[HN Gopher] FTX tapped into customer accounts to fund risky bets...
___________________________________________________________________
FTX tapped into customer accounts to fund risky bets, setting up
its downfall
Author : mfiguiere
Score : 321 points
Date : 2022-11-10 15:29 UTC (7 hours ago)
(HTM) web link (www.wsj.com)
(TXT) w3m dump (www.wsj.com)
| solotronics wrote:
| Probably a good time to mention the original mission statement of
| Bitcoin was to custody your own money without counterparty risk.
| Time and time again we have seen altcoin ponzis and exchanges
| collapse under the weight of their fractional reserve. What is
| still working? Bitcoin.
|
| Greed in this space causes people to act with a more short term
| view for quick profits while ignoring fundamentals. Over and over
| again.
| n0tth3dro1ds wrote:
| Not your keys, not your coins.
| varsketiz wrote:
| Is Bitcoin history a metaphor for "society needs to learn more
| about technology"?
| laluser wrote:
| The Twitter thread from SBF is even better where he admits he
| messed up. And still trying to throw jabs at Binance here and
| there like it's their fault they're here. Unbelievable.
| sillysaurusx wrote:
| In case anyone wants a link to the thread, here it is:
| https://twitter.com/SBF_FTX/status/1590709166515310593?s=20&...
|
| It was actually in an adjacent paywalled article
| (https://www.wsj.com/livecoverage/stock-market-news-
| today-11-...). If anyone knows a way to bypass that paywall,
| I'd be curious to read the rest.
| Projectiboga wrote:
| Pop it into archive.is or dot tv
| [deleted]
| saberdancer wrote:
| Usually you can get a copy of the article by going to
| archive.ph and pasting the paywalled link.
|
| It may not be most ethical thing to do but if you want to
| read an article or two behind a paywall, I don't think it is
| insane to do.
|
| This article though seems to be some kind of a live feed
| where there is not really a lot archived - maybe it works
| better for paying users viewing things live.
| zeven7 wrote:
| That article is miniscule and mostly just links to the
| tweets. After the 3 sentence preview which is visible to
| anyone it has 1 more sentence (a quote from SBF) then "Other
| highlights from his series of tweets" followed by 5 short 1
| sentence bullet points summarizing things from the tweets.
| Then an embed of the first tweet wraps it up.
| [deleted]
| [deleted]
| warinukraine wrote:
| To me the funniest part is him saying "I should've done
| better", as if he was attempting something worthwhile, but
| failed. No, he stole his customers and "done better" would've
| been doing the opposite.
| oldgradstudent wrote:
| Even Saul Goodman would have told him to shut up.
| the_doctah wrote:
| Suggesting Saul was actually a bad lawyer? He always told his
| clients to shut up.
| skippyboxedhero wrote:
| He also attempted to claim that the problem was due to an issue
| with the "labelling" of funds...this story leaks, we know he
| has been telling people he lent the money to Alameda, and in
| these tweets he is now saying that he has a problem expressing
| what happened...
|
| ...I feel bad for him because he obviously believes his own
| bullshit, but he should have just said nothing rather than lie
| about what happened and pull the Mr. Magoo act.
| nemo44x wrote:
| I think he's in the anger and bargaining phases of it all. I
| expect he will either kill himself or go to prison when his
| fraud laid out. "I messed up" isn't going to get him out of
| this. This story has just begun.
| crakhamster01 wrote:
| I have no sympathy for Sequoia et al and the various celebrities
| that lost their money betting on FTX. I feel terrible for the
| average retail investor that got duped by the string of
| endorsements that made FTX seem "legitimate".
|
| I'm hoping the little guy is able to get their money out before
| investors do, but history makes this seem unlikely.
| shp0ngle wrote:
| I highly recommend reading this article, from _50 days ago_.
|
| So many humorous quotes to be had in that article.
|
| https://www.sequoiacap.com/article/sam-bankman-fried-spotlig...
|
| edit: archive https://archive.ph/GQkCp
| maxFlow wrote:
| This was one of the worst written, saddest pieces I have ever
| read. It's full of idiotic commentary, unjustified praise and
| just plain ignorance. Out of the dozen+ remarkably stupid
| quotes I found I'll share this excerpt:
|
| > That's when SBF told Sequoia about the so-called super-app:
| "I want FTX to be a place where you can do anything you want
| with your next dollar. You can buy bitcoin. You can send money
| in whatever currency to any friend anywhere in the world. You
| can buy a banana. You can do anything you want with your money
| from inside FTX."
|
| > Suddenly, the chat window on Sequoia's side of the Zoom
| lights up with partners freaking out.
|
| > "I LOVE THIS FOUNDER," typed one partner.
|
| > "I am a 10 out of 10," pinged another.
|
| > "YES!!!" exclaimed a third.
|
| > What Sequoia was reacting to was the scale of SBF's vision.
| It wasn't a story about how we might use fintech in the future,
| or crypto, or a new kind of bank. It was a vision about the
| future of money itself--with a total addressable market of
| every person on the entire planet.
|
| > "I sit ten feet from him, and I walked over, thinking, Oh,
| shit, that was really good," remembers Arora. "And it turns out
| that that fucker was playing League of Legends through the
| entire meeting."
|
| Lo and behold. The intricate, behind-the-scenes scheming of the
| highly educated financial elite, revelead at last. All
| predicated upon the grand vision of... buying a banana with
| your "super-app". No wonder we're going through a much needed
| correction, some people need to be weeded out of decision
| making roles ASAP.
| [deleted]
| shp0ngle wrote:
| > o I find myself convinced that, if SBF can keep his wits
| about him in the years ahead, he's going to slay--that, just as
| Alameda was a stepping stone to FTX, FTX will be to the super-
| app. Banking will be disrupted and transformed by crypto, just
| as media was transformed and disrupted by the web. Something of
| the sort must happen eventually, as the current system, with
| its layers upon layers of intermediaries, is antiquated and
| prone to crashing--the global financial crisis of 2008 was just
| the latest in a long line of failures that occurred because
| banks didn't actually know what was on their balance sheets.
| Crypto is money that can audit itself
|
| > there. The FTX competitive advantage? Ethical behavior. SBF
| is a Peter Singer-inspired utilitarian in a sea of Robert
| Nozick-inspired libertarians. He's an ethical maximalist in an
| industry that's overwhelmingly populated with ethical
| minimalists. I'm a Nozick man myself, but I know who I'd rather
| trust my money with: SBF, hands-down. And if he does end up
| saving the world as a side effect of being my banker, all the
| better.
| reso wrote:
| Please tell me someone has this on internet archive.
| shp0ngle wrote:
| https://archive.ph/GQkCp
|
| archive of google cache (best thing I can do!)
| chmod775 wrote:
| https://web.archive.org/web/20221109025610/https://www.sequo.
| ..
| [deleted]
| songeater wrote:
| "Among Wall Street's financial elite, SBF's Bitcoin arb is
| mentioned in the same hushed tones as Paul Tudor Jones's 1987
| shorting of the entire American economy, or George Soros's 1992
| raid on the Bank of England, or John Paulson's 2008 bet against
| subprime mortgages. Alameda's capture of the kimchi premium
| (and other trades like it) gave SBF the grubstake he needed for
| his next move: founding the crypto exchange FTX--a company that
| may very well end up creating the dominant all-in-one financial
| super-app of the future."
| nullc wrote:
| The hushed tones of 'that is obviously bullshit'.
| josaka wrote:
| Customers with assets in custodial accounts of an exchange that
| goes bankrupt are likely general unsecured creditors, and the
| assets are probably property of the bankruptcy estate.
| https://www.creditslips.org/creditslips/2022/02/what-happens...
|
| This means that, in the line of people to get paid out of those
| assets, you're not even at the front. Custodial accounts leave
| you with little protection.
| trident5000 wrote:
| This seems to be a slam dunk for prison time.
|
| Only thing I can think of is if these companies are international
| so he doesnt get prosecuted in the US under US laws. Thats his
| only hope.
| elefanten wrote:
| Well, his ultimate hedge is that both his parents are Stanford
| law professors. Slam dunk unlikely.
| AustinDev wrote:
| He was also the 6th largest political donor for the 2022
| election cycle.
| _fizz_buzz_ wrote:
| Bernie Madoff was also a big political donor, didn't help
| him in the end. SBF will also probably not hand out
| donations in the near future, so there is very little
| incentive to help him out at this point.
| adrr wrote:
| Good investment. Steal from customers and use their money
| to prevent prosecution.
| skullone wrote:
| I checked my FTX account, only had play money in there. But,
| despite all the people saying "FTX is fine, withdrawls still
| work, it's all fine" - nope, everything is disabled, withdrawls
| show $0.10 avaialble to withdrawl (out of a few hundred I had in
| actual US cash, plus the BTC and doge transactions are all
| disabled. This is very serious for many people - there are some
| who had substantial amounts of money, including my friend who is
| at the moment suicidal, a lot of his identity and worth was tied
| up in crypto. Please offer support to those you know who are
| affected by this scam, and do not encourage or enable anyone else
| to dablle more than throwaway money into anything crypto
| pmcollins wrote:
| FTX.us or intl?
| skullone wrote:
| ftx.us - checked again, at least my account is still unable
| to withdraw.
| woah wrote:
| This has nothing to do with crypto, it has to do with people
| sending their money to a con man. If your friend had "his
| identity tied up in crypto", then why wasn't he holding it
| himself?
| chatterhead wrote:
| Countdown to Fried fleeing to Israel begins...
| tinktank wrote:
| Scam after scam after scam. Welcome to crypto, folks.
| dang wrote:
| Maybe so, but please don't post unsubstantive comments to
| Hacker News. We're trying for a different sort of forum.
|
| https://news.ycombinator.com/newsguidelines.html
| jo6gwb wrote:
| For all those who want to draw parallels to the banking industry,
| Reg O delineates rules for lending to insiders.
|
| https://www.federalreserve.gov/supervisionreg/legalinterpret...
| esotericimpl wrote:
| JumpCrisscross wrote:
| > _Reg O delineates rules for lending to insiders_
|
| Also, in case this isn't painfully obvious, broker's can't make
| prop bets using client assets. And exchanges can't make prop
| bets using their flows.
| jwmoz wrote:
| Apparently he was playing league of legends whilst the market was
| falling apart
| chlodwig wrote:
| From the article: "FTX Chief Executive Sam Bankman-Fried said in
| investor meetings this week that Alameda owes FTX about $10
| billion, people familiar with the matter said. FTX extended loans
| to Alameda using money that customers had deposited on the
| exchange for trading purposes, a decision that Mr. Bankman-Fried
| described as a poor judgment call, one of the people said."
|
| In the FTX International terms of service (
| https://help.ftx.com/hc/article_attachments/9719619779348/FT... )
| they say that users have full title, ownership and control of
| digital assets. They say that the assets are the property of the
| user, and shall not be loaned to FTX trading, shall not be
| treated as they belong to FTX trading, and that users control the
| assets in the account.
|
| So if they did indeed loan out customer deposits, that is just
| straight up criminal fraud, open and shut. This isn't like some
| DeFi scheme where they are working around some legal loophole or
| in the fine print tell you that they will probably lose your
| money. This is just straight up illegal under the plain vanilla
| theft and fraud laws of any country. This isn't even a bank run
| (banks at least tell you they are loaning your deposits out) --
| it's a run on a U-Haul self-storage where you find out that they
| actually sold all the furniture in your storage unit to a pawn
| shop.
| dools wrote:
| > banks at least tell you they are loaning your deposits out
|
| Side not but that's not really how banking works. Banks create
| deposits when they originate loans and separately look for the
| assets they need in order to satisfy any regulatory
| requirements and net flows of funds for inter bank settlements.
|
| https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/m...
| wefarrell wrote:
| I'm pretty ignorant when it comes to this space. Do they not
| have any kind of compliance structure? In hindsight it seems
| pretty obvious that this sort of thing would happen without it.
| convolvatron wrote:
| compliance to what? all those regulations are just hindering
| the operation of the free market, and we started this whole
| crypto thing to avoid them on purpose?
| exolymph wrote:
| Well, they at least _had_ compliance staff. "Most of FTX's
| legal and compliance staff quit Tuesday evening, people
| familiar with the matter told Semafor, leaving few executives
| who could answer questions that now loom large over the
| firm." https://www.semafor.com/article/11/09/2022/ftx-legal-
| and-com...
|
| Pretty much every large exchange has a compliance team, btw,
| at least the ones with US operations.
| fnordpiglet wrote:
| They're not securities and they're regulated. Theres nothing
| to comply to. Perhaps crypto exchanges should be regulated?
