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Comment by gzer0 | Hacker News Reader

Interestingly, FTX made a $500 million USD investment in Anthropic; supposedly, this was made while Anthropic was valued at $4.6 billion (unconfirmed). Now, Anthropic is nearing $30 billion.

Anyone know the latest on this? Is FTX going to sell that stake off to pay back the debts?

[1] https://www.businessinsider.com/sam-bankman-frieds-anthropic...

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It's being debated in the bankruptcy court. Some creditors want to sell it off and others want to let it ride. Because this is crypto, some people want to issue a crypto token that represents claims on the estate.

>some people want to issue a crypto token that represents claims on the estate

What could possibly go wrong? :D

Obviously they should divide it into a low-risk low-return tranche and a high-risk high-return tranche and market two tokens, with an LLM informed of the rules providing final arbitrage.

"It can't literally go tits up"

The Legend of 1r0nyman

Binance has offered to list it on their exchange.

Hilarious! The drama doesn’t end.

I just want a token that represents a claim on the movie rights.

Interestingly its specifically illegal to trade movie futures so a securitized token would not be allowed.

1. https://en.wikipedia.org/wiki/Onion_Futures_Act

What if it was based in the Bahamas?

The onion stuff sounds bad but movie futures sound fine? Wouldn't it be good for studios to be able to hedge? I'm a little confused as to what the instrument is actually for, were it not for this law could I, like, short The Marvels?

It would be horrible and too easy to manipulate, think a fighter taking a dive.

Say the Marvels is coming out, Brie Larson knows everyone hates her and she's a bad actor so it will probably flop. Brie takes out a $10 million short on her own movie.

Now she has an incentive to be horrible so she acts EXTRA bad and treats people even worse than usual to be sure it flops.

Is this any different than the incentives set up by conventional publicly listed companies? Like a CEO in principle could “take a dive” but their compensation discourages that.

CEOs are also usually not allowed to take short positions in the company they head. Analogously, actors should not be allowed to short movie futures they act in.

And they say wit is dead

...it was homicide

I snorted

Naturally, we'll need to tokenize the risk tranche, leverage a decentralized finance protocol to auto-balance the portfolio, and have an AI-powered DAO govern the arbitrage, ensuring our digital assets stay liquid.

That extra computation will put more strain on the energy grid, but that's a good thing, because it will solve climate change.

Few

what disappoints me about this comment is how many of my well-educated non-tech friends would regard the number of technical terms here as a sign that it's a well-researched idea

thats also the kind of feedback I get in teachings from buisness advidors around pitching. "We need to see a little more proof you have credentials to pull off this idea. When we were talking last week you mentioned some technical terms, put a few of those in"

Is that in 3D?

I'd like to subscribe to your newsletter

If RWAs were adopted and the tokens were non-custodial then not much. The issue with FTX is it was a centralized company and all funds were fully custodial. And while all this was happening SBF was buddy buddy with Gary Gensler. Aka it was a tradfi problem, not a crypto problem.

Would you please explain why it matters that the "funds" were fully custodial?

not your keys, not your crypto

but it’s a moot point because centralized exchanges like coinbase offer a valuable service of solving a lot of the issues with crypto ux

/solv/hid/

My understanding is the stolen money was fiat from the “fiat@“ account routed through Silvergate Bank.

Customers sent real money to FTX expecting FTX to buy some coin and hold it on their behalf (because managing that properly themselves is out of scope for regular folks).

So now the coin is defacto owned by FTX, not the customer.

Similar to what does not happen when you buy ATT stock in your Schwab account.

That's very similar to what happens with stocks. When you buy a stock, it's Cede & co who actually own the physical certificates that transfer rights. There's a complicated web of contractual obligations between them and other DTCC companies that exists to give you essentially the same rights as if you were a true stockholder, but it's all being done "on your behalf" in a legal sense.

Unless you directly register your stock through a DRS transfer to the issuing agent for the company. This agent manages stock issued to insiders and employees as well but any stock holder can truly own their stock the same way the CEO of the company does. It’s a pain, takes forever, and brokers will play dumb and try to prevent it, but they legally must allow you.

