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Comment by jiggawatts | Hacker News Reader

He's repeatedly said things that are plainly not true. I'm not sure if they're deliberate lies, or if there is an element of self delusion.

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.

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"I'm going to raise new investor money to pay my old investors off" is also, you know, the literal definition of a Ponzi scheme.

yeah, this is the part i keep thinking but haven’t seen anybody else saying.

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

Is this the reductio ad absurdum of VC culture, whereby founders stop even considering that overall profit is (eventually) an end goal, and that VCs don’t pick from an endless money tree? In the case of FTX, some reports seem to suggest that VCs themselves have lost sight of this

I'm not sure if customers of FTX should count as investors. They are creditors and should have a senior claim on whatever remains. FTX is just your garden variety scam, not a Ponzi.

On the other hand what exactly makes the "shitcoins" less real than bitcoin?

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).

Thank you for this hazily remembered summary of the most recent "Money Stuff" newsletter

> 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. :)

> 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.

What is there for them to ‘get off’ from? They are losing their money. Is investing in a barely veiled scam a crime?

I think they mean from social reprisal rather than a legal one. If they invest in risky projects that turn out to be frauds (and sometimes it feels like everything Softbank is involved with is a fraud - WireCard, Greensill, WeWork, and now this), they probably aren't breaking the law (at least, we'd need a lot more evidence to conclude this is deliberate rather than reckless), but they enable a higher rate of fraud in society. Which sucks for those of us living in it, which is to say, everyone.

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.

That is typically called ‘reputational damage’, with the consequences being investors not giving them money to invest because they think they would lose it in another scam later.

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?

> What is there for them to ‘get off’ from?

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.

You seem to be conflating investors with owner/operators?

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?

The operators of FYX took billions in deposits and sent them secretly and illegally to a trading firm run by SBF’s ex-girlfriend or however they count their polyamorous lovers. Oh I seem to recall it’s something like paramour. And then sort of lost track of it all. Lol whoops. I’m pretty sure that should land the lot of them in jail. They’re not in jail yet so maybe they’re getting away with it so far.

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.

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 bankruptcy court will sell the brand right? I’ll buy the brand in court for $100, if it includes the domain name

Adam Neumann (of WeWork) has received hundreds of millions in new investment.

You're talking about retail customers (dumb money) being lured back in. But the comment above is about getting billionaires (smart money) to sign up and recapitalise FTX. I don't see the latter happening...

This is how people addicted to gambling think. Their strategy would have worked if they just got one more round of blackjack etc. This is not the type of person I would want running a financial org with custodial/FBO funds.

>I want to know what this kid is smoking.

https://astralcodexten.substack.com/p/the-psychopharmacology...

That is kind of the thing about these liquid "volcoins" (vitalik buterin terminology). If you think cryptocurrency stores value, then who is to say that you will be the first to sell them and "unstore" that value? Couldn't someone just front run you? Exactly. The moment FTX's crypto holdings were known people did exactly that, leaving FTX with worthless cryptocurrencies.

The more I hear him talk the more I think his attorney told him to act as stupid as possible and that’s their defense strategy.

Fraud requires intent. Weirdly that makes incompetence a legitimate defence to fraud (and similar) charges...

He should have advised Bernie:

"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!"

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