[HN Gopher] Alameda took 1B hit in mobileCoin trade to prop up FTX
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Alameda took 1B hit in mobileCoin trade to prop up FTX
Author : kalimanzaro
Score : 152 points
Date : 2022-12-02 15:29 UTC (7 hours ago)
(HTM) web link (www.ft.com)
(TXT) w3m dump (www.ft.com)
| s17n wrote:
| So if I'm understanding this correctly, a trader managed to: 1.
| Buy a bunch of mobilecoin, a thinly traded coin, below $10. 2.
| Single handedly pump the coin price to $60, due to the market's
| illiquidity 3. Instead of trying to sell at $60 (which wouldn't
| work because there wasn't actually a market for the coin), the
| trader simply borrowed dollars from FTX at the $60 value 4. The
| coin price eventually returned to $10 but the trader had
| effectively cashed out at a higher price by borrowing from ftx
| against the (now worthless) collateral 5. Presumably, the trader
| then simply defaulted on his loans to FTX and kept the money.
|
| Is this right? Crazy if true.
| TuringNYC wrote:
| Sounds right, but there is also point 5
|
| 5. Trader who borrowed ("cashed out") is now being margin
| called by lawyers who are managing the FTX bankruptcy.
|
| 6. Investigation of whether this was an insider deal to funnel
| away money from FTX, because no legitimate margin desk, CVA or
| MVA process would allow such a thing.
| super256 wrote:
| I mean, it wasn't even FTX who bought the bankrupt position,
| but Alameda. (since Alameda was the backstop provider)
|
| Bankrupt positions were usually sold for 1% under market
| price to backstops, so if mobile coin traded at 60 dollars
| and trader goes bankrupt, Alameda bought the position for
| 59.4 dollars per mobile coin (what a sweet deal!). The trade
| is done for trader. I am not convinced that if you go
| bankrupt, because you bought some GME at $120, you can go
| after the counter party who sold you GME at that price. (You
| can try, but it's some bad faith stuff).
|
| This trade underlines again why the commodities exchange act
| is so vital to the whole country, and shows just _how_ crappy
| FTX liquidation model is. [1]
|
| Also, I really like trade because it's smart and funny.
|
| [1] CME Group CEO Terrence Duffy said it too! Here:
| https://youtu.be/V4SWraem1e0?t=2963
| shorthistory wrote:
| Would you even need to take anonymization steps for this as
| another commenter has suggested (fake/stolen KYC and
| anonymized collateral)?
|
| It seems to me that whomever was making these trades knew
| (suspected/or had actual inside operational information-but
| possibly from prior trades) that Alameda would buy the
| position and he would not be liable for the subsequent
| deflation of price.
|
| If you knew that Alameda were going to backstop at 1% under
| the market price, this seems like an obvious trade to make.
| But how would you know that Alameda were going to do that
| without inside information?
| super256 wrote:
| 1) No, no need for fake KYC. It's a fair trade.
|
| 2) The information that backstop providers buy the
| position once your margin fraction is >= 1.5% is public
| info from documentation [1][2].
|
| 3) It is an obvious trade and theoretically still
| possible on exchanges which have backstop providers
| and/or "insurance funds" to prevent clawbacks. (It
| depends on their risk model whether they allow you to
| open such a position in the first place, though. I don't
| know about their models at all!)
|
| But just because it is obvious, it doesn't mean it is
| easy to pull off. Most people fail at the first step,
| which is that you have initial margin to open a position
| and then actually move the price in your favour. Then you
| have people, who will try to bet against you, hunt your
| stops etc.
|
| [1] Backstops: https://help.ftx.com/hc/en-
| us/articles/360024479392-Backstop...
|
| [2] Cashing out: https://youtu.be/0ms7u__Gbys?t=87
| super256 wrote:
| Oh, btw. This trade is similar to the mango trade as
| described by Matt Levine.
|
| https://www.bloomberg.com/opinion/articles/2022-10-12/def
| i-d...
|
| Also a very funny trade!
| notch656a wrote:
| Just a guess for possible other steps:
|
| -1. They acquired fake/stolen KYC credential
|
| 0 . Their collateral was anonymized
|
| 7. The investigation fails to uncover who it was.
| mrep wrote:
| Can't read the article but how did they cash out? Use the
| mobilecoin as collateral to buy btc and transfer the btc out?
|
| Example: take $6 in mobile coin and pump to 60, then borrow $30
| using the $60 as collateral and buy $30 worth of bitcoin and
| finally transfer that bitcoin out. You then have a 5x return
| ignoring cost to pump?
| throw389274 wrote:
| Here's a personal anecdote which may have served as a warning
| to their collapse. I bought ~1000 mobile coins when they were a
| couple dollars, sold most of them at $60 and bought BTC,
| however it was at precisely that time FTX refused to let me
| withdraw them.
|
| They claimed it was because my country was introducing new
| legislation to regulate cryptocurrencies and it was to prepare
| for the new rules. They however jumped the gun and just blocked
| my country the moment it was announced, which was a couple
| months before the new rules were actually set to go into
| effect.
|
| I tried logging in from other countries with a VPN, but my
| account was already flagged, and their customer support said I
| had to show a valid passport or government issued ID from
| another country to prove I was not in the country where I was,
| which was obviously not possible. I was never able to withdraw
| my BTC.
|
| I suspect this was the start and they were already short funds
| (which may already be a known fact now, I just haven't been
| following too closely), and they were just looking for excuses
| to take whatever they could from their users.
| hayd wrote:
| Thieves.
| TylerE wrote:
| He could even pay them back and keep 5:6ths of the loot free
| and clear.
| shorthistory wrote:
| How would that work? He would still be liable for the full
| amount and the cost of servicing the margin loan. Or are you
| suggesting the bankruptcy proceedings will settle for a lower
| figure?
| 0cf8612b2e1e wrote:
| Depending on how the margin was setup, the thinking is that
| the trader could surrender the (now valued at $10 coins).
| hgsgm wrote:
| [deleted]
| michaelteter wrote:
| Accepting highly volatile assets as collateral seems obviously
| very risky for a lender/exchange.
