Telling it like it is | Hacker News Reader

Telling it like it is

jeffreycarter.substack.com

113 pointsrmason107 comments

Part of a good con is that group dynamics engender silence. The more people with dirty hands in on it, the less likely anyone will break ranks. The thing gains a momentum of its own. Afterwards, at the trial, everyone says; "My only crime was I didn't stop it or speak out".

Very few of us are really denied that chance, except soldiers risking desertion. Justice must account for the genuine ability to walk away, versus bad faith. On the matter of Blutkitt, in his excruciating account of "Ordinary Men", C. R. Browning notes that even the members of Battalion 101 had a genuine (no bullet in the back) chance to walk away.

Do today's white-collar bandits and digital fraudsters have a realistic chance to turn their backs on wrongdoing they encounter? Of course. But at the cost of losing a network of rich and influential friends. Are there examples in tech of people taking a courageous stance? Definitely. Roger McNamee is one random example who must have burned a few bridges when writing "Zucked: Waking Up to the Facebook Catastrophe".

Ya right. Its like trying to take "a courageous stand" against a contagious virus.

A large well organized group is required to keep such things in check.

There is no dearth of people (esp in the US) who will take stands and call out bs. But that's not enough.

> It's like trying to take "a courageous stand" against a contagious virus.

Indeed. The past two years may have much to teach us about the kind of measures, and unpleasant sacrifices of the economy, needed to neutralise such problems.

This article mentions "on-the-run clearing" and links to another discussing SBF's plan to clear every thirty seconds, but I don't really understand the proposal discussed. I gather that, on traditional stock exchanges, a lot of trading happens during the day, and then after trading finishes all the people who made trades have to deliver on what they promised. Clearly this is not how retail crypto exchanges work: for those, one has to deliver into one's account with the exchange before one can trade, and, at least from the user's perspective, trades clear immediately, and the user can the request the traded assets be delivered from the exchange back to their accounts elsewhere.

What was SBF's proposal, then? Bringing the existing retail crypto model to … non-retail crypto trading? That doesn't seem very risky; if anything, it seems to considerably reduce the risk that a counterparty fail to deliver, because the exchange already has the asset. Obviously there's the risk (as we have seen play out numerous times now) of the exchange itself failing to deliver, but I don't get the sense that that or anything like it is what Terry Duffy or Jeffrey Carter were concerned about.

ELI5 what's the big deal about "on-the-run clearing"?

>because the exchange already has the asset.

Has the FTX fiasco not yet revealed to you that the exchange doesn't always have the asset?

As I understand it on-the-run clearing is about demanding collateral for leveraged trade. Matt Levine has written about it better than I ever could.

Traditional clearing does that as well, this is the so called 'margin call'. What's different in on-the-run clearing is that the check happens every 30 seconds, while traditional clearing typically happens between trading days.

> ELI5 what's the big deal about "on-the-run clearing"?

I only found an article about it from the author himself: https://jeffreycarter.substack.com/p/on-the-run-clearing

I read it but I still don't understand what's so wrong with it.

I can't find Matt Levine's article about it (he explains it very well). The problem is that often you don't want positions to be quickly liquidated when a margin call comes. The current system of allowing traders time to post more collateral has risks (i.e. they might not pay), but the downside of automated liquidation is:

1) cascading liquidations as forced selling pushes prices down and triggers yet more forced selling

2) not every person is going to be able to monitor their positions 24/7, so they will get wiped out as they sleep (e.g. a farmer hedging their crop wakes up to find they lost all their money because the market temporarily dipped in price overnight)

Clearing is very complex to answer inline in this comment.

