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The Sam Bankman-Fried empire crumbled. What happened?

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Re: The Sam Bankman-Fried empire crumbled. What happened?

#51

Post by schemescape »

dabeeeenster wrote: post #14

https://twitter.com/SBF_FTX/status/1590709172936798208 "5) The full story here is one I'm still fleshing out every detail of, but as a very high level, I fucked up twice. The first time, a poor internal labeling of bank-related accounts meant that I was substantially off on my sense of users' margin. I thought it was way lower." Amazing

What does “poor internal labeling of bank-related accounts” mean? They didn’t know which of their accounts were fiat vs crypto? Asset vs liability? Something else?

Re: The Sam Bankman-Fried empire crumbled. What happened?

#52

Post by antasvara »

ARandumGuy wrote: post #11

I think this should be a warning to anyone still invested in other crypto companies or exchanges. Everything seems like it's going well, until the music stops and the exchange is insolvent. FTX is not unique. A lot of crypto exchanges are doing just as much shady stuff. When you put your money with these companies, you're betting that "no really, this one is above board!" That's an extremely risky game to play when t…

In a lot of ways, crypto is just relearning the basic lessons of finance that banks and corporations learned decades ago.

Things like "don't allow customers to use your company's assets as collateral" and "using a bunch of leverage on volatile crypto" are much less frequent in traditional finance, specifically due to regulation or the fact that these strategies have tried and failed before.

This isn't to say that decentralized finance is exactly the same as traditional finance, because it isn't. But I think the lesson here is that when you're offering products similar to traditional finance, you should assume that many of the same rules/best practices of traditional finance should apply.

Re: The Sam Bankman-Fried empire crumbled. What happened?

#54

Post by stusmall »

rideontime wrote: post #24
hamiltonians wrote: post #19

ftt is still trading at $3. It's down but not out. this is the same price as late 2020.

Should I buy some? What can I do with FTT?

The crypto community is wild. Literally in a thread about how the wheels are coming off the cart, the project frozen withdraws and possibly mishandled user funds there is the question "Should I buy in?" Also I love that the question of "What value does this provide?" comes after the question about buying it. At least the question came at all.

Re: The Sam Bankman-Fried empire crumbled. What happened?

#55

Post by pjc50 »

eftychis wrote: post #39
aniforprez wrote: post #16

Earlier quoted context omitted.

While I could say banks are equally guilty of doing shady stuff, the truth is banking is hundreds of years old and as such, has regulations and insurance behind it. Not regulating is how we get messes like the Housing Bubble in the 2000s in the US culminating in the crash in 2011. Crypto being a completely new space has no regulation and no checks and balances which leads to messes like this with companies playing ar…

a) They are similar products banks/certain financial institutions utilize right now, just with corporate debt -- oh what can go wrong in a recession, right? b) Bank runs happened in 2008 (U.S.), 2010-12 etc. A lot of crypto companies buy insurance similar to what the government says, but lacking regulation and the government behind you makes it as you said problematic. But: banks are years old and keep making the sam…

> your corner side community bank that acts as intermediate and its job is community welfare and good relations

Spain used to have a lot of these, and the financial crisis blew almost all of them up: https://en.wikipedia.org/wiki/Savings_bank_(Spain)

Re: The Sam Bankman-Fried empire crumbled. What happened?

#56

Post by vishnugupta »

Sequoia did a profile on SBF/FTX less than 2 months ago [1], only to mark down their investment to 0 [2]

Some of the passage from that article reads so far removed from reality that I can't even know if it's coherent. Really wild stuff.

[1] https://www.sequoiacap.com/article/sam-bankman-fried-spotlig...

[2] https://twitter.com/sequoia/status/1590522718650499073

Re: The Sam Bankman-Fried empire crumbled. What happened?

#57

Post by pjc50 »

duvenaud wrote: post #34
aniforprez wrote: post #16

Earlier quoted context omitted.

While I could say banks are equally guilty of doing shady stuff, the truth is banking is hundreds of years old and as such, has regulations and insurance behind it. Not regulating is how we get messes like the Housing Bubble in the 2000s in the US culminating in the crash in 2011. Crypto being a completely new space has no regulation and no checks and balances which leads to messes like this with companies playing ar…

I mean, banking was already hundreds of years old in the 2000s. So recent bubbles and crashes in traditional markets seem like evidence that regulation, at least the kind that ends up being implemented, isn't doing much to prevent very bad outcomes.

There are two kinds of risk that are fundamentally unavoidable in being a "bank" - that is, any institution that borrows short and lends long. One is liquidity as a result of that duration mismatch: you have enough money owed to you that you've lent out, but it's not due yet. The other is loan writeoffs: you've lent money that you cannot get back, often because it's secured against an asset whose value has fallen significantly.

These can be reduced but not entirely eliminated by setting reserve requirements, LTV ratios, etc., which is what https://www.bis.org/bcbs/basel3.htm is all about.

You can't really eliminate the duration mismatch without eliminating anything recognisable as a "bank", and it becomes much more expensive to get credit and to do basic financial operations.

Re: The Sam Bankman-Fried empire crumbled. What happened?

#59

Post by wmf »

labrador wrote: post #42

I'm having a hard time understanding why organizations like the Ontario Teachers’ Pension Plan has money in uninsured crypto funds. Somebody has some explaining to do. Sequoia Writes Off Entire $210MM FTX Investment; Here Are All The Other Funds That Are Losing Billions In FTX https://www.zerohedge.com/markets/here-are-all-funds-are-abo... Edit: 25 billion dollars up in smoke Ontario Teachers’ Pension Plan faces a hi…

No good investments are insured and FTX isn't a fund.

Re: The Sam Bankman-Fried empire crumbled. What happened?

#60

Post by technotony »

acyou wrote: post #25

The name Sam Bankman-Fried came up quite a lot in Twitter v. Musk. I wonder if he ended up with a stake in the acquisition deal. If SBF was indeed a sizable backer of the Twitter buyout, this more than anything could take Twitter out at the knees.

Even if he did invest, why would that weaken Twitter at this point? The deal is done, SBF wouldn't be able to pull his money out of it if he wanted to.
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