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The Sam Bankman-Fried empire crumbled. What happened?
- wigster 4y agois this nominative determinism kicking in?
- itsdrewmiller 4y agoDefinitely a bit of "Crowley if you think I am holy, Crowley if you think of me foully" too.
- deleted 4y ago[deleted]
- deleted 4y ago[deleted]
- natdempk 4y agoThere is a part two available here with more opinion/analysis: https://newsletter.mollywhite.net/p/ftx-analysis https://newsletter.mollywhite.net/p/ftx-analysis
- williamstein 4y agoWith potential for discussion here: https://news.ycombinator.com/item?id=33547135 https://news.ycombinator.com/item?id=33547135
- pvg 4y agoThat's a link to nowhere, not a 'potential discussion'. On HN it's better to keep the discussion of closely related things in one place otherwise it just gets repetitive. The splits, when they happen, are just more work for the moderators who end up having to merge this this stuff.
- itintheory 4y ago
- thakoppno 4y agoI presume this individual cashed out at least some of his net worth in hard assets. Just curious how one could structure a vehicle for those assets that would be resilient to asset forfeiture? Also, what portion of the fortune would be most likely to have been squirreled away?
- bpodgursky 4y agoIF his goal was personal fraud and enrichment (and to be clear, I think this is VERY unproven) it would be far easier to stash some away in a mixed/clean bitcoin or monero account and memorize the mnemonic phrase. No paper evidence, no financial trail.
- edf13 4y agoI would of expected the vast majority of his net worth would of been the same FTT tokens which are now heading to 0. How much he cashed out (And the timing of this) will be interesting to learn.
- siftrics 4y agoMichael Lewis, author of The Big Short, was in the process of writing a book about the success of FTX and SBF. He personally went to the Super Bowl with them and visited them in the Bahamas multiple times. Someone on Twitter said, "he just got his perfect ending." It's gonna be a fantastic book.
- par 4y agoHe should call it The Big Short 2: Get Shorted.
- indymike 4y agoMaybe "Coming up Short".
- chinathrow 4y agoI'll pre-order it the day it's available. The big fry.
- akgerber 4y agoReminds me of the documentary Weiner, which was supposed to be a comeback film about Anthony Weiner's run for NYC mayor but instead became an intimate portrait of a man's life (as well as that of his unfortunate wife) utterly collapsing.
- seertaak 4y agoTrue, only that Weiner was surprisingly endearing in that documentary. Despite at the time being a staunch republican, it's hard not to like the guy, and when the fall comes you're almost rooting for him. But SBF? The last interview I saw him give was I think with Levine; it was shocking because SBF was describing whence crypto derives its value. And Levine remarked that SBF was describing a Ponzi scheme. For me, that interview showed two things. First, that SBF quite obviously has no morals whatsoever. And second, he's not nearly as smart as he's portrayed to be. His whole cred derives from his MIT degree combined with his experience at Jane Street. Jane Street is a great firm, but what they do is really specific, and not necessarily the "coolest" way to make money. It's a lot of tech and infrastructure, less finance and trading chops. (The real badasses are RenTech, for example.) Anyway, I watched a few videos that he made while working at his crypto hedge fund, Alameda. He described the strategies, and they sounded like the typical market maker stuff - arbing exchange discrepancies yadda yadda. Not the most inspired stuff.
- simonw 4y agoThis is such an excellent write-up - showcases a veteran Wikipedia editor's ability to synthesize something comprehensive from a huge array of rapidly changing sources.
- SanjayMehta 4y agoSBF's Wikipedia page is being vandalized right now. https://en.wikipedia.org/wiki/Sam_Bankman-Fried https://en.wikipedia.org/wiki/Sam_Bankman-Fried https://archive.is/2022.11.10-162501/https://en.wikipedia.org/wiki/Sam_Bankman-Fried https://archive.is/2022.11.10-162501/https://en.wikipedia.or...
- whateveracct 4y agoSeems like a tangent
- ARandumGuy 4y agoI think this should be a warning to anyone still invested in other crypto companies or exchanges. Everything seems like it's going well, until the music stops and the exchange is insolvent. FTX is not unique. A lot of crypto exchanges are doing just as much shady stuff. When you put your money with these companies, you're betting that "no really, this one is above board!" That's an extremely risky game to play when the crypto space operates with no transparency and no consumer protections.
