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FTX tapped into customer accounts to fund risky bets, setting up its downfall

wsj.com

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Re: FTX tapped into customer accounts to fund risky bets, setting up its downfall

#51

Post by steveBK123 »

zenapollo wrote: post #33

Quoted post unavailable.

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.

Re: FTX tapped into customer accounts to fund risky bets, setting up its downfall

#52

Post by latchkey »

oldgradstudent wrote: post #44
zenapollo wrote: post #33

Quoted post unavailable.

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.

Seems so odd to delete a tweet at this point. It isn't like it disappears.

Re: FTX tapped into customer accounts to fund risky bets, setting up its downfall

#53

Post by deck4rd »

somuchfordonor wrote: post #10

> 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 H…

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

Re: FTX tapped into customer accounts to fund risky bets, setting up its downfall

#54

Post by cauthon »

somuchfordonor wrote: post #10

> 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 H…

I largely agree, but what does dim sum have to do with any of this

Re: FTX tapped into customer accounts to fund risky bets, setting up its downfall

#56

Post by itsdrewmiller »

amluto wrote: post #32
somuchfordonor wrote: post #10

> 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 H…

> 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 h…

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.

Re: FTX tapped into customer accounts to fund risky bets, setting up its downfall

#57

Post by solveit »

somuchfordonor wrote: post #37
amluto wrote: post #32

Earlier quoted context omitted.

> 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 h…

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.

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.

Re: FTX tapped into customer accounts to fund risky bets, setting up its downfall

#59

Post by oldgradstudent »

vkou wrote: post #45
zenapollo wrote: post #33

Quoted post unavailable.

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…

> 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).

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