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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

#291

Post by headsoup »

malandrew wrote: post #221
salawat wrote: post #118

Earlier quoted context omitted.

...A bench test of an ATM probably doesn't involve real money. No one in finance is stupid enough to use real money on production environments for testing purposes. There is test... And there is PROD. Never do the two meet. Ever. If someone out there does, please make yourself known so we can get the investigators over there ASAP.

You can test in production if you have multi-tenancy aware services, where tenancy is some string value like Foo to make sure reads to Foo can only read data that was written to Foo.

That's not testing in production, that's just the same as saying your test VMWare environment is in the same datacentre as your prod VMWare environment.

Re: A software change allowed FTX to use client money

#292

Post by camgunz »

t0suj4 wrote: post #257
TheNorthman wrote: post #243

Earlier quoted context omitted.

Probably because the whole Topf & Söhne debacle doesn't need repeating? Engineers are of course partly responsible for the things they implement.

Why should be someone responsible for how the product of their labor is being used?

Most things are ambiguous, so you can have an argument about what intent was. Even things like firearms, you can say, "well, I made this gun so people can use it in self defense".

This seems pretty unambiguous though. Sometimes you're just facilitating breaking the law, or making things dangerously unsafe.

Re: A software change allowed FTX to use client money

#293

Post by headsoup »

mertd wrote: post #129
geoduck14 wrote: post #125

Earlier quoted context omitted.

>If Jamie Dimon asked a developer at the bank "hey can you have Chase ATMs allow these 10 accounts that are in my name to withdraw unlimited funds?" everyone involved would be in jail. This isn't true I worked for a large bank. I managed data for their mortgages. We bought another bank and processed their mortgages with our systems. There were several thousand accounts that we called "friends of the " because they ha…

I fail to see the equivalence. These are just loans with weirdly favorable terms. If the other bank had shareholders, then this would be a breach of the fiduciary duty. Otherwise it's just bad business? Bad business != fraud.

Isn't it fraud if you're telling you're customers you don't and can't do this?

Re: A software change allowed FTX to use client money

#294

Post by headsoup »

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 work in a company where there is no one that has some idea about the laws that apply to what you do that you could check with, you would be a little concerned.

Re: A software change allowed FTX to use client money

#295

Post by vintermann »

ithinkso wrote: post #265
t0suj4 wrote: post #257

Earlier quoted context omitted.

Why should be someone responsible for how the product of their labor is being used?

That's why be don't deserve the title of engineer in software and we should stick with coder or programmer. 'Hi mate. We just bought this rebar from Alibaba, saved as a ton of money. Could you sign here real quick? We need to finish that bridge!'

Engineer doesn't imply honesty. In those jurisdiction where it's a protected title, it just implies that you have some mix of STEM topics in your degree. Software engineers, in these jurisdictions, have that mix, and are as real as bioengineers (a.k.a hospital lab workers), chemical process engineers, construction engineers, etc.

No one has had their engineer title taken away for being a crook, as far as I know. Unless the crooked thing they did was fake their diploma.

Titles won't fix this.

Re: A software change allowed FTX to use client money

#296

Post by PeterisP »

silasdavis wrote: post #286
meltedcapacitor wrote: post #203

Earlier quoted context omitted.

Crypto is flooded with liquidity so market making is like selling ice to an eskimo. These days a naive market making strategy in crypto just incinerates capital very reliably as the tiny bid ask spread is a small fraction of the adverse selection risk (whole spread moving past). They did probably make money on this in the early days and got smoked when the sophisticated tradfi players joined. Front running large trad…

How is information on order books non public? Usually crypto order books are public APIs.

It depends on the time, it's public after the fact, but not-public during the time gap where someone like Alameda could do front-running by managing to get in other transactions before the loser's orders get executed, or before any others get the chance to take that order.

Re: A software change allowed FTX to use client money

#297

Post by roenxi »

TheNorthman wrote: post #243
rxhernandez wrote: post #220

Earlier quoted context omitted.

Should an engineer be tracking what their company is telling media outlets? No one else is tasked with looking at my code except other engineers; why should engineers spend their precious time making sure that other business units are performing their duties ethically?

Probably because the whole Topf & Söhne debacle doesn't need repeating? Engineers are of course partly responsible for the things they implement.

> Engineers are of course partly responsible for the things they implement.

That is outrageous. The company owners have limited liability protections. The employees should receive at least that unless they are in a position that requires specific legal training like an engineer legislatively appointed to be responsible for some safety function. Where they are appointed and remunerated specifically for their legal responsibility, in other words.

And the court cases after WWII are hardly reliable precedent. They were basically making it up as they went with fairly flimsy justification apart from the fact they had a bunch of troops still in fighting form.

Re: A software change allowed FTX to use client money

#298

Post by darkerside »

helsinkiandrew wrote: post #93
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…

> Singh will definitely get prison time as well Remember Alamada wasn’t a normal customer. It was acting as a market maker/counterparty of last resort to many other FTX customers. In that case there could be situations where ‘normal customer liquidation rules’ shouldn’t apply - it can go in the red temporarily to enable others to trade (and FTX to make commission). From the facts in the article (which are obviously n…

Singh was the chief engineer for a major exchange. It's his job to know better than this.

If the chief engineer for NASDAQ put in a backdoor to allow a market maker unlimited margin, would you assume they just figured it was legit because someone said so?

He knows how markets work too well for a defense like that.

Re: A software change allowed FTX to use client money

#300

Post by neomantra »

silasdavis wrote: post #286
meltedcapacitor wrote: post #203

Earlier quoted context omitted.

Crypto is flooded with liquidity so market making is like selling ice to an eskimo. These days a naive market making strategy in crypto just incinerates capital very reliably as the tiny bid ask spread is a small fraction of the adverse selection risk (whole spread moving past). They did probably make money on this in the early days and got smoked when the sophisticated tradfi players joined. Front running large trad…

How is information on order books non public? Usually crypto order books are public APIs.

Some examples of hidden information that doesn't generally get disseminated in exchange orderbook APIs:

* Attribution: who's making the order?

* Short labelling... are they selling or shorting?

* Non-display or iceberg orders (not common in crypto?)

* Immediate-or-cancel orders... the executions hit the feed, but not the original order details. Also whiffs (order but no fill) don't get disseminated in any way.

* Certain order types that may rest on the exchanges order book but either don't have a specific price or display doesn't make sense... market orders, midpoint orders, pegged orders, auction order books (less common in crypto)

EDIT: On the attribution side -- they could also know the leverage any customer is taking and use that adversarially (which was the straw that broke their camel).

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