.
Gold depositories have the same issues as crypto exchanges have typically had - it’s almost inevitable that someone absconds with the actual gold without telling anyone, or ‘prints’ extra without backing assets, etc. and until someone does an audit or everyone tries to withdraw their gold/tokens/whatever, no one knows.
It also enables a lot of other scams.
[https://www.cftc.gov/LearnAndProtect/AdvisoriesAndArticles/f...]
For anyone reading, educate yourself so you don’t get defrauded.
Not all depositories are a bad idea in all situations - but be cautious.
(Also, historical footnote - the last credible audit of the gold at Fort Knox was in 1974, hah - https://www.usmint.gov/learn/history/historical-documents/in...)
And which cops have a nasty tendency to seize on sight in the US if seen in any significant quantity (outside of an armored car) because ‘proceeds of crime’?
And pretty much every drug transaction, illegal sexual transaction, whatever is done in cash? To the point most major crime shows and drama shows have scenes involving some massive pile or duffel bags or whatever of cash as a plot point?
Cash on the barrel head is the textbook definition of ‘difficult to regulate’.
Also, most people buying person to person used cars and doing yard sale transactions use it too, of course.
It’s not a requirement that Cash transactions involve a crime at all. Same with crypto.
If your transaction is illegal though, using Venmo seems pretty dumb.
But then there’s China, right?[0] And arguably India?[1]
I agree with your larger point, but I don’t think it’s “western” per se to dream of the surveillance state knowing our every spend.
[0]: https://www.nytimes.com/2020/10/27/technology/alipay-china.h...
[1]: https://en.wikipedia.org/wiki/2016_Indian_banknote_demonetis...
Thanks for the links!
So, no, cash isn't entirely separated from financial institutions.
Cash transactions do not, so spending, receiving, and if one is crazy storage can be done without institutions.
That hypothetical $10k transaction for instance only sets alarm bells off if it’s an abnormal transaction for an individual account.
Someone doing a cash business is going to do stuff like that so much, it’s a drop in the bucket and no one cares. Coin shops, check cashing places, certain types of convenience stores and restaurants, etc.
If they manage the cash themselves instead of a cash drop, such as if they are a dispensary and are unbanked, a given dollar bill can circulate a very long time before touching a bank, depending on which parts of the economy it touches.
The reality is it isn’t super hard to launder funds apparently, so it ends up back in a bank somewhere soon, but with the intermediary transactions hidden.
Do you mean bank transfer?
Let’s say I buy a legal widget for $10K and I pay cash and I don’t plan to treat it as a business expense. On my side, I’m done, and any alarm that might be invoked is the problem of the seller, and probably dependent on their compliance with weakly enforced regulations.
For some classes of widget I might want a receipt, but definitely not for all. You can easily spend that much on a birthday dinner with your friends, if that’s your thing.
I don’t think anybody is arguing that cash is “entirely separated from financial institutions” but — even above $10K — it allows for the possibility (not the guarantee) of transaction privacy.
Devon Zuegel talks with EconTalk host Russ Roberts about the crazy world of money and finance in Argentina. When inflation is often high and unpredictable, people look for unusual ways to hold their savings. And when banks are unreliable because of public policy, people look for unusual ways to keep their savings safe and to make financial transactions. Welcome to Argentina, where Zuegel finds surprising applications of cryptocurrency for solving problems.
https://www.econtalk.org/devon-zuegel-on-inflation-argentina...
Practical value add? Less clear. On-chain comes with "contract risk", off-chain is more or less unregulated and comes with these FTX-like collapse risks.
However, whether this freedom to tinker and invent new primitives is worth all the extra risk from people trying to "invest" in this stuff, way less clear. Especially when the freedom is most often used to recreate traditional flavors of financial fraud dressed up as new technology.
There needs to be some conceptual separation between the actual on-chain technology (used by a very smaller minority of people with some kind of financial stake in crypto) vs. buying tokens/coins off-chain. At the very least marketing and promotion of buying made-up crypto tokens should be illegal and probably every off-chain entity related to crypto should be heavily regulated to avoid using the cover of "new technology" to perpetuate scams.
The US has shown they can effectively enforce AML/KYC requirements across the vast majority of exchanges and businesses. Any exchange the average person tries to use to buy crypto will request your ID to do any meaningful transaction.
Granted, there are exchanges you can use a VPN and access without KYC, and while it is difficult to manage billions of dollars in the dark, it's certainly possible. But they can regulate the vast majority that any regular user will find, and have shown they're willing to OFAC others.
It is not going to be long before regulations are increased, and some exchanges/services will be known to be subject to them - and will likely lean on that as a selling point. The others will only be accessible to those going out of their way to use them.
No one needs a pile of paperwork to prove to the gov’t who they are to spend or get paid cash.
No one needs to be on a list, and have their every transaction double checked to make sure it’s with a validated counterparty to pay in or get paid cash.
Etc.
At that point, it’s literally cheaper, easier, and safer to just use a normal bank.
Which is I guess the point.
To be clear there's different types of regulations, some we/I personally agree with more than others.
Personally, I agree with you that kyc/aml laws are over the top. I think privacy and money laundering are two things people often conflate, and that privacy is something we should want. (Side tangent - the majority of crypto was not really designed for anonymity or privacy, although that's a whole different topic). People claiming "crypto is just for money laundering" as a reason it's bad should be applying the same logic to physical cash.
What I'm particularly interested in is regulations around the big exchanges to prevent them from putting all of their clients money somewhere stupid, losing it all, and go illiquid.
> At that point, it’s literally cheaper, easier, and safer to just use a normal bank.
I mean yes, an FDIC insured bank is absolutely safer than an unregulated crypto exchange. This is the exact reason why the phrase "not your keys, not your coins" exists, and why everyone says you shouldn't keep your keys on an exchange. Done properly, a crypto wallet should be safer than a bank provided you can assure physical safety and redundancy of your keys.
Part of the problem IMO is that crypto became this "get rich quick" thing - with "exchanges" advertising double digit returns, people using NFTs for art for some reason, etc. I think the technology has uses, but this "get rich quick" bs has been a massive hinderance. I really think this "the point of crypto is to make money" mentality is missing the actual use of it.
tl;dr - a properly used crypto wallet should be safer then a FDIC bank, an FDIC bank is faaar safer then a crypto exchange, there could be more regulation on just the exchanges, and aml/kyc laws are a seperate type of regulation - I was just using these as an example of the US government successfully regulating exchanges.
It’s a lot easier to make a lot of money if you steal it, or play games. Most of those are already illegal, no regulators required.
Regulation can help of course, if someone actually comes by and checks that nothing illegal going on. but the type of regulation that comes along with ‘have a reliable audit of what you’ve got every night, or else’ also tends to include ‘and make sure you don’t do business with drug lords and human traffickers’, at least in the West.
God help you if you try to fight that last one too.
It's not about pleading to these entities that they are "doing it wrong". They know this, because this is their way to control it / oppose "doing it right".
Or do you have to fill out a slip and get audited for every transaction?
Bitcoin was about digital money, out of the reach of central banks as a response to the 2008's financial crisis.
Modern crypto is about trying to convince others your altcoin has some intrinsic value by selling rumours, partnerships, governance or some other vaporous dream, so it can be used for gambling.