It is not only collecting margin, settlement, and paying/collecting from accounts. It's also risk management. For example, CME and ICE have created proprietary algorithms that calculate the level of risk in a market based on open positions, daily liquidity, width of bid/ask spreads, and daily market movement of the future and underlying cash prices. SBF was basically talking out of his ass when he wanted every 30 seconds. In a volatile market, that would break the market. Price discovery would cease. Bid/Ask spreads would be super wide. Currently, there is a role for brokers to play by qualifying customers. I will tell you 99% of the VCs I interacted with and almost 100% of the entrepreneurs didn't truly understand clearing. Check out Bitnomial.com if you want to see how it is done in a crypto market the way it should be done. They went through at least a three year process at the CFTC to become a designated contract market in the US where lots of crypto exchanges have gone to Bermuda simply to avoid regulation.

I have no respect for Duffy’s story. He criticizes VCs for being naive, cheerleading SBF and staying silent. Now what does it mean that the CME CEO was not naive, (purportedly) roasted SBF in private, and then stayed silent?

This is not bravery. Its cowardice in the form of ex-post bluster.

Duffy did testify against FTX’s proposal in Congress back in May: https://www.cmegroup.com/content/dam/cmegroup/media-room/spe...

It’s pretty strongly worded:

> FTX’s Proposal is glaringly deficient and poses significant risk to market stability and market participants.

Granted, he didn’t publicly call the guy a fraud. Avoiding libel lawsuits is probably a good habit for a risk manager.

It's not slander[1] if it's true. Moreover, calling someone a "fraud" is likely to be viewed by a court as a statement of opinion, not of fact, and so it's likely non-actionable under U.S. common law.

[1] Libel is written defamation; slander is oral.

You're right that a court might find you to be expressing an opinion if you call someone a fraud, but you'll spend a lot of money on your legal defense to find this out. Calling a deep-pocketed person a fraud is buying an expensive lawsuit.

Also, the more memorable mnemonic (at least IMO) is "slander is spoken, libel is not".

The quote is: "Slander is spoken. In print, it's libel"

Spoken slander, literate libel

You seem to be quoting Spider-Man (if my quick google search is on point); I was quoting my law school professor.

Is Spider-Man well-known as the source of this mnemonic? I’m pretty sure lawyers were saying it for decades before the books/movies came out, but I could be wrong.

Well, memes tend to plant in our collective heads, so I guess yes?

Chances are that more people have seen spider man than met your law professor, but yes I'm not arguing that your law professor is a more authoritative source of law related stuff, just saying that I did remember the quote I quoted, for what is worth.

> It’s pretty strongly worded:

He also says it is important for marketstakeholders and the CFTC to investigate the clear conflict of interest (between FTX and Alameda).

And he ends saying that even though he is for innovation, he says that innovation which is found to increase risk unacceptably or fails to protect consumer is against the law.

Pretty good read IMO.

That's a red herring though. FTX's proposal was good - it was just contrary to CME's profit interests.

Given everything we know of FTX, I would be shocked it they managed to produce a proposed commodites trading regulation which is:

1. Radically different from the current one, and

2. Good

Not impossible it’s true but I’d say the onus is to prove that, given the source and given the current system functions well enough

Many of the TradFi HFT firms were in support of FTX's proposal. The people that ran FTX were generally reasonably competent at finance (ex Jane Street), but extremely cavalier about risk with other people's money, and extremely poor at operational management.

This is not a defense of them in any sense, other than to say that they were perfectly capable of being scumbags while also producing a good alternative to CME's futures products.

You can read about all of the people that thought FTX's proposal was good here:

https://www.bloomberg.com/news/articles/2022-11-15/ftx-once-...

> Many of the TradFi HFT firms were in support of FTX's proposal.

I read all the quotes. None appear to be Tradfi HFT firms. They instead appear to be a variety of VCs and individuals FTX paid money to or who had a crypto interest.

