IRS files $44B claims against bankrupt FTX
unchainedcrypto.com
unchainedcrypto.com
I was stupid and thought that the 7+% interest I was getting from Gemini+GUSD+Genesis Holdings was a good idea, I put a good chunk of money in there, and as of right now the status for that appears to be in "limbo at best". It's particularly upsetting, because this all unfolded right after I got fired from my last job, when I really needed my liquid money to pay for things like "my mortgage" and "food".
I'm fine now fiscally, and even wasn't in too much trouble back in November [1], but it make me lose multiple nights of sleep worrying about stuff, and also made me feel like an idiot for ever thinking that cryptocurrency was a good idea.
[1] I have a good chunk of money stashed in stocks/ETFs, which I could have liquidated for money, but the market was pretty far down so I would have had to take a big haircut.
I looked at these and they were so absurd there was no way I would invest. No fundamentals. No audit. No insurance. No stable company or bank.
What was your thought process in putting funds here? Did you think it would just take longer to explode and you would be able to withdraw before? Did you genuinely believe?
[1] https://www.gemini.com/dollar It still mentioned "FDIC" stuff in small print, but it was much more prominent in earlier stuff.
If someone is offering a high interest, very liquid investment with returns so high that you are better off taking a larger mortgage, and putting the extra money into the investment, there has to be a hidden risk component: Otherwise, why would anyone issue mortgages, instead of investing in this very liquid instrument? It's too good to be true.
It's not unlike the people that spent money ordering cryptominers from butterfly labs: The expected return from buying them (pay the whole thing off in two months, and afterwards it's all profit!") just doesn't line up, regardless of the justification. Extraordinary returns exist, but they either require that you discover them yourself, or have to carry significant risks. So when someone is selling the opportunity to you, and you are told there's no risk, you have to know you are being lied to, no due diligence necessary.
Before the collapse, FTX and crypto had a veneer of respectability. They had ads everywhere and the mainstream press treated them like legitimate financial investments.
The failure here isn't of the individuals who get suckered with crypto bullshit, it's a failure in our ability to regulate and tamp down that kind of crap. Shame on the press, government institutions, and of course tech sector VCs, for either shilling for, investing in, or looking the other way while these frauds were taking people to the cleaners.
* There is no free money. Why would there be free money?
* It isn't FDIC insured. Look, it is a lie
* It has ponzi economics, etc
And it would get hand waved away. Agree that authorities dropped the ball, but the way a good con works is the mark wants to get conned, they want to believe there is something too good to be true.
This is not aimed at OP, who opened up, admonished themself, etc.
The world is full of liars, something one learns as one gets older.
> I sincerely hope that I never meet Sam Bankman Fried, because if I did I do not know what I would do but it certainly wouldn't be legal.
Why is this statement not condemned? Of course it's terrible that SBF was a fraud. But insinuating that physical harm is justified is just not ok. They were the naïve ones who bought into the BS, waived away all the warning voices, and now they are threating violence? Not ok.
This also explains all the hype and starry eyes for LLMs.
When interest rate is below inflation, we do have free money, it's just not for everyone.
Nope, the failure is of the individuals. Sure, regulators deserve some of the blame but nobody forced the individuals to put their money into such ridiculous schemes.
If anyone was thinking about "investing" in cryptocurrencies, just try and remember that it's largely-unregulated funny money, and you're probably not going to save the world while simultaneously getting rich from it.
I'm hoping that other people can learn from my mistake the age-old adage: if it looks too good to true, it probably is.
[1] (well, most of the time, admittedly I'm subject to vanity like anyone else)
It's hard to be successful at everything. Ask the friends of anyone here, they'll point at the things someone did right and the things they messed up to get their.
Glad you're doing better.
I made most of them back YOLO-ing TQQQ, but like you, I was having cold sweats for several nights.
Thankfully, there is so much money in tech industry that you can still recover from mistakes like this.
But it doesn’t change the fact that I was once a fool.
This should be piercing-the-veil fraud if true.
Good, but insufficient. Misleadingly using the FDIC’s brand should open a criminal investigation.
I'm sorry you fell victim to this. It's a shame the regulators, meant to protect consumers from this exact thing, weren't able to do their jobs. Don't take it as a personal failure. This was systemic, and you were served up by lots of deeply monied interests.
We’re all getting older, and there’s a good chance we’ll lose some of our faculties along the way. I’d prefer to live in a place that does something to help protect me from outright scams, and not have to take “personal responsibility”, and constantly be on guard against every potential bad actor.
The link you posted does mention fdic but it says Gemini’s deposits are fdic insured (probably true as what kind of a crazy company keeps cash in uninsured accounts). Definitely shady of them to word it like that as it’s likely meant to confuse and mislead. But again, pretty easy to validate and disprove before sending any funds.
