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A software change allowed FTX to use client money

reuters.com

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Re: A software change allowed FTX to use client money

#91

Post by eternalban »

echelon wrote: post #34
alar44 wrote: post #31

Earlier quoted context omitted.

Really? I feel like intent would be really hard to prove. "Hey, due to the way our accounting works I need you to subtract X from our dashboard." "Ok boss." Are programmers expected to know finance law? If I build a program for a dairy farmer am I supposed to know the laws of the interstate dairy trade? I can't believe that would be the case.

> Are programmers expected to know finance law? Working on fintech and transaction rails? Probably. I had to know regulations when I worked in fintech. Plus, you don't have to know the law to be found guilty of breaking it. The engineers working on this are innocent until proven guilty, but you'd better believe all internal comms, meeting notes, and commit messages will be scrutinized. Someone had to ask for the syst…

> The engineers working on this are innocent until proven guilty

I believe in due process [& friendship, too]. But alas for the engineers concerned, SBF does not:

https://www.businessinsider.com/ftx-collapse-bankman-fried-e...

"When asked to clarify whether they were both gone, Bankman-Fried said that Wang was "scared" and Singh was "ashamed and guilty" because FTX customers' deposits had been lost."

Isn't that a strange thing to say? Singh is the guy who made the change, per Reuters, and this snake knew that.

Re: A software change allowed FTX to use client money

#92

Post by fallingknife »

andrewstuart wrote: post #85
totalZero wrote: post #80

Earlier quoted context omitted.

It's not just crypto. The entire fintech space has an ideology that lines up far better with Silicon Valley than with Wall Street. The Wall Street mentality would dictate a very different course of action than the Silicon Valley mentality in many of the situations described in the cases brought by the DoJ and the SEC, and yet the Silicon Valley mentality seems to have been the guideline used by SBF/FTX -- perhaps bec…

A license should be required to prove you understand your ethical obligations to handle anyone else's money. It's sad that the entire crypto industry happened too fast for the regulations to keep up, with the unsurprising result that vast amounts of customer money have been lost and stolen - the precise reason for regulation. I would not be surprised if many people have taken their own lives as a result of crypto los…

No one is breaking the rules because they don't know them and nobody knows the rules better than those breaking them.

Re: A software change allowed FTX to use client money

#93

Post by helsinkiandrew »

hn_throwaway_99 wrote: post #23

> Only Singh, Bankman-Fried and a few other top FTX and Alameda executives knew about the exemption in the code, according to three former executives briefed on the matter. A digital dashboard used by staff to track FTX customer assets and liabilities was programmed so it would not take into account that Alameda had withdrawn the client funds, according to two of the people and a screenshot of the portal that Reuters…

> Singh will definitely get prison time as well

Remember Alamada wasn’t a normal customer. It was acting as a market maker/counterparty of last resort to many other FTX customers. In that case there could be situations where ‘normal customer liquidation rules’ shouldn’t apply - it can go in the red temporarily to enable others to trade (and FTX to make commission).

From the facts in the article (which are obviously not complete) if I was Singh my defence would be I assumed/was told the changes were to support Alamadas role as market maker and their actual long term exposure was being monitored elsewhere.

Re: A software change allowed FTX to use client money

#94

Post by acdha »

parksoha wrote: post #67
arcbyte wrote: post #36

Earlier quoted context omitted.

Developers need to know the business better than the business people. Always. Otherwise you can't implement the software very well.

Isn't it completely unscalable? I work for a big automaker, there's literally people whose only job is to be compliant and inform the necessary leads about it. There's hundreds of countries, each with very specific things. If I study everything, I can't code. When knowledge arrives at my team, is already condensed to the point of: "in X country, you must tell the prices of a call if you show a phone number for assist…

Down to the trivia level for an entire global company, sure, but this is a lot more general and bigger. Like if you have rules against accepting gifts from vendors, maybe you don’t remember if the threshold is $10 or $15, but you shouldn’t need to ask to know it’s not $30k in a suitcase.

Re: A software change allowed FTX to use client money

#95

Post by hn_throwaway_99 »

parksoha wrote: post #67
arcbyte wrote: post #36

Earlier quoted context omitted.

Developers need to know the business better than the business people. Always. Otherwise you can't implement the software very well.

Isn't it completely unscalable? I work for a big automaker, there's literally people whose only job is to be compliant and inform the necessary leads about it. There's hundreds of countries, each with very specific things. If I study everything, I can't code. When knowledge arrives at my team, is already condensed to the point of: "in X country, you must tell the prices of a call if you show a phone number for assist…

For some reason, I've seen a lot of people try to make arguments around FTX that completely miss the scale and malfeasance that occurred. This wasn't a case of "oh, you got some esoteric GAAP depreciation rule wrong". This was an engineering leader putting a ton of special cases in the code saying "For our most beloved partner, none of the rules apply, including letting them take unlimited amounts of customer funds. Oh, and be sure to hide this from the dashboards the rest of the company uses."

This is not hard. Nobody needs to be versed in the ins-and-outs of jurisdictional compliance rules to see this was blatant and egregious.

