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Comment by Ographer | Hacker News Reader

A reddit post called out SBF as a fraud 2 years ago and no one on the Bitcoin subreddit believed them!

https://www.reddit.com/r/Bitcoin/comments/p1oqqu/the_ceo_of_...

Good find, but worth noting that this is accusing him of front-running when what he actually did was dumber and more criminal: using FTX customer deposits to cover losses on the Alameda side.

I imagine SBF's charges are more serious than a front-running charge. The prosecution also may not have had sufficient evidence of front-running to get the charges to stick.

But any exchange in such close company with a hedge fund should always be suspected of front-running. There's an inherent conflict of interest between those two entity types. And I would be surprised if Alameda wasn't front-running FTX customers, given both firm's obvious ethical shortcomings.

Is front-running something you could/would do manually? The prosecution had access to the source code and git history of FTX.

Front-running efficacy can be measured in milliseconds. It's a world where microwave towers sometimes replace fiber lines, to gain a few milliseconds of advantage. That is, when the front-runner isn't "in-house", which Alameda had ample opportunity to be. Alameda and FTX were separate legal entities, but Sam largely headed both. Alameda front-running servers, in theory, could have been running right along side FTX servers, with only inches of network-induced latency.

You can of course front-run manually, depending on the degree of automation in the systems one is front-running, but front-runners will generally want to automate. And to scale the scheme for a realtime system of FTX's volume, Alameda would certainly want to automate it.

I wasn't following the case closely enough, but did the prosecution have access to Alameda source code, or was it only FTX? As long as Alameda had access to FTX order records, any front-running code would likely have resided in Alameda repositories.

> I wasn't following the case closely enough, but did the prosecution have access to Alameda source code, or was it only FTX?

This blog post [0] contains screenshots of git commits that were used as evidence in the trial. It only shows commits to FTX's source code, so I don't know if the prosecution also had access to Alameda's source code.

Given how obviously incriminating those snippets are, I don't think SBF really tried to hide his crimes. I'm not sure then why they would architecture FTX such there are no signs of front-running in their code.

Personally, my guess is that either A) the prosecution found evidence of front-running but thought that the case was air-tight enough already and they didn't want to confuse the jurors or B) Alameda didn't actually do any front-running.

[0]: https://newsletter.mollywhite.net/p/the-fraud-was-in-the-cod...

I'm not in the industry. That said, it's my understanding that "front-running" as a term of art necessarily implies some sort of illegal behavior (at least in the US and European markets), but being clever with physics (microwave towers, bouncing signals off the ionosphere, etc.) is fair game, and if you can pull off some profitable arbitrage trades with that sort of setup, you're in the clear.

No doubt, though plausible deniability often begins with physical and legal separation, bringing the physics into play :)

> any exchange in such close company with a hedge fund should always be suspected of front-running

Indeed -- I knew several professional traders who used FTX. At the time, their consensus was:

1) "Probably Alameda has an unfair latency advantage, because they are the designated market-maker, and owned+operated by the same people who run the exchange." This could be called 'front-running' depending on how you define the term.

2) "However, SBF probably won't steal all our money because he is well-known, extraditable by USA, and would go to prison."

Needless to say, assumption 2) was incorrect.

The premise of 2) is entirely correct, they just underestimated how irrational people can be.

Exactly.

SBF was a sociopath who would (acdg to sworn testimony of his GF) actually go ahead and toss the coin if the outcome was one side results in the world getting twice as good and the other side causes the world to be destroyed, and he DGAF that he was also making the bet for everyone on the planet.

They didn't count on the fact that this mentality would also mean that in real life, he would also do all kinds of risky crimes, and even go to trial instead of taking a plea deal, because there's a non-zero!! chance he could get away with it.

Bad bets all around

> SBF was a sociopath who would (acdg to sworn testimony of his GF) actually go ahead and toss the coin if the outcome was one side results in the world getting twice as good and the other side causes the world to be destroyed, and he DGAF that he was also making the bet for everyone on the planet.

It could be true he's probably a sociopath, but having an edgy philosophical talk with your girlfriend is just that. It could say something about his character but it's nothing more than a fantasy.

Much more damning is stealing all those billions to become rich and famous.

I'm pretty sure it was more than just one 'edgy talk' with his GF, but one of many concrete examples of his attitude towards taking risks and especially taking risks that affect others who did not sign up for the risk.

I saw an article that implied that SBF confirmed on the stand his willingness to do the coin-toss, but I couldn't find it to confirm.

