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The Sam Bankman-Fried empire crumbled. What happened?

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Re: The Sam Bankman-Fried empire crumbled. What happened?

#61

Post by jrmg »

dabeeeenster wrote: post #14

https://twitter.com/SBF_FTX/status/1590709172936798208 "5) The full story here is one I'm still fleshing out every detail of, but as a very high level, I fucked up twice. The first time, a poor internal labeling of bank-related accounts meant that I was substantially off on my sense of users' margin. I thought it was way lower." Amazing

At the end of the thread:

NOT ADVICE, OF ANY KIND, IN ANY WAY

I WAS NOT VERY CAREFUL WITH MY WORDS HERE, AND DO NOT MEAN ANY OF THEM IN A TECHNICAL OR LEGAL SENSE; I MAY WELL HAVE NOT DESCRIBED THINGS RIGHT though I'm trying to be transparent. I'M NOT A GOOD DEV AND PROBABLY MISDESCRIBED SOMETHING.

That’s quite the (ad-hoc) disclaimer…

Re: The Sam Bankman-Fried empire crumbled. What happened?

#62

Post by brk »

zeroclip wrote: post #53

Very informative and clearly written, kudos to Molly! The irony is that DeFi and blockchain protocols fixes this.

Blockchain may fix it, but couldn't we also argue that blockchain created these problems in the first place?

I will fully admit I have only casually followed the whole blockchain/crypto scheme, so maybe I'm wildly off on something, and would definitely appreciate informed responses.

Without blockchain, there is no "crypto", without crypto, there are no exchanges and related coins, and without those, none of this happens or exists.

How would blockchain be used to fix this?

Re: The Sam Bankman-Fried empire crumbled. What happened?

#63

Post by chlodwig »

dabeeeenster wrote: post #14

https://twitter.com/SBF_FTX/status/1590709172936798208 "5) The full story here is one I'm still fleshing out every detail of, but as a very high level, I fucked up twice. The first time, a poor internal labeling of bank-related accounts meant that I was substantially off on my sense of users' margin. I thought it was way lower." Amazing

"4) FTX International currently has a total market value of assets/collateral higher than client deposits (moves with prices!). But that's different from liquidity for delivery--as you can tell from the state of withdrawals. The liquidity varies widely, from very to very little. 5) The full story here is one I'm still fleshing out every detail of, but as a very high level, I fucked up twice. The first time, a poor internal labeling of bank-related accounts meant that I was substantially off on my sense of users' margin. I thought it was way lower. 6) My sense before: Leverage: 0x USD liquidity ready to deliver: 24x average daily withdrawals Actual: Leverage: 1.7x Liquidity: 0.8x Sunday's withdrawals. Because, of course, when it rains, it pours. We saw roughly $5b of withdrawals on Sunday--the largest by a huge margin." https://twitter.com/SBF_FTX/status/1590709172936798208

I don't understand this. In FTX International terms of service ( https://help.ftx.com/hc/article_attachments/9719619779348/FT... ) they say that users have full title to digital assets, that they are the property of the user, and shall not be loaned to FTX trading and are treated as they belong to FTX trading, and that users control the assets in the account.

FTX was never claiming to run a bank where they loan out users deposits for interest. They were claiming to be running a 100% allocated, straight up custodial vault. Therefore they should be able to simply return whatever assets customers owned on their service, even if every customer wants their asset back at the same time.

If they were actually loaning out customer's assets and running a fractional-reserve bank, that is just straight up fraud, full-stop.

Re: The Sam Bankman-Fried empire crumbled. What happened?

#64

Post by acgt23 »

treis wrote: post #46
dabeeeenster wrote: post #14

https://twitter.com/SBF_FTX/status/1590709172936798208 "5) The full story here is one I'm still fleshing out every detail of, but as a very high level, I fucked up twice. The first time, a poor internal labeling of bank-related accounts meant that I was substantially off on my sense of users' margin. I thought it was way lower." Amazing

Can someone ELI5 what margin has to do with the bank run?

