‘We kind of lost track’: how SBF blurred lines between FTX and Alameda
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For example, he keeps repeating that customers could be made whole if the $4B of new investment comes through.
Newsflash buddy: that ain't happening, ever. Nobody in their right mind or... any... mind would invest in FTX, ever. It's a worthless wreck being picked apart for scrap.
But he keeps repeating it like there's a 50:50 chance of it happening and he just needs to "tip things" towards it being more likely.
The other big lie he keeps repeating is that mark-to-market value of the shitcoins FTX had on their books. They're worse than junk bonds, with some worth maybe one cent on the dollar, if that. But he keeps repeating that if it wasn't for the freeze on FTX's trading, customers could be refunded their crypto if those "assets" could be just sold off.
I want to know what this kid is smoking.
Too late I think. If you had joined FTX as an employee you would have received direct advice on what to smoke. :)
If I'm not mistaken, their drug of choice was trans-dermal patches of Rx amphetamines.
Just keep this in mind when we keep hearing about how ideal trajetory is to go to an Ivy League in order to be qualified for Vc money from the majors: Sequoia, Blakrock et al.
I still cannot believe how easily they are getting off on such a blatant lack of due diligence in all of this; but I guess when he played the game and he knew who to pay off this is just the name of the game.
I could see the argument for people saying, hey, gigantic VC firms, get your shit together, or we'll create a protest movement to shame you into it. Not because they're breaking the law, but because they're making messes which other people have to clean up.
Which they are going to be suffering from (somewhat).
Unless someone is picketing the line of investors lining up to give them money (how?), who/what is even going to be protesting?
Not to sound crass, but each other... and I mean that in every sense of the word, they felt they were the smartest people on Earth and spouting the EA narrative of solving the World's problems while simultaneously using their Ivy League connections and paying off who they had to keep paying themselves and living in some hedonistic debauchery in he Bahamas as they lived in some poly-amorous situation.
> They are losing their money. Is investing in a barely veiled scam a crime?
Their is about a billion of what were likely customer deposits missing, and no one knows who took it; the Bahama government stepped in and took what was left after the fact and started the bankruptcy. As for investing in a scam, well, they were funneling customer funds into Alameda so that alone is a breach of basic fiduciary trust in finance, so yes... it is a crime.
The question is what will come from this, because the argument is that regulation is required when FTX and Alameda are both regulated and licensed proving the reality of a multi-tiered legal system that includes access to VC money, which as entrepreneurs we've been told is a meritocracy based allocation that is accessible to anyone with 'a better mouse trap' when it's clear that it isn't and never has been.
I'm not sure we can get clear collusion charges for these VCs as of yet, but it begs the question of how blatant these connections and funding gets made made for the 'right' candidate with almost no scrutiny for those with political connections which in turn could curry favor at a later time.
We’ll see what they knew and when, and if the VC firms knew of the specifics of the mismanagement of customer funds, then they’ll have some culpability.
Otherwise, aren’t they another victim (albeit one that it’s particularly embarrassing that fell for it!) not a co-conspirator?
I would not be so sure. You'd be surprised how people will given bad or fallen companies or individuals second chances, especially if enticed with discounts or rebates. FTX's brand could be bought out, retaining its users and then offer a generous incentive to sign up, like $100 in free crypto or so. Some may stay, and new people join.
the problem isn’t really that “he just needs to raise more money” to make the existing customers whole. it’s that he thinks he can raise more money from investors, and then give it to defrauded customers. what exactly would the “investors” get in this scenario?! A Ponzi ticket? ownership in FTX?
he still owes the money after that! it’s like he can’t think more than one step at a time or something. could be the root cause of his issues, i guess
"Just wait, I just need another few good months and you'll all have your money back; honest, it's not a Ponzi scheme, I double pinky-swear!"
How could someone who built FTX make a principled distinction?
>with some worth maybe one cent on the dollar, if that
But if they aren't worth zero, then why can't they be worth any other number?
I mean, I can see the magic is gone, but I am not quite on board with calling someone an idiot for refusing to accept that the magic is gone. It's not like we have an objective theory for how it develops and vanishes.
