[HN Gopher] FTX's balance sheet was bad
___________________________________________________________________
FTX's balance sheet was bad
Author : latchkey
Score : 362 points
Date : 2022-11-14 18:12 UTC (4 hours ago)
(HTM) web link (www.bloomberg.com)
(TXT) w3m dump (www.bloomberg.com)
| tppiotrowski wrote:
| > And another big asset is $616 million worth of the MAPS token
| ($865 million "before last week"). MAPS is the token of Maps.me
| 2.0, a sort of Serum spinoff that was also launched by FTX;
|
| I remember when maps.me added crypto and many users fled to
| Organic Maps. I didn't know that FTX was behind it.
| sjkoelle wrote:
| ga did they add crypto? maps.me was an amazing product in 2018
| but seems to have gone south.
| gadders wrote:
| >> a negative $8bn entry described as "hidden, poorly internally
| labled 'fiat@' account".
|
| Anyone else old enough to remember Nick Leeson and Error Account
| 88888?
|
| https://www.independent.co.uk/news/business/how-account-8888...
| mongol wrote:
| I am old enough but I don't remember, being ignorant of it.
| legitster wrote:
| I often joke that crypto has been run by gold bugs who were
| forced to "smoke the whole pack" on fiat currencies. So a lot of
| crypto is a nihilistic homage to federal reserve systems.
|
| In that way, "DeFi" feels the same about the finance industry.
|
| It was no secret that SBF _hated_ traditional finance. And so I
| assume he refused to learn anything from it. But what he ended up
| creating was almost a hilarious parody of the financial system.
|
| That's at least how I can square the circle about how someone who
| could criticize Lehman Brothers for letting themselves get
| overleveraged on shady asset classes could literally have
| negative 8 billion dollars in "Hidden, poorly internally labeled
| 'fiat@' account" and then publicly go to Twitter to say they have
| a "liquidity problem".
| kuwoze wrote:
| let me square it for you:
|
| he is a fraud
| zeroclip wrote:
| > In that way, "DeFi" feels the same about the finance
| industry.
|
| How? DeFi protocols are behaving predictably and not pausing
| user withdrawals or hiding billion dollar black holes in their
| balances.
| this_user wrote:
| Yeah, the predictably get exploited, and lose everyone's
| money.
| [deleted]
| jmull wrote:
| > It was no secret that SBF hated traditional finance.
|
| To point out: that's part of the narrative SBF was selling. I
| wouldn't take it literally. There's a certain kind of person
| who can/will say anything, and seem sincere, just to get you to
| part with your money.
| elevenoh wrote:
| jmyeet wrote:
| > I often joke that crypto has been run by gold bugs
|
| You're not wrong. Crypto is the natural evolution of the gold
| bug.
|
| Gold bugs funamentally don't understand the finance system. The
| gold standard was never about fully backing your currency with
| a global commodity (fun fact: the US dollar was never 100%
| backed by gold reserves). A gold standard is actually just a
| peg, a promise by the government to exchange dollars for gold
| (and vice versa) at a fixed rate. And you don't technically
| need _any_ gold for that.
|
| Yet gold bugs harp on about gold reserves and that's the least
| important part of the gold standard. Either way you have a
| trust issue. FDR famously performed a sovereign debt
| devaluation, for example.
|
| Likewise, my experience with crypto people is they too
| (generally, not always) don't understand why the TradFi system
| is the way it is. Worse, they seem to use wilful ignorance of
| that as a badge of honor (while muttering something about
| "disruption").
|
| So gold bugs who (rationally or irrationally) hate TradFi find
| a natural home with similarly minded Crypto Andys.
| kipchak wrote:
| >the US dollar was never 100% backed by gold reserves
|
| The dollar was created by the coinage act in 1792, with
| dollars being made of the equivalent amount of silver or
| gold. To me this seems like practically same thing as being
| 100% backed by gold reserves.
|
| If we're talking about paper dollars or originally "Demand
| Notes" from 1861 onward that would be the case as they were
| put in place because the government was broke trying to fund
| the Civil War,[1] and had to issue currency on credit[2]
| (about $1.5b additional in todays dollars, for comparison
| there's about $51b total in 2021).
|
| >A gold standard is actually just a peg, a promise by the
| government to exchange dollars for gold (and vice versa) at a
| fixed rate. And you don't technically need any gold for that.
|
| Wouldn't you need enough reserves to allow anyone who
| attempted to exchange their dollars for gold to do so?
| Fractional banking and bank runs seem like a rough analog.
|
| [1]https://www.mycreditunion.gov/financial-resources/history-
| un...
|
| [2]https://www.cs.mcgill.ca/~rwest/wikispeedia/wpcd/wp/d/Dema
| nd...
| lazide wrote:
| Regarding gold/silver backing - yes, _if_ they let you
| actually do that redemption or exchange. Something that has
| historically been suspended or banned multiple times.
| Including by FDR in 1933, and Nixon when the US exited the
| gold standard entirely.
|
| [https://www.history.com/this-day-in-history/fdr-takes-
| united...]
|
| Like Tether, if you can't actually redeem it for what it's
| nominally backed by, is it really backed by it?
| [deleted]
| excite1997 wrote:
| I think you're debating a strawman, though. Sure, there are
| delusional / ignorant goldbugs who make stupid arguments, but
| you can find that in pretty much any domain. There are also
| reasonable people, including heterodox economists, who
| understand the history of currencies and monetary systems,
| and still advocate for a return to pegged currencies or for
| precious metals as a part of a diversified portfolio. You
| don't have to agree with them, but ad hominems are probably
| unnecessary.
|
| I mean, it's not even that fringe is you consider that
| Central Banks sure hoard a lot of gold specifically because
| they see it as useful in certain (bad) economic scenarios.
| notch656a wrote:
| Most gold bugs I've interacted with are more interested in
| replicating commodity money (i.e. gold coins for trade) than
| gold standard (i.e. dollars backed by gold).
|
| Gold standard is dumb for reasons you say. Commodity money is
| by design supposed to be 100% backed, as the gold is actually
| inside the money and the face value is the weight gold inside
| it.
| lazide wrote:
| FYI, Historically, it has been _really_ common to debase
| currency by diluting or reducing the precious metal content
| of coins.
|
| [https://en.m.wikipedia.org/wiki/Methods_of_coin_debasement
| ]
| notch656a wrote:
| Valid, although once the gold is in my hands it's kind of
| hard to debase it. Of course the weakness is that it may
| be impractical to check it is debased every time you
| receive it (although it is practical for large
| transactions).
|
| Each money has its own weakness. One of the big
| weaknesses with fiat and gold-backed money is that it can
| be debased even while it is in your personal possession.
| rsj_hn wrote:
| There is a reason why there has never existed a society in
| which the majority of transactions were done by people
| exchanging gold or silver coins kept in little leather
| pouches. It's just too impractical.
|
| - problems with availability - in most traditional
| societies, there just weren't enough coins to meet
| transaction demand, and so people transacted based on
| credit or other informal ledgers.
|
| - problems with theft
|
| - problems with weight
|
| - problems with people shaving some of the metal off
|
| - problems with counterfeits -- not actually easy to test
| the percentage of gold in your coin
|
| - problems with credit markets. Credit markets need to move
| money around quickly and efficiently, and be able to raise
| large sums. That's not compatible with socks filled with
| gold buried under your rose bush. The money needs to be
| available in the credit markets so it can be efficiently
| deployed, moved around, etc.
|
| So from the beginning, gold was used for specialized
| purposes -- e.g. to settle international trade or large
| payments, rather than as a primary means of payment.
|
| There is no way to get around this. The moment you
| introduce gold, merchants will start borrowing gold by
| selling Bills of Exchange -- effectively promises to pay
| gold. These bills of exchange will be more valuable if they
| are bearer instruments, and so the merchant will make them
| bearer instruments (to allow raising more money). Then you
| get a market in which people are buying and selling bills
| of exchange at a discount. Now you have a discount rate and
| a money market, and all you are missing is a financial
| crisis in which a large bank steps to staff their discount
| window when the smaller traders are forced to close their
| own. All of a sudden, you are back to credit-based money,
| as the Bills of Exchange are themselves used to settle more
| trade than the gold coins. It's just a lot easier to carry
| a piece of paper that says "X promises to pay 1000 gold
| coins next year" then it is to actually lug 1000 gold coins
| around.
|
| The ease of convenience, the needs of merchants to tap
| capital markets, will ultimately subvert whatever metallic
| standard you come up with. Then, financial crises will drag
| in the government to start regulating and centralizing the
| capital markets.
| jmyeet wrote:
| What you describe has a lot of merit but it also explains
| the move from silver currency to gold. Gold has a lot of
| interesting properties from the point of view of coinage
| and an instrument of value:
|
| 1. Up until the fairly recently (ie the last century) it
| was the densest element anyone could get in quantity.
| This was not true for silver so silver currency could
| (and was) debased (like you say). This was more difficult
| with gold as doing so would lower the density;
|
| 2. Gold has a relatively uncommon appearance. There are
| very few substances that could imitate its look. Iron
| pyrite (aka "fool's gold") is the common one but it's not
| as dense and is harder. It's also why people would bite
| into gold coins to verify it;
|
| 3. Shaving or cutting coins was actually more of a
| feature than a bug. Consider "pieces of eight" [1].
|
| Previous metals as a basis for coinage were more
| important than perhaps you're giving it credit for.
| Ultimately what happened was that the coins themselves
| because a store of value and the metal content became
| less important as counterfeiting coins wasn't typically
| trivial. This of course was what ultimately led to paper
| money.
|
| [1]: https://www.kingmanyachtcenter.com/sea-history-what-
| is-a-pie...
| [deleted]
| notch656a wrote:
| I've never stated commodity money should replace all
| other form of exchange. In fact per above, you list a
| system where both credit and commodity money exist in
| parallel with one another.
|
| >It's just a lot easier to carry a piece of paper that
| says "X promises to pay 1000 gold coins next year" then
| it is to actually lug 1000 gold coins around.
|
| Not sure if you've ever carried around a gold coin, or
| ~$1800 (the value of 1 oz gold coin). But the amount of
| space it would take up, within factor of 2.
|
| ~1.8 cubic inches for the gold and 1.2 cubic inches for
| the bills. So maybe 50% worse space wise for the gold,
| but in any case not enough to make carrying gold much
| more burdensome than cash. Sadly you can no longer obtain
| large (~$1000) bills as they have been eliminated pretty
| much worldwide.
| sergiotapia wrote:
| olalonde wrote:
| > It was no secret that SBF hated traditional finance.
|
| Uh? The guy worked in traditional finance for a few years and
| was pushing for more regulations on cryptocurrency. His parents
| were compliance lawyers. He donated tons of money to the
| democratic party to push for regulations. He ran a centralized
| exchange. This does not exactly scream DeFi... He was just an
| opportunist who saw crypto as a means to get rich quick and
| apparently, getting rich from trading fees was not quick enough
| for him.
|
| There are a lot of "gold bugs" types in crypto but they mostly
| self-custody BTC and stay away from shitcoins and day trading.
| chc4 wrote:
| SBF (and like half the people at Alameda) worked at Jane Street
| or other big name financial firms. They weren't ignorant of
| traditional finance.
| billsnow wrote:
| He was there for only three years, and at least ignorant
| about the finer points.
| psychlops wrote:
| His point, I believe, it that it's traditional finance
| using crypto to do their usual thing. Pump and dump.
| billsnow wrote:
| That's not what traditional finance does...
| psychlops wrote:
| Where do you suppose the term comes from?
| billsnow wrote:
| Ok fine that's not what jane street does.
| [deleted]
| psychlops wrote:
| Fair enough, I know very little about Jane Street other
| than where they are located and that I'd never qualify to
| work there.
| ericd wrote:
| (They're not located on Jane St)
| jsemrau wrote:
| Being an entry level staffer is not the same as running a
| n-Billion dollar business. The higher you rise, the more
| important the role of governance, compliance, and risk
| management becomes. If you shortcut this you will miss an
| important part of "job experience"
| jjtheblunt wrote:
| do you mean they were knowingly manipulative of those who
| actually were ignorant of traditional finance, as a business
| plan of sorts?
| [deleted]
| JumpCrisscross wrote:
| > _worked at Jane Street or other big name financial firms.
| They weren 't ignorant of traditional finance_
|
| I was an options market maker. That taught me a lot about
| options but little about finance. The latter comes from
| curiosity and initiative, up to and including reading history
| books. Given SBF was post book or whatever, the ignorance
| isn't surprising.
| MrMan wrote:
| prop trading firm and a sell side firm or an exchange are not
| structured the same way. its like calling zebra and deer and
| giraffes the same animal.
| saberdancer wrote:
| Did you read comments Caroline made on her blog/tumblr?
|
| Not sure of the timeline but she was asking why not double
| down on a 50/50 bet every time (if you lose) - you can earn
| "infinite" money but lose only your bet.
|
| I am not sure working somewhere means you are an expert in
| it. It's incredible these people managed to create a company
| size of FTX.
