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Comment by zeven7 | Hacker News Reader

> Investigating abnormalities with wallet movements related to consolidation of ftx balances across exchanges - unclear facts as other movements not clear. Will share more info as soon as we have it.

From FTX's general counsel[1], retweeted by FTX_Official. So that indicates it's not being sold off legitimately under some sort of liquidation proceedings. It could be insiders or it could be hackers.

[1] https://twitter.com/_Ryne_Miller/status/1591281729125613570

Rumors on Twitter[2] are there was also an update just pushed to the FTX app. Concerns are the update may contain malware. It makes sense to uninstall the FTX app if you have it.

[2] https://twitter.com/zachxbt/status/1591295039946493952

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> Reports on crypto Twitter are that this is a hack

Is that based on some evidence, or is it speculation?

I reworded things to separate the first hand information (FTX_Official indicating they don't know what's going on) from speculation (app hacker rumors).

Some call this a "hack", others who are brighter noticed that the recent FTX limited account unfreeze before they declared bankruptcy was to mask their own personal outflows as they siphoned money from a sinking ship

I saw an update on coindesk that they confirmed it was a hack on their official telegram channel?

What a dumpster fire. But let's be honest, I think retail investors weren't getting anything back anyways. Probably only impacts creditors

Lol, a 'hack.' An unfortunately extremely convenient one that I'll almost guarantee specifically took customer funds, you know, after the bros already took their first cut.

It happens on Wall St as well but more "subtle". Retail investors and tax payers have always been the bag holders.

Do banks get hacked very often? They seem to have their security in order. Probably because they would have to reimburse their customers if something went wrong.

I have direct knowledge of several bank hacks. Most of the time they don’t publish it.

Isn't the difference that banks have insurance for those hacks?

Yes banks have fidelity bonds called bankers blanket bonds (BBB) which cover losses from fraud, theft, etc. The FDIC doesn’t ensure against robbery, identity theft(banking fraud), etc. so this is an important protection for banks to provide.

Ah! I had no idea FDIC didn't cover robbery. Thanks for clarifying!

They will cover the depositor's funds up to the 250k limit in the event of an event where the bank cannot return your funds, but banks assets or property is not covered under FDIC and need to be separately insured.

I imagine they do their best to run a tight ship yes, but I also imagine the fact that banks still run a lot of legacy pipelines and audits means it's also a little harder to find bugs in the apps and websites, that would actually let you achieve much.

When the banks get bankrupt (i.e due overleverage, stealing/using customer's money etc) their customers get nothing back. A such example is MF Global. I'm not going into the whole story why banks and centralised/opaque finance is bad.

Now the whole point of crypto was the tech behind it which was supposed to replace banks, exchanges and missuse of your OWN money. It's supposed to be an alternative to the trash financial tools we already use. The fact that people are using entities such FTX, Binance makes them deserve to be punished for their betrayal. Regardless if they use FTX or JP Morgan they pretty much deserve to experiment the shortfalls of centralised finance. I think it's part of the hello world example of what DeFi is trying to solve.

One more thing: If FTX was hacked I bet it has almost nothing to do with the crypto technology.

https://en.m.wikipedia.org/wiki/MF_Global

You wrote: <<their customers get nothing back>>

Another comment already noted that MF Global was not a (commercial/retail) bank. One part of it was a broker-dealer.

Also, in the United States customers of MF Global brokerage were covered by the Securities Investor Protection Corporation (SIPC) which (to quote Wiki): <<can pay the customer (via its trustee) up to $500,000 for missing equity, including up to $250,000 for missing cash>>. Please read more here: https://en.wikipedia.org/wiki/Securities_Investor_Protection...

Even with all of the bad behaviour during MF Global's last days (to quote Wiki again): <<In January 2013, a judge approved a settlement that would return 93 percent of customers' investments, with the prospect of additional payouts from the company's general estate.>>

Impressive, considering the extent of fraud at MF Global! Can any collapsed crypto exchange claim the same recovery rate? I doubt it.

MF Global wasn’t a bank.