I hope you get something back and I guess the good news is that you only make this mistake once in life and teach everyone in your family how to avoid.
I'm also reasonably sure that the FDIC insurance stuff was more prominently displayed on their site, though I'm having trouble confirming that so maybe I'm just misremembering.
And indeed, I have helped a few people avoid these scams now. When friends of mine ask me about investing in crypto now, I tell them "I think you should buy Treasury Bills directly from the government for safe short term stuff, and probably just find a good low cost index fund from a registered broker for longer term stuff".
Originally:
> Gemini is a U.S. company regulated by the New York Department of Financial Services. GUSD reserves are eligible for FDIC insurance up to $250,000 per user while custodied with State Street Bank and Trust.¹
Later:
> Gemini is a U.S. company regulated as a limited purpose trust company by the New York State Department of Financial Services. Each GUSD corresponds to a U.S. dollar held by Gemini in accounts at U.S. FDIC-insured bank accounts and money market funds holding short-term U.S. treasury bonds and maintained at a custodian. The cash portion of these GUSD reserves may be eligible for FDIC “pass through” insurance for Gemini customers, in the event of the failure of a bank holding the U.S. dollar deposit portion of the GUSD reserves.
[1] https://web.archive.org/web/20211201224824/https://www.gemin...
Simple to who? Simple to you? I didn't invest in Gemini and also thought these returns were obviously bunk, but I've never heard of "FDIC's bankfind tool" before your comment.
The guy already said he accepts his share of the blame for not doing DD, but I'm not sure why you're so insistent that it's entirely his fault when SBF was clearly committing fraud.
Either someone is competent enough to earn thousands to hold with FTX or competent enough to inherit win and not have it wasted away.
Either way, if I have $10-100k or whatever and this isn’t simple for me then the issue isn’t FTX, it’s me and I’m going to eventually lose it.
I’m saying it is OP’s fault because he invested in magical thinking. Of course it’s also SBF’s fault for committing fraud. But this is an entirely avoidable fraud as it’s not a complicated con.
If I buy magic beans from a traveler whose fault is it? It’s certainly the traveler’s fault for claiming they will grow into a beanstalk to heaven, but it’s also my fault for believing such a tale.
Remember Bernie Madhoff?
FTX was patently impossible.
I’m really amazed you thought that 7% yield from savings at a time of 0% interest rates was anything other than a fabrication
On the other hand, this was an epic level of fraud. As an example, I was making ~8-10% off of peer-to-peer lending when rates were very low, done via very (seemingly) reputable lending platforms. Imagining if a SBF-level scammer was running one of these, and I very much feel for those that put trust in an overall system that generally doesn't have this scale of fraud.
Any of these schemes had to involve a much higher risk than conventional investing. You can wave your hands as much as you want, but that doesn't hide the fact that there was (and still is) systemic risk that was by a) nature incredibly difficult to quantify and b) probably pretty high, given the returns. There is no free lunch.
The guy (SBF) was hanging out with and appeared to be anointed by Gensler and crew https://www.sec.gov/about/commissioners/gary-gensler. How much due diligence does one expect common citizens to perform?
Even a person with a finance background such as myself cannot realistically state what yield is "viable", especially without history.
Commercial Real Estate is paying 8.5% preferred these days...is that viable? Not sure, but I can look at history across rate environments.
Crypto has no history so I think a lot of people were going on trust of the players. Many investments are about trusting the managers.
If Commercial Real Estate is paying 8.5% and someone starts offering “Crypto Commercial Real Estate” as a competing product for those same fundamentals but offers 400% return, would you still be unable to assess its viability?
Totally agree. But why would you compare crypto high yield accounts to MM funds, rather than, say, CLOs or CLO funds, or structured notes (https://pprcapitalmgmt.com/invest-in-a-real-estate-fund/) or factored receiveables funds
Necessarily risky. Not necessarily fabrication. Between those two there is room for both productive gains and delusional optimism.
There's not a floor of 0%. Negative returns exist.
You could provide liquidity for stablecoin swaps, collect the shitcoin rewards and regularly dump them. Withdraw at anytime.
Of course, in that scenario you had good control and the counterparty can't rug you because you could verify what was going on. There was some technical risk, but it never actually occurred.
It was because interest rates were zero, largely, that this was possible.
The mistake here was giving the assets to another party who can do whatever they like and where you can't see directly what they were doing.
> There was some technical risk, but
These statements are a bit at odds. "But it never actually occurred" is a statement of chance, not risk. I also suspect you are downplaying significant systemic risk. "Withdraw at anytime" could go away quite easily in several scenarios.
