[HN Gopher] The failure of FTX and Sam Bankman-Fried will leave ...
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The failure of FTX and Sam Bankman-Fried will leave deep scars
Author : axiomdata316
Score : 30 points
Date : 2022-11-20 20:11 UTC (2 hours ago)
(HTM) web link (www.economist.com)
(TXT) w3m dump (www.economist.com)
| dahdum wrote:
| This article is 3 days old, before the "hack" was revealed as SBF
| transferring the funds (after bankruptcy and stepping down) to
| support Bahamas regulators in a jurisdictional fight. Which, in
| the Vox interview, he said winning was his only way out of the
| mess.
| rhaway84773 wrote:
| It wasn't a failure. It was a scam. The "failure" was the
| revelation of the scam, which was a good thing.
|
| The fact that SBF has in the past publicly described running a
| Ponzi and not really recognized it as one indicates it may even
| be possible that the FTX guys didn't even understand they were
| running a scam.
|
| But just because they did not realize they were doing so does not
| make the scam they were running any less of one.
| mccorrinall wrote:
| I think it wasn't a scam, because scamming implies intentional
| malicious behavior; at least for me.
|
| I think they were just... extremely incompetent.
|
| Their balance sheet with ,,semi liquid" (whatever that means!)
| assets and trying to apply arithmetic operations on an excel
| cell called ,,Hidden, poorly internally labeled 'fiat@'
| account" pretty much reflects this.
| hnaccy wrote:
| >I think they were just... extremely incompetent.
|
| SBF is the son of two Stanford law professors, graduated from
| MIT, and worked four years at Jane Street.
|
| It seems like the limit of credulity to think he was an
| unwitting dufus that just accidentally ran one of the biggest
| ponzis in history.
| MrRiddle wrote:
| yakak wrote:
| While I think competent scammers had better odds of not
| getting caught, I don't see how it is not a scam to take
| money, try to beat how it is currently allocated, whether or
| not you believe you will be able to put it back.
| a4isms wrote:
| Incompetence is, "I had no idea companies have standard
| methods of bookkeeping and accounting, or that I could have
| hired people skilled in these matters, like CFOs, accounting
| firms, or managers with any experience whatsoever working in
| business and/or finance."
|
| Malice is, "I knew how businesses are supposed to be run, but
| I accidentally on purpose chose to run my business in a way
| where nobody could exercise oversight, and while nobody was
| exercising oversight, I engaged in a pattern of trades and
| deals that enriched me at the expense of people who trusted
| me."
|
| SBF is a grown-ass adult. He knows that when people trust you
| with their money, you have a moral obligation to handle it
| competently, or hire people who know how to handle it
| competently.
|
| He and his backers know how to run a business such that the
| shenanigans he actually pulled would get flagged. He chose
| not to do so, and his backers chose to look the other way.
| And then he coincidentally used the lack of oversight or
| standard controls to steal billions of dollars from his
| customers.
|
| Believe whatever you like, but don't expect the rest of the
| world to nod along in agreement.
| mtrycz2 wrote:
| If is, in fact, a problem with FTX, not crypto per se.
|
| It's like if "Theranos' scam will leave deep scars in USD".
| highwaylights wrote:
| I mean, it's a problem insofar as it reflects badly on
| everything.
|
| That said there's any number of debates you could have:
|
| Was FTX a deliberate ponzi?
|
| Was FTX a ponzi but they were too naive to understand that?
|
| Was it a ponzi within a ponzi? (I.e. has all of crypto been a
| single giant ponzi with nested levels all along?)
|
| Regardless of what anyone thinks, you only get confirmation
| either way after the fact.
| mccorrinall wrote:
| I would not call BTC a ponzi, but it is indeed true that
| BTC's value is not derived from debt.
| the_snooze wrote:
| Outside of drugs and ransoms, what actual commercial activity
| does cryptocurrency enable that justifies all the hype around it?
| It's been 13 years since the Satoshi whitepaper and crypto is
| still flailing around for legitimacy. After a certain point, it's
| probably safe to assume it's all just techno quackery.
| indigochill wrote:
| Theoretically, inexpensive international transfer of value
| (e.g. for citizens of low-wealth countries working abroad
| sending money back home)
|
| Assuming the sender/recipient's countries don't outlaw it or
| regulate it into parity with traditional banking.
