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FTX held less than $1B in liquid assets against $9B in liabilities

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Re: FTX held less than $1B in liquid assets against $9B in liabilities

#151

Post by lotsofpulp »

memish wrote: post #136
celestialcheese wrote: post #110

How the fuck did all these high-profile investors miss this. 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. These aren't schleps in this list. Blackrock, Sequoia, Tiger, Lightspeed, the fucking NEA. Jesus. Did no one…

Appeal to authority is a hell of a drug. "I'm a big advocate for Sam because he has two parents that are compliance lawyers. If there's ever a place I can be where I'm not going to get in trouble, it's gonna be FTX" https://twitter.com/Guruleaks1/status/1591086077489844224

Or maybe that guy was spouting nonsense because he was betting he can pawn off his ownership stake onto someone else for a gain.

Re: FTX held less than $1B in liquid assets against $9B in liabilities

#152

Post by schlauerfox »

Majromax wrote: post #49
JonathanBeuys wrote: post #15

There should be more discussion about how to store value without counterparty risk. Most people think it is as easy as ordering a hardware wallet, following the process the wallet software suggests and - hurray! - your keys, your coins! But it is not that easy. You also have to cut the wallet manufacturer and the software developer out of the loop. I have yet to see a description on how to safely create a wallet that…

> There should be more discussion about how to store value without counterparty risk. > Most people think it is as easy as ordering a hardware wallet, following the process the wallet software suggests and - hurray! - your keys, your coins! What exactly is the threat model here? To my knowledge, there's been no general compromise of truly air-gapped hardware that could only exfiltrate data by a back channel in an oth…

Actually secure uses for distributed decentralized databases (cryptocurrencies) like the world bank climate warehouse are going to use proper self custody solutions that aren't 'keep this paper safe' with clawback technologies and peer to peer (escrowless) methods of transfer. This one is being built by BitTorrent creator Bram Cohen. It's me shilling but I feel I'm a supporter for a technology reason, it's not been affected by the latest madness because it's business focused tech that works. https://www.chia.net/2022/10/29/a-new-home-for-the-prefarm/

Re: FTX held less than $1B in liquid assets against $9B in liabilities

#153

Post by smeej »

oldgradstudent wrote: post #109
smeej wrote: post #101

Earlier quoted context omitted.

First, it is absolutely better to hold your own keys. That said, I don't think it's fair to say "nothing" in a situation where holding the keys means having control of the coins. FTX's problem wasn't that they had liabilities. It was that they didn't have cryptographic custody of the assets they claimed to have. They don't have the ability to make a case in court that the funds they held belong to customers and, thus…

From the Kraken terms of service: > None of the Digital Assets in your Kraken Account are the property of Payward. Payward does not represent or treat assets in your Kraken Account as belonging to Payward. However, a court may disagree with Payward’s treatment of your assets and subject them to claims of Payward’s creditors. This will be tested in court. Kraken's liabilities matter.

I didn't say they didn't matter, and I explicitly did say whether a court would agree had not been decided.

What I also said is that proof of reserves is not nothing.

Kraken has proven they do have your coins. FTX did not.

This does not mean Kraken is invulnerable. It's just not vulnerable to the vulnerability that killed FTX.

Re: FTX held less than $1B in liquid assets against $9B in liabilities

#154

Post by shawabawa3 »

epistasis wrote: post #125

This was always a Ponzi scheme, and SBF was incredibly open about it being a Ponzi scheme, and yet people still tried to beat out the Ponzi scheme. Here's SBF back in April (just a small excerpt, the full section is far more damning): > SBF: So, you know, X tokens [are] being given out each day, all these like sophisticated firms are like, huh, that's interesting. Like if the total amount of money in the box is a hun…

Except in that comment he's talking about yield farming, and he's 100% right about a lot of what yield farming products did

However he runs an exchange, not one of these magic boxes, and he was never saying or claiming that that was what ftx was doing

Re: FTX held less than $1B in liquid assets against $9B in liabilities

#155

Post by 323 »

lottin wrote: post #113
323 wrote: post #46

Earlier quoted context omitted.

It's about 200 lines of Python code to implement a Bitcoin HD (Hierarchical Deterministic) wallet using just the standard library and old-style addresses. This will give you a 256-bit integer as the private key. You can process this further with whatever additional method you want (Shamir Secret Sharing, ...). Obviously not for everybody, but the underlying cryptography is pretty simple.

This method doesn't eliminate counter-party risk does it? You'd need to use open-source hardware, write your own C compiler in assembler, then write a Python interpreter, along with the standard library and cryptographic functions, and finally the actual wallet, while making sure your code isn't compromised during the entire process. I forgot the OS, which also needs to be written from scratch.

Nobody wrote their own C compiler, OS, for bitcoin, yet no such wide-spread attacks happened.

BTW, this logic also applies to everything else - all websites in the world are hackable if the website owner doesn't write their own compilers, OSes, ...