|
| I wonder if SBF has a good knowledge of banking history. No
| doubt, there are examples in the past of banks making similar
| mistakes.
| Mistletoe wrote:
| It depends when you asked. Prior to FTX's fall he was a genius
| that knew everything. Now he has adopted some sort of Lennie
| from Of Mice and Men act that would have made John Malkovich
| blush. He doesn't know anything- the balance sheet, how to
| code, the trades, where any of the money is...
| jandrese wrote:
| He's a classic confidence man and probably a narcissist. He
| probably thought he was the smartest man in the room because
| he surrounded himself with yes men. I don't doubt that he
| knew what he was doing was unethical and probably illegal,
| but since everyone else in the world was dumber than him they
| would never know. Then reality came crashing in all at once
| and you're seeing these interviews where he claims it was all
| a big misunderstanding and you should feel bad for him
| because the big mean market was so unfair to him. Absolute
| horseshit. Dude flagrantly played with fire and got burned.
| doomrobo wrote:
| Agreed. But I think you mean Lenny from Of Mice and Men
| Mistletoe wrote:
| You are right. I've edited it above. That's the second time
| this week I've done something stupid like that. I think I
| should stop posting. I'm not even old enough to use that as
| an excuse.
|
| *Formerly said Grapes of Wrath.
| JumpCrisscross wrote:
| > _Prior to FTX's fall he was a genius that knew everything_
|
| To folks who bought into crypto. The rest of us has been
| calling the whole space a scam from the start. I don't think
| I've had a better track record in calling shorts in my life.
| bboygravity wrote:
| It wasn't a mistake, it was deliberate fraud.
| gitfan86 wrote:
| Legally I think they are better going after the embezzlement
| angle instead of fraud.
|
| It is a fact that FTX funds were used to buy a house that his
| parents had in their name and that they used. SBF can say
| that the house purchase was an "accident" but most jurors
| understand that you don't just "accidently" have a house in
| your name that you live in.
| nullc wrote:
| The embezzlement portion seems relatively small compared to
| the overall claimed of losses. Stuff like the property will
| be recovered too.
|
| But the billion dollars transferred into the pockets of
| this mobileCoin trader on the other hand...
| skippyboxedhero wrote:
| I am not sure if it is embezzlement because the
| shareholders gave him carte blanche. They had no directors
| (it was only SBF and one of his cronies), they had no-one
| overseeing anything, all of the transactions were approved
| by the company (btw, any transfers outside the company can
| now be clawed back in bankruptcy anyway).
|
| I think the stuff going on with Alameda is a bit more spicy
| because he, and others, made several very explicit lies
| about that relationship. The stuff with the houses was
| unbelievable but the finger should really point at the
| shareholders who allowed it to happen.
| dragonwriter wrote:
| > Legally I think they are better going after the
| embezzlement angle instead of fraud.
|
| Legally, they aren't mutually exclusive, and a part of what
| is probably making the criminal side take longer than
| people like is investigating the wide array of crimes that
| appear to have been committed and deciding how best to
| charge them.
| lordfrito wrote:
| At the very best it's gross negligence on a scale never
| before seen.
|
| When does gross negligence become fraud? Does it require
| intent? Do they need to show intent? Basically show he knew
| what he was doing even though he plays dumb?
| vkou wrote:
| Probably at the part where you start buying 300m dollar
| homes with company money.
| lordfrito wrote:
| Extending loans and perks (jets etc.) to executives is
| pretty standard stuff. Yeah it looks bad, especially when
| you're gut is telling you this guy is a crook. So SBF
| lived well like all executives do, that's not a smoking
| gun or a litmus test for fraud.
|
| I'm sure if they can prove fraud, then this kind of stuff
| is icing that gets him a harsher sentence.
| mrguyorama wrote:
| >Extending loans and perks (jets etc.) to executives is
| pretty standard stuff.
|
| Maybe we should change that?
| lordfrito wrote:
| There's nothing wrong with offering incentives to lure
| top talent. It's the cost of doing business.
|
| At the lowest level things like discount healthcare
| benefits and 401k matching are the simplest incentives
| that get paid for by the employer. The cost of doing
| business and attracting talent.
|
| Microsoft was famous for having stocked break-rooms,
| unlimited cola and caffeine for programmers who slept in
| their offices. Googlers get free meals, and Mountain View
| campus has free rides to/from work. All paid for on
| company dime.
|
| At the mid-management level you get company cars. Some of
| these people drive over a 1000 miles a month as part of
| the job, the wear and tear on their personal car is a
| burden. So the company offers a car as part of the
| compensation package. They get to use the car for
| personal business as well, that's a perk. Should that be
| taken away?
|
| At the executive level things like company jets become a
| necessity, simply as a travel time saver. Time is money
| as they say. They can get more done during the day if
| they have faster travel and accommodations. I worked for
| a CTO who on average got around 1,000 emails a day and
| usually stayed up past 10pm to answer them. He says the
| thing people don't understand is that when he wakes up in
| the morning, his mail box is already full as the European
| division has already been running for several hours.
| Pressing business to address. And so spending company $$$
| on things like jets and helicopters to get more
| productive free time from your execs is money well spent.
|
| Some companies have formal retreats and where they send
| team members to "team build". As long as it can be
| justified, and the company is profitable, and the
| shareholders are OK with it, then why can't the company
| spend it's money as it sees fit (within limits of the law
| of course)?
|
| I agree that the perks and compensation can get
| egregious. Also, this kind of stuff is ripe for abuse,
| which is why a company needs good governance. There was
| no governance at FTX, no corporate controls at all. Which
| is why the situation was so ugly.
|
| But as far as perks goes, these are great tools to lure
| talent, and get the most out of them. Let's not throw the
| baby out with the bathwater.
|
| If FTX was profitable, and the shareholders were OK with
| it, there's nothing wrong with offering paid for housing
| as a perk (even if it is a bit unorthodox, other than at
| a casino). If FTX was a con all along, then it was a
| crime, which changes the equation significantly.
| [deleted]
| AlexandrB wrote:
| > I wonder if SBF has a good knowledge of banking history.