- aniforprez 4y agoWhile I could say banks are equally guilty of doing shady stuff, the truth is banking is hundreds of years old and as such, has regulations and insurance behind it. Not regulating is how we get messes like the Housing Bubble in the 2000s in the US culminating in the crash in 2011. Crypto being a completely new space has no regulation and no checks and balances which leads to messes like this with companies playing around with their assets and unable to repay their customers when they collapse. I suppose the draw of crypto is inherently that it is a wild, freeform space free from government interference for some people I guess
- fred_is_fred 4y agoUnfortunaely the draw for many isn't that they want a libertarian dream society with no rules, but rather they think they can get rich quick. The "banks are bad" is part of the appeal also. I have a cousin who works in the food service industry (think something like managing a Chipotle) and has put all his liquid assets into crypto and still thinks they will "pay off so he can retire". As for banks - as soon as these crypto scams fail, everyone will find out just why the SEC and FDIC are there. They were not created just because some politician had an idea for more bureaucracy.
- no_wizard 4y agoMy "hot take" if you will: SEC and FDIC aren't usually, to the general public, negatively seen due to their mission. Its the fact they don't prevent criminal / unethical behaviors beforehand, and banks get away with alot before anyone intervenes. I actually don't think the average US citizen is "anti regulation" with this. I think - and I include myself in this - that we see agencies like the SEC (more so than the FDIC) don't act fast enough or often enough, and when they do, the fines are a slap on the wrist vs the profit made by the bad behavior. In a nutshell, they just aren't acting effectively, and thats why they get a bad wrap.
- xrd 4y agoThe original dotcom implosion was caused by all these "new Internet" companies selling advertising to each other and recognizing that as revenue, even though it was just a swap of ad space that no else wanted. When people figured that out, we had the crash of 2000. SBF maybe isn't the best quant, but he clearly knows his history.
- ghaff 4y agoAnd it went beyond the internet companies in no small part because those companies were loading up on hardware and software from all the big tech companies. (Oracle, EMC, Sun, Cisco were explicitly called out as the four horsemen of the internet but the effects were felt much more broadly.)
- gregw2 4y agoAlternate/additional explanation… the dotcom crash happened after the first quarter of 2000 when the quarterly financials of the big internet hardware/server vendors (Sun but also EMC, Cisco, Oracle, etc) came out and sales were way down because nobody had quite anticipated that their clients would take the servers used for y2k testing and repurpose them, rather than buying new stuff. Then the voice of skeptics had credence to raise other concerns (ad swap, etc) which snowballed.
- dabeeeenster 4y agohttps://twitter.com/SBF_FTX/status/1590709172936798208 https://twitter.com/SBF_FTX/status/1590709172936798208 "5) The full story here is one I'm still fleshing out every detail of, but as a very high level, I fucked up twice. The first time, a poor internal labeling of bank-related accounts meant that I was substantially off on my sense of users' margin. I thought it was way lower." Amazing
- rozap 4y agoBlockchain solves this.
- treis 4y agoCan someone ELI5 what margin has to do with the bank run?
- acgt23 4y agoIt doesn’t really, none of this is adding up. But he’s explicitly lied about this stuff in the past couple days (and since deleted the tweets) so that’s probably what’s happening here
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- nullc 4y agoMuch of the assets traded on FTX were leveraged sidebets e.g. "perpetuals", the underlying assets didn't exist.
- schemescape 4y agoWhat does “poor internal labeling of bank-related accounts” mean? They didn’t know which of their accounts were fiat vs crypto? Asset vs liability? Something else?
- skippyboxedhero 4y agoMy thoughts exactly. He managed to say precisely nothing in 27 (or whatever it was) tweets apart from the obvious...that he wasn't up to running the company. WSJ is reporting that money was lent to Alameda based on a conversation that SBF had with an investor (saying that the gap was $10bn) but this isn't what he saying publicly...maybe this is obvious because, if this is true, then it is hard to see how he avoids jail.
- hamiltonians 4y agoftt is still trading at $3. It's down but not out. this is the same price as late 2020.
- rideontime 4y agoShould I buy some? What can I do with FTT?
- twblalock 4y agoYou can turn $3 into $0 very quickly.
- vishnugupta 4y ago> What can I do with FTT? Sell it to someone else.
- nisegami 4y agoFind some other sucker to hold the bag.