>I’m sorry for your loss but I’m really amazed you thought that 7% yield from savings at a time of 0% interest rates was anything other than a fabrication.
I'm amazed that this is itself amazing. The 7% was over a time when US inflation peaked at ~9%. It doesn't seem right to say, of a yield that doesn't compensate for inflation, that it's is so ridiculously high that only the most self-deluded investor thought it was achievable.
Furthermore, the collapse didn't happen while those sky-high rates were being promised. As of November 1st 2022, rates had been cut to 5.6%, and then, that was only for the Gemini dollar (which Gemini issued and was willing to use as a loss leader). By then, other stablecoins were lower, like DAI at 4.9% [1], similar to the rate that overcollateralized platforms like Compound were charging to borrow it.
(Disclaimer: I used Gemini Earn, but was able to remove all assets before suspension of withdrawals and hat not put anything in that I would need urgently.)
[1] https://web.archive.org/web/20221027002940/https://www.gemin... -- note, that's from Oct 27, before the final GUSD drop.
I'm sure you can find double digit interest rates for say bonds that represent payday loans, but you should expect the bondholders to default at a correspondingly high rate.
But investors should be aware that higher rates imply higher risks.
Did something substantial changed on the market recently? Because right now I can literally get a risk-free 7% time-limited savings deposit from my bank (Santander), which HN tells me is completely legit, all while banks in most other countries in the EU are stuck at offering 0.01% or even negative interest rates. What gives?
I've long given up on trying to make any sense out of it.
EDIT: to be clear, I'm in EU too (Poland). I don't follow what FED is doing (outside of what I occasionally hear about it on HN). I imagine it has some impact on EU markets (US having most nuclear carriers, etc.), but I don't know how big. From my perspective, we're still "at a time of 0% interest rates", and Santander suddenly offering 7% rates is some kind of anomaly, compared to other banks - both locally and EU-wide.
However what the ECB(European Central Bank, steward of the euro) and the NBP (Narodowy Bank Polski) have done, impacts you much more directly.
https://www.ecb.europa.eu/stats/policy_and_exchange_rates/ke...
https://www.ecb.europa.eu/press/pr/date/2023/html/ecb.mp2305....
And of course, most relevant, Polish Central Bank: https://nbp.pl/en/monetary-policy/mpc-decisions/interest-rat...
The 7% interest rate you get in Poland is based on the one set by the central bank. Note that it is only like this since end of 2022, before that the rate was probably hovering around zero, like the ECB.
Yes. The FED has increased to interest rates. So the marked can support that now.
Yes, something very substantial has changed.
I still feel bad but only in the measure that poor economic literacy contributes to people falling for these scams. That and old-fashioned greed :)
7% risk-free savings with negative interest rates... Come on.
Clearly I'm not the only one who was suckered by some of this verbiage though: https://www.sec.gov/news/press-release/2023-7
The entire space rests on the metrics generated at the whim of perhaps a hundred or two extremely (crypto-)influential individuals who are all affiliated with one another and whose incentives and behaviors are highly correlated even when that affiliation is weak or antagonistic. I'm referring here to the large established miners, both public and dark (i.e. bot farm based, corrupting gov. officials, etc.) As well as the pools that they pretend not to control, and to a lesser extent the operators of the larger exchanges - although they are not nearly as free to move in recent years as the miners still are. It's no accident in miners are extremely publicity shy.
This group, which behaves like a cartel so it's reasonable to think about it as one, self-generates nearly every metric used to determine the size and depth of the entire industry. The fees and other costs to create fraudulent statistics would be impossible for anyone who is not a miner to swallow, but if you're mining at scale there is an enormous discount - because an inverse scale fraction of those fees are paid to yourselves.
Transaction volume, price, number of nodes, number of accounts, velocity of funds, everything that is used to construct a picture of the real human interest in this market via the lens of virtual numbers that describe it is completely under the control of a few people. Although some of them are more regulated today than they were in the past, for a good part of a decade there was effectively no oversight into how any of these operations worked, and they were free to openly front run the market, buy electricity at substantially corruption-reduced cost or just outright steal it- and again in the early days this paid off extraordinarily well because early large block rewards could be sat on and held until they bubble-appreciate several thousand of percent above acquisition cost.
when you're paying reduced (or nearly zero) cost for your production infrastructure you don't need to sell all of your product right away, and you thereby accumulate a future war chest to create a market 'bottom' anytime liquidity gets a little bit too loose for your liking: simply slow-roll selling new block rewards and voila, price stabilizes. Your carefully managed low public profile lets the media and public fill in their own self-serving explanation, which is that the public must be crazy about this stuff it cant stop buying it.
Exactly)
Although it’s a lot easier to trust a boring and stable company like Fidelity that’s not offering snake oil.
