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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

#561

Post by vitiral »

siftrics wrote: post #358
woah wrote: post #351

Earlier quoted context omitted.

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.

Bitcoin supports a few transactions per second globally. Please explain how everything would be done on chain?

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

#562

Post by 100001_100011 »

colechristensen wrote: post #466
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 a blockchain failure in that blockchains in general cannot actually support transactions like this. There's too much volume and there are fees. It is also a regulatory failure, there are reasons this kind of dipping into customer funds is quite illegal in the US. FTX should not have been reachable by US citizens (funding should have been impossible) _or_ FTX should have been sanctioned _by_ the US. There is no…

> It is a blockchain failure in that blockchains in general cannot actually support transactions like this.

"The #LightningNetwork has a theoretical throughput of 40 million #TPS... Lightning enables #Bitcoin to be a planetary scale decentralized medium of exchange."

https://twitter.com/Excellion/status/1456088664132440069?cxt...

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

#563

Post by umeshunni »

graderjs wrote: post #503

Isn't this what a bank is? The money sitting in your account is not really there, it's being invested by the bank. Bank accounts exist on the gamble that not everyone wants to withdraw money at once.

Matt Levine explains why this is worse:

https://www.bloomberg.com/opinion/articles/2022-11-09/bankma...

tl;dr - the bank can't invest the money in its own stock.

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

#564

Post by jongjong »

Whenever something like this happens, I'm often surprised by the relative lack of outrage. People are too forgiving. I noticed a lot of comments about SBF along the lines of "I know he's a good guy..." or "Everyone makes mistakes" or "Everyone deserves a second chance..."

F that. Society has created an environment where it's better to ask for forgiveness later than it is to ask for permission prior. Our society systematically rewards deception and punishes honesty. There are a large bunch of apologists who keep showing up saying "Oh but deep down, such and such is a good guy" - If we keep going down that path of pretending that people's actions don't define their true character, we will soon run out of actual good guys... Or those that remain will be backed into a corner and forced to fight to survive.

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

#565

Post by pshc »

TedDoesntTalk wrote: post #547
pshc wrote: post #541

Earlier quoted context omitted.

I think this one is actually possible, they have policy for letting loved ones into accounts. Better to be sure and write the account password in the will.

> they have policy for letting loved ones into accounts Who has this policy? The blockchain??

Apple

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

#566

Post by lambdasquirrel »

rootusrootus wrote: post #87
dang wrote: post #67

All: please don't fulminate*. Perhaps you don't owe embattled billionaires better, but you owe this community better if you're participating in it. HN is a site for curious conversation, so please wait to feel some curiosity before you comment. * https://news.ycombinator.com/newsguidelines.html

> fulminate Hearby nominated as word of the day. Excellent.

And here I was thinking that it was just chemistry jargon, i.e. mercury fulminate.

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

#567

Post by 100001_100011 »

LeafGuild wrote: post #440
dmak wrote: post #419

Earlier quoted context omitted.

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.

No blockchain can ever guarantee there's any visibility or accountability. Defi means are only useful to trade cryptos for other cryptos, and you only have visibility if no one launders the money through crypto mixers. Once you want to cash out and trade your cryptos for any real assets, like buying a pizza, you instantly lose visibility again because all that has to happen off chain. Just because something is a trad…

> No blockchain can ever guarantee there's any visibility or accountability

Visibility or accountability of what? Many blockchains are public.

I find you not only misinformed but possibly intentionally trying to mislead people.

"The amount of energy necessary to refute bullshit is an order of magnitude bigger than to produce it."

- Paul Kedrosky

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

#568

Post by BurningFrog »

stephen_g wrote: post #559
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…

Banks don't actually even 'lend out' customer deposits. That's a very common misconception. In modern bank operations, incoming fund transfers (which involve deposits) do provide liquidity that help allow the bank to be able to lend, but banks are actually levering up capital (paid-up share capital, retained earnings, etc.) to lend. The primary limit on how much they are able to lend (by Basel III regulations) is a m…

I didn't understand much of the jargon, but if banks don't lend out customer deposits, why are they gone when banks go bankrupt?

If they were not lent out, where did they go?

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

#569

Post by memish »

The CEO of FTX said "we tend not to have stop losses... I'm trying to think of a good example of a trade where I've lost a ton of money... I probably don't want to go into specifics with that"

https://twitter.com/ApeDurden/status/1590912098871435265

How did this place end up managing billions of dollars?

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

#570

Post by 100001_100011 »

LeafGuild wrote: post #543
siftrics wrote: post #532

Earlier quoted context omitted.

You just have no idea what you're talking about. I can see exactly what Alameda and FTX was doing on chain. I can see the exact amounts of each token they sent, where they sent it, what they swapped it for, etc. It's all publicly documented.

Well if I'm the one who's uninformed, you're not telling me anything I don't already know. Yes, I know you can see the transactions they made in that particular token on-chain. You have to get the information about who owns any of those wallet addresses from somewhere else. The chain doesn't tell you anything other than that they sent a token somewhere. Yes the other data is public but that isn't because of any featu…

> The blockchain also won't tell you the actual details of the deals this guy was making

Why should it?

Does your bank tell the world the details of what you shopped from the grocery store today?

Financial privacy either is or should be a human right. Banks fail to protect this right. Blockchains can protect this right.

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