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Comment by bushbaba | Hacker News Reader

Binance is even more shady than FTX. They are most likely not solvent. Personally, I'd move all my funds off binance to off-exchange wallets for the time being.

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Just makes one wonder why the binance guy even stirred the pot initially with FTX, like 3 possibilities exist:

1. He assumed the blowout would be minimal outside of FTX and/or assumed FTX was shady but not as bad as it turned out

2. He acknowledged the possibility that binance will also get scrutiny but realized FTX was just so bad that letting it fester further will only get him arrested faster too.

3. He’s just another idiot who made money lucky.

Curious which it is.

I mean fourth possibility is that binance is solvent right? I’m not assigning probabilities to any of them but taking their insolvency as a foregone conclusion seems pretty incorrect?

Assuming rational actors I can't see any reason to evade audits for years, even after litigation, unless the result of the audit would be bad.

Surely, the following two statements can be true at the same time?

1. Binance is run by criminals and all sorts of people would go to jail if anyone looked at their books.

2. Binance is solvent.

Not saying this is the case, but there's many other reasons for a crypto firm to be shady than their insolvency.

(Not an audit expert)

I can imagine that a full audit would uncover dangerous skeletons in the closet that don’t necessarily imply insolvency. At the very least, Binance made no secret of using extremely dubious banking relationships to collect money from its clients.

Also not an audit expert, but my understanding is that they've released an audited point-in-time snapshot of their bank accounts. The problem is that there are various ways to make that number go up for an instant, so people want (amoung other things) the value of their bank accounts over a longer period.

Audits aren't all-or-nothing, they've already paid an auditing firm to do a custom audit they designed. They could have made that audit much better without going into what you're mentioning.

See Tether. Crypto is just a massive house of cards that will collapse and drag the economy with it.

Crypto (coins, not graphy), is a superteeeny amount of "economy". Most serious finance players avoided doing anything serious with crypto mostly because it's just a very small market for them. Typical investment bank moves more money per day, than the whole cryptocurrency market is worth.

It's too small. It's entire, and arguably entirely fantastical market cap is still smaller than Apple.

> arguably entirely fantastical market cap

The idea of using market cap as a frame of reference for crypto needs to die. There are much stricter controls about how a company issues more stock (and thus can inflate or deflate the price) than how a cryptocurrency issues more coins. Also, cryptocurrency market caps are denominated as an exchange of <insert your country> fiat, whereas a company's market cap is in the fiat in which the company is actually sourced (e.g. NASDAQ).

You just can't compare the two.

Yeah, but it makes for a fantastic scapegoat.

Scapegoat for what excatly?

The economy collapsing...it's the first comment in this thread for context.

I thought Germany's dependency on Russian gas was the reason this time?

It depends on how the media wants to spin it.

My point was, even if the whole crypto ecosystem went to zero right now, the effects on the economy at large would be negligible. However, it would be the perfect scapegoat to finally crash the economy with no survivors. The media would not have a problem with just blaming it all on crypto: as you can see here, people are already very eager to do so! No other explanation needed to convince the masses!

Whom exactly would want to crash the whole economy?

You are aware that the whole economy is a house of cards, right? Not just crypto?

It is bound to crash down after the last decades of reckless policies and all-around fuckery going on. So why not do this "cleansing" while blaming it all on an already hated scapegoat? It doesn't matter if it's not real nor realistic, what matters is the narrative, which I'm sure everyone ITT will gladly lap up!

Maybe an audit shows they are too solvent, only achievable with profits from a prior leverage of protected customer funds that they don't want to reveal.

Say with Tether instead, if they invested in junky stuff but none of it went bust and they made way more than investing in t-bills or whatever they promised, then they may not want an audit to reveal they have 3X more than enough to cover outstanding tether, something t-bills couldn't have achieved.

While we can’t be sure of the minutiae of their assets we can be sure due to the beauty of the blockchain that they own an incredible amount of Bitcoin.

https://bitinfocharts.com/top-100-richest-bitcoin-addresses....

#1, 5, 10…

Same thing for Ethereum.

https://etherscan.io/accounts

This is very far from FTX in my opinion. Billion and billions of dollars of crypto in wallets we can see. And these are just the ones we know of.