Btcjam were making the market between miners buying more equipment and capital much earlier.
Eth staking was also in the plan this same time as FTX
Good reminder to all here that if you don't hold they private keys to your crypto, all you have is an IOU from a risky new business.
Many coins have failed, many more will fail, and many if not all will drop to zero as the mania subsides. When that happens it doesn’t matter where your keys are if the market turns illiquid in seconds during a crash.
I can definitely see a lot of cryptocurrencies losing a ton of a value but they do have a legitimate use for remittances. If you're transferring $1000 it doesn't matter if you convert it into 1 bitcoin or 100 bitcoins since your wife is cashing it out the next day for 20,000 pesos.
The fact is that billions in locked value have accrued securely over the years in battle tested protocols like curve, aave and yearn.
Doesn't matter if you own your keys if nobody wants to buy your Crypto/NFT etc.
Re your numbers, I'm afraid I don't trust any of the numbers in this market as none of them are audited.
You don’t have to. That’s the point. It’s a trustless infrastructure, with public data that anybody can audit. There are countless independent services that are reporting the same numbers, from querying the blockchain data.
So while the blockchains provide public records of transactions, the prices are not set by the blockchains and participants are anonymous enough to be difficult to track.
Uniswap, Cowswap, Kyber, Balancer, they all agree.
Hint: they likely could never have even gotten to the point of taking customer deposits, or would have been shut down within weeks or months at most by regulators.
Yeah, I think it falls down pretty quickly; if nowhere sooner, then at the point where “We issue our own cryptocurrency” turns into “We issue our own cash”.
All point out the same issue, as both have various regulatory precedents and/or obvious real life issues.
It’s like taking to some floating Janus head sometimes.
In person interaction doesn’t work that way.
Programmers see all this bureaucratic regulatory red tape and decide to try and make something more efficient by removing it and claim that they've saved finance by reinventing it.
Then one by one, they start seeing why each of these regulations exist; the regulations didn't exist to keep the little person down, it was to protect against scams. And then they suddenly want regulation on their funny money, at which point cryptocurrency just kind of becomes a worse version of real currency.
Pretty hard to avoid gov’t oversight/regulation when a USD Wire and ACH goes through the fed, for instance.
Easier when it goes through a blockchain which they can’t control.
Which is why a lot of exchanges (and all the sketchy ones) use things like Tether and stablecoins, and avoid US banks.
This is indeed a failure of crypto, because FTX was the one primarily in control of the coin supply.
Anyway, it should be clear to people that the 7% in an outside currency has to come from somewhere. And most of this stuff has been a zero-sum game so the money comes from:
1) Investors who bought the top
2) Traders who got liquidated
3) IPO investors who bought shares in a money-losing business model like WeWork
4) Advertisers whose ads didn’t pay off (yes, advertising is a zero-sum game too)
Sadly, most people do not realize it’s a zero sum game and the bagholder class only grows and grows until the speculative bubble pops.
Either you live in a country where you can trust your money system, or you don't.
And since they are too fragmented and comically self-serving to organize anything like their own soveriegn state, they need to piggyback off an existing one.
Is there any crypto “bank” that promises to pay interest while you hold your own keys?
This makes some sense, as with treasuries you run the risk of not having access to your cash when you need it because of trade and settlement windows. Funds in Aave are 100% liquid.
The correct answer is 0, because you're being scammed.
I pinky swear that my NotAScamBank is FDIC insured, and that it has 20% interest p.a., would you like to deposit money with me?
Obviously the FDIC is gonna take a look and say "hah no, go away", NotAScamBank knows this, and won't even bother applying. It's a scam, why would they be honest about FDIC status?
In DeFi, you give your money to a "smart" contract, which can of course still get hacked or what not. Always assess your risk/reward ratio.
Where does the yield come from? Collateralized lending/borrowing markets. People are still gambling with crypto and they can do it better, if they can borrow funds. It got a lot smaller after the collapse of FTX, but hasn't stopped at all.
Aave still has $7.5b locked up.
If you have any experience in currency conversion, this is the equivalent to that. If you've travelled you've probably bought and sold currency at the airports. If you're in Saigon, you get the best USD->VND rates not at the airport, but by going to the gold dealers who have shops on the streets. You have to shop around to different stores to find the best rates. DeFi enables you to effectively be that conversion service (gold dealer). But instead of USD->VND, it is ETH->BTC (or whatever cryptos you want to provide liquidity for, or lend/borrow).
I personally find this a fascinating aspect of crypto that few understand or even care to look into. It goes far beyond just the gambling aspect of buy/hold and number go up (or down). It turns into real finance and an actual valid use case for crypto. Sure, crypto is re-inventing the same old stuff that people have been doing for ages, but at least now people globally have the ability to try out these mechanics, instead of just leaving it up to the bankers (or gold dealers) to get rich on your money. I love the concept of power to the people.
