[HN Gopher] FTX's Venture Capital Backers Face 'Serious Question...
       ___________________________________________________________________
        
       FTX's Venture Capital Backers Face 'Serious Questions,' CFTC
       Official Says
        
       Author : mirthlessend
       Score  : 83 points
       Date   : 2023-01-21 15:04 UTC (7 hours ago)
        
 (HTM) web link (www.bloomberg.com)
 (TXT) w3m dump (www.bloomberg.com)
        
       | LatteLazy wrote:
       | I don't see any immediate evidence there were conflicts of
       | interest here (happy to be proven wrong). I do see an astounding
       | lack of any of the actual work an investment manager should be
       | doing. Such a huge degree of laziness that I think it should be
       | criminal. People at these firms didn't just squander their
       | client's cash (this wasn't money lost because not ever bet is a
       | winner, it was basically given away). They actively assisted one
       | of the worlds largest frauds. Arthur Anderson were basically
       | destroyed because they enabled Enron. And Enron was a much
       | subtler, more complex fraud. There are serious questions to be
       | answered here IMHO.
        
       | gumby wrote:
       | This feels like a stretch by the CFTC.
       | 
       | The investors' LPs should have a bone to pick with what happened
       | to their money, but there's a good reason why you have to be a
       | qualified investor to become an LP. But the funds themselves
       | aren't CFTC regulated anyway.
       | 
       | The real issue is the utter fraudulence of the whole
       | crypto"currency"* sector, but the CFTC doesn't have authority
       | over that (not clear anyone does, unfortunately) and that's not
       | the subject of action here.
       | 
       | * I refuse to overload the abbreviation "crypto" when it has a
       | perfectly useful definition already.
        
         | raincom wrote:
         | What if LPs were agents of pension funds, endowments, etc? Such
         | LPs have no skin in the game.
        
         | cactusplant7374 wrote:
         | Kevin O'Leary invested and was paid as a promoter. He has made
         | more than he lost. What is to say that the funds aren't in on
         | the con?
        
       | jbirer wrote:
       | [flagged]
        
         | hef19898 wrote:
         | You mean getting political conections like SBF by bein a big
         | donor? Your argument seems a tad flawed...
        
         | drowsspa wrote:
         | Lol this is probably the quickest arrest of a financial
         | fraudster ever
        
       | jmyeet wrote:
       | There's a lot of finger pointing here. Luckily there's a lot of
       | blame to go around. Let's start with the two obvious questions:
       | 
       | 1. How did VCs give _billions_ in funding to someone without
       | insisting on an adult in the room? I mean having a respected CFO
       | to report on the company 's finances. Additionally, there should
       | be regular board meetings and an audit committee who reviews such
       | documents; and
       | 
       | 2. Why was the SEC so toothless here? For anything connected to
       | the US financial system or operating within US jurisdiction, the
       | SEC should, at the very minimum, be ensuring compliance with
       | custodial assets.
        
         | HWR_14 wrote:
         | > the SEC should, at the very minimum, be ensuring compliance
         | with custodial assets.
         | 
         | FTX claimed that none of the things they had custody of were
         | securities. Most crypto claims the same. Why would the SEC be
         | able regulate them? Their case for not being securities seems
         | reasonable.
        
         | TacticalCoder wrote:
         | > 2. Why was the SEC so toothless here?
         | 
         | The head of the SEC, Gary Gensler, 's former boss happens to be
         | the father of the CEO of Alameda-the-scam.
         | 
         | SBF and Caroline Ellison: these fraudsters were _very_ well-
         | connected.
         | 
         | As a sidenote early on in the scandal a US _senator_ wrote that
         | there were suspicion that SBF was working hand in hand with
         | corrupted officials to engage in regulatory capture of the
         | cryptocurrencies exchange market.
         | 
         | And when did the shit hit the fan for SBF? Once he got very
         | cocky and tweeted how he was going again to DC and how CZ (from
         | Binance) was not allowed to go there.
         | 
         | These were SBF's famous last words. CZ answered that SBF wasn't
         | a team player. Then the leak on Coindesk happened and all the
         | articles exposing the SBF/FTX/Alameda scam came out.
         | 
         | Ain't it "strange" that it all unfolded after a tweet were SBF
         | was boasting about how he was going to DC while CZ wasn't
         | welcome there?
        