| hacker_lady wrote:
| fnordpiglet wrote:
| This is why in regulated securities markets customer assets
| must be held in segregated accounts. Corzine, who knew better,
| ended up with an orange suit for not doing this.
| qeternity wrote:
| Did Corzine actually go to jail? This didn't sound right to
| me and a quick search suggests no.
| [deleted]
| wslh wrote:
| How many years could Sam Bankman-Fried get in jail?
|
| It is also interesting to read on his Wikipedia profile [1]
| about "Bankman-Fried is a supporter of effective altruism and
| claims to pursue earning to give as an altruistic career. He is
| a member of Giving What We Can and has claimed that he plans to
| donate the great majority of his wealth to effective charities
| over the course of his life.". Having direct access to a lot of
| money changes a some people ethics.
|
| [1] https://en.wikipedia.org/wiki/Sam_Bankman-Fried
| Digory wrote:
| So if the chain is supposed to enable "trustless" finance, what
| enabled Alameda to take anything? Seems Alameda and its clients
| should be screwed, but FTX's holders should be relatively easy
| to identify and restore.
|
| But everyone seems to say that's not the case. So what broke
| down here? Why isn't the ledger ledgering?
| delusional wrote:
| The ledger ensures that the handing over of the "thing" can
| happen without trust in any intermediary. You still
| ultimately have to trust the counterparty to deliver what
| they promise.
|
| Think of it like HTTPS. Nobody can sneak anything into the
| request, but the counterparty you're contacting could still
| be a fraud.
| ChadNauseam wrote:
| There are fully-decentalized exchanges which have to have
| much less counterparty risk (because anyone could take the
| other side of your deal, so you don't want to trust them).
| As a simple example, imagine a contract which I send 1 ETH
| to, and if you send it 1000 USDC it'll send you the ETH.
| The big counterparty risk with that system is that the
| price of ETH will skyrocket and someone else will call the
| contract to make the trade before I can cancel it, but that
| kind of thing is hard to avoid in any system.
| LeafGuild wrote:
| >but that kind of thing is hard to avoid in any system.
|
| No it isn't, that's what limit orders are for. There's
| still the exact same counterparty risk there anyway, in
| the form of USDC. Circle is another big dodgy centralized
| provider. The major critical flaw with all this defi
| stuff is that it can only reliably trade cryptos for
| other cryptos. Once you actually try to get any of it out
| into real assets, the counterparty risk immediately comes
| back again. No crypto defi stuff can ever solve that. The
| idea is just bad, it's a scam from the very beginning.
| topranks wrote:
| The big risk with that system is a bug in the smart
| contract that lets me take all the ETH and USDC.
| Digory wrote:
| But this isn't counterparty risk, it's fraud risk, right?
| It sounds like "Atrium borrowed a bunch of houses from FX,
| but FX didn't own the houses." When you check the Recorder
| (the blockchain for houses), the deeds should all say "John
| Doe owns 123 Main St."
|
| In the world with a Recorder of Deeds, Atrium is screwed,
| and FX might be screwed, but John Doe is easily confirmed
| as the owner of 123 Main.
|
| It sounds like people here gave their coins to FX, so that
| the "deed" shows FX "owns" the coin. In effect, they
| destroyed the 'trustless' part of the equation. And then
| SBF violated the trust.
|
| So, the next innovation seems to be a blockchain that shows
| an owner and an agent?
| fnordpiglet wrote:
| I think technically you would look at this as exchange
| risk. Securities regulations exist because of precedent,
| and this isn't specifically fraud but lack of customer
| funds segregation from the business risks.
| phas0ruk wrote:
| FTX is a centralised exchange, it is not routing all customer
| trades on chain. It's not a blockchain failure, it's just a
| lack of client asset segregation by a traditional centralised
| trading house.
| Digory wrote:
| So the internal trades aren't on chain. Well, that's going
| to leave a mark.
|
| Is there a coin that distinguishes agent and owner? Seems
| like you want trustless agency if you're pursuing trustless
| finance.
| legutierr wrote:
| This is the whole idea behind DeFi. All trading is done
| autonomously on-chain, and owners retain custody
| throughout.
| chironjit wrote:
| This is the correct answer. When you move your tokens into
| a centralised exchange like FTX, your funds are pooled with
| everyones deposit.
|
| There are always deposits and wihdrawals, and of course
| maybe you traded your tokens for another before
| withdrawing. So its hard to parse how much customers
| deposited vs genuinely withdrew, and so you cant really
| tell if the exchange is short unless they declare their
| actual assets and liabilities.
| cma wrote:
| From the Sequoia puff-piece:
|
| > Something of the sort must happen eventually, as the
| current system, with its layers upon layers of
| intermediaries, is antiquated and prone to crashing--the
| global financial crisis of 2008 was just the latest in a
| long line of failures that occurred because banks didn't
| actually know what was on their balance sheets. Crypto is
| money that can audit itself, no accountant or bookkeeper
| needed, and thus a financial system with the blockchain
| built in can, in theory, cut out most of the financial
| middlemen, to the advantage of all. Of course, that's the
| pitch of every crypto company out there. The FTX
| competitive advantage? Ethical behavior. SBF is a Peter
| Singer-inspired utilitarian in a sea of Robert Nozick-
| inspired libertarians. He's an ethical maximalist in an
| industry that's overwhelmingly populated with ethical
| minimalists. I'm a Nozick man myself, but I know who I'd
| rather trust my money with: SBF, hands-down. And if he
| does end up saving the world as a side effect of being my
| banker, all the better.
| LeafGuild wrote:
| It is absolutely a blockchain failure. Blockchains are
| intentionally designed to facilitate this. They have no
| possible way to stop this kind of fraud. Even if you built
| an elaborate set of smart contracts that could audit
| participants, they would still not stop anything. That
| activity can just be moved to another chain and avoid the
| audits. This kind of thing can just keep happening over and
| over again, as it already has for the last 12 years.
| Remember Mt Gox? Nothing fundamental has changed about
| blockchains that could ever prevent this from happening.
| It's viewed as a feature that everyone just loses their
| money sometimes. The designers of blockchains _want_ this
| to happen. From speaking to them, they view any kind of
| fraud prevention as an affront to their definition of
| "economic freedom" and what it entails.
| twawaaay wrote:
| That's because it is all built on greed and a lot of lies.
|
| The only time you actually are part of the trustless system
| is when you are sole custodian of any private keys necessary
| to access the coins.
|
| The issue with this is that a whole lot of people have no
| idea what it is, how it works, how to be part of the system
| and how to keep keys secure and safe at the same time.
|
| And it is fine. People can't know everything.
|
| But one thing I know, if you buy stuff you do not understand
| and then you loose money, it is on you.
| joe_the_user wrote:
| Maybe you're thinking of Etherium or other smart-contract
| systems, Etherium is a system where things like that happen
| automatically. With Bitcoin, the only thing you have is a
| secure (but static) ledger of who (which wallet/id) has what
| bitcoins. Any transfers have to be "manually" and just
| recorded by the blockchain.
|
| Of course, the automatic processes in Etherium produce a
| bunch of other weird effects.
| mccorrinall wrote:
| Where does this Etherium-meme(?) come from? I've seen
| several people writing Etherium and Monaro instead of
| Ethereum and Monero on mailing lists, but never understood
| what it means and where it comes from.
| newfonewhodis wrote:
| I put $100 in my Chase account. Chase goes horse betting with
| my money and loses it all. My account shows $0.
|
| That's basically what happened here.
| jefftk wrote:
| Well, your account still shows $100, but Chase has paused
| withdrawals while they "sort out liquidity issues" so it's
| effectively $0
| ericd wrote:
| Yep, this is exactly what happened en masse during the
| Great Depression. People were selling their bank account
| books for a fraction of their nominal value.
| chlodwig wrote:
| Not exactly, because banks tell you that they will loan out
| your money and you might not get it back, that's why you get
| interest on the account. They can't go horse betting, but
| they can loan it out. You don't have "title" over the USD in
| the bank reserves.
|
| This is like if you put $100 in _Chase 's security deposit
| box_, and they opened it up, took the cash, and lent it out,
| and then when you come to get it, they say, woops, we lost it
| all. That would be just straight up theft or fraud.
| SilasX wrote:
| >Not exactly, because banks tell you that they will loan
| out your money and you might not get it back, that's why
| you get interest on the account.
|
| That's not right either. They promise you will get it back
| (the FDIC insurance), just that e.g. large amounts may have
| a delay. They are also scrutinized by regulators to ensure
| that the loans are sane enough not to all evaporate in
| value overnight, as a horse bet might.
| kwertyoowiyop wrote:
| In the USA, bank accounts are guaranteed by the government,
| up to $250K.
| eftychis wrote:
| Per institution. And there is a lot of consolidation. So
| I would be careful. It is really easy to be placing money
| into different banks, but essentially the same one.
| achenatx wrote:
| there are a variety of caveats, on your side it is per
| entity.
|
| If you are married it is 500K, if you have a trust it is
| like 1.25M. 250K for each beneficiary up to 5 (or
| something like that).
| tootie wrote:
| And the FDIC can afford to do that because there are laws
| dictating liquidity requirements to banks and disclosure
| requirements to inspect and enforce those rules.
| kwertyoowiyop wrote:
| It's almost as if our existing financial system, built
| upon the lessons from hundreds of years, is worthwhile!
| :-)
| Animatronio wrote:
| That's what makes it so boring, whereas DeFi is so
| exciting it gives you a heart attack seemingly every
| other day.
| legutierr wrote:
| What does DeFi have to do with any of what is happening
| with FTX?
| Veliladon wrote:
| It's been funny to watch crypto basically speedrun the
| entire monetary system from Rai stones all the way to
| calls for central banking.
| nostrebored wrote:
| You would've been correct two years ago. We're doing zero
| fractional reserve banking now. Hearing this should
| convince people that they should get their money out now,
| but nobody seems to care.
| NovemberWhiskey wrote:
| > _We're doing zero fractional reserve banking now._
|
| No; we're not. In fact, banks are positively awash with
| reserves by historical standards.
|
| https://fred.stlouisfed.org/series/TOTRESNS
| klodolph wrote:
| I don't know about others, but I suspect that if the FDIC
| ran out of money, congress would figure out a way to fund
| it even if it meant printing money. I am okay with this.
| nostrebored wrote:
| But liquidity is the issue here. In the event that this
| happens, how long would it be before you could have
| access to your funds?
| klodolph wrote:
| Why do you say liquidity is the issue? It sounds like you
| are imagining some specific scenario here.
| iamthirsty wrote:
| While you're correct[0], still the FDIC is guaranteeing
| it up to $250k.
|
| [0]:https://www.federalreserve.gov/monetarypolicy/reserve
| req.htm
| JamesianP wrote:
| It may be that what the FDIC promises to do is not in
| sync with what it can actually afford to do.
| iamthirsty wrote:
| The FDIC, as of March 2021, has 119.4 billion[0], along
| with "... a US$100 billion line of credit with the United
| States Department of the Treasury.[9]"[1].
|
| I think they've got enough to cover any consumer issues.
|
| [0]: https://www.fdic.gov/about/strategic-
| plans/strategic/insuran...
|
| [1]: https://en.wikipedia.org/wiki/Federal_Deposit_Insura
| nce_Corp...
| JamesianP wrote:
| How much is the total liability they are guaranteeing?
|
| And $119 billion where exactly? In US treasuries? If so
| it's about as safe as the social security "fund". What if
| the "customer issue" includes a govt default?
|
| All you're saying here is that we can treat an FDIC
| guarantee like a govt guarantee, which is probably true,
| but still not the same as a case where the guarantor has
| actual assets which the prior poster was suggesting. The
| FDIC is making promises and backing those promises with
| other promises. There's not cash laying around anywhere
| to back it up. I'm not saying the only response is run
| for the hills like the other poster, but I find these
| defenses rather naive. The likelihood of any insurance
| scheme failing is not zero. Same for a government's
| finances.
| iamthirsty wrote:
| > There's not cash laying around anywhere to back it up.
|
| Did you not read the part where they have $119.4 Billion
| dollars? And that was a year-and-a-half ago, it's
| probably closer to $130B now. It seems like you didn't
| read any of the source material, let alone my comment,
| before replying.
| JamesianP wrote:
| ...yes I did. Your post at least, which was short and
| sweet. Bravo. I did not read the wiki article and don't
| plan to, but I skimmed the other one. Got as far as this
| at least: "Means and Strategies: The FDIC maintains the
| viability of the DIF by investing the fund, monitoring
| and responding to changes in the reserve ratio,
| collecting risk-based premiums, and evaluating the
| deposit insurance system in light of an evolving
| financial services industry."