| gruez wrote:
| >Not sure of the timeline but she was asking why not double
| down on a 50/50 bet every time (if you lose) - you can earn
| "infinite" money but lose only your bet.
|
| I'm pretty sure you're referring to this tweet
|
| https://twitter.com/0xHonky/status/1591630071915483136
|
| In which case she wasn't the person asking the question.
| Somebody else was asking it, and she was unequivocally
| saying that it wouldn't work.
| jonasdegendt wrote:
| Rookie mistake! The trick is to double your betting amount
| every time you lose the 50/50, until you win, and then
| return back to your regular bet. That's how you turn a
| profit. (/s)
| throwaway777845 wrote:
| jsemrau wrote:
| > read comments Caroline made on her blog/tumblr? Isn't
| that the Martingale strategy?
|
| > It's incredible these people managed to create a company
| size of FTX.
|
| Didn't they got hundreds of millions in play money from
| their network (school friends). This worked while
| everything was going up and new cash was coming in.
| DebtDeflation wrote:
| >This worked while everything was going up
|
| "Never confuse being long in a bull market with genius."
|
| --John Bogle
| spamizbad wrote:
| Makes me wonder what's going on at Jane Street. How sure are
| we they're above board?
| typon wrote:
| This is what I have been thinking. This whole thing has
| soured in my mind: Jane Street, Effective Altruism. Crypto,
| VCs, Silicon Valley culture in general I already assumed
| are scummy.
| ilrwbwrkhv wrote:
| You got it. That is the correct line to follow. Sequoia
| in particular must be heavily investigated.
| neilparikh wrote:
| > Effective Altruism
|
| The practical version of Effective Altruism for most
| people is essentially "if you're well off, you should
| donate a chunk of your income to buying anti-malaria bed
| nets/deworming medicine/direct cash transfers for the
| global poor". I don't see how that could "sour" in your
| mind, seems like a fairly unreservedly good thing.
|
| I want to point out that there are real people [1] being
| helped by Effective Altruism right now. Telling them
| "sorry, can't help you any more, some rich asshole in the
| US just committed a scam, and he claimed he wanted to
| help you too" just seems incredibly petty and cruel to
| me.
|
| [1] - This is also a group that traditionally doesn't
| receive much attention either.
| tweestuff wrote:
| whimsicalism wrote:
| Maybe you should spend a moment researching rather than
| using some nebulous transitive property of "if they hired
| this person, they must also be a scam."
|
| Jane St is a prop trading firm - the only money they have
| to lose is their own.
| paganel wrote:
| One of the biggest financial frauds of this century has
| just been perpetrated by two young people that used to
| work for them, the questioning related to "how did Jane
| Street hire these people" is perfectly logical.
| hahaxdxd123 wrote:
| Well the interview process is more or less "are you good
| at probability puzzles and games somewhat related to
| trading."
|
| A plausible story to me is that they were good at
| whatever they screen for in the interview and then at
| Jane Street they made a bunch of money. Then they
| attributed too much of that to themselves and not enough
| to whatever institutional processes and risk frameworks
| they benefited from. They bring themselves but not those
| processes to their own trading firm, and then boom!
| MrMan wrote:
| I worked on quant buy side for a long time and you dont
| just automatically come out of these places knowing one
| secret to making money trading. equally smart on paper
| people might be working on message passing, risk
| management, data analysis, special projects, also
| trading, simulator, database, and might spend 5 years in-
| house and not come away from the experience with
| knowledge which by itself represented major alpha.
|
| for me just knowing how to setup a quant trading firm,
| how to choose prime brokers, how to find and select
| vendors, leased lines, how to setup paper work, cap intro
| relationships, exchange memberships, FIX certs, are of
| equal value as alpha tricks, and really I dont even see a
| lot of evidence that the Almeda / FTX people were
| particularly well-seasoned in any respect.
| [deleted]
| biggoodwolf wrote:
| The founder of EA got SBF in. That's another can of worms
| but that guy apparently changed his last name from Crouch
| to McAuskil or whatever...
| telotortium wrote:
| How would Will MacAskill have enough sway to get SBF in
| Jane Street? Also, why would that matter? I have
| absolutely no reason to believe SBF couldn't pass their
| interviews.
| tedunangst wrote:
| Did they work in the risk management back office at JS?
| paganel wrote:
| The Societe Generale guy that managed to lose 5 billion
| euros for the bank through "breach of trust and forgery"
| (to quote wikipedia [1]) didn't work in the risk
| management department. I don't think that was any
| consolation for the bank's stakeholders.
|
| [1]
| https://en.wikipedia.org/wiki/J%C3%A9r%C3%B4me_Kerviel
| tedunangst wrote:
| Actually he had worked in compliance, and then they moved
| him to front office. Extremely dangerous. Not
| recommended.
|
| But the point is you can't infer anything about Jane
| Street risk controls from people who didn't have that
| role.
| typon wrote:
| It's not about losing other people's money only. What I'm
| worried about is: are extremely over-leveraged and able
| to get the returns they have by doing tax and regulatory
| dodges that their competitors aren't participating in?
| Did SBF learn how to operate in the financial world from
| seeing how Jane Street operates?
| whimsicalism wrote:
| They are a high frequency market maker. They are not a
| hedge fund.
|
| They make money from the pennies in the spread, many many
| many times over. They are not making over-leveraged big
| bets.
|
| I encourage you to talk to anyone who works in market-
| making finance.
| ralph84 wrote:
| Being a market maker doesn't exempt a firm from blowing
| itself up. See Knight Capital.
| whimsicalism wrote:
| Knight Capital was traded (so taking other people's
| money).
|
| Let's also try not to conflate "blowing up" with actual
| fraud. Traders are free to lose all of their own money,
| and doing so is not fraud
| ralph84 wrote:
| Knight was the largest market maker on NASDAQ and NYSE at
| the time they blew up so if you're going to use "they're
| just a market maker" as a defense for JS you can't
| dismiss Knight as "oh, not THAT kind of market maker."
| And Knight was known for plenty of shady activity like
| front running and spoofing.
| whimsicalism wrote:
| Knight did not blow up due to fraud, so they were not
| "below board." Losing money is not against the law.
|
| Furthermore, Jane St _only trades their own capital_ -
| ie. not capital deposited by customers in an exchange and
| not capital provided by selling ownership stakes of
| itself on a public market. This is a clear distinction
| from Knight.
|
| It's as if some guy just had a bunch of money, traded it
| and made some more money, hired a bunch of people to keep
| trading it, and it has made a ton of great returns and
| people are asking: is this a scam?
|
| Who would it be scamming? The only suckers are this guy.
| thepasswordis wrote:
| Alameda was supposedly a prop trading firm too.
| whimsicalism wrote:
| FTX is the one who lost their customers' money.
|
| Jane St is fully above board and has no such associated
| firm managing customer money.
| 22SAS wrote:
| I work in the trading industry. These people had short
| tenures at JS, especially Ellison. They weren't seasoned
| senior traders making big decisions. JS, unlike Alameda,
| has been in the business for 20+ years and have been very
| profitable for most of their existence.
|
| It would be worrisome if most of Alameda was full of ex-
| JS traders, who had been there for 7+ years.
| wellareyousure wrote:
| mediaman wrote:
| I can't look at their balance sheet and conclude that they
| were anything but ignorant of traditional finance. He seemed
| completely unaware of duration risk, and it seems like they
| have never talked to an accountant or anyone who has even the
| slightest clue about what a balance sheet should remotely
| look like.
|
| SBF worked at Jane Street, but he must have been there in a
| capacity that insulated him from this sort of knowledge. At
| large firms such as that there are very specialized roles
| that juniors typically start within, where the visibility is
| fairly limited.
| dragonwriter wrote:
| > I can't look at their balance sheet and conclude that
| they were anything but ignorant of traditional finance. He
| seemed completely unaware of duration
|
| SBF is notorious for advocating expected-result decision-
| making with risk entirely disregarded, and essentially
| saying if you aren't in the high risk range where the
| median (rather than expected) result is break even or
| worse, you are usually being too cautious; he's not
| _ignorant_ of risk, just deliberately contemptuous towards
| it being a negative factor in decisions.
|
| Turns out, when you chase Gambler's Ruin that hard...
| HDThoreaun wrote:
| They knew this balance sheet was bullshit. They were just
| trying to cover up the $10 billion "loan" they gave alameda
| after it blew up in the spring. I agree that alameda made
| mistakes that traditional funds wouldn't, but the balance
| sheet isn't one of them.
| olalonde wrote:
| The FTX disaster was not due to incompetence nor ignorance
| but to fraud.
| dragonwriter wrote:
| I think SBF's public and, AFAICT, honest belief in
| expected value optimization without regard to risk played
| a fairly central role in every step of the fraud, and
| that it constitutes a very specific form of incompetence.
| olalonde wrote:
| That's an extremely charitable interpretation of the
| events, in my opinion. Misappropriating custodial funds
| is not ever acceptable when you are running an exchange,
| no matter how good your EV looks like.
|
| And I'm not buying into his whole effective altruism
| thing. What I think is that SBF had a strong desire to
| make money, ethics be damned, but had a troubled
| conscience. Effective altruism gave him moral comfort and
| helped him rationalize his actions.
| dragonwriter wrote:
| > That's an extremely charitable interpretation of the
| events, in my opinion.
|
| Only because you seem to be reading into it a positive
| moral judgement that I did not, in any way, express.
|
| > Misappropriating custodial funds is not ever acceptable
| when you are running an exchange, no matter how good your
| EV looks like.
|
| I didn't say it was.
|
| > And I'm not buying into his whole effective altruism
| thing.
|
| SBF doesn't just advocate that method of decision-making
| in the context of EA, he advocates fairly consistently
| for financial and other decision-making.
| olalonde wrote:
| It seems I read too much in your comment. I can agree
| with labeling his method of decision-making as
| incompetent but I believe what happened at FTX goes
| beyond that and I just hope he doesn't get away with it
| by playing that card.
| tick_tock_tick wrote:
| Or he thought he could get away with it and grow fast
| enough where it wouldn't burn him.
| [deleted]
| lancesells wrote:
| You think this is ignorance? I know very little about
| finance or the technology of finance but this is pretty
| clearly fraud and criminal behavior.
|
| My only question is was he able to pay for his private jets
| or residences in FTT? He seemed pretty convincing to a lot
| of people so it would be interesting to see if everything
| was paid in his own made up currency.
| monetus wrote:
| I don't think ignorance and fraud are mutually exclusive.
| I think he has put both on display to a pretty
| significant degree, personally.
| bogomipz wrote:
| Perhaps not ignorant but maybe inexperienced for the roles
| and responsibilities they assumed at their new company? This
| is from a piece about Caroline Ellison the CEO at Alameda:
|
| >"Before joining Alameda as a trader in March 2018, Ellison
| spent 19 months as a junior trader at Jane Street after
| graduating from Stanford University with a bachelor's degree
| in mathematics in 2016. In a podcast two years ago, Ellison
| explained that Jane Street was her first job out of college.
| A diehard mathematician and Harry Potter fan born of two
| economists, Ellison she hadn't wanted to go into trading but
| "just didn't really know what to do" with her life.
|
| > "She was persuaded to join Alameda by SBF, who also
| previously worked for Jane Street. When she quit Jane Street,
| Ellison said she felt bad for staying such a short amount of
| time. However, this feeling quickly dissipated when she
| arrived at Alameda and discovered that she had "kind of more
| trading experience than a lot of Alameda traders,"
| anyway."[1]
|
| And similarly for Constance Wang the FTX CEO/COO:
|
| >"Constance Wang joined FTX as chief operating officer in the
| Bahamas in 2019. Initially, she was chief operating officer
| (COO) of FTX's crypto derivatives exchange. In January 2022
| she was promoted as CEO of FTX digital markets, with
| responsibility for the Bahamas HQ. An org chart published by
| the Information puts her one level below Sam Bankman-Fried.
|
| >This looks like a big job. All the more so because Wang is
| only a few years into her career. Before she joined FTX, most
| of her time had been spent at Credit Suisse in Singapore.
|
| >Wang wasn't an MD at Credit Suisse. She wasn't even a
| director or associate director. She was an analyst and she
| worked at the bank for two years, first in KYC in the private
| bank and then in APAC risk and controls. It was her first job
| out of university.
|
| "Admittedly, Wang didn't go straight from Credit Suisse to
| FTX - there was an eight-month detour to Huobi Global, a
| crypto exchange in Singapore first. However, the fact that
| this was sufficient to land her a job in her late 20s running
| 'institutional clients servicing and operational procedure,'
| at a fund with $1bn of revenues last year, looks slightly
| questionable."[2]
|
| [1] https://www.efinancialcareers.com/news/2022/11/caroline-
| elli...
|
| [2] https://www.efinancialcareers.com/news/2022/11/constance-
| wan...
| jnwatson wrote:
| You can't make this stuff up. This would make an amazingly
| funny movie.
| gammarator wrote:
| It's going to be one! https://theankler.com/p/hwood-ftx-
| frenzy-as-michael-lewis?sd...
| handspun wrote:
| It's only a matter of time, Michael Lewis has been
| shadowing SBF for months now.
