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A software change allowed FTX to use client money

reuters.com

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Re: A software change allowed FTX to use client money

#181

Post by xg15 »

megablast wrote: post #161
hn_throwaway_99 wrote: post #23

> Only Singh, Bankman-Fried and a few other top FTX and Alameda executives knew about the exemption in the code, according to three former executives briefed on the matter. A digital dashboard used by staff to track FTX customer assets and liabilities was programmed so it would not take into account that Alameda had withdrawn the client funds, according to two of the people and a screenshot of the portal that Reuters…

> If you want to see what you should never do as a software engineer if you like not being in jail, this is it. Strange comment. Are the engineers who made the code change responsible?? Do engineers need to be lawyers and financial gurus too, and evaluate every ticket they are given for possible illegality in every country the software is used??

"I was only following orders" is generally seen as a bad defense since the end of WW2.

Re: A software change allowed FTX to use client money

#182

Post by everfree »

spookthesunset wrote: post #116
roland35 wrote: post #12

And this is what really ruins crypto to me. With no actual legal protection, no trust, "code is law", am I expected to keep up with every pull request? And of course these exchanges are completely opaque on top of that.

Crypto only exists because it is unregulated. If it had to play by ethical, moral rules the entire space would collapse. The sole purpose of crypto is fraud. You take away the fraud and you get nothing but a solution in search of a problem.

Do you really believe that when Satoshi originally sat down to write the Bitcoin source code, he was thinking "I am going to write an open source software tool that's purpose-built for committing fraud"?

Re: A software change allowed FTX to use client money

#183

Post by everfree »

gcr wrote: post #45
rafale wrote: post #18

Earlier quoted context omitted.

This is not crypto, this is Enron, Theranos and Madoff. In DeFi, you check the code once, and that's what gonna run (exception being proxy contracts, but those are a red flag in itself).

Remember what happened with the 2016 Ethereum DAO? Even expert programmers aren't able to check smart contracts for all possible issues.

Expert programmers in a programming language that at the time had no tooling and had only existed for less than one year? No such thing.

Re: A software change allowed FTX to use client money

#184

Post by rjzzleep »

jack_pp wrote: post #149
adrr wrote: post #146

Earlier quoted context omitted.

I never understood why Alameda took risky bets when it could just make a bunch of cash off buy/ask spreads assuming trading volume was decent. Running the exchange they can front run any large trades and move the market.

Arrogance, they thought they were smarter than the market. There are people who make a living playing poker that are not intellectually gifted. Their secret? Do as you say, play boring, safe strategies that will guarantee you will make money in the long run. They might not run up 1000$ to 10000$ very often but they sure do win. However, remove discipline, add intellectual ability and an abundance of overconfidence an…

Judging from some of the videos that circulated from the Alameda CEO I'd say it's also a significant portion of incompetence. I'm not going to guess which one was more though.

Re: A software change allowed FTX to use client money

#185

Post by galaxyLogic »

arcbyte wrote: post #36
alar44 wrote: post #31

Earlier quoted context omitted.

Really? I feel like intent would be really hard to prove. "Hey, due to the way our accounting works I need you to subtract X from our dashboard." "Ok boss." Are programmers expected to know finance law? If I build a program for a dairy farmer am I supposed to know the laws of the interstate dairy trade? I can't believe that would be the case.

Developers need to know the business better than the business people. Always. Otherwise you can't implement the software very well.

I would say no. They just need to know how to implement what they are asked to implement.

Say you are an engineer working for a gun manufacturer. You need to know how to manufacture the gun. You don't need to know what it is used for or by whom or even how much it is sold for.

If you are aware that a crime is going on you in principle are required to report it, but not doing so is not nearly at the same level of crime as actually doing the crime. So here I think the court will look at two things?

Did the engineer know that a crime was being committed?

Did the engineer personally benefit from the proceeds of the crime more than their ordinary salary?