|
| "DIF fund" being the $119B. In my post I presumed that
| 119 billion is in US Treasuries. I'm also presuming US
| treasuries are not the same thing as cash. Whatever the
| case, generally people don't refer to "cash laying
| around" as an investment.
|
| EDIT: Try this much more readable doc:
| https://www.fdic.gov/about/financial-
| reports/reports/2020ann....
|
| The $119B in assets includes only $3B in cash, with $110B
| in treasuries.
| fragmede wrote:
| Bank of America has an estimated 67 million customers.
| Assuming $250k per person, and I've got the number of
| zeros right, that's $16 trillion ($16,750,000,000,000) in
| liability if they were to go down, enough to sink FDIC.
| iamthirsty wrote:
| I think you got the math wrong, because I'm 100% sure not
| all 67million customers have $250,000 in their accounts.
| Being that 56% of Americans can't cover $1,000
| expense[0], and most people with >$100k assuredly have
| their money in assets rather than cash, I think your math
| is way, way, _way_ off.
|
| [0]: https://www.cnbc.com/2022/01/19/56percent-of-
| americans-cant-...
| nostrebored wrote:
| Right, but the FDIC explicitly says large amounts may
| take longer in the status quo. The only reason to have
| money in the bank is for a reasonably safe, liquid form
| of money.
|
| If they aren't providing safety or liquidity, why should
| you use them?
| iamthirsty wrote:
| They are providing safety and liquidity, your statement
| is laughable, honestly.
|
| The safety is personal -- no one can rob your home when
| you're gone and steal the money under your mattress
| because it's not under there, it's in a bank.
|
| And in regards to liquidity, if you can tell me the exact
| day, time, and amount you tried to pull out of a consumer
| bank (large household bank names) and instead of getting
| cash in hand the bank told you "sorry, we spent your
| money on loans, we don't have any to give you", I'd love
| to see it.
|
| Bonus points if then the FDIC didn't cover it.
|
| Banks provide both safety and liquidity at the consumer
| level. It would also be a really bad idea to continue to
| encourage everyone to pull money out of banks and hold it
| in cash -- both economically and personally. People
| largely benefit from banks existing, that's, well, why
| they exist!
| gfd wrote:
| Only tangentially related, but don't put cash in safety
| deposit boxes. Police can take them under civil forfeiture
| laws:
|
| https://nypost.com/2021/06/12/fbi-aims-to-keep-
| valuables-86m...
|
| https://www.businessinsider.com/fbi-raid-1400-boxes-us-
| priva...
| Spooky23 wrote:
| Asset forfeiture sucks, but I'd be more worried about run
| of the mill bank incompetence. Banks don't really want to
| be in that business and screw up often.
| roywiggins wrote:
| The greater risk is probably that your bank will just
| screw up and lose your stuff:
|
| https://www.nytimes.com/2019/07/19/business/safe-deposit-
| box...
| loeg wrote:
| Police can take anything anywhere under civil forfeiture;
| it's truly insane.
| cmeacham98 wrote:
| Civil asset forfeiture is one of those things that feels
| really unjust in the US, and I'm somewhat surprised there
| hasn't been a Supreme Court case ruling it
| unconstitutional per the 4th Amendment.
|
| I'd love to hear a steelmanned argument in favor of it,
| maybe I'm missing something obvious?
| klodolph wrote:
| Civil asset forfeiture is a surprisingly complicated
| network of related legal issues, unfortunately. It can be
| incredibly complicated to litigate. Asset forfeiture
| cases often involve the federal government and have to be
| litigated in federal court, which is difficult and
| expensive.
|
| If you want to think of laws as an ecosystem, then think
| of civil asset forfeiture as a highly evolved species
| with all sorts of specialized defenses.
|
| It seems to be slowly being ground away. The modern
| version of civil asset forfeiture was as a tool to take
| away the profits of drug kingpins in the 1980s and
| bootleggers during prohibition. Seems like the modern
| drug kingpins are companies like Johnson & Johnson,
| though.
| zizee wrote:
| > I'd love to hear a steelmanned argument in favor of it,
| maybe I'm missing something obvious?
|
| If it were a big shipment of plutonium laced heroin, it
| seems fair game.
|
| I think the biggest issue with civil asset forfeiture is
| the conflict of interest where police departments are
| keeping/using the seized assets. From the outside it
| looks a lot like the government acting like a gang.
|
| The other big problem is it seems like it is up to the
| owner to prove the assets "innocence", rather than police
| proving the assets were the result of illegal activity.
|
| If assets are seized, they need to go to a third party
| that can store them safely, return the assets to their
| owners. If found "guilty", the assets should go to some
| victims of crime fund, or destroyed.
| [deleted]
| HideousKojima wrote:
| The only steelmanned argument for civil asset forfeiture
| goes back to its origins, when it was used to seize
| smuggled goods on ships. Since the ship's owner was
| almost always a wealthy person living in a different
| country making them almost impossible to go after, and
| the smuggled goods were missing tax stamps etc. making it
| clear that they were being illegally smuggled, the
| government would simply seize the goods. That's literally
| the origin of civil asset forfeiture in the US, and all
| of the horrible and unjustifiable examples of it that we
| see nowadays grew out of that much more limited and
| justifiable example.
| tialaramex wrote:
| Seems to me in the specific case of wealthy foreigner
| owns smuggled good a better (more just) arrangement
| accuses _them_ not the goods, but with the mechanism that
| if they for some reason don 't want to attend court
| (maybe because they're super guilty?) their goods are
| seized but the crime still exists.
|
| There are some nuances to work out to ensure cops can't
| accuse say Vladimir Putin of a crime involving the $8000
| they found in your house, and then since Putin doesn't
| show up they keep your money, but the general idea seems
| more sound than civil forfeiture.
| ChadNauseam wrote:
| No civil asset forfeiture: cop pulls a drug dealer over,
| the drug dealer bribes the cop and is on his way.
|
| With civil asset forfeiture: cop pulls a drug dealer
| over, the drug dealer offers to bribe the cop, the cop
| laughs and takes all his stuff anyway, books him, and the
| police department buys a martini machine.
|
| Kind of a weak case, but that was the best steelman I
| could think of.
| derangedHorse wrote:
| As others have pointed out in comments on this post, banks
| typically don't loan out customer funds and instead use
| them as reserves. For loans, banks can create money out of
| thin air and just increase the number representing the
| borrower's bank account balance in a database somewhere.
| Interest is to incentivize adding more reserves to their
| balance sheets which in turn allows more loans (with
| considerably larger interest rates) to be given out
| shapefrog wrote:
| If the 50-1 shot horse won the race, they would have put your
| $100 back in your account and put $4900 in their account
| [deleted]
| vgeek wrote:
| I know pop culture and humor is frowned upon on HN, but
| https://m.youtube.com/watch?v=XhFTG7fFwc4 is just too
| relevant to not share for this whole situation.
| jojobas wrote:
| Except
|
| 1) Chase doesn't have to show you $0, you'll still see $100.
|
| 2) When you decide to spend the money, chances are the seller
| is also with Chase, then all Chase has to do is show you $0
| and the seller +$100
|
| 3) If the seller happens to be with another bank, Chase will
| just go in credit with that other bank for $100. The total of
| such interbank accounts is around 0 as money flows both ways,
| and, with a decent margin, within the bank reserve amount.
|
| Fractional-reserve banking works so well with so little
| "actual" reserve money that some consider it counterfeiting.
| fdgsdfogijq wrote:
| Why is this getting downvoted? its a plain speech description
| of what they did
| RC_ITR wrote:
| Because Chase actually does _something_ sort of similar
| (primarily mortgage lending), but they employ _a ton_ of
| people to think _all day_ about managing risk.
|
| So I think people don't like the comparison, since the true
| difference is FTX did horse betting, while Chase does
| something much more rational.
| zeven7 wrote:
| To add to that: Chase tells you what they're doing. FTX
| told its customers it wouldn't lend it out, and then it
| did. Additionally, customer accounts at Chase are insured
| by FDIC up to $250k. Chase tells you they're going to bet
| with your money, manages the risk well* on most days*,
| and even if they lose your money you get it back anyway.
| FTX did the opposite of all that.
| mjn wrote:
| Chase is also more restricted in how the investment
| banking side of the business can use funds from the
| retail banking side, precisely because banks in the 1920s
| _did_ play fast and loose with investing customer
| deposits, which caused a bunch of depositors to lose
| savings in the 1929 crash.
|
| The amount of interaction between the two sides that's
| allowed has increased and decreased over the years, but
| it hasn't been unrestricted since the Glass-Steagall Act
| of 1933: https://en.wikipedia.org/wiki/Separation_of_inve
| stment_and_r...
| based69 wrote:
| Doesnt fannie mae/freddie mac essentially backstop a lot
| of this risk too?
| [deleted]
| bin_bash wrote:
| This is one of the reasons downturns in markets are good. If the
| market would've just kept growing then SBF likely could've kept
| his ponzi scheme afloat without anyone noticing.
|
| The 2008 recession is what really stopped Bernie Madoff.
| naraga wrote:
| Sure, yet, these people will mostly manage to escape. Have no
| doubt they all have few mils on side and they are ready to lie
| to themselves all sort of excuses to make them feel better
| spending them. Sam apparently "miss-labeled" some accounts all
| in pursuit to give more to charity i am pretty sure.
| justin_oaks wrote:
| Yes, downturns help expose "the bezzle": the gap between
| perceived value and long-term economic value.
|
| I first learned the term "bezzle" here on Hacker News and read
| more about it in the article "Why the Bezzle Matters to the
| Economy":
| https://carnegieendowment.org/chinafinancialmarkets/85179
|
| It's an interesting read to those who enjoy economics.
| guardiangod wrote:
| >ponzi scheme
|
| This is not a ponzi scheme. This is a good old "not firewalling
| your customer's money and your investment money" that everyone
| suffered from in 2008. The situation is cataphoric enough
| without people mis-using terms.
| shmatt wrote:
| >The first $10,000 USD value in your deposit wallets will
| earn 8% APY
|
| (This is what FTX was offering customers)
|
| And now we know the accounts weren't actually covered by real
| money (or "value" as they called it). So when person X was
| asking FTX for their money back, FTX would send person X+1's
| money to cover
|
| Sounds like a Ponzi to me
| CamelCaseName wrote:
| It's only a ponzi scheme if you have no underlying business
| but transferring money between people.
|
| Presumably FTX expected that its risky bets would pay off
| and that return would then fund the interest promised.
|
| Otherwise, would you consider corporate debt a ponzi
| scheme?
| [deleted]
| jazzyjackson wrote:
| > fund the interest promised.
|
| IMO this is key, the interest being paid out to account
| holders was not profits from any underlying business, it
| was just paid out from new "customer" deposits.
|
| If a corporation is in debt and paying back interest,
| it's sustainable as long as the business actually has a
| plan to grow. If your business is acquiring new users to
| pay out obscene interest rates to your early adopters,
| that's a ponzi
|
| (mr ponzi himself didn't mean to scam anyone either way
| by the way, until he realized his postage-arbitrage plans
| were going south and he scrambled not to break his
| promises)
| NickC25 wrote:
| >Presumably FTX expected that its risky bets would pay
| off and that return would then fund the interest
| promised.
|
| So did Bernie.
|
| >Otherwise, would you consider corporate debt a ponzi
| scheme?
|
| Depends on what you count as corporate debt.
|
| I'd have no problem buying the debt of a mature, massive
| company like Apple or Microsoft, because they have hard
| assets, steady cashflows, successful products on the
| market.
|
| The debt of a zombie corporation with a useless product
| that was only sustainable due to 0% interest rates? No
| thanks. Is that a ponzi scheme? Probably not the
| classical definition of one, but it's ponzi-adjecent.
| IanCal wrote:
| > So did Bernie.
|
| No, he just straight up didn't invest peoples money, he
| paid out "gains" just from other deposits. That's why it
| was a Ponzi scheme - that's what they are.
| NickC25 wrote:
| Initially, he did invest their money, he just didn't get
| the (I believe it was) +/- 10% that he promised investors
| (and was getting like clockwork) before the 08 crash.
|
| Once he started not being able to make those returns did
| thing start to unravel. His own kids were in denial right
| up until the end - almost nobody, even inside Bernie's
| firm, knew it was fraudulent.
| JackFr wrote:
| > almost nobody, even inside Bernie's firm, knew it was
| fraudulent.
|
| It's amazing what you can fail to know when not knowing
| it keeps you out of jail.
| IanCal wrote:
| He hadn't been doing any trades for 15+ years when it all
| fell apart.
| squeaky-clean wrote:
| The original scheme by Ponzi himself was based around
| profiting from arbitrage from postage stamps. He promised
| 50% returns within 90 days and couldn't keep up with his
| claims in a legitimate manner.
