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

wsj.com

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

#481

Post by bluetwo »

achenatx wrote: post #259
eftychis wrote: post #246

Earlier quoted context omitted.

Per institution. And there is a lot of consolidation. So I would be careful. It is really easy to be placing money into different banks, but essentially the same one.

there are a variety of caveats, on your side it is per entity. If you are married it is 500K, if you have a trust it is like 1.25M. 250K for each beneficiary up to 5 (or something like that).

Actually this is not correct either.

A married couple each have 250k coverage for their personal accounts, and each have 250k for shared account(s), so they could in theory have 1M coverage at a single institution.

Other qualified relationships work similarly.

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

#482

Post by LeafGuild »

tl_donson wrote: post #476
LeafGuild wrote: post #423

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. This is completely and utterly irrelevant and has not stopped anyone from performing massive fraud. Just look at the long history of crypto scams. They still happened constantly despite blockchains having that feature. It's just impossible for a blockchain to prevent these frauds. It doesn't…

> On a DEX you can't even know if the person on the other end is a real person or not without going outside the chain. why does it matter if the counterparty is a human?

If I'm trying to arrange a trade on the exchange so I can get a pizza for my dogecoins, because the pizza guy says he only wants BCH and not dogecoins, and I would rather not pay double transaction fees just to buy a pizza, how do I know the other person is a real pizza chef and not a bot trying to scam me?

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

#483

Post by lmm »

ricardou wrote: post #185
Animats wrote: post #170

Trading halt announcement at FTX.US.[1] Announcement says withdrawals still up. But Twitter messages indicate withdrawals are not working. FTX Japan shut down by order of Japan Financial Services Agency.[2] FTX.intl processing some withdrawals, according to blockchain.[3] A few lucky people got to exit. Way too much happening to mention here. Just use Google to search "FTX" and limit search to 1 day. Margin calls all…

SBF tweeted[1] not too long ago that FTX.us was safe and was 100% liquid. I suppose that wasn't the case? [1] https://twitter.com/SBF_FTX/status/1590709195892195329?t=tQR...

Wasn't he tweeting the same thing about FTX proper a couple of days before that? Why would you think this time is any more trustworthy?

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

#484

Post by kypro »

PragmaticPulp wrote: post #458
woah wrote: post #317

Earlier quoted context omitted.

This has nothing to do with crypto, it has to do with people sending their money to a con man. If your friend had "his identity tied up in crypto", then why wasn't he holding it himself?

> If your friend had "his identity tied up in crypto", then why wasn't he holding it himself? Some people love day trading crypto. They keep funds on exchanges so they can trade immediately and not deal with constant back and forth transactions with their own wallet.

Yes, this is exactly the point that needs to be made. A few weeks ago I think it was quite easy to argue that it was riskier not to have it on an exchange because when it's not on an exchange you can't convert it back into USD when significant market moving events take place.

But more importantly a lot of these people chose to keep their crypto with FTX specifically because it was seen as the safest pair of hands. If investors like Paul Tudor Jones are "stupid" enough to fall for this "scam", then I think we should probably have a bit of compassion for the average Joe who's lost money here.

My heart genuinely goes out to everyone impacted by this.

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

#485

Post by JamesianP »

qnt wrote: post #474
JamesianP wrote: post #471

Earlier quoted context omitted.

It's more accurate to say they loan out a multiple of deposits based on the inverse of the fraction (the "money multiplier"). If someone puts 1 million in the bank and the fractional reserve is 20 percent, they can now create loans of up to 4 million. Such that the reserve is 20 percent of their total assets of 5 million (= 4 million loans + 1 million cash).

Again no, neither of these are accurate. Modern banks do not operate on a fractional reserve basis at all. This is a falsehood peddled by well out of date undergrad econ textbooks https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/m...

I'm describing what fractional reserve means. Technically that fraction has been set to zero very recently so it is trivial though still not false. This was discussed a lot elsewhere on this board.

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

#486

Post by astrange »

wslh wrote: post #288
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…

How many years could Sam Bankman-Fried get in jail? It is also interesting to read on his Wikipedia profile [1] about "Bankman-Fried is a supporter of effective altruism and claims to pursue earning to give as an altruistic career. He is a member of Giving What We Can and has claimed that he plans to donate the great majority of his wealth to effective charities over the course of his life.". Having direct access to…

Giving away other people’s money is both effective and altruistic, it seems to me.