|
| https://www.theguardian.com/books/2022/nov/14/ftx-crypto-
| kin...
| basch wrote:
| https://theankler.com/p/hwood-ftx-frenzy-as-michael-
| lewis?sd...
| TheOtherHobbes wrote:
| Meanwhile, at Credit Suisse:
|
| https://www.reuters.com/business/finance/spies-lies-
| chairman...
|
| https://www.theguardian.com/news/2022/feb/21/tax-timeline-
| cr...
| factsarelolz wrote:
| Both SBF and the other person were glorified interns and got
| position based upon their parents network.
| whimsicalism wrote:
| Doubt it, unless you have evidence otherwise. Jane St
| (unlike customer-facing finance firms, like Goldman Sachs)
| does not really engage in this style of nepotism hiring
| that I know of.
|
| More likely is that the child of prominent academics might
| actually be more intelligent than average themselves and
| certainly provided more opportunity to flourish.
| factsarelolz wrote:
| Could you detail SBF's experience that would have opened
| doors to him at Jane St without nepotism? I ask because I
| can't find any evidence to show how he was able to get
| into that position. Thanks for the guidance and I look
| forward to your reply.
| 22SAS wrote:
| Most of JS's trading interns and new graduate hires, are
| STEM grads at HYPSM schools. SBF going to MIT gave him a
| big leg up.
| whimsicalism wrote:
| He went to MIT and interned there.
|
| I'm confused as to what you are asking - Jane St
| certainly hires plenty of people out of college not for
| nepotism reasons.
|
| The fact that he did not have a prior job before college
| is not evidence he was hired for nepotism.
|
| Let me guess - he also got into MIT through nepotism as
| well.
| stefan_ wrote:
| His parents are professors at Stanford. So yeah, of
| course he did.
| eddsh1994 wrote:
| What was his GPA at MIT? Did his parents jobs get his
| exams marked higher?
| stefan_ wrote:
| Does it matter? He did an undergraduate physics degree,
| the only time his name appears on Scholar is in a book of
| his mom or a letter from one of their colleagues, and
| when it was over he promptly went to some quant company
| that gobbles up these graduates by the busload (and spits
| them out again). The least important part in all of this
| is the grades, or possibly even what undergraduate he
| did.
| whimsicalism wrote:
| Can't tell if you are being earnest but as someone who
| majored in CS at a HYPSM, I can tell you there is
| literally no chance that this occured.
|
| I know kids who definitely got in because of parents
| money, but it certainly did not impact their grading.
| NtochkaNzvanova wrote:
| I would exclude MIT from that list, but the rest of those
| schools basically have a huge reputation for grade
| inflation -- i.e., once you get in, you won't be given a
| bad GPA because you're paying so much. Grading people
| legitimately based on competence would piss of the
| parents/donors too much. Curious to hear your take on
| this.
| whimsicalism wrote:
| Gotcha and thanks for being upfront about your reasoning.
|
| I'll let others decide on whether they find that
| reasoning convincing!
| hutzlibu wrote:
| You "got" a different poster, though.
| asdfqweqe12 wrote:
| Youre all over this thread defending Jane Street.
|
| > Jane St (unlike customer-facing finance firms, like
| Goldman Sachs) does not really engage in this style of
| nepotism hiring that I know of.
|
| Wow i'm sold.
| whimsicalism wrote:
| Because it's a comment thread I find interesting, I made
| 4 or so comments related to Jane St, 2 of which are
| replying to people replying to me.
|
| I promise you I have no affiliations with JS whatsoever,
| just think that there is lots of sloppy reasoning going
| on in this thread.
| codehalo wrote:
| >It was no secret that SBF hated traditional finance.
|
| That is quite odd. FTX was the very definition of traditional
| finance (with or without whatever regulations you may think is
| required). Maybe he was bullshitting you too?
|
| Crypto is now infested with Wall Streeters and VCs trying to
| convert it into some grotesque form of the old system they are
| familiar with and failing catastrophically. In a few years
| decentralized DEXs will all but replace the centralized
| exchanges.
| anonporridge wrote:
| This is the great thing about this whole event.
|
| It's a grotesque level of criminal fraud, but unlike when
| that happens in traditional finance, there will be no
| bailout. These fraudsters will get wiped out and there is no
| one to appeal to who can save them.
| fortran77 wrote:
| Canadian taxpayers will, one way or another, bail out the
| teacher's pension fund that invested in FTX
|
| https://decrypt.co/114235/ontario-teachers-95m-ftx-
| pension-f...
| IfOnlyYouKnew wrote:
| It's a pension fund with a lot of VC deals, and a rather
| profitable one at that. It can easily eat $95 million in
| losses.
| AnimalMuppet wrote:
| These fraudsters _and others_ will get wiped out. That 's
| the bummer about this whole event.
|
| You may feel that the others were too greedy and naive, and
| therefore deserve what they get. Perhaps. But they're still
| getting wiped out, and they didn't participate in the
| fraud. (Unless you consider all of crypto to be a fraud...)
| anonporridge wrote:
| Sometimes, the best way to train children to avoid
| putting their hand in the fire is not to be overbearing
| and make certain they never get burned, but to let them
| make that mistake and get burned a little so they
| viscerally understand the consequences of doing such a
| dangerous thing. If you never let them get a little
| burned, then they might get terribly burned when you're
| not around to pull them out.
|
| Losing tons of money is not the end of the world, even if
| it can feel like it. It might just mean you have to
| swallow your pride and go work at Walmart or McDonalds
| for a while to build yourself back up. Millions of people
| live that life every day.
|
| Stay humble. Stack sats.
| selectodude wrote:
| There are a lot of people who already work at McDonalds
| or Walmart that watched FTX's super bowl commercial and
| knew about the "whole crypto thing" that, too, are wiped
| out.
|
| I'm enjoying this shit as much as anybody but
| unsophisticated people are certainly feeling this right
| now.
| fredgrott wrote:
| here is the problem in the a nutshell, SBF hired fraud
| scammers, several bad actors from poker scams where part of
| SBFs crew...indicating that something other than skill level
| was the factor in hiring.
| hahaxdxd123 wrote:
| What does the expression "smoke the whole pack" mean?
|
| I Googled but there are no real results. Thanks!
| ZeroGravitas wrote:
| I assume this is a reference to catching a child smoking a
| cigarette, and to punish them, and put them off doing it
| again, the parent forces them to smoke the whole pack of
| cigarettes one after another.
|
| This (in theory) makes them feel sick and develop an aversion
| to the cigarettes.
| jdminhbg wrote:
| A father catches his young son sneaking a cigarette. To teach
| him a lesson, he says, "You want to be a smoker, huh? Well go
| ahead, smoke this whole pack!" He makes him smoke all of
| them, the boy gets horribly sick from it, and never wants to
| smoke again.
|
| Essentially it's a metaphor for forcing someone to go all-in
| on something they wanted just a little taste of.
| chasd00 wrote:
| I think it refers to the old punishment for a kid caught
| smoking. You catch a kid smoking a cigarette and then sit
| there and force them to smoke one after another until the
| whole pack is done. They get really really sick.
|
| So the analogy is take something you like and then force it
| on you 24x7x365 until you hate every moment of it.
| TrickyRick wrote:
| I guess Web 3.0 got its Madoff 2.0
| hef19898 wrote:
| Wow, imagine having _8 billion_ of customer money, negative, at a
| badly labelled internal account. And now remember that Wirecard
| fell over made up assets of 2 billion.
|
| FTX is an even bigger mess than Wirecard.
| durnygbur wrote:
| Wire-what? No one in Europe remembers them anymore. Germans
| chase more ferociously torrent users, than the one executive
| who vanished.
| def_true_false wrote:
| Zee Germans are currently too busy with fucking up the energy
| market to the tune of 200B to care about silly stuff like
| wirecard :)
| gruez wrote:
| >There is also an obscure $7mn holding called "TRUMPLOSE"
|
| https://ftx.com/trump-tokens
| jefftk wrote:
| "Joe Biden won the 2020 United States Presidential election:
| TRUMPLOSE is redeemable for $1.00! All TRUMPLOSE balances on
| FTX will be auto-redeemed for $1.00 at 11/15/2020, 9:00:00 AM."
|
| How can TRUMPLOSE assets still be on their balance sheet?
| (Aside from "we have no idea what we're doing...")
| atdrummond wrote:
| It is 2024 futures, not 2020.
| jefftk wrote:
| I don't see anything in https://ftx.com/trump-tokens about
| 2024? It's all 2020.
| NoboruWataya wrote:
| There is a separate TRUMP2024 token:
| https://ftx.com/trade/TRUMP2024
|
| TRUMPLOSE is the 2020 one, so your point stands that
| there is no explanation for that account still having a
| huge amount of money. That said, we now know that
| internal labelling of accounts was not FTX's forte, so...
| beefield wrote:
| > So if for instance some company creates a token, and says that
| there can be 10 billion of the token, and reserves them all for
| itself, and then sells 1 million of them to outside investors for
| $1 each, then the market cap of that token is $1 million ($1
| times 1 million circulating tokens), while the fully diluted
| market cap is $10 billion ($1 times 10 billion total tokens), and
| the issuer's 9,999,000,000 remaining tokens have a value, on this
| math, of $9.999 billion.
|
| I have had for a while this secret plan to become the richest
| person in the world by a wide margin. Because I seem to be too
| lazy to actually execute it, I think it is better to just publish
| it for the hope that someone else does it:
|
| So, the plan is to create a new cryptocurrency called Googolcoin
| (GGC). The supply of the coin would be - as the name implies,
| 10^100 GGC. I would pre-mine all but say 1000 of them for myself
| and leave the rest for miners. Then I would start making the
| market and put all of my GGC for sale, at a price of $1/GGC. Of
| course, I would also put offer to buy as many GGC as anyone wants
| to sell at say $0.7/GGC. Then I would go and bribe someone and
| buy one GGC from me. And there you have it. My net worth would be
| _orders_ of magnitude greater than all other wealth in the earth
| combined! Take that, Elon.
|
| (If my reader at this point has not realized that the concept of
| market cap for cryptocurrencies is stupidest thing since... well
| previous stupidest thing, I would recommend selling your crypto
| ASAP.)
| [deleted]
| ribosometronome wrote:
| https://www.youtube.com/watch?v=iHfJRON3b-w
|
| Reminds me of Max Fosh briefly being the world's richest man.
| alexb_ wrote:
| This has got to be one of the most absurd situations I've ever
| seen. Absolutely fucking insane that this could have even lasted
| that long. Every single charitable interpretation of this
| situation, every single possible way that they could have somehow
| argued their way out of it being a clear scam, it's all just
| obviously stealing.
|
| I think it's absolutely absurd that "smart money" was pumped into
| this to the tune of billions upon billions of dollars. The
| popularity of this delusion, and the madness of the billion-
| dollar crowd is so much worse than anyone could have thought.
| gary_0 wrote:
| I still have doubts that regulators will step in and take
| decisive action to prevent this kind of thing happening again.
| Is fraud basically legal now?
| joe_the_user wrote:
| _Absolutely fucking insane that this could have even lasted
| that long._
|
| When things are good, Ponzi schemes appear smarter, hipper and
| more profitable than ordinary businesses and so no one want to
| run anything else after a bit. That's why the Fed is there to
| "take away the punch bowl just when the party is getting
| interesting" - because, whatever their other virtues, markets
| won't stop this before disaster strikes.
| lkrubner wrote:
| Strongly agree. In normal times there are scammers and people
| trying to set up Ponzi schemes, but they don't typically fool
| sophisticated investors. These last 30 years have seen the
| markets grow increasingly deranged. In that sense, Bernie
| Madoff was the true visionary who set the tone for this era,
| much more so than Elon Musk or Adam Neumann.
| KKKKkkkk1 wrote:
| _The vast majority of FTX Trading's recorded assets are either
| illiquid venture capital investments [...] In all, the
| spreadsheet says FTX Trading's assets were [...] $3.2bn of
| illiquid private equity investments._
|
| Sounds like the VCs may have managed to recoup their investments
| using customer funds before the thing blew up.
| xg15 wrote:
| Maybe I misunderstood, but if the investments were on the
| "assets" side, doesn't that mean that FTX _was_ the VC investor
| here - and the "asset" is the potential of the investment to
| pay off?
| [deleted]
| [deleted]
| TacticalCoder wrote:
| Now people are realizing that the scam was planned from the
| beginning. Serum started trading in 2020 and was in preparation
| before that. And SBF was part of it from the beginning.
|
| Compliance lawyer was previously involved in massive online poker
| scams. Guess who's that lawyer' ex-colleague lawyer, also
| involved in the scam, is working for? tether/iFinex/BitFinex.
|
| Go read @bitfinex'ed 's Twitter account. He's been exposing
| tether / iFinex / Bitfinex / Alameda / FTX and SBF as frauds
| since the very beginning.
| gruez wrote:
| >Go read @bitfinex'ed 's Twitter account. He's been exposing
| tether / iFinex / Bitfinex / Alameda / FTX and SBF as frauds
| since the very beginning.
