[HN Gopher] FTX's collapse strands scientists ___________________________________________________________________ FTX's collapse strands scientists Author : pseudolus Score : 65 points Date : 2022-11-16 20:06 UTC (2 hours ago) (HTM) web link (www.science.org) (TXT) w3m dump (www.science.org) | criddell wrote: | > FTX's collapse was unthinkable just days earlier. | | I was shocked -- SHOCKED! -- to find out there was gambling going | on in there. | cscurmudgeon wrote: | This wasn't pure gambling. | | This was plain fraud. | | Let us not sugarcoat it by saying it was "plain" gambling. | | It was gambling BUT with stolen funds. | halfmatthalfcat wrote: | Unthinkable to the most naive and gullible people on Earth | maybe. | lob_it wrote: | I just got free crypto from a timeshare promotion on | oceanfront property in Arizona... FOMO is not my problem :| | | As an aside, this post from 2008 does point to all of the | carbon being released from the 1st meter of soil/permafrost, | which has probably since melted. | | https://phydeauxpseaks.blogspot.com/2008/08/you-know-that- | ol... | qohen wrote: | _oceanfront property in Arizona_ | | Casablanca, it turns out, has a relevant quote for this | too[0]: | | _Captain Renault: What in heaven 's name brought you to | Casablanca? | | Rick: My health. I came to Casablanca for the waters. | | Captain Renault: The waters? What waters? We're in the | desert. | | Rick: I was misinformed._ | | [0] https://www.imdb.com/title/tt0034583/quotes/qt0429951 | lob_it wrote: | The innovation has been so good, I got to skip most of | the fiction entertainment outlets. | | I would suck at pop culture trivia :) | dragontamer wrote: | The line above was a movie-quote, I believe Cassablanca? | Where the inspector/regulator comes out of the Casino saying | that he's shocked to hear of gambling in the facility, | flanked by two call girls. | | ------ | | EDIT: That being said, the level of shock here is warranted. | | > "It's definitely a mess," says Josh Morrison, who heads | 1Day Sooner, a pandemic preparedness research and advocacy | organization that received $375,000 from the Future Fund and | the FTX Foundation. During the pandemic, 1DaySooner became | known for advocating so-called human challenge trials, which | deliberately infected volunteers with SARS-CoV-2 to test | vaccines. | | So FTX allegedly donates a lot of money to various causes. | Those scientists begin the trials (expecting the money to pay | them back eventually), but... FTX goes bankrupt before it | hands those scientists money. | | That's... bad. I'm not in the scientific field, but it seems | like these groups had reasonable expectation that some money | was coming for them... and that money wasn't related to | cryptocoins or whatever. | criddell wrote: | You're right about Casablanca: | | https://www.youtube.com/watch?v=SjbPi00k_ME | qohen wrote: | _The line above was a movie-quote, I believe Cassablanca? | Where the inspector /regulator comes out of the Casino | saying that he's shocked to hear of gambling in the | facility, flanked by two call girls._ | | Quick FYI: there are no call-girls and the place is not | (nominally) a casino, it's Rick's Cafe Americain, which | Renault calls a cafe and Rick famously calls a gin joint -- | in any event, a popular nightspot. | | Here's the text of the relevant scene, from IMDB[0]: | | _Rick: How can you close me up? On what grounds? | | Captain Renault: I'm shocked! Shocked to find that gambling | is going on in here. | | [a croupier hands Renault a pile of money] | | Croupier: Your winnings, sir. | | Captain Renault: [sotto voce] Oh, thank you very much. | | [aloud] | | Captain Renault: Everybody out at once._ | | In Renault's defense, right before all this, he was told by | a superior to close the place down and, when a reluctant | Renault says he has no excuse to do so, he's told, "Find | one." Hence his feigning being "shocked" at the gambling. | | (If you have 32 seconds, you can watch this classic scene | here: [1]). | | [0] https://www.imdb.com/title/tt0034583/quotes/qt0429972 | | [1] https://www.youtube.com/watch?v=vxnpY0owPkA | qohen wrote: | BTW, since I just stumbled across this, there's a page | showing the sets and a reconstructed floor-plan for | Rick's Cafe Americain, if anyone's interested: | | http://www.paper-dragon.com/fistsand45s/ricks-cafe- | americain... | | (Amusingly, in the comments, someone says they're | building it in Minecraft). | avgDev wrote: | Crypto exchange and collapse, one cannot name a better duo. | leppr wrote: | This whole episode should hopefully bring donation recipients to | do more due diligence on where the money comes from, before | spending it. | | The US president, those