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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

#461

Post by LeafGuild »

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.

Well I'm not a politician or lawmaker and I have no problem blaming blockchain for this. I'm technically a "business person" because I have a job, but technically all crypto people who intend to use it to make money are also business people. The way bitcoin and all its friends are designed is intentionally done so in a way that allows centralized entities to run amok and cause havoc without any accountability until the entire thing collapses. It's blockchains that are the fraud. The designers of blockchains, including Satoshi, were aware of these problems and the risks of the system becoming unstable or getting targeted by scammers. They went forward with their designs anyway knowing the risks. Because they thought they were better than the central banks and they wanted to say they were sticking it to the man. How were they better though, when their inventions gave way to one giant fraud after another in a shockingly small amount of time? These Enron-level and WorldCom-level events are a weekly occurrence in crypto.

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

#462

Post by bmitc »

laluser wrote: post #456
bmitc wrote: post #427

Earlier quoted context omitted.

Reminds me of this: https://youtu.be/HQhmGIW7MVU Also, does he not have lawyers or public relations?

I'm sure he thinks he doesn't need one because he is 'acting in good faith'. Completely delusional.

It really does look like he got caught up in something and completely lost track of reality basically. It's like those dreams, that at least I have, where you have some problem that you're solving and almost there but everything you try can't finish it, and then all of the sudden you wake up and have no idea what you were even trying to solve.

It really shows how the media, these VCs, these paper billionaires, and their followers get caught up in hype storms that sort of self-perpetuate until they hit land.

What's even crazier is that both of his parents are law professors.

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

#463

Post by easytiger »

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…

Everyone should read that article. The delusion is insane

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

#464

Post by tartoran »

phas0ruk wrote: post #278
Digory wrote: post #235

Earlier quoted context omitted.

So if the chain is supposed to enable "trustless" finance, what enabled Alameda to take anything? Seems Alameda and its clients should be screwed, but FTX's holders should be relatively easy to identify and restore. But everyone seems to say that's not the case. So what broke down here? Why isn't the ledger ledgering?

FTX is a centralised exchange, it is not routing all customer trades on chain. It’s not a blockchain failure, it’s just a lack of client asset segregation by a traditional centralised trading house.

Whats the difference between FTX and Coinbase for example? Couldn’t coinbase pull the same move?

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

#465

Post by 3327 »

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…

No post body was provided.

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

#466

Post by colechristensen »

phas0ruk wrote: post #278
Digory wrote: post #235

Earlier quoted context omitted.

So if the chain is supposed to enable "trustless" finance, what enabled Alameda to take anything? Seems Alameda and its clients should be screwed, but FTX's holders should be relatively easy to identify and restore. But everyone seems to say that's not the case. So what broke down here? Why isn't the ledger ledgering?

FTX is a centralised exchange, it is not routing all customer trades on chain. It’s not a blockchain failure, it’s just a lack of client asset segregation by a traditional centralised trading house.

It is a blockchain failure in that blockchains in general cannot actually support transactions like this. There's too much volume and there are fees.

It is also a regulatory failure, there are reasons this kind of dipping into customer funds is quite illegal in the US. FTX should not have been reachable by US citizens (funding should have been impossible) _or_ FTX should have been sanctioned _by_ the US. There is no reason at all that rogue financial institutions should be allowed to transact with American-regulated banks. If you want to do business in the finance sector with Americans you need to be regulated. Any argument to the contrary is very clearly contradicted by the series of crypto, defi, etc. failures in which gullible Americans lost tons of money while institutions they trusted violated common sense rules that every traditional financial institution in the US must abide by.

If you want to have freedom from this kind of regulation, you have to live in a world where these kinds of failures and frauds don't happen. Clearly they happen over and over without competent government watching them.

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

#467

Post by colechristensen »

tartoran wrote: post #464
phas0ruk wrote: post #278

Earlier quoted context omitted.