- stusmall 4y agoThe crypto community is wild. Literally in a thread about how the wheels are coming off the cart, the project frozen withdraws and possibly mishandled user funds there is the question "Should I buy in?" Also I love that the question of "What value does this provide?" comes after the question about buying it. At least the question came at all.
- lovehashbrowns 4y agoIt’s all from that buy the dip meme. I saw something similar where people were asking if they should buy that LUNA coin thing during its meteoric collapse. I think that coin is still in the dumpster so..
- kurisufag 4y ago$LUNA zeroed, hit a 10x bump, then zeroed again. it's a common trend, and a lot of people ride that bump for significant profit.
- ajkjk 4y agoI still don't get who is actually trading crypto on these exchanges. I have trouble believing it is not 99% wash trades.
- bombcar 4y agoThat low?
- polygamous_bat 4y agoThe part that is not wash trading is what I would imagine "veteran" "crypto traders" just trading the same tokens back and forth looking for just one more hit.
- TechBro8615 4y agoThe first time I ever even heard of SBF was when he testified at a Senate hearing as a "billionaire crypto exchange founder." I didn't think much of it, but it was a bit weird - I thought I was pretty familiar with the space and the people in it but apparently not.
- jamesfmilne 4y agoI was in the local Co-op supermarket in North London buying some bread & milk the other day. The staff in the shop were talking amongst themselves about how "they were into crypto". I doubt they were comparing their elliptic curve coefficients. SBF, CZ and his ilk have taken money these people can ill afford to lose in this financial climate and spaffed it up the wall on sports stadiums and billboards of themselves all over the place.
- acyou 4y agoThe name Sam Bankman-Fried came up quite a lot in Twitter v. Musk. I wonder if he ended up with a stake in the acquisition deal. If SBF was indeed a sizable backer of the Twitter buyout, this more than anything could take Twitter out at the knees.
- seaal 4y agoSBF passed on the Twitter deal[0] CZ invested $500 million. [0] https://mobile.twitter.com/sbf_ftx/status/1588213357131464704 https://mobile.twitter.com/sbf_ftx/status/158821335713146470...
- moralestapia 4y agoNot a fan of Musk but a fan of truth. Elon was the one who passed on them.
- technotony 4y agoEven if he did invest, why would that weaken Twitter at this point? The deal is done, SBF wouldn't be able to pull his money out of it if he wanted to.
- emehex 4y agoNaive question: % chance SBF goes to jail?
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- jefftk 4y agoA prediction market on whether he's convicted of a felony in the next three years is at 47%: https://manifold.markets/mr22222222/sbf-convicted-of-a-felony-before-20 https://manifold.markets/mr22222222/sbf-convicted-of-a-felon...
- rasz 4y agoGood family with connections, good school, white, male, didnt directly scam anyone important.
- techsplooge 4y ago
- rr888 4y agoTo me its extraordinary that its just a few years old. Started in 2019, valued at $32 billion just a few years later. For an exchange?
- zelias 4y ago
- friend_and_foe 4y agoPlease do. This type of low effort crap seeping in from Reddit is starting to get annoying. Take it back there, save your words here for when you actually have something substantial to say.
- labrador 4y agoI'm having a hard time understanding why organizations like the Ontario Teachers’ Pension Plan has money in uninsured crypto funds. Somebody has some explaining to do. Sequoia Writes Off Entire $210MM FTX Investment; Here Are All The Other Funds That Are Losing Billions In FTX https://www.zerohedge.com/markets/here-are-all-funds-are-about-lose-billions-ftx https://www.zerohedge.com/markets/here-are-all-funds-are-abo... Edit: 25 billion dollars up in smoke Ontario Teachers’ Pension Plan faces a hit on investment in crypto trading platform FTX https://archive.ph/V6Aw0 https://archive.ph/V6Aw0 No mention of it on the website https://www.otpp.com/en-ca/ https://www.otpp.com/en-ca/
- wmf 4y agoNo good investments are insured and FTX isn't a fund.
- diab0lic 4y agoPlenty of good investments are insured. There are whole classes of investment that simply would not be sane to do without insurance. Taking an example from every day life: People buy investment properties and most of the time they insure them.
- jrochkind1 4y agoInvestment properties not generally insured against loss in market value, no matter how drastic.
