[HN Gopher] FTX Owes Money to More Than a Million People, Court ...
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FTX Owes Money to More Than a Million People, Court Filing Suggests
Author : bubblehack3r
Score : 199 points
Date : 2022-11-15 17:17 UTC (5 hours ago)
(HTM) web link (www.vice.com)
(TXT) w3m dump (www.vice.com)
| Taniwha wrote:
| But is it really "money"? I'm pretty sure they just owe them some
| large numbers, there are plenty of large numbers where those ones
| came from I'm sure they can make some more
| btilly wrote:
| I like how the article acknowledged, _...FTX operated a highly
| complex corporate structure with dozens of companies..._ without
| pointing out that one of the reasons for the complex structure
| was to make the fraud harder to track down.
| boeingUH60 wrote:
| Are you sure? FTX was collecting deposits in many countries, so
| I think they had to have local subsidiaries to enable
| that...The corporate structure seems orthogonal to their fraud
| zwkrt wrote:
| There was a breakdown recently that I can't find that showed
| that FTX's corporate structure was at least an order of
| magnitude more complex than Lehman Bro's at the time of it's
| collapse.
|
| EDIT: here's the diagrams (thanks HN!)
|
| https://www.manchesteropenhive.com/view/9781526100580/figure.
| ..
|
| https://i.redd.it/078p4g7m6cz91.jpg
|
| Note that for LB, like most normal companies, it has
| subsidiaries where it makes sense to operate under different
| tax laws, etc. So they have a Japanese company, and
| Australian company... For FTX there is no such rhyme or
| reason. Most of the entities outside of DE are in Antigua,
| Seychelles, Cayman Islands, Switzerland. I don't know enough
| about finance to understand if this is a red flag, but given
| the circumstances the intent behind such a structure is
| certainly suspiscious.
| andsoitis wrote:
| > Antigua, Seychelles, Cayman Islands, Switzerland
|
| All are tax havens and, afaik, provide a level of corporate
| veils that are not readily available elsewhere.
| gruez wrote:
| >>corporate structure seems orthogonal to their fraud
|
| >FTX's corporate structure was at least an order of
| magnitude more complex than Lehman Bro's at the time of
| it's collapse.
|
| Okay, but what does corporate structure complexity have to
| do with fraud? It seems like you're trying to argue
| something along the lines of "lehman brothers was complex
| and collapsed due to fraud. FTX is even more complex than
| lehman brothers, therefore it's even more fraud then
| lehman!", but we didn't even establish how complexity has
| to do with fraud.
| [deleted]
| grey-area wrote:
| https://www.tookitaki.com/compliance_hub/shell-companies-
| mon...
| gruez wrote:
| It feels like certain terms (eg. "ponzi scheme", "money
| laundering", "shell companies") get thrown around any
| time there's any sort of financial malfeasance, without
| regard to their specific meaning. For the money
| laundering claim, do we have any reason to believe that
| SBF is trying to launder money (ie. trying to conceal the
| origin of money, obtained from illicit activities such as
| drug trafficking, corruption, embezzlement or gambling,
| by converting it into a legitimate source[1])? Is he
| secretly also a darknet drug dealer or something? I guess
| you could argue the embezzle angle, but the guy isn't
| exactly known for a lavish lifestyle. He does use company
| funds to fund his charities/PACs and buy expensive
| properties (I think there was a group penthouse in
| Bermuda that's for sale now), but that's all in the open.
|
| [1] https://en.wikipedia.org/wiki/Money_laundering
| grey-area wrote:
| Alameda
| JumpCrisscross wrote:
| > _what does corporate structure complexity have to do
| with fraud?_
|
| Broadly speaking, inexplicable complexity in finance
| means fraud.
| gruez wrote:
| Except in this case there's a far simpler explanation
| floating around:
|
| 1. Alameda Research experienced some losses and needed
| capital injection
|
| 2. In a transaction that was probably not at arms-length
| and possibly fraudulent, they borrowed money from FTX by
| putting FTT and other tokens as collateral
|
| 3. The tokens taken as collateral crashed in value, which
| caused FTX to be unable to meet their liabilities
| JamesianP wrote:
| Obviously all their planning did not account for issue #3
| either way. But perhaps their concern was simply having
| actions like #2 exposed, and more generally the value of
| their company (which goes hand-in-hand with the value of
| their various tokens) exposed. In that infamous
| interview, the guy talked about manipulating the prices
| of crypto using a small float as one tactic.
| baobabKoodaa wrote:
| > Okay, but what does corporate structure complexity have
| to do with fraud?
|
| Their point is that we can't look at those diagrams and
| determine if LB was more complex than FTX, because we
| suspect that those diagrams weren't drawn with the same
| granularity. So it's possible (perhaps even likely) that
| LB was more complex than FTX, and this would be apparent
| if we were to compare diagrams drawn with the same
| granularity.
| lazide wrote:
| The potential relation to fraud is that financial
| complexity can be used to obfuscate cash flows and a
| great many other things and hide malfeasance. Even if
| things like corporate officers and beneficial ownership
| info is easy to retrieve, having a Byzantine structure of
| entities can make it really hard to see the 'one hand
| washing the other' stuff, especially for outsiders.
|
| And corporate officers and beneficial ownership info is
| rarely easy to get when this is done offshore, like many
| of these were.
| baobabKoodaa wrote:
| Not sure if you replied to the wrong comment by accident,
| but that has absolutely nothing to do with my comment
| that you replied to.