For example the Fidelity quote is not “Fidelity, the firm”. It is from “ Fidelity Digital Assets President Tom Jessop”

Then you didn't read very carefully:

> Several letters noted the fact that the derivatives market had become concentrated in a dwindling number of players, and argued that it would be safer to trust middleman-free operations such as Bankman-Fried’s. “In the traditional intermediated model, a dependence on a limited number of clearing organizations creates a systematic concentration of risk,” Richard J. McDonald, chief regulatory counsel for Susquehanna International Group, wrote “The CFTC has an opportunity to minimize market risk by enabling platforms, such as FTX, to provide direct access to trading on margin without required intermediation.”

Susquehana is a very well respected tradfi quant firm: https://sig.com/

> FTX’s plan would “protect and empower” US investors, permitting retail investors access to products “previously available only to the small subset of well-resourced and powerful investors able to connect to the complex, traditional market infrastructure,” Peter L. Briger, CEO of investment manager Fortress Investment Group, wrote to the CFTC

Fortress Investment Group is a very well respected tradfi firm.

They're all right there. And this isn't even a complete list. If you search around, plenty of other traditional quant/HFT firms strongly supported the move. Basically the only two entities that opposed it were CME and Binance.

Was it? The author claims that it had previously been explored and found not to be worth it.

That could be puffery of course. But I have worked in several fields. A big advantage I bring is that I have an outsider's perspective and experience from a different domain ("Hey, why don't we try it this way?"). But a very big disadvantage is that when exploring something I find out that people often have thought of it and don't do things that way for good reason. For me that means I look before I speak.

A lot of the bomb-throwing suggestions of crypto revolutionaries is similar, and I have no reason to believe SBF was any different. In fact there's good reason to believe that SBF and his colleagues lacked adequate perspective, from their statements, their actions in retrospect, and frankly because of his MIT background. I'm also an MIT grad and was also an arrogant know-it-all into my late 20s (at least!) and am simply lucky that I got a few things right along the way so people were still talking to me by the time I grew up.

Yes, it was:

https://www.bloomberg.com/news/articles/2022-11-15/ftx-once-...

> The author claims that it had previously been explored and found not to be worth it.

The author isn't an unbiased observer here.

> That could be puffery of course. But I have worked in several fields. A big advantage I bring is that I have an outsider's perspective and experience from a different domain ("Hey, why don't we try it this way?"). But a very big disadvantage is that when exploring something I find out that people often have thought of it and don't do things that way for good reason. For me that means I look before I speak.

For all their fault's the principals at FTX were not pure outsiders here. They were all ex Jane Street employees (traditional finance HFT firm) who ran a futures exchange in crypto. And if you don't accept those credentials, have a look at who else signed off on their proposal in the above article.

The reason CME didn't like their proposal is that it would have forced them to innovate and stop lazily rent seeking off their past efforts.

> A lot of the bomb-throwing suggestions of crypto revolutionaries is similar, and I have no reason to believe SBF was any different. In fact there's good reason to believe that SBF and his colleagues lacked adequate perspective, from their statements, their actions in retrospect, and frankly because of his MIT background. I'm also an MIT grad and was also an arrogant know-it-all into my late 20s (at least!) and am simply lucky that I got a few things right along the way so people were still talking to me by the time I grew up.

Somewhat ironically given your argument, everything you've said here is an "outside view" perspective on why they might be wrong. Look at the content of their proposal, and I think you'll change your mind pretty quick. Or just trust the dozens of traditional finance firms that supported them against CME.

If you want a similarly "outside view" argument in favor of their proposal, basically everyone in finance supported it except the incumbent commodity futures exchange, which should tell you everything you need to know.

no it was not. it was put forth by people who don't understand markets, nor do they understand risk management. looked good on a blackboard though

[deleted - misconstrued statement]

He meant SBF’s net worth was near zero or negative.

Most people, even rich people, do not carry much cash in their pockets…

Dude he meant that the net worth was all a mirage, and that anyone had more money in their pocket than SBF pretended he had in his entire net worth (because he stole it). He called him a fraud right there and all you can say is that he should have shown more respect to poor little guy SBF, him the meanie "tradfi"?