| jcpham2 wrote:
| FWIW I have difficulty distinguishing the difference
| between a Ponzi scheme and "The Time Value of Money"
| concept itself. Every place I see that offers interest on
| crypto deposits, I fear they have no business plan to
| generate the profits to pay the interest on a deflationary
| fake internet money in the first place.
|
| My fear is they are just Ponzi-ing on Wayne! seeking the
| next highest interest rate holding the biggest bag, hoping
| the 'ol Time Value of Money will save their ass.
|
| The whole house of cards has a lot to do with the
| _velocity_ at which the money moves and whether it's
| stagnating or generating interest somewhere else.
|
| My rant is over. None of this stuff has affected me.
| largepeepee wrote:
| Simple.
|
| It is always can you trust the other party.
|
| And that's the basis of society, government and money.
| JALTU wrote:
| Time value of money is not the same. It's actually simple
| and elegant and flexible, and to your point, you want to
| see the borrower have a plan, so to speak. Or cash flows.
| Or collateral. Or all of the above. And still, you can
| lose. But the concept of the price of money is separate
| from that.
| ProjectArcturis wrote:
| >Every place I see that offers interest on crypto
| deposits, I fear they have no business plan to generate
| the profits to pay the interest on a deflationary fake
| internet money in the first place.
|
| You are correct. Literally every place offering high
| interest rates on crypto deposits is a Ponzi scheme.
| jrm4 wrote:
| What makes it not a ponzi? Is the idea that "the possibility
| that number may go up" the only thing to distinguish it?
| oldgradstudent wrote:
| According to Wikipedia a Ponzi scheme
|
| > is a form of fraud that lures investors and pays profits
| to earlier investors with funds from more recent investors.
|
| So if they are paying yield while actually losing money and
| covering it up by recruiting new clients then it's a Ponzi
| scheme.
| colinmhayes wrote:
| So my understanding is that alameda needed more capital to
| fund its operations that had a track record of success, so
| sbf created ftx and gave customer assets to alameda to
| invest. So the business thesis here isn't "use new user
| money to pay old users" it's "steal all the users money to
| invest and hope the investments continue to be profitable."
| I guess they started ponzi-ing once alameda went bust but
| that wasn't the original plan, although that's probably
| true for most ponzi's.
| [deleted]
| steveBK123 wrote:
| Even in 2008 that is not what happened.
|
| Tell me which retail brokerages lost their customers assets
| because they gambled them away?
|
| There is no glossing over the fact that all these crypto
| explosions are a result of largely re-implementing a pre-Fed,
| pre-FDIC, pre Great Depression style banking system with all
| its long-patched defects.
| arcticbull wrote:
| ... except in a way that fundamentally prevents the patches
| and even lauds the defects.
| steveBK123 wrote:
| Yes, exactly.. this is the end state for crypto rather
| than a step towards being a normal market that normal
| people can use
| NovemberWhiskey wrote:
| > _" not firewalling your customer's money and your
| investment money" that everyone suffered from in 2008_
|
| ... cite for this, please. I don't recall there being any
| significant client money problems in that period.
| guardiangod wrote:
| You are right. Even though there were cases in 2008 they
| weren't significant contributors to the great recession.
| oldgradstudent wrote:
| I don't think this was a major problem in the 2008 crisis.
|
| John Corzine's MF Global was a well known case in 2011.
|
| https://en.wikipedia.org/wiki/MF_Global
| VHRanger wrote:
| They used FTT as collateral for loans used on trading
| activities that boosted FTT value
|
| It's not literally a Ponzi, but it's Ponzi adjacent behavior,
| like what Bill Hwang did.
| colinmhayes wrote:
| Bill hwang didn't even take investor money. How did you
| come to the conclusion that his behavior was ponzi
| adjacent?
| quickthrowman wrote:
| Bill Hwang lied about his market exposure to the brokers
| who sold him the equity swaps. It was just garden variety
| fraud with no ponzi adjacent behavior at all.
| Kstarek wrote:
| He actually didn't lie lol, they knew they just didn't
| care as he was a very profitable customer
| abraae wrote:
| It's only when the tide goes out that you learn who has been
| swimming naked.
|
| Warren Buffett
| knorker wrote:
| "Only when the tide goes out do you discover who's been
| swimming naked"
| SilverBirch wrote:
| I think at this point anyone who has any involvement in crypto
| needs to ask themselves the following question: Are you Molly?
|
| Becuase if not, you're fucked. She's the only one walking out of
| this shitshow with a reputation.
| [deleted]
| NelsonMinar wrote:
| To summarize, the WSJ article says he took $10B of $16B in
| customer deposits to FTX and used that to finance his hedge fund.
| reso wrote:
| ...and then the hedge fund lost the whole $10B. Corruption AND
| incompetence.
| MrMan wrote:
| or just spent it?
| moralestapia wrote:
| Or stole it.
| bagels wrote:
| Seems like blaming the economy/stock market can make for
| a good cover if nobody looks too hard.
| michael1999 wrote:
| Looks like much of it was spent filling in the bezzle left
| from the early blow-ups in terra, etc. He was trying to prop
| up the whole ecosystem.
| jbverschoor wrote:
| Damn, that's nearly 2/3. Insane.
| RadixDLT wrote:
| this dude is Bernie Madoff 2.0
| digianarchist wrote:
| He's more like Nick Leeson than Bernie Madoff.
| rchaud wrote:
| You know those corner stores that act as Western Union/Moneygram
| agents? They have to follow stronger regulations (KYC/AML/BSA)
| and are audited on a quarterly basis by WU/MG to ensure there is
| no co-mingling of funds.
|
| A bodega conducts better financial oversight than these masters
| of the cryptoverse.
| selimthegrim wrote:
| Did SBF have any cats in the office? That should have been a
| warning sign.
| zhoujianfu wrote:
| Are you referencing Tibanne?!
| zenapollo wrote:
| steveBK123 wrote:
| Banks lend your deposits out. Banks do not play the market with
| your deposits. Anything close to that ended in 2008.
|
| And even the banks that did so, given they were FDIC insured
| and part of the Fed Reserve banking system did not leave any
| customers in the hole.
|
| We can argue about taxpayer bailouts and bad incentives, but
| the system worked the way it was supposed to - normal people
| can put their money in a bank account knowing they will be able
| to get it back out, come hell or high water.
| zenapollo wrote:
| > Banks lend your deposits out. Banks do not play the market
| with your deposits. Anything close to that ended in 2008.
|
| True that the Volcker rule of Dodd-Frank 2010 eliminated
| banks using deposits for prop trading as well as other
| gambling loopholes. That is, until it was weakened in 2019 by
| R Congress and Trump admin.
|
| https://www.americanprogress.org/article/hollowing-
| volcker-r...
|
| In any case, I would agree that the FDIC is the big
| difference, backed by the Fed printing press.
| arcticbull wrote:
| > Fed printing press
|
| Fed doesn't print money, Treasury prints money. Money is
| created when banks lend. The FDIC DIF (deposit insurance
| fund) is $125B and funded entirely by private contributions
| from member banks. They have a $100B line of credit at
| Treasury if things go pear shaped but generally they have
| the authority to seize failing institutions and sell the
| accounts to other banks without touching the DIF let alone
| the backup line of credit. They did this in 2008, selling
| WaMu to JPMorgan.
| zenapollo wrote:
| I did not know how the FDIC was backed, thank you.
|
| However, yes the treasury is an actual printing press,
| but the money supply is controlled by The Fed. They tell
| the treasury how much to print, they can provide
| unlimited liquidity to banks, and they are the largest
| backer of govt debt.
| izzydata wrote:
| I suspect you need to be a bank and aren't allowed to make such
| risky bets.
| [deleted]
| arcticbull wrote:
| How does this question keep coming up? It's obvious.
|
| 1. Banks _create_ money when they lend. This is the job that
| their Fed has conferred to them. They do so under a strict
| regulatory framework and with very tight risk requirements.
| Lending is where money comes from.
|
| 2. Fractional reserve works because banks are backed by the
| FDIC which has a massive deposit insurance fund ($125B). The
| FDIC has a massive line of credit ($100B) with the Treasury in
| case _that_ ever runs out. And they have the authority to take
| possession of failed institutions and sell the accounts like
| they did in 2008 with WaMu (under OTS). When WaMu went under
| the bank was sold to JPMorgan and nobody lost a penny _without_
| touching the DIF.
|
| 3. FTX was backed by nobody and nothing.
|
| 4. We know how banks operate, it's public and transparent. If
| FTX told depositors it was taking their money and gambling with
| it, and planned to stick them with the losses while keeping all
| the profit for themselves (a) that would be one thing and (b)
| nobody would sign up for that.
|
| > Most deposits are used for gambling by banks
|
| No they're not.
|
| > The US fractional reserve requirement for banks is 10%.
|
| No it's not, it's 0%.
|
| > If SBF was gambling with only 10B of 16B that's a 37% reserve
| - conservative by banking standards.
|
| No it's not. It's wildly irresponsible by any standard.
| oldgradstudent wrote:
| Just two days ago he claimed that they were not investing
| customer funds. A few hours ago he deleted that Tweet.
|
| That moves it into fraud territory.
| colinmhayes wrote:
| He wasn't, he was just loaning them to his other company.
| lordnacho wrote:
| Loaning things out == investing
| cbzbc wrote:
| Loaning them to invest them.
| latchkey wrote:
| Seems so odd to delete a tweet at this point. It isn't like
| it disappears.
| vkou wrote:
| It's different in a lot of ways. The most important one that
| you've missed is that banks don't need to have enough liquidity
| to cover customer deposits, but they do need to have enough
| _assets_. If a bank 's assets ever drop below its liabilities,
| it is _immediately liquidated_ , the shareholders lose
| everything, and insurance steps in to fix any gaps.
|
| SBF has neither liquidity nor assets sufficient to cover its
| deposits, because most of his assets was a pile of worthless
| fartcoin that he printed for himself, but pretended that it was
| worth billions. And because he was not properly audited[1], his
| equity wasn't immediately liquidated to cover the gap, when the
| gap could still be covered.
|
| ... Also, reserve requirements have nothing to do with this
| particular failure case. They have everything to do with
| issuing loans, and the rate at which money is created
| (inflation!), but this wasn't a failure caused by issuing
| loans.
|
| [1] It's weird how VC due diligence seems to go out the window
| as soon as their money starts funding a hot new crypto scam.
| It's almost as if they are playing a heads-we-win-big, tails-
| we-lose-nothing-but-our-investment game...
| oldgradstudent wrote:
| > If a bank's assets ever drop below its liabilities, it is
| immediately liquidated, the shareholders lose everything, and
| insurance steps in to fix any gaps.
|
| That's how it's supposed to work. We've all found out in 2008
| that's no longer the case.
|
| The FDIC took over and sold or liquidated a few hundred small
| banks and a handful of medium sized banks. The big ones were
| considered to be too big to fail and were bailed out. The
| shareholders of these bing banks did not lose everything, and
| even the subordinated debt was payed (e.g. Citi).
| vkou wrote:
| > That's how it's supposed to work. We've all found out in
| 2008 that's no longer the case.
|
| 1. Not every bank that became insolvent had a hole on their
| balance sheet that required all of their equity to be wiped
| out to fill. The shareholders got a haircut proportionate
| to how big those holes were.
|
| 2. The rot would have gone far deeper, and the holes could
| not have been covered if those bank balance sheets looked
| anything like FTX's did. Banks, for the most part, faced a
| liquidity crisis, not an insolvency crisis, and the owners
| of the ones that faced the latter were, for all intents and
| purposes, wiped out.
|
| 3. The FDIC is funded by banks, not by taxpayers. The FDIC
| only cares about customer deposits, it doesn't give two
| figs about _investments_.
|
| The controversial, taxpayer bailouts were not for retail
| banks (The FDIC was designed a very long ago to handle this
| case, and handled it well, without dipping into the public
| purse), they were for shit like AIG. And speaking of
| shareholder equity, that didn't do so hot. Their public
| valuation went down 98% from 2007 to 2008, and is, as of
| today, down 75% from their peak. I wouldn't have wanted to
| have been a shareholder.
| arcticbull wrote:
| So bail-outs weren't grants, they were loans, and the loans
| have been repaid netting a massive windfall to the
| government over over $100B with many more billions to come,
| a ton of jobs were saved and it's hard to argue that they
| were at all a bad thing. [1] This is coming from someone
| who at the time thought the bailouts were a bad idea.
|
| [1] https://projects.propublica.org/bailout/
| NelsonMinar wrote:
| Banks are highly regulated in exactly how much of the deposits
| they can use and what kind of risks they can take with it. This
| is complicated:
| https://en.wikipedia.org/wiki/Capital_requirement
|
| Also in the US at least banks are FDIC insured, so if the bank
| is breaking the law and gambling inappropriately consumers are
| still protected.
