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FTX balance sheet, revealed

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Re: FTX balance sheet, revealed

#271

Post by jjeaff »

linuxftw wrote: post #201
pooper wrote: post #186

Earlier quoted context omitted.

Problem is that this is only apparent in hindsight. How do you tell apart Theranos and something like Color Labs[techcrunch]? Sometimes it isn't even clear in hindsight. From the outside, both are novel ideas. Both had talented workers working on novel ideas. I don't know enough/anything about biochemistry so I don't know if the vision Theranos sold was even possible but how do I know that the all public all the time…

As a lay person, it might be difficult. As a well funded VC, I'd expect due diligence beyond the level of 'let me see your balance sheet' before investing millions of dollars. One particular item of fraud was the claim that their machines were on helicopters in US-led war zones. Okay, show me the contract details for this, or some kind of evidence this is actually true, and then I will verify with the counter party t…

I don't think that Theranos had a lot of traditional VC funding. Tim Draper was the first investor and apparently neighbors with Elizabeth Holmes and pretty much the only VC I saw on the list. But he was the first investor so there may have been nothing to do due diligence on at that point. But then she got money from the DeVos family, the Waltons, Rupert Murdoch, Larry Ellison, Oppenheimers, and several other huge names.

Proof that lots of money does not necessarily make one a "sophisticated" investor. But maybe the $50m-$100m that each of those investors put in wasn't enough to be worth their time to do any due diligence.

Re: FTX balance sheet, revealed

#272

Post by jjeaff »

MarkPNeyer wrote: post #163
ShamelessC wrote: post #131

Earlier quoted context omitted.

Eh, it is _obviously_ a ponzi scheme after doing a bit of research. In this podcast he all but says it out loud. https://jaxandmartinshow.com/sam-bankman-fried-transcript/

This quote is very interesting because he seems to try and argue for its legitimacy at the end. “Is that even wrong,” he asks. You get the impression that he believes in something like a postmodern theory of value that says, you need nothing fundamental for a thing to have value. Mass appeal is sufficient. So he looks at dogecoin and thinks, like many of us: this serves no purpose and makes no sense. He simply conclu…

He's not wrong about value. Plenty of valuable things in society have not fundamental value. High end art and luxury brand clothing are two examples. And no, a $50m van Gogh does not have utility because you can enjoy it. Because you could enjoy a $200 reproduction just as well.

Re: FTX balance sheet, revealed

#273

Post by brchn »

irusensei wrote: post #105

The whole thing that is bugging me is that they made big political donations to both D and R. They use the money they conjured out of thin air and backed politicians with it. They probably backed the politicians who were most friendly to them. Those politicians might have won and that dirty money might have done a difference. Does that sound moral to you? I think it’s absolutely terrifying. Every candidate that recei…

Yes the US gov is corrupt, if that’s what you’re implying. Anonymous political donations from special interests are the primary driver of public policy.

Re: FTX balance sheet, revealed

#274

Post by vkou »

fallingknife wrote: post #158
vkou wrote: post #147

Earlier quoted context omitted.

Which exact Wall St. firms took all their customer's deposits and bet them all on the Kentucky Horse Derby, while filling their balance sheets with their own equity, and self-printed scrip? There's a lot that went wrong in 2008, but none of it looked anything like this.

MF Global edit: And a ton of others, like every major investment bank (who also used customer funds as collateral for prop bets) except that the government bailed them out.

That's a fair point. The main difference between the two seems to be one of scope, and it's ridiculous that nobody at MF Global went to prison.

Re: FTX balance sheet, revealed

#275

Post by catbird »

oldgradstudent wrote: post #253
catbird wrote: post #226

Earlier quoted context omitted.

What does it mean here that “the shareholders will take a hit?” Do the shareholders normally receive some regular payments that would stop (or be reduced) in that situation? I know nothing about finance, but the stories unfolding this week have me interested to learn more about how all this works.

The bank has deposits and capital from its shareholders. The bank promises to pay the depositors interest, and the bank collects interest from the loans it makes. If the bank made good loans, the difference between the interest it pays and the interest it collects increases the bank's capital, and at some point it may pay dividends to the shareholders. If the bank made bad loans, and some of them are not repayed, the…

Thank you for the explanation!