“Nothing to do with the crypto technology” is an empty and meaningless statement.

IF, and that’s a very big if, they got hacked, the fact that $600m could be moved and disappeared so quickly is 100% to do with the “crypto technology”. In the real financial system it is exponentially harder to make money disappear, transfers are logged on three sides of the transaction, you have to hack multiple autonomous and different tech stacks, and you have to wait as the transfers get transmitted, validated and passed in.

“In January 2013, a judge approved a settlement that would return 93 percent of customers' investments”

A great deal larger than nothing.

Wall Street doesn't rug pull people. It sells them bad bets and takes the opposite side of those bets. There is a massive difference.

It’s not a massive difference just a rug pull at a higher conceptual level (informational) because the obvious financial rug pull was done a hundred years ago and has since been regulated.

They always give you the information, too. People just don't always like to read it. Some people don't care, and others just jump on whatever bandwagon they can find.

Almost everyone who has lost their shirt in financial derivatives in the past 50 years could have learned about the risks they were taking from some text in a prospectus somewhere, but chose not to.

That's exactly the same for crypto too though, all the warning signs are constantly there.

It's not that Wall Street gives you warning signs. They literally tell you "this is a probably a bad bet, and you should not take it" in the descriptions of most products. Very few people actually read those descriptions, despite the fact that they really should if they are buying weird financial products. The banks tell you to read them. And yes, a mortgage is a weird financial product.

For example, people who lost a lot of money holding XIV (a leveraged inverse-VIX ETN) had the warning about not holding the thing overnight in bold red text in the prospectus. People holding leveraged CDOs and every kind of CDS had all kinds of warnings in big bold text in their prospectus. The good old "liar's loans" of the early 2000's had big bold text saying "it will be bad for you if you lie about your income."

Pretty much the only financial products that don't come with big bold text saying "you are an idiot for buying this" are single stocks and the most boring of ETFs/mutual funds (eg SPY).

Contrast that with the warning signs from crypto projects, which are a lot more oblique than big bold text in a document that they tell you to read. Wall Street screws you, but they generally do it slowly and they tell you how. Crypto projects just straight up steal your money one day out of the blue and run to Dubai.

CDO2s backed by worthless subprime loans were put into AAA rated bonds. I'd call that an outright scam. For that matter all versions were far more risk than they claimed they were, given that they were worthless, even if there was some fine print somewhere.

I don't have an ISDA with a bank or a copy of a CDO-squared prospectus, but it's hard to imagine that there wasn't a big warning about them being a leveraged product that you should not invest in long-term.

The rating agencies did not understand the products they were rating. However, the warnings were almost certainly on the label.

That's why the rating agencies were sued over this, and not the banks.

A rating inherently claims understanding though. Is a bridge safe to walk on? Some guy who doesn't understand engineering is putting signs on it rating its safety. Ignorance is not a defense at this point.

They did sue the banks. For many things including inflated appraisals of the loans.

I'm sure they have some kind of warning for everything that isn't FDIC insured. But misrepresenting high risk as low risk instead of zero risk is just a quantitative difference. There are plenty of scams that do this. for example just lying about a company's earnings. I suppose the precise crimes they charge them for may differ a bit.

Retail investors are creditors right? Though I guess you mean only the larger creditors. I think the bigger difference is that bankruptcy proceedings take a long time and to a retail investor ‘you might get some money back in N years’ isn’t so different from ‘you get nothing’.

> bankruptcy proceedings take a long time and to a retail investor ‘you might get some money back in N years’ isn’t so different from ‘you get nothing’.

Does anyone actually remember MtGox? It wasn't actually that long ago!

Karpelès never went to jail. He was convicted of poor recording keeping, not of embezzlement, and given a suspended sentence.

If - hypothetically - someone else wanted to take a similar path, the odds of jail time are actually pretty low.

I just had that realization that I'm sure so many have already had.. In a bankruptcy, we really are creditors.. but we're not Creditors, and won't get our money back until big C's have had all they want.