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

#487

Post by jquery »

capableweb wrote: post #183
Animats wrote: post #170

Trading halt announcement at FTX.US.[1] Announcement says withdrawals still up. But Twitter messages indicate withdrawals are not working. FTX Japan shut down by order of Japan Financial Services Agency.[2] FTX.intl processing some withdrawals, according to blockchain.[3] A few lucky people got to exit. Way too much happening to mention here. Just use Google to search "FTX" and limit search to 1 day. Margin calls all…

> JP Morgan says expect 50% drop across the board in crypto. Around 10 AM PST, somebody just pulled a billion dollars out of Tether. Meanwhile, aggregate of the cryptocurrency market is up 5.38% over the last day, Tether recovered landing on 0.9999 USD after 4-5 hours of the drop hitting bottom at 0.9818 USD, which was nowhere near previous all-time low Tether has hit previously. In other words, everyone screams "pan…

Tether will unravel, it's only a) a matter of time, and b) whether it happens in public, or behind closed doors in smoky rooms.

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

#488

Post by moistly »

nullc wrote: post #328
songeater wrote: post #140

Earlier quoted context omitted.

"Among Wall Street’s financial elite, SBF’s Bitcoin arb is mentioned in the same hushed tones as Paul Tudor Jones’s 1987 shorting of the entire American economy, or George Soros’s 1992 raid on the Bank of England, or John Paulson’s 2008 bet against subprime mortgages. Alameda’s capture of the kimchi premium (and other trades like it) gave SBF the grubstake he needed for his next move: founding the crypto exchange FTX…

The hushed tones of 'that is obviously bullshit'.

That is what aggravates me the most: that there is so much money sloshing around out there, desperate to be spent, and it goes to obvious bullshit instead of building bio-sand water filters for every off-grid community in the world, or ensuring everyone in the world gets a sandwich at least once a day, or basically ANYTHING that would make the world a better place for everyone. Instead, over-privileged, over-wealthy, over-gullible people are wasting the economy on digital artifacts. What a senseless waste.

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

#489

Post by astrange »

siftrics wrote: post #354
LeafGuild wrote: post #324

Earlier quoted context omitted.

It is absolutely a blockchain failure. Blockchains are intentionally designed to facilitate this. They have no possible way to stop this kind of fraud. Even if you built an elaborate set of smart contracts that could audit participants, they would still not stop anything. That activity can just be moved to another chain and avoid the audits. This kind of thing can just keep happening over and over again, as it alread…

This is not true at all. 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. FTX is a centralized entity that custodies funds. It has nothing to do with a blockchain, which could have completely prevented this. There are many examples of decentralized exchanges (DEXs) for which it is mathematically impossible to loan out depositor's funds with…

When that guy hacked the DAO and Ethereum reversed the transaction, did he keep the coins or not?

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

#490

Post by stoplying1 »

kypro wrote: post #484
PragmaticPulp wrote: post #458

Earlier quoted context omitted.

> If your friend had "his identity tied up in crypto", then why wasn't he holding it himself? Some people love day trading crypto. They keep funds on exchanges so they can trade immediately and not deal with constant back and forth transactions with their own wallet.

Yes, this is exactly the point that needs to be made. A few weeks ago I think it was quite easy to argue that it was riskier not to have it on an exchange because when it's not on an exchange you can't convert it back into USD when significant market moving events take place. But more importantly a lot of these people chose to keep their crypto with FTX specifically because it was seen as the safest pair of hands. If…

Uhm, yeah, people made the wrong bet because they fell for another hyped up tech company.

But let's put a fine point on it -- that specifically fell in with a rent-seeking company capitalizing on a decentralizaed space with a centralized platform and then surprise-pikachu'd when they did the same thing as every one before them.

> because when it's not on an exchange you can't convert it back into USD when significant market moving events take place.

Weew, well, idk, if y'all know this, and I'll take the karma hit, but the rest of us that know better than to day trade mostly roll their eyes at this ... crap. And if you WERE "day trading" and didn't manage to pull out, well, maybe day trading isn't in your cards. Go watch YT for a few hours and I'm sure youll be on to your next get rich scheme.

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