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FTX used corporate funds to purchase employee homes, new filing shows

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Re: FTX used corporate funds to purchase employee homes, new filing shows

#411
post #32

This is the kind of theft that puts people in prison fast. It will take years to untangle the whole financial mess, but buying a house with company funds right before a bankruptcy is easy to explain to a jury.

>in prison fast

Maybe not too fast (or at all) for SBF though. His father is a Stanford Law professor and that doesn't come without some connection to the rest of the legal world-- and so, assuming SBF is likely to have some method of funding, a flavor of defense along these lines could keep him out of jail:

"SBF was simply an idealistic young man who tried to strike out in a new direction in the financial world. But he'd only had a year or two of experience and found himself in a crypto industry filled with scammers and VC forms eager with FOMO failed to provide the guidance or ensure proper governance as would usually be the case. And so business SBF built was very ad hoc on the inside and when things started crashing down SBF made some extremely poor but well intentioned decisions. But now? He's learned his lesson"

And then he gets his probation and a ban from working in the industry for X years. And maybe even a handslap jail sentence.

Based on what's come out so far that has some small chance of still being how he gets off the hook, but it's early days and getting worse by the tweet.

Re: FTX used corporate funds to purchase employee homes, new filing shows

#412

Earlier quoted context omitted.

It isn't necessarily that Sequoia (or any of the other VCs) had dirty money to launder. It could have also been that they wanted to use clean money for unclean purposes. To be clear: I'm just letting my mind wander in response to your question, not saying that's what happened.

I heard George Soros gave $200m to Sequoia to give to FTX to give to antifa to smuggle yellow cake disguised as children's pronouns.

No post body was provided.

Re: FTX used corporate funds to purchase employee homes, new filing shows

#413

how did ftx successfully raise so much vc money recently? do these top vc firms do no due diligence?

https://decrypt.co/114719/tumblr-blog-linked-ex-alameda-rese...

if a crypto journalist was able to find these tweets and blogs, it would indicate the VCs didn't do their due diligence on the CEO, at the least.

Re: FTX used corporate funds to purchase employee homes, new filing shows

#414

Earlier quoted context omitted.

It appears (although everything is unclear) that the 8bn hole was caused by customer dollar payments for ftx going to alameda as ftx didn’t actually have a bank account. For three years. So unclear it was ever good.

This alone is quite incredible. FTX, as a business, never actually existed. It was all just a smoke screen for his hedge fund. Employees were stealing from the company, there were no internal controls...the rules for VC are...different. If you were on a Board and this happened on your watch, you would never work on another Board again. If you did this in PE, fired. If you invested in such a public company, very likel…

I agree with you, but to play devil's advocate:

>Sequoia are a huge fund, they are one of the doyens of the industry...it isn't even that they failed, they didn't even put in place the mechanism to try to protect their investor's money. It is unbelivable.

Don't VCs typically expect 9 of 10 investments to fail, but for the one which succeeds to more than make up for the rest? From the VCs point of view, as long as the allocation to each company is balanced, does it even matter whether an investment resulted in 100% loss due to a scandalous fraud instead of "normal" company failure?

Re: FTX used corporate funds to purchase employee homes, new filing shows

#415
post #369

Earlier quoted context omitted.

If that's how unsophisticated these VC operations are then I think we'll see a lot of them lose their shirts in the coming macroeconomic environment. Which will consequently make future funding rounds all the more difficult.

Unless the Fed blinks.

Just today the Fed governors stated inflation has not been sufficiently curtailed... https://www.cnbc.com/2022/11/17/feds-bullard-says-rate-hikes...

Re: FTX used corporate funds to purchase employee homes, new filing shows

#416
post #291

Earlier quoted context omitted.

That's at least one strong reason - VCs look at the person as much as the business. Crypto was filled with sleazy car-salesman "investor" types at the time Alameda Research was looking for funding. So when in came someone with a Jane Street background and not a single flashy Ferrari in their driveway, the dam broke on VCs finally being able to pour money into the crypto space on a decent looking founder.

SBF had huge sleaze vibes, so I don't know if your logic applies. > and not a single flashy Ferrari the article mentions his $30 million dollar penthouse ... It seems the only place the flashy assets didn't exist was in the press coverage put out by organizations SBF gave money to...