Re: FTX balance sheet, revealed

#276

Post by 331c8c71 »

kayamon wrote: post #199
331c8c71 wrote: post #139

Earlier quoted context omitted.

How would a regulated exchange gamble with clients money? It's even technically impossible for all they do is managing a place where participants trade.

Most banks loan their customer assets out. You money isn't sitting in a big Scrooge-McDuck money pit at Citibank -- it gets loaned back out to other people.

My point was specifically about an exchange since the claim was "Everything here could have been done with any non-crypto exchange".

I fully agree with your point about bank deposits. Unlike ftx, however, the banks are tightly regulated and monitored.

Re: FTX balance sheet, revealed

#277

Post by rvba »

landemva wrote: post #257
rvba wrote: post #173

Earlier quoted context omitted.

A central bank can go bankrupt - it cannot keep printing money forever. When we look at places with hyper-inflation, at some point people lose all their "faith" in a currency (and in the central bank). People no longer want to receive a currency that can be printed at 'no cost', because this currency will only keep losing value due to constant printing. They demand other, "hard" currency, or just use barter. Of cours…

> Zimbabwean ... banknotes and this was one my my best investments ever Great example of scarcity and price rising via collector demand. They are not making any more of those notes, and collectors are interested similar to collecting scarce baseball cards. Neither have intrinsic use nor utility, but they are scarce and people like to collect them.

I bought few of those "100 trillion dollar" banknotes since I find them cool and perhaps a bit to show off (I made an "in case of emergency break glass" type of thing to be hung on the wall). Those banknotes are unique - unless some other country gets even higher inflation, those will always be shown in every "economy 101" book, so they arent just a thing only for banknote collectors (whom I am not), but also a novelty item for general public (or at least economy students). It seems only the highest denominated bills skyrocketed in price, other bills are relatively cheap.

Supposedly there is a guy who bought a whole briefcase of those 100 trillion banknotes and makes a living by selling them on ebay.

Re: FTX balance sheet, revealed

#278

Post by lupire »

jjeaff wrote: post #272
MarkPNeyer wrote: post #163

Earlier quoted context omitted.

This quote is very interesting because he seems to try and argue for its legitimacy at the end. “Is that even wrong,” he asks. You get the impression that he believes in something like a postmodern theory of value that says, you need nothing fundamental for a thing to have value. Mass appeal is sufficient. So he looks at dogecoin and thinks, like many of us: this serves no purpose and makes no sense. He simply conclu…

He's not wrong about value. Plenty of valuable things in society have not fundamental value. High end art and luxury brand clothing are two examples. And no, a $50m van Gogh does not have utility because you can enjoy it. Because you could enjoy a $200 reproduction just as well.

Telling that your example is the most famous example of a fraudulent market.

Re: FTX balance sheet, revealed

#279

Post by lupire »

pooper wrote: post #194
codetrotter wrote: post #178

Earlier quoted context omitted.

I want to pay my taxes in BTC or ETH. I remain hopeful that one day I will be able to. Until then, fiat taxes it is.

I lost faith in cryptocurrency pretty early on because of the idea that it costs money to send or receive money. My ideal of a currency is it should be free of cost or almost free of cost to send or receive money. There was another post here about a thought experiment where someone asked if I had eight billion dollars, how can I send a dollar to every person on earth? Well, right now you can't because it costs too mu…

Yeah I'd like everything to be free. But nothing created by people is.

Re: FTX balance sheet, revealed

#280

Post by lupire »

vkou wrote: post #142
wolpoli wrote: post #47

Earlier quoted context omitted.

> Imagine if JP Morgan Chase's entire value was in JP Morgan Chase stock, and they just reported that as their value in cash. It's like recursive valuation. While I think real world finance is on much more stable ground than crypto, I thought it'll be funny to point out that many of the world's central banks back their liabilities (the currency they issue) with own government's bonds. Luckily, the bonds are denominat…

Unlike FTX, central banks have the power to create money out of thin air, while the governments that operate them have the power to create demand for money out of thin air, through taxation. Governments thus, control both the demand for, and the supply of money.

> governments that operate them have the power to create demand for money out of thin air, through taxation.

This is Modern Monetary Theory, but government never actually uses that power. Instead, they use "open market operations" on securities to manipulate money supply, and taxation for very roughly balancing spending.

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