I read a funny thing about how someone else who was basically speculating on any available "shitcoins" convinced themselves they were doing an arbitrage because they got coins at a discount (but locked up for a while).
https://astralcodexten.substack.com/p/the-psychopharmacology...
I'm surprised anyone is fooled by the fact he just happens to remember only the facts that point to the least criminal explanation.
What's the chance of that?
He's either coming clean about how he's not a smart as they said he was, or he's still playing the game. It's another double down.
Look at how the CEO of Alameda is handling this whole thing, for example.
The whole SBF "effective altruism" is just a variation on solipsism, the belief not being the only one to exist but the only moral actor to exist. That being itself an incredibly selfish or non-altruistic position.
It’s like a con artist taking advantage of folks by convincing them to do a get-rich-quick scheme. It’s hard to not consider everyone as shitty in the scenario.
Very few people thought they were legitimately doing something that created actual value, just getting on the train to getting rich without having to do anything.
If you have a bone to pick with the "effective altruism" movement, it would be better to critique what they actually have done than make philosophical or mind-reading declarations. Many people on HN don't know any more about it than antifa.
Even if SBF could have gotten away with it, now I am skeptical that his altruism would have done more positive things than if he had never earned the money to begin with.
I first heard of https://en.wikipedia.org/wiki/Motte-and-bailey_fallacy on HN, by the way.
It's in the comment above:
> they stole customer funds
SBF isn't some random crook who happens to be vaguely associated with Effective Altruism; he's a relatively central figure to the movement. Currently, one of the most significant fruits of EA is massive fraud.
Your comments here, as well thought out as they may be, are not part of "the comment above".
"they stole customer funds" = FTX stole customer funds.
"SBF isn't some random crook who happens to be vaguely associated with Effective Altruism; he's a relatively central figure to the movement."
If you say so, why should I doubt it? Perhaps everyone associated with the movement is a monster. Let's assume that is the case.
That doesn't defend the pseudo-philosophical/psychological pronouncements on what the essence of the idea is.
With or without your addition it looks to me like an equivocal attack on being effective in doing good, rather than on "Effective Altruism" as a movement.
Psychobabble is not aimed at people who are deeply familiar with the history and the nature of the movement, but at people like me who know nothing much about it.
It's schematically the same as a lot of rhetoric that see-saws on a foundation of equivocation but careless people fall off.
If someone is going to traffic in this nasty, illogical rhetoric, I object to them sliding by doing it in a completely careless and sloppy way.
Unless of course you know in advance that important and powerful people have your back and will ensure that nothing bad will ever happen to you.
It's not impossible, it's literally Rupert Murdoch's business model.
The jury will need to decide if was incompetent or evil, and in that case, you definitely want them thinking you’re incompetent.
He is making sure that he doesn’t appear smart enough to have the capacity to collude though clearly if you follow the money trail that’s exactly what happened. He is making himself to be the scapegoat by playing the fool.
Just like Bernie Made-off, he isn’t an island of culpability as is being conveniently portrayed. He was surrounded by various people who can be documented to have benefitted in the millions of dollars and will magically, by slight of hand, walk away from the whole thing scot free.
He is the opposite of stupid. He’s playing the fool to help the politically powerful patrons he served. That’s effective “altruism” for sure.
To bypass the Paywall: https://12ft.io/https://www.ft.com/content/a1df1d73-9932-4d1...
7 bill sent to Binance and random VC is plausible at least, but it sounds like the money vanished (it doesn't vanish, someone somewhere took out large sums of money).
7 bill sent to crypto is hard to believe, and sounds more like laundering, but the cash reserves should nonetheless have a paper trail.
4 bill will not vanish, or it may have never existed, or he's lying and it was moved to a Cayman acct(s) somewhere.
If it never existed, then FTX was operating more like a bank - dollars only work because they have a paper trail and we can keep printing new ones. Try cashing out your savings, you might be able to. Now try everyone cashing out - there is no money for it.
With a real bank OFC there is a lot of scrutiny and supposedly you have to keep track of assets and liabilities but there is a large degree of fudging it, plus they can always get loans from the unlimited central supply if they have an immediate shortfall...
