FTX faces potential hack, sees mysterious outflows totaling more than $600M • Hacker News Board

Re: FTX faces potential hack, sees mysterious outflows totaling more than $600M

#871

Post by willmadden » Sun, Nov 13, 2022, 6:01 PM UTC

AlexandrB wrote: post #843

willmadden wrote: post #735

Earlier quoted context omitted.

It sure is interesting how they extended their tentacles into as many other companies and projects as possible (SBF even approached Elon about financing the Twitter acquisition) while knowing they were financing these deals with customer deposits, before blowing it up in the most spectacular way possible… I can’t imagine a series of actions that would be more destructive to the industry. The actions don’t make sense…

The idea that this is some kind of "op" is undermined by the fact that SBF was broadcasting his own lack of trustworthiness for a long time. Remember that exchange with Matt Levine where SBF all but admits to running a Ponzi scheme[1]? That was half a year ago. I think the idea that this is some kind of 4D chess move by regulators is a convenient way for the gullible idiots who believed in this stuff to put the blame…

At no point did he admit to investing customer deposits in defi or similar schemes without their consent in that interview. FTX’s terms even state that they would never do that.

His actions since Alameda blew up were not rational, even if we assume that he was operating a Ponzi scheme the entire time.

He bailed out as many failed projects as he could and attempted to make investments with funds he did not have after the collapse of his ponzi started.

A ponzi operator who sees their house of cards collapsing is going to look for ways to get more money into the ponzi unencumbered with the hope that they can make back the losses before anyone notices.

They are not going to allocate what precious little capital they still have to investments that do not contribute more capital to the ponzi.

Yet this is exactly what SBF did.

It doesn’t make any sense.

Yet the regulation authorities are considering (that SBF literally authored) does very little to address the root causes of centralized exchange collapse, and is more or less designed to give power to regulators first and protect investors as a distant second.

What is needed are proof of reserves that include both assets and liabilities for centralized exchanges.

Centralized exchanges shouldn’t be able to lock up 100mm USD worth in customer Ethereum deposits for staking, when their exchange allows someone to buy that 100mm USD in ETH and withdraw it from the exchange before they can unlock the ETH and use it to fund the withdrawal without delay. If the exchange is going to allow customers to stake ETH on their exchange, the actual customers' ETH must be staked, and shouldn't be accounted for separately than the staked ETH deposit.

That is the core of the issue with centralized exchanges that play shell games with customer funds. They create financial risk if customer deposits are not backed 1:1 and mirroring the financial decisions of the depositor. Anything less is a ponzi, no matter how much window dressing is applied.

It's worth noting that banks are ponzi schemes, but they can borrow funds at the discount rate at will, and must meet capital requirements, so the damage their ponzi schemes can cause is limited. There is no lender of last resort in crypto. Centralized exchanges cannot behave like banks!

Re: FTX faces potential hack, sees mysterious outflows totaling more than $600M

#872

Post by jimpol » Sun, Nov 13, 2022, 6:34 PM UTC

eternalban wrote: post #752

px43 wrote: post #270

Earlier quoted context omitted.

This is a Wall Street corruption story. https://twitter.com/wallstreetpro/status/1591167190996504576 Sam, Caroline, and everyone at the top of FTX and Alameda have very close family ties to key power brokers on Wall Street, which is how they were able to run this scam. FTX has also lobbied extensively for harsh regulations on DeFi, which is a key reason that he was hated by people in the cryptocurrency space, and ado…

Wiki was quiet about Caroline Ellison's family but a random post on the internet just happened by and the claim is her father is Glenn Ellison. https://economics.mit.edu/people/faculty/glenn-ellison but p.s. the whole comment is worth a paste: SEC Chair Gary Gensler’s old boss at MIT was Glenn Ellison. His daughter Caroline Ellison is the CEO of FTX sister-company Alameda Research (and Sam Bankman-Fried’s lover appar…

Sbf gon get epsteined

Re: FTX faces potential hack, sees mysterious outflows totaling more than $600M

#873

Post by grumpyprole » Sun, Nov 13, 2022, 7:06 PM UTC

netheril96 wrote: post #607

grumpyprole wrote: post #288

Earlier quoted context omitted.