The problem are central exchanges creating monstrous speculation instruments and of course gambling with user funds on top of it by lack of regulation.
But yeah, it’s mostly semi-transparent grifts, and has been for awhile.
But that’s not crypto, that’s just a crypto-related service.
When a packet hops from one country to another, it's bound by a different set of laws. Same thing with an international financial transaction, crypto or otherwise.
Edit: Businesses, more specifically.
Sounds like a solid plan.
To buy and sell cars in a personal capacity, you don't need a license. But if you run a business with the intent of making a profit by buying and selling cars to other individuals, that's illegal to do without a licensed corporation.
To buy and sell gold in a personal capacity, you don't need a license. But if you run a business with the intent of making a profit by buying and selling gold to other individuals, that's illegal to do without a licensed corporation.
It all comes down to whether the government deems something to be a personal activity or a business activity. Handling hundreds of millions of dollars worth of trades may well be considered a personal activity, if you're rich and making a series of OTC trades with a friend. But if you're attracting a diverse customer base and making a business out of it, that's when regulations apply.
A great example of the murkiness of this distinction was the crackdown on localbitcoins. It wasn't the people doing one-off personal trades who got in trouble, it was the people profiting off of volume, doing many trades and capturing the spread. The people who traded with several counterparties, but maybe not enough to be considered a business - well, that's where the gray area lies and personally, I am not a big fan of that gray area.
Do you have a USA reference for this belief? From my experience and knowledge that claim is not true.
The critical distinction is between someone who is buying and selling precious metals, compared to someone who is "in the business of" buying and selling precious metals.
"crafted precious metal dealer". And that sounds like a professional license, not a requirement to start a corporation.
The headline says filing for US bankruptcy so I’m assuming they have some US based entity — which as of yesterday was perfectly solvent because the accounts weren’t commingled.
So one would presume (without actually reading TFA) that they are indeed subject to US financial oversight and have some explaining to do to the people in charge of those sorts of things.
I for one am not very excited to continue using the legacy systems with countless of middle men and entrenched rent seekers to extract the maximum they can out of the completely legal trades I do with other consenting individuals.
The guy who is supposed to have "won" this , is running an exchange apparently banned by china, largely disliked by regulators and disinvited by governments, and not funded by any government or large investors, right?
All the proposed usecases except speculation and censorship resistant wealth transfers (eg. getting money out of Russia) have been abandoned.
Just because you haven’t found crypto helpful doesn’t mean it doesn’t have use cases.
Maybe the payment is related to, say, Cannabis, so companies like Wise would refuse to facilitate it [1], legal or not.
Or perhaps they've heard the stories of PayPal seizing funds with no explanation or recourse (e.g. [2]), and don't want to roll the dice on that.
Maybe they want to exchange currency at the actual market rate, rather than PayPal's 3-4% spread.
Or they might not want to wait forever for a two-sided ACH transfer (usually the cheapest option with e.g. Wise), or pay wire fees and still have to wait until Monday morning before a US bank will consider processing the transfer.
[1] https://wise.com/acceptable-use-policy
[2] https://arstechnica.com/tech-policy/2022/01/paypal-stole-use...
It’s crazy how stupid HN becomes at the word crypto.
“A non binary view about crypto omgzzz can’t compute!!!”
It is no different from saying "In some places I can buy houses with cocaine". Sure, if the buyer thinks they can immediately offload cocaine for cash, the buyer might take it. That does not mean that the house is sold for cocaine.
2. All the "not your keys, not your coins" mindless chanting misses the point. While true, a modern financial system depends on being able to have trust in financial institutions if you actually need to move money quickly. Years ago I went the "move everything to cold storage" route, and it was a major pain in the ass, not to mention slow and expensive every time you needed to move to an exchange to trade or convert to fiat. It's the equivalent of stuffing your money under your mattress - valid for emergency situations, but not for a currency you actually want to transact in.
Oh, and the reason hardly anyone actually stuffs money under their mattress any more is that we've built up institutions (e.g. FDIC insurance, SIPC insurance, and the associated regulations to provide this insurance) to reliably protect depositors.
Currencies tanking is not uncommon either. I'm not sure what you think this proves exactly.
The actual tech is sort of irrelevant, it’s the hubris and exceptionalism
A reasonably likely possibility is that the SEC starts sending letters to every issuer and exchange that sells to US persons. If you're an issuer, you have to register as a security or get a no-action letter that says yours is a utility token. If you're an exchange or a broker, you have to register as an exchange or a broker. Sign up for FINRA regulation and pay SIPC premiums. They did that to ICO issuers back in 2017, which is why you don't see many ICOs any more. NFTs were a workaround for that, but the SEC has been saying that bulk NFT issues and fractional NFTs are probably securities.
The SEC has been reluctant to do this, partly because they were still litigating over whether crypto issues are securities, and partly due to political pressure. Last week, the SEC won SEC vs. LBRY with a decision that crypto is almost always a security. Much of the political pressure came from FTX, which is now a political liability. FTX donated to both Republicans and Democrats. Now, on Capitol Hill, key committee leaders from both parties are against them.[1] The SEC is now ready to act.[2]
The crypto industry sees regulation coming and is freaking out. It's not that filing an S-1 is that hard. It's that you have to give all the info crypto issuers like to hide, such as where the money is going, the business plan, and who's running the thing. Under penalty of perjury.
(I want to see an S-1 for Yuga Labs (Bored Ape Yacht Club / Otherside). They raised $400 million, printed some pictures, and threw some raves. That could be the most fun S-1 to read since BOYSTOYS.COM did an IPO for a strip club.)
There are fewer offshore havens available. China pulled the plug on crypto mining. (Literally. Power was cut to crypto mines.) Cyprus cracked down. Japan, post Mt. Gox, licenses and regulates crypto exchanges. Bahaman regulators were about to take FTX into liquidation. Cyprus cracked down after the binary option debacle. There's still Bulgaria.
What will be left after all the sketchy operators are shut down?
[1] https://www.cnbc.com/2022/11/11/crypto-meltdown-washington-t...
[2] https://finance.yahoo.com/news/sec-chair-gensler-slams-non-1...
Of course that would kill crypto.
In general I’m glad the government let the experiment be run. I was not one of the people saying crypto should be banned, and I’m still not. But at this point I think it should be regulated, for the same reason most other investments are.
Doesn't it cost 200K$+ in attorney fees?
How much it costs to draft depends on how convoluted your financial structure is.
try not to conflate the two.
It is interesting that the waves that we are experiencing are nothing new, everything has been repeating every 20-40 years for the past three centuries or more.
Yeah, bitcoin is nothing new. It is the roughly similar thing happening all over again -- people buying something they absolutely do not understand just because they see the value is going up. Investing is hard and here is this golden opportunity -- just put your money in and see it multiply. And for a long time this works because more people are putting their money in and expecting returns. Then suddenly for whatever reason the positive returns dry up (at the very least you have to run out of new capital at some point) and those same people who were only in to speculate now want to get their money back. But as the first are able to do it, the price starts to fall.
Then you get companies or individuals swarming nearby the stream of money because, hey, for every greedy person with capital you will find a greedy person without it. And lots of these people also want to get rich quick.