He stayed silent, by meeting with government regulators and lawmakers, and guaranteeing he was going to sue them if they made SBFs proposed changes?

Does it only count if he puts out a really mean tweet in your book?

> Does it only count if he puts out a really mean tweet in your book?

With a meme of pepe sbf or higher value pepe.

He criticized her too: look at the tweet embedded in his post of her with SBF and some other guy I don't know, garlanded with a bunch of crypto keyword hashtags.

"Every politician that got money from SBF or FTX ought to cut a check and give it all back to the penny. It wasn’t SBFs to give. He stole it from his customers."

This, right here. If someone sells you a stolen car, that car is not yours as it was not the thief's to sell. The police will eventually come take it away and they will be right in doing so.

Exactly, precisely, it's theft not fraud. You can't accuse any of the cockamamie nonsense this inflated and instrumental child concocted of being as sophisticated as fraud. For that you have to look at his sponsors and their patronage.

Fraud is theft by deception.

SBF was the second largest individual donor to the Democrats in 2022, giving about $40M this election cycle. I presume that the vast majority of that money is gone, spent. I don't realistically know how people could give it back.

The same way money is often repaid: take it from future income.

The Democratic committees raised $853M in the 2022 election cycle, compared to $805M for the Republicans. If they had to deduct $50M next cycle to account for the illegitimate funds, it wouldn’t ruin them.

This sometimes does happen.

Elizabeth Warren gave back money she got from the Sackler family (owners of Purdue Pharma and primary operators of the opioid crisis).

The Sacklers donated mostly to Republicans, but AFAIK none of them returned the money.

Or who they'd give it back to (there's a long line of creditors owed way more than $40m, and quite a few of them had far more responsibility and ability to do due diligence than the politicians)

One thing to expect political parties and nonprofits to reject donations up front from unpalatable people, another for them to bail out ripped off speculators with long since spent donations.

It wasn't even directly given to Democrats. Most of it ($27m) was spent via the Protect Our Future PAC which he founded and controlled and was supposedly being used to fund politicians who would back his longtermism goals. https://www.opensecrets.org/political-action-committees-pacs...

Also a similar magnitude donor to the GOP by the way, though about 30MM rather than 40 IIRC.

It's interesting and encouraging if $40MM is a major donation. Billions were spent on the midterm; if $40MM is "major" than most of the money came from small donations, which is how it should be.

> Also a similar magnitude donor to the GOP by the way, though about 30MM rather than 40 IIRC.

Source? opensecrets lists SBF as having donated $36M to democrats and only $240k to republicans.

https://www.opensecrets.org/elections-overview/biggest-donor...

I don't recall hearing that SBF donated large amounts to the Republicans, but I do recall that someone else at FTX did, and indeed there's ~$20m in the list if you search for FTX - as well as a third exec donating a further $8m to the democrats: https://www.opensecrets.org/elections-overview/biggest-donor...

Sorry, I meant $26MM from another FTX exec. I was thinking of FTX rather than SBF specifically and should not have written it that way.

Because of the comments I won't edit my post (still have time) but issue this correction instead.

That's the lovely thing about the oh-so-fungible thing called "money", and white-collar crime. The stolen car is a recognizable and emotive thing, with an identity all its own.

Vs. the vague and amorphous "money", which so easily flows from being bits in a computer here, to marks on a sheet of paper there, to bits in some other computer... The emotions of the neutral human observer don't stick to it nearly so tightly. And a huge number of politicians, business exec's, lawyers, and other "friends" of white collar crime are naturally quite resistant to the "you should give it back" notions of the little people...

This isn’t always the case. People who took cash out of Madoff’s ponzi scheme had to return it & take their proportionatey share of the total returned to all investors in exchange.

Cash that’s been paid out from a bankrupt company can be clawed back by the bankrupty trustee. Usually this only applies to payments made shortly before the company goes under though.