| lazide wrote:
| Nope, my comment is definitely applicable.
| baobabKoodaa wrote:
| Ok, care to explain?
|
| It seems to me that your comment concerns the connection
| between financial complexity and fraud (it's easier to
| conceal fraud when you have complex structures).
|
| My comment didn't concern that topic at all. My comment
| concerned "can we judge if A is more complex than B based
| on these 2 pictures". I said that we can't know if A is
| more complex than B, or if B is more complex than A,
| based on these 2 pictures.
|
| Your comment doesn't even mention the pictures. Nor does
| it attempt to draw any kind of conclusion about the
| comparison between A and B. Nor does it provide a general
| framework for drawing comparisons. So I don't see how it
| relates to what I said at all.
| lazide wrote:
| You quoted the section I was answering, and then went on
| that tangent yes.
|
| Which I figured was because you couldn't see the
| connection, otherwise you would have quoted another
| section?
| zwkrt wrote:
| You're right that it is just an implication on my part
| (and thanks for the sister comment of yours for finding
| the diagram!). Comparing it to LB is just a little bit
| flippant. But you have to admit, LB was a 100 year old
| company that provided actual value in an incredibly
| complex and entrenched market. FTX was only a few years
| old and basically managed electronic trading cards for
| electronic trading card enthusiasts, yet has ~100
| different entities in the corporate chart? Something is a
| bit off.
| saalweachter wrote:
| Hell, just the fact that all of Lehman's subsidiaries are
| named "Lehman", and most of FTX's are named like they used
| a code name generator.
| lazide wrote:
| Almost like in Lehmans case, transparency and clear
| accountability were at least somewhere important.
|
| Less so for FTX.
| wjnc wrote:
| I saw those plots and I think there is a false comparison.
| No way the Lehman plot is at the same level of granularity
| as the FTX plot. My firm is mid-sized European insurer. We
| have a chart with low hundreds of entities. Most arise from
| compliance purposes. Many from acquisitions that have not
| been definitively integrated. Some follow from certain
| reinsurance deals. We have many funds in the market, some
| entities are related to ESG-activities, some are caretakers
| entities for certain customers. I get it though. In M&A of
| small firms I have seen ten people work in a firm with
| twenty entities and have raised questions. But it's the
| story that counts. In larger companies you have notaries on
| retainer just to keep the legal structure follow the
| organizational reality.
| chinathrow wrote:
| https://i.redd.it/078p4g7m6cz91.jpg
| btilly wrote:
| Yes, I'm sure.
|
| For example FTX was able to claim, with a vague semblance of
| honesty, that it had assets to cover liabilities. But in fact
| what it did was transfer money to other companies that were
| part of the network, like Alameda, and get back tokens with a
| book value but no real market value, like Serum. On paper
| both companies had engaged in a fair transaction. In reality
| customer money got moved to another company that was then
| free to do with it what it wanted, all hidden behind the
| corporate structure.
|
| Read https://archive.ph/TOgjK for Matt Levine explaining
| exactly how this actually worked.
| basch wrote:
| That relationship only requires two companies, not 130.
| tibbar wrote:
| I don't think this is quite right. Matt is saying that the
| Serum _wasn 't_ exchanged for customer money -- it was more
| or less created out of thin air. He suggests that most of
| FTX's magical crypto assets like Serum were created for < 1
| billion of customer money. He points out that we don't
| _know_ from the balance sheet where they flushed the
| $16billion of investments. (It does seem like a lot of it
| went to Alameda, but not in exchange for Serum. And we
| still don 't know how Alameda lost all the money it lost.)
| djbusby wrote:
| Alameda Research has a profile on CrunchBase, they
| invested in a cannabis bank for example.
| espadrine wrote:
| Since they used Serum's diluted market cap to justify it
| as an increase in assets, and focused on having more
| assets than liabilities, it implies they took this higher
| total asset balance to shoulder liabilities that their
| existing assets did not cover.
|
| Since every dollar they received in customer deposits
| appeared both in assets and liabilities, the only way
| they ended up with liabilities that their (non-Serum,
| non-FTT) assets did not cover, is by exchanging the
| dollars with something that lost value.
| tibbar wrote:
| > Since every dollar they received in customer deposits
| appeared both in assets and liabilities, the only way
| they ended up with liabilities that their (non-Serum,
| non-FTT) assets did not cover, is by exchanging the
| dollars with something that lost value.
|
| That's the way it _ought_ to work in the absence of fraud
| or theft. But as Matt says, the reason this balance sheet
| is so insane is that there 's no evidence this happened.
| Only a very small amount of customer dollars could have
| been used to generate Serum. FTX invented several
| cryptocurrencies which, at a 10x inflated valuation,
| obscure the fact that they completely lost $16 billion of
| assets.
|
| In fact, it seems that SBF used a backdoor in his own
| software to secretly transfer customer funds to Alameda.
| There's no evidence that any sort of internal accounting
| actually balanced the books in the way you suggest, which
| is what's so insane about this whole story.
| lazide wrote:
| It doesn't matter how thoroughly you do your double entry
| accounting if you can't trust the statement (or there is
| no statement) you reconcile against. Or no one ever tries
| to reconcile shit.
|
| How does it go again?
|
| " The government are very keen on amassing statistics.