|
| Famously, SBF said he "would never read a book"[1]. So I
| suspect his knowledge of banking history is spotty, at best.
|
| [1] https://lithub.com/crypto-nerd-sam-bankman-fried-who-just-
| lo...
|
| More from that interview:
|
| > "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."
| [deleted]
| TheRealPomax wrote:
| When they're both your own company, one didn't "take a hit" to
| prop up the other, you simply committed more fraud in order to
| try to hide the problem.
| sschueller wrote:
| I just don't understand how you can expose yourself to such risk
| if you are supposed to be this super smart MIT graduate.
|
| I don't understand much about finance but if I had the CEO
| responsibility I would make damn sure I am not exposed like that.
|
| I just don't believe that it was an unfortunate event and SBF is
| innocent. How can you be so oblivious and I also think the top
| investors should be held accountable, they had to know the risk.
|
| Like with a terrorism charge you have the one committing the act
| and you also have the ones that aided and abeded. The enablers.
| dragonwriter wrote:
| > I just don't understand how you can expose yourself to such
| risk if you are supposed to be this super smart MIT graduate.
|
| SBF publicly stated (well before the collapse) that he operated
| his life under a complete disregard of risk in pursuit of
| optimized expected value with no risk premium.
|
| While this is probably a rationalization, and he might well
| have actually been something of a risk junkie, even taken at
| face value its not surprising how he ended up exposed to
| massive risk that most people would have seen aa unwarranted
| even given the large potential rewards if it all worked out.
| Terretta wrote:
| YOLO
|
| // Not being cute. If you believe you are young enough and
| clever enough to have time and energy to hit reset and try
| again on a Game Over, then it's an actually valid point of
| view -- if you cannot go less than zero. Given extreme
| rewards even with unlimited downside, if the downside is
| actually limited by bankrupt at zero, that caps the downside
| so taking the risk makes a lot of sense if you believe you
| can start again "near the top" (having developed non monetary
| resources and techniques to build wealth fast).
| wmf wrote:
| It's not even completely crazy. You start a startup at age
| 25, shoot for the moon, it fails after 5 years, and then you
| start another startup. The part he did wrong is the criming
| which will prevent him from trying again.
| balderdash wrote:
| Really the question in my mind is whether it's: negligence,
| gross negligence, or fraud...
| jaywalk wrote:
| Probably a mix of all three.
| NotYourLawyer wrote:
| It's fine if you have automated margin calls every 30 seconds
| and you can blow out somebody's position quickly enough not to
| lose money. Which is what FTX allegedly had set up... for every
| trader except Alameda.
| HDThoreaun wrote:
| No it's not really. It would not have been possible to sell
| the shit coin collateral for the amount loaned against it at
| any point. By the time FTX had liquidated half the collateral
| the coins liquidity would be gone and the rest of the coins
| would be worthless. There was no point in time where these
| loans were solvent, they were just pumped so they looked
| solvent on paper.
| wmf wrote:
| They could calculate margin based on the liquidation value
| of collateral given the current state of the order book
| instead of mark-to-market value but I don't know if they
| did that.
| HDThoreaun wrote:
| But the entire order book could be wash trades that
| disappear as soon as the loan is made
| skippyboxedhero wrote:
| The issue here was the risk-management system didn't work for
| this trader.
|
| What it sounds like, although it isn't totally clear, is that
| this guy worked out how to exploit their margin call system
| by running up an illiquid coin using FTX money, cashing out,
| and leaving FTX holding the bag.
| kalimanzaro wrote:
| https://archive.ph/cPXEf
| dpflan wrote:
| I find the collapse, the PR, puff-pieces, SBF chatting away
| during NYT DealBook summit, celebrities white-washing to be
| incredible to watch. I am wondering how large the impact is on
| investors: Why is Bill Ackman talking about how cool Helium is
| within the last month? It does seem like a (last?) gasp for
| reassurance and hence liquidity for the larger/st investors
| involved in cryptocurrency/web3 madness. How much money is being
| lost that desperation is required to pump the ponzi still...
| negamax wrote:
| Good point. Also Cathy Wood suddenly buying more $COIN and
| $GBTC seems like similar forces at play. Many are caught off
| guard and seem to have lost big on paper
| dpflan wrote:
| Indeed, the compound growth required for BTC to reach Wood's
| $1M target by 2030 from where it is now, seems incredibly
| unlikely...
| skippyboxedhero wrote:
| Cathie Wood is another version of SBF. She has repeatedly
| said stuff that is obviously false. Even worse, she has
| actually demonstrated that her staff also have no idea what
| they are doing.
|
| It isn't possible to go full-FTX with a long-only
| fund...but there is further downside.
| inasio wrote:
| I didn't know she ended up picking up McAfee's torch.
| Hopefully she skipped the pledge.
| louloulou wrote:
| Yeah, she didn't really pick up the torch with the same
| flare
| https://twitter.com/dergigi/status/1597721460784582657
| gitfan86 wrote:
| They are all trying to frontrun the next boom cycle in hopes
| of having good returns for 2023. Their returns for 2022 are
| garbage. Can you imagine giving ARK 1% of your wealth as
| payment for them losing 60% of your wealth? Their hope is
| that the fed cuts rates in early 2023, and that causes a ton
| of money on the sidelines to come back into the market into
| speculative assets.
| a11yclub wrote:
| I personally think all of crypto is a scam but bitcoin, anyone
| who plays with alt-coins is just trying to get rich quick...
| You could say the same for bitcoiners, but it I think it's
| different.
| zampano wrote:
| What makes bitcoin different other than it being older than
| the rest of the pack?
| rahen wrote:
| Bitcoin is the only currency that's leaderless,
| decentralized, belongs to no company or some 30 years-old
| "CEO", and is contributed to much like the Linux kernel.
| You could compare it to TCP/IP versus proprietary protocols
| du jour.
|
| Or just Google "what sets bitcoin apart to other cryptos".
|
| https://bitcoinmagazine.com/culture/what-makes-bitcoin-
| diffe...
