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FTX’s Sam Bankman-Fried cashed out $300M during funding spree

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Re: FTX’s Sam Bankman-Fried cashed out $300M during funding spree

#131

Post by wslh »

slibhb wrote: post #73
thepasswordis wrote: post #42

Just a general statement on people commenting on this saga: Sam wasn't doing effective altruism. He was lying about doing effective altruism. It's weird to me that people talk about this as an indictment of EA...but this rings similar to me as claiming that this is an indictment of DeFi or cryptocurrency generally. Sam/Caroline weren't doing DeFi, and neither were they really doing anything related to cryptocurrency.…

It's an indictment of EA because many prominent EA people were associated with FTX/Sam. That shows poor judgement and, on some level, EA is about smart people making judgements about long-term good. How can we trust them to make those judgements when they decide to hitch their wagon to FTX?

I will tell three stories:

A friend of mine is part of a Mensa (top 2% IQ people) local chapter. He did that mainly for fun and no pedantic reasons.

He always tells me story of the problems they have organizing basic activities and governance for the chapter... Even when all participants have a very high IQ.

Beyond the validity of IQ, people do crazy things when trusted people, or in power positions give recommendations. Also by FOMO.

The second story is from a friend who is a second generation finance professional, knows about the complexity of investments in general and in crypto, had crypto companies, and more but was scammed in a basic way investing in a crypto fund.

The third story is about a group of business people who created successful businesses, have a WhatsApp group for recommending crypto investments: one guy recommended a DeFi project, I immediately recommended to escape from that investment because it didn't have a security audit (my field and basic due diligence) and... well the project was easily hacked.

Re: FTX’s Sam Bankman-Fried cashed out $300M during funding spree

#132

Post by adam_arthur »

jliptzin wrote: post #86

Dump your life savings into a crypto exchange based in the Bahamas, sure. But god forbid you invest $20k in a startup without being an “accredited investor”

Yeah, let the sophisticated retail investors that were buying growth and meme stocks at 100x sales go wild

Re: FTX’s Sam Bankman-Fried cashed out $300M during funding spree

#133

Post by tedmiston »

engineer_22 wrote: post #39

FBM is a loon, and everyone knew it, but as long as they were making money they looked the other way. The crypto bubble crash was directly driven by the COVID bailout. People had pockets full of money from day trading on robin hood, money flowing out of Blackrock like it was the big rock candy mountain. Nobody should be shocked, and the professional pension fund managers should be ashamed.

FBM?

Re: FTX’s Sam Bankman-Fried cashed out $300M during funding spree

#134

Post by huevosabio »

georgex7 wrote: post #114
slibhb wrote: post #73

Earlier quoted context omitted.

It's an indictment of EA because many prominent EA people were associated with FTX/Sam. That shows poor judgement and, on some level, EA is about smart people making judgements about long-term good. How can we trust them to make those judgements when they decide to hitch their wagon to FTX?

Prominent investors, politicians, athletes, etc were associated with FTX/Sam. Should we lose faith in Sequoia, etc, etc, etc?

It's a bit of a kalman update.

Many of them fully endorsed or implicitly endorsed SBF.

That SBF was revealed as a fraudster should update your belief on the quality of these people, but not outright scratch them out.

For example, I have severely downgraded my opinion of Sequoia.

Re: FTX’s Sam Bankman-Fried cashed out $300M during funding spree

#135

Post by engineer_22 »

tedmiston wrote: post #133
engineer_22 wrote: post #39

FBM is a loon, and everyone knew it, but as long as they were making money they looked the other way. The crypto bubble crash was directly driven by the COVID bailout. People had pockets full of money from day trading on robin hood, money flowing out of Blackrock like it was the big rock candy mountain. Nobody should be shocked, and the professional pension fund managers should be ashamed.

FBM?