|
| Seems like the account trashes mainly Tether/Bitfinex, but also
| whatever other crypto company shows up in the news (eg. FTX,
| Binance, or coinbase). If you trash everything, of course
| you're going to turn out to be the guy who was right "since the
| very beginning". It doesn't mean that you're actually a good
| source or anything.
|
| For instance, I scrolled all the way to the bottom (to escape
| all the recent FTX tweets), and found a retweet[1] portraying
| FTX as some sort of predatory lender and how "SBF HAS ACTUALLY
| RISKED LITTLE OR NOTHING", which we now know is the opposite of
| what happened (matt levine says that the probably lost money
| bailing all those companies out).
|
| [1] https://twitter.com/otteroooo/status/1571522943305523206
| TacticalCoder wrote:
| > If you trash everything, of course you're going to turn out
| to be the guy who was right "since the very beginning".
|
| But he _was_ right. Do you really think tether
| /iFinex/Bitfinex/Deltec are nice persons playing it fair?
|
| It's clear he wants Bitfinex to fail and Bitfinex shall
| eventually fall.
| grey-area wrote:
| All the companies you list are frauds, save _maybe_ coinbase.
| celestialcheese wrote:
| > Still it is striking that the balance sheet that FTX circulated
| to potential rescuers consisted mostly of stuff it made up. Its
| balance sheet consisted mostly of stuff it made up! Stuff it made
| up! You can't do that! That's not how balance sheets work! That's
| not how anything works!
|
| This is absolute gold.
|
| Also...
|
| > FTX/Alameda were funneling customer money into effective
| altruism. Bankman-Fried seems to have generously funded a lot of
| effective altruism charities, artificial-intelligence and
| pandemic research, Democratic political candidates, etc.
|
| This is just catnip to the "right-wing" media machine, Even worse
| is that it's not even really that far-fetched of a theory.
| Billions spent influencing elections and policy over the last 3
| years, and a $10B hole of customer funds just missing. This is
| just reinforcing the worst conspiracy theories out there, and I'm
| sad to see it..
|
| *edit, formatting
| whimsicalism wrote:
| Unfortunately, there is a history of this exact type of scam
| among firms very, very closely associated with the Democratic
| party.
|
| The owner of this firm probably had more pull with the higher-
| ups than SBF will ultimately have - he got no jail time & a 5
| million dollar fine. He's already back to running hedge funds.
|
| [0]: https://en.wikipedia.org/wiki/MF_Global
| TechBro8615 wrote:
| The current unsubstantiated right wing rumor is that Ukraine
| "invested" a bunch of the US aid money into FTX.
|
| I think the rumor is probably conflating "actual" ($ backed)
| aid with the crypto donations individuals made through FTX at
| the beginning of the war, but who knows.
| smsm42 wrote:
| Or more likely, it's just "everybody we hate are surely
| connected and conspiring against us" type of thing, where
| everything just gets dumped into one huge pot, mixed up and
| served up for rage clicks. I mean, it both has words "crypto"
| in it, there's billions here and billions there, shake up
| weeple!
| [deleted]
| Aunche wrote:
| > generously funded... Democratic political candidates
|
| This isn't the smoking gun that Republicans want to portray it
| as. A third of their political spending went to Republicans.
| Companies will typically donate to the incumbent party because
| they're the ones who actually write the laws, so it's not
| unusual for them to donate more to Democrats.
| vkou wrote:
| Why is a coal billionaire spending money on campaign
| contributions normal, but a finance billionare doing the same
| catnip for the worst right-wing conspiracy theories? [1]
|
| For someone who just arrived on Earth from another planet,
| modern campaign financing rules are indistinguishable from
| bribes, regardless of who the money goes to.
|
| [1] I mean, aside from the _obvious_ answer (Which is that
| their guys aren 't the beneficiaries.)
| ok_dad wrote:
| I absolutely hate myself for replying, but in this situation
| you gave, SBF may have used customer's money, but an oil/coal
| baron uses their own money.
|
| Even if you consider billionaires to be a disgusting stain on
| society, like myself, there's still a difference between
| stealing money to spend on stuff (political donations or
| Lambo's) and spending money/stocks you legally made in a
| horrible, earth-killing industry.
|
| I absolutely detest greed in all it's forms, but I also don't
| think people should lower their morals and ethics to match
| the lowest of the low, as if they're Robin Hood (the
| character, not the company).
| vkou wrote:
| That just makes SBF a thief, but that's not really relevant
| to the core problem of pay-to-play campaign contributions.
| ok_dad wrote:
| The parent comment was asking what the difference was, I
| said the difference was the theft. I guess I was wrong
| because I looked up the right wind conspiracies and they
| all seem to care only about the part to play aspects,
| which is definitely very ironic considering the history
| of right wing financing.
| TacticalCoder wrote:
| > Even worse is that it's not even really that far-fetched
|
| Partizan politics aside... SBF's very mom was running a
| fundraising campaign. And after George Soros SBF was the
| biggest donor.
|
| SBF had already siphoned $95m out of Canadian teachers pension
| funds.
|
| > This is just reinforcing the worst conspiracy theories out
| there
|
| At this point it's not just conspiracy theories anymore.
| BlockFi had already reached an agreement with the SEC (and SBF
| "bought" BlockFi when it was in trouble) and it's totally
| obvious that FTX would have been a licensed regulated exchanges
| once the current bill would have passed.
|
| It's an undisputable fact that the chief FTX lobbyist was an
| ex-CFTC commissioner. He apparently also was an ex- colleague
| of the SEC's chair, Gary Gensler.
|
| And as weird coincidence would have it: Gary Gensler was an ex-
| colleague of Alameda's 28 years CEO's father.
|
| And you dare to say it's "re-inforcing conspiracy theories"?
|
| Let the scum of this earth be exposed for what it is.
|
| I'm not defending people because they happen to be leeches
| close to the political party I'm voting for.
| celestialcheese wrote:
| I should have been more clear - this isn't a conspiracy
| theory. The money disappeared and there were huge donations
| to left-wing causes. It's fraud propping up political
| spending. No defence and not defending them. It boils my
| blood.
|
| The conspiracy theories I was referring too are the"jewish
| space lazers, George Soros Jewish Cabal Running The World
| Drinking Babies Blood" type anti-semetic conspiracies spouted
| off by people like Kanye and other far-right conspiracy nuts.
|
| This gives them ammo and confirmation bias that the more
| nutty and harmful theories have legs, and that can have real-
| world, extremely dangerous outcomes.
| vkou wrote:
| Which left-wing political causes were championed by the ~40
| million he gave to the Republican party?
|
| Without digging into the minutia, it seems like a classic
| example of 'pay both sides so that no matter who wins, we
| get a seat at the table.' Unsurprisingly, the incumbents
| got paid more.
|
| The causes don't seem to matter, pay to play does.
|
| Now, if the right is ready to embrace an end to
| corporations and millionaires donating to political
| campaigns, it's a fantastic idea that we should embrace.
| If, of course, it's just sour grapes and complaining after
| losing a midterm senate election after putting forward a
| slate of some of the worst candidates they could field, I
| don't have a minute of time for it.
|
| Given the historic track record on campaign financing, I
| think it's the latter.
| moralestapia wrote:
| OT but also part of that newsletter (by the end),
|
| That take on ESG as an excuse to mask out antitrust violations,
| wow, never thought of it like that.
|
| Agree with everyone else here, Matt Levine is top notch.
| webscout wrote:
| hn_throwaway_99 wrote:
| The thing that this piece really got me thinking about is how
| many other crypto companies are the same ponzi scheme because
| they are counting made-up things as assets on their balance
| sheet.
|
| In other words, suppose I create token SCAMMER, and I say its
| supply will be capped at 1 million tokens (or 10 million, or 100
| million - that's the "nice" thing about crypto, I can kinda
| choose whatever number I want), and then I'm able to sell 10 of
| those tokens for $100 each. According to FTX math, I now have
| $99,999,000 of assets on my balance sheet, but of course if I
| actually tried to sell a lot of my "kept" tokens I would tank the
| SCAMMER price.
|
| Even better, and I think what is probably more common in the
| crypto industry: suppose I get my buddy to create a SUX2BEU
| token. I tell my buddy I'll by 10 SUX2BEU tokens for $100 each if
| he buys 10 of my SCAMMER tokens for $100 each. Now suddenly we
| can both say we have huge assets on our balance sheets! Until, of
| course, someone decides to pull aside the curtain covering the
| wizard.
|
| So many ponzi schemes on top of ponzi schemes...
| nemo44x wrote:
| It's shitcoins all the way down.
| waynesonfire wrote:
| I think artwork also works this way. I have 10 piece of art
| drawn by Mr. Artist. My friend buys a piece for 1 million
| dollars, I now have ~9 million dollars of "assets".
|
| These shenanigans have been going on for a long time in wealthy
| groups.
| smsm42 wrote:
| That's why you see all kinds of fintechs trying to push art
| investment into the masses nowdays. They want the stupid
| money.
| mgraczyk wrote:
| This isn't a ponzi scheme as others have pointed out.
|
| This is well understood and goes on all the time in NFTs, it's
| usually called wash trading.
|
| People in crypto know this is happening. The reason they still
| speculate is because it's hard to predict when it will
| collapse, and some people think they have an edge predicting
| that sort of thing.
| twblalock wrote:
| If you made a coin that was actually called ScamCoin people
| would buy it, because they would believe they could sell it to
| someone else for a profit.
| yojo wrote:
| Empirically true. See: PonziCoin
| https://techweez.com/2018/01/26/ponzicoin-crypto-scheme/
| twblalock wrote:
| DogeCoin was supposed to be a parody and people actually
| bought it.
|
| Also my phone does not flag DogeCoin as a misspelled word.
|
| Anyone who invests in this stuff is either really dumb, or
| morally impaired yet smart enough to exploit people who are
| really dumb.
| pram wrote:
| You mean Elon?
| smsm42 wrote:
| Did Elon seriously invest in Doge? I was assuming he was
| just having fun, in his own way.
| hotpotamus wrote:
| As someone who has made a bit of money in crypto, there's
| no reason I can't be really dumb _and_ morally impaired,
| but lucky. I will note that moral impairment and
| intelligence are not highly correlated as far as I know.
| Anon1096 wrote:
| You're not describing a Ponzi scheme, you're describing wash
| trading and fraudulent accounting.
| startupsfail wrote:
| It is surprising that so far there haven't been any
| legislation in Europe that prohibits CO2 emissions and energy
| consumption for crypto mining. Feels like a slum dunk to get
| it passed and get some nice political credit for it.
| ballenf wrote:
| Do they need to? At typical EU energy rates, is there a
| token in the world worth mining?
| gruez wrote:
| Yeah, seems like the carbon tax + high energy prices are
| already working as intended (ie. forcing non-productive
| energy consumers offline).
| initplus wrote:
| Europe doesn't have a large scale crypto mining industry.
| Energy prices aren't competitive enough there for it to be
| viable.
|
| Europe's hashrate could disappear overnight and barely
| anyone would notice.
| Gigachad wrote:
| It would be a good statement and might set off a chain
| reaction for other countries. At any rate, a country that
| isn't very dependent on crypto mining would be a good
| place to start the bans.
| advisedwang wrote:
| people pay in, and that money is spent on (making the project
| look good|delivering a yield|paying execs|propping up a
| trading company|whatever) and then the money is not there
| anymore for withdrawals. That's the essence of a Ponzi scheme
| and this meets that criterion.
|
| Sure, there's fraudlent accounting, and wash trading, and
| other bullshit, but that's all just the some and mirrors that
| allows the ponzi scheme to work.
| basch wrote:
| thats not what a ponzi scheme is.
|
| a ponzi scheme reports a profit, and pays out that profit
| to early investors. (the payout is actually later investors
| inflow.)
|
| the only one of the ones you mentioned that is actually a
| ponzi scheme is the "delivering a yield." its the yield
| delivery, aka dividend, that makes it a ponzi scheme, not
| just fraudulently running away with the money. the scheme
| works because people get paid out regularly, and have no
| reason to believe their money isnt working for them.
| Silverback_VII wrote:
| You are wrong. In a ponzi people are often encouraged to
| reinvest their gains. You only take the money of new
| investors to pay out early investors if really necessary
| (that is to maintain the illusion that the money is still
| there) otherwise you use the money for something else or
| yourself.
|
| exactly how crypto works.
| felipellrocha wrote:
| Just because that is a common feature of ponzi schemes,
| that alone doesn't make it a ponzi scheme. A ponzi scheme
| takes some sort of initial investment from new investors
| and gives that back to old investors in form of "return".
| Meaning, the system itself doesn't rely on any sort of
| growth in order to return, only the sign up of new people
| into the scheme, which is why they can seemingly deliver
| such reliable returns to early investors. Eventually you
| run out of new people to sign up, and the entire house of
| cards falls apart very quickly.
| [deleted]
| rossdavidh wrote:
| Paul Graham wrote an essay years ago in which he described the
| moment when he realized that most of the dot-com companies in
| the late 90's were selling their ads mostly to other dot-com
| companies, who were buying their ads in turn. It looked like
| growing revenue for everyone, but once it came time to show a
| profit, all of it came crashing down...
