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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

#411

Post by joshlemer »

y04nn wrote: post #362
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

I find it very ironic that Satoshi created Bitcoin with the objective to be more resilient than banks, with the famous genesis block containing "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks". A decade later, the bitcoin creation generated an entire industry of "crypto banks" that are opaque, played with customers money and went bankrupt.

But fundamentally and crucially, nobody is bailing these banks out. Bitcoin itself, and its holders (other than those who left their money in FTX) are untouched. It seems to be unironically working as intended, no?

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

#412

Post by cmeacham98 »

ummonk wrote: post #381
tialaramex wrote: post #255

Earlier quoted context omitted.

Seems to me in the specific case of wealthy foreigner owns smuggled good a better (more just) arrangement accuses them not the goods, but with the mechanism that if they for some reason don't want to attend court (maybe because they're super guilty?) their goods are seized but the crime still exists. There are some nuances to work out to ensure cops can't accuse say Vladimir Putin of a crime involving the $8000 they…

What if they don’t know who it belongs to?

If they reasonably cannot determine its owner, they get to seize it, but if you show up with proof it's yours they have to give it back (and go through the normal process).

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

#413

Post by eigenvalue »

umeshunni wrote: post #203
tootie wrote: post #192

Earlier quoted context omitted.

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?

Might have something to do with the $40mm donation he gave to politicians recently... and the fact that he was "buddy buddy" with Gary Gensler (at least until this morning, when Gary rushed to throw him under the bus in a media interview).

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

#414

Post by adrr »

sytelus wrote: post #389
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.

He simultaneously played League of Legends when pitching to VC on Zoom call. That indicated to VC how serious and responsible he was. They unanimously and immediately signed off funding merely out of awe.

I had to Google this because that is some straight up Silicon Valley show stuff.

https://www.businessinsider.com/ftx-sam-bankman-fried-league...

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

#415

Post by majormajor »

FormerBandmate wrote: post #124
huevosabio wrote: post #69

Earlier quoted context omitted.

It feels like a very Adam Neumann move.

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...

That link is taking me to a "oh shit our bad" sort of page now, but I'm curious on the date. I don't see an original timestamp on the wayback machine version, though. :(

If they were still taking him seriously as "ethical" after the Luna fiasco where he had previously trashed it in press (as the scheme was just a perpetual motion machine) but was perfectly willing to make money off of poor suckers who got conned... I don't know what to say.

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

#416

Post by [deleted] »

muxator wrote: post #410
cma wrote: post #322

Earlier quoted context omitted.

From the Sequoia puff-piece: > Something of the sort must happen eventually, as the current system, with its layers upon layers of intermediaries, is antiquated and prone to crashing—the global financial crisis of 2008 was just the latest in a long line of failures that occurred because banks didn’t actually know what was on their balance sheets. Crypto is money that can audit itself, no accountant or bookkeeper need…

I'd like to read this in context; do you know where this declararion could be found? Who is speaking? Thanks!

[deleted]

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

#417

Post by datalopers »

muxator wrote: post #410
cma wrote: post #322

Earlier quoted context omitted.

From the Sequoia puff-piece: > Something of the sort must happen eventually, as the current system, with its layers upon layers of intermediaries, is antiquated and prone to crashing—the global financial crisis of 2008 was just the latest in a long line of failures that occurred because banks didn’t actually know what was on their balance sheets. Crypto is money that can audit itself, no accountant or bookkeeper need…

I'd like to read this in context; do you know where this declararion could be found? Who is speaking? Thanks!

Sequoia deleted it. You can find a cached version though at https://webcache.googleusercontent.com/search?q=cache:pizI33...

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

#418

Post by ceejayoz »

roywiggins wrote: post #297
gfd wrote: post #188

Earlier quoted context omitted.

Only tangentially related, but don't put cash in safety deposit boxes. Police can take them under civil forfeiture laws: https://nypost.com/2021/06/12/fbi-aims-to-keep-valuables-86m... https://www.businessinsider.com/fbi-raid-1400-boxes-us-priva...

The greater risk is probably that your bank will just screw up and lose your stuff: https://www.nytimes.com/2019/07/19/business/safe-deposit-box...

Probably not.

> Every year, a few hundred customers report to the authorities that valuable items — art, memorabilia, diamonds, jewelry, rare coins, stacks of cash — have disappeared from their safe deposit boxes.

https://en.wikipedia.org/wiki/Civil_forfeiture_in_the_United...

> In 2010, there were 11,000 noncriminal forfeiture cases.

If I'm reading it correctly, that's just the Federal cases alone.

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

#419

Post by dmak »

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…

It's strange to attribute failure to the blockchain in this case. There was no visibility into how much leverage was taken on by Alameda because they aren't borrowing through DeFi means. This a traditional finance problem where a hedge fund takes on too much leverage and no one finds out until they explode.

No visibility leads to no accountability.

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

#420

Post by xs83 »

For those wondering why people would store coins on centralised exchanges, the answer is simply because you are heavily incentivised to do so. When Ethereum was congested and simple transfers were costing upwards of $200 - FTX offered a number of free ERC20 withdrawals if you staked a certain amount of FTT.

in addition to that - the more FTT you staked the more preferential treatment you got in access to IDO's and referral fees, when you couple this with a platform that felt "safe" and "trustworthy" - this was a recipe for disaster.

I've been in Crypto a long time and previous rugs always felt a bit sketchy, like it was an unfinished product, you put up with it but your risk tolerance was lower as those platforms felt like they might disappear at any one point.

FTX felt different - and this is why there are people with 8 figures+ stuck on there right now.

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