There’s such a thing as seniority of claims and it may often be the case that the mass of ordinary people don’t have the most senior claims but it isn’t about the size – investors (who, in some sense, have the most junior claims) will likely get hosed even though they’re big.

I think there are two ways to think about this:

1. If you’re a company and you have N classes of debt then probably ‘ordinary people’ will all be in the same class (this can vary, eg if you’re a big retail store then wages owed will likely be a different more senior class of debt than anything you owe customers). So the more senior claims are more likely to be big companies as are the more junior claims, and it is unlikely that the ‘ordinary people’ class of debt will be the most senior. For FTX I expect the hedge funds and retail customers to have the same seniority.

2. Hedge funds, etc, will be able to retain lawyers and seek representation in the bankruptcy process in a way that is unaffordable to ordinary people. So they might end up with favourable timelines/restructurings or better accounting of what they’re owed but those arrangements can’t be that the big members of the class get a higher proportion of their money back than the smaller members.

In my country the first creditor that gets their money in case of a bankruptcy is the tax man.

And a lot of bankrupt companies owe the government a lot of money in due taxes...

Greed drives all of us to do things we normally wouldn’t. Given the nature of crypto, unless there’s a good reason to have the FTX app (say as opposed to using their website), then uninstalling it seems like very sound advice.

It’s unfortunate that what started out with altruistic motives, a method for decentralized anonymous asset exchange, is being derailed by opportunists. There was a time where a 51% attack was the biggest concern.

All that said, I’m not surprised at where we are today.

> It’s unfortunate that what started out with altruistic motives

Are you actually buying into SBF’s pathetic ideologies? Or are you more referring to Satoshi’s white paper when you refer to “altruistic motives”.

I can’t understand how anyone would take SBF seriously. He’s a smug charlatan who converted funny money to real money so that he could dump it into politics for his own aims, all while calling his actions “altruism”. Biggest false virtue signaler of all time.

> Or are you more referring to Satoshi’s white paper when you refer to “altruistic motives”.

There's little altruistic about an emission that allocates half of all supply (first four years) going to early miners including Satoshi himself, and leaves only crumbs for later generations.

This was my biggest “a-ha” realization around crypto, that the distribution model is utterly and irreparably broken for the most popular currencies. Whenever I bring this up with BTC/crypto maximalists their counterpoint is that fiat is also unevenly distributed and that it’s not a novel problem. The disconnect is truly puzzling.

It's not a novel problem, but nearly all cryptocurrencies exacerbate it by concentrating the majority of emission on the first few years. Non-pow coins even start with the creators holding 100% of supply.

When they could instead minimize the problem (or limit it to the pre-existing fiat inequality) with a pure linear emission, i.e. fixed block subsidy.

The resulting high supply inflation rate (1/n after n years) would have the side benefit of deterring speculation, and keeping prices (and hence environmental impact) low.

It's not so puzzling when you realize most people are perfectly fine about something if they get paid by it, or think they might one day get paid by it.

Less fine if they won't and someone else will.

Satoshi picked that model probably because it's easy to divide by 2 (x >> 2). He didn't want to prematurely optimize or overthink anything because it was a simple experiment and nobody could have predicted that Bitcoin will become the mammoth it is now.

Shifting by two is dividing by four. Not so easy, after all!

Parent mentions decentralized anonymous asset exchange being the goal and 51% attacks being the biggest concern. That tells me he's talking about Satoshi. Those topics don't apply to SBF.

Agreed. IN particular, William MacAskill[1] is worth particular interest. Closer to abstract low tier cult than serious philosophy. The fact he changed his name (his real name is William Crouch) to sound more like a marketable philosopher should be indicative enough to anyone with an ounce of sense that one should be guarded engaging with this supposed philosophy.

That so many people at FTX called themselves "EAers" or "subscribe to the philosophy of EA" screams charlatanism to me. That it became entwined with the Crypto community is no surprise to me.

It reminds me of the many many "churches" in Africa that tell people great fortune will come their way if they are loyal to this particular preacher or whatnot. [2] It is obvious to me those are a scam. Perhaps more akin to Scientology - creation of a VIP club - the less sense it makes the better?