We know they hold a lot. That’s not the same thing as owning.

The attestations Tether and Binance like to call audits are like printing off your house's appraised value of $1M. Real audits are the sort of thing that reveal you're underwater on its mortgage and leveraged its value to borrow another $1M to buy a pile of Beanie Babies.

As for 3), we really need to avoid the narrative that these people are idiots or stupid. They are sharks - intentionally malevolent people who have defrauded millions of people. SBF's current defense is that he was too naive and unaware of what was happening at FTX. Obviously its a lie - but we shouldn't help these people spread it.

I think his defense is sort of:

1. We had a busted accounting system

2. Early on in FTX people had to route dollars via Alameda because banking is hard

3. We accidentally credited those dollars both to Ftx and Alameda

4. Each side thought they had billions to spend / lose (their VC and related spend was WILD), and suddenly, oops!!!!!!

I suspect there's a grain of truth to this, in that steps 1-4 did actually happen to some degree and influenced expenditures/risk taking that the firm couldn't back. Given what's known (for some definition), the upper crew knew about the problem well before the bank run, and knowingly transferred funds from FTX to Alameda. This sort of 'best case' scenario still implies an absurd commingling of exchange and user funds.

It doesn't strike me as plausible that nobody ever questioned the extra billions , and it definitely isn't believable that when Alameda got margin called, they just casually 'sent' some of the double counted billions without taking some time to think "hey, so about these billions".

Also, this doesn't square with Sam constantly claiming that he misjudged whether FTT was good backing - if they didn't commingle/steal customer funds, he wouldn't have cared about FTT collateral!

SBF recently said that both the FTX & Alameda/FTX Trading accounts were the same. People who signed up for just storage were exposed to the same risks as the trading degenerates. When everything collapsed, the trading degenerates could withdraw using the very same money that regular FTX users had put money in.

It's fraud, from the beginning.

It's fraud for sure .. but it doesn't mean he intended to take the money or anything. He was just too naive to understand how dangerous mixing the funds would be during an inevitable period of pressure and (I'm guessing) felt like keeping the mondy separate is the kind of control that an overly bureaucratic bank would need, not a nimble startup like FTX :-/

Don't get me wrong, he should still go to prison.

The MIT educated, son of two Stanford teachers, professors of law and business, brother to a Wall Street trader, Jane Street employee, extremely well connected kid was simply too naive :(

Sorry, but you're just giving in too much in his bullshit. Especially when FTX terms of service explicitly said that your funds would never be given to FTX Trading, and that they would be kept apart. It's not an accident. Separating the funds was consciously thought of and immediately followed up by "lol no".

I think the education, Jane St, etc... is what allowed him to be naive. He never had to do the grunt work of running ops at Goldman Sachs to earn his stripes. He just skipped to the fun part of mansions and TED talks.

Anyway, it's clearly fraud and he should go to prison. And in some ways maybe the callous disregard for bureaucracy and controls (we don't need these, it's a waste) is worse than if he had malicious intent (I'm going to take all this money and run). For the person with malicious intent, there's not much to do other than build rules to constrain future people like that since they won't learn from the punishment of others. For the person with disdain for mechanistic controls and regulation however, we do need to show that it's just not acceptable to bypass that stuff and that society will punish you severely.

I don't believe that at all. I can believe an initial loss of some amount of money, but there's no way everyone completely ignored it for years.

Like, how hard do you have to try to lose 8 Billion dollars and not know how?

I'd bet on them hoping they could make the money back after losing it, and just digging successively deeper holes. They knew what they were doing, and excuses are all about avoiding decades of well-deserved prison for the amount of people they've fucked over.

I don’t think they ignored it for years? That would imply most of the FTX lifetime, they’re not even and were only big for maybe 1.5-2 years?

If you look at them buying out the binance share + their VC spend, I think that was over over 4bn? Buying out binance alone was 2.5bn iirc, and they had well over a billion in investments between FTX and Alameda. That doesn’t feel like the behavior of someone who knows they’re in a huge hole, but then who knows.

Not trying to apply moral judgment or make excuses, just speculating about what happened fwiw. At the end of the day they stole customer money (a few good friends got super wrecked, I have no loyalty to ftx or anything)

I though SBF’s defense was poor FTX was manipulated by those bastards running Alameda, and that he had no idea what going on there.