FTX is a centralised exchange, it is not routing all customer trades on chain. It’s not a blockchain failure, it’s just a lack of client asset segregation by a traditional centralised trading house.

Whats the difference between FTX and Coinbase for example? Couldn’t coinbase pull the same move?

Coinbase is a public company trading in the US, they are registered and regulated by the US. Reporting and auditing requirements make this kind of fraud much less likely and punishable earlier than collapse. Shareholder groups or the SEC suspecting this kind of fraud have many avenues to prevent, change, and punish this kind of fraud.

FTX was based in the Bahamas.

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

#468

Post by Nursie »

rglover wrote: post #452
Nursie wrote: post #435

Earlier quoted context omitted.

> You're given a perfect form of money Ha, wow. Yeah no, Bitcoin is not a perfect form of money at all. It- - uses vast amounts of energy - can only process a few TPS - confirms slowly - has limited quantities which warps economies - is irreversible in cases of theft or fraud - is lost forever if you lose your keys And that's just off the top my head. I get what you're saying - "not your keys not your coins", but the…

- uses vast amounts of energy Bank branches, ATMs, armored cars, computer systems for the banks, computer systems for card processors, credit rating firms, etc. Bitcoin replaces all of that and, comparatively, for significantly less energy. This is a surface-level argument intended for shortsighted thinkers. - can only process a few TPS - confirms slowly On main net. Lightning network can outpace Visa. - has limited…

> Bitcoin replaces all of that

No, it doesn't, it doesn't offer 1% of the services those things you mentioned can offer.

> This is a surface-level argument intended for shortsighted thinkers.

Yes, that describes your argument perfectly.

> On main net. Lightning network can outpace Visa.

The fact the lightning network needs to exist shows flaws in bitcoin, or lightning wouldn't be required. Lightning also has massive flaws and is unlikely to be able to scale very far due to routing issues, and requiring the locking of funds. Its main utility seems to be for people to handwave away problems with bitcoin.

> By warp, you actually mean makes them fair and natural.

No, we have a lot of history to show us currency that is in limited amounts is a very poor idea, favouring and rewarding those who hold the tokens over those who actually produce.

> Which is good. It makes you value it. If I hold all of my money in cash and have a house fire, it's lost forever. No difference.

Wow. This is why people don't do that, and use banks, precisely to avoid that sort of catastrophic loss. Though you've just told us in previous comments that you shouldn't trust crypto custodial services either. You're basically saying "this is a huge risk and in my perfect system you just have to live with it, and there's no recourse if it goes wrong and it's your fault"

No thanks!

> Slaves?

Yeah, this is idealogical nonsense at this point, not any sort of reasoned debate.

But regardless of whether you agree with the points I raise, the idea that bitcoin is 'perfect' doesn't really hold up. The huge energy use is not a desirable feature for a monetary system, one that is 'perfect' would not have that. Perhaps we cannot create such a 'perfect' system, perhaps (and this is not my view, obviously) bitcoin is the absolute best we can ever do(!), it's still not 'perfect', because it encompasses a set of compromises.

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

#469

Post by Jerry2 »

eloff wrote: post #453
chaosbolt wrote: post #445

Earlier quoted context omitted.

>poor judgment call >tell people their money is safe then basically steal it by giving it to your friend SBF needs to be thrown in jail, he won't though, for obvious reasons.

Why won't he be thrown in jail? This looks pretty open and shut. The courts will confiscate his assets and jail him. This is quite similar to what happened to Bernie Madoff.

> Why won't he be thrown in jail?

He's the second biggest donor to the Democratic Party. He has a lot of political cover.

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

#470

Post by eloff »

Jerry2 wrote: post #469
eloff wrote: post #453

Earlier quoted context omitted.

Why won't he be thrown in jail? This looks pretty open and shut. The courts will confiscate his assets and jail him. This is quite similar to what happened to Bernie Madoff.

> Why won't he be thrown in jail? He's the second biggest donor to the Democratic Party. He has a lot of political cover.

That's not going to save him.
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