71–80 of 746 posts
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.
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.
Quoted post unavailable.
There are quite strict rules about their capitalization and the quality of the underlying assets.
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
Earlier quoted context omitted.
>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.
>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
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?
Quoted post unavailable.
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.
This is embezzlement. Mr. Bankman-Fried should be arrested. Now.
Arrested by UN? Genuinely curious
Once there's an arrest warrant, getting away becomes much more difficult.
> 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…
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…
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.
To summarize, the WSJ article says he took $10B of $16B in customer deposits to FTX and used that to finance his hedge fund.
Earlier quoted context omitted.
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 accoun…
> 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…
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.