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

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

#351

Post by woah »

solotronics wrote: post #273

Probably a good time to mention the original mission statement of Bitcoin was to custody your own money without counterparty risk. Time and time again we have seen altcoin ponzis and exchanges collapse under the weight of their fractional reserve. What is still working? Bitcoin. Greed in this space causes people to act with a more short term view for quick profits while ignoring fundamentals. Over and over again.

This has nothing to do with Bitcoin or not. Bitcoin was probably one of FTXs largest assets. Every cryptocurrency allows self custody, as this is core to the concept.

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

#352

Post by AustinDev »

_fizz_buzz_ wrote: post #334
AustinDev wrote: post #122

Earlier quoted context omitted.

He was also the 6th largest political donor for the 2022 election cycle.

Bernie Madoff was also a big political donor, didn't help him in the end. SBF will also probably not hand out donations in the near future, so there is very little incentive to help him out at this point.

True, likely the main impetus was to influence politicians in order to secure favorable regulations.

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

#354

Post by siftrics »

LeafGuild wrote: post #324
phas0ruk wrote: post #278

Earlier quoted context omitted.

FTX is a centralised exchange, it is not routing all customer trades on chain. It’s not a blockchain failure, it’s just a lack of client asset segregation by a traditional centralised trading house.

It is absolutely a blockchain failure. Blockchains are intentionally designed to facilitate this. They have no possible way to stop this kind of fraud. Even if you built an elaborate set of smart contracts that could audit participants, they would still not stop anything. That activity can just be moved to another chain and avoid the audits. This kind of thing can just keep happening over and over again, as it alread…

This is not true at all.

If you are the only person in the world with the private key to your coins, you are the only person who can move them. Period.

FTX is a centralized entity that custodies funds. It has nothing to do with a blockchain, which could have completely prevented this.

There are many examples of decentralized exchanges (DEXs) for which it is mathematically impossible to loan out depositor's funds without their consent, because the only person capable of signing a transaction to move the funds is the depositor themself.

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

#355

Post by Zamiel_Snawley »

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.

One thing to note is that FTX.us is an affiliated company that is onshore in the US, that does have compliance requirements, and FTX.us is currently not believed to be insolvent/bankrupt. *This may not be true, there are rumors that I haven't looked into that FTX.us is halting withdrawals, which does not bode well.*

FTX.com is some conglomeration of entities incorporated in Antigua, Bermuda, and the Bahamas[1]. FTX.com is the one that has blown up, and I won't pretend to know about the reporting requirements of such a complicated structure in multiple jurisdictions.

Also, Sam Bankman-Fried owned 90% of Alameda Research as of last year. So unless that changed(I can't find evidence it has), it looks to me like he tried to bail himself out with customers' money. Presumably he thought he could return the money eventually and no one would be the wiser. So much for that.

This is just my understanding and I am not an expert in these things.

[1] https://help.ftx.com/hc/en-us/articles/360056976411

[2] https://finance.yahoo.com/news/ftx-ceo-sam-bankman-fried-pro...

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

#356

Post by Bilal_io »

woah wrote: post #317
skullone wrote: post #145

I checked my FTX account, only had play money in there. But, despite all the people saying "FTX is fine, withdrawls still work, it's all fine" - nope, everything is disabled, withdrawls show $0.10 avaialble to withdrawl (out of a few hundred I had in actual US cash, plus the BTC and doge transactions are all disabled. This is very serious for many people - there are some who had substantial amounts of money, includin…

This has nothing to do with crypto, it has to do with people sending their money to a con man. If your friend had "his identity tied up in crypto", then why wasn't he holding it himself?

Yup. Not your wallet, not your money.

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

#357

Post by nostrebored »

NovemberWhiskey wrote: post #249
nostrebored wrote: post #210

Earlier 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.

> We’re doing zero fractional reserve banking now. No; we're not. In fact, banks are positively awash with reserves by historical standards. https://fred.stlouisfed.org/series/TOTRESNS

The required reserve amount was reduced to zero at the beginning of the pandemic as a way to increase the velocity of money. We are in ZFRB land right now.

Bank reserves have obviously dropped year over year since the introduction of this policy, especially as a percentage of M1/M2.

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

#358

Post by siftrics »

woah wrote: post #351
solotronics wrote: post #273

Probably a good time to mention the original mission statement of Bitcoin was to custody your own money without counterparty risk. Time and time again we have seen altcoin ponzis and exchanges collapse under the weight of their fractional reserve. What is still working? Bitcoin. Greed in this space causes people to act with a more short term view for quick profits while ignoring fundamentals. Over and over again.

This has nothing to do with Bitcoin or not. Bitcoin was probably one of FTXs largest assets. Every cryptocurrency allows self custody, as this is core to the concept.

It has everything to do with Bitcoin.

If this was all done on-chain, users would have sole custody over their funds and no one else in the entire world, including SBF, would be able to move them or loan them out.

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

#359

Post by UncleEntity »

nostrebored wrote: post #234
iamthirsty wrote: post #230

Earlier quoted context omitted.

While you're correct[0], still the FDIC is guaranteeing it up to $250k. [0]: https://www.federalreserve.gov/monetarypolicy/reservereq.htm

Right, but the FDIC explicitly says large amounts may take longer in the status quo. The only reason to have money in the bank is for a reasonably safe, liquid form of money. If they aren’t providing safety or liquidity, why should you use them?

> Right, but the FDIC explicitly says large amounts may take longer in the status quo.

Right, you can’t ramp up the printing presses instantly — which is literally what they would do if they had to.

I think people are missing the point that if it ever got so bad the FDIC had to worry about covering everyone your biggest worry would be the roving gangs looking for the Mormon food caches.

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

#360

Post by encryptluks2 »

skippyboxedhero wrote: post #258
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.

He also attempted to claim that the problem was due to an issue with the "labelling" of funds...this story leaks, we know he has been telling people he lent the money to Alameda, and in these tweets he is now saying that he has a problem expressing what happened... ...I feel bad for him because he obviously believes his own bullshit, but he should have just said nothing rather than lie about what happened and pull th…

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