> This isn’t always the case. People who took cash out of Madoff’s ponzi scheme had to return it & [...]

Quite true. And I've not followed the details about SBF's schemes...but it sounds like he's different from Madoff in three important respects, all of which seem likely to make claw-backs less viable:

- Diverting funds to cover trading losses at an allied & now-bankrupt firm. If Madoff had (say) directly lost $1B by buying some stock which then fell in value, would there have been any possible claw-back on that $1B? I'd bet "no".

- Lots of funds were "laundered" through various sorts of crypto transactions. Anything "crypto" is probably a far greasier pig, to try to wrestle the real money back.

- Layers of corporate structure, HQ'ed in an offshore tax haven. IANAL, and certainly not a lawyer qualified in tax haven corporate securities law, but this sounds more like a gold mine for the lawyers than good news for the victims.

Some of that has been happening -- a couple of people in congress at least.

Makes the others look worse.

Even so, don’t cut a check to SBF now. Cut a check to the customers who lost their money once the bankruptcy court sets up a mechanism to do so.

Many people are now saying they "knew right away it was all a con" - probably including the person standing in the corner the day SBF was born. Not so many of them were saying it at the time.

The faster they took to twitter to tell everyone how they sniffed out a rat when they were offering to give him billions or were being offered billions - the less likely it is they "knew all along".

Dutch regulators and central bank officials have been calling it a con for years. And the Netherlands wrote the book on conjuring money out of thin air.

Ever wondered why all these crypto companies are in the Bahamas or Virgin Islands and not on the Zuidas in Amsterdam? The weather? But you just can't beat the zeitgeist.

On HN, what happens when people point out "this is a con?" Downvotes, flags, warnings from the moderator, and (last but most) absurdist pushback from other commenters.

At the time, lots of people said something at the time. Later on, yeah, "nobody said anything at the time."

This Onion headline says it best:

https://www.theonion.com/man-who-lost-everything-in-crypto-j...

Anyone that's in crypto still is asking to loose it all. I don't know why, maybe it's getting their jimmies rustled, but I know that all the signs have been blaring for years now.

There's no way anybody could have known!

The VCs blew it in their diligence. They should have known

This would be more convincing if you could cite an article/comment along the lines of "SBF is gambling with depositors cash".

There is plenty of crypto is a scam that get upvoted, and piled on by the crypto is a scam crowd. Its almost a meme on hn at this point to get upvotes just write "crypto is a scam"

Wait until it comes to Tether's turn. The ability for those guys to skirt any serious investigation or attention is truly magical.

It's not even a complex multi-layered obfuscated fraud, it's practically out in the open, yet will still be a "how could we have known?!" Situation once it collapses (i.e. wealth transfer complete)

Tether has a very different reputation in the eye of the mainstream media who couldn't say enough good things about SBF "effective altruism". Turns out it's easier to be altruistic when you just scam investors and clients.

> The ability for those guys to skirt any serious investigation or attention is truly magical.

>yet will still be a "how could we have known?!" Situation once it collapses (i.e. wealth transfer complete)

"Tether is a scam" accusations are well known and has been around for years. As a quick reference, the "Bitfinexed" account (on twitter) has been around since 2017. It's certainly not comparable to FTX which seemingly imploded out of nowhere.

Going by Bitfinex'ed, FTX was a money laundering front for Tether/Bitfinex, replacing Reginald Fowler. Also supposed (though it appears purely speculation) is that FTX was killed because it was about to create its own stablecoin.

Rambling, pointless article is rambling and pointless. The author has a clear ideological axe to grind and if you read his other articles, he makes the same arguments over and over again ad nauseum as if he's a broken jukebox that gets kicked every time he writes another article.

This is just ad hominem.

I disagree. This article is extremely poorly written and is in fact rambling; it's hard to understand where it's going and what its point is. The only (mildly) useful part is the extract from the interview with Terry Duffy.