That said, I'm not here to give financial advice about how to get the best rates. There is nothing weird about that. I'm just saying they are out there if you want to look for them and learn more about it all. Aave is just an example of the fact that a single site has a $7.5b market. Of course, if there is a market that large, there is going to be many other sites than that, and it is all quite competitive.
If you're interested in this, please do your own research.
I didn’t feel like the Gemini people were terribly unprofessional; at least not outwardly.
If you're an efficient-market believer, there's no such thing as a "down" market, because the price is always correct.
I'm not a believer, but there is some value in the thought.
For cryptoskeptics such as myself it's been fascinating to watch as the crypto world speedruns the lessons of debt, finance and the banking system that led them to work the way they do. A lot of otherwise smart people in other areas discovered those smarts don't automatically transfer to disrupting the financial system.
What ultimately underlies the financial system--including crypto--is trust and, beyond that, the military might of governments.
To your specific case, I saw a quote (that I can't find) that basically said that any investment consistently offering above-market returns is eitehr a scam or has risks that you cannot see.
Bear Stearns returned above market returns every month until it didn't, and that was that.
I was kind of enamored with the tech behind blockchains (and to some extent I suppose I still kind of am), and saw the insane growth it was going through, and drank the stupid kool-ade.
Seeing it all go pear-shaped has really highlighted why we regulate banks in the way that we do. It's not perfect, but I sleep better knowing that an actually-insured bank won't really run away with my money.
The very broad notion of digital currency involving cryptography is as good, bad or ugly as any number of other everyday concepts and mechanisms. There's no special inherent evil in that broad notion.
Your investment choice, on the other hand, was average. Not terrible. Average. That is, you diversified, you lost some, but you're still around to play the game, and still ranking very highly in the overall human race affluence stakes.
Snake Oil, or even simpler, mundanely-poor investments, from all walks of life, are the true basis of idiot bait. Digital currency involving cryptography simply is what it is. It's quite likely that the near-to-medium future of humanity will involve quite a lot of it, in some form or another (not at all like most of the current forms, of course).
I was in a position that gave me more headaches than I'd like; unpleasant but fundamentally I'll get over it (most of my savings are in ETFs and treasury bills). I was able to sell some stock at a bit of a loss, pay for my mortgage and food until I found another decent job. It sucks, I don't like losing money on my investments when I know I could have waited them out had I been employed, but fundamentally not earth-shattering.
But I did read stories about people who really bought into cryptocurrencies, and were really taken for everything they were worth by the Gemini Earn program, which it sounds like your friend was.
I can only hope that the SEC lawsuit against Gemini is successful, and all the investors are made whole; I cannot speak for your friend, but I'd be happy enough to forfeit my interest if I could get my principal back.
Humans in general cannot 'time the market'. To think that you can is a fool's errand. Therefore, the fact your stocks are down isn't a good reason not to sell them.
OP wasn't trying to time the market. They had a liquidity issue and needed cash.
> Therefore, the fact your stocks are down isn't a good reason not to sell them.
Realizing a loss is the perfect reason not to sell. This is why smart people recommend having an emergency fund, so you don't have to take a hit and damage your long term goals when you find yourself in a short term pinch. Not selling is actually the most important part of owning stocks.
That said, you clearly also get a lot of other things right: admitting your error, long term savings in a home, a good job, understanding what a portfolio is, plus other obviously smart decisions.
Hopefully we all learn from your mistake - it is so easy to screw up or be beguiled into screwing up.
But yeah, fundamentally I suppose it's better for me to have been conned like this while I'm still relatively young, and where I didn't have all my net worth tied up in it.
Honestly at this point, if anyone were to ask me for investing advice, I would tell them to stay the hell away from cryptocurrency.
You are insinuating physical violence (I will assume) which is never acceptable.
And in your case you made a mistake ie
'I put a chunk of money in there'
and further SBF had no control over this: 'because this all unfolded right after I got fired from my last job, when I really needed my liquid money to pay for things like "my mortgage" and "food".'
The takeaway for others is events happen in life. Could be someone's fault could be nobody's fault.
Having all your eggs (or no eggs) in one basket can and does lead often to disaster.
Sorry for the harsh way of putting this. What you are indicating is that you had no cushion and made the mistake of being lured by a high return and ignored potentially any downsides. (Gemini is not and did not claim to be an FDIC insured bank. Also crypto can and does lose value unlike money in a bank. Even if you had been able to get 7% return if crypto loses value you lose money. Same as or similar to a dividend paying stock).