It really is just another pyramid scheme that lures in people who do not understand finances but want to get rich quick (and some who do understand but are just too greedy to pass on the opportunity or play with somebody elses capital), the difference being it looks way more legit and legal because of the number of investors and amount of capital.
The cycle length has something to do with how long people remember the previous painful lesson before they forget and do it all over again. Remarkably stable over centuries...
One could also argue that the presence of regulators and regulation creates the very problem it tries to solve through moral hazard.
As long as there are schmucks with dollar signs in their eyes and little patience to read history, these disasters will continue - with or without regulation.
I made the argument a couple days ago that CZ thought he was playing "4D chess" as the kids like to say these days by publicly and loudly dumping FTT, and he ended up burning the whole thing down.
In this case it looks like the court is the District of Delaware Bankruptcy Court and there are 29 docket numbers, representing 29 different(?) chapter 11 bankruptcy filings by the same attorney on behalf of 29 differently named entities.
The docket numbers are 22-11066-JTD (JTD because it's assigned to Judge John T Dorsey??), 22-11067, ... 22-11094.
The entity names are respectively Alameda Research LLC; Alameda Research Ltd; FTX Trading Ltd.; Alameda Research Holdings Inc.; Clifton Bay Investments LLC; West Realm Shires Services Inc.; West Realm Shires Financial Services Inc.; Ledger Holdings Inc.; FTX Japan Holdings K.K.; FTX Europe AG; FTX Property Holdings Ltd; LT Baskets Ltd.; Alameda TR Ltd; Allston Way Ltd; Analisya Pte Ltd; Atlantis Technology Ltd.; Bancroft Way Ltd; Blue Ridge Ltd; Cardinal Ventures Ltd; Cedar Bay Ltd; Liquid Securities Singapore Pte Ltd; Maclaurin Investments Ltd.; Mangrove Cay Ltd; Paper Bird Inc; Pioneer Street Inc.; Quoine India Pte Ltd; Quoine Vietnam Co. Ltd; SNG INVESTMENTS YATIRIM VE DANISMANLIK ANONIM SIRK; Strategy Ark Collective Ltd.
This seems awfully confusing. Are the press really supposed to follow all 29 of these docket entries for new filings, or what?
Like cmon now. Isn't that the inevitable progression? And if so, doesn't that mean these folks who insist upon separating state from money just want to become the ruling class?
I dunno. That's just how it always comes across to me.
- https://subconscious.substack.com/p/centralization-is-inevit...
The question is, do you want it to be controlled by rational actors seeking to exploit everyone else, or an organization that has potential for other (maybe even altruistic) motives?
It's a fundamentally contradictory world view, of course. You cannot have cosmopolitan financial capitalism without very strong states propping up an extremely unnatural global order. But you can understand how middle-wealthy tech people ended up there. They were self-made, annoyed with taxes, and primarily held wealth that was generated without geographic ties. This is opposed to traditional middle-wealthy folks, whose revenue streams were historically closely tied to place and/or community.
Now that the End Of History is over, the contradiction is laid bare, and the reaction has been a sort of ideological immune response triggering fever dreams that are increasingly absurd and desperate (metaverse, web3, NFTs).
If you allow for fiat money, then almost definitionally, there's a state that everybody agrees is empowered to create the money or else, why would they continue to ensure the value of money?
The majority of people on Earth live in countries which are considered corrupt & incompetent and have regular bank crashes. It would be a good thing if we remove control of money from corrupt governments.
It’s not worth boiling the oceans for.
But even so, crypto was never really about the poor and unfortunate.
Crypto is about pure greed. Money. Tax evasion. Don’t tell waffle stories about people in other countries please. It was never about them. Be at least honest.
Ethereum and PoS is no longer energy intensive.
I first played around with blockchain in 2011 or so and I still don't know what actual utility this technology is supposed to have. I have never -- never -- encountered a value-producing use case for cryptocurrency that can't be solved by either signed git commits or a SQL database.
Around 2015 a lot of people I thought were smart enough were exploring use cases for blockchain. AFAICT everyone in that space either left the space altogether, is still rambling about solving supply chain fraud (...), or pivoted to shovel salesmanship to support speculators (or speculate themselves).
Now it's "investing" in the confidence of the future of a computing network that can only handle 7 transactions a second, but that still hasn't stopped it becoming the essential oils for tech bros either.
Google dorian satoshi nakamoto newsweeks. The guy is probably behind btc. He worked previously as army contractor and in the finance sector...
Just like TOR network was the work of 2 previously army contractors (I remember that quite well, even if wikipedia doesn't seem to remember as well).
Beside, Belgian and other CB (not even ECB) never had a thing to say about crypto with public blockchain of any sort. But monero, which has a private blockchain, has been prohibited in nearly all EU juridiction soon after its launch.
Eh? You can’t like give me anything - you can give me a token - which can also effectively be money. The latter usually occurs due to some other trust relationship needing to be established - we are back at square one.
It doesn’t solve the underlying difficulty of exchanging physical goods and services that are not tokens - you, know, the actual hard part. It also doesn’t solve the laundering aspect once you try to get those tokens liquidated to something not volatile as fuck.
You can't trust the git guy.
Eg: all of the weird supply chain nonsense around blockchain. You can keep a ledger and so on, but if there's corruption/theft in the physical warehouse then the ledger is worth only and exactly the disk space to which it's written. No amount of distributed consensus will change anything about the fact that Joe's cousin's friend heard about the shipment and stole 10% of the bulk good and replaced it with dirt to make the weights match.
The problem of doing business with people who you don't completely trust is very real. However, blockchain offers no solution (except and unless the thing you are trading is something that literally be placed on a blockchain, ie nothing physical and nothing that depends on a legal system to enforce).
The "I don't trust you" market consists of everyone who does business using written contracts. So, nearly everyone.
Now, I may trust someone now, but circumstances change. People change. I don't trust the universe to be constant. I thus want to enshrine agreements in contracts and and I want there to be institutions that can offer objective (within reason) arbitration in case my counterparty and I come to disagree in the future.
I don't know what sort of business you operate in, but in my industry, trust is paramount and is practically equivalent to capital. You'll simply not even be employed unless you are trusted. It takes a long time to build a track record and you can lose it in the matter of seconds if you make poor decisions.
So yes, IMO the world operates fundamentally on the basis of trust. I don't believe for a moment that long term successful business can be conducted in an environment without fundamental trust between counterparties. Again, trust does not equal blindly taking people at their word or neglecting due diligence. "Trust, but verify" is the saying.
Trust is inherently a forwards-looking thing. If you don't trust someone not to change in a way that breaks the promises they've made to you, that's not trust at all.
> Fundamentally, I do business with people I trust.
> I don't know what sort of business you operate in
Software industry. When employers have tried to screw me out of things they promised me, I've pointed to sections of written contracts (with the unspoken understanding of a lawsuit if their side of the contract is not upheld) and it's saved me multiple times. These companies just don't care about what they promised you, you can't trust them, they only respond to the looming threat of legal action. On the flip side, I've been screwed before at those times where I didn't keep a meticulous paper trail. The last one was particularly tough because I thought I had made close friends with the person I was doing business with, and I genuinely thought they could be trusted, but they ended up stiffing me out of payment in the end.