> BTC (on chain) is still working as intended, after all these years. It's certainly working on destroying the planet with its obscene energy requirements.

Well, maybe I should raise the example of ETH instead. It is still working as intended, decentralized, and consuming little energy.

Given ETH only switched to proof-of-stake this year, I think perhaps it's a bit early to call it out as a long-standing energy efficiency success.

Re: FTX faces potential hack, sees mysterious outflows totaling more than $600M

#874

Post by kevinak » Sun, Nov 13, 2022, 8:08 PM UTC

ipython wrote: post #830

kevinak wrote: post #824

Earlier quoted context omitted.

A tax would result in a cost for the business. Bitcoin mining results in a profit. Why would you pick the first one? Transporting miners is not the hard part, you just keep them in containers. What is hard is building the necessary stuff to actually flare the gas properly.

A tax incentive , as in an offset on their costs.

Sure, so we just move the cost to someone else effectively? Seems unfair and unnecessary when they can just mine bitcoin instead.

Re: FTX faces potential hack, sees mysterious outflows totaling more than $600M

#875

Post by quantified » Sun, Nov 13, 2022, 8:23 PM UTC

mrich wrote: post #348

quantified wrote: post #177

Earlier quoted context omitted.

Let's keep out eyes on this. It is a super lurid scenario (to use a word introduced by @dang on this posting). By "this" I don't mean the earlier bits of the FTX debacle, but specifically this draining event. The statement that "FTX apps are malware" is weird in that it implies they became malware a while back. I could see either hackers penetrating due to inadequate security, or insiders setting up for an opportune…

To be clear, even the FTX bankruptcy and the way it happened, not even taking this outflow/hack here into account, is jail worthy. The question is whether it falls under US jurisdiction and whether the defense lawyers can be paid enough to somehow avoid this, or postpone for a decade or so.

Oh yes. Some are asking whether this is Lehman or Enron (forgetting Worldcom) I expect this is a love child that we'll call "FTX".

Re: FTX faces potential hack, sees mysterious outflows totaling more than $600M

#876

Post by ALittleClarity » Sun, Nov 13, 2022, 9:17 PM UTC

eternalban wrote: post #752

px43 wrote: post #270

Earlier quoted context omitted.

This is a Wall Street corruption story. https://twitter.com/wallstreetpro/status/1591167190996504576 Sam, Caroline, and everyone at the top of FTX and Alameda have very close family ties to key power brokers on Wall Street, which is how they were able to run this scam. FTX has also lobbied extensively for harsh regulations on DeFi, which is a key reason that he was hated by people in the cryptocurrency space, and ado…

Wiki was quiet about Caroline Ellison's family but a random post on the internet just happened by and the claim is her father is Glenn Ellison. https://economics.mit.edu/people/faculty/glenn-ellison but p.s. the whole comment is worth a paste: SEC Chair Gary Gensler’s old boss at MIT was Glenn Ellison. His daughter Caroline Ellison is the CEO of FTX sister-company Alameda Research (and Sam Bankman-Fried’s lover appar…

Ellison was not GG's boss. GG taught in the B School; GE is in HASS.

Re: FTX faces potential hack, sees mysterious outflows totaling more than $600M

#877

Post by pclmulqdq » Sun, Nov 13, 2022, 10:57 PM UTC

JamesianP wrote: post #859

pclmulqdq wrote: post #853

Earlier quoted context omitted.

It's not that Wall Street gives you warning signs. They literally tell you "this is a probably a bad bet, and you should not take it" in the descriptions of most products. Very few people actually read those descriptions, despite the fact that they really should if they are buying weird financial products. The banks tell you to read them. And yes, a mortgage is a weird financial product. For example, people who lost…

CDO2s backed by worthless subprime loans were put into AAA rated bonds. I'd call that an outright scam. For that matter all versions were far more risk than they claimed they were, given that they were worthless, even if there was some fine print somewhere.