           | pclmulqdq wrote:
           | A paper billionaire fucked with a cash billionaire and found
           | out what happens when you try to do that.
        
         | diegocg wrote:
         | > How did VCs give billions in funding to someone without
         | insisting on an adult in the room?
         | 
         | Don't know how the whole VC thing works but I suspect that the
         | people who took the decision weren't risking their own money,
         | and they probably won't face many consequences.
        
         | [deleted]
        
         | kasey_junk wrote:
         | For 2, it's (still) not clear who the chief regulator for
         | crypto should be. The SEC has tried at times to assert
         | authority there with pushback all around.
         | 
         | The current legislative push is to make the CFTC the regulator.
         | The CFTC both by mission and culture is more hands off. It's
         | also much smaller in size than the SEC so focuses on cases
         | where the law is more obviously being broken (eg boiler rooms
         | selling leveraged gold contracts as physical gold to senior
         | homes).
         | 
         | Crypto is a cutting edge area where the laws and regulators
         | have not kept up and where until recently most of the
         | participants liked it that way.
        
         | __derek__ wrote:
         | Re: #2, as Matt Levine likes to say, everything is securities
         | fraud. All the stuff that FTX did before was probably illegal,
         | but it was in a grey area without a particular regulator. Once
         | it became clear that FTX falsely claimed to investors that it
         | had effective risk controls, didn't misuse/steal customer
         | funds, and wasn't operating a giant Ponzi scheme, it moved
         | squarely into the SEC's remit.
        
         | rcme wrote:
         | For 1, I think the obvious answer was that the Fed, thanks to
         | ZIRP, created an environment where investors were clamoring for
         | investment opportunities. This gave high-growth companes, like
         | FTX was on paper, a lot of leverage with the terms of
         | investment.
        
           | jmyeet wrote:
           | VCs have a fiduciary responsibility to their investors
           | (technically, Limited Partners or LPs). Those investors could
           | have a valid cause of action that the VCs were reckless and
           | negligent in how they handled the FTX investment with no
           | oversight.
        
           | carlosdp wrote:
           | Yea this is almost certainly the correct answer. I think any
           | founders that raised a round in the last 2 years can easily
           | understand how this happened.
           | 
           | Especially to Sequoia, which felt like they were behind in
           | crypto investments (while a16z was getting into all the "big
           | winners"). Lots of pressure to deploy capital, and like the
           | other commentor pointed out, there _was_ a massive a amount
           | of real revenue being made by FTX.
           | 
           | That likely also contributed to the lack of scrutiny. Who in
           | their right mind would commit such massive and blatant fraud,
           | when if they simply didn't touch client funds in any
           | weird/illegal way, they would _still_ be an insanely rich
           | billionaire!
        
             | __derek__ wrote:
             | > Especially to Sequoia, which felt like they were behind
             | in crypto investments (while a16z was getting into all the
             | "big winners").
             | 
             | Sequoia had other peers that resisted this temptation,
             | though, so the "blame ZIRP" argument isn't sufficient.
        
           | tyre wrote:
           | > like FTX was on paper
           | 
           | FTX was high-growth in practice too. FTX was a phenomenal
           | business. It wasn't like most crypto projects that are scams;
           | their business and profits were genuinely massive.
           | 
           | What they did was take consumer funds and loan them out
           | without real collateral. That's bad and dumb and illegal, but
           | doesn't change the fact that the growth and economics of FTX
           | were real.
        
             | pclmulqdq wrote:
             | Crypto exchanges, like other platforms, grow because there
             | is capital that wants to trade there. This means that they
             | have the same bootstrapping problem as a competitor to Uber
             | or Facebook.
             | 
             | FTX's solution to that problem was Alameda Research, which
             | traded huge volumes on their exchange. That, in turn, made
             | the exchange look big enough to be a serious player, which
             | drove customers and more growth.
             | 
             | The "phenomenal" part of FTX's business was the fraud.
        
