Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

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

wsj.com

Post reply on HN
Print view View original

201–210 of 746 posts

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

#201

Post by paganel »

lavezzi wrote: post #131
FormerBandmate wrote: post #124

Earlier quoted context omitted.

Sequoia did a nauseating, hilarious puff piece on him a couple months ago and this guy sounds like Adam Neumann’s second coming. https://www.sequoiacap.com/article/sam-bankman-fried-spotlig...

Will need the Wayback Machine as they are trying to damage control: https://web.archive.org/web/20221027180943/https://www.sequo...

> SBF himself has amassed more wealth in a shorter period of time than anyone else, ever. The 2022 Forbes Billionaires List pegs SBF’s net worth at $24 billion. He’s now 30 years old. But we get ahead of ourselves.

This is just gold.

Hopefully this all circus going down will also bring down all the phonies from VC companies like Sequoia Capital, guys (they're mostly guys, of course) who still live off the few successful bets they made in the early 2000s. We need fraudster-enablers like Sequoia to actually go bust if we really want for our industry to find its lustre again and for real innovation to come back.

Later edit: I've mostly gone through all of it, and I have to say that that that archived article is pure genius, it has copy-paste-ble gem after copy-paste-ble gem. It would most probably deserve its own, separate submission, on HN.

In a saner investment environment that sort of article, and the huge fraud the people behind it helped perpetuate by giving this SBF guy money (one of the Skype founders, really? the rationalist community, really?) should help bring some people down, and in so doing leaving our industry, well, cleaner.

But I'm pretty sure that nothing like that will happen, the small fries will be too scared to call these people out as fraudster-enablers, thinking that they might need money from them at some future point, the other sharks in the pool will behave like nothing has ever happened, hoping that the regulatory powers that be will move along, to say nothing of the politicians, after all, to quote Vox, SBF is "one of Biden’s biggest donors" [1].

To re-capitulate, one of the US president's biggest donors has just defrauded people out of $10 billion (that we know of) while some of the biggest figures/institutions in the US tech industry had stood behind him. Business as usual in the rules-based United States.

[1] https://www.vox.com/recode/2021/3/20/22335209/sam-bankman-fr...

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

#202

Post by adrr »

scrivna wrote: post #177

How do you lose $10B in a few years trading? That’s truly impressive. “We lose money on every trade but make it up on volume”

I'll bet they lost 90% of that money in the last 7 months. They were probably doing fine during the bull market.

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

#203

Post by umeshunni »

tootie wrote: post #192
ricardou wrote: post #185

Earlier quoted context omitted.

SBF tweeted[1] not too long ago that FTX.us was safe and was 100% liquid. I suppose that wasn't the case? [1] https://twitter.com/SBF_FTX/status/1590709195892195329?t=tQR...

If FTX were a real company that Tweet would be enough to be put in handcuffs by the SEC.

Why doesn't that apply here?

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

#204

Post by kwertyoowiyop »

tootie wrote: post #190
kwertyoowiyop wrote: post #182

Earlier quoted context omitted.

In the USA, bank accounts are guaranteed by the government, up to $250K.

And the FDIC can afford to do that because there are laws dictating liquidity requirements to banks and disclosure requirements to inspect and enforce those rules.

It’s almost as if our existing financial system, built upon the lessons from hundreds of years, is worthwhile! :-)

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

#205

Post by nemothekid »

radicaldreamer wrote: post #72
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.

The people who invest in venture funds need to demand better governance for portfolio companies, otherwise this will continue to happen.

Sequioa, who invested in FTX quite loudly, reported to their LPs that they only lost 150MM in their fund that had 7.5B in realized gains. Going off their letter they took 5B and turned it into 12.5B for a return of 150%[0].

After this spectacular blowup barely put a dent in their returns, why would LPs demand anything? Sequioa will just tell them "hey it's the name of the game, there are some losers who go bankrupt and winners who return the entire fund several times over".

If Sequioa took a massive markdown on FTX that would be a different story. However they came out unscathed and looks like they are managed well despite fellating SBF quite openly. What would you even demand of them given that they didn't lose much money? They probably lose even more money on companies that end up just not being successful in the first place. You can't ask them to not invest in risky business, thats the whole point of VC.

[0] Could be misinterpreting the letter, they said FTX was 3% of commited capital, 150M / 3% = 5B, and they had 7.5B of realized and unrealized gains.

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

#206

Post by cmeacham98 »

dvt wrote: post #186
Animats wrote: post #143

Earlier quoted context omitted.

No, see Molly White's blog and the WSJ parent article. What seems to have happened is that 1) FTX.intl loaned money to Alameda Research in the US in exchange for some token, 2) Alameda Research, which is a crypto trading firm, speculated with that money and lost, 3) the collateral from Alameda to FTX turned out to have little value, and so 4) FTX.intl goes down. Bear in mind that Mr. Bankman-Fried heads all three org…

I fully understand the purported chain of events. But, again: the US does not have jurisdiction over FTX. So why would he "get arrested" in California for embezzlement? He didn't break any US laws. The FTX/Alameda deal was likely done via SAFT[1], which is both legal and popular. [1] https://www.investopedia.com/terms/s/simple-agreement-future...

Does FTX international have any US investors? This would be a theft of their funds too, right?

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

#207

Post by fshbbdssbbgdd »

capableweb wrote: post #183
Animats wrote: post #170

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…

> JP Morgan says expect 50% drop across the board in crypto. Around 10 AM PST, somebody just pulled a billion dollars out of Tether. Meanwhile, aggregate of the cryptocurrency market is up 5.38% over the last day, Tether recovered landing on 0.9999 USD after 4-5 hours of the drop hitting bottom at 0.9818 USD, which was nowhere near previous all-time low Tether has hit previously. In other words, everyone screams "pan…

FTX let people withdraw 100% of the time until they didn’t.

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

#208

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

#209

Post by ketzo »

scrivna wrote: post #177

How do you lose $10B in a few years trading? That’s truly impressive. “We lose money on every trade but make it up on volume”

Oversimplification, but: Alameda made a lot of money on paper, kept mostly in incredibly volatile assets. Over the last week, it turned out that those assets were worth very little.

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

#210

Post by nostrebored »

tootie wrote: post #190
kwertyoowiyop wrote: post #182

Earlier quoted context omitted.

In the USA, bank accounts are guaranteed by the government, up to $250K.

And the FDIC can afford to do that because there are laws dictating liquidity requirements to banks and disclosure requirements to inspect and enforce those rules.

You would’ve been correct two years ago. We’re doing zero fractional reserve banking now. Hearing this should convince people that they should get their money out now, but nobody seems to care.
Post reply on HN