I don't have an ISDA with a bank or a copy of a CDO-squared prospectus, but it's hard to imagine that there wasn't a big warning about them being a leveraged product that you should not invest in long-term.

The rating agencies did not understand the products they were rating. However, the warnings were almost certainly on the label.

That's why the rating agencies were sued over this, and not the banks.

Re: FTX faces potential hack, sees mysterious outflows totaling more than $600M

#878

Post by JamesianP » Sun, Nov 13, 2022, 11:51 PM UTC

pclmulqdq wrote: post #877

JamesianP wrote: post #859

Earlier quoted context omitted.

CDO2s backed by worthless subprime loans were put into AAA rated bonds. I'd call that an outright scam. For that matter all versions were far more risk than they claimed they were, given that they were worthless, even if there was some fine print somewhere.

I don't have an ISDA with a bank or a copy of a CDO-squared prospectus, but it's hard to imagine that there wasn't a big warning about them being a leveraged product that you should not invest in long-term. The rating agencies did not understand the products they were rating. However, the warnings were almost certainly on the label. That's why the rating agencies were sued over this, and not the banks.

A rating inherently claims understanding though. Is a bridge safe to walk on? Some guy who doesn't understand engineering is putting signs on it rating its safety. Ignorance is not a defense at this point.

They did sue the banks. For many things including inflated appraisals of the loans.

I'm sure they have some kind of warning for everything that isn't FDIC insured. But misrepresenting high risk as low risk instead of zero risk is just a quantitative difference. There are plenty of scams that do this. for example just lying about a company's earnings. I suppose the precise crimes they charge them for may differ a bit.

Re: FTX faces potential hack, sees mysterious outflows totaling more than $600M

#879

Post by HaZeust » Mon, Nov 14, 2022, 3:39 AM UTC

bogomipz wrote: post #848

HaZeust wrote: post #700

Earlier quoted context omitted.

Bulk bridge swap service IMO. Avalanche or Fantom would be your best bet right now.

Could you or someone else explain why DeFi is integral to these hacks? The article mentions the decentralized exchange 1inch and you are mentioning Avalanche and Fantom. Is just that that DEX and P2P create levels of indirection that make it much harder to track the movements of the stolen assets?

Do bear in mind that I was answering a question about how to swap coins given such a low amount of time that this hacker (likely insider; opinion) had. I named decentralized exchanges because they don't give up the ownerships of their crypto AND they offer bridges/swapping services from one coin to another - which makes it not only harder to track the assets when you're trying to do this sort of process, but it also offers a more streamlined approach for doing the process in the first place - which is swapping a bunch of coins.

For sake of lucidity, I want to say that this doesn't necessarily make DeFi integral to these hacks, but it does make the process of liquidating from these hacks easier.

Re: FTX faces potential hack, sees mysterious outflows totaling more than $600M

#880

Post by bogomipz » Mon, Nov 14, 2022, 4:18 AM UTC

HaZeust wrote: post #879

bogomipz wrote: post #848

Earlier quoted context omitted.

Could you or someone else explain why DeFi is integral to these hacks? The article mentions the decentralized exchange 1inch and you are mentioning Avalanche and Fantom. Is just that that DEX and P2P create levels of indirection that make it much harder to track the movements of the stolen assets?

Do bear in mind that I was answering a question about how to swap coins given such a low amount of time that this hacker (likely insider; opinion) had. I named decentralized exchanges because they don't give up the ownerships of their crypto AND they offer bridges/swapping services from one coin to another - which makes it not only harder to track the assets when you're trying to do this sort of process, but it also…

>"For sake of lucidity, I want to say that this doesn't necessarily make DeFi integral to these hacks, but it does make the process of liquidating from these hacks easier."

Yes sorry I didn't articulate that very well in my post. This is what in fact I was asking - why it was significant in the "process of liquidating from these hacks."

Could you explain what you mean by "they don't "give up the ownerships of their crypto"? This sounds like an important point but I'm unsure what you mean. Do they anonymize the transaction or something else?