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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

#281

Post by twawaaay »

Digory wrote: post #235
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…

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?

That's because it is all built on greed and a lot of lies.

The only time you actually are part of the trustless system is when you are sole custodian of any private keys necessary to access the coins.

The issue with this is that a whole lot of people have no idea what it is, how it works, how to be part of the system and how to keep keys secure and safe at the same time.

And it is fine. People can't know everything.

But one thing I know, if you buy stuff you do not understand and then you loose money, it is on you.

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

#282

Post by joe_the_user »

Digory wrote: post #235
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…

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?

Maybe you're thinking of Etherium or other smart-contract systems, Etherium is a system where things like that happen automatically. With Bitcoin, the only thing you have is a secure (but static) ledger of who (which wallet/id) has what bitcoins. Any transfers have to be "manually" and just recorded by the blockchain.

Of course, the automatic processes in Etherium produce a bunch of other weird effects.

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

#283

Post by vgeek »

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.

I know pop culture and humor is frowned upon on HN, but https://m.youtube.com/watch?v=XhFTG7fFwc4 is just too relevant to not share for this whole situation.

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

#284

Post by [deleted] »

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…

[deleted]

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

#285

Post by _jal »

iudqnolq wrote: post #256
dang wrote: post #242

Earlier quoted context omitted.

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 t…

The connection would be that popular posts in the discussion are criticizing Silicon Valley investor culture. > Moreover, even if there were ... Makes sense. You have a much better view of that than me.

Really only criticizing a particular corner of SV investor culture.

The old school, Sand Hill-style tradition of greed, pettiness, backbiting and double-crosses continues unchanged.

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

#286

Post by selimthegrim »

chasd00 wrote: post #266
paganel wrote: post #221

Earlier quoted context omitted.

> Alameda’s CEO is Caroline Ellison Just search for that Ellison young lady online. She's partly responsible for fraud that saw $10 billion of other people's money go into the ether. How come that kid (she looks to be under 30 years of age) was put in charge of a multi-billion dollar company is way, way beyond me.

I take it her last name isn't the Ellison right? If so, that could be a hint.

Megan Ellison produces movies

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

#287

Post by exolymph »

wefarrell wrote: post #231
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’m pretty ignorant when it comes to this space. Do they not have any kind of compliance structure? In hindsight it seems pretty obvious that this sort of thing would happen without it.

Well, they at least had compliance staff. "Most of FTX's legal and compliance staff quit Tuesday evening, people familiar with the matter told Semafor, leaving few executives who could answer questions that now loom large over the firm." https://www.semafor.com/article/11/09/2022/ftx-legal-and-com...

Pretty much every large exchange has a compliance team, btw, at least the ones with US operations.

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

#288

Post by wslh »

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…

How many years could Sam Bankman-Fried get in jail?

It is also interesting to read on his Wikipedia profile [1] about "Bankman-Fried is a supporter of effective altruism and claims to pursue earning to give as an altruistic career. He is a member of Giving What We Can and has claimed that he plans to donate the great majority of his wealth to effective charities over the course of his life.". Having direct access to a lot of money changes a some people ethics.

[1] https://en.wikipedia.org/wiki/Sam_Bankman-Fried

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

#289

Post by colinmhayes »

willcipriano wrote: post #268
colinmhayes wrote: post #117

Earlier quoted context omitted.

The entire point of FTX is that Americans were barred from using it. Now Americans certainly ignored that rule by using vpn’s, but I’m not sure that gives the sec jurisdiction. The Americans using the exchange were explicitly breaking the TOS

Is it legal to defraud people in other countries from the US? I can't imagine that it is.

Well he's in the bahamas, not the US.

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

#290

Post by iamthirsty »

fragmede wrote: post #277
iamthirsty wrote: post #275

Earlier quoted context omitted.

The FDIC, as of March 2021, has 119.4 billion[0], along with "... a US$100 billion line of credit with the United States Department of the Treasury.[9]"[1]. I think they've got enough to cover any consumer issues. [0]: https://www.fdic.gov/about/strategic-plans/strategic/insuran... [1]: https://en.wikipedia.org/wiki/Federal_Deposit_Insurance_Corp...

Bank of America has an estimated 67 million customers. Assuming $250k per person, and I've got the number of zeros right, that's $16 trillion ($16,750,000,000,000) in liability if they were to go down, enough to sink FDIC.

I think you got the math wrong, because I'm 100% sure not all 67million customers have $250,000 in their accounts. Being that 56% of Americans can't cover $1,000 expense[0], and most people with >$100k assuredly have their money in assets rather than cash, I think your math is way, way, way off.

[0]: https://www.cnbc.com/2022/01/19/56percent-of-americans-cant-...

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