How do you lose $10B in a few years trading? That’s truly impressive. “We lose money on every trade but make it up on volume”
Some of them are definitely Luna/UST
FTX tapped into customer accounts to fund risky bets, setting up its downfall
441–450 of 746 posts
Re: FTX tapped into customer accounts to fund risky bets, setting up its downfall
#442FTX is going into liquidation in Bahamas: https://www.scb.gov.bs/wp-content/uploads/2022/11/Securities...
Mr. Brian Simms, K.C. (Lennox Paton Counsel and Attorney-at Law) was appointed as provisional liquidator. Additionally, the powers of the directors of FDM have been suspended and no assets of FDM, client assets or trust assets held by FDM, can be transferred, assigned or otherwise dealt with, without the written approval of the provisional liquidator.
Re: FTX tapped into customer accounts to fund risky bets, setting up its downfall
#443Earlier quoted context omitted.
> banks at least tell you they are loaning your deposits out Side not but that’s not really how banking works. Banks create deposits when they originate loans and separately look for the assets they need in order to satisfy any regulatory requirements and net flows of funds for inter bank settlements. https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/m...
No, when you take a loan out of a bank, the bank doesn't "create deposits" that it loans to you. The bank loans you existing deposits. The method by which banks end up creating money is less dramatic than you think. I wrote a long-form explainer here: https://www.attejuvonen.fi/money-out-of-thin-air/
Not at all.
When you get a loan, the bank creates a liability and deposit out of thin air. The deposit is a "demand deposit", which is effectively equivalent and fungible to central-bank-backed currency (hence the term "money" usually applies to both, though they are different things).
The bank needs no existing customer deposits to create a demand deposit and liability in your account.
You should run through your example again, except begin by creating a loan, rather than first beginning by a customer lending the bank a deposit.
The BoE article linked above is absolutely correct.
Re: FTX tapped into customer accounts to fund risky bets, setting up its downfall
#444Earlier quoted context omitted.
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."
This is true in all parts of law. Law is not code. It's part of why we have judges.
Re: FTX tapped into customer accounts to fund risky bets, setting up its downfall
#445From 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…
>poor judgment call
>tell people their money is safe then basically steal it by giving it to your friend
SBF needs to be thrown in jail, he won't though, for obvious reasons.
Re: FTX tapped into customer accounts to fund risky bets, setting up its downfall
#446Earlier quoted context omitted.
So the internal trades aren't on chain. Well, that's going to leave a mark. Is there a coin that distinguishes agent and owner? Seems like you want trustless agency if you're pursuing trustless finance.
This is the whole idea behind DeFi. All trading is done autonomously on-chain, and owners retain custody throughout.
That's a marketing line, it's not true. Nobody actually has any custody of anything in crypto. The value of the tokens is completely and totally dependent on a consensus of crypto miners doing their job within the parameters of the system, assuming you want them to maintain a price and trading volume that's favorable to the token holders. If the majority of miners suddenly go bust due to outside circumstances, or they decide to conspire together and attack the system, or conspire with some whales to perform a rug pull, or any number of other malicious actions, then it's extremely likely that your tokens aren't going to be worth anything anymore. This applies to every token, including bitcoin.
Re: FTX tapped into customer accounts to fund risky bets, setting up its downfall
#447Earlier quoted context omitted.
He’s more like Nick Leeson than Bernie Madoff.
Do you even know the story of Nick Leeson?
I've seen the movie. Man gambles other people's money and attempts to hide the losses in a fake account. Basically the Mt Gox story and not too dissimilar to what FTX has done.
Re: FTX tapped into customer accounts to fund risky bets, setting up its downfall
#448Earlier quoted context omitted.
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.c…
Isn't it quite possible there might be contagion there though as well? For instance the NY Times had the following in a piece they just published:
>"Mr. Bankman-Fried is also facing dissent from within the senior ranks of FTX. On Wednesday night, the general counsel for FTX’s U.S. arm wrote on an internal messaging system that he had “advised U.S. regulators of my instruction to founders to turn off functionality” of the websites for FTX and the U.S. arm, according to two people who saw the message and a screenshot that has circulated on Twitter.
“Sam has a different perspective than me on this,” wrote the lawyer, Ryne Miller. He added that “we should not be optimistic for an outcome that is positive.” The post was swiftly deleted."[1]
[1] https://www.nytimes.com/2022/11/10/technology/ftx-crypto-exc...
Re: FTX tapped into customer accounts to fund risky bets, setting up its downfall
#449Earlier quoted context omitted.
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. Right up to the moment you lose your laptop in a fire, forget the password to your wallet, accidentally run malware on your personal computer, etc. Or if you die and haven't gone through the complication of setting up a way for your heirs to gain control of your accounts. Yes, you can take…
Pretty easy to download a wallet that’s stored in the Secure Enclave of your iPhone with an encrypted backup to your Apple ID account and all those problems go away.
Re: FTX tapped into customer accounts to fund risky bets, setting up its downfall
#450> FTX Chief Executive Sam Bankman-Fried told an investor this week that Alameda owes FTX about $10 billion, the person 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, according to the person. This raises the question of who else Alameda owes. It's a sign of the times that $10 billion…
Cumulative inflation since 1998 is about ~83%, so that's part of it. There are other parallels to LTCM, too. Once the Alameda balance sheet leaked, people could see exactly what coins they had and where they were vulnerable. And most of the risk came from their FTT token, where their holdings would have taken years to sell at the average daily value traded. Thus other traders could start shorting FTT to catalyze the fall, just like what happened to LTCM's illiquid "off the run" bond positions:
(Source: https://www.wsj.com/articles/SB968629287803799708 ) ____________
Badly in need of a lift, Meriwether called an old friend, Vinny Mattone, who had been the fund's first contact at Bear Stearns, LTCM's clearing broker. Mattone, who had retired, was everything that J.M.'s elegant professors were not. He wore a gold chain and a pinkie ring, and he showed up at Long-Term in a black silk shirt, open at the chest. He looked as if he weighed 300 pounds. Unlike J.M.'s strangely wooden partners, Mattone saw markets as exquisitely human institutions -- inherently volatile, ever-fallible.
"Where are you?" Mattone asked bluntly.
"We're down by half," Meriwether said.
"You're finished," Mattone replied, as if this conclusion needed no explanation.
For the first time, Meriwether sounded worried. "What are you talking about? We still have two billion. We have half -- we have Soros."
Mattone smiled sadly. "When you're down by half, people figure you can go down all the way. They're going to push the market against you. They're not going to roll [refinance] your trades. You're finished."