| They collect them, add them, raise them to the nth power,
| take the cube root and prepare wonderful diagrams. But
| you must never forget that every one of these figures
| comes in the first instance from the village watchman,
| who just puts down what he damn pleases."
|
| - Josiah Stamp
| mNovak wrote:
| Everyone is making a big fuss over the complex corporate
| structure, and while suspicious, it's also not totally out of
| the norm. If you've ever seen real-estate syndication deals
| (another activity with many investors over varying classes),
| those regularly have a web of dozens of entities just to wrap
| around a single property.
| ohgodplsno wrote:
| It might have something to do with the fact that real estate
| is ripe with fraud and undeclared income too.
| oh_sigh wrote:
| It's also extremely common for totally legit purposes as well.
|
| I have some money in fundrise(RE investing crowdfunding), and
| they have a number of subsidiaries for various reasons
| invisible to the end user until tax time.
| LatteLazy wrote:
| Sorry to be contrary but... Is that actually true in this case?
| It seems to me that the fraud was very very simple no? The CEO
| "lent" money from this business (which was really client money)
| to another business he controlled. That's not exactly complex
| or novel. I don't even think there was deception within the
| company was there, he just told people to do it and they did.
| It isn't like he played a careful, decade long shell game like
| Enron. This was the digital equivalent of someone putting their
| hand in the till...
| lazide wrote:
| Simple that way? Yes, probably.
|
| Tracing the actual on the ground transactions and seeing
| where each dollar went, and figuring out the mechanisms used
| to actually lift said dollars?
|
| That's what this discussion is about, and it's not as clearly
| understood right now.
| lencastre wrote:
| When will someone pull up a site with a search?
|
| Assuming there is a KYC database that survived...
| impetus21 wrote:
| They do not I argue-- don't 10X leverage on contracts without a
| license!
| twiddling wrote:
| https://givingpledge.org/pledger?pledgerId=445
|
| Lol. I guess he won't be giving
| 2devnull wrote:
| I wish there was more focus on the "buying political influence
| with dark money" angle, and less on "young tech guy gets rich and
| destroys the economy" angle of the story.
|
| As a group of mostly young tech guys and girls, we should be
| concerned about the narrative society, especially Wall Street and
| their media outlets, convey about us. Recall when redditors
| buying GME stock was being blamed for the many ills of
| capitalism. The whole robbinhood saga. The scapegoat is always a
| smart, wealthy young technologists.
|
| SBF is more of a Soros than an Aaron Swartz. Wall Street loves to
| blame Silicon Valley, but it's bs.
| memish wrote:
| They did this whole piece about him donating to effective
| altruism, but they didn't even mention that he's a top
| political donor, let alone investigate it.
|
| FTX's Collapse Casts a Pall on a Philanthropy Movement
|
| Sam Bankman-Fried, the chief executive of the embattled
| cryptocurrency exchange, was a proponent and donor of the
| "effective altruism" movement.
|
| https://www.nytimes.com/2022/11/13/business/ftx-effective-al...
| mynameishere wrote:
| You can't mention that he's the #2 political donor without
| mentioning that those donations went to the Democratic party
| and that the #1 political donor is George Soros. Any kind of
| negative reporting against either is absolutely forbidden.
|
| You also get into the possibility that there was a cycle of
| money that went: US Taxpayer Dollars -> Ukraine -> FTX ->
| Democratic Party -> Further Money to Ukraine. That's
| influence buying of the absolute ugliest sort and the NY
| Times is unlikely to even hint at it.
| jjtheblunt wrote:
| which is because the NYT is pwned by the Democrats somehow
| undisclosed?
| twiddling wrote:
| https://givingpledge.org/pledger?pledgerId=445
| colinsane wrote:
| > Pledge Letter
|
| > A while ago I became convinced that our duty was to do
| the most we could for the long run aggregate utility of the
| world.
|
| > In the end, it's the work my friends and colleagues at
| foundations do that matters the most. A more just world
| would shine a brighter light on them. In this world, I'm
| honored to be able to support their work.
|
| the page is titled "Pledge Letter"... but where's the
| pledge? what am i looking at here?
| jjtheblunt wrote:
| But NYT is soooooo often faulted for being a source of
| Democratic Party propaganda, enough so that they announced
| they were replacing editors within the last several months.
|
| Perhaps what you notice is NOT coincidence?
| loceng wrote:
| Any narratives against the establishment - whomever FTX et al
| are toeing the line with - are downvoted/suppressed, including
| on HN.
| rurp wrote:
| What are you talking about? This has been well covered in the
| news and discussed in multiple HN threads.
|
| Just a few recent examples in the news:
|
| https://www.axios.com/2022/11/15/ftz-crypto-bankman-fried-
| de... https://fortune.com/crypto/2022/11/15/politicians-sam-
| bankma...
|
| https://fortune.com/crypto/2022/11/15/politicians-sam-
| bankma...
|
| https://cointelegraph.com/news/sbf-has-been-a-significant-
| do...
|
| https://nypost.com/2022/11/14/sam-bankman-fried-broke-
| crypto...
| loceng wrote:
| That's a straw man, I didn't say it wasn't getting
| coverage.
| rurp wrote:
| I don't think a heavily reported on and discussed story
| meets any normal definition of "suppressed".
| sdiacom wrote:
| Isn't buying political influence with money what most people
| with absurd amounts of money do? I don't like it one bit
| either, but it's hardly unique to SBF.
