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FTX tapped into customer accounts to fund risky bets, setting up its downfall

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Re: FTX tapped into customer accounts to fund risky bets, setting up its downfall

#401

Post by Fnoord »

siftrics wrote: post #375
stouset wrote: post #365

Earlier quoted context omitted.

> If you are the only person in the world with the private key to your coins, you are the only person who can move them. Period. Right up to the moment you lose your laptop in a fire, forget the password to your wallet, accidentally run malware on your personal computer, etc. Or if you die and haven't gone through the complication of setting up a way for your heirs to gain control of your accounts. Yes, you can take…

Totally valid criticism. But blaming blockchain for the failures of centralized finance, which we've seen time and time again throughout all of history, is literally intentional deception. If a politician or lawmaker or business person blames blockchain for this, it is FRAUD. Full stop.

All these blockchain cryptocurrencies end up being traded on unregulated exchanges. These don't have same protection and requirements as banks. They are a wild west. And why do people use these exchanges so much versus blockchain? Because blockchain is highly inconvenient. I mean for starters how on earth is it user-friendly to require the entire thing on a device, requiring synchronization as well. It also requires a high quality always-on connection.

Re: FTX tapped into customer accounts to fund risky bets, setting up its downfall

#402

Post by [deleted] »

lavezzi wrote: post #131
FormerBandmate wrote: post #124

Earlier quoted context omitted.

Sequoia did a nauseating, hilarious puff piece on him a couple months ago and this guy sounds like Adam Neumann’s second coming. https://www.sequoiacap.com/article/sam-bankman-fried-spotlig...

Will need the Wayback Machine as they are trying to damage control: https://web.archive.org/web/20221027180943/https://www.sequo...

[deleted]

Re: FTX tapped into customer accounts to fund risky bets, setting up its downfall

#403

Post by furyofantares »

pge wrote: post #164
largepeepee wrote: post #158

Earlier quoted context omitted.

Really shows how little oversight any of these venture funds have. They come across more like frat bros with huge pockets casually giving away billions under a pinky promise of eventual returns. At this point, they are doing the same level of DD as those degens in WSB. But I guess you don't have much leverage when the fed is printing trillions for years and we end up with dozens of Zuckerberg types, too much power an…

It is dangerous to extrapolate from one case (or even a few notable cases in recent years) that venture funds have "little oversight" over portfolio companies. These are the exceptions rather than the rule. Obviously, some boards are better than others at oversight, but the complete absence of a functioning board, as was the case at FTX, is definitely very, very unusual.

What's dangerous about that?

Re: FTX tapped into customer accounts to fund risky bets, setting up its downfall

#404

Post by rglover »

y04nn wrote: post #362
shmatt wrote: post #29

Earlier quoted context omitted.

>The first $10,000 USD value in your deposit wallets will earn 8% APY (This is what FTX was offering customers) And now we know the accounts weren't actually covered by real money (or "value" as they called it). So when person X was asking FTX for their money back, FTX would send person X+1's money to cover Sounds like a Ponzi to me

I find it very ironic that Satoshi created Bitcoin with the objective to be more resilient than banks, with the famous genesis block containing "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks". A decade later, the bitcoin creation generated an entire industry of "crypto banks" that are opaque, played with customers money and went bankrupt.

It's a beautiful lesson in human behavior and greed. You're given a perfect form of money (Bitcoin) that you can safely hold with minimal effort and your shortsighted greed ("yield farming") forces you to lose it all to a conman.

The silver lining to all of this is that people might actually start listening to Bitcoin maxi's after this year.

Re: FTX tapped into customer accounts to fund risky bets, setting up its downfall

#405

Post by WalterSear »

wefarrell wrote: post #231
chlodwig wrote: post #151

From the article: "FTX Chief Executive Sam Bankman-Fried said in investor meetings this week that Alameda owes FTX about $10 billion, people familiar with the matter said. FTX extended loans to Alameda using money that customers had deposited on the exchange for trading purposes, a decision that Mr. Bankman-Fried described as a poor judgment call, one of the people said." In the FTX International terms of service ( h…

I’m pretty ignorant when it comes to this space. Do they not have any kind of compliance structure? In hindsight it seems pretty obvious that this sort of thing would happen without it.

That's the whole promise of the thing.

Think how much cheaper and faster cars could be, if we didn't have to spend resources on seatbelts and catalytic converters. The entrenched car hegemony are in bed with the government to keep the little guy down by requiring these things.

Re: FTX tapped into customer accounts to fund risky bets, setting up its downfall

#406

Post by nmfisher »

criddell wrote: post #137
reso wrote: post #105

Earlier quoted context omitted.