|
| And only really uniquely useful if the sender/recipient doesn't
| already use the hawala system.
| knorker wrote:
| > Assuming the sender/recipient's countries don't outlaw it
| or regulate it into parity with traditional banking.
|
| This raises an obvious question, though: Why would countries
| NOT regulate it like traditional banking?
|
| Notice how customs declarations say "more than $10'000 in
| money _or financial instruments_ ". Countries don't care
| about _money_ specifically, they care about transfer of
| _monetary instruments_.
|
| Which means of course they care about BTC for international
| transfers. Maybe the laws are up to date, and maybe they're
| not, but it's perfectly clear that the intention of the laws
| is to include BTC, and it seems extremely likely that
| eventually they will be harmonized.
| mccorrinall wrote:
| People rent servers at liteserver and vultr and pay for cheats
| on engineowning and donate to cock.li with btc.
|
| So, uh, it just works?
| daveevad wrote:
| The send money to my relatives in South America without having
| to pay exorbitant transfer fees still seems pretty plausible to
| me.
| endisneigh wrote:
| How much does it cost to send $1000 USD to South America
| using BTC and have them convert it to say, real, e.g.
| $1000USD to real via BTC vs other fiat methods. Using Wise
| you'd pay $15USD. Curious to know how much USD you'd pay with
| Bitcoin.
| SXX wrote:
| If you sent your USD to Argentine for insance you'll have
| to use official central bank exchange rate if you used
| Wise. With crypto you can actually convert your money using
| real world exchange rate which is very diffrent from
| official one.
|
| Official exchange rate: 1 USD = 162 Peso
|
| Real world one: 1 USD = 300 Peso
| endisneigh wrote:
| doesn't answer the question
| seunosewa wrote:
| You'll lose half of the value of your money if you send
| it the normal way. Crypto fees are unlikely be as high as
| 50%.
| andrewflnr wrote:
| The more relevant question is what it cost before people
| started using Bitcoin for that purpose. I think Bitcoin lit
| a fire under the major financial providers to be more
| efficient.
| haskellandchill wrote:
| I send a fair amount to my gf in Venezuela. Bitcoin doesn't
| help, the operator there prefers USD through Zelle and
| charges 10%, black market.
| knorker wrote:
| What are the source of the fees? Legal compliance?
|
| IOW are your savings due to breaking, or loopholing laws?
| A4ET8a8uTh0 wrote:
| Hmm. It is an interesting question. That said, does hype have
| to be justified though? I always considered hype to be its own
| force closer to marketing than commercial viability. Hype
| either is or isn't and it seems we are reaching the point where
| it may actually die off as a fair amount of people lose some
| cash. Naturally, it is hard to tell with any kind of certainty.
|
| <<is still flailing around for legitimacy.
|
| Here we disagree. The governments are seizing it, regulating
| it, trying to copy it for its own purposes. It already is
| legitimate simply because it is has people using it.
| xyzzy4747 wrote:
| It's pretty good for remittances.
| ogogmad wrote:
| To redeem them, you have to sell them. Somebody might be left
| holding the bag.
| ogogmad wrote:
| All of the seasoned hedge fund managers are suggesting to avoid
| crypto. By seasoned, I mean with a 30-year record.
| CyberDildonics wrote:
| Crypto curreny enables anyone to use money electronically
| without permission from a third party. It also enables anyone
| to plausibly invent their own currency. This might not solve
| any problems for you, but there are lots of problems it can
| solve. In the earlier days when bitcoin transaction fees were a
| few cents instead of a few dollars, paying for things on the
| internet was wonderful. No need to fill out forms and possibly
| get your credit card denied because you use a VPN and no need
| to worry about your number getting stolen now or down the road.
| No fees going to a credit card company and no hidden fees now
| or in the future.
|
| That utility is still there if a store takes multiple crypto
| currencies since only bitcoin has the throughput of a 28.8 dial
| up modem (1.16 KB/s). Ethereum has much more throughput but
| still has high fees. Anything else (litecoin, bitcoin cash,
| doge coin, monero etc.) will still give this utility, which is
| arguably the least impactful thing about crypto currency.