Despite the fact that he owns Alameda.

I’m implying they’re idiots as in they can’t always think 3 steps ahead. This says nothing about their benevolence or lack thereof.

4. Years of living as a criminal, constantly afraid of getting caught, has taken a tole on his psyche. He's now starting to act in a self-destructive manner, not rationally in his best interest.

Cool movie plot

or (4) he thinks he's legit and simply experiencing a temporary setback. His intent is to put the spotlight somewhere else so he can keep the charade long enough to get the books back into balance. Motivated reasoning makes him sure this will succeed if he can buy enough time, even though that's obviously highly unlikely.

Given the negative impact of recent events on his business, he either did not expect FTX to explode so easily or wanted to get it over with.

4. He has relatives in mainland, and ccp wants crypto gone completely.

Or that they run a legitimate company and don't like scammers running competing exchanges and stealing customers money which makes the whole industry look bad

4. It is all ego driven.

All of the above?

It's difficult for anyone to be more shady than the people who stole ten billion dollars from their customers.

> difficult for anyone to be more shady than the people who stole ten billion dollars from their customers

We literally don’t know where Binance is. It’s absolutely shadier than FTX, if a better-run scam.

And we don't know who really owns it: "...Mr. Hillmann said he couldn’t provide the name of Binance’s ultimate parent company because Binance over the past year and a half has been in the process of a broad corporate reorganization."

Even if Changpeng Zhao owns the majority of binance.com, the coins might be held by some other legally-distinct entity.

Hold my Cristal

Give it a few weeks to play out, at least before making that call.

Giving it a few weeks to play out is how people end up without money once withdrawals are frozen.

I'm not saying it would happen here, but in general I don't see any incentive to wait to find out and risk losing everything. Why not withdraw early and wait to see how it plays out while your money is safe?

I think that comment is in reference to “Binance is even more shady than FTX” rather than advice on how to manage your funds.

Gp said give it a few weeks before declaring there’s no one shadier than FTX/Alameda

What about the exchange that potentially steals 70 billion (though I guess their own holdings of Binance token of 17 billion is possibly a more accurate estimate)?

I guess we'll see if Binance manages to have an 11B balance sheet hole? ;P

> They are most likely not solvent

On what basis do you make this statement?

For the time being? Keeping your funds on an exchange (or in a bank) means they are, quite literally, not your funds.

If you don't want the risk of loss, don't give your money to second parties.

That's true for an exchange, but is absolutely not true for a bank (in a well-run modern state). At least if you don't have millions+ of dollars in the bank, the state ensures that even if the bank were fraudulent, your money is still your money.

Your statement is commonly believed, but is completely false. Money held in banks, at least in the USA, can be frozen or taken indefinitely by the state with no evidence of wrongdoing or even probable cause.

There is a blog post on my website called "Your Money Isn't Yours" about the time Chase and the state of Indiana conspired to steal all of the money I had in the world without any basis or reason.

Many people misunderstand this about property in the USA. Civil asset forfeiture among several other mechanisms means that property is guilty until proven innocent and can be stripped from you at any time without any evidence whatsoever.

Money held in the bank in your account is literally not your money. It's the bank's money with a corresponding liability to you. They prove this quite plainly by loaning it out to other parties.

The government can also seize your house, your cash, or your gun using civil assets forfeiture.

So either there is no private property in the USA, or your money is your money, even if it's in a bank.

I don't think property being subject to confiscation at any time is exactly the same thing as "no private property".

They don't really for brokerage accounts, which is what most people's retirement savings actually are in.

The post I was replying to was saying "Keeping your funds on an exchange (or in a bank) means they are, quite literally, not your funds.". I was pointing out that it's absurd to compare unregulated crypto exchanges to proper banks (in a working state - I am sure banks in failed states can well be just as bad).

Technically it's true that the depositor gives up "ownership" of his funds upon making a deposit, but in the US this is practically a moot point for most people because of FDIC protections. Depending on the state (for example, "right of setoff" in NY) there may be some unusual corner cases, but in general crypto exchanges have far more power over your crypto deposits than traditional banks do over your cash deposits.

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