I am not a lawyer though so don't take my advise.:-)

Re: A software change allowed FTX to use client money

#186

Post by baq »

megablast wrote: post #161
hn_throwaway_99 wrote: post #23

> Only Singh, Bankman-Fried and a few other top FTX and Alameda executives knew about the exemption in the code, according to three former executives briefed on the matter. A digital dashboard used by staff to track FTX customer assets and liabilities was programmed so it would not take into account that Alameda had withdrawn the client funds, according to two of the people and a screenshot of the portal that Reuters…

> If you want to see what you should never do as a software engineer if you like not being in jail, this is it. Strange comment. Are the engineers who made the code change responsible?? Do engineers need to be lawyers and financial gurus too, and evaluate every ticket they are given for possible illegality in every country the software is used??

But if you only told someone to do it and haven’t actually done it yourself, are you guilty of breaking the law?

Yes, you are. Splitting responsibility between those who give orders and those who follow them to avoid penalties is exactly why both are persecuted and put in jail.

Re: A software change allowed FTX to use client money

#187

Post by ilikehurdles »

megablast wrote: post #161
hn_throwaway_99 wrote: post #23

> Only Singh, Bankman-Fried and a few other top FTX and Alameda executives knew about the exemption in the code, according to three former executives briefed on the matter. A digital dashboard used by staff to track FTX customer assets and liabilities was programmed so it would not take into account that Alameda had withdrawn the client funds, according to two of the people and a screenshot of the portal that Reuters…

> If you want to see what you should never do as a software engineer if you like not being in jail, this is it. Strange comment. Are the engineers who made the code change responsible?? Do engineers need to be lawyers and financial gurus too, and evaluate every ticket they are given for possible illegality in every country the software is used??

In some cases, yes, they are held responsible. When I was trained on HIPAA compliance lawyers made it clear that individual employees could be held responsible for some violations. And yes, we restricted service availability based on region until we achieved compliance with GDPR and various regional PII/PHI data export laws.

I work in another regulated industry today, and throughout the year sign off on understanding various regulations and trainings of 3 letter agencies, that are essentially in place to indemnify the company in case of a violation. I’d expect financial services follows similar steps.

Re: A software change allowed FTX to use client money

#188

Post by ApolloFortyNine »

falcolas wrote: post #4

> Bankman-Fried had directed subordinates to update the software in mid-2020 to enable Alameda to maintain a negative balance on its account, the SEC complaint said. And thus do we have another piece of evidence for why morals and ethics matter, even for software developers. I doubt they'll end up with liability, but I do hope they at least recognize and think about how their actions enabled this whole mess.

>And thus do we have another piece of evidence for why morals and ethics matter,

It sounds like there's plenty of other evidence, but allowing a 'negative balance' hardly sounds like a smoking gun.

A negative balance is often how credit is displayed.

>Since Alameda didn't have the funds to meet these requests, Bankman-Fried directed Alameda to tap its "line of credit" with FTX to obtain billions of dollars in financing, the complaint said

The article actually says as much. Now as Chief Engineer it's possible he was aware it was a scam, but it's also possible he was just told they have an arrangement with Alameda that allows them to maintain a credit line.

Re: A software change allowed FTX to use client money

#189

Post by baq »

megablast wrote: post #165
jacquesm wrote: post #157

Earlier quoted context omitted.

Ignorance of the law is never an excuse if you are found to be breaking the law. So if you think what you are doing is possibly in violation of the law you better bone up or ask a lawyer for a statement on letterhead that what you are doing is ok.

So every dev needs to also be an expert lawyer and financier??? OK.

If you are in finance or law it is a good idea to know what you can go to jail for. Engineers are people and people can go to jail for breaking laws they didn’t know about.

Re: A software change allowed FTX to use client money

#190

Post by joshlemer »

xg15 wrote: post #181
megablast wrote: post #161

Earlier quoted context omitted.

> If you want to see what you should never do as a software engineer if you like not being in jail, this is it. Strange comment. Are the engineers who made the code change responsible?? Do engineers need to be lawyers and financial gurus too, and evaluate every ticket they are given for possible illegality in every country the software is used??

"I was only following orders" is generally seen as a bad defense since the end of WW2.

This is why I don't get why the phrase/excuse/justification "I'm just doing my job" is so commonly used.
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