             | zaphar wrote:
             | Ahhhh yes, The this was a great business if only they
             | hadn't thrown all the money out the window argument. If a
             | business is throwing money out the window then it doesn't
             | matter how good the _rest_ of the business is. The company
             | is a bad business.
             | 
             | FTX was high growth but apparently 0 profit which does not
             | make a business good. Claims that, if only they hadn't been
             | crooks and/or incompetent, this would have been great
             | doesn't change the fact that they were, in fact, either
             | highly incompetent or crooks.
        
         | throwaway98797 wrote:
         | isn't it enough that the VCs lost money and credibility
         | 
         | do we need the heavy arm of the law in everything?
        
       | spaceman_2020 wrote:
       | Here in India, Sequoia has backed multiple startups that had
       | glaring lapses in corporate governance (Zilingo and most
       | recently, GoMechanic)
       | 
       | This is another symptom of zero interest rate policies. It
       | encourages bad behavior up and down the pecking order.
       | 
       | There are already strong calls to reduce interest rates. Imo,
       | most people crying out for lower interest rates are likely
       | swimming naked and just want the tide to come back in.
        
         | woodruffw wrote:
         | This seems like misdirected blame: maybe low interest rates
         | incentivize this behavior, but surely we expect VC firms to be
         | _capable_ of operating within host legal frameworks, right?
         | 
         | I think it's maybe more judicious to look at the culture these
         | VC firms have fostered instead: one where law and civic
         | interest are secondary at best responsibilities. Racing to an
         | obscene valuation that gets saddled on public investors is the
         | #1 priority.
        
           | raincom wrote:
           | A lot of human activity is mimetic--from learning
           | slang/jargon, accents, all the way to hiring and laying off
           | people. If one top tier VC invests in a company X, other top
           | tiers pile on X, thereby increasing the valuation multiples.
        
           | jmeister wrote:
           | Parent is comment is referring to poor corporate governance,
           | not necessarily illegal.
        
           | spamizbad wrote:
           | Yeah it's strange these firms, staffed with expensively
           | educated professionals from top institutions, with decades of
           | industry experience, somehow lose all autonomy if interest
           | rates get too low for too long.
           | 
           | It seems like every egregious mistake firms make somehow gets
           | traced back to interest rates. A very convenient way to
           | absolve people of responsibility.
        
             | vba616 wrote:
             | >it's strange
             | 
             | I don't understand what's strange about it. Short term
             | thinking spreads even among people who know better because
             | of competition. If you're not taking the risks other people
             | are, then how do you do business?
             | 
             | A fairly well known quote from a bank CEO is "As long as
             | the music is playing, you've got to get up and dance".
             | 
             | The corollary, from that perspective, seems to be that
             | government regulation is required to save industry because
             | individuals can't prevent a crisis.
        
               | FormerBandmate wrote:
               | Tiger Global thrashed every other VC because they did no
               | due diligence, so everyone else stopped doing it.
               | Competition frequently leads to market failures
        
           | cloutchaser wrote:
           | You are partially right, of course the individuals bear
           | responsibility. But you also have to acknowledge that at a
           | macro level every economic crises since 1999 has been caused
           | by central banks blowing bubbles. Including the recent VC
           | bubble.
        
             | woodruffw wrote:
             | In general, I'm skeptical of any sort of "look what you
             | made me do" reasoning. Central banks can incentivize more
             | or less risky market behavior, but they don't strip
             | investors' autonomy. It takes a conscious effort to dump
             | your money into patently fraudulent ventures.
        
               | vba616 wrote:
               | >In general, I'm skeptical of any sort of "look what you
               | made me do" reasoning
               | 
               | Sure, I would be too. But you're not conversing with the
               | people who did it, are you?
        
               | woodruffw wrote:
               | Not sure what you mean; the GP's comment is an example of
               | this reasoning format.
        