Perhaps the biggest evidence is that he went to trial instead of taking a plea deal. At the very least, he put his parents and family through an awful and unnecessary ordeal, just because he thought there was a chance he could convince a jury. But, in reality, it was not even close.

You're "pretty sure"? Unless it was stated from himself under oath is largely useless.

I'm commenting based on the reporting that I read indicating that he ALSO said confirmed it under oath, and other reporting indicating that his GF and others have long indicated that this was his overall attitude, i.e., that SBF taking any risk was OK as long as the possible outcome was positive, regardless of whether the more likely outcome was harm to many other people who did not agree to take the risk.

The "pretty sure" caveat is that I cannot offhand recite chapter and verse of all the citations.

Number 2 is half correct.

It's probably a result of not having complete information and giving benefit of the doubt.

The guy realized SBF was doing weird shit that was probably, if not straight up illegal, at least highly unethical. And front-running was the thing that made the most sense to him at the time.

>what he actually did

No, what he was charged with was using customer funds.

I'm sure they did all kinds of shady things, including front-running customers.

On what basis are you sure of that?

proven character

also, remember, it was all for the greater good...

I mean, if he was doing all kinds of smarter types of fraud, one would think they wouldn't have gone broke.

This is actually one of the reasons why the FTX collapse came as a surprise for most crypto insiders. Everyone assumed that Alameda Research (the trading arm of FTX) was printing money, alas it was losing billions. Sam Trabuco, co-founder of Alameda, who has been surprisingly absent from any trial, was instrumental in creating this illusion of success for Alameda.

I’m sure there’s a Reddit thread for every cryptocurrency company and founder calling them a fraud.

And statistically, they're virtually all correct.

Just like how, statistically, a cancer test strip that always says "not cancer" is virtually always correct.

You're confusing false positives and false negatives

Ok let me make a correction.

It’s always a good blind bet that a singular new company and/or founder will fail their next venture, not just startups in the crypto space, but across every industry. If you know a little bit (insider info) about the space and founders you can probably make better bets, though .

not with crypto though, because it's all a scam or a front, there is no actually successful crypto projects, unless you count successful as having scammed a bunch of money out of people's hands, in which case, yes theyre all pretty much successful

The poster accused SBF of front running his customers but comments underneath seem skeptical:

>Clearly OP has no fucking clue what he’s talking about because the videos in question don’t prove he’s front running.

>The Youtube video you linked to (I watched some from the point you linked), appears to be about trading an arb opportunity that existed because of a large sell wall on Binance. Where does it show he's using 'private FTX analytics' to 'front run his customers'?

In crypto community everybody is calling everybody a fraud. Probably because in the early days of the Bitcoin and the altcoins, the industry was largely unregulated with a lot of scams going around. But nowadays, governments seem to be catching up.

these subreddits are/were absolutely full to the brim with bots/adversarial actors. it's obvious after spending any time on them. the incentive to manipulate is just too high, and the ease with which to do it is too low

Exactly. Right now on the subreddit there is a post about how a guy plans to invest 2% of his net worth into bitcoin and most of the comments are mocking him for not investing 90-100%.

There is no such thing as skepticism or critical analysis on these subreddits. Obviously these commenters are already holders and have incentive to convince more people to buy. Like you said, I'm sure there are plenty of bots active in pushing their narrative with no consequences or accountability.

Whether crypto is useful or not, the market manipulation and ponzi-scheme recruiting tactics are too sleazy for me to invest seriously.

Shame the Youtube vid of him frontrunning has been removed.

It's still here: https://web.archive.org/web/20221113092101/https://www.youtu...

I don't really think it shows clear evidence of him front-running FTX users. He doesn't even seem to be trading on FTX.

From this, we can glean two lessons:

1) There's not a lot of weight to put on such criticism because for any success there are also critics. Critics are wrong until and unless they're right. As others have noted, in this case, he wasn't convicted for the thing these critics were claiming he was doing.

2) ... But, it's Bitcoin. Any critic claiming anything Bitcoin related is probably tied to a scam is statistically likely to be correct. ;)

Best comment: "If this is true, this would be the worst rugpull ever!"

> OP you literally have no idea what you’re talking about. Put your tin foil hat away and stop trying to stir up controversy where there is none.

Some of the replies to that... my god.

TBF you can accusations of fraud against anyone in space like this. It's like Nostradamus predictions.

The sheer confidence and contempt of some of those commentators is impressive...

great idea for a trader. scrape anything where people say something like "this is so f* dumb I don't have the time to explain it" as it could be a black swan and call puts against it.

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