SEC often asserts jurisdiction over anything where American domiciled investors have suffered a large loss. That bar will definitely be met here.

SBF says US customers are not affected by this. > This was about FTX International. FTX US, the US based exchange that accepts Americans, was not financially impacted by this shitshow. > It's 100% liquid. Every user could fully withdraw (modulo gas fees etc). https://twitter.com/SBF_FTX/status/1590709195892195329

I wouldn't believe a word SBF says, I'm pretty sure the guy is a pathological liar:

https://twitter.com/WatcherGuru/status/1590773534615572481

Re: FTX tapped into customer accounts to fund risky bets, setting up its downfall

#407

Post by arkis22 »

jcpham2 wrote: post #96
shmatt wrote: post #29

Earlier quoted context omitted.

>The first $10,000 USD value in your deposit wallets will earn 8% APY (This is what FTX was offering customers) And now we know the accounts weren't actually covered by real money (or "value" as they called it). So when person X was asking FTX for their money back, FTX would send person X+1's money to cover Sounds like a Ponzi to me

FWIW I have difficulty distinguishing the difference between a Ponzi scheme and "The Time Value of Money" concept itself. Every place I see that offers interest on crypto deposits, I fear they have no business plan to generate the profits to pay the interest on a deflationary fake internet money in the first place. My fear is they are just Ponzi-ing on Wayne! seeking the next highest interest rate holding the biggest…

The concepts bleed into each other, but Matt Levine explains it well. The Ponzi scheme is unsustainable. it gives you a solvency problem, your assets are bad and no amount of time will help. With fractional reserve banking run on banks usually come down to a liquidity problem, everyone wants their money now and you don't have all of it. So you call up someone with cash, like the FED, and theyll lend to you because you are a chartered, regulated bank.

basically the difference is asset quality and proper accounting. Banks are similar to ponzis, but they are HIGHLY regulated to ensure their continued operation.

Re: FTX tapped into customer accounts to fund risky bets, setting up its downfall

#408

Post by bcbrown »

lavezzi wrote: post #131
FormerBandmate wrote: post #124

Earlier quoted context omitted.

Sequoia did a nauseating, hilarious puff piece on him a couple months ago and this guy sounds like Adam Neumann’s second coming. https://www.sequoiacap.com/article/sam-bankman-fried-spotlig...

Will need the Wayback Machine as they are trying to damage control: https://web.archive.org/web/20221027180943/https://www.sequo...

A nice quote that seems rather relevant right now: > To do the most good for the world, SBF needed to find a path on which he’d be a coin toss away from going totally bust.

Re: FTX tapped into customer accounts to fund risky bets, setting up its downfall

#409

Post by baobabKoodaa »

dools wrote: post #312
chlodwig wrote: post #151

From the article: "FTX Chief Executive Sam Bankman-Fried said in investor meetings this week that Alameda owes FTX about $10 billion, people familiar with the matter said. FTX extended loans to Alameda using money that customers had deposited on the exchange for trading purposes, a decision that Mr. Bankman-Fried described as a poor judgment call, one of the people said." In the FTX International terms of service ( h…

> banks at least tell you they are loaning your deposits out Side not but that’s not really how banking works. Banks create deposits when they originate loans and separately look for the assets they need in order to satisfy any regulatory requirements and net flows of funds for inter bank settlements. https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/m...

No, when you take a loan out of a bank, the bank doesn't "create deposits" that it loans to you. The bank loans you existing deposits. The method by which banks end up creating money is less dramatic than you think. I wrote a long-form explainer here: https://www.attejuvonen.fi/money-out-of-thin-air/

Re: FTX tapped into customer accounts to fund risky bets, setting up its downfall

#410

Post by muxator »

cma wrote: post #322
chironjit wrote: post #294

Earlier quoted context omitted.

This is the correct answer. When you move your tokens into a centralised exchange like FTX, your funds are pooled with everyones deposit. There are always deposits and wihdrawals, and of course maybe you traded your tokens for another before withdrawing. So its hard to parse how much customers deposited vs genuinely withdrew, and so you cant really tell if the exchange is short unless they declare their actual assets…

From the Sequoia puff-piece: > Something of the sort must happen eventually, as the current system, with its layers upon layers of intermediaries, is antiquated and prone to crashing—the global financial crisis of 2008 was just the latest in a long line of failures that occurred because banks didn’t actually know what was on their balance sheets. Crypto is money that can audit itself, no accountant or bookkeeper need…

I'd like to read this in context; do you know where this declararion could be found? Who is speaking? Thanks!
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