Generally only worth it if you intend to hold your stock for some time (which you should)

Also sometimes you can start them directly with a company (bypassing brokers entirely).

Others will let you send a cheque and buy more. Informal communities exist to buy that first share from another individual so you can continue.

Sometimes all at no charge. Was handier back when brokerage commissions were a thing (and a lot higher).

Did this with GE a while ago (worked out for me!)

Exactly my point. In the Schwab case they don't get to buy yachts with your ATT stock.

Because nobody would've lost anything had they held onto their coins instead of keeping them in centralized exchanges which are essentially banks in all but name. One of the reasons cryptocurrency was invented was to free us from the banks but they reinvented the entire banking system instead on top of it.

It’s very interesting to me because when you put your money in a bank and it enters a bankruptcy proceeding, your account (which is in essence an unsecured loan you made to the bank) disappears into the bankruptcy estate, to be shared by the various tiers of creditors in order of priority (to wit: you lose your money). Of course, the FDIC protects you.

When you put things (e.g., stock) in a “custodial account” with a company like Charles Schwab or similar, if they enter BK then your property is separate from the bankruptcy estate and must be returned to you, in theory.

FTX seems to have combined all the best features of all systems: because they had custody of the tokens, they were able to actually lose them; when they entered bankruptcy, the customer assets could not go to the secured creditors (to the extent that they were custodial, not debt) and they couldn’t go to the customer either (because “not your keys, not your crypto”).

Cherry on top: no FDIC protection. The only winner is the criminal, who is free (for a while) to use customer funds to pay Tom Brady to be his friend.

“Free from the banks,” indeed.

There is only TradFi. Crypto grew up and was assimilated. There is only one holistic system of systems, one vast and immane, interwoven, interacting, multivariate, multinational dominion of dollars.

Paddy Chayefsky, back from the dead?

I think this is a terrible idea, but I fully endorse it because of the chance that it could hilariously result in FTX investors losing the same money twice.

Spoiler alert: it will be sold off to satisfy the debts of the bankrupt corporation. That's SOP for bankruptcy court, and it would take an extremely persuasive case to convince the court to do otherwise.

It's unclear there are buyers for this amount of private shares at the market price.

It's one thing for Google etc to invest billions in cash and cloud services[1] into Anthropic with the understanding that money will be used for engineering and growth.

It's quite different for any buyer to come in and spend $4B on the secondary market for nothing but shares, with none of that money going to Anthropic.

There is a large appetite for exposure to the big AI companies, so maybe the demand is there. But it's not as simple as selling a large stock holding on the public market.

[1] https://www.axios.com/2023/10/30/google-invests-2-billion-an...

There's a buyer for everything at the right price.

There are tons of big private equity funds and several trillion-dollar fund managers for which buying a 10% stake of a privately held 30 billion dollar startup would just be a question of some paperwork.

Maybe. It is not liquid like stocks though. They'll probably try to auction it off?

If there's a way to sell it at a fair price, yes. Otherwise, they have a fiduciary responsibility to hold it until a buyer can be found to pay a fair price. They won't hold it just to let it ride though - that's correct. IANAL :-)

i dont get why the shares in the investment isn't just divvied up to each individual investor, and let them make a choice to sell or not. And if there's transaction costs involved in selling small amounts, it could be aggregated before divving up, and those who wants to sell can collectively sell and save on costs.

Anthropic isn't publicly traded yet so it can't have too many investors.

Holders can still band together as a single pot, like a fund which can count as only one investor.

This sounds like a loophole, and now that I think if it it probably is - VCs and stuff should not have been allowed to ask for money from pension funds without imposing at least some rules normally applied to public companies.

And now there are startups where you can place bids on private market stock without being a qualified investor or pushing the company into a spot where it has to go public.

The shares may not be transferrable, or some investors may not want to go to the trouble.

Anthropic doesn’t want dozens (hundreds?) of disgruntled creditors on their cap table and there might be provisions preventing such a transfer.

With, of course, the minters of that coin taking the majority of the claims /s

That reminds me, it's been nearly two months now since we heard from either Kyle Davies or Zhu Su...

They ghosted their own creditors but somehow found the time to be interviewed for the new Bloomberg crypto documentary.

