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Comment by Telamon | Hacker News Reader

Except that FTX isn't "crypto" it is/was a centralised exchange, a company just like others. So whether you believe crypto itself is a scam or not, this is straight up old-style fraud from a company doing things they shouldn't, so not really the same thing.

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Among its other endeavors, FTX created FTT, a token that had a peak notional market cap just under $10B, and that value seems to have been used to paper over massive holes in the FTX balance sheet. Massive, unexplained movements of FTT between FTX and Alameda Research[1] presaged the imminent collapse of both companies, and Binance dumping their FTT holdings was the precipitating event. FTX is about as "crypto" as you can get.

[1] https://cointelegraph.com/news/alameda-research-ftt-token-tr...

A self-issued asset is an unregistered security and has nothing to do with decentralized cryptocurrencies like bitcoin or Ethereum.

Nice when you get to define what Real Crypto is. I had been lead to believe that anything goes.

Then you're part of the problem. Bitcoin is real, the rest are scams. What part were you struggling with here?

What property of Bitcoin make is less of a scam than ETH?

The rules of Bitcoin are fixed in place, and no one party can adjust them in future. ETH has core developers who can make any changes they wish whenever they wish.

Well that's untrue.

The rules of both BTC and ETH are enforced by miners. At the moment ETH miners are generally amenable to changes by the core dev team. But there is no reason why future BTC miners could not do the same.

In particular, some of the same groups mine both BTC and ETH so it is clear they are amenable to changes.

Secondly, it's unclear why your presumption that change is bad is correct. The change to proof-of-stake for ETH is clearly a good thing environmentally for example.

FTT was an ERC20 token on the Ethereum blockchain.

If it's "nothing to do with decentralized cryptocurrencies" then neither is DeFi which is built around trading ERC20 tokens.

now you’re getting it.

If FTX isn’t crypto, then I guess Binance, Coinbase and Crypto.com aren’t crypto either?

Funny how crypto pumpers, when they were looking to sell some NFTs or whatever, have been more than happy to promote these exchanges as easy ways for retail investors to get their money into the system. But when the shit hits the fan, now the same crypto pumpers are saying that real crypto is something completely else.

> If FTX isn’t crypto, then I guess Binance, Coinbase and Crypto.com aren’t crypto either?

Indeed they're not. "cryptos" are cryptocurrencies, like Bitcoin. FTX and alike are centralized exchanges (CEX).

This confusion is like calling banks and Wall Street "the US Dollar". And when Madoff and Lehman Brothers happen, calling out on the USD instead of the fraudsters.

The USD allows to do money laundering, fund terrorism and create scams, but that doesn't mean it is a scam itself, or that it should be banned, or that people who use the USD participate in a scam.

Eh, USD is not just the dollar, it is an entire set of systems that include regulations that prevent fraud schemes. The USD without these systems would be the broken joke BTC is currently.

That's right, they are not crypto. They are exchanges. They operate very similar to stock exchanges except the asset classes they operate around are different. People pointing at crypto's failure right now would be equivalent to TD Ameritrade blowing up and saying stocks failed.

FTX had enormous crypto holdings and made investments in companies you’d definitely consider crypto companies, notwithstanding that there aren’t any “pure” exchanges in the crypto world anyway—they all get their noses in it.

> this is straight up old-style fraud from a company

Traditional banks definitely go up bankrupt, and regulated financial entities definitely break laws, but it seems to happen with alarming frequency with crypto companies.

Given that the only two proven use-cases for crypto are doing an end-run around regulation/laws (however foolish or unjust people may believe those rules to be) and speculation/gambling, it also doesn't seem that surprising?

I would probably add a distinction that one of the main current use-cases proven is avoiding restrictions rather than regulation/laws. I think a much more positive case can be made for working around limitations that are put in by large players in various industries to make it harder for the common person to do something or start a business in a given area, even in cases where there aren't specific laws around it.

> avoiding restrictions rather than regulation/laws

Could you give an example? Most of the ones I've seen are regulations/laws that someone simply thinks are unjust, eg a country's currency controls or avoiding laws designed to stop money laundering.