Which might be what he's looking for i.e. a bailout via printed money, which would allow investors to withdraw funds and OFC send inflation sky high...
Of course there is money in a bank run on an otherwise solvent bank. The Fed steps in and either lends the money in exchange for its pound of flesh, or takes over and makes depositors whole, up to the FDIC limits.
The fact that the Fed CAN do this, combined with bank regulations such as reserve requirements, is why it doesn’t need to do this very often.
Banks are explicit that they borrow short and lend long. It’s not that the money isn’t there, it’s just a mismatch in liquidity/duration. For FTX, the assets themselves were bad, never mind the liquidity.
They tried to do the equivalent by minting more of their in-house coin "FTT", right? Both after the bankruptcy filing, but I saw one analysis posted on HN suggest they had been doing that on an ongoing basis as part of their operations too, trying to cover shortfalls by simply minting FTT and calling that collateral for loans or what you have.
It just... didn't work.
I think there is a misunderstanding of how his blabbing is hurting his future defences.
It is not about admitting or not admitting to crimes. When you say that he did not admit to being guilty it sounds like you expect him to say “yes I SBF have done wire fraud using interstate communications”. He certainly did not do that. That is not what anyone says when they say he is admitting crimes.
The way criminal law works is that the crimes have elements. To be able to say that you have commited X a prosecutor has to show A and B and (C or D). What he is doing is not admitting X, but providing the As, or Bs or Cs on a silver platter for a prosecutor.
For example maybe for some crime they have to show that when you made a statement you did know that it is false. That is really hard to show. Unless you help them out by going on the record about what did you know and when. (Which many of his statements seems to be doing.) That is one element I have heard about, but there are many different crimes he can be in trouble for and many different elements. Also the interpretation of many of these elements is arcane to say the least. You really need to be an expert on law to be able to tell what the terms means. Which means that it is very easy for him to fall into a trap where he is saying something which to my untrained ears sounds fine, perhaps even exculpatory, but for a lawyer’s ears provides the last element to prove something.
The other way his blabbing is hurting him is that it locks him into a specific story. Years from now, when prosecutors get a case together they will have to share all their evidence with his legal team. Then his legal team would have the option to find the most defensible, legally best narrative for all of it. But they can’t do that if he already locked himself into some narative. Every time he opens his mouth he is removing freedom to maneuver from his future defense team.
The third way he is hurting his case is that if there is anything he says which later turns out to be false, or can be depicted as false, that can be used to paint him as a liar. And that can be used to undermine other things he might say. This might not be a crime in itself, but can be used to convince perhaps a jury to disregard his statements.
IANAL but since it's not under oath does it really matter what he's saying?
Statements by another person generally cannot be used against him unless that person is brought into court, put under oath, and his lawyers get a chance to cross-examine the person.
That is called the hearsay rule. That rule does not apply to statements made by the defendant.
[1] https://nymag.com/intelligencer/2022/12/why-hasnt-sam-bankma...
Instead, he’s launching an aggressive PR tour to rebrand himself from a genius wunderkind to a hapless fool who made some innocent mistakes. It’s a risky strategy, but he has two lawyer parents who are almost definitely helping him thread this needle, legally speaking, plus who knows who else through their connections.
Committing fraud at this scale carries significant risk - founders who have embezzled far less have been targeted by less wealthy adversaries whom they've defrauded.
They also received a 16 million dollar home from FTX.
The banks will shortly have a 16M home*
If he acquired representation it would make him appear to:
1) be aware that he did something wrong
2) make his idiotic statements unreliable going forward as a lawyer would filter his statements
3) give the prosecution enough to work with to break his idiot defense.
This is all part of his plan to evade accountability and prison time.
I'm doubtful it's a coherent pre-planned legal strategy though. Playing dumb isn't a legal defense. Considering his obsession with "altruistic" charity, it makes sense he'd take an altruistic approach to the media backlash... Something detached from a purely rational/economic approach that places communicating his own good intentions as the most important metric.
Ego is occams razor
There is no a good legal strategy here by talking like this no matter how you spin it. He just desperately wants to come off as a hapless good guy who got in over his head, even if it makes prosecution easier.