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- diab0lic 4y agoNobody ever claimed they did, but it is an investment, with insurance. If you want something more financial a short vertical spread [0] is a strategy in which you are purchasing insurance on the risk (investment) you just took (made). There are many such investments of this form. [0] https://www.optionsplaybook.com/option-strategies/short-call-spread/ https://www.optionsplaybook.com/option-strategies/short-call...
- newaccount2021 4y ago
- raverbashing 4y agoHow did it happen? Sequoia invested on a personality cult who thought he was too important to stop playing games while in an investor meeting https://twitter.com/firstadopter/status/1590453539813621761 https://twitter.com/firstadopter/status/1590453539813621761
- zeroclip 4y agoVery informative and clearly written, kudos to Molly! The irony is that DeFi and blockchain protocols fixes this.
- brk 4y agoBlockchain may fix it, but couldn't we also argue that blockchain created these problems in the first place? I will fully admit I have only casually followed the whole blockchain/crypto scheme, so maybe I'm wildly off on something, and would definitely appreciate informed responses. Without blockchain, there is no "crypto", without crypto, there are no exchanges and related coins, and without those, none of this happens or exists. How would blockchain be used to fix this?
- dibt 4y ago>How would blockchain be used to fix this? All of the things that are being reported on this situation would not have been possible on a DEX. Decentralized exchanges (DEX) exist on-chain. They incorporate automatic market making (AMM), not a third-party market maker with an association to the exchange. The DEX does not have custody of user funds, and it would be impossible to hide a multi-billion dollar hole in an exchange's balance sheet.
- kzzzznot 4y agoDo they work in practice?
- dibt 4y agoYes. https://uniswap.org/ https://uniswap.org/ and https://curve.fi/ https://curve.fi/ are the most popular, and have similar 24 hour volume to established exchanges like Coinbase.
- mikeyouse 4y agoKind of.. Solend is a major one that's currently falling over.. and apparently just disappeared $6M worth of users' assets; https://twitter.com/patio11/status/1590725993324777472 https://twitter.com/patio11/status/1590725993324777472
- vishnugupta 4y agoSequoia did a profile on SBF/FTX less than 2 months ago [1], only to mark down their investment to 0 [2] Some of the passage from that article reads so far removed from reality that I can't even know if it's coherent. Really wild stuff. [1] https://www.sequoiacap.com/article/sam-bankman-fried-spotlight/ https://www.sequoiacap.com/article/sam-bankman-fried-spotlig... [2] https://twitter.com/sequoia/status/1590522718650499073 https://twitter.com/sequoia/status/1590522718650499073
- cma 4y agoThey seem to have replaced that page with a disclaimer about the failure. Here was the archived: https://web.archive.org/web/20221027180943/https://www.sequoiacap.com/article/sam-bankman-fried-spotlight/ https://web.archive.org/web/20221027180943/https://www.sequo... > Something of the sort must happen eventually, as the current system, with its layers upon layers of intermediaries, is antiquated and prone to crashing—the global financial crisis of 2008 was just the latest in a long line of failures that occurred because banks didn’t actually know what was on their balance sheets. Crypto is money that can audit itself, no accountant or bookkeeper needed, and thus a financial system with the blockchain built in can, in theory, cut out most of the financial middlemen, to the advantage of all. Of course, that’s the pitch of every crypto company out there. The FTX competitive advantage? Ethical behavior. SBF is a Peter Singer–inspired utilitarian in a sea of Robert Nozick–inspired libertarians. He’s an ethical maximalist in an industry that’s overwhelmingly populated with ethical minimalists. I’m a Nozick man myself, but I know who I’d rather trust my money with: SBF, hands-down. And if he does end up saving the world as a side effect of being my banker, all the better. oof
- low_tech_love 4y agoMatt Levine's talk with SBF is definitely the most bizarrely depressing (or funny, depending on your mood) thing you'll read today. Hell, this week? https://www.bloomberg.com/news/articles/2022-04-25/sam-bankman-fried-described-yield-farming-and-left-matt-levine-stunned https://www.bloomberg.com/news/articles/2022-04-25/sam-bankm...