|
| "How is crypto different than a bank" is a reductive and
| foolish comparison. There are many, many differences. The
| primary one being that almost every cryptocurrency system is a
| fraud at its heart.
| duncancarroll wrote:
| > "every cryptocurrency system is a fraud at its heart."
|
| I'm not sure I agree with you on that part.
|
| Fraud is defined as "wrongful or criminal deception intended
| to result in financial or personal gain." Encryption-based
| currency by itself does not meet that definition.
|
| Can people use crypto to commit fraud? Yes, just the same as
| they could use fiat or anything else that has perceived
| value.
|
| imho the main value of crypto as a technology is that it is
| A) decentralized, and B) removes many intermediaries &
| inefficiencies involved in handling + distributing money.
| </$0.02>
| NelsonMinar wrote:
| You misquoted me; I said "almost every cryptocurrency
| system" for a reason.
|
| A thread where we're discussing a guy using $10B of $16B of
| cryptocurrency customer deposits to finance his private
| hedge fund gambling is not a good place to try to make your
| argument.
| zenapollo wrote:
| Of course you're right that they are very different. But "at
| it's heart" all money is imagined. Dollars are simply backed
| by all the most powerful institutions on the planet.
|
| The reason I asked is because it seems to me that people are
| clutching their pearls and saying this is stealing. But as I
| see it, the difference between FTX and Chase Bank are that
| Chase has a lot of rules and regulations, and a good
| insurance policy. But "at it's heart" SFB is no different
| than Jamie Dimon. The ethics of what SFB did and what
| American banks would like to do is exactly the same.
| vkou wrote:
| At heart a snake oil salesman and a doctor are no
| different, but only one of them actually helps people.
| [deleted]
| CaptainZapp wrote:
| Banks usually don't hold their assets in funny money tokens.
|
| There are quite strict rules about their capitalization and the
| quality of the underlying assets.
| hmahncke wrote:
| Remarkable that a venture-backed company can loan $10B to the
| founder's hedge fund without running into some sort of
| board/corporate sign-off that's required to literally execute the
| agreement/fund transfer.
| ksherlock wrote:
| WSJ has another article with more information on that:
|
| https://www.wsj.com/articles/silicon-valley-poured-money-int...
|
| "Silicon Valley Poured Money Into FTX, With Few Strings
| Attached"
|
| "A marquee roster of investors from Silicon Valley and Wall
| Street swarmed FTX. They invested nearly $2 billion with few
| strings attached and no oversight on the cryptocurrency
| exchange's board, promoting it as a safe bet."
|
| Anyhow, The board of directors consisted of SBF until the
| summer of 2021. Then 2 "independent" directors were added, 1
| was an FTX executive, the other was a lawyer in Antigua
| skippyboxedhero wrote:
| The recent Sebastian Mallaby book about VC charts the growth
| of this "founder rules" approach.
|
| In the age of ESG, it turns out that the "G" part is being
| ignored totally (because it counter to the interests of
| insiders) but the "E" and "S" is ever more important (because
| it is in the interests of insiders) despite it doing little
| to help improve returns (SBF was the king of "S"...might
| there be a correlation between saying you are more ethical
| than anyone and permitting yourself to steal from
| customers?).
| shaburn wrote:
| Would this even be possible at any hedge fund?
| cjtrowbridge wrote:
| Of course not. Crypto is a vehicle for tech founders to do
| all the unethical things that are banned in traditional
| finance without technically breaking the law.
| tanseydavid wrote:
| Not a hedge fund but MF Global/Jon Corzine was an interesting
| similar incident that was not crypto-related.
|
| https://en.wikipedia.org/wiki/Jon_Corzine
|
| > Corzine was subpoenaed to appear before a House committee
| on December 8, 2011, to answer questions regarding 1.2
| billion dollars of missing money from MF Global client
| accounts. He testified before the committee, "I simply do not
| know where the money is, or why the accounts have not been
| reconciled to date," and that given the number of money
| transfers in the final days of trading at MF Global, he
| didn't know specifics of the movement of the funds. He also
| denied authorizing any misuse of customer funds.
|
| > On the day of MF Global's bankruptcy, a Bloomberg reporter
| wrote "Jon Corzine's risk appetite helped destroy his firm.
| It also provided an object lesson for Paul Volcker's campaign
| against proprietary trading on Wall Street."
| nonameiguess wrote:
| And for anyone who wasn't familiar with this guy and
| doesn't click on the link, he was a US Senator and then NJ
| Governor who ran this fund immediately after leaving
| office. He's the guy Chris Christie replaced.
| lordnacho wrote:
| I was partner at a couple of hedge funds. Every fund has its
| own docs, but normally it is going to restrict you to sending
| money to specific things, you can't just do anything you
| want. Certainly you cannot just lend it to yourself if you
| want serious investors, they do a whole due diligence
| questionnaire about what sign-off is needed, who can sign,
| audits, and so on.
|
| I remember a friend with a fund, he was in a short-term
| pickle waiting for some money to bridge a house purchase.
| Didn't even cross his mind to lend it to himself and pay it
| back two weeks later, even though that would have been nearly
| risk free and a minuscule proportion of the fund.
| cbtacy wrote:
| They had no real board. They had no real governance. What's
| amazing is that large venture funds would put this much money
| into this kind of company without any board seats.
| largepeepee wrote:
| Really shows how little oversight any of these venture funds
| have.
|
| They come across more like frat bros with huge pockets
| casually giving away billions under a pinky promise of
| eventual returns.
|
| At this point, they are doing the same level of DD as those
| degens in WSB.
|
| But I guess you don't have much leverage when the fed is
| printing trillions for years and we end up with dozens of
| Zuckerberg types, too much power and no oversight to hold
| them accountable.
| pge wrote:
| It is dangerous to extrapolate from one case (or even a few
| notable cases in recent years) that venture funds have
| "little oversight" over portfolio companies. These are the
| exceptions rather than the rule.
|
| Obviously, some boards are better than others at oversight,
| but the complete absence of a functioning board, as was the
| case at FTX, is definitely very, very unusual.
| largepeepee wrote:
| Like you have conceded, there are more than a few notable
| cases in recent years.
|
| Often hiding their "secret sauce", which often turn out
| to be lies and deception for a variety of reasons.
|
| It is no longer very very "unusual" when free loans,
| credit and liquidity has been floating around for years
| thanks to the money printer.
| huevosabio wrote:
| It feels like a very Adam Neumann move.
| FormerBandmate wrote:
| Sequoia did a nauseating, hilarious puff piece on him a
| couple months ago and this guy sounds like Adam Neumann's
| second coming.
|
| https://www.sequoiacap.com/article/sam-bankman-fried-
| spotlig...
| lavezzi wrote:
| Will need the Wayback Machine as they are trying to damage
| control: https://web.archive.org/web/20221027180943/https:/
| /www.sequo...
| paganel wrote:
| > SBF himself has amassed more wealth in a shorter period
| of time than anyone else, ever. The 2022 Forbes
| Billionaires List pegs SBF's net worth at $24 billion.
| He's now 30 years old. But we get ahead of ourselves.
|
| This is just gold.
|
| Hopefully this all circus going down will also bring down
| all the phonies from VC companies like Sequoia Capital,
| guys (they're mostly guys, of course) who still live off
| the few successful bets they made in the early 2000s. We
| need fraudster-enablers like Sequoia to actually go bust
| if we really want for our industry to find its lustre
| again and for real innovation to come back.
|
| Later edit: I've mostly gone through all of it, and I
| have to say that that that archived article is pure
| genius, it has copy-paste-ble gem after copy-paste-ble
| gem. It would most probably deserve its own, separate
| submission, on HN.
|
| In a saner investment environment that sort of article,
| and the huge fraud the people behind it helped perpetuate
| by giving this SBF guy money (one of the Skype founders,
| really? the rationalist community, really?) should help
| bring some people down, and in so doing leaving our
| industry, well, cleaner.
|
| But I'm pretty sure that nothing like that will happen,
| the small fries will be too scared to call these people
| out as fraudster-enablers, thinking that they might need
| money from them at some future point, the other sharks in
| the pool will behave like nothing has ever happened,
| hoping that the regulatory powers that be will move
| along, to say nothing of the politicians, after all, to
| quote Vox, SBF is "one of Biden's biggest donors" [1].
|
| To re-capitulate, one of the US president's biggest
| donors has just defrauded people out of $10 billion (that
| we know of) while some of the biggest
| figures/institutions in the US tech industry had stood
| behind him. Business as usual in the rules-based United
| States.
|
| [1] https://www.vox.com/recode/2021/3/20/22335209/sam-
| bankman-fr...
| Cipater wrote:
| >But, right there, between a bright yellow sunshade and
| the crumb-strewn red-brick floor, SBF's purpose in life
| was set: He was going to get filthy rich, for charity's
| sake. All the rest was merely execution risk.
| discodave wrote:
| I managed to get this screenshot at least:
|
| https://twitter.com/findgriffin/status/1590822569883873280
| threeseed wrote:
| When I was first read it I thought it was a parody, Silicon
| Valley style.
|
| But Sequoia this prestigious VC has been shown to be
| childish, incompetent, reckless and completely
| unprofessional.
|
| It will be forever be a stain on them.
| [deleted]
| robocat wrote:
| HN discussion (138 comments so far):
| https://news.ycombinator.com/item?id=33549059
| rogerkirkness wrote:
| Self dealing
| radicaldreamer wrote:
| The people who invest in venture funds need to demand better
| governance for portfolio companies, otherwise this will
| continue to happen.
| nemothekid wrote:
| Sequioa, who invested in FTX quite loudly, reported to their
| LPs that they only lost 150MM in their fund that had 7.5B in
| realized gains. Going off their letter they took 5B and
| turned it into 12.5B for a return of 150%[0].
|
| After this spectacular blowup barely put a dent in their
| returns, why would LPs demand anything? Sequioa will just
| tell them "hey it's the name of the game, there are some
| losers who go bankrupt and winners who return the entire fund
| several times over".
|
| If Sequioa took a massive markdown on FTX that would be a
| different story. However they came out unscathed and looks
| like they are managed well despite fellating SBF quite
| openly. What would you even demand of them given that they
| didn't lose much money? They probably lose even more money on
| companies that end up just not being successful in the first
| place. You can't ask them to not invest in risky business,
| thats the whole point of VC.
|
| [0] Could be misinterpreting the letter, they said FTX was 3%
| of commited capital, 150M / 3% = 5B, and they had 7.5B of
| realized and unrealized gains.
| skippyboxedhero wrote:
| I mentioned this is another reply, so sorry for anyone who
| reads both.
|
| I would read Mallaby's history of the VC industry to see why
| this isn't possible. Around 1997 the balance of power shifted
| heavily in favour of founders (this is when dual-share class)
| started, and they stopped demanding seats on the board.
|
| Iirc, Sequoia was a firm that held out (along with other old-
| style funds), they missed out on a lot of companies over the
| next ten years so ended up racing to the bottom...this is how
| we got here.
|
| Btw, just on corporate governance...it is the most important
| factor for a company. A lot of the issues with corporates we
| have today are due to poor oversight from shareholders (not
| helped by passive). If corporate governance isn't working,
| capitalism won't work either.
| pge wrote:
| I generally agree, but it's not "people," it's institutional
| funds (endowments, pension funds, etc). The way venture
| returns are distributed is that a small number of funds (of
| which Sequioia has historically been one) stand out from the
| rest in terms of returns. With the lengthy bull market that
| we have had until this year, VC was a high-performing asset
| class. Pension fund and endowment managers felt they needed
| to be in the asset class, which really meant being in those
| top 10 or so funds that were generating outsized returns.
| When LPs are competing to get into a few top funds, the funds
| have all the leverage. My sense is that LPs don't feel like
| they can make any kind of demands on the VC funds, for fear
| of being blocked out of investing.
|
| Now we have a market turn and VC is unlikely to sustain the
| returns of the past decade. That may shift the leverage, but
| history suggests that LPs will still not put any kind of
| meaningful pressure on the top funds to do anything
| different.
| returnInfinity wrote:
| can do only in crypto
| [deleted]
| LatteLazy wrote:
| Based on a claim by one anonymous source, that SBF told them
| that.
|
| Might be true, but papers (especially ones like the WSJ) should
| not publish such pap.
| cycrutchfield wrote:
| Are you not aware of how journalism works?
| bin_bash wrote:
| There is absolutely 0 chance that the WSJ would run an article
| with a headline like this without verifying the information
| with multiple parties. That verification is often off-the-
| record so you won't read about it in the article.