In the software industry and in particular working at start-ups, promises are worth jack shit unless they're in a written contract. Nobody trusts anyone to uphold promises. I would love to work in an industry where people could trust each other to uphold their word. What industry are you in?
Courts are extremely expensive and time-consuming. Contracts are definitely not the opposite of trusting who you're doing business with. If you do not trust someone to fulfill their side of a contract, you probably don't bother writing up the contract. The contract is there to punish breach of trust, not to establish trust.
Security is the opposite of trusting who you're doing business with. There's a reason super markets -- the most common type of business operating without high trust -- employ loss prevention professionals.
Notice that the blockchain offers no substantive defense to a five finger discount...
If someone can only be trusted under threat of punishment, that means that they aren't actually trustworthy in the first place. I think we might have different definitions of trust. If I fully trust someone, to me that means that I know there's no need for the threat of court at all, because I can be sure that they will uphold their word even if it's in their better financial interest to break it.
Did you trust the POTUS when he said that Iraq had WMD before starting a war? I suppose he's a painter now so everything's peachy.
A lot of people have been giving reminders of the general untrustworthiness of establishments, including Snowden & Assange. Establishments that many people are forced to deal with.
It would be nice if everybody could be safely trusted. For those who readily trust, there is no problem to solve.
However, some other people see untrustworthiness everywhere, so they take opportunities to try to opt out of the system by engaging in a trustless system that does not require privileged middlemen. It's been baby steps so far.
But the blockchain space has an extreme bias against the existing finance world. Frequently products in the space want to tear it down as they view it as predatory.
This leaves us with the current situation, the crypto industry speed running the history of finance and a technology in search of a problem.
[1] - "How Mainframes Keep The Financial Industry Up And Running"
"...92 of the top 100 banks use the mainframe to provide banking services to customers, and other types of financial services companies depend on the mainframe, as well. Visa, for example, uses the mainframe to process billions of credit and debit card payments every year. According to some estimates, up to $3 trillion in daily commerce flows through mainframes..."
[1] https://blog.share.org/Article/mainframe-matters-how-mainfra...
https://www.fiscal.treasury.gov/ach/ and https://www.swift.com handle much of the US, and it's a system developed in the 70s (or earlier) and it works.
It could be modernized and things like https://explore.fednow.org are trying to do that.
But the problems involved are not things a blockchain would secure because there's a trusted intermediary which can just run a database.
in every other rich country, you just log in to your bank's web ui thing, click "SEND MONEY TO MY MUM", and then it sends it, for free, to your mum, with no risk of your mum being able to take more money, no random intermediary, no worry about if it actually gets there, no third party holding it in a non-bank cash account, no pre-authorisation, etc. you enter a bank identification number and an account number (and a name, usually, to avoid mistakes) and it just happens and it just works. in most countries this is quick, even, e.g. in the UK it's almost always < 5 seconds.
FOR FREE.
no blockchains, no multi-billion ponzi schemes, just a boring and simple service offered by every bank in the country.
making the Fed make banks just introduce free, instant bank transfers could have saved the world tens of billions of dollars and apparently tens of billions of tons of greenhouse gases.
These are in theory lessons that are meant to be passed along by the Public Education system but ours is pretty broken.
Most of the problems people perceive with the banking system are completely societal, 0% technical. If your bank doesn't let you send money instantly to your friend for free, that isn't because your bank needs a blockchain.
that's excellent, thank you for putting it better than I did.
Let's not ignore the non-"rich" countries
Also the name given during the transfer aside the IBAN won't make the transfer fail as far as I know if incorrect.
The banks are adding some instant money transfer services in the last few years though.
the EU did this, SPANNING TWENTY EIGHT COUNTRIES. they don't even all use the same CURRENCY.
edit: sorry, it's 36 - EU27 + EFTA + UK + microstates
> The banks are adding some instant money transfer services in the last few years though.
it appears to me, judging from talking to Americans, and my own use of the US banking system, that customers do not even generally have ability to login to their bank's website and transfer money, AT ALL, forget "instant".
overall, this is such a bizarre reply, but emblematic of many of the problems the US faces - "it's too hard to fix $problem_with_well_known_solution because of entrenched interests, so let's create this absolutely awful parallel system that creates a whole new world of entrenched interests who will in turn block any innovation".
why do you think it would be hard? ACH exists, and lets banks transfer money. why can't banks make it better like Australia did? or have the same structure create a parallel, better transfer system banks can opt in to, like the UK did with FPS?
I would have said that letting venmo/paypal/etc do it was the worst possible solution, but then I could not have imagined that another solution people would seriously propose was "cryptocurrency".
This is what happens when you build a country with a disproportionate number of the sort of people who are willing to say "Fuck it. Building a decent living in my home country is too hard. I'm going to cross an ocean in a steam ship and start a new life on a new continent where I am a complete stranger."
I say this as an American who has made similar choices of questionable wisdom.
The new services (and the tech companies) only selling point is they can be instant and cheaper or free (though not all older approaches have fees). And serve groups like younger people with no credit.
And what is your post emblematic of with it's abuse of caps and stereotyping? I'm just talking about why they haven't replaced an older solution that "isn't broke" since it gets 99.9 percent of the job done already. No need to lose your mind.
> Problem: US healthcare is broken.
> Solution: Build a for-profit company that will generate trillions of dollars in value for its shareholders, all of which will come from payment for healthcare
Or send money to a wallet in China.
I assure you I understand the rails going on in international money transfers, and the amount of different systems, protocols and hops to make it happen is staggering.
It can take sophisticated modern treasury operations years to get up and running in new jurisdictions independent of the regulatory challenges.
If we could isolate it to the compliance and risk management portions of the challenge it would increase innovation dramatically.
KYC is a feature, not a bug, so there has to be at least some sort of relationship even if it's via mutual registration with a third party.
Also, modernization of banking systems, including inter-bank transfer, has been slowing happening in the background for the last decade. AFAIK no one is using pow, pos, or blockchains (except, maybe, just in the sense that traditional databases have many of the same desirable attributes as a blockchain).
> could unlock innovation in everything from payments to mortgages.
Innovation in mortgages didn't work out so well last time, and honestly the actual origination of a mortgage is one of the least painful and inefficient parts of real estate.
When bitcoin launched we really did need innovation in payments. Apple Pay and Google Pay solved a lot of the problem, and the recent rise of "bank/lender as an api" startups popping up now solve a significant part of the rest of the problem.
For me, enthusiasm for "the blockchain" is a quick way to identify a) people who promote technologies without bothering to research the fundamentals and b) crooks/charlatans.
That project was in an environment where chain of custody is an established mechanism for ensuring public safety. Layering a web of trust over the top of that was something the users could mostly digest. Consumers can only use software signed by a particular department or person, only approved software is signed, and approval requires a chain of approvals before it going back to an original signature that says "these are the bits we gave you".
That's a useful application of the Merkle Trees. But you'll note there's no distributed consensus, and there's no Proof of Work. Or rather, the proof inferred, backed by process and in this case legistlation.
Blockchain admits it's only barely a Merkle Tree right in the name. Our graph looked a lot more like trunk in a git repo. Slightly more tree-like but people only care about the last node.