I mean, the guy stole about more than ten thousand dollars from me. I wouldn't actually hurt him, I was engaging in a bit of hyperbole (which I feel you're deliberately refusing to understand), but fundamentally I am not going to lose a ton of sleep if something bad happens to SBF.
> and further SBF had no control over this: 'because this all unfolded right after I got fired from my last job, when I really needed my liquid money to pay for things like "my mortgage" and "food".'
No, but it is why I am especially upset over this stuff. If it had happened when I was gainfully employed at the time I would obviously be upset to have thirteen grand stolen from me, but it especially hurt because I was a victim of all the layoffs that happened last year. I didn't claim there was some divine rationality, which I also think you are deliberately not understanding.
> Having all your eggs (or no eggs) in one basket can and does lead often to disaster. > Sorry for the harsh way of putting this. What you are indicating is that you had no cushion
In the post that you are responding to, I mention that I did have a cushion, and I didn't put all my eggs in one basket. I had a fair bit of stock and ETFs. I had to sell in a down market, so that wasn't fun, but I feel like you didn't finish reading the post.
> Also crypto can and does lose value unlike money in a bank. Even if you had been able to get 7% return if crypto loses value you lose money
This was GUSD, which was ostensibly pegged 1-to-1 to the US dollar, so it wasn't supposed to be able to "lose value" in any substantial way.
> Gemini is not and did not claim to be an FDIC insured bank.
No, but the verbiage on this was less clear on this in the past: https://web.archive.org/web/20211201224824/https://www.gemin.... Thanks johnmaguire in this post: https://news.ycombinator.com/item?id=35907642
This page: https://web.archive.org/web/20211201212024/https://www.gemin...
Now I will note that on that page it does say this:
"Gemini is partnering with accredited third party borrowers including Genesis, who are vetted through a risk management framework which reviews our partners’ collateralization management process. Additionally, on a periodic basis we will conduct an analysis of our partners’ cash flow, balance sheet, and financial statements to ensure the appropriate risk ratios and healthy financial condition of our partners."
But the thing is this. There is literally no way to prevent against outright fraud of a counter party. (See the Crazy Eddie story where they were shifting inventory from store to store when they were being audited).
Look one thing I will tell you here let's call it 'the bottom line'. I am an old timer. And I right off saw crypto involved risk and as such I did not either make or lose any money on crypto. As an again 'old timer' it just didn't make sense to me. I would have never gone down this road because being around for so many years right off it had the potential for issues. Plus again there is always counterparty risk.
However, I do think Gemini/Genesis and SBF were deliberately obfuscating the risk to make these investments seem less risky, and obviously I have the right to be mad at SBF for outright stealing my money.
Was 7% in 2021 too good to be true? Yes, obviously, in hindsight it was, but that pays no bearing on whether or not I was robbed.
The article also only mentions what half the bill is. $20.4B of partnership taxes and unpaid payroll, but no info on the other $23.6B of taxes.
Edit:
From a random googled article: $1.02B of revenue in 2021. It seems like a long jump from that to a $44b tax bill - even if they had perfect accounting they would never have been able to pay that much
https://www.cnbc.com/2022/08/20/ftx-grew-revenue-1000percent...
Clicking through to the list of filings shows about 1850 items (rounded, 93 pages of 20 filings each), many of which don’t appear to be against FTX.
For example there’s a $2.5 billion one on the first page against “Paper Bird Inc”, who I haven’t looked up yet.
From Oct 19, 2022, just before their collapse: https://www.ftxpolicy.com/posts/possible-digital-asset-indus...
That revenue is probably mostly fees from the exchanges. Alameda as a partnership started with peanuts and was at some point (say 2021 fiscal year) was worth like 80b or whatever out of trading and made up coins whose cost is petty expenses on a web page and a few dev days, so an aggressive interpretation is that 80B minus 10 million whatever is capital gains, that passes through Alameda partners as personal income.
Of course they burnt it all the next year so there might be an equally big tax credit for fiscal year 2022, to be used against future profit/income lol.
Also, FTX had no concept or accounting of client assets, so for tax purposes it might be considered that all the money clients "deposited" was revenue, which is how SBF functionally treated it.
https://fortune.com/2022/11/21/new-ftx-ceo-john-ray-hired-cl...
why isn't tax collection "deserving"?
From a social-equity standpoint, I'd rather see FTX depositors get some cash, instead of having the IRS book the biggest recoveries. But in terms of what the law is, if we're looking at total FTX contempt for the right way to classify people on its payroll, it's hard to argue against the IRS coming down hard on this one.
Not to mention, FTX was in the Bahamas and Alemada Research was based in Hong Kong, so people working there may not even be covered by US employment law.