| mcintyre1994 wrote:
| Ad-supported mobile games seem to work like this too, all
| their ads are for other free ad-supported mobile games. Also
| I downloaded a QR code scanning app and every time I tried to
| scan a QR code it showed me an ad for another QR code
| scanning app lol.
| physicsguy wrote:
| I do think of this a bit when I see startups being the main
| customers of other startup's products. For e.g. I've never in
| my career at big orgs and small orgs alike had authority to
| just go and purchase $50/dev/month on productivity tooling
| for my teams, so I've never quite worked out who is paying
| for these
| pewter_wiz wrote:
| [deleted]
| hintymad wrote:
| But aren't startups doing the same thing as PG said nowadays?
| That is, portfolio companies use each other's products to
| boost their revenue and user base.
| jonny_eh wrote:
| SpaceX just bought a bunch of ads on Twitter.
|
| https://www.cnbc.com/2022/11/14/spacex-just-bought-a-big-
| ad-...
| rsynnott wrote:
| In a way, that that is _notable_ today is evidence that
| the dot-com advertising problem _isn't_ notable today. In
| 1999 that would be just What You Did, and not really
| worthy of comment.
| belval wrote:
| > According to internal documents viewed by CNBC, SpaceX
| has spent more than $160,000 on the Twitter ad campaign
| for Starlink in Australia and Spain so far.
|
| Your definition for "a bunch" is a bit questionable, but
| good on you for posting the source.
| freejazz wrote:
| All this without your own definition of a "bunch"!
| belval wrote:
| You got me. I wonder if we did a poll, how much money is
| "a bunch of money" and how much money is "a bunch of
| money on ads" for people.
|
| I think if it had been $500k or $1M I would've called it
| a bunch, but $160k seems low.
| khuey wrote:
| I'm no fan of Elon's recent antics but a $160k
| advertising spend doesn't strike me as a "bunch" for a
| major corporation.
| timkam wrote:
| Still, in B2B you typically want to show you have some
| megacorp logos (in particular due to larger deal size and
| up-sell potential), are attractive to different industries,
| et cetera. So this may be a known issue, but it's also
| considered when assessing startups.
| tomhoward wrote:
| It's a very different scenario.
|
| Just selling to other early-stage startups doesn't generate
| much growth/revenue or make you look like a solid business
| to a sophisticated investor. SaaS/B2B companies that make
| it big do so because they get huge numbers of small-medium
| businesses using their platform, not just startups - I.e,
| Slack, Stripe, Square, Shopify, Canva, Zendesk, Zapier,
| Segment.
|
| Having other startups using your product is a good early
| source of product feedback and a strong signal to very
| early-stage investors, but that alone doesn't give you the
| huge growth you need for bigger funding rounds.
|
| It's very different to the scenario PG was describing in
| the late 90s; in those days, a startup would be founded,
| quickly IPO to raise several $million from unsophisticated
| retail investors, then spend much of it on advertising on
| Yahoo to drive traffic and artificially push the share
| price up. Hence when the music stopped in 2000 all that ad
| spend dried up and Yahoo's share price crashed.
|
| All those companies I mentioned above are going fine;
| slowed growth, sure, but they have real businesses with
| broad customer bases well beyond the startup ecosystem, so
| they're all able to continue operating and doing OK.
| rglover wrote:
| Yes. Nothing has changed. It's not quite the blind leading
| the blind but some variety of that idea.
|
| A uses B uses C
|
| C uses A but not B
|
| B uses C
|
| "Ooooo, A uses B I should use them for C!"
| hef19898 wrote:
| The lesson drawn, and a good one as an investor, was the YC
| advice that start-ups should build stuff for other start-ups.
| loeg wrote:
| Sell shovels in a gold rush?
| jgalt212 wrote:
| It worked like a charm for AWS.
| justinator wrote:
| In what world is AWS a startup?
| lazide wrote:
| When AWS was starting?
| Nowado wrote:
| You mean when they separated internal infrastructure of
| the largest ecommerce in the world to the point when it
| was possible to sell it in commodified pieces to other
| businesses?
| vasco wrote:
| That is not what happened and is a fake myth origin
| story. AWS was started from scratch with a small team in
| south africa. The best description of all the myths and
| the real thing I've heard is here:
| https://www.acquired.fm/episodes/amazon-web-services
|
| It sounds good to perpetuate the "but Amazon.com had
| extra capacity they could sell" but it's not true.
| remram wrote:
| Unfortunately if the only source is this 3 hour podcast,
| you are going to have trouble convincing anyone.
| Nowado wrote:
| There are sources, I didn't go through them yet, but they
| are there. It's pages of unorganized links, but it's
| something.
| smachiz wrote:
| I mean... a little disingenuous. AMZN was a $10-20B
| publicly traded company at that time. When is it a
| startup vs a product offering of an established company?
| drsnow wrote:
| I think it's a bit unfair to characterize every company
| that is "starting" as a "startup", particularly when the
| "startup" in question is/was backed by one of the largest
| companies on the planet. I don't think people think of
| such companies' endeavors as startups, even when they are
| starting.
| sillysaurusx wrote:
| There is an exact answer to your question, and it has
| nothing to do with the size of the company: a startup is
| a company designed to grow fast. Everything we associate
| with the success of a startup is a byproduct of growth.
|
| With that definition, AWS is a startup. So was the
| iPhone. Both invented their respective markets, and had
| to grow quickly to do it. If either of them had needed to
| raise money from VCs, smart VCs would've invested. But
| they didn't need to raise capital, since they were
| already a successful company.
| at-fates-hands wrote:
| >> So many ponzi schemes on top of ponzi schemes...
|
| Isn't this what happened with Quadriga exchange?
|
| _The regulator said Thursday that Vancouver-based Quadriga 's
| late founder Gerald Cotten committed fraud by opening accounts
| under aliases and crediting himself with fictitious currency
| and crypto asset balances, which he traded with unsuspecting
| clients._
|
| _On Thursday, the OSC attributed about $115 million of the
| $169 million clients lost to Cotten 's "fraudulent" trading._
|
| _Another $28 million was lost when Cotten used client assets
| on three external crypto asset trading platforms without
| authorization or disclosure._
|
| _The OSC said he also misappropriated millions in client
| assets to fund his "lavish" lifestyle and because he was in
| sole control of the company ever since 2016, he "ran the
| business as he saw fit, with no proper system of internal
| oversight or controls or proper books and records."_
|
| https://www.cbc.ca/news/business/osc-quadriga-gerald-cotten-...
| gruez wrote:
| That's just regular theft/embezzlement, not a ponzi.
| ignoramous wrote:
| See also: _Basecamp valuation tops $100,000,000,000 after bold
| VC investment_ (2015), https://archive.is/A0Wb1
| drexlspivey wrote:
| That's a common problem when dealing with illiquid assets and
| not a characteristic of just crypto. For example a VC firm buys
| 10% shares of a company valued $1B at their latest round. Then
| the market tanks but no one really knows what these shares are
| worth because they are not trading anywhere so you don't have a
| price to mark them. As a result you mark them in your books
| with the latest round price at $100m even though they might be
| worth much much less.
| codyb wrote:
| Although, according to Matt Levine who writes Money Matters,
| that can sometimes be a feature instead of a bug whereby
| private firms are better able to ride bad market conditions
| than public firms are.
|
| In some cases you could see it being positive not having your
| stock price drop everytime the Fed announces a new rate
| increase or jump everytime they don't (or etc etc with other
| events) if your primary goal is to continue at a steady pace
| to achieve some goal.
| am3101 wrote:
| Small note: it's Cliff Asness from AQR who came up with the
| illiquidity "premium," though Levine does report it a lot.
| This matters a bit bc AQR is a large hedge fund that trades
| in liquids and therefore is marked frequently... there's a
| bit of self-serving bias here (although may still be true).
| jimbokun wrote:
| Classic illiquid asset problem.
|
| Don't know the "real" price because it's infrequently (or
| never) traded.
| cbtacy wrote:
| But are we really talking about "assets" here?
| lazide wrote:
| Good luck finding a solid definition of that term that
| excludes them without excluding a whole class of other,
| more traditionally recognized stuff.
|
| Tokens, etc. are easiest to think of as securities (aka
| stock) generally, albeit securities in a more abstract
| thing than a company.
| IfOnlyYouKnew wrote:
| No. You can't just make up the book value of your assets. You
| need some sort of justification, and these are, for public
| companies, strictly regulated.
| Chyzwar wrote:
| Company have valuation would be based on recorded revenue,
| profit or at least growth rate. When buying a stake in a
| company, there is a whole legal framework and due diligence.
| Crypto token just have the bunch of wash trades to support
| theirs valuation and no transparency.
| mediaman wrote:
| This is different. In the case of the VC who bought shares in
| the startup, they at least have the price they paid for the
| shares.
|
| In the case of crypto companies who create their own tokens
| and then use them as collateral, they never actually paid
| anything for the tokens they own. There's not even a cost
| basis. It's entirely made up.
|
| Not only is what the crypto companies doing much worse, but
| it is rare for VCs to leverage their investments in
| companies. It's not like their fund is levering up 2:1 and
| buying companies, like a PE fund does, because in the case of
| VCs their investments are usually not producing cash flow.
| But in the case of some of these crypto companies, they were
| levering up using collateral of tokens they made up that they
| never paid anything for.
|
| It's much, much worse than anything recently seen in finance.
| CDOs were bad in 2008, but at least the mortgages were a
| secured claim on a physical asset that someone actually paid
| something for.
| jmull wrote:
| > ...and not a characteristic of just crypto
|
| That's a rather fine and unimportant distinction.
|
| It _is_ characteristic of crypto, just not _only_ crypto.
|
| And, in the case of crypto, the asset never represents
| anything but itself.
| worik wrote:
| Oh yes.
|
| > in the case of crypto, the asset never represents
| anything but itself.
|
| This is the foul taste of all crypto "assets". They are not
| assets because they have no intrinsic value for anything.
|
| The nearest real economy analogy is the art market, which
| is hopelessly inflated, utterly riddled with fraud, and
| with very little intrinsic value.
|
| But you can hang a painting on a wall and look at it. Even
| if it is a fake it still looks good on the wall.
|
| Crypto has none of that. All it has is the scam, the fake,
| the hope of a bigger fool.
|
| Shame on us for letting this happen. It gives a bad name to
| geeks in general and cryptography specifically.
| aqme28 wrote:
| You don't even need a buddy for that. Just make another
| anonymous address to buy your token from yourself. Or a dozen,
| it doesn't matter.
| chewz wrote:
| > I tried, in the previous section, to capture the horrors of
| FTX's balance sheet as it spiraled into bankruptcy. But, as I
| said, there is something important missing in that account.
| What's missing is the money. What's missing is that FTX had at
| some point something like $16 billion of customer money, but most
| of its assets turned out to be tokens that it made up. It did not
| pay $16 billion for those tokens, or even $1 billion, probably. 7
| Money came in, but then when customers came to FTX and pried open
| the doors of the safe, all they found were cobwebs and Serum.
| Where did the money go?
| queuebert wrote:
| Levered losses?
| HDThoreaun wrote:
| It went into that @fiat account which was probably Alameda
| mzs wrote:
| I would assume most of it was stolen.
| nafix wrote:
| I feel like all the news stories are ignoring some very blatant
| questions like this. Maybe they are just waiting for more
| details to come out?
| civilized wrote:
| I don't know much about Austrian economics, but the wiki article
| about its "malinvestment" concept [1] sounds like it's talking
| about us:
|
| > In Austrian business cycle theory, malinvestments are badly
| allocated business investments due to artificially low cost of
| credit and an unsustainable increase in money supply. Central
| banks are often blamed for causing malinvestments, such as the
| dot-com bubble and the United States housing bubble. Austrian
| economists such as the Swedish central bank's Nobel Memorial
| Prize in Economic Sciences laureate F. A. Hayek advocate the idea
| that malinvestment occurs due to the combination of fractional
| reserve banking and artificially low interest rates misleading
| relative price signals which eventually necessitate a corrective
| contraction - a boom followed by a bust.
|
| [1] https://en.wikipedia.org/wiki/Malinvestment
| tibbydudeza wrote:
| So Sam Bankman-Fried is the new Adam Neuman. Seems he decamped to
| the Bahamas - is there an extradition treaty with the US ???.
| jerrycruncher wrote:
| SBF is more like the reverse Neumann.
|
| Neumann went into WeWork's endgame looking like a fool, and
| emerged from it a rich wizard.
| nullc wrote:
| > $16 billion of dollar liabilities and assets consisting mostly
| of some magic beans that you invented yourself and acquired for
| zero dollars? WHAT? Never mind the valuation of the beans; where
| did the money go?
|
| Exactly. This is the first time I've seen the media asking the
| right questions.
|
| The answer probably is in part that most of it never existed to
| begin with-- those 'customer' liabilities probably include the
| probably fictional billions in arb gains SBF claimed to have and
| some amount of magic beans deposited by related entities.