|
| With SBF, there seems to be this attempt at drawing guilt-by-
| association because of his donations to the Democratic Party. I
| don't think this makes a lot of sense.
|
| For an example on the other end of the parliamentary spectrum,
| say, if Musk's future Twitter profits (good luck with that)
| were to come from the savings from firing half of the company's
| employees, and he then donated those to the Republican Party,
| it would be absurd to blame the Republican Party for the loss
| of jobs that it indirectly benefited from.
|
| Obviously firing employees is not equivalent to fraud, and
| donating illicit profits could be part of a scheme to launder
| them. But unless a causal link can be proven, it all looks like
| speculation to me.
| lazide wrote:
| Buying useful things with money to make more money is pretty
| much the definition of a businessman, after all.
|
| And it seems like the ROI on politicians is _amazing_.
| esotericimpl wrote:
| gruez wrote:
| >As a group of mostly young tech guys and girls, we should be
| concerned about the narrative society, especially Wall Street
| and their media outlets, convey about us. Recall when redditors
| buying GME stock was being blamed for the many ills of
| capitalism. The whole robbinhood saga.
|
| Source? I hate statements like these because it sounds like
| there's a central blame committee out there handing down blames
| (or at least some sort of consensus), when in reality in all
| likelihood it's a hot take by some Bloomberg columnist.
| mise_en_place wrote:
| ars wrote:
| He was accused of saying "Kanye Was Right" about Jews. That's
| pretty blatant antisemitism, and you should be ashamed of
| yourself for trying to imply anything else.
|
| I'm flagging your post.
| TacticalCoder wrote:
| When? After the SBF fraud was exposed?
| oh_sigh wrote:
| What does that have to do with SBF and others at FTX being
| Jews?
| varelse wrote:
| donatj wrote:
| When MtGox collapsed I held .01 BTC there worth about $1 at the
| time, about $170 today. I'd transferred just enough for me to
| play around with.
|
| The sheer number of letters I have gotten in the mail about the
| bankruptcy from the Japanese government easily cost a pretty
| penny more than my initial $1 in postage alone. I was honestly a
| little impressed they managed to hunt me down.
|
| I made zero attempts at getting that money back.
| Ptchd wrote:
| Bailouts are only for the big banks....
| jjtheblunt wrote:
| I wonder if bailouts are, one step removed, really for the big
| investment firms behind the political parties offering the
| bailouts, presumably invested in who is being bailed out.
|
| I have no evidence but I do wonder.
| vyrotek wrote:
| When you owe the bank a million, you have a problem.
|
| When you owe the bank several billion, the bank has a problem.
|
| When the unregulated-bank owes billions to millions of people, I
| guess the people have a problem?
| ru552 wrote:
| If FTX pays anyone back, it will be the institutions that hold
| their debt.
| encryptluks2 wrote:
| What about institutions that owe FTX and Alameda Research
| money? Didn't FTX and Alameda invest in companies as well..
| and will those companies still owe a percentage of those
| investments in order to liquidate money?
| thewataccount wrote:
| Not FTX - but I know Coinbase has stated in their earnings
| report that they will use user deposits to pay debtors back
| first in the case of bankruptcy.
|
| Edit - better explanations below this
|
| Also a friendly reminder to everyone not to trust any
| exchange at all with crypto unless you're actively trading
| it, keep it in a wallet!
| bonestamp2 wrote:
| I forgot about that. I don't have much at coinbase, but
| going to move that over to my ledger where it should be
| anyway.
| maerF0x0 wrote:
| > my ledger where it should be anyway.
|
| +1 to this. Remember the classic phrase that goes
| something like "Not your keys, not your crypto"
| Gwypaas wrote:
| They want to do that, pending what the bankruptcy court
| would decide which they have no power to influence.
|
| Like the Kraken ToS.
|
| > Ownership. Title to Digital Assets shall at all times
| remain with you and shall not transfer to Payward, except
| as provided herein. All interests in Digital Assets we hold
| for Kraken Accounts are held for customers, are not
| property of Payward. As the owner of Digital Assets in your
| Kraken Account, you bear all risk of loss of such Digital
| Assets. None of the Digital Assets in your Kraken Account
| are the property of Payward. Payward does not represent or
| treat assets in your Kraken Account as belonging to
| Payward. _However, a court may disagree with Payward's
| treatment of your assets and subject them to claims of
| Payward's creditors_.
|
| https://www.kraken.com/legal
|
| Which means that the current fad of "proof of reserves"
| means absolutely nothing without the liabilities side, both
| customer accounts and for the company itself.
| thewataccount wrote:
| Thanks for the correction!
| shawabawa3 wrote:
| No, Coinbase has stated that a _bankruptcy court may decide
| to do that_ and Coinbase has no control over that
| rafale wrote:
| Celsius argued that depositors were actually lenders. I
| wonder if FTX will try the same angle. It's gonna be harder
| to justify because while Celsius was all about yield, FTX was
| a traditional exchange doing custody on behalf of its
| clients.
| [deleted]
| zoklet-enjoyer wrote:
| FTX was giving 8% interest on the first $10k deposited. I
| definitely considered myself a lender and I gtfo before
| shtf
| TremendousJudge wrote:
| What I don't understand is how this kind of stuff doesn't
| qualify them as a bank
| lazide wrote:
| Well, first the regulators would need to grow a pair.
| labster wrote:
| Crypto: reimplementing the financial system, poorly.