| qotgalaxy wrote:
| bombcar wrote:
| I suspect the strange news/media outfall is because nobody
| quite knows yet WHO is at fault and since the money lost is
| from larger investors, they themselves are perhaps worried that
| they are at fault somehow, so there's really no "narrative" at
| play.
|
| Something similar happened during the implosion of the mortgage
| crisis; it wasn't clear how the contagion had spread until
| later.
| TacticalCoder wrote:
| > I find the collapse, the PR, puff-pieces, SBF chatting away
| during NYT DealBook summit, celebrities white-washing to be
| incredible to watch.
|
| What I find _way_ more incredible is that we 've got someone
| who committed many crimes: wire fraud, running ponzis, pumping
| and dumping shitcoins which were considered for some as
| securities, funneling money out of the US to the Bahamas using
| tens if not hundreds of companies, naming his company "Alameda
| Research" to dodge banking restrictions, lying up until the
| very last moment when things blew up that everything fine,
| lying about US customers deposits being FDIC insured, bribing
| people (several people came out and said SBF downright offered
| them $1m to paint FTX in a positive light), using the stolen
| money to buy properties in the Bahamas to the tune of $300m,
| etc.
|
| And yet... This is resumed by many with: *"Cryptos are all
| ponzis".
|
| What's the reasoning? Everybody in crypto is a fraudster so
| investors and depositors all deserve to be wiped out by a
| scammer? And he should walk free?
|
| While the guy who wrote "tornado cash" is in jail?
|
| While Aaron Swartz got sentenced for putting online research
| papers (paid with taxpayers money btw)?
|
| Is that what you're saying? That's it's all a gigantic fraud so
| it's on par for the course and SBF is not worse than the guy
| who bought two DOGE and three SHIBA INU coin?
| nashashmi wrote:
| This is a storyboard for a John Oliver episode
| JumpCrisscross wrote:
| > _Everybody in crypto is a fraudster so investors and
| depositors all deserve to be wiped out by a scammer?_
|
| Nobody deserves to be wiped out. But anyone wiped out in
| crypto is on their own. They chose to sidestep centuries of
| knowledge on financial regulation. If they want their money,
| they need to pay for lawyers.
|
| > _and he should walk free?_
|
| The wheels of justice grind slowly but fine. The day after
| any fraud, HN is filled with conclusions that the fraudster
| will walk free. (Holmes until the day of her sentencing.)
|
| SBF is almost certain to be charged. It just won't happen
| this week.
| jakelazaroff wrote:
| _> The wheels of justice grind slowly but fine. The day
| after any fraud, HN is filled with conclusions that the
| fraudster will walk free. (Holmes until the day of her
| sentencing.)_
|
| This is part of the problem, is it not? There are tiers of
| justice. Law and order types shriek about how none of us
| are safe because presumptively innocent people who shoplift
| or jump turnstiles are not kept in cages before their
| trial. Meanwhile, you can steal billions of dollars or
| forge medical data and you're not only walking free, but
| invited to speak at glamorous conferences.
| [deleted]
| JumpCrisscross wrote:
| > _you can steal billions of dollars or forge medical
| data and you 're not only walking free, but invited to
| speak at glamorous conferences_
|
| Plenty of felons speak at conferences? And again, you're
| asking for instantaneous indictment. That's not how
| competent legal systems work.
| jakelazaroff wrote:
| The indictment I'm asking for is no more instantaneous
| than is standard for low-level arrestees.
| dragonwriter wrote:
| Low level arrestees don't get indicted, generally;
| indictments aren't required in most states even for
| felonies (unlike the federal system) and some states have
| entirely abolished indictment and criminal grand juries,
| so indictments tend to only happen for federal and a
| fraction of state felonies, biased toward more major
| felonies in the states that use the system.
|
| And when someone is accused of minor low-level offenses,
| prosecutors aren't worried about losing the ability to
| prosecute potentially multiple major crimes, and to lose
| access to any restitution and criminal forefeiture
| actions associated with them, by premature prosecution of
| lesser included offenses blocking the more major ones
| under double jeopardy rules.
| mywittyname wrote:
| > because presumptively innocent people who shoplift or
| jump turnstiles are not kept in cages before their trial.
|
| But they are, and therein lie the hypocrisy. If you're
| wealthy, then you get the opportunity to turn yourself in
| after weeks or months to get your affairs in order, while
| regular people who allegedly commit minor crimes get a
| gun pointed at them, roughed up, arrested, and shoved in
| a cell for who knows how long until they are finally
| informed that they have a bench warrant out on them for
| something that happened in 2017.
| JumpCrisscross wrote:
| > _until they are finally informed that they have a bench
| warrant out on them for something that happened in 2017_
|
| If you're wealthy and ignore warrants until a traffic
| stop, this happens to you too.
| notch656a wrote:
| IANAL and this isn't legal advice, but the example
| warrants I found issue by a state government only command
| the officer of the state it happens in to perform the
| arrest. I'm not certain an officer out of state from the
| offense would be _commanded_ to serve the warrant, rather
| than just have the option. And the rich often perform
| their shenanigans somewhere else so they don 't shit
| where they eat.
|
| See an example arrest warrant
| http://www.georgetowncriminaldefenselawyer.com/wp-
| content/up...
| object-a wrote:
| Total hunch here, but:
|
| Based on everything reported, it seems very likely he will go
| to prison, or at least stand trial, for everything that has
| happened. It's not clear why it's taking so long, there might
| be jurisdictional/logistical issues with the fact that he's
| in the Bahamas.
|
| The Dealbook interviews and news stories don't seem to be
| helping him... if anything they generate more outrage and
| provide more contradictions in his story. He's trying to
| pitch himself as incompetent rather than criminal, but by
| constantly talking about the case I think he's undercutting
| himself.
|
| If I was an investigator, I wouldn't interrupt someone when
| they're incriminating themselves.
| lordfrito wrote:
| > It's not clear why it's taking so long
|
| Investigations like this take time. The old saying is the
| wheels of justice grind slowly, but they grind exceedingly
| fine.
|
| The new CEO can't even make sense of what happened, and he
| has access to all internal information. It's going to take
| a long time to sort out what exactly happened.