|
| E.g. Deposit $1 billion magic beancoins you essentially made up
| (or a friend made up), then trade them for "Bitcoin perpetuals"
| (levered paper bitcoins) with FTX itself acting as the
| counterparty. Now the 'customer' is owed $1bn in bitcoin on FTX's
| books and ftx is long a billion in magic beans.
|
| Then get your friends in the media to write glowing stories about
| FTX's meteoric rise and some suckers come in, deposit real
| bitcoin, invest money from real pension funds, etc. and the
| 'customer' can then withdraw some of their paper bitcoins. ... at
| least until the exchange runs out of anything except magic beans
| and someone forgets to set the switch to 'more magic'.
|
| > FTX worked fine: People liked its technology, and it seems to
| have made money.
|
| Well, the people who deposited there liked the 8% APY they gave
| people simply for depositing funds. Prudent people saw that
| obvious ponzi scheme marker and stayed the hell away!
| dibt wrote:
| > where did the money go?
|
| Isn't it obvious? It was paid to customers and others that took
| the money or equivalent dollar amount in assets off the
| exchange. Either to a bank, another exchange, on-chain self-
| custody, political donations, salaries, stadium naming rights,
| Sam's "make it all back" scheme, etc.
|
| Matt is smart, so maybe he knows, and the question is
| rhetorical.
| nullc wrote:
| It's not rhetorical: The known donations, naming rights, etc.
| don't remotely add up to the amount of liabilities.
|
| If their balance sheet was full of some external asset that
| had lost a ton of value you could say, okay customer
| deposited Bitcoin and FTX used it to buy whatevercoin and
| whatever coin lost 96% of its value. The money went to the
| people selling whatevercoin.
|
| But in this case it's a mystery-- their balance sheet is full
| of magic beans but most of them are magic beans ftx and crew
| appear to have printed from nothing, not magic beans they
| would have had to buy on the market.
|
| So customers deposited real money, a bit was spent on
| donations/etc. And FTX created some magic beans-- so where
| did the money go?
|
| And my conjecture was just that a big chunk of the
| liabilities are also fake too-- the result of magic beans
| being deposited by 'customers' (really FTX insiders) and
| traded for paper bitcoin ('perpetuals').
| drexlspivey wrote:
| I think it's fairly clear what happened:
|
| Customers deposited $8B you mark $8B of cash as assets and
| $8B of customer claims as liabilities.
|
| You send that cash to Alameda *off the books* because
| otherwise you will raise some alarms in internal
| procedures. Now your assets and liabilities don't match
| anymore.
|
| You want to do some accounting because you are about to go
| bankrupt, you now end up with a $8B hole that you mark as
| "Hidden poorly internally labeled account"
| esoterica wrote:
| I think you're confused about what a liability is. If the
| liabilities were fake FTX would not be insolvent. Their problem
| is that their liabilities are real but their assets are fake.
| nullc wrote:
| You might want to consider adopting a less condescending
| communication style in accordance with HN policy-- it would
| make it easier for both of us to learn something.
|
| I think I adequately described a credible sequence of
| operations, but your dismissive reply has made it impossible
| for me to tell which parts weren't communicated effectively.
|
| The central unanswered question is "where did the real money
| go?": Those ftx related magic beans were constructed for
| ~free. The balance sheet makes it look like billions of
| Bitcoin are owed, so where did they go?
|
| The idea that FTX didn't _pay_ for the magic beans is just an
| assumption, but it 's not necessary. They could have paid a
| related entity for them using the paper bitcoin traded on the
| site.
|
| I'm suggesting that related entities such as Alameda research
| and SBF personally deposited magic means and traded them for
| Bitcoin "perpetuals", with FTX awarding them paper Bitcoins.
| This creates a bitcoin liability on FTX's balance sheets even
| though no billions of dollars ever existed.
|
| Some amount of actual valuable assets were deposited, then
| withdrawn by people who traded magic beans for FTX bitcoin
| liability (and/or were awarded bitcoin through FTX's 8%/yr
| yield program on customer deposits) -- leaving FTX with a
| balance sheet full of huge Bitcoin liabilities.
|
| In that scenario one could go back through the transaction
| records and unwind some of these magic bean trades and make
| FTX _less_ insolvent, but they 'd still be insolvent because
| of the real assets that were withdrawn by parties that only
| brought magic beans into the picture, as well as FTX's
| spending, donations, bills for their designer amphetamines
| and cleanup services for their orgies, and other "business
| expenses" typical of their industry.
| jmyeet wrote:
| Forgive the repetition (I've mentioned this on other threads
| about FTX and their balance sheets) but this doesn't seem to be
| widely reported or known for some reason:
|
| 1. FTX had no CFO [1]; and
|
| 2. Their accounting firm is on the Metaverse [2].
|
| (1) is particularly shocking because its normally the CFO's
| experience and reputation that gives investors and customers
| confidence in published numbers (yes, there's that awkward trust
| element against that seems to be an anathema to Crypto Andys).
| Even if it's not a regulatory requirement, I"m honestly shocked
| that the investors (Sequoia, etc) didn't insist on an adult in
| the room so they could trust the financials.
|
| Horrible for the customers. No sympathy for the investors. A
| giant fail by the financial press for not highlighting this issue
| earlier as it's a definite red flag.
|
| [1]: https://www.ledgerinsights.com/ftx-warning-signs-no-cfo/
|
| [2]: https://www.coindesk.com/business/2022/11/11/meet-the-
| metave...
| nemo44x wrote:
| It's even funnier and crazier than "Silicon Valley". I mean,
| c'mon - the auditor was the first Metaverse financial auditing
| company?! It's just so amazing and hilarious.
| xg15 wrote:
| - invent a currency.
|
| - mint one token and sell it to your friend for $1.
|
| - make a tweet saying that supply of your currency will be capped
| at 1 billion tokens.
|
| - you now own $999.999.999 in assets!
|
| Analysts hate this one weird trick!
| c7b wrote:
| > It's an Excel file full of the howling of ghosts and the
| shrieking of tortured souls.
|
| I wish I had Matt Levine's eloquence to put this madness into
| words. Great analysis and I just want to add a small thing: while
| a balance sheet _looks_ like a simple listing of assets and
| liabilities, that 's not how you go about constructing one. Your
| financial statements are the result of a sequence of double-entry
| bookeeping statements, and the balance sheet is one particular
| _view_ on the data processed by this formalism. There is no way
| assets couldn 't add up to liability plus equity, no matter the
| market fluctuations, valuation uncertainty,... (your numbers
| might be out of date/incorrect, but they would still be
| internally consistent). The resulting checksum mechanism is an
| interesting aspect why double-entry bookeeping was such a useful
| tool for merchants on busy, dirty, buzzing medieval markets.
|
| FTX, on the other hand, looks more like a mechanism for
| funnelling cash to who knows where - that's the big question that
| Matt correctly points out: where did all the money go? There's no
| way you can spend $16bn on meth and yachts and mansions in the
| Bahamas in the space of a few years.
| thinkharderdev wrote:
| From the article my bet would be that they basically vaporized
| all the money bailing out bad trades at Alameda.
| c7b wrote:
| Maybe, but it might be worth following the money a bit
| further (especially on the later transactions). Was the money
| at Alameda really just lost on bad trades, or which accounts
| did it end up in eventually?
|
| I read somewhere else that the portfolio of Alameda contained
| over 400 companies that looked like little more than a
| Twitter profile with a handful of followers. It's not hard to
| imagine that the people behind those 'firms' were the same or
| related to those who are now saying 'whoopsies, they looked
| like such good trades back then, my bad'.
| jb12 wrote:
| Matt Levine consistently puts out such good content. His
| newsletter is absolutely worth subscribing to.
| PaulHoule wrote:
| He wrote a whole issue of _Bloomberg Businessweek_ boosting
| crypto recently that was not up to his usual standard and was
| worse than the usual _Businessweek_ standards of layout and
| typography.
|
| It seemed something a year out of sync, aimed to get 'greater
| fools' to take a second look at crypto, completely divorced
| from the headlines a week ago and a week hence.
| legitster wrote:
| ???
|
| The Bloomberg crypto issue was great! What were your specific
| problems with it?
|
| I read it cover to cover and didn't get a single sense of it
| "boosting" crypto. If anything, it was really in depth and
| skeptical.
| PaulHoule wrote:
| It's not news. Anybody who doesn't know how Bitcoin works
| in 2022 is never going to understand how Bitcoin works and
| they need clear messaging such as "No" or "Nothing more to
| see here, move on folks." My guess is that the real
| audience is blockchain enthusiasts who crave validation and
| will squee on it so much that they'll buy 50 reprints.
|
| Why doesn't Bloomberg take an issue and reprint the first
| few chapters of _Extraordinary Popular Delusions_ and add a
| paragraph about each of the 20 times that people said
| "it's different this time" and it wasn't? That wouldn't be
| news but it would be timeless wisdom that would serve
| readers well.
| legitster wrote:
| Ummmm. I think for the typical readership of Bloomberg -
| guys in their 50s looking for cool places to park some
| extra cash - a five page explainer on how smart contracts
| work with some editorializing about how they will
| probably never work as promised is kind of the perfect
| inoculation against hype.
|
| If people are curious about crypto, and their only
| sources of information are polemic, that seems much, much
| worse for everyone.
| nocoiner wrote:
| If you felt that way about that issue, never ever look up the
| other single-topic issue they put out a decade or so ago
| about code and programming. The design of that one would
| probably make your head explode.
| danielodievich wrote:
| I just finished reading this article and I absolutely loved
| it. The layout with meme pictures was an excellent use of
| that format, especially in context of all this crypto non-
| ponzi-sense. Another friend of mine who doesn't know Matt was
| very complimentary of it (in fact he gave me the paper
| article). My wife is reading it now and enjoying it too!
|
| There is no accounting for taste.
| PaulHoule wrote:
| Memes are where neurotypicals and autists can both pretend
| that they are communicating when actually they aren't.
| thinkharderdev wrote:
| I read that article and I wouldn't characterize it as
| "boosting" crypto at all.
| legitster wrote:
| Never paywalled!
| lokar wrote:
| The email subscription is free
| SnooSux wrote:
| Link: https://www.bloomberg.com/account/newsletters/money-stuff
| ProAm wrote:
| Never subscribe to his newsletter, it's impossible to
| unsubscribe when you want to. Literally have to filter it in my
| mail to go to the trash as for the Bloomberg website won't let
| me unsubscribe.
| HDThoreaun wrote:
| jpm_sd wrote:
| "Its balance sheet consisted mostly of stuff it made up! Stuff it
| made up! You can't do that! That's not how balance sheets work!
| That's not how anything works!"
|
| I'm picturing Matt Levine being carted away by nice men in white
| coats after finishing this paragraph
| bena wrote:
| Now, I'm not a money scientist or anything, but I really feel
| as if Sam Bankman-Fried could have picked up a book or two on
| accounting or how to manage a balance sheet before proclaiming
| himself a money genius.
| cma wrote:
| He says in the Sequoia hagiography he never would read a
| book.
| bena wrote:
| Yes. Yes. That's the joke here. That the guy who decried
| traditional forms of communicating information and styled
| himself as some sort of nu-genius philanthropist was
| hoisted by his own petard. That if he had even a fraction
| of the intelligence he thought he had he would have
| realized that he didn't have nearly the knowledge needed to
| do what he claimed he would do.
|
| His books are a mess because he had no idea of how to
| organize them.
| lazide wrote:
| Why do you think he would _want to_?
|
| If he didn't want to be doing criminal things, he has plenty
| of means and opportunity to do them non-criminally.
| bewaretheirs wrote:
| Unfortunately nobody has distilled accounting into a series
| of six-paragraph blog posts.
|
| (see https://lithub.com/crypto-nerd-sam-bankman-fried-who-
| just-lo...)
|
| "I'm very skeptical of books. I don't want to say no book is
| ever worth reading, but I actually do believe something
| pretty close to that," explains SBF. "I think, if you wrote a
| book, you fucked up, and it should have been a six-paragraph
| blog post."
| baxtr wrote:
| I think that's a bullshit quote. He actually said it but I
| think he understood how to stir the pot: but being
| eccentric and controversial.
| whimsicalism wrote:
| Guess he is saying his parents (both authors) fucked up in
| more than the obvious way.
| Scoundreller wrote:
| As someone that has probably read less than 10 fictional
| books in their life, I can see where he's coming from.
|
| Like, I'm literate and basically read stuff all day. And I
| can get through a textbook as a part of a course, but force
| me to read a novel and by page 7 I'm falling asleep and
| losing track of the characters.
|
| I'm on the fence about borrowing/buying a book that was
| based on a podcast series because I fear 90% of what it
| covered was in the podcast.
| swarnie wrote:
| Why waste the time?
|
| The scam clearly worked without all the effort.
| bmitc wrote:
| I made a comment elsewhere about the balance sheet. When I
| looked at it, it indeed looked like something Sam Bankman-Fried
| just typed into Excel on the weekend of their emergency
| meeting.
|
| How in the world is a balance sheet not a report that is
| generated by a system, viewable by any executive? Did they not
| have a CFO or any finance people or accountants?
