[HN Gopher] FTX's collapse strands scientists
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FTX's collapse strands scientists
Author : pseudolus
Score : 65 points
Date : 2022-11-16 20:06 UTC (2 hours ago)
(HTM) web link (www.science.org)
(TXT) w3m dump (www.science.org)
| criddell wrote:
| > FTX's collapse was unthinkable just days earlier.
|
| I was shocked -- SHOCKED! -- to find out there was gambling going
| on in there.
| cscurmudgeon wrote:
| This wasn't pure gambling.
|
| This was plain fraud.
|
| Let us not sugarcoat it by saying it was "plain" gambling.
|
| It was gambling BUT with stolen funds.
| halfmatthalfcat wrote:
| Unthinkable to the most naive and gullible people on Earth
| maybe.
| lob_it wrote:
| I just got free crypto from a timeshare promotion on
| oceanfront property in Arizona... FOMO is not my problem :|
|
| As an aside, this post from 2008 does point to all of the
| carbon being released from the 1st meter of soil/permafrost,
| which has probably since melted.
|
| https://phydeauxpseaks.blogspot.com/2008/08/you-know-that-
| ol...
| qohen wrote:
| _oceanfront property in Arizona_
|
| Casablanca, it turns out, has a relevant quote for this
| too[0]:
|
| _Captain Renault: What in heaven 's name brought you to
| Casablanca?
|
| Rick: My health. I came to Casablanca for the waters.
|
| Captain Renault: The waters? What waters? We're in the
| desert.
|
| Rick: I was misinformed._
|
| [0] https://www.imdb.com/title/tt0034583/quotes/qt0429951
| lob_it wrote:
| The innovation has been so good, I got to skip most of
| the fiction entertainment outlets.
|
| I would suck at pop culture trivia :)
| dragontamer wrote:
| The line above was a movie-quote, I believe Cassablanca?
| Where the inspector/regulator comes out of the Casino saying
| that he's shocked to hear of gambling in the facility,
| flanked by two call girls.
|
| ------
|
| EDIT: That being said, the level of shock here is warranted.
|
| > "It's definitely a mess," says Josh Morrison, who heads
| 1Day Sooner, a pandemic preparedness research and advocacy
| organization that received $375,000 from the Future Fund and
| the FTX Foundation. During the pandemic, 1DaySooner became
| known for advocating so-called human challenge trials, which
| deliberately infected volunteers with SARS-CoV-2 to test
| vaccines.
|
| So FTX allegedly donates a lot of money to various causes.
| Those scientists begin the trials (expecting the money to pay
| them back eventually), but... FTX goes bankrupt before it
| hands those scientists money.
|
| That's... bad. I'm not in the scientific field, but it seems
| like these groups had reasonable expectation that some money
| was coming for them... and that money wasn't related to
| cryptocoins or whatever.
| criddell wrote:
| You're right about Casablanca:
|
| https://www.youtube.com/watch?v=SjbPi00k_ME
| qohen wrote:
| _The line above was a movie-quote, I believe Cassablanca?
| Where the inspector /regulator comes out of the Casino
| saying that he's shocked to hear of gambling in the
| facility, flanked by two call girls._
|
| Quick FYI: there are no call-girls and the place is not
| (nominally) a casino, it's Rick's Cafe Americain, which
| Renault calls a cafe and Rick famously calls a gin joint --
| in any event, a popular nightspot.
|
| Here's the text of the relevant scene, from IMDB[0]:
|
| _Rick: How can you close me up? On what grounds?
|
| Captain Renault: I'm shocked! Shocked to find that gambling
| is going on in here.
|
| [a croupier hands Renault a pile of money]
|
| Croupier: Your winnings, sir.
|
| Captain Renault: [sotto voce] Oh, thank you very much.
|
| [aloud]
|
| Captain Renault: Everybody out at once._
|
| In Renault's defense, right before all this, he was told by
| a superior to close the place down and, when a reluctant
| Renault says he has no excuse to do so, he's told, "Find
| one." Hence his feigning being "shocked" at the gambling.
|
| (If you have 32 seconds, you can watch this classic scene
| here: [1]).
|
| [0] https://www.imdb.com/title/tt0034583/quotes/qt0429972
|
| [1] https://www.youtube.com/watch?v=vxnpY0owPkA
| qohen wrote:
| BTW, since I just stumbled across this, there's a page
| showing the sets and a reconstructed floor-plan for
| Rick's Cafe Americain, if anyone's interested:
|
| http://www.paper-dragon.com/fistsand45s/ricks-cafe-
| americain...
