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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

#111

Post by wereallterrrist »

gcr wrote: post #44
gruez wrote: post #29

Earlier quoted context omitted.

There's many reasons to hate smart contracts, but this isn't one of them. The article is talking about changes to a codebase that's closed source and deployed with little scrutiny. None of this is applicable to reputable smart contract projects, which are open source and require some sort of consensus and/or vote for code changes. Using this as an argument against smart contracts makes as much sense as using the elec…

Your very post says it -- "reputable." In this field, no matter the technology, reputation and trust are everything amidst fears of rug pulls and scams, and smart contracts don't replace the need for social trust. It's hard to name any crypto organization that was seen as more reputable than FTX before this happened. If we can't even trust someone with SBF's track record, what's left?

Speak for yourself. Before I read your full comment I assumed your last line was a literal joke.

Countless charlatans have run confidence scams (cons) in the crypto space, accuring money and attention around a centralized platform, in a tech area predicated on decentralized technology.

Living through the MtGox era, watching the corners of the Internet refer to the incident for a decade and then the Shocked Pikachu faces now? I just can't.

I don't care about crypto and "the masses". I invest in things I understand, and it hasn't _burnt_ me yet. I understand crypto and it's unique value prop and it sure as hell doesn't involve investing in or putting my money into a centralized platform. And certainly not one run by the blessed-ilk of Wall Street.

Once again, ever so slight skepticism for the win. It's truly unbelievable the irrationality people engage in when they think they're in on something even when they don't actually understand it!

"The line goes up" is a cautionary tale, and yet I think some folks really missed the whole middle section talking about the psychology that the vultures (NFT, centralized exchanges, etc) are preying upon when chasing explosive growth (or riches, on the other side of the equation).

> and smart contracts don't replace the need for social trust.

idk, a (still relatively) fat stack of crypto sitting on my Ledger would disagree.

Re: A software change allowed FTX to use client money

#112

Post by lmm »

jeroenhd wrote: post #89
totalZero wrote: post #80

Earlier quoted context omitted.

It's not just crypto. The entire fintech space has an ideology that lines up far better with Silicon Valley than with Wall Street. The Wall Street mentality would dictate a very different course of action than the Silicon Valley mentality in many of the situations described in the cases brought by the DoJ and the SEC, and yet the Silicon Valley mentality seems to have been the guideline used by SBF/FTX -- perhaps bec…

This is why I'm very wary watching foreign developments in the payment space. Living in a country where contscyless payments and free instant transactions were a thing long before Apple and Google arrived with their products, these services seem to add very little except for a foreign third party. Sure, PayPal was around in case you needed to buy something online in another country, but I don't believe it's as deeply…

> How much can you really trust a company built on profiting off the failings of a basic institution underlying almost all commerce?

Meh. Being a middleman, or doing something better than companies do themselves, is the foundation of most economic value creation.

Re: A software change allowed FTX to use client money

#113

Post by spookthesunset »

andrewstuart wrote: post #85
totalZero wrote: post #80

Earlier quoted context omitted.

It's not just crypto. The entire fintech space has an ideology that lines up far better with Silicon Valley than with Wall Street. The Wall Street mentality would dictate a very different course of action than the Silicon Valley mentality in many of the situations described in the cases brought by the DoJ and the SEC, and yet the Silicon Valley mentality seems to have been the guideline used by SBF/FTX -- perhaps bec…

A license should be required to prove you understand your ethical obligations to handle anyone else's money. It's sad that the entire crypto industry happened too fast for the regulations to keep up, with the unsurprising result that vast amounts of customer money have been lost and stolen - the precise reason for regulation. I would not be surprised if many people have taken their own lives as a result of crypto los…

The only reason bitcoin and friends are “worth” anything at all is precisely because there are no regulations. If crypto companies had to play by the same rules as real fintech firms the whole thing would collapse. Why? Because the entire crypto space is nothing but hot air.

If exchanges and stuff had to play by any rules, they’d go out of business because there is no other reason for crypto’s existence but to run scams.

(Okay maybe it won’t entirely collapse but crypto certainly wouldn’t be valued anywhere near what it is now)

Re: A software change allowed FTX to use client money

#114

Post by lumost »

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…

This seems flaky at best. Either becoming an extreme lapse of judgment - or intentional ignorance. His position as a higher up makes claiming the former difficult.

Re: A software change allowed FTX to use client money

#115

Post by lmm »

wanderingmind wrote: post #101
andrewstuart wrote: post #75

The real problem behind all these crypto companies is the people who make the money have no concept of what "integrity" is. They aren't coming from a baseline assumption that their job is to protect and interests and the money of their clients. Traditional banks, for the most part, have DNA built around protecting customer interests and customer money. Crypto companies have none of that attitude - behind every one of…

You mean like how Goldman sold junk bonds to customers while knowing it was junk?

They only sell those to accredited investors - indeed, the counterparty in the famous lawsuit was a German bank who'd bragged about how they were smart traders playing with the big boys.

Re: A software change allowed FTX to use client money

#116

Post by spookthesunset »

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.

Re: A software change allowed FTX to use client money

#117

Post by mathieuh »

andrewstuart wrote: post #75

The real problem behind all these crypto companies is the people who make the money have no concept of what "integrity" is. They aren't coming from a baseline assumption that their job is to protect and interests and the money of their clients. Traditional banks, for the most part, have DNA built around protecting customer interests and customer money. Crypto companies have none of that attitude - behind every one of…

Do traditional banks protect customer interests? They may now after being forced to, but the UK government is deregulating the banking sector considerably to try and avoid losing even more face by London losing financial capital status, and I would not be surprised at all if we see banks taking stupid risks/being wilfully negligent again.

Let’s not forget that these regulations they’re getting rid of came about after 2008, when banks had to be bailed out by taxpayers around the world.

As they say, what causes more damage, the founding of a bank or the robbing of a bank?

Re: A software change allowed FTX to use client money

#118

Post by salawat »

stickfigure wrote: post #105
steveBK123 wrote: post #73

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 is not dissimilar.

"For testing purposes, these 10 account numbers should be allowed to remove cash from any of our ATMs. The testers will put the money back." It doesn't sound that nefarious. If you told me this is how ATMs are currently being tested in the industry, I wouldn't be able to contradict you.

...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.

Re: A software change allowed FTX to use client money

#119

Post by greesil »

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.

That's why I'm getting a MBA.

Re: A software change allowed FTX to use client money

#120

Post by eximius »

mathieuh wrote: post #117
andrewstuart wrote: post #75

The real problem behind all these crypto companies is the people who make the money have no concept of what "integrity" is. They aren't coming from a baseline assumption that their job is to protect and interests and the money of their clients. Traditional banks, for the most part, have DNA built around protecting customer interests and customer money. Crypto companies have none of that attitude - behind every one of…

Do traditional banks protect customer interests? They may now after being forced to, but the UK government is deregulating the banking sector considerably to try and avoid losing even more face by London losing financial capital status, and I would not be surprised at all if we see banks taking stupid risks/being wilfully negligent again. Let’s not forget that these regulations they’re getting rid of came about after…

I think it depends on the part of the organization.

The teams managing the money-handling-software care very much about protecting your cents.

The product managers inventing new fees do not.

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