| trophycase wrote:
| FTX is not crypto. If you had a bank that accepted ears
| of corn and bushels of apples for deposit, and trading
| between them, you wouldn't blame farmers when that bank
| stole everyone's deposits.
| [deleted]
| zoklet-enjoyer wrote:
| Yeah I would. Why wouldn't you blame the thief?
| andirk wrote:
| > FTX is not crypto
|
| And a bank is not the ears of corn in the analogy. The
| thief here is FTX which is like the bank. You don't blame
| the corn for being stolen. Yes, blame the thief.
| ceejayoz wrote:
| If a whole _bunch_ of banks trading in corn /apples did
| that, though, things start to be a bit different.
| JamesianP wrote:
| Certainly that's true of the overall sector. But crypto
| as a technology has some advantages and some
| disadvantages, same for traditional banking. People were
| arguing even before the crash that FTX was combining
| disadvantages of both.
| splitstud wrote:
| agumonkey wrote:
| > the people have a problem?
|
| the people are the problem
| lazide wrote:
| Why not both?
| ben_w wrote:
| Money: the problem of the people, by the people, for the
| people.
| JamesianP wrote:
| At least one bright side. The victims definitely have a case
| against FTX and gang, but not against me or other taxpayers..
| stefan_ wrote:
| Read some of the letters to the judge in the Celsius
| bankruptcy:
|
| https://twitter.com/molly0xFFF/status/1550160830762782724
|
| I think when massive scams like FTX start airing Super Bowl
| ads, _we all have a problem_.
| pjc50 wrote:
| Does America even _have_ an Advertising Standards Agency? It
| seems like you can just air massive frauds to everyone and
| nobody notices.
| andirk wrote:
| The commercials said "fortune favors the _brave_" where
| brave almost literally means risky.
|
| Take note of every commercial you see and you'll notice
| that some huge % of them have dead bodies on their balance
| sheets, poisoned water, coups, criminal behavior. Like how
| the (unnamed?) main character of Fight Club's job as an
| insurance adjuster was to figure out if it was cheaper to
| do a recall or pay off the victims' families.
|
| All that said, yeah absolutely no one even glancing at
| FTX's books before letting them in the room is very
| 2008-ish.
| noasaservice wrote:
| Well, kind of.
|
| The Federal Trade Commission (FTC) does handle fraudulent
| advertisements and the like.... If they even address your
| complaint, AND if the complaint comes in your favor, you
| are still guaranteed nothing.
|
| And the "punishments" are at the level of 'just doing
| business' for most cases.
|
| With FTX, its when rich people get hit is when the
| government gets involved. The rest of us can get stuffed.
| rodgerd wrote:
| > When the unregulated-bank owes billions to millions of
| people, I guess the people have a problem?
|
| That should definitely be the case. The moral risk of anyone
| else covering this would be catastrophic.
| Mountain_Skies wrote:
| Cal-Berkeley is removing the FTX logo from their football field.
| They had a ten year naming rights deal to call it 'FTX Field' and
| the company paid in crypto. I wonder if Cal got the full amount
| up front and converted it into cash or not.
| thehappypm wrote:
| It would be astonishing if Cal didn't liquidate immediately.
| memish wrote:
| You might even say "his ambitions exceeded his grasp"
|
| https://www.nytimes.com/2022/11/14/technology/ftx-sam-bankma...
| nostromo wrote:
| The Times should be deeply embarrassed by that article.
|
| SBF is equal parts Bernie Madoff and Elizabeth Holmes but the
| Times is trying to paint him as an unlucky entrepreneur, down
| on his luck. The author doesn't even seem to understand that he
| stole billions from his customers to try and paper over losses
| from his trading.
| next_xibalba wrote:
| The WSJ has a much more cleared eyed take on SBF/FTX:
|
| https://archive.ph/B2t1F
| memish wrote:
| Their coverage generally doesn't seem to understand it.
| Anything notable missing here?
|
| From their "Here's What to Know" page
| https://www.nytimes.com/2022/11/10/technology/ftx-binance-
| cr...
|
| The Aftermath of FTX's Downfall
|
| The sudden collapse of the cryptocurrency exchange has left
| the crypto industry stunned. Crackdown Begins: Regulators are
| moving to freeze parts of FTX's business, while other
| divisions file for insolvency or prepare to halt operations.
| Here's what's next for the company.
| https://www.nytimes.com/2022/11/11/business/dealbook/ftx-
| sbf...
|
| Investors Under Scrutiny: Venture capital firms and
| investment funds showered nearly $2 billion on FTX with few
| strings attached. Now, they are facing questions, too.
| https://www.nytimes.com/2022/11/11/technology/ftx-
| investors-...
|
| 'Effective Altruism': The fall of FTX dealt a significant
| blow to the philanthropy movement that is deeply tied to the
| company's founder, Sam Bankman-Fried.
| https://www.nytimes.com/2022/11/13/business/ftx-effective-
| al...
|
| Sports Sponsorships: From the naming rights for an N.B.A.
| arena to patches on M.L.B. umpires' uniforms, FTX's collapse
| puts sponsorship deals worth hundreds of millions of dollars
| in doubt. https://www.nytimes.com/2022/11/10/business/ftx-
| sports-spons...
| anonporridge wrote:
| NYT integrity was severely compromised by the piece. They're
| clearly deeply in bed with this guy and trying to massage the
| narrative in his favor.
| jmull wrote:
| This is a weird, bad take, that keeps popping up on every
| FTX-related story.