I've tried to read about Effective Altruism and my conclusions are that it is immature gibberish and these proponents are not fully formed emotionally intelligent adults. [3]

> SBF ended up hanging out a lot with his younger brother Gabe, who was living in an EA commune on nearby Stuart Street.

Communes - but it isn't a cult right?

[1] https://en.wikipedia.org/wiki/William_MacAskill

[2] https://www.nytimes.com/2002/03/13/world/africans-fill-churc...

[3] https://web.archive.org/web/20221027180943/https://www.sequo...

I hear a lot of critiques around effective altruism that boil down to attacks on people who practice it as being immature, naive, or cult like.

At its core, EA asks what the most effective way to contribute to humanity is. Some of the thinkers are mature and have produced amazing projects, givewell being an obvious example.

There are definitely some weirdos affiliated with the movement, but I don't think that that discredits its approach or philosophy.

It's performative in exactly the same way I grew up among with evangelical extremists. You can't reduce moral decisions and ethics to some sort of karmic account balance. Functionally EA allows its promotors to rebrand self interest as actually altruism. It becomes an all purpose end to justify any means. A thought ending cliche to avoid engaging with the actual complexity.

And yet no one ever seems to be able to actually define a better moral decision making process or describe what the argument defeating "complexity" actually is. Just a longer way of saying "I disagree."

What is the evidence that we actually truly know what is most effective in a lot of situations? If "effectiveness" is just a hypothesis then the whole thing becomes quite shaky in terms of resource allocation.

I think the OP is being unfair to Will and EA, but your statement is pretty outrageous. No one's ever come up with a moral or political philosophy other than utilitarianism - are you serious?

Didn’t he change his name when he was first married (to some more distant family name) instead of only one spouse changing name?

I think it is his ex-wife’s name?

No, it isn't.

Most of the rules of civilization are centered around preventing the 20% predators from devouring the 80% normal people.

And here I sit, thinking those rules were so that the 1% could take all the value the 99% produced.

Heh. The 1% are mostly the very successful predators and their heirs.

They buy/make a lot of rules, but there's still (currently) a ton more to constrain predation.

(The more money you have, of course, the easier it is to game a more complex system...)

Nuclear weapons made this a bigger issue since it closes the option of last resort, which is war. See North Korea…

Not sure what you mean. After what was done to Libya after they gave up nukes, North Korea learned it can't disarm without subsequently being invaded and destroyed.

Most? That's an understatement.

The rules that aren't are so few they may as well be rounding errors lost in noise.

There's a line describing this in a failed US version of the cop drama Prime Suspect... I forget the exact wording but it's some grizzled cop talking about how their job is to protect the herd from the carnivorous sheep in it.

https://slate.com/culture/2015/01/american-snipers-wolves-sh...

most are about 10% of predators trying to devour the other 10% of predators while preventing being devoured by the 80% of normal people

In times like this I often find comfort in the expression "The Purpose of a System is What It Does"

https://en.wikipedia.org/wiki/The_purpose_of_a_system_is_wha...

Doesn't this make all forms of bureaucracy (and hence, civilization) parasitic ? (Or are you just supposed to regularly "drain the swamp" ?)

No. Seems like a non sequitur to me.

"The bureaucracy is expanding to meet the needs of the expanding bureaucracy." from (supposedly) Oscar Wilde

Survival of the fittest to survive, from Charles Darwin

(This is a serious question, I have been pondering it for years now...)

> what started out with altruistic motives, [...] is being derailed by opportunists.

See: all human history.

The essential trust anchor will always be transparency that directly affects a person in society. Anonymous money and anonymous power will be exploited.