This happens after events like this - people show up after the fact saying they told you so. There's usually news clips, articles or even tweets where they loudly and clearly claim "I am saying that X is going to happen". And they're often getting laughed at or being described as hysterical, so I don't begrudge people if they want to get a bit of revenge and indulge in a bit of schadenfreude at their erstwhile tormentors' expense. But to try to claim credit with "my friend privately said X would happen" is a fairly bizarre brag, I don't think second-hand dubious clout is worth much.

In any case, a good number of people have been loudly pleading with the world to be not just skeptical of FTX, but of all of these insanely valued crypto companies - they're often dismissed as haters.

DH0. Name-calling.

DH1. Ad Hominem.

DH2. Responding to Tone.

DH3. Contradiction.

DH4. Counterargument.

DH5. Refutation.

DH6. Refuting the Central Point.

http://www.paulgraham.com/disagree.html

I see my parent as a mixture of DH 0, 1, and 2. No chance of sniffing 3 or above.

Unfortunately this is HN were people want to believe in "hard science" and rationality. But if you want to understand crypto you're better off studying history, sociology and psychology.

>This is why when SBF wanted to do on-the-run clearing every thirty seconds the traditional exchanges recoiled. Of course, the innovators thought they had found an Achilles heel they could exploit to take the big corporate guys down, but they hadn’t. The big corporates had explored these sorts of ideas long ago.

>Sometimes when there is a process or an idea that isn’t being used, the reason it isn’t being used is that it sucks.

Well? What was the reason? Invoking chesterton's fence is very patronizing to the reader.

I dipped into a few other articles and the author frequently makes broad statements without supporting arguments.

I think this is supposed to be a casual conversation between people who share a point of view.

I listened to the linked podcast with Terry Duffy speaking. Does anyone know what the specific 'innovation' of SBF is to which Duffy is referring?

probably on the run clearing

https://www.youtube.com/watch?v=tNLn2xYzvao worth a watch

Why are entire paragraphs repeated twice in that post?

Presumably an error introduced by copy paste during the editing process.

The failure there isn't journalistic, but regulatory. Journalists don't have the privilege of looking deeply inside books and how company conducts it's business, but auditors have.

No, but there are cases where they might have taken a closer and more critical look. I haven't followed this story closely, but in the lead-up to the 2008 crash, the press seemed to me unduly easy on the zero-principal mortgage loans.

That's ridiculous. There have been twitter/substance/etc folk long calling out all the shenanigans and diving into the data, figures and relationships that any reasonable journalist would have had an easy time of it.

I don't know why investigative journalism suddenly seems so 'hard' these days, but I'd assume it involves just following the money for the most part...

> The failure there isn't journalistic,

It absolutely is a media failure. It exposed how corrupt some outlets are, in insidious ways. The media built a positive image of SBF and FTX without ever doing serious investigative job because he was giving to the right people... and still, when FTX scam scramble, instead of apologizing the same media continued to be lenient toward the fraudster trying to spin the scammer as some idealist who just made bad bets, when he was already deep into his scam.

> Journalists don't have the privilege of looking deeply inside books and how company conducts it's business, but auditors have.

Many people in Crypto and finance had already figured out FTX business model was some sort of scam, the media and their glowing reviews of SBF weren't interested in hearing them, because SBF was being too generous about donations...

While I agree with the idea that journalists in general were not nearly critical enough, it’s a bit much to say that no one ever asked questions and/or was critical. I vividly remember the interview in which Matt Levine participated, and he basically called SBF out on running a Ponzi scheme and being OK with it (which was then, surprisingly enough, acknowledged by SBF).

To make this all about “telling it like it is like we do on the trading floor” is trying to force an angle that is simply not there. The better point hidden in the article is that journalists don’t really grasp the material they’re covering, and as such are incapable of asking critical questions.