|
| I don't get it. What do you think this story says? I read it
| and it just can't be characterized the way you are saying.
| trophycase wrote:
| ???? How do you interview a man who just more or less stole
| tens of billions of dollars from customers, lied about it
| repeatedly, is trying to cover up evidence of that, and is
| arrogantly tweeting while still not being arrested, and not
| once mention any of that?
|
| This garbage reads like "a day in the life of a silicon
| valley CEO" or something. The dude just perpetrated one of
| the largest financial frauds in the history of the world.
| Bernie Madoff level, and this is all the NYT has to say.
| Totally disgusting to defend the NYT here.
|
| Dude said before Congress that they never trade or leverage
| using customer funds. That was a complete and utter lie.
|
| He "testified to Congress and met with regulators" hugely
| downplays his attempts at regulatory capture via donations
| and attempted backroom deals (Gary Gensler is implicated in
| this too). Including the alleged prid pro quo.
|
| It mentions his "effective altruism" and "philanthropy" but
| doesn't mention who his donations are to, or the fact that
| half of it was just a guise and actually he spent millions
| on housing in the Bahamas or in New York.
| FireBeyond wrote:
| > the dude just perpetrated one of the largest financial
| frauds in the history of the world. Bernie Madoff level,
| and this is all the NYT has to say. Totally disgusting to
| defend the NYT here.
|
| What charges have been filed?
|
| What has he been convicted of?
|
| Comparing him to Madoff is disingenuous. Prior to Madoff
| being charged, the media was the same... they're not
| going to print words like "perpetrated one of the largest
| financial frauds in the world" without charges. The only
| thing that screams is "defamation lawsuit". To be clear,
| I have no boat in this race. But calling the NYT out for
| not making statements that they do not (yet) have the
| ability to prove is entirely problematic.
| Bootvis wrote:
| They could try to ask hard questions and press for
| answers.
| FireBeyond wrote:
| What answers do you believe he will provide to the media
| in the face of an SEC investigation and pending
| litigation?
| dahdum wrote:
| Just repeating what others are saying, but to me it's a
| remarkable puff piece that presents him as a down-to-earth
| noble guy that maybe made some mistakes.
|
| He's worse than Madoff and these sycophant journalists are
| still eating out of his palm.
| nullc wrote:
| If a lot of people have the impression that the piece is a
| promotional piece, ... then perhaps that is actually the
| net effect of the piece.
| emehex wrote:
| From a tweet:
|
| Word count NYT's puff piece on SBF:
|
| "Fraud": 0 "Enron": 0 "Crime": 0 "Illiquid": 0 "Stolen": 0
| "Hidden": 0 "Criminal": 0 "Back door": 0 "He's getting
| sleep": 1
|
| Source:
| https://twitter.com/TrungTPhan/status/1592349684471037955
| FireBeyond wrote:
| You are not going to see any media claim that he
| defrauded investors, committed a crime, stole, when there
| are no charges filed (yet), let alone convictions.
| Implying that the NYT is trying to puff him up by
| avoiding a defamation suit is reaching.
| nwienert wrote:
| Completely untrue, they do this stuff all the time.
| Usually they just interview people in the industry and
| quote them, or temper with words like alleged. But it's
| common.
| tootie wrote:
| "In less than a week, the cryptocurrency billionaire Sam
| Bankman-Fried went from industry leader to industry
| villain, lost most of his fortune, saw his $32 billion
| company plunge into bankruptcy and became the target of
| investigations by the Securities and Exchange Commission
| and the Justice Department."
|
| That's the first paragraph. Literally calls him a
| "villain" and says he's the target of multiple
| investigations.
| jakelazaroff wrote:
| Yes it can? It's a remarkably lenient profile of someone
| who just stole upwards of $10B from retail investors. We're
| talking about people's life savings. Their tuition money.
| The down payment for a house.
|
| Here are some choice quotes:
|
| _> Mr. Bankman-Fried did, however, agree with critics in
| the crypto community who said he had expanded his business
| interests too quickly across a wide swath of the industry.
| He said his other commitments had led him to miss signs
| that FTX was running into trouble._
|
| _> "Had I been a bit more concentrated on what I was
| doing, I would have been able to be more thorough," he
| said. "That would have allowed me to catch what was going
| on on the risk side."_
|
| He didn't "miss signs". There was nothing to "catch". He
| stole billions of dollars from his customers.
|
| _> Mr. Bankman-Fried's circle of colleagues was bound by a
| commitment to effective altruism, a charitable movement
| that urges adherents to give away their wealth in efficient
| and logical ways._
|
| How bad a guy can he be?
|
| _> Mr. Bankman-Fried said he wished "we'd bitten off a lot
| less."_
|
| Bitten off less of his customers' money, he means?
|
| _> As FTX has crumbled, Mr. Bankman-Fried has been
| "working constructively with regulators, bankruptcy
| officials and the company to try to do what's best for
| consumers," he said on Sunday._
|
| What a mensch!
|
| _> He has also found other ways to occupy his time in
| recent days, playing the video game Storybook Brawl, though
| less than he usually does, he said. "It helps me unwind a
| bit," he said. "It clears my mind."_
|
| So happy for him.
|
| _> Shortly before the interview, Mr. Bankman-Fried had
| posted a cryptic tweet: the word "What." Then he had
| tweeted the letter H. Asked to explain, Mr. Bankman-Fried
| said he planned to post the letter A and then the letter P.