           | xwolfi wrote:
           | VC firms are not really capable of anything purposeful:
           | they're here to find a discount, which helps the company
           | return a premium: they're a symbiotic parasite and whatever
           | the culture they foster, when discount is hard to find or
           | when premium look gigantic, well they jump on anything
           | forgetting that finding a discount in a difficult period or a
           | gigantic premium is a red flag.
           | 
           | But do you expect parasites to start thinking ? They cant.
           | 
           | Sequoia put in their own website that the FTX CEO was playing
           | a video game while pitching hundreds of millions of
           | investment. The same firm would kick me out of the door if I
           | went without a tie to interview for a secretary job.
           | 
           | Difference is that I dont promise a huge premium at a huge
           | discount. And it's a red flag for any sentient when someone
           | is distracted in a high stake conversation, but not to the
           | Sequoia parasite only eating premiums.
        
           | nprateem wrote:
           | A VC firm charging 20% carry has a massive incentive _not_ to
           | put their civic interests before profit.
           | 
           | Plus, if they don't chase returns, their competitors will,
           | then they'll struggle to raise subsequent funds.
           | 
           | Market forces + low interest rates are a recipe for
           | recklessness.
        
         | vba616 wrote:
         | > Imo, most people crying out for lower interest rates are
         | likely swimming naked and just want the tide to come back in.
         | 
         | Is it possible that zero interest rates are bad _and_
         | excessively high rates are bad at the same time?
         | 
         | The long term inflation goal in the US, I believe, is 2%. And
         | long term interest rates here that are determined by the market
         | are higher, but not as high as policymakers have set short term
         | rates to.
         | 
         | Would it not make sense to set rates somewhere in that window
         | (roughly 2-4%) and stop messing with them? For other countries,
         | scale rates accordingly.
         | 
         | Metaphorically, I feel like the US federal reserve was driving
         | a car with the gas pedal to the floor and it didn't respond for
         | a while, so they kept going until they suddenly found
         | themselves going 100 mph, and now they are determined to keep
         | on the brakes as hard as they can until they are 100%
         | motionless. This is not a good way to drive in traffic, even if
         | you do survive it.
         | 
         | There is an alleged tendency of almost everybody to justify
         | their job by looking busy even if what they are doing is worse
         | than doing nothing. And that's what I think of when I think of
         | central banks in my adult lifetime. Along with being a
         | passenger in a car where the driver is on and off the gas and
         | brakes constantly to the point of nausea.
         | 
         | Inverted yield curves worry people even if they can't agree on
         | how linked they are to recessions. So...why not just _not_
         | invert them? I believe that markets have to be regulated, but
         | they also should be listened to.
        
           | __derek__ wrote:
           | > Would it not make sense to set rates somewhere in that
           | window (roughly 2-4%) and stop messing with them? For other
           | countries, scale rates accordingly.
           | 
           | That alone wouldn't work because inflation is affected by
           | factors beyond interest rates, but this is basically a part
           | of Modern Monetary Theory: set short-term interest rates at a
           | fixed price, then use other levers to push inflation back to
           | target.
           | 
           | IMO, a more compelling alternative to the current system is
           | Nominal GDP Targeting.[1][2]
           | 
           | [1]: https://www.mercatus.org/research/research-papers/case-
           | nomin...
           | 
           | [2]: https://www.mercatus.org/research/working-
           | papers/nominal-gdp...
        
           | raincom wrote:
           | High interest rates are product of high inflation. That's why
           | 2% inflation target means 2 percent interest rate target.
           | Nominal interest rate = inflation rate + real interest rate.
        
             | vba616 wrote:
             | Are you agreeing with something I wrote, or disagreeing, or
             | what?
             | 
             | I wonder if HN has banned using ChatGPT to comment or is
             | considering it.
        
       | Animats wrote:
       | This action will have a useful side effect. The CFTC has been
       | seen by the crypto community as a toothless tiger. Legislation
       | was proposed (by FTX!) to get the SEC out of crypto enforcement
       | and turn it over to the CFTC. With the CFTC looking at funding
       | sources of scams, that now looks far less attractive.
        
       | gitfan86 wrote:
       | I love how SBF is continuing the grift. He is on Twitter posting
       | spreadsheets claiming that FTX is still solvent even today.
        
