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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

#511

Post by siftrics »

LeafGuild wrote: post #461
siftrics wrote: post #375

Earlier quoted context omitted.

Totally valid criticism. But blaming blockchain for the failures of centralized finance, which we've seen time and time again throughout all of history, is literally intentional deception. If a politician or lawmaker or business person blames blockchain for this, it is FRAUD. Full stop.

Well I'm not a politician or lawmaker and I have no problem blaming blockchain for this. I'm technically a "business person" because I have a job, but technically all crypto people who intend to use it to make money are also business people. The way bitcoin and all its friends are designed is intentionally done so in a way that allows centralized entities to run amok and cause havoc without any accountability until t…

No post body was provided.

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

#512

Post by zen21 »

twawaaay wrote: post #281
Digory wrote: post #235

Earlier quoted context omitted.

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.…

What about if you buy something you thought you understood, but that’s only because you were lied to?

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

#513

Post by deevolution »

cma wrote: post #322
chironjit wrote: post #294

Earlier quoted context omitted.

This is the correct answer. When you move your tokens into a centralised exchange like FTX, your funds are pooled with everyones deposit. There are always deposits and wihdrawals, and of course maybe you traded your tokens for another before withdrawing. So its hard to parse how much customers deposited vs genuinely withdrew, and so you cant really tell if the exchange is short unless they declare their actual assets…

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 know who I'd rather trust my money with: SBF, hands down."

This quote is complety antithetical to everything crypto is actually trying to achieve; which is a trustless financial system, a system that would be void of these sorts of melt downs.

Don't trust; verify.

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

#514

Post by teedeepee »

jacooper wrote: post #400
ricardou wrote: post #185

Earlier quoted context omitted.

SBF tweeted[1] not too long ago that FTX.us was safe and was 100% liquid. I suppose that wasn't the case? [1] https://twitter.com/SBF_FTX/status/1590709195892195329?t=tQR...

Ftx.us is apperantly a totally separate exchange

Alameda was also a totally separate entity, until we found out it wasn't.

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

#515

Post by ricochet11 »

doorman2 wrote: post #508
PragmaticPulp wrote: post #458

Earlier quoted context omitted.

> If your friend had "his identity tied up in crypto", then why wasn't he holding it himself? Some people love day trading crypto. They keep funds on exchanges so they can trade immediately and not deal with constant back and forth transactions with their own wallet.

I'm not too involved with the crypto space, but why have a centralized exchange at all? Like why can't the exchange setup a transaction directly between me and the counterparty that we both sign?

we have lots of decentralized exchanges: uniswap, paraswap, dydx, loopring, etc....

not sure why more people dont use them, perhaps fooled by the convenience/ marketing/ promotional lures of CEXs.

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

#516

Post by jimbob21 »

LeafGuild wrote: post #446
legutierr wrote: post #306

Earlier quoted context omitted.

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 the…

Wow you are uninformed.

>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.

Number of miners has absolutely nothing to do with trading volumes, not sure where you got that from. Miners don't maintain a price any more than a whale maintains a price.

>If the majority of miners suddenly go bust due to outside circumstances

The rest of the miners would step in and start making more money, actually.

>they decide to conspire together and attack the system, or conspire with some whales to perform a rug pull

Not much of a rug pull to sell the tokens you've legitimately acquired through mining or fiat buying. That's just selling. High volatility selling, yes, but still just selling.

>it's extremely likely that your tokens aren't going to be worth anything anymore. This applies to every token, including bitcoin.

Oh yes, Bitcoin has died thousands of times. Maybe you'll be right one day, but I doubt it.

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

#517

Post by TedDoesntTalk »

cmckn wrote: post #436
throwaway5959 wrote: post #431

Earlier quoted context omitted.

That’s insane.

It’s the only way any popular token has met trading demand; the vast majority of transactions have to happen off-chain, or the thing would fall over. (but yeah it’s wild)

Brokerage houses and market makers do the same.

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

#518

Post by EamonnMR »

doorman2 wrote: post #508
PragmaticPulp wrote: post #458

Earlier quoted context omitted.

> If your friend had "his identity tied up in crypto", then why wasn't he holding it himself? Some people love day trading crypto. They keep funds on exchanges so they can trade immediately and not deal with constant back and forth transactions with their own wallet.

I'm not too involved with the crypto space, but why have a centralized exchange at all? Like why can't the exchange setup a transaction directly between me and the counterparty that we both sign?

Because economies of scale win. Centralizers can consume all available oxygen first, it doesn't matter that they can then go belly up.

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

#519

Post by tartoran »

easytiger wrote: post #463
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…

Everyone should read that article. The delusion is insane

I listened on it and was definitely good and very eye opening. The delusion does seem surreal

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

#520

Post by TedDoesntTalk »

colechristensen wrote: post #467
tartoran wrote: post #464

Earlier quoted context omitted.

Whats the difference between FTX and Coinbase for example? Couldn’t coinbase pull the same move?

Coinbase is a public company trading in the US, they are registered and regulated by the US. Reporting and auditing requirements make this kind of fraud much less likely and punishable earlier than collapse. Shareholder groups or the SEC suspecting this kind of fraud have many avenues to prevent, change, and punish this kind of fraud. FTX was based in the Bahamas.

Yep Coinbase is traded on NASDAQ and is subject to heavy regulation and reporting.
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