| "It's going to be more than one word," he said. "I'm making
| it up as I go."_
|
| _> So he was planning a series of cryptic tweets?
| "Something like that."_
|
| _> But why? "I don't know," he said. "I'm improvising. I
| think it's time."_
|
| What does this even mean? Why include it in the story?
| tootie wrote:
| The parts you're critiquing are literally quotes of
| things he said to the interviewer. I think you're
| expecting too much of a routine story. The reporter got
| direct access to SBF which is not easy to do and got him
| on record speaking to his mistakes which he,
| unsurprisingly, gave roundabout non-incriminating
| answers. The rest of the piece is mostly outlining the
| facts and timeline around the collapse. A journalist
| isn't going to pass judgment like you want. Certainly not
| on a case that is still open.
| jakelazaroff wrote:
| Okay, but printing those quotes without context is a
| choice. When biggest financial fraudster since Bernie
| Madoff tries to give a roundabout non-incriminating
| answer, the thing to do is print it and also say that
| what actually happened is FTX "loaned" customer assets to
| a hedge fund -- also operated by himself! -- in return
| for essentially nothing. Not take him at his word that
| $10B missing was just a whoopsie that happened because he
| wasn't paying close attention.
|
| As for the case being open... I mean, what is the point
| of a newspaper if they're just going to reprint whatever
| the authorities say happened? What about the absolutely
| bonkers balance sheet that FTX released, for example?
| Matt Levine did a good job breaking it down [1], because
| _that 's_ the job of a journalist: to make otherwise-
| inaccessible information available to laypeople.
|
| [1] https://www.bloomberg.com/opinion/articles/2022-11-14
| /ftx-s-...
| tootie wrote:
| There's tons of context in the article. It lists
| everything they did wrong. That Bloomberg piece is very
| much an opinion column and says so at the top.
| jakelazaroff wrote:
| It's simply untrue that there is context. Let's just take
| one example:
|
| _> Alameda had accumulated a large "margin position" on
| FTX, essentially meaning it had borrowed funds from the
| exchange, Mr. Bankman-Fried said. "It was substantially
| larger than I had thought it was," he said. "And in fact
| the downside risk was very significant." He said the size
| of the position was in the billions of dollars but
| declined to provide further details._
|
| We _know_ the size of the positions! The Financial Times
| reported on Friday (as _news_ ) that FTX held $900M in
| assets against $9B in liabilities [1]. And that was
| _before_ the balance sheet was released!
|
| Why is it important to run this quote? Why allow him to
| spin the story like this? Why let him present it as a
| mistake? Why not include actual numbers? These are all
| choices the NYT is making that frame SBF in a positive
| light.
|
| [1] https://www.ft.com/content/f05fe9f8-ca0a-48d5-8ef2-7a
| 4d813af...
| tootie wrote:
| It's later in the article as is a link to additional
| details reported by the WSJ and specific accusations on
| which FTX directors had personal knowledge.
|
| "the company used FTX customer funds to make the
| payments. Besides her and Mr. Bankman-Fried, she said,
| two other people knew about the arrangement: Mr. Singh
| and Mr. Wang.
|
| "The meeting was previously reported by The Wall Street
| Journal. Mr. Singh did not respond to a request for
| comment, and Mr. Wang could not be reached. According to
| a person familiar with FTX's finances, the exchange lent
| as much as $10 billion to Alameda."
| jmull wrote:
| Just to point out: you're comparing a news story to an
| opinion column.
|
| I'm just calling for some critical thinking here! I get
| it, everyone's angry. But you don't have to let it turn
| your brain off.
| [deleted]
| [deleted]
| klyrs wrote:
| Like Musk's buyout of twitter, Ye's attempt on Parler,
| SBF has joined the ranks of avant garde performance
| artists. Or that's how I'm rationalizing all the popcorn
| I've been eating, anyway.
| jmull wrote:
| > What does this even mean? Why include it in the story?
|
| I mean... it's an interview... with the guy at the center
| of all of it.
|
| How is it not newsworthy to put him on the record?
| Where's the lack of integrity in that?
|
| Anyone on SBF's side would try to get him to shut
| completely up. Instead the NYTs has made him feel
| comfortable and got him talking. He's going to hang
| himself with his words. They will be quote from this,
| using it against him at trial and sentencing, because
| there will be plenty of private communications counter to
| this, which shows a conscious effort to deceive.
|
| Getting mad at the NYT over FTX is just weird.
| MichaelCollins wrote:
| This one is particularly egregious:
|
| > _" Mr. Bankman-Fried's circle of colleagues was bound
| by a commitment to effective altruism, a charitable
| movement that urges adherents to give away their wealth
| in efficient and logical ways."_
|
| Not _" Bankman-Fried CLAIMS his circle of colleagues were
| bound by a commitment to effective altruism"_ The article
| isn't reporting the claim Bankman-Fried makes about
| himself. As written, the journalist is the one making
| this claim. That's far over the line. This man stole
| billions of dollars and the New York Times is asserting
| that he's an altruist.
| bena wrote:
| For an "effective altruist", he was neither that
| effective or that altruisitic. Odd.
| HPMOR wrote:
| Or from a more cynical perspective he was extremely
| effective and altruistic. He robbed millions of people
| with spare capital and redistributed hundreds of millions
| to EA causes.
