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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

#151

Post by chlodwig »

From the article: "FTX Chief Executive Sam Bankman-Fried said in investor meetings this week that Alameda owes FTX about $10 billion, people familiar with the matter said. FTX extended loans to Alameda using money that customers had deposited on the exchange for trading purposes, a decision that Mr. Bankman-Fried described as a poor judgment call, one of the people said."

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

So if they did indeed loan out customer deposits, that is just straight up criminal fraud, open and shut. This isn't like some DeFi scheme where they are working around some legal loophole or in the fine print tell you that they will probably lose your money. This is just straight up illegal under the plain vanilla theft and fraud laws of any country. This isn't even a bank run (banks at least tell you they are loaning your deposits out) -- it's a run on a U-Haul self-storage where you find out that they actually sold all the furniture in your storage unit to a pawn shop.

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

#152

Post by lordnacho »

colinmhayes wrote: post #123
oldgradstudent wrote: post #44

Earlier quoted context omitted.

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.

He wasn’t, he was just loaning them to his other company.

Loaning things out == investing

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

#153

Post by rchaud »

You know those corner stores that act as Western Union/Moneygram agents? They have to follow stronger regulations (KYC/AML/BSA) and are audited on a quarterly basis by WU/MG to ensure there is no co-mingling of funds.

A bodega conducts better financial oversight than these masters of the cryptoverse.

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

#154

Post by steveBK123 »

arcticbull wrote: post #68
steveBK123 wrote: post #50

Earlier quoted context omitted.

Even in 2008 that is not what happened. Tell me which retail brokerages lost their customers assets because they gambled them away? There is no glossing over the fact that all these crypto explosions are a result of largely re-implementing a pre-Fed, pre-FDIC, pre Great Depression style banking system with all its long-patched defects.

... except in a way that fundamentally prevents the patches and even lauds the defects.

Yes, exactly.. this is the end state for crypto rather than a step towards being a normal market that normal people can use

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

#155

Post by dang »

tinktank wrote: post #149

Scam after scam after scam. Welcome to crypto, folks.

Maybe so, but please don't post unsubstantive comments to Hacker News. We're trying for a different sort of forum.

https://news.ycombinator.com/newsguidelines.html

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

#156

Post by newfonewhodis »

chlodwig wrote: post #151

From the article: "FTX Chief Executive Sam Bankman-Fried said in investor meetings this week that Alameda owes FTX about $10 billion, people familiar with the matter said. FTX extended loans to Alameda using money that customers had deposited on the exchange for trading purposes, a decision that Mr. Bankman-Fried described as a poor judgment call, one of the people said." In the FTX International terms of service ( h…

I put $100 in my Chase account. Chase goes horse betting with my money and loses it all. My account shows $0.

That's basically what happened here.

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

#157

Post by [deleted] »

sillysaurusx wrote: post #127
laluser wrote: post #13

The Twitter thread from SBF is even better where he admits he messed up. And still trying to throw jabs at Binance here and there like it’s their fault they’re here. Unbelievable.

In case anyone wants a link to the thread, here it is: https://twitter.com/SBF_FTX/status/1590709166515310593?s=20&... It was actually in an adjacent paywalled article ( https://www.wsj.com/livecoverage/stock-market-news-today-11-... ). If anyone knows a way to bypass that paywall, I'd be curious to read the rest.

[deleted]

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

#158

Post by largepeepee »

cbtacy wrote: post #132
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.

They had no real board. They had no real governance. What's amazing is that large venture funds would put this much money into this kind of company without any board seats.

Really shows how little oversight any of these venture funds have.

They come across more like frat bros with huge pockets casually giving away billions under a pinky promise of eventual returns.

At this point, they are doing the same level of DD as those degens in WSB.

But I guess you don't have much leverage when the fed is printing trillions for years and we end up with dozens of Zuckerberg types, too much power and no oversight to hold them accountable.

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

#159

Post by [deleted] »

newfonewhodis wrote: post #156
chlodwig wrote: post #151

From the article: "FTX Chief Executive Sam Bankman-Fried said in investor meetings this week that Alameda owes FTX about $10 billion, people familiar with the matter said. FTX extended loans to Alameda using money that customers had deposited on the exchange for trading purposes, a decision that Mr. Bankman-Fried described as a poor judgment call, one of the people said." In the FTX International terms of service ( h…

I put $100 in my Chase account. Chase goes horse betting with my money and loses it all. My account shows $0. That's basically what happened here.

[deleted]

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

#160

Post by jefftk »

newfonewhodis wrote: post #156
chlodwig wrote: post #151

From the article: "FTX Chief Executive Sam Bankman-Fried said in investor meetings this week that Alameda owes FTX about $10 billion, people familiar with the matter said. FTX extended loans to Alameda using money that customers had deposited on the exchange for trading purposes, a decision that Mr. Bankman-Fried described as a poor judgment call, one of the people said." In the FTX International terms of service ( h…

I put $100 in my Chase account. Chase goes horse betting with my money and loses it all. My account shows $0. That's basically what happened here.

Well, your account still shows $100, but Chase has paused withdrawals while they "sort out liquidity issues" so it's effectively $0
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