         | TacticalCoder wrote:
         | FTX's current CEO, in charge of the bankruptcy, explained why
         | SBF was, once more, full of it. The accounting by which FTX.us
         | would be solvent relies on the $250m that LedgerX owns (FTX.us
         | bought LedgerX). The problem is that... These $250m came from
         | Alameda and is money stolen from customers and investors as
         | part of the multiple frauds SBF committed.
        
         | dtjb wrote:
         | *FTX US
        
       | nickpinkston wrote:
       | If the CFTC does this, I hope they limit it to investments /
       | valuations of $1B or more, as seed-stage companies shouldn't have
       | to pay for an audit, etc.
       | 
       | This is what happened with Sarbanes Oxley where they
       | overregulated the IPO process and caused the companies to stay
       | private (and uninspected) for longer as well as removing the
       | post-IPO growth upside from retail investors [1].
       | 
       | This is not to mention the recent SPAC craze being a way to get
       | around this as well, which ended up with the median SPAC losing
       | 70% of its value, while the S&P lost roughly 1/4 of that over the
       | same period. [2]
       | 
       | There's a sweet spot for this kind of regulation, and overly "get
       | tough" never works more than sensible restrictions where the risk
       | is highest.
       | 
       | [1]
       | https://en.wikipedia.org/wiki/Sarbanes%E2%80%93Oxley_Act#Cri...
       | 
       | [2] https://www.fa-mag.com/news/spac-euphoria-turns-into-
       | painful...
        
         | georgeecollins wrote:
         | I don't think they have a case if they are arguing they didn't
         | audit. VCs don't audit all the time. You will note they said
         | "conflict of interest."
         | 
         | A conflict of interest would be if they invested $x and then
         | got early access to y tokens. The announcement of their
         | investment suddenly makes y tokens more valuable. You could
         | even imagine the tokens could be sold for more than the
         | investment. In that case, what incentive does the VC have to
         | audit? Also, that should be illegal if it isn't.
         | 
         | Don't worry about the cost of audits. I do think if you took
         | tokens from a VC investment and sold them you may have done
         | something illegal.
        
         | threeseed wrote:
         | > as seed-stage companies shouldn't have to pay for an audit
         | 
         | According to the new CEO, FTX had no board and lacked basic due
         | diligence.
         | 
         | That doesn't seem too onerous for seed-stage companies once
         | they have taken external funding to have in place.
        
           | beambot wrote:
           | Most seed funds (sub-$2M checks) have to make a large number
           | of investments (like 15 per partner every 2-3 years) to make
           | the fund economics work. Sitting on as many boards would be
           | impossible / ineffective.
           | 
           | The situation is different when you hit SeriesA, where
           | partners generally do up to 3x investments per year. This
           | results in a more manageable board load.
        
         | hef19898 wrote:
         | SOX is, IMHO, one of the most reasonable regulations people
         | came up with in the last decades. There seems to be quite some
         | push back against some of the SOX rules, especially when it
         | comes to internal controls, and especially coming from the
         | start-up community.
        
           | georgeecollins wrote:
           | It's really weird the way people argue how disastrous
           | regulations are when their are clear examples of them being
           | fine.
           | 
           | - California bans non-competes and it is essentially the
           | fastest growing economy in the western world. But if you read
           | WSJ banning non-competes is a disaster.
           | 
           | - SOX is supposedly a disaster, but when SPACSs bypass that
           | process they are almost universally terrible. Also, the stock
           | market and the VC business have both done great under SOX.
           | 
           | I think we don't realize how good the existing US regulatory
           | framework is. If we try to improve it we should have a strong
           | status quo bias.
        
             | arbuge wrote:
             | > - California bans non-competes and it is essentially the
             | fastest growing economy in the western world.
             | 
             | Source? From cursory Googling, it doesn't even seem to
             | crack the top 10 US states, let alone Western world
             | economies...
             | 
             | https://www.usnews.com/news/best-
             | states/rankings/economy/gro...
        