Zhu Su was arrested in Singapore about a month ago. Davies remains on the run.

So, effectively, some kind of "FTX Crypto-themed ETF"?

I'll create a new crypto token for them for 5% of the net worth. Give me a call FTX administrators.

Fuckin' cryptobros, ROFL

Looking online I see reports that FTX owes its creditors $3B. If Anthropic has 6.5x then the initial $500 million is now worth $3.25B.

Is it actually possible that all creditors will get their money back? Pretty crazy if so.

In a slightly different universe, the literally criminal risk might have worked a little longer.

Then again, GenAI perhaps undermines the notion of NFTs and "digital art/assets as valuable fungible commodities." It was really wierd seeing Stable Diffusion take off as NFTs were collapsing... so maybe there is no universe where FTX fakes it until they make it.

Keep in mind that "NFTs representing digital art" are a subset of what NFTs are. GenAI might have impacted art tokens, but wouldn't affect NFTs as a whole.

That’s right, NFT’s are a tool for low talent charlatans to grift at scale off of laypeople by claiming they will make money buying them. The digital art was just one such con.

The concept of NFTs for art is pretty new. I first heard about the idea of NFTs in 2013 and that was using them for things like deeds to land and vehicles.

... which remains a terrible idea, because what happens to your land or vehicle if you lose your keys / forget your pass phrase? Or if someone else phishes you?

which is incredibly stupid because a nft is fundamentally incapable of solving these challenges (owning the nft means nothing if a court determines someone else owns the house)

what about an org that issues them as e.g. season tickets, and makes a market for them?

The whole idea of GenAI is to make purely digital content "cheap."

And that's basically NFT's niche, as I understand it. Why bother commoditizing the digital space when (according to GenAI acolytes) digital scarcity is going to disappear anyway?

I dunno about NFTs representing real world assets either. It feels like the order is fundamentally lost once that jump to the real world made.

> digital scarcity is going to disappear anyway?

Digital scarcity is an artificial creation of copyright law, bought by people who had a vested interest in porting analog rules over to the new world after the infinitely error-free replicability of digital goods threatened their profit model. If generative AI puts them back in the same quandary, they will simply buy more laws and continue protecting their wealth.

Copyright law has the exact same purpose for digital goods as it did for physical books. Copying books has not really been hard since the 1450s or so. Copyright has always been about maintaining the value of books and other art works in the face of vastly cheaper copying.

The only important difference between physical copyright and digital copyright is the fact that you aren't allowed, in most jurisdictions, to sell on your legally obtained digital copy of something the same way you are for a physical copy. And even this is understandable.

The big problem with copyright is not the existence of it. It's the absurd terms it has gotten to. If copyright maxxed out at, say, 10 years, or even 20, we would live in a much better place than either today or even than a world with no copyright at all.

Much like the infamous FTT token, just because it’s worth that much on paper doesn’t mean that is what you could sell it for today. I say this as a person with chunks of stock in a few private companies.

And obviously for the people impacted, it’s quite a loss to get all your money over a year after you tried to withdraw it, even if you do get it all.

I am fairly confident there is private money that would gladly buy 3.5 billion worth of anthropic at the current price

But 100%, it's not just about getting repaid. Yes that helps, but not having your money last year might have mattered to some ftx customers

Can a $3B nominal stake in Anthropic actually be liquidated for $3B?

Openly, and all at once? No chance whatsoever.

AI market is hot. What makes you say that: no one has that kind of cash?

Well, the most obvious problem is that Anthropic isn't a publicly traded company.

It can be privately traded.

why do you assume that? Many stocks have riders to prevent private trading.

I’m assuming, given the circumstances, that you can ask all the investors if they are willing to help.

What do you mean Buy help? Do you mean ask investors like Google if they want to purchase another 3 billion of shares from the FTX creditors?

Lots of investors want in on Anthropic and OpenAI but can't. Getting access to shares to participate in this market (with market leaders) is not easy, especially not at scale. Amazon and Google were willing to pay an above-market premium to align strategically, but financial investors I can see do 80-90% of that valuation and be very happy.