>the article mentions his $30 million dollar penthouse

the $30M penthouse in the Bahamas that was purchased using investor money and customer funds... he didn't own it at the time he received funding from these big name VCs, did he?

Re: FTX used corporate funds to purchase employee homes, new filing shows

#417
post #287

Earlier quoted context omitted.

> FTX’s list of investors spans powerful and well-known investment firms: NEA, IVP, Iconiq Capital, Third Point Ventures, Tiger Global, Altimeter Capital Management, Lux Capital, Mayfield, Insight Partners, Sequoia Capital, SoftBank, Lightspeed Venture Partners, Ribbit Capital, Temasek Holdings, BlackRock and Thoma Bravo. - https://archive.ph/1tjP5 This is an extraordinary number of high-profile companies which eithe…

There's a third option: FOMO. They didn't want to look stupid later for failing to invest in case FTX turned out to be the next big thing, so they took a gamble.

This strikes me as unlikely. A VC does not look stupid for passing on an investment, even one that would've been successful. Do you think 90% of that list "looks stupid" for not having invested in Google? These big name VCs reached their status through vision, extreme due diligence, and of course luck; not from FOMOing into investments.

Re: FTX used corporate funds to purchase employee homes, new filing shows

#418

Earlier quoted context omitted.

I wonder if those other reasons simply were the guy's background and pedigree. Silicon Valley is no different than Wall Street in its obsession with having the "right" educational background, having the "right" parents, having the "right" connections and so on. So many doors in corporate hiring can be bypassed with "Went to MIT" and "Stanford parents" and I wonder if they can also be bypassed by founders looking for…

Don’t VC always say they invest in the founder not the company? It’s all about how that person makes them feel. Some argue that is why there is less diversity in VC funded companies.

Just based off that news article with how much the VCs were delighted after a call with SBF while he was playing League of Legends it certainly seems like they base most of their investing off gut feeling and "vibe check" vs actual fiscal due diligence. Which is how charismatic quirky founders like Elizabeth Holmes, Adam Neumann and now SBF keep finagling big round raises.

Re: FTX used corporate funds to purchase employee homes, new filing shows

#419
post #54

how did ftx successfully raise so much vc money recently? do these top vc firms do no due diligence?

That's one theory. Of course, given the depth of financial depravity on display here and the incredible thinness of the financial defense, one must also entertain the theory that they did do the due diligence, they were aware of how dangerous this was, and they invested anyhow for other reasons. And that those reasons are probably not good. There have been many cases where companies go to great lengths to do accounti…

I like a good conspiracy theory, but it's unrealistic to expect that the investors knew about this.

If they did, they would know there'd be a 100% chance that it would blow up.

This is some serious balance sheet depravity. This is not like the CEO buying up companies with a conflict of interest, or billing the company for their private jet. All of that is plausibly legit.

When there are no financial controls at all, money is being looted, it will go down.

VC funds normally don't do due diligence so long as some other entity did it in the round, there is legit oversight on the board etc.. in this case, their own controls failed.

All of the funds who invested in FTX need a serious audit of policy.

This is a dereliction of responsibility, not just a 'bad bet' and so heads should roll. They probably won't though.

Re: FTX used corporate funds to purchase employee homes, new filing shows

#420

Earlier quoted context omitted.

That's at least one strong reason - VCs look at the person as much as the business. Crypto was filled with sleazy car-salesman "investor" types at the time Alameda Research was looking for funding. So when in came someone with a Jane Street background and not a single flashy Ferrari in their driveway, the dam broke on VCs finally being able to pour money into the crypto space on a decent looking founder.

I am slightly baffled by this comment since my first impression of him was exactly "sleazy vibes". Not in the flashy Ferrari sense but because the look seemed to try so hard to be the opposite of flash - the nasty stretched out t-shirts, shorts and forever bed-head hair. It struck me as a contrived and something of a put on. Google "John Blutarsky Animal House." SBF appears to have patterned his look after Jon Belush…

I can confirm that this kind of look is not at all atypical in the quantitative prop trading world and it's not contrived.
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