I’m not buying the brilliant conman narrative until I see more evidence he actually profited from this more than some $16M house for his already upper-middle class family.
I do like the idea he just thinks he can good-guy himself out of it.
Maybe that's what got him money in the first place? A disarming pseduo-honesty.
It's really more like a phishing attack to get people to voluntarily wire money to the Alameda bank account presented on the website's interface, and they did.
Why on earth would such an exchange be precluded from having Compliance Officers?
That does not pass even a basic sniff test. It does not make any sense.
I don't think they get regular audits like normal banks...correct me if you know different.
Under Bahamian law?
No proof, just an idea.
It's a sure way to force regulation onto an Industry that so far has been in an ambiguous and nebulous realm, if the goal was to do it with a major yield farming operation that ran a ponzi then we might as well dismantle Social Security and the FDIC because both are insolvent and run on equally shaky model. Not to mention rational reserve banks that have violated all of the Basel requirements since 2008.
Personally speaking I have no sympathy for FTX users at all: this was a regulated and licensed operation and any argument that suggests more regulations are required defy the logic behind why these were in place to begin with.
One logical explanation is that this is a prelude to him committing suicide. His public interviews and statements may be his way of leaving behind some sort of explanation and justification.
SBF may be kidding himself about how gullible crypto investors are. Maybe he thinks if he could get people to believe in FTX tokens, FTX could be solvent again.
I think FTX was a known issue and was "setup" for lack of better terminology as the Lehman Brothers scapegoat that will be used to justify regulation against crypto, and if they can, towards CBDCs.
“History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and its issuance.” -James Madison
"The real truth of the matter is,as you and I know, that a financial element in the large centers has owned the government ever since the days of Andrew Jackson…" -Franklin D. Roosevelt (in a letter to Colonel House, dated November 21, 1933)
So saying FTX is like a bank is sort of true, but only implies that it needed the same regulation banks need.
Oh and also there’s the part where they were lying about treating customers’ money the way honest pre-FDIC banks did, and instead appear to have stolen it.
- republican (people linking this meltdown to deep state conspiracy theories)
- sexist (comments about caroline)
- anti-semitic (comments about religion)
and in the past, these mobs have been wrong in many cases. People are repeating theories as if they are facts, and that makes me uneasy.
Even that scenario is probably criminal negligence.
> I don't want vigilante mobs condemning people to jail...
you're making the mistake that the mobs are making when they scream and howl about how he hasn't already been arrested.
maybe the feds aren't going to do a damn thing, but the fact that they haven't done anything within a few weeks means _nothing_.
their standard procedure, if they wanted this guy (and his co-conspirators), would be to keep watching and waiting while they keep digging themselves a deeper hole. the folks brought in to run the bankruptcy are digging stuff up, and SBF and his co-conspirators are probably chatting away with each other over lines that could be tapped.
they've got a big complicated mess to untangle, and they don't want to bring somebody in just to have the defendant invoke speedy when they know they've got months of work ahead of them to build their case.
Which side of the story do you think is missing? SBF has been on a huge media tour.
> maybe there is a 1% chance that the books were not cooked, that the rapid crypto crash combined with bad accounting practices (not fraud) did actually lead to losing billions of dollars.
How do you factor in the alleged backdoor coded into FTX or the fact they hired someone who had previously helped cover up criminal activity as a regulatory/compliance officer?
https://www.nbcnews.com/news/ftxs-regulatory-chief-4-job-tit...
https://www.pokernews.com/news/2013/05/audio-tapes-expose-ul...
The guy ~destroyed~ stole billions of dollars worth of other people's money. Yet, he is freely hanging out on twitter and podcasts. When people interview him they ask questions about him politely and give him complete benefit of the doubt.
He has his complete freedom and everyone is just speculating that he'll be arrested and judged.
What else do you want? People not to even be angry?
SBF himself has openly admitted to multiple crimes, including fraud. Everyone should be against lynch mobs and jumping to conclusions but that is not the case here. SBF has done multiple public interviews and admitted to many of these crimes openly, even if he hasn't characterized them as crimes.