| somuchfordonor wrote:
| > Alameda's CEO is Caroline Ellison, a Stanford University
| graduate who like Mr. Bankman-Fried previously worked for
| quantitative trading firm Jane Street Capital. Alameda is based
| in Hong Kong, where FTX was headquartered before relocating to
| the Bahamas last year.
|
| Are the folks at Jane Street making money because they are smart,
| or because they use that perception to perpetuate some scam?
|
| I interact with a lot of Harvard kids. Some of them are from Long
| Island, they know dads who work at that Republican's hedge fund.
| They are smart kids. They have good cognitive gifts.
|
| But not once - not from word of mouth, or directly from them, or
| someone, ever, anywhere - have I heard a common sense way these
| guys make money due to intelligence, instead of due to a scam or
| due to luck.
|
| It is really frustrating. So much human potential wasted on
| chasing the dollar sign. They are in denial that it is scams.
|
| It has always been scams. Why is this so hard to believe? Why in
| the absence of any positive evidence, like "oh here is our genius
| but nonetheless expired" trading strategy, which anyone could
| have furnished in the last two decades, they agree, oh it must be
| real?
|
| The simple answer seems, because if you believe it to be real,
| you can be this specific kind of Harvard + New York + "X" kid -
| and seriously, they are all cut from the same jib, superficially
| and inside their character, it tarnishes the institution - and
| you can do this scam and pocket your change and eat dim sum with
| 20 people on the weekends and have a skinny girlfriend and buy a
| condo. You can do something pretty meaningless with your life in
| exchange for the burn out.
|
| This scam life lets 20 year olds not hear from their horrible
| parents that burned them out and gave them no meaning. Eventually
| they turn 30 and hope that a decade went by without a crash, and
| then life decides for them to sell before the ponzi collapses.
| Like you have a baby with your skinny girlfriend and you buy the
| condo and great, you sell, and it happens to be well timed!
|
| I fucking hate Jane Street, I have hated them since I've known
| the assholes who intern there, and I don't know why this Bankman-
| Fried guy got such a big pass for scamming literally millions of
| people, and why this Caroline girl isn't going to be sent to
| jail, and it's frustrating because you can actually tell! You can
| predict this from when these kids are 20!
| justinbaker84 wrote:
| This is a very well articulated comment. Thank you for laying
| this out so clearly. I don't know any hedge fund types so it is
| helpful to hear from somebody who does.
| [deleted]
| govg wrote:
| Everything in their comment points to them not having a clue
| about the financial industry in general or about how hedge
| funds / trading firms generate revenue or even try to.
| markisus wrote:
| But you actually can make money honestly by finding mispricings
| in the market. Eg Buffet, or Burry during the housing crisis.
|
| You can also make money through arbitrage or other brief
| financial blips that occur in the market.
|
| These things aren't really scams in the normal sense.
| somuchfordonor wrote:
| > honestly by finding mispricings in the market. Eg Buffet,
| or Burry during the housing crisis.
|
| Like who wants to be on the other side of a Jane Street
| transaction? Absolutely fucking nobody. If you're talking
| about "mispricings" during the "housing crisis," my dude,
| nobody wanted to sell their house to these dumb fucks! They
| were going to starve, they had no choice! How does that not
| seem like a scam of some sort to you? That's not honest
| money!
|
| Those 20 year olds with Math degrees from Harvard. They don't
| fucking know _anything_ dude, they did not discover a model,
| they did not make a model with a price that says price is
| lower than this other price, then persuade some people to
| make some bet. That 's a _parallel reconstruction_ , that's
| to justify whatever actual scam is going on. How do you not
| see that?
|
| There's no common sense reason Math 55 equips you with some
| magical vision into pricing that actually winds up _meaning_
| anything. When it does, it might as well be _random_.
|
| If the Mercers were good people, would they be Republicans?
| No dude. C'mon, use common sense. Don't get hung up on
| "normal sense." Use _common sense_.
|
| If Sam Bankman-Fried was a good person, would he fuck $10b
| out of his own god damned customers' money?
|
| No dude, he's made some unspecific, previously-bankrupt-and-
| now-literally-bankrupt promise to donate some money to
| something somewhere in the future, to whitewash the fact that
| he just went around fucking everyone.
|
| I mean get a grip Effective Altruists, whose guts I hate too,
| and whose energy is the stereotype of the student I am
| talking about - the same students! - where they get this
| readily packaged "religion" that happens to align exactly
| with their meaning-bankrupt approach to life.
|
| So don't even get on it with the "honest" money. I can find
| the venture capitalists who take some dumb person's money and
| then hand it over to something risky and interesting: I see
| how VC is honest, it's just not necessarily intelligent, but
| it's redeemable. But the Jane Street people: No dude. Not
| Warren Buffet, not Burry, none of those vultures.
| adamsmith143 wrote:
| >Like who wants to be on the other side of a Jane Street
| transaction? Absolutely fucking nobody. If you're talking
| about "mispricings" during the "housing crisis," my dude,
| nobody wanted to sell their house to these dumb fucks! They
| were going to starve, they had no choice! How does that not
| seem like a scam of some sort to you? That's not honest
| money!
|
| This comment makes me think you don't have the slightest
| idea of how the financial sector works, how Warren Buffet
| makes money, what happened in 07-08 or how Michael Burry
| made money during the crisis.
|
| >If the Mercers were good people, would they be
| Republicans? No dude. C'mon, use common sense. Don't get
| hung up on "normal sense." Use common sense.
|
| This comment makes me think you are just a troll.
|
| >But the Jane Street people: No dude. Not Warren Buffet,
| not Burry, none of those vultures.
|
| This is just ignorant. If Warren Buffet looks at Coca-Cola
| and thinks hey this stock is under-priced and will be worth
| more in the next decade and makes 10B off it there's no
| scam involved. Michael Burry evidently read through
| hundreds of Mortgage Backed Securities and saw that the
| underlying assets were more risky then they were priced at
| and made a killing betting against them. No scam. I'm not
| privy to what Jane Street's techniques are but it's most
| likely some ML driven search for alpha but again nothing
| screams scam. They aren't taking retail investor money, you
| couldn't invest with them even if you wanted to. Where's
| the scam?
|
| All of your posts reek of paranoid delusions frankly.
| tedunangst wrote:
| How many houses do you think Jane Street was buying up?
| amluto wrote:
| > But not once - not from word of mouth, or directly from them,
| or someone, ever, anywhere - have I heard a common sense way
| these guys make money due to intelligence, instead of due to a
| scam or due to luck.
|
| Financial markets have a fascinating property: any well-known
| strategy that can be implemented at reasonable cost [0] stops
| working. This is because people implement it and the profit
| goes away. If Jane Street has a common sense strategy or three
| that makes money, they're not telling you about it.
|
| (I'm taking about actual market profits here. It is well known
| that you can make _lots_ of money by charging fees on a
| lackluster fund as long as you can find investors.)
|
| [0] The cost issue is real, and the relevant parameter is some
| combination of _profit_ (revenue - opex), capex and risk. For
| example, one can make money (revenue) by being the fastest
| market on the block. But the revenue there is approximately
| bounded and competition has driven the cost up to insane
| levels, so it is _not_ straightforward to do this profitably.
| itsdrewmiller wrote:
| The original comment addresses that concern:
|
| >Why in the absence of any positive evidence, like "oh here
| is our genius but nonetheless expired" trading strategy,
| which anyone could have furnished in the last two decades,
| they agree, oh it must be real?
|
| I agree that there should be some obviously awesome things
| these funds did that they can share now given they are no
| longer able to exploit them. I have no idea if they have done
| so and I and GP are just not aware of it.
| jeffreyrogers wrote:
| There are known expired strategies that generated large
| profits for long periods of time. In some cases the people
| involved in developing the strategies have directly
| published things explaining what they did.
| 121789 wrote:
| Do you have any examples? Would be interested to read
| sone
| elijaht wrote:
| Article mentions one (bitcoin arbitrage)
| taliesinb wrote:
| I'd be fascinated to read these published things if
| anyone can point to them!
| jeffreyrogers wrote:
| The books and articles by Ed Thorpe are a good place to
| start.
| tych0 wrote:
| And at least in SBF/Alameda's case, they did, and you can
| google it. IIUC it was basic arbitrage, the hard part was
| figuring out how to interface with Japan's banks.
|
| Maybe the guy is a bad dude, I don't have a horse in that
| race. But lots of trading strategies that have worked in
| the past are well known.
| espadrine wrote:
| That is part of it. The Sequoia piece[0] describes what
| kicked off Alameda Research: after a tumultuous hard fork,
| there used to be a discrepancy between the price of Bitcoin
| in JPY at a Japanese exchange, and that in a US exchange.
| So he opened a Japanese account, bought a bitcoin in the US
| for a low price, and sold it in Japan for a high price.
|
| To be clear, it is described by SBF. I haven't verified
| historical prices to confirm it. The journalist that wrote
| this article probably hasn't either.
|
| [0]: https://web.archive.org/web/20221110141739/https://www
| .sequo...
| peyton wrote:
| He claims to have been wiring $25m a day from a BoA
| branch to banks in rural Japan. Total horseshit.
| somuchfordonor wrote:
| I see a lot of variations on these arbitrage and secrecy
| themes.
|
| Arbitrage that sticks around for years: those are scams dude.
| They involve collusion, not intelligence. I understand it
| might not be illegal collusion, but if either side of the
| transaction being scammed found out, they would find someone
| else to work with.
|
| Trust me, I know. I've worked in ad tech.
| adamsmith143 wrote:
| >Trust me, I know. I've worked in ad tech.
|
| Trust me I know about the inner workings of the Financial
| world because I did an internship at a Digital Marketing
| agency and totally didn't get coldly rejected by Jane
| Street when I applied for their Head of Trading position
| that I totally deserve because I'm like way smarter than
| those Harvard Math 55 morons.
|
| Lol this is S tier cope or A tier trolling.
| DebtDeflation wrote:
| The obvious suspicion, for any company that is both a
| market maker and doing prop trading, is that they're
| engaging in some sort of front running. They're probably
| doing it in a highly obfuscated non-trivial way otherwise
| they'd get caught quickly, but nevertheless are using their
| visibility into trillions of dollars worth of order flow to
| shape their own trading strategy.
| bwi4 wrote:
| I just assume everyone but retail has order flow data
| now.
| solveit wrote:
| I mean, yeah. For arbitrage to stick around for years it
| requires that the person who first found it be years ahead
| of the curve, and that's really hard to do just by being
| smarter than the competition. The vast, vast majority of
| these will be collusion, or regulatory capture, or literal
| fraud, or whatever where the competition knows full well
| what you're doing, but can't/won't jump in for completely
| unrelated reasons.
|
| But finding lots of different things to arbitrage and
| consistently being two weeks ahead of the competition _is_
| something you can do with a dedicated team of smart,
| experienced people, and this is the business model that
| Jane Street and others claim to be running.
| deck4rd wrote:
| Jane Street has been purchasing advertisements with popular
| math YouTubers[1][2] recently, and it really bothers me. Think
| how many young, mathematically curious people are watching
| these channels and getting told that working for Jane Street is
| a worthwhile use of their time and intelligence.
|
| [1]: Numberphile, e.g.
| https://www.youtube.com/watch?v=rBU9E-ZOZAI
|
| [2]: Stand-up Maths (Matt Parker), e.g.
| https://www.youtube.com/watch?v=EGoRJePORHs
| cauthon wrote:
| I largely agree, but what does dim sum have to do with any of
| this
| tedunangst wrote:
| Dude got pranked and had somebody order chicken feet one
| time, has been living a life of resentment ever since.
| chasd00 wrote:
| I hear what you're saying but consider we're going on two
| entire generations of brilliant people being spent largely on
| just putting an ad on your phone and computer. The stock market
| isn't the only waste of intelligence.
| LeifCarrotson wrote:
| Income is a combination of two main factors:
|
| 1. The value you add to the economic 'stream' flowing around
| you
|
| 2. The amount you're able to divert out of that and into your
| own control
|
| These are influenced by a number of secondary factors:
|
| 1. Starting capital to buy tools and resources to increase your
| ability to contribute
|
| 2. The ability to help others increase their contributions, or
| less charitably, the ability to take credit for the
| contributions of others
|
| 3. A willingness or unwillingness to pillage the commons
|
| A humble farmer can work some acres of land, use his mind to
| know what best to grow, use his hands to make it happen, trust
| the sun and rain to grow the crops, and sell the harvest for a
| value greater than the cost to lease the land and buy the seed.
| With a million-dollar combine, cultivators, spreaders, center-
| pivot irrigation systems, an all the other features of modern
| agriculture, he can reap a much greater - more valuable -
| harvest.