Or, you know, explicitly trying to make sure north korea can sell the crypto they make with ransomware.

> Traditional banks definitely go up bankrupt, and regulated financial entities definitely break laws, but it seems to happen with alarming frequency with crypto companies.

Traditional finance can be just as bad. Remember the savings and loan crisis? Just as regulations had to catch up with banking so too will they for cryptocurrency exchanges.

Sure, but I’ll note that you’re pulling an example from 30-40 years ago here where I’d be a little surprised if you couldn’t find an example of malfeasance leading to loss of deposits for at least every year since MtGox went down.

Yes but also consider how long banking has existed, and yet this still happened just 30-40 years ago. Cryptocurrency exchanges are relatively nascent in comparison.

The fact that a lack of regulation results in a marketplace of scams was known before bitcoin was invented. Naivety of that is not acceptable. Bitcoin chose not to build in any protections in a financial systems to stop scams means they were purposely, or out of abject stupidity, leaving them out. Bitcoin doesn't get to say "oops we can add the ability to stop scams later" because it should have been table stakes from the very beginning

But bitcoin was literally built to be free from regulation. Why is that?

Okay, but imagine instead recreating the system where the SLC happened vs continuing in one where it's been accounted for...

FTX wasn't just an exchange for crypto. they had their own crypto token, FTT. the whole fraud is based around the fact that the valuation of FTT was in reality fraudulent.

No it isn't. That's what SBF is trying to tell people to make it sound like it's just a story of incompetence and incorrect valuations. They stole user deposits which were specifically not meant to have anything done to them but be held and used them in the trading arm/to prop up other things.

The price of FTT shouldn't have mattered to anyone not holding FTT. But yes the precipitant here was that they had clearly been thinking "oh we have loads of FTT still so can always sell that to cover user withdrawals and won't get caught".

ok, I agree with that too, but I also strongly believer that FTT (and most tokens) are created to enable fraud such as this (we can use our fradulent token as a means of collateral). Perhaps your argument is, even without FTT they would have found other means of stealing peoples deposits with a different cover story, and I guess I buy that as well.

Just use their list of "assets" to illustrate your point. In descending order from the back-of-the-envelope balance sheet of doom: SRM $2,187M "other ventures" $1,475M GDA $1,150M SOL $981M MAPS $616M FTT $553M Anthropic $500M "locked" USDT $500M HOOD $472M USD in Ledger Prime $200M USDB $73M PYTH $63M OXY $54M ETHE $53M TWTR $43M STG $45M FIDA $36M DAI $28M DOT $28M

and so on in to irrelevancy. Its a bunch of garbage "coins-that-definitely-arent-unregulated-securities" (SOL, MAPS, OXY, MSOL) and related garbage producers (SRM, GDA, etc). More or less their entire set of assets is either crap that they made up to sell to rubes, or crap that someone else made for FTX to invest in and sell to rubes. They dont and never did have meaningful assets to back teh house of cards once they stole their customers real USD.

https://d1e00ek4ebabms.cloudfront.net/production/7ab64a3b-6c...

The root basis for the for all of the fraud Sammie boy engaged in starts with the FTT token.

Now the no true Scotsman fallacy people are throwing around is just that, FTX is and was a crypto company.

Do you mean that before FTX directed customers to wire deposits to Alameda and then immediately misappropriated the funds, they launched a token? like, one of them temporally preceded the other, even though the actions were unrelated?

This is incorrect, they just stole customer funds. They could do that without issuing a token.

> Except that FTX isn't "crypto"

nobody buys this line

> it's not real communism

Same thing all the time, true believers have a hard time being critical of themselves.

FTX was a crypto company full stop

If you’re trying to equate communism stuff with Stalin or something then of course there will be reasonable push back. You’ll find a lot less if talking specifics like Lenin or Cuba. Otherwise communism and politics are a lot more complicated and nuanced than the simplicity that is cryptocurrency.

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