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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

#161

Post by nonameiguess »

tanseydavid wrote: post #106
shaburn wrote: post #81

Earlier quoted context omitted.

Would this even be possible at any hedge fund?

Not a hedge fund but MF Global/Jon Corzine was an interesting similar incident that was not crypto-related. https://en.wikipedia.org/wiki/Jon_Corzine > Corzine was subpoenaed to appear before a House committee on December 8, 2011, to answer questions regarding 1.2 billion dollars of missing money from MF Global client accounts. He testified before the committee, "I simply do not know where the money is, or why the ac…

And for anyone who wasn't familiar with this guy and doesn't click on the link, he was a US Senator and then NJ Governor who ran this fund immediately after leaving office. He's the guy Chris Christie replaced.

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

#162

Post by chlodwig »

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.

Not exactly, because banks tell you that they will loan out your money and you might not get it back, that's why you get interest on the account. They can't go horse betting, but they can loan it out. You don't have "title" over the USD in the bank reserves.

This is like if you put $100 in Chase's security deposit box, and they opened it up, took the cash, and lent it out, and then when you come to get it, they say, woops, we lost it all. That would be just straight up theft or fraud.

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

#163

Post by ksherlock »

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.

WSJ has another article with more information on that:

https://www.wsj.com/articles/silicon-valley-poured-money-int...

"Silicon Valley Poured Money Into FTX, With Few Strings Attached"

"A marquee roster of investors from Silicon Valley and Wall Street swarmed FTX. They invested nearly $2 billion with few strings attached and no oversight on the cryptocurrency exchange’s board, promoting it as a safe bet."

Anyhow, The board of directors consisted of SBF until the summer of 2021. Then 2 "independent" directors were added, 1 was an FTX executive, the other was a lawyer in Antigua

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

#164

Post by pge »

largepeepee wrote: post #158
cbtacy wrote: post #132

Earlier quoted context omitted.

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 an…

It is dangerous to extrapolate from one case (or even a few notable cases in recent years) that venture funds have "little oversight" over portfolio companies. These are the exceptions rather than the rule.

Obviously, some boards are better than others at oversight, but the complete absence of a functioning board, as was the case at FTX, is definitely very, very unusual.

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

#165

Post by chollida1 »

reso wrote: post #105
bhaskara2 wrote: post #61

Earlier quoted context omitted.

Arrested by UN? Genuinely curious

SEC often asserts jurisdiction over anything where American domiciled investors have suffered a large loss. That bar will definitely be met here.

> SEC often asserts jurisdiction over anything where American domiciled investors have suffered a large loss. That bar will definitely be met here

Thankfully for Sam, US investors are banned from FTX and must use FTX.US which so far has not been linked to any of this.

So its going to be very hard to show US investor harm given that they are all banned from using it by US law.

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

#166

Post by 121789 »

jeffreyrogers wrote: post #126
itsdrewmiller wrote: post #56

Earlier quoted context omitted.

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 the…

There are known expired strategies that generated large profits for long periods of time. In some cases the people involved in developing the strategies have directly published things explaining what they did.

Do you have any examples? Would be interested to read sone

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

#167

Post by taliesinb »

jeffreyrogers wrote: post #126
itsdrewmiller wrote: post #56

Earlier quoted context omitted.

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 the…

There are known expired strategies that generated large profits for long periods of time. In some cases the people involved in developing the strategies have directly published things explaining what they did.

I'd be fascinated to read these published things if anyone can point to them!

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

#168

Post by largepeepee »

jcpham2 wrote: post #96
shmatt wrote: post #29

Earlier quoted context omitted.

>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…

Simple.

It is always can you trust the other party.

And that's the basis of society, government and money.

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

#170

Post by Animats »

Trading halt announcement at FTX.US.[1] Announcement says withdrawals still up. But Twitter messages indicate withdrawals are not working.

FTX Japan shut down by order of Japan Financial Services Agency.[2]

FTX.intl processing some withdrawals, according to blockchain.[3] A few lucky people got to exit.

Way too much happening to mention here. Just use Google to search "FTX" and limit search to 1 day. Margin calls all over crypto land. JP Morgan says expect 50% drop across the board in crypto. Around 10 AM PST, somebody just pulled a billion dollars out of Tether. Word of the day: "deleveraging".

[1] https://ftx.us/home

[2] https://www.msn.com/en-us/money/companies/japan-cracks-down-...

[3] https://www.msn.com/en-us/money/companies/crypto-exchange-ft...

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