- molsongolden 4y agoThis is a great quick read and it's interesting because it's an abstraction of many other markets (not just DeFi). Reminds me of Damodaran's[0] focus on price vs. value when evaluating equities: >I have long drawn a distinction between price and value, two terms that get used interchangeably in both academia and practice, but with very different drivers and implications. As we watch stock indices around the world gain and lose trillions each day, it is worth remembering that markets are pricing mechanisms, not value mechanisms, or as Ben Graham would put it, they are voting machines, not weighting machines, at least in the short term. [0](Well-respected finance/valuation professor at NYU for anyone not familiar) https://pages.stern.nyu.edu/~adamodar/ https://pages.stern.nyu.edu/~adamodar/
- adamsmith143 4y agoThe same story as always, SBF thought he was smarter than everyone else but like everyone in 07-08' he misjudged his risk exposure and it turns out when the market stops going up the music stops.
- woeirua 4y agoSBF just made a tweet thread where he tried to apologize, while also distancing himself from FTX.US. Just more lies. Why anyone would believe him is beyond me. My guess, is he's desperately trying to avoid a run on FTX.US to keep the SEC from coming in like a bull in a china shop. I feel bad for him, he's either going to jail for a very long time, or he'll have an "accident" after losing so many people so much money.
- coolspot 4y agoDon’t hold your breath. Newman, Karpelès and others are alive and free.
- nullc 4y ago"Users' margin" is now apparently code for "how fictional are the assets we're selling users". Could we say that "We don't invest client assets (even in Treasuries)" was technically true on the basis that there weren't any assets to invest? :P I guess "internal labeling of bank-related accounts" is one of those "dumb" activities that they were counting on amphetamines to take care of for them: https://twitter.com/carolinecapital/status/1379036346300305408 https://twitter.com/carolinecapital/status/13790363463003054...
- EGreg 4y agoWhat happened was Binance squeezed a competitor, by dumping their token. Then announced stuff on Twitter that made people suddenly withdraw $6B out of it. This is an unregualated market — but even if it was regulated, what would the regular do after the fact to make it right for everyone inside an exchange or crypto that went to zero?
- leganthropane 4y agoRegulated fractional reserve banks are usually insured by the regulators. If the bank goes bust, the government covers the customers' losses up to a predetermined amount (FDIC covers $250k per account in the US). This helps to prevent bank runs, because people know that they'll get their money even if the bank collapses.
- mrguyorama 4y agoI'm so tired of people who are lauded as geniuses because their lottery ticket bet paid off. Why are people so convinced that being rich means you're smart?
- bergenty 4y agoBecause getting rich is one of the hardest things to do in society. It’s getting power + stability in one fell swoop and is everything humans are biologically built to value.
- codyb 4y agoWell... not really right? Cause lots of people are rich through inheriance. And lots through the lottery. SBY appears to have gotten very rich through a simple arbitrage trade. Props to him for exploring the space and making the moves... but it doesn't take a genius to see that if you can buy something for cheap in one place and sell it in another for more that you can make a bunch of money if you do it over and over.
- bergenty 4y agoSo a handful of people. I think that pretty much aligns with what I was saying.
- codyb 4y agoI'd say much more than a handful. Most of the super rich who made it through "smarts" had very rich parents. See Bill Gates, Elon Musk. Etc. See, all of the royalty of the world that still exist. See all of the oligarchs. It's no shocker the richest people in the world all seem to have gone to the same universities, come from the same families, etc etc.
- 0x500x79 4y agoI love the veritasium video on luck. I highly recommend anyone who is interested in this concept watch it.
- jjmorrison 4y agoCan someone explain to me why they can't solve this by moving the money back from Alameda to FTX? Assuming Alameda is not that bad at investing money, most of the loan should still be there no?
- mjaques 4y agoThis is exactly what I was wondering. It's possible (likely) that Alameda has invested that money in iliquid assets or assets that have since lost value. Also, since the loans of FTX to Alameda were backed by FTT, which has since collapsed, even if FTX makes a margin call, the collateral has a fraction of the original value.
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- benjaminwootton 4y agoThe noise is that they used it for the summer bailouts. I suspect a lot of this $8 billion will turn out to be illiquidity rather than vanished into the ether.
- AmericanOP 4y agoSounds like a guy with ADHD built two banks doing bad things made illegal in the early 1900s
- jbverschoor 4y agoHe got busted with his hand in the cookiejar, that's what happened
- proamdev123 4y agoCghfhguyyrret rfxz z z yuyhtty
- cheapliquor 4y agoyeah