|
| But when a dealership has negotiated exclusive rights over a
| region, and the salesmen take a non-negotiable commission of
| sales, does the salesman who connects the farmer to the combine
| he knows he needs deserve thousands of dollars for closing that
| sale, just because he's situated himself between the farmer and
| the manufacturer?
|
| When Wall Street or Jane Street sees that our massive farm
| industry needs massive numbers of combines - it's a $500B
| industry - and they're able to siphon off a percent of that
| industry's output for "providing liquidity" just because their
| Daddy knows some people, while the farmer's Daddy worked
| 18-hour-days every harvest season until he died, and the former
| is a multimillionaire by age 30 while the latter might make
| $200k during 4 of 5 seasons and lose $300k in a bad year...it
| just doesn't feel right.
| sidewndr46 wrote:
| You're glossing over the fact that part 1 of your income
| equation is irrelevant if you can get the government on your
| side.
| mrguyorama wrote:
| In the US, you don't get the government on your side
| without money and connections.
| danans wrote:
| > 3. A willingness or unwillingness to pillage the commons
|
| This is an important point. As we've pushed the limits of our
| natural resources, and woken up to the externalized costs of
| some of our ways of creating value (i.e. respiratory disease
| from fossil fuel based energy), this is increasingly going to
| require us to re-evaluate how we define 'value' added to the
| economic stream.
|
| > But when a dealership has negotiated exclusive rights over
| a region, and the salesmen take a non-negotiable commission
| of sales, does the salesman who connects the farmer to the
| combine he knows he needs deserve thousands of dollars for
| closing that sale, just because he's situated himself between
| the farmer and the manufacturer?
|
| I'm not arguing for any value added by middle-men in your
| example, but sales people provide a service that many of us
| "maker" types don't want to deal with, which is to engage
| "socially" with potential customers. Selling and buying an
| expensive product or service is often a social act. That
| social act has a value in some spaces.
| zen21 wrote:
| > 1. The value* you add to the economic 'stream' flowing
| around you
|
| *Real or imagined value.
| 22SAS wrote:
| I work in the industry at a market-maker. Jane Street is a lot
| more than just these two people. Prop trading firms and some
| quantitative hedge funds are a lot different than traditional
| hedge funds. Jane Street is mainly an ETF market maker, and are
| very good in that. They make their money because some of their
| core strategies work very well.
|
| Also, JS has low attrition and traders there mostly stay long-
| term since it's a very trader-first place than some other
| places like HRT, Jump. Both SBF and Ellison had short tenures
| at JS.
| skippyboxedhero wrote:
| SBF tried to throw Ellison under the bus in his latest tweet
| storm saying that he was shutting the fund down and that her
| tweets (some of which appear to have been either straight lies
| or attempts to manipulate the market) weren't approved by him.
|
| I would suspect that both of them get into legal trouble.
|
| Btw, I would say generally: quant investing isn't a scam, Jane
| Street make most of their money from ETF AP...that isn't
| complex, most of the high capacity strategies are quite simple
| (index replication being one, stat arb being another). The more
| complex HFT strategies tend to be (at their root) about
| detecting when someone is moving the market: for example, XYZ
| fund gets new money from investors, they deploy that into
| stocks, and HFT is about detecting that and calculating whether
| that is going to move the market (and XYZ fund now deploys
| various execution algos to stop HFT funds detecting that they
| have a huge order that will move the market).
|
| There is nothing wrong with this work and, contrary to what
| people think, it is valuable. If you look at what it cost to
| invest capital even ten years ago, it was expensive. As in:
| $10-20 for a single trade. That has gone down to pennies, and
| created trillions of value. Saying they are all scammers
| because one guy is a scammer is not really a valid criticism.
| matt_s wrote:
| Payment for Order Flow was invented by Bernie Madoff. I believe
| many of the technical and complex Wall St. "products" like that
| are probably scams if it were laid out in laymans terms. Not
| products that retail/brokerage account holders use like buying
| a stock, ETF's or those "20XX Retirement Fund" - I'm talking
| about the obtuse derivatives and other "products" that Wall
| Street invents for themselves.
|
| Edit to add: PFOF is the mechanism that Robinhood (and others)
| make money on - back of house Wall St. pays Robinhood for the
| order flow.
| Projectiboga wrote:
| Hedge fund success comes from better tax treatment to very
| delayed tac for the 'carry over' part. And they get better
| trading and much higher margin. Yes skill and good ideas can
| drive better profitz with lower tax. Scams go easier with lower
| tax too.
| paganel wrote:
| > Alameda's CEO is Caroline Ellison
|
| Just search for that Ellison young lady online. She's partly
| responsible for fraud that saw $10 billion of other people's
| money go into the ether. How come that kid (she looks to be
| under 30 years of age) was put in charge of a multi-billion
| dollar company is way, way beyond me.
| chasd00 wrote:
| I take it her last name isn't _the_ Ellison right? If so,
| that could be a hint.
| selimthegrim wrote:
| Megan Ellison produces movies
| jeffreyrogers wrote:
| Jane Street isn't a hedge fund so I'm not sure why you're
| lumping in criticism of hedge funds with criticism of Jane
| Street.
|
| I'm sure some hedge funds have been scams, and probably a
| decent percentage are frauds in the sense that they have no
| alpha even before fees (this isn't a crime though). There's not
| much evidence that the fund you're referring to is a fraud.
| There are published strategies now that if implemented in the
| 90s and early 2000s would've earned returns of >50% after
| transaction costs so their results seem attainable though
| obviously exceptional.
| danans wrote:
| > The simple answer seems, because if you believe it to be
| real, you can be this specific kind of Harvard + New York + "X"
| kid - and seriously, they are all cut from the same jib,
| superficially and inside their character, it tarnishes the
| institution - and you can do this scam and pocket your change
| and eat dim sum with 20 people on the weekends and have a
| skinny girlfriend and buy a condo. You can do something pretty
| meaningless with your life in exchange for the burn out.
|
| > This scam life lets 20 year olds not hear from their horrible
| parents that burned them out and gave them no meaning.
| Eventually they turn 30 and hope that a decade went by without
| a crash, and then life decides for them to sell before the
| ponzi collapses. Like you have a baby with your skinny
| girlfriend and you buy the condo and great, you sell, and it
| happens to be well timed!
|
| This is great screenplay material, like a "Millenial Fight-Club
| on Wall-Street". You should keep writing!
| dang wrote:
| All: please don't fulminate*. Perhaps you don't owe embattled
| billionaires better, but you owe this community better if you're
| participating in it.
|
| HN is a site for _curious_ conversation, so please wait to feel
| some curiosity before you comment.
|
| * https://news.ycombinator.com/newsguidelines.html
| tr33house wrote:
| thanks dang! Love this
| iudqnolq wrote:
| I think this merits your tradition of moderating less if YC's
| interests are implicated.
| dang wrote:
| Do you mean because there's some connection between FTX and
| YC? I certainly don't know of any.
|
| Moreover, even if there were, (a) the OP has been on HN's
| front page for hours and is currently at #4, (b) this story
| has been heavily discussed on HN, with several major threads
| in the last few days alone, and (c) asking people not to
| fulminate doesn't mean they can't make substantive critical
| points--if anything it helps them do so.
| iudqnolq wrote:
| The connection would be that popular posts in the
| discussion are criticizing Silicon Valley investor culture.
|
| > Moreover, even if there were ...
|
| Makes sense. You have a much better view of that than me.
| _jal wrote:
| Really only criticizing a particular corner of SV
| investor culture.
|
| The old school, Sand Hill-style tradition of greed,
| pettiness, backbiting and double-crosses continues
| unchanged.
| rootusrootus wrote:
| > fulminate
|
| Hearby nominated as word of the day. Excellent.
| Waterluvian wrote:
| Diablo 2 taught me this. Along with my other favourite word:
| Gargantuan.
| JadeNB wrote:
| Since we're talking language, I hope you won't mind my
| mentioning it's 'hereby'--etymologically literally
| 'here'+'by'; nothing to do with hearing.
| rootusrootus wrote:
| You are absolutely correct. I missed that on my proofread.
| Kind of lame since it is such a short post.
|
| The older I get, the more I find myself making spelling
| mistakes based on word pronunciation. Sometimes I use a
| totally different word than what I was thinking, which
| makes absolutely no sense unless you read it aloud. Then
| you realize what happened. Hopefully it is not early onset
| dementia. Though it would not be -that- early.
| 7e wrote:
| Sorry, no. If I can't protest here, where can I protest? Is
| this supposed to be a safe space for billionaires? It's my
| community, too. Don't censor me in the name of curiosities.
| This isn't Iran.
| dang wrote:
| This is one of those times where it's helpful to know what
| you're optimizing for. On HN we have the luxury of a single
| principle that we're optimizing for: intellectual curiosity.
| (see https://news.ycombinator.com/newsguidelines.html plus
| lots of past explanations: https://hn.algolia.com/?dateRange=
| all&page=0&prefix=true&sor...)
|
| This makes it easier to answer questions that would otherwise
| feel like hard tradeoffs. In this case: should people be
| shouting angrily in a protesty way in HN threads? No--but not
| because protest is bad or unimportant. It's just incompatible
| with intellectual curiosity, and since we're optimizing for
| the latter, it has to win.
|
| When people are protesting or doing battle, they tend to
| either repeat their most effective phrases (slogans, etc.) or
| to spontaneously vent their strong emotions (name-calling,
| etc.). But repetition and name-calling are clearly bad for
| curiosity. I believe they're even different neurological
| states: high indignation comes with a level of arousal that
| rules out the relaxed playfulness that curious conversation
| depends on.
|
| I hope it's clear that this isn't a judgment about protest or
| indignation in general--those are as human as anything else
| and when they're called for they're called for. It's just
| relative to the particular mandate of this particular site.
| We're trying to play one game and not another.
|
| Is that censorship? Well, that word has become so stretchy
| that you can apply it however you feel. But I'd say no, for
| the same reason that chess isn't crokinole. It isn't
| censorship to say you don't get to whack your opponent's
| bishop.
| fantasyman1 wrote:
| throw10920 wrote:
| You've clearly and concisely stated what I've been
| struggling to verbalize for several years now: that heated
| emotional flamewars aren't discouraged/forbidden on HN
| because emotion is bad (which is a strawman often brought
| up), but because _HN is not the place for that_ , because
| we optimize for intellectual curiosity.
|
| Just like programming languages - HN is neither the only
| forum in existence, nor does it need to serve the needs of
| every human in existence.
| dang wrote:
| (It was more concise before I finished editing)
| Animats wrote:
| Trading halt announcement at FTX.US.[1] Announcement says
| withdrawals still up. But Twitter messages indicate withdrawals
| are not working.
|
| FTX Japan shut down by order of Japan Financial Services
| Agency.[2]
|
| FTX.intl processing some withdrawals, according to blockchain.[3]
| A few lucky people got to exit.
|
| Way too much happening to mention here. Just use Google to search
| "FTX" and limit search to 1 day. Margin calls all over crypto
| land. JP Morgan says expect 50% drop across the board in crypto.
| Around 10 AM PST, somebody just pulled a billion dollars out of
| Tether. Word of the day: "deleveraging".
|
| [1] https://ftx.us/home
|
| [2] https://www.msn.com/en-us/money/companies/japan-cracks-
| down-...
|
| [3] https://www.msn.com/en-us/money/companies/crypto-exchange-
| ft...
| capableweb wrote:
| > JP Morgan says expect 50% drop across the board in crypto.
| Around 10 AM PST, somebody just pulled a billion dollars out of
| Tether.
|
| Meanwhile, aggregate of the cryptocurrency market is up 5.38%
| over the last day, Tether recovered landing on 0.9999 USD after
| 4-5 hours of the drop hitting bottom at 0.9818 USD, which was
| nowhere near previous all-time low Tether has hit previously.
|
| In other words, everyone screams "panic!" while the world
| quietly moves on.
| fshbbdssbbgdd wrote:
| FTX let people withdraw 100% of the time until they didn't.
| ww520 wrote:
| Because CPI looks better than expected. The entire market
| goes up.
| Animats wrote:
| Tether will stay very close to 1.0 until, some day, they
| can't make a redemption. The number to watch is their "market
| cap". Note that Tether can make that go up by minting more
| Tether, but when you see it go down, that usually means
| someone cashed out.
|
| Stablecoins have only two stable points: 1 and 0.
| ricardou wrote:
| SBF tweeted[1] not too long ago that FTX.us was safe and was
| 100% liquid. I suppose that wasn't the case?
|
| [1]
| https://twitter.com/SBF_FTX/status/1590709195892195329?t=tQR...
| Animats wrote:
| Submit a withdrawal order and find out.