Then e.g. in Ethereum there's also a Merkle tree of the entire state as well.
> there's no distributed consensus
Distributed consensus is necessary if you want high availability and replication for your Merkle tree.
If data in your tree is important, you want to replicate it, right? You want to be sure it's stored on multiple nodes.
So this distributed consensus thing, Byzantine Fault Tolerance, it basically gives you a receipt that at least N nodes have this data stored.
You didn't implement it because it takes considerable effort. But if you implemented Merkle tree with high availability, you'd get something very similar to blockchain.
Yes!
> You didn't implement it because it takes considerable effort.
I'd wager it's because he was smart enough to read the man page for rsync and didn't over-engineer a non-solution to a non-problem in his particular use-case.
No, distributed consensus is necessary if you're willing to sacrifice correctness for availability.
>> public safety
> So this distributed consensus thing, Byzantine Fault Tolerance,
Show me a blockchain that actually implements BFT. Longest chain wins is not Byzantine Fault Tolerance.
?!?!
Do you think it's most correct to have only one replica?
> Show me a blockchain that actually implements BFT.
A lot of blockchains implement some variant of PBFT. Including the one I made: https://gitlab.com/chromaway/postchain/
If I makes you feel any better, I see Raft as only BFT during leader election, the rest of the time if the leader is a bad actor then everything is fucked. It’s a game of Secret Hitler.
Remember, the Byzantine Generals problem is what the BFT term is acknowledging, and the problem with the generals was one of sabotage, not just missing messages. It’s only statistically unlikely that longest chain is created in earnest and not via malfeasance. But the bigger a system scales the more frequent counterexamples occur. That’s the lesson of every scalable system. Bad days that used to happen once a quarter now happen a couple times a week.
Edit:
> In a consortium blockchain, typically blocks must be approved (signed) by a majority of consortium members.
Well, well. Adults have finally joined the blockchain community. Maybe there’s hope yet.
I've heard a lot of people used it to buy drugs on the internet.
Also, the bounty was awarded to a company who is theoretically developing a solution. I'm not holding my breath, and anyway I hope for the sake of everyone guilty of harmless "crimes" (buying recreational drugs) that the anonymity holds.
To track cash, you need to surveil each point at which the cash changes hands, otherwise that information is lost forever. To track XMR, you likewise need to surveil each point at which XMR changes hands. In some ways, the process is similar to reconstructing TOR traffic - you can't passively observe and deanonymize the entire network, you have to actively target a specific actor. I believe that's what the IRS is talking about when they offer their bounty.
It did seem though that some targeted attacks where you obtain the private keys of separate individuals could allow you to confirm that they transacted via Monero in the past by inspecting the block chain with these keys.
However, private keys are easy to strongly encrypt, typically don't leave your own machine, and can be safeguarded in many other ways. So in practice, they are impossible to lift from a sophisticated user without performing an equally sophisticated attack of deception, for example an evil maid attack with specialized hardware/software.
A real bounty would be close to 100x that number.
The value is in a permissionless and censorship resistant financial network. You may not find that valuable, but that's ok.
Assuming you do believe that decentralization is nice to have, applications like decentralized banking (ie. lending, borrowing, exchange of assets) become valuable.
There are also emergent culture sources of "value" in the industry, such as medium native artforms in on-chain generative artworks, distributed multiplayer "runtime" systems artworks, on-chain gaming and metagaming, etc.
I understand that for many people, even if you grant that _some_ people might find the above legitimately valuable or useful you may still believe that it doesn't justify the energy costs. To that my response would be that all of the above are serviced by networks like ethereum and its various layer two solutions, none of which utilize proof of work, and the sum of which have a fairly modest carbon footprint, as with other computationally inexpensive digital technologies.
If you take issue with Bitcoin specifically I can't really offer an argument with conviction. BTC is what got me into the industry, and I think the BTC whitepaper is a brilliant example of human ingenuity, but more recent advancements in the technology leave me skeptical about the societal ROI on large scale PoW operations.
> I think the BTC whitepaper is a brilliant example of human ingenuity
I largely have the same problem as hinkley (sibling comment): I had seen most or all of these ideas prior to the emergence of BTC. I first countered Merkle trees... gosh, forever ago. Got really into cryptography in the 90s. Etc. The idea of creating a currency backed by PoW didn't seem ingenious; it seemed like a particularly silly application of otherwise quite useful technologies. AFAICT it still is mostly useless, except that it made some people very wealthy.
Anyways, I'll go back to yelling at kids to stop picking my tulips.
https://www.npr.org/sections/thetwo-way/2014/01/22/265060754...
So no this effort was not enabled by crypto
I learned that by watching Cool Runnings.
Does that make it a good financial system? To the degree that a clown car is a good public transport system.
You have always --always-- lived in a high trust society with trustworthy institutions
I will concede your point if it means you'll agree that at the very least cryptocurrency is useless to people in the USA.
(Even as a hedge. My resiliency to societal collapse comes from the social relationships I maintain in my local community and the collection of skills and knowledge we collectively have, not my ability to flee to New Zealand and hope my digital tokens still have perceived value.)
For those either on the wrong side of the society (eg. Source of income is what the society defines as crime etc) or living in a society where your wealth (possibly acquired through corruption) can be seized without recourse, it is potentially a useful way to store and transfer wealth in a way that is difficult and expensive to interfere with or detect. This is a real use case though possibly not a morally defensible one to most of us.
The other theoriticical use case of having a form of liquidish currency that is not devaluable at whim by governments has not come to pass due to speculation and volatility.
The rest are either speculating OR selling shovels to the gold diggers.
Eventually everyone realized that the value-add of the utility those tokens bring is roughly ~$0, and the only reason tokens in general, and those tokens in particular have any value at all is because people buy them so they could sell them to a bigger fool.
Token producers thus took the next logical step[1] - dispense with any promises of token utility, and go straight to minting NFTs and fartcoins. Why bother actually developing a product and ecosystem when the only thing people buying from you care about is the pump and dump?
[1] I'm omitting the various ponzicoins, here, those are straight up, unabashed fraud, without even a fig leaf to cover themselves with. :)
I can not.
It's been 13 years and there's still nothing.
It was never anything else but a scam and can not be anything else but a scam for all crypto"currencies" with a transaction fee are negative sum games.
And yet, we have these middlemen like Coinbase and what not. IN theory, decentralized currency is awesome. In practice, almost impossible. Novel idea for sure but it is time we admit that it cannot be implemented without middlemen.
1. Establish a presence at an exchange (you need to do this only once)
2. The receiver needs to establish presence at their exchange (every receiver of yours need to do this)
3. Transfer money to the exchange
4. Buy coins and move them and the receiver exchanges back them to money
5. The receiver needs to move money from the exchange to their back account
Reminder: you want to transfer money and crypto"currency" is merely a vehicle to do this. And so turns out the hard part is #3 and #5 -- integrating into existing banking systems and #4 is completely superflous. For example, wise.com (nee transferwise) solves the same problem except without the receiver needing to do this nightmarish rigmarole.
Not trusting the middle man would require the entire world to switch to some crypto"currency" and this is completely unfeasible with the current ones.