|
| Once he is indicted, I'm sure SBF will be well defended. A
| smart prosecutor will take their time in order to build an
| iron clad case. If he gets off on a technicality you run
| the risk of not being able to prosecute again due to double
| jeopardy. If you want a conviction, you really need your
| ducks in a row ahead of time.
|
| > but by constantly talking about the case I think he's
| undercutting himself
|
| Absolutely. The FBI doesn't usually announce
| investigations, as that puts the person being investigated
| on notice. Let him talk freely, it's all potential evidence
| to be used against him later.
|
| Once the FBI announces an investigation, it often means
| that they have more than enough evidence and are mostly
| ready to prosecute. By announcing it, they hope to pull in
| little more information from those in the know, who might
| not have come forward.
|
| These frauds seem to take place at the speed of light,
| while it takes forever for justice to show up. But it will
| show up. The slow speed of investigations is a feature of
| justice, not a bug.
| pookha wrote:
| This guy's out there doing who-knows-what in the
| Bahama's. He should be shipped back to the US and brought
| into custody. As context Bernie was in jail within a few
| days.
| lordfrito wrote:
| Getting him back to US requires extradition which will
| take time and evidence. Alternatively they can try to
| lure him here (hey bro come visit me in US we got
| billions to invest) and arrest him after he lands. Also,
| I believe the government of the Bahamas is keeping close
| tabs on him, there's a non-zero chance they might arrest
| him first.
|
| A big difference between SBF and Madoff is that Madoff
| admitted to his sons that there was ongoing fraud that
| was about to unravel. He asked them for a week to get
| things in order. His sons, not wanting to be accessories
| to the crime their father just confessed to, immediately
| went to the feds and told them what was going on. They
| arrested Bernie the next morning. [1]
|
| [1] https://www.youtube.com/watch?v=-duaB887gMQ
| somenameforme wrote:
| There's another, newer, saying as well - American's
| confidence in the US Criminal Justice System is now at
| 14% [1]. Okay that's not a saying, but it says much more
| than any saying. That's the lowest level ever, and by an
| extremely wide margin. It's seemingly approaching zero.
| And some would say we're divided on everything. Nonsense!
|
| And that is what makes this case so interesting to many,
| myself among them. It's essentially a very visible test
| of "our" cynicism, and the integrity of the criminal
| justice system. SBF has all the right family connections,
| "donated" to all the right people, and even pulled a
| reverse Robin Hood - stealing from the poor to give to
| the rich, all the while also being arguably the most
| visible advocate for their interests (within his domain).
|
| It will be interesting to follow.
|
| [1] - https://news.gallup.com/poll/394283/confidence-
| institutions-...
| lordfrito wrote:
| Not disagreeing that many things are wrong and need
| fixing in the digital age. But lately it seem people
| being divided often has little to do with the underlying
| facts and basis in reality. A lot of it is perception.
| Someone recently told me that your opinions say less
| about you and more about the kind of media you consume.
| Disagreement, cynicism and conspiracy theories are a sign
| of the times.
|
| For example, my Red friends to say the Dems are helping
| SBF because he was their #2 donor. Well SBF was also one
| of the biggest donors to the Republicans as well. [1] But
| that doesn't stop some people from believing its a big
| liberal conspiracy. It's not that their facts are wrong,
| it's that they only have half the facts and are drawing
| the wrong (and often biased) conclusions. But I digress.
|
| I'm not as cynical in our justice system as you are. I
| take comfort in the fact that Elizabeth Holmes is going
| to prison for 10 years. Like SBF she had all the right
| connections, was a media darling, compared to Steve Jobs
| etc. Cynical people thought that she was going to walk,
| but the conviction proves otherwise.
|
| I don't believe justice in this country is in as bad of a
| state as many believe. I think it takes a long time, and
| the younger generations are raised to expect immediate
| gratification, so they are frustrated at the "lack" of
| anything happening. I firmly believe SBF is going to
| prison for a long time. I'll revisit this prediction in 5
| years to see if I'm right.
|
| [1] https://decrypt.co/116005/sbf-hid-republican-
| donations-media...
| rootusrootus wrote:
| > It's not clear why it's taking so long
|
| At this point I think the DOJ is just sitting in stunned
| silence, quietly hoovering up all the data they can and
| waiting for him to finish adding more evidence to that
| pile. This will be a blockbuster of a legal case and I
| expect they're working to get everything lined up before
| they open fire.
|
| I would predict SBF will spend the rest of his life in a US
| prison, but OTOH many people reading the statutes had good
| arguments why Elizabeth Holmes was going to get what
| amounted to a life sentence, but look what actually
| happened.
| HWR_14 wrote:
| > It's not clear why it's taking so long,
|
| How much money did he steal?
|
| Answer that. Not prove he wasn't in legal compliance in
| tricky TOS people signed without reading. Not prove that it
| wasn't all honest inept code. Not even prove that it turns
| out an unnamed hacker was not behind it all.
|
| The prosecutor is going into a US court and say he stole
| how much money in the US?
|
| Keep in mind that the CEO who unraveled Enron among other
| things has said it's going to take months to figure out how
| much money still in valid investments owned by FTX and is
| legitimately not stolen.
|
| (I'm using stole, but lawyers probably would have a
| different set of terms)
| object-a wrote:
| This is a good reason for why it's taking so long -- It
| seems from a lot of reporting that there was theft/fraud,
| but prosecutors probably want extremely solid evidence
| (including some details on where the money went) before
| arresting, or attempting extradition.
| acdha wrote:
| I don't see anyone arguing that he should get leniency. It's
| more in the opposite direction: given how common scams are in
| this space _and_ how basically every time the response is
| some combination of "yeah, everyone knew that [but didn't say
| anything]" or "yes, but this new venture is totally
| different" it seems reasonable to question whether anything
| in the field is what it's actually being portrayed as. At the
| very least it seems like a good argument that there needs to
| be some big improvements in self-regulation and things like
| real, public audit reports.
