[HN Gopher] What Happened at FTX?
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What Happened at FTX?
Author : robin_reala
Score : 28 points
Date : 2022-11-17 19:54 UTC (3 hours ago)
(HTM) web link (lcamtuf.substack.com)
(TXT) w3m dump (lcamtuf.substack.com)
| basseq wrote:
| It is far too early to publish these kinds of articles. It will
| take months if not years to untangle "what happened" and do a
| true retrospective. This is little more than a poor summary of
| "what we know so far".
| notch656a wrote:
| These same scams have existed for hundreds/thousands of years.
| What really happened is baseline greedy-as-hell VCs became
| desperate and drunk to keep up with inflation (and take advantage
| of "free" money) when the fed pegged interest rates way down into
| the (real) far-negatives. It made the story of SBF et al even
| more likely.
|
| People sought riskier and riskier investments and did less and
| less vetting. The real estate situation where you had to waive
| all inspections and put up massive earnest cash up front was just
| an analogy for what was going on everywhere. Just to keep up with
| inflation you basically had to put yourself out there and pray,
| and people who otherwise would end up as little more than punks
| at Jane Street sniffed the blood in the ocean.
|
| While SBF is the primary culprit here, the fed's short-sighted
| policies created incalculable damage to our economic landscape
| and advantages for scammers. I fear we will disproportionately be
| seeing more unwinding of these kind of schemes.
| kebman wrote:
| This is true. For more on the topic, look up the seigniorage of
| the antiquity, and not least the ... self issued ... gold
| certificates of Stockholms Banco of 1661, boasting the first
| printing of bank notes used in Europe. It didn't go so well...
| snoot wrote:
| gennarro wrote:
| Nothing new in this article. Just endless fascination I suppose.
| bcrl wrote:
| As the number of crypto exchanges that have imploded
| spectacularly keeps rising, I'm starting to think that crypto
| exchanges can't be run profitably. From Quadriga to FTX now, I
| have friends that were burned 5+ years ago, and yet the same
| story seems to keep repeating itself. There's a term for people
| that keep trying the same thing over and over while expecting
| different results... Unless these are all completely isolated
| cases of fraud?
| gruez wrote:
| >I'm starting to think that crypto exchanges can't be run
| profitably.
|
| Coinbase and Kraken would beg to differ. They have been
| operating since 2011 and 2012 respectively.
|
| >As the number of crypto exchanges that have imploded
| spectacularly keeps rising
|
| Given that the number can only go up (exchanges can't un-
| implode), this statement seems like a truism. You could say the
| same about VC backed companies, for instance.
| polygamous_bat wrote:
| > >I'm starting to think that crypto exchanges can't be run
| profitably.
|
| > Coinbase and Kraken would beg to differ. They have been
| operating since 2011 and 2012 respectively.
|
| Kraken isn't public, and we don't know their inner balance
| sheet. However, Coinbase seems to have lost more than a
| billion dollars in the four quarters [0]. Definitely not how
| I define "running profitably."
|
| [0] https://www.wsj.com/market-data/quotes/COIN/financials
| janef0421 wrote:
| I think an actual exchange, that holds all assets and charges
| brokerage fees, likely can run profitably. The issue, it seems,
| is that there are a lot of companies that call themselves
| "brokerages" for legal reasons, but which actually operate as
| banks, holding only a fraction of user and making profit from
| lending and investing the rest. Since crypto isn't actively
| subject to the same regulations as other parts of the financial
| system, this leads to a lot of fraudulent operators and a lack
| of consumer protections, even for customers of non-fraudulent
| companies.
| vt85 wrote:
| downvotetruth wrote:
| FTX: "'**** the regs' they make everything worse"
|
| FTX employees submitted payment requests through an online chat
| platform where a disparate group of supervisors approved
| disbursements by responding with personalized emojis. Other
| practices included the use of an unsecured group email account as
| the root user to access confidential private keys and critically
| sensitive data for the FTX Group companies around the world, the
| use of software to conceal the misuse of customer funds; the
| secret exemption of Alameda from certain aspects of FTX.com's
| auto-liquidation protocol. Also, the audit firm for the Dotcom
| Silo was Prager Metis, a firm whose website indicates that they
| are the "first-ever CPA firm to officially open its Metaverse
| headquarters in the metaverse platform Decentraland".
| aliqot wrote:
| Just link the tweet thread that you're summarizing.
|
| https://twitter.com/GRDecter/status/1593272102047580161
| downvotetruth wrote:
| The paragraph highlights excerpts not in the direct link from
| the court filing:
| https://s.wsj.net/public/resources/documents/FTXFILING.pdf
| chitowneats wrote:
| > In short, the collapse of FTX had little to do with
| cryptocurrencies
|
| How far does the price of BTC have to drop before we dispense
| with this charade?
| kebman wrote:
| In the end it would seem that SBF and his gang wasn't so
| interested in crypto as he was in fiat currency and real
| estate. As for the ramifications for the crypto scene, the
| trust of cryptocurrencies has gone right into the cellar now,
| if not in Bitcoin itself, then certainly in the centralized
| actors now purporting to offer it to retail customers. In turn,
| that would of course also warrant a rebate. Not least because
| it puts pressure on other bad actors on the scene.
| freitasm wrote:
| Scam and robbery. But that's the kind of "thought leaders" some
| of these "crypto investments" attract. We already know that.
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