You don't want to transfer money, you want to transfer value. If the recipient can use the crypto currency to buy something else, they don't need an exchange.
Here's my very simple setup: have a bunch of mbtc sit in a wallet. Open the wallet. Insert the password. Insert address and amount. Insert the password again. Done.
I can do the same with a bank, but it takes much longer (i.e. days instead of seconds or minutes) unless the recipient is at the same bank, or I pay extra and they're in the same network, and I need to rely on the bank to allow my payment. Want to buy porn, drugs, or want to gamble your hard earned money away? Good luck using your VISA or PayPal for that.
There's plenty of potential in crypto, it doesn't need to replace any and all usecases of banking to be useful.
Everyone wants to transfer money except a vanishingly small percentage of the population who wants to use these things. Aside from a rounding error, no one even understands what they are or how to use them. I get invoiced for services in money, I pay my taxes in money. There's nothing else.
This has been the favorite poster child of bitcoin shills but it's been, again, thirteen years and it still doesn't work so much that there has not even been a credible attempt making it work.
You're not one of them. That's fine, not everything has to include you to be useful.
Who does? People who sell bitcoin hardware and one small tourist shop in colorado that sells christmas ornaments.
Wow, what utility!
I also occasionally spend money at international businesses on things PayPal, VISA and MC aren't fond of, so short of putting bills into an envelope and sending them it's difficult to do. Crypto solves that for me. It's quick and I don't need anyone's approval of the industry I'm spending money on. It's like cash for local shopping, minus the large acceptance. I'd love to see more businesses use crypto, and for it to be less roller-coaster-y, and to have less energy waste etc, but it is what it is, and it still works for me.
Not at all, a simple wire works , yes , even for porn.
That's getting better, and some day it will probably work globally and near-instant, but we're not there yet.
I mean international money transfer using Bitcoin doesn't work. Currently Wise leads in the international money transfer business and something even better Bitcoin should have arisen if the crypto bros' claims were true -- but there's nothing.
IMO there is one saving grace of cryptocurrencies, but ultimately this is also the reason why they simply won't be accepted: they are temporarily out of government control. This allows one to funnel funds in and out of hostile jurisdictions. This is a genuinely beneficial use case for people trapped in these jurisdictions. However, I'd argue this is such a vanishingly small portion of the mindshare and "business" conducted with and on behalf of the crypto industry, that it doesn't offer even a shred of redemption. The one altruistic use case is practically drowned out in the insane amount of buzzword laden echo chambers coming up with ever more hare brained structures and concepts to sell to each other. I wonder if these people even recognize how much of a caricature they have become.
I really connected the dots when I read some banker's messages to Elon Musk about how SBF was pitching some blockchain silliness for Twitter (as he would), and even Elon Musk, the master memer and troll, recognized how silly the idea was.
Banks controlling who gets to participate in sending and receiving payments is obviously bad in my opinion. Being able to participate in the economy is fundamentally important. The government cannot outlaw a legal business, but banks and payment providers can do it for them. That doesn't bother anyone that buys a pop album off Amazon, but that's a different issue if you want to sell porn or drugs or whatever US morals have issues with and just get cut off from payments, so that your willing customers cannot pay you. When that happens, people get out the old "it's a private company, you have no right to their platform"-spiel and crypto-currencies solve that.
Crypto-currencies are to finance what the fediverse is to social media. They have shortcomings, in a perfect world we wouldn't have any need for them, but they fill a niche in the real world we inhabit.
I'm sorry but I deeply disagree with this. If you want to do commerce and your area of business is shady/illegal, then the way to change it is to campaign for a change in the law. All that cryptocurrencies accomplish is that people are able to sidestep the law.
I'd like drugs to be legal, government controlled and taxed. But until that day comes, the fact that drug dealing can't be conducted using the official financial system is a feature, not a bug.
Not without changing human nature. If there is a get-rich-quick scheme available, there will always be takers.
Then there is nothing left to do.
"I can clearly see the revolutionary potential of blockchain."
Started in 2009. 13 years now. How much longer do we need to see the revolutionary potential ? Isn't it obvious that there is no real practical usage ?
What do you feel is the "revolutionary potential" here? Bitcoin has been around for a while, and I surely haven't seen it.
I see this stuff only used for scams, speculation, and illicit transactions. None of this is "revolutionary" - scams, speculation, and illicit transactions have been around as long as money.
Try thinking about people in Turkey or Venezuala, where the yearly inflation is 100% - 5,000%. Bitcoin looks like a relatively stable safe heaven in comparison.
https://www.coindesk.com/layer2/2022/10/25/turkey-cryptocurr...
In the US it was illegal to send dollars to Wikileaks. Is it really your money if you aren't allowed to send it to whoever you want?
Imagine instead of Wikileaks it was a political cause you truly believed in and wanted to support but your government didn't like. Surely you can see how they could label any money flowing to this cause as an "illicit transaction". Dn't you think that you should have the power to support whatever cause you believe is right? Or do you think that only your government should decide what are the approved political causes you are allowed to support?
From the article you posted, it seems like its primary value there has been as a proxy for other [more stable] currencies.
USD did that something like that for a while when it was gold-backed. How is it now revolutionary when crypto does the same thing backed by fiat currencies instead of gold?
2/3 (D) 1/3 (R)
https://www.opensecrets.org/elections-overview/top-organizat...
70 million in one year. Yikes. Seems like the company was full of bad decisions.
Also while it’s kind of a thing to buy influence to the legislative process, buying your way out of justice isn’t really. There’s way too much apparatus outside of electoral politics. FTX wasn’t investigated because what were they going to be investigated for, it’s an unregulated offshore financial outfit with no signs of distress until it went boom, like most “Ponzi schemes”.
According to MarketWatch, he was the second largest donor to the Democrat Party.
Good for him I guess that Dems did well in the election. Though, I would love an independent probe to ensure there's no quid pro quo.
The Republican party has been defunct since 2008. I say this as a republican. Yes, they have local machines in isolated areas, but the party itself is non-existent on a national level, except when they scrape by due people being disaffected by the democrats. The Republicans have not been a true majority party for decades.
You will certainly see certain republicans shouting this, myself included. You will see smaller local groups shout this. But the national party does not really exist
Source: was a quant at some hedge fund in a past life.
"Musk responded to the text by asking if Bankman-Fried had “huge amounts of money?” MacAskill said SBF was worth about US$24 billion at the time and could be willing to provide as much as US$8 billion to US$15 billion in financing." [1]
[1] https://forkast.news/sbf-wanted-to-join-elon-musk-twitter-de...
What does it mean for funds tying to demands?
Might make sense to tax the people doing the work less and the people owning stuff more. Should be a homerun policy in any democracy.
It's Enron accounting all the way down. Except in Enron's case the accounting was actually creatively done to dodge regulators. These guys didn't even have that to worry about.
Michael Grimes [IBanker at Morgan Stanley]: Do you have 5 minutes to connect on possible meeting tomorrow I believe you will want to take?
Elon: Will call in about half an hour
Michael: Sam Bankman Fried is why I'm calling https://twitter.com/sbf_ftx/status/1514588820641128452 https://www.vox.com/platform/amp/recode/2021/3/20/22335209/s... https://ftx.us
Elon: ??