| a4isms wrote:
| These statements can all be simultaneously true:
|
| 1. It is foolish to walk down a dark alley flashing wads of
| cash;
|
| 2. Anyone who robs another person who is walking down a dark
| alley flashing wads of cash deserves to be punished harshly;
|
| 3. If there's a pawn shop at the end of the alley that is
| knowingly selling guns to robbers, fencing the goods they rob
| from citizens, and enticing citizens to walk down the alley,
| they also deserve to be punished harshly;
|
| 4. If citizens are regularly being robbed, we should look for
| structural ways to create safety, such as lighting alleyways,
| reinstating bicycle patrols for police, &c.
|
| The fact that it's foolish to invest in these ponzi schemes
| and outright robberies in no way dilutes the blame that these
| fraudsters deserve, along with the industry that has sprung
| up around them to profit from that fraud. And none of that
| invalidates the notion that regulations and enforcement seem
| like an awfully good idea.
| sottol wrote:
| It looks like some of these larger cases take a while to
| prosecute. Not saying there's no favoritism here, but FYI the
| Enron scandal unfolded in late 2001 and the current and
| former CEO Lay and Skilling's trial started more than four
| (4!) years later in early 2006.
| retconn wrote:
| That's very quick.
|
| My memory is a little hazy, but the fast prosecution was
| motivated by covering up structural inefficiencies in CA
| energy trading created knowingly against considerable
| objections by politicians, that Enron abused, and not the a
| priori fraud of propping up their stock for dozens of
| quarters to be able to trade so massively in the first
| place.
|
| Edit : to clarify, politicians created structural
| inefficiency in the California grid, in the name of
| deregulation, specifically Govenor Pete Wilson and
| California Legislature AB 1890 of 1996.
| loeg wrote:
| You seem to repeatedly raise the idea that we can't or
| shouldn't use the FTX fraud and collapse to criticize the
| rest of the crypto space, or that doing so somehow excuses
| SBF. You are wrong on both counts.
| officialjunk wrote:
| all the crimes sbf committed are "traditional" fraud and
| not dependent on there being crypto involved.
|
| we should still scrutinize and perform due diligence on all
| businesses, though, including crypto businesses.
| freejazz wrote:
| Well, it's him doing them in the crypto space that has
| enabled the proliferation.
| nradov wrote:
| Everyone in crypto is a fraudster so investors and depositors
| all deserve to be wiped out. But the scammers _also_ deserve
| to go to prison for wire fraud and related crimes. Both
| things can be true. There is no contradiction in the
| reasoning.
|
| Alexey Pertsev is in jail for allegedly operating an illegal
| money transfer business in violation of AML/KYC laws. If he
| had merely developed the Tornado Cash code without actually
| using it then he wouldn't be in jail.
|
| I agree that the Aaron Swartz case was a travesty of justice.
| adoxyz wrote:
| The whole premise of crypto is that it's unregulated, so yes
| it should 100% be assumed that you're probably going to get
| swindled.
|
| There was a story about how Sequoia (or a different VC) gave
| FTX millions while SBF was playing games during the call with
| them. I mean, if nothing else, if you can't expect the
| tiniest ounce of professionalism from a company you're
| investing in, I find it hard to feel bad for you when you're
| scammed out of that investment.
| mywittyname wrote:
| I'm certain each party felt they could swindle the other.
| Hence the lack of professionalism from one party, and the
| apathy towards the behavior from the other.
|
| When one has a king-high full house, they should call every
| raise. But that but no one knows if that's the winning hand
| until everyone shows their cards.
| retconn wrote:
| >I'm certain each party felt they could swindle the
| other.
|
| There's a reason trader turrets handsets and boxes have
| high resistance non latching push to talk switches.
| Because both sides of every deal think the other sides
| just that in the most regulated markets and otc / "self
| reg" alike.
| vkou wrote:
| I think most people have roughly zero sympathy for
| institutional investors that give good money to garbage
| companies, but what's outrageous here is that be stole
| customer funds.
| jcpham2 wrote:
| FTX advertised direct to consumers through Fortune cookies
| via openfortune.
|
| I know because I saved one on my desk and I'm looking at it.
|
| The crypto fortune cookies were the biggest red flag I've
| ever seen in my life.
| somenameforme wrote:
| They were also being promoted by the World Economic Forum
| whose page described them as a partner [1], while SBF was
| rubbing shoulders with individuals like Clinton/Blair and
| receiving lavish praises throughout the corporate media and
| becoming one of the biggest political players there is.
|
| [1] - https://web.archive.org/web/20220613111008/https://ww
| w.wefor...
| dpflan wrote:
| OK, maybe not all ponzis, some maybe less ponzi than others,
| or maybe even not at all. Are you saying that 1 individual
| was problematic, blatantly told Matt Levine he is involved in
| ponzi schemes, ran one of the largest such, began absorbing
| smaller ponzis, and that because of this 1 individual saying
| the industry is all ponzis is a stretch? I agree with that,
| sure, absolutism is hard to prove. But, the evidence of what
| has happened and what exists at the largest scale in the
| industry is a huge fraud -- it is a decent assumptive base.
| 40acres wrote:
| I don't understand the criticism of the Dealbook interview. I
| want to hear SBF side and found that he's definitely hanging
| himself with his public statements. If the media were to
| "deplatform" him that would be an incredible disservice. I
| thought ARS asked fair questions.
| dpflan wrote:
| Sure, he can mint himself enough rope, but the opportunity
| can give weight to a narrative that is desired, whatever it
| may be.
| throwup wrote:
| The interesting thing is that FTX had almost no retail
| customers in the US[1], yet most of the coverage has been US-
| focused, due to the VC investors and US political donations. It
| really was just investors (in the company itself) that got hit
| the hardest. It just goes to show how easy it is to buy media
| coverage. If the media talked about things that affected their
| readers rather than their owners, the FTX news cycle wouldn't
| have lasted one day before everybody moved on.
|
| [1]:
| https://cdn.i-scmp.com/sites/default/files/d8/images/canvas/...
| [deleted]
| ac29 wrote:
| > The interesting thing is that FTX had almost no retail
| customers in the US[1]
|
| This is only true if you believe the massive amounts of
| customers in the Cayman Islands, Virgin Islands, etc were not
| just US persons' shell companies.