Re: FTX held less than $1B in liquid assets against $9B in liabilities

#156

Post by mkl »

onphonenow wrote: post #145
celestialcheese wrote: post #121

Earlier quoted context omitted.

The timing of the big investments back in Oct '21 for their Series B and Jan '22 for Series C makes your guess seem likely. Seems like most of the actual fraud started after the 3AC/TerraLuna blowup as SBF trying to trade out of the hole he was in.

I’m slightly curious if Sam had a personal relationship with someone at alameda? He took a pretty straightforward way to make money (charge fees running an exchange) and then looks to have dumped money into an absolute black whole of illiquidity and stupidity at alameda which was run by Caroline ? Even if alameda was making smart seed round investments- the liquidity horizons make no sense for an exchange to be part…

That seems to be known: "Alameda CEO Caroline Ellison, whose firm played a central role in the company’s collapse – and who, at times, has dated Bankman-Fried" - https://fortune.com/2022/11/11/sam-bankman-fried-crypto-empi...

Re: FTX held less than $1B in liquid assets against $9B in liabilities

#157

Post by cplusplusfellow »

onphonenow wrote: post #145
celestialcheese wrote: post #121

Earlier quoted context omitted.

The timing of the big investments back in Oct '21 for their Series B and Jan '22 for Series C makes your guess seem likely. Seems like most of the actual fraud started after the 3AC/TerraLuna blowup as SBF trying to trade out of the hole he was in.

I’m slightly curious if Sam had a personal relationship with someone at alameda? He took a pretty straightforward way to make money (charge fees running an exchange) and then looks to have dumped money into an absolute black whole of illiquidity and stupidity at alameda which was run by Caroline ? Even if alameda was making smart seed round investments- the liquidity horizons make no sense for an exchange to be part…

He lived with the CEO of Alameda and is said to be in a polyamorous relationship with her. He’s also co-CEO.

Re: FTX held less than $1B in liquid assets against $9B in liabilities

#158

Post by oldgradstudent »

smeej wrote: post #153
oldgradstudent wrote: post #109

Earlier quoted context omitted.

From the Kraken terms of service: > None of the Digital Assets in your Kraken Account are the property of Payward. Payward does not represent or treat assets in your Kraken Account as belonging to Payward. However, a court may disagree with Payward’s treatment of your assets and subject them to claims of Payward’s creditors. This will be tested in court. Kraken's liabilities matter.

I didn't say they didn't matter, and I explicitly did say whether a court would agree had not been decided. What I also said is that proof of reserves is not nothing. Kraken has proven they do have your coins. FTX did not. This does not mean Kraken is invulnerable. It's just not vulnerable to the vulnerability that killed FTX.

> This does not mean Kraken is invulnerable. It's just not vulnerable to the vulnerability that killed FTX.

FTX could have borrowed using these assets as collateral, and the result would have been very similar, but FTX could have posted a proof of reserves.

You're right that the court would have had more freedom to act, though.

In any case, the news about the supposed hack may make the argument moot.

Re: FTX held less than $1B in liquid assets against $9B in liabilities

#159

Post by FerociousTimes »

fullsend wrote: post #141
pigtailgirl wrote: post #123

Earlier quoted context omitted.

-- a 30 year old personally has $600MM to invest in a single company? - his startup was founded in 2019 - that was crazy comp structure he had? - he comes from money? - or..? --

Already the world of founders, funding, and venture capital is full of incestuous relationships and shady dealings. I can’t imagine what happens when you combine that kind of capital with the utter shamelessness and obtuse financial engineering of the cryptocurrency space.

By incestuous, do you mean full-blown incest literally or just plain cronyism and good old boys' club?

Re: FTX held less than $1B in liquid assets against $9B in liabilities

#160

Post by jasmer »

JonathanBeuys wrote: post #15

There should be more discussion about how to store value without counterparty risk. Most people think it is as easy as ordering a hardware wallet, following the process the wallet software suggests and - hurray! - your keys, your coins! But it is not that easy. You also have to cut the wallet manufacturer and the software developer out of the loop. I have yet to see a description on how to safely create a wallet that…

You cannot 'store value' without some counterparty risk because ultimately the value you store, has to be 'valuable' to some other person, likely many of them.

Money/Credit is a social construct; not objectively separate from the system in which it's 'useful'.

If you really want to - you can store Gold in safe. How hard is that? It's relatively easy. A bit annoying, but plausible.

Of course, you have to be sure that others will value Gold in the future. There's no formal 'counterparty' in the specific sense you're alluding to (if the gold is under your bed) but the inherent value of the stored good depends on a 'counterparty'.

You can buy Real Estate, a bit of a pain and dependent on a bunch of laws, but that's an option.

Or any other thing.

All of it ultimately depends on 'counter party' and 'contextual' issues.

I think that this is a serious problem among the 'Self Sovereign' thinking - in pragmatic reality - there is no such thing. At least not in the sense of things like 'currency' or even 'stores of value' to be deployed commercially.

(You can 'store' things like fuel for your own future consumption, but that's a different story)

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