SBF

Re: FTX’s Sam Bankman-Fried cashed out $300M during funding spree

#136

Post by JamesianP »

karmakurtisaani wrote: post #30
slap_shot wrote: post #5

> the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals. The most fascinating part of this whole story to me is just how few checks and balances there were in this company. Even without a board, did major investors not get his quarterly financials? If the leaked balance sheet was any indication of their level financial engineering cap…

I think the reason is that he was seen as a financial genius boy wonder who just understood crypto better than anyone from the "old guard". So he got away with wildly inappropriate things. More generally, we (as a society) seem to be worshiping those who make a fortune, and forget that they too are just as faulty as the rest of us. Initial innovative success gets projected to mythical proportions, and once the invest…

There is a saying that you invest in the leadership not the company. So the whole personality hype probably was indeed big for getting investment as well as keeping investors from insisting on putting their own "guys' in charge (maybe they didn't even have any experienced crypto people yet).

Overall though, this isn't really surprising. I think generally no one really knows what's going on in a private company like this if the CEO is the founder and has all the power. It's exceeding possible and common for them to mix personal and company finances. Probably the norm.

Re: FTX’s Sam Bankman-Fried cashed out $300M during funding spree

#137

Post by tedmiston »

PaulDavisThe1st wrote: post #115
jliptzin wrote: post #109

Earlier quoted context omitted.

I am saying the whole “accredited investor” thing should be abolished

So, USA makes some effort to stop ripoffs of unwitting "unaccredited" investors within the USA. Because this cannot stop ripoffs outside the USA, you propose ditching the within-borders effort?

> So, USA makes some effort to stop ripoffs of unwitting "unaccredited" investors within the USA.

The problem is that it's a dubious premise to begin with to assume that someone's knowledge or competence is tied to their salary or net worth. It's just baseless gatekeeping.

Re: FTX’s Sam Bankman-Fried cashed out $300M during funding spree

#138

Post by jiggawatts »

jliptzin wrote: post #86

Dump your life savings into a crypto exchange based in the Bahamas, sure. But god forbid you invest $20k in a startup without being an “accredited investor”

Rules like this exist only to maintain old wealth at the expense of the young.

Just like with Ponzi, you need new idiots to come along and dump their money into a pot so that the early investors can cash out.

The early investors need to be early! You can't have young idiots coming in at the beginning, they might cash out before you.

So a two-phase investment system is required: the old money that can invest early, and the new money that can be exploited by them.

Conveniently, the old money controls politics and gets to write the laws, which is why there is a law restricting only "accredited investors" as eligible for being in the first round.. the only profitable round.

A friend of mine sold a startup and spent months talking to the uber rich, people with net worths north of 500M. His eyes were opened when he realised that the entire system favours these people and the preservation and expansion of their wealth. It's not an accident. They buy these laws!

Re: FTX’s Sam Bankman-Fried cashed out $300M during funding spree

#139

Post by robswc »

wslh wrote: post #131
slibhb wrote: post #73

Earlier quoted context omitted.

It's an indictment of EA because many prominent EA people were associated with FTX/Sam. That shows poor judgement and, on some level, EA is about smart people making judgements about long-term good. How can we trust them to make those judgements when they decide to hitch their wagon to FTX?

I will tell three stories: A friend of mine is part of a Mensa (top 2% IQ people) local chapter. He did that mainly for fun and no pedantic reasons. He always tells me story of the problems they have organizing basic activities and governance for the chapter... Even when all participants have a very high IQ. Beyond the validity of IQ, people do crazy things when trusted people, or in power positions give recommendati…

Not sure if its selection bias but I've almost only heard horror stories from Mensa. Sounds great on paper but I imagine it could also attract those looking to prove something while pushing away those that are smart but less competitive.

Re: FTX’s Sam Bankman-Fried cashed out $300M during funding spree

#140

Post by JamesianP »

amanj41 wrote: post #67
colechristensen wrote: post #36

Earlier quoted context omitted.

In other words, the investors were stupid and deserved what they got. Customers were owed better, but large scale investors who don't do due diligence and end up losing their shirts deserve every bit of it.

I have to agree with this. While I don't like to victim blame usually, the VCs are too much in a position of power to truly be victims here. They absolutely could have pushed for more transparency or a board and likely would have smelled smoke when there was none

VC's also have a high risk tolerance. Not every investment is even expected to pay off. So yes from their perspective, they took a risky bet and lost.

But they'd still have a case as victims if FTX signed contracts and then violated them. Or broke laws which cost them money.

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