FTX used corporate funds to purchase employee homes, new filing shows • Hacker News Board

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

#431

Post by dragonwriter » Fri, Nov 18, 2022, 10:42 AM UTC

justincormack wrote: post #214

tfehring wrote: post #194

Earlier quoted context omitted.

> I do not believe there is any credible theory that any investor could possibly have been unaware of these issues. I'm not convinced that the issues that caused Binance to back out even existed the last time FTX raised outside capital (March 2022 according to Crunchbase). My understanding is that in March, FTX had a basically normal balance sheet for a crypto exchange, with roughly enough non-FTT assets to balance a…

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.

> 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.

Despite the notional legal structure, I think the key thing is that FTX, FTX.US, Alameda Research, and the other 130 or so entities involved were mostly not, in any meaningful sense, distinct businesses, it was all just three grifters in a trenchcoat.

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

#432

Post by dragonwriter » Fri, Nov 18, 2022, 10:52 AM UTC

skippyboxedhero wrote: post #370

mikeyouse wrote: post #341

Earlier quoted context omitted.

Right. All of these "bigger than Enron" or "bigger than Madoff" claims are so dumb. Much of the money lost on FTX was in the form of magic bean tokens that people pretended were worth billions of dollars - they weren't actually worth billions of dollars.

Right, but the money lost was USD deposits. Madoff was magic beans, he just invented $50bn of money that he said he made for investors. SBF was depositing customer money into his hedge fund directly (FTX didn't even have a bank account). So this is a relatively big fraud because it was USD value multiple billions, likely near $10bn. This was money stolen directly from customers. The $1bn that SBF took directly out of…

> SBF was depositing customer money into his hedge fund directly (FTX didn't even have a bank account).

Even the CEO running the whole set of related entities in bankruptcy doesn't know which of the FTX-related entities had bank accounts and what accounts they were because they literally didn't keep records of that. Or who their employees were. Or, well, much of anything.

Probably because the whole corporate structure was a paper thin veneer over fraud, amd discussing the individual paper entities as if they were meaningfully distinct in any way is mostly missing the point.

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

#433

Post by caf » Fri, Nov 18, 2022, 11:08 AM UTC

seagullrific wrote: post #237

jerf wrote: post #54

Earlier quoted context omitted.

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…

> 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…

Temasek is a Singapore Government fund, so that's taxpayer money it lost to a savage grift. If it wasn't a one-party state where the opposition is suppressed, that might be uncomfortable for the government.

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

#434

Post by mananaysiempre » Fri, Nov 18, 2022, 11:41 AM UTC

nu11ptr wrote: post #88

jerf wrote: post #54

Earlier quoted context omitted.

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…

"FTX's books don't so much have red flags as that they are printed on red flags, with ink derived from red flags, a custom-made red cover made out of more red flags, and each page, when opened, has pop-up red flags along with a little electronic speaker that plays Red Flag by Antigoni while you get sprayed with Red Flag perfume [1]." OMG - I'm dying here. You really shouldn't have buried that at the bottom of your re…

Somewhat related Soviet joke:

A Westerner arrives in the USSR. Walks absentmindedly along the street, boom, open manhole, falls down, climbs up all covered in sewage, shouts, furious: “What the hell? Couldn’t they have put up a red flag or something like normal people?” A passerby replies: “You’re from the airport?” “Yeah.” “You’ve seen the huge red flag on the roof, right?”

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

#435

Post by wfaler » Fri, Nov 18, 2022, 12:41 PM UTC

moneycantbuy wrote: post #28

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

Honestly, I think any "smart money" managers who invested in this should be ashamed. It's absolutely an indictment of their intelligence.

The basics of due diligence is: * How is their record keeping of board decisions & financials? * What board decisions and indemnities exist in those records that may have conflicts of interest or claims from other third parties? (FTX didn't even have a board) * etc..

Furthermore, probably should raise every red flag ever for a reasonably intelligent person if some 20-somethings with a few years of experience claim they have the secret sauce to trade successfully under every possible market regime. It falls on its own implausibility and only reeks of hubris.

To understand most market regimes likely to occur, you likely need people in their late 50'ies onboard, or even older (there's a reason Buffett, Soros et al come out relatively unscathed out of most crises, while everyone else bleeds out).

This is a result of stupidity meeting easy money.

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

#436

Post by xdavidliu » Fri, Nov 18, 2022, 1:18 PM UTC

jandrese wrote: post #232

jerf wrote: post #54

Earlier quoted context omitted.

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…

What blows my mind is that SBF is going to investors asking for money in his billion dollar "no you can't look at the books" crypto hedge fund while looking like he's playing hookie from his math class and playing video games during the pitch meeting and the supposedly very serious Wall Street types went "Wow! This guy is amazing! All the money he wants and more!".

the sequioa people had no idea what he was wearing during the pitch, nor did they know at the time that he was gaming. they could only hear his voice.

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

#437

Post by whatwherewhy » Fri, Nov 18, 2022, 1:25 PM UTC

oarabbus_ wrote: post #414

skippyboxedhero wrote: post #367

Earlier quoted context omitted.

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…

It does matter, the risk calculation gets way worse once you start counting in the possibility of fraud. It's going to be 9/10 if each one of the 10 actually try their hardest to succeed. It's going to be 10/10 if fraud isn't prevented.

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

#438

Post by xdavidliu » Fri, Nov 18, 2022, 1:26 PM UTC

kevinventullo wrote: post #245

MichaelCollins wrote: post #144

Earlier quoted context omitted.

Tim Draper still supports Elizabeth Holmes: https://fortune.com/2022/01/05/venture-capital-tim-draper-el... I don't know how. Maybe he's just fucking stupid, or too prideful to admit he was wrong.

It may be less about pride and and more about reputation management. It’s the same reason Trump never admits he’s wrong; it’s simply not strategically beneficial to do so.

its also possible that ego is simply a “Kahneman type 2 brain” manifestation of unconscious reputation management, kinda like how instinctively shrinking away from large scary animals is unconscious life expectancy preservation

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

#439

Post by boppo1 » Fri, Nov 18, 2022, 3:57 PM UTC

oarabbus_ wrote: post #415

boppo1 wrote: post #369

Earlier quoted context omitted.

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...

Sure, I'm just curious how we'll deal with interest payments on our debt, especially since our economy has evolved to thrive on low rates. The hikes are necessary, but I think they're going to kill a bunch of BS jobs, meanwhile we'll have to raise taxes to service the debt. Gonna be real interesting.

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

#440

Post by skippyboxedhero » Fri, Nov 18, 2022, 5:09 PM UTC

oarabbus_ wrote: post #414

skippyboxedhero wrote: post #367

Earlier quoted context omitted.

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…

Yes, because the result here is that investor money has been stolen by employees.

Again, if you work at an equity fund and you invest in a company that was obviously fraudulent, your investors don't go: "Oh well, better luck next time...shit happens, amirite?". If this happens in a PE fund, where there is direct oversight, then I would suspect that the investors would remove you as a manager.

The only responsibility you have is to protect your shareholder's interests. Not only was this disregarded but Sequoia gave them the structure that allowed them to steal from their own investors.

I have never seen a situation like this that didn't end up in charges against the fund managers because it is such an egregious failure (this, of course, won't happen here...everyone here has donated far too much money...but I have seen this professionally).