Elon: I'm backlogged with a mountain of critical work matters. ls this urgent?
Michael: Wants 1-Sb. Serious about partner w/you. Same security you own
Michael: Not urgent unless you want him to fly tomorrow. He has a window tomorrow then he's wed-Friday booked
Michael: Could do $5bn if everything vision lock. Would do the engineering for social media blockchain integration. Founded FTX crypto exchange. Believes in your mission. Major Democratic donor. So thought it was potentially worth an hour tomorrow a la the Orlando meeting and he said he could shake hands on 5 if you like him and I think you will. Can talk when you have more time not urgent but if tomorrow works it could get us $5bn equity in an hour
Elon: Blockchain twitter isn't possible, as the bandwidth and latency requirements cannot be supported by a peer to peer network, unless those "peers" are absolutely gigantic, thus defeating the purpose of a decentralized network.
Elon: ["disliked" "Could do $5bn ..."]
Elon: So long as I don't have to have a laborious blockchain debate
Elon: Strange that Orlando declined
Elon: Please let him know that I would like to talk and understand why he declined
Elon: Does Sam actually have $3B liquid?
Michael: I think Sam has it yes. He actually said up to 10 at one point but in writing he said up to 5. He's into you. And he specifically said the blockchain piece is only if you liked it and not gonna push it. Orlando referred Sams interest to us and will be texting you to speak to say why he (Orlando) declined. We agree orlando needs to call you and explain given everything he said to us and you. Will make that happen We can push Sam to next week but I do believe you will like him. Ultra Genius and doer builder like your formula. Built FTX from scratch after MIT physics. Second to Bloomberg in donations to Biden campaign.
“Let me add useless, wasteful, and costly blockchain “tech” to your money-losing CRUD app. By the way, did you know we’re massive Democrat donors?”
Like offering poop flavored ice cream with vomit sprinkles.
If any of this had happened in a non-rules based world or even at the periphery of our “civilized” world, a whole bunch of US-financed NGOs and “civil society” thingies would have been up all in arms about it, with cries of corruption and the like. But the moment when it turns out that the second largest financial donor to the US President is basically a crook and a fraudster all those voices are suddenly silent.
If that was to set the stage for reinstating Trump, it seems to have backfired massively, as Trump (of all people), called him out as a BS artist and RINO.
Still, on what should have been of the busiest weeks in Twitter's history, he found time to use his Twitter bullhorn to advocate voting Republican in every race.
That's normal for trading firms. Lehman Brothers went down about this fast.
The larger finance and regulatory systems are no longer willing to tolerate long "pauses" in withdrawals from crypto companies. Now, you "pause" withdrawals for a day and you're dead. Back in the Mt. Gox days, crypto exchanges went into limbo for months before the hammer of bankruptcy came down. That's over.
It did not “happen that fast”. It’s been forecasted and debated for weeks if not months. We were just not privy to those meetings, IMs, and calls. You’d have to be incredibly handicapped to assume behind the scenes comms aren’t occurring and merely a deluded rube to assume it’s all “nice”.
The analytics exist to predict these things and people chose to let it play out, see if it could be fixed before the bill was due.
This is the free market. Awareness exists for those with the money to build the analysis. They sit and gamble on the actual outcome that will occur.
SBF screwed up by assuming the establishment cared enough to rescue his ephemeral pet. The establishment never cares about the fallout to the average person. “Free market” to be stupid. Where being smart is kowtowing to established rule.
Because the establishment is people too. Same core motives. Same lack of obligation to buy into others bullshit. Life on Earth is sorted. It’s normalized. Actual science of net new discovery is the only true frontier, not engineering new versions of old shit. Crypto is just a new version of a manipulated value store like religious symbols and nation state currency. It has all the same upsides and pitfalls because it’s belief in nothing but the imagination of a handful of dumb apes.
As a data structure it’s not interesting; a linked list with a unique hash in place of an index. Yes yes much mathematical notation can be jotted down to explain it but the same can be said of growing lettuce and we don’t seem to feel the need to do so. Short hand recipes and experience suffice.
Crypto is former script kiddies clinging to nostalgia as humans do. It fills the same existential hole as things like superheroes, war heroes, and gods; not for everyone and demanding it should be is the same old human imperialism of thought. We don’t need crypto like we don’t need fiat currency, because special people don’t exist. Any rules for defining them are arbitrary given the unknown reason for our existence.
Rationalists, basically. It sound thoroughly glib but is the actual answer.
I get it. Like utilitarianism itself, it makes a lot of sense in the small and like zero sense at all generalized.
It happens all the time. The VCs know how their portfolio companies operate and still keep supporting them.
Quick reminder that we're on a VC board that has participated in this shell game; this fraud that has stolen money from naive people.
And before I get downvoted to oblivion or moderated by @dang I hope a few people read this comment and realize how much was stolen from you so the sand hill gang can play monopoly ... it was a lot.
Oh and it is all the fault of the Devs
https://twitter.com/SBF_FTX/status/1590774827467812865
If you stick your company name in your twitter handle - does that mean the company owns the twitter account too???
Oh wait, it was yesterday.
That's when you know shits getting real.
When something bad happens, bitcoiners say "this is good for bitcoin".
Although crypto is marred with scams and is by nature often shady, this isn't about crypto but about 1 single person, the ex-CEO, stealing people's money.
The FTT on its balance sheets as if it was real money is very crypto-stupid though.
https://finance.yahoo.com/news/sam-bankman-fried-secretly-tr...
This is exactly what you would expect absent regulation.
If you win, you win.
If you lose, your customers lose.
I don't think brazen criminals should get a different perspective than sneaky ones; perhaps a worse characterization because they either don't recognize what they're doing is wrong, or they simply hold society in contempt.
This is just investing with client funds, which the US learned the hard way must be carefully restricted. The US has the Glass-Steagall Act, and deposit insurance to try to prevent bank runs like this.
https://www.bloomberg.com/news/articles/2022-04-25/sam-bankm...
Me, after watching people sell no-hope dotcoms, dubious real estate, and cryptocurrency: “… unless they thought they could cash out before the other fools wised up”
>This is just investing with client funds...
This is just plain not true.
If he siphoned off even 1% ($160M+)- you can bet he's going to lose it in bankruptcy proceedings.
He will probably have dispersed quite some sums to friends and family, some of that will come back to him in one way or another.
Finally, he will be able to go on the celebrity speaking circuit for quite a while...
Yeah, talking about the power of failure what he learned from it.
Hopefully the US Gov goes after him and forces him to pay it back to creditors/customers, similar to Trevor Milton/Nikola
He openly talked about how the whole thing was a Ponzi scheme.
From Levine’s column yesterday:
> “People on Twitter now are like “he admitted that FTX is a Ponzi!” but of course that’s not true. He conceded a certain validity to my claim that some crypto businesses — not his — are Ponzis. He is just in the business of trading their tokens.