> he basically called SBF out on running a Ponzi scheme and being OK with it (which was then, surprisingly enough, acknowledged by SBF).

That's not how I recall it. Levine asked SBF to describe yield farming and SBF went on his (in)famous thing about boxes, practically calling them out as pyramid schemes (but without mentioning any specific names). At no point was FTX referred to as a ponzi scheme.

Alameda was yield farming though and SBF was running that thing for a while too.

Agreed. Levine even said after the interview that he came away more confident in SBF because it sounded to him that SBF's business model was selling people shovels to dig for gold. Even if the gold was fake and worthless.

What actually happened was FTX was reliant on these "assets" to get loans even though they were just an exchange that should have just been passing them off to counterparties.

After the SBF thing about boxes--

> 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.

> Joe Weisenthal: (27:27) > At no point did any of this require any sort of like economic case, it’s just like other people put money in the box. And so I'm going to too, and then it's more valuable. So they're gonna put more money in, and at no point in the cycle, did it seem to like, describe any sort of like economic purpose?

https://www.bloomberg.com/news/articles/2022-04-25/sam-bankm...

Matt did call it a Ponzi scheme in so many words:

> I think of myself as like a fairly cynical person, and that was so much more cynical than how I would have described farming. Like, you're just like "well, I'm in the Ponzi business, and it's pretty good!"

You can listen to it right here:

https://www.youtube.com/watch?v=KZYqL79GDXU&t=1633s

He was referring to SBF’s description of Defi. SBF wasn’t describing FTX in that quote

Levine himself says that SBF wasn't calling FTX or Alameda ponzi schemes, but rather was saying that some of the coins traded on FTX were ponzis, and that he left that interview feeling impressed with SBF's savvy.

Specifically, Levine's words:

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.

Reference: https://www.bloomberg.com/opinion/articles/2022-11-10/ftx-is... (paywalled)

> Levine himself says that SBF wasn't calling FTX or Alameda ponzi schemes, but rather was saying that some of the coins traded on FTX were ponzis

Hmm, well. When the ponzi schemes inevitably collapse, then so does the trade in them, right?

Lots of exchanges have survived lots of failures of individual assets traded on those exchanges.

Lots of exchanges aren't cryptocurrency-only exchanges.

This all seems very counterfactual and vibes based.

To be clear about this conversation, someone claims that Levine "called SBF out on running a Ponzi scheme." I provide a clear quote from Levine disavowing that. You come in and say that well, maybe FTX was unsound in a way that is actually different from what actually went wrong with FTX/Alameda.

Is there any content to your contribution here? Or is it all just vibes?

I'm not disputing that Mr Levine's take was that SBF and co were "in the Ponzi (trading) business" rather than running a Ponzi themselves.

I am just just pointing out that while this is not as rapidly or completely unstable as running one of the traded Ponzis, it is also not fundamentally stable and sustainable. IDK what "vibes" have to do with that, if anything. These are fundamentals that eventually bring down temporarily bubbles. If that's what you mean by "vibes", it's the opposite.

This is exactly the quote I had in mind, yes. Thank you for looking it up.

>Matt Levine participated, and he basically called SBF out on running a Ponzi scheme and being OK with it (

That's not quite how it went. Matt Levine wasn't especially negative of him, just found it wild. And they were talking talking more about him being in the Ponzi (in a sense) business more so than him running a Ponzi scam specifically.

If we’re thinking of the same clip with Matt Levine, I think your characterization is a bit misleading. IIRC Matt Levine was definetly not calling FTX a Ponzi scheme, but yield farming. SBF and FTX (or maybe Alameda?) participated in yield farming, but that has little to do with the aspect of FTX that actually ended up falling apart.

For those interested I think the clip is in an episode of the Odd Lots podcast with both SBF and Matt Levine.

Matt works for an extremely reputable institution, not to mention he's a former Goldman Sachs lawyer. He would be the last person to call anyone or anything a fraud.

