Where does did all that money go? Is it part of a zero sum game and in someone else's hands now, did it evaporate, or a combination of the two?
FTX tapped into customer accounts to fund risky bets, setting up its downfall
241–250 of 746 posts
Re: FTX tapped into customer accounts to fund risky bets, setting up its downfall
#242All: 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
I think this merits your tradition of moderating less if YC's interests are implicated.
Do you mean because there's some connection between FTX and YC? I certainly don't know of any.
Moreover, even if there were, (a) the OP has been on HN's front page for hours and is currently at #4, (b) this story has been heavily discussed on HN, with several major threads in the last few days alone, and (c) asking people not to fulminate doesn't mean they can't make substantive critical points—if anything it helps them do so.
Re: FTX tapped into customer accounts to fund risky bets, setting up its downfall
#243From 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…
So if the chain is supposed to enable "trustless" finance, what enabled Alameda to take anything? Seems Alameda and its clients should be screwed, but FTX's holders should be relatively easy to identify and restore. But everyone seems to say that's not the case. So what broke down here? Why isn't the ledger ledgering?
The ledger ensures that the handing over of the "thing" can happen without trust in any intermediary. You still ultimately have to trust the counterparty to deliver what they promise.
Think of it like HTTPS. Nobody can sneak anything into the request, but the counterparty you're contacting could still be a fraud.
Re: FTX tapped into customer accounts to fund risky bets, setting up its downfall
#244Earlier quoted context omitted.
I don’t know about others, but I suspect that if the FDIC ran out of money, congress would figure out a way to fund it even if it meant printing money. I am okay with this.
But liquidity is the issue here. In the event that this happens, how long would it be before you could have access to your funds?
Why do you say liquidity is the issue? It sounds like you are imagining some specific scenario here.
Re: FTX tapped into customer accounts to fund risky bets, setting up its downfall
#245Earlier quoted context omitted.
Does FTX international have any US investors? This would be a theft of their funds too, right?
It does, but those investors were breaking FTX ToS by using the site (you had to use a VPN to access it). I'm not sure if the SEC has standing for American investors that pretended to not be American.
Sorry, I mean investors in the company itself, not crypto traders.
Re: FTX tapped into customer accounts to fund risky bets, setting up its downfall
#246Earlier quoted context omitted.
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,…
In the USA, bank accounts are guaranteed by the government, up to $250K.
Per institution.
And there is a lot of consolidation.
So I would be careful.
It is really easy to be placing money into different banks, but essentially the same one.
Re: FTX tapped into customer accounts to fund risky bets, setting up its downfall
#247Remarkable 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…
The recent Sebastian Mallaby book about VC charts the growth of this "founder rules" approach.
In the age of ESG, it turns out that the "G" part is being ignored totally (because it counter to the interests of insiders) but the "E" and "S" is ever more important (because it is in the interests of insiders) despite it doing little to help improve returns (SBF was the king of "S"...might there be a correlation between saying you are more ethical than anyone and permitting yourself to steal from customers?).
Re: FTX tapped into customer accounts to fund risky bets, setting up its downfall
#248Earlier quoted context omitted.
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.
While you're correct[0], still the FDIC is guaranteeing it up to $250k. [0]: https://www.federalreserve.gov/monetarypolicy/reservereq.htm
It may be that what the FDIC promises to do is not in sync with what it can actually afford to do.
Re: FTX tapped into customer accounts to fund risky bets, setting up its downfall
#249Earlier quoted context omitted.
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.
>We’re doing zero fractional reserve banking now.
No; we're not. In fact, banks are positively awash with reserves by historical standards.
Re: FTX tapped into customer accounts to fund risky bets, setting up its downfall
#250The 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.
Pop it into archive.is or dot tv