This claim is the IRS to making up the biggest plausible number it can and then using that to review the facts and make a case to the bankruptcy judge.
If my understanding is correct, merely the fact the IRS has officially made this classification entitles those workers to a refund, even if the IRS never manages to collect the money from FTX.
A nice big fat bonus paycheck for the workers there!
Possibly, if they ever actually collect it. (not sure of the legal requirement here)
The best thing a contractor in this situation can do is file an amended return now, using Form 8919 to re-calculate the employee share of FICA tax they owe. This will also involve filing Form SS-8 (separately) to dispute their status as a contractor. It may take several years to get processed, but at least it creates a formal claim that the IRS will have to eventually honor or deny.
Also note that only the 7.65% employer portion of FICA, less the income tax deduction that Schedule C filers get for that, is in question. Also, as employees there may be other business deductions they took on Schedule C they would no longer be entitled to.
The employer (FTX) is also liable for taxes that sole proprietors don't pay, such as FUTA (federal unemployment), and a variety of state payroll taxes most likely.
Here’s a quote from the IRS [0]: “ An employer generally must withhold social security and Medicare taxes from employees' wages and pay the employer share of these taxes.”
[0] https://www.irs.gov/businesses/small-businesses-self-employe...
The argument is that, as the now employees understood themselves to be contractors, they paid the (higher) contractor tax rate (employee + employer). If the IRS is retconning them as employees and FTX owed the employer's share of the employees' taxes, the employees are entitled to a refund of the amount they overpaid.
Genius. Why not, free money. Unless of course you don't think government agencies should play fast and loose with their enforcement based on the likelihood of the defending party to successfully resist.
FTX was so badly run that it isn't even suitable as a business school case study. The questions it really raises is how they got as far as they did at that scale without ramming into one legal wall or another even sooner, and I don't even mean exotic cryptocurrency laws, I mean just plain ol' corporate laws that everyone else faces. How much you want to bet they weren't correctly an Equal Opportunity Employer, or managed to have non-trivial OSHA violations, or... just pick your agency, really.
All the people who would have done so didn’t want to upset the ‘getting rich’ Apple cart.
There is no doubt in anyone's mind that that tax bill isn't real, it's obviously a negotiation tactic to try and get a larger cut. I don't think that's something that a government agency should do, even if the target is a giant fraud.
44B$ is more then FTX's ever had in assets, it's definitely more then they had in revenue and more then they probably ever paid employees. And taxes should be a fraction of that on top of what they probably did pay.
https://time.com/6095957/jules-kroll-private-detective-profi...
1. There is an overwhelming abundance of rich idiots in this world. Wealth-merit determinism has been publicly dealt a serious blow that I hope people will take to heart.
2. Finance is a mature and ever-evolving complex technology in itself that has proved why it is the way it is, and no amount of idealist nerds and their "investor" fools can possibly knock it down. It must be humbling to rediscover every regulation and facet of finance, one crypto-blunder at a time. Finance as an industry attracts some of the world's most intelligent and most ruthless individuals, but you think they're somehow leaving money on the table? You think you can do better because you know python and cryptography 101? Really?
> 1. There is an overwhelming abundance of rich idiots in this world. Wealth-merit determinism has been publicly dealt a serious blow that I hope people will take to heart.
And somehow people still say poor people are poor because they lack financial intelligence and we could fix their poverty by giving them finance education. No poor people are poor because they lack money, because of that they must be smarter with their money, they can't afford to loose it.
Rich people on the other hand don't need to care. I would even say that many don't even notice the money they lost here
One of the smartest things I heard said about crypto is it’s an unvarnished metric of the animal spirits in our world. Its optimal price isn’t zero. But somewhere just above it. Enough to inspire productive work, but not enough to gain animation of its own.
People made poor decisions re: FTX and lost a lot of that money.
So now they have less money.
How else do you expect it to work?
If someone had a lot of money, and they didn’t blow it all, then they’re just less rich.
If someone had a little money and they didn’t blow it all, now they’re just a bit more poor.
If someone had a lot of money and blew it all, they’re now broke.
If someone had a little money and blew it all, they’re now broke too.
Seriously, what is the alternative here?
This is a guy who is an utter piece of shit, and his FN STANFORD parents were certainly in on it and they need to go down as well, but they are a smoke screen.
https://web.archive.org/web/20220922164619/https://www.sequo...
How do investors put in >$1B without doing any real diligence or having the company setup a board or even have a CFO.
In the end, it all was bullshit, and (assuming the US government is correct with the re-classification of "independent contractors") exploitation and fraud.
Mixed precedence [1]. Where assets were ringfenced, the courts are treating those users as asset owners.
Unsecured creditor is the default. Lowest rung. This is true pretty much across web3/crypto.
