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It's only a ponzi scheme if you have no underlying business but transferring money between people. Presumably FTX expected that its risky bets would pay off an

It's only a ponzi scheme if you have no underlying business but transferring money between people. Presumably FTX expected that its risky bets would pay off and that return would then fund the interest promised. Otherwise, would you consider corporate debt a ponzi scheme?

jazzyjackson 4y ago
> fund the interest promised. IMO this is key, the interest being paid out to account holders was not profits from any underlying business, it was just paid out from new "customer" deposits. If a corporation is in debt and paying back interest, it's sustainable as long as the business actually has a plan to grow. If your business is acquiring new users to pay out obscene interest rates to your early adopters, that's a ponzi (mr ponzi himself didn't mean to scam anyone either way by the way, until he realized his postage-arbitrage plans were going south and he scrambled not to break his promises)
NickC25 4y ago
>Presumably FTX expected that its risky bets would pay off and that return would then fund the interest promised. So did Bernie. >Otherwise, would you consider corporate debt a ponzi scheme? Depends on what you count as corporate debt. I'd have no problem buying the debt of a mature, massive company like Apple or Microsoft, because they have hard assets, steady cashflows, successful products on the market. The debt of a zombie corporation with a useless product that was only sustainable due to 0% interest rates? No thanks. Is that a ponzi scheme? Probably not the classical definition of one, but it's ponzi-adjecent.
- IanCal 4y ago
  > So did Bernie. No, he just straight up didn't invest peoples money, he paid out "gains" just from other deposits. That's why it was a Ponzi scheme - that's what they are.
  - NickC25 4y ago
    Initially, he did invest their money, he just didn't get the (I believe it was) +/- 10% that he promised investors (and was getting like clockwork) before the 08 crash. Once he started not being able to make those returns did thing start to unravel. His own kids were in denial right up until the end - almost nobody, even inside Bernie's firm, knew it was fraudulent.
    - IanCal 4y ago
      He hadn't been doing any trades for 15+ years when it all fell apart.
    - JackFr 4y ago
      > almost nobody, even inside Bernie's firm, knew it was fraudulent. It’s amazing what you can fail to know when not knowing it keeps you out of jail.
      - svnt 4y ago
        It helps if you sleep in fits on a beanbag and play League of Legends with every spare brain cell.
squeaky-clean 4y ago
The original scheme by Ponzi himself was based around profiting from arbitrage from postage stamps. He promised 50% returns within 90 days and couldn't keep up with his claims in a legitimate manner.
deleted 4y ago
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jazzyjackson 4y ago

> fund the interest promised. IMO this is key, the interest being paid out to account holders was not profits from any underlying business, it was just paid out from new "customer" deposits. If a corporation is in debt and paying back interest, it's sustainable as long as the business actually has a plan to grow. If your business is acquiring new users to pay out obscene interest rates to your early adopters, that's a ponzi (mr ponzi himself didn't mean to scam anyone either way by the way, until he realized his postage-arbitrage plans were going south and he scrambled not to break his promises)

NickC25 4y ago

>Presumably FTX expected that its risky bets would pay off and that return would then fund the interest promised. So did Bernie. >Otherwise, would you consider corporate debt a ponzi scheme? Depends on what you count as corporate debt. I'd have no problem buying the debt of a mature, massive company like Apple or Microsoft, because they have hard assets, steady cashflows, successful products on the market. The debt of a zombie corporation with a useless product that was only sustainable due to 0% interest rates? No thanks. Is that a ponzi scheme? Probably not the classical definition of one, but it's ponzi-adjecent.

IanCal 4y ago
> So did Bernie. No, he just straight up didn't invest peoples money, he paid out "gains" just from other deposits. That's why it was a Ponzi scheme - that's what they are.
- NickC25 4y ago
  Initially, he did invest their money, he just didn't get the (I believe it was) +/- 10% that he promised investors (and was getting like clockwork) before the 08 crash. Once he started not being able to make those returns did thing start to unravel. His own kids were in denial right up until the end - almost nobody, even inside Bernie's firm, knew it was fraudulent.
  - IanCal 4y ago
    He hadn't been doing any trades for 15+ years when it all fell apart.
  - JackFr 4y ago
    > almost nobody, even inside Bernie's firm, knew it was fraudulent. It’s amazing what you can fail to know when not knowing it keeps you out of jail.
    - svnt 4y ago
      It helps if you sleep in fits on a beanbag and play League of Legends with every spare brain cell.

squeaky-clean 4y ago

The original scheme by Ponzi himself was based around profiting from arbitrage from postage stamps. He promised 50% returns within 90 days and couldn't keep up with his claims in a legitimate manner.

deleted 4y ago

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