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Comment by samtho | Hacker News Reader

Isn’t the bigger issue that the fund itself was fake? If they made the decision to set aside some amount of money to be untouchable based on a random number, that is, uh, unconventional to say the least, but they very purposefully chose not to have an insurance fund despite advertising that they did which makes this all the more sinister.

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Yes. This should be an instrumental price of evidence in proving that FTX leadership was not “tragically incompetent” but rather willfully and knowingly defrauded its customers.

i think when you are trying to prove a company is lying about having a zillion dollars of insurance, it helps if you can kind of pull the curtain down and show everyone the number 'zillion' was made up by someone throwing a pair of dice, not by someone counting a pile of zillions of dollar bills.

Well, yes, the issue is it was fake. But they compounded their fraud by publicly asserting a value of the fund, and the fact they implemented it as a random number shows malicious intent. Sometimes you can wave around incompetence etc as a mitigating factor, but this is clearly intentional deception and this proves it clearly and beyond a doubt.

On the contrary, you want your fund to cover unlucky situations. By linking the size of the insurance to a random number, you cancel out unlucky external events with a lucky internal event, thereby ensuring proper coverage.

So long as the random value is truly random. Were there lava lamps in the FTX server room?

You don't cover "unlucky" with 'random numbers". You cover it with a detailed risk analysis.

Insurance companies have very detailed models on how much risk their customers provide, how much they're likely to cost, and charge accordingly.

They don't just go "yolo random(1,100)'l" and hope they're in business in 5 years.

Well, a random number covers nothing at all. Money covers risk, a number backed by nothing is nothing.

In this case, the random element was almost insignificantly small after a few days.

The fund size was 7500 * the trading volume since the fund was set up.

OP was joking

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