Short sellers and people that bitch about things are either heroes or completely marginalized entities (without any reputation to uphold).

Also, IDK why you expect "the system" to warn you about fraudsters. The entire premise of crypto is that it's unlimited, ungoverned finance - which also means unlimited fraud opportunity. So many reputable people warned about this general problem. Like - this should be even more common than it is, because it's ridiculously profitable and kind of legal!

Matt Levine's newsletter is kind of a comedy version of comp.risks; financial industry failures, presented entertainingly. But he did manage to get SBF to openly admit on his podcast that he was running a Ponzi:

https://www.ft.com/content/eac0e56c-f30b-4591-b603-f971e60dc...

"Levine:

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."

Dateline April 25.

> The entire premise of crypto is that it's unlimited, ungoverned finance - which also means unlimited fraud opportunity.

True, but a lot of modern cryptocurrency businesses have been spending a lot of marketing $$$$ on buying a veneer of legitimacy.

Smart investors know that just because they've got reputable investors, famous board members, favourable press coverage, celebrity endorsements and a sports arena named after them, doesn't mean that This Time It's Different.

But I can understand why a naive investor might fall for the marketing.

See I don't understand this. Just because it is said that crypto is some decentralised no government economy surely does not mean it isn't governed by existing laws and regulations for their processes and actions? Especially the fact that for the most part, it gets redeemed into fiat currency.

The current title is not informative. Perhaps an exception should be made for the “no editorializing” rule? It used to have “SBF” for context.

That said, here is Matt Levine’s article on why tradfi’s approach to clearing and settlement is different from that of cryptoland:

https://www.bloomberg.com/opinion/articles/2022-06-01/crypto...

I have a hard time following along with the rest of it when you start by calling Ron Desantis honest.

The key issue here is the lack or transparency.

People guessed SBF was a fraud, they were right, but it was still just a guess. The same people guessed USDT was a fraud when it de-pegged by 2.5% last week, they were wrong because it was just a guess.

Other people guessed the opposite in both cases with inverse results.

What we need isn't to argue over who the best guessers are. Or form teams of guessers. It is to stop guessing and actually verify some things for once...

> The same people guessed USDT was a fraud when it de-pegged by 2.5% last week, they were wrong…

No, they’re not.

Thank you for guessing randomly.

No, this has been conclusively proven.

Their website used to say "Our reserve holdings are published daily and subject to frequent professional audits", for years. This was a lie, intentional deception for financial benefit. They're still promising they'll get around to it eventually (https://www.pymnts.com/cryptocurrency/2022/tether-audit-prom...).

2016: https://archive.ph/mVPmL

2018: https://archive.ph/9UMhd

They got caught moving money around to temporarily pad their bank balances to "verify" their cash reserves. https://ag.ny.gov/press-release/2021/attorney-general-james-...

> In the face of persistent questions about whether the company actually held sufficient funds, Tether published a self-proclaimed ‘verification’ of its cash reserves, in 2017, that it characterized as “a good faith effort on our behalf to provide an interim analysis of our cash position.” In reality, however, the cash ostensibly backing tethers had only been placed in Tether’s account as of the very morning of the company’s ‘verification.’

> On November 1, 2018, Tether publicized another self-proclaimed ‘verification’ of its cash reserve; this time at Deltec Bank & Trust Ltd. of the Bahamas. The announcement linked to a letter dated November 1, 2018, which stated that tethers were fully backed by cash, at one dollar for every one tether. However, the very next day, on November 2, 2018, Tether began to transfer funds out of its account, ultimately moving hundreds of millions of dollars from Tether’s bank accounts to Bitfinex’s accounts. And so, as of November 2, 2018 — one day after their latest ‘verification’ — tethers were again no longer backed one-to-one by U.S. dollars in a Tether bank account.

Both of these are clear-cut fraud.

Reply on news.ycombinator.com