| ww520 wrote:
| He doesn't get it. The entire brand is tarnished. Nothing to
| salvage.
| tootie wrote:
| If FTX were a real company that Tweet would be enough to be
| put in handcuffs by the SEC.
| umeshunni wrote:
| Why doesn't that apply here?
| lotsofpulp wrote:
| SEC only enforces the law via civil means, so they do not
| do handcuffs. Handcuffs would be FBI territory.
| NovemberWhiskey wrote:
| Ehhh, that's misleading. The SEC often files enforcement
| actions directly with the DOJ and the SEC attorneys are
| often dual-hatted as SAUSAs.
| lotsofpulp wrote:
| Interesting, I did not know that!
| largepeepee wrote:
| That's assuming SEC enforce their own rules, they are
| often... Subjective and reactive.
| WoahNoun wrote:
| Because the law isn't computer code and there are always
| grey lines. From Matt Levine:
|
| >But there are also a lot of places in securities law
| where the rules are a little bit vague and you are
| operating a little bit on the cutting edge and the best
| practice is to pick up the phone and call the SEC staff
| and say "hey what do you think about this?" Sometimes
| this is fairly formalized: The SEC staff issues "no-
| action letters" (you send them a letter saying "is it
| okay if we do this," and they send back a letter saying
| "if you do that, we probably won't sue you," which is
| almost as good as them saying "yes") and "telephone
| interpretations" (you call them up and ask "is it okay if
| we do this," they say "sure seems fine" or "no that's
| bad," and then they write down the question and answer so
| other people with the same question don't have to ask it
| again). These are places where the rules are unclear, or
| they are clear but applying them as written would create
| bad results, so the solution is to ask the SEC "is it
| okay if we do this" and they just tell you.
|
| >Crypto people want rules! I don't mean that they want to
| be regulated; I mean, specifically, that they want rules.
| They want published, objectively specified, open and
| transparent rules, so that everyone is on a level playing
| field to do crypto stuff that complies with whatever the
| rules are. I don't mean that everyone in crypto wants
| that: Informal regulation favors the well-capitalized and
| the incumbent, and if you're a big crypto firm on good
| terms with the SEC (which might be an empty set) you
| might prefer informality and opacity. I just mean that,
| philosophically, crypto people should want open
| transparent rules for permissionless innovation. That is
| how the crypto system is designed to work, and they
| should want the securities laws to work the same way. And
| in fact Coinbase Global Inc., which is maybe the closest
| thing the US crypto industry has to a big regulated
| incumbent, has sent the SEC a petition asking it to make
| rules for crypto securities.
|
| >Temperamentally I do not think the SEC likes this, and I
| think that Gensler means what he says about "working
| directly with entrepreneurs," and I think that this is a
| reasoned choice. Look at how crypto often works in
| practice. People write smart contracts with immutable
| public code, and then other people hack them to steal
| their money. That could be the SEC! If you are the SEC,
| and crypto people say "please write clear transparent
| rules so we know what is and isn't allowed," you might
| hear that as "please write clear transparent rules so
| that we can game them." This would be a reasonable lesson
| for the SEC to take from (1) the history of crypto's
| "code is law" philosophy ending in hacks, (2) the history
| of crypto firms ignoring the US securities laws, and for
| that matter (3) the history of traditional finance firms
| trying to game the SEC's rules. Crypto is a wholly new
| area for US securities regulation, and if you try to
| write all the rules from scratch in one go you will get
| things wrong. And then people will ruthlessly exploit
| whatever you get wrong.
|
| https://news.bloomberglaw.com/securities-law/matt-
| levines-mo...
| blastonico wrote:
| But he said he is sorry
| rkagerer wrote:
| _FTX extended loans to Alameda using money that customers had
| deposited on the exchange for trading purposes_
|
| If that's true, Bankman-Fried should go to jail. It wasn't FTX's
| money to lend.
| colesantiago wrote:
| All these kids should be chucked in jail and seized of their
| assets. I don't care how smart they are.
| RadixDLT wrote:
| all criminals think they are smart because they figure out a
| way to scam people
| nullc wrote:
| and frequently failing to get that the reason that other
| people aren't performing the scam is that they don't want to
| rip people off and don't want to suffer the consequences--
| not because they couldn't figure out how.
| SevenNation wrote:
| > FTX Chief Executive Sam Bankman-Fried told an investor this
| week that Alameda owes FTX about $10 billion, the person said.
| FTX extended loans to Alameda using money that customers had
| deposited on the exchange for trading purposes, a decision that
| Mr. Bankman-Fried described as a poor judgment call, according to
| the person.
|
| This raises the question of who else Alameda owes. It's a sign of
| the times that $10 billion doesn't seem like a lot today, but
| it's way more than the Long Term Capital Management debacle:
|
| > LTCM was initially successful, with annualized returns (after
| fees) of around 21% in its first year, 43% in its second year and
| 41% in its third year. However, in 1998 it lost $4.6 billion in
| less than four months due to a combination of high leverage and
| exposure to the 1997 Asian financial crisis and 1998 Russian
| financial crisis.[4] The master hedge fund, Long-Term Capital
| Portfolio L.P., collapsed soon thereafter, leading to an
| agreement on September 23, 1998, among 14 financial institutions
| for a $3.65 billion recapitalization under the supervision of the
| Federal Reserve.[1] The fund was liquidated and dissolved in
| early 2000.
|
| https://en.wikipedia.org/wiki/Long-Term_Capital_Management
|
| When it comes to things like this, the connectivity of the money
| seems at least as important as the quantity.
| wbl wrote:
| LTCM was a problem because everyone lent to them since they had
| lots of government bonds to hock as collateral. So that 4.6
| billion loss due to impairment of the value of the Russian
| loans was a huge problem.
|
| By contrast no bank would have touched Alameda with a ten foot
| pole. Loan to a crypto fund?
| SevenNation wrote:
| > By contrast no bank would have touched Alameda with a ten
| foot pole.
|
| Would you believe... a pension fund is involved with FTX?
|
| https://fortune.com/2022/11/10/canadian-teachers-could-
| have-...
|
| I doubt the full extent of the connections to Alameda (or
| FTX) have been disclosed.
| Animats wrote:
| This is embezzlement. Mr. Bankman-Fried should be arrested. Now.
| bhaskara2 wrote:
| Arrested by UN? Genuinely curious
| Animats wrote:
| Richmond, CA police department. Alameda Research HQ is at
| 5327 Jacuzzi St Ste 1c, Richmond, CA 94804. Since they were
| apparently the recipient of the money, and he's apparently
| the principal beneficiary of all this, that's where to start.
| Mr. Bankman-Fried may not physically be there, but they have
| jurisdiction.
|
| Once there's an arrest warrant, getting away becomes much
| more difficult.
| dvt wrote:
| You're conflating FTX.us (which is regulated) and operates
| in the USA, and FTX global (where all this chicanery
| happened) and is located in the Bahamas.
|
| With that said, the SEC is already also investigating any
| potential links between the two entities. I don't think
| they'd be stupid enough to cross those wires, but you never
| know.
| Animats wrote:
| No, see Molly White's blog and the WSJ parent article.
| What seems to have happened is that 1) FTX.intl loaned
| money to Alameda Research in the US in exchange for some
| token, 2) Alameda Research, which is a crypto trading
| firm, speculated with that money and lost, 3) the
| collateral from Alameda to FTX turned out to have little
| value, and so 4) FTX.intl goes down. Bear in mind that
| Mr. Bankman-Fried heads all three organizations.
|
| Whether FTX.us is also involved is not yet clear. But it
| will be. The SEC and CFTC are descending, with hard
| questions.
|
| Molly White: "This suggests to me that a) they are in a
| really bad spot, and b) they want as few people sniffing
| around in their books as possible." Right. That was
| probably the real goal of a merger with Binance. In
| bankruptcy, all the dirty laundry comes out. Being
| acquired by Binance offered hope of keeping any criminal
| activity hidden. That hope is now gone.
| Emma_Goldman wrote:
| Thanks - this is the most succinct summary of the
| financial nexus leading to FTX's spiral into insolvency
| that I've seen, and squares with my own understanding.
| What we don't know is how the chain of cause and effect
| played out over a timeline. How did Alameda lose $10bn?
| How long has FTX been insolvent? Surely they have been
| staring down the end of a barrel for a good while?
| dvt wrote:
| I fully understand the purported chain of events. But,
| again: the US does not have jurisdiction over FTX. So why
| would he "get arrested" in California for embezzlement?
| He didn't break any US laws. The FTX/Alameda deal was
| likely done via SAFT[1], which is both legal and popular.
|
| [1] https://www.investopedia.com/terms/s/simple-
| agreement-future...
| cmeacham98 wrote:
| Does FTX international have any US investors? This would
| be a theft of their funds too, right?
| nemothekid wrote:
| It does, but those investors were breaking FTX ToS by
| using the site (you had to use a VPN to access it).
|
| I'm not sure if the SEC has standing for American
| investors that pretended to not be American.
| cmeacham98 wrote:
| Sorry, I mean investors in the company itself, not crypto
| traders.
| dvt wrote:
| Sequoia marked their $150M investment into FTX down to $0
| in a letter to LPs[1].
|
| [1] https://twitter.com/sequoia/status/159052271865049907
| 3/photo...
| TylerE wrote:
| If years of following crypto has taught me anything, it's
| the answer to "They couldn't possibly be that stupid,
| could they?" is _always_ yes.
| reso wrote:
| SEC often asserts jurisdiction over anything where American
| domiciled investors have suffered a large loss. That bar will
| definitely be met here.
| chollida1 wrote:
| > SEC often asserts jurisdiction over anything where
| American domiciled investors have suffered a large loss.
| That bar will definitely be met here
|
| Thankfully for Sam, US investors are banned from FTX and
| must use FTX.US which so far has not been linked to any of
| this.
|
| So its going to be very hard to show US investor harm given
| that they are all banned from using it by US law.
| colinmhayes wrote:
| The entire point of FTX is that Americans were barred from
| using it. Now Americans certainly ignored that rule by
| using vpn's, but I'm not sure that gives the sec
| jurisdiction. The Americans using the exchange were
| explicitly breaking the TOS
| willcipriano wrote:
| Is it legal to defraud people in other countries from the
| US? I can't imagine that it is.
| colinmhayes wrote:
| Well he's in the bahamas, not the US.
| criddell wrote:
| SBF says US customers are not affected by this.
|
| > This was about FTX International. FTX US, the US based
| exchange that accepts Americans, was not financially
| impacted by this shitshow.
|
| > It's 100% liquid. Every user could fully withdraw (modulo
| gas fees etc).
|
| https://twitter.com/SBF_FTX/status/1590709195892195329
| returnInfinity wrote:
| We need some lawyer to confirm if he can be arrested or even
| prosecuted in the US. Since its a business based out of
| Bahamas.
| mzs wrote:
| He, not the company, his criminal actions victimized
| Americans.
| [deleted]
| andirk wrote:
| How ironic that crypto bros (like me) want a libertarian-yet-
| democratic user-owned form of currency without government
| intrusion, and then something like FTX not being overseen by the
| government tanks all cryptos.
|
| When pretty much any company or industry gets to a certain
| valuation size, it seems that oversight is an absolute
| requirement lest things go south quickly, whether intentional or
| negligent. Government oversight isn't a guarantee of fair play,
| but it can lessen the risk.
| rdtwo wrote:
| So they stole 10 billion. It's always a good deal to invest other
| people's money into risky bets then take all the profit. If you
| lose you stick them with the losses.
|
| A lot of people should go to jail but probably won't.
| SQueeeeeL wrote:
| They only _should_ go to jail if the US had that actual
| ideology. Remember, every decision made by the state is
| political, these people not getting punished is everything
| working exactly as intended
| AustinDev wrote:
| No idea why you're being downvoted. It is a fact that he
| donated ~40M to politicians this election cycle.[1] If I had
| to guess the donations were part of a hedge to avoid
| accountability for this scam he ran.
|
| [1]https://www.opensecrets.org/elections-overview/biggest-
| donor...
| tspike wrote:
| http://archive.today/nZNmw
| [deleted]
| leet_thow wrote:
| Where does did all that money go? Is it part of a zero sum game
| and in someone else's hands now, did it evaporate, or a
| combination of the two?
| scrivna wrote:
| How do you lose $10B in a few years trading? That's truly
| impressive.
|
| "We lose money on every trade but make it up on volume"
| adrr wrote:
| I'll bet they lost 90% of that money in the last 7 months. They
| were probably doing fine during the bull market.
| ketzo wrote:
| Oversimplification, but: Alameda made a lot of money on paper,
| kept mostly in incredibly volatile assets. Over the last week,
| it turned out that those assets were worth very little.
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