| jandrese wrote:
| It's pretty hard to feel bad for tax dodging fat cats
| getting bitten by a con man though.
| skorpeon87 wrote:
| Who cares if you feel bad for them? Who even asked? Crime
| isn't supposed to be legal when you victimize other
| unsympathetic criminals.
| [deleted]
| HDThoreaun wrote:
| Those wouldn't be retail customers in the US though, they'd
| be customers in the Cayman Islands...
| ac29 wrote:
| They aren't "in the Cayman Islands" any more than a VPN
| user is in the country of their VPN server though. In
| this case, setting up a shell company in the Caribbean
| was a convenient way to get around US regulation (or
| taxes, or both).
| HDThoreaun wrote:
| FTX was transacting with a user in the Cayman's not the
| us.
| [deleted]
| luckylion wrote:
| Is it common for retail investors in the US to create shell
| companies in the Cayman Islands etc? Is that a service
| offered at low cost that everybody uses to get around so
| regulatory hurdle, like using a VPN to get around simple
| geofencing on streaming platforms?
| kolencherry wrote:
| It's around $4-5k USD to set up a exempted company and
| get a bank account for said company in the Caymans, with
| annual costs being in the $2-3k USD range. Can be cheaper
| or more expensive, depending on the service provider. Not
| uncommon for more savvy investors.
| mikeyouse wrote:
| It's very common for investment firms and other tax-
| dodging entities, very uncommon for the everyday wealthy
| person. Much of the privacy benefit to Caymen shell corps
| is readily available in Delaware or e.g. Montana, so only
| more exotic tax schemes require international companies.
| ac29 wrote:
| > Much of the privacy benefit to Caymen shell corps is
| readily available in Delaware or e.g. Montana, so only
| more exotic tax schemes require international companies.
|
| FTX.com was unavailable to US persons or companies, so
| being legally based in Delaware/Montana/etc wouldnt have
| helped.
| insane_dreamer wrote:
| No
| Cullinet wrote:
| Yes. Sub $10k pa for nominee management of companies.
| Used to have Mossack Fonseca as a customer.
| dmix wrote:
| All media is super US focused.
|
| "World news" is code word for "non-US news" since US is the
| default, which makes sense.
| tsimionescu wrote:
| In every country, world news very explicitly means news
| about what's happening outside that country.
| [deleted]
| skybrian wrote:
| This is kind of a weird argument. There's no reason US
| reporters or commenters shouldn't write about things that
| happen in other countries, if they find it interesting. The
| FTX scandal is fascinating for lots of reasons.
|
| (I've also seen coverage about how it affected the Bahamas.)
| itronitron wrote:
| Yeah, I wonder if the investors bought the media coverage in
| addition to paying for it (intentionally or not.)
| basch wrote:
| I believe it is more "give the people what they want." This
| story is getting clicks because the numbers are so big it
| has everybody daydreaming about having lived through this
| from the inside. People want details to fill in the cracks
| of their fantasies.
|
| This is like Nightcrawler, and the press is satisfying the
| bloodlust of its readers who like The Social Network like
| drama and Big Shortesque scandals.
|
| We arent living in the right reality if Adam McKay/Charles
| Randolph/Michael Lewis and Aaron Sorkin/David Fincher/Ben
| Mezrich dont have dueling FTX movies coming out on opposite
| streaming services the same week. (Probably Apple and
| Disney, who then happen to announce a merger, because of
| course thats how the world works now.)
| pavlov wrote:
| The Apple-Disney merger is a rumor of genuine vintage.
|
| It was first rumored around 1996-97 when Apple was in
| enormous trouble. Potential acquirers according to the
| rumor mill included Oracle, Sun and Disney. (Somehow the
| "Network Computer" was a cornerstone of these
| speculations, but I forget what Disney had to do with any
| of it.)
|
| After Jobs firmly established himself at Apple, the
| Pixar-Disney connection ensured this speculation
| regularly resurfaced. Sometime around 2007 Apple passed
| Disney in market cap and the rumor flipped from a merger
| of equals to "Apple buys Disney".
| basch wrote:
| That was a silly tangent. My point was, the press isnt
| being forced upon society by puppetmasters who lost money
| in FTX. Thats a silly silly conspiracy theory.
|
| The story is just generating clicks with the home
| investor crowd, who has no skin in the game.
| makestuff wrote:
| So FTX was just a bunch of institutional traders trading
| against each other? Sounds a lot like a dark pool.
| chollida1 wrote:
| > So FTX was just a bunch of institutional traders trading
| against each other? Sounds a lot like a dark pool.
|
| A dark pool has nothing to do with who trades in it. As GME
| made famous, alot of GME retail orders got sent to dark
| pools to trade on.
|
| What distinguishes a dark pool from a lit exchange is that
| orders are hidden and often trade at the midpoint(half
| penny) and not on the penny.
|
| Who is on the exchange has nothing to do with dark vs lit.
| fasthands9 wrote:
| This is what has befuddled me.
|
| I still wager the main con was more similar to classic VC
| frauds where you pump up your user numbers and trade volume
| in order to get more investment dollars (which you can then
| spend on anything). Advertising on sports arenas and stuff
| gave them a lot of plausibility as the "big player" to people
| (like me) who dont trade crypto at all.
| benjaminwootton wrote:
| As I post on many threads, I have barely heard a single story
| about retail losing money on FTX, whereas I personally knew a
| handful who lost money with LUNA. I assume institutions are
| holding the vast majority of the bags here.
| hi5eyes wrote:
| common joke amongst ct natives is that left curves got rekt
| in luna, while right curves got rekt in ftx. interesting to
| see it commonly admitted by corresponding market
| participants
| pavlov wrote:
| Fascinatingly cryptic comment. My best guesses don't map
| to anything intelligible. Connecticut natives? Left curve
| of the what exactly?
| andremendes wrote:
| Not sure if you are being sarcastic but I will post my
| guesses:
|
| ct => crypto traders
|
| left and right => each person political leaning tendency
| scatters wrote:
| Think it's left/right of the bell curve (as in the meme),
| i.e. dumb money (retail) vs. smart money (industry).