| robryan wrote:
| I was thinking about this. A chartiable explaination would be
| that individual companies in the group have proper balance
| sheets but there was no nice collation of just the material
| assets of the whole group.
| lazide wrote:
| For many businesses, such a thing isn't really possible
| anyway (without manually maintaining a bunch of excel
| sheets for instance). A _lot_ of large important things are
| done by a couple of folks poking and prodding and
| spreadsheets, then making decisions.
| insaneirish wrote:
| > How in the world is a balance sheet not a report that is
| generated by a system, viewable by any executive? Did they
| not have a CFO or any finance people or accountants?
|
| Depending on your line of business, this is actually not a
| simple thing when you're trying to mark assets to market in a
| meaningful way. When everything you own is liquid, it's one
| thing. When things are less liquid, it's another. This is
| true even of completely legitimate businesses.
| bmitc wrote:
| But isn't that basically the line of business of an
| exchange and a trading firm, supposedly one specializing in
| arbitrage? And despite its difficulty, which I can
| understand, it still seems like something that should be a
| bit more automated than the CEO typing them into a
| spreadsheet a week before the company collapses and warning
| readers of the "obvious" chance of typos.
| lazide wrote:
| To be fair, it's quite common for them to be generated by
| someone in finance and then distributed.
|
| Of course, it also happens sometimes that they are cooked in
| some specific way, and that is used to hide that fact.
| ericd wrote:
| You might be surprised at the percentage of the business
| world that is run on spreadsheets.
| bmitc wrote:
| I'm not surprised by spreadsheets at all. They're extremely
| powerful, and I know they're used heavily. But this was
| clearly a document just basically made up by the CEO on the
| spot.
| EMM_386 wrote:
| > Did they not have a CFO or any finance people or
| accountants?
|
| Perhaps not?
|
| "If you take a look at the about FTX page, it shows six
| senior team members: the CEO, the COO, two leaders on tech
| and two on compliance and legal. Something is missing. For a
| company managing billions of client funds, $16 billion
| according to the Wall Street Journal (WSJ), is it not odd
| that there is no Chief Financial Officer (CFO)?"
|
| https://www.ledgerinsights.com/ftx-warning-signs-no-cfo/
| baxtr wrote:
| Anything but I fear. For Levine these kind of stories are pure
| fun to dissect.
|
| I can wholeheartedly recommend his Newsletter. Not the first
| one being so funny.
| spaceman_2020 wrote:
| What boggles my mind is how they lost it all. They should have
| been sitting on 1000x gains. Their Solana stake alone would have
| been worth billions.
| dordoka wrote:
| Yeah, exactly. I reckon they didn't lose it. That money was
| sent somewhere else and they "covered" it up with their own
| issued/invented tokens at ridiculous real cost. It would seem
| plausible to think that they used Alameda as a proxy for the
| real destination of all that money.
| drcode wrote:
| The recent crypto downturn has been unrelenting and deep:
| It's totally plausible they just thought they were the kind
| of geniuses who could spot the bottom of the market and
| quickly bled through all the money
|
| but yeah, it's also possible the money just ended up at a
| third unknown entity
| dordoka wrote:
| I agree, i wouldn't be surprised either if they were just
| morons believing they were geniuses
| jsemrau wrote:
| Trading is easy if everything goes up. The moment in time
| you are stomaching 90%+ losses your operating capital
| quickly disappears.
| acchow wrote:
| This is satire, right?
| brookst wrote:
| Is it wrong that I want the crypto and NFT and GME and other
| insane bullshit to continue just so we are blessed with more of
| Matt Levine!s writing? Damn that guy is talented.
|
| So HN please go invent more multi-billion-dollar insanity that is
| too crazy to even be called a scam, because the world needs more
| of this great writing.
| mongol wrote:
| So what will happen? Will we see criminal charges and prison
| times?
| skizm wrote:
| > FTX shot its customer money into some still-unexplained reaches
| of the astral plane and was like "well we do have $5 billion of
| this Serum token we made up, that's something?" No it isn't!
|
| The upcoming series of FTX articles will be better than the Elon
| saga I think.
| hn_throwaway_99 wrote:
| Recommendation: If you've been following or interested in the FTX
| scandal at all, read this whole brilliant post beginning to end.
| Not only is the writing in Matt Levine's hilarious style (I
| second all the other comments related to this!) it is also
| incredibly informative as to the mechanics of all the WTFs that
| actually went down. For example, I've been following this fairly
| closely but I didn't really have a good understanding of how
| Serum/SRM played a role, and Levine outlines this clearly.
|
| Really great piece, thanks for posting.
| silexia wrote:
| I would say Levine's proposed scenarios for how the money was
| stolen are generous... he comes up with all sorts of scenarios
| that make SBF and friends not sound like what they actually are
| - fraudsters.
| hn_throwaway_99 wrote:
| Really?? That's not the impression I got at all. Statements
| like "The result of adding or subtracting those numbers with
| ordinary numbers is not a number; it is prison" doesn't
| exactly sound like he's being generous to SBF.
| rowls66 wrote:
| Most financial companies have large balance sheets, a small
| amount of equity that is highly leveraged, and asset values based
| on many assumptions. If the assumptions change, a business can go
| from everything is great to insolvent really fast. That is why
| such businesses are highly regulated. With crypto we see why this
| regulation is so important.
| rossdavidh wrote:
| That youngsters in a new, unregulated and often scammy industry
| could do this, is not at all surprising. That lots of old people
| with billions of dollars gave them money to lose, is what needs
| explaining here.
| fullshark wrote:
| Explanation: Greed, FOMO, and a lack of better opportunities.
| From that Sequoia profile I guess they were also just so
| enchanted by some global arbitrage trade SBF did, exploiting
| arbitrage being every banker's fantasy scenario.
| ricardou wrote:
| Time and time again it seems like the people involved in the
| crypto industry are speedrunning through dynamics that are now
| either clearly understood as a failing strategy, or outright
| illegal. Another such example here.
| nostromo wrote:
| Does Sequoia do literally no due diligence on the companies they
| invest in?
|
| This wasn't seed capital, this was $213mm. And it wasn't just a
| bet that didn't turn out, it was fraudulent at its core.
| enraged_camel wrote:
| The piece Sequoia had on their website about SBF, which they
| have since removed, described a meeting they had with SBF, and
| at the end of the meeting they walked over to him and found him
| playing League of Legends on his laptop. For some reason, this
| made them think even more highly of him.
| sandgiant wrote:
| > What Sequoia was reacting to was the scale of SBF's vision.
| It wasn't a story about how we might use fintech in the
| future, or crypto, or a new kind of bank. It was a vision
| about the future of money itself--with a total addressable
| market of every person on the entire planet.
|
| > "I sit ten feet from him, and I walked over, thinking, Oh,
| shit, that was really good," remembers Arora. "And it turns
| out that that fucker was playing League of Legends through
| the entire meeting."
|
| > "We were incredibly impressed," Bailhe says. "It was one of
| those your-hair-is-blown-back type of meetings."
|
| https://web.archive.org/web/20221027180943/https://www.sequo.
| ..
| Tossrock wrote:
| Playing League of Legends... in Bronze league:
| https://archive.ph/gW721
| themanmaran wrote:
| Echoing this question. I worked in smallcap investment banking
| for several years. My bank wouldn't speak to you if you didn't
| have 2-3 years of _Audited_ financials (note: not 'Reviewed'
| or a 'Compilation'). Often we would request an additional audit
| if we didn't recognize the firm that did the prior auditing.
|
| All for a valuation range of $200MM - $500MM.
|
| Meanwhile a hastily compiled excel sheet seems to satisfy the
| largest VC's in the market? Billion dollar valuations based on
| totally unsubstantiated numbers?
|
| Audit's are expensive (like $30-$80k). But surely better than
| losing $200MM on hot air.
| erostrate wrote:
| It's worse than that. That spreadsheet was created _after_
| FTX became insolvent. When Sequoia invested, they probably
| didn 't even have something as good as that terrible
| spreadsheet.
|
| Or more charitably, Sequoia presented with something more
| professional looking, but completely incorrect.
| BrentOzar wrote:
| > The result of adding or subtracting those numbers with ordinary
| numbers is not a number; it is prison.
|
| Haven't laughed that hard in a while.
| mike10921 wrote:
| I missed that line while skimming the article, but that is
| exactly what was going through my mind. It is mind-boggling how
| this can exist on such a grand scale without any scrutiny.
| Animats wrote:
| The big question: Where did the somewhere between US$4 billion
| and $16 billion that went to Alameda Research go? It seems that
| FTX transferred most of their assets to Alameda Research, which
| either lost, stole, or hid them. Has Caroline Ellison, the CEO,
| been questioned yet?
| moralestapia wrote:
| My bet would be that they stole them.
|
| Before someone tries to Hanlon's razor this, these guys were
| not stupid, they can pretend to be but they come from very
| competitive backgrounds, they knew what was going on.
|
| They're going to jail.
| TheOtherHobbes wrote:
| I wonder how Alameda's VC investors and backers are doing?
| klenwell wrote:
| Did anyone else see the FTX fortune cookies?
|
| https://mobile.twitter.com/klenwell/status/15921781646752522...
| wgd wrote:
| I remember getting those once a couple of months ago. It was
| so indescribably disappointing. I had never heard of FTX
| before that because I don't care about crypto-BS, but I feel
| like everything happening to FTX lately is a suitable
| punishment for inflicting those on the world and so I'm just
| sitting here with the metaphorical popcorn.
| wl wrote:
| Sadly, OpenFortune still exists and will happily insert
| some other company's ad into your fortune cookie.
| mzs wrote:
| I really disliked those. I had this fun routine where I would
| let my dogs pick a fortune cookie and then read the fortune
| to him or her before giving the cookie to the dog as a treat.
| One time Sky got, "you will live a long life and eat many
| cookies." I about cried.
|
| These, blegh took all the fun out of it and I just stopped
| getting Chinese take-out.
| lukemercado wrote:
| This whole article is a beauty.
|
| > FTX worked fine: People liked its technology, and it seems to
| have made money. The problem was in its balance sheet, which
| was full of snakes, and its governance, which put all the
| snakes there.
|
| Fucking lol.
| dweekly wrote:
| Matt Levine is a national treasure.
| guelo wrote:
| The journalism I'm impressed by is coindesk's. They broke
| this story and have been all over it.
| JTon wrote:
| I happened to catch the Odd Lots podcast episode where Matt
| Levine and SBF of FTX were co-guests soon after it first came
| out [1]. Matt's reactions were priceless. Well worth the
| listen now, considering FTX blowup
|
| [1] https://www.youtube.com/watch?v=KZYqL79GDXU
| bombcar wrote:
| Levine has said that he was a _fan_ of SBF based on that
| podcast, btw. Someone posted about it earlier today.
|
| https://news.ycombinator.com/item?id=33594284
|
| I think people would do well to remember that Levine's job
| is _NOT_ to do your due diligence for you; he 's an
| entertainer.
| dwohnitmok wrote:
| The point about being an entertainer is a good one.
| Nonetheless, after reading that I came out with more
| respect for Levine. With FTX in shambles, it would've
| been easy to go with the flow and lean into how he
| predicted the whole thing with his Ponzi question, but
| Levine instead honestly comes out and says that he
| actually liked SBF more after that interview.
| robocat wrote:
| > he's an entertainer
|
| That is a gross cynical misrepresentation.
|
| He appears to me to be a financial geek, interested in
| the mechanics of finance for its own sake, and who finds
| comedy (often dark comedy) in the mechanics of our
| financial systems.
|
| Philosophically, we can't be 100% sure of his motivations
| to publish his insights, but everything of his that I
| have read points to the reason primarily being that he
| finds it fascinating, a nearly purposeless academic joy.
| bombcar wrote:
| There's nothing wrong with being an entertainer, it's
| just something to keep in mind.
|
| In other words, don't make major financial decisions
| based on Levine _not_ saying it is a good or bad idea.
| HDThoreaun wrote:
| I really don't think anyone was confused about yield
| farming being a Ponzi. Everyone who was in it just thought
| they'd get out before it blew up. Not really related to FTX
| blowing up.
| noelsusman wrote:
| This distinction keeps getting lost in all this.
| Exchanges like Celsius and Voyager were pretty explicit
| about the fact that they were taking your crypto and
| lending it out to people to generate yield. Anyone with a
| brain should have realized that involved some risk of
| losing your assets, especially when you compare their
| rates to what was available elsewhere at the time. Those
| exchanges blowing up because of bad loans was entirely
| foreseeable and not surprising.
|
| But that's not why FTX blew up. They went down seemingly
| due to straight up fraud and/or theft. FTX users had no
| indication that FTX was doing anything other than holding
| their assets and collecting transaction fees. They're
| completely different situations.
| rabf wrote:
| Good to see a well researched accurate article on this
| compared to some of the hit pieces floating around from other
| "journalists".
| whimsicalism wrote:
| It'd have been more impressive if the article had preceded
| the collapse.
|
| Easy to pile on after the fact.