[1] https://www.ft.com/content/a87860bf-a8bf-4669-a152-de465c83a...
from what I have read FTX was the only major exchange that didn't claim ownership over your uninvested funds in the fine print, which is the crux of the situation.
people using them as a wallet were not investing nor getting interest in their deposits.
You threw your money in the local wishing well and are now upset that it got confiscated with your money inside it for unpaid taxes.
Many others can pretty much pack and go
I mean I don't think we need full communism to prevent and solve this kind of crazy finance thing, but it's really weird how americans will often fight against common sense regarding finance, safety and risks.
There are days I want to believe capitalism can be "reformed" and made better, but other days, I tend to think finance should be managed and tightly controlled by the government to limit the level of damage foul play can do. And yet I can already hear armchair economist answering me about the invisible hand, the collective intelligence of the free market, decentralized decision making, etc.
It is really weird how currency and economics have been hijacked by politics. Such a weird phenomenon.
I don't follow. If currency and economics aren't directly in the realm of politics, then nothing is.
>it is really weird how currency and economics have been hijacked by politics. such a weird phenomenon.
?
same with guns. We need gun control. There's a world of gun control examples to sample and decide what or what combination might be a good starting point for us, we can't get to the table to talk about it.
The same is true of gun control. There are many, many laws already on the books regarding gun control. Yet you take the disingenuous approach of “they won’t even engage in a discussion about any sort of regulation”. The discussion is happening constantly, just because the outcome isn’t the one you want it doesn’t mean there isn’t a conversation.
Firearm homicides are concentrated among people who are mostly already criminals. I'm happy to give you sources if you'd like. Gun control wouldn't work well for people who already aren't following the law.
In terms of a truly "random" shooting that people are sensibly more afraid of, like a mass shooting event, you're roughly about ten times more likely to be killed or injured by that than being killed or injured by a lightning strike. Even for people younger than 45, heart disease or narcotics overdoses each kills more than gun homicides. By your logic, we should have fast food control and revamp the War on Drugs, leaving aside the fact that there is an actual enumerated constitutional right to civilian firearm ownership.
If you care about people being shot by others, banning AR-15s from law-abiding citizens does approximately nothing, so I find that a focus on gun control is not well-reasoned.
> People can't afford to get sick. Don't mention socialized medicine, you'll just end up footing the bill for illegals.
Healthcare costs are elevated in this country, sure. There's a lot we could do to alleviate that, including deregulation. Socialized medicine isn't all sunshine and rainbows, either; our northern neighbors are waiting an average of three months to see a specialist after being referred by a GP, then another three to four months before they receive actual treatment by that specialist. It's a classic example of a government-imposed price ceiling leading to a shortage.
> The capitalist class is abusing the working class, unions have their own problems so "ehh," and then there's people bending over backwards to take the perspective of the billionaires.
> I expect any drastic finance reform would be met with similar fear from a class of people only ever abused by the thing they're protecting.
Yes, those poor dumb rednecks who are always voting against their interests. I hope some day you can bend over backwards to take the perspective of the rednecks and see if you can find a different reason behind their motive.
shut the fuck up and and realize the problem isn't farmers and rednecks its inner city twats that think they're farmers and rednecks. I live in AZ.
I made a good faith effort to engage with the discussion points you raised. Have a nice day.
It's literally the first text after the headline
I'm going to guess that the IRS is going to take the lion's share of assets.
Now I'm sure it'll get litigated, but there's a big difference between "I cheated my taxes and got caught" versus "I paid all my taxes, but then the rules changed and now I owe more".
They’re almost certainly inflating the claim in preparation of litigation, e.g. by reclassifying “all of FTX’s contractors to full-time employees.” (There is pressure, in such bankruptcies, to file claims fast.) But the current claim is 4x FTX’s cash. It’s unlikely the IRS is off by 4x. Unsecured creditors’ recovery is likely going to be zero.
Yes. Which is why it’s unlikely to expect the claim to quarter. (It might get reassigned from FTX to Alameda or Blockfolio, though.)
> it's more likely the IRS is calling the embezzled money income and/or wages
Partnership taxes on the embezzled money.
Even if ya'll will be given all your money back - you'd still manage to lose it again in a short time and blame someone else. SBF has nothing to do with it.
Your mindset and you do.
I’m no Michael Bury but it was pretty obvious this was eventually going to fail, the unknown was when. The whole system was so rotten you could not short crypto without exposing yourself to the same systematic risks which would cause the eventual collapse. Maybe your shorts were right, but good luck getting any money out after the whole thing implodes.
People will continue to get scammed for the rest of eternity so I think the best thing we can do is set up strong safety nets and welfare for those who lose their life savings. Regulation does help, but scammers will always find new ways.