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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

#421
post #288

Earlier quoted context omitted.

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…

Using client funds to go double or nothing is ethical in utilianism. When the ends justify the means, anything goes.

Very few utilitarians or affective altruists (including me) consider that ethical.

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

#423

Earlier quoted context omitted.

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 with…

>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.

This is completely and utterly irrelevant and has not stopped anyone from performing massive fraud. Just look at the long history of crypto scams. They still happened constantly despite blockchains having that feature. It's just impossible for a blockchain to prevent these frauds. It doesn't matter if you still have all your coins if the value of that coin drops to zero after it's revealed the whole market for that coin is fraudulent, which is exactly what happened this week! And multiple times earlier this year, and multiple times before that! It doesn't matter if it's stored on a DEX either, when you're still stuck with a worthless coin that no one will trade you for! How many shitcoins need to collapse before this is understood? Blockchains do not and will never solve this problem because they create the problem, by design, by allowing anyone to manipulate and dump tokens anywhere they want with no regard for what's fraudulent and what isn't. On a DEX you can't even know if the person on the other end is a real person or not without going outside the chain. I can't believe I'm still talking about this after the long, long string of fraud that's happened over the last 12 years. FTX is not the problem, they are the symptom. The problem is blockchains. They're intentionally built to enable fraud. They have no other purpose, and they aren't even particularly good at that because they stop working when everyone notices the fraud.

I should also mention, your statement isn't even correct! There's a very easy way to get someone else to move their coins for you: threaten them. That's the entire principle that ransomware is built on. It's real easy for criminals and the police and anyone else using the threat of force to get people to give up their coins, blockchains don't prevent that and it's impossible for them to do so because they can't affect anything that happens in the real world outside the chain. I really can't understate this. Blockchains are a fraud. Every claimed authority or security provided by a blockchain is trivially defeated by just routing around it or by gaming the market, which is ridiculously easy for anyone with some cash to throw around because there are no real rules or safeguards. They're probably the worst "invention" that's come out of the tech sector in the last 15 years. I really hope this crash is the end for crypto.

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

#424

Earlier quoted context omitted.

That's assuming SEC enforce their own rules, they are often... Subjective and reactive.

Because the law isn't computer code and there are always grey lines. From Matt Levine: >But there are also a lot of places in securities law where the rules are a little bit vague and you are operating a little bit on the cutting edge and the best practice is to pick up the phone and call the SEC staff and say “hey what do you think about this?” Sometimes this is fairly formalized: The SEC staff issues “no-action let…

Such disappointing reasoning (by the SEC, not Levine). Seems to be summarized as "we can't make rules because people might follow them. We'd rather sit back and reserve the right to punish whatever we feel like."

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

#425
post #382

Earlier quoted context omitted.

I think this merits your tradition of moderating less if YC's interests are implicated.

> I think this merits your tradition of moderating less if YC's interests are implicated. That tradition has gone out the window: https://twitter.com/breckyunits/status/1590858862504316928

As far as I'm concerned, that tradition is exactly as it has always been.

If you're going to make a claim like that you should say why, and post links, so readers can make up their own minds.

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

#426

Earlier quoted context omitted.

But that’s the principle of how banking works. Nobody expects that their money deposited into a savings account is going to sit in a bank vault until it’s time to go pick it up — they know the bank is going to loan it out and pocket the difference between what they charge the borrower and what they pay in interest. Checking accounts are different in that they should have the money on hand to settle whatever spending…

U.S. reserve percentages have been 0% across the board since 2020. https://www.federalreserve.gov/monetarypolicy/reservereq.htm

I believe this is misleading, yes, reserve requirements are at 0. Capital requirements are not - https://www.federalreserve.gov/supervisionreg/large-bank-cap...

Reserve requirements are about how much cash they must keep as a percentage of their assets, where capital requirements (which are non-zero) are more relevant to the fraction held in fractional reserve systems and are about ensuring solvency.

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

#427
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.

Reminds me of this: https://youtu.be/HQhmGIW7MVU

Also, does he not have lawyers or public relations?

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

#428
post #285

Earlier quoted context omitted.

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.

Doubt that there are any old school Sand Hill firms engaging in those kinds of ‘traditions’, and still around.

Do you have a source?

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

#429
post #420

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 re…

It feels like every time there's a crypto exchange exit-scam/fail/crash/run/fraud, someone says "but this one felt safe/different/better than the others".

I (genuinely) wonder how many more times that will happen?

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

#430
post #421

Earlier quoted context omitted.

Using client funds to go double or nothing is ethical in utilianism. When the ends justify the means, anything goes.

Very few utilitarians or affective altruists (including me) consider that ethical.

> To maximize your expected value, you must aim for it and then march blindly forth, acting as if the fabulously lucky SBF of the future can reach into the other, parallel, universes and compensate the failson SBFs for their losses. It sounds crazy, or perhaps even selfish—but it’s not. It’s math. It follows from the principle of risk-neutrality. [0]

I think he figured in a million realities, the expected value is net very large. He just happens to live in a reality where it collapsed, but how much of his wealth is due to these games? I don't know if the probabilistic method is common among EA. For instance, if you gave me a chance to bet my entire net worth on a 51% odds game, sure the expected return is positive and if i had a million realities and netted everything out, I should take the bet. But most people would see that as insane

https://web.archive.org/web/20221027181046/https://www.sequo...

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