| renewiltord wrote:
| I wonder if there was anyone who knew this and knew
| enough to force knowledge on everyone. Binance's FTT-USDT
| linear perp would have minted if you knew and could
| advertise that to the world. And considering the amount
| you could have minted, you could have backed account hard
| with hella USDT. For that kind of information, no way
| you're getting it for free.
|
| You're going to get that as late as possible after
| someone has sold hella FTT-USDT perps and stood enough
| USDT there to survive funding fee for a few weeks.
| lxgr wrote:
| How about (much) earlier this year? Matt Levine, in a
| podcast with SBF:
|
| > Matt: (27:13) I think of myself as like a fairly
| cynical person. And that was so much more cynical than
| how I would've described farming. You're just like, well,
| I'm in the Ponzi business and it's pretty good.
|
| https://www.bloomberg.com/news/articles/2022-04-25/sam-
| bankm...
| HDThoreaun wrote:
| He also said he was even more bullish on FTX and SBF
| after the podcast that quote came from
| whimsicalism wrote:
| Yes, I read the article where Matt Levine explicitly
| mentions that he missed this.
| jerf wrote:
| There's that famous quote about the tide going out and
| seeing who isn't actually wearing swim suits. I think a
| similar thing applies to all the financial chicanery that
| has been in play in this 0% interest rate environment. In
| reality, while the financial system is irreducibly
| complicated in some important ways, there's also an
| important sense in which the entire thing is really built
| on just some simple primitives. Basically, the financial
| system can move risk spatially and temporally, and charge
| a fee for the activity. That's really all it can do. I
| think from the proper point of view it can't really even
| do that primitive without at least some net increase in
| risk, though I admit defending that mathematically would
| be a challenge. (For now we could just start with the
| proposition that if there was an easy way to simply
| reduce overall risk, it would have already been taken, so
| all in all there can't be very many such things just
| lying around. And they've been building a _lot_ of things
| on this primitive, so it 's not a hard guess that there's
| a lot more use of the primitive than there could possibly
| be opportunities for such uses to result in true net
| reduction in risk, whatever exactly that may mean... I
| know I'm handwaving here.)
|
| If you think about it mathematically, it's important to
| understand that no amount of concatenation of the
| primitive of "moving around risk" can do anything more
| than that. And, _in particular_ , no amount of
| concatenation of things that leave net risk either the
| same or somewhat greater can ever end up _reducing_ the
| amount of risk in the system.
|
| However, each such composed operation introduces a place
| for someone to misprice the risk, especially as the risk
| is communicated across lossy channels, let alone channels
| with a certain amount of incentive to misrepresent the
| risk to the buyers on the other end. So while no amount
| of combination of those primitives can ever reduce risk
| overall, it sure is full of opportunities to convince
| people the risk has been reduced, and for them to take
| various actions based on that. Combine that with one of
| the most popular operations being to take a nice risk
| gradient that gradually ramps up from "high probability
| of small bad event" to "low probability of big bad event"
| and shoving all the risk into "super low probability of
| total utter unrecoverable catastrophe", and the whole
| thing is just destined to explode hopelessly.
|
| And yet... perhaps some readers are saying _well, duh,
| jerf, how else could it be_ , I would say to you I'm
| firmly middle aged now, but those castles based on
| financial engineering have been floating in the sky _my
| entire adult life_ now, even counting the so-called
| "crises" I've seen. And to the naked eye, those castles
| have gotten bigger, higher, nicer, and more numerous the
| entire time. It takes... something... some pretty big
| cajones to stare up at those things that have been
| floating in the sky for so long and saying "they can't
| possibly do that forever". Especially when you may well
| have bankrupted yourself seven times over trying to trade
| on that presumption, even if it is in fact true in some
| abstract sense.
|
| The financial system is rapidly simplifying. It's going
| to be a painful process for quite a lot of people. A lot
| of people who think they are on solid ground are going to
| discover they've been herded onto the flying castles
| without realizing it. It will, if nothing else, be very
| educational I suppose.
| chewz wrote:
| Marc Cohodes had spoken to Bloomberg Crypto staff about
| his suspicions of FTX - they were not interested in
| following. It had been months ago.
| NoboruWataya wrote:
| These people are in the business of market commentary,
| not market predictions. That said, Levine has been very
| critical of crypto (and very entertaining about it) for a
| long time now.
| [deleted]
| EMM_386 wrote:
| I only wish he had gone into the "compliance officer was also
| previously involved in massive online poker scams".
|
| Maybe the next one!
| guynamedloren wrote:
| Marc Cohodes has been sounding the alarm about FTX for a
| while. Here's a snippet (from last month, before the FTX
| crash) where he calls out the shady background of said
| compliance officer:
|
| https://youtu.be/VbDiWXFxqr8?t=2348
|
| The whole conversation is fascinating.
| function_seven wrote:
| > _If you try to calculate the equity of a balance sheet with
| an entry for HIDDEN POORLY INTERNALLY LABELED ACCOUNT,
| Microsoft Clippy will appear before you in the flesh, bloodshot
| and staggering, with a knife in his little paper-clip hand,
| saying "just what do you think you're doing Dave?" You cannot
| apply ordinary arithmetic to numbers in a cell labeled "HIDDEN
| POORLY INTERNALLY LABELED ACCOUNT." The result of adding or
| subtracting those numbers with ordinary numbers is not a
| number; it is prison._
|
| I had this full quote on my clipboard. It's a masterpiece. 3
| Cuil (!?).
| stephc_int13 wrote:
| I wonder how the people at Sequoia feels now. I'd like to see the
| comments of people who lost money in this fiasco here.
|
| The HN crowd is generally hostile to crypto scams, but there are
| likely exceptions.
| whimsicalism wrote:
| I'm a crypto moderate, if such a thing exists. Given the
| vitriol that I see here re:crypto (and the fact that pretty
| much every thread on crypto has to get dang chiming in to
| remind people to be civil & adhere to guidelines), there is
| little chance that actual "crypto evangelists" are going to be
| commenting here.
|
| Even a comment like this one will get aggressively downvoted in
| the current climate.
| jfghi wrote:
| Given that it's a scam affecting many, vitriol is quite
| appropriate. However, I've mostly seen objective reality
| mislabeled as vitriol.
| whimsicalism wrote:
| I trust the moderators of this site to know vitriol when
| they see it.
|
| Honestly, all you need to see is dang's comment history [0]
| to see the proportionate amount of time they have to spend
| moderating crypto comments.
|
| [0]:
| https://news.ycombinator.com/posts?id=dang&next=33563869
| Semaphor wrote:
| Mostly agreed, though there certainly are done evangelists,
| just few and rarely high quality
| wyldfire wrote:
| I feel like I am slowly changing my mind about cryptocoins.
| It always seemed so powerful. Bitcoin's exchange rate may
| fluctuate but it has value and is nearly indestructible. You
| could complain that it's overvalued but it's not at all a
| ponzi scheme. Unfortunately, it seems like the only utility
| that has arrived is for the black market. A bajillion new
| coins have been created, some of which also have real value
| and purport to improve on bitcoin. But here we are in 2022
| and while I can see some cryptocoin ATMs in supermarkets, I
| doubt they're used for much beyond paying ransoms.
|
| Even if we move the most important/useful coins off of proof-
| of-work +, I think governments around the world may move to
| outlaw cryptocoins. At which point whatever modest legitimate
| utility that existed will be eliminated and only the black
| market will remain.
|
| + this seems difficult or impossible for bitcoin until/unless
| it forks to something that looks completely unlike bitcoin.
| whimsicalism wrote:
| What is "black-market" is socially constructed and
| dependent on where you are resided.
|
| Crypto has massive uses in evading capital controls in
| countries that have traditionally had trouble managing
| their own currencies, like the Turkish Lira or the Naira.
| In these countries, it is often illegal to hold substantial
| sums of dollars and not safe to hold these sums on your
| person.
|
| These are "black market" uses from the perspective of the
| Nigerian or Turkish government, but immensely valuable to
| the user - and from my American perspective, probably a
| positive use case.
| burkaman wrote:
| The people at Sequoia did not lose money. They are fine, and
| their investors are probably fine. The people who lost money
| were actual FTX users, who probably trusted FTX in part because
| it was so well-marketed and endorsed by so many "trustworthy"
| organizations like Sequoia.
| drexlspivey wrote:
| What? They bought shares in a company that went to zero, they
| lost all the money. The only way their investment is worth
| anything is if every single FTX customer gets their money
| back because in a liquidation lenders get paid first before
| equity investors.
| burkaman wrote:
| Yes, but the actual people involved, the employees of
| Sequoia, did not lose anything. I guess the word "lose" is
| ambiguous here, but I mean that they will not be personally
| affected by this failure.
| stephc_int13 wrote:
| Well, they might consider renaming their fund going forward.
|
| https://www.newcomer.co/p/sequoias-bad-year-just-got-much-
| wo...
| stephc_int13 wrote:
| I am not worried about the financials of Sequoia, but I think
| this could be a big stain on their reputation.
|
| They've been spectacularly wrong and lazy on this one.
| nullc wrote:
| SBF was well liked by much of the Bitcoin haters because he
| pushed many of the same sentiments. It not for the fact that
| this implosion has also dragged the Bitcoin price somewhat too
| you would be hearing much gloating. (well, you're probably
| hearing gloating anyways because thats how social media works.
| :) ).
| def_true_false wrote:
| It seems that being EA adjacent is not a good proxy for
| competence nor trustworthiness. No one could have predicted
| this. /s
|
| I wonder what portion of bag holders in this round were part
| of the cohort that hasn't seen a crypto winter yet.
| ilrwbwrkhv wrote:
| As I said elsewhere. Sequoia needs to be thoroughly
| investigated and charged for their crimes if found.
| chasd00 wrote:
| This has all the echos of Enron and Arthur Anderson. I know
| Sequoia isn't an auditing firm but the warning flags and
| misses on their part are so extraordinary it wouldn't
| surprise me to find out there's people at Sequoia who were in
| on it.
| akelly wrote:
| > Where did all the money go?
|
| One theory is that the crypto quant funds figured out how to
| exploit the Alameda FTX market maker starting in 2020-2021 to
| take tons of money from Alameda. But FTX couldn't just turn off
| the Alameda market maker because most of the FTX trading volume,
| and therefore FTX revenue, was these crypto quant funds taking
| money from Alameda. So if they turned off the Alameda money
| spigot then their revenue would drop off a cliff and they
| wouldn't be able to raise more money from Sequoia or the UAE. And
| the value of FTT was tied to the trading volume and was a huge
| portion of their assets, so if volume fell they would be
| insolvent.
|
| Basically they turned customer deposits into revenue at pennies
| on the dollar.
| smsm42 wrote:
| That answers the question who got those 16 billions, at least.
| felixbraun wrote:
| And then Luna happened, sealing their fate
| lend000 wrote:
| This doesn't make much sense to me. I think the problem is that
| arbitrage just dried up (as it does in a maturing market), and
| SBF got high on his own farts and started making directional
| bets. This is clear from the amount of FTT tokens that were
| held by Alameda in comparison to the amount of assets a typical
| market maker would hold relative to a pair's liquidity.
| [deleted]
| caiomassan wrote:
| well, he is the 6th highest donor for the democratic party.
| mikeyouse wrote:
| Yep, SBF was 6th on the list of largest 2022 donors by
| donating exclusively to Democrats. Guess who's 14th on that
| same list donating exclusively to Republicans:
|
| https://www.opensecrets.org/outside-spending/top_donors
|
| That's right, Ryan Salame - CoCEO of FTX. Trying to make this
| into a partisan thing is silly.
| thinkharderdev wrote:
| Holy crap this is so much worse than I could have imagined....
| neonate wrote:
| https://archive.ph/4LlX8
| impulser_ wrote:
| One thing I learned from this FTX situation is that VC firms are
| horrible at their job.
|
| How does one of the world's largest VC firms, Sequoia, with 90b
| dollars in assets not do simple due diligence on their
| investments.
|
| Do VC firms not do background check on executives, or look at
| financial statements of the company they put their money in?
| bhk wrote:
| FTX's problems were nothing that a government bailout couldn't
| solve.
| [deleted]
| dang wrote:
| Recent and related:
|
| _FTX balance sheet, revealed_ -
| https://news.ycombinator.com/item?id=33577437 - Nov 2022 (286
| comments)
|
| (too many other FTXen to make a generic list)
| smsm42 wrote:
| It is incredible that each time I read new article on FTX I think
| "well, that tops everything I've seen so far in supposedly legit
| financial companies" and each next day I learn something that
| totally leaves the previous one in the dust. Turns out they
| didn't just used customers' money for risky investment as I
| thought, they actually pretended that illiquid token they
| themselves invented is a good asset to cover liabilities for
| customers' money! And they actually sent balance sheet with this
| to the investors trying to entice them to invest in this. No
| wonder Binance run away at the first look of it.
| grey-area wrote:
| Binance does the same, as do Bitfinex and Tether and pretty
| much the entire cryptocurrency ecosystem.
| sbierwagen wrote:
| Coindesk says they don't.
|
| There's a pretty solid 90% chance that every exchange with a
| stablecoin is going to blow up, but I'd only guess a 30%
| chance of Coindesk going under.
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