               | georgeecollins wrote:
               | You make a really good point, I should have cited a
               | source. Let's compare California with the top state on
               | that list.
               | 
               | https://www.statista.com/statistics/187834/gdp-of-the-us-
               | fed...
               | 
               | https://www.statista.com/statistics/187861/gdp-of-the-us-
               | fed...
               | 
               | What's kind of a joke about that is that between
               | 2020-2021 California added an Idaho.
               | 
               | Also, to undermine my point, Texas seems to have grown at
               | almost exactly the same rate (80% increase in 20 years):
               | https://www.statista.com/statistics/188132/gdp-of-the-us-
               | fed...
               | 
               | Compare this to an excellent first world economy,
               | Germany. I think all Europe and Japan is worse. South
               | Korea is probably much better.
               | 
               | https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?end=2
               | 021...
               | 
               | So I think you could say California only grew at the pace
               | of the fastest states in the US in the last twenty years
               | (all with non-competes, which was my point) but the
               | overall amount of growth was by far the most. The point
               | is having no non-competes didn't seem to destroy it.
               | 
               | And here's the propaganda version -- I think being
               | skeptical of this stuff is a good idea.
               | https://www.gov.ca.gov/2022/10/24/icymi-california-
               | poised-to...
               | 
               | I was being too flip and you were right to point this
               | out.
        
               | Scoundreller wrote:
               | Maybe not in percent but in added billions $ of gdp or
               | gdp per capita. A large shell getting larger instead of a
               | tiny one doubling.
               | 
               | Just a shot in the dark though.
        
               | teh64 wrote:
               | On your own link it's 6th in terms of GDP growth. The
               | other 2 are growth of young population and net migration
               | where California is much more behind.
        
               | thesteamboat wrote:
               | Your link doesn't exactly mean what you think --- they're
               | giving a combination of economic growth and population
               | growth. When looking at just the GDP growth, your link
               | suggests that they are the 6th fastest growing US state
               | economy. As a sibling commentator noted, this is growth
               | is on top already being the largest state economy. (Texas
               | had the 2nd largest GDP percentage increase from 2020 to
               | 2021. Texas grew 2% faster than California, for an
               | economy only 2/3 the size. Raw data [which the usnews
               | article cited] here https://www.bea.gov/itable/regional-
               | gdp-and-personal-income )
               | 
               | Not too long ago there was news that CA is about to pass
               | Germany to become the 4th largest economy in the world.
               | (CA press release here:
               | https://www.gov.ca.gov/2022/10/24/icymi-california-
               | poised-to... original article by Bloomberg)
        
           | lumost wrote:
           | Anecdotally, companies in bad shape use SOX as an excuse for
           | a lot of their bad behavior.
           | 
           | I worked at an ad tech which decided engineers should not
           | have access to revenue data. Nor should they have access to
           | click data or other relevant data on how customers were
           | doing.
           | 
           | Needless to say, if you are a transactional business who
           | makes money when people perform an action - this is critical
           | information to know. The company eventually lost focused and
           | failed to IPO.
           | 
           | While all of this was done in the name of SOX. I don't
           | believe SOX required any of it.
        
           | nickpinkston wrote:
           | I think that it's mostly reasonable too, but there's a
           | balance in regulation pushing the bad behavior to less
           | regulated places and stifling what you're trying to
           | encourage.
           | 
           | One example of this in the Bay Area was the Ghost Ship Fire
           | [1] where they were forced to live off the grid because of
           | over regulation, and then dying in a fire that some of that
           | regulation was trying to prevent.
           | 
           | It's a classic problem. Laws have enforcement costs and
           | knock-on effects.
           | 
           | https://en.wikipedia.org/wiki/Ghost_Ship_warehouse_fire
        
             | stanleydrew wrote:
             | I agree we need to think hard about tradeoffs of regulation
             | and adjust when the pendulum swings too far in one
             | direction. But I think you can come up with a better
             | example of downsides of overregulation than the Ghost Ship
             | Fire.
             | 
             | To say that people were "forced" to live there due to
             | overregulation is quite a stretch I think. I've known a few
             | creative people in the bay area who lived in similar
             | situations and they all were making an active choice to
             | live in communal housing illegally converted from
             | industrial use. They found it creatively energizing.
        
