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

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

#91

Post by tedunangst »

cauthon wrote: post #54
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

Dude got pranked and had somebody order chicken feet one time, has been living a life of resentment ever since.

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

#92

Post by arcticbull »

oldgradstudent wrote: post #59
vkou wrote: post #45

Earlier quoted context omitted.

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 o…

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/

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

#94

Post by tedunangst »

somuchfordonor wrote: post #46
markisus wrote: post #14

Earlier quoted context omitted.

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.

> 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…

How many houses do you think Jane Street was buying up?

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

#95

Post by cjtrowbridge »

shaburn wrote: post #81
hmahncke wrote: post #66

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.

Would this even be possible at any hedge fund?

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.

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

#96

Post by jcpham2 »

shmatt wrote: post #29
guardiangod wrote: post #15

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

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.

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

#97

Post by IanCal »

NickC25 wrote: post #85
CamelCaseName wrote: post #75

Earlier quoted context omitted.

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?

>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 o…

> 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.

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