researchers, and many, many startups are | holding what is pretty directly the money of FTX's unsuspecting | users. | | The recovery will be a long and painful process. | bibanez wrote: | I don't really understand the logic here. If you've received a | donation, you can't be forced to return any money, specially if | you didn't know it had dubious origins | [deleted] | leppr wrote: | If the money is stolen (as is the case in the articles' | story), then yes, you can be legally compelled to return the | money to its original owner. | YetAnotherNick wrote: | Source will be appreciated. What if the money has already | been spent? Do they track it all the way through or just | one level? | hobom wrote: | The just-world fallacy is strongly in play with many comments | here. Because those foundations and charities are massively | affected by this scandal, there MUST be something they did wrong, | right? Surely they should have vetted their donors better? And | when making these arguments, we totally forget that people | specialising in vetting people, like investment funds, | journalists and so on, completely fell for the guy. If you want | charities to implement a standard that would have prevented them | from taking money from SBF, congratulations, you now have a | process that prevents them from taking money from basically any | billionaire. | skycatcher wrote: | The comments saying the lesson here is that recipients of | donations like non-profits and foundations should be vetting | their donors better seem unreasonable to me. | | If FTX investors, customers, and watchers of the crypto space did | not catch what FTX and SBF were doing until the shit hit the fan, | what kind of due diligence can we reasonably expect of these | recipients that would've alerted them to something being wrong | here? | | And consider that the number of donors for most institutions | would be much larger than the number of companies FTX investors | would've had to keep an eye on. | SilverBirch wrote: | I think the underlying message here is regulation failed. You | can dance around and shout "crypto" and people will apparently | just stop doing due diligence. All these companies - the VCs, | the advertisers etc. all relied on "This isn't an actual | literal ponzi though right?" and the US regulators were like | "LOL IDK". It's kind of the regulators job not to be trusting | in VCs and reputation and really _do the work_. | TacticalCoder wrote: | > I think the underlying message here is regulation failed. | You can dance around and shout "crypto" and people will | apparently just stop doing due diligence | | Regulation failed? The media were complicit into this. | Presenting SBF as the second coming of the Christ because | he'd give it all to charities / non-profits / help advance | science / etc. Regulator people fell for this. | | I'm not so sure it's "accredited investors" we need as much | as "accredited journalists". | dragontamer wrote: | What? | | FTX isn't a US security that was traded on any platform. VCs | (and accredited investors) are people rich enough, that the | USA / regulators have deemed it "fine" if they lose a lot of | money. | | Accredited investors are supposed to have over $1M bucks not | because it proves that they're smart. Its so that when they | inevitably get caught in a Ponzi scheme or whatever, USA | doesn't have to rush in and save their money. | | Welcome to USA. If you're an accredited investor and/or | Venture Capitalist, the training wheels are entirely off. | You're on your own. | | -------- | | There's no FDIC insurance or SEC governing FTX's deposits. | Its wholly unregulated, and in the Bahamas to boot. | SilverBirch wrote: | FTX took deposits from unaccredited US investors with | specific guarantees about what would happen with the money | and they filed for bankruptcy in Delaware. | | I don't care about the VCs getting their money, I'm happy | they go to zero etc- I'm saying the opposite, the VCs gave | a false sense of security to regular folk that FTX was | legit, but in reality FTX was telling depositors that they | were doing all these things to protect them that they | weren't. | | At minimum, the regulators should say "Hey, you can't tell | people their money is safe if it isn't" (siloed customer | accounts etc) at best the regulators should say "Hey, you | _have_ to make sure regular consumers are safe if you plan | to take money from US consumers ". | lmm wrote: | The US legal system needs to start going after VCs that | invest in criminal companies. They may not be breaking the | law themselves, but they profit off lawbreaking, and | they're the ones with the deep pockets. (Isn't this the | whole point of RICO?) | AlexandrB wrote: | Isn't half the point of "crypto" to have an unregulated | financial market? FTX operated out of the Bahamas for a | reason. How can regulators fail to regulate a company that's | not even based in their jurisdiction. You might have a point | with FTX.US though. | SilverBirch wrote: | They filed for bankruptcy in Delaware, and FTX US is bust. | So I think it's more than just the weird bahamanian guys | went crazy. | bombcar wrote: | Perhaps not more vetting, and more not depending on continual | donation flow, even if such is under contract or promise. | friendzis wrote: | I'll just leave this here: | https://twitter.com/Bitfinexed/status/1592560145384767490 | leppr wrote: | There are different levels of due diligence expected depending | on the areas and the amounts involved. They were the Democratic | party's second biggest donor [1]. Not a small contributor. | | Anyone in their right mind would assume presidential candidates | to vet their biggest donors. | | [1]: https://fortune.com/2022/11/10/sam-bankman-fried-ftx-joe- | bid... | halpmeh wrote: | Anyone in their right might would also assume that depositors | would vet the financial institutions holding their (billions | of dollars of) capital, but alas here we are. | | Also, I think you underestimate the amount of effort it takes | to uncover something like this. There was a YouTube video | posted to HN a few days ago where Marc Cohodes went over why | he believed FTX was a scam a few weeks prior to the news | breaking. It provided an interesting glimpse into what's | required to do DD on this type of operation. It starts with | good intuition, which most people don't have, and then | evolves into things like hiring private investigators, or | running comprehensive background checks on the officers of | the company, or calling people with intimate knowledge of the | inner workings, or finding ex-employees, etc. etc. etc. | | Now you could say, well a presidential candidate should do | all that stuff. And in an ideal world, they would. But Marc | Cohodes does this as a full time job and likely makes large | sums of money from his vocation. It's unrealistic to expect | most people, presidential candidate or otherwise, to be | capable of performing that kind of DD. | HDThoreaun wrote: | The dem party probably figured Sequoia did a better vetting | job than they'd be able to, and they probably weren't wrong. | mbaum9 wrote: | mikeyouse wrote: | People really need to understand what a PAC is -- | "Presidential candidates" can only accept a few thousand | dollars from an individual. Large donors don't give to | candidates, they give to PACs. | | Of SBF's $40ish million in donations, over $25M went to a | specific PAC "Protect our Future PAC"[1]. Of that PAC's | spending - over $10M went to support a single cypto-friendly | Oregon house candidate in his _primary_ where he lost to a | different Democrat. In fact nearly all of SBF 's support went | to primary campaigns so when people say "he spent $40M | supporting Democrats" the vast majority of that funding was | in races _against other Democrats_. | | The other thing to know about PACs, is that by law, they are | not affiliated with the campaign. The campaigns can't vet the | donations to PACs because _they aren 't donations to the | candidate_ and it would be illegal for them to coordinate | with the PAC. This is the 3-card monte allowed by our insane | campaign finance regime, but within those bounds, SBFs | donations weren't to actual candidates who would vet these | donors. The PAC has its own compliance, but there basically | are no restrictions on donors as long as they're from the US. | That's how random Russian billionaires donated to Trump's | PACs in 2016, and the only reason that was frowned upon is | because the funds came from a foreign national.[2] | | [1] - https://www.opensecrets.org/outside- | spending/detail?cmte=C00... | | [2] - https://www.justice.gov/usao-sdny/pr/lev-parnas-and- | igor-fru... | zone411 wrote: | Very unreasonable. Large firms like Sequoia, Blackrock, | Softbank invested and sports teams like Miami Heat or Mercedes | F1 actually advertised them. | dragontamer wrote: | Venture Capitalists are free to invest in whatever they want. | That doesn't mean its a good buy, it means that those guys | are willing to put down some risky bets (probably because | they have hundreds-of-billions or even trillions in assets, | and can weather any losses). | | > sports teams like Miami Heat or Mercedes F1 actually | advertised them | | How does that prove any kind of reliability at all? There's | no FDIC insurance on any of the deposits. There's no actual | regulation or transparency. Its not like VMFXX or SWVXX where | there are