               | nickpinkston wrote:
               | Yea, a lot of my friends live in the same housing and for
               | the same reasons, but I find many of them move out once
               | they make enough money for typical housing.
               | 
               | A better Bay Area example if housing regulations stopping
               | all growth and leading to all sorts of problems, but
               | that's well covered.
        
             | [deleted]
        
       | xiphias2 wrote:
       | Regulators (specifically Gary Gansler at SEC) job is to protect
       | consumers generally, pointing at VCs just shows that they are not
       | doing their job.
       | 
       | FTX is an offshore company, but Genesis, Blockfi, FTX US, Gemini,
       | Coinbase are not, and regulators let them offer unregistered
       | securities for a long time.
        
         | bdcravens wrote:
         | FTX stole investors' funds. That's a far greater concern than
         | unregistered securities.
        
           | namdnay wrote:
           | The former usually follows the latter
        
           | throwawaycities wrote:
           | Lucky for those investors the FTC's investigation shows the
           | funds/VCs handling their investments were negligent and
           | breached their fiduciary duty by not conducting any due
           | diligence. Time for those investors to sue the VCs/funds.
        
             | cactusplant7374 wrote:
             | Looking forward to the depositions.
        
           | [deleted]
        
         | nickpinkston wrote:
         | Yea, this is more of a story of SBF and other crypto elites
         | making a lot of donations to wealthy politicians, media
         | companies, etc. who were hesitant to investigate them.
         | 
         | Bloomberg apparently was presented evidence of the FTX fraud
         | many months before its downfall which it didn't cover because
         | it was bad for business. [1]
         | 
         | This was also what happened in the Madoff case where outside
         | investigators discovered the fraud and sent their pile of
         | evidence to the Feds, who sat on it for years as the fraud
         | expanded. [2]
         | 
         | I bet we'll eventually see messages from SBF & Co. talking
         | about Madoff specifically as a model for the scheme.
         | 
         | [1] https://www.youtube.com/watch?v=qXzvVRw_Qgw
         | 
         | [2]
         | https://en.wikipedia.org/wiki/Harry_Markopolos#Madoff_invest...
        
           | ejstronge wrote:
           | It is hard to believe the claim in the video that '5 crypto
           | ladies' at Bloomberg passed on this enormous story absent
           | evidence from the speaker.
           | 
           | Regarding Madoff, there were indeed investigations after some
           | of the complaints. Notably, these situations differ in that
           | Madoff was a respected figure within the regulatory apparatus
           | (but it's hard to imagine that SBF holds sway over the
           | editorial process at Bloomberg). It is true that the
           | investigations into Madoff were ineffectual, at least
           | according to reports I have seen
        
             | nickpinkston wrote:
             | Yea, that's why I linked to the video (re: source is a
             | single witness), but also SBF was definitely a powerful guy
             | almost to the degree Madoff was, and we already see
             | publications like the NY Times covering for SBF [1], so I
             | don't see that as a big jump.
             | 
             | I have a personal journalist friend whose editors didn't
             | let them cover Theranos before the WSJ broke the news for
             | similar reasons, so it's not out of the question.
             | 
             | Not to mention the regulatory apparatus and Congressional
             | inaction. [2]
             | 
             | [1] https://www.youtube.com/watch?v=UqDJ6Ph8r9o
             | 
             | [2] https://fortune.com/2022/11/10/ftx-crypto-collapse-
             | binance-c...
        
         | LatteLazy wrote:
         | I agree Gansler are not doing their job. In this case, I think
         | the CFTC (who seem to do more and make fewer speeches than
         | Gansler) are doing good work though: Investors helped SBF
         | commit his fraud, they funded it, they advertised it and they
         | endorsed it. They SHOULD face some repercussions. The level of
         | negligence they showed is frankly breath-taking.
        
         | dragonwriter wrote:
         | > FTX is an offshore company,
         | 
         | FTX.US is not
        
           | throw03172019 wrote:
           | OP listed FTX US in the category of "in the US".
        
       | ekpyrotic wrote:
       | Non-paywall link: https://archive.ph/7yuc1
        
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