It’s an interesting question. The shares are likely not transferrable without amending the LLC agreement or whatever. If you want in on Anthropic, though, and you know the FTX estate has to liquidate, then there’s a chance you can get to a good price; maybe less than $3B but probably not a ton, because lots of other people want in too.

On the other hand, the current investors probably won’t want to make an exception for FTX if they know it’s going to cause them to write down their stakes.

If I'm a creditor in FTX, it's a pretty big gamble, and I'm definitely not sure I'd be willing to settle for "sure, give me some shares in some AI company...". A significant chance that value craters, after all.

As long as you’re able to sell those shares immediately, a bunch of money loaded investors will be waiting to get your fraction of the AI pie from you.

I think that’s the most likely outcome: look for a buyer willing to take all the shares at market value, but also willing to offer shares to creditors willing to keep some Anthropic at a private valuation. Not sure if there’s a risk they’ll be more than a thousand people, triggering the need for an IPO — which presumably Anthropic would oppose.

> As long as you’re able to sell those shares immediately

You can't. Trades in even the most liquid private companies can still take weeks to close, if not longer. Add on the transfer restrictions that Anthropic almost certainly has, and you're going to be holding those shares for a long time.

Bankruptcy must have powers though. In theory a corporation/trust could carry on owning those shares and then that entity gets sold on.

you would settle for cash after the FTX trustees sell those shares on private secondary markets

Someone has to buy and liquidate all that stock. Seems unlikely.

Seeing as Google and Amazon just closed billion dollar deals buying up Anthropic equity, it seems quite likely in my opinion.

They're buying it and holding it for the long run. Maybe it is as simple as letting them and other privileged parties buy more from FTX's stake and then redirecting the proceeds to each creditor.

They're going through normal bankruptcy stuff and may liquidate the Anthropic stake. It looks at this point like there's likely going to be money enough to pay all creditors, which is just hilarious.

Smart investor that Sam! I guess the new bubble pays off the old one.

How do you know FTX only lost 3-4 billion?

In fact, there's a significant market right now for purchasing FTX claims precisely because of this Anthropic investment. The bet is that you can buy the FTX claim for 35 or 40 cents on the dollar, and get 75 or 80 cents on the dollar if the Anthropic value gets unlocked during the bankruptcy process.

could you show us how to look up this info? its fascinating and as a financially savvy trader i'm surprised i was never taught this in business school

There are places like this;

https://www.x-claim.com/marketplace/how-it-works

Buying a creditor’s claim is nothing new.

But they’re usually a bad deal for the unfortunate creditor in a bankruptcy unless you absolutely positively need liquid cash immediately. Or have some non-public info that suggests the claims buyer is way overvaluing things.

General advice is to let your claim ride.

FTX’s bankruptcy filings are full of entries about transfers of creditor claims by some random hedge funds.

I let my mtgox claim ride and regret it. I could have sold the claim in 2015, bought bitcoin and had far more cash now.

The payout will probably come in the next 10 years or so.

The problem with letting a cryptocurrency bankruptcy ride is that there isn’t much case law, so before you get paid loads of legal questions have to be settled which can take decades.

If you have an FTX claim then sell it, take the cash and move on.

There is plenty of case law. Mtgox creditors are just really lucky that they’ll be made more than whole because any excess is supposed to go to the equity holders per bankruptcy law.

Of course there will always be situations where someone could have invested reduced immediate proceeds more favourably, but it’s easy to say that in hindsight.

It’s been almost 10 years and no-one has been paid. I don’t expect that they will actually start payouts.

Even more interestingly, Anthropic isn't traditionally structured: it's a Long-Term Benefit Trust [1]. That's not say shares can't be sold, but, rather, shareholders have very little governance rights. Debatable whether this is good, e.g. Meta's success being tied to Zuck's large holdings. On the other hand, you have WeWork.

[1] - https://www.vox.com/future-perfect/23794855/anthropic-ai-ope...

If I were SBF’s lawyer I’d be trying to delay sentencing until Anthropic goes public or gets bought for as much as possible.

I wonder how that works. It’s still private so would they have an auction or something?

How convenient.

So, if you count this, and if you count all the money that has been recovered, he didn't actually steal anything... I mean that, all considered, there is more money now than when he started the company.

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