requirements to publish their assets on a regular | basis, or describe asset flows / liquidity requirements. | | -------- | | Still though, the scientists in this discussion were _NOT_ | investors. The economy is designed for _investors_ to win | (and lose) money as per appropriate risks. Its fine for | investors to lose money here, that's the entire point of | capitalism. (The investors get the money if they bet right, | but they lose their money if they lose). | | These scientists who allegedly got funds... its not their job | to be trying to figure out which groups to trust or not | trust. Maybe scientific donations / 401c type deals need to | be more carefully watched in the future? | zone411 wrote: | > How does that prove any kind of reliability at all? | There's no FDIC insurance on any of the deposits. There's | no actual regulation or transparency. Its not like VMFXX or | SWVXX where there are requirements to publish their assets | on a regular basis, or describe asset flows / liquidity | requirements. | | The point is that these companies with way more financial | experience, size, and more reasons to investigate failed to | find any warning signs, so these non-profits had very | little chance, even if they didn't go with the "don't look | a gift horse in the mouth" approach. FTX might have let | some auditor from an investor putting in $100M take a look | at their books but they'd almost surely tell a non-profit | with no leverage that's receiving the money to get lost if | they asked. | dragontamer wrote: | > The point is that these companies with way more | financial experience, size, more reasons to investigate | failed to find any warning signs | | I don't think you get the point of Softbank or even | Blackrock. | | When you have $10 Trillion in assets like Blackrock, you | _DON'T_ sweat a $300 million investment or even a $2 | billion investment here or there. It literally doesn't | matter. Its not even a rounding error to you, your | company, or your investors. | | Its barely worth Blackrock's time to seriously look at | things like this. That's why we get $Billion London Whale | mistakes or whatever, because they have so much money to | manage the only reasonable way to do it is to hand | billions of (management) dollars to executives and give | those executives broad leeway to do whatever they want. | TacticalCoder wrote: | > If FTX investors, customers, and watchers of the crypto space | did not catch what FTX and SBF were doing until the shit hit | the fan, what kind of due diligence can we reasonably expect of | these recipients that would've alerted them to something being | wrong here? | | About two minutes of googling would have come up with the fact | that one of their top executive was linked to the biggest | online poker scandal. | | Now, granted, that information required two minutes and not 30 | seconds to be found because the first few pages of results | would be NY Times pieces and their ilk pumping the FTX scam | "because altruistic democrats donor". | | A lot of people have been, at the very least, turning a very | blind eye here. | | Now is not the time to say it's "unreasonable" to do two | minutes of googling. | RcouF1uZ4gsC wrote: | Maybe it's a good lesson for non-profits and foundations to vet | their major donors better. Before that Epstein was a major donor | and the cachet of having donated to so many high profile | charities likely allowed him to be a predator longer. | | In the case with FTX, it was likely committing fraud, and the | money the foundations received was the equivalent of stolen | goods. | mrcode007 wrote: | I tend to be skeptical of grants that don't fork cash up front. A | lot of "pledged" or "committed" grants, giveaways are often tax | dodges. I may be wrong, I'm not a tax expert, but it seems that | tax deductions on pledges are accounted for immediately while the | cash flow out is actually delayed. If my understanding is | correct, it would make sense to pledge as much as one can in an | "up" year. | wanderingmind wrote: | "We don't think it is right that anyone should lose their jobs | over a financial calamity totally unrelated to the excellent work | they are doing," | | Yet we are totally OK with exploiting young people aspirations by | making them slaves and destroying their careers and mental | health. The last thing we need to worry about is the academic | cabal crying wolf. | Tyrek wrote: | I suspect there's a simpler takeaway than what most comments are | suggesting: Don't spend substantial amounts of money (based on | nominally promised funding) before the checks have cleared. ___________________________________________________________________ (page generated 2022-11-16 23:00 UTC)