It doesn’t really, none of this is adding up. But he’s explicitly lied about this stuff in the past couple days (and since deleted the tweets) so that’s probably what’s happening here

Re: The Sam Bankman-Fried empire crumbled. What happened?

#65

Post by no_wizard »

fred_is_fred wrote: post #20
aniforprez wrote: post #16

Earlier quoted context omitted.

While I could say banks are equally guilty of doing shady stuff, the truth is banking is hundreds of years old and as such, has regulations and insurance behind it. Not regulating is how we get messes like the Housing Bubble in the 2000s in the US culminating in the crash in 2011. Crypto being a completely new space has no regulation and no checks and balances which leads to messes like this with companies playing ar…

Unfortunaely the draw for many isn't that they want a libertarian dream society with no rules, but rather they think they can get rich quick. The "banks are bad" is part of the appeal also. I have a cousin who works in the food service industry (think something like managing a Chipotle) and has put all his liquid assets into crypto and still thinks they will "pay off so he can retire". As for banks - as soon as these…

My "hot take" if you will:

SEC and FDIC aren't usually, to the general public, negatively seen due to their mission. Its the fact they don't prevent criminal / unethical behaviors beforehand, and banks get away with alot before anyone intervenes.

I actually don't think the average US citizen is "anti regulation" with this. I think - and I include myself in this - that we see agencies like the SEC (more so than the FDIC) don't act fast enough or often enough, and when they do, the fines are a slap on the wrist vs the profit made by the bad behavior.

In a nutshell, they just aren't acting effectively, and thats why they get a bad wrap.

Re: The Sam Bankman-Fried empire crumbled. What happened?

#67

Post by Firmwarrior »

loeg wrote: post #50
siftrics wrote: post #6

Michael Lewis, author of The Big Short, was in the process of writing a book about the success of FTX and SBF. He personally went to the Super Bowl with them and visited them in the Bahamas multiple times. Someone on Twitter said, "he just got his perfect ending." It's gonna be a fantastic book.

I don't understand why anyone takes Lewis seriously after Flash Boys. He seems to just make things up from thin air.

That book was entertaining, but so frustrating to read

These big corporate traders are being paid millions to be the best at what they do (managing stock portfolios) and then it turns out they're actually awful at it and a bunch of genius math kids are running circles around them in the dark. And somehow I'm supposed to feel bad for the lazy, clueless, suit-wearing, trash-talking traders?

Re: The Sam Bankman-Fried empire crumbled. What happened?

#68

Post by somuchfordonor »

eftychis wrote: post #47
lkrubner wrote: post #30

Earlier quoted context omitted.

"US culminating in the crash in 2011" The official date given by NBER says that the recession began in December of 2007, which put the economy into a fragile state, which was intelligently managed for another 9 months, before circumstances went beyond anything that could be managed. Then the financial meltdown began in September of 2008.

And to amend a bit, to give the whole perspective: And one of the triggers started when around 2005 the FED started raising interest rates. Which it had lowered more dramatically due to 9/11. https://www.bankrate.com/banking/federal-reserve/history-of-... Let that sync in, is my 2c. (Extra:The FED interest rates takes 2 years to kick in to Adjustable Rate Mortgages which where the first to fall.)

> And one of the triggers started when around 2005 the FED started raising interest rates

The fed did not cause the crypto crash. It didn't force people to gamble on cryptocurrencies. It didn't force them to not sell, at the top of the naked ponzi schemes they participated in.

Re: The Sam Bankman-Fried empire crumbled. What happened?

#69

Post by codegeek »

rr888 wrote: post #29

To me its extraordinary that its just a few years old. Started in 2019, valued at $32 billion just a few years later. For an exchange?

Hence the Crypto bubble. Nothing should be valued at 32 billion in less than 3 years when all it produces is speculative stuff. Nothing screams more "get rich quick" than these things.
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