“In fact, I came away from that conversation bullish on FTX and Bankman-Fried. My view was, and is, that if you talk to a crypto exchange operator and he is like “crypto is changing the world, your old-fashioned economics are just FUD, HODL,” then that’s bad. A wild-eyed crypto true believer is not the person to operate an exchange. The person you want operating an exchange is a clear-eyed trader. You want someone whose basic attitude to financial assets is, like, “if someone wants to buy and someone wants to sell, I will put them together and collect a fee.” You want someone whose perspective is driven by markets, not ideology, who cares about risk, not futurism. A certain cynicism about the products he is trading is probably healthy.”
At the very least, it's apparent that SBF sees crypto as being heavily based on speculation that's disconnected from any actual value proposition, but he's choosing to exploit and profit from those systems. And it's now apparent that he also was engaging in speculation with user funds himself via Alameda.
A wild-eyed crypto believer might lose anywhere from a few thousand to a few million of their own money in poorly placed speculation.
A sophisticated market-maker will facilitate the loss of billions (about $10 billion in this case) from numerous people.
Which is more dangerous? A HODL who loses their savings on some speculative crypto purchase, or the next Bernie Madoff?
A wild eyed Luna type can lose a lot of people’s money and is probably more likely to do so than a skeptical trader making deals. The issue with this wasn’t that general heuristic which is still true (imo), it was SBF’s decisions despite that (which were bad and extremely high risk, but different than it being a ponzi).
Pair that with an intelligent enemy looking for ways to destroy you and this is where it ends up.
The difference Levine is pointing out is between the type of person operating the exchange. It is not the comparison between janitor and CEO at a fortune 500 company.
A "true believer" will cause just as much (or per Levine's assertion: more) damage as a "sophesticated crypto cynicist", but one will at least understand financial fundamentals while the other brings none of the learnings from running any kind of investment or banking firm.
The largely unregulated, uninsured, and opaque marketplace of crypto, facilitated by people like SBF, has been the conduit for the true believers.
If somebody says "I know you're a sucker and I'm going to take your money", (as SBF did in Levine interview) they just told you everything you need to know. You can rest assured that their other dealings are dirty, as is now coming to light for SBF.
I'm not sure why "good faith" is being brought into question, and I certainly haven't challenged the good faith of those who disagree with me. So I'm not going to address that aspect of the conversation.
Per the commenting guidelines, we are expected to believe people are commenting in good faith even when they say:
>A wild-eyed crypto believer might lose anywhere from a few thousand to a few million of their own money in poorly placed speculation.
>A sophisticated market-maker will facilitate the loss of billions (about $10 billion in this case) from numerous people.
Which is either a deliberately bad comparison (akin to janitor vs CEO), or completely irrelevant in the context of what SBF was saying / what Levine thought.
A wild-eyed crypto believer would make all the same mistakes as the sophisticated trader and run the exchange into the ground while breaking laws. The sophisticated trader will typically run their business within the legal framework, while taking as much profit as possible.
That's a pretty funny statement. Markets are ideology.
It's the government's job to prove crimes.
FTX CEO has been openly lying about the impact for a long time now, and has mismanaged billions of dollars (of other people's money). Resigning doesn't seem like a reasonable punishment.
Andreessen [of Andreessen Horowitz, investors of 350M in a company that's single asset is currently a landing page] positioned the new company as a long-awaited solution to the nation’s “housing crisis.” ... “community-driven, experience-centric service” — to explain how the new startup would “create a system where renters receive the benefits of owners.”
This sounds completely different than WeWork, which had the simple goal of changing the world, one beer-Friday at a time.
The sad part is the AZ money isn't the dumb money in this deal; that will flow in latter.
I don't know much about this whole thing. It sounds likely there will be investigations, and they may prove "large scale theft" at that time. But right now resigning is the only way for him to "take responsibility".
When everything was going down he tweeted something on the line that everything was fine, he later deleted that but for sure there's an archive somewhere (and I'm sure Elon would be GLAD to provide that data). That's fraud, and I'm sure there's a lot more like that once the DOJ/SEC start looking around.
I like SBF, honestly, I like his personality, I don't believe he's a bad person, I could even believe (with a truckload of salt) that all of this happened without him being fully aware of what was going on. But, real is real, and I'm quite sure he will do jail time.
Only a court can decide that.
I will no longer take part in the company and will quietly fly away on my private jet to my $50 million home where I will contemplate my next venture.
https://ustoday.news/both-the-doj-and-sec-are-investigating-...
is he? sounds like his various corporate frauds have destroyed a lot of companies and led to corporate bankruptcies, but what information is there about how much he scooped out before?
He stood to make a lot more from this working out than what the current situation permits.
The allegation is he moved money between companies to support his terrible “hedge” fund. Where have you seen anything at all about him not having a lot of personal money?
Or put another way, where have you seen anything at all about him having a lot of assets outside of the Alameda and FTX groups?
https://www.thestreet.com/investing/cryptocurrency/crypto-bi... (this covers the details, but isn’t paywalled.)
https://www.reddit.com/r/wallstreetbets/comments/ys4lmo/she_...
gold
Edit: Also funny, was the unrelated Matt Damon TV ads about how "Fortune Favors the Brave." Obviously it comes from Caesar, but it was also used in Charles Dickens's Little Dorrit by a character encouraging what later turned out a Ponzi scheme...
That's not what OP said. OP highlighted the fact that a lot of the crypto space lambasts the traditional banking system as being wholly corrupt, despite a lot of the crypto space itself being equally corrupted in the same ways.
Edit: "People who live in glass houses shouldn't throw stones", basically.
i still can't get over the fact that FTX CEO is taking his customers money to fund his gambling firm.
SBF loaned her company 10 billion to trade without basic risk management for trading.
They’re also super dangerous if you have gigantic positions
Anyways they wouldn’t save you from collateralizing your loans with shitcoins, taking leveraged bets with money that isn’t yours, having super high exposure to UST and/or Luna, exposed to hackable defi products. Harder things that “having a good sense for risk” usually entails thinking about.
The real red flags are claiming she doesn’t use math and that she’s never lost a lot of money on a trade despite doing largely human informed trading for size…
But if you are, there’s no reason to just auto trade a position away. The decision of “what to do when price hits X” is a function of many things instead of price, and you’re better off dynamically deciding.
Consider that you could already implement a stop as a 24/7 trading firm anyways
For the peak crypto years it was almost impossible to lose money AS AN EXCHANGE. These clowns really thought they were on fire, and not just in position that random moves could be winning strategies.
She wasn't running an exchange. You're confusing Alameda, the trading outfit, with FTX, the exchange. She was the CEO of Alameda. She was not the CEO of FTX.
It was really tough to lose money, which we all knew was unsustainable.
They're primarily marketed to unsophisticated retail traders as providing protection that they can't provide-- something equivalent to a free put.
In fact, some time back their firm was sued for IIRC essentially manipulating markets to trigger traders stop loss orders in order to swallow up trades at unreasonable prices.
Tiny traders in the largest of markets can potentially get away with using stop losses and not get burned too badly too often, but none of the cryptocurrency markets really qualify as that.
Guess their entire trading strategy was hurr durr the coins go up. Completely unsurprising they lost their asses when gasp the coins stopped going up.
The comfort with risk part seems worse in hindsight. Obviously somewhat less comfort with risk would have been better.
Is any group tracking his location, or is he going to disappear like many that have come before him.
How funny, US intelligence definitely is out of business