|
| The shame is that it is all such a mess it almost doesn't
| matter. People won't stop leaving their balances in exchanges
| or putting it in ponzi schemes, or terrible 'smart contracts'
| or anything else.
|
| People in general seem to want lottery tickets much more than
| they want a usable peer to peer electronic currency.
| WalterBright wrote:
| > It also enables anyone to plausibly invent their own
| currency.
|
| People have been doing that for hundreds of years. It's still
| done regularly today. Writing a check is creating your own
| money. Issuing a coupon is creating your own money. Creating
| a credit card is issuing your own money. It goes on...
| CyberDildonics wrote:
| I think the burden of proof is going to have to be on you
| here because I don't think there is any way to bend
| definitions to make this true.
|
| You might be able to say the things you listed are IOUs,
| but they aren't ledgers, they won't scale and they can't be
| used without a central authority.
|
| There have been a few examples of people creating a
| centralized currency before bitcoin though. One was liberty
| dollars which was a single company that printed bills and
| claimed they could all be exchanged for gold (which was
| probably true, they went down from the US taking legal
| action and not any kind of default).
| willhinsa wrote:
| troon-lover wrote:
| tester756 wrote:
| [deleted]
| photochemsyn wrote:
| "It's amazing that you would build a 32 billion dollar financial
| firm that doesn't have an accounting department, but OK...
| Reading on further, FTX didn't even have 'an accurate list' of
| its own bank accounts, or even a complete record of the people
| who worked for the firm. FTX apparently used 'an unsecured group
| email account' to manage the security keys for its digital
| assets... The document discloses the secret exemption of Alameda
| from certain aspects of FTX.com's auto-liquidation protocol (what
| that means is that while other customers would have been subject
| to margin calls and automated liquidation, Alameda was not)..."
|
| - Patrick Boyle's review of the latest on court filings in the
| bankruptcy proceedings (with some snarky commentary removed):
|
| https://www.youtube.com/watch?v=mVrMpk4lGjA
| WalterBright wrote:
| What I don't understand the value of is NFT. What is the value in
| digital ephemera? How would it be different from copyright?
| knorker wrote:
| That's kind of off topic, but here's a great explanation of
| NFTs: https://onezero.medium.com/nfts-arent-as-stupid-as-you-
| think...
|
| Edit: to answer your question, NFTs expressed in traditional
| speak would be this: An exclusive transferable license to claim
| that you are the current holder of a string of bytes loosely
| associated with a work of art. No copyright is assigned to you,
| and you get no other rights either, such as rights to
| duplicate, re-license, or create derivative works.
| ogogmad wrote:
| Exactly, and what if you forget or lose this string of bytes?
| Or what if someone finds it, and transfers ownership to
| himself? It's impossible to get it redeemed because of how
| the technology works. No court on Earth would - or even
| should - recognise something like this.
| cykros wrote:
| NFT's are fine, in that the represent a token that isn't
| fungible, and as such, would be a great way which, if
| regulated, would allow for things like selling real estate
| (deeds) or automobiles (titles) and other things of this nature
| using the blockchain to avoid the possibility of forgery, and
| to cut out the overhead associated with verifying chain of
| custody in conventional systems. Obviously, the adoption needs
| to happen and regulations need to be written for this to happen
| effectively, but it very well could.
|
| As far as trading silly gifs that you "own", well...yes, it's
| asinine. But not really any moreso than how much money kids
| these days are pumping into Fortnite skins and similar
| nonsense.
| knorker wrote:
| > would be a great way which, if regulated, would allow for
| things like selling real estate (deeds) or automobiles
| (titles)
|
| Absolutely not. The source of truth for real estate is the
| local government's land registry.
|
| The NFT blockchain can _never_ be the source of truth, since
| ownership can change due to court action, bankruptcy, eminent
| domain, or whatever.
|
| You cannot have someone refuse to give up their passwords,
| and just give up "ok, I guess you own this real estate or car
| forever, then".
|
| No. The police will come arrest you if you squat. The
| government will not care that you have the private key to an
| NFT of the house.
|
| Blockchain solutions _inherently_ cannot be the source of
| truth. Which means they 'll drift away from the truth. Which
| means they become pointless.
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