> Reports on crypto Twitter are that this is a hack

It's really unfortunate to get "hacked" with such bad timing. You steal customer money and file for bankruptcy but now the bad hackers, probably from the Bahamas as well, take whatever is left and cash out. Oh no! /s

But it's alright, SBF said he's sorry.

honestly, the vulnerability was probably already there and there was a symbiosis with the person. Rules for rulers, there are various keyholders in your empire. This company wasn't following any best practices, so no reason to think they have crypto security best practices internally.

this person absolutely knows that they can kick leadership when they're down and that all blame will go to the leadership

it doesn't require being an "apologist" for leadership to see this vulnerability. Council and compliance all resigned, the ceo resigned. Any semblance of checks are gone and any rogue developer can use their keys on anything, rumor now is that an app update went out turning them into malware.

its equally as plausible as just a cringeworthy vendetta of spiraling founders, dumber things have happened in crypto. smart things have too, I’m leaving towards a smart thing

SBF takes "full responsibility".

Don't worry tweet that "he's sorry" and it will be all right.

Perhaps he will take some time to clear his head. Is there a monastery in South America where he can repent? Preferably one with no extradition treaty?

All the countries in South America have extradition treaties with the United States. If he's looking for a monastery, he should head to a Buddhist monastery in Vietnam.

List of countries with extradition treaties with the USA: https://2009-2017.state.gov/documents/organization/71600.pdf

Taking full responsibility would be liquidating his assets to make all customers as whole as possible, even if it leaves him destitute. Lack of responsibility/consequences for the capitalist class is the root cause for many of the social problems we have today.

It's not OK that we hugely reward taking risks to capital and then largely isolate the "risk"-taker from the consequences of failure when they materialize.

100%

i volonteer to take some "responsibility" as well

In unrelated news SBF just found he had a bunch of crypto in his personal wallet. Totally not at all the pile of crypto that was last seen in the FTX wallet.

Yes, 1-2 billion in Sam’s personal wallets:

“Reuters is reporting that at least $1 billion in customer funds at the exchange disappeared last weekend, citing two former senior employees briefed on the company's finances.”

https://www.reuters.com/markets/currencies/exclusive-least-1...

A minor problem with the blockchain is that the blockchain is actually an authenticated record of all transactions, so it’s pretty hard to hide where the crypto went unless you never actually exchange it or use it to buy something.

Swap to Monero then slowly trickle swap back to your coin of choice as you need the funds. 'Problem Solved'

There is a reason US regulated exchanged with KYC don't deal in XMR.

Huh? Kraken deals in XMR in the US. You can literally upload a US passport and they will sell/buy you XMR. They've been doing it for years.

His keys his coins

FTX CTO Gary Wang as well has a lot of recent GitHub commit activity in last 2 days and now suddenly the site is hacked https://github.com/garywang

I'm as sceptical as the next person but I don't think "coder writes code" is anything.

The CTO writing and committing code for a (formerly) $16 billion dollar company does seem slightly off imo.

I think it’s quite normal (at least at some companies) for a CTO to spend some time writing code as part of setting technical direction. In that case there might be other executives who do the other parts of the CTO role you imagine (eg having lots of reports).

How do you know it's him and not somebody else with the same name? I don't see any crypto projects.

> I don't see any crypto projects.

How do you know that? It says explicitly: "52 contributions in private repositories" between November 1 and November 11.

Obviously nobody knows what the private repos are. I was talking about public projects. "Gary Wang" is not an uncommon name. For example, here is another one with a Wikipedia page https://en.wikipedia.org/wiki/Gary_Wang

That's a good point. For whatever reason, I missed the first part of your comment. I did indeed operate under the assumption, incorrectly, that it was his profile.

What's interesting is that a lot of the FTX people on the about page (https://about.ftx.com/), including Gary Wang and Dan Friedberg have deleted their LinkedIn accounts, whereas they were available earlier. If they're deleting something so harmless, then who knows what else they are deleting and covering up.

I don't think this means anything. They might just not want any publicity, or to be harassed by malcontented FTX depositors. In the context of the FTX implosion, their LinkedIn profiles are far from harmless.

Yeah and I’m sure the Apple App Store review process won’t catch the steal_private_keys_and_upload_to_china() method they inserted. Not that iPhone apps can’t do this in the first place. A lot of FUD right now to create even more chaos.

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