| ninth_ant wrote:
| It's fairly well established that SBF had strong ties in
| the EA community long before FTX. The infamous now-
| deleted profile by sequoia goes into this in more detail.
|
| I think it's reasonable to conclude that SBFs interest in
| EA was legitimate, irrespective of him defrauding his
| customers. Even if that isn't the case, interest in the
| subject of EA still accurately describes his circle of
| colleagues.
| function_seven wrote:
| Fun game idea: Read this parent comment, but with
| s/Bankman-Fried/Madoff/g.
|
| See how nuts that sounds? "Oh, Mr. Madoff missed some
| signs" that his scheme was insolvent.
|
| Yeah, NYTimes deserves at least some of the criticism on
| this piece.
| SkyMarshal wrote:
| I can't help but wonder if the NYTimes article was
| intentionally designed to be 99% puff piece disguising the
| 1% of extremely damning information, just to get them
| direct access to the FTX team so they could get something
| juicy. Journalists can be sneaky like that sometimes.
|
| The 1% of damning info was Caroline's reported admission
| that Alameda borrowed short-term to make long-term illiquid
| VC investments, and when those loans got called and Alameda
| couldn't pay, FTX commingled its customer funds with
| Alameda to pay them.
|
| That was a new bit of info, that NYTimes just casually
| snuck into the middle of the puff piece without further
| commentary, but it's quite damning and kinda insane. While
| all the rubes are complaining about the article being too
| gentle, the financial crimes prosecutors are adding it to
| their case files.
|
| https://twitter.com/WClementeIII/status/1592289824542949376
| MrMan wrote:
| that is by itself jail worthy
| SkyMarshal wrote:
| exactly.
| notch656a wrote:
| It's hilarious that SBF is tweeting without the slightest
| apparent concern of jail nor the fact that he stole $B of
| deposits by international customers, many of which may
| have connections to organized crime.
|
| The closest comparable person I can think of was Madoff,
| and he had the leverage that at least most of his
| customer's money wasn't actually destroyed so his
| cooperation worth a lot. I honestly don't know that SBF
| has anything to bargain to the legal system or his angry,
| often crime involved, customers as it appears he
| destroyed basically all of their money. I'm not saying he
| should be terrified, but personally I would feel very
| terrified I were in that position.
|
| I think his best outcome at this point is some form of
| plea that incudes witness protection program in exchange
| for un-"hacking" the remaining $600M.
| lazide wrote:
| Well, being able to pull off this kind of massive fraud
| pretty much requires steely eyed indifference to your own
| mortality and/or consequences anyway.
|
| Most mortals start sweating bullets if they steal a
| candybar, or at most a car.
| burkaman wrote:
| I also think it's weird. There's like 8 other NYT articles
| about FTX this week and I believe all of them mention fraud
| and/or criminal investigations and/or potential theft of
| customer funds. Maybe this profile is bad but if NYT as a
| whole is trying to rescue this guy they're doing a very bad
| job of it.
| [deleted]
| acchow wrote:
| NYT can't convict him for crimes until the courts do.
| Otherwise, they may be sued for libel.
| twblalock wrote:
| It's not a particularly good story, but I wish people would
| stop with the conspiratorial thinking. There is no evidence
| that the NYT is "in bed" with the guy or trying to help him
| -- and no reason to believe it would be in their interest to
| do that for him.
|
| Why would they want to help him? Do you think he is bribing
| them with his worthless imaginary money? How does the NYT
| benefit from defending someone who has destroyed his own
| reputation and lost billions of dollars of customer money?
|
| Is it possible the entire thing was a Madoff-style fraud from
| the beginning? Yes, but that is not the only possibility. No
| charges have been filed, and all the people who think he
| should be thrown in jail never mention what laws they think
| he broke. It's not illegal to be an incompetent failure, and
| fraud has a specific definition that requires intent and does
| not cover all instances of simply lying.
|
| If the NYT had written an article accusing the guy of crimes,
| they wouldn't have a basis for doing so. Not yet, anyway.
| Maybe actual criminal lawbreaking will be discovered, but
| right now, there is no proof. Should newspapers be accusing
| people of crimes without proof?
|
| People need to put down the pitchforks and torches and wait
| for the full truth to come out. It's going to take a while.
| nwiswell wrote:
| I think people who know / met him just legitimately like
| him. Nerd charisma, I guess. Matt Levine actually copped to
| it in his column.
| hn_throwaway_99 wrote:
| Tons of comments, here and elsewhere, that say that NYT should
| be really embarrassed by this piece. I thought the same after
| reading snippets posted by others, but after reading the full
| piece end-to-end, I disagree.
|
| I think the article is a fairly straightforward account of what
| happened. I think there are places that it could have
| emphasized the fact that "borrowing customer funds" is
| accurately called theft, but it didn't come across to me as a
| "puff piece" that people are calling it.
|
| For example, I thought this paragraph was pretty informative
| and actually extremely damning to the people involved - what is
| described here is clear theft, plain and simple:
|
| > Around the time the crypto market crashed this spring, Ms.
| Ellison explained, lenders moved to recall those loans, the
| person familiar with the meeting said. But the funds that
| Alameda had spent were no longer easily available, so the
| company used FTX customer funds to make the payments. Besides
| her and Mr. Bankman-Fried, she said, two other people knew
| about the arrangement: Mr. Singh and Mr. Wang.
|
| With that one statement I don't see in any way how SBF,
| Ellison, Singh and Wang avoid lengthy prison terms.
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