If any of this looks remotely familiar to any software devs out there, you should really re-examine your morals. Or at least hire a lawyer.

Re: A software change allowed FTX to use client money

#96

Post by mianos »

alar44 wrote: post #31
hn_throwaway_99 wrote: post #23

> Only Singh, Bankman-Fried and a few other top FTX and Alameda executives knew about the exemption in the code, according to three former executives briefed on the matter. A digital dashboard used by staff to track FTX customer assets and liabilities was programmed so it would not take into account that Alameda had withdrawn the client funds, according to two of the people and a screenshot of the portal that Reuters…

Really? I feel like intent would be really hard to prove. "Hey, due to the way our accounting works I need you to subtract X from our dashboard." "Ok boss." Are programmers expected to know finance law? If I build a program for a dairy farmer am I supposed to know the laws of the interstate dairy trade? I can't believe that would be the case.

I have been working in finance my whole life.

A senior developer of anything in this area would be expected to fully understand the risk implications of this. I have written the code to closeout positions automatically multiple times in multiple jobs.

It may have been possible someone directed a junior developer to make this change, but then it would be a case of hunting down who told them. If that happened in my team I'd be documenting everything I saw and running, not walking, not walking briskly, out the door.

This said, nothing is black and white. For example, due to immature processes, they might have told the developer that the main account was only one of many accounts they can call on, but the code only allows for one, so we have to make an exception. I'd still be freaking out.

Re: A software change allowed FTX to use client money

#97

Post by tmaly »

alar44 wrote: post #31
hn_throwaway_99 wrote: post #23

> Only Singh, Bankman-Fried and a few other top FTX and Alameda executives knew about the exemption in the code, according to three former executives briefed on the matter. A digital dashboard used by staff to track FTX customer assets and liabilities was programmed so it would not take into account that Alameda had withdrawn the client funds, according to two of the people and a screenshot of the portal that Reuters…

Really? I feel like intent would be really hard to prove. "Hey, due to the way our accounting works I need you to subtract X from our dashboard." "Ok boss." Are programmers expected to know finance law? If I build a program for a dairy farmer am I supposed to know the laws of the interstate dairy trade? I can't believe that would be the case.

Most companies in financial services require training around compliance topics such as AML.

If you are trading or working with customer money, you usually have to take the Series 7 exam.

So I would say for regulated industries, programmers are expected to know some degree of financial law.

Re: A software change allowed FTX to use client money

#98

Post by jiggawatts »

andrewstuart wrote: post #75

The real problem behind all these crypto companies is the people who make the money have no concept of what "integrity" is. They aren't coming from a baseline assumption that their job is to protect and interests and the money of their clients. Traditional banks, for the most part, have DNA built around protecting customer interests and customer money. Crypto companies have none of that attitude - behind every one of…

> The real problem behind all these crypto companies is the people who make the money have no concept of what "integrity" is.

You don't need integrity while "the line goes up". Integrity is only for when it goes down. Until recently, the line has been consistently going up. SBF was banking on it going up forever. If it had gone up forever, he would not have been caught!

While the line goes up, integrity just eats into potential profits. It's an extra cost. No business willingly spends extra money they don't have to. That's why regulation and oversight is mandatory.

> ...he taught me that with customer money you cannot get even a single cent wrong.

SBF gave an accounting on FTX holdings with an error margin of "plus-minus 10 billion dollars".

Can you imagine having error bars 20 billion dollars in size!?

For reference, companies with market caps in that range include: Tata Motors, Best Buy, Komatsu, Zoom, East Japan Railway, Mitsubishi Electric, Delta Airlines, or Panasonic!

Sit down and picture telling someone with a straight face that you may or may not have misplaced "value" on the same order of magnitude as an entire airline, or an electronics manufacturer with a worldwide presence built up over seven decades of growth.

Re: A software change allowed FTX to use client money

#99

Post by 0xcde4c3db »

wildrhythms wrote: post #88
0xcde4c3db wrote: post #76

Earlier quoted context omitted.

> Debt is money from the future. By the same token, money is debt from the past. The origins of debt are ultimately material. Alice has a bushel of apples today, but Bob won't have a bushel of oranges until next month. The function of money is to decouple the general function of debt from its material details. In other words, you can have debt without money, but you cannot have money without an underlying debt.

Do you actually believe all of the world's debt can be repaid?

Not a chance. I believe we're all mostly out here trying our best to make the numbers add up, when we're not (judiciously, I hope) looking the other way because some particular numbers offend our sensibilities. People are complicated, and economies are made of people. Money isn't a law of the universe, it's a technology we invented and (mis)apply in accordance with our values and desires.

Re: A software change allowed FTX to use client money

#100

Post by [deleted] »

andrewstuart wrote: post #75

The real problem behind all these crypto companies is the people who make the money have no concept of what "integrity" is. They aren't coming from a baseline assumption that their job is to protect and interests and the money of their clients. Traditional banks, for the most part, have DNA built around protecting customer interests and customer money. Crypto companies have none of that attitude - behind every one of…

[deleted]
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