| pavlov wrote:
| That does make sense, but I'm oddly reluctant to give up
| on the mental image of a Connecticut locker room where
| crypto investment preferences are revealed by the
| individual curve direction.
| Thetawaves wrote:
| I interpreted left/right to be corresponding curves of
| wealth distribution.
| NameError wrote:
| What are "ct natives", "left curves" and "right curves"?
| candiddevmike wrote:
| My new conspiracy theory is all of the smaller coins were an
| easy way to extend the Ponzi scheme by inventing valuation out
| of thin air. Now that those have been unmasked and everyone's
| asking hard questions around liquidity or pulling their coins
| into their own wallets, the major players are over leveraged to
| the gills (because you can't make "real money" on customer
| money without risky bets). The only way out is to get BTC's
| price back to the good ol days and keep the Ponzi going.
| balderdash wrote:
| That's why in "legacy" (stocks/bonds/futures) risk/portfolio
| management side not only is there a market quote next to your
| position, but also #of trading days at x% of avg. daily
| volume to exit...and as a supervisor/risk manager you're
| going to assign a lot of risk to that illiquid position
| (regardless of where the "price" is)
| EMM_386 wrote:
| > My new conspiracy theory is all of the smaller coins were
| an easy way to extend the Ponzi scheme by inventing valuation
| out of thin air.
|
| That's exactly what happened. I invent $GRBG coin, reserve 1
| billion of them, and sell 1 to my friend for $1. Boom, $1
| billion "market cap".
|
| Then you wash trade between each other, raising the price
| enough so the suckers start to notice, and then cash out at
| the top.
| onlyrealcuzzo wrote:
| > My new conspiracy theory is all of the smaller coins were
| an easy way to extend the Ponzi scheme by inventing valuation
| out of thin air.
|
| I don't think this is a conspiracy theory...
|
| At the very least, we know that some of largest institutions
| were regularly pumping up assets for solvency reasons.
| jgalt212 wrote:
| The Ponzi can keep going for a while. The Fed Balance Sheet is
| still within 95% of its all time high.
|
| These huge asset price moves are more a function of investor
| preferences and people trying to get in front of the Fed rather
| than there being a lot less money around. The (real) Art
| Market, for example, still seems quite healthy.
|
| https://www.federalreserve.gov/monetarypolicy/bst_recenttren...
| [deleted]
| LatteLazy wrote:
| At this point I think we should stop pretending they were
| separate entities...
| JaggerFoo wrote:
| The article is short on details of the trade, mostly filler on
| already reported FTX downfall and other downfalls.
| benatkin wrote:
| Ah yes, mobilecoin. I haven't heard much about it since the
| Signal announcement. I hoped Signal reversed their decision but
| apparently not: https://support.signal.org/hc/en-
| us/articles/360057625692-In...
| dmix wrote:
| The FTX trade happened in April 2021 and it looks like it was
| because the value of mobilecoin spiked and someone in FTX bet
| on it at a high price before it dropped.
|
| https://imgur.com/a/dgeaIzK
|
| I don't think this was some FTX investment directly to
| mobilecoin itself (they were buying coins, not loans/investment
| that would expose them to FTXs recent drop). Despite the
| headline making it seem that way. In the year plus since the
| Apr 2021 price spike mobilecoin price is pretty stable.
|
| So I'm not sure why Signal should drop them other than because
| of the general volatility in crypto.
| skorpeon87 wrote:
| > _So I'm not sure why Signal should drop them other than
| because of the general volatility in crypto._
|
| The affiliation to a cryptoscheme casts the entirety of
| Signal in a disreputable light. Not least because it gets
| Signal tangled up in stories like this one.
| dmix wrote:
| They should act to avoid guilt by association?
| lxgr wrote:
| "Association" hardly seems like the correct term for
| marketing a fringe cryptocurrency to unsophisticated
| users/retail investors.
| dmix wrote:
| Moxie was a technical advisor for mobilecoin, helping
| people send money privately sounds like a noble pursuit
| to me. At least it has a real world use case + legitimate
| real world userbase/implementation. Most crypto companies
| don't have that.
| benatkin wrote:
| I don't think a messenger should provide a way to
| transfer money. It is one reason I hate Facebook
| Messenger. I liked Signal more before then because of its
| focus on messaging.
| ummonk wrote:
| No one said anything about legal guilt. It's generally
| good practice not to associate with fraudsters if you
| care about your reputation though.
| Melting_Harps wrote:
| > Ah yes, mobilecoin. I haven't heard much about it since the
| Signal announcement. I hoped Signal reversed their decision but
| apparently not: https://support.signal.org/hc/en-
| us/articles/360057625692-In...
|
| Yeah, I remember that; I highly respect Moxie too but his web3
| analysis seemed to exclude using an alt with no proven history
| in Signal for payments [0]. His involvement was being an
| advisor and perhaps even its former CTO, whih would explain a
| lot.
|
| I wonder if Meredith will intervene considering they are openly
| talking about how Signal needs to be able to carry it's costs
| moving forward [1] and I'm guessing the mobilecoin deal came
| with some stake under Moxie in it's foundation?
|
| 0: https://www.coindesk.com/tech/2021/04/09/signal-founder-
| may-...
|
| 1: https://fortune.com/2022/11/29/signal-president-meredith-
| whi...
| benatkin wrote:
| > his web3 analysis seemed to exclude using an alt with no
| proven history in Signal for payments
|
| I never suggested that nor do I think that. I just don't like
| the feature.
| nullc wrote:
| Come on. Mobilecoin was just a straight up method of
| transferring value from the non-profit into the pockets of
| private parties. It couldn't be more clear short of them
| saying it outright.
|
| A purely premined purely centralized "cryptocurrency" with no
| selling point except that all signal users would be forced
| onto it which, once it was launched, made someone a billion
| dollars and then it was abandoned and forgotten. (The almost
| unusable demo grade integration in signal continues to exist,
| if you look really hard for it.)
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