|
| (Amusingly, in the comments, someone says they're
| building it in Minecraft).
| avgDev wrote:
| Crypto exchange and collapse, one cannot name a better duo.
| leppr wrote:
| This whole episode should hopefully bring donation recipients to
| do more due diligence on where the money comes from, before
| spending it.
|
| The US president, those researchers, and many, many startups are
| holding what is pretty directly the money of FTX's unsuspecting
| users.
|
| The recovery will be a long and painful process.
| bibanez wrote:
| I don't really understand the logic here. If you've received a
| donation, you can't be forced to return any money, specially if
| you didn't know it had dubious origins
| [deleted]
| leppr wrote:
| If the money is stolen (as is the case in the articles'
| story), then yes, you can be legally compelled to return the
| money to its original owner.
| YetAnotherNick wrote:
| Source will be appreciated. What if the money has already
| been spent? Do they track it all the way through or just
| one level?
| hobom wrote:
| The just-world fallacy is strongly in play with many comments
| here. Because those foundations and charities are massively
| affected by this scandal, there MUST be something they did wrong,
| right? Surely they should have vetted their donors better? And
| when making these arguments, we totally forget that people
| specialising in vetting people, like investment funds,
| journalists and so on, completely fell for the guy. If you want
| charities to implement a standard that would have prevented them
| from taking money from SBF, congratulations, you now have a
| process that prevents them from taking money from basically any
| billionaire.
| skycatcher wrote:
| The comments saying the lesson here is that recipients of
| donations like non-profits and foundations should be vetting
| their donors better seem unreasonable to me.
|
| If FTX investors, customers, and watchers of the crypto space did
| not catch what FTX and SBF were doing until the shit hit the fan,
| what kind of due diligence can we reasonably expect of these
| recipients that would've alerted them to something being wrong
| here?
|
| And consider that the number of donors for most institutions
| would be much larger than the number of companies FTX investors
| would've had to keep an eye on.
| SilverBirch wrote:
| I think the underlying message here is regulation failed. You
| can dance around and shout "crypto" and people will apparently
| just stop doing due diligence. All these companies - the VCs,
| the advertisers etc. all relied on "This isn't an actual
| literal ponzi though right?" and the US regulators were like
| "LOL IDK". It's kind of the regulators job not to be trusting
| in VCs and reputation and really _do the work_.
| TacticalCoder wrote:
| > I think the underlying message here is regulation failed.
| You can dance around and shout "crypto" and people will
| apparently just stop doing due diligence
|
| Regulation failed? The media were complicit into this.
| Presenting SBF as the second coming of the Christ because
| he'd give it all to charities / non-profits / help advance
| science / etc. Regulator people fell for this.
|
| I'm not so sure it's "accredited investors" we need as much
| as "accredited journalists".
| dragontamer wrote:
| What?
|
| FTX isn't a US security that was traded on any platform. VCs
| (and accredited investors) are people rich enough, that the
| USA / regulators have deemed it "fine" if they lose a lot of
| money.
|
| Accredited investors are supposed to have over $1M bucks not
| because it proves that they're smart. Its so that when they
| inevitably get caught in a Ponzi scheme or whatever, USA
| doesn't have to rush in and save their money.
|
| Welcome to USA. If you're an accredited investor and/or
| Venture Capitalist, the training wheels are entirely off.
| You're on your own.
|
| --------
|
| There's no FDIC insurance or SEC governing FTX's deposits.
| Its wholly unregulated, and in the Bahamas to boot.
| SilverBirch wrote:
| FTX took deposits from unaccredited US investors with
| specific guarantees about what would happen with the money
| and they filed for bankruptcy in Delaware.
|
| I don't care about the VCs getting their money, I'm happy
| they go to zero etc- I'm saying the opposite, the VCs gave
| a false sense of security to regular folk that FTX was
| legit, but in reality FTX was telling depositors that they
| were doing all these things to protect them that they
| weren't.
|
| At minimum, the regulators should say "Hey, you can't tell
| people their money is safe if it isn't" (siloed customer
| accounts etc) at best the regulators should say "Hey, you
| _have_ to make sure regular consumers are safe if you plan
| to take money from US consumers ".
| lmm wrote:
| The US legal system needs to start going after VCs that
| invest in criminal companies. They may not be breaking the
| law themselves, but they profit off lawbreaking, and
| they're the ones with the deep pockets. (Isn't this the
| whole point of RICO?)
| AlexandrB wrote:
| Isn't half the point of "crypto" to have an unregulated
| financial market? FTX operated out of the Bahamas for a
| reason. How can regulators fail to regulate a company that's
| not even based in their jurisdiction. You might have a point
| with FTX.US though.
| SilverBirch wrote:
| They filed for bankruptcy in Delaware, and FTX US is bust.
| So I think it's more than just the weird bahamanian guys
| went crazy.
| bombcar wrote:
| Perhaps not more vetting, and more not depending on continual
| donation flow, even if such is under contract or promise.
| friendzis wrote:
| I'll just leave this here:
| https://twitter.com/Bitfinexed/status/1592560145384767490
| leppr wrote:
| There are different levels of due diligence expected depending
| on the areas and the amounts involved. They were the Democratic
| party's second biggest donor [1]. Not a small contributor.
|
| Anyone in their right mind would assume presidential candidates
| to vet their biggest donors.
|
| [1]: https://fortune.com/2022/11/10/sam-bankman-fried-ftx-joe-
| bid...
| halpmeh wrote:
| Anyone in their right might would also assume that depositors
| would vet the financial institutions holding their (billions
| of dollars of) capital, but alas here we are.
|
| Also, I think you underestimate the amount of effort it takes
| to uncover something like this. There was a YouTube video
| posted to HN a few days ago where Marc Cohodes went over why
| he believed FTX was a scam a few weeks prior to the news
| breaking. It provided an interesting glimpse into what's
| required to do DD on this type of operation. It starts with
| good intuition, which most people don't have, and then
| evolves into things like hiring private investigators, or
| running comprehensive background checks on the officers of
| the company, or calling people with intimate knowledge of the
| inner workings, or finding ex-employees, etc. etc. etc.
|
| Now you could say, well a presidential candidate should do
| all that stuff. And in an ideal world, they would. But Marc
| Cohodes does this as a full time job and likely makes large
| sums of money from his vocation. It's unrealistic to expect
| most people, presidential candidate or otherwise, to be
| capable of performing that kind of DD.
| HDThoreaun wrote:
| The dem party probably figured Sequoia did a better vetting
| job than they'd be able to, and they probably weren't wrong.
| mbaum9 wrote:
| mikeyouse wrote:
| People really need to understand what a PAC is --
| "Presidential candidates" can only accept a few thousand
| dollars from an individual. Large donors don't give to
| candidates, they give to PACs.
|
| Of SBF's $40ish million in donations, over $25M went to a
| specific PAC "Protect our Future PAC"[1]. Of that PAC's
| spending - over $10M went to support a single cypto-friendly
| Oregon house candidate in his _primary_ where he lost to a
| different Democrat. In fact nearly all of SBF 's support went
| to primary campaigns so when people say "he spent $40M
| supporting Democrats" the vast majority of that funding was
| in races _against other Democrats_.
|
| The other thing to know about PACs, is that by law, they are
| not affiliated with the campaign. The campaigns can't vet the
| donations to PACs because _they aren 't donations to the
| candidate_ and it would be illegal for them to coordinate
| with the PAC. This is the 3-card monte allowed by our insane
| campaign finance regime, but within those bounds, SBFs
| donations weren't to actual candidates who would vet these
| donors. The PAC has its own compliance, but there basically
| are no restrictions on donors as long as they're from the US.
| That's how random Russian billionaires donated to Trump's
| PACs in 2016, and the only reason that was frowned upon is
| because the funds came from a foreign national.[2]
|
| [1] - https://www.opensecrets.org/outside-
| spending/detail?cmte=C00...
|
| [2] - https://www.justice.gov/usao-sdny/pr/lev-parnas-and-
| igor-fru...
| zone411 wrote:
| Very unreasonable. Large firms like Sequoia, Blackrock,
| Softbank invested and sports teams like Miami Heat or Mercedes
| F1 actually advertised them.
| dragontamer wrote:
| Venture Capitalists are free to invest in whatever they want.
| That doesn't mean its a good buy, it means that those guys
| are willing to put down some risky bets (probably because
| they have hundreds-of-billions or even trillions in assets,
| and can weather any losses).
|
| > sports teams like Miami Heat or Mercedes F1 actually
| advertised them
|
| How does that prove any kind of reliability at all? There's
| no FDIC insurance on any of the deposits. There's no actual
| regulation or transparency. Its not like VMFXX or SWVXX where
| there are requirements to publish their assets on a regular
| basis, or describe asset flows / liquidity requirements.
|
| --------
|
| Still though, the scientists in this discussion were _NOT_
| investors. The economy is designed for _investors_ to win
| (and lose) money as per appropriate risks. Its fine for
| investors to lose money here, that's the entire point of
| capitalism. (The investors get the money if they bet right,
| but they lose their money if they lose).
|
| These scientists who allegedly got funds... its not their job
| to be trying to figure out which groups to trust or not
| trust. Maybe scientific donations / 401c type deals need to
| be more carefully watched in the future?
| zone411 wrote:
| > How does that prove any kind of reliability at all?
| There's no FDIC insurance on any of the deposits. There's
| no actual regulation or transparency. Its not like VMFXX or
| SWVXX where there are requirements to publish their assets
| on a regular basis, or describe asset flows / liquidity
| requirements.
|
| The point is that these companies with way more financial
| experience, size, and more reasons to investigate failed to
| find any warning signs, so these non-profits had very
| little chance, even if they didn't go with the "don't look
| a gift horse in the mouth" approach. FTX might have let
| some auditor from an investor putting in $100M take a look
| at their books but they'd almost surely tell a non-profit
| with no leverage that's receiving the money to get lost if
| they asked.
| dragontamer wrote:
| > The point is that these companies with way more
| financial experience, size, more reasons to investigate
| failed to find any warning signs
|
| I don't think you get the point of Softbank or even
| Blackrock.
|
| When you have $10 Trillion in assets like Blackrock, you
| _DON'T_ sweat a $300 million investment or even a $2
| billion investment here or there. It literally doesn't
| matter. Its not even a rounding error to you, your
| company, or your investors.
|
| Its barely worth Blackrock's time to seriously look at
| things like this. That's why we get $Billion London Whale
| mistakes or whatever, because they have so much money to
| manage the only reasonable way to do it is to hand
| billions of (management) dollars to executives and give
| those executives broad leeway to do whatever they want.
| TacticalCoder wrote:
| > If FTX investors, customers, and watchers of the crypto space
| did not catch what FTX and SBF were doing until the shit hit
| the fan, what kind of due diligence can we reasonably expect of
| these recipients that would've alerted them to something being
| wrong here?
|
| About two minutes of googling would have come up with the fact
| that one of their top executive was linked to the biggest
| online poker scandal.
|
| Now, granted, that information required two minutes and not 30
| seconds to be found because the first few pages of results
| would be NY Times pieces and their ilk pumping the FTX scam
| "because altruistic democrats donor".
|
| A lot of people have been, at the very least, turning a very
| blind eye here.
|
| Now is not the time to say it's "unreasonable" to do two
| minutes of googling.
| RcouF1uZ4gsC wrote:
| Maybe it's a good lesson for non-profits and foundations to vet
| their major donors better. Before that Epstein was a major donor
| and the cachet of having donated to so many high profile
| charities likely allowed him to be a predator longer.
|
| In the case with FTX, it was likely committing fraud, and the
| money the foundations received was the equivalent of stolen
| goods.
| mrcode007 wrote:
| I tend to be skeptical of grants that don't fork cash up front. A
| lot of "pledged" or "committed" grants, giveaways are often tax
| dodges. I may be wrong, I'm not a tax expert, but it seems that
| tax deductions on pledges are accounted for immediately while the
| cash flow out is actually delayed. If my understanding is
| correct, it would make sense to pledge as much as one can in an
| "up" year.
| wanderingmind wrote:
| "We don't think it is right that anyone should lose their jobs
| over a financial calamity totally unrelated to the excellent work
| they are doing,"
|
| Yet we are totally OK with exploiting young people aspirations by
| making them slaves and destroying their careers and mental
| health. The last thing we need to worry about is the academic
| cabal crying wolf.
| Tyrek wrote:
| I suspect there's a simpler takeaway than what most comments are
| suggesting: